SECURITIES PURCHASE AGREEMENT
SECURITIES PURCHASE AGREEMENT (this "AGREEMENT"), dated as of September
28, 2000, between Network Commerce Inc., a corporation organized under the laws
of the State of Washington (the "COMPANY"), and Capital Ventures International
(the "PURCHASER").
WHEREAS:
A. The Company and the Purchaser are executing and delivering this
Agreement in reliance upon the exemption from securities registration afforded
by the provisions of Regulation D ("REGULATION D"), as promulgated by the United
States Securities and Exchange Commission (the "SEC") under the Securities Act
of 1933, as amended (the "SECURITIES ACT").
B. The Company desires to sell, and the Purchaser desires to purchase,
upon the terms and conditions stated in this Agreement, (i) convertible notes of
the Company in the aggregate principal amount of Twenty Million Dollars
($20,000,000), in the form attached hereto as EXHIBIT A (the "NOTES"),
convertible into shares of the Company's common stock, par value $.001 per share
(the "COMMON STOCK"), and (ii) warrants (the "WARRANTS"), in the form attached
hereto as EXHIBIT B, to acquire an aggregate of 4,050,633 shares of Common
Stock. The shares of Common Stock issuable upon conversion of or otherwise
pursuant to the Notes are referred to herein as the "CONVERSION SHARES" and the
shares of Common Stock issuable upon exercise of or otherwise pursuant to the
Warrants are referred to herein as the "WARRANT SHARES." The Notes, the
Warrants, the Conversion Shares and the Warrant Shares are collectively referred
to herein as the "SECURITIES" and each of them may individually be referred to
herein as a "SECURITY."
C. Contemporaneous with the execution and delivery of this Agreement,
the parties hereto are executing and delivering a Registration Rights Agreement,
in the form attached hereto as EXHIBIT C (the "REGISTRATION RIGHTS AGREEMENT"),
pursuant to which the Company has agreed to provide certain registration rights
under the Securities Act and the rules and regulations promulgated thereunder,
and applicable state securities laws.
D. All references herein to monetary denominations shall refer to
lawful money of the United States of America.
NOW, THEREFORE, the Company and the Purchaser hereby agree as follows:
1. PURCHASE AND SALE OF NOTES AND WARRANTS.
(a) PURCHASE OF NOTES AND WARRANTS. On the Closing Date (as defined
below), subject to the satisfaction (or waiver) of the conditions set forth in
Section 6 and Section 7 below, the
Company shall issue and sell to the Purchaser, and the Purchaser severally
agrees to purchase from the Company, the Notes and the Warrants for an aggregate
purchase price of Twenty Million Dollars ($20,000,000) (the "PURCHASE PRICE").
(b) FORM OF PAYMENT. On the Closing Date, the Purchaser shall pay the
Purchase Price by wire transfer to the Company, in accordance with the Company's
written wiring instructions, against delivery of the duly executed Notes and
Warrants and the Company shall deliver the Notes and Warrants against delivery
of the Purchase Price.
(c) CLOSING DATE. Subject to the satisfaction (or waiver) of the
conditions thereto set forth in Section 6 and Section 7 below, the date and time
of the issuance and sale of the Notes and Warrants pursuant to this Agreement
(the "CLOSING") shall be 12:00 noon, New York City time, on September 28, 2000,
subject to a two business day grace period at either party's option, but in any
event not later than September 30, 2000, or such other time as may be mutually
agreed upon by the Company and the Purchaser (the "CLOSING DATE"). The Closing
shall occur at the offices of Heights Capital Management, Inc., ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇,
▇▇▇▇▇ ▇▇▇, ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇.
2. PURCHASER'S REPRESENTATIONS AND WARRANTIES
The Purchaser represents and warrants to the Company as follows:
(a) PURCHASE FOR OWN ACCOUNT, ETC.. The Purchaser is purchasing the
Securities for the Purchaser's own account for investment purposes only and not
with a present view towards the public sale or distribution thereof, except
pursuant to sales that are exempt from the registration requirements of the
Securities Act and/or sales registered under the Securities Act. The Purchaser
understands that the Purchaser must bear the economic risk of this investment
indefinitely, unless the Securities are registered pursuant to the Securities
Act and any applicable state securities or blue sky laws or an exemption from
such registration is available, and that the Company has no present intention of
registering the resale of any such Securities other than as contemplated by the
Registration Rights Agreement. Notwithstanding anything in this Section 2(a) to
the contrary, by making the representations herein, the Purchaser does not agree
to hold the Securities for any minimum or other specific term and reserves the
right to dispose of the Securities at any time in accordance with or pursuant to
a registration statement or an exemption from the registration requirements
under the Securities Act.
(b) ACCREDITED INVESTOR STATUS. The Purchaser is an "ACCREDITED
INVESTOR" as that term is defined in Rule 501(a) of Regulation D.
(c) RELIANCE ON EXEMPTIONS. The Purchaser understands that the Notes and
Warrants are being offered and sold to the Purchaser in reliance upon specific
exemptions from the registration requirements of United States federal and state
securities laws and that the Company is relying upon the truth and accuracy of,
and the Purchaser's compliance with, the representations, warranties,
agreements, acknowledgments and understandings of the Purchaser set forth herein
in order to
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determine the availability of such exemptions and the eligibility of the
Purchaser to acquire the Securities.
(d) INFORMATION. The Purchaser and its counsel, if any, have been
furnished all materials relating to the business, finances and operations of the
Company and materials relating to the offer and sale of the Securities which
have been specifically requested by the Purchaser or its counsel. The Purchaser
and its counsel have been afforded the opportunity to ask questions of the
Company and have received what the Purchaser believes to be satisfactory answers
to any such inquiries. Neither such inquiries nor any other investigation
conducted by the Purchaser or its counsel or any of its representatives shall
modify, amend or affect the Purchaser's right to rely on the Company's
representations and warranties contained in Section 3 below. The Purchaser
understands that the Purchaser's investment in the Securities involves a high
degree of risk.
(e) GOVERNMENTAL REVIEW. The Purchaser understands that no United States
federal or state agency or any other government or governmental agency has
passed upon or made any recommendation or endorsement of the Securities.
(f) TRANSFER OR RESALE. The Purchaser understands that (i) except as
provided in the Registration Rights Agreement, the sale or resale of the
Securities have not been and are not being registered under the Securities Act
or any state securities laws, and the Securities may not be transferred unless
(a) the resale of the Securities has been registered thereunder; or (b) the
Purchaser shall have delivered to the Company an opinion of counsel (which
opinion shall be in form, substance and scope customary for opinions of counsel
in comparable transactions) to the effect that the Securities to be sold or
transferred may be sold or transferred pursuant to an exemption from such
registration; or (c) sold under and in compliance with Rule 144 promulgated
under the Securities Act (or a successor rule) ("RULE 144"); or (d) sold or
transferred to an affiliate of the Purchaser who agrees to sell or otherwise
transfer the Securities only in accordance with the provisions of this Section
2(f) and who is an Accredited Investor; and (ii) neither the Company nor any
other person is under any obligation to register such Securities under the
Securities Act or any state securities laws (other than pursuant to the
Registration Rights Agreement). Notwithstanding the foregoing or anything else
contained herein to the contrary, the Securities may be pledged as collateral in
connection with a bona fide margin account or other lending arrangement,
provided such pledge is consistent with applicable laws, rules and regulations.
