EXHIBIT 99.2
SECURITIES PURCHASE AGREEMENT
This Securities Purchase Agreement (this "AGREEMENT") is dated as of
May 23, 2003, among Tag-It Pacific, Inc., a Delaware corporation (the
"COMPANY"), and the purchasers identified on the signature pages hereto (each a
"PURCHASER" and collectively the "PURCHASERS"); and
WHEREAS, subject to the terms and conditions set forth in this
Agreement and pursuant to Section 4(2) of the Securities Act (as defined below),
and Rule 506 promulgated thereunder, the Company desires to issue and sell to
the Purchasers, and each Purchaser, severally and not jointly, desires to
purchase from the Company in the aggregate, up to a number of shares of Common
Stock equal to 19.9% of the Company's issued and outstanding Common Stock on the
Closing Date.
NOW, THEREFORE, IN CONSIDERATION of the mutual covenants contained in
this Agreement, and for other good and valuable consideration the receipt and
adequacy of which are hereby acknowledged, the Company and each Purchaser agrees
as follows:
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 have the
meanings indicated in this Section 1.1:
"ACTION" shall have the meaning ascribed to such term in
Section 3.1(j).
"AFFILIATE" means any Person that, directly or indirectly
through one or more intermediaries, controls or is controlled by or is
under common control with a Person as such terms are used in and
construed under Rule 144. With respect to a Purchaser, any investment
fund or managed account that is managed on a discretionary basis by the
same investment manager as such Purchaser will be deemed to be an
Affiliate of such Purchaser.
"BUSINESS DAY" means any day except Saturday, Sunday and any
day which shall be a federal legal holiday or a day on which banking
institutions in the State of New York are authorized or required by law
or other governmental action to close.
"CLOSING" means the closing of the purchase and sale of the
Common Stock pursuant to Section 2.1(a).
"CLOSING DATE" means the date of the Closing.
"CLOSING PRICE" means on any particular date (a) the last
reported closing bid price per share of Common Stock on such date on
the Trading Market (as reported by Bloomberg L.P. at 4:15 PM (New York
time), or (b) if there is no such price on such date, then the closing
bid price on the Trading Market on the date nearest preceding such date
(as reported by Bloomberg L.P. at 4:15 PM (New York time) for the
closing bid price for regular session trading on such day), or (c) if
the Common Stock is not then
1
listed or quoted on the Trading Market and if prices for the Common
Stock are then reported in the "pink sheets" published by the National
Quotation Bureau Incorporated (or a similar organization or agency
succeeding to its functions of reporting prices), the most recent bid
price per share of the Common Stock so reported, or (d) if the shares
of Common Stock are not then publicly traded the fair market value of a
share of Common Stock as determined by an appraiser selected in good
faith by the Purchasers of a majority in interest of the Shares then
outstanding.
"COMMISSION" means the Securities and Exchange Commission.
"COMMON STOCK" means the common stock of the Company, $0.001
par value per share, and any securities into which such common stock
may hereafter be reclassified.
"COMMON STOCK EQUIVALENTS" means any securities of the Company
or the Subsidiaries which would entitle the holder thereof to acquire
at any time Common Stock, including without limitation, any debt,
preferred stock, rights, options, warrants or other instrument that is
at any time convertible into or exchangeable for, or otherwise entitles
the holder thereof to receive, Common Stock.
"COMPANY COUNSEL" means Stubbs Alderton & Markiles LLP.
"DISCLOSURE SCHEDULES" means the Disclosure Schedules attached
as ANNEX I hereto.
"EFFECTIVE DATE" means the date that the Registration
Statement is first declared effective by the Commission.
"ESCROW AGENT" shall have the meaning set forth in the Escrow
Agreement.
"ESCROW AGREEMENT" shall mean the Escrow Agreement in
substantially the form of EXHIBIT B hereto executed and delivered
contemporaneously with this Agreement.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended.
"INTELLECTUAL PROPERTY RIGHTS" shall have the meaning ascribed
to such term in Section 3.1(o).
"LIENS" means a lien, charge, security interest, encumbrance,
right of first refusal or other restriction.
"MATERIAL ADVERSE EFFECT" shall have the meaning ascribed to
such term in Section 3.1(b).
"MATERIAL PERMITS" shall have the meaning ascribed to such
term in Section 3.1(m).
"PERMITTED LIENS" means (i) liens for the payment of federal,
state or other taxes, the payment of which is neither delinquent nor
subject to penalties or claims that are being contested in good faith,
(ii) statutory liens of landlords and warehousemen's, carriers',
mechanics', suppliers', materialmen's, repairmen's, or other like liens
2
(including landlords' liens) arising in the ordinary course of business
and with respect to amounts not yet delinquent, or with respect to
amounts being contested in good faith by appropriate proceedings; and
(iii) liens incurred or deposits made in the ordinary course of
business in connection with workers' compensation, unemployment
insurance and other similar types of social security.
"PER SHARE PURCHASE PRICE" equals $3.50, subject to adjustment
for reverse and forward stock splits, stock dividends, stock
combinations and other similar transactions of the Common Stock that
occur after the date of this Agreement.
"PERSON" means an individual or corporation, partnership,
trust, incorporated or unincorporated association, joint venture,
limited liability company, joint stock company, government (or an
agency or subdivision thereof) or other entity of any kind.
"REGISTRATION STATEMENT" means a registration statement
meeting the requirements set forth in the Registration Rights Agreement
and covering the resale by the Purchasers of the Shares.
"REGISTRATION RIGHTS AGREEMENT" means the Registration Rights
Agreement, dated as of the date of this Agreement, among the Company
and each Purchaser, in the form of EXHIBIT A hereto.
"RULE 144," means Rule 144 promulgated by the Commission
pursuant to the Securities Act, as such Rule may be amended from time
to time, or any similar rule or regulation hereafter adopted by the
Commission having substantially the same effect as such Rule.
