Securities Purchase Agreement - PFSweb Inc.
SECURITIES PURCHASE AGREEMENT
This Securities Purchase Agreement (this "AGREEMENT") is dated as of
November 7, 2003 among PFSweb, Inc., a Delaware corporation (the "COMPANY"), and
the purchasers identified on the signature pages hereto (each a "PURCHASER" and
collectively the "PURCHASERS").
WHEREAS, subject to the terms and conditions set forth in this
Agreement and pursuant to Section 4(2) of the Securities Act of 1933, as amended
(the "SECURITIES ACT"), the Company desires to issue and sell to the Purchasers,
and the Purchasers, severally and not jointly, desire to purchase from the
Company, securities of the Company as more fully described in this Agreement.
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 the Purchasers agree
as follows:
ARTICLE I
DEFINITIONS
1.1 Definitions. In addition to the terms defined elsewhere in this
Agreement, the following terms have the meanings indicated:
"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 under the Securities Act. 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.
"BANKRUPTCY EVENT" means any of the following events: (a) the
Company commences a case or other proceeding under any bankruptcy,
reorganization, arrangement, adjustment of debt, relief of debtors,
dissolution, insolvency or liquidation or similar law of any
jurisdiction relating to the Company; (b) there is commenced against
the Company any such case or proceeding that is not dismissed within 60
days after commencement; (c) the Company is adjudicated insolvent or
bankrupt or any order of relief or other order approving any such case
or proceeding is entered; (d) the Company suffers any appointment of
any custodian or the like for it or any substantial part of its
property that is not discharged or stayed within 60 days; (e) the
Company makes a general assignment for the benefit of creditors; (f)
the Company fails to pay, or states that it is unable to pay or is
unable to pay, its debts generally as they become due; (g) the Company
calls a meeting of its creditors with a view to arranging a
composition, adjustment or restructuring of its debts; or (h) the
Company, by any act or failure to act, expressly indicates its consent
to, approval of or acquiescence in any of the foregoing or takes any
corporate or other action for the purpose of effecting any of the
foregoing.
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"CLOSING" means the closing of the purchase and sale of the
Shares and the Warrants pursuant to Section 2.1.
"CLOSING DATE" means the date of the Closing.
"CLOSING PRICE" 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 an Eligible Market or any other
national securities exchange, the closing bid price per share of the
Common Stock for such date (or the nearest preceding date) on the
primary Eligible Market or exchange on which the Common Stock is then
listed or quoted; (b) if prices for the Common Stock are then quoted on
the OTC Bulletin Board, the closing bid price per share of the Common
Stock for such date (or the nearest preceding date) so quoted; (c) 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 an independent appraiser selected in
good faith by a majority-in-interest of the Purchasers.
"COMMISSION" means the Securities and Exchange Commission.
"COMMON STOCK" means the common stock of the Company, par
value $0.001 per share.
"COMPANY COUNSEL" means Wolff & Samson PC, counsel to the
Company.
"EFFECTIVE DATE" means the date that the Registration
Statement is declared effective by the Commission.
"ELIGIBLE MARKET" means the New York Stock Exchange, the
American Stock Exchange, the Nasdaq National Market or the Nasdaq
SmallCap Market.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended.
"FILING DATE" means the 30th day following the Closing Date.
"LOSSES" means any and all losses, claims, damages,
liabilities, settlement costs and expenses, including without
limitation costs of preparation and reasonable attorneys' fees.
"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.
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"PROCEEDING" means an action, claim, suit, investigation or
proceeding (including, without limitation, an investigation or partial
proceeding, such as a deposition), whether commenced or threatened.
"PROSPECTUS" means the prospectus included in the Registration
Statement (including, without limitation, a prospectus that includes
any information previously omitted from a prospectus filed as part of
an effective registration statement in reliance upon Rule 430A
promulgated under the Securities Act), as amended or supplemented by
any prospectus supplement, with respect to the terms of the offering of
any portion of the Registrable Securities covered by the Registration
Statement, and all other amendments and supplements to the Prospectus,
including post-effective amendments, and all material incorporated by
reference or deemed to be incorporated by reference in such Prospectus.
"REGISTRABLE SECURITIES" means any Common Stock (including
Underlying Shares) issued or issuable pursuant to the Transaction
Documents, together with any securities issued or issuable upon any
stock split, dividend or other distribution, recapitalization or
similar event with respect to the foregoing.
"REGISTRATION STATEMENT" means each registration statement
required to be filed under Article VI, including (in each case) the
Prospectus, amendments and supplements to such registration statement
or Prospectus, including pre- and post-effective amendments, all
exhibits thereto, and all material incorporated by reference or deemed
to be incorporated by reference in such registration statement.
"REQUIRED EFFECTIVENESS DATE" means the 90th day following the
Closing Date.
"RIGHTS PLAN" means the Rights Agreement dated as of June 8,
2000 between the Company and ChaseMellon Shareholder Services, LLC and
the documents, instruments and agreements referenced therein.
"RULE 144," "RULE 415," and "RULE 424" means Rule 144, Rule
415 and Rule 424, respectively, promulgated by the Commission pursuant
to the Securities Act, as such Rules 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.
"SECURITIES" means the Shares, the Warrants and the Underlying
Shares.
"SHARES" means an aggregate of 1,581,944 shares of Common
Stock, which are being purchased by the Purchasers pursuant to this
Agreement and any additional shares of Common Stock that are issued
pursuant Section 4.9 below.
"SUBSIDIARY" means any Person in which the Company directly or
indirectly owns capital stock or holds an equity or similar interest.
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"TRADING DAY" means (a) any day on which the Common Stock is
listed or quoted and traded on its primary Trading Market, or (b) if
the Common Stock is not then listed or quoted and traded on any
Eligible Market, then a day on which trading occurs on the New York
Stock Exchange (or any successor thereto).
"TRADING MARKET" means the Nasdaq SmallCap Market or any other
national securities exchange, market or trading or quotation facility
on which the Common Stock is then listed or quoted.
"TRANSACTION DOCUMENTS" means this Agreement, the Warrants and
any other documents or agreements executed in connection with the
transactions contemplated hereunder.
"UNDERLYING SHARES" means the shares of Common Stock issuable
upon exercise of the Warrants.
"WARRANTS" means a Common Stock purchase warrant, in the form
of Exhibit A (the "First Warrant"), and a Common Stock purchase
warrant, in the form of Exhibit B (the "Second Warrant").
ARTICLE II
PURCHASE AND SALE
2.1 Closing. Subject to the terms and conditions set forth in this
Agreement, at the Closing, the Company shall issue and sell to the Purchasers,
and the Purchasers shall, severally and not jointly, purchase from the Company,
the Shares and the Warrants for an aggregate purchase price of up to $5,000,000.
The Closing shall take place at the offices of the Purchaser immediately
following the execution hereof, or at such other location or time as the parties
may agree.
2.2 Closing Deliveries.
(a) At the Closing, the Company shall deliver or cause to be
delivered to each Purchaser the following:
(i) one or more stock certificates, free and clear of
all restrictive and other legends (except as expressly provided in
Section 4.1(b) hereof), evidencing the number of Shares indicated below
such Purchaser's name on the signature page of this Agreement,
registered in the name of such Purchaser;
(ii) a First Warrant and a Second Warrant, registered
in the name of such Purchaser, pursuant to which such Purchaser shall
have the right to acquire the number of shares of Common Stock
indicated below such Purchaser's name on the signature page of this
Agreement, on the terms set forth therein;
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(iii) a legal opinion of Company Counsel, in the form
of Exhibit C, executed by such counsel and delivered to the Purchasers.
(b) At the Closing, each Purchaser shall deliver or cause to
be delivered to the Company the purchase price indicated below such Purchaser's
name on the signature page of this Agreement, in United States dollars and in
immediately available funds, by wire transfer to an account designated in
writing by the Company for such purpose.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
3.1 Representations and Warranties of the Company. The Company hereby
represents and warrants as of the date hereof to each of the Purchasers as
follows:
(a) Subsidiaries. The Company has no direct or indirect
Subsidiaries other than those listed in Schedule 3.1(a). Except as disclosed in
Schedule 3.1(a), the Company owns, directly or indirectly, all of the capital
stock of each Subsidiary free and clear of any lien, charge, claim, 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.
(b) 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 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 do 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, could not, individually or in the aggregate, (i)
adversely affect the legality, validity or enforceability of any Transaction
Document, (ii) have or result in a material adverse effect on the results of
operations, assets, prospects, business or condition (financial or otherwise) of
the Company and the Subsidiaries, taken as a whole, or (iii) adversely impair
the Company's ability to perform fully on a timely basis its obligations under
any of the Transaction Documents (any of (i), (ii) or (iii), a "MATERIAL ADVERSE
EFFECT").
