Exhibit 4.20
SECURITIES PURCHASE AGREEMENT
SECURITIES PURCHASE AGREEMENT dated as of June 22, 2000, between
▇▇▇▇▇▇.▇▇▇, Inc., a Delaware corporation with principal executive offices
located at ▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ (the
"Company"), and the persons signatory hereto (the "Buyers").
W I T N E S S E T H:
WHEREAS, Buyers desires to purchase from the Company, and the Company
desires to issue and sell to the Buyers, upon the terms and subject to the
conditions of this Agreement, (i) 1,100 shares of Series A Convertible Preferred
Stock, $0.01 par value (the "Preferred Stock"), having the rights, preferences
and privileges set forth in the Certificate of Designations of Rights,
Preferences, Privileges and Restrictions of Series A Preferred Stock attached
hereto as ANNEX I (the "Certificate of Designations"), (ii) warrants to purchase
an aggregate of 275,000 shares (the "Warrants") of the Company's common stock
$0.01 par value (the "Common Stock"), 137,500 Warrants in the form attached
hereto as Annex II-A ("Class A Warrants") and 137,500 Warrants in the form
attached hereto as Annex II-B ("Class B Warrants").
WHEREAS, upon the terms and subject to the conditions set forth in the
Certificate of Designations, the Preferred Stock is convertible into shares of
Common Stock;
WHEREAS, the Warrants, upon the terms and subject to the conditions in
the Warrants, will for a period of five (5) years be exercisable to purchase
275,000 shares of Common Stock;
NOW THEREFORE, in consideration of the premises and the mutual
covenants contained herein, the parties hereto, intending to be legally bound,
hereby agree as follows:
I. PURCHASE AND SALE OF PREFERRED STOCK AND WARRANTS
A. TRANSACTION. Each Buyer hereby agrees to purchase from the Company,
and the Company hereby agrees to issue and sell to each Buyer, in a transaction
exempt from the registration and prospectus delivery requirements of the
Securities Act of 1933, as amended (the "Securities Act"), the number of shares
of Preferred Stock and Warrants set forth on the signature page hereof.
B. PURCHASE PRICE; FORM OF PAYMENT. The purchase price for the
Preferred Stock and Warrants to be purchased by Buyer hereunder shall be equal
to one thousand dollars ($1,000) times the number of shares of Preferred Stock
purchased (the "Purchase Price"). Each Buyer shall pay the Purchase Price on the
date hereof by wire transfer of immediately available funds to the escrow agent
(the "Escrow Agent") identified in those certain Escrow Instructions of even
date herewith, a copy of which is attached hereto as ANNEX III (the "Escrow
Instructions").
Simultaneously against receipt by the Escrow Agent of the Purchase
Price, the Company shall deliver one or more duly authorized, issued and
executed
certificates (I/N/O Buyer or, if the Company otherwise has been notified, I/N/O
Buyer's nominee) evidencing the Securities, to the Escrow Agent or its
designated depository. By executing and delivering this Agreement, Buyer and the
Company each hereby agrees to observe the terms and conditions of the Escrow
Instructions, all of which are incorporated herein by reference as if fully set
forth herein.
C. METHOD OF PAYMENT. Payment into escrow of the Purchase Price shall
be made by wire transfer of immediately available funds to:
Sterling National Bank & Trust Company
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
ABA# ▇▇▇▇▇▇▇▇▇
Snow ▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇ Escrow Account
Account# ▇▇-▇▇▇▇▇▇-▇▇
Simultaneously with the execution of this Agreement, the Buyer shall deposit
with the Escrow Agent the Purchase Price and the Company shall deposit with the
Escrow Agent the Securities.
II. BUYER'S REPRESENTATIONS, WARRANTIES; ACCESS TO INFORMATION; INDE-
PENDENT INVESTIGATION.
Buyer represents and warrants to and covenants and agrees with the
Company as follows:
A. Buyer is purchasing the Preferred Stock, the Warrants, the Common
Stock issuable upon exercise of the Warrants (the "Warrant Shares") and the
shares of Common Stock issuable upon conversion of the Preferred Stock,
including payment of the Additional Amounts, as defined in the Certificate of
Designations (the "Conversion Shares" and, collectively with the Preferred
Stock, the Warrants and the Warrant Shares, the "Securities") for its own
account, for investment purposes only and not with a view towards or in
connection with the public sale or distribution thereof in violation of the
Securities Act.
B. Buyer is (i) an "accredited investor" within the meaning of Rule
501 of Regulation D under the Securities Act, (ii) experienced in making
investments of the kind contemplated by this Agreement, (iii) capable, by reason
of its business and financial experience, of evaluating the relative merits and
risks of an investment in the Securities, and (iv) able to afford the loss of
its investment in the Securities.
C. Buyer understands that the Securities are being offered and sold by
the Company in reliance on an exemption from the registration requirements of
the Securities Act and equivalent state securities and "blue sky" laws, and that
the Company is relying upon the accuracy of, and Buyer's compliance with,
Buyer's representations, warranties and covenants set forth in this Agreement to
determine the availability of such exemption and the eligibility of Buyer to
purchase the Securities;
D. Buyer has been furnished with or provided access to all materials
relating to the business, financial position and results of operations of the
2
Company, and all other materials requested by Buyer to enable it to make an
informed investment decision with respect to the Securities.
E. Buyer acknowledges that it has been furnished with,or had access to
through the ▇▇▇▇▇ system of the Securities and Exchange Commission (the "SEC"),
copies of the Company's Annual Report on Form 10-KSB for the fiscal year ended
December 31, 1999 and all other reports and documents heretofore filed by the
Company with the SEC pursuant to the Securities Act and the Securities Exchange
Act of 1934, as amended (the "Exchange Act"), since December 31, 1999
(collectively the "SEC Filings").
F. Buyer acknowledges that in making its decision to purchase the
Securities it has been given an opportunity to ask questions of and to receive
answers from the Company's executive officers, directors and management
personnel concerning the terms and conditions of the private placement of the
Securities by the Company.
G. Buyer understands that the Securities have not been approved or
disapproved by the SEC or any state securities commission and that the foregoing
authorities have not reviewed any documents or instruments in connection with
the offer and sale to it of the Securities and have not confirmed or determined
the adequacy or accuracy of any such documents or instruments.
H. This Agreement has been duly and validly authorized, executed and
delivered by Buyer and is a valid and binding agreement of Buyer enforceable
against it in accordance with its terms, subject to applicable bankruptcy,
insolvency, fraudulent conveyance, reorganization, moratorium and similar laws
affecting creditors' rights and remedies generally.
I. Neither Buyer nor its affiliates, nor any person acting on its or
their behalf, has the intention of entering, or will enter into, prior to the
closing, or has entered within the past 30 days, any put option, short position
or other similar instrument or position with respect to the Common Stock and
neither Buyer nor any of its affiliates, nor any person acting on its or their
behalf, will use at any time shares of Common Stock acquired pursuant to this
Agreement to settle any put option, short position or other similar instrument
or position that may have been entered into prior to the execution of this
Agreement.
