EXHIBIT 10.1
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CONVERTIBLE SUBORDINATED DEBENTURE PURCHASE AGREEMENT
Between
DIGITAL BIOMETRICS, INC.
and
KA INVESTMENTS LDC
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December 1, 1997
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CONVERTIBLE SUBORDINATED DEBENTURE PURCHASE AGREEMENT,
dated as of December 1, 1997 (this "Agreement"), between Digital Biometrics,
Inc., a Delaware corporation (the "Company"), and KA Investments LDC, a Cayman
Islands corporation (the "Purchaser").
WHEREAS, subject to the terms and conditions set forth herein, the
Company desires to issue and sell to the Purchaser and the Purchaser desires to
purchase an aggregate principal amount of $2,500,000 of the Company's to be
created 8% Convertible Subordinated Debentures, due December 1, 2000 (the
"Debentures"), which are convertible into the Company's common stock, par value
$.01 per share (the "Common Stock").
IN CONSIDERATION of the mutual covenants and agreements set forth
herein and for good and valuable consideration, the receipt of which is hereby
acknowledged, the parties agree as follows:
ARTICLE I
PURCHASE AND SALE OF DEBENTURES
1.1 Purchase and Sale. Subject to the terms and conditions set forth
herein, the Company shall issue and sell to the Purchaser and the Purchaser
shall purchase the Debentures, in denominations of $100,000 and integral
multiples of $50,000 in excess thereof.
1.2 The Tranche 1 Closing. (a) Subject to the terms and conditions set
forth herein, the Company shall issue and sell to the Purchaser and the
Purchaser shall purchase an aggregate principal amount of $500,000 of the
Debentures (the "Tranche 1 Debentures") for a purchase price of $500,000 (the
"Purchase Price"). The closing of the purchase and sale of the Tranche 1
Debentures (the "Tranche 1 Closing") shall take place at the offices of ▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇ LLP ("RSPAB"), ▇▇▇▇ ▇▇▇▇▇▇ ▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇,
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, immediately following the execution hereof or such
later date as the parties shall agree. The date of the Tranche 1 Closing is
hereinafter referred to as the "Tranche 1 Closing Date."
(b) At the Tranche 1 Closing, (i) the Company shall
deliver to the Purchaser (1) the Tranche 1 Debentures and the Tranche 1 Warrants
(as defined in Section 3.17), each registered in the name of the Purchaser, (2)
the legal opinion of ▇▇▇▇▇▇ and ▇▇▇▇▇▇ P.A., substantially in the form attached
hereto as Exhibit C, and (3) all other documents, instruments and writings
required to have been delivered at or prior to the Tranche 1 Closing by the
Company pursuant to this Agreement, and (b) the Purchaser shall
deliver to the Company (1) $500,000, less the fees contemplated in Sections
2.1(l) and 5.1, in immediately available funds by wire transfer to an account
designated in writing by the Company for such purpose on or prior to the Tranche
1 Closing Date, and (2) all documents, instruments and writings required to have
been delivered at or prior to the Tranche 1 Closing by the Purchaser pursuant to
this Agreement.
1.3 The Tranche 2 Closing. (a) Subject to the terms and conditions set
forth in this Agreement, the Company shall have the right to deliver a written
notice to the Purchaser (a "Subsequent Financing Notice") requiring the
Purchaser to purchase Debentures in the aggregate principal amount of up to
$500,000 (the "Tranche 2 Debentures") and the Tranche 2 Warrants (as defined in
Section 3.15). The Company may not deliver the Subsequent Financing Notice
relating to the Tranche 2 Debentures earlier than 75 days nor later than 105
days after the Tranche 1 Closing Date or, if such day is not a Business Day, the
next succeeding Business Day. The closing of the purchase and sale of the
Tranche 2 Debentures (the "Tranche 2 Closing") shall take place at the offices
of RSPAB on such date (which may not, without the consent of the Purchaser, be
prior to the fifteenth day after receipt of the Subsequent Financing Notice
relating to the Tranche 2 Debentures or, if such day is not a Business Day, the
next succeeding Business Day) as the Company may designate in the Subsequent
Financing Notice relating to the Tranche 2 Debentures; provided, however, that
in no case shall the Tranche 2 Closing take place unless and until the
conditions listed in Section 4.1 have been satisfied or waived by the
appropriate party and in no event shall the Tranche 2 Closing occur subsequent
to the 120th day after the Tranche 1 Closing Date or, if such day is not a
Business Day, the next succeeding Business Day (such date, the "Tranche 2
Closing Expiration Date"). The date of the Tranche 2 Closing is hereinafter
referred to as the "Tranche 2 Closing Date."
(b) At the Tranche 2 Closing, (i) the Company shall
deliver to the Purchaser (a) the Tranche 2 Debentures and the Tranche 2
Warrants, each registered in the name of the Purchaser, and (b) all other
documents, instruments and writings required to have been delivered at or prior
to the Tranche 2 Closing by the Company pursuant to this Agreement, and (ii) the
Purchaser shall deliver to the Company (a) an amount equal to the aggregate
principal amount of Tranche 2 Debentures to be sold at the Tranche 2 Closing in
accordance with this Section less the fees contemplated by Sections 2.1(l) and
5.1, in immediately available funds by wire transfer to an account designated in
writing by the Company prior to the Tranche 2 Closing Date and (b) all
documents, instruments and writings required to have been delivered at or prior
to Tranche 2 Closing by the Purchaser pursuant to this Agreement.
1.4 Tranche 3 Closing. (a) Subject to the terms and conditions set
forth in this Agreement, the Company shall have the right to deliver a
Subsequent Financing Notice requiring the Purchaser to purchase Debentures in
such principal amount as the Company may designate in such notice, which may not
be more than $500,000 (the "Tranche 3
Debentures") and the Tranche 3 Warrants (as defined in Section 3.15). The
Company may not deliver the Subsequent Financing Notice relating to the Tranche
3 Debentures earlier than 75 days nor later than 105 days after the earlier to
occur of the Tranche 2 Closing Date or the Tranche 2 Closing Expiration Date or,
if such day is not a Business Day, the next succeeding Business Day. The closing
of the purchase and sale of the Tranche 3 Debentures (the "Tranche 3 Closing")
shall take place at the offices of RSPAB on such date (which may not, without
the consent of the Purchaser, be prior to the fifteenth day after receipt of the
Subsequent Financing Notice relating to the Tranche 3 Debentures or, if such day
is not a Business Day, the next succeeding Business Day) as the Company may
designate in the Subsequent Financing Notice relating to the Tranche 3
Debentures; provided, however, that in no case shall the Tranche 3 Closing take
place unless and until the conditions listed in Section 4.1 have been satisfied
or waived by the appropriate party and in no event shall the Tranche 3 Closing
occur subsequent to the 120th day after the earlier the earlier to occur of the
Tranche 2 Closing Date or Tranche 2 Closing Expiration Date or, if such day is
not a Business Day, the next succeeding Business Day (such date, the "Tranche 3
Closing Expiration Date"). The date of the Tranche 3 Closing is hereinafter
referred to as the "Tranche 3 Closing Date."
(b) At the Tranche 3 Closing, (i) the Company shall
deliver to the Purchaser (a) the Tranche 3 Debentures and Tranche 3 Warrants,
each registered in the name of the Purchaser, and (b) all other documents,
instruments and writings required to have been delivered at or prior to the
Tranche 3 Closing by the Company pursuant to this Agreement, and (ii) the
Purchaser shall deliver to the Company (a) an amount equal to the aggregate
principal amount of Tranche 3 Debentures to be sold at the Tranche 3 Closing in
accordance with this Section less the fees contemplated by Sections 2.1(l) and
5.1, in immediately available funds by wire transfer to an account designated in
writing by the Company prior to the Tranche 3 Closing Date and (b) all
documents, instruments and writings required to have been delivered at or prior
to Tranche 3 Closing by the Purchaser pursuant to this Agreement.
