INVESTMENT AGREEMENT
dated as of
January 12, 2001
among
DATAWATCH CORPORATION,
WC CAPITAL, LLC
and
CARNEGIE HILL ASSOCIATES, LLC
TABLE OF CONTENTS
Page
ARTICLE 1
DEFINITIONS
SECTION 1.01. Definitions....................................................1
ARTICLE 2
PURCHASE AND SALE
SECTION 2.01. Purchase and Sale..............................................5
SECTION 2.02. Closing........................................................5
SECTION 2.03. Legending of Securities........................................6
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
SECTION 3.01. Corporate Existence and Power..................................6
SECTION 3.02. Corporate Authorization........................................6
SECTION 3.03. Governmental Authorization.....................................7
SECTION 3.04. Non-contravention..............................................7
SECTION 3.05. Capitalization.................................................8
SECTION 3.06. Subsidiaries...................................................8
SECTION 3.07. SEC Filings....................................................9
SECTION 3.08. Financial Statements...........................................9
SECTION 3.09. Absence of Certain Changes....................................10
SECTION 3.10. No Undisclosed Material Liabilities...........................11
SECTION 3.11. Litigation....................................................12
SECTION 3.12. Compliance with Laws..........................................12
SECTION 3.13. Finders' Fees.................................................12
SECTION 3.14. Employee Benefit Plans........................................12
SECTION 3.15. Taxes.........................................................14
SECTION 3.16. Environmental Matters.........................................14
SECTION 3.17. Title to Properties...........................................16
SECTION 3.18. Intellectual Property.........................................16
SECTION 3.19. Significant Agreements........................................17
SECTION 3.20. Exemption from Registration...................................18
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Page
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS
SECTION 4.01. Organization..................................................18
SECTION 4.02. Power and Authorization.......................................18
SECTION 4.03. Finders' Fees.................................................19
SECTION 4.04. Purchase for Investment.......................................19
SECTION 4.05. Disclosure of Information.....................................19
SECTION 4.06. Restricted Securities.........................................19
ARTICLE 5
CONDITIONS TO CLOSING
SECTION 5.01. Conditions to the Obligations of the Purchasers...............20
SECTION 5.02. Conditions to the Obligations of the Company..................24
ARTICLE 6
COVENANTS OF THE COMPANY
SECTION 6.01. Notices of Certain Events.....................................24
SECTION 6.02. Registration Rights...........................................25
SECTION 6.03. Access to Book and Records....................................25
ARTICLE 7
ADDITIONAL COVENANTS
SECTION 7.01. Board Representation; Committees..............................25
SECTION 7.02. Reports.......................................................27
SECTION 7.03. Preemptive Rights.............................................28
SECTION 7.04. Fees and Expenses.............................................30
SECTION 7.05. Use of Proceeds...............................................30
ARTICLE 8
TERMINATION
SECTION 8.01. Grounds for Termination.......................................31
SECTION 8.02. Effect of Termination.........................................31
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Page
ARTICLE 9
MISCELLANEOUS
SECTION 9.01. Notices.......................................................31
SECTION 9.02. Survival......................................................33
SECTION 9.03. Amendments and Waivers........................................33
SECTION 9.04. Successors and Assigns........................................34
SECTION 9.05. Governing Law.................................................34
SECTION 9.06. Counterparts; Third Party Beneficiaries.......................34
SECTION 9.07. Public Announcements..........................................34
SECTION 9.08. Entire Agreement; Exhibits....................................34
SECTION 9.09. Headings......................................................35
Exhibit A Registration Rights
Exhibit B Share Allocation
Exhibit C Form of Indemnity Contract
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INVESTMENT AGREEMENT
INVESTMENT AGREEMENT ("Agreement"), dated as of January 12, 2001, among
Datawatch Corporation, a Delaware corporation (the "Company"), WC Capital, LLC,
a Delaware limited liability company ("WC"), and Carnegie Hill Associates, LLC,
a Delaware limited liability company ("CHA" and, together with WC, the
"Purchasers").
WHEREAS, the Company desires to sell to the Purchasers, and the Purchasers
desire to purchase from the Company, an aggregate of 1,875,000 shares of Common
Stock upon the terms and subject to the conditions of this Agreement.
NOW, THEREFORE, in consideration of the premises and the respective
representations, warranties, covenants, agreements and conditions contained
herein, each of the Company and the Purchasers agrees as follows:
ARTICLE 1
DEFINITIONS
SECTION 1.01. Definitions. (a) The following terms, as used herein, have
the following meanings:
"1933 Act" means the Securities Act of 1933, as amended, and the rules and
regulations promulgated thereunder.
"1934 Act" means the Securities Exchange Act of 1934, as amended, and the
rules and regulations promulgated thereunder.
"Affiliate" means, with respect to any Person, any other Person directly or
indirectly controlling, controlled by or under common control with such Person.
"Balance Sheet" means the audited consolidated balance sheet of the Company
as of September 30, 2000.
"Balance Sheet Date" means September 30, 2000.
"beneficial ownership" and "beneficially own" shall be determined in
accordance with Rules 13d-3 and 13d-5 under the 1934 Act.
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"Benefit Arrangement" means any employment, severance or similar contract
or arrangement (whether or not written) or any plan, policy, fund, program or
contract or arrangement (whether or not written) providing for compensation,
bonus, profit-sharing, stock option or other stock-related rights or other forms
of incentive or deferred compensation, vacation benefits, insurance coverage
(including any self-insured arrangements), health or medical benefits,
disability benefits, worker's compensation, supplemental unemployment benefits,
severance benefits and post-employment or retirement benefits (including
compensation, pension, health, medical or life insurance or other benefits) that
(i) is not an Employee Plan; (ii) is entered into, maintained, administered or
contributed to, as the case may be, by the Company or any of its Affiliates; and
(iii) covers any employee or former employee of the Company or any Subsidiary.
"Closing Date" means the date of the Closing.
"Code" means the United States Internal Revenue Code of 1986, as amended.
"Commission" means the United States Securities and Exchange Commission.
"Common Stock" means the Common Stock of the Company, par value $.01 per
share.
"Common Stock Plan" means any present or future Employee Plan, employment
agreement, restricted stock, stock option, stock purchase or dividend
reinvestment plan or other similar type of plan or arrangement of the Company
which provides for the issuance of equity securities or options or rights to
purchase equity securities of the Company.
"Convertible Securities" means any securities convertible into or
exercisable or exchangeable for Voting Securities.
"Employee Plan" means any "employee benefit plan," as defined in Section
3(3) of ERISA, that (i) is subject to any provision of ERISA; (ii) is
maintained, administered or contributed to by the Company or any of its
Affiliates; and (iii) covers any employee or former employee of the Company or
any Subsidiary.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended, and any successor statute thereto, and the rules and regulations
promulgated thereunder.
"ERISA Affiliate" of any entity means any other entity which, together with
such entity, would be treated as a single employer under Section 414 of the
Code.
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"Lien" means, with respect to any property or asset, any mortgage, lien,
pledge, charge, security interest, encumbrance or other adverse claim of any
kind in respect of such property or asset. For the purposes of this Agreement, a
Person shall be deemed to own subject to a Lien any property or asset which it
has acquired or holds subject to the interest of a vendor or lessor under any
conditional sale agreement, capital lease or other title retention agreement
relating to such property or asset.
"Material Adverse Effect" means a material adverse effect on the condition
(financial or otherwise), business, assets, results of operations or prospects
of the Company and the Subsidiaries, taken as a whole.
"Multiemployer Plan" means a multiemployer plan, as defined in Section
3(37) of ERISA.
"New Shares" means any newly issued shares of capital stock of the Company,
including Common Stock and any class or series of preferred stock, whether
authorized or not, and Rights to acquire shares of Common Stock or preferred
stock.
"Originally Issued Shares" means, with respect to any Purchaser and as of
any time, the aggregate number of Shares issued to such Purchaser on the Closing
Date.
"PBGC" means the Pension Benefit Guaranty Corporation.
"Person" means an individual, corporation, partnership, limited liability
company, association, trust or other entity or organization, including a
government or political subdivision or an agency or instrumentality thereof.
"Registration Rights Agreement" means the registration rights set forth in
Exhibit A.
"Rights" means any options, warrants, convertible or exchangeable
securities or other rights, however denominated, to subscribe for, purchase or
otherwise acquire any equity interest, including any Common Stock or preferred
stock of any class or series, with or without payment of additional
consideration in cash or property, either immediately or upon the occurrence of
a specified date or specified event or the satisfaction or happening of any
other condition or contingency.
"Subsidiary" means any entity of which securities or other ownership
interests having ordinary voting power to elect a majority of the board of
directors or other persons performing similar functions are at the time directly
or indirectly owned by the Company.
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"Tax" (and, with correlative meaning, "Taxes" and "Taxable") means (i) any
net income, alternative or add-on minimum tax, gross income, gross receipts,
sales, use, ad valorem, value added, transfer, franchise, profits, license,
withholding on amounts paid to or by any Person, payroll, employment, excise,
severance, stamp, occupation, premium, property, environmental or windfall
profit tax, custom, duty or other tax, governmental fee or other like assessment
or charge of any kind whatsoever, together with any interest or any penalty,
addition to tax or additional amount imposed by any governmental authority (a
"Taxing Authority") responsible for the imposition of any such tax (domestic or
foreign); (ii) any liability of any Person for the payment of any amounts of the
type described in clause (i) as a result of being a member of any affiliated,
consolidated, combined or unitary group or being a party to any agreement or
arrangement whereby liability of a Person for payments of such amounts was
determined or taken into account with reference to the liability of any other
Person for any period; and (iii) any liability of any Person for the payment of
any amounts of the type described in clause (i) as a result of any express or
implied obligation to indemnify any other Person.
"Voting Securities" means all securities of the Company entitled, in the
ordinary course, to vote in the election of Directors of the Company.
(b) Each of the following terms is defined in the Section set forth
opposite such term:
Term Section
---- -------
Accredited Investor................................. 4.04
Additional Shares................................... 7.03(c)
Closing............................................. 2.02
Company Securities.................................. 3.05(b)
Company 10-K........................................ 3.07(a)
Contract............................................ 3.04
Environmental Laws.................................. 3.16(c)(ii)
Intellectual Property............................... 3.18
Notice.............................................. 7.03(a)
Purchase Price...................................... 2.01
Purchaser Nominee................................... 7.01(a)
Returns............................................. 3.15
SEC Reports......................................... 3.07(a)
Shares.............................................. 2.01
Significant Agreements.............................. 3.19
Subsidiary Securities............................... 3.06(b)
Transaction......................................... 7.03(b)
Transaction Shares.................................. 7.03(b)
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ARTICLE 2
PURCHASE AND SALE
SECTION 2.01. Purchase and Sale. Upon the terms and subject to the
conditions of this Agreement, the Company agrees to sell and the Purchasers
agree, severally and not jointly, to purchase from the Company, for an aggregate
purchase price of $1,162,500 (the "Purchase Price"), an aggregate of 1,875,000
shares of Common Stock (the "Shares"). The number of Shares to be purchased at
the Closing by each Purchaser, and the portion of the Purchase Price to be paid
by each Purchaser, are set forth opposite such Purchaser's name on Exhibit B
hereto.
SECTION 2.02. Closing. The closing (the "Closing") of the transactions
contemplated hereby shall take place at the offices of Xxxxxx Xxxxxx & Xxxxxxx,
00 Xxxx Xxxxxx, Xxx Xxxx, XX 00000-0000, at 4:30 p.m., New York time, on January
12, 2001, or at such other time or place as the parties may agree. At the
Closing:
(a) The Company shall deliver to each Purchaser one or more certificates
for the Shares, registered in the name of such Purchaser and representing the
number of the Shares to be purchased by such Purchaser; and
(b) Each Purchaser shall deliver to the Company an amount equal to the
number of the Shares to be purchased by such Purchaser at the Closing multiplied
by $0.62 per share in immediately available funds by wire transfer to an account
of the Company designated by the Company, by notice to each Purchaser, no later
than two business days prior to the Closing.
SECTION 2.03. Legending of Securities. All Shares to be issued to each
Purchaser by the Company hereunder shall bear the following legend:
"The securities represented hereby have not been registered under the
Securities Act of 1933, as amended, or securities laws of any state and
may not be offered, sold, transferred or otherwise disposed of except
in compliance therewith."
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ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Except as set forth in the Disclosure Schedule delivered by the Company to
each of the Purchasers prior to the execution of this Agreement, (the
"Disclosure Schedule") (each section or subsection of which qualifies the
corresponding representation and warranty), the Company represents and warrants
to each Purchaser as of the date hereof and as of the Closing Date that:
SECTION 3.01. Corporate Existence and Power. The Company is a corporation
duly incorporated, validly existing and in good standing under the laws of
Delaware and has all corporate powers and all governmental licenses,
authorizations, permits, consents and approvals required to carry on its
business as now conducted, except for those licenses, authorizations, permits,
consents and approvals the absence of which would not, individually or in the
aggregate, reasonably be expected to have a Material Adverse Effect. The Company
is duly qualified to do business as a foreign corporation and is in good
standing in each jurisdiction where such qualification is necessary, except for
those jurisdictions where failure to be so qualified or in good standing would
not, individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect. The Company has heretofore delivered to each Purchaser true and
complete copies of the restated certificate of incorporation and by-laws of the
Company as currently in effect.
SECTION 3.02. Corporate Authorization. (a) The execution, delivery and
performance by the Company of this Agreement are within the Company's corporate
powers and have been duly authorized by all necessary corporate action on the
part of the Company. This Agreement constitutes a valid and binding agreement of
the Company enforceable against the Company in accordance with its terms, except
that (i) the enforcement hereof may be subject to (x) bankruptcy, insolvency,
reorganization, moratorium or other similar laws now or hereafter in effect
relating to creditors' rights generally and (y) general principles of equity and
the discretion of the court before which any proceeding therefor may be brought;
and (ii) any rights to indemnity or contribution under hereunder or under the
registration rights agreement may be limited by federal and state securities
laws and public policy considerations.
(b) The Shares, when issued and delivered to and paid for by each Purchaser
pursuant to this Agreement, will be validly issued, fully paid and
non-assessable, and the issuance of such Shares is not subject to any
pre-emptive or similar rights.
SECTION 3.03. Governmental Authorization. The execution, delivery and
performance by the Company of this Agreement require no action by or in respect
of, or filing
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with, any governmental body, agency or official other than (i) compliance with
any applicable requirements of the 1934 Act; (ii) compliance with any applicable
existing requirements of the Nasdaq Stock Market; and (iii) any action or filing
as to which the failure to make or obtain would not, individually or in the
aggregate, reasonably be expected to have a Material Adverse Effect.
SECTION 3.04. Non-contravention. The execution, delivery and performance by
the Company of this Agreement do not and will not (i) violate the certificate of
incorporation or by-laws or any similar organizational document of the Company
or any Subsidiary; (ii) assuming compliance with the matters referred to in
Section 3.03, violate any applicable law, rule, regulation, judgment,
injunction, order or decree; (iii) constitute a default under, or give rise to
any right of termination, cancellation or acceleration of any right or
obligation of the Company or any Subsidiary or to a loss of any benefit to which
the Company or any Subsidiary is entitled under, any loan or credit agreement,
note, mortgage, bond, indenture, lease, benefit plan or other agreement,
obligation, instrument, permit, concession, franchise or license (each, a
"Contract") binding upon or held by the Company or any Subsidiary; or (iv)
result in the creation or imposition of any Lien on any asset of the Company or
any Subsidiary.
