Securities Purchase Agreement - Loudeye Corp. and Bonanza Master Fund Ltd.
SECURITIES PURCHASE AGREEMENT
This Securities Purchase Agreement (this "Agreement") is dated as of
August 28, 2003, among Loudeye Corp., a Delaware corporation (the "Company"),
and the purchasers identified on the signature pages hereto (each a "Purchaser"
and collectively the "Purchasers"); and
WHEREAS, subject to the terms and conditions set forth in this Agreement
and pursuant to Section 4(2) of the Securities Act (as defined below), and Rule
506 promulgated thereunder, the Company desires to issue and sell to the
Purchasers, and each Purchaser, severally and not jointly, desires to purchase
from the Company in the aggregate, up to $15,000,000 of Common Stock and
Warrants to purchase shares of Common Stock.
NOW, THEREFORE, IN CONSIDERATION of the mutual covenants contained in this
Agreement, and for other good and valuable consideration the receipt and
adequacy of which are hereby acknowledged, the Company and each Purchaser agrees
as follows:
DEFINITIONS
Definitions. In addition to the terms defined elsewhere in this Agreement,
for all purposes of this Agreement, the following terms have the meanings
indicated in this Section 1.1:
"Action" shall have the meaning ascribed to such term in Section
3.1(j).
"Affiliate" means any Person that, directly or indirectly through
one or more intermediaries, controls or is controlled by or is under
common control with a Person as such terms are used in and construed under
Rule 144. With respect to a Purchaser, any investment fund or managed
account that is managed on a discretionary basis by the same investment
manager as such Purchaser will be deemed to be an Affiliate of such
Purchaser.
"Business Day" means any day except Saturday, Sunday and any day
which shall be a federal legal holiday or a day on which banking
institutions in the State of New York are authorized or required by law or
other governmental action to close.
"Closing" means the closing of the purchase and sale of the Common
Stock and Warrants pursuant to Section 2.1.
"Closing Date" means the date of the Closing, which shall be the
date hereof.
<PAGE>
"Closing Price" means on any particular date (a) the last reported
closing bid price per share of Common Stock on such date on the Trading
Market (as reported by Bloomberg L.P. at 4:15 PM (New York time) as the
last reported closing bid price for regular session trading on such day),
or (b) if there is no such price on such date, then the closing bid price
on the Trading Market on the date nearest preceding such date (as reported
by Bloomberg L.P. at 4:15 PM (New York time) as the closing bid price for
regular session trading on such day), or (c) if the Common Stock is not
then listed or quoted on the Trading Market and if prices for the Common
Stock are then reported in the "pink sheets" published by the National
Quotation Bureau Incorporated (or a similar organization or agency
succeeding to its functions of reporting prices), the most recent bid
price per share of the Common Stock so reported, or (d) if the shares of
Common Stock are not then publicly traded the fair market value of a share
of Common Stock as determined by an appraiser selected in good faith by
the Purchasers of a majority in interest of the Shares then outstanding.
"Commission" means the Securities and Exchange Commission.
"Common Stock" means the common stock of the Company, $0.001 par
value per share, and any securities into which such common shares may
hereafter be reclassified.
"Common Stock Equivalents" means any securities of the Company or
the Subsidiaries which would entitle the holder thereof to acquire at any
time Common Stock, including without limitation, any debt, preferred
stock, rights, options, warrants or other instrument that is at any time
convertible into or exchangeable for, or otherwise entitles the holder
thereof to receive, Common Stock.
"Company Counsel" means Procopio, Cory, Hargreaves & Savitch LLP.
"Disclosure Schedules" means the Disclosure Schedules concurrently
delivered herewith.
"Effective Date" means the date that the Registration Statement is
first declared effective by the Commission.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"FW" means Feldman Weinstein LLP with offices located at 420
Lexington Avenue, New York, New York 10170-0002.
"Intellectual Property Rights" shall have the meaning ascribed to
such term in Section 3.1(o).
"Liens" means a lien, charge, security interest, encumbrance, right
of first refusal or other restriction.
<PAGE>
"Material Adverse Effect" shall have the meaning ascribed to such
term in Section 3.1(b).
"Material Permits" shall have the meaning ascribed to such term in
Section 3.1(m).
"Per Share Purchase Price" equals $1.55, subject to adjustment for
reverse and forward stock splits, stock dividends, stock combinations and
other similar transactions of the Common Stock that occur after the date
of this Agreement.
"Person" means an individual or corporation, partnership, trust,
incorporated or unincorporated association, joint venture, limited
liability company, joint stock company, government (or an agency or
subdivision thereof) or other entity of any kind.
"Registration Statement" means a registration statement meeting the
requirements set forth in the Registration Rights Agreement and covering
the resale by the Purchasers of the Shares and the Warrant Shares.
"Registration Rights Agreement" means the Registration Rights
Agreement, dated as of the date of this Agreement, among the Company and
each Purchaser, in the form of Exhibit B hereto.
"Rule 144" means Rule 144 promulgated by the Commission pursuant to
the Securities Act, as such Rule may be amended from time to time, or any
similar rule or regulation hereafter adopted by the Commission having
substantially the same effect as such Rule.
"SEC Reports" shall have the meaning ascribed to such term in
Section 3.1(h).
"Securities" means the Shares, the Warrants and the Warrant Shares.
"Securities Act" means the Securities Act of 1933, as amended.
"Shares" means the shares of Common Stock issued or issuable to each
Purchaser pursuant to this Agreement.
"Subscription Amount" means, as to each Purchaser, the amounts set
forth below such Purchaser's signature block on the signature page hereto,
in United States dollars and in immediately available funds.
"Subsidiary" shall have the meaning ascribed to such term in Section
3.1(a).
"Trading Day" means (i) a day on which the Common Stock is traded on
a Trading Market, or (ii) if the Common Stock is not listed on a Trading
Market, a day on which the Common Stock is traded on the over-the-counter
market, as reported by the OTC Bulletin Board, or (iii) if the Common
Stock is not quoted on the OTC Bulletin Board, a day on which the Common
Stock is quoted in the over-the-counter market as reported by the National
Quotation Bureau Incorporated (or any similar organization or
<PAGE>
agency succeeding to its functions of reporting prices); provided, that in
the event that the Common Stock is not listed or quoted as set forth in
(i), (ii) and (iii) hereof, then Trading Day shall mean a Business Day.
"Trading Market" means the following markets or exchanges on which
the Common Stock is listed or quoted for trading on the date in question:
the American Stock Exchange, the New York Stock Exchange, the Nasdaq
National Market or the Nasdaq SmallCap Market.
"Transaction Documents" means this Agreement, the Registration
Rights Agreement, the Warrant and any other documents or agreements
executed in connection with the transactions contemplated hereunder.