(c) 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 hereunder and thereunder. The execution and delivery of each of the
Transaction Documents by the Company and the consummation by it of the
transactions contemplated hereby and thereby have been duly authorized by all
necessary action on the part of the Company and no further consent or action is
required by the Company, its Board of Directors or its stockholders. Each of the
Transaction Documents has
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been (or upon delivery will be) 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.
(d) No Conflicts. The execution, delivery and performance of
the Transaction Documents by the Company and the consummation by the Company of
the transactions contemplated hereby and 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, (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 to which the Company or a Subsidiary is subject (including federal and
state securities laws and regulations and the rules and regulations of any
self-regulatory organization to which the Company or its securities are
subject), or by which any property or asset of the Company or a Subsidiary is
bound or affected; except for acceleration that may arise under the Rights Plan
and except in the case of each of clauses (ii) and (iii), such as could not,
individually or in the aggregate, have or result in a Material Adverse Effect.
(e) Issuance of the Securities. The Securities (including the
Underlying Shares) 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 and shall not be
subject to preemptive rights or similar rights of stockholders, except for
rights to purchase stock arising under the Rights Plan. 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 Securities (including the
Underlying Shares).
(f) Capitalization. The number of shares and type of all
authorized, issued and outstanding capital stock, options and other securities
of the Company (whether or not presently convertible into or exercisable or
exchangeable for shares of capital stock of the Company) are set forth in
Schedule 3.1(f). All outstanding shares of capital stock are duly authorized,
validly issued, fully paid and nonassessable and have been issued in compliance
with all applicable securities laws. Except as disclosed in Schedule 3.1(f),
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.
There are no anti-dilution or price adjustment provisions contained in any
security issued by the Company (or in any agreement providing rights to security
holders) other than the options set forth on Schedule 3.1(f), and the issue and
sale of the Securities (including the Underlying Shares) will not obligate the
Company to issue shares of Common Stock or other securities to any Person (other
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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, except as set forth in the Rights Plan. To the knowledge of the
Company, except as specifically disclosed in Schedule 3.1(f), no Person or group
of related Persons beneficially owns (as determined pursuant to Rule 13d-3 under
the Exchange Act), or has the right to acquire, by agreement with or by
obligation binding upon the Company, beneficial ownership of in excess of 5% of
the outstanding Common Stock, ignoring for such purposes any limitation on the
number of shares of Common Stock that may be owned at any single time.
(g) 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) thereof, 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 being collectively referred
to herein as the "SEC REPORTS" and, together with this Agreement and the
Schedules to this Agreement, the "DISCLOSURE MATERIALS") on a timely basis or
has received a valid extension of such time of filing and has filed any such SEC
Reports prior to the expiration of any such extension. The Company has delivered
to the Purchasers a copy of all SEC Reports filed within the 10 days preceding
the date hereof. 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, 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 United States
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, as of the dates thereof, fairly
present in all material respects the financial position of the Company and its
consolidated subsidiaries as of and for the dates thereof and the results of
operations and cash flows for the periods then ended, subject, in the case of
unaudited statements, to normal, immaterial, year-end audit adjustments. All
material agreements to which the Company or any Subsidiary is a party or to
which the property or assets of the Company or any Subsidiary are subject are
included as part of or specifically identified in the SEC Reports as of the
dates thereof.
(h) Material Changes. Since the date of the latest audited
financial statements included within the SEC Reports, except as specifically
disclosed in the SEC Reports, (i) there has been no event, occurrence or
development that, individually or in the aggregate, has had or that could result
in a Material Adverse Effect, (ii) the Company has not incurred any liabilities
(contingent or otherwise) other than (A) trade payables, accrued expenses and
capital leases incurred in the ordinary course of business consistent with past
practice and borrowings under credit arrangements disclosed in the SEC Reports
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 any material accounting policies
or the identity of its auditors, (iv) the Company has not declared or made any
dividend or distribution of cash or other property to its
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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 or purchase plans.
(i) 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 relating to taxes, environmental protection, occupational health
and safety, product quality and safety and employment and labor matters, except
in each case as could not, individually or in the aggregate, have or result in a
Material Adverse Effect.
(j) 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 and good and
marketable title in all personal property owned by them that is material to the
business of the Company and the Subsidiaries, 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 except for Liens disclosed
in the Disclosure Materials. Any real property and facilities held under lease
by the Company and the Subsidiaries are held by them under valid, subsisting and
enforceable leases of which the Company and the Subsidiaries are in compliance.
(k) Certain Fees. Except for the fees described in Schedule
3.1(k), 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, and the Company has not taken any action that
would cause any Purchaser to be liable for any such fees or commissions.
(l) Private Placement. Neither the Company nor any Person
acting on the Company's behalf has sold or offered to sell or solicited any
offer to buy the Securities by means of any form of general solicitation or
advertising. Neither the Company nor any of its Affiliates nor any person acting
on the Company's behalf has, directly or indirectly, at any time within the past
six months, made any offer or sale of any security or solicitation of any offer
to buy any security under circumstances that would (i) eliminate the
availability of the exemption from registration under Regulation D under the
Securities Act in connection with the offer and sale of the Securities as
contemplated hereby or (ii) cause the offering of the Securities pursuant to the
Transaction Documents to be integrated with prior offerings by the Company for
purposes of any applicable law, regulation or shareholder approval provisions,
including without limitation under the rules and regulations of any Trading
Market. 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. The
Company
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is not a United States real property holding corporation within the meaning of
the Foreign Investment in Real Property Tax Act of 1980.
(m) Form S-3 Eligibility. The Company is eligible to register
its Common Stock for resale by the Purchasers under Form S-3 promulgated under
the Securities Act.
(n) Listing and Maintenance Requirements. The Company has, in
the two years preceding the date hereof, received notice (written or oral) 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.
(o) Registration Rights. Except as described in Schedule
3.1(o), the Company has not granted or agreed to grant to any Person any rights
(including "piggy-back" registration rights) to have any securities of the
Company registered with the Commission or any other governmental authority that
have not been satisfied.
(p) Application of Takeover Protections. There is no control
share acquisition, business combination, poison pill (including any distribution
under a rights agreement) or other similar anti-takeover provision under the
Company's 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 as a result of the Company's
issuance of the Securities and the Purchasers' ownership of the Securities,
except for the Rights Plan.
(q) Disclosure. The Company confirms that neither it 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, nonpublic information, other than the transactions contemplated by the
Transaction Documents. The Company understands and confirms that each of the
Purchasers will rely on the foregoing representations in effecting transactions
in securities of the Company. Subject to the limitations of this Agreement, all
disclosure provided to the Purchasers regarding the Company, its business and
the transactions contemplated hereby, including the Schedules to this Agreement,
furnished by or on behalf of the Company are true and correct and do not contain
any untrue statement of a material fact or omit to state any material fact
necessary in order to make the statements made therein, in light of the
circumstances under which they were made, not misleading. No event or
circumstance has occurred or information exists with respect to the Company or
any of its Subsidiaries or its or their business, properties, prospects,
operations or financial conditions, which, under applicable law, rule or
regulation, requires public disclosure or announcement by the Company, but which
has not been so publicly announced or disclosed (assuming for this purpose that
the Company's reports filed under the Exchange Act are being incorporated into
an effective registration statement filed by the Company under the Securities
Act) other than the transactions contemplated by the Transaction Documents,
which need not be so disclosed or announced until after the Closing. The Company
acknowledges and agrees that no
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Purchaser makes or has made any representations or warranties with respect to
the transactions contemplated hereby other than those specifically set forth in
Section 3.2.
(r) Absence of Litigation. There is no action, suit, claim,
proceeding, inquiry or investigation before or by any court, public board,
government agency, self-regulatory organization or body pending or, to the
knowledge of the Company, threatened against or affecting the Company or any of
its Subsidiaries that could, individually or in the aggregate, have a Material
Adverse Effect. Schedule 3.1(r) contains a complete list and summary description
of any pending or, to the knowledge of the Company, threatened proceeding
against or affecting the Company or any of its Subsidiaries, without regard to
whether it would, individually or in the aggregate, have a Material Adverse
Effect.
(s) Acknowledgment Regarding Purchasers' Purchase of
Securities. The Company acknowledges and agrees that each of the Purchasers is
acting solely in the capacity of an arm's length purchaser with respect to this
Agreement and the transactions contemplated hereby. The Company further
acknowledges that no Purchaser is acting as a financial advisor or fiduciary of
the Company (or in any similar capacity) with respect to this Agreement and the
transactions contemplated hereby and any advice given by any Purchaser or any of
their respective representatives or agents in connection with this Agreement and
the transactions contemplated hereby is merely incidental to the Purchasers'
purchase of the Securities. The Company further represents to each Purchaser
that the Company's decision to enter into this Agreement has been based solely
on the independent evaluation of the Company and its representatives.
