Conformed Copy AMENDED AND RESTATED SECURITIES PURCHASE AGREEMENT
Exhibit
10.1
Conformed
Copy
AMENDED
AND RESTATED SECURITIES PURCHASE AGREEMENT
This
Amended and Restated Securities Purchase Agreement (this “Agreement”) is dated
as of December 9, 2010, by and between MGT Capital Investments, Inc., a Delaware
corporation (the “Company”), and
Laddcap Value Partners, LP, a Delaware limited partnership company, or an
Affiliate (defined below) thereof (collectively, the “Purchaser”), and
amends and restates in its entirety the Securities Purchase Agreement (the
“Original
Agreement”), dated as of November 16, 2010, by and between the Company
and the Purchaser.
WHEREAS,
the Company and the Purchaser entered into the Original Agreement on November
16, 2010, and subsequently agreed to amend and restate such agreement with this
Agreement, and the parties desire that this Agreement supersede the Original
Agreement in all respects;
WHEREAS,
subject to the terms and conditions set forth in this Agreement, the Company
desires to issue and sell to the Purchaser, and the Purchaser desires to
purchase from the Company, securities of the Company as more fully described in
this Agreement.
NOW,
THEREFORE, in consideration of the mutual covenants contained in this Agreement,
and for other good and valuable consideration, the receipt and adequacy of which
are hereby acknowledged, the Company and the Purchaser agree as
follows:
ARTICLE
I
DEFINITIONS
Section
1.1 Definitions. In
addition to the terms defined elsewhere in this Agreement, for all purposes of
this Agreement, the following terms have the meanings set forth in this Section
1.1:
“Action” shall have
the meaning ascribed to such term in Section 3.1(k).
“Affiliate” means any
Person that, directly or indirectly through one or more intermediaries, controls
or is controlled by or is under common control with a Person as such terms are
used in and construed under Rule 405 under the Securities Act.
“Board of Directors”
means the board of directors of the Company.
“Business Day” means
any day except any Saturday, any Sunday, any day which is a federal legal
holiday in the United States or any day on which banking institutions in the
State of New York are authorized or required by law or other governmental action
to close.
“Closing” means the
closing of the purchase and sale of the Securities pursuant to Section
2.1.
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“Closing Date” means
the Trading Day on which all of the Transaction Documents have been executed and
delivered by the applicable parties thereto, and all conditions precedent to (i)
the Purchasers’ obligations to pay the Subscription Amount and (ii) the
Company’s obligations to deliver the Securities, in each case, have been
satisfied or waived, but in no event later than the Drop-Dead Date (defined
below).
“Commission” means the
United States Securities and Exchange Commission.
“Common Stock” means
the common stock of the Company, par value $0.001 per share, and any other class
of securities into which such securities may hereafter be reclassified or
changed.
“Common Stock
Equivalents” means any securities of the Company or the Subsidiaries
which would entitle the holder thereof to acquire at any time Common Stock,
including, without limitation, any debt, preferred stock, rights, options,
warrants or other instrument that is at any time convertible into or exercisable
or exchangeable for, or otherwise entitles the holder thereof to receive, Common
Stock.
“Disclosure Schedules”
means the Disclosure Schedules of the Company delivered concurrently
herewith.
“Evaluation Date”
shall have the meaning ascribed to such term in Section 3.1(s).
“Exchange Act” means
the Securities Exchange Act of 1934, as amended, and the rules and regulations
promulgated thereunder.
“GAAP” shall have the
meaning ascribed to such term in Section 3.1(h).
“Indebtedness” shall
have the meaning ascribed to such term in Section 3.1(cc).
“Intellectual Property
Rights” shall have the meaning ascribed to such term in Section
3.1(p).
“Liens” means a lien,
charge, security interest, encumbrance, right of first refusal, preemptive right
or other restriction.
“Material Adverse
Effect” shall have the meaning assigned to such term in Section
3.1(b).
“Permits” shall have
the meaning ascribed to such term in Section 3.1(n).
“Person” means an
individual or corporation, partnership, trust, incorporated or unincorporated
association, joint venture, limited liability company, joint stock company,
government (or an agency or subdivision thereof) or other entity of any
kind.
“Proceeding” means an
action, claim, suit, investigation or proceeding (including, without limitation,
an informal investigation or partial proceeding, such as a deposition), whether
commenced or threatened in writing.
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“Purchaser Party”
shall have the meaning ascribed to such term in Section 4.6.
“Registration Rights
Agreement” means the Registration Rights Agreement, dated as of the
Closing Date, by and between the Company and the Purchaser, in the form attached
hereto as Exhibit B.
“Required Approvals”
shall have the meaning ascribed to such term in Section 3.1(e).
“Rule 144” means Rule
144 promulgated by the Commission pursuant to the Securities Act, as such Rule
may be amended from time to time, or any similar rule or regulation hereafter
adopted by the Commission having substantially the same effect as such
Rule.
“SEC Reports” shall
have the meaning ascribed to such term in Section 3.1(h).
“Securities” means the
Shares.
“Securities Act” means
the Securities Act of 1933, as amended, and the rules and regulations
promulgated thereunder.
“Shares” shall have
the meaning ascribed to such term in Section 2.1.
“Short Sales” means
all “short sales” as defined in Rule 200 of Regulation SHO under the Exchange
Act (but shall not be deemed to include the location and/or reservation of
borrowable shares of Common Stock).
“Subscription Amount”
means One Million dollars ($1,000,000.00), in United States dollars and in
immediately available funds.
“Subsidiary” means any
subsidiary of the Company with respect to which the Company owns in excess of
50% of any class of such subsidiary’s outstanding securities, and shall, where
applicable, also include any direct or indirect subsidiary of the Company formed
or acquired after the date of the Original Agreement, which in each case will be
owned by the Company at the Closing.
“Trading Day” means a
day on which the principal Trading Market is open for trading.
“Trading Market” means
any of the following markets or exchanges on which the Common Stock is listed or
quoted for trading on the date in question: the OTC Bulletin Board, the OTC QB,
the OTC QX, NYSE AMEX, the Nasdaq Capital Market, the Nasdaq Global Market, the
Nasdaq Global Select Market, or the New York Stock Exchange (or any successors
to any of the foregoing).
“Transaction
Documents” means this Agreement, the Registration Rights Agreement and
any other documents or agreements executed in connection with the transactions
contemplated hereunder.
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“Transfer Agent” means
Standard Registrar & Transfer, and any successor transfer agent of the
Company.
ARTICLE
II
PURCHASE
AND SALE
Section
2.1 Closing. On
the Closing Date, upon the terms and subject to the conditions set forth herein,
the Company agrees to sell, and the Purchaser agrees to purchase, Six Million
Five Hundred Thousand (6,500,000) shares of Common Stock of the Company (the
“Shares”) for
the Subscription Amount. The Purchaser shall deliver to the Company,
via wire transfer of immediately available funds, an amount equal to the
Subscription Amount and the Company shall deliver to the Purchaser the Shares,
and the Company and the Purchaser shall deliver the other items set forth in
Section 2.2 deliverable at the Closing. Upon satisfaction of the
covenants and conditions set forth in Sections 2.2 and 2.3, the Closing shall
occur at the offices of ▇▇▇▇▇▇ & ▇▇▇▇▇▇ LLP, ▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇, ▇▇▇
▇▇▇▇, ▇▇ ▇▇▇▇▇, or such other location (including remotely by exchange of
electronic or .pdf documents) as the parties shall mutually agree.
Section
2.2 Deliveries.
(a) On
or prior to the Closing Date, the Company shall deliver or cause to be delivered
to the Purchaser the following:
(i) this
Agreement duly executed by the Company;
(ii) a
legal opinion of Company Counsel, substantially in the form of Exhibit A attached
hereto;
(iii) the
Registration Rights Agreement, duly executed as of the Closing Date by the
Company;
(iv) a
certificate evidencing the Shares, which certificate shall be registered in the
name of the Purchaser and shall bear the legend referenced in Section 4.10(b) of
this Agreement;
(v) a
copy of irrevocable instructions to the Company’s transfer agent instructing the
transfer agent to deliver the Shares, registered in the name of the
Purchaser;
(vi) a
letter of resignation from ▇▇▇ ▇▇▇▇▇▇▇▇-▇▇▇▇▇ (with respect to his position as a
member of a Board of Directors) effective as of on or before the
Closing;
(vii) a
certificate duly executed by an executive officer of the Company, dated as of
the Closing Date, certifying as to the matters set forth in Sections 2.3(b)(i) –
(viii).
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(b) On
or prior to the Closing Date, the Purchaser shall deliver or cause to be
delivered to the Company the following:
(i) this
Agreement duly executed by such Purchaser; and
(ii) the
Purchaser’s Subscription Amount by wire transfer to the account as specified in
writing by the Company.
