Exhibit 10.1
CONVERTIBLE PREFERRED STOCK AND WARRANTS PURCHASE AGREEMENT
Between
Sedona Corporation
and
the Investor Signatory Hereto
CONVERTIBLE PREFERRED STOCK AND WARRANTS PURCHASE AGREEMENT dated as of
May 5, 2000 (the "Agreement"), between the Investor signatory hereto (the
"Investor"), and Sedona Corporation, a corporation organized and existing under
the laws of the Commonwealth of Pennsylvania (the "Company").
WHEREAS, Investor as Seller and the Company as Buyer have executed that
certain Asset Purchase and Sale Agreement dated April 9, 2000 (together with all
exhibits and schedules collectively, the "APSA").
WHEREAS, capitalized terms used herein and not otherwise defined herein
shall have the meaning given to them in the APSA.
WHEREAS, the parties desire that, upon the terms and subject to the
conditions contained herein, in consideration for the transfer of Assets
pursuant to the APSA, the Company shall issue and sell to the Investor, and the
Investor shall purchase in the aggregate, (i) $1,500,000 Stated Value of
Convertible Preferred Stock (as defined below) and (ii) Warrants (as defined
below) to purchase up to 247,934 shares of Common Stock at an exercise price
equal to Three and 025/1000's Dollars ($3.025) per share.
WHEREAS, such investments will be made in reliance upon the provisions
of Section 4(2) and/or 4(6) of the Securities Act of 1933, as amended, (the
"Securities Act") and/or Regulation D ("Regulation D") and the other rules and
regulations promulgated under the Securities Act, and/or upon such other
exemption from the registration requirements of the Securities Act as may be
available with respect to any or all of the investments in securities to be made
hereunder.
NOW, THEREFORE, the parties hereto agree as follows:
ARTICLE I
Certain Definitions
Section 1.1. "Capital Shares" shall mean the Common Stock and any
shares of any other class of common stock whether now or hereafter authorized,
having the right to participate in the distribution of earnings and assets of
the Company.
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Section 1.2. "Capital Shares Equivalents" shall mean any securities,
rights, or obligations that are convertible into or exchangeable for or give any
right to subscribe for any Capital Shares of the Company or any Warrants,
options or other rights to subscribe for or purchase Capital Shares or any such
convertible or exchangeable securities.
Section 1.3. "Certificate of Designations" shall mean the Certificate
of Designations setting forth the terms of the Convertible Preferred Stock in
the form of Exhibit A hereto.
Section 1.4. "Closing" shall mean the closing of the issuance of the
Convertible Preferred Stock and Warrants pursuant to Section 2.1.
Section 1.5. "Closing Date" shall mean the date on which all conditions
to the Closing have been satisfied (as defined in Section 2.1(b) hereto) and the
Closing shall have occurred.
Section 1.6. "Common Stock" shall mean the Company's common stock,
$.001 par value per share.
Section 1.7. "Conversion Shares" shall mean the shares of Common Stock
issuable upon conversion of the Convertible Preferred Stock.
Section 1.8. "Convertible Preferred Stock" shall mean the $1,500,000
Stated Value of Series H Convertible Preferred Stock, as described in the
Certificate of Designations to be issued to the Investor pursuant to this
Agreement.
Section 1.9. "Damages" shall mean any loss, claim, damage, judgment,
penalty, deficiency, liability, costs and expenses (including, without
limitation, reasonable attorney's fees and disbursements and reasonable costs
and expenses of expert witnesses and investigation).
Section 1.10. "Effective Date" shall mean the date on which the SEC
first declares effective a Registration Statement registering the resale of the
Registrable Securities as set forth in the Registration Rights Agreement.
Section 1.11. "Exchange Act" shall mean the Securities Exchange Act of
1934, as amended, and the rules and regulations promulgated thereunder.
Section 1.12. "Legend" shall mean the legend set forth in Section 9.1.
Section 1.13. "Market Price" on any given date shall mean the average
closing market price on the Principal Market (as reported by Bloomberg L.P.) of
the Common Stock during the twenty (20) consecutive Trading Day period ending on
the Trading Day immediately prior to the date for which the Market Price is to
be determined.
Section 1.14. "Material Adverse Effect" shall mean any effect on the
business, operations, properties, prospects, stock price or financial condition
of the Company that is material and adverse to the Company and its subsidiaries
and affiliates, taken as a whole, and/or any condition, circumstance, or
situation that would prohibit or otherwise interfere with the ability of the
Company to enter into and perform any of its obligations under this Agreement,
the Registration Rights Agreement, the Certificate of Designations or the
Warrants in any material respect.
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Section 1.15. "Outstanding" when used with reference to shares of
Common Stock or Capital Shares (collectively the "Shares"), shall mean, at any
date as of which the number of such Shares is to be determined, all issued and
outstanding Shares, and shall include all such Shares issuable in respect of
outstanding scrip or any certificates representing fractional interests in such
Shares; provided, however, that "Outstanding" shall not mean any such Shares
then directly or indirectly owned or held by or for the account of the Company.
Section 1.16. "Person" shall mean an individual, a corporation, a
partnership, a limited liability company, an association, a trust or other
entity or organization, including a government or political subdivision or an
agency or instrumentality thereof.
Section 1.17. "Principal Market" shall mean the American Stock
Exchange, the New York Stock Exchange, the NASDAQ National Market, the NASDAQ
SmallCap Market or the OTC Bulletin Board, whichever is at the time the
principal trading exchange or market for the Common Stock, based upon share
volume.
Section 1.18. "Purchase Price" shall mean the Stated Value per share of
Convertible Preferred Stock, as defined in the Certificate of Designations which
purchase price shall be satisfied by the Investor through the transfer of Assets
pursuant to the APSA.
Section 1.19. "Registrable Securities" shall mean the Conversion Shares
and the Warrant Shares until (i) the Registration Statement has been declared
effective by the SEC, and all Conversion Shares and Warrant Shares have been
disposed of pursuant to the Registration Statement, (ii) all Conversion Shares
and Warrant Shares have been sold under circumstances under which all of the
applicable conditions of Rule 144 (or any similar provision then in force) under
the Securities Act ("Rule 144") are met, (iii) all Conversion Shares and Warrant
Shares have been otherwise transferred to holders who may trade such shares
without restriction under the Securities Act, and the Company has delivered a
new certificate or other evidence of ownership for such securities not bearing a
restrictive legend or (iv) such time as, in the opinion of counsel to the
Company, all Conversion Shares and Warrant Shares may be sold without any time,
volume or manner limitations pursuant to Rule 144(k) (or any similar provision
then in effect) under the Securities Act.
Section 1.20. "Registration Rights Agreement" shall mean the agreement
regarding the filing of the Registration Statement for the resale of the
Registrable Securities, entered into between the Company and the Investor as of
the Closing Date in the form annexed hereto as Exhibit C.
Section 1.21. "Registration Statement" shall mean a registration
statement on Form S-3 (if use of such form is then available to the Company
pursuant to the rules of the SEC and, if not, on such other form promulgated by
the SEC for which the Company then qualifies and which counsel for the Company
shall deem appropriate, and which form shall be available for the resale by the
Investor of the Registrable Securities to be registered thereunder in accordance
with the provisions of this Agreement, the Registration Rights Agreement and in
accordance with the intended method of distribution of such securities), for the
registration of the resale by the Investor of the Registrable Securities under
the Securities Act.
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Section 1.22. "Regulation D" shall have the meaning set forth in the
recitals of this Agreement.
Section 1.23. "SEC" shall mean the Securities and Exchange Commission.
Section 1.24. "Section 4(2)" and "Section 4(6)" shall have the meanings
set forth in the recitals of this Agreement.
Section 1.25. "Securities Act" shall have the meaning set forth in the
recitals of this Agreement.
Section 1.26. "SEC Documents" shall mean the Company's Annual Report on
Form 10-K for the fiscal year ended December 31, 1999 and each report, proxy
statement or registration statement filed by the Company with the SEC pursuant
to the Exchange Act or the Securities Act since the filing of such Annual Report
through the date hereof.
