SECURITIES ACQUISITION AND INVESTOR RIGHTS AGREEMENT
This
Securities Acquisition and Investor Rights Agreement (this "Agreement") is
dated
as of December 8, 2006 by and among MEDirect Latino Inc., a Florida corporation
(the "Company"), and Granite Creek FlexCap I, L.P., a Delaware limited
partnership (the "Holder").
WHEREAS,
subject to the terms and conditions set forth in this Agreement and pursuant
to
Section 4(2) of the Securities Act of 1933, as amended (the "Securities Act"),
the Company desires to issue to the Holder, and the Holder desires to acquire
from the Company, securities of the Company as more fully described in this
Agreement.
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 Holder agree as
follows:
ARTICLE
I
DEFINITIONS
1.1 Definitions. In
addition to the terms defined elsewhere in this Agreement, the following terms
have the meanings indicated:
"Affiliate"
means any Person that, directly or indirectly through one or more
intermediaries, controls or is controlled by or is under common control with
a
Person, as such terms are used in and construed under Rule 144 under the
Securities Act.
"Business"
shall have the meaning set forth in the Loan Agreement.
"Business
Day" means any day other than Saturday, Sunday or any other day on which
commercial banks in Chicago are authorized or required by law to remain closed,
or with respect to the Commission, is a day on which the Commission is
closed.
"Closing"
means the closing of the transactions contemplated by the Transaction
Documents.
"Closing
Date" means the date of the Closing.
"Closing
Price" means, for any date, the price determined by the first of the
following clauses that applies: (a) if the Common Stock is then listed or quoted
on an Eligible Market or any other national securities exchange, the closing
price per share of the Common Stock for such date (or the nearest preceding
date
that is a Business Day if the Closing Date is not a Business Day) on the primary
Eligible Market or exchange on which the Common Stock is then listed or quoted;
(b) if prices for the Common Stock are then quoted on the OTC Bulletin
Board, the closing bid price per share of the Common Stock for such date (or
the
nearest preceding date) so quoted; (c) if prices for the Common Stock are
then reported in the "Pink Sheets" published by the National Quotation Bureau
Incorporated (or a similar organization or agency succeeding to its function
of
reporting prices), the most recent closing bid price per share of the Common
Stock so reported; or (d) in all other cases, the fair market value of a
share of Common Stock as determined by an independent appraiser selected in
good
faith by the Company.
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"Co-Investment
Notice" shall have the meaning set forth in Section
7.4(a).
"Commission"
means the Securities and Exchange Commission.
"Common
Stock" means the common stock of the Company, par value $0.0001 per
share.
"Common
Stock Equivalents" means, collectively, Options and Convertible
Securities.
"Company
Counsel" means ▇▇▇▇▇▇ ▇▇▇▇, counsel to the Company.
"Convertible
Securities" means any stock or securities (other than Options) convertible
into or exercisable or exchangeable for Common Stock.
"Designated
Stockholder" means each of ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ and ▇▇▇▇▇ ▇.
▇▇▇▇▇▇▇.
"Effective
Date" means the date that the Registration Statement is first declared
effective by the Commission.
"Eligible
Market" means any of the New York Stock Exchange, the American Stock
Exchange , the OTC Bulletin Board or the Pink Sheets.
"Exchange
Act" means the Securities Exchange Act of 1934, as amended.
"Excluded
Stock" means the issuance of Common Stock (A) upon exercise or conversion of
any options or other securities described in Schedule 3.1(i) (provided
that such exercise or conversion occurs in accordance with the terms thereof,
without amendment or modification, and that the applicable exercise or
conversion price or ratio is described in such schedule) or otherwise pursuant
to any employee benefit plan described in Schedule 3.1(i) or which is
hereafter adopted by the Company and approved by its stockholders or (B) in
connection with any issuance of shares or grant of options to employees,
officers, directors or consultants of the Company pursuant to a stock option
plan or other incentive stock plan duly adopted by the Company's board of
directors or in respect of the issuance of Common Stock upon exercise of any
such options.
"Family
Group" shall have the meaning set forth in Section 7.3.
"Filing
Date" means the 90th day
after the
Closing Date, or if the 90th day after
the
Closing Date is not a Business Day for the Commission, then on the next day
thereafter that is a Business Day for the Commission.
"Holder's
Counsel" shall mean ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇, P.C.
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"Lien"
means any lien, charge, claim, security interest, encumbrance, right of first
refusal or other restriction.
"Loan"
means the loan in the maximum principal amount of Eight Million Two Hundred
Fifty Thousand Dollars ($8,250,000) pursuant to the Loan Agreement.
"Loan
Agreement" means the loan and security agreement entered into as of the date
hereof by and among the Company as borrower, Granite Creek FlexCap I, L.P,
St.
Cloud Capital Partners, L.P., Bedford Oak Partners, L.P., ▇▇▇▇ ▇. and ▇▇▇▇
▇▇▇▇▇▇, Hungry Lizard, LLC and KKP Investments II LLC, a Delaware limited
liability company, as lenders, and Granite Creek Partners, L.L.C. as
agent.
"Losses"
means any and all losses, claims, damages, liabilities, settlement costs and
expenses, including, without limitation, costs of preparation and reasonable
attorneys' fees.
"Market
Value" means as to Common Stock on any Trading Day, the product of the
Closing Price on such Trading Day and the number of shares of Common Stock
then
held by the Holder.
"New
Securities" has the meaning set forth in Section 7.1.
"Notice
Parties" has the meaning set forth in Section 7.1.
"Offer
Notice" has the meaning set forth in Section 7.1.
"Options"
means any rights, warrants or options to subscribe for or purchase Common Stock
or Convertible Securities.
"Permitted
Transferees" shall have the meaning set forth in Section
7.3.
"Person"
means any individual or corporation, partnership, trust, incorporated or
unincorporated association, joint venture, limited liability company, joint
stock company, government (or an agency or subdivision thereof) or any court
or
other federal, state, local or other governmental authority or other entity
of
any kind.
"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.
"Pro
Rata Share" has the meaning set forth in the Loan Agreement.
"Prospectus"
means the prospectus included in the Registration Statement (including, without
limitation, a prospectus that includes any information previously omitted from
a
prospectus filed as part of an effective registration statement in reliance
upon
Rule 430A promulgated under the Securities Act), as amended or supplemented
by
any prospectus supplement, with respect to the terms of the offering of any
portion of the Registrable Securities covered by the Registration Statement,
and
all other amendments and supplements to the Prospectus including post effective
amendments, and all material incorporated by reference or deemed to be
incorporated by reference in such Prospectus.
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"Registrable
Securities" means any Common Stock issued or issuable to any person pursuant
to the Transaction Documents, together with any securities issued or issuable
upon any stock split, dividend or other distribution, recapitalization or
similar event with respect to the foregoing. The Holder acknowledges that the
Company may choose to include the Registrable Securities hereunder on a
registration statement with other similar securities.
"Registration
Statement" means each registration statement required to be filed under
Article VI, including (in each case) the Prospectus, amendments and
supplements to such registration statement or Prospectus, including pre- and
post-effective amendments, all exhibits thereto, and all material incorporated
by reference or deemed to be incorporated by reference in such registration
statement.
"Required
Effectiveness Date" means the 180th day
after Closing
Date; provided, however, that if the 180th day after
the
Closing Date is not a Business Day for the Commission, then the Required
Effectiveness Date shall be the first day thereafter which is a Business Day
for
the Commission.
"Rule
144," "Rule 415," and "Rule 424" means Rule 144, Rule 415 and
Rule 424, respectively, promulgated by the Commission pursuant to the Securities
Act, as such Rules 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.
"Sale
Notice" has the meaning set forth in Section 7.2.
"SBA"
shall mean the Small Business Administration.
"SBIA"
shall mean the Small Business Investment Act of 1958, as amended, and the
regulations thereunder, including but not limited to Title 13, Code of
Federal Regulations, § 121.103.
"Securities"
means the shares of Common Stock issuable upon conversion of the Loan or any
portion thereof.
"Selling
Stakeholder" has the meaning set forth in Section 7.2.
"Small
Business Investment Company" has the meaning set forth in the
SBIA.
"Stock
Option Plan" means any plan, written or not, approved by the Company's board
of directors and pursuant to which the Company may issues stock, restricted
stock, options, warrants or other share related instruments to its employees,
which plan does not permit the issuance of more than one million (1,000,000)
shares or rights to acquire share in the aggregate, based upon the Company's
current capitalization; provided that such shares or rights to acquire shares
may not be issued to any person who is an executive officer or a member of
the
board of directors of the Company as of the date hereof..
"Subsidiary"
means any Person in which the Company, directly or indirectly, owns at least
ten
percent (10%) of the capital stock or holds an equivalent equity or similar
interest.
"Tag
Along Election Period" has the meaning set forth in Section
7.2.
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"Trading
Day" means for any such date, the first of the following clauses to apply:
(a) any day on which the Common Stock is listed or quoted and traded on its
primary Trading Market (or any successor thereto), (b) if the Common Stock
is
not then listed or quoted and traded on any Eligible Market, then a day on
which
trading occurs on the American Stock Exchange (or any successor thereto), or
(c)
if trading ceases to occur on the American Stock Exchange (or any successor
thereto), any Business Day.
"Trading
Market" means the Pink Sheets, OTC Bulletin Board or any other Eligible
Market.
"Transaction
Documents" means this Agreement, the Transfer Agent Instructions, the Loan
Agreement and any other documents or agreements executed in connection with
the
transactions contemplated hereunder.
"Transfer
Agent Instructions" means the Irrevocable Transfer Agent Instructions, in
the form of Exhibit C, executed by the Company and delivered to and
acknowledged in writing by the Company's transfer agent.
ARTICLE
II
CLOSING
2.1 Closing. The
Closing shall take place at the offices of the Company, or at such other
location or time as the parties may agree.
2.2 Closing
Deliveries.
(a) At
the Closing, the Company shall deliver or cause to be delivered to the Holder
the following:
(i) an
executed copy of the Loan Agreement, the Note (as defined in the Loan Agreement)
and all other documents requiring the Company's signature pursuant to the terms
of the Loan Agreement as well as all other document required to be delivered
and/or executed by the Company or its agents as set forth therein;
(ii) a
legal opinion of Company Counsel, in the form of Exhibit A, executed by
such counsel and delivered to the Holder;
(iii) duly
executed Transfer Agent Instructions acknowledged by the Company's transfer
agent; and
(iv) such
other documents or information as the Holder as an Small Business Investment
Company, or the SBA, which has jurisdiction over the Holder, may require of
the
Company or the Holder in connection with the transaction contemplated
hereby.
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(b) At
the Closing the Holder shall deliver to the Company:
(i) The
cash consideration contemplated in this Agreement in readily available
funds.
(ii) Any
requested documentation indicating that the Loan contemplated being made as
of
the date hereof is duly authorized and Holder has all required approvals for
the
Holder to make the Loan.
ARTICLE
III
REPRESENTATIONS
AND WARRANTIES
3.1 Representations
and Warranties of the Company. The Company hereby represents and
warrants to the Holder as follows:
(a) Company
Organization and Name. The Company is a corporation duly
organized, existing and in good standing under the laws of the State of Florida,
with full and adequate corporate power to carry on and conduct its business
as
presently conducted. The Company's state issued organizational
identification number is P03000000129. The Company is duly licensed or qualified
in all foreign jurisdictions wherein the nature of its activities require such
qualification or licensing. The exact legal name of the Company is as
set forth in the first paragraph of this Agreement, and the Company currently
does not conduct, nor has it during the last five (5) years conducted, business
under any other name or trade name, except for "Interaxx Digital Tools, Inc."
which it used prior to July 23, 2004.
(b) Subsidiaries. The
Borrower does not have any Subsidiaries.
(c) [intentionally
omitted]
(d) Authorization;
Validity. The Company has full right power and authority to enter
into this Agreement, to make the borrowings and execute and deliver this
Agreement and perform its duties and obligations under this Agreement and the
other Transaction Documents. The execution and delivery of this
Agreement and the other Transaction Documents will not, nor will the observance
or performance of any of the matters and things herein or therein set forth,
violate or contravene any provision of law or of the articles of incorporation
or bylaws of the Company. All necessary and appropriate corporate
action has been taken on the part of the Company to authorize the execution
and
delivery of this Agreement and the other Transaction Documents. This
Agreement and the other Transaction Documents are valid and binding agreements
and contracts of the Company in accordance with their respective
terms.
(e) Compliance
with Laws. The nature and transaction of the Company's Business
and operations and the use of its properties and assets do not and during the
term of the Loan shall not, violate or conflict with any applicable law,
statute, ordinance, rule, regulation or order of any kind or nature, including,
without limitation, the provisions of Occupational Safety and Health Act of
1970, as amended, the Fair Labor Standards Act of 1938, as amended, the Code,
and the rules and regulations thereunder, and all Environmental Laws or any
zoning, land use, building, noise abatement, occupational health and safety
or
other laws, any building permit or any condition, grant, easement, covenant,
condition or restriction, whether recorded or not. The Company has
obtained all material permits, licenses, approvals, consents, certificates,
orders or authorizations of any Governmental Authority required for the lawful
conduct of its business (the "Permits"). All of the Permits are valid
and subsisting and in full force and effect. There are no actions,
claims or proceedings pending or to the best of the Company's knowledge,
threatened that seek the revocation, cancellation, suspension or modification
of
any of the Permits.
