EXECUTION COPY
EXHIBIT 99.1
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PREFERRED STOCK PURCHASE AGREEMENT
BETWEEN
GENUTEC BUSINESS SOLUTIONS, INC.,
AND
SEAVIEW MEZZANINE FUND LP
SERIES B PREFERRED STOCK
DATED AS OF FEBRUARY 27, 2006
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TABLE OF CONTENTS
(Not Part of Agreement)
Section Heading Page
------- ------- ----
1. Definitions..............................................................1
2. Issuance and Sale of Preferred Shares and Warrants.......................6
3. Redemption and Repurchase of Preferred Shares............................8
4. Representations and Warranties of the Company............................9
5. Representations of the Purchasers.......................................10
6. Closing Conditions......................................................10
7. Affirmative Covenants...................................................11
8. Negative Covenants......................................................13
9. Miscellaneous...........................................................13
i
EXHIBITS
Exhibit A - Form of Amendment to Articles of Incorporation
Exhibit B - Registration Rights
ii
PREFERRED STOCK PURCHASE AGREEMENT
PREFERRED STOCK PURCHASE AGREEMENT (this "AGREEMENT") dated as of
February 27, 2007, by and between GENUTEC BUSINESS SOLUTIONS, INC., a Montana
corporation (the "COMPANY"), and SEAVIEW MEZZANINE FUND LP, a Delaware limited
partnership ("SEAVIEW" or the "PURCHASER", and together with its successors and
assigns, the "PURCHASERS").
RECITALS
WHEREAS, pursuant to the provisions of a Note Purchase Agreement dated
September 16, 2005 (the "NOTE PURCHASE AGREEMENT") among the Company, Technology
Investment Capital Corp., as Collateral Agent (the "COLLATERAL AGENT") and the
purchasers named therein, Seaview acquired $5,000,000 principal amount of the
Company's Senior Secured Notes due 2010 (the "NOTES");
WHEREAS, on or prior to the date hereof, the Board of Directors of the
Company (the "BOARD OF DIRECTORS") has adopted and approved, and the Company has
filed with the Secretary of State of the State of Montana, an amendment in the
form of EXHIBIT A hereto (the "CHARTER AMENDMENT") to the Amended and Restated
Articles of Incorporation of the Company (as from time to time amended or
restated, the "COMPANY CHARTER"), pursuant to which, in accordance with the
authority granted to it in Article V of the Company Charter, the Board of
Directors has created a series of the preferred stock, par value $.0001 per
share, of the Company, designated the Series B Convertible Preferred Stock,
having the preferences, limitations and relative rights set forth in the Charter
Amendment (the "SERIES B PREFERRED");
WHEREAS, the Company has proposed to issue and sell to Seaview an
aggregate of 51,508 shares of Series B Preferred in exchange for the Notes,
together with accrued interest thereon, in the amount of $5,150,805, at a rate
of one (1) share of Series B Preferred per $100 principal of or accrued interest
on the Notes; and
WHEREAS, the Purchasers have agreed to acquire such shares of Series B
Preferred in exchange for their Notes upon the terms and conditions hereinafter
provided;
NOW, THEREFORE, in consideration of the foregoing recitals and the
mutual covenants and agreements contained herein, the parties hereto agree as
follows:
Section 1. DEFINITIONS. For the purposes of this Agreement, the
following terms shall have the following respective meanings:
"AFFILIATE" means, as to any Person, any Person which directly or
indirectly Controls, is controlled by, or is under common control with such
Person. For purposes of this definition, "CONTROL" of a Person means the power,
direct or indirect, (i) to vote or direct the voting of 5% or more of the
outstanding shares of voting equity interests of such Person, or (ii) to direct
or cause the direction of the management and policies of such Person whether by
ownership of voting equity interests, by contract or otherwise. "CONTROLLING"
and "CONTROLLED" have meanings correlative thereto. Notwithstanding the
foregoing, for purposes of this Agreement and the other Transaction Documents,
none of the Purchasers or their respective Affiliates shall be deemed to be
Affiliates of the Company or its Subsidiaries.
"BOARD OF DIRECTORS" has the meaning specified in the Recitals to this
Agreement.
"BUSINESS DAY" means any day except a Saturday, a Sunday or a legal
holiday in New York City.
"CHARTER AMENDMENT" has the meaning specified in the Recitals to this
Agreement.
"CLOSING DATE" has the meaning specified in Section 2.3.
"COMPANY" means GenuTec Business Solutions, Inc., a Montana
corporation, and any successor thereto resulting from a Permitted Change of
Jurisdiction.
"COMPANY CHARTER" has the meaning specified in the Recitals to this
Agreement.
"COMPANY COMMON STOCK" means the Class A voting common stock, par
value $.01 per share, of the Company.
"COMPANY PREFERRED STOCK" means the Preferred Stock, par value $.0001
per share, of the Company, including the Series B Preferred and any other series
thereof.
"CONTROL," "CONTROLLING" and "CONTROLLED" have the meanings specified
in the definition of "Affiliate."
"CONVERTIBLE SECURITIES" has the meaning specified in Section 4.1(a).
"ELIGIBLE ASSIGNEE" means (i) a Purchaser, or (ii) an Affiliate of a
Purchaser.
"EQUITY INTERESTS" means (i) with respect to any Person that is a
corporation, any and all shares, interests, participations or other equivalents
(however designated and whether voting or nonvoting) of capital stock, including
each class of common stock and preferred stock of such Person, and (ii) with
respect to any Person that is not a corporation, any and all general partnership
interests, limited partnership interests, membership or limited liability
company interests, beneficial interests or other equity interests of or in such
Person (including any common, preferred or other interest in the capital or
profits of such Person, and whether or not having voting or similar rights).
"EXCHANGE ACT" means as of any date the Securities Exchange Act of
1934, as amended, or any similar federal statute then in effect, and a reference
to a particular section thereof shall include a reference to the comparable
section, if any, of any such similar federal statute.
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"GOVERNMENTAL AUTHORITY" means any nation or government, any state,
province, county, city, municipality, town, village, department or other
political subdivision thereof, any agency, authority, instrumentality,
regulatory body, court, administrative tribunal or other entity exercising
executive, legislative, judicial, regulatory or administrative functions of or
pertaining to government (including any central bank or similar monetary or
regulatory authority), and any corporation or other entity owned or controlled,
through stock or capital ownership or otherwise, by any of the foregoing.
"INITIAL PUBLIC OFFERING" means the initial underwritten public
offering by the Company of its common stock for cash pursuant to an effective
registration statement under the Securities Act, other than a registration
relating solely to employee benefit plans or solely to a transaction described
in Rule 145(a) of the SEC.
"MAJORITY PURCHASERS" means at any time Purchasers holding a majority
of the Preferred Shares then outstanding.
"MARKET PRICE" means, as of any date of determination, with respect to
the Company Common Stock, (A) if the Company Common Stock is listed or admitted
to trading on any national securities exchange, the average of the last reported
sale prices, regular way, per share of Company Common Stock for each of the 20
consecutive trading days preceding such day on the principal national securities
exchange on which the shares of Company Common Stock is listed or admitted to
trading (without taking into account any extended or after-hours trading
session), or (B) if the Company Common Stock is not listed or admitted to
trading on any national securities exchange but is listed on NASDAQ or quoted in
the OTC Bulletin Board, the average of the last reported sale prices (or, if
last-sale price quotations are not available, the average of the last available
bid and asked prices) per share of Company Common Stock for each of the days in
such 20 trading day period as reported on NASDAQ or the OTC Bulletin Board
(without taking into account any extended or after-hours trading session), or
(C) if the Company Common Stock is traded in the over-the-counter market but not
quoted on the OTC Bulletin Board, the average of the last available bid and
asked prices per share of the Company Common Stock for each of the days in such
20 trading day period as quoted in the Pink Sheets Electronic Quotation Service
or, if not so quoted, as furnished by any member of the NASD selected by the
Company, or (D) if the Company Common Stock is not publicly traded, the Market
Price for such day shall be the fair market value per share thereof as
determined jointly by the Company and Seaview.
"MATERIAL ADVERSE EFFECT" means any change or changes or effect or
effects that individually or in the aggregate are or are likely to be materially
adverse to (i) the assets, business, operations, income, prospects or condition
(financial or otherwise) of the Company and its Subsidiaries taken as a whole,
(ii) the legality, validity or enforceability of this Agreement or any of the
other Transaction Documents or (iii) the ability of the Company and its
Subsidiaries to fulfill their obligations under this Agreement and the other
Transaction Documents.
"NASD" means the National Association of Securities Dealers, Inc. or
any successor thereto.
"NASDAQ" means The NASDAQ Stock Market, Inc. and any successor
thereto.
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"NOTE" has the meaning specified in the Recitals to this Agreement.
"NOTE DOCUMENTS" means collectively the Note Purchase Agreement, the
Notes, the Subsidiary Guarantee, the Security Documents, and any other
instruments or documents now or hereafter executed and delivered pursuant to or
in connection with any of the foregoing (but excluding the Transaction
Documents).
"NOTE PURCHASE AGREEMENT" has the meaning specified in the Recitals to
this Agreement.
"OPTIONS" has the meaning specified in Section 4.1(a).
"ORDER" means any order, writ, injunction, decree, judgment, award,
determination or written direction or demand of any court, arbitrator or
Governmental Authority.
"OTC BULLETIN BOARD" means the Over-the-Counter Bulletin Board
maintained by NASDAQ or the NASD, and any successor thereto.
"OUTSTANDING ON A FULLY DILUTED BASIS" means, as of any date of
determination, with respect to the shares of Company Common Stock, (a) all
shares of Company Common Stock that are issued and outstanding on such date of
determination, and (b) all shares of Company Common Stock that would be
outstanding as of such date of determination assuming (i) the exercise of all
then outstanding Options to subscribe for or purchase shares of Company Common
Stock, (ii) the exercise of all then outstanding Options to subscribe for or
purchase shares of Company Preferred Stock and the conversion or exchange of all
other securities that by their terms are convertible into or exchangeable for
shares of Company Preferred Stock, and (iii) the conversion or exchange of all
then outstanding shares of Company Preferred Stock or other securities that by
their terms are convertible into or exchangeable for shares of Company Common
Stock and all such shares or other securities that would be outstanding upon the
exercise of the options, warrants and other rights and the conversion or
exchange of the other securities referred to in the foregoing clause (ii) (in
each case whether or not such Options are at the time so exercisable and whether
or not such shares of Company Preferred Stock or other securities are at the
time so convertible or exchangeable).
"PERSON" means and includes an individual, a corporation, a
partnership, an association, a joint venture, a limited liability company, a
trust, a syndicate, an unincorporated organization and a Governmental Authority.
"PREFERRED SHARES" has the meaning specified in Section 2.2.
"PURCHASER" and "PURCHASERS" have the meanings specified in the
Preamble to this Agreement and include any Person which hereafter becomes a
Purchaser pursuant to the provisions of Section 94.
"REQUIREMENT OF LAW" means any statute, ordinance, code, treaty,
directive, law, rule or regulation of any Governmental Authority, and any Order
of any court, arbitrator or Governmental Authority.
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"SALE OF THE COMPANY" means (i) a sale or other disposition (including
a disposition by means of a merger or consolidation of the Company with or into
another Person or Persons) of outstanding shares of Company Common Stock or Call
Securities constituting or representing rights to acquire 50% or more of the
shares of Company Common Stock then Outstanding on a Fully Diluted Basis, (ii)
any transaction or series of transactions described in Rule 145(a) of the SEC
pursuant to or in connection with which the Company shall issue a number of
shares of Company Common Stock or Call Securities which constitute or represent
rights to acquire in the aggregate a number of shares of Company Common stock
equal to or greater than the number of such shares that were Outstanding on a
Fully Diluted Basis immediately prior to such transaction or series of
transactions, (iii) any other transaction or series of transactions as a result
of which Persons who were not holders of Company Common Stock or Call Securities
immediately prior to such transaction or series of transactions shall acquire
shares of Company Common Stock or Call Securities constituting or representing
rights to acquire, immediately following such transaction or series of
transactions, 50% of more of the shares Company Common Stock Outstanding on a
Fully Diluted Basis, (iv) a sale or other Disposition of all or substantially
all of the assets of the Company or of the capital stock or assets of any of its
Subsidiaries (other than the capital stock or assets of Subsidiaries
representing in the aggregate less than 50% of the total consolidated assets and
less than 50% of the Consolidated Revenues of the Company and its Subsidiaries),
and (v) a voluntary or involuntary liquidation, dissolution or winding up of the
Company (including any transaction or event that is deemed to be a liquidation,
dissolution or winding up of the Company pursuant to any provision of the
Certificate of Incorporation of the Company).
"SEAVIEW" means Seaview Mezzanine Fund LP, a Delaware limited
partnership.
"SEC" means the United States Securities and Exchange Commission and
any successor agency, authority, commission or Governmental Authority.
"SECURITIES ACT" means as of any date the Securities Act of 1933, as
amended, or any similar federal statute then in effect, and a reference to a
particular section thereof shall include a reference to the comparable section,
if any, of any such similar federal statute.
"SERIES B PREFERRED" has the meaning specified in the Recitals to this
Agreement.
"SUBSIDIARY" of any Person means (a) any corporation with respect to
which more than 50% of the issued and outstanding voting equity interests of
such corporation (irrespective of whether at the time Equity Interests of any
other class or classes of such Person shall or might have voting power upon the
occurrence of any contingency) is at the time directly or indirectly owned or
controlled by such Person, by such Person and one or more of its other
Subsidiaries or by one or more of such Person's other Subsidiaries, or (b) any
partnership or limited liability company in which such Person and/or one or more
Subsidiaries of such Person shall have an interest (whether in the form of
voting or participation in profits or capital contribution) of more than 50% or
of which any such Person is a general partner or may exercise the powers of a
general partner.
"TICC" means Technology Investment Capital Corp., a Maryland
corporation.
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"TOTAL RATE OF RETURN" has the meaning specified in Section 2.4(b).
"TRANSACTION DOCUMENTS" means this Agreement and any other instruments
or documents now or hereafter executed and delivered pursuant to or in
connection with this Agreement.
"WARRANTS" has the meaning specified in the Note Purchase Agreement.
Section 2. ISSUANCE AND SALE OF PREFERRED SHARES.
Section 2.1. AUTHORIZATION OF PREFERRED SHARES. The Company has duly
authorized the issuance and sale of 51,508 shares of Series B Preferred.
Section 2.2. ISSUANCE AND SALE OF PREFERRED SHARES IN EXCHANGE FOR
NOTES. On the Closing Date, subject to the terms and conditions set forth in
this Agreement, the Company hereby agrees to issue and sell to Seaview, and
Seaview hereby agrees to purchase, an aggregate of 51,508 shares of Series B
Preferred (the "PREFERRED SHARES"), in exchange for Notes in the principal
amount of $5,000,000 together with $150,805 accrued unpaid interest thereon.
Section 2.3. CLOSING. The sale and delivery of the Preferred Shares
hereunder on the Closing Date shall take place at the offices of Xxxxxxxxxxx &
Xxxxxxxx Xxxxxxx Xxxxx Xxxxx LLP, 000 Xxxxxxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000
at 10:00 a.m., New York time on the date of execution and delivery of this
Agreement (herein called the "CLOSING DATE"). On the Closing Date, subject to
the conditions specified in Section 6, the Company will issue and deliver to
Seaview the Preferred Shares, and Seaview will assign (without recourse) and
deliver to the Company the Notes held by Seaview. In addition, the expenses of
Seaview incurred through the Closing Date and required to be reimbursed by the
Company pursuant to Section 9.2 hereof shall be paid in full by the Company on
the Closing Date.
Section 2.4. CONTINGENT PAYMENT.
(a) If, as of the date of the closing of any Sale of the Company (the
"SALE DATE"), the Total Rate of Return (as defined below) realized by Seaview,
determined without taking into account any payment or issuance of shares of
Company Common Stock made pursuant to the provisions of this Section 2.4(a),
shall be less than 25.0% per annum, then on the Payment Date (as defined below)
the Company shall pay to Seaview, in addition to all other amounts payable under
this Agreement, an amount (the "MAKE-WHOLE AMOUNT") such that, if such amount
had been paid to Seaview on the Sale Date and had been taken into account in
determining the Total Rate of Return as of such date, would have resulted in a
Total Rate of Return of 25.0%. The Make-Whole Amount shall be paid in cash or,
at the option of the Company, in shares of Company Common Stock valued at the
Market Price (as defined below) thereof as of the Sale Date.
(b) For the purposes hereof, the "TOTAL RATE OF RETURN" shall be equal
to the internal rate of return per annum, compounded annually, realized or
deemed realized by Seaview on its investment in the Company represented by the
Preferred Shares, and the shares of Company Common Stock received by the
Purchasers upon conversion of the Preferred Shares or otherwise pursuant to the
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provisions of this Agreement (the "PREFERRED STOCK INVESTMENT"), and shall be
computed on the basis of the following:
(i) except as otherwise provided in Section 2.4(b)(ii), the
computation of the Total Rate of Return shall be made for the period
from and including the Closing Date to and including the Sale Date;
(ii) the following assumptions shall be made in computing the
Total Rate of Return: (A) in the event that on the Sale Date Seaview
shall hold any shares of Company Common Stock issued upon conversion
of the Preferred Shares, the computation shall be made based on the
assumption that all such Preferred Shares were exercised on the Sale
Date and all shares of Company Common Stock received by Seaview upon
such conversion and any other shares of Company Common Stock
previously received by Seaview upon the conversion of Preferred Shares
were sold by it on the Sale Date for a price per share in cash equal
to the Market Price as of such date (whether or not such Preferred
Shares are actually converted or such shares of Company Common Stock
are actually sold on such date); and (B) solely for purposes of
computing the Total Rate of Return after giving effect to any
Make-Whole Amount payable pursuant to Section 2.4(a), any cash amount
paid pursuant thereto shall be deemed to have been paid on the Sale
Date, and any shares of Company Common Stock issued pursuant thereto
shall be deemed to have been issued on the Sale Date and to have been
sold by Seaview on the Sale Date for a price per share in cash equal
to the Market Price as of such date; and
(iii) the computation shall take into account (A) all cash
payments made by Seaview in respect of its Preferred Stock Investment
during the applicable period referred to in paragraph (i) above,
including, without limitation, the payment of the purchase price of
$5,000,000 principal of Notes plus accrued interest for the Preferred
Shares issued on the Closing Date, and all out-of-pocket costs and
expenses paid by Seaview in connection with the Preferred Stock
Investment for which the Company is responsible but which have not
been reimbursed to Seaview; (B) all dividends received by Seaview in
respect of the Preferred Shares during the period from and including
the Closing Date to and including the Sale Date, and (C) any payment
received (or assumed to have been received pursuant to the provisions
of paragraph (ii) above) in respect of any sale of Preferred Shares or
shares of Company Common Stock made on or prior to the Sale Date (or
assumed to have been made on the Maturity Date pursuant to paragraph
(ii) above).
(c) Within 30 days after the Sale Date, Seaview shall give written
notice to the Company (the "MAKE-WHOLE NOTICE") with respect to the amount of
the Make-Whole Amount (if any) to be paid to Seaview, which notice shall contain
a calculation thereof in reasonable detail, including the Market Price per share
of the Company Common Stock determined by Seaview for such purpose. If the
Company disagrees with the amount of the Market Price specified in the
Make-Whole Notice or disagrees for any other reason with the calculation of the
Make-Whole Amount therein stated, it shall so notify Seaview in writing within
five (5) Business Days after receipt of the Make-Whole Notice, stating the bases
for its objection thereto (the "OBJECTION NOTICE"). If a Notice of Objection is
not received by Seaview within period of five (5) Business Days, the Make-Whole
Amount as determined by Seaview in the Make-Whole Notice shall be final and
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binding for all purposes of this Section 2.4. If a Notice of Objection is
received by Seaview on a timely basis and the parties are unable to reach
agreement with respect to the matters set forth therein within a period of 15
days after such receipt, the Make-Whole Amount (including the relevant Market
Price) shall be determined in good faith by an independent investment banking
firm selected jointly by the Company and Seaview or, if that selection cannot be
made within 15 days, by an independent investment banking firm selected by the
American Arbitration Association in accordance with its rules. The fees and
expenses of such independent investment banking firm shall be borne equally by
the Company and Seaview. For the purposes hereof, the determination of the "fair
market value" of any shares of Company Common Stock shall be based upon the
market value of the Company determined on a going concern basis, assuming that
all of the outstanding shares of Company Common Stock are being sold as between
a willing buyer and a willing seller in an arm's length transaction for cash
payable in full on completion, and taking into account all prior or preferential
rights and conversion rights of holders of Company Preferred Stock at the time
outstanding and any shares of any class which may be issuable under any then
outstanding options, warrants or other rights to subscribe for, or securities
convertible into or exchangeable for, shares of Company Common Stock, and taking
into account all other relevant factors determinative of value, PROVIDED that no
discount shall be imposed by reason of such shares of Company Common Stock
constituting a minority ownership interest or by reason of the illiquidity of
such shares or any contractual or other restrictions on the sale or transfer
thereof. The determination of such investment banking firm with respect to the
matters submitted to it hereunder shall be final and binding on all parties
hereto.
(d) The Company shall pay the applicable Make-Whole Amount (if any) to
Seaview within ten (10) Business Days after receipt of the Make-Whole Notice,
or, if a timely Notice of Objection shall be received by Seaview as provided in
paragraph (c) above, within ten (10) Business Days after all disputes with
respect to the matters set forth therein shall be finally resolved in accordance
with the provisions hereof (the "PAYMENT DATE"), PROVIDED that if both Preferred
Shares and Notes originally issued to TICC under the Note Purchase Agreement are
outstanding, the Notes together with accrued unpaid interest and other amounts
due thereon shall be paid in full before any payment is made to the Purchasers
on account of the Make-Whole Amount.
Section 2.5. REGISTRATION RIGHTS. The Purchasers and the Company shall
have the respective rights and obligations set forth in EXHIBIT B hereto with
respect to registrations of the Company 's securities under the Securities Act.
Section 3. REDEMPTION AND REPURCHASE OF PREFERRED SHARES.
Section 3.1. MANDATORY REDEMPTION OF PREFERRED SHARES IN CERTAIN
EVENTS. Upon and at any time after either (a) the payment or prepayment in full
of all indebtedness of the Company for principal of and interest on the Notes
originally issued to TICC under the Note Purchase Agreement, and all fees,
expenses and other amounts owing to the holders of the Notes pursuant to the
Note Purchase Agreement, or (b) any public offering, issuance and sale of Equity
Interests of the Company, or a Sale of the Company, each Purchaser shall have
the right to require the Company to redeem and repurchase all or any part of the
Preferred Shares held by such Purchaser, at a purchase price equal to the sum of
$100 per Preferred Share plus all unpaid dividends accrued thereon to the date
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of such payment; PROVIDED that if Notes originally issued to TICC under the Note
Purchase Agreement are outstanding, the Notes together with accrued unpaid
interest and other amounts due thereon shall be paid in full before any payment
is made to the Purchasers on account of the redemption of the Preferred Shares.
Section 3.2. MANNER OF PAYMENTS. Each amount payable hereunder or upon
redemption or repurchase of Preferred Shares, and all payments of dividends on
the Preferred Shares, shall be paid in Dollars, by wire transfer or other
immediately available funds, without deduction, set-off or counterclaim, to the
Purchasers at such accounts and banks as shall be designated by the respective
Purchasers from time to time by written notice to the Company, not later than
2:00 p.m. (New York City time) on the day on which such amount is due hereunder.
Any amount received later than 2:00 p.m. (New York City time) on any day shall
be deemed received on the next succeeding Business Day.
Section 4. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company
represents and warrants to the Purchasers that, as of the Closing Date after
giving effect to the transactions contemplated by this Agreement:
Section 4.1. EQUITY INTERESTS.
(a) The authorized Equity Interests of the Company consist of
100,000,000 shares of Company Common Stock and 10,000,000 shares of Company
Preferred Stock, including 60,000 shares of Series B Preferred Stock. Set forth
in SCHEDULE 4.1 is a true and complete list of the holders of five percent (5%)
or more of the outstanding shares of Company Common Stock and of all of the
Company Preferred Stock, and the aggregate numbers of outstanding shares of
Company Common Stock, Options, Convertible Securities and other Call Securities
(each as defined below). All of the issued and outstanding shares of Company
Common Stock and Company Preferred Stock are validly issued, fully paid and
non-assessable. Except as set forth in SCHEDULE 4.1, there are no outstanding
(i) options, warrants or rights to subscribe for or purchase, or agreements
(contingent or otherwise) providing for the issuance of, or calls, commitments
or claims of any character relating to, any shares of Company Common Stock or
Company Preferred Stock ("OPTIONS"), (ii) securities (including debt securities
and equity securities) that are or by their terms may become convertible into or
exchangeable for any shares of Company Common Stock or Company Preferred Stock
("CONVERTIBLE SECURITIES"), or (iii) options, warrants or rights to subscribe
for or purchase, or agreements (contingent or otherwise) providing for the
issuance of, or calls, commitments or claims of any character relating to, any
Convertible Securities (together with Options and Convertible Securities, "CALL
SECURITIES"). Except as set forth in SCHEDULE 4.1, none of the authorized Equity
Interests of the Company constitutes Redeemable Stock, and the Company has no
obligation, whether mandatory or at the option of any other Person, at any time
to redeem or repurchase any shares of Company Common Stock or Company Preferred
Stock or any Call Securities, pursuant to the terms of the Company's
Organizational Documents or by contract or otherwise.
(b) The shares of Company Common Stock issuable upon conversion of the
Preferred Shares have been duly and validly reserved for issuance upon such
exercise and, when issued and delivered against payment therefor as provided
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therein, will be duly authorized, validly issued, fully paid and non-assessable
and subject to no Liens in respect of the issuance thereof.
Section 4.2. OFFERING OF SECURITIES. None of the Company or its
representatives has, directly or indirectly, offered any of the Preferred Shares
or any security similar to any of them for sale to, or solicited any offers to
buy any of the Preferred Shares or any security similar to them from, or
otherwise approached or negotiated with respect thereto with, more than ten (10)
Persons including the Purchasers, and none of the Company or its representatives
has taken or will take any action which would subject the issuance or sale of
any of the Preferred Shares to the provisions of Section 5 of the Securities Act
or violate the provisions of any securities or Blue Sky laws of any applicable
jurisdiction.
Section 5. REPRESENTATIONS OF THE PURCHASERS. Seaview represents to
the Company that (a) it is an "accredited investor," within the meaning of Rule
501 promulgated by the SEC under the Securities Act, and (b) it is acquiring the
Preferred Shares to be purchased by it hereunder for its own account, for
investment, and not with a view to or for sale in connection with any
distribution thereof in violation of the registration provisions of the
Securities Act or the rules and regulations promulgated thereunder.
Section 6. CLOSING CONDITIONS.
Section 6.1. CONDITIONS TO CLOSING. Seaview's obligations to purchase
and pay for the Preferred Shares shall be subject to the satisfaction, or waiver
by Seaview in writing, on or before the Closing Date, of the following
conditions:
(a) PROCEEDINGS SATISFACTORY. All corporate and other proceedings
taken or to be taken in connection with the transactions contemplated hereby and
all documents incident thereto shall be reasonably satisfactory in form and
substance to Seaview and its counsel.
(b) DELIVERIES. Seaview and its counsel shall have received all such
counterpart originals or certified or other copies of such documents as it may
reasonably request, including:
(i) stock certificates representing the Preferred Shares;
(ii) certified copies of resolutions of the Boards of Directors of
the Company and each Subsidiary of the Company authorizing the
execution, delivery and performance of this Agreement and the other
Transaction Documents and the amendments to the Note Documents to
which the Company or such Subsidiary is respectively a party;
(iii) certificates as to the incumbency and signatures of each of
the officers of the Company and its Subsidiaries who shall execute
this Agreement or any other Transaction Document on behalf of such
respective party;
(c) REPRESENTATIONS AND WARRANTIES TRUE. The representations and
warranties of the Company contained in Section 4 of this Agreement and in the
other Transaction Documents shall be true on and as of the Closing Date with the
same effect as if such representations and warranties had been made on and as of
the Closing Date.
- 10 -
(d) ABSENCE OF MATERIAL ADVERSE CHANGE, ETC. Since December 31, 2006,
no change or changes shall have occurred to the business, operations,
properties, assets, income, prospects or condition, financial or otherwise, of
the Company and its Subsidiaries, taken as a whole, which Seaview reasonably
believes in good faith to constitute a Material Adverse Effect.
(e) CONSENTS AND APPROVALS. All necessary consents, approvals and
authorizations of, and declarations, registrations and filings with,
Governmental Authorities and nongovernmental Persons required in order to
consummate the transactions contemplated herein shall have been obtained or made
and shall be in full force and effect.
(f) ABSENCE OF LITIGATION, ORDERS, ETC. There shall not be pending or,
to the knowledge of the Company and its Subsidiaries, threatened, any action,
suit, proceeding, governmental investigation or arbitration against or affecting
any of the Company or its Subsidiaries or their respective assets or property
(and, as to any action, suit, proceeding, governmental investigation or
arbitration so disclosed, there shall not have occurred since the date of this
Agreement any development) which seeks to enjoin or restrain any of the
transactions contemplated herein or which Seaview reasonably believes in good
faith is likely to have a Material Adverse Effect. No Order of any court,
arbitrator or Governmental Authority shall be in effect which purports to enjoin
or restrain any of the transactions contemplated herein or which Seaview
reasonably believes in good faith to constitute a Material Adverse Effect.
(g) CHARTER AMENDMENT. The Charter Amendment shall have been duly
adopted and approved by the Board of Directors, shall have been filed with and
accepted by the Secretary of State of the State of Montana, and shall be in full
force and effect, and Seaview shall have received such evidence thereof as it
shall reasonably request.
(h) FEES AND EXPENSES. The fees payable by the Company on the Closing
Date pursuant to Section 9.2 shall be paid in full by the Company on the Closing
Date.
Section 7. AFFIRMATIVE COVENANTS. The Company covenants and agrees
that so long as any of the Preferred Shares shall be outstanding:
Section 7.1. REINCORPORATION IN DELAWARE. Within 90 days after the
Closing Date the Company shall effect a reincorporation of the Company in
Delaware pursuant to a merger of the Company with and into a corporation newly
organized in such other jurisdiction, PROVIDED that (a) there shall be no
material change as a result of such transaction, except as necessary to
implement the transaction contemplated by Sections 7.2, 7.3, 7.4 and 7.5, in (i)
the assets, liabilities, business, operations or financial condition of the
Company and its Subsidiaries, or (ii) the corporate structure of the Company and
its Subsidiaries or the voting powers, designations, preferences, limitations,
restrictions or relative rights of any class or series of the authorized or
outstanding Equity Interests of the Company or any of its Subsidiaries,
including the Series B Preferred and the Company Common Stock, and the surviving
corporation of such merger shall have authorized classes and series of capital
stock having the same designations, preferences, limitations and relative rights
and the same number of authorized shares of each of such classes and series as
the Company immediately prior to such merger, (b) the surviving corporation of
such merger shall execute an agreement satisfactory in form and substance to
Seaview to be bound by all of the terms and provisions of this Agreement and all
- 11 -
of the other Transaction Documents as though an original party thereto, and (c)
each Preferred Share outstanding immediately prior to such merger shall be
converted into an identical share of Series B Convertible Preferred Stock, par
value $.0001 per share, of the surviving corporation of such merger, and the
term "Preferred Shares" used herein shall thereafter be deemed to refer to such
shares of Series B Convertible Preferred Stock of such surviving corporation.
Section 7.2. REVERSE SPLIT. Within 90 days after the Closing Date the
Company shall complete a transaction (which may consist of a tender offer,
merger, reverse split of its Common Stock or other corporate reorganization or
recapitalization), which shall be in form and substance satisfactory to Seaview
and completed pursuant to documents and agreements in form and substance
satisfactory to Seaview, that has the effect of reducing the number of holders
of its Common Stock to a number fewer than 250.
Section 7.3. DIVIDEND OF RIGHTS TO COMMON STOCKHOLDERS. Promptly as is
commercially reasonable after the Closing Date, the Company shall distribute as
a dividend to each holder of the Company Common Stock, warrants or other rights
to acquire a number of additional shares of Common Stock equal to 50% of the
number of shares of Common Stock then held by such stockholder, each such
warrant or other right (i) to have a ten year term, and to be initially
exercisable after the first anniversary of the date of issuance thereof, and
(ii) to have an exercise price per share of Common Stock purchasable thereunder
equal to three (3) times the initial conversion price per share of the Series B
Preferred.
Section 7.4. INCREASING AUTHORIZED COMMON STOCK. The Company and
Seaview will take all necessary or appropriate actions (including, without
limitation, using commercially reasonable efforts to obtain any necessary
approval of the stockholders of the Company) to amend the Company Charter to
increase the number of authorized shares of Common Stock to such number as shall
be reasonably sufficient, in the judgment of Seaview, to satisfy the conversion
rights of all outstanding shares of Preferred Stock held by or expected to be
held by Seaview.
Section 7.5. STOCK OPTION PLAN. The Company shall, pursuant to
resolutions of the Board, establish and implement a new stock option plan
providing for the issuance of options to acquire shares of Common Stock to
officers, directors and employees of the Company, in an aggregate amount not to
exceed at any time 20% of the shares of Common Stock Outstanding on a Fully
Diluted Basis, each such option to have an exercise price per share of Common
Stock purchasable thereunder equal to 120% of the Market Price of shares of
Common Stock on the date when granted.
Section 7.6. CANCELLATION OF WARRANTS. All Warrants issued to Seaview
and TICC under the Preferred Stock and Warrant Purchase Agreement dated
September 16, 2005 are hereby cancelled.
Section 8. NEGATIVE COVENANTS. The Company covenants and agrees that
so long as any of the Preferred Shares shall be outstanding, it will not
violate, breach or fail to comply with any of the covenants, agreements and
- 12 -
conditions contained in this Agreement or the Company Charter.
Section 9. MISCELLANEOUS.
Section 9.1. AMENDMENT AND WAIVER.
(a) No provision of this Agreement or any other Transaction Document
may be amended, waived or otherwise modified unless such amendment, waiver or
other modification is in writing and is signed by the Company and the Majority
Purchasers; PROVIDED that no such amendment, waiver or other modification shall,
unless signed by all of the Purchasers directly affected thereby, (i) change the
definition of the term "Majority Purchasers" or the percentage of Purchasers
which shall be required for the Purchasers to take any action hereunder, which
change shall be deemed to directly affect all Purchasers; (ii) amend, waive or
otherwise modify this Section 9.1(a) or the definitions of the terms used in
this Section insofar as the definitions affect the substance of this Section,
which amendment, waiver or other modification shall be deemed to directly affect
all Purchasers; or (iii) consent to the assignment, delegation or other transfer
by the Company or any of its Subsidiaries of any of their rights and obligations
under any Transaction Document, which consent shall be deemed to directly affect
all Purchasers.
(b) No failure or delay by any Purchaser in exercising any right,
remedy, power or privilege hereunder shall operate as a waiver thereof, nor
shall any single or partial exercise of any right, remedy, power or privilege
hereunder preclude any other or further exercise thereof or the exercise of any
other right, remedy, power or privilege. The rights, remedies, powers and
privileges herein provided are cumulative and are not exclusive of any rights,
remedies, powers and privileges provided by law.
Section 9.2. EXPENSES.
(a) The Company agrees, whether or not the transactions hereby
contemplated shall be consummated, to pay and save the Purchasers harmless
against any and all liability for the payment of all expenses arising in
connection with this Agreement and the other Transaction Documents, including
all expenses incurred in connection with (i) the reproduction of such agreements
and instruments and all stamp and other similar taxes (together in each case
with interest and penalties, if any) which may be payable in respect of the
execution and delivery of such agreement or instruments or the issuance,
delivery or acquisition by the Purchasers of any Preferred Share pursuant to
this Agreement, and (ii) the fees and disbursements of counsel to Seaview
incurred in connection with the preparation and negotiation of this Agreement
and the other Transaction Documents, and the consummation of the transactions
hereby and thereby contemplated.
(b) The Company also agrees to pay to the Purchasers on demand all
expenses hereafter incurred by the Purchasers (including reasonable counsel fees
and disbursements) from time to time in connection with (i) the enforcement,
attempted enforcement or preservation of any of the rights or remedies of the
Purchasers under this Agreement or any of the other Transaction Documents, (ii)
any amendment or requested amendment of, or waiver or consent or requested
- 13 -
waiver or consent under or with respect to, this Agreement or any of the other
Transaction Documents, whether or not the same shall become effective, (iii)
attendance by the representatives of the Purchasers at meetings of the boards of
directors (and committees thereof) of the Company and its Subsidiaries, and (iv)
the negotiation and documentation of any workout, restructuring or similar
arrangement relating to the Company or its Subsidiaries.
(c) The obligations of the Company under this Section 9.2 shall
survive the redemption or repurchase of the Preferred Shares, the enforcement of
any provision of this Agreement or the other Transaction Documents, any such
amendments, waivers or consents, and any such workout, restructuring or similar
arrangement.
Section 9.3. SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All
representations and warranties contained herein or made in writing by or on
behalf of any party to this Agreement or otherwise in connection herewith shall
survive the execution and delivery of this Agreement and the delivery of the
Preferred Shares to the Purchasers, and shall be deemed to be material and to
have been relied upon by the Purchasers, regardless of any investigation made by
the Purchasers or on their behalf.
Section 9.4. SUCCESSORS AND ASSIGNS; SALES AND TRANSFERS OF PREFERRED
SHARES.
(a) This Agreement shall be binding upon and inure to the benefit of
the parties hereto and their respective successors and assigns, provided that
neither the Company nor any of its Subsidiaries may transfer or assign any of
their respective rights or obligations hereunder or under the other Transaction
Documents without the prior written consent of the Majority Purchasers.
(b) Any Purchaser may at any time sell, assign and transfer all or any
portion of such Purchaser's Preferred Shares to one or more (i) Eligible
Assignees, or (ii) other Persons (other than a natural person) approved by the
Majority Purchasers, and each such purchaser or assignee of Preferred Shares
shall thereupon be deemed a "Purchaser" hereunder; provided however that the
rights of Seaview to the Make-Whole Amount under Section 2.4 shall be personal
to Seaview and cannot be assigned to any transferee of Preferred Shares except
an Eligible Assignee.
(c) Notwithstanding the foregoing provisions of this Section 9.4 or
any other provision of this Agreement, any Purchaser may at any time pledge, and
grant or assign a security interest in, all or any portion of the Preferred
Shares held by it and its rights under this Agreement and the other Transaction
Documents to secure obligations of such Purchaser, and in the event of any
foreclosure of such pledge and security interest, the secured party thereof may
sell and assign such Preferred Shares, together with such rights and interests
of such Purchaser under this Agreement and the other Transaction Documents, in a
public or private sale and may exercise all other rights of a secured party with
respect thereto in accordance with the documentation governing such pledge and
security interest and applicable law; PROVIDED that no such pledge or assignment
shall release such Purchaser from any of its obligations hereunder or substitute
any such pledgee or assignee for such Purchaser as a party hereto.
- 14 -
Section 9.5. NOTICES. All notices hereunder shall be in writing and
shall be conclusively deemed to have been received and shall be effective (a) on
the day on which delivered if delivered personally or transmitted by facsimile
transmission, (b) one Business Day after the date on which the same is delivered
to a nationally recognized overnight courier service, (c) three Business Days
after being sent by registered or certified United States mail, return receipt
requested, or (d) if sent by e-mail as provided below, and shall be addressed:
(i) if to the Company or any of its Subsidiaries, to:
GenuTec Business Solutions, Inc.
0X Xxxxxxx Xxxxxx, Xxxxx 000
Xxxxx Xxxxx, XX 00000
Attention: President
Facsimile:
E-mail:
(i) if to Seaview, to:
Seaview Mezzanine Fund LP
000 Xxxxxxx Xxxxxx, Xxxxx 0000
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxx X. Xxxxxxx
Facsimile:
E-mail: xxxxx@xxxxxxxxxxxxxxxxxxxxxx.xxx
(i) if to any Purchaser other than Seaview, to it at the
address, facsimile number or e-mail address for such
Purchaser designated in writing to the Company;
or to such other address or addresses or telecopy number or numbers as any of
such Persons may most recently have designated in writing to the others by such
notice. Notices and other communications sent to an e-mail address shall be
deemed received upon the sender's receipt of an acknowledgement from the
intended recipient (such as by the "return receipt requested" function, as
available, return e-mail or other written acknowledgement), PROVIDED that if
such notice or other communication is not sent during the normal business hours
of the recipient, such notice or communication shall be deemed to have been sent
at the opening of business on the next Business Day.
Section 9.6. INDEMNIFICATION. In consideration of the execution and
delivery of this Agreement by Seaview, the Company hereby agrees to defend,
indemnify, exonerate and hold harmless each Purchaser and each of the officers,
directors, stockholders, partners, members, managers, Affiliates, trustees,
employees and agents of each Purchaser (herein collectively called the
"INDEMNITEES") from and against any and all liabilities, obligations, losses,
damages, claims, actions, suits, proceedings, judgments, costs and expenses,
including legal fees and other expenses incurred in the investigation, defense,
appeal and settlement of claims, actions, suits and proceedings (herein
collectively called the "INDEMNIFIED LIABILITIES"), incurred by the Indemnitees
- 15 -
or any of them arising out of or resulting from any act or failure to act by the
Company or any of its Subsidiaries or their respective officers, directors,
employees, agents, representatives or Affiliates relating to this Agreement, any
of the other Transaction Documents, the issuance of the Preferred Shares or the
transactions contemplated hereby or thereby, or the performance by the Company
of its obligations hereunder or thereunder except for any such Indemnified
Liabilities which are finally judicially determined to have resulted from the
Indemnitee's gross negligence, willful misconduct or willful breach of this
Agreement, and if and to the extent that the foregoing undertaking may be
unenforceable for any reason, the Company hereby agrees to make the maximum
contribution to the payment and satisfaction of each of the Indemnified
Liabilities which is permissible under applicable law. The obligations of the
Company under this Section 9.6 shall survive the redemption or repurchase of the
Preferred Shares, and the enforcement of any provision hereof.
Section 9.7. PUNITIVE DAMAGES. Each party to this Agreement agrees
that it shall not have a remedy of punitive, special, exemplary, indirect or
consequential damages against any other party to this Agreement in connection
with any claim or dispute arising hereunder and hereby waives any right or claim
to any such damages that such party now has or which may arise in the future in
connection with any such claim or dispute, whether such claim or dispute is
resolved by arbitration or judicially.
Section 9.8. INTEGRATION AND SEVERABILITY. This Agreement embodies the
entire agreement and understanding among the Purchasers and the Company with
regard to its subject matter, and supersedes all prior agreements and
understandings relating to the subject matter hereof. In case any one or more of
the provisions contained in this Agreement or in any instrument contemplated
hereby for such date, or any application thereof, shall be invalid, illegal or
unenforceable in any respect, the validity, legality and enforceability of the
remaining provisions contained herein and therein, and any other application
thereof, shall not in any way be affected or impaired thereby.
Section 9.9. COUNTERPARTS. This Agreement may be executed in two or
more counterparts, each of which shall be deemed an original but all of which
shall together constitute one and the same instrument. Delivery of an executed
counterpart of a signature page of this Agreement by telecopy or other
electronic means shall be effective as delivery of a manually executed
counterpart of this Agreement. Delivery of manually executed counterparts of
this Agreement shall immediately follow delivery by telecopy or other electronic
means, but the failure to so deliver a manually executed counterpart shall not
affect the validity, enforceability, or binding effect hereof.
Section 9.10. GOVERNING LAW. THIS AGREEMENT AND THE NOTES SHALL BE
CONSTRUED IN ACCORDANCE WITH AND SHALL BE GOVERNED BY THE LAWS OF THE STATE OF
NEW YORK.
Section 9.11. SUBMISSION TO JURISDICTION; WAIVER OF SERVICE AND VENUE.
(A) THE COMPANY CONSENTS AND AGREES TO THE EXCLUSIVE JURISDICTION OF
ANY STATE OR FEDERAL COURT SITTING IN THE COUNTY OF NEW YORK, STATE OF NEW YORK
- 16 -
WITH RESPECT TO ANY ACTION INSTITUTED BY IT THEREIN, AND WAIVES ANY OBJECTION
BASED ON VENUE OR FORUM NON CONVENIENS IN CONNECTION WITH ANY SUCH ACTION.
(B) THE COMPANY HEREBY WAIVES PERSONAL SERVICE OF ANY AND ALL PROCESS
UPON IT AND CONSENTS THAT ALL SUCH SERVICE OF PROCESS MAY BE MADE BY HAND
DELIVERY OR BY REGISTERED OR CERTIFIED UNITED STATES MAIL TO THE COMPANY AT ITS
ADDRESS SET FORTH IN SECTION 9.5.
(C) NOTHING IN THIS SECTION 9.11 SHALL AFFECT THE RIGHT OF THE
PURCHASERS TO SERVE LEGAL PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR AFFECT
THE RIGHT OF THE PURCHASERS TO BRING ANY ACTION OR PROCEEDING AGAINST THE
COMPANY OR ITS PROPERTY IN THE COURTS OF ANY OTHER JURISDICTION.
Section 9.12. WAIVER OF RIGHT TO TRIAL BY JURY. EACH OF THE COMPANY
AND THE PURCHASERS HEREBY WAIVES ANY RIGHT TO TRIAL BY JURY OF ANY CLAIM,
DEMAND, ACTION OR CAUSE OF ACTION (I) ARISING UNDER THIS AGREEMENT OR ANY OTHER
INSTRUMENT, DOCUMENT OR AGREEMENT EXECUTED OR DELIVERED IN CONNECTION HEREWITH
OR (II) IN ANY WAY CONNECTED WITH OR RELATED OR INCIDENTAL TO THE DEALINGS OF
THE PARTIES HERETO OR ANY OF THEM IN RESPECT TO THIS AGREEMENT OR ANY OTHER
INSTRUMENT, DOCUMENT OR AGREEMENT EXECUTED OR DELIVERED IN CONNECTION HEREWITH
OR THE TRANSACTIONS RELATED HERETO, IN EACH CASE WHETHER NOW EXISTING OR
HEREAFTER ARISING, AND WHETHER SOUNDING IN CONTRACT OR TORT OR OTHERWISE. THE
COMPANY AND THE PURCHASERS HEREBY AGREE AND CONSENT THAT ANY SUCH CLAIM, DEMAND,
ACTION OR CAUSE OF ACTION SHALL BE DECIDED BY COURT TRIAL WITHOUT A JURY AND
THAT ANY PARTY MAY FILE AN ORIGINAL COUNTERPART OR A COPY OF THIS AGREEMENT WITH
ANY COURT AS WRITTEN EVIDENCE OF THE CONSENT OF THE PARTIES HERETO TO THE WAIVER
OF THEIR RIGHT TO TRIAL BY JURY.
[REMAINDER OF PAGE INTENTIONALLY BLANK. SIGNATURES FOLLOW.]
- 17 -
IN WITNESS WHEREOF, the Company and the Purchasers have executed this
Agreement by their duly authorized officers as of the date first written above.
COMPANY:
-------
GENUTEC BUSINESS SOLUTIONS, INC.
By: /s/ Xxx Xxxxx
-------------------------------------
Name: Xxx Xxxxx
Title: President
PURCHASERS:
----------
SEAVIEW MEZZANINE FUND LP
By: Seaview GP, LLC
its General Partner
By: /s/ Xxxxx Xxxxxxx
-------------------------------------
Name: Xxxxx Xxxxxxx
Title: Member, Managing Director
- 18 -
EXHIBIT B
---------
Registration Rights
-------------------
1. DEFINITIONS. As used in this EXHIBIT B, the following terms
shall have the following meanings:
"COMMON STOCK" means Common Stock, $0.001, of the Company.
"INVESTOR STOCKHOLDERS" means Stockholders of the Company who are
at any relevant time holders of Preferred Shares issued pursuant to the
Preferred Stock Purchase Agreement (the "PURCHASE AGREEMENT").
"PRO RATA" means, with respect to the Registrable Securities held
by a Stockholder to be excluded from an underwritten public offering as provided
in this EXHIBIT B, the number which bears the same proportion to the total
number of shares of Common Stock to be excluded as the aggregate number of
shares of Registrable Securities held by such Stockholder bears to the aggregate
number of shares of Common Stock held by all Stockholders participating in such
offering whose shares are to be excluded.
"REGISTRABLE SECURITIES" means, collectively, (i) Common Stock of
the Company, including without limitation Common Stock issued or issuable upon
conversion of Preferred Shares issued pursuant to the Purchase Agreement, and
(ii) Common Stock issued or issuable by way of stock dividend or stock split or
in connection with a combination of shares, recapitalization, merger,
consolidation or other reorganization or otherwise with respect to Registrable
Securities. Registrable Securities shall cease to be Registrable Securities when
(i) a registration statement with respect to the sale of such securities shall
have become effective under the Securities Act and such securities shall have
been disposed of in accordance with such registration statement, (ii) such
securities shall have been sold pursuant to Rule 144 (or any successor
provision) under the Securities Act or (iii) such securities shall have been
otherwise transferred, new certificates therefor not bearing a legend
restricting further transfer shall have been delivered by the Company and
subsequent disposition of such securities shall not require the registration or
qualification of such securities under the Securities Act or any similar state
law then in effect.
"REGISTRATION EXPENSES" means all expenses incident to the
Company's performance of or compliance with this EXHIBIT B and the completion of
transactions relating thereto including, without limitation, all registration
and filing fees, all fees and expenses of complying with securities or blue sky
laws, all printing expenses, the fees and disbursements of the Company's
independent public accountants, including the expenses of any special audits,
reviews, compilations or other reports or information required by or incident to
such performance and compliance, and the reasonable fees or expenses of counsel
for the Company and of one special counsel to represent the holders on whose
- 19 -
behalf Registrable Securities are being registered, but excluding (i) any
allocation of the Company or selling Stockholder personnel or other general
overhead expenses of the Company or of any selling Stockholder or other expenses
for the preparation of financial statements or other data normally prepared by
the Company in the ordinary course of its business, which shall be borne by the
party incurring the expense in all cases, and (ii) any underwriting discounts
and commissions with respect to such Registrable Securities, which shall be
borne by the holder on whose behalf such Registrable Securities are being
registered.
"STOCKHOLDER" means a holder of Common Stock or Preferred Shares.
Unless otherwise defined herein, capitalized terms used in this EXHIBIT B have
the meanings assigned to them in the Purchase Agreement.
2. REGISTRATION ON REQUEST. (a) Upon the written request of Investor
Stockholders holding a majority of the Registrable Securities held by all
Investor Stockholders, requesting that the Company effect the registration under
the Securities Act of all or part of the Registrable Securities held by such
Investor Stockholders (the "REQUESTING STOCKHOLDERS") and specifying the
intended method or methods of disposition of such Registrable Securities, the
Company will thereupon use its commercially reasonable best efforts to effect,
at the earliest possible date, the registration, under the Securities Act,
subject to Section 2(e), of the Registrable Securities which the Company has
been so requested to register by such Requesting Stockholders, for disposition
as stated in such request, to the extent required to permit the disposition (in
accordance with the intended methods thereof as aforesaid) of the Registrable
Securities to be so registered, PROVIDED that (A) if the Company shall have
previously effected a registration of which notice has been given to all
Investor Stockholders holding Registrable Securities pursuant to Section 3, in
which all Investor Stockholders wishing to do so were permitted to sell all
Registrable Securities they desired to sell, the Company shall not be required
to effect a registration pursuant to this Section 2 until a period of 120 days
shall have elapsed from the effective date of the most recent such previous
registration, (B) the Company shall not be obligated to effect more than two (2)
such registrations requested by the Investor Stockholders pursuant to this
Section 2(a) (with the exception of S-3 registrations described in Section 2(b)
herein), and (C) each such request must include Registrable Securities having an
offering price of at least $2,000,000 in the aggregate. Each registration
requested pursuant to this Section 2 shall be (i) effected by the filing of a
registration statement on Form S-1 or Form S-3 (or any other form which the
Company is qualified to use), and (ii) if the Company is qualified and if agreed
to in writing by the Requesting Stockholders, filed pursuant to Rule 415 under
the Securities Act (or equivalent rule then in effect).
(b) The Investor Stockholders will be entitled to unlimited S-3
registrations; PROVIDED, HOWEVER, that each must include Registrable Securities
having an offering price of at least $1,000,000 in the aggregate and no more
than two such registrations shall be required in any twelve-month period.
(c) The Company will pay all Registration Expenses (exclusive of
underwriting discounts and commissions), including the cost of one counsel for
the selling stockholders, in connection with each registration of Registrable
- 20 -
Securities effected by the Company pursuant to this Section 2, provided that the
expenses of the first three S-3 registrations will be borne by the Company, and
thereafter all S-3 registration expenses will be borne by the selling
stockholders PRO RATA.
(d) The Company will not register securities for sale for the
account of any Person other than (i) the Company, and (ii) holders of
Registrable Securities. The Company will not grant to any Person the right to
request a registration of securities except pursuant to Section 2(a), or with
the written consent of Investor Stockholders holding a majority of the shares of
Registrable Securities held by all Investor Stockholders, and except to Persons
that have been granted such rights prior to the closing Date. The Company may
grant incidental rights to participate in registrations comparable to those
granted in Section 3.
(e) If the registration so requested by the Requesting Stockholders
involves an underwritten offering of the securities so being registered, to be
distributed (on a firm commitment basis) by or through one or more underwriters
of recognized standing under underwriting terms appropriate for such a
transaction, and the managing underwriter of such underwritten offering shall
advise the Company in writing that, in its opinion, the distribution of all or a
specified portion of the Registrable Securities which the Requesting
Stockholders have requested to register under Section 2(a) and all other
Registrable Securities which other holders thereof have requested be included in
such offering pursuant to Section 3 will materially and adversely affect the
distribution of such securities by such underwriters (such opinion to state the
reasons therefor), then the Company will promptly furnish the Requesting
Stockholders a copy of the opinion of the managing underwriter, and will
register the shares of Common Stock which the Requesting Stockholders and all
such other holders of Registrable Securities have requested pursuant to Section
2(a) in an amount not to exceed the maximum number of shares that the managing
underwriter deems advisable. The Registrable Securities which THE Requesting
Stockholders and all such other holders of Registrable Securities have requested
to be included in such offering that are to be excluded from such offering shall
be allocated FIRST, among such other holders Pro Rata, and second, to the extent
of any Registrable Securities remaining to be excluded, among the Requesting
Stockholders Pro Rata.
(f) If requested by the underwriters for any underwritten offering
of Registrable Securities pursuant to a registration requested under this
Section 2, the Company will enter into an underwriting agreement with such
underwriters for such offering, such agreement to contain such representations
and warranties by the Company and such other terms and provisions as are
customarily contained in underwriting agreements with respect to secondary
distributions, including, without limitation, indemnities and contribution
provisions to the effect and to the extent provided in Section 6.
(g) If, at any time after requesting registration pursuant to
Section 2(a) and prior to the effective date of the registration statement filed
in connection with such registration request, the Requesting Stockholders shall
determine for any reason not to register such Registrable Securities, such
Requesting Stockholders may, at their election, give written notice of such
determination to the Company. The Company shall then be relieved of its
obligations to register any Registrable Securities in connection with such
Requesting Stockholders' registration request (but not its obligation to pay the
- 21 -
Registration Expenses in connection therewith as provided in Section 2(c)), and
such terminated registration shall be counted as a request for registration
pursuant to Section 2(a). If, however, the Requesting Stockholders pay the
Registration Expenses in connection therewith, the terminated registration shall
not be counted as a request for registration pursuant to Section 2(a).
(h) In connection with the first request for registration pursuant
to Section 2(a), the Company may, within fifteen (15) days after its receipt of
such request, give the Requesting Stockholders notice that it is the good faith
intention of the Company to register securities under the Securities Act for
sale for its own account. Thereafter, the provisions of Section 3 shall govern,
and the Requesting Stockholders' registration request under Section 2(a) shall
be deemed rescinded. The Requesting Stockholders shall again be entitled to
request such registration under Section 2(a), but not sooner than the earliest
of (i) one hundred and twenty (120) days after the effective date of the
Company's registration, (ii) the Company's determination (of which the Company
shall promptly notify the holders of Registrable Securities) not to proceed with
its registration of securities, and (iii) the Company's failure to use best
efforts to effect the registration of its securities.
(i) In connection with any request for registration pursuant to
Section 2(a), the Company may, on two occasions only, upon a good-faith
determination by the Company's Board of Directors that such a registration would
interfere with the completion of a proposed corporate transaction, notify the
Requesting Stockholder that it intends to defer such registration for up to one
hundred twenty (120) days. In such event the Requesting Stockholder may rescind
its registration request, and shall again be entitled to request such
registration under Section 2(a), but not sooner than the end of the period of
deferral determined by the Company.
3. INCIDENTAL REGISTRATIONS. (a) If, at any time, the Company proposes
to register any of its securities under the Securities Act (including without
limitation a registration on request of the Investor Stockholders pursuant to
Section 2 above), whether or not for sale for its own account, on a form and in
a manner which would permit registration of Registrable Securities for sale to
the public under the Securities Act, it will each such time give prompt written
notice to all holders of Registrable Securities of its intention to do so,
describing such securities and specifying the form and manner and the other
relevant facts involved in such proposed registration, and upon the written
request of any such holder delivered to the Company within thirty (30) days
after the giving of any such notice (which request shall specify the Registrable
Securities intended to be disposed of by such holder and the intended method of
disposition thereof), the Company will use its best efforts to effect the
registration under the Securities Act of all Registrable Securities which the
Company has been so requested to register by the holders of Registrable
Securities, to the extent requisite to permit the disposition (in accordance
with the intended methods thereof as aforesaid) of the Registrable Securities so
to be registered, PROVIDED that:
(i) if, at any time after giving such written notice of its
intention to register any of its securities and prior to the effective
date of the registration statement filed in connection with such
registration, the Company shall determine for any reason not to
register such securities, the Company may, at its election, give
written notice of such determination to each holder of Registrable
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Securities and thereupon shall be relieved of its obligation to
register any Registrable Securities in connection with such
registration (but not from its obligation to pay the Registration
Expenses in connection therewith as provided in Section 3(b)), without
prejudice however to the rights of the Investor Stockholders to
request that such registration be effected as a registration under
Section 2(a);
(ii) if the registration so proposed by the Company involves an
underwritten offering of the securities so being registered, whether
or not for sale for the account of the Company, to be distributed (on
a firm commitment basis) by or through one or more underwriters of
recognized standing under underwriting terms appropriate for such a
transaction, and the managing underwriter of such underwritten
offering shall advise the Company in writing that, in its opinion, the
distribution of all or a specified portion of the Registrable
Securities which the Stockholders have requested the Company to
register in accordance with this Section 3(a) concurrently with the
securities being distributed by such underwriters will materially and
adversely affect the distribution of such securities by such
underwriters (such opinion to state the reasons therefor), then the
Company will promptly furnish each such holder of Registrable
Securities with a copy of such opinion and may deny, by written notice
to each such holder accompanying such opinion, the registration of all
or a specified portion of such Registrable Securities (in case of a
denial as to a portion of such Registrable Securities, such portion to
be allocated Pro Rata among such holders), after giving effect to any
priorities with respect to registration of holders of Registrable
Securities under registration rights granted prior to the Closing
Date; and
(iii) the Company shall not be obligated to effect any
registration of Registrable Securities under this Section 3 incidental
to the registration of any of its securities in connection with
dividend reinvestment plans or stock option or other employee benefit
plans.
(b) The Company will pay all Registration Expenses in connection
with each registration of Registrable Securities requested pursuant to this
Section 3.
4. REGISTRATION PROCEDURES. (a) If and whenever the Company is
required to use its commercially reasonable best efforts to effect the
registration of any Registrable Securities under the Securities Act as provided
in Section 2 or 3, the Company will as expeditiously as possible:
(i) prepare and promptly file with the Commission a registration
statement with respect to such Registrable Securities (in any event,
use its best efforts to file such registration statement within ninety
(90) days after the end of the period within which requests for
registration may be delivered to the Company) and use its best efforts
to cause such registration statement to become effective;
(ii) prepare and file with the Commission such amendments and
supplements to such registration statement and the prospectus used in
connection therewith as may be necessary to keep such registration
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statement effective and to comply with the provisions of the
Securities Act with respect to the disposition of all Registrable
Securities and other securities covered by such registration statement
until the earlier of such time as all of such Registrable Securities
and other securities have been disposed of in accordance with the
intended methods of disposition by the seller or sellers thereof set
forth in such registration statement or the expiration of six (6)
months after such registration statement becomes effective;
(iii) furnish to each seller of such Registrable Securities,
without charge, such number of conformed copies of such registration
statement and of each such amendment and supplement thereto (in each
case including all exhibits), such number of copies of the prospectus
included in such registration statement (including each preliminary
prospectus and any summary prospectus), in conformity with the
requirements of the Securities Act, such documents incorporated by
reference in such registration statement or prospectus, and such other
documents, as such seller may reasonably request;
(iv) use its best efforts to register or qualify all Registrable
Securities and other securities covered by such registration statement
under the securities or blue sky laws of such jurisdictions as each
seller (or in an underwritten offering, the managing underwriter)
shall reasonably request, and do any and all other acts and things
which may be necessary or advisable to enable such seller to
consummate the disposition in such jurisdictions of its Registrable
Securities covered by such registration statement, except that the
Company shall not for any such purpose be required to qualify
generally to do business as a foreign corporation in any jurisdiction
wherein it is not so qualified, or to subject itself to taxation in
any such jurisdiction, or to consent to general service of process in
any such jurisdiction;
(v) furnish to each seller of Registrable Securities by means of
such registration a signed counterpart, addressed to such seller, of
(A) an opinion of counsel for the Company, dated the effective date of
such registration statement (or, if such registration includes an
underwritten public offering, dated the date of the closing under the
underwriting agreement speaking both as of the effective date of the
registration statement and the date of the closing under the
underwriting agreement) and (B) a "cold comfort" letter dated the
effective date of such registration statement (and, if such
registration statement includes an underwritten public offering, dated
the date of the closing under the underwriting agreement) signed by
the independent public accountants who have certified the Company's
financial statements included in such registration statement, covering
substantially the same matters with respect to such registration
statement (and the prospectus included therein) and, in the case of
such accountants' letter, with respect to events subsequent to the
date of such financial statements, as are customarily covered in
opinions of issuer's counsel and in accountants' letters delivered to
underwriters in underwritten public offerings of securities and, in
the case of the accountants' letter, such other financial matters, as
such seller may reasonably request;
(vi) immediately notify each seller of Registrable Securities
covered by such registration statement, at any time when a prospectus
relating thereto is required to be delivered under the Securities Act,
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of 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 seller prepare and furnish to
such seller 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
or other 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;
(vii) otherwise use its best efforts to comply with all applicable
rules and regulations of the Commission, and make available to its
securities holders, as soon as reasonably practicable, an earnings
statement covering the period of at least twelve (12) months, but not
more than eighteen (18) months, beginning with the first month of the
first fiscal quarter after the effective date of such registration
statement, which earnings statement shall satisfy the provisions of
Section 11(a) of the Securities Act; and
(viii) use its best efforts to list such securities on the NASDAQ
and each securities exchange on which the Common Stock of the Company
is then listed, if such securities are not already so listed and if
such listing is then permitted under the rules of such exchange, and,
if necessary, provide a transfer agent and registrar for such
Registrable Securities not later than the effective date of such
registration statement.
The Company may require each such holder of Registrable Securities as to which
any registration is being effected to furnish the Company such information
regarding such holder and the distribution of such securities as the Company may
from time to time reasonably request in writing and as shall be required by law
or by the Commission in connection therewith.
(b) If the Company at any time proposes to register any of its
securities under the Securities Act (other than pursuant to a request made under
Section 2), whether or not for sale for its own account, and such securities are
to be distributed by or through one or more underwriters, the Company will,
subject to Section 3(a)(ii), make reasonable efforts, if requested by any holder
of Registrable Securities who requests incidental registration of Registrable
Securities in connection therewith pursuant to Section 3, arrange for such
underwriters to include such Registrable Securities among those securities to be
distributed by or through such underwriters. The holders of Registrable
Securities on whose behalf Registrable Securities are to be distributed by such
underwriters shall be parties to any such underwriting agreement and the
representations and warranties by, and the other agreements on the part of, the
Company to and for the benefit of such underwriters, shall also be made to and
for the benefit of such holders of Registrable Securities.
(c) Whenever a registration requested pursuant to Section 2 is for
an underwritten offering, the Company shall have the right to select the
managing underwriter to administer the offering, subject to the approval of the
holders of a majority of the Registrable Securities included in such
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registration, such approval not to be unreasonably withheld or delayed. If the
Company at any time proposes to register any of its securities under the
Securities Act for sale for its own account and such securities are to be
distributed by or through one or more underwriters, the managing underwriter
shall be selected by the Company.
(d) If any registration pursuant to Section 2 or 3 shall be in
connection with an underwritten public offering, each holder of Registrable
Securities agrees by acquisition of such Registrable Securities, if so required
by the managing underwriters, not to effect any public sale or distribution of
Registrable Securities (other than as part of such underwritten public offering)
within the period of time between fourteen (14) days prior to the effective date
of such registration statement and one hundred twenty (120) days after the
effective date of such registration statement.
5. PREPARATION; REASONABLE INVESTIGATION. In connection with the
preparation and filing of each registration statement registering Registrable
Securities under the Securities Act, the Company will give the holders of
Registrable Securities on whose behalf such Registrable Securities are to be so
registered and their underwriters, if any, and their respective counsel and
accountants, the opportunity to review and comment upon such registration
statement, each prospectus included therein or filed with the Commission, and
each amendment thereof or supplement thereto, and will give each of them such
access to its books and records and such opportunities to discuss the business
of the Company with its officers and the independent public accountants who have
certified its financial statements as shall be necessary, in the reasonable
opinion of such holders and such underwriters or their respective counsel, to
conduct a reasonable investigation within the meaning of the Securities Act.
6. INDEMNIFICATION; CONTRIBUTION. (a) In the event of any registration
of any securities of the Company under the Securities Act, the Company will, and
hereby does, indemnify and hold harmless in the case of any registration
statement filed pursuant to Section 2 or 3, the holder of any Registrable
Securities covered by such registration statement, its directors and officers,
each officer and director of each underwriter, each other person who
participates as an underwriter in the offering or sale of such securities and
each other person, if any, who controls such holder or any such underwriter
within the meaning of the Securities Act against any losses, claims, damages,
liabilities and expenses, joint or several, to which such holder or any such
director or officer or participating or controlling person may become subject
under the Securities Act or otherwise, insofar as such losses, claims, damages,
liabilities or expenses (or actions or proceedings or investigations in respect
thereof) arise out of or are based upon (x) any untrue statement or alleged
untrue statement of any material fact contained in any registration statement
under which such securities were registered under the Securities Act, any
preliminary prospectus (unless, with respect to the indemnification of the
officers and directors of each underwriter and each other person participating
as an underwriter, any such statement is corrected in a subsequent prospectus
and the underwriters are given the opportunity to circulate the corrected
prospectus to all persons receiving the preliminary prospectus), final
prospectus or summary prospectus included therein, or any amendment or
supplement thereto, or any document incorporated by reference therein, or (y)
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, or
(z) any violation by the Company of any securities laws, and the Company will
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reimburse such holder and each such director, officer, participating person and
controlling person for any legal or any other expenses reasonably incurred by
them in connection with investigating or defending any such loss, claim,
liability, action or proceeding; PROVIDED, HOWEVER, that the Company shall not
be liable to any seller, director, officer, participating person or controlling
person in any such case to the extent that any such loss, claim, damage,
liability (or action or proceeding in respect thereof) or expense arises out of
or is based upon an untrue statement or alleged untrue statement or omission or
alleged omission made in such registration statement, any such preliminary
prospectus, final prospectus, summary prospectus, amendment or supplement in
reliance upon and in conformity with written information furnished to the
Company in an instrument executed by or under the direction of such seller,
director, officer, participating person or controlling person for use in the
preparation thereof, which information was specifically stated to be for use in
the registration statement, prospectus, offering circular or other document.
Such indemnity shall remain in full force and effect regardless of any
investigation made by or on behalf of such seller or any such director, officer,
participating person or controlling person and shall survive the transfer of
such securities by such seller. The Company shall agree to provide for
contribution relating to such indemnity as shall be reasonably requested by any
seller of Registrable Securities or the underwriters.
(b) The Company may require, as a condition to including any
Registrable Securities in any registration statement filed pursuant to Section
2(a), that the Company shall have received an undertaking satisfactory to it
from the prospective sellers of such securities and their underwriters, to
indemnify and hold harmless (in the same manner and to the same extent as set
forth in subdivision (a) of this Section 6) the Company, each director of the
Company, each officer of the Company who shall sign such registration statement
and each other person, if any, who controls the Company within the meaning of
the Securities Act, with respect to any statement in or omission from such
registration statement, any preliminary prospectus, final prospectus or summary
prospectus included therein, or any amendment or supplement thereto, but only if
such statement or omission was made in reliance upon and in conformity with
written information furnished to the Company through an instrument duly executed
by such sellers or their underwriters specifically stating that it is for use in
the preparation of such registration statement, preliminary prospectus, final
prospectus, summary prospectus, amendment or supplement, and PROVIDED THAT (i)
the obligation to provide indemnification pursuant to this Section 6(b) shall be
several, and not joint and several, among such sellers and (ii) the liability of
each seller hereunder shall be limited to the proportion of any such loss,
claim, damage, liability or expense which is equal to the proportion that the
public offering price of the shares sold by such seller under such registration
statement bears to the total public offering price of all securities sold
thereunder, but not in any event to exceed the net proceeds received by such
seller from the sale of Registrable Securities covered by such registration
statement. Such indemnity shall remain in full force and effect regardless of
any investigation made by or on behalf of the Company or any such director,
officer or controlling person and shall survive the transfer of such securities
by such sellers.
(c) Promptly after receipt by an indemnified party of notice of the
commencement of any action or proceeding involving a claim referred to in the
preceding subdivisions of this Section 6, such indemnified party will, if a
claim in respect thereof is to be made against an indemnifying party, give
written notice to the latter of the commencement of such action; PROVIDED,
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HOWEVER, that the failure of any indemnified party to give notice as provided
herein shall not relieve the indemnifying party of its obligations under the
preceding subdivisions of this Section 6 except to the extent that the
indemnifying party's liabilities and obligations under this Section 6 are
increased as a result of such failure to give notice. In case any such action is
brought against an indemnified party, the indemnifying party shall be entitled
to participate in and to assume the defense thereof, jointly with any other
indemnifying party similarly notified, to the extent that it may wish, with
counsel reasonably satisfactory to such indemnified party. After notice from the
indemnifying party to such indemnified party of its election so to assume the
defense thereof, the indemnifying party shall not be liable to such indemnified
party for any legal or other expenses subsequently incurred by the indemnified
party in connection with the defense thereof unless (i) the indemnifying party
shall have failed to retain counsel for the indemnified party as aforesaid, (ii)
the indemnifying party and the indemnified party shall have mutually agreed to
the retention of such counsel or (iii) representation of such indemnified party
by the counsel retained by the indemnifying party would be inappropriate due to
actual or potential differing interests between such indemnified party and any
other person represented by such counsel in such proceeding or the indemnified
party shall have reasonably concluded that there may be legal defenses available
to it which are different from or additional to those available to the
indemnifying party (in which case the indemnifying party shall not have the
right to direct the defense of such action on behalf of the indemnified party).
No indemnifying party will consent to entry of any judgment or enter into any
settlement which 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 to such claim or litigation. The indemnifying party shall
not be liable for any settlement of any proceeding effected without the written
consent of such indemnifying party, such consent not to be unreasonably withheld
or delayed, but if settled with such consent or if there be a final judgment for
the plaintiff, the indemnifying party agrees to indemnify each indemnified party
from and against any loss or liability by reason of such settlement or judgment.
(d) Indemnification similar to that specified in this Section 6 (with
appropriate modifications) shall be given by the Company and each seller of
Registrable Securities with respect to any required registration or other
qualification of such Registrable Securities under any federal or state law or
regulation or governmental authority other than the Securities Act.
7. RULE 144 REPORTING. With a view to making available the benefits of
certain rules and regulations of the Commission which may at any time permit the
sale of the Registrable Securities to the public without registration (but in no
way reducing the rights of the holders of such Registrable Securities) at all
times after 90 days after any registration statement covering a public offering
of securities of the Company under the Securities Act shall have become
effective, or at all times after the Common Stock of the Company shall initially
be registered pursuant to the requirements of Section 12 of the Exchange Act,
the Company agrees at its cost and expense to use its best efforts to:
(a) make and keep public information available, as those terms are
understood within Rule 144 under the Securities Act;
(b) file with the Commission in a timely manner all reports and other
documents required of the Company under the Securities Act and the Exchange Act;
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(c) furnish to each holder of Registrable Securities, forthwith upon
request a written statement by the Company as to its compliance with the
reporting requirements of such Rule 144 and of the Securities Act and the
Exchange Act, a copy of the most recent annual or quarterly report of the
Company, and such other reports and documents so filed by the Company as such
holder may reasonably request in availing itself of any rule or regulation of
the Commission allowing such holder to sell any Registrable Stock without
registration; and
(d) furnish to each Holder of Registrable Securities which is a
"qualified institutional buyer" within the meaning of Rule 144A under the
Securities Act, promptly upon written request from such Holder, such information
as may be required under Rule 144A for delivery to any prospective purchaser of
any Registrable Securities in order to permit such holder to avail itself of the
benefits of the exemptions under the Securities Act afforded by such Rule.
8. "MARKET STAND-OFF" AGREEMENT. Each Investor Stockholder hereby
agrees that it will not, without the prior written consent of the managing
underwriter, during the period commencing on the date of the final prospectus
relating to the Company's initial public offering ("IPO") and ending on the date
specified by the Company and the managing underwriter (such period not to exceed
one hundred and eighty days) (i) lend; offer; pledge; sell; contract to sell;
sell any option or contract to purchase; purchase any option or contract to
sell; grant any option, right, or warrant to purchase; or otherwise transfer or
dispose of, directly or indirectly, any shares of Common Stock or any securities
convertible into or exercisable or exchangeable for Common Stock held
immediately before the effective date of the registration statement for such
offering or (ii) enter into any swap or other arrangement that transfers to
another, in whole or in part, any of the economic consequences of ownership of
such securities, whether any such transaction described in clause (i) or (ii)
above is to be settled by delivery of Common Stock or other securities, in cash,
or otherwise. The foregoing provisions of this SECTION 8 shall apply only to the
IPO, shall not apply to the sale of any shares to an underwriter pursuant to an
underwriting agreement, and shall be applicable to the Investor Stockholders
only if all officers, directors, and stockholders individually owning more than
one percent (1%) of the Company's outstanding Common Stock are subject to the
same restrictions. The underwriters in connection with such registration are
intended third-party beneficiaries of this SECTION 8 and shall have the right,
power, and authority to enforce the provisions hereof as though they were a
party hereto. Each Investor Stockholder further agrees to execute such
agreements as may be reasonably requested by the underwriters in connection with
such registration that are consistent with this SECTION 8 or that are necessary
to give further effect thereto. Any discretionary waiver or termination of the
restrictions of any or all of such agreements by the Company or the underwriters
shall apply pro rata to all Investor Stockholders subject to such agreements,
based on the number of shares subject to such agreements.
9. TRANSFER OF REGISTRATION RIGHTS. The registration rights granted to
the Investor Stockholders in this EXHIBIT B may be transferred, but only to (a)
Affiliates of the Investor Stockholders, and (b) any transferee of Common Stock
that shall deliver to the Company a written instrument, in form and substance
satisfactory to the Company, by which such transferee agrees to be bound by the
terms of this EXHIBIT B.
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10. TERMINATION OF REGISTRATION RIGHTS. The right of any Investor
Stockholder to request registration or inclusion of Registrable Securities in
any registration pursuant to SECTION 2 or SECTION 3 shall terminate when all of
such Holder's Registrable Securities could be sold without restriction under SEC
Rule 144(k).
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