Section 1.27. "Senior Securities" shall mean all existing Series of
Preferred Stock which by their terms are required to be senior in right of
payment of dividends and/or liquidation proceeds to any after-created Series of
Preferred Stock. Upon closing, none of the outstanding Series of Preferred Stock
will be senior in right of payment of dividends and/or liquidation proceeds to
the Convertible Preferred Stock.
Section 1.28. "Shares" shall have the meaning set forth in Section
1.17.
Section 1.29. "Stated Value" shall have the meaning set forth in the
Certificate of Designations.
Section 1.30. "Trading Day" shall mean any day during which the
Principal Market shall be open for business.
Section 1.31. "Warrants" shall mean the Warrants substantially in the
form of Exhibit B to be issued to the Investor hereunder.
Section 1.32. "Warrant Shares" shall mean all shares of Common Stock or
other securities issued or issuable pursuant to exercise of the Warrants.
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ARTICLE II
Purchase and Sale of Convertible Preferred Stock and Warrants
Section 2.1. Investment.
(a) Upon the terms and subject to the conditions set forth herein, and
in consideration for the payment of the Purchase Price by the Investor, the
Company agrees to issue the Convertible Preferred Stock together with the
Warrants on the Closing Date.
(b) The Closing is subject to the satisfaction or waiver by the party
to be benefited thereby of the following conditions:
(i) the conditions to Closing contained in the APSA;
(ii) acceptance and execution by the Company and by the
Investor of this Agreement and all Exhibits hereto;
(iii) all representations and warranties of the Investor
contained herein shall remain true and correct as of
the Closing Date and the Investor shall have
performed all obligations and complied with all
covenants required by this Agreement to be performed
or complied with by the Investor on or prior to the
Closing Date (as a condition to the Company's
obligations);
(iv) all representations and warranties of the Company
contained herein shall remain true and correct as of
the Closing Date and the Company shall have
performed all obligations and complied with all
covenants required by this Agreement to be performed
or complied with by the Company on or prior to the
Closing Date (as a condition to the Investor's
obligations);
(v) the Company shall have obtained all permits and
qualifications required by any state for the offer
and sale of the Convertible Preferred Stock and
Warrants, or shall have the availability of
exemptions therefrom;
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(vi) the sale and issuance of the Convertible Preferred
Stock and the Warrants hereunder, and the proposed
issuance by the Company to the Investor of the
Common Stock underlying the Convertible Preferred
Stock and the Warrants upon the conversion or
exercise thereof shall be legally permitted by all
laws and regulations to which the Investor and the
Company are subject and there shall be no ruling,
judgment or writ of any court prohibiting the
transactions contemplated by this Agreement;
(vii) delivery of the original fully executed Convertible
Preferred Stock certificates and Warrants
certificates to the Investor;
(viii) delivery to the Investor of an opinion of Xxxxx
Xxxxxxx Xxxxxxx & Xxxxx LLP, counsel to the Company,
in the form attached hereto;
(ix) execution and delivery of the Registration Rights
Agreement by the Investor and the Company;
(x) the written consent of holders of at least 85% in
interest of the then outstanding shares of Series G
Convertible Preferred Stock consenting to the
creation of the Convertible Preferred Stock on a
parity with the Series G Convertible Preferred Stock
as to payments of dividends or distribution of
assets upon liquidation, dissolution or winding up
of the Company.
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Section 2.2 Liquidated Damages. The parties hereto acknowledge and
agree that the sums payable pursuant to the Registration Rights Agreement shall
constitute liquidated damages and not penalties. The parties further acknowledge
that (a) the amount of loss or damages likely to be incurred is incapable or is
difficult to precisely estimate, (b) the amounts specified in such agreement
bear a reasonable proportion and are not plainly or grossly disproportionate to
the probable loss likely to be incurred by the Investor in connection with the
failure by the Company to timely cause the registration of the Registrable
Securities and (c) the parties are sophisticated business parties and have been
represented by sophisticated and able legal and financial counsel and negotiated
this Agreement at arm's length.
ARTICLE III
Representations and Warranties of Investor
In addition to and not be way of limitation of the representations and
warranties of the Investor contained in the APSA, the Investor represents and
warrants to the Company that:
Section 3.1. Organization. The Investor is duly organized, validly
existing and in good standing under the laws of its jurisdiction of
organization.
Section 3.2. Intent. The Investor is entering into this Agreement for
its own account and not with a view to or for sale in connection with any
distribution of the Common Stock. The Investor has no present arrangement
(whether or not legally binding) at any time to sell the Convertible Preferred
Stock, the Warrants, any Conversion Shares or Warrant Shares to or through any
person or entity; provided, however, that by making the representations herein,
the Investor does not agree to hold such securities for any minimum or other
specific term and reserves the right to dispose of the Conversion Shares and
Warrant Shares at any time in accordance with federal and state securities laws
applicable to such disposition.
Section 3.3. Sophisticated Investor. The Investor is a sophisticated
investor (as described in Rule 506(b)(2)(ii) of Regulation D) and an accredited
investor (as defined in Rule 501 of Regulation D), and Investor has such
experience in business and financial matters that it has the capacity to protect
its own interests in connection with this transaction and is capable of
evaluating the merits and risks of an investment in the Convertible Preferred
Stock, the Warrants and the underlying Common Stock. The Investor acknowledges
that an investment in the Convertible Preferred Stock, the Warrants and the
underlying Common Stock is speculative and involves a high degree of risk.
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Section 3.4. Authority. This Agreement and each agreement attached as
an Exhibit hereto which is required to be executed by Investor has been duly
authorized and validly executed and delivered by the Investor and is a valid and
binding agreement of the Investor enforceable against it in accordance with its
terms, subject to applicable bankruptcy, insolvency, or similar laws relating
to, or affecting generally the enforcement of, creditors' rights and remedies or
by other equitable principles of general application.
Section 3.5. Not an Affiliate. The Investor is not an officer, director
or "affiliate" (as that term is defined in Rule 405 of the Securities Act) of
the Company.
Section 3.6. Absence of Conflicts. The execution and delivery of this
Agreement and each agreement which is attached as an Exhibit hereto and executed
by the Investor in connection herewith, and the consummation of the transactions
contemplated hereby and thereby, and compliance with the requirements hereof and
thereof by the Investor, will not to the knowledge of the Investor, violate any
law, rule, regulation, order, writ, judgment, injunction, decree or award
binding on Investor or (a) violate any provision of any indenture, instrument or
agreement to which Investor is a party or is subject, or by which Investor or
any of its assets is bound; (b) conflict with or constitute a material default
thereunder; (c) result in the creation or imposition of any lien pursuant to the
terms of any such indenture, instrument or agreement, or constitute a breach of
any fiduciary duty owed by Investor to any third party; or (d) require the
approval of any third-party (which has not been obtained) pursuant to any
material contract, agreement, instrument, relationship or legal obligation to
which Investor is subject or to which any of its assets, operations or
management may be subject.
Section 3.7. Disclosure; Access to Information. The Investor has
received all documents, records, books and other publicly available information
pertaining to Investor's investment in the Company that have been requested by
the Investor. The Company is subject to the periodic reporting requirements of
the Exchange Act, and the Investor has reviewed copies of all SEC Documents
deemed relevant by Investor.
Section 3.8. Manner of Sale. At no time was Investor presented with or
solicited by or through any leaflet, public promotional meeting, television
advertisement or any other form of general solicitation or advertising.
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ARTICLE IV
Representations and Warranties of the Company
In addition to and not by way of limitation of the representations and
warranties of the Company contained in the APSA, the Company represents and
warrants to the Investor that, except as set forth on the Disclosure Schedule
prepared by the Company and attached hereto:
Section 4.1. Organization of the Company. The Company is a corporation
duly incorporated and existing in good standing under the laws of the
Commonwealth of Pennsylvania and has all requisite corporate authority to own
its properties and to carry on its business as now being conducted. The Company
does not have any subsidiaries and does not own more that fifty percent (50%) of
or control any other business entity except as set forth in the SEC Documents.
