EXHIBIT 4.5
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SECURITIES PURCHASE AGREEMENT
Among
THRUSTMASTER, INC.,
STRONG RIVER INVESTMENTS, INC.,
▇▇▇▇▇▇▇▇ INVESTMENTS L.P.
and
MONTROSE INVESTMENTS L.P.
January 28, 1999
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SECURITIES PURCHASE AGREEMENT, dated as of January 28, 1999 (this
"AGREEMENT"), among ThrustMaster, Inc., an Oregon corporation (the
"COMPANY"), Strong River Investments Inc. ("STRONG RIVER"), a corporation
organized under the laws of the British Virgin Islands, ▇▇▇▇▇▇▇▇ Investments
L.P. ("▇▇▇▇▇▇▇▇"), a Delaware limited partnership, and Montrose Investments
L.P. ("MONTROSE"), a Cayman Islands exempt limited partnership. Strong River,
▇▇▇▇▇▇▇▇ and Montrose are each referred to herein as a "PURCHASER" and are
collectively referred to herein as the "PURCHASERS".
WHEREAS, subject to the terms and conditions set forth in this
Agreement, the Company desires to issue and the Purchasers desire to purchase
shares (the "SHARES") of the Company's common stock, no par value (the
"COMMON STOCK").
NOW THEREFORE, the Company and the Purchasers hereby agree as follows:
ARTICLE I
PURCHASE AND SALE OF SECURITIES
1.1 PURCHASE OF SHARES. Subject to the terms and conditions set forth
herein, the Company shall issue and sell to the Purchasers and the Purchasers
shall purchase the Shares.
For purposes of this Agreement, "BUSINESS DAY" and "PER SHARE MARKET
VALUE" shall have the meanings set forth in EXHIBIT A. Each of the Tranche 1
Closing, the Tranche 2 Closing and Tranche 3 Closing are sometimes
individually referred to herein as a "CLOSING". Each of the First Tranche 1
Warrant, Second Tranche 1 Warrant, First Tranche 3 Warrant and Second Tranche
3 Warrant are sometimes collectively referred to herein as the "WARRANTS".
Each of the First Tranche 1 Adjustment Shares, Second Tranche 1 Adjustment
Shares, First Tranche 2 Adjustment Shares, Second Tranche 2 Adjustment
Shares, First Tranche 3 Adjustment Shares and Second Tranche 3 Adjustment
Shares are sometimes collectively referred to herein as the "ADJUSTMENT
SHARES".
1.2 THE TRANCHE 1 CLOSING. (a) Subject to the terms and conditions
set forth herein, the Company shall issue and sell to the Purchasers and the
Purchasers shall purchase 250,000 Shares (the "TRANCHE 1 SHARES") for a
purchase price of $4,000,000 (the "PURCHASE PRICE"). The closing of the
purchase and sale of the Tranche 1 Shares (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 or cause to be delivered to (A) Strong River (1) a stock certificate,
registered in the name of Strong River representing 125,000 Tranche 1 Shares
to be acquired at the Tranche 1 Closing by it, (2) a
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common stock purchase warrant (the "FIRST TRANCHE 1 WARRANT"), in the form of
EXHIBIT D-1, registered in the name of Strong River, entitling the holder
thereof to acquire 17,689 shares of Common Stock upon the terms set forth
therein, (3) a common stock purchase warrant (the "SECOND TRANCHE 1
WARRANT"), in the form of EXHIBIT D-2, registered in the name of Strong
River, entitling the holder thereof to acquire 17,689 shares of Common Stock
upon the terms set forth therein, (4) the legal opinion of ▇▇▇▇▇▇▇ Coie LLP
outside counsel to the Company, addressed to the Strong River, substantially
in the form attached hereto as EXHIBIT C, and (5) 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, including
without limitation, executed originals of each of the Registration Rights
Agreement, dated the date hereof, between the Company and the Purchasers in
the form of EXHIBIT A attached hereto (the "REGISTRATION RIGHTS AGREEMENT")
and the Irrevocable Transfer Agent Instructions, in the form of EXHIBIT B
attached hereto (the "TRANSFER AGENT INSTRUCTIONS"), delivered to and
acknowledged by the Company and the Company's transfer agent, to (B) ▇▇▇▇▇▇▇▇
(1) a stock certificate, registered in the name of ▇▇▇▇▇▇▇▇ representing
43,750 Tranche 1 Shares to be acquired at the Tranche 1 Closing by it, (2) a
First Tranche 1 Warrant registered in the name of ▇▇▇▇▇▇▇▇, entitling the
holder thereof to acquire 6,191 shares of Common Stock upon the terms set
forth therein, (3) a Second Tranche 1 Warrant registered in the name of
▇▇▇▇▇▇▇▇, entitling the holder thereof to acquire 6,191 shares of Common
Stock upon the terms set forth therein, (4) the legal opinion of ▇▇▇▇▇▇▇ Coie
LLP outside counsel to the Company, addressed to ▇▇▇▇▇▇▇▇, substantially in
the form attached hereto as EXHIBIT C, and (5) 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, including
without limitation, executed originals of each of the Registration Rights
Agreement and the Irrevocable Transfer Agent Instructions, delivered to and
acknowledged by the Company and the Company's transfer agent, and to (C)
Montrose (1) a stock certificate, registered in the name of ▇▇▇▇▇▇▇▇
representing 81,250 Tranche 1 Shares to be acquired at the Tranche 1 Closing
by it, (2) a First Tranche 1 Warrant registered in the name of Montrose,
entitling the holder thereof to acquire 11,497 shares of Common Stock upon
the terms set forth therein, (3) a Second Tranche 1 Warrant registered in the
name of Montrose, entitling the holder thereof to acquire 11,497 shares of
Common Stock upon the terms set forth therein, (4) the legal opinion of
▇▇▇▇▇▇▇ Coie LLP outside counsel to the Company, addressed to Montrose,
substantially in the form attached hereto as EXHIBIT C, and (5) 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,
including without limitation, executed originals of each of the Registration
Rights Agreement and the Irrevocable Transfer Agent Instructions, delivered
to and acknowledged by the Company and the Company's transfer agent, (b) the
Purchasers shall deliver or cause to be delivered to the Company (1)
$4,000,000 (the "TRANCHE 1 PURCHASE PRICE") 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 Purchasers pursuant to this Agreement, including,
without limitation, an executed Registration Rights 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 Purchasers (a
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"SUBSEQUENT FINANCING NOTICE") requiring the Purchasers or any other fund
under common management with any of the Purchasers (a "Designee") to purchase
such number of shares of Common Stock, for an aggregate purchase price of no
less than $1,000,000 and no more than $6,000,000 (the "TRANCHE 2 PURCHASE
PRICE"), equal to the Tranche 2 Purchase Price divided by the Per Share
Market Value of the Common Stock on the trading day immediately preceding the
Tranche 2 Closing Date (the "TRANCHE 2 SHARES") or, if applicable, 50% of the
Tranche 2 Purchase Price (the "EARLY TRANCHE 2 PURCHASE PRICE") divided by
the Per Share Market Value of the Common Stock on the trading day immediately
preceding the Early Tranche 2 Closing Date (the "EARLY TRANCHE 2 SHARES"),
PROVIDED, HOWEVER that the Tranche 2 Purchase Price shall not be in excess of
(i) $1,000,000 if the Per Share Market Value on the trading day immediately
preceding the Tranche 2 Closing Date, or the Early Tranche 2 Closing Date, if
applicable, is less than or equal to $8.00, (ii) $2,000,000 if the Per Share
Market Value on the trading day immediately preceding the Tranche 2 Closing
Date, or the Early Tranche 2 Closing Date, if applicable, is greater than
$8.00 but less than or equal to $9.00, (iii) $3,000,000 if the Per Share
Market Value on the trading day immediately preceding the Tranche 2 Closing
Date, or the Early Tranche 2 Closing Date, if applicable, is greater than
$9.00 but less than or equal to $10.00, (iv) $4,000,000 if the Per Share
Market Value on the trading day immediately preceding the Tranche 2 Closing
Date, or the Early Tranche 2 Closing Date, if applicable, is greater than
$10.00 but less than or equal to $17.00, (v) $4,500,000 if the Per Share
Market Value on the trading day immediately preceding the Tranche 2 Closing
Date, or the Early Tranche 2 Closing Date, if applicable, is greater than
$17.00 but less than or equal to $18.00, (vi) $5,000,000 if the Per Share
Market Value on the trading day immediately preceding the Tranche 2 Closing
Date, or the Early Tranche 2 Closing Date, if applicable, is greater than
$18.00 but less than or equal to $19.00, (vii) $5,500,000 if the Per Share
Market Value on the Tranche 2 Closing Date, or the Early Tranche 2 Closing
Date, if applicable, is greater than $19.00 but less than or equal to $20.00,
and (viii) $6,000,000 if the Per Share Market Value on the trading day
immediately preceding the Tranche 2 Closing Date, or the Early Tranche 2
Closing Date, if applicable, is greater than $20.00. The Company may not
deliver the Subsequent Financing Notice relating to the Tranche 2 Shares
earlier than five (5) Business Days after the Second Tranche 1 Adjustment
Date or, if such day is not a Business Day, the next succeeding Business Day.
