EXHIBIT 99.1
SECURITIES PURCHASE AGREEMENT
SECURITIES PURCHASE AGREEMENT (the "Agreement"), dated as of October 13,
1999, by and among RoweCom Inc., a Delaware 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 convertible notes of the Company, in the
form attached as Exhibit A (together with any convertible notes issued in
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replacement thereof in accordance with the terms thereof, the "Convertible
Notes"), 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 Convertible Notes;
C. The Buyers wish to purchase, upon the terms and conditions stated in
this Agreement, (i) Convertible Notes in an aggregate principal amount of up to
$20,000,000 in the respective amounts set forth opposite each Buyer's name on
the Schedule of Buyers (the "Initial Notes"), and (ii) warrants (the "Initial
Warrants") to purchase up to 224,000 shares of Common Stock (as exercised
collectively, the "Initial Warrant Shares"), such Initial Warrants to be
substantially in the form attached as Exhibit B;
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D. Subject to the terms and conditions set forth in this Agreement, the
Company has the right to cause the Buyers to purchase (i) Convertible Notes in
the aggregate principal amount of up to $15,000,000 (pro rata based on the
aggregate principal amount of Initial Notes each Buyer purchased in relation to
the total aggregate principal amount of Initial Notes) (the "Additional Notes"
and, collectively with the Initial Notes, the "Notes") and (ii) warrants (the
"Additional Warrants" and, collectively with the Initial Warrants, the
"Warrants") to purchase up to a number of shares of Common Stock equal to the
quotient of (A) $4,200,000 divided by (B) 110% of the average Closing Sale Price
of the Common Stock on the 10 trading days immediately preceding the Additional
Closing Date (as exercised, collectively, the "Additional Warrant Shares" and,
collectively with the Initial Warrant Shares, the "Warrant Shares") (pro rata
based on the aggregate principal amount of Initial Notes each Buyer purchased in
relation to the total aggregate principal amount of Initial Notes) such
Additional Warrants to be substantially in the form attached as Exhibit B;
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 C (the "Registration Rights
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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 Buyer hereby agree as follows:
1. PURCHASE AND SALE OF NOTES.
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a. Purchase of Notes and Warrants. Subject to satisfaction (or
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waiver) of the conditions set forth in Sections 6(a) and 7(a), the Company shall
issue and sell to each Buyer and each Buyer severally agrees to purchase from
the Company the Initial Notes in the principal amount as set forth opposite such
Buyer's name on the Schedule of Buyers along with the Initial Warrants as set
forth opposite such Buyers named on the Schedule of Buyers (the "Initial
Closing"). The aggregate purchase price (the "Initial Purchase Price") of the
Initial Notes and the Initial Warrants at the Initial Closing shall be
$20,000,000. Subject to the satisfaction (or waiver) of the conditions set forth
in Sections 1(c), 1(d), 6(b) and 7(b), the Company may require that the Buyers
purchase the Additional Notes along with the Additional Warrants (the
"Additional Closing" and, together with the Initial Closing, the "Closings").
The aggregate purchase price (the "Additional Purchase Price") of the Additional
Notes and the Additional Warrants at the Additional Closing shall be
$15,000,000. "Business Day" means any day other than Saturday, Sunday or other
day on which commercial banks in the City of New York are authorized or required
by law to remain closed.
b. The Initial Closing Date. The date and time of the Initial
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Closing (the "Initial Closing Date") shall be 10:00 a.m. Central Time, within
three (3) Business Days following the date hereof, subject to satisfaction (or
waiver) of the conditions to the Initial Closing set forth in Sections 6(a) and
7(a) (or such later date as is mutually agreed to by the Company and the Buyer).
The Initial Closing shall occur on the Initial Closing Date at the offices of
▇▇▇▇▇▇ ▇▇▇▇▇▇ & ▇▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇
▇▇▇▇▇-▇▇▇▇.
c. The Additional Closing Date. The date and time of the Additional
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Closing (the "Additional Closing Date") shall be 10:00 a.m. Central Time, on the
third Business Day following the date of receipt by each Buyer of the Additional
Effectiveness Notice (as defined below) which Additional Closing Date shall be
no more than 85 days following the Additional Note Notice Date (as defined
below), 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
Section 1(c) and Section 1(d), (or such later date as is mutually agreed to by
the Company and the Buyer). During the period beginning on and including the
date which is 120 days after the Initial Closing Date and ending on the first
anniversary of the Initial Closing Date (the "Additional Notice Period"), but
subject to the requirements of Sections 6(b) and 7(b) and satisfaction of the
Additional Notice Conditions and the Effectiveness Conditions (both as defined
in Section 1(d) below), the Company, on only one occasion, may require the
Buyers to purchase Additional Notes and the related Additional Warrants by
delivering written notice to each Buyer (the "Additional Note Notice") on any
date during the Additional Notice Period (the "Additional Note Notice Date").
The Company's Additional Note Notice shall set forth (i) the aggregate principal
amount of Additional Notes and related Additional Warrants the Company is
requiring each Buyer to
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purchase at the Additional Closing (pro rata based on the aggregate principal
amount of the Initial Notes each Buyer purchased in relation to the total
aggregate principal amount of Initial Notes). The Company shall deliver written
notice to each Buyer (the "Additional Effectiveness Notice") by facsimile and
overnight delivery within one (1) Business Day of the satisfaction of the
Effectiveness Conditions. The Additional Closing shall occur on the Additional
Closing Date at the offices of ▇▇▇▇▇▇ ▇▇▇▇▇▇ & ▇▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇,
▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇. The Initial Closing Date and the
Additional Closing Date collectively are referred to in this Agreement as the
"Closing Dates."