▇▇▇.▇▇▇▇▇▇▇'S REPRESENTATIONS
The Company represents and warrants to Buyer that except as disclosed
on Schedule III hereto:
A. CAPITALIZATION. 1. The authorized capital stock of the Company
consists of 50,000,000 shares of Common Stock, of which 16,146,499 shares are
outstanding on the date hereof and 5,000,000 shares of preferred stock, par
value $0.01, none of which are outstanding on the date hereof. All of the issued
and outstanding shares of Common Stock have been duly authorized and validly
issued and are fully paid and non-assessable. As of the date hereof, the Company
has outstanding stock options and warrants to purchase 6,368,952 shares of
Common Stock as set forth on Schedule III.A. The Conversion Shares and Warrant
Shares have been duly and validly authorized and reserved for issuance by the
Company, and when issued by the Company upon conversion of the Preferred Shares
3
(including payment of the Additional Amount), or on exercise of the Warrants,
will be duly and validly issued, fully paid and non-assessable and will not
subject the holder thereof to personal liability by reason of being such holder.
There are no preemptive, subscription, "call" or other similar rights to acquire
the Common Stock (including the Conversion Shares and Warrant Shares) that have
been issued or granted to any person.
2. The Company does not have any subsidiaries and does not own or
control, directly or indirectly, any interest in any other corporation,
partnership, limited liability company, unincorporated business organization,
association, trust or other business entity.
B. ORGANIZATION; REPORTING COMPANY STATUS.
1. The Company is a corporation duly organized,validly existing and in
good standing under the laws of its jurisdiction of organization and is duly
qualified as a foreign corporation in all jurisdictions in which the failure to
so qualify would have a material adverse effect on the business, properties,
prospects, condition (financial or otherwise) or results of operations of the
Company or on the consummation of any of the transactions contemplated by this
Agreement (a "Material Adverse Effect").
2. The Company has registered the Common Stock pursuant to Section 12
of the Exchange Act and has timely filed with the SEC all reports and
information required to be filed by it pursuant to all reporting obligations
under Section 13(a) or 15(d), as applicable, of the Exchange Act for the
12-month period immediately preceding the date hereof. The Common Stock is
listed and traded on the NASDAQ SmallCap Market ("NASDAQ") and the Company has
not received any notice regarding, and to its knowledge there is no threat, of
the termination or discontinuance of the eligibility of the Common Stock for
such listing.
C. AUTHORIZED SHARES. The Company has duly and validly authorized and
reserved for issuance shares of Common Stock sufficient in number for the
conversion of the Preferred Stock (assuming for purposes of this Section III.C.
a Conversion Price (as defined in the Certificate of Designations) of $1.00 and
the exercise of the Warrants. The Company understands and acknowledges the
potentially dilutive effect to the Common Stock of the issuance of the
Conversion Shares upon conversion of the Preferred Stock and the Warrant Shares
upon exercise of the Warrants. The Company further acknowledges that its
obligation to issue Conversion Shares upon conversion of the Preferred Stock and
Warrant Shares upon exercise of the Warrants in accordance with this Agreement
is absolute and unconditional regardless of the dilutive effect that such
issuance may have on the ownership interests of other stockholders of the
Company, notwithstanding the commencement of any case under 11 U.S.C. ss. 101 ET
SEQ. (the "Bankruptcy Code"). In the event the Company is a debtor under the
Bankruptcy Code, the Company hereby waives to the fullest extent permitted any
rights to relief it may have under 11 U.S.C. ss. 362 in respect of the
conversion of the Preferred Stock and the exercise of the Warrants. The Company
agrees, without cost or expense to the Buyer, to take or consent to any and all
action necessary to effectuate relief under 11 U.S.C. ss. 362.
D. AUTHORITY; VALIDITY AND ENFORCEABILITY. The Company has the
requisite corporate power and authority to enter into this Agreement, the
Certificate of Designations, the Registration Rights Agreement of even date
4
herewith between the Company and Buyer, a copy of which is annexed hereto as
Annex IV (the "Registration Rights Agreement") and the Warrants and to perform
all of its obligations hereunder and thereunder (including the issuance, sale
and delivery to Buyer of the Securities). The execution, delivery and
performance by the Company of this Agreement, the Certificate of Designations,
the Warrants and the Registration Rights Agreement, and the consummation by the
Company of the transactions contemplated hereby and thereby (the issuance of the
Preferred Stock, the Warrants and the issuance and reservation for issuance of
the Conversion Shares and Warrant Shares), has been duly authorized by all
necessary corporate action on the part of the Company and no further consent or
authorization of the Company or its Board of Directors or stockholders is
required, except to the extent stockholder approval is required under NASDAQ
rules. Each of this Agreement, the Certificate of Designations, the Warrants and
the Registration Rights Agreement has been duly validly executed and delivered
by the Company and each instrument constitutes a valid and binding obligation of
the Company enforceable against it in accordance with its terms, subject to
applicable bankruptcy, insolvency, fraudulent conveyance, reorganization,
moratorium and similar laws affecting creditors, rights and remedies generally.
The Securities have been duly and validly authorized for issuance by the Company
and, when executed and delivered by the Company, will be valid and binding
obligations of the Company enforceable against it in accordance with their
terms, subject to applicable bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium and similar laws affecting creditors' rights and
remedies generally.
E. NON-CONTRAVENTION. The execution and delivery by the Company of
this Agreement, the Certificate of Designations, the Warrants and the
Registration Rights Agreement, the issuance of the Securities, and the
consummation by the Company of the other transactions contemplated hereby and
thereby, do not and will not conflict with or result in a breach by the Company
of any of the terms or provisions of, or constitute a default (or an event
which, with notice, lapse of time or both, would constitute a default) under (i)
the Amended and Restated Certificate of Incorporation or by-laws of the Company,
(ii) except for such conflict, breach or default which would not have a Material
Adverse Effect, any indenture, mortgage, deed of trust or other material
agreement or instrument to which the Company is a party or by which their
respective properties or assets are bound, or (iii) any law, rule, regulation,
decree, judgment or order of any court or public or governmental authority
having jurisdiction over the Company or any of the Company's properties or
assets, nor is the Company otherwise in violation of, conflict with or in
default under any of the foregoing, except for such conflict, breach or default
which would not have a Material Adverse Affect.
F. APPROVALS. No authorization, approval or consent of any court or
public or governmental authority is required to be obtained by the Company for
the issuance and sale of the Preferred Stock and the Warrants (and the
Conversion Shares and Warrant Shares) to Buyer as contemplated by this
Agreement, except such authorizations, approvals and consents that have been
obtained by the Company prior to the date hereof.
G. SEC FILINGS.None of the SEC Filings contained at the time they were
filed any untrue statement of a material fact or omitted to state any material
fact required to be stated therein or necessary to make the statements made
therein, in light of the circumstances under which they were made, not
misleading. The Company has not provided to Buyer any information that,
5
according to applicable law, rule or regulation, should have been disclosed
publicly prior to the date hereof by the Company, but which has not been so
disclosed.
H. ABSENCE OF CERTAIN CHANGES. Except as disclosed in the SEC Filings
or the Financial Statements (as defined in Section III.L. hereto), since the
Balance Sheet Date (as defined in Section III.L.), there has not occurred any
change, event or development in the business, financial condition, prospects or
results of operations of the Company, and there has not existed any condition
having or reasonably likely to have, a Material Adverse Effect.
I. FULL DISCLOSURE. There is no fact known to the Company (other than
general economic or industry conditions known to the public generally) that has
not been fully disclosed in writing to the Buyer that (i) reasonably would be
expected to have a Material Adverse Effect or (ii) reasonably would be expected
to materially and adversely affect the ability of the Company to perform its
obligations pursuant to this Agreement, the Certificate of Designations, the
Warrants or the Registration Rights Agreement.