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(f) Regulated
Business. Without limiting the generality of the representation
and warranty set forth in Section 3.1(e), the Company represents and
warrants that it has been issued such licenses or permits as are required to
conduct its business as being conducted as of the date hereof, including but
not
limited to your license to be a supplier of durable medical equipment,
orthotics, prosthetics, and supplies ("DMEPOS") issued by the Centers for
Medicare & Medicaid Services and your license from the State of Florida to
be a Home Medical Equipment and Services provider ("HME"), and as Company
intends to conduct its business at least during the term of the
Loan. None of the individuals in its employ are required to have any
licenses to operate the Company's business. Copies of the DMEPOS and
HME licenses are attached hereto as Schedule 3.1(f).
(g) Environmental
Laws and Hazardous Substances. The Company represents, warrants
and agrees with the Holder that (i) the Company has not generated, used,
stored, treated, transported, manufactured, handled, produced or disposed of
any
Hazardous Materials, on or off any of the premises of the Company (whether
or
not owned by it) in any manner which at any time violates any Environmental
Law
or any license, permit, certificate, approval or similar authorization
thereunder, (ii) the operations of the Company comply in all material
respects with all Environmental Laws and all licenses, permits certificates,
approvals and similar authorizations thereunder, (iii) there has been no
investigation, proceeding, complaint, order, directive, claim, citation or
notice by any governmental authority or any other Person, nor is any pending
or,
to the best of the Company's knowledge, threatened, and the Company shall
immediately notify the Holder upon becoming aware of any such investigation,
proceeding, complaint, order, directive, claim, citation or notice, and shall
take prompt and appropriate actions to respond thereto, with respect to any
non-compliance with, or violation of, the requirements of any Environmental
Law
by the Company or the release, spill or discharge, threatened or actual, of
any
Hazardous Material or the generation, use, storage, treatment, transportation,
manufacture, handling, production or disposal of any Hazardous Material or
any
other environmental, health or safety matter, which affects the Company or
its
business, operations or assets or any properties at which the Company has
transported, stored or disposed of any Hazardous Materials, (iv) the
Company has no material liability, contingent or otherwise, in connection with
a
release, spill or discharge, threatened or actual, of any Hazardous Materials
or
the generation, use, storage, treatment, transportation, manufacture, handling,
production or disposal of any Hazardous Material, and (v) without limiting
the generality of the foregoing, the Company shall, following determination
by
the Holder that there is non-compliance, or any condition which requires any
action by or on behalf of the Company in order to avoid any non-compliance,
with
any Environmental Law, at the Company's sole expense cause an independent
environmental engineer acceptable to the Holder to conduct such tests of the
relevant site as are appropriate, and prepare and deliver a report setting
forth
the result of such tests, a proposed plan for remediation and an estimate of
the
costs thereof.
(h) Absence
of Breach or Conflict. The execution, delivery and performance of
this Agreement, the Loan Documents and any other documents or instruments to
be
executed and delivered by the Company in connection with the Loan shall not:
(i) violate any provisions of law or any applicable regulation, order,
writ, injunction or decree of any court or governmental authority, or
(ii) conflict with, be inconsistent with, or result in any breach or
default of any of the terms, covenants, conditions, or provisions of any
indenture, mortgage, deed of trust, instrument, document, agreement or contract
of any kind to which the Company is a party or by which the Company or any
of
its property or assets may be bound.
(i) 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) is set forth in Schedule 3.1(i). All outstanding
shares of capital stock are duly authorized, validly issued, fully paid and
nonassessable and have been issued in compliance with all applicable securities
laws. Except as disclosed in Schedule 3.1(i), there are no outstanding
options, warrants, script rights to subscribe to, calls or commitments of any
character whatsoever relating to, or securities, rights or obligations
convertible into or exercisable or exchangeable for, or giving any Person any
right to subscribe for or acquire, any shares of Common Stock, or contracts,
commitments, understandings or arrangements by which the Company or any
Subsidiary is or may become bound to issue additional shares of Common Stock,
or
securities or rights convertible or exchangeable into shares of Common Stock.
Except as disclosed in Schedule 3.1(i), there are no anti-dilution or
price adjustment provisions contained in any security issued by the Company
(or
in any agreement providing rights to security holders) and the issue and sale
of
the Securities will not obligate the Company to issue shares of Common Stock
or
other securities to any Person and will not result in a right of any holder
of
Company securities to adjust the exercise, conversion, exchange or reset price
under such securities. To the knowledge of the Company, except as specifically
disclosed in Schedule 3.1(i), no Person or group of related Persons
beneficially owns (as determined pursuant to Rule 13d-3 under the Exchange
Act),
or has the right to acquire, by agreement with or by obligation binding upon
the
Company, beneficial ownership of in excess of 5% of the outstanding Common
Stock, ignoring for such purposes any limitation on the number of shares of
Common Stock that may be owned at any single time.
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(j) Reservation
of Shares. The Company has reserved and until
the Loan is repaid in full the Company shall keep reserved from its duly
authorized capital stock the maximum number of shares of Common Stock issuable
upon conversion of the Loan.
(k) SEC
Reports; Financial Statements. The Company has filed all reports
required to be filed by it under the Exchange Act, including pursuant to Section
13(a) or 15(d) thereof, for the two years preceding the date hereof (or such
shorter period as the Company was required by law to file such material) (the
foregoing materials (together with any materials filed by the Company under
the
Exchange Act, whether or not required) being collectively referred to herein
as
the "SEC Reports" and, together with this Agreement and the Exhibits and
Schedules to this Agreement, 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. The Company
has delivered to the Holder true, correct and complete copies of all SEC Reports
filed within the 10 days preceding the date hereof. As of their
respective dates, 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 Securities and Exchange 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 the light of the
circumstances under which they were made, not misleading. 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. Such financial statements have been prepared in accordance
with GAAP, except as may be otherwise specified in such financial statements
or
the notes thereto, and fairly present in all material respects the financial
position of the Company and its consolidated Subsidiaries 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, immaterial,
year-end audit adjustments. All material agreements to which the
Company or any Subsidiary is a party or to which the property or assets of
the
Company or any Subsidiary are subject are included as part of or specifically
identified in the SEC Reports.
(l) Financial
Statements. All financial statements submitted to the Holder have
been prepared in accordance with GAAP on a basis, except as otherwise noted
therein, consistent with the previous fiscal year and truly and accurately
reflect the financial condition of the Company and the results of the operations
for the Company as of such date and for the periods indicated. Since
the date of the most recent financial statement submitted by the Company to
the
Holder, there has been no material adverse change in the financial condition
or
in the assets or liabilities of the Company, or any changes except those
occurring in the ordinary course of business.
(m) Projections.
The projections provided to the Holder by Company, a copy of which are attached
hereto as Exhibit D represent Company's best estimate of its anticipated
sales and costs for the periods covered thereby based upon the assumptions
set
forth therein.
(n) Intellectual
Property. Company owns or licenses or otherwise has the right to
use all Intellectual Property necessary for the operation of its business as
presently conducted or proposed to be conducted. As of the date
hereof, the Company does not have any Intellectual Property registered, or
subject to pending applications, in the United States Patent and Trademark
Office or any similar office or agency in the United States, any State thereof,
any political subdivision thereof or in any other country, other than those
described in Schedule 3.1(n) attached hereto and has not granted any
licenses with respect thereto other than as set forth therein. No
event has occurred which permits or would permit after notice or passage of
time
or both, the revocation, suspension or termination of such rights. To
the best of the Company's knowledge, no slogan or other advertising device,
product, process, method, substance or other Intellectual Property or goods
bearing or using any Intellectual Property presently contemplated to be sold
by
or employed by the Company infringes any patent, trademark, servicemark,
tradename, copyright, license or other Intellectual Property owned by any other
Person presently and no claim or litigation is pending or threatened against
or
affecting the Company contesting its right to sell or use any such Intellectual
Property. Schedule 3.1(n) sets forth all of the agreements or
other arrangements of the Company pursuant to which the Company has a material
license or other right to use any trademarks, logos, designs, representations
or
other Intellectual Property owned by another person as in effect on the date
hereof and the dates of the expiration of such agreements or other arrangements
of the Company as in effect on the date hereof (collectively, together with
such
agreements or other arrangements as may be entered into by the Company after
the
date hereof, collectively, the "License Agreements" and individually, a "License
Agreement"). No trademark, servicemark, copyright or other
Intellectual Property at any time used by the Company which is owned by another
person, or owned by the Company subject to any Lien in favor of any person
other
than The Holder, is affixed to any Inventory, except (a) to the extent permitted
under the term of the license agreements listed on Schedule 3.1(n) and
(b) to the extent the sale of Inventory to which such Intellectual Property
is
affixed is permitted to be sold by the Company under applicable law (including
the United States Copyright Act of 1976).
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(o) Litigation
and Taxes. There is no litigation, demand, charge, claim,
petition or governmental investigation or proceeding pending, or threatened,
against the Company, which, if adversely determined, would result in any
material adverse change in the financial condition or properties, business
or
operations of the Company. The Company has duly filed all applicable
income or other tax returns on a timely basis and has paid all income or other
taxes when due. There is no controversy or objection pending, or
threatened in respect of any tax returns of the Company.
(p) Event
of Default. No Event of Default (as defined in the Loan
Agreement) has occurred and is continuing, and no event has occurred and is
continuing which, with the lapse of time, the giving of notice, or both, would
constitute such an Event of Default under this Agreement or any of the Loan
Documents and the Company is not in default (without regard to grace or cure
periods) under any contract or agreement to which it is a party.
(q) Governmental
Regulation. The Company is not, or after giving effect to any
loan, will not be, subject to regulation under the Public Utility Holding
Company Act of 1935, the Federal Power Act or the Investment Company Act of
1940
or to any federal or state statute or regulation limiting its ability to incur
indebtedness for borrowed money.
(r) Small
Business Matters. The Company, together with its "affiliates" (as
that term is defined in Title 13, Code of Federal Regulations,
§ 121.103), is a "small business concern" within the meaning of the Small
Business Investment Act of 1958, as amended, and the regulations thereunder,
including but not limited to Title 13, Code of Federal Regulations,
§ 121.103 (the "SBIA") and is in full compliance with, the provisions of
the SBIA. The information regarding the Company and its affiliates
set forth in the SBA Form 480, Form 652 and Parts A and B of
Form 1031 delivered at the Closing is accurate and complete. The
information regarding use of proceeds to be used by the Holder in completing
SBA
Form 1050 is also accurate and complete. Copies of such forms shall
have been completed and executed by the Company and delivered at the Closing
together with a written statement of the Company regarding its planned use
of
the proceeds from the Loan. The Company does not presently engage in,
and it shall not hereafter engage in, any activities, nor shall the Company
use
directly or indirectly the proceeds from the Loan hereunder for any purpose,
for
which a Small Business Investment Company is prohibited from providing funds
by
the SBIA). The Company acknowledges that the Holder is a federal
licensee under the SBIA. Neither the Company nor any of its officers,
managers, or shareholders or, to the best of their knowledge, their employees
directly or indirectly own or control, or are related to any Person who owns
or
controls, any interest in, or is an officer, director, employee, shareholder,
or
agent of, the Holder or any entity in any way related to or affiliated with
the
Holder or any other Small Business Investment Company. The Company
has not received, is not receiving, and has no intention to apply for any
assistance from the SBA or any Small Business Investment Company other than
the
Holder. Promptly after the end of each calendar year (but in any
event prior to February 28 of each year), Company shall deliver to Agent a
written assessment of the economic impact of the Holder's investment in the
Company, specifying the full-time equivalent jobs created or retained in
connection with the investment, the impact of the investment on the businesses
of the Company and on taxes paid by the Company and its employees.
(s) Individual
Licenses. There are no licenses required of individuals which are
necessary to the conduct of the Company's business as presently
conducted.
(t) Place
of Business. The principal place of business of the Company is
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇ and
the Company shall promptly notify the Holder of any change in such
location.
(u) Certain
Fees. No brokerage or finder's fees or commissions are or will be
payable by the Company to any broker, financial advisor or consultant, finder,
placement agent, investment banker, bank or other Person with respect to the
transactions contemplated by this Agreement, and the Company has not taken
any
action that would cause the Holder to be liable for any such fees or
commissions.
-9-
(v) Private
Placement. Neither the Company nor any Person acting on the
Company's behalf has sold or offered to sell or solicited any offer to buy
the
Securities by means of any form of general solicitation or
advertising. Neither the Company nor any of its Affiliates nor any
Person acting on the Company's behalf has, directly or indirectly, at any time
within the past six months, made any offer or sale of any security or
solicitation of any offer 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 issuance 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 stockholder
approval provisions, including, without limitation, under the rules and
regulations of any Trading Market. The Company is not, and is not an
Affiliate of, an "investment company" within the meaning of the Investment
Company Act of 1940, as amended. The Company is not a United States
real property holding corporation within the meaning of the Foreign Investment
in Real Property Tax Act of 1980.