1.5 Tranche 4 Closing. (a) Subject to the terms and conditions set
forth in this Agreement, the Company shall have the right to deliver to the
Purchaser a Subsequent Financing Notice requiring the Purchaser to purchase
Debentures in such principal amount as the Company may designate in such notice,
which may not be more than $500,000 (the "Tranche 4 Debentures") and the Tranche
4 Warrants (as defined in Section 3.15). The Company may not deliver the
Subsequent Financing Notice relating to the Tranche 4 Debentures earlier than 75
days nor later than 105 days after the earlier to occur of the Tranche 3 Closing
Date or the Tranche 3 Closing Expiration Date or, if such day is not a Business
Day, the next succeeding Business Day. The closing of the purchase and sale of
the Tranche 4 Debentures (the "Tranche 4 Closing") shall take place at the
offices of RSPAB on such date (which may not, without the consent of the
Purchaser, be prior to the fifteenth day after receipt of the Subsequent
Financing Notice relating to the Tranche 4
Debentures or, if such day is not a Business Day, the next succeeding Business
Day) as the Company may designate in the Subsequent Financing Notice relating to
the Tranche 4 Debentures; provided, however, that in no case shall the Tranche 4
Closing take place unless and until the conditions listed in Section 4.1 have
been satisfied or waived by the appropriate party and in no event shall the
Tranche 4 Closing occur after the 120th day after the earlier to occur of the
Tranche 3 Closing Date or Tranche 3 Closing Expiration Date or, if such day is
not a Business Day, the next succeeding Business Day (such date, the "Tranche 4
Closing Expiration Date"). The date of the Tranche 4 Closing is hereinafter
referred to as the "Tranche 4 Closing Date."
(b) At the Tranche 4 Closing, (i) the Company shall
deliver to the Purchaser (a) the Tranche 4 Debentures and Tranche 4 Warrants,
each registered in the name of the Purchaser, and (b) all other documents,
instruments and writings required to have been delivered at or prior to the
Tranche 4 Closing by the Company pursuant to this Agreement, and (ii) the
Purchaser shall deliver to the Company (a) an amount equal to the aggregate
principal amount of Tranche 4 Debentures to be sold at the Tranche 4 Closing in
accordance with this Section less the fees contemplated by Sections 2.1(l) and
5.1, in immediately available funds by wire transfer to an account designated in
writing by the Company prior to the Tranche 4 Closing Date and (b) all
documents, instruments and writings required to have been delivered at or prior
to Tranche 4 Closing by the Purchaser pursuant to this Agreement.
1.6 Tranche 5 Closing. (a) Subject to the terms and conditions set
forth in this Agreement, the Company shall have the right to deliver to the
Purchaser a Subsequent Financing Notice requiring the Purchaser to purchase
Debentures in such principal amount as the Company may designate in such notice,
which may not be more than $500,000 (the "Tranche 5 Debentures") and the Tranche
5 Warrants (as defined in Section 3.15). The Company may not deliver the
Subsequent Financing Notice relating to the Tranche 5 Debentures earlier than 75
days nor later than 105 days after the earlier to occur of the Tranche 4 Closing
Date or the Tranche 4 Closing Expiration Date or, if such day is not a Business
Day, the next succeeding Business Day. The closing of the purchase and sale of
the Tranche 5 Debentures (the "Tranche 5 Closing") shall take place at the
offices of RSPAB on such date (which may not, without the consent of the
Purchaser, be prior to the fifteenth day after receipt of the Subsequent
Financing Notice relating to the Tranche 5 Debentures or, if such day is not a
Business Day, the next succeeding Business Day) as the Company may designate in
the Subsequent Financing Notice relating to the Tranche 5 Debentures; provided,
however, that in no case shall the Tranche 5 Closing take place unless and until
the conditions listed in Section 4.1 have been satisfied or waived by the
appropriate party and in no event shall the Tranche 5 Closing occur after the
120th day after the earlier to occur of the Tranche 4 Closing Date or Tranche 4
Closing Expiration Date or, if such day is not a Business Day, the next
succeeding Business Day (such date, the "Tranche 5 Closing
Expiration Date"). The date of the Tranche 5 Closing is hereinafter referred to
as the "Tranche 5 Closing Date."
(b) At the Tranche 5 Closing, (i) the Company shall
deliver to the Purchaser (a) the Tranche 5 Debentures and the Tranche 5
Warrants, each registered in the name of the Purchaser, and (b) all other
documents, instruments and writings required to have been delivered at or prior
to the Tranche 5 Closing by the Company pursuant to this Agreement, and (ii) the
Purchaser shall deliver to the Company (a) an amount equal to the aggregate
principal amount of Tranche 5 Debentures to be sold at the Tranche 5 Closing in
accordance with this Section less the fees contemplated by Sections 2.1(l) and
5.1, in immediately available funds by wire transfer to an account designated in
writing by the Company prior to the Tranche 5 Closing Date and (b) all
documents, instruments and writings required to have been delivered at or prior
to Tranche 5 Closing by the Purchaser pursuant to this Agreement.
1.7 The Tranche 1 Debentures shall be in the form of Exhibit A attached
hereto. The Tranche 2 Debentures, Tranche 3 Debentures, Tranche 4 Debentures and
Tranche 5 Debentures shall be identical to the Tranche 1 Debentures, except that
the definition of "Conversion Price" for such Debentures shall be determined by
reference to the applicable Original Issue Date of such Debenture.
For purposes of this Agreement, "Conversion Price," "Original
Issue Date," "Conversion Date" "Trading Day" and "Per Share Market Value" shall
have the meanings set forth in the Debentures; and "Average Price" as at any
date shall mean the average Per Share Market Value for the five (5) Trading Days
immediately preceding such date.
ARTICLE II
REPRESENTATIONS AND WARRANTIES
2.1 Representations and Warranties of the Company. The Company hereby
represents and warrants to the Purchaser as of the date hereof and as of each
Closing Date as follows:
(a) Organization and Qualification. The Company is a
corporation, duly incorporated, validly existing and in good standing under the
laws of the State of Delaware, with the requisite corporate power and authority
to own and use its properties and assets and to carry on its business as
currently conducted. The Company has no subsidiaries other than as set forth in
Schedule 2.1(a) attached hereto (collectively, the "Subsidiaries"). Except as
set forth on Schedule 2.1(a), each of the Subsidiaries is a corporation, duly
incorporated, validly existing and in good standing under the laws of the
jurisdiction of its incorporation,
with the requisite corporate power and authority to own and use its properties
and assets and to carry on its business as currently conducted. Each of the
Company and the Subsidiaries is duly qualified to do business and is in good
standing as a foreign corporation 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, individually or in the aggregate, (x) adversely
affect the legality, validity or enforceability of this Agreement, the
Debentures, the Warrants, and the Registration Rights Agreement, dated the date
hereof, between the Company and the Purchaser and substantially in the form of
Exhibit B attached hereto (the "Registration Rights Agreement," and collectively
with this Agreement, the Debentures and the Warrants, the "Transaction
Documents"), (y) have a material adverse effect on the results of operations,
assets, or financial condition of the Company and the Subsidiaries, taken as a
whole, or (z) adversely impair the Company's ability to perform fully on a
timely basis its material obligations under any Transaction Document (a
"Material Adverse Effect").