d. The Additional Notice Conditions and the Effectiveness
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Conditions. Notwithstanding anything in this Agreement to the contrary, the
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Company shall not be entitled to deliver an Additional Note Notice unless all of
the following conditions (the "Additional Notice Conditions") are satisfied: (i)
at all times during the period beginning on the date which is 30 days before the
Additional Note Notice Date and ending on and including the Additional Note
Notice Date, the Initial Registration Statement shall have been effective and
available for the sale of all of the Initial Registrable Securities (as defined
in the Registration Rights Agreement); (ii) at all times during the period
beginning on the Initial Closing Date and ending on and including the Additional
Note Notice Date, the Common Stock shall have been designated for quotation on
The New York Stock Exchange, Inc. (the "NYSE") or the Nasdaq National Market and
shall not have been suspended from trading on such exchanges (other than
suspensions of not more than one day due to business announcements by the
Company) nor shall delisting or suspension by such exchanges have been
threatened either (A) in writing by such exchanges or (B) by falling below the
minimum listing maintenance requirements of such exchanges; (iii) during the
period beginning on the Initial Closing Date and ending on and including the
Additional Note Notice Date, there shall not have occurred either (A) the
consummation of a Change in Control (as defined in the Notes) or a public
announcement of a pending Change in Control which has not been abandoned or
terminated or (B) a Triggering Event (as defined in the Notes) or an event
which, with the passage of time, would constitute a Triggering Event, assuming
it were not cured; (iv) on each day during the period beginning on the Initial
Closing Date and ending on and including the Additional Note Notice Date, the
Company shall have delivered Conversion Shares upon conversion of the Notes on a
timely basis as set forth in Section 2(e)(ii) of the Notes and the Company
otherwise shall have been in compliance with the Transaction Documents (as
defined below) and shall not have breached any provision of the Transaction
Documents; (v) on each day during the period beginning 10 Business Days prior to
the Additional Note Notice Date and ending on the Additional Closing Date, the
Closing Sale Price of the Common Stock shall not have been less than $25.00 per
share (subject to appropriate adjustments for any stock dividends, stock splits
or other similar transactions with respect to the Common Stock); (vi) there
shall not have been a prior Additional Note Notice; and (vii) the Company shall
have either (A) delivered and not rescinded or revoked at least two Company's
Conversion Elections (as defined in the Notes) which in the aggregate, with all
other Company's Conversion Elections which have not been rescinded or revoked,
were for the conversion of not less than $10,000,000 of principal amount of the
Notes or (B) redeemed not less than $10,000,000 of principal amount of Notes.
Notwithstanding anything in this Agreement to the contrary, the Company shall
not be entitled to require the Buyer to purchase the Additional Notes unless, in
addition to the satisfaction of
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the Additional Notice Conditions and the requirements of Section 7(b), all of
the following conditions (the "Effectiveness Conditions") are satisfied: (i) at
all times during the period beginning on the Additional Note Notice Date and
ending on and including the Additional Closing Date, the Initial Registration
Statement shall have been effective and available for the sale of all of the
Registrable Securities; (ii) at all times during the period beginning on the
Additional Note Notice Date and ending on and including the Additional Closing
Date, the Common Stock shall have been designated for quotation on the NYSE or
the Nasdaq National Market and shall not have been suspended from trading on
such exchanges (other than suspensions of not more than one day due to business
announcements by the Company) nor shall delisting or suspension by such
exchanges have been threatened either (A) in writing by such exchanges or (B) by
falling below the minimum listing maintenance requirements of such exchanges;
(iii) during the period beginning on the Additional Note Notice Date and ending
on and including the Additional Closing Date, there shall not have occurred
either (A) the consummation of a Change in Control or a public announcement of a
pending Change in Control which has not been abandoned or terminated or (B) a
Triggering Event or an event which, with the passage of time, would constitute a
Triggering Event, assuming it were not cured; (iv) during the period beginning
on the Additional Note Notice Date and ending on and including the Additional
Closing Date, the Company shall have delivered Conversion Shares upon conversion
of the Notes on a timely basis as set forth in Section 2(e)(ii) of the Notes and
the Company otherwise shall have been in compliance with the Transaction
Documents (as defined below) and shall not have breached any provision of the
Transaction Documents; and (v) the Company shall have either (A) delivered and
not rescinded or revoked at least two Company's Conversion Elections which in
the aggregate, with all other Company Conversion Election which have not been
rescinded or revoked, was for the conversion of not less than $10,000,000 of
principal amount of the Notes or (B) redeemed not less than $10,000,000 of
principal amount of Notes, (vii) the Company shall have delivered an Additional
Note Notice on no more than one prior occasion and (viii) the Company shall have
received shareholder approval of the issuance of the Conversion Shares and
Warrant Shares consistent with the requirements of Section 4(k).
e. Form of Payment. On the Closing Date (i) each Buyer shall pay its
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pro rata portion of the Purchase Price to the Company for the Notes and the
related Warrants to be issued and sold to such Buyer 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 Notes (in the
principal amounts as such Buyer shall request) (the "Note Certificates")
representing such principal amount of the Notes which such Buyer is then
purchasing along with the related Warrants, duly executed on behalf of the
Company and registered in the name of such Buyer.
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2. BUYER'S REPRESENTATIONS AND WARRANTIES.
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Each Buyer represents and warrants with respect to only itself that:
a. Investment Purpose. Such Buyer (i) is acquiring the Notes and the
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Warrants, (ii) upon conversion of the Notes, will acquire the Conversion Shares
then issuable and (iii) upon exercise of the Warrants, will acquire the Warrant
Shares issuable upon exercise thereof (the Notes, the Warrants, the Conversion
Shares and the Warrant 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
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investor" as that term is defined in Rule 501(a) of Regulation D.
c. Reliance on Exemptions. Such Buyer understands that the
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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 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
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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 and received answers from
the Company concerning he transactions contemplated by this Agreement. 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 Sections 3 and 9(m) 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
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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.
