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EXHIBIT 4.1
SECURITIES PURCHASE AGREEMENT
SECURITIES PURCHASE AGREEMENT (the "AGREEMENT"), dated as of October
21, 1998, by and among Alpha-Beta Technology, Inc., a Massachusetts corporation,
with headquarters located at ▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇▇
▇▇▇▇▇ (the "COMPANY"), and the investors listed on the Schedule of Buyers
attached hereto (individually, a "BUYER" and collectively, the "BUYERS").
WHEREAS:
A. The Company and the Buyers are executing and delivering this
Agreement in reliance upon the exemption from securities registration afforded
by Rule 506 of 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");
B. The Company has authorized the following new series of its
Preferred Stock, par value $0.01 per share (the "PREFERRED STOCK"): the
Company's Series F Convertible Preferred Stock (the "PREFERRED SHARES"), which
shall be convertible into shares of the Company's Common Stock, par value $0.01
per share (the "COMMON STOCK") (as converted, the "CONVERSION SHARES"), in
accordance with the terms of the Company's Certificate of Vote of Directors
Establishing Series F Convertible Preferred Stock, substantially in the form
attached hereto as EXHIBIT A (the "CERTIFICATE OF DESIGNATIONS");
C. The Buyers wish to purchase, upon the terms and conditions
stated in this Agreement, initially an aggregate of 1500 of the Preferred Shares
(the "INITIAL PREFERRED SHARES") in the respective amounts set forth opposite
each Buyer's name on the Schedule of Buyers on the Initial Closing Date (as
defined below);
D. Subject to the terms and conditions set forth in this
Agreement, the Buyers wish to purchase an aggregate of an additional 1500 of the
Preferred Shares (the "ADDITIONAL PREFERRED SHARES") in the respective amounts
set forth opposite each Buyer's name in the Schedule of Buyers on the Additional
Closing Date (as defined below) (the Initial Preferred Shares and the Additional
Preferred Shares collectively are referred to in this Agreement as the
"PREFERRED SHARES"); and
E. Contemporaneously with the execution and delivery of this
Agreement, the parties hereto are executing and delivering a Registration Rights
Agreement substantially in the form attached hereto as EXHIBIT B (the
"REGISTRATION RIGHTS AGREEMENT") pursuant to which the Company has agreed to
provide certain registration rights under the 1933 Act and the rules and
regulations promulgated thereunder, and applicable state securities laws.
NOW THEREFORE, the Company and the Buyers hereby agree as follows:
1. PURCHASE AND SALE OF PREFERRED SHARES.
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a. PURCHASE OF PREFERRED SHARES. Subject to satisfaction (or
waiver) of the conditions set forth in Sections 6(a) and 7(a) below, the Company
shall issue and sell to each Buyer and each Buyer severally agrees to purchase
from the Company the respective number of Initial Preferred Shares set forth
opposite such Buyer's name on the Schedule of Buyers, (as defined below) (the
"INITIAL CLOSING"). Subject to the satisfaction (or waiver) of the conditions
set forth in Sections 1(c), 6(b) and 7(b) below, the Company shall issue and
sell to each Buyer and each Buyer severally agrees to purchase from the Company
the respective number of Additional Preferred Shares set forth opposite such
Buyer's name on the Schedule of Buyers (the "ADDITIONAL CLOSING"). The Initial
Closing and the Additional Closing collectively are referred to in this
Agreement as the "CLOSINGS." The purchase price (the "PURCHASE PRICE") of each
Preferred Share at each of the Closings shall be $1,000. Notwithstanding the
foregoing, the aggregate amount of Additional Preferred Shares required to be
purchased by the Buyers shall be reduced on a dollar for dollar basis to the
extent of the amount of financing received by the Company from the issuance of
any equity securities or debt securities with an equity component to Ross
Financial Corporation or its affiliates after the Initial Closing but on or
prior to the Additional Closing Date.
b. THE INITIAL CLOSING DATE. The date and time of the Initial
Closing (the "INITIAL CLOSING DATE") shall be 10:00 a.m. Central Time, within
three (3) business days following the date hereof, subject to notification of
satisfaction (or waiver) of the conditions to the Initial Closing set forth in
Sections 6(a) and 7(a) below (or such later date as is mutually agreed to by the
Company and the Buyers). The Initial Closing shall occur on the Initial Closing
Date at the offices of ▇▇▇▇▇▇ ▇▇▇▇▇▇ & Zavis, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇
▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇ or such other place as the parties shall
agree.
c. THE ADDITIONAL CLOSING DATE. The date and time of the
Additional Closing (the "ADDITIONAL CLOSING DATE") shall be 10:00 a.m. Central
Time, on the fifth business day following the date of the receipt by each Buyer
of the Additional Share Notice (as defined below) following the date the
Registration Statement (as defined in the Registration Rights Agreement) is
declared effective by the SEC, subject to satisfaction (or waiver) of the
conditions to the Additional Closing set forth in Sections 6(b) and 7(b) and the
conditions set forth in this paragraph (or such later date as is mutually agreed
to by the Company and the Buyers). The Company shall deliver written notice (the
"ADDITIONAL SHARE NOTICE") to each Buyer of the event described in the preceding
sentence on the first business day (the "ADDITIONAL SHARE NOTICE DATE")
following the occurrence of such event. Notwithstanding the foregoing, no Buyer
shall be required to purchase the Additional Preferred Shares unless each of the
following conditions is satisfied: (i) such Buyer shall have received the
Additional Share Notice on or before the second business day after the
Effectiveness Deadline (as defined in the Registration Rights Agreement); (ii)
the Company shall take all action necessary to have on the Additional Closing
Date, Conversion Shares which are (1) authorized and reserved for issuance, (2)
available under rule 4460 of the Nasdaq National Market and (3) available for
resale under the Registration Statement which shall have been declared
effective, of no less than 200% of the sum of (A) the number of Conversion
Shares issuable upon the conversion of all of the outstanding Initial Preferred
Shares and the Additional Preferred Shares to be issued by the Company and (B)
the number of Conversion Shares then held by Buyers; (iii) during the period
beginning on the date of this Agreement and ending on and including the
Additional
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Closing Date, there shall not have occurred (A) a public announcement of a Major
Transaction (as defined in Section 3(c) of the Certificate of Designations)
which has not been abandoned or terminated, (B) a Triggering Event (as defined
in Section 3(d) of the Certificate of Designations) or (C) a Material Adverse
Change (as defined below); (iv) at all times during the period beginning on the
date of this Agreement and ending on and including the Additional Closing Date,
the Common Stock shall have been designated on the Nasdaq National Market and
shall not have been suspended from trading and the Company shall not have been
notified of any pending or threatened proceeding or other action to delist or
suspend the Common Stock; and (vii) and the Company shall not have previously
delivered an Additional Share Notice. The Additional Closing shall occur on the
Additional Closing Date at the offices of ▇▇▇▇▇▇ ▇▇▇▇▇▇ & ▇▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇ or such other place as the
parties shall agree. The Initial Closing Date and the Additional Closing Date
collectively are referred to in this Agreement as the "CLOSING DATES." "MATERIAL
ADVERSE CHANGE" means any change, event, result or happening involving, directly
or indirectly, the Company or any of its Subsidiaries (as defined below)
resulting in a material adverse effect on the business, financial condition or
results of operations of the Company and its Subsidiaries, taken as a whole.
d. FORM OF PAYMENT. On each of the Closing Dates, (i) each
Buyer shall pay the Purchase Price to the Company for the Preferred Shares to be
issued and sold to such Buyer at the respective Closing, by wire transfer of
immediately available funds in accordance with the Company's written wire
instructions, and (ii) the Company shall deliver to each Buyer, stock
certificates (in the denominations as such Buyer shall request) (the "STOCK
CERTIFICATES") representing such number of the Preferred Shares which such Buyer
is then purchasing (as indicated opposite such Buyer's name on the Schedule of
Buyers). Such Stock Certificates shall bear the restrictive legends required
pursuant to Section 2(g).