(g) LEGENDS. The Purchaser understands that the Notes and Warrants and,
until such time as the Conversion Shares and Warrant Shares have been registered
under the Securities Act (including registration pursuant to Rule 416
thereunder) as contemplated by the Registration Rights Agreement or otherwise
may be sold by the Purchaser under Rule 144, the certificates for the Conversion
Shares and Warrant Shares may bear a restrictive legend in substantially the
following form:
The securities represented by this certificate have not been registered
under the Securities Act of 1933, as amended, or the securities laws of any
state of the United States or in any other
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jurisdiction. The securities represented hereby may not be offered, sold or
transferred in the absence of an effective registration statement for the
securities under applicable securities laws unless offered, sold or transferred
pursuant to an available exemption from the registration requirements of those
laws.
The Company agrees that it shall, immediately prior to the Registration
Statement (as defined in the Registration Rights Agreement) being declared
effective, deliver to its transfer agent an opinion letter of counsel, opining
that at any time the Registration Statement is effective, the transfer agent
shall issue, in connection with the issuance of the Conversion Shares and
Warrant Shares, certificates representing such Conversion Shares and Warrant
Shares without the restrictive legend above, provided such Conversion Shares and
Warrant Shares are to be sold pursuant to the prospectus contained in the
Registration Statement. Upon receipt of such opinion, the Company shall cause
the transfer agent to confirm, for the benefit of the holders, that no further
opinion of counsel is required at the time of transfer in order to issue such
shares without such restrictive legend.
The legend set forth above shall be removed and the Company shall issue a
certificate without such legend to the holder of any Security upon which it is
stamped, if, unless otherwise required by state securities laws, (a) the sale of
such Security is registered under the Securities Act (including registration
pursuant to Rule 416 thereunder) as contemplated by the Registration Rights
Agreement; (b) such holder provides the Company with an opinion of counsel, in
form, substance and scope customary for opinions of counsel in comparable
transactions, to the effect that a public sale or transfer of such Security may
be made without registration under the Securities Act; or (c) such holder
provides the Company with reasonable assurances that such Security can be sold
under Rule 144. In the event the above legend is removed from any Security and
thereafter the effectiveness of a registration statement covering such Security
is suspended or the Company determines that a supplement or amendment thereto is
required by applicable securities laws, then upon reasonable advance written
notice to the Purchaser the Company may require that the above legend be placed
on any such Security that cannot then be sold pursuant to an effective
registration statement or under Rule 144 and the Purchaser shall cooperate in
the replacement of such legend. Such legend shall thereafter be removed when
such Security may again be sold pursuant to an effective registration statement
or under Rule 144.
(h) AUTHORIZATION; ENFORCEMENT. This Agreement and the Registration
Rights Agreement have been duly and validly authorized, executed and delivered
on behalf of the Purchaser and are valid and binding agreements of the Purchaser
enforceable against the Purchaser in accordance with their terms.
(i) RESIDENCY. The Purchaser is a resident of the jurisdiction set forth
under the Purchaser's name on the execution page hereto.
The Purchaser's representations and warranties made in this Article 2 are
made solely for the purpose of permitting the Company to make a determination
that the offer and sale of the Notes and
4
Warrants pursuant to this Agreement complies with applicable U.S. federal and
state securities laws and not for any other purpose. Accordingly, the Company
should not rely on such representations and warranties for any other purpose.
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
The Company represents and warrants to each Purchaser as follows:
(a) ORGANIZATION AND QUALIFICATION. The Company and each of its
subsidiaries is a corporation duly organized and existing in good standing under
the laws of the jurisdiction in which it is incorporated, and has the requisite
corporate power to own its properties and to carry on its business as now being
conducted. The Company and each of its subsidiaries is duly qualified as a
foreign corporation to do business and is in good standing in every jurisdiction
in which the nature of the business conducted by it makes such qualification
necessary and where the failure so to qualify would have a Material Adverse
Effect. "MATERIAL ADVERSE EFFECT" means any material adverse effect on (i) the
Securities, (ii) the ability of the Company to perform its obligations hereunder
or under the Certificate of Designation, the Warrants or the Registration Rights
Agreement or (iii) the business, operations, properties, prospects or financial
condition of the Company and its subsidiaries, taken as a whole.
(b) AUTHORIZATION; ENFORCEMENT. (i) The Company has the requisite
corporate power and authority to enter into and perform its obligations under
this Agreement, the Notes, the Warrants and the Registration Rights Agreement,
to issue and sell the Notes and the Warrants in accordance with the terms
hereof, to issue the Conversion Shares upon conversion of the Notes in
accordance with the terms thereof and to issue the Warrant Shares upon exercise
of the Warrants in accordance with the terms thereof; (ii) the execution,
delivery and performance of this Agreement, the Notes, the Warrants and the
Registration Rights Agreement by the Company and the consummation by it of the
transactions contemplated hereby and thereby (including, without limitation, the
issuance of the Notes and the Warrants and the issuance and reservation for
issuance of the Conversion Shares and Warrant Shares) have been duly authorized
by the Company's Board of Directors and no further consent or authorization of
the Company, its Board of Directors, any or committee of the Board of Directors
is required, and (iii) this Agreement constitutes, and, upon execution and
delivery by the Company of the Registration Rights Agreement, the Notes and the
Warrants, such agreements will constitute, valid and binding obligations of the
Company enforceable against the Company in accordance with their terms.
(c) STOCKHOLDER AUTHORIZATION. Except as provided in Section 4(q)
hereof, neither the execution, delivery or performance by the Company of its
obligations under this Agreement, the Notes, the Warrants or the Registration
Rights Agreement, nor the consummation by it of the transactions contemplated
hereby or thereby (including, without limitation, the issuance of the Notes or
the Warrants or the issuance or reservation for issuance of the Conversion
Shares or Warrant Shares) requires any consent or authorization of the Company's
stockholders, including but not
5
limited to consent under Rule 4460(i) promulgated by the National Association of
Securities Dealers, Inc. (the "NASD") or any similar rule.
