SECURITIES PURCHASE AGREEMENT
Exhibit 4.1
Execution Copy
THIS SECURITIES PURCHASE AGREEMENT (this “Agreement”), dated as of March 9, 2010, by and
between Liberator Medical Holdings, Inc., a Nevada corporation with headquarters located at 0000 XX
Xxxx Xxxx Xxx, Xxxxxx, Xxxxxxx 00000 (the “Company”), and Kinderhook Partners, L.P. (the
“Investor”).
BACKGROUND
A. The Company and the Investor are executing and delivering this Agreement in reliance upon
the exemption from 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 (the “SEC”) under the Securities Act.
B. The Investor wishes to purchase, and the Company wishes to sell, upon the terms and
conditions stated in this Agreement, 4,666,667 shares of the common stock, par value $.001 per
share, of the Company (the “Common Stock”, which shall be collectively be referred to herein as the
“Shares”), at the purchase price of $1.50 per share.
C. The Shares issued or issuable pursuant to this Agreement are collectively are referred to
herein as the “Securities.”
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 Investor agree as follows:
ARTICLE I
DEFINITIONS
DEFINITIONS
1.0 Definitions. In addition to the terms defined elsewhere in this Agreement, the
following terms have the meanings indicated:
“Affiliate” means any Person that, directly or indirectly through one or more intermediaries,
controls or is controlled by or is under common control with a Person, as such terms are used in
and construed under Rule 144 under the Securities Act.
“Agent” has the meaning set forth in Section 3.1(l).
“Agreement” has the meaning set forth in the Preamble.
“Best Efforts” means the efforts that a prudent person desirous of achieving a result would
use in similar circumstances to ensure that such result is achieved as expeditiously as practical;
provided, however, that an obligation to use Best Efforts under this Agreement does not require the
Company to dispose of or make any change to its business, expend any material funds or incur
any other material burden.
“Business Day” means any day other than Saturday, Sunday, any day which shall be a federal
legal holiday in the United States or any day on which banking institutions in The State of New
York are authorized or required by law or other governmental action to close.
“Closing” means the closing of the purchase and sale of the Securities pursuant to Section
2.1.
“Closing Date” means the date and time of the Closing and shall be on such date and time as is
mutually agreed to by the Company and the Investor.
“Company” has the meaning set forth in the Preamble.
“Company Counsel” means Siegel, Lipman, Xxxxx, Xxxxxxx & Xxxxxx, LLP, counsel to the Company.
“Common Stock” has the meaning set forth in the Preamble.
“Contingent Obligation” has the meaning set forth in Section 3.1(z).
“Convertible Securities” means any stock or securities (other than Options) convertible into
or exercisable or exchangeable for Common Stock.
“Disclosure Materials” has the meaning set forth in Section 3.1(g).
“Effective Date” means the date that the Registration Statement is first declared effective by
the SEC.
“Effectiveness Period” has the meaning set forth in Section 6.1(b).
“8-K Filing” has the meaning set forth in Section 4.5.
“Eligible Market” means any of the New York Stock Exchange, the American Stock Exchange, the
NASDAQ Global Select Market, the NASDAQ Global Market, the NASDAQ Capital Market or OTC Bulletin
Board.
“Environmental Laws” has the meaning set forth in Section 3.1(cc).
“Event Payments” has the meaning set forth in Section 6.1(d).
“Exchange Act” means the Securities Exchange Act of 1934, as amended.
“Excluded Events” has the meaning set forth in Section 6.1(d)(ii).
“GAAP” has the meaning set forth in Section 3.1(g).
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“Hazardous Materials” has the meaning set forth in Section 3.1(cc).
“Indebtedness” has the meaning set forth in Section 3.1(z).
“Indemnification Agreement” means the Indemnification Agreement between the Company and
the Kinderhook Director, which shall be promptly entered into upon appointment of the
Kinderhook Director, pursuant to which the Company shall agree to indemnify the Kinderhook
Director, as a director of the board of directors of the Company, to the fullest extent
permitted by law, and as more fully set forth in such Indemnification Agreement.
“Indemnified Party” has the meaning set forth in Section 6.4(c).
“Indemnifying Party” has the meaning set forth in Section 6.4(c).
“Insolvent” has the meaning set forth in Section 3.1(h).
“Intellectual Property Rights” has the meaning set forth in Section 3.1(s).
“Investor” has the meaning set forth in the Preamble.
“Lien” means any lien, charge, claim, security interest, encumbrance, right of first refusal
or other restriction.
“Losses” means any and all losses, claims, damages, liabilities, settlement costs and
expenses, including, without limitation, reasonable attorneys’ fees.
“Material Adverse Effect” means (i) a material adverse effect on the results of operations,
assets, business, prospects or financial condition of the Company and the Subsidiaries taken as a
whole on a consolidated basis or (ii) material and adverse impairment of the Company’s ability to
perform its obligations under any of the Transaction Documents, provided, that none of the
following alone shall be deemed, in and of itself, to constitute a Material Adverse Effect: (i) a
change in the market price or trading volume of the Common Stock or (ii) changes in general
economic conditions or changes affecting the industry in which the Company operates generally (as
opposed to Company-specific changes) so long as such changes do not have a disproportionate effect
on the Company and its Subsidiaries taken as a whole.
“Material Permits” has the meaning set forth in Section 3.1(u).
“Options” means any outstanding rights, warrants or options to subscribe for or purchase
Common Stock or Convertible Securities.
“Person” has the meaning set forth in Section 3.1(z).
“Proceeding” means an action, claim, suit, investigation or proceeding (including, without
limitation, a partial proceeding, such as a deposition), whether commenced or threatened in
writing.
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“Prospectus” means the prospectus included in the Registration Statement (including, without
limitation, a prospectus that includes any information previously omitted from a prospectus filed
as part of an effective registration statement in reliance upon Rule 430A promulgated under the
Securities Act), as amended or supplemented by any prospectus supplement, with respect to the terms
of the offering of any portion of the Registrable Securities covered by the Registration Statement,
and all other amendments and supplements to the Prospectus including post-effective amendments, and
all material incorporated by reference or deemed to be incorporated by reference in such
Prospectus.
“Registrable Securities” means the Shares issued or issuable pursuant to this Agreement,
together with any securities issued or issuable upon any stock split, dividend or other
distribution, recapitalization or similar event with respect to the foregoing.
“Registration Statement” means each registration statement required to be filed under Article
VI, including (in each case) the Prospectus, amendments and supplements to such registration
statement or Prospectus, including pre- and post-effective amendments, all exhibits thereto, and
all material incorporated by reference or deemed to be incorporated by reference in such
registration statement.
“Regulation D” has the meaning set forth in the Preamble.
“Required Effectiveness Date” means (i) if the Registration Statement does not become subject
to review by the SEC, the date which is the earliest of (a) ninety (90) days immediately following
receipt of the Demand Registration Notice (as defined in Section 6.1(a)) by the Company
Date or (b) five (5) Trading Days after the Company receives notification from the SEC that the
Registration Statement will not become subject to review, or (ii) if the Registration Statement
becomes subject to review by the SEC, the date which is the earliest of (a) one hundred and twenty
(120) days immediately following receipt of the Demand Registration Notice (as defined in
Section 6.1(a)) by the Company or (b) five (5) Trading Days after the Company receives
notification from the SEC that the SEC has no further comment to the Registration Statement.
“Rule 144,” “Rule 415,” and “Rule 424” means Rule 144, Rule 415 and Rule 424, respectively,
promulgated by the SEC pursuant to the Securities Act, as such Rules may be amended from time to
time, or any similar rule or regulation hereafter adopted by the SEC having substantially the same
effect as such Rule.
“SEC” has the meaning set forth in the Preamble.
“SEC Reports” has the meaning set forth in Section 3.1(g).
“Securities” has the meaning set forth in the Preamble.
“Securities Act” has the meaning set forth in the Preamble.
“Shares” has the meaning set forth in the Preamble.
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“Stockholders Agreement” means the Stockholders Agreement by and between the Investor and
Xxxx X. Xxxxxxxxx, the Company’s Chief Executive Officer, dated the date hereof, pursuant to
which Xx. Xxxxxxxxx will agree to vote his shares of Common Stock to provide the Investor the
right to appoint a director to the board of directors of the Company .
“Subsidiary” means any significant subsidiary of the Company, as defined in Regulation S-X,
Rule 1-02(w).
“Trading Day” means (i) a day on which the Common Stock is traded on a Trading Market (other
than the OTC Bulletin Board), or (ii) if the Common Stock is not listed or quoted on a Trading
Market (other than the OTC Bulletin Board), a day on which the Common Stock is traded in the
over-the-counter market, as reported by the OTC Bulletin Board, or (iii) if the Common Stock is not
listed or quoted on any Trading Market, a day on which the Common Stock is quoted in the
over-the-counter market as reported by the Pink Sheets LLC (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 OTC
Bulletin Board on which the Common Stock is listed or quoted for trading on the date in question.
“Transaction Documents” means this Agreement, the schedules and exhibits attached hereto, the
Stockholders Agreement and the Transfer Agent Instructions.
“Transfer Agent” means Jersey Transfer & Trust Company, Inc., or any successor transfer agent
for the Company.
“Transfer Agent Instructions” means, with respect to the Company, the Irrevocable Transfer
Agent Instructions, in the form of Exhibit E, executed by the Company and delivered to and
acknowledged in writing by the Transfer Agent.
ARTICLE II
PURCHASE AND SALE
PURCHASE AND SALE
1.0 Closing. Subject to the terms and conditions set forth in this Agreement, at the
Closing the Company shall issue and sell to the Investor, and the Investor shall purchase from the
Company, such number of Shares for the price set forth on the Investor’s signature page to this
Agreement. The date and time of the Closing and shall be 11:00 a.m., New York City Time, on the
Closing Date. The Closing shall take place at the offices of the Company’s Counsel.
2.0 Closing Deliveries.
( ) At the Closing, the Company shall deliver or cause to be delivered to the Investor the
following:
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( ) a fully-executed copy of the Company’s irrevocable instructions to the Transfer Agent
directing the Transfer Agent to deliver, on an expedited basis, one or more stock certificates,
free and clear of all restrictive and other legends (except as expressly provided in Section
4.1(b) hereof), evidencing such number of Shares set forth on the Investor’s signature page to
this Agreement, registered in the name of the Investor;
( ) a legal opinion of Company Counsel, in the form of Exhibit C, executed by such
counsel and delivered to the Investor;
(v) a certificate of the Secretary of the Company, dated as of the Closing Date, (a)
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, (b) certifying the current versions of the certificate of incorporation, as amended
and by-laws of the Company and (c) certifying as to the signatures and authority of persons signing
the Transaction Documents and related documents on behalf of the Company;
(vi) a certificate of the Chief Executive Officer or Chief Financial Officer of the Company,
dated as of the Closing Date, certifying to the fulfillment of the conditions specified in
Section 5.1(a) and (b);
(i) a fully-executed copy of the Stockholders
Agreement;
(ii) a certificate evidencing the formation and good standing of the Company and each of its
Subsidiaries in such entity’s jurisdiction of formation issued by the Secretary of State (or
comparable office) of such jurisdiction; and
(iii) a certified copy of the Certificate of Incorporation as certified by the Secretary of
State of the State of Nevada and copies of the Subsidiaries’ Charters as certified by the Secretary
of State of the State of Florida (or, in each case, a fax or pdf copy of such certificate).
( ) At the Closing, the Investor shall deliver or cause to be delivered to the Company the
purchase price set forth on the Investor’s signature page to this Agreement in United States
dollars and in immediately available funds, by wire transfer to the following account for such
purpose: Wachovia Bank, N.A., Jacksonville, FL, ABA: 000000000, For Credit to: Liberator Medical
Holdings, Inc., Account No.: 2000036081347.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
REPRESENTATIONS AND WARRANTIES
1.0 Representations and Warranties of the Company. The Company hereby represents and
warrants to the Investor as follows (which representations and warranties shall be deemed to apply,
where appropriate, to each Subsidiary of the Company):
( ) Subsidiaries. The Company owns or controls, directly or indirectly, all of the
capital stock or comparable equity interests of each Subsidiary free and clear of any Lien, and
all 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;
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and the Company owns or controls, directly or indirectly, only the following corporations,
partnerships, limited liability partnerships, limited liability companies, associations or other
entities: (i) Liberator Medical Supply, Inc., a Florida corporation, (ii) Liberator Health and
Education Services, Inc., a Florida corporation, and (iii) Liberator Health and Wellness, Inc.,
a Florida corporation (each, a “Subsidiary”).
( ) Organization and Qualification. The Company and each Subsidiary is an entity
duly organized, validly existing and in good standing under the laws of the jurisdiction of its
incorporation, with the requisite legal authority to own and use its properties and assets and
to carry on its business as currently conducted. Neither the Company nor any Subsidiary is not
in violation of any of the provisions of its respective certificate or articles of
incorporation, bylaws or other organizational or charter documents. The Company and each
Subsidiary is duly qualified to do business and is in good standing as a foreign corporation or
other entity in each jurisdiction in which the nature of the business conducted or property
owned by it makes such qualification necessary, except where the failure to be so qualified or
in good standing, as the case may be, would not, individually or in the aggregate, have or
reasonably be expected to result in a Material Adverse Effect.
( ) Authorization; Enforcement. The Company has the requisite corporate 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 have been duly authorized by all necessary corporate action on the part of the Company
and no further consent or action is required by the Company, its Board of Directors or its
stockholders. Each of the Transaction Documents to which it is a party has been (or upon
delivery will be) 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 (i) as limited by general equitable
principles and applicable bankruptcy, insolvency, reorganization, moratorium and other laws of
general application affecting enforcement of creditors’ rights generally, (ii) as limited by
laws relating to the availability of specific performance, injunctive relief or other equitable
remedies and (iii) insofar as indemnification and contribution provisions may be limited by
applicable law.
( ) 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 and thereby do not, and will not, (i) conflict with or violate
any provision of the Company’s or any Subsidiary’s certificate or articles of incorporation,
bylaws or other organizational or charter documents, (ii) except as disclosed in Schedule
3.1(d),conflict with, or constitute a default (or an event that with notice or lapse of time
or both would become a default) under, or give to others any rights of termination, amendment,
acceleration or cancellation (with or without notice, lapse of time or both) of, any agreement,
credit facility, debt or other instrument (evidencing a Company or Subsidiary debt or otherwise)
or other understanding to which the Company or any Subsidiary is a party or by which any
property or asset of the Company or any Subsidiary is bound, or affected, except to the extent
that such conflict, default, termination, amendment, acceleration or cancellation right would
not
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reasonably be expected to have a Material Adverse Effect, or (iii) result in a violation of
any law, rule, regulation, order, judgment, injunction, decree or other restriction of any court
or governmental authority to which the Company or any Subsidiary is subject (including, assuming
the accuracy of the representations and warranties of the Investor set forth in Section
3.2 hereof, federal and state securities laws and regulations and the rules and regulations
of any self-regulatory organization to which the Company or its securities are subject,
including all applicable Trading Markets), or by which any property or asset of the Company or
any Subsidiary are is bound or affected, except to the extent that such violation would not
reasonably be expected to have a Material Adverse Effect.
( ) The Securities. The Securities are duly authorized and, when issued and paid
for in accordance with the applicable Transaction Documents, will be duly and validly issued,
fully paid and nonassessable, free and clear of all Liens and will not be subject to preemptive
or similar rights of stockholders (other than those imposed by the Investor).
( ) Capitalization. The aggregate number of shares and type of all authorized,
issued and outstanding classes of capital stock, options and other securities of the Company
(whether or not presently convertible into or exercisable or exchangeable for shares of capital
stock of the Company) is set forth in Schedule 3.1(f) hereto. All outstanding shares of
capital stock are duly authorized, validly issued, fully paid and nonassessable and have been
issued in compliance in all material respects with all applicable securities laws. Except as
disclosed in Schedule 3.1(f) hereto, the Company did not have outstanding at January 30,
2010 any other Options, script rights to subscribe to, calls or commitments of any character
whatsoever relating to, or securities, rights or obligations convertible into or exercisable or
exchangeable for, or entered into any agreement giving any Person any right to subscribe for or
acquire, any shares of Common Stock, or securities or rights convertible or exchangeable into shares of Common Stock. Except as set forth on Schedule 3.1(f) hereto, and except for
customary adjustments as a result of stock dividends, stock splits, combinations of shares,
reorganizations, recapitalizations, reclassifications or other similar events, 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 obligate the Company to issue shares of Common Stock or other securities to
any Person (other than the Investor) and will not result in a right of any holder of securities
to adjust the exercise, conversion, exchange or reset price under such securities. To the
knowledge of the Company, except as disclosed in the SEC Reports and any Schedules 13D or 13G
filed with the SEC pursuant to Rule 13d-1 of the Exchange Act by reporting persons or in
Schedule 3.1(f) hereto, no Person or group of related Persons beneficially owns (as
determined pursuant to Rule 13d-3 under the Exchange Act), or has the right to acquire, by
agreement with or by obligation binding upon the Company, beneficial ownership of in excess of
5% of the outstanding Common Stock.
( ) SEC Reports; Financial Statements. Except as set forth on Schedule
3.1(g), the Company has filed all reports required to be filed by it under the Exchange Act,
including pursuant to Section 13(a) or 15(d) thereof, for the 12 months
preceding the date hereof 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 and has
filed all reports required to be filed by it under the Exchange Act, including pursuant to
Section 13(a) or 15(d) thereof, for the two
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years preceding the date hereof. Such reports required to be filed by the Company under
the Exchange Act, including pursuant to Section 13(a) or 15(d) thereof, together with any
materials filed or furnished by the Company under the Exchange Act, whether or not any such
reports were required being collectively referred to herein as the “SEC Reports” and, together
with this Agreement and the Schedules to this Agreement, the “Disclosure Materials”. As of
their respective dates (or, if amended or superseded by a filing prior to the Closing Date, then
on the date of such filing), the SEC Reports filed by the Company complied in all material
respects with the requirements of the Securities Act and the Exchange Act and the rules and
regulations of the SEC promulgated thereunder, and none of the SEC Reports, when filed (or, if
amended or superseded by a filing prior to the Closing Date, then on the date of such filing) by
the Company, 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 the
light of the circumstances under which they were made, not misleading. The financial statements
of the Company included in the SEC Reports comply in all material respects with applicable
accounting requirements and the rules and regulations of the SEC with respect thereto as in
effect at the time of filing (or, if amended or superseded by a filing prior to the Closing
Date, then on the date of such filing). Such financial statements have been prepared in
accordance with United States generally accepted accounting principles applied on a consistent
basis during the periods involved (“GAAP”), except as may be otherwise specified in such
financial statements, the notes thereto and except that unaudited financial statements may not
contain all footnotes required by GAAP or may be condensed or summary statements, and fairly
present in all material respects the consolidated financial position of the Company and its
consolidated subsidiaries as of and for the dates thereof and the results of operations and cash
flows for the periods then ended, subject, in the case of unaudited statements, to normal,
year-end audit adjustments. 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 identified in the SEC Reports, to the extent such agreements are required
to be included or identified pursuant to the rules and regulations of the SEC.
( ) Material Changes; Undisclosed Events, Liabilities or Developments; Solvency.
Since the date of the latest audited financial statements included within the SEC Reports,
except as disclosed in the SEC Reports or in Schedule 3.1(h) hereto, (i) there has been
no event, occurrence or development that, individually or in the aggregate, has had or that
would result in a Material Adverse Effect, (ii) the Company has not incurred any material
liabilities other than (A) trade payables and accrued expenses incurred in the ordinary course
of business consistent with past practice and (B) liabilities not required to be reflected in
the Company’s financial statements pursuant to GAAP or required to be disclosed in filings made
with the SEC, (iii) the Company has not altered its method of accounting or changed its
auditors, except as disclosed in its SEC Reports, (iv) the Company has not declared or made any
dividend or distribution of cash or other property to its stockholders, in their capacities as
such, or purchased, redeemed or made any agreements to purchase or redeem any shares of its
capital stock, and (v) the Company has not issued any equity securities to any officer, director
or Affiliate, except pursuant to existing Company stock-based plans. The Company has not taken
any steps to seek protection pursuant to any bankruptcy law nor does the Company have any
knowledge or reason to believe that its creditors intend to initiate involuntary bankruptcy
proceedings or any actual knowledge of any fact which would reasonably lead a creditor to do so.
The Company is not as
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of the date hereof, and after giving effect to the transactions contemplated hereby to
occur at the applicable Closing, will not be Insolvent (as defined below). For purposes of this
Section 3.1(h), “Insolvent” means (i) the present fair saleable value of the Company’s assets is
less than the amount required to pay the Company’s total Indebtedness (as defined in Section
3.1(aa)), (ii) the Company is unable to pay its debts and liabilities, subordinated, contingent
or otherwise, as such debts and liabilities become absolute and matured, (iii) the Company
intends to incur or believes that it will incur debts that would be beyond its ability to pay as
such debts mature or (iv) the Company has unreasonably small capital with which to conduct the
business in which it is engaged as such business is now conducted and is proposed to be
conducted.
( ) Absence of Litigation. Except as disclosed in the SEC Reports, there is no
action, suit, claim, or Proceeding, or, to the Company’s knowledge, inquiry or investigation,
before or by any court, public board, government agency, self-regulatory organization or body
pending or, to the knowledge of the Company, threatened against or affecting the Company or any
Subsidiary that could, individually or in the aggregate, to have a Material Adverse Effect.
( ) Compliance. Except as would not, individually or in the aggregate, reasonably
be expected to have or result in a Material Adverse Effect, (i) neither the Company nor any
Subsidiary is not 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 written 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) neither
the Company nor any Subsidiary is in violation of any order of any court, arbitrator or
governmental body, or (iii) neither the Company nor any Subsidiary is in violation of any
statute, rule or regulation of any governmental authority.
( ) Title to Assets. Neither the Company nor any Subsidiary owns real property.
The Company and each Subsidiary has good and marketable title in all personal property owned by
them that is material to the business of the Company and each Subsidiary, in each case free and
clear of all Liens, except for Liens that do not, individually or in the aggregate, have or
result in a Material Adverse Effect. Any real property and facilities held under lease by the
Company or any Subsidiary is held by it under valid, subsisting and enforceable leases of which
the Company and each Subsidiary is in material compliance.
( ) No General Solicitation; Placement Agent’s Fees. Neither the Company, nor any
of its Affiliates, nor any Person acting on its or their behalf, has engaged in any form of
general solicitation or general advertising (within the meaning of Regulation D) in connection
with the offer or sale of the Securities. The Company shall be responsible for the payment of
any placement agent’s fees, financial advisory fees, or brokers’ commission (other than for
persons engaged by the Investor or its investment advisor) relating to or arising out of the
issuance of the Securities pursuant to this Agreement. The Company shall pay, and hold the
Investor harmless against, any liability, loss or expense (including, without limitation,
reasonable attorney’s fees and out-of-pocket expenses) arising in connection with any such claim
for fees arising out of the issuance of the Securities pursuant to this Agreement. The Company
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acknowledges that is has engaged Littlebanc Advisors LLC through Wilmington Capital
Securities LLC as its exclusive placement agent (the “Agent”) in connection with the sale of the
Securities. Other than the Agent, the Company has not engaged any placement agent or other
agent in connection with the sale of the Securities.
( ) Private Placement; Investment Company; U.S. Real Property Holding Corporation.
Neither the Company nor any of its Affiliates nor, any Person acting on the Company’s behalf
has, directly or indirectly, at any time within the past six months, made any offer or sale of
any security or solicitation of any offer to buy any security under circumstances that would (i)
eliminate the availability of the exemption from registration under Regulation D under the
Securities Act in connection with the offer and sale by the Company of the Securities as
contemplated hereby or (ii) cause the offering of the Securities pursuant to the Transaction
Documents to be integrated with prior offerings by the Company for purposes of any applicable
law, regulation or stockholder approval provisions, including, without limitation, under the
rules and regulations of any Trading Market. Assuming the accuracy of the representations and
warranties of the Investor set forth in Section 3.2, no registration under the
Securities Act is required for the offer and sale of the Securities by the Company to the
Investor as contemplated hereby. The sale and issuance of the Securities hereunder does not
contravene the rules and regulations of any Trading Market on which the Common Stock is listed
or quoted. The Company is not required to be registered as, and is not an Affiliate of, an
“investment company” within the meaning of the Investment Company Act of 1940, as amended. The
Company is not required to be registered as a United States real property holding corporation
within the meaning of the Foreign Investment in Real Property Tax Act of 1980.
( ) Listing and Maintenance Requirements. The Company has not, in the twelve
months preceding the date hereof, received notice (written or oral) from any Trading Market on
which the Common Stock is or has been listed or quoted to the effect that the Company is not in
compliance with the listing or maintenance requirements of such Trading Market. The Company is,
and has no reason to believe that it will not in the foreseeable future continue to be, in
compliance with all such listing and maintenance requirements.
( ) Registration Rights. Except as described in Schedule 3.1(o), the
Company has not granted or agreed to grant to any Person any rights (including “piggy-back”
registration rights) to have any securities of the Company registered with the SEC or any other
governmental authority that have not expired or been satisfied or waived.
( ) Application of Takeover Protections. The Company and its Board of Directors
have taken all necessary action, if any, 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 become applicable to the Investor as a result of the Investor
and the Company fulfilling their respective obligations or exercising their rights under the
Transaction Documents, including, without limitation, as a result of the Company’s issuance of
the Securities and the Investor’s ownership of the Securities.
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( ) Disclosure. All disclosure provided by the Company to the Investor regarding
the Company, its business and the transactions contemplated hereby, including the Schedules to
this Agreement furnished by or on behalf of the Company, including, without limitation, new and
repeat customer data, leads and % leads closed data, cost per lead closed data, advertising
spend, and capitalization table, 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 the light of the circumstances under which they
were made, not misleading. To the Company’s knowledge, except for the transactions contemplated
by this Agreement, no event or circumstance has occurred or information exists with respect to
the Company or any Subsidiary or their its businesses, properties, operations or financial
condition, 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. The
Company acknowledges and agrees that the Investor neither makes nor has made any representations
or warranties with respect to the transactions contemplated hereby other than those set forth in
this Agreement.
( ) Acknowledgment Regarding Investor’s Purchase of Securities. Based upon the
assumption that the transactions contemplated by this Agreement are consummated in all material
respects in conformity with the Transaction Documents, the Company acknowledges and agrees that
the Investor is acting solely in the capacity of an arm’s length purchaser with respect to the
Transaction Documents and the transactions contemplated hereby and thereby. The Company further
acknowledges that the Investor is not acting as a financial advisor or fiduciary of the Company
(or in any similar capacity) with respect to this Agreement and the transactions contemplated
hereby and any advice given by the Investor or its representatives or agents in connection with
the Transaction Documents and the transactions contemplated hereby and thereby is merely
incidental to the Investor’s purchase of the Securities. The Company further represents to the
Investor that the Company’s decision to enter into this Agreement has been based solely on the
independent evaluation of the transactions contemplated hereby by the Company and its advisors
and representatives.
( ) Patents and Trademarks. The Company and each Subsidiary owns, or possesses
adequate rights or licenses to use, all trademarks, trade names, service marks, service xxxx
registrations, service names, patents, patent rights, copyrights, inventions, licenses,
approvals, governmental authorizations, trade secrets and other intellectual property rights
(“Intellectual Property Rights”) necessary to conduct its business their respective businesses
as now conducted. None of the Company’s or any Subsidiary’s Intellectual Property Rights have
expired or terminated, or are expected to expire or terminate within three years from the date
of this Agreement. The Company does not have any knowledge of any infringement by the Company
or any Subsidiary of Intellectual Property Rights of others. Except as disclosed in the SEC
Reports, there is no claim, action or proceeding being made or brought, or to the knowledge of
the Company, being threatened, against the Company or any Subsidiary regarding its Intellectual
Property Rights.
( ) Insurance. The Company and each Subsidiary is insured by insurers of
recognized financial responsibility against such losses and risks and in such amounts as are
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prudent and customary in the businesses and locations in which the Company and each
Subsidiary is engaged.
( ) Regulatory Permits. The Company and each Subsidiary possesses all
certificates, authorizations and permits issued by the appropriate federal, state, local or
foreign regulatory authorities necessary to conduct their respective businesses as presently
conducted and described in the SEC Reports (“Material Permits”), except where the failure to
possess such permits does not, individually or in the aggregate, have or reasonably be expected
to result in a Material Adverse Effect, and neither the Company nor any Subsidiary has received
has not received any written notice of proceedings relating to the revocation or modification of
any Material Permit.
( ) Transactions With Affiliates and Employees. Except as set forth or
incorporated by reference in the Company’s SEC Reports, none of the officers, directors or
employees of the Company is presently a party to any transaction with the Company that would be
required to be reported on Form 10-K by Item 12 thereof pursuant to Regulation S-K Item 404(a)
(other than for ordinary course services as employees, officers or directors), including any
contract, agreement or other arrangement providing for the furnishing of services to or by,
providing for rental of real or personal property to or from, or otherwise requiring payments to
or from any such officer, director or employee or, to the Company’s knowledge, any corporation,
partnership, trust or other entity in which any such officer, director, or employee has a
substantial interest or is an officer, director, trustee or partner.
( ) Internal Accounting Controls. The Company and each Subsidiary maintains a
system of internal accounting controls sufficient to provide reasonable assurance that (i)
transactions are executed in accordance with management’s general or specific authorizations,
(ii) transactions are recorded as necessary to permit preparation of financial statements in
conformity with generally accepted accounting principles and to maintain asset accountability,
(iii) access to assets is permitted only in accordance with management’s general or specific
authorization, and (iv) the recorded accountability for assets is compared with the existing
assets at reasonable intervals and appropriate action is taken with respect to any differences.
( ) Xxxxxxxx-Xxxxx Act. The Company is in compliance in all material respects with
applicable requirements of the Xxxxxxxx-Xxxxx Act of 2002 and applicable rules and regulations
promulgated by the SEC thereunder, except where such noncompliance would not have, individually
or in the aggregate, a Material Adverse Effect.
( ) Foreign Corrupt Practices. Neither the Company nor any Subsidiary nor, to the
knowledge of the Company, any director, officer, agent, employee or other Person acting on
behalf of the Company or any Subsidiary has, in the course of its actions for, or on behalf of,
the Company (i) used any corporate funds for any unlawful contribution, gift, entertainment or
other unlawful expenses relating to political activity; (ii) made any direct or indirect
unlawful payment to any foreign or domestic government official or employee or to any foreign or
domestic political parties or campaigns from corporate funds; (iii) violated or is in violation
in any material respect of any provision of the U.S. Foreign Corrupt Practices Act of 1977, as
amended;
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or (iv) made any unlawful bribe, rebate, payoff, influence payment, kickback or other
unlawful payment to any foreign or domestic government official or employee.
( ) Indebtedness. Except as disclosed in the SEC Reports, neither the Company nor
any Subsidiary (i) has any outstanding Indebtedness (as defined below), (ii) is in violation of
any term of or is in default under any contract, agreement or instrument relating to any
Indebtedness, except where such violations and defaults would not result, individually or in the
aggregate, in a Material Adverse Effect, and (iii) is a party to any contract, agreement or
instrument relating to any Indebtedness, the performance of which, in the judgment of the
Company’s officers, has or is expected to have a Material Adverse Effect. For purposes of
this Agreement: (x) “Indebtedness” of any Person means, without duplication (A) all
indebtedness for borrowed money, (B) all obligations issued, undertaken or assumed as the
deferred purchase price of property or services (other than trade payables entered into in the
ordinary course of business), (C) all reimbursement or payment obligations with respect to
letters of credit, surety bonds and other similar instruments, (D) all obligations evidenced by
notes, bonds, debentures or similar instruments, including obligations so evidenced incurred in
connection with the acquisition of property, assets or businesses, (E) all indebtedness created
or arising under any conditional sale or other title retention agreement, or incurred as
financing, in either case with respect to any property or assets acquired with the proceeds of
such indebtedness (even though the rights and remedies of the seller or bank under such
agreement in the event of default are limited to repossession or sale of such property), (F) all
monetary obligations under any leasing or similar arrangement which, in connection with
generally accepted accounting principles, consistently applied for the periods covered thereby,
is classified as a capital lease, (G) all indebtedness referred to in clauses (A) through (F)
above secured by (or for which the holder of such Indebtedness has an existing right, contingent
or otherwise, to be secured by) any mortgage, lien, pledge, charge, security interest or other
encumbrance upon or in any property or assets (including accounts and contract rights) owned by
any Person, even though the Person which owns such assets or property has not assumed or become
liable for the payment of such indebtedness, and (H) all Contingent Obligations in respect of
indebtedness or obligations of others of the kinds referred to in clauses (A) through (G) above;
(y) “Contingent Obligation” means, as to any Person, any direct or indirect liability,
contingent or otherwise, of that Person with respect to any indebtedness, lease, dividend or
other obligation of another Person if the primary purpose or intent of the Person incurring such
liability, or the primary effect thereof, is to provide assurance to the obligee of such
liability that such liability will be paid or discharged, or that any agreements relating
thereto will be complied with, or that the holders of such liability will be protected (in whole
or in part) against loss with respect thereto; and (z) “Person” means an individual, a limited
liability company, a partnership, a joint venture, a corporation, a trust, an unincorporated
organization, a government or any department or agency thereof and any other legal entity.
( ) Employee Relations. Neither the Company nor any Subsidiary is a party to any
collective bargaining agreement or employs any member of a union. The Company believes that its
relations with its employees as disclosed in the SEC Reports. Except as disclosed in the SEC
Reports, during the period covered by the SEC Reports, no executive officer of the Company or
any Subsidiary has notified the Company or any Subsidiary that such officer intends to leave the
Company or a Subsidiary, as applicable, or otherwise terminate such officer’s
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employment with the Company or a Subsidiary, as applicable. To the knowledge of the
Company or any Subsidiary, no executive officer of the Company or any Subsidiary is in violation
of any material term of any employment contract, confidentiality, disclosure or proprietary
information agreement, 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 Subsidiary to any liability with respect to any of the foregoing
matters.
( ) Labor Matters. The Company and each Subsidiary is in compliance in all
material respects with all federal, state, local and foreign laws and regulations respecting
labor, employment and employment practices and benefits, terms and conditions of employment and
wages and hours, except where failure to be in compliance would not, either individually or in
the aggregate, reasonably be expected to result in a Material Adverse Effect.
( ) Environmental Laws. The Company and each Subsidiary (i) is in compliance in
all material respects with any and all Environmental Laws (as hereinafter defined), (ii) has
received all permits, licenses or other approvals required of them under applicable
Environmental Laws to conduct their respective businesses and (iii) is in compliance in all
material respects with all terms and conditions of any such permit, license or approval where,
in each of the foregoing clauses (i), (ii) and (iii), the failure to so comply would be
reasonably expected to have, individually or in the aggregate, a Material Adverse Effect. The
term “Environmental Laws” means all federal, state, local or foreign laws relating to pollution
or protection of human health or the environment (including, without limitation, ambient air,
surface water, groundwater, land surface or subsurface strata), including, without limitation,
laws relating to emissions, discharges, releases or threatened releases of chemicals,
pollutants, contaminants, or toxic or hazardous substances or wastes (collectively, “Hazardous
Materials”) into the environment, or otherwise relating to the manufacture, processing,
distribution, use, treatment, storage, disposal, transport or handling of Hazardous Materials,
as well as all authorizations, codes, decrees, demands or demand letters, injunctions,
judgments, licenses, notices or notice letters, orders, permits, plans or regulations issued,
entered, promulgated or approved thereunder.
( ) Subsidiary Rights. The Company or one of its Subsidiaries has the
unrestricted right to vote, and (subject to limitations imposed by applicable law) to receive
dividends and distributions on, all capital securities of its Subsidiaries as owned by the
Company or such Subsidiary.
( ) Tax Status. The Company and each Subsidiary (i) has made or 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
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 and (iii) has set
aside on its books provision reasonably adequate for the payment of all taxes for periods
subsequent to the periods to which such returns, reports or declarations apply. There are no
unpaid taxes in any material amount claimed to be due by the taxing authority of any
jurisdiction, and the officers of the Company know of no basis for any such claim.
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( ) Manipulation of Price. The Company has not, and to its knowledge no one acting
on its behalf has, (i) taken, directly or indirectly, any action designed to cause or to result
in the stabilization or manipulation of the price of any security of the Company to facilitate
the sale or resale of any of the Securities, (ii) other than the Agent, sold, bid for,
purchased, or paid any compensation for soliciting purchases of, any of the Securities, or (iii)
other than the Agent, paid or agreed to pay to any person any compensation for soliciting
another to purchase any other securities of the Company..
2.0 Representations and Warranties of the Investor. The Investor hereby represents
and warrants to the Company as follows:
( ) Organization; Authority. The Investor is an entity duly organized, validly
existing and in good standing under the laws of the jurisdiction of its organization with the
requisite corporate, partnership or other power and authority to enter into and to consummate
the transactions contemplated by the Transaction Documents and otherwise to carry out its
obligations hereunder and thereunder. The purchase by the Investor of the Securities hereunder
has been duly authorized by all necessary corporate, partnership or other action on the part of
the Investor. This Agreement has been duly executed and delivered by the Investor and
constitutes the valid and binding obligation of the Investor, enforceable against it in
accordance with its terms, except (i) as limited by general equitable principles and applicable
bankruptcy, insolvency, reorganization, moratorium and other laws of general application
affecting enforcement of creditors’ rights generally, (ii) as limited by laws relating to the
availability of specific performance, injunctive relief or other equitable remedies and (iii)
insofar as indemnification and contribution provisions may be limited by applicable law.
( ) No Public Sale or Distribution. The Investor is (i) acquiring the Shares in
the ordinary course of business for its own account and not with a view towards, or for resale
in connection with, the public sale or distribution thereof, except pursuant to sales registered
under the Securities Act or under an exemption from such registration and in compliance with
applicable federal and state securities laws, and the Investor does not have a present
arrangement to effect any distribution of the Securities to or through any person or entity;
provided, however, that by making the representations herein, the Investor does
not agree to hold any of the Securities for any minimum or other specific term and reserves the
right to dispose of the Securities at any time in accordance with or pursuant to a registration
statement or an exemption under the Securities Act.
( ) Investor Status. At the time the Investor was offered the Securities, it was,
at the date hereof it is an “accredited investor” as defined in Rule 501(a) under the Securities
Act or a “qualified institutional buyer” as defined in Rule 144A(a) under the Securities Act.
The Investor is not a registered broker dealer registered under Section 15(a) of the Exchange
Act, or a member of the Financial Industry Regulatory Authority (“FINRA”), Inc. or an entity
engaged in the business of being a broker dealer. Except as otherwise disclosed in writing to
the Company on Exhibit B-2 (attached hereto) on or prior to the date of this Agreement,
the Investor is not affiliated with any broker dealer registered under Section 15(a) of the
Exchange Act, or a member of FINRA. or an entity engaged in the business of being a broker
dealer.
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( ) General Solicitation. The Investor is not purchasing the Securities as a
result of any advertisement, article, notice or other communication regarding the Securities
published in any newspaper, magazine or similar media, broadcast over television or radio,
disseminated over the Internet or presented at any seminar or any other general solicitation or
general advertisement.
( ) Experience of the Investor. The Investor, 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. The Investor
understands that it must bear the economic risk of this investment in the Securities
indefinitely, and is able to bear such risk and is able to afford a complete loss of such
investment.
( ) Access to Information. The Investor acknowledges that it has reviewed the
Disclosure Materials and has been afforded: (i) the opportunity to ask such questions as it has
deemed necessary of, and to receive answers from, representatives of the Company concerning the
terms and conditions of the offering of the Securities and the merits and risks of investing in
the Securities; (ii) access to information about the Company and each Subsidiary 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 the Investor or its representatives or counsel shall modify, amend or affect the
Investor’s right to rely on the truth, accuracy and completeness of the Disclosure Materials and
the Company’s representations and warranties contained in the Transaction Documents. The
Investor acknowledges receipt of copies of the SEC Reports.
( ) No Governmental Review. The Investor 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 Securities.
( ) Restricted Securities. The Investor understands that the Securities are
characterized as “restricted securities” under the U.S. federal securities laws inasmuch as they
are being acquired from the Company in a transaction not involving a public offering and that
under such laws and applicable regulations such securities may be resold without registration
under the Securities Act only in certain limited circumstances.
( ) Legends. It is understood that, except as provided in Section 4.1(b) of
this Agreement, certificates evidencing such Securities may bear the legend set forth in
Section 4.1(b).
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ARTICLE IV
OTHER AGREEMENTS OF THE PARTIES
OTHER AGREEMENTS OF THE PARTIES
1.0 Transfer Restrictions.
( ) The Investor covenants that the Securities will 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 the registration requirements of the
Securities Act, and in compliance with any applicable state securities laws. In connection with
any transfer of Securities other than pursuant to an effective registration statement or to the
Company, or pursuant to Rule 144, the Company may require the transferor to provide to the
Company an opinion of counsel selected by the transferor, the form and substance of which
opinion shall be reasonably satisfactory to the Company, to the effect that such transfer does
not require registration under the Securities Act. Notwithstanding the foregoing, the Company
hereby consents to and agrees to register on the books of the Company and with its Transfer
Agent, without any such legal opinion, except to the extent that the transfer agent requests
such legal opinion, any transfer of Securities by an Investor to an Affiliate of the Investor,
provided that the transferee certifies to the Company that it is an “accredited investor” as
defined in Rule 501(a) under the Securities Act and provided that such Affiliate does not
request any removal of any existing legends on any certificate evidencing the Securities.
( ) The Investor agrees to the imprinting, until no longer required by this
Section 4.1(b), of the following legend on any certificate evidencing any of the
Securities:
THESE SECURITIES HAVE NOT BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE
COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION
FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES
ACT”), OR ANY APPLICABLE STATE SECURITIES LAWS AND, ACCORDINGLY, MAY NOT BE OFFERED
OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES
ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO,
THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN COMPLIANCE WITH
APPLICABLE STATE SECURITIES LAWS OR BLUE SKY LAWS. THESE SECURITIES MAY BE PLEDGED
IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT WITH A REGISTERED BROKER-DEALER OR
OTHER LOAN WITH A FINANCIAL INSTITUTION THAT IS AN “ACCREDITED INVESTOR” AS DEFINED
IN RULE 501(a) UNDER THE SECURITIES ACT OR OTHER LOAN SECURED BY SUCH SECURITIES.
Certificates evidencing the Shares shall not be required to contain such legend or any other
legend (i) while a registration statement (including the Registration Statement) covering the
resale of the Shares is effective under the Securities Act, (ii) following any sale of such
Securities pursuant to Rule 144 if the holder provides the Company with a legal opinion (and
the documents upon which the legal opinion is based) reasonably acceptable to the Company to
the
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effect that the Securities can be sold under Rule 144, (iii) if the Securities are eligible for
sale under Rule 144 without any volume limitation, or (iv) if the holder provides the Company
with a legal opinion (and the documents upon which the legal opinion is based) reasonably
acceptable to the Company to the effect that the legend is not required under applicable
requirements of the Securities Act (including controlling judicial interpretations and
pronouncements issued by the Staff of the SEC). The Company shall cause its counsel to issue
the legal opinion included in the Transfer Agent Instructions to the Transfer Agent on the
Effective Date, or, if no Registration Statement is filed or available, then at such time as
the Shares are freely tradable pursuant to Rule 144 without volume limitations. Following the
Effective Date and provided the registration statement referred to in clause (i) above is then
in effect, or at such earlier time as a legend is no longer required for certain Securities,
the Company will no later than three Trading Days following the delivery by an Investor to the
Company or the Transfer Agent (if delivery is made to the Transfer Agent a copy shall be
contemporaneously delivered to the Company) of (i) a legended certificate representing such
Securities (and, in the case of a requested transfer, endorsed or with stock powers attached,
signatures guaranteed, and otherwise in form necessary to affect transfer), and (ii) an opinion
of counsel to the extent required by Section 4.1(a), deliver or cause to be delivered
to the Investor a certificate representing such Securities that is free from all restrictive
and other legends. The Company may not make any notation on its records or give instructions
to the Transfer Agent that enlarge the restrictions on transfer set forth in this Section.
If within three Trading Days after receipt by the Company or its Transfer Agent of a
legended certificate and the other documents as specified in Clauses (i) and (ii) of the
paragraph immediately above, the Company shall fail to cause to be issued and delivered to the
Investor a certificate representing such Securities that is free from all restrictive and other
legends, and if on or after such Trading Day the Investor purchases (in an open market
transaction or otherwise) shares of Common Stock to deliver in satisfaction of a sale by the
Investor of shares of Common Stock that the Investor anticipated receiving from the Company
without any restrictive legend (the “Covering Shares”), then the Company shall, within three
Trading Days after the Investor’s request, pay cash to the Investor in an amount equal to the
excess (if any) of the Investor’s total purchase price (including brokerage commissions, if
any) for the Covering Shares, over the product of (A) the number of Covering Shares, times (B)
the closing bid price on the date of delivery of such certificate and the other documents as
specified in Clauses (i) and (ii) of the paragraph immediately above.
( ) The Company will not object to and shall permit (except as prohibited by law) an Investor
to pledge or grant a security interest in some or all of the Securities in connection with a bona
fide margin agreement with a registered broker-dealer or grant a security interest in some or all
of the Securities to a financial institution that is an “accredited investor” as defined in Rule
501(a) under the Securities Act and who agrees to be bound by the provisions of this Agreement, and
if required under the terms of such arrangement, the Company will not object to and shall permit
(except as prohibited by law) the Investor to transfer pledged or secured Securities to the
pledgees or secured parties. Except as required by law, such a pledge or transfer would not be
subject to approval of the Company, no legal opinion of the pledgee, secured party or pledgor shall
be required in connection therewith (but such legal opinion shall be required in connection with a
subsequent transfer or foreclosure following default by the Purchaser transferee of the pledge),
and no notice shall be required of such pledge. The Investor acknowledges that the Company shall
not be
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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 the Investor and its pledgee
or secured party. At the appropriate Investor’s expense, the Company will execute and deliver such
reasonable documentation as a pledgee or secured party of Securities may reasonably request in
connection with a pledge or transfer of the Securities, including the preparation and filing of any
required prospectus supplement under Rule 424(b)(3) of the Securities Act or other applicable
provision of the Securities Act to appropriately amend the list of Selling Stockholders thereunder.
Provided that the Company is in compliance with the terms of this Section 4.1(c), the
Company’s indemnification obligations pursuant to Section 6.4 shall not extend to any
Proceeding or Losses arising out of or related to this Section 4.1(c).
2.0 Furnishing of Information. Until the date that the Investor owning Shares may
sell all of them under Rule 144 (without volume limitations) of the Securities Act (or any
successor provision), the Company covenants to use its commercially reasonable efforts 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; and
the Company further agrees to send the following to the Investor (i) unless the following are filed
with the SEC through XXXXX and are available to the public through the XXXXX system, within one (1)
Business Day after the filing thereof with the SEC, a copy of its annual reports and quarterly
reports on Form 10-K or 10-Q, any interim reports or any consolidated balance sheets, income
statements, stockholders’ equity statements and/or cash flow statements for any period other than
annual, any current reports on Form 8-K and any registration statements (other than on Form S-8) or
amendments filed pursuant to the 1933 Act, (ii) on the same day as the release thereof, facsimile
or e-mailed copies of all press releases issued by the Company or any of its Subsidiaries, and
(iii) copies of any notices and other information made available or given to the stockholders of
the Company generally, contemporaneously with the making available or giving thereof to the
stockholders. The Company further covenants that it will take such further action as any holder of
Securities may reasonably request to satisfy the provisions of this Section 4.2.
3.0 Integration. The Company shall not, and shall use its commercially reasonable
efforts to ensure that no Affiliate thereof shall, sell, offer for sale or solicit offers to buy or
otherwise negotiate in respect of any security (as defined in Section 2 of the Securities Act) that
would be integrated with the offer or sale of the Securities in a manner that would require the
registration under the Securities Act of the sale of the Securities to the Investor or that would
be integrated with the offer or sale of the Securities for purposes of the rules and regulations of
any Trading Market.
4.0 Securities Laws Disclosure; Publicity. The Company shall, at or before 9:00 a.m.,
New York time, on the first Trading Day following execution of this Agreement, issue a press
release disclosing all material terms of the transactions contemplated hereby. On the Closing
Date, the Company shall file a Current Report on Form 8-K with the SEC (the “8-K Filing”)
describing the terms of the transactions contemplated by the Transaction Documents and including as
exhibits to such Current Report on Form 8-K the Transaction Documents in the form required by the
Exchange Act. Thereafter, the Company shall timely file any filings and notices required by the
SEC or applicable law with respect to the transactions contemplated hereby and provide copies
thereof to the Investor promptly after filing. Except as herein provided, neither the Company nor
any Subsidiary shall publicly disclose the name of the Investor, or include the name of the
Investor in any press
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release without the prior written consent of the Investor (which consent shall not be
unreasonably withheld or delayed), unless otherwise required by law, regulatory authority or
Trading Market. Neither the Company nor any Subsidiary shall, and shall cause each of their
respective officers, directors, employees and agents not to, provide the Investor with any material
nonpublic information regarding the Company or any Subsidiary from and after the issuance of the
above referenced press release without the express written consent of the Investor.
5.0 Use of Proceeds. The Company intends to use the net proceeds from the sale of the
Securities for working capital, payment of outstanding institutional indebtedness and general
corporate purposes. The Company also may use a portion of the net proceeds, currently intended for
general corporate purposes, to acquire or invest in technologies, products or services that
complement its business. Pending these uses, the Company intends to invest the net proceeds from
this offering in short-term, interest-bearing, investment-grade securities, or as otherwise
pursuant to the Company’s customary investment policies.
6.0 Directors and Officers Insurance. The Company agrees to promptly obtain, from
financially sound and reputable insurers, directors and officers liability insurance with coverage
customary for companies similarly situated to the Company, which shall include coverage for and
reasonably satisfactory to the Kinderhook Director upon election of him or her to the board of
directors. The Company will cause to be maintained the directors and officers liability insurance
required by this Section 4.6 so long as the Kinderhook Director or his or her successor or
replacement shall serve as a member of the board of Directors pursuant to the terms of the
Stockholders Agreement.
7.0 Kinderhook Director/Observer.
( ) Election of Director. Upon the request of Kinderhook at any time after the
Closing and prior to the earliest of (i) the fourth (4th) anniversary of the date of
this Agreement and (b) such time as Kinderhook shall no longer hold at least seventy-five
percent (75%) of the Kinderhook Shares during the term of this Agreement (the “Director
Period”), the Company agrees to take all action necessary or desirable (including, without
limitation, calling a meeting of the Company’s stockholders and preparing and filing a Proxy
Statement with the SEC), subject to the exercise by the Board of Directors of its fiduciary
duties, to ensure that a director selected at Kinderhook’s sole discretion and request be
elected to the Company’s board of directors (the “Kinderhook Director”). Such Kinderhook
Director shall be an additional director to be added as a member of the board of directors as
such board is then currently constituted. It is understood and agreed that the initial
Kinderhook Director may be Xxxxxx Xxxx. Notwithstanding the foregoing, Kinderhook may terminate
its rights under this Section 4.7 in its discretion at any time upon notice to the
Company.
( ) Removal. The Company shall not take any action to remove the Kinderhook
Director, other than for Cause (as defined below). “Cause” shall mean the Kinderhook Director’s
conviction of, or plea of nolo contendere, to a felony or crime involving moral turpitude, (ii)
if it is finally judicially determined by a court of competent jurisdiction that the Kinderhook
Director has violated his fiduciary duties to the Company in any material respect, or (iii) if
the person serving as the Kinderhook Director would cause the Company to be in violation
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of any law or regulation material to the Company. In any such situation, Kinderhook will
be entitled to select another person to be elected or appointed to the Company’s Board of
Directors in accordance with the terms of this Agreement and the Stockholders Agreement.
( ) Vacancy. The Company agrees to take such action as shall be reasonably
necessary from time to time to ensure that in the event that a Kinderhook Director, for any
reason, shall cease to serve as a member of the Board of Directors during his or her term in
office, the resulting vacancy on the Board of Directors shall be filled in accordance with this
Section 4.7 and the Stockholders Agreement.
( ) Further Action. The Company agrees to take such further actions as shall be
reasonably necessary to carry out the intent of this Section 4.7 and the Stockholders
Agreement, including, without limitation, promptly entering into the Indemnification Agreement
upon appointment of the Kinderhook Director.
( ) Observer Rights.
( ) At the request of Kinderhook, at any time during the Director Period that
there is not a Kinderhook Director then serving on the Board of Directors of the
Company, the Company shall invite a representative of Kinderhook to attend all
meetings of its Board of Directors in a nonvoting observer capacity and, in this
respect, shall give such representative copies of all notices, minutes, consents, and
other materials that it provides to its directors at the same time and in the same
manner as provided to such directors; provided, however, that such representative
shall agree to hold in confidence all information so provided.
(ii) Confidentiality. Kinderhook agrees that it will keep confidential
and will not disclose, divulge, or use for any purpose (other than to monitor
Kinderhook’s investment in the Company) any confidential information obtained from
the Company pursuant to the terms of this Agreement (including notice of the
Company’s intention to file a registration statement), unless such confidential
information (A) is known or becomes known to the public in general (other than as a
result of a breach of this Section 4.7(e)(ii) by Kinderhook), (B) is or has
been independently developed or conceived by the Kinderhook without use of the
Company’s confidential information, or (C) is or has been made known or disclosed to
Kinderhook by a third party without a breach of any obligation of confidentiality
such third party may have to the Company; provided, however, that Kinderhook may
disclose confidential information (w) to its attorneys, accountants, consultants, and
other professionals to the extent necessary to obtain their services in connection
with monitoring its investment in the Company; (x) to any prospective purchaser of
any Shares from Kinderhook, if such prospective purchaser agrees to be bound by the
provisions of this Section 4.7(e)(ii); (y) to any affiliate, limited or
general partner or any investor or partner of such limited or general partner,
member, shareholder, or wholly owned subsidiary of Kinderhook in the ordinary course
of business, provided that Kinderhook informs such Person (“Person” is defined to
mean any individual, corporation, partnership, trust, limited liability company,
association or other entity.)
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that such information is confidential and directs such Person to maintain the
confidentiality of such information; or (z) as may otherwise be required by law or
regulation. The Company acknowledges that Kinderhook is in the business of venture
capital and other investing activities and therefore review the business plans and
related proprietary information of many enterprises, including enterprises that may
have products or services that compete directly or indirectly with those of the
Company. Subject to the obligations of confidentiality set forth in this Section
4.7 and the Kinderhook Director’s fiduciary duties of care and loyalty as a
director of the Company, nothing in this Agreement shall preclude or in any way
restrict Kinderhook from investing or participating in any particular enterprise,
regardless of whether such enterprise has products or services that compete with
those of the Company.
(f) Expenses of Kinderhook Director and Observer. The Company shall promptly
reimburse the Kinderhook Director and the observer for all of his or her reasonable
out-of-pocket expenses, including without limitation the cost of non-stop commercial flights,
incurred in attending each meeting of the Company’s Board of Directors or any committee thereof.
(g) Directors and Officers Insurance. Upon appointment of the Kinderhook Director,
the Company shall promptly obtain, from financially sound and reputable insurers, directors and
officers liability insurance with coverage customary for companies similarly situated to the
Company. The Company will cause to be maintained the directors and officers liability insurance
required by this Section 4.7 so long as the Kinderhook Director shall remain on the
board of directors and the Stockholder Agreement remains effective.
4.8 Rights to Future Stock Issuances. Subject to the terms and conditions of this
Section 4.8 and applicable securities laws, if the Company proposes to offer or sell any
equity securities of the Company, whether or not currently authorized, as well as rights, options
or warrants to purchase such equity securities, or securities of any type whatsoever that are, or
may become, convertible or exchangeable into or exercisable for such equity securities
(collectively, “New Securities), other than any offering of New Securities in a firm commitment
underwriting, then the Company shall first offer such New Securities to Kinderhook. Kinderhook
shall be entitled to apportion the right of first offer hereby granted to it among itself and its
Affiliates in such proportions as it deems appropriate.
( ) The Company shall give notice (the “Offer Notice”) to Kinderhook, stating
(i) its bona fide intention to offer such New Securities, (ii) the number of such New
Securities to be offered, and (iii) the price and terms, if any, upon which it
proposes to offer such New Securities.
( ) By notification to the Company within twenty (20) days after the Offer
Notice is given, Kinderhook may elect to purchase or otherwise acquire, at the price
and on the terms specified in the Offer Notice, up to that portion of such New
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Securities which equals the proportion that the Common Stock issued and held by
Kinderhook bears to the total Common Stock of the Company then outstanding.
( ) If the Company does not enter into an agreement for the sale of the New
Securities within such period, or if such agreement is not consummated within thirty
(30) days of the execution thereof, the right provided hereunder shall be deemed to
be revived and such New Securities shall not be offered unless first reoffered to
Kinderhook in accordance with this Section 4.8. If all New Securities
referred to in the Offer Notice are not elected to be purchased or acquired as
provided in Section 4.8, the Company may, during the ninety (90) day period
following the expiration of the periods provided in Section 6.1(b), offer and
sell the remaining unsubscribed portion of such New Securities to any Person or
Persons at a price not less than, and upon terms no more favorable to the offeree
than, those specified in the Offer Notice. If the Company does not enter into an
agreement for the sale of the New Securities within ninety (90) days following the
expiration of the period provided in Section 4.8(c), or if such agreement is
not consummated within thirty (30) days of the execution thereof, the right provided
hereunder shall be deemed to be revived and such New Securities shall not be offered
unless first reoffered to Kinderhook in accordance with this Section 4.8.
( ) The right of first offer in this Section 4.8 shall not be applicable
to (i) shares of Common Stock issuable or issued to employees, consultants or
directors of the Company pursuant to a stock option plan or restricted stock plan
approved by the Board of Directors of the Company, (ii) Common Stock, or options or
warrants to purchase Common Stock, issued to vendors, suppliers, financial
institutions or lessors in connection with commercial credit arrangements, commercial
property transactions, equipment financings, leases or similar transactions approved
by the Board of Directors of the Company, (iii) shares of Common Stock or preferred
stock issuable upon exercise of options or convertible securities outstanding as of
the date of this Agreement, and (iv) Common Stock, or options or warrants to purchase
Common Stock issued in connection with bona fide acquisitions, mergers or similar
transactions, the terms of which are approved by the Board of Directors of the
Company.
( ) Notwithstanding any provision hereof to the contrary, in lieu of complying
with the provisions of this Section 4.8, the Company may elect to give notice
to Kinderhook within thirty (30) days after the issuance of New Securities. Such
notice shall describe the type, price and terms of the New Securities. Kinderhook
shall have twenty (20) days from the date notice is given to elect to purchase on the
same price and terms up to the number of New Securities that would, if purchased by
such Kinderhook, maintain such Kinderhook’s percentage-ownership position, calculated
as set forth in Section 4.8(b) before giving effect to the issuance of such
New Securities. The closing of such sale shall occur within sixty (60) days of the
date notice is given to the Kinderhook.
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ARTICLE V
CONDITIONS
CONDITIONS
1.0 Conditions Precedent to the Obligations of the Investor. The obligation of the
Investor to acquire Securities at the Closing is subject to the satisfaction or waiver by the
Investor, at or before the Closing, of each of the following conditions:
( ) Representations and Warranties. The representations and warranties of the
Company contained herein shall be true and correct in all material respects as of the date when
made and as of the Closing as though made on and as of such date; and
( ) Performance. The Company and each other Investor shall have performed,
satisfied and complied in all material respects with all covenants, agreements and conditions
required by the Transaction Documents to be performed, satisfied or complied with by it at or
prior to the Closing.
( ) No Suspensions of Trading in Common Stock; Listing. Trading in the Common Stock
shall not have been suspended by the SEC or any Trading Market (except for any suspensions of
trading of not more than one Trading Day solely to permit dissemination of material information
regarding the Company) at any time since the date of execution of this Agreement, and the Common
Stock shall have been at all times since such date listed for trading on a Trading Market.
( ) Absence of Litigation. No action, suit or proceeding by or before any court or
any governmental body or authority, against the Company or any Subsidiary or pertaining to the
transactions contemplated by this Agreement or their consummation, shall have been instituted on
or before the Closing Date, which action, suit or proceeding would, if determined adversely,
have a Material Adverse Effect.
( ) Third Party Consents. The Company shall have received all consents from third
parties necessary to consummate the transactions contemplated by this Agreement and the
Stockholders Agreement, including, without limitation, the consent of Millennium Partners, L.P.
( ) Stockholders Agreement. The Company shall have delivered to the Investor a
fully-executed copy of the Stockholders Agreement.
( ) Opinion. Counsel to the Company shall have delivered an opinion to the
Investor in substantially the form annexed hereto as Exhibit C.
2.0 Conditions Precedent to the Obligations of the Company. The obligation of the
Company to sell the Securities at the Closing is subject to the satisfaction or waiver by the
Company, at or before the Closing, of each of the following conditions:
( ) Representations and Warranties. The representations and warranties of the
Investor contained herein shall be true and correct in all material respects as of the date when
made and as of the Closing Date as though made on and as of such date; and
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( ) Performance. The Investor shall have performed, satisfied and complied in all
material respects with all covenants, agreements and conditions required by the Transaction
Documents to be performed, satisfied or complied with by the Investor at or prior to the
Closing.
ARTICLE VI
REGISTRATION RIGHTS
REGISTRATION RIGHTS
1.0 Registration Statement.
( ) As promptly as possible following receipt by the Company of a notice of the Investor’s
demand registration request (the “Demand Registration Notice”), but no later than thirty (30)
days thereafter, the Company shall prepare and file with the SEC a Registration Statement
covering the resale of all Registrable Securities, or the maximum amount thereof as shall comply
with applicable SEC rules as then in effect, for an offering to be made on a continuous basis
pursuant to Rule 415. The Registration Statement shall be on Form S-3 (except if the Company is
not then eligible to register for resale the Registrable Securities on Form S-3, in which case
such registration shall be on another appropriate form in accordance with the Securities Act and
the Exchange Act) and shall contain (except if otherwise directed by the Investor or requested
by the SEC) the “Plan of Distribution” in substantially the form attached hereto as Exhibit
D.
( ) The Company shall use its commercially reasonable efforts to cause the Registration
Statement to be declared effective by the SEC as promptly as possible after the filing thereof,
but in any event prior to the Required Effectiveness Date, and shall use its commercially
reasonable efforts to keep the Registration Statement continuously effective under the
Securities Act until the earlier of the date that all Shares covered by such Registration
Statement have been sold or can be sold publicly without any volume limitations under Rule 144
(the “Effectiveness Period”); provided that, upon notification by the SEC 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) Trading Days
after receipt of such notice and request that it become effective on 4:00 p.m. New York City
time on the Effective Date and file a prospectus supplement for any Registration Statement,
whether or not required under Rule 424 (or otherwise), by 9:00 a.m. New York City time the day
after the Effective Date.
( ) The Company shall notify the Investor in writing promptly (and in any event within two
Trading Days) after receiving notification from the SEC that the Registration Statement has been
declared effective.
( ) Notwithstanding anything in this Agreement to the contrary, after sixty (60)
consecutive Trading Days of continuous effectiveness of the initial Registration Statement filed
and declared effective pursuant to this Agreement, the Company may, by written notice to the
Investor, suspend sales under a Registration Statement after the Effective Date thereof and/or
require that the Investor immediately cease the sale of shares of Common Stock pursuant thereto
and/or defer the filing of any subsequent Registration Statement if the Company is engaged in a
material merger, acquisition or sale and the Board of Directors determines in good faith, by
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appropriate resolutions, that, as a result of such activity, (A) it would be materially
detrimental to the Company (other than as relating solely to the price of the Common Stock) to
maintain a Registration Statement at such time or (B) it is in the best interests of the Company
to suspend sales under such registration at such time. Upon receipt of such notice, the
Investor shall immediately discontinue any sales of Registrable Securities pursuant to such
registration until the Investor is advised in writing by the Company that the current Prospectus
or amended Prospectus, as applicable, may be used. In no event, however, shall this right be
exercised to suspend sales beyond the period during which (in the good faith determination of
the Company’s Board of Directors) the failure to require such suspension would be materially
detrimental to the Company. The Company’s rights under this Section 6(d) may be
exercised for a period of no more than twenty (20) Trading Days at a time and not more than
three times in any twelve-month period, without such suspension being considered as part of an
Event Payment determination. Immediately after the end of any suspension period under this
Section 6(d), the Company shall take all necessary actions (including filing any
required supplemental prospectus) to restore the effectiveness of the applicable Registration
Statement and the ability of the Investor to publicly resell their Registrable Securities
pursuant to such effective Registration Statement.
( ) The Company shall not, from the date hereof until the Effective Date of the
Registration Statement, prepare and file with the SEC a registration statement relating to an
offering for its own account (a “Primary Registration”) or the account of others under
the Securities Act of any of its equity securities, other than (i) pursuant to the
Registration Rights Agreement, dated May 22, 2008, between the Company and Millennium Partners,
L.P., as amended to the date hereof (the “Millennium Registration Agreement”), (ii) any
registration statement or post-effective amendment to a registration statement (or supplement
thereto) relating to the Company’s employee benefit plans registered on Form S-8 and (iii) a
Primary Registration, in which the Investor can include Registrable Securities for resale in
accordance with Section 6.7 of this Agreement.
2.0 Registration Procedures. In connection with the Company’s registration
obligations hereunder, the Company shall:
( ) Not less than three Trading Days prior to the filing of a Registration Statement or any
related Prospectus or any amendment or supplement thereto, furnish via email to the Investor who
has supplied the Company with email addresses copies of all such documents proposed to be filed,
which documents (other than any document that is incorporated or deemed to be incorporated by
reference therein) will be subject to the review of the Investor. The Company shall reflect in
each such document when so filed with the SEC such comments regarding the Investor and the plan
of distribution as the Investor may reasonably and promptly propose no later than two Trading
Days after the Investor has been so furnished with copies of such documents as aforesaid.
( ) (i) Subject to Section 6.1(e), prepare and file with the SEC such amendments,
including post-effective amendments, to each Registration Statement and the Prospectus used in
connection therewith as may be necessary to keep the Registration Statement continuously
effective, as to the applicable Registrable Securities for the Effectiveness Period and prepare
and
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file with the SEC 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 possible, and
in any event within twelve (12) Trading Days (except to the extent that the Company reasonably
requires additional time to respond to accounting comments), to any comments received from the
SEC with respect to the Registration Statement or any amendment thereto; and (iv) comply in all
material respects with the provisions of the Securities Act and the Exchange Act with respect to
the disposition of all Registrable Securities covered by the Registration Statement during the
applicable period in accordance with the intended methods of disposition by the Investor thereof
set forth in the Registration Statement as so amended or in such Prospectus as so supplemented.
( ) Notify the Investor as promptly as reasonably possible, and (if requested by the
Investor confirm such notice in writing no later than two Trading Days thereafter, of any of the
following events: (i) the SEC notifies the Company whether there will be a “review” of any
Registration Statement; (ii) the SEC comments in writing on any Registration Statement;
(iii) any Registration Statement or any post-effective amendment is declared effective; (iv) the
SEC or any other Federal or state governmental authority requests any amendment or supplement to
any Registration Statement or Prospectus or requests additional information related thereto;
(v) the SEC issues any stop order suspending the effectiveness of any Registration Statement or
initiates any Proceedings for that purpose; (vi) the Company receives notice of any suspension
of the qualification or exemption from qualification of any Registrable Securities for sale in
any jurisdiction, or the initiation or threat of any Proceeding for such purpose; or (vii) the
financial statements included in any Registration Statement become ineligible for inclusion
therein or any Registration Statement or Prospectus or other document contains any untrue
statement of a material fact or omits to state any material fact required to be stated therein
or necessary to make the statements therein, in the light of the circumstances under which they
were made, not misleading.
( ) Use its commercially reasonable efforts to avoid the issuance of or, if issued, obtain
the withdrawal of (i) any order suspending the effectiveness of any Registration Statement, or
(ii) any suspension of the qualification (or exemption from qualification) of any of the
Registrable Securities for sale in any jurisdiction, as soon as possible.
( ) If requested by an Investor, provide the Investor without charge, at least one
conformed copy of each Registration Statement and each amendment thereto, including financial
statements and schedules, 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 SEC.
( ) Promptly deliver to the Investor, without charge, as many copies of the Prospectus or
Prospectuses (including each form of prospectus) and each amendment or supplement thereto as
such Persons may reasonably request. The Company hereby consents to the use of such Prospectus
and each amendment or supplement thereto by the selling Investor in connection with the offering
and sale of the Registrable Securities covered by such Prospectus
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and any amendment or supplement thereto to the extent permitted by federal and state
securities laws and regulations.
( ) (i) In the time and manner required by each Trading Market, prepare and file with such
Trading Market an additional shares listing application covering all of the Registrable
Securities; (ii) take all steps necessary to cause such Shares to be approved for listing on
each Trading Market as soon as possible thereafter; (iii) provide to the Investor evidence of
such listing; and (iv) except as a result of the Excluded Events, during the Effectiveness
Period, maintain the listing of such Shares on each such Trading Market or another Eligible
Market.
( ) Prior to any public offering of Registrable Securities, use its Best Efforts to
register or qualify or cooperate with the Investor in connection with the registration or
qualification (or exemption from such registration or qualification) of such Registrable
Securities for offer and sale under the securities or Blue Sky laws of such jurisdictions within
the United States as the Investor requests in writing, to keep each such registration or
qualification (or exemption therefrom) effective for so long as required, but not to exceed the
duration of the Effectiveness Period, and to do any and all other acts or things reasonably
necessary or advisable to enable the disposition in such jurisdictions of the Registrable
Securities covered by a Registration Statement; provided, however, that the
Company shall not be obligated to file any general consent to service of process or to qualify
as a foreign corporation or as a dealer in securities in any jurisdiction in which it is not so
qualified or to subject itself to taxation in respect of doing business in any jurisdiction in
which it is not otherwise so subject.
( ) Cooperate with the Investor to facilitate the timely preparation and delivery of
certificates representing Registrable Securities to be delivered to a transferee pursuant to a
Registration Statement, which certificates shall be free, to the extent permitted by this
Agreement and under law, of all restrictive legends, and to enable such certificates to be in
such denominations and registered in such names as any the Investor may reasonably request.
( ) Upon the occurrence of any event described in Section 6.2(c)(vii), as promptly
as reasonably possible, prepare a supplement or amendment, including a post-effective amendment,
to the Registration Statement or a supplement to the related Prospectus or any document
incorporated or deemed to be incorporated therein by reference, and file any other required
document so that, as thereafter delivered, neither the Registration Statement nor such
Prospectus will contain an untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading.
( ) Cooperate with any reasonable due diligence investigation undertaken by the Investor in
connection with the sale of Registrable Securities, including, without limitation, by making
available documents and information; provided that the Company will not deliver or make
available to the Investor material, nonpublic information unless the Investor requests in
advance in writing to receive material, nonpublic information and agrees to keep such
information confidential.
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( ) Comply with all rules and regulations of the SEC applicable to the registration of the
Securities.
( ) It shall be a condition precedent to the obligations of the Company to complete the
registration pursuant to this Agreement with respect to the Registrable Securities of the
Investor or to make any Event Payments set forth in Section 6.1(c) to the Investor that
the Investor furnish to the Company the information specified in Exhibits B-1 and B-2 hereto and
such other information regarding itself, the Registrable Securities and other shares of Common
Stock held by it and the intended method of disposition of the Registrable Securities held by it
(if different from the Plan of Distribution set forth on Exhibit D hereto) as shall be
reasonably required to effect the registration of such Registrable Securities and shall complete
and execute such documents in connection with such registration as the Company may reasonably
request.
( ) The Company shall comply with all applicable rules and regulations of the SEC under the
Securities Act and the Exchange Act, including, without limitation, Rule 172 under the
Securities Act, file any final Prospectus, including any supplement or amendment thereof, with
the SEC pursuant to Rule 424 under the Securities Act, promptly inform the Investor in writing
if, at any time during the Effectiveness Period, the Company does not satisfy the conditions
specified in Rule 172 and, as a result thereof, the Investor is required to make available a
Prospectus in connection with any disposition of Registrable Securities and take such other
actions as may be reasonably necessary to facilitate the registration of the Registrable
Securities hereunder.
3.0 Registration Expenses. The Company shall pay all fees and expenses incident to
the performance of or compliance with Article VI of this Agreement by the Company, including
without limitation (a) all registration and filing fees and expenses, including without limitation
those related to filings with the SEC, any Trading Market and in connection with applicable state
securities or Blue Sky laws, (b) printing expenses (including without limitation expenses of
printing certificates for Registrable Securities), (c) messenger, telephone and delivery expenses,
(d) fees and disbursements of counsel for the Company, (e) fees and expenses of all other Persons
retained by the Company in connection with the consummation of the transactions contemplated by
this Agreement, (f) the fees and expenses of counsel to the Investor, not to exceed $25,000, and
(g) all listing fees to be paid by the Company to the Trading Market.
4.0 Indemnification
( ) Indemnification by the Company. The Company shall, notwithstanding any
termination of this Agreement, indemnify and hold harmless the Investor, the officers,
directors, partners, members, agents and employees of each of them, each Person who controls the
Investor (within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange
Act) and the officers, directors, partners, members, agents and employees of each such
controlling Person, to the fullest extent permitted by applicable law, from and against any and
all Losses, as incurred, arising out of or relating to (i) any misrepresentation or breach of
any representation or warranty made by the Company in the Transaction Documents or any other
certificate, instrument or document contemplated hereby or thereby, (ii) any breach of any
covenant, agreement or obligation of the Company contained in the Transaction Documents or any
other
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certificate, instrument or document contemplated hereby or thereby, (iii) any cause of
action, suit or claim brought or made against such Indemnified Party (as defined in Section
6.4(c) below) by a third party (including for these purposes a derivative action brought on
behalf of the Company), arising out of or resulting from (x) the execution, delivery,
performance or enforcement of the Transaction Documents or any other certificate, instrument or
document contemplated hereby or thereby, (y) any transaction financed or to be financed in whole
or in part, directly or indirectly, with the proceeds of the issuance of the Securities, or (z)
the status of Indemnified Party as holder of the Securities (unless, and only to the extent
that, such action, suit or claim is based, including in part, upon a breach of the Investor’s
representations, warranties or covenants under the Transaction Documents or any conduct by the
Investor that constitutes fraud, gross negligence or willful misconduct) or (iv) any untrue or
alleged untrue statement of a material fact contained in the Registration Statement, any
Prospectus or any form of Company prospectus or in any amendment or supplement thereto or in any
Company 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 the light
of the circumstances under which they were made) not misleading, 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 the Investor furnished in writing to the
Company by the Investor for use therein, or to the extent that such information relates to the
Investor or the Investor’s proposed method of distribution of Registrable Securities and was
reviewed and expressly approved by the Investor in writing expressly for use in the Registration
Statement, or (B) with respect to any prospectus, if the untrue statement or omission of
material fact contained in such prospectus was corrected on a timely basis in the prospectus, as
then amended or supplemented, if such corrected prospectus was timely made available by the
Company to the Investor, and the Investor seeking indemnity hereunder was advised in writing not
to use the incorrect prospectus prior to the use giving rise to Losses.
( ) Indemnification by Investor. The Investor shall indemnify and hold harmless
the Company and its directors, officers, agents and employees to the fullest extent permitted by
applicable law, from and against all Losses (as determined by a court of competent jurisdiction
in a final judgment not subject to appeal or review) arising solely out of any untrue statement
of a material fact contained in the Registration Statement, any Prospectus, or any form of
prospectus, or in any amendment or supplement thereto, or arising out of or relating to any
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 the light
of the circumstances under which they were made) not misleading, but only to the extent that (i)
such untrue statements or omissions are based solely upon information regarding the Investor
furnished to the Company by the Investor in writing expressly for use therein, or to the extent
that such information relates to the Investor or the Investor’s proposed method of distribution
of Registrable Securities and was reviewed and expressly approved in writing by the Investor
expressly for use in the Registration Statement (it being understood that the information
provided by the Investor to the Company in Exhibits B-1 and B-2 and the
Plan of Distribution set forth on Exhibit D, as the same may be modified by the Investor
and other information provided by the Investor to the Company in or pursuant to the Transaction
Documents constitutes information reviewed and expressly approved by the Investor in writing
expressly for use in the Registration
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Statement), such Prospectus or such form of prospectus or in any amendment or supplement
thereto. In no event shall the liability of any selling Investor hereunder be greater in amount
than the dollar amount of the net proceeds received by the Investor upon the sale of the
Registrable Securities giving rise to such indemnification obligation.
( ) Conduct of Indemnification Proceedings. If any Proceeding shall be brought or
asserted against any Person entitled to indemnity hereunder (an “Indemnified Party”), such
Indemnified Party shall promptly notify the Person from whom indemnity is sought (the
“Indemnifying Party”) in writing, and the Indemnifying Party shall assume the defense thereof,
including the employment of counsel reasonably satisfactory to the Indemnified Party and the
payment of all fees and expenses incurred in connection with defense thereof; provided, that the
failure of any Indemnified Party to give such notice shall not relieve the Indemnifying Party of
its obligations or liabilities pursuant to this Agreement, except (and only) to the extent that
it shall be finally determined by a court of competent jurisdiction (which determination is not
subject to appeal or further review) that such failure shall have proximately and materially
adversely prejudiced the Indemnifying Party.
An Indemnified Party shall have the right to employ separate counsel in any such Proceeding
and to participate in the defense thereof, but the fees and expenses of such counsel shall be at
the expense of such Indemnified Party or Parties unless: (i) the Indemnifying Party has agreed in
writing to pay such fees and expenses; or (ii) the Indemnifying Party shall have failed promptly to
assume the defense of such Proceeding and to employ counsel reasonably satisfactory to such
Indemnified Party in any such Proceeding; or (iii) the named parties to any such Proceeding
(including any impleaded parties) include both such Indemnified Party and the Indemnifying Party,
and such Indemnified Party shall have been advised by counsel that a conflict of interest is likely
to exist if the same counsel were to represent such Indemnified Party and the Indemnifying Party
(in which case, if such Indemnified Party notifies the Indemnifying Party in writing that it elects
to employ separate counsel at the expense of the Indemnifying Party, the Indemnifying Party shall
not have the right to assume the defense thereof and the reasonable fees and expenses of separate
counsel shall be at the expense of the Indemnifying Party). It shall be understood, however, that
the Indemnifying Party shall not, in connection with any one such Proceeding (including separate
Proceedings that have been or will be consolidated before a single judge) be liable for the fees
and expenses of more than one separate firm of attorneys at any time for all Indemnified Parties,
which firm shall be appointed by a majority of the 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. No Indemnifying Party shall, without the prior
written consent of the Indemnified Party, effect any settlement of any pending Proceeding in
respect of which any Indemnified Party is a party, unless such settlement includes an unconditional
release of such Indemnified Party from all liability on claims that are the subject matter of such
Proceeding.
All reasonable 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 20 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
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reimburse all such fees and expenses to the extent it is finally judicially determined that
such Indemnified Party is not entitled to indemnification hereunder).
( ) Contribution. If a claim for indemnification under Section 6.4(a) or
(b) is unavailable to an Indemnified Party (by reason of public policy or otherwise),
then each Indemnifying Party, in lieu of indemnifying such Indemnified Party, shall contribute
to the amount paid or payable by such Indemnified Party as a result of such Losses, in such
proportion as is appropriate to reflect the relative fault of the Indemnifying Party and
Indemnified Party in connection with the actions, statements or omissions that resulted in such
Losses as well as any other relevant equitable considerations. The relative fault of such
Indemnifying Party and Indemnified Party shall be determined by reference to, among other
things, whether any action in question, including any untrue or alleged untrue statement of a
material fact or omission or alleged omission of a material fact, has been taken or made by, or
relates to information supplied by, such Indemnifying Party or Indemnified Party, and the
parties’ relative intent, knowledge, access to information and opportunity to correct or prevent
such action, statement or omission. The amount paid or payable by a party as a result of any
Losses shall be deemed to include, subject to the limitations set forth in Section
6.4(c), any reasonable attorneys’ or other reasonable fees or expenses incurred by such
party in connection with any Proceeding to the extent such party would have been indemnified for
such fees or expenses if the indemnification provided for in this Section was available to such
party in accordance with its terms.
The parties hereto agree that it would not be just and equitable if contribution pursuant to
this Section 6.4(d) were determined by pro rata allocation or by any other method of
allocation that does not take into account the equitable considerations referred to in the
immediately preceding paragraph. Notwithstanding the provisions of this Section 6.4(d),
the Investor shall not be required to contribute, in the aggregate, any amount in excess of the
amount by which the net proceeds actually received by the Investor from the sale of the Registrable
Securities subject to the Proceeding exceed the amount of any damages that the Investor 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 6.4 are in
addition to any liability that the Indemnifying Parties may have to the Indemnified Parties.
5.0 Dispositions. The Investor agrees that it will comply with the prospectus
delivery requirements of the Securities Act as applicable to it in connection with sales of
Registrable Securities pursuant to the Registration Statement and shall sell its Registrable
Securities in accordance with the Plan of Distribution set forth in the Prospectus. The Investor
further agrees that, upon receipt of a notice from the Company of the occurrence of any event of
the kind described in Sections 6.2(c)(v), (vi) or (vii), the Investor will
discontinue disposition of such Registrable Securities under the Registration Statement until the
Investor is advised in writing by the Company that the use of the Prospectus, or amended
Prospectus, as applicable, may be resumed. The Company may provide appropriate stop orders to
enforce the provisions of this paragraph. The Investor agrees that the removal of the restrictive
legend from certificates representing Securities as set forth in this Section 4.1 is predicated
upon the Company’s reliance that the Investor will comply with the
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provisions of this subsection. Both the Company and the Transfer Agent, and their respective
directors, officers, employees and agents, may rely on this subsection.
6.0 No Piggyback on Registrations. Neither the Company nor any of its security
holders (other than the Investor in such capacity pursuant hereto) may include securities of the
Company in the Registration Statement other than the Registrable Securities.
7.0 Piggy-Back Registrations. (a) If at any time during the Effectiveness Period
there is not an effective Registration Statement covering all of the Registrable Securities and the
Company shall determine to prepare and file with the SEC 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 (i) pursuant to the Millennium Registration Agreement and (ii) on Form S-4
or Form S-8 (each as promulgated under the Securities Act) or their then equivalents relating to
equity securities to be issued solely in connection with any acquisition of any entity or business
or equity securities issuable in connection with stock option or other employee benefit plans, then
the Company shall send to the Investor not then eligible to sell all of their Registrable
Securities under Rule 144 in a three-month period, written notice of such determination and if,
within ten days after receipt of such notice, any the Investor shall so request in writing, the
Company shall include in such registration statement all or any part of such Registrable Securities
the Investor requests to be registered.
(b) Notwithstanding the foregoing, in the event that, in connection with any underwritten
public offering, the managing underwriter(s) thereof shall impose a limitation on the number of
shares of Common Stock which may be included in the Registration Statement because, in such
underwriter(s)’ judgment, marketing or other factors dictate such limitation is necessary to
facilitate public distribution, then the Company shall be obligated to include in such Registration
Statement only such limited portion of the Registrable Securities with respect to which the
Investor has requested inclusion hereunder as the underwriter shall permit; provided, however, that
(i) the Company shall not exclude any Registrable Securities unless the Company has first excluded
all outstanding securities, the holders of which are not contractually entitled to inclusion of
such securities in such Registration Statement or are not contractually entitled to pro rata
inclusion with the Registrable Securities and (ii) after giving effect to the immediately preceding
proviso, any such exclusion of Registrable Securities shall be made pro rata among the Investor and
the holders of other securities having the contractual right to inclusion of their securities in
such Registration Statement by reason of demand registration rights, in proportion to the number of
Registrable Securities or other securities, as applicable, sought to be included by the Investor or
other holder.
(c) If an offering in connection with which the Investor is entitled to registration under
this Section 6.7 is an underwritten offering, then the Investor whose Registrable
Securities are included in such Registration Statement shall, unless otherwise agreed by the
Company, offer and sell such Registrable Securities in an underwritten offering using the same
underwriter or underwriters and, subject to the provisions of this Agreement, on the same terms and
conditions as other shares of Common Stock included in such underwritten offering and shall enter
into an underwriting agreement in a form and substance reasonably satisfactory to the Company and
the underwriter or underwriters.
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ARTICLE VII
MISCELLANEOUS
MISCELLANEOUS
1.0 Termination. This Agreement may be terminated by the Company or the Investor, by
written notice to the other party, if the Closing has not been consummated by the third Trading Day
following the date of this Agreement; provided that no such termination will affect the right of
any party to xxx for any breach by the other party (or parties).
2.0 Fees and Expenses. Except as expressly set forth in the Transaction Documents to
the contrary, each party shall pay the fees and expenses of its advisers, counsel, accountants and
other experts, if any, and all other expenses incurred by such party incident to the negotiation,
preparation, execution, delivery and performance of this Agreement. Notwithstanding the foregoing,
the Company agrees to pay the fees, disbursements and expenses of counsel to the Investor, not to
exceed $25,000. 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 applicable Securities.
3.0 Entire Agreement. The Transaction Documents, together with the Exhibits and
Schedules thereto, contain the entire understanding of the parties with respect to the subject
matter hereof and supersede all prior agreements and understandings, oral or written, with respect
to such matters, which the parties acknowledge have been merged into such documents, exhibits and
schedules. At or after the Closing, and without further consideration, the Company will execute
and deliver to the Investor such further documents as may be reasonably requested in order to give
practical effect to the intention of the parties under the Transaction Documents.
4.0 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 or email at the facsimile number or email address specified in this Section prior to
6:30 p.m. (New York City time) on a Trading Day, (b) the next Trading Day after the date of
transmission, if such notice or communication is delivered via facsimile or email at the facsimile
number or email address specified in this Section on a day that is not a Trading Day or later than
6:30 p.m. (New York City time) on any Trading Day, (c) the Trading Day following the date of
deposit with a nationally recognized overnight courier service, or (d) upon actual receipt by the
party to whom such notice is required to be given. The addresses, facsimile numbers and email
addresses for such notices and communications are those set forth on the signature pages hereof, or
such other address or facsimile number as may be designated in writing hereafter, in the same
manner, by any such Person.
5.0 Amendments; Waivers. No provision of this Agreement may be waived or amended
except in a written instrument signed, in the case of an amendment, by the Company and the Investor
or, in the case of a waiver, by the party against whom enforcement of any such waiver is sought.
No waiver of any default with respect to any provision, condition or requirement of this Agreement
shall be deemed to be a continuing waiver in the future or a waiver of any subsequent default or a
waiver of any other provision, condition or requirement hereof, nor shall any delay or omission of
any party to exercise any right hereunder in any manner impair the exercise of any such right.
Notwithstanding the foregoing, a waiver or consent to depart from the provisions hereof with
respect to a matter that relates exclusively to the rights of the Investor under Article VI
may be given by the Investor.
-35-
6.0 Construction. The headings herein are for convenience only, do not constitute a
part of this Agreement and shall not be deemed to limit or affect any of the provisions hereof.
The language used in this Agreement will be deemed to be the language chosen by the parties to
express their mutual intent, and no rules of strict construction will be applied against any party.
7.0 Successors and Assigns. This Agreement shall be binding upon and inure to the
benefit of the parties and their successors and permitted assigns. The Company may not assign this
Agreement or any rights or obligations hereunder without the prior written consent of the Investor.
The Investor may assign its rights under this Agreement to any Person to whom the Investor assigns
or transfers any Securities, provided (i) such transferor agrees in writing with the transferee or
assignee to assign such rights, and a copy of such agreement is furnished to the Company after such
assignment, (ii) the Company is furnished with written notice of (x) the name and address of such
transferee or assignee and (y) the Registrable Securities with respect to which such registration
rights are being transferred or assigned, (iii) following such transfer or assignment, the further
disposition of such securities by the transferee or assignee is restricted under the Securities Act
and applicable state securities laws, (iv) such transferee agrees in writing to be bound, with
respect to the transferred Securities, by the provisions hereof that apply to the “Investor” and
(v) such transfer shall have been made in accordance with the applicable requirements of this
Agreement and with all laws applicable thereto.
8.0 No Third-Party Beneficiaries. This Agreement is intended for the benefit of the
parties hereto and their respective successors and permitted assigns and is not for the benefit of,
nor may any provision hereof be enforced by, any other Person, except that (i) each Indemnified
Party is an intended third party beneficiary of Section 6.4 and may enforce the provisions
of such section directly against the parties with such obligations thereunder and (ii) the
Kinderhook observer is an intended third party beneficiary of Section 4.7(f) of this
Agreement.
9.0 Governing Law; Venue; Waiver of Jury Trial. THE CORPORATE LAWS OF THE STATE OF
NEW YORK SHALL GOVERN ALL ISSUES CONCERNING THE RELATIVE RIGHTS OF THE COMPANY AND ITS
STOCKHOLDERS, WITHOUT REGARD TO ITS CONFLICTS OF LAW PROVISIONS. ALL QUESTIONS CONCERNING THE
CONSTRUCTION, VALIDITY, ENFORCEMENT AND INTERPRETATION OF THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK. THE COMPANY AND INVESTOR HEREBY
IRREVOCABLY SUBMIT TO THE NON-EXCLUSIVE JURISDICTION OF THE STATE AND FEDERAL COURTS SITTING IN THE
CITY OF NEW YORK, BOROUGH OF MANHATTAN FOR THE ADJUDICATION OF ANY DISPUTE BROUGHT BY THE COMPANY
OR THE INVESTOR HEREUNDER, 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 WAIVE, AND AGREE NOT TO ASSERT IN ANY SUIT, ACTION OR PROCEEDING BROUGHT BY
THE COMPANY OR THE INVESTOR, ANY CLAIM THAT IT IS NOT PERSONALLY SUBJECT TO THE JURISDICTION OF ANY
SUCH COURT, OR 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
-36-
(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 AND INVESTOR HEREBY WAIVE ALL RIGHTS TO
A TRIAL BY JURY.
10.0 Survival. The representations and warranties, agreements and covenants contained
herein shall survive the Closing.
11.0 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 email attachment, 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 or email-attached signature page were an original
thereof.
12.0 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.
13.0 Rescission and Withdrawal Right. Notwithstanding anything to the contrary
contained in (and without limiting any similar provisions of) the Transaction Documents, whenever
the Investor exercises a right, election, demand or option owed to the Investor by the Company
under a Transaction Document and the Company does not timely perform its related obligations within
the periods therein provided, then, prior to the performance by the Company of the Company’s
related obligation, the Investor may rescind or withdraw, in its sole discretion from time to time
upon written notice to the Company, any relevant notice, demand or election in whole or in part
without prejudice to its future actions and rights.
14.0 Replacement of Securities. If any certificate or instrument evidencing any
Securities is mutilated, lost, stolen or destroyed, the Company shall issue or cause to be issued
in exchange and substitution for and upon cancellation thereof, or in lieu of and substitution
therefor, a new certificate or instrument, but only upon receipt of evidence reasonably
satisfactory to the Company of such loss, theft or destruction and 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 Securities.
15.0 Remedies. In addition to being entitled to exercise all rights provided herein
or granted by law, including recovery of damages, the Investor and the Company will be entitled to
seek specific performance under the Transaction Documents. The parties agree that monetary damages
may not be adequate compensation for any loss incurred by reason of any breach of obligations
described in the foregoing sentence and hereby agree to waive in any action for specific performance of any such obligation (other than in connection with any action for a temporary
restraining order) the defense that a remedy at law would be adequate.
-37-
16.0 Payment Set Aside. To the extent that the Company makes a payment or payments to
the Investor hereunder or the Investor enforces or exercises its rights hereunder, and such payment
or payments or the proceeds of such enforcement or exercise or any part thereof are subsequently
invalidated, declared to be fraudulent or preferential, set aside, recovered from, disgorged by or
are required to be refunded, repaid or otherwise restored to the Company by a trustee, receiver or
any other person under any law (including, without limitation, any bankruptcy law, state or federal
law, common law or equitable cause of action), then to the extent of any such restoration the
obligation or part thereof originally intended to be satisfied shall be revived and continued in
full force and effect as if such payment had not been made or such enforcement or setoff had not
occurred.
17.0 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, 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.
18.0 Further Assurances. At any time or from time to time after the date hereof, the
parties agree to cooperate with each other, and at the request of any other party, to execute and
deliver any further instruments or documents and to take all such further action as the other party
may reasonably request in order to evidence or effectuate the consummation of the transactions
contemplated hereby and to otherwise carry out the intent of the parties hereunder
19.0 Specific Enforcement. The parties acknowledge and agree that the parties hereto
would be irreparably damaged in the event any of the provisions of this Agreement were not
performed by the parties in accordance with their specific terms or were otherwise breached.
Accordingly, it is agreed that the parties hereto shall be entitled to an injunction to prevent
breaches of this Agreement and to specifically enforce this Agreement and the terms and provisions
hereof in addition to any other remedy to which the parties may be entitled at law or in equity.
[SIGNATURE PAGES TO FOLLOW]
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IN WITNESS WHEREOF, the parties hereto have caused this Securities Purchase Agreement to
be duly executed by their respective authorized signatories as of the date first indicated above.
| LIBERATOR MEDICAL HOLDINGS, INC. |
||||
| By: | /s/ Xxxx X. Xxxxxxxxx | |||
| Name: | Xxxx X. Xxxxxxxxx | |||
| Title: | President | |||
| Address for Notice: Liberator Medical Holdings, Inc. 0000 XX Xxxx Xxxxxxx Xxxxxx, XX 00000 Telephone: 000-000-0000 Facsimile No.: (000) 000-0000 Attn: Xxxx X. Xxxxxxxxx, President With a copy to: Siegel, Lipman, Xxxxx, Xxxxxxx & Xxxxxx, XXX Xxx Xxxxx, Xxxxx 000 0000 Xxxx Xxxxxx Xxxx Xxxx Xxxxx, XX 00000 Tel: 000-000-0000 Fax: 000-000-0000 Email: xxxxxxxx@xxxxxxx.xxx Attn: Xxxxxxxx Xxxxxxx, Esq. |
||||
COMPANY SIGNATURE PAGE
Investor Signature Page
By its execution and delivery of this signature page, the undersigned Investor hereby joins in
and agrees to be bound by the terms and conditions of the Securities Purchase Agreement dated as of
March 9, 2010 (the “Purchase Agreement”) by and between Liberator Medical Holdings, Inc. and the
Investor (as defined therein), as to the number of shares of Common Stock set forth below, and
authorizes this signature page to be attached to the Purchase Agreement or counterparts thereof.
| Kinderhook Partners L.P. |
||||
| By: | /s/ Xxxxxx Xxxx | |||
| Name: | Xxxxxx Xxxx | |||
| Title: | Associate | |||
| Address: 0 Xxxxxxxxx Xxxxx Xxxxx 000 Xxxx Xxx, XX 00000 Tax ID No.: 00-0000000 Telephone No.: (000) 000-0000 Facsimile No.: (000) 000-0000 Email Address: xxxxx@xxxxxxxxxxxxxxxxxx.xxx Number of Shares: 4,666,667 Aggregate Purchase Price: $7,000,000 |
||||
Delivery Instructions (if different than above):
c/o: Xxxx Xxxxxxx, Xxxx Xxxxx, Deutsche Bank
Address: 000 Xxxx Xxxxxx (0 Xxxx)
Xxx Xxxx, XX 00000
Address: 000 Xxxx Xxxxxx (0 Xxxx)
Xxx Xxxx, XX 00000
Telephone No.: (000) 000-0000
Facsimile No. : (000) 000-0000
Facsimile No. : (000) 000-0000
Other Special Instructions: Kinderhook Partners L.P. (Liberator Medical Holdings Purchase)
| Exhibits: | ||
| A | Instruction Sheet for Investor |
|
| B | Opinion of Company Corporate Counsel |
|
| C | Plan of Distribution |
|
| D | Company Transfer Agent Instructions |
Exhibit A
INSTRUCTION SHEET FOR INVESTOR
(to be read in conjunction with the entire Securities Purchase Agreement)
| A. | Complete the following items in the Securities Purchase Agreement: |
| 1. | Complete and execute the Investor Signature Page. The Agreement must be executed by an individual authorized to bind the Investor. | ||
| 2. | Exhibit B-1 — Stock Certificate Questionnaire: | ||
| Provide the information requested by the Stock Certificate Questionnaire; | |||
| 3. | When applicable — Exhibit B-2 — Registration Statement Questionnaire: | ||
| Provide the information requested by the Investor Certificate. | |||
| 4. | Return, via facsimile, the signed Securities Purchase Agreement including the properly completed Exhibits B-1 through B-2, to: |
Facsimile:
Telephone:
Attn:
Telephone:
Attn:
| 5. | After completing instruction number five (5) above, deliver the original signed Securities Purchase Agreement including the properly completed Exhibits B-1 through B-2 to: |
Address:
| B. | Instructions regarding the wire transfer of funds for the purchase of the Securities will be telecopied to the Investor by the Company at a later date. |
-2-
Exhibit B-1
STOCK CERTIFICATE QUESTIONNAIRE
Please provide us with the following information:
1.
|
The exact name that the Securities are to be registered in (this is the name that will appear on the stock certificate(s)). You may use a nominee name if appropriate: | |||
2.
|
The relationship between the Investor of the Securities and the Registered Holder listed in response to item 1 above: | |||
3.
|
The mailing address, telephone and telecopy number and email address of the Registered Holder listed in response to item 1 above: | |||
4.
|
The Tax Identification Number of the Registered Holder listed in response to item 1 above: | |||
Exhibit B-2
REGISTRATION STATEMENT QUESTIONNAIRE
(To be delivered promptly after the Investor Requests a Registration Pursuant to Section 6.1)
In connection with the Registration Statement, please provide us with the following
information regarding the Investor.
1. Please state your organization’s name exactly as it should appear in the Registration
Statement:
Except as set forth below, your organization does not hold any equity securities of the
Company on behalf of another person or entity.
State any exceptions here:
If the Investor is not a natural person, please identify the natural person or persons who
will have voting and investment control over the Securities owned by the Investor:
2. Address of your organization:
| Telephone: | ||||
| Fax: | ||||
| Contact Person: | ||||
3. Have you or your organization had any position, office or other material relationship within
the past three years with the Company or its affiliates? (Include any relationships involving you
or any
of your affiliates, officers, directors, or principal equity holders (5% or more) that has held any
position or office or has had any other material relationship with the Company (or its predecessors
or affiliates) during the past three years.)
Yes No
If yes, please indicate the nature of any such relationship below:
4. Are you the beneficial owner of any other securities of the Company? (Include any equity
securities that you beneficially own or have a right to acquire within 60 days after the date
hereof, and as to which you have sole voting power, shared voting power, sole investment power or
shared investment power.)
Yes No
If yes, please describe the nature and amount of such ownership as of a recent date.
5. Except as set forth below, you wish that all the shares of the Company’s common stock
beneficially owned by you or that you have the right to acquire from the Company be offered for
your account in the Registration Statement.
State any exceptions here:
6. Have you made or are you aware of any arrangements relating to the distribution of the
shares of the Company pursuant to the Registration Statement?
Yes No
If yes, please describe the nature and amount of such arrangements.
-2-
1. FINRA Matters
(a) State below whether (i) you or any associate or affiliate of yours are a member of FINRA,
a controlling shareholder of a FINRA member, a person associated with a member, a direct or
indirect affiliate of a member, or an underwriter or related person with respect to the proposed
offering; (ii) you or any associate or affiliate of yours owns any stock or other securities of any
FINRA member not purchased in the open market; or (iii) you or any associate or affiliate of yours
has made any outstanding subordinated loans to any FINRA member. If you are a general or limited
partnership, a no answer asserts that no such relationship exists for you as well as for each of
your general or limited partners.
Yes: No:
If “yes,” please identify the FINRA member and describe your relationship, including, in the
case of a general or limited partner, the name of the partner:
If you answer “no” to Question 7(a), you need not respond to Question 7(b).
( ) State below whether you or any associate or affiliate of yours has been an underwriter,
or a controlling person or member of any investment banking or brokerage firm which has been or
might be an underwriter for securities of the Corporation or any affiliate thereof including,
but not limited to, the common stock now being registered.
Yes: No:
If “yes,” please identify the FINRA member and describe your relationship, including, in the
case of a general or limited partner, the name of the partner.
-3-
ACKNOWLEDGEMENT
The undersigned hereby agrees to notify the Company promptly of any changes in the foregoing
information which should be made as a result of any developments, including the passage of time.
The undersigned also agrees to provide the Company and the Company’s counsel any and all such
further information regarding the undersigned promptly upon request in connection with the
preparation, filing, amending, and supplementing of the Registration Statement (or any prospectus
contained therein). The undersigned hereby consents to the use of all such information in the
Registration Statement.
The undersigned understands and acknowledges that the Company will rely on the information set
forth herein for purposes of the preparation and filing of the Registration Statement.
The undersigned understands that the undersigned may be subject to serious civil and criminal
liabilities if the Registration Statement, when it becomes effective, either contains an untrue
statement of a material fact or omits to state a material fact required to be stated in the
Registration Statement or necessary to make the statements in the Registration Statement not
misleading. The undersigned represents and warrants that all information it provides to the
Company and its counsel is currently accurate and complete and will be accurate and complete at the
time the Registration Statement becomes effective and at all times subsequent thereto, and agrees
during the Effectiveness Period and any additional period in which the undersigned is making sales
of Shares under and pursuant to the Registration Statement, and agrees during such periods to
notify the Company immediately of any misstatement of a material fact in the Registration
Statement, and of the omission of any material fact necessary to make the statements contained
therein not misleading.
Dated:
| Name | ||||
| Signature | ||||
| Name and Title of Signatory |
-4-
Exhibit C
OPINION POINTS OF COMPANY COUNSEL
1. The Company is a corporation duly incorporated, validly existing and in good
standing under the laws of the State of Nevada, with corporate power and authority to own,
lease and operate its properties and to conduct its business as described in the SEC Reports
and to enter into and perform its obligations under the Securities Purchase Agreement. The
Company is duly qualified to do business as a foreign corporation and is in good standing
under the laws of Florida and [any other states].
2. The Company has all necessary corporate power and authority to execute and deliver
the Transaction Documents, to perform its obligations thereunder and to consummate the other
Transactions.
3. Each of the Transaction Documents has been duly authorized, executed and delivered
by the Company and constitutes a valid and binding agreement of the Company, enforceable
against the Company in accordance with its terms.
4. The Company has all necessary power and authority to issue and deliver the shares of
Common Stock; the shares of Common Stock to be issued pursuant to this Agreement have been
duly authorized, and, when duly issued and delivered to holders of the Common Stock, the
Common Stock will be duly and validly issued, fully paid and nonassessable and will be
issued in compliance with federal and state securities laws. None of the shares of Common
Stock will be issued in violation of any preemptive rights, rights of first refusal or other
similar rights to subscribe for or purchase securities of the Company.
5. The execution and delivery of the Transaction Documents by the Company, the
performance by the Company of its obligations thereunder (other than performance by the
Company of its obligations under the indemnification sections of such agreements, as to
which no opinion need be rendered), including the issuance and sale of the Securities (i)
will not result in any violation of the provisions of the charter or by-laws of the Company
or any subsidiary; (ii) will not constitute a breach of, default, or “Debt Repayment
Triggering Event” under, or result in the creation or imposition of any security interest,
mortgage, pledge, lien, charge, encumbrance or adverse claim upon any property or assets of
the Company or any of its subsidiaries, pursuant to any material existing instrument; (iii)
will not result in any violation of any federal, Nevada, Florida, Delaware or New York law
or, to the best knowledge of such counsel any administrative regulation or administrative or
court decree, applicable to the Company or any of its subsidiaries; or (v) will not require
any consent, approval, authorization or other order of, or registration or filing with, any
court or other governmental or regulatory authority or agency, except (a) with respect to
the transactions contemplated by the Securities Purchase Agreement as may be required under
the Securities Act and the Exchange Act, (b) as required by the state securities or “blue
sky” laws and (c) for such consents, approvals, authorizations, orders, filings or
registrations which have been obtained or made. A “Debt Repayment Triggering Event” means
any
-5-
event or condition that gives, or with the giving of notice or lapse of time would give
the holder of any note, debenture or other evidence of indebtedness (or any person acting on
such holder’s behalf) the right to require the repurchase, redemption or repayment of all or
a portion of such indebtedness by the Company or any of its subsidiaries.
6. Assuming the accuracy of the representations and warranties of the Investor
contained in the Securities Purchase Agreement and the compliance of such party with the
agreements set forth herein and therein, it is not necessary, in connection with the
issuance and sale of the Securities, in the manner contemplated by Transaction Documents, to
register the Securities under the Securities Act.
7. The Company is not, and after receipt of payment for the Securities will not be, an
“investment company” within the meaning of Investment Company Act.
8. The Company has an authorized capitalization as set forth in its SEC Reports, and
all of the outstanding shares of Common Stock have been duly authorized and validly issued,
are fully paid and nonassessable and conform to the description thereof contained in the SEC
Reports. To our knowledge, none of the outstanding shares of Common Stock were issued in
violation of any preemptive rights, rights of first refusal or other similar rights to
subscribe for or purchase securities of the Company.
9. Except as disclosed in the SEC Reports, to our knowledge (i) there are no
outstanding securities convertible into or exchangeable for, or warrants, options or rights
issued by the Company to purchase any shares of Common Stock, (ii) there are no statutory,
contractual, preemptive or other rights to subscribe for or to purchase any shares of Common
Stock and (iii) there are no restrictions upon transfer of the Common Stock pursuant to the
Company’s charter or bylaws or the General Corporation Law of the State of Nevada or
otherwise.
10. To our knowledge, none of the Securities will be issued in violation of any
preemptive rights, rights of first refusal or other similar rights to subscribe for or
purchase securities of the Company.
11. Neither the Company nor any of its subsidiaries is (i) in violation of its charter
or by laws, (ii) is in default under any indenture, mortgage, loan or credit agreement,
note, contract, franchise, lease or other instrument to which the Company or any of its
subsidiaries is a party or by which it or any of them may be bound, or to which any of the
property or assets of the Company or any of its subsidiaries is subject, except for such
defaults as would not, individually or in the aggregate, result in a Material Adverse Effect
or (iii) is in violation of any law, administrative regulation or administrative or court
decree applicable to the Company or any subsidiary or has failed to obtain any material
license, permit, certificate, franchise or other governmental authorization or permit
necessary to the ownership of its property or to the conduct of its business.
12. To the knowledge of such counsel and other then as set forth in the SEC Reports,
there are no legal or governmental proceedings pending to which the Company is a party, or
-6-
with respect to the any of the Transaction Documents or any transactions contemplated
thereby, or of which any property or assets of the Company is subject which, if determined
adversely to the Company, might have a Material Adverse Effect on the financial position,
stockholders’ equity, results of operations or business of the Company; and, to the
knowledge of such counsel, no such proceedings are overtly threatened or contemplated by
governmental authorities or threatened by others.
-7-
Exhibit D
PLAN OF DISTRIBUTION
The selling stockholder may, from time to time, sell any or all of its shares of common stock on
any stock exchange, market or trading facility on which the shares are traded or in private
transactions. These sales may be at fixed or negotiated prices. The selling stockholder may use
any one or more of the following methods when selling shares:
| • | ordinary brokerage transactions and transactions in which the broker-dealer solicits purchasers; |
| • | block trades in which the broker-dealer will attempt to sell the shares as agent but may position and resell a portion of the block as principal to facilitate the transaction; |
| • | purchases by a broker-dealer as principal and resale by the broker-dealer for its account; |
| • | an exchange distribution in accordance with the rules of the applicable exchange; |
| • | privately negotiated transactions; |
| • | short sales; |
| • | broker-dealers may agree with the selling stockholder to sell a specified number of such shares at a stipulated price per share; |
| • | a combination of any such methods of sale; and |
| • | any other method permitted pursuant to applicable law. |
The selling stockholder may also sell shares under Rule 144 under the Securities Act, if
available, rather than under this prospectus.
Broker-dealers engaged by the selling stockholder may arrange for other brokers-dealers to
participate in sales. Broker-dealers may receive commissions or discounts from the selling
stockholder (or, if any broker-dealer acts as agent for the purchaser of shares, from the
purchaser) in amounts to be negotiated. The selling stockholder does not expect these commissions
and discounts to exceed what is customary in the types of transactions involved. Any profits on
the resale of shares of common stock by a broker-dealer acting as principal might be deemed to be
underwriting discounts or commissions under the Securities Act. Discounts, concessions,
commissions and similar selling expenses, if any, attributable to the sale of shares will be borne
by a selling stockholder. The selling stockholder may agree to indemnify any agent, dealer or
broker-dealer that participates in transactions involving sales of the shares if liabilities are
imposed on that person under the Securities Act.
The selling stockholder may from time to time pledge or grant a security interest in some or
all of the shares of common stock owned by it and, if it defaults in the performance of its secured
obligations, the pledgees or secured parties may offer and sell the shares of common stock from
time to time under this prospectus after we have filed a supplement to this prospectus under Rule
424(b)(3) or other applicable provision of the Securities Act of 1933 supplementing or amending the
list of selling stockholders to include the pledgee, transferee or other successors in interest as
a selling stockholder under this prospectus.
The selling stockholder also may transfer the shares of common stock in other circumstances,
in which case the transferees, pledgees or other successors in interest will be the selling
beneficial owners for purposes of this prospectus and may sell the shares of common stock from time
to time under this prospectus after we have filed a supplement to this prospectus under Rule
424(b)(3) or other applicable provision of the Securities Act of 1933 supplementing or amending the
list of selling stockholders to include the pledgee, transferee or other successors in interest as
selling stockholders under this prospectus.
The selling stockholder and any broker-dealers or agents that are involved in selling the
shares of common stock may be deemed to be “underwriters” within the meaning of the Securities Act
in connection with such sales. In such event, any commissions received by such broker-dealers or
agents and any profit on the resale of the shares of common stock purchased by them may be deemed
to be underwriting commissions or discounts under the Securities Act.
We are required to pay all fees and expenses incident to the registration of the shares of
common stock. We have agreed to indemnify the selling stockholder against certain losses, claims,
damages and liabilities, including liabilities under the Securities Act.
The selling stockholder has advised us that it has not entered into any agreements,
understandings or arrangements with any underwriters or broker-dealers regarding the sale of their
shares of common stock, nor is there an underwriter or coordinating broker acting in connection
with a proposed sale of shares of common stock by the selling stockholder. If we are notified by
the selling stockholder that any material arrangement has been entered into with a broker-dealer
for the sale of shares of common stock, if required, we will file a supplement to this prospectus.
If the selling stockholder use this prospectus for any sale of the shares of common stock, it will
be subject to the prospectus delivery requirements of the Securities Act.
The anti-manipulation rules of Regulation M under the Securities Exchange Act of 1934 may
apply to sales of our common stock and activities of the selling stockholder.
-2-
Exhibit E
COMPANY TRANSFER AGENT INSTRUCTIONS
Jersey Transfer & Trust Company, Inc.
000 Xxxxxxxxxx Xxxxxx
Xxxxxx, XX 00000-0000
Attention: Liberator Medical Holdings, Inc. Account Representative
000 Xxxxxxxxxx Xxxxxx
Xxxxxx, XX 00000-0000
Attention: Liberator Medical Holdings, Inc. Account Representative
Ladies and Gentlemen:
Reference is made to that certain Securities Purchase Agreement, dated as of March 9, 2010 (the
“Agreement”), by and between Liberator Medical Holdings, Inc., a Nevada corporation (the
“Company”), and Kinderhook Partners, L.P. (the “Holder”), pursuant to which the Company is issuing
to the Holder shares (the “Shares”) of Common Stock of the Company, par value $.001 per share (the
“Common Stock”).
In connection with the consummation of the transactions contemplated by the Agreement, this
letter shall serve as our irrevocable authorization and direction to you:
(i) to issue an aggregate of 4,666,667 shares of our Common Stock in the name of the Holder.
The certificate should bear the legend set forth on Annex I attached hereto and “stop
transfer” instructions should be placed against their subsequent transfer. Kindly deliver the
certificate to the respective address set forth on Annex I via hand delivery or overnight
courier. We confirm that these shares will be validly issued, fully paid and non-assessable upon
issuance; and
(ii) to issue (provided that you are the transfer agent of the Company at such time)
certificates for shares of Common Stock upon transfer or resale of the Shares and receipt by you of
certificate(s) for the Shares so transferred or sold (duly endorsed or accompanied by stock powers
duly endorsed, in each case with signatures guaranteed and otherwise in form eligible for
transfer).
You acknowledge and agree that so long as you have previously received (a) written
confirmation from the Company’s legal counsel that either (i) a registration statement covering
resales of the Shares has been declared effective by the Securities and Exchange Commission (the
“SEC”) under the Securities Act of 1933, as amended (the “Securities Act”), or (ii) the Shares are
eligible for sale in conformity with Rule 144 (without volume limitations) under the Securities Act
(“Rule 144”) and (b) if applicable, a copy of such registration statement, then, unless otherwise
required by law, within three (3) Business Days of your receipt of certificates representing the
Shares, you shall issue the certificates representing the Shares to the Holder or their
transferees, as the case may be, registered in the names of such Holder or transferees, as the case
may be, and such certificates shall not bear any legend restricting transfer of the Shares thereby
and should not be subject to any stop-transfer restriction. Any certificates tendered for transfer
shall be endorsed or with stock powers attached, signatures guaranteed, and otherwise in form
necessary to affect transfer.
A form of written confirmation from the Company’s outside legal counsel that a registration
statement covering resales of the Shares has been declared effective by the SEC under the
Securities Act is attached hereto as Annex I.
Please be advised that the Holder is relying upon this letter as an inducement to enter into
the Agreement and, accordingly, it is a third party beneficiary to these instructions.
Please execute this letter in the space indicated to acknowledge your agreement to act in
accordance with these instructions. Should you have any questions concerning this matter, please
contact our counsel, Xxxxxxxx Xxxxxxx, Esq., at (000) 000-0000.
| Very truly yours, LIBERATOR MEDICAL HOLDINGS, INC. |
||||
| By: | ||||
| Name: | ||||
| Title: | ||||
| THE FOREGOING INSTRUCTIONS ARE ACKNOWLEDGED AND AGREED TO this ___day of March, 2010 JERSEY TRANSFER & TRUST COMPANY, INC. |
||||
| By: | ||||
| Name: | ||||
| Title: | ||||
Enclosures
-2-
ANNEX II
FORM OF NOTICE OF EFFECTIVENESS OF REGISTRATION STATEMENT [AT
SUCH TIME AS THE SHARES ARE FREELY TRADABLE UNDER RULE 144]
SUCH TIME AS THE SHARES ARE FREELY TRADABLE UNDER RULE 144]
Jersey Transfer & Trust Company, Inc.
000 Xxxxxxxxxx Xxxxxx
Xxxxxx, XX 00000-0000
Attention: Liberator Medical Holdings, Inc. Account Representative
000 Xxxxxxxxxx Xxxxxx
Xxxxxx, XX 00000-0000
Attention: Liberator Medical Holdings, Inc. Account Representative
Re: Liberator Medical Holdings, Inc.
Ladies and Gentlemen:
We are counsel to Liberator Medical Holdings, Inc., a Nevada corporation (the “Company”), and
have represented the Company in connection with that certain Securities Purchase Agreement, dated
as of March 9, 2010 (the “Securities Purchase Agreement”), entered into by and between the Company
and Kinderhook Partners, L.P. (the “Purchaser”) pursuant to which the Company issued to the
Purchaser shares of Common Stock of the Company, par value $.001 per share (the “Shares”).
[Pursuant to the Securities Purchase Agreement, the Company agreed to register the resale of the
Shares (collectively, the “Registrable Securities”) under the Securities Act of 1933, as amended
(the “Securities Act”). In connection with the Company’s obligations under the Securities Purchase
Agreement, on , 20[___], the Company filed a Registration Statement on
Form S-3 (File No. 333-[ ]) (the “Registration Statement”) with the
Securities and Exchange Commission (the “Commission”) relating to the Registrable Securities which
names the Purchaser as a selling shareholder thereunder.]
[In connection with the foregoing, we advise you that a member of the SEC’s staff has advised
us by telephone that the SEC has entered an order declaring the Registration Statement effective
under the Securities Act at [a.m.][p.m.] on ,
20[___], and we have no knowledge, after telephonic inquiry of a member of the staff, that any stop
order suspending its effectiveness has been issued or that any proceedings for that purpose are
pending before, or threatened by, the Commission and the Registrable Securities are available for
resale under the Securities Act pursuant to the Registration Statement.]
This letter shall serve as our standing notice to you that the Shares may be freely
transferred by the Purchaser pursuant to [the Registration Statement so long as the Holder
certifies they will comply with the plan of distribution description in connection with sales or
transfers of the Shares set forth in the Registration Statement and with the prospectus delivery
requirements of the Securities Act, to the extent such delivery requirement are applicable] [and in
conformity with Rule 144 (without volume limitations) under the Securities Act of 1933, as
amended]. You need not require further letters from us to effect any future legend-free issuance or
reissuance of shares of the Shares to the Purchaser or the transferees of the Purchaser, as the
case may be, as contemplated by the Company’s Irrevocable Transfer Agent Instructions dated , 20[___].
-3-
Schedule 3.1(d)
NO CONFLICTS
Securities Purchase Agreement, dated as of May 22, 2008, by and among Liberator
Medical Holdings, Inc., Liberator Medical Supply, Inc., and the Buyers listed thereto.
Securities Purchase Agreement, dated as of October 17, 2008, by and among Liberator
Medical Holdings, Inc., Liberator Medical Supply, Inc., Liberator Health and Education
Services, Inc., and the Buyers listed thereto.
Registration Rights Agreement dated as of May 22, 2008, by and among Liberator Medical
Holdings, Inc., and the Purchasers listed thereto, as supplemented on October 17, 2008
Schedule 3.1(f)
CAPITALIZATION
The authorized and outstanding capital stock of the Company consists of 200,000,000 authorized
shares of common stock, $0.001 par value per share, of which 34,029,666 shares are outstanding as
of the date of this Agreement, net of 89,600 shares of Treasury Stock. The issued and outstanding
shares of common stock have been duly and validly authorized and issued and are fully paid and
non-assessable. Except for (i) 2,000,000 shares of common stock which are allocated to stock
options granted and available for awards under the Company’s Equity Incentive Plan; (ii) warrants
to purchase an aggregate of 13,791,602 shares of common stock, (iii) convertible debt instruments
convertible into 7,865,834 shares of common stock, (iv) 338,219 shares of common stock which are
reserved for the Employee Stock Purchase Plan and (v) such other commitments to issue securities
and other securities as disclosed in the Admission Document or the Announcements, there are no
options, warrants, pre-emptive rights or other rights to subscribe for or purchase, agreements or
other obligations to issue, or rights to convert any obligations into or exchange any securities
for, shares of capital stock of or ownership interests in the Company are outstanding as of the
date hereof. All of the issued and outstanding shares of capital stock of the Company have been
offered, issued and sold by the Company in compliance with applicable U.S. federal and state
securities laws. All the outstanding shares of capital stock of each subsidiary of the Company
have been duly and validly authorized and issued and are fully paid and non-assessable.
-2-
Schedule 3.1(g)
SEC REPORTS
None.
-3-
Schedule 3.1(h)
MATERIAL CHANGES
None.
-4-
Schedule 3.1(o)
REGISTRATION RIGHTS
There are 829,000 warrants expiring between February 1, 2013, and April 17, 2013, having piggyback
registration rights.
Registration Rights Agreement with Millennium Partners, L.P., described in Schedule 3.1(d).
-5-