2. BUYER'S REPRESENTATIONS AND WARRANTIES.
Each Buyer represents and warrants with respect to only itself
that:
a. INVESTMENT PURPOSE. Such Buyer (i) is acquiring the
Preferred Shares and (ii) upon conversion of the Preferred Shares, will acquire
the Conversion Shares then issuable (the Preferred Shares and the Conversion
Shares collectively are referred to herein as the "SECURITIES"), for its own
account for investment only and not with a view towards, or for resale in
connection with, the public sale or distribution thereof, except pursuant to
sales registered or exempted under the 1933 Act; provided, however, that by
making the representations herein, such Buyer does not agree to hold any of the
Securities for any minimum or other specific term and reserves the right to
dispose of the Securities at any time in accordance with or pursuant to a
registration statement or an exemption under the 1933 Act.
b. ACCREDITED INVESTOR STATUS. Such Buyer is an "accredited
investor" as that term is defined in Rule 501(a)(3) of Regulation D.
c. RELIANCE ON EXEMPTIONS. Such 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
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in part upon the truth and accuracy of, and such Buyer's compliance with, the
representations, warranties, agreements, acknowledgments and understandings of
such Buyer set forth herein in order to determine the availability of such
exemptions and the eligibility of such Buyer to acquire such securities.
d. INFORMATION. Such 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 Securities
which have been requested by such Buyer. Such Buyer and its advisors, if any,
have been afforded the opportunity to ask questions of the Company. Neither such
inquiries nor any other due diligence investigations conducted by such Buyer or
its advisors, if any, or its representatives shall modify, amend or affect such
Buyer's right to rely on the Company's representations and warranties contained
in Section 3 below. Such Buyer understands that its investment in the Securities
involves a high degree of risk. Such Buyer has sought such accounting, legal and
tax advice as it has considered necessary to make an informed investment
decision with respect to its acquisition of the Securities.
e. NO GOVERNMENTAL REVIEW. Such 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
or the fairness or suitability of the investment in the Securities nor have such
authorities passed upon or endorsed the merits of the offering of the
Securities.
f. TRANSFER OR RESALE. Such Buyer understands that except as
provided in the Registration Rights Agreement: (i) the Securities have not been
and are not being registered under the 1933 Act or any state securities laws,
and may not be offered for sale, sold, assigned or transferred unless (A)
subsequently registered thereunder, (B) such Buyer shall have, if requested by
the Company, delivered to the Company an opinion of counsel, in a form
reasonably acceptable to the Company, to the effect that such Securities to be
sold, assigned or transferred may be sold, assigned or transferred pursuant to
an exemption from such registration, or (C) such Buyer provides the Company with
assurance reasonably acceptable to the Company that such Securities can be sold,
assigned or transferred pursuant to Rule 144 promulgated under the 1933 Act (or
a successor rule thereto) ("RULE 144"); (ii) any sale of the Securities made in
reliance on Rule 144 may be made only in accordance with the terms of Rule 144
and further, if Rule 144 is not applicable, any resale of the 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 defined in the ▇▇▇▇ ▇▇▇) may
require compliance with some other exemption under the 1933 Act or the rules and
regulations of the SEC thereunder; and (iii) neither the Company nor any other
person is under any obligation to register such Securities under the 1933 Act or
any state securities laws or to comply with the terms and conditions of any
exemption thereunder.
g. LEGENDS. Such Buyer understands that the certificates or
other instruments representing the Preferred Shares and, until such time as the
sale of the Conversion Shares have been registered under the 1933 Act as
contemplated by the Registration Rights Agreement, the stock certificates
representing the Conversion Shares,
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except as set forth below, shall bear a restrictive legend in substantially the
following form (and a stop-transfer order may be placed against transfer of such
stock certificates):
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE
SECURITIES LAWS. THE SECURITIES HAVE BEEN ACQUIRED FOR INVESTMENT AND
MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED IN THE
ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER
THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES
LAWS, OR AN OPINION OF COUNSEL, IN A FORM REASONABLY ACCEPTABLE TO THE
COMPANY, THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR APPLICABLE
STATE SECURITIES LAWS OR UNLESS SOLD PURSUANT TO RULE 144 UNDER SAID
ACT.
The legend set forth above shall be removed and the Company shall issue a
certificate without such legend to the holder of the Securities upon which it is
stamped, if, unless otherwise required by state securities laws, (i) such
Securities are registered for sale under the 1933 Act, (ii) in connection with a
sale transaction, such holder provides the Company with an opinion of counsel,
in a generally acceptable form, to the effect that a public sale, assignment or
transfer of such Securities may be made without registration under the 1933 Act,
or (iii) such holder provides the Company with reasonable assurances that such
Securities can be sold pursuant to Rule 144 without any restriction as to the
number of securities acquired as of a particular date that can then be
immediately sold.
h. AUTHORIZATION; ENFORCEMENT. This Agreement has been duly
and validly authorized, executed and delivered on behalf of such Buyer and is a
valid and binding agreement of such Buyer enforceable against such Buyer in
accordance with its terms, subject as to enforceability to general principles of
equity and to applicable bankruptcy, insolvency, reorganization, moratorium,
liquidation and other similar laws relating to, or affecting generally, the
enforcement of applicable creditors' rights and remedies.
i. RESIDENCY. Such Buyer is a resident of that country
specified on the Schedule of Buyers.
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
The Company represents and warrants to each of the Buyers
that:
a. ORGANIZATION AND QUALIFICATION. The Company and its
"Subsidiaries" (which for purposes of this Agreement means any entity in which
the Company, directly or indirectly, owns capital stock or holds an equity or
similar interest) (a complete list of which is set forth in SCHEDULE 3(a)) are
corporations duly organized and validly existing in good standing under the laws
of the jurisdiction in which they are incorporated, and have the requisite
corporate power and authorization to own their properties and to carry on their
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business as now being conducted. Each of the Company and its Subsidiaries is
duly qualified as a foreign corporation to do business and is in good standing
in every jurisdiction in which its ownership of property or the nature of the
business conducted by it makes such qualification necessary, except to the
extent that the failure to be so qualified or be in good standing would not have
a Material Adverse Effect. As used in this Agreement, "MATERIAL ADVERSE EFFECT"
means any material adverse effect on the business, properties, assets,
operations, results of operations or financial condition of the Company and its
Subsidiaries, if any, taken as a whole, or on the transactions contemplated
hereby or by the agreements and instruments to be entered into in connection
herewith, or on the authority or ability of the Company to perform its
obligations under the Transaction Documents (as defined below) or the
Certificate of Designations.
b. AUTHORIZATION; ENFORCEMENT; COMPLIANCE WITH OTHER
INSTRUMENTS. (i) The Company has the requisite corporate power and authority to
enter into and perform this Agreement, the Registration Rights Agreement, the
Irrevocable Transfer Agent Instructions, the Second Amendment to the Shareholder
Rights Agreement and each of the other agreements entered into by the parties
hereto in connection with the transactions contemplated by this Agreement
(collectively, the "TRANSACTION DOCUMENTS"), and to issue the Securities in
accordance with the terms hereof and thereof, (ii) the execution and delivery of
the Transaction Documents and the Certificate of Designations by the Company and
the consummation by it of the transactions contemplated hereby and thereby,
including without limitation the issuance of the Preferred Shares and the
reservation for issuance and the issuance of the Conversion Shares issuable upon
conversion thereof, have been duly authorized by the Company's Board of
Directors and no further consent or authorization is required by the Company,
its Board of Directors or its stockholders, except for, if required by the
Principal Market (as defined below), approval by its stockholders prior to the
issuance of a number of shares of Common Stock equal to or in excess of 20% of
the number of shares of common Stock outstanding immediately prior to the
Initial Closing Date; (iii) the Transaction Documents have been duly executed
and delivered by the Company, (iv) the Transaction Documents constitute the
valid and binding obligations of the Company enforceable against the Company in
accordance with their terms, except as such enforceability may be limited by
general principles of equity or applicable bankruptcy, insolvency,
reorganization, moratorium, liquidation or similar laws relating to, or
affecting generally, the enforcement of creditors' rights and remedies, and (v)
prior to each of the Closing Dates, the Certificate of Designations has been
filed with the Secretary of State of The Commonwealth of Massachusetts and will
be in full force and effect, enforceable against the Company in accordance with
its terms. The "PRINCIPAL MARKET" shall mean the securities or trading market
upon which the Common Stock is listed or quoted provided that such market is one
of the following: the Nasdaq National Market, The American Stock Exchange, Inc.
or The New York Stock Exchange, Inc.