The Company is duly qualified and is in good standing as a foreign corporation
to do business in every jurisdiction in which the nature of the business
conducted or property owned by it makes such qualification necessary, other than
those in which the failure so to qualify would not have a Material Adverse
Effect.
Section 4.2. Authority. (i) The Company has the requisite corporate
power and corporate authority to enter into and perform its obligations under
this Agreement, the Registration Rights Agreement, and the Warrants and to issue
the Convertible Preferred Stock, the Conversion Shares, the Warrants and the
Warrant Shares pursuant to their respective terms, (ii) the execution, issuance
and delivery of this Agreement, the Registration Rights Agreement, the
Certificate of Designations, the Convertible Preferred Stock certificates and
the Warrants by the Company and the consummation by it of the transactions
contemplated hereby have been duly authorized by all necessary corporate action
and no further consent or authorization of the Company or its Board of Directors
or stockholders is required, and (iii) this Agreement, the Registration Rights
Agreement, the Convertible Preferred Stock certificates and the Warrants have
been duly executed and delivered by the Company and at the Closing shall
constitute valid and binding obligations of the Company enforceable against the
Company in accordance with their terms, except as such enforceability may be
limited by applicable bankruptcy, insolvency, or similar laws relating to, or
affecting generally the enforcement of, creditors' rights and remedies or by
other equitable principles of general application and except the Company makes
no representation or warranty with respect to the enforceability of any terms of
these agreements which require the Company to issue Conversion Shares upon
conversion of the Convertible Preferred Stock and Warrant Shares upon the
exercise of the Warrants notwithstanding the commencement of any case under 11
USC Sec. 101 et seq. (the "Bankruptcy Code") or, in the event it is a debtor
under the Bankruptcy Code, to waive any rights to relief it may have under 11
USC Sec. 362 in respect of the conversion of the Convertible Preferred Stock and
the exercise of the Warrants, or which prohibit the Company from seeking
affirmative judicial relief from its obligations hereunder except pursuant to
the Bankruptcy Code. The Company has duly and validly authorized and reserved
for issuance shares of Common Stock sufficient in number for the conversion of
the Convertible Preferred Stock and for the exercise of the Warrants. The
Company understands and acknowledges the potentially dilutive effect to the
Common Stock of the issuance of the Conversion Shares and, upon any redemption
of the Warrants, the Warrant Shares. The Company further acknowledges that its
obligation to issue Conversion Shares upon conversion of the Convertible
Preferred Stock and Warrant Shares upon exercise of the Warrants in accordance
with this Agreement and the Certificate of Designations is absolute and
unconditional regardless of the dilutive effect that such issuance may have on
the ownership interests of other stockholders of the Company and, to the extent
permitted under the Bankruptcy Code, notwithstanding the commencement of any
case under the Bankruptcy Code. The Company shall not seek affirmative judicial
relief from its obligations hereunder except pursuant to the Bankruptcy Code,
although the Company reserves the right to defend any action brought by the
Investor or any third party. In the event the Company is a debtor under the
Bankruptcy Code, the Company hereby waives to the fullest extent permitted any
rights to relief it may have under 11 U.S.C. Sec. 362 in respect of the
conversion of the Convertible Preferred Stock and the exercise of the Warrants.
The Company agrees, without cost or expense to the Investor, to take or consent
to any and all action necessary to effectuate relief under 11 U.S.C. Sec. 362.
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Section 4.3. Capitalization. The authorized capital stock of the
Company consists of (i) 50,000,000 shares of Common Stock, $0.001 par value per
share, of which 26,745,398 shares are issued and outstanding as of March 31,
2000 and (ii) 1,000,000 shares of Class A preferred stock; of which (A) 500,000
have been designated as Series A Convertible Preferred Stock, par value $2.00
per share, 500,000 of which shares are issued and outstanding, (B) 5,000 have
been designated as Series B Convertible Preferred Stock, par value $2.00 per
share, 1,000 of which are issued and outstanding; (C) 1,000 have been designated
as Series F Convertible Preferred Stock, par value $2.00, 1,000 of which are
issued and outstanding, (D) 3,000 have been designated as Series G Convertible
Preferred Stock, par value $2.00 per share, all of which are issued and
outstanding, and (E) 1,500 have been designated as Series H Convertible
Preferred Stock, par value $2.00 per share, all of which will be issued
hereunder. Except for (i) the outstanding Series A Convertible Preferred Stock,
Series B Convertible Preferred Stock, Series F Convertible Preferred Stock and
Series G Convertible Preferred Stock, (ii) outstanding options and warrants as
set forth in the SEC Documents, and (iii) as set forth in the Disclosure
Schedule, there are no outstanding Capital Shares Equivalents nor any agreements
or understandings pursuant to which any Capital Shares Equivalents may become
outstanding. The Company is not a party to any agreement granting registration
or anti-dilution rights to any person with respect to any of its equity or debt
securities. All of the outstanding shares of Common Stock of the Company have
been duly and validly authorized and issued and are fully paid and
non-assessable.
Section 4.4. Common Stock. The Company has registered its Common Stock
pursuant to Section 12(b) or (g) of the Exchange Act and is in full compliance
with all reporting requirements of the Exchange Act, and the Company is in
compliance with all requirements for the continued listing or quotation of its
Common Stock, and such Common Stock is currently listed or quoted on, the
Principal Market. As of the date hereof, the Principal Market is the Nasdaq
SmallCap Market and the Company has not received any notice regarding, and to
its knowledge there is no threat, of the termination or discontinuance of the
eligibility of the Common Stock for such listing.
Section 4.5. SEC Documents. The Company has made available to the
Investor true and complete copies of the SEC Documents. The Company has not
provided to the Investor any information that, according to applicable law, rule
or regulation, should have been disclosed publicly prior to the date hereof by
the Company, but which has not been so disclosed. As of their respective dates,
the SEC Documents complied in all material respects with the requirements of the
Exchange Act, and rules and regulations of the SEC promulgated thereunder and
the SEC Documents did not contain any untrue statement of a material fact or
omit to state a material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under which
they were made, not misleading. The financial statements of the Company included
in the SEC Documents complied in all material respects with applicable
accounting requirements and the published rules and regulations of the SEC or
other applicable rules and regulations with respect thereto at the time of such
inclusion. Such financial statements have been prepared in accordance with
generally accepted accounting principles applied on a consistent basis during
the periods involved (except (i) as may be otherwise indicated in such financial
statements or the notes thereto or (ii) in the case of unaudited interim
statements, to the extent they exclude footnotes or may be condensed or summary
statements) and fairly present in all material respects the financial position
of the Company as of the dates thereof and the results of operations and cash
flows for the periods then ended (subject, in the case of unaudited interim
statements, to normal year-end audit adjustments). Neither the Company nor any
of its subsidiaries has any material indebtedness, obligations or liabilities of
any kind (whether accrued, absolute, contingent or otherwise, and whether due or
to become due) that would have been required to be reflected in, reserved
against or otherwise described in the financial statements or in the notes
thereto in accordance with GAAP, which was not fully reflected in, reserved
against or otherwise described in the financial statements or the notes thereto
included in the SEC Documents or was not incurred in the ordinary course of
business consistent with the Company's past practices since the last date of
such financial statements.
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Section 4.6. Exemption from Registration; Valid Issuances. Subject to
the accuracy of the Investor's representations in Article III, the sale of the
Convertible Preferred Stock, the Conversion Shares, the Warrants and the Warrant
Shares will not require registration under the Securities Act and/or any
applicable state securities law. When issued and paid for in accordance with the
Warrants and validly converted in accordance with the terms of the Convertible
Preferred Stock, the Conversion Shares and the Warrant Shares will be duly and
validly issued, fully paid, and non-assessable. Neither the sales of the
Convertible Preferred Stock, the Conversion Shares, the Warrants or the Warrant
Shares pursuant to, nor the Company's performance of its obligations under, this
Agreement, the Registration Rights Agreement, the Certificate of Designations or
the Warrants will (i) result in the creation or imposition by the Company of any
liens, charges, claims or other encumbrances upon the Convertible Preferred
Stock, the Conversion Shares, the Warrants or the Warrant Shares or, except as
contemplated herein, any of the assets of the Company, or (ii) entitle the
holders of Outstanding Capital Shares to preemptive or other rights to subscribe
for or acquire the Capital Shares or other securities of the Company. The
Convertible Preferred Stock, the Conversion Shares, the Warrants and the Warrant
Shares shall not subject the Investor to personal liability to the Company or
its creditors by reason of the possession thereof.
Section 4.7. No General Solicitation or Advertising in Regard to this
Transaction. Neither the Company nor any of its affiliates nor, to the knowledge
of the Company, any person acting on its or their behalf (i) has conducted or
will conduct any general solicitation (as that term is used in Rule 502(c) of
Regulation D) or general advertising with respect to the sale of the Convertible
Preferred Stock or the Warrants, or (ii) made any offers or sales of any
security or solicited any offers to buy any security under any circumstances
that would require registration of the Convertible Preferred Stock, the
Conversion Shares, the Warrants or the Warrant Shares under the Securities Act.
Section 4.8. No Conflicts. The execution, delivery and performance of
this Agreement by the Company and the consummation by the Company of the
transactions contemplated hereby, including without limitation the issuance of
and payment of dividends upon the Convertible Preferred Stock, the Conversion
Shares, the Warrants and the Warrant Shares, do not and will not (i) result in a
violation of the Company's Certificate of Incorporation or By-Laws or (ii)
conflict with, or constitute a material 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 of, any material
agreement, indenture or instrument, or any "lock-up" or similar provision of any
underwriting or similar agreement to which the Company is a party, or (iii)
result in a violation of any federal, state or local law, rule, regulation,
order, judgment or decree (including federal and state securities laws and
regulations) applicable to the Company or by which any material property or
asset of the Company is bound or affected, nor is the Company otherwise in
violation of, conflict with or default under any of the foregoing (except in
each case for such conflicts, defaults, terminations, amendments, accelerations,
cancellations and violations as would not have, individually or in the
aggregate, a Material Adverse Effect), provided, that the Company makes no
representation or warranty that any rights of the Investor under this Agreement,
the Certificate of Designations or the Warrants will be enforceable in any
bankruptcy proceeding involving the Company, nor that the enforcement of the
rights of the Investor under this Agreement or the Certificate of Designations
does not conflict with or create an event of default under the governing
documents respecting the creation and sale of the Company's Series B Convertible
Preferred Stock, Series F Convertible Preferred Stock or Series G Convertible
Preferred Stock. Further, the Company does not represent or warrant that any
terms of this Agreement, the Certificate of Designations, the Warrants, the
Registration Rights Agreement or the Convertible Preferred Stock, Conversion
Shares and Warrant Shares issuable pursuant to such documents requiring the
Company to honor redemption requests during bankruptcy or insolvency, or to
honor redemption requests which cause such bankruptcy or insolvency, do not
result in a violation of any federal or state law, rule or regulation applicable
to the Company. The business of the Company is not being conducted in violation
of any law, ordinance or regulation of any governmental entity, except for
possible violations that either singly or in the aggregate would not have a
Material Adverse Effect. The Company is not required under any Federal, state or
local law, rule or regulation to obtain any consent, authorization or order of,
or make any filing or registration with, any court or governmental agency in
order for it to execute, deliver or perform any of its obligations under this
Agreement or issue and sell the Convertible Preferred Stock or the Warrants in
accordance with the terms hereof (other than any SEC, Principal Market or state
securities filings that may be required to be made by the Company subsequent to
Closing, any registration statement that may be filed pursuant hereto, and any
shareholder approval required by the rules applicable to companies whose common
stock trades on the Principal Market); provided that, for purposes of the
representation made in this sentence, the Company is assuming and relying upon
the accuracy of the relevant representations and agreements of the Investor
herein.
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Section 4.9. No Material Adverse Change. Since December 31, 1999, no
Material Adverse Effect has occurred or exists with respect to the Company,
except as disclosed in the SEC Documents.
Section 4.10. No Undisclosed Events or Circumstances. Since December
31, 1999, no event or circumstance has occurred or exists with respect to the
Company or its businesses, properties, prospects, operations or financial
condition, that, under applicable law, rule or regulation, requires public
disclosure or announcement prior to the date hereof by the Company but which has
not been so publicly announced or disclosed in the SEC Documents.
Section 4.11. No Integrated Offering. Other than pursuant to an
effective registration statement under the Securities Act, or pursuant to the
issuance or exercise of employee stock options, or pursuant to its discussion
with the Investor in connection with the transactions contemplated hereby, the
Company has not issued, offered or sold the Convertible Preferred Stock, the
Warrants or any shares of Common Stock (including for this purpose any
securities of the same or a similar class as the Convertible Preferred Stock,
the Warrants or Common Stock, or any securities convertible into, exchangeable
or exercisable for the Convertible Preferred Stock or Common Stock or any such
other securities) within the six-month period next preceding the date hereof,
and the Company shall not permit any of its directors, officers or affiliates
directly or indirectly, to take any action (including, without limitation, any
offering or sale to any Person of the Convertible Preferred Stock, Warrants or
shares of Common Stock), so as to make unavailable the exemption from Securities
Act registration being relied upon by the Company for the offer and sale to the
Investor of the Convertible Preferred Stock (and the Conversion Shares) or the
Warrants (and the Warrant Shares) as contemplated by this Agreement.
Section 4.12. Litigation and Other Proceedings. Except as disclosed in
the SEC Documents, there are no lawsuits or proceedings pending or, to the
knowledge of the Company, threatened, against the Company or any subsidiary, nor
has the Company received any written or oral notice of any such action, suit,
proceeding or investigation, which could reasonably be expected to have a
Material Adverse Effect. Except as set forth in the SEC Documents, no judgment,
order, writ, injunction or decree or award has been issued by or, to the
knowledge of the Company, requested of any court, arbitrator or governmental
agency which could result in a Material Adverse Effect.
Section 4.13. No Misleading or Untrue Communication. The Company and,
to the knowledge of the Company, any person representing the Company, or any
other person selling or offering to sell the Convertible Preferred Stock or the
Warrants in connection with the transaction contemplated by this Agreement, have
not made, at any time, any oral communication in connection with the offer or
sale of the same which contained any untrue statement of a material fact or
omitted to state any material fact necessary in order to make the statements, in
the light of the circumstances under which they were made, not misleading.
12
Section 4.14. Material Non-Public Information. The Company has not
disclosed to the Investor any material non-public information that (i) if
disclosed, would reasonably be expected to have a material effect on the price
of the Common Stock or (ii) according to applicable law, rule or regulation,
should have been disclosed publicly by the Company prior to the date hereof but
which has not been so disclosed.
Section 4.15. Insurance. The Company and each subsidiary maintains
property and casualty, general liability, workers' compensation, environmental
hazard, personal injury and other similar types of insurance with financially
sound and reputable insurers that is adequate, consistent with industry
standards and the Company's historical claims experience. The Company has not
received notice from, and has no knowledge of any threat by, any insurer (that
has issued any insurance policy to the Company) that such insurer intends to
deny coverage under or cancel, discontinue or not renew any insurance policy
presently in force.
Section 4.16. Tax Matters.
(a) The Company and each subsidiary has filed all Tax Returns which it
is required to file under applicable laws; all such Tax Returns are true and
accurate and have been prepared in compliance with all applicable laws; the
Company has paid all Taxes due and owing by it or any subsidiary (whether or not
such Taxes are required to be shown on a Tax Return) and have withheld and paid
over to the appropriate taxing authorities all Taxes which it is required to
withhold from amounts paid or owing to any employee, stockholder, creditor or
other third parties; and since December 31, 1998, the charges, accruals and
reserves for Taxes with respect to the Company (including any provisions for
deferred income taxes) reflected on the books of the Company are adequate to
cover any Tax liabilities of the Company if its current tax year were treated as
ending on the date hereof.
(b) No claim has been made by a taxing authority in a jurisdiction
where the Company does not file tax returns that the Company or any subsidiary
is or may be subject to taxation by that jurisdiction. There are, to the
Company's knowledge, no foreign, federal, state or local tax audits or
administrative or judicial proceedings pending or being conducted with respect
to the Company or any subsidiary; no information related to Tax matters has been
requested by any foreign, federal, state or local taxing authority; and, except
as disclosed above, no written notice indicating an intent to open an audit or
other review has been received by the Company or any subsidiary from any
foreign, federal, state or local taxing authority. There are no material
unresolved questions or claims concerning the Company's Tax liability. The
Company (A) has not executed or entered into a closing agreement pursuant to ss.
7121 of the Internal Revenue Code or any predecessor provision thereof or any
similar provision of state, local or foreign law; or (B) has not agreed to and
is not required to make any adjustments pursuant to ss. 481 (a) of the Internal
Revenue Code or any similar provision of state, local or foreign law by reason
of a change in accounting method initiated by the Company or any of its
subsidiaries, does not have any knowledge that the IRS has proposed any such
adjustment or change in accounting method, and does not have any application
pending with any taxing authority requesting permission for any changes in
accounting methods that relate to the business or operations of the Company. The
Company has not been a United States real property holding corporation within
the meaning of ss. 897(c)(2) of the Internal Revenue Code during the applicable
period specified in ss. 897(c)(1)(A)(ii) of the Internal Revenue Code.
(c) The Company has not made an election under ss. 341(f) of the
Internal Revenue Code. The Company is not liable for the Taxes of another person
that is not a subsidiary of the Company under (A) Treas. Reg. ss. 1.1502-6 (or
comparable provisions of state, local or foreign law), (B) as a transferee or
successor, (C) by contract or indemnity or (D) otherwise. The Company is not a
party to any tax sharing agreement. The Company has not made any payments, is
not obligated to make payments and is not a party to an agreement that could
obligate it to make any payments that would not be deductible under ss. 280G of
the Internal Revenue Code.
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(d) For purposes of this Section 4.16:
"IRS" means the United States Internal Revenue Service.
"Tax" or "Taxes" means federal, state, county, local, foreign,
or other income, gross receipts, ad valorem, franchise,
profits, sales or use, transfer, registration, excise,
utility, environmental, communications, real or personal
property, capital stock, license, payroll, wage or other
withholding, employment, social security, severance, stamp,
occupation, alternative or add-on minimum, estimated and other
taxes of any kind whatsoever (including, without limitation,
deficiencies, penalties, additions to tax, and interest
attributable thereto) whether disputed or not.
"Tax Return" means any return, information report or filing
with respect to Taxes, including any schedules attached
thereto and including any amendment thereof.
Section 4.17. Property. Neither the Company nor any of its subsidiaries
owns any real property. Each of the Company and its subsidiaries has good and
marketable title to all personal property owned by it, free and clear of all
liens, encumbrances and defects except such as do not materially affect the
value of such property and do not materially interfere with the use made and
proposed to be made of such property by the Company; and to the Company's
knowledge any real property, mineral or water rights, and buildings held under
lease by the Company as tenant are held by it under valid, subsisting and
enforceable leases with such exceptions as are not material and do not interfere
with the use made and intended to be made of such property, mineral or water
rights, and buildings by the Company.
Section 4.18. Intellectual Property. Each of the Company and its
subsidiaries owns or possesses adequate and enforceable rights to use all
patents, patent applications, trademarks, trademark applications, trade names,
service marks, copyrights, copyright applications, licenses, know-how (including
trade secrets and other unpatented and/or unpatentable proprietary or
confidential information, systems or procedures) and other similar rights and
proprietary knowledge (collectively, "Intangibles") necessary for the conduct of
its business as now being conducted. To the Company's knowledge, except as
disclosed in the SEC Documents neither the Company nor any of its subsidiaries
is infringing upon or in conflict with any right of any other person with
respect to any Intangibles. Except as disclosed in the SEC Documents, no adverse
claims have been asserted by any person to the ownership or use of any
Intangibles and the Company has no knowledge of any basis for such claim.
14
Section 4.19. Internal Controls and Procedures. The Company maintains
books and records and internal accounting controls which provide reasonable
assurance that (i) all transactions to which the Company or any subsidiary is a
party or by which its properties are bound are executed with management's
authorization; (ii) the recorded accounting of the Company's consolidated assets
is compared with existing assets at regular intervals; (iii) access to the
Company's consolidated assets is permitted only in accordance with management's
authorization; and (iv) all transactions to which the Company or any subsidiary
is a party or by which its properties are bound are recorded as necessary to
permit preparation of the financial statements of the Company in accordance with
U.S. generally accepted accounting principles.
Section 4.20. Payments and Contributions. Neither the Company, any
subsidiary, nor any of its directors, officers or, to its knowledge, other
employees has (i) used any Company funds for any unlawful contribution,
endorsement, gift, entertainment or other unlawful expense relating to political
activity; (ii) made any direct or indirect unlawful payment of Company funds to
any foreign or domestic government official or employee; (iii) violated or is in
violation of any provision of the Foreign Corrupt Practices Act of 1977, as
amended; or (iv) made any bribe, rebate, payoff, influence payment, kickback or
other similar payment to any person with respect to Company matters.
Section 4.21. No Misrepresentation. The representations and warranties
of the Company contained in this Agreement, any schedule, annex or exhibit
hereto and any agreement, instrument or certificate furnished by the Company to
the Investor pursuant to this Agreement, do not contain any 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 light of the circumstances under
which they were made, not misleading.
ARTICLE V
Covenants of the Investor
The Investor covenants with the Company that:
Section 5.1. Compliance with Law. The Investor's trading activities
with respect to shares of the Company's Common Stock will be in compliance with
all applicable state and federal securities laws, rules and regulations and
rules and regulations of the Principal Market on which the Company's Common
Stock is listed. The foregoing includes compliance with all applicable state and
federal securities laws, rules and regulations in the event that the Investor's
beneficial ownership of the Company's Common Stock exceeds 5% of the Company's
then outstanding Common Stock.
Section 5.2. Limitation on Short Sales. The Investor agrees that it
will make no short sales (as defined in any applicable SEC or NASD rules) of the
Company's Common Stock while any of the Convertible Preferred Stock owned by
such Investor remains issued and outstanding. The foregoing limitation shall not
apply on any Trading Day when the closing bid price of the Common Stock on the
previous Trading Day exceeds three (3) times the closing bid price on the
Closing Date.
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ARTICLE VI
Covenants of the Company
Section 6.1. Registration Rights. The Company shall cause the
Registration Rights Agreement to remain in full force and effect and the Company
shall comply in all material respects with the terms thereof.
Section 6.2. Reservation of Common Stock. As of the date hereof, the
Company has reserved and the Company shall continue to reserve and keep
available at all times, free of preemptive rights, shares of Common Stock for
the purpose of enabling the Company to issue the Conversion Shares and the
Warrant Shares pursuant to any conversion of the Convertible Preferred Stock or
exercise of the Warrants. The number of shares so reserved from time to time, as
theretofore increased or reduced as hereinafter provided, may be reduced by the
number of shares actually delivered pursuant to any conversion of the
Convertible Preferred Stock or exercise of the Warrants and the number of shares
so reserved shall be increased or decreased to reflect potential increases or
decreases in the Common Stock that the Company may thereafter be obligated to
issue by reason of adjustments to the Warrants.
Section 6.3. Listing of Common Stock. The Company hereby agrees to
maintain the listing of the Common Stock on a Principal Market, and as soon as
reasonably practicable following the Closing to list the Conversion Shares and
the Warrant Shares on the Principal Market. The Company further agrees, if the
Company applies to have the Common Stock traded on any other Principal Market,
it will include in such application the Conversion Shares and the Warrant
Shares, and will take such other action as is necessary or desirable in the
opinion of the Investor to cause the Conversion Shares and Warrant Shares to be
listed on such other Principal Market as promptly as possible. The Company will
take all action to continue the listing and trading of its Common Stock on a
Principal Market (including, without limitation, maintaining sufficient net
tangible assets) and will comply in all respects with the Company's reporting,
filing and other obligations under the bylaws or rules of the Principal Market
and shall provide Investor with copies of any correspondence to or from such
Principal Market which questions or threatens delisting of the Common Stock,
within three (3) Trading Days of the Company's receipt thereof, until the
Investor has disposed of all of its Registrable Securities. In the event that
the issuance of Conversion Shares, when added to the number of Conversion Shares
previously issued by the Company and the Warrant Shares issued upon exercise of
the Warrants, will exceed 19.9% of the number of shares of the Company's Common
Stock which were issued and outstanding on the Closing Date, the Company will
present a proposal for stockholder approval at the next annual meeting of
stockholders to permit the Company to issue a number of Conversion Shares and
Warrant Shares in excess of 19.9% of the number of the Company's issued and
outstanding shares of Common Stock on the Closing Date, with the recommendation
of the Board of Directors that such proposal be approved. If such proposal is
not approved, the Company shall (i) purchase the unexercisable portion of the
Warrants for cash at a price per share equal to the difference between the
Market Price on the date of the stockholders' meeting and $3.025 and (ii) redeem
any unconvertible Convertible Preferred Stock pursuant to Section 7 of the
Certificate of Designations, within five (5) Trading Days of such vote.
16
Section 6.4. Exchange Act Registration. The Company will cause its
Common Stock to continue to be registered under Section 12(b) or (g) of the
Exchange Act, will use its best efforts to comply in all respects with its
reporting and filing obligations under the Exchange Act, and will not take any
action or file any document (whether or not permitted by the Exchange Act or the
rules thereunder) to terminate or suspend such registration or to terminate or
suspend its reporting and filing obligations under said Act until the Investor
has disposed of all of its Registrable Securities.
Section 6.5. Legends. Except as may be required by any laws or
regulations applicable thereto enacted as of or after the date hereof, the
certificates evidencing the Registrable Securities shall be free of legends,
except as set forth in Article IX.
Section 6.6. Corporate Existence; Conflicting Agreements. The Company
will take all steps necessary to preserve and continue the corporate existence
of the Company. The Company shall not enter into any agreement, the terms of
which agreement would restrict or impair the right or ability of the Company to
perform any of its obligations under this Agreement or any of the other
agreements attached as exhibits hereto or under the Certificate of Designations.
Section 6.7. Consolidation; Merger. The Company shall not, at any time
after the date hereof, effect any merger or consolidation of the Company with or
into, or a transfer of all or substantially all of the assets of the Company to,
another entity (a "Consolidation Event") unless the resulting successor or
acquiring entity (if not the Company) assumes by written instrument or by
operation of law the obligation to deliver to the Investor such shares of stock
and/or securities as the Investor is entitled to receive pursuant to this
Agreement and the Certificate of Designations.
Section 6.8. Issuance of Convertible Preferred Stock and Warrant
Shares. The sale of the Convertible Preferred Stock and the Warrants and the
issuance of the Warrant Shares pursuant to exercise of the Warrants and the
Conversion Shares upon conversion of the Convertible Preferred Stock shall be
made in accordance with the provisions and requirements of Section 4(2), 4(6) or
Regulation D and any applicable state securities law. The Company shall make any
necessary SEC and "blue sky" filings required to be made by the Company in
connection with the sale of the Securities to the Investor as required by all
applicable laws, and shall provide a copy thereof to the Investor promptly after
such filing.
Section 6.9. Limitation on Future Financing. The Company agrees that it
will not enter into any sale of its securities for cash at a discount to Market
Price, the principal purpose of which is to raise money, until 120 days after
the effective date of the Registration Statement except for any sales (i)
pursuant to any presently existing employee benefit plan which plan has been
approved by the Company's stockholders, (ii) pursuant to any compensatory plan
for a full-time employee or key consultant, (iii) pursuant to a shelf
registration statement, or (iv) with the prior approval of the Investor, which
will not be unreasonably withheld.
17
Section 6.10. Pro-Rata Redemption. The Company agrees that if it shall
redeem any of the Convertible Preferred Stock, that it shall make such
redemption pro-rata among the Investor and any other then holders of the
Convertible Preferred Stock in proportion to their respective ownership
interests of such securities.
ARTICLE VII
Survival; Indemnification
Section 7.1. Survival. The representations, warranties and covenants
made by each of the Company and the Investor in this Agreement, the annexes,
schedules and exhibits hereto and in each instrument, agreement and certificate
entered into and delivered by them pursuant to this Agreement, shall survive the
Closing and the consummation of the transactions contemplated hereby; provided,
however, that the representations and warranties of the parties set forth in
Articles 3 and 4 shall survive until the earlier of (i) September 15, 2005 and
(ii) the date on which all shares of Convertible Preferred Stock issued pursuant
to this Agreement have been converted into shares of the Company's Common Stock,
but in no event shall these representations and warranties expire before May 5,
2003. In the event of a breach or violation of any of such representations,
warranties or covenants, the party to whom such representations, warranties or
covenants have been made shall have all rights and remedies for such breach or
violation available to it under the provisions of this Agreement, irrespective
of any investigation made by or on behalf of such party on or prior to the
Closing Date.
Section 7.2. Indemnity. In addition to and not by way of limitation of
the indemnity provisions contained in the APSA:
(a) The Company hereby agrees to indemnify and hold harmless the
Investor, its respective Affiliates and their respective officers, directors,
partners and members (collectively, the "Investor Indemnitees"), from and
against any and all Damages in excess of $50,000, and agrees to reimburse the
Investor Indemnitees for all reasonable out-of-pocket expenses (including the
reasonable fees and expenses of legal counsel), in each case promptly as
incurred by the Investor Indemnitees and to the extent arising out of or in
connection with:
(i) any misrepresentation, omission of fact or breach of any
of the Company's representations or warranties contained in this
Agreement, the annexes, schedules or exhibits hereto or any instrument,
agreement or certificate entered into or delivered by the Company
pursuant to this Agreement; or
18
(ii) any failure by the Company to perform in any material
respect any of its covenants, agreements, undertakings or obligations
set forth in this Agreement, the annexes, schedules or exhibits hereto
or any instrument, agreement or certificate entered into or delivered
by the Company pursuant to this Agreement; or
(iii) any action instituted against the Investor by any
stockholder of the Company who is not an Affiliate of an Investor, with
respect to any of the transactions contemplated by this Agreement.
(b) The Investor hereby agrees to indemnify and hold harmless the
Company, its Affiliates and their respective officers, directors, partners and
members (collectively, the "Company Indemnitees"), from and against any and all
Damages in excess of $50,000, and agrees to reimburse the Company Indemnitees
for reasonable all out-of-pocket expenses (including the reasonable fees and
expenses of legal counsel), in each case promptly as incurred by the Company
Indemnitees and to the extent arising out of or in connection with:
(i) any misrepresentation, omission of fact, or breach of
any of the Investor's representations or warranties
contained in this Agreement, the annexes, schedules
or exhibits hereto or any instrument, agreement or
certificate entered into or delivered by the Investor
pursuant to this Agreement; or
(ii) any failure by the Investor to perform in any
material respect any of its covenants, agreements,
undertakings or obligations set forth in this
Agreement, the annexes, schedules or exhibits hereto
or any instrument, agreement or certificate entered
into or delivered by the Investor pursuant to this
Agreement.
Section 7.3. Notice. Promptly after receipt by either party hereto
seeking indemnification pursuant to Section 7.2 (an "Indemnified Party") of
written notice of any investigation, claim, proceeding or other action in
respect of which indemnification is being sought (each, a "Claim"), the
Indemnified Party promptly shall notify the party from whom indemnification
pursuant to Section 7.2 is being sought (the "Indemnifying Party") of the
commencement thereof; but the omission so to notify the Indemnifying Party shall
not relieve it from any liability that it otherwise may have to the Indemnified
Party, except to the extent that the Indemnifying Party is actually prejudiced
by such omission or delay. In connection with any Claim as to which both the
Indemnifying Party and the Indemnified Party are parties, the Indemnifying Party
shall be entitled to assume the defense thereof. Notwithstanding the assumption
of the defense of any Claim by the Indemnifying Party, the Indemnified Party
shall have the right to employ separate legal counsel and to participate in the
defense of such Claim, and the Indemnifying Party shall bear the reasonable
fees, out-of-pocket costs and expenses of such separate legal counsel to the
Indemnified Party if (and only if): (x) the Indemnifying Party shall have agreed
to pay such fees, out-of-pocket costs and expenses, (y) the Indemnified Party
reasonably shall have concluded that representation of the Indemnified Party and
the Indemnifying Party by the same legal counsel would not be appropriate due to
actual or, as reasonably determined by legal counsel to the Indemnified Party,
potentially differing interests between such parties in the conduct of the
defense of such Claim, or if there may be legal defenses available to the
Indemnified Party that are in addition to or disparate from those available to
the Indemnifying Party, or (z) the Indemnifying Party shall have failed to
employ legal counsel reasonably satisfactory to the Indemnified Party within a
reasonable period of time after notice of the commencement of such Claim. If the
Indemnified Party employs separate legal counsel in circumstances other than as
described in clauses (x), (y) or (z) above, the fees, costs and expenses of such
legal counsel shall be borne exclusively by the Indemnified Party. Except as
provided above, the Indemnifying Party shall not, in connection with any Claim
in the same jurisdiction, be liable for the fees and expenses of more than one
firm of legal counsel for the Indemnified Party (together with appropriate local
counsel). The Indemnifying Party shall not, without the prior written consent of
the Indemnified Party (which consent shall not unreasonably be withheld), settle
or compromise any Claim or consent to the entry of any judgment that does not
include an unconditional release of the Indemnified Party from all liabilities
with respect to such Claim or judgment.
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Section 7.4. Direct Claims. In the event one party hereunder should
have a claim for indemnification that does not involve a claim or demand being
asserted by a third party, the Indemnified Party promptly shall deliver notice
of such claim to the Indemnifying Party. If the Indemnified Party disputes the
claim, such dispute shall be resolved by mutual agreement of the Indemnified
Party and the Indemnifying Party or by binding arbitration conducted in
accordance with the procedures and rules of the American Arbitration Association
as set forth in Article X. Judgment upon any award rendered by any arbitrators
may be entered in any court having competent jurisdiction thereof.
ARTICLE VIII
Due Diligence Review; Non-Disclosure of Non-Public Information.
Section 8.1. Due Diligence Review. Subject to Section 8.2, the Company
shall make available for inspection and review by the Investor, advisors to and
representatives of the Investor (who may or may not be affiliated with the
Investor and who are reasonably acceptable to the Company), any underwriter
participating in any disposition of the Registrable Securities on behalf of the
Investor pursuant to the Registration Statement, any such registration statement
or amendment or supplement thereto or any blue sky, Nasdaq or other filing, all
SEC Documents and other filings with the SEC, and all other publicly available
corporate documents and properties of the Company as may be reasonably necessary
for the purpose of such review, and cause the Company's officers, directors and
employees to supply all such publicly available information reasonably requested
by the Investor or any such representative, advisor or underwriter in connection
with such Registration Statement (including, without limitation, in response to
all questions and other inquiries reasonably made or submitted by any of them),
prior to and from time to time after the filing and effectiveness of the
Registration Statement for the sole purpose of enabling the Investor and such
representatives, advisors and underwriters and their respective accountants and
attorneys to conduct initial and ongoing due diligence with respect to the
Company and the accuracy of the Registration Statement.
Section 8.2. Non-Disclosure of Non-Public Information.
(a) The Company shall not disclose material non-public information to
the Investor, advisors to or representatives of the Investor unless prior to
disclosure of such information the Company identifies such information as being
non-public information and provides the Investor, such advisors and
representatives with the opportunity to accept or refuse to accept such
non-public information for review. Other than disclosure of any comment letters
received from the SEC staff with respect to the Registration Statement, the
Company may, as a condition to disclosing any non-public information hereunder,
require the Investor's advisors and representatives to enter into a
confidentiality agreement in form and content reasonably satisfactory to the
Company and the Investor.
20
(b) Nothing herein shall require the Company to disclose material
non-public information to the Investor or their advisors or representatives, and
the Company represents that it does not disseminate material non-public
information to any investors who purchase stock in the Company in a public
offering, to money managers or to securities analysts, provided, however, that
notwithstanding anything herein to the contrary, the Company will, as
hereinabove provided, promptly notify the advisors and representatives of the
Investor and, if any, underwriters, of any event or the existence of any
circumstance (without any obligation to disclose the specific event or
circumstance) of which it becomes aware, constituting material non-public
information (whether or not requested of the Company specifically or generally
during the course of due diligence by such persons or entities), which, if not
disclosed in the prospectus included in the Registration Statement would cause
such prospectus to include a material misstatement or to omit a material fact
required to be stated therein in order to make the statements, therein in light
of the circumstances in which they were made, not misleading. Nothing contained
in this Section 8.2 shall be construed to mean that such persons or entities
other than the Investor (without the consent of the Investor prior to disclosure
of such information as set forth in Section 8.2(a)) may not obtain non-public
information in the course of conducting due diligence in accordance with the
terms of this Agreement and nothing herein shall prevent any such persons or
entities from notifying the Company of their opinion that based on such due
diligence by such persons or entities, that the Registration Statement contains
an untrue statement of a material fact or omits a material fact required to be
stated in the Registration Statement or necessary to make the statements
contained therein, in light of the circumstances in which they were made, not
misleading.
ARTICLE IX
Legends; Transfer Agent Instructions
Section 9.1. Legends. Unless otherwise provided below, each certificate
representing the Convertible Preferred Stock, Warrants or Registrable Securities
will bear the following legend or equivalent (the "Legend"):
THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE
U.S. SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR STATE
SECURITIES LAWS AND HAVE BEEN ISSUED IN RELIANCE UPON AN EXEMPTION FROM THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND SUCH LAWS. NEITHER THIS
SECURITY NOR ANY INTEREST OR PARTICIPATION HEREIN MAY BE SOLD, ASSIGNED,
TRANSFERRED, PLEDGED, ENCUMBERED, OR OTHERWISE DISPOSED OF, EXCEPT PURSUANT TO
AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT AND STATE
SECURITIES LAWS OR PURSUANT TO A TRANSACTION THAT IS EXEMPT FROM SUCH
REGISTRATION.
21
Section 9.2. No Other Legend or Stock Transfer Restrictions. No legend
other than the one specified in Section 9.1 has been or shall be placed on the
share certificates representing the Registrable Securities and no instructions
or "stop transfer orders," "stock transfer restrictions," or other restrictions
have been or shall be given to the Company's transfer agent with respect thereto
other than as expressly set forth in this Article IX or pursuant to Section 6.6.
Section 9.3. Compliance. Nothing in this Article shall affect in any
way the Investor's obligations to comply with all applicable securities laws
upon resale of the Common Stock nor the Company's obligations under the
Registration Rights Agreement.
ARTICLE X
Choice of Law; Arbitration
Section 10.1. Governing Law/Arbitration. This Agreement shall be
governed by and construed in accordance with the laws of the State of New York
applicable to contracts made in New York by persons domiciled in New York City
and without regard to its principles of conflicts of laws. Any dispute under
this Agreement shall be submitted to arbitration under the American Arbitration
Association (the "AAA") in New York City, New York, and shall be finally and
conclusively determined by the decision of a board of arbitration consisting of
three (3) members (hereinafter referred to as the "Board of Arbitration")
selected according to the rules governing the AAA. The Board of Arbitration
shall meet on consecutive business days in New York City, New York, and shall
reach and render a decision in writing (concurred in by a majority of the
members of the Board of Arbitration) with respect to the amount, if any, which
the losing party is required to pay to the other party in respect of a claim
filed. In connection with rendering its decisions, the Board of Arbitration
shall adopt and follow the laws of the State of New York unless the matter at
issue is the corporation law of the company's state of incorporation, in which
event the corporation law of such jurisdiction shall govern such issue. To the
extent practical, decisions of the Board of Arbitration shall be rendered no
more than thirty (30) calendar days following commencement of proceedings with
respect thereto. The Board of Arbitration shall cause its written decision to be
delivered to all parties involved in the dispute. Any decision made by the Board
of Arbitration (either prior to or after the expiration of such thirty (30)
calendar day period) shall be final, binding and conclusive on the parties to
the dispute, and entitled to be enforced to the fullest extent permitted by law
and entered in any court of competent jurisdiction. The Board of Arbitration
shall be authorized and is hereby directed to enter a default judgment against
any party failing to participate in any proceeding hereunder within the time
periods set forth in the AAA rules. The non-prevailing party to any arbitration
(as determined by the Board of Arbitration) shall pay the expenses of the
prevailing party, including reasonable attorney's fees, in connection with such
arbitration. Any party shall be entitled to obtain injunctive relief from a
court in any case where such relief is available, and the non-prevailing party
to any such injunctive proceeding shall pay the expenses of the prevailing
party, including reasonable attorney's fees, in connection with such proceeding.
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ARTICLE XI
Assignment
Section 11.1. Assignment. Neither this Agreement nor any rights of the
Investor or the Company hereunder may be assigned by either party to any other
person. Notwithstanding the foregoing, (a) the provisions of this Agreement
shall inure to the benefit of, and be enforceable by, any permitted transferee
of any of the Convertible Preferred Stock or Warrants purchased or acquired by
the Investor with respect to the Convertible Preferred Stock or Warrants held by
such person, and (b) upon the prior written consent of the Company, which
consent shall not unreasonably be withheld or delayed, the Investor's interest
in this Agreement may be assigned at any time, in whole or in part, to any other
person or entity (including any Affiliate of the Investor) who agrees to make
the representations and warranties contained in Article III and who agrees to be
bound by the terms of this Agreement. The Investor shall not assign its rights
under this Agreement to any Person which the Company reasonably believes is a
competitor of the Company.
ARTICLE XII
Notices
Section 12.1. Notices. All notices, demands, requests, consents,
approvals, and other communications required or permitted hereunder shall be in
writing and, unless otherwise specified herein, shall be (i) hand delivered,
(ii) deposited in the mail, registered or certified, return receipt requested,
postage prepaid, (iii) delivered by reputable air courier service with charges
prepaid, or (iv) transmitted by facsimile, addressed as set forth below or to
such other address as such party shall have specified most recently by written
notice. Any notice or other communication required or permitted to be given
hereunder shall be deemed effective (a) upon hand delivery or delivery by
facsimile, with accurate confirmation generated by the transmitting facsimile
machine, at the address or number designated below (if delivered on a business
day during normal business hours where such notice is to be received), or the
first business day following such delivery (if delivered other than on a
business day during normal business hours where such notice is to be received)
or (b) on the first business day following the date of sending by reputable
courier service, fully prepaid, addressed to such address, or (c) upon actual
receipt of such mailing, if mailed. The addresses for such communications shall
be:
If to the Company: Sedona Corporation
000 Xxxxx Xxxxx Xxxx
Xxxxxxxx, XX 00000
Attention: Xxxxx X. Xxxxxx
Facsimile: (000) 000-0000
with a copy to: Xxxxx Xxxxxxx Xxxxxxx & Xxxxx LLP
(shall not constitute notice) 0000 Xxxxxxxxxx Xxxxxx, XX
Xxxxxxxxxx, XX 00000
Attention: Xxxxxx X. Xxxxxx, Esq.
Facsimile: 000-000-0000
If to the Investor: Acxiom Corporation
#0 Xxxxxxxxxxx Xxx
Xxxxxx Xxxx, XX 00000
Attention: General Counsel
Facsimile: 000-000-0000
with a copy to: Friday, Xxxxxxxx & Xxxxx
(shall not constitute notice) 000 Xxxx Xxxxxxx Xxxxxx, Xxxxx 0000
Xxxxxx Xxxx, XX 00000
Attention: Xxxxx X. Xxxxxx, Esq.
Facsimile: 000-000-0000
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Either party hereto may from time to time change its address or facsimile number
for notices under this Section 12.1 by giving written notice of such changed
address or facsimile number to the other party hereto as provided in this
Section 12.1.
ARTICLE XIII
Miscellaneous
Section 13.1. Counterparts/Facsimile/Amendments. This Agreement may be
executed in multiple counterparts, each of which may be executed by less than
all of the parties and shall be deemed to be an original instrument which shall
be enforceable against the parties actually executing such counterparts and all
of which together shall constitute one and the same instrument. Except as
otherwise stated herein, in lieu of the original documents, a facsimile
transmission or copy of the original documents shall be as effective and
enforceable as the original. This Agreement may be amended only by a writing
executed by all parties.
Section 13.2. Entire Agreement. This Agreement, the APSA, the Operating
Agreement effective February 1, 2000, the Addendum to Operating Agreement
effective March 22, 2000, the agreements attached as Exhibits hereto and to the
APSA, which include, but are not limited to the Certificate of Designations, the
Warrants and the Registration Rights Agreement, set forth the entire agreement
and understanding of the parties relating to the subject matter hereof and
supersedes all prior and contemporaneous agreements, negotiations and
understandings between the parties, both oral and written relating to the
subject matter hereof. The terms and conditions of all Exhibits to this
Agreement are incorporated herein by this reference and shall constitute part of
this Agreement as is fully set forth herein.
Section 13.3. Severability. In the event that any provision of this
Agreement becomes or is declared by a court of competent jurisdiction to be
illegal, unenforceable or void, this Agreement shall continue in full force and
effect without said provision; provided that such severability shall be
ineffective if it materially changes the economic benefit of this Agreement to
any party.
Section 13.4. Headings. The headings used in this Agreement are used
for convenience only and are not to be considered in construing or interpreting
this Agreement.
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Section 13.5. Number and Gender. There may be one or more Investor
parties to this Agreement, which Investor may be natural persons or entities.
All references to plural Investors shall apply equally to a single Investor if
there is only one Investor, and all references to an Investor as "it" shall
apply equally to a natural person.
Section 13.6. Reporting Entity for the Common Stock. The reporting
entity relied upon for the determination of the trading price or trading volume
of the Common Stock on any given Trading Day for the purposes of this Agreement
shall be Bloomberg, L.P. or any successor thereto. The written mutual consent of
the Investor and the Company shall be required to employ any other reporting
entity.
Section 13.7. Replacement of Certificates. Upon (i) receipt of evidence
reasonably satisfactory to the Company of the loss, theft, destruction or
mutilation of a certificate representing the Convertible Preferred Stock or any
Conversion Shares or Warrants or any Warrant Shares and (ii) in the case of any
such loss, theft or destruction of such certificate, upon delivery of an
indemnity agreement or security reasonably satisfactory in form to the Company
(which shall not include the posting of any bond) or (iii) in the case of any
such mutilation, on surrender and cancellation of such certificate, the Company
at its expense will execute and deliver, in lieu thereof, a new certificate of
like tenor.
Section 13.8. Fees and Expenses. Each of the Company and the Investor
agrees to pay its own expenses incident to the performance of its obligations
hereunder.
Section 13.9. Brokerage. Each of the parties hereto represents that it
has had no dealings in connection with this transaction with any finder or
broker who will demand payment of any fee or commission from the other party.
The Company on the one hand, and the Investor, on the other hand, agree to
indemnify the other against and hold the other harmless from any and all
liabilities to any person claiming brokerage commissions or finder's fees on
account of services purported to have been rendered on behalf of the
indemnifying party in connection with this Agreement or the transactions
contemplated hereby.
Section 13.10. Publicity. The Company agrees it will not issue any
press release or other public announcement of the transactions contemplated by
this Agreement without the prior consent of the Investor, which shall not be
unreasonably withheld nor delayed by more than two (2) Trading Days from its
receipt of such proposed release. No release shall name the Investor without its
express consent.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by the undersigned, thereunto duly authorized, as of the date first set
forth above.
SEDONA CORPORATION
By: /s/ Xxxxx X. Xxxxxx
----------------------------------------
Name: Xxxxx X. Xxxxxx
Title: President and CEO
ACXIOM CORPORATION
By: /s/ Xxxxxxxxx X. Xxxxxxxxx
----------------------------------------
Name: Xxxxxxxxx X. Xxxxxxxxx
Title: Finance and Accounting Leader,
Financial Services Division
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