SECURITIES PURCHASE AGREEMENT
This
Securities Purchase Agreement (this “Agreement”)
is
dated as of June 15, 2007, by and among GSE Systems, Inc., a Delaware
corporation (the “Company”),
and
each purchaser identified on the signature pages hereto (each, including its
successors and assigns, a “Purchaser”
and
collectively, the “Purchasers”).
RECITALS
A. The
Company and each Purchaser is executing and delivering this Agreement in
reliance upon the exemption from securities registration afforded by Section
4(2) of the Securities Act of 1933, as amended (the “Securities
Act”),
and
Rule 506 of Regulation D (“Regulation
D”)
as
promulgated by the United States Securities and Exchange Commission (the
“Commission”)
under
the Securities Act.
B. Each
Purchaser, severally and not jointly, wishes to purchase, and the Company wishes
to sell, upon the terms and conditions stated in this Agreement, (i) that
aggregate number of shares of the common stock, par value $0.01 per share (the
“Common
Stock”),
of
the Company, set forth below such Purchaser’s name on the signature page of this
Agreement (which aggregate amount for all Purchasers together shall be 1,666,667
shares of Common Stock and shall be collectively referred to herein as the
“Shares”)
and
(ii) warrants, in substantially the form attached hereto as Exhibit
A
(the
“Warrants”),
to
acquire up to that number of additional shares of Common Stock equal to 10.0%
of
the number of Shares purchased by such Purchaser (rounded up to the nearest
whole share) (the shares of Common Stock issuable upon exercise of or otherwise
pursuant to the Warrants collectively are referred to herein as the
“Warrant
Shares”).
C. The
Shares, the Warrants and the Warrant Shares collectively are referred to herein
as the “Securities”.
D. The
Company has engaged ▇▇▇▇ Capital Partners, LLC as its placement agent (the
“Placement
Agent”)
for
the offering of the Securities on a “best efforts” basis.
E. Contemporaneously
with the execution and delivery of this Agreement, the parties hereto are
executing and delivering a Registration Rights Agreement, substantially in
the
form attached hereto as Exhibit
B
(the
“Registration
Rights Agreement”),
pursuant to which, among other things, the Company will agree to provide certain
registration rights with respect to the Shares and the Warrant Shares under
the
Securities Act and the rules and regulations promulgated thereunder and
applicable state securities laws.
NOW,
THEREFORE, IN CONSIDERATION of the mutual covenants contained in this Agreement,
and for other good and valuable consideration, the receipt and adequacy of
which
are hereby acknowledged, the Company and the Purchasers hereby agree as
follows:
ARTICLE
I
DEFINITIONS
1.1 Definitions.
In
addition to the terms defined elsewhere in this Agreement, for all purposes
of
this Agreement, the following terms shall have the meanings indicated in this
Section 1.1:
“Action”
means
any action, suit, inquiry, notice of violation, proceeding (including any
partial proceeding such as a deposition) or investigation, to the Company’s
Knowledge, pending or threatened in writing (or otherwise) against the Company,
any Subsidiary or any of their respective properties before or by any federal,
state, county, local or foreign court, arbitrator, governmental or
administrative agency, regulatory authority, stock market, stock exchange or
trading facility.
1
“Affiliate”
means,
with respect to any Person, any other Person that, directly or indirectly
through one or more intermediaries, Controls, is controlled by or is under
common control with such Person, as such terms are used in and construed under
Rule 144. With respect to a Purchaser, any investment fund or managed account
that is managed on a discretionary basis by the same investment manager as
such
Purchaser will be deemed to be an Affiliate of such Purchaser.
“Agreement”
has
the
meaning ascribed to such term in the Preamble.
“Business
Day”
means
a
day, other than a Saturday or Sunday, on which banks in New York City are open
for the general transaction of business.
“Buy-In”
has
the
meaning set forth in Section 4.1(f).
“Buy-In
Price”
has
the
meaning set forth in Section 4.1(f).
“Closing”
means
the closing of the purchase and sale of the Shares and the Warrants pursuant
to
this Agreement.
“Closing
Sales Price”
means,
for any security as of any date, the last trade price for such security on
the
Principal Trading Market, as reported by Bloomberg Financial Markets, or, if
the
Principal Trading Market begins to operate on an extended hours basis and does
not designate the last trade price then the last trade price of such security
prior to 4:00:00 p.m., New York City Time, as reported by Bloomberg,
Financial Markets, or if the foregoing do not apply, the last trade price of
such security in the over-the-counter market on the electronic bulletin board
for such security as reported by Bloomberg Financial Markets, or, if no closing
bid price is reported for such security by Bloomberg Financial Markets, the
average of the bid prices and asked prices of any market makers for such
security as reported in the “pink sheets” by Pink Sheets LLC. If the Closing
Sales Price cannot be calculated for a security on a particular date on any
of
the foregoing bases, the Closing Sales Price of such security on such date
shall
be the fair market value as mutually determined by the Company and the holder.
If the Company and the holder are unable to agree upon the fair market value
of
such security, then such dispute shall be resolved pursuant to Section 10
of the Warrants. All such determinations shall be appropriately adjusted for
any
stock dividend, stock split, stock combination or other similar transaction
during the applicable calculation period.
“Closing
Date”
means
the Trading Day when all of the Transaction Documents have been executed and
delivered by the applicable parties thereto, and all of the conditions set
forth
in Sections 2.1, 2.2, 5.1 and 5.2 hereof are satisfied, or such other date
as
the parties may agree.
“Commission”
has
the
meaning set forth in the Recitals.
“Common
Stock”
has
the
meaning set forth in the Recitals, and also includes any securities into which
the Common Stock may hereafter be reclassified or changed.
“Common
Stock Equivalents”
means
any securities of the Company or any Subsidiary which would entitle the holder
thereof to acquire at any time Common Stock, including, without limitation,
any
debt, preferred stock, rights, options, warrants or other instrument that is
at
any time convertible into or exchangeable for, or otherwise entitles the holder
thereof to receive, Common Stock or other securities that entitle the holder
to
receive, directly or indirectly, Common Stock.
“Company”
has
the
meaning ascribed to such term in the Preamble
2
“Company
Counsel”
means
▇▇▇▇▇ ▇▇▇▇▇▇ LLP.
“Company
Deliverables”
has
the
meaning set forth in Section 2.2(a).
“Company
Party”
has
the
meaning set forth in Section 4.11(b).
“Company’s
Knowledge”
means
with respect to any statement made to the knowledge of the Company, that the
statement is based upon the actual knowledge of the officers of the Company
having responsibility for the matter or matters that are the subject of the
statement.
“Control”
(including the terms “controlling”, “controlled by” or “under common control
with”) means the possession, direct or indirect, of the power to direct or cause
the direction of the management and policies of a Person, whether through the
ownership of voting securities, by contract or otherwise.
“Deadline
Date”
has
the
meaning set forth in Section 4.1(f).
“Disclosure
Materials”
has
the
meaning set forth in Section 3.1(h).
“DTC”
has
the
meaning set forth in Section 4.1(c).
“Effective
Date”
means
the date on which the initial Registration Statement required by Section 2(a)
of
the Registration Rights Agreement is first declared effective by the
Commission.
“Effectiveness
Deadline”
means
the date on which the initial Registration Statement is required to be declared
effective by the Commission under the terms of the Registration Rights
Agreement.
“Engagement
Letter”
has
the
meaning set forth in Section 6.1.
“Environmental
Laws”
has
the
meaning set forth in Section 3.1(l).
“Exchange
Act”
means
the Securities Exchange Act of 1934, as amended, or any successor statute,
and
the rules and regulations promulgated thereunder.
“GAAP”
means
U.S. generally accepted accounting principles, as applied by the
Company.
“Indemnified
Person”
has
the
meaning set forth in Section 4.11(c).
“Indemnifying
Person”
has
the
meaning set forth in Section 4.11(c).
“Intellectual
Property”
has
the
meaning set forth in Section 3.1(r).
“Irrevocable
Transfer Agent Instructions”
has
the
meaning set forth in Section 4.1(d).
“Legend
Removal Date” has
the
meaning set forth in Section 4.1(c).
“Lien”
means
any lien, charge, claim, encumbrance, security interest, right of first refusal,
preemptive right or other restrictions of any kind.
“Losses”
has
the
meaning set forth in Section 4.11(a).
3
“Material
Adverse Effect”
means
any of (i) a material and adverse effect on the legality, validity or
enforceability of any Transaction Document, (ii) a material and adverse effect
on the results of operations, assets, business or financial condition of the
Company and the Subsidiaries, taken as a whole, or (iii) any material adverse
impairment to the Company's ability to perform in any material respect on a
timely basis its obligations under any Transaction Document.
“Material
Contract”
means
any contract of the Company that was filed (or should have been filed) as an
exhibit to the SEC Reports pursuant to Item 601(b)(4) or Item 601(b)(10) of
Regulation S-K.
“Material
Permits”
has
the
meaning set forth in Section 3.1(p).
“New
York Courts”
means
the state and federal courts sitting in the City of New York, Borough of
Manhattan.
“Outside
Date”
means
July 14, 2007.
“Person”
means
an individual, corporation, partnership, limited liability company, trust,
business trust, association, joint stock company, joint venture, sole
proprietorship, unincorporated organization, governmental authority or any
other
form of entity not specifically listed herein.
“Placement
Agent”
has
the
meaning set forth in the Recitals.
“Press
Release” has
the
meaning set forth in Section 4.9.
“Principal
Trading Market”
means
the Trading Market on which the Common Stock is primarily listed on and quoted
for trading, which, as of the date of this Agreement and the Closing Date,
shall
be the American Stock Exchange.
“Proceeding”
means
an action, claim, suit, investigation or proceeding (including, without
limitation, an investigation or partial proceeding, such as a deposition),
whether commenced or threatened.
“Purchaser”
has the
meaning set forth in the Recitals.
“Purchase
Price”
means
$6.00 per Share.
“Purchaser
Deliverables”
has
the
meaning set forth in Section 2.2(b).
“Purchaser
Party”
has
the
meaning set forth in Section 4.11(a).
“Registration
Rights Agreement”
has
the
meaning set forth in the Recitals.
“Registration
Statement”
means
a
registration statement meeting the requirements set forth in the Registration
Rights Agreement and covering the resale by the Purchasers of the Registrable
Securities (as defined in the Registration Rights Agreement).
“Regulation
D”
has
the
meaning set forth in the Recitals.
“Required
Approvals”
has
the
meaning set forth in Section 3.1(e).
“Rule
144”
means
Rule 144 promulgated by the Commission pursuant to the Securities Act, as such
Rule may be amended from time to time, or any similar rule or regulation
hereafter adopted by the Commission having substantially the same effect as
such
Rule.
4
“SEC
Reports”
has
the meaning set forth in Section 3.1(h).
“Secretary’s
Certificate”
has
the
meaning set forth in Section 2.2(a)(vii).
“Securities”
has
the
meaning set forth in the Recitals.
“Securities
Act”
has the
meaning set forth in the Recitals.
“Shares”
has the
meaning set forth in the Recitals.
“Short
Sales”
include, without limitation, all “short sales” as defined in Rule 200
promulgated under Regulation SHO under the Exchange Act, whether or not against
the box, and all types of direct and indirect stock pledges, forward sale
contracts, options, puts, calls, short sales, swaps, “put equivalent positions”
(as defined in Rule 16a-1(h) under the Exchange Act) and similar arrangements
(including on a total return basis), and sales and other transactions through
non-U.S. broker dealers or foreign regulated brokers.
“Subscription
Amount”
means
with respect to each Purchaser, the aggregate amount to be paid for the Shares
and the related Warrants purchased hereunder as indicated on such Purchaser’s
signature page to this Agreement next to the heading “Aggregate Purchase Price
(Subscription Amount)”. For the avoidance of doubt, the Subscription Amount for
each Purchaser shall equal: (i) the Purchase Price; multiplied
by
(ii) the
number of Shares to be purchased at the Closing by such Purchaser.
“Subsidiary”
means
any
“significant subsidiary” as defined in Rule 1-02(w) of Regulation S-X
promulgated by the Commission under the Exchange Act and any other entity
required to be disclosed in the SEC Reports pursuant to Item 601(b)(21) of
Regulation S-K.
“Trading
Affiliate”
has
the
meaning set forth in Section 3.2(h).
“Trading
Day”
means
(i) a day on which the Common Stock is listed or quoted and traded on its
Principal Trading Market (other than the OTC Bulletin Board), or (ii) if the
Common Stock is not listed on a Trading Market (other than the OTC Bulletin
Board), a day on which the Common Stock is traded in the over-the-counter
market, as reported by the OTC Bulletin Board, or (iii) if the Common Stock
is
not quoted on any Trading Market, a day on which the Common Stock is quoted
in
the over-the-counter market as reported in the “pink sheets” by Pink Sheets LLC
(or any similar organization or agency succeeding to its functions of reporting
prices); provided,
that in
the event that the Common Stock is not listed or quoted as set forth in (i),
(ii) and (iii) hereof, then Trading Day shall mean a Business Day.