Section
2.3 Closing
Conditions.
(a) The
obligations of the Company hereunder in connection with the Closing are subject
to the following conditions being met:
(i) the
accuracy in all material respects on the Closing Date of the representations and
warranties of the Purchaser contained herein (except for the representations and
warranties that speak as of a specific date, which shall be made as of such
date);
(ii) all
obligations, covenants and agreements of the Purchaser required to be performed
at or prior to the Closing Date shall have been performed; and
(iii) the
receipt by the Company of a favorable opinion from Broadmark Capital that the
transactions contemplated hereby are in the best interests of the shareholders
of the Company;
(iv) the
delivery by the Purchaser of the items set forth in Section 2.2(b) of this
Agreement.
(b) The
obligation of the Purchaser hereunder in connection with the Closing is subject
to the following conditions being met:
(i) the
accuracy in all material respects when made and on the Closing Date of the
representations and warranties of the Company contained herein (except for the
representations and warranties that speak as of a specific date, which shall be
made as of such date);
(ii) all
obligations, covenants and agreements of the Company required to be performed at
or prior to the Closing Date shall have been performed;
(iii) the
delivery by the Company of the items set forth in Section 2.2(a) of this
Agreement;
(iv) ▇▇▇
▇▇▇▇▇▇▇▇-▇▇▇▇▇ shall have resigned from his role as a member of the Board of
Directors;
(v) the
Board of Directors shall have appointed ▇▇▇▇▇▇ ▇. ▇▇▇▇ to the Board
of Directors as a replacement for ▇▇▇ ▇▇▇▇▇▇▇▇▇-▇▇▇▇▇;
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(vi) the
Board of Directors shall have elected ▇▇▇▇▇ ▇▇▇▇▇▇ as Chairman of the Board of
Directors;
(vii) there
shall have been no Material Adverse Effect with respect to the Company since the
date of the Original Agreement; and
(viii) from
the date of the Original Agreement to the Closing Date, trading in the Common
Stock shall not have been suspended by the Commission or the Company’s principal
Trading Market (except for any suspension of trading of limited duration agreed
to by the Company, which suspension shall be terminated prior to the Closing),
and, at any time prior to the Closing Date, trading in securities generally as
reported by Bloomberg L.P. shall not have been suspended or limited, or minimum
prices shall not have been established on securities whose trades are reported
by such service, or on any Trading Market, nor shall a banking moratorium have
been declared either by the United States or New York State authorities which,
in the reasonable judgment of the Purchaser, makes it impracticable or
inadvisable to purchase the Securities at the Closing.
ARTICLE
III
REPRESENTATIONS
AND WARRANTIES
Section
3.1 Representations and
Warranties of the Company. Except as set forth in the
Disclosure Schedules, which Disclosure Schedules shall be deemed a part hereof
and shall qualify any representation or otherwise made herein to the extent of
the disclosure contained in the corresponding section of the Disclosure
Schedules or otherwise referenced in the Disclosure Schedules in such a manner
that it is reasonably identifiable to which section such disclosure corresponds,
the Company hereby represents and warrants as of the date of the Original
Agreement and as of the Closing Date (except for the representations and
warranties that speak as of a specific date, which shall be made as of such
date) to the Purchaser as follows:
(a) Subsidiaries. All
of the direct and indirect Subsidiaries of the Company, or entities of which the
Company owns greater than 50% of the outstanding equity, are as set forth in
Section 3.1(a) of the Disclosure Schedule. The Company owns, directly
or indirectly, the amount(s) set forth in Section 3.1(a) of the Disclosure
Schedule of capital stock or other equity interests of each Subsidiary free and
clear of any Liens, and all such issued and outstanding shares of capital stock
of each Subsidiary are validly issued and are fully paid, and
non-assessable.
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(b) Organization and
Qualification. The Company and each of the Subsidiaries is an
entity duly incorporated or otherwise organized, validly existing and in good
standing under the laws of the jurisdiction of its incorporation or
organization, with the requisite power and authority to own and use its
properties and assets and to carry on its business as currently
conducted. Neither the Company nor any Subsidiary is in violation nor
default of any of the provisions of its respective certificate or articles of
incorporation, bylaws or other organizational or charter
documents. Each of the Company and the Subsidiaries is duly qualified
to conduct business and is in good standing as a foreign corporation or other
entity in each jurisdiction in which the nature of the business conducted or
property owned by it makes such qualification necessary, except where the
failure to be so qualified or in good standing, as the case may be, could not
have or reasonably be expected to result in: (i) a material adverse effect on
the legality, validity or enforceability of any Transaction Document, (ii) a
material adverse effect on the results of operations, assets, business,
prospects or condition (financial or otherwise) of the Company and the
Subsidiaries, taken as a whole, or (iii) a material adverse effect on the
Company’s ability to perform in any material respect on a timely basis its
obligations under any Transaction Document (any of (i), (ii) or (iii), a “Material Adverse
Effect”) and no Proceeding has been instituted in any such jurisdiction
revoking, limiting or curtailing or seeking to revoke, limit or curtail such
power and authority or qualification.
(c) Authorization;
Enforcement. The Company has the requisite corporate power and
authority to enter into and to consummate the transactions contemplated by each
of the Transaction Documents and otherwise to carry out its obligations
hereunder and thereunder including, without limitation, the issuance of the
Shares. The execution and delivery of each of the Transaction
Documents by the Company and the consummation by it of the transactions
contemplated hereby and thereby have been duly authorized by all necessary
action on the part of the Company and no further action is required by the
Company, the Board of Directors or the Company’s stockholders in connection
therewith other than in connection with the Required Approvals. Each
Transaction Document to which it is a party has been (or upon delivery will have
been) duly executed by the Company and, when delivered in accordance with the
terms hereof and thereof, will constitute the valid and binding obligation of
the Company enforceable against the Company in accordance with its terms, except
(i) as limited by general equitable principles and applicable bankruptcy,
insolvency, reorganization, moratorium and other laws of general application
affecting enforcement of creditors’ rights generally, (ii) as limited by laws
relating to the availability of specific performance, injunctive relief or other
equitable remedies and (iii) insofar as indemnification and contribution
provisions may be limited by applicable law.
(d) No
Conflicts. The execution, delivery and performance by the
Company of the Transaction Documents, the issuance and sale of the Securities
and the consummation by it of the transactions contemplated hereby and thereby
to which it is a party do not and will not (i) conflict with or violate any
provision of the Company’s or any Subsidiary’s certificate or articles of
incorporation, bylaws or other organizational or charter documents, 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, result in the creation of any Lien
upon any of the properties or assets of the Company or any Subsidiary, or give
to others any rights of termination, amendment, acceleration or cancellation
(with or without notice, lapse of time or both) of, any agreement, credit
facility, debt or other instrument (evidencing a Company or Subsidiary debt or
otherwise) or other understanding to which the Company or any Subsidiary is a
party or by which any property or asset of the Company or any Subsidiary is
bound or affected, or (iii) subject to the Required Approvals, conflict with or
result in a violation of any law, rule, regulation, order, judgment, injunction,
decree or other restriction of any court or governmental authority to which the
Company or a Subsidiary is subject (including federal and state securities laws
and regulations), or by which any property or asset of the Company or a
Subsidiary is bound or affected; except in the case of each of clauses (ii) and
(iii), such as would not reasonably be expected to result in a Material Adverse
Effect.
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(e) Filings, Consents and
Approvals. The Company is not required to obtain any consent,
waiver, authorization or order of, give any notice to, or make any filing or
registration with, any court or other federal, state, local or other
governmental authority or other Person in connection with the execution,
delivery and performance by the Company of the Transaction Documents, other
than: (i) the filings required pursuant to Section 4.3 of this Agreement, (ii)
the filing with the Commission of a registration statement in accordance with
the Registration Rights Agreement, (iii) application(s) to each applicable
Trading Market for the listing of the Securities for trading thereon in the time
and manner required thereby and (iv) such filings as are required to be made
under applicable state securities laws (collectively, the “Required
Approvals”).
(f) Issuance of the
Securities. The Securities are duly authorized and, when
issued and paid for in accordance with the applicable Transaction Documents,
will be duly and validly issued, fully paid and nonassessable, free and clear of
all Liens imposed by the Company.