"SEC REPORTS" shall have the meaning ascribed to such term in
Section 3.1(h).
"SECURITIES" means the Shares.
"SECURITIES ACT" means the Securities Act of 1933, as amended.
"SHARES" means the shares of Common Stock issued or issuable
to each Purchaser pursuant to this Agreement.
"SUBSCRIPTION AMOUNT" means, as to each Purchaser and the
Closing, the amounts set forth below such Purchaser's signature block
on the signature page hereto, in United States dollars and in
immediately available funds.
"SUBSIDIARY" shall have the meaning ascribed to such term in
Section 3.1(a).
"TRADING DAY" means (i) a day on which the Common Stock is
traded on a Trading Market, or (ii) if the Common Stock is not listed
on a Trading Market, a day on which the Common Stock is traded on the
over-the-counter market, as reported by the OTC Bulletin Board, or
(iii) if the Common Stock is not quoted on the OTC Bulletin Board, a
day on which the Common Stock is quoted in the over-the-counter market
as reported by the National Quotation Bureau Incorporated (or any
similar organization or agency succeeding its functions of reporting
prices); provided, that in the event that the
3
Common Stock is not listed or quoted as set forth in (i), (ii) and
(iii) hereof, then Trading Day shall mean a Business Day.
"TRADING MARKET" means the following markets or exchanges on
which the Common Stock is listed or quoted for trading on the date in
question: the American Stock Exchange, the New York Stock Exchange, the
Nasdaq National Market or the Nasdaq SmallCap Market.
"TRANSACTION DOCUMENTS" means this Agreement, the Escrow
Agreement and the Registration Rights Agreement and any other documents
or agreements executed in connection with the transactions contemplated
hereunder.
ARTICLE II.
PURCHASE AND SALE
2.1 CLOSING. At the Closing, the Purchasers shall purchase,
severally and not jointly, and the Company shall issue and sell, in the
aggregate, up to a number of shares of Common Stock equal to 19.9% of the
Company's issued and outstanding Common Stock on the Closing Date. Subject to
the preceding sentence, each Purchaser shall purchase from the Company, and the
Company shall issue and sell to each Purchaser, a number of Shares equal to such
Purchaser's Subscription Amount divided by the Per Share Purchase Price. Upon
satisfaction of the conditions set forth in Section 2.2, the Closing shall occur
at the offices of the Escrow Agent, or such other location as the parties shall
mutually agree.
2.2 CLOSING CONDITIONS.
(a) At the Closing the Company shall deliver or cause to
be delivered to the Escrow Agent on behalf of each Purchaser:
(i) this Agreement duly executed by the Company;
(ii) a certificate evidencing a number of Shares
equal to such Purchaser's Subscription Amount divided by the
Per Share Purchase Price, registered in the name of such
Purchaser;
(iii) the Registration Rights Agreement duly
executed by the Company;
(iv) the Escrow Agreement duly executed by the
Company; and
(v) a legal opinion of Company Counsel, in the
form of EXHIBIT C attached hereto.
(b) At the Closing each Purchaser shall deliver or cause
to be delivered to the Escrow Agent the following:
(i) this Agreement duly executed by such;
(ii) such Purchaser's Subscription Amount as to
such Closing by wire transfer to the account of the Escrow
Agent;
4
(iii) the Escrow Agreement duly executed by such
Purchaser; and
(iv) the Registration Rights Agreement duly
executed by such Purchaser.
(c) All representations and warranties of the other party
contained herein shall remain true and correct as of the Closing Date.
(d) As of the Closing Date, there shall have been no
Material Adverse Effect with respect to the Company since the date
hereof.
(e) From the date hereof to the Closing Date, trading in
the Common Stock shall not have been suspended by the Commission
(except for any suspension of trading of limited duration agreed to by
the Company, which suspension shall be terminated prior to the
Closing), and, at any time prior to Closing Date, trading in securities
generally as reported by Bloomberg Financial Markets shall not have
been suspended or limited, or minimum prices shall not have been
established on securities whose trades are reported by such service, or
on any Trading Market, nor shall a banking moratorium have been
declared either by the United States or New York State authorities.
ARTICLE III.
REPRESENTATIONS AND WARRANTIES
3.1 REPRESENTATIONS AND WARRANTIES OF THE COMPANY. Except as set
forth in the SEC Reports or under the corresponding section of the Disclosure
Schedules delivered concurrently herewith, the Company hereby makes the
following representations and warranties as of the date hereof and as of the
Closing Date to each Purchaser:
(a) SUBSIDIARIES. The Company has no direct or indirect
subsidiaries. The Company owns, directly or indirectly, all of the
capital stock of each Subsidiary free and clear of any lien, charge,
security interest, encumbrance, right of first refusal or other
restriction (collectively, "LIENS") other than Permitted 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 conduct business and is in good
standing as a foreign corporation or other entity in each jurisdiction
in which the nature of the business conducted or property owned by it
makes such qualification necessary, except where the failure to be so
qualified or in good standing, as the case may be, would not have or
reasonably be expected to result in (i) a material adverse effect on
the
5
legality, validity or enforceability of any Transaction Document, (ii)
a material adverse effect on the results of operations, assets,
business or financial condition of the Company and the Subsidiaries,
taken as a whole, or (iii) adversely impair the Company's ability to
perform in any material respect on a timely basis its obligations under
any Transaction Document (any of (i), (ii) or (iii), a "MATERIAL
ADVERSE EFFECT").
(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 of the Transaction Documents by the Company and the
consummation by it of the transactions contemplated thereby have been
duly authorized by all necessary action on the part of the Company and
no further action is required by the Company in connection therewith.
