SECURITIES PURCHASE AGREEMENT
THIS SECURITIES PURCHASE AGREEMENT, dated as of the date of acceptance set
forth below (this "Agreement"), is entered into by and between ▇▇▇▇▇▇▇▇.▇▇▇ a
California corporation, with headquarters located at ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇ (the "Company"), and each entity named on a signature page
hereto (each, a "Buyer") (each agreement with a Buyer being deemed a separate
and independent agreement between the Company and such Buyer, except that each
Buyer acknowledges and consents to the rights granted to each other Buyer under
such agreement and the Transaction Agreements, as defined below, referred to
therein).
W I T N E S S E T H:
WHEREAS, the Company and the Buyer are executing and delivering this
Agreement in accordance with and in reliance upon the exemption from securities
registration afforded, inter alia, by Rule 506 under Regulation D ("Regulation
D") as promulgated by the United States Securities and Exchange Commission (the
"SEC") under the Securities Act of 1933, as amended (the "1933 Act"), and/or
Section 4(2) of the 1933 Act; and
WHEREAS, the Buyer wishes to purchase, upon the terms and subject to the
conditions of this Agreement, shares of the Series A-1 and Series A-2
Convertible Preferred Stock, par value $1,000 per share and having a stated
value of $1,000 per share, of the Company (the "Convertible Preferred Stock")
which will be convertible into shares of Common Stock, no par value per share of
the Company (the "Common Stock"), upon the terms and subject to the conditions
of such Convertible Preferred Stock, together with the Warrants (as defined
below) exercisable for the purchase of shares of Common Stock, and subject to
acceptance of this Agreement by the Company;
NOW THEREFORE, in consideration of the premises and the mutual covenants
contained herein and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties agree as follows:
1. AGREEMENT TO PURCHASE; PURCHASE PRICE.
a. Purchase; Certain Definitions.
(i) The undersigned hereby agrees to purchase from the Company
Convertible Preferred Stock having a stated value in the amount set forth
on the Buyer's signature page of this Agreement (the "Preferred Stock,"
which term includes the Initial Preferred Stock and the Additional
Preferred Stock, as defined below), out of a total offering of such
Convertible Preferred Stock having a stated value of $5,000,000, and having
the terms and conditions set forth in the Certificate of
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Determination of Rights and Preferences of the Series A-1 Convertible
Preferred Stock and Series A-2 Convertible Preferred Stock of the Company
attached hereto as Annex I (the "Certificate of Determination").
(ii) Subject to the terms and conditions of this Agreement and the
other Transaction Agreements, the Buyer will purchase (x) Series A-1
Convertible Preferred Stock having a stated value of $3,000,000 multiplied
by the Buyer's Allocable Share (the "Initial Preferred Stock") on the
Initial Closing Date (as those terms are defined below) and (y) Series A-2
Convertible Preferred Stock having a stated value of $2,000,000 (the
"Additional Preferred Stock") on the Additional Closing Date (as defined
below).
(iii) The Purchase Price (as defined below) to be paid by the Buyer
shall be equal to the amount set forth on the Buyer's signature page of
this Agreement, and shall be payable in United States Dollars.
b. Certain Definitions. As used herein, each of the following terms has the
meaning set forth below, unless the context otherwise requires:
(i) "Securities" means the Preferred Stock, the Warrants and the
Common Stock issuable upon conversion of the Preferred Stock or the
exercise of the Warrants.
(ii) "Purchase Price" means the purchase price for the Initial
Preferred Stock or the Additional Preferred Stock, as the case may be.
(iii) "Initial Closing Date" means the date of the closing of the
purchase and sale of the Initial Preferred Stock, as provided herein.
(iv) "Additional Closing Date" means the date of the closing of the
purchase and sale of the Additional Preferred Stock, as provided herein.
(v) "Closing Date" means the Initial Closing Date or the Additional
Closing Date, as the case may be.
(vi) "Buyer's Allocable Share" means the fraction of which the
numerator is the stated value of the Buyer's Preferred Stock specified on
the Buyer's signature page of this Agreement and the denominator is
$5,000,000.
(vii) "Effective Date" means the effective date of the Registration
Statement covering the Registrable Securities (as those terms are defined
in the Registration Rights Agreement defined below).
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(viii) "Conversion Shares" means the shares of Common Stock issuable
upon conversion of the Preferred Stock.
(ix) "Warrant Shares" means the shares of Common Stock issuable upon
exercise of the Warrants.
(x) "Shares" means the shares of Common Stock representing any or
all of the Conversion Shares and the Warrant Shares.
(xi) "Latest Audited Date" means December 31, 1999.
(xii) "Closing Bid Price" means the closing bid price of the Common
Stock (in U.S. Dollars) on the Principal Trading Market, as reported by
Bloomberg LP (or if that service is not then reporting the relevant
information regarding the Common Stock, a comparable reporting service of
national reputation selected by the Buyer and reasonably acceptable to the
Company).
(xiii) "Principal Trading Market" means The Nasdaq/SmallCap Market or,
if the Common Stock is no longer listed on that market, the principal
securities exchange or trading market on which the Common Stock is listed
or traded.
(xiv) "Volume Standard" means an average daily trading volume of
100,000 shares of the Common Stock on the Principal Trading Market for the
relevant period.
(xv) "Certificates" means (x) the stock certificates, duly executed
by the Company and issued in the name of the Buyer, representing the
Preferred Stock being issued to the Buyer on the relevant Closing Date and
(y) the Warrants, each duly executed on behalf of the Company and issued in
the name of the Buyer, being issued to the Buyer on the relevant Closing
Date.
c. Form of Payment; Delivery of Certificates.
(i) The Buyer shall pay the Purchase Price for the relevant
Preferred Stock by delivering immediately available good funds in United
States Dollars to the escrow agent (the "Escrow Agent") identified in the
Joint Escrow Instructions attached hereto as Annex II (the "Joint Escrow
Instructions") on the date prior to the relevant Closing Date.
(ii) No later than the relevant Closing Date, but in any event as
promptly as practicable following payment by the Buyer to the Escrow Agent
of the relevant Purchase Price, the Company shall deliver the Certificates
to the Escrow Agent.
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(iii) By signing this Agreement, each of the Buyer and the Company,
subject to acceptance by the Escrow Agent, agrees to all of the terms and
conditions of, and becomes a party to, the Joint Escrow Instructions, all
of the provisions of which are incorporated herein by this reference as if
set forth in full.
d. Method of Payment. Payment into escrow of the Purchase Price shall be
made by wire transfer of funds to:
Bank of New York
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
ABA# ▇▇▇▇▇▇▇▇▇
For credit to the account of ▇▇▇▇▇▇▇ & Prager LLP, Esqs.
Account No.: [To be provided to the Buyer by ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇ LLP]
Re: ▇▇▇▇▇▇▇▇.▇▇▇
Not later than 5:00 p.m., New York time, on the date which is three (3)
Nasdaq/SmallCap Market trading days after the Company shall have accepted this
Agreement and returned a signed counterpart of this Agreement to the Escrow
Agent by facsimile, the Buyer shall deposit with the Escrow Agent the Purchase
Price for the Initial Preferred Stock in immediately available funds. Time is of
the essence with respect to such payment, and failure by the Buyer to make such
payment, shall allow the Company to cancel this Agreement.
e. Escrow Property. The Purchase Price, if any, for the Initial Preferred
Stock or the Additional Preferred Stock, as the case may be, which is delivered
to the Escrow Agent as contemplated by Section 1(d) hereof is referred to as the
"Escrow Funds." The Escrow Funds and the Certificates delivered to the Escrow
Agent as contemplated by Section 1(c) hereof are referred to as the "Escrow
Property."