c. CAPITALIZATION. As of the date hereof, the authorized
capital stock of the Company consists of (i) 30,000,000 shares of Common Stock,
of which as of the date hereof, 20,597,272 shares were issued and outstanding,
2,786,622 shares are issuable and reserved for
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issuance pursuant to the Company's stock option plans and no shares are issuable
and reserved for issuance pursuant to securities (other than the Preferred
Shares) exercisable or exchangeable for, or convertible into, shares of Common
Stock, except as set forth on SCHEDULE 3(c) and (ii) 1,000,000 shares of
preferred stock, which as of the date hereof, no shares were issued and
outstanding, except as set forth on SCHEDULE 3(c). All of such outstanding
shares have been, or upon issuance will be, validly issued and are fully paid
and nonassessable. Except as disclosed in SCHEDULE 3(c), (i) no shares of the
Company's capital stock are subject to preemptive rights or any other similar
rights or any liens or encumbrances suffered or permitted by the Company, (ii)
there are no outstanding debt securities, (iii) there are no outstanding
options, warrants, scrip, rights to subscribe to, calls or commitments of any
character whatsoever relating to, or securities or rights convertible into, any
shares of capital stock of the Company or any of its Subsidiaries, or contracts,
commitments, understandings or arrangements by which the Company or any of its
Subsidiaries is or may become bound to issue additional shares of capital stock
of the Company or any of its Subsidiaries or options, warrants, scrip, rights to
subscribe to, calls or commitments of any character whatsoever relating to, or
securities or rights convertible into, any shares of capital stock of the
Company or any of its Subsidiaries, (iv) there are no agreements or arrangements
under which the Company or any of its Subsidiaries is obligated to register the
sale of any of their securities under the 1933 Act (except the Registration
Rights Agreement), (v) there are no outstanding securities of the Company or any
of its Subsidiaries which contain any redemption or similar provisions, and
there are no contracts, commitments, understandings or arrangements by which the
Company or any of its Subsidiaries is or may become bound to redeem a security
of the Company or any of its Subsidiaries, (vi) there are no securities or
instruments containing anti-dilution or similar provisions that will be
triggered by the issuance of the Securities as described in this Agreement, and
(vii) the Company does not have any stock appreciation rights or "phantom stock"
plans or agreements or any similar plan or agreement. The Company has furnished
to the Buyers true and correct copies of the Company's Restated Articles of
Organization, as amended and as in effect on the date hereof (the "ARTICLES OF
ORGANIZATION"), and the Company's By-laws, as in effect on the date hereof (the
"BY-LAWS"), and the terms of all securities convertible into or exercisable for
Common Stock and the material rights of the holders thereof in respect thereto.
d. ISSUANCE OF SECURITIES. The Preferred Shares are duly
authorized and, upon issuance in accordance with the terms hereof, shall be (i)
validly issued, fully paid and non-assessable, (ii) free from all taxes, liens
and charges with respect to the issue thereof and (iii) entitled to the rights
and preferences set forth in the Certificate of Designations. A number of shares
of Common Stock equal to 200% of the number of Conversion Shares issuable upon
conversion of the Preferred Shares and outstanding on the applicable Closing
Date (after giving effect to the Preferred Shares issued on such Closing Date
and assuming all such outstanding Preferred Shares were fully convertible on
such date regardless of any limitation on the timing or amount of such
conversions) initially have been duly authorized and reserved for issuance
(subject to adjustment pursuant to the Company's covenant set forth in Section
4(f) below) upon conversion of the Preferred Shares. Upon conversion in
accordance with the Certificate of Designations, the Conversion Shares will be
validly issued, fully paid and nonassessable and free from all taxes, liens and
charges with respect to the issue thereof, with the holders being entitled to
all rights accorded to a holder of Common Stock. Based in
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part upon the representations of the Buyers set forth in Section 2, the issuance
by the Company of the Securities is exempt from registration under the 1933 Act.
e. NO CONFLICTS. Except as disclosed in SCHEDULE 3(e), the
execution, delivery and performance of the Transaction Documents by the Company,
the performance by the Company of its obligations under the Certificate of
Designations and the consummation by the Company of the transactions
contemplated hereby and thereby will not (i) result in a violation of the
Articles of Incorporation, any Certificate of Designations, Preferences and
Rights of any outstanding series of Preferred Stock of the Company or the
By-laws or (ii) conflict with, or constitute a default (or an event which with
notice or lapse of time or both would become a default) under, or give to others
any rights of termination, amendment, acceleration or cancellation of, any
material agreement, indenture or material instrument to which the Company or any
of its Subsidiaries is a party, or result in a violation of any law, rule,
regulation, order, judgment or decree (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 traded or listed) applicable to the
Company or any of its Subsidiaries or by which any property or asset of the
Company or any of its Subsidiaries is bound or affected. Except as disclosed in
SCHEDULE 3(e), neither the Company nor its Subsidiaries is in violation of any
term of or in default under the Articles of Organization, any Certificate of
Designations, Preferences and Rights of any outstanding series of Preferred
Stock or the By-laws or their organizational charter or by-laws, respectively,
or any contract, agreement, mortgage, indebtedness, indenture, instrument,
judgment, decree or order or any statute, rule or regulation applicable to the
Company or its Subsidiaries, except for possible conflicts, defaults,
terminations, amendments, accelerations, cancellations and violations that would
not individually or in the aggregate have a Material Adverse Effect. The
business of the Company and its Subsidiaries is not being conducted in violation
of any law, ordinance, regulation of any governmental entity having authority or
jurisdiction over the Company, except for possible violations the sanctions for
which either individually or in the aggregate would not have a Material Adverse
Effect. Except as specifically contemplated by this Agreement and as required
under the 1933 Act, the Company is not required to obtain any consent,
authorization or order of, or make any filing or registration with, any court or
governmental agency or any regulatory or self regulatory agency in order for it
to execute, deliver or perform any of its obligations under or contemplated by
the Transaction Documents or to perform its obligations under the Certificate of
Designations, in each case in accordance with the terms hereof or thereof.
Except as disclosed in SCHEDULE 3(e), all consents, authorizations, orders,
filings and registrations which the Company is required to obtain pursuant to
the preceding sentence have been obtained or effected on or prior to the date
hereof. The Company is not in violation of the listing requirements of the
Principal Market as in effect on the date hereof and on each of the Closing
Dates and is not aware of any facts which would reasonably lead to delisting of
the Common Stock by the Principal Market in the foreseeable future.
f. SEC DOCUMENTS; FINANCIAL STATEMENTS. Since December 31,
1997, the Company has filed all reports, schedules, forms, statements and other
documents required to be filed by it with the SEC pursuant to the reporting
requirements of the Securities Exchange Act of 1934, as amended (the "1934 ACT")
(all of the foregoing filed prior to the date hereof and all exhibits included
therein and financial statements and schedules thereto and documents
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incorporated by reference therein being hereinafter referred to as the "SEC
DOCUMENTS"). The Company has delivered to the Buyers or their respective
representatives true and complete copies of the SEC Documents. As of their
respective dates, the SEC Documents complied in all material respects with the
requirements of the 1934 Act and the rules and regulations of the SEC
promulgated thereunder applicable to the SEC Documents, and none of the SEC
Documents, at the time they were filed with the SEC, contained any untrue
statement of a material fact or omitted to state a material fact required to be
stated therein or necessary in order to make the statements therein, in light of
the circumstances under which they were made, not misleading. The financial
statements of the Company included in the SEC Documents have been prepared in
accordance with generally accepted accounting principles, consistently applied,
during the periods involved (except (i) as may be otherwise indicated in such
financial statements or the notes thereto, or (ii) in the case of unaudited
interim statements, to the extent they may exclude footnotes or may be condensed
or summary statements) and fairly present in all material respects the financial
position of the Company as of the dates thereof and the results of its
operations and cash flows for the periods then ended (subject, in the case of
unaudited statements, to normal year-end audit adjustments). No other
information provided by or on behalf of the Company to the Buyers which is not
included in the SEC Documents contains any untrue statement of a material fact
or omits to state any material fact necessary in order to make the statements
therein, in the light of the circumstance under which they are or were made, not
misleading.
g. ABSENCE OF CERTAIN CHANGES. Except as disclosed in SCHEDULE
3(g) or in the SEC Documents filed at least five (5) days prior to the date
hereof and available on ▇▇▇▇▇, since December 31, 1997, there has been no
material adverse change and no material adverse development in the business,
properties, operations, financial condition or results of operations of the
Company or its Subsidiaries. The Company has not taken any steps, and does not
currently expect to take any steps, to seek protection pursuant to any
bankruptcy law nor does the Company or its Subsidiaries have any knowledge or
reason to believe that its creditors intend to initiate involuntary bankruptcy
proceedings.
h. ABSENCE OF LITIGATION. There is no action, suit,
proceeding, inquiry or investigation before or by any court, public board,
government agency, self-regulatory organization or body pending or, to the
knowledge of the Company or any of its Subsidiaries, threatened against or
affecting the Company, the Common Stock or any of the Company's Subsidiaries or
any of the Company's or the Company's Subsidiaries' officers or directors in
their capacities as such, except as set forth in SCHEDULE 3(h).