Notwithstanding anything to the contrary ontained herein, in the event that
the average Per Share Market Value for the 25 calendar days immediately
preceding the First Tranche 1 Adjustment Date is greater than $12.00 and the
Per Share Market Value on the First Tranche 1 Adjustment Date is greater than
$10.00, the Company shall have the right to deliver a Subsequent Financing
Notice commencing one trading day after the First Tranche 1 Adjustment Date
(the "EARLY NOTICE DATE") requiring the Purchasers to purchase the Early
Tranche 2 Shares. The closing of the purchase and sale of the Early Tranche
2 Shares (the "EARLY TRANCHE 2 CLOSING"), if applicable, shall take place at
the offices of RSPAB on the fifth Business Day after the Subsequent Financing
Notice relating to the Early Tranche 2 Shares is deemed delivered hereunder
or on such other date as otherwise agreed to by the parties; PROVIDED,
HOWEVER, that in no case shall the Early Tranche 2 Closing take place unless
and until the conditions listed in SECTION 4.1 have been satisfied by the
Company or waived by the Purchasers and in no event shall the Early Tranche 2
Closing occur subsequent to the 10th Business Day after the Early Notice Date
(such date, the "EARLY TRANCHE 2 CLOSING EXPIRATION DATE"). The date of the
Early Tranche 2 Closing is hereinafter referred to as the "EARLY TRANCHE 2
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CLOSING DATE." The closing of the purchase and sale of all of the Tranche 2
Shares, or the remaining 50% of the Tranche 2 Shares, if applicable, (the
"TRANCHE 2 CLOSING") shall take place at the offices of RSPAB on the fifth
Business Day after the Subsequent Financing Notice requiring the purchase of
such Shares is deemed delivered hereunder or on such other date as otherwise
agreed to by the parties; 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 by the Company or waived by the Purchasers
and in no event shall the Tranche 2 Closing occur subsequent to the 150th 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)(i) At the Early Tranche 2 Closing, if applicable, (i)
the Company shall deliver to or cause to be delivered to each Purchaser (1) a
stock certificate, registered in the name of such Purchaser or such
Purchaser's Designee representing such number of Early Tranche 2 Shares equal
to the Early Tranche 2 Purchase Price paid by such Purchaser or such
Purchaser's Designee divided by the Per Share Market Value of the Common
Stock on the trading day immediately preceding the Early Tranche 2 Closing
Date, (2) the legal opinion referred to in Section 4.1(xi), and (3) all other
documents, instruments and writings required to have been delivered at or
prior to the Early Tranche 2 Closing Date by the Company pursuant to this
Agreement, including the Transfer Agent Instructions referenced in Section
4.1(xvi), and (b) the Purchasers shall deliver or cause to be delivered to
the Company (1) the Early Tranche 2 Purchase Price, in immediately available
funds by wire transfer to an account designated in writing by the Company for
such purpose on or prior to the Early Tranche 2 Closing Date, and (2) all
documents, instruments and writings required to have been delivered at or
prior to the Early Tranche 2 Closing Date by the Purchasers pursuant to this
Agreement.
(ii) At the Tranche 2 Closing, (i) the Company shall deliver
to or cause to be delivered to each Purchaser (1) a stock certificate,
registered in the name of such Purchaser or such Purchaser's Designee
representing such number of Tranche 2 Shares equal to the Tranche 2 Purchase
Price (or 50% of the Tranche 2 Purchase Price if there has been an Early
Tranche 2 Closing pursuant to Section 1.3(b)(i) above) paid by such Purchaser
or such Purchaser's Designee divided by the Per Share Market Value of the
Common Stock on the trading day immediately preceding the Tranche 2 Closing
Date, (2) the legal opinion referred to in Section 4.1(xi), and (3) all other
documents, instruments and writings required to have been delivered at or
prior to the Tranche 2 Closing Date by the Company pursuant to this
Agreement, including the Transfer Agent Instructions referenced in Section
4.1(xvi), and (b) the Purchasers shall deliver or cause to be delivered to
the Company (1) the Tranche 2 Purchase Price (or 50% of the Tranche 2
Purchase Price if there has been an Early Tranche 2 Closing pursuant to
Section 1.3(b)(i) above), 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 2 Closing Date, and (2) all documents, instruments and
writings required to have been delivered at or prior to the Tranche 2 Closing
Date by the Purchasers pursuant to this Agreement.
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1.4 THE 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 Purchasers to purchase such number
of shares of Common Stock (the "TRANCHE 3 SHARES"), for an aggregate purchase
price of no less than $1,000,000 and no more than $6,000,000 (the "TRANCHE 3
PURCHASE PRICE"), equal to the Tranche 3 Purchase Price divided by the Per
Share Market Value of the Common Stock on the trading day immediately
preceding the Tranche 3 Closing Date, PROVIDED, HOWEVER that the Tranche 3
Purchase Price shall not be in excess of (i) $1,000,000 if the Per Share
Market Value on the trading day immediately preceding the Tranche 3 Closing
Date is less than or equal to $8.00, (ii) $2,000,000 if the Per Share Market
Value on the trading day immediately preceding the Tranche 3 Closing Date is
greater than $8.00 but less than or equal to $9.00, (iii) $3,000,000 if the
Per Share Market Value on the trading day immediately preceding the Tranche 3
Closing Date is greater than $9.00 but less than or equal to $10.00, (iv)
$4,000,000 if the Per Share Market Value on the trading day immediately
preceding the Tranche 3 Closing Date is greater than $10.00 but less than or
equal to $17.00, (v) $4,500,000 if the Per Share Market Value on the trading
day immediately preceding the Tranche 3 Closing Date is greater than $17.00
but less than or equal to $18.00, (vi) $5,000,000 if the Per Share Market
Value on the trading day immediately preceding the Tranche 3 Closing Date is
greater than $18.00 but less than or equal to $19.00, (vii) $5,500,000 if the
Per Share Market Value on the trading day immediately preceding the Tranche 3
Closing Date is greater than $19.00 but less than or equal to $20.00, and
(viii) $6,000,000 if the Per Share Market Value on the trading day
immediately preceding the Tranche 3 Closing Date is greater than $20.00. The
Company may not deliver the Subsequent Financing Notice relating to the
Tranche 3 Shares earlier than 5 Business Days after the earlier to occur of
the Tranche 2 Closing Expiration Date or the Second Tranche 2 Adjustment 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 Shares (the "TRANCHE 3
CLOSING") shall take place at the offices of RSPAB on the fifth Business Day
after the Subsequent Financing Notice is deemed delivered hereunder or on
such other date as otherwise agreed to by the parties; PROVIDED, HOWEVER,
that in no case shall the Tranche 3 Closing take place unless and until the
conditions listed in SECTION 4.2 have been satisfied by the Company or waived
by the Purchasers and in no event shall the Tranche 3 Closing occur
subsequent to the 150th day after the earlier to occur of the Tranche 2
Closing Expiration Date or the Tranche 2 Closing 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 or cause to be delivered to each Purchaser (1) a stock certificate,
registered in the name of such Purchaser or such Purchaser's Designee
representing such number of Tranche 3 Shares equal to the Tranche 3 Purchase
Price paid by such Purchaser or such Purchaser's Designee divided by the Per
Share Market Value of the Common Stock on the trading day immediately
preceding the Tranche 3 Closing Date to be acquired at the Tranche 3 Closing
by the Purchasers, (2) a common stock purchase warrant (the "FIRST TRANCHE 3
WARRANT"), in the form of EXHIBIT E-1, registered in the name of each
Purchaser or the name of each Purchaser's Designee, entitling the Purchasers
to acquire an aggregate number of shares of Common Stock equal to 6.25% of
the quotient obtained
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by dividing (A) (1) the sum of (i) the Tranche 1 Purchase Price, (ii) the
Tranche 2 Purchase Price and (iii) the Tranche 3 Purchase Price less (2)
$12,000,000, by (B) 132.5% times the Per Share Market Value of the Common
Stock on the trading day immediately preceding the Tranche 3 Closing Date, at
an exercise price equal to 125% of the Per Share Market Value of the Common
Stock on the trading day immediately preceding the Tranche 3 Closing Date,
upon the terms set forth therein, (3) a common stock purchase warrant (the
"SECOND TRANCHE 3 WARRANT"), in the form of EXHIBIT E-2, registered in the
name of each Purchaser or the name of each Purchaser's Designee, entitling
the Purchasers to acquire an aggregate number of shares of Common Stock equal
to 6.25% of the quotient obtained by dividing (A) (1) the sum of (i) the
Tranche 1 Purchase Price, (ii) the Tranche 2 Purchase Price and (iii) the
Tranche 3 Purchase Price less (2) $12,000,000, by (B) 132.5% times the Per
Share Market Value of the Common Stock on the trading day immediately
preceding the Tranche 3 Closing Date, at an exercise price equal to 140% of
the Per Share Market Value of the Common Stock on the trading day immediately
preceding the Tranche 3 Closing Date upon the terms set forth therein, (4)
the legal opinion referred to in Section 4.2(xi), and (5) all other
documents, instruments and writings required to have been delivered at or
prior to the Tranche 3 Closing Date by the Company pursuant to this
Agreement, including the Transfer Agent Instructions referenced in Section
4.1(xvi), and (b) the Purchasers shall deliver or cause to be delivered to
the Company (1) the Tranche 3 Purchase Price, 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 3 Closing Date, and (2) all documents,
instruments and writings required to have been delivered at or prior to the
Tranche 3 Closing Date by the Purchasers pursuant to this Agreement.