"VWAP" means, for any date, the price determined by the first of the
following clauses that applies: (a) if the Common Stock is then listed or
quoted on a Trading Market, the daily volume weighted average price of the
Common Stock for such date (or the nearest preceding date) on the primary
Trading Market on which the Common Stock is then listed or quoted as
reported by Bloomberg Financial L.P. (based on a Trading Day from 9:30
a.m. ET to 4:02 p.m. Eastern Time) using the VAP function; (b) if the
Common Stock is not then listed or quoted on a Trading Market and if
prices for the Common Stock are then quoted on the OTC Bulletin Board, the
volume weighted average price of the Common Stock for such date (or the
nearest preceding date) on the OTC Bulletin Board; (c) if the Common Stock
is not then listed or quoted on the OTC Bulletin Board and if prices for
the Common Stock are then reported in the "Pink Sheets" published by the
National Quotation Bureau Incorporated (or a similar organization or
agency succeeding to its functions of reporting prices), the most recent
bid price per share of the Common Stock so reported; or (d) in all other
cases, the fair market value of a share of Common Stock as determined by a
nationally recognized-independent appraiser selected in good faith by
Purchasers holding a majority of the principal amount of Shares then
outstanding.
"Warrants" means the Common Stock Purchase Warrants, in the form of
Exhibit C, issuable to the Purchasers at the Closing, which warrants shall
be exercisable beginning on the 6 month anniversary after the Closing Date
and have an exercise price equal to $2.00, subject to adjustment therein,
and a term of exercise of 3 years.
"Warrant Shares" means the shares of Common Stock issuable upon
exercise of the Warrants.
PURCHASE AND SALE
Closing. At the Closing, the Purchasers shall purchase, severally and not
jointly, and the Company shall issue and sell, in the aggregate, up to
$15,000,000 of Common Stock and Warrants to purchase shares of Common Stock on
the Closing Date. Each Purchaser shall purchase from the Company, and the
Company shall issue and sell to each Purchaser, a number
<PAGE>
of Shares equal to such Purchaser's Subscription Amount divided by the Per Share
Purchase Price, together with the Warrants, on the Closing Date. Upon
satisfaction of the conditions set forth in Section 2.2, the Closing shall occur
at the offices of FW, or such other location as the parties shall mutually
agree.
Closing Conditions.
At the Closing the Company shall deliver or cause to be
delivered to each Purchaser (unless otherwise indicated below):
this Agreement duly executed by the Company;
within 3 Trading Days of the Closing Date, a certificate
evidencing a number of Shares equal to such Purchaser's
Subscription Amount divided by the Per Share Purchase Price,
registered in the name of such Purchaser;
within 3 Trading Days of the Closing Date, a Warrant,
registered in the name of such Purchaser, pursuant to which
such Purchaser shall have the right to acquire up to the
number of shares of Common Stock equal to 10% of the Shares to
be issued to such Purchaser at such Closing;
the Registration Rights Agreement duly executed by the
Company; and
a legal opinion of Company Counsel, in the form of
Exhibit A attached hereto.
At the Closing each Purchaser shall deliver or cause to be
delivered to the Company the following:
this Agreement duly executed by such Purchaser;
such Purchaser's Subscription Amount as to such Closing
by wire transfer to the account of the Company; and
the Registration Rights Agreement duly executed by such
Purchaser.
All representations and warranties of the Company and the
Purchasers contained herein shall remain true and correct as of the
Closing Date.
As of the Closing Date, there shall have been no Material
Adverse Effect with respect to the Company since the date hereof.
From the date hereof to the Closing Date, trading in the
Common Stock shall not have been suspended by the Commission (except
for any suspension of trading of limited duration agreed to by the
Company, which suspension shall be terminated prior to the Closing),
and, at any time prior to the Closing Date, trading in securities
generally as reported by Bloomberg Financial Markets shall not have
been suspended or limited, or minimum prices shall not have been
established on securities whose trades are reported
<PAGE>
by such service, or on any Trading Market, nor shall a banking
moratorium have been declared either by the United States or New
York State authorities.
REPRESENTATIONS AND WARRANTIES
Representations and Warranties of the Company. Except as set forth under
the corresponding section of the Disclosure Schedules herewith or in the SEC
Reports, the Company hereby makes the following representations and warranties
as of the date hereof to each Purchaser:
Subsidiaries. The Company has no direct or indirect subsidiaries.
The Company owns, directly or indirectly, all of the capital stock of its
Subsidiaries free and clear of any lien, charge, security interest,
encumbrance, right of first refusal or other restriction (collectively,
"Liens"), and all the issued and outstanding shares of capital stock of
each Subsidiary are validly issued and are fully paid, non-assessable and
free of preemptive and similar rights. If the Company has no subsidiaries,
then references in the Transaction Documents to the Subsidiaries will be
disregarded.
Organization and Qualification. Each of the Company and the
Subsidiaries is an entity duly incorporated or otherwise organized,
validly existing and in good standing under the laws of the jurisdiction
of its incorporation or organization (as applicable), with the requisite
corporate power and authority to own and use its properties and assets and
to carry on its business as currently conducted. Neither the Company nor
any Subsidiary is in violation of any of the provisions of its respective
certificate or articles of incorporation, bylaws or other organizational
or charter documents. Each of the Company and the Subsidiaries is duly
qualified to conduct business and is in good standing as a foreign
corporation or other entity in each jurisdiction in which the nature of
the business conducted or property owned by it makes such qualification
necessary, except where the failure to be so qualified or in good
standing, as the case may be, would not have or reasonably be expected to
result in (i) a material adverse effect on the legality, validity or
enforceability of any Transaction Document, (ii) a material adverse effect
on the results of operations, assets, business or financial condition of
the Company and the Subsidiaries, taken as a whole, or (iii) a material
adverse effect on the Company's ability to perform in any material respect
on a timely basis its obligations under any Transaction Document (any of
(i), (ii) or (iii), a "Material Adverse Effect").
Authorization; Enforcement. The Company has the requisite corporate
power and authority to enter into and to consummate the transactions
contemplated by each of the Transaction Documents and otherwise to carry
out its obligations thereunder. The execution and delivery of each of the
Transaction Documents by the Company and the consummation by it of the
transactions contemplated thereby have been duly authorized by all
necessary action on the part of the Company and no further action is
required by the Company in connection therewith. Each Transaction Document
has been (or upon delivery will have been) duly executed by the Company
and, when delivered in accordance with the terms hereof, will constitute
the valid and binding obligation of the Company enforceable against the
Company in accordance with its terms except (i) as
<PAGE>
limited by applicable bankruptcy, insolvency, reorganization, moratorium
and other laws of general application affecting enforcement of creditors'
rights generally and (ii) as limited by laws relating to the availability
of specific performance, injunctive relief or other equitable remedies,
and (iii) with respect to the indemnification provisions set forth in the
Registration Rights Agreement, as limited by public policy.