J. ABSENCE OF LITIGATION. There is no action, suit, claim, proceeding,
inquiry or investigation pending or, to the Company's knowledge, threatened, by
or before any court or public or governmental authority which, if determined
adversely to the Company, would have a Material Adverse Effect.
K. ABSENCE OF EVENTS OF DEFAULT. No "Event of Default" (as defined in
any agreement or instrument to which the Company is a party) and no event which,
with notice, lapse of time or both, would constitute an Event of Default (as so
defined), has occurred and is continuing, which could have a Material Adverse
Effect.
L. FINANCIAL STATEMENTS; NO UNDISCLOSED LIABILITIES. The Company has
delivered or made available to Buyer true and complete copies of its audited
balance sheet as at December 31, 1999 and the related audited statements of
operations and cash flows for the fiscal year ended December 31, 1999 including
the related notes and schedules thereto as well as the same unaudited financial
statements as of and for the three month period ended March 31, 2000
(collectively, the "Financial Statements"), and all management letters, if any,
from the Company's independent auditors relating to the dates and periods
covered by the Financial Statements. Each of the Financial Statements has been
prepared in accordance with United States General Accepted Accounting Principles
("GAAP") (subject, in the case of the interim Financial Statements, to normal
year end adjustments and the absence of footnotes) and in conformity with the
practices consistently applied by the Company without modification of the
accounting principles used in the preparation thereof, and fairly presents the
financial position, results of operations and cash flows of the Company as at
the dates and for the periods indicated. For purposes hereof, the audited
balance sheet of the Company as at December 31, 1999 is hereinafter referred to
as the "Balance Sheet" and December 31, 1999 is hereinafter referred to as the
"Balance Sheet Date". The Company has no indebtedness, obligations or
liabilities of any kind (whether accrued, absolute, contingent or otherwise, and
whether due or to become due) that would have been required to be reflected in,
reserved against or otherwise described in the Balance Sheet or in the notes
thereto in accordance with GAAP, which was not fully reflected in, reserved
against or otherwise described in the Balance Sheet or the notes thereto or was
6
not incurred in the ordinary course of business consistent with the Company's
past practices since the Balance Sheet Date.
M. COMPLIANCE WITH LAWS; PERMITS.The Company is in compliance with all
laws, rules, regulations, codes, ordinances and statutes (collectively "Laws")
applicable to it or to the conduct of its business, except for such
non-compliance which would not have a Material Adverse Effect. The Company
possesses all permits, approvals, authorizations, licenses, certificates and
consents from all public and governmental authorities which are necessary to
conduct its business, except for those the absence of which would not have a
Material Adverse Effect.
N. RELATED PARTY TRANSACTIONS. Neither the Company nor any of its
officers, directors or "Affiliates" (as such term is defined in Rule 12b-2 under
the Exchange Act) has borrowed any moneys from or has outstanding any
indebtedness or other similar obligations to the Company. Neither the Company
nor any of its officers, directors or Affiliates (i) owns any direct or indirect
interest constituting more than a one percent equity (or similar profit
participation) interest in, or controls or is a director, officer, partner,
member or employee of, or consultant to or lender to or borrower from, or has
the right to participate in the profits of, any person or entity which is (x) a
competitor, supplier, customer, landlord, tenant, creditor or debtor of the
Company, (y) engaged in a business related to the business of the Company , or
(z) a participant in any transaction to which the Company is a party (other than
in the ordinary course of the Company's business) or (ii) is a party to any
contract, agreement, commitment or other arrangement with the Company.
O. INSURANCE. The Company maintains property and casualty, general
liability and workers' compensation, insurance with financially sound and
reputable insurers that is adequate in light of the Company's historical claims
experience. The Company has not received notice from, and has no knowledge of
any threat by, any insurer (that has issued any insurance policy to the Company)
that such insurer intends to deny coverage under or cancel, discontinue or not
renew any insurance policy presently in force.
P. SECURITIES LAW MATTERS.Based, in part, upon the representations and
warranties of Buyer set forth in Section II hereof, the offer and sale by the
Company of the Securities is exempt from (i) the registration and prospectus
delivery requirements of the Securities Act and the rules and regulations of the
SEC thereunder and (ii) the registration and/or qualification provisions of all
applicable state securities and "blue sky" laws. Other than pursuant to an
effective registration statement under the Securities Act, the Company has not
issued, offered or sold Preferred Stock or any shares of Common Stock (including
for this purpose any securities of the same or a similar class as the Preferred
Stock or Common Stock, or any securities convertible into or exchangeable or
exercisable for Preferred Stock or Common Stock or any such other securities)
within the six-month period next preceding the date hereof, except as previously
disclosed in writing to Buyer, and the Company shall not directly or indirectly
take, and shall not permit any of its directors, officers or Affiliates directly
or indirectly to take, any action (including, without limitation, any offering
or sale to any person or entity of Preferred Stock or shares of Common Stock),
so as to make unavailable the exemption from Securities Act registration being
relied upon by the Company for the offer and sale to Buyer of the Preferred
Stock (and the Conversion Shares) as contemplated by this Agreement. No form of
7
general solicitation or advertising has been used or authorized by the Company
or any of its officers, directors or Affiliates in connection with the offer or
sale of the Preferred Stock (and the Conversion Shares) as contemplated by this
Agreement or any other agreement to which the Company is a party.
Q. ENVIRONMENTAL MATTERS. 1. The operations of the Company are in
material compliance with all applicable Environmental Laws and all permits
issued pursuant to Environmental Laws or otherwise;
2. to its knowledge, the Company has obtained or applied for all mate-
rial permits required under all applicable Environmental Laws necessary to
operate their respective businesses;
3. to its knowledge, the Company is not the subject of any outstanding
written order of and the Company is not a party to any agreement with, any
governmental authority or person respecting (i) Environmental Laws, (ii)
Remedial Action or (iii) any Release or threatened Release of Hazardous
Materials;
4. the Company has not received, since the October 14, 1999, any writ-
ten communication alleging that it may be in violation of any Environmental Law
or any permit issued pursuant to any Environmental Law, or may have any
liability under any Environmental Law;
5. to its knowledge, the Company does not have any current contingent
liability in connection with any Release of any Hazardous Materials into the
indoor or outdoor environment (whether on-site or off-site);
6. to the Company's knowledge, there are no investigations of the
business, operations, or currently or previously owned, operated or leased
property of the Company pending or threatened which could lead to the imposition
of any liability pursuant to any Environmental Law;
7. to its knowledge, there is not located at any of the properties of
the Company any (A) underground storage tanks, (B) asbestos-containing material
or (C) equipment containing polychlorinated biphenyls; and,
8. the Company has provided to Buyer all environmentally related
audits, studies, reports, analyses, and results of investigations that have been
performed with respect to the currently or previously owned, leased or operated
properties of the Company.
