Exhibit 10.1
SECURITIES PURCHASE AGREEMENT
This Securities Purchase Agreement (this "AGREEMENT") is dated as of
April 14, 2005, among RCG COMPANIES INCORPORATED, a Delaware corporation (the
"COMPANY"), and the investors identified on the signature pages hereto (each, an
"INVESTOR" and collectively, the "INVESTORS").
WHEREAS, subject to the terms and conditions set forth in this
Agreement and pursuant to Section 4(2) of the Securities Act (as defined below)
and Rule 506 promulgated thereunder, the Company desires to issue and sell to
each Investor, and each Investor, severally and not jointly, desires to purchase
from the Company certain 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 Investors agree
as follows:
ARTICLE I.
DEFINITIONS
1.1 Definitions. In addition to the terms defined elsewhere in this Agreement,
for all purposes of this Agreement, the following terms shall have the meanings
indicated in this Section 1.1:
"ACTION" means any action, suit, inquiry, notice of violation,
proceeding (including any partial proceeding such as a deposition) or
investigation pending or threatened in writing against or affecting the Company,
any Subsidiary or any of their respective properties before or by any court,
arbitrator, governmental or administrative agency, regulatory authority
(federal, state, county, local or foreign), stock market, stock exchange or
trading facility.
"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.
"BUSINESS DAY" means any day except Saturday, Sunday and any
day which is a federal legal holiday or a day on which banking institutions in
the State of New York are authorized or required by law or other governmental
action to close.
"CERTIFICATE OF DESIGNATION" shall mean a Certificate of
Designation relating to the Shares to be filed prior to the Closing by the
Company with the Secretary of State of the State of Delaware setting forth the
rights, preferences and privileges of the Shares, in the form attached as
Exhibit A hereto.
"CLOSING" means the closing of the purchase and sale of Shares
and Warrants contemplated by Section 2.1.
"CLOSING DATE" means the Business Day immediately following
the date on which all of the conditions set forth in Sections 5.1 and 5.2 hereof
are satisfied, or such other date as the parties may agree.
"COMMISSION" means the Securities and Exchange Commission.
"COMMON STOCK" means the common stock of the Company, par
value $.04 per share, and any securities into which such common stock may
hereafter be reclassified, converted or exchanged.
"COMMON STOCK EQUIVALENTS" means any securities of the Company
or any Subsidiary which entitle the holder thereof to acquire Common Stock at
any time, including without limitation, any debt, preferred stock, rights,
options, warrants or other instrument that is at any time convertible into or
exchangeable for, or otherwise entitles the holder thereof to receive, Common
Stock or other securities that entitle the holder to receive, directly or
indirectly, Common Stock.
"COMPANY COUNSEL" means Katten Muchin Zavis Rosenman.
"COMPANY DELIVERABLES" has the meaning set forth in Section
2.2(a).
"DISCLOSURE MATERIALS" has the meaning set forth in Section
3.1(h).
"EFFECTIVE DATE" means the date that the initial Registration
Statement required by Section 2(a) of the Registration Rights Agreement is first
declared effective by the Commission.
"EVALUATION DATE" has the meaning set forth in Section 3.1(r).
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended.
"FAREQUEST" means Farequest Holdings, Inc.
"FAREQUEST NOTE" means that certain promissory note dated
February 1, 2004, which the Company issued to the Farequest stockholders'
representative in connection with that certain Agreement and Plan of Merger
dated November 30, 2004 by and among the Company, WTI Acquisition, Inc.,
Farequest and the other parties set forth therein.
"FAREQUEST VOTING AGREEMENT" means that certain voting
agreement and proxy, by and between the Investors' voting representative and the
Farequest stockholders' representative as holder of the Farequest Note in the
form attached as Exhibit B hereto, dated as of April 14, 2005.
"FIRST MEETING" has the meaning set forth in Section 4.14(b).
"GAAP" means U.S. generally accepted accounting principles.
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"INTELLECTUAL PROPERTY RIGHTS" has the meaning set forth in
Section 3.1(o).
"INVESTMENT AMOUNT" means, with respect to each Investor, the
Investment Amount indicated on such Investor's signature page to this Agreement.
"INVESTOR DELIVERABLES" has the meaning set forth in Section
2.2(b).
"INVESTOR PARTY" has the meaning set forth in Section 4.7.
"KNOWLEDGE" means the actual knowledge of any executive
officer of the Company after due inquiry.
"LIEN" means any lien, charge, encumbrance, security interest,
right of first refusal or other restrictions of any kind.
"LOSSES" has the meaning set forth in Section 4.7.
"MATERIAL ADVERSE EFFECT" means any of (i) a material and
adverse effect on the legality, validity or enforceability of any Transaction
Document, (ii) a material and 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) an adverse impairment to the
Company's ability to perform on a timely basis its obligations under any
Transaction Document.
"NEW YORK COURTS" means the state and federal courts sitting
in the City of New York, Borough of Manhattan.
"OUTSIDE DATE" means April 29, 2005.
"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.
"PLACEMENT AGENTS" means Roth Capital Partners, LLC and Bryant
Park Capital.
"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.
"REGISTRATION RIGHTS AGREEMENT" means the Registration Rights
Agreement, dated as of the date of this Agreement, among the Company and the
Investors, in the form of Exhibit C hereto.
"REGISTRABLE SECURITIES" means the Warrant Shares and the
Underlying Shares issued and issuable under the Warrants and the Shares,
respectively (without regard to any exercise or conversion caps thereunder),
together with any securities issued or issuable upon any stock split, dividend
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or other distribution, recapitalization or similar event, or any conversion or
exercise price adjustments with respect to any such securities.
"REGISTRATION STATEMENT" means a registration statement
meeting the requirements set forth in the Registration Rights Agreement and
covering the resale by the Investors of the Underlying Shares and the Warrant
Shares.
"RESET PERIOD" means the 20 Trading Days immediately following
the filing by the Company of a Current Report on Form 8-K disclosing the
effectiveness of the Reverse Stock Split on the American Stock Exchange.
"REVERSE STOCK SPLIT" means a 1-10 reverse stock split of the
Company's Common Stock.
"RULE 144" means Rule 144 promulgated by the Commission
pursuant to the Securities Act, as such Rule may be amended from time to time,
or any similar rule or regulation hereafter adopted by the Commission having
substantially the same effect as such Rule.
"SEC REPORTS" has the meaning set forth in Section 3.1(h).
"SECURITIES" means the Shares, the Underlying Shares, the
Warrants and the Warrant Shares.
"SECURITIES ACT" means the Securities Act of 1933, as amended.
"SHARES" means the shares of Series C Convertible Preferred
Stock issuable to the Investors pursuant to this Agreement, having the rights,
preferences and privileges set forth in the Certificate of Designation.