(w) SEC
Filing Status The Company is not subject to any stop order or other
restriction imposed by any court, legal action or governmental authority which
would prohibit the issuance of the Securities.
(x) Listing
and Maintenance Requirements. The Company has not, in the two
years preceding the date hereof, received notice (written or oral) 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
with all such listing and maintenance requirements.
(y) Registration
Rights. Except as described in Schedule 3.1(v), and except
as provided to the Holder pursuant hereto, the Company has not granted or agreed
to grant to any Person any rights (including "piggy-back" registration rights)
to have any securities of the Company registered with the Commission or any
other governmental authority that have not been satisfied.
(z) Application
of Takeover Protections. There is no 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 become
applicable to the Holder as a result of the Holder and the Company fulfilling
their obligations or exercising their rights under the Transaction Documents,
including, without limitation, as a result of the Company's issuance of the
Securities and the Holder's ownership of the Securities.
(aa) Disclosure. The
Company confirms that neither it nor any other Person acting on its behalf
has
provided any of the Holder or its agents or counsel with any information that
constitutes or might constitute material, nonpublic information. The
Company understands and confirms that the Holder will rely on the foregoing
representations in effecting transactions in securities of the
Company. All disclosure materials provided to the Holder regarding
the Company, its business and the transactions contemplated hereby, including
the Transaction Documents and the Schedules to this Agreement, furnished by
or
on behalf of the Company are true and correct 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 the 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, prospects, 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. The Company acknowledges and agrees
that the Holder is not making and has not made (i) any representations or
warranties with respect to the transactions contemplated hereby other than
those
specifically set forth in Section 3.2 or (ii) any statement, commitment
or promise to the Company or, to its knowledge, any of its representatives
which
is or was an inducement to the Company to enter into this Agreement or
otherwise.
(bb) Acknowledgment
Regarding Holder. The Company acknowledges and agrees that the
Holder is acting solely in the capacity of an arm's length counter party with
respect to the Company and to this Agreement and the transactions contemplated
hereby. The Company further acknowledges that the Holder is not acting as a
financial advisor or fiduciary of the Company (or in any similar capacity)
with
respect to this Agreement and any advice given by the Holder or any of its
representatives or agents in connection with this Agreement is merely incidental
to the Holder's acquisition of the contingent right to acquire the
Securities. The Company further represents to the Holder that the
Company's decision to enter into this Agreement has been based solely on the
independent evaluation of the transactions contemplated hereby by the Company
and its representatives.
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(cc) Transactions
With Affiliates and Employees. Except as set forth in SEC Reports
filed at least ten days prior to the date hereof, none of the officers or
directors of the Company and, to the knowledge of the Company, none of the
employees of the Company is presently a party to any transaction with the
Company or any Subsidiary (other than for services as employees, officers and
directors), including any contract, agreement or other arrangement providing
for
the furnishing of services to or by, providing for rental of real or personal
property to or from, or otherwise requiring payments to or from any officer,
director or such employee or, to the knowledge of the Company, any entity in
which any officer, director, or any such employee has a substantial interest
or
is an officer, director, trustee or partner.
(dd) Internal
Accounting Controls. The Company and the 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 generally
accepted accounting principles and to maintain asset accountability, (iii)
access to assets is permitted only in accordance with management's general
or
specific authorization, and (iv) the recorded accountability for assets is
compared with the existing assets at reasonable intervals and appropriate action
is taken with respect to any differences.
(ee) Independent
Nature of the Purchasers. The Company acknowledges that the
obligations of all persons acquiring securities from the Company under the
Transaction Documents are several and not joint with the obligations of any
other third party purchasers of the Company's securities, and they shall not
be
responsible in any way for the performance of the obligations of any other
third
party purchasers of the Company's securities. The Holder and the
Company agree and acknowledge that (i) the decision of the Holders to enter into
this Agreement has been made (and the decision of the Holders to purchase the
Securities pursuant to this Agreement and the terms of the Notes will be made)
by the Holder independently of any other third party purchasers of the Company's
securities and (ii) no other third party purchasers of the Company's securities
have acted as agent for the Holder in connection with any of them making their
investment hereunder and that no such other third party purchasers will be
acting as agent of the Holder in connection with monitoring its investment
hereunder. Nothing contained herein or in any other Transaction Document or
any
agreement of any such other third party purchaser, and no action taken by the
Holder pursuant hereto or any other third party purchaser pursuant thereto,
shall be deemed to constitute the Holders or any such other third party
purchasers as a partnership, an association, a joint venture or any other kind
of entity, or create a presumption that the Holders or any third party
purchasers are in any way acting in concert or as a group with respect to any
matters. The Holder shall be entitled to independently protect and enforce
its
rights, including, without limitation, the rights arising out of this Agreement
or out of any of the other Transaction Documents, and it shall not be necessary
for any such other third party purchasers to be joined as an additional party
in
any proceeding for such purpose. To the extent that any such other third party
purchasers purchase the same or similar securities as a Holder hereunder or
on
the same or similar terms and conditions or pursuant to the same or similar
documents, all such matters are solely in the control of the Company, not the
action or decision of the Holder, and would be solely for the convenience of
the
Company and not because it was required or requested to do so by the Holder
or
any such other third party purchaser.
3.2 Representations
and Warranties of the Holder. The Holder hereby represents and
warrants to the Company as follows:
(a) Organization;
Authority. The Holder is an entity duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
organization with the requisite power and authority to enter into and to
consummate the transactions contemplated by the Transaction Documents and
otherwise to carry out its obligations hereunder and
thereunder. Entry into this Agreement has been duly authorized by all
necessary action on the part of the Holder. This Agreement has been
duly executed and delivered by the Holder and constitutes the valid and binding
obligation of the Holder, enforceable against it in accordance with its
terms.
As
of the date(s) the Holder acquires
any Securities the Holder shall make the following representation and
warranties:
(b) Investment
Intent. The Holder is acquiring the Securities as principal for
investment purposes only and not with a view to or for distributing or reselling
such Securities or any part thereof, without prejudice, however, to the Holder's
right, subject to the provisions of this Agreement, at all times to sell or
otherwise dispose of all or any part of such Securities 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.
-11-
(c) Holder
Status. At the time the Holder elected to acquire the Securities,
it was, and at the date hereof it is, an "accredited investor" as defined in
Rule 501(a) under the Securities Act.
(d) Experience
of the Holder. The Holder, either alone or together with its representatives
has such knowledge, sophistication and experience in business and financial
matters so as to be capable of evaluating the merits and risks of the
prospective investment in the Securities, and has so evaluated the merits and
risks of such investment. The Holder is able to bear the economic risk of an
investment in the Securities and, at the present time, is able to afford a
complete loss of such investment.
(e) Certain
Trading Limitations. The Holder agrees that beginning on the date
the Holder first learned of this transaction, and continuing until the Required
Effectiveness Date, it has not entered into and will not enter into any Short
Sales. For purposes of this Section 3.2(e), a "Short Sale" by the Holder
means a sale of Common Stock that is marked as a short sale and that is executed
at a time when the Holder has no equivalent offsetting long position in the
Common Stock. For purposes of determining whether the Holder has an
equivalent offsetting long position in the Common Stock, all Common Stock and
all Common Stock that would be issuable upon conversion or exercise in full
of
all Options then held by the Holder (assuming that such Options were then fully
convertible or exercisable, notwithstanding any provisions to the contrary,
and
giving effect to any conversion or exercise price adjustments scheduled to
take
effect in the future) shall be deemed to be held long by the
Holder.
(f) Rule
144. The Holder acknowledges that the Securities must be held
indefinitely unless subsequently registered for resale under the Securities
Act
or unless an exemption from such registration is available. The
Holder is aware of the provisions of Rule 144 promulgated under the Securities
Act which permits limited resale of securities purchased in a private placement,
subject to the satisfaction of certain conditions, including, among other
things, the existence of a public market for the shares, the availability of
certain current public information about the Company, the resale occurring
not
less than one year after a party has purchased and fully paid for the security
to be sold, the sale being effected through a "broker's transaction" or in
a
transaction directly with a "market maker" and the number of shares being sold
during any three-month period not exceeding specified limitations.
(g) Access
to Information. The Holder has had an opportunity to discuss the Company's
business, management and financial affairs with its management. It
has also had an opportunity to ask questions of officers of the Company. The
Holder understands that such discussions, as well as any written information
issued by the Company, did not contain any material non-public information
and
were intended to describe certain aspects of the Company's business and
prospects. THE HOLDER UNDERSTANDS THAT ITS INVESTMENT IN THE SECURITIES INVOLVES
A HIGH DEGREE OF RISK.
(h) No
Governmental Review. The Holder understands that no United States federal or
state agency or any other government or governmental agency or authority has
passed upon or made any recommendation or endorsement of the
Securities.
(i) Residency.
The Holder is a resident of the State of Illinois.
(j) Acknowledgment
Regarding 5% Ownership of Company's Outstanding Common Stock. The Holder
acknowledges and agrees that if at any point in time the Holder owns five
percent (5%) or more of the Company's outstanding shares of Common Stock, then
said Holder may be subject to obligations, including the filing of applicable
documents, under the rules and regulations of the Commission.
-12-
ARTICLE
IV
CONVERSION
OF NOTES
4.1 Conversion
of Notes.
(a) At
any time, at the Holder's election and prior to repayment in full of the Loan,
the Holder may, at any time, upon five (5) days' notice (the "Conversion
Notice") elect to convert all or any portion of its Note into shares of the
Company's Common Stock.
(b) In
the event the principal and interest due under this Note from time to time,
or
any portion thereof, is to be converted, the Lender shall surrender this Note
to
the Borrower during usual business hours together with the Conversion Notice
specifying that the Lender elects to convert this Note into shares of Common
Stock in accordance with the provisions of the Note and this Agreement, the
dollar amount to be converted into shares (the "Conversion Amount") and
specifying the name or names in which the shares to be issued upon such
conversion shall be held, together with the addresses and social security
numbers, in the case of natural persons, or federal employer identification
numbers, in the case of entities, of the persons so named. The number
of shares of Common Stock to be issued upon the conversion of the amounts due
under this Note shall be calculated as follows, subject to adjustment as set
forth in Section 5.4 below: the Conversion Amount shall be
multiplied by (i) subject to the following paragraph, .4286 and that amount
shall be converted into shares at $1.50 per share, (ii) .2857 and that amount
shall be converted into shares at $2.00 per share and (iii) .2857 and that
amount shall be converted into shares at $2.50 per share (each, "Conversion
Prices"); provided, however, that if a Conversion Price Adjustment Event has
occurred, then the Conversion Price of the .4286 traunch shall thereafter be
$1.00 per share.
(c) A
"Conversion Price Adjustment Event" shall mean the failure on the part of the
Borrower, (i) within six (6) months of the date hereof, to identify and hire
either a Chief Executive Officer or a Chief Financial Officer on terms
acceptable to both the Borrower and at least the Required Lenders or (ii) the
failure of the Borrower, within six (6) months of the first date of employment
of the first to be hired of a Chief Executive Officer or a Chief Financial
Officer, to identify and hire on terms acceptable to the Borrower and at least
the Required Lenders a person to fill the position of Chief Executive Officer
or
Chief Financial Officer, whichever was not previously
filled.
4.2 Delivery
of Securities.
(a) Upon
conversion of the Note or any part thereof, the Company shall promptly (but
in
no event later than the close of trading on the last of such number of Trading
Days as trades clear on United States markets or exchanges, currently three
(3)
business days, after the Conversion Date (the "Settlement Period")) issue or
cause to be issued and cause to be delivered to or upon the written order of
the
Holder and in such name or names as the Holder may designate, a certificate
for
the Securities issuable upon such conversion, free of restrictive legends unless
a registration statement covering the resale of the Securities and naming the
Holder as a selling stockholder thereunder is not then effective and the
Securities are not freely transferable without volume restrictions pursuant
to
Rule 144 under the Securities Act. A "Trading Day" is any day that
the exchange or market upon which the Company's shares are traded is open for
trading. The Holder, or any Person so designated by the Holder to
receive Securities, shall be deemed to have become holder of record of such
Securities as of the Conversion Date. The Company shall, upon request
of the Holder, use its best efforts to deliver Securities hereunder
electronically through the Depository Trust Corporation or another established
clearing corporation performing similar functions. The Note shall
only be cancelled when it has been converted in full or repaid in full or some
combination thereof.
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(b) In
addition to any other rights available to a Holder, if the Company fails to
deliver to the Holder a certificate representing Securities upon conversion
by
the end of the Settlement Period, and if after end of the Settlement Period
the
Holder purchases (in an open market transaction or otherwise) shares of Common
Stock to deliver in satisfaction of a sale by the Holder of the Securities
that
the Holder anticipated receiving from the Company (a "Buy-In"), then the Company
shall, within the number of days then comprising a Settlement Period following
the date of the Holder's request, and in the Holder's discretion, either (i)
pay
cash to the Holder in an amount equal to the Holder'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 Common Stock) shall terminate,
or
(ii) promptly honor its obligation to deliver to the Holder a certificate or
certificates representing such Common Stock and pay cash to the Holder 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 Price on the date
of the event giving rise to the Company’s obligation to deliver such
certificate.