Each Transaction Document has been (or upon delivery will have been)
duly executed by the Company and, when delivered in accordance with the
terms hereof, will constitute the valid and binding obligation of the
Company enforceable against the Company in accordance with its terms
except (i) as limited by applicable bankruptcy, insolvency,
reorganization, moratorium and other laws of general application
affecting enforcement of creditors' rights generally and (ii) as
limited by laws relating to the availability of specific performance,
injunctive relief or other equitable remedies.
(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 in the case of
each of clauses (ii) and (iii), such as would not have or reasonably be
expected to result in a Material Adverse Effect.
(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 (a) the filing
with the Commission of the Registration Statement, the application(s)
to each Trading Market for the listing of the Shares for trading
thereon in the time and manner required thereby, and applicable Blue
Sky filings, (b) such as have already been obtained or such exemptive
filings as are required to be made under applicable securities laws,
(c) such other filings as may be
6
required following the Closing Date under the Securities Act, the
Exchange Act and corporate law.
(f) ISSUANCE OF THE SECURITIES. The Securities are duly
authorized and, when issued and paid for in accordance with the
Transaction Documents, will be duly and validly issued, fully paid and
nonassessable, free and clear of all Liens. The Company has reserved
from its duly authorized capital stock the maximum number of shares of
Common Stock issuable pursuant to this Agreement.
(g) CAPITALIZATION. The capitalization of the Company is
as described in the Company's most recent periodic report filed with
the Commission. The Company has not issued any capital stock since such
filing other than pursuant to the exercise of employee stock options
under the Company's stock option plans, the issuance of shares of
Common Stock to employees pursuant to the Company's employee stock
purchase plan and pursuant to the conversion or exercise of outstanding
Common Stock Equivalents. 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 a result of the purchase and sale of the
Securities, there are no outstanding options, warrants, script rights
to subscribe to, calls or commitments of any character whatsoever
relating to, or securities, rights or obligations convertible into or
exchangeable for, or giving any Person any right to subscribe for or
acquire, any shares of Common Stock, or contracts, commitments,
understandings or arrangements by which the Company or any Subsidiary
is or may become bound to issue additional shares of Common Stock, or
securities or rights convertible or exchangeable into shares of Common
Stock. The issue and sale of the Securities will not obligate the
Company to issue shares of Common Stock or other securities to any
Person (other than the Purchasers) and will not result in a right of
any holder of Company securities to adjust the exercise, conversion,
exchange or reset price under such securities.
(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 two years preceding the date hereof (or such shorter
period as the Company was required by law to file such material) (the
foregoing materials, including the exhibits thereto, being collectively
referred to herein as the "SEC REPORTS" and, together with the
Disclosure 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. 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
generally accepted accounting principles applied on a consistent basis
during the periods involved ("GAAP"), except as may be otherwise
7
specified in such financial statements or the notes thereto and except
that unaudited financial statements may not contain all footnotes
required by GAAP, and fairly present in all material respects the
financial position of the Company and its consolidated subsidiaries as
of and for the dates thereof and the results of operations and cash
flows for the periods then ended, subject, in the case of unaudited
statements, to normal year-end audit adjustments.
(i) MATERIAL CHANGES. Since the date of the latest
audited financial statements included within the SEC Reports, except as
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
and accrued expenses incurred in the ordinary course of business
consistent with past practice and (B) liabilities not required to be
reflected in the Company's financial statements pursuant to GAAP or
required to be disclosed in filings made with the Commission, (iii) the
Company has not altered its method of accounting, (iv) the Company has
not declared or made any dividend or distribution of cash or other
property to its stockholders or purchased, redeemed or made any
agreements to purchase or redeem any shares of its capital stock and
(v) the Company has not issued any equity securities to any officer,
director or Affiliate, except pursuant to existing Company stock option
plans. The Company does not have pending before the Commission any
request for confidential treatment of information.
(j) LITIGATION. Except as disclosed in the SEC Reports,
there is no action, suit, inquiry, notice of violation, proceeding or
investigation pending or, to the knowledge of the Company, threatened
against or affecting the Company, any Subsidiary or any of their
respective properties before or by any court, arbitrator, governmental
or administrative agency or regulatory authority (federal, state,
county, local or foreign) (collectively, an "ACTION") which (i)
adversely affects or challenges the legality, validity or
enforceability of any of the Transaction Documents or the Securities or
(ii) could, if there were an unfavorable decision, have or reasonably
be expected to result in a Material Adverse Effect. Neither the Company
nor any Subsidiary, nor any director or officer thereof, is or has been
the subject of any Action involving a claim of violation of or
liability under federal or state securities laws or a claim of breach
of fiduciary duty. There has not been, and to the knowledge of the
Company, there is not pending or contemplated, any investigation by the
Commission involving the Company or any current or former director or
officer of the Company. The Commission has not issued any stop order or
other order suspending the effectiveness of any registration statement
filed by the Company or any Subsidiary under the Exchange Act or the
Securities Act.
(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 which could reasonably be expected to result
in a Material Adverse Effect.
(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 Subsidiary under), nor has the Company or any
8
Subsidiary received notice of a claim that it is in default under or
that it is in violation of, any indenture, loan or credit agreement or
any other agreement or instrument to which it is a party or by which it
or any of its properties is bound (whether or not such default or
violation has been waived), (ii) is in violation of any order of any
court, arbitrator or governmental body, or (iii) is or has been in
violation of any statute, rule or regulation of any governmental
authority, including without limitation all foreign, federal, state and
local laws applicable to its business, except in the case of clauses
(i), (ii) and (iii) as would not have or reasonably be expected to
result in a Material Adverse Effect.
(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 would not
have or reasonably be expected to result in a Material Adverse Effect
("MATERIAL PERMITS"), and neither the Company nor any Subsidiary has
received any notice of proceedings relating to the revocation or
modification of any Material Permit.
(n) 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
Permitted Liens and 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.