"SHORT SALES" include, without limitation, all "short sales"
as defined in Rule 200 promulgated under Regulation SHO under the Exchange Act
and all types of direct and indirect stock pledges, forward sale contracts,
options, puts, calls, swaps and similar arrangements (including on a total
return basis), and sales and other transactions through non-US broker dealers or
foreign regulated brokers.
"STOCKHOLDER APPROVAL" has the meaning set forth in Section
4.14.
"SUBSIDIARY" means any "significant subsidiary" as defined in
Rule 1-02(w) of the Regulation S-X promulgated by the Commission under the
Exchange Act.
"TRADING DAY" means (i) a day on which the Common Stock is
traded on a Trading Market (other than the OTC Bulletin Board), or (ii) if the
Common Stock is not listed on a Trading Market (other than the OTC Bulletin
Board), a day on which the Common Stock is traded in the over-the-counter
market, as reported by the OTC Bulletin Board, or (iii) if the Common Stock is
not quoted on any Trading Market, a day on which the Common Stock is quoted in
the over-the-counter market as reported by the National Quotation Bureau
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Incorporated (or any similar organization or agency succeeding to its functions
of reporting prices); provided, that in the event that the Common Stock is not
listed or quoted as set forth in (i), (ii) and (iii) hereof, then Trading Day
shall mean a Business Day.
"TRADING MARKET" means whichever of the New York Stock
Exchange, the American Stock Exchange, the NASDAQ National Market, the NASDAQ
SmallCap Market or OTC Bulletin Board on which the Common Stock is listed or
quoted for trading on the date in question.
"TRANSACTION DOCUMENTS" means this Agreement, the Certificate
of Designation, the Registration Rights Agreement, the Warrants, the Voting
Agreement, the Farequest Voting Agreement and any other documents or agreements
executed by the Company in connection with the transactions contemplated
hereunder.
"UNDERLYING SHARES" means the shares of Common Stock issuable
upon conversion of the Shares.
"VOTING AGREEMENT" means collectively those certain voting
agreements and proxies, by and between the Investors' voting representative and
the stockholders identified therein, dated as of April 14, 2005, in the form of
Exhibit E hereto.
"WARRANTS" means the Common Stock purchase warrants in the
form of Exhibit F hereto issuable to the Investors at the Closing.
"WARRANT SHARES" means the shares of Common Stock issuable
upon exercise of the Warrants.
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 each Investor, and
each Investor shall, severally and not jointly, purchase from the Company, the
Shares and the Warrants contemplated by Section 2.2. The Closing shall take
place at the offices of Bryan Cave LLP, 1290 Avenue of the Americas, New York,
NY 10104 on the Closing Date 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 Investor the following (the "COMPANY
DELIVERABLES"):
(i) one or more stock certificates, evidencing Shares with a
stated value equal to such Investor's Investment Amount, registered in the name
of such Investor;
(ii) a Warrant, registered in the name of such Investor,
pursuant to which such Investor shall have the right to acquire the number of
Warrant Shares equal to 40% of the number of Underlying Shares as would be
issuable upon a conversion in full of the Shares issuable to such Investor in
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accordance with Section 2.2(a)(i) (without regard to any limitations on
conversion of the Shares);
(iii) a copy of the executed, filed and effective Certificate
of Designation, accompanied by a certificate evidencing the acceptance thereof
by the Secretary of State of the State of Delaware;
(iv) the legal opinion of Company Counsel, in agreed form,
addressed to the Investors; and
(v) the Registration Rights Agreement, duly executed by the
Company.
(b) At the Closing, each Investor shall deliver or cause to be
delivered to the Company the following (the "INVESTOR DELIVERABLES"):
(i) its Investment Amount, in United States dollars and in
immediately available funds, by wire transfer to an account designated in
writing by the Company for such purpose; and
(ii) the Registration Rights Agreement, duly executed by such
Investor.
ARTICLE III.
REPRESENTATIONS AND WARRANTIES
3.1 Representations and Warranties of the Company. The Company hereby
makes the following representations and warranties to each Investor:
(a) Subsidiaries. The Company has no direct or indirect
Subsidiaries other than as specified in the SEC Reports. 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 and all 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.
(b) Organization and Qualification. The Company and each
Subsidiary are duly incorporated or otherwise organized, validly existing and in
good standing under the laws of the respective 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 respective businesses 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. The Company
and each Subsidiary are duly qualified to conduct its respective businesses and
are 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
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qualified or in good standing, as the case may be, could not, individually or in
the aggregate, have or reasonably be expected to result in 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 thereunder. The execution and delivery of each Transaction Document
by the Company and the consummation by it of the transactions contemplated
thereby have been duly authorized by all necessary action on the part of the
Company and no further action is required by the Company in connection with such
authorization other than the requirement that the Company obtain the Stockholder
Approval as contemplated herein. Each Transaction Document has been (or upon
delivery will have been) duly executed by the Company and, when delivered in
accordance with the terms hereof, will constitute the valid and binding
obligation of the Company enforceable against the Company in accordance with its
terms, except as such enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium, liquidation or similar laws relating to,
or affecting generally the enforcement of, creditors' rights and remedies or by
other equitable principles of general application, and except as rights to
indemnity and contribution may be limited by the federal securities laws and
underlying public policy.
(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 thereby do not and will not (i) conflict with or
violate any provision of the Company's or any Subsidiary's certificate or
articles of incorporation, bylaws or other organizational or charter documents,
or (ii) conflict with, or constitute a default (or an event that with notice or
lapse of time or both would become a default) under, or give to others any
rights of termination, amendment, acceleration or cancellation (with or without
notice, lapse of time or both) of, any agreement, credit facility, debt or other
instrument (evidencing a Company or Subsidiary debt or otherwise) or other
understanding to which the Company or any Subsidiary is a party or by which any
property or asset of the Company or any Subsidiary is bound or affected, or
(iii) result in a violation of any law, rule, regulation, order, judgment,
injunction, decree or other restriction of any court or governmental authority
to which the Company or a Subsidiary is subject (including federal and state
securities laws and regulations), or by which any property or asset of the
Company or a Subsidiary is bound or affected; except (A) in the case of each of
clauses (ii) and (iii), such as could not, individually or in the aggregate,
have or reasonably be expected to result in a Material Adverse Effect and (B)
that Stockholder Approval will be required to honor conversions of Shares and
exercises of Warrants and to effectuate the Reverse Stock Split.