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f. Transfer or Resale. Such Buyer understands that except as
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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 delivered to the
Company an opinion of counsel, in a form reasonably satisfactory 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 reasonable assurance 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. Notwithstanding the
foregoing, the Securities may be pledged in connection with a bona fide margin
account.
g. Legends. Such Buyer understands that the certificates or other
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instruments representing the Notes and the Warrants and, until such time as the
sale of the Conversion Shares and the Warrant Shares have been registered under
the 1933 Act as contemplated by the Registration Rights Agreement, the stock
certificates representing the Conversion Shares and the Warrant Shares, 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 SATISFACTORY 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.
NOTWITHSTANDING THE FOREGOING, THE SECURITIES MAY BE PLEDGED
IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT.
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 (i) such Securities are registered for sale under the 1933 Act, (ii)
in connection with a sale transaction, such holder
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provides the Company with an opinion of counsel, in a form reasonably
satisfactory to the Company, 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. Such Buyer acknowledges, covenants
and agrees to sell the Securities represented by a certificate(s) from which the
legend has been removed, only pursuant to (i) a registration statement effective
under the 1933 Act, or (ii) advice of counsel that such sale is exempt from
registration required by Section 5 of the 1933 Act.
h. Authorization; Enforcement. This Agreement and the Registration
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Rights Agreement have been duly and validly authorized by all necessary
corporate or partnership action on such Buyer's part, executed and delivered on
behalf of such Buyer and are valid and binding agreements of such Buyer
enforceable against such Buyer in accordance with their 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 jurisdiction
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specified on the Schedule of Buyers.
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
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The Company represents and warrants to each of the Buyers that:
a. Organization and Qualification. The Company and its "Subsidiaries"
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(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 Subsidiaries is set forth in Schedule 3(a))
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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 properties and to carry on their
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, financial condition or prospects of the
Company and its Subsidiaries 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).
b. Authorization; Enforcement; Compliance with Other Instruments.
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(i) The Company has the requisite corporate power and authority to enter into
and perform its obligations under this Agreement, the Registration Rights
Agreement, the Irrevocable Transfer Agent Instructions (as defined in Section
5), the Notes, the Warrants and each of the other agreements entered into by the
parties hereto in connection with the transactions contemplated
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by this Agreement (collectively, the "Transaction Documents"), and to issue the
Securities in accordance with the terms thereof, (ii) the execution and delivery
of the Transaction Documents by the Company and the consummation by it of the
transactions contemplated hereby and thereby, including without limitation the
issuance of the Notes and the Warrants and the reservation for issuance and the
issuance of the Conversion Shares and the Warrant Shares issuable upon
conversion or exercise 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, (iii) the Transaction Documents have
been duly executed and delivered by the Company, and (iv) this Agreement and the
Registration Rights Agreement and, when executed and delivered, the other
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.
c. Capitalization. The authorized capital stock of the Company
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consists of (i) 34,000,000 shares of Common Stock, of which as of the date
hereof 10,154,117 shares were issued and outstanding, 1,985,912 shares were
issuable and reserved for issuance pursuant to the Company's stock option and
purchase plans and no shares are issuable and reserved for issuance pursuant to
securities (other than the Notes and the Warrants) exercisable or exchangeable
for, or convertible into, shares of Common Stock and (ii) 23,000,000 shares of
preferred stock, of which as of the date hereof, no shares were issued and
outstanding. 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
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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 issued by the Company; (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 Buyer true and correct copies of the
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Company's Certificate of Incorporation, as amended and as in effect on the date
hereof (the "Certificate of Incorporation"), 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 Notes and the Warrants are duly
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authorized and, upon issuance in accordance with the terms hereof, shall be free
from all taxes, liens and charges with respect to the issue thereof. At least
1,557,335 shares of Common Stock (subject to adjustment pursuant to the
Company's covenant set forth in Section 4(f) below) have been duly authorized
and reserved for issuance upon conversion of the Notes and exercise of the
Warrants. Upon conversion or exercise in accordance with the Notes or the
Warrants, as the case may be, the Conversion Shares and the Warrant 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. The issuance by the Company
to the Buyer of the Securities is exempt from registration under the 1933 Act.
e. No Conflicts. Except as disclosed in Schedule 3(e), the
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execution, delivery and performance of the Transaction Documents by the Company,
the performance by the Company of its obligations under the Notes and the
consummation by the Company of the transactions contemplated hereby and thereby
(including, without limitation, the reservation for issuance and issuance of the
Conversion Shares and the Warrant Shares) will not (i) result in a violation of
the Certificate of Incorporation, any Certificate of Designations, Preferences
and Rights of any outstanding series of preferred stock of the Company or
the By-laws; (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
agreement, indenture or instrument to which the Company or any of its
Subsidiaries is a party; or (iii) 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
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term of (i) its Certificate of Incorporation, any Certificate of Designations,
Preferences and Rights of any outstanding series of preferred stock of the
Company or By-laws or their organizational charter or by-laws, respectively, or
(ii) any statute, rule or regulation applicable to the Company or its
Subsidiaries and neither the Company nor its Subsidiaries is in default under
any contract, agreement, mortgage, indebtedness, indenture, instrument,
judgment, decree or order, except for such violations or defaults which would
not, either individually or in the aggregate, have a Material Adverse Effect.