No Conflicts. The execution, delivery and performance of the
Transaction Documents by the Company and the consummation by the Company
of the transactions contemplated thereby do not and will not (i) conflict
with or violate any provision of the Company's or any Subsidiary's
certificate or articles of incorporation, bylaws or other organizational
or charter documents, or (ii) conflict with, or constitute a default (or
an event that with notice or lapse of time or both would become a default)
under, or give to others any rights of termination, amendment,
acceleration or cancellation (with or without notice, lapse of time or
both) of, any agreement, credit facility, debt or other instrument
(evidencing a Company or Subsidiary debt or otherwise) or other
understanding to which the Company or any Subsidiary is a party or by
which any property or asset of the Company or any Subsidiary is bound or
affected, or (iii) result in a violation of any law, rule, regulation,
order, judgment, injunction, decree or other restriction of any court or
governmental authority as currently in effect to which the Company or a
Subsidiary is subject (including federal and state securities laws and
regulations), or by which any property or asset of the Company or a
Subsidiary is bound or affected; except in the case of each of clauses
(ii) and (iii), such as would not have or reasonably be expected to result
in a Material Adverse Effect.
Filings, Consents and Approvals. The Company is not required to
obtain any consent, waiver, authorization or order of, give any notice to,
or make any filing or registration with, any court or other federal,
state, local or other governmental authority or other Person in connection
with the execution, delivery and performance by the Company of the
Transaction Documents, other than (a) the filing with the Commission of
the Registration Statement, the application(s) to each Trading Market for
the listing of the Shares and Warrant Shares for trading thereon in the
time and manner required thereby, and applicable Blue Sky filings, and (b)
such as have already been obtained or such exemptive filings as are
required to be made under applicable securities laws.
Issuance of the Securities. The Securities are duly authorized and,
when issued and paid for in accordance with the Transaction Documents,
will be duly and validly issued, fully paid and nonassessable, free and
clear of all Liens. The Company has reserved from its duly authorized
capital stock the maximum number of shares of Common Stock issuable
pursuant to this Agreement and the Warrants.
Capitalization. The capitalization of the Company is as described in
the Company's most recent periodic report filed with the Commission. The
Company has not issued any capital stock since such filing other than
pursuant to the exercise of employee stock options under the Company's
stock option plans, the issuance of shares of Common Stock to employees
pursuant to the Company's employee stock purchase plan and pursuant to the
conversion or exercise of Common Stock Equivalents outstanding on the date
hereof. No Person has any right of first refusal, preemptive right,
<PAGE>
right of participation, or any similar right to participate in the
transactions contemplated by the Transaction Documents. Except as a result
of the purchase and sale of the Securities and except for employee stock
options under the Company's stock option plans, there are no outstanding
options, warrants, script rights to subscribe to, calls or commitments of
any character whatsoever relating to, or securities, rights or obligations
convertible into or exchangeable for, or giving any Person any right to
subscribe for or acquire, any shares of Common Stock, or contracts,
commitments, understandings or arrangements by which the Company or any
Subsidiary is or may become bound to issue additional shares of Common
Stock, or securities or rights convertible or exchangeable into shares of
Common Stock. The issue and sale of the Securities will not obligate the
Company to issue shares of Common Stock or other securities to any Person
(other than the Purchasers) and will not result in a right of any holder
of Company securities to adjust the exercise, conversion, exchange or
reset price under such securities.
SEC Reports; Financial Statements. The Company has filed all reports
required to be filed by it under the Securities Act and the Exchange Act,
including pursuant to Section 13(a) or 15(d) of the Exchange Act, for the
two years preceding the date hereof (or such shorter period as the Company
was required by law to file such material) (the foregoing materials,
including the exhibits thereto and the financial statements therein,are
collectively referred to herein as the "SEC Reports", and are incorporated
herein by reference) on a timely basis or has received a valid extension
of such time of filing and has filed any such SEC Reports prior to the
expiration of any such extension. The SEC Reports incorporated by
reference herein include without limitation the Form 10-K for the fiscal
year ended December 31, 2002, including the audited financial statements
included therein, and the Form 10-Q for the quarter ended June 30, 2003,
including the unaudited interim financial statements included therein. As
of their respective dates, the SEC Reports complied in all material
respects with the requirements of the Securities Act and the Exchange Act
and the rules and regulations of the Commission promulgated thereunder, as
applicable, and none of the SEC Reports, when filed, contained any untrue
statement of a material fact or omitted to state a material fact required
to be stated therein or necessary in order to make the statements therein,
in light of the circumstances under which they were made, not misleading.
The financial statements of the Company included in the SEC Reports comply
in all material respects with applicable accounting requirements and the
rules and regulations of the Commission with respect thereto as in effect
at the time of filing. Such financial statements have been prepared in
accordance with generally accepted accounting principles applied on a
consistent basis during the periods involved ("GAAP"), except as may be
otherwise specified in such financial statements or the notes thereto and
except that unaudited financial statements may not contain all footnotes
required by GAAP, and fairly present in all material respects the
financial position of the Company and its consolidated subsidiaries as of
and for the dates thereof and the results of operations and cash flows for
the periods then ended, subject, in the case of unaudited statements, to
normal year-end audit adjustments.
Material Changes. Since the date of the latest audited financial
statements included within the SEC Reports, (i) there has been no event,
occurrence or development that has had or that could reasonably be
expected to result in a Material Adverse Effect, (ii) the Company has not
incurred any liabilities (contingent or otherwise) other than (A)
<PAGE>
trade payables and accrued expenses incurred in the ordinary course of
business consistent with past practice and (B) liabilities not required to
be reflected in the Company's financial statements pursuant to GAAP or
required to be disclosed in filings made with the Commission, (iii) the
Company has not altered its method of accounting, (iv) the Company has not
declared or made any dividend or distribution of cash or other property to
its stockholders or purchased, redeemed or made any agreements to purchase
or redeem any shares of its capital stock and (v) the Company has not
issued any equity securities to any officer, director or Affiliate, except
pursuant to existing Company stock option plans. The Company does not have
pending before the Commission any request for confidential treatment of
information.
Litigation. There is no action, suit, inquiry, notice of violation,
proceeding or investigation pending or, to the knowledge of the Company,
threatened against or affecting the Company, any Subsidiary or any of
their respective properties before or by any court, arbitrator,
governmental or administrative agency or regulatory authority (federal,
state, county, local or foreign) (collectively, an "Action") which (i)
adversely affects or challenges the legality, validity or enforceability
of any of the Transaction Documents or the Securities or (ii) could, if
there were an unfavorable decision, have or reasonably be expected to
result in a Material Adverse Effect. Neither the Company nor any
Subsidiary, nor any director or officer thereof, is or has been the
subject of any Action involving a claim of violation of or liability under
federal or state securities laws or a claim of breach of fiduciary duty.
There has not been, and to the knowledge of the Company, there is not
pending or contemplated, any investigation by the Commission involving the
Company or any current or former director or officer of the Company. The
Commission has not issued any stop order or other order suspending the
effectiveness of any registration statement filed by the Company or any
Subsidiary under the Exchange Act or the Securities Act.
Labor Relations. No material labor dispute exists or, to the
knowledge of the Company, is imminent with respect to any of the employees
of the Company which could reasonably be expected to result in a Material
Adverse Effect.