For purposes of this Section III.Q.:
"ENVIRONMENTAL LAW" means any federal, state or local statute, regula-
tion, ordinance, or rule of common law as now or hereafter in effect in any way
relating to the protection of human health and safety or the environment
including, without limitation, the Comprehensive Environmental Response,
Compensation and Liability Act (42 U.S.C.ss.9601 ET SEQ.), the Hazardous
Materials Transportation Act (49 U.S.C. App.ss.1801 ET SEG.), the Resource
Conservation and Recovery Act (42 U.S.C.ss.6901 ET SEQ.), the Clean Water Act
(33 U.S.C.ss.1251 ET SEG.), the Clean Air Act (42 U.S.C.ss.7401 ET SEG.), the
Toxic Substances Control Act (15 U.S.C.ss.2601 ET SEG.), the Federal
Insecticide, Fungicide, and Rodenticide Act (7 U.S.C.ss.136 ET SEQ.), and the
8
Occupational Safety and Health Act (29 U.S.C.ss.651 ET SEG.), and the
regulations promulgated pursuant thereto.
"HAZARDOUS MATERIAL" means any substance, material or waste which is
regulated by the United States or any state or local governmental authority
including, without limitation, petroleum and its by-products, asbestos, and any
material or substance which is defined as a "hazardous waste," "hazardous
substance," "hazardous material," "restricted hazardous waste," "industrial
waste," "solid waste," "contaminant," "pollutant," "toxic waste" or toxic
substance" under any provision of any Environmental Law;
"RELEASE" means any release, spill, filtration, emission, leaking,
pumping, injection, deposit, disposal, discharge, dispersal, or leaching into
the indoor or outdoor environment, or into or out of any property, in each case
in violation of any Environmental law.
"REMEDIAL ACTION" means all actions to (x) clean up, remove, treat or
in any other way address any Hazardous Material; (y) prevent the Release of any
Hazardous Material in violation of any Environmental law so it does not endanger
or threaten to endanger public health or welfare or the indoor or outdoor
environment; or (z) perform pre-remedial studies and investigations or
post-remedial monitoring and care.
R. LABOR MATTERS. The Company is not party to any labor or collective
bargaining agreement and there are no labor or collective bargaining agreements
which pertain to employees of the Company. No employees of the Company are
represented by any labor organization and none of such employees has made a
pending demand for recognition, and there are no representation proceedings or
petitions seeking a representation proceeding presently pending or, to the
Company's knowledge, threatened to be brought or filed, with the National Labor
Relations Board or other labor relations tribunal. There is no organizing
activity involving the Company or pending or to the Company's knowledge,
threatened by any labor organization or group of employees of the Company. There
are no (i) strikes, work stoppages, slowdowns, lockouts or arbitrations or (ii)
material grievances or other labor disputes pending or, to the knowledge of the
Company, threatened against or involving the Company. There are no unfair labor
practice charges, grievances or complaints pending or, to the knowledge of the
Company, threatened by or on behalf of any employee or group of employees of the
Company.
S. ERISA MATTERS. The Company and its ERISA Affiliates are in
compliance in all material respects with all provisions of ERISA applicable to
it. Neither the Company nor any ERISA Affiliate maintains, contributes,
maintained or contributed to a plan subject to the provisions of Title IV of
ERISA or Section 412 of the Internal Revenue Code.
For purposes of this Section III.S.:
"ERISA" means the Employee Retirement Income Security Act of 1974, or
any successor statute, together with the final regulations promulgated
thereunder, as the same may be amended from time to time.
"ERISA AFFILIATE" means any trade or business (whether or not
incorporated) that is a member of a group of which the Company is a member and
9
which is treated as a single employer under ss. 414 of the Internal Revenue Code
of 1986, as amended (the "Internal Revenue Code").
T. TAX MATTERS. 1. The Company has filed all Tax Returns which it is
required to file under applicable Laws, except for such Tax Returns in respect
of which the failure to so file does not and could not have a Material Adverse
Effect; all such Tax Returns are true and accurate in all material respects and
have been prepared in compliance with all applicable Laws; the Company has paid
all Taxes due and owing by it (whether or not such Taxes are required to be
shown on a Tax Return) and have withheld and paid over to the appropriate taxing
authorities all Taxes which they are required to withhold from amounts paid or
owing to any employee, stockholder, creditor or other third parties; and since
December 31, 1999, the charges, accruals and reserves for Taxes with respect to
the Company (including any provisions for deferred income taxes) reflected on
the books of the Company are adequate to cover any Tax liabilities of the
Company if its current tax year were treated as ending on the date hereof.
2. No claim has been made by a taxing authority in a jurisdiction where
the Company does not file tax returns that such corporation is or may be subject
to taxation by that jurisdiction. To the Company's knowledge, there are no
foreign, federal, state or local tax audits or administrative or judicial
proceedings pending or being conducted with respect to the Company; no
information related to Tax matters has been requested by any foreign, federal,
state or local taxing authority; and, except as disclosed above, no written
notice indicating an intent to open an audit or other review has been received
by the Company from any foreign, federal, state or local taxing authority. To
the Company's knowledge, there are no material unresolved questions or claims
concerning the Company's Tax liability. The Company (A) has not executed or
entered into a closing agreement pursuant to ss. 7121 of the Internal Revenue
Code or any predecessor provision thereof or any similar provision of state,
local or foreign law; or (B) has not agreed to or is required to make any
adjustments pursuant to ss. 481 (a) of the Internal Revenue Code or any similar
provision of state, local or foreign law by reason of a change in accounting
method initiated by the Company or has any knowledge that the IRS has proposed
any such adjustment or change in accounting method, or has any application
pending with any taxing authority requesting permission for any changes in
accounting methods that relate to the business or operations of the Company. The
Company has not been a United States real property holding corporation within
the meaning of ss. 897(c)(2) of the Internal Revenue Code during the applicable
period specified in ss. 897(c)(1)(A)(ii) of the Internal Revenue Code.
3. The Company has not made an election under ss. 341(f) of the
Internal Revenue Code. The Company is not liable for the Taxes of another person
that is not a subsidiary of the Company under (A) Treas. Reg. ss. 1.1502-6 (or
comparable provisions of state, local or foreign law), (B) as a transferee or
successor, (C) by contract or indemnity or (D) otherwise. The Company is not a
party to any tax sharing agreement. The Company has not made any payments, is
obligated to make payments or is a party to an agreement that could obligate it
to make any payments that would not be deductible under ss. 28OG of the Internal
Revenue Code.
For purposes of this Section III.T.:
"IRS" means the United States Internal Revenue Service.
10
"TAX" or "TAXES" means federal, state, county, local, foreign, or other
income, gross receipts, ad valorem, franchise, profits, sales or use, transfer,
registration, excise, utility, environmental, communications, real or personal
property, capital stock, license, payroll, wage or other withholding,
employment, social security, severance, stamp, occupation, alternative or add-on
minimum, estimated and other taxes of any kind whatsoever (including, without
limitation, deficiencies, penalties, additions to tax, and interest attributable
thereto) whether disputed or not.
"TAX RETURN" means any return, information report or filing with
respect to Taxes, including any schedules attached thereto and including any
amendment thereof.
U. PROPERTY. The Company does not own any real property. The Company
has good and marketable title to all personal property owned by it, 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 any real
property and buildings held under lease by the Company are held by it under
valid, subsisting and enforceable leases with such exceptions as are not
material and do not interfere with the use made and proposed to be made of such
property and buildings by the Company.
V. INTELLECTUAL PROPERTY. The Company owns or possesses adequate and
enforceable rights to use all patents, patent applications, trademarks,
trademark applications, trade names, service marks, copyrights, copyright
applications, licenses, know-how (including trade secrets and other unpatented
and/or unpatentable proprietary or confidential information, systems or
procedures) and other similar rights and proprietary knowledge (collectively,
"Intangibles") necessary for the conduct of its business as now being conducted.
To the Company's knowledge, the Company is not infringing upon or in conflict
with any right of any other person with respect to any Intangibles. No claims
have been asserted by any person to the ownership or use of any Intangibles and
the Company has no knowledge of any basis for such claim.
W. INTERNAL CONTROLS AND PROCEDURES. The Company maintains accurate
books and records and internal accounting controls which provide reasonable
assurance that (i) all transactions to which the Company is a party or by which
its properties are bound are executed with management's authorization; (ii) the
reported accountability of the Company's assets is compared with existing assets
at regular intervals; (iii) access to the Company's assets is permitted only in
accordance with management's authorization; and (iv) all transactions to which
the Company is a party or by which its properties are bound are recorded as
necessary to permit preparation of the financial statements of the Company in
accordance with U.S. generally accepted accounting principles.
X. PAYMENTS AND CONTRIBUTIONS. Neither the Company nor any of its
directors, officers or, to its knowledge, other employees has (i) used any
Company funds for any unlawful contribution, endorsement, gift, entertainment or
other unlawful expense relating to political activity; (ii) made any direct or
indirect unlawful payment of Company funds to any foreign or domestic government
official or employee; (iii) violated or is in violation of any provision of the
Foreign Corrupt Practices Act of 1977, as amended; or (iv) made any bribe,
11
rebate, payoff, influence payment, kickback or other similar payment to any
person with respect to Company matters.
Y. NO MISREPRESENTATION. No representation or warranty of the Company
contained in this Agreement, any schedule, annex or exhibit hereto or any
agreement, instrument or certificate furnished by the Company to Buyer pursuant
to this Agreement, contains any untrue statement of a material fact or omits to
state a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading.
Z. RIGHT OF FIRST REFUSAL. Except as provided in Section IV.K., the
Company has not granted any right of first refusal to any person with respect to
the issuance of the Preferred Stock, Common Stock or securities convertible into
Common Stock.
IV. CERTAIN COVENANTS AND ACKNOWLEDGMENTS.
A. RESTRICTIVE LEGEND. Buyer acknowledges and agrees that, upon issu-
ance pursuant to this Agreement, the Securities (and any shares of Common Stock
issued upon conversion of the Preferred Stock or upon exercise of the Warrants)
shall have endorsed thereon a legend in substantially the following form (and a
stop-transfer order may be placed against transfer of the Preferred Stock and
the Conversion Shares:
"THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE "SECURITIES ACT"), OR THE SECURITIES LAWS OF ANY STATE,
AND ARE BEING OFFERED AND SOLD PURSUANT TO AN EXEMPTION FROM THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT AND SUCH LAWS. THESE SECURITIES MAY NOT BE
SOLD OR TRANSFERRED EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER
THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT OR SUCH OTHER LAWS."
B. FILINGS. The Company shall make all necessary SEC and "blue sky"
filings required to be made by the Company in connection with the sale of the
Securities to the Buyer as required by all applicable Laws, and shall provide a
copy thereof to the Buyer promptly after such filing.
C. REPORTING STATUS. So long as the Buyer beneficially owns any of the
Securities, the Company shall use its best efforts to file all reports required
to be filed by it with the SEC pursuant to Section 13 or 15(d) of the Exchange
Act.
D. LISTING. So long as the Buyer beneficially owns any of the Securi-
ties, except to the extent the Company lists its Common Stock on The New York
Stock Exchange, the Company shall use its best efforts to maintain its listing
of the Common Stock on the NASDAQ.
E. RESERVED CONVERSION SHARES. Subject to Section 5.11 of the
Certificate of Designations, the Company at all times from and after the date
hereof shall have a sufficient number of shares of Common Stock duly and validly
authorized and reserved for issuance to satisfy the conversion, in full, of the
Preferred Stock, including payment of the Additional Amount (assuming for
purposes of this Section IV.E., a Conversion Price of $1.00), and upon the
12
exercise of the Warrants. In the event the average of the Market Prices (as
defined in the Registration Rights Agreement) for any ten consecutive Trading
Days (as defined in the Certificate of Designations) is $1.00 or less, the
Company shall, within 10 days of the occurrence of such event, authorize and
reserve for issuance such additional shares of Common Stock sufficient in number
for the conversion, in full, of the Preferred Stock, assuming for purposes of
this Section IV.E. a Conversion Price of $0.50 per share, subject to Section
5.11 of the Certificate of Designations.
F. REGISTRATION RIGHTS AGREEMENT. The Company shall cause the Regis-
tration Rights Agreement to remain in full force and effect and the Company
shall comply in all material respects with the terms thereof.
G. NOTICE OF CERTAIN EVENTS AFFECTING REGISTRATION. The Company will
immediately notify the Buyer upon the occurrence of any of the following events
in respect of a registration statement or related prospectus in respect of an
offering of the Securities; (i) receipt of any request for additional
information by the SEC or any other federal or state governmental authority
during the period of effectiveness of the Registration Statement to be supplied
by amendments or supplements to the registration statement or related
prospectus; (ii) the issuance by the SEC or any other federal or state
governmental authority of any stop order suspending the effectiveness of the
Registration Statement or the initiation of any proceedings for that purpose;
(iii) receipt of any notification with respect to the suspension of the
qualification or exemption from qualification of any of the Securities for sale
in any jurisdiction or the initiation or threatening of any proceeding for such
purpose; (iv) the happening of any event that makes any statement made in the
Registration Statement or related prospectus or any document incorporated or
deemed to be incorporated therein by reference untrue in any material respect or
that requires the making of any changes in the Registration Statement, related
prospectus or documents so that, in the case of the Registration Statement, 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 not misleading, and that in the case of the related prospectus, 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; and (v) the Company's reasonable determination that a post-effective
amendment to the Registration Statement would be appropriate; and the Company
will promptly make available to Buyer any such supplement or amendment to the
related prospectus.
H. CONSOLIDATION; MERGER. The Company shall not, at any time after the
date hereof, effect any merger or consolidation of the Company with or into, or
a transfer of all or substantially all of the assets of the Company to, another
entity (a "Consolidation Event") unless the resulting successor or acquiring
entity (if not the Company) assumes by written instrument or by operation of law
the obligation to deliver to Buyer such shares of stock and/or securities as
Buyer is entitled to receive pursuant to this Agreement.
I. ISSUANCE OF PREFERRED SHARES AND WARRANT SHARES. The sale of the
Preferred Stock and the issuance of the Warrant Shares pursuant to exercise of
the Warrant and the Conversion Shares upon conversion of the Preferred Stock
shall be made in accordance with the provisions and requirements of Section 4(2)
13
of Regulation D and any applicable state securities law. The Company shall make
all necessary SEC and "blue sky" filings required to be made by the Company in
connection with the sale of the Securities to Buyer as required by all
applicable Laws, and shall provide a copy thereof to Buyer promptly after such
filing.
J. LIMITATION ON FUTURE FINANCING. The Company agrees that it will not
enter into any financing at a discount to Market Price (as defined in the
Certificate of Designations) which contains dividend, interest, payment,
liquidation, redemption, exchange, conversion or similar terms which may be
calculated by formulas based in part on the varying market price of the
Company's securities (a "Variable Rate Financing"), other than under a private
equity line of credit with ▇. ▇. ▇▇▇▇▇▇▇▇, LLC for not less than $5,000,000,
which provides for the issuance of convertible exchangeable term notes and other
than any equity line of credit with any other investor for not less than
$5,000,000 (an "Equity Line Financing"), until (i) six months from the effective
date of the Registration Statement, or (ii) Buyer gives written approval for
such additional financing; provided, however, anything to the contrary appearing
herein notwithstanding, neither this Section nor any other provision hereof
shall be construed to restrict or prohibit the Company's right to restructure,
amend or modify any financing facility existing on the date hereof.