(b) Authorization; Enforcement. The Company has the requisite
corporate power and authority to enter into and to consummate the transactions
contemplated by the Transaction Documents and to otherwise carry out its
obligations thereunder. The execution and delivery of each Transaction Document
by the Company and the consummation by it of the transactions contemplated
thereby have been duly authorized by all necessary action on the part of the
Company. Each Transaction Document has been duly executed by the Company and
when delivered in accordance with the terms hereof and each Transaction Document
shall constitute the legal, valid and binding obligation of the Company
enforceable against the Company in accordance with its terms, except as such
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium, liquidation or similar laws relating to, or
affecting generally the enforcement of, creditors' rights and remedies or by
other equitable principles of general application. Neither the Company nor any
Subsidiary is in violation of any provision of its respective certificate of
incorporation, by-laws or other charter documents (or their foreign
equivalents).
(c) Capitalization. The authorized, issued and outstanding
capital stock of the Company is set forth in Schedule 2.1(c). No shares of
Common Stock are entitled to preemptive or similar rights, nor is any holder of
the Common Stock entitled to preemptive or similar rights arising out of any
agreement or understanding with the Company by virtue of any of the Transaction
Documents. Except as disclosed in Schedule 2.1(c), there are no outstanding
options, warrants, script rights to subscribe to, calls or commitments of any
character whatsoever relating to, or, except as a result of the purchase and
sale of the Debentures and Warrants hereunder, securities, rights or obligations
convertible into or exchangeable for, or giving any person any right to
subscribe for or acquire any shares of Common Stock, or contracts, commitments,
understandings, or arrangements by which the Company or any Subsidiary is or may
become bound to issue additional shares of Common Stock, or securities or rights
convertible or exchangeable into shares of Common Stock. To
the knowledge of the Company, except as specifically disclosed in the SEC
Documents (as defined below) or Schedule 2.1(c), no Person or group of Persons
(as defined below) beneficially owns (as determined pursuant to Rule 13d-3
promulgated under the Securities Exchange Act of 1934, as amended (the "Exchange
Act")) or has the right to acquire by agreement with or by obligation binding
upon the Company beneficial ownership of in excess of 5% of the Common Stock. A
"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.
(d) Issuance of Debentures and Warrants. The Debentures and
the Warrants are duly authorized, and, when issued and paid for in accordance
with the terms hereof, shall be validly issued, fully paid and nonassessable.
The Company has and at all times while the Debentures and the Warrants are
outstanding will maintain an adequate reserve of duly authorized shares of
Common Stock to enable it to perform its conversion, exercise and other
obligations under this Agreement, the Warrants and the Debentures and in no
circumstances shall such reserved and available shares of Common Stock be less
than the sum of (i) 200% of (A) the number of shares of Common Stock as would be
issuable upon conversion in full of the Debentures, assuming such conversion
were effected on the Original Issue Date, and (B) the number of shares of Common
Stock as are issuable as payment of interest on the Debentures, and (ii) the
number of shares of Common Stock as are issuable upon exercise in full of the
Warrants. The shares of Common Stock issuable upon conversion of the Debentures,
as payment of interest in respect thereof and upon exercise of the Warrants are
sometimes referred to herein as the "Underlying Shares," and the Debentures,
Warrants and Underlying Shares are, collectively, the "Securities." When issued
in accordance with the terms of the Debentures and the Warrants, the Underlying
Shares will be duly authorized, validly issued, fully paid and nonassessable.
(e) No Conflicts. The execution, delivery and performance of
the Transaction Documents by the Company and the consummation by the Company of
the transactions contemplated thereby do not and will not (i) conflict with or
violate any provision of its certificate of incorporation, bylaws or other
charter documents (or their foreign equivalents) (each as amended through the
date hereof), (ii) subject to obtaining the consents referred to in Section
2.1(f), conflict with, or constitute a default (or an event which with notice or
lapse of time or both would become a default) under, or give to others any
rights of termination, amendment, acceleration or cancellation of, any
agreement, indenture or instrument (evidencing a Company debt or otherwise) to
which the Company is a party or by which any property or asset of the Company is
bound or affected, or (iii) 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 is subject (including federal and
state securities laws and regulations), or by which any property or asset of the
Company is bound or affected, except in the case of each of clauses (ii) and
(iii), as could not,
individually or in the aggregate, have or result in a Material Adverse Effect.
The business of the Company is not being conducted in violation of any law,
ordinance or regulation of any governmental authority, except for violations
which, individually or in the aggregate, could not have or result in a Material
Adverse Effect.
(f) Consents and Approvals. Neither the Company nor any
Subsidiary is required to obtain any consent, waiver, authorization or order of,
or make any filing or registration with, any court or other federal, state,
local, foreign 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 filing of a registration statement (an "Underlying
Securities Registration Statement") contemplated by the Registration Rights
Agreement with the Commission, which shall be filed in the time period set forth
in the Registration Rights Agreement, (ii) the applications for the listing of
the Underlying Shares with the Nasdaq National Market (and on each other
national securities exchange, market or trading facility on which the Common
Stock is then listed), (iii) to the extent required by Section 4(a)(ii) of the
Debentures, the "Stockholder Approval" as therein defined, and (iv) other than,
in all other cases, where the failure to obtain such consent, waiver,
authorization or order, or to give or make such notice or filing, could not have
or result in, individually or in the aggregate, a Material Adverse Effect
(together with the consents, waivers, authorizations, orders, notices and
filings referred to in Schedule 2.1(f), the "Required Approvals"). The Company
shall deliver to the Purchaser the Underlying Shares in the manner contemplated
hereby and by the Registration Rights Agreement free and clear of all liens and
encumbrances of any nature whatsoever.
(g) Litigation; Proceedings. Except as specifically disclosed
in the SEC Documents (as hereinafter defined), there is no action, suit, notice
of violation, proceeding or investigation pending or, to the best knowledge of
the Company, threatened against or affecting the Company or any of its
Subsidiaries or any of their respective properties before or by any court,
governmental or administrative agency or regulatory authority (federal, state,
county, local or foreign) which (i) adversely affects or challenges the
legality, validity or enforceability of any Transaction Document or the
Securities or (ii) could, individually or in the aggregate, have or result in a
Material Adverse Effect. Notwithstanding anything to the contrary contained
herein, in the event the Company obtains an unfavorable ruling in its patent
lawsuit pending against Identix, Inc. pending in the United States District
Court for the District of Northern California or decides not to continue
pursuing its claim against Identix, Inc., such unfavorable ruling or
discontinuance of litigation by the Company shall not be considered, for the
purposes of this Agreement, a Material Adverse Effect.
(h) No Default or Violation. Neither the Company nor any
Subsidiary (i) is in default under or in violation of (or has 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, (ii) is in violation of any order of any court, arbitrator or
governmental body, or (iii) is in violation of any statute, rule or regulation
of any governmental authority, except as could not individually or in the
aggregate, have or result in, a Material Adverse Effect.
(i) Private Offering. Neither the Company nor any Person
acting on its behalf has taken or will take any action which might subject the
offering, issuance or sale of the Securities to the registration requirements of
Section 5 of the Securities Act of 1933, as amended (the "Securities Act").