(e) Filings, Consents and Approvals. The Company is not
required to obtain any consent, waiver, authorization or order of, give any
notice to, or make any filing or registration with, any court or other federal,
state, local or other governmental authority or other Person in connection with
the execution, delivery and performance by the Company of the Transaction
Documents other than (i) the filing with the Commission of one or more
Registration Statements in accordance with the requirements of the Registration
Rights Agreement, (ii) filings required by state securities laws, (iii) the
filing of a Notice of Sale of Securities on Form D with the Commission under
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Regulation D of the Securities Act (iv) the filings required in accordance with
Section 4.5, (v) the filing of proxy materials with the Commission in connection
with the Stockholder Approval, (vi) the filing of an amendment to the Company's
charter to reflect the Reverse Stock Split, (vii) filings, consents and
approvals required by the rules and regulations of the American Stock Exchange,
and (viii) those that have been made or obtained prior to the date of this
Agreement.
(f) Issuance of the Securities. The Securities have been duly
authorized and, the Shares, Underlying Shares and Warrant Shares, when issued
and paid for in accordance with the Transaction Documents, will be duly and
validly issued, fully paid and nonassessable, free and clear of all Liens. The
Company has reserved from its duly authorized capital stock the shares of Common
Stock issuable pursuant to this Agreement and the Warrants in order to issue the
Shares and the Warrant Shares.
(g) Capitalization. Except as otherwise disclosed in Schedule
3.1(g), the number of shares and type of all authorized, issued and outstanding
capital stock of the Company, and all shares of Common Stock reserved for
issuance under the Company's various option and incentive plans, is disclosed in
the SEC Reports. Except as have been waived, no securities of the Company are
entitled to preemptive or similar rights, and no Person has any right of first
refusal, preemptive right, right of participation, or any similar right to
participate in the transactions contemplated by the Transaction Documents.
Except as disclosed in the SEC Reports or Schedule 3.1(g), there are no
outstanding options, warrants, scrip 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.
Except as set forth in Schedule 3.1(g), the issue and sale of the Securities
will not, immediately or with the passage of time, obligate the Company to issue
shares of Common Stock or other securities to any Person (other than the
Investors) 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.
(h) 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 twelve months
preceding the date hereof (or such shorter period as the Company was required by
law to file such reports) (the foregoing materials being collectively referred
to herein as the "SEC REPORTS" and, together with the Schedules to this
Agreement (if any), the "DISCLOSURE MATERIALS") on a timely basis or has timely
filed a valid extension of such time of filing and has filed any such SEC
Reports prior to the expiration of any such extension. 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,
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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
GAAP applied on a consistent basis during the periods involved, except as may be
otherwise specified in such financial statements or the notes thereto, and
fairly present in all material respects the financial position of the Company
and its consolidated Subsidiaries as of and for the dates thereof and the
results of operations and cash flows for the periods then ended, subject, in the
case of unaudited statements, to normal, immaterial, year-end audit adjustments.
(i) 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 has had or that could reasonably be expected to result in a
Material Adverse Effect, (ii) the Company has not incurred any liabilities
(contingent or otherwise) other than (A) trade payables, accrued expenses and
other liabilities incurred in the ordinary course of business consistent with
past practice and (B) liabilities not required to be reflected in the Company's
financial statements pursuant to GAAP or required to be disclosed in filings
made with the Commission, and (C) liabilities that have not had or that could
not reasonably be expected to result in a Material Adverse Effect, (iii) the
Company has not altered its method of accounting except as required by GAAP 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 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
incentive plans. The Company does not have pending before the Commission any
request for confidential treatment of information.
(j) Litigation. There is no Action which (i) adversely affects
or challenges the legality, validity or enforceability of any of the Transaction
Documents or the Securities or (ii) except as disclosed in the SEC Reports, is
reasonably expected to result in a Material Adverse Effect. Neither the Company
nor any Subsidiary, nor any director or officer thereof (in his or her capacity
as such), is or has been the subject of any Action involving a claim of
violation of or liability under federal or state securities laws or a claim of
breach of fiduciary duty, except as disclosed in the SEC Reports. There has not
been, and to the Knowledge of the Company, there is not pending any
investigation by the Commission involving the Company or any current or former
director or officer of the Company (in his or her capacity as such). The
Commission has not issued any stop order or other order suspending the
effectiveness of any registration statement filed by the Company or any
Subsidiary under the Exchange Act or the Securities Act.
(k) Labor Relations. No material labor dispute exists or, to
the Knowledge of the Company, is imminent with respect to any of the employees
of the Company.
(l) Compliance. Except as disclosed in the SEC Reports,
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
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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, debenture, promissory note 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 reasonably
be expected to result in a Material Adverse Effect. The Company is in compliance
with all effective requirements of the Sarbanes-Oxley Act of 2002, as amended,
and the rules and regulations thereunder, that are applicable to it, except
where such noncompliance could not have or reasonably be expected to result in a
Material Adverse Effect.
(m) 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 reasonably be expected to result in a Material Adverse Effect, and
neither the Company nor any Subsidiary has received any notice of proceedings
relating to the revocation or modification of any such permits.
(n) Title to Assets. Except as set forth in Schedule 3.1(n),
the Company and the Subsidiaries have good and marketable title in fee simple to
all real property owned by them that is material to their respective businesses
and good and marketable title in all personal property owned by them that is
material to their respective businesses, 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. 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, except as could not, individually or in the
aggregate, have or reasonably be expected to result in a Material Adverse
Effect.
(o) 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, individually or in the aggregate, have or reasonably
be expected to result in a Material Adverse Effect (collectively, the
"INTELLECTUAL PROPERTY RIGHTS"). Neither the Company nor any Subsidiary has
received a written notice that the Intellectual Property Rights used by the
Company or any Subsidiary violates or infringes upon the rights of any Person.
Except as set forth in the SEC Reports, 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.
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(p) Insurance. The Company and the Subsidiaries are insured by
insurers of recognized financial responsibility against such losses and risks
and in such amounts which are prudent and customary in the businesses in which
the Company and the Subsidiaries are engaged. The Company has no reason to
believe that it will not be able to renew its and the Subsidiaries' 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 on
terms consistent with market for the Company's and such Subsidiaries' respective
lines of business.
(q) Transactions With Affiliates and Employees. Except as set
forth in the SEC Reports, 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.
(r) 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 generally accepted accounting principles and to maintain asset
accountability, (iii) access to assets is permitted only in accordance with
management's general or specific authorization, and (iv) the recorded
accountability for assets is compared with the existing assets at reasonable
intervals and appropriate action is taken with respect to any differences. The
Company has established disclosure controls and procedures (as defined in
Exchange Act Rules 13a-15(e) and 15d-15(e)) for the Company and designed such
disclosure controls and procedures to provide reasonable assurance that material
information relating to the Company, including its Subsidiaries, is made known
to the certifying officers by others within those entities, particularly during
the period in which the Company's Form 10-K or 10-Q, as the case may be, is
being prepared. The Company's certifying officers have evaluated the
effectiveness of the Company's disclosure controls and procedures in accordance
with Item 307 of Regulation S-K under the Exchange Act as of the Company's most
recent fiscal quarter-end or fiscal year-end (such date, the "EVALUATION DATE").