SECTION 3.05. Capitalization. (a) The authorized capital stock of the
Company consists of (i) 20,000,000 shares of Common Stock, of which 9,426,274
shares were issued and outstanding as of January 10, 2001 (which amount does not
include 32,052 shares held in treasury); (ii) 1,000,000 shares of preferred
stock, par value $.01 per share, of which no shares were issued or outstanding
as of January 10, 2001. All outstanding shares of Common Stock and any other
class of capital stock of the Company have been duly authorized and are validly
issued, fully paid and non-assessable.
(b) Except as set forth in Section 3.05(a) above or Section 3.05(b) of the
Disclosure Schedule, there are no outstanding (i) shares of capital stock or
Voting Securities of the Company; (ii) securities of the Company convertible
into or exercisable or exchangeable for shares of capital stock or Voting
Securities of the Company; or (iii) warrants, options or other rights to acquire
from the Company, or other obligations of the Company to issue, any capital
stock, Voting Securities or securities convertible into or exercisable or
exchangeable for capital stock or Voting Securities of the Company (the items in
clauses 3.05(b)(i), (ii) and (iii) being referred to collectively as the
"Company Securities"). There are no outstanding obligations of the Company or
any Subsidiary to repurchase, redeem or otherwise acquire any Company
Securities.
SECTION 3.06. Subsidiaries. (a) Each Subsidiary (i) is duly incorporated or
organized, validly existing and, to the extent applicable, in good standing
under the laws of its jurisdiction of incorporation or organization, has all
corporate or other organizational powers
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and all governmental licenses, authorizations, permits, consents and approvals
required to carry on its business as now conducted, except for those licenses,
authorizations, permits, consents and approvals the absence of which would not,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect; and (ii) is duly qualified to do business as a foreign
corporation or other legal entity and, to the extent applicable, is in good
standing in each jurisdiction where such qualification is necessary, except for
those jurisdictions where the failure to be so qualified or, to the extent
applicable, in good standing would not, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect. All Subsidiaries and
their respective jurisdictions of incorporation or organization are identified
in Section 3.06(a) of the Disclosure Schedule.
(b) Except as set forth in Section 3.06(b) of the Disclosure Schedule, all
of the outstanding capital stock of, or other voting securities or ownership
interests in, each Subsidiary are owned by the Company, directly or indirectly,
free and clear of any Lien and free of any other limitation or restriction,
including any restriction on the right to vote, sell or otherwise dispose of
such capital stock or other voting securities or ownership interests (other than
such transfer restrictions as may exist under federal and state securities
laws). Except as set forth in Section 3.06(b) of the Disclosure Schedule, there
are no outstanding (i) securities of the Company or any Subsidiary convertible
into or exercisable or exchangeable for shares of capital stock or other voting
securities or ownership interests in any Subsidiary; or (ii) options or other
rights to acquire from the Company or any Subsidiary, or other obligation of the
Company or any Subsidiary to issue, any capital stock or other voting securities
or ownership interests in, or any securities convertible into or exercisable or
exchangeable for any capital stock or other voting securities or ownership
interests in, any Subsidiary (the items in clauses 3.06(b)(i) and (ii) being
referred to collectively as the "Subsidiary Securities").
SECTION 3.07. SEC Filings. (a) The Company has delivered to each Purchaser
(i) the Company's annual report on Form 10-K for its fiscal year ended September
30, 2000 (the "Company 10-K"); and (ii) all of its other reports, statements,
schedules and registration statements filed with the Commission since October 1,
2000 (the items in clauses 3.07(a)(i) and (ii) being referred to collectively as
the "SEC Reports").
(b) As of its filing date, or, if such SEC Report was amended, on the date
of filing of such amendment, each SEC Report did 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.
SECTION 3.08. Financial Statements. The audited consolidated balance sheets
as of September 30, 1999 and 2000 and the related audited consolidated
statements of operations, changes in shareholders' equity and cash flows for
each of the years ended September 30, 1998, 1999 and 2000 included in the
Company 10-K fairly present, in all
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material respects and in all material respects and in conformity with generally
accepted accounting principles applied on a consistent basis (except as may be
indicated in the notes thereto), the consolidated financial position of the
Company as of the dates thereof and its consolidated results of operations and
cash flows for the periods then ended.
SECTION 3.09. Absence of Certain Changes. Except as set forth in Section
3.09 of the Disclosure Schedule, since the Balance Sheet Date, other than as
disclosed, or provided for, in the Company 10-K or other SEC Report, the
businesses of the Company and its Subsidiaries have been conducted in the
ordinary course consistent with past practices and there has not been:
(a) any event, occurrence, development or state of circumstances or facts
which has had or would reasonably be expected to have, individually or in the
aggregate, a Material Adverse Effect;
(b) any declaration, setting aside or payment of any dividend or other
distribution with respect to any shares of capital stock of the Company, or any
repurchase, redemption or other acquisition by the Company or any Subsidiary of
any outstanding shares of capital stock or other securities of, or other
ownership interests in, the Company or any Subsidiary;
(c) any amendment of any material term of any outstanding security of the
Company or any Subsidiary;
(d) any incurrence, assumption or guarantee by the Company or any
Subsidiary of any indebtedness for borrowed money, except in the ordinary course
of business consistent with past practices;
(e) any creation or assumption by the Company or any Subsidiary of any Lien
on any material asset other than in the ordinary course of business consistent
with past practices;
(f) any making of any loan, advance or capital contribution to or
investment in any Person other than loans, advances or capital contributions to
or investments in Subsidiaries made in the ordinary course of business
consistent with past practices;
(g) any damage, destruction or other casualty loss (whether or not covered
by insurance) affecting the business or assets of the Company or any Subsidiary
which, individually or in the aggregate, has had or would reasonably be expected
to have, individually or in the aggregate, a Material Adverse Effect;
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(h) any change in any method of accounting or application thereof by the
Company or any Subsidiary, except for any such change required by reason of a
concurrent change in generally accepted accounting principles;
(i) any (A) employment, deferred compensation, severance, retirement or
other similar agreement entered into with any director, officer or employee of
the Company or any Subsidiary (or any amendment to any such existing agreement),
(B) grant of any severance or termination pay to any director, officer or
employee of the Company or any Subsidiary or (C) change in compensation or other
benefits payable to any director, officer or employee of the Company or any
Subsidiary pursuant to any severance or retirement plans or policies thereof,
other than in the ordinary course of business consistent with past practices; or
(j) any labor dispute, other than routine individual grievances, or any
activity or proceeding by a labor union or representative thereof to organize
any employees of the Company or any Subsidiary or any lockouts, strikes,
slowdowns, work stoppages or threats thereof by or with respect to any employees
of the Company or any Subsidiary.
SECTION 3.10. No Undisclosed Material Liabilities. There are no liabilities
of the Company or any Subsidiary of any kind whatsoever, whether accrued,
contingent, absolute, determined, determinable or otherwise, and there is no
existing condition, situation or set of circumstances which could reasonably be
expected to result in such a liability, other than:
(a) liabilities disclosed or provided for in the Balance Sheet;
(b) liabilities incurred in the ordinary course of business consistent with
past practice since the Balance Sheet Date, which in the aggregate are not
material; and
(c) liabilities under this Agreement.
SECTION 3.11. Litigation. There is no action, suit, investigation or
proceeding pending against, or, to the knowledge of the Company, threatened
against or affecting, the Company or any Subsidiary or any of their respective
properties before any court or arbitrator or any governmental body, agency or
official (i) which would, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect; or (ii) which in any manner
challenges or seeks to prevent, enjoin, alter or materially delay the
transactions contemplated by this Agreement.
SECTION 3.12. Compliance with Laws. Neither the Company nor any Subsidiary
is in violation of or has violated any applicable law, rule or regulation,
except for violations which, individually or in the aggregate, would not
reasonably be expected to have a Material Adverse Effect.
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SECTION 3.13. Finders' Fees. There is no investment banker, broker, finder
or other intermediary which has been retained by or is authorized to act on
behalf of the Company which might be entitled to any fee or commission in
connection with the transactions contemplated by this Agreement.
SECTION 3.14. Employee Benefit Plans. (a) The Company has provided the
Purchasers with a list identifying each Employee Plan and Benefit Arrangement.
(b) No Employee Plan (i) constitutes a Multiemployer Plan; or (ii) is
maintained in connection with any trust described in Section 501(c)(9) of the
Code. Neither the Company nor any ERISA Affiliate of the Company maintains,
contributes to or is required to contribute to or in the past has maintained,
contributed to or been required to contribute to any plan subject to Title IV of
ERISA.
(c) Each Employee Plan which is intended to be qualified under Section
401(a) of the Code is so qualified and has been so qualified during the period
from its adoption to date, and each trust forming a part thereof is exempt from
tax pursuant to Section 501(a) of the Code and has been so exempt since its
creation. The Company has furnished to the Purchasers copies of the most recent
Internal Revenue Service determination letter with respect to each such Employee
Plan. To the Company's knowledge, each Employee Plan and Benefit Arrangement has
been maintained in substantial compliance with its terms and with the
requirements prescribed by any and all statutes, orders, rules and regulations,
including, but not limited to, ERISA and the Code, which are applicable to such
Employee Plan or Benefit Arrangement, as applicable.
(d) Except as disclosed in Section 3.14 of the Disclosure Schedule, there
is no contract, agreement, plan or arrangement covering any employee or former
employee of the Company or any Subsidiary that, individually or collectively,
could give rise to the payment of any amount that would not be deductible
pursuant to the terms of Section 162(m) or 280G of the Code.
(e) Neither the Company nor any Subsidiary maintains or contributes to any
Employee Plan which provides, or has any liability to provide, life insurance,
medical or other welfare benefits to any employee upon retirement or termination
of employment, except as may be required by law.
(f) Except as disclosed in writing to the Purchasers, since the Balance
Sheet Date, there has been no amendment to, written interpretation or
announcement (whether or not written) by the Company or any of its Affiliates
relating to, or change in employee participation or coverage under, any Employee
Plan or Benefit Arrangement
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which would increase materially the expense of maintaining such Employee Plan or
Benefit Arrangement above the level of the expense incurred in respect thereof
for the fiscal year ended on the Balance Sheet Date.
(g) Except as set forth in Section 3.14(g) of the Disclosure Schedule or
disclosed in the Company's SEC Reports, neither the Company nor any Subsidiary
is a party to or subject to any union contract or any employment contract
providing for annual future compensation of $100,000 or more with any officer,
consultant, director or employee.
SECTION 3.15. Taxes. Except as disclosed in the financial statements
included in the Company 10-K (including the notes thereto) or as set forth in
Section 3.15 of the Disclosure Schedule or except in respect of Taxes, the
liability for which would not, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect, (i) all Tax returns, statements,
reports and forms required to be filed with any Taxing Authority by or on behalf
of the Company or any Subsidiary (collectively, the "Returns"), on or prior to
the Closing Date, have been or will be filed when due in accordance with all
applicable laws except where failure to so file would not subject the Company or
any Subsidiary to liabilities or penalties; (ii) as of the time of filing, the
Returns correctly reflected (and, as to any Returns not filed as of the date
hereof, will correctly reflect) the facts regarding the income, business,
assets, operations, activities and status of the Company and each Subsidiary;
(iii) the Company and each Subsidiary has timely paid, withheld or made
provision for all Taxes shown as due and payable on the Returns that have been
filed; (iv) neither the Company nor any Subsidiary is delinquent in the payment
of any Tax or has requested any extension of time within which to file or send
any Return, which Return has not since been filed or sent; (v) neither the
Company nor any Subsidiary (or any member of any affiliated or combined group of
which the Company or any Subsidiary is or has been a member) has been granted
any extension or waiver of the limitation period applicable to the assessment or
collection of any Taxes payable by the Company or any Subsidiary which will
remain in effect after the Closing Date; (vi) there is no claim, audit, action,
suit, proceeding or investigation now pending or threatened against or with
respect to the Company or any Subsidiary of which the Company is aware in
respect of any Tax or assessment; and (vii) there are no liens for Taxes upon
the assets of the Company or any Subsidiary except liens for current Taxes not
yet due.
SECTION 3.16. Environmental Matters. (a) Except as set forth in the Company
10-K or other SEC Report:
(i) no notice, notification, demand, request for information,
citation, summons or order has been received, no complaint has been filed,
no penalty has been assessed and no investigation, action, claim, suit,
proceeding or review is pending or, to the knowledge of the Company,
threatened by any governmental entity or other Person with respect to any
matters relating to the Company or any Subsidiary and
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relating to or arising out of any Environmental Law which, individually or
in the aggregate, would reasonably be expected to result in a Material
Adverse Effect;
(ii) the Company is in compliance with all Environmental Laws and has,
and is in compliance with, all environmental permits, except where any
noncompliance or failure to receive environmental permits would not,
individually or in the aggregate, reasonably be expected to result in a
Material Adverse Effect; and
(iii) to the Company's knowledge, there are no liabilities of, or
relating to, the Company or any Subsidiary of any kind whatsoever, whether
accrued, contingent, absolute, determined, determinable or otherwise,
arising under or relating to any Environmental Law which, individually or
in the aggregate, would reasonably be expected to have a Material Adverse
Effect, and there are no facts, conditions, situations or set of
circumstances which could reasonably be expected to result in or be the
basis for any such liability.
(b) There has been no environmental investigation, study, audit, test,
review or other analysis conducted of which the Company has knowledge in
relation to the current or prior business of the Company or any property or
facility now or previously owned or leased by the Company or any Subsidiary.
(c) For purposes of this Section, the following terms shall have the
meanings set forth below:
(i) "Company" and "Subsidiary" shall include any entity which is, in
whole or in part, a predecessor of the Company or any Subsidiary; and
(ii) "Environmental Laws" means any and all federal, state, local and
foreign statutes, laws, judicial decisions, regulations, ordinances, rules,
judgments, orders, decrees, codes, plans, injunctions, permits,
concessions, grants, franchises, licenses, agreements and governmental
restrictions, relating to human health, the environment or to emissions,
discharges or releases of pollutants, contaminants or other hazardous
substances or wastes into the environment, including without limitation
ambient air, surface water, groundwater or land, or otherwise relating to
the manufacture, processing, distribution, use, treatment, storage,
disposal, transport or handling of pollutants, contaminants or other
hazardous substances or wastes or the clean-up or other remediation
thereof.
SECTION 3.17. Title to Properties. Each of the Company and the Subsidiaries
has good and marketable title in fee simple to all real property and good and
marketable title to all personal property owned by it which is material to its
business, in each case free and clear of all Liens and defects except such as
are set forth in Section 3.17 of the
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Disclosure Schedule or such as would not, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect. Any real property and
facilities held under lease by any of the Company or the Subsidiaries are held
by it under valid, subsisting and enforceable leases with such exceptions as
would not have a Material Adverse Effect.