(o) PATENTS AND TRADEMARKS. To the knowledge of the
Company and each Subsidiary, the Company and the Subsidiaries have, or
have rights to use, all patents, patent applications, trademarks,
trademark applications, service marks, trade names, copyrights,
licenses and other similar rights that are necessary or material for
use in connection with their respective businesses as described in the
SEC Reports and which the failure to so have could have or reasonably
be expected to result in a Material Adverse Effect (collectively, the
"INTELLECTUAL PROPERTY RIGHTS"). Neither the Company nor any Subsidiary
has received a written notice that the Intellectual Property Rights
used by the Company or any Subsidiary violates or infringes upon the
rights of any Person. To the knowledge of the Company, all such
Intellectual Property Rights are enforceable.
(p) 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.
9
(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, in each case in excess of $60,000 other
than (a) for payment of salary or consulting fees for services
rendered, (b) reimbursement for expenses incurred on behalf of the
Company and (c) for other employee benefits, including stock option
agreements under any stock option plan of the Company.
(r) INTERNAL ACCOUNTING CONTROLS. The Company and each of
its subsidiaries maintains a system of internal accounting controls
sufficient to provide reasonable assurance that (i) transactions are
executed in accordance with management's general or specific
authorizations, (ii) transactions are recorded as necessary to permit
preparation of financial statements in conformity with GAAP and to
maintain asset accountability, (iii) access to assets is permitted only
in accordance with management's general or specific authorization, and
(iv) the recorded accountability for assets is compared with the
existing assets at reasonable intervals and appropriate action is taken
with respect to any differences. The Company has established disclosure
controls and procedures (as defined in Exchange Act Rules 13a-14 and
15d-14) for the Company and designed such disclosures controls and
procedures to ensure that material information relating to the Company,
including its subsidiaries, is made known to the certifying officers by
others within those entities, particularly during the period in which
the Company's Form 10-K or 10-Q, as the case may be, is being prepared.
The Company's certifying officers have evaluated the effectiveness of
the Company's controls and procedures as of a date within 90 days prior
to the filing date of the Form 10-Q for the quarter ended September 30,
2002 (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.
Since the Evaluation Date, there have been no significant changes in
the Company's internal controls (as such term is defined in Item 307(b)
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) PRIVATE PLACEMENT. Assuming the accuracy of the
Purchasers representations and warranties set forth in Section 3.2, no
registration under the Securities Act is required for the offer and
sale of the Securities by the Company to the Purchasers as contemplated
hereby. The issuance and sale of the Securities hereunder does not
contravene the rules and regulations of the Trading Market.
(t) INVESTMENT COMPANY. The Company is not, and is not an
Affiliate of, an "investment company" within the meaning of the
Investment Company Act of 1940, as amended.
10
(u) REGISTRATION RIGHTS. No Person has any right to cause
the Company to effect the registration under the Securities Act of any
securities of the Company.
(v) LISTING AND MAINTENANCE REQUIREMENTS. The Company has
not, in the 12 months preceding the date hereof, received notice from
any Trading Market on which the Common Stock is or has been listed or
quoted to the effect that the Company is not in compliance with the
listing or maintenance requirements of such Trading Market. The Company
is, and has no reason to believe that it will not in the foreseeable
future continue to be, in compliance with all such listing and
maintenance requirements.
(w) APPLICATION OF TAKEOVER PROTECTIONS. The Company and
its Board of Directors have taken all necessary action, if any, in
order to render inapplicable any control share acquisition, business
combination, poison pill (including any distribution under a rights
agreement) or other similar anti-takeover provision under the Company's
Certificate of Incorporation (or similar charter documents) or the laws
of its state of incorporation that is or could become applicable to the
Purchasers as a result of the Purchasers and the Company fulfilling
their obligations or exercising their rights under the Transaction
Documents, including without limitation the Company's issuance of the
Securities and the Purchasers' ownership of the Securities.
(x) DISCLOSURE. The Company confirms that, neither the
Company nor any other Person acting on its behalf has provided any of
the Purchasers or their agents or counsel with any information that
constitutes or might constitute material, non-public information. The
Company understands and confirms that the Purchasers will rely on the
foregoing representations and covenants in effecting transactions in
securities of the Company.
(y) NO INTEGRATED OFFERING. Neither the Company, nor any
of its affiliates, nor any Person acting on its or their behalf has,
directly or indirectly, made any offers or sales of any security or
solicited any offers to buy any security, under circumstances that
would cause this offering of the Securities to be integrated with prior
offerings by the Company for purposes of the Securities Act or any
applicable shareholder approval provisions, including, without
limitation, under the rules and regulations of any exchange or
automated quotation system on which any of the securities of the
Company are listed or designated.
3.2 REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS. Each
Purchaser hereby, for itself and for no other Purchaser, represents and warrants
as of the date hereof and as of the Closing Date to the Company as follows:
(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 full right, corporate or
partnership power and authority to enter into and to consummate the
transactions contemplated by the Transaction Documents and otherwise to
carry out its obligations thereunder. The execution, delivery and
performance by such Purchaser of the transactions contemplated by this
Agreement has been duly authorized by all necessary corporate action on
the part of such Purchaser. Each Transaction Document to which it is
party has been duly executed by such Purchaser, and when delivered by
such Purchaser in accordance with terms hereof, will constitute the
valid and
11
legally binding obligation of such Purchaser, enforceable against it in
accordance with its terms.
(b) INVESTMENT INTENT. Such Purchaser understands that
the Securities are "restricted securities" and have not been registered
under the Securities Act or any applicable state securities law and is
acquiring the Securities as principal for its own account for
investment purposes only and not with a view to or for distributing or
reselling such Securities or any part thereof, has no present intention
of distributing any of such Securities and has no arrangement or
understanding with any other persons regarding the distribution of such
Securities (this representation and warranty not limiting such
Purchaser's right to sell the Securities pursuant to the Registration
Statement or otherwise in compliance with applicable federal and state
securities laws). Such Purchaser is acquiring the Securities hereunder
in the ordinary course of its business. Such Purchaser does not have
any agreement or understanding, directly or indirectly, with any Person
to distribute any of the Securities.