(t) Patents and Trademarks. 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 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 violate or infringe upon the rights of any Person. To
the knowledge of the Company, all such Intellectual Property Rights are
enforceable and there is no existing infringement by another Person of any of
the Intellectual Property Rights.
(u) Going Concern. The Company and the Subsidiaries have no
knowledge (upon receipt of the proceeds of this transaction) that the Company
will receive a "going concern" opinion from the Company's independent public
accountants in the Company's annual report on Form 10-K pursuant to Section 13
or 15(d) under the Exchange Act for the fiscal year ended December 31, 2003.
(v) 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 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
without a significant increase in cost, except for significant increases in cost
that are generally applicable to the insurance industry.
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(w) Regulatory Permits. The Company and the Subsidiaries
possess all certificates, authorizations and permits issued by the appropriate
federal, state, local or foreign regulatory authorities necessary to conduct
their respective businesses as described in the SEC Reports, except where the
failure to possess such permits could not, individually or in the aggregate,
have or result in a Material Adverse Effect ("MATERIAL PERMITS"), and neither
the Company nor any Subsidiary has received any notice of proceedings relating
to the revocation or modification of any Material Permit.
(x) Transactions With Affiliates and Employees. Except as set
forth in Schedule 3.1(x) or the SEC Reports filed at least ten days prior to the
date hereof, 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.
(y) Solvency. Based on the financial condition of the Company
as of the Closing Date, (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 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 (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).
(z) Internal Accounting Controls. The Company and the
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 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.
(aa) Press Releases. Each press release disseminated by the
Company during the three (3) years preceding the date of this Agreement did not,
to the Company's knowledge at the time of release, contain any untrue statement
of a material fact or omit to state a material fact required to
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be stated therein or necessary in order to make the statements therein, in light
of the circumstances under which they were made, not misleading.
3.2 Representations and Warranties of the Purchasers. Each Purchaser
hereby, as to itself only and for no other Purchaser, represents and warrants to
the Company as follows:
(a) 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 the requisite 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 hereunder and thereunder. The purchase by such Purchaser of the
Securities hereunder has been duly authorized by all necessary action on the
part of such Purchaser. This Agreement has been duly executed and delivered by
such Purchaser and constitutes the valid and binding obligation of such
Purchaser, enforceable against it in accordance with its terms.
(b) Investment Intent. Such Purchaser is acquiring the
Securities as principal for its own account for investment purposes only and not
with a view to or for distributing or reselling such Securities or any part
thereof, without prejudice, however, to such Purchaser's right, subject to the
provisions of this Agreement, at all times to sell or otherwise dispose of all
or any part of such Securities pursuant to an effective registration statement
under the Securities Act or under an exemption from such registration and in
compliance with applicable federal and state securities laws. Nothing contained
herein shall be deemed a representation or warranty by such Purchaser to hold
Securities for any period of time. Such Purchaser does not have any agreement or
understanding, directly or indirectly, with any Person to distribute any of the
Securities.
(c) Purchaser Status. At the time such Purchaser was offered
the Securities, it was, and at the date hereof it is, and on each date on which
it exercises any Warrants, it will be an "accredited investor" as defined in
Rule 501(a) under the Securities Act. The Purchasers are not acting in concert
or as a group with respect to the transactions contemplated by the Transaction
Document.
(d) 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.
(e) Access to Information. Such Purchaser acknowledges that it
has reviewed the Disclosure Materials and has been afforded (i) the opportunity
to ask such questions as it has deemed necessary of, and to receive answers
from, representatives of the Company concerning the terms and conditions of the
offering of the Securities and the merits and risks of investing in the
Securities; (ii) access to information about the Company and the Subsidiaries
and their respective financial condition, results of operations, business,
properties, management and prospects sufficient to enable it to evaluate its
investment; and (iii) the opportunity to obtain such additional information that
the
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Company possesses or can acquire without unreasonable effort or expense that is
necessary to make an informed investment decision with respect to the
investment. Neither such inquiries nor any other investigation conducted by or
on behalf of such Purchaser or its representatives or counsel shall modify,
amend or affect such Purchaser's right to rely on the truth, accuracy and
completeness of the Disclosure Materials and the Company's representations and
warranties contained in the Transaction Documents.
(f) SEC Reports. Such Purchaser acknowledges that, except as
expressly set forth herein, neither the Company nor any Person acting on its
behalf makes or has made any representations or warranties with respect to the
transactions contemplated hereby. Such Purchaser further acknowledges that (i)
it has reviewed all of the SEC Reports and the financial statements and exhibits
therein or thereto, including the "Risk Factors" contained therein and (ii)
pursuant to the terms of this Agreement, the Company may not provide it with any
material nonpublic information.
ARTICLE IV
OTHER AGREEMENTS OF THE PARTIES
4.1 Transfer Restrictions.
(a) Securities may only be disposed of pursuant to an
effective registration statement under the Securities Act or pursuant to an
available exemption from the registration requirements of the Securities Act,
and in compliance with any applicable state securities laws. In connection with
any transfer of Securities other than pursuant to an effective registration
statement or to the Company or pursuant to Rule 144(k), except as otherwise set
forth herein, the Company may require the transferor 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 under the Securities Act.
Notwithstanding the foregoing, the Company hereby consents to and agrees to
register on the books of the Company and with its transfer agent, without any
such legal opinion, any transfer of Securities by a Purchaser to an Affiliate of
such Purchaser, provided that the transferee certifies to the Company that it is
an "accredited investor" as defined in Rule 501(a) under the Securities Act and
agrees in writing to be bound, with respect to the transferred Securities, by
the provisions hereof that apply to the "Purchasers."
(b) The Purchasers agree to the imprinting, so long as is
required by this Section 4.1(b), of the following legend on any certificate
evidencing Securities:
[NEITHER] THESE SECURITIES [NOR THE SECURITIES INTO WHICH THESE
SECURITIES ARE EXERCISABLE] 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 RULE 144(K) OR UNLESS THE HOLDER FURNISHES THE
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COMPANY WITH AN OPINION OF COUNSEL, THE FORM AND SUBSTANCE OF WHICH
OPINION SHALL BE REASONABLY SATISFACTORY TO THE COMPANY, TO THE EFFECT
THAT SUCH TRANSFER DOES NOT REQUIRE REGISTRATION UNDER THE SECURITIES
ACT 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. NOTWITHSTANDING THE
FOREGOING, THESE SECURITIES [AND THE SECURITIES ISSUABLE UPON EXERCISE
OF THESE SECURITIES] MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE
MARGIN ACCOUNT OR OTHER LOAN OR FINANCING ARRANGEMENT SECURED BY SUCH
SECURITIES.
Certificates evidencing Securities shall not be required to contain such legend
or any other legend (i) while a Registration Statement covering the resale of
such Securities is effective under the Securities Act, or (ii) following any
sale of such Securities pursuant to Rule 144, or (iii) if such Securities 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).
Following the Effective Date or at such earlier time as a legend is no longer
required for certain Securities, the Company will, no later than three Trading
Days following the delivery by a Purchaser to the Company or the Company's
transfer agent of a legended certificate representing such Securities, 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. For so long as any Purchaser owns Securities, the Company will not
effect or publicly announce its intention to effect any exchange,
recapitalization or other transaction that effectively requires or rewards
physical delivery of certificates evidencing the Common Stock.
(c) The Company acknowledges and agrees that a Purchaser may
from time to time pledge or grant a security interest in some or all of the
Securities in connection with a bona fide margin agreement or other loan or
financing arrangement secured by the Securities and, if required under the terms
of such agreement, loan or arrangement, such Purchaser may transfer pledged or
secured Securities to the pledgees or secured parties. Such a pledge or transfer
would not be subject to approval of the Company and no legal opinion of the
pledgee, secured party 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 or secured party 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) of the Securities Act or other applicable provision of the Securities
Act to appropriately amend the list of Selling Stockholders thereunder.
4.2 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
Exchange Act. Upon the request of any Purchaser, the Company shall deliver to
such Purchaser a written
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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 such laws, it will prepare and
furnish to the Purchasers and make publicly available in accordance with
paragraph (c) of Rule 144 such information as is required for the Purchasers to
sell the Securities under Rule 144.