(j) SEC Documents. Except as set forth on Schedule 2.1(j), the
Company has filed all reports required to be filed by it under the Exchange Act,
including pursuant to Section 13(a) or 15(d) thereof, since September 30, 1996,
(the foregoing materials being collectively referred to herein as the "SEC
Documents" and, together with the Schedules to this Agreement and other
documents and information furnished by or on behalf of the Company at any time
prior to the Closing, as the "Disclosure Materials") on a timely basis or has
received a valid extension of such time of filing and has filed any such SEC
Documents prior to the expiration of any such extension. As of their respective
dates, the SEC Documents complied in all material respects with the requirements
of the Securities Act and the Exchange Act and the rules and regulations of the
Commission promulgated thereunder, and none of the SEC Documents, when filed,
contained any untrue statement of a material fact or omitted to state a material
fact required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading. The financial statements of the Company included in the SEC
Documents comply in all material respects with applicable accounting
requirements and the rules and regulations of the Commission with respect
thereto. Such financial statements have been prepared in accordance with
generally accepted accounting principles applied on a consistent basis during
the periods involved, except as may be otherwise specified in such financial
statements or the notes thereto, and fairly present in all material respects the
financial position of the Company as of and for the dates thereof and the
results of operations and cash flows for the periods then ended, subject, in the
case of unaudited statements, to normal year-end audit adjustments. Except as
set forth in Schedule 2.1(j), since the date of the financial statements
included in the Company's Annual Report on Form 10-K for the fiscal year ended
September 30, 1996, there has been no event, occurrence or development that has
had or that could have or result in a Material Adverse Effect which has not been
specifically disclosed in writing to the Purchaser by the Company. The Company
last filed audited financial statements with the Commission in connection with
its Form 10-K for the fiscal year ended September 30, 1996, and has not received
any comments from the Commission in respect thereof. The Schedules to this
Agreement furnished by or on behalf of the Company do not contain any untrue
statement of a material fact or omit to state any material fact necessary in
order to make the statements made therein, in light of the circumstances under
which they were made, not misleading.
(k) Investment Company. The Company is not, and is not an
"Affiliate person" of, an "investment company" within the meaning of the
Investment Company Act of 1940, as amended.
(l) Certain Fees. Except for fees payable and warrants
issuable to ▇▇▇▇▇▇, ▇▇▇▇▇▇▇ & ▇▇▇▇▇, Inc., no fees or commissions will be
payable by the Company to any broker, financial advisor, finder, investment
banker, or bank with respect to the transactions contemplated hereby. The
Purchaser shall have no obligation with respect to such 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
hereby. The Company shall indemnify and hold harmless the Purchaser, its
employees, officers, directors, agents, and partners, and their respective
Affiliates (as such term is defined under Rule 405 promulgated under the
Securities Act), from and against all claims, losses, damages, costs (including
the costs of preparation and attorney's fees) and expenses suffered in respect
of any such claimed or existing fees.
(m) Solicitation Materials. The Company has not (i)
distributed any offering materials in connection with the offering and sale of
the Securities other than the Disclosure Materials and any amendments and
supplements thereto or (ii) solicited any offer to buy or sell the Securities by
means of any form of general solicitation or advertising.
(n) Form S-1 Eligibility. The Company is eligible to register
securities for resale with the Commission under Form S-1 promulgated under the
Securities Act.
(o) Exclusivity. The Company shall not issue and sell
Debentures to any Person other than the Purchaser and its Affiliates and managed
funds, if any.
(p) Listing and Maintenance Requirements Compliance. Except as
set forth in Schedule 2.1(p), the Company has not in the two years preceding the
date hereof received written notice from any stock exchange or market on which
the Common Stock is or has been listed (or on which it has been quoted) to the
effect that the Company is not in compliance with the listing or maintenance
requirements of such exchange or market.
(q) Patents and Trademarks. Except as set forth in Schedule
2.1(q), the Company has, or has rights to use, all patents, patent applications,
trademarks, trademark applications, service marks, trade names, copyrights,
licenses, trade secrets and other intellectual property rights which are
necessary for use in connection with its business or which the failure to so
have would have a Material Adverse Effect (collectively, the "Intellectual
Property Rights"). To the best knowledge of the Company, none of the
Intellectual Property Rights infringe on any rights of any other Person, and the
Company either owns or has duly licensed or otherwise acquired all necessary
rights with respect to the Intellectual Property Rights. The Company has not
received any notice from any third
party of any claim of infringement by the Company of any of the Intellectual
Property Rights, and has no reason to believe there is any basis for any such
claim. To the best knowledge of the Company, except as set forth in Schedule
2.1(q), there is no existing infringement by another Person on any of the
Intellectual Property Rights. Notwithstanding anything to the contrary contained
herein, in the event the Company obtains an unfavorable ruling in its patent
lawsuit pending against Identix, Inc. pending in the United States District
Court for the District of Northern California or decides not to continue
pursuing its claim against Identix, Inc., such unfavorable ruling or
discontinuance of litigation by the Company shall not be considered, for the
purposes of this Agreement, a Material Adverse Effect.
2.2 Representations and Warranties of the Purchaser. The Purchaser
hereby makes the following representations and warranties to the Company:
(a) Organization; Authority. The Purchaser is a corporation
duly incorporated, validly existing and in good standing under the laws of the
jurisdiction of its organization with the requisite power and authority to enter
into and to consummate the transactions contemplated by the Transaction
Documents and to carry out its obligations thereunder. The acquisition of the
Securities by the Purchaser has been duly authorized by all necessary action on
the part of the Purchaser. Each of this Agreement and the Registration Rights
Agreement has been duly executed and delivered by the Purchaser and constitutes
the valid and legally binding obligation of the Purchaser, enforceable against
the Purchaser, in accordance with its terms, subject to bankruptcy, insolvency,
fraudulent transfer, reorganization, moratorium and similar laws of general
applicability relating to or affecting creditors' rights generally and to
general principles of equity.
(b) Investment Intent. The Purchaser is acquiring the
Securities for its own account for investment purposes only and not with a view
to or for distributing or reselling such Securities or any part thereof or
interest therein, without prejudice, however, to the Purchaser's right, subject
to the provisions of this Agreement and the Registration Rights Agreement, at
all times to sell or otherwise dispose of all or any part of such Securities
pursuant to an effective registration statement under the Securities Act and in
compliance with applicable state securities laws or under an exemption from such
registration.
(c) Purchaser Status. At the time the Purchaser was offered
the Securities, it was, and at the date hereof, it is, and at each Closing Date,
it will be, an "accredited investor" pursuant to in Rule 501(a)(3) under the
Securities Act.
(d) Experience of 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.
(e) Ability of Purchaser to Bear Risk of Investment. Purchaser
acknowledges that the Securities are speculative investments and involve a high
degree of risk and 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.
(f) Access to Information. The Purchaser acknowledges receipt
of the Disclosure Materials and further acknowledges that it has been afforded
(i) the opportunity to ask such questions as it has deemed necessary of, and to
receive answers from, representatives of the Company concerning the terms and
conditions of the offering of the Securities, and the merits and risks of
investing in the Securities; (ii) access to information about the Company and
the Company's financial condition, results of operations, business, properties,
management and prospects sufficient to enable it to evaluate its investment; and
(iii) the opportunity to obtain such additional information which the Company
possesses or can acquire without unreasonable effort or expense that is
necessary to make an informed investment decision with respect to the investment
and to verify the accuracy and completeness of the information contained in the
Disclosure Materials. Neither such inquiries nor any other investigation
conducted by or on behalf of such Purchaser or its representatives, agents or
counsel shall modify, amend or affect such Purchaser's right to rely on the
truth, accuracy and completeness of the Disclosure Materials and the Company's
representations and warranties contained in the Transaction Documents.
(g) Reliance. The Purchaser understands and acknowledges that
(i) the Securities are being offered and sold to the Purchaser without
registration under the Securities Act in a private placement that is exempt from
the registration provisions of the Securities Act and (ii) the availability of
such exemption, depends in part on, and the Company will rely upon the accuracy
and truthfulness of, the foregoing representations and the Purchaser hereby
consents to such reliance.