(c) PURCHASER STATUS. At the time such Purchaser was
offered the Securities, it was, and at the date hereof it is an
"accredited investor" as defined in Rule 501(a) under the Securities
Act. Such Purchaser is not required to be registered as a broker-dealer
under Section 15 of the Exchange Act.
(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) GENERAL SOLICITATION. Such Purchaser is not
purchasing the Securities as a result of any advertisement, article,
notice or other communication regarding the Securities published in any
newspaper, magazine or similar media or broadcast over television or
radio or presented at any seminar or any other general solicitation or
general advertisement.
(f) REGISTRATION REQUIRED. Such Purchaser hereby
covenants with the Company not to make any sale of the Shares without
complying with the provisions hereof and of the Registration Rights
Agreement, and without effectively causing the prospectus delivery
requirement under the Securities Act to be satisfied (unless such
Purchaser is selling such Shares in a transaction not subject to the
prospectus delivery requirement), and such Purchaser acknowledges that
the certificates evidencing the Shares will be imprinted with a legend
that prohibits their transfer except in accordance therewith.
(g) NO TAX OR LEGAL ADVICE. Such Purchaser understands
that nothing in this Agreement, any other Transaction Document or any
other materials presented to such Purchaser in connection with the
purchase and sale of the Securities constitutes legal, tax or
investment advice. Such Purchaser has consulted such legal, tax and
investment advisors as it, in its sole discretion, has deemed necessary
or appropriate in connection with its purchase of Securities.
12
The Company acknowledges and agrees that each Purchaser does not make
or has not made any representations or warranties with respect to the
transactions contemplated hereby other than those specifically set forth in this
Section 3.2.
ARTICLE IV.
OTHER AGREEMENTS OF THE PARTIES
4.1 TRANSFER RESTRICTIONS.
(a) The Securities may only be disposed of in compliance with
state and federal securities laws. In connection with any transfer of
Securities other than pursuant to an effective registration statement,
to the Company, to an Affiliate of a Purchaser or in connection with a
pledge as contemplated in Section 4.1(b), the Company may require the
transferor thereof to provide to the Company an opinion of counsel
selected by the transferor, the form and substance of which opinion
shall be reasonably satisfactory to the Company, to the effect that
such transfer does not require registration of such transferred
Securities under the Securities Act. As a condition of transfer, any
such transferee shall agree in writing to be bound by the terms of this
Agreement and shall have the rights of a Purchaser under this Agreement
and the Registration Rights Agreement.
(b) The Purchasers agree to the imprinting, so long as is
required by this Section 4.1(b), of a legend on any of the Securities
in the following form:
THESE SECURITIES HAVE NOT BEEN REGISTERED WITH THE SECURITIES
AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY
STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER
THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"),
AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT
TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES
ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A
TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF
THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE
SECURITIES LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO
THE TRANSFEROR TO SUCH EFFECT, THE SUBSTANCE OF WHICH SHALL BE
REASONABLY ACCEPTABLE TO THE COMPANY. THESE SECURITIES MAY BE
PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT WITH A
REGISTERED BROKER-DEALER OR OTHER LOAN WITH A FINANCIAL
INSTITUTION THAT IS AN "ACCREDITED INVESTOR" AS DEFINED IN
RULE 501(a) UNDER THE SECURITIES ACT.
The Company acknowledges and agrees that a Purchaser may from
time to time pledge pursuant to a bona fide margin agreement with a
registered broker-dealer or grant a security interest in some or all of
the Securities to a financial institution that is an "accredited
investor" as defined in Rule 501(a) under the Securities Act and, if
required under the terms of such 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 legal counsel of the pledgee,
13
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.
(c) Certificates evidencing the Shares shall not contain
any legend (including the legend set forth in Section 4.1(b)), (i)
while a registration statement (including the Registration Statement)
covering the resale of such security is effective under the Securities
Act, or (ii) following any sale of such Shares pursuant to Rule 144, or
(iii) if such Shares are eligible for sale under Rule 144(k), or (iv)
if such legend is not required under applicable requirements of the
Securities Act (including judicial interpretations and pronouncements
issued by the Staff of the Commission). The Company shall cause its
counsel to issue a legal opinion to the Company's transfer agent
promptly after the Effective Date if required by the Company's transfer
agent to effect the removal of the legend hereunder. The Company agrees
that following the Effective Date or at such time as such legend is no
longer required under this Section 4.1(c), it will, no later than seven
Trading Days following the delivery by a Purchaser to the Company or
the Company's transfer agent of a certificate representing Shares
issued with a restrictive legend, 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.
(d) In addition to such Purchaser's other available
remedies, the Company shall pay to a Purchaser, in cash, as liquidated
damages and not as a penalty, for each $1,000 of Shares (based on the
Closing Price of the Common Stock on the date such Securities are
submitted to the Company's transfer agent) subject to Section 4.1(c),
$5 per Trading Day (increasing to $10 per Trading Day five (5) Trading
Days after such damages have begun to accrue) for each Trading Day
after such seventh Trading Day until such certificate is delivered.
Nothing herein shall limit such Purchaser's right to pursue actual
damages for the Company's failure to deliver certificates representing
any Securities as required by the Transaction Documents, and such
Purchaser shall have the right to pursue all remedies available to it
at law or in equity including, without limitation, a decree of specific
performance and/or injunctive relief.
