UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
_______________
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported):
August 6, 2007
INTERNATIONAL FIGHT LEAGUE, INC.
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(Exact name of Registrant as Specified in its Charter)
Delaware
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(State or Other Jurisdiction of Incorporation)
000-21134 04-2893483
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(Commission File Number) (IRS Employer Identification No.)
424 West 33rd Street, Suite 650, New York, NY 10001
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(Address of Principal Executive Offices)
(212) 356-4000
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(Registrant's Telephone Number)
Check the appropriate box below if the Form 8-K filing is intended to
simultaneously satisfy the filing obligation of the registrant under any of the
following provisions (see General Instruction A.2. below):
[ ] Written communications pursuant to Rule 425 under the Securities Act
(17 CFR 230.425)
[ ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act
(17 CFR 240.14a-12)
[ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the
Exchange Act (17 CFR 240.14d-2(b))
[ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the
Exchange Act (17 CFR 240.13e-4(c))
Item 1.01 - Entry into a Material Definitive Agreement.
The information set forth under Item 3.02 of this Current Report on Form 8-K is
incorporated by reference in response to this Item 1.01.
Item 3.02 - Unregistered Sales of Equity Securities.
International Fight League, Inc. (the "Company") entered into a Securities
Purchase Agreement (the "Securities Purchase Agreement"), dated as of August 1,
2007, among the Company and the purchasers named therein (the "Purchasers"). The
Securities Purchase Agreement provides for the sale by the Company to the
Purchasers of (i) a total of 25,330,000 shares of common stock, par value $0.01
(the "Shares"), at a price of $0.50 per share for gross proceeds of $12,665,000,
and (ii) five-year warrants (the "Warrants") to acquire up to 12,665,000, or 50%
of the number of Shares sold pursuant to the Securities Purchase Agreement, of
additional shares of common stock of the Company (the "Warrant Shares"). The
transactions contemplated by the Securities Purchase Agreements closed on August
6, 2007 (the "Closing Date"). The Company issued, on August 1, 2007, a press
release under Rule 135c of the Securities Act of 1933, as amended (the
"Securities Act"), announcing its entry into the Securities Purchase Agreement
and describing the transactions contemplated thereby. The full text of the press
release is attached hereto as Exhibit 99.1.
All of the Purchasers represented that they were "accredited investors," as that
term is defined in Rule 501(a) of Regulation D under the Securities Act, and the
sale of the Shares was made in reliance on exemptions provided by Regulation D
and Section 4(2) of the Securities Act.
In connection with the Securities Purchase Agreement, the Company and the
Purchasers entered into a Registration Rights Agreement, dated as of August 1,
2007, and the Company agreed to file a registration statement to register the
resale of the Shares and Warrant Shares, within 60 days of the Closing Date and
to use reasonable best efforts to cause the registration statement to be
declared effective within 90 days (or 120 days upon full review by the SEC).
In connection with the private placement, the Company incurred expenses which
included, without limitation, commissions to the placement agent, legal and
accounting fees, and other miscellaneous expenses, of approximately $1 million.
In addition, the Company will also issue five-year warrants to purchase 729,900
shares of the Company's common stock to the placement agent as additional
compensation for their services.
The Company did not use any form of advertising or general solicitation in
connection with the sale of the Shares and Warrants. The Shares, the Warrants
and the Warrant Shares are non-transferable in the absence of an effective
registration statement under the Act, or an available exemption therefrom, and
all certificates are imprinted with a restrictive legend to that effect.
The description of the private placement described in this Current Report on
Form 8-K does not purport to be complete and is qualified in its entirety by
reference to the form of Securities Purchase Agreement filed as Exhibit 4.1, the
form of Registration Rights Agreement filed as Exhibit 4.2, and the form of
Warrant filed as Exhibit 4.3 to this Current Report on Form 8-K (collectively,
the "Transaction Documents"), all of which are incorporated herein by reference.
The forms of the Transaction Documents have been included to provide investors
and security holders with information regarding their terms. They are not
intended to provide any other factual information about the Company. The
Transaction Documents contain certain representations and warranties, as well as
indemnification with respect to a breach of such representations or warranties.
Investors and security holders should not rely on the representations and
warranties as characterizations of the actual state of facts because they were
made only as of the respective dates of the Transaction Documents. In addition,
information concerning the subject matter of the representations and warranties
may change after the respective dates of the Transaction Documents, and such
subsequent information may not be fully reflected in the Company's public
disclosures.
Item 9.01 - Financial Statements and Exhibits
See the Exhibit Index hereto, which is incorporated by reference herein.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this Report to be signed on its behalf by the
undersigned hereunto duly authorized.
INTERNATIONAL FIGHT LEAGUE, INC.
By: /s/ Michael C. Keefe
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Michael C. Keefe
President, Business & Legal Affairs
and Secretary
Date: August 6, 2007
EXHIBIT INDEX
Exhibit
No. Description
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4.1 Form of Securities Purchase Agreement, dated as of August 1, 2007.
4.2 Form of Registration Rights Agreement, dated as of August 1, 2007.
4.3 Form of Warrant, dated as of August 6, 2007.
99.1 Press Release of International Fight League, Inc., dated August 1,
2007.
Execution Copy
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SECURITIES PURCHASE AGREEMENT
This Securities Purchase Agreement (this "Agreement") is dated as of August
1, 2007, by and among International Fight League, Inc., a Delaware corporation
(the "Company"), and each purchaser identified on the signature pages hereto
(each, including its successors and assigns, a "Purchaser" and collectively, the
"Purchasers").
RECITALS
A. The Company and each Purchaser are executing and delivering this
agreement in reliance upon the exemption from securities registration afforded
by Section 4(2) of the Securities Act of 1933, as amended (the "Securities
Act"), and Rule 506 of Regulation D ("Regulation D") as promulgated by the
United States Securities and Exchange Commission under the Securities Act.
B. Each Purchaser, severally and not jointly, wishes to purchase, and
the Company wishes to sell, upon the terms and conditions stated in this
Agreement, (i) that aggregate number of shares of common stock, $0.01 par value
per share (the "Common Stock"), of the Company, set forth below such Purchaser's
name on the signature page of this Agreement, at the price of $0.50 per share
(which aggregate amount for all Purchasers together shall be 25,330,000 shares
of Common Stock and shall be collectively referred to herein as the "Shares"),
and (ii) warrants, in substantially the form attached hereto as Exhibit A (the
"Warrants"), to acquire up to that number of additional shares of Common Stock
equal to 50% of the number of Shares purchased by such Purchaser (the shares of
Common Stock issuable upon exercise of or otherwise pursuant to the Warrants,
collectively, the "Warrant Shares").
C. The Shares, the Warrants and the Warrant Shares issued pursuant to
this Agreement are collectively referred to herein as the "Securities."
D. The Company has engaged [________] as its placement agent (the
"Placement Agent") for the offering of the Securities on a "best efforts" basis.
E. Contemporaneously with the execution and delivery of this
Agreement, the parties hereto are executing and delivering a Registration Rights
Agreement, in the form attached hereto as Exhibit B (the "Registration Rights
Agreement"), pursuant to which, among other things, the Company will agree to
provide certain registration rights with respect to the Shares under the
Securities Act and applicable state securities laws.
NOW, THEREFORE, IN CONSIDERATION of the mutual covenants contained in this
Agreement, and for other good and valuable consideration the receipt and
adequacy of which are hereby acknowledged, the Company and the Purchasers hereby
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, to the Company's Knowledge, 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, with respect to any Person, any other Person that,
directly or indirectly through one or more intermediaries, Controls, is
controlled by or is under common control with such 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.
"Agreement" has the meaning set forth in the Introduction.
"Business Day" means a day, other than a Saturday or Sunday, on which
banks in New York City are open for the general transaction of business.
"Closing" means the closing of the purchase and sale of the Securities
pursuant to this Agreement.
"Closing Date" means the Trading Day when all of the Transaction
Documents have been executed and delivered by the applicable parties thereto,
and all of the conditions set forth in Sections 2.1 and 2.2 hereof are
satisfied, or such other date as the parties may agree.
"Commission" means the United States Securities and Exchange
Commission.
"Common Stock" has the meaning set forth in the Recitals, and also
includes any securities into which the Common Stock may hereafter be
reclassified or changed into.
"Common Stock Equivalents" means any securities of the Company or any
Subsidiary 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 or other securities that entitle the holder to receive, directly or
indirectly, Common Stock.
"Company" has the meaning set forth in the Introduction.
"Company Counsel" means Lowenstein Sandler PC.
"Company Counsel Duties" has the meaning set forth in Section 6.2(a).
"Company Deliverables" has the meaning set forth in Section 2.2(a).
"Control" (including the terms "controlling", "controlled by" or
"under common control with") means the possession, direct or indirect, of the
power to direct or cause the direction of the management and policies of a
Person, whether through the ownership of voting securities, by contract or
otherwise.
"Disclosure Materials" has the meaning set forth in Section 3.1(h).
"Effective Date" means the date on which the initial Registration
Statement required by Section 2(a) of the Registration Rights Agreement is first
declared effective by the Commission.
"Effectiveness Deadline" means the date on which the initial
Registration Statement is required to be declared effective by the Commission
under the terms of the Registration Rights Agreement.
"Environmental Laws" has the meaning set forth in Section 3.1(l).
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"Escrow Amount" has the meaning set forth in Section 6.1(a).
"Evaluation Date" has the meaning set forth in Section 3.1(v).
"Exchange Act" means the Securities Exchange Act of 1934, as amended,
or any successor statute, and the rules and regulations promulgated thereunder.
"GAAP" means U.S. generally accepted accounting principles, as applied
by the Company.
"Indemnified Party" has the meaning set forth in Section 4.4(a).
"Indemnifying Party" has the meaning set forth in Section 4.4(a).
"Intellectual Property" has the meaning set forth in Section 3.1(r).
"Irrevocable Transfer Agent Instructions" has the meaning set forth in
Section 4.1(e).
"Knowledge" means with respect to any statement made to the knowledge
of a party, that the statement is based upon the actual knowledge, after due
inquiry, of the executive officers of such party having responsibility for the
matter or matters that are the subject of the statement.
"Lien" means any lien, charge, claim, encumbrance, security interest,
right of first refusal, preemptive right or other restrictions of any kind.
"Losses" has the meaning set forth in Section 4.4.
"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,
business or financial condition of the Company and the Subsidiaries, taken as a
whole, or (iii) any material adverse impairment to the Company's ability to
perform in any material respect on a timely basis its obligations under any
Transaction Document.
"Material Contract" means any contract of the Company that was filed
as an exhibit to the SEC Filings pursuant to Item 601(b)(4) or Item 601(b)(10)
of Regulation S-K.
"Material Permits" has the meaning set forth in Section 3.1(p).
"New York Courts" means the state and federal courts sitting in the
City of New York, Borough of Manhattan.
"Outside Date" means August 31, 2007.
"OTCBB" has the meaning set forth in the definition of "Principal
Trading Market."
"Person" means an individual, corporation, partnership, limited
liability company, trust, business trust, association, joint stock company,
joint venture, sole proprietorship, unincorporated organization, governmental
authority or any other form of entity not specifically listed herein.
"Placement Agent" has the meaning set forth in the Recitals.
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"Principal Trading Market" means the Trading Market on which the
Common Stock is primarily listed on and quoted for trading, which, as of the
Closing Date means the Over the Counter Bulletin Board ("OTCBB").
"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.
"Purchaser" or "Purchasers" has the meaning set forth in the Recitals.
"Purchaser Deliverables" has the meaning set forth in Section 2.2(b).
"Purchaser Party" has the meaning set forth in Section 4.4.
"Registration Rights Agreement" has the meaning set forth in the
Recitals.
"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 Registrable Securities (as defined in the
Registration Rights Agreement).
"Regulation D" has the meaning set forth in the Recitals.
"Required Approvals" has the meaning set forth in Section 3.1(e).
"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).
"Secretary's Certificate" has the meaning set forth in Section
2.2(a)(vii).
"Securities" has the meaning set forth in the Recitals.
"Securities Act" means the Securities Act of 1933, as amended.
"Short Sales" include, without limitation, all "short sales" as
defined in Rule 200 promulgated under Regulation SHO under the Exchange Act,
whether or not against the box, and all types of direct and indirect stock
pledges, forward sale contracts, options, puts, calls, short sales, swaps, "put
equivalent positions" (as defined in Rule 16a-1(h) under the Exchange Act) and
similar arrangements (including on a total return basis), and sales and other
transactions through non-US broker dealers or foreign regulated brokers.
"Strategic Investor" means an investor who the Board determines in
good faith can provide synergistic, marketing, sponsorship, operational or other
business benefits to the Company.
"Subscription Amount" means with respect to each Purchaser, the
aggregate amount to be paid for the Shares and the Warrants purchased hereunder
as indicated on such Purchaser's signature page to this Agreement next to the
heading "Aggregate Purchase Price (Subscription Amount)".
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"Subsidiary" means any "significant subsidiary" as defined in Rule
1-02(w) of Regulation S-X promulgated by the Commission under the Exchange Act
and any other entity required to be disclosed in the SEC Reports pursuant to
Item 601(b)(21) of Regulation S-K.
"Trading Affiliate" has the meaning set forth in Section 3.2(h).
"Trading Day" means (i) a day on which the Common Stock is listed or
quoted and traded on its primary Trading Market (other than the OTCBB), or (ii)
if the Common Stock is not listed on a Trading Market (other than the OTCBB), a
day on which the Common Stock is traded in the over-the-counter market, as
reported by the OTCBB, 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 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 Global Select Market, the NASDAQ Global
Market, the NASDAQ Capital Market, or the OTCBB on which the Common Stock is
listed or quoted for trading on the date in question.
"Transaction Documents" means this Agreement, the schedules and
exhibits attached hereto, the Warrants, the Registration Rights Agreement, the
Irrevocable Transfer Agent Instructions and any other documents or agreements
executed in connection with the transactions contemplated hereunder.
"Transfer Agent" means American Stock Transfer, or any successor
transfer agent for the Company.
"Warrants" has the meaning set forth in the Recitals. The Placement
Agent and/or its designees are also receiving placement agent warrants as
compensation for services rendered in connection with the transactions set forth
herein, which warrants shall also constitute "Warrants" for all purposes
hereunder.
"Warrant Shares" has the meaning set forth in the Recitals. Warrant
Shares shall also include shares of Common Stock issuable upon exercise of
Warrants received by the Placement Agent and/or its designees as compensation
for services rendered in connection with the transactions set forth herein.
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 Purchaser,
and each Purchaser shall, severally and not jointly, purchase from the Company,
such number of shares of Common Stock and Warrants to purchase a number of
Warrant Shares, as indicated below such Purchaser's name on the signature page
of this Agreement, for an aggregate purchase price for such Purchaser as
indicated below such Purchaser's name on the signature page of this Agreement.
Upon confirmation that the other conditions to closing specified herein have
been satisfied or duly waived by the Purchasers, the Company shall deliver to
Company Counsel, in trust, a certificate or certificates, registered in such
name or names as the Purchasers may designate, representing the Shares and
Warrants, with instructions that such certificates are to be held for release to
the Purchasers only upon payment in full of the Subscription Amount to the
Company by all the Purchasers. Unless otherwise agreed to by the Company and any
Purchaser, upon such receipt by Company Counsel of the certificates, each
Purchaser shall promptly, but no more than one Business Day thereafter, cause a
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wire transfer in same day funds to be sent to the account of the Company as
instructed in writing by the Company, in an amount representing the purchase
price for such Purchaser as indicated below such Purchaser's name on the
signature page of this Agreement. On the date (the "Closing Date") the Company
receives the aggregate Subscription Amounts, the certificates evidencing the
Shares and Warrants shall be released to the Purchasers (the "Closing"). The
Closing of the purchase and sale of the Shares and Warrants shall take place at
the offices of Lowenstein Sandler PC, 1251 Avenue of the Americas, New York, New
York on the Closing Date or at such other locations or remotely by facsimile
transmission or other electronic means as the parties may mutually agree.
2.2 Closing Deliveries. (a) On or prior to the Closing, the Company shall
issue, deliver or cause to be delivered to each Purchaser the following (the
"Company Deliverables"):
(i) This Agreement, duly executed by the Company;
(ii) One or more stock certificates, containing the legends
provided in Section 4.1(b) hereof, evidencing a number of Shares indicated below
such Purchaser's name on the signature page of this Agreement, registered in the
name of such Purchaser;
(iii) One or more Warrants, executed by the Company and
registered in the name of such Purchaser, pursuant to which such Purchaser shall
have the right to acquire such number of Warrant Shares equal to 50% of the
number of Shares issuable to such Purchaser pursuant to Section 2.2(a)(ii) on
the terms set forth therein;
(iv) a legal opinion of Company Counsel, in the form attached
hereto as Exhibit D, executed by such counsel and addressed to the Purchasers
and the Placement Agent;
(v) the Registration Rights Agreement, duly executed by the
Company;
(vi) duly executed Irrevocable Transfer Agent Instructions
acknowledged in writing by the Transfer Agent;
(vii) a certificate of the Secretary of the Company (the
"Secretary's Certificate"), dated as of the Closing Date, certifying the
resolutions adopted by the Board of Directors of the Company approving the
transactions contemplated by this Agreement and the other Transaction Documents
and the issuance of the Securities, certifying the current versions of the
certificate or articles of incorporation, as amended and by-laws of the Company
and certifying as to the signatures and authority of persons signing the
Transaction Documents and related documents on behalf of the Company; and
(viii) the Compliance Certificate referred to in Section 5.1(h).
(b) On or prior to the Closing, each Purchaser shall deliver or cause
to be delivered to the Company the following (the "Purchaser Deliverables"):
(i) This Agreement, duly executed by such Purchaser;
(ii) Such Purchaser's Subscription Amount, in United States
dollars and in immediately available funds, in the amount set forth as the
"Purchase Price" indicated below such Purchaser's name on the applicable
signature page hereto by wire transfer to an account designated in writing by
the Company for such purpose, as set forth on Exhibit F attached hereto;
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(iii) the Registration Rights Agreement, duly executed by such
Purchaser;
(iv) a fully completed and duly executed Selling Securityholder
Notice and Questionnaire in the form attached as Annex B to the Registration
Rights Agreement; and
(v) a fully completed and duly executed Accredited Investor
Questionnaire and Stock Certificate Questionnaire in the forms attached hereto
as Exhibits C-1 and C-2, respectively.
ARTICLE III.
REPRESENTATIONS AND WARRANTIES
3.1 Representations and Warranties of the Company. The Company hereby
represents and warrants to the Purchasers and to the Placement Agent that,
except as set forth in the Schedules delivered herewith:
(a) Subsidiaries. The Company has no direct or indirect Subsidiaries
other than those listed in Schedule 3.1(a) hereto. Except as disclosed in
Schedule 3.1(a) hereto, the Company owns, directly or indirectly, all of the
capital stock or comparable equity interests of each Subsidiary free and clear
of any and all Liens, and all the issued and outstanding shares of capital stock
or comparable equity interest of each Subsidiary are validly issued and are
fully paid, non-assessable and free of preemptive and similar rights to
subscribe for or purchase securities.
(b) Organization and Qualification. The Company and each Subsidiary 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 or lease 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, could not have or reasonably be expected to have, individually or in the
aggregate, resulted in a Material Adverse Effect and no Proceeding has been
instituted in any such jurisdiction revoking, limiting or curtailing or seeking
to revoke, limit or curtail such power and authority or qualification.
(c) Authorization; Enforcement; Validity. The Company has the
requisite corporate power and authority to enter into and to consummate the
transactions contemplated by each of the Transaction Documents to which it is a
party and otherwise to carry out its obligations hereunder and thereunder. The
execution and delivery of each of the Transaction Documents to which it is a
party by the Company and the consummation by it of the transactions contemplated
hereby and thereby (including, but not limited to, the sale and delivery of the
Shares and the Warrants and the subsequent issuance of the Warrant Shares upon
the exercise of the Warrants) have been duly authorized by all necessary
corporate action on the part of the Company and no further corporate action is
required by the Company, its Board of Directors or its stockholders in
connection therewith other than in connection with the Required Approvals. Each
of the Transaction Documents to which it is a party has been (or upon delivery
will have been) duly executed by the Company and is, or 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. Except as set forth on
Schedule 3.1(c) hereto, there are no shareholder agreements, voting agreements,
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or other similar arrangements with respect to the Company's capital stock to
which the Company is a party or, to the Company's Knowledge, between or among
any of the Company's shareholders.