The Company acknowledges and agrees that the Purchaser makes
no representations or warranties with respect to the transactions contemplated
hereby other than those specifically set forth in this Section 2.2.
ARTICLE III
OTHER AGREEMENTS OF THE PARTIES
3.1 Transfer Restrictions. (a) The Securities may only be disposed of
pursuant to an effective registration statement under the Securities Act, to the
Company or pursuant to an available exemption from or in a transaction not
subject to the registration requirements thereof. In connection with any
transfer of Securities other than pursuant to an effective registration
statement or to the Company, the Company may require the
transferor thereof to provide to the Company an opinion of counsel experienced
in the area of United States securities laws selected by the transferor, the
form and substance of which opinion shall be reasonably satisfactory to the
Company, to the effect that such transfer does not require registration under
the Securities Act. Notwithstanding the foregoing, the Company hereby consents
to and agrees to register in its securities transfer register any transfer by
the Purchaser to an Affiliate of the Purchaser, or any transfers among
Affiliates provided that the transferee certifies to the Company that it is an
"accredited investor" as defined in Rule 501(a) under the Securities Act, and
such transfer does not otherwise violate any federal or state securities laws.
Any such transferee shall have the rights of the Purchaser under this Agreement
and the Registration Rights Agreement.
(b) The Purchaser agrees to the imprinting, so long as is
required by this Section 3.1(b), of the following legends on the Securities:
NEITHER THESE SECURITIES NOR THE SECURITIES INTO WHICH THESE
SECURITIES ARE [CONVERTIBLE] [EXERCISABLE] HAVE BEEN REGISTERED WITH
THE UNITED STATES 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.
[FOR DEBENTURES ONLY] THIS DEBENTURE IS SUBJECT TO CERTAIN RESTRICTIONS
ON TRANSFER AND CONVERSIONS SET FORTH IN A CONVERTIBLE DEBENTURE
PURCHASE AGREEMENT, DATED AS OF DECEMBER 1, 1997, BETWEEN DIGITAL
BIOMETRICS, INC. (THE "COMPANY") AND THE ORIGINAL HOLDER HEREOF. A COPY
OF THAT AGREEMENT IS ON FILE AT THE PRINCIPAL OFFICE OF THE COMPANY.
Underlying Shares shall not contain the legend set forth above
if the conversion of such Debentures or exercise of the Warrants or other
issuances of Underlying Shares, as the case may be, occurs at any time while an
Underlying Securities Registration Statement is effective under the Securities
Act or, in the event there is not an effective Underlying Securities
Registration Statement at such time, if in the opinion of counsel to the Company
experienced in the area of United States securities laws such legend is not
required under applicable requirements of the Securities Act (including judicial
interpretations and pronouncements issued by the staff of the Commission). The
Company
may also cause a stop-transfer order to be placed against the Securities with
its transfer agent during such time as the legends are on the Securities. The
Company agrees that it will provide the Purchaser, upon request, with a
certificate or certificates representing Underlying Shares, free from such
legend at such time as such legend is no longer required in accordance with this
Section. The Company may not make any notation on its records or give
instructions to any transfer agent of the Company which enlarge the restrictions
of transfer set forth in this Section .
3.2 Acknowledgement of Dilution. The Company acknowledges that the
issuance of the Underlying Shares upon (i) conversion of the Debentures and as
payment of interest thereon and (ii) exercise of the Warrants may result in
dilution of the outstanding shares of Common Stock, which dilution may be
substantial under certain market conditions. The Company further acknowledges
that, except as provided in Section 4(a)(ii) or Section 5 of the Debentures, its
obligation to issue Underlying Shares in accordance with the Debentures and the
Warrants is unconditional and absolute regardless of the effect of any such
dilution.
3.3 Furnishing of Information. As long as the Purchaser owns
Securities, the Company covenants to timely file (or obtain extensions in
respect thereof and file within the applicable grace period) all reports
required to be filed by the Company after the date hereof pursuant to Section
13(a) or 15(d) of the Exchange Act. If at any time prior to the date on which
the Purchaser may resell all of its Underlying Shares without volume
restrictions pursuant to Rule 144(k) promulgated under the Securities Act (as
determined by counsel to the Company pursuant to a written opinion letter to
such effect, addressed and acceptable to the Company's transfer agent for the
benefit of and enforceable by the Purchaser), the Company is not required to
file reports pursuant to such sections, it will prepare and furnish to the
Purchaser and make publicly available in accordance with Rule 144(c) promulgated
under the Securities Act annual and quarterly financial statements, together
with a discussion and analysis of such financial statements in form and
substance substantially similar to those that would otherwise be required to be
included in reports required by Section 13(a) or 15(d) of the Exchange Act in
the time period that such filings would have been required to have been made
under the Exchange Act. The Company further covenants that it will take such
further action as any holder of Securities may reasonably request, all to the
extent required from time to time to enable such Person to sell Securities
without registration under the Securities Act within the limitation of the
exemptions provided by Rule 144 promulgated under the Securities Act, including
the legal opinion referenced above in this Section. Upon the request of any such
Person, the Company shall deliver to such Person a written certification of a
duly authorized officer as to whether it has complied with such requirements.
3.4 Copies and Use of Disclosure Materials. The Company consents to the
use of the Disclosure Materials and any amendments and supplements thereto by
the Purchaser
in connection with resales of the Securities other than pursuant to an effective
registration statement, subject to any confidentiality requirements in
connection therewith.
3.5 Blue Sky Laws. In accordance with the Registration Rights
Agreement, the Company shall qualify the Underlying Shares under the securities
or Blue Sky laws of such jurisdictions as the Purchaser may reasonably request
and shall continue such qualification at all times through the third anniversary
of the last Closing Date; provided, however, that neither the Company nor its
Subsidiaries shall be required in connection therewith to qualify as a foreign
corporation where they are not now so qualified or to take any action that would
subject the Company to general service of process in any such jurisdiction where
it is not then so subject.
3.6 Integration. The Company shall not and shall use its best efforts
to ensure that no Affiliate of the Company shall sell, offer for sale or solicit
offers to buy or otherwise negotiate in respect of any security (as defined in
Section 2 of the Securities Act) that would be integrated with the offer or sale
of the Securities in a manner that would require the registration under the
Securities Act of the issue offer or sale of the Securities to the Purchaser.
3.7 Increase in Authorized Shares. At such time as the Company would
be, if a notice of conversion or exercise (as the case may be) were to be
delivered on such date, precluded from (a) converting the full outstanding
principal amount of Debentures (and paying any accrued but unpaid interest in
respect thereof in shares of Common Stock) that remain unconverted at such date
or (b) honoring the exercise in full of the Warrants, due to the unavailability
of a sufficient number of shares of authorized but unissued or reacquired Common
Stock, the Board of Directors of the Company shall promptly (and in any case
within 45 Business Days from such date) prepare and mail to the shareholders of
the Company proxy materials requesting authorization to amend the Company's
certificate of incorporation to increase the number of shares of Common Stock
which the Company is authorized to issue to at least a number of shares equal to
the sum of (i) all shares of Common Stock then outstanding, (ii) the number of
shares of Common Stock issuable on account of all outstanding warrants, options
and convertible securities (other than the Debentures and the Warrants) and on
account of all shares reserved under any stock option, stock purchase, warrant
or similar plan, (iii) 200% of the number of Underlying Shares as would then be
issuable upon a conversion in full of the then outstanding Debentures and as
payment of all future interest thereon in shares of Common Stock in accordance
with the terms of this Agreement and the Debentures and (iv) such number of
Underlying Shares as would then be issuable upon the exercise in full of the
Warrants. In connection therewith, the Board of Directors shall (a) adopt proper
resolutions authorizing such increase, (b) recommend to and otherwise use its
best efforts to promptly and duly obtain stockholder approval to carry out such
resolutions (and hold a special meeting of the shareholders no later than the
60th day after delivery of the proxy materials relating to such meeting) and
(c) within 5 Business Days of obtaining such shareholder authorization, file an
appropriate amendment to the Company's certificate of incorporation to evidence
such increase.