i. ACKNOWLEDGMENT REGARDING BUYERS' PURCHASE OF PREFERRED
SHARES. The Company acknowledges and agrees that each of the Buyers is acting
solely in the capacity of arm's length purchaser with respect to the Transaction
Documents and the transactions contemplated thereby. The Company further
acknowledges that each Buyer is not acting as a financial advisor or fiduciary
of the Company (or in any similar capacity) with respect to the Transaction
Documents and the transactions contemplated thereby and any advice given by any
of the Buyers or any of their respective representatives or agents in connection
with the Transaction Documents and the transactions contemplated thereby is
merely incidental to such Buyer's purchase of the Securities. The Company
further represents to each Buyer that the
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Company's decision to enter into the Transaction Documents has been based solely
on the independent evaluation by the Company and its representatives.
j. NO UNDISCLOSED EVENTS, LIABILITIES, DEVELOPMENTS OR
CIRCUMSTANCES. Other than the transactions contemplated hereby, no event,
liability, development or circumstance has occurred or exists with respect to
the Company or its Subsidiaries or their respective business, properties,
operations or financial condition, that would be required to be disclosed by the
Company under applicable securities laws on a registration statement filed with
the SEC relating to an issuance and sale by the Company of its Common Stock and
which has not been publicly announced.
k. NO GENERAL SOLICITATION. Neither the Company, nor any of
its affiliates, nor any person acting on its or their behalf, has engaged in any
form of general solicitation or general advertising (within the meaning of
Regulation D under the ▇▇▇▇ ▇▇▇) in connection with the offer or sale of the
Securities.
l. NO INTEGRATED OFFERING. The Company has not, directly or
indirectly, made any offers or sales of any security or solicited any offers to
buy any security, under circumstances that would require registration of any of
the Securities under the 1933 Act or cause this offering of Securities to be
integrated with prior offerings by the Company for purposes of the 1933 Act or
any applicable stockholder approval provisions, including, without limitation,
under the rules and regulations of the Principal Market, nor will the Company or
any of its Subsidiaries take any action or steps that would require registration
of the Securities under the 1933 Act or cause the offering of the Securities to
be integrated with other offerings.
m. EMPLOYEE RELATIONS. Neither the Company nor any of its
Subsidiaries is involved in any union labor dispute nor, to the knowledge of the
Company or any of its Subsidiaries, is any such dispute threatened. Neither the
Company nor any of its Subsidiaries is a party to a collective bargaining
agreement, and the Company and its Subsidiaries believe that relations with
their employees are good. No executive officer (as defined in Rule 501(f) of the
▇▇▇▇ ▇▇▇) has notified the Company that such officer intends to leave the
Company or otherwise terminate such officer's employment with the Company.
n. INTELLECTUAL PROPERTY RIGHTS. The Company and its
Subsidiaries own or possess adequate rights or licenses to use all trademarks,
trade names, service marks, service ▇▇▇▇ registrations, service names, patents,
patent rights, copyrights, inventions, licenses, approvals, governmental
authorizations, trade secrets and rights necessary to conduct their respective
businesses as now conducted. Except as set forth on SCHEDULE 3(n), none of the
Company's trademarks, trade names, service marks, service ▇▇▇▇ registrations,
service names, patents, patent rights, copyrights, inventions, licenses,
approvals, government authorizations, trade secrets or other intellectual
property rights necessary to conduct its business as now or as proposed to be
conducted have expired or terminated, or are expected to expire or terminate
within two years from the date of this Agreement. The Company and its
Subsidiaries do not have any knowledge of any infringement by the Company or its
Subsidiaries of trademark,
11
trade name rights, patents, patent rights, copyrights, inventions, licenses,
service names, service marks, service ▇▇▇▇ registrations, trade secret or other
similar rights of others, or of any such development of similar or identical
trade secrets or technical information by others and, except as set forth on
SCHEDULE 3(n), there is no claim, action or proceeding being made or brought
against, or to the Company's knowledge, being threatened against, the Company or
its Subsidiaries regarding trademark, trade name, patents, patent rights,
invention, copyright, license, service names, service marks, service ▇▇▇▇
registrations, trade secret or other infringement; and the Company and its
Subsidiaries are unaware of any facts or circumstances which might give rise to
any of the foregoing. The Company and its Subsidiaries have taken reasonable
security measures to protect the secrecy, confidentiality and value of all of
their intellectual properties.
o. ENVIRONMENTAL LAWS. The Company and its Subsidiaries (i)
are in compliance with any and all applicable foreign, federal, state and local
laws and regulations relating to the protection of human health and safety, the
environment or hazardous or toxic substances or wastes, pollutants or
contaminants ("ENVIRONMENTAL LAWS"), (ii) have received all permits, licenses or
other approvals required of them under applicable Environmental Laws to conduct
their respective businesses and (iii) are in compliance with all terms and
conditions of any such permit, license or approval where, in each of the three
foregoing cases, the failure to so comply would have, individually or in the
aggregate, a Material Adverse Effect.
p. TITLE. The Company and its Subsidiaries have good and
marketable title in fee simple to all real property and good and marketable
title to all personal property owned by them which is material to the business
of the Company and its Subsidiaries, in each case free and clear of all liens,
encumbrances and defects except such as are described in SCHEDULE 3(p) or such
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 or any of
its Subsidiaries. Any real property and facilities held under lease by the
Company or any of its Subsidiaries are held by them under valid, subsisting and
enforceable leases with such exceptions as are not material and do not interfere
with the use made and proposed to be made of such property and buildings by the
Company and its Subsidiaries.
q. INSURANCE. Neither the Company nor any such Subsidiary has
been refused any insurance coverage sought or applied for and neither the
Company nor any such Subsidiary has any reason to believe that it will not be
able to renew its existing insurance coverage as and when such coverage expires
or to obtain similar coverage from similar insurers as may be necessary to
continue its business at a cost that would not materially and adversely affect
the condition, financial or otherwise, or the earnings, business or operations
of the Company and its Subsidiaries, taken as a whole.
r. 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, except where the failure to possess such items would not
have, individually or in the aggregate, a Material Adverse Effect and neither
the Company nor any such Subsidiary has received any notice of proceedings
relating to the revocation or modification of any such certificate,
authorization or
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permit.
s. NO MATERIALLY ADVERSE CONTRACTS, ETC. Neither the Company
nor any of its Subsidiaries is subject to any charter, corporate or other legal
restriction, or any judgment, decree, order, rule or regulation which in the
judgment of the Company's officers has a Material Adverse Effect. Neither the
Company nor any of its Subsidiaries is a party to any contract or agreement
which in the reasonable judgment of the Company's officers has or is expected to
have a Material Adverse Effect.
t. TAX STATUS. Except as set forth on SCHEDULE 3(t), the
Company and each of its Subsidiaries has made or filed all federal and state
income and all other tax returns, reports and declarations required by any
jurisdiction to which it is subject (unless and only to the extent that the
Company and each of its Subsidiaries has set aside on its books provisions
reasonably adequate for the payment of all unpaid and unreported taxes) and has
paid all taxes and other governmental assessments and charges that are material
in amount, shown or determined to be due on such returns, reports and
declarations, except those being contested in good faith and has set aside on
its books provision reasonably adequate for the payment of all taxes for periods
subsequent to the periods to which such returns, reports or declarations apply.
There are no unpaid taxes in any material amount claimed to be due by the taxing
authority of any jurisdiction, and the officers of the Company know of no basis
for any such claim.
u. CERTAIN TRANSACTIONS. Except as set forth on SCHEDULE 3(u)
and in the SEC Documents filed at least ten days prior to the date hereof and
except for arm's length transactions pursuant to which the Company makes
payments in the ordinary course of business upon terms no less favorable than
the Company could obtain from third parties and other than the grant of stock
options disclosed on SCHEDULE 3(c), none of the officers or directors of the
Company is presently a party to any transaction with the Company or any of its
Subsidiaries (other than for services as employees, officers and directors),
including any contract, agreement or other arrangement providing for the
furnishing of services to or by, providing for rental of real or personal
property to or from, or otherwise requiring payments to or from any officer or
director or, to the knowledge of the Company, any corporation, partnership,
trust or other entity in which any officer or director has a substantial
interest or is an officer, director, trustee or partner.
v. DILUTIVE EFFECT. The Company understands and acknowledges
that the number of Conversion Shares issuable upon conversion of the Preferred
Shares will increase in certain circumstances. The Company further acknowledges
that, subject to such limitations as are expressly set forth in the Transaction
Documents, its obligation to issue Conversion Shares upon conversion of the
Preferred Shares in accordance with this Agreement and the Certificate of
Designations is absolute and unconditional regardless of the dilutive effect
that such issuance may have on the ownership interests of other stockholders of
the Company.
w. SHAREHOLDER RIGHTS PLAN; APPLICATION OF TAKEOVER
PROTECTIONS. The Company and its directors have taken all necessary action, if
any, in order to render inapplicable (i) any shareholder rights plan, "poison
pill" or similar arrangement (a
13
"Shareholder Rights Plan") to which it is a party and (ii) any control share
acquisition, business combination, poison pill (including any distribution under
a rights agreement) or other similar anti-takeover provision under the Restated
Articles of Organization of the Company or any anti-takeover laws which are or
could be applicable to any Purchaser as a result of the transactions
contemplated by this Agreement, including, without limitation, the Company's
issuance of the Preferred Shares or the Conversion Shares and any Buyer's
ownership of such shares.
x. NO OTHER AGREEMENTS. The Company has not, directly or
indirectly, made any agreements with any Buyers relating to the terms or
conditions of the transactions contemplated by the Transaction Documents except
as set forth in the Transaction Documents.