(c) The
Company's obligations to issue and deliver Securities in accordance with the
terms hereof are absolute and unconditional, irrespective of any action or
inaction by the Holder to enforce the same, any waiver or consent with respect
to any provision hereof, the recovery of any judgment against any Person or
any
action to enforce the same, or any setoff, counterclaim, recoupment, limitation
or termination, or any breach or alleged breach by the Holder or any other
Person of any obligation to the Company or any violation or alleged violation
of
law by the Holder or any other Person, and irrespective of any other
circumstance which might otherwise limit such obligation of the Company to
the
Holder in connection with the issuance of the Securities. Nothing
herein shall limit a Holder's right to pursue any other remedies available
to it
hereunder, at law or in equity including, without limitation, a decree of
specific performance and/or injunctive relief with respect to the Company’s
failure to timely deliver certificates representing shares of Common Stock
upon
conversion of the Note as required pursuant to the terms
hereof.
(d) Notwithstanding
the foregoing, the obligations of the Company stated in this section shall
be
limited to covering the actual loss incurred by the Holder for untimely
delivery. However, the Company will retain the obligation to deliver all shares
as soon as possible.
4.3 Charges,
Taxes and Expenses. Issuance and delivery of certificates
for shares of Common Stock upon conversion of the Note shall be made without
charge to the Holder for any issue or transfer tax, withholding tax, transfer
agent fee or other incidental tax or expense in respect of the issuance of
such
certificates, all of which taxes and expenses shall be paid by the Company;
provided, however, that the Company shall not be required to pay any tax which
may be payable in respect of any transfer involved in the registration of any
certificates for the Securities in a name other than that of the Holder or
an
Affiliate thereof. The Holder shall be responsible for all other tax
liability that may arise as a result of holding or receiving Securities upon
conversion hereof.
4.4 Certain
Adjustments. The number of Securities issuable upon conversion of
the Note and the Conversion Prices are subject to adjustment from time to time
as set forth in this Article IV.
(a) Stock
Dividends and Splits. If the Company, at any time prior to
repayment of the Loan in full, (i) pays a stock dividend on its Common Stock
or
otherwise makes a distribution on any class of capital stock that is payable
in
shares of Common Stock, (ii) subdivides outstanding shares of Common Stock
into
a larger number of shares, or (iii) combines outstanding shares of Common Stock
into a smaller number of shares, then in each such case the Conversion Price
shall be multiplied by a fraction of which the numerator shall be the number
of
shares of Common Stock outstanding immediately before such event and of which
the denominator shall be the number of shares of Common Stock outstanding
immediately after such event. Any adjustment made pursuant to clause
(i) of this paragraph shall become effective immediately after the record date
for the determination of stockholders entitled to receive such dividend or
distribution, and any adjustment pursuant to clause (ii) or (iii) of this
paragraph shall become effective immediately after the effective date of such
subdivision or combination.
(b) Pro
Rata Distributions. If the Company, at any time prior to
repayment of the Loan in full, distributes to holders of Common Stock (i)
evidence of its indebtedness, (ii) any security (other than a distribution
of
Common Stock covered by the preceding paragraph), (iii) rights or warrants
to subscribe for or purchase any security, or (iv) any other asset (in each
case, "Distributed Property"), then the Company shall promptly provide the
Holder with notice of such Distributed Property.
-14-
(c) Fundamental
Transactions. If, at any time prior to repayment of the Loan in
full, (i) the Company effects any merger or consolidation of the Company with
or
into another Person, (ii) the Company effects any sale of all or substantially
all of its assets in one or a series of related transactions, (iii) any tender
offer or exchange offer (whether by the Company or another Person) is completed
pursuant to which holders of Common Stock are permitted to tender or exchange
their shares for other securities, cash or property, or (iv) the Company effects
any reclassification of the Common Stock or any compulsory share exchange
pursuant to which the Common Stock is effectively converted into or exchanged
for other securities, cash or property (other than as a result of a subdivision
or combination of shares of Common Stock covered by Section 9(a) above)
(in any such case, a "Fundamental Transaction"), then the Holder shall have
the
right to receive, (i) upon conversion of the Note prior to or in connection
with
the closing of the Fundamental Transaction, the same amount and kind of
securities, cash or property that is received by holders of Common Stock or
(ii)
at the Holder’s request, any successor to the Company or surviving entity in
such Fundamental Transaction shall issue to the Holder a new convertible note
entitling the Holder to acquire an equity interest in the Company or surviving
entity in an amount equal to the Holder's pro rata position in the Company
prior
to the transaction. The aggregate Conversion Price for the Note will
not be affected by any such Fundamental Transaction, but the Company shall
apportion such aggregate Conversion Price in a reasonable manner reflecting
the
relative value of Holder's interest in the Company before the Fundamental
Transaction and Holder's pro rata interest in the Company or surviving entity
after the Fundamental Transaction. The terms of any agreement
pursuant to which a Fundamental Transaction is effected shall include terms
requiring any such successor or surviving entity to comply with the provisions
of this paragraph (c) and insuring that any replacement security will be
adjusted upon any subsequent transaction analogous to a Fundamental
Transaction.
(d) Subsequent
Equity Sales.
(i) If
from the date hereof through and prior to repayment of the Loan in full, the
Company or any Subsidiary issues additional shares of Common Stock or rights,
warrants, options or other securities or debt convertible, exercisable or
exchangeable for shares of Common Stock or otherwise entitling any Person to
acquire shares of Common Stock (collectively, "Common Stock Equivalents") at
an
effective net price to the Company per share of Common Stock (the "Effective
Price") less than the Conversion Prices (as adjusted hereunder to such date),
then the Conversion Prices shall be reduced to equal the Effective
Price. For purposes of this paragraph, in connection with any
issuance of any Common Stock Equivalents, (A) the maximum number of shares
of
Common Stock potentially issuable at any time upon conversion, exercise or
exchange of such Common Stock Equivalents (the "Deemed Number") shall be deemed
to be outstanding upon issuance of such Common Stock Equivalents, (B) the
Effective Price applicable to such Common Stock shall equal the minimum dollar
value of consideration payable to the Company to purchase such Common Stock
Equivalents and to convert, exercise or exchange them into Common Stock (net
of
any discounts, fees, commissions and other expenses), divided by the Deemed
Number, and (C) no further adjustment shall be made to the Conversion Price
upon
the actual issuance of Common Stock upon conversion, exercise or exchange of
such Common Stock Equivalents.
(ii) If
from the date hereof through and prior to repayment of the Loan in full, the
Company or any Subsidiary issues Common Stock Equivalents with an Effective
Price or a number of underlying shares that floats or resets or otherwise varies
or is subject to adjustment based (directly or indirectly) on market prices
of
the Common Stock (a "Floating Price Security"), then for purposes of applying
the preceding paragraph in connection with any subsequent conversion, the
Effective Price will be determined separately on each Conversion Date and will
be deemed to equal the lowest Effective Price at which any holder of such
Floating Price Security is entitled to acquire Common Stock on such Conversion
Date (regardless of whether any such holder actually acquires any shares on
such
date).
(e) Number
of Shares. Simultaneously with any adjustments to the Conversion
Price pursuant to paragraphs (a) or (d) of this Section, the number of shares
that may be purchased upon conversion of the Note shall be increased
proportionately, so that after such adjustment the aggregate Conversion Price
payable hereunder for the increased number of shares shall be the same as the
aggregate Conversion Price in effect immediately prior to such
adjustment.
(f) Calculations. All
calculations under this Article IV shall be made to the nearest cent or
the nearest 1/100th of a share, as applicable. The number of shares
of Common Stock outstanding at any given time shall not include shares owned
or
held by or for the account of the Company, and the disposition of any such
shares shall be considered an issue or sale of Common Stock.
-15-
(g) Notice
of Adjustments. Upon the occurrence of each adjustment pursuant
to this Article IV, the Company at its expense will promptly compute such
adjustment in accordance with the terms of the Note and this Agreement and
prepare a certificate setting forth such adjustment, including a statement
of
the adjusted Conversion Price and adjusted number or type of shares or other
securities issuable upon conversion of the Note (as applicable), describing
the
transactions giving rise to such adjustments and showing in detail the facts
upon which such adjustment is based. Upon written request, the
Company will promptly deliver a copy of each such certificate to the Holder
and
to the Company's Transfer Agent.
(h) Notice
of Corporate Events. If the Company (i) declares a dividend or
any other distribution of cash, securities or other property in respect of
its
Common Stock, including without limitation any granting of rights or warrants
to
subscribe for or purchase any capital stock of the Company or any Subsidiary,
(ii) authorizes or approves, enters into any agreement contemplating or solicits
stockholder approval for any Fundamental Transaction or (iii) authorizes the
voluntary dissolution, liquidation or winding up of the affairs of the Company,
then the Company shall deliver to the Holder a notice describing the material
terms and conditions of such transaction, at least 10 calendar days prior to
the
applicable record or effective date on which a Person would need to hold Common
Stock in order to participate in or vote with respect to such transaction,
and
the Company will take all steps reasonably necessary in order to insure that
the
Holder is given the practical opportunity to convert the Note prior to such
time
so as to participate in or vote with respect to such transaction; provided,
however, that the failure to deliver such notice or any defect therein shall
not
affect the validity of the corporate action required to be described in such
notice.
(i) Exceptions
to the Adjustment Provisions of this Article IV. Notwithstanding the
foregoing, the Company shall have the right to issue up to an aggregate of
one
million (1,000,000) shares or options or warrants for share of the Company's
Common Stock which issuance or proposed issuances will not result in an
adjustment of the Holder's Conversion Price under the Note; provided that (1)
such shares, options and/or warrants are issued for the sole purpose of employee
compensation, (2) such issuance or proposed issuance is not made to any
executive or member of the board of directors of the Company as of the date
hereof and (3) the Company will provide the Holder with prior written notice
of
such issuance or proposed issuance.
ARTICLE
V
OTHER
AGREEMENTS OF THE PARTIES
5.1 Transfer
Restrictions.
(a) The
Securities may only be disposed of pursuant to an effective registration
statement under the Securities Act or pursuant to an available exemption from
the registration requirements of the Securities Act, and in compliance with
any
applicable state securities laws. In connection with any transfer of
any of the Securities other than pursuant to an effective registration statement
or to the Company or pursuant to Rule 144(k), except as otherwise set forth
herein, the Company may require the transferor to provide to the Company an
opinion of counsel selected by the transferor, the form and substance of which
opinion shall be reasonably satisfactory to the Company, to the effect that
such
transfer does not require registration under the Securities
Act. Notwithstanding the foregoing, the Company hereby consents to
and agrees to register on the books of the Company and with its transfer agent,
without any such legal opinion, any transfer of any of the Securities by the
Holder to an Affiliate of the Holder, provided that the transferee certifies
to
the Company that it is an "accredited investor" as defined in Rule 501(a) under
the Securities Act.
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(b) The
Holder agrees to the imprinting, so long as is required by this Section
5.1(b), of the following legend on any certificate evidencing
Securities:
NEITHER
THESE SECURITIES NOR ANY SECURITIES INTO WHICH THESE SECURITIES MAY BE
EXERCISABLE HAVE BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION
OR
THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM
REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES
ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN
AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT AND IN COMPLIANCE WITH APPLICABLE STATE
SECURITIES LAWS OR BLUE SKY LAWS. NOTWITHSTANDING THE FOREGOING,
THESE SECURITIES [AND THE SECURITIES ISSUABLE UPON EXERCISE OF THESE SECURITIES]
MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN
OR
FINANCING ARRANGEMENT SECURED BY SUCH SECURITIES.
In
addition, the Holder acknowledges that each certificate for the Securities
shall
bear any additional legend required by any other applicable domestic or foreign
securities or blue sky laws.
Certificates
evidencing the Securities shall not be required to contain such legend or any
other legend (i) while a Registration Statement covering the resale of the
Securities is effective under the Securities Act, or (ii) following any sale
of
the Securities pursuant to Rule 144, or (iii) if the Securities are eligible
for
sale under Rule 144(k), or (iv) if such legend is not required under applicable
requirements of the Securities Act (including judicial interpretations and
pronouncements issued by the Staff of the Commission). The Company
shall cause its counsel to issue the legal opinion included in the Transfer
Agent Instructions to the Company's transfer agent on the Effective Date. 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 Trading Days following
the delivery by the Holder to the Company or the Company's transfer agent of
a
legended certificate representing such Securities, deliver or cause to be
delivered to the Holder 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 any transfer agent of the
Company that enlarge the restrictions on transfer set forth in this
Section.