(d) CAPITALIZATION. The capitalization of the Company as of the date
hereof, including the authorized capital stock, the number of shares issued and
outstanding, the number of shares issuable and reserved for issuance pursuant to
the Company's stock option plans, the number of shares issuable and reserved for
issuance pursuant to securities (other than the Notes and the Warrants)
exercisable or exchangeable for, or convertible into, any shares of capital
stock and the number of shares to be reserved for issuance upon conversion of
the Notes and exercise of the Warrants is set forth on SCHEDULE 3(d). All of
such outstanding shares of capital stock have been, or upon issuance, will be,
validly issued, fully paid and non-assessable. No shares of capital stock of the
Company (including the Conversion Shares and the Warrant Shares) are subject to
preemptive rights or any other similar rights of the stockholders of the Company
or any liens or encumbrances. Except for the Securities and as set forth on
SCHEDULE 3(d), as of the date of this Agreement, (i) there are no outstanding
options, warrants, scrip, rights to subscribe to, calls or commitments of any
character whatsoever relating to, or securities or rights convertible into or
exercisable or exchangeable for, any shares of capital stock of the Company or
any of its subsidiaries, or arrangements by which the Company or any of its
subsidiaries is or may become bound to issue additional shares of capital stock
of the Company or any of its subsidiaries, nor are any such issuances or
arrangements contemplated, and (ii) there are no agreements or arrangements
under which the Company or any of its subsidiaries is obligated to register the
sale of any of its or their securities under the Securities Act (except the
Registration Rights Agreement). SCHEDULE 3(d) sets forth all of the Company
issued securities or instruments containing antidilution or similar provisions
that will be triggered by, and all of the resulting adjustments that will be
made to such securities and instruments as a result of, the issuance of the
Securities in accordance with the terms of this Agreement, the Notes or the
Warrants. The Company has furnished to the Purchaser true and correct copies of
the Company's Certificate of Incorporation as in effect on the date hereof
("CERTIFICATE OF INCORPORATION"), the Company's By-laws as in effect on the date
hereof (the "BY-LAWS"), and all other instruments and agreements governing
securities convertible into or exercisable or exchangeable for capital stock of
the Company.
(e) ISSUANCE OF SHARES. The Conversion Shares and Warrant Shares are
duly authorized and reserved for issuance, and, upon conversion of the Notes and
exercise of the Warrants in accordance with the terms thereof, will be validly
issued, fully paid and non-assessable, and free from all taxes, liens, claims
and encumbrances and will not be subject to preemptive rights, rights of first
refusal or other similar rights of stockholders of the Company and will not
impose personal liability upon the holder thereof.
(f) NO CONFLICTS. The execution, delivery and performance of this
Agreement, the Registration Rights Agreement, the Notes and the Warrants by the
Company, and the consummation by the Company of the transactions contemplated
hereby and thereby (including, without limitation, the issuance and reservation
for issuance, as applicable, of the Notes, the Warrants, the Conversion Shares
and Warrant Shares) will not (i) result in a violation of the Certificate of
Incorporation or By-
6
laws or (ii) conflict with, or constitute a default (or an event that with
notice or lapse of time or both would become a default) under, or give to others
any rights of termination, amendment (including, without limitation, the
triggering of any anti-dilution provisions), acceleration or cancellation of,
any agreement, indenture or instrument to which the Company or any of its
subsidiaries is a party, or result in a violation of any law, rule, regulation,
order, judgment or decree (including United States federal and state securities
laws and regulations and rules or regulations of any self-regulatory
organizations to which either the Company or its securities are subject)
applicable to the Company or any of its subsidiaries or by which any property or
asset of the Company or any of its subsidiaries is bound or affected (except,
with respect to clause (ii), for such conflicts, defaults, terminations,
amendments, accelerations, cancellations and violations that would not,
individually or in the aggregate, have a Material Adverse Effect). Neither the
Company nor any of its subsidiaries is in violation of its Certificate of
Incorporation, By-laws or other organizational documents and neither the Company
nor any of its subsidiaries is in default (and no event has occurred which, with
notice or lapse of time or both, would put the Company or any of its
subsidiaries in default) under, nor has there occurred any event giving others
(with notice or lapse of time or both) any rights of termination, amendment,
acceleration or cancellation of, any agreement, indenture or instrument to which
the Company or any of its subsidiaries is a party, except for actual or possible
violations, defaults or rights that would not, individually or in the aggregate,
have a Material Adverse Effect. The businesses of the Company and its
subsidiaries are not being conducted, and shall not be conducted so long as the
Purchaser owns any of the Securities, in violation of any law, ordinance or
regulation of any governmental entity, except for possible violations the
sanctions for which either singly or in the aggregate would not have a Material
Adverse Effect. Except as specifically contemplated by this Agreement and the
Registration Rights Agreement, the Company is not required to obtain any
consent, approval, authorization or order of, or make any filing or registration
with, any court or governmental agency or any regulatory or self regulatory
agency or other third party in order for it to execute, deliver or perform any
of its obligations under this Agreement, the Registration Rights Agreement, the
Notes or the Warrants, in each case in accordance with the terms hereof or
thereof. The Company is not in violation of the listing requirements of the
NASDAQ National Market ("NASDAQ") and does not reasonably anticipate that the
Common Stock will be delisted by NASDAQ for the foreseeable future.
(g) SEC DOCUMENTS, FINANCIAL STATEMENTS. Since October 4, 1999, the
Company has timely filed (within applicable extension periods) all reports,
schedules, forms, statements and other documents required to be filed by it with
the SEC pursuant to the reporting requirements of Sections 13, 14 and 15(d) of
the Securities Exchange Act of 1934, as amended (the "EXCHANGE ACT") (all of the
foregoing filed prior to the date hereof and all exhibits included therein and
financial statements and schedules thereto and documents incorporated by
reference therein, being hereinafter referred to herein as the "SEC DOCUMENTS").
The Company has delivered to the Purchaser true and complete copies of the SEC
Documents. As of their respective dates, the SEC Documents complied in all
material respects with the requirements of the Exchange Act or the Securities
Act, as the case may be, and the rules and regulations of the SEC promulgated
thereunder applicable to the SEC Documents, and none of the SEC Documents, at
the time they were filed with the SEC, contained any untrue statement of a
material fact or omitted to state a material fact required to be stated therein
7
or necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading. None of the statements
made in any such SEC Documents is, or has been, required to be amended or
updated under applicable law (except for such statements as have been amended or
updated in subsequent filings made prior to the date hereof). As of their
respective dates, the financial statements of the Company included in the SEC
Documents complied as to form in all material respects with applicable
accounting requirements and the published rules and regulations of the SEC
applicable with respect thereto. Such financial statements have been prepared in
accordance with U.S. generally accepted accounting principles ("GAAP"),
consistently applied, during the periods involved (except (i) as may be
otherwise indicated in such financial statements or the notes thereto, or (ii)
in the case of unaudited interim statements, to the extent they may not include
footnotes or may be condensed or summary statements) and fairly present in all
material respects the consolidated financial position of the Company and its
consolidated subsidiaries as of the dates thereof and the consolidated results
of their operations and cash flows for the periods then ended (subject, in the
case of unaudited statements, to immaterial year-end audit adjustments). Except
as set forth in the financial statements of the Company included in the SEC
Documents filed prior to the date hereof, the Company has no liabilities,
contingent or otherwise, other than (i) liabilities incurred in the ordinary
course of business subsequent to the date of such financial statements and (ii)
obligations under contracts and commitments incurred in the ordinary course of
business and not required under GAAP to be reflected in such financial
statements, which liabilities and obligations referred to in clauses (i) and
(ii), individually or in the aggregate, are not material to the financial
condition or operating results of the Company.
(h) ABSENCE OF CERTAIN CHANGES. Since June 30, 2000, there has been no
material adverse change and no material adverse development in the business,
properties, operations, prospects, financial condition or results of operations
of the Company and its subsidiaries, taken as a whole, except as disclosed in
the SEC Documents filed prior to the date hereof.