The business of the Company and its Subsidiaries is not being conducted, and
shall not be conducted, in violation of any law, ordinance or regulation of any
governmental entity, except for such violation which would not, individually or
in the aggregate, have a Material Adverse Effect. Except as specifically
contemplated by this Agreement and except such as have been obtained as of the
date hereof, the Company is not required to obtain any consent, authorization or
order of, or make any filing or registration
9
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 in accordance with the terms
hereof or thereof. Except as disclosed in Schedule 3(e), all consents,
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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 and its Subsidiaries are unaware of any
facts or circumstances which might reasonably be expected to give rise to any of
the foregoing. The Company is not in violation of the listing requirements of
the Nasdaq National Market as in effect on the date hereof and on each of the
Closing Dates and has no actual knowledge of any facts which would reasonably
lead to delisting or suspension of the Common Stock by the Nasdaq National
Market in the foreseeable future.
f. SEC Documents; Financial Statements. Since March 8, 1999, 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 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 incorporated by reference therein being hereinafter referred to as the
"SEC Documents"). A complete list of the Company's SEC Documents is set forth on
Schedule 3(f). 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. As of their respective dates, the financial statements of the
Company included in the SEC Documents complied as to form in all material
respects with applicable accounting requirements of the SEC with respect
thereto. Such financial statements 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). Neither the
Company nor any of its Subsidiaries or any of their officers, directors,
employees or agents have provided the Buyers with any material, nonpublic
information. As of April 1, 2000, the Company expects to meet the requirements
for the use of Form S-3 for registration of the resale of the Registrable
Securities (as defined in the Registration Rights Agreement) by each Buyer.
g. Absence of Certain Changes. Except as disclosed in Schedule 3(g),
-------------------------- -------------
since March 8, 1999 there has been no material adverse change and no material
adverse development in the business, properties, operations, financial
condition, liabilities or results of operations of the Company or its
Subsidiaries, taken as a whole. 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 any of its Subsidiaries have any
knowledge that its
10
creditors intend to initiate involuntary bankruptcy proceedings or any knowledge
of any fact which would reasonably lead a creditor to do so.
h. Absence of Litigation. Except as disclosed in Schedule 3(h),
--------------------- ------------
there is no action, suit, proceeding, inquiry or investigation, which could,
individually or in the aggregate, have a Material Adverse Effect, 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 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), to
the knowledge of the Company none of the directors or officers of the Company
have been involved as a defendant in securities related litigation during the
past five years.
i. Acknowledgment Regarding the Buyer's Purchase of Notes. 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 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. Except in connection with the acquisition of the Information
-------------
Services Group of ▇▇▇▇▇▇ Holdings plc (the "▇▇▇▇▇▇ Acquisition") and for the
issuance of the Notes and Warrants contemplated by this Agreement, 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 (including
by way of incorporation by reference) filed with the SEC relating to an issuance
and sale by the Company of its Common Stock and which has not been publicly
disclosed.
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. Neither the Company, nor any of its
----------------------
affiliates, nor any person acting on its or their behalf has, directly or
indirectly, made any offers or sales of any security or solicited any offers to
buy any security, under circumstances that would require registration of any of
the Securities under the 1933 Act or cause this offering of the Securities to be
integrated with prior offerings by the Company for purposes of the 1933 Act
11
or any applicable stockholder approval provisions, including, without
limitation, under the rules and regulations of the Nasdaq National 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. Except in connection with the ▇▇▇▇▇▇
------------------
Acquisition, 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. None of the Company's or its
Subsidiaries' employees is a member of a union and neither the Company nor any
of its Subsidiaries is a party to a collective bargaining agreement, and the
Company and its Subsidiaries believe that their relations with their employees
are good. Dr. ▇▇▇▇▇▇▇ ▇▇▇▇ has not notified the Company's Board of Directors
that he intends to leave the Company or otherwise terminate his employment with
the Company.
n. Intellectual Property Rights. Except in connection with the
----------------------------
▇▇▇▇▇▇ acquisition, 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 have expired or terminated,
or are expected to expire or terminate within two years from the date of this
Agreement, except where such expiration or termination would not, individually
or in the aggregate, have a Material Adverse Effect. The Company and its
Subsidiaries do not have any knowledge of any infringement by the Company or its
Subsidiaries of trademarks, trade name rights, patents, patent rights,
copyrights, inventions, licenses, service names, service marks, service ▇▇▇▇
registrations, trade secrets 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), no claim, action or proceeding
------------
has been made or brought against, or to the Company's knowledge, has been
threatened against, the Company or its Subsidiaries regarding trademarks, trade
name rights, patents, patent rights, inventions, copyrights, licenses, service
names, service marks, service ▇▇▇▇ registrations, trade secrets 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
confidentiality and value of all of their intellectual properties and the
secrecy, confidentiality and value with respect to their trade secrets.
o. 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 certificates,
authorizations or permits would not, individually or in the aggregate, have a
Material Adverse Effect, and neither the Company nor any such Subsidiary
12
has received any notice of proceedings relating to the revocation or
modification of any such certificate, authorization or permit.
p. Internal Accounting Controls. The Company and each of its
----------------------------
Subsidiaries maintain a system of internal accounting controls sufficient to
provide reasonable assurance that (i) transactions are executed in accordance
with management's general or specific authorizations, (ii) transactions are
recorded as necessary to permit preparation of financial statements in
conformity with generally accepted accounting principles and to maintain asset
accountability, (iii) access to assets is permitted only in accordance with
management's general or specific authorization and (iv) the recorded
accountability for assets is compared with the existing assets at reasonable
intervals and appropriate action is taken with respect to any differences.
q. Tax Status. 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 for which the Company 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.
r. Transactions With Affiliates. Except as set forth on Schedule
---------------------------- --------
3(r), in connection with the ▇▇▇▇▇▇ Acquisition and in the SEC Documents filed
---
at least ten days prior to the date hereof and other than the grant of stock
options disclosed on Schedule 3(c), none of the officers, directors, or
------------
employees 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, director or such employee or, to the knowledge of the Company, any
corporation, partnership, trust or other entity in which any officer, director,
or any such employee has a substantial interest or is an officer, director,
trustee or partner.
s. Dilutive Effect. The Company understands and acknowledges that
---------------
the number of Conversion Shares issuable upon conversion of the Notes will
increase in certain circumstances. The Company further acknowledges that its
obligation to issue Conversion Shares upon conversion of the Notes in accordance
with this Agreement and the Notes absolute and unconditional regardless of the
dilutive effect that such issuance may have on the ownership interests of the
stockholders of the Company.