2. BUYER REPRESENTATIONS, WARRANTIES, ETC.; ACCESS TO INFORMATION;
INDEPENDENT INVESTIGATION.
The Buyer represents and warrants to, and covenants and agrees with, the
Company as follows:
a. Without limiting Buyer's right to sell the Common Stock pursuant to the
Registration Statement, the Buyer is purchasing the Preferred Stock and the
Warrants and will be acquiring the Shares for its own account for investment
only and not with a view towards the public sale or distribution thereof and not
with a view to or for sale in connection with any distribution thereof.
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b. The Buyer is (i) an "accredited investor" as that term is defined in
Rule 501 of the General Rules and Regulations under the 1933 Act by reason of
Rule 501(a)(3), (ii) experienced in making investments of the kind described in
this Agreement and the related documents, (iii) able, by reason of the business
and financial experience of its officers (if an entity) and professional
advisors (who are not affiliated with or compensated in any way by the Company
or any of its affiliates or selling agents), to protect its own interests in
connection with the transactions described in this Agreement, and the related
documents, and (iv) able to afford the entire loss of its investment in the
Securities.
c. All subsequent offers and sales of the Preferred Stock and the Shares by
the Buyer shall be made pursuant to registration of the Shares under the 1933
Act or pursuant to an exemption from registration.
d. The Buyer understands that the Securities are being offered and sold to
it in reliance on specific exemptions from the registration requirements of
United States federal and state securities laws and that the Company is relying
upon the truth and accuracy of, and the Buyer's compliance with, the
representations, warranties, agreements, acknowledgments and understandings of
the Buyer set forth herein in order to determine the availability of such
exemptions and the eligibility of the Buyer to acquire the Securities.
e. The Buyer and its advisors, if any, have been furnished with all
materials relating to the business, finances and operations of the Company and
materials relating to the offer and sale of the Preferred Stock and the offer of
the Shares which have been requested by the Buyer, including those set forth on
Annex V hereto. The Buyer and its advisors, if any, have been afforded the
opportunity to ask questions of the Company and have received complete and
satisfactory answers to any such inquiries. Without limiting the generality of
the foregoing, the Buyer has also had the opportunity to obtain and to review
the Company's (1) Annual Report on Form 10-K, as amended, for the fiscal year
ended December 31, 1999, (2) Quarterly Report on Form 10-Q for the fiscal
quarter ended March 31, 2000; (3) Current Report on Form 8-K filed on April 17,
2000; and (4) Definitive Proxy Statement filed on June 1, 2000 (collectively,
the "Company's SEC Documents").
f. The Buyer understands that its investment in the Securities involves a
high degree of risk.
g. The Buyer understands that no United States federal or state agency or
any other government or governmental agency has passed on or made any
recommendation or endorsement of the Securities.
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h. This Agreement and the other Transaction Agreements to which the Buyer
is a party have been duly and validly authorized, executed and delivered on
behalf of the Buyer and are valid and binding agreements of the Buyer
enforceable in accordance with their respective terms, subject as to
enforceability to general principles of equity and to bankruptcy, insolvency,
moratorium and other similar laws affecting the enforcement of creditors' rights
generally.
3. COMPANY REPRESENTATIONS, ETC. The Company represents and warrants to
the Buyer as of the date hereof and as of each Closing Date that, except as
otherwise provided in the Company Disclosure Materials attached hereto as Annex
V hereto:
a. Concerning the Preferred Stock and the Shares. The Preferred Stock has
been duly authorized, and when issued and paid for in accordance with the terms
of this Agreement, will be duly and validly issued, fully paid and
non-assessable and will not subject the holder thereof to personal liability
solely by reason of acquiring the Preferred Stock hereunder. There are no
preemptive rights of any stockholder of the Company, as such, to acquire the
Preferred Stock, the Warrants or the Shares.
b. Reporting Company Status. The Company is a corporation duly organized,
validly existing and in good standing under the laws of the State of California
and has the requisite corporate power to own its properties and to carry on its
business as now being conducted. The Company is duly qualified as a foreign
corporation to do business and is in good standing in each jurisdiction where
the nature of the business conducted or property owned by it makes such
qualification necessary, other than those jurisdictions in which the failure to
so qualify would not have a material adverse effect on the business, operations
or financial condition or results of operation of the Company and its
subsidiaries taken as a whole. The Company has registered its stock and is
obligated to file reports pursuant to Section 12 of the 1934 Act. The Common
Stock is listed and traded on The Nasdaq/ SmallCap Market. The Company has
received no notice, either oral or written, with respect to the continued
eligibility of the Common Stock for such listing, and the Company has maintained
all requirements for the continuation of such listing.
c. Authorized Shares. The authorized capital stock of the Company consists
of (i) 20,000,000 shares of Common Stock, no par value per share, of which
approximately 5,500,000 shares have been issued as of the date hereof and
(ii)10,000,000 shares of Indeterminate Preferred Stock, par value $1,000 per
share, of which none have been issued as of the date hereof. All issued and
outstanding shares of Common Stock have been duly authorized and validly issued
and are fully paid and non-assessable. The Company has sufficient authorized and
unissued shares of Common Stock as may be necessary to effect the issuance of
the Shares. The Shares have been duly authorized and, when issued upon
conversion of, or as dividends on, the Preferred Stock or upon exercise of the
Warrants, each in accordance with its respective terms, will be duly and validly
issued, fully paid and non-assessable and will not subject the holder thereof to
personal liability by reason of being such holder.
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d. Securities Purchase Agreement; Registration Rights Agreement and Stock.
This Agreement and the Registration Rights Agreement, the form of which is
attached hereto as Annex IV (the "Registration Rights Agreement"), and the
transactions contemplated thereby, have been duly and validly authorized by the
Company. This Agreement has been duly executed and delivered by the Company and
this Agreement is, and each of the other Transaction Agreements, when executed
and delivered by the Company, will be, a valid and binding agreement of the
Company enforceable in accordance with their respective terms, subject as to
enforceability to general principles of equity and to bankruptcy, insolvency,
moratorium, and other similar laws affecting the enforcement of creditors'
rights generally.
e. Non-contravention. The execution and delivery of this Agreement and the
Registration Rights Agreement by the Company, the issuance of the Securities,
and the consummation by the Company of the other transactions contemplated by
this Agreement, the Registration Rights Agreement, and the Preferred Stock do
not and will not conflict with or result in a breach by the Company of any of
the terms or provisions of, or constitute a default under (i) the Articles of
Incorporation or the By-Laws of the Company, each as currently in effect, (ii)
any indenture, mortgage, deed of trust, or other material agreement or
instrument to which the Company is a party or by which it or any of its
properties or assets are bound, including any listing agreement for the Common
Stock except as herein set forth, (iii) to its knowledge, any existing
applicable law, rule, or regulation or any applicable decree, judgment, or order
of any court, United States federal or state regulatory body, administrative
agency, or other governmental body having jurisdiction over the Company or any
of its properties or assets, or (iv) the Company's listing agreement for its
Common Stock, except such conflict, breach or default which would not have a
material adverse effect on the business, operations, condition (financial or
otherwise), or results of operations of the Company and its subsidiaries, taken
as a whole, or on the transactions contemplated herein.