(d) No Conflicts. The execution, delivery and performance of the
Transaction Documents to which it is a party by the Company and the consummation
by the Company of the transactions contemplated hereby or thereby (including,
without limitation, the issuance of the Shares, the Warrants and the reservation
for issuance and the issuances of the Warrant Shares) do not and will not (i)
conflict with or violate any provision of the Company's or any Subsidiary's
certificate or articles of incorporation, bylaws or other organizational or
charter documents, (ii) conflict with, or constitute a default (or an event that
with notice or lapse of time or both would become a default) under, result in
the creation of any Lien upon any of the properties or assets of the Company or
any Subsidiary 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) subject to the Required
Approvals, conflict with or result in a violation of any law, rule, regulation,
order, judgment, injunction, decree or other restriction of any court or
governmental authority to which the Company or a Subsidiary is subject
(including federal and state securities laws and regulations and the rules and
regulations, assuming the correctness of the representations and warranties made
by the Purchasers herein, of any self-regulatory organization to which the
Company or its securities are subject, including all applicable Trading
Markets), or by which any property or asset of the Company or a Subsidiary is
bound or affected, except in the case of clauses (ii) and (iii) such as would
not, individually or in the aggregate, have or reasonably be expected to result
in a Material Adverse Effect.
(e) Filings, Consents and Approvals. Neither the Company nor any
Subsidiary is 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 (including the issuance of the Securities), 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 applicable state securities laws, (iii) the filing of a
Notice of Sale of Securities on Form D with the Commission under Regulation D of
the Securities Act, (iv) the filing of any requisite notices and/or
application(s) to the Principal Trading Market for the issuance and sale of the
Securities and the listing of the Common Stock for trading or quotation, as the
case may be, thereon in the time and manner required thereby, (v) the filings
required in accordance with Section 4.3 of this Agreement and (vi) those that
have been made or obtained prior to the date of this Agreement (collectively,
the "Required Approvals").
(f) Issuance of the Securities. The Shares and the Warrant Shares have
been duly authorized and, when issued and paid for in accordance with the terms
of the Transaction Documents, will be duly and validly issued, fully paid and
nonassessable, free and clear of all Liens, other than restrictions on transfer
provided for in the Transaction Documents or imposed by applicable securities
laws. Assuming the accuracy of the representations and warranties of the
Purchasers in this Agreement, the Shares and the Warrant Shares will be issued
in compliance with all applicable federal and state securities laws. The Company
has reserved from its duly authorized capital stock the maximum number of shares
of Common Stock issuable upon exercise of the Warrants.
(g) Capitalization. The number of shares and type of all authorized,
issued and outstanding capital stock, options, warrants and other securities of
the Company (whether or not presently convertible into or exercisable or
exchangeable for shares of capital stock of the Company) is specified in
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Schedule 3.1(g) hereto. All of the outstanding shares of capital stock of the
Company are duly authorized, validly issued, fully paid and non-assessable, have
been issued in compliance in all material respects with all applicable federal
and state securities laws, and none of such outstanding shares was issued in
violation of any preemptive rights or similar rights to subscribe for or
purchase any capital stock of the Company. Except as specified in Schedule
3.1(g) hereto, there are no outstanding options, warrants or 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 the
Company's capital stock, or contracts, commitments, understandings or
arrangements by which the Company or any Subsidiary is or may become bound to
issue additional shares of capital stock of the Company, or options, securities
or rights convertible or exchangeable into shares of capital stock of the
Company. Except for customary adjustments as a result of stock dividends, stock
splits, combination of shares, reorganizations, recapitalizations,
reclassifications or other similar events, or as disclosed in Schedule 3.1(g)
hereto or in any Schedule 13D or Schedule 13G or Company report on file with the
Commission, there are no anti-dilution or price adjustment provisions contained
in any security issued by the Company (or in any agreement providing rights to
security holders) and the issuance 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 Purchasers) and
will not, result in a right of any holder of securities to adjust the exercise,
conversion, exchange or reset price under such securities.
(h) SEC Reports. The Company has filed all reports, schedules, forms,
statements and other documents required to be filed by it under the Exchange
Act, including pursuant to Section 13(a) or 15(d) thereof, since January 1, 2004
(the foregoing materials, including the exhibits thereto and documents
incorporated by reference therein, being collectively referred to herein as the
"SEC Reports" and together with this Agreement and the Schedules to this
Agreement (if any), 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 the date hereof,
the Company is not aware of any event occurring on or prior to the Closing Date
(other than the transactions contemplated by the Transaction Documents) that
requires the filing of a Form 8-K after the Closing. As of their respective
dates, or to the extent corrected by a subsequent restatement, 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.
(i) Financial Statements. 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 (or to the extent corrected
by a subsequent restatement). 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 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 taken as a
whole 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. All material agreements to which the
Company or any Subsidiary is a party or to which the property or assets of the
Company or any Subsidiary are subject are included as part of or specifically
identified in the SEC Reports.
(j) Tax Matters. Each of the Company and its Subsidiaries (i) has
accurately and timely prepared and filed all foreign, federal and state income
and all other tax returns, reports and declarations required by any jurisdiction
to which it is subject, (ii) has paid all taxes and other governmental
9
assessments and charges that are material in amount, shown or determined to be
due on such returns, reports and declarations, except those being contested in
good faith, with respect to which adequate reserves have been set aside on the
books of the Company and (iii) has set aside on its books provisions reasonably
adequate for the payment of all taxes for periods subsequent to the periods to
which such returns, reports or declarations apply, except, in the case of
clauses (i) and (ii) above, where the failure to so pay or file any such tax,
assessment, charge or return would not result in a Material Adverse Effect.
There are no unpaid taxes in any material amount claimed to be due by the taxing
authority of any jurisdiction.
(k) Material Changes. Since December 31, 2006, except as specifically
disclosed in the SEC Reports or as set forth in Schedule 3.1(k) hereto, (i)
there have been no events, occurrences or developments that have had or that
could reasonably be expected to result, either individually or in the aggregate,
in a Material Adverse Effect, (ii) the Company has not incurred any material
liabilities 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, (iii) the Company has not altered its method of
accounting or the manner in which it keeps its accounting books and records,
(iv) the Company has not declared or made any dividend or distribution of cash
or other property to its shareholders or purchased, redeemed or made any
agreements to purchase or redeem any shares of its capital stock (other than in
connection with repurchases of unvested stock issued to employees of the
Company), (v) the Company has not issued any equity securities to any officer,
director or Affiliate, except Common Stock issued in the ordinary course as
dividends on outstanding preferred stock and pursuant to existing Company stock
option or stock purchase plans or executive and director corporate arrangements
disclosed in the SEC Reports and (vi) there has not been any material change or
amendment to, or any waiver of any material right under, any contract under
which the Company, any subsidiary thereof, or any of their assets is bound or
subject.
(l) Environmental Matters. To the Company's Knowledge, neither the
Company nor any Subsidiary (i) is in violation of any statute, rule, regulation,
decision or order of any governmental agency or body or any court, domestic or
foreign, relating to the use, disposal or release of hazardous or toxic
substances or relating to the protection or restoration of the environment or
human exposure to hazardous or toxic substances (collectively, "Environmental
Laws"), (ii) owns or operates any real property contaminated with any substance
that is in violation of any Environmental Laws, (iii) is liable for any off-site
disposal or contamination pursuant to any Environmental Laws, and (iv) is
subject to any claim relating to any Environmental Laws; which violation,
contamination, liability or claim has had or could reasonably be expected to
have a Material Adverse Effect, individually or in the aggregate; and there is
no pending or, to the Company's Knowledge, threatened investigation that might
lead to such a claim.
(m) 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 specifically disclosed in the SEC
Reports, could, if there were an unfavorable decision, individually or in the
aggregate, result in a judgment against the Company or any Subsidiary in excess
of $100,000 and for which no insurance is available. Neither the Company nor any
Subsidiary, nor, to the Company's Knowledge, any current director or officer
thereof (in his or her capacity thereof), is or has been since December 31,
2001, 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 Company's Knowledge, there is not pending or
contemplated, any investigation by the Commission involving the Company or, to
the Company's Knowledge any current or former director or officer of the Company
10
(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.
(n) Employment Matters. 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. None of the Company's or its Subsidiaries' employees is a member of a
union that relates to such employee's relationship with the Company, and neither
the Company or any of its Subsidiaries is a party to a collective bargaining
agreement, and the Company and its Subsidiaries believe that their relationships
with their employees are good. No executive officer, to the Knowledge of the
Company, is, or is now expected to be, in violation of any material term of any
employment contract, confidentiality, disclosure or proprietary information
agreement or non-competition agreement, or any other contract or agreement or
any restrictive covenant, and the continued employment of each such executive
officer does not subject the Company or any of its Subsidiaries to any liability
with respect to any of the foregoing matters. The Company and its Subsidiaries
are in compliance with all U.S. federal, state, local and foreign laws and
regulations relating to employment and employment practices, terms and
conditions of employment and wages and hours, except where the failure to be in
compliance could not, individually or in the aggregate, reasonably be expected
to have a Material Adverse Effect.
(o) Compliance. Neither the Company nor any Subsidiary (i) is in
default under or in violation of (and no event has occurred that has not been
waived that, with notice or lapse of time or both, would result in a default by
the Company or any Subsidiary under), nor has the Company or any Subsidiary
received notice of a claim that it is in default under or that it is in
violation of, any indenture, loan or credit agreement or any other agreement or
instrument to which it is a party or by which it or any of its properties is
bound (whether or not such default or violation has been waived), (ii) is in
violation of any order of any court, arbitrator or governmental body having
jurisdiction over the Company or its properties or assets, or (iii) is or has
been in violation of, or in receipt of notice that it is in violation of, any
statute, rule or regulation of any governmental authority applicable to the
Company, except in each case as could not, individually or in the aggregate,
have or reasonably be expected to result in a Material Adverse Effect.
(p) 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, individually or in the aggregate, has not and could not
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 such Material
Permits. Furthermore, the Company and the Subsidiaries possess all necessary
Material Permits and/or Required Approvals which were required in connection
with the recently completed reverse merger.
(q) Title to Assets. Except for property that is specifically the
subject of, and covered by, other representations and warranties as to ownership
or title contained herein, the Company and the Subsidiaries have 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 and Liens for the payment of federal, state
or other taxes, the payment of which is neither delinquent nor subject to
penalties. Any real property and facilities held under lease by the Company and
the Subsidiaries are held by them under valid, subsisting and enforceable leases
of which the Company and the Subsidiaries are in material compliance. Neither
the Company nor any Subsidiary own any real property.
11
(r) Patents and Trademarks. The Company and its Subsidiaries own,
possess, license or have other rights to use all foreign and domestic patents,
patent applications, trade and service marks, trade and service mark
registrations, trade names, copyrights, licenses, inventions, trade secrets,
technology, Internet domain names, know-how and other intellectual property
(collectively, the "Intellectual Property") necessary for the conduct of their
respective businesses as now conducted or as proposed to be conducted. Except as
set forth in the SEC Reports and except where such violations or infringements
would not reasonably be expected to result, either individually or in the
aggregate, in a Material Adverse Effect, (a) there are no rights of third
parties to any such Intellectual Property; (b) to the Company's Knowledge, there
is no infringement by third parties of any such Intellectual Property; (c) there
is no pending or, to the Company's Knowledge, threatened action, suit,
proceeding or claim by others challenging the Company's and its Subsidiaries'
rights in or to any such Intellectual Property, and the Company is unaware of
any facts which would form a reasonable basis for any such claim; (d) there is
no pending or, to the Company's Knowledge, threatened action, suit, proceeding
or claim by others challenging the validity or scope of any such Intellectual
Property; and (e) there is no pending or, to the Company's Knowledge, threatened
action, suit, proceeding or claim by others that the Company and/or any of its
Subsidiaries infringe or otherwise violate any patent, trademark, copyright,
trade secret or other proprietary rights of others, and the Company is unaware
of any other fact which would form a reasonable basis for any such claim.
(s) 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 and location
in which the Company and the Subsidiaries are engaged. Neither the Company nor
any Subsidiary has any knowledge that it will be unable to renew its existing
insurance coverage for the Company and the Subsidiaries 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.
(t) Transactions With Affiliates and Employees. Except as set forth in
the SEC Reports made on or prior to the date hereof, none of the officers or
directors of the Company and, to the Company's Knowledge, none of the employees
of the Company is presently a party to any transaction with the Company or any
Subsidiary or to a presently contemplated transaction (other than for services
as employees, officers and directors) that would be required to be disclosed
pursuant to Item 404 of Regulation S-K promulgated under the Securities Act.
(u) Internal Accounting Controls. The Company and the Subsidiaries
maintain a system of internal accounting controls sufficient to provide
reasonable assurance that (i) transactions are executed in accordance with
management's general or specific authorizations, (ii) transactions are recorded
as necessary to permit preparation of financial statements in conformity with
GAAP and to maintain asset accountability, (iii) access to assets is permitted
only in accordance with management's general or specific authorization, and (iv)
the recorded accountability for assets is compared with the existing assets at
reasonable intervals and appropriate action is taken with respect to any
differences.
(v) Sarbanes-Oxley; Disclosure Controls. The Company is in compliance
in all material respects with all of the provisions of the Sarbanes-Oxley Act of
2002 which are applicable to it as of the Closing Date. The Company has
established disclosure controls and procedures (as defined in Exchange Act Rules
13a-15(e) and 15d-15(e)) for the Company and designed such disclosure controls
and procedures to ensure that material information relating to the Company is
made known to the certifying officers by others within those entities. The
Company's certifying officers have evaluated the effectiveness of its controls
and procedures as of a date within 90 days prior to the filing of the most
recently filed periodic report under the Exchange Act (such date, the
"Evaluation Date"). The Company presented in its most recently filed periodic
report under the Exchange Act the conclusions of the certifying officers about
12
the effectiveness of the disclosure controls and procedures based on their
evaluations as of the Evaluation Date. Since such 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) or, to the Company's Knowledge, in other
factors that could significantly affect the Company's internal controls.
(w) Certain Fees. No person or entity will have, as a result of the
transactions contemplated by this Agreement, any valid right, interest or claim
against or upon the Company or a Purchaser for any commission, fee or other
compensation pursuant to any agreement, arrangement or understanding entered
into by or on behalf of the Company, other than [________] as placement agent
with respect to the offer and sale of the Shares and Warrants (which placement
agent fees are being paid by the Company) or the issuance of the Warrant Shares.
The Company shall pay, and hold each Purchaser harmless against, any liability,
loss or expense (including, without limitation, attorney's fees and
out-of-pocket expenses) arising in connection with any such right, interest or
claim.
(x) Private Placement. Assuming the accuracy of the Purchasers'
representations and warranties set forth in Section 3.2 of this Agreement, no
registration under the Securities Act is required for the offer and sale of the
Securities by the Company to the Purchasers under the Transaction Documents.
Other than certain piggy-back registration rights granted to Lifeline
Industries, Inc., as of the date of this Agreement, there are no outstanding
registration rights held by any holder of the Company's securities.
(y) No Directed Selling Efforts or General Solicitation. Neither the
Company, nor any of its Affiliates, nor any Person acting on its or their behalf
has conducted any "general solicitation" or "general advertising" (as those
terms are used in Regulation D) in connection with the offer or sale of any of
the Shares and Warrants.
(z) No Integrated Offering. Assuming the accuracy of the Purchasers'
representations and warranties set forth in Section 3.2, and subject to Section
4.9 of this Agreement, neither the Company, its Subsidiaries nor any of their
Affiliates, nor any Person acting on its or their behalf has, directly or
indirectly, at any time within the past six months made any offers or sales of
any Company security or solicited any offers to buy any security, under
circumstances that would (i) eliminate the availability of the exemption from
registration under Regulation D under the Securities Act in connection with the
offer and sale by the Company of the Shares and Warrants or the issuance of the
Warrant Shares as contemplated hereby or (ii) cause the offering of the Shares
and Warrants or the issuance of the Warrant Shares pursuant to the Transaction
Documents to be integrated with prior offerings by the Company for purposes of
any applicable law, regulation or shareholder approval provisions, including,
without limitation, under the rules and regulations of the Principal Trading
Market on which any of the securities of the Company are listed or designated.
(aa) Exchange Act. The Company's Common Stock is registered pursuant
to Section 12(g) of the Exchange Act, and the Company has taken no action
designed to terminate the registration of the Common Stock under the Exchange
Act nor has the Company received any notification that the Commission is
contemplating terminating such registration.
(bb) Investment Company. Neither the Company nor any of its
Subsidiaries is required to be registered as, and is not an Affiliate of, and
immediately following the Closing will not be required to register as, an
"investment company" within the meaning of the Investment Company Act of 1940,
as amended.
(cc) Questionable Payments. Neither the Company nor any of its
Subsidiaries, nor, to the Company's Knowledge, any directors, officers,
employees, agents or other Persons acting on behalf of the Company or any of its
13
Subsidiaries has, in the course of its actions for, or on behalf of, the
Company: (a) directly or indirectly, used any corporate funds for unlawful
contributions, gifts, entertainment or other unlawful expenses relating to
foreign or domestic political activity; (b) made any direct or indirect unlawful
payments to any foreign or domestic governmental officials or employees or to
any foreign or domestic political parties or campaigns from corporate funds; (c)
violated in any material respect any provision of the Foreign Corrupt Practices
Act of 1977, as amended or (d) made any other unlawful bribe, rebate, payoff,
influence payment, kickback or other unlawful payment to any foreign or domestic
government official or employee.
(dd) 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 charter documents or the laws of its
state of incorporation that is or could reasonably be expected to become
applicable to any of 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.
(ee) Disclosure. The Company confirms that neither it nor any of its
officers or directors nor any other Person acting on its or their behalf has
provided, and it has not authorized the Placement Agent to provide, any
Purchaser or its respective agents or counsel with any information that it
believes constitutes or could reasonably be expected to constitute material,
non-public information except insofar as the existence, provisions and terms of
the Transaction Documents and the proposed transactions hereunder provided to
the Purchasers may constitute such information, all of which will be disclosed
by the Company in the Press Release as contemplated by Section 4.3 hereof
together with the Form 8-K. All disclosure provided to the Purchasers regarding
the Company, its business and the transactions contemplated hereby, furnished
prior to the date of this Agreement by the Company or authorized by the Company
and furnished by the Placement Agent on behalf of the Company (including the
Company's representations and warranties set forth in this Agreement) are true
and correct in all material respects and do not contain any untrue statement of
a material fact or omit to state any material fact necessary in order to make
the statements made therein, in light of the circumstances under which they were
made, not misleading. No event or circumstance has occurred or information
exists with respect to the Company nor any of its Subsidiaries or its or their
business, properties, operations or financial conditions, which, under
applicable law, rule or regulation, requires public disclosure or announcement
by the Company but which has not been so publicly announced or disclosed, except
for the announcement of this Agreement and related transactions.
(ff) Off Balance Sheet Arrangements. There is no transaction,
arrangement, or other relationship between the Company and an unconsolidated or
other off balance sheet entity that is required to be disclosed by the Company
in its Exchange Act filings and is not so disclosed or that otherwise would be
reasonably likely to have a Material Adverse Effect.
(gg) Consultation with Auditors. The Company has consulted its
independent auditors concerning the accounting treatment of the transactions
contemplated by the Transaction Documents, and in connection therewith has
furnished such auditors complete copies of the Transaction Documents. The
Company intends to (but the Company cannot assure that the Commission will allow
the Company to) account for the gross proceeds raised from the financing which
is the subject of this Agreement as equity in its financial statements.
14
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 and the Placement Agent as
follows:
(a) Organization; Authority. Such Purchaser is an entity duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its organization with the requisite corporate or partnership
power and authority to enter into and to consummate the transactions
contemplated by the applicable Transaction Documents and otherwise to carry out
its obligations hereunder and thereunder. The execution, delivery and
performance by such Purchaser of the transactions contemplated by this Agreement
have been duly authorized by all necessary corporate or, if such Purchaser is
not a corporation, such partnership, limited liability company or other
applicable like action, on the part of such Purchaser. Each of this Agreement
and the Registration Rights Agreement has been duly executed by such Purchaser,
and when delivered by such Purchaser in accordance with terms hereof, will
constitute the valid and legally binding obligation of such Purchaser,
enforceable against it 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.
(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 Shares and
Warrants, and upon the exercise of the Warrants, will acquire the Warrant Shares
issuable upon exercise thereof, as principal for its own account and not with a
view to, or for distributing or reselling such Securities or any part thereof in
violation of the Securities Act or any applicable state securities laws, without
prejudice, however, to such Purchaser's right, subject to the provisions of this
Agreement and the Registration Rights Agreement, at all times to sell or
otherwise dispose of all or any part of such Shares or Warrant Shares pursuant
to an effective registration statement under the Securities Act or under an
exemption from such registration and in compliance with applicable federal and
state securities laws. Such Purchaser is acquiring the Shares and Warrants, and
upon the exercise of the Warrants, will acquire the Warrant Shares issuable upon
exercise thereof, in the ordinary course of its business. Such Purchaser does
not presently have any agreement, plan or understanding, directly or indirectly,
with any Person to distribute or effect any distribution of any of the
Securities (or any securities which are derivatives thereof) to or through any
person or entity; provided, however, that by making the representations herein,
such Purchaser does not agree to hold any of the Securities for any minimum
period of time.