ARTICLE II
REPRESENTATIONS AND WARRANTIES
2.1 REPRESENTATIONS, WARRANTIES AND AGREEMENTS OF THE COMPANY. The
Company hereby makes the following representations and warranties to the
Purchasers:
(a) ORGANIZATION AND QUALIFICATION. The Company is a corporation,
duly incorporated and validly existing 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. The Company has no subsidiaries other than those set forth on
Schedule 2.1(a) (collectively the "SUBSIDIARIES"). 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 (as applicable), with the requisite 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, be reasonably expected to have or result in a material
adverse effect on the results of operations,
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assets, prospects, or condition (financial or otherwise) of the Company and
the Subsidiaries, taken as a whole (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 each of this Agreement, the Registration Rights
Agreement and the Warrants (collectively, the "TRANSACTION DOCUMENTS"), and
otherwise to carry out its obligations thereunder. The execution and
delivery of each of the Transaction Documents by the Company and the
consummation by it of the transactions contemplated thereby have been duly
authorized by all necessary corporate action on the part of the Company and
no further corporate action is required by the Company. Each of the
Transaction Documents has been duly executed by the Company and, when
delivered (or filed, as the case may be) in accordance with the terms hereof,
will constitute the valid and binding obligation of the Company enforceable
against the Company in accordance with its terms. Neither the Company nor
any Subsidiary is in violation of any of the provisions of its respective
articles of incorporation, by-laws or other charter documents.
(c) CAPITALIZATION. The number of 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 statutory 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 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 Reports (as defined below) or SCHEDULE 2.1(c), no Person or group of
related Persons 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 Shares. 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 THE SECURITIES The Securities are duly
authorized, and, when issued and paid for in accordance with the terms
hereof, shall have been validly issued, fully paid and nonassessable, free
and clear of all liens, encumbrances and rights of first refusal of any kind
created by the Company (collectively, "LIENS"). The Company has on the date
hereof and will on each Closing Date, at all times while the Warrants are
outstanding, maintain an adequate reserve of duly authorized Common Stock, to
enable it to perform its exercise and other obligations under this Agreement
and the Warrants on each such Closing Date. With respect to the Securities
to be issued at or in connection with each Closing hereunder, such number of
reserved and available
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shares of Common Stock is not less than the sum (i) the maximum number of
shares of Common Stock which may be issued to the Purchasers pursuant to
Section 1.3 on the Tranche 2 Closing Date and pursuant to Section 1.4 on the
Tranche 3 Closing Date, respectively, assuming, that each of the Tranche 2
Purchase Price and the Tranche 3 Purchase Price equals $6,000,000, (ii) the
maximum number of Adjustment Shares which may be issued to the Purchasers
pursuant to Section 3.15 at any time after the Tranche 1 Closing Date, the
Tranche 2 Closing Date and Tranche 3 Closing Date, respectively, assuming
that the Per Share Market Value of the Common Stock utilized to determine any
such Adjustment Price on each such date is 50% of the Per Share Market Value
on the trading day immediately preceding the Tranche 1 Closing Date and (iii)
the number of shares of Common Stock issuable upon exercise of the First
Tranche 1 Warrants and Second Tranche 1 Warrants and (iv) the number of
shares of Common Stock issuable upon exercise of the First Tranche 3 Warrants
and Second Tranche 3 Warrants assuming that the Tranche 2 Purchase Price is
equal to $6,000,000 and the Tranche 3 Purchase Price is equal to $6,000,000
and the Per Share Market Value of the Common Stock on the trading day
immediately preceding the Tranche 3 Closing Date is $20.01 (such number of
shares of Common Stock to be reserved prior to each Closing Date shall be
referred to as the "INITIAL MINIMUM"). All such authorized shares of Common
Stock shall be duly reserved for issuance to the holders of the Shares,
Adjustment Shares and the Warrants. The shares of Common Stock issuable upon
exercise of the Warrants are referred to herein as the "UNDERLYING SHARES".
The Shares, the Adjustment Shares, the Warrants and the Underlying Shares are
collectively referred to as, the "SECURITIES."
(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 Articles of Incorporation (as amended through
the date hereof), or (ii) subject to obtaining the Required Approvals (as
defined below), 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
(with or without notice, lapse of time or both) of, any agreement, credit
facility, indenture or instrument (evidencing a Company debt or otherwise)
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) 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 and the rules and regulations of the principal market or exchange
on which the Common Stock is listed or traded), 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,
reasonably be expected to 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 reasonably be expected to
have or result in a Material Adverse Effect.
(f) FILINGS, CONSENTS AND APPROVALS. Neither the Company nor any
Subsidiary is required to obtain any consent, waiver, authorization or order
of, give any notice to, or make
9
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 filing of the registration statements with the
Commission meeting the requirements set forth in the Registration Rights
Agreement and covering the resale of the Shares, the Adjustment Shares and
the Underlying Shares by the Purchasers, (ii) the application(s) to the
Nasdaq National Market (the "NASDAQ") for the listing of the Shares, the
Adjustment Shares and the Underlying Shares with the NASDAQ (and with any
other national securities exchange or market on which the Common Stock is
then listed), (iii) applicable Blue Sky filings, (iv) the filing of Current
Reports on Form 8-K with the Commission disclosing the transaction
contemplated hereby, (v) the filing of Forms D with the Commission as
required by Regulation D promulgated under the Securities Act and (vi) in all
other cases where the failure to obtain such consent, waiver, authorization
or order, or to give such notice or make such filing or registration could
not have or result in, individually or in the aggregate, a Material Adverse
Effect (the consents, waivers, authorizations, orders, notices and filings
referred to in (i)-(iv) of this Section are, collectively, the "REQUIRED
APPROVALS").
(g) LITIGATION; PROCEEDINGS. There is no action, suit, notice of
violation, proceeding or investigation pending or, to the 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 of the Transaction Documents
or the Securities or (ii) could, individually or in the aggregate, be
reasonably expected to have or result in a Material Adverse Effect.
(h) NO DEFAULT OR VIOLATION. Neither the Company nor any
Subsidiary (i) is in default under or in violation of (and no event has
occurred which has not been waived which, 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, (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, in
each case as could not individually or in the aggregate, reasonably be
expected to, have or result in a Material Adverse Effect.
(i) PRIVATE OFFERING. Assuming the accuracy of the
representations and warranties of the Purchasers set forth in Sections
2.2(b)-(g), the offer, issuance and sale of the Securities to the Purchasers
as contemplated hereby are exempt from the registration requirements of the
Securities Act of 1933, as amended (the "SECURITIES ACT"). Neither the
Company nor, to the Company's knowledge, any Person acting on its behalf has
taken any action which could subject the offering, issuance or sale of the
Securities to the registration requirements of the Securities Act. Neither
the Company nor, to the Company's knowledge, any Person acting on the
Company's behalf has solicited any offer to buy or sell the Securities by
means of any form of general solicitation or advertising.