(i) ABSENCE OF LITIGATION. Except as disclosed in the SEC Documents
filed prior to the date hereof, there is no action, suit, proceeding, inquiry or
investigation before or by any court, public board, government agency,
self-regulatory organization or body, including, without limitation, the SEC or
NASDAQ, pending or, to the knowledge of the Company or any of its subsidiaries,
threatened against or affecting the Company, any of its subsidiaries, or any of
their respective directors or officers in their capacities as such. To the best
knowledge of the Company, after reasonable investigation, there are no facts
which, if known by a potential claimant or governmental authority, could give
rise to a claim or proceeding which, if asserted or conducted with results
unfavorable to the Company or any of its subsidiaries, could reasonably be
expected to have a Material Adverse Effect.
(j) INTELLECTUAL PROPERTY. Each of the Company and its subsidiaries owns
or is licensed to use all patents, patent applications, trademarks, trademark
applications, trade names, service marks, copyrights, copyright applications,
licenses, permits, inventions, discoveries, processes, scientific, technical,
engineering and marketing data, object and source codes, know-how (including
trade secrets and other unpatented and/or unpatentable proprietary or
confidential information,
8
systems or procedures) and other similar rights and proprietary knowledge
necessary for the conduct of its business as now being conducted (collectively,
"INTANGIBLES"). To the best knowledge of the Company, neither the Company nor
any subsidiary of the Company infringes or is in conflict with any right of any
other person with respect to any Intangibles which, if the subject of an
unfavorable decision, ruling or finding, would have a Material Adverse Effect.
Neither the Company nor any of its subsidiaries has received written notice of
any pending conflict with or infringement upon such third party Intangibles.
Neither the Company nor any of its subsidiaries has entered into any consent
agreement, indemnification agreement, forbearance to ▇▇▇ or settlement agreement
with respect to the validity of the Company's or its subsidiaries' ownership or
right to use its Intangibles and, to the best knowledge of the Company, there is
no reasonable basis for any such claim to be successful. The Intangibles are
valid and enforceable and no registration relating thereto has lapsed, expired
or been abandoned or canceled or is the subject of cancellation or other
adversarial proceedings, and all applications therefor are pending and in good
standing. The Company and its subsidiaries have complied, in all material
respects, with their respective contractual obligations relating to the
protection of the Intangibles used pursuant to licenses. To the best knowledge
of the Company, no person is infringing on or violating the Intangibles owned or
used by the Company or its subsidiaries.
(k) FOREIGN CORRUPT PRACTICES. Neither the Company, nor any of its
subsidiaries, nor any director, officer, agent, employee or other person acting
on behalf of the Company or any subsidiary has, in the course of his actions
for, or on behalf of, the Company, used any corporate funds for any unlawful
contribution, gift, entertainment or other unlawful expenses relating to
political activity; made any direct or indirect unlawful payment to any foreign
or domestic government official or employee from corporate funds; violated or is
in violation of any provision of the U.S. Foreign Corrupt Practices Act of 1977;
or made any bribe, rebate, payoff, influence payment, kickback or other unlawful
payment to any foreign or domestic government official or employee.
(l) DISCLOSURE. All information relating to or concerning the Company
set forth in this Agreement or provided to the Purchaser pursuant to Section
2(d) hereof or otherwise in connection with the transactions contemplated hereby
is true and correct in all material respects and the Company has not omitted to
state any material fact necessary in order to make the statements made herein or
therein, in light of the circumstances under which they were made, not
misleading. No event or circumstance has occurred or exists with respect to the
Company or its subsidiaries or their respective businesses, properties,
prospects, operations or financial conditions, which has not been publicly
disclosed but, under applicable law, rule or regulation, would be required to be
disclosed by the Company in a registration statement filed on the date hereof by
the Company under the Securities Act with respect to a primary issuance of the
Company's securities.
(m) ACKNOWLEDGMENT REGARDING PURCHASER'S PURCHASE OF THE SECURITIES. The
Company acknowledges and agrees that the Purchaser is not acting as a financial
advisor or fiduciary of the Company (or in any similar capacity) with respect to
this Agreement or the transactions contemplated hereby, the relationship between
the Company and the Purchaser is "arms-length" and any statement made by the
Purchaser or any of its representatives or agents in connection with this
9
Agreement and the transactions contemplated hereby is merely incidental to the
Purchaser's purchase of the Securities and has not been relied upon by the
Company, its officers or directors in any way. The Company further acknowledges
that the Company's decision to enter into this Agreement has been based solely
on an independent evaluation by the Company and its representatives.
(n) LISTING. The Company has secured the listing of the Conversion
Shares and Warrant Shares upon each national securities exchange or automated
quotation system upon which shares of Common Stock are currently listed (subject
to official notice of issuance).
(o) FORM S-3 ELIGIBILITY. On October 4, 2000, the Company will become
eligible to register the resale of its Common Stock on a registration statement
on Form S-3 under the Securities Act. There exist no facts or circumstances that
would prohibit or delay the preparation and filing of a registration statement
on Form S-3 with respect to the Registrable Securities (as defined in the
Registration Rights Agreement). The Company has no basis to believe that its
past or present independent public auditors will withhold their consent to the
inclusion, or incorporation by reference, of their audit opinion concerning the
Company's financial statements which are included in the Registration Statement
required to be filed pursuant to the Registration Rights Agreement.
(p) NO GENERAL SOLICITATION. Neither the Company nor any distributor
participating on the Company's behalf in the transactions contemplated hereby
(if any) nor any person acting for the Company, or any such distributor, has
conducted any "general solicitation," as such term is defined in Regulation D,
with respect to any of the Securities being offered hereby.
(q) NO INTEGRATED OFFERING. Neither the Company, nor any of its
affiliates, nor any person acting on its or their behalf, has directly or
indirectly made any offers or sales of any security or solicited any offers to
buy any security under circumstances that would require registration of the
Securities being offered hereby under the Securities Act or cause this offering
of Securities to be integrated with any prior offering of securities of the
Company for purposes of the Securities Act, the result of such integration which
would require registration under the Securities Act, or any applicable
stockholder approval provisions, including, without limitation, Rule 4460(i) of
the NASD or any similar rule.
(r) NO BROKERS. The Company has taken no action that would give rise to
any claim by any person for brokerage commissions, finder's fees or similar
payments by the Purchaser relating to this Agreement or the transactions
contemplated hereby.
(s) ACKNOWLEDGMENT REGARDING SECURITIES. The number of Conversion Shares
issuable upon conversion of the Notes may increase in certain circumstances,
including if the bid price of the Common Stock declines. The Company's executive
officers have studied and fully understand the nature of the Securities being
sold hereunder. The Company acknowledges that its obligation to issue Conversion
Shares upon conversion of the Notes in accordance with the terms of the Notes is
absolute and unconditional, regardless of the dilution that such issuance may
have on the ownership interests of other stockholders. Taking the foregoing into
account, the Company's Board of Directors
10
has determined in its good faith business judgment that the issuance of the
Notes and Warrants hereunder and the consummation of the other transactions
contemplated hereby are in the best interests of the Company and its
stockholders.