4. COVENANTS.
a. BEST EFFORTS. Each party shall use its best efforts timely
to satisfy each of the conditions to be satisfied by it as provided in Sections
6 and 7 of this Agreement.
b. FORM D. The Company agrees to file a Form D with respect to
the Securities as required under Regulation D and to provide a copy thereof to
each Buyer promptly after such filing. The Company shall, on or before each of
the Closing Dates, take such action as the Company shall reasonably determine is
necessary to qualify the Securities for, or obtain exemption for the Securities
for, sale to the Buyers at each of the Closings pursuant to this Agreement under
applicable securities or "Blue Sky" laws of the states of the United States, and
shall provide evidence of any such action so taken to the Buyers on or prior to
the Closing Date. The Company shall make all filings and reports relating the
offer and sale of the Securities required under the applicable securities or
"Blue Sky" laws of the states of the United States following each of the Closing
Dates.
c. REPORTING STATUS. Until the earlier of (i) the date which
is one year after the date as of which the Investors (as that term is defined in
the Registration Rights Agreement) may sell all of the Conversion Shares without
restriction pursuant to Rule 144(k) promulgated under the 1933 Act (or successor
thereto), or (ii) the date on which (A) the Investors shall have sold all the
Conversion Shares and (B) none of the Preferred Shares is outstanding (the
"REGISTRATION PERIOD"), the Company shall file all reports required to be filed
with the SEC pursuant to 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 otherwise permit such
termination.
d. USE OF PROCEEDS. The Company will use the proceeds from the
sale of the Preferred Shares for substantially the same purposes and in
substantially the same amounts as indicated in SCHEDULE 4(d).
e. FINANCIAL INFORMATION. The Company agrees to send the
following to each Investor (as that term is defined in the Registration Rights
Agreement) during the Registration Period: (i) within five (5) days after the
filing thereof with the SEC, a copy of any Current Reports on Form 8-K; (ii) on
the same day as the release thereof, facsimile copies
14
of all press releases issued by the Company or any of its Subsidiaries and (iii)
copies of any notices and other information made available or given to the
stockholders of the Company generally, contemporaneously with the making
available or giving thereof to the stockholders.
f. RESERVATION OF SHARES. The Company shall take all action
necessary to at all times have authorized, and reserved for the purpose of
issuance, no less than 200% of the number of shares of Common Stock needed to
provide for the issuance of the Conversion Shares with respect to all
outstanding Preferred Shares.
g. INTENTIONALLY OMITTED.
h. LISTING. The Company shall promptly secure the listing of
all of the Registrable Securities (as defined in the Registration Rights
Agreement) upon each national securities exchange and automated quotation system
(including the Principal Market), if any, upon which shares of Common Stock are
then listed (subject to official notice of issuance) and shall maintain, so long
as any other shares of Common Stock shall be so listed, such listing of all
Registrable Securities from time to time issuable under the terms of the
Transaction Documents and the Certificate of Designations. The Company shall
maintain the Common Stock's authorization for quotation on the Principal Market.
Neither the Company nor any of its Subsidiaries shall take any action which
would be reasonably expected to result in the delisting or suspension of the
Common Stock on the Principal Market. The Company shall promptly provide to each
Buyer copies of any notices it receives from the Principal Market regarding the
continued eligibility of the Common Stock for listing on such Principal Market.
The Company shall pay all fees and expenses in connection with satisfying its
obligations under this Section 4(h).
i. EXPENSES. Subject to Section 9(l) below, following the
Initial Closing, the Company shall reimburse the Buyers for the Buyers'
reasonable expenses (including attorneys fees and expenses) in connection with
negotiating and preparing the Transaction Documents and consummating the
transactions contemplated thereby up to an aggregate of $30,000.
j. PROXY STATEMENT. The Company shall provide each stockholder
entitled to vote at the next meeting of stockholders of the Company, which shall
be not later than 120 days after the Initial Closing Date (the "Stockholder
Meeting Deadline"), a proxy statement, which has been previously reviewed by the
Buyers and a counsel of their choice, soliciting each such stockholder's
affirmative vote at such stockholder meeting for approval of the Company's
issuance of all of the Securities as described in this Agreement and the
increase in the number of the Company's authorized shares of Common Stock to
50,000,000, and the Company shall use its best efforts to solicit its
stockholders' approval of such issuance of the Securities and cause the Board of
Directors of the Company to recommend to the stockholders that they approve such
proposal. If the Company fails to hold a meeting of its stockholders by the
Stockholder Meeting Deadline (unless such failure is the result solely of the
actions of the Buyers), then, as partial relief (which remedy shall not be
exclusive of any other remedies available at law or in equity), the Company
shall pay to each holder of Preferred Shares an amount in cash per Preferred
Share equal to the product of (i) $1,000 multiplied by (ii) .025
15
multiplied by (iii) the quotient of (x) the number of days after the Stockholder
Meeting Deadline that a meeting of the Company's stockholders is not held,
divided by (y) 30. The Company shall make the payments referred to in the
immediately preceding sentence within five days of the earlier of (I) the
holding of the meeting of the Company's stockholders, the failure of which
resulted in the requirement to make such payments and (II) the last day of each
30-day period beginning on the day after the Stockholder Meeting Deadline. In
the event the Company fails to make such payments in a timely manner, such
payments shall bear interest at the rate of 1.5% per month (pro rated for
partial months) until paid in full.
k. TRANSACTIONS WITH AFFILIATES. So long as (i) any Preferred
Shares are outstanding or (ii) any Buyer owns Conversion Shares with a market
value equal to or greater than $500,000, the Company shall not, and shall cause
each of its Subsidiaries not to, enter into, amend, modify or supplement, or
permit any Subsidiary to enter into, amend, modify or supplement, any agreement,
transaction, commitment or arrangement with any of its or any Subsidiary's
officers, directors, person who were officers or directors at any time during
the previous two years, stockholders who beneficially own 5% or more of the
Common Stock, or affiliates or with any individual related by blood, marriage or
adoption to any such individual or with any entity in which any such entity or
individual owns a 5% or more beneficial interest (each a "RELATED PARTY"),
except for (a) customary employment arrangements and benefit programs on
reasonable terms, (b) any agreement, transaction, commitment or arrangement on
an arms-length basis on terms no less favorable than terms which would have been
obtainable from a person other than such Related Party, or (c) any agreement,
transaction, commitment or arrangement which is approved by a majority of the
disinterested directors of the Company. For purposes hereof, any director who is
also an officer of the Company or any Subsidiary of the Company shall not be a
disinterested director with respect to any such agreement, transaction,
commitment or arrangement. "AFFILIATE" for purposes hereof means, with respect
to any person or entity, another person or entity that, directly or indirectly,
(i) has a 5% or more equity interest in that person or entity, (ii) has 5% or
more common ownership with that person or entity, (iii) controls that person or
entity, or (iv) shares common control with that person or entity. "CONTROL" or
"CONTROLS" for purposes hereof means that a person or entity has the power,
direct or indirect, to conduct or govern the policies of another person or
entity.
l. FILING OF FORM 8-K. On or before the second (2nd) business
day following each of the Closing Dates, the Company shall file a Form 8-K with
the SEC describing the terms of the transaction contemplated by the Transaction
Documents and consummated at such Closing, in each case in the form required by
the 1934 Act.
