SECURITIES PURCHASE AGREEMENT
Exhibit
2
Execution
Copy
THIS SECURITIES PURCHASE
AGREEMENT (this “Agreement”), dated as of March
8, 2010, by and between Liberator Medical Holdings, Inc., a Nevada corporation
with headquarters located at 0000 XX Xxxx Xxxx Xxx, Xxxxxx, Xxxxxxx 00000 (the
“Company”), and
Kinderhook Partners, L.P. (the “Investor”).
BACKGROUND
A. The
Company and the Investor are executing and delivering this Agreement in reliance
upon the exemption from registration afforded by Section 4(2) of the
Securities Act of 1933, as amended (the “Securities Act”), and
Rule 506 of Regulation D (“Regulation D”) as promulgated by the
United States Securities and Exchange Commission (the “SEC”) under the Securities
Act.
B. The
Investor wishes to purchase, and the Company wishes to sell, upon the terms and
conditions stated in this Agreement, 4,666,667 shares of the common stock, par
value $.001 per share, of the Company (the “Common Stock”, which shall be
collectively be referred to herein as the “Shares”), at the purchase
price of $1.50 per share.
C. The
Shares issued or issuable pursuant to this Agreement are collectively are
referred to herein as the “Securities.”
NOW,
THEREFORE, IN CONSIDERATION of the mutual covenants contained in this Agreement,
and for other good and valuable consideration the receipt and adequacy of which
are hereby acknowledged, the Company and the Investor agree as
follows:
ARTICLE
I
DEFINITIONS
1.1 Definitions. In
addition to the terms defined elsewhere in this Agreement, the following terms
have the meanings indicated:
“Affiliate” means any Person
that, directly or indirectly through one or more intermediaries, controls or is
controlled by or is under common control with a Person, as such terms are used
in and construed under Rule 144 under the Securities Act.
“Agent” has the meaning set
forth in Section
3.1(l).
“Agreement” has the meaning set
forth in the Preamble.
“Best Efforts” means the
efforts that a prudent person desirous of achieving a result would use in
similar circumstances to ensure that such result is achieved as expeditiously as
practical; provided,
however, that an obligation to use Best Efforts under this Agreement does
not require the Company to dispose of or make any change to its business, expend
any material funds or incur any other material burden.
“Business Day” means any day
other than Saturday, Sunday, any day which shall be a federal legal holiday in
the United States or any day on which banking institutions in The State of New
York are authorized or required by law or other governmental action to
close.
“Closing” means the closing of
the purchase and sale of the Securities pursuant to Section 2.1.
“Closing Date” means the date
and time of the Closing and shall be on such date and time as is mutually agreed
to by the Company and the Investor.
“Company” has the meaning set forth in
the Preamble.
“Company Counsel” means Siegel,
Lipman, Xxxxx, Xxxxxxx & Xxxxxx, LLP, counsel to the Company.
“Common Stock” has the meaning
set forth in the Preamble.
“Contingent Obligation” has the
meaning set forth in Section
3.1(z).
“Convertible Securities” means
any stock or securities (other than Options) convertible into or exercisable or
exchangeable for Common Stock.
“Disclosure Materials” has the
meaning set forth in Section 3.1(g).
“Effective Date” means the date
that the Registration Statement is first declared effective by the
SEC.
“Effectiveness Period” has the
meaning set forth in Section 6.1(b).
“8-K Filing” has the meaning
set forth in Section
4.5.
“Eligible Market” means any of
the New York Stock Exchange, the American Stock Exchange, the NASDAQ Global
Select Market, the NASDAQ Global Market, the NASDAQ Capital Market or OTC
Bulletin Board.
“Environmental Laws” has the
meaning set forth in Section
3.1(cc).
“Event Payments” has the
meaning set forth in Section 6.1(d).
“Exchange Act” means the
Securities Exchange Act of 1934, as amended.
“Excluded Events” has the
meaning set forth in Section 6.1(d)(ii).
“GAAP” has the meaning set
forth in Section
3.1(g).
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“Hazardous Materials” has the
meaning set forth in Section
3.1(cc).
“Indebtedness” has the meaning
set forth in Section
3.1(z).
“Indemnification Agreement”
means the Indemnification Agreement between the Company and the Kinderhook
Director, which shall be promptly entered into upon appointment of the
Kinderhook Director, pursuant to which the Company shall agree to indemnify the
Kinderhook Director, as a director of the board of directors of the Company, to
the fullest extent permitted by law, and as more fully set forth in such
Indemnification Agreement.
“Indemnified Party” has the
meaning set forth in Section 6.4(c).
“Indemnifying Party” has the
meaning set forth in Section 6.4(c).
“Insolvent” has the meaning set
forth in Section
3.1(h).
“Intellectual Property Rights”
has the meaning set forth in Section 3.1(s).
“Investor” has the meaning set
forth in the Preamble.
“Lien” means any lien, charge,
claim, security interest, encumbrance, right of first refusal or other
restriction.
“Losses” means any and all
losses, claims, damages, liabilities, settlement costs and expenses, including,
without limitation, reasonable attorneys’ fees.
“Material Adverse Effect” means
(i) a material adverse effect on the results of operations, assets, business,
prospects or financial condition of the Company and the Subsidiaries taken as a
whole on a consolidated basis or (ii) material and adverse impairment of
the Company's ability to perform its obligations under any of the Transaction
Documents, provided, that none of the following alone shall be deemed, in and of
itself, to constitute a Material Adverse Effect: (i) a change in the market
price or trading volume of the Common Stock or (ii) changes in general economic
conditions or changes affecting the industry in which the Company operates
generally (as opposed to Company-specific changes) so long as such changes do
not have a disproportionate effect on the Company and its Subsidiaries taken as
a whole.
“Material Permits” has the
meaning set forth in Section 3.1(u).
“Options” means any outstanding
rights, warrants or options to subscribe for or purchase Common Stock or
Convertible Securities.
“Person” has the meaning set
forth in Section 3.1(z).
“Proceeding” means an action,
claim, suit, investigation or proceeding (including, without limitation, a
partial proceeding, such as a deposition), whether commenced or threatened in
writing.
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“Prospectus” means the
prospectus included in the Registration Statement (including, without
limitation, a prospectus that includes any information previously omitted from a
prospectus filed as part of an effective registration statement in reliance upon
Rule 430A promulgated under the Securities Act), as amended or supplemented by
any prospectus supplement, with respect to the terms of the offering of any
portion of the Registrable Securities covered by the Registration Statement, and
all other amendments and supplements to the Prospectus including post-effective
amendments, and all material incorporated by reference or deemed to be
incorporated by reference in such Prospectus.
“Registrable Securities” means
the Shares issued or issuable pursuant to this Agreement, together with any
securities issued or issuable upon any stock split, dividend or other
distribution, recapitalization or similar event with respect to the
foregoing.
“Registration Statement” means
each registration statement required to be filed under Article VI, including (in
each case) the Prospectus, amendments and supplements to such registration
statement or Prospectus, including pre- and post-effective amendments, all
exhibits thereto, and all material incorporated by reference or deemed to be
incorporated by reference in such registration statement.
“Regulation D” has the meaning
set forth in the Preamble.
“Required Effectiveness Date”
means (i) if the Registration Statement does not become subject to review by the
SEC, the date which is the earliest of (a) ninety (90) days immediately
following receipt of the Demand Registration Notice (as defined in Section 6.1(a)) by
the Company Date or (b) five (5) Trading Days after the Company receives
notification from the SEC that the Registration Statement will not become
subject to review, or (ii) if the Registration Statement becomes subject to
review by the SEC, the date which is the earliest of (a) one hundred and
twenty (120) days immediately following receipt of the Demand Registration
Notice (as defined in Section 6.1(a)) by
the Company or (b) five (5) Trading Days after the Company receives
notification from the SEC that the SEC has no further comment to the
Registration Statement.
“Rule 144,” “Rule 415,” and “Rule 424” means Rule 144,
Rule 415 and Rule 424, respectively, promulgated by the SEC pursuant
to the Securities Act, as such Rules may be amended from time to time, or any
similar rule or regulation hereafter adopted by the SEC having substantially the
same effect as such Rule.
“SEC” has the meaning set
forth in the Preamble.
“SEC Reports” has the meaning
set forth in Section
3.1(g).
“Securities” has the meaning
set forth in the Preamble.
“Securities Act” has the
meaning set forth in the Preamble.
“Shares” has the meaning set
forth in the Preamble.
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“Stockholders Agreement” means the
Stockholders Agreement by and between the Investor and Xxxx X. Xxxxxxxxx, the
Company’s Chief Executive Officer, dated the date hereof, pursuant to which Xx.
Xxxxxxxxx will agree to vote his shares of Common Stock to provide the Investor
the right to appoint a director to the board of directors of the Company
..
“Subsidiary” means any
significant subsidiary of the Company, as defined in Regulation S-X, Rule
1-02(w).
“Trading Day” means (i) a day
on which the Common Stock is traded on a Trading Market (other than the OTC
Bulletin Board), or (ii) if the Common Stock is not listed or quoted on a
Trading Market (other than the OTC Bulletin Board), a day on which the Common
Stock is traded in the over-the-counter market, as reported by the OTC Bulletin
Board, or (iii) if the Common Stock is not listed or quoted on any Trading
Market, a day on which the Common Stock is quoted in the over-the-counter market
as reported by the Pink Sheets LLC (or any similar organization or agency
succeeding to its functions of reporting prices); provided, that in the event
that the Common Stock is not listed or quoted as set forth in (i), (ii) and
(iii) hereof, then Trading Day shall mean a Business Day.
“Trading Market” means
whichever of the New York Stock Exchange, the American Stock Exchange, the
NASDAQ Global Select Market, the NASDAQ Global Market, the NASDAQ Capital Market
or OTC Bulletin Board on which the Common Stock is listed or quoted for trading
on the date in question.
“Transaction Documents” means
this Agreement, the schedules and exhibits attached hereto, the Stockholders
Agreement and the Transfer Agent Instructions.
“Transfer Agent” means Jersey
Transfer & Trust Company, Inc., or any successor transfer agent for the
Company.
“Transfer Agent Instructions”
means, with respect to the Company, the Irrevocable Transfer Agent Instructions,
in the form of Exhibit E,
executed by the Company and delivered to and acknowledged in writing by the
Transfer Agent.
ARTICLE
II
PURCHASE
AND SALE
2.1 Closing. Subject
to the terms and conditions set forth in this Agreement, at the Closing the
Company shall issue and sell to the Investor, and the Investor shall purchase
from the Company, such number of Shares for the price set forth on the
Investor’s signature page to this Agreement. The date and time of the
Closing and shall be 11:00 a.m., New York City Time, on the Closing
Date. The Closing shall take place at the offices of the Company’s
Counsel.
2.2 Closing
Deliveries.
(a) At
the Closing, the Company shall deliver or cause to be delivered to the Investor
the following:
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(i)
a fully-executed copy of the Company’s irrevocable instructions to the Transfer
Agent directing the Transfer Agent to deliver, on an expedited basis, one or
more stock certificates, free and clear of all restrictive and other legends
(except as expressly provided in Section 4.1(b)
hereof), evidencing such number of Shares set forth on the Investor’s signature
page to this Agreement, registered in the name of the Investor;
(ii)
a legal opinion of Company Counsel, in the form of Exhibit C,
executed by such counsel and delivered to the Investor;
(v)
a certificate of the Secretary of the Company, dated as of the Closing Date,
(a) certifying the resolutions adopted by the Board of Directors of the
Company approving the transactions contemplated by this Agreement and the other
Transaction Documents and the issuance of the Securities, (b) certifying
the current versions of the certificate of incorporation, as amended and by-laws
of the Company and (c) certifying as to the signatures and authority of
persons signing the Transaction Documents and related documents on behalf of the
Company;
(vi)
a certificate of the Chief Executive Officer or Chief Financial Officer of the
Company, dated as of the Closing Date, certifying to the fulfillment of the
conditions specified in Section 5.1(a) and
(b);
(vii)
a
fully-executed copy of the Stockholders Agreement;
(viii) a
certificate evidencing the formation and good standing of the Company and each
of its Subsidiaries in such entity’s jurisdiction of formation issued by the
Secretary of State (or comparable office) of such jurisdiction; and
(ix) a
certified copy of the Certificate of Incorporation as certified by the Secretary
of State of the State of Nevada and copies of the Subsidiaries’ Charters as
certified by the Secretary of State of the State of Florida (or, in each case, a
fax or pdf copy of such certificate).
(b)
At the Closing, the Investor shall deliver or cause to be delivered to the
Company the purchase price set forth on the Investor’s signature page to this
Agreement in United States dollars and in immediately available funds, by wire
transfer to the following account for such purpose: Wachovia Bank, N.A.,
Jacksonville, FL, ABA: 000000000, For Credit to: Liberator Medical Holdings,
Inc., Account No.: 2000036081347.
ARTICLE
III
REPRESENTATIONS
AND WARRANTIES
(a)
Subsidiaries. The
Company owns or controls, directly or indirectly, all of the capital stock or
comparable equity interests of each Subsidiary free and clear of any Lien, and
all issued and outstanding shares of capital stock or comparable equity interest
of each Subsidiary are validly issued and are fully paid, non-assessable and
free of preemptive and similar rights; and the Company owns or controls,
directly or indirectly, only the following corporations, partnerships, limited
liability partnerships, limited liability companies, associations or other
entities: (i) Liberator Medical Supply, Inc., a Florida corporation, (ii)
Liberator Health and Education Services, Inc., a Florida corporation, and (iii)
Liberator Health and Wellness, Inc., a Florida corporation (each, a
“Subsidiary”).
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(b)
Organization and
Qualification. The Company and each Subsidiary is an entity
duly organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation, with the requisite legal authority to own and
use its properties and assets and to carry on its business as currently
conducted. Neither the Company nor any Subsidiary is not in violation
of any of the provisions of its respective certificate or articles of
incorporation, bylaws or other organizational or charter
documents. The Company and each Subsidiary is duly qualified to do
business and is in good standing as a foreign corporation or other entity in
each jurisdiction in which the nature of the business conducted or property
owned by it makes such qualification necessary, except where the failure to be
so qualified or in good standing, as the case may be, would not, individually or
in the aggregate, have or reasonably be expected to result in a Material Adverse
Effect.
(c)
Authorization;
Enforcement. The Company has the requisite corporate authority
to enter into and to consummate the transactions contemplated by each of the
Transaction Documents to which it is a party and otherwise to carry out its
obligations hereunder and thereunder. The execution and delivery of
each of the Transaction Documents to which it is a party by the Company and the
consummation by it of the transactions contemplated hereby and thereby have been
duly authorized by all necessary corporate action on the part of the Company and
no further consent or action is required by the Company, its Board of Directors
or its stockholders. Each of the Transaction Documents to which it is
a party has been (or upon delivery will be) duly executed by the Company and is,
or when delivered in accordance with the terms hereof, will constitute, the
valid and binding obligation of the Company enforceable against the Company in
accordance with its terms, except (i) as limited by general equitable principles
and applicable bankruptcy, insolvency, reorganization, moratorium and other laws
of general application affecting enforcement of creditors’ rights generally,
(ii) as limited by laws relating to the availability of specific performance,
injunctive relief or other equitable remedies and (iii) insofar as
indemnification and contribution provisions may be limited by applicable
law.
(d) No
Conflicts. The execution, delivery and performance of the
Transaction Documents to which it is a party by the Company and the consummation
by the Company of the transactions contemplated hereby and thereby do not, and
will not, (i) conflict with or violate any provision of the Company’s or
any Subsidiary’s certificate or articles of incorporation, bylaws or other
organizational or charter documents, (ii) except as disclosed in Schedule
3.1(d),conflict with, or constitute a default (or an event that with
notice or lapse of time or both would become a default) under, or give to others
any rights of termination, amendment, acceleration or cancellation (with or
without notice, lapse of time or both) of, any agreement, credit facility, debt
or other instrument (evidencing a Company or Subsidiary debt or otherwise) or
other understanding to which the Company or any Subsidiary is a party or by
which any property or asset of the Company or any Subsidiary is bound, or
affected, except to the extent that such conflict, default, termination,
amendment, acceleration or cancellation right would not reasonably be expected
to have a Material Adverse Effect, or (iii) result in a violation of any law,
rule, regulation, order, judgment, injunction, decree or other restriction of
any court or governmental authority to which the Company or any Subsidiary is
subject (including, assuming the accuracy of the representations and warranties
of the Investor set forth in Section 3.2 hereof,
federal and state securities laws and regulations and the rules and regulations
of any self-regulatory organization to which the Company or its securities are
subject, including all applicable Trading Markets), or by which any property or
asset of the Company or any Subsidiary are is bound or affected,
except to the extent that such violation would not reasonably be expected to
have a Material Adverse Effect.
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(e)
The
Securities. The Securities are duly authorized and, when
issued and paid for in accordance with the applicable Transaction Documents,
will be duly and validly issued, fully paid and nonassessable, free and clear of
all Liens and will not be subject to preemptive or similar rights of
stockholders (other than those imposed by the Investor).
(f) Capitalization. The
aggregate number of shares and type of all authorized, issued and outstanding
classes of capital stock, options and other securities of the Company (whether
or not presently convertible into or exercisable or exchangeable for shares of
capital stock of the Company) is set forth in Schedule 3.1(f)
hereto. All outstanding shares of capital stock are duly authorized,
validly issued, fully paid and nonassessable and have been issued in compliance
in all material respects with all applicable securities laws. Except
as disclosed in Schedule 3.1(f)
hereto, the Company did not have outstanding at January 30, 2010 any other
Options, script rights to subscribe to, calls or commitments of any character
whatsoever relating to, or securities, rights or obligations convertible into or
exercisable or exchangeable for, or entered into any agreement giving any Person
any right to subscribe for or acquire, any shares of Common Stock, or securities
or rights convertible or exchangeable into shares of Common
Stock. Except as set forth on Schedule 3.1(f)
hereto, and except for customary adjustments as a result of stock dividends,
stock splits, combinations of shares, reorganizations, recapitalizations,
reclassifications or other similar events, there are no anti-dilution or price
adjustment provisions contained in any security issued by the Company (or in any
agreement providing rights to security holders) and the issuance and sale of the
Securities will not obligate the Company to issue shares of Common Stock or
other securities to any Person (other than the Investor) and will not result in
a right of any holder of securities to adjust the exercise, conversion, exchange
or reset price under such securities. To the knowledge of the
Company, except as disclosed in the SEC Reports and any Schedules 13D or 13G
filed with the SEC pursuant to Rule 13d-1 of the Exchange Act by reporting
persons or in Schedule
3.1(f) hereto, no Person or group of related Persons beneficially owns
(as determined pursuant to Rule 13d-3 under the Exchange Act), or has the right
to acquire, by agreement with or by obligation binding upon the Company,
beneficial ownership of in excess of 5% of the outstanding Common
Stock.
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(g) SEC Reports; Financial
Statements. Except as set forth on Schedule 3.1(g), the
Company has filed all reports required to be filed by it under the Exchange Act,
including pursuant to Section 13(a) or
15(d) thereof,
for the 12 months preceding the date hereof on a timely basis or has received a
valid extension of such time of filing and has filed any such SEC Reports prior
to the expiration of any such extension and has filed all reports required to be
filed by it under the Exchange Act, including pursuant to Section 13(a) or 15(d)
thereof, for the two years preceding the date hereof. Such reports
required to be filed by the Company under the Exchange Act, including pursuant
to Section 13(a) or 15(d) thereof, together with any materials filed or
furnished by the Company under the Exchange Act, whether or not any such reports
were required being collectively referred to herein as the “SEC Reports” and, together
with this Agreement and the Schedules to this Agreement, the “Disclosure
Materials”. As of their respective dates (or, if amended or
superseded by a filing prior to the Closing Date, then on the date of such
filing), the SEC Reports filed by the Company complied in all material respects
with the requirements of the Securities Act and the Exchange Act and the rules
and regulations of the SEC promulgated thereunder, and none of the SEC Reports,
when filed (or, if amended or superseded by a filing prior to the Closing Date,
then on the date of such filing) by the Company, contained any untrue statement
of a material fact or omitted to state a material fact required to be stated
therein or necessary in order to make the statements therein, in the light of
the circumstances under which they were made, not misleading. The
financial statements of the Company included in the SEC Reports comply in all
material respects with applicable accounting requirements and the rules and
regulations of the SEC with respect thereto as in effect at the time of filing
(or, if amended or superseded by a filing prior to the Closing Date, then on the
date of such filing). Such financial statements have been prepared in
accordance with United States generally accepted accounting principles applied
on a consistent basis during the periods involved (“GAAP”), except as may be
otherwise specified in such financial statements, the notes thereto and except
that unaudited financial statements may not contain all footnotes required by
GAAP or may be condensed or summary statements, and fairly present in all
material respects the consolidated financial position of the Company and its
consolidated subsidiaries as of and for the dates thereof and the results of
operations and cash flows for the periods then ended, subject, in the case of
unaudited statements, to normal, year-end audit adjustments. All
material agreements to which the Company or any Subsidiary is a party or to
which the property or assets of the Company or any Subsidiary are subject are
included as part of or identified in the SEC Reports, to the extent such
agreements are required to be included or identified pursuant to the rules and
regulations of the SEC.
(h) Material Changes;
Undisclosed Events, Liabilities or Developments;
Solvency. Since the date of the latest audited financial
statements included within the SEC Reports, except as disclosed in the SEC
Reports or in Schedule
3.1(h) hereto, (i) there has been no event, occurrence or
development that, individually or in the aggregate, has had or that would result
in a Material Adverse Effect, (ii) the Company has not incurred any
material liabilities other than (A) trade payables and accrued expenses
incurred in the ordinary course of business consistent with past practice and
(B) liabilities not required to be reflected in the Company's financial
statements pursuant to GAAP or required to be disclosed in filings made with the
SEC, (iii) the Company has not altered its method of accounting or changed
its auditors, except as disclosed in its SEC Reports, (iv) the Company has
not declared or made any dividend or distribution of cash or other property to
its stockholders, in their capacities as such, or purchased, redeemed or made
any agreements to purchase or redeem any shares of its capital stock, and
(v) the Company has not issued any equity securities to any officer,
director or Affiliate, except pursuant to existing Company stock-based
plans. The Company has not taken any steps to seek protection
pursuant to any bankruptcy law nor does the Company have any knowledge or reason
to believe that its creditors intend to initiate involuntary bankruptcy
proceedings or any actual knowledge of any fact which would reasonably lead a
creditor to do so. The Company is not as of the date hereof, and
after giving effect to the transactions contemplated hereby to occur at the
applicable Closing, will not be Insolvent (as defined below). For
purposes of this Section 3.1(h), “Insolvent” means (i) the
present fair saleable value of the Company's assets is less than the amount
required to pay the Company's total Indebtedness (as defined in Section
3.1(aa)), (ii) the Company is unable to pay its debts and liabilities,
subordinated, contingent or otherwise, as such debts and liabilities become
absolute and matured, (iii) the Company intends to incur or believes that it
will incur debts that would be beyond its ability to pay as such debts mature or
(iv) the Company has unreasonably small capital with which to conduct the
business in which it is engaged as such business is now conducted and is
proposed to be conducted.
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(i) Absence of
Litigation. Except as disclosed in the SEC Reports, there is
no action, suit, claim, or Proceeding, or, to the Company's knowledge, inquiry
or investigation, before or by any court, public board, government agency,
self-regulatory organization or body pending or, to the knowledge of the
Company, threatened against or affecting the Company or any Subsidiary that
could, individually or in the aggregate, to have a Material Adverse
Effect.
(j) Compliance. Except
as would not, individually or in the aggregate, reasonably be expected to have
or result in a Material Adverse Effect, (i) neither the Company nor any
Subsidiary is not in default under or in violation of (and no event has occurred
that has not been waived that, with notice or lapse of time or both, would
result in a default by the Company or any Subsidiary under), nor has the Company
or any Subsidiary received written notice of a claim that it is in default under
or that it is in violation of, any indenture, loan or credit agreement or any
other agreement or instrument to which it is a party or by which it or any of
its properties is bound (whether or not such default or violation has been
waived), (ii) neither the Company nor any Subsidiary is in violation of any
order of any court, arbitrator or governmental body, or (iii) neither the
Company nor any Subsidiary is in violation of any statute, rule or regulation of
any governmental authority.
(k) Title to
Assets. Neither the Company nor any Subsidiary owns real
property. The Company and each Subsidiary has good and marketable
title in all personal property owned by them that is material to the business of
the Company and each Subsidiary, in each case free and clear of all Liens,
except for Liens that do not, individually or in the aggregate, have or result
in a Material Adverse Effect. Any real property and facilities held
under lease by the Company or any Subsidiary is held by it under valid,
subsisting and enforceable leases of which the Company and each Subsidiary is in
material compliance.
(l) No General Solicitation;
Placement Agent's Fees. Neither the Company, nor any of its
Affiliates, nor any Person acting on its or their behalf, has engaged in any
form of general solicitation or general advertising (within the meaning of
Regulation D) in connection with the offer or sale of the
Securities. The Company shall be responsible for the payment of any
placement agent’s fees, financial advisory fees, or brokers’ commission (other
than for persons engaged by the Investor or its investment advisor) relating to
or arising out of the issuance of the Securities pursuant to this
Agreement. The Company shall pay, and hold the Investor harmless
against, any liability, loss or expense (including, without limitation,
reasonable attorney's fees and out-of-pocket expenses) arising in connection
with any such claim for fees arising out of the issuance of the Securities
pursuant to this Agreement. The Company acknowledges that is has
engaged Littlebanc Advisors LLC through Wilmington Capital Securities LLC as its
exclusive placement agent (the “Agent”) in connection with the
sale of the Securities. Other than the Agent, the Company has not
engaged any placement agent or other agent in connection with the sale of the
Securities.
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(m) Private Placement;
Investment Company; U.S. Real Property Holding
Corporation. Neither the Company nor any of its Affiliates
nor, any Person acting on the Company’s behalf has, directly or indirectly, at
any time within the past six months, made any offer or sale of any security or
solicitation of any offer to buy any security under circumstances that would
(i) eliminate the availability of the exemption from registration under
Regulation D under the Securities Act in connection with the offer and sale
by the Company of the Securities as contemplated hereby or (ii) cause the
offering of the Securities pursuant to the Transaction Documents to be
integrated with prior offerings by the Company for purposes of any applicable
law, regulation or stockholder approval provisions, including, without
limitation, under the rules and regulations of any Trading
Market. Assuming the accuracy of the representations and warranties
of the Investor set forth in Section 3.2, no
registration under the Securities Act is required for the offer and sale of the
Securities by the Company to the Investor as contemplated hereby. The sale and
issuance of the Securities hereunder does not contravene the rules and
regulations of any Trading Market on which the Common Stock is listed or
quoted. The Company is not required to be registered as, and is not
an Affiliate of, an “investment company” within the meaning of the Investment
Company Act of 1940, as amended. The Company is not required to be
registered as a United States real property holding corporation within the
meaning of the Foreign Investment in Real Property Tax Act of 1980.
(n) Listing and Maintenance
Requirements. The Company has not, in the twelve months
preceding the date hereof, received notice (written or oral) from any Trading
Market on which the Common Stock is or has been listed or quoted to the effect
that the Company is not in compliance with the listing or maintenance
requirements of such Trading Market. The Company is, and has no
reason to believe that it will not in the foreseeable future continue to be, in
compliance with all such listing and maintenance requirements.
(o) Registration
Rights. Except as described in Schedule 3.1(o), the
Company has not granted or agreed to grant to any Person any rights (including
“piggy-back” registration rights) to have any securities of the Company
registered with the SEC or any other governmental authority that have not
expired or been satisfied or waived.
(p) Application of Takeover
Protections. The Company and its Board of Directors have taken
all necessary action, if any, to render inapplicable any control share
acquisition, business combination, poison pill (including any distribution under
a rights agreement) or other similar anti-takeover provision under the Company’s
charter documents or the laws of its state of incorporation that is or could
become applicable to the Investor as a result of the Investor and the Company
fulfilling their respective obligations or exercising their rights under the
Transaction Documents, including, without limitation, as a result of the
Company’s issuance of the Securities and the Investor’s ownership of the
Securities.
-11-
(q) Disclosure. All
disclosure provided by the Company to the Investor regarding the Company, its
business and the transactions contemplated hereby, including the Schedules to
this Agreement furnished by or on behalf of the Company, including, without
limitation, new and repeat customer data, leads and % leads closed data, cost
per lead closed data, advertising spend, and capitalization table, are true and
correct in all material respects and do not contain any untrue statement of a
material fact or omit to state any material fact necessary in order to make the
statements made therein, in the light of the circumstances under which they were
made, not misleading. To the Company's knowledge, except for the
transactions contemplated by this Agreement, no event or circumstance has
occurred or information exists with respect to the Company or any Subsidiary or
their its businesses, properties, operations or financial condition, which,
under applicable law, rule or regulation, requires public disclosure or
announcement by the Company but which has not been so publicly announced or
disclosed. The Company acknowledges and agrees that the Investor
neither makes nor has made any representations or warranties with respect to the
transactions contemplated hereby other than those set forth in this
Agreement.
(r) Acknowledgment Regarding
Investor’s Purchase of Securities. Based upon the assumption
that the transactions contemplated by this Agreement are consummated in all
material respects in conformity with the Transaction Documents, the Company
acknowledges and agrees that the Investor is acting solely in the capacity of an
arm's length purchaser with respect to the Transaction Documents and the
transactions contemplated hereby and thereby. The Company further
acknowledges that the Investor is not acting as a financial advisor or fiduciary
of the Company (or in any similar capacity) with respect to this Agreement and
the transactions contemplated hereby and any advice given by the Investor or its
representatives or agents in connection with the Transaction Documents and the
transactions contemplated hereby and thereby is merely incidental to the
Investor’s purchase of the Securities. The Company further represents
to the Investor that the Company’s decision to enter into this Agreement has
been based solely on the independent evaluation of the transactions contemplated
hereby by the Company and its advisors and representatives.
(s) Patents and
Trademarks. The Company and each Subsidiary owns, or possesses
adequate rights or licenses to use, all trademarks, trade names, service marks,
service xxxx registrations, service names, patents, patent rights, copyrights,
inventions, licenses, approvals, governmental authorizations, trade secrets and
other intellectual property rights (“Intellectual Property Rights”)
necessary to conduct its business their respective businesses as now
conducted. None of the Company’s or any Subsidiary’s Intellectual
Property Rights have expired or terminated, or are expected to expire or
terminate within three years from the date of this Agreement. The
Company does not have any knowledge of any infringement by the Company or any
Subsidiary of Intellectual Property Rights of others. Except as
disclosed in the SEC Reports, there is no claim, action or proceeding being made
or brought, or to the knowledge of the Company, being threatened, against the
Company or any Subsidiary regarding its Intellectual Property
Rights.
(t) Insurance. The
Company and each Subsidiary is insured by insurers of recognized financial
responsibility against such losses and risks and in such amounts as are prudent
and customary in the businesses and locations in which the Company and each
Subsidiary is engaged.
-12-
(u) Regulatory
Permits. The Company and each Subsidiary possesses all
certificates, authorizations and permits issued by the appropriate federal,
state, local or foreign regulatory authorities necessary to conduct their
respective businesses as presently conducted and described in the SEC Reports
(“Material Permits”),
except where the failure to possess such permits does not, individually or in
the aggregate, have or reasonably be expected to result in a Material Adverse
Effect, and neither the Company nor any Subsidiary has received has not received
any written notice of proceedings relating to the revocation or modification of
any Material Permit.
(v) Transactions With Affiliates
and Employees. Except as set forth or incorporated by
reference in the Company’s SEC Reports, none of the officers, directors or
employees of the Company is presently a party to any transaction with the
Company that would be required to be reported on Form 10-K by Item 12 thereof
pursuant to Regulation S-K Item 404(a) (other than for ordinary course services
as employees, officers or directors), including any contract, agreement or other
arrangement providing for the furnishing of services to or by, providing for
rental of real or personal property to or from, or otherwise requiring payments
to or from any such officer, director or employee or, to the Company's
knowledge, any corporation, partnership, trust or other entity in which any such
officer, director, or employee has a substantial interest or is an officer,
director, trustee or partner.
(w) Internal Accounting
Controls. The Company and each Subsidiary maintains a system
of internal accounting controls sufficient to provide reasonable assurance that
(i) transactions are executed in accordance with management’s general or
specific authorizations, (ii) transactions are recorded as necessary to
permit preparation of financial statements in conformity with generally accepted
accounting principles and to maintain asset accountability, (iii) access to
assets is permitted only in accordance with management’s general or specific
authorization, and (iv) the recorded accountability for assets is compared
with the existing assets at reasonable intervals and appropriate action is taken
with respect to any differences.
(x) Xxxxxxxx-Xxxxx Act.
The Company is in compliance in all material respects with applicable
requirements of the Xxxxxxxx-Xxxxx Act of 2002 and applicable rules and
regulations promulgated by the SEC thereunder, except where such noncompliance
would not have, individually or in the aggregate, a Material Adverse
Effect.
(y) Foreign Corrupt
Practices. Neither the Company nor any Subsidiary nor, to the
knowledge of the Company, any director, officer, agent, employee or other Person
acting on behalf of the Company or any Subsidiary has, in the course of its
actions for, or on behalf of, the Company (i) used any corporate funds for any
unlawful contribution, gift, entertainment or other unlawful expenses relating
to political activity; (ii) made any direct or indirect unlawful payment to any
foreign or domestic government official or employee or to any foreign or
domestic political parties or campaigns from corporate funds; (iii) violated or
is in violation in any material respect of any provision of the U.S. Foreign
Corrupt Practices Act of 1977, as amended; or (iv) made any unlawful bribe,
rebate, payoff, influence payment, kickback or other unlawful payment to any
foreign or domestic government official or employee.
-13-
(z) Indebtedness. Except
as disclosed in the SEC Reports, neither the Company nor any Subsidiary (i) has
any outstanding Indebtedness (as defined below), (ii) is in violation of any
term of or is in default under any contract, agreement or instrument relating to
any Indebtedness, except where such violations and defaults would not result,
individually or in the aggregate, in a Material Adverse Effect, and (iii) is a
party to any contract, agreement or instrument relating to any Indebtedness, the
performance of which, in the judgment of the Company's officers, has or is
expected to have a Material Adverse Effect. For purposes
of this Agreement: (x) “Indebtedness” of any Person means, without
duplication (A) all indebtedness for borrowed money, (B) all obligations
issued, undertaken or assumed as the deferred purchase price of property or
services (other than trade payables entered into in the ordinary course of
business), (C) all reimbursement or payment obligations with respect to letters
of credit, surety bonds and other similar instruments, (D) all obligations
evidenced by notes, bonds, debentures or similar instruments, including
obligations so evidenced incurred in connection with the acquisition of
property, assets or businesses, (E) all indebtedness created or arising under
any conditional sale or other title retention agreement, or incurred as
financing, in either case with respect to any property or assets acquired with
the proceeds of such indebtedness (even though the rights and remedies of the
seller or bank under such agreement in the event of default are limited to
repossession or sale of such property), (F) all monetary obligations under any
leasing or similar arrangement which, in connection with generally accepted
accounting principles, consistently applied for the periods covered thereby, is
classified as a capital lease, (G) all indebtedness referred to in clauses
(A) through (F) above secured by (or for which the holder of such Indebtedness
has an existing right, contingent or otherwise, to be secured by) any mortgage,
lien, pledge, charge, security interest or other encumbrance upon or in any
property or assets (including accounts and contract rights) owned by any Person,
even though the Person which owns such assets or property has not assumed or
become liable for the payment of such indebtedness, and (H) all Contingent
Obligations in respect of indebtedness or obligations of others of the kinds
referred to in clauses (A) through (G) above; (y) “Contingent Obligation” means,
as to any Person, any direct or indirect liability, contingent or otherwise, of
that Person with respect to any indebtedness, lease, dividend or other
obligation of another Person if the primary purpose or intent of the Person
incurring such liability, or the primary effect thereof, is to provide assurance
to the obligee of such liability that such liability will be paid or discharged,
or that any agreements relating thereto will be complied with, or that the
holders of such liability will be protected (in whole or in part) against loss
with respect thereto; and (z) “Person” means an individual,
a limited liability company, a partnership, a joint venture, a corporation, a
trust, an unincorporated organization, a government or any department or agency
thereof and any other legal entity.
(aa)
Employee
Relations. Neither the Company nor any Subsidiary is a party
to any collective bargaining agreement or employs any member of a
union. The Company believes that its relations with its employees as
disclosed in the SEC Reports. Except as disclosed in the SEC Reports,
during the period covered by the SEC Reports, no executive officer of the
Company or any Subsidiary has notified the Company or any Subsidiary that such
officer intends to leave the Company or a Subsidiary, as applicable, or
otherwise terminate such officer's employment with the Company or a Subsidiary,
as applicable. To the knowledge of the Company or any Subsidiary, no
executive officer of the Company or any Subsidiary is in violation of any
material term of any employment contract, confidentiality, disclosure or
proprietary information agreement, non-competition agreement, or any other
contract or agreement or any restrictive covenant, and the continued employment
of each such executive officer does not subject the Company or any Subsidiary to
any liability with respect to any of the foregoing matters.
-14-
(bb) Labor
Matters. The Company and each Subsidiary is in compliance in all
material respects with all federal, state, local and foreign laws and
regulations respecting labor, employment and employment practices and benefits,
terms and conditions of employment and wages and hours, except where failure to
be in compliance would not, either individually or in the aggregate, reasonably
be expected to result in a Material Adverse Effect.
(cc) Environmental
Laws. The Company and each Subsidiary (i) is in compliance in
all material respects with any and all Environmental Laws (as hereinafter
defined), (ii) has received all permits, licenses or other approvals
required of them under applicable Environmental Laws to conduct their respective
businesses and (iii) is in compliance in all material respects with all terms
and conditions of any such permit, license or approval where, in each of the
foregoing clauses (i), (ii) and (iii), the failure to so comply would be
reasonably expected to have, individually or in the aggregate, a Material
Adverse Effect. The term “Environmental Laws” means all
federal, state, local or foreign laws relating to pollution or protection of
human health or the environment (including, without limitation, ambient air,
surface water, groundwater, land surface or subsurface strata), including,
without limitation, laws relating to emissions, discharges, releases or
threatened releases of chemicals, pollutants, contaminants, or toxic or
hazardous substances or wastes (collectively, “Hazardous Materials”) into
the environment, or otherwise relating to the manufacture, processing,
distribution, use, treatment, storage, disposal, transport or handling of
Hazardous Materials, as well as all authorizations, codes, decrees, demands or
demand letters, injunctions, judgments, licenses, notices or notice letters,
orders, permits, plans or regulations issued, entered, promulgated or approved
thereunder.
(dd) Subsidiary
Rights. The Company or one of its Subsidiaries has the
unrestricted right to vote, and (subject to limitations imposed by applicable
law) to receive dividends and distributions on, all capital securities of its
Subsidiaries as owned by the Company or such Subsidiary.
(ee) Tax
Status. The Company and each Subsidiary (i) has made or filed
all foreign, federal and state income and all other tax returns, reports and
declarations required by any jurisdiction to which it is subject, (ii) has paid
all taxes and other governmental assessments and charges that are material in
amount, shown or determined to be due on such returns, reports and declarations,
except those being contested in good faith and (iii) has set aside on its books
provision reasonably adequate for the payment of all taxes for periods
subsequent to the periods to which such returns, reports or declarations
apply. There are no unpaid taxes in any material amount claimed to be
due by the taxing authority of any jurisdiction, and the officers of the Company
know of no basis for any such claim.
-15-
(ff) Manipulation of
Price. The Company has not, and to its knowledge no one acting on its
behalf has, (i) taken, directly or indirectly, any action designed to cause or
to result in the stabilization or manipulation of the price of any security of
the Company to facilitate the sale or resale of any of the Securities, (ii)
other than the Agent, sold, bid for, purchased, or paid any compensation for
soliciting purchases of, any of the Securities, or (iii) other than the Agent,
paid or agreed to pay to any person any compensation for soliciting another to
purchase any other securities of the Company..
3.2 Representations and
Warranties of the Investor. The Investor hereby represents and
warrants to the Company as follows:
(a) Organization;
Authority. The Investor is an entity duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
organization with the requisite corporate, partnership or other power and
authority to enter into and to consummate the transactions contemplated by the
Transaction Documents and otherwise to carry out its obligations hereunder and
thereunder. The purchase by the Investor of the Securities hereunder
has been duly authorized by all necessary corporate, partnership or other action
on the part of the Investor. This Agreement has been duly executed
and delivered by the Investor and constitutes the valid and binding obligation
of the Investor, enforceable against it in accordance with its terms, except (i)
as limited by general equitable principles and applicable bankruptcy,
insolvency, reorganization, moratorium and other laws of general application
affecting enforcement of creditors’ rights generally, (ii) as limited by laws
relating to the availability of specific performance, injunctive relief or other
equitable remedies and (iii) insofar as indemnification and contribution
provisions may be limited by applicable law.
(b) No Public Sale or
Distribution. The Investor is (i) acquiring the Shares in the
ordinary course of business for its own account and not with a view towards, or
for resale in connection with, the public sale or distribution thereof, except
pursuant to sales registered under the Securities Act or under an exemption from
such registration and in compliance with applicable federal and state securities
laws, and the Investor does not have a present arrangement to effect any
distribution of the Securities to or through any person or entity; provided, however, that by
making the representations herein, the Investor does not agree to hold any of
the Securities for any minimum or other specific term and reserves the right to
dispose of the Securities at any time in accordance with or pursuant to a
registration statement or an exemption under the Securities Act.
(c) Investor
Status. At the time the Investor was offered the Securities,
it was, at the date hereof it is an “accredited investor” as defined in Rule
501(a) under the Securities Act or a “qualified institutional buyer” as defined
in Rule 144A(a) under the Securities Act. The Investor is not a
registered broker dealer registered under Section 15(a) of the Exchange Act, or
a member of the Financial Industry Regulatory Authority (“FINRA”), Inc. or an entity
engaged in the business of being a broker dealer. Except as otherwise
disclosed in writing to the Company on Exhibit B-2 (attached
hereto) on or prior to the date of this Agreement, the Investor is not
affiliated with any broker dealer registered under Section 15(a) of the Exchange
Act, or a member of FINRA. or an entity engaged in the business of being a
broker dealer.
-16-
(d) General
Solicitation. The Investor is not purchasing the Securities as
a result of any advertisement, article, notice or other communication regarding
the Securities published in any newspaper, magazine or similar media, broadcast
over television or radio, disseminated over the Internet or presented at any
seminar or any other general solicitation or general advertisement.
(e) Experience of the
Investor. The Investor, either alone or together with its
representatives has such knowledge, sophistication and experience in business
and financial matters so as to be capable of evaluating the merits and risks of
the prospective investment in the Securities, and has so evaluated the merits
and risks of such investment. The Investor understands that it must
bear the economic risk of this investment in the Securities indefinitely, and is
able to bear such risk and is able to afford a complete loss of such
investment.
(f) Access to
Information. The Investor acknowledges that it has reviewed
the Disclosure Materials and has been afforded: (i) the
opportunity to ask such questions as it has deemed necessary of, and to receive
answers from, representatives of the Company concerning the terms and conditions
of the offering of the Securities and the merits and risks of investing in the
Securities; (ii) access to information about the Company and each
Subsidiary and their respective financial condition, results of operations,
business, properties, management and prospects sufficient to enable it to
evaluate its investment; and (iii) the opportunity to obtain such additional
information that the Company possesses or can acquire without unreasonable
effort or expense that is necessary to make an informed investment decision with
respect to the investment. Neither such inquiries nor any other
investigation conducted by or on behalf of the Investor or its representatives
or counsel shall modify, amend or affect the Investor’s right to rely on the
truth, accuracy and completeness of the Disclosure Materials and the Company’s
representations and warranties contained in the Transaction
Documents. The Investor acknowledges receipt of copies of the SEC
Reports.
(g) No Governmental
Review. The Investor understands that no United States federal
or state agency or any other government or governmental agency has passed on or
made any recommendation or endorsement of the Securities or the fairness or
suitability of the investment in the Securities nor have such authorities passed
upon or endorsed the merits of the offering of the Securities.
(h) Restricted
Securities. The Investor understands that the Securities are
characterized as “restricted securities” under the U.S. federal securities laws
inasmuch as they are being acquired from the Company in a transaction not
involving a public offering and that under such laws and applicable regulations
such securities may be resold without registration under the Securities Act only
in certain limited circumstances.
(i)
Legends. It is
understood that, except as provided in Section 4.1(b) of
this Agreement, certificates evidencing such Securities may bear the legend set
forth in Section
4.1(b).
-17-
ARTICLE
IV
OTHER
AGREEMENTS OF THE PARTIES
4.1 Transfer
Restrictions.
(a) The
Investor covenants that the Securities will only be disposed of pursuant to an
effective registration statement under, and in compliance with the requirements
of, the Securities Act or pursuant to an available exemption from the
registration requirements of the Securities Act, and in compliance with any
applicable state securities laws. In connection with any transfer of
Securities other than pursuant to an effective registration statement or to the
Company, or pursuant to Rule 144, the Company may require the transferor to
provide to the Company an opinion of counsel selected by the transferor, the
form and substance of which opinion shall be reasonably satisfactory to the
Company, to the effect that such transfer does not require registration under
the Securities Act. Notwithstanding the foregoing, the Company hereby
consents to and agrees to register on the books of the Company and with its
Transfer Agent, without any such legal opinion, except to the extent that the
transfer agent requests such legal opinion, any transfer of Securities by an
Investor to an Affiliate of the Investor, provided that the transferee certifies
to the Company that it is an “accredited investor” as defined in Rule 501(a)
under the Securities Act and provided that such Affiliate does not request any
removal of any existing legends on any certificate evidencing the
Securities.
(b) The
Investor agrees to the imprinting, until no longer required by this Section 4.1(b),
of the following legend on any certificate evidencing any of the
Securities:
THESE
SECURITIES HAVE NOT BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION
OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM
REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), OR ANY
APPLICABLE STATE SECURITIES LAWS AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD
EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT
OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO,
THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN COMPLIANCE WITH
APPLICABLE STATE SECURITIES LAWS OR BLUE SKY LAWS. THESE SECURITIES
MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT WITH A REGISTERED
BROKER-DEALER OR OTHER LOAN WITH A FINANCIAL INSTITUTION THAT IS AN “ACCREDITED
INVESTOR” AS DEFINED IN RULE 501(a) UNDER THE SECURITIES ACT OR OTHER LOAN
SECURED BY SUCH SECURITIES.
-18-
Certificates
evidencing the Shares shall not be required to contain such legend or any other
legend (i) while a registration statement (including the Registration Statement)
covering the resale of the Shares is effective under the Securities Act, (ii)
following any sale of such Securities pursuant to Rule 144 if the holder
provides the Company with a legal opinion (and the documents upon which the
legal opinion is based) reasonably acceptable to the Company to the effect that
the Securities can be sold under Rule 144, (iii) if the Securities are eligible
for sale under Rule 144 without any volume limitation, or (iv) if the holder
provides the Company with a legal opinion (and the documents upon which the
legal opinion is based) reasonably acceptable to the Company to the effect that
the legend is not required under applicable requirements of the Securities Act
(including controlling judicial interpretations and pronouncements issued by the
Staff of the SEC). The Company shall cause its counsel to issue the
legal opinion included in the Transfer Agent Instructions to the Transfer Agent
on the Effective Date, or, if no Registration Statement is filed or available,
then at such time as the Shares are freely tradable pursuant to Rule 144 without
volume limitations. Following the Effective Date and provided
the registration statement referred to in clause (i) above is then in effect, or
at such earlier time as a legend is no longer required for certain Securities,
the Company will no later than three Trading Days following the delivery by an
Investor to the Company or the Transfer Agent (if delivery is made to the
Transfer Agent a copy shall be contemporaneously delivered to the Company) of
(i) a legended certificate representing such Securities (and, in the case of a
requested transfer, endorsed or with stock powers attached, signatures
guaranteed, and otherwise in form necessary to affect transfer), and (ii) an
opinion of counsel to the extent required by Section 4.1(a),
deliver or cause to be delivered to the Investor a certificate representing such
Securities that is free from all restrictive and other legends. The
Company may not make any notation on its records or give instructions to the
Transfer Agent that enlarge the restrictions on transfer set forth in this
Section.
If within
three Trading Days after receipt by the Company or its Transfer Agent of a
legended certificate and the other documents as specified in Clauses (i) and
(ii) of the paragraph immediately above, the Company shall fail to cause to be
issued and delivered to the Investor a certificate representing such Securities
that is free from all restrictive and other legends, and if on or after such
Trading Day the Investor purchases (in an open market transaction or otherwise)
shares of Common Stock to deliver in satisfaction of a sale by the Investor of
shares of Common Stock that the Investor anticipated receiving from the Company
without any restrictive legend (the “Covering Shares”), then the
Company shall, within three Trading Days after the Investor’s request, pay cash
to the Investor in an amount equal to the excess (if any) of the Investor’s
total purchase price (including brokerage commissions, if any) for the Covering
Shares, over the product of (A) the number of Covering Shares, times (B) the
closing bid price on the date of delivery of such certificate and the other
documents as specified in Clauses (i) and (ii) of the paragraph immediately
above.
(c) The
Company will not object to and shall permit (except as prohibited by law) an
Investor to pledge or grant a security interest in some or all of the Securities
in connection with a bona fide margin agreement with a registered broker-dealer
or grant a security interest in some or all of the Securities to a financial
institution that is an “accredited investor” as defined in Rule 501(a) under the
Securities Act and who agrees to be bound by the provisions of this Agreement,
and if required under the terms of such arrangement, the Company will not object
to and shall permit (except as prohibited by law) the Investor to transfer
pledged or secured Securities to the pledgees or secured
parties. Except as required by law, such a pledge or transfer would
not be subject to approval of the Company, no legal opinion of the pledgee,
secured party or pledgor shall be required in connection therewith (but such
legal opinion shall be required in connection with a subsequent transfer or
foreclosure following default by the Purchaser transferee of the pledge), and no
notice shall be required of such pledge. The Investor acknowledges
that the Company shall not be responsible for any pledges relating to, or the
grant of any security interest in, any of the Securities or for any agreement,
understanding or arrangement between the Investor and its pledgee or secured
party. At the appropriate Investor's expense, the Company will
execute and deliver such reasonable documentation as a pledgee or secured party
of Securities may reasonably request in connection with a pledge or transfer of
the Securities, including the preparation and filing of any required prospectus
supplement under Rule 424(b)(3) of the Securities Act or other applicable
provision of the Securities Act to appropriately amend the list of Selling
Stockholders thereunder. Provided that the Company is in compliance with the
terms of this Section
4.1(c), the Company’s indemnification obligations pursuant to Section 6.4 shall not
extend to any Proceeding or Losses arising out of or related to this Section
4.1(c).
-19-
4.2 Furnishing of
Information. Until the date that the Investor owning Shares
may sell all of them under Rule 144 (without volume limitations) of the
Securities Act (or any successor provision), the Company covenants to use its
commercially reasonable efforts to timely file (or obtain extensions in respect
thereof and file within the applicable grace period) all reports required to be
filed by the Company after the date hereof pursuant to the Exchange Act; and the
Company further agrees to send the following to the Investor (i) unless the
following are filed with the SEC through XXXXX and are available to the public
through the XXXXX system, within one (1) Business Day after the filing thereof
with the SEC, a copy of its annual reports and quarterly reports on Form 10-K or
10-Q, any interim reports or any consolidated balance sheets, income statements,
stockholders’ equity statements and/or cash flow statements for any period other
than annual, any current reports on Form 8-K and any registration statements
(other than on Form S-8) or amendments filed pursuant to the 1933 Act, (ii) on
the same day as the release thereof, facsimile or e-mailed copies of all press
releases issued by the Company or any of its Subsidiaries, and (iii) copies of
any notices and other information made available or given to the stockholders of
the Company generally, contemporaneously with the making available or giving
thereof to the stockholders. The Company further covenants that it
will take such further action as any holder of Securities may reasonably request
to satisfy the provisions of this Section
4.2.
4.3 Integration. The
Company shall not, and shall use its commercially reasonable efforts to ensure
that no Affiliate thereof shall, sell, offer for sale or solicit offers to buy
or otherwise negotiate in respect of any security (as defined in Section 2
of the Securities Act) that would be integrated with the offer or sale of the
Securities in a manner that would require the registration under the Securities
Act of the sale of the Securities to the Investor or that would be integrated
with the offer or sale of the Securities for purposes of the rules and
regulations of any Trading Market.
4.4 Securities Laws Disclosure;
Publicity. The Company shall, at or before 9:00 a.m., New York
time, on the first Trading Day following execution of this Agreement, issue a
press release disclosing all material terms of the transactions contemplated
hereby. On the Closing Date, the Company shall file a Current Report
on Form 8-K with the SEC (the “8-K Filing”) describing the
terms of the transactions contemplated by the Transaction Documents and
including as exhibits to such Current Report on Form 8-K the Transaction
Documents in the form required by the Exchange Act. Thereafter, the
Company shall timely file any filings and notices required by the SEC or
applicable law with respect to the transactions contemplated hereby and provide
copies thereof to the Investor promptly after filing. Except as
herein provided, neither the Company nor any Subsidiary shall publicly disclose
the name of the Investor, or include the name of the Investor in any press
release without the prior written consent of the Investor (which consent shall
not be unreasonably withheld or delayed), unless otherwise required by law,
regulatory authority or Trading Market. Neither the Company nor any
Subsidiary shall, and shall cause each of their respective officers, directors,
employees and agents not to, provide the Investor with any material nonpublic
information regarding the Company or any Subsidiary from and after the issuance
of the above referenced press release without the express written consent of the
Investor.
-20-
4.5 Use of
Proceeds. The Company intends to use the net proceeds from the
sale of the Securities for working capital, payment of outstanding institutional
indebtedness and general corporate purposes. The Company also may use
a portion of the net proceeds, currently intended for general corporate
purposes, to acquire or invest in technologies, products or services that
complement its business. Pending these uses, the Company intends to
invest the net proceeds from this offering in short-term, interest-bearing,
investment-grade securities, or as otherwise pursuant to the Company's customary
investment policies.
4.6 Directors and Officers
Insurance. The Company agrees to promptly obtain, from
financially sound and reputable insurers, directors and officers liability
insurance with coverage customary for companies similarly situated to the
Company, which shall include coverage for and reasonably satisfactory to the
Kinderhook Director upon election of him or her to the board of
directors. The Company will cause to be maintained the directors and
officers liability insurance required by this Section 4.6 so long
as the Kinderhook Director or his or her successor or replacement shall serve as
a member of the board of Directors pursuant to the terms of the Stockholders
Agreement.
4.7 Kinderhook
Director/Observer.
(a) Election of
Director. Upon the request of Kinderhook at any time after the
Closing and prior to the earliest of (i) the fourth (4th)
anniversary of the date of this Agreement and (b) such time as Kinderhook shall
no longer hold at least seventy-five percent (75%) of the Kinderhook Shares
during the term of this Agreement (the “Director Period”), the Company
agrees to take all action necessary or desirable (including, without limitation,
calling a meeting of the Company’s stockholders and preparing and filing a Proxy
Statement with the SEC), subject to the exercise by the Board of Directors of
its fiduciary duties, to ensure that a director selected at Kinderhook’s sole
discretion and request be elected to the Company’s board of directors (the
“Kinderhook
Director”). Such Kinderhook Director shall be an additional
director to be added as a member of the board of directors as such board is then
currently constituted. It is understood and agreed that the initial
Kinderhook Director may be Xxxxxx Xxxx. Notwithstanding the
foregoing, Kinderhook may terminate its rights under this Section 4.7 in its
discretion at any time upon notice to the Company.
(b) Removal. The
Company shall not take any action to remove the Kinderhook Director, other than
for Cause (as defined below). “Cause” shall mean the Kinderhook
Director’s conviction of, or plea of nolo contendere, to a felony or crime
involving moral turpitude, (ii) if it is finally judicially determined by a
court of competent jurisdiction that the Kinderhook Director has violated his
fiduciary duties to the Company in any material respect, or (iii) if the person
serving as the Kinderhook Director would cause the Company to be in violation of
any law or regulation material to the Company. In any such situation,
Kinderhook will be entitled to select another person to be elected or appointed
to the Company’s Board of Directors in accordance with the terms of this
Agreement and the Stockholders Agreement.
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(c) Vacancy. The
Company agrees to take such action as shall be reasonably necessary from time to
time to ensure that in the event that a Kinderhook Director, for any reason,
shall cease to serve as a member of the Board of Directors during his or her
term in office, the resulting vacancy on the Board of Directors shall be filled
in accordance with this Section 4.7 and the
Stockholders Agreement.
(d) Further
Action. The Company agrees to take such further actions as
shall be reasonably necessary to carry out the intent of this Section 4.7 and the
Stockholders Agreement, including, without limitation, promptly entering into
the Indemnification Agreement upon appointment of the Kinderhook
Director.
(e) Observer
Rights.
(i)
At the request of Kinderhook, at any time during the Director Period that there
is not a Kinderhook Director then serving on the Board of Directors of the
Company, the Company shall invite a representative of Kinderhook to attend all
meetings of its Board of Directors in a nonvoting observer capacity and, in this
respect, shall give such representative copies of all notices, minutes,
consents, and other materials that it provides to its directors at the same time
and in the same manner as provided to such directors; provided, however, that such
representative shall agree to hold in confidence all information so
provided.
(ii)
Confidentiality. Kinderhook
agrees that it will keep confidential and will not disclose, divulge, or use for
any purpose (other than to monitor Kinderhook’s investment in the Company) any
confidential information obtained from the Company pursuant to the terms of this
Agreement (including notice of the Company’s intention to file a registration
statement), unless such confidential information (A) is known or becomes known
to the public in general (other than as a result of a breach of this Section 4.7(e)(ii) by
Kinderhook), (B) is or has been independently developed or conceived by the
Kinderhook without use of the Company’s confidential information, or (C) is or
has been made known or disclosed to Kinderhook by a third party without a breach
of any obligation of confidentiality such third party may have to the Company;
provided, however, that
Kinderhook may disclose confidential information (w) to its attorneys,
accountants, consultants, and other professionals to the extent necessary to
obtain their services in connection with monitoring its investment in the
Company; (x) to any prospective purchaser of any Shares from Kinderhook, if such
prospective purchaser agrees to be bound by the provisions of this Section 4.7(e)(ii);
(y) to any affiliate, limited or general partner or any investor or partner of
such limited or general partner, member, shareholder, or wholly owned subsidiary
of Kinderhook in the ordinary course of business, provided that Kinderhook
informs such Person (“Person” is defined to mean any
individual, corporation, partnership, trust, limited liability company,
association or other entity.) that such information is confidential and directs
such Person to maintain the confidentiality of such information; or (z) as may otherwise be
required by law or regulation. The Company acknowledges that
Kinderhook is in the business of venture capital and other investing activities
and therefore review the business plans and related proprietary information of
many enterprises, including enterprises that may have products or services that
compete directly or indirectly with those of the Company. Subject to
the obligations of confidentiality set forth in this Section 4.7 and the
Kinderhook Director’s fiduciary duties of care and loyalty as a director of the
Company, nothing in this Agreement shall preclude or in any way restrict
Kinderhook from investing or participating in any particular enterprise,
regardless of whether such enterprise has products or services that compete with
those of the Company.
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(f) Expenses of Kinderhook
Director and Observer. The Company shall promptly reimburse
the Kinderhook Director and the observer for all of his or her reasonable
out-of-pocket expenses, including without limitation the cost of non-stop
commercial flights, incurred in attending each meeting of the Company's Board of
Directors or any committee thereof.
(g) Directors and Officers
Insurance. Upon appointment of the Kinderhook Director, the
Company shall promptly obtain, from financially sound and reputable
insurers, directors and officers liability insurance with coverage customary for
companies similarly situated to the Company. The Company will cause
to be maintained the directors and officers liability insurance required by this
Section 4.7 so
long as the Kinderhook Director shall remain on the board of directors and the
Stockholder Agreement remains effective.
4.8
Rights to Future
Stock Issuances. Subject to the terms and conditions of this Section 4.8 and
applicable securities laws, if the Company proposes to offer or sell any equity
securities of the Company, whether or not currently authorized, as well as
rights, options or warrants to purchase such equity securities, or securities of
any type whatsoever that are, or may become, convertible or exchangeable into or
exercisable for such equity securities (collectively, “New Securities), other than
any offering of New Securities in a firm commitment underwriting, then the
Company shall first offer such New Securities to
Kinderhook. Kinderhook shall be entitled to apportion the right of
first offer hereby granted to it among itself and its Affiliates in such
proportions as it deems appropriate.
(a) The
Company shall give notice (the “Offer Notice”) to Kinderhook,
stating (i) its bona fide intention to offer such New Securities, (ii) the
number of such New Securities to be offered, and (iii) the price and terms, if
any, upon which it proposes to offer such New Securities.
(b) By
notification to the Company within twenty (20) days after the Offer Notice is
given, Kinderhook may elect to purchase or otherwise acquire, at the price and
on the terms specified in the Offer Notice, up to that portion of such New
Securities which equals the proportion that the Common Stock issued and held by
Kinderhook bears to the total Common Stock of the Company then outstanding.
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(c) If
the Company does not enter into an agreement for the sale of the New Securities
within such period, or if such agreement is not consummated within thirty (30)
days of the execution thereof, the right provided hereunder shall be deemed to
be revived and such New Securities shall not be offered unless first reoffered
to Kinderhook in accordance with this Section
4.8. If all New Securities referred to in the Offer Notice are
not elected to be purchased or acquired as provided in Section 4.8, the
Company may, during the ninety (90) day period following the expiration of the
periods provided in Section 6.1(b), offer
and sell the remaining unsubscribed portion of such New Securities to any Person
or Persons at a price not less than, and upon terms no more favorable to the
offeree than, those specified in the Offer Notice. If the Company
does not enter into an agreement for the sale of the New Securities within
ninety (90) days following the expiration of the period provided in Section 4.8(c), or if
such agreement is not consummated within thirty (30) days of the execution
thereof, the right provided hereunder shall be deemed to be revived and such New
Securities shall not be offered unless first reoffered to Kinderhook in
accordance with this Section
4.8.
(d) The
right of first offer in this Section 4.8 shall not
be applicable to (i) shares of Common Stock issuable or issued to employees,
consultants or directors of the Company pursuant to a stock option plan or
restricted stock plan approved by the Board of Directors of the Company, (ii)
Common Stock, or options or warrants to purchase Common Stock, issued to
vendors, suppliers, financial institutions or lessors in connection with
commercial credit arrangements, commercial property transactions, equipment
financings, leases or similar transactions approved by the Board of Directors of
the Company, (iii) shares of Common Stock or preferred stock issuable upon
exercise of options or convertible securities outstanding as of the date of this
Agreement, and (iv) Common Stock, or options or warrants to purchase Common
Stock issued in connection with bona fide acquisitions, mergers or similar
transactions, the terms of which are approved by the Board of Directors of the
Company.
(e) Notwithstanding
any provision hereof to the contrary, in lieu of complying with the provisions
of this Section
4.8, the Company may elect to give notice to Kinderhook within thirty
(30) days after the issuance of New Securities. Such notice shall
describe the type, price and terms of the New Securities. Kinderhook
shall have twenty (20) days from the date notice is given to elect to purchase
on the same price and terms up to the number of New Securities that would, if
purchased by such Kinderhook, maintain such Kinderhook’s percentage-ownership
position, calculated as set forth in Section 4.8(b) before
giving effect to the issuance of such New Securities. The closing of such sale
shall occur within sixty (60) days of the date notice is given to the
Kinderhook.
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ARTICLE
V
CONDITIONS
5.1 Conditions Precedent to the
Obligations of the Investor. The obligation of the Investor to
acquire Securities at the Closing is subject to the satisfaction or waiver by
the Investor, at or before the Closing, of each of the following
conditions:
(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 Investor shall have performed, satisfied and complied in
all material respects with all covenants, agreements and conditions required by
the Transaction Documents to be performed, satisfied or complied with by it at
or prior to the Closing.
(c) No Suspensions of Trading in
Common Stock; Listing. Trading in the Common Stock shall not have been
suspended by the SEC or any Trading Market (except for any suspensions of
trading of not more than one Trading Day solely to permit dissemination of
material information regarding the Company) at any time since the date of
execution of this Agreement, and the Common Stock shall have been at all times
since such date listed for trading on a Trading Market.
(d) Absence of
Litigation. No action, suit or proceeding by or before any court or any
governmental body or authority, against the Company or any Subsidiary or
pertaining to the transactions contemplated by this Agreement or their
consummation, shall have been instituted on or before the Closing Date, which
action, suit or proceeding would, if determined adversely, have a Material
Adverse Effect.
(e) Third Party
Consents. The Company shall have received all consents from
third parties necessary to consummate the transactions contemplated by this
Agreement and the Stockholders Agreement, including, without limitation, the
consent of Millennium Partners, L.P.
(f) Stockholders Agreement. The
Company shall have delivered to the Investor a fully-executed copy of the
Stockholders Agreement.
(g) Opinion. Counsel
to the Company shall have delivered an opinion to the Investor in substantially
the form annexed hereto as Exhibit
C.
5.2 Conditions Precedent to the
Obligations of the Company. The obligation of the Company to
sell the Securities at the Closing is subject to the satisfaction or waiver by
the Company, at or before the Closing, of each of the following
conditions:
(a) Representations and
Warranties. The representations and warranties of the Investor
contained herein shall be true and correct in all material respects as of the
date when made and as of the Closing Date as though made on and as of such date;
and
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(b) Performance. The
Investor shall have performed, satisfied and complied in all material respects
with all covenants, agreements and conditions required by the Transaction
Documents to be performed, satisfied or complied with by the Investor at or
prior to the Closing.
ARTICLE
VI
REGISTRATION
RIGHTS
6.1 Registration
Statement.
(a) As
promptly as possible following receipt by the Company of a notice of the
Investor’s demand registration request (the “Demand Registration Notice”),
but no later than thirty (30) days thereafter, the Company shall prepare and
file with the SEC a Registration Statement covering the resale of all
Registrable Securities, or the maximum amount thereof as shall comply with
applicable SEC rules as then in effect, for an offering to be made on a
continuous basis pursuant to Rule 415. The Registration Statement
shall be on Form S-3 (except if the Company is not then eligible to register for
resale the Registrable Securities on Form S-3, in which case such registration
shall be on another appropriate form in accordance with the Securities Act and
the Exchange Act) and shall contain (except if otherwise directed by the
Investor or requested by the SEC) the “Plan of Distribution” in substantially
the form attached hereto as Exhibit
D.
(b) The
Company shall use its commercially reasonable efforts to cause the Registration
Statement to be declared effective by the SEC as promptly as possible after the
filing thereof, but in any event prior to the Required Effectiveness Date, and
shall use its commercially reasonable efforts to keep the Registration Statement
continuously effective under the Securities Act until the earlier of the date
that all Shares covered by such Registration Statement have been sold or can be
sold publicly without any volume limitations under Rule 144 (the “Effectiveness Period”);
provided that, upon notification by the SEC that a Registration Statement will
not be reviewed or is no longer subject to further review and comments, the
Company shall request acceleration of such Registration Statement within
five (5) Trading Days after receipt of such notice and request that it
become effective on 4:00 p.m. New York City time on the Effective Date and file
a prospectus supplement for any Registration Statement, whether or not required
under Rule 424 (or otherwise), by 9:00 a.m. New York City time the day after the
Effective Date.
(c) The
Company shall notify the Investor in writing promptly (and in any event within
two Trading Days) after receiving notification from the SEC that the
Registration Statement has been declared effective.
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(d) Notwithstanding
anything in this Agreement to the contrary, after sixty (60) consecutive Trading
Days of continuous effectiveness of the initial Registration Statement filed and
declared effective pursuant to this Agreement, the Company may, by written
notice to the Investor, suspend sales under a Registration Statement after the
Effective Date thereof and/or require that the Investor immediately cease the
sale of shares of Common Stock pursuant thereto and/or defer the filing of any
subsequent Registration Statement if the Company is engaged in a material
merger, acquisition or sale and the Board of Directors determines in good faith,
by appropriate resolutions, that, as a result of such activity, (A) it
would be materially detrimental to the Company (other than as relating solely to
the price of the Common Stock) to maintain a Registration Statement
at such time or (B) it is in the best interests of the Company to suspend
sales under such registration at such time. Upon receipt of such
notice, the Investor shall immediately discontinue any sales of Registrable
Securities pursuant to such registration until the Investor is advised in
writing by the Company that the current Prospectus or amended Prospectus, as
applicable, may be used. In no event, however, shall this right be
exercised to suspend sales beyond the period during which (in the good faith
determination of the Company’s Board of Directors) the failure to require such
suspension would be materially detrimental to the Company. The
Company’s rights under this Section 6(d) may be
exercised for a period of no more than twenty (20) Trading Days at a time and
not more than three times in any twelve-month period, without such suspension
being considered as part of an Event Payment
determination. Immediately after the end of any suspension period
under this Section
6(d), the Company shall take all necessary actions (including filing any
required supplemental prospectus) to restore the effectiveness of the applicable
Registration Statement and the ability of the Investor to publicly resell their
Registrable Securities pursuant to such effective Registration
Statement.
(e) The
Company shall not, from the date hereof until the Effective Date of the
Registration Statement, prepare and file with the SEC a registration statement
relating to an offering for its own account (a “Primary Registration”) or
the account of others under the Securities Act of any of its equity securities,
other than (i) pursuant to
the Registration Rights Agreement, dated May 22, 2008, between the Company and
Millennium Partners, L.P., as amended to the date hereof (the “Millennium
Registration Agreement”), (ii) any registration statement or post-effective
amendment to a registration statement (or supplement thereto) relating to the
Company’s employee benefit plans registered on Form S-8 and (iii) a Primary
Registration, in which the Investor can include Registrable Securities for
resale in accordance with Section 6.7 of this
Agreement.
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, furnish via email
to the Investor who has supplied the Company with email addresses copies of all
such documents proposed to be filed, which documents (other than any document
that is incorporated or deemed to be incorporated by reference therein) will be
subject to the review of the Investor. The Company shall reflect in
each such document when so filed with the SEC such comments regarding the
Investor and the plan of distribution as the Investor may reasonably and
promptly propose no later than two Trading Days after the Investor has been so
furnished with copies of such documents as aforesaid.
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(b) (i) Subject
to Section
6.1(e), prepare and file with the SEC such amendments, including
post-effective amendments, to each Registration Statement and the Prospectus
used in connection therewith as may be necessary to keep the Registration
Statement continuously effective, as to the applicable Registrable Securities
for the Effectiveness Period and prepare and file with the SEC such additional
Registration Statements in order to register for resale under the Securities Act
all of the Registrable Securities; (ii) cause the related Prospectus to be
amended or supplemented by any required Prospectus supplement, and as so
supplemented or amended to be filed pursuant to Rule 424; (iii) respond as
promptly as reasonably possible, and in any event within twelve (12) Trading
Days (except to the extent that the Company reasonably requires additional time
to respond to accounting comments), to any comments received from the SEC with
respect to the Registration Statement or any amendment thereto; and
(iv) comply in all material respects with the provisions of the Securities
Act and the Exchange Act with respect to the disposition of all Registrable
Securities covered by the Registration Statement during the applicable period in
accordance with the intended methods of disposition by the Investor thereof set
forth in the Registration Statement as so amended or in such Prospectus as so
supplemented.
(c) Notify
the Investor as promptly as reasonably possible, and (if requested by the
Investor confirm such notice in writing no later than two Trading Days
thereafter, of any of the following events: (i) the SEC notifies
the Company whether there will be a “review” of any Registration Statement;
(ii) the SEC comments in writing on any Registration Statement;
(iii) any Registration Statement or any post-effective amendment is
declared effective; (iv) the SEC or any other Federal or state governmental
authority requests any amendment or supplement to any Registration Statement or
Prospectus or requests additional information related thereto; (v) the SEC
issues any stop order suspending the effectiveness of any Registration Statement
or initiates any Proceedings for that purpose; (vi) the Company receives
notice of any suspension of the qualification or exemption from qualification of
any Registrable Securities for sale in any jurisdiction, or the initiation or
threat of any Proceeding for such purpose; or (vii) the financial
statements included in any Registration Statement become ineligible for
inclusion therein or any Registration Statement or Prospectus or other document
contains any untrue statement of a material fact or omits to state any material
fact required to be stated therein or necessary to make the statements therein,
in the light of the circumstances under which they were made, not
misleading.
(d) Use
its commercially reasonable efforts to avoid the issuance of or, if issued,
obtain the withdrawal of (i) any order suspending the effectiveness of any
Registration Statement, or (ii) any suspension of the qualification (or
exemption from qualification) of any of the Registrable Securities for sale in
any jurisdiction, as soon as possible.
(e) If
requested by an Investor, provide the Investor without charge, at least one
conformed copy of each Registration Statement and each amendment thereto,
including financial statements and schedules, and all exhibits to the extent
requested by such Person (including those previously furnished or incorporated
by reference) promptly after the filing of such documents with the
SEC.
(f) Promptly
deliver to the Investor, without charge, as many copies of the Prospectus or
Prospectuses (including each form of prospectus) and each amendment or
supplement thereto as such Persons may reasonably request. The Company hereby
consents to the use of such Prospectus and each amendment or supplement thereto
by the selling Investor in connection with the offering and sale of the
Registrable Securities covered by such Prospectus and any amendment or
supplement thereto to the extent permitted by federal and state securities laws
and regulations.
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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 Shares
to be approved for listing on each Trading Market as soon as possible
thereafter; (iii) provide to the Investor evidence of such listing; and
(iv) except as a result of the Excluded Events, during the Effectiveness
Period, maintain the listing of such Shares on each such Trading Market or
another Eligible Market.
(h) Prior
to any public offering of Registrable Securities, use its Best Efforts to
register or qualify or cooperate with the Investor in connection with the
registration or qualification (or exemption from such registration or
qualification) of such Registrable Securities for offer and sale under the
securities or Blue Sky laws of such jurisdictions within the United States as
the Investor requests in writing, to keep each such registration or
qualification (or exemption therefrom) effective for so long as required, but
not to exceed the duration of the Effectiveness Period, and to do any and all
other acts or things reasonably necessary or advisable to enable the disposition
in such jurisdictions of the Registrable Securities covered by a Registration
Statement; provided, however, that the
Company shall not be obligated to file any general consent to service of process
or to qualify as a foreign corporation or as a dealer in securities in any
jurisdiction in which it is not so qualified or to subject itself to taxation in
respect of doing business in any jurisdiction in which it is not otherwise so
subject.
(i) Cooperate
with the Investor to facilitate the timely preparation and delivery of
certificates representing Registrable Securities to be delivered to a transferee
pursuant to a Registration Statement, which certificates shall be free, to the
extent permitted by this Agreement and under law, of all restrictive legends,
and to enable such certificates to be in such denominations and registered in
such names as any the Investor may reasonably request.
(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 reasonable due diligence investigation undertaken by the Investor in
connection with the sale of Registrable Securities, including, without
limitation, by making available documents and information; provided that the
Company will not deliver or make available to the Investor material, nonpublic
information unless the Investor requests in advance in writing to receive
material, nonpublic information and agrees to keep such information
confidential.
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(l) Comply
with all rules and regulations of the SEC applicable to the registration of the
Securities.
(m) It
shall be a condition precedent to the obligations of the Company to complete the
registration pursuant to this Agreement with respect to the Registrable
Securities of the Investor or to make any Event Payments set forth in Section 6.1(c) to the
Investor that the Investor furnish to the Company the information specified in
Exhibits B-1 and B-2 hereto and such other information regarding itself, the
Registrable Securities and other shares of Common Stock held by it and the
intended method of disposition of the Registrable Securities held by it (if
different from the Plan of Distribution set forth on Exhibit D hereto) as
shall be reasonably required to effect the registration of such Registrable
Securities and shall complete and execute such documents in connection with such
registration as the Company may reasonably request.
(n) The
Company shall comply with all applicable rules and regulations of the SEC under
the Securities Act and the Exchange Act, including, without limitation, Rule 172
under the Securities Act, file any final Prospectus, including any supplement or
amendment thereof, with the SEC pursuant to Rule 424 under the Securities Act,
promptly inform the Investor in writing if, at any time during the Effectiveness
Period, the Company does not satisfy the conditions specified in Rule 172 and,
as a result thereof, the Investor is required to make available a Prospectus in
connection with any disposition of Registrable Securities and take such other
actions as may be reasonably necessary to facilitate the registration of the
Registrable Securities hereunder.
6.3 Registration
Expenses. The Company shall pay all fees and expenses incident
to the performance of or compliance with Article VI of this Agreement by
the Company, including without limitation (a) all registration and filing
fees and expenses, including without limitation those related to filings with
the SEC, any Trading Market and in connection with applicable state securities
or Blue Sky laws, (b) printing expenses (including without limitation
expenses of printing certificates for Registrable Securities),
(c) messenger, telephone and delivery expenses, (d) fees and
disbursements of counsel for the Company, (e) fees and expenses of all other
Persons retained by the Company in connection with the consummation of the
transactions contemplated by this Agreement, (f) the fees and expenses of
counsel to the Investor, not to exceed $25,000, and (g) all listing fees to
be paid by the Company to the Trading Market.
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6.4 Indemnification
(a) Indemnification by the
Company. The Company shall, notwithstanding any termination of
this Agreement, indemnify and hold harmless the Investor, the officers,
directors, partners, members, agents and employees of each of them, each Person
who controls the Investor (within the meaning of Section 15 of the
Securities Act or Section 20 of the Exchange Act) and the officers,
directors, partners, members, agents and employees of each such controlling
Person, to the fullest extent permitted by applicable law, from and against any
and all Losses, as incurred, arising out of or relating to (i) any
misrepresentation or breach of any representation or warranty made by the
Company in the Transaction Documents or any other certificate, instrument or
document contemplated hereby or thereby, (ii) any breach of any covenant,
agreement or obligation of the Company contained in the Transaction Documents or
any other certificate, instrument or document contemplated hereby or thereby,
(iii) any cause of action, suit or claim brought or made against such
Indemnified Party (as defined in Section 6.4(c) below)
by a third party (including for these purposes a derivative action brought on
behalf of the Company), arising out of or resulting from (x) the execution,
delivery, performance or enforcement of the Transaction Documents or any other
certificate, instrument or document contemplated hereby or thereby, (y) any
transaction financed or to be financed in whole or in part, directly or
indirectly, with the proceeds of the issuance of the Securities, or (z) the
status of Indemnified Party as holder of the Securities (unless, and only to the
extent that, such action, suit or claim is based, including in part, upon a
breach of the Investor’s representations, warranties or covenants under the
Transaction Documents or any conduct by the Investor that constitutes fraud,
gross negligence or willful misconduct) or (iv) any untrue or alleged untrue
statement of a material fact contained in the Registration Statement, any
Prospectus or any form of Company prospectus or in any amendment or supplement
thereto or in any Company preliminary prospectus, or arising out of or relating
to any omission or alleged omission of a material fact required to be stated
therein or necessary to make the statements therein (in the case of any
Prospectus or form of prospectus or supplement thereto, in the light of the
circumstances under which they were made) not misleading, except to the extent,
but only to the extent, that (A) such untrue statements, alleged untrue
statements, omissions or alleged omissions are based solely upon information
regarding the Investor furnished in writing to the Company by the
Investor for use therein, or to the extent that such information
relates to the Investor or the Investor's proposed method of distribution of
Registrable Securities and was reviewed and expressly approved by the Investor
in writing expressly for use in the Registration Statement, or (B) with respect
to any prospectus, if the untrue statement or omission of material fact
contained in such prospectus was corrected on a timely basis in the prospectus,
as then amended or supplemented, if such corrected prospectus was timely made
available by the Company to the Investor, and the Investor seeking indemnity
hereunder was advised in writing not to use the incorrect prospectus prior to
the use giving rise to Losses.
(b) Indemnification by
Investor. The Investor shall indemnify and hold harmless the
Company and its directors, officers, agents and employees to the fullest extent
permitted by applicable law, from and against all Losses (as determined by a
court of competent jurisdiction in a final judgment not subject to appeal or
review) arising solely out of any untrue statement of a material fact contained
in the Registration Statement, any Prospectus, or any form of prospectus, or in
any amendment or supplement thereto, or arising out of or relating to any
omission of a material fact required to be stated therein or necessary to make
the statements therein (in the case of any Prospectus or form of prospectus or
supplement thereto, in the light of the circumstances under which they were
made) not misleading, but only to the extent that (i) such untrue statements or
omissions are based solely upon information regarding the Investor furnished to
the Company by the Investor in writing expressly for use therein, or to the
extent that such information relates to the Investor or the Investor’s proposed
method of distribution of Registrable Securities and was reviewed and expressly
approved in writing by the Investor expressly for use in the Registration
Statement (it being understood that the information provided by the Investor to
the Company in Exhibits B-1 and B-2 and the Plan of
Distribution set forth on Exhibit D, as the
same may be modified by the Investor and other information provided by the
Investor to the Company in or pursuant to the Transaction Documents constitutes
information reviewed and expressly approved by the Investor in writing expressly
for use in the Registration Statement), such Prospectus or such form of
prospectus or in any amendment or supplement thereto. In no event
shall the liability of any selling Investor hereunder be greater in amount than
the dollar amount of the net proceeds received by the Investor upon the sale of
the Registrable Securities giving rise to such indemnification
obligation.
-31-
(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 (and only) to the
extent that it shall be finally determined by a court of competent jurisdiction
(which determination is not subject to appeal or further review) that such
failure shall have proximately and materially adversely prejudiced the
Indemnifying Party.
An
Indemnified Party shall have the right to employ separate counsel in any such
Proceeding and to participate in the defense thereof, but the fees and expenses
of such counsel shall be at the expense of such Indemnified Party or Parties
unless: (i) the Indemnifying Party has agreed in writing to pay
such fees and expenses; or (ii) the Indemnifying Party shall have failed
promptly to assume the defense of such Proceeding and to employ counsel
reasonably satisfactory to such Indemnified Party in any such Proceeding; or
(iii) the named parties to any such Proceeding (including any impleaded
parties) include both such Indemnified Party and the Indemnifying Party, and
such Indemnified Party shall have been advised by counsel that a conflict of
interest is likely to exist if the same counsel were to represent such
Indemnified Party and the Indemnifying Party (in which case, if such Indemnified
Party notifies the Indemnifying Party in writing that it elects to employ
separate counsel at the expense of the Indemnifying Party, the Indemnifying
Party shall not have the right to assume the defense thereof and the reasonable
fees and expenses of separate counsel shall be at the expense of the
Indemnifying Party). It shall be understood, however, that the
Indemnifying Party shall not, in connection with any one such Proceeding
(including separate Proceedings that have been or will be consolidated before a
single judge) be liable for the fees and expenses of more than one separate firm
of attorneys at any time for all Indemnified Parties, which firm shall be
appointed by a majority of the Indemnified Parties. The Indemnifying
Party shall not be liable for any settlement of any such Proceeding effected
without its written consent, which consent shall not be unreasonably
withheld. No Indemnifying Party shall, without the prior written
consent of the Indemnified Party, effect any settlement of any pending
Proceeding in respect of which any Indemnified Party is a party, unless such
settlement includes an unconditional release of such Indemnified Party from all
liability on claims that are the subject matter of such Proceeding.
All
reasonable fees and expenses of the Indemnified Party (including reasonable fees
and expenses to the extent incurred in connection with investigating or
preparing to defend such Proceeding in a manner not inconsistent with this
Section) shall be paid to the Indemnified Party, as incurred, within 20 Trading
Days of written notice thereof to the Indemnifying Party (regardless of whether
it is ultimately determined that an Indemnified Party is not entitled to
indemnification hereunder; provided, that the Indemnifying Party may require
such Indemnified Party to undertake to reimburse all such fees and expenses to
the extent it is finally judicially determined that such Indemnified Party is
not entitled to indemnification hereunder).
-32-
(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), the Investor shall not be required to contribute, in the
aggregate, any amount in excess of the amount by which the net proceeds actually
received by the Investor from the sale of the Registrable Securities subject to
the Proceeding exceed the amount of any damages that the Investor has otherwise
been required to pay by reason of such untrue or alleged untrue statement or
omission or alleged omission. No Person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the
Securities Act) shall be entitled to contribution from any Person who was not
guilty of such fraudulent misrepresentation.
The
indemnity and contribution agreements contained in this Section 6.4 are in addition
to any liability that the Indemnifying Parties may have to the Indemnified
Parties.
6.5 Dispositions. The
Investor agrees that it will comply with the prospectus delivery requirements of
the Securities Act as applicable to it in connection with sales of Registrable
Securities pursuant to the Registration Statement and shall sell its Registrable
Securities in accordance with the Plan of Distribution set forth in the
Prospectus. The Investor further agrees that, upon receipt of a
notice from the Company of the occurrence of any event of the kind described in
Sections
6.2(c)(v), (vi) or (vii), the Investor
will discontinue disposition of such Registrable Securities under the
Registration Statement until the Investor is advised in writing by the Company
that the use of the Prospectus, or amended Prospectus, as applicable, may be
resumed. The Company may provide appropriate stop orders to enforce
the provisions of this paragraph. The Investor agrees that the removal of the
restrictive legend from certificates representing Securities as set forth in
this Section 4.1 is predicated upon the Company’s reliance that the Investor
will comply with the provisions of this subsection. Both the Company and the
Transfer Agent, and their respective directors, officers, employees and agents,
may rely on this subsection.
-33-
6.6 No Piggyback on
Registrations. Neither the Company nor any of its security
holders (other than the Investor in such capacity pursuant hereto) may include
securities of the Company in the Registration Statement other than the
Registrable Securities.
6.7 Piggy-Back
Registrations. (a) If at any time during the Effectiveness
Period there is not an effective Registration Statement covering all of the
Registrable Securities and the Company shall determine to prepare and file with
the SEC a registration statement relating to an offering for its own account or
the account of others under the Securities Act of any of its equity securities,
other than (i) pursuant to the Millennium Registration Agreement and
(ii) on Form S-4 or Form S-8 (each as promulgated under the Securities Act) or
their then equivalents relating to equity securities to be issued solely in
connection with any acquisition of any entity or business or equity securities
issuable in connection with stock option or other employee benefit plans, then
the Company shall send to the Investor not then eligible to sell all of their
Registrable Securities under Rule 144 in a three-month period, written notice of
such determination and if, within ten days after receipt of such notice, any the
Investor shall so request in writing, the Company shall include in such
registration statement all or any part of such Registrable Securities the
Investor requests to be registered.
(b) Notwithstanding the
foregoing, in the event that, in connection with any underwritten public
offering, the managing underwriter(s) thereof shall impose a limitation on the
number of shares of Common Stock which may be included in the Registration
Statement because, in such underwriter(s)’ judgment, marketing or other factors
dictate such limitation is necessary to facilitate public distribution, then the
Company shall be obligated to include in such Registration Statement only such
limited portion of the Registrable Securities with respect to which the Investor
has requested inclusion hereunder as the underwriter shall permit; provided, however, that (i) the Company
shall not exclude any Registrable Securities unless the Company has first
excluded all outstanding securities, the holders of which are not contractually
entitled to inclusion of such securities in such Registration Statement or are
not contractually entitled to pro rata inclusion with the Registrable Securities
and (ii) after giving effect to the immediately preceding proviso, any such
exclusion of Registrable Securities shall be made pro rata among the Investor
and the holders of other securities having the contractual right to inclusion of
their securities in such Registration Statement by reason of demand registration
rights, in proportion to the number of Registrable Securities or other
securities, as applicable, sought to be included by the Investor or other
holder.
(c) If an offering in
connection with which the Investor is entitled to registration under this Section 6.7 is an
underwritten offering, then the Investor whose Registrable Securities are
included in such Registration Statement shall, unless otherwise agreed by the
Company, offer and sell such Registrable Securities in an underwritten offering
using the same underwriter or underwriters and, subject to the provisions of
this Agreement, on the same terms and conditions as other shares of Common Stock
included in such underwritten offering and shall enter into an underwriting
agreement in a form and substance reasonably satisfactory to the Company and the
underwriter or underwriters.
-34-
ARTICLE
VII
MISCELLANEOUS
7.1 Termination. This
Agreement may be terminated by the Company or the Investor, by written notice to
the other party, if the Closing has not been consummated by the third Trading
Day following the date of this Agreement; provided that no such termination will
affect the right of any party to xxx for any breach by the other party (or
parties).
7.2 Fees and
Expenses. Except as expressly set forth in the Transaction
Documents to the contrary, each party shall pay the fees and expenses of its
advisers, counsel, accountants and other experts, if any, and all other expenses
incurred by such party incident to the negotiation, preparation, execution,
delivery and performance of this Agreement. Notwithstanding the
foregoing, the Company agrees to pay the fees, disbursements and expenses of
counsel to the Investor, not to exceed $25,000. The Company shall pay
all Transfer Agent fees, stamp taxes and other taxes and duties levied in
connection with the sale and issuance of the applicable Securities.
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 Investor such further
documents as may be reasonably requested in order to give practical effect to
the intention of the parties under the Transaction Documents.
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 or email at the facsimile number or
email address specified in this Section prior to 6:30 p.m. (New York City
time) on a Trading Day, (b) the next Trading Day after the date of
transmission, if such notice or communication is delivered via facsimile or
email at the facsimile number or email address specified in this Section on a
day that is not a Trading Day or later than 6:30 p.m. (New York City time) on
any Trading Day, (c) the Trading Day following the date of deposit with a
nationally recognized overnight courier service, or (d) upon actual receipt
by the party to whom such notice is required to be given. The
addresses, facsimile numbers and email addresses for such notices and
communications are those set forth on the signature pages hereof, or such other
address or facsimile number as may be designated in writing hereafter, in the
same manner, by any such Person.
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 the Investor or, in the case of a waiver, by the party against
whom enforcement of any such waiver is sought. No waiver of any
default with respect to any provision, condition or requirement of this
Agreement shall be deemed to be a continuing waiver in the future or a waiver of
any subsequent default or a waiver of any other provision, condition or
requirement hereof, nor shall any delay or omission of any party to exercise any
right hereunder in any manner impair the exercise of any such
right. Notwithstanding the foregoing, a waiver or consent to depart
from the provisions hereof with respect to a matter that relates exclusively to
the rights of the Investor under Article VI may
be given by the Investor.
-35-
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.
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
Investor. The Investor may assign its rights under this Agreement to
any Person to whom the Investor assigns or transfers any Securities, provided
(i) such transferor agrees in writing with the transferee or assignee to assign
such rights, and a copy of such agreement is furnished to the Company after such
assignment, (ii) the Company is furnished with written notice of (x) the name
and address of such transferee or assignee and (y) the Registrable Securities
with respect to which such registration rights are being transferred or
assigned, (iii) following such transfer or assignment, the further disposition
of such securities by the transferee or assignee is restricted under the
Securities Act and applicable state securities laws, (iv) such transferee agrees
in writing to be bound, with respect to the transferred Securities, by the
provisions hereof that apply to the “Investor” and (v) such transfer shall have
been made in accordance with the applicable requirements of this Agreement and
with all laws applicable thereto.
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 (i) each Indemnified Party is an intended third party
beneficiary of Section
6.4 and may enforce the provisions of such section directly against the
parties with such obligations thereunder and (ii) the Kinderhook observer is an
intended third party beneficiary of Section 4.7(f) of
this Agreement.
7.9 Governing Law; Venue; Waiver
of Jury Trial. THE CORPORATE LAWS OF THE STATE OF NEW YORK
SHALL GOVERN ALL ISSUES CONCERNING THE RELATIVE RIGHTS OF THE COMPANY AND ITS
STOCKHOLDERS, WITHOUT REGARD TO ITS CONFLICTS OF LAW PROVISIONS. ALL
QUESTIONS CONCERNING THE CONSTRUCTION, VALIDITY, ENFORCEMENT AND INTERPRETATION
OF THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS
OF THE STATE OF NEW YORK. THE COMPANY AND INVESTOR HEREBY IRREVOCABLY
SUBMIT TO THE NON-EXCLUSIVE JURISDICTION OF THE STATE AND FEDERAL COURTS SITTING
IN THE CITY OF NEW YORK, BOROUGH OF MANHATTAN FOR THE ADJUDICATION OF ANY
DISPUTE BROUGHT BY THE COMPANY OR THE INVESTOR HEREUNDER, IN CONNECTION HEREWITH
OR WITH ANY TRANSACTION CONTEMPLATED HEREBY OR DISCUSSED HEREIN (INCLUDING WITH
RESPECT TO THE ENFORCEMENT OF ANY OF THE TRANSACTION DOCUMENTS), AND HEREBY
IRREVOCABLY WAIVE, AND AGREE NOT TO ASSERT IN ANY SUIT, ACTION OR PROCEEDING
BROUGHT BY THE COMPANY OR THE INVESTOR, ANY CLAIM THAT IT IS NOT PERSONALLY
SUBJECT TO THE JURISDICTION OF ANY SUCH COURT, OR THAT SUCH SUIT, ACTION OR
PROCEEDING IS IMPROPER. EACH PARTY HEREBY IRREVOCABLY WAIVES PERSONAL
SERVICE OF PROCESS AND CONSENTS TO PROCESS BEING SERVED IN ANY SUCH SUIT, ACTION
OR PROCEEDING BY MAILING A COPY THEREOF VIA REGISTERED OR CERTIFIED MAIL OR
OVERNIGHT DELIVERY (WITH EVIDENCE OF DELIVERY) TO SUCH PARTY AT THE ADDRESS IN
EFFECT FOR NOTICES TO IT UNDER THIS AGREEMENT AND AGREES THAT SUCH SERVICE SHALL
CONSTITUTE GOOD AND SUFFICIENT SERVICE OF PROCESS AND NOTICE
THEREOF. NOTHING CONTAINED HEREIN SHALL BE DEEMED TO LIMIT IN ANY WAY
ANY RIGHT TO SERVE PROCESS IN ANY MANNER PERMITTED BY LAW. THE
COMPANY AND INVESTOR HEREBY WAIVE ALL RIGHTS TO A TRIAL BY JURY.
-36-
7.10
Survival. The
representations and warranties, agreements and covenants contained herein shall
survive the Closing.
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 or email attachment, such signature shall create a valid
and binding obligation of the party executing (or on whose behalf such signature
is executed) with the same force and effect as if such facsimile or
email-attached signature page were an original thereof.
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 the Investor exercises a right, election, demand or option owed to the
Investor by the Company under a Transaction Document and the Company does not
timely perform its related obligations within the periods therein provided,
then, prior to the performance by the Company of the Company's related
obligation, the Investor may rescind or withdraw, in its sole discretion from
time to time upon written notice to the Company, any relevant notice, demand or
election in whole or in part without prejudice to its future actions and
rights.
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 the execution by the holder
thereof of a customary lost certificate affidavit of that fact and an agreement
to indemnify and hold harmless the Company for any losses in connection
therewith. The applicants for a new certificate or instrument under
such circumstances shall also pay any reasonable third-party costs associated
with the issuance of such replacement Securities.
7.15
Remedies. In
addition to being entitled to exercise all rights provided herein or granted by
law, including recovery of damages, the Investor and the Company will be
entitled to seek specific performance under the Transaction
Documents. The parties agree that monetary damages may not be
adequate compensation for any loss incurred by reason of any breach of
obligations described in the foregoing sentence and hereby agree to waive in any
action for specific performance of any such obligation (other than in connection
with any action for a temporary restraining order) the defense that a remedy at
law would be adequate.
-37-
7.16
Payment Set
Aside. To the extent that the Company makes a payment or
payments to the Investor hereunder or the Investor enforces or exercises its
rights hereunder, and such payment or payments or the proceeds of such
enforcement or exercise or any part thereof are subsequently invalidated,
declared to be fraudulent or preferential, set aside, recovered from, disgorged
by or are required to be refunded, repaid or otherwise restored to the Company
by a trustee, receiver or any other person under any law (including, without
limitation, any bankruptcy law, state or federal law, common law or equitable
cause of action), then to the extent of any such restoration the obligation or
part thereof originally intended to be satisfied shall be revived and continued
in full force and effect as if such payment had not been made or such
enforcement or setoff had not occurred.
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
Further
Assurances. At any time or from time to time after the date hereof,
the parties agree to cooperate with each other, and at the request of any other
party, to execute and deliver any further instruments or documents and to take
all such further action as the other party may reasonably request in order to
evidence or effectuate the consummation of the transactions contemplated hereby
and to otherwise carry out the intent of the parties hereunder
7.19
Specific
Enforcement. The parties acknowledge and agree that the
parties hereto would be irreparably damaged in the event any of the provisions
of this Agreement were not performed by the parties in accordance with their
specific terms or were otherwise breached. Accordingly, it is agreed
that the parties hereto shall be entitled to an injunction to prevent breaches
of this Agreement and to specifically enforce this Agreement and the terms and
provisions hereof in addition to any other remedy to which the parties may be
entitled at law or in equity.
[SIGNATURE
PAGES TO FOLLOW]
-38-
IN
WITNESS WHEREOF, the parties hereto have caused this Securities Purchase
Agreement to be duly executed by their respective authorized signatories as of
the date first indicated above.
|
LIBERATOR
MEDICAL HOLDINGS, INC.
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||
|
By:
|
/s/ Xxxx X. Xxxxxxxxx | |
|
Name:
Xxxx X. Xxxxxxxxx
|
||
|
Title:
President
|
||
|
Address
for Notice:
|
||
|
Liberator
Medical Holdings, Inc.
|
||
|
0000
XX Xxxx Xxxxxxx
|
||
|
Xxxxxx,
XX 00000
|
||
|
Telephone:
000-000-0000
|
||
|
Facsimile
No.: (000) 000-0000
|
||
|
Attn: Xxxx
X. Xxxxxxxxx, President
|
||
|
With
a copy to:
|
||
|
Siegel,
Lipman, Xxxxx, Xxxxxxx & Xxxxxx, XXX
|
||
|
Xxx
Xxxxx, Xxxxx 000
|
||
|
0000
Xxxx Xxxxxx Xxxx
|
||
|
Xxxx
Xxxxx, XX 00000
|
||
|
Tel:
000-000-0000
|
||
|
Fax:
000-000-0000
|
||
|
Email:
xxxxxxxx@xxxxxxx.xxx
|
||
|
Attn:
Xxxxxxxx Xxxxxxx,
Esq.
|
||
COMPANY
SIGNATURE PAGE
Investor Signature
Page
By its
execution and delivery of this signature page, the undersigned Investor hereby
joins in and agrees to be bound by the terms and conditions of the Securities
Purchase Agreement dated as of March 8, 2010 (the “Purchase Agreement”) by and
between Liberator Medical Holdings, Inc. and the Investor (as defined therein),
as to the number of shares of Common Stock set forth below, and authorizes this
signature page to be attached to the Purchase Agreement or counterparts
thereof.
|
Kinderhook
Partners L.P.
|
|||
|
By:
|
/s/ Xxxxxx Xxxx | ||
|
Name:
|
Xxxxxx Xxxx | ||
|
Title:
|
Associate | ||
|
Address:
0 Xxxxxxxxx Xxxxx
|
|||
|
Xxxxx
000
|
|||
|
Xxxx
Xxx, XX 00000
|
|||
|
Tax
ID No.: 00-0000000
|
|||
|
Telephone
No.: (000) 000-0000
|
|||
|
Facsimile
No.: (000) 000-0000
|
|||
|
Email
Address: xxxxx@xxxxxxxxxxxxxxxxxx.xxx
|
|||
|
Number
of Shares: 4,666,667
|
|||
|
Aggregate
Purchase Price:
$7,000,000
|
|||
Delivery
Instructions (if different than above):
c/o: Xxxx
Xxxxxxx, Xxxx Xxxxx, Deutsche Bank
Address:
000 Xxxx Xxxxxx (0 Xxxx)
Xxx
Xxxx, XX 00000
Telephone
No.: (000)
000-0000
Facsimile
No. : (000)
000-0000
Other
Special Instructions: Kinderhook Partners L.P. (Liberator Medical Holdings
Purchase)
Exhibits:
A Instruction
Sheet for Investor
B Opinion
of Company Corporate Counsel
C Plan
of Distribution
D Company
Transfer Agent Instructions
-2-
Exhibit A
INSTRUCTION SHEET FOR
INVESTOR
(to be
read in conjunction with the entire Securities Purchase Agreement)
|
A.
|
Complete the following
items in the Securities Purchase
Agreement:
|
|
|
1.
|
Complete
and execute the Investor Signature Page. The Agreement must be
executed by an individual authorized to bind the
Investor.
|
|
|
2.
|
Exhibit
B-1 - Stock Certificate
Questionnaire:
|
Provide the information
requested by the Stock Certificate Questionnaire;
|
|
3.
|
When applicable -
Exhibit B-2 - Registration Statement
Questionnaire:
|
Provide the information
requested by the Investor Certificate.
|
|
4.
|
Return,
via facsimile, the signed Securities Purchase Agreement including the
properly completed Exhibits B-1 through B-2,
to:
|
Facsimile:
Telephone:
Attn:
|
|
5.
|
After
completing instruction number five (5) above, deliver the original signed
Securities Purchase Agreement including the properly completed Exhibits
B-1 through B-2 to:
|
Address:
|
B.
|
Instructions
regarding the wire transfer of funds for the purchase of the Securities
will be telecopied to the Investor by the Company at a later
date.
|
-3-
Exhibit
B-1
LIBERATOR
MEDICAL HOLDINGS, INC.
STOCK CERTIFICATE
QUESTIONNAIRE
|
Please
provide us with the following information:
|
|||
|
1.
|
The
exact name that the Securities are to be registered in (this is the name
that will appear on the stock certificate(s)). You may use a
nominee name if appropriate:
|
||
|
2.
|
The
relationship between the Investor of the Securities and the Registered
Holder listed in response to item 1 above:
|
||
|
3.
|
The
mailing address, telephone and telecopy number and email address of the
Registered Holder listed in response to item 1 above:
|
||
|
4.
|
The
Tax Identification Number of the Registered Holder listed in response to
item 1 above:
|
Exhibit
B-2
LIBERATOR
MEDICAL HOLDINGS, INC.
REGISTRATION STATEMENT
QUESTIONNAIRE
(To be delivered promptly after the
Investor Requests a Registration Pursuant to Section 6.1)
In
connection with the Registration Statement, please provide us with the following
information regarding the Investor.
1. Please
state your organization’s name exactly as it should appear in the Registration
Statement:
______________________________________________________________________
Except as
set forth below, your organization does not hold any equity securities of the
Company on behalf of another person or entity.
State any
exceptions here:
______________________________________________________________________
If the
Investor is not a natural person, please identify the natural person or persons
who will have voting and investment control over the Securities owned by the
Investor:
______________________________________________________________________
2. Address
of your organization:
______________________________________________________
______________________________________________________
Telephone: __________________________
Fax: ________________________________
Contact
Person: _______________________
3. Have
you or your organization had any position, office or other material relationship
within the past three years with the Company or its
affiliates? (Include any relationships involving you or any of your
affiliates, officers, directors, or principal equity holders (5% or more) that
has held any position or office or has had any other material relationship with
the Company (or its predecessors or affiliates) during the past three
years.)
o Yes o No
If yes,
please indicate the nature of any such relationship below:
4. Are
you the beneficial owner of any other securities of the
Company? (Include any equity securities that you beneficially own or
have a right to acquire within 60 days after the date hereof, and as to which
you have sole voting power, shared voting power, sole investment power or shared
investment power.)
o Yes o No
If yes,
please describe the nature and amount of such ownership as of a recent
date.
5. Except
as set forth below, you wish that all the shares of the Company’s common stock
beneficially owned by you or that you have the right to acquire from the Company
be offered for your account in the Registration Statement.
State
any exceptions here:
6. Have
you made or are you aware of any arrangements relating to the distribution of
the shares of the Company pursuant to the Registration Statement?
o Yes o No
If yes,
please describe the nature and amount of such arrangements.
-2-
|
|
7.
|
FINRA
Matters
|
(a) State
below whether (i) you or any associate or affiliate of yours are a
member of FINRA, a
controlling shareholder
of a FINRA member, a
person associated with a member, a direct
or indirect affiliate
of a member, or an
underwriter or related
person with respect to the proposed offering; (ii) you or any associate or affiliate of yours owns any
stock or other securities of any FINRA member not purchased in the
open market; or (iii) you or any associate or affiliate of yours has made
any outstanding subordinated loans to any FINRA member. If you are a general
or limited partnership, a no answer asserts that no such relationship exists for
you as well as for each of your general or limited partners.
|
Yes:
o
|
No:
o
|
If “yes,”
please identify the FINRA member and describe your
relationship, including, in the case of a general or limited partner, the name
of the partner:
If you
answer “no” to Question 7(a), you need not respond to Question
7(b).
(b) State
below whether you or any associate or affiliate of yours has been
an underwriter, or a controlling person or member
of any investment banking or brokerage firm which has been or might be an
underwriter for securities of the Corporation or any affiliate thereof including,
but not limited to, the common stock now being registered.
|
Yes:
o
|
No:
o
|
If “yes,”
please identify the FINRA member and describe your
relationship, including, in the case of a general or limited partner, the name
of the partner.
-3-
ACKNOWLEDGEMENT
The
undersigned hereby agrees to notify the Company promptly of any changes in the
foregoing information which should be made as a result of any developments,
including the passage of time. The undersigned also agrees to provide
the Company and the Company’s counsel any and all such further information
regarding the undersigned promptly upon request in connection with the
preparation, filing, amending, and supplementing of the Registration Statement
(or any prospectus contained therein). The undersigned hereby
consents to the use of all such information in the Registration
Statement.
The
undersigned understands and acknowledges that the Company will rely on the
information set forth herein for purposes of the preparation and filing of the
Registration Statement.
The
undersigned understands that the undersigned may be subject to serious civil and
criminal liabilities if the Registration Statement, when it becomes effective,
either contains an untrue statement of a material fact or omits to state a
material fact required to be stated in the Registration Statement or necessary
to make the statements in the Registration Statement not
misleading. The undersigned represents and warrants that all
information it provides to the Company and its counsel is currently accurate and
complete and will be accurate and complete at the time the Registration
Statement becomes effective and at all times subsequent thereto, and agrees
during the Effectiveness Period and any additional period in which the
undersigned is making sales of Shares under and pursuant to the
Registration Statement, and agrees during such periods to notify the Company
immediately of any misstatement of a material fact in the Registration
Statement, and of the omission of any material fact necessary to make the
statements contained therein not misleading.
Dated: __________
|
Name
|
||
|
Signature
|
||
|
Name
and Title of Signatory
|
-4-
Exhibit C
OPINION POINTS OF
COMPANY
COUNSEL
1. The
Company is a corporation duly incorporated, validly existing and in good
standing under the laws of the State of Nevada, with corporate power and
authority to own, lease and operate its properties and to conduct its business
as described in the SEC Reports and to enter into and perform its obligations
under the Securities Purchase Agreement. The Company is duly qualified to do
business as a foreign corporation and is in good standing under the laws of
Florida and [any other
states].
2. The
Company has all necessary corporate power and authority to execute and deliver
the Transaction Documents, to perform its obligations thereunder and to
consummate the other Transactions.
3. Each
of the Transaction Documents has been duly authorized, executed and delivered by
the Company and constitutes a valid and binding agreement of the Company,
enforceable against the Company in accordance with its terms.
4. The
Company has all necessary power and authority to issue and deliver the shares of
Common Stock; the shares of Common Stock to be issued pursuant to this Agreement
have been duly authorized, and, when duly issued and delivered to holders of the
Common Stock, the Common Stock will be duly and validly issued, fully paid and
nonassessable and will be issued in compliance with federal and state securities
laws. None of the shares of Common Stock will be issued in violation
of any preemptive rights, rights of first refusal or other similar rights to
subscribe for or purchase securities of the Company.
5. The
execution and delivery of the Transaction Documents by the Company, the
performance by the Company of its obligations thereunder (other than performance
by the Company of its obligations under the indemnification sections of such
agreements, as to which no opinion need be rendered), including the issuance and
sale of the Securities (i) will not result in any violation of the provisions of
the charter or by-laws of the Company or any subsidiary; (ii) will not
constitute a breach of, default, or “Debt Repayment Triggering Event” under, or
result in the creation or imposition of any security interest, mortgage, pledge,
lien, charge, encumbrance or adverse claim upon any property or assets of the
Company or any of its subsidiaries, pursuant to any material existing
instrument; (iii) will not result in any violation of any federal, Nevada,
Florida, Delaware or New York law or, to the best knowledge of such counsel any
administrative regulation or administrative or court decree, applicable to the
Company or any of its subsidiaries; or (v) will not require any consent,
approval, authorization or other order of, or registration or filing with, any
court or other governmental or regulatory authority or agency, except (a) with
respect to the transactions contemplated by the Securities Purchase Agreement as
may be required under the Securities Act and the Exchange Act, (b) as required
by the state securities or “blue sky” laws and (c) for such consents, approvals,
authorizations, orders, filings or registrations which have been obtained or
made. A “Debt
Repayment Triggering Event” means any event or condition that gives, or
with the giving of notice or lapse of time would give the holder of any note,
debenture or other evidence of indebtedness (or any person acting on such
holder’s behalf) the right to require the repurchase, redemption or repayment of
all or a portion of such indebtedness by the Company or any of its
subsidiaries.
-5-
6.
Assuming the accuracy of the representations and warranties of the
Investor contained in the Securities Purchase Agreement and the compliance of
such party with the agreements set forth herein and therein, it is not
necessary, in connection with the issuance and sale of the Securities, in the
manner contemplated by Transaction Documents, to register the Securities under
the Securities Act.
7.
The Company is not, and after receipt of payment for the
Securities will not be, an “investment company” within the meaning of Investment
Company Act.
8. The
Company has an authorized capitalization as set forth in its SEC Reports, and
all of the outstanding shares of Common Stock have been duly authorized and
validly issued, are fully paid and nonassessable and conform to the description
thereof contained in the SEC Reports. To our knowledge, none of the
outstanding shares of Common Stock were issued in violation of any preemptive
rights, rights of first refusal or other similar rights to subscribe for or
purchase securities of the Company.
9.
Except as disclosed in the SEC Reports, to our knowledge (i) there
are no outstanding securities convertible into or exchangeable for, or warrants,
options or rights issued by the Company to purchase any shares of Common Stock,
(ii) there are no statutory, contractual, preemptive or other rights to
subscribe for or to purchase any shares of Common Stock and (iii) there are no
restrictions upon transfer of the Common Stock pursuant to the Company’s charter
or bylaws or the General Corporation Law of the State of Nevada or
otherwise.
10.
To our knowledge, none of the Securities will be issued in
violation of any preemptive rights, rights of first refusal or other similar
rights to subscribe for or purchase securities of the Company.
11.
Neither the Company nor any of its subsidiaries is (i) in violation
of its charter or by laws, (ii) is in default under any indenture, mortgage,
loan or credit agreement, note, contract, franchise, lease or other instrument
to which the Company or any of its subsidiaries is a party or by which it or any
of them may be bound, or to which any of the property or assets of the Company
or any of its subsidiaries is subject, except for such defaults as would not,
individually or in the aggregate, result in a Material Adverse Effect or (iii)
is in violation of any law, administrative regulation or administrative or court
decree applicable to the Company or any subsidiary or has failed to obtain any
material license, permit, certificate, franchise or other governmental
authorization or permit necessary to the ownership of its property or to the
conduct of its business.
-6-
12.
To the knowledge of such counsel and other then as set forth
in the SEC Reports, there are no legal or governmental proceedings pending to
which the Company is a party, or with respect to the any of the Transaction
Documents or any transactions contemplated thereby, or of which any property or
assets of the Company is subject which, if determined adversely to the Company,
might have a Material Adverse Effect on the financial position, stockholders’
equity, results of operations or business of the Company; and, to the knowledge
of such counsel, no such proceedings are overtly threatened or contemplated by
governmental authorities or threatened by others.
-7-
Exhibit D
PLAN OF
DISTRIBUTION
The
selling stockholder may, from time to time, sell any or all of its shares of
common stock on any stock exchange, market or trading facility on which the
shares are traded or in private transactions. These sales may be at
fixed or negotiated prices. The selling stockholder may use any one
or more of the following methods when selling shares:
|
·
|
ordinary
brokerage transactions and transactions in which the broker-dealer
solicits purchasers;
|
|
·
|
block
trades in which the broker-dealer will attempt to sell the shares as agent
but may position and resell a portion of the block as principal to
facilitate the transaction;
|
|
·
|
purchases
by a broker-dealer as principal and resale by the broker-dealer for its
account;
|
|
·
|
an
exchange distribution in accordance with the rules of the applicable
exchange;
|
|
·
|
privately
negotiated transactions;
|
|
·
|
short
sales;
|
|
·
|
broker-dealers
may agree with the selling stockholder to sell a specified number of such
shares at a stipulated price per
share;
|
|
·
|
a
combination of any such methods of sale;
and
|
|
·
|
any
other method permitted pursuant to applicable
law.
|
The selling stockholder may also sell
shares under Rule 144 under the Securities Act, if available, rather than under
this prospectus.
Broker-dealers engaged by the selling
stockholder may arrange for other brokers-dealers to participate in
sales. Broker-dealers may receive commissions or discounts from the
selling stockholder (or, if any broker-dealer acts as agent for the purchaser of
shares, from the purchaser) in amounts to be negotiated. The selling
stockholder does not expect these commissions and discounts to exceed what is
customary in the types of transactions involved. Any profits on the
resale of shares of common stock by a broker-dealer acting as principal might be
deemed to be underwriting discounts or commissions under the Securities
Act. Discounts, concessions, commissions and similar selling
expenses, if any, attributable to the sale of shares will be borne by a selling
stockholder. The selling stockholder may agree to indemnify any
agent, dealer or broker-dealer that participates in transactions involving sales
of the shares if liabilities are imposed on that person under the Securities
Act.
The selling stockholder may from time
to time pledge or grant a security interest in some or all of the shares of
common stock owned by it and, if it defaults in the performance of its secured
obligations, the pledgees or secured parties may offer and sell the shares of
common stock from time to time under this prospectus after we have filed a
supplement to this prospectus under Rule 424(b)(3) or other applicable provision
of the Securities Act of 1933 supplementing or amending the list of selling
stockholders to include the pledgee, transferee or other successors in interest
as a selling stockholder under this prospectus.
The selling stockholder also may
transfer the shares of common stock in other circumstances, in which case the
transferees, pledgees or other successors in interest will be the selling
beneficial owners for purposes of this prospectus and may sell the shares of
common stock from time to time under this prospectus after we have filed a
supplement to this prospectus under Rule 424(b)(3) or other applicable provision
of the Securities Act of 1933 supplementing or amending the list of selling
stockholders to include the pledgee, transferee or other successors in interest
as selling stockholders under this prospectus.
The selling stockholder and any
broker-dealers or agents that are involved in selling the shares of common stock
may be deemed to be “underwriters” within the meaning of the Securities Act in
connection with such sales. In such event, any commissions received
by such broker-dealers or agents and any profit on the resale of the shares of
common stock purchased by them may be deemed to be underwriting commissions or
discounts under the Securities Act.
We are required to pay all fees and
expenses incident to the registration of the shares of common
stock. We have agreed to indemnify the selling stockholder against
certain losses, claims, damages and liabilities, including liabilities under the
Securities Act.
The selling stockholder has advised us
that it has not entered into any agreements, understandings or arrangements with
any underwriters or broker-dealers regarding the sale of their shares of common
stock, nor is there an underwriter or coordinating broker acting in connection
with a proposed sale of shares of common stock by the selling
stockholder. If we are notified by the selling stockholder that any
material arrangement has been entered into with a broker-dealer for the sale of
shares of common stock, if required, we will file a supplement to this
prospectus. If the selling stockholder use this prospectus for any
sale of the shares of common stock, it will be subject to the prospectus
delivery requirements of the Securities Act.
The anti-manipulation rules of
Regulation M under the Securities Exchange Act of 1934 may apply to sales of our
common stock and activities of the selling stockholder.
-2-
Exhibit E
COMPANY TRANSFER AGENT
INSTRUCTIONS
Jersey
Transfer & Trust Company, Inc.
000
Xxxxxxxxxx Xxxxxx
Xxxxxx,
XX 00000-0000
Attention: Liberator
Medical Holdings, Inc. Account Representative
Ladies
and Gentlemen:
Reference
is made to that certain Securities Purchase Agreement, dated as of March 8, 2010
(the “Agreement”), by
and between Liberator Medical Holdings, Inc., a Nevada corporation (the
“Company”), and
Kinderhook Partners, L.P. (the “Holder”), pursuant to which
the Company is issuing to the Holder shares (the “Shares”) of Common Stock of
the Company, par value $.001 per share (the “Common Stock”).
In
connection with the consummation of the transactions contemplated by the
Agreement, this letter shall serve as our irrevocable authorization and
direction to you:
(i) to
issue an aggregate of 4,666,667 shares of our Common Stock in the name of the
Holder. The certificate should bear the legend set forth on Annex I attached
hereto and “stop transfer” instructions should be placed against their
subsequent transfer. Kindly deliver the certificate to the respective
address set forth on Annex I via hand
delivery or overnight courier. We confirm that these shares will be
validly issued, fully paid and non-assessable upon issuance; and
(ii) to
issue (provided that you are the transfer agent of the Company at such time)
certificates for shares of Common Stock upon transfer or resale of the
Shares and receipt by you of certificate(s) for the Shares so transferred
or sold (duly endorsed or accompanied by stock powers duly endorsed, in each
case with signatures guaranteed and otherwise in form eligible for
transfer).
You
acknowledge and agree that so long as you have previously received (a) written
confirmation from the Company’s legal counsel that either (i) a
registration statement covering resales of the Shares has been declared
effective by the Securities and Exchange Commission (the “SEC”) under the Securities Act
of 1933, as amended (the “Securities Act”), or
(ii) the Shares are eligible for sale in conformity with Rule 144 (without
volume limitations) under the Securities Act (“Rule 144”) and
(b) if applicable, a copy of such registration statement, then, unless
otherwise required by law, within three (3) Business Days of your receipt
of certificates representing the Shares, you shall issue the certificates
representing the Shares to the Holder or their transferees, as the case may be,
registered in the names of such Holder or transferees, as the case may be, and
such certificates shall not bear any legend restricting transfer of the Shares
thereby and should not be subject to any stop-transfer
restriction. Any certificates tendered for transfer shall be endorsed
or with stock powers attached, signatures guaranteed, and otherwise in form
necessary to affect transfer.
A form of
written confirmation from the Company’s outside legal counsel that a
registration statement covering resales of the Shares has been declared
effective by the SEC under the Securities Act is attached hereto as Annex I.
Please be
advised that the Holder is relying upon this letter as an inducement to enter
into the Agreement and, accordingly, it is a third party beneficiary to these
instructions.
Please
execute this letter in the space indicated to acknowledge your agreement to act
in accordance with these instructions. Should you have any questions
concerning this matter, please contact our counsel, Xxxxxxxx Xxxxxxx, Esq., at
(000) 000-0000.
|
Very
truly yours,
|
||
|
LIBERATOR
MEDICAL HOLDINGS, INC.
|
||
|
By:
|
||
|
Name:
|
||
|
Title:
|
||
THE
FOREGOING INSTRUCTIONS ARE
ACKNOWLEDGED
AND AGREED TO
this ___
day of March, 2010
|
JERSEY
TRANSFER & TRUST COMPANY, INC.
|
|||
|
By:
|
|||
|
Name:
|
|||
|
Title:
|
|||
Enclosures
-2-
ANNEX II
FORM OF
NOTICE OF EFFECTIVENESS OF REGISTRATION STATEMENT [AT SUCH TIME AS THE SHARES
ARE FREELY TRADABLE UNDER RULE 144]
Jersey
Transfer & Trust Company, Inc.
000
Xxxxxxxxxx Xxxxxx
Xxxxxx,
XX 00000-0000
Attention: Liberator
Medical Holdings, Inc. Account Representative
Re:
Liberator Medical Holdings, Inc.
Ladies
and Gentlemen:
We are
counsel to Liberator Medical Holdings, Inc., a Nevada corporation (the “Company”), and have
represented the Company in connection with that certain Securities Purchase
Agreement, dated as of March 8, 2010 (the “Securities Purchase
Agreement”), entered into by and between the Company and Kinderhook
Partners, L.P. (the “Purchaser”) pursuant to which
the Company issued to the Purchaser shares of Common Stock of the Company, par
value $.001 per share (the “Shares”). [Pursuant
to the Securities Purchase Agreement, the Company agreed to register the resale
of the Shares (collectively, the “Registrable Securities”) under
the Securities Act of 1933, as amended (the “Securities Act”). In
connection with the Company’s obligations under the Securities Purchase
Agreement, on
, 20[__], the Company filed a Registration Statement on Form S-3 (File
No. 333-
[ ])
(the “Registration
Statement”) with the Securities and Exchange Commission (the “Commission”) relating to the
Registrable Securities which names the Purchaser as a selling shareholder
thereunder.]
[In
connection with the foregoing, we advise you that a member of the SEC’s staff
has advised us by telephone that the SEC has entered an order declaring the
Registration Statement effective under the Securities Act at [a.m.][p.m.]
on
, 20[__], and we have no knowledge, after telephonic inquiry of a member of the
staff, that any stop order suspending its effectiveness has been issued or that
any proceedings for that purpose are pending before, or threatened by, the
Commission and the Registrable Securities are available for resale under the
Securities Act pursuant to the Registration Statement.]
This
letter shall serve as our standing notice to you that the Shares may be freely
transferred by the Purchaser pursuant to [the Registration Statement so long as
the Holder certifies they will comply with the plan of distribution description
in connection with sales or transfers of the Shares set forth in the
Registration Statement and with the prospectus delivery requirements of the
Securities Act, to the extent such delivery requirement are applicable] [and in
conformity with Rule 144 (without volume limitations) under the Securities Act
of 1933, as amended]. You need not require further letters from us to effect any
future legend-free issuance or reissuance of shares of the Shares to the
Purchaser or the transferees of the Purchaser, as the case may be, as
contemplated by the Company’s Irrevocable Transfer Agent Instructions dated
, 20[__].
-3-
Schedule
3.1(d)
NO
CONFLICTS
Securities
Purchase Agreement, dated as of May 22, 2008, by and among Liberator
Medical
Holdings, Inc., Liberator Medical Supply, Inc., and the Buyers listed
thereto.
Securities
Purchase Agreement, dated as of October 17, 2008, by and among Liberator
Medical
Holdings, Inc., Liberator Medical Supply, Inc., Liberator Health and Education
Services,
Inc., and the Buyers listed thereto.
Registration
Rights Agreement dated as of May 22, 2008, by and among Liberator Medical
Holdings,
Inc., and the Purchasers listed thereto, as supplemented on October 17,
2008
Schedule
3.1(f)
CAPITALIZATION
The
authorized and outstanding capital stock of the Company consists of 200,000,000
authorized shares of common stock, $0.001 par value per share, of which
34,029,666 shares are outstanding as of the date of this Agreement, net of
89,600 shares of Treasury Stock. The issued and outstanding shares of
common stock have been duly and validly authorized and issued and are fully paid
and non-assessable. Except for (i) 2,000,000 shares of common stock
which are allocated to stock options granted and available for awards under the
Company’s Equity Incentive Plan; (ii) warrants to purchase an aggregate of
13,791,602 shares of common stock, (iii) convertible debt instruments
convertible into 7,865,834 shares of common stock, (iv) 338,219 shares of common
stock which are reserved for the Employee Stock Purchase Plan and (v) such other
commitments to issue securities and other securities as disclosed in the
Admission Document or the Announcements, there are no options, warrants,
pre-emptive rights or other rights to subscribe for or purchase, agreements or
other obligations to issue, or rights to convert any obligations into or
exchange any securities for, shares of capital stock of or ownership interests
in the Company are outstanding as of the date hereof. All of the
issued and outstanding shares of capital stock of the Company have been offered,
issued and sold by the Company in compliance with applicable U.S. federal and
state securities laws. All the outstanding shares of capital stock of
each subsidiary of the Company have been duly and validly authorized and issued
and are fully paid and non-assessable.
-2-
Schedule
3.1(g)
SEC
REPORTS
None.
-3-
Schedule
3.1(h)
MATERIAL
CHANGES
None.
-4-
Schedule
3.1(o)
REGISTRATION
RIGHTS
There are
829,000 warrants expiring between February 1, 2013, and April 17, 2013, having
piggyback registration rights.
Registration
Rights Agreement with Millennium Partners, L.P., described in Schedule
3.1(d).
-5-