f. Approvals. No authorization, approval or consent of any court,
governmental body, regulatory agency, self-regulatory organization, or stock
exchange or market or the stockholders of the Company is required to be obtained
by the Company for the issuance and sale of the Securities to the Buyer as
contemplated by this Agreement, except such authorizations, approvals and
consents that have been obtained.
g. SEC Filings. None of the Company's SEC Documents contained, at the time
they were filed, any untrue statement of a material fact or omitted to state any
material fact required to be stated therein or necessary to make the statements
made therein in light of the circumstances under which they were made, not
misleading. The Company has since April 1, 1999 timely filed all requisite
forms, reports and exhibits thereto with the SEC.
h. Absence of Certain Changes. Since the Latest Audited Date, there has
been no material adverse change and no material adverse development in the
business, properties,
7
operations, condition (financial or otherwise), or results of operations of the
Company, except as disclosed in the Company's SEC Documents. Since the Latest
Audited Date, except as provided in the Company's SEC Documents, the Company has
not (i) incurred or become subject to any material liabilities (absolute or
contingent) except liabilities incurred in the ordinary course of business
consistent with past practices; (ii) discharged or satisfied any material lien
or encumbrance or paid any material obligation or liability (absolute or
contingent), other than current liabilities paid in the ordinary course of
business consistent with past practices; (iii) declared or made any payment or
distribution of cash or other property to stockholders with respect to its
capital stock, or purchased or redeemed, or made any agreements to purchase or
redeem, any shares of its capital stock; (iv) sold, assigned or transferred any
other tangible assets, or canceled any debts or claims, except in the ordinary
course of business consistent with past practices; (v) suffered any substantial
losses or waived any rights of material value, whether or not in the ordinary
course of business, or suffered the loss of any material amount of existing
business; (vi) made any changes in employee compensation, except in the ordinary
course of business consistent with past practices; or (vii) experienced any
material problems with labor or management in connection with the terms and
conditions of their employment.
i. Full Disclosure. There is no fact known to the Company (other than
general economic conditions known to the public generally or as disclosed in the
Company's SEC Documents) that has not been disclosed in writing to the Buyer
that (i) would reasonably be expected to have a material adverse effect on the
business, operations, condition (financial or otherwise), or results of
operations of the Company and its subsidiaries, taken as a whole , (ii) would
reasonably be expected to materially and adversely affect the ability of the
Company to perform its obligations pursuant to this Agreement or any of the
agreements contemplated hereby (collectively, including this Agreement, the
"Transaction Agreements"), or (iii) would reasonably be expected to materially
and adversely affect the value of the rights granted to the Buyer in the
Transaction Agreements.
j. Absence of Litigation. Except as set forth in the Company's SEC
Documents, there is no action, suit, proceeding, inquiry or investigation before
or by any court, public board or body pending or, to the knowledge of the
Company, threatened against or affecting the Company, wherein an unfavorable
decision, ruling or finding would have a material adverse effect on the
properties, business, operations, condition (financial or otherwise), or results
of operation of the Company and its subsidiaries taken as a whole or the
transactions contemplated by any of the Transaction Agreements or which would
adversely affect the validity or enforceability of, or the authority or ability
of the Company to perform its obligations under, any of the Transaction
Agreements.
k. Absence of Events of Default. Except as set forth in the Company's SEC
Documents, no Event of Default (or its equivalent term), as defined in the
respective agreement to which the Company is a party, and no event which, with
the giving of notice or the passage of time or both, would become an Event of
Default (or its equivalent term) (as so defined in such
8
agreement), has occurred and is continuing, which would have a material adverse
effect on the business, operations, condition (financial or otherwise), or
results of operations of the Company and its subsidiaries, taken as a whole.
l. Prior Issues. Except as set forth in the Company's SEC Documents, during
the twelve (12) months preceding the date hereof, the Company has not issued any
convertible securities. As of the date hereof, the outstanding unconverted
principal amount of each convertible security issued by the Company is as set
forth in Annex V hereto.
m. No Undisclosed Liabilities or Events. The Company has no liabilities or
obligations other than those disclosed in the Company's SEC Documents or those
incurred in the ordinary course of the Company's business since the Latest
Audited Date, and which individually or in the aggregate, do not or would not
have a material adverse effect on the properties, business, operations,
condition (financial or otherwise), or results of operations of the Company and
its subsidiaries, taken as a whole. No event or circumstances has occurred or
exists with respect to the Company or its properties, business, operations,
condition (financial or otherwise), or results of operations, which, under
applicable law, rule or regulation, requires public disclosure or announcement
prior to the date hereof by the Company but which has not been so publicly
announced or disclosed. There are no proposals currently under consideration or
currently anticipated to be under consideration by the Board of Directors or the
executive officers of the Company (other than the transactions contemplated by
the Transaction Agreements) which proposal would (x) change the Articles of
Incorporation or any other charter document or the By-Laws of the Company, each
as currently in effect, with or without shareholder approval, which change would
reduce or otherwise adversely affect the rights and powers of the shareholders
of the Common Stock or (y) materially or substantially change the business,
assets or capital of the Company, including its interests in subsidiaries.
n. No Default. Except as provided in the Company's SEC Documents, the
Company is not in default in the performance or observance of any material
obligation, agreement, covenant or condition contained in any material
indenture, mortgage, deed of trust or other material instrument or agreement to
which it is a party or by which it or its property is bound.
o. No Integrated Offering. Neither the Company nor any of its affiliates
nor any person acting on its or their behalf has, directly or indirectly, at any
time since November 1, 1999, made any offer or sales of any security or
solicited any offers to buy any security under circumstances that would
eliminate the availability of the exemption from registration under Rule 506 of
Regulation D in connection with the offer and sale of the Securities as
contemplated hereby.
p. Dilution. The number of Shares issuable upon conversion of the Preferred
Stock and the exercise of the Warrants may increase substantially in certain
circumstances, including, but not necessarily limited to, the circumstance
wherein the trading price of the Common Stock declines prior to the conversion
of the Preferred Stock. The Company's executive officers and
9
directors have studied and fully understand the nature of the Securities being
sold hereby and recognize that they have a potential dilutive effect. The board
of directors of the Company has concluded, in its good faith business judgment,
that such issuance is in the best interests of the Company. The Company
specifically acknowledges that its obligation to issue the Shares upon
conversion of the Preferred Stock and upon exercise of the Warrants is binding
upon the Company and enforceable regardless of the dilution such issuance may
have on the ownership interests of other shareholders of the Company, the
Company will honor every Notice of Conversion (as defined in the Certificate of
Determination) relating to the conversion of the Preferred Stock and every
Notice of Exercise Form (as contemplated by the Warrants) relating to the
exercise of the Warrants unless the Company is subject to an injunction (which
injunction was not sought by the Company) prohibiting the Company from doing so.
q. Brokers, Finders. Except for payment of fees to ▇▇▇▇▇ ▇▇▇▇▇▇, an
independent finder (the "Finder") , and fees payable to Union Atlantic LC or
Union Atlantic Capital, LC (the "Placement Agent"), the payment of which fees is
the sole responsibility of the Company, the Company has taken no action which
would give rise to any claim by any person for brokerage commission, finder's
fees or similar payments by Buyer relating to this Agreement or the transactions
contemplated hereby. Buyer shall have no obligation with respect to such fees or
with respect to any claims made by or on behalf of other persons for fees of a
type contemplated in this Section 3(q) that may be due in connection with the
transactions contemplated hereby. The Company shall indemnify and hold harmless
each of Buyer, its employees, officers, directors, agents, and partners, and
their respective affiliates, from and against all claims, losses, damages, costs
(including the costs of preparation and attorney's fees) and expenses suffered
in respect of any such claimed or existing fees, as and when incurred.