(g) Capitalization. The
capitalization of the Company is as set forth in Section 3.1(g) of the
Disclosure Schedule. The Company has not issued any capital stock
since its most recently filed periodic report under the Exchange
Act. No Person has any right of first refusal, preemptive right,
right of participation, or any similar right to participate in the transactions
contemplated by the Transaction Documents. There are no outstanding
options, warrants, scrip rights to subscribe to, calls or commitments of any
character whatsoever relating to, or securities, rights or obligations
convertible into or exercisable or exchangeable for, or giving any Person any
right to subscribe for or acquire, any shares of Common Stock, or contracts,
commitments, understandings or arrangements by which the Company or any
Subsidiary is or may become bound to issue additional shares of Common Stock or
Common Stock Equivalents. The issuance and sale of the Securities
will not obligate the Company to issue shares of Common Stock or other
securities to any Person (other than the Purchasers) and will not result in a
right of any holder of Company securities to adjust the exercise, conversion,
exchange or reset price under any of such securities. All of the outstanding
shares of capital stock of the Company are validly issued, fully paid and
nonassessable, have been issued in compliance with all federal and state
securities laws, and none of such outstanding shares was issued in violation of
any preemptive rights or similar rights to subscribe for or purchase
securities. No further approval or authorization of any stockholder,
the Board of Directors or others is required for the issuance and sale of the
Securities. There are no stockholders agreements, voting agreements
or other similar agreements with respect to the Company’s capital stock to which
the Company is a party or, to the knowledge of the Company, between or among any
of the Company’s stockholders.
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(h) SEC Reports; Financial
Statements. The Company has filed all reports, schedules,
forms, statements and other documents required to be filed by the Company under
the Securities Act and the Exchange Act, including pursuant to Section 13(a) or
15(d) thereof, for the two years preceding the date of the Original Agreement
(or such shorter period as the Company was required by law or regulation to file
such material) (the foregoing materials, including the exhibits thereto and
documents incorporated by reference therein, being collectively referred to
herein as the “SEC
Reports”) on a timely basis or has received a valid extension of such
time of filing and has filed any such SEC Reports prior to the expiration of any
such extension. As of their respective dates, the SEC Reports
complied in all material respects with the requirements of the Securities Act
and the Exchange Act, as applicable, and none of the SEC Reports, when filed,
contained any untrue statement of a material fact or omitted to state a material
fact required to be stated therein or necessary in order to make the statements
therein, in the light of the circumstances under which they were made, not
misleading. The financial statements of the Company included in the SEC Reports
comply in all material respects with applicable accounting requirements and the
rules and regulations of the Commission with respect thereto as in effect at the
time of filing. Such financial statements have been prepared in
accordance with United States generally accepted accounting principles applied
on a consistent basis during the periods involved (“GAAP”), except as may
be otherwise specified in such financial statements or the notes thereto and
except that unaudited financial statements may not contain all footnotes
required by GAAP, and fairly present in all material respects the financial
position of the Company and its consolidated Subsidiaries as of and for the
dates thereof and the results of operations and cash flows for the periods then
ended, subject, in the case of unaudited statements, to normal, immaterial,
year-end audit adjustments.
(i) Material Changes;
Undisclosed Events, Liabilities or Developments. Except as
contemplated by the Transaction Documents, since the date of the latest audited
financial statements included within the SEC Reports, except as specifically
disclosed in a subsequent SEC Report filed prior to the date of the Original
Agreement, (i) there has been no event, occurrence or development that has had
or that could reasonably be expected to result in a Material Adverse Effect,
(ii) the Company has not incurred any liabilities (contingent or otherwise)
other than (A) trade payables and accrued expenses incurred in the ordinary
course of business consistent with past practice and (B) liabilities not
required to be reflected in the Company’s financial statements pursuant to GAAP
or disclosed in filings made with the Commission, (iii) the Company has not
altered its method of accounting, (iv) the Company has not declared or made any
dividend or distribution of cash or other property to its stockholders or
purchased, redeemed or made any agreements to purchase or redeem any shares of
its capital stock and except for this agreement (v) the Company has not issued
any equity securities to any officer, director or Affiliate, except pursuant to
existing Company stock option plans. The Company does not have
pending before the Commission any request for confidential treatment of
information. Except for the issuance of the Securities contemplated
by this Agreement, no event, liability, fact, circumstance, occurrence or
development has occurred or exists or is reasonably expected to occur or exist
with respect to the Company or its Subsidiaries or their respective business,
prospects, properties, operations, assets or financial condition that would be
required to be disclosed by the Company under applicable securities laws at the
time this representation is made or deemed made that has not been publicly
disclosed at least 1 Trading Day prior to the date that this representation is
made.
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(j) No Undisclosed Events,
Liabilities, Developments or Circumstances. No event, liability,
development or circumstance has occurred or exists, or is reasonably expected to
exist or occur with respect to the Company, any of the Subsidiaries or their
respective business, properties, liabilities, prospects, operations (including
results thereof) or condition (financial or otherwise), that (i) would be
required to be disclosed by the Company under applicable securities laws on a
registration statement filed with the SEC relating to an issuance and sale by
the Company of its Common Stock and which has not been publicly announced or
(ii) could have a Material Adverse Effect.
(k) Litigation. There
is no action, suit, notice of inquiry, violation, proceeding or investigation
pending or, to the knowledge of the Company, threatened against or affecting the
Company, any Subsidiary or any of their respective properties before or by any
court, arbitrator, governmental or administrative agency or regulatory authority
(federal, state, county, local or foreign) (collectively, an “Action”) which (i)
adversely affects or challenges the legality, validity or enforceability of any
of the Transaction Documents or the Securities or (ii) would, if there were an
unfavorable decision, have or reasonably be expected to result in a Material
Adverse Effect. Neither the Company nor any Subsidiary, nor any
director or officer thereof, is or has been the subject of any Action involving
a claim of violation of or liability under federal or state securities laws or a
claim of breach of fiduciary duty. To the knowledge of the Company,
there has not been, and there is not pending or contemplated, any investigation
by the Commission involving the Company or any current or former director or
officer of the Company. The Commission has not issued any stop order
or other order suspending the effectiveness of any registration statement filed
by the Company or any Subsidiary under the Exchange Act or the Securities
Act.
(l) Labor
Relations. No material labor dispute exists or, to the
knowledge of the Company, is imminent with respect to any of the employees of
the Company. None of the Company’s or its Subsidiaries’ employees is
a member of a union that relates to such employee’s relationship with the
Company or such Subsidiary, and neither the Company nor any of its Subsidiaries
is a party to a collective bargaining agreement, and the Company and its
Subsidiaries believe that their relationships with their employees are
good. Except as contemplated in Section 2.3(b) of this Agreement, no
executive officer (as defined in Rule 501(f) promulgated under the Securities
Act) or other key employee of the Company or any of the Subsidiaries has
notified the Company or any such Subsidiary that such officer intends to leave
the Company or any such Subsidiary or otherwise terminate such officer’s
employment with the Company or any such Subsidiary. No executive
officer or other key employee, to the knowledge of the Company, is, or is now
expected to be, in violation of any material term of any employment contract,
confidentiality, disclosure or proprietary information agreement or
non-competition agreement, or any other contract or agreement or any restrictive
covenant in favor of any third party, and the continued employment of each such
executive officer or key employee, to the knowledge of the Company, does not
subject the Company or any of its Subsidiaries to any liability with respect to
any of the foregoing matters. The Company and its Subsidiaries are in
material compliance with all U.S. federal, state, local and foreign laws and
regulations relating to employment and employment practices, terms and
conditions of employment and wages and hours.
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(m) Compliance. Neither
the Company nor any Subsidiary: (i) is in default under or in violation of (and
no event has occurred that has not been waived that, with notice or lapse of
time or both, would result in a default by the Company or any Subsidiary under),
nor has the Company or any Subsidiary received notice of a claim that it is in
default under or that it is in violation of, any indenture, loan or credit
agreement or any other agreement or instrument to which it is a party or by
which it or any of its properties is bound (whether or not such default or
violation has been waived), (ii) is in violation of any judgment, decree or
order of any court, arbitrator or governmental body or (iii) is or has been in
violation of any statute, rule, ordinance or regulation of any governmental
authority, including without limitation all foreign, federal, state and local
laws relating to taxes, environmental protection, occupational health and
safety, product quality and safety and employment and labor
matters.
(n) Regulatory
Permits. The Company and the Subsidiaries possess all
certificates, authorizations and permits issued by the appropriate federal,
state, local or foreign regulatory authorities necessary to conduct their
respective businesses (“Permits”), and
neither the Company nor any Subsidiary has received any notice of proceedings
relating to the revocation or modification of any Permit.
(o) Title to
Assets. The Company and the Subsidiaries have good and
marketable title in fee simple to all real property owned by them and good and
marketable title in all personal property owned by them that is material to the
business of the Company and the Subsidiaries, in each case free and clear of all
Liens, except for Liens 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 the Subsidiaries and Liens for the payment of
federal, state or other taxes, the payment of which is neither delinquent nor
subject to penalties. Any real property and facilities held under
lease by the Company and the Subsidiaries are to their knowledge held by them
under valid, subsisting and enforceable leases with which the Company and the
Subsidiaries are in compliance.