(t) TITLE. The Company and its subsidiaries have good and marketable
title in fee simple to all real property and good and merchantable title to all
personal property owned by them that is material to the business of the Company
and its subsidiaries, in each case free and clear of all liens, encumbrances and
defects except such as do not materially affect the value of such property and
do not materially interfere with the use made and proposed to be made of such
property by the Company and its subsidiaries. Any real property and facilities
held under lease by the Company and its subsidiaries are held by them under
valid, subsisting and enforceable leases with such exceptions as are not
material and do not materially interfere with the use made and proposed to be
made of such property and buildings by the Company and its subsidiaries.
(u) TAX STATUS. Except as set forth in the SEC Documents, the Company
and each of its subsidiaries has made or filed all foreign, U.S. federal, state
and local income and all other tax returns, reports and declarations required by
any jurisdiction to which it is subject (unless and only to the extent that the
Company and each of its subsidiaries has set aside on its books provisions
reasonably adequate for the payment of all unpaid and unreported taxes) and has
paid all taxes and other governmental assessments and charges that are material
in amount, shown or determined to be due on such returns, reports and
declarations, except those being contested in good faith and has set aside on
its books provisions reasonably adequate for the payment of all taxes for
periods subsequent to the periods to which such returns, reports or declarations
apply. There are no unpaid taxes in any material amount claimed to be due by the
taxing authority of any jurisdiction, and the officers of the Company know of no
basis for any such claim. The Company has not executed a waiver with respect to
any statute of limitations relating to the assessment or collection of any
federal, state or local tax. None of the Company's tax returns is presently
being audited by any taxing authority.
(v) KEY EMPLOYEES. Each of the Company's directors, officers and any Key
Employee (as defined below) is currently serving the Company in the capacity
disclosed in the SEC Documents. No Key Employee, to the best of the knowledge of
the Company and its subsidiaries, is, or is now expected to be, in violation of
any material term of any employment contract, confidentiality, disclosure or
proprietary information agreement, non-competition agreement, or any other
contract or agreement or any restrictive covenant, and the continued employment
of each Key Employee does not subject the Company or any of its subsidiaries to
any material liability with respect to any of the foregoing matters. No Key
Employee has, to the best of the knowledge of the Company and its subsidiaries,
any intention to terminate or limit his employment with, or services to, the
Company or any of its subsidiaries, nor is any such Key Employee subject to any
constraints which would cause such employee to be unable to devote his full time
and attention to such employment or services. "KEY EMPLOYEE" means the persons
listed on SCHEDULE 3(v) and any individual who assumes or performs any of the
duties of a Key Employee.
11
(w) INSURANCE. The Company has in force fire, casualty, product
liability and other insurance policies, with extended coverage, sufficient in
amount to allow it to replace any of its material properties or assets which
might be damaged or destroyed or sufficient to cover liabilities to which the
Company may reasonably become subject, and such types and amounts of other
insurance with respect to its business and properties, on both a per occurrence
and an aggregate basis, as are customarily carried by persons engaged in the
same or similar business as the Company. No default or event has occurred that
could give rise to a default under any such policy.
(x) ENVIRONMENTAL MATTERS. There is no environmental litigation or other
environmental proceeding pending or threatened by any governmental regulatory
authority or others with respect to the current or any former business of the
Company or any partnership or joint venture currently or at any time affiliated
with the Company. No state of facts exists as to environmental matters or
Hazardous Substances (as defined below) that involves the reasonable likelihood
of a material capital expenditure by the Company or that may otherwise have a
Material Adverse Effect. No Hazardous Substances have been treated, stored or
disposed of, or otherwise deposited, in or on the properties owned or leased by
the Company or by any partnership or joint venture currently or at any time
affiliated with the Company in violation of any applicable environmental laws.
The environmental compliance programs of the Company comply in all respects with
all environmental laws, whether federal, state or local, currently in effect. As
used herein, "Hazardous Substances" means any substance, waste, contaminant,
pollutant or material that has been determined by any governmental authority to
be capable of posing a risk of injury to health, safety, property or the
environment.
4. COVENANTS.
(a) BEST EFFORTS. The parties shall use their best efforts timely to
satisfy each of the conditions described in Section 6 and Section 7 of this
Agreement.
(b) FORM D: BLUE SKY LAWS. The Company shall file with the SEC a Form D
with respect to the Securities as required under Regulation D and provide a copy
thereof to the Purchaser promptly after such filing. The Company shall, on or
before the Closing Date, take such action as the Company shall reasonably
determine is necessary to qualify the Securities for sale to the Purchaser
pursuant to this Agreement under applicable securities or "blue sky" laws of the
states of the United States or obtain exemption therefrom, and shall provide
evidence of any such action so taken to the Purchaser on or prior to the Closing
Date. Within ten (10) days after the Closing Date, the Company shall file a Form
8-K concerning this Agreement and the transactions contemplated hereby, which
Form 8-K shall attach this Agreement and its Exhibits as exhibits to such Form
8-K.
(c) REPORTING STATUS. So long as any Purchaser beneficially owns any of
the Securities, the Company shall timely file all reports required to be filed
with the SEC pursuant to the Exchange Act, and the Company shall not terminate
its status as an issuer required to file reports under the Exchange Act even if
the Exchange Act or the rules and regulations thereunder would permit such
termination. In addition, the Company shall take all actions necessary to meet
the "registrant eligibility" requirements set forth in the general instructions
to Form S-3 or any successor form
12
thereto, to continue to be eligible to register the resale of its Common Stock
on a registration statement on Form S-3 under the Securities Act.
(d) USE OF PROCEEDS. The Company shall use the proceeds from the sale of
the Notes and Warrants as set forth in SCHEDULE 4(d).
(e) ADDITIONAL EQUITY CAPITAL. During the period beginning on the date
hereof and ending 150 days following the effective date of the Registration
Statement required to be filed by the Company pursuant to Section 2(a) of the
Registration Rights Agreement, the Company will not, without the prior written
consent of the Purchaser, contract with any party to obtain additional financing
in which any equity or equity-linked securities having common stock registration
rights and/or public resale rights effective within one year after the Closing
Date are issued (including any debt financing with an equity component).
(f) EXPENSES. The Company shall pay to Heights Capital Management, Inc.
("HEIGHTS") at the Closing, reimbursement for the out-of-pocket expenses
reasonably incurred by Heights and its affiliates and advisors in connection
with the negotiation, preparation, execution and delivery of this Agreement and
the other agreements to be executed in connection herewith, including, without
limitation, Heights' and its affiliates and advisors' reasonable due diligence
and attorneys' fees and expenses (the "EXPENSES"); provided, however, that
Heights shall be permitted to deduct all Expenses (subject to such maximum
amount) from the Purchase Price payable by Heights hereunder. In addition, from
time to time thereafter, upon Heights' written request, the Company shall pay to
Heights such additional Expenses, if any, not covered by such payment, in each
case to the extent reasonably incurred by Heights or its affiliates or agents in
connection with the negotiation, preparation, execution and delivery of this
Agreement and the other agreements executed in connection herewith.
Notwithstanding the foregoing, the Company shall not be obligated to reimburse
Heights for more than $50,000 pursuant to this Section 4(f).