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4. CERTAIN COVENANTS AND ACKNOWLEDGMENTS.
a. Transfer Restrictions. The Buyer acknowledges that (1) the Preferred
Stock have not been and are not being registered under the provisions of the
1933 Act and, except as provided in the Registration Rights Agreement, the
Shares have not been and are not being registered under the 1933 Act, and may
not be transferred unless (A) subsequently registered thereunder or (B) the
Buyer shall have delivered to the Company an opinion of counsel, reasonably
satisfactory in form, scope and substance to the Company, to the effect that the
Securities to be sold or transferred may be sold or transferred pursuant to an
exemption from such registration; (2) any sale of the Securities made in
reliance on Rule 144 promulgated under the 1933 Act ("Rule 144") may be made
only in accordance with the terms of said Rule and further, if said Rule is not
applicable, any resale of such Securities under circumstances in which the
seller, or the person through whom the sale is made, may be deemed to be an
underwriter, as that term is used in the 1933 Act, may require compliance with
some other exemption under the 1933 Act or the rules and regulations of the SEC
thereunder; and (3) neither the Company nor any other person is under any
obligation to register the Securities (other than pursuant to the Registration
Rights Agreement) under the 1933 Act or to comply with the terms and conditions
of any exemption thereunder.
b. Restrictive Legend. The Buyer acknowledges and agrees that the Preferred
Stock and the Warrants, and, until such time as the Common Stock has been
registered under the 1933 Act as contemplated by the Registration Rights
Agreement and sold in accordance with an effective Registration Statement,
certificates and other instruments representing any of the Securities shall bear
a restrictive legend in substantially the following form (and a stop-transfer
order may be placed against transfer of any such Securities):
THESE SECURITIES (THE "SECURITIES") HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE
SECURITIES LAWS OF ANY STATE AND MAY NOT BE SOLD OR OFFERED
FOR SALE IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT
FOR THE SECURITIES OR AN OPINION OF COUNSEL OR OTHER EVIDENCE
ACCEPTABLE TO THE COMPANY THAT SUCH REGISTRATION IS NOT
REQUIRED.
c. Registration Rights Agreement. The parties hereto agree to enter into
the Registration Rights Agreement on or before the Initial Closing Date.
d. Filings.
(i) The Company undertakes and agrees to make all necessary filings
in connection with the sale of the Securities to the Buyer under any
United States laws and regulations applicable to the Company, or by any
domestic securities exchange or trading market, and to provide a copy
thereof to the Buyer promptly after such filing.
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(ii) Subject to the conditions of the immediately following sentence,
the Company undertakes and agrees to take all steps necessary to have a
meeting and vote of the stockholders of the Company no later than the
Meeting Date (as defined below) regarding either or both (A) the
authorization of the Company's issuance to the holders of the Preferred
Stock of shares of Common Stock in excess of twenty percent (20%) of the
outstanding shares of Common Stock on the date of this Agreement in
accordance with NASDAQ Rule 4310(c)(25)(H)(i) or Rule 4460(i)(1), as may be
applicable and/or (B) the increase of the authorized shares of Common Stock
of the Company, if and as may be necessary, to enable the Company to meet
its obligations regarding the reservation of shares and the conversion of
the Preferred Stock as contemplated by the Certificate of Determination and
the other Transaction Agreements. The term "Meeting Date" means the date
which is the earlier of (x) seventy-five (75) days after the date on which
the Company has issued, after the date of this Agreement, shares of Common
Stock which, in the aggregate equal or exceed ten percent (10%) of the
outstanding shares of Common Stock on the date hereof or (y) the date on
which the Company holds its next regular or special stockholders meeting or
(v) the date on which the Company holds its next regular or special
stockholders meeting after the meeting originally scheduled to be held on
or about June 24, 2000. The Company will recommend to the stockholders that
such authorization be granted and will seek proxies from stockholders not
attending the meeting naming a director or officer of the Company as such
stockholder's proxy and directing the proxy to vote, or giving the proxy
the authority to vote, in favor of such authorization. Upon determination
that the stockholders have voted in favor of such authorization, the
Company shall cause its counsel to issue to the Buyer an unqualified
opinion (the "Authorization Opinion") that such authorization has been duly
adopted by all necessary corporate action of the Company and that the
Company will be able to issue, without restriction as to the number of such
shares, all shares of Common Stock as may be issuable upon conversion of
the Preferred Stock and without any limits imposed by the Cap Regulations
(as defined in the Certificate of Determination) adopted on or before and
in effect on the date of the Authorization Opinion. The Authorization
Opinion shall state that the Buyer may rely thereon in connection with the
transactions contemplated by this Agreement and the other Transaction
Agreements regarding its holdings of the Preferred Stock. If, for any
reason, (x) the Authorization Opinion is not issued within five (5)
business days after such meeting, (y) the meeting is not held by the
Meeting Date or (z) the requisite stockholder approval is not obtained at
the meeting, then in lieu of issuing any shares in violation of NASDAQ Rule
4310(c)(25)(H) or Rule 4460(i)(1), as may be applicable, or any of the
other Cap Regulations, the Company shall redeem the outstanding Preferred
Stock as set forth in Section VI of the Certificate of Determination within
ten (10) days after the Meeting Date.
(iii) In furtherance of the provisions of the immediately preceding
subparagraph (ii) hereof, the Company (a) commits to using its best efforts
to obtain any stockholder authorization contemplated by said subparagraph
(ii), and (b) represents to the Buyer that the Company has obtained the
binding irrevocable commitment or proxy (each, a "Principal Voter Proxy")
of each Principal Voter (as defined below) that such Principal Voter will
vote in favor of any stockholder authorization contemplated by said
subparagraph (ii). A "Principal Voter" is a person who meets any one or
more of the following criteria: (A) a person who is a director or principal
officer of the Company (each, a "Company Principal") and who, directly or
indirectly, holds any shares of
12
Common Stock of the Company; (B) a spouse of a Company Principal who
resides in the household of the Company Principal (a "Principal's Spouse")
and who, directly or indirectly, holds any shares of Common Stock of the
Company, (C) a parent, sibling or child of a Company Principal who resides
in the household of a Company Principal or of a Principal's Spouse (each, a
"Principal's Relative") and who, directly or indirectly, holds any shares
of Common Stock or (D) any other person or entity, including, without
limitation, for profit or non-profit corporations, partnerships and trusts,
whose voting rights regarding Common Stock of the Company is subject to the
direction, control or other influence of any Company Principal, Principal's
Spouse or Principal's Relative. The Company will deliver such Principal
Voter Proxies to the Buyer or the Buyer's designee on the Initial Closing
Date.