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 such holder of Securities, the Company
shall deliver to such holder a written certification of a duly authorized
officer as to whether it has complied with the preceding sentence. As long as
any Purchaser owns Securities, if the Company is not required to file reports
pursuant to such laws, it will prepare and furnish to the Purchasers and make
publicly available in accordance with Rule 144(c) such information as is
required for the Purchasers to sell the Securities under Rule 144. The Company
further covenants that it will take such further action as any holder of
Securities may reasonably request, all to the extent
14
required from time to time to enable such Person to sell such Securities without
registration under the Securities Act within the limitation of the exemptions
provided by Rule 144.
4.3 INTEGRATION. The Company shall not sell, offer for sale or
solicit offers to buy or otherwise negotiate in respect of any security (as
defined in Section 2 of the Securities Act) that would be integrated with the
offer or sale of the Securities in a manner that would require the registration
under the Securities Act of the sale of the Securities to the Purchasers or that
would be integrated with the offer or sale of the Securities for purposes of the
rules and regulations of any Trading Market.
4.4 SECURITIES LAWS DISCLOSURE; PUBLICITY. The Company shall,
within one Business Day following the date of this Agreement, issue a press
release or file a Current Report on Form 8-K, in each case reasonably acceptable
to the placement agent of the Securities disclosing the transactions
contemplated hereby and make such other filings and notices in the manner and
time required by the Commission. The Company and the placement agent of the
Securities shall consult with each other in issuing any press releases with
respect to the transactions contemplated hereby, and neither the Company nor any
Purchaser shall issue any such press release or otherwise make any such public
statement without the prior consent of the Company, with respect to any press
release of any Purchaser, or without the prior consent of the placement agent of
the Securities, with respect to any press release of the Company, which consent
shall not unreasonably be withheld, except if such disclosure is required by
law, in which case the disclosing party shall promptly provide the other party
with prior notice of such public statement or communication. Notwithstanding the
foregoing, the Company shall not publicly disclose the name of any Purchaser, or
include the name of any Purchaser in any filing with the Commission or any
regulatory agency or Trading Market, without the prior written consent of such
Purchaser, except (i) as required by federal securities law in connection with
the registration statement contemplated by the Registration Rights Agreement and
(ii) to the extent such disclosure is required by law or Trading Market
regulations, in which case the Company shall provide the Purchasers with prior
notice of such disclosure permitted under subclause (i) or (ii).
4.5 NON-PUBLIC INFORMATION. The Company covenants and agrees that
neither it nor any other Person acting on its behalf will provide any Purchaser
or its agents or counsel with any information that the Company believes
constitutes material non-public information, unless prior thereto such Purchaser
shall have executed a written agreement regarding the confidentiality and use of
such information. The Company understands and confirms that each Purchaser shall
be relying on the foregoing representations in effecting transactions in
securities of the Company.
4.6 USE OF PROCEEDS. Except as set forth on Schedule 4.6 attached
hereto, the Company shall use the net proceeds from the sale of the Securities
hereunder for working capital purposes and not for the satisfaction of any
portion of the Company's debt (other than payment of trade payables in the
ordinary course of the Company's business and prior practices), to redeem any
Company equity or equity-equivalent securities or to settle any outstanding
litigation.
4.7 INDEMNIFICATION OF PURCHASERS. The Company will indemnify and
hold the Purchasers and their directors, officers, shareholders, partners,
employees and agents (each, a "PURCHASER PARTY") harmless from any and all
losses, liabilities, obligations, claims, contingencies, damages, costs and
expenses, including all judgments, amounts paid in
15
settlements, court costs and reasonable attorneys' fees and costs of
investigation that any such Purchaser Party may suffer or incur as a result of
or relating to any inaccuracy or breach of any of the representations,
warranties, covenants or agreements made by the Company in this Agreement or in
the other Transaction Documents. If any proceeding shall be brought or asserted
against any Purchase Party entitled to indemnity hereunder (an "Indemnified
Party"), such Indemnified Party shall promptly notify the Company in writing,
and the Company shall have the right to 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 Company 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 prejudiced the Company;
provided that the Indemnified Party shall be entitled to participate in the
defense of such matter and to employ counsel of its own choosing and at its own
expense to assist in the handling of such matter.
4.8 RESERVATION OF COMMON STOCK. As of the date hereof, the
Company has reserved and the Company shall continue to reserve and keep
available at all times, free of preemptive rights, a sufficient number of shares
of Common Stock for the purpose of enabling the Company to issue Shares pursuant
to this Agreement.
4.9 LISTING OF COMMON STOCK. The Company hereby agrees to use
commercially reasonably efforts to maintain the listing of the Common Stock on
the Trading Market, and as soon as reasonably practicable following the Closing
(but not later than the earlier of the Effective Date and the first anniversary
of the Closing Date) to list the applicable Shares on the Trading Market. The
Company further agrees, if the Company applies to have the Common Stock traded
on any other Trading Market, it will include in such application the Shares, and
will take such other action as is necessary or desirable in the opinion of the
Investors to cause the Shares to be listed on such other Trading Market as
promptly as possible. The Company will take all action reasonably necessary to
continue the listing and trading of its Common Stock on a Trading Market and
will comply in all respects with the Company's reporting, filing and other
obligations under the bylaws or rules of the Trading Market.
ARTICLE V.
MISCELLANEOUS
5.1 FEES AND EXPENSES. Except as otherwise set forth in this
Agreement, each party shall pay the fees and expenses of its advisers, counsel,
accountants and other experts, if any, and all other expenses incurred by such
party incident to the negotiation, preparation, execution, delivery and
performance of this Agreement. The Company shall pay all stamp and other taxes
and duties levied in connection with the sale of the Securities.
5.2 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 and
understandings, oral or written, with respect to such matters, which the parties
acknowledge have been merged into such documents, exhibits and schedules.
16
5.3 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 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 address for such notices and communications shall be
as set forth on the signature pages attached hereto.