(g) FINANCIAL INFORMATION. The Company shall send (via electronic
transmission or otherwise) the following reports to the Purchaser until the
Purchaser transfers, assigns or sells all of its Securities: (i) within ten (10)
days after the filing with the SEC, a copy of its Annual Report on Form 10-K,
its Quarterly Reports on Form 10-Q, its proxy statements and any Current Reports
on Form 8-K; and (ii) within one (1) day after release, copies of all press
releases issued by the Company or any of its subsidiaries.
(h) RESERVATION OF SHARES. The Company shall at all times have
authorized and reserved for the purpose of issuance a sufficient number of
shares of Common Stock to provide for the full conversion of the Notes and
issuance of the Conversion Shares in connection therewith, the full exercise of
the Warrants and the issuance of the Warrant Shares in connection therewith and
as otherwise required by the Notes and the Warrants.
(i) LISTING. The Company shall maintain, so long as the Purchaser (or
any of its affiliates) owns any Securities, the listing of all Conversion Shares
and Warrant Shares from time
13
to time issuable upon conversion of the Notes and exercise of the Warrants on
each national securities exchange or automated quotation system on which shares
of Common Stock are currently listed. The Company will use its best efforts to
continue the listing and trading of its Common Stock on NASDAQ, the New York
Stock Exchange ("NYSE") or the American Stock Exchange ("AMEX") and will comply
in all respects with the reporting, filing and other obligations under the
bylaws or rules of the NASD and such exchanges, as applicable. The Company shall
promptly provide to the Purchaser copies of any notices it receives regarding
the continued eligibility of the Common Stock for trading on the NASDAQ or, if
applicable, any securities exchange or automated quotation system on which
securities of the same class or series issued by the Company are then listed or
quoted, if any.
(j) CORPORATE EXISTENCE. So long as the Purchaser beneficially owns any
Securities, the Company shall maintain its corporate existence, and in the event
of a merger, consolidation or sale of all or substantially all of the Company's
assets, the Company shall ensure that the surviving or successor entity in such
transaction (i) assumes the Company's obligations hereunder and under the
Registration Rights Agreement, the Notes and the Warrants and the agreements and
instruments entered into in connection herewith and therewith regardless of
whether or not the Company would have had a sufficient number of shares of
Common Stock authorized and available for issuance in order to effect the
conversion of all the Notes and exercise in full of all Warrants outstanding as
of the date of such transaction and (ii) except in the event of a merger,
consolidation of the Company into any other corporation, or the sale or
conveyance of all or substantially all of the assets of the Company where the
consideration consists solely of cash, the surviving or successor entity is a
publicly traded corporation whose common stock is listed for trading on the
NASDAQ, NYSE or AMEX.
(k) NO INTEGRATED OFFERINGS. The Company shall not make any offers or
sales of any security (other than the Securities) under circumstances that would
require registration of the Securities being offered or sold hereunder under the
Securities Act or cause this offering of the Securities to be integrated with
any other offering of securities by the Company for purposes of any stockholder
approval provision applicable to the Company or its securities.
(l) LEGAL COMPLIANCE. The Company shall conduct its business and the
business of its subsidiaries in compliance with all laws, ordinances or
regulations of governmental entities applicable to such businesses, except where
the failure to do so would not have a Material Adverse Effect.
(m) REDEMPTIONS AND DIVIDENDS. So long as the Purchaser beneficially
owns any Notes, the Company shall not, without first obtaining the written
approval of the Purchaser, repurchase, redeem, or declare or pay any cash
dividend or distribution on, any shares of capital stock of the Company, except
for repurchases of stock held by employees or former employees of the Company.
(n) TRADING RESTRICTIONS. The Purchaser shall be not permitted to sell,
transfer or otherwise dispose of, during any 45 trading day period, more than
4.99% of the least number of
14
shares of Common Stock issued and outstanding during such 45 trading day period
(other than dispositions to the Company).
(o) INSPECTION OF PROPERTIES AND BOOKS. So long as the Purchaser shall
hold any Notes, the Purchaser and its representatives and agents (collectively,
the "INSPECTORS") shall have the right, at the Purchaser's expense, to visit and
inspect any of the properties of the Company and of its subsidiaries, to examine
the books of account and records of the Company and of its subsidiaries, to make
or be provided with copies and extracts therefrom, to discuss the affairs,
finances and accounts of the Company and of its subsidiaries with, and to be
advised as to the same by, its and their officers, employees and independent
public accountants (and by this provision the Company authorizes such
accountants to discuss such affairs, finances and accounts, whether or not a
representative of the Company is present) all at such reasonable times and
intervals and to such reasonable extent as the Purchaser may desire; PROVIDED,
HOWEVER, that each Inspector shall hold in confidence and shall not make any
disclosure (except to the Purchaser) of any such information which the Company
determines in good faith to be confidential, and of which determination the
Inspectors are so notified, unless (a) the disclosure of such information is
necessary to avoid or correct a misstatement or omission in any Registration
Statement filed pursuant to the Registration Rights Agreement, (b) the release
of such information is ordered pursuant to a subpoena or other order from a
court or government body of competent jurisdiction, or (c) such information has
been made generally available to the public other than by disclosure in
violation of this or any other agreement. The Company shall not be required to
disclose any confidential information to any Inspector until and unless such
Inspector shall have entered into confidentiality agreements (in form and
substance satisfactory to the Company) with the Company with respect thereto,
substantially in the form of this Section 4(p). The Purchaser agrees that it
shall, upon learning that disclosure of such information is sought in or by a
court or governmental body of competent jurisdiction or through other means,
give prompt notice to the Company and allow the Company, at its expense, to
undertake appropriate action to prevent disclosure of, or to obtain a protective
order for, the information deemed confidential.
(q) ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ ACT. In the event that the Purchaser is required
to file a pre-merger notification under the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust
Improvement Act of 1976, as amended, with respect to the transactions
contemplated by this Agreement, the Registration Rights Agreement, the Notes and
the Warrants, the Purchaser and the Company shall promptly prepare and make all
such required filings, provide full cooperation to each other with respect
thereto and shall request early termination of the waiting period with respect
thereto. The Purchaser shall be responsible for its legal costs and expenses
associated with such filings and the Company shall be responsible for all other
costs and expenses (including, but not limited to all filing fees) associated
with such filings.
(r) STOCKHOLDER APPROVAL. If, on the effective date of the Registration
Statement, the Company is prohibited by Rule 4460(i) of the NASD or any
successor or similar rule, or the rules of any other securities exchange on
which the Common Stock is then listed or traded from issuing all of the shares
of Common Stock issuable upon complete conversion of the Notes and complete
exercise of the Warrants (without giving effect to the limitations on conversion
and exercise
15
contained in Article III.D. of the Notes and Section 7(g) of the Warrants), the
Company shall call a meeting of its stockholders to be held as promptly as
practicable and in any event no later than 90 days after the effective date of
the Registration Statement for the purpose of voting upon and approving this
Agreement, the Notes, the Warrants and the Registration Rights Agreement, the
authorization and issuance of the Notes and the Warrants, and the issuance of
the Conversion Shares upon conversion of or otherwise pursuant to the Notes and
the Warrant Shares upon exercise of or otherwise pursuant to the Warrants. The
Company shall, through its Board of Directors, recommend to its stockholders
approval of such matters. The Company shall use its best efforts to solicit from
its stockholders proxies in favor of such matters sufficient to comply with all
relevant legal requirements, including, without limitation, Rule 4460(i)
promulgated by the NASD, and shall vote such proxies in favor of such matters.
5. TRANSFER AGENT INSTRUCTIONS.
(a) The Company shall instruct its transfer agent to issue certificates,
registered in the name of the Purchaser or its nominee, for the Conversion
Shares and the Warrant Shares in such amounts as specified from time to time by
the Purchaser to the Company upon conversion of the Notes or exercise of the
Warrants, as applicable. To the extent and during the periods provided in
Sections 2(f) and 2(g) of this Agreement, all such certificates shall bear the
restrictive legend specified in Section 2(g) of this Agreement.
(b) The Company warrants that no instruction other than such
instructions referred to in this Section 5, and stop transfer instructions to
give effect to Section 2(f) hereof in the case of the transfer of the Conversion
Shares or Warrant Shares prior to registration of the Conversion Shares and
Warrant Shares under the Securities Act or without an exemption therefrom, will
be given by the Company to its transfer agent and that the Securities shall
otherwise be freely transferable on the books and records of the Company as and
to the extent provided in this Agreement and the Registration Rights Agreement.
Nothing in this Section shall affect in any way the Purchaser's obligations and
agreement set forth in Section 2(g) hereof to resell the Securities pursuant to
an effective registration statement or under an exemption from the registration
requirements of applicable securities law.
(c) If the Purchaser provides the Company and the transfer agent with an
opinion of counsel, which opinion of counsel shall be in form, substance and
scope customary for opinions of counsel in comparable transactions, to the
effect that the Securities to be sold or transferred may be sold or transferred
pursuant to an exemption from registration, or the Purchaser provides the
Company with reasonable assurances that such Securities may be sold under Rule
144, the Company shall permit the transfer and, in the case of the Conversion
Shares and Warrant Shares, promptly instruct its transfer agent to issue one or
more certificates in such name and in such denominations as specified by the
Purchaser.
6. CONDITIONS TO THE COMPANY'S OBLIGATION TO SELL.
16
The obligation of the Company hereunder to issue and sell the Notes and
Warrants to the Purchaser hereunder is subject to the satisfaction, at or before
the Closing, of each of the following conditions thereto, provided that these
conditions are for the Company's sole benefit and may be waived by the Company
at any time in its sole discretion.
(a) The Purchaser shall have delivered the Purchase Price in accordance
with Section 1(b) above.
(b) The representations and warranties of the Purchaser shall be true
and correct as of the date when made and as of the Closing Date as though made
at that time (except for representations and warranties that speak as of a
specific date, which representations and warranties shall be true and correct as
of such date), and the Purchaser shall have performed, satisfied and complied in
all material respects with the covenants, agreements and conditions required by
this Agreement to be performed, satisfied or complied with by the Purchaser at
or prior to the Closing Date.
(c) No statute, rule, regulation, executive order, decree, ruling or
injunction shall have been enacted, entered, promulgated or endorsed by any
court or governmental authority of competent jurisdiction or any self-regulatory
organization having authority over the matters contemplated hereby which
prohibits the consummation of any of the transactions contemplated by this
Agreement.
7. CONDITIONS TO THE PURCHASER'S OBLIGATION TO PURCHASE.
The obligation of the Purchaser hereunder to purchase the Notes and
Warrants from the Company hereunder is subject to the satisfaction, at or before
the Closing Date, of each of the following conditions, provided that such
conditions are for the Purchaser's sole benefit and may be waived by the
Purchaser at any time in the Purchaser's sole discretion:
(a) The Company shall have executed this Agreement, the Notes, the
Warrants and the Registration Rights Agreement, and delivered executed original
copies of the same to the Purchaser.
(b) The Company shall have delivered to the Purchaser duly executed
Notes and Warrants (each in such denominations as the Purchaser shall request)
in accordance with Section 1(b) above.
(c) The Common Stock shall be listed on NASDAQ and trading in the Common
Stock (or NASDAQ generally) shall not have been suspended by the SEC or NASDAQ.
(d) The representations and warranties of the Company shall be true and
correct as of the date when made and as of the Closing Date as though made at
that time (except for representations and warranties that speak as of a specific
date, which representations and warranties shall be true and correct as of such
date) and the Company shall have performed, satisfied and complied in all
material respects with the covenants, agreements and conditions required by this
Agreement to be performed,
17
satisfied or complied with by the Company at or prior to the Closing Date. The
Purchaser shall have received a certificate, executed by the Chief Executive
Officer of the Company after reasonable investigation, dated as of the Closing
Date to the foregoing effect and as to such other matters as may reasonably be
requested by the Purchaser.
(e) No statute, rule, regulation, executive order, decree, ruling,
injunction, action or proceeding shall have been enacted, entered, promulgated
or endorsed by any court or governmental authority of competent jurisdiction or
any self-regulatory organization having authority over the matters contemplated
hereby which questions the validity of, challenges or prohibits the consummation
of, any of the transactions contemplated by this Agreement.
(f) The Purchaser shall have received an opinion of the Company's
counsel, dated as of the Closing Date, in form, scope and substance reasonably
satisfactory to the Purchaser and in substantially the form of EXHIBIT D
attached hereto.
(g) There shall have been no material adverse changes and no material
adverse developments in the business, properties, operations, prospects,
financial condition or results of operations of the Company and its
subsidiaries, taken as a whole, since the date hereof, and no information, of
which the Purchaser is not currently aware, shall come to the attention of
the Purchaser that is materially adverse to the Company.
(h) The Purchaser shall have received a copy of resolutions, duly
adopted by the Board of Directors of the Company, which shall be in full force
and effect at the time of the Closing, authorizing the execution, delivery and
performance by the Company of this Agreement, the Registration Rights Agreement,
the Notes and the Warrants and the consummation by the Company of the
transactions contemplated hereby and thereby, certified as such by the Secretary
or Assistant Secretary of the Company.
8. GOVERNING LAW; MISCELLANEOUS.
(a) GOVERNING LAW; JURISDICTION. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York applicable to
contracts made and to be performed in the State of New York. The Company and the
Purchaser irrevocably consent to the jurisdiction of the United States federal
courts and the state courts located in the State of New York in any suit or
proceeding based on or arising under this Agreement and irrevocably agree that
all claims in respect of such suit or proceeding may be determined in such
courts. The Company irrevocably waives the defense of an inconvenient forum to
the maintenance of such suit or proceeding. The Company further agrees that
service of process upon the Company mailed by first class mail shall be deemed
in every respect effective service of process upon the Company in any such suit
or proceeding. Nothing herein shall affect the right of the Purchaser to serve
process in any other manner permitted by law. The Company agrees that a final
non-appealable judgment in any such suit or proceeding shall be conclusive and
may be enforced in other jurisdictions by suit on such judgment or in any other
lawful manner.
18
(b) COUNTERPARTS. This Agreement may be executed in two or more
counterparts, all of which 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. This Agreement, once executed by a party, may be
delivered to the other parties hereto by facsimile transmission of a copy of
this Agreement bearing the signature of the party so delivering this Agreement.
In the event any signature is delivered by facsimile transmission, the party
using such means of delivery shall cause the manually executed Execution Page(s)
hereof to be physically delivered to the other party within five (5) days of the
execution hereof, provided that the failure to so deliver any manually executed
Execution Page shall not affect the validity or enforceability of this
Agreement.
(c) HEADINGS. The headings of this Agreement are for convenience of
reference and shall not form part of, or affect the interpretation of, this
Agreement.
(d) SEVERABILITY. If any provision of this Agreement shall be invalid or
unenforceable in any jurisdiction, such invalidity or unenforceability shall not
affect the validity or enforceability of the remainder of this Agreement or the
validity or enforceability of this Agreement in any other jurisdiction.
(e) ENTIRE AGREEMENT; AMENDMENTS. This Agreement and the instruments
referenced herein contain the entire understanding of the Purchaser, the
Company, their affiliates and persons acting on their behalf with respect to the
matters covered herein and therein and, except as specifically set forth herein
or therein, neither the Company nor the Purchaser makes any representation,
warranty, covenant or undertaking with respect to such matters. No provision of
this Agreement may be waived other than by an instrument in writing signed by
the party to be charged with enforcement and no provision of this Agreement may
be amended other than by an instrument in writing signed by the Company and the
Purchaser.
(f) NOTICES. Any notices required or permitted to be given under the
terms of this Agreement shall be sent by certified or registered mail (return
receipt requested) or delivered personally, by responsible overnight carrier or
by confirmed facsimile, and shall be effective five (5) days after being placed
in the mail, if mailed, or upon receipt or refusal of receipt, if delivered
personally or by responsible overnight carrier or confirmed facsimile, in each
case addressed to a party. The addresses for such communications shall be:
If to the Company:
Network Commerce Inc.
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Facsimile: (▇▇▇)-▇▇▇-▇▇▇▇
Attn: General Counsel
19
with a copy simultaneously transmitted by like means to:
▇▇▇▇▇▇▇ Coie LLP
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Facsimile: (▇▇▇)-▇▇▇-▇▇▇▇
Attn: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
If to the Purchaser, to the address set forth under the Purchaser's name
on the execution page hereto.
Each party shall provide notice to the other party of any change in
address.
(g) SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon and
inure to the benefit of the parties and their successors and assigns. Except as
provided herein or therein, neither the Company nor the Purchaser shall assign
this Agreement or any rights or obligations hereunder. Notwithstanding the
foregoing, the Purchaser may assign its rights hereunder to any of its
"affiliates," as that term is defined under the Exchange Act, without the
consent of the Company or to any other person or entity with the consent of the
Company, which consent shall not be unreasonably withheld. This provision shall
not limit the Purchaser's right to transfer the Securities pursuant to the terms
of the Notes, the Warrants and this Agreement or to assign the Purchaser's
rights hereunder or thereunder to any such transferee. In addition, and
notwithstanding anything to the contrary contained in this Agreement, the
Registration Rights Agreement, the Notes or the Warrants, the Securities may be
pledged and all rights of the Purchaser under this Agreement or any other
agreement or document related to the transactions contemplated hereby may be
assigned, without further consent of the Company, to a bona fide pledgee in
connection with the Purchaser's margin or brokerage account.
(h) THIRD PARTY BENEFICIARIES. This Agreement is intended for the
benefit of the parties hereto and their respective permitted successors and
assigns, and is not for the benefit of, nor may any provision hereof be enforced
by, any other person; provided that Section 4(f) may be enforced by Heights.
(i) SURVIVAL. The representations and warranties of the Company and the
agreements and covenants set forth in Sections 3, 4, 5 and 8 hereof shall
survive for three years following the Closing notwithstanding any due diligence
investigation conducted by or on behalf of the Purchaser. Moreover, none of the
representations and warranties made by the Company herein shall act as a waiver
of any rights or remedies the Purchaser may have under applicable U.S. federal
or state securities laws. The Company shall indemnify and hold harmless the
Purchaser and each of the Purchaser's officers, directors, employees, partners,
members, agents and affiliates for all losses or damages arising as a result of
or related to any breach or alleged breach by the Company of any of its
representations or covenants set forth herein, including advancement of expenses
as they are incurred.
20
(j) PUBLICITY. The Company and the Purchaser shall have the right to
approve before issuance any press releases, SEC or NASD filings, 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 Purchaser, to make any press release or SEC or NASD filings with
respect to such transactions as is required by applicable law and regulations
(although the Purchaser shall be consulted by the Company in connection with any
such press release and filing prior to its release and shall be provided with a
copy thereof).
(k) FURTHER ASSURANCES. Each party shall do and perform, or cause to be
done and performed, all such further acts and things, and shall execute and
deliver all such other agreements, certificates, instruments and documents, as
the other party may reasonably request in order to carry out the intent and
accomplish the purposes of this Agreement and the consummation of the
transactions contemplated hereby.
(l) TERMINATION. In the event that the Closing shall not have occurred
on or before September 30, 2000, unless the parties agree otherwise, this
Agreement shall terminate at the close of business on such date. Notwithstanding
any termination of this Agreement, any party not in breach of this Agreement
shall preserve all rights and remedies it may have against another party hereto
for a breach of this Agreement prior to or relating to the termination hereof.
(m) JOINT PARTICIPATION IN DRAFTING. Each party to this Agreement has
participated in the negotiation and drafting of this Agreement, the Notes, the
Warrants and the Registration Rights Agreement. As such, the language used
herein and therein shall be deemed to be the language chosen by the parties
hereto to express their mutual intent, and no rule of strict construction will
be applied against any party to this Agreement.
(n) EQUITABLE RELIEF. The Company acknowledges that a breach by it of
its obligations hereunder will cause irreparable harm to the Purchaser by
vitiating the intent and purpose of the transactions contemplated hereby.
Accordingly, the Company acknowledges that the remedy at law for a breach of its
obligations hereunder (including, but not limited to, its obligations pursuant
to Section 5 hereof) will be inadequate and agrees, in the event of a breach or
threatened breach by the Company of the provisions of this Agreement (including,
but not limited to, its obligations pursuant to Section 5 hereof), that the
Purchaser shall be entitled, in addition to all other available remedies, to an
injunction restraining any breach and requiring immediate issuance and transfer
of the Securities, without the necessity of showing economic loss and without
any bond or other security being required.
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IN WITNESS WHEREOF, the undersigned Purchaser and the Company have caused
this Agreement to be duly executed as of the date first above written.
NETWORK COMMERCE INC.
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇
--------------------------
Name: ▇▇▇▇▇▇ ▇▇▇▇▇▇
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Title: Chairman & CEO
-----------------------
PURCHASER:
CAPITAL VENTURES INTERNATIONAL
By: Heights Capital Management, Inc.
its authorized agent
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇
------------------------------
Name: ▇▇▇▇▇▇ ▇▇▇▇▇
Title: President, Heights Capital Management, Inc.
RESIDENCE: Cayman Islands
ADDRESS: c/o Heights Capital Management, Inc.
▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇▇▇▇▇
With a copy to:
Heights Capital Management, Inc.
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▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
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