e. Reporting Status. So long as the Buyer beneficially owns any of the
Securities, the Company shall file all reports required to be filed with the SEC
pursuant to Section 13 or 15(d) of the 1934 Act, and the Company shall not
terminate its status as an issuer required to file reports under the 1934 Act
even if the 1934 Act or the rules and regulations thereunder would permit such
termination. The Company will take all reasonable action under its control to
obtain and to continue the listing and trading of its Common Stock (including,
without limitation, all Registrable Securities) on The Nasdaq/Small Cap market
and will comply in all material respects with the Company's reporting, filing
and other obligations under the by-laws or rules of the National Association of
Securities Dealers, Inc. ("NASD") or The Nasdaq/Small Cap Market.
f. Use of Proceeds. The Company may use the proceeds from the sale of the
Preferred Stock (excluding amounts paid by the Company for legal fees, finder's
fees and escrow fees in connection with the sale of the Preferred Stock) for
internal working capital purposes and other corporate business activities.
g. Certain Agreements. Except to the extent specifically provided in
Section 4(j) hereof, but in each such event subject to compliance with all of
the other provisions of this Agreement, the Company covenants and agrees that it
will not, without the prior written consent of the Buyer, enter into
(x) any subsequent or further offer or sale of Common Stock or
securities convertible into Common Stock (collectively, "New Common Stock")
except as contemplated by Section 4(j) hereof,, or
(y) any subsequent offer or contract for an equity line or similar
arrangement which contemplates the issuance of New Common Stock
with any third party (a "New Investor") on any date which is earlier than one
hundred eighty (180) days after the Effective Date.
13
h. Available Shares. The Company shall have at all times authorized and
reserved for issuance, free from preemptive rights, shares of Common Stock
sufficient to yield (the "Reserved Standard") at least the aggregate of (i) two
hundred percent (200%) of the number of shares of Common Stock issuable at
conversion as may be required to satisfy the conversion rights of the Buyer
pursuant to the terms and conditions of the Certificate of Determination or to
represent payment of dividends on the Preferred Stock and (ii) the number of
shares issuable upon exercise as may be required to satisfy the exercise rights
of the Buyer pursuant to the terms and conditions of the Warrants. If, at any
time, the number of shares so authorized and reserved for issuance to all Buyers
is less than the number of shares contemplated by Paragraph B of Article VI of
the Certificate of Determination, the Company shall promptly take all steps
necessary or appropriate, which may include the calling of a special or regular
shareholders' meeting, to authorize an increase in the number of authorized
shares at least sufficient to enable the Company to comply with the Reserved
Standard.
i. Warrants. The Company agrees to issue to the Buyer on each Closing Date
transferable warrants (the "Warrants") for the purchase of a number of shares of
Common Stock equal to (x) the stated value of the Preferred Stock issued to the
Buyer on such Closing Date, divided by (y) the Fixed Conversion Price ( as
defined in the Certificate of Determination). The Warrants shall bear an
exercise price per share equal to 110% of (i) for the Warrants issued on the
Initial Closing Date, the average Closing Bid Price for the five (5) trading
days ending on the trading day immediately before (x) June 23, 2000 or (y) the
Initial Closing Date, whichever is lower, and (ii) for the Warrants issued on
the Additional Closing Date, the average Closing Bid Price for the five (5)
trading days ending on the trading day immediately before the Additional Closing
Date (subject in each instance to adjustment as provided in the Warrant). The
Warrants will expire on the last day of the calendar month in which the fifth
anniversary of the relevant Closing Date occurs. The Warrants shall be in the
form annexed hereto as Annex VI, together with (x) registration rights as
provided in the Registration Rights Agreement and (y) piggy-back registration
rights after the effectiveness of the Registration Statement expires, as
contemplated by the Registration Rights Agreement.
j. Right of First Refusal. (i) Subject to the provisions of this paragraph
(j), the Company may during the period commencing on the Effective Date and
continuing through and including the date which is one hundred eighty (180) days
after the Effective Date offer to enter into any transaction (a "New
Transaction") for the sale of New Common Stock to a New Investor, but only if
(x) the average Closing Bid Price for the twenty (20) trading days ending on the
trading immediately before the New Transaction Notice (as defined below) is at
least $5.50 per share (adjusted for capital transactions occurring after the
Initial Closing Date) and (y) the sale price per share of Common Stock or, if a
convertible security or other right to acquire shares, the conversion or
exercise price per share of Common Stock is at least $5.50 per share (adjusted
for capital transactions occurring after the Initial Closing Date). Before
consummating the New Transaction with a New Investor, the Company shall give
written notice (a "New Transaction Notice") to the Buyer summarizing all of the
terms of such offer (a "New Transaction Offer"). The Buyer shall have the right
(the "Right of First Refusal"), exercisable by written notice given to the
Company by the close of business on the fifth business day after the Buyer's
receipt of the New Transaction Offer
14
(the "Right of First Refusal Expiration Date"), to participate in all or any
part of the New Transaction Offer on the terms so specified.
(ii) If, and only if, the Buyer does not exercise the Right of First
Refusal in full, the Company may consummate the remaining portion of the
New Transaction with any New Investor on the terms specified in the New
Transaction Offer within thirty (30) days of the Right of First Refusal
Expiration Date.
(iii) If the terms of the New Transaction to be consummated with such
other party differ from the terms specified in the New Transaction Offer so
that the terms are more beneficial in any respect to the New Investor, the
Company shall give the Buyer a New Transaction Offer relating to the terms
of the New Transaction, as so changed, and the Buyer's Right of First
Refusal and the preceding terms of this paragraph (j) shall apply with
respect to such changed terms.
(iv) If there is more than one Buyer signatory to this Agreement, the
preceding provisions of this paragraph (j) shall apply pro rata among them
(based on their relative Buyer's Allocable Shares), except that, to the
extent any such Buyer does not exercise its Right of First Refusal in full
(a "Declining Buyer"), the remaining Buyer or Buyers who or which have
exercised their own Right of First Refusal in full, shall have the right
(pro rata among them based on their relative Buyer's Allocable Shares, if
more than one) to exercise all or a portion of such Declining Buyer's
unexercised Right of Refusal.
(v) In the event the New Transaction is consummated with such New
Investor at any time prior to the expiration of one hundred eighty (180)
days after the Effective Date on terms providing for
(x) either a sale price equal to or computed based on, or a
determination of a conversion price (howsoever defined or computed)
based on, a lower percentage of the then current market price
(howsoever defined or computed) than provided in the Certificate of
Determination for determining the Conversion Price, the terms of any
unissued or unconverted share of Preferred Stock shall be modified to
reduce the relevant Conversion Price to be equal to that provided in
the New Transaction as so consummated; and/or
(y) the issuance of warrants at an exercise price lower than
that provided in the Warrants, the terms of any unissued or
unexercised Warrants shall be modified to reduce the relevant Warrant
exercise price to be equal to that provided in the New Transaction as
so consummated.
k. Reimbursement. If (i) the Buyer, other than by reason of its gross
negligence or willful misconduct, becomes involved in any capacity in any
action, proceeding or investigation brought by any shareholder of the Company,
in connection with or as a result of the consummation of the transactions
contemplated by the Transaction Documents, or if the Buyer is impleaded in any
such action, proceeding or investigation by any person, or (ii) the Buyer, other
than by reason of its gross negligence or willful misconduct or by reason of its
trading of the Common Stock in a manner that is illegal under the federal or
state securities laws, becomes involved in any capacity in any action,
proceeding or investigation brought by the SEC against or involving the Company
or in connection with or as a result of the consummation of the transactions
15
contemplated by the Transaction Documents, or if the Buyer is impleaded in any
such action, proceeding or investigation by any person, then in any such case,
the Company will reimburse the Buyer 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 addition, other than with respect
to any matter in which Buyer is a named party, the Company will pay to the Buyer
reasonable out-of-pocket costs with respect to assisting in preparation for
hearings, trials or pretrial matters, or otherwise with respect to inquiries,
hearing, trials, and other proceedings relating to the subject matter of this
Agreement. The reimbursement obligations of the Company under this Section 4(k)
shall be in addition to any liability which the Company may otherwise have,
shall extend upon the same terms and conditions to any affiliates of the Buyer
that 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 the Buyer 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, the Buyer and any such affiliate and any such
person.
