EXHIBIT 4.2
JUNE 2001
(1) STRATUS SERVICES GROUP, INC
(2) XXXXXXX.XXX LIMITED
SUBSCRIPTION AGREEMENT
CONTENTS
CLAUSE PAGE
1. DEFINITIONS AND INTERPRETATION 1
2. CONDITIONS PRECEDENT 2
3. FIRST SUBSCRIPTION 2
4. SECOND SUBSCRIPTION 3
5. WARRANTIES 3
6. APPLICATION 3
7. REGISTRATION RIGHTS 3
8. FURTHER ASSURANCE 4
9. ENTIRE AGREEMENT 4
10. SEVERABILITY 4
11. WAIVER 5
12. VARIATION 5
13. NO PARTNERSHIP 5
14. CONFIDENTIALITY 5
15. ANNOUNCEMENTS 7
16. ASSIGNMENT 7
17. NOTICES 8
18. AGENT FOR SERVICE 9
19. COSTS AND EXPENSES 10
20. TIME OF THE ESSENCE 10
21. RIGHTS OF THIRD PARTIES (EXCLUDING) 10
22. GOVERNING LAW AND JURISDICTION 10
SCHEDULE 1 - WARRANTIES 12
SCHEDULE 2 - REGISTRATION RIGHTS 23
THIS AGREEMENT is made on 2001
BETWEEN:
(1) STRATUS SERVICES GROUP, INC whose principal office is at 000 Xxxxx Xxxx,
Xxxxx 000 Xxxxxxxxx, Xxx Xxxxxx 00000 ("Stratus");
(2) XXXXXXX.XXX LIMITED whose registered office is at Xxxx House, Sovereign
Court, Ermine Business Park, Huntington, Cambs PE28 6XU ("Artisan")
RECITALS:-
(A) Stratus wishes to raise up to US$2.1 million of additional equity capital
to finance the repayment of US$2.1 million nominal of its 6% Convertible
Debenture dated December 4, 2000.
(B) Artisan wishes to subscribe up to US$2.1 million for equity share capital
of Stratus on the terms set out below.
IT IS AGREED as follows:-
1. DEFINITIONS AND INTERPRETATION
1.1 In this agreement the following words and expressions shall respectively
have the following meanings:-
Market Value The average closing market price per Stratus
share over the five trading days immediately
preceding that on which the relevant Stratus
shares are allotted and issued.
Stratus Shares Shares of common stock of Stratus of US$0.01
par value.
1.2 References herein to the masculine gender, to an individual and to the
singular number shall include references to the feminine gender, to a
corporation and to the plural number respectively.
1.3 References to Clauses and Schedules are references respectively to Clauses
of and Schedules to this Agreement. References to paragraphs are (unless
otherwise stated) to paragraphs of the Clause in which the references
appears.
PAGE 2
1.4 Words and phrases defined in the Companies Xxx 0000 shall (unless the
context otherwise requires) have the same meanings herein.
1.5 The Schedules hereto shall form part of this Agreement as if the contents
thereof were expressly set out herein.
1.6 The headings in this Agreement and the Schedules hereto have been inserted
for convenience only and shall not affect its interpretation or
construction in any way.
1.7 Where any provision of the Articles conflicts with the provisions hereof,
the parties hereby agree that the provisions hereof shall prevail, to the
intent that they shall if necessary in any case procure the amendment of
the Articles to the extent required to enable the Company to be
administered as provided herein
2. CONDITIONS PRECEDENT
This agreement is conditional on Stratus delivering to Artisan:
2.1 an opinion signed by Counsel satisfactory to Artisan and in a form
satisfactory to Artisan as to the due incorporation, good standing and
such other matters relating to Stratus and the due execution of this
Agreement and the due authorisation and valid issue of the Stratus Shares
as Artisan may require, including that registration under the 1933 Act is
not required;
2.2 certified copies of the constitutional documents of Stratus and of the
documents constituting its 6% Convertible Debenture dated December 4, 2000
2.3 a certified copy of the minutes of the meeting of the Board of Stratus
approving this Agreement.
If this condition shall not be satisfied on the date hereof (or such later
date if any as the parties may agree) this agreement shall be void ab
initio and neither party shall have any liability under it.
3. FIRST SUBSCRIPTION
Subject to the satisfaction of the condition precedent mentioned in clause
2 above Stratus shall issue and deliver 900,000 Stratus Shares to Artisan
at a subscription price of US$1.00 per share and shall procure the
preparation and delivery to Artisan of a certificate in respect of such
shares against payment by Artisan of the sum of US$900,000 by telegraphic
transfer to Mellon Bank Xxxxxxxxxx, XX 00000-0000 ABA
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Routing # 0430-00261; Credit to Xxxxxxx Xxxxx Denver Service Center
Account # 0000000 FBO: Stratus Services Group, Inc. Account # 721-07H03.
4. SECOND SUBSCRIPTION
Subject to the satisfaction of the condition precedent referred to in
clause 2 above on such date (if any) as Stratus and Artisan shall mutually
determine (being not earlier than 15 August 2001 and not later than 31
December 2001) Stratus, upon the mutual agreement of Stratus and Artisan,
may elect to procure that a meeting of its board of directors shall be
held at which there shall be allotted and issued to Artisan a number of
Stratus Shares (mutually determined by Stratus and Artisan) for
subscription at Market Value, the aggregate Market Value of all of such
shares not exceeding US$1.2 million.
5. WARRANTIES AND UNDERTAKINGS
5.1 In consideration of Artisan agreeing to subscribe for the Stratus Shares
under this agreement, Stratus represents warrants and undertakes to
Artisan, in the terms of the representations, warranties and undertakings
set out in Part 2 of Schedule 1 to this agreement ("the Warranties") and
so that the rights and remedies of Artisan in respect of the Warranties
shall continue to subsist notwithstanding completion of the subscription
for the Stratus Shares under this agreement.
5.2 Artisan makes the representations set out in Part 3 of Schedule 1.
5.3 Stratus shall give Artisan notice of each meeting of its Board of
Directors, or any committee thereof, and shall provide copies of all
materials provided to the directors in connection with such meetings; and
Artisan shall be entitled to have one individual attend such meetings as
an observer.
6. APPLICATION
Stratus hereby undertakes to Artisan that the majority of the subscription
monies in respect of the Stratus Shares payable hereunder shall be applied
in or towards the repayment of the "December 4, 2000 6% Convertible
Debenture".
7. REGISTRATION RIGHTS
Artisan and it successors in title to the Stratus Shares subscribed by it
under this Agreement shall be entitled to the registration rights set out
in Schedule 2 to this Agreement.
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8. FURTHER ASSURANCE
Each party agrees to execute and deliver to the others or do as
appropriate all such other documents, assurances and acts as may be
reasonably necessary or desirable to fulfil the provisions of this
Agreement or to carry into effect the intentions of the parties as
expressed herein.
9. ENTIRE AGREEMENT
This Agreement constitutes the entire agreement between the parties with
respect to its subject matter. It supersedes all previous agreements and
understandings between the parties and each party acknowledges that, in
entering into this Agreement, it does not do so on the basis of or in
reliance upon any representations, promises, undertakings, warranties or
other statements (whether written or oral) of any nature whatsoever
except as expressly provided in this Agreement and accordingly all
conditions, warranties or other terms implied by statute or common law
are hereby excluded to the fullest extent permitted by law.
10. SEVERABILITY
10.1 If at any time any provision of this Agreement is or becomes illegal,
invalid or unenforceable in any respect under the law of any
jurisdiction, that shall not affect or impair:-
10.1.1 the legality, validity or enforceability in that jurisdiction of any
other provision of this Agreement; or
10.1.2 the legality, validity or enforceability under the law of any other
jurisdiction of that or any other provision of this Agreement.
10.2 Without prejudice to Clause 10.1, should any competent authority or
court indicate that this Agreement will only be exempt from, or fall
outside the scope of, any applicable laws or regulations if it is
amended in certain respects or any provision of this Agreement be
discovered or declared (whether formally or informally) by any competent
authority or court to be legally void or unenforceable in whole or in
part, then the parties shall meet with a view to reaching agreement upon
amendments that are acceptable to the competent authority or court and
most nearly achieve the object of the objectionable, allegedly void or
unenforceable provision and upon such other amendments as may be
appropriate, having regard to the changed nature of the Agreement.
PAGE 5
11. WAIVER
11.1 No delay, omission or forbearance by either party hereunder to exercise or
enforce any right, power or remedy arising under or in connection with
this Agreement shall operate as a waiver of that or any other right, power
or remedy, and any single or partial exercise or enforcement thereof shall
not preclude any other or further exercise or enforcement thereof or the
exercise or enforcement of any right, power or other remedy.
11.2 A waiver of a breach of or default under any of the terms of this
Agreement does not constitute a waiver of any other breach or default and
shall not affect the other terms of this Agreement.
11.3 A waiver of a breach of or default under any of the terms of this
Agreement will not prevent a party from subsequently requiring compliance
with the waived obligation in respect of that breach or continued default.
11.4 The rights, powers and remedies provided in this Agreement are cumulative
and (subject as otherwise provided in this Agreement) are not exclusive of
any right, power or remedy provided by law or by any other agreement or
document.
12. VARIATION
This Agreement may not be released, discharged, supplemented, amended,
varied or modified except by an instrument in writing signed by a duly
authorised representative of each of the parties hereto.
13. NO PARTNERSHIP
It is acknowledged and agreed by each of the parties that neither the
entry into nor the performance of the terms of this Agreement constitutes
or shall constitute a partnership or joint venture between the parties.
14. CONFIDENTIALITY
14.1 Each party undertakes to the other to keep secret and confidential all
information (whether written, pictorial, in machine readable form or oral)
and in whatever form received during the continuance of this Agreement or
obtained as a result of entering into or performing this Agreement
concerning the business or affairs of the other party including without
limitation:
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14.1.1 non-public information concerning the trade secrets, customers,
suppliers or business associations of the other party; and
14.1.2 non-public information concerning the financial, operational, technical
or commercial affairs of the other party
all of which shall be the "Confidential Information".
14.2 Each party undertakes to the other not to use the Confidential
Information of the other party except for the purposes of this Agreement
and shall not (without the prior written consent of the other party)
disclose the same to any person save to the extent necessary for the
performance of this Agreement and except to the extent that such
information:-
14.2.1 is required to be disclosed by the law of any relevant jurisdiction;
14.2.2 is required to be disclosed by any securities exchange or regulatory or
governmental body to which either party is subject or submits, wherever
situated, including (without limitation) the London Stock Exchange, the
Financial Services Authority and the Panel on Takeovers and Mergers
whether or not the requirement for information has the force of law, in
which case the party concerned shall take all such steps as may be
reasonable and practicable in the circumstances to agree the contents of
such announcement with the other party before making such announcement
provided that, in any event, any such announcement shall be made only
after notice to the other party;
14.2.3 is trivial or obvious;
14.2.4 is already in the public domain at the time of disclosure or thereafter
shall fall into the public domain other than as a result of breach of
this clause; or
14.2.5 is already in the disclosing party's possession (as evidenced by written
records) otherwise than as a result of a breach of this clause; or
14.2.6 becomes known to the disclosing party from a source other than the other
party otherwise than as a result of a breach of this clause;
14.2.7 was disclosed after the express prior written approval of the party to
whom such information belongs
and in any event subject to the disclosing party having notified the
other in writing prior to making such disclosure.
PAGE 7
14.3 Each of the parties undertakes to the other to take all such steps as
shall from time to time be necessary to ensure compliance with the
provisions of this clause 14 by its Group Companies, employees, agents
and sub-contractors.
14.4 Notwithstanding anything contained elsewhere in this Agreement, the
provisions of this clause 14 shall survive the termination or expiry of
this Agreement.
15. ANNOUNCEMENTS
15.1 Save as provided below, no public statement or announcement (or any
statement or disclosure to any public or regulatory body or any other
body which has an obligation to or which is likely to make public any
such statement or disclosure) concerning the fact or subject matter of
this Agreement or any ancillary matter shall be made by any party
without the prior written approval of the other, such approval not to be
unreasonably withheld or delayed.
15.2 Any party may make an announcement concerning the subject matter of this
Agreement or any ancillary matter if required by:
15.2.1 the law of any relevant jurisdiction;
15.2.2 any securities, exchange or regulatory or governmental body to which
that party is subject or submits, wherever situated, including (without
limitation) NASDAQ, the London Stock Exchange, the Financial Services
Authority and the Panel on Takeovers and Mergers, whether or not the
requirement has the force of law, in which case the party concerned
shall take all such steps as may be reasonable and practicable in the
circumstances to agree the contents of such announcement with the other
party before making such announcement provided that, in any event, any
such announcement shall be made only after notice to the other party.
16. ASSIGNMENT
16.1 Except as specifically provided in paragraph 7.4 of Schedule 2 to this
Agreement Stratus may not without the prior written consent of Artisan
assign or in any way dispose of to any third party its rights under this
Agreement. Artisan may assign any of its rights to any person to whom or
which it is transferring any of the Stratus Shares.
16.2 The assigning party shall promptly give notice to the other party of any
permitted assignment under sub-clause 16.1 above and any purported
assignment shall not
PAGE 8
be valid unless the assignee agrees in writing to be bound by the
provisions of this Agreement.
17. NOTICES
17.1 Any notice to be given hereunder shall be in writing (other than writing
on the screen of a visual display unit or other similar device which
shall not be treated as writing for the purposes of this clause unless
receipt of the relevant communication is acknowledged by the relevant
party either by electronic mail or by other written means) and delivered
by hand or by pre-paid first class post or by facsimile letter or by
electronic mail letter (and notices sent by facsimile or by electronic
mail shall be confirmed immediately by pre-paid first class post)
addressed and sent to the party to be served at the addresses provided
in sub-clause 17.3.
17.2 Notices addressed as provided in sub-clause 17.3 shall be deemed to have
been duly served:-
17.2.1 if sent by personal delivery, upon delivery at the address of the
relevant party;
17.2.2 if sent by first class post, two business days after the date of posting
if posted in the country of destination otherwise after seven days;
17.2.3 if sent by facsimile, when despatched provided that if any such notice
would otherwise be deemed to be served outside working hours, such
notice shall be deemed to be served at the start of working hours on the
next business day; and
17.2.4 if sent by electronic mail, when receipt of the notice is acknowledged
in accordance with Clause 17.1.
17.3 The relevant addressee, address, electronic mail address and facsimile
number of each party for the purpose of this Agreement are:-
NAME OF PARTY ADDRESS AND E-MAIL ADDRESS FACSIMILE NUMBER
------------- -------------------------- ----------------
Stratus Services 000 Xxxxx Xxxx, +1 732 294 1133
Group, Inc. Xxxxx 000 Xxxxxxxxx,
Xxx Xxxxxx,
XXX 00000
Xxxxxxxxxxxx@xxxxxxxxxxxxxxx.xxx;
xxxxxxxxxx@xxxxxxxxxxxxxxx.xxx;
PAGE 9
Xxxxxxx.xxx Limited Xxxx House x00(0)0000-000-000
Xxxxxxxxx Xxxxx
Xxxxxx Xxxxxxxx Xxxx
Xxxxxxxxxx, Xxxxx
XX00 0XX
or such other address as any party may have previously notified to the
other.
18. AGENT FOR SERVICE
18.1 Stratus irrevocably agrees that any notice or process may be sufficiently
and effectively served on it by service on its agent ___________________,
if no replacement agent has been appointed and notified to the other party
pursuant to Clause 18.5, or on the replacement agent if one has been
appointed and notified to Artisan.
18.2 The relevant addressee, address, electronic mail address and facsimile
number of _______________________ for the purpose of this Clause 18 are:-
NAME OF PARTY ADDRESS [AND E-MAIL ADDRESS] FACSIMILE NUMBER
18.3 Any notice or process served on ___________________ in accordance with
this Clause 18 shall be deemed to have been duly served on Stratus
according to the same times as those specified in Clause 17.2 above.
18.4 A copy of any notice or process served on an agent pursuant to this Clause
18 shall be sent by post to Stratus at its address for the time being for
the service of notices under Clause 17, but no failure or delay in so
doing shall prejudice the effectiveness of service of the relevant notice
or process in accordance with Clause 18.1 above.
18.5 If the agent referred to in Clause 18.1 (or any replacement agent
appointed pursuant to this Clause 18.5) at any time ceases for any reason
to act as such, Stratus shall appoint a replacement agent to accept
service having an address for service in England and Wales and shall
notify Artisan of the name and address of the replacement agent. Failing
any such appointment and notification, Artisan shall be
PAGE 10
entitled by notice to Stratus to appoint such replacement agent to act on
Stratus' behalf.
19. COSTS AND EXPENSES
Save as otherwise stated in any other provision of this Agreement, each
party shall bear its own costs and expenses in relation to the
negotiation, preparation, execution and carrying into effect of this
Agreement and all other documents referred to in it.
20. TIME OF THE ESSENCE
It is agreed that time is of the essence of this Agreement with regard to
the performance by Stratus of its obligations under this Agreement.
21. RIGHTS OF THIRD PARTIES (EXCLUDING)
21.1 No person who is not a party to this Agreement shall have any right under
the Contracts (Rights of Third Parties) Xxx 0000 to enforce any term of
this Agreement.
21.2 Nothing contained in Clause 21.1 shall affect any right or remedy of any
third party which exists or is available other than under the Contracts
(Rights of Third Parties) Xxx 0000.
22. GOVERNING LAW AND JURISDICTION
22.1 This Agreement is governed by and shall be construed in accordance with
English law.
22.2 The courts of England have non-exclusive jurisdiction to hear and decide
any suit, action or proceedings, and to settle any disputes, which may
arise out of or in connection with this Agreement (respectively,
"Proceedings" and "Disputes") and, for these purposes, each party hereby
irrevocably submits to the jurisdiction of the courts of England.
22.3 Each party irrevocably waives any objection which it might at any time
have to the courts of England being nominated as the forum to hear and
decide any Proceedings and to settle any Disputes and agrees not to claim
that the courts of England are not a convenient or appropriate forum.
22.4 Process by which any Proceedings are begun in England may be served in
accordance with Clauses 17 and 18, provided that nothing contained in this
sub-clause affects the right to serve process in another manner permitted
by law.
PAGE 11
The common seal of )
STRATUS SERVICES GROUP, INC )
was hereunto affixed presence of )
/s/ Xxxxxx X. Xxxxxxx, Xx.
------------------------------------
Xxxxxx X. Xxxxxxx, Xx.
Chairman and Chief Executive Officer
/s/ J. Xxxx Xxxxxxx, Esq.
------------------------------------
J. Xxxx Xxxxxxx, Esq.
Secretary and General Counsel
Executed and delivered as a deed by )
ARTISAN PLC )
Acting by two directors/ a director and the )
Secretary )
/s/ Xxxxxxx Xxxx
------------------------------------
Director
/s/ Xxxxxx Xxxxxx
------------------------------------
Witness
PAGE 12
SCHEDULE 1
WARRANTIES
PART 1
1. DEFINITIONS
As used in this Schedule 1, all capitalized terms not otherwise defined in
this Agreement shall have the following meanings:
"Affiliate" means, as applied to any Person, (a) any
other Person directly or indirectly
controlling, controlled by or under common
control with, that Person, (b) any other
Person that owns or controls (i) 10% or more
of any class of equity securities of that
Person or any of its Affiliates or (ii) 10%
or more of any class of equity securities
(including any equity securities issuable
upon the exercise of any option or
convertible security) of that Person or any
of its Affiliates, or (c) any director,
partner, member, officer, manager, agent,
employee or relative of such Person. For the
purposes of this definition, "control"
(including with correlative meanings, the
terms "controlling", "controlled by", and
"under common control with") as applied to
any Person, means the possession, directly
or indirectly, of the power to direct or
cause the direction of the management and
policies of that Person, whether through
ownership of voting securities or by
contract or otherwise.
"Contract" means any agreement (including licenses with
non-governmental Persons), lease, evidence
of indebtedness, mortgage, indenture,
security agreement or other instrument or
contract, whether written or oral.
PAGE 13
"Exchange Act" means the Securities Exchange Act of 1934,
as amended, and the rules and regulations of
the SEC thereunder.
"Encumbrance" means any security interest, lien, pledge,
claim, charge, escrow, encumbrance, option,
right of first offer, right of first
refusal, preemptive right, mortgage,
indenture, security agreement or other
similar agreement, arrangement, contract,
commitment, understanding or obligation,
whether written or oral and whether or not
relating in any way to credit or the
borrowing of money.
"Governmental or Regulatory means any court, tribunal, arbitrator,
Authority" authority, agency, commission, official or
other instrumentality of the United States,
any foreign country or any domestic or
foreign state, county, city or other
political subdivision.
"Indebtedness" means (a) all indebtedness of Stratus,
including the principal of, and premium, if
any, and interest (including interest
accruing after the filing of a petition
initiating any proceeding under any state,
federal or foreign bankruptcy laws, whether
or not allowable as a claim in such
proceeding) on, all indebtedness, whether
outstanding currently or hereafter created
(i) for borrowed money, (ii) for money
borrowed by others and guaranteed, directly
or indirectly, by Stratus, (iii) for money
borrowed by others for which Stratus
provides security, (iv) constituting
purchase money indebtedness the payment of
which Stratus is directly or contingently
liable, (v) constituting reimbursement
obligations under bank letters of credit,
(vi) under interest rate and currency swaps,
caps, floors, collars or similar agreements
or arrangements intended to protect Stratus
against fluctuations in interest or currency
PAGE 14
exchange rates, (vii) under any lease of any
real or personal property, which obligations
are capitalised on Stratus's books in
accordance with generally accepted
accounting principles, or (viii) under any
other arrangement under which obligations
are recorded as indebtedness on Stratus's
books in accordance with generally accepted
accounting principles, and (b) any
modifications, refundings, deferrals,
renewals or extensions of any such
Indebtedness, or securities, notes or other
evidences of indebtedness issued in exchange
for such Indebtedness.
"Law" or "Laws" means all laws, statutes, rules,
regulations, ordinances and other
pronouncements having the effect of law of
the United States, any foreign country or
any domestic or foreign state, county, city
or other political subdivision or of any
Governmental or Regulatory Authority.
"Material Adverse Effect" means a material adverse effect on the
business or financial position of a Person
and such Person's subsidiaries, taken as a
whole.
"Nasdaq" means the Nasdaq SmallCap Market.
"Person" means any natural person, corporation,
general partnership, limited partnership,
limited liability company or partnership,
proprietorship, other business organisation,
trust, union, association or Governmental or
Regulatory Authority.
"SEC" means the Securities and Exchange
Commission.
"Securities Act" means the Securities Act of 1933, as
amended, and the rules and regulations of
the SEC thereunder.
PAGE 15
"Transfer" means, directly or indirectly, any sale,
transfer, assignment, hypothecation, pledge
or other disposition of any securities of
Stratus or any interests therein.
PART 2
2. REPRESENTATIONS AND WARRANTIES OF STRATUS
Stratus hereby represents and warrants to Artisan that:
2.1 ORGANISATION AND QUALIFICATION.
Stratus is a corporation duly organised, validly existing and in good
standing under the Laws of the State of Delaware. Stratus is duly
qualified and is authorised to do business and is in good standing as a
foreign corporation in each state or jurisdiction where the nature of its
business or the ownership of property make such qualification necessary,
except where the failure of Stratus to be so qualified would not have a
Material Adverse Effect on Stratus.
2.2 AUTHORITY.
Stratus has full power and authority to execute and deliver this
Agreement, to perform its obligations hereunder and to consummate the
transactions contemplated hereby (including the issuance, sale and
delivery of the Stratus Shares being sold hereunder). The execution,
delivery and performance by Stratus of this Agreement and the consummation
by it of the transactions contemplated hereby (including the issuance,
sale and delivery of the Stratus Shares being sold hereunder) have been
duly and validly authorised by all necessary action by its Board of
Directors, and no other action is necessary to authorise the execution,
delivery and performance of this Agreement and the consummation by Stratus
of the transactions contemplated hereby (including the issuance, sale and
delivery of the Stratus Shares being sold hereunder). This Agreement has
been duly and validly executed and delivered by Stratus and constitutes a
legal, valid and binding obligation of Stratus enforceable against Stratus
in accordance with its terms, except as the enforceability thereof may be
limited by bankruptcy, insolvency, reorganisation, moratorium or other
similar laws relating to the enforcement of creditors' rights generally
and by general principles of equity.
2.3 VALID ISSUANCE OF STRATUS SHARES; CAPITALISATION.
PAGE 16
The Stratus Shares that are being purchased by Artisan hereunder, when
issued, sold and delivered in accordance with the terms of this Agreement
for the consideration expressed herein, will be duly and validly issued,
fully paid, and nonassessable, and will be free of restrictions on
transfer other than restrictions on transfer under this Agreement and
under applicable federal and state securities laws. The Stratus Shares
that are being purchased by Artisan hereunder will be quoted on Nasdaq or
any other securities exchange that the Stratus Shares are then listed
upon.
The authorised capital stock of Stratus consists of 30,000,000 shares, par
value $.01 per share, of which 25,000,000 shares are common stock and
5,000,000 shares are preferred stock and may be issued from time to time
in one or more series. As the date of this Agreement, 6,111,619 shares of
common stock and no shares of preferred stock are issued and outstanding,
and 4,101,206 shares of common stock are reserved for issuance upon the
exercise of outstanding warrants and employee stock options and 5,096,180
shares of Common Stock reserved for issuance upon the conversion of the
December 4, 2000 6% Convertible Debenture. Except as designated in the
prior sentence, there are no rights, subscriptions, warrants, options,
conversion rights, calls or other agreements or commitments of any kind
outstanding to purchase or otherwise acquire any shares of Stratus's
stock, or any other interest or securities or obligations of any kind
exchangeable for, or convertible into any shares of stock, of any class of
or any other equity interest in Stratus or obligating Stratus to grant,
extend or enter into any such agreement or commitment.
2.4 NO CONFLICTS.
The execution and delivery by Stratus of this Agreement, the performance
by Stratus of its obligations under this Agreement and the consummation of
the transactions contemplated hereby (including the issuance, sale and
delivery of the Stratus Shares being sold hereunder) do not and will not
(i) conflict with, or constitute a default under, any Contract to which
Stratus is a party, (ii) result in a violation of Stratus's organiSational
documents, or any order, judgment or decree of any court or Governmental
or Regulatory Authority having jurisdiction over Stratus or any of its
assets or properties or (iii) result in, or require, the creation or
imposition of any Encumbrance upon any of the assets or properties of
Stratus.
2.5 BROKERS.
PAGE 17
No agent, broker, finder, investment banker, financial advisor or other
similar Person will be entitled to any fee, commission or other
compensation in connection with the transactions contemplated by this
Agreement on the basis of any act or statement made or alleged to have
been made by Stratus or any of its Affiliates.
2.6 EXEMPTION FROM REGISTRATION.
Assuming the accuracy on the date hereof and on any other date Artisan
purchases Stratus Shares under this Agreement of the representations and
warranties of the Purchaser set forth in Section 3 of this Schedule 1, the
issuance and sale of the Stratus Shares will be exempt from the
registration requirements of the Securities Act.
2.7 LITIGATION.
There are no actions, suits, proceedings or investigations pending, or to
the knowledge of Stratus, threatened, against or affecting Stratus, except
for those that could not reasonably be expected to have either
individually or in the aggregate a Material Adverse Effect on Stratus.
Stratus is not in default with respect to any order, writ, injunction,
judgment, decree or rule of any Governmental or Regulatory Authority,
except for such defaults that could not reasonably be expected to have
either individually or in the aggregate a Material Adverse Effect on
Stratus.
2.8 NO DEFAULTS.
Stratus is not in default, and no event has occurred and no condition
exists which constitutes, or which with the passage of time or the giving
of notice or both would constitute, a default in the payment of any
material Indebtedness.
2.9 SEC REPORTS AND FINANCIAL STATEMENTS.
(a) Stratus has filed all forms, reports and documents required to be
filed by it pursuant to Section 13 or Section 15(d) of the Exchange
Act within the last 12 months on a timely basis or has received a
valid extension of time for filing. Stratus has made available to
the Purchaser Stratus's Annual Report on Form 10-K for the fiscal
year ended September 30, 2000 and its Quarterly Reports on Form 10-Q
for the quarters ended December 1, 2000, and March 31, 2001 (the
"SEC Reports"). Each SEC Report complied as to form in all material
respects with the rules and regulations of the SEC under the
Exchange Act on the date of filing and as of such date (or if
amended or superseded by a filing prior to the date
PAGE 18
of this Agreement, on the date of such filing) did not contain any
untrue statement of 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.
(b) Each of the consolidated financial statements (including, in each
case, any related notes thereto) (the "Financial Statements")
contained in the SEC Report (i) was prepared in accordance with
generally accepted accounting principles ("GAAP") applied on a
consistent basis throughout the periods involved (except as may be
expressly described in the notes thereto) and (ii) fairly presents
in all material respects the consolidated financial position of
Stratus as at the respective dates thereof and the consolidated
results of its operations and cash flows for the periods indicated.
2.10 EVENTS SUBSEQUENT TO THE DATE OF THE LAST FINANCIAL STATEMENT.
Since March 31, 2001 (the "Financial Statements Date"), Stratus has not
(i) sold, assigned, transferred or granted any exclusive license with
respect to any patent, trademark, trade name, service xxxx, copyright,
trade secret or other intangible asset necessary for the operation of
Stratus's business substantially as now conducted, (ii) suffered any loss
of property that had a Material Adverse Effect on Stratus or waived any
right of substantial value to Stratus other than in the ordinary course of
business or (iii) entered into any commitment, obligation, understanding
or other arrangement, contingent or otherwise, to effect, directly or
indirectly, any of the foregoing. Since the Financial Statements Date, no
events have occurred which individually or collectively have had a
Material Adverse Effect on Stratus.
2.11 ABSENCE OF UNDISCLOSED LIABILITIES.
Since the Financial Statements Date, Stratus has not had any loss
contingency (as defined in Statement of Financial Accounting Standards No.
5), whether matured or unmatured, fixed or contingent, that could have a
Material Adverse Effect on Stratus, except (i) obligations to perform
under commitments or other obligations incurred in the ordinary course of
business and (ii) tax and related liabilities.
2.12 TITLE TO ASSETS, PROPERTIES AND RIGHTS.
Stratus has good and marketable title (or a valid leasehold interest) to
all of the assets (whether real, personal or mixed) necessary for the
conduct of Stratus's business substantially as now conducted, free and
clear of all Encumbrances,
PAGE 19
except for (i) liens for current taxes, assessments and other governmental
charges not yet due and payable for which reserves have been established
as required by generally accepted accounting principles; (ii) easements,
covenants, conditions and restrictions (whether or not of record) as to
which no material violation or encroachment exists or, if such violation
or encroachment exists, as to which the cure of such violation or
encroachment would not materially interfere with the conduct of Stratus's
business; (iii) any Zoning or other governmentally established
restrictions or encumbrances; (iv) workers or unemployment compensation
liens arising in the ordinary course of business; or (v) mechanic's,
materialman's, supplier's, vendor's or similar liens arising in the
ordinary course of business securing amounts which are not delinquent.
(The matters set forth in the foregoing clauses (i) through (v) being
referred to herein as the "Permitted Encumbrances"). Such assets are in
such operating condition and repair as is suitable for the uses for which
they are used in Stratus's business, are not subject to any condition
which materially interferes with the use thereof by Stratus, and
constitute all assets, properties, interests in properties and rights
necessary to permit Stratus to carry on its business after the date of
this Agreement substantially as conducted by Stratus prior thereto.
2.13 PATENTS, TRADEMARKS, COPYRIGHTS AND LICENSES.
Stratus (i) owns or possesses all the patents, trademarks, service marks,
trade names, copyrights and licenses therefor necessary for the conduct of
Stratus's business substantially as now conducted without any known
conflict with the rights of others that are likely to have a Material
Adverse Effect on Stratus and (ii) has allocated or licensed all such
patents, trademarks, service marks, trade names, copyrights and licenses
to Stratus for use by Stratus in its business. To the best knowledge of
Stratus, Stratus has not interfered with, infringed upon or
misappropriated any intellectual property rights of any Person or
committed any acts of unfair competition with respect to the operation of
Stratus's business, and Stratus has not received from any Person in the
past five years (or since its inception, if shorter) any notice, charge,
complaint, claim or assertion thereof, and no such claim is impliedly
threatened by an offer to license from another Person under a claim of
use. No activity, service or procedure currently conducted by Stratus
violates in any material respect any Contract of Stratus with any third
Person relating to any intellectual property rights.
2.14 GOVERNMENTAL CONSENTS.
PAGE 20
Stratus has, and is in good standing with respect to, all governmental
consents, approvals, licenses, authorisations, permits, certificates,
inspections and franchises necessary to continue to conduct Stratus's
business substantially as now conducted and to own or lease and operate
the assets and properties necessary for the conduct by Stratus of its
business substantially as now conducted except for such failures that
could not reasonably be expected to have either individually or in the
aggregate a Material Adverse Effect on Stratus.
2.15 NO CONSENT OR APPROVAL REQUIRED.
No consent, approval or authoriSation of, or declaration to or filing
with, any Person is required by Stratus for the valid authoriSation,
execution and delivery by Stratus of this Agreement or its consummation of
the transactions contemplated hereby (including the issuance, sale and
delivery of the Stratus Shares being sold hereunder), other than those
consents, approvals, authoriSations, declarations or filings which have
been obtained or made, as the case may be, required filings with the SEC
and Nasdaq, and that the failure to obtain or make would not have a
Material Adverse Effect on Stratus.
2.16 COMPLIANCE WITH LAWS.
Stratus has duly complied with, and the assets and properties, business
operations and leaseholds used in connection with the business of Stratus
are in compliance with, the provisions of all laws applicable to Stratus,
its assets and properties or the conduct of its business and there have
been no citations, notices or orders of non-compliance issued to Stratus
under any such law, rule or regulation, except for such non-compliance
which could not reasonably be expected to have either individually or in
the aggregate a Material Adverse Effect on Stratus.
2.17 LABOUR RELATIONS.
Stratus's employees are not subject to any collective bargaining
agreement. There are no material grievances, disputes or controversies
with any union or any other organisation of Stratus's employees, or
threats of strikes, work stoppages or any asserted pending demands for
collective bargaining by any union or organisation, that could have a
Material Adverse Effect on Stratus.
PART 3
PAGE 21
3. REPRESENTATIONS AND WARRANTIES OF ARTISAN
Artisan hereby represents and warrants to Stratus that:
3.1 Artisan is acquiring the Stratus Shares for its own account as principal,
for investment purposes only, and not for or with a view to the resale,
distribution or granting of a participation therein, in whole or in part,
in violation of the Securities Act.
3.2 Artisan acknowledges its understanding that the offering and sale of the
Stratus Shares has not been registered under the Securities Act, on the
basis of the exemption in Section 4(2) thereof relating to transactions
not involving a public offering, or any state securities laws. Artisan
understands that Stratus's reliance on the Section 4(2) exemption is based
on the representations herein made by Artisan. Artisan is an "Accredited
Investor" as that term is defined in Regulation D under the Securities
Act.
3.3 Artisan acknowledges that it is familiar with the limitations which are
imposed by the Securities Act on any Transfer of an interest in the
Stratus Shares. Artisan understands and acknowledges that it may have to
bear the economic risk of its investment in the Stratus Shares for an
indefinite period of time unless the Stratus Shares are subsequently
registered under the Securities Act or an exemption therefrom is
available. Artisan hereby agrees that the Stratus Shares will not be
Transferred other than (i) pursuant to a registration under the Securities
Act or pursuant to an exemption therefrom and (ii) in compliance with any
applicable state securities laws.
3.4 Artisan has been given access to all information regarding Stratus and the
business, condition and operations of Stratus that Artisan has requested
in order to evaluate its investment in the Stratus Shares. Artisan has
been given the opportunity to ask questions of, and to receive answers
from, representatives of Stratus concerning the terms and conditions of
the offering of the Stratus Shares and other matters pertaining to such
Artisan's investment in the Stratus Shares.
3.5 Artisan understands that the Stratus Shares will initially bear the
following legend:
"THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED, OR UNDER ANY STATE SECURITIES LAWS. THIS SECURITY MAY NOT BE
OFFERED, SOLD OR TRANSFERRED EXCEPT PURSUANT TO (i) AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933, AS AMENDED AND IN
COMPLIANCE WITH
PAGE 22
APPLICABLE STATE SECURITIES LAWS OR (ii) AN APPLICABLE EXEMPTION FROM
REGISTRATION THEREUNDER AND UNDER APPLICABLE STATE SECURITIES LAWS AS TO
WHICH AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY SHALL HAVE BEEN
DELIVERED TO STRATUS."
PAGE 23
SCHEDULE 2
REGISTRATION RIGHTS
1. DEFINITIONS
As used in this Schedule 2, the following terms shall have the following
meanings:
"Common Stock" shall mean the Company's Common Stock, par
value $0.01 per share.
"Company" shall mean Stratus Services Group, Inc.
"Investors" shall mean Artisan and Xxxxxxx Securities
Inc., and each of their affiliates or
permitted transferees who is a subsequent
holder of any Registrable Securities.
"Prospectus" shall mean the prospectus included in any
Registration Statement, as amended or
supplemented by any prospectus supplement,
with respect to the terms of the offering
of any portion of the Registrable
Securities or Additional Registrable
Securities covered by such Registration
Statement and by all other amendments and
supplements to the prospectus, including
post-effective amendments and all material
incorporated by reference in such
prospectus.
"Register," "registered" and refer to a registration made by preparing
registration" and filing a registration statement or
similar document in compliance with the
1933 Act (as defined below), and the
declaration or ordering of effectiveness
of such registration statement or
document.
"Registrable Securities" shall mean the Stratus Shares issued and
issuable to the Investors pursuant to this
agreement and shares issued to Artisan or
Xxxxxxx Securities upon the conversion of
Preferred
PAGE 24
Shares held by them, and any other
securities issued or issuable with respect
to or in exchange for Registrable
Securities.
"Registration Statement" shall mean any registration statement of
the Company filed under the 1933 Act that
covers the resale of any of the
Registrable Securities, pursuant to the
provisions of this agreement, amendments
and supplements to such Registration
Statement, including post-effective
amendments, all exhibits and all material
incorporated by reference in such
Registration Statement.
"SEC" means the U.S. Securities and Exchange
Commission.
"1933 Act" means the Securities Act of 1933, as
amended, and the rules and regulations
promulgated thereunder.
"1934 Act" means the Securities Exchange Act of 1934,
as amended, and the rules and regulations
promulgated thereunder.
2. REGISTRATION.
2.1 Registration Statements.
2.1.1 Registrable Securities.
Promptly on request of either of the Investors (but no later than thirty
(30) days after such request), the Company shall prepare and file with
the SEC one Registration Statement on Form S-3 (or, if Form S-3 is not
then available to the Company, on such form of registration statement as
is then available to effect a registration for resale of all of the
Registrable Securities, subject to the Investors' consent), covering the
resale of the Registrable Securities in an amount equal to the number of
shares of Common Stock held by the Investors. A second Registration
Statement will be filed by Stratus when, and if, necessary to register
the maximum number of shares which might be issued pursuant to clause 4
of this agreement. Such Registration Statements also shall cover, to the
extent allowable under the 1933 Act
PAGE 25
and the Rules promulgated thereunder (including Rule 416), such
indeterminate number of additional shares of Common Stock resulting from
stock splits, stock dividends or similar transactions with respect to the
Registrable Securities. No securities held by a third party shall be
included in the Registration Statement without the consent of each
Investor. The Registration Statement (and each amendment or supplement
thereto, and each request for acceleration of effectiveness thereof)
shall be provided in accordance with Section 3(c) to the Investors and
their counsel prior to its filing or other submission.
2.2 Expenses.
The Company will pay all expenses associated with registration hereunder,
including the Investors' reasonable expenses in connection with the
registration but excluding discounts, commissions, fees of underwriters,
selling brokers, dealer managers or similar securities industry
professionals.
2.3 Effectiveness.
2.3.1 The Company shall use its best efforts to have each Registration
Statement declared effective as soon as practicable. If (A) the
Registration Statement covering Registrable Securities is not declared
effective by the SEC within one hundred and twenty (120) days following a
request (the "Registration Date"), (B) after a Registration Statement has
been declared effective by the SEC, sales cannot be made pursuant to such
Registration Statement for any reason (including without limitation by
reason of a stop order, or the Company's failure to update the
Registration Statement) but except as excused pursuant to subparagraph
(ii) below, or (C) the Common Stock generally or the Registrable
Securities specifically are not listed or included for quotation on the
American Stock Exchange, the Nasdaq National Market System, the Nasdaq
Small Cap Market, or the
New York Stock Exchange then the Company will
make pro rata payments to each Investor, as liquidated damages and not as
a penalty, in an amount equal to 2% of the aggregate amount paid by such
Investor to the Company for shares of Common Stock still held by such
Investor for any month or pro rata for any portion thereof following the
Registration Date during which any of the events described in (A) or (B)
or (C) above occurs and is continuing (the "Blackout Period"). Each such
payment shall be due and payable within five (5) days of the end of each
month (or ending portion thereof) of the Blackout Period. Such payments
shall be in partial compensation to the Investors, and shall not
constitute the Investors' exclusive remedy for such events. The Blackout
Period shall terminate upon (x) the effectiveness of the applicable
Registration Statement (or in the case of (B), an
PAGE 26
amendment) in the case of (A) and (B) above; (y) listing or inclusion of
the Common Stock on the American Stock Exchange, the Nasdaq National
Market System, the Nasdaq Small Cap Market or the
New York Stock Exchange
in the case of (C) above; and (z) in the case of the events described in
(A) or (B) above, the earlier termination of the Registration Period (as
defined in Section 3(a) below). The amounts payable as liquidated damages
pursuant to this paragraph shall be payable, at the option of the
Investors, in lawful money of the United States or in shares of Common
Stock at the Market Value and amounts payable as liquidated damages shall
be paid monthly within two (2) business days of the last day of each
month following the commencement of the Blackout Period until the
termination of the Blackout Period. Amounts payable as liquidated damages
hereunder shall cease when an Investor no longer holds Registrable
Securities.
2.3.2 For not more than ten (10) consecutive trading days or for a total of not
more than twenty (20) trading days in any twelve (12) month period, the
Company may delay updating the Registration Statement to disclose
material non-public information concerning the Company, the disclosure of
which at the time is not, in the good faith opinion of the Company, in
the best interests of the Company (an "Allowed Delay"); provided, that
the Company shall promptly (a) notify the Investors in writing of the
existence of (but in no event, without the prior written consent of an
Investor, shall the Company disclose to such Investor any of the facts or
circumstances regarding) material non-public information giving rise to
an Allowed Delay, and (b) advise the Investors in writing to cease all
sales under the Registration Statement until the end of the Allowed
Delay.
3. COMPANY OBLIGATIONS
The Company will use its best efforts to effect the registration of the
Registrable Securities in accordance with the terms hereof, and pursuant
thereto the Company will, as expeditiously as possible:
3.1 use its best efforts to cause such Registration Statement to become
effective and to remain continuously effective for a period that will
terminate upon the earlier of (i) the date on which all Registrable
Securities covered by such Registration Statement, as amended from time
to time, have been sold, and (ii) the date on which all Registrable
Securities may be sold pursuant to Rule 144(k) (the "Registration
Period");
3.2 prepare and file with the SEC such amendments and post-effective
amendments to the Registration Statement and the Prospectus as may be
necessary to keep the
PAGE 27
Registration Statement effective for the period specified in Section 3(a)
and to comply with the provisions of the 1933 Act and the 1934 Act with
respect to the distribution of all Registrable Securities, Second Closing
Registrable Securities and Additional Registrable Securities; provided
that, at least five (5) business days prior to the filing of a
Registration Statement or Prospectus, or any amendments or supplements
thereto, the Company will furnish to the Investors copies of all documents
proposed to be filed, which documents will be subject to the comments of
the Investors, which must be received within such five (5) business day
period;
3.3 permit counsel designated by the Investors to review each Registration
Statement and all amendments and supplements thereto no fewer than seven
(7) days prior to their filing with the SEC and not file any document to
which such counsel reasonably objects;
3.4 furnish to the Investors and their legal counsel (i) promptly after the
same is prepared and publicly distributed, filed with the SEC, or received
by the Company, one copy of any Registration Statement and any amendment
thereto, each preliminary prospectus and Prospectus and each amendment or
supplement thereto, and each letter written by or on behalf of the Company
to the SEC or the staff of the SEC, and each item of correspondence from
the SEC or the staff of the SEC, in each case relating to such
Registration Statement (other than any portion of any thereof which
contains information for which the Company has sought confidential
treatment), and (ii) such number of copies of a Prospectus, including a
preliminary prospectus, and all amendments and supplements thereto and
such other documents as each Investor may reasonably request in order to
facilitate the disposition of the Registrable Securities owned by such
Investor;
3.5 in the event the Company selects an underwriter for the offering, the
Company shall enter into and perform its reasonable obligations under an
underwriting agreement, in usual and customary form, including, without
limitation, customary indemnification and contribution obligations, with
the underwriter of such offering;
3.6 if required by the underwriter, or if any Investor is described in the
Registration Statement as an underwriter, the Company shall furnish, on
the effective date of the Registration Statement, on the date that
Registrable Securities are delivered to an underwriter, if any, for sale
in connection with the Registration Statement and at periodic intervals
thereafter from time to time on request, (i) an opinion, dated as of such
date, from independent legal counsel representing the Company for purposes
of such Registration Statement, in form, scope and substance as is
customarily given in an underwritten public offering, addressed to the
underwriter and the
PAGE 28
Investors and (ii) a letter, dated such date, from the Company's
independent certified public accountants in form and substance as is
customarily given by independent certified public accountants to
underwriters in an underwritten public offering, addressed to the
underwriter and the Investors;
3.7 make effort to prevent the issuance of any stop order or other suspension
of effectiveness and, if such order is issued, obtain the withdrawal of
any such order at the earliest possible moment;
3.8 furnish to each Investor at least five copies of the Registration
Statement and any post-effective amendment thereto, including financial
statements and schedules by air mail within two business days of the
effective date thereof;
3.9 prior to any public offering of Registrable Securities use its reasonable
best efforts to register or qualify or cooperate with the Investors and
their counsel in connection with the registration or qualification of such
Registrable Securities for offer and sale under the securities or blue sky
laws of such jurisdictions requested by the Investor and do any and all
other reasonable acts or things necessary or advisable to enable the
distribution in such jurisdictions of the Registrable Securities covered
by the Registration Statement;
3.10 cause all Registrable Securities covered by a Registration Statement to be
listed on each securities exchange, interdealer quotation system or other
market on which similar securities issued by the Company are then listed;
3.11 immediately notify the Investors, at any time when a Prospectus relating
to the Registrable Securities is required to be delivered under the
Securities Act, upon discovery that, or upon the happening of any event as
a result of which, the Prospectus included in such Registration Statement,
as then in effect, includes an 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 not misleading in the light of
the circumstances then existing, and at the request of any such holder,
promptly prepare and furnish to such holder a reasonable number of copies
of a supplement to or an amendment of such Prospectus as may be necessary
so that, as thereafter delivered to the purchasers of such Registrable
Securities such Prospectus shall not include 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 not misleading in the
light of the circumstances then existing; and
PAGE 29
3.12 otherwise use its best efforts to comply with all applicable rules and
regulations of the SEC under the 1933 Act and the 1934 Act, take such
other actions as may be reasonably necessary to facilitate the
registration of the Registrable Securities hereunder; and make available
to its security holders, as soon as reasonably practicable, but not later
than the Availability Date (as defined below), an earnings statement
covering a period of at least twelve months, beginning after the effective
date of each Registration Statement, which earnings statement shall
satisfy the provisions of Section 11(a) of the 1933 Act (for the purpose
of this subsection 3(l), "Availability Date" means the 45th day following
the end of the fourth fiscal quarter that includes the effective date of
such Registration Statement, except that, if such fourth fiscal quarter is
the last quarter of the Company's fiscal year, "Availability Date" means
the 90th day after the end of such fourth fiscal quarter).
4. DUE DILIGENCE REVIEW; INFORMATION
The Company shall make available, during normal business hours, for
inspection and review by the Investors, advisors to and representatives of
the Investors (who may or may not be affiliated with the Investors and who
are reasonably acceptable to the Company), any underwriter participating
in any disposition of Common Stock on behalf of the Investors pursuant to
the Registration Statement or amendments or supplements thereto or any
blue sky, NASD or other filing, all financial and other records, all SEC
Documents and other filings with the SEC, and all other corporate
documents and properties of the Company as may be reasonably necessary for
the purpose of such review, and cause the Company's officers, directors
and employees, within a reasonable time period, to supply all such
information reasonably requested by the Investors or any such
representative, advisor or underwriter in connection with such
Registration Statement (including, without limitation, in response to all
questions and other inquiries reasonably made or submitted by any of
them), prior to and from time to time after the filing and effectiveness
of the Registration Statement for the sole purpose of enabling the
Investors and such representatives, advisors and underwriters and their
respective accountants and attorneys to conduct initial and ongoing due
diligence with respect to the Company and the accuracy of the Registration
Statement.
5. OBLIGATIONS OF THE INVESTORS.
5.1 Each Investor shall furnish in writing to the Company such information
regarding itself, the Registrable Securities held by it and the intended
method of disposition of the Registrable Securities held by it, as shall
be reasonably required to effect the registration of such Registrable
Securities and shall execute such documents in
PAGE 30
connection with such registration as the Company may reasonably request.
At least fifteen (15) business days prior to the first anticipated filing
date of any Registration Statement, the Company shall notify each Investor
of the information the Company requires from such Investor if such
Investor elects to have any of the Registrable Securities included in the
Registration Statement. An Investor shall provide such information to the
Company at least five (5) business days prior to the first anticipated
filing date of such Registration Statement if such Investor elects to have
any of the Registrable Securities included in the Registration Statement.
5.2 Each Investor, by its acceptance of the Registrable Securities, if any,
agrees to cooperate with the Company as reasonably requested by the
Company in connection with the preparation and filing of a Registration
Statement hereunder, unless such Investor has notified the Company in
writing of its election to exclude all of its Registrable Securities from
the Registration Statement.
5.3 Each Investor agrees that, upon receipt of any notice from the Company of
the happening of any event rendering a Registration Statement no longer
effective, such Investor will immediately discontinue disposition of
Registrable Securities, pursuant to the Registration Statement covering
such Registrable Securities until the Investor's receipt of the copies of
the supplemented or amended prospectus filed with the SEC and declared
effective and, if so directed by the Company, the Investor shall deliver
to the Company (at the expense of the Company) or destroy (and deliver to
the Company a certificate of destruction) all copies in the Investor's
possession of the prospectus covering the Registrable Securities current
at the time of receipt of such notice.
6. INDEMNIFICATION
6.1 Indemnification by Company.
The Company agrees to indemnify and hold harmless, to the fullest extent
permitted by law, the Investors, each of their officers, directors,
partners and employees each person who controls the Investors and each
underwriter for the Investors (within the meaning of the 0000 Xxx) against
all losses, claims, damages, liabilities, costs (including, without
limitation, reasonable attorney's fees) and expenses imposed on such
person caused by (i) any untrue or alleged untrue statement of a material
fact contained in any Registration Statement, Prospectus or any
preliminary prospectus or any amendment or supplement thereto or any
omission or alleged omission to state therein a material fact required to
be stated therein or necessary to make the statements therein not
misleading, except insofar as the same are based upon any
PAGE 31
information furnished in writing to the Company by such Investors or such
Underwriters as the case may be, expressly for use therein, or (ii) any
violation by the Company of any federal, state or common law, rule or
regulation applicable to the Company in connection with any Registration
Statement, Prospectus or any preliminary prospectus, or any amendment or
supplement thereto, and shall reimburse in accordance with subparagraph
(c) below, each of the foregoing persons for any legal and any other
expenses reasonably incurred in connection with investigating or defending
any such claims. Indemnity under this Section 5(a) shall remain in full
force and effect regardless of any investigation made by or on behalf of
any indemnified party and shall survive the permitted transfer of the
Registrable Securities.
6.2 Indemnification by Holder.
In connection with any registration pursuant to the terms of this
Agreement, each Investor will furnish to the Company in writing such
information as the Company reasonably requests concerning the holders of
Registrable Securities or the proposed manner of distribution for use in
connection with any Registration Statement or Prospectus and agrees,
severally but not jointly, to indemnify and hold harmless, to the fullest
extent permitted by law, the Company, its directors, officers, employees,
stockholders and each person who controls the Company (within the meaning
of the 0000 Xxx) against any losses, claims, damages, liabilities and
expense (including reasonable attorney's fees) resulting from any untrue
statement of a material fact or any omission of a material fact required
to be stated in the Registration Statement or Prospectus or preliminary
prospectus or amendment or supplement thereto or necessary to make the
statements therein not misleading, to the extent, but only to the extent
that such untrue statement or omission is contained in any information
furnished in writing by such Investor to the Company specifically for
inclusion in such Registration Statement or Prospectus or amendment or
supplement thereto and that such information was substantially relied upon
by the Company in preparation of the Registration Statement or Prospectus
or any amendment or supplement thereto. In no event shall the liability of
an Investor be greater in amount than the dollar amount of the proceeds
(net of all expense paid by such Investor and the amount of any damages
such holder has otherwise been required to pay by reason of such untrue
statement or omission) received by such Investor upon the sale of the
Registrable Securities, Second Closing Registrable Securities or
Additional Registrable Securities included in the Registration Statement
giving rise to such indemnification obligation.
PAGE 32
6.3 Conduct of Indemnification Proceedings.
Any person entitled to indemnification hereunder shall (i) give prompt
notice to the indemnifying party of any claim with respect to which it
seeks indemnification and (ii) permit such indemnifying party to assume
the defense of such claim with counsel reasonably satisfactory to the
indemnified party; PROVIDED that any person entitled to indemnification
hereunder shall have the right to employ separate counsel and to
participate in the defense of such claim, but the fees and expenses of
such counsel shall be at the expense of such person unless (a) the
indemnifying party has agreed to pay such fees or expenses, or (b) the
indemnifying party shall have failed to assume the defense of such claim
and employ counsel reasonably satisfactory to such person or (c) in the
reasonable judgment of any such person, based upon written advice of its
counsel, a conflict of interest exists between such person and the
indemnifying party with respect to such claims (in which case, if the
person notifies the indemnifying party in writing that such person elects
to employ separate counsel at the expense of the indemnifying party, the
indemnifying party shall not have the right to assume the defense of such
claim on behalf of such person); and PROVIDED, FURTHER, that the failure
of any indemnified party to give notice as provided herein shall not
relieve the indemnifying party of its obligations hereunder, except to the
extent that such failure to give notice shall materially adversely affect
the indemnifying party in the defense of any such claim or litigation. It
is understood that the indemnifying party shall not, in connection with
any proceeding in the same jurisdiction, be liable for fees or expenses of
more than one separate firm of attorneys at any time for all such
indemnified parties. No indemnifying party will, except with the consent
of the indemnified party, consent to entry of any judgment or enter into
any settlement that does not include as an unconditional term thereof the
giving by the claimant or plaintiff to such indemnified party of a release
from all liability in respect of such claim or litigation.
6.4 Contribution.
If for any reason the indemnification provided for in the preceding
paragraphs (a) and (b) is unavailable to an indemnified party or
insufficient to hold it harmless, other than as expressly specified
therein, then the indemnifying party shall contribute to the amount paid
or payable by the indemnified party as a result of such loss, claim,
damage or liability in such proportion as is appropriate to reflect the
relative fault of the indemnified party and the indemnifying party, as
well as any other relevant equitable considerations. No person guilty of
fraudulent misrepresentation within the meaning of Section 11(f) of the
1933 Act shall be entitled to contribution from
PAGE 33
any person not guilty of such fraudulent misrepresentation. In no event
shall the contribution obligation of a holder of Registrable Securities be
greater in amount than the dollar amount of the proceeds (net of all
expenses paid by such holder and the amount of any damages such holder has
otherwise been required to pay by reason of such untrue or alleged untrue
statement or omission or alleged omission) received by it upon the sale of
the Registrable Securities giving rise to such contribution obligation.
7. MISCELLANEOUS.
7.1 Amendments and Waivers.
This Agreement may be amended only by a writing signed by the parties
hereto. The Company may take any action herein prohibited, or omit to
perform any act herein required to be performed by it, only if the Company
shall have obtained the written consent to such amendment, action or
omission to act, of each Investor.
7.2 Notices.
All notices and other communications provided for or permitted hereunder
shall be made as set forth in Section 9.4 of the Purchase Agreement.
7.3 Assignments and Transfers by Investors.
This Agreement and all the rights and obligations of the Investors
hereunder may not be assigned or transferred to any transferee or assignee
except to an affiliate or permitted transferee of an Investor who is a
subsequent holder of any Registrable Securities, Second Closing
Registrable Securities or Additional Registrable Securities.
7.4 Assignments and Transfers by the Company.
This Agreement may not be assigned by the Company without the prior
written consent of each Investor, except that without the prior written
consent of the Investors, but after notice duly given, the Company shall
assign its rights and delegate its duties hereunder to any
successor-in-interest corporation, and such successor-in-interest shall
assume such rights and duties, in the event of a merger or consolidation
of the Company with or into another corporation or the sale of all or
substantially all of the Company's assets.
7.5 Benefits of the Agreement.
PAGE 34
The terms and conditions of this Agreement shall inure to the benefit of
and be binding upon the respective permitted successors and assigns of the
parties. Nothing in this Agreement, express or implied, is intended to
confer upon any party other than the Company and the Investors or their
respective successors and assigns any rights, remedies, obligations, or
liabilities under or by reason of this Agreement, except for right to
indemnify and as otherwise expressly provided in this Agreement.
7.6 Counterparts.
This Agreement may be executed in two or more counterparts, each of which
shall be deemed an original, but all of which together shall constitute
one and the same instrument.
7.7 Titles and Subtitles.
The titles and subtitles used in this Agreement are used for convenience
only and are not to be considered in construing or interpreting this
Agreement.
7.8 Severability.
If one or more provisions of this Agreement are held to be unenforceable
under applicable law, such provision shall be excluded from this Agreement
and the balance of this Agreement shall be interpreted as if such
provision were so excluded and shall be enforceable in accordance with its
terms to the fullest extent permitted by law.
7.9 Further Assurances.
The parties shall execute and deliver all such further instruments and
documents and take all such other actions as may reasonably be required to
carry out the transactions contemplated hereby and to evidence the
fulfilment of the agreements herein contained.
7.10 Entire Agreement.
This Agreement is intended by the parties as a final expression of their
agreement and intended to be a complete and exclusive statement of the
agreement and understanding of the parties hereto in respect of the
subject matter contained herein. This Agreement supersedes all prior
agreements and understandings between the parties with respect to such
subject matter.
PAGE 35
7.11 Applicable Law.
The provision of this schedule shall be governed by, and construed in
accordance with, the laws of the State of
New York without regard to
principles of conflicts of law and the parties hereby submit to the
non-exclusive jurisdiction of the courts of England and the courts of
New
York.