t. Application of Takeover Protections. The Company and its board of
-----------------------------------
directors have taken all necessary action, if any, in order to render
inapplicable any control
13
share acquisition, business combination, poison pill (including any distribution
under a rights agreement) or other similar anti-takeover provision under the
Certificate of Incorporation or the laws of the state of its incorporation which
is or could become applicable to the Buyers as a result of the Buyers and the
Company fulfilling their obligations under the Transaction Documents, including,
without limitation, the Company's issuance of the Securities and the Buyers'
ownership of the Securities.
u. Rights Agreement. As of the date hereof, the Company has not
----------------
adopted a shareholder rights plan or similar arrangement relating to
accumulation of beneficial ownership of Common Stock or a change in control of
the Company.
v. Year 2000 Compliance. Except in connection with the ▇▇▇▇▇▇
--------------------
Acquisition, the Company has initiated a review and assessment of all areas
within its and each Subsidiary's business and operations that could be
materially adversely affected by the "Year 2000 Problem" (that is, the risk that
computer applications used by the Company or any of the Subsidiaries may be
unable to recognize and perform properly date-sensitive functions involving
certain dates prior to and any date after December 31, 1999). Based on the
foregoing, the Company believes that the computer applications that are
currently material to its or any Subsidiary's business and operations are
reasonably expected to be able to perform properly date-sensitive functions for
all dates before and after January 1, 2000.
w. Environmental Laws. The Company and its Subsidiaries (i) except
------------------
in connection with the ▇▇▇▇▇▇ Acquisition, are in compliance in all material
respects 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) except in connection with the ▇▇▇▇▇▇
Acquisition, have received all permits, licenses or other approvals required of
them under applicable Environmental Laws to conduct their respective businesses,
except where the failure to receive such permits, licenses or approvals would
not, individually or in the aggregate, have a Material Adverse Effect and (iii)
are in compliance in all material respects with all terms and conditions of any
such permit, license or approval, except where the failure to be in compliance
or receive such permits, licenses or approvals would not, individually or in the
aggregate, have a Material Adverse Effect.
x. Title. The Company and its Subsidiaries have good and marketable
-----
title in fee simple to all real property owned by them 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(x) 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 and any of
its Subsidiaries. Any real property and facilities held under lease by the
Company and 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.
14
y. Insurance. The Company and each of its Subsidiaries are insured by
---------
insurers of recognized financial responsibility against such losses and risks
and in such amounts as management of the Company believes to be prudent and
customary in the businesses in which the Company and its Subsidiaries are
engaged. Except in connection with the ▇▇▇▇▇▇ Acquisition, neither the Company
nor any such Subsidiaries 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.
z. No Other Agreements. The Company has not, directly or indirectly,
-------------------
made any agreements with any Buyer 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 and Blue Sky. 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 the each of 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 each of the Closing Dates. The Company shall
make all filings and reports relating to the offer and sale of the Securities
required under 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 on which the Investors (as that term is defined in the
Registration Rights Agreement) may sell all of the Conversion Shares and the
Warrant Shares without restriction pursuant to Rule 144(k) promulgated under the
1933 Act (or successor thereto) and (ii) the date on which (A) the Investors
shall have sold all the Conversion Shares and the Warrant Shares and (B) none of
the Notes or the Warrants is outstanding (the "Reporting 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 Notes for substantially the same purposes and in substantially the same
amounts as indicated in Schedule 4(d).
------------
15
e. Financial Information. The Company agrees to send the following
---------------------
to each Investor (as defined in the Registration Rights Agreement) during the
Reporting Period: (i) within two (2) days after the filing thereof with the SEC,
a copy of its Annual Reports on Form 10-K or Form 10-KSB, its Quarterly Reports
on Form 10-Q or Form 10-QSB, any Current Reports on Form 8-K and any
registration statements (other than on Form S-8) or amendments filed pursuant to
the 1933 Act; (ii) on the same day as the release thereof, facsimile copies 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 the sum of (A) 200% the number of shares of Common Stock
needed to provide for the issuance of the Conversion Shares and (B) 100% the
number of shares of Common Stock needed to provide for the issuance of the
Warrant Shares (without regard to any limitations on conversions or exercise
thereof).
g. 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 Nasdaq National 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. The Company shall maintain the Common Stock's
authorization for listing on the Nasdaq National Market or the New York Stock
Exchange ("NYSE"). Neither the Company nor any of its Subsidiaries shall
voluntarily take any action which may result in the delisting or suspension of
the Common Stock on the Nasdaq National Market or NYSE (other than to switch
listings from the Nasdaq National Market to NYSE). The Company shall promptly,
and in no event later than the following Business Day, offer to provide to such
Buyer copies of any notices it receives from the Nasdaq National Market or NYSE
regarding the continued eligibility of the Common Stock for listing on such
automated quotation system or securities exchange, provided that such notices
shall not contain any material non-public information. The Company shall pay
all fees and expenses in connection with satisfying its obligations under this
Section 4(h).
h. Expenses. Subject to Section 9(l) below, at the Initial Closing,
--------
the Company shall reimburse the Buyers for the Buyers' expenses (including legal
expenses, in connection with due diligence and negotiating and preparing the
Transaction Documents and consummating the transactions contemplated thereby) of
$40,000, which amount shall be deducted from the Initial Purchase Price.
i. Transactions With Affiliates. So long as (i) any Notes or
----------------------------
Warrants are outstanding or (ii) any Buyer owns Conversion Shares or Warrant
Shares with a market value of at least $500,000 the Company shall not, and shall
cause each of its Subsidiaries not to,
16
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 which is approved by a
majority of the disinterested directors of the Company or (c) 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. 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.