5. TRANSFER AGENT INSTRUCTIONS.
a. The Company warrants that, with respect to the Securities, other than
the stop transfer instructions to give effect to Section 4(a) hereof, it will
give its transfer agent no instructions inconsistent with instructions to issue
Common Stock from time to time upon conversion of the Preferred Stock in such
amounts as specified from time to time by the Company to the transfer agent,
bearing the restrictive legend specified in Section 4(b) of this Agreement prior
to registration of the Shares under the 1933 Act, registered in the name of the
Buyer or its nominee and in such denominations to be specified by the Buyer in
connection with each conversion of the Preferred Stock. Except as so provided,
the Shares shall otherwise be freely transferable on the books and records of
the Company as and to the extent provided in this Agreement, the Registration
Rights Agreement, and applicable law. Nothing in this Section shall affect in
any way the Buyer's obligations and agreement to comply with all applicable
securities laws upon resale of the Securities. If the Buyer provides the Company
with an opinion of counsel reasonably satisfactory to the Company that
registration of a resale by the Buyer of any of the Securities in accordance
with clause (1)(B) of Section 4(a) of this Agreement is not required under the
1933 Act, the Company shall (except as provided in clause (2) of Section 4(a) of
this Agreement) permit the transfer of the Securities and, in the case of the
Converted Shares or the Warrant Shares, as the case may be, promptly instruct
the Company's transfer agent to issue one or more certificates for Common Stock
without legend in such name and in such denominations as specified by the Buyer.
The Company agrees that if a sale by a holder of Securities complies with the
provisions of Rule 144, it will instruct the Company's transfer agent to
transfer shares to each purchaser in such a transaction and, if necessary,
arrange for an opinion of counsel to be delivered to the transfer agent with
respect to such transfer.
16
b. Subject to the provisions of this Agreement, the Company will permit the
Buyer to exercise its right to convert the Preferred Stock in the manner
contemplated by the Certificate of Determination. The Company acknowledges that
the submission (by facsimile transmission or delivery by mail, messenger or
courier) of a Notice of Conversion substantially in the form annexed hereto as
Annex VII shall constitute adequate notice of the exercise of the conversion
right by the holder of the Preferred Stock.
c The Company will authorize its transfer agent to give information
relating to the Company directly to the Buyer or the Buyer's representatives
upon the request of the Buyer or any such representative , to the extent such
information relates to (i) the status of shares of Common Stock issued or
claimed to be issued to the Buyer in connection with a Notice of Conversion, or
(ii) the number of outstanding shares of Common Stock of all stockholders as of
a current or other specified date. The Company will provide the Buyer with a
copy of the authorization so given to the transfer agent.
6. CLOSING DATES.
a. The Initial Closing Date shall occur on the date which is the first NYSE
trading day after each of the conditions contemplated by Sections 7 and 8 hereof
shall have either been satisfied or been waived by the party in whose favor such
conditions run.
b. (i) The Additional Closing Date shall be the date which is seven (7)
business days after the date of the Company Additional Closing Date Notice or
the Buyer Additional Closing Date Notice (as those terms are defined below;
each, an "Additional Closing Date Notice") .
(ii) On a date which is no earlier than the fifteenth business day
after the Effective Date and ending on the thirtieth business day after the
Effective Date, the Company may give notice (the "Company Additional
Closing Date Notice") by fax transmission or hand delivery to the Buyer,
with a copy to the Escrow Agent, specifying its demand that the Buyer
purchase the Additional Preferred Stock, as contemplated by Section
1(a)(ii)(y) hereof. The closing of the purchase and sale of the Additional
Preferred Stock shall be subject to the provisions of this Section 6(b) and
the other terms of this Agreement.
(iii) It shall be a condition to the Company's right to issue a
Company Closing Date Notice that, as of the Additional Closing Notice Date:
(A) The Registration Statement shall have been declared
effective and shall continue to be effective;
(B) Each of the Transaction Agreements shall continue to be in
full force and effect and be applicable, to the extent relevant, to
the
17
Additional Preferred Stock and the Warrants to be issued on the
Additional Closing Date (and the Company's issuance of the Company
Additional Closing Date Notice shall constitute the Company's making
each such representation and warranty as of such date);
(C) The Closing Bid Price on the trading day immediately prior to
the date of the Company Additional Closing Date Notice was not less
than $2.00 per share (adjusted to reflect any capital adjustments made
by the Company after the Initial Closing Date);
(D) (a)(i) If the average Closing Bid Price for the Common Stock
for the thirty (30) trading days ending on the trading day immediately
before the date the Company Additional Date Notice was given, was not
less than $2.50 per share (adjusted to reflect any capital adjustments
made by the Company after the Initial Closing Date), and (ii) the
average daily trading volume for the thirty (30) trading days ending
the trading day immediately prior to the date of the Company
Additional Closing Date Notice was not less than the Volume Standard;
provided, however, that if the average daily trading volume during
that period is less than the Volume Standard, but at least
seventy-five percent (75%) of the Volume Standard, the amount of the
Additional Preferred Stock to be purchased by the Buyer shall be
two-thirds of the amount contemplated by Section 1(a)(ii)(y);
(b)(i) If the average Closing Bid Price for the Common Stock
for the thirty (30) trading days ending on the trading day
immediately before the date the Company Additional Date
Notice was given, was not less than $4.00 per share
(adjusted to reflect any capital adjustments made by the
Company after the Initial Closing Date), and (ii) the
average daily trading volume for the thirty (30) trading
days ending the trading day immediately prior to the date of
the Company Additional Closing Date Notice was not less than
seventy-five percent (75%) of the Volume Standard; provided,
however, that if the average daily trading volume during
that period is less than such amount but at least fifty
percent (50%) of the Volume Standard, the amount of the
Additional Preferred Stock to be purchased by the Buyer
shall be two- thirds of the amount contemplated by Section
1(a)(ii)(y);
(E) the Authorization Opinion shall have been issued to the
Buyer; and
18
(F) The representations and warranties of the Company contained
in Section 3 hereof shall be true and correct in all material respects
and there shall have been no material adverse effect on the business,
operations or financial condition or results of operations of the
Company and its subsidiaries taken as a whole, from the Initial
Closing Date through and including the date the Company gives the
Company Additional Closing Date Notice to the Buyer (and the Company's
issuance of the Additional Closing Date Notice shall constitute the
Company's making each such representation and warranty as of such
date).
(iv) The Buyer by written notice to the Company can waive all or any part
of the conditions referred to in Section 6(b)(iii) with respect to all or any
specified portion of the Additional Preferred Stock; and
(v) If the Company has not given the Company Additional Closing Date
Notice, then, during the period commencing on the thirty-first business day
after the Effective Date and ending on the forty-fifth business day after the
Effective Date, the Buyer shall have the right to give notice (the "Buyer
Additional Closing Date Notice") by fax transmission or hand delivery to the
Company, with a copy to the Escrow Agent, specifying its demand that the Company
issue all or part of the Additional Preferred Stock, as contemplated by Section
1(a)(ii)(y) hereof.