The Company presented in its most recently filed Form 10-K or Form 10-Q the
conclusions of the certifying officers about the effectiveness of the disclosure
controls and procedures based on their evaluations as of the Evaluation Date.
During the fiscal quarter ended on the Evaluation Date, there have been no
significant changes in the Company's internal controls (as such term is defined
in Item 308(c) of Regulation S-K under the Exchange Act) or, to the Company's
Knowledge, in other factors that could significantly affect the Company's
internal controls.
(s) Solvency. Based on the financial condition of the Company
as of the Closing Date (and assuming that the Closing shall have occurred), (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
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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).
(t) Certain Fees. Except as payable to the Placement Agents,
no brokerage or finder's fees or commissions are or will be payable by the
Company to any broker, financial advisor or consultant, finder, placement agent,
investment banker, bank or other Person with respect to the transactions
contemplated by this Agreement. The Investors shall have no obligation with
respect to any fees or with respect to any claims (other than such fees or
commissions owed by an Investor pursuant to agreements entered into by such
Investor which fees or commissions shall be the sole responsibility of such
Investor) made by or on behalf of other Persons for fees of a type contemplated
in this Section that may be due in connection with the transactions contemplated
by this Agreement.
(u) Certain Registration Matters. Assuming the accuracy of the
Investors' representations and warranties set forth in Section 3.2(b)-(e), no
registration under the Securities Act is required for the offer, sale and
issuance of the Securities by the Company to the Investors under the Transaction
Documents. The Company is eligible to register its Common Stock for resale by
the Investors under Form S-3 promulgated under the Securities Act. Except as
specified in Schedule 3.1(u), 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.
(v) Listing and Maintenance Requirements. Except as specified
in the SEC Reports, the Company has not, in the two years preceding the date
hereof, received notice from any Trading Market to the effect that the Company
is not in compliance with the listing or maintenance requirements thereof. Other
than as to stock price and net worth, the Company is, and has no reason to
believe that it will not in the foreseeable future continue to be, in compliance
with the listing and maintenance requirements for continued listing of the
Common Stock on the Trading Market on which the Common Stock is currently listed
or quoted. Except in connection with Section 4.14 herein, the issuance and sale
of the Securities under the Transaction Documents does not contravene the rules
and regulations of the Trading Market on which the Common Stock is currently
listed or quoted, and no approval of the stockholders of the Company thereunder
is required for the Company to issue and deliver to the Investors the Securities
contemplated by the Transaction Documents.
12
(w) Investment Company. The Company is not, and is not an
Affiliate of, and immediately following the Closing will not have become, an
"investment company" within the meaning of the Investment Company Act of 1940,
as amended.
(x) Application of Takeover Protections. The Company has taken
all necessary action, if any, in order to render inapplicable any control share
acquisition, business combination, poison pill (including any distribution under
a rights agreement) or other similar anti-takeover provision under the Company's
Certificate of Incorporation (or similar charter documents) or the laws of its
state of incorporation that is or could become applicable to the Investors as a
result of the Investors and the Company fulfilling their obligations or
exercising their rights under the Transaction Documents, including without
limitation the Company's issuance of the Securities and the Investors' ownership
of the Securities.
(y) No Additional Agreements. The Company does not have any
agreement or understanding with any Investor with respect to the transactions
contemplated by the Transaction Documents other than as specified in the
Transaction Documents.
(z) Disclosure. The Company confirms that neither it nor any
Person acting on its behalf has provided any Investor or its respective agents
or counsel with any information that the Company believes constitutes material,
non-public information except insofar as the existence and terms of the proposed
transactions hereunder may constitute such information. The Company understands
and confirms that the Investors will rely on the foregoing representations and
covenants in effecting transactions in securities of the Company. All disclosure
provided to the Investors regarding the Company, its business and the
transactions contemplated hereby, furnished by or on behalf of the Company
(including the Company's representations and warranties set forth in this
Agreement) 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.
3.2 Representations and Warranties of the Investors. Each Investor
hereby, for itself and for no other Investor, represents and warrants to the
Company as follows:
(a) Organization; Authority. Such Investor 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 applicable Transaction Documents and otherwise to carry out
its obligations thereunder. The execution, delivery and performance by such
Investor of the transactions contemplated by this Agreement has been duly
authorized by all necessary corporate or, if such Investor is not a corporation,
such partnership, limited liability company or other applicable like action, on
the part of such Investor. Each of this Agreement and the Registration Rights
Agreement has been duly executed by such Investor, and when delivered by such
Investor in accordance with terms hereof, will constitute the valid and legally
binding obligation of such Investor, enforceable against it in accordance with
its terms, except as such enforceability may be limited by applicable
13
bankruptcy, insolvency, reorganization, moratorium, liquidation or similar laws
relating to, or affecting generally the enforcement of, creditors' rights and
remedies or by other equitable principles of general application.
(b) Investment Intent. Such Investor 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 Investor's right at all times to
sell or otherwise dispose of all or any part of such Securities in compliance
with applicable federal and state securities laws. Subject to the immediately
preceding sentence, nothing contained herein shall be deemed a representation or
warranty by such Investor to hold the Securities for any period of time. Such
Investor is acquiring the Securities hereunder in the ordinary course of its
business. Such Investor does not have any agreement or understanding, directly
or indirectly, with any Person to distribute any of the Securities.
(c) Investor Status. At the time such Investor was offered the
Securities, it was, and at the date hereof it is, and on each date on which it
exercises Warrants it will be, an "accredited investor" as defined in Rule
501(a) under the Securities Act. Such Investor is not a registered broker-dealer
under Section 15 of the Exchange Act.
(d) General Solicitation. Such Investor is not purchasing the
Securities as a result of any advertisement, article, notice or other
communication regarding the Securities published in any newspaper, magazine or
similar media or broadcast over television or radio or presented at any seminar,
any registration statement or prospectus, or any other general solicitation or
general advertisement.
(e) Access to Information. Such Investor 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 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 Investor or its representatives or counsel shall modify, amend
or affect such Investor'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) Certain Trading Activities. Such Investor has not directly
or indirectly, nor has any Person acting on behalf of or pursuant to any
understanding with such Investor, engaged in any transactions in the securities
of the Company (including, without limitations, any Short Sales involving the
Company's securities) since the earlier to occur of (1) the time that such
Investor was first contacted by the Company, any Placement Agent or any other
Person regarding an investment in the Company and (2) the 30th day prior to the
date of this Agreement.