j. Proxy Statement. The Company shall provide each stockholder
---------------
entitled to vote at the next meeting of stockholders of the Company, which
meeting shall occur on or before the Proxy Statement Trigger 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 in
accordance with applicable law and the rules and regulations of the Nasdaq
National Market, 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, 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 Notes an amount in cash equal to the product of (i)
the principal amount of Notes held by such holder of Notes multiplied by (ii)
.015 multiplied by (iii) the quotient of (x) the number of days after the
Stockholder Meeting Deadline and prior to the date that a meeting of the
Company's stockholders is 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 and
(II) the last day of each 30-day period beginning on the Stockholder Meeting
Deadline. The "Proxy Statement Trigger Date" shall mean the first date after the
date of this Agreement on which the sum of (i) the number of Conversion Shares
issued or issuable upon conversion of the Notes (without regards to any
limitations on conversions) and (ii) the number of Warrant Shares issued upon
exercise of the Warrants (without regards to any limitations on Conversion),
each based on the Conversion Price in
17
effect on the date of such determination, is greater than or equal to 15% of the
number of shares of Common Stock issued and outstanding immediately prior to the
Initial Closing.
k. Filing of Form 8-K. On or before the 1st day following each of
------------------
the Closing Dates and the Additional Note Notice Date, 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.
l. Corporate Existence. So long as any Buyer beneficially owns any
-------------------
Notes or Warrants, the Company shall maintain its corporate existence and shall
not sell all or substantially all of the Company's assets, except in the event
of a merger or consolidation or sale of all or substantially all of the
Company's assets, where the surviving or successor entity in such transaction
(i) assumes the Company's obligations hereunder and under the agreements and
instruments entered into in connection herewith and (ii) is a publicly traded
corporation whose common stock is listed for trading on the Nasdaq National
Market or NYSE.
18
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
and the Warrant Shares in such amounts as specified from time to time by each
Buyer to the Company upon conversion of the Notes or exercise of the Warrants
(in the form attached hereto as Exhibit E, the "Irrevocable Transfer Agent
---------
Instructions"). Prior to registration of the Conversion Shares and the Warrant
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 and the Warrant Shares, prior to
registration of the Conversion Shares and the Warrant Shares under the ▇▇▇▇ ▇▇▇)
will be given by the Company to its transfer agent with respect to the
Securities 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 a form reasonable satisfactory to the Company, that registration of a resale
by such Buyer of any of such Securities is not required under the 1933 Act or
such Buyer provides the Company with reasonable assurances that the Securities
can be sold pursuant to Rule 144, the Company shall permit the transfer, and, in
the case of the Conversion Shares and the Warrant 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) The obligation of the Company hereunder to issue and sell the
Initial Notes and the Initial Warrants 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 this Agreement and
the Registration Rights Agreement and delivered the same to the Company.
19
(ii) Such Buyer shall have delivered to the Company its pro
rata portion of the Initial Purchase Price for the Initial Notes and the
Initial Warrants 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.
(iii) The representations and warranties of such Buyer contained
herein 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 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) Any obligation of the Company hereunder to issue and sell the
Additional Notes and the Additional Warrants 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 its pro
rata portion of the Additional Purchase Price for the Additional Notes and
the Additional Warrants 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 contained
herein 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) The obligation of each Buyer hereunder to purchase the Initial
Notes and the Initial Warrants 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 such Buyer's sole benefit and
may be waived by such Buyer at any time in its sole discretion by providing the
Company and each Buyer with prior written notice thereof:
(i) The Company shall have executed each of the Transaction
Documents, and delivered the same to such Buyer.
20
(ii) The Common Stock shall be designated for quotation on the
Nasdaq National Market or listed on NYSE, and shall not have been suspended
from trading on or delisted from such exchanges (excluding suspensions of
not more than one day due to business announcements by the Company) nor
shall delisting or suspension by such exchanges have been threatened either
(A) in writing by such exchanges or (B) by falling below the minimum
listing maintenance requirements of such exchanges and the Company has
complied with the listing requirements of the Nasdaq National Market for
the Conversion Shares and the Warrant Shares issuable upon conversion or
exercise of the Initial Notes and the Initial Warrants, as the case may be.
(iii) The representations and warranties of the Company
contained herein 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 such Buyer may reasonably request, including, without limitation, an
update as of the Initial Closing Date regarding the representation
contained in Section 3(c) above.
(iv) Such Buyer shall have received the opinion of ▇▇▇▇▇▇▇ ▇▇▇▇
LLP dated as of the Initial Closing Date, in substantially the forms of
Exhibit D attached hereto.
---------
(v) The Company shall have executed and delivered to such
Buyer the Note Certificates for the Initial Notes and the Initial Warrants
being purchased by such Buyer at the Initial Closing.
(vi) 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").
(vii) 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 Initial Notes and exercise of
the Initial Warrants, at least 1,557,335 shares of Common Stock.
(viii) The Irrevocable Transfer Agent Instructions, in the form
of Exhibit E 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 domestic
21
Subsidiary in such corporation's state of incorporation issued by the
Secretary of State of such state of incorporation as of a date within ten
days of the Initial Closing Date.
(x) The Company shall have delivered to such Buyer a
secretary's certificate certifying as to (A) the Resolutions, (B) the
Certificate of Incorporation and (C) the By-laws, each as in effect at the
Initial Closing Date.
(xi) The Company shall have delivered to such Buyer a certified
copy of its Certificate of Incorporation as certified by the Secretary of
State of the State of Delaware within ten days of the Initial Closing Date.
(xii) The Company shall have delivered to such Buyer a letter
from the Company's transfer agent certifying the number of shares of Common
Stock outstanding as of a date within five days of the Initial Closing
Date.
(xiii) The Company shall have delivered to the Buyers such other
documents relating to the transactions contemplated by the Transaction
Documents as the Buyers or their counsel may reasonably request.
(b) The obligation of each Buyer hereunder to purchase the Additional
Notes and the Additional Warrants 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 such Buyer's sole benefit and
may be waived by such Buyer at any time in its sole discretion by providing the
Company and each Buyer with prior written notice thereof:
(i) The Company shall have complied with the requirements of
Section 1(c) and all of the Additional Notice Conditions set forth in
Section 1(d) shall have been satisfied as of the Additional Closing Date.