(c) Purchaser Status. At the time such Purchaser was offered the
Shares and Warrants, 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 Purchaser is not a registered
broker-dealer under Section 15 of the Exchange Act.
(d) General Solicitation. Such Purchaser is not purchasing the Shares
and Warrants as a result of any advertisement, article, notice or other
communication regarding the Shares and Warrants published in any newspaper,
magazine or similar media or broadcast over television or radio or presented at
any seminar or any other general advertisement.
(e) 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.
15
(f) Access to Information. Such Purchaser acknowledges that it has had
the opportunity to review 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 Shares and Warrants and the merits and risks of investing
in the Securities; (ii) access to information (other than material non-public
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
Purchaser or its representatives or counsel shall modify, amend or affect such
Purchaser's right to rely on the truth, accuracy and completeness of the
Disclosure Materials and the Company's representations and warranties contained
in the Transaction Documents.
(g) Residency. Such Purchaser has, if an entity, its principal place
of business or, if an individual, its primary residence in the jurisdiction set
forth immediately below such Purchaser's name on the signature pages hereto.
(h) Certain Trading Activities. Other than with respect to the
transactions contemplated herein, since the earlier to occur of (1) the time
that such Purchaser was first contacted by the Company, the Placement Agent or
any other Person regarding this investment in the Company and (2) the tenth
(10th) day prior to the date of this Agreement, neither the Purchaser nor any
Affiliate of such Purchaser which (x) had knowledge of the transactions
contemplated hereby, (y) has or shares discretion relating to such Purchaser's
investments or trading or information concerning such Purchaser's investments,
including in respect of the Securities, and (z) is subject to such Purchaser's
review or input concerning such Affiliate's investments or trading
(collectively, "Trading Affiliates") has directly or indirectly, nor has any
Person acting on behalf of or pursuant to any understanding with such Purchaser
or Trading Affiliate, effected or agreed to effect any transactions in the
securities of the Company (including, without limitation, any Short Sales
involving the Company's securities). Notwithstanding the foregoing, no Purchaser
makes any representation, warranty or covenant hereby that it will not engage in
Short Sales in the securities of the Company after the time that the
transactions contemplated by this Agreement are first publicly announced as
described in Section 4.3.
(i) Brokers and Finders. No Person will have, as a result of the
transactions contemplated by this Agreement, any valid right, interest or claim
against or upon the Company, or any Purchaser for any commission, fee or other
compensation pursuant to any agreement, arrangement or understanding entered
into by or on behalf of the Purchaser.
(j) Independent Investment Decision. Such Purchaser has independently
evaluated the merits of its decision to purchase the Shares and Warrants
pursuant to the Transaction Documents, and such Purchaser confirms that it has
not relied on the advice of any other Purchaser's business and/or legal counsel
in making such decision. Such Purchaser understands that nothing in this
Agreement or any other materials presented by or on behalf of the Company to the
Purchaser in connection with the purchase of the Shares and Warrants 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 the Shares and Warrants. Such
Purchaser understands that the Placement Agent has acted solely as the agent of
the Company in this placement of the Shares and Warrants and such Purchaser has
not relied on the business or legal advice of the Placement Agent or any of its
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 Purchaser in connection with the transactions contemplated by the
Transaction Documents.
16
(k) Reliance on Exemptions. Such Purchaser understands that the Shares
and Warrants being offered and sold to it in reliance on specific exemptions
from the registration requirements of United States federal and state securities
laws and that the Company is relying in part upon the truth and accuracy of, and
such Purchaser's compliance with, the representations, warranties, agreements,
acknowledgements and understandings of such Purchaser set forth herein in order
to determine the availability of such exemptions and the eligibility of such
Purchaser to acquire the Securities.
(l) No Governmental Review. Such Purchaser understands that no United
States federal or state agency or any other government or governmental agency
has passed on or made any recommendation or endorsement of the Securities or the
fairness or suitability of the investment in the Securities nor have such
authorities passed upon or endorsed the merits of the offering of the Shares and
Warrants.
The Company acknowledges and agrees that no Purchaser 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) Compliance with Laws. Notwithstanding any other provision of
this Article IV, each Purchaser covenants that the securities may only be
disposed of pursuant to an effective registration statement under, and in
compliance with the requirements of, 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 compliance with any applicable state
and federal securities laws. In connection with any transfer of the Securities
other than (i) pursuant to an effective registration statement, (ii) to the
Company, (iii) to an Affiliate of a Purchaser, (iv) pursuant to Rule 144 or (v)
in connection with a bona fide pledge as contemplated in Section 4.1(b), except
as otherwise provided herein, 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. 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) Legends. Certificates evidencing the Securities shall bear any
legend as required by the "blue sky" laws of any state and a restrictive legend
in substantially the following form, until such time as they are not required
under Section 4.1(c):
[NEITHER THE ISSUANCE AND SALE OF THE SECURITIES REPRESENTED BY THIS
CERTIFICATE NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE
EXERCISABLE HAVE BEEN][THE SECURITIES REPRESENTED BY THIS CERTIFICATE
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
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SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS
OR BLUE SKY LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL REASONABLY
SATISFACTORY TO THE COMPANY.
The Company acknowledges and agrees that a Purchaser may from time to
time pledge, and/or grant a security interest in some or all of the legended
Securities, in connection with applicable securities laws, pursuant to a bona
fide margin agreement in compliance with a bona fide margin loan. Such a pledge
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 shall be required in
connection with a subsequent transfer or foreclosure following default by the
Purchaser transferee of the pledge. No notice shall be required of such pledge
but Purchaser's transferee shall promptly notify the Company of any such
subsequent transfer or foreclosure. Each Purchaser acknowledges that the Company
shall not be responsible for any pledges relating to, or the grant of any
security interest in, any of the Securities or for any agreement, understanding
or arrangement between any Purchaser and its pledgee or secured party. The
Company's indemnification obligations pursuant to this Agreement shall not
extend to any Proceeding or Losses arising out of or related to this Section
4.1(b). 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 423(b)(3) of the Securities Act or other applicable
provision of the Securities Act to appropriately amend the list of Selling
Shareholders thereunder. Each Purchaser acknowledges and agrees that, except as
otherwise provided in Section 4.1(c), any Securities subject to a pledge or
security interest as contemplated by this Section 4.1(b) shall continue to bear
the legend set forth in this Section 4.1(b) and be subject to the restrictions
on transfer set forth in Section 4.1(a).
(c) Removal of Legends. The legend set forth in Section 4.1(b) above
shall be removed and the Company shall issue a certificate without such legend
to the holder of the Shares upon which it is stamped or issue to such holder by
electronic delivery at the applicable balance account at The Depositary Trust
Company, if (i) such Shares are sold or transferred pursuant to Rule 144
(assuming the transferor is not an Affiliate of the Company), or (ii) such
Shares are eligible for sale under Rule 144(k). The Company shall cause its
counsel to issue the legal opinion referred to in the Irrevocable Transfer Agent
Instructions to the Company's transfer agent on the Effective Date. Any fees
(with respect to the Transfer Agent, counsel to the Company or otherwise)
associated with the issuance of such opinion or the removal of such legend shall
be borne by the Company. If any portion of the Warrant is exercised at a time
when there is an effective registration statement to cover the resale of the
Warrant Shares, or if such Warrant Shares may be sold under Rule 144(k), then
such Warrant Shares shall be issued free of all legends. Following the Effective
Date, or at such time as a legend is no longer required for certain Shares, the
Company will no later than three (3) Trading Days following the delivery by a
Purchaser to the Company or the Transfer Agent (with notice to the Company) of
(i) a legended certificate representing such Shares (endorsed or with stock
powers attached, signatures guaranteed, and otherwise in form necessary to
affect the reissuance and/or transfer) or (ii) an Exercise Notice in the manner
stated in the Warrants to effect the exercise of such Warrant in accordance with
its terms and an opinion of counsel to the extent required by Section 4.1(a),
deliver or cause to be delivered to such Purchaser a certificate representing
such Shares or Warrant Shares that is free from all restrictive and other
legends. The Company may not make any notation on its records or give
instructions to the Transfer Agent that enlarge the restrictions on transfer set
forth in this Section.
(d) Acknowledgement. Each Purchaser hereby covenants with the Company
not to make any sale of the Shares or Warrant Shares under the Registration
Statement without complying with the provisions of this Agreement and without
effectively causing the prospectus delivery requirement under the Securities Act
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to be satisfied, and such Purchaser acknowledges and agrees that the Shares or
Warrant Shares are not transferable on the books of the Company in connection
with any sale under the Registration Statement unless the certificate submitted
to the transfer agent evidencing the Shares or Warrant Shares is accompanied by
a separate Purchaser's Certificate of Subsequent Sale delivered by the
Purchaser: (i) in the form of Exhibit F hereto, (ii) executed by an officer of,
or other authorized person designated by, the Purchaser, and (iii) to the effect
that (A) the Shares or Warrant Shares have been sold in accordance with the
Registration Statement, the Securities Act and any applicable state securities
or blue sky laws and (B) the requirement of delivering a current prospectus has
been satisfied. The Purchaser will notify the Company promptly after each sale
of Shares or Warrant Shares. The Purchaser acknowledges that there may
occasionally be times when the Company must suspend the use of the Prospectus
forming a part of the Registration Statement (a "Suspension") until such time as
an amendment to the Registration Statement has been filed by the Company and
declared effective by the Commission, or until such time as the Company has
filed an appropriate report with the Commission pursuant to the Exchange Act.
The Purchaser hereby covenants that it will not sell any of the Shares or
Warrant Shares pursuant to said Prospectus during the period commencing at the
time at which the Company gives the Purchaser written notice of the Suspension
of the use of said Prospectus and ending at the time the Company gives the
Purchaser written notice that the Purchaser may thereafter effect sales pursuant
to said Prospectus.
(e) Irrevocable Transfer Agent Instructions. The Company shall issue
irrevocable instructions to the Transfer Agent, and any subsequent transfer
agent, to issue certificates or credit shares to the applicable balance accounts
at The Depository Trust Company ("DTC"), registered in the name of each
Purchaser or its respective nominee(s), for the Shares or Warrant Shares in such
amounts as specified from time to time by each Purchaser to the Company in the
form of Exhibit E attached hereto (the "Irrevocable Transfer Agent
Instructions"). The Company warrants that no instruction other than the
Irrevocable Transfer Agent Instructions referred to in this Section 4(e) will be
given by the Company to its transfer agent in connection with this Agreement,
and that the Securities shall otherwise be freely transferable on the books and
records of the Company as and to the extent provided in this Agreement and the
other Transaction Documents. The Company acknowledges that a breach by it of its
obligations under this Section 4(e) will cause irreparable harm to a Purchaser.
Accordingly, the Company acknowledges that the remedy at law for a breach of its
obligations under this Section 4(e) will be inadequate and agrees, in the event
of a breach or threatened breach by the Company of the provisions of this
Section 4(e), that a Purchaser shall be entitled, in addition to all other
available remedies, to an order and/or injunction restraining any breach and
requiring immediate issuance and transfer, without the necessity of showing
economic loss and without any bond or other security being required.
4.2 Reservation of Common Stock. The Company shall maintain a reserve
from its duly authorized shares of Common Stock for issuance pursuant to the
Transaction Documents in such amount as may be required to fulfill its
obligations in full under the Transaction Documents. In the event that at any
time the then authorized shares of Common Stock are insufficient for the Company
to satisfy its obligations in full under the Transaction Documents, the Company
shall promptly take such actions as may be required to increase the number of
authorized shares.
4.3 Securities Laws Disclosure; Publicity. Promptly after the execution of
this Agreement, the Company shall issue a press release (the "Press Release")
disclosing the material terms of the transactions contemplated hereby. After the
Closing Date, the Company will file a Current Report on Form 8-K with the
Commission describing the terms of the Transaction Documents (and including as
exhibits to such Current Report on Form 8-K the material Transaction Documents
(including, without limitation, this Agreement and the Registration Rights
Agreement)). Without any such Purchaser's prior consent, the Company agrees not
to disclose in the Press Release the names, addresses or any other information
about a Purchaser, except as required by law and to satisfy its obligations
under the Registration Rights Agreement.
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4.4 Indemnification. In addition to the indemnity provided in the
Registration Rights Agreement, the Company will indemnify and hold the
Purchasers and their directors, officers, shareholders, partners, members,
managers, employees and agents (each, a "Purchaser Party") harmless from any and
all losses, liabilities, obligations, claims, contingencies, damages, costs and
expenses, including all judgments, amounts paid in settlements, court costs and
reasonable attorneys' fees and costs of investigation (collectively, "Losses")
that any such Purchaser 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
Purchaser 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. If and to the extent
that such indemnification is unenforceable for any reason, the Company shall
make the maximum contribution to the payment and satisfaction of such losses
permissible under applicable law.
(a) Conduct of Indemnification Proceedings.
(i) If any Proceeding shall be brought or asserted against any
Person entitled to indemnity hereunder (an "Indemnified Party"), such
Indemnified Party shall promptly notify the Person from whom indemnity is sought
(the "Indemnifying Party") in writing, and the Indemnifying Party shall have the
right to assume the defense thereof, including the employment of counsel
reasonably satisfactory to the Indemnified Party and the payment of all
reasonable fees and expenses incurred in connection with defense thereof;
provided, that the failure of any Indemnified Party to give such notice shall
not relieve the Indemnifying Party of its obligations or liabilities pursuant to
this Agreement, except (and only) to the extent that it shall be finally
determined by a court of competent jurisdiction (which determination is not
subject to appeal or further review) that such failure shall have proximately
and materially adversely prejudiced the Indemnifying Party.
(ii) An Indemnified Party shall have the right to employ separate
counsel in any such Proceeding and to participate (but not control) in the
defense thereof, but the fees and expenses of such counsel shall be at the
expense of such Indemnified Party or Parties unless: (1) the Indemnifying Party
has agreed in writing to pay such fees and expenses; (2) the Indemnifying Party
shall have failed promptly to assume the defense of such Proceeding and to
employ counsel reasonably satisfactory to such Indemnified Party in any such
Proceeding; or (3) the named parties to any such Proceeding (including any
impleaded parties) include both such Indemnified Party and the Indemnifying
Party, and such Indemnified Party shall have been advised by counsel that a
conflict of interest is likely to exist if the same counsel were to represent
such Indemnified Party and the Indemnifying Party (in which case, if such
Indemnified Party notifies the Indemnifying Party in writing that it elects to
employ separate counsel at the expense of the Indemnifying Party, the
Indemnifying Party shall not have the right to assume the defense thereof and
such counsel shall be at the expense of the Indemnifying Party), provided, that
the Indemnifying Party shall not be liable for the fees and expenses of more
than one separate firm of attorneys at any time for all Indemnified Parties. The
Indemnifying Party shall not be liable for any settlement of any such Proceeding
effected without its written consent, which consent shall not be unreasonably
withheld, delayed or conditioned. No Indemnifying Party shall, without the prior
written consent of the Indemnified Party, effect any settlement of any pending
Proceeding in respect of which any Indemnified Party is a party, unless such
settlement includes an unconditional release of such Indemnified Party from all
liability on claims that are the subject matter of such Proceeding.
(iii) All fees and expenses of the Indemnified Party (including
reasonable fees and expenses to the extent incurred in connection with
investigating or preparing to defend such Proceeding in a manner not
inconsistent with this Section) shall be paid to the Indemnified Party, as
incurred, within twenty Trading Days of written notice thereof to the
20
Indemnifying Party (regardless of whether it is ultimately determined that an
Indemnified Party is not entitled to indemnification hereunder; provided, that
the Indemnifying Party may require such Indemnified Party to undertake to
reimburse all such fees and expenses to the extent it is finally judicially
determined that such Indemnified Party is not entitled to indemnification
hereunder).
(b) Contribution.
(i) If a claim for indemnification under Section 4.4 is
unavailable to an Indemnified Party (by reason of public policy or otherwise),
then each Indemnifying Party, in lieu of indemnifying such Indemnified Party,
shall contribute to the amount paid or payable by such Indemnified Party as a
result of such Losses, in such proportion as is appropriate to reflect the
relative fault of the Indemnifying Party and Indemnified Party in connection
with the actions, statements or omissions that resulted in such Losses as well
as any other relevant equitable considerations. The relative fault of such
Indemnifying Party and Indemnified Party shall be determined by reference to,
among other things, whether any action in question, including any untrue or
alleged untrue statement of a material fact or omission or alleged omission of a
material fact, has been taken or made by, or relates to information supplied by,
such Indemnifying Party or Indemnified Party, and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
action, statement or omission. The amount paid or payable by a party as a result
of any Losses shall be deemed to include, subject to the limitations set forth
in Section 4.4(c), any reasonable attorneys' or other reasonable fees or
expenses incurred by such party in connection with any Proceeding to the extent
such party would have been indemnified for such fees or expenses if the
indemnification provided for in this Section was available to such party in
accordance with its terms.
(ii) The parties hereto agree that it would not be just and
equitable if contribution pursuant to this Section 4.4(b) were determined by pro
rata allocation or by any other method of allocation that does not take into
account the equitable considerations referred to in the immediately preceding
paragraph. Notwithstanding the provisions of this Section 4.4(d), no Holder
shall be required to contribute, in the aggregate, any amount in excess of the
amount by which the net proceeds actually received by such Holder from the sale
of the Registrable Securities subject to the Proceeding exceeds the amount of
any damages that such Holder has otherwise been required to pay by reason of
such untrue or alleged untrue statement or omission or alleged omission. No
person guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the Securities Act) shall be entitled to contribution from any Person
who was not guilty of such fraudulent misrepresentation.
(iii) The indemnity and contribution agreements contained in this
Section are in addition to any liability that the Indemnifying Parties may have
to the Indemnified Parties and are not in diminution or limitation of the
indemnification provisions under the Purchase Agreement.
4.5 Listing of Securities. Promptly following the date hereof, the Company
shall take all necessary action to cause the Shares or Warrant Shares to be
listed upon the Principal Trading Market, if any, upon which shares of Common
Stock are then listed (subject to official notice of issuance) and shall
maintain, so long as any other shares of Common Stock shall be so listed, such
listing. Further, if the Company applies to have its Common Stock or other
securities listed on any other Trading Market it shall include in such
application the Shares and Warrant Shares and will take such other action as is
necessary to cause the Shares and Warrant Shares to be listed on such other
Trading Market as promptly as practicable.
4.6 Use of Proceeds. The Company intends to use the net proceeds from the
sale of the Shares and Warrants hereunder for expanding league events and
television production, working capital needs, repayment of outstanding
indebtedness and general corporate purposes.
21
4.7 Transactions and Confidentiality After The Date Hereof. Each Purchaser
shall not, and shall cause its Trading Affiliates not to, engage, directly or
indirectly, in any transactions in the securities of the Company (including,
without limitation, any Short Sales) involving the Company's securities during
the period from the date hereof until such time as (i) after the transactions
contemplated by this Agreement are first publicly announced as described in
Section 4.3 or (ii) this Agreement is terminated in full pursuant to Section
7.16. Notwithstanding the foregoing, in the case of a Purchaser or Trading
Affiliate that is a multi-managed investment vehicle whereby separate portfolio
managers manage separate portions of such Purchaser's or Trading Affiliate's
assets and the portfolio managers have no direct knowledge of the investment
decisions made by the portfolio managers managing other portions of such
Purchaser's or Trading Affiliate's assets, the representation set forth above
shall only apply with respect to the portion of assets managed by the portfolio
manager that made the investment decision to purchase the Shares and Warrants
covered by this Agreement. Each Purchaser understands and acknowledges,
severally and not jointly with any other Purchaser, that the Commission
currently takes the position that covering a short position established prior to
effectiveness of a resale registration statement with shares included in such
registration statement would be a violation of Section 5 of the Securities Act,
as set forth in Item 65, Section 5 under Section A, of the Manual of Publicly
Available Telephone Interpretations, dated July 1997, compiled by the Office of
Chief Counsel, Division of Corporation Finance. Each Purchaser, severally and
not jointly with the other Purchasers, covenants that until such time as the
transactions contemplated by this Agreement are publicly disclosed by the
Company as described in Section 4.3, such Purchaser will maintain the
confidentiality of all disclosures made to it in connection with this
transaction (including the existence and terms of this transaction).
4.8 Furnishing of Information. As long as any Purchaser owns the
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. As long as any Purchaser owns the 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 Shares and
Warrant Shares under Rule 144. The Company further covenants that it will take
such further action as any holder of the Securities may reasonably request, all
to the extent required from time to time to enable such Person to sell the
Shares and Warrant Shares without registration under the Securities Act within
the limitation of the exemptions provided by Rule 144.