(vi) The closing for the Additional Preferred Stock shall be conducted
upon the same terms and conditions as those applicable to the Initial Preferred
Stock.
c. Each closing of the purchase and issuance of Preferred Stock shall occur
on the relevant Closing Date at the offices of the Escrow Agent and shall take
place no later than 3:00 P.M., New York time, on such day or such other time as
is mutually agreed upon by the Company and the Buyer.
d. Notwithstanding anything to the contrary contained herein, the Escrow
Agent will be authorized to release the Escrow Funds to the Company and to
others and to release the other Escrow Property on the relevant Closing Date
upon satisfaction of the conditions set forth in Sections 7 and 8 hereof and as
provided in the Joint Escrow Instructions.
7. CONDITIONS TO THE COMPANY'S OBLIGATION TO SELL.
The Buyer understands that the Company's obligation to sell the relevant
Preferred Stock to the Buyer pursuant to this Agreement on the relevant Closing
Date is conditioned upon:
18
DRAFT -2 6/21/00
a. The Buyer's execution and delivery of this Agreement and the other
Transaction Agreements contemplated to be signed by the Buyer;
b. Delivery by the Buyer to the Escrow Agent of good funds as payment in
full of an amount equal to the Purchase Price for the relevant Preferred Stock
in accordance with this Agreement;
c. The accuracy on such Closing Date of the representations and warranties
of the Buyer contained in this Agreement, each as if made on such date, and the
performance by the Buyer on or before such date of all covenants and agreements
of the Buyer required to be performed on or before such date;
d. Except to the extent contemplated by specific provisions of the
Transaction Agreements, there shall not be in effect any law, rule or regulation
prohibiting or restricting the transactions contemplated hereby to an extent
materially greater than contemplated herein, or requiring any consent or
approval which shall not have been obtained; and
e. From and after the date hereof to and including such Closing Date, the
trading of the Common Stock shall not have been suspended by the SEC or the NASD
and trading in securities generally on the NYSE or The Nasdaq/SmallCap Market
shall not have been suspended or limited, nor shall minimum prices been
established for securities traded on The Nasdaq/SmallCap Market, nor shall there
be any outbreak or escalation of hostilities involving the United States or any
material adverse change in any financial market that in either case in the
reasonable judgment of the Company makes it impracticable or inadvisable to sell
the Preferred Stock.
8. CONDITIONS TO THE BUYER'S OBLIGATION TO PURCHASE.
The Company understands that the Buyer's obligation to purchase the
Preferred Stock on the relevant Closing Date is conditioned upon:
a. The adoption of the Certificate of Determination by all necessary
corporate action of the Company and the filing of all filings necessary to
effectuate the Certificate of Determination as a part of the charter documents
of the Company;
b. The execution and delivery of this Agreement and the Registration Rights
Agreement by the Company;
c. Delivery by the Company to the Escrow Agent of the relevant Certificates
in accordance with this Agreement;
d. The accuracy in all material respects on such Closing Date of the
representations and warranties of the Company contained in this Agreement, each
as if made on such
20
date, and the performance by the Company on or before such date of all covenants
and agreements of the Company required to be performed on or before such date;
e. On such Closing Date, the Registration Rights Agreement shall be in full
force and effect and the Company shall not be in default thereunder;
f. On such Closing Date, the Buyer shall have received an opinion of
counsel for the Company, dated such Closing Date, in form, scope and substance
reasonably satisfactory to the Buyer, substantially to the effect set forth in
Annex III attached hereto;
g. Except to the extent contemplated by specific provisions of the
Transaction Agreements, there shall not be in effect any law, rule or regulation
prohibiting or restricting the transactions contemplated hereby to an extent
materially greater than contemplated herein, or requiring any consent or
approval which shall not have been obtained;
h. From and after the date hereof to and including such Closing Date, the
trading of the Common Stock shall not have been suspended by the SEC or the NASD
and trading in securities generally on the The Nasdaq/SmallCap Market shall not
have been suspended or limited, nor shall minimum prices been established for
securities traded on The Nasdaq/SmallCap Market, nor shall there be any outbreak
or escalation of hostilities involving the United States or any material adverse
change in any financial market that in either case in the reasonable judgment of
the Buyer makes it impracticable or inadvisable to purchase the Preferred Stock;
and
i. With respect to the Additional Closing Date,
(i) a Company Additional Closing Date Notice shall have been duly
given in accordance with the provisions of Section 6(b);
(ii) all the other conditions of Section 6(b) shall have been
satisfied;
(iii) the Registration Statement shall have been declared effective
and continue to be effective;
(iv) each of the Transaction Agreements shall continue to be in full
force and effect and be applicable, to the extent relevant, to the
Additional Preferred Stock and Warrants (and the Company's issuance of the
Additional Preferred Stock shall constitute the Company's making a
representation and warranty to such effect as of such date);
(v) the representations and warranties of the Company contained in
Section 3 hereof shall be true and correct in all material respects (and
the Company's issuance of the Additional Preferred Stock shall constitute
the Company's making each such representation and warranty as of such date)
and there shall have been no material adverse change to the business,
operations or
21
financial condition or results of operation of the Company and its
subsidiaries taken as a whole from the Initial Closing Date through and
including the Additional Closing Date (and the Company's issuance of the
Additional Preferred Stock shall constitute the Company's making such
representation and warranty as of such date);
(vi) the Company shall have timely issued all shares issuable upon
conversion of the Preferred Stock or upon exercise of the Warrants prior to the
date of such Additional Closing Date; and
(vii) the Company shall have available and shall reserve for issuance to
Buyer at least two hundred (200%) of the number of Shares which would be issued
on (x) conversion of all unconverted Initial Preferred Stock and all Additional
Preferred Stock and (y) exercise of all unexercised Warrants.
9. GOVERNING LAW: MISCELLANEOUS.
a. This Agreement shall be governed by and interpreted in accordance with
the laws of the State of New York for contracts to be wholly performed in such
state and without giving effect to the principles thereof regarding the conflict
of laws. Each of the parties consents to the jurisdiction of the federal courts
whose districts encompass any part of the City of New York or the state courts
of the State of New York sitting in the City of New York in connection with any
dispute arising under this Agreement and hereby waives, to the maximum extent
permitted by law, any objection, including any objection based on forum non
conveniens, to the bringing of any such proceeding in such jurisdictions. To the
extent determined by such court, the Company shall reimburse the Buyer for any
reasonable legal fees and disbursements incurred by the Buyer in enforcement of
or protection of any of its rights under any of the Transaction Agreements.
b. Failure of any party to exercise any right or remedy under this
Agreement or otherwise, or delay by a party in exercising such right or remedy,
shall not operate as a waiver thereof.
c. This Agreement shall inure to the benefit of and be binding upon the
successors and assigns of each of the parties hereto.
d. All pronouns and any variations thereof refer to the masculine, feminine
or neuter, singular or plural, as the context may require.
e. A facsimile transmission of this signed Agreement shall be legal and
binding on all parties hereto.