(ii) The Common Stock shall be designated for quotation on the
Nasdaq National Market or listed on NYSE, and shall not have been suspended
from trading on or delisted from such exchanges nor shall delisting or
suspension by such exchanges have been threatened either (A) in writing by
such exchanges or (B) by falling below the minimum listing maintenance
requirements of such exchanges and the Company has complied with the
listing requirements of the Nasdaq National Market for the Conversion
Shares and the Warrant Shares issuable upon conversion or exercise of the
Additional Notes and the Additional Warrants, as the case may be.
(iii) The representations and warranties of the Company
contained herein 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 (A)
representations and warranties that speak as of a specific date and (B)
with respect to the representations made in Section 3(c) and the list of
Subsidiaries referred to in Section 3(a), events which occur on or after
the date of this Agreement and are disclosed in SEC filings made by the
Company at least ten Business Days prior to the Additional Note Notice
Date) and the
22
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 such Buyer may reasonably request, 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 ▇▇▇▇▇▇▇ ▇▇▇▇
LLP dated as of the Additional Closing Date, in substantially the forms of
Exhibit D attached hereto.
---------
(v) The Company shall have executed and delivered to such
Buyer the Note Certificates for the Additional Notes and the Additional
Warrants being purchased by such Buyer at the Additional Closing.
(vi) 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").
(vii) As of the Additional Closing Date, the Company shall have
reserved out of its authorized and unissued Common Stock, at least the sum
of (A) 200% of the number of Conversion Shares issuable upon the conversion
of the Notes (as if the Additional Notes were issued and outstanding) and
(B) the number of Warrant Shares issuable upon the exercise of the Warrants
(as if the Additional Warrants were issued and outstanding).
(viii) The Irrevocable Transfer Agent Instructions, in the form
of Exhibit E 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 domestic Subsidiary in such corporation's state of incorporation
issued by the Secretary of State of such state of incorporation as of a
date within ten days of the Additional Closing Date.
(x) The Company shall have delivered to such Buyer a
secretary's certificate certifying as to (A) the Resolutions, (B) the
Certificate of Incorporation and (C) the By-laws, each as in effect at the
Additional Closing Date.
(xi) The Company shall have delivered to such Buyer a certified
copy of its Certificate of Incorporation as certified by the Secretary of
State of the State of Delaware within ten days of the Additional Closing
Date.
23
(xii) The Company shall have delivered to such Buyer a letter
from the Company's transfer agent certifying the number of shares of Common
Stock outstanding as of a date within five days of the Additional Closing
Date.
(xiii) The Registration Statement registering no less than the
sum of (A) 200% of the number of Conversion Shares then issuable upon the
conversion of all outstanding Notes (including the Additional Notes as if
they were issued and outstanding and without regard to any limitations on
conversion), (B) the number of Warrant Shares then issuable upon exercise
of all outstanding Warrants (including the Additional Warrants as if they
were issued and outstanding and without regard to any limitations on
exercise) and (C) the number of Conversion Shares and Warrant Shares that
are then held by the Buyers shall have been declared effective by the SEC
and shall be available for resale for all the Registrable Securities.
(xiv) the Company shall have received shareholder approval of
the issuance of the Conversion Shares and Warrant Shares consistent with
the requirements of Section 4(j).
(xv) The Company shall have delivered to the Buyers such other
documents relating to the transactions contemplated by the Transaction
Documents as the Buyers or their 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, 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 and direct or indirect investors and any of the
foregoing persons' 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
any other certificate, instrument or document contemplated thereby, (b) any
breach of any covenant, agreement or obligation of the Company contained in the
Transaction Documents or any other certificate, instrument or document
contemplated thereby or (c) any cause of action, suit or claim brought or made
against such Indemnitee (other than a cause of action, suit or claim which is
(x) brought or made by the Company and (y) is not a shareholder derivative suit)
and arising out of or resulting from (i) the execution, delivery, performance or
enforcement of the Transaction Documents, (ii) 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 (iii) solely the status of such
24
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.
9. GOVERNING LAW; MISCELLANEOUS.
----------------------------
a. Governing Law; Jurisdiction; Jury Trial. The corporate laws of the
---------------------------------------
State of Delaware 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 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. EACH PARTY HEREBY IRREVOCABLY WAIVES ANY RIGHT IT MAY
HAVE, AND AGREES NOT TO REQUEST, A JURY TRIAL FOR THE ADJUDICATION OF ANY
DISPUTE HEREUNDER OR IN CONNECTION HEREWITH OR ARISING OUT OF THIS AGREEMENT OR
ANY TRANSACTION CONTEMPLATED HEREBY.
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.
25
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 Buyers which purchased at least two-thirds (2/3) of the
aggregate principal amount of the Initial Notes on the Initial Closing Date or,
if prior to the Initial Closing Date, the Buyers listed on the Schedule of
Buyers as being obligated to purchase at least two-thirds (2/3) of the aggregate
principal amount of the Notes proposed to be issued at the Initial Closing. 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
Notes or Warrants 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 unless the same consideration also is
offered to all of the parties to the Transaction Documents or holders of the
Notes 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 receipt, when sent by facsimile (provided
confirmation of transmission is mechanically or electronically generated and
kept on file by the sending party); or (iii) one (1) Business 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:
RoweCom Inc.
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
Executive Vice President
and Chief Financial Officer
With a copy to:
▇▇▇▇▇▇▇ ▇▇▇▇ LLP
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
26
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇ ▇▇▇▇▇▇, Esq.
