Exhibit 10.1
SECURITIES PURCHASE AGREEMENT
Between
The Ashton Technology Group, Inc.
and
Xxxxxxx Drive LLC
SECURITIES PURCHASE AGREEMENT dated as of February 9, 2001 (this
"Agreement"), between the Investor signatory hereto on the date hereof (the
----------
"Investor"), and The Ashton Technology Group, Inc., a Delaware corporation (the
---------
"Company").
-------
WHEREAS, the parties desire that, upon the terms and subject to the
conditions contained herein, the Company shall have the opportunity to issue and
sell to Investor from time to time as provided herein and pursuant to Rule 506
promulgated under the Securities Act of 1933, as amended (the "Securities Act"),
--------------
and Section 4(2) thereunder, up to $25,000,000 of shares of Common Stock (as
defined below).
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Company and the Investor agree
as follows:
ARTICLE I
Certain Definitions
"Affiliate" means, with respect to any Person, any other Person that
---------
directly or indirectly controls or is controlled by or under common control with
such Person. For the purposes of this definition, "control," when used with
-------
respect to any Person, means the possession, direct or indirect, of the power to
direct or cause the direction of the management and policies of such Person,
whether through the ownership of voting securities, by contract or otherwise;
and the terms of "affiliated," "controlling" and "controlled" have meanings
---------- ----------- ----------
correlative to the foregoing.
"Bid Price" means the closing bid price (as reported by Bloomberg L.P. or
---------
any successor to its function of reporting share prices) of the Common Stock as
reported on the Principal Market on the date in question, or if there is no such
price on such date, then the closing bid price as reported on the date nearest
preceding such date. If the Principal Market is the Nasdaq National Market or
Nasdaq Small Cap Market, then Bid Price for any Trading Day shall be the closing
bid price reported thereon at approximately 4:15 p.m. (New York City time) for
such Trading Days' regular session trading.
"Business Day" shall mean any day (other than a day which is a Saturday,
------------
Sunday or legal holiday in the State of New York or the Commonwealth of
Pennsylvania) on which banks are open for business in New York City or the
Commonwealth of Pennsylvania.
"Closing Warrant" means the Common Stock purchase warrant, in the form of
---------------
Exhibit C-1 hereto, to be delivered to the Investor concurrently with the
-----------
execution of this Agreement, entitling the Investor to purchase shares of Common
Stock from time to time in accordance with the terms thereof.
"Commitment Period" means the period commencing on the Effective Date and
-----------------
expiring on the earliest to occur of (x) the date on which the Investor shall
have paid an aggregate of $25,000,000 in Purchase Price for Put Shares pursuant
to this Agreement, (y) the date this Agreement is terminated in accordance with
the terms hereof, or (z) the date occurring 24 months from the date of execution
of this Agreement.
"Common Stock" means the Company's common stock, par value $.01 per share,
------------
or such securities into which such stock shall hereafter be reclassified.
"Common Stock Equivalents" means any rights, warrants, options and other
------------------------
equity or equity equivalent securities that are, at any time over the life
thereof, convertible into or exchangeable for, or that permit the holder thereof
to otherwise receive shares of, Common Stock or other Common Stock Equivalents.
"Effective Date" means the date on which the SEC first declares effective a
--------------
Registration Statement meeting the requirements of the Registration Statement
and registering the sale by the Company and resale by the Investor of the
Registrable Securities.
"Exchange Act" means the Securities Exchange Act of 1934, as amended, and
------------
the rules and regulations promulgated thereunder.
"Investment Amount" means the dollar amount to be invested by the Investor
-----------------
to purchase Put Shares as specified in a Put Notice.
"Market Price" on any date means the average of the three lowest Bid Prices
------------
during the Valuation Period relating to such date, subject to equitable
adjustment in the event of a Valuation Event during such Valuation Period.
"Maximum Put Amount" means, as of any Put Date, 150% of the weighted
------------------
average daily price for the twenty Trading Day period prior to the Put Date
multiplied by the weighted average daily trading volume for such twenty Trading
Day period.
"Minimum Commitment Amount" means $2,500,000.
-------------------------
"Outstanding" when used with reference to shares of Common Stock, means, at
-----------
any date as of which the number of such shares is to be determined, all issued
and outstanding shares of
-2-
Common Stock, and shall include all such shares issuable in respect of
outstanding scrip or any certificates representing fractional interests in such
shares; provided, that "Outstanding" shall not mean any shares of Common Stock
--------
directly or indirectly owned or held by or for the account of the Company.
"Person" means an individual, a corporation, a partnership, a limited
------
liability company, an association, a trust or other entity or organization,
including a government or political subdivision or an agency or instrumentality
thereof.
"Principal Market" means whichever of the Nasdaq National Market, Nasdaq
----------------
SmallCap Market, American Stock Exchange, New York Stock Exchange or OTC
Bulletin Board, that is then the principal trading exchange, market or quotation
system for the Common Stock.
"Purchase Price" means with respect to Put Shares, an amount equal to 90%
--------------
of the Market Price for the Valuation Period for a Put (subject to certain
adjustments as set forth in Section 5.8).
"Put" means the exercise by the Company of its right to require the
---
Investor to purchase Put Shares pursuant to the terms of this Agreement.
"Put Shares"shall have the meaning set forth in Section 2.1(a) hereof.
----------
"Registrable Securities" has the meaning set forth in the Registration
----------------------
Rights Agreement.
"Registration Rights Agreement" means the Registration Rights Agreement
-----------------------------
between the Company and the Investor, dated the date hereof, in the form of
Exhibit B hereto.
---------
"Registration Statement" shall have the meaning set forth in the
----------------------
Registration Rights Agreement.
"SEC" means the Securities and Exchange Commission.
---
"Securities" means, collectively, the Put Shares, Warrants and Warrant
----------
Shares.
"Trading Day" means (a) a day on which the Common Stock is traded on the
-----------
Principal Market on which the Common Stock is then listed or quoted, or (b) if
the Common Stock is not listed or quoted for trading on a Principal Market, a
day on which the Common Stock is traded in the over-the-counter market, as
reported by the National Quotation Bureau Incorporated (or any similar
organization or agency succeeding its functions of reporting prices); provided,
--------
that in the event that the Common Stock is not listed or quoted as set forth in
(a) or (b) hereof, then Trading Day shall mean any Business Day.
"Underlying Shares Registration Statement" shall have the meaning set forth
----------------------------------------
in the Registration Rights Agreement.
-3-
"Undrawn Amount" means $2,500,000 less the aggregate Purchase Price paid
--------------
during the Commitment Period for Put Shares pursuant to this Agreement.
"Valuation Event" means an action by the Company during the Commitment
---------------
Period to:
(1) subdivide or combine the Common Stock;
(2) pay a dividend on its Common Stock or Common Stock
Equivalents (other than regularly scheduled cash dividend payments to the
holders of the Series B Preferred Stock) or make any other distribution of such
securities;
(3) issue any additional shares of Common Stock or Common Stock
Equivalents ("Additional Capital Shares") at a price per share less than, or
-------------------------
that provide a holder thereof with the right to receive or subscribe for at any
time over the life thereof shares of Common Stock at a price per share less
than, the Bid Price in effect immediately prior to such issuance, or without
consideration (other than pursuant to this Agreement) (including through
conversions, exchanges or resets of other adjustments to the price paid for such
securities);
(4) make a distribution of its assets or evidences of its
indebtedness to the holders of Common Stock or Common Stock Equivalents as a
dividend in liquidation or by way of return of capital (other than as a dividend
payable out of earnings or surplus legally available for dividends under
applicable law) or any distribution to such holders made in respect of the sale
of all or substantially all of the Company's assets.
"Valuation Period" means the period of twenty Trading Days commencing on
----------------
the Put Date or, in the case of Section 2.7, the twenty Trading Days immediately
preceding and including the last Trading Day of the Commitment Period.
"Warrants" means, collectively, (a) the Closing Warrant, and (b) any Common
--------
Stock purchase warrant, in the form of Exhibit C-2 hereto, to be delivered to
-----------
the Broker (as defined herein) concurrently with the execution of this
Agreement, entitling the Broker to purchase from time to time in accordance with
the terms thereof shares of Common Stock.
"Warrant Shares" means the shares of Common Stock issuable upon exercise of
--------------
the Warrants.
ARTICLE II
Purchase and Sale of Common Stock
Section II.1 Investments.
-----------
(1) Puts. Subject to the conditions and limitations set
----
forth herein, the Company may make a Put by the delivery of a duly completed
written notice to the Investor in the form attached hereto as Exhibit A (each, a
---------
"Put Notice"), specifying therein the Investment Amount
----------
-4-
that the Company intends to sell to the Investor. The number of shares of Common
Stock that the Investor shall receive pursuant to a Put ("Put Shares") shall be
----------
determined by dividing the Investment Amount specified in the Put Notice
(subject to adjustment as herein provided) by the Purchase Price for such Put.
(2) Limitations on Puts and Common Stock Issuable.
---------------------------------------------
(i) The Company may not deliver a Put Notice to the
extent that, following the purchase by the Investor of Put Shares thereunder,
the Investor and its affiliates would beneficially own (as determined in
accordance with Section 13(d) of the Exchange Act and the rules thereunder) in
excess of 4.999% of the then outstanding shares of Common Stock.
(ii) The maximum Purchase Price for all Puts is an
aggregate of $25,000,000.
(iii) The Investment Amount for each Put shall be
neither less than $100,000 nor more than the Maximum Put Amount.
(iv) The Investment Amount measured on a Closing Date
shall not be more than the dollar value of the product of (x) 150% of the
weighted average daily price for the twenty Trading Days commencing on the Put
Date multiplied by (y) the weighted average trading volume for such twenty
Trading Day period. If the Investment Amount indicated in a Put Notice would
exceed the limitation set forth in this paragraph, then the Investment Amount
shall automatically be reduced to the maximum dollar amount permitted by this
restriction.
(v) The Company may not deliver a Put Notice during
the continuation of any of the events specified in Section 5.4.
(vi) The Company may not deliver a Put Notice during
the 45 Trading Days prior to the required date of filing by the Company of its
Annual Report with the Commission; provided that the restriction set forth in
--------
this Section 2.2(b)(vi) shall be void, released and inoperable if the
Registration Statement is on Form S-3.
(vii) The Company may not deliver a Put Notice in the
event that the delivery of such Put Notice and the issuance of Common Stock
pursuant thereto would result in the issuance of shares of Common Stock, when
aggregated with all previously issued shares of Common Stock issued hereunder,
will be in excess of 19.99% of the issued and outstanding shares of Common Stock
of the Company issued as of the date thereof (the "Maximum Issuance Amount").
-----------------------
(viii) In the event that a Put Notice is delivered which
would not exceed the Maximum Issuance Amount on the Put Date (as defined in
Section 2.2(b) hereof), but due to a decrease in pricing would result on the
Closing Date in the issuance of Common Stock, when aggregated with all
previously issued shares of Common Stock issued hereunder, in an amount in
excess of the Maximum Issuance Amount, then the number of shares of Common Stock
to be issued pursuant to such Put Notice shall automatically be reduced to be
less than the Maximum Issuance Amount.
-5-
Section II.2 Mechanics.
---------
(1) Put Notice. Subject to the conditions and limitations
----------
herein, at any time during the Commitment Period the Company may deliver a Put
Notice to the Investor.
(2) Date of Delivery of Put Notice or Notice to Acquire
---------------------------------------------------
Investment Shares. A Put Notice shall be deemed delivered on: (i) the Trading
-----------------
Day it is received by facsimile or otherwise in accordance with Section 8.2 by
the Investor if such notice is received prior to 12:00 noon Eastern Time, or
(ii) the immediately succeeding Trading Day if it is received by facsimile or
otherwise after 12:00 noon Eastern Time on a Trading Day or at any time on a day
which is not a Trading Day. The Trading Day that a Put Notice is deemed
delivered pursuant to this Section is the "Put Date."
--------
Section II.3 Closings.
--------
(a) Subject to the satisfaction of the conditions set
forth in this Agreement, the closing of the purchase by the Investor of Put
Shares following a Put (a "Closing") shall occur on the second Business Day
-------
following the end of the Valuation Period for such Closing (or such other date
as is mutually agreed to by the Company and the Investor) (a "Closing Date") at
------------
the offices of Xxxxxxxx Xxxxxxxxx Xxxxxx Xxxxxxxx & Xxxxxx LLP, 0000 Xxxxxx xx
xxx Xxxxxxxx, Xxx Xxxx, XX 00000 ("Xxxxxxxx Xxxxxxxxx") or such other place to
------------------
which the parties may agree. At least one Business Day prior to each Closing
Date, the Company shall deliver (or cause to be delivered) into escrow with
Xxxxxxxx Xxxxxxxxx (or such other escrow agent to which the parties may agree):
(1) the certificate contemplated by Section 6.1(c); (2) the legal opinion
contemplated by Section 6.1(f); (3) a writing, executed by the Investor and the
Company concurring as to (x) the total number of Put Shares that are to be
issued and sold at such Closing, (y) the Investment Amount for the Put Shares
issuable at such Closing and (z) the number of Warrant Shares that will vest on
such Closing Date under the Closing Warrant as a result of such Put (it being
agreed that 15 shares of Common Stock shall vest under such Closing Warrant for
each $10,000 of Purchase Price paid at the Closing (plus a pro rata amount of
such Warrant Shares with respect to any portion of the Purchase Price in excess
of $100,000), and (4) all other documents, instruments and writings required to
be delivered by it pursuant to the Transaction Documents (as defined herein) in
order to effect a Closing hereunder (the items contemplated by clauses (1)
through (4) above are collectively referred to as the "Company Required Items").
----------------------
At least one Business Day prior to each Closing Date, the Company shall deliver
to the Investor's account through the Depository Trust Company DWAC system, per
written account instructions delivered by the Investor to the Company (the "DTC
---
Account"), the Put Shares to be issued and sold to the Investor at such Closing
-------
and meeting the requirements of Section 5.3 which Put Shares shall be held in
escrow pending delivery to the Company of the Investment Amount for the Put
Shares to be issued and sold at such Closing pursuant to the terms hereof.
(b) Xxxxxxxx Xxxxxxxxx (or such other escrow agent to which
the parties may agree) shall notify the Company and the Investor on the Business
Day it receives all of the Company Required Items relating to such Closing. If:
(i) Xxxxxxxx Xxxxxxxxx (or such other escrow
-6-
agent to which the parties may agree) shall have provided such notice by the
Closing, (ii) the DTC Account shall have been credited with the Put Shares to be
issued and sold to the Investor at such Closing and (iii) the other conditions
to the Investor's obligation to purchase Put Shares at such Closing as provided
hereunder shall have been satisfied or waived, the Investor shall deliver (or
cause to be delivered): (x) to the Company, the Investment Amount for the Put
Shares to be issued and sold at such Closing, less the amounts contemplated by
clause (y) following this clause (x), and (y) (1) to Xxxxxxxx Xxxxxxxxx (or such
other escrow agent to which the parties may agree), $2,000, and (2) to the
Investor, the amount of any Blackout Payments (as defined below), together with
all accrued interest thereon, then owed and for which full payment shall not
have previously been made. In the event that: (i) any Company Required Item
shall not have been delivered, (ii) the DTC Account shall not have been credited
with the Put Shares to be issued and sold to the Investor at such Closing or
(iii) any condition set forth in Article VI shall not have been fulfilled or
waived by the Investor then, at the option of the Investor, such Closing shall
be canceled and any Company Required Items delivered to Xxxxxxxx Xxxxxxxxx (or
such other escrow agent to which the parties may agree) and any Put Shares
credited to the DTC Account, in both cases, in connection with such Closing,
shall be returned to or as directed by the Company. The parties hereto
understand and agree that Xxxxxxxx Xxxxxxxxx (or such other escrow agent to
which the parties may agree) will not release the Company Required Items to the
Investor prior to its receipt of written confirmation from the Company that the
Company has received the net proceeds from the sale of the Put Shares to have
been sold at such Closing; provided, if the Company does not confirm such
--------
receipt by 5:00 p.m. Eastern Time on the Business Day following the Closing
Date, the parties hereby direct Xxxxxxxx Xxxxxxxxx (or such other escrow agent
to which the parties may agree) to deliver the Company Required Items to the
Investor at such time as Xxxxxxxx Xxxxxxxxx (or such other escrow agent to which
the parties may agree) receives written evidence from the institution from which
the Investment Amount was delivered on behalf of the Investor that funds equal
to the amount required hereunder to be delivered to the Company at such Closing
were delivered in accordance with the wire instructions provided by the Company
for such purpose (a federal wire number for the correct amount and in accordance
with the wire instructions provided by the Company for such purpose shall be
conclusive evidence of the Company's receipt).
(c) Each of the parties hereby agrees jointly and severally
to indemnify and hold harmless Xxxxxxxx Xxxxxxxxx (or such other escrow agent to
which the parties may agree) and its members, employees, agents and
representatives from any and all claims, liabilities, costs or expenses in any
way arising from or relating to the performance of its duties hereunder and
agrees that Xxxxxxxx Xxxxxxxxx (or such other escrow agent to which the parties
may agree) shall not have any liability hereunder other than as arising solely
from its willful misconduct in performing its duties hereunder. The parties
understand and agree that Xxxxxxxx Xxxxxxxxx (or such other escrow agent to
which the parties may agree) may, at any time upon two Business Days prior
written notice to the parties, resign from its duties and obligations hereunder
without recourse to any party. The Company further understands and agrees that
Xxxxxxxx Xxxxxxxxx acts as legal counsel to the Investor in connection with the
transactions contemplated hereby and may, from time to time, represent the
Investor in other matters, including such matters as may directly or indirectly
be adverse to the interests of the Company. The Company consents to such
representation and waives any claim that such representation represents a
conflict of interest on the part of Xxxxxxxx
-7-
Xxxxxxxxx. The Company understands that the Investor and Xxxxxxxx Xxxxxxxxx are
relying explicitly on the foregoing provision in connection with the Investor
entering into this Agreement.
Section II.4 Termination of Investment Obligation.
------------------------------------
(1) The obligation of the Investor to purchase shares of
Common Stock shall, at the Investor's option (as evidenced by a notice to such
effect to the Company), terminate permanently (including with respect to a
Closing Date that has not yet occurred) in the event that (i) there shall occur
any stop order or suspension of the effectiveness of the Registration Statement
(or the ability of the Investor to use the prospectus thereunder to dispose of
Registrable Securities) for an aggregate of thirty Trading Days during the
Commitment Period for any reason (provided, that, for such purpose only Trading
Days occurring 60 or less Trading Days following a Closing shall be counted if
such suspension or stop order shall have earlier occurred), (ii) the Company
shall at any time breach its obligations under the Transaction Documents (as
hereinafter defined), or (iii) if, after the Effective Date, the registration
statement ceases to be effective as to all Registrable Securities then owned by
or issuable to the Investor, or the prospectus thereunder is not available for
use by the Investor to sell Registrable Securities, in either case, for an
aggregate of 30 Trading Days (provided, that, for such purpose only Trading Days
occurring not more than 60 Trading Days following a Closing shall be counted).
(2) The obligation of the Company to sell Put Shares to the
Investor following delivery of a Put Notice shall terminate if the Investor
fails to honor such Put Notice within two Trading Days following the Closing
Date scheduled for such Put, and the Company notifies Investor of such
termination. Notwithstanding any such termination, the Company shall maintain
the Registration Statement in effect (and shall permit the Investor to use the
prospectus thereunder to sell Registrable Securities) for not less than 45
Trading Days following the date of any such termination.
Section II.5 Blackout Payments. If for any reason an Investor is not
-----------------
permitted for more than an aggregate of fifteen consecutive Trading Days during
the period commencing on the Effective Date and ending on the 45/th/ Trading Day
following the expiration of the Commitment Period to use the prospectus under
the Registration Statement to dispose of all Registrable Securities or if such
Registration Statement shall not be effective, then the Company shall pay to
such Investor on the following Business Day and on the Business Day following
each additional such fifteen Trading Day period in excess the initial fifteen
Trading Day period, as liquidated damages and not as a penalty, cash in an
amount equal to 2% of the Purchase Price paid for all Put Shares and 2% of the
exercise price paid for all Warrant Shares issued to and then held by such
Investor. The amounts that may become due and payable pursuant to this Section
are sometimes referred to herein as "Blackout Payments." Late interest on any
-----------------
unpaid Blackout Payments shall accrue from and after the date due at the rate of
15% per annum (or such lesser maximum amount as shall be permitted under
applicable law) until all Blackout Payments, plus all accrued interest thereon,
shall have been paid in full.
Section II.6 Delisting; Suspension. If at any time prior to the 30/th/
---------------------
Trading Day following the expiration of the Commitment Period the Common Stock
shall fail to be listed or quoted for
-8-
trading on a Principal Market or shall have been suspended from trading thereon
(excluding suspensions of not more than one Trading Day as a result of material
announcements by the Company) (a "Repurchase Event"), the Investor shall have
----------------
the right, exercisable within 30 days of a Repurchase Event, to put to the
Company, and the Company shall purchase, all or such portion of the Put Shares
issued to and then held by the Investor. The purchase price for such shares
shall equal the higher of (x) the Purchase Price paid for such shares and (y)
the product of (1) the number of such shares and (2) the higher of the closing
sale price of the Common Stock on the date of the demand by the Investor of such
put and the closing sale price of the Common Stock (as reported by Bloomberg
L.P. or any successor to its function of reporting Bid Prices) on the date of
payment (if there shall no longer be a reported closing sale price for the
Common Stock, the amount under this clause (y) shall equal the last reported
closing sale price of the Common Stock on the Principal Market). The purchase
price under this Section shall be paid in cash and shall be due in full by the
10th Business Day following the demand therefor. Late interest on any unpaid
portion of the amounts that are due from the Company under this Section shall
accrue from and after the date due at the rate of 15% per annum (or such lesser
maximum amount as shall be permitted under applicable law) until all such
amounts, plus all accrued interest thereon, shall have been paid in full. The
Investor shall have the right to rescind ab initio any demand for a put
-- ------
hereunder at any time prior to the payment in full of the applicable purchase
price by the Company.
Section II.7 Minimum Commitment Amount. If during the Commitment Period
-------------------------
the Company, for any reason (including a failure to cause a Registration
Statement to be declared effective under the Registration Rights Agreement),
fails to issue and deliver Put Shares having an aggregate Purchase Price equal
to or exceeding the Minimum Commitment Amount, then, the Company shall, by the
tenth Business Day following the Commitment Period, pay to the Investors, in
cash, an amount equal to the product of (a) the Undrawn Amount and (b) the
Market Price less the Purchase Price, measured on the day of expiration of the
Commitment Period.
ARTICLE III
Representations and Warranties of Investor
The Investor represents and warrants to the Company as follows:
Section III.1 Intent. The Investor is entering into this Agreement and
------
will purchase the Securities issuable to it hereunder (subject to the effects of
Section 3.9) for its own account and the Investor has no present arrangement
(whether or not legally binding) at any time to sell the Common Stock to or
through any person or entity; provided, however, that by making the
representations herein, the Investor does not agree to hold Securities for any
minimum or other specific term and reserves the right to dispose of Securities
at any time in accordance with federal and state securities laws applicable to
such disposition and the terms and conditions, if any, relating thereto as set
forth in this Agreement.
Section III.2 Sophisticated Investor. The Investor is a sophisticated
----------------------
investor (as described in Rule 506(b)(2)(ii) of Regulation D) and an accredited
investor (as defined in Rule 501 of
-9-
Regulation D), and Investor has such experience in business and financial
matters that it has the capacity to protect its own interests in connection with
this transaction and is capable of evaluating the merits and risks of an
investment in the Securities. The Investor acknowledges that an investment in
the Securities is speculative and involves a high degree of risk.
Section III.3 Authority. The Investor has the requisite power and
---------
authority to enter into and consummate the transactions contemplated by the
Transaction Documents and otherwise to carry out its obligations thereunder. The
execution and delivery of this Agreement and the Registration Rights Agreement
have been duly authorized by the Investor and when delivered in accordance with
the terms hereof will constitute valid and binding agreements of the Investor
enforceable against it in accordance with their respective terms.
Section III.4 Not an Affiliate. Investor is not an officer, director or
----------------
Affiliate of the Company.
Section III.5 Organization and Standing. Investor is a duly organized,
-------------------------
validly existing, and in good standing under the laws of the jurisdiction of its
organization.
Section III.6 Disclosure; Access to Information. Investor has received
---------------------------------
and reviewed all documents, records, books and other publicly available
information pertaining to Investor's investment in the Company that have been
requested by Investor, including without limitation copies of all of the
Company's periodic and current reports filed pursuant to the Exchange Act, and
Investor has reviewed copies of any such reports that have been requested by it.
However, no inquiries or investigation by the Investor or its agents shall
modify, amend or affect the Investor's right to rely on the truth, accuracy and
completeness of the Disclosure Materials (as defined below) and the Company's
representations and warranties contained in the Transaction Documents.
Section III.7 Manner of Sale. At no time was Investor presented with or
--------------
solicited by or through any leaflet, public promotional meeting, television
advertisement or any other form of general solicitation or advertising (as
defined in Rule 501 under the Securities Act) in connection with its investment
in the Securities.
Section III.8 Financial Capacity. Investor currently has the financial
------------------
capacity to meet its obligations to the Company hereunder, and the Investor has
no present knowledge of any circumstances which could cause it to become unable
to meet such obligations in the future.
Section III.9 Underwriter Liability. Investor understands that it is the
---------------------
position of the SEC that with respect to any disposition of Registrable
Securities through a Registration Statement the Investor will be an underwriter
within the meaning of Section 2(11) of the Securities Act. The Investor agrees
to be identified as an underwriter of the Registrable Securities sold by it in
the Registration Statement.
Section 3.10 Broker-Dealer Status. Investor is not registered with the
--------------------
National Association of Securities Dealers as a broker or dealer. Investor is
acquiring the Securities hereunder in the ordinary course of its business, and
Investor does not have any agreements or understandings, directly or indirectly,
with any Person with respect to the distribution of the Securities.
-10-
The Company acknowledges and agrees that the Investor has not made and
does not make any representations or warranties with respect to the transactions
contemplated hereby other than as specifically set forth in this Article III.
ARTICLE IV
Representations and Warranties of the Company
The Company represents and warrants to the Investor as follows:
Section IV.1 Organization and Qualification. The Company is a corporation
------------------------------
duly incorporated, validly existing and in good standing under the laws of the
State of Delaware, with the requisite corporate power and authority to own and
use its properties and assets and to carry on its business as currently
conducted. The Company has no subsidiaries other than as set forth in Schedule
--------
4.1 (collectively the "Subsidiaries"). Each of the Subsidiaries is an entity,
--- ------------
duly incorporated or otherwise organized, validly existing and in good standing
under the laws of the jurisdiction of its incorporation with the requisite power
and authority to own and use its properties and assets and to carry on its
business as currently conducted. Each of the Company and the Subsidiaries is
duly qualified to do business and is in good standing as a foreign corporation
in each jurisdiction in which the nature of the business conducted or property
owned by it makes such qualification necessary, except where the failure to be
so qualified or in good standing, as the case may be, would not reasonably be
expected to, individually or in the aggregate, (x) adversely affect the
legality, validity or enforceability of the Securities or any of this Agreement,
the Registration Rights Agreement or the Warrants (collectively, the
"Transaction Documents"), (y) have or result in a material adverse effect on the
---------------------
results of operations, assets, prospects, or condition (financial or otherwise)
of the Company and the Subsidiaries, taken as a whole, or (z) adversely impair
the Company's ability to perform fully on a timely basis its obligations under
any of the Transaction Documents (any of (x), (y) or (z), a "Material Adverse
----------------
Effect").
------
Section IV.2 Authorization; Enforcement. The Company has the requisite
--------------------------
corporate power and authority to enter into and to consummate the transactions
contemplated by each of the Transaction Documents and otherwise to carry out its
obligations thereunder. The execution and delivery of each of the Transaction
Documents by the Company and the consummation by it of the transactions
contemplated thereby have been duly authorized by all necessary corporate action
on the part of the Company. Each of the Transaction Documents has been duly
executed by the Company and, when delivered (or filed, as the case may be) in
accordance with the terms hereof, will constitute the valid and binding
obligation of the Company enforceable against the Company in accordance with its
terms. Neither the Company nor any Subsidiary is in violation of any of the
provisions of its respective certificate or articles of incorporation, by-laws
or other organizational or charter documents.
Section IV.3 Capitalization. The number of authorized, issued and
--------------
outstanding capital stock of the Company is set forth in Schedule 4.3. Except
------------
as disclosed in the SEC Documents (as
-11-
defined herein), the Company owns all of the capital stock of each Subsidiary.
No shares of Common Stock are entitled to preemptive or similar rights, nor is
any holder of securities of the Company or any Subsidiary entitled to preemptive
or similar rights arising out of any agreement or understanding with the Company
or any Subsidiary by virtue of any of the Transaction Documents. Except as a
result of the purchase and sale of the Securities and except as disclosed in the
SEC Documents or as set forth in Schedule 4.3, there are no outstanding options,
------------
warrants, scrip rights to subscribe to, calls or commitments of any character
whatsoever relating to, or securities, rights or obligations convertible into or
exchangeable for, or giving any Person any right to subscribe for or acquire,
any shares of Common Stock, or contracts, commitments, understandings, or
arrangements by which the Company or any Subsidiary is or may become bound to
issue additional shares of Common Stock, or securities or rights convertible or
exchangeable into shares of Common Stock. The issue and sale of the Securities
hereunder will not obligate the Company to issue shares of Common Stock or other
securities to any Person other than to the Investor and will not result in any
right of any holder of the Company's securities to adjust the exercise,
conversion or reset price under such securities.
Section IV.4 Issuance of the shares of Common Stock. When issued and paid
--------------------------------------
for in accordance with the terms hereof and the Warrants (as applicable), the
Put Shares and Warrant Shares will be duly and validly issued, fully paid and
nonassessable, free and clear of all liens, encumbrances and rights of first
refusal of any kind (collectively, "Liens"), except for Liens in favor of
-----