14
(g) Limited Ownership. The purchase by such Investor of the
Securities issuable to it at the Closing will not result in such Investor
(individually or together with other Person with whom such Investor has
identified, or will have identified, itself as part of a "group" in a public
filing made with the Commission involving the Company's securities) acquiring,
or obtaining the right to acquire, in excess of 19.999% of the outstanding
shares of Common Stock or the voting power of the Company on a post transaction
basis that assumes that the Closing shall have occurred. Such Investor does not
presently intend to, alone or together with others, make a public filing with
the Commission to disclose that it has (or that it together with such other
Persons have) acquired, or obtained the right to acquire, as a result of the
Closing (when added to any other securities of the Company that it or they then
own or have the right to acquire), in excess of 19.999% of the outstanding
shares of Common Stock or the voting power of the Company on a post transaction
basis that assumes that the Closing shall have occurred.
(h) Independent Investment Decision. Such Investor has
independently evaluated the merits of its decision to purchase Securities
pursuant to the Transaction Documents, and such Investor confirms that it has
not relied on the advice of any other Investor's business and/or legal counsel
in making such decision. Such Investor has not relied on the business or legal
advice of any Placement Agents or any of their respective agents, counsel or
Affiliates in making its investment decision hereunder, and confirms that none
of such Persons has made any representations or warranties to such Investor in
connection with the transactions contemplated by the Transaction Documents.
The Company acknowledges and agrees that no Investor has made or makes any
representations or warranties with respect to the transactions contemplated
hereby other than those specifically set forth in this Section 3.2.
ARTICLE IV.
OTHER AGREEMENTS OF THE PARTIES
4.1 (a) Securities may only be disposed of in compliance with state and
federal securities laws. In connection with any transfer of the Securities other
than pursuant to an effective registration statement, to the Company, to an
Affiliate of an Investor or in connection with a pledge as contemplated in
Section 4.1(b), the Company may require the transferor thereof to provide to the
Company an opinion of counsel selected by the transferor and reasonably
acceptable to the Company, the form and substance of which opinion shall be
reasonably satisfactory to the Company, to the effect that such transfer does
not require registration of such transferred Securities under the Securities
Act.
(b) Certificates evidencing the Securities will contain the
following legend, until such time as they are not required under Section 4.1(c):
[NEITHER THESE SECURITIES NOR THE SECURITIES ISSUABLE UPON
[EXERCISE] [CONVERSION] OF THESE SECURITIES HAVE BEEN
REGISTERED] [THESE SECURITIES HAVE NOT BEEN REGISTERED] WITH
THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES
COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM
REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
15
"SECURITIES ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED OR
SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION
FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH
APPLICABLE STATE SECURITIES LAWS AS EVIDENCED BY A LEGAL
OPINION OF COUNSEL TO THE TRANSFEROR TO SUCH EFFECT, THE
SUBSTANCE OF WHICH SHALL BE REASONABLY ACCEPTABLE TO THE
COMPANY. [THESE SECURITIES AND THE SECURITIES ISSUABLE UPON
EXERCISE OF THESE SECURITIES] [THESE SECURITIES] MAY BE
PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT SECURED
BY SUCH SECURITIES.
The Company acknowledges and agrees that an Investor may from
time to time pledge, and/or grant a security interest in some or all of the
Securities pursuant to a bona fide margin agreement in connection with a bona
fide margin account and, if required under the terms of such agreement or
account, such Investor may transfer pledged or secured Securities to the
pledgees or secured parties. Such a pledge or transfer would not be subject to
approval or consent of the Company and no legal opinion of legal counsel to the
pledgee, secured party or pledgor shall be required in connection with the
pledge, but such legal opinion may be required in connection with a subsequent
transfer following default by the Investor transferee of the pledge. No notice
shall be required of such pledge. At the appropriate Investor'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.
(c) Certificates evidencing the Underlying Shares and Warrant
Shares shall not contain any legend (including the legend set forth in Section
4.1(b)): (i) following a sale of such Securities pursuant to an effective
registration statement (including the Registration Statement), or (ii) following
a sale of such Underlying Shares or Warrant Shares pursuant to Rule 144
(assuming the transferor is not an Affiliate of the Company), or (iii) once such
Underlying Shares or Warrant Shares are eligible for sale under Rule 144(k). 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.
(d) The Investors covenant and agree that in order to
effectuate any transfer of their Shares they must deliver the certificates
therefor to the Company or its transfer agent for registration of such
transferred Shares in the name of the transferee.
4.2 Furnishing of Information. (a) As long as any Investor owns the
Securities, the Company covenants to timely file (or obtain extensions in
respect thereof and file within the applicable grace period) all reports
16
required to be filed by the Company after the date hereof pursuant to the
Exchange Act. Upon request of any such Person, the Company shall deliver to such
Person a written certification of a duly authorized officer as to whether it has
complied with the preceding sentence. As long as any Investor owns Securities,
if the Company is not required to file reports pursuant to such laws, it will
prepare and furnish to the Investors and make publicly available in accordance
with Rule 144(c) such information as is required for the Investors to sell the
Underlying Shares and Warrant Shares under Rule 144. The Company further
covenants that it will take such further action as any holder of Securities may
reasonably request, all to the extent reasonably required from time to time to
enable such Person to sell the Underlying Shares and Warrant Shares without
registration under the Securities Act within the limitation of the exemptions
provided by Rule 144.
(b) Each Investor agrees to provide such information as may be
requested by the Trading Market or the Commission in connection with the
transaction contemplated hereby.
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 Securities to the Investors.
4.4 Subsequent Registrations. Other than a Registration Statement,
prior to the Effective Date, the Company may not file any registration statement
(other than on Form S-8) with the Commission with respect to any securities of
the Company, except that, if (x) the Company shall have filed the initial
Registration Statement required under Section 2(a) of the Registration Rights
Agreement by the Filing Date (as defined in the Registration Rights Agreement)
and (y) 31 calendar days shall have elapsed from the date of such filing, then
the Company may only file another registration statement if required to comply
with outstanding registration obligations to other Persons following such 31
calendar days and prior to the Effective Date, or if the Company has been
notified by the Commission that such initial Registration Statement will not be
subject to further review or Commission comment, the Company may not file such
other registration statement until following the Effective Date.
4.5 Securities Laws Disclosure; Publicity. By 9:00 a.m. (New York time)
on the Trading Day following the execution of this Agreement, and by 9:00 a.m.
(New York time) on the Trading Day following the Closing Date, the Company shall
issue press releases disclosing the transactions contemplated hereby and the
Closing. On the Trading Day following the execution of this Agreement the
Company will file a Current Report on Form 8-K disclosing the material terms of
the Transaction Documents (and attach as exhibits thereto the Transaction
Documents), and on the Trading Day following the Closing Date the Company will
file an additional Current Report on Form 8-K to disclose the Closing. In
addition, the Company will make such other filings and notices in the manner and
time required by the Commission and the Trading Market on which the Common Stock
is listed. Notwithstanding the foregoing, the Company shall not publicly
disclose the name of any Investor, or include the name of any Investor in any
17
filing with the Commission (other than the Registration Statement and any
exhibits to filings made in respect of this transaction in accordance with
filings required under the Exchange Act) or any regulatory agency or Trading
Market, without the prior written consent of such Investor, except to the extent
such disclosure is required by law or Trading Market regulations.