If to the Transfer Agent:
BankBoston N.A.
c/o EquiServe
Blue Hills Office Park
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
If to a Buyer, to it at the address and facsimile number set forth on the
Schedule of Buyers, with copies to such Buyer's representatives as set forth on
the Schedule of Buyers, or at such other address and/or facsimile number and/or
to the attention of such other person as the recipient party has specified by
written notice given to each other party five days prior to the effectiveness of
such change. Written confirmation of receipt (A) given by the recipient of such
notice, consent, waiver or other communications, (B) mechanically or
electronically generated by the sender's facsimile machine containing the time,
date, recipient facsimile number and an image of the first page of such
transmission or (C) provided by a nationally recognized overnight delivery
service shall be rebuttable evidence of personal service, receipt by facsimile
or receipt from a nationally recognized overnight delivery service in accordance
with clause (i), (ii) or (iii) above, respectively.
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 Notes. The Company shall not assign this
Agreement or any rights or obligations hereunder, including by merger or
consolidation, without the prior written consent of the Buyers which purchased
at least two-thirds (2/3) of the aggregate principal amount of the Initial Notes
on the Initial Closing Date. The rights under this Agreement shall be
assignable by a Buyer without consent of the Company. Notwithstanding the
foregoing, any assignment by a Buyer shall not release such Buyer from its
obligations hereunder unless such obligations are assumed by such assignee and
such Buyer has proved, to the Company's reasonable satisfaction, that such
assignee has the financial ability to satisfy such assignees obligations under
Sections 1(a) and (c). Notwithstanding anything to the contrary contained in
the Transaction Documents, the Buyers 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.
27
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 the 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 the Buyer's failure to satisfy the
conditions set forth in Sections 6 and 7 above (and the non-breaching party's
failure to waive such unsatisfied condition(s)), the non-breaching 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 non-breaching
Buyers for expenses up to the amount described in Section 4(h) above.
m. Placement Agent. The Company acknowledges that it has engaged
---------------
▇.▇. ▇▇▇▇▇▇▇▇ & Co. as a placement agent in connection with the sale of the
Notes and the Warrants. The Company shall be responsible for the payment of any
placement agent's fees or brokers' commissions relating to or arising out of the
transactions contemplated hereby. 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 permitted transferee of the
--------
Securities shall have all rights and remedies set forth in the Transaction
Documents and all rights and remedies which such Buyer or permitted transferee
of the Securities 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 any Buyer hereunder or pursuant to the Registration
Rights Agreement or the Warrants or such Buyer enforces or exercises its 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.
* * * * * *
IN WITNESS WHEREOF, the Buyers and the Company have caused this Securities
Purchase Agreement to be duly executed as of the date first written above.
COMPANY: BUYER:
ROWECOM INC. HFTP INVESTMENT L.L.C.
By: Promethean Asset Management, L.L.C.
Its: Investment Manager
By: /s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇. By: /s/ ▇▇▇▇▇ ▇. ▇'▇▇▇▇▇, ▇▇.
-------------------------------- -----------------------------------
Name: ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇. Name: ▇▇▇▇▇ ▇. ▇'▇▇▇▇▇, ▇▇.
Title: Executive Vice President and Its: Managing Member
Chief Financial Officer
▇▇▇▇▇▇▇▇, L.P.
By: ▇▇▇▇▇▇, ▇▇▇▇▇▇ & Co., L.P.
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
-------------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: Chief Operating Officer
SCHEDULE OF BUYERS
Principal
Amount of
Investor Address Initial Notes Investor's Representatives' Address
Investor Name and Facsimile Number and Facsimile Number
---------------------------- --------------------------------------- ------------------ -------------------------------------
HFTP Investment L.L.C. c/o Promethean Asset Management, L.L.C. $10,000,000 Promethean Investment Group, L.L.C.
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇/▇▇/ ▇▇▇▇▇ ▇▇/▇▇/ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇ ▇. ▇'▇▇▇▇▇, ▇▇. Attn: ▇▇▇▇▇ ▇. ▇'▇▇▇▇▇, ▇▇.
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇
Telephone: ▇▇▇-▇▇▇-▇▇▇▇ Telephone: ▇▇▇-▇▇▇-▇▇▇▇
Facsimile: ▇▇▇-▇▇▇-▇▇▇▇ Facsimile: ▇▇▇-▇▇▇-▇▇▇▇
Residence: New York ▇▇▇▇▇▇ ▇▇▇▇▇▇ & ▇▇▇▇▇
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attn: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Esq.
Telephone: ▇▇▇-▇▇▇-▇▇▇▇
Facsimile: 312-902-1061
▇▇▇▇▇▇▇▇, L.P. c/o ▇▇▇▇▇▇, ▇▇▇▇▇▇ & Co., L.P. $10,000,000 c/o ▇▇▇▇▇▇, ▇▇▇▇▇▇ & Co., L.P.
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ - 26/th/ Floor ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ - ▇▇/▇▇/ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇▇▇▇ or ▇▇▇ ▇▇▇▇▇▇ Attention: ▇▇▇▇ ▇▇▇▇ or ▇▇▇ ▇▇▇▇▇▇
Telephone: ▇▇▇-▇▇▇-▇▇▇▇ Telephone: ▇▇▇-▇▇▇-▇▇▇▇
Facsimile: ▇▇▇-▇▇▇-▇▇▇▇ Facsimile: ▇▇▇-▇▇▇-▇▇▇▇
Residence: Cayman Island
SCHEDULES
---------
Schedule of Buyers
Schedule 3(a) - Subsidiaries
Schedule 3(c) - Capitalization
Schedule 3(e) - Conflicts
Schedule 3(f) - SEC Documents
Schedule 3(g) - Material Changes
Schedule 3(h) - Litigation
Schedule 3(n) - Intellectual Property
Schedule 3(r) - Transactions with Affiliates
Schedule 3(x) - Liens
Schedule 4(d) - Use of Proceeds
EXHIBITS
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Exhibit A - Form of Notes
Exhibit B - Form of Warrant
Exhibit C - Form of Registration Rights Agreement
Exhibit D - Form of Opinion of Counsel
Exhibit E - Form of Irrevocable Transfer Agent Instructions