(c) The
Company acknowledges and agrees that the Holder may from time to time pledge
or
grant a security interest in some or all of the Securities in connection with
a
bona fide margin agreement or other loan or financing arrangement secured by
the
Securities and, if required under the terms of such agreement, loan or
arrangement, the Holder may transfer pledged or secured Securities to the
pledgees or secured parties, subject to the Company's consent which shall not
be
unreasonably withheld. Such a pledge or transfer would not be subject
to approval of the Company and no legal opinion of the pledgee, secured party
or
pledgor shall be required in connection therewith. Further, no notice
shall be required of such pledge. At the Holder's expense, the
Company will execute and deliver such reasonable documentation as a pledgee
or
secured party of the Securities may reasonably request in connection with a
pledge or transfer of the Securities, 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.
5.2 Furnishing
of Information. As long as the Holder owns any of the Securities,
the Company covenants to timely file (or obtain extensions in respect thereof
and file within the applicable grace period) all reports required to be filed
by
the Company after the date hereof pursuant to the Exchange Act. Upon
the request of the Holder, the Company shall deliver to the Holder a written
certification of a duly authorized officer as to whether it has complied with
the preceding sentence. As long as the Holder owns any of the Securities, if
the
Company is not required to file reports pursuant to such laws, it will prepare
and furnish to the Holder and make publicly available in accordance with
paragraph (c) of Rule 144 such information as is required for the Holder to
sell
the Securities under Rule 144. The Company further covenants that it
will take such further action as the Holder may reasonably request to satisfy
the provisions of Rule 144 applicable to the issuer of securities relating
to
transactions for the sale of securities pursuant to Rule 144.
5.3 Financial
Statements. The Company shall at all times maintain a standard
and modern system of accounting, on the accrual basis of accounting and in
all
respects in accordance with GAAP, and shall furnish to the Holder or its
authorized representatives such information regarding the business affairs,
operations and financial condition of the Company, including, but not limited
to:
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(a) as
soon as available, and in any event, within ninety (90) days after the close
of
each of its fiscal years, a copy of the annual audited, compiled financial
statements of the Company, including balance sheet, statement of income and
retained earnings, statement of cash flows for the fiscal year then ended and
such other information (including nonfinancial information) as the Holder may
request, in reasonable detail, prepared and certified by an independent
certified public accountant acceptable to the Holder, containing an unqualified
opinion;
(b) as
soon as available, and in any event, within forty-five (45) days following
the
end of each fiscal quarter, a copy of the financial statements of the Company
regarding such fiscal quarter, including balance sheet, statement of income
and
retained earnings, statement of cash flows for the fiscal quarter then ended
and
such other information (including nonfinancial information) as the Holder may
request, in reasonable detail, prepared and certified as accurate by the
Company; and
(c) as
soon as available, and in any event, within thirty (30) days following the
end
of each calendar month, a copy of the financial statements of the Company
regarding such calendar month, including balance sheet, statement of income
and
retained earnings, statement of cash flows for the calendar month then ended
and
such other information (including nonfinancial information) as the Holder may
request, in reasonable detail, prepared and certified as accurate by the
Company.
5.4 Integration.
The Company will not offer, sell or solicit offers to buy or otherwise negotiate
in respect of any security (as defined in the Securities Act) in a manner that
would cause the offer and issuance of the Securities to the Holder to fail
to be
entitled to the exemption from registration afforded by Rule 506 of Regulation
D
and Section 4(2) of the Securities Act or that would be integrated with the
offer or sale of the Securities for purposes of the rules and regulations of
any
Trading Market.
5.5 Reservation
of Securities. The Company shall maintain a reserve from its duly
authorized shares of Common Stock for issuance pursuant to the Transaction
Documents in such amount as may be required to fulfill its obligations in full
under the Transaction Documents. In the event that at any time the
then authorized shares of Common Stock are insufficient for the Company to
satisfy its obligations in full under the Transaction Documents, the Company
shall promptly take such actions as may be required to increase the number
of
authorized shares.
5.6 Securities
Laws Disclosure; Publicity. The Company shall, on or before 9:00
a.m., Florida time, on December 8, 2006, issue a press release in the form
attached hereto as Schedule 5.6. On the Closing Date, the
Company shall file a Current Report on Form 8-K with the Commission (the "8-K
Filing") describing the terms of the transactions contemplated by the
Transaction Documents, in the form required by the Exchange Act. Thereafter,
the
Company shall timely file any filings and notices required by the Commission
or
applicable law with respect to the transactions contemplated hereby and provide
copies thereof to the Holder promptly after filing. Except with
respect to the 8-K Filing (a copy of which will be provided to the Holder for
its review as early as practicable prior to its filing), the Company shall,
at
least one day prior to the filing or dissemination of any disclosure required
by
this paragraph, provide a copy thereof to the Holder for its
review. Notwithstanding the foregoing, the Company shall not publicly
disclose the name of the Holder, or include the name of the Holder in any filing
with the Commission or any regulatory agency or Trading Market, without the
prior written consent of the Holder, except to the extent such disclosure (but
not any disclosure as to the controlling Persons thereof) is required by law
or
Trading Market regulations, in which case the Company shall provide the Holder
with prior notice of such disclosure. The Company shall not, and
shall cause each of its Subsidiaries and its and each of their respective
officers, directors, employees and agents not to, provide the Holder with any
material nonpublic information regarding the Company or any of its Subsidiaries
from and after the filing of the 8-K Filing without the express prior written
consent of the Holder. In the event of a breach of the foregoing covenant by
the
Company, any of its Subsidiaries, or any of its or their respective officers,
directors, employees and agents, the Company shall make a public disclosure,
in
the form of a press release, public advertisement or otherwise, of such material
nonpublic information. The Holder shall not have any liability to the Company,
its Subsidiaries, or any of its or their respective officers, directors,
employees, stockholders or agents for any such disclosure. Subject to
the foregoing, neither the Company nor the Holder shall issue any press releases
or any other public statements with respect to the transactions contemplated
hereby; provided, however, that the Company shall be entitled, without the
prior
approval of the Holder, to make any press release or other public disclosure
with respect to such transactions (i) in substantial conformity with the 8-K
Filing and contemporaneously therewith and (ii) as is required by applicable law
and regulations (provided that in the case of clause (i) the Holder shall be
consulted by the Company in connection with any such press release or other
public disclosure prior to its release). Each press release disseminated during
the 12 months preceding the date of this Agreement did not at the time of
release contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they are made,
not
misleading.
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5.7 Reimbursement. If
the Holder and/or any of its Affiliates or any officer, director, partner,
controlling Person, member, manager, investment advisor, employee or agent
of
the Holder or any of its Affiliates (each a "Related Person") becomes involved
in any capacity in any Proceeding brought by or against any Person in connection
with or as a result of the transactions contemplated by the Transaction
Documents (except per the indemnification provisions set forth in Section
7.4 hereof), the Company will indemnify and hold harmless the Holder and
each Related Person for their reasonable legal and other expenses (including
the
costs of any investigation, preparation and travel) and for any Losses incurred
in connection therewith which are determined by a court of competent
jurisdiction in a non-appealable order to have resulted from the gross
negligence, willful misconduct or fraud of the Company or its
Affiliates. In addition, the Company shall indemnify and hold
harmless the Holder and Related Person from and against any and all Losses
arising out of or relating to any breach by the Company of any representation,
warranty or covenant made by the Company in this Agreement or any other
Transaction Document, or any allegation by a third party that, if true, would
constitute such a breach. The conduct of any Proceedings for which
indemnification is available under this paragraph shall be governed by
Section 7.4(c) below. Subject to Section 7.4 below, the
indemnification obligations of the Company under this paragraph shall be in
addition to any liability that the Company may otherwise have and shall be
binding upon and inure to the benefit of any successors, assigns, heirs and
personal representatives of the Holder and any such Related
Persons. The Company also agrees that neither the Holder nor any
Related Person shall have any liability to the Company or any Person asserting
claims on behalf of or in right of the Company in connection with or as a result
of the transactions contemplated by the Transaction Documents, except to the
extent that any Losses incurred by the Company result from the gross negligence
or willful misconduct of the Holder or Related Person in connection with such
transactions. If the Company breaches its obligations under any Transaction
Document, then, in addition to any other liabilities the Company may have under
any Transaction Document or applicable law, the Company shall pay or reimburse
the Holder on demand for all costs of collection and enforcement (including
reasonable attorneys fees and expenses). Without limiting the
generality of the foregoing, the Company specifically agrees to reimburse the
Holder for all costs of enforcing the indemnification obligations in this
paragraph as determined by a court of competent jurisdiction in a final judgment
not subject to appeal or review. Notwithstanding anything to the
contrary contained in this Section 5.8 to the contrary, this Section
5.8 shall not provide any Person with any additional remedy for any claim
provided by the provisions of Section 6.4 hereof.
ARTICLE
VI
CONDITIONS
6.1 Conditions
Precedent to the Obligations of the Holder. The obligation of the
Holder to acquire the Securities at the Closing is subject to the satisfaction
or waiver by the Holder, at or before the Closing, of each of the following
conditions:
(a) Representations
and Warranties. The representations and warranties of the Company contained
herein shall be true and correct in all material respects as of the date when
made and as of the Closing as though made on and as of such date;
and
(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.
6.2 Conditions
Precedent to the Obligations of the Company. The obligation of
the Company to sell the Securities at the Closing is subject to the satisfaction
or waiver by the Company, at or before the Closing, of each of the following
conditions:
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(a) Representations
and Warranties. The representations and warranties of the Holder
contained herein 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;
(b) Performance. The
Holder 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 Holder at or prior
to the Closing; and
(c) No
Injunction. No statute, rule, regulation, executive order,
decree, ruling or injunction shall have been enacted, entered, promulgated,
endorsed or threatened or be pending by or before any governmental authority
of
competent jurisdiction which prohibits or threatens to prohibit the consummation
of any of the transactions contemplated by this Agreement and the agreements
attached as exhibits hereto.
ARTICLE
VII
REGISTRATION
RIGHTS
7.1 Registration
Statement
(a) As
promptly as possible, and in any event on or prior to the Filing Date, the
Company shall prepare and file with the Commission a Registration Statement
covering the resale of all Registrable Securities for an offering to be made
on
a continuous basis pursuant to Rule 415. The Registration Statement
shall be on Form S-1 (except if the Company is not then eligible to register
for
resale the Registrable Securities on Form S-1, in which case such registration
shall be on another appropriate form in accordance herewith as the Holder may
consent in writing) and shall contain (except if otherwise directed by the
Holder) the "Plan of Distribution" attached hereto as Exhibit
B.
(b) The
Company shall use commercially reasonable efforts to cause the Registration
Statement to be declared effective by the Commission as promptly as possible
after the filing thereof, but in any event prior to the Required Effectiveness
Date, and shall use commercially reasonable efforts to keep the Registration
Statement continuously effective under the Securities Act until the earlier
of
(i) the date when all Registrable Securities covered by such Registration
Statement have been resold either under the Registration Statement or pursuant
to Rule 144, and (ii) the date on which all Registrable Securities may be sold
without restriction or limitation pursuant to paragraph (k) of Rule 144
("Effectiveness Period").
(c) The
Company shall notify the Holder in writing promptly (and in any event within
one
Trading Day) after receiving notification from the Commission that the
Registration Statement has been declared effective.
(d) Commencing
upon the occurrence of any Event (as defined below) and until the applicable
Event is cured, as partial relief for the damages suffered therefrom by the
Holder (which remedy shall not be exclusive of any other remedies available
under this Agreement, at law or in equity), the Company shall pay upon the
occurrence of such Event and on every monthly anniversary thereof to the Holder
an amount in cash, as damages and not as a penalty, the amount of Holder's
Pro
Rata Share of Twenty Thousand Dollars ($20,000), in each case, prorated for
any
partial month. Any amounts payable pursuant to the preceding sentence
are payable, at the Company's election, up to one-half in shares of Common
Stock. The payments to which the Holder shall be entitled pursuant to
this Section 7.1(d) are referred to herein as "Event
Payments". Any Event Payments payable pursuant to the terms hereof
shall apply on a pro rata basis for any portion of a month prior to the cure
of
an Event. In the event the Company fails to make Event Payments in a
timely manner, such Event Payments shall bear interest at the rate of twelve
percent (12%) per annum (prorated for partial months) until paid in
full.
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For
such
purposes, each of the following shall constitute an "Event":
(i) the
Registration Statement is not filed on or prior to the Filing Date or is not
declared effective on or prior to the Required Effectiveness Date;
(ii) after
the Effective Date, the Commission issues a stop order which has the effect
of
suspending the Holder's right to sell Registrable Securities under the
Registration Statement (or a subsequent Registration Statement filed in
replacement thereof) and such suspension is not waived or lifted for five or
more Trading Days (whether or not consecutive);
(iii) after
the Effective Date, any Registrable Securities covered by such Registration
Statement are not listed on an Eligible Market;
(iv) the
Common Stock is not listed or quoted, or is suspended from trading, on an
Eligible Market for a period of five (5) Trading Days (which need not be
consecutive Trading Days) in any twelve (12) month period; or
(v) the
Company fails to have available a sufficient number of authorized but unissued
and otherwise unreserved shares of Common Stock available to issue Securities
upon any conversion of the Loan or, at any time following the Effective Date,
any Shares are not listed on an Eligible Market.