Compliance. Neither the Company nor any Subsidiary (i) is in default
under or in violation of (and no event has occurred that has not been
waived that, with notice or lapse of time or both, would result in a
default by the Company or any Subsidiary under), nor has the Company or
any Subsidiary received notice of a claim that it is in default under or
that it is in violation of, any indenture, loan or credit agreement or any
other agreement or instrument to which it is a party or by which it or any
of its properties is bound (whether or not such default or violation has
been waived), (ii) is in violation of any order of any court, arbitrator
or governmental body, or (iii) is or has been in violation of any statute,
rule or regulation of any governmental authority, including without
limitation all foreign, federal, state and local laws applicable to its
business, except in the case of clauses (i), (ii) and (iii) as would not
have or reasonably be expected to result in a Material Adverse Effect.
Regulatory Permits. The Company and the Subsidiaries possess all
certificates, authorizations and permits issued by the appropriate
federal, state, local or foreign
<PAGE>
regulatory authorities necessary to conduct their respective businesses as
described in the SEC Reports, except where the failure to possess such
permits would not have or reasonably be expected to result in a Material
Adverse Effect ("Material Permits"), and neither the Company nor any
Subsidiary has received any notice of proceedings relating to the
revocation or modification of any Material Permit.
Title to Assets. The Company and the Subsidiaries have good and
marketable title in fee simple to all real property owned by them that is
material to the business of the Company and the Subsidiaries, taken as a
whole, and good and marketable title in all personal property owned by
them that is material to the business of the Company and the Subsidiaries,
taken as a whole, in each case free and clear of all Liens, except for
Liens as do not materially affect the value of such property and do not
materially interfere with the use made and proposed to be made of such
property by the Company and the Subsidiaries and Liens for the payment of
federal, state or other taxes, the payment of which is neither delinquent
nor subject to penalties. Any real property and facilities held under
lease by the Company and the Subsidiaries are held by them under valid,
subsisting and enforceable leases with which the Company and the
Subsidiaries are in material compliance.
Patents and Trademarks. To the knowledge of the Company and each
Subsidiary, the Company and the Subsidiaries have, or have rights to use,
all patents, patent applications, trademarks, trademark applications,
service marks, trade names, copyrights, licenses and other similar rights
that are necessary or material for use in connection with their respective
businesses as described in the SEC Reports and which the failure to so
have could have or reasonably be expected to result in a Material Adverse
Effect (collectively, the "Intellectual Property Rights"). Neither the
Company nor any Subsidiary has received a written notice that the
Intellectual Property Rights used by the Company or any Subsidiary
violates or infringes upon the rights of any Person. To the knowledge of
the Company, all such Intellectual Property Rights are enforceable.
Insurance. The Company and the Subsidiaries are insured by insurers
of recognized financial responsibility against such losses and risks and
in such amounts as are prudent and customary in the businesses in which
the Company and the Subsidiaries are engaged. Neither the Company nor any
Subsidiary has any knowledge 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 without a significant increase in cost.
Transactions With Affiliates and Employees. None of the officers or
directors of the Company and, to the knowledge of the Company, none of the
employees of the Company is presently a party to any transaction with the
Company or any Subsidiary (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 entity in which any officer, director, or any such employee
has a substantial interest or is an officer, director, trustee or partner,
in each case in excess of
<PAGE>
$60,000 other than (a) for payment of salary or consulting fees for
services rendered, (b) reimbursement for expenses incurred on behalf of
the Company and (c) for other employee benefits, including stock option
agreements under any stock option plan of the Company.
Internal Accounting Controls. The Company and each of its
subsidiaries maintains 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 GAAP 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. The
Company has established disclosure controls and procedures (as defined in
Exchange Act Rules 13a-15(e) and 15d-15(e) for the Company and designed
such disclosure controls and procedures to ensure that material
information relating to the Company, including its subsidiaries, is made
known to the certifying officers by others within those entities,
particularly during the period in which the Company's Form 10-K or 10-Q,
as the case may be, is being prepared. The Company's certifying officers
have evaluated the effectiveness of the Company's controls and procedures
as of the end of the period covered by the most recently filed Form 10-Q
(such date, the "Evaluation Date"). The Company presented in its most
recently filed Form 10-Q the conclusions of the certifying officers about
the effectiveness of the disclosure controls and procedures based on their
evaluations as of the Evaluation Date. Since the Evaluation Date, there
have been no significant changes in the Company's internal controls (as
such term is defined in Exchange Act Rules 13a-15(f)) that has affected,
or is reasonably likely to materially affect, the Company's internal
controls over financial reporting.
Certain Fees. No brokerage or finder's fees or commissions are or
will be payable by the Company to any broker, financial advisor or
consultant, finder, placement agent, investment banker, bank or other
Person with respect to the transactions contemplated by this Agreement.
The Purchasers shall have no obligation with respect to any fees or with
respect to any claims made by or on behalf of other Persons for fees of a
type contemplated in this Section that may be due under any agreement or
arrangement entered into by the Company in connection with the
transactions contemplated by this Agreement.
Private Placement. Assuming the accuracy of the Purchasers
representations and warranties set forth in Section 3.2, no registration
under the Securities Act is required for the offer and sale of the
Securities by the Company to the Purchasers as contemplated hereby. The
issuance and sale of the Securities hereunder does not contravene the
rules and regulations of the Trading Market.
Investment Company. The Company is not, and is not an Affiliate of,
an "investment company" within the meaning of the Investment Company Act
of 1940, as amended.
<PAGE>
Registration Rights. No Person has any right to cause the Company to
effect the registration under the Securities Act of any securities of the
Company.
Form S-3 Eligibility. Subject to the Company's continued listing on
The Nasdaq Stock Market, the Company is eligible to register the resale of
its Common Stock by the Purchasers under Form S-3 promulgated under the
Securities Act.
Listing and Maintenance Requirements. The Company has not, in the 12
months preceding the date hereof, received notice from any Trading Market
on which the Common Stock is or has been listed or quoted to the effect
that the Company is not in compliance with the listing or maintenance
requirements of such Trading Market. The Company is, and has no reason to
believe that it will not in the foreseeable future continue to be, in
compliance with all such listing and maintenance requirements.
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 share acquisition, business combination, poison
pill (including any distribution under a rights agreement) or other
similar anti-takeover provision under the Company's Certificate of
Incorporation (or similar charter documents) or the laws of its state of
incorporation that is or could become applicable to the Purchasers as a
result of the Purchasers and the Company fulfilling their obligations or
exercising their rights under the Transaction Documents, including without
limitation the Company's issuance of the Securities and the Purchasers'
ownership of the Securities.
Disclosure. The Company confirms that, neither the Company nor any
other Person acting on its behalf has provided any of the Purchasers or
their agents or counsel with any information that constitutes or might
constitute material, non-public information. The Company understands and
confirms that the Purchasers will rely on the foregoing representations
and covenants in effecting transactions in securities of the Company. None
of the disclosures provided to the Purchasers regarding the Company and
its business set forth in the SEC Documents, this Agreement, including the
Disclosure Schedules, or any other Transaction Document, contain any
untrue statement of a material fact or omit to state any material fact
necessary in order to make the statements made therein, in light of the
circumstances under which they were made, not misleading.
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 cause this
offering of the Securities to be integrated with prior offerings by the
Company for purposes of the Securities Act or any applicable shareholder
approval provisions, including, without limitation, under the rules and
regulations of any exchange or automated quotation system on which any of
the securities of the Company are listed or designated.