4.6 Limitation on Issuance of Future Priced Securities. During the six
months following the Closing Date, the Company shall not issue any future priced
securities other than in connection with business combinations.
4.7 Indemnification of Investors. In addition to the indemnity provided
in the Registration Rights Agreement, the Company will indemnify and hold the
Investors and their directors, trustees, officers, stockholders, partners,
employees and agents (each, an "INVESTOR PARTY") harmless from any and all
losses, liabilities, obligations, claims, contingencies, damages, costs and
expenses, including all judgments, amounts paid in settlements, court costs and
reasonable attorneys' fees and costs of investigation (collectively, "Losses")
that any such Investor Party may suffer or incur as a result of or relating to
any misrepresentation, breach or inaccuracy of any representation, warranty,
covenant or agreement made by the Company in any Transaction Document. In
addition to the indemnity contained herein, the Company will reimburse each
Investor Party for its reasonable legal and other expenses (including the cost
of any investigation, preparation and travel in connection therewith) incurred
in connection therewith, as such expenses are incurred.
4.8 Non-Public Information. The Company covenants and agrees that
neither it nor any other Person acting on its behalf will provide any Investor
or its agents or counsel with any information that the Company believes
constitutes material non-public information, unless prior thereto such Investor
shall have executed a written agreement regarding the confidentiality and use of
such information. The Company understands and confirms that each Investor shall
be relying on the foregoing representations in effecting transactions in
securities of the Company.
4.9 Listing of Securities. Subject to obtaining necessary Stockholder
Approval pursuant to and as defined in Section 4.14, the Company agrees, (i) to
cause the Underlying Shares and the Warrant Shares to be duly listed on the
Trading Market, (ii) if the Company applies to have the Common Stock traded on
any other Trading Market, it will include in such application the Underlying
Shares and Warrant Shares, and will take such other action as is necessary or
desirable to cause the Underlying Shares and Warrant Shares to be listed on such
other Trading Market as promptly as possible, and (iii) it will take all action
reasonably necessary to continue the listing and trading of its Common Stock on
a Trading Market and will comply in all material respects with the Company's
reporting, filing and other obligations under the bylaws or rules of the Trading
Market.
4.10 Use of Proceeds. The Company will use the net proceeds from the
sale of the Securities hereunder in accordance with Schedule 4.10.
4.11 Acknowledgment of Dilution. The Company acknowledges that the
issuance of Underlying Shares upon conversion of Shares and Warrant Shares upon
exercise of Warrants will result in substantial dilution of the outstanding
shares of Common Stock. The Company further acknowledges that its obligation to
18
honor conversions under the Shares and exercises under the Warrants is
unconditional and absolute and not subject to any right of set off,
counterclaim, delay or reduction, regardless of the effect of any such dilution
or any claim that the Company may have against any Investor.
4.12 Reservation of Shares. The Company shall maintain a reserve from
its duly authorized shares of Common Stock to comply with its conversion
obligations under the Shares. If on any date the Company would be, if notice of
conversion were to be delivered on such date, precluded from issuing the number
of (i) Underlying Shares, as the case may be, issuable upon conversion in full
of the Shares or (ii) Warrant Shares, as the case may be, issuable upon exercise
in full of the Warrants (in each case, without regard to any conversion or
exercise caps or other limitation thereunder), due to the unavailability of a
sufficient number of authorized but unissued or reserved shares of Common Stock,
then the Company shall promptly prepare and mail to the stockholders of the
Company proxy materials or other applicable materials requesting authorization
to amend the Company's certificate of incorporation or other organizational
document to increase the number of shares of Common Stock which the Company is
authorized to issue so as to provide enough shares for issuance of the
Underlying Shares and Warrant Shares. In connection therewith, the Board of
Directors shall (a) adopt proper resolutions authorizing such increase, (b)
recommend to and otherwise use its best efforts to promptly and duly obtain
stockholder approval (including the hiring of a nationally recognized proxy
solicitor firm) to carry out such resolutions (and hold a special meeting of the
stockholders as soon as practicable, but in any event not later than the 60th
day after delivery of the proxy or other applicable materials relating to such
meeting) and (c) within five Business Days of obtaining such stockholder
authorization, file an appropriate amendment to the Company's certificate of
incorporation or other organizational document to evidence such increase.
4.13 Conversion Procedures. The form of Exercise Notice included in the
Warrants sets forth the totality of the procedures required by the Investors in
order to convert the Warrants. The Company shall honor exercises of Warrants and
shall deliver Warrant Shares in accordance with the terms, conditions and time
periods set forth in the Warrants.
4.14 Stockholder Approval.
(a) The Company covenants and agrees to use its best efforts
to obtain the approval of its stockholders as required by the rules and
regulations of the American Stock Exchange in order to issue Underlying Shares
and Warrant Shares and to otherwise perform its respective obligations under the
transactions contemplated by the Transaction Documents, including (i) approving
the issuance of in excess of 19.99% of the shares of Common Stock outstanding on
the date of this Agreement and (ii) effectuating the Reverse Stock Split
(collectively "STOCKHOLDER APPROVAL").
(b) In furtherance of the obligations of the Company under
Section 4.14(a), the Company shall use its best efforts to obtain Stockholder
Approval in connection with this Section 4.14, and in pursuit thereof (a) the
Board of Directors of the Company shall adopt proper resolutions authorizing the
actions set forth in subsection (a) above, (b) the Board of Directors of the
Company shall recommend and the Company shall otherwise use its best efforts to
19
promptly and duly obtain stockholder approval, including, without limitation,
soliciting proxies from its stockholders in connection therewith in the same
manner as all other management proposals in such proxy statement and having all
management-appointed proxy-holders vote their proxies in favor of such proposals
to carry out such resolutions (and hold a special meeting of the stockholders as
soon as practicable, but in any event not later than the 60th day after delivery
of the proxy or other applicable materials relating to such meeting) and (c)
within three Business Days of obtaining such stockholder authorization, take all
actions necessary to effectuate the actions set forth in subsections (a)(i) and
(a)(ii) above. If the Company does not obtain Stockholder Approval at the first
meeting (the "FIRST MEETING"), the Company shall (1) provided it has been
approved as required by the American Stock Exchange, on the next Business Day
effect the conversion of the Farequest Notes into Common Stock, (2) and in
addition to satisfying clauses (a), (b) and (c) as contemplated above, call a
special meeting of its stockholders as soon as reasonable practicable but in no
event later than ninety (90) days following the First Meeting, and utilize a
record date therefor that would include all shares of Common Stock issuable upon
conversion of the Farequest Notes to seek Stockholder Approval until the date
Stockholder Approval is obtained. The Company shall use its commercially best
efforts to hold the First Meeting as soon as possible, but in any event the
Company shall use its commercially best efforts to hold the First Meeting prior
to the ninetieth (90th) day after the date of this Agreement.