“Trading
Market”
means
whichever of the New York Stock Exchange, the American Stock Exchange, the
Nasdaq Global Select Market, the Nasdaq Global Market, the Nasdaq Capital Market
or the OTC Bulletin Board on which the Common Stock is listed or quoted for
trading on the date in question.
“Transaction
Documents”
means
this Agreement, the schedules and exhibits attached hereto, the Warrants, the
Registration Rights Agreement, the Irrevocable Transfer Agent Instructions
and
any other documents or agreements executed in connection with the transactions
contemplated hereunder.
“Transfer
Agent”
means
Continental Stock Transfer & Trust Company, or any successor transfer agent
for the Company.
“Warrants”
has
the
meaning set forth in the Recitals to this Agreement; provided,
however
that the
term “Warrants” shall be deemed to include any Liquidated Damages Warrants (as
such term is defined in the Registration Rights Agreement) issued under the
Registration Rights Agreement.
5
“Warrant
Shares”
has
the
meaning set forth in the Recitals to this Agreement; provided,
however
that the
term “Warrant Shares” shall be deemed to include the any shares of Common Stock
issuable upon exercise of any Liquidated Damages Warrants issued under the
Registration Rights Agreement.
ARTICLE
II
PURCHASE
AND SALE
2.1 Closing.
(a) Amount.
Subject
to the terms and conditions set forth in this Agreement, at the Closing, the
Company shall issue and sell to each Purchaser, and each Purchaser shall,
severally and not jointly, purchase from the Company, such number of shares
of
Common Stock for the aggregate purchase price, as indicated below such
Purchaser’s name on the signature page of this Agreement (the “Subscription
Amount”).
In
addition, each Purchaser shall receive a Warrant to purchase a number of Warrant
Shares equal to 10.0% of the number of Shares purchased by such Purchaser,
as
indicated below such Purchaser’s name on the signature page to this Agreement.
The Warrants shall have an exercise price equal to $6.00 per Warrant
Share.
(b) Closing.
The
Closing of the purchase and sale of the Shares and Warrants shall take place
at
the offices of ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ PC, 1251 Avenue of the Americas, New York,
New
York on the Closing Date or at such other locations or remotely by facsimile
transmission or other electronic means as the parties may mutually
agree.
(c) Form
of Payment.
On the
Closing Date, (i) each Purchaser shall pay its respective Subscription Amount
to
the Company for the Shares and the Warrants to be issued and sold to such
Purchaser at the Closing, by wire transfer of immediately available funds in
accordance with the Company's written wire instructions as previously provided
by the Company, (ii)
the
Company shall irrevocably instruct the Transfer Agent to deliver to each
Purchaser by delivery of one or more stock certificates, free and clear of
all
restrictive and other legends (except as expressly provided in Section 4.1(b)
hereof) evidencing, the number of Shares such Purchaser is purchasing as is
set
forth
on such
Purchaser’s signature page to this Agreement next to the heading “Number of
Shares to be Acquired”,
within
three (3) calendar days after the Closing and (iii) the Company shall issue
to each Purchaser a Warrant pursuant to which such Purchaser shall have the
right to acquire such number of Warrant Shares as is set forth on such
Purchaser’s signature page to this Agreement next to the heading “Underlying
Shares Subject to Warrant”, in the case of clauses (ii) and (iii), duly executed
on behalf of the Company and registered in the name of such
Purchaser.
2.2 Closing
Deliveries.
(a) On or prior to the Closing, the Company shall issue, deliver or
cause to be delivered to each Purchaser the following (the “Company
Deliverables”):
(i) this
Agreement, duly executed by the Company;
(ii) a
copy of
a duly executed instructions to the Transfer Agent instructing it to issue
one
or more stock certificates, free and clear of all restrictive and other legends
(except as provided in Section 4.1(b) hereof), evidencing the Shares subscribed
for by Purchaser hereunder, as indicated below such Purchaser’s name on the
applicable signature page hereto, registered in the name of such Purchaser
as
set forth on the Stock Certificate Questionnaire included as Exhibit
C-2
hereto;
(iii) a
Warrant, executed by the Company and registered in the name of such Purchaser
as
set forth on the Stock Certificate Questionnaire included as Exhibit
C-2
hereto,
pursuant to which such Purchaser shall have the right to acquire such number
of
Warrant Shares, as indicated below such Purchaser’s name on the applicable
signature page hereto, on the terms set forth therein;
6
(iv) a
legal
opinion of Company Counsel, in the form attached hereto as Exhibit
D,
executed by such counsel and addressed to the Purchasers and the Placement
Agent;
(v) the
Registration Rights Agreement, duly executed by the Company;
(vi) duly
executed Irrevocable Transfer Agent Instructions acknowledged in writing by
the
Transfer Agent;
(vii) a
certificate of the Secretary of the Company (the “Secretary’s
Certificate”),
dated
as of the Closing Date, (a) certifying the resolutions adopted by the Board
of
Directors of the Company approving the transactions contemplated by this
Agreement and the other Transaction Documents and the issuance of the
Securities, (b) certifying the current versions of the certificate or articles
of incorporation, as amended, and by-laws of the Company and (c) certifying
as
to the signatures and authority of persons signing the Transaction Documents
and
related documents on behalf of the Company, in the form attached hereto as
Exhibit
F;
(viii) the
Compliance Certificate referred to in Section 5.1(h);
(ix) a
certificate evidencing the formation and good standing of the Company in such
entity’s jurisdiction of formation issued by the Secretary of State (or
comparable office) of such jurisdiction, as of a date within thirty (30) days
of
the Closing Date;
(x) a
certificate evidencing the Company’s qualification as a foreign corporation and
good standing issued by the Secretary of State (or comparable office) of each
jurisdiction in which the Company is qualified to do business as a foreign
corporation, as of a date within thirty (30) days of the Closing Date; and
(xi) a
certified copy of the Certificate of Incorporation of the Company, as certified
by the Secretary of State of the State (or comparable office) of such entity’s
jurisdiction of formation, as of a date within thirty (30) days of the Closing
Date.
(b) On
or
prior to the Closing, each Purchaser shall deliver or cause to be delivered
to
the Company the following (the “Purchaser
Deliverables”):
(i) this
Agreement, duly executed by such Purchaser;
(ii) its
Subscription Amount, in United States dollars and in immediately available
funds, in the amount set forth as the “Purchase Price (Subscription Amount)”
indicated below such Purchaser’s name on the applicable signature page hereto by
wire transfer to an account previously designated in writing by the Company
for
such purpose;
(iii) the
Registration Rights Agreement, duly executed by such Purchaser;
(iv) a
fully
completed and duly executed Selling Stockholder Questionnaire in the form
attached as Annex B to the Registration Rights Agreement; and
(v) a
fully
completed and duly executed Accredited Investor Questionnaire and Stock
Certificate Questionnaire in the forms attached hereto as Exhibits
C-1
and
C-2,
respectively.
7
ARTICLE
III
REPRESENTATIONS
AND WARRANTIES
3.1 Representations
and Warranties of the Company.
The
Company hereby represents and warrants as of the date hereof and the Closing
Date (except for the representations and warranties that speak as of a specific
date, which shall be made as of such date), to each of the Purchasers and to
the
Placement Agent that, except as set forth in the Schedules delivered
herewith:
(a) Subsidiaries.
The
Company has no direct or indirect Subsidiaries other than those listed in the
SEC Reports. Except as disclosed in the SEC Reports or Schedule
3.1(a)
hereto,
the Company owns, directly or indirectly, all of the capital stock or comparable
equity interests of each Subsidiary free and clear of any and all Liens, and
all
the issued and outstanding shares of capital stock or comparable equity interest
of each Subsidiary are validly issued and are fully paid, non-assessable and
free of preemptive and similar rights to subscribe for or purchase securities.
(b) Organization
and Qualification.
The
Company and each of its Subsidiaries is an entity duly incorporated or otherwise
organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation or organization (as applicable), with the
requisite power and authority to own or lease and use its properties and assets
and to carry on its business as currently conducted. Neither the Company nor
any
Subsidiary is in violation of any of the provisions of its respective
certificate or articles of incorporation, bylaws or other organizational or
charter documents. The Company and each of its Subsidiaries is duly qualified
to
conduct business and is in good standing as a foreign corporation or other
entity in each jurisdiction in which the nature of the business conducted or
property owned by it makes such qualification necessary, except where the
failure to be so qualified or in good standing, as the case may be, could not
have or reasonably be expected to have, individually or in the aggregate, a
Material Adverse Effect, and, to the Company’s Knowledge no Proceeding has been
instituted, is pending, or, is threatened in any such jurisdiction revoking,
limiting or curtailing or seeking to revoke, limit or curtail such power and
authority or qualification.
(c) Authorization;
Enforcement; Validity.
The
Company has the requisite corporate power and authority to enter into and to
consummate the transactions contemplated by each of the Transaction Documents
to
which it is a party and otherwise to carry out its obligations hereunder and
thereunder. The execution and delivery by the Company of each of the Transaction
Documents to which it is a party and the consummation by it of the transactions
contemplated hereby and thereby (including, but not limited to, the sale and
delivery of the Shares and the Warrants and the reservation for issuance and
the
subsequent issuance of the Warrant Shares upon exercise of the Warrants) have
been duly authorized by all necessary corporate action on the part of the
Company, and no further corporate action is required by the Company, its Board
of Directors or its shareholders in connection therewith other than in
connection with the Required Approvals. Each of the Transaction Documents to
which it is a party has been (or upon delivery will have been) duly executed
by
the Company and is, or when delivered in accordance with the terms hereof,
will
constitute the legal, valid and binding obligation of the Company enforceable
against the Company in accordance with its terms, except as such enforceability
may be limited by applicable bankruptcy, insolvency, reorganization, moratorium,
liquidation or similar laws relating to, or affecting generally the enforcement
of, creditors’ rights and remedies or by other equitable principles of general
application. There are no shareholder agreements, voting agreements, or other
similar arrangements with respect to the Company’s capital stock to which the
Company is a party or, to the Company’s Knowledge, between or among any of the
Company’s shareholders.
8
(d) No
Conflicts.
The
execution, delivery and performance by the Company of the Transaction Documents
to which it is a party and the consummation by the Company of the transactions
contemplated hereby or thereby (including, without limitation, the issuance
of
the Shares and Warrants and the reservation for issuance and issuance of the
Warrant Shares) do not and will not (i) conflict with or violate any provision
of the Company’s or any Subsidiary’s certificate or articles of incorporation,
bylaws or other organizational or charter documents, (ii) except as set forth
on
Schedule
3.1(d),
conflict with, or constitute a default (or an event that with notice or lapse
of
time or both would become a default) under, result in the creation of any Lien
upon any of the properties or assets of the Company or any Subsidiary or give
to
others any rights of termination, amendment, acceleration or cancellation (with
or without notice, lapse of time or both) of, any agreement, credit facility,
debt or other instrument (evidencing a Company or Subsidiary debt or otherwise)
or other understanding to which the Company or any Subsidiary is a party or
by
which any property or asset of the Company or any Subsidiary is bound, or
affected, or (iii) subject to the Required Approvals, conflict with or result
in
a violation of any law, rule, regulation, order, judgment, injunction, decree
or
other restriction of any court or governmental authority to which the Company
or
a Subsidiary is subject (including federal and state securities laws and
regulations and the rules and regulations, assuming the correctness of the
representations and warranties made by the Purchasers herein, of any
self-regulatory organization to which the Company or its securities are subject,
including all applicable Trading Markets), or by which any property or asset
of
the Company or a Subsidiary is bound or affected, except in the case of clauses
(ii) and (iii) such as would not, individually or in the aggregate, have or
reasonably be expected to have a Material Adverse Effect.
(e) Filings,
Consents and Approvals.
Neither
the Company nor any of its Subsidiaries is required to obtain any consent,
waiver, authorization or order of, give any notice to, or make any filing or
registration with, any court or other federal, state, local or other
governmental authority or other Person in connection with the execution,
delivery and performance by the Company of the Transaction Documents (including
the issuance of the Securities), other than (i) the filing with the Commission
of one or more Registration Statements in accordance with the requirements
of
the Registration Rights Agreement, (ii) filings required by applicable state
securities laws, (iii) the filing of a Notice of Sale of Securities on Form
D
with the Commission under Regulation D of the Securities Act, (iv) the filing
of
any requisite notices and/or application(s) to the Principal Trading Market
for
the issuance and sale of the Common Stock and the Warrants and the listing
of
the Common Stock for trading or quotation, as the case may be, thereon in the
time and manner required thereby, (v) the filings required in accordance with
Section 4.9 of this Agreement and (vi) those that have been made or obtained
prior to the date of this Agreement (collectively, the “Required
Approvals”).
(f) Issuance
of the Securities.