3.8 Purchaser Ownership of Common Stock. The Purchaser may not use its
ability to convert Debentures or use its ability to acquire shares of Common
Stock upon exercise of the Warrants, to the extent that such conversion or
exercise would result in the Purchaser beneficially owning (for purposes of Rule
13d-3 under the Exchange Act) more than 4.999% of the outstanding shares of the
Common Stock; provided, however, that if ten days shall have elapsed since
Purchaser has declared a default under any Transaction Document and such event
shall not have been cured to Purchaser's satisfaction prior to the expiration of
such ten-day period, the provisions of this Section 3.8 shall be null and void
ab initio. Notwithstanding anything to the contrary contained herein, the
provisions of this Section shall have no effect on the Company's obligation to
issue shares of Common Stock to the Purchaser upon receipt or delivery of any
conversion or exercise notice. The terms and conditions of this Section shall
not apply to any conversion of Debentures other than at the option of Purchaser.
3.9 Listing and Reservation of Underlying Shares. (a) The Company shall
(i) not later than the fifth Business Day following the Closing Date, prepare
and file with the Nasdaq National Market (as well as any other national
securities exchange or market on which the Common Stock is then listed) an
additional shares listing application covering at least the sum of (A) two times
the number of Underlying Shares as would be issuable upon a conversion in full
of the Debentures, assuming such conversion occurred on the Original Issue Date,
(B) the number of Underlying Shares required to pay interest in respect of the
Debentures in stock, and (C) the number of Underlying Shares issuable upon
exercise in full of the Warrants, (ii) take all steps necessary to cause the
such shares to be approved for listing in the Nasdaq National Market (as well as
on any other national securities exchange or market on which the Common Stock is
then listed) as soon as possible thereafter, and (iii) provide to the Purchaser
evidence of such listing, and the Company shall maintain the listing of its
Common Stock on such exchange or market.
(b) The Company shall maintain a reserve of Common Stock for
the issuance upon conversion of Debentures (and for payment of interest thereon)
and upon exercise of the Warrants in such amount as to enable the Company to
perform its obligations in full under the Transaction Documents, which reserve
shall include a number of shares of Common Stock equal to not less than two
times the number of shares of Common Stock as would be issuable upon the
conversion in full of the Debentures and interest thereon, assuming such
conversion occurred on the Original Issue Date (subject to increase as
required).
3.10 Conversion Procedures. Exhibit E attached hereto sets forth the
procedures with respect to the conversion of the Debentures, including the form
of legal opinion, if
necessary, that shall be rendered to the Company's transfer agent and such other
information and instructions as may be reasonably necessary to enable the
Purchaser to exercise its right of conversion smoothly and expeditiously.
3.11 Purchaser's Rights if Trading in Common Stock is Suspended or
Delisted. If at any time while the Purchaser (or any assignee thereof) owns any
Securities, trading in the shares of the Common Stock is suspended on or
delisted from the Nasdaq National Market or any other principal market or
exchange for such shares (other than as a result of the suspension of trading in
securities on such market or exchange generally or temporary suspensions pending
the release of material information) for more than two Trading Days, at the
Purchaser's option exercisable by five Business Days prior written notice to the
Company, the Company shall repay the entire principal amount of then outstanding
Debentures and redeem all then outstanding Underlying Shares then held by the
Purchaser, at an aggregate purchase price equal to the sum of (I) the aggregate
outstanding principal amount of Debentures then held by the Purchaser plus all
accrued but unpaid interest thereon divided by the Conversion Price on the date
of the repurchase notice and multiplied by the Average Price preceding (a) the
day of such notice or (b) the date of payment in full of the repurchase price
calculated under this Section, whichever is greater, (II) the aggregate of all
non-principal and interest amounts then payable in respect of all Debentures to
be repaid, (III) the number of Underlying Shares then held by such Purchaser
multiplied by the Average Price immediately preceding (A) the date of the notice
or (B) the date of payment in full by the Company of the repurchase price
calculated under this Section, whichever is greater, and (IV) interest on the
amounts set forth in I - III above accruing from the 5th Business Day after such
notice until the repurchase price under this Section is paid in full at the rate
of 15% per annum.
3.12 Notice of Breaches. Each of the Company and the Purchaser shall
give prompt written notice to the other of any breach of any representation,
warranty or other agreement contained in this Agreement or in the Registration
Rights Agreement, as well as any events or occurrences arising after the date
hereof and prior to the Closing Date which would reasonably be likely to cause
any representation or warranty or other agreement of such party, as the case may
be, contained herein to be incorrect or breached as the date thereof. However,
no disclosure by either party pursuant to this Section shall be deemed to cure
any breach of any representation, warranty or other agreement contained herein
or in the Registration Rights Agreement.
Notwithstanding the generality of the foregoing, the Company shall
promptly notify the Purchaser of any notice or claim (written or oral) that it
receives from any lender of the Company to the effect that the consummation of
the transactions contemplated hereby and by the Registration Rights Agreement
violates or would violate any written agreement or understanding between such
lender and the Company, and the Company shall promptly
furnish by facsimile to the holders of the Debentures a copy of any written
statement in support of or relating to such claim or notice.
3.13 Conversion and Exercise Obligations of the Company. The Company
shall honor conversions of the Debentures and exercises of the Warrants and
shall deliver Underlying Shares in accordance with the respective terms and
conditions and time periods set forth in the Debentures and the Warrants.
3.14 Subsequent Offerings; Certain Company Actions. (a) The Company
shall not without the prior written consent of the Purchaser which consent will
not be unreasonably withheld or delayed, directly or indirectly offer, sell,
grant any option to purchase, or otherwise dispose (or announce any offer, sale,
grant any option to purchase or other disposition) of any of its or its
Affiliates equity or equity-equivalent securities in a transaction not subject
to the registration requirements of the Securities Act or in a transaction not
subject to the registration requirements of the Securities Act at a price which
is, on the face thereof, or implied therein, less than the market price or fair
market value for such securities (a "Private Placement") until the earlier to
occur of (i) 60 Trading Days after the Tranche 2 Closing Date or Tranche 2
Closing Expiration Date, as applicable, (any days that the Purchaser is unable
to sell Underlying Shares under the Underlying Securities Registration Statement
shall be added to such 60 Trading Day period) or (ii) such time as conversions
aggregating 85% or more of all outstanding Debentures relating to each Closing
have been honored by the Company (as evidenced by a writing executed by each of
the Purchaser and the Company), provided, however that notwithstanding anything
to the contrary contained herein, in the event the Company consummates a Private
Placement at a time after the requirements of subparagraph (i) or (ii) have been
satisfied, the Purchaser shall no longer have any obligation to purchase
Debentures hereunder. The following offerings and issuances shall not be subject
to the restrictions set forth in the immediately preceding sentence: (w) the
granting of options or warrants to employees, officers, directors and advisors
of the Company, and the issuance of shares of Common Stock upon exercise of
options granted, under any stock option plan heretofore or hereinafter duly
adopted by the Company, (x) any equity or equity-equivalent private offering (i)
entered into prior to the Tranche 1 Closing Date or (ii) arranged by an
investment banker that is licensed by the National Association of Securities
Dealers, Inc. and which is restricted from resale for a period of at least 180
days, provided, that such 180 day period terminates at least 90 days after the
Tranche 5 Closing Date or Tranche 5 Closing Expiration Date, as applicable, (y)
any acquisition transaction which is restricted from resale for a period of at
least 180 days, provided, that such 180 day period terminates at least 90 days
after the Tranche 5 Closing Date or Tranche 5 Closing Expiration Date, as
applicable and (z) shares of Common Stock issued upon conversion of Debentures
or exercise of the Warrants.