(p) Patents and
Trademarks. The Company and the Subsidiaries have, or have
rights to use, all patents, patent applications, trademarks, trademark
applications, service marks, trade names, trade secrets, inventions, copyrights,
licenses and other intellectual property rights and similar rights necessary or
material for use in connection with their respective businesses as described in
the SEC Reports (collectively, the “Intellectual Property
Rights”). None of, and neither the Company nor any Subsidiary
has received a notice (written or otherwise) that any of, the Intellectual
Property Rights has expired, terminated or been abandoned, or is expected to
expire or terminate or be abandoned, within two (2) years from the date of this
Agreement. Neither the Company nor any Subsidiary has received, since
the date of the latest audited financial statements included within the SEC
Reports, a written notice of a claim or otherwise has any knowledge that the
Intellectual Property Rights violate or infringe upon the rights of any
Person. All such Intellectual Property Rights are enforceable and to
the knowledge of the Company there is no existing infringement by another Person
of any of the Intellectual Property Rights. The Company and its
Subsidiaries have taken reasonable security measures to protect the secrecy,
confidentiality and value of all of their intellectual properties.
11
(q) Insurance. The
Company and the Subsidiaries are insured by insurers of recognized financial
responsibility against such losses and risks and in such amounts as are
customary in the businesses in which the Company and the Subsidiaries are
engaged, including, but not limited to, directors and officers insurance
coverage at least equal to the aggregate Subscription Amount. Neither
the Company nor any such Subsidiary has any reason to believe that it will not
be able to renew its existing insurance coverage as and when such coverage
expires or to obtain similar coverage from similar insurers as may be necessary
to continue its business without a significant increase in cost.
(r) Transactions With Affiliates
and Employees. None of the officers or directors of the
Company and, to the knowledge of the Company, none of the employees of the
Company is presently a party to any transaction with the Company or any
Subsidiary (other than for services as employees, officers and directors),
including any contract, agreement or other arrangement providing for the
furnishing of services to or by, providing for rental of real or personal
property to or from, or otherwise requiring payments to or from any officer,
director or such employee or, to the knowledge of the Company, any entity in
which any officer, director, or any such employee of the Company has a
substantial interest or is an officer, director, trustee or partner, in each
case in excess of $120,000 other than for (i) payment of salary or consulting
fees for services rendered, (ii) reimbursement for expenses incurred on behalf
of the Company and (iii) other employee benefits, including stock option
agreements under any stock option plan of the Company.
(s) ▇▇▇▇▇▇▇▇-▇▇▇▇▇; Internal
Accounting Controls. Except as described in the SEC Reports,
the Company is in material compliance with any and all applicable requirements
of the ▇▇▇▇▇▇▇▇-▇▇▇▇▇ Act of 2002 that are effective as of the date of the
Original Agreement, and any and all applicable rules and regulations promulgated
by the Commission thereunder that are effective as of the date of the Original
Agreement and as of the Closing Date. Except as described in the SEC
Reports, the Company and the Subsidiaries maintain a system of internal
accounting controls sufficient to provide reasonable assurance that: (i)
transactions are executed in accordance with management’s general or specific
authorizations, (ii) transactions are recorded as necessary to permit
preparation of financial statements in conformity with GAAP and to maintain
asset accountability, (iii) access to assets is permitted only in accordance
with management’s general or specific authorization, and (iv) the recorded
accountability for assets is compared with the existing assets at reasonable
intervals and appropriate action is taken with respect to any differences. The
Company has established disclosure controls and procedures (as defined in
Exchange Act Rules 13a-15(e) and 15d-15(e)) for the Company and designed such
disclosure controls and procedures to ensure that information required to be
disclosed by the Company in the reports it files or submits under the Exchange
Act is recorded, processed, summarized and reported, within the time periods
specified in the Commission’s rules and forms. The Company’s
certifying officers have evaluated the effectiveness of the Company’s disclosure
controls and procedures as of the end of the period covered by the Company’s
most recently filed Quarterly Report on Form 10-Q under the Exchange Act (such
date, the “Evaluation
Date”). The Company presented in its most recently filed
periodic report under the Exchange Act the conclusions of the certifying
officers about the effectiveness of the disclosure controls and procedures based
on their evaluations as of the Evaluation Date. Since the Evaluation
Date, there have been no changes in the Company’s internal control over
financial reporting (as such term is defined in the Exchange Act) that have
materially affected, or are reasonably likely to materially affect, the
Company’s internal control over financial reporting.
12
(t) Subsidiary Rights.
The Company or one of the Subsidiaries has the unrestricted right to vote, and
(subject to limitations imposed by applicable law) to receive dividends and
distributions on, all capital securities of the Subsidiaries as owned by the
Company or such Subsidiary.
(u) Off Balance Sheet
Arrangements. There is no transaction, arrangement, or other relationship
between the Company or any of the Subsidiaries and an unconsolidated or other
off balance sheet entity that is required to be disclosed by the Company in its
Exchange Act filings and is not so disclosed or that otherwise could be
reasonably likely to have a Material Adverse Effect. Confirm.
(v) Certain
Fees. No brokerage or finder’s fees or commissions are or will
be payable by the Company to any broker, financial advisor or consultant,
finder, placement agent, investment banker, bank or other Person with respect to
the transactions contemplated by the Transaction Documents. The
Purchasers shall have no obligation with respect to any fees or with respect to
any claims made by or on behalf of other Persons for fees of a type contemplated
in this Section that may be due in connection with the transactions contemplated
by the Transaction Documents.
(w) Investment Company.
The Company is not, and is not an Affiliate of, and immediately after receipt of
payment for the Securities, will not be or be an Affiliate of, an “investment
company” within the meaning of the Investment Company Act of 1940, as
amended.
(x) Registration
Rights. Other than the rights of the Purchaser under the
Registration Rights Agreement, no Person has any right to cause the Company to
effect the registration under the Securities Act of any securities of the
Company.
(y) Listing and Maintenance
Requirements. The Common Stock is registered pursuant to
Section 12(b) or 12(g) of the Exchange Act, and the Company has taken no action
designed to terminate, or which to its knowledge is likely to have the effect of
terminating, the registration of the Common Stock under the Exchange Act nor has
the Company received any notification that the Commission is contemplating
terminating such registration. The Company is, and has no reason to
believe that it will not in the foreseeable future continue to be, in compliance
with all such listing and maintenance requirements. The Company has
not received any notice of deficiency from the exchange on which its Common
Stock is listed, nor is it aware of any violations of any listing requirements
in respect of the rules of such exchange.
13
(z) Application of Takeover
Protections. The Company and the Board of Directors have taken
all necessary action, if any, in order to render inapplicable any control share
acquisition, business combination, poison pill (including any distribution under
a rights agreement) or other similar anti-takeover provision under the Company’s
certificate of incorporation (or similar charter documents) or the laws of its
state of incorporation that is or could become applicable to the Purchasers as a
result of the Purchasers and the Company fulfilling their obligations or
exercising their rights under the Transaction Documents, including without
limitation as a result of the Company’s issuance of the Securities and the
Purchasers’ ownership of the Securities.
(aa) Disclosure. Except
with respect to the material terms and conditions of the transactions
contemplated by the Transaction Documents, the Company confirms that neither it
nor any other Person acting on its behalf has provided any of the Purchasers or
their agents or counsel with any information that it believes constitutes or
might constitute material, non-public information The Company
understands and confirms that the Purchasers will rely on the foregoing
representation in effecting transactions in securities of the
Company. All of the disclosure furnished by or on behalf of the
Company to the Purchasers regarding the Company, its business and the
transactions contemplated hereby, including this Agreement, the Disclosure
Schedules to this Agreement and any certificate furnished in connection
herewith, is true and correct and does not contain any untrue statement of a
material fact or omit to state any material fact necessary in order to make the
statements made therein, in light of the circumstances under which they were
made, not misleading.
(bb) No Integrated
Offering. Assuming the accuracy of the Purchasers’ representations and
warranties set forth in Section 3.2, neither the Company, nor any of its
Affiliates, nor any Person acting on its or their behalf has, directly or
indirectly, made any offers or sales of any security or solicited any offers to
buy any security, under circumstances that would cause this offering of the
Securities to be integrated with prior offerings by the Company for purposes of
any applicable shareholder approval provisions of any Trading Market on which
any of the securities of the Company are listed or designated.