4.3 Integration. The Company shall not, and shall use its best efforts
to ensure that no Affiliate of the Company shall, sell, offer for sale or
solicit offers to buy or otherwise negotiate in respect of any security (as
defined in Section 2 of the Securities Act) that would be integrated with the
offer or sale of the Securities in a manner that would require the registration
under the Securities Act of the sale of the Securities to the Purchasers, or
that would be integrated with the offer or sale of the Securities for purposes
of the rules and regulations of any Trading Market.
4.4 Reservation of Securities. The Company shall maintain a reserve
from its duly authorized shares of Common Stock for issuance pursuant to the
Transaction Documents in such amount as may be required to fulfill its
obligations in full under the Transaction Documents. In the event that, at any
time, the then authorized shares of Common Stock are insufficient for the
Company to satisfy its obligations in full under the Transaction Documents, the
Company shall promptly take such actions as may be required to increase the
number of authorized shares.
4.5 Subsequent Placements.
(a) From the date hereof until the Effective Date, the Company
will not, directly or indirectly, offer, sell, grant any option to purchase, or
otherwise dispose of (or announce any offer, sale, grant or any option to
purchase or other disposition of) any of its or the Subsidiaries' equity or
equity equivalent securities, including without limitation any debt, preferred
stock or other instrument or security that is, at any time during its life and
under any circumstances, convertible into or exchangeable for Common Stock (any
such offer, sale, grant, disposition or announcement being referred to as a
"SUBSEQUENT PLACEMENT"), unless (i) the Company delivers to each of the
Purchasers a written notice (the "SUBSEQUENT PLACEMENT NOTICE") of its intention
to effect such Subsequent Placement, which Subsequent Placement Notice shall
describe in reasonable detail the proposed terms of such Subsequent Placement,
the amount of proceeds intended to be raised thereunder, the Person with whom
such Subsequent Placement is proposed to be effected, and attached to which
shall be a term sheet or similar document relating thereto and (ii) such
Purchaser shall not have notified the Company by 6:30 p.m. (New York City time)
on the second Trading Day after its receipt of the Subsequent Placement Notice
of its willingness to provide (or to cause its designee to provide), subject to
completion of mutually acceptable documentation, all or part of such financing
to the Company on the same terms set forth in the Subsequent Placement Notice.
If the Purchasers shall fail to so notify the Company of their willingness to
participate in the full Subsequent Placement, the Company may effect the
remaining portion of such Subsequent Placement on the terms and to the Persons
set forth in the Subsequent Placement Notice; provided that the Company must
provide the Purchasers with a second Subsequent Placement Notice, and the
Purchasers will again have the right of first refusal set forth above in this
paragraph (a), if the Subsequent Placement subject to the initial Subsequent
Placement Notice is not consummated for any reason on the terms set forth in
such Subsequent Placement Notice within 30 Trading Days after the date of the
initial
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Subsequent Placement Notice with the Persons identified in the Subsequent
Placement Notice. If the Purchasers indicate a willingness to provide financing
in excess of the amount set forth in the Subsequent Placement Notice, then each
Purchaser will be entitled to provide financing pursuant to such Subsequent
Placement Notice up to an amount equal to such Purchaser's pro rata portion of
the aggregate purchase price paid for the Securities under this Agreement, but
the Company shall not be required to accept financing from the Purchasers in an
amount in excess of the amount set forth in the Subsequent Placement Notice.
(b) The restrictions contained in paragraph (a) of this
Section shall not apply to (i) the granting of options or issuance of Common
Stock to employees, consultants, officers and directors of the Company pursuant
to any stock option or purchase plan duly adopted by the Company or to the
issuance of Common Stock upon exercise of such options or (ii) to the issuance
of Common Stock in connection with strategic partnerships, up to an aggregate of
462,962 shares of Common Stock.
4.6 Securities Laws Disclosure; Publicity. The Company shall, on the
Closing Date, issue a press release acceptable to the Purchasers disclosing all
material terms of the transactions contemplated hereby. On or before 8:30 a.m.,
Eastern time, the second Trading Day following the Closing Date, the Company
shall file a Current Report on Form 8-K with the Commission describing the terms
of the transactions contemplated by the Transaction Documents and including as
exhibits to such Current Report on Form 8-K this Agreement and the form of
Warrants, in the form required by the Exchange Act. Thereafter, the Company
shall timely file any filings and notices required by the Commission or
applicable law with respect to the transactions contemplated hereby and provide
copies thereof to the Purchasers promptly after filing. The Company shall, at
least two Trading Days prior to the filing or dissemination of any disclosure
required by this paragraph, provide a copy thereof to the Purchasers for their
review. The Company and the Purchasers shall consult with each other in issuing
any press releases or otherwise making public statements or filings and other
communications with the Commission or any regulatory agency or Trading Market
with respect to the transactions contemplated hereby, and neither party shall
issue any such press release or otherwise make any such public statement, filing
or other communication without the prior consent of the other, 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, filing or
other 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 to the
extent such disclosure (but not any disclosure as to the controlling Persons
thereof) is required by law or Trading Market regulations, in which case the
Company shall provide the Purchasers with prior notice of such disclosure.
Neither the Company nor any Person acting on its behalf will provide any
Purchaser with material, nonpublic information about the Company unless such
Purchaser consents to receive such information in writing in advance.
4.7 Use of Proceeds. The Company shall use the net proceeds from the
sale of the Securities hereunder for working capital purposes, including the
repayment of any portion of the Company's debt (including payment of trade
payables and accrued expenses in the ordinary course
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of the Company's business and prior practices), but not to redeem any Company
equity or equity-equivalent securities or to settle any outstanding litigation.
4.8 Reimbursement. If any Purchaser or any of its Affiliates or any
officer, director, partner, controlling person, employee or agent of a Purchaser
or any of its Affiliates (a "RELATED PERSON") becomes involved in any capacity
in any Proceeding brought by or against any Person in connection with or as a
result of the transactions contemplated by the Transaction Documents, the
Company will indemnify and hold harmless such Purchaser or Related Person for
its reasonable legal and other expenses (including the costs of any
investigation, preparation and travel) and for any Losses incurred in connection
therewith, as such expenses or Losses are incurred, to the extent that they
result directly or indirectly from any action or inaction on the part of the
Company. In addition, the Company shall indemnify and hold harmless each
Purchaser and Related Person from and against any and all Losses, as incurred,
arising out of or relating to any breach by the Company of any of the
representations, warranties or covenants made by the Company in this Agreement
or any other Transaction Document, or any allegation by a third party that, if
true, would constitute such a breach. The conduct of any Proceedings for which
indemnification is available under this paragraph shall be governed by Section
6.4(c) below. The indemnification obligations of the Company under this
paragraph shall be in addition to any liability that the Company may otherwise
have and shall be binding upon and inure to the benefit of any successors,
assigns, heirs and personal representatives of the Purchasers and any such
Related Persons. The Company also agrees that neither the Purchasers nor any
Related Persons shall have any liability to the Company or any Person asserting
claims on behalf of or in right of the Company in connection with or as a result
of the transactions contemplated by the Transaction Documents, except to the
extent that any losses, claims, damages, liabilities or expenses incurred by the
Company result directly from the gross negligence or willful misconduct of the
applicable Purchaser or Related Person in connection with such transactions. If
the Company breaches its obligations under any Transaction Document, then, in
addition to any other liabilities the Company may have under any Transaction
Document or applicable law, the Company shall pay or reimburse the Purchasers on
demand for all costs of collection and enforcement (including reasonable
attorneys fees and expenses). Without limiting the generality of the foregoing,
the Company specifically agrees to reimburse the Purchasers on demand for all
costs of enforcing the indemnification obligations in this paragraph.
4.9 Additional Issuance of Shares.
(a) If, at any time from and after the date hereof until the
Effective Date, the Company shall issue shares of Common Stock or rights,
warrants, options or other securities or debt that are convertible into or
exchangeable for shares of Common Stock ("COMMON STOCK EQUIVALENTS"), entitling
any Person to acquire shares of Common Stock at a price per share (the "LESSER
PER SHARE PRICE") less than the per share purchase price paid by the Purchasers
pursuant to this Agreement, then the Company shall issue to each Purchaser, no
later than three (3) Trading Days following the issuance of such shares of
Common Stock or Common Stock Equivalents, such additional number of shares (the
"ADDITIONAL SHARES") of Common Stock equal to the excess of (A) the quotient
obtained by dividing the aggregate purchase price paid by such Purchaser for the
shares purchased pursuant to this Agreement divided by the Lesser Per Share
Price over (B) the number of shares purchased by such Purchaser at the Closing.