(b) As long as Debentures are outstanding, the Company shall
not and shall cause the Subsidiaries not to, without the consent of the
Purchaser, which consent will not
be unreasonably withheld or delayed, (i) amend its certificate of incorporation,
bylaws or other charter documents (or their foreign equivalents) (ii) split,
combine or reclassify its outstanding capital stock; (iii) declare, authorize,
set aside or pay any dividend or other distribution with respect to the Common
Stock; (iv) repay, repurchase or offer to repay, repurchase or otherwise acquire
shares of its Common Stock; or (v) enter into any agreement with respect to any
of the foregoing, in each such case so as to adversely affect rights of the
Purchaser.
3.15 The Warrants. At each of the Tranche 1 Closing, Tranche 2 Closing,
Tranche 3 Closing, Tranche 4 Closing and Tranche 5 Closing, the Company shall
issue to the Purchaser, common stock purchase warrants, in the form of Exhibit D
(the "Tranche 1 Warrants, Tranche 2 Warrants, Tranche 3 Warrants, Tranche 4
Warrants and Tranche 5 Warrants" and collectively, the "Warrants"), pursuant to
which the Purchaser shall have the right at any time thereafter through the
fifth anniversary of the date of issuance thereof, to acquire 15,000 shares of
Common Stock at an exercise price per share equal to $2.50. In the event that
there is not a Tranche 4 Closing or Tranche 5 Closing, the Company shall issue
to the Purchaser the Tranche 4 Warrants and Tranche 5 Warrants on the Tranche 4
Closing Expiration Date and Tranche 5 Closing Expiration Date, respectively,
unless the reason there is not a Tranche 4 Closing or Tranche 5 Closing if due
solely to a breach of this Agreement by Purchaser.
3.16 Use of Proceeds. The Company shall use all of the proceeds from
the placement of the Securities for working capital purposes and not for the
satisfaction of any portion of Company debt (except for reductions of the
Company's indebtedness to banks under any revolving line of credit) or to redeem
Company equity or equity-equivalent securities. Pending application of the
proceeds of this placement in the manner permitted hereby the Company will
invest such proceeds in interest bearing accounts and/or short-term, investment
grade interest bearing securities.
ARTICLE IV
CONDITIONS
4.1 Conditions Precedent to the Obligation of the Purchasers to
Purchase the Tranche 2 Debentures, the Tranche 3 Debentures, the Tranche 4
Debentures and the Tranche 5 Debentures. The obligation of the Purchaser
hereunder to acquire and pay for ▇▇▇▇▇▇▇ ▇ ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ 3 Debentures,
Tranche 4 Debentures and Tranche 5 Debentures is subject to the satisfaction or
waiver by the Purchaser at or before the ▇▇▇▇▇▇▇ ▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇ ▇▇▇▇▇▇▇,
▇▇▇▇▇▇▇ ▇ Closing and Tranche 5 Closing, as applicable, of each of the following
conditions:
(a) Tranche 1 Closing. The Tranche 1 Closing shall have
occurred.
(b) Accuracy of the Company's Representations and Warranties.
The representations and warranties of the Company contained herein shall be true
and correct in all material respects as of the date when made and as of the
Tranche 2 Closing Date, Tranche 3 Closing Date, Tranche 4 Closing Date and
Tranche 5 Closing Date, as applicable, as though made on and as of such date;
(c) Performance by the Company. The Company shall have
performed, satisfied and complied in all material respects with all covenants,
agreements and conditions required by the Transaction Documents to be performed,
satisfied or complied with by the Company at or prior to the Tranche 2 Closing
Date, Tranche 3 Closing Date, Tranche 4 Closing Date and Tranche 5 Closing Date,
as applicable;
(d) Underlying Securities Registration Statements. The
Underlying Securities Registration Statement registering the Registrable
Securities (as such term is defined in the Registration Rights Agreement) shall
have been declared effective under the Securities Act by the Commission and with
respect to each Closing Date, such Underlying Registration Statement shall have
remained effective and shall not be subject to any stop order and no stop order
shall be pending or threatened as at any Closing Date;
(e) No Injunction. No statute, rule, regulation, executive
order, decree, ruling or injunction shall have been enacted, entered,
promulgated or endorsed by any court or governmental authority which prohibits
the consummation of any of the transactions contemplated by this Agreement or
the Registration Rights Agreement relating to the issuance or conversion of any
of the Securities.
(f) No Suspensions of Trading in Common Stock. The trading in
the Common Stock shall not have been suspended by the Commission or on the
Nasdaq National Market (except for any suspension of trading of limited duration
solely to permit dissemination of material information regarding the Company and
except if, at the time there is any suspension on the Nasdaq National Market,
the Common Stock is then listed and approved for trading on the New York Stock
Exchange, Nasdaq SmallCap Market or the American Stock Exchange within one (1)
Trading Day thereof);
(g) Listing of Common Stock. The Common Stock, including the
Common Stock duly reserved for issuance upon conversion of the Tranche 2
Debentures, Tranche 3 Debentures, Tranche 4 Debentures and Tranche 5 Debentures,
as applicable, shall have been at all times between the Tranche 1 Closing Date,
the Tranche 2 Closing Date, the Tranche 3 Closing Date, the Tranche 4 Closing
Date and the Tranche 5 Closing Date, as applicable, and on such applicable
Closing Date be, listed for trading on the Nasdaq National Market, the American
Stock Exchange, New York Stock Exchange or the Nasdaq SmallCap Market.
(h) Change of Control. No Change of Control in the Company
shall have occurred. "Change of Control" means the occurrence of any of (i) an
acquisition after the date hereof by an individual or legal entity of in excess
of 40% of the voting securities of the Company, (ii) a replacement of more than
one-half of the members of the Company's board of directors which is not
approved by those individuals who are members of the board of directors on the
date hereof in one or a series of related transactions, (iii) the merger of the
Company with or into another entity, consolidation or sale of all or
substantially all of the assets of the Company in one or a series of related
transactions or (iv) the execution by the Company of an agreement to which the
Company is a party or by which it is bound, providing for any of the events set
forth above in (i), (ii) or (iii).
(i) Legal Opinion. The Company shall have delivered to such
Purchaser an opinion of outside legal counsel to the Company in substantially
the forms attached hereto as Exhibit C and dated the applicable Closing Date;
(j) Required Approvals. All Required Approvals shall have
been obtained;
(k) Shares of Common Stock. On each of the Tranche 2 Closing
Date, Tranche 3 Closing Date, Tranche 4 Closing Date and Tranche 5 Closing Date,
as applicable, the Company shall have reserved for issuance to the Purchaser two
times the number of Underlying Shares which would be issuable upon conversion in
full of the ▇▇▇▇▇▇▇ ▇ ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ 3 Debentures, Tranche 4 Debentures,
Tranche 5 Debentures and Tranche 5 Debentures, as applicable, assuming such
conversion occurred on the Original Issue Date for such Securities;
(l) Delivery of Securities. The Company shall have delivered
to the Purchaser or an affiliate thereof the Debentures being purchased at such
Closing, registered in the name of the Purchaser, each in form satisfactory to
the Purchaser; and
(m) Performance of Conversion/Exercise Obligations. Through
the Tranche 2 Closing Date, Tranche 3 Closing Date, Tranche 4 Closing Date and
Tranche 5 Closing Date, as applicable, the Company shall have (a) delivered
Underlying Shares upon conversion of Debentures and otherwise performed its
obligations in accordance with the terms, conditions and timing requirements of
each Debenture and (b) shall have delivered Underlying Shares upon exercise of
the Warrants and otherwise performed its obligations in accordance with the
terms of the Warrants.