5.3 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 Purchaser or, in the case of a waiver, by the
party against whom enforcement of any such waiver is sought. No waiver of any
default with respect to any provision, condition or requirement of this
Agreement shall be deemed to be a continuing waiver in the future or a waiver of
any subsequent default or a waiver of any other provision, condition or
requirement hereof, nor shall any delay or omission of either party to exercise
any right hereunder in any manner impair the exercise of any such right.
5.4 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.
5.5 SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon
and inure to the benefit of the parties and their successors and permitted
assigns. The Company may not assign this Agreement or any rights or obligations
hereunder without the prior written consent of each Purchaser. Any Purchaser may
assign any or all of its rights under this Agreement to any Person to whom such
Purchaser assigns or transfers any Securities, provided such transferee agrees
in writing to be bound, with respect to the transferred Securities, by the
provisions hereof that apply to the "Purchasers".
5.6 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.
5.7 GOVERNING LAW. All questions concerning the construction,
validity, enforcement and interpretation of the Transaction Documents shall be
governed by and construed and enforced in accordance with the internal laws of
the State of New York, without regard to the principles of conflicts of law
thereof. Each party agrees that all legal proceedings concerning the
interpretations, enforcement and defense of the transactions contemplated by
this Agreement and any other Transaction Documents (whether brought against a
party hereto or its respective affiliates, directors, officers, shareholders,
employees or agents) shall be commenced exclusively in the state and federal
courts sitting in the City of New York. Each party hereto hereby irrevocably
submits to the exclusive jurisdiction of the state and federal courts sitting in
the City
17
of New York, New York for the adjudication of any dispute hereunder or in
connection herewith or with any transaction contemplated hereby or discussed
herein (including with respect to the enforcement of the any of the Transaction
Documents), and hereby irrevocably waives, and agrees not to assert in any suit,
action or proceeding, any claim that it is not personally subject to the
jurisdiction of any such court, that such suit, action or proceeding is
improper. Each party hereto hereby irrevocably waives personal service of
process and consents to process being served in any such suit, action or
proceeding by 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 (including its affiliates,
agents, officers, directors and employees) hereby irrevocably waives, to the
fullest extent permitted by applicable law, any and all right to trial by jury
in any legal proceeding arising out of or relating to this Agreement or the
transactions contemplated hereby. If either party shall commence an action or
proceeding to enforce any provisions of a Transaction Document, then the
prevailing party in such action or proceeding shall be reimbursed by the other
party for its attorneys fees and other costs and expenses incurred with the
investigation, preparation and prosecution of such action or proceeding.
5.8 SURVIVAL. The representations, warranties, agreements and
covenants contained herein shall survive the Closing and delivery of the Share.
5.9 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.
5.10 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.
5.11 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.
5.12 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
18
monetary damages may not be adequate compensation for any loss incurred by
reason of any breach of obligations described in the foregoing sentence and
hereby agrees to waive in any action for specific performance of any such
obligation the defense that a remedy at law would be adequate.
5.13 PAYMENT SET ASIDE. To the extent that the Company makes a
payment or payments to any Purchaser pursuant to any Transaction Document or a
Purchaser enforces or exercises its rights thereunder, and such payment or
payments or the proceeds of such enforcement or exercise or any part thereof are
subsequently invalidated, declared to be fraudulent or preferential, set aside,
recovered from, disgorged by or are required to be refunded, repaid or otherwise
restored to the Company, a trustee, receiver or any other person under any law
(including, without limitation, any bankruptcy law, state or federal law, common
law or equitable cause of action), then to the extent of any such restoration
the obligation or part thereof originally intended to be satisfied shall 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.
5.14 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 obligations of any other
Purchaser under any Transaction Document. Nothing contained herein or in any
Transaction Document, and no action taken by any Purchaser pursuant thereto,
shall be deemed to constitute the Purchasers as a partnership, an association, a
joint venture or any other kind of entity, or create a presumption that the
Purchasers are in any way acting in concert or as a group with respect to such
obligations or the transactions contemplated by the Transaction Document. Each
Purchaser shall be entitled to independently protect and enforce its rights,
including without limitation, the rights arising out of this Agreement or out of
the other Transaction Documents, and it shall not be necessary for any other
Purchaser to be joined as an additional party in any proceeding for such
purpose. Each Purchaser has been represented by its own separate legal counsel
in their review and negotiation of the Transaction Documents. For reasons of
administrative convenience only, Purchasers and their respective counsel have
chosen to communicate with the Company through Feldman Weinstein LLP. Feldman
Weinstein LLP does not represent the Purchasers in this transaction but only
Roth Capital Partners, the placement agent that introduced the Company to the
Purchasers. The Company has elected to provide all Purchasers with the same
terms and Transaction Documents for the convenience of the Company and not
because it was required or requested to do so by the Purchasers.
(SIGNATURE PAGE FOLLOWS)
19
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.
TAG-IT PACIFIC, INC. ADDRESS FOR NOTICE:
------------------
21900 Burbank Boulevard
/s/ Colin Dyne Suite 270
By:_______________________________ Woodland Hills, California 91367
Name: Colin Dyne Attn:
Title: CEO Tel:
Fax:
With copy to (which shall not constitute notice):
Attn:
Tel:
Fax:
[SIGNATURE PAGE CONTINUES]
20
[PURCHASER SIGNATURE PAGES TO SECURITIES PURCHASE AGREEMENT]
ADDRESS FOR NOTICE:
------------------
GOLDMAN CAPITAL MANAGEMENT
220 E. 42 Street, 29th Fl.
/s/ Neal I. Goldman New York, New York 10017
__________________________ Attn: Neal I. Goldman
Neal I. Goldman Fax: (212) 476-9265
Tel: (212) 476-9261
Tax ID #: ###-##-####
Subscription Amount: $350,000
[SIGNATURE PAGE CONTINUES]
21
[PURCHASER SIGNATURE PAGES TO SECURITIES PURCHASE AGREEMENT]
PRISM OFFSHORE FUND, LTD ADDRESS FOR NOTICE:
------------------
c/o Delta Partners LLC
/s/ Rebecca Rogers One International Place
By: __________________________ Suite 2401
Name: Rebecca Rogers Boston, Massachusetts 02110
Title: Chief Financial Officer Tel: (617) 526-8939
Delta Partners, LLC Fax: (617) 526-8937
Attn: Rebecca Rogers
Tax ID #: N/A
Subscription Amount: $1,400,000
With a copy to:
[SIGNATURE PAGE CONTINUES]
22
[PURCHASER SIGNATURE PAGES TO SECURITIES PURCHASE AGREEMENT]
PRISM PARTNERS, LP ADDRESS FOR NOTICE:
------------------
c/o Delta Partners LLC
/s/ Rebecca Rogers One International Place
By: __________________________ Suite 2401
Name: Rebecca Rogers Boston, Massachusetts 02110
Title: Chief Financial Officer Tel: (617) 526-8939
Delta Partners, LLC Fax: (617) 526-8937
Attn: Rebecca Rogers
Tax ID #: N/A
Subscription Amount: $1,050,000
With a copy to:
[SIGNATURE PAGE CONTINUES]
23
[PURCHASER SIGNATURE PAGES TO SECURITIES PURCHASE AGREEMENT]
SF CAPITAL PARTNERS, LTD.
/s/ Brian H. Davidson
By: ____________________________
Name: Brian H. Davidson
Title: Authorized Signatory
ADDRESS FOR NOTICE:
c/o Staro Asset Management, LLC
3600 South Lake Drive
St. Francis, Wisconsin 53235
Attn: Brian H. Davidson
Tel: 414-294-7016
Fax: 414-294-7700
Tax ID #:
Subscription Amount: $437,500
[SIGNATURE PAGE CONTINUES]
24
[PURCHASER SIGNATURE PAGES TO SECURITIES PURCHASE AGREEMENT]
MICROCAPITAL FUND LIMITED PARTNERSHIP ADDRESS FOR NOTICE:
------------------
c/o MicroCapital
/s/ Ian P. Ellis 415 Jessie Street, Suite 1002
By: __________________________ San Francisco, CA 94103
Name: Ian P. Ellis ian@microcapital.com
Title: President of GP Attn: Ian Ellis
Tax ID #: 52-2286453
Tel: (415) 925-6833
Subscription Amount: $630,000
[SIGNATURE PAGE CONTINUES]
25
[PURCHASER SIGNATURE PAGES TO SECURITIES PURCHASE AGREEMENT]
MICROCAPITAL LLC ADDRESS FOR NOTICE:
------------------
c/o MicroCapital
/s/ Ian P. Ellis 415 Jessie Street, Suite 1002
By: __________________________ San Francisco, CA 94103
Name: Ian P. Ellis ian@microcapital.com
Title: President Attn: Ian Ellis
Tax ID #: 13-4103993
Tel: (415) 925-6833
Subscription Amount: $70,000
[SIGNATURE PAGE CONTINUES]
26
[PURCHASER SIGNATURE PAGES TO SECURITIES PURCHASE AGREEMENT]
LAGUNITAS PARTNERS LP ADDRESS FOR NOTICE:
------------------
c/o Gruber & McBaine Cap Mgmt
/s/ J. Patterson McBaine 50 Osgood Place
By: __________________________ Penthouse
Name: J. Patterson McBaine San Francisco, CA 94133
Title: as General Partner Tel: (415) 981-2101
Fax: (415) 956-7858
Attn: J. Patterson McBaine
Tax ID#: 94-3052761
Subscription Amount: $1,330,000.00
[SIGNATURE PAGE CONTINUES]
27
[PURCHASER SIGNATURE PAGES TO SECURITIES PURCHASE AGREEMENT]
GRUBER & MCBAINE INTERNATIONAL ADDRESS FOR NOTICE:
------------------
c/o Gruber & McBaine Cap Mgmt
/s/ J. Patterson McBaine 50 Osgood Place
By: __________________________ Penthouse
Name: J. Patterson McBaine San Francisco, CA 94133
Title: as Attorney-In-Fact Tel: (415) 981-2101
Fax: (415) 956-7858
Attn: J. Patterson McBaine
Tax ID#: N/A Offshore account
Subscription Amount: $420,000.00
[SIGNATURE PAGE CONTINUES]
28
[PURCHASER SIGNATURE PAGES TO SECURITIES PURCHASE AGREEMENT]
JON D. GRUBER & LINDA W. GRUBER ADDRESS FOR NOTICE:
------------------
c/o Gruber & McBaine Cap Mgmt
/s/ J. Patterson McBaine 50 Osgood Place
By: __________________________ Penthouse
Name: Jon D. Gruber & Linda W. Gruber San Francisco, CA 94133
Title: JTWROS Tel: (415) 981-2101
Fax: (415) 956-7858
Attn: J. Patterson McBaine
Tax ID#: ###-##-####
Subscription Amount: $175,000.00
[SIGNATURE PAGE CONTINUES]
29
[PURCHASER SIGNATURE PAGES TO SECURITIES PURCHASE AGREEMENT]
J. PATTERSON MCBAINE ADDRESS FOR NOTICE:
------------------
c/o Gruber & McBaine Cap Mgmt
/s/ J. Patterson McBaine 50 Osgood Place
By: __________________________ Penthouse
Name: J. Patterson McBaine San Francisco, CA 94133
Title: Individual Tel: (415) 981-2101
Fax: (415) 956-7858
Attn: J. Patterson McBaine
Tax ID#: ###-##-####
Subscription Amount: $175,000.00
30