SECTION 3.18. Intellectual Property. Except as has not had and would not
reasonably be expected to have, individually or in the aggregate, a Material
Adverse Effect, (i) each of the Company and the Subsidiaries owns, or is
licensed to use (in each case, free and clear of any Liens), all Intellectual
Property used in or necessary for the conduct of its business as currently
conducted; (ii) the use of any Intellectual Property by the Company and the
Subsidiaries does not infringe on or otherwise violate the rights of any Person
and is in accordance with any applicable license pursuant to which the Company
or any Subsidiary acquired the right to use any Intellectual Property; (iii) to
the knowledge of the Company, no Person is challenging, infringing on or
otherwise violating any right of the Company or any of the Subsidiaries with
respect to any Intellectual Property owned by and/or licensed to the Company or
the Subsidiaries; and (iv) neither the Company nor any of the Subsidiaries has
received any written notice or otherwise has knowledge of any pending claim,
order or proceeding with respect to any Intellectual Property used by the
Company or the Subsidiaries and to its knowledge no Intellectual Property owned
and/or licensed by the Company or the Subsidiaries is being used or enforced in
a manner that would reasonably be expected to result in the abandonment,
cancellation or unenforceability of such Intellectual Property. For purposes of
this Section, the term "Intellectual Property" shall mean trademarks, service
marks, brand names, certification marks, trade dress and other indications of
origin, the goodwill associated with the foregoing and registrations in any
jurisdiction of, and applications in any jurisdiction to register, the
foregoing, including any extension, modification or renewal of any such
registration or application; inventions, discoveries and ideas, whether
patentable or not, in any jurisdiction; patents, applications for patents
(including, without limitation, divisions, continuations, continuations in part
and renewal applications), and any renewals, extensions or reissues thereof, in
any jurisdiction; nonpublic information, trade secrets and confidential
information and rights in any jurisdiction to limit the use or disclosure
thereof by any Person; writings and other works, whether copyrightable or not,
in any jurisdiction; registrations or applications for registration of
copyrights in any jurisdiction, and any renewals or extensions thereof; and any
similar intellectual property or proprietary rights.
SECTION 3.19. Significant Agreements. Section 3.19 of the Disclosure
Schedule sets forth a complete and correct list of (i) all Contracts applicable
on the date of this Agreement to the Company or any of the Subsidiaries or any
of their respective properties or assets and that are required to be filed as
exhibits to the SEC Reports; (ii) all Contracts applicable to the Company or any
of the Subsidiaries or any of their respective properties or assets and in
effect as of the date of this Agreement that are reasonably expected to require
the
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payment (whether by or to the Company or any of the Subsidiaries) of $1 million
or more in the aggregate in any twelve-month period; and (iii) all in-licenses
or Contracts in effect on the date of this Agreement calling for the purchase or
other acquisition by the Company or any of the Subsidiaries of rights to
products that generate or are reasonably expected to generate $1 million or more
of annualized revenues (the Contracts described in clauses (i) through (iii)
being collectively referred to herein as the "Significant Agreements"). The
Company has heretofore made available to the Purchasers complete and correct
copies of each of the Significant Agreements, each as amended or modified to the
date hereof (including any waivers with respect thereto). Each of the
Significant Agreements is in full force and effect and enforceable against the
Company and the Subsidiaries, as applicable, and, to the knowledge of the
Company, against the other party or parties thereto, in each case in accordance
with its terms, except as such enforceability may be limited by bankruptcy,
insolvency, reorganization, moratorium and similar laws relating to or affecting
creditors generally or by general equity principles (regardless of whether such
enforceability is considered in a proceeding in equity or at law) and except in
each case where the failure to be in full force and effect and enforceable has
not had and would not reasonably be expected to have, individually or in the
aggregate, a Material Adverse Effect. None of the Company or any of the
Subsidiaries has received any notice (written or oral) of cancellation or
termination of, or expression or indication of any intention or desire to cancel
or terminate, any of the Significant Agreements except in each case for those
that have not had and would not reasonably be expected to have, individually or
in the aggregate, a Material Adverse Effect. No Significant Agreement is the
subject of, or, to the knowledge of the Company, has been threatened to be made
the subject of, any arbitration, suit or other legal proceeding except in each
case for those that have not had and would not reasonably be expected to have,
individually or in the aggregate, a Material Adverse Effect. With respect to any
Significant Agreement which by its terms will terminate as of a certain date
unless renewed or unless an option to extend such Significant Agreement is
exercised, neither the Company nor any of the Subsidiaries has received any
notice (written or oral), or otherwise has any knowledge, that any such
Significant Agreement will not be, or is not likely to be, so renewed or that
any such extension option will not be exercised except in each case for those
that have not had and would not reasonably be expected to have, individually or
in the aggregate, a Material Adverse Effect. There exists no event of default or
occurrence, condition or act on the part of the Company or any of the
Subsidiaries or, to the knowledge of the Company, the other party or parties to
the Significant Agreements which constitutes or would constitute (with notice or
lapse of time or both) a breach of or default under any of the Significant
Agreements except in each case for those that have not had and would not
reasonably be expected to have, individually or in the aggregate, a Material
Adverse Effect.
SECTION 3.20. Exemption from Registration. None of the Company, the
Subsidiaries or any of their respective Affiliates has directly, or through any
agent, (i) sold, offered for sale, solicited offers to buy or otherwise
negotiated in respect of, any "security" (as
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defined in the 0000 Xxx) that is or could be integrated with the sale of the
Shares in a manner that would require the registration under the 1933 Act of the
Shares; or (ii) engaged in any form of general solicitation or general
advertising (as those terms are used in Regulation D under the 0000 Xxx) in
connection with the offering of the Shares or in any manner involving a public
offering within the meaning of Section 4(2) of the 1933 Act. Assuming the
accuracy of the representations and warranties of the Purchasers in Article 4,
it is not necessary in connection with the offer, sale and delivery of the
Shares to the Purchasers in the manner contemplated by this Agreement to
register any of the Shares under the 1933 Act.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS
Each Purchaser represents and warrants to the Company, severally as to
itself and not jointly, as of the date hereof and as of the Closing Date that:
SECTION 4.01. Organization. Such Purchaser is organized under the laws of
the State of Delaware.
SECTION 4.02. Power and Authorization. The execution, delivery and
performance by such Purchaser of this Agreement are within the powers of such
Purchaser and have been duly authorized by all necessary action on the part of
such Purchaser. This Agreement constitutes a valid and binding agreement of such
Purchaser enforceable against such Purchaser in accordance with its terms,
except that (i) the enforcement hereof may be subject to (x) bankruptcy,
insolvency, reorganization, moratorium or other similar laws now or hereafter in
effect relating to creditors' rights generally and (y) general principles of
equity and the discretion of the court before which any proceeding therefor may
be brought; and (ii) any rights to indemnity or contribution under hereunder or
under the registration rights agreement may be limited by federal and state
securities laws and public policy considerations.
SECTION 4.03. Finders' Fees. There is no investment banker, broker, finder
or other intermediary which has been retained by or is authorized to act on
behalf of such Purchaser who might be entitled to any fee or commission from
such Purchaser or any of its Affiliates upon consummation of the transactions
contemplated by this Agreement.
SECTION 4.04. Purchase for Investment. Such Purchaser is acquiring the
Shares for investment for its own account and not with a view to, or for sale in
connection with, any distribution thereof. Such Purchaser is an "Accredited
Investor" as such term is defined in Regulation D under the 1933 Act.
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SECTION 4.05. Disclosure of Information. Each Purchaser believes it has
received all the information it considers necessary or appropriate for deciding
whether to purchase the Shares. Each Purchaser further represents that it has
had an opportunity to ask questions and receive answers from the Company
regarding the terms and conditions of the sale of the Restricted Securities.
SECTION 4.06. Restricted Securities. Each Purchaser understands that the
Shares it is purchasing are characterized as "restricted securities" under the
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 1933 Act, only in certain limited circumstances. In this connection, each
Purchaser represents that it is familiar with Rule 144 under the 1933 Act, as
presently in effect, and understands the resale limitations imposed thereby and
by the 1933 Act.
ARTICLE 5
CONDITIONS TO CLOSING
SECTION 5.01. Conditions to the Obligations of the Purchasers. The
obligations of each of the Purchasers to purchase and pay for the Shares shall,
in its sole discretion, be subject to the satisfaction of the following
conditions at or prior to the Closing (unless expressly waived in writing by
such Purchasers at or prior to the Closing):
(a) On the Closing Date, the Purchasers shall have received the opinion,
dated as of the Closing Date and addressed to the Purchasers, of Xxxxx, Xxxxxxx
& Xxxxxxxxx, counsel for the Company, in form and substance satisfactory to
counsel for the Purchasers, to the effect that:
(i) The Company is a corporation duly incorporated, validly existing
and in good standing under the laws of Delaware and has all corporate
powers and all governmental licenses, authorizations, permits, consents and
approvals required to carry on its business as now conducted, except for
those licenses, authorizations, permits, consents and approvals the absence
of which would not, individually or in the aggregate, have a Material
Adverse Effect. The Company is duly qualified to do business as a foreign
corporation and is in good standing in each jurisdiction where such
qualification is necessary, except for those jurisdictions where failure to
be so qualified or in good standing would not, individually or in the
aggregate, have a Material Adverse Effect.
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(ii) The execution, delivery and performance by the Company of this
Agreement are within the Company's corporate powers and have been duly
authorized by all necessary corporate action on the part of the Company.
This Agreement constitutes a valid and binding agreement of the Company
enforceable against the Company in accordance with its terms, except that
(i) the enforcement hereof may be subject to (x) bankruptcy, insolvency,
reorganization, moratorium or other similar laws now or hereafter in effect
relating to creditors' rights generally and (y) general principles of
equity and the discretion of the court before which any proceeding therefor
may be brought; and (ii) any rights to indemnity or contribution under
hereunder or under the registration rights agreement may be limited by
federal and state securities laws and public policy considerations.
(iii) The Shares, when issued and delivered to and paid for by each
Purchaser pursuant to this Agreement, will be validly issued, fully paid
and non-assessable, and the issuance of such Shares is not subject to any
pre-emptive or similar rights.
(iv) The execution, delivery and performance by the Company of this
Agreement require no action by or in respect of, or filing with, any
governmental body, agency or official other than (i) compliance with any
applicable requirements of the 1934 Act; (ii) compliance with any
applicable existing requirements of the Nasdaq Stock Market; and (iii) any
action or filing as to which the failure to make or obtain would not,
individually or in the aggregate, have a Material Adverse Effect.
(v) The execution, delivery and performance by the Company of this
Agreement do not and will not (i) violate the certificate of incorporation
or bylaws of the Company or any Subsidiary; (ii) (x) assuming compliance
with any applicable requirements of the 1934 Act, (y) assuming compliance
with any applicable existing requirements of the Nasdaq Stock Market and
(z) except for any action or filing as to which the failure to make or
obtain would not, individually or in the aggregate, have a Material Adverse
Effect, violate any applicable law, rule, regulation, judgment, injunction,
order or decree; (iii) constitute a default under, or give rise to any
right of termination, cancellation or acceleration of any right or
obligation of the Company or any Subsidiary or to a loss of any benefit to
which the Company or any Subsidiary is entitled under, any Contract binding
upon or held by the Company or any Subsidiary; or (iv) result in the
creation or imposition of any material Lien on any asset of the Company or
any Subsidiary.
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(vi) No registration under the 1933 Act of the Shares is required in
connection with the sale of the Shares to the Purchasers as contemplated by
this Agreement assuming the accuracy of the Purchasers' representations in
Article 4 and those of the Company contained in this Agreement regarding
the absence of a general solicitation in connection with the sale of such
Shares to the Purchasers.
(b) The representations and warranties of the Company contained in this
Agreement that are qualified by materiality or Material Adverse Effect shall be
true and correct in all respects and the representations and warranties of the
Company contained in this Agreement that are not so qualified shall be true and
correct in all material respects, in each case on and as of the date hereof and
on and as of the Closing Date as if made on and as of the Closing Date; the
statements of the Company's officers made pursuant to any certificate delivered
in accordance with the provisions hereof shall be true and correct on and as of
the date made and on and as of the Closing Date; the Company shall have
performed all covenants and agreements and satisfied all conditions on its part
to be performed or satisfied hereunder at or prior to the Closing Date; and
subsequent to the Balance Sheet Date, there shall have been no event or
development, and no information shall have become known, that, individually or
in the aggregate, has or would be reasonably likely to have a Material Adverse
Effect.
(c) The sale of the Shares hereunder shall not be enjoined (temporarily or
permanently) on the Closing Date.
(d) Subsequent to the Balance Sheet Date, none of the Company or any of the
Subsidiaries shall have sustained any loss or interference with respect to its
business or properties from fire, flood, hurricane, accident or other calamity,
whether or not covered by insurance, or from any strike, labor dispute, slow
down or work stoppage or from any legal or governmental proceeding, order or
decree, which loss or interference, individually or in the aggregate, has or
would be reasonably likely to have a Material Adverse Effect.
(e) The Purchasers shall have received a certificate of the Company, dated
the Closing Date, signed on behalf of the Company by its Chief Executive Officer
and its Chief Financial Officer, to the effect that:
(i) The representations and warranties of the Company contained in
this Agreement that are qualified by materiality or Material Adverse Effect
are true and correct in all respects and the representations and warranties
of the Company contained in this Agreement that are not so qualified are
true and correct in all material respects, in each case on and as of the
date hereof and on and as of the Closing Date, and the Company has
performed all covenants and
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agreements and satisfied all conditions on its part to be performed or
satisfied hereunder at or prior to the Closing Date;
(ii) At the Closing Date, since the date hereof or since the Balance
Sheet Date, no event or development has occurred, and no information has
become known, except as set forth in Section 3.09 of the Disclosure
Schedule that, individually or in the aggregate, has or would be reasonably
likely to have a Material Adverse Effect; and
(iii) The sale of the Shares hereunder has not been enjoined
(temporarily or permanently).
(f) The Company shall have obtained, with financially sound and reputable
insurers, directors' and officers' liability insurance in the amount of coverage
at least equal to $2,000,000. The Company shall have entered into indemnity
contracts with each of the Purchaser Nominees substantially in the form of
Exhibit C hereto.
(g) Prior to the Closing Date, (i) trading in securities generally on
either the New York Stock Exchange or the Nasdaq Stock Market shall not have
been suspended or limited or minimum or maximum prices shall not have been
generally established on such exchange or market, or additional material
governmental restrictions, not in force on the date of this Agreement, shall not
have been imposed upon trading in securities generally by such exchange or
market or by order of the Commission or any court or other governmental
authority; (ii) trading in the Common Stock shall not have been suspended by the
Commission or the Nasdaq Stock Market; (iii) a general banking moratorium shall
not have been declared by either federal or New York state authorities; or (iv)
any material adverse change in the financial or securities markets in the United
States or in political, financial or economic conditions in the United States or
any outbreak or material escalation of hostilities or declaration by the Unites
States of a national emergency or war or other calamity or crisis shall not have
occurred.