(n) Market Capitalization. The Company's "Market
Capitalization" shall not have been less than $12,000,000 at or prior to the
Tranche 2 Closing Date, Tranche 3 Closing Date, Tranche 4 Closing Date or
Tranche 5 Closing Date, as applicable. "Market Capitalization" shall be
determined by taking the weighted volume average of the Per Share Market for the
fifteen (15) Trading Days immediately prior to each applicable Closing Date
and multiplying such fifteen (15) day weighted volume average by the number of
outstanding shares of the Company's Common Stock on the date preceding the
applicable Closing Date.
ARTICLE V
MISCELLANEOUS
5.1 Fees and Expenses. Each party shall pay the fees and
expenses of its advisers and other experts in connection with the transactions
contemplated by this Agreement, except that the Company shall pay at the
applicable Closing the legal fees and disbursements of the Purchaser's counsel
in connection with the negotiation and preparation of the Transaction Documents
in the amount of $15,000, and the Purchaser shall pay such expenses as specified
in the Registration Rights Agreement. The Company shall pay all stamp and other
taxes and duties levied in connection with the issuance of the Debentures
pursuant hereto. The Purchaser shall be responsible for the Purchaser's own tax
liability that may arise as a result of the investment hereunder or the
transactions contemplated by this Agreement.
5.2 Entire Agreement; Amendments. This Agreement, together
with the Exhibits and Schedules hereto, the Debentures and the Warrants 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. The Exhibits and Schedule to this Agreement are
hereby incorporated herein and made part hereof for all purposes as if fully set
forth herein.
5.3 Notices. Any and all notices or other communications or
deliveries required or permitted to be provided hereunder shall be in writing
and shall be deemed given and effective on the earliest of (i) the date of
transmission, if such notice or communication is delivered via facsimile at the
facsimile telephone number specified in this Section prior to 4:30 p.m.
(Minneapolis time) on a Business Day, (ii) the Business Day after the date of
transmission, if such notice or communication is delivered via facsimile at the
facsimile telephone number specified in the Purchase Agreement later than 4:30
p.m. (Minneapolis time) on any date and earlier than 11:59 p.m. (Minneapolis
time) on such date, (iii) the Business Day following the date of mailing, if
sent by nationally recognized overnight courier service, or (iv) upon actual
receipt by the party to whom such notice is required to be given. The address
for such notices and communications shall be as follows:
If to the Company: Digital Biometrics, Inc.
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Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
Attn: Chief Financial Officer
With copies to: ▇▇▇▇▇▇ and ▇▇▇▇▇▇ P.A.
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Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
Attn: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
If to the Purchaser: KA Investments LDC
c/o Tarmachan Capital Management
1712 ▇▇▇▇▇▇▇ Crossroads
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
Attn: ▇▇▇▇▇ ▇▇▇▇▇▇▇
With copies to: ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ &
▇▇▇▇▇▇ LLP
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Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
Attn: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
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or such other address as may be designated in writing hereafter, in the same
manner, by such Person.
5.4 Amendments; Waivers. No provision of this Agreement may be
waived or amended except in a written instrument signed, in the case of an
amendment, by both the Company and the Purchaser; or, in the case of a waiver,
by the party against whom enforcement of any such waiver is sought. No waiver of
any default with respect to any provision, condition or requirement of this
Agreement shall be deemed to be a continuing waiver in the future or a waiver of
any other provision, condition or requirement hereof, nor shall any delay or
omission of either party to exercise any right hereunder in any manner impair
the exercise of any such right accruing to it thereafter.
5.5 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.
5.6 Successors and Assigns. This Agreement shall be binding
upon and inure to the benefit of the parties and their successors and permitted
assigns, including any Persons to whom any Purchaser transfers Debentures or
Warrants. The assignment by a party of this Agreement or any rights hereunder
shall not affect the obligations of such party under this Agreement.
5.7 No Third-Party Beneficiaries. This Agreement is intended
for the benefit of the parties hereto and their respective permitted successors
and assigns and, other than with respect to permitted assignees under Section
5.6, is not for the benefit of, nor may any provision hereof be enforced by, any
other Person.
5.8 Governing Law. This Agreement shall be governed by and
construed and enforced in accordance with the internal laws of the State of
Delaware without regard to the principles of conflicts of law thereof.
5.9 Survival. The representations, warranties, agreements and
covenants contained in this Agreement shall survive after the last Closing Date
and the delivery and conversion of the Debentures.
5.10 Execution. This Agreement may be executed in two or more
counterparts, all of which when taken together shall be considered one and the
same agreement and shall become effective when counterparts have been signed by
each party and delivered to the other party, it being understood that both
parties need not sign the same counterpart. In the event that any signature is
delivered by facsimile transmission, such signature shall create a valid and
binding obligation of the party executing (or on whose behalf such signature is
executed) the same with the same force and effect as if such facsimile signature
page were an original thereof.
5.11 Publicity. The Company and the Purchaser shall consult
with each other in issuing any press releases or otherwise making public
statements with respect to the transactions contemplated hereby and neither
party shall issue any such press release or otherwise make any such public
statement without the prior written consent of the other, which consent shall
not be unreasonably withheld or delayed, except that no prior consent shall be
required if such disclosure is required by law, in which such case the
disclosing party shall provide the other party with prior notice of such public
statement. Notwithstanding the foregoing, the Company shall not publicly
disclose the name of the Purchaser without the prior written consent of the
Purchaser, except to the extent
required by law, in which case the Company shall provide Purchaser with prior
written notice of such public disclosure.
5.12 Severability. In case any one or more of the provisions
of this Agreement shall be invalid or unenforceable in any respect, the validity
and enforceability of the remaining terms and provisions of this Agreement shall
not in any way be affected or impaired thereby and the parties will attempt to
agree upon a valid and enforceable provision which shall be a reasonable
substitute therefor, and upon so agreeing, shall incorporate such substitute
provision in this Agreement.
5.13 Remedies. Each of the parties to this Agreement
acknowledges and agrees that the other parties would be damaged irreparably in
the event any of the provisions of this Agreement are not performed in
accordance with their specific terms or otherwise are breached. Accordingly,
each of the parties hereto agrees that the other parties shall be entitled to an
injunction or injunctions to prevent breaches of the provisions of this
Agreement and to enforce specifically this Agreement and the terms and
provisions of this Agreement in any action instituted in any court of the United
States of America or any state thereof having jurisdiction over the parties to
this Agreement and the matter, in addition to any other remedy to which they may
be entitled, at law or in equity.
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SIGNATURE PAGE FOLLOWS]
IN WITNESS WHEREOF, the parties hereto have caused this
Debenture Purchase Agreement to be duly executed by their respective authorized
persons as of the date first indicated above.
Company:
DIGITAL BIOMETRICS, INC.
By:
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Name:
Title:
Purchaser:
KA INVESTMENTS LDC
By:
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Name:
Title: