EXECUTION COPY
SECURITIES PURCHASE AGREEMENT
This Securities Purchase Agreement (this "Agreement") is dated as of
November 24, 2003 among Icad, Inc., a Delaware corporation (the "Company"), and
the purchasers identified on the signature pages hereto (each, a "Purchaser" and
collectively, the "Purchasers").
WHEREAS, subject to the terms and conditions set forth in this
Agreement and pursuant to Section 4(2) of the Securities Act of 1933, as amended
(the "Securities Act"), the Company desires to issue and sell to the Purchasers,
and the Purchasers, severally and not jointly, desire to purchase from the
Company, securities of the Company as more fully described in this Agreement.
NOW, THEREFORE, IN CONSIDERATION of the mutual covenants contained in
this Agreement, and for other good and valuable consideration the receipt and
adequacy of which are hereby acknowledged, the Company and the Purchasers agree
as follows:
ARTICLE I
DEFINITIONS
1.1 Definitions. In addition to the terms defined elsewhere in this
Agreement, the following terms have the meanings indicated:
"Additional Investment Rights" means, collectively, the
Additional Investment Rights issued and sold under this Agreement, in
the form of Exhibit A.
"Affiliate" means any Person that, directly or indirectly
through one or more intermediaries, controls or is controlled by or is
under common control with a Person, as such terms are used in and
construed under Rule 144 under the Securities Act.
"Business Day" means any day other than Saturday, Sunday or
other day on which commercial banks in The City of New York are
authorized or required by law to remain closed.
"Closing" means the closing of the purchase and sale of the
Shares and the Additional Investment Rights pursuant to Section 2.1.
"Closing Date" means the date of the closing.
"Closing Price" means, for any date, the price determined by
the first of the following clauses that applies: (a) if the Common
Stock is then listed or quoted on an Eligible Market or any other
national securities exchange, the closing price per share of the Common
Stock for such date (or the nearest preceding date) on the primary
Eligible Market or exchange on which the Common Stock is then listed or
quoted; (b) if prices for the Common Stock are then quoted on the OTC
Bulletin Board, the closing bid price per share of the Common Stock for
such date (or the nearest preceding date) so quoted; (c) if prices for
the Common Stock are then reported in the "Pink Sheets" published by
the National Quotation Bureau Incorporated (or a similar organization
or agency succeeding to its functions of reporting prices), the most
recent closing bid price per share of the Common Stock so reported; or
(d) in all other cases, the fair market value of a share of Common
Stock as determined by an independent appraiser selected jointly by the
Company and the Lead Purchaser.
"Commission" means the Securities and Exchange Commission.
"Common Stock" means the common stock of the Company, par
value $0.01 per share.
"Common Stock Equivalents" means, collectively, Options and
Convertible Securities.
"Company Counsel" means Blank Rome, LLP, counsel to the
Company.
"Convertible Securities" means any stock or securities (other
than Options) convertible into or exercisable or exchangeable for
Common Stock.
"Effective Date" means the date that the Registration
Statement is first declared effective by the Commission.
"Eligible Market" means any of the New York Stock Exchange,
the American Stock Exchange, the NASDAQ National Market or the NASDAQ
SmallCap Market.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"Filing Date" means December 24, 2003.
"Lead Purchaser" means Vertical Ventures, LLC. or its
successor and assign.
"Lien" means any lien, charge, claim, security interest,
encumbrance, right of first refusal or other restriction.
"Losses" means any and all losses, claims, damages,
liabilities, settlement costs and expenses, including, without
limitation, costs of preparation and reasonable attorneys' fees.
"Options" means any rights, warrants or options to subscribe
for or purchase Common Stock or Convertible Securities.
"Person" means any individual or corporation, partnership,
trust, incorporated or unincorporated association, joint venture,
limited liability company, joint stock company, government (or an
agency or subdivision thereof) or any court or other federal, state,
local or other governmental authority or other entity of any kind.
"Per Unit Purchase Price" means $5.00.
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"Proceeding" means an action, claim, suit, investigation or
proceeding (including, without limitation, an investigation or partial
proceeding, such as a deposition), whether commenced or threatened.
"Prospectus" means the prospectus included in the Registration
Statement, as amended or supplemented by any prospectus supplement,
with respect to the terms of the offering of any portion of the
Registrable Securities covered by the Registration Statement, and all
other amendments and supplements to the Prospectus including post
effective amendments, and all material incorporated by reference or
deemed to be incorporated by reference in such Prospectus.
"Purchaser Counsel" has the meaning set forth in Section
6.2(h).
"Registrable Securities" means any Common Stock (including
Underlying Shares) issued or issuable pursuant to the Transaction
Documents, together with any securities issued or issuable upon any
stock split, dividend or other distribution, recapitalization or
similar event with respect to the foregoing.
"Registration Statement" means each registration statement
required to be filed under Article VI, including (in each case) the
Prospectus, amendments and supplements to such registration statement
or Prospectus, including pre- and post-effective amendments, all
exhibits thereto, and all material incorporated by reference or deemed
to be incorporated by reference in such registration statement.
"Required Effectiveness Date" means February 22, 2004.
"Rule 144," "Rule 415," and "Rule 424" means Rule 144, Rule
415 and Rule 424, respectively, promulgated by the Commission pursuant
to the Securities Act, as such Rules may be amended from time to time,
or any similar rule or regulation hereafter adopted by the Commission
having substantially the same effect as such Rule.
"Securities" means the Shares, the Additional Investment
Rights, and the Underlying Shares.
"Shares" means an aggregate of 1,260,000 shares of Common
Stock, which are being issued and sold to the Purchasers at the
Closing.
"Subsidiary" means any subsidiaries, as defined under Rule
1.02 (x) of Regulation S-X promulgated by the Commission, of the
Company.
"Trading Day" means (a) any day on which the Common Stock is
listed or quoted and traded on its primary Trading Market, (b) if the
Common Stock is not then listed or quoted and traded on any Eligible
Market, then a day on which trading occurs on the NASDAQ National
Market (or any successor thereto), or (c) if trading ceases to occur on
the NASDAQ National Market (or any successor thereto), any Business
Day.
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"Trading Market" means the Nasdaq National Market or any other
Eligible Market, or any national securities exchange, market or trading
or quotation facility on which the Common Stock is then listed or
quoted.
"Transaction Documents" means this Agreement, the Additional
Investment Rights, the Transfer Agent Instructions and any other
documents or agreements executed in connection with the transactions
contemplated hereunder.
"Transfer Agent Instructions" means the Irrevocable Transfer
Agent Instructions, in the form of Exhibit D, executed by the Company
and delivered to and acknowledged in writing by the Company's transfer
agent.
"Underlying Shares" means the shares of Common Stock issuable
upon exercise of the Additional Investment Rights.
"Unit" means one Share and an Additional Investment Right to
acquire 0.25 of a share of Common Stock.
ARTICLE II
PURCHASE AND SALE
2.1 Closing. Subject to the terms and conditions set forth in this
Agreement, at the Closing the Company shall issue and sell to each Purchaser,
and each Purchaser shall, severally and not jointly, purchase from the Company,
such number of Units indicated below such Purchaser's name on the signature page
of this Agreement at the Per Unit Purchase Price. The Closing shall take place
at the offices of Proskauer Rose LLP immediately following the execution hereof,
or at such other location or time as the parties may agree.
2.2 Closing Deliveries.
(a) At the Closing, the Company shall deliver or cause to be delivered
to each Purchaser the following:
(i) one or more stock certificates, free and clear of all
restrictive and other legends (except as expressly provided in Section
4.1(b) hereof), evidencing such number of Shares equal to the number of
Units indicated below such Purchaser's name on the signature page of
this Agreement, registered in the name of such Purchaser;
(ii) an Additional Investment Right, registered in the name of
such Purchaser, pursuant to which such Purchaser shall have the right
to acquire such number of Underlying Shares indicated below such
Purchaser's name on the signature page of this Agreement, on the terms
set forth therein;
(iii) a legal opinion of Company Counsel, in the form of
Exhibit B, executed by such counsel and delivered to the Purchasers;
and
(iv) duly executed Transfer Agent Instructions acknowledged by
the Company's transfer agent.
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(b) At the Closing, each Purchaser shall deliver or cause to be
delivered to the Company an amount equal to the Per Unit Purchase Price
multiplied by the number of Units indicated below such Purchaser's name on the
signature page of this Agreement, in United States dollars and in immediately
available funds, by wire transfer to an account designated in writing to such
Purchaser by the Company for such purpose.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
3.1 Representations and Warranties of the Company. The Company hereby
represents and warrants to each of the Purchasers as follows:
(a) Subsidiaries. The Company has no direct or indirect
Subsidiaries other than those listed in Schedule 3.1(a). Except as disclosed in
Schedule 3.1(a), the Company owns, directly or indirectly, all of the capital
stock or comparable equity interests of each Subsidiary free and clear of any
Lien and all the issued and outstanding shares of capital stock or comparable
equity interest of each Subsidiary are validly issued and are fully paid,
non-assessable and free of preemptive and similar rights.
(b) Organization and Qualification. Each of the Company and the
Subsidiaries is an entity duly organized, validly existing and in good standing
under the laws of the jurisdiction of its incorporation or organization (as
applicable), with the requisite power and authority to own and use its
properties and assets and to carry on its business as currently conducted.
Neither the Company nor any Subsidiary is in violation of any of the provisions
of its respective certificate or articles of incorporation, bylaws or other
organizational or charter documents. Except as set forth in Schedule 3.1(b),
each of the Company and the Subsidiaries is duly qualified to do business and is
in good standing as a foreign corporation or other entity in each jurisdiction
in which the nature of the business conducted or property owned by it makes such
qualification necessary, except where the failure to be so qualified or in good
standing, as the case may be, could not, individually or in the aggregate, (i)
adversely affect the legality, validity or enforceability of any Transaction
Document, (ii) have or result in a material adverse effect on the results of
operations, assets, business or condition (financial or otherwise) of the
Company and the Subsidiaries, taken as a whole on a consolidated basis, or (iii)
adversely impair the Company's ability to perform fully on a timely basis its
obligations under any of the Transaction Documents (any of (i), (ii) or (iii), a
"Material Adverse Effect").
(c) Authorization; Enforcement. The Company has the requisite
corporate power and authority to enter into and to consummate the transactions
contemplated by each of the Transaction Documents and otherwise to carry out its
obligations hereunder and thereunder. The execution and delivery of each of the
Transaction Documents by the Company and the consummation by it of the
transactions contemplated hereby and thereby have been duly authorized by all
necessary action on the part of the Company and, except as set forth on Schedule
3.1(c), no further consent or action is required by the Company, its Board of
Directors or its stockholders. Each of the Transaction Documents has been (or
upon delivery will be) duly executed by the Company and is, or when delivered in
accordance with the terms hereof, will constitute, the valid and binding
obligation of the Company enforceable against the Company in accordance with its
terms.
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(d) No Conflicts. The execution, delivery and performance of the
Transaction Documents by the Company and the consummation by the Company of the
transactions contemplated hereby and thereby do not and will not (i) conflict
with or violate any provision of the Company's or any Subsidiary's certificate
or articles of incorporation, bylaws or other organizational or charter
documents, (ii) conflict with, or constitute a default (or an event that with
notice or lapse of time or both would become a default) under, or give to others
any rights of termination, amendment, acceleration or cancellation (with or
without notice, lapse of time or both) of, any agreement, credit facility, debt
or other instrument (evidencing a Company or Subsidiary debt or otherwise) or
other understanding to which the Company or any Subsidiary is a party or by
which any property or asset of the Company or any Subsidiary is bound or
affected, or (iii) result in a violation of any law, rule, regulation, order,
judgment, injunction, decree or other restriction of any court or governmental
authority to which the Company or a Subsidiary is subject (including federal and
state securities laws and regulations and the rules and regulations of any
self-regulatory organization to which the Company or its securities are
subject), or by which any property or asset of the Company or a Subsidiary is
bound or affected, except in the case of clauses (ii) and (iii) which could not
have a Material Adverse Effect.
(e) Issuance of the Securities. The Securities (including the
Underlying Shares) are duly authorized and, when issued and paid for in
accordance with the Transaction Documents, will be duly and validly issued,
fully paid and nonassessable, free and clear of all Liens and shall not be
subject to preemptive rights or similar rights of stockholders. The Company has
reserved from its duly authorized capital stock the maximum number of shares of
Common Stock issuable upon exercise of the Additional Investment Rights.
(f) Capitalization. The number of shares and type of all
authorized, issued and outstanding capital stock, options and other securities
of the Company (whether or not presently convertible into or exercisable or
exchangeable for shares of capital stock of the Company) is set forth in
Schedule 3.1(f). All outstanding shares of capital stock are duly authorized,
validly issued, fully paid and nonassessable and have been issued in compliance
with all applicable securities laws. Except as disclosed in Schedule 3.1(f),
there are no outstanding options, warrants, script rights to subscribe to, calls
or commitments of any character whatsoever relating to, or securities, rights or
obligations convertible into or exercisable or exchangeable for, or giving any
Person any right to subscribe for or acquire, any shares of Common Stock, or
contracts, commitments, understandings or arrangements by which the Company or
any Subsidiary is or may become bound to issue additional shares of Common
Stock, or securities or rights convertible or exchangeable into shares of Common
Stock. Except as set forth in Schedule 3.1(f), there are no anti-dilution or
price adjustment provisions (other than "mechanical" price adjustment
provisions) contained in any security issued by the Company (or in any agreement
providing rights to security holders) and the issue and sale of the Securities
(including the Underlying Shares) will not obligate the Company to issue shares
of Common Stock or other securities to any Person (other than the Purchasers)
and will not result in a right of any holder of Company securities to adjust the
exercise, conversion, exchange or reset price under such securities. To the
knowledge of the Company, except as specifically disclosed in Schedule 3.1(f),
no Person or group of related Persons beneficially owns (as determined pursuant
to Rule 13d-3 under the Exchange Act), or has the right to acquire, by agreement
with or by obligation binding upon the Company, beneficial ownership of in
excess of 5% of the outstanding Common Stock, ignoring for such purposes any
limitation on the number of shares of Common Stock that may be owned at any
single time.
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(g) SEC Reports; Financial Statements. The Company has filed all
reports required to be filed by it under the Exchange Act, including pursuant to
Section 13(a) or 15(d) thereof, for the two years preceding the date hereof (or
such shorter period as the Company was required by law to file such material)
(the foregoing materials (together with any materials filed by the Company under
the Exchange Act, whether or not required) being collectively referred to herein
as the "SEC Reports" and, together with this Agreement and the Schedules to this
Agreement, the "Disclosure Materials") on a timely basis or has received a valid
extension of such time of filing and has filed any such SEC Reports prior to the
expiration of any such extension. The Company has delivered to each Purchaser
true, correct and complete copies of all SEC Reports filed within the 10 days
preceding the date hereof. As of their respective dates, the SEC Reports
complied in all material respects with the requirements of the Securities Act
and the Exchange Act and the rules and regulations of the Commission promulgated
thereunder, and none of the SEC Reports, when filed as amended, contained any
untrue statement of a material fact or omitted to state a material fact required
to be stated therein or necessary in order to make the statements therein, in
the light of the circumstances under which they were made, not misleading. The
financial statements of the Company included in the SEC Reports comply in all
material respects with applicable accounting requirements and the rules and
regulations of the Commission with respect thereto as in effect at the time of
filing. Such financial statements have been prepared in accordance with United
States generally accepted accounting principles applied on a consistent basis
during the periods involved ("GAAP"), except as may be otherwise specified in
such financial statements or the notes thereto, and fairly present in all
material respects the financial position of the Company and its consolidated
subsidiaries as of and for the dates thereof and the results of operations and
cash flows for the periods then ended, subject, in the case of unaudited
statements, to normal, immaterial, year-end audit adjustments. All material
agreements to which the Company or any Subsidiary is a party or to which the
property or assets of the Company or any Subsidiary are subject are included as
part of or specifically identified in the SEC Reports.
(h) Material Changes. Since the date of the latest audited
financial statements included within the SEC Reports, except as specifically
disclosed in the SEC Reports or in Schedule 3.1(h), (i) there has been no event,
occurrence or development that, individually or in the aggregate, has had or
that could result in a Material Adverse Effect, (ii) the Company has not
incurred any liabilities (contingent or otherwise) other than (A) trade payables
and accrued expenses incurred in the ordinary course of business consistent with
past practice and (B) liabilities not required to be reflected in the Company's
financial statements pursuant to GAAP or required to be disclosed in filings
made with the Commission, (iii) the Company has not altered its method of
accounting or the identity of its auditors, except as disclosed in its SEC
Reports, (iv) the Company has not declared or made any dividend or distribution
of cash or other property to its stockholders or purchased, redeemed or made any
agreements to purchase or redeem any shares of its capital stock, and (v) the
Company has not issued any equity securities to any officer, director or
Affiliate, except pursuant to existing Company stock-based plans and as set
forth in Schedule 3.1(h).
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(i) Absence of Litigation. There is no action, suit, claim,
proceeding, inquiry or investigation before or by any court, public board,
government agency, self-regulatory organization or body pending or, to the
knowledge of the Company, threatened against or affecting the Company or any of
its Subsidiaries that could, individually or in the aggregate, have a Material
Adverse Effect. Schedule 3.1(i) contains a complete list and summary description
of any pending or, to the knowledge of the Company, threatened proceeding
against or affecting the Company or any of its Subsidiaries, which would not,
individually or in the aggregate, have a Material Adverse Effect.
(j) Compliance. Neither the Company nor any Subsidiary (i) is in
default under or in violation of (and no event has occurred that has not been
waived that, with notice or lapse of time or both, would result in a default by
the Company or any Subsidiary under), nor has the Company or any Subsidiary
received notice of a claim that it is in default under or that it is in
violation of, any indenture, loan or credit agreement or any other agreement or
instrument to which it is a party or by which it or any of its properties is
bound (whether or not such default or violation has been waived), (ii) is in
violation of any order of any court, arbitrator or governmental body, or (iii)
is or has been in violation of any statute, rule or regulation of any
governmental authority, including without limitation all foreign, federal, state
and local laws relating to taxes, environmental protection, occupational health
and safety, product quality and safety and employment and labor matters, except
in each case as could not, individually or in the aggregate, have or result in a
Material Adverse Effect.
(k) Title to Assets. The Company and the Subsidiaries have good
and marketable title in fee simple to all real property owned by them that is
material to the business of the Company and the Subsidiaries and good and
marketable title in all personal property owned by them that is material to the
business of the Company and the Subsidiaries, in each case free and clear of all
Liens, except for Liens as do not materially affect the value of such property
and do not materially interfere with the use made and proposed to be made of
such property by the Company and the Subsidiaries. Any real property and
facilities held under lease by the Company and the Subsidiaries are held by them
under valid, subsisting and enforceable leases of which the Company and the
Subsidiaries are in compliance in all material respects.
(l) Certain Fees. Except for the fees described in Schedule
3.1(l), all of which are payable to registered broker-dealers, no brokerage or
finder's fees or commissions are or will be payable by the Company to any
broker, financial advisor or consultant, finder, placement agent, investment
banker, bank or other Person with respect to the transactions contemplated by
this Agreement, and the Company has not taken any action that would cause any
Purchaser to be liable for any such fees or commissions.
(m) Private Placement. Neither the Company nor any Person acting
on the Company's behalf has sold or offered to sell or solicited any offer to
buy the Securities by means of any form of general solicitation or advertising.
Neither the Company nor any of its Affiliates nor any person acting on the
Company's behalf has, directly or indirectly, at any time within the past six
months, made any offer or sale of any security or solicitation of any offer to
buy any security under circumstances that would (i) eliminate the availability
of the exemption from registration under Regulation D under the Securities Act
in connection with the offer and sale of the Securities as contemplated hereby
or (ii) cause the offering of the Securities pursuant to the Transaction
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Documents to be integrated with prior offerings by the Company for purposes of
any applicable law, regulation or stockholder approval provisions, including,
without limitation, under the rules and regulations of any Trading Market. The
Company is not, and is not an Affiliate of, an "investment company" within the
meaning of the Investment Company Act of 1940, as amended. The Company is not a
United States real property holding corporation within the meaning of the
Foreign Investment in Real Property Tax Act of 1980.
(n) Form S-3 Eligibility. The Company is eligible to register its
Common Stock for resale by the Purchasers using Form S-3 promulgated under the
Securities Act.
(o) Listing and Maintenance Requirements. The Company has not, in
the two years preceding the date hereof, received notice (written or oral) from
any Trading Market on which the Common Stock is or has been listed or quoted to
the effect that the Company is not in compliance with the listing or maintenance
requirements of such Trading Market. The Company is, and has no reason to
believe that it will not in the foreseeable future continue to be, in compliance
with all such listing and maintenance requirements.
(p) Registration Rights. Except as described in Schedule 3.1(p),
the Company has not granted or agreed to grant to any Person any rights
(including "piggy-back" registration rights) to have any securities of the
Company registered with the Commission or any other governmental authority that
have not been satisfied.
(q) Application of Takeover Protections. Except as set forth in
the Risk Factors (defined below), there is no control share acquisition,
business combination, poison pill (including any distribution under a rights
agreement) or other similar anti-takeover provision under the Company's charter
documents or the laws of its state of incorporation that is or could become
applicable to any of the Purchasers as a result of the Purchasers and the
Company fulfilling their obligations or exercising their rights under the
Transaction Documents, including, without limitation, as a result of the
Company's issuance of the Securities and the Purchasers' ownership of the
Securities.
(r) Disclosure. The Company confirms that neither it nor any other
Person acting on its behalf has provided any of the Purchasers or their agents
or counsel with any information that constitutes or might constitute material,
nonpublic information. The Company understands and confirms that each of the
Purchasers will rely on the foregoing representations in effecting transactions
in securities of the Company. All disclosure provided to the Purchasers
regarding the Company, its business and the transactions contemplated hereby,
including the Schedules to this Agreement, furnished by or on behalf of the
Company are true and correct and do not contain any untrue statement of a
material fact or omit to state any material fact necessary in order to make the
statements made therein, in the light of the circumstances under which they were
made, not misleading. No event or circumstance has occurred or information
exists with respect to the Company or any of its Subsidiaries or its or their
business, properties, prospects, operations or financial conditions, which,
under applicable law, rule or regulation, requires public disclosure or
announcement by the Company but which has not been so publicly announced or
disclosed. The Company acknowledges and agrees that no Purchaser makes or has
made any representations or warranties with respect to the transactions
contemplated hereby other than those specifically set forth in Section 3.2.
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(s) Acknowledgment Regarding Purchasers' Purchase of Securities.
The Company acknowledges and agrees that each of the Purchasers is acting solely
in the capacity of an arm's length purchaser with respect to this Agreement and
the transactions contemplated hereby. The Company further acknowledges that no
Purchaser is acting as a financial advisor or fiduciary of the Company (or in
any similar capacity) with respect to this Agreement and the transactions
contemplated hereby and any advice given by any Purchaser or any of their
respective representatives or agents in connection with this Agreement and the
transactions contemplated hereby is merely incidental to the Purchasers'
purchase of the Securities. The Company further represents to each Purchaser
that the Company's decision to enter into this Agreement has been based solely
on the independent evaluation of the transactions contemplated hereby by the
Company and its representatives.
(t) Patents and Trademarks. The Company and the Subsidiaries have,
or have rights to use, all patents, patent applications, trademarks, trademark
applications, service marks, trade names, copyrights, licenses and other similar
rights that are necessary or material for use in connection with their
respective businesses as described in the SEC Reports and which the failure to
so have could have a Material Adverse Effect (collectively, the "Intellectual
Property Rights"). Neither the Company nor any Subsidiary has received a written
notice (which has not been resolved) that the Intellectual Property Rights used
by the Company or any Subsidiary violates or infringes upon the rights of any
Person. To the knowledge of the Company, all such Intellectual Property Rights
are enforceable and there is no existing infringement by another Person of any
of the Intellectual Property Rights.
(u) Insurance. The Company and the Subsidiaries are insured by
insurers of recognized financial responsibility against such losses and risks
and in such amounts as are prudent and customary in the businesses in which the
Company and the Subsidiaries are engaged. Neither the Company nor any Subsidiary
has any reason to believe that it will not be able to renew its existing
insurance coverage as and when such coverage expires or to obtain similar
coverage from similar insurers as may be necessary to continue its business.
(v) Regulatory Permits. The Company and the Subsidiaries possess
all certificates, authorizations and permits issued by the appropriate federal,
state, local or foreign regulatory authorities necessary to conduct their
respective businesses as described in the SEC Reports, except where the failure
to possess such permits could not, individually or in the aggregate, have or
result in a Material Adverse Effect ("Material Permits"), and neither the
Company nor any Subsidiary has received any notice of proceedings relating to
the revocation or modification of any Material Permit.
(w) Transactions With Affiliates and Employees. Except as set
forth in SEC Reports filed at least ten days prior to the date hereof, none of
the officers or directors of the Company and, to the knowledge of the Company,
none of the employees of the Company is presently a party to any transaction
with the Company or any Subsidiary (other than for services as employees,
officers and directors), including any contract, agreement or other arrangement
providing for the furnishing of services to or by, providing for rental of real
or personal property to or from, or otherwise requiring payments to or from any
officer, director or such employee or, to the knowledge of the Company, any
entity in which any officer, director, or any such employee has a substantial
interest or is an officer, director, trustee or partner.
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(x) Solvency. Based on the financial condition of the Company as
of the Closing Date, (i) the Company's fair saleable value of its assets exceeds
the amount that will be required to be paid on or in respect of the Company's
existing debts and other liabilities (including known contingent liabilities) as
they mature; (ii) the Company's assets do not constitute unreasonably small
capital to carry on its business for the current fiscal year as now conducted
and as proposed to be conducted including its capital needs taking into account
the particular capital requirements of the business conducted by the Company,
and projected capital requirements and capital availability thereof; and (iii)
the current cash flow of the Company, together with the proceeds the Company
would receive, were it to liquidate all of its assets, after taking into account
all anticipated uses of the cash, would be sufficient to pay all amounts on or
in respect of its debt when such amounts are required to be paid. The Company
does not intend to incur debts beyond its ability to pay such debts as they
mature (taking into account the timing and amounts of cash to be payable on or
in respect of its debt).
(y) Going Concern. The Company and the Subsidiaries have no
knowledge (upon receipt of the proceeds of this transaction) that BDO Xxxxxxx,
LLP, the Company's independent public accountants, will issue an audit letter
containing a "going concern" opinion in connection with the Company's annual
report on Form 10-K pursuant to Section 13 or 15(d) under the Exchange Act for
the fiscal year ended December 31, 2003.
(z) Internal Accounting Controls. The Company and the Subsidiaries
maintain a system of internal accounting controls sufficient to provide
reasonable assurance that (i) transactions are executed in accordance with
management's general or specific authorizations, (ii) transactions are recorded
as necessary to permit preparation of financial statements in conformity with
generally accepted accounting principles and to maintain asset accountability,
(iii) access to assets is permitted only in accordance with management's general
or specific authorization, and (iv) the recorded accountability for assets is
compared with the existing assets at reasonable intervals and appropriate action
is taken with respect to any differences.
3.2 Representations, Warranties and Covenants of the Purchasers. Each
Purchaser hereby, as to itself only and for no other Purchaser, represents,
warrants and covenants to the Company as follows:
(a) Organization; Authority. Such Purchaser is an entity duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its organization with the requisite corporate or partnership
power and authority to enter into and to consummate the transactions
contemplated by the Transaction Documents and otherwise to carry out its
obligations hereunder and thereunder. The purchase by such Purchaser of the
Shares and the Additional Investment Rights hereunder has been duly authorized
by all necessary action on the part of such Purchaser. This Agreement has been
duly executed and delivered by such Purchaser and constitutes the valid and
binding obligation of such Purchaser, enforceable against it in accordance with
its terms.
(b) Investment Intent. Such Purchaser is acquiring the Securities
as principal for its own account for investment purposes only and not with a
view to or for distributing or reselling such Securities or any part thereof,
without prejudice, however, to such Purchaser's right, subject to the provisions
of this Agreement, at all times to sell or otherwise dispose of all or any part
11
of such Securities pursuant to an effective registration statement under the
Securities Act or under an exemption from such registration and in compliance
with applicable federal and state securities laws. Nothing contained herein
shall be deemed a representation or warranty by such Purchaser to hold
Securities for any period of time.
(c) Purchaser Status. At the time such Purchaser was offered the
Shares and the Additional Investment Rights, it was, and at the date hereof it
is, an "accredited investor" as defined in Rule 501(a) under the Securities Act.
(d) Experience of such Purchaser. Such Purchaser, either alone or
together with its representatives has such knowledge, sophistication and
experience in business and financial matters so as to be capable of evaluating
the merits and risks of the prospective investment in the Securities, and has so
evaluated the merits and risks of such investment. Such Purchaser is able to
bear the economic risk of an investment in the Securities and, at the present
time, is able to afford a complete loss of such investment.
(e) Information. Each Purchase acknowledges that it has received
and reviewed copies of SEC Reports, including, in each case, the exhibits
thereto and all of the documents incorporated by reference therein, and the Risk
Factors attached as Exhibit E hereto; that it has had the opportunity to review
other public information about the Company and understands such information; and
that it has not received any information regarding this Company that constitutes
material, nonpublic information.
(f) No Brokerage or Finder's Fees. No Purchaser has taken any
action that would cause the Company to be liable for any brokerage of finder's
fee or commissions to be payable by the Company, except as set forth in Schedule
3.1(l).
(g) Such Purchaser understands and agrees that the Securities are
"restricted securities" within the meaning of Rule 144 promulgated under the Act
that can and will only be resold by the Purchaser pursuant to (i) an effective
registration statement under the Act where the prospectus delivery requirements
are complied with or (ii) under an applicable exemption from registration under
the Act, and (iii) that such sales must also comply with any applicable state
securities or "blue sky" laws.
(h) Such Purchaser understands that any sales by the Purchaser of
any of the Securities that are not made in compliance with 3.2 could subject the
Company and Purchaser to possible civil and criminal liability under applicable
federal securities laws and state securities of "blue sky" laws.
(i) Such Purchaser (i) will only sell the Securities in a bona
fide transaction that complies with the applicable federal and state securities
laws, (ii) will not sell or otherwise dispose of or transfer the Securities or
any interest therein in a transaction that is part of a plan or scheme to avoid
the registration requirements of the Act and (iii) acknowledges and agrees that
notwithstanding the removal of the legend set forth in this Section 4.1(b) from
the Securities upon effectiveness of a Registration Statement covering the
Securities, the Securities will remain "restricted securities," and the
Purchaser will remain responsible for compliance with the federal and state
securities laws in connection with any resale of the Securities, any such sale
will be made in compliance with Section 3.2(g) and the Company and any Company
12
Related Person (as defined in Section 4.8) may produce this Agreement to any
interested party in any Proceeding or other inquiry with respect to the matters
set forth in this Section 3.2.
(j) Such Purchaser understands that the Company, its officers,
directors and agents are relying on the representation of the Purchaser set
forth in this Sections 3.2 in order to determine compliance with applicable
securities laws in connection with the sale of the Securities to the Purchaser.
(k) If any of the Company or any of its Affiliates or any officer,
director, partner, controlling person, employee or agent of the Company or any
of its Affiliates (a "Company Related Person") becomes involved in any capacity
in any Proceeding resulting directly from a breach by a Purchaser of any of its
representations, warranties or covenants set forth in Section 3.2(g) through (j)
such Purchaser will indemnify and hold harmless the Company or Company Related
Person for its reasonable legal and other expenses (including the costs of any
investigation, preparation and travel) and for any Losses incurred in connection
therewith, as such expenses or Losses are incurred.
ARTICLE IV
OTHER AGREEMENTS OF THE PARTIES
4.1 Transfer Restrictions.
(a) Securities may only be disposed of pursuant to an effective
registration statement under the Securities Act or pursuant to an available
exemption from the registration requirements of the Securities Act, and in
compliance with any applicable state securities laws. In connection with any
transfer of Securities other than pursuant to an effective registration
statement or to the Company or pursuant to Rule 144(k), except as otherwise set
forth herein, the Company may require the transferor to provide to the Company
an opinion of counsel selected by the transferor, the form and substance of
which opinion shall be reasonably satisfactory to the Company, to the effect
that such transfer does not require registration under the Securities Act.
Notwithstanding the foregoing, the Company hereby consents to and agrees to
register on the books of the Company and with its transfer agent, without any
such legal opinion, any transfer of Securities by a Purchaser to an Affiliate of
such Purchaser, provided that the transferee certifies to the Company that it is
an institutional "accredited investor" as defined in Rule 501(a) under the
Securities Act or A "qualified institutional buyer" as defined in Rule 144A
under the Securities Act.
(b) The Purchasers agree to the imprinting, so long as is required
by this Section 4.1(b), of the following legend on any certificate evidencing
Securities:
[NEITHER] THESE SECURITIES [NOR THE SECURITIES INTO WHICH THESE
SECURITIES ARE EXERCISABLE] HAVE [NOT] BEEN REGISTERED WITH THE
SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY
STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND,
ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE
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REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN
AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH
APPLICABLE STATE SECURITIES LAWS. NOTWITHSTANDING THE FOREGOING, THESE
SECURITIES [AND THE SECURITIES ISSUABLE UPON EXERCISE OF THESE
SECURITIES] MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN
ACCOUNT OR OTHER LOAN OR FINANCING ARRANGEMENT SECURED BY SUCH
SECURITIES.
Certificates evidencing Securities shall not be required to contain such legend
or any other legend (i) while a Registration Statement covering the resale of
such Securities is effective under the Securities Act, or (ii) following any
sale of such Securities pursuant to Rule 144, or (iii) if such Securities are
eligible for sale under Rule 144(k), or (iv) if such legend is not required
under applicable requirements of the Securities Act (including judicial
interpretations and pronouncements issued by the Staff of the Commission). The
Company shall cause its counsel to issue the legal opinion included in the
Transfer Agent Instructions to the Company's transfer agent on the Effective
Date (provided that any transferee of a Purchaser must deliver an affidavit with
respect to the matters set forth in Section 3.2(g) through (k)). Following the
Effective Date or at such earlier time as a legend is no longer required for
certain Securities, the Company will no later than three Trading Days following
the delivery by a Purchaser to the Company or the Company's transfer agent of a
legended certificate representing such Securities, deliver or cause to be
delivered to such Purchaser a certificate representing such Securities that is
free from all restrictive and other legends. Each Purchaser covenants and agrees
that it will comply with the prospectus delivery requirements set forth in
Section 5 of the Securities Act of 1933, as amended, in connection with any sale
of Securities pursuant to the Registration Statement. The Company may not make
any notation on its records or give instructions to any transfer agent of the
Company that enlarge the restrictions on transfer set forth in this Section.
Until the 30th Trading Day following the Effective Date, the Company will not
effect or publicly announce its intention to effect any exchange,
recapitalization or other transaction that effectively requires or rewards
physical delivery of certificates evidencing the Common Stock, except that the
Company may effect a reverse stock split if necessary or required to meet the
continuing listing requirements for its Common Stock on the Nasdaq Stock Market,
Inc.
(c) The Company acknowledges and agrees that a Purchaser may from
time to time pledge or grant a security interest in some or all of the
Securities in connection with a bona fide margin agreement or other loan or
financing arrangement secured by the Securities and, if required under the terms
of such agreement, loan or arrangement, such Purchaser may transfer pledged or
secured Securities to the pledgees or secured parties. Such a pledge or transfer
would not be subject to approval of the Company and no legal opinion of the
pledgee, secured party or pledgor shall be required in connection therewith.
Further, no notice shall be required of such pledge unless such pledge is
foreclosed upon. At the appropriate Purchaser's expense, the Company will
execute and deliver such reasonable documentation as a pledgee or secured party
of Securities may reasonably request in connection with a pledge or transfer of
the Securities, including the preparation and filing of any required prospectus
supplement under Rule 424(b)(3) of the Securities Act or other applicable
provision of the Securities Act to appropriately amend the list of Selling
Stockholders thereunder.
14
4.2 Furnishing of Information. As long as any Purchaser owns
Securities, the Company covenants to timely file (or obtain extensions in
respect thereof and file within the applicable grace period) all reports
required to be filed by the Company after the date hereof pursuant to the
Exchange Act. Upon the reasonable request of any Purchaser, the Company shall
deliver to such Purchaser a written certification of a duly authorized officer
as to whether it has complied with the preceding sentence. As long as any
Purchaser owns Securities, if the Company is not required to file reports
pursuant to such laws, it will prepare and furnish to the Purchasers and make
publicly available in accordance with paragraph (c) of Rule 144 such information
as is required for the Purchasers to sell the Securities under Rule 144. The
Company further covenants that it will take such further action as any holder of
Securities may reasonably request to satisfy the provisions of Rule 144
applicable to the issuer of securities relating to transactions for the sale of
securities pursuant to Rule 144.
4.3 Integration. The Company shall not, and shall use its best efforts
to ensure that no Affiliate of the Company shall, sell, offer for sale or
solicit offers to buy or otherwise negotiate in respect of any security (as
defined in Section 2 of the Securities Act) that would be integrated with the
offer or sale of the Securities in a manner that would require the registration
under the Securities Act of the sale of the Securities to the Purchasers or that
would be integrated with the offer or sale of the Securities for purposes of the
rules and regulations of any Trading Market.
4.4 Reservation of Securities. The Company shall maintain a reserve
from its duly authorized shares of Common Stock for issuance pursuant to the
Transaction Documents in such amount as may be required to fulfill its
obligations in full under the Transaction Documents. In the event that at any
time the then authorized shares of Common Stock are insufficient for the Company
to satisfy its obligations in full under the Transaction Documents, the Company
shall promptly take such actions as may be required to increase the number of
authorized shares.
4.5 Subsequent Placements.
(a) From the date hereof until the Effective Date (the "Blockout
Period"), the Company will not, directly or indirectly, offer, sell, grant any
option to purchase, or otherwise dispose of (or announce any offer, sale, grant
or any option to purchase or other disposition of) any of its or the
Subsidiaries' equity or equity equivalent securities, including without
limitation any debt, preferred stock or other instrument or security that is, at
any time during its life and under any circumstances, convertible into or
exchangeable or exercisable for Common Stock or Common Stock Equivalents (any
such offer, sale, grant, disposition or announcement being referred to as a
"Subsequent Placement").
(b) From the end of the Blockout Period until the 60th Trading Day
thereafter, the Company will not, directly or indirectly, effect any Subsequent
Placement unless the Company shall have first complied with this Section 4.5(b).
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(i) The Company shall deliver to each Purchaser a written notice (the
"Offer") of any proposed or intended issuance or sale or exchange of the
securities being offered (the "Offered Securities") in a Subsequent Placement,
which Offer shall (w) identify and describe the Offered Securities, (x) describe
the price or method of determining the price and other terms upon which they are
to be issued or sold, and the number or amount of the Offered Securities to be
issued or sold, (y) identify the persons or entities (if known) to which or with
which the Offered Securities are to be offered, issued or sold and (z) offer to
issue and sell to each Purchaser on the same terms and conditions set forth in
the Offer (A) a pro rata portion of twenty-five percent (25%) of the Offered
Securities based on such Purchaser's pro rata portion of the aggregate purchase
price paid by the Purchasers for all of the Shares purchased hereunder (the
"Basic Amount"), and (B) with respect to each Purchaser that elects to purchase
its Basic Amount, any additional portion of the Offered Securities attributable
to the Basic Amounts of other Purchasers as such Purchaser shall indicate it
will purchase or acquire should the other Purchasers subscribe for less than
their Basic Amounts (the "Undersubscription Amount").
(ii) To accept an Offer, in whole or in part, a Purchaser must deliver
a written notice to the Company prior to the end of the ten (10) Trading Day
period of the Offer, setting forth the portion of the Purchaser's Basic Amount
that such Purchaser elects to purchase and, if such Purchaser shall elect to
purchase all of its Basic Amount, the Undersubscription Amount, if any, that
such Purchaser elects to purchase (in either case, the "Notice of Acceptance").
If the Basic Amounts subscribed for by all Purchasers are less than the total of
all of the Basic Amounts, then each Purchaser who has set forth an
Undersubcription Amount in its Notice of Acceptance shall be entitled to
purchase, in addition to the Basic Amounts subscribed for, the Undersubscription
Amount it has subscribed for; provided, however, that if the Undersubscription
Amounts subscribed for exceed the difference between the total of all the Basic
Amounts and the Basic Amounts subscribed for (the "Available Undersubscription
Amount"), each Purchaser who has subscribed for any Undersubscription Amount
shall be entitled to purchase on that portion of the Available Undersubscription
Amount as the Basic Amount of such Purchaser bears to the total Basic Amounts of
all Purchasers that have subscribed for Undersubscription Amounts, subject to
rounding by the Board of Directors to the extent its deems reasonably necessary.
(iii) The Company shall have five (5) Trading Days from the expiration
of the period set forth in Section 4.5(b)(ii) above to issue, sell or exchange
all or any part of such Offered Securities as to which a Notice of Acceptance
has not been given by the Purchasers (the "Refused Securities"), but only to the
offerees described in the Offer (if disclosed) and only upon terms and
conditions (including, without limitation, unit prices and interest rates) that
are not more favorable to the acquiring person or persons or less favorable to
the Company than those set forth in the Offer.
(iv) In the event the Company shall propose to sell less than all the
Refused Securities (any such sale to be in the manner and on the terms specified
in Section 4.5(b)(iii) above), then each Purchaser may, at its sole option and
in its sole discretion, reduce the number or amount of the Offered Securities
specified in its Notice of Acceptance to an amount that shall be not less than
16
the number or amount of the Offered Securities that the Purchaser
elected to purchase pursuant to Section 4.5(b)(ii) above multiplied by
a fraction, (i) the numerator of which shall be the number or amount of
Offered Securities the Company actually proposes to issue or sell
(including Offered Securities to be issued or sold to Purchasers
pursuant to Section 4.5(b)(ii) above prior to such reduction) and (ii)
the denominator of which shall be the original amount of the Offered
Securities. In the event that any Purchaser so elects to reduce the
number or amount of Offered Securities specified in its Notice of
Acceptance, the Company may not issue or sell more than the reduced
number or amount of the Offered Securities unless and until such
securities have again been offered to the Purchasers in accordance with
Section 4.5(b)(i) above.
(v) Upon the closing of the issuance or sale of all or less
than all of the Refused Securities, the Purchasers shall acquire from
the Company, and the Company shall issue to the Purchasers, the number
or amount of Offered Securities specified in the Notices of Acceptance,
as reduced pursuant to Section 4.5(b)(iv) above if the Purchasers have
so elected, upon the terms and conditions specified in the Offer.
(vi) Any Offered Securities not acquired by the Purchasers or
other persons in accordance with Section 4.5(b)(iii) above may not be
issued, sold or exchanged until they are again offered to the
Purchasers under the procedures specified in this Agreement.
(c) The restrictions contained in paragraphs (a) and (b) of this
Section 4.5 shall not apply to (A) any issuance of Common Stock or grant of
Options to employees, officers, directors of or consultants or advisors to the
Company, in each case, pursuant to a stock-based plan duly approved by the
Company's board of directors; (B) upon exercise, conversion or exchange of any
Common Stock Equivalents described in Schedule 3.1(f) (provided that such
exercise or conversion occurs in accordance with the terms thereof, without
amendment or modification) or clause (A) of this Section 4.5(e); (C) the
issuance of securities pursuant to the Company's bona fide acquisition of
another corporation, or all or a portion of its assets, by merger or other
business combination, purchase of assets or other corporate reorganization in
each case, as approved by the Company's board of directors and not for the
principal purpose of raising cash; or (D) the issuance of securities in
connection with a joint venture or development agreement or strategic
partnership or similar agreement approved by the Company's board of directors, a
primary purpose of which is not to raise equity capital and from an entity whose
business is not primarily to invest in companies.
4.6 Securities Laws Disclosure; Publicity. The Company shall, on or
before 8:30 a.m., New York City time, on November 25, 2003, issue a press
release acceptable to the Purchasers disclosing all material terms of the
transactions contemplated hereby. On November 25, 2003, the Company shall file a
Current Report on Form 8-K with the Commission (the "8-K Filing") describing the
terms of the transactions contemplated by the Transaction Documents and
including as exhibits to such Current Report on Form 8-K this Agreement and form
of the Additional Investment Rights, in the form required by the Exchange Act.
Thereafter, the Company shall timely file any filings and notices required by
the Commission or applicable law with respect to the transactions contemplated
hereby and provide copies thereof to the Lead Purchaser promptly after filing.
17
The Company shall, prior to the filing or dissemination of any disclosure
required by this paragraph, provide a copy thereof to the Lead Purchaser and its
counsel for their review. The Company and the Lead Purchaser shall consult with
each other in issuing any press releases or otherwise making public statements
or filings and other communications with the Commission or any regulatory agency
or Trading Market with respect to the transactions contemplated hereby, and
neither party shall issue any such press release or otherwise make any such
public statement, filing or other communication without the prior consent of the
other, except if such disclosure is required by law, in which case the
disclosing party shall promptly provide the other party with prior notice of
such public statement, filing or other communication. Notwithstanding the
foregoing, the Company shall not publicly disclose the name of any Purchaser, or
include the name of any Purchaser in any filing with the Commission or any
regulatory agency or Trading Market, without the prior written consent of such
Purchaser, except to the extent such disclosure (but not any disclosure as to
the controlling Persons thereof) is required by law or Trading Market
regulations, in which case the Company shall provide the Purchasers with prior
notice of such disclosure. The Company shall not, and shall cause each of its
Subsidiaries and its and each of their respective officers, directors, employees
and agents not to, unless requested in writing by a Purchaser, provide any
Purchaser with any material nonpublic information regarding the Company or any
of its Subsidiaries from and after the filing of the 8-K Filing without the
express written consent of such Purchaser. In the event of a breach of the
foregoing covenant by the Company, any of its Subsidiaries, or any of its or
their respective officers, directors, employees and agents, in addition to any
other remedy provided herein or in the Transaction Documents, a Purchaser shall
have the right to make a public disclosure, in the form of a press release,
public advertisement or otherwise, of such material nonpublic information with
the prior approval by the Company (which shall not be unreasonably withheld or
delayed). No Purchaser shall have any liability to the Company, its
Subsidiaries, or any of its or their respective officers, directors, employees,
shareholders or agents for any such disclosure. Subject to the foregoing,
neither the Company nor any Purchaser shall issue any press releases or any
other public statements with respect to the transactions contemplated hereby;
provided, however, that the Company shall be entitled, without the prior
approval of any Purchaser, to make any press release or other public disclosure
with respect to such transactions (i) in substantial conformity with the 8-K
Filing and contemporaneously therewith and (ii) as is required by applicable law
and regulations (provided that in the case of clause (i) each Purchaser shall be
consulted by the Company in connection with any such press release or other
public disclosure prior to its release). Each press release disseminated during
the 12 months preceding the date of this Agreement did not at the time of
release contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they are made, not
misleading.
4.7 Use of Proceeds. Except as set forth on Schedule 4.7, the Company
shall use the net proceeds from the sale of the Securities hereunder for working
capital purposes and acquisitions or other business combination transactions,
and not (i) for the satisfaction of any portion of the Company's debt (other
than payment of trade payables and accrued expenses in the ordinary course of
the Company's business and prior practices), (ii) to redeem any Company equity
or equity-equivalent securities, or (iii) to settle any outstanding litigation.
18
4.8 Reimbursement. If any Purchaser or any of its Affiliates or any
officer, director, partner, controlling person, employee or agent of a Purchaser
or any of its Affiliates (a "Related Person") becomes involved in any capacity
in any Proceeding brought by or against any Person (other than the Company) in
connection with or as a result of the transactions contemplated by the
Transaction Documents, the Company will indemnify and hold harmless such
Purchaser or Related Person for its reasonable legal and other expenses
(including the costs of any investigation, preparation and travel) and for any
Losses incurred in connection therewith, as such expenses or Losses are
incurred, excluding only Losses that result directly from such Purchaser's or
Related Person's gross negligence or willful misconduct. In addition, the
Company shall indemnify and hold harmless each Purchaser and Related Person from
and against any and all Losses, as incurred, arising out of or relating to any
breach by the Company of any of the representations, warranties or covenants
made by the Company in this Agreement or any other Transaction Document, or any
allegation by a third party that, if true, would constitute such a breach. The
conduct of any Proceedings for which indemnification is available under this
paragraph shall be governed by Section 6.4(c) below. The indemnification
obligations of the Company under this paragraph shall be in addition to any
liability that the Company may otherwise have and shall be binding upon and
inure to the benefit of any successors, assigns, heirs and personal
representatives of the Purchasers and any such Related Persons. The Company also
agrees that neither the Purchasers nor any Related Persons shall have any
liability to the Company or any Person asserting claims on behalf of or in right
of the Company in connection with or as a result of the transactions
contemplated by the Transaction Documents, except to the extent that any Losses
incurred by the Company result from any breach by such Purchaser of any
representation or warranty made by the Purchaser in this Agreement, the gross
negligence or willful misconduct of the applicable Purchaser or Related Person
in connection with such transactions. If the Company breaches its obligations
under any Transaction Document, then, in addition to any other liabilities the
Company may have under any Transaction Document or applicable law, the Company
shall pay or reimburse the Purchasers on demand for all costs of collection and
enforcement (including reasonable attorneys fees and expenses). Without limiting
the generality of the foregoing, the Company specifically agrees to reimburse
the Purchasers on demand for all costs of enforcing the indemnification
obligations in this paragraph.
ARTICLE V
CONDITIONS
5.1 Conditions Precedent to the Obligations of the Purchasers. The
obligation of each Purchaser to acquire Securities at the Closing is subject to
the satisfaction or waiver by such Purchaser, at or before the Closing, of each
of the following conditions:
(a) Representations and Warranties. The representations and
warranties of the Company contained herein shall be true and correct in all
material respects as of the date when made and as of the Closing as though made
on and as of such date; and
(b) Performance. The Company and each other Purchaser shall have
performed, satisfied and complied in all material respects with all covenants,
agreements and conditions required by the Transaction Documents to be performed,
satisfied or complied with by it at or prior to the Closing.
19
5.2 Conditions Precedent to the Obligations of the Company. The
obligation of the Company to sell Securities at the Closing is subject to the
satisfaction or waiver by the Company, at or before the Closing, of each of the
following conditions:
(a) Representations and Warranties. The representations and
warranties of the Purchasers contained herein shall be true and correct in all
material respects as of the date when made and as of the Closing Date as though
made on and as of such date; and
(b) Performance. The Purchasers shall have performed, satisfied
and complied in all material respects with all covenants, agreements and
conditions required by the Transaction Documents to be performed, satisfied or
complied with by the Purchasers at or prior to the Closing.
ARTICLE VI
REGISTRATION RIGHTS
6.1 Shelf Registration
(a) As promptly as possible, and in any event on or prior to the
Filing Date, the Company shall prepare and file with the Commission a "Shelf"
Registration Statement covering the resale of all Registrable Securities for an
offering to be made on a continuous basis pursuant to Rule 415. The Registration
Statement shall be on Form S-3 (except if the Company is not then eligible to
register for resale the Registrable Securities on Form S-3, in which case such
registration shall be on another appropriate form in accordance herewith as the
Purchasers may consent) and shall contain (except if otherwise directed by the
Purchasers) the "Plan of Distribution" attached hereto as Exhibit C.
(b) The Company shall use its best efforts to cause the
Registration Statement to be declared effective by the Commission as promptly as
possible after the filing thereof, but in any event prior to the Required
Effectiveness Date, and shall use its best efforts to keep the Registration
Statement continuously effective under the Securities Act until the Securities
can be sold pursuant to Rule 144(k) or such earlier date when all Registrable
Securities covered by such Registration Statement have been sold publicly (the
"Effectiveness Period").
(c) The Company shall notify each Purchaser in writing promptly
(and in any event within one business day) after receiving notification from the
Commission that the Registration Statement has been declared effective.
(d) Upon the occurrence of any Event (as defined below) and on
every monthly anniversary thereof until the applicable Event is cured, as
partial relief for the damages suffered therefrom by the Purchasers (which
remedy shall not be exclusive of any other remedies available under this
Agreement, at law or in equity), the Company shall pay to each Purchaser an
amount in cash, as liquidated damages and not as a penalty, equal to 1.0% of the
aggregate purchase price paid by such Purchaser hereunder for the first month
and 2.0% for each month thereafter. The payments to which a Purchaser shall be
entitled pursuant to this Section 6.1(d) are referred to herein as "Event
20
Payments". Any Event Payments payable pursuant to the terms hereof shall apply
on a pro-rata basis for any portion of a month prior to the cure of an Event. In
the event the Company fails to make Event Payments in a timely manner, such
Event Payments shall bear interest at the rate of 1.5% per month (prorated for
partial months) until paid in full. Notwithstanding anything to the contrary,
the Company shall only be required to make one Event Payment during any monthly
period.
For such purposes, each of the following shall constitute an "Event":
(i) the Registration Statement is not filed on or prior to the
Filing Date or is not declared effective on or prior to the Required
Effectiveness Date; provided, however, that for the purposes of the
Event Payment under this Section 6.1(d) only, if prior to the Required
Effectiveness Date, the Company is required to include or incorporate
financial information that has not been filed in an SEC Report, the
Company shall have until April 30, 2004 to cure the failure to declare
the Registration Statement effective on or prior to the Required
Effectiveness Date before such Event Payment is due to the Purchasers
under this Section 6.1(d);
(ii) after the Effective Date, a Purchaser is not permitted to
sell Registrable Securities under the Registration Statement (or a
subsequent Registration Statement filed in replacement thereof) for any
reason for seven (7) or more consecutive Trading Days or aggregate of
twenty (20) days in any 365-day period;
(iii) the Common Stock is not listed or quoted, or is
suspended from trading, on an Eligible Market or over-the-counter
bulletin board for a period of seven (7) Trading Days (which need not
be consecutive Trading Days);
(iv) the Company fails for any reason to deliver a certificate
evidencing any Securities to a Purchaser within five Trading Days after
delivery of such certificate is required pursuant to any Transaction
Document or the exercise rights of the Purchasers pursuant to the
Transaction Documents are otherwise suspended for any reason; or
(v) the Company fails to have available a sufficient number of
authorized but unissued and otherwise unreserved shares of Common Stock
available to issue Underlying Shares upon any exercise of the
Additional Investment Rights or, at any time following the Effective
Date, any Shares or Underlying Shares are not listed on an Eligible
Market.
(e) If (i) any Event occurs and remains uncured for 60 days; and (ii)
the Company fails to make any cash payment required under the Transaction
Documents and such failure is not cured within 10 days after notice of such
default is first given to the Company by a Purchaser, then at any time or times
thereafter any Purchaser may deliver to the Company a notice (a "Repurchase
Notice") requiring the Company to repurchase all or any portion of the Shares
and any Underlying Shares then held by such Purchaser at a price (the
"Repurchase Price") per share equal to 100% of the average of the Closing Prices
for the five Trading Days preceding either (a) the date of delivery of the
notice requiring such repurchase, or (b) the date on which the applicable
repurchase price (together with any other payments, expenses and liquidated
21
damages then due and payable under the Transaction Documents) is paid in full,
whichever is greater. If a Purchaser delivers a Repurchase Notice pursuant to
this Section, the Company shall pay the aggregate Repurchase Price (together
with any other payments, expenses and liquidated damages then due and payable
pursuant to the Transaction Documents) to such Purchaser no later than the fifth
Trading Day following the date of delivery of the Repurchase Notice, and upon
receipt thereof such Purchaser shall deliver original certificates evidencing
the Securities so repurchased to the Company (to the extent such certificates
have been delivered to such Purchaser). Notwithstanding the foregoing,
immediately upon the occurrence of a Bankruptcy Event, each Purchaser will
automatically be deemed to have delivered a Repurchase Notice pursuant to this
paragraph and will be entitled to receive the corresponding Repurchase Price
without any further action or notice to the Company.
(f) The Company shall not, prior to the Effective Date of the
Registration Statement, prepare and file with the Commission a registration
statement relating to an offering for its own account or the account of others
under the Securities Act of any of its equity securities.
6.2 Registration Procedures. In connection with the Company's
registration obligations hereunder, the Company shall:
(a) Not less than three Trading Days prior to the filing of a
Registration Statement or any related Prospectus or any amendment or supplement
thereto (including any document that would be incorporated or deemed to be
incorporated therein by reference), the Company shall (i) furnish to each
Purchaser and its Purchaser Counsel of all such documents proposed to be filed,
which documents (other than those incorporated or deemed to be incorporated by
reference) will be subject to the review of each Purchaser and Purchaser Counsel
of the Lead Purchaser, and (ii) cause its officers and directors, counsel and
independent certified public accountants to respond to such inquiries as shall
be necessary, in the reasonable opinion of respective counsel, to conduct a
reasonable investigation within the meaning of the Securities Act. The Company
shall not file a Registration Statement or any such Prospectus or any amendments
or supplements thereto to which Purchasers holding a majority of the Registrable
Securities shall reasonably and timely object.
(b) (i) Prepare and file with the Commission such amendments,
including post-effective amendments, to each Registration Statement and the
Prospectus used in connection therewith as may be necessary to keep the
Registration Statement continuously effective as to the applicable Registrable
Securities for the Effectiveness Period and prepare and file with the Commission
such additional Registration Statements in order to register for resale under
the Securities Act all of the Registrable Securities; (ii) cause the related
Prospectus to be amended or supplemented by any required Prospectus supplement,
and as so supplemented or amended to be filed pursuant to Rule 424; (iii)
respond as promptly as reasonably possible, and in any event within ten days, to
any comments received from the Commission with respect to the Registration
Statement or any amendment thereto and as promptly as reasonably possible
provide the Purchasers true and complete copies of all correspondence from and
to the Commission relating to the Registration Statement; and (iv) comply in all
material respects with the provisions of the Securities Act and the Exchange Act
with respect to the disposition of all Registrable Securities covered by the
Registration Statement during the applicable period in accordance with the
intended methods of disposition by the Purchasers thereof set forth in the
Registration Statement as so amended or in such Prospectus as so supplemented
22
(c) Notify the Lead Purchaser of Registrable Securities to be sold
and its Purchaser Counsel as promptly as reasonably possible, and (if requested
by any such Person) confirm such notice in writing no later than one Trading
Day, in the case of clause (i) and (ii) and 5 days in the cases of clauses (iii)
through (vii), thereafter, of any of the following events: (i) the Commission
notifies the Company whether there will be a "review" of any Registration
Statement; (ii) the Commission comments in writing on any Registration Statement
(in which case the Company shall deliver to each Purchaser a copy of such
comments and of all written responses thereto); (iii) any Registration Statement
or any post-effective amendment is declared effective; (iv) the Commission or
any other Federal or state governmental authority requests any amendment or
supplement to any Registration Statement or Prospectus or requests additional
information related thereto; (v) the Commission issues any stop order suspending
the effectiveness of any Registration Statement or initiates any Proceedings for
that purpose; (vi) the Company receives notice of any suspension of the
qualification or exemption from qualification of any Registrable Securities for
sale in any jurisdiction, or the initiation or threat of any Proceeding for such
purpose; or (vii) the financial statements included in any Registration
Statement become ineligible for inclusion therein or any statement made in any
Registration Statement or Prospectus or any document incorporated or deemed to
be incorporated therein by reference is untrue in any material respect or any
revision to a Registration Statement, Prospectus or other document is required
so that it will not contain any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary to make the
statements therein, in the light of the circumstances under which they were
made, not misleading.
(d) Use its best reasonable efforts to avoid the issuance of or,
if issued, obtain the withdrawal of (i) any order suspending the effectiveness
of any Registration Statement, or (ii) any suspension of the qualification (or
exemption from qualification) of any of the Registrable Securities for sale in
any jurisdiction, as soon as possible.
(e) Furnish to Lead Purchaser and its Purchaser Counsel, without
charge, at least one conformed copy of each Registration Statement and each
amendment thereto, including financial statements and schedules, all documents
incorporated or deemed to be incorporated therein by reference, and all exhibits
to the extent requested by such Person (including those previously furnished or
incorporated by reference) promptly after the filing of such documents with the
Commission.
(f) Promptly deliver to Lead Purchaser and its Purchaser Counsel,
without charge, as many copies of the Prospectus or Prospectuses (including each
form of prospectus) and each amendment or supplement thereto as such Persons may
reasonably request. The Company hereby consents to the use of such Prospectus
and each amendment or supplement thereto by each of the selling Purchasers in
connection with the offering and sale of the Registrable Securities covered by
such Prospectus and any amendment or supplement thereto, unless the Company has
notified the Purchasers of an event set forth in Section 6.2(c)(v), (vi) or
(vii).
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(g) (i) In the time and manner required by each Trading Market,
prepare and file with such Trading Market an additional shares listing
application covering all of the Registrable Securities; (ii) take all steps
necessary to cause such Registrable Securities to be approved for listing on
each Trading Market as soon as possible thereafter; (iii) provide to the
Purchasers evidence of such listing; and (iv) maintain the listing of such
Registrable Securities on each such Trading Market or another Eligible Market.
(h) Prior to any public offering of Registrable Securities, use
its best efforts to register or qualify or cooperate with the selling Purchasers
and any counsel designated by any Purchaser (each, a "Purchaser Counsel", and
the Lead Purchaser has initially designated Proskauer Rose LLP) in connection
with the registration or qualification (or exemption from such registration or
qualification) of such Registrable Securities for offer and sale under the
securities or Blue Sky laws of such jurisdictions within the United States as
any Purchaser requests in writing, to keep each such registration or
qualification (or exemption therefrom) effective during the Effectiveness Period
and to do any and all other acts or things necessary or advisable to enable the
disposition in such jurisdictions of the Registrable Securities covered by a
Registration Statement; provided, however, that the Company shall not be
obligated to execute or file any general consent to service of process or to
qualify as a foreign corporation to do business under the law of any such
jurisdiction.
(i) Cooperate with the Purchasers to facilitate the timely
preparation and delivery of certificates representing Registrable Securities to
be delivered to a transferee pursuant to a Registration Statement, which
certificates shall be free, to the extent permitted by this Agreement, of all
restrictive legends, and to enable such Registrable Securities to be in such
denominations and registered in such names as any such Purchasers may request.
(j) Upon the occurrence of any event described in Section
6.2(c)(vii), as promptly as reasonably possible, prepare a supplement or
amendment, including a post-effective amendment, to the Registration Statement
or a supplement to the related Prospectus or any document incorporated or deemed
to be incorporated therein by reference, and file any other required document so
that, as thereafter delivered, neither the Registration Statement nor such
Prospectus will contain an untrue statement of a material fact or omit to state
a material fact required to be stated therein or necessary to make the
statements therein, in the light of the circumstances under which they were
made, not misleading.
(k) Cooperate with any due diligence investigation undertaken by
the Purchasers in connection with the sale of Registrable Securities, including,
without limitation, by making available any documents and information; provided
that the Company will not deliver or make available to any Purchaser material,
nonpublic information unless such Purchaser specifically requests in advance to
receive material, nonpublic information in writing.
(l) Comply with all applicable rules and regulations of the
Commission.
6.3 Registration Expenses. The Company shall pay (or reimburse the
Purchasers for) all fees and expenses incident to the performance of or
compliance with this Agreement by the Company, including without limitation (a)
all registration and filing fees and expenses, including without limitation
those related to filings with the Commission, any Trading Market and in
24
connection with applicable state securities or Blue Sky laws, (b) printing
expenses (including without limitation expenses of printing certificates for
Registrable Securities and of printing prospectuses requested by the
Purchasers), (c) messenger, telephone and delivery expenses, (d) fees and
disbursements of counsel for the Company and up to $10,000 in the aggregate for
the Purchaser Counsel for the Lead Purchasers, (e) fees and expenses of all
other Persons retained by the Company in connection with the consummation of the
transactions contemplated by this Agreement, and (f) all listing fees to be paid
by the Company to the Trading Market.
6.4 Indemnification
(a) Indemnification by the Company. The Company shall,
notwithstanding any termination of this Agreement, indemnify and hold harmless
each Purchaser, the officers, directors, partners, members, agents, brokers
(including brokers who offer and sell Registrable Securities as principal as a
result of a pledge or any failure to perform under a margin call of Common
Stock), investment advisors and employees of each of them, each Person who
controls any such Purchaser (within the meaning of Section 15 of the Securities
Act or Section 20 of the Exchange Act) and the officers, directors, partners,
members, agents and employees of each such controlling Person, to the fullest
extent permitted by applicable law, from and against any and all Losses, as
incurred, arising out of or relating to any untrue or alleged untrue statement
of a material fact contained in the Registration Statement, any Prospectus or
any form of prospectus or in any amendment or supplement thereto or in any
preliminary prospectus, or arising out of or relating to any omission or alleged
omission of a material fact required to be stated therein or necessary to make
the statements therein (in the case of any Prospectus or form of prospectus or
supplement thereto, in the light of the circumstances under which they were
made) not misleading, except to the extent, but only to the extent, that (i)
such untrue statements, alleged untrue statements, omissions or alleged
omissions are based solely upon information regarding such Purchaser furnished
in writing (or not furnished, in the case of an omission) to the Company by such
Purchaser expressly for use therein, or to the extent that such information
relates to such Purchaser or such Purchaser's proposed method of distribution of
Registrable Securities and was reviewed and expressly approved in writing by
such Purchaser expressly for use in the Registration Statement, such Prospectus
or such form of Prospectus or in any amendment or supplement thereto, (ii) in
the case of an occurrence of an event of the type specified in Section
6.2(c)(v)-(vii), the use by such Purchaser of an outdated or defective
Prospectus after the Company has notified such Purchaser in writing that the
Prospectus is outdated or defective and prior to the receipt by such Purchaser
of the Advice contemplated in Section 6.5 or (iii) resulting from the fact that
such Purchaser sold Registrable Securities to a Person whom there was not sent
or given, prior to the written confirmation of such sale, a copy of the
Prospectus. The Company shall notify the Purchasers promptly of the institution,
threat or assertion of any Proceeding of which the Company is aware in
connection with the transactions contemplated by this Agreement.
(b) Indemnification by Purchasers. Each Purchaser shall, severally
and not jointly, indemnify and hold harmless the Company, its directors,
officers, agents and employees, each Person who controls the Company (within the
meaning of Section 15 of the Securities Act and Section 20 of the Exchange Act),
and the directors, officers, agents or employees of such controlling Persons, to
the fullest extent permitted by applicable law, from and against all Losses (as
determined by a court of competent jurisdiction in a final judgment not subject
to appeal or review) arising solely out of any untrue statement of a material
25
fact contained in the Registration Statement, any Prospectus, or any form of
prospectus, or in any amendment or supplement thereto, or arising solely out of
any omission of a material fact required to be stated therein or necessary to
make the statements therein (in the case of any Prospectus or form of prospectus
or supplement thereto, in the light of the circumstances under which they were
made) not misleading to the extent, but only to the extent, that such untrue
statement or omission is contained in any information so furnished in writing
(or not furnished, in the case of an omission) by such Purchaser to the Company
specifically for inclusion in such Registration Statement or such Prospectus or
to the extent that (i) such untrue statements or omissions are based solely upon
information regarding such Purchaser furnished in writing (or not furnished, in
the case of an omission) to the Company by such Purchaser expressly for use
therein, or to the extent that such information relates to such Purchaser or
such Purchaser's proposed method of distribution of Registrable Securities and
was reviewed and expressly approved in writing by such Purchaser expressly for
use in the Registration Statement, such Prospectus or such form of Prospectus or
in any amendment or supplement thereto, (ii) in the case of an occurrence of an
event of the type specified in Section 6.2(c)(v)-(vii) or (iii) resulting from
the fact that such Purchaser sold Registrable Securities to a Person whom there
was not sent or given prior to the written confirmation of such sale, a copy of
the Prospectus, the use by such Purchaser of an outdated or defective Prospectus
after the Company has notified such Purchaser in writing that the Prospectus is
outdated or defective and prior to the receipt by such Purchaser of the Advice
contemplated in Section 6.5. In no event shall the liability of any selling
Purchaser hereunder be greater in amount than the dollar amount of the proceeds
received by such Purchaser upon the sale of the Registrable Securities giving
rise to such indemnification obligation.
(c) Conduct of Indemnification Proceedings. If any Proceeding
shall be brought or asserted against any Person entitled to indemnity hereunder
(an "Indemnified Party"), such Indemnified Party shall promptly notify the
Person from whom indemnity is sought (the "Indemnifying Party") in writing, and
the Indemnifying Party shall assume the defense thereof, including the
employment of counsel reasonably satisfactory to the Indemnified Party and the
payment of all fees and expenses incurred in connection with defense thereof;
provided, that the failure of any Indemnified Party to give such notice shall
not relieve the Indemnifying Party of its obligations or liabilities pursuant to
this Agreement, except that such failure shall have adversely prejudiced the
Indemnifying Party.
An Indemnified Party shall have the right to employ separate
counsel in any such Proceeding and to participate in the defense thereof, but
the fees and expenses of one such counsel shall be at the expense of such
Indemnified Party or Parties unless: (i) the Indemnifying Party has agreed in
writing to pay such fees and expenses; or (ii) the Indemnifying Party shall have
failed promptly to assume the defense of such Proceeding and to employ counsel
reasonably satisfactory to such Indemnified Party in any such Proceeding; or
(iii) the named parties to any such Proceeding (including any impleaded parties)
include both such Indemnified Party and the Indemnifying Party, and such
Indemnified Party shall have been advised in writing by counsel that a conflict
of interest is likely to exist if the same counsel were to represent such
Indemnified Party and the Indemnifying Party (in which case, if such Indemnified
Party notifies the Indemnifying Party in writing that it elects to employ
separate counsel at the expense of the Indemnifying Party, the Indemnifying
26
Party shall not have the right to assume the defense thereof and such counsel
shall be at the expense of the Indemnifying Party). The Indemnifying Party shall
not be liable for any settlement of any such Proceeding effected without its
written consent, which consent shall not be unreasonably withheld. No
Indemnifying Party shall, without the prior written consent of the Indemnified
Party, effect any settlement of any pending Proceeding in respect of which any
Indemnified Party is a party, unless such settlement includes an unconditional
release of such Indemnified Party from all liability on claims that are the
subject matter of such Proceeding.
All fees and expenses of the Indemnified Party (including
reasonable fees and expenses to the extent incurred in connection with
investigating or preparing to defend such Proceeding in a manner not
inconsistent with this Section) shall be paid to the Indemnified Party, as
incurred, within ten Trading Days of written notice thereof to the Indemnifying
Party (regardless of whether it is ultimately determined that an Indemnified
Party is not entitled to indemnification hereunder; provided, that the
Indemnifying Party may require such Indemnified Party to undertake to reimburse
all such fees and expenses to the extent it is finally judicially determined
that such Indemnified Party is not entitled to indemnification hereunder).
(d) Contribution. If a claim for indemnification under Section
6.4(a) or (b) is unavailable to an Indemnified Party (by reason of public policy
or otherwise), then each Indemnifying Party, in lieu of indemnifying such
Indemnified Party, shall contribute to the amount paid or payable by such
Indemnified Party as a result of such Losses, in such proportion as is
appropriate to reflect the relative fault of the Indemnifying Party and
Indemnified Party in connection with the actions, statements or omissions that
resulted in such Losses as well as any other relevant equitable considerations.
The relative fault of such Indemnifying Party and Indemnified Party shall be
determined by reference to, among other things, whether any action in question,
including any untrue or alleged untrue statement of a material fact or omission
or alleged omission of a material fact, has been taken or made by, or relates to
information supplied by, such Indemnifying Party or Indemnified Party, and the
parties' relative intent, knowledge, access to information and opportunity to
correct or prevent such action, statement or omission. The amount paid or
payable by a party as a result of any Losses shall be deemed to include, subject
to the limitations set forth in Section 6.4(c), any reasonable attorneys' or
other reasonable fees or expenses incurred by such party in connection with any
Proceeding to the extent such party would have been indemnified for such fees or
expenses if the indemnification provided for in this Section was available to
such party in accordance with its terms.
The parties hereto agree that it would not be just and equitable
if contribution pursuant to this Section 6.4(d) were determined by pro rata
allocation or by any other method of allocation that does not take into account
the equitable considerations referred to in the immediately preceding paragraph.
Notwithstanding the provisions of this Section 6.4(d), no Purchaser shall be
required to contribute, in the aggregate, any amount in excess of the amount by
which the proceeds actually received by such Purchaser from the sale of the
Registrable Securities subject to the Proceeding exceeds the amount of any
damages that such Purchaser has otherwise been required to pay by reason of such
untrue or alleged untrue statement or omission or alleged omission. No Person
guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of
the Securities Act) shall be entitled to contribution from any Person who was
not guilty of such fraudulent misrepresentation.
27
The indemnity and contribution agreements contained in this
Section are in addition to any liability that the Indemnifying Parties may have
to the Indemnified Parties.
6.5 Dispositions. Each Purchaser agrees that it will comply with the
prospectus delivery requirements of the Securities Act as applicable to it in
connection with sales of Registrable Securities pursuant to the Registration
Statement. Each Purchaser further agrees that, upon receipt of a notice from the
Company of the occurrence of any event of the kind described in Sections
6.2(c)(v), (vi) or (vii), such Purchaser will discontinue disposition of such
Registrable Securities under the Registration Statement until such Purchaser's
receipt of the copies of the supplemented Prospectus and/or amended Registration
Statement contemplated by Section 6.2(j), or until it is advised in writing (the
"Advice") by the Company that the use of the applicable Prospectus may be
resumed, and, in either case, has received copies of any additional or
supplemental filings that are incorporated or deemed to be incorporated by
reference in such Prospectus or Registration Statement. The Company may provide
appropriate stop orders to enforce the provisions of this paragraph.
6.6 No Piggyback on Registrations. Neither the Company nor any of its
security holders (other than the Purchasers in such capacity pursuant hereto)
may include securities of the Company in the Registration Statement other than
the Registrable Securities, and the Company shall not after the date hereof
enter into any agreement providing any such right to any of its security
holders.
6.7 Piggy-Back Registrations. If at any time during the Effectiveness
Period there is not an effective Registration Statement covering all of the
Registrable Securities and the Company shall determine to prepare and file with
the Commission a registration statement relating to an offering for its own
account or the account of others under the Securities Act of any of its equity
securities, other than on Form S-4 or Form S-8 (each as promulgated under the
Securities Act) or their then equivalents relating to equity securities to be
issued solely in connection with any acquisition of any entity or business or
equity securities issuable in connection with stock option or other employee
benefit plans, then the Company shall send to each Purchaser written notice of
such determination and if, within fifteen days after receipt of such notice, any
such Purchaser shall so request in writing, the Company shall include in such
registration statement all or any part of such Registrable Securities such
Purchaser requests to be registered.
ARTICLE VII
MISCELLANEOUS
7.1 Termination. This Agreement may be terminated by the Company or any
Purchaser, by written notice to the other parties, if the Closing has not been
consummated by the third Business Day following the date of this Agreement;
provided that no such termination will affect the right of any party to xxx for
any breach by the other party (or parties).
7.2 Fees and Expenses. At the Closing, the Company shall pay to
Vertical Ventures, LLC an aggregate of $25,000 for their legal fees and expenses
incurred in connection with its due diligence and the preparation and
negotiation of the Transaction Documents. In lieu of the foregoing payment,
Vertical Ventures, LLC may retain such amount at the Closing. Except as
28
expressly set forth in the Transaction Documents to the contrary, each party
shall pay the fees and expenses of its advisers, counsel, accountants and other
experts, if any, and all other expenses incurred by such party incident to the
negotiation, preparation, execution, delivery and performance of this Agreement.
The Company shall pay all transfer agent fees, stamp taxes and other taxes and
duties levied in connection with the issuance of the Securities.
7.3 Entire Agreement. The Transaction Documents, together with the
Exhibits and Schedules thereto, contain the entire understanding of the parties
with respect to the subject matter hereof and supersede all prior agreements and
understandings, oral or written, with respect to such matters, which the parties
acknowledge have been merged into such documents, exhibits and schedules. At or
after the Closing, and without further consideration, the Company will execute
and deliver to the Purchasers such further documents as may be reasonably
requested in order to give practical effect to the intention of the parties
under the Transaction Documents.
7.4 Notices. Any and all notices or other communications or deliveries
required or permitted to be provided hereunder shall be in writing and shall be
deemed given and effective on the earliest of (a) the date of transmission, if
such notice or communication is delivered via facsimile at the facsimile number
specified in this Section prior to 5:30 p.m. (New York City time) on a Trading
Day, (b) the next Trading Day after the date of transmission, if such notice or
communication is delivered via confirmed facsimile at the facsimile number
specified in this Section on a day that is not a Trading Day or later than 5:30
p.m. (New York City time) on any Trading Day, (c) the Trading Day following the
date of deposit with a nationally recognized overnight courier service, or (d)
upon actual receipt by the party to whom such notice is required to be given.
The addresses and facsimile numbers for such notices and communications are
those set forth on the signature pages hereof, or such other address or
facsimile number as may be designated in writing hereafter, in the same manner,
by any such Person.
7.5 Amendments; Waivers. No provision of this Agreement may be waived
or amended except in a written instrument signed, in the case of an amendment,
by the Company and each of the Purchasers or, in the case of a waiver, by the
party against whom enforcement of any such waiver is sought. No waiver of any
default with respect to any provision, condition or requirement of this
Agreement shall be deemed to be a continuing waiver in the future or a waiver of
any subsequent default or a waiver of any other provision, condition or
requirement hereof, nor shall any delay or omission of either party to exercise
any right hereunder in any manner impair the exercise of any such right.
Notwithstanding the foregoing, a waiver or consent to depart from the provisions
hereof with respect to a matter that relates exclusively to the rights of
Purchasers under Article VI and that does not directly or indirectly affect the
rights of other Purchasers may be given by Purchasers holding at least a
majority of the Registrable Securities to which such waiver or consent relates.
7.6 Construction. The headings herein are for convenience only, do not
constitute a part of this Agreement and shall not be deemed to limit or affect
any of the provisions hereof. The language used in this Agreement will be deemed
to be the language chosen by the parties to express their mutual intent, and no
rules of strict construction will be applied against any party.
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7.7 Successors and Assigns. This Agreement shall be binding upon and
inure to the benefit of the parties and their successors and permitted assigns.
The Company may not assign this Agreement or any rights or obligations hereunder
without the prior written consent of the Purchasers. Any Purchaser may assign
its rights under this Agreement to any Person to whom such Purchaser assigns or
transfers any Securities, provided such transferee agrees in writing to be
bound, with respect to the transferred Securities, by the provisions hereof that
apply to the "Purchasers" and executes a certificate as to the representations,
warranties and covenants set forth in Section 3.2(g) through (k).
Notwithstanding anything to the contrary herein, Securities may be assigned to
any Person in connection with a bona fide margin account or other loan or
financing arrangement secured by such Securities.
7.8 No Third-Party Beneficiaries. This Agreement is intended for the
benefit of the parties hereto and their respective successors and permitted
assigns and is not for the benefit of, nor may any provision hereof be enforced
by, any other Person, except that each Related Person is an intended third party
beneficiary of Section 4.8 and each Indemnified Party is an intended third party
beneficiary of Section 6.4 and (in each case) may enforce the provisions of such
Sections directly against the parties with obligations thereunder.
7.9 Governing Law; Venue; Waiver Of Jury Trial. All Questions
Concerning The Construction, Validity, Enforcement And Interpretation Of This
Agreement. THE COMPANY Hereby Irrevocably Submits To The Exclusive Jurisdiction
Of The State And Federal Courts Sitting In The CITY OF NEW YORK, BOROUGH OF
MANHATTAN For The Adjudication Of Any Dispute BROUGHT BY ANY PURCHASER
Hereunder, In Connection Herewith Or With Any Transaction Contemplated Hereby Or
Discussed Herein (Including With Respect To The Enforcement Of Any Of The
Transaction Documents), And Hereby Irrevocably Waives, And Agrees Not To Assert
In Any Suit, Action Or ProceedinG BROUGHT BY ANY PURCHASER, Any Claim That It Is
Not Personally Subject To The Jurisdiction Of Any Such Court, That Such Suit,
Action Or Proceeding Is Improper. Each purchaser HEREBY IRREVOCABLY SUBMITS TO
THE EXCLUSIVE JURISDICTION OF THE STATE AND FEDERAL COURTS SITTING IN DELAWARe,
for the adjudication of any dispute brought by the company hereunder, in
connection herewith or with any transaction contemplated hereby or discussed
herein (including with respect to the enforcement of any of the transaction
documents), and hereby irrevocably waives, and agrees not to assert in any suit,
action or proceeding brought by the company, any claim that it is not personally
subject to the jurisdiction of any such court or that such suit, action or
proceeding is improper. Each party Hereby Irrevocably Waives Personal Service Of
Process And Consents To Process Being Served In Any Such Suit, Action Or
Proceeding By Mailing A Copy Thereof Via Registered Or Certified Mail Or
Overnight Delivery (With Evidence Of Delivery) To Such Party At The Address In
Effect For Notices To It Under This Agreement And Agrees That Such Service Shall
Constitute Good And Sufficient Service Of Process And Notice Thereof. Nothing
Contained Herein Shall Be Deemed To Limit In Any Way Any Right To Serve Process
In Any Manner Permitted By Law. The Company AND EACH PURCHASER Hereby Waives All
Rights To A Trial By Jury.
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7.10 Survival. The representations, warranties, agreements and
covenants contained herein shall survive the Closing and the delivery and/or
exercise of the Securities, as applicable.
7.11 Execution. This Agreement may be executed in two or more
counterparts, all of which when taken together shall be considered one and the
same agreement and shall become effective when counterparts have been signed by
each party and delivered to the other party, it being understood that both
parties need not sign the same counterpart. In the event that any signature is
delivered by facsimile transmission, such signature shall create a valid and
binding obligation of the party executing (or on whose behalf such signature is
executed) with the same force and effect as if such facsimile signature page
were an original thereof.
7.12 Severability. If any provision of this Agreement is held to be
invalid or unenforceable in any respect, the validity and enforceability of the
remaining terms and provisions of this Agreement shall not in any way be
affected or impaired thereby and the parties will attempt to agree upon a valid
and enforceable provision that is a reasonable substitute therefor, and upon so
agreeing, shall incorporate such substitute provision in this Agreement.
7.13 Rescission and Withdrawal Right. Notwithstanding anything to the
contrary contained in (and without limiting any similar provisions of) the
Transaction Documents, whenever any Purchaser exercises a right, election,
demand or option under a Transaction Document and the Company does not timely
perform its related obligations within the periods therein provided, then such
Purchaser may rescind or withdraw, in its sole discretion from time to time upon
written notice to the Company, any relevant notice, demand or election in whole
or in part without prejudice to its future actions and rights.
7.14 Replacement of Securities. If any certificate or instrument
evidencing any Securities is mutilated, lost, stolen or destroyed, the Company
shall issue or cause to be issued in exchange and substitution for and upon
cancellation thereof, or in lieu of and substitution therefor, a new certificate
or instrument, but only upon receipt of evidence reasonably satisfactory to the
Company of such loss, theft or destruction and customary and reasonable
indemnity, if requested. The applicants for a new certificate or instrument
under such circumstances shall also pay any reasonable third-party costs
associated with the issuance of such replacement Securities.
7.15 Remedies. In addition to being entitled to exercise all rights
provided herein or granted by law, including recovery of damages, each of the
Purchasers and the Company will be entitled to specific performance under the
Transaction Documents. The parties agree that monetary damages may not be
adequate compensation for any loss incurred by reason of any breach of
obligations described in the foregoing sentence and hereby agrees to waive in
any action for specific performance of any such obligation the defense that a
remedy at law would be adequate.
31
7.16 Payment Set Aside. To the extent that the Company makes a payment
or payments to any Purchaser hereunder or pursuant to the Additional Investment
Rights, or any Purchaser enforces or exercises its rights hereunder or
thereunder, and such payment or payments or the proceeds of such enforcement or
exercise or any part thereof are subsequently invalidated, declared to be
fraudulent or preferential, set aside, recovered from, disgorged by or are
required to be refunded, repaid or otherwise restored to the Company by a
trustee, receiver or any other person under any law (including, without
limitation, any bankruptcy law, state or federal law, common law or equitable
cause of action), then to the extent of any such restoration the obligation or
part thereof originally intended to be satisfied shall be revived and continued
in full force and effect as if such payment had not been made or such
enforcement or setoff had not occurred.
7.17 Adjustments in Share Numbers and Prices. In the event of any stock
split, subdivision, dividend or distribution payable in shares of Common Stock
(or other securities or rights convertible into, or entitling the holder thereof
to receive directly or indirectly shares of Common Stock), combination or other
similar recapitalization or event occurring after the date hereof, each
reference in any Transaction Document to a number of shares or a price per share
shall be amended to appropriately account for such event.
7.18 Independent Nature of Purchasers' Obligations and Rights. The
obligations of each Purchaser under any Transaction Document are several and not
joint with the obligations of any other Purchaser, and no Purchaser shall be
responsible in any way for the performance of the obligations of any other
Purchaser under any Transaction Document. The decision of each Purchaser to
purchase Shares pursuant to this Agreement has been made by such Purchaser
independently of any other Purchaser and independently of any information,
materials, statements or opinions as to the business, affairs, operations,
assets, properties, liabilities, results of operations, condition (financial or
otherwise) or prospects of the Company or of the Subsidiary which may have been
made or given by any other Purchaser or by any agent or employee of any other
Purchaser, and no Purchaser or any of its agents or employees shall have any
liability to any other Purchaser (or any other person) relating to or arising
from any such information, materials, statements or opinions. Nothing contained
herein or in any Transaction Document, and no action taken by any Purchaser
pursuant thereto, shall be deemed to constitute the Purchasers as a partnership,
an association, a joint venture or any other kind of entity, or create a
presumption that the Purchasers are in any way acting in concert or as a group
with respect to such obligations or the transactions contemplated by the
Transaction Document. Each Purchaser acknowledges that no other Purchaser has
acted as agent for such Purchaser in connection with making its investment
hereunder and that no other Purchaser will be acting as agent of such Purchaser
in connection with monitoring its investment hereunder. Each Purchaser shall be
entitled to independently protect and enforce its rights, including without
limitation the rights arising out of this Agreement or out of the other
Transaction Documents, and it shall not be necessary for any other Purchaser to
be joined as an additional party in any proceeding for such purpose.
[Signature pages to follow]
32
IN WITNESS WHEREOF, the parties hereto have caused this Securities
Purchase Agreement to be duly executed by their respective authorized
signatories as of the date first indicated above.
ICAD, INC.
By: /s/ W. Xxxxx Xxxx
------------------------
Name: W. Xxxxx Xxxx
Title: President and CEO
Address for Notice:
0 Xxxxxxxx Xxxx, Xxxxx 00
Xxxxxx, XX 00000
Phone: (000) 000-0000
Fax: (000) 000-0000
Attn: Chief Financial Officer
With a copy to: Blank Rome LLP
000 Xxxxxxxxx Xxxxxx
Xxx Xxxx, XX 00000
Facsimile No.: (000) 000-0000
Telephone No.: (000) 000-0000
Attn: Xxxxxx X. Mittuan
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK
SIGNATURE PAGES FOR PURCHASERS FOLLOW]
Vertical Ventures, LLC
By: /s/ Xxxxxx Xxxxxxxxx
-------------------------
Name: Xxxxxx Xxxxxxxxx
Title: Partner
Number of Units: 300,000
Underlying Shares subject to
Additional Investment Rights: 75,000
Address for Notice:
Vertical Ventures, LLC
000 Xxxxxxxxx Xxx, 00xx Xxxxx
Xxx Xxxx, XX 00000
Facsimile No.: (000) 000-0000
Telephone No.: (000) 000-0000
Attn: Xxxxx Xxxxx / Xxxxxx Xxxxxxxxx
With a copy to: Proskauer Rose LLP
0000 Xxxxxxxx
Xxx Xxxx, Xxx Xxxx 00000-0000
Facsimile No.: (000) 000-0000
Telephone No.: (000) 000-0000
Attn: Xxxx X. Xxxxxxx, Esq.
DEEPHAVEN SMALL CAP GROWTH FUND, LLC
By: /s/ Xxxxx Xxxxxxxxx
----------------------------------
Name: Xxxxx Xxxxxxxxx
Title: Director of Private Placements
Number of Units: 200,000
Underlying Shares subject to
Additional Investment Rights: 50,000
Address for Notice:
Deephaven Small Cap Growth Fund, LLC
000 Xxxxxxxx Xxxx, Xxxxx 000
Xxxxxxxxxx, XX 00000
Facsimile No.: (000) 000-0000
Telephone No.: (000) 000-0000
Attn: Xxxxx Xxxxxxxxx
BONANZA MASTER FUND LTD.
By: /s/ Xxxxx Xxxxx
--------------------------------
Name: Xxxxx Xxxxx
Title: Managing Director
Number of Units: 150,000
Underlying Shares subject to
Additional Investment Rights: 37,500
Address for Notice:
Bonanza Capital
0000 Xxxxxxx, Xxxxx 000
Xxxxxx, XX 00000
Facsimile No.: 214.987.4342
Telephone No.: 000.000.0000
Attn: Xxxxx Xxxxx
OMICRON MASTER TRUST
By: /s/ Xxxxx Xxxxxxxxx
--------------------------------
Name: Xxxxx Xxxxxxxxx
Title: Managing Partner
Number of Units: 200,000
Underlying Shares subject to
Additional Investment Rights: 50,000
Address for Notice:
000 Xxxxxxx Xxx
00xx Xxxxx
Xxx Xxxx, XX
00000
Facsimile No.: (000) 000-0000
Telephone No.: (000) 000-0000
Attn: Xxxxx Xxxx
CRANSHIRE CAPITAL, L.P.
By: /s/ Xxxxxxxx X. Xxxxx
--------------------------------------
Name: Xxxxxxxx X. Xxxxx
Title: President -Downsview Capital, L.P.,
The General Partner
Number of Units: 300,000
Underlying Shares subject to
Additional Investment Rights: 75,000
Address for Notice:
Cranshire Capital, L.P.
000 Xxxxxx Xxxx, Xxxxx 0000
Xxxxxxxxxx, XX 00000
Facsimile No.: (000) 000-0000
Telephone No.: (000) 000-0000
Attn: Xxxxxxxx X. Xxxxx
CRESCENT INTERNATIONAL LTD
By: /s/ Xxx Xxxx
----------------------------------
Name: Xxx Xxxx Maxi Brezzi
Title: Authorized Signatories
Number of Units: 60,000
Underlying Shares subject to
Additional Investment Rights: 15,000
Address for Notice:
X/x Xxxxxxxxxx (Xxxxxxxxxxx) XX
00, A. Xxxxx-Xxxxx
XX 0000 Xxxxxxxx, Xxxxxx, Xxxxxxxxxxx
Facsimile No.: x0 00 00 000 0000
Telephone No.: x0 00 00 000 0000
Attn: Xxxxx Xxxxxxxxx
SMITHFIELD FIDUCIARY LLC
By: /s/ Xxxx X. Chill
--------------------------------------
Name: Xxxx X. Chill
Title: Authorized Signatory
Number of Units: 50,000
Underlying Shares subject to
Additional Investment Rights: 12,500
Address for Notice:
C/o Highbridge Capital Management, LLC
0 Xxxx 00xx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Facsimile No.: (000) 000-0000
Telephone No.: (000) 000-0000
Attn: Xxx X. Xxxxxx / Xxxx X. Chill
Exhibits:
A Form of Additional Investment Right
B Opinion of Company Counsel
C Plan of Distribution
D Transfer Agent Instructions