14
(cc) Solvency. Based
on the consolidated financial condition of the Company as of the Closing Date,
after giving effect to the receipt by the Company of the proceeds from the sale
of the Securities hereunder, (i) the fair saleable value of the Company’s assets
exceeds the amount that will be required to be paid on or in respect of the
Company’s existing debts and other liabilities (including known contingent
liabilities) as they mature, and (ii) the current cash flow of the Company,
together with the proceeds the Company would receive, were it to liquidate all
of its assets, after taking into account all anticipated uses of the cash, would
be sufficient to pay all amounts on or in respect of its liabilities when such
amounts are required to be paid. The Company does not intend to incur
debts beyond its ability to pay such debts as they mature (taking into account
the timing and amounts of cash to be payable on or in respect of its
debt). The Company has no knowledge of any facts or circumstances
which lead it to believe that it will file for reorganization or liquidation
under the bankruptcy or reorganization laws of any jurisdiction within 6 months
from the Closing Date. Section 3.1(cc) of the Disclosure Schedule
sets forth as of the date of the Original Agreement all outstanding secured and
unsecured Indebtedness of the Company or any Subsidiary, or for which the
Company or any Subsidiary has commitments. For the purposes of this
Agreement, “Indebtedness” means
(x) any liabilities for borrowed money or amounts owed in excess of $75,000
(other than trade accounts payable incurred in the ordinary course of business),
(y) all guaranties, endorsements and other contingent obligations in respect of
indebtedness of others, whether or not the same are or should be reflected in
the Company’s balance sheet (or the notes thereto), except guaranties by
endorsement of negotiable instruments for deposit or collection or similar
transactions in the ordinary course of business; and (z) the present value of
any lease payments in excess of $75,000 due under leases required to be
capitalized in accordance with GAAP. Neither the Company nor any
Subsidiary is in default with respect to any Indebtedness.
(dd) Tax
Status. Except for matters that would not, individually or in
the aggregate, have or reasonably be expected to result in a Material Adverse
Effect, the Company and each Subsidiary (i) has made or filed all United States
federal and state income and all foreign income and franchise tax returns,
reports and declarations required by any jurisdiction to which it is subject,
(ii) has paid all taxes and other governmental assessments and charges that are
material in amount, shown or determined to be due on such returns, reports and
declarations and (iii) has set aside on its books provision reasonably adequate
for the payment of all material 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.
(ee) Foreign Corrupt
Practices. To the knowledge of the Company, neither the
Company, nor to the knowledge of the Company, any agent or other person acting
on behalf of the Company, has (i) directly or indirectly, used any funds for
unlawful contributions, gifts, entertainment or other unlawful expenses related
to foreign or domestic political activity, (ii) made any unlawful payment to
foreign or domestic government officials or employees or to any foreign or
domestic political parties or campaigns from corporate funds, (iii) failed to
disclose fully any contribution made by the Company (or made by any person
acting on its behalf of which the Company is aware) which is in violation of
law, or (iv) violated in any material respect any provision of the Foreign
Corrupt Practices Act of 1977, as amended.
(ff) Accountants. The
Company’s accounting firm is EisnerAmper LLP. To the knowledge and
belief of the Company, such accounting firm is a registered public accounting
firm as required by the Exchange Act.
(gg) Purchasers’ Purchase of
Securities. The Purchaser is acting solely in the capacity of
an arm’s length purchaser with respect to the Transaction Documents and the
transactions contemplated thereby. The Purchaser is not acting as a
financial advisor to the Company (or in any similar capacity) with respect to
the Transaction Documents and the transactions contemplated thereby and any
advice given by the Purchaser or any of its respective representatives or agents
in connection with the Transaction Documents and the transactions contemplated
thereby is merely incidental to the Purchaser’s purchase of the
Securities. The Company’s decision to enter into this Agreement and
the other Transaction Documents has been based solely on the independent
evaluation of the transactions contemplated hereby by the Company and its
representatives.
15
(hh) Regulation M
Compliance. The Company has not, and to its knowledge no one
acting on its behalf has, (i) taken, directly or indirectly, any action designed
to cause or to result in the stabilization or manipulation of the price of any
security of the Company to facilitate the sale or resale of any of the
Securities, (ii) sold, bid for, purchased, or, paid any compensation for
soliciting purchases of, any of the Securities, or (iii) paid or agreed to pay
to any Person any compensation for soliciting another to purchase any other
securities of the Company, other than, in the case of clauses (ii) and (iii),
compensation paid to the Company’s placement agent in connection with the
placement of the Securities.
(ii) Office of Foreign Assets
Control. Neither the Company nor, to the Company’s knowledge,
any director, officer, agent, employee or affiliate of the Company is currently
subject to any U.S. sanctions administered by the Office of Foreign Assets
Control of the U.S. Treasury Department (“OFAC”).
(jj) U.S. Real Property Holding
Corporation. The Company is not and has never been a U.S. real
property holding corporation within the meaning of Section 897 of the Internal
Revenue Code of 1986, as amended, and the Company shall so certify upon
Purchaser’s request.
(kk) Bank Holding Company
Act. Neither the Company nor any of its Subsidiaries or
Affiliates is subject to the Bank Holding Company Act of 1956, as amended (the
“BHCA”) and to
regulation by the Board of Governors of the Federal Reserve System (the “Federal
Reserve”). Neither the Company nor any of its Subsidiaries or
Affiliates owns or controls, directly or indirectly, five percent (5%) or more
of the outstanding shares of any class of voting securities or twenty-five
percent or more of the total equity of a bank or any entity that is subject to
the BHCA and to regulation by the Federal Reserve. Neither the
Company nor any of its Subsidiaries or Affiliates exercises a controlling
influence over the management or policies of a bank or any entity that is
subject to the BHCA and to regulation by the Federal Reserve.
(ll) Money
Laundering. The operations of the Company are in material
compliance with applicable financial record-keeping and reporting requirements
of the Currency and Foreign Transactions Reporting Act of 1970, as amended,
applicable money laundering statutes and applicable rules and regulations
thereunder (collectively, the “Money Laundering
Laws”), and no action, suit or proceeding by or before any court or
governmental agency, authority or body or any arbitrator involving the Company
with respect to the Money Laundering Laws is pending or, to the knowledge of the
Company, threatened.
16
(mm) Environmental
Matters. Except as disclosed in the SEC Reports, to the knowledge of the
Company, neither the Company nor any of its Subsidiaries (i) is in
violation of any statute, rule, regulation, decision or order of any
governmental agency or body or any court, domestic or foreign, relating to the
use, disposal or release of hazardous or toxic substances or relating to the
protection or restoration of the environment or human exposure to hazardous or
toxic substances (collectively, “Environmental Laws”),
(ii) is liable for any off-site disposal or contamination pursuant to any
Environmental Laws, or (iii) is subject to any claim relating to any
Environmental Laws; in each case, which violation, contamination, liability or
claim has had or would reasonably be expected to have, individually or in the
aggregate, a Material Adverse Effect; and, to the Company’s Knowledge, there is
no pending or threatened investigation that might lead to such a
claim.
(nn) Application of Anti-Takeover
Provisions. There is no control share acquisition, business
combination, poison pill (including any distribution under a rights agreement)
or other similar anti-takeover provision under the Company’s Certificate of
Incorporation (or similar charter documents) or applicable law that would become
applicable to the Purchaser as a result of the issuance of the
Securities.
(oo) Shell
Company. The Company is not now and has not been, at any time
during the past three (3) years, a shell company as defined by Rule 405 of the
Securities Act and has never been an issuer subject to Rule 144(i) under the
Securities Act.
Section
3.2 Representations and
Warranties of the Purchasers. The Purchaser hereby represents
and warrants as of the date of the Original Agreement and as of the Closing Date
(except for the representations and warranties that speak as of a specific date,
which shall be made as of such date) to the Company as follows:
(a) Organization;
Authority. The Purchaser is either an individual or an entity
which one? duly organized, validly existing and in good standing under the laws
of the jurisdiction of its organization with full right, corporate, partnership
or limited liability company power and authority to enter into and to consummate
the transactions contemplated by this Agreement and otherwise to carry out its
obligations hereunder and thereunder. The execution and delivery of this
Agreement and performance by the Purchaser of the transactions contemplated by
this Agreement have been duly authorized by all necessary corporate,
partnership, limited liability company or similar action, as applicable, on the
part of the Purchaser. Each Transaction Document to which it is a
party has been duly executed by the Purchaser, and when delivered by the
Purchaser in accordance with the terms hereof, will constitute the valid and
legally binding obligation of the Purchaser, enforceable against it in
accordance with its terms, except: (i) as limited by general equitable
principles and applicable bankruptcy, insolvency, reorganization, moratorium and
other laws of general application affecting enforcement of creditors’ rights
generally, (ii) as limited by laws relating to the availability of specific
performance, injunctive relief or other equitable remedies and (iii) insofar as
indemnification and contribution provisions may be limited by applicable
law.