For such purposes, in connection with any
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issuance of any Common Stock Equivalents, (x) the maximum number of shares of
Common Stock potentially issuable at any time upon conversion, exercise or
exchange of such Common Stock Equivalents (the "DEEMED NUMBER") shall be deemed
to be outstanding upon issuance of such Common Stock Equivalents, and (y) the
price per share applicable to such Common Stock Equivalents shall be deemed to
equal the minimum dollar value of consideration payable to the Company to
purchase such Common Stock Equivalents and to convert, exercise or exchange them
into Common Stock, divided by the Deemed Number. The foregoing shall not apply
to (a) any grant of options or warrants, or the issuance of additional
securities, under any duly authorized Company stock option, restricted stock
plan or stock purchase plan or (b) any shares of Common Stock issued pursuant to
strategic partnerships, up to an aggregate of 462,962 shares of Common Stock.
(b) Notwithstanding anything to the contrary contained in this
Section 4.9, the number of shares of Common Stock that shall be issued to a
Purchaser pursuant hereto shall be limited to the extent necessary to insure
that, following such issuance, the total number of shares of Common Stock then
beneficially owned by such Purchaser and its Affiliates and any other Persons
whose beneficial ownership of Common Stock would be aggregated with the
Purchaser's for purposes of Sections 13(d) and 16 of the Exchange Act, does not
exceed 9.999% (the "MAXIMUM PERCENTAGE") of the total number of issued and
outstanding shares of Common Stock (including for such purpose the shares of
Common Stock issuable upon exercise of all Warrants and other Convertible
Securities held by such Purchaser and its Affiliates and any other Persons whose
beneficial ownership of Common Stock would be so aggregated). For such purposes,
beneficial ownership shall be determined in accordance with Section 13(d) of the
Exchange Act and the rules and regulations promulgated thereunder. The Company
shall, instead of issuing shares of Common Stock in excess of the limitation
referred to in this Section 4.9(d), pay to such Purchaser an amount in cash
equal to the fair market value of the number of shares of Common Stock in excess
of such limitation; provided, however, that the Purchaser may, at its option,
elect to waive the requirement to deliver such cash and the Company's obligation
to issue shares in excess of the foregoing limitation shall be suspended until
such time, if any, as such shares of Common Stock may be issued in compliance
with such limitation. Additionally, by written notice to the Company, the
Purchaser may waive the provisions of this Section or increase or decrease the
Maximum Percentage to any other percentage specified in such notice, but (i) any
such waiver or increase will not be effective until the 61st day after such
notice is delivered to the Company, and (ii) any such waiver or increase or
decrease will apply only to the Purchaser and not to any other Purchaser.
(c) All shares to be issued pursuant to this Section 4.9, upon
issuance, shall be duly authorized, validly issued, fully paid and
non-assessable and free of any Liens or preemptive or similar rights. Upon the
issuance of any shares of Common Stock pursuant to this Section 4.9, such shares
shall be "Shares" and "Registrable Securities" for all purposes hereunder.
Without limiting the generality of the foregoing, the Purchasers shall have all
of the rights provided in Article VI below with respect to such additional
Shares, mutatis mutandis.
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ARTICLE V
CONDITIONS
5.1 Conditions Precedent to the Obligations of the Purchasers. The
obligation of each Purchaser to acquire Securities at the Closing is subject to
the satisfaction by the Company (or waiver by such Purchaser), at or before the
Closing, of each of the following conditions:
(a) Representations and Warranties. The representations and
warranties of the Company contained herein shall be true and correct in all
material respects as of the date when made and as of the Closing as though made
on and as of such date; and
(b) Performance. The Company and each other Purchaser shall
have performed, satisfied and complied in all material respects with all
covenants, agreements and conditions required by the Transaction Documents to be
performed, satisfied or complied with by it at or prior to the Closing.
5.2 Conditions Precedent to the Obligations of the Company. The
obligation of the Company to sell Securities at the Closing is subject to the
satisfaction by the Purchasers (or waiver by the Company), at or before the
Closing, of each of the following conditions:
(a) Representations and Warranties. The representations and
warranties of the Purchasers contained herein shall be true and correct in all
material respects as of the date when made and as of the Closing Date as though
made on and as of such date; and
(b) Performance. The Purchasers shall have performed,
satisfied and complied in all material respects with all covenants, agreements
and conditions required by the Transaction Documents to be performed, satisfied
or complied with by the Purchasers at or prior to the Closing.
ARTICLE VI
REGISTRATION RIGHTS
6.1 Shelf Registration
(a) As promptly as possible, and in any event on or prior to
the Filing Date, the Company shall prepare and file with the Commission a
"Shelf" Registration Statement covering the resale of all Registrable Securities
for an offering to be made on a continuous basis pursuant to Rule 415. The
Registration Statement shall be on Form S-3 (except if the Company is not then
eligible to register for resale the Registrable Securities on Form S-3, in which
case such registration shall be on another appropriate form in accordance
herewith as the Purchasers may consent) and shall contain (except if otherwise
directed by the Purchasers) the "Plan of Distribution" attached hereto as
Exhibit D.
(b) The Company shall use its best efforts to cause the
Registration Statement to be declared effective by the Commission as promptly as
possible after the filing thereof, but in any event prior to the Required
Effectiveness Date, and shall use its best efforts to keep the Registration
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Statement continuously effective under the Securities Act until the fourth
anniversary of the Effective Date or such earlier date when all Registrable
Securities covered by such Registration Statement have been sold (the
"EFFECTIVENESS PERIOD").
(c) The Company shall notify each Purchaser in writing
promptly (and in any event within one business day) after receiving notification
from the Commission that the Registration Statement has been declared effective.
(d) In the event of the occurrence of one or more Events (as
defined below) during the three year period following the date hereof, as
partial relief for the damages suffered therefrom by the Purchasers (which
remedy shall not be exclusive of any other remedies available under this
Agreement, at law or in equity), the Company shall pay to each Purchaser an
amount in cash, as liquidated damages and not as a penalty, equal to the product
obtained by multiplying (A) 1.0% of the aggregate purchase price paid by such
Purchaser under Section 2.1 hereunder by (B) a fraction, the numerator of which
is the sum of the number of Shares and Common Stock issued upon exercise of the
Warrants owned by the Purchaser as of the date of the Event plus the number of
Underlying Shares issuable pursuant to the Warrants owned by the Purchaser as of
the date of the Event to the extent that the Exercise Price is less than the
Closing Price as of the date of the Event, and the denominator of which is the
sum of the number of Shares purchased by the Purchaser hereunder plus the number
of Underlying Shares in respect of the Warrants issued to the Purchaser
hereunder. The liquidated damages payable pursuant to the terms hereof shall
apply on a pro-rata basis for any portion of a month prior to the cure of an
Event and shall be paid by the 30th day following the occurrence of an Event and
each 30 days thereafter until the Event is cured. In the event the Company fails
to make a liquidated damages payment in a timely manner, such payment until paid
in full shall bear interest at the rate of 1.5% per month or such lesser maximum
rate that is permitted to be paid by applicable law. For such purposes, each of
the following shall constitute an "EVENT":
(i) the Registration Statement is not filed on or
prior to the Filing Date or is not declared effective on or prior to
the Required Effectiveness Date;
(ii) after the Effective Date, a Purchaser is not
permitted to sell Registrable Securities under the Registration
Statement (or a subsequent Registration Statement filed in replacement
thereof) as the result of any action or inaction on the part of the
Company for five or more Trading Days (whether or not consecutive);
(iii) the Common Stock is not listed or quoted, or is
suspended from trading, on an Eligible Market for a period of three
Trading Days (which need not be consecutive Trading Days);
(iv) the Company fails for any reason to deliver a
certificate evidencing any Securities to a Purchaser within three
Trading Days after delivery of such certificate is required pursuant to
any Transaction Document or the exercise or conversion rights of the
Purchasers pursuant to the Transaction Documents are otherwise
suspended for any reason; or
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(v) the Company fails to have available a sufficient
number of authorized but unissued and otherwise unreserved shares of
Common Stock available to issue Underlying Shares upon any exercise of
the Warrants or to satisfy its obligations under Section 4.9 above or,
at any time following the Effective Date, any Shares or Underlying
Shares are not listed on an Eligible Market.
(e) If (i) any Event occurs and remains uncured for 60 days;
(ii) the Company fails to make any cash payment required under the Transaction
Documents and such failure is not cured within five days after notice of such
default is first given to the Company by a Purchaser; or (iii) the Company
defaults in the timely performance of any other obligation under the Transaction
Documents and such default continues uncured for a period of 20 days after the
date on which notice of such default is first given to the Company by a
Purchaser (it being understood that no prior notice need be given in the case of
a default that cannot reasonably be cured within 20 days), then at any time or
times thereafter any Purchaser may deliver to the Company a notice (a
"REPURCHASE NOTICE") requiring the Company to repurchase all or any portion of
the Shares and any Underlying Shares then held by such Purchaser at a price (the
"REPURCHASE PRICE") per share equal to 115% of the average of the Closing Prices
for the five Trading Days preceding either (a) the date of delivery of the
Repurchase Notice, or (b) the date on which the applicable repurchase price
(together with any other payments, expenses and liquidated damages then due and
payable under the Transaction Documents) is paid in full, whichever is greater.