Notwithstanding
the foregoing, no Event may be deemed to occur entitling the Holder to an Event
Payment or other relief if the Event occurs after the Holder has disposed of
all
of its Registrable Securities. Upon written request of the Company, Holder
agrees to inform the Company of the amount of Registrable Securities is holds
from time to time, which shall be held by the Company in strictest
confidence.
(e) The
Company shall not, prior to the Effective Date of the Registration Statement,
prepare and file with the Commission a registration statement relating to an
offering for its own account or the account of others under the Securities
Act
of any of its equity securities; provided, however that the Company may file
such a registration statement provided that not less than 50% of Holder's
Registrable Securities may be included in such registration
statement.
7.2 Registration
Procedures. In connection with the Company's registration
obligations hereunder, the Company shall:
(a) Not
less than three Trading Days prior to the filing of a Registration Statement
or
any related Prospectus or any amendment, or not less than one Trading Day for
any supplement thereto (including any document that would be incorporated or
deemed to be incorporated therein by reference), the Company shall (i) furnish
to the Holder copies of all such documents proposed to be filed, which documents
(other than those incorporated or deemed to be incorporated by reference) will
be subject to the review of the Holder for up to three Trading Days, and (ii)
cause its officers and directors, counsel and independent certified public
accountants to respond to such inquiries as shall be necessary, in the
reasonable opinion of counsel, to conduct a reasonable investigation within
the
meaning of the Securities Act.
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(b) (i) Prepare
and file with the Commission such amendments, including post-effective
amendments, to each Registration Statement and the Prospectus used in connection
therewith as may be necessary to keep the Registration Statement continuously
effective as to the applicable Registrable Securities for the Effectiveness
Period and prepare and file with the Commission such additional Registration
Statements in order to register for resale under the Securities Act all of
the
Registrable Securities; (ii) cause the related Prospectus to be amended or
supplemented by any required Prospectus supplement, and as so supplemented
or
amended to be filed pursuant to Rule 424; (iii) respond as promptly as
reasonably possible, and in any event within ten days, to any comments received
from the Commission with respect to the Registration Statement or any amendment
thereto and as promptly as reasonably possible provide the Holder true and
complete copies of all correspondence from and to the Commission relating to
the
Registration Statement; and (iv) comply in all material respects with the
provisions of the Securities Act and the Exchange Act with respect to the
disposition of all Registrable Securities covered by the Registration Statement
during the applicable period in accordance with the intended methods of
disposition by the Holder thereof set forth in the Registration Statement as
so
amended or in such Prospectus as so supplemented.
(c) Notify
the Holder and the Holder's Counsel of the Registrable Securities to be sold
as
promptly as reasonably possible, and (if requested by any such Person) confirm
such notice in writing no later than one Trading Day thereafter, of any of
the
following events: (i) the Commission notifies the Company whether there will
be
a "review" of any Registration Statement; (ii) the Commission comments in
writing on any Registration Statement (in which case the Company shall deliver
to the Holder a copy of such comments and of all written responses thereto);
(iii) any Registration Statement or any post-effective amendment is declared
effective; (iv) the Commission or any other Federal or state governmental
authority requests any amendment or supplement to any Registration Statement
or
Prospectus or requests additional information related thereto; (v) the
Commission issues any stop order suspending the effectiveness of any
Registration Statement or initiates any Proceedings for that purpose; (vi)
the
Company receives notice of any suspension of the qualification or exemption
from
qualification of any Registrable Securities for sale in any jurisdiction, or
the
initiation or threat of any Proceeding for such purpose; or (vii) the financial
statements included in any Registration Statement become ineligible for
inclusion therein or any statement made in any Registration Statement or
Prospectus or any document incorporated or deemed to be incorporated therein
by
reference is untrue in any material respect or any revision to a Registration
Statement, Prospectus or other document is required so that it will not contain
any untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary to make the statements therein,
in
the light of the circumstances under which they were made, not
misleading.
(d) Use
its commercially reasonable efforts to avoid the issuance of or, if issued,
obtain the withdrawal of (i) any order suspending the effectiveness of any
Registration Statement, or (ii) any suspension of the qualification (or
exemption from qualification) of any of the Registrable Securities for sale
in
any jurisdiction, as soon as possible.
(e) Furnish
to the Holder and the Holder's Counsel, without charge, at least one conformed
copy of each Registration Statement and each amendment thereto, including
financial statements and schedules, all documents incorporated or deemed to
be
incorporated therein by reference, and all exhibits to the extent requested
by
such Person (including those previously furnished or incorporated by reference)
promptly after the filing of such documents with the Commission.
(f) Promptly
deliver to the Holder and the Holder's Counsel, without charge, as many copies
of the Prospectus or Prospectuses (including each form of prospectus) and each
amendment or supplement thereto as such Persons may reasonably
request. The Company hereby consents to the use of such Prospectus
and each amendment or supplement thereto by the Holder in connection with the
offering and sale of the Registrable Securities covered by such Prospectus
and
any amendment or supplement thereto.
(g) In
the time and manner required by each Trading Market on which the Company's
shares are listed, (i) prepare and file with such Trading Market an additional
shares listing application covering all of the Registrable Securities; (ii)
take
all steps necessary to cause such Registrable Securities to be approved for
listing on each Trading Market on which the Company's shares are listed as
soon
as possible thereafter; (iii) provide to the Holder evidence of such listing;
and (iv) maintain the listing of such Registrable Securities on such Trading
Market or another Eligible Market.
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(h) Prior
to any public offering of Registrable Securities, use commercially reasonable
efforts to register or qualify or cooperate with a the Holder and the Holder's
Counsel in connection with the registration or qualification (or exemption
from
such registration or qualification) of such Registrable Securities for offer
and
sale under the securities or Blue Sky laws of such jurisdictions within the
United States as the Holder requests in writing, to keep each such registration
or qualification (or exemption therefrom) effective during the Effectiveness
Period and to do any and all other acts or things necessary or advisable to
enable the disposition in such jurisdictions of the Registrable Securities
covered by a Registration Statement.
(i) Cooperate
with the Holder to facilitate the timely preparation and delivery of
certificates representing Registrable Securities to be delivered to a transferee
pursuant to a Registration Statement, which certificates shall be free, to
the
extent permitted by this Agreement, of all restrictive legends, and to enable
such Registrable Securities to be in such denominations and registered in such
names as the Holder may request.
(j) Upon
the occurrence of any event described in Section 7.2(c)(vii), as promptly
as reasonably possible, prepare a supplement or amendment, including a
post-effective amendment, to the Registration Statement or a supplement to
the
related Prospectus or any document incorporated or deemed to be incorporated
therein by reference, and file any other required document so that, as
thereafter delivered, neither the Registration Statement nor such Prospectus
will contain an untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the statements therein,
in the light of the circumstances under which they were made, not
misleading.
(k) Cooperate
with any reasonable due diligence investigation undertaken by the Holder in
connection with the sale of Registrable Securities, including, without
limitation, by making available any documents and information; provided that
the
Company will not deliver or make available to the Holder material, nonpublic
information unless the Holder specifically requests in advance to receive
material, nonpublic information in writing.
(l) Comply
with all applicable rules and regulations of the Commission.
7.3 Registration
Expenses. The Company shall pay (or reimburse the Holder for) all
reasonable fees and expenses incident to the performance of or compliance with
this Agreement by the Company, including without limitation (a) all registration
and filing fees and expenses, including without limitation those related to
filings with the Commission, any Trading Market and in connection with
applicable state securities or Blue Sky laws, (b) printing expenses (including
without limitation expenses of printing certificates for Registrable Securities
and of printing prospectuses requested by the Holder), (c) messenger, telephone
and delivery expenses, (d) fees and disbursements of counsel for the Company,
(e) fees and expenses of all other Persons retained by the Company in connection
with the consummation of the transactions contemplated by this Agreement, and
(f) all listing fees to be paid by the Company to the Trading
Market.
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7.4 Indemnification
(a) Indemnification
by the Company. The Company shall, notwithstanding any
termination of this Agreement, indemnify and hold harmless the Holder, the
officers, directors, partners, members, managers, agents, brokers (including
brokers who offer and sell Registrable Securities as principal as a result
of a
pledge or any failure to perform under a margin call of Common Stock),
investment advisors, employees, representatives and agents of each of them,
each
Person who controls the Holder (within the meaning of Section 15 of the
Securities Act or Section 20 of the Exchange Act) and the officers, directors,
partners, members, managers, agents, employees, representatives and investment
advisors of each such controlling Person, to the fullest extent permitted by
applicable law, from and against any and all Losses (as determined by a court
of
competent jurisdiction in a final judgment not subject to appeal or review),
arising out of or relating to any untrue or alleged untrue statement of a
material fact contained in the Registration Statement, any Prospectus or any
form of prospectus or in any amendment or supplement thereto or in any
preliminary prospectus, or arising out of or relating to any omission or alleged
omission of a material fact required to be stated therein or necessary to make
the statements therein (in the case of any Prospectus or form of prospectus
or
supplement thereto, in the light of the circumstances under which they were
made) not misleading, except to the extent, but only to the extent, that (i)
such untrue statements, alleged untrue statements, omissions or alleged
omissions are based solely upon information regarding the Holder furnished
in
writing to the Company by the Holder or its authorized agent expressly for
use
therein, or to the extent that such information relates to the Holder or the
Holder's proposed method of distribution of Registrable Securities and was
reviewed and expressly approved in writing by the Holder expressly for use
in
the Registration Statement, such Prospectus or such form of Prospectus or in
any
amendment or supplement thereto or (ii) in the case of an occurrence of an
event
of the type specified in Section 7.2(c)(v)-(vii), the use by the Holder
of an outdated or defective Prospectus after the Company has notified the Holder
in writing that the Prospectus is outdated or defective and prior to the receipt
by the Holder of the Advice contemplated in Section 7.5. The
Company shall notify the Holder promptly of the institution, threat or assertion
of any Proceeding of which the Company is aware in connection with the
transactions contemplated by this Agreement. Notwithstanding the
foregoing, to the extent the Holder suffers any Losses pursuant to the
occurrence of an Event under Section 7.1(d), the Holder shall only be
entitled to make a claim under this Section 7.4 for Losses not covered by
the Event Payments.
(b) Indemnification
by the Holder. The Holder shall indemnify and hold harmless the Company, its
directors, officers, agents and employees, each Person who controls the Company
(within the meaning of Section 15 of the Securities Act and Section 20 of the
Exchange Act), and the directors, officers, agents or employees of such
controlling Persons, to the fullest extent permitted by applicable law, from
and
against all Losses (as determined by a court of competent jurisdiction in a
final judgment not subject to appeal or review) arising solely out of any untrue
statement of a material fact contained in the Registration Statement, any
Prospectus, or any form of prospectus, or in any amendment or supplement
thereto, or arising solely out of any omission of a material fact required
to be
stated therein or necessary to make the statements therein (in the case of
any
Prospectus or form of prospectus or supplement thereto, in the light of the
circumstances under which they were made) not misleading to the extent, but
only
to the extent, that such untrue statement or omission is contained in any
information so furnished in writing by the Holder or its authorized agent to
the
Company specifically for inclusion in such Registration Statement or such
Prospectus or to the extent that (i) such untrue statements or omissions are
based solely upon information regarding the Holder furnished in writing to
the
Company by the Holder expressly for use therein, or to the extent that such
information relates to the Holder or the Holder's proposed method of
distribution of Registrable Securities and was reviewed and expressly approved
in writing by the Holder or its authorized agent expressly for use in the
Registration Statement, such Prospectus or such form of Prospectus or in any
amendment or supplement thereto or (ii) in the case of an occurrence of an
event
of the type specified in Section 7.2(c)(v)-(vii), the use by the Holder
of an outdated or defective Prospectus after the Company has notified the Holder
in writing that the Prospectus is outdated or defective and prior to the receipt
by the Holder of the Advice contemplated in Section 7.5. In no
event shall the liability of the Holder hereunder be greater in amount than
the
dollar amount of the net proceeds received by the Holder upon the sale of the
Registrable Securities giving rise to such indemnification
obligation.
(c) Conduct
of Indemnification Proceedings. If any Proceeding shall be brought or
asserted against any Person entitled to indemnity hereunder (an
"Indemnified Party"), such Indemnified Party shall promptly
notify the Person from whom indemnity is sought (the "Indemnifying Party")
in
writing, and the Indemnifying Party shall assume the defense thereof, including
the employment of counsel reasonably satisfactory to the Indemnified Party
and
the payment of all fees and expenses incurred in connection with defense
thereof; provided, that the failure of any Indemnified Party to give such notice
shall not relieve the Indemnifying Party of its obligations or liabilities
pursuant to this Agreement, except (and only) to the extent that it shall be
finally determined by a court of competent jurisdiction (which determination
is
not subject to appeal or further review) that such failure shall have
proximately and materially adversely prejudiced the Indemnifying
Party.