On or before the Closing Date, the Purchasers and counsel for the
Purchasers shall have received such further documents, opinions, certificates,
letters and schedules or instruments relating to the business, corporate, legal
and financial affairs of the Company and the Subsidiaries as they shall have
heretofore reasonably requested from the Company.
All such documents, opinions, certificates, letters, schedules or
instruments delivered pursuant to this Agreement will comply with the provisions
hereof only if they are reasonably satisfactory in all material respects to the
Purchasers and counsel for the Purchasers.
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SECTION 5.02. Conditions to the Obligations of the Company. The obligations
of the Company to be discharged under this Agreement on or prior to the Closing
are subject to satisfaction of the following conditions at or prior to the
Closing (unless expressly waived in writing by the Company at or prior to the
Closing):
(a) The representations and warranties of Purchasers contained in this
Agreement that are qualified by materiality or Material Adverse Effect shall be
true and correct in all respects and the representations and warranties of the
Company contained in this Agreement that are not so qualified shall be true and
correct in all material respects, in each case on and as of the date hereof and
on and as of the Closing Date as if made on and as of the Closing Date.
(b) The sale of the Shares hereunder shall not be enjoined (temporarily or
permanently) on the Closing Date.
ARTICLE 6
COVENANTS OF THE COMPANY
The Company agrees that:
SECTION 6.01. Notices of Certain Events. Prior to the Closing, the Company
shall promptly notify each Purchaser of:
(a) any notice or other communication from any Person alleging that the
consent of such Person is or may be required in connection with the transactions
contemplated by this Agreement;
(b) any notice or other communication from any governmental or regulatory
agency or authority in connection with the transactions contemplated by this
Agreement; and
(c) any actions, suits, claims, investigations or proceedings commenced or,
to its knowledge, threatened against, relating to or involving or otherwise
affecting the Company or any Subsidiary that, if pending on the date of this
Agreement, would have been required to have been disclosed pursuant to Section
3.11.
SECTION 6.02. Registration Rights. Each Purchaser shall have the
Registration Rights set forth in Exhibit A.
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SECTION 6.03. Access to Book and Records. The Company agrees that, after
Closing and for so long as a WC beneficially owns, directly or indirectly, at
least 40% of the Originally Issued Shares, WC will have access on reasonable
terms to the books, records and employees of the Company and the Subsidiaries
and to the provision by the Company of all information reasonably requested by
WC, subject to confidentiality obligations that at the time may be owed by the
Company to third parties, to appropriate confidentiality arrangements and
requirements of law.
ARTICLE 7
ADDITIONAL COVENANTS
SECTION 7.01. Board Representation; Committees. (a) The Company agrees that
for so long as WC beneficially owns, directly or indirectly, at least 50% of the
Originally Issued Shares, WC shall have the right to cause the Company to
include, as nominees for the Company's Board of Directors recommended by the
Board, two Directors (the "Purchaser Nominees").
(b) At or prior to the Closing, the Company shall, if necessary, increase
the size of the Board of Directors of the Company as determined pursuant to
Section 7.01(a) and shall elect as Directors of the Company (with a term
expiring at the following annual meeting of the Company's stockholders) the
Purchaser Nominees designated by WC. In connection with the annual meeting of
stockholders of the Company next following such election, the Company shall
nominate the Purchaser Nominees for election as Directors by the stockholders
and use its best efforts to cause the Purchaser Nominees to be so elected and
re-elected at each subsequent stockholder meeting at which Directors are elected
for so long as WC shall have the rights set forth in Section 7.01(a).
(c) For so long as WC shall have the rights set forth in Section 7.01(a),
if a vacancy shall exist in the office of a Purchaser Nominee, WC shall be
entitled to designate a successor and the Company shall elect such successor as
a Director of the Company (with a term expiring at the following annual meeting
of the Company's stockholders).
(d) For so long as WC shall have the rights set forth in Section 7.01(a),
at least one Purchaser Nominee shall be entitled to serve as a member of each
committee (whether standing or special) of the Board of Directors of the Company
and WC shall have the right to designate one Purchaser Nominee to serve as the
Chairman of the Board of the Company; provided that such Purchaser Nominee is
then serving as a Director of the Company.
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(e) For so long as WC shall have the rights set forth in Section 7.01(a),
any Purchaser Nominee then serving as the Chairman of the Board of the Company
shall be entitled to serve, in such capacity, as an executive officer of the
Company with such duties as are related to the Company's strategic planning;
provided that, unless otherwise determined by the Board of Directors of the
Company, any such Purchaser Nominee serving as an executive officer of the
Company shall not be entitled to receive any compensation in connection
therewith; provided, further, that this Agreement shall not be deemed to be an
employment contract between the Company and such Purchaser Nominee and nothing
herein shall obligate such Purchaser Nominee to dedicate any defined portion of
his business time and effort to the performance of the duties described herein.
The Chief Executive Officer and President of the Company shall report directly
to such Purchaser Nominee..
SECTION 7.02. Reports. The Company agrees that, after the Closing and for
so long as WC beneficially owns, directly or indirectly, at least 40% of the
Originally Issued Shares, the Company will furnish to WC the following reports,
subject, in the case of paragraphs (d), (e) and (g) below, to confidentiality
obligations that at the time may be owed by the Company to third parties and
appropriate confidentiality arrangements:
(a) Within the applicable time period required under the 1934 Act,
after the end of each fiscal year of the Company, the information required
by Form 10-K (or any successor form thereto) under the 1934 Act with
respect to such period (including a "Management's Discussion and Analysis
of Financial Condition and Results of Operations" section that describes
the consolidated financial position and results of operations of the
Company), together with a report thereon by the Company's independent
accountants.
(b) Within the applicable time period required under the 1934 Act,
after the end of each of the first three fiscal quarters of each fiscal
year of the Company, the information required by Form 10-Q (or any
successor form thereto) under the 1934 Act with respect to such period
(including a "Management's Discussion and Analysis of Financial Condition
and Results of Operations" section that describes the consolidated
financial position and results of operations of the Company).
(c) Any current report on Form 8-K (or any successor form thereto)
required to filed under the 1934 Act.
(d) As soon as practicable upon approval or adoption by the Company's
Board of Directors, the Company's budget and operating plan (including
projected balance sheets and profit and loss and cash flow statements), if
any, for such fiscal year.
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(e) Simultaneously with the delivery thereof to any of the Company's
lenders or other holders of the Company's indebtedness, such other
financial and operating data of the Company and the Subsidiaries delivered
to such lenders or holders.
(f) Promptly after the same are filed with the SEC, copies of all
reports, statements and other documents filed with the Commission pursuant
to the 1933 Act or the 0000 Xxx.
(g) Promptly after receipt thereof, a copy of any communication
received by the Company from any holder of the Company's outstanding
indebtedness notifying the Company that a default or event of default
exists under the terms of the instrument or instruments governing such
indebtedness.
SECTION 7.03. Preemptive Rights. (a) Subject to the terms and conditions
specified in this Section 7.03, the Company hereby grants to each Purchaser a
right to purchase up to the number of Additional Shares (as defined below) in
connection with any Transaction (as defined below) undertaken by the Company;
provided, however, that the rights set forth in this Section 7.03 shall only
apply to WC so long as WC holds at least five percent (5%) of the Originally
Issued Shares and shall only apply to CHA so long as CHA holds at least
twenty-five percent (25%) of the Originally Issued Shares.
(b) Subject to the terms and conditions specified in this Section 7.03,
each time the Company proposes to offer, sell or otherwise issue any New Shares
in a public or private transaction (a "Transaction"), the Company shall deliver
a notice (the "Notice") to each Purchaser stating (i) the Company's bona fide
intention to undertake such Transaction, (ii) the number of New Shares to be
offered in the Transaction (the "Transaction Shares"), (iii) the number of
Additional Shares up to which such Purchaser may elect to purchase in such
Transaction (which would be added to the Transaction Shares) and (iv) the price
and terms, if any, upon which it proposes to offer, sell or otherwise issue New
Shares in the Transaction.
(c) Within 7 days after receipt by such Purchaser of the Notice, such
Purchaser may elect to purchase, at the price and on the terms specified in the
Notice, up to the number of Additional Shares set forth in the Notice. The
number of New Shares ("Additional Shares") that the Purchaser may elect to
purchase and include in the Transaction shall be calculated as follows:
Additional Shares = Transaction Shares -- Transaction Shares
------------------
1-- X%
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X% represents the percentage (stated as a decimal) of the outstanding
shares of Common Stock then held by such Purchaser (assuming the conversion,
exercise or exchange of all New Shares then held by such Purchaser and acquired
pursuant to this Section 7.03).
(d) In the event that the price or terms upon which the Company proposes to
offer, sell or otherwise issue New Shares in the Transaction or the number of
Transaction Shares to be included in such Transaction changes for any reason
(other than including the Additional Shares) after the Notice is delivered to
the Purchasers, the number of Additional Shares shall, with respect to a change
in the number of Transaction Shares, be recalculated using the new number of
Transaction Shares and, in any case, the Company shall promptly provide a
revised Notice to each Purchaser reflecting any such recalculated Additional
Shares and any change to such price or terms. If the Company proposes to offer,
sell or issue any New Shares for consideration other than cash, each Purchaser
may exercise the right set forth in this Section 7.03 and purchase Additional
Shares for cash at a per share purchase price equal to (i)(A) the face amount of
any cash received for such New Shares plus (B) the fair market value of the
non-cash consideration expressly received for such New Shares, as reasonably
determined by the Board of Directors of the Company in good faith, divided by
(ii) the number of Transaction Shares issued in such Transaction (excluding any
Additional Shares).
(e) The rights of the Purchasers set forth in this Section 7.03 shall not
be applicable to (i) shares of Common Stock issued as a stock dividend to all
holders of shares of Common Stock or upon any subdivision or combination of
shares of Common Stock; (ii) securities issued for the acquisition by the
Company of another entity or business by merger or such other transaction as
would result in the ownership by the Company of not less than a majority of the
voting power of the other entity or for the purchase of all the assets of an
entity or business, (iii) shares of Common Stock or Rights that are sold by the
Company pursuant to a bona fide public offering pursuant to a registration
statement filed under the 1933 Act; (iv) shares of Common Stock or Rights issued
pursuant to the Company's stock option plans in existence at the date of this
Agreement or other such stock option plans as approved by the stockholders of
the Company; (v) shares of Common Stock issued upon exercise of any Rights as to
which the Purchasers shall have been afforded the opportunity to exercise their
rights of first refusal pursuant to this Section 7.03; (vi) up to an aggregate
of 70,000 shares of Common Stock or Rights issued to Silicon Valley Bank; and
(vii) up to aggregate of 50,000 shares of Common Stock or Rights issued to
Xxxxxxx Xxxx.
(f) The rights and obligations of the Purchasers under this Section 7.03
shall not be assignable, except that the right to purchase any Additional Shares
may be assigned by each Purchaser to any of its Affiliates that agrees in
writing to be bound by the provisions of this Section 7.03.
-26-
SECTION 7.04. Fees and Expenses. (a) The Company shall be responsible for
the payment of all expenses incurred by the Company in connection with the
transactions contemplated by this Agreement, regardless of whether such
transactions are consummated, including, without limitation, all fees and
expenses of the Company's legal counsel, all third-party consultants engaged by
the Company to assist in such transactions and all fees and expenses incurred in
connection with any filings to be made with any governmental agency. The Company
also agrees to reimburse the Purchasers for all out-of-pocket expenses
reasonably incurred by the Purchasers in connection with the transactions
contemplated by this Agreement, including, without limitation, all fees and
expenses of the Purchasers' legal counsel, financial advisors, accountants and
all third-party consultants engaged by the Purchasers to assist in such
transactions and all fees and expenses, including fees and expenses of legal
counsel, incurred in connection with enforcing the provisions of, and collecting
amounts payable pursuant to, this Agreement; provided that the aggregate amount
of such expenses shall not exceed $30,000. Such reimbursements shall be due to
the Purchasers at the Closing, or promptly following any earlier termination of
this Agreement for any reason or, in the case of fees and expenses incurred
thereafter, promptly upon demand therefor.
(b) All amounts payable under this Agreement shall be paid in immediately
available funds to an account or accounts designated by the recipient of such
amounts.
SECTION 7.05. Use of Proceeds. The Company shall use the proceeds from the
sale of the Shares for general corporate purposes.
ARTICLE 8
TERMINATION
SECTION 8.01. Grounds for Termination. This Agreement may be terminated at
any time by mutual written agreement of the Company and each Purchaser.
SECTION 8.02. Effect of Termination. If this Agreement is terminated as
permitted by Section 8.01, termination shall be without liability of any party
(or any stockholder, director, officer, employee, agent, consultant or
representative of such party) to the other parties to this Agreement; provided
that if such termination shall result from the willful failure of any party to
fulfill a condition to the performance of the obligations of any other party or
to perform a covenant of this Agreement or from a willful breach by any party to
this Agreement, such party shall be fully liable for any and all damage, loss or
expense incurred or suffered by the other party or parties as a result of such
failure or breach. The provisions of Sections 9.02 shall survive any termination
hereof pursuant to Section 8.01. The
-27-
provisions of Section 6.02 and the Registration Rights shall survive any
termination of this Agreement subsequent to the Closing.
ARTICLE 9
MISCELLANEOUS
SECTION 9.01. Notices. All notices and other communications hereunder shall
be in writing and shall be deemed duly given (i) on the date of delivery if
delivered personally, or by telecopy or telefacsimile, upon confirmation of
receipt; or (ii) on the first business day following the date of dispatch if
delivered by an internationally recognized next-day courier service. All notices
hereunder shall be delivered as set forth below, or pursuant to such other
instructions as may be designated in writing by the party to receive such
notice.
if to WC, to:
WC Capital, LLC
000 Xxxx Xxxxxx Xxxxx Xxxx
Xxxxxx Xxxxx, XX 00000
Attention: Xxxxx Xxxx
Fax: (000) 000-0000
with a copy to:
Xxxxxx Xxxxxx & Xxxxxxx
00 Xxxx Xxxxxx
Xxx Xxxx, XX 00000-0000
Attention: Xxxxxxxxxxx X. Xxx, Esq.
Fax: (000) 000-0000
if to CHA, to:
Carnegie Hill Associates, LLC
00 Xxxx 00xx Xxxxxx
Xxx. Xx. 00X
Xxx Xxxx, XX 00000
Attention: Xxxxxxx de X. Xxxxxxx
Fax: (000) 000-0000
with a copy to:
-00-
Xxxxxx Xxxxxx & Xxxxxxx
00 Xxxx Xxxxxx
Xxx Xxxx, XX 00000-0000
Attention: Xxxxxxxxxxx X. Xxx, Esq.
Fax: (000) 000-0000
if to the Company, to:
Datawatch Corporation
000 Xxxxx Xxxxxx
Xxxxx 000
Xxxxxx, XX 00000
Attention: Xxxxx X. Xxxxxxx
Fax: (000) 000-0000
with a copy to:
Xxxxx, Xxxxxxx & Xxxxxxxxx
Exchange Place
00 Xxxxx Xxxxxx
Xxxxxx, XX 00000
Attention: Xxxxxxx X. Xxxxxxx, Xx., Esq.