K. RIGHT OF FIRST REFUSAL. Except for Variable Rate Financings and
Equity Line Financings, the Company shall not enter into any financing at a
discount to Market Price with Persons other than the Buyers (a "Restricted
Financing") during the period commencing on the date hereof and ending six
months after the effective date of the Registration Statement, unless the
Company shall first have satisfied its obligations under this Section IV.K.
(a) If the Company receives a written offer from any
Person or group of Persons other than the Buyers, the
Company shall give the Buyers a written notice of such
offer stating the type, terms, and purchase price of
the securities offered as part of such Restricted
Financing and the other material terms and conditions
of the proposed Restricted Financing and attaching a
copy of the offer signed by the Person or Persons
making such offer.
(b) The Buyers shall have the right to purchase all or any
part of the securities offered as part of such Restricted
Financing on the same terms and conditions as are set forth
in the Company's written notice. Each Buyer may exercise
its right to purchase such securities by giving a written
notice of exercise to the Company within three Trading
Days after such Buyer's receipt of the Company's notice.
Each Buyer shall have the right to purchase such securities
pro rata in accordance with their investment in the
Company as a result of their purchase of Preferred Stock
under this Agreement. Each Buyer may also notify the Company
that it will purchase its pro rata share of any such
securities not purchased by the other Buyers.
14
(c) If the Buyers shall not have exercised their rights to
purchase all of such securities, then the Company
shall have the right to sell all securities not
subscribed by the Buyers on the same terms and
conditions as those set forth in the Company's notice.
If the Company shall not have sold all such securities
within 30 days after the expiration of the three
Trading Day period in paragraph (b) above, then the
Company shall not sell any such securities unless it
first offers to sell such securities to the Buyers in
accordance with the procedures set forth in this
Section IV.K.
V. TRANSFER AGENT INSTRUCTIONS.
A. The Company undertakes and agrees that no instruction other than
the instructions referred to in this Section V and customary stop transfer
instructions prior to the registration and sale of the Common Stock pursuant to
an effective Securities Act registration statement will be given to its transfer
agent for the Common Stock and that the Common Stock issuable upon conversion of
the Preferred Stock, including the payment of the Additional Amount, and upon
exercise of the Warrants otherwise shall be freely transferable on the books and
records of the Company as and to the extent provided in this Agreement, the
Registration Rights Agreement and applicable law. Nothing contained in this
Section V.A. shall affect in any way Buyer's obligations and agreement to comply
with all applicable securities laws upon resale of such Common Stock. If, at any
time, Buyer provides the Company with an opinion of counsel reasonably
satisfactory to the Company that registration of the resale by Buyer of such
Common Stock is not required under the Securities Act and that the removal of
restrictive legends is permitted under applicable law, the Company shall permit
the transfer of such Common Stock and, promptly instruct the Company's transfer
agent to issue one or more certificates for Common Stock without any restrictive
legends endorsed thereon.
B. The Company shall permit Buyer to exercise its right to convert the
Preferred Stock by telecopying an executed and completed Notice of Conversion to
the Company. Each date on which a Notice of Conversion is telecopied to and
received by the Company in accordance with the provisions hereof shall be deemed
a Conversion Date. The Company shall transmit the certificates evidencing the
shares of Common Stock issuable upon conversion of any Preferred Stock (together
with certificates evidencing any Preferred Stock not being so converted) to
Buyer via express courier, by electronic transfer or otherwise, within three
business days after receipt by the Company of the Notice of Conversion (the
"Delivery Date"). Within 30 days after Buyer delivers the Notice of Conversion
to the Company, Buyer shall deliver to the Company the Preferred Stock being
converted. Buyer shall indemnify the Company for any damages to third parties as
a result of a claim by such third party to ownership of the Preferred Stock
converted prior to receipt of the Preferred Stock by the Company.
C. The Company shall permit Buyer to exercise its right to purchase
shares of Common Stock pursuant to exercise of the Warrants in accordance with
its applicable terms of the Warrants. The last date that the Company may deliver
shares of Common Stock issuable upon any exercise of Warrants is referred to
herein as the "Warrant Delivery Date."
15
D. The Company understands that a delay in the issuance of the shares
of Common Stock issuable upon the conversion of the Preferred Stock (including
the payment of the Additional Amount) or upon exercise of the Warrants beyond
the applicable Delivery Date or Warrant Delivery Date could result in economic
loss to Buyer. As compensation to Buyer for such loss (and not as a penalty),
the Company agrees to pay to Buyer for late issuance of Common Stock issuable
upon conversion of the Preferred Stock or exercise of the Warrants in accordance
with the following schedule (where "No. Business Days" is defined as the number
of business days beyond three (3) days from the Delivery Date or the Warrant
Delivery Date, as applicable):
Compensation For Each
5 Shares of Preferred
Stock Not Converted
Timely or Shares of Common
Stock Issuable Upon Exercise
of Each 250 Warrants
No. Business Days Not Issued Timely
----------------- -----------------
1 $ 100
2 $ 200
3 $ 300
4 $ 400
5 $ 500
6 $ 600
7 $ 700
8 $ 800
9 $ 900
10 $1000
more than 10 $ 200 for each
Business Day Late
beyond 10 days
The Company shall pay to Buyer the compensation described above by the transfer
of immediately available funds upon Buyer's demand. Nothing herein shall limit
Buyer's right to pursue actual damages for the Company's failure to issue and
deliver Common Stock to Buyer (which actual damages shall be reduced by the
amount of any compensation paid by the Company as described above in this
Section V.D.), and in addition to any other remedies which may be available to
Buyer, in the event the Company fails for any reason to effect delivery of such
shares of Common Stock within five business days after the relevant Delivery
Date or the Warrant Delivery Date, as applicable, Buyer shall be entitled to
rescind the relevant Notice of Conversion or exercise of Warrants by delivering
a notice to such effect to the Company whereupon the Company and Buyer shall
each be restored to their respective original positions immediately prior to
delivery of such Notice of Conversion on delivery. The Company may pay the
compensation described above in additional shares of Common Stock based upon the
Market Price (as defined in the Certificate of Designations) as determined on
the date of payment.
E. Upon the execution and delivery hereof, the Company is issuing to
the transfer agent for its Common Stock (and to any substitute or replacement
transfer agent for its Common Stock upon the Company's appointment of any such
substitute or replacement transfer agent) instructions relating to the
16
Securities. Such instructions shall be irrevocable by the Company from and after
the date hereof or from and after the issuance thereof to any such substitute or
replacement transfer agent, as the case may be, except as otherwise expressly
provided in the Registration Rights Agreement. It is the intent and purpose of
such instructions, to require the transfer agent for the Common Stock from time
to time upon transfer of Securities by Buyer to issue certificates evidencing
such Registrable Securities free of legends and without consultation by the
transfer agent with the Company or its counsel and without the need for any
further advice or instruction or documentation to the transfer agent by or from
the Company or its counsel or Buyer.