If a Purchaser delivers a Repurchase Notice pursuant to this Section, the
Company shall pay the aggregate Repurchase Price (together with any other
payments, expenses and liquidated damages then due and payable pursuant to the
Transaction Documents) to such Purchaser no later than the fifth Trading Day
following the date of delivery of the Repurchase Notice, and upon receipt
thereof such Purchaser shall deliver original certificates evidencing the
Securities so repurchased to the Company (to the extent such certificates have
been delivered to such Purchaser). Notwithstanding the foregoing, immediately
upon the occurrence of a Bankruptcy Event, each Purchaser will automatically be
deemed to have delivered a Repurchase Notice pursuant to this paragraph and will
be entitled to receive the corresponding Repurchase Price without any further
action or notice to the Company.
6.2 Registration Procedures. In connection with the Company's
registration obligations hereunder, the Company shall:
(a) Not less than three Trading Days prior to the filing of a
Registration Statement or any related Prospectus or any amendment or supplement
thereto (including any document that would be incorporated or deemed to be
incorporated therein by reference), (i) furnish to the Purchasers and their
counsel copies of all such documents proposed to be filed, which documents
(other than those incorporated or deemed to be incorporated by reference) will
be subject to the review of such Purchasers and their counsel, and (ii) cause
its officers and directors, counsel and independent certified public accountants
to respond to such inquiries as shall be necessary, in the reasonable opinion of
respective counsel, to conduct a reasonable investigation within the meaning of
the Securities Act. The Company shall not file a Registration Statement or any
such Prospectus or any amendments or supplements thereto to which Purchasers
holding a majority of the Registrable Securities shall reasonably object.
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(b) (i) Prepare and file with the Commission such amendments,
including post-effective amendments, to each Registration Statement and the
Prospectus used in connection therewith as may be necessary to keep the
Registration Statement continuously effective as to the applicable Registrable
Securities for the Effectiveness Period and prepare and file with the Commission
such additional Registration Statements in order to register for resale under
the Securities Act all of the Registrable Securities; (ii) cause the related
Prospectus to be amended or supplemented by any required Prospectus supplement,
and as so supplemented or amended to be filed pursuant to Rule 424; and (iii)
respond as promptly as reasonably possible, and in any event within ten days, to
any comments received from the Commission with respect to the Registration
Statement or any amendment thereto and as promptly as reasonably possible
provide the Purchasers true and complete copies of all correspondence from and
to the Commission relating to the Registration Statement.
(c) Notify the Purchasers of Registrable Securities to be sold
and their counsel as promptly as reasonably possible, and (if requested by any
such Person) confirm such notice in writing no later than one Trading Day
following such request, of any of the following events: (i) the Commission
notifies the Company whether there will be a "review" of any Registration
Statement; (ii) the Commission comments in writing on any Registration Statement
(in which case the Company shall deliver to each Purchaser a copy of such
comments and of all written responses thereto); (iii) the Commission or any
other Federal or state governmental authority requests any amendment or
supplement to any Registration Statement or Prospectus or requests additional
information related thereto; (iv) the Commission issues any stop order
suspending the effectiveness of any Registration Statement or initiates any
Proceedings for that purpose; (v) the Company receives notice of any suspension
of the qualification or exemption from qualification of any Registrable
Securities for sale in any jurisdiction, or the initiation or threat of any
Proceeding for such purpose; (vi) the financial statements included in any
Registration Statement become ineligible for inclusion therein or any statement
made in any Registration Statement or Prospectus or any document incorporated or
deemed to be incorporated therein by reference is untrue in any material respect
or any revision to a Registration Statement, Prospectus or other document is
required so that it will not contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances under which they were
made, not misleading; or (vii) any Registration Statement or any post-effective
amendment is declared effective.
(d) Use its best efforts to avoid the issuance of or, if
issued, obtain the withdrawal of (i) any order suspending the effectiveness of
any Registration Statement or (ii) any suspension of the qualification (or
exemption from qualification) of any of the Registrable Securities for sale in
any jurisdiction, at the earliest practicable moment.
(e) Furnish to each Purchaser and its counsel, without charge,
at least one conformed copy of each Registration Statement and each amendment
thereto, including financial statements and schedules, all documents
incorporated or deemed to be incorporated therein by reference, and all exhibits
to the extent requested by such Person (including those previously furnished or
incorporated by reference) promptly after the filing of such documents with the
Commission.
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(f) Promptly deliver to each Purchaser and its counsel,
without charge, as many copies of the Prospectus or Prospectuses (including each
form of prospectus) and each amendment or supplement thereto as such Persons may
reasonably request. The Company hereby consents to the use of such Prospectus
and each amendment or supplement thereto by each of the selling Purchasers in
connection with the offering and sale of the Registrable Securities covered by
such Prospectus and any amendment or supplement thereto.
(g) (i) In the time and manner required by each Trading
Market, prepare and file with such Trading Market an additional shares listing
application covering all of the Registrable Securities; (ii) take all steps
necessary to cause such Registrable Securities to be approved for listing on
each Trading Market as soon as possible thereafter; (iii) provide to the
Purchasers evidence of such listing; and (iv) use its best efforts to maintain
the listing of such Registrable Securities on each such Trading Market or
another Eligible Market.
(h) Prior to any public offering of Registrable Securities,
use its best efforts to register or qualify or cooperate with the selling
Purchasers and their counsel in connection with the registration or
qualification (or exemption from such registration or qualification) of such
Registrable Securities for offer and sale under the securities or Blue Sky laws
of such jurisdictions within the United States as any Purchaser requests in
writing, to keep each such registration or qualification (or exemption
therefrom) effective during the Effectiveness Period and to do any and all other
acts or things necessary or advisable to enable the disposition in such
jurisdictions of the Registrable Securities covered by a Registration Statement,
except that the Company shall not for any such purpose be required to qualify
generally to do business as a foreign corporation in any jurisdiction where, but
for the requirements of this clause (h), it would not be obligated to be so
qualified or to consent to general service of process in any such jurisdiction.
(i) Upon the occurrence of any event described in Section
6.2(c)(vi), as promptly as reasonably possible, prepare a supplement or
amendment, including a post-effective amendment, to the Registration Statement
or a supplement to the related Prospectus or any document incorporated or deemed
to be incorporated therein by reference, and file any other required document so
that, as thereafter delivered, neither the Registration Statement nor such
Prospectus will contain an untrue statement of a material fact or omit to state
a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading.
(j) Comply with all applicable rules and regulations of the
Commission.
(k) Cooperate with the Purchasers to facilitate the timely
preparation and delivery of certificates representing Registrable Securities to
be delivered to a transferee pursuant to a Registration Statement, which
certificates shall be free, to the extent permitted by the Purchase Agreement,
of all restrictive legends, and to enable such Registrable Securities to be in
such denominations and registered in such names as any such Purchasers may
request.
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(l) Cooperate with any due diligence investigation undertaken
by the Purchasers in connection with the sale of Registrable Securities,
including without limitation by making available any documents and information;
provided that the Company will not deliver or make available to any Purchaser
material, nonpublic information unless such Purchaser specifically requests in
advance to receive material, nonpublic information and such Purchaser agrees to
maintain the confidentiality of such information and agrees not to sell or
transfer any securities of the Company except in compliance with applicable law.
6.3 Registration Expenses. The Company shall pay all fees and expenses
incident to the performance of or compliance with this Agreement by the Company,
including without limitation (a) all registration and filing fees and expenses,
including without limitation those related to filings with the Commission, any
Trading Market and in connection with applicable state securities or Blue Sky
laws, (b) printing expenses (including without limitation expenses of printing
certificates for Registrable Securities and of printing prospectuses requested
by the Purchasers), (c) messenger, telephone and delivery expenses, (d) fees and
disbursements of counsel for the Company, and (e) fees and expenses of all other
Persons retained by the Company in connection with the consummation of the
transactions contemplated by this Agreement.