5. TRANSFER AGENT INSTRUCTIONS.
The Company shall issue irrevocable instructions to its
transfer agent, and any subsequent transfer agent, to issue certificates,
registered in the name of each Buyer or its respective nominee(s), for the
Conversion Shares in such amounts as specified from time to
16
time by each Buyer to the Company upon conversion of the Preferred Shares (the
"IRREVOCABLE TRANSFER AGENT INSTRUCTIONS"). Prior to registration of the
Conversion Shares under the 1933 Act, all such certificates shall bear the
restrictive legend specified in Section 2(g) of this Agreement. The Company
warrants that no instruction other than the Irrevocable Transfer Agent
Instructions referred to in this Section 5, and stop transfer instructions to
give effect to Section 2(f) hereof (in the case of the Conversion Shares, prior
to registration of the Conversion Shares under the ▇▇▇▇ ▇▇▇) will be given by
the Company to its transfer agent and that the Securities shall otherwise be
freely transferable on the books and records of the Company as and to the extent
provided in this Agreement and the Registration Rights Agreement. Nothing in
this Section 5 shall affect in any way each Buyer's obligations and agreements
set forth in Section 2(g) to comply with all applicable prospectus delivery
requirements, if any, upon resale of the Securities. If a Buyer provides the
Company with an opinion of counsel, in form and substance which is generally
acceptable, that registration of a resale by such Buyer of any of such
Securities is not required under the 1933 Act, the Company shall permit the
transfer, and, in the case of the Conversion Shares, promptly instruct its
transfer agent to issue one or more certificates in such name and in such
denominations as specified by such Buyer and without any restrictive legends.
The Company acknowledges that a breach by it of its obligations hereunder will
cause irreparable harm to the Buyers by vitiating the intent and purpose of the
transaction contemplated hereby. Accordingly, the Company acknowledges that the
remedy at law for a breach of its obligations under this Section 5 will be
inadequate and agrees, in the event of a breach or threatened breach by the
Company of the provisions of this Section 5, that the Buyers shall be entitled,
in addition to all other available remedies, to an injunction restraining any
breach and requiring immediate issuance and transfer, without the necessity of
showing economic loss and without any bond or other security being required.
6. CONDITIONS TO THE COMPANY'S OBLIGATION TO SELL.
a. INITIAL CLOSING DATE. The obligation of the Company
hereunder to issue and sell the Initial Preferred Shares to each Buyer at the
Initial Closing is subject to the satisfaction, at or before the Initial Closing
Date, of each of the following conditions, provided that these conditions are
for the Company's sole benefit and may be waived by the Company at any time in
its sole discretion by providing each Buyer with prior written notice thereof:
(i) Such Buyer shall have executed each of the
Transaction Documents and delivered the same to the Company.
(ii) The Certificate of Designations shall have been filed
with the Secretary of State of The Commonwealth of Massachusetts.
(iii) Such Buyer shall have delivered to the Company the
Purchase Price for the Initial Preferred Shares being purchased by such
Buyer at the Initial Closing by wire transfer of immediately available
funds pursuant to the wire instructions provided by the Company.
(iv) The representations and warranties of such Buyer
shall be true and
17
correct as of the date when made and as of the Initial Closing Date as
though made at that time (except for representations and warranties
that speak as of a specific date), and such Buyer shall have performed,
satisfied and complied with the covenants, agreements and conditions
required by the Transaction Documents to be performed, satisfied or
complied with by such Buyer at or prior to the Initial Closing Date.
b. ADDITIONAL CLOSING DATE. The obligation of the
Company hereunder to issue and sell the Additional Preferred Shares to each
Buyer at the Additional Closing is subject to the satisfaction, at or before the
Additional Closing Date, of each of the following conditions, provided that
these conditions are for the Company's sole benefit and may be waived by the
Company at any time in its sole discretion by providing each Buyer with prior
written notice thereof:
(i) Such Buyer shall have delivered to the Company the
Purchase Price for the Additional Preferred Shares being purchased by
such Buyer at the Additional Closing by wire transfer of immediately
available funds pursuant to the wire instructions provided by the
Company.
(ii) The representations and warranties of such Buyer
shall be true and correct as of the date when made and as of the
Additional Closing Date as though made at that time (except for
representations and warranties that speak as of a specific date), and
such Buyer shall have performed, satisfied and complied with the
covenants, agreements and conditions required by the Transaction
Documents to be performed, satisfied or complied with by such Buyer at
or prior to the Additional Closing Date.
7. CONDITIONS TO EACH BUYER'S OBLIGATION TO PURCHASE.
a. INITIAL CLOSING DATE. The obligation of each Buyer
hereunder to purchase the Initial Preferred Shares at the Initial Closing is
subject to the satisfaction, at or before the Initial Closing Date, of each of
the following conditions, provided that these conditions are for each Buyer's
sole benefit and may be waived by such Buyer at any time in its sole discretion:
(i) The Company shall have executed each of the
Transaction Documents, and delivered the same to such Buyer.
(ii) The Certificate of Designations shall have been filed
with the Secretary of State of The Commonwealth of Massachusetts, and a
copy thereof certified by such Secretary of State shall have been
delivered to such Buyer.
(iii) The Common Stock shall be authorized for quotation on
the Principal Market, trading in the Common Stock shall not have been
suspended by the Principal Market or the SEC, at any time beginning on
the date hereof and through and including the Initial Closing Date and
the Company shall not have been notified of any pending or threatened
proceeding or other action to delist or suspend the Common Stock.
18
(iv) The representations and warranties of the Company
shall be true and correct as of the date when made and as of the
Initial Closing Date as though made at that time (except for
representations and warranties that speak as of a specific date) and
the Company shall have performed, satisfied and complied with the
covenants, agreements and conditions required by the Transaction
Documents to be performed, satisfied or complied with by the Company at
or prior to the Initial Closing Date. Such Buyer shall have received a
certificate, executed by the Chief Executive Officer of the Company,
dated as of the Initial Closing Date, to the foregoing effect and as to
such other matters as may be reasonably requested by such Buyer
including, without limitation, an update as of the Initial Closing Date
regarding the representation contained in Section 3(c) above.
(v) Such Buyer shall have received the opinion of the
Company's counsel dated as of the Initial Closing Date, in form, scope
and substance reasonably satisfactory to such Buyer and in
substantially the form of EXHIBIT C attached hereto.
(vi) The Company shall have executed and delivered to such
Buyer the Stock Certificates (in such denominations as such Buyer shall
request) for the Preferred Shares being purchased by such Buyer at the
Initial Closing.
(vii) The Board of Directors of the Company shall have
adopted resolutions consistent with Section 3(b)(ii) above and in a
form reasonably acceptable to such Buyer (the "RESOLUTIONS").
(viii) As of the Initial Closing Date, the Company shall
have reserved out of its authorized and unissued Common Stock, solely
for the purpose of effecting the conversion of the Preferred Shares, a
number of shares of Common Stock equal to at least 200% of the number
of Conversion Shares issuable upon conversion of the Preferred Shares
outstanding on the Initial Closing Date (after giving effect to the
Preferred Shares to be issued on the Initial Closing Date and assuming
all such Preferred Shares were fully convertible or exercisable on such
date regardless of any limitation on the timing or amount of such
conversions or exercises).
(ix) The Irrevocable Transfer Agent Instructions, in the
form of EXHIBIT D attached hereto, shall have been delivered to and
acknowledged in writing by the Company's transfer agent.
(x) The Company shall have delivered to such Buyer a
certificate evidencing the incorporation and good standing of the
Company and each Subsidiary in such corporation's state of
incorporation issued by the Secretary of State of such state of
incorporation as of a date within 10 days of the Initial Closing.
(xi) The Company shall have delivered to such Buyer a
certified copy of its
19
Articles of Organization as certified by the Secretary of State of The
Commonwealth of Massachusetts within ten days of the Initial Closing
Date.
(xii) The Company shall have delivered to such Buyer a
clerk's certificate, dated as the Initial Closing Date, as to (i) the
Resolutions, (ii) the Articles of Organization and (iii) the Bylaws,
each as in effect at the Initial Closing.
(xiii) The Company shall have delivered to such Buyer such
other documents relating to the transactions contemplated by this
Agreement as such Buyer or its counsel may reasonably request.
b. ADDITIONAL CLOSING DATE. The obligation of each Buyer
hereunder to purchase the Additional Preferred Shares at the Additional Closing
is subject to the satisfaction, at or before the Additional Closing Date, of
each of the following conditions, provided that these conditions are for each
Buyer's sole benefit and may be waived by such Buyer at any time in its sole
discretion:
(i) Certificate of Designations shall be in full force
and effect and shall not have been amended since the Initial Closing
Date, and a copy thereof certified by the Secretary of State of The
Commonwealth of Massachusetts shall have been delivered to such Buyer.