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An
Indemnified Party shall have the right to employ separate counsel in any such
Proceeding and to participate in the defense thereof, but the fees and expenses
of such counsel shall be at the expense of such Indemnified Party or Parties
unless: (i) the Indemnifying Party has agreed in writing to pay such
fees and expenses; or (ii) the Indemnifying Party shall have failed promptly
to
assume the defense of such Proceeding and to employ counsel reasonably
satisfactory to such Indemnified Party in any such Proceeding; or (iii) the
named parties to any such Proceeding (including any impleaded parties) include
both such Indemnified Party and the Indemnifying Party, and such Indemnified
Party shall have been advised in writing by counsel that a conflict of interest
is likely to exist if the same counsel were to represent such Indemnified Party
and the Indemnifying Party (in which case, if such Indemnified Party notifies
the Indemnifying Party in writing that it elects to employ separate counsel
at
the expense of the Indemnifying Party, the Indemnifying Party shall not have
the
right to assume the defense thereof and such counsel shall be at the expense
of
the Indemnifying Party). The Indemnifying Party shall not be liable
for any settlement of any such Proceeding effected without its written consent,
which consent shall not be unreasonably withheld or delayed. No
Indemnifying Party shall, without the prior written consent of the Indemnified
Party, effect any settlement of any pending Proceeding in respect of which
any
Indemnified Party is a party, unless such settlement includes an unconditional
release of such Indemnified Party from all liability on claims that are the
subject matter of such Proceeding.
All
fees
and expenses of the Indemnified Party (including reasonable fees and expenses
to
the extent incurred in connection with investigating or preparing to defend
such
Proceeding in a manner not inconsistent with this Section) the reimbursement
of
which is the responsibility of the Indemnifying Party hereunder, shall be paid
to the Indemnified Party, promptly after it is determined by a court of
competent jurisdiction in a final judgment not subject to appeal or review
that
such Indemnified Party is entitled to indemnification hereunder.
(d) Contribution. If
a claim for indemnification under Section 7.4(a) or (b) is
unavailable to an Indemnified Party (by reason of public policy or otherwise),
then each Indemnifying Party, in lieu of indemnifying such Indemnified Party,
shall contribute to the amount paid or payable by such Indemnified Party as
a
result of such Losses, in such proportion as is appropriate to reflect the
relative fault of the Indemnifying Party and Indemnified Party in connection
with the actions, statements or omissions that resulted in such Losses as well
as any other relevant equitable considerations. The relative fault of
such Indemnifying Party and Indemnified Party shall be determined by reference
to, among other things, whether any action in question, including any untrue
or
alleged untrue statement of a material fact or omission or alleged omission
of a
material fact, has been taken or made by, or relates to information supplied
by,
such Indemnifying Party or Indemnified Party, and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
action, statement or omission. The amount paid or payable by a party
as a result of any Losses shall be deemed to include, subject to the limitations
set forth in Section 7.4(c), any reasonable attorneys' or other
reasonable fees or expenses incurred by such party in connection with any
Proceeding to the extent such party would have been indemnified for such fees
or
expenses if the indemnification provided for in this Section was available
to
such party in accordance with its terms.
The
parties hereto agree that it would not be just and equitable if contribution
pursuant to this Section 7.4(d) were determined by pro rata allocation or
by any other method of allocation that does not take into account the equitable
considerations referred to in the immediately preceding
paragraph. Notwithstanding the provisions of this Section
7.4(d), the Holder shall not be required to contribute any amount in excess
of the amount by which the proceeds actually received by the Holder from the
sale of the Registrable Securities subject to the Proceeding exceeds the amount
of any damages that the Holder has otherwise been required to pay by reason
of
such untrue or alleged untrue statement or omission or alleged
omission. No Person guilty of fraudulent misrepresentation (within
the meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any Person who was not guilty of such fraudulent
misrepresentation.
The
indemnity and contribution agreements contained in this Section are in addition
to any liability that the Indemnifying Parties may have to the Indemnified
Parties.
7.5 Dispositions. The
Holder agrees that it will comply with the prospectus delivery requirements
of
the Securities Act as applicable to it in connection with sales of Registrable
Securities pursuant to the Registration Statement. The Holder further
agrees that, upon receipt of a notice from the Company of the occurrence of
any
event of the kind described in Sections 7.2(c)(v), (vi) or
(vii), the Holder will discontinue disposition of such Registrable
Securities under the Registration Statement until the Holder's receipt of the
copies of the supplemented Prospectus and/or amended Registration Statement
contemplated by Section 7.2(j), or until it is advised in writing (the
"Advice") by the Company that the use of the applicable Prospectus may be
resumed, and, in either case, has received copies of any additional or
supplemental filings that are incorporated or deemed to be incorporated by
reference in such Prospectus or Registration Statement. The Company
may provide appropriate stop orders to enforce the provisions of this
paragraph.
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7.6 No
Piggyback on Registrations. Except as set forth on Schedule 7.6,
neither the Company nor any of its security holders (other than the Holder
in
such capacity pursuant hereto) may include securities of the Company in the
Registration Statement other than the Registrable Securities, and the Company
shall not after the date hereof enter into any agreement providing any such
right to any of its security holders.
7.7 Piggy-Back
Registrations. If at any time during the Effectiveness Period
there is not an effective Registration Statement covering all of the Registrable
Securities which then remain unused and the Company shall determine to prepare
and file with the Commission a registration statement relating to an offering
for its own account or the account of others under the Securities Act of any
of
its equity securities, other than on Form S-4 or Form S-8 (each as promulgated
under the Securities Act) or their then equivalents relating to equity
securities to be issued solely in connection with any acquisition of any entity
or business or equity securities issuable in connection with stock option or
other employee benefit plans, then the Company shall send to the Holder written
notice of such determination and if, within fifteen days after receipt of such
notice, the Holder shall so request in writing, the Company shall include in
such registration statement all or any part of such Registrable Securities
the
Holder requests to be registered.
ARTICLE
VIII
OTHER
RIGHTS
8.1 Pre-Emptive
Rights. The Holder, along with all of the other holders of
Registrable Securities, shall have the right to subscribe for any equity
securities or securities convertible or exchangeable into equity securities
now
or hereafter authorized which the Company proposes to issue or sell ("New
Securities"), and such right shall be exercisable by the Holder or its
assignees; provided,however, that this Section 8.1 shall
not apply to (a) the issuance of Common Stock upon the exercise of any
securities outstanding on the date hereof, (b) equity securities issued in
connection with acquisitions of businesses or assets by the Company approved
by
the Board, (c) the issuance of options or awards made pursuant to the Stock
Option Plan or the issuance of Common Stock upon exercise of such options or
(d)
equity securities issued to the Holder after the date hereof (so as to avoid
double counting hereunder). The Company shall give the Holder not
less than five days' written notice (an "Offer Notice") of any issuance or
sale. The Offer Notice shall reflect the terms of the issuance or
sale and state that the other parties to the transaction are firmly committed
to
the acquisition of the shares subject only to the Holder's right to participate
as set forth in this Section 8.1. If the Holder desires to
acquire the offered securities, the Holder shall provide readily available
funds
in accordance with the terms set forth in the Offer Notice. If the
Holder fails to exercise its rights pursuant to this Section 8.1, the
Company shall be entitled to sell such
New Securities which Holder did not elect to purchase
during the 35 days following the date of the Offer Notice on terms and
conditions set forth in the Offer Notice to the Holder. Any New
Securities offered or sold by the Company to any Person after such 35-day period
must be re-offered to the Holder pursuant to the terms of this Section
8.1.
8.2 Participation
Rights. Prior to any Transfer of Common Stock (other than a
Permitted Transfer not covered by this Section 8.2) by a Designated
Stockholder or any holder of Registrable Securities, including the Holder (each,
a "Selling Stakeholder"), such person or his or her or its agent shall deliver
a
written notice (the "Sale Notice") to the "Notice Parties" (defined as such
of
the Designated Stockholders and the holders of Registrable Securities that
are
not the Selling Stakeholder in each case), specifying in reasonable detail
the
identity of the prospective transferee(s), the number of shares to be
transferred and the terms and conditions of the Transfer, including a price
per
share for the shares of Common Stock proposed to be Transferred (which notice
may be the same notice and given at the same time as the Offer Notice under
Section 8.1). The Notice Parties may elect to participate in
any contemplated Transfer of Common Stock by a Selling Stakeholder, at the
same
price per share and on the same terms by delivering written notice to the
Selling Stakeholder within five (5) days after delivery of the Sale Notice
(the
"Tag Along Election Period"). If, during the Tag Along Election
Period, a Notice Party has elected to participate in such Transfer, then,
subject to the requirements of the preceding sentence, the Selling Stakeholder
and the Notice Parties electing to participate shall each be entitled to sell
in
the contemplated Transfer, at the same price and on the same terms per share,
a
number of shares of Common Stock determined as follows: (i) first, each shall
be
entitled to Transfer up to the same proportion of its shares of Common Stock
(determined on an as if converted basis) as the Selling Stakeholder proposes
to
sell; and (ii) second, the Selling Stakeholder may Transfer any remaining shares
of Common Stock as the transferee will accept on the same terms.
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None
of the Holder or any Designated
Stockholder shall transfer any of its Common Stock to any prospective transferee
if such prospective transferee(s) declines to allow the participation of the
others. Each Designated Stockholder and holders of Registrable
Securities transferring Common Stock pursuant to this Section 8.2 shall
pay its proportional share (based on the number of shares of Common Stock to
be
sold) of the expenses incurred by such Person in connection with such transfer
and shall be obligated to join on a pro rata basis (based on the number of
shares of Common Stocks to be sold) in any indemnification or other obligations
that the Selling Stakeholder agrees to provide in connection with such transfer
(other than any such obligations that relate specifically to a particular
Selling Stakeholder such as indemnification with respect to representations
and
warranties given by a Selling Stakeholder regarding such person's title to
and
ownership of Common Stock.
8.3 Permitted
Transfer. The restrictions set forth in Section 8.2 shall
not apply with respect to any Transfer of Company Securities by any Designated
Stockholder pursuant to applicable laws of descent and distribution or among
such Person's Family Group (as defined below) (collectively referred to herein
as "Permitted Transferees") or to redemptions or repurchases of Common Stock;
provided that the restrictions contained in Section
8.2 shall continue to be applicable to the Common
Stock transferred by a Designated Stockholder after any such Transfer and
provided further that the transferees of such Common Stock shall have agreed
in
writing to be bound by the provisions of this Agreement affecting the Common
Stock so transferred. For purposes of this Agreement, "Family Group" means,
with
respect to any Designated Stockholder, such Designated Stockholder's spouse
and
descendants (whether natural or adopted), any trust solely for the benefit
of
the Designated Stockholder and/or the Designated Stockholder's spouse and/or
descendants or an entity of which the Designated Shareholder and/or his or
her
Family Group owns at least a majority equity and economic interest in such
entity; provided however that such Family Group ownership shall not be used
to
accomplish a transaction with a third party that this the restrictions on
transfer in this agreement are otherwise intended to prohibit. Each
Designated Stockholder shall give the Holder and the Company 30 days' prior
written notice of any Transfers to Permitted Transferees.
8.4 Co-Investment
Rights.
(a) If
at any time the Company intends to issue New Securities and the Holder has
not
exercised its rights under Section 8.1, then the Company shall deliver to
the Holder along with all of the other holders of Registrable Securities 30
days' prior written notice of such New Securities ("Co-Investment
Notice"). Such Co-Investment Notice shall describe the terms and
conditions of the offering of New Securities. Upon receipt of such
Co-Investment Notice, the Holder shall have the right ("Co-Investment Right"),
but not the obligation, to purchase the Holder's Pro Rata Share of the New
Securities on the same terms and conditions offered or to be offered (for
purposes of such calculation, fractions shall be rounded down to the nearest
whole number if such fraction is less than 0.5, and rounded up to the nearest
whole number if such fraction is equal to or greater than
0.5). Thereafter, subject to Section 8.4(b), any remaining New
Securities may be offered to such third parties as the Company
desires.
(b) If
the offering of New Securities is not completed within 180 days following the
date of the Investment Notice, the New Securities will be required to be
reoffered to the Holder in accordance with Section 8.4(a).
(c) The
rights granted pursuant to Section 8.4 hereof shall not apply
to: (a) issuances of additional Common Stock or rights thereto
pursuant to the Stock Option Plan or (b) issuances of Common Stock or other
Company securities in acquisition transactions, or (c) securities issued
pursuant to the Stock Option Plan.
8.5 Board
of Directors. The Holder shall have the right to nominate and the
Designated Stockholders agree to vote in favor of two directors nominated by
the
Holder to serve from time to time.
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8.6 Observation
Rights. The Holder shall have the right to have present at each
telephonic meeting and all in-person meetings of the Company's board of
directors up to two representatives of its choosing on and after the date
hereof. Such persons, which initially shall be ▇▇▇▇ ▇▇▇▇▇▇ and ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, shall receive notice of the meetings to which the directors are
entitled and shall receive, at the same time when such materials are sent to
the
directors, all information provided to the directors in connection with a
meeting or relating to the Company. In the event the Company's board
is considering acting by written consent, the Holder's designee shall receive
the notice, form of consent and related materials concurrently with the same
being provided to the directors. The Company shall reimburse the
Holder for all of one of its designees' reasonable expenses in attending not
less than two in-person board meetings in any 12 month period.