6.4 Indemnification
(a) Indemnification by the Company. The Company shall,
notwithstanding any termination of this Agreement, indemnify and hold harmless
each Purchaser, the officers, directors, partners, members, agents, brokers
(including brokers who offer and sell Registrable Securities as principal as a
result of a pledge or any failure to perform under a margin call of Common
Stock), investment advisors and employees of each of them, each Person who
controls any such Purchaser (within the meaning of Section 15 of the Securities
Act or Section 20 of the Exchange Act) and the officers, directors, partners,
members, agents and employees of each such controlling Person, to the fullest
extent permitted by applicable law, from and against any and all Losses, as
incurred, arising out of or relating to any untrue or alleged untrue statement
of a material fact contained in the Registration Statement, any Prospectus or
any form of prospectus or in any amendment or supplement thereto or in any
preliminary prospectus, or arising out of or relating to any omission or alleged
omission of a material fact required to be stated therein or necessary to make
the statements therein (in the case of any Prospectus or form of prospectus or
supplement thereto, in light of the circumstances under which they were made)
not misleading, except to the extent, but only to the extent, that (i) such
untrue statements, alleged untrue statements, omissions or alleged omissions are
based solely upon information regarding such Purchaser furnished in writing to
the Company by such Purchaser expressly for use therein, or to the extent that
such information relates to such Purchaser or such Purchaser's proposed method
of distribution of Registrable Securities and was reviewed and expressly
approved in writing by such Purchaser expressly for use in the Registration
Statement, such Prospectus or such form of Prospectus or in any amendment or
supplement thereto or (ii) in the case of an occurrence of an event of the type
specified in Section 6.2(c)(iv)-(vi), the use by such Purchaser of an outdated
or defective Prospectus after the Company has notified such Purchaser in writing
that the Prospectus is outdated or defective and prior to the receipt by such
Purchaser of the Advice contemplated in Section 6.5. The Company shall notify
the Purchasers promptly of the
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institution, threat or assertion of any Proceeding of which the Company is aware
in connection with the transactions contemplated by this Agreement.
(b) Indemnification by Purchasers. Each Purchaser shall,
severally and not jointly, indemnify and hold harmless the Company, its
directors, officers, agents and employees, each Person who controls the Company
(within the meaning of Section 15 of the Securities Act and Section 20 of the
Exchange Act), and the directors, officers, agents or employees of such
controlling Persons, to the fullest extent permitted by applicable law, from and
against all Losses (as determined by a court of competent jurisdiction in a
final judgment not subject to appeal or review) arising solely out of or based
solely upon any untrue statement of a material fact contained in any
Registration Statement, any Prospectus, or any form of prospectus, or in any
amendment or supplement thereto, or arising solely out of or based solely upon
any omission of a material fact required to be stated therein or necessary to
make the statements therein not misleading to the extent, but only to the
extent, that such untrue statement or omission is contained in any information
so furnished in writing by such Purchaser to the Company specifically for
inclusion in such Registration Statement or such Prospectus or to the extent
that (i) such untrue statements or omissions are based solely upon information
regarding such Purchaser furnished in writing to the Company by such Purchaser
expressly for use therein, or to the extent that such information relates to
such Purchaser or such Purchaser's proposed method of distribution of
Registrable Securities and was reviewed and expressly approved in writing by
such Purchaser expressly for use in the Registration Statement, such Prospectus
or such form of Prospectus or in any amendment or supplement thereto or (ii) in
the case of an occurrence of an event of the type specified in Section
6.2(c)(iv)-(vi), the use by such Purchaser of an outdated or defective
Prospectus after the Company has notified such Purchaser in writing that the
Prospectus is outdated or defective and prior to the receipt by such Purchaser
of the Advice contemplated in Section 6.5. In no event shall the liability of
any selling Purchaser hereunder be greater in amount than the dollar amount of
the net proceeds received by such Purchaser upon the sale of the Registrable
Securities giving rise to such indemnification obligation.
(c) Conduct of Indemnification Proceedings. If any Proceeding
shall be brought or asserted against any Person entitled to indemnity hereunder
(an "INDEMNIFIED PARTY"), such Indemnified Party shall promptly notify the
Person from whom indemnity is sought (the "INDEMNIFYING PARTY") in writing, and
the Indemnifying Party shall assume the defense thereof, including the
employment of counsel reasonably satisfactory to the Indemnified Party and the
payment of all fees and expenses incurred in connection with defense thereof;
provided, that the failure of any Indemnified Party to give such notice shall
not relieve the Indemnifying Party of its obligations or liabilities pursuant to
this Agreement, except (and only) to the extent that it shall be finally
determined by a court of competent jurisdiction (which determination is not
subject to appeal or further review) that such failure shall have proximately
and materially adversely prejudiced the Indemnifying Party.
An Indemnified Party shall have the right to employ separate
counsel in any such Proceeding and to participate in the defense thereof, but
the fees and expenses of such counsel shall be at the expense of such
Indemnified Party or Parties unless: (i) the Indemnifying Party has agreed in
writing to pay such fees and expenses; or (ii) the Indemnifying Party shall have
failed promptly to assume the defense of such Proceeding and to employ counsel
reasonably satisfactory to such
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Indemnified Party in any such Proceeding; or (iii) the named parties to any such
Proceeding (including any impleaded parties) include both such Indemnified Party
and the Indemnifying Party, and such Indemnified Party shall have been advised
by counsel that a conflict of interest is likely to exist if the same counsel
were to represent such Indemnified Party and the Indemnifying Party (in which
case, if such Indemnified Party notifies the Indemnifying Party in writing that
it elects to employ separate counsel at the expense of the Indemnifying Party,
the Indemnifying Party shall not have the right to assume the defense thereof
and such counsel shall be at the expense of the Indemnifying Party). The
Indemnifying Party shall not be liable for any settlement of any such Proceeding
effected without its written consent, which consent shall not be unreasonably
withheld. No Indemnifying Party shall, without the prior written consent of the
Indemnified Party, effect any settlement of any pending Proceeding in respect of
which any Indemnified Party is a party, unless such settlement includes an
unconditional release of such Indemnified Party from all liability on claims
that are the subject matter of such Proceeding.
All fees and expenses of the Indemnified Party which under
this Section are the responsibility of the Indemnifying Party (including
reasonable fees and expenses to the extent incurred in connection with
investigating or preparing to defend such Proceeding in a manner not
inconsistent with this Section) shall be paid to the Indemnified Party, as
incurred, within ten Trading Days of written notice thereof to the Indemnifying
Party (regardless of whether it is ultimately determined that an Indemnified
Party is not entitled to indemnification hereunder; provided, that the
Indemnifying Party may require such Indemnified Party to undertake to reimburse
all such fees and expenses to the extent it is finally judicially determined
that such Indemnified Party is not entitled to indemnification hereunder).
(d) Contribution. If a claim for indemnification under Section
6.4(a) or (b) is unavailable to an Indemnified Party (by reason of public policy
or otherwise), then each Indemnifying Party, in lieu of indemnifying such
Indemnified Party, shall contribute to the amount paid or payable by such
Indemnified Party as a result of such Losses, in such proportion as is
appropriate to reflect the relative fault of the Indemnifying Party and
Indemnified Party in connection with the actions, statements or omissions that
resulted in such Losses as well as any other relevant equitable considerations.
The relative fault of such Indemnifying Party and Indemnified Party shall be
determined by reference to, among other things, whether any action in question,
including any untrue or alleged untrue statement of a material fact or omission
or alleged omission of a material fact, has been taken or made by, or relates to
information supplied by, such Indemnifying Party or Indemnified Party, and the
parties' relative intent, knowledge, access to information and opportunity to
correct or prevent such action, statement or omission. The amount paid or
payable by a party as a result of any Losses shall be deemed to include, subject
to the limitations set forth in Section 6.4(c), any reasonable attorneys' or
other reasonable fees or expenses incurred by such party in connection with any
Proceeding to the extent such party would have been indemnified for such fees or
expenses if the indemnification provided for in this Section was available to
such party in accordance with its terms.
The parties hereto agree that it would not be just and
equitable if contribution pursuant to this Section 6.4(d) were determined by pro
rata allocation or by any other method of allocation that does not take into
account the equitable considerations referred to in the immediately
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preceding paragraph. Notwithstanding the provisions of this Section 6.4(d), no
Purchaser shall be required to contribute, in the aggregate, any amount in
excess of the amount by which the proceeds actually received by such Purchaser
from the sale of the Registrable Securities subject to the Proceeding exceeds
the amount of any damages that such Purchaser has otherwise been required to pay
by reason of such untrue or alleged untrue statement or omission or alleged
omission. No Person guilty of fraudulent misrepresentation (within the meaning
of Section 11(f) of the Securities Act) shall be entitled to contribution from
any Person who was not guilty of such fraudulent misrepresentation.
The indemnity and contribution agreements contained in this
Section are in addition to any liability that the Indemnifying Parties may have
to the Indemnified Parties.