17
(b) Understandings or
Arrangements. The Purchaser is acquiring the Securities as
principal for its own account and has no direct or indirect arrangement or
understandings with any other persons to distribute or regarding the
distribution of such Securities (this representation and warranty not limiting
the Purchaser’s right to sell the Securities pursuant to a registration
statement or otherwise in compliance with applicable federal and state
securities laws). Such Purchaser is acquiring the Securities
hereunder in the ordinary course of its business.
(c) Purchaser
Status. At the time the Purchaser was offered the Securities,
it was, and as of the date of this Agreement it is, either: (i) an “accredited
investor” as defined in Rule 501(a)(1), (a)(2), (a)(3), (a)(7) or (a)(8) under
the Securities Act or (ii) a “qualified institutional buyer” as defined in Rule
144A(a) under the Securities Act. The Purchaser is not required to be
registered as a broker-dealer under Section 15 of the Exchange Act.
(d) Experience of the
Purchaser. The Purchaser, either alone or together with its
representatives, has such knowledge, sophistication and experience in business
and financial matters so as to be capable of evaluating the merits and risks of
the prospective investment in the Securities, and has so evaluated the merits
and risks of such investment. The Purchaser is able to bear the
economic risk of an investment in the Securities and, at the present time, is
able to afford a complete loss of such investment. The Company has
provided the Purchaser with access to the Company and its books and records, and
the Purchaser has had the opportunity to ask questions of the Company and, as of
the date of the Original Agreement, has received any information that it has
requested from the Company.
(e) Certain Transactions and
Confidentiality. Other than consummating the transactions
contemplated hereunder, and otherwise disclosed in its SEC filings, the
Purchaser or any of Affiliate, has not, nor has any Person acting on behalf of
or pursuant to any understanding with the Purchaser, directly or indirectly
executed any purchases or sales, including Short Sales, of the securities of the
Company during the period commencing August 1, 2010 and ending the latter of (i)
immediately prior to the execution hereof or the (ii) the date on which the
Company publicly announces the transactions contemplated by this
Agreement. Other than to other Persons party to this Agreement, such
Purchaser has maintained the confidentiality of all disclosures made to it in
connection with this transaction (including the existence and terms of this
transaction). Notwithstanding the foregoing, for avoidance of doubt, nothing
contained herein shall constitute a representation or warranty, or preclude any
actions, with respect to the identification of the availability of, or securing
of, available shares to borrow in order to effect Short Sales or similar
transactions in the future.
(f) Certain
Fees. To the knowledge of the Purchaser, no brokerage or
finder’s fees or commissions are or will be payable by the Company to any
broker, financial advisor or consultant, finder, placement agent, investment
banker, bank or other Person with respect to the transactions contemplated by
the Transaction Documents.
18
The
Company acknowledges and agrees that the representations contained in Section
3.2 shall not modify, amend or affect such Purchaser’s right to rely on the
Company’s representations and warranties contained in this Agreement or any
representations and warranties contained in any other Transaction Document or
any other document or instrument executed and/or delivered in connection with
this Agreement or the consummation of the transaction contemplated
hereby. The Purchaser hereby further represents and warrants that, as
of the date of the Original Agreement, it does not have any actual knowledge of
any inaccuracy of the representations and warranties of the Company set forth in
Section 3.1.
ARTICLE
IV
OTHER
AGREEMENTS OF THE PARTIES
Section
4.1 Furnishing of
Information. Until the time that the Purchaser no longer owns
any of the Securities, the Company covenants to timely file (or obtain
extensions in respect thereof and file within the applicable grace period) all
reports required to be filed by the Company after the date of the Original
Agreement pursuant to the Exchange Act so long as the Company is then subject to
the reporting requirements of the Exchange Act. As long as the
Purchaser owns Securities, if the Company is not required to file reports
pursuant to the Exchange Act, it will prepare and furnish to the Purchasers and
make publicly available in accordance with Rule 144(c) such information as is
required for the Purchasers to sell the Securities, including without
limitation, under Rule 144. The Company further covenants that it will take such
further action as any holder of Securities may reasonably request, to the extent
required from time to time to enable such Person to sell such Securities without
registration under the Securities Act, including without limitation, within the
requirements of the exemption provided by Rule 144.
Section
4.2 Integration. The
Company shall not sell, offer for sale or solicit offers to buy or otherwise
negotiate in respect of any security (as defined in Section 2 of the Securities
Act) that would be integrated with the offer or sale of the Securities for
purposes of the rules and regulations of any Trading Market such that it would
require shareholder approval prior to the closing of such other transaction
unless shareholder approval is obtained before the closing of such subsequent
transaction.
Section
4.3 Securities Laws Disclosure;
Publicity. The Company shall, during or prior to the Trading
Day immediately following the second business day following the date hereof,
issue a press release disclosing the material terms of the transactions
contemplated hereby, and issue a Current Report on Form 8-K (which shall include
this Agreement as an exhibit thereto) disclosing the material terms of the
transactions contemplated hereby, and including the Transaction Documents as
exhibits thereto within the time required by the Exchange Act. From
and after the issuance of such press release, the Company shall have publicly
disclosed all material, non-public information delivered to the Purchaser by the
Company or any of its Subsidiaries, or any of their respective officers,
directors, employees or agents in connection with the transactions contemplated
by the Transaction Documents. The Company and the Purchaser shall consult with
each other in issuing any other press releases with respect to the transactions
contemplated hereby, and neither the Company nor any Purchaser shall issue any
such press release nor otherwise make any such public statement without the
prior consent of the Company, with respect to any press release of any
Purchaser, or without the prior consent of the Purchaser, with respect to any
press release of the Company, which consent shall not unreasonably be withheld
or delayed, except if such disclosure is required by law, in which case the
disclosing party shall promptly provide the other party with prior notice of
such public statement or communication.
19
Section
4.4 Use of
Proceeds. The Company shall use the net proceeds from the sale
of the Securities for general working capital purposes, and shall not use such
proceeds for: (a) the satisfaction of any portion of the Company’s debt (other
than payment of trade payables in the ordinary course of the Company’s business
and prior practices), (b) the redemption of any Common Stock or Common Stock
Equivalents or (c) the settlement of any outstanding litigation or (d) in
violation of the FCPA or OFAC regulations.
Section
4.5 Indemnification of
Purchasers. Subject to the provisions of this Section 4.6, the
Company will indemnify and hold the Purchaser and its shareholders, members,
partners, directors, managers, officers, employees and agents (and any other
Persons with a functionally equivalent role of a Person holding such titles
notwithstanding a lack of such title or any other title), each Person who
controls the Purchaser (within the meaning of Section 15 of the Securities Act
and Section 20 of the Exchange Act), and the shareholders, members, partners,
directors, managers, officers, employees and agents (and any other Persons with
a functionally equivalent role of a Person holding such titles notwithstanding a
lack of such title or any other title) of such controlling persons (each, a
“Purchaser
Party”) harmless from any and all losses, liabilities, obligations,
claims, contingencies, damages, costs and expenses, including all judgments,
amounts paid in settlements, court costs and reasonable attorneys’ fees and
costs of investigation that any such Purchaser Party may suffer or incur as a
result of or relating to (a) any breach of any of the representations,
warranties, covenants or agreements made by the Company in this Agreement or in
the other Transaction Documents or (b) any action instituted against a Purchaser
in any capacity, or any of them or their respective Affiliates, by any
stockholder of the Company who is not an Affiliate of such Purchaser, with
respect to any of the transactions contemplated by the Transaction Documents
(unless such action is based upon a breach of the Purchaser’s representations,
warranties or covenants under the Transaction Documents or any agreements or
understandings the Purchaser may have with any such stockholder or any
violations by the Purchaser of state or federal securities laws or any conduct
by the Purchaser which constitutes fraud, gross negligence, willful misconduct
or malfeasance). If any action shall be brought against any Purchaser
Party in respect of which indemnity may be sought pursuant to this Agreement,
such Purchaser Party shall promptly notify the Company in writing, and the
Company shall have the right to assume the defense thereof with counsel of its
own choosing reasonably acceptable to the Purchaser Party (in this regard,
▇▇▇▇▇▇▇ ▇▇▇▇▇▇ shall be deemed to be reasonably acceptable to
Purchaser). Any Purchaser Party shall have the right to employ
separate counsel in any such action and participate in the defense thereof, but
the fees and expenses of such counsel shall be at the expense of such Purchaser
Party except to the extent that (i) the employment thereof has been specifically
authorized by the Company in writing, (ii) the Company has failed after a
reasonable period of time to assume such defense and to employ counsel or (iii)
in such action there is, in the reasonable opinion of counsel, a material
conflict on any material issue between the position of the Company and the
position of such Purchaser Party, in which case the Company shall be responsible
for the reasonable fees and expenses of no more than one such separate
counsel. The Company will not be liable to any Purchaser Party under
this Agreement (y) for any settlement by a Purchaser Party effected without the
Company’s prior written consent, which shall not be unreasonably withheld or
delayed; or (z) to the extent, but only to the extent, that a loss, claim,
damage or liability is attributable to any Purchaser Party’s breach of any of
the representations, warranties, covenants or agreements made by such Purchaser
Party in this Agreement or in the other Transaction Documents. The
indemnification required by this Section 4.6 shall be made by periodic payments
of the amount thereof during the course of the investigation or defense, as and
when bills are received. The indemnity agreements contained herein shall not be
an exclusive remedy but shall be in addition to any cause of action or similar
right in law or in equity of any Purchaser Party against the Company or others,
and (y) any liabilities the Company may be subject to pursuant to
law.