Solvency. Based on the financial condition of the Company giving
effect to the closing of the transactions contemplated herein, (i) the
Company's fair saleable value of its assets exceeds the amount that will
be required to be paid on or in respect of the Company's existing debts
and other liabilities (including known contingent liabilities) as
<PAGE>
they mature; (ii) the Company's assets do not constitute unreasonably
small capital to carry on its business for the current fiscal year as now
conducted and as proposed to be conducted including its capital needs
taking into account the particular capital requirements of the business
conducted by the Company, and projected capital requirements and capital
availability thereof, and including the anticipated proceeds of the sale
of the Securities; and (iii) the current cash flow of the Company,
together with the proceeds the Company would receive, were it to liquidate
all of its assets, after taking into account all anticipated uses of the
cash, would be sufficient to pay all amounts on or in respect of its debt
when such amounts are required to be paid. The Company does not intend to
incur debts beyond its ability to pay such debts as they mature (taking
into account the timing and amounts of cash to be payable on or in respect
of its debt).
Representations and Warranties of the Purchasers. Each Purchaser hereby,
for itself and for no other Purchaser, represents and warrants as of the date
hereof and as of the Closing Date to the Company as follows:
Organization; Authority. Such Purchaser is an entity duly organized,
validly existing and in good standing under the laws of the jurisdiction
of its organization with full right, corporate or partnership power and
authority to enter into and to consummate the transactions contemplated by
the Transaction Documents and otherwise to carry out its obligations
thereunder. The execution, delivery and performance by such Purchaser of
the transactions contemplated by this Agreement has been duly authorized
by all necessary corporate or similar action on the part of such
Purchaser. Each Transaction Document to which it is a party has been duly
executed by such Purchaser, and when delivered by such Purchaser in
accordance with the terms hereof, will constitute the valid and legally
binding obligation of such Purchaser, enforceable against it in accordance
with its terms.
Investment Intent. Such Purchaser understands that the Securities
are "restricted securities" and have not been registered under the
Securities Act or any applicable state securities law and is acquiring the
Securities as principal for its own account for investment purposes only
and not with a view to or for distributing or reselling such Securities or
any part thereof, has no present intention of distributing any of such
Securities and has no arrangement or understanding with any other persons
regarding the distribution of such Securities (this representation and
warranty not limiting such Purchaser's right to sell the Securities
pursuant to the Registration Statement or otherwise in compliance with
applicable federal and state securities laws). Such Purchaser is acquiring
the Securities hereunder in the ordinary course of its business. Such
Purchaser does not have any agreement or understanding, directly or
indirectly, with any Person to distribute any of the Securities.
Purchaser Status. At the time such Purchaser was offered the
Securities, it was, and at the date hereof it is an "accredited investor"
as defined in Rule 501(a) under the Securities Act. Such Purchaser is not
required to be registered as a broker-dealer under Section 15 of the
Exchange Act.
<PAGE>
Experience of such Purchaser. Such Purchaser, either alone or
together with its representatives, has such knowledge, sophistication and
experience in business and financial matters so as to be capable of
evaluating the merits and risks of the prospective investment in the
Securities, and has so evaluated the merits and risks of such investment.
Such Purchaser is able to bear the economic risk of an investment in the
Securities and, at the present time, is able to afford a complete loss of
such investment.
General Solicitation. Such Purchaser is not purchasing the
Securities as a result of any advertisement, article, notice or other
communication regarding the Securities published in any newspaper,
magazine or similar media or broadcast over television or radio or
presented at any seminar or any other general solicitation or general
advertisement.
Residence. If such Purchaser is an individual, then such Purchaser
resides in the state or province identified in the address of such
Purchaser set forth on the signature page hereto; if such Purchaser is a
partnership, corporation, limited liability company or other entity, then
the office or offices of such Purchaser in which its investment decision
was made is located at the address or addresses of such Purchaser set
forth on the signature pages hereto.
No Prior Short Selling. At no time during the 30 days prior to the
date hereof has such Purchaser engaged in or effected, in any manner
whatsoever, directly or indirectly, in any "short sale" (as such term is
defined in Rule 3b-3 of the Exchange Act) of the Common Stock (a "Short
Sale").
Beneficial Ownership. At the Closing Date, such Purchaser does not
beneficially own in excess of 4.99% of the number of shares of Common
Stock of the Company outstanding, determined in accordance with Rule 13d-3
of the Exchange Act.
The Company acknowledges and agrees that each Purchaser does not make or
has not made any representations or warranties with respect to the transactions
contemplated hereby other than those specifically set forth in this Section 3.2.
OTHER AGREEMENTS OF THE PARTIES
Transfer Restrictions.
The Securities may only be disposed of in compliance with state and
federal securities laws. In connection with any transfer of Securities
other than pursuant to an effective registration statement, to the
Company, to an Affiliate of a Purchaser or in connection with a pledge as
contemplated in Section 4.1(b), the Company may require the transferor
thereof to provide to the Company an opinion of counsel selected by the
transferor, the form and substance of which opinion shall be reasonably
satisfactory to the Company, to the effect that such transfer does not
require registration of such transferred Securities under the Securities
Act. As a condition of transfer, any such transferee shall
<PAGE>
agree in writing to be bound by the terms of this Agreement and shall have
the rights of a Purchaser under this Agreement and the Registration Rights
Agreement.
The Purchasers agree to the imprinting, so long as is required by
this Section 4.1(b), of a legend on any of the Securities in the following
form:
THESE SECURITIES HAVE NOT BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE
COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN
EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT
TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO
AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH
APPLICABLE STATE SECURITIES LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO
THE TRANSFEROR TO SUCH EFFECT, THE SUBSTANCE OF WHICH SHALL BE REASONABLY
ACCEPTABLE TO THE COMPANY. THESE SECURITIES MAY BE PLEDGED IN CONNECTION WITH A
BONA FIDE MARGIN ACCOUNT WITH A REGISTERED BROKER-DEALER.
The Company acknowledges and agrees that a Purchaser may from time
to time pledge pursuant to a bona fide margin agreement with a registered
broker-dealer and, if required under the terms of such arrangement, such
Purchaser may transfer pledged Securities to the pledgees. Such a pledge
would not be subject to approval of the Company and no legal opinion of
legal counsel of the pledgee or pledgor shall be required in connection
therewith. Further, no notice shall be required of such pledge. At the
appropriate Purchaser's expense, the Company will execute and deliver such
reasonable documentation as a pledgee of Securities may reasonably request
in connection with a pledge or transfer of the Securities, including the
preparation and filing of any required prospectus supplement under Rule
424(b)(3) under the Securities Act or
<PAGE>
other applicable provision of the Securities Act to appropriately amend
the list of Selling Stockholders thereunder.