10
(j) SEC REPORTS; FINANCIAL STATEMENTS. The Company has filed all
reports required to be filed by it under the Exchange Act, including pursuant
to Section 13(a) or 15(d) thereof, for the three years preceding the date
hereof (or such shorter period as the Company was required by law to file
such material) (the foregoing materials being collectively referred to herein
as the "SEC REPORTS" and, together with the Schedules to this Agreement the
"DISCLOSURE MATERIALS") on a timely basis or has received a valid extension
of such time of filing and has filed any such SEC Reports prior to the
expiration of any such extension. As of their respective dates, the SEC
Reports complied in all material respects with the requirements of the
Exchange Act and, the rules and regulations promulgated thereunder, and none
of the SEC Reports, when filed, contained any untrue statement of a material
fact or omitted to state a material fact required to be stated therein or
necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading. All material
agreements to which the Company is a party or to which the property or assets
of the Company are subject have been filed as exhibits to the SEC Reports to
the extent required. 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 generally accepted accounting principles
("GAAP") applied on a consistent basis during the periods involved, except as
may be otherwise specified in such financial statements or the notes thereto
and the unaudited financial statement do not contain 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. Since September 30, 1998, except as specifically disclosed
in the SEC Reports or SCHEDULE 2.1(j) annexed hereto, (a) there has been no
event, occurrence or development that has had or that could reasonably be
expected to have or result in a Material Adverse Effect, (b) the Company has
not incurred any liabilities (contingent or otherwise) other than (x)
liabilities incurred in the ordinary course of business consistent with past
practice and (y) liabilities not required to be reflected in the Company's
financial statements pursuant to GAAP or required to be disclosed in filings
made with the Commission, (c) the Company has not altered its method of
accounting or the identity of its auditors and (d) the Company has not
declared or made any payment or distribution of cash or other property to its
stockholders or officers or directors (other than in compliance with existing
Company stock option plans) with respect to its capital stock, or purchased,
redeemed (or made any agreements to purchase or redeem) any shares of its
capital stock. The Company last filed audited financial statements with the
Commission on March 26, 1998, and has not received any comments from the
Commission in respect thereof.
(k) INVESTMENT COMPANY. The Company is not, and is not an
Affiliate (as defined in Rule 405 under the Securities Act) of, an
"investment company" within the meaning of the Investment Company Act of
1940, as amended.
(l) CERTAIN FEES. No fees or commissions will be payable by the
Company to any broker, financial advisor or consultant, finder, placement
agent, investment banker, or bank
11
with respect to the transactions contemplated by this Agreement. 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 this Agreement as a result of action by or on
behalf of the Company or any of its Affiliates.
(m) FORM S-3 ELIGIBILITY. The Company is eligible to register
securities for resale with the Commission under Form S-3 promulgated under
the Securities Act.
(n) LISTING AND MAINTENANCE REQUIREMENTS COMPLIANCE. The Company
has not, in the two years preceding the date hereof, received notice (written
or oral) from the NASDAQ or any other stock exchange, market or trading
facility 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. The Company
is currently in compliance with all such maintenance requirements and no fact
or circumstances currently exist which could reasonably be expected to result
in noncompliance with such maintenance requirements in the foreseeable future.
(o) PATENTS AND TRADEMARKS. The Company has, or has rights to
use, all patents, patent applications, trademarks, trademark applications,
service marks, trade names, copyrights, licenses and rights (collectively,
the "INTELLECTUAL PROPERTY RIGHTS") which are necessary or material for use
in connection with its business, and which the failure to so have would have
a Material Adverse Effect. To the best knowledge of the Company, all such
Intellectual Property Rights are enforceable and there is no existing
infringement by another Person of any of the Intellectual Property Rights.
(p) REGISTRATION RIGHTS; RIGHTS OF PARTICIPATION. Except as set
forth on SCHEDULE 6(b) to the Registration Rights Agreement, (i) the Company
has not granted or agreed to grant to any Person any rights (including
"piggy-back" registration rights) to have any securities of the Company
registered with the Commission or any other governmental authority which has
not been satisfied and (ii) 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.
(q) REGULATORY PERMITS. The Company and its Subsidiaries possess
all certificates, authorizations and permits issued by the appropriate
Federal, state or foreign regulatory authorities necessary to conduct their
respective businesses as described in the SEC Reports, except where the
failure to possess such permits could not, individually or in the aggregate,
have or result in a Material Adverse Effect ("MATERIAL PERMITS"), and neither
the Company nor any such Subsidiary has received any notice of proceedings
relating to the revocation or modification of any Material Permit.
(r) TITLE. The Company and the Subsidiaries have good and
marketable title in fee simple to all real property and personal property
owned by them which is material to the
12
business of the Company and its Subsidiaries, in each case free and clear of
all Liens, except for liens, claims or encumbrances as do not materially
affect the value of such property and do not interfere with the use made and
proposed to be made of such property by the Company and its Subsidiaries.
Any real property and facilities held under lease by the Company and its
Subsidiaries are held by them under valid, subsisting and enforceable leases
with such exceptions as are not material and do not materially interfere with
the use made and proposed to be made of such property and buildings by the
Company and its Subsidiaries.
(s) DISCLOSURE. All disclosure provided to the Purchasers
regarding the Company, its business and the transactions contemplated hereby,
including the Schedules to this Agreement, furnished by or on behalf of the
Company are true and correct and do not contain any untrue statement of a
material fact or omit to state any material fact necessary in order to make
the statements made therein, in light of the circumstances under which they
were made, not misleading.
2.2 REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS. The Purchasers
hereby jointly and severally represent and warrant to the Company as follows:
(a) ORGANIZATION; AUTHORITY. Such Purchaser is duly organized,
validly existing and in good standing under the laws of the jurisdiction of
its organization with the requisite corporate power and authority, to enter
into and to consummate the transactions contemplated by the Transaction
Documents and otherwise to carry out its obligations thereunder. The
purchase by each Purchaser of the Securities hereunder has been duly
authorized by all necessary action on the part of such Purchaser. Each of
this Agreement and the Registration Rights Agreement has been duly executed
and delivered by such Purchaser and constitutes the valid and legally binding
obligation of such Purchaser, enforceable against it in accordance with its
terms.
(b) INVESTMENT INTENT. Such Purchaser is acquiring the Securities
as principal 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 such Purchaser's right,
subject to the provisions of this Agreement and the Registration Rights
Agreement, 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 federal and state securities laws or under an
exemption from such registration.
(c) PURCHASER STATUS. At the time such Purchaser was offered the
Securities, it was, and at the date hereof, it is, and at each Closing Date,
Adjustment Date and each exercise date under its Warrant, it will be, an
"accredited investor" as defined in Rule 501(a) under the Securities Act.
(d) EXPERIENCE OF THE PURCHASER. Such 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
13
Securities, and has so evaluated the merits and risks of such investment.
Such Purchaser has not been organized for the sole purpose of acquiring the
Securities.
(e) ABILITY OF PURCHASER TO BEAR RISK OF INVESTMENT. Such
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. Such Purchaser acknowledges receipt of
the Disclosure Materials and further acknowledges that it has reviewed the
Disclosure Materials and 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 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) GENERAL SOLICITATION. Such Purchaser is not purchasing the
Securities as a result of or subsequent to any advertisement, article, notice
or other communication regarding the Securities published in any newspaper,
magazine or similar media or broadcast over television or radio or presented
at any seminar.
(h) RELIANCE. Such Purchaser understands and acknowledges that
(i) the Securities are being offered and sold to it 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 such
Purchaser hereby consents to such reliance.
(i) INVOLVEMENT IN CERTAIN PROCEEDINGS. Neither the Purchasers
nor any of their Affiliates has been involved in any of the proceedings
described in Section 401(f) of Regulation S-K under the Securities Act during
the periods described therein.
(j) CERTAIN FEES. Except with respect to fees payable to Ram
Capital Resources LLC, the Purchasers have not entered into any written
agreement with any Person with respect to fees or commissions payable to any
broker, financial advisor or consultant, finder, placement agent, investment
banker, or bank with respect to the transactions contemplated by this
Agreement.
14
(k) BENEFICIAL OWNERSHIP. Neither the Purchasers nor any of their
Affiliates is the beneficial owner of any shares of the Company's Common
Stock as of the trading day immediately preceding the Tranche 1 Closing Date.
The Company acknowledges and agrees that the Purchasers make 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) 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 of the Securities Act, and in
compliance with any applicable federal and state securities laws. In
connection with any transfer of Securities other than pursuant to an
effective registration statement or to the Company, except as otherwise set
forth herein, 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 securities under the Securities Act. Notwithstanding the
foregoing, the Company hereby consents to and agrees to register on the books
of the Company and with any transfer agent for the securities of the Company
any transfer of Securities by such Purchaser to a Designee of such Purchaser
or any transfer among any such Designees, provided that transferee certifies
to the Company that it is an "accredited investor" within the meaning of Rule
501(a) under the Securities Act and that it is acquiring the Securities
solely for investment purposes. Any such transferee shall agree in writing
to be bound by the terms of this Agreement and shall have the rights of a
Purchaser under this Agreement and the Registration Rights Agreement.
(b) The Purchasers agree to the imprinting, so long as is required
by this Section 3.1(b), of the following legend on the Securities:
NEITHER THESE SECURITIES [NOR THE SECURITIES INTO WHICH THESE
SECURITIES ARE EXERCISABLE] HAVE BEEN REGISTERED WITH THE SECURITIES
AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN
RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT
OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND, ACCORDINGLY, MAY NOT
BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE
EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION
15
REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE
STATE SECURITIES LAWS.
The legend set forth above shall be removed from the Shares and the
Adjustment Shares, and the Company shall cause its transfer agent to issue a
certificate or certificates without any legend (upon surrender of the
legended certificates duly endorsed) to each holder of the Shares and/or
Adjustment Shares upon which it is stamped if such legend is not required
under applicable requirements of the Securities Act and other applicable
securities laws. Underlying Shares shall not contain the legend set forth
above nor any other legend if the exercise of Warrants or other issuances of
Underlying Shares as contemplated by the Warrants occurs at any time such
legend is not required under applicable requirements of the Securities Act
and the applicable securities laws.
3.2 ACKNOWLEDGMENT OF DILUTION. The Company acknowledges that the
issuance of the Adjustment Shares on any Adjustment Date and the issuance of
Underlying Shares upon exercise of the Warrants may result in dilution of
the outstanding shares of Common Stock, which dilution may be substantial
under certain market conditions.
3.3 FURNISHING OF INFORMATION. As long as the Company is subject to
Sections 13(a) and 15(d) of the Exchange Act, 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. So long as
any of the Purchasers owns Securities, if the Company is not required to file
reports pursuant to such laws, it will prepare and furnish to such 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,
as well as any other information required thereby, 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. 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 [INTENTIONALLY OMITTED.]
3.5 INTEGRATION. The Company shall not, and shall use its best efforts
to ensure that, no Affiliate 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 sale of the Securities to the Purchasers.
16
3.6 STOCKHOLDER APPROVAL UNDER THE RULES AND REGULATIONS OF THE NASDAQ
STOCK MARKET. If on any Adjustment Date or Closing Date (other than the
Tranche 1 Closing Date) (A) the Common Stock is listed for trading on NASDAQ,
(B) the Adjustment Price or Purchase Price, as the case may be, then in
effect is such that the aggregate number of shares of Common Stock that would
then be issuable as Adjustment Shares and/or Shares, as the case may be,
together with any Adjustment Shares and Shares previously issued at a
discount to the Tranche 1 Shares, would equal or exceed 20% of the number of
shares of Common Stock outstanding on the Tranche 1 Closing Date (such number
of shares as would not equal or exceed such 20% limit, the "ISSUABLE
MAXIMUM"), and (C) the Company shall not have previously obtained the vote of
shareholders (the "SHAREHOLDER APPROVAL"), if any, as may be required by the
applicable rules and regulations of the Nasdaq Stock Market, Inc. (or any
successor entity) applicable to approve the issuance of shares of Common
Stock in excess of the Issuable Maximum pursuant to the terms hereof, then
the Company shall issue to the holder so requesting Adjustment Shares or
Shares, as the case may be, a number of shares of Common Stock equal to the
Issuable Maximum and, with respect to the remainder of Adjustment Shares or
Shares, as the case may be, which would result in an issuance of shares of
Common Stock in excess of the Issuable Maximum (the "EXCESS SHARES"), the
Company shall have the option to either (1) use its best efforts to obtain
the Shareholder Approval applicable to such issuance as soon as is possible,
but in any event not later than the 90th day after such request, or (2)
deliver to such holder cash in an amount equal to the product of (x) the Per
Share Market Value on the applicable Adjustment Date or Closing Date, as
applicable, and (y) the number of shares of Common Stock in excess of such
holder's pro rata portion of the Issuable Maximum that would have otherwise
been issuable to the holder but for the provisions of this Section (such
amount of cash being hereinafter referred to as the "DISCOUNT EQUIVALENT").
If the Company fails to pay the Discount Equivalent in full pursuant to this
Section within fifteen (15) days after the Company fails to obtain
Shareholder Approval pursuant to (1) above or the date payable pursuant to
(2) above, the Company will pay interest thereon at a rate of 9% per annum to
the holder, accruing daily from the applicable Adjustment Date or Closing
Date, as the case may be, until such amount, plus all such interest thereon,
is paid in full.
3.7 INCREASE IN AUTHORIZED SHARES. At such times as the Company would
be, if a notice of exercise were to be delivered on such date or Adjustment
Date, precluded from issuing such number of Underlying Shares as would be
issuable upon exercise in full of the Warrants or issuing all of the
Adjustment Shares due to the unavailability of a sufficient number of shares
of authorized but unissued or reserved shares of Common Stock, the Company
shall promptly (and in any case, within 30 Business Days from such date)
prepare and mail to the stockholders of the Company proxy materials
requesting authorization to amend the Company's Articles of Incorporation to
increase the number of shares of Common Stock which the Company is authorized
to issue to at least such number of shares as reasonably requested by the
Purchasers in order to provide for such number of authorized and unissued
shares of Common Stock to enable the Company to comply with its exercise and
reservation of shares obligations as set forth in this Agreement and 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 stockholders no
later than the 60th day after delivery of the proxy materials
17
relating to such meeting) and (c) within five (5) Business Days of obtaining
such stockholder authorization, file an appropriate amendment to the
Company's Articles of Incorporation to evidence such increase.
3.8 LISTING AND RESERVATION OF UNDERLYING SHARES. (a) The Company
shall (i) not later than the tenth Business Day following the Closing Date
prepare and file with the NASDAQ (or such other national securities exchange
or market or trading or quotation facility on which the Common Stock is then
listed) an additional shares listing application covering a number of shares
of Common Stock which is not less than the Initial Minimum applicable to each
such Closing, (ii) take all steps necessary to cause such shares to be
approved for listing in the NASDAQ (or on the other primary national
securities exchange or market or trading or quotation facility on which the
Common Stock is then listed) as soon as possible thereafter, and (iii)
provide to the Purchasers evidence of such listing, and the Company shall
maintain the listing of its Common Stock thereon.
(b) The Company shall maintain a reserve of shares of Common Stock
for issuance pursuant to Section 3.15 and upon exercise of the Warrant in
accordance with its terms, in such amount as may be required to fulfill
obligations in full under the Transaction Documents, which reserve shall
include, with respect to each Closing, a number of shares of Common Stock
equal to no less than the Initial Minimum, with respect to each Closing.
3.9 EXERCISE AND ISSUANCE PROCEDURES. The Warrants set forth the
totality of the procedures with respect to the exercise of the Warrants,
including such other information and instructions as may be reasonably
necessary to enable the Purchasers to exercise the Warrants in accordance
with their terms. The Company shall honor any exercise of the Warrants and
shall deliver Underlying Shares in accordance with the terms, conditions and
time periods set forth in the Warrants and shall issue Adjustment Shares in
accordance with Section 3.15.
3.10 [INTENTIONALLY OMITTED]
3.11 RIGHT OF FIRST REFUSAL; SUBSEQUENT REGISTRATIONS. (a) The Company
shall not, directly or indirectly, without the prior written consent of the
Purchasers, offer, sell, grant any option to purchase, or otherwise dispose
of (or announce any offer, sale, grant or any option to purchase or other
disposition) any of its or its Affiliates' equity or equity-equivalent
securities in a transaction intended to be exempt or not subject to
registration under the Securities Act (a "SUBSEQUENT PLACEMENT") for a period
of 180 days after the effective date of the registration statement covering
the underlying Shares issued pursuant to the Tranche 1 Closing (the
"UNDERLYING SECURITIES REGISTRATION STATEMENT"), except (i) the granting of
options or warrants to employees, officers and directors, and the issuance of
shares upon exercise of options granted, under any stock option plan
heretofore or hereinafter duly adopted by the Company, (ii) shares of Common
Stock issued upon exercise of any currently outstanding warrants and upon
conversion of any currently outstanding convertible securities of the
Company, in each case disclosed in SCHEDULE 2.1(c), (iii) the Securities, and
(iv) equity or equity-equivalent securities issued in connection with
strategic transactions involving the Company and other entities, including,
18
without limitation, joint ventures, marketing or distribution agreement,
technology transfer or development arrangements unless (A) the Company
delivers to the Purchasers a written notice (the "SUBSEQUENT PLACEMENT
NOTICE") of its intention effect such Subsequent Placement, which Subsequent
Placement Notice shall describe in reasonable detail the proposed terms of
such Subsequent Placement, the amount of proceeds intended to be raised
thereunder, the Person with whom such Subsequent Placement shall be effected,
and attached to which shall be a term sheet or similar document relating
thereto and (B) no Purchaser shall have notified the Company by 5:00 p.m.
(New York City time) on the fifth (5th) Business Day after its receipt of the
Subsequent Placement Notice of its willingness to cause such Purchaser to
provide (or to cause its Designee to provide), subject to completion of
mutually acceptable documentation, financing to the Company on terms no less
favorable to the Company than those terms set forth in the Subsequent
Placement Notice. If the Purchasers shall fail to notify the Company of its
intention to provide such financing within such time period or shall fail to
provide such financing within thirty (30) Business Days after notifying the
Company of its intention to provide such financing (the "PURCHASERS RIGHT
EXPIRATION DATE"), the Company may effect the Subsequent Placement
substantially upon the terms and to the Persons (or Affiliates of such
Persons) set forth in the Subsequent Placement Notice; PROVIDED, that the
Company shall provide the Purchasers with a second Subsequent Placement
Notice, and the Purchasers shall again have the right of first refusal set
forth above in this paragraph (a), if the Subsequent Placement subject to the
initial Subsequent Placement Notice shall not have been consummated for any
reason on the terms set forth in such Subsequent Placement Notice within
thirty (30) Business Days after (x) the date the Purchasers notify the
Company of their unwillingness to provide such financing or (y) the
Purchasers Right Expiration Date, as the case may be.
(b) Except for (x) Underlying Shares, (y) other "Registrable
Securities" (as such term is defined in the Registration Rights Agreement) to
be registered, and securities of the Company permitted pursuant to Schedule
6(b) of the Registration's Rights Agreement to be registered in the
Underlying Securities Registration Statement in accordance with the
Registration Rights Agreement, and (z) Common Stock to be registered for
resale in connection with financings permitted pursuant to paragraph (a)(i),
(iii) and (iv) of Section 3.11(a), the Company shall not, without the prior
written consent of the Purchasers (i) issue or sell any of its or any of its
Affiliates' equity or equity-equivalent securities pursuant to Regulation S
promulgated under the Securities Act, or (ii) register for resale any
securities of the Company, in each case, for a period of not less than 90
Business Days after the date that any registration statement covering the
resale of any of the Shares, Adjustment Shares and the Underlying Shares by
the Purchasers meeting the requirement of the Registration Rights Agreement
is declared effective by the Commission. Any days that any Purchaser is
unable to sell Underlying Securities under any such registration statement
shall be added to such 90 Business Day period for the purposes of (i) and
(ii) above.
3.12 CERTAIN SECURITIES LAWS DISCLOSURES; PUBLICITY. The Company
shall: (i) issue within one (1) Business Day of each Closing a press release
acceptable to the Purchasers disclosing the transactions contemplated hereby,
(ii) file within ten (10) Business Days after each Closing Date with the
Commission a Current Report on Form 8-K disclosing the transactions
19
contemplated hereby, and (iii) timely file with the Commission a Form D
promulgated under the Securities Act as required under Regulation D
promulgated under the Securities Act and provide a copy thereof to the
Purchasers promptly after the filing thereof. The Company shall, no less
than two (2) Business Days prior to the filing of any disclosure required by
clauses (ii) and (iii) above, provide a copy thereof to the Purchasers.
3.13 USE OF PROCEEDS. The Company shall not use the net proceeds form
the sale of Securities hereunder to redeem any 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.
3.14 REIMBURSEMENT. If either Purchaser, other than by reason of its
negligence or willful misconduct, becomes involved in any capacity in any
action, proceeding or investigation brought by or against any Person,
including stockholders of the Company, in connection with or as a result of
the consummation of the transactions contemplated by Transaction Documents,
the Company will reimburse such Purchaser for its reasonable legal and other
expenses (including the cost of any investigation and preparation) incurred
in connection therewith, as such expenses are incurred in an amount not to
exceed $200,000 in the aggregate. The reimbursement obligations of the
Company under this paragraph shall be in addition to any liability which the
Company may otherwise have, shall extend upon the same terms and conditions
to any Affiliate of such Purchaser who are actually named in such action,
proceeding or investigation, and partners, directors, agents, employees and
controlling persons (if any), as the case may be, of such Purchaser and any
such Affiliate, and shall be binding upon and inure to the benefit of any
successors, assigns, heirs and personal representatives of the Company, such
Purchaser and any such Affiliate and any such Person. The Company also
agrees that neither such Purchaser nor any Affiliate, partners, directors,
agents, employees or controlling persons shall have any liability to the
Company or any person asserting claims on behalf of or in right of the
Company in connection with or as a result of the consummation of the
Transaction Documents except to the extent that any losses, claims, damages,
liabilities or expenses incurred by the Company result from the negligence or
willful misconduct of such Purchaser. Notwithstanding anything to the
contrary, the Company shall not be obligated to pay any reimbursements
hereunder in the event that a court, in a final unappealable judgement,
determines that such Purchaser is liable for the act upon which reimbursement
is sought and the Company may condition payment of any reimbursemnt hereunder
upon receipt of an undertaking reasonably satisfactory to the Company to
repay any such reimbursement.
3.15 ISSUANCE OF ADJUSTMENT SHARES. (a) The Company shall, on the
twenty-fifth (25th) day following the date the Underlying Securities
Registration Statement, covering the Tranche 1 Shares, has been declared
effective by the Commission (the "FIRST TRANCHE 1 ADJUSTMENT DATE"), issue to
the Purchasers for no additional consideration such aggregate number of
shares of Common Stock (the "FIRST TRANCHE 1 ADJUSTMENT SHARES") as equals
the quotient obtained by dividing (i) the product of (A) 50% of the Tranche 1
Shares and (B) an amount equal to (x) the difference of (1) 112 1/2% of the
Per Share Market Value of the Common Stock on the Tranche 1
20
Closing Date less (2) the average of the lowest ten (10) Per Share Market
Values during the twenty-five (25) days immediately preceding the First
Tranche 1 Adjustment Date (the "FIRST TRANCHE 1 ADJUSTMENT PRICE" and (ii)
the First Tranche 1 Adjustment Price.
(b) The Company shall, on the twenty-fifth (25th) day following
the First Tranche 1 Adjustment Date (the "SECOND TRANCHE 1 ADJUSTMENT DATE"),
issue to the Purchasers for no additional consideration such aggregate number
of shares of Common Stock (the "SECOND TRANCHE 1 ADJUSTMENT SHARES") as
equals the quotient obtained by dividing (i) the product of (A) 50% of the
Tranche 1 Shares and (B) an amount equal to (x) the difference of
(1) 112 1/2% of the Per Share Market Value of the Common Stock on the
Tranche 1 Closing Date less (2) the average of the lowest ten (10) Per Share
Market Values during the twenty-five (25) days immediately preceding the
Second Tranche 1 Adjustment Date (the "SECOND TRANCHE 1 ADJUSTMENT PRICE")
and (ii) the Second Tranche 1 Adjustment Price.
(c) The Company shall, on the twenty-fifth (25th) day following
the date the Underlying Securities Registration Statement, covering the
Tranche 2 Shares, has been declared effective by the Commission (the "FIRST
TRANCHE 2 ADJUSTMENT DATE"), issue to the Purchasers for no additional
consideration such aggregate number of shares of Common Stock (the "FIRST
TRANCHE 2 ADJUSTMENT SHARES") as equals the quotient obtained by dividing (i)
the product of (A) 50% of the Tranche 2 Shares and (B) an amount equal to (x)
the difference of (1) 112 1/2% of the Per Share Market Value of the Common
Stock on the Tranche 2 Closing Date less (2) the average of the lowest ten
(10) Per Share Market Values during the twenty-five (25) days immediately
preceding the First Tranche 2 Adjustment Date (the "FIRST TRANCHE 2
ADJUSTMENT PRICE") and (ii) the First Tranche 2 Adjustment Price.
(d) The Company shall, on the twenty-fifth (25th) day following
the First Tranche 2 Adjustment Date (the "SECOND TRANCHE 2 ADJUSTMENT DATE"),
issue to the Purchasers for no additional consideration such aggregate number
of shares of Common Stock (the "SECOND TRANCHE 2 ADJUSTMENT SHARES") as
equals the quotient obtained by dividing (i) the product of (A) 50% of the
Tranche 2 Shares and (B) an amount equal to (x) the difference of
(1) 112 1/2% of the Per Share Market Value of the Common Stock on the
Tranche 2 Closing Date less (2) the average of the lowest ten (10) Per
Share Market Values during the twenty-five (25) days immediately preceding
the Second Tranche 2 Adjustment Date (the "SECOND TRANCHE 2 ADJUSTMENT PRICE")
and (ii) the Second Tranche 2 Adjustment Price.
(e) The Company shall, on the twenty-fifth (25th) day following
the date the Underlying Securities Registration Statement, covering the
Tranche 3 Shares, has been declared effective by the Commission (the "FIRST
TRANCHE 3 ADJUSTMENT DATE"), issue to the Purchasers for no additional
consideration such aggregate number of shares of Common Stock (the "FIRST
TRANCHE 3 ADJUSTMENT SHARES") as equals the quotient obtained by dividing (i)
the product of (A) 50% of the Tranche 3 Shares and (B) an amount equal to (x)
the difference of (1) 112 1/2 % of the Per Share Market Value of the Common
Stock on the Tranche 3 Closing Date less (2) the average of the lowest ten
(10) Per Share Market Values during the twenty-five (25) days immediately
preceding the First Tranche 3 Adjustment Date (the "FIRST TRANCHE 3
ADJUSTMENT PRICE") and (ii) the First Tranche 3 Adjustment Price.
21
(f) The Company shall, on the twenty-fifth (25th) day following
the First Tranche 3 Adjustment Date (the "SECOND TRANCHE 3 ADJUSTMENT DATE"),
issue to the Purchasers for no additional consideration such aggregate number
of shares of Common Stock (the "SECOND TRANCHE 3 ADJUSTMENT SHARES") as
equals the quotient obtained by dividing (i) the product of (A) 50% of the
Tranche 3 Shares and (B) an amount equal to (x) the difference of
(1) 112 1/2% of the Per Share Market Value of the Common Stock on the
Tranche 3 Closing Date less (2) the average of the lowest ten (10) Per Share
Market Values during the twenty-five (25) days immediately preceding the
Second Tranche 3 Adjustment Date (the "SECOND TRANCHE 3 ADJUSTMENT PRICE")
and (ii) the Second Tranche 3 Adjustment Price.
3.16 LIMITATIONS ON SHORT SALES. Each Purchaser agrees that it will not
enter into any Short Sales (as hereinafter defined) from the period
commencing on the First Tranche 1 Closing Date and ending on the last
applicable Adjustment Date. For purposes of this Section 3.16, a "SHORT
SALE" by a Purchaser shall mean a sale of Common Stock by such Purchaser that
is marked as a short sale and that is made at a time when there is no
equivalent offsetting long position in Common Stock held by the Purchaser.
For purposes of determining whether there is an equivalent offsetting long
position in Common Stock held by a Purchaser, Adjustment Shares that have not
yet been issued in connection with the immediately preceding Closing Date
shall be deemed to be held long by the Purchaser, and the number of
Adjustment Shares then held by a Purchaser on any particular date of
computation shall be equal to the number of Adjustment Shares issuable
pursuant to Section 3.15 on the next Adjustment Date calculated as if such
computation date were such Adjustment Date (e.g. using the lowest ten (10)
Per Share Market Values during the twenty-five (25) days immediately
preceding such computation date).
ARTICLE IV
CONDITIONS
4.1 CONDITIONS PRECEDENT TO THE OBLIGATION OF THE PURCHASERS TO
PURCHASE THE EARLY TRANCHE 2 SHARES OR THE TRANCHE 2 SHARES. The obligation
of the Purchasers to acquire the Early Tranche 2 Shares or the Tranche 2
Shares is subject to the satisfaction or waiver by the Purchasers, at or
before the Early Tranche 2 Closing Date or the Tranche 2 Closing Date, as the
case may be, of each of the following conditions:
(i) TRANCHE 1 CLOSING. The Tranche 1 Closing shall have occurred;
(ii) ACCURACY OF THE COMPANY'S REPRESENTATIONS AND WARRANTIES. The
representations and warranties of the Company contained herein shall be true
and correct as of the date when made and as of the Early Tranche 2 Closing
Date or the Tranche 2 Closing Date, as the case may be, as though made on and
as of the Early Tranche 2 Closing Date or the Tranche 2 Closing Date, as the
case may be;
(iii) PERFORMANCE BY THE COMPANY. The Company shall have
performed, satisfied and complied with all covenants, agreements and
conditions required by the Transaction
22
Documents to be performed, satisfied or complied with by the Company at or
prior to the Early Tranche 2 Closing Date or the Tranche 2 Closing Date, as
the case may be;
(iv) UNDERLYING SECURITIES REGISTRATION STATEMENT. The Underlying
Securities Registration Statement covering the Tranche 1 Shares, Warrant
Shares and Adjustment Shares issuable in connection with the Tranche 1
Closing shall have been declared effective under the Securities Act by the
Commission for at least twenty-five (25) days and shall have remained
effective at all times, not subject to any actual or threatened stop order or
subject to any actual or threatened suspension at any time prior to the Early
Tranche 2 Closing Date or the Tranche 2 Closing Date, as the case may be;
(v) 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 of competent jurisdiction
which prohibits the consummation of any of the transactions contemplated by
the Transaction Documents, including the issuance of any of the Shares,
Adjustment Shares or exercise of the Warrants;
(vi) ADVERSE CHANGES. Since the Tranche 1 Closing Date, no event
or series of events which reasonably would be expected to have or result in a
Material Adverse Effect shall have occurred.
(vii) MANAGEMENT. ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, ▇▇. shall not have left the
Company or suffered a voluntary or involuntary material lessening of
responsibility as Chief Executive Officer of the Company;
(viii) 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 (except for any suspension of trading of limited duration solely to
permit dissemination of material information regarding the Company) at any
time since the Tranche 1 Closing Date;
(ix) LISTING OF COMMON STOCK. The Common Stock shall have been
at all times since the Tranche 1 Closing Date listed for trading on the
NASDAQ;
(x) 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 or
"group" (as described in Rule 13d-5(b)(1) promulgated under the Exchange Act)
of in excess of 50% 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);
23
(xi) LEGAL OPINION. The Company shall have delivered to the
Purchaser the opinion of the Company's outside counsel, in substantially the
form of EXHIBIT C, dated the Early Tranche 2 Closing Date or the Tranche 2
Closing Date, as the case may be;
(xii) REQUIRED APPROVALS. All Required Approvals shall have been
obtained;
(xiii) DELIVERY OF STOCK CERTIFICATE. The Company shall have
delivered to the Purchaser or its Designee the stock certificate(s)
representing the Early Tranche 2 Shares or the Tranche 2 Shares registered in
the name of the Purchaser or its Designee, in form satisfactory to the
Purchasers;
(xiv) PERFORMANCE OF ISSUANCE AND EXERCISE OBLIGATIONS. The
Company shall have (a) delivered Adjustment Shares, as applicable, upon each
Tranche 1 Adjustment Date and otherwise performed its obligations in
accordance with the terms, conditions and timing requirements of this
Agreement and (b) delivered Underlying Shares upon exercise of the Warrants
and otherwise performed its obligations in accordance with the terms of the
Warrants; PROVIDED, HOWEVER that in the event there is an Early Tranche 2
Closing, the Company's obligation to deliver the Second Tranche 1 Adjustment
Shares prior to the Early Tranche 2 Closing Date shall be waived.
(xv) CLOSING THRESHOLDS. For the 20 Business Days immediately
preceding the Early Tranche 2 Closing Date or the Tranche 2 Closing Date, as
the case may be, the average daily trading volume of the Common Stock on
NASDAQ shall be at least 50,000 shares and there shall be no five (5)
consecutive Business Days within such twenty (20) Business Day period where
the average daily volume is less than 30,000 shares per day and the average
of the Per Share Market Values for the ten (10) Business Days immediately
preceding the Early Tranche 2 Closing Date or the Tranche 2 Closing Date, as
the case may be, shall be greater than $7.00; and
(xvi) TRANSFER AGENT INSTRUCTIONS. The Transfer Agent
Instructions, dated the Early Tranche 2 Closing Date or the Tranche 2 Closing
Date, as the case may be, shall have been delivered to and acknowledged in
writing by the Company's transfer agent.
4.2 CONDITIONS PRECEDENT TO THE OBLIGATION OF THE PURCHASERS TO
PURCHASE TRANCHE 3 SHARES. The obligation of the Purchasers to acquire
Tranche 3 Shares is subject to the satisfaction or waiver by the Purchasers,
at or before the Tranche 3 Closing Date of each of the following conditions:
(ii) TRANCHE 2 CLOSING. The Tranche 2 Closing or the Tranche 2
Closing Expiration Date shall have occurred;
(iii) ACCURACY OF THE COMPANY'S REPRESENTATIONS AND WARRANTIES. The
representations and warranties of the Company contained herein shall be true
and correct as of the
24
date when made and as of the Tranche 3 Closing Date as though made on and as
of the Tranche 3 Closing Date.
(iv) PERFORMANCE BY THE COMPANY. The Company shall have
performed, satisfied and complied 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 3 Closing Date;
(v) UNDERLYING SECURITIES REGISTRATION STATEMENT. The Underlying
Securities Registration Statement covering the Shares, Warrant Shares and
Adjustment Shares issuable in connection with the Tranche 1 Closing and
Tranche 2 Closing shall each have been declared effective under the
Securities Act by the Commission for at least twenty-five (25) days and shall
each have remained effective at all times, not subject to any actual or
threatened stop order or subject to any actual or threatened suspension at
any time prior to the Tranche 3 Closing Date;
(vi) 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 of competent
jurisdiction which prohibits the consummation of any of the transactions
contemplated by the Transaction Documents, including the issuance of any of
the Shares, Adjustment Shares or exercise of the Warrants;
(vii) ADVERSE CHANGES. Since the Tranche 2 Closing Date or the
Tranche 2 Closing Expiration Date, as the case may be, no event or series of
events which reasonably would be expected to have or result in a Material
Adverse Effect shall have occurred;
(viii) MANAGEMENT. ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, ▇▇. shall not have left the
Company or suffered a voluntary or involuntary material lessening of
responsibility as Chief Executive Officer of the Company;
(ix) 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 (except for any suspension of trading of limited duration solely to
permit dissemination of material information regarding the Company) at any
time since the Tranche 2 Closing Date or the Tranche 2 Closing Expiration
Date, as the case may be;
(x) LISTING OF COMMON STOCK. The Common Stock shall have been
at all times since the Tranche 2 Closing Date or the Tranche 2 Closing
Expiration Date, as the case may be, listed for trading on the NASDAQ;
(xi) CHANGE OF CONTROL. No Change of Control in the Company
shall have occurred.
25
(xii) LEGAL OPINION. The Company shall have delivered to the
Purchaser the opinion of the Company's outside counsel, in substantially the
form of EXHIBIT C, dated the Tranche 3 Closing Date;
(xiii) REQUIRED APPROVALS. All Required Approvals shall have been
obtained;
(xiv) DELIVERY OF STOCK CERTIFICATE. The Company shall have
delivered to the Purchaser or its Designee the stock certificate(s)
representing the Tranche 3 Shares registered in the name of the Purchaser or
its Designee, in form satisfactory to the Purchasers;
(xv) PERFORMANCE OF ISSUANCE AND EXERCISE OBLIGATIONS. The
Company shall have (a) delivered Adjustment Shares, as applicable upon each
Tranche 2 Adjustment Date and otherwise performed its obligations in
accordance with the terms, conditions and timing requirements of this
Agreement and (b) delivered Underlying Shares upon exercise of the Warrants
and otherwise performed its obligations in accordance with the terms of the
Warrants;
(xvi) CLOSING THRESHOLD. For the 20 Business Days immediately
preceding the Tranche 3 Closing Date, the average daily trading volume of the
Common Stock on NASDAQ shall be at least 50,000 shares and there shall be no
five (5) consecutive Business Days within such twenty (20) Business Day
period where the average daily volume is less than 30,000 shares per day and
the average of the Per Share Market Values for the ten (10) Business Days
immediately preceding the Tranche 3 Closing Date shall be greater than $7.00;
and
(xvii) TRANSFER AGENT INSTRUCTIONS. The Transfer Agent
Instructions, dated the Tranche 3 Closing Date, shall have been delivered to
and acknowledged in writing by the Company's transfer agent.
ARTICLE V
MISCELLANEOUS
5.1 FEES AND EXPENSES. The Company has paid $30,000 to RAM Capital
Resources, LLP, which amount shall be paid to RSPAB, in connection with the
preparation and negotiation of the Transaction Documents. Other than the
amounts contemplated in the immediately preceding sentence, each party shall
pay the fees and expenses of its advisers, counsel, accountants and other
experts, if any, and all other expenses incurred by such party incident to
the negotiation, preparation, execution, delivery and performance of this
Agreement. The Company shall pay all stamp and other taxes and duties levied
in connection with the issuance of the Securities.
5.2 ENTIRE AGREEMENT; AMENDMENTS. This Agreement, together with the
Exhibits and Schedules hereto, the Registration Rights Agreement 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.
26
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 6:00 p.m.
(New York City 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 6:00 p.m. (New York City time) on any date and earlier than 11:59 p.m.
(New York City 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: ThrustMaster, Inc.
▇▇▇▇ ▇.▇. ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ #▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, ▇▇., CEO
With copies to: ▇▇▇▇▇▇▇ Coie LLP
▇▇▇▇ ▇▇ ▇▇▇▇▇ ▇▇▇., ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
If to Strong River: Strong River Investments Inc.
c/▇ ▇▇▇▇▇▇▇ Capital Corp.
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: Avi Vigder
If to Montrose: Montrose Investments, Ltd.
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Attn: ▇▇▇▇ ▇▇▇▇
If to ▇▇▇▇▇▇▇▇: ▇▇▇▇▇▇▇▇ Investments L.P.
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Attn: ▇▇▇▇ ▇▇▇▇
With copies to (for all
27
communications to each
of the Purchasers): ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ &
▇▇▇▇▇▇ LLP
▇▇▇▇ ▇▇▇▇▇▇ ▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
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 Purchasers, 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. The Company may not assign this Agreement or any rights or
obligations hereunder without the prior written consent of the Purchasers.
Except as set forth in Section 3.1(a), the Purchasers may not assign this
Agreement or any of the rights or obligations hereunder or under the
Transaction Documents (other than to a Designee of the respective Purchaser)
without the consent of the Company, except that the Purchasers may assign
their respective rights hereunder and, subject to the terms thereof, under
the Transaction Documents without the consent of the Company as long as such
assignee demonstrates to the reasonable satisfaction of the Company its
satisfaction of the representations and warranties set forth in Section 2.2.
5.7 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.
5.8 GOVERNING LAW. This Agreement 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
hereby irrevocably submits to the non-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 the any of
28
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. Each party hereby irrevocably waives personal
service of process and consents to process being served in any such suit,
action or proceeding by mailing a copy thereof to such party at the address
in effect for notices to it under this Agreement and agrees that such service
shall constitute good and sufficient service of process and notice thereof.
Nothing contained herein shall be deemed to limit in any way any right to
serve process in any manner permitted by law.
5.9 SURVIVAL. The representations, warranties, agreements and
covenants contained herein shall survive the Closings and the issuances of
the Adjustment Shares.
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 Purchasers shall consult with each
other in issuing any press releases or otherwise making public statements or
filings and other communications with the Commission or any regulatory
agency or stock market or trading facility with respect to the transactions
contemplated hereby and neither party shall issue any such press release or
otherwise make any such public statement, filings or other communications
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, filing or other communication. Notwithstanding the
foregoing, the Company shall not publicly disclose the name of any of the
Purchasers, or include the name of any of the Purchasers in any filing with
the Commission, or any regulatory agency, trading facility or stock market
without the prior written consent of the respective Purchaser, except to the
extent such disclosure (but not any disclosure as to the controlling Persons
thereof) is required by law or by applicable rules, bylaws or policies of the
NASDAQ, in which case the Company shall provide the respective Purchaser with
prior notice of such 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 affecting 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. In addition to being entitled to exercise all rights
provided herein or granted by law, including recovery of damages, the
Purchasers will be entitled to specific
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performance of the obligations of the Company under the Transaction
Documents. Each of the Company and the Purchasers agree that monetary
damages may not be adequate compensation for any loss incurred by reason of
any breach of its obligations described in the foregoing sentence and hereby
agrees to waive in any action for specific performance of any such obligation
the defense that a remedy at law would be adequate.
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SIGNATURE PAGE FOLLOWS]
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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.
COMPANY:
THRUSTMASTER, INC.
By:
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Name:
Title:
PURCHASERS:
STRONG RIVER INVESTMENTS, INC.
By:
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Name:
Title:
▇▇▇▇▇▇▇▇ INVESTMENTS L.P.
By:
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Name:
Title:
MONTROSE INVESTMENTS L.P.
By:
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Name:
Title:
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