20
Section
4.6 Listing of Common
Stock. The Company hereby agrees to use commercially reasonable efforts
to maintain the listing or quotation of the Common Stock on the Trading Market
on which it is currently listed, and concurrently with the Closing, the Company
shall apply to list or quote all of the Shares on such Trading Market and
promptly secure the listing of all of the Shares on such Trading Market. The
Company further agrees, if the Company applies to have the Common Stock traded
on any other Trading Market, it will then include in such application all of the
Shares, and will take such other action as is reasonably necessary to cause all
of the Shares to be listed or quoted on such other Trading Market as promptly as
possible. The Company will then take all action reasonably necessary
to continue the listing and trading of its Common Stock on a Trading Market and
will comply in all respects with the Company’s reporting, filing and other
obligations under the bylaws or rules of the Trading Market.
Section
4.7 Certain Transactions and
Confidentiality. The Purchaser covenants that neither it nor any
Affiliate or any other Person acting on its behalf or pursuant to any
understanding with it will execute any purchases or sales, including Short Sales
of any of the Company’s securities during the period commencing with the
execution of the Original Agreement and ending at such time that the
transactions contemplated by this Agreement are first publicly announced
pursuant to the initial press release as described in Section
4.3. The Purchaser covenants that until such time as the transactions
contemplated by this Agreement are publicly disclosed by the Company pursuant to
the initial press release as described in Section 4.3, the Purchaser will
maintain the confidentiality of the existence and terms of this transaction and
the information included in the Disclosure Schedules. Notwithstanding
the foregoing and notwithstanding anything contained in this Agreement to the
contrary, the Company has been informed that (i) the Purchaser does not make any
representation, warranty or covenant hereby that it will not engage in effecting
transactions in any securities of the Company after the Closing Date, (ii) the
Purchaser shall not be restricted or prohibited from effecting any transactions
in any securities of the Company in accordance with applicable securities laws
from and after the Closing Date, and (iii) Purchaser shall not have any duty of
confidentiality to the Company or its Subsidiaries after the issuance of the
initial press release as described in Section 4.3.
21
Section
4.8 Transfers;
Legend.
(a) Securities
may only be disposed of in compliance with state and federal securities laws. In
connection with any transfer of the Securities other than pursuant to an
effective registration statement, to the Company, to an Affiliate of an
Purchaser or in connection with a pledge as contemplated in Section 4.08(b), the
Company may require the transferor thereof to provide to the Company an opinion
of counsel selected by the transferor, the form and substance of which opinion
shall be reasonably satisfactory to the Company, to the effect that such
transfer does not require registration of such transferred Shares under the
Securities Act
(b) Certificates
evidencing the Shares will contain the following legend, until such time as they
are not required under Section 4.08(c):
THESE
SECURITIES HAVE NOT BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION
OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM
REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES
ACT”), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN
AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE
SECURITIES LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO THE TRANSFEROR TO
SUCH EFFECT, THE SUBSTANCE OF WHICH SHALL BE REASONABLY ACCEPTABLE TO THE
COMPANY. THESE SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN
ACCOUNT SECURED BY SUCH SECURITIES IN ACCORDANCE WITH APPLICABLE
LAW.
The
Company has been informed that the Purchaser may from time to time pledge,
and/or grant a security interest in some or all of the Securities pursuant to a
bona fide margin agreement in connection with a bona fide margin account and, if
required under the terms of such agreement or account, the Purchaser may
transfer pledged or secured Securities to the pledgees or secured parties in
accordance with applicable law. Such a pledge or transfer would not be subject
to approval or consent of the Company and no legal opinion of legal counsel to
the pledgee, secured party or pledgor shall be required in connection with the
pledge, but such legal opinion may be required in connection with a subsequent
transfer following default by the Purchaser transferee of the pledge. No notice
shall be required of such pledge. At the Purchaser’s expense, the Company will
execute and deliver such reasonable documentation as a pledgee or secured party
of Securities may reasonably request in connection with a pledge or transfer of
the Securities. Except as otherwise provided in Section 4.10(c), any Securities
subject to a pledge or security interest as contemplated by this Section 4.10(b)
shall continue to bear the legend set forth in Section 4.1(b) and be subject to
the restrictions on transfer set forth in Section 4.10(a).
(c) Certificates
evidencing Securities shall not contain any legend (including the legend set
forth in Section 4.1(b)): (i) following a sale or transfer of such Securities
pursuant to an effective registration statement (including a Registration
Statement), or (ii) following a sale or transfer of such Shares pursuant to Rule
144 (assuming the transferee is not an Affiliate of the Company), or (iii) while
such Securities are eligible for sale without volume limitations pursuant to
Rule 144. If the Purchaser shall make a sale or transfer of
Securities either (x) pursuant to Rule 144 or (y) pursuant to a registration
statement and in each case shall have delivered to the Company or the Company’s
transfer agent the certificate representing Securities containing a restrictive
legend which are the subject of such sale or transfer and a representation
letter in customary form.
22
Section
4.9 Restriction on trading in
the Company’s Securities
For the
period from the date of the Original Agreement to the Closing Date, it is
understood and acknowledged by the Purchaser that: (i) each of the Purchaser and
its Affiliates has been asked by the Company to agree, and the
Purchaser (on behalf of its self and its Affiliates) has agreed, to desist from
purchasing or selling, long and/or short, securities of the Company, or
“derivative” securities based on securities issued by the Company; (ii) the
Purchaser has agreed to desist from future open market or other transactions by
the Purchaser, specifically including, without limitation, Short Sales or
“derivative” transactions, before or after the closing of this private placement
transactions; (iii) the Purchaser, and counter-parties in “derivative”
transactions to which the Purchaser is a party, directly or indirectly,
presently may not have a “short” position in the Common Stock, and (iv) the
Purchaser shall not have any affiliation with or control over any arm’s length
counter-party in any “derivative” transaction.
Section
4.10 Cooperation of the
Parties.
Each of
the Company (subject to its exercise of the fiduciary duties owned to its
shareholders) and the Purchaser agree that they will use their commercially
reasonable efforts to close the transaction contemplated hereby by the Closing
Date. The Company and the Purchaser further agree that they shall
each provide reasonable cooperation to the other party for all necessary filings
made by the Company and/or the Purchaser incident to the transactions
contemplated hereby, whether before or after the Closing Date.
ARTICLE
V
MISCELLANEOUS
Section
5.1 Termination. This
Agreement may be terminated by either the Company or the Purchaser by written
notice to the other party if the Closing has not been consummated on or before
December 31, 2010 (the “Drop-Dead Date”);
provided, however, that no such termination will affect the right of any party
to ▇▇▇ for any breach by the other party. Subject to Section 4.11,
the Company may terminate this Agreement prior to the Drop-Dead Date if (and
only if) the Company receives a bonafide, written offer for a transaction at
least as favorable to the Company, and on terms more favorable to the Company,
as the transaction contemplated hereby (collectively, the “Company Termination
Option”). In the event that the Company Termination Option has
not be exercised by the Drop-Dead Date, the Company’s right to exercise the
Company Termination Option shall expire in its entirety, without regard to
whether the Closing has (or has not) occurred by such date.
23
Section
5.2 Fees and
Expenses. Each party shall pay the fees and expenses of its
advisers, counsel, accountants and other experts, if any, and all other expenses
incurred by such party incident to the negotiation, preparation, execution,
delivery and performance of this Agreement, provided, however, that, in the
event that the Closing has not occurred on or before the Drop-Dead Date, unless
such Closing has not occurred because of a breach by the Purchaser of its
obligations under this Agreement, the Company shall reimburse the Purchaser for
all of their reasonable out-of-pocket expenses (including reasonable legal fees)
up to a maximum of $35,000. The Company shall pay all Transfer Agent
fees and stamp taxes levied in connection with the delivery of any Securities to
the Purchasers.