4.15 Limitation on Trading. Each Investor covenants that neither it nor
any Person acting on its behalf or pursuant to any understanding with it will
engage in or close out any transactions in the securities of the Company
(including Short Sales) prior to the Trading Day following the Reset Period.
4.16 Farequest Note. In the event that Stockholder Approval is not
obtained at the First Meeting, the Company shall irrevocably tender a conversion
notice with respect to the Farequest Note (which shall be contingent upon
receipt of stockholder approval of such conversion) to the holder thereof to
become effective on the Business Day following the date of the First Meeting.
ARTICLE V.
CONDITIONS PRECEDENT TO CLOSING
5.1 Conditions Precedent to the Obligations of the Investors to
Purchase Securities. The obligation of each Investor to acquire Securities at
the Closing is subject to the satisfaction or waiver by such Investor, 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;
20
(b) Performance. The Company 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;
(c) No Injunction. No statute, rule, regulation, executive
order, decree, ruling or injunction shall have been enacted, entered,
promulgated or endorsed by any court or governmental authority of competent
jurisdiction that prohibits the consummation of any of the transactions
contemplated by the Transaction Documents;
(d) Adverse Changes. Since the date of execution of this
Agreement, no event or series of events shall have occurred that reasonably
could have or result in a Material Adverse Effect;
(e) No Suspensions of Trading in Common Stock; Listing.
Trading in the Common Stock shall not have been suspended by the Commission or
any Trading Market (except for any suspensions of trading of not more than one
Trading Day solely to permit dissemination of material information regarding the
Company) at any time since the date of execution of this Agreement, and the
Common Stock shall have been at all times since such date listed for trading on
a Trading Market;
(f) Company Deliverables. The Company shall have delivered the
Company Deliverables in accordance with Section 2.2(a);
(g) Voting Agreement. The Voting Agreement shall have been
duly executed and delivered by the stockholders identified therein;
(h) Farequest Note. The Company shall have irrevocably
tendered a conversion notice with respect to the Farequest Note (which shall be
contingent upon receipt of stockholder approval of such conversion) to the
holder thereof to become effective on the Business Day following the date of the
First Meeting in the event that Stockholder Approval is not obtained at the
First Meeting;
(i) Farequest Voting Agreement. The Farequest Voting Agreement
shall have been duly executed and delivered by the Farequest stockholders'
representative;
(j) Stock Pledge Agreement. The Company shall have delivered a
stock pledge agreement, executed and delivered by William Goldstein and the
investor representative signatory thereto; and
(k) Officer's Certificate. The Company shall have delivered to
the Investors a certificate executed by a duly authorized officer of the Company
certifying that (i) the representations and warranties of the Company contained
herein are 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, (ii) the Company
has performed, satisfied and complied in all material respects with all
21
covenants, agreements and conditions required by the Transaction Documents to be
performed, satisfied or complied with by it at or prior to the Closing and (iii)
the items referenced in Sections 5.1(c)-(j) have been satisfied.
5.2 Conditions Precedent to the Obligations of the Company to sell
Securities. The obligation of the Company to sell Securities at the Closing is
subject to the satisfaction 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 each Investor 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;
(b) Performance. Each Investor 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 such Investor at or prior to the Closing;
(c) No Injunction. No statute, rule, regulation, executive
order, decree, ruling or injunction shall have been enacted, entered,
promulgated or endorsed by any court or governmental authority of competent
jurisdiction that prohibits the consummation of any of the transactions
contemplated by the Transaction Documents;
(d) Investors Deliverables. Each Investor shall have delivered
its Investors Deliverables in accordance with Section 2.2(b);
(e) Voting Agreement. The Voting Agreement shall have been
duly executed and delivered by the Investors' voting representative; and
(f) Farequest Voting Agreement. The Farequest Voting Agreement
shall have been duly executed and delivered by the Investors' voting
representative.
ARTICLE VI.
MISCELLANEOUS
6.1 Fees and Expenses. 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 the Transaction Documents. The Company
shall pay all stamp and other taxes and duties levied in connection with the
sale of the Shares.
6.2 Entire Agreement. The Transaction Documents, together with the
Exhibits and Schedules thereto, contain the entire understanding of the parties
with respect to the subject matter hereof and supersede all prior agreements,
understandings, discussions and representations, oral or written, with respect
to such matters, which the parties acknowledge have been merged into such
documents, exhibits and schedules.
22
6.3 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 (provided the sender
receives a machine-generated confirmation of successful transmission) at the
facsimile number specified in this Section prior to 5:30 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 5:30 p.m. (New York City time) on any Trading Day, (c) the Trading Day
following the date of mailing, if sent by U.S. nationally recognized overnight
courier service, or (d) upon actual receipt by the party to whom such notice is
required to be given. The address for such notices and communications shall be
as follows:
If to the Company: RCG Companies Incorporated
6836 Morrison Boulevard, Suite 200
Charlotte, NC 28211
Attn: Chief Financial Officer
Facsimile: (704) 366-5056
With a copy to: Katten Muchin Zavis Rosenman
525 West Monroe Street
Chicago, IL 60661
Attn.: Matthew S. Brown
Facsimile: (312) 577-8726
If to an Investor: To the address set forth under such Investor's name
on the signature pages hereof;
or such other address as may be designated in writing hereafter, in the same
manner, by such Person.
6.4 Amendments; Waivers; No Additional Consideration. No provision of
this Agreement may be waived or amended except in a written instrument signed by
the Company and the Investors holding a majority of the Underlying Shares
determined on an as-converted basis. No waiver of any default with respect to
any provision, condition or requirement of this Agreement shall be deemed to be
a continuing waiver in the future or a waiver of any subsequent default or a
waiver of any other provision, condition or requirement hereof, nor shall any
delay or omission of either party to exercise any right hereunder in any manner
impair the exercise of any such right. No consideration shall be offered or paid
to any Investor to amend or consent to a waiver or modification of any provision
of any Transaction Document unless the same consideration is also offered to all
Investors who then hold Shares.
6.5 Termination. This Agreement may be terminated prior to Closing
only:
(a) by written agreement of the Investors and the Company;
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(b) by the Company or an Investor (as to itself but no other
Investor) upon written notice to the other, if the Closing shall not have taken
place by 6:30 p.m. Eastern time on the Outside Date; provided, that the right to
terminate this Agreement under this Section 6.5(b) shall not be available to any
Person whose failure to comply with its obligations under this Agreement has
been the cause of or resulted in the failure of the Closing to occur on or
before such time; or
(c) by an Investor (as to itself but no other Investor) if it
concludes in good faith that any of the conditions precedent contained in
Section 5.1 shall have been breached or shall not be capable of being satisfied
by the Outside Date despite the assumed best efforts of the Company.