VI. DELIVERY INSTRUCTIONS.
The Securities shall be delivered by the Company on a
"delivery-against-payment basis" at the Closing.
VII. CLOSING DATE.
The date and time of the issuance and sale of the Preferred Shares (the
"Closing Date") shall be the date hereof or such other as shall be mutually
agreed upon in writing. The issuance and sale of the Securities shall occur on
the Closing Date at the offices of the Escrow Agent.
VIII. CONDITIONS TO THE COMPANY'S OBLIGATIONS.
The Buyer understands that the Company's obligation to sell the
Securities on the Closing Date to Buyer pursuant to this Agreement is
conditioned upon:
A. Delivery by Buyer of the Purchase Price;
B. The accuracy in all material respects on the Closing Date of the
representations and warranties of Buyer contained in this Agreement as if made
on the Closing Date (except for representations and warranties which, by their
express terms, speak as of and relate to a specified date, in which case such
accuracy shall be measured as of such specified date) and the performance by
Buyer in all material respects on or before the Closing Date of all covenants
and agreements of Buyer required to be performed by it pursuant to this
Agreement on or before the Closing Date;
C. There shall not be in effect any Law or order, ruling, judgment or
writ of any court or public or governmental authority restraining, enjoining or
otherwise prohibiting any of the transactions contemplated by this Agreement.
IX. CONDITIONS TO BUYER'S OBLIGATIONS.
The Company understands that Buyer's obligation to purchase the
Securities on the Closing Date pursuant to this Agreement is conditioned upon:
A. Delivery by the Company of one or more certificates (I/N/O Buyer)
evidencing the Securities to be purchased by Buyer pursuant to this Agreement;
B. The accuracy in all material respects on the Closing Date of the
representations and warranties of the Company contained in this Agreement as if
17
made on the Closing Date (except for representations and warranties which, by
their express terms, speak as of and relate to a specified date, in which case
such accuracy shall be measured as of such specified date) and the performance
by the Company in all material respects on or before the Closing Date of all
covenants and agreements of the Company required to be performed by it pursuant
to this Agreement on or before the Closing Date;
C. Buyer having received an opinion of counsel for the Company, dated
the Closing Date, in form, scope and substance reasonably satisfactory to the
Buyer.
D. There not having occurred (i) any general suspension of trading in,
or limitation on prices listed for, the Common Stock on the NASDAQ, (ii) the
declaration of a banking moratorium or any suspension of payments in respect of
banks in the United States, (iii) the commencement of a war, armed hostilities
or other international or national calamity directly or indirectly involving the
United States or any of its territories, protectorates or possessions, or (iv)
in the case of the foregoing existing at the date of this Agreement, a material
acceleration or worsening thereof.
E. There not having occurred any event or development, and there being
in existence no condition, having or which reasonably and foreseeably would have
a Material Adverse Effect.
F. The Company shall have delivered to Buyer reimbursement of Buyer's
out-of-pocket costs and expenses incurred in connection with the transactions
contemplated by the Preferred Stock and this Agreement (including the fees and
disbursements of legal counsel, which is being held in escrow by the Escrow
Agent).
G. There shall not be in effect any Law or order, ruling, judgment or
writ of any court or public or governmental authority restraining, enjoining or
otherwise prohibiting any of the transactions contemplated by this Agreement.
H. Delivery of Irrevocable Instructions to the Transfer Agent.
X. TERMINATION.
A. TERMINATION BY MUTUAL WRITTEN CONSENT. This Agreement may be termi-
nated and the transactions contemplated hereby may be abandoned, for any reason
and at any time prior to the Closing Date, by the mutual written consent of the
Company and Buyer.
B. TERMINATION BY THE COMPANY OR BUYER. This Agreement may be
terminated and the transactions contemplated hereby may be abandoned by action
of the Company or Buyer if (i) the Closing shall not have occurred at or prior
to 5:00 p.m., New York City time, on June 30, 2000; PROVIDED, HOWEVER, that the
right to terminate this Agreement pursuant to this Article X.B(i) shall not be
available to any party whose failure to fulfill any of its obligations under
this Agreement has been the cause of or resulted in the failure of the Closing
to occur at or before such time and date or (ii) any court or public or
governmental authority shall have issued an order, ruling, judgment or writ, or
there shall be in effect any Law, restraining, enjoining or otherwise
18
prohibiting the consummation of any of the transactions contemplated by this
Agreement.
C. TERMINATION BY BUYER. This Agreement may be terminated and the
transactions contemplated hereby may be abandoned by Buyer at any time prior to
the Closing Date, if (i) the Company shall have failed to comply in any material
respect with any of its covenants or agreements contained in this Agreement,
(ii) there shall have been a breach by the Company with respect to any
representation or warranty made by it in this Agreement, or (iii) there shall
have occurred any event or development, or there shall be in existence any
condition, having or reasonably and foreseeably likely to have a Material
Adverse Effect.
D. TERMINATION BY THE COMPANY.This Agreement may be terminated and the
transactions contemplated hereby may be abandoned by the Company at any time
prior to the Closing Date, if (i) Buyer shall have failed to comply in any
material respect with any of its covenants or agreements contained in this
Agreement or (ii) there shall have been a breach by Buyer with respect to any
representation or warranty made by it in this Agreement.
XI. SURVIVAL; INDEMNIFICATION.
A. The representations, warranties and covenants made by each of the
Company and Buyer in this Agreement, the annexes, schedules and exhibits hereto
and in each instrument, agreement and certificate entered into and delivered by
them pursuant to this Agreement, shall survive the Closing and the consummation
of the transactions contemplated hereby. In the event of a breach or violation
of any of such representations, warranties or covenants, the party to whom such
representations, warranties or covenants have been made shall have all rights
and remedies for such breach or violation available to it under the provisions
of this Agreement or otherwise, whether at law or in equity, irrespective of any
investigation made by or on behalf of such party on or prior to the Closing
Date.
B. The Company hereby agrees to indemnify and hold harmless the Buyer,
its Affiliates and their respective officers, directors, partners and members
(collectively, the "Buyer Indemnitees"), from and against any and all losses,
claims, damages, judgments, penalties, liabilities and deficiencies
(collectively, "Losses"), and agrees to reimburse the Buyer Indemnitees for all
out-of-pocket expenses (including the reasonable fees and expenses of legal
counsel), in each case promptly as incurred by the Buyer Indemnitees and to the
extent arising out of or in connection with:
1. any misrepresentation, omission of fact or breach of any of
the Company's representations or warranties contained in this Agree-
ment, the annexes, schedules or exhibits hereto or any instrument,
agreement or certificate entered into or delivered by the Company
pursuant to this Agreement; or
2. any failure by the Company to perform in any material
respect any of its covenants, agreements, undertakings or obligations
set forth in this Agreement, the annexes, schedules or exhibits hereto
or any instrument, agreement or certificate entered into or delivered
by the Company pursuant to this Agreement.
19
C. Buyer hereby agrees to indemnify and hold harmless the Company, its
Affiliates and their respective officers, directors, partners and members
(collectively, the "Company Indemnitees"), from and against any and all Losses,
and agrees to reimburse the Company Indemnitees for all out-of-pocket expenses
(including the reasonable fees and expenses of legal counsel), in each case
promptly as incurred by the Company Indemnitees and to the extent arising out of
or in connection with:
1. any misrepresentation, omission of fact, or breach of any of
Buyer's representations or warranties contained in this Agreement, the
annexes, schedules or exhibits hereto or any instrument, agreement or
certificate entered into or delivered by Buyer pursuant to this Agree-
ment; or
2. any failure by Buyer to perform in any material respect any
of its covenants, agreements, undertakings or obligations set forth in
this Agreement or any instrument, certificate or agreement entered into
or delivered by Buyer pursuant to this Agreement.