Certificates evidencing the Shares and Warrant Shares shall not
contain any legend (including the legend set forth in Section 4.1(b)), (i)
while a registration statement (including the Registration Statement)
covering the resale of such security is effective under the Securities
Act, or (ii) following any sale of such Shares or Warrant Shares pursuant
to Rule 144, or (iii) if such Shares or Warrant Shares are eligible for
sale under Rule 144(k), or (iv) if such legend is not required under
applicable requirements of the Securities Act (including judicial
interpretations and pronouncements issued by the Staff of the Commission).
The Company shall cause its counsel to issue a legal opinion to the
Company's transfer agent promptly after the Effective Date if required by
the Company's transfer agent to effect the removal of the legend
hereunder. If all or any portion of a Warrant is exercised at a time when
there is an effective registration statement to cover the resale of the
Warrant Shares, such Warrant Shares shall be issued free of all legends.
The Company agrees that following the Effective Date or at such time as
such legend is no longer required under this Section 4.1(c), it will, no
later than five Trading Days following the delivery by a Purchaser to the
Company or the Company's transfer agent of a certificate representing
Shares or Warrant Shares, as the case may be, issued with a restrictive
legend ("Share Delivery Date"), deliver or cause to be delivered to such
Purchaser a certificate representing such Securities that is free from all
restrictive and other legends. The Company may not make any notation on
its records or give instructions to any transfer agent of the Company that
enlarge the restrictions on transfer set forth in this Section.
In addition to such Purchaser's other available remedies, the
Company shall pay to a Purchaser, in cash, as liquidated damages and not
as a penalty, for each $1,000 of Shares or Warrant Shares (based on the
Closing Price of the Common Stock on the date such Securities are
submitted to the Company's transfer agent) subject to Section 4.1(c), $5
per Trading Day (increasing to $10 per Trading Day five (5) Trading Days
after such damages have begun to accrue) for each Trading Day after the
applicable Share Delivery Date until such certificate is delivered.
Nothing herein shall limit such Purchaser's right to pursue actual damages
for the Company's failure to deliver certificates representing any
Securities as required by the Transaction Documents, and such Purchaser
shall have the right to pursue all remedies available to it at law or in
equity including, without limitation, a decree of specific performance
and/or injunctive relief.
Each Purchaser severally and not jointly agrees that the removal of
the restrictive legend from certificates representing Securities as set
forth in this Section 4.1 is predicated upon the Company's reliance that
the Purchaser will sell any Securities pursuant to either the registration
requirements of the Securities Act, including any applicable prospectus
delivery requirements, or an exemption therefrom.
Furnishing of Information. As long as any Purchaser owns Securities, the
Company covenants to timely file (or obtain extensions in respect thereof and
file within the applicable grace period) all reports required to be filed by the
Company after the date hereof pursuant to the
<PAGE>
Exchange Act. Upon the request of any such holder of Securities, the Company
shall deliver to such holder a written certification of a duly authorized
officer as to whether it has complied with the preceding sentence. As long as
any Purchaser owns Securities, if the Company is not required to file reports
pursuant to the Exchange Act, it will prepare and furnish to the Purchasers and
make publicly available in accordance with Rule 144(c) such information as is
required for the Purchasers to sell the Securities under Rule 144. The Company
further covenants that it will take such further action as any holder of
Securities may reasonably request, all to the extent required from time to time
to enable such Person to sell such Securities without registration under the
Securities Act within the limitation of the exemptions provided by Rule 144.
Integration. The Company shall not sell, offer for sale or solicit offers
to buy or otherwise negotiate in respect of any security (as defined in Section
2 of the Securities Act) that would be integrated with the offer or sale of the
Securities in a manner that would require the registration under the Securities
Act of the sale of the Securities to the Purchasers or that would be integrated
with the offer or sale of the Securities for purposes of the rules and
regulations of any Trading Market such that the transaction contemplated hereby
would violate any such rules or regulations.
[RESERVED]
Securities Laws Disclosure; Publicity. The Company shall, within one (1)
Trading Day following the date hereof, issue a press release or file a Current
Report on Form 8-K, in each case reasonably acceptable to each Purchaser
disclosing the transactions contemplated hereby and make such other filings and
notices in the manner and time required by the Commission. The Company and each
Purchaser shall consult with each other in issuing any press releases with
respect to the transactions contemplated hereby, and neither the Company nor any
Purchaser shall issue any such press release or otherwise make any such public
statement without the prior consent of the Company, with respect to any press
release of any Purchaser, or without the prior consent of each Purchaser, with
respect to any press release of the Company, which consent shall not
unreasonably be withheld, except if such disclosure is required by law, in which
case the disclosing party shall promptly provide the other party with prior
notice of such public statement or communication. Notwithstanding the foregoing,
the Company shall not publicly disclose the name of any Purchaser, or include
the name of any Purchaser in any filing with the Commission or any regulatory
agency or Trading Market, without the prior written consent of such Purchaser,
except (i) as required by federal securities law in connection with the
registration statement contemplated by the Registration Rights Agreement and
(ii) to the extent such disclosure is required by law or Trading Market
regulations, in which case the Company shall provide the Purchasers with prior
notice of such disclosure permitted under subclause (i) or (ii).
Shareholders Rights Plan. No claim will be made or enforced by the Company
or any other Person that any Purchaser is an "Acquiring Person" under any
shareholders rights plan or similar plan or arrangement in effect or hereafter
adopted by the Company, or that any Purchaser could be deemed to trigger the
provisions of any such plan or arrangement, by virtue of receiving
<PAGE>
Securities under the Transaction Documents or under any other agreement between
the Company and the Purchasers.
Non-Public Information. The Company covenants and agrees that neither it
nor any other Person acting on its behalf will provide any Purchaser or its
agents or counsel with any information that the Company believes constitutes
material non-public information, unless prior thereto such Purchaser shall have
executed a written agreement regarding the confidentiality and use of such
information. The Company understands and confirms that each Purchaser shall be
relying on the foregoing representations in effecting transactions in securities
of the Company.
Use of Proceeds. Except as set forth on Schedule 4.8 attached hereto, the
Company shall use the net proceeds from the sale of the Securities hereunder for
working capital purposes and not for the satisfaction of any portion of the
Company's debt (other than payment of trade payables, capital lease obligations
and accrued expenses in the ordinary course of the Company's business and prior
practices), or to redeem any Company equity or equity-equivalent securities or
to settle any outstanding litigation.
Indemnification of Purchasers. The Company will indemnify and hold the
Purchasers and their directors, officers, shareholders, partners, employees and
agents (each, a "Purchaser Party") harmless from any and all losses,
liabilities, obligations, claims, contingencies, damages, costs and expenses,
including all judgments, amounts paid in settlements, court costs and reasonable
attorneys' fees and costs of investigation that any such Purchaser Party may
suffer or incur as a result of or relating to: (a) any breach of any of the
representations, warranties, covenants or agreements made by the Company in this
Agreement or in the other Transaction Documents; or (b) any cause of action,
suit or claim brought or made against such Purchaser Party and arising solely
out of or solely resulting from the execution, delivery, performance or
enforcement of this Agreement or any of the other Transaction Documents and
without causation by any other activity, obligation, condition or liability
pertaining to such Purchaser. The Company will reimburse such Purchaser for its
reasonable legal and other expenses (including the cost of any investigation,
preparation and travel in connection therewith) incurred in connection
therewith, as such expenses are incurred. Notwithstanding the foregoing, such
indemnity (other than as to an indemnity called for under the Registration
Rights Agreement) shall not exceed, in the aggregate, the Subscription Amount of
such Purchaser together with its reasonable attorneys' fees and costs of
investigation subject to indemnification above. Except as set forth above, the
mechanics and procedures with respect to the rights and obligations under this
Section 4.9 will be the same as those set forth in the Registration Rights
Agreement.