The
Shares have been duly authorized and, when issued and paid for in accordance
with the terms of the Transaction Documents, will be duly and validly issued,
fully paid and nonassessable and free and clear of all Liens, other than
restrictions on transfer provided for in the Transaction Documents or imposed
by
applicable securities laws, and shall not be subject to preemptive or similar
rights. The Warrants have been duly authorized and, when issued and paid for
in
accordance with the terms of the Transaction Documents, will be duly and validly
issued, free and clear of all Liens, other than restrictions on transfer
provided for in the Transaction Documents or imposed by applicable securities
laws, and shall not be subject to preemptive or similar rights of shareholders.
The Warrant Shares issuable upon exercise of the Warrants have been duly
authorized and, when issued and paid for in accordance with the terms of the
Transaction Documents and the Warrants will be duly and validly issued, fully
paid and nonassessable, free and clear of all Liens, other than restrictions
on
transfer provided for in the Transaction Documents or imposed by applicable
securities laws, and shall not be subject to preemptive or similar rights of
shareholders. Assuming the accuracy of the representations and warranties of
the
Purchasers in this Agreement, the Shares and the Warrant Shares will be issued
in compliance with all applicable federal and state securities laws. As of
the
Closing Date, the Company shall have reserved from its duly authorized capital
stock not less than 100% of the maximum number of shares of Common Stock
issuable upon exercise of the Warrants (without taking into account any
limitations on the exercise of the Warrants set forth in the Warrants). The
Company shall, so long as any of the Warrants are outstanding, take all action
necessary to reserve and keep available out of its authorized and unissued
capital stock, solely for the purpose of effecting the exercise of the Warrants,
100% of the number of shares of Common Stock issuable upon exercise of the
Warrants (without taking into account any limitations on the exercise of the
Warrants set forth in the Warrants).
9
(g) Capitalization.
The
number of shares and type of all authorized, issued and outstanding capital
stock, options and other securities of the Company (whether or not presently
convertible into or exercisable or exchangeable for shares of capital stock
of
the Company) has been set forth in the SEC Reports and has changed since the
date of such SEC Reports only to reflect stock option and warrant exercises
that
do not, individually or in the aggregate, have a material affect on the issued
and outstanding capital stock, options and other securities. All of the
outstanding shares of capital stock of the Company are duly authorized, validly
issued, fully paid and non-assessable, have been issued in compliance in all
material respects with all applicable federal and state securities laws, and
none of such outstanding shares was issued in violation of any preemptive rights
or similar rights to subscribe for or purchase any capital stock of the Company.
Except as specified in the SEC Reports or Schedule
3.1(g):
(i) no
shares of the Company's capital stock are subject to preemptive rights or any
other similar rights or any liens or encumbrances suffered or permitted by
the
Company; (ii) there are no outstanding options, warrants, scrip, rights to
subscribe to, calls or commitments of any character whatsoever relating to,
or
securities or rights convertible into, or exercisable or exchangeable for,
any
shares of capital stock of the Company, or contracts, commitments,
understandings or arrangements by which the Company is or may become bound
to
issue additional shares of capital stock of the Company or options, warrants,
scrip, rights to subscribe to, calls or commitments of any character whatsoever
relating to, or securities or rights convertible into, or exercisable or
exchangeable for, any shares of capital stock of the Company; (iii) there are
no
outstanding debt securities, notes, credit agreements, credit facilities or
other agreements, documents or instruments evidencing indebtedness of the
Company or by which the Company is or may become bound; (iv) there are no
financing statements securing obligations in any material amounts, either singly
or in the aggregate, filed in connection with the Company; (v) there are no
agreements or arrangements under which the Company is obligated to register
the
sale of any of their securities under the Securities Act (except the
Registration Rights Agreement); (vi) there are no outstanding securities or
instruments of the Company or which contain any redemption or similar
provisions, and there are no contracts, commitments, understandings or
arrangements by which the Company is or may become bound to redeem a security
of
the Company; (vii) there are no securities or instruments containing
anti-dilution or similar provisions that will be triggered by the issuance
of
the Securities; (viii) the Company does not have any stock appreciation rights
or “phantom stock” plans or agreements or any similar plan or agreement; and
(ix) the Company has no liabilities or obligations required to be disclosed
in
the SEC Reports (as defined herein) but not so disclosed in the SEC Reports,
other than those incurred in the ordinary course of the Company's businesses
and
which, individually or in the aggregate, do not or could not have or reasonably
be expected to have a Material Adverse Effect.
(h) SEC
Reports.
The
Company has filed all reports, schedules, forms, statements and other documents
required to be filed by it under the Exchange Act, including pursuant to Section
13(a) or 15(d) thereof, for the two years preceding the date hereof (or such
shorter period as the Company was required by law or regulation to file such
material) (the foregoing materials, including the exhibits thereto and documents
incorporated by reference therein, being collectively referred to herein as
the
“SEC
Reports”
and
together with this Agreement and the Schedules to this Agreement (if any),
the
“Disclosure
Materials”),
on a
timely basis or has received a valid extension of such time of filing and has
filed any such SEC Reports prior to the expiration of any such extension. As
of
the date hereof, the Company is not aware of any event occurring on or prior
to
the Closing Date (other than the transactions contemplated by the Transaction
Documents) that requires the filing of a Form 8-K after the Closing. As of
their
respective dates, or to the extent corrected by a subsequent restatement, the
SEC Reports complied in all material respects with the requirements of the
Securities Act and the Exchange Act and the rules and regulations of the
Commission promulgated thereunder, and none of the SEC Reports, when filed,
contained any untrue statement of a material fact or omitted to state a material
fact required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading. All material Contracts to which the Company or any Subsidiary is
a
party or to which the property or assets of the Company or any of its
Subsidiaries are subject are included as part of or specifically identified
in
the SEC Reports.
10
(i) Financial
Statements.The
financial statements of the Company included in the SEC Reports comply in all
material respects with applicable accounting requirements and the rules and
regulations of the Commission with respect thereto as in effect at the time
of
filing (or to the extent corrected by a subsequent restatement). Such financial
statements have been prepared in accordance with GAAP applied on a consistent
basis during the periods involved, except as may be otherwise specified in
such
financial statements or the notes thereto and except that unaudited financial
statements may not contain all footnotes required by GAAP, and fairly present
in
all material respects the financial position of the Company and its consolidated
subsidiaries taken as a whole as of and for the dates thereof and the results
of
operations and cash flows for the periods then ended, subject, in the case
of
unaudited statements, to normal, year-end audit adjustments.
(j) Tax
Matters.
The
Company and each of its Subsidiaries (i) has accurately and timely prepared
and
filed all foreign, federal and state income and all other tax returns, reports
and declarations required by any jurisdiction to which it is subject, (ii)
has
paid all taxes and other governmental assessments and charges that are material
in amount, shown or determined to be due on such returns, reports and
declarations, except those being contested in good faith, with respect to which
adequate reserves have been set aside on the books of the Company and (iii)
has
set aside on its books provisions reasonably adequate for the payment of all
taxes for periods subsequent to the periods to which such returns, reports
or
declarations apply, except, in the case of clauses (i) and (ii) above, where
the
failure to so pay or file any such tax, assessment, charge or return would
not
have a Material Adverse Effect. There are no unpaid taxes in any material amount
claimed to be due by the Company or any of its Subsidiaries by the taxing
authority of any jurisdiction.
(k) Material
Changes.
Since
the date of the latest audited financial statements included within the SEC
Reports, except as specifically disclosed in the SEC Reports or as set forth
in
Schedule
3.1(k)
hereto,
(i) there have been no events, occurrences or developments that have had or
could reasonably be expected to have, either individually or in the aggregate,
a
Material Adverse Effect, (ii) the Company has not incurred any material
liabilities (contingent or otherwise) other than (A) trade payables, accrued
expenses and other liabilities incurred in the ordinary course of business
consistent with past practice and (B) liabilities not required to be reflected
in the Company's financial statements pursuant to GAAP or required to be
disclosed in filings made with the Commission, (iii) the Company has not altered
its method of accounting or the manner in which it keeps its accounting books
and records, (iv) the Company has not declared or made any dividend or
distribution of cash or other property to its shareholders or purchased,
redeemed or made any agreements to purchase or redeem any shares of its capital
stock (other than in connection with repurchases of unvested stock issued to
employees of the Company), (v) the Company has not issued any equity securities
to any officer, director or Affiliate, except Common Stock issued in the
ordinary course as dividends on outstanding preferred stock or pursuant to
existing Company stock option or stock purchase plans or executive and director
corporate arrangements disclosed in the SEC Reports and (vi) there has not
been
any material change or amendment to, or any waiver of any material right under,
any Material Contract under which the Company, any of its Subsidiaries, or
any
of their respective assets is bound or subject. Except for the issuance of
the
Securities contemplated by this Agreement or as set forth in Schedule
3.1(k)
hereto,
no event, liability or development has occurred or exists with respect to the
Company or its Subsidiaries or their respective business, properties, operations
or financial condition that would be required to be disclosed by the Company
under applicable securities laws at the time this representation is made that
has not been publicly disclosed at least one Trading Day prior to the date
that
this representation is made.
11
(l) Environmental
Matters.
To the
Company’s Knowledge, neither the Company nor any of its Subsidiaries (i) is in
violation of any statute, rule, regulation, decision or order of any
governmental agency or body or any court, domestic or foreign, relating to
the
use, disposal or release of hazardous or toxic substances or relating to the
protection or restoration of the environment or human exposure to hazardous
or
toxic substances (collectively, “Environmental
Laws”),
(ii)
owns or operates any real property contaminated with any substance that is
in
violation of any Environmental Laws, (iii) is liable for any off-site disposal
or contamination pursuant to any Environmental Laws, or (iv) is subject to
any
claim relating to any Environmental Laws; which violation, contamination,
liability or claim has had or could reasonably be expected to have, individually
or in the aggregate, a Material Adverse Effect; and, to the Company’s Knowledge,
there is no pending or threatened investigation that might lead to such a
claim.
(m) Litigation.
There
is no Action which (i) adversely affects or challenges the legality, validity
or
enforceability of any of the Transaction Documents or the Securities or (ii)
except as specifically disclosed in the SEC Reports, could, if there were an
unfavorable decision, individually or in the aggregate, reasonably be expected
to have a Material Adverse Effect. Neither the Company nor any of its
Subsidiaries, nor, to the Company’s Knowledge, any current director or officer
thereof (in his or her capacity thereof), is or has been during the five-year
period prior to the Closing Date the subject of any Action involving a claim
of
violation of or liability under federal or state securities laws or a claim
of
breach of fiduciary duty. To the Company’s Knowledge, there has not been, there
is not pending or there is not contemplated, any investigation by the Commission
involving the Company or, to the Company’s Knowledge, any current or former
director or officer of the Company (in his or her capacity as such). The
Commission has not issued any stop order or other order suspending the
effectiveness of any registration statement filed by the Company or any of
its
Subsidiaries under the Exchange Act or the Securities Act.
(n) Employment
Matters.
No
material labor dispute exists or, to the Company’s Knowledge, is imminent with
respect to any of the employees of the Company which could reasonably be
expected to have a Material Adverse Effect. Except as set forth on Schedule
3.1(n),
none of
the Company’s or any Subsidiary’s employees is a member of a union that relates
to such employee’s relationship with the Company, and neither the Company nor
any of its Subsidiaries is a party to a collective bargaining agreement, and
the
Company and each Subsidiary believes that its relationship with its employees
is
good. No executive officer of the Company (as defined in Rule 501(f) of the
▇▇▇▇
▇▇▇) has notified the Company or any Subsidiary that such officer intends to
leave the Company or any such Subsidiary or otherwise terminate such officer's
employment with the Company or any such Subsidiary. No executive officer, to
the
Company’s Knowledge, is in violation of any material term of any employment
contract, confidentiality, disclosure or proprietary information agreement
or
non-competition agreement, or any other contract or agreement or any restrictive
covenant, and the continued employment of each such executive officer does
not
subject the Company or any Subsidiary to any liability with respect to any
of
the foregoing matters. The Company and its Subsidiaries are in compliance with
all U.S. federal, state, local and foreign laws and regulations relating to
employment and employment practices, terms and conditions of employment and
wages and hours, except where the failure to be in compliance would not,
individually or in the aggregate, have or reasonably be expected to have a
Material Adverse Effect.
(o) Compliance.
Neither
the Company nor any of its Subsidiaries (i) is in default under or in violation
of (and no event has occurred that has not been waived that, with notice or
lapse of time or both, would result in a default by the Company or any of its
Subsidiaries under), nor has the Company or any of its Subsidiaries received
notice of a claim that it is in default under or that it is in violation of,
any
indenture, loan or credit agreement or any other agreement or instrument to
which it is a party or by which it or any of its properties is bound (whether
or
not such default or violation has been waived), (ii) is in violation of any
order of any court, arbitrator or governmental body having jurisdiction over
the
Company or its properties or assets, or (iii) is or has been in violation of,
or
in receipt of notice that it is in violation of, any statute, rule or regulation
of any governmental authority applicable to the Company, except in each case
as
would not, individually or in the aggregate, have or reasonably be expected
to
have a Material Adverse Effect.
12
(p) Regulatory
Permits.
The
Company and each of its Subsidiaries possess all certificates, authorizations
and permits issued by the appropriate federal, state, local or foreign
regulatory authorities necessary to conduct its respective business as described
in the SEC Reports, except where the failure to possess such permits,
individually or in the aggregate, has not and could not reasonably be expected
to have a Material Adverse Effect (“Material
Permits”),
and
(i) neither the Company nor any of its Subsidiaries has received any notice
of
proceedings relating to the revocation or modification of any such Material
Permits and (ii) the Company is unaware of any facts or circumstances that
the
Company would reasonably expect to give rise to the revocation or modification
of any Material Permits.
(q) Title
to Assets.
Neither
the Company nor any of its Subsidiaries owns any real property. The Company
and
its Subsidiaries have good and marketable title to all personal property owned
by them which is material to the business of the Company and its Subsidiaries,
taken as whole, in each case free and clear of all Liens, except as disclosed
in
the SEC Reports or Schedule
3.1q
or such
as do not materially affect the value of such property and do not interfere
with
the use made and proposed to be made of such property by the Company and any
of
its Subsidiaries. Any real property and facilities held under lease by the
Company and any of its Subsidiaries are held by them under valid, subsisting
and
enforceable leases with such exceptions as are not material and do not interfere
with the use made and proposed to be made of such property and buildings by
the
Company and its Subsidiaries.
(r) Patents
and Trademarks.
The
Company and its Subsidiaries own, possess, license or have other rights to
use
all foreign and domestic patents, patent applications, trade and service marks,
trade and service ▇▇▇▇ registrations, trade names, copyrights, licenses,
inventions, trade secrets, technology, Internet domain names, know-how and
other
intellectual property (collectively, the “Intellectual
Property”)
necessary for the conduct of their respective businesses as now conducted.
Except as set forth in the SEC Reports and except where such violations or
infringements could not reasonably be expected to have, either individually
or
in the aggregate, a Material Adverse Effect, (a) there are no rights of
third parties to any such Intellectual Property; (b) to the Company’s Knowledge,
there is no infringement by third parties of any such Intellectual Property;
(c)
to the Company’s Knowledge, there is no pending or threatened action, suit,
proceeding or claim by others challenging the Company’s and its Subsidiaries’
rights in or to any such Intellectual Property, and the Company is unaware
of
any facts which would form a reasonable basis for any such claim; (d) to the
Company’s Knowledge, there is no pending or threatened action, suit, proceeding
or claim by others challenging the validity or scope of any such Intellectual
Property; and (e) to the Company’s Knowledge, there is no pending or threatened
action, suit, proceeding or claim by others that the Company and/or any
Subsidiary infringes or otherwise violates any patent, trademark, copyright,
trade secret or other proprietary rights of others, and the Company is unaware
of any other fact which would form a reasonable basis for any such
claim.
(s) Insurance.
The
Company and each of the Subsidiaries are insured by insurers of recognized
financial responsibility against such losses and risks and in such amounts
as
the Company believes to be prudent and customary in the businesses and locations
in which the Company and such Subsidiaries are engaged. Neither the Company
nor
any of its Subsidiaries has received any notice of cancellation of any such
insurance, nor does the Company or any Subsidiary have any knowledge that it
will be unable to renew its existing insurance coverage for the Company and
such
Subsidiaries as and when such coverage expires or to obtain similar coverage
from similar insurers as may be necessary to continue its business without
a
significant increase in cost.
(t) Transactions
With Affiliates and Employees.
Except
as set forth in the SEC Reports on on Schedule 3(t), none of the officers or
directors of the Company and, to the Company’s Knowledge, none of the employees
of the Company is presently a party to any transaction with the Company or
to a
presently contemplated transaction (other than for services as employees,
officers and directors) that would be required to be disclosed pursuant to
Item
404 of Regulation S-K promulgated under the Securities Act.
13
(u) Internal
Accounting Controls.
The
Company and each of its Subsidiaries maintain a system of internal accounting
controls sufficient to provide reasonable assurance that (i) transactions are
executed in accordance with management's general or specific authorizations,
(ii) transactions are recorded as necessary to permit preparation of financial
statements in conformity with GAAP and to maintain asset and liability
accountability, (iii) access to assets or incurrence of liabilities is permitted
only in accordance with management's general or specific authorization, and
(iv)
the recorded accountability for assets and liabilities is compared with the
existing assets and liabilities at reasonable intervals and appropriate action
is taken with respect to any differences.
(v) ▇▇▇▇▇▇▇▇-▇▇▇▇▇;
Disclosure Controls.
The
Company is in compliance in all material respects with all of the provisions
of
the ▇▇▇▇▇▇▇▇-▇▇▇▇▇ Act of 2002 which are applicable to it, except where such
noncompliance has not had and could not reasonably be expected to have,
individually or in the aggregate, a Material Adverse Effect. The Company
maintains disclosure controls and procedures (as such term is defined in Rule
13a-15(e) and 15d-15(e) under the Exchange Act) that are effective in ensuring
that information required to be disclosed by the Company in the reports that
it
files or submits under the Exchange Act is recorded, processed, summarized
and
reported, within the time periods specified in the rules and forms of the
Commission, including, without limitation, controls and procedures designed
in
to ensure that information required to be disclosed by the Company in the
reports that it files or submits under the Exchange Act is accumulated and
communicated to the Company's management, including its principal executive
officer or officers and its principal financial officer or officers, as
appropriate, to allow timely decisions regarding required disclosure.
(w) Certain
Fees.
No
person
or entity will have, as a result of the transactions contemplated by this
Agreement, any valid right, interest or claim against or upon the Company or
a
Purchaser for any commission, fee or other compensation pursuant to any
agreement, arrangement or understanding entered into by or on behalf of the
Company, other than the Placement Agent with respect to the offer and sale
of
the Securities (which placement agent fees are being paid by the Company).
The
Company shall indemnify, pay, and hold each Purchaser harmless against, any
liability, loss or expense (including, without limitation, attorneys’ fees and
out-of-pocket expenses) arising in connection with any such right, interest
or
claim.
(x) Private
Placement.
Assuming
the accuracy of the Purchasers’ representations and warranties set forth in
Section 3.2 of this Agreement, no registration under the Securities Act is
required for the offer and sale of the Securities by the Company to the
Purchasers under the Transaction Documents.
(y) Registration
Rights.Other
than each of the Purchasers or as set forth in Schedule
3.1(y)
hereto,
no Person has any right to cause the Company to effect the registration under
the Securities Act of any securities of the Company other than those securities
which are currently registered on an effective registration statement on file
with the Commission.
(z) No
Directed Selling Efforts or General Solicitation.
Neither
the Company, nor any of its Affiliates, nor any Person acting on its or their
behalf has conducted any “general solicitation” or “general advertising” (as
those terms are used in Regulation D) in connection with the offer or sale
of
any of the Securities.
(aa) No
Integrated Offering.
Assuming the accuracy of the Purchasers’ representations and warranties set
forth in Section 3.2, none of the Company, its Subsidiaries nor any of their
Affiliates, nor any Person acting on its or their behalf has, directly or
indirectly, at any time within the past six months, made any offers or sales
of
any Company security or solicited any offers to buy any security under
circumstances that would (i) eliminate the availability of the exemption from
registration under Regulation D under the Securities Act in connection with
the
offer and sale by the Company of the Securities as contemplated hereby or (ii)
cause the offering of the Securities pursuant to the Transaction Documents
to be
integrated with prior offerings by the Company for purposes of any applicable
law, regulation or shareholder approval provisions, including, without
limitation, under the rules and regulations of any Trading Market on which
any
of the securities of the Company are listed or designated.
14
(bb) Listing
and Maintenance Requirements.
The
Common Stock is registered pursuant to Section 12(b) or 12(g) of the Exchange
Act, and the Company has taken no action designed to terminate (or which would
reasonably be expected to have the effect of terminating) the registration
of
the Common Stock under the Exchange Act nor has the Company received any
notification that the Commission is contemplating terminating such registration.
Except as specified in the SEC Reports, the Company has not, in the 12 months
preceding the date hereof, received written notice from any Trading Market
on
which the Common Stock is or has been listed or quoted to the effect that the
Company is not in compliance with the listing or maintenance requirements of
such Trading Market. The Company is, and has no reason to believe that it will
not in the foreseeable future continue to be, in compliance in all material
respects with the listing and maintenance requirements for continued trading
of
the Common Stock on the Principal Trading Market.
(cc) Investment
Company.
Neither
the Company nor any of its Subsidiaries is required to be registered as, and
is
not an Affiliate of, and immediately following the Closing will not be required
to register as, an “investment company” within the meaning of the Investment
Company Act of 1940, as amended.
(dd) Questionable
Payments. Neither
the Company nor any of its Subsidiaries, nor, to the Company’s Knowledge, any
directors, officers, employees, agents or other Persons acting on behalf of
the
Company or any of its Subsidiaries has, in the course of its actions for, or
on
behalf of, the Company: (a) directly or indirectly, used any corporate funds
for
unlawful contributions, gifts, entertainment or other unlawful expenses relating
to foreign or domestic political activity; (b) made any direct or indirect
unlawful payments to any foreign or domestic governmental officials or employees
or to any foreign or domestic political parties or campaigns from corporate
funds; (c) violated in any material respect any provision of the Foreign Corrupt
Practices Act of 1977, as amended, or (d) made any other unlawful bribe, rebate,
payoff, influence payment, kickback or other unlawful payment to any foreign
or
domestic government official or employee.
(ee) Application
of Takeover Protections; Rights Agreements.
The
Company and its board of directors have taken all necessary action, if any,
in
order to render inapplicable any control share acquisition, business
combination, poison pill (including any distribution under a rights agreement)
or other similar anti-takeover provision under the Company's charter documents
or the laws of its state of incorporation that is or could reasonably be
expected to become applicable to any of the Purchasers as a result of the
Purchasers and the Company fulfilling their obligations or exercising their
rights under the Transaction Documents, including, without limitation, the
Company's issuance of the Securities and the Purchasers' ownership of the
Securities. The Company has not adopted a stockholder rights plan or similar
arrangement relating to accumulations of beneficial ownership of Common Stock
or
a change in control of the Company.
(ff) Disclosure.
The
Company confirms that neither it nor any of its officers or directors nor any
other Person acting on its or their behalf has provided, and it has not
authorized the Placement Agent to provide, any Purchaser or its respective
agents or counsel with any information that it believes constitutes or could
reasonably be expected to constitute material, non-public information except
insofar as the existence, provisions and terms of the Transaction Documents
and
the proposed transactions hereunder may constitute such information, all of
which will be disclosed by the Company in the Form 8-K as contemplated by
Section 4.9 hereof. The Company understands and confirms that the Purchasers
will rely on the foregoing representations in effecting transactions in
securities of the Company. All disclosure provided to the Purchasers regarding
the Company, its business and the transactions contemplated hereby furnished
by
the Company or authorized by the Company and furnished by the Placement Agent
on
behalf of the Company prior to the date hereof
15
(including
the Company’s representations and warranties set forth in this Agreement) are
true and correct in all material respects and do not contain any untrue
statement of a material fact or omit to state any material fact necessary in
order to make the statements made therein, in light of the circumstances under
which they were made, not misleading. No event or circumstance has occurred
or
information exists with respect to the Company or any of its Subsidiaries or
its
or their business, properties, operations or financial conditions, which, under
applicable law, rule or regulation, requires public disclosure or announcement
by the Company but which has not been so publicly announced or disclosed
(assuming for this purpose that the Company’s reports filed under the Exchange
Act are being incorporated into an effective registration statement filed by
the
Company under the Securities Act), except for the announcement of this Agreement
and related transactions.
(gg) Off
Balance Sheet Arrangements.
There
is no transaction, arrangement, or other relationship between the Company (or
any Subsidiary) and an unconsolidated or other off balance sheet entity that
is
required to be disclosed by the Company in its Exchange Act filings and is
not
so disclosed or that otherwise would be reasonably be likely to have a Material
Adverse Effect.
(hh) Acknowledgment
Regarding Purchasers’ Purchase of Securities.
The Company acknowledges and agrees that each of the Purchasers is acting solely
in the capacity of an arm’s length purchaser with respect to the Transaction
Documents and the transactions contemplated hereby and thereby. The
Company further acknowledges that no Purchaser is acting as a financial advisor
or fiduciary of the Company (or in any similar capacity) with respect to the
Transaction Documents and the transactions contemplated thereby and any advice
given by any Purchaser or any of their respective representatives or agents
in
connection with the Transaction Documents and the transactions contemplated
thereby is merely incidental to the Purchasers’ purchase of the
Securities. The Company further represents to each Purchaser that the
Company’s decision to enter into this Agreement and the other Transaction
Documents has been based solely on the independent evaluation of the
transactions contemplated hereby by the Company and its
representatives.
(ii) Regulation
M Compliance.
The Company has not, and to the Company’s Knowledge no one acting on its behalf
has, (i) taken, directly or indirectly, any action designed to cause or to
result in the stabilization or manipulation of the price of any security of
the
Company to facilitate the sale or resale of any of the Securities, (ii) sold,
bid for, purchased, or paid any compensation for soliciting purchases of, any
of
the securities of the Company or (iii) paid or agreed to pay to any Person
any
compensation for soliciting another to purchase any other securities of the
Company, other than, in the case of clauses (ii) and (iii), compensation paid
to
the Placement Agent in connection with the placement of the
Securities
(jj) No
Additional Agreements.The
Company does not have any agreement or understanding with any Purchaser with
respect to the transactions contemplated by the Transaction Documents other
than
as specified in the Transaction Documents.
(kk) Form
S-3 Eligibility.
As of
the date hereof, the Company meets the eligibility requirements contained in
Section I.A. and in Section I.B.3 of the General Instructions to Form S-3 to
register the resale of its securities by selling securityholders with the
Commission on a registration statement on Form S-3 under the Securities Act,
subject to any limitations or restrictions that may be imposed by the Commission
on the Company’s use of a registration statement on Form S-3 as a result of its
interpretation of Rule 415 under the Securities Act.
3.2 Representations
and Warranties of the Purchasers.
Each
Purchaser hereby, for itself and for no other Purchaser, represents and warrants
as of the date hereof and as of the Closing Date to the Company as
follows:
16
(a) Organization;
Authority.
Such
Purchaser is an entity duly organized, validly existing and in good standing
under the laws of the jurisdiction of its organization with the requisite
corporate or partnership power and authority to enter into and to consummate
the
transactions contemplated by the applicable Transaction Documents and otherwise
to carry out its obligations hereunder and thereunder. The execution, delivery
and performance by such Purchaser of the transactions contemplated by this
Agreement have been duly authorized by all necessary corporate or, if such
Purchaser is not a corporation, such partnership, limited liability company
or
other applicable like action, on the part of such Purchaser. Each of this
Agreement and the Registration Rights Agreement has been duly executed by such
Purchaser, and when delivered by such Purchaser in accordance with the terms
hereof, will constitute the valid and legally binding obligation of such
Purchaser, enforceable against it in accordance with its terms, except as such
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium, liquidation or similar laws relating to, or
affecting generally the enforcement of, creditors’ rights and remedies or by
other equitable principles of general application.
(b) No
Conflicts.
The
execution, delivery and performance by such Purchaser of this Agreement and
the
Registration Rights Agreement and the consummation by such Purchaser of the
transactions contemplated hereby and thereby will not (i) result in a violation
of the organizational documents of such Purchaser, (ii) conflict with, or
constitute a default (or an event which with notice or lapse of time or both
would become a default) under, or give to others any rights of termination,
amendment, acceleration or cancellation of, any agreement, indenture or
instrument to which such Purchaser is a party, or (iii) result in a violation
of
any law, rule, regulation, order, judgment or decree (including federal and
state securities laws) applicable to such Purchaser, except in the case of
clauses (ii) and (iii) above, for such conflicts, defaults, rights or violations
which would not, individually or in the aggregate, reasonably be expected to
have a material adverse effect on the ability of such Purchaser to perform
its
obligations hereunder.
(c) Investment
Intent.
Such
Purchaser understands that the Securities are “restricted securities” and have
not been registered under the Securities Act or any applicable state securities
law and is acquiring the Securities and, upon exercise of the Warrants, will
acquire the Warrant Shares issuable upon exercise thereof as principal for
its
own account and not with a view to, or for distributing or reselling such
Securities or any part thereof in violation of the Securities Act or any
applicable state securities laws; provided,
however,
that by
making the representations herein, such Purchaser does not agree to hold any
of
the Securities for any minimum period of time and reserves the right, subject
to
the provisions of this Agreement and the Registration Rights Agreement, at
all
times to sell or otherwise dispose of all or any part of such Securities or
Warrant Shares pursuant to an effective registration statement under the
Securities Act or under an exemption from such registration and in compliance
with applicable federal and state securities laws. Such Purchaser is acquiring
the Securities hereunder in the ordinary course of its business. Such Purchaser
does not presently have any agreement, plan or understanding, directly or
indirectly, with any Person to distribute or effect any distribution of any
of
the Securities (or any securities which are derivatives thereof) to or through
any person or entity; such Purchaser is not a registered broker-dealer under
Section 15 of the Exchange Act or an entity engaged in a business that would
require it to be so registered as a broker-dealer.
(d) Purchaser
Status.
At the
time such Purchaser was offered the Securities, it was, and at the date hereof
it is, and on each date on which it exercises the Warrants it will be, an
“accredited investor” as defined in Rule 501(a) under the Securities Act.
(e) Residency.
Such
Purchaser has, if an entity, its principal place of business or, if an
individual, its primary residence in the jurisdiction set forth immediately
below such Purchaser’s name on the signature pages hereto
17
(f) General
Solicitation.Such
Purchaser is not purchasing the Securities as a result of any advertisement,
article, notice or other communication regarding the Securities published in
any
newspaper, magazine or similar media or broadcast over television or radio
or
presented at any seminar or any other general advertisement.
(g) Experience
of Such Purchaser.
Such
Purchaser, either alone or together with its representatives, has such
knowledge, sophistication and experience in business and financial matters
so as
to be capable of evaluating the merits and risks of the prospective investment
in the Securities, and has so evaluated the merits and risks of such investment.
Such Purchaser is able to bear the economic risk of an investment in the
Securities and, at the present time, is able to afford a complete loss of such
investment.
(h) Access
to Information.
Such
Purchaser acknowledges that it has had the opportunity to review the Disclosure
Materials and has been afforded (i) the opportunity to ask such questions as
it
has deemed necessary of, and to receive answers from, representatives of the
Company concerning the terms and conditions of the offering of the Securities
and the merits and risks of investing in the Securities; (ii) access to
information about the Company and the Subsidiaries and their respective
financial condition, results of operations, business, properties, management
and
prospects (other than material non-public information) sufficient to enable
it
to evaluate its investment; and (iii) the opportunity to obtain such additional
information that the Company possesses or can acquire without unreasonable
effort or expense that is necessary to make an informed investment decision
with
respect to the investment. Neither such inquiries nor any other investigation
conducted by or on behalf of such Purchaser or its representatives or counsel
shall modify, amend or affect such Purchaser's right to rely on the truth,
accuracy and completeness of the Disclosure Materials and the Company's
representations and warranties contained in the Transaction Documents. Such
Purchaser has sought such accounting, legal and tax advice as it has considered
necessary to make an informed decision with respect to its acquisition of the
Securities.
(i) Certain
Trading Activities.
Other
than with respect to the transactions contemplated herein, since the earlier
to
occur of (1) the time that such Purchaser was first contacted by the Company,
the Placement Agent or any other Person regarding the transactions contemplated
hereby and (2) the tenth (10th)
day
prior to the date of this Agreement, neither the Purchaser nor any Affiliate
of
such Purchaser which (x) had knowledge of the transactions contemplated hereby,
(y) has or shares discretion relating to such Purchaser’s investments or trading
or information concerning such Purchaser’s investments, including in respect of
the Securities, and (z) is subject to such Purchaser’s review or input
concerning such Affiliate’s investments or trading (collectively, “Trading
Affiliates”)
has
directly or indirectly, nor has any Person acting on behalf of or pursuant
to
any understanding with such Purchaser or Trading Affiliate, effected or agreed
to effect any transactions in the securities of the Company (including, without
limitation, any Short Sales involving the Company’s securities). Notwithstanding
the foregoing, in the case of a Purchaser and/or Trading Affiliate that is,
individually or collectively, a multi-managed investment vehicle whereby
separate portfolio managers manage separate portions of such Purchaser's or
Trading Affiliate’s assets and the portfolio managers have no direct knowledge
of the investment decisions made by the portfolio managers managing other
portions of such Purchaser's or Trading Affiliate’s assets, the representation
set forth above shall apply only with respect to the portion of assets managed
by the portfolio manager that have knowledge about the financing transaction
contemplated by this Agreement. Other than to other Persons party to this
Agreement, such Purchaser has maintained the confidentiality of all disclosures
made to it in connection with this transaction (including the existence and
terms of this transaction). Notwithstanding the foregoing, no Purchaser makes
any representation, warranty or covenant hereby that it will not engage in
Short
Sales in the securities of the Company after the earlier to occur of (i) sixty
(60) days following the Closing Date and (ii) the Effective Date.
18
(j) Brokers
and Finders.
No
Person (other than the Placement Agent) will have, as a result of the
transactions contemplated by this Agreement, any valid right, interest or claim
against or upon the Company or any Purchaser for any commission, fee or other
compensation pursuant to any agreement, arrangement or understanding entered
into by or on behalf of the Purchaser.
(k) Independent
Investment Decision.
Such
Purchaser has independently evaluated the merits of its decision to purchase
Securities pursuant to the Transaction Documents, and such Purchaser confirms
that it has not relied on the advice of any other Purchaser’s business and/or
legal counsel in making such decision. Such Purchaser understands that nothing
in this Agreement or any other materials presented by or on behalf of the
Company to the Purchaser in connection with the purchase of the Securities
constitutes legal, tax or investment advice. Such Purchaser has consulted such
legal, tax and investment advisors as it, in its sole discretion, has deemed
necessary or appropriate in connection with its purchase of the Securities.
Such
Purchaser understands that the Placement Agent has acted solely as the agent
of
the Company in this placement of the Securities and such Purchaser has not
relied on the business or legal advice of the Placement Agent or any of its
agents, counsel or Affiliates in making its investment decision hereunder,
and
confirms that none of such Persons has made any representations or warranties
to
such Purchaser in connection with the transactions contemplated by the
Transaction Documents.
(l) Reliance
on Exemptions.
Such
Purchaser understands that the Securities being offered and sold to it in
reliance on specific exemptions from the registration requirements of United
States federal and state securities laws and that the Company is relying in
part
upon the truth and accuracy of, and such Purchaser’s compliance with, the
representations, warranties, agreements, acknowledgements and understandings
of
such Purchaser set forth herein in order to determine the availability of such
exemptions and the eligibility of such Purchaser to acquire the
Securities.
(m) No
Governmental Review.Such
Purchaser understands that no United States federal or state agency or any
other
government or governmental agency has passed on or made any recommendation
or
endorsement of the Securities or the fairness or suitability of the investment
in the Securities nor have such authorities passed upon or endorsed the merits
of the offering of the Securities.
(n) Regulation
M.Such
Purchaser is aware that the anti-manipulation rules of Regulation M under the
Exchange Act may apply to sales of Common Stock and other activities with
respect to the Common Stock by the Purchasers.
(o) Beneficial
Ownership.
Such
Purchaser shall not, by reason of its purchase of the Shares, become a
beneficial owner (as defined under the Section 13(d) of the Exchange Act) of
20%
or more of the Common Stock.
The
Company and each of the Purchasers acknowledge and agree that no party to this
Agreement has made or makes any representations or warranties with respect
to
the transactions contemplated hereby other than those specifically set forth
in
this Article III and the other Transaction Documents.
ARTICLE
IV
OTHER
AGREEMENTS OF THE PARTIES
4.1 Transfer
Restrictions.
(a) Compliance
with Laws.
Notwithstanding any other provision of this Article IV, each Purchaser covenants
that the Securities may be disposed of only pursuant to an effective
registration statement under, and in compliance with the requirements of, the
Securities Act, or pursuant to an available exemption from, or in a transaction
not subject to, the registration requirements of the Securities Act, and in
compliance with any applicable state and federal securities laws. In connection
with any transfer of the Securities other than (i) pursuant to an effective
registration statement, (ii) to the Company, (iii) pursuant to Rule 144(k)
following the applicable holding period or (iv) in connection with a bona fide
pledge as contemplated in Section 4.1(b), the Company may require the transferor
thereof to provide to the Company an opinion of counsel selected by the
transferor and reasonably acceptable to the Company, the form and substance
of
which opinion shall be reasonably satisfactory to the Company, to the effect
that such transfer does not require registration of such transferred Securities
under the Securities Act. As a condition of transfer, any such transferee shall
agree in writing to be bound by the terms of this Agreement and shall have
the
rights of a Purchaser under this Agreement and the Registration Rights
Agreement.
19
(b) Legends.
Certificates evidencing the Securities shall bear any legend as required by
the
“blue sky” laws of any state and a restrictive legend in substantially the
following form, until such time as they are not required under Section
4.1(c):
[NEITHER
THESE SECURITIES NOR THE SECURITIES ISSUABLE UPON EXERCISE OF THESE SECURITIES
HAVE BEEN REGISTERED] [THESE SECURITIES HAVE NOT BEEN REGISTERED] UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), OR APPLICABLE STATE
SECURITIES LAWS. THE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED
OR ASSIGNED (I) IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR
THE SECURITIES UNDER THE SECURITIES ACT OR (B) AN AVAILABLE EXEMPTION FROM,
OR
IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES
ACT AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS OR BLUE SKY LAWS
AS
EVIDENCED BY A LEGAL OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE COMPANY
OR
(II)
UNLESS SOLD PURSUANT TO RULE 144 UNDER SAID ACT.
The
Company acknowledges and agrees that a Purchaser may from time to time pledge,
and/or grant a security interest in, some or all of the legended Securities
in
connection with applicable securities laws, pursuant to a bona fide margin
agreement in compliance with a bona fide margin loan. Such a pledge would not
be
subject to approval or consent of the Company and no legal opinion of legal
counsel to the pledgee, secured party or pledgor shall be required in connection
with the pledge, but such legal opinion shall be required in connection with
a
subsequent transfer or foreclosure following default by the Purchaser transferee
of the pledge. No notice shall be required of such pledge, but Purchaser’s
transferee shall promptly notify the Company of any such subsequent transfer
or
foreclosure. Each Purchaser acknowledges that the Company shall not be
responsible for any pledges relating to, or the grant of any security interest
in, any of the Securities or for any agreement, understanding or arrangement
between any Purchaser and its pledgee or secured party. At the appropriate
Purchaser’s expense, the Company will execute and deliver such reasonable
documentation as a pledgee or secured party of Shares may reasonably request
in
connection with a pledge or transfer of the Shares, including the preparation
and filing of any required prospectus supplement under Rule 424(b)(3) of the
Securities Act or other applicable provision of the Securities Act to
appropriately amend the list of Selling Stockholders thereunder. Each Purchaser
acknowledges and agrees that, except as otherwise provided in Section 4.1(c),
any Shares subject to a pledge or security interest as contemplated by this
Section 4.1(b) shall continue to bear the legend set forth in this Section
4.1(b) and be subject to the restrictions on transfer set forth in Section
4.1(a).
20
(c) Removal
of Legends.
The
legend set forth in Section 4.1(b) above shall be removed and the Company shall
issue a certificate without such legend or any other “restrictive” legend to the
holder of the applicable Securities upon which it is stamped or issue to such
holder by electronic delivery at the applicable balance account at the
Depository Trust Company (“DTC”),
if
(i) such Securities are registered for resale under the Securities Act pursuant
to an effective registration statement, (ii) such Securities are sold or
transferred pursuant to Rule 144 (assuming the transferor is not an Affiliate
of
the Company), or (iii) such Securities are eligible for sale under Rule 144(k).
The Company shall cause Company Counsel to issue the legal opinion referred
to
in the Irrevocable Transfer Agent Instructions to the Company’s transfer agent
on the Effective Date. Any fees (with respect to the Transfer Agent, Company
Counsel or otherwise) associated with the issuance of such opinion or the
removal of such legend shall be borne by the Company. If any portion of the
Warrant is exercised at a time when there is an effective registration statement
to cover the resale of the Warrant Shares, or if such Warrant Shares may be
sold
under Rule 144(k), then such Warrant Shares shall be issued free of all legends.
Following the Effective Date, or at such earlier time as a legend is no longer
required for certain Securities, the Company will no later than three (3)
Trading Days following the delivery by a Purchaser to the Company or the
Transfer Agent (with notice to the Company) of (i) a legended certificate
representing such Shares or Warrant Shares (endorsed or with stock powers
attached, signatures guaranteed, and otherwise in form necessary to affect the
reissuance and/or transfer or (ii) an Exercise Notice in the manner stated
in
the Warrants to effect the exercise of such Warrant in accordance with its
terms
and an opinion of counsel to the extent required by Section 4.1(a), (such third
Trading Day, the “Legend
Removal Date”),
to
deliver or cause to be delivered to such Purchaser a certificate representing
such Securities that is free from all restrictive and other legends. The Company
may not make any notation on its records or give instructions to the Transfer
Agent that enlarge the restrictions on transfer set forth in this Section.
Certificates for Shares or Warrant Shares subject to legend removal hereunder
shall be transmitted by the Transfer Agent to the Purchasers by crediting the
account of the Purchaser’s prime broker with DTC.
(d) Irrevocable
Transfer Agent Instructions.
The
Company shall issue irrevocable instructions to its transfer agent, and any
subsequent transfer agent, to issue certificates or credit shares to the
applicable balance accounts at DTC, registered in the name of each Purchaser
or
its respective nominee(s), for the Shares and the Warrant Shares in such amounts
as specified from time to time by each Purchaser to the Company in the form
of
Exhibit
E
attached
hereto (the “Irrevocable
Transfer Agent Instructions”).
The
Company represents and warrants that no instruction other than the Irrevocable
Transfer Agent Instructions referred to in this Section 4.1(d) will be given
by
the Company to its transfer agent in connection with this Agreement, and that
the Securities shall otherwise be freely transferable on the books and records
of the Company as and to the extent provided in this Agreement and the other
Transaction Documents. The Company acknowledges that a breach by it of its
obligations under this Section 4.1(d) will cause irreparable harm to a
Purchaser. Accordingly, the Company acknowledges that the remedy at law for
a
breach of its obligations under this Section 4.1(d) will be inadequate and
agrees, in the event of a breach or threatened breach by the Company of the
provisions of this Section 4.1(d), that a Purchaser shall be entitled, in
addition to all other available remedies, to an order and/or injunction
restraining any breach and requiring immediate issuance and transfer, without
the necessity of showing economic loss and without any bond or other security
being required.
(e) Acknowledgement.
Each
Purchaser hereunder acknowledges (i) that the Company’s agreement hereunder to
remove any legends from the Shares or the Warrant Shares is not an affirmative
statement or representation that such Shares or the Warrant Shares are freely
tradable and (ii) its primary responsibilities under the Securities Act and
accordingly will not sell the Shares, the Warrant Shares or any interest therein
without complying with the requirements of the Securities Act. While the
above-referenced registration statement remains effective, each Purchaser
hereunder may sell the shares in accordance with the plan of distribution
contained in the registration statement and if it does so it will comply
therewith and with the related prospectus delivery requirements unless an
exemption therefrom is available. Each Purchaser, severally and not jointly
with
the other Purchasers, agrees that if it is notified by the Company in writing
at
any time after the date any legend is removed pursuant to Section
4.1(c)
hereof
that the registration statement registering the resale of the Shares or the
Warrant Shares is not effective or that the prospectus included in such
registration statement no longer complies with the requirements of Section
10 of
the Securities Act, the Purchaser will refrain from selling such Shares and
Warrant Shares until such time as the Purchaser is notified by the Company
that
such registration statement is effective or such prospectus is compliant with
Section 10 of the Exchange Act, unless such Purchaser is able to, and does,
sell
such Shares or Warrant Shares pursuant to an available exemption from the
registration requirements of Section 5 of the Securities Act. Both the Company
and its Transfer Agent, and their respective directors, officers, employees
and
agents, may rely on this subsection (e) and each Purchaser hereunder will
indemnify and hold harmless each of such persons from any breaches or violations
of this paragraph.
21
(f) Buy-In.
If the
Company shall fail for any reason or for no reason to issue to a Purchaser
unlegended certificates within three (3) Trading Days of receipt of documents
necessary for the removal of the legend set forth above (the “Deadline
Date”),
then,
in addition to all other remedies available to such Purchaser, if on or after
the Trading Day immediately following such three (3) Trading Day period, such
Purchaser purchases (in an open market transaction or otherwise) shares of
Common Stock to deliver in satisfaction of a sale by the holder of shares of
Common Stock that such Purchaser anticipated receiving from the Company without
any restrictive legend (a “Buy-In”),
then
the Company shall, within three (3) Trading Days after such Purchaser’s request
and in such Purchaser’s sole discretion, either (i) pay cash to the Purchaser in
an amount equal to such Purchaser’s total purchase price (including brokerage
commissions, if any) for the shares of Common Stock so purchased (the
“Buy-In
Price”),
at
which point the Company’s obligation to deliver such certificate (and to issue
such shares of Common Stock) shall terminate, or (ii) promptly honor its
obligation to deliver to such Purchaser a certificate or certificates
representing such shares of Common Stock and pay cash to the Purchaser in an
amount equal to the excess (if any) of the Buy-In Price over the product of
(a)
such number of shares of Common Stock, times (b) the Closing Sales Price on
the
Deadline Date.
4.2 Acknowledgment
of Dilution.
The Company acknowledges that the issuance of the Securities may result in
dilution of the outstanding shares of Common Stock, which dilution may be
substantial under certain market conditions. The Company further
acknowledges that its obligations under the Transaction Documents, including
without limitation its obligation to issue the Shares and the Warrant Shares
pursuant to the Transaction Documents, are unconditional and absolute and not
subject to any right of set off, counterclaim, delay or reduction, regardless
of
the effect of any such dilution or any claim the Company may have against any
Purchaser and regardless of the dilutive effect that such issuance may have
on
the ownership of the other shareholders of the Company.
4.3 Reservation
of Common Stock.
The
Company shall take all action necessary to at all times have authorized, and
reserved for the purpose of issuance from and after the Closing Date, no less
than 100% of the maximum number of shares of Common Stock issuable upon exercise
of the Warrants issued at the Closing (without taking into account any
limitations on exercise of the Warrants set forth in the Warrants).
4.4 Furnishing
of Information.
In
order to enable the Purchasers to sell the Securities under Rule 144 of the
Securities Act, for a period of two years from the Closing (or such shorter
period that the Purchaser can sell under Rule 144 without regard to volume
limitations), the Company shall use its commercially reasonable efforts to
timely file (or obtain extensions in respect thereof and file within the
applicable grace period) all reports required to be filed by the Company after
the date hereof pursuant to the Exchange Act. During such period, if the Company
is not required to file reports pursuant to such laws, it will prepare and
furnish to the Purchasers and make publicly available in accordance with Rule
144(c) such information as is required for the Purchasers to sell the Shares
and
Warrant Shares under Rule 144. The Company further covenants that it will take
such further action as any holder of Securities may reasonably request, all
to
the extent required from time to time to enable such Person to sell the Shares
and Warrant Shares without registration under the Securities Act within the
limitation of the exemptions provided by Rule 144.
22
4.5 Reporting
Status.
Other
than in connection with a Fundamental Transaction (as such term is defined
in
the Warrant), during the two year period from and after the Effective Date,
the
Company shall not terminate its status as an issuer required to file reports
under the Exchange Act even if the Exchange Act or the rules and regulations
thereunder would otherwise permit such termination.
4.6 Form
D
and Blue Sky.
The
Company agrees to timely file a Form D with respect to the Securities as
required under Regulation D. The Company shall take such action and make all
filings and reports relating to the offer and sale of the Securities as the
Company shall reasonably determine is necessary in order to obtain an exemption
for or to qualify the Securities for sale to the Purchasers at the Closing
pursuant to this Agreement under applicable securities or “Blue Sky” laws of the
states of the United States (or to obtain an exemption from such
qualification).
4.7 No
Integration.
The
Company shall not, and shall use its best efforts to ensure that no Affiliate
of
the Company shall, sell, offer for sale or solicit offers to buy or otherwise
negotiate in respect of any security (as defined in Section 2 of the Securities
Act) that will be integrated with the offer or sale of the Securities in a
manner that would require the registration under the Securities Act of the
sale
of the Securities to the Purchasers, or that will be integrated with the offer
or sale of the Securities for purposes of the rules and regulations of any
Trading Market such that it would require shareholder approval prior to the
closing of such other transaction unless shareholder approval is obtained before
the closing of such subsequent transaction.
4.8 Subsequent
Registrations.
Other
than pursuant to the Registration Statement, prior to the date that is 60 days
after the Effective Date, the Company shall not file any registration statement
(other than on Form S-8 or, in connection with an acquisition, on Form S-4)
with
the Commission with respect to any securities of the Company.
4.9 Securities
Laws Disclosure; Publicity.
By 9:00
a.m., New York City time, on the Trading Day immediately following the execution
of this Agreement, the Company shall issue a press release (the “Press
Release”)
reasonably acceptable to the Placement Agent. On or before 9:00 a.m., New York
City time, on the second Trading Day following the execution of this Agreement
(or such earlier time as required by law), the Company will file a Current
Report on Form 8-K with the Commission describing the terms of the Transaction
Documents (and including as exhibits to such Current Report on Form 8-K the
material Transaction Documents (including, without limitation, this Agreement,
the form of Warrant and the Registration Rights Agreement)). Notwithstanding
the
foregoing, the Company shall not publicly disclose the name of any Purchaser
or
an Affiliate of any Purchaser, or include the name of any Purchaser or an
Affiliate of any Purchaser in any press release or filing with the Commission
(other than the Registration Statement or the Form 8-K) or any regulatory agency
or Trading Market, without the prior written consent of such Purchaser, except
(i) as required by federal securities law in connection with (A) any
registration statement contemplated by the Registration Rights Agreement and
(B)
the filing of final Transaction Documents (including signature pages thereto)
with the Commission and (ii) to the extent such disclosure is required by law,
request of the Staff of the Commission or Trading Market regulations, in which
case the Company shall provide the Purchasers with prior written notice of
such
disclosure permitted under this subclause (ii). Each Purchaser, severally and
not jointly with the other Purchasers, covenants that until such time as the
transactions contemplated by this Agreement are publicly disclosed by the
Company as described in this Section 4.9, such Purchaser will maintain the
confidentiality of all disclosures made to it in connection with this
transaction (including the existence and terms of this transaction).
4.10 Non-Public
Information.
Except
with respect to the material terms and conditions of the transactions
contemplated by the Transaction Documents, the Company shall not, and shall
cause each Subsidiary and each of their respective officers, directors,
employees and agents, not to, provide any Purchaser with any material,
non-public information regarding the Company or any of its Subsidiaries from
and
after the filing of the Press Release without the express written consent of
such Purchaser, unless prior thereto such Purchaser shall have executed a
written agreement regarding the confidentiality and use of such information.
23
4.11 Indemnification.
(a) Indemnification
of Purchasers.
In
addition to the indemnity provided in the Registration Rights Agreement, the
Company will indemnify and hold each Purchaser and its directors, officers,
shareholders, members, partners, employees and agents (and any other Persons
with a functionally equivalent role of a Person holding such titles
notwithstanding a lack of such title or any other title), each Person who
controls such Purchaser (within the meaning of Section 15 of the Securities
Act
and Section 20 of the Exchange Act), and the directors, officers, shareholders,
agents, members, partners or employees (and any other Persons with a
functionally equivalent role of a Person holding such titles notwithstanding
a
lack of such title or any other title) of such controlling person (each, a
“Purchaser
Party”)
harmless from any and all losses, liabilities, obligations, claims,
contingencies, damages, costs and expenses, including all judgments, amounts
paid in settlements, court costs and reasonable attorneys’ fees and costs of
investigation (collectively, “Losses”)
that
any such Purchaser Party may suffer or incur as a result of or relating to
third
party claims against such Purchaser relating to any breach of any of the
representations, warranties, covenants or agreements made by the Company in
this
Agreement or in the other Transaction Documents. The Company will not be
liable to any Purchaser Party under this Agreement to the extent, but only
to
the extent that the Loss is attributable to any Purchaser Party’s breach of any
of the representations, warranties, covenants or agreements made by such
Purchaser Party in this Agreement or in the other Transaction
Documents.
(b) Conduct
of Indemnification Proceedings.
Promptly
after receipt by any Person (the “Indemnified
Person”)
of
notice of any demand, claim or circumstances which would or might give rise
to a
claim or the commencement of any action, proceeding or investigation in respect
of which indemnity may be sought pursuant to Section
4.11(a),
such
Indemnified Person shall promptly notify the Company in writing and the Company
shall assume the defense thereof, including the employment of counsel reasonably
satisfactory to such Indemnified Person, and shall assume the payment of all
fees and expenses; provided,
however, that
the
failure of any Indemnified Person so to notify the Company shall not relieve
the
Company of its obligations hereunder except to the extent that the Company
is
actually and materially prejudiced by such failure to notify. In any such
proceeding, any Indemnified Person shall have the right to retain its own
counsel, but the fees and expenses of such counsel shall be at the expense
of
such Indemnified Person unless: (i) the Company and the Indemnified Person
shall
have mutually agreed to the retention of such counsel; (ii) the Company shall
have failed promptly to assume the defense of such proceeding and to employ
counsel reasonably satisfactory to such Indemnified Person in such proceeding;
or (iii) in the reasonable judgment of counsel to such Indemnified Person,
representation of both parties by the same counsel would be inappropriate due
to
actual or potential differing interests between them. The Company shall not
be
liable for any settlement of any proceeding effected without its written
consent, which consent shall not be unreasonably withheld, delayed or
conditioned. Without the prior written consent of the Indemnified Person, which
consent shall not be unreasonably withheld, delayed or conditioned, the Company
shall not effect any settlement of any pending or threatened proceeding in
respect of which any Indemnified Person is or could have been a party and
indemnity could have been sought hereunder by such Indemnified Party, unless
such settlement includes an unconditional release of such Indemnified Person
from all liability arising out of such proceeding.
4.12 Listing
of Securities.
Prior
to the execution of this Agreement or promptly following the date hereof, the
Company shall have taken or shall take all necessary action to cause the Shares
and the Warrant Shares to be listed upon the Principal Trading Market, if any,
upon which shares of Common Stock are then listed (subject to official notice
of
issuance) and shall maintain, so long as any other shares of Common Stock shall
be so listed, such listing. Further, if the Company applies to have its Common
Stock or other securities listed on any other Trading Market, it shall include
in such application the Shares and the Warrant Shares and will take such other
action as is necessary to cause the Shares, and the Warrant Shares to be listed
on such other Trading Market as promptly as practicable.
24
4.13 Use
of
Proceeds.
The
Company intends to use the net proceeds from the sale of the Securities
hereunder for working capital and general corporate purposes and not to redeem
any Common Stock or Common Stock Equivalents or to settle any outstanding
Action.
4.14 Short
Sales After The Date Hereof.
Such
Purchaser shall not, and shall cause its Trading Affiliates not to, engage,
directly or indirectly, in any Short Sales involving the Company’s securities
during the period from the date hereof until the earlier to occur of (i) sixty
(60) days following the Closing Date and (ii) the Effective Date.
Notwithstanding the foregoing, in the case of a Purchaser that is a
multi-managed investment vehicle whereby separate portfolio managers manage
separate portions of such Purchaser's assets and the portfolio managers have
no
direct knowledge of the investment decisions made by the portfolio managers
managing other portions of such Purchaser's assets, the representation set
forth
above shall apply only with respect to the portion of assets managed by the
portfolio manager that have knowledge about the financing transaction
contemplated by this Agreement. Each Purchaser understands and acknowledges,
severally and not jointly with any other Purchaser, that the Commission
currently takes the position that covering a short position established prior
to
effectiveness of a resale registration statement with shares included in such
registration statement would be a violation of Section 5 of the Securities
Act,
as set forth in Item 65, Section 5 under Section A, of the Manual of Publicly
Available Telephone Interpretations, dated July 1997, compiled by the Office
of
Chief Counsel, Division of Corporation Finance.
ARTICLE
V
CONDITIONS
PRECEDENT TO CLOSING
5.1 Conditions
Precedent to the Obligations of the Purchasers to Purchase
Securities.
The
obligation of each Purchaser to acquire Securities at the Closing is subject
to
the fulfillment to such Purchaser’s satisfaction, on or prior to the Closing
Date, of each of the following conditions, any of which may be waived by such
Purchaser (as to itself only):
(a) Representations
and Warranties.
The
representations and warranties of the Company contained herein shall be true
and
correct in all material respects (except for those representations and
warranties which are qualified as to materiality, in which case such
representations and warranties shall be true and correct in all respects) as
of
the date when made and as of the Closing Date, as though made on and as of
such
date, except for such representations and warranties that speak as of a specific
date.
(b) Performance.
The
Company shall have performed, satisfied and complied in all material respects
with all covenants, agreements and conditions required by the Transaction
Documents to be performed, satisfied or complied with by it at or prior to
the
Closing.
(c) No
Injunction.
No
statute, rule, regulation, executive order, decree, ruling or injunction shall
have been enacted, entered, promulgated or endorsed by any court or governmental
authority of competent jurisdiction that prohibits the consummation of any
of
the transactions contemplated by the Transaction Documents.
(d) Consents.The
Company shall have obtained in a timely fashion any and all consents, permits,
approvals, registrations and waivers necessary or appropriate for consummation
of the purchase and sale of the Securities at the Closing (including all
Required Approvals), all of which shall be and remain so long as necessary
in
full force and effect.
(e) Adverse
Changes.
Since
the date of execution of this Agreement, no event or series of events shall
have
occurred that has had or would reasonably be expected to have a Material Adverse
Effect.
25
(f) No
Suspensions of Trading in Common Stock; Listing.
Trading
in the Common Stock shall not have been suspended by the Commission or the
Principal Trading Market (except for any suspensions of trading of not more
than
one Trading Day solely to permit dissemination of material information regarding
the Company) at any time since the date of execution of this
Agreement.
(g) Company
Deliverables.
The
Company shall have delivered the Company Deliverables in accordance with Section
2.2(a).
(h) Compliance
Certificate.
The
Company shall have delivered to each Purchaser a certificate, dated as of the
Closing Date and signed by its Chief Executive Officer or its Chief Financial
Officer, dated as of the Closing Date, certifying to the fulfillment of the
conditions specified in Sections 5.1(a) and (b) in the form attached hereto
as
Exhibit
G.
(i) Termination.This
Agreement shall not have been terminated as to such Purchaser in accordance
with
Section 6.17 herein.
5.2 Conditions
Precedent to the Obligations of the Company to sell Securities.
The
Company's obligation to sell and issue the Securities at the Closing is subject
to the fulfillment to the satisfaction of the Company on or prior to the Closing
Date of the following conditions, any of which may be waived by the
Company:
(a) Representations
and Warranties.
The
representations and warranties made by the Purchasers in Section 3.2 hereof
shall be true and correct in all material respects as of the date when made,
and
as of the Closing Date as though made on and as of such date, except for
representations and warranties that speak as of a specific date.
(b) Performance.
The
Purchasers shall have performed, satisfied and complied in all material respects
with all covenants, agreements and conditions required by the Transaction
Documents to be performed, satisfied or complied with by the Purchasers at
or
prior to the Closing Date.
(c) No
Injunction.
No
statute, rule, regulation, executive order, decree, ruling or injunction shall
have been enacted, entered, promulgated or endorsed by any court or governmental
authority of competent jurisdiction that prohibits the consummation of any
of
the transactions contemplated by the Transaction Documents.
(d) Consents.
The
Company shall have obtained in a timely fashion any and all consents, permits,
approvals, registrations and waivers necessary or appropriate for consummation
of the purchase and sale of the Securities, all of which shall be and remain
so
long as necessary in full force and effect.
(e) Purchasers
Deliverables.
Each
Purchaser shall have delivered its Purchaser Deliverables in accordance with
Section 2.2(b).
(f) Termination.This
Agreement shall not have been terminated as to such Purchaser in accordance
with
Section 6.17 herein.
ARTICLE
VI
MISCELLANEOUS
6.1 Fees
and Expenses.
At
Closing, the Company shall reimburse the Placement Agent for the reasonable
fees
and expenses in connection with the transactions contemplated by this Agreement
pursuant to its obligations under its engagement letter with the Placement
Agent
(the “Engagement
Letter”),
which
the Company agrees shall include the reasonable fees and expenses of counsel
to
the Placement Agent (which fees shall include, without limitation, the fees
and
expenses associated with the negotiation, preparation and execution and delivery
of this Agreement and the other Transaction Documents and any amendments,
modifications or waivers thereto), subject to the consent of the Company for
fees and expenses in excess of $35,000. The Company and the Purchasers shall
each pay the fees and expenses of their respective advisers, counsel,
accountants and other experts, if any, and all other expenses incurred by such
party in connection with the negotiation, preparation, execution, delivery
and
performance of this Agreement. The Company shall pay all Transfer Agent fees,
stamp taxes and other taxes and duties levied in connection with the sale and
issuance of the Securities to the Purchasers. Each party acknowledges that
▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ PC has rendered legal advice to the Placement Agent and
not
to such party in connection with the transactions contemplated hereby, and
that
such party has relied for such matters on the advice of its own respective
counsel.
26
6.2 Entire
Agreement.
The
Transaction Documents, together with the Exhibits and Schedules thereto, contain
the entire understanding of the parties with respect to the subject matter
hereof and supersede all prior agreements, understandings, discussions and
representations, oral or written, with respect to such matters, which the
parties acknowledge have been merged into such documents, exhibits and
schedules. At or after the Closing, and without further consideration, the
Company and the Purchasers will execute and deliver to the other such further
documents as may be reasonably requested in order to give practical effect
to
the intention of the parties under the Transaction Documents.
6.3 Notices.
Any and
all notices or other communications or deliveries required or permitted to
be
provided hereunder shall be in writing and shall be deemed given and effective
on the earliest of (a) the date of transmission, if such notice or communication
is delivered via facsimile (provided the sender receives a machine-generated
confirmation of successful transmission) at the facsimile number specified
in
this Section prior to 5:00 p.m., New York City time, on a Trading Day, (b)
the
next Trading Day after the date of transmission, if such notice or communication
is delivered via facsimile at the facsimile number specified in this Section
on
a day that is not a Trading Day or later than 5:00 p.m., New York City time,
on
any Trading Day, (c) the Trading Day following the date of mailing, if sent
by
U.S. nationally recognized overnight courier service with next day delivery
specified, or (d) upon actual receipt by the party to whom such notice is
required to be given. The address for such notices and communications shall
be
as follows:
If
to the
Company: GSE
Systems, Inc.
▇▇▇▇
▇▇▇▇▇▇▇▇▇▇ ▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Telephone
No.: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile
No.: (▇▇▇) ▇▇▇-▇▇▇▇
Attention:
Chief Financial Officer
With
a
copy to: ▇▇▇▇▇
▇▇▇▇▇▇ LLP
▇▇▇▇
▇▇▇▇▇▇▇▇
▇▇▇
▇▇▇▇,
▇▇ ▇▇▇▇▇-▇▇▇▇
Telephone
No.: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile
No.: (▇▇▇) ▇▇▇-▇▇▇▇
Attention:
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq.
|
If
to a Purchaser:
|
|
or
such
other address as may be designated in writing hereafter, in the same manner,
by
such Person.