D. Promptly after receipt by either party hereto seeking
indemnification pursuant to this Section XI (an "Indemnified Party") of written
notice of any investigation, claim, proceeding or other action in respect of
which indemnification is being sought (each, a "Claim"), the Indemnified Party
promptly shall notify the party against whom indemnification pursuant to this
Section XI is being sought (the "Indemnifying Party") of the commencement
thereof; but the omission to so notify the Indemnifying Party shall not relieve
it from any liability that it otherwise may have to the Indemnified Party,
except to the extent that the Indemnifying Party is materially prejudiced and
forfeits substantive rights and defenses by reason of such failure. In
connection with any Claim, the Indemnifying Party shall be entitled to assume
the defense thereof. Notwithstanding the assumption of the defense of any Claim
by the Indemnifying Party, the Indemnified Party shall have the right to employ
separate legal counsel (together with appropriate local counsel) and to
participate in the defense of such Claim, and the Indemnifying Party shall bear
the reasonable fees, out-of-pocket costs and expenses of such separate legal
counsel to the Indemnified Party if (and only if): (x) the Indemnifying Party
shall have agreed to pay such fees, out-of-pocket costs and expenses, (y) the
Indemnified Party and the Indemnifying Party reasonably shall have concluded
that representation of the Indemnified Party and the Indemnifying Party by the
same legal counsel would not be appropriate due to actual or, as
reasonably-determined by legal counsel to the Indemnified Party, (i) potentially
differing interests between such parties in the conduct of the defense of such
Claim, or (ii) if there may be legal defenses available to the Indemnified Party
that are in addition to or disparate from those available to the Indemnifying
Party and which can not be presented by counsel to the Indemnifying Party, or
(z) the Indemnifying Party shall have failed to employ legal counsel reasonably
satisfactory to the Indemnified Party within a reasonable period of time after
notice of the commencement of such Claim. If the Indemnified Party employs
separate legal counsel in circumstances other than as described in clauses (x),
(y) or (z) above, the fees, costs and expenses of such legal counsel shall be
borne exclusively by the Indemnified Party. Except as provided above, the
Indemnifying Party shall not, in connection with any Claim in the same
Jurisdiction, be liable for the fees and expenses of more than one firm of legal
20
counsel for the Indemnified Party (together with appropriate local counsel). The
Indemnifying Party shall not, without the prior written consent of the
Indemnified Party (which consent shall not unreasonably be withheld), settle or
compromise any Claim or consent to the entry of any judgment that does not
include an unconditional release of the Indemnified Party from all liabilities
with respect to such Claim or judgment.
E. In the event one party hereunder should have a claim for
indemnification that does not involve a claim or demand being asserted by a
third party, the Indemnified Party promptly shall deliver notice of such claim
to the Indemnifying Party. If the Indemnified Party disputes the claim, such
dispute shall be resolved by mutual agreement of the Indemnified Party and the
Indemnifying Party or by binding arbitration in San Francisco, California
conducted in accordance with the commercial procedures and rules of the American
Arbitration Association. Judgment upon any award rendered by any arbitrators may
be entered in any court having competent jurisdiction thereof.
XII. GOVERNING LAW: MISCELLANEOUS.
This Agreement shall be governed by and interpreted in accordance with
the laws of the State of California, without regard to the conflicts of law
principles of such state. Each of the parties consents to the jurisdiction of
the federal courts whose districts encompass any part of the City of San
Francisco or the state courts of the State of California sitting in the City of
San Francisco in connection with any dispute arising under this Agreement and
hereby waives, to the maximum extent permitted by law, any objection, including
any objection based on FORUM NON CONVENIENS, to the bringing of any such
proceeding in such jurisdictions. A facsimile transmission of this signed
Agreement shall be legal and binding on all parties hereto. This Agreement may
be signed in one or more counterparts, each of which shall be deemed an
original. The headings of this Agreement are for convenience of reference and
shall not form part of, or affect the interpretation of, this Agreement. 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. This Agreement may
be amended only by an instrument in writing signed by the party to be charged
with enforcement. This Agreement supersedes all prior agreements and
understandings among the parties hereto with respect to the subject matter
hereof.
XIII. NOTICES. Except as may be otherwise provided herein, any notice
or other communication or delivery required or permitted hereunder shall be in
writing and shall be delivered personally or sent by certified mail, postage
prepaid, or by a nationally recognized overnight courier service, and shall be
deemed given when so delivered personally or by overnight courier service, or,
if mailed, three (3) days after the date of deposit in the United States mails,
as follows:
(1) if to the Company, to:
▇▇▇▇▇▇.▇▇▇, Inc.
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
21
Attention: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
with a copy to:
▇▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇., Esq.
McCutchen, Doyle, ▇▇▇▇▇ & ▇▇▇▇▇▇▇, LLP
▇ ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
(2) if to Buyer, to the address set forth on the signature page
hereof.
with a copy to:
Snow ▇▇▇▇▇▇ ▇▇▇▇▇▇ P.C.
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇▇▇▇▇▇▇▇▇, Esq.
The Company or Buyer may change the foregoing address by notice given pursuant
to this Section XVIII.
XIV. CONFIDENTIALITY. Each of the Company and Buyer agrees to keep
confidential and not to disclose to or use for the benefit of any third party
the terms of this Agreement or any other information which at any time is
communicated by the other party as being confidential without the prior written
approval of the other party; provided, however, that this provision shall not
apply to information which, at the time of disclosure, is already part of the
public domain (except by breach of this Agreement) and information which is
required to be disclosed by law (including, without limitation, pursuant to Item
10 of Rule 601 of Regulation S-K under the Securities Act and the Exchange Act).
XV. ASSIGNMENT. This Agreement shall not be assignable by either of the
parties hereto prior to the Closing without the prior written consent of the
other party, and any attempted assignment contrary to the provisions hereby
shall be null and void; PROVIDED, HOWEVER, that Buyer may assign its rights and
obligations hereunder, in whole or in part, to any affiliate of Buyer who
furnishes to the Company the representations and warranties set forth in Section
II hereof and otherwise agrees to be bound by the terms of this Agreement.
XVI. BROKERS. Each of the parties hereto represents that it has had no
dealings in connection with this transaction with any finder or broker who will
demand payment of any fee or commission from the other party, except for Astor
Capital who is the agent of the Company and whose fee shall be paid by the
Company. The Company on the one hand, and Buyer, on the other hand, agree to
indemnify the other against and hold the other harmless from any and all
liabilities to any person claiming brokerage commissions or finder's fees on
account of services purported to have been rendered on behalf of the
indemnifying party in connection with this Agreement or the transactions
contemplated hereby.
22
IN WITNESS WHEREOF, the parties hereto have duly executed and delivered
this Agreement on the date first above written.
▇▇▇▇▇▇.▇▇▇, INC.
By: /s/▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
---------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: President & CEO
BUYER
Name: Alborz Select Opportunities Fund
By: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
Investment Manager
BUYER
Name: ▇▇▇▇▇▇ Hosny Moustafa
BUYER
Name: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
BUYER
Name: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
23