Reservation of Common Stock. As of the date hereof, the Company has
reserved and the Company shall continue to reserve and keep available at all
times, free of preemptive rights, a sufficient number of shares of Common Stock
for the purpose of enabling the Company to issue Shares pursuant to this
Agreement and Warrant Shares pursuant to the Warrants.
Listing of Common Stock. The Company hereby agrees to use commercially
reasonable efforts to maintain the listing of the Common Stock on the Trading
Market, and as soon as reasonably practicable following the Closing (but not
later than the earlier of the Effective Date and the first anniversary of the
Closing Date) to list the applicable Shares and Warrant Shares on the Trading
Market. The Company further agrees, if the Company applies to have the Common
<PAGE>
Stock traded on any other Trading Market, it will include in such application
the Shares and Warrant Shares, and will take such other action as is necessary
or desirable in the opinion of the Purchasers to cause the Shares and the
Warrant Shares to be listed on such other Trading Market as promptly as
possible. The Company will take all action reasonably necessary to continue the
listing and trading of its Common Stock on a Trading Market and will comply in
all respects with the Company's reporting, filing and other obligations under
the bylaws or rules of the Trading Market.
Subsequent Equity Sales. From the date hereof until 45 days after the
Effective Date, neither the Company nor any Subsidiary shall issue additional
shares of Common Stock or Common Stock Equivalents. Notwithstanding anything to
the contrary herein, this Section 4.12 shall not apply to the following (a) the
granting of options to employees, officers and directors of the Company pursuant
to any stock option plan duly adopted by a majority of the non-employee members
of the Board of Directors of the Company or a majority of the members of a
committee of non-employee directors established for such purpose, or (b) the
exercise of any security issued by the Company in connection with the offer and
sale of the Company's securities pursuant to this Agreement, or (c) the exercise
of or conversion of any convertible securities, options or warrants issued and
outstanding on the date hereof, provided such securities have not been amended
since the date hereof, or (d) acquisitions or strategic investments, the primary
purpose of which is not to raise capital.
Certain Trading Restrictions.
Restrictions. So long as a Purchaser continues to hold any
Securities acquired hereunder, such Purchaser shall not, nor will it
knowingly through its Affiliates, engage in any Short Sales, except on
those days (each a "Permitted Day") on which the aggregate short position
with respect to the Common Stock of such Purchaser prior to giving effect
to any Short Sales by such Purchaser on such Permitted Day does not exceed
such Purchaser's Permitted Share Position (as defined below) on such
Permitted Day; provided, however, that a Purchaser will only be entitled
to engage in transactions that constitute Short Sales on a Permitted Day
to the extent that following such transaction, the aggregate short
position with respect to the Common Stock of such Purchaser does not
exceed such Purchaser's Permitted Share Position. For purposes of this
Section 4.13, a Purchaser's "Permitted Share Position" means, with respect
to any date of determination, the number of shares of Common Stock owned
by such Purchaser (including Shares) plus the maximum number of Warrants
Shares then issuable (including as to portions of the Warrants not yet
exercised and without regard to any exercise caps or other exercise
restrictions applicable to the Warrants) to such Purchaser.
Other Transactions Permitted. Subject to Section 4.13(a) and
applicable securities laws, the Company acknowledges and agrees that
nothing in this Section 4.13 or elsewhere in any Transaction Document
prohibits any Purchaser from, and each Purchaser is permitted to, engage,
directly or indirectly, in hedging transactions involving the Securities
and the Common Stock (including, without limitation, by way of Short
Sales, purchases and sales of options, swap transactions and synthetic
transactions) at any time.
<PAGE>
MISCELLANEOUS
Fees and Expenses. The Company agrees to pay $25,000 to Bonanza Master
Fund Ltd. ("Bonanza") for its legal and due diligence fees and expenses incurred
in connection with the investigation and negotiation of the transaction and the
preparation and negotiation of the Transaction Documents ($10,000 of which has
already been received). Accordingly, in lieu of the foregoing payments, the
Company, on the Closing Date, will direct that the aggregate amount that Bonanza
is to pay for the Shares and Warrants at the Closing, be reduced by $15,000
(less any amounts delivered to Bonanza Prior to the Closing Date in partial
satisfaction of the aforementioned fee). Except as otherwise set forth in this
Agreement, each party shall pay the fees and expenses of its advisers, counsel,
accountants and other experts, if any, and all other expenses incurred by such
party incident to the negotiation, preparation, execution, delivery and
performance of this Agreement. The Company shall pay all stamp and other taxes
and duties levied in connection with the sale of the Securities.
Entire Agreement. The Transaction Documents, together with the exhibits
and schedules thereto, contain the entire understanding of the parties with
respect to the subject matter hereof and supersede all prior agreements and
understandings, oral or written, with respect to such matters, which the parties
acknowledge have been merged into such documents, exhibits and schedules.
5.4 Notices. Any and all notices or other communications or deliveries
required or permitted to be provided hereunder shall be in writing and shall be
deemed given and effective on the earliest of (a) the date of transmission, if
such notice or communication is delivered via facsimile at the facsimile number
specified on the signature pages attached hereto prior to 6:30 p.m. (New York
City time) on a Trading Day, (b) the next Trading Day after the date of
transmission, if such notice or communication is delivered via facsimile at the
facsimile number on the signature pages attached hereto on a day that is not a
Trading Day or later than 6:30 p.m. (New York City time) on any Trading Day, (c)
the Trading Day following the date of mailing, if sent by U.S. nationally
recognized overnight courier service, or (d) upon actual receipt by the party to
whom such notice is required to be given. The address for such notices and
communications shall be as set forth on the signature pages attached hereto, or
such other address as may be designated in writing hereafter, in the same
manner, by such Person.
Amendments; Waivers. No provision of this Agreement may be waived or
amended except in a written instrument signed, in the case of an amendment, by
the Company and Purchasers holding, or obligated to purchase, at least two
thirds of the Shares or, in the case of a waiver, by the party against whom
enforcement of any such waiver is sought. No waiver of any default with respect
to any provision, condition or requirement of this Agreement shall be deemed to
be a continuing waiver in the future or a waiver of any subsequent default or a
waiver of any other provision, condition or requirement hereof, nor shall any
delay or omission of either party to exercise any right hereunder in any manner
impair the exercise of any such right.
<PAGE>
Construction. The headings herein are for convenience only, do not
constitute a part of this Agreement and shall not be deemed to limit or affect
any of the provisions hereof. 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.