4.9 Non-Public Information. Except with respect to the material terms and
conditions of the transactions contemplated by the Transaction Documents, the
Company shall not, and shall cause each of its officers, directors, employees
and agents, not to, provide any Purchaser with any material, non-public
information regarding the Company from and after the filing of the Press Release
without the express written consent of such Purchaser, unless prior thereto such
Purchaser shall have executed a written agreement regarding the confidentiality
and use of such information.
4.10 Stock Splits and Reclassification. From the date hereof until the
earlier of (i) 60 days after the Effective Date of the first Registration
Statement filed pursuant to the Registration Rights Agreement, and (ii) July 31,
2008 , the Company shall not, without the consent of holders of at least a
majority of the Shares issued at Closing, consummate, undertake, or announce any
intention to consummate or undertake a reverse or forward stock split or
reclassification of the Common Stock.
4.11 Strategic Investors. Notwithstanding anything in this Agreement or in
any Transaction Document to the contrary, nothing in this Agreement or in any
Transaction Document shall prohibit or restrict the Company's ability to, and
the Company shall have the right to, offer, sell or otherwise issue, any of its
securities to one or more Strategic Investors; provided, however, if, prior to
the Filing Date, the Company proposes to sell its securities to one or more
22
Strategic Investors for gross cash proceeds in excess of $20,000,000, then,
prior to consummating such sale, the Company shall have received the written
consent from the Purchasers who, on the Closing Date, acquired 66.6% or more of
the number of Shares sold pursuant to this Agreement; provided, further,
however, each Purchaser hereby agrees to keep the receipt and substance of any
such notice confidential, until such time as the subject transaction has been
publicly disclosed by the Company or such Purchaser has received further written
notice from the Company that such transaction has been terminated.
ARTICLE V.
CONDITIONS PRECEDENT TO CLOSING
5.1 Conditions Precedent to the Obligations of the Purchasers to Purchase
the Shares and Warrants. The obligation of each Purchaser to acquire the Shares
and Warrants at the Closing is subject to the fulfillment, to such Purchaser's
satisfaction, on or prior to the Closing Date, of each of the following
conditions, any of which may be waived by such Purchaser (as to itself only):
(a) Representations and Warranties. The representations and warranties
of the Company contained herein shall be true and correct in all material
respects (except to the extent that any such representation or warranty is
already qualified by materiality, in which case it shall be true and correct in
all respects) as of the date when made and as of the Closing Date, as though
made on and as of such date;
(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) Consents. The Company shall have obtained in a timely fashion any
and all consents, permits, approvals, registrations and waivers necessary or
appropriate for consummation of the purchase and sale of the Shares and
Warrants, all of which shall be and remain so long as necessary in full force
and effect;
(e) 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;
(f) 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;
(g) Company Deliverables. The Company shall have delivered the Company
Deliverables in accordance with Section 2.2(a);
(h) Compliance Certificate. The Company shall have delivered to each
Purchaser a certificate, dated as of the Closing Date and signed by its Chief
Executive Officer or its Chief Financial Officer, dated as of the Closing Date,
certifying to the fulfillment of the conditions specified in Sections 5.1(a),
(b), (c), (d), (e) and (f); and
23
(i) Termination. This Agreement shall not have been terminated as to
such Purchaser in accordance with Section 7.16 herein.
5.2 Conditions Precedent to the Obligations of the Company to Sell the
Shares and Warrants. The Company's obligation to sell and issue the Shares and
Warrants at the Closing is subject to the fulfillment to the satisfaction of the
Company on or prior to the Closing Date of the following conditions, any of
which may be waived by the Company:
(a) Representations and Warranties. The representations and warranties
made by the Purchasers in Section 3.2 hereof 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. The Purchasers shall have performed, satisfied and
complied in all material respects with all covenants, agreements and conditions
required by the Transaction Documents to be performed, satisfied or complied
with by the Purchasers at or prior to the Closing;
(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) Purchasers Deliverables. Each Purchaser shall have delivered its
Purchaser Deliverables in accordance with Section 2.2(b); and
(e) Termination. This Agreement shall not have been terminated as to
such Purchaser in accordance with Section 7.16 herein.
ARTICLE VI.
ESCROW
6.1 Escrow Arrangement.
(a) Simultaneously with the execution and delivery of this Agreement
by a Purchaser, such Purchaser shall promptly cause a wire transfer of
immediately available funds (U.S. dollars) in an amount representing such
Purchaser's Purchase Price, to be paid to a non-interest bearing escrow account
of the Company Counsel (the aggregate amounts received being held in escrow by
Company Counsel are referred to herein as the "Escrow Amount"). Company Counsel
shall hold the Escrow Amount in escrow in accordance with Section 6.1(b).
(b) Company Counsel shall continue to hold the Escrow Amount in escrow
in accordance with and subject to this Agreement, from the date of its receipt
of the funds constituting the Escrow Amount until the earlier of:
(i) the date this Agreement is terminated pursuant to Section
7.16, in which case, if Company Counsel then holds any portion of the Escrow
Amount, then: (A) Company Counsel shall return the portion of the Escrow Amount
received from each Purchaser which it then holds, to each such Purchaser, in
accordance with written wire transfer instructions received from such Purchaser;
and (B) if Company Counsel has not received written wire transfer instructions
from any Purchaser before such termination date, then Company Counsel may, in
its sole and absolute discretion, either (x) deposit that portion of the Escrow
Amount to be returned to such Purchaser in a court of competent jurisdiction on
written notice to such Purchaser, and Company Counsel shall thereafter have no
further liability with respect to such deposited funds, or (y) continue to hold
24
such portion of the Escrow Amount pending receipt of written wire transfer
instructions from such Purchaser or an order from a court of competent
jurisdiction; OR
(ii) in the case of the Closing, receipt of written instructions
from both the Company and the Placement Agent that the Closing shall have been
consummated, in which case, Company Counsel shall release the Escrow Amount as
per the joint instructions received from the Company and the Placement Agent.
(c) For the avoidance of doubt, the Escrow Amount shall be used to pay
such fees and expenses as required under that certain Engagement Agreement,
dated as of October 20, 2006, as amended, between the Company and the Placement
Agent and the balance of the Escrow Amount shall be released as per the written
instructions delivered to the Company Counsel pursuant to Section 6.1(b).
6.2 Duties; Responsibilities. The Company and the Purchasers acknowledge
and agree for the benefit of Company Counsel (which shall be deemed to be a
third party beneficiary of this Section 6) as follows:
(a) Company Counsel: (i) is not responsible for the performance by the
Company or the Purchasers of this Agreement or any of the Transaction Documents
or for determining or compelling compliance therewith; (ii) is only responsible
for (A) holding the Escrow Amount in escrow pending receipt of written
instructions from the Company and the Placement Agent directing the release of
the Escrow Amount, and (B) disbursing the Escrow Amount in accordance with the
written instructions from the Company and the Placement Agent, each of the
responsibilities of Company Counsel in clause (A) and (B) is ministerial in
nature, and no implied duties or obligations of any kind shall be read into this
Agreement against or on the part of Company Counsel (collectively, the "Company
Counsel Duties"); (iii) shall not be obligated to take any legal or other action
hereunder which might in its judgment involve or cause it to incur any expense
or liability unless it shall have been furnished with indemnification acceptable
to it, in its sole discretion; (iv) may rely on and shall be protected in acting
or refraining from acting upon any written notice, instruction (including,
without limitation, wire transfer instructions, whether incorporated herein or
provided in a separate written instruction), instrument, statement, certificate,
request or other document furnished to it hereunder and believed by it to be
genuine and to have been signed or presented by the proper Person, and shall
have no responsibility for making inquiry as to, or for determining, the
genuineness, accuracy or validity thereof, or of the authority of the Person
signing or presenting the same; and (v) may consult counsel satisfactory to it,
and the opinion or advice of such counsel in any instance shall be full and
complete authorization and protection in respect of any action taken, suffered
or omitted by it hereunder in good faith and in accordance with the opinion or
advice of such counsel. Documents and written materials referred to in this
Section 6.2(a) include, without limitation, e-mail and other electronic
transmissions capable of being printed, whether or not they are in fact printed;
and any such e-mail or other electronic transmission may be deemed and treated
by Company Counsel as having been signed or presented by a Person if it bears,
as sender, the Person's e-mail address.
(b) Company Counsel shall not be liable to anyone for any action taken
or omitted to be taken by it hereunder, except in the case of Company Counsel's
gross negligence or willful misconduct in breach of the Company Counsel Duties.
IN NO EVENT SHALL COMPANY COUNSEL BE LIABLE FOR INDIRECT, PUNITIVE, SPECIAL OR
CONSEQUENTIAL DAMAGE OR LOSS (INCLUDING BUT NOT LIMITED TO LOST PROFITS)
WHATSOEVER, EVEN IF COMPANY COUNSEL HAS BEEN INFORMED OF THE LIKELIHOOD OF SUCH
LOSS OR DAMAGE AND REGARDLESS OF THE FORM OF ACTION.
25
(c) The Company and the Purchasers hereby indemnify and hold harmless
Company Counsel from and against any and all loss, liability, cost, damage and
expense, including, without limitation, reasonable counsel fees and expenses,
which Company Counsel may suffer or incur by reason of any action, claim or
proceeding brought against Company Counsel arising out of or relating to the
performance of the Company Counsel Duties, unless such action, claim or
proceeding is exclusively the result of the willful misconduct, bad faith or
gross negligence of Company Counsel.
(d) Company Counsel shall have the right at any time to resign for any
reason and be discharged of its duties as escrow agent hereunder (including
without limitation the Company Counsel Duties) by giving written notice of its
resignation to the Company and the Placement Agent at least ten (10) calendar
days prior to the specified effective date of such resignation. All obligations
of the Company Counsel hereunder shall cease and terminate on the effective date
of its resignation and its sole responsibility thereafter shall be to hold the
Escrow Amount, for a period of ten (10) calendar days following the effective
date of resignation, at which time,
(i) if a successor escrow agent shall have been appointed and
have accepted such appointment in a writing to both the Company and the
Placement Agent, then upon written notice thereof given to each of the
Purchasers, the Company Counsel shall deliver the Escrow Amount to the successor
escrow agent, and upon such delivery, Company Counsel shall have no further
liability or obligation; or
(ii) if a successor escrow agent shall not have been appointed,
for any reason whatsoever, Company Counsel shall at its option in its sole
discretion, either (A) deliver the Escrow Amount to a court of competent
jurisdiction selected by Company Counsel and give written notice thereof to the
Company and the Purchasers, or (B) continue to hold Escrow Amount in escrow
pending written direction from the Company and the Placement Agent in form and
formality satisfactory to Company Counsel.
(e) In the event that the Company Counsel shall be uncertain as to its
duties or rights hereunder or shall receive instructions with respect to the
Escrow Amount or any portion thereunder which, in its sole discretion, are in
conflict either with other instructions received by it or with any provision of
this Agreement, Company Counsel shall have the absolute right to suspend all
further performance under this Agreement (except for the safekeeping of such
Escrow Amount) until such uncertainty or conflicting instructions have been
resolved to the Company Counsel's sole satisfaction by final judgment of a court
of competent jurisdiction, joint written instructions from the Company and all
of the Purchasers, or otherwise. In the event that any controversy arises
between the Company and one or more of the Purchasers or any other party with
respect to this Agreement or the Escrow Amount, the Company Counsel shall not be
required to determine the proper resolution of such controversy or the proper
disposition of the Escrow Amount, and shall have the absolute right, in its sole
discretion, to deposit the Escrow Amount with the clerk of a court selected by
the Company Counsel and file a suit in interpleader in that court and obtain an
order from that court requiring all parties involved to litigate in that court
their respective claims arising out of or in connection with the Escrow Amount.
Upon the deposit by the Company Counsel of the Escrow Amount with the clerk of
such court in accordance with this provision, the Company Counsel shall
thereupon be relieved of all further obligations and released from all liability
hereunder.
(f) The provisions of this Article VI shall survive any termination of
this Agreement.
26
ARTICLE VII.
MISCELLANEOUS
7.1 Fees and Expenses. The Company and the Purchasers shall each pay the
fees and expenses of their respective advisers, counsel, accountants and other
experts, if any and all other expenses incurred by such party in connection with
the negotiation, preparation, execution, delivery and performance of this
Agreement. The Company shall pay all Transfer Agent fees, stamp taxes and other
taxes and duties levied in connection with the sale and issuance of the Shares
and Warrants to the Purchasers. Each party acknowledges that Lowenstein Sandler
PC has rendered legal advice to the Company, and not to such party in connection
with the transactions contemplated hereby, and that such party has relied for
such matters on the advice of its own respective counsel. The Company further
agrees to pay such fees and expenses as required by it under that certain
Engagement Agreement, dated as of October 20, 2006, as amended, with the
Placement Agent, including without limitation, the reasonable fees and expenses
of the Placement Agent's counsel.
7.2 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. At or after the Closing, and without further
consideration, the Company and the Purchasers will execute and deliver to the
other such further documents as may be reasonably requested in order to give
practical effect to the intention of the parties under the Transaction
Documents.
7.3 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 5:00 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 5:00 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 with next day delivery specified, 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: International Fight League, Inc.
424 West 33rd Street, Suite 650
New York, New York 10001
Telephone No.: (212) 356-4000
Facsimile No.: (212) 564-6546
Attention: Michael Keefe
With a copy to: Lowenstein Sandler PC
1251 Avenue of the Americas
New York, New York 10020
Telephone No.: (212) 262-6700
Facsimile No.: (973) 597-2507
Attention: Steven E. Siesser, Esq.
27
If to a Purchaser: To the address set forth under such Purchaser's name
on the signature page hereof; or such other address
as may be designated in writing hereafter, in the
same manner, by such Person.
7.4 Amendments; Waivers; No Additional Consideration. No provision of this
Agreement may be waived or amended except in a written instrument signed, in the
case of an amendment prior to Closing, by the Company and each of the Purchasers
or, in the case of an amendment after Closing, by the Company and the Purchasers
then holding a majority of the Shares, and in the case of a waiver at any time,
by the party against whom enforcement of 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.
7.5 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.
7.6 Successors and Assigns. The provisions of this Agreement shall inure to
the benefit of and be binding upon the parties and their successors and
permitted assigns. This Agreement, or any rights or obligations hereunder, may
not be assigned by the Company without the prior written consent of the
Purchasers. Any Purchaser may assign its rights hereunder in whole or in part to
any Person to whom such Purchaser assigns or transfers any Securities in
compliance with this agreement and applicable law, provided such transferee
shall have agreed in writing to be bound, with respect to the transferred
Securities, by the terms and conditions of this Agreement that apply to the
"Purchasers".
7.7 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 (i) each Purchaser Party is an intended third party
beneficiary of Section 4.4, and (ii) Placement Agent is an intended third party
beneficiary of Article III hereof, and each Purchaser Party or the Placement
Agent, as the case may be, may enforce the provisions of such Sections directly
against the parties with obligations thereunder.
7.8 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
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
28
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 attorney's fees and other costs and expenses incurred with
the investigation, preparation and prosecution of such Proceeding.
7.9 Survival. Subject to applicable statute of limitations, the
representations, warranties, agreements and covenants contained herein shall
survive the Closing Date and the delivery of the Shares and the Warrants.
7.10 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, or by e-mail delivery of a ".pdf" format data file, such
signature shall create a valid and binding obligation of the party executing (or
on whose behalf such signature is executed) with the same force and effect as if
such facsimile signature page were an original thereof.
7.11 Severability. If any provision of this Agreement is held to be invalid
or unenforceable in any respect, the validity and enforceability of the
remaining terms and provisions of this Agreement shall not in any way be
affected or impaired thereby and the parties will attempt to agree upon a valid
and enforceable provision that is a reasonable substitute therefor, and upon so
agreeing, shall incorporate such substitute provision in this Agreement.
7.12 Replacement of Shares. If any certificate or instrument evidencing any
Shares 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 the execution by the holder thereof of a customary lost
certificate affidavit of that fact and an agreement to indemnify and hold
harmless the Company for any losses in connection therewith. 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
Shares. If a replacement certificate or instrument evidencing any Shares 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.
7.13 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.
29
7.14 Adjustments in Share Numbers and Prices. In the event of any stock
split, subdivision, dividend or distribution payable in shares of Common Stock
(or other securities or rights convertible into, or entitling the holder thereof
to receive directly or indirectly shares of Common Stock), combination or other
similar recapitalization or event occurring after the date hereof, and before
the Closing Date, each reference in any Transaction Document to a number of
shares or a price per share shall be amended to appropriately account for such
event.
7.15 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. The decision of each Purchaser to
purchase the Shares and Warrants pursuant to the Transaction Documents has been
made by such Purchaser independently of any other Purchaser and independently of
any information, materials, statements or opinions as to the business, affairs,
operations, assets, properties, liabilities, results of operations, condition
(financial or otherwise) or prospects of the Company or any Subsidiary which may
have been made or given by any other Purchaser or by any agent or employee of
any other Purchaser, and no Purchaser and any of its agents or employees shall
have any liability to any other Purchaser (or any other Person) relating to or
arising from any such information, materials, statement or opinions. Nothing
contained herein or in any Transaction Document, and no action taken by any
Purchaser pursuant thereto, shall be deemed to constitute the Purchasers as a
partnership, an association, a joint venture or any other kind of entity, or
create a presumption that the Purchasers are in any way acting in concert or as
a group with respect to such obligations or the transactions contemplated by the
Transaction Documents. Each Purchaser acknowledges that no other Purchaser has
acted as agent for such Purchaser in connection with making its investment
hereunder and that no Purchaser will be acting as agent of such Purchaser in
connection with monitoring its investment in the Securities or enforcing its
rights under the Transaction Documents. 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. The Company acknowledges
that each of the Purchasers has been provided with the same Transaction
Documents for the purpose of closing a transaction with multiple Purchasers and
not because it was required or requested to do so by any Purchaser. The
Company's obligations to each Purchaser under this Agreement are identical to
its obligations to each other Purchaser other than such differences resulting
solely from the number of the Shares and Warrants purchased by such Purchaser,
but regardless of whether such obligations are memorialized herein or in another
agreement between the Company and a Purchaser.
7.16 Termination. This Agreement may be terminated and the sale and
purchase of the Shares and Warrants abandoned at any time prior to the Closing
by either the Company or any Purchaser (with respect to itself only) upon
written notice to the other, if the Closing has not been consummated on or prior
to 5:00 p.m. (New York City time) on the Outside Date; provided, however, that
the right to terminate this Agreement under this Section 7.16 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. Nothing in this Section 7.16 shall be deemed to
release any party from any liability for any breach by such party of the terms
and provisions of this Agreement or the other Transaction Documents or to impair
the right of any party to compel specific performance by any other party of its
obligations under this Agreement or the other Transaction Documents. In the
event of a termination pursuant to this Section, the Company shall promptly
notify all non-terminating Purchasers. Upon a termination in accordance with
this Section, the Company and the terminating Purchaser(s) shall not have any
further obligation or liability (including arising from such termination) to the
other and no Purchaser will have any liability to any other Purchaser under the
Transaction Documents as a result therefrom.
30
Execution Copy
--------------
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.
INTERNATIONAL FIGHT LEAGUE, INC.
By: /s/ Gareb Shamus
--------------------------------
Name: Gareb Shamus
Title: Chief Executive Officer
WITH RESPECT TO ARTICLE VI ONLY,
ACKNOWLEDGED AND AGREED TO BY:
LOWENSTEIN SANDLER PC
By:
--------------------------------------------
Name:
Title:
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
[SIGNATURE PAGES FOR PURCHASERS FOLLOW]
NAME OF PURCHASER:_______________________
By:_
Name:
Title:
Purchase Price Per Share: $_____________
Aggregate Purchase Price
(Subscription Amount): $____________
Number of Shares to be acquired:_________
Number of Warrant Shares:________________
Tax ID No.:______________________________
Address for Notice:
_________________________________________
_________________________________________
_________________________________________
Telephone No.:___________________________
Facsimile No.:___________________________
Attention:_______________________________
Delivery Instructions:
(if different than above)
c/o ______________________________________________
Street: __________________________________________
City/State/Zip: __________________________________
Attention: _______________________________________
Telephone No.: ___________________________________
2
Execution Copy
--------------
REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement (this "Agreement") is made and
entered into as of August 1, 2007, by and among International Fight League,
Inc., a Delaware corporation (the "Company"), and the several purchasers
signatory hereto (each a "Purchaser" and collectively, the "Purchasers").
This Agreement is made pursuant to the Securities Purchase Agreement,
dated as of the date hereof between the Company and each Purchaser (the
"Purchase Agreement").
NOW, THEREFORE, IN CONSIDERATION of the mutual covenants contained in
this Agreement, and for other good and valuable consideration the receipt and
adequacy of which are hereby acknowledged, the Company and the Purchasers agree
as follows:
1. Definitions. Capitalized terms used and not otherwise defined herein
that are defined in the Purchase Agreement shall have the meanings given such
terms in the Purchase Agreement. As used in this Agreement, the following terms
shall have the respective meanings set forth in this Section 1:
"Advice" shall have the meaning set forth in Section 6(e).
"Affiliate" means, with respect to any person, any other person which
directly or indirectly controls, is controlled by, or is under common control
with, such person.
"Agreement" shall have the meaning set forth in the Introduction.
"Business Day" means a day, other than a Saturday or Sunday, on which
banks in New York City are open for the general transaction of business.
"Closing" shall have the meaning set forth in the Purchase Agreement.
"Closing Date" shall have the meaning set forth in the Purchase
Agreement.
"Commission" means the Securities and Exchange Commission.
"Common Stock" means the common stock of the Company, $0.01 par value
per share, and any securities into which such common stock may hereinafter be
reclassified.
"Company" shall have the meaning set forth in the Introduction.
"Effective Date" means the date that the Registration Statement filed
pursuant to Section 2(a) is first declared effective by the Commission.
"Effectiveness Deadline" means, with respect to the Registration
Statement required to be filed to cover the resale by the Holders of the
Registrable Securities, the earlier of: (i) the 90th calendar day following the
Closing Date; provided, that, if the Commission reviews and has written comments
to the filed Registration Statement, then the Effectiveness Deadline under this
clause (i) shall be the 120th calendar day following the Closing Date, and (ii)
the fifth (5th) Trading Day following the date on which the Company is notified
by the Commission that the Registration Statement will not be reviewed or is no
longer subject to further review and comments and the effectiveness of the
Registration Statement may be accelerated.
"Effectiveness Period" shall have the meaning set forth in Section
2(b).
"Event" shall have the meaning set forth in Section 2(c).
"Event Date" shall have the meaning set forth in Section 2(c).
"Exchange Act" means the Securities Exchange Act of 1934, as amended,
and the rules and regulations promulgated thereunder.
"Filing Deadline" means, with respect to the Registration Statement
required to be filed pursuant to Section 2(a), the 60th calendar day following
the Closing Date.
"Holder" or "Holders" means the holder or holders, as the case may be,
from time to time of Registrable Securities.
"Indemnified Party" shall have the meaning set forth in Section 5(c).
"Indemnifying Party" shall have the meaning set forth in Section 5(c).
"Losses" shall have the meaning set forth in Section 5(a).
"New York Courts" means the state and federal courts sitting in the
City of New York, Borough of Manhattan.
"OTCBB" shall have the meaning set forth in the definition of
"Principal Trading Market."
"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 Agent" means [_________] and any permitted assigns.
"Principal Trading Market" means the Trading Market on which the
Common Stock is primarily listed on and quoted for trading, which, as of the
Closing Date shall be the Over the Counter Bulletin Board ("OTCBB").
"Proceeding" means an action, claim, suit, investigation or proceeding
(including, without limitation, an investigation or partial proceeding, such as
a deposition), whether commenced or threatened.
"Prospectus" means the prospectus included in a Registration Statement
(including, without limitation, a prospectus that includes any information
previously omitted from a prospectus filed as part of an effective registration
statement in reliance upon Rule 430A promulgated under the Securities Act), as
amended or supplemented by any prospectus supplement, with respect to the terms
of the offering of any portion of the Registrable Securities covered by a
Registration Statement, and all other amendments and supplements to the
Prospectus, including post-effective amendments, and all material incorporated
by reference or deemed to be incorporated by reference in such Prospectus.
"Purchase Agreement" shall have the meaning set forth in the
Introduction.
"Purchaser" and "Purchasers" shall have the meanings set forth in the
Introduction.
2
"Register," "registered" and "registration" refer to a registration
made by preparing and filing a Registration Statement or similar document in
compliance with the Securities Act, and the declaration or ordering of
effectiveness of such Registration Statement or document.
"Registrable Securities" means all of (i) the Shares issuable (ii) the
Warrant Shares issuable, (iii) any additional shares issuable in connection with
any anti-dilution provisions in the Warrants (without giving effect to any
limitations on exercise set forth in the Warrant) and (iv) any securities issued
or issuable upon any stock split, dividend or other distribution,
recapitalization or similar event; provided, that the Holder has completed and
delivered to the Company a Selling Shareholder Questionnaire; and provided,
further, that a Holder's security shall cease to be Registrable Securities upon
the earliest to occur of the following: (A) sale pursuant to a Registration
Statement or Rule 144 under the Securities Act (in which case, only such
security sold shall cease to be a Registrable Security); or (B) such security
becoming eligible for sale by the Holder pursuant to Rule 144(k).
"Registration Statement" means any registration statement of the
Company filed under the Securities Act that covers the resale of any of the
Registrable Securities pursuant to the provisions of this Agreement, including
(in each case) the Prospectus, amendments and supplements to such registration
statement, including pre- and post-effective amendments, all exhibits thereto
and all material incorporated by reference or deemed to be incorporated by
reference in such Registration Statement.
"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 purpose and effect as such Rule.
"Rule 415" means Rule 415 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 purpose and effect as such Rule.
"Rule 424" means Rule 424 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 purpose and effect as such Rule.
"SEC Guidance" means (i) any publicly-available written or oral
guidance, comments, requirements or requests of the Commission staff and (ii)
the Securities Act.
"Securities" means, collectively, the Shares, Warrants and Warrant
Shares.
"Securities Act" means the Securities Act of 1933, as amended, and the
rules and regulations promulgated thereunder.
"Selling Shareholder Questionnaire" means a questionnaire in the form
attached as Annex B hereto, or such other form of questionnaire as may
reasonably be adopted by the Company from time to time.
"Shares" means the shares of Common Stock issued or issuable to the
Purchasers pursuant to the Purchase Agreement.
"Trading Day" means (i) a day on which the Common Stock is listed or
quoted and traded on its primary Trading Market (other than the OTCBB), or (ii)
if the Common Stock is not listed on a Trading Market (other than the OTCBB), a
day on which the Common Stock is traded in the over-the-counter market, as
reported by the OTCBB, or (iii) if the Common Stock is not quoted on any Trading
3
Market, 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 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 Global Select Market, the NASDAQ Global
Market, the NASDAQ Capital Market or OTCBB on which the Common Stock is listed
or quoted for trading on the date in question.
"Warrants" means those Warrants issued to the Purchasers pursuant to
the Purchase Agreement.
"Warrant Shares" means those shares of Common Stock issuable upon
exercise of the Warrants.
2. Registration.
(a) On or prior to the Filing Deadline, the Company shall prepare and
file with the Commission a Registration Statement covering the resale of all
Registrable Securities not already covered by an existing and effective
Registration Statement for an offering to be made on a continuous basis pursuant
to Rule 415. The Registration Statement shall be on Form S-1 and shall contain
(except if otherwise required pursuant to written comments received from the
Commission upon a review of such Registration Statement) the "Plan of
Distribution" attached hereto as Annex A.
(b) The Company shall use its reasonable best efforts to cause the
Registration Statement to be declared effective by the Commission as soon as
practicable and, in any event, no later than the Effectiveness Deadline
(including filing with the Commission a request for acceleration of
effectiveness in accordance with Rule 461 promulgated under the Securities Act
within five (5) Business Days after the date that the Company is notified
(orally or in writing, whichever is earlier) by the Commission that a
Registration Statement will not be "reviewed," or not be subject to further
review and the effectiveness of the Registration Statement may be accelerated)
and shall use its reasonable best efforts to keep the Registration Statement
continuously effective under the Securities Act until the earliest of: (i) such
time as all of the Registrable Securities covered by such Registration Statement
have been publicly sold by the Holders; (ii) the date that all Registrable
Securities covered by the Registration Statement may be sold by non-affiliates
without volume restrictions pursuant to Rule 144(k) as determined by counsel to
the Company pursuant to a written opinion letter to such effect, addressed and
acceptable to the Company's transfer agent and the affected Holders; and (iii)
the second anniversary of this Agreement (the "Effectiveness Period"). The
Company shall ensure that each Registration Statement (including any amendments
or supplements thereto and prospectuses contained therein) shall not contain any
untrue statement of a material fact or omit to state a material fact required to
be stated therein, or necessary to make the statements therein (in the case of
prospectuses, in the light of the circumstances in which they were made) not
misleading. Such Registration Statement shall also cover, to the extent
allowable under the Securities Act and the rules promulgated thereunder
(including Rule 416), such indeterminate number of additional shares of Common
Stock resulting from stock splits, stock dividends or similar transactions with
respect to the Registrable Securities.
(c) If: (i) the Registration Statement is not filed on or prior to the
Filing Deadline, (ii) a Registration Statement is not declared effective by the
Commission (or otherwise does not become effective) on or prior to its
Effectiveness Deadline or (iii) after its Effective Date, such Registration
Statement ceases for any reason (including without limitation by reason of a
4
stop order, or the Company's failure to update the Registration Statement), but
excluding the inability of any Holder to sell the Registrable Securities covered
thereby due to market conditions, to remain continuously effective and available
to the Holders as to all Registrable Securities to which it is required to cover
at any time prior to the expiration of the Effectiveness Period for an aggregate
of more than 20 consecutive Trading Days or for more than an aggregate of 40
Trading Days in any 12-month period (which need not be consecutive), (any such
failure or breach in clauses (i), (ii) or (iii) above being referred to as an
"Event," and, for purposes of clauses (i) or (ii), the date on which such Event
occurs, or for purposes of clause (iii), the date which such 20 consecutive or
40 Trading Day period (as applicable) is exceeded, being referred to as "Event
Date"), then in addition to any other rights available to the Holders: (x) on
such Event Date the Company shall pay to each Holder an amount in cash, as
partial liquidated damages and not as a penalty, equal to 1.0% of the aggregate
purchase price paid by such Holder pursuant to the Purchase Agreement for any
Registrable Securities then held by such Holder (which remedy shall not be
exclusive of any other remedies available under this Agreement); and (y) on each
monthly anniversary of each such Event Date thereof (if the applicable Event
shall not have been cured by such date) until the applicable Event is cured, the
Company shall pay to each Holder an amount in cash, as partial liquidated
damages and not as a penalty, equal to 1.0% of the aggregate purchase price paid
by such Holder pursuant to the Purchase Agreement for any Registrable Securities
then held by such Holder (which remedy shall not be exclusive of any other
remedies available under this Agreement). The parties agree that the Company
will not be liable for liquidated damages under this Section 2(c) in respect of
the Warrants or the Warrant Shares. If the Company fails to pay any partial
liquidated damages pursuant to this Section in full within seven days after the
date such liquidated damages are payable, the Company will pay interest thereon
at a rate of 10% per annum (or such lesser maximum amount that is permitted to
be paid by applicable law) to the Holder, accruing daily from the date such
partial liquidated damages are due until such amounts, plus all such interest
thereon, are paid in full. The partial liquidated damages pursuant to the terms
hereof shall apply on a daily pro-rata basis for any portion of a month prior to
the cure of an Event, except in the case of the first Event Date.
Notwithstanding the foregoing, the maximum payment to a Holder associated with
all Events in the aggregate shall not exceed (i) in any 30-day period, an
aggregate of 1.0% of the purchase price paid by such Holder for its Registrable
Securities (plus interest accrued thereon, if applicable) and (ii) 10.0% of the
purchase paid by such Holder for its Registrable Securities.
(d) The Company shall not, from the date hereof until the date
occurring sixty (60) days after the Effective Date of the Registration
Statement, prepare and file with the Commission a registration statement
relating to an offering for its own account or the account of others under the
Securities Act of any of its equity securities other than a registration
statement on Form S-8 or, in connection with an acquisition, on Form S-4.
(e) Each Holder agrees to furnish to the Company a completed Selling
Shareholder Questionnaire. The Company shall not be required to include the
Registrable Securities of a Holder in a Registration Statement who fails to
furnish to the Company a fully completed Selling Shareholder Questionnaire at
least two Trading Days prior to the Filing Deadline (subject to the requirements
set forth in Section 3(a)).
(f) Notwithstanding anything in this Agreement to the contrary, if the
Commission refuses to declare a Registration Statement filed pursuant to this
Agreement effective as a valid secondary offering under Rule 415 due to the
number of Registrable Securities included in such Registration Statement
relative to the outstanding number of shares of Common Stock, then, without any
liability under Section 2(c) or any further obligation to register such excess
Registrable Securities, the Company shall be permitted to reduce the number of
Registrable Securities included in such Registration Statement to an amount that
does not exceed an amount that the Commission allows for the offering thereunder
to qualify as a valid secondary offering under Rule 415. The Company shall not
be liable for liquidated damages under this Agreement as to any Registrable
Securities which are not permitted by the Commission to be included in a
5
Registration Statement due solely to SEC Guidance from the time that it is
determined that such Registrable Securities are not permitted to be registered
solely due to SEC Guidance. In such case, the liquidated damages shall be
calculated to only apply to the percentage of Registrable Securities which are
permitted in accordance with SEC Guidance to be included in such Registration
Statement.
3. Registration Procedures
In connection with the Company's registration obligations hereunder,
the Company shall:
(a) Not less than four (4) Trading Days prior to the filing of a
Registration Statement or any related Prospectus or any amendment or supplement
thereto, furnish to each Holder copies of such Registration Statement,
Prospectus or amendment or supplement thereto, as proposed to be filed, which
documents will be subject to the review of such Holder (it being acknowledged
and agreed that if a Holder does not object to or comment on the aforementioned
documents within two Trading Days after its receipt thereof, then the Holder
shall be deemed to have consented to and approved the use of such documents).
The Company shall not file a Registration Statement, any Prospectus or any
amendments or supplements thereto in which the "Selling Stockholder" section
thereof differs from the disclosure received from a Holder in its Selling
Shareholder Questionnaire (as amended or supplemented), except as may otherwise
be required by applicable securities law or the Commission.
(b) (i) Prepare and file with the Commission such amendments,
including post-effective amendments, to each Registration Statement and the
Prospectus used in connection therewith as may be necessary to keep such
Registration Statement continuously effective as to the applicable Registrable
Securities for its Effectiveness Period and prepare and file with the Commission
such additional Registration Statements in order to register for resale under
the Securities Act all of the Registrable Securities; (ii) cause the related
Prospectus to be amended or supplemented by any required Prospectus supplement,
and as so supplemented or amended to be filed pursuant to Rule 424; (iii)
respond as promptly as reasonably practicable, and, provide the Holders true and
complete copies of all correspondence from and to the Commission relating to
such Registration Statement that pertains to the Holders as Selling Stockholders
but not any comments that would result in the disclosure to the Holders of
material and non-public information concerning the Company; and (iv) comply with
the provisions of the Securities Act and the Exchange Act with respect to the
disposition of all Registrable Securities covered by each Registration
Statement.
(c) Notify the Holders as promptly as reasonably possible (and, in the
case of (i)(A) below, not less than three Trading Days prior to such filing, in
the case of (iii) and (iv) below, not more than one Trading Day after such
issuance or receipt and, in the case of (v) below, not less than three Trading
Days prior to the financial statements in any Registration Statement becoming
ineligible for inclusion therein) and (if requested by any such Person) confirm
such notice in writing no later than one Trading Day following the day (i)(A)
when a Prospectus or any Prospectus supplement or post-effective amendment to a
Registration Statement is proposed to be filed; (B) when the Commission notifies
the Company whether there will be a "review" of such Registration Statement and
whenever the Commission comments in writing on any Registration Statement (in
which case the Company shall provide true and complete copies thereof and all
written responses thereto to each of the Holders that pertain to the Holders as
a Selling Stockholder or to the Plan of Distribution, but not information which
the Company believes would constitute material and non-public information); and
(C) with respect to each Registration Statement or any post-effective amendment,
when the same has become effective; (ii) of any request by the Commission or any
other Federal or state governmental authority for amendments or supplements to a
Registration Statement or Prospectus or for additional information that pertains
to the Holders as Selling Stockholders or the Plan of Distribution; (iii) of the
6
issuance by the Commission or any other federal or state governmental authority
of any stop order suspending the effectiveness of a Registration Statement
covering any or all of the Registrable Securities or the initiation of any
Proceedings for that purpose; (iv) of the receipt by the Company of any
notification with respect to the suspension of the qualification or exemption
from qualification of any of the Registrable Securities for sale in any
jurisdiction, or the initiation or threatening of any Proceeding for such
purpose; and (v) of the occurrence of any event or passage of time that makes
the financial statements included in a Registration Statement ineligible for
inclusion therein or any statement made in such Registration Statement or
Prospectus or any document incorporated or deemed to be incorporated therein by
reference untrue in any material respect or that requires any revisions to such
Registration Statement, Prospectus or other documents so that, in the case of
such Registration Statement or the Prospectus, as the case may be, it will not
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary to make the statements therein
(in the case of any Prospectus, form of prospectus or supplement thereto, in
light of the circumstances under which they were made), not misleading.
(d) Use its reasonable best efforts to avoid the issuance of, or, if
issued, obtain the withdrawal of (i) any order suspending the effectiveness of a
Registration Statement, or (ii) any suspension of the qualification (or
exemption from qualification) of any of the Registrable Securities for sale in
any jurisdiction, as soon as practicable.
(e) If requested by a Holder, furnish to such Holder, without charge,
at least one conformed copy of each Registration Statement and each amendment
thereto and all exhibits to the extent requested by such Person (including those
previously furnished or incorporated by reference) promptly after the filing of
such documents with the Commission; provided, that the Company shall have no
obligation to provide any document pursuant to this clause that is available on
the Commission's EDGAR system.
(f) Upon notification by the Commission that a Registration Statement
will not be reviewed or is no longer subject to further review and comments, the
Company shall request acceleration of such Registration Statement within five
(5) Business Days after receipt of such notice such that it becomes effective no
later than 5:00 p.m. New York City time on the Effective Date and file a
prospectus supplement for any Registration Statement, whether or not it is
required under Rule 424 (or otherwise), by 9:00 a.m. New York City time the day
after the Effective Date.
(g) Prior to any public offering of Registrable Securities by a
Holder, register or qualify such Registrable Securities for offer and sale by
the Holder under the securities or Blue Sky laws of such jurisdictions within
the United States as any Holder reasonably requests in writing, to keep each
such registration or qualification (or exemption therefrom) effective during the
Effectiveness Period and to do any and all other acts or things reasonably
necessary to enable the disposition in such jurisdictions of the Registrable
Securities covered by the Registration Statements; provided, that the Company
shall not be required to qualify generally to do business in any jurisdiction
where it is not then so qualified or to take any action that would subject the
Company to general service of process in any jurisdiction where it is not then
so subject or subject the Company to any material tax in any such jurisdiction
where it is not then so subject.
(h) If requested by the Holders, cooperate with the Holders to
facilitate the timely preparation and delivery of certificates representing
Registrable Securities to be delivered to a transferee pursuant to the
Registration Statement, which certificates shall be free, to the extent
permitted by the Purchase Agreement and under applicable law, of all restrictive
legends, and to enable such Registrable Securities to be in such denominations
7
and registered in such names as any such Holders may reasonably request. In
connection therewith, if required by the Company's transfer agent, the Company
shall promptly after the effectiveness of the Registration Statement cause an
opinion of counsel as to the effectiveness of the Registration Statement to be
delivered to and maintained with its transfer agent, together with any other
authorizations, certificates and directions required by the transfer agent,
which authorize and direct the transfer agent to issue such Registrable
Securities without legend upon sale by the holder of such shares of Registrable
Securities under the Registration Statement.
(i) Following the occurrence of any event contemplated by Section
3(c)(v), as promptly as reasonably possible, prepare a supplement or amendment,
including a post-effective amendment, to the affected Registration Statements or
a supplement to the related Prospectus or any document incorporated or deemed to
be incorporated therein by reference, and file any other required document so
that, as thereafter delivered, no Registration Statement nor any Prospectus will
contain an untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein (in
the case of any Prospectus, form of prospectus or supplement thereto, in light
of the circumstances under which they were made), not misleading.
(j) (i) In the time and manner required by the Principal Trading
Market, prepare and file with such Trading Market an additional shares listing
application covering all of the Registrable Securities, (ii) take all steps
necessary to cause such Registrable Securities to be approved for listing on the
Principal Trading Market as soon as possible thereafter, (iii) if requested by
any Holder, provide such Holder evidence of such listing, and (iv) during the
Effectiveness Period, maintain the listing of such Registrable Securities on the
Principal Trading Market.
(k) As long as any Holder 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 Section 13(a) or 15(d) of the Exchange Act. As long
as any Holder owns Securities, if the Company is not required to file reports
pursuant to Section 13(a) or 15(d) of the Exchange Act, it will prepare and
furnish to the Holders and make publicly available in accordance with Rule
144(c) promulgated under the Securities Act annual and quarterly financial
statements, together with a discussion and analysis of such financial statements
in form and substance substantially similar to those that would otherwise be
required to be included in reports required by Section 13(a) or 15(d) of the
Exchange Act, as well as any other information required thereby, in the time
period that such filings would have been required to have been made under the
Exchange Act. The Company further covenants that it will take such further
action as any Holder may reasonably request, all to the extent required from
time to time to enable such Person to sell Shares or Warrant Shares without
registration under the Securities Act within the limitation of the exemptions
provided by Rule 144 promulgated under the Securities Act, including compliance
with the provisions of the Purchase Agreement relating to the transfer of the
Shares or Warrant Shares.
(l) The Company may require each selling Holder to furnish to the
Company a certified statement as to the number of shares of Common Stock
beneficially owned by such Holder and any Affiliate thereof and as to any NASD
affiliations and of any natural persons who have the power to vote or dispose of
the Common Stock.
4. Registration Expenses. All fees and expenses incident to the Company's
performance of or compliance with its obligations under this Agreement
(excluding any underwriting discounts and selling commissions and all legal fees
and expenses of legal counsel for any Holder) shall be borne by the Company
whether or not any Registrable Securities are sold pursuant to a Registration
Statement. The fees and expenses referred to in the foregoing sentence shall
include, without limitation, (i) all registration and filing fees (including,
without limitation, fees and expenses (A) with respect to filings required to be
made with the securities exchanges on which the Common Stock is then listed for
trading, and (B) in compliance with applicable state securities or Blue Sky
laws), (ii) printing expenses (including, without limitation, expenses of
8
printing certificates for Registrable Securities and of printing prospectuses if
the printing of prospectuses is reasonably requested by the Holders of a
majority of the Registrable Securities included in the Registration Statement),
(iii) messenger, telephone and delivery expenses, (iv) fees and disbursements of
counsel for the Company, (v) Securities Act liability insurance, if the Company
so desires such insurance, and (vi) fees and expenses of all other Persons
retained by the Company in connection with the consummation of the transactions
contemplated by this Agreement. In addition, the Company shall be responsible
for all of its internal expenses incurred in connection with the consummation of
the transactions contemplated by this Agreement (including, without limitation,
all salaries and expenses of its officers and employees performing legal or
accounting duties), the expense of any annual audit and the fees and expenses
incurred in connection with the listing of the Registrable Securities on any
securities exchange as required hereunder. In no event shall the Company be
responsible for any broker or similar commissions of any Holder or any legal
fees or other costs of the Holders.
5. Indemnification.
(a) Indemnification by the Company. The Company shall, notwithstanding
any termination of this Agreement, indemnify and hold harmless each Holder, the
officers, directors, agents, partners, members, managers, shareholders,
Affiliates and employees of each of them, each Person who controls any such
Holder (within the meaning of Section 15 of the Securities Act or Section 20 of
the Exchange Act) and the officers, directors, partners, members, managers,
shareholders, agents and employees of each such controlling Person, to the
fullest extent permitted by applicable law, from and against any and all losses,
claims, damages, liabilities, costs (including, without limitation, reasonable
costs of preparation and investigation and reasonable attorneys' fees) and
expenses (collectively, "Losses"), as incurred, arising out of or relating to
(i) any untrue or alleged untrue statement of a material fact contained in any
Registration Statement, any Prospectus or any form of prospectus or in any
amendment or supplement thereto (it being understood that the Holder has
approved Annex A hereto for this purpose) or in any preliminary prospectus, or
arising out of or relating to any omission or alleged omission of a material
fact required to be stated therein or necessary to make the statements therein
(in the case of any Prospectus or form of prospectus or supplement thereto, in
light of the circumstances under which they were made) not misleading, or (ii)
any violation or alleged violation by the Company of the Securities Act,
Exchange Act or any state securities law, or any rule or regulation thereunder,
in connection with the performance of its obligations under this Agreement,
except to the extent, but only to the extent, that (A) such untrue statements,
alleged untrue statements, omissions or alleged omissions are based solely upon
information regarding such Holder furnished in writing to the Company by such
Holder expressly for use therein, or to the extent that such information relates
to such Holder or such Holder's proposed method of distribution of Registrable
Securities and was reviewed and approved by such Holder expressly for use in the
Registration Statement, such Prospectus or such form of Prospectus or in any
amendment or supplement thereto (it being understood that each Holder has
approved Annex A hereto for this purpose) or (B) in the case of an occurrence of
an event of the type specified in Section 3(c)(ii)-(v), the use by a Holder of
an outdated or defective Prospectus after the Company has notified such Holder
in writing that the Prospectus is outdated or defective and prior to the receipt
by such Holder of Advice (as defined in Section 6(e) below), but only if and to
the extent that following the receipt of the Advice the misstatement or omission
giving rise to such Loss would have been corrected; provided, however, that the
indemnity agreement contained in this Section 5(a) shall not apply to amounts
paid in settlement of any Losses if such settlement is effected without the
prior written consent of the Company, which consent shall not be unreasonably
withheld. Each Holder shall notify the Company promptly of the institution,
threat or assertion of any Proceeding of which the Holder is aware in connection
with the transactions contemplated by this Agreement. Such indemnity shall
remain in full force and effect regardless of any investigation made by or on
behalf of an Indemnified Party (as defined in Section 5(c)) and shall survive
the transfer of the Registrable Securities by the Holders.
9
(b) Indemnification by Holders. Each Holder shall, notwithstanding any
termination of this Agreement, severally and not jointly, indemnify and hold
harmless the Company, its directors, officers, agents and employees, each Person
who controls the Company (within the meaning of Section 15 of the Securities Act
and Section 20 of the Exchange Act), and the directors, officers, agents or
employees of such controlling Persons, to the fullest extent permitted by
applicable law, from and against all Losses, as incurred, arising solely out of
or based solely upon any untrue or alleged untrue statement of a material fact
contained in any Registration Statement, any Prospectus, or any form of
prospectus, or in any amendment or supplement thereto, or arising solely out of
or based solely upon any omission or alleged omission of a material fact
required to be stated therein or necessary to make the statements therein (in
the case of any Prospectus, or any form of prospectus or supplement thereto, in
light of the circumstances under which they were made) not misleading to the
extent, but only to the extent, that such untrue statements or omissions are
based solely upon information regarding such Holder furnished in writing to the
Company by such Holder expressly for use therein, or to the extent that such
information relates to such Holder or such Holder's proposed method of
distribution of Registrable Securities and was reviewed and approved by such
Holder expressly for use in the Registration Statement (it being understood that
the Holder has approved Annex A hereto for this purpose), such Prospectus or
such form of Prospectus or in any amendment or supplement thereto; provided,
however, that the indemnity agreement contained in this Section 5(b) shall not
apply to amounts paid in settlement of any Losses if such settlement is effected
without the prior written consent of the Holder, which consent shall not be
unreasonably withheld. In no event shall the liability of any selling Holder
hereunder be greater in amount than the dollar amount of the net proceeds
received by such Holder upon the sale of the Registrable Securities giving rise
to such indemnification obligation.
(c) Conduct of Indemnification Proceedings. If any Proceeding shall be
brought or asserted against any Person entitled to indemnity hereunder (an
"Indemnified Party"), such Indemnified Party shall promptly notify the Person
from whom indemnity is sought (the "Indemnifying Party") in writing, and the
Indemnifying Party shall have the right to assume the defense thereof, including
the employment of counsel reasonably satisfactory to the Indemnified Party and
the payment of all reasonable fees and expenses incurred in connection with
defense thereof; provided, that the failure of any Indemnified Party to give
such notice shall not relieve the Indemnifying Party of its obligations or
liabilities pursuant to this Agreement, except (and only) to the extent that it
shall be finally determined by a court of competent jurisdiction (which
determination is not subject to appeal or further review) that such failure
shall have proximately and materially adversely prejudiced the Indemnifying
Party.
An Indemnified Party shall have the right to employ separate counsel
in any such Proceeding and to participate (but not control) in the defense
thereof, but the fees and expenses of such counsel shall be at the expense of
such Indemnified Party or Parties unless: (1) the Indemnifying Party has agreed
in writing to pay such fees and expenses; (2) the Indemnifying Party shall have
failed promptly to assume the defense of such Proceeding and to employ counsel
reasonably satisfactory to such Indemnified Party in any such Proceeding; or (3)
the named parties to any such Proceeding (including any impleaded parties)
include both such Indemnified Party and the Indemnifying Party, and such
Indemnified Party shall have been advised by counsel that a conflict of interest
is likely to exist if the same counsel were to represent such Indemnified Party
and the Indemnifying Party (in which case, if such Indemnified Party notifies
the Indemnifying Party in writing that it elects to employ separate counsel at
the expense of the Indemnifying Party, the Indemnifying Party shall not have the
right to assume the defense thereof and such counsel shall be at the expense of
the Indemnifying Party), provided, that the Indemnifying Party shall not be
liable for the fees and expenses of more than one separate firm of attorneys at
any time for all Indemnified Parties. The Indemnifying Party shall not be liable
for any settlement of any such Proceeding effected without its written consent,
which consent shall not be unreasonably withheld, delayed or conditioned. No
Indemnifying Party shall, without the prior written consent of the Indemnified
Party, effect any settlement of any pending Proceeding in respect of which any
10
Indemnified Party is a party, unless such settlement includes an unconditional
release of such Indemnified Party from all liability on claims that are the
subject matter of such Proceeding.
All fees and expenses of the Indemnified Party (including reasonable
fees and expenses to the extent incurred in connection with investigating or
preparing to defend such Proceeding in a manner not inconsistent with this
Section) shall be paid to the Indemnified Party, as incurred, within twenty
Trading Days of written notice thereof to the Indemnifying Party (regardless of
whether it is ultimately determined that an Indemnified Party is not entitled to
indemnification hereunder; provided, that the Indemnifying Party may require
such Indemnified Party to undertake to reimburse all such fees and expenses to
the extent it is finally judicially determined that such Indemnified Party is
not entitled to indemnification hereunder).
(d) Contribution. If a claim for indemnification under Section 5(a) or
5(b) is unavailable to an Indemnified Party (by reason of public policy or
otherwise), then each Indemnifying Party, in lieu of indemnifying such
Indemnified Party, shall contribute to the amount paid or payable by such
Indemnified Party as a result of such Losses, in such proportion as is
appropriate to reflect the relative fault of the Indemnifying Party and
Indemnified Party in connection with the actions, statements or omissions that
resulted in such Losses as well as any other relevant equitable considerations.
The relative fault of such Indemnifying Party and Indemnified Party shall be
determined by reference to, among other things, whether any action in question,
including any untrue or alleged untrue statement of a material fact or omission
or alleged omission of a material fact, has been taken or made by, or relates to
information supplied by, such Indemnifying Party or Indemnified Party, and the
parties' relative intent, knowledge, access to information and opportunity to
correct or prevent such action, statement or omission. The amount paid or
payable by a party as a result of any Losses shall be deemed to include, subject
to the limitations set forth in Section 5(c), any reasonable attorneys' or other
reasonable fees or expenses incurred by such party in connection with any
Proceeding to the extent such party would have been indemnified for such fees or
expenses if the indemnification provided for in this Section was available to
such party in accordance with its terms.
The parties hereto agree that it would not be just and equitable if
contribution pursuant to this Section 5(d) were determined by pro rata
allocation or by any other method of allocation that does not take into account
the equitable considerations referred to in the immediately preceding paragraph.
Notwithstanding the provisions of this Section 5(d), no Holder shall be required
to contribute, in the aggregate, any amount in excess of the amount by which the
net proceeds actually received by such Holder from the sale of the Registrable
Securities subject to the Proceeding exceeds the amount of any damages that such
Holder has otherwise been required to pay by reason of such untrue or alleged
untrue statement or omission or alleged omission. No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
shall be entitled to contribution from any Person who was not guilty of such
fraudulent misrepresentation.
The indemnity and contribution agreements contained in this Section
are in addition to any liability that the Indemnifying Parties may have to the
Indemnified Parties and are not in diminution or limitation of the
indemnification provisions under the Purchase Agreement.
11
6. Miscellaneous
(a) Remedies. In the event of a breach by the Company or by a Holder,
of any of their obligations under this Agreement, each Holder or the Company, as
the case may be, in addition to being entitled to exercise all rights granted by
law and under this Agreement, including recovery of damages, will be entitled to
specific performance of its rights under this Agreement. The Company and each
Holder agree that monetary damages would not provide adequate compensation for
any losses incurred by reason of a breach by it of any of the provisions of this
Agreement and hereby further agrees that, in the event of any action for
specific performance in respect of such breach, it shall waive the defense that
a remedy at law would be adequate.
(b) Entire Agreement. This Agreement is intended by the parties as a
final expression of their agreement and intended to be a complete and exclusive
statement of the agreement and understanding of the parties hereto in respect of
the subject matter contained herein. This Agreement supersedes all prior
agreements and understandings between the parties with respect to such subject
matter, except for, and as provided in the Transaction Documents.
(c) Benefits of the Agreement. The terms and conditions of this
Agreement shall inure to the benefit of and be binding upon the respective
permitted successors and assigns of the parties. Nothing in this Agreement,
express or implied, is intended to confer upon any party other than the parties
hereto or their respective successors and assigns any rights, remedies,
obligations, or liabilities under or by reason of this Agreement, except as
expressly provided in this Agreement.
(d) Compliance. Each Holder covenants and agrees that it will comply
with the prospectus delivery requirements of the Securities Act as applicable to
it (unless an exemption therefrom is available) in connection with sales of
Registrable Securities pursuant to the Registration Statement and shall sell the
Registrable Securities only in accordance with a method of distribution
described in the Registration Statement.
(e) Discontinued Disposition. Each Holder further agrees by its
acquisition of such Registrable Securities that, upon receipt of a notice from
the Company of the occurrence of any event of the kind described in Section
3(c)(ii)-(v), such Holder will forthwith discontinue disposition of such
Registrable Securities under the Registration Statement until it is advised in
writing (the "Advice") by the Company that the use of the applicable Prospectus
may be resumed, and, in either case, has received copies of any additional or
supplemental filings that are incorporated or deemed to be incorporated by
reference in such Prospectus or Registration Statement. The Company may provide
appropriate stop orders to enforce the provisions of this paragraph.
(f) Amendments and Waivers. This Agreement may be amended only by a
writing signed by the Company and the Holders of a majority of the Registrable
Securities issued at the Closing. The Company may take any action herein
prohibited, or omit to perform any act herein required to be performed by it,
only if the Company shall have obtained the written consent to such amendment,
action or omission to act, of each Purchaser. Failure of any party to exercise
any right or remedy under this Agreement or otherwise or delay by a party in
exercising such right or remedy shall not operate as a waiver thereof.
(g) 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 (i) the date of transmission, if
such notice or communication is delivered via facsimile at the facsimile number
specified in this Section prior to 5:00 p.m. (New York City time) on a Trading
Day, (ii) the next Trading Day after the date of transmission, if such notice or
12
communication is delivered via facsimile or e-mail to the facsimile number or
e-mail addressed specified in this Section on a day that is not a Trading Day or
later than 5:00 p.m. (New York City time) on any Trading Day, (iii) the Business
Day following the date of mailing, if sent by nationally recognized overnight
courier service with next day delivery specified, or (iv) 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: 424 West 33rd Street, Suite 650
New York, New York 10001
Telephone No.: (212) 356-4000
Facsimile No.: (212) 564-6546
Attention: Michael Keefe
With a copy to: Lowenstein Sandler PC
1251 Avenue of the Americas
New York, New York 10020
Telephone No.: (212) 262-6700
Facsimile No.: (212) 262-7402
Attention: Steven E. Siesser, Esq.
If to a Purchaser: To the address set forth under such
Purchaser's name on the signature pages
hereto.
If to any other Person who is To the address of such Holder as it
then the registered Holder: appears in the stock transfer books of
the Company or such other address as
may be designated in writing hereafter,
in the same manner, by such Person.
provided, that any party may change its address for notices by providing written
notice to the other parties in the manner prescribed by this Section.
(h) Successors and Assigns. This Agreement shall inure to the benefit
of and be binding upon the successors and permitted assigns of each of the
parties and shall inure to the benefit of each Holder. The Company may not
assign its rights or obligations hereunder without the prior written consent of
each Holder. The rights of the Holders hereunder, including the right to have
the Company register Registrable Securities pursuant to this Agreement, may be
assigned by each Holder to transferees or assignees of all or any portion of the
Registrable Securities, but only if (i) the Holder agrees in writing with the
transferee or assignee to assign such rights, and a true and complete copy of
such agreement is furnished to the Company prior to such assignment, (ii) prior
to such assignment, the Company is furnished with written notice of the name and
address of such transferee or assignee and the securities with respect to which
such registration rights are being transferred or assigned, (iii) at or before
the time the Company received the written notice contemplated by clause (ii) of
this sentence, the transferee or assignee agrees in writing with the Company to
be bound by all of the provisions contained herein and (iv) the transferee is an
"accredited investor" as that term is defined in Rule 501 of Regulation D.
(i) Execution and Counterparts. This Agreement may be executed in any
number of counterparts, each of which when so executed shall be deemed to be an
original and, all of which taken together shall constitute one and the same
Agreement. In the event that any signature is delivered by facsimile
13
transmission, such signature shall create a valid binding obligation of the
party executing (or on whose behalf such signature is executed) the same with
the same force and effect as if such facsimile signature were the original
thereof.
(j) 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 (whether brought
against a party hereto or its respective Affiliates, employees or agents) will
be commenced 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 hereunder or in connection herewith or with any
transaction contemplated hereby or discussed herein, and hereby irrevocably
waives, and agrees not to assert in any Proceeding, any claim that it is not
personally subject to the jurisdiction of any 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 Proceeding arising out of or
relating to this Agreement or the transactions contemplated hereby. If any party
shall commence a Proceeding to enforce any provisions of this Agreement, then
the prevailing party in such Proceeding shall be reimbursed by the other parties
for its attorney's fees and other costs and expenses incurred with the
investigation, preparation and prosecution of such Proceeding.
(k) Cumulative Remedies. The remedies provided herein are cumulative
and not exclusive of any remedies provided by law.
(l) Severability. If any term, provision, covenant or restriction of
this Agreement is held by a court of competent jurisdiction to be invalid,
illegal, void or unenforceable, the remainder of the terms, provisions,
covenants and restrictions set forth herein shall remain in full force and
effect and shall in no way be affected, impaired or invalidated, and the parties
hereto shall use their reasonable efforts to find and employ an alternative
means to achieve the same or substantially the same result as that contemplated
by such term, provision, covenant or restriction. It is hereby stipulated and
declared to be the intention of the parties that they would have executed the
remaining terms, provisions, covenants and restrictions without including any of
such that may be hereafter declared invalid, illegal, void or unenforceable.
(m) Headings. The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.
(n) Independent Nature of Purchasers' Obligations and Rights. The
obligations of each Purchaser under this Agreement are several and not joint
with the obligations of any other Purchaser hereunder, and no Purchaser shall be
responsible in any way for the performance of the obligations of any other
Purchaser hereunder. The decision of each Purchaser to purchase Shares and
Warrant Shares pursuant to the Transaction Documents has been made independently
of any other Purchaser. Nothing contained herein or in any other agreement or
document delivered at any closing, and no action taken by any Purchaser pursuant
hereto or 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 with
respect to such obligations or the transactions contemplated by this Agreement.
Each Purchaser acknowledges that no other Purchaser has acted as agent for such
Purchaser in connection with making its investment hereunder and that no
Purchaser will be acting as agent of such Purchaser in connection with
14
monitoring its investment in the Securities or enforcing its rights under the
Transaction Documents. Each Purchaser shall be entitled to protect and enforce
its rights, including without limitation the rights arising out of this
Agreement, and it shall not be necessary for any other Purchaser to be joined as
an additional party in any Proceeding for such purpose. The Company acknowledges
that each of the Purchasers has been provided with the same Registration Rights
Agreement for the purpose of closing a transaction with multiple Purchasers and
not because it was required or requested to do so by any Purchaser.
(o) Currency. Unless otherwise indicated, all dollar amounts referred
to in this Agreement are in United States Dollars. All amounts owing under this
Agreement are in United States Dollars. All amounts denominated in other
currencies shall be converted in the United States dollar equivalent amount in
accordance with the applicable exchange rate in effect on the date of
calculation.
(p) Further Assurances. The parties shall execute and deliver all such
further instruments and documents and take all such other actions as may
reasonably be required to carry out the transactions contemplated hereby and to
evidence the fulfillment of the agreements herein contained.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK
SIGNATURE PAGES TO FOLLOW]
15
IN WITNESS WHEREOF, the parties have executed this Registration Rights
Agreement as of the date first written above.
INTERNATIONAL FIGHT LEAGUE, INC.
By:_________________________________
Name: Gareb Shamus
Title: Chief Executive Officer
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK
SIGNATURE PAGES OF HOLDERS TO FOLLOW]
IN WITNESS WHEREOF, the parties have executed this Registration Rights
Agreement as of the date first written above.
NAME OF INVESTING ENTITY
____________________________________
AUTHORIZED SIGNATORY
By:_________________________________
Name:
Title:
ADDRESS FOR NOTICE
c/o:________________________________
Street:_____________________________
City/State/Zip:_____________________
Attention:__________________________
Tel:________________________________
Fax:________________________________
Email:______________________________
NEITHER THESE SECURITIES NOR THE SECURITIES ISSUABLE UPON EXERCISE OF THESE
SECURITIES HAVE 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 APPLICABLE STATE SECURITIES LAWS AND, ACCORDINGLY, MAY NOT BE OFFERED OR
SOLD EXCEPT PURSUANT TO (I) AN EFFECTIVE REGISTRATION STATEMENT UNDER THE
SECURITIES ACT OR (II) 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 OR BLUE SKY LAWS. THESE
SECURITIES AND THE SECURITIES ISSUABLE UPON EXERCISE OF THESE SECURITIES MAY BE
PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN SECURED BY
SUCH SECURITIES.
INTERNATIONAL FIGHT LEAGUE, INC.
WARRANT TO PURCHASE COMMON STOCK
Warrant No. [ ] Original Issue Date: August 6, 2007
INTERNATIONAL FIGHT LEAGUE, INC., a Delaware corporation (the
"Company"), hereby certifies that, for value received, [_____________________]
or its permitted registered assigns (the "Holder"), is entitled to purchase from
the Company up to a total of [___________] shares of common stock, $0.01 par
value per share (the "Common Stock"), of the Company (each such share, a
"Warrant Share" and all such shares, the "Warrant Shares") at an exercise price
per share equal to $1.05 (as adjusted from time to time as provided in Section 9
herein, the "Exercise Price"), at any time and from time to time from and after
the Original Issue Date (the "Issuance Date") and through and including 5:00
P.M., New York City time, on August 6, 2012 (the "Expiration Date"), and subject
to the following terms and conditions:
This Warrant (this "Warrant") is one of a series of similar warrants
issued pursuant to that certain Securities Purchase Agreement, dated as of
August 1, 2007, by and among the Company and the Purchasers identified therein
(the "Purchase Agreement"). All such warrants are referred to herein,
collectively, as the "Warrants."
1. Definitions. In addition to the terms defined elsewhere in this Warrant,
capitalized terms that are not otherwise defined herein have the meanings
ascribed to such terms in the Purchase Agreement.
2. Registration of Warrants. The Company shall register this Warrant, upon
records to be maintained by the Company for that purpose (the "Warrant
Register"), in the name of the record Holder (which shall include the initial
Holder or, as the case may be, any registered assignee to which this Warrant is
permissibly assigned hereunder) from time to time. The Company may deem and
treat the registered Holder of this Warrant as the absolute owner hereof for the
purpose of any exercise hereof or any distribution to the Holder, and for all
other purposes, absent actual notice to the contrary.
3. Registration of Transfers. Subject to the restrictions on transfer set forth
in Section 4.1 of the Purchase Agreement and Section 15(b) hereof and compliance
with all applicable securities laws, the Company shall register the transfer of
1
all or any portion of this Warrant to an Affiliate of the Holder in the Warrant
Register, upon (i) surrender of this Warrant with a completed Form of Assignment
attached as Schedule 1 duly completed and signed by the transferee, to the
Company at its address specified herein; (ii) if the Registration Statement is
not effective, delivery by or on behalf of the transferring Holder (at its
expense), at the request of the Company, of an opinion of counsel reasonably
satisfactory to the Company to the effect that the transfer of such portion of
this Warrant may be made pursuant to an available exemption from the
registration requirements of the Securities Act and all applicable state
securities or blue sky laws; and (iii) accurate completion, execution and by the
transferee of the Certification attached hereto as Appendix A to Schedule 1.
Upon any such registration or transfer (including, to the extent applicable,
receipt of the items set forth in clauses (i), (ii) and (iii) immediately
preceding), a new warrant to purchase Common Stock in substantially the form of
this Warrant (any such new warrant, a "New Warrant") evidencing the portion of
this Warrant so transferred shall be issued to the transferee, and a New Warrant
evidencing the remaining portion of this Warrant not so transferred, if any,
shall be issued to the transferring Holder. The acceptance of the New Warrant by
the transferee thereof shall be deemed the acceptance by such transferee of all
of the rights and obligations of a Holder of a Warrant.
4. Exercise and Duration of Warrant.
(a) All or any part of this Warrant shall be exercisable by the registered
Holder at any time and from time to time on or after the Issuance Date and
through and including 5:00 P.M. New York City time on the Expiration Date. At
5:00 P.M., New York City time, on the Expiration Date, the portion of this
Warrant not exercised prior thereto shall be and become void and of no value and
this Warrant shall be terminated and no longer outstanding;
(b) The Holder may exercise this Warrant by delivering to the Company (i)
an exercise notice, in the form attached as Schedule 2 hereto (the "Exercise
Notice"), appropriately completed and duly signed, and (ii) payment of the
Exercise Price for the number of Warrant Shares as to which this Warrant is
being exercised (which may take the form of a "cashless exercise" if so
indicated in the Exercise Notice and if a "cashless exercise" may occur at such
time pursuant to Section 10 below), and the date such items are delivered to the
Company (as determined in accordance with the notice provisions hereof) is an
"Exercise Date." The delivery by (or on behalf of) the Holder of the Exercise
Notice and the applicable Exercise Price as provided above shall constitute the
Holder's certification to the Company that its representations contained in the
Purchase Agreement are true and correct as of the Exercise Date as if remade in
their entirety (or, in the case of any transferee Holder, such transferee
Holder's duly executed certification to the Company that such representations
are true and correct as to such transferee Holder as of the Exercise Date).
Execution and delivery of the Exercise Notice shall have the same effect as
cancellation of the original Warrant and issuance of a New Warrant evidencing
the right to purchase the remaining number of Warrant Shares.
5. Delivery of Warrant Shares.
(a) Upon exercise of this Warrant, the Company shall promptly (but in no
event later than three (3) Trading Days after the Exercise Date) issue or cause
to be issued and cause to be delivered to or upon the written order of the
Holder and in such name or names as the Holder may designate (provided that, if
the Registration Statement is not effective and the Holder directs the Company
to deliver a certificate for the Warrant Shares in a name other than that of the
Holder or an Affiliate of the Holder, it shall deliver to the Company on the
Exercise Date an opinion of counsel reasonably satisfactory to the Company to
the effect that the issuance of such Warrant Shares in such other name may be
2
made pursuant to an available exemption from the registration requirements of
the Securities Act and all applicable state securities or blue sky laws), a
certificate for the Warrant Shares issuable upon such exercise, free of
restrictive legends, unless a registration statement covering the resale of the
Warrant Shares and naming the Holder as a selling stockholder thereunder is not
then effective or the Warrant Shares are not freely transferable without volume
restrictions pursuant to Rule 144(k) under the Securities Act. The Holder, or
any Person permissibly so designated by the Holder to receive Warrant Shares,
shall be deemed to have become the holder of record of such Warrant Shares as of
the Exercise Date.
(b) If by the close of the third (3) Trading Day after delivery of an
Exercise Notice, the Company fails to deliver to the Holder a certificate
representing the required number of Warrant Shares in the manner required
pursuant to Section 5(a), and if after such third Trading Day and prior to the
receipt of such Warrant Shares, the Holder purchases (in an open market
transaction or otherwise) shares of Common Stock to deliver in satisfaction of a
sale by the Holder of the Warrant Shares which the Holder anticipated receiving
upon such exercise (a "Buy-In"), then the Company shall, within three Trading
Days after the Holder's request and in the Holder's sole discretion, either (1)
pay in cash to the Holder an amount equal to the Holder's total purchase price
(including brokerage commissions, if any) for the shares of Common Stock so
purchased (the "Buy-In Price"), at which point the Company's obligation to
deliver such certificate (and to issue such Warrant Shares) shall terminate or
(2) promptly honor its obligation to deliver to the Holder a certificate or
certificates representing such Warrant Shares and pay cash to the Holder in an
amount equal to the excess (if any) of the Buy-In Price over the product of (A)
such number of Warrant Shares, times (B) the closing bid price of a share of
Common Stock on the date of exercise.
(c) To the extent permitted by law, the Company's obligations to issue and
deliver Warrant Shares in accordance with the terms hereof are absolute and
unconditional, irrespective of any action or inaction by the Holder to enforce
the same, any waiver or consent with respect to any provision hereof, the
recovery of any judgment against any Person or any action to enforce the same,
or any setoff, counterclaim, recoupment, limitation or termination, or any
breach or alleged breach by the Holder or any other Person of any obligation to
the Company or any violation or alleged violation of law by the Holder or any
other Person, and irrespective of any other circumstance which might otherwise
limit such obligation of the Company to the Holder in connection with the
issuance of Warrant Shares. Nothing herein shall limit the Holder's right to
pursue any other remedies available to it hereunder, at law or in equity
including, without limitation, a decree of specific performance and/or
injunctive relief with respect to the Company's failure to timely deliver
certificates representing shares of Common Stock upon exercise of this Warrant
as required pursuant to the terms hereof.
6. Charges, Taxes and Expenses. Issuance and delivery of certificates for
shares of Common Stock upon exercise of this Warrant shall be made without
charge to the Holder for any issue or transfer tax, withholding tax, transfer
agent fee or other incidental tax or expense in respect of the issuance of such
certificates, all of which taxes and expenses shall be paid by the Company;
provided, however, that the Company shall not be required to pay any tax which
may be payable in respect of any transfer involved in the registration of any
certificates for Warrant Shares or Warrants in a name other than that of the
Holder or an Affiliate thereof. The Holder shall be responsible for all other
tax liability that may arise as a result of holding or transferring this Warrant
or receiving Warrant Shares upon exercise hereof.
7. Replacement of Warrant. If this Warrant is mutilated, lost, stolen or
destroyed, the Company shall issue or cause to be issued in exchange and
substitution for and upon cancellation hereof, or in lieu of and substitution
3
for this Warrant, a New Warrant, but only upon receipt of evidence reasonably
satisfactory to the Company of such loss, theft or destruction (in such case)
and, in each case, a customary and reasonable indemnity, if requested.
Applicants for a New Warrant under such circumstances shall also comply with
such other reasonable regulations and procedures and pay such other reasonable
third-party costs as the Company may prescribe. If a New Warrant is requested as
a result of a mutilation of this Warrant, then the Holder shall deliver such
mutilated Warrant to the Company as a condition precedent to the Company's
obligation to issue the New Warrant.
8. Reservation of Warrant Shares. The Company covenants that it will initially
reserve and keep available out of the aggregate of its authorized but unissued
and otherwise unreserved Common Stock, solely for the purpose of enabling it to
issue Warrant Shares upon exercise of this Warrant as herein provided, the
number of Warrant Shares which are initially issuable and deliverable upon the
exercise of this entire Warrant, free from preemptive rights or any other
contingent purchase rights of persons other than the Holder. The Company further
covenants that it will at all times reserve and keep available out of the
aggregate of its authorized but unissued and otherwise unreserved Common Stock,
solely for the purpose of enabling it to issue Warrant Shares upon exercise of
this Warrant as herein provided, the number of Warrant Shares which are then
issuable and deliverable upon the exercise of this entire Warrant, free from
preemptive rights or any other contingent purchase rights of persons other than
the Holder (taking into account the adjustments and restrictions of Section 9).
The Company covenants that all Warrant Shares so issuable and deliverable shall,
upon issuance and the payment of the applicable Exercise Price in accordance
with the terms hereof, be duly and validly authorized, issued and fully paid and
nonassessable. The Company will take all such action as may be reasonably
necessary to assure that such shares of Common Stock may be issued as provided
herein without violation of any applicable law or regulation, or of any
requirements of any securities exchange or automated quotation system upon which
the Common Shares may be listed.
9. Certain Adjustments. The Exercise Price and number of Warrant Shares
issuable upon exercise of this Warrant are subject to adjustment from time to
time as set forth in this Section 9.
(a) Stock Dividends and Splits. If the Company, at any time while this
Warrant is outstanding, (i) pays a stock dividend on its Common Stock or
otherwise makes a distribution on any class of capital stock that is payable in
shares of Common Stock, (ii) subdivides its outstanding shares of Common Stock
into a larger number of shares, or (iii) combines its outstanding shares of
Common Stock into a smaller number of shares, then in each such case the
Exercise Price shall be multiplied by a fraction, the numerator of which shall
be the number of shares of Common Stock outstanding immediately before such
event and the denominator of which shall be the number of shares of Common Stock
outstanding immediately after such event. Any adjustment made pursuant to clause
(i) of this paragraph shall become effective immediately after the record date
for the determination of stockholders entitled to receive such dividend or
distribution, and any adjustment pursuant to clause (ii) or (iii) of this
paragraph shall become effective immediately after the effective date of such
subdivision or combination.
(b) Pro Rata Distributions. If the Company, at any time while this Warrant
is outstanding, distributes to all holders of Common Stock (i) evidences of its
indebtedness, (ii) any security (other than a distribution of Common Stock
covered by the preceding paragraph), (iii) rights or warrants to subscribe for
or purchase any security, or (iv) any other asset (in each case, "Distributed
Property"), then, upon any exercise of this Warrant that occurs after the record
date fixed for determination of stockholders entitled to receive such
distribution, the Holder shall be entitled to receive, in addition to the
4
Warrant Shares otherwise issuable upon such exercise (if applicable), the
Distributed Property that such Holder would have been entitled to receive in
respect of such number of Warrant Shares had the Holder been the record holder
of such Warrant Shares immediately prior to such record date.
(c) Fundamental Transactions. If, at any time while this Warrant is
outstanding (i) the Company effects any merger or consolidation of the Company
with or into another Person, in which the Company is not the survivor, (ii) the
Company effects any sale of all or substantially all of its assets or a majority
of its Common Stock is acquired by a third party, in each case, in one or a
series of related transactions, (iii) any tender offer or exchange offer
(whether by the Company or another Person) is completed pursuant to which all or
substantially all of the holders of Common Stock are permitted to tender or
exchange their shares for other securities, cash or property, or (iv) the
Company effects any reclassification of the Common Stock or any compulsory share
exchange pursuant to which the Common Stock is effectively converted into or
exchanged for other securities, cash or property (other than as a result of a
subdivision or combination of shares of Common Stock covered by Section 9(a)
above) (in any such case, a "Fundamental Transaction"), then the Holder shall
have the right thereafter to receive, upon exercise of this Warrant, the same
amount and kind of securities, cash or property as it would have been entitled
to receive upon the occurrence of such Fundamental Transaction if it had been,
immediately prior to such Fundamental Transaction, the holder of the number of
Warrant Shares then issuable upon exercise in full of this Warrant without
regard to any limitations on exercise contained herein (the "Alternate
Consideration"). Notwithstanding the foregoing, in the event of a Fundamental
Transaction that, is (1) a transaction where the consideration paid to the
holders of the Common Stock consists solely of cash, (2) a "Rule 13e-3
transaction" as defined in Rule 13e-3 under the Securities Exchange Act of 1934,
as amended, or (3) a Fundamental Transaction involving a person or entity not
traded on a Trading Market (other than the OTC Bulletin Board), at the request
of the Holder delivered before the 90th day after such Fundamental Transaction,
the Company (or the successor entity to the Company) shall purchase this Warrant
from the Holder by paying to the Holder, within five (5) Business Days after
such request (or, if later, on the effective date of the Fundamental
Transaction), cash in an amount equal to the value of the remaining unexercised
portion of this Warrant on the date of such Fundamental Transaction, which value
shall be determined by use of the Black Scholes Option Pricing Model obtained
from the "OV" function on Bloomberg determined as of the day immediately
following the public announcement of the applicable Fundamental Transaction and
reflecting (i) a risk-free interest rate corresponding to the U.S. Treasury rate
for a period equal to the remaining term of this Warrant as of such date of
request and (ii) an expected volatility equal to the greater of (A) 40% and (B)
the 100 day volatility obtained from the HVT function on Bloomberg determined as
of the Trading Day immediately prior to the announcement of the Fundamental
Transaction. The provisions of this paragraph (c) shall similarly apply to
subsequent transactions analogous to a Fundamental Transaction.
(d) Subsequent Equity Sales.
(i) Except as provided in subsection (d)(iii) hereof, if and whenever
the Company shall issue or sell, or is, in accordance with any of subsections
(d)(ii)(l) through (d)(ii)(7) hereof, deemed to have issued or sold, any shares
of Common Stock for no consideration or for a consideration per share less than
the Exercise Price in effect immediately prior to the time of such issue or
sale, then and in each such case (a "Trigger Issuance") the then-existing
Exercise Price shall be reduced as of the close of business on the effective
date of the Trigger Issuance, to a price determined as follows:
Adjusted Exercise Price = (A x B) + D
-----------
A+C
5
where
"A" equals the number of shares of Common Stock outstanding,
including Additional Shares of Common Stock (as defined below) deemed to be
issued hereunder, immediately preceding such Trigger Issuance;
"B" equals the Exercise Price in effect immediately preceding
such Trigger Issuance;
"C" equals the number of Additional Shares of Common Stock
issued or deemed issued hereunder as a result of the Trigger Issuance; and
"D" equals the aggregate consideration, if any, received or
deemed to be received by the Company upon such Trigger Issuance;
provided, however, that in no event shall the Exercise Price after giving effect
to such Trigger Issuance be greater than the original Exercise Price.
For purposes of this subsection (d), "Additional Shares of Common Stock" shall
mean all shares of Common Stock issued by the Company or deemed to be issued
pursuant to this subsection (d), other than Excluded Issuances (as defined in
subsection (d)(iii) hereof).
(ii) For purposes of this subsection 9(d), the following subsections
(d)(ii)(l) to (d)(ii)(7) shall also be applicable:
(1) Issuance of Rights or Options. In case at any time the
Company shall in any manner grant (directly and not by assumption in a merger or
otherwise) any warrants or other rights to subscribe for or to purchase, or any
options for the purchase of, Common Stock or any stock or security convertible
into or exchangeable for Common Stock (such warrants, rights or options being
called "Options" and such convertible or exchangeable stock or securities being
called "Convertible Securities"), whether or not such Options or the right to
convert or exchange any such Convertible Securities are immediately exercisable,
and the price per share for which Common Stock is issuable upon the exercise of
such Options or upon the conversion or exchange of such Convertible Securities
(determined by dividing (i) the sum (which sum shall constitute the applicable
consideration) of (x) the total amount, if any, received or receivable by the
Company as consideration for the granting of such Options, plus (y) the
aggregate amount of additional consideration payable to the Company upon the
exercise of all such Options, plus (z), in the case of such Options which relate
to Convertible Securities, the aggregate amount of additional consideration, if
any, payable upon the issue or sale of such Convertible Securities and upon the
conversion or exchange thereof, by (ii) the total maximum number of shares of
Common Stock issuable upon the exercise of such Options or upon the conversion
or exchange of all such Convertible Securities issuable upon the exercise of
such Options) shall be less than the Exercise Price in effect immediately prior
to the time of the granting of such Options, then the total number of shares of
Common Stock issuable upon the exercise of such Options or upon conversion or
exchange of the total amount of such Convertible Securities issuable upon the
exercise of such Options shall be deemed to have been issued for such price per
share as of the date of granting of such Options or the issuance of such
Convertible Securities and thereafter shall be deemed to be outstanding for
purposes of adjusting the Exercise Price. Except as otherwise provided in
6
subsection 9(d)(ii)(3), no adjustment of the Exercise Price shall be made upon
the actual issue of such Common Stock or of such Convertible Securities upon
exercise of such Options or upon the actual issue of such Common Stock upon
conversion or exchange of such Convertible Securities.
(2) Issuance of Convertible Securities. In case the Company
shall in any manner issue (directly and not by assumption in a merger or
otherwise) or sell any Convertible Securities, whether or not the rights to
exchange or convert any such Convertible Securities are immediately exercisable,
and the price per share for which Common Stock is issuable upon such conversion
or exchange (determined by dividing (i) the sum (which sum shall constitute the
applicable consideration) of (x) the total amount received or receivable by the
Company as consideration for the issue or sale of such Convertible Securities,
plus (y) the aggregate amount of additional consideration, if any, payable to
the Company upon the conversion or exchange thereof, by (ii) the total number of
shares of Common Stock issuable upon the conversion or exchange of all such
Convertible Securities) shall be less than the Exercise Price in effect
immediately prior to the time of such issue or sale, then the total maximum
number of shares of Common Stock issuable upon conversion or exchange of all
such Convertible Securities shall be deemed to have been issued for such price
per share as of the date of the issue or sale of such Convertible Securities and
thereafter shall be deemed to be outstanding for purposes of adjusting the
Exercise Price, provided that (a) except as otherwise provided in subsection
9(d)(ii)(3), no adjustment of the Exercise Price shall be made upon the actual
issuance of such Common Stock upon conversion or exchange of such Convertible
Securities and (b) no further adjustment of the Exercise Price shall be made by
reason of the issue or sale of Convertible Securities upon exercise of any
Options to purchase any such Convertible Securities for which adjustments of the
Exercise Price have been made pursuant to the other provisions of subsection
9(d).
(3) Change in Option Price or Conversion Rate. Upon the happening
of any of the following events, namely, if the purchase price provided for in
any Option referred to in subsection 9(d)(ii)(l) hereof, the additional
consideration, if any, payable upon the conversion or exchange of any
Convertible Securities referred to in subsections 9(d)(ii)(l) or 9(d)(ii)(2), or
the rate at which Convertible Securities referred to in subsections 9(d)(ii)(l)
or 9(d)(ii)(2) are convertible into or exchangeable for Common Stock shall
change at any time (including, but not limited to, changes under or by reason of
provisions designed to protect against dilution), the Exercise Price in effect
at the time of such event shall forthwith be readjusted to the Exercise Price
which would have been in effect at such time had such Options or Convertible
Securities still outstanding provided for such changed purchase price,
additional consideration or conversion rate, as the case may be, at the time
initially granted, issued or sold. On the termination of any Option for which
any adjustment was made pursuant to this subsection 9(e) or any right to convert
or exchange Convertible Securities for which any adjustment was made pursuant to
this subsection 9(d) (including, without limitation, upon the redemption or
purchase for consideration of such Convertible Securities by the Company), the
Exercise Price then in effect hereunder shall forthwith be changed to the
Exercise Price which would have been in effect at the time of such termination
had such Option or Convertible Securities, to the extent outstanding immediately
prior to such termination, never been issued.
(4) Stock Dividends. Subject to the provisions of this Section
9(d), in case the Company shall declare a dividend or make any other
distribution upon any stock of the Company (other than the Common Stock) payable
in Common Stock, Options or Convertible Securities, then any Common Stock,
7
Options or Convertible Securities, as the case may be, issuable in payment of
such dividend or distribution shall be deemed to have been issued or sold
without consideration.
(5) Consideration for Stock. In case any shares of Common Stock,
Options or Convertible Securities shall be issued or sold for cash, the
consideration received therefor shall be deemed to be the gross amount received
by the Company therefor. In case any shares of Common Stock, Options or
Convertible Securities shall be issued or sold for a consideration other than
cash, the amount of the consideration other than cash received by the Company
shall be deemed to be the fair value of such consideration as determined in good
faith by the Board of Directors of the Company. In case any Options shall be
issued in connection with the issue and sale of other securities of the Company,
together comprising one integral transaction in which no specific consideration
is allocated to such Options by the parties thereto, such Options shall be
deemed to have been issued for such consideration as determined in good faith by
the Board of Directors of the Company. If Common Stock, Options or Convertible
Securities shall be issued or sold by the Company and, in connection therewith,
other Options or Convertible Securities (the "Additional Rights") are issued,
then the consideration received or deemed to be received by the Company shall be
reduced by the fair market value of the Additional Rights (as determined using
the Black-Scholes option pricing model or another method mutually agreed to by
the Company and the Holder). The Board of Directors of the Company shall respond
promptly, in writing, to an inquiry by the Holder as to the fair market value of
the Additional Rights. In the event that the Board of Directors of the Company
and the Holder are unable to agree upon the fair market value of the Additional
Rights, the Company and the Holder shall jointly select an appraiser who is
experienced in such matters. The decision of such appraiser shall be final and
conclusive, and the cost of such appraiser shall be borne evenly by the Company
and the Holder.
(6) Record Date. In case the Company shall take a record of the
holders of its Common Stock for the purpose of entitling them (i) to receive a
dividend or other distribution payable in Common Stock, Options or Convertible
Securities or (ii) to subscribe for or purchase Common Stock, Options or
Convertible Securities, then such record date shall be deemed to be the date of
the issue or sale of the shares of Common Stock deemed to have been issued or
sold upon the declaration of such dividend or the making of such other
distribution or the date of the granting of such right of subscription or
purchase, as the case may be.
(7) Treasury Shares. The number of shares of Common Stock
outstanding at any given time shall not include shares owned or held by or for
the account of the Company or any of its wholly-owned subsidiaries, and the
disposition of any such shares (other than the cancellation or retirement
thereof) shall be considered an issue or sale of Common Stock for the purpose of
this subsection (d).
(iii) Upon any adjustment to the Exercise Price pursuant to Section
9(d) above, the number of Warrant Shares purchasable hereunder shall be adjusted
by multiplying such number by a fraction, the numerator of which shall be the
Exercise Price in effect immediately prior to such adjustment and the
denominator of which shall be the Exercise Price in effect immediately
thereafter.
(e) Number of Warrant Shares. Simultaneously with any adjustment to the
Exercise Price pursuant to this Section 9, the number of Warrant Shares that may
be purchased upon exercise of this Warrant shall be increased or decreased
proportionately, so that after such adjustment the aggregate Exercise Price
8
payable hereunder for the increased or decreased number of Warrant Shares shall
be the same as the aggregate Exercise Price in effect immediately prior to such
adjustment.
(f) Calculations. All calculations under this Section 9 shall be made to
the nearest cent or the nearest 1/100th of a share, as applicable. The number of
shares of Common Stock outstanding at any given time shall not include shares
owned or held by or for the account of the Company, and the sale or issuance of
any such shares shall be considered an issue or sale of Common Stock.
(g) Notice of Adjustments. Upon the occurrence of each adjustment pursuant
to this Section 9, the Company at its expense will, at the written request of
the Holder, promptly compute such adjustment, in good faith, in accordance with
the terms of this Warrant and prepare a certificate setting forth such
adjustment, including a statement of the adjusted Exercise Price and adjusted
number or type of Warrant Shares or other securities issuable upon exercise of
this Warrant (as applicable), describing the transactions giving rise to such
adjustments and showing in detail the facts upon which such adjustment is based.
Upon written request, the Company will promptly deliver a copy of each such
certificate to the Holder and to the Company's transfer agent.
10. Payment of Exercise Price. The Holder shall pay the Exercise Price in
immediately available funds; provided, however, that, notwithstanding anything
contained herein to the contrary, if at any time after the twelve (12) month
anniversary of the Original Issuance Date a registration statement covering the
issuance of the Warrant Shares that are subject to the exercise by the Holder
pursuant to the Securities Act is not available for the issuance of such Warrant
Shares, the Holder may, in its sole discretion, satisfy its obligation to pay
the Exercise Price through a "cashless exercise", in which event the Company
shall issue to the Holder the number of Warrant Shares determined as follows:
X = Y [(A-B)/A]
where:
X = the number of Warrant Shares to be issued to the Holder.
Y = the total number of Warrant Shares with respect to which
this Warrant is being exercised.
A = the average of the Closing Sale Prices of the shares of
Common Stock (as reported by Bloomberg Financial Markets)
for the five Trading Days ending on the date immediately
preceding the Exercise Date.
B = the Exercise Price then in effect for the applicable
Warrant Shares at the time of such exercise.
For purposes of this Warrant, "Closing Sale Price" means, for any security as of
any date, the last trade price for such security on the principal securities
exchange or trading market for such security, as reported by Bloomberg Financial
Markets, or, if such exchange or trading market begins to operate on an extended
hours basis and does not designate the last trade price, then the last trade
price of such security prior to 4:00 P.M., New York City time, as reported by
Bloomberg Financial Markets, or if the foregoing do not apply, the last trade
9
price of such security in the over-the-counter market on the electronic bulletin
board for such security as reported by Bloomberg Financial Markets, or, if no
last trade price is reported for such security by Bloomberg Financial Markets,
the average of the bid prices, or the ask prices, respectively, of any market
makers for such security as reported in the "pink sheets" by Pink Sheets LLC. If
the Closing Sale Price cannot be calculated for a security on a particular date
on any of the foregoing bases, the Closing Sale Price of such security on such
date shall be the fair market value as determined in good faith by the Company.
If the Holder disputes the fair market value of such security by written notice
to the Company and the Company and the Holder are unable to agree upon the fair
market value of such securities, then the Company shall, within two business
days submit via facsimile (a) the disputed determination of the Exercise Price
to an independent, reputable investment bank selected by the Company and
approved by the Holder or (b) the disputed arithmetic calculation of the Warrant
Shares to the Company's independent, outside accountant. The Company shall cause
the investment bank or the accountant, as the case may be, to perform the
determinations or calculations and notify the Company and the Holder of the
results no later than ten business days from the time it receives the disputed
determinations or calculations. Such investment bank's or accountant's
determination or calculation, as the case may be, shall be binding upon all
parties absent demonstrable error. All such determinations shall be
appropriately adjusted for any stock dividend, stock split, stock combination or
other similar transaction during the applicable calculation period. The party
whose determination of fair market value is further from the fair market value,
as determined by the investment bank or the accountant, shall pay the fees of
such investment bank or accountant.
For purposes of Rule 144 promulgated under the Securities Act, it is intended,
understood and acknowledged that the Warrant Shares issued in a cashless
exercise transaction shall be deemed to have been acquired by the Holder, and
the holding period for the Warrant Shares shall be deemed to have commenced, on
the date this Warrant was originally issued pursuant to the Purchase Agreement
(provided that the Commission continues to take the position that such treatment
is proper at the time of such exercise).
11. No Fractional Shares. No fractional Warrant Shares will be issued in
connection with any exercise of this Warrant. In lieu of any fractional shares
which would otherwise be issuable, the number of shares of Warrant Shares to be
issued shall be rounded up to the nearest whole number.
12. Notices. Any and all notices or other communications or deliveries
hereunder (including, without limitation, any Exercise Notice) shall be in
writing and shall be deemed given and effective on the earliest of (i) the date
of transmission, if such notice or communication is delivered via facsimile or
e-mail at the facsimile number or e-mail address specified in the Purchase
Agreement prior to 5:00 p.m. (New York City time) on a Trading Day, (ii) the
next Trading Day after the date of transmission, if such notice or communication
is delivered via facsimile at the facsimile number specified in the Purchase
Agreement on a day that is not a Trading Day or later than 5:00 p.m. (New York
City time) on any Trading Day, (iii) the Trading Day following the date of
mailing, if sent by nationally recognized overnight courier service specifying
next Trading Day delivery, or (iv) upon actual receipt by the party to whom such
notice is required to be given, if by hand delivery. The address and facsimile
number of a party for such notices or communications shall be as set forth below
unless changed by such party by two (2) Trading Days' prior notice to the other
party in accordance with this Section 12:
10
If to the Company: International Fight League, Inc.
424 West 33rd Street, Suite 650
New York, New York 10001
Telephone No.: (212) 356-4000
Facsimile No.: (212) 564-6546
Attention: Michael Keefe
With a copy to: Lowenstein Sandler PC
1251 Avenue of the Americas
New York, New York 10020
Telephone No.: (212) 262-6700
Facsimile No.: (973) 597-2507
Attention: Steven E. Siesser, Esq.
If to the original Holder: To the address of such Holder as it
appears in the stock transfer books of
the Company or such other address as
may be designated in writing hereafter,
in the same manner, by such Person.
13. Warrant Agent. The Company shall serve as warrant agent under this Warrant.
Upon thirty (30) days' notice to the Holder, the Company may appoint a new
warrant agent. Any corporation into which the Company or any new warrant agent
may be merged or any corporation resulting from any consolidation to which the
Company or any new warrant agent shall be a party or any corporation to which
the Company or any new warrant agent transfers substantially all of its
corporate trust or shareholders services business shall be a successor warrant
agent under this Warrant without any further act. Any such successor warrant
agent shall promptly cause notice of its succession as warrant agent to be
mailed (by first class mail, postage prepaid) to the Holder at the Holder's last
address as shown on the Warrant Register.
14. Limitations on Exercise. The Company shall not effect the exercise of
this Warrant, and the Holder shall not have the right to exercise this Warrant,
to the extent that after giving effect to such exercise, such Person (together
with such Person's affiliates) would beneficially own in excess of 4.99% (the
"Maximum Percentage") of the shares of Common Stock outstanding immediately
after giving effect to such exercise. For purposes of the foregoing sentence,
the aggregate number of shares of Common Stock beneficially owned by such Person
and its affiliates shall include the number of shares of Common Stock issuable
upon exercise of this Warrant with respect to which the determination of such
sentence is being made, but shall exclude shares of Common Stock which would be
issuable upon (i) exercise of the remaining, unexercised portion of this Warrant
beneficially owned by such Person and its affiliates and (ii) exercise or
conversion of the unexercised or unconverted portion of any other securities of
the Company beneficially owned by such Person and its affiliates (including,
without limitation, any convertible notes or convertible preferred stock or
warrants) subject to a limitation on conversion or exercise analogous to the
limitation contained herein. Except as set forth in the preceding sentence, for
purposes of this paragraph, beneficial ownership shall be calculated in
accordance with Section 13(d) of the Securities Exchange Act of 1934, as
amended. For purposes of this Warrant, in determining the number of outstanding
shares of Common Stock, the Holder may rely on the number of outstanding shares
of Common Stock as reflected in (1) the Company's most recent Form 10-K, Form
10-KSB, Form 10-Q, Form 10-QSB, Current Report on Form 8-K or other public
filing with the Securities and Exchange Commission, as the case may be, (2) a
more recent public announcement by the Company or (3) any other notice by the
11
Company or the Transfer Agent setting forth the number of shares of Common Stock
outstanding. For any reason at any time, upon the written or oral request of the
Holder, the Company shall within one Business Day confirm orally and in writing
to the Holder the number of shares of Common Stock then outstanding. In any
case, the number of outstanding shares of Common Stock shall be determined after
giving effect to the conversion or exercise of securities of the Company,
including the warrants issued pursuant to the Purchase Agreement, by the Holder
and its affiliates since the date as of which such number of outstanding shares
of Common Stock was reported. By written notice to the Company, the Holder may
from time to time increase or decrease the Maximum Percentage to any other
percentage not in excess of 9.99% specified in such notice; provided that (I)
any such increase will not be effective until the sixty-first (61st) day after
such notice is delivered to the Company, and (II) any such increase or decrease
will apply only to the Holder and not to any other holder of warrants issued
pursuant to the Purchase Agreement.
15. Miscellaneous.
(a) The Holder, solely in such Person's capacity as a holder of this
Warrant, shall not be entitled to vote or receive dividends or be deemed the
holder of share capital of the Company for any purpose, nor shall anything
contained in this Warrant be construed to confer upon the Holder, solely in such
Person's capacity as the Holder of this Warrant, any of the rights of a
stockholder of the Company or any right to vote, give or withhold consent to any
corporate action (whether any reorganization, issue of stock, reclassification
of stock, consolidation, merger, amalgamation, conveyance or otherwise), receive
notice of meetings, receive dividends or subscription rights, or otherwise,
prior to the issuance to the Holder of the Warrant Shares which such Person is
then entitled to receive upon the due exercise of this Warrant. In addition,
nothing contained in this Warrant shall be construed as imposing any liabilities
on the Holder to purchase any securities (upon exercise of this Warrant or
otherwise) or as a stockholder of the Company, whether such liabilities are
asserted by the Company or by creditors of the Company.
(b) Subject to compliance with applicable securities laws, this Warrant
shall not be assigned by the Holder, unless the Holder shall, together with such
assignment, provide written notice thereof to the Company, in the form of
Schedule 1 annexed hereto and made a part hereof. This Warrant shall not be
assigned by the Company except to a successor in the event of a Fundamental
Transaction.
(c) This Warrant shall be binding on and inure to the benefit of the
parties hereto and their respective permitted successors and assigns. Subject to
the preceding sentence, nothing in this Warrant shall be construed to give to
any Person other than the Company and the Holder any legal or equitable right,
remedy or cause of action under this Warrant. This Warrant shall be amended only
in writing signed by the Company and the Holder, or their permitted successors
and assigns.
(d) GOVERNING LAW; VENUE; WAIVER OF JURY TRIAL. ALL QUESTIONS CONCERNING
THE CONSTRUCTION, VALIDITY, ENFORCEMENT AND INTERPRETATION OF THIS WARRANT SHALL
BE GOVERNED BY AND CONSTRUED AND ENFORCED EXCLUSIVELY IN ACCORDANCE WITH THE
LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO THE PRINCIPLES OF CONFLICTS OF
LAW THEREOF (OTHER THAN SECTIONS 5-1401 AND 5-1402 OF THE NEW YORK GENERAL
OBLIGATIONS LAW). EACH PARTY HEREBY IRREVOCABLY SUBMITS TO THE EXCLUSIVE
JURISDICTION OF THE STATE AND FEDERAL COURTS SITTING IN THE CITY OF NEW YORK,
BOROUGH OF MANHATTAN, FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN
CONNECTION HEREWITH OR WITH ANY TRANSACTION CONTEMPLATED HEREBY OR DISCUSSED
HEREIN (INCLUDING WITH RESPECT TO THE ENFORCEMENT OF ANY OF THE TRANSACTION
DOCUMENTS), AND HEREBY IRREVOCABLY WAIVES, AND AGREES NOT TO ASSERT IN ANY SUIT,
12
ACTION OR PROCEEDING, ANY CLAIM THAT IT IS NOT PERSONALLY SUBJECT TO THE
JURISDICTION OF ANY SUCH COURT, THAT SUCH SUIT, ACTION OR PROCEEDING IS
IMPROPER. EACH PARTY HEREBY IRREVOCABLY WAIVES PERSONAL SERVICE OF PROCESS AND
CONSENTS TO PROCESS BEING SERVED IN ANY SUCH SUIT, ACTION OR PROCEEDING BY
MAILING A COPY THEREOF VIA REGISTERED OR CERTIFIED MAIL OR OVERNIGHT DELIVERY
(WITH EVIDENCE OF DELIVERY) TO SUCH PARTY AT THE ADDRESS IN EFFECT FOR NOTICES
TO IT UNDER THIS AGREEMENT AND AGREES THAT SUCH SERVICE SHALL CONSTITUTE GOOD
AND SUFFICIENT SERVICE OF PROCESS AND NOTICE THEREOF. NOTHING CONTAINED HEREIN
SHALL BE DEEMED TO LIMIT IN ANY WAY ANY RIGHT TO SERVE PROCESS IN ANY MANNER
PERMITTED BY LAW. THE COMPANY HEREBY WAIVES ALL RIGHTS TO A TRIAL BY JURY.
(e) The headings herein are for convenience only, do not constitute a part
of this Warrant and shall not be deemed to limit or affect any of the provisions
hereof.
(f) In case any one or more of the provisions of this Warrant shall be
invalid or unenforceable in any respect, the validity and enforceability of the
remaining terms and provisions of this Warrant shall not in any way be affected
or impaired thereby, and the parties will attempt in good faith to agree upon a
valid and enforceable provision which shall be a commercially reasonable
substitute therefor, and upon so agreeing, shall incorporate such substitute
provision in this Warrant.
(g) Prior to exercise of this Warrant, the Holder hereof shall not,
by reason of by being a Holder, be entitled to any rights of a stockholder with
respect to the Warrant Shares.
16. Registration Rights. This Warrant has been issued in connection with the
transactions contemplated by (a) the Purchase Agreement, and (b) that certain
Registration Rights Agreement of even date therewith. The Holder of this Warrant
is entitled to have the Warrant Shares included as Registrable Securities and
registered for resale under the Securities Act, subject to and in accordance
with the Registration Rights Agreement.
17. Definitions.
"Affiliate" of any specified Person means any other person or entity
directly or indirectly controlling, controlled by or under direct or indirect
common control with such specified Person. For purposes of this definition,
"control" means the power to direct the management and policies of such Person
or firm, directly or indirectly, whether through the ownership of voting
securities, by contract or otherwise.
"Eligible Market" means whichever of the New York Stock Exchange, the
American Stock Exchange, the NASDAQ Global Select Market, the NASDAQ Global
Market, the NASDAQ Capital Market, or the OTC Bulletin Board on which the Common
Stock is listed or quoted for trading on the date in question.
"Person" means any court or other federal, state, local or other
governmental authority or other 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.
13
"Trading Day" shall mean any day on which the Common Stock is listed
or quoted on any Eligible Market.
[Signature Page Follows.]
14
IN WITNESS WHEREOF, each of the undersigned has caused this Warrant to
be duly executed by its authorized officer as of the date first indicated above.
INTERNATIONAL FIGHT LEAGUE, INC.
By: _______________________________
Name: Gareb Shamus
Title: Chief Executive Officer