Section
5.3 Entire
Agreement. The Transaction Documents, together with the
exhibits and schedules thereto, contain the entire understanding of the parties
with respect to the subject matter hereof and supersede all prior agreements and
understandings, oral or written, with respect to such matters, which the parties
acknowledge have been merged into such documents, exhibits and
schedules.
Section
5.4 Notices. Any
and all notices or other communications or deliveries required or permitted to
be provided hereunder shall be in writing and shall be deemed given and
effective on the second (2nd) Trading Day following the date of mailing, if sent
by U.S. nationally recognized overnight courier service or (d) upon actual
receipt by the party to whom such notice is required to be given. The
address for such notices and communications shall be as set forth on the
signature pages attached hereto.
Section
5.5 Amendments;
Waivers. No provision of this Agreement may be waived,
modified, supplemented or amended except in a written instrument signed, in the
case of an amendment, by the Company and the Purchaser or, in the case of a
waiver, by the party against whom enforcement of any such waived provision is
sought. No waiver of any default with respect to any provision,
condition or requirement of this Agreement shall be deemed to be a continuing
waiver in the future or a waiver of any subsequent default or a waiver of any
other provision, condition or requirement hereof, nor shall any delay or
omission of any party to exercise any right hereunder in any manner impair the
exercise of any such right.
Section
5.6 Headings. The
headings herein are for convenience only, do not constitute a part of this
Agreement and shall not be deemed to limit or affect any of the provisions
hereof.
Section
5.7 Successors and
Assigns. This Agreement shall be binding upon and inure to the
benefit of the parties and their successors and permitted
assigns. The Company may not assign this Agreement or any rights or
obligations hereunder without the prior written consent of the
Purchaser. The Purchaser may assign any or all of its rights under
this Agreement to any Person to whom the Purchaser assigns or transfers any
Securities.
Section
5.8 No Third-Party
Beneficiaries. This Agreement is intended for the benefit of
the parties hereto and their respective successors and permitted assigns and is
not for the benefit of, nor may any provision hereof be enforced by, any other
Person, except as otherwise set forth in Section 4.6.
24
Section
5.9 Governing
Law. All questions concerning the construction, validity,
enforcement and interpretation of the Transaction Documents shall be governed by
and construed and enforced in accordance with the internal laws of the State of
New York, without regard to the principles of conflicts of law
thereof. Each party agrees that all legal proceedings concerning the
interpretations, enforcement and defense of the transactions contemplated by
this Agreement and any other Transaction Documents (whether brought against a
party hereto or its respective affiliates, directors, officers, shareholders,
employees or agents) shall be commenced exclusively in the state and federal
courts sitting in the City of New York. Each party hereby irrevocably submits to
the exclusive jurisdiction of the state and federal courts sitting in the City
of New York, borough of Manhattan for the adjudication of any dispute hereunder
or in connection herewith or with any transaction contemplated hereby or
discussed herein (including with respect to the enforcement of any of the
Transaction Documents), and hereby irrevocably waives, and agrees not to assert
in any suit, action or proceeding, any claim that it is not personally subject
to the jurisdiction of any such court, that such suit, action or proceeding is
improper or is an inconvenient venue for such proceeding. Nothing
contained herein shall be deemed to limit in any way any right to serve process
in any other manner permitted by law. If either party shall commence
an action or proceeding to enforce any provisions of the Transaction Documents,
then, in addition to the obligations of the Company under Section 4.6, the
prevailing party in such action or proceeding shall be reimbursed by the other
party for its reasonable attorneys’ fees and other costs and expenses incurred
with the investigation, preparation and prosecution of such action or
proceeding.
Section
5.10 WAIVER OF JURY
TRIAL. IN ANY ACTION, SUIT, OR PROCEEDING IN ANY JURISDICTION
BROUGHT BY ANY PARTY AGAINST ANY OTHER PARTY, THE PARTIES EACH KNOWINGLY AND
INTENTIONALLY, TO THE GREATEST EXTENT PERMITTED BY APPLICABLE LAW, HEREBY
ABSOLUTELY, UNCONDITIONALLY, IRREVOCABLY AND EXPRESSLY WAIVES FOREVER TRIAL BY
JURY.
Section
5.11 Survival. The
representations and warranties contained herein shall survive the Closing and
the delivery of the Securities.
Section
5.12 Execution. This
Agreement may be executed in two or more counterparts, all of which when taken
together shall be considered one and the same agreement and shall become
effective when counterparts have been signed by each party and delivered to the
other party, it being understood that both parties need not sign the same
counterpart. In the event that any signature is delivered by
facsimile transmission or by e-mail delivery of a “.pdf” format data file, such
signature shall create a valid and binding obligation of the party executing (or
on whose behalf such signature is executed) with the same force and effect as if
such facsimile or “.pdf” signature page were an original thereof.
Section
5.13 Severability. If
any term, provision, covenant or restriction of this Agreement is held by a
court of competent jurisdiction to be invalid, illegal, void or unenforceable,
the remainder of the terms, provisions, covenants and restrictions set forth
herein shall remain in full force and effect and shall in no way be affected,
impaired or invalidated, and the parties hereto shall use their commercially
reasonable efforts to find and employ an alternative means to achieve the same
or substantially the same result as that contemplated by such term, provision,
covenant or restriction. It is hereby stipulated and declared to be the
intention of the parties that they would have executed the remaining terms,
provisions, covenants and restrictions without including any of such that may be
hereafter declared invalid, illegal, void or unenforceable.
25
Section
5.14 Rescission and Withdrawal
Right. Notwithstanding anything to the contrary contained in
(and without limiting any similar provisions of) any of the other Transaction
Documents, in the event that the Company or the Purchaser has materially
breached any of its representations or warranties contained herein, then the
Purchaser or the Company, as the case may be, may rescind or withdraw, in its
sole discretion upon written notice to the other party, the transactions
contemplated by this Agreement.
Section
5.15 Replacement of
Securities. If any certificate or instrument evidencing any
Securities is mutilated, lost, stolen or destroyed, the Company shall issue or
cause to be issued in exchange and substitution for and upon cancellation
thereof (in the case of mutilation), or in lieu of and substitution therefor, a
new certificate or instrument, but only upon receipt of evidence reasonably
satisfactory to the Company of such loss, theft or destruction. The
applicant for a new certificate or instrument under such circumstances shall
also pay any reasonable third-party costs (including customary indemnity)
associated with the issuance of such replacement Securities.
Section
5.16 Remedies. In
addition to being entitled to exercise all rights provided herein or granted by
law, including recovery of damages, each of the Purchasers and the Company will
be entitled to specific performance under the Transaction
Documents. The parties agree that monetary damages may not be
adequate compensation for any loss incurred by reason of any breach of
obligations contained in the Transaction Documents and hereby agree to waive and
not to assert in any action for specific performance of any such obligation the
defense that a remedy at law would be adequate.
Section
5.17 Saturdays, Sundays,
Holidays, etc. If the last or appointed day for the taking of
any action or the expiration of any right required or granted herein shall not
be a Business Day, then such action may be taken or such right may be exercised
on the next succeeding Business Day.
Section
5.18 Construction. The
parties agree that each of them and/or their respective counsel has reviewed and
had an opportunity to revise the Transaction Documents and, therefore, the
normal rule of construction to the effect that any ambiguities are to be
resolved against the drafting party shall not be employed in the interpretation
of the Transaction Documents or any amendments hereto. In addition, each and
every reference to share prices and shares of Common Stock in any Transaction
Document shall be subject to adjustment for reverse and forward stock splits,
stock dividends, stock combinations and other similar transactions of the Common
Stock that occur after the date of this Agreement.
(Signature
Pages Follow)
26
IN
WITNESS WHEREOF, the parties hereto have caused this Securities Purchase
Agreement to be duly executed by their respective authorized signatories as of
the date first indicated above.
|
MGT
CAPITAL INVESTMENTS, INC.
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|
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By:
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/s/ ▇▇▇ ▇▇▇▇▇▇▇▇-▇▇▇▇▇
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|
Name:
▇▇▇ ▇▇▇▇▇▇▇▇-▇▇▇▇▇
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Title:CEO
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|
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By:
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▇▇▇▇▇ ▇. ▇▇▇▇▇▇
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Name:
▇▇▇▇▇ ▇. ▇▇▇▇▇▇
|
|
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Title:
CFO
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LADDCAP
VALUE PARTNERS, LP
|
|
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By:
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/s/ ▇▇▇▇▇▇ ▇▇▇▇
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Name:
▇▇▇▇▇▇ ▇▇▇▇
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Title:
Managing Member of General
Partner
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|
27
Exhibit
A
Form of
Opinion
28
Exhibit
B
Form of
Registration Rights Agreement
29