(ii) The Common Stock shall be authorized for quotation on
the Principal Market, trading in the Common Stock shall not have been
suspended by Principal Market or the SEC on or at any time prior to the
Additional Closing Date and the Company shall not have been notified of
any pending or threatened proceeding or other action to delist or
suspend the Common Stock on or prior to the Additional Closing Date.
(iii) The representations and warranties of the Company
shall be true and correct as of the date when made and as of the
Additional Closing Date as though made at that time (except for
representations and warranties that speak as of a specific date) and
the Company shall have performed, satisfied and complied with the
covenants, agreements and conditions required by the Transaction
Documents to be performed, satisfied or complied with by the Company at
or prior to the Additional Closing Date. Such Buyer shall have received
a certificate, executed by the Chief Executive Officer of the Company,
dated as of the Additional Closing Date, to the foregoing effect and as
to such other matters as may be reasonably requested by such Buyer
including, without limitation, an update as of the Additional Closing
Date regarding the representation contained in Section 3(c) above.
(iv) Such Buyer shall have received the opinion of the
Company's counsel dated as of the Additional Closing Date, in form,
scope and substance reasonably satisfactory to such Buyer and in
substantially the form of EXHIBIT C attached hereto.
(v) The Company shall have executed and delivered to such
Buyer the Stock
20
Certificates (in such denominations as such Buyer shall request) for
the Preferred Shares being purchased by such Buyer at the Additional
Closing.
(vi) The Board of Directors of the Company shall have
adopted the Resolutions.
(vii) As of the Additional Closing Date, the Company shall
have reserved out of its authorized and unissued Common Stock, solely
for the purpose of effecting the conversion of the Preferred Shares, a
number of shares of Common Stock equal to at least 200% of the number
of Conversion Shares issuable upon conversion of the Preferred Shares
outstanding on the Additional Closing Date (after giving effect to the
Preferred Shares to be issued on such Additional Closing Date and
assuming all such outstanding Preferred Shares were fully convertible
or exercisable on such date regardless on any limitation on the timing
or amount of such conversions or exercises) which such number of shares
of Common Stock shall be fully available to be issued as Conversion
Shares under Rule 4460 of the Nasdaq National Market.
(viii) The Irrevocable Transfer Agent Instructions, in the
form of EXHIBIT D attached hereto, shall have been delivered to and
acknowledged in writing by the Company's transfer agent.
(ix) The Company shall have delivered to such Buyer a
certificate evidencing the incorporation and good standing of the
Company and each Subsidiary in such corporation's state of
incorporation issued by the Secretary of State of such state of
incorporation as of a date within 10 days of the Additional Closing.
(x) The Company shall have delivered to such Buyer a
certified copy of its Articles of Organization as certified by the
Secretary of State of The Commonwealth of Massachusetts within ten days
of the Additional Closing Date.
(xi) The Company shall have delivered to such Buyer a
clerk's certificate, dated as the Additional Closing Date, as to (i)
the Resolutions, (ii) the Articles of Organization and (iii) the
Bylaws, each as in effect at the Additional Closing.
(xii) The conditions to the Additional Closing set forth in
Section 1(c) shall have been satisfied on or before the Additional
Closing Date.
(xiii) The Company shall have delivered to such Buyer such
other documents relating to the transactions contemplated by this
Agreement as such Buyer or its counsel may reasonably request.
8. INDEMNIFICATION. In consideration of each Buyer's execution
and delivery of the Transaction Documents and acquiring the Securities
thereunder and in addition to all of the Company's other obligations under the
Transaction Documents and the Certificate of Designations, the Company shall
defend, protect, indemnify and hold harmless each Buyer and each other holder of
the Securities and all of their stockholders, officers, directors, employees
21
and direct or indirect investors and any of the foregoing person's agents or
other representatives (including, without limitation, those retained in
connection with the transactions contemplated by this Agreement) (collectively,
the "INDEMNITEES") from and against any and all actions, causes of action,
suits, claims, losses, costs, penalties, fees, liabilities and damages, and
expenses in connection therewith (irrespective of whether any such Indemnitee is
a party to the action for which indemnification hereunder is sought), and
including reasonable attorneys' fees and disbursements (the "INDEMNIFIED
LIABILITIES"), incurred by any Indemnitee as a result of, or arising out of, or
relating to (a) any misrepresentation or breach of any representation or
warranty made by the Company in the Transaction Documents or the Certificate of
Designations or any other certificate, instrument or document contemplated
hereby or thereby, (b) any breach of any covenant, agreement or obligation of
the Company contained in the Transaction Documents or the Certificate of
Designations or any other certificate, instrument or document contemplated
hereby or thereby, or (c) any cause of action, suit or claim brought or made
against such Indemnitee and arising out of or resulting from the execution,
delivery, performance or enforcement of the Transaction Documents or the
Certificate of Designations or any other certificate, instrument or document
contemplated hereby or thereby, (d) any transaction financed or to be financed
in whole or in part, directly or indirectly, with the proceeds of the issuance
of the Securities or (e) the status of such Buyer or holder of the Securities as
an investor in the Company. To the extent that the foregoing undertaking by the
Company may be unenforceable for any reason, the Company shall make the maximum
contribution to the payment and satisfaction of each of the Indemnified
Liabilities which is permissible under applicable law. Notwithstanding the
foregoing, if a Buyer breaches its obligations under Section 4(d) of the
Registration Rights Agreement to refrain from disposing of Registrable
Securities pursuant to the Registration Statement under the circumstances
described in Section 4(d) of the Registration Rights Agreement, then such Buyer
shall not be entitled to indemnification under clause (c) or (e) above with
respect to actions, suits or claims made against such Buyer which are based on
such breach.
9. GOVERNING LAW; MISCELLANEOUS.
a. GOVERNING LAW. The corporate laws of The Commonwealth of
Massachusetts shall govern all issues concerning the relative rights of the
Company and its stockholders. All other questions concerning the construction,
validity, enforcement and interpretation of this Agreement shall be governed by
the internal laws of the State of New York, without giving effect to any choice
of law or conflict of law provision or rule (whether of the State of New York or
any other jurisdictions) that would cause the application of the laws of any
jurisdictions other than the State of New York. Each party hereby irrevocably
submits to the non-exclusive jurisdiction of the state and federal courts
sitting 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, and hereby irrevocably waives, and agrees not to
assert in any suit, action or
22
proceeding, any claim that it is not personally subject to the jurisdiction of
any such court, that such suit, action or proceeding is brought in an
inconvenient forum or that the venue of 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 for such 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.
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 in that jurisdiction or the
validity or enforceability of any provision of this Agreement in any other
jurisdiction.
b. COUNTERPARTS. This Agreement may be executed in two or more
identical counterparts, all of which 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; provided that a facsimile signature
shall be considered due execution and shall be binding upon the signatory
thereto with the same force and effect as if the signature were an original, not
a facsimile signature.
c. HEADINGS. The headings of this Agreement are for
convenience of reference and shall not form part of, or affect the
interpretation of, this Agreement.
d. SEVERABILITY. 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 in that jurisdiction or the validity or
enforceability of any provision of this Agreement in any other jurisdiction.
e. ENTIRE AGREEMENT; AMENDMENTS. This Agreement supersedes all
other prior oral or written agreements between the Buyers, the Company, their
affiliates and persons acting on their behalf with respect to the matters
discussed herein, and this Agreement and the instruments referenced herein
contain the entire understanding of the parties with respect to the matters
covered herein and therein and, except as specifically set forth herein or
therein, neither the Company nor any Buyer makes any representation, warranty,
covenant or undertaking with respect to such matters. No provision of this
Agreement may be amended other than by an instrument in writing signed by the
Company and the holders of at least two-thirds (2/3) of the Preferred Shares
then outstanding, and no provision hereof may be waived other than by an
instrument in writing signed by the party against whom enforcement is sought. No
such amendment shall be effective to the extent that it applies to less than all
of the holders of the Preferred Shares then outstanding. No consideration shall
be offered or paid to any person to amend or consent to a waiver or modification
of any provision of any of the Transaction Documents or the Certificates of
Designations unless the same consideration also is offered to all of the parties
to the Transaction Documents or holders of Preferred Shares, as the case may be.
f. NOTICES. Any notices consents, waivers or other
communications required or permitted to be given under the terms of this
Agreement must be in writing and will be deemed to have been delivered (i) upon
receipt, when delivered personally; (ii) upon
23
receipt, when sent by facsimile (provided confirmation of transmission is
mechanically generated and kept on file by the sending party); (iii) one (1) day
after deposit with a nationally recognized overnight delivery service, in each
case properly addressed to the party to receive the same. The addresses and
facsimile numbers for such communications shall be:
If to the Company:
Alpha-Beta Technology, Inc.
▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Telephone: ▇▇▇-▇▇▇-▇▇▇▇
Facsimile: ▇▇▇-▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
With a copy to:
Company Counsel
▇▇▇▇▇▇▇, Procter & ▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Telephone: ▇▇▇-▇▇▇-▇▇▇▇
Facsimile: ▇▇▇-▇▇▇-▇▇▇▇
Attention: ▇▇▇▇ ▇. ▇▇▇▇ III, Esq.
If to the Transfer Agent:
Boston EquiServe
Shareholder Services Division
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Telephone: ▇▇▇-▇▇▇-▇▇▇▇
Facsimile: ▇▇▇-▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
If to a Buyer, to its address and facsimile number on the Schedule of
Buyers, with copies to such Buyer's representatives as set forth on the Schedule
of Buyers.
Each party shall provide five (5) days' prior written notice to the
other party of any change in address or facsimile number.
g. SUCCESSORS AND ASSIGNS. This Agreement shall be
binding upon and inure to the benefit of the parties and their respective
successors and assigns, including any purchasers of the Preferred Shares. Until
the Company fully satisfies its obligations, if any, under Sections 2(d)(i) and
3 of the Certificate of Designations, the Company shall not assign this
Agreement or any rights or obligations hereunder without the prior written
consent of the holders of two-thirds (2/3) of the Preferred Shares then
outstanding including by merger or
24
consolidation. A Buyer may assign some or all of its rights hereunder to
affiliates or associates of such Buyer, without the consent of the Company, and
to others, with the consent of the Company; provided, however, that any such
assignment shall not release such Buyer from its obligations hereunder unless
such obligations are assumed by such assignee and the Company has consented to
such assignment and assumption. Notwithstanding anything to the contrary
contained in the Transaction Documents, Buyer shall be entitled to pledge the
Securities in connection with a bona fide margin account.
h. NO THIRD PARTY BENEFICIARIES. This Agreement is intended
for the benefit of the parties hereto and their respective permitted successors
and assigns, and is not for the benefit of, nor may any provision hereof be
enforced by, any other person.
i. SURVIVAL. Unless this Agreement is terminated under Section
9(l), the representations and warranties of the Company and the Buyers contained
in Sections 2 and 3, the agreements and covenants set forth in Sections 4, 5 and
9, and the indemnification provisions set forth in Section 8, shall survive each
of the Closings. Each Buyer shall be responsible only for its own
representations, warranties, agreements and covenants hereunder.
j. PUBLICITY. The Company and each Buyer shall have the right
to approve before issuance any press releases or any other public statements
with respect to the transactions contemplated hereby; provided, however, that
the Company shall be entitled, without the prior approval of any Buyer, to make
any press release or other public disclosure with respect to such transactions
as is required by applicable law and regulations (although each Buyer shall be
consulted by the Company in connection with any such press release or other
public disclosure prior to its release and shall be provided with a copy
thereof).
k. FURTHER ASSURANCES. Each party shall do and perform, or
cause to be done and performed, all such further acts and things, and shall
execute and deliver all such other agreements, certificates, instruments and
documents, as the other party may reasonably request in order to carry out the
intent and accomplish the purposes of this Agreement and the consummation of the
transactions contemplated hereby.
l. TERMINATION. In the event that the Initial Closing shall
not have occurred with respect to a Buyer on or before three (3) business days
from the date hereof due to the Company's or such Buyer's failure to satisfy the
conditions set forth in Sections 6 and 7 above (and the nonbreaching party's
failure to waive such unsatisfied condition(s)), the nonbreaching party shall
have the option to terminate this Agreement with respect to such breaching party
at the close of business on such date without liability of any party to any
other party; provided, however, that if this Agreement is terminated pursuant to
this Section 9(l), the Company shall remain obligated to reimburse the
non-breaching Buyers for the expenses described in Section 4(i) above.
m. PLACEMENT AGENT. The Company acknowledges that it has
engaged
25
World Capital Funding, LLC as placement agent in connection with the sale of the
Preferred Shares. The Company shall be responsible for the payment of any
placement agent's fees or broker's commissions relating to or arising out of the
purchase of the Securities by the Buyers. The Company shall pay, and hold each
Buyer harmless against, any liability, loss or expense (including, without
limitation, attorneys' fees and out-of-pocket expenses) arising in connection
with any such claim.
n. NO STRICT CONSTRUCTION. The language used in this Agreement
will be deemed to be the language chosen by the parties to express their mutual
intent, and no rules of strict construction will be applied against any party.
o. REMEDIES. Each Buyer and each holder of Preferred Shares,
Conversion Shares shall have all rights and remedies set forth in this
Agreement, the Certificate of Designation and all rights and remedies which such
holders have been granted at any time under any other agreement or contract and
all of the rights which such holders have under any law. Any Person having any
rights under any provision of this Agreement shall be entitled to enforce such
rights specifically (without posting a bond or other security), to recover
damages by reason of any breach of any provision of this Agreement and to
exercise all other rights granted by law.
p. PAYMENT SET ASIDE. To the extent that the Company makes a
payment or payments to the Buyers hereunder or pursuant to the Certificate of
Designations or the Buyers enforce or exercise their rights hereunder or
thereunder, and such payment or payments or the proceeds of such enforcement or
exercise or any part thereof are subsequently invalidated, declared to be
fraudulent or preferential, set aside, recovered from, disgorged by or are
required to be refunded, repaid or otherwise restored to the Company, a trustee,
receiver or any other Person under any law (including, without limitation, any
bankruptcy law, state or federal law, common law or equitable cause of action),
then to the extent of any such restoration the obligation or part thereof
originally intended to be satisfied shall be revived and continued in full force
and effect as if such payment had not been made or such enforcement or setoff
had not occurred.
* * * * * *
26
IN WITNESS WHEREOF, the parties have caused this Securities Purchase
Agreement to be duly executed as of day and year first above written.
COMPANY: BUYERS:
-------- -------
ALPHA-BETA TECHNOLOGY, INC. HFTP INVESTMENTS LLC
By: Promethean Investment Group L.L.C.
Its: Investment Manager
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇ By: /s/ ▇▇▇▇▇ ▇. ▇'▇▇▇▇▇, ▇▇.
-------------------------------- ----------------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇ Name: ▇▇▇▇▇ ▇. ▇'▇▇▇▇▇, ▇▇.
Its: Chief Financial Officer Its: President
27
SCHEDULE OF BUYERS
NUMBER OF
INITIAL/
DDITIONAL
INVESTOR ADDRESS PREFERRED INVESTOR'S REPRESENTATIVES' ADDRESS
INVESTOR NAME AND FACSIMILE NUMBER A SHARES AND FACSIMILE NUMBER
-------------------- --------------------------------------- --------- -----------------------------------
HFTP INVESTMENTS LLC c/o Promethean Investment Group, L.L.C. 1500/1500 Promethean Investment Group, L.L.C.
▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇ ▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ 10019 ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇ ▇. ▇'▇▇▇▇▇, ▇▇. Attn: ▇▇▇▇▇ ▇. ▇'▇▇▇▇▇, ▇▇.
Facsimile: ▇▇▇-▇▇▇-▇▇▇▇ Facsimile: ▇▇▇-▇▇▇-▇▇▇▇
Residence: New York ▇▇▇▇▇▇ ▇▇▇▇▇▇ & ▇▇▇▇▇
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attn: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Esq.
Facsimile: ▇▇▇-▇▇▇-▇▇▇▇
28
LIST OF SCHEDULES
-----------------
SCHEDULE OF BUYERS
SCHEDULE 3(a) Subsidiaries
SCHEDULE 3(c) Capitalization
SCHEDULE 3(e) Conflicts
SCHEDULE 3(g) Material Changes
SCHEDULE 3(h) Litigation
SCHEDULE 3(n) Intellectual Property
SCHEDULE 3(p) Liens
SCHEDULE 3(t) Tax Status
SCHEDULE 3(u) Certain Transactions
SCHEDULE 4(d) Use of Proceeds
LIST OF EXHIBITS
----------------
EXHIBIT A Form of Certificate of Designations
EXHIBIT B Form of Registration Rights Agreement
EXHIBIT C Form of Company Counsel Opinion
EXHIBIT D Form of Irrevocable Transfer Agent Instructions