Upon a termination in accordance with this Section 6.5, the Company and
the terminating Investor(s) shall not have any further obligation or liability
(including as arising from such termination) to the other and no Investor will
have any liability to any other Investor under the Transaction Documents as a
result therefrom.
6.6 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. This Agreement
shall be construed as if drafted jointly by the parties, and no presumption or
burden of proof shall arise favoring or disfavoring any party by virtue of the
authorship of any provisions of this Agreement or any of the Transaction
Documents.
6.7 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 Investors. No Investor may assign any
or all of its rights or obligations hereunder without the prior written consent
of the Company; provided, however, that any Investor may assign any or all of
its rights under this Agreement to any Person to whom such Investor assigns or
transfers any Securities, provided such transferee agrees in writing to be
bound, with respect to the transferred Securities, by the provisions hereof that
apply to the "Investors."
6.8 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 as otherwise set forth in Section 4.7 (as to each
Investor Party).
6.9 Governing Law. All questions concerning the construction, validity,
enforcement and interpretation of this Agreement shall be governed by and
construed and enforced in accordance with the internal laws of the State of New
York, without regard to the principles of conflicts of law thereof. Each party
agrees that all Proceedings concerning the interpretations, enforcement and
defense of the transactions contemplated by this Agreement and any other
Transaction Documents (whether brought against a party hereto or its respective
Affiliates, employees or agents) shall be commenced exclusively in the New York
Courts. Each party hereto hereby irrevocably submits to the exclusive
jurisdiction of the New York Courts for the adjudication of any dispute
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hereunder or in connection herewith or with any transaction contemplated hereby
or discussed herein (including with respect to the enforcement of the any of the
Transaction Documents), and hereby irrevocably waives, and agrees not to assert
in any Proceeding, any claim that it is not personally subject to the
jurisdiction of any such New York Court, or that such Proceeding has been
commenced in an improper or inconvenient forum. Each party hereto hereby
irrevocably waives personal service of process and consents to process being
served in any such 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. Each party hereto hereby
irrevocably waives, to the fullest extent permitted by applicable law, any and
all right to trial by jury in any legal proceeding arising out of or relating to
this Agreement or the transactions contemplated hereby. If either party shall
commence a Proceeding to enforce any provisions of a Transaction Document, then
the prevailing party in such Proceeding shall be reimbursed by the other party
for its reasonable attorneys' fees and other costs and expenses incurred with
the investigation, preparation and prosecution of such Proceeding.
6.10 Survival. The representations, warranties, agreements and
covenants contained herein shall survive the Closing and the delivery of the
Securities.
6.11 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.
6.12 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.
6.13 Rescission and Withdrawal Right. Notwithstanding anything to the
contrary contained in (and without limiting any similar provisions of) the
Transaction Documents, whenever any Investor 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 Investor
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.
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6.14 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 Securities. If a replacement
certificate or instrument evidencing any Securities is requested due to a
mutilation thereof, the Company may require delivery of such mutilated
certificate or instrument as a condition precedent to any issuance of a
replacement.
6.15 Remedies. In addition to being entitled to exercise all rights
provided herein or granted by law, including recovery of damages, each of the
Investors 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.
6.16 Payment Set Aside. To the extent that the Company makes a payment
or payments to any Investor pursuant to any Transaction Document or an Investor
enforces or exercises its rights thereunder, and such payment or payments or the
proceeds of such enforcement or exercise or any part thereof are subsequently
invalidated, declared to be fraudulent or preferential, set aside, recovered
from, disgorged by or are required to be refunded, repaid or otherwise restored
to the Company, a trustee, receiver or any other person under any law
(including, without limitation, any bankruptcy law, state or federal law, common
law or equitable cause of action), then to the extent of any such restoration
the obligation or part thereof originally intended to be satisfied shall 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.
6.17 Independent Nature of Investors' Obligations and Rights. The
obligations of each Investor under any Transaction Document are several and not
joint with the obligations of any other Investor, and no Investor shall be
responsible in any way for the performance of the obligations of any other
Investor under any Transaction Document. The decision of each Investor to
purchase Securities pursuant to the Transaction Documents has been made by such
Investor independently of any other Investor. Nothing contained herein or in any
Transaction Document, and no action taken by any Investor pursuant thereto,
shall be deemed to constitute the Investors as a partnership, an association, a
joint venture or any other kind of entity, or create a presumption that the
Investors are in any way acting in concert or as a group with respect to such
obligations or the transactions contemplated by the Transaction Documents. Each
Investor acknowledges that no other Investor has acted as agent for such
Investor in connection with making its investment hereunder and that no Investor
will be acting as agent of such Investor in connection with monitoring its
investment in the Securities or enforcing its rights under the Transaction
Documents. Each Investor shall be entitled to independently protect and enforce
its rights, including without limitation the rights arising out of this
26
Agreement or out of the other Transaction Documents, and it shall not be
necessary for any other Investor to be joined as an additional party in any
proceeding for such purpose. The Company acknowledges that each of the Investors
has been provided with the same Transaction Documents for the purpose of closing
a transaction with multiple Investors and not because it was required or
requested to do so by any Investor.
6.18 Limitation of Liability. Notwithstanding anything herein to the
contrary, the Company acknowledges and agrees that the liability of an Investor
arising directly or indirectly, under any Transaction Document of any and every
nature whatsoever shall be satisfied solely out of the assets of such Investor,
and that no trustee, officer, other investment vehicle or any other Affiliate of
such Investor or any investor, stockholder or holder of shares of beneficial
interest of such a Investor shall be personally liable for any liabilities of
such Investor.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK
SIGNATURE PAGES FOLLOW]
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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.
RCG COMPANIES INCORPORATED
By: \s\ Marc E. Bercoon
------------------------------
Name: Marc E. Bercoon
Title: Chief Financial Officer
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK
SIGNATURE PAGES FOR INVESTORS FOLLOW]
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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.
NAME OF INVESTOR
------------------------------------------
By:
--------------------------------------
Name:
Title:
Investment Amount: $
----------------------
Tax ID No.:
------------------------------
ADDRESS FOR NOTICE
c/o:
-------------------------------------
Street:
----------------------------------
City/State/Zip:
--------------------------
Attention:
-------------------------------
Tel:
---------------------------------
Fax:
---------------------------------
DELIVERY INSTRUCTIONS
(if different from above)
c/o:
-------------------------------------
Street:
-----------------------------------
City/State/Zip:
--------------------------
Attention:
-------------------------------
Tel:
---------------------------------
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