Successors and Assigns. This Agreement shall be binding upon and inure to
the benefit of the parties and their successors and permitted assigns. The
Company may not assign this Agreement or any rights or obligations hereunder
without the prior written consent of each Purchaser. Any Purchaser may assign
any or all of its rights under this Agreement to any Person to whom such
Purchaser assigns or transfers any Securities, provided such transferee agrees
in writing to be bound, with respect to the transferred Securities, by the
provisions hereof that apply to the "Purchasers".
No Third-Party Beneficiaries. This Agreement is intended for the benefit
of the parties hereto and their respective successors and permitted assigns and
is not for the benefit of, nor may any provision hereof be enforced by, any
other Person, except as otherwise set forth in Section 4.9.
Governing Law. All questions concerning the construction, validity,
enforcement and interpretation of the Transaction Documents shall be governed by
and construed and enforced in accordance with the internal laws of the State of
New York, without regard to the principles of conflicts of law thereof. Each
party agrees that all legal proceedings concerning the interpretations,
enforcement and defense of the transactions contemplated by this Agreement and
any other Transaction Documents (whether brought against a party hereto or its
respective affiliates, directors, officers, shareholders, employees or agents)
shall be commenced exclusively in the state and federal courts sitting in the
City of New York. Each party hereto hereby irrevocably submits to the exclusive
jurisdiction of the state and federal courts sitting in the City of New York,
New York for the adjudication of any dispute hereunder or in connection herewith
or with any transaction contemplated hereby or discussed herein (including with
respect to the enforcement of any of the Transaction Documents), and hereby
irrevocably waives, and agrees not to assert in any suit, action or proceeding,
any claim that it is not personally subject to the jurisdiction of any such
court, that such suit, action or proceeding is improper. Each party hereto
hereby irrevocably waives personal service of process and consents to process
being served in any such suit, action or proceeding by delivering a copy thereof
via overnight delivery (with evidence of delivery) to such party at the address
in effect for notices to it under this Agreement and agrees that such service
shall constitute good and sufficient service of process and notice thereof.
Nothing contained herein shall be deemed to limit in any way any right to serve
process in any manner permitted by law. Each party hereto (including its
affiliates, agents, officers, directors and employees) hereby irrevocably
waives, to the fullest extent permitted by applicable law, any and all right to
trial by jury in any legal proceeding arising out of or relating to this
Agreement or the transactions contemplated hereby. If either party shall
commence an action or proceeding to enforce any provisions of a Transaction
Document, then the prevailing party in such action or proceeding shall be
reimbursed by the other party for its attorneys fees and other costs and
expenses incurred with the investigation, preparation and prosecution of such
action or proceeding.
<PAGE>
Survival. The representations and warranties herein shall survive the
Closing for a period of one year.
Execution. This Agreement may be executed in two or more counterparts, all
of which when taken together shall be considered one and the same agreement and
shall become effective when counterparts have been signed by each party and
delivered to the other party, it being understood that both parties need not
sign the same counterpart. In the event that any signature is delivered by
facsimile transmission, such signature shall create a valid and binding
obligation of the party executing (or on whose behalf such signature is
executed) with the same force and effect as if such facsimile signature page
were an original thereof.
Severability. If any provision of this Agreement is held to be invalid or
unenforceable in any respect, the validity and enforceability of the remaining
terms and provisions of this Agreement shall not in any way be affected or
impaired thereby and the parties will attempt to agree upon a valid and
enforceable provision that is a reasonable substitute therefor, and upon so
agreeing, shall incorporate such substitute provision in this Agreement.
Replacement of Securities. If any certificate or instrument evidencing any
Securities is mutilated, lost, stolen or destroyed, the Company shall issue or
cause to be issued in exchange and substitution for and upon cancellation
thereof, or in lieu of and substitution therefor, a new certificate or
instrument, but only upon receipt of evidence reasonably satisfactory to the
Company of such loss, theft or destruction and customary and reasonable
indemnity, if requested. The applicants for a new certificate or instrument
under such circumstances shall also pay any reasonable third-party costs
associated with the issuance of such replacement Securities.
Remedies. In addition to being entitled to exercise all rights provided
herein or granted by law, including recovery of damages, each of the Purchasers
and the Company will be entitled to specific performance under the Transaction
Documents. The parties agree that monetary damages may not be adequate
compensation for any loss incurred by reason of any breach of obligations
described in the foregoing sentence and hereby agrees to waive in any action for
specific performance of any such obligation the defense that a remedy at law
would be adequate.
Payment Set Aside. To the extent that the Company makes a payment or
payments to any Purchaser pursuant to any Transaction Document or a Purchaser
enforces or exercises its rights 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, to the
extent permissible under applicable law, 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.
Independent Nature of Purchasers' Obligations and Rights. The obligations
of each Purchaser under any Transaction Document are several and not joint with
the obligations of any other Purchaser, and no Purchaser shall be responsible in
any way for the performance of the
<PAGE>
obligations of any other Purchaser under any Transaction Document. Nothing
contained herein or in any Transaction Document, and no action taken by any
Purchaser pursuant thereto, shall be deemed to constitute the Purchasers as a
partnership, an association, a joint venture or any other kind of entity, or
create a presumption that the Purchasers are in any way acting in concert or as
a group with respect to such obligations or the transactions contemplated by the
Transaction Document. Each Purchaser shall be entitled to independently protect
and enforce its rights, including without limitation, the rights arising out of
this Agreement or out of the other Transaction Documents, and it shall not be
necessary for any other Purchaser to be joined as an additional party in any
proceeding for such purpose. Each Purchaser has been represented by its own
separate legal counsel in their review and negotiation of the Transaction
Documents. For reasons of administrative convenience only, Purchasers and their
respective counsel have chosen to communicate with the Company through FW. FW
does not represent all of the Purchasers in this transaction but only Bonanza.
The Company has elected to provide all Purchasers with the same terms and
Transaction Documents for the convenience of the Company and not because it was
required or requested to do so by the Purchasers.
(Signature Page Follows)
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Securities
Purchase Agreement to be duly executed by their respective authorized
signatories as of the date first indicated above.
LOUDEYE CORP. Address for Notice:
By:
------------------------------------
Name: Attn:
Title: Tel:
Fax:
With copy to (which shall not constitute notice):
[SIGNATURE PAGE CONTINUES]
<PAGE>
[PURCHASER'S SIGNATURE PAGE]
BONANZA MASTER FUND LTD. Address for Notice:
8235 Douglas, Suite 423
Dallas, TX 75205
P: 214.615.7090
By: F: 214.987.4342
----------------------------------------- Attn: Brian Ladin
Name:
Title:
Subscription Amount: $
With a copy to:
Feldman Weinstein LLP
420 Lexington Avenue
New York, New York 10170-0002
Tel: (212) 931-8704
Fax: (212) 410-4741
Attn: Robert F. Charron
[SIGNATURE PAGE CONTINUES]
<PAGE>
[PURCHASER'S SIGNATURE PAGE]
[PURCHASER]
By:
--------------------------
Name:
Title:
Subscription Amount: $
Address for Notice:
Tax ID Number:
[SIGNATURE PAGE CONTINUES]