27
6.4 Amendments;
Waivers; No Additional Consideration.
No
provision of this Agreement may be waived or amended except in a written
instrument signed, in the case of an amendment, by the Company and each of
the
Purchasers holding or having the right to acquire a majority of the Shares
and
the Warrant Shares on a fully-diluted basis at the time of such amendment or,
in
the case of a waiver, by the party against whom enforcement of any such waiver
is sought. No waiver of any default with respect to any provision, condition
or
requirement of this Agreement shall be deemed to be a continuing waiver in
the
future or a waiver of any subsequent default or a waiver of any other provision,
condition or requirement hereof, nor shall any delay or omission of either
party
to exercise any right hereunder in any manner impair the exercise of any such
right. No consideration shall be offered or paid to any Purchaser to amend
or
consent to a waiver or modification of any provision of any Transaction Document
unless the same consideration is also offered to all Purchasers who then hold
Securities.
6.5 Construction.
The
headings herein are for convenience only, do not constitute a part of this
Agreement and shall not be deemed to limit or affect any of the provisions
hereof. The language used in this Agreement will be deemed to be the language
chosen by the parties to express their mutual intent, and no rules of strict
construction will be applied against any party. This Agreement shall be
construed as if drafted jointly by the parties, and no presumption or burden
of
proof shall arise favoring or disfavoring any party by virtue of the authorship
of any provisions of this Agreement or any of the Transaction
Documents.
6.6 Successors
and Assigns.
The
provisions of this Agreement shall inure to the benefit of and be binding upon
the parties and their successors and permitted assigns. This Agreement, or
any
rights or obligations hereunder, may not be assigned by the Company without
the
prior written consent of the Purchasers. Any Purchaser may assign its rights
hereunder in whole or in part to any Person to whom such Purchaser assigns
or
transfers any Securities in compliance with the Transaction Documents and
applicable law, provided such transferee shall agree in writing to be bound,
with respect to the transferred Securities, by the terms and conditions of
this
Agreement that apply to the “Purchasers”.
6.7 No
Third-Party Beneficiaries.
This
Agreement is intended for the benefit of the parties hereto and their respective
successors and permitted assigns and is not for the benefit of, nor may any
provision hereof be enforced by, any other Person, except (i) each Purchaser
Party is an intended third party beneficiary of Section 4.11, and (ii) the
Placement Agent is an intended third party beneficiary of Article III hereof,
and each Purchaser Party or the Placement Agent, as the case may be, may enforce
the provisions of such Sections directly against the parties with obligations
thereunder.
6.8 Governing
Law.
All
questions concerning the construction, validity, enforcement and interpretation
of this Agreement shall be governed by and construed and enforced in accordance
with the internal laws of the State of New York, without regard to the
principles of conflicts of law thereof. Each party agrees that all Proceedings
concerning the interpretations, enforcement and defense of the transactions
contemplated by this Agreement and any other Transaction Documents (whether
brought against a party hereto or its respective Affiliates, employees or
agents) shall be commenced exclusively in the New York Courts. Each party hereto
hereby irrevocably submits to the exclusive jurisdiction of the New York Courts
for the adjudication of any dispute hereunder or in connection herewith or
with
any transaction contemplated hereby or discussed herein (including with respect
to the enforcement of any of the Transaction Documents), and hereby irrevocably
waives, and agrees not to assert in any Proceeding, any claim that it is not
personally subject to the jurisdiction of any such New York Court, or that
such
Proceeding has been commenced in an improper or inconvenient forum. Each party
hereto hereby irrevocably waives personal service of process and consents to
process being served in any such Proceeding by mailing a copy thereof via
registered or certified mail or overnight delivery (with evidence of delivery)
to such party at the address in effect for notices to it under this Agreement
and agrees that such service shall constitute good and sufficient service of
process and notice thereof. Nothing contained herein shall be deemed to limit
in
any way any right to serve process in any manner permitted by law. EACH
PARTY HERETO HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY
APPLICABLE LAW, ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING
ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED
HEREBY.
28
6.9 Survival.
Subject
to applicable statute of limitations, the representations, warranties,
agreements and covenants contained herein shall survive the Closing and the
delivery of the Securities.
6.10 Execution.
This
Agreement may be executed in two or more counterparts, all of which when taken
together shall be considered one and the same agreement and shall become
effective when counterparts have been signed by each party and delivered to
the
other party, it being understood that both parties need not sign the same
counterpart. In the event that any signature is delivered by facsimile
transmission, or by e-mail delivery of a “.pdf” format data file, such signature
shall create a valid and binding obligation of the party executing (or on whose
behalf such signature is executed) with the same force and effect as if such
facsimile signature page were an original thereof.
6.11 Severability.
If any
provision of this Agreement is held to be invalid or unenforceable in any
respect, the validity and enforceability of the remaining terms and provisions
of this Agreement shall not in any way be affected or impaired thereby and
the
parties will attempt to agree upon a valid and enforceable provision that is
a
reasonable substitute therefor, and upon so agreeing, shall incorporate such
substitute provision in this Agreement.
6.12 Replacement
of Securities.
If any
certificate or instrument evidencing any Securities is mutilated, lost, stolen
or destroyed, the Company shall issue or cause to be issued in exchange and
substitution for and upon cancellation thereof, or in lieu of and substitution
therefor, a new certificate or instrument, but only upon receipt of evidence
reasonably satisfactory to the Company and the Transfer Agent of such loss,
theft or destruction and the execution by the holder thereof of a customary
lost
certificate affidavit of that fact and an agreement to indemnify and hold
harmless the Company and the Transfer Agent for any losses in connection
therewith or, if required by the Company or the Transfer Agent, a bond in such
form and amount as is reasonably required by the Company or the Transfer Agent.
The applicants for a new certificate or instrument under such circumstances
shall also pay any reasonable third-party costs associated with the issuance
of
such replacement Securities. If a replacement certificate or instrument
evidencing any Securities is requested due to a mutilation thereof, the Company
may require delivery of such mutilated certificate or instrument as a condition
precedent to any issuance of a replacement.
6.13 Remedies.
In
addition to being entitled to exercise all rights provided herein or granted
by
law, including recovery of damages, each of the Purchasers and the Company
will
be entitled to specific performance under the Transaction Documents. The parties
agree that monetary damages may not be adequate compensation for any loss
incurred by reason of any breach of obligations described in the foregoing
sentence and hereby agree to waive in any action for specific performance of
any
such obligation (other than in connection with any action for a temporary
restraining order) the defense that a remedy at law would be
adequate.
6.14 Payment
Set Aside.
To the
extent that the Company makes a payment or payments to any Purchaser pursuant
to
any Transaction Document or a Purchaser enforces or exercises its rights
thereunder, and such payment or payments or the proceeds of such enforcement
or
exercise or any part thereof are subsequently invalidated, declared to be
fraudulent or preferential, set aside, recovered from, disgorged by or are
required to be refunded, repaid or otherwise restored to the Company, a trustee,
receiver or any other person under any law (including, without limitation,
any
bankruptcy law, state or federal law, common law or equitable cause of action),
then to the extent of any such restoration the obligation or part thereof
originally intended to be satisfied shall be revived and continued in full
force
and effect as if such payment had not been made or such enforcement or setoff
had not occurred.
29
6.15 Adjustments
in Share Numbers and Prices.
In the
event of any stock split, subdivision, dividend or distribution payable in
shares of Common Stock (or other securities or rights convertible into, or
entitling the holder thereof to receive directly or indirectly shares of Common
Stock), combination or other similar recapitalization or event occurring after
the date hereof, each reference in any Transaction Document to a number of
shares or a price per share shall be deemed to be amended to appropriately
account for such event.
6.16 Independent
Nature of Purchasers' Obligations and Rights.
The
obligations of each Purchaser under any Transaction Document are several and
not
joint with the obligations of any other Purchaser, and no Purchaser shall be
responsible in any way for the performance of the obligations of any other
Purchaser under any Transaction Document. The decision of each Purchaser to
purchase Securities pursuant to the Transaction Documents has been made by
such
Purchaser independently of any other Purchaser and independently of any
information, materials, statements or opinions as to the business, affairs,
operations, assets, properties, liabilities, results of operations, condition
(financial or otherwise) or prospects of the Company or any Subsidiary which
may
have been made or given by any other Purchaser or by any agent or employee
of
any other Purchaser, and no Purchaser and any of its agents or employees shall
have any liability to any other Purchaser (or any other Person) relating to
or
arising from any such information, materials, statement or opinions. Nothing
contained herein or in any Transaction Document, and no action taken by any
Purchaser pursuant thereto, shall be deemed to constitute the Purchasers as
a
partnership, an association, a joint venture or any other kind of entity, or
create a presumption that the Purchasers are in any way acting in concert or
as
a group with respect to such obligations or the transactions contemplated by
the
Transaction Documents. Each Purchaser acknowledges that no other Purchaser
has
acted as agent for such Purchaser in connection with making its investment
hereunder and that no Purchaser will be acting as agent of such Purchaser in
connection with monitoring its investment in the Securities or enforcing its
rights under the Transaction Documents. Each Purchaser shall be entitled to
independently protect and enforce its rights, including without limitation
the
rights arising out of this Agreement or out of the other Transaction Documents,
and it shall not be necessary for any other Purchaser to be joined as an
additional party in any proceeding for such purpose. The Company acknowledges
that each of the Purchasers has been provided with the same Transaction
Documents for the purpose of closing a transaction with multiple Purchasers
and
not because it was required or requested to do so by any Purchaser. The
Company’s obligations to each Purchaser under this Agreement are identical to
its obligations to each other Purchaser other than such differences resulting
solely from the number of Securities purchased by such Purchaser, but regardless
of whether such obligations are memorialized herein or in another agreement
between the Company and a Purchaser.
6.17 Termination.
This
Agreement may be terminated and the sale and purchase of the Shares and the
Warrants abandoned at any time prior to the Closing by either the Company or
any
Purchaser (with respect to itself only) upon written notice to the other, if
the
Closing has not been consummated on or prior to 5:00 p.m., New York City time,
on the Outside Date; provided,
however,
that
the right to terminate this Agreement under this Section 6.17 shall not be
available to any Person whose failure to comply with its obligations under
this
Agreement has been the cause of or resulted in the failure of the Closing to
occur on or before such time. Nothing in this Section 6.17 shall be deemed
to
release any party from any liability for any breach by such party of the terms
and provisions of this Agreement or the other Transaction Documents or to impair
the right of any party to compel specific performance by any other party of
its
obligations under this Agreement or the other Transaction Documents. In the
event of a termination pursuant to this Section, the Company shall promptly
notify all non-terminating Purchasers. Upon a termination in accordance with
this Section, the Company and the terminating Purchaser(s) shall not have any
further obligation or liability (including arising from such termination) to
the
other, and no Purchaser will have any liability to any other Purchaser under
the
Transaction Documents as a result therefrom.
30
IN
WITNESS WHEREOF, the parties hereto have caused this Securities Purchase
Agreement to be duly executed by their respective authorized signatories as
of
the date first indicated above.
GSE
SYSTEMS, INC.
By:_/s/
▇▇▇▇ ▇. Moran______________________________
Name: ▇▇▇▇ ▇. ▇▇▇▇▇
Title: Chief Executive Officer
[REMAINDER
OF PAGE INTENTIONALLY LEFT BLANK]
[SIGNATURE
PAGES FOR PURCHASERS FOLLOW]
31
NAME
OF
PURCHASER: ____________________________
By:
Name:
Title:
Aggregate
Purchase Price (Subscription Amount): $_____________
Number
of
Shares to be Acquired: ______________________
Underlying
Shares Subject to Warrant: ________________
(10.0%
of
the number of Shares to be acquired)
Tax
ID
No.: ____________________
Address
(Primary Residence, if individual or Principal Place of Business, if
entity)
__________________________________
__________________________________
__________________________________
Address
for Notice (if different than above):
__________________________________
__________________________________
__________________________________
Telephone
No.: _______________________
Facsimile
No.: ________________________
Attention:
_______________________
Delivery
Instructions:
(if
different than above)
c/o
_______________________________
Street:
____________________________
City/State/Zip:
______________________
Attention:
__________________________
Telephone
No.: ____________________________
32
EXHIBITS:
A:
Form
of
Warrant
B:
Form
of
Registration Rights Agreement
C-1:
Accredited
Investor Questionnaire
C-2: Stock
Certificate Questionnaire
D:
Form
of
Opinion of Company Counsel
E:
Irrevocable
Transfer
Agent Instructions
F: Form
of
Secretary’s Certificate
G: Form
of
Officer’s Certificate
SCHEDULES:
3.1(a)
Subsidiaries
3.1(d)
Consents
3.1(g)
Capitalization
3.1(k)
Material Changes
3.1(n)
Employment Matters
3.1(q)
Title to Assets
3.1(t)
Transactions with Affiliates and Employees
3.1(y)
Registration Rights
33