Fax: (000) 000-0000
SECTION 9.02. Survival. The representations and warranties of the parties
hereto contained in this Agreement or in any certificate or other writing
delivered pursuant hereto or in connection herewith shall survive the Closing
until twelve months after the Closing Date.
SECTION 9.03. Amendments and Waivers. (a) Any provision of this Agreement
may be amended or waived prior to the Closing Date if, but only if, such
amendment or waiver is in writing and is signed, in the case of an amendment, by
each party to this Agreement or, in the case of a waiver, by the party against
whom the waiver is to be effective.
(b) No failure or delay by any party in exercising any right, power or
privilege hereunder shall operate as a waiver thereof nor shall any single or
partial exercise thereof preclude any other or further exercise thereof or the
exercise of any other right, power or privilege. The rights and remedies herein
provided shall be cumulative and not exclusive of any rights or remedies
provided by law.
-29-
SECTION 9.04. Successors and Assigns. The provisions of this Agreement
shall be binding upon and inure to the benefit of the parties hereto and their
respective successors and assigns; provided that except as expressly provided
herein no party may assign, delegate or otherwise transfer any of its rights or
obligations under this Agreement without the consent of each other party hereto.
SECTION 9.05. Governing Law. This Agreement shall be governed by and
construed in accordance with the law of the State of New York, without regard to
the conflicts of law rules of such state.
SECTION 9.06. Counterparts; Third Party Beneficiaries. This Agreement may
be signed in any number of counterparts, each of which shall be an original,
with the same effect as if the signatures thereto and hereto were upon the same
instrument. No provision of this Agreement is intended to confer upon any Person
other than the parties hereto any rights or remedies hereunder.
SECTION 9.07. Public Announcements. The Company and each Purchaser shall
agree on the form and content of any public announcements which shall be made
concerning this Agreement or the transactions contemplated hereby, and neither
the Company nor any Purchaser shall make any such public announcement without
the consent of the other, except with respect to any public announcement or
other public disclosure, to the extent either party determines, in good faith
and with the advice of counsel, such announcement or disclosure is required by
law or the rules or regulations of any exchange or market on which such party's
securities are listed or to avoid undue risk that the transactions contemplated
hereby will be enjoined or that such party, its officers, directors or
representatives will be liable for damages as a result thereof.
SECTION 9.08. Entire Agreement; Exhibits. This Agreement constitutes the
entire agreement among the parties with respect to the subject matter of this
Agreement and supersedes all prior agreements and understandings, both oral and
written, among the parties with respect to the subject matter of this Agreement.
No representation, inducement, promise, understanding, condition or warranty not
set forth herein has been made or relied upon by any party hereto. All exhibits
hereto constitute part of this Agreement and are expressly incorporated herein.
SECTION 9.09. Headings. The headings and the table of contents appearing in
this Agreement are inserted only as a matter of convenience and for reference
and in no way define, limit or describe the scope and intent of this Agreement
or any of the provisions hereof.
-30-
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed by their respective authorized officers as of the day and year
first above written.
DATAWATCH CORPORATION
By: /s/ Xxxxx X. Xxxxxxx
-------------------------------------------
Name: Xxxxx X. Xxxxxxx
Title: Chief Executive Officer
WC CAPITAL, LLC
By: /s/ Xxxxx Xxxx
-------------------------------------------
Name: Xxxxx Xxxx
Title: Managing Principal
CARNEGIE HILL ASSOCIATES, LLC
By: /s/ Xxxxxxx de X. Xxxxxxx
-------------------------------------------
Name: Xxxxxxx de X. Xxxxxxx
Title: Managing Principal
Exhibit A
REGISTRATION RIGHTS
ARTICLE 1
DEFINITIONS
SECTION 1.01. Definitions. Terms used in the Investment Agreement (the
"Agreement"), dated as of January 12, 2001, among Datawatch Corporation, a
Delaware corporation (the "Company"), WC Capital, LLC, a Delaware limited
liability company ("WC") and Carnegie Hill Associates, LLC, a Delaware limited
liability company ("CHA" and, together with WC, the "Purchasers"), are used
herein as therein defined. In addition, the following terms, as used herein,
have the following meanings:
"Commencement Date" means the 90th day following the Closing Date.
"Company Indemnified Parties" has the meaning set forth in Section 6.02.
"Demand Registration" has the meaning set forth in Section 2.01.
"Disadvantageous Effect" has the meaning set forth in Section 2.07.
"Holders" means
(i) the Purchasers;
(ii) each other Person, other than the Company or an Affiliate of the
Company, who at any time acquires any Registrable Shares directly or
indirectly from any Purchaser or Holder in a transaction or chain of
transactions not involving a public offering within the meaning of and
registered under the 1933 Act, and who:
(A) so acquires the lesser of (x) all of the Registrable Shares
held by such Holder and (y) 5% of the original number of Registrable
Shares initially held by all Purchasers; or
(B) is a constituent stockholder, partner or member (including
limited partners and retired partners or members) of a Holder to whom
Registrable Shares
-2-
are distributed as part of a distribution by such Holder to its
constituent stockholders, partners or members generally, or is a
liquidating trust established in connection with the dissolution or
winding up of any Holder; and
(iii) any Holder's successors, Affiliates and, in the case of any
Holder who is a natural person, such individual's spouse, ancestors, lineal
descendants, siblings, executors, administrators and heirs who acquire
Registrable Shares by gift, will or intestate succession,
in each of the foregoing cases, if such Person (if not a Purchaser) agrees in
writing to be bound by this Agreement as a Holder and for so long as such Person
continues to hold any Registrable Shares.
"Holder Indemnified Parties" has the meaning set forth in Section 6.01.
"Indemnified Party" has the meaning set forth in Section 6.03.
"Indemnifying Party" has the meaning set forth in Section 6.03.
"Initiating Holders" has the meaning set forth in Section 2.02.
"Losses" has the meaning set forth in Section 6.01.
"Majority Holders" means any one or more Holders who hold a total number of
Registrable Shares equal to at least a majority of the aggregate number of
Registrable Shares then held by all Holders.
"Majority Selling Holders" means, with respect to any Demand Registration
or Piggyback Registration, any one or more Selling Holders who hold a total
number of Registrable Shares equal to at least a majority of the aggregate
number of Registrable Shares which are held by all Selling Holders and which are
or are to be included in such Demand Registration or Piggyback Registration.
"Piggyback Registration" has the meaning set forth in Section 3.01.
"Registrable Shares" means (i) any and all Shares; (ii) any and all shares
of Common Stock (other than the Shares) held by the Purchasers on the Closing
Date; (iii) any and all Common Stock issued or issuable upon the exercise of any
Rights or other securities, acquired by or issuable to the Purchasers pursuant
to Section 7.03 of the Agreement; and (iv) any other shares of Common Stock
issued in respect of any such shares set forth in clauses (i), (ii) or (iii)
(because of stock splits, stock dividends, reclassifications, recapitalizations,
or similar events); provided, however, that shares of Common Stock held by a
particular Holder which are Registrable Shares shall cease to be Registrable
Shares (x) upon any sale
-3-
pursuant to a Registration Statement or Rule 144 under the 1933 Act, (y) at such
time as such Holder is able to sell such shares (whether or not sold) pursuant
to Rule 144(k) under the 1933 Act or (z) upon any sale, transfer or assignment
in any manner to a Person which is not entitled to the rights provided by this
Agreement. For purposes hereof, any Person shall be deemed to hold, as of any
time, (i) all issued and outstanding shares of Common Stock, Registrable Shares
or other securities then held or deemed to be held by such Person; (ii) all
additional shares of Common Stock, Registrable Shares or other securities which
would then be held by such Person if it were assumed that all Rights, if any,
then held or deemed to be held by such Person had been duly and effectively
exercised in full at and effective as of such time; and (iii) all additional
shares of Common Stock, Registrable Shares or other securities, if any, which
such Person then has a right to purchase pursuant to the rights granted pursuant
to Section 7.03 of the Agreement by virtue of any prior exercise thereof,
assuming, in the case of clause (ii), that all adjustments to the kind, number
and amount of shares of capital stock or other securities issuable upon
exercise, exchange or conversion of any of the Rights referred to in such clause
required by reason of any event or transaction occurring at or prior to such
time had been duly and effectively made as and when required by the terms
thereof.
"Registration Expenses" shall mean, with respect to any Demand Registration
or Piggyback Registration all (i) registration, qualification and filing fees;
(ii) fees and expenses of compliance with securities or blue sky laws (including
the reasonable fees and disbursements of counsel for any underwriters, dealers
or placement agents in connection therewith); (iii) printing expenses (or
comparable duplication expenses) and escrow fees; (iv) internal expenses of the
Company (including all salaries and expenses of officers and employees
performing legal or accounting duties); (v) fees and disbursements of counsel
for the Company; (vi) fees and expenses for independent certified public
accountants retained by the Company (including all fees and expenses associated
with special audits or the delivery by independent certified public accountants
of a "cold comfort" letter or letters); (vii) fees and expenses of any special
experts retained by the Company in connection with such registration; (viii)
fees and expenses of listing the Registrable Shares on a securities exchange or
otherwise in connection with Section 4.01(r); (ix) the reasonable fees and
expenses of a single firm of legal counsel for the Holders participating in such
Demand Registration or Piggyback Registration; and (x) all other reasonable
fees, costs, expenses and disbursements incurred in connection with or incident
to the Company's compliance with Article 4. Registration Expenses do not include
underwriting commissions or discounts payable in respect to Registrable Shares
of a Holder included in a Demand Registration or Piggyback Registration.
"Registration Statement" means a registration statement of the Company
under the 1933 Act on any form for which the Company then qualifies and which
permits the sale thereunder of the number of Registrable Shares (and any other
securities of the Company) to be included therein in accordance herewith
-4-
by the Selling Holders and, in the case of the Registrable Shares, according to
the method(s) of distribution determined in accordance herewith and in the case
of any other securities covered thereby, according to the plan(s) of
distribution described therein, including all exhibits and schedules to, all
financial statements included in or otherwise filed with, and all documents
incorporated by reference in any such registration statement, in each case as
amended or supplemented as of any reference date.
"Selling Holders" means, with respect to any Demand Registration or
Piggyback Registration, any Holders holding any Registrable Shares which are or
are to be included in such Demand Registration or Piggyback Registration in
accordance with this Agreement.
"Shelf Registration" has the meaning set forth in Section 2.10.
ARTICLE 2
DEMAND REGISTRATION
SECTION 2.01. Right to Demand Registration. The Holders shall have the
right to require the Company to register Registrable Shares under the 1933 Act
(a "Demand Registration"), which right shall be exercisable in the manner set
forth in this Article 2 at any time or from time to time on or after the
Commencement Date.
SECTION 2.02. Registrations. Any Holder or Holders holding in the aggregate
20% of the Registrable Shares (the "Initiating Holders") then held by all
Holders may request, in writing, that the Company effect a Demand Registration
on any form available for such registration under the 1933 Act, of Registrable
Shares constituting at least 20% of the Registrable Shares owned by the Holders.
If the Initiating Holders intend to distribute the Registrable Shares by means
of an underwritten offering, they shall so advise the Company in their request.
In the event such Demand Registration is underwritten, the right of any other
Holder to participate in such Demand Registration shall be conditioned on such
Holder's participation in such underwriting on the same terms as the Initiating
Holders. Upon receipt of any such request, the Company shall promptly give
written notice of such proposed registration to all other Holders. Such Holders
shall have the right, by giving written notice to the Company within thirty days
after the Company provides its notice, to elect to have included in such Demand
Registration such of their Registrable Shares as such Holders may request in
such notice of election. Subject to Section 2.03, the Holders shall be entitled
in the aggregate to require the Company to effect four Demand Registrations
pursuant to this Section 2.02 (any of which may be a Shelf Registration as
provided in Section 2.10) and, except as provided in Section 5.01, a Demand
Registration shall not be deemed to have been effected unless such registration
has been declared or ordered effective and, except for any Shelf Registration
Statement, the securities offered pursuant to such registration have been sold.
Notwithstand-
-5-
ing anything to the contrary contained herein, the Company shall not be required
to effect more than two Demand Registrations during any single twelve-month
period.
SECTION 2.03. Continuing Demand Registration. Subject to Sections 2.06 and
4.04, if the number of Registrable Shares sought to be included by the Holders
in any Demand Registration is reduced pursuant to Section 2.06, by reason of the
inclusion in such Demand Registration of shares of Common Stock held by any
Person(s) other than Holders, by more than 10%, the registration shall not count
as a Demand Registration.
SECTION 2.04. Reasonable Efforts by the Company. Subject to Section 2.05
and Section 2.07, if a Demand Registration is requested pursuant to Section 2.02
the Company shall, as soon as practicable after the period of thirty days
referred to in such Section, file with the Commission and use its reasonable
efforts to cause to become effective a Registration Statement which shall cover
the Registrable Shares requested to be registered by the Selling Holders and
shall take all other actions (including those required by Article 4) as may be
necessary or advisable to permit the Selling Holders to dispose of all such
Registrable Shares requested to be included in such Demand Registration in
accordance with the intended method(s) of distribution and in compliance with
the 1933 Act and state "blue sky" and securities laws.
SECTION 2.05. Withdrawals. The Majority Selling Holders may, at any time
and from time to time reasonably in advance of the planned date of consummation
of the sale or other distribution of Registrable Shares pursuant to any Demand
Registration, (i) permit any Selling Holder to withdraw, in whole or in part,
from participation in such Demand Registration; (ii) permit any Holder who was
not originally a Selling Holder to become a Selling Holder and include in such
Demand Registration any or all of such Holder's Registrable Shares; or (iii)
otherwise increase or decrease the number of Registrable Shares to be included
in such Demand Registration; provided, however, that if any such decrease would
result in the reduction of the number of Registrable Shares to be registered in
such Demand Registration to a number that would not be sufficient to satisfy the
condition stated in Section 2.02, then such decrease shall not be effective
unless approved by the Company and, if not so approved, the Selling Holder(s)
shall be deemed to have abandoned and terminated such Demand Registration. The
Majority Selling Holders may terminate or abandon such Demand Registration upon
written notice to the Company to that effect, in which event such Demand
Registration shall be deemed not to have been requested.
SECTION 2.06. Methods of Distribution; Reduction in Shares to be
Registered. (a) Subject to the last sentence of this Section 2.06(a) and to the
provisions of Section 2.06(b), the Registrable Shares of any Selling Holder
included in a Demand Registration may be registered for sale by such Selling
Holder directly or through sale or placement agents or to or through one or more
underwriters designated from time to time by such Selling Holder and
-6-
approved by the Company in its reasonable discretion and for resale by any such
underwriter or broker-dealer, through broker-dealers or in any other manner, in
one or more transactions and at a fixed price or prices, which may be changed,
at market prices prevailing at the time of sale, at prices related to such
prevailing market prices, at prices determined on a negotiated or competitive
bid basis or at a price or prices otherwise determined by such Selling Holder.
Notwithstanding the preference of any Selling Holder in any Demand Registration,
if the Majority Selling Holders, in their sole discretion, determine that the
offering and sale of Registrable Shares pursuant to such Demand Registration
should be pursuant to an underwriting or through a selling or placement agent or
syndicate, then such Majority Selling Holders shall have the right to select the
underwriters or managing underwriter, selling or placement agent or managing
selling or placement agent or syndicate manager for such offering and sale and
to establish, by agreement with such underwriters, managing underwriter, selling
or placement agents, managing selling or placement agent or syndicate manager or
otherwise the price or prices and other terms of such underwriting, offering and
sale, and in such event no Selling Holder who otherwise would be entitled to
include Registrable Shares in such Demand Registration shall be entitled to have
such Registrable Shares so included unless they are included in such
underwritten offering or offered and sold through such selling or placement
agent or syndicate at such price or prices and on such terms. Any such managing
underwriter, managing selling or placement agent or syndicate manager selected
by the Majority Selling Holders, shall be subject to the Company's approval,
which shall not be unreasonably withheld or delayed.
(b) If a Demand Registration is for or includes an underwritten offering or
an offering through a sales or placement agent or syndicate, and the managing
underwriter, such sales or placement agent, or the managing sales agent or the
syndicate manager determines in good faith that inclusion in such registration
of all Registrable Shares and other securities, if any, requested or proposed to
be included in such offering exceeds the number that could be sold without
having an adverse effect on such offering, including the price at which the
Majority Selling Holders propose to sell their Registrable Shares included in
such offering, then the number of Registrable Shares to be offered for the
accounts of the Selling Holders shall be reduced or limited on such basis in
proportion to the respective numbers of Registrable Shares requested to be
included in such offering by the Selling Holders, to the extent necessary to
reduce the total number of shares to be included in such offering to the amount
recommended by such managing underwriter, agent, managing sales agent or
syndicate manager; provided, however, that if, without violation of Section
2.09, in connection with such Demand Registration securities other than
Registrable Shares held by Selling Holders are being offered (whether for the
account of the Company or any Person other than a Holder), such reduction shall
be made (i) first, from any shares proposed to be sold for the accounts of the
Company or other Persons who are not Holders, allocated among the Company and
such other Persons in such manner as may be acceptable to the Company; and (ii)
second, from the Registrable Shares requested to be included in such
registration by the Holders (allocated, if necessary,
-7-
pro rata among all such Holders on the basis of the relative numbers of shares
each such Person has requested to be included in such registration), it being
understood and agreed that the securities referred to in clause (i) above shall
not be included in any such offering unless or until all the Registrable Shares
requested to be included in such offering by the Holders are so included.
SECTION 2.07. Right of the Company to Suspend Registration. The Company
shall be entitled to suspend, for a reasonable period of time not in excess of
ninety days after its receipt of a request for a Demand Registration pursuant to
Section 2.02, the filing of any Registration Statement which it otherwise would
be required to file pursuant to this Article 2, if (i) at any time prior to the
filing of such Registration Statement (A) the Company is engaged or has fixed
plans to engage in a registered public offering of its securities, (B) the
Company is in possession of material nonpublic information not ripe for
disclosure in a registration statement and the Board of Directors of the Company
determines, in good faith and in the exercise of reasonable business judgment,
that the disclosure of such information would be materially detrimental to the
business and affairs of the Company and that any Registration Statement absent
the inclusion of such information would be materially misleading, (C) the
Company is then prohibited (pursuant to the terms of an underwriting agreement
in connection with a public offering of its securities or otherwise) from filing
such Registration Statement or (D) the Company is engaged in any other activity
which, in the good faith determination of the Board of Directors of the Company,
would be adversely affected by the requested Demand Registration to the material
detriment of the Company (each, a "Disadvantageous Effect"); and (ii) the
Company gives all Selling Holders written notice of such suspension; provided,
however, that a suspension pursuant to this Section 2.07 or pursuant to Section
4.02 by reason of the existence of one or more Disadvantageous Effects shall be
authorized only once during any twelve-month period. In the event of any
suspension pursuant to this Section 2.07, then unless the request for the Demand
Registration is withdrawn pursuant to the last sentence of this Section 2.07,
the Company shall file such Registration Statement as soon as practicable after
the first to occur of (w) the consummation of the transaction which is the
asserted basis for such Disadvantageous Effect, (x) the abandonment or
termination of such transaction prior to consummation, (y) the determination by
the Board of Directors of the Company that such filing would not or would no
longer result in such Disadvantageous Effect and (z) the ninety-first day after
the receipt of the applicable request for such Demand Registration. If the
Company shall suspend the filing of any Registration Statement pursuant to this
Section 2.07, the Majority Selling Holders shall have the right to withdraw the
request for such Demand Registration by giving written notice to the Company
prior to expiration of such suspension period.
SECTION 2.08. Form of Registration Statement. If, in connection with a
Demand Registration, the Company proposes to effect such registration through
the filing of a Registration Statement on a particular registration form
available for such registration under
-8-
the 1933 Act and either the underwriters or managing underwriter, selling or
placement agent or managing selling or placement agent or syndicate manager, if
any, in connection with such Demand Registration shall advise the Company in
writing of its or their reasonable and good faith opinion that the use of
another available form is of material importance to the success of the proposed
offering or sale or other distribution contemplated, then such Demand
Registration shall be effected on such other form.
SECTION 2.09. No Other Participants in Demand Registration. Unless
otherwise agreed by the Majority Holders, neither the Company nor any other
Person except Holders shall be permitted to include any shares of Common Stock,
Rights or other securities for registration, offering, sale or distribution in
any Demand Registration.
SECTION 2.10. Shelf Registration. (a) The Company shall use its reasonable
best efforts to qualify for registration on Form S-3 or any comparable or
successor form or forms. Any request made at such time as the Company is
eligible to effect a registration of Registrable Shares on Form S-3 or any
comparable or successor form or forms by any Holder for a Demand Registration on
Form S-3 or any comparable or successor form or forms pursuant to Section 2.02
may, at the election of the Initiating Holder by specification in the applicable
request, include a request that all or any of the Registrable Shares requested
to be included in such Demand Registration be registered under the 1933 Act for
offering and sale on a delayed or continuous basis pursuant to Rule 415 under
the 1933 Act (a "Shelf Registration") to be filed on or after the Commencement
Date. In the event of any such request for a Shelf Registration, the notice
given by the Initiating Holder pursuant to Section 2.02 shall state that such
request was for or included a Shelf Registration. To the extent that a request
for a Demand Registration is for or includes a Shelf Registration, no Selling
Holder participating in such Shelf Registration shall be required to provide
information with respect to the desired price range for the Registrable Shares
requested to be included therein by any Selling Holder or the intended method(s)
of disposition or distribution thereof except to the extent and at the time or
times required in order to satisfy the applicable requirements of Regulation S-K
promulgated by the Commission. The method(s) of distribution of the Registrable
Shares of any Selling Holder included in any Shelf Registration may be any
method or methods permitted by Rule 415 of the 1933 Act and any such Selling
Holder may change such method or methods of distribution at any time and from
time to time while the Registration Statement relating to such Shelf
Registration is required to remain effective in accordance with the terms of
Section 2.10(b) hereof; provided that such Selling Holder provides to the
Company the information reasonably required to permit compliance with the
applicable requirements of Regulation S-K promulgated by the Commission.
(b) Subject to Section 4.02, the Company shall use all reasonable efforts
to keep each Registration Statement filed with respect to any Shelf Registration
continuously effective until two years from the date on which the Commission
declares such Registration
-9-
Statement effective. Such period shall be automatically extended by the
aggregate number of days, if any, during which any delay, deferral, postponement
or suspension is in effect with respect to such Registration Statement.
(c) The Company shall effect any Shelf Registration requested pursuant to
this Agreement on a Registration Statement of the Company under the 1933 Act on
any form, including Form S-3, for which the Company then qualifies and which
permits the offering and distribution thereunder of the number of Registrable
Shares to be included therein in accordance with the method(s) of distribution
determined in accordance with this Agreement.
(d) The fact that a Registration Statement with regard to a Shelf
Registration is effective as of a particular time shall not prejudice or
otherwise affect the rights of the Selling Holders to participate in any such
Demand Registration requested by any other Holders or to participate in any
Piggyback Registration.
ARTICLE 3
PIGGYBACK REGISTRATION
SECTION 3.01. Right to Require Piggyback Registration. (a) If, at any time
or from time to time, the Company shall determine to register any of its
securities, either for its own account or the account of a security holder or
holders (other than (w) a registration statement on Form S-4 or S-8 (or any
substitute form that may be adopted by the Commission), (x) a Registration
Statement filed by the Company solely registering up to 70,000 shares of Common
Stock for the account of Silicon Valley Bank, (y) a Registration Statement filed
by the Company solely registering up to 50,000 shares of Common Stock for the
account of Xxxxxxx Xxxx or (z) a registration statement filed in connection with
an offer of securities solely to the Company's existing security holders) in a
transaction that may be used for the registration of Registrable Shares for
distribution by any one or more of the methods permitted by Section 3.02(a),
then upon each and every such occasion the Company shall give prior written
notice of such proposed registration to each Holder of its intention to do so
promptly and in any event not later than the fourteenth day before the
anticipated filing date of the applicable Registration Statement. Such notice
shall specify whether the proposed registration is for the account of the
Company, for the account of one or more other Persons or both and also specify
the kind and number or amount of securities proposed to be registered on behalf
of each thereof and the proposed offering price or prices and distribution
methods and arrangements. Upon the terms and subject to the conditions and
limitations set forth in this Article 3, each Holder may elect to participate in
such registration by giving the Company, within ten days after such notice has
been given by the Company, a written request to register any or all of such
Holder's Registrable Shares in connection with such registration (any such
registration
-10-
as to which any such request is made being sometimes referred to as an
"Piggyback Registration")
(b) Any such request by a Holder shall state (i) the kind and number of
Registrable Shares to be included in such registration by such Holder; (ii) such
Holder's preferred method of distribution of such Registrable Shares permitted
by Section 3.02(b); and (iii) any other information that the Company reasonably
requests in such notice given by it to the Holders. Upon receipt of one or more
of such requests, the Company shall, subject to Section 3.02 and Section 3.03,
as soon as practicable, file with the Commission and use its reasonable efforts
to cause to become effective, a Registration Statement which shall cover the
Registrable Shares requested to be registered by the requesting Holders and
shall take all such other actions (including those required by Article 4) as may
be necessary or advisable to permit the requesting Holders to dispose of all
such Registrable Shares requested to be included in such Piggyback Registration
in accordance with the permitted intended method or methods of distribution in
compliance with the 1933 Act and state "blue sky" and securities laws.
SECTION 3.02. Methods of Distribution; Reduction in Number of Shares to be
Registered. (a) Subject to Section 3.02(b), Section 3.02(c) and Section 4.05,
the Registrable Shares of any Holder included in a Piggyback Registration may be
registered for sale by such Holder directly or through sales or placement agents
designated from time to time or to or through one or more underwriters or
broker-dealers designated from time to time by such Holder and for resale by any
such underwriter or broker-dealer, in one or more transactions and at a fixed
price, which may be changed, at market prices prevailing at the time of sale, at
prices related to such prevailing market prices, at prices determined on a
negotiated or competitive bid basis or at a price otherwise determined by such
Holder.
(b) If the registration of which the Company gives notice is for a
registered public offering involving an underwriting, the Company shall so
advise the Holders as a part of the written notice given pursuant to Section
3.01. In such event, the right of any Holder to participate in such registration
pursuant to this Article 3 shall be conditioned upon such Holder's participation
in such underwriting and the inclusion of Registrable Shares in the underwriting
to the extent provided herein. Subject to Section 4.04, if any Piggyback
Registration is for (or includes) an underwritten offering, the Company will
permit each Holder who elects to include any of its Registrable Shares in such
Piggyback Registration to elect to include any or all of such Registrable Shares
in such underwritten offering on the same terms and conditions as any similar
securities included therein. In a registration pursuant to Section 3.01
involving an underwritten public offering, if the managing underwriter or
underwriters of such underwritten offering have informed, in writing, the
Company and each Holder who requested Registrable Shares to be included in such
offering that in such underwriter's or underwriters' reasonable opinion the
total number of securities which the Company, the Holders who requested
Registrable Shares to be included in such offering and any other Persons
de-
-11-
siring to participate in such registration intend to include in such offering is
such as to materially and adversely affect the success of such offering,
including the price at which such securities can be sold, then the Company will
be required to include in such registration only the amount of securities which
it so advised should be included in such registration. In such event:
(i) if the registration was initiated by any security holder(s) of the
Company exercising "demand" registration rights, securities shall be
registered in such offering in the following order of priority:
(A) first, the securities, if any, which the Company proposes to
register and the securities such security holder(s) initiating such
registration propose to register, allocated, if necessary, pro rata
among the Company and such holder(s) on the basis of the relative
numbers of shares each such Person proposes to include in the
registration; provided that if such initiating holder or holders are
Holders, the Company shall not be entitled to include any securities
in such registration without the prior written consent of the Majority
Holders and, as among Holders there shall be no priority and
Registrable Securities sought to be included by Holders shall be
included pro rata based on the amount of securities sought to be
registered by such Persons;
(B) second, provided that no securities sought to be included by
the Company or such initiating holder(s) have been excluded from such
registration, the securities which have been requested to be included
in such registration by Holders pursuant to this Agreement (unless the
initiating holder(s) are Holders, in which case clause (i)(A) shall
govern the priority of the Holders) (allocated, if necessary, pro rata
among all such Holders on the basis of the relative numbers of shares
each such Person has requested to include in registration); and
(C) third, provided that no securities sought to be included
under clause (i)(A) or (i)(B) have been excluded, the securities of
all other Persons sought to be included in such registration
(allocated, if necessary, among such Persons in such manner as the
Company deems acceptable); or
(ii) if the registration was initiated by the Company, otherwise than
by reason of any such exercise of "demand" registration rights, securities
shall be registered in such offering in the following order of priority:
(A) first, the securities, if any, which the Company proposes to
register;
-12-
(B) second, provided that no securities sought to be included by
the Company have been excluded from such registration, the securities
which have been requested to be included in such registration by
Holders pursuant hereto (allocated, if necessary, pro rata among all
such Holders on the basis of the relative numbers of shares each such
Person has requested to include in registration); and
(C) third, provided that no securities sought to be included
under clause (ii)(A) or (ii)(B) have been excluded, the securities of
all other Persons sought to be included in such registration
(allocated, if necessary, among such Persons in such manner as the
Company deems acceptable).
(c) If, as a result of the provisions of Section 3.02(b), any Holder shall
not be entitled to include all Registrable Securities in a Piggy-Back
Registration that such Holder has requested to be included, such Holder may
elect to withdraw his request to include Registrable Securities in such
registration.
SECTION 3.03. Withdrawal of Registration. The Company may, without the
consent of any Holder, delay, suspend, abandon or withdraw any Piggyback
Registration and any related proposed offering or other distribution in which
any Holder has requested inclusion of Registrable Shares pursuant to this
Article 3.
ARTICLE 4
OBLIGATIONS WITH RESPECT TO REGISTRATION
SECTION 4.01. In General. Whenever the Company is obligated by the
provisions of Article 2 or Article 3 to effect the registration of any
Registrable Shares under the 1933 Act, the Company shall use its reasonable
efforts to effect the registration of all Registrable Shares which any Holder
has requested to be included therein for offering, sale and distribution in
accordance with the permitted intended methods of distribution thereof as
quickly as practicable, and in connection therewith the Company will do the
following as expeditiously as possible:
(a) (i) prepare and file with the Commission a Registration Statement on
any form for which the Company then qualifies and which is available for the
registration of the Registrable Shares requested to be registered in accordance
with the intended methods of distribution thereof; (ii) include in the
Registration Statement all Registrable Shares requested to be included pursuant
to Article 2 or Article 3 (as the case may be); and (iii) use its reasonable
efforts to cause such Registration Statement to become effective;
-13-
(b) prepare and file with the Commission such amendments and post-effective
amendments and supplements to the Registration Statement or any prospectus as
may be necessary to keep the Registration Statement effective, current and in
compliance with the provisions of the 1933 Act, until the last to occur of (i)
the sale or other distribution of all of the Registrable Shares covered by such
Registration Statement in accordance with the intended methods of distribution
thereof; (ii) the expiration of all periods during which transactions in
Registrable Shares by a dealer are not exempt from the provisions of Section 5
of the 1933 Act by virtue of Section 4(3) of the 1933 Act or during which any
dealer is obligated under the 1933 Act to deliver a prospectus in connection
with transactions involving Registrable Shares; and (iii) the expiration of all
other periods, if any, during which the Registration Statement is required to
remain effective in order to avoid a violation of applicable law by any Holder
or the Company related to the sale or other distribution of all of the
Registrable Shares covered by such Registration Statement in accordance with the
intended methods of distribution thereof;
(c) at least five days prior to filing any Registration Statement or
prospectus or any amendment or supplement thereto, furnish to each Holder and
each underwriter, if any, of the Registrable Shares covered by such Registration
Statement copies of the current draft of such Registration Statement or
prospectus (including documents to be incorporated by reference therein), which
documents will be subject to the reasonable review and comments of such Holders
(and their respective counsel) during such five-day period, and if any Holder
objects in writing to any statements in any such documents with respect to such
Holder or the distribution of the Registrable Shares to be included by it in
such Registration Statement, the Company shall, subject to applicable law,
promptly revise such statements to such Holder's reasonable satisfaction;
(d) promptly notify each Holder of the effectiveness of the Registration
Statement;
(e) furnish to each Holder without charge and as soon as such documents
become available to the Company, at least one copy of the Registration Statement
and each amendment thereto, and such number of conformed copies thereof, copies
of the prospectus (including each preliminary prospectus and each amendment or
supplement thereto), in each case together with all exhibits thereto and all
documents incorporated by reference in any of such documents as such Holder may
reasonably (in light of such Holder's intended method of distribution) request
in order to facilitate the disposition of the Registrable Shares being sold by
such Holder (it being understood that the Company consents to the use, in
compliance with the 1933 Act, of each preliminary prospectus and prospectus and
each amendment or supplement thereto by each Holder, each underwriter, broker,
dealer, placement agent and other securities industry professional and each
agent of each Holder in connection with the offering, sale and distribution of
the Registrable Shares covered thereby);
-14-
(f) promptly notify each Holder, at any time when a prospectus relating to
Registrable Shares of such Holder covered by the Registration Statement is
required to be delivered under the 1933 Act, of the happening of any event as a
result of which the preliminary prospectus or prospectus included in such
Registration Statement or any prospectus supplement contains any untrue
statement of a material fact or omits to state a material fact necessary to make
the statements therein, in light of the circumstances under which they were
made, not misleading, and the Company will, as promptly as practicable
thereafter, prepare and file with the Commission and furnish to each Holder a
supplement or amendment to such preliminary prospectus, prospectus or prospectus
supplement so that, as thereafter delivered to the prospective purchasers of the
Registrable Shares being distributed by such Holder, such preliminary
prospectus, prospectus or prospectus supplement will 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;
(g) enter into customary agreements (including, in the case of an
underwritten offering, an underwriting agreement in customary form) and make
such representations and warranties to any underwriters, brokers, dealers,
placement agents and other Persons involved in the distribution of the
Registrable Shares included in such Registration Statement as in form, substance
and scope are customarily made by issuers in similar circumstances or which may
be reasonably requested;
(h) furnish to each underwriter, broker, dealer or placement agent
participating in any offering or sale or other distribution pursuant to such
Registration Statement a signed counterpart of (i) an opinion of counsel to the
Company addressed to such underwriter, broker, dealer or placement agent (as the
case may be); and (ii) a "cold comfort" letter or letters from the Company's
independent certified public accountants, each in customary form and covering
such matters of the type customarily covered by legal opinions or "cold comfort"
letters (as the case may be) in similar offerings, sales or distributions of
securities of similarly situated issuers and such other matters as the Majority
Selling Holders may reasonably request;
(i) prepare and file with the Commission promptly upon the request of any
such Holder, any amendments or supplements to such Registration Statement or the
applicable prospectus which, in the reasonable opinion of counsel for such
Holder, is required under the 1933 Act in connection with the distribution of
Registrable Shares by such Holder;
(j) effective on or prior to the date the Registration Statement becomes
effective, use its reasonable efforts to register or qualify the Registrable
Shares covered by a Registration Statement under the securities or blue sky laws
of such jurisdictions in the United States as the Majority Selling Holders or
any underwriter, broker, dealer or placement agent
-15-
participating in the offering or sale or other distribution of the Registrable
Shares covered thereby shall reasonably request, and do any and all other acts
and things which may be reasonably necessary to enable each Selling Holder to
consummate the offering and disposition of such Registrable Shares in such
jurisdictions of such Registrable Shares in accordance with the permitted
methods of distribution described in such Registration Statement; provided,
however, that the Company shall in no event be required to qualify generally to
do business as a foreign corporation in any jurisdiction where it is not
otherwise required to be so qualified or, to conform its capitalization or the
composition of its assets at the time to the securities or blue sky laws of such
jurisdiction;
(k) make generally available to the Company's securityholders earnings
statements satisfying the provisions of the last sentence of Section 11(a) of
the 1933 Act no later than forty-five days after the end of the twelve-month
period beginning with the first month of the first fiscal quarter commencing
after the effective date of the Registration Statement, which earnings
statements shall cover said twelve-month period;
(l) promptly notify each Selling Holder and each underwriter, broker,
dealer and placement agent participating in any offering or sale or other
distribution of securities covered by such Registration Statement of the
issuance or threatened issuance of any stop order or other order suspending the
effectiveness of the Registration Statement or preventing or suspending the use
of any preliminary prospectus, prospectus or prospectus supplement; use
reasonable efforts to prevent the issuance of any such threatened stop order or
other order, and if any such order is issued, use its best efforts to obtain the
lifting or withdrawal of such order at the earliest possible moment and promptly
notify each Selling Holder and each such underwriter, broker, dealer and
placement agent of any such lifting or withdrawal;
(m) as promptly as practicable after filing with the Commission of any
document which is incorporated by reference into a Registration Statement,
notify each Selling Holder of such filing and deliver a copy of such document to
each Selling Holder;
(n) cooperate with each Selling Holder and the underwriters, brokers,
dealers and placement agents participating in any offering or sale or other
distribution of securities covered by such Registration Statement to facilitate
the timely preparation and delivery of certificates, not bearing any restrictive
legends, unless otherwise required by such Holder, representing the securities
covered by such Registration Statement, and enable all Registrable Shares of
such Selling Holder covered thereby to be in such denominations and registered
in such names as such Selling Holder may request;
(o) use its reasonable efforts to cause the Registrable Shares covered by
the Registration Statement to be registered with or approved by such other
governmental authorities within the United States and its territories as may be
necessary to enable the Selling Hold-
-16-
ers to consummate the disposition of such securities in accordance with the
intended methods of disposition;
(p) cooperate with the Selling Holders and the underwriters, brokers,
dealers and placement agents participating in any offering or sale or other
distribution of securities covered by such Registration Statement in making any
filings or submissions required to be made, and in furnishing all appropriate
information in connection therewith, with the National Association of Securities
Dealers, Inc., any national securities exchange, any other "self-regulatory
organization" (as defined in the Exchange Act) or with any governmental
authority;
(q) promptly notify each Selling Holder and each underwriter, broker,
dealer and placement agent participating in any offering or sale or other
distribution of securities covered by such Registration Statement of the
issuance or threatened issuance of any order suspending the registration or
qualification of any Registrable Shares covered by such Registration Statement
for disposition in any jurisdiction; use its reasonable efforts to prevent the
issuance of any such threatened order and; if any such order is issued, use its
reasonable best efforts to obtain the lifting or withdrawal of such order at the
earliest possible moment and promptly notify each Selling Holder and each such
underwriter, broker, dealer and placement agent of any such lifting or
withdrawal;
(r) if any shares of Common Stock or any other capital stock or securities
of the same class, series, issue or other type as any Registrable Shares covered
by such Registration Statement are or upon consummation of all sales and other
distributions covered by such Registration Statement will be listed, qualified
or otherwise eligible for trading or quotation on a national securities exchange
or The Nasdaq Stock Market, use its reasonable best efforts to cause, by the
date of the first sale of any Registrable Shares pursuant to such Registration
Statement, all Registrable Shares covered by such Registration Statement to be
listed, qualified or eligible for trading or quotation on each such exchange or
quotation system;
(s) take, and use its reasonable efforts to cause each of the respective
Affiliates of the Company to take, all action necessary to effect each
registration, offering, sale and distribution of the Registrable Shares
contemplated hereby, including preparing and filing any required financial or
other information;
(t) make available to each registrar, transfer agent, trustee or similar
agent or fiduciary for each class, series, issue or other type of Registrable
Shares a supply of certificates or other instruments evidencing or constituting
such Registrable Shares which shall be in a form complying with the requirements
of such registrar, transfer agent, trustee or similar agent or fiduciary
promptly after the registration of such Registrable Shares;
(u) in the case of an underwritten offering, use its best efforts to cause
the senior executive officers of the Company to participate in the customary
"road show" presen-
-17-
tations that may be reasonably requested by the managing underwriter or
underwriters in any such underwritten offering and otherwise to facilitate,
cooperate with, and participate in each proposed offering contemplated herein
and customary selling efforts related thereto; and
(v) take all other actions which are reasonably necessary or which may be
reasonably requested by the Majority Selling Holders or the Majority Holders or
any underwriter, broker, dealer or placement agent participating in any offering
or sale or other distribution of securities covered by such Registration
Statement to effect the registration and qualification of the Registrable Shares
covered by such Registration Statement and to facilitate the disposition thereof
in accordance with the respective plans of distribution of the Selling Holders.
SECTION 4.02. Suspension of Registration Proceedings. Notwithstanding
anything to the contrary contained herein, if at any time after the filing of a
Registration Statement in a Demand Registration, the Company determines, in its
reasonable business judgment, that such offering, sale or other distribution
covered thereby would result in a Disadvantageous Effect, then the Company may
suspend the offering, sale or distribution of any of the Registrable Shares
pursuant to such Registration Statement by giving written notice to such effect
to each Selling Holder and upon receipt of such notice such Selling Holder shall
not offer or sell any shares of Common Stock, or engage in any other transaction
involving or relating to the Common Stock; provided, however, that (i) the
Company may not require such suspension unless such suspension is also required
on the part of each and every Person (including the Company) who proposes to
offer, sell or otherwise distribute any securities pursuant to such Registration
Statement; and (ii) a suspension pursuant to this Section 4.02 or pursuant to
Section 2.07 by reason of the existence of one or more Disadvantageous Effects
shall be authorized only once during any twelve-month period. Any such
suspension pursuant to this Section 4.02 shall terminate upon the first to occur
of (w) the consummation of the transaction or event which is the asserted basis
for such Disadvantageous Effect, (x) the abandonment or termination of such
transaction or event prior to consummation, (y) the determination by the Board
of Directors of the Company that such event, offering, sale or other
distribution would not or would no longer result in such Disadvantageous Effect,
and (z) the ninety-first day after the written notice of such suspension is
given in accordance with this Section.
SECTION 4.03. Procedures if Stop Order Issued. Each Selling Holder, upon
receipt of any written notice from the Company of the happening of any event of
the kind described in Section 4.01(f), will forthwith discontinue disposition of
Registrable Shares pursuant to the applicable Registration Statement until such
Selling Holder's receipt of the copies of the supplemented or amended
preliminary prospectus, prospectus or prospectus supplement contemplated by
Section 4.01(f), and, if so directed by the Company, such Selling Holder will
deliver to the Company all copies in its possession of the most recent
preliminary prospectus, prospectus or prospectus supplement covering such
Registrable Shares at the time of receipt
-18-
of such notice. In the event the Company shall give any such notice after a
Registration Statement has become effective, the Company shall extend the period
during which the effectiveness of such Registration Statement shall be
maintained pursuant to Section 4.01(b) hereof by the number of days during the
period from and including the date of the giving of notice pursuant to Section
4.01(f) to the date when the Company shall make available to each Selling Holder
the copies of the supplemented or amended preliminary prospectus, prospectus or
prospectus supplement contemplated by Section 4.01(f).
SECTION 4.04. Participation in Underwritten Offers. No Holder or other
Person who otherwise has a right to participate in any underwritten offering in
connection with a Demand Registration or a Piggyback Registration shall be
entitled to so participate unless such Person (i) agrees to sell its securities
on the basis provided in any underwriting arrangements applicable to all
stockholders who participate therein (including so-called "lock-up"
arrangements); and (ii) completes and executes all questionnaires, powers of
attorney, indemnities, underwriting agreements and other documents reasonably
required under the terms of such underwriting arrangements and this Agreement;
provided, that in the case of any Demand Registration, the Majority Selling
Holders shall have the right to determine those arrangements by agreement with
the managing underwriter(s) as provided in Section 2.06(a).
SECTION 4.05. Restriction on Other Sales. If, in the case of either (or
each) of the first two underwritten offerings after the date hereof that consist
of or include offerings of Common Stock for the account of the Company
registered pursuant to Section 5 of the 1933 Act, the managing underwriter(s)
for such offering determine in good faith that public sales of Common Stock by
the Holders otherwise than as part of such offering would adversely affect the
success of such offering, and if the Holders, collectively, then own Registrable
Shares constituting 10% or more of the fully diluted shares of Common Stock then
outstanding (after giving effect to all sales, including any by Holders, and
issuances of Common Stock or Rights to acquire Common Stock pursuant to the
Registration Statement covering such offering), then to the extent requested by
such managing underwriter(s), no Holder shall effect any sale or distribution
into the public market of any Common Stock owned by such Holder, other than as
part of such underwritten offering (to the extent that such Holder has the right
or is otherwise allowed to participate therein), for such period after the
effective date of the Registration Statement covering such offering as such
managing underwriter(s) shall specify; provided that (i) such period shall not
exceed 180 days; and (ii) each of the executive officers and the Directors of
the Company who beneficially own Common Stock or Rights to acquire Common Stock,
and each Person who holds a number of shares of Common Stock (including shares
issuable upon exercise of Rights but excluding shares acquired in a public
market) equal to or greater than the number of Registrable Shares held (after
giving effect to any sales pursuant to such Registration Statement) by the
Holders, collectively, also agree to be subject to the same restrictions for the
same period and any waiver or release from such restriction granted to any such
officer, director or Person is also granted to each of the Holders
-19-
with respect to the same number of shares. Any contract or agreement entered
into on or after the date hereof (other than any agreement between the Company
and Silicon Valley Bank relating to 70,000 shares of Common Stock) pursuant to
which the Company issues any securities or becomes or may become obligated to
register or to permit the participation in the registration of any securities of
the Company shall contain restrictions upon the holders of such securities
equivalent to those imposed upon the Holders under this Section. The provisions
of this Section 4.05 shall not prevent the conversion, exchange or exercise of
any securities pursuant to their respective terms into or for other securities
of the Company or any public sale or other distribution by any of the Holders
with the prior consent of the Company, and are supplemental to any similar
requirements imposed by the 1933 Act.
ARTICLE 5
EXPENSES OF REGISTRATION
SECTION 5.01. Expenses. Except as provided in the last sentence of this
Section 5.01, all Registration Expenses incurred in connection with or otherwise
incident to any Demand Registration or Piggyback Registration and the offering
or sale or other distribution of any Registrable Shares in connection therewith
shall be borne by the Company, whether or not any Registration Statement filed
in connection therewith ever becomes effective or any such sale or other
distribution ever is consummated. Underwriting discounts and selling commissions
attributable to the Registrable Shares included in such registration shall be
borne by the holders of such Registrable Shares pro rata on the basis of the
respective numbers of such included Registrable Shares. Subject to the last
sentence of this Section 5.01, the Company shall not be required to pay the
Registration Expenses of any Demand Registration begun pursuant to Section 2.02
that is withdrawn at the request of the Majority Selling Holders, unless the
Majority Holders elect in writing to have such registration counted as a Demand
Registration. In any such case, (i) the Holders of Registrable Shares to have
been registered shall bear all such Registration Expenses pro rata on the basis
of the number of shares to have been registered; and (ii) the Company shall not
be deemed to have effected a Demand Registration for purposes of the last
sentence of Section 2.02. Notwithstanding the foregoing, however, the Company
shall pay such Registration Expenses (and shall not be deemed to have effected a
Demand Registration for purposes of the last sentence of Section 2.02) if the
withdrawal is pursuant to Section 2.07 or Section 3.02.
-20-
ARTICLE 6
INDEMNIFICATION AND CONTRIBUTION
SECTION 6.01. Indemnification by the Company. The Company shall indemnify
and hold harmless each Holder, each former Holder, each Person (if any) who
controls such Holder or former Holder within the meaning of the 1933 Act or the
1934 Act and each of their respective Affiliates, partners, directors, officers,
employees and agents (collectively, the "Holder Indemnified Parties") from and
against any liabilities, obligations, losses, damages, assessments, fines and
penalties of any kind or nature, including all amounts paid or agreed to be paid
in settlement of any claim, action, suit, hearing, proceeding or investigation
(collectively, "Losses"), whether direct, indirect, joint or several, and
subject to Section 6.03, also shall indemnify and reimburse each Holder
Indemnified Party for all reasonable fees, costs and expenses (including
reasonable fees and disbursements of counsel) in connection with preparing for,
defending against or settling, prosecuting any appeal of any judgment entered
in, or otherwise as a result of, any claim, action, suit, hearing, proceeding or
investigation, in each case which in any manner results from, arises out of, or
is based upon or related or attributable to (i) any untrue statement or alleged
untrue statement of any material fact contained in any Registration Statement as
originally filed or in any amendment thereof, or in any preliminary, final or
summary prospectus, or in any amendment thereof or supplement thereto, or any
omission or alleged omission to state in any thereof a material fact required to
be stated therein or necessary to make the statements therein not misleading; or
(ii) any violation by the Company of any federal or state law, rule or
regulation or common law applicable to the Company and relating to action
required of or inaction by the Company in connection with any Demand
Registration or Piggyback Registration; provided, however, that, in the case of
clause (i), the Company shall not be obligated to indemnify any Holder or any of
its controlling Persons, Affiliates, partners, directors, officers, employees or
agents for any Loss to the extent (and only to the extent) that such Loss arises
from (A) any such untrue statement made in or omission from the Registration
Statement or any amendment thereof, or any related preliminary, final or summary
prospectus or any amendment thereof or supplement thereto, which statement or
omission related directly to information about such Holder or its proposed plan
of distribution of the Registrable Shares of such Holder covered by such
Registration Statement and was made or omitted in reliance upon and in
conformity with the latest information about such Holder or its proposed plan of
distribution of the Registrable Shares of such Holder covered by such
Registration Statement which was provided to the Company by such Holder in
writing and stated in writing to be specifically for use in such Registration
Statement (or amendment thereto) or such prospectus (or amendment thereof or
supplement thereto) or (B) in the case of a sale directly by a Holder (including
a sale of shares through any underwriter retained by such Holder to engage in a
distribution on behalf of such Holder), such untrue statement or alleged untrue
statement or omission or alleged omission was con-
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tained in a preliminary prospectus and corrected in a final prospectus or
amended prospectus, copies of which were delivered to such Holder or such
underwriter on a timely basis, and such Holder or such underwriter failed to
deliver a copy of the final or amended prospectus at or prior to the
confirmation of the sale of the Registrable Shares to the Person asserting any
such Losses in any case where delivery is required by the Securities Act. The
Company will also indemnify each underwriter, selling broker, dealer manager,
placement agent and similar securities industry professional participating in
the distribution of Registrable Shares, its officers and directors and each
Person who controls such Person (within the meaning of the 0000 Xxx) to the
extent reasonably required by such underwriter; provided, however, that if the
Company and any such underwriter, selling broker, dealer manager or similar
industry professional enters into an underwriting, purchase or other agreement
relating to such distribution which contains provisions relating to
indemnification and contribution between the Company and such Person, such
provisions shall be deemed to govern indemnification and contribution as between
the Company and such Person.
SECTION 6.02. Indemnification by Each Holder. Each Holder, individually and
not jointly, shall indemnify and hold harmless the Company, each of its
directors, each of its officers and its legal counsel and independent
accountants, each underwriter of the Registrable Shares so registered (including
any broker or dealer through whom such of the shares may be sold), and each
Person, if any, who controls the Company within the meaning of the 1933 Act and
the 1934 Act (the "Company Indemnified Parties") and the Holder Indemnified
Parties (other than such indemnifying Holder and its controlling Persons,
Affiliates, partners, directors, officers, employees and agents) from and
against any Loss to which such Company Indemnified Parties and/or Holder
Indemnified Parties may become subject, and subject to Section 6.03, also shall
indemnify and reimburse each Company Indemnified Party and each such Holder
Indemnified Party for all reasonable fees, costs and expenses (including
reasonable fees and disbursements of counsel) in connection with preparing for,
defending against or settling, prosecuting any appeal of any judgment entered
in, or otherwise as a result of any claim, action, suit, hearing, proceeding or
investigation, in each case insofar and to the extent (and only insofar and to
the extent) as such Loss or such claim, action, suit, hearing, proceeding or
investigation arises out of or is based upon any untrue statement or alleged
untrue statement of a material fact contained in any Registration Statement
pursuant to which any Registrable Shares of such Holder were offered and sold or
in any related preliminary, final or summary prospectus, or in any amendment
thereof or supplement thereto, or any omission or alleged omission to state
therein a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading, if the statement or omission related to information about such
Holder or its proposed plan of distribution of the Registrable Shares of such
Holder covered by such Registration Statement and was made or omitted in
reliance upon and in conformity with the latest information about such Holder or
its proposed plan of distribution of the Registrable Shares of such Holder
covered by such Registration Statement which was provided by such Holder in
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writing and stated in writing to be specifically for inclusion therein;
provided, however, that such Holder will not indemnify or hold harmless any
Company Indemnified Party and/or Holder Indemnified Party from or against any
such Loss, fee, cost or expense if the untrue statement, omission or alleged
untrue statement or omission upon which such Losses or expenses are based was
contained in or omitted from (as the case may be) any preliminary prospectus,
prospectus or summary prospectus, or any amendment thereof or supplement
thereto, used after such time as the Company was advised in writing by or on
behalf of such Holder that the information about such Selling Holder contained
therein needs to be corrected, revised or supplemented.
SECTION 6.03. Procedures. Each party claiming a right to indemnification
under this Article 6 (the "Indemnified Party") shall give notice to the party
from whom such indemnification is or may be sought (the "Indemnifying Party")
promptly after such Indemnified Party has actual knowledge of any claim as to
which indemnification may be sought, and the Indemnifying Party may participate
at its own expense in the defense or, if it so elects, assume the defense (with
counsel reasonably satisfactory to the Indemnified Party) of any such claim and
any action or proceeding resulting therefrom, including the payment of all
expenses. The failure of any Indemnified Party to give notice as provided herein
shall not relieve the Indemnifying Party from its obligations to indemnify such
Indemnified Party, except to the extent the Indemnified Party's failure to so
notify results in the forfeiture by the Indemnifying Party of substantial rights
and defenses. In the event that the Indemnifying Party elects to assume the
defense in any action or proceeding, an Indemnified Party shall have the right
to employ separate counsel in any such action or proceeding and to participate
in the defense thereof, but such Indemnified Party shall pay the fees and
expenses of such separate counsel unless (i) the Indemnifying Party has agreed
to pay such fees and expenses; (ii) any relief other than the payment of money
is sought against the Indemnified Party; (iii) the use of counsel chosen by the
Indemnifying Party to represent the Indemnified Party would present such counsel
with a conflict of interest; or (iv) the defendants in any such action or
proceeding include the Indemnifying Party and the Indemnified Party and the
Indemnified Party shall have been advised by counsel that there may be one or
more legal defenses available to it and/or any other Indemnified Party that are
different from or additional to those available to 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 assume the defense of such action or
proceeding on such Indemnified Party's behalf, it being understood, however,
that the Indemnifying Party shall not, in connection with any one such action or
proceeding or separate but substantially similar or related actions or
proceedings arising out of the same general allegations or circumstances, be
liable for the reasonable fees and expenses of more than one separate firm of
attorneys (in addition to local counsel) at any time for all Indemnified
Parties, which firm or firms shall be designated in writing by the applicable
Indemnified Parties). If the Indemnifying Party elects not to defend, or if,
after commencing or undertaking any such defense, the Indemnifying
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Party fails to prosecute or withdraws from such defense or fails to appeal any
judgment adverse or unfavorable to the Indemnified Party, the Indemnified Party
shall have the right to undertake the defense, settlement or appeal thereof (as
the case may be), at the Indemnifying Party's expense. If the Indemnified Party
assumes the defense of any such claim, investigation, action, suit, hearing or
proceeding pursuant to this Section 6.03 and proposes to settle the same prior
to a final judgment thereon or to forgo or abandon any appeal available after
final judgment thereon, then the Indemnified Party shall give the Indemnifying
Party prompt written notice thereof and the Indemnifying Party shall have the
right to participate in the settlement, assume or reassume the defense thereof
or prosecute such appeal, in each case at the Indemnifying Party's expense. The
Indemnifying Party shall not, without written consent of such Indemnified Party,
settle or compromise or consent to entry of any judgment with respect to any
such claim, investigation, action, suit, hearing or proceeding (i) in which any
relief other than the payment of money damages is or may be sought against such
Indemnified Party or (ii) which does not include as an unconditional term
thereof the giving by the claimant, Person conducting such investigation or
initiating such hearing, plaintiff or petitioner to such Indemnified Party of a
release from all liability with respect to such claim, investigation, action,
suit or proceeding and all other claims or causes of action (known or unknown)
arising or which might arise out of the same facts.
SECTION 6.04. Contribution. In order to provide for just and equitable
contribution if a claim for indemnification pursuant to the indemnification
provisions of this Article 6 is made but it is found in a final judgment by a
court of competent jurisdiction (not subject to further appeal) that such
indemnification may not be enforced in such case, even though the express
provisions hereof provide for indemnification in such case or the
indemnification provided for under this Article 6, even though so provided for,
otherwise is unavailable to or insufficient to hold any Indemnified Party
harmless to the full extent provided herein with respect to any Loss (or any
fees, costs or expenses) for which such indemnification is provided for, then
the Indemnifying Party shall contribute to the amount paid or payable by such
Indemnified Party as a result of such Losses (i) in such proportion as is
appropriate to reflect the relative fault of the Indemnifying Party, on the one
hand, and such Indemnified Party, on the other, in connection with the
statements or omissions which resulted in such Losses; or (ii) if the allocation
provided by clause (i) above is not permitted by applicable law, in such
proportion as is appropriate to reflect not only the relative fault referred to
in clause (i) above but also the relative benefits received by the Indemnifying
Party, on the one hand, and such Indemnified Party, on the other, from the
subject offering or distribution, as well as any other relevant equitable
considerations. Relative fault shall be determined by reference to, among other
things, whether the untrue or alleged untrue statement of a material fact or the
omission or alleged omission to state a material fact relates to information
supplied by (or omitted to be supplied by) the Indemnifying Party or the
Indemnified Party and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such statement or omission.
The relative benefits received by the Indemnifying Party, on the one
-24-
hand, and the Indemnified Party, on the other, shall be deemed to be in the same
proportion as the net proceeds of the offering or other distribution received by
the Indemnifying Party bears to the net proceeds of the offering or other
distribution received by the Indemnified Party. No Person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the 0000 Xxx) shall be
entitled to contribution from any person who was not guilty of such fraudulent
misrepresentation. The Company and the Holders agree that it would not be just
and equitable if contributions pursuant to this Section 6.04 were to be
determined by pro rata allocation (even if all Holders were treated as one
entity for such purpose) or by any other method of allocation which does not
take account of the equitable considerations referred to above in this Section
6.04.
SECTION 6.05. Limit on Liability of Holders. The parties agree, to the
maximum extent permitted by law, that the obligations and liability of each
Selling Holder with respect to any Demand Registration or Piggyback
Registration, whether for indemnification pursuant to Section 6.02, contribution
pursuant to Section 6.04 or otherwise, shall not in any event exceed in the
aggregate the amount of net proceeds received by such Selling Holder from the
sale of the Registrable Shares sold by such Selling Holder in such Demand
Registration or Piggyback Registration.
ARTICLE 7
RULE 144
SECTION 7.01. Rule 144. The Company covenants that it will use best efforts
to file any reports required to be filed by it under the 1933 Act and the 1934
Act and that it will take such further action as Holders may reasonably request,
all to the extent required from time to time to enable Holders to sell
Registrable Shares without registration under the 1933 Act within the limitation
of the exemptions provided by Rule 144 under the 1933 Act, as such Rule may be
amended from time to time, or any similar rule or regulation hereafter adopted
by the Commission. Upon the request of a Holder, the Company will deliver to
such Holder a written statement as to whether it has complied with such
requirements.
Exhibit B
Purchaser Shares Purchase Price
WC Capital, LLC.................... 1,552,420 $962,500.40
Carnegie Hill Associates, LLC...... 322,580 $199,999.60
Exhibit C
[INTENTIONALLY LEFT BLANK]