22
f. This Agreement may be signed in one or more counterparts, each of which
shall be deemed an original.
g. The headings of this Agreement are for convenience of reference and
shall not form part of, or affect the interpretation of, this Agreement.
h. If any provision of this Agreement shall be invalid or unenforceable in
any jurisdiction, such invalidity or unenforceability shall not affect the
validity or enforceability of the remainder of this Agreement or the validity or
enforceability of this Agreement in any other jurisdiction.
i. This Agreement may be amended only by an instrument in writing signed by
the party to be charged with enforcement thereof.
j. This Agreement supersedes all prior agreements and understandings among
the parties hereto with respect to the subject matter hereof.
10. NOTICES. Any notice required or permitted hereunder shall be given in
writing (unless otherwise specified herein) and shall be deemed effectively
given on the earliest of
(a) the date delivered, if delivered by personal delivery as against
written receipt therefor or by confirmed facsimile transmission,
(b) the seventh business day after deposit, postage prepaid, in the
United States Postal Service by registered or certified mail, or
(c) the third business day after mailing by domestic or international
express courier, with delivery costs and fees prepaid,
in each case, addressed to each of the other parties thereunto entitled at the
following addresses (or at such other addresses as such party may designate by
ten (10) days' advance written notice similarly given to each of the other
parties hereto):
COMPANY: ▇▇▇▇▇▇▇▇.▇▇▇
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇ ▇▇▇▇▇
Telephone No.: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopier No.: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
23
▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇▇▇ LLP
▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, Esq.
Telephone No.: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopier No.: (▇▇▇) ▇▇▇-▇▇▇▇
BUYER: At the address set forth on the signature
page of this Agreement.
with a copy to:
▇▇▇▇▇▇▇ & Prager LLP
▇▇ ▇▇▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇, Esq.
Telephone No.: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopier No. (▇▇▇) ▇▇▇-▇▇▇▇
ESCROW AGENT: ▇▇▇▇▇▇▇ & Prager LLP
▇▇ ▇▇▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇.
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Telephone No.: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopier No. (▇▇▇) ▇▇▇-▇▇▇▇
11. SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The Company's and the
Buyer's representations and warranties herein shall survive the execution and
delivery of this Agreement and the delivery of the Certificates and the Warrants
and the payment of the Purchase Price and shall inure to the benefit of the
Buyer and the Company and their respective successors and assigns.
[BALANCE OF PAGE INTENTIONALLY LEFT BLANK.]
24
IN WITNESS WHEREOF, this Agreement has been duly executed by the Buyer by
one of its officers thereunto duly authorized as of the date set forth below.
STATED VALUE OF PREFERRED STOCK: $
---------------------------
PURCHASE PRICE OF PREFERRED STOCK: $
---------------------------
SIGNATURES FOR ENTITIES
IN WITNESS WHEREOF, the undersigned represents that the foregoing
statements are true and correct and that it has caused this Securities Purchase
Agreement to be duly executed on its behalf this day , 2000.
-------------------------------- ------------------------------------
Address Printed Name of Subscriber
-------------------------------- By:
--------------------------------
Telecopier No. (Signature of Authorized Person)
-----------------
------------------------------------
-------------------------------- Printed Name and Title
Jurisdiction of Incorporation
or Organization
As of the date set forth below, the undersigned hereby accepts this Agreement
and represents that the foregoing statements are true and correct and that it
has caused this Securities Purchase Agreement to be duly executed on its behalf.
▇▇▇▇▇▇▇▇.▇▇▇
By:
-------------------------------------
▇▇▇▇ ▇▇▇▇▇
Title: Chief Executive Officer
-------------------------------------
Date: ,2000
----------------------------------
25
ANNEX I CERTIFICATE OF DETERMINATION
ANNEX II JOINT ESCROW INSTRUCTIONS
ANNEX III OPINION OF COUNSEL
ANNEX IV REGISTRATION RIGHTS AGREEMENT
ANNEX V COMPANY DISCLOSURE MATERIALS
ANNEX VI FORM OF WARRANT
ANNEX VII NOTICE OF CONVERSION FORM
26
COMPANY DISCLOSURE MATERIALS
----------------------------
NONE
▇▇▇▇▇▇▇▇.▇▇▇
Notice of Conversion
(To be Executed by the Registered Holder
in order to Convert the Series A Preferred Stock)
TO: ▇▇▇▇▇▇▇.▇▇▇ VIA TELECOPIER TO:
▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇ ( )
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇ Attn:
FROM: ("Holder")
-----------------------------------------------------------------
DATE: (the "Conversion Date")
----------------------------------------------------
RE: Conversion of shares (the "Converted Shares") of the
-------------------
[ ] Series A-1 Convertible Preferred Stock
[ ] Series A-2 Convertible Preferred Stock
(the "Preferred Stock") of ▇▇▇▇▇▇▇▇.▇▇▇ (the "Company") into ______ shares (the
"Conversion Shares") of Common Stock (defined below)
CONVERSION DATE:
---------------------------------------------------
The captioned Holder hereby gives notice to the Company, pursuant to the
Certificate of Determination of Convertible Preferred Stock of ▇▇▇▇▇▇▇▇.▇▇▇ (the
"Certificate of Determination"), that the Holder elects to convert the Converted
Shares into fully paid and non- assessable shares of Common Stock, no par value
(the "Common Stock"), of the Company as of the Conversion Date specified above.
Said conversion shall be based on the following Conversion Price (the lower of
the two alternatives is checked):
[ ] $ , representing the Fixed Conversion Price (as
---------------
defined in the Certificate of Determination)
[ ] $ , representing the Variable Conversion Price
---------------
(as defined in the Certificate of Determination)
A schedule of the Closing Bid Prices of the Common Stock for the [ ]
twenty-two [ ] forty-five trading days prior to the relevant Conversion Date,
as reported on the Principal Trading Market by the Reporting Service (as those
terms are defined in the Certificate of Determination), is attached for your
reference in determining the Variable Conversion Price, if that box is checked
above.
Based on this Conversion Price, the number of Conversion Shares indicated
above should be issued in the following name(s):
Name and Record Address Conversion Shares
----------------------------- -----------------
----------------------------- -----------------
----------------------------- -----------------
As contemplated by the Certificate of Determination and the Securities
Purchase Agreement, dated June ____, 2000 (the "Securities Purchase Agreement"),
to which the Company and the Holder are parties, this Notice of Conversion is
being sent by facsimile to the telecopier number and officer indicated above,
with a copy to the Company's counsel.
The Holder has previously surrendered or will surrender (or cause to be
surrendered) the certificate(s) for the Converted Shares, duly endorsed, to the
Company at the address indicated above by express courier within 5 business days
after delivery or facsimile transmission of this Notice of Conversion.
The certificates representing the Conversion Shares (together with
certificate(s) representing the shares of Preferred Stock not converted hereby)
should be transmitted by the Company to the Holder via express courier or by
electronic transfer within the time contemplated by the Certificate of
Determination after receipt of this Notice of Conversion (by facsimile
transmission or otherwise) and the certificate(s) representing the Converted
Shares to:
-----------------------------
-----------------------------
-----------------------------
As contemplated by Article III of the Certificate of Determination, the
Company should also pay all unpaid dividends on the Converted Shares by check
payable to the Holder (unless such dividends are being paid in Common Stock as
contemplated by said section, in which event such shares should be issued in the
name of the Holder) delivered in the same manner as, and together with, the
Conversion Shares.
----------------------------------------
(Print name of Holder)
By:
------------------------------------
(Signature of Authorized Person)
----------------------------------------
(Printed Name and Title)