8.7 Right
of First Refusal on Additional Financings or Refinancings. The
Company shall first offer to the holders of Registrable Securities the
opportunity to refinance the Loan or to enter into additional financing
arrangements. Such holders shall have 10 business days within which
to advise the Company of their participation in any refinancing.
8.8 Negative
Covenants.
(a) Subsidiaries;
Transfer; Merger. The Company shall not form any subsidiaries,
and shall not, either directly or indirectly, merge, consolidate, sell,
transfer, license, lease, encumber or otherwise dispose of all or any part
of
its property or business or all or any substantial part of its assets, or sell
or discount (with or without recourse) any of its Promissory Notes, Chattel
Paper, Payment Intangibles or Accounts, except Inventory in the ordinary course
of business.
(b) Issuance
of Stock Interests. Except as
required pursuant to and in accordance with the terms of that certain settlement
agreement between the Company and ▇▇. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ dated November 30, 2006,
the Company shall not, either directly or indirectly, issue or distribute any
additional capital stock or other securities of the Company.
(c) Change
of Legal Status; Organizational Documents. The Company shall not
change its name, its organizational identification number, if it has one, its
type of organization, its jurisdiction of organization or other legal
structure. The Company shall not amend any of its articles or bylaws
or any agreements among its stockholders and shall not alter the present size
of
its board of directors, which has been set by resolution of the board of
directors at six members.
(d) Distributions. The
Company shall not, either directly or indirectly, purchase or redeem any shares
of its stock, or declare or pay any dividends (other than stock dividends),
whether in cash or otherwise, or set aside any funds for any such purpose or
make any distribution to its shareholders.
The
rights pursuant to this Article VIII shall terminate upon the later to
occur of the repayment in full of the loan pursuant to the Loan
Agreement.
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ARTICLE
IX
MISCELLANEOUS
9.1 Termination.
This Agreement may be terminated by the Company or the Holder, by written notice
to the other parties, if the Closing has not been consummated by the third
Trading Day following the date of this Agreement; provided that no such
termination will affect the right of any party to ▇▇▇ for any breach by the
other party (or parties).
9.2 Fees
and Expenses. The Holder shall be entitled to reimbursement of
costs and expenses incurred in connection with the transactions covered in
the
Transaction Documents which amount shall be payable solely from the Closing
proceeds and paid to the Holder at Closing. Except as expressly set
forth in the Transaction Documents to the contrary, each party shall pay the
fees and expenses of its advisers, counsel, accountants and other experts,
if
any, and all other expenses incurred by such party incident to the negotiation,
preparation, execution, delivery and performance of this
Agreement. The Company shall pay all transfer agent fees, stamp taxes
and other taxes and duties levied in connection with the issuance of the
Securities.
9.3 Entire
Agreement. The Transaction Documents, together with the Exhibits
and Schedules thereto, contain the entire understanding of the parties with
respect to the subject matter hereof and supersede all prior agreements and
understandings, oral or written, with respect to such matters, which the parties
acknowledge have been merged into such documents, exhibits and
schedules. At or after the Closing, and without further
consideration, the parties will execute and deliver to each 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.
9.4 Notices. Any
and all notices or other communications or deliveries required or permitted
to
be provided hereunder shall be in writing and shall be deemed given and
effective on the earliest of (a) the date of transmission, if such notice or
communication is delivered via facsimile at the facsimile number specified
in
this Section 9.4 prior to 4:30 p.m. (Chicago 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 4:30 p.m. (Chicago
time) on any Trading Day, (c) the Trading Day following the date of deposit
with
a nationally recognized overnight courier service, or (d) upon actual receipt
by
the party to whom such notice is required to be given. The addresses and
facsimile numbers for such notices and communications are those set forth on
the
signature page hereto, or such other address or facsimile number as may be
designated in writing hereafter, in the same manner, by the Company or the
Holder.
9.5 Amendments;
Waivers. No provision of this Agreement may be waived or amended
except in a written instrument signed, in the case of an amendment, by the
Company and the Holder 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.
9.6 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.
9.7 Successors
and Assigns. This Agreement shall be binding upon and inure to
the benefit of the parties and their successors and permitted
assigns. The Company may not assign this Agreement or any rights or
obligations hereunder without the prior written consent of the Holder. The
Holder may assign its rights under this Agreement to any Person to whom the
Holder assigns or transfers any of the Securities, provided such transferee
agrees in writing to be bound, with respect to the transferred Securities,
by
the provisions hereof that apply to the Holder, and subject to the Company's
approval, which shall not be unreasonably withheld. Notwithstanding
anything to the contrary herein, the Securities may be assigned to any Person
in
connection with a bona fide margin account or other loan or financing
arrangement secured by such Securities.
9.8 No
Third-Party Beneficiaries. This Agreement is intended for the
benefit of the parties hereto and their respective successors and permitted
assigns and is not for the benefit of, nor may any provision hereof be enforced
by, any other Person, except that each Related Person is an intended third
party
beneficiary of Section 5.8 and each Indemnified Party is an intended
third party beneficiary of Section 7.4 and (in each case) may enforce the
provisions of such Sections directly against the parties with obligations
thereunder.
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9.9 Governing
Law; Venue; Waiver Of Jury Trial. ALL QUESTIONS CONCERNING THE
CONSTRUCTION, VALIDITY, ENFORCEMENT AND INTERPRETATION OF THIS AGREEMENT SHALL
BE GOVERNED BY AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE
STATE OF ILLINOIS. THE COMPANY AND THE HOLDER HEREBY IRREVOCABLY SUBMIT TO
THE
EXCLUSIVE JURISDICTION OF THE STATE AND FEDERAL COURTS SITTING IN THE CITY
OF
CHICAGO, COUNTY OF ▇▇▇▇ FOR THE ADJUDICATION OF ANY DISPUTE BROUGHT BY THE
COMPANY OR THE HOLDER HEREUNDER, 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 WAIVE,
AND AGREE NOT TO ASSERT IN ANY SUIT, ACTION OR PROCEEDING BROUGHT BY THE COMPANY
OR THE HOLDER, ANY CLAIM THAT IT IS NOT PERSONALLY SUBJECT TO THE JURISDICTION
OF ANY SUCH COURT, OR THAT SUCH SUIT, ACTION OR PROCEEDING IS
IMPROPER. EACH PARTY HEREBY IRREVOCABLY WAIVES PERSONAL SERVICE OF
PROCESS AND CONSENTS TO PROCESS BEING SERVED IN ANY SUCH SUIT, ACTION OR
PROCEEDING BY MAILING A COPY THEREOF VIA REGISTERED OR CERTIFIED MAIL OR
OVERNIGHT DELIVERY (WITH EVIDENCE OF DELIVERY) TO SUCH PARTY AT THE ADDRESS
IN
EFFECT FOR NOTICES TO IT UNDER THIS AGREEMENT AND AGREES THAT SUCH SERVICE
SHALL
CONSTITUTE GOOD AND SUFFICIENT SERVICE OF PROCESS AND NOTICE
THEREOF. NOTHING CONTAINED HEREIN SHALL BE DEEMED TO LIMIT IN ANY WAY
ANY RIGHT TO SERVE PROCESS IN ANY MANNER PERMITTED BY LAW. THE
COMPANY AND THE HOLDER HEREBY WAIVE ALL RIGHTS TO A TRIAL BY JURY.
9.10 Survival. The
representations, warranties, agreements and covenants contained herein shall
survive the Closing and the delivery and/or exercise of the Securities, as
applicable.
9.11 Execution. This
Agreement may be executed in two or more counterparts, all of which when taken
together shall be considered one and the same agreement and shall become
effective when counterparts have been signed by each party and delivered to
the
other party, it being understood that both parties need not sign the same
counterpart. In the event that any signature is delivered by
facsimile transmission, such signature shall create a valid and binding
obligation of the party executing (or on whose behalf such signature is
executed) with the same force and effect as if such facsimile signature page
were an original thereof.
9.12 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.
9.13 Rescission
and Withdrawal Right. Notwithstanding anything to the contrary
contained in (and without limiting any similar provisions of) the Transaction
Documents, whenever the Holder exercises a right, election, demand or option
under a Transaction Document and the Company does not timely perform its related
obligations within the periods therein provided, then the Holder may rescind
or
withdraw, in its sole discretion from time to time upon written notice to the
Company, any relevant notice, demand or election in whole or in part without
prejudice to its future actions and rights.
9.14 Replacement
of Securities. If any certificate or instrument evidencing any of
the 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 of such loss, theft or destruction and customary and reasonable
indemnity, if requested. 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.
9.15 Remedies. In
addition to being entitled to exercise all rights provided herein or granted
by
law, including recovery of damages, the Holder 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 the defense that a remedy at law would be adequate and agree
to
waive any requirement that the Holder post a bond or other security in
connection with any such proceeding seeking specific performance.
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9.16 Payment
Set Aside. To the extent that the Company makes a payment or
payments to the Holder hereunder, or the Holder enforces or exercises its rights
hereunder or 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
by 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.
9.17 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 amended to appropriately account for such event.
9.18 Independent
Nature of the Purchasers’ Obligations and Rights. The Company
acknowledges that the obligations of all persons acquiring securities from
the
Company under the Transaction Documents are several and not joint with the
obligations of any other third party purchasers of the Company's securities,
and
they shall not be responsible in any way for the performance of the obligations
of any other third party purchasers of the Company's securities. The
Holder and the Company agree and acknowledge that (i) the decision of the
Holders to enter into this Agreement has been made (and the decision of the
Holders to purchase the Securities, if ever, will be made) by the Holder
independently of any other third party purchasers of the Company's securities
and (ii) no other third party purchasers of the Company's securities have acted
as agent for the Holder in connection with any of them making their investment
hereunder and that no such other third party purchasers will be acting as agent
of the Holder in connection with monitoring its investment hereunder. Nothing
contained herein or in any other Transaction Document or any agreement of any
such other third party purchaser, and no action taken by the Holder pursuant
hereto or any other third party purchaser pursuant thereto, shall be deemed
to
constitute the Holders or any such other third party purchasers as a
partnership, an association, a joint venture or any other kind of entity, or
create a presumption that the Holders or any third party purchasers are in
any
way acting in concert or as a group with respect to any matters. The
Holder shall be entitled to independently protect and enforce its rights,
including, without limitation, the rights arising out of this Agreement or
out
of any of the other Transaction Documents, and it shall not be necessary for
any
such other third party purchasers to be joined as an additional party in any
proceeding for such purpose. To the extent that any such other third party
purchasers purchase the same or similar securities as a Holder hereunder or
on
the same or similar terms and conditions or pursuant to the same or similar
documents, all such matters are solely in the control of the Company, not the
action or decision of the Holder, and would be solely for the convenience of
the
Company and not because it was required or requested to do so by the Holder
or
any such other third party purchaser.
[SIGNATURE
PAGES TO FOLLOW]
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IN
WITNESS WHEREOF, the parties hereto have caused this Securities Acquisition
and
Investor Rights Agreement to be duly executed by their respective authorized
signatories as of the date first indicated above.
GRANITE
CREEK FLEXCAP I, L.P.
By: __________________________
Name: __________________________
Title: __________________________
Address
for Notice:
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▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇,
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Facsimile
No.: (▇▇▇) ▇▇▇-▇▇▇▇
Telephone
No.: (▇▇▇) ▇▇▇-▇▇▇▇
Attn: ▇▇▇▇
▇▇▇▇▇▇
With
a
copy to:
▇▇▇▇▇▇▇▇
& ▇▇▇▇▇
▇▇▇
▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇,
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Facsimile
No.: (▇▇▇) ▇▇▇-▇▇▇▇
Telephone
No.: (▇▇▇) ▇▇▇-▇▇▇▇
Attn: ▇▇▇▇▇
▇. ▇▇▇▇▇▇▇
By: __________________________
Its: ___________________________
Name: ________________________
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WITH
RESPECT TO SECTION 8.5
ONLY:
__________________________________________
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▇. ▇▇▇▇▇▇▇▇
__________________________________________
▇▇▇▇▇
▇.
▇▇▇▇▇▇▇
Address
for Notice:
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▇▇▇▇
▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇
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▇▇▇▇▇▇▇
▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Facsimile
No.: (▇▇▇) ▇▇▇-▇▇▇▇
Telephone
No.: (▇▇▇)▇▇▇-▇▇▇▇
Attn:
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
With
a
copy to:
▇▇▇▇▇▇
▇. ▇▇▇▇▇▇, Attorney,
P.A.
▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇
▇
▇▇▇▇▇▇▇▇▇▇▇▇,
▇▇ ▇▇▇▇▇
Facsimile
No.: (▇▇▇) ▇▇▇-▇▇▇▇
Telephone
No.: (▇▇▇)
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