6.5 Dispositions. Each Purchaser agrees that it will comply with the
prospectus delivery requirements of the Securities Act as applicable to it in
connection with sales of Registrable Securities pursuant to the Registration
Statement. Each Purchaser further agrees that, upon receipt of a notice from the
Company of the occurrence of any event of the kind described in Sections
6.2(c)(iv), (v) or (vi), such Purchaser will discontinue disposition of such
Registrable Securities under the Registration Statement until such Purchaser's
receipt of the copies of the supplemented Prospectus and/or amended Registration
Statement contemplated by Section 6.2(i), or until it is advised in writing (the
"ADVICE") by the Company that the use of the applicable Prospectus may be
resumed, and, in either case, has received copies of any additional or
supplemental filings that are incorporated or deemed to be incorporated by
reference in such Prospectus or Registration Statement. The Company may provide
appropriate stop orders to enforce the provisions of this paragraph.
6.6 No Piggyback on Registrations. Except as and to the extent
specified in Schedule 3.1(o), neither the Company nor any of its security
holders (other than the Purchasers in such capacity pursuant hereto) may include
securities of the Company in the Registration Statement other than the
Registrable Securities, and the Company shall not after the date hereof enter
into any agreement providing any such right to any of its security holders.
6.7 Piggy-Back Registrations. If at any time during the Effectiveness
Period there is not an effective Registration Statement covering all of the
Registrable Securities and the Company shall determine to prepare and file with
the Commission a registration statement relating to an offering for its own
account or the account of others under the Securities Act of any of its equity
securities, other than on Form S-4 or Form S-8 (each as promulgated under the
Securities Act) or their then equivalents relating to equity securities to be
issued solely in connection with any acquisition of any entity or business or
equity securities issuable in connection with stock option or other employee
benefit plans, then the Company shall send to each Purchaser written notice of
such determination and if, within fifteen days after receipt of such notice, any
such Purchaser shall so request in writing, the Company shall include in such
registration statement all or any part of such Registrable Securities such
Purchaser requests to be registered.
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ARTICLE VII
MISCELLANEOUS
7.1 Termination. This Agreement may be terminated by the Company or any
Purchaser, by written notice to the other parties, if the Closing has not been
consummated by the third business day following the date of this Agreement;
provided that no such termination will affect the right of any party to sue for
any breach by the other party (or parties).
7.2 Fees and Expenses. At the Closing, the Company shall pay Heimdall
Investments Ltd. $15,000 for their legal fees and expenses incurred in
connection with the preparation and negotiation of the Transaction Documents. In
lieu of the foregoing payment, Heimdall Investments Ltd. may retain such amount
at the Closing. Except as expressly set forth in the Transaction Documents to
the contrary, 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 transfer agent fees,
stamp taxes and other taxes and duties levied in connection with the issuance of
the Securities.
7.3 Entire Agreement. The Transaction Documents, together with the
Exhibits and Schedules hereto and thereto, contain the entire understanding of
the parties with respect to the subject matter hereof and thereof 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. At or after the Closing, and without further
consideration, the Company will execute and deliver to the Purchasers such
further documents as may be reasonably requested in order to give practical
effect to the intention of the parties under the Transaction Documents.
7.4 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 in this Section 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 specified in
this Section 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 addresses for such notices and communications are those set forth on the
signature pages hereof, or such other address as may be designated in writing
hereafter, in the same manner, by such Person.
7.5 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 each of the Purchasers or, in the case of a waiver, by the
party against whom enforcement of any such waiver is sought. No waiver of any
default with respect to any provision, condition or requirement of this
Agreement shall be deemed to be a continuing waiver in the future or a waiver of
any subsequent default or a waiver of any other provision, condition or
requirement hereof, nor shall any delay or
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omission of either party to exercise any right hereunder in any manner impair
the exercise of any such right. Notwithstanding the foregoing, a waiver or
consent to depart from the provisions hereof with respect to a matter that
relates exclusively to the rights of Purchasers under Article VI and that does
not directly or indirectly affect the rights of other Purchasers may be given by
Purchasers holding at least a majority of the Registrable Securities to which
such waiver or consent relates.
7.6 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.
7.7 Successors and Assigns. This Agreement shall be binding upon and
inure to the benefit of the parties and their successors and permitted assigns.
The Company may not assign this Agreement or any rights or obligations hereunder
without the prior written consent of the Purchasers. Any Purchaser may assign
its rights under this Agreement to any Person to whom such Purchaser assigns or
transfers any Securities, but not to any other Person, provided such transferee
agrees in writing to be bound, with respect to the transferred Securities, by
the provisions hereof that apply to the "Purchasers."
7.8 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 that each Related Person is an intended third party
beneficiary of Section 4.8 and each Indemnified Party is an intended third party
beneficiary of Section 6.4 and (in each case) may enforce the provisions of such
Sections directly against the parties with obligations thereunder.
7.9 GOVERNING LAW; VENUE; WAIVER OF JURY TRAIL. THE CORPORATE LAWS OF
THE STATE OF DELAWARE SHALL GOVERN ALL ISSUES CONCERNING THE RELATIVE RIGHTS OF
THE COMPANY AND ITS STOCKHOLDERS. ALL QUESTIONS CONCERNING THE CONSTRUCTION,
VALIDITY, ENFORCEMENT AND INTERPRETATION OF THIS AGREEMENT SHALL BE GOVERNED BY
AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.
EACH PARTY HEREBY IRREVOCABLY SUBMITS TO THE NONEXCLUSIVE JURISDICTION OF THE
STATE AND FEDERAL COURTS SITTING IN THE CITY OF NEW YORK, BOROUGH OF MANHATTAN,
FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN CONNECTION HEREWITH OR WITH
ANY TRANSACTION CONTEMPLATED HEREBY OR DISCUSSED HEREIN (INCLUDING WITH RESPECT
TO THE ENFORCEMENT OF 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 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 VIA REGISTERED OR
CERTIFIED MAIL OR 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. THE COMPANY HEREBY WAIVES ALL
RIGHTS TO A TRIAL BY JURY.
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7.10 Survival. The representations, warranties, agreements and
covenants contained herein shall survive the Closing and the delivery, exercise
and/or conversion of the Securities, as applicable.
7.11 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.
7.12 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.
7.13 Rescission and Withdrawal Right. Notwithstanding anything to the
contrary contained in (and without limiting any similar provisions of) the
Transaction Documents, whenever any Purchaser exercises a right, election,
demand or option under a Transaction Document and the Company does not timely
perform its related obligations within the periods therein provided, then such
Purchaser may rescind or withdraw, in its sole discretion from time to time upon
written notice to the Company, any relevant notice, demand or election in whole
or in part without prejudice to its future actions and rights.
7.14 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 certificate or instrument.
7.15 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 agree to waive in any
action for specific performance of any such obligation the defense that a remedy
at law would be adequate.
7.16 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
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obligations of any other Purchaser under any Transaction Document. The decision
of each Purchaser to purchase Securities pursuant to this Agreement has been
made by such Purchaser independently of any other Purchaser and independently of
any information, materials, statements or opinions as to the business, affairs,
operations, assets, properties, liabilities, results of operations, condition
(financial or otherwise) or prospects of the Company or of any Subsidiary that
may have been made or given by any other Purchaser or by any agent or employee
of any other Purchaser, and no Purchaser or any of its agents or employees shall
have any liability to any other Purchaser (or any other Person) relating to or
arising from any such information, materials, statements or opinions. 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 acknowledges that no other Purchaser has
acted as agent for such Purchaser in connection with making its investment
hereunder and that no other Purchaser will be acting as agent of such Purchaser
in connection with monitoring its investment hereunder. 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.
7.17 Payment Set Aside. To the extent that the Company makes a payment
or payments to any Purchaser hereunder or pursuant to the other Transaction
Documents or any Purchaser 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 by 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.
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IN WITNESS WHEREOF, the parties hereto have caused this Securities
Purchase Agreement to be duly executed by their respective authorized
signatories as of the date first indicated above.
PFSweb, Inc.
By:
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Name:
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Title:
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Address for Notice:
500 North Central Expressway
Plano, Texas 75074
Facsimile No.: (972) 881-0145
Telephone No.: (972) 881-2900
Attn: Thomas J. Madden
With a copy to: Wolff & Samson PC
One Boland Drive
West Orange, NJ 07052
Facsimile No. (973) 530-2213
Telephone No. (973) 530-2013
Attn. Morris Bienenfeld, Esq.
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Exhibits:
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A Form of First Warrant
B Form of Second Warrant
C Opinion of Company Counsel
D Plan of Distribution
Schedules:
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3.1(a) Subsidiaries
3.1(f) Capitalization
3.1(k) Certain Fees
3.1(o) Registration Rights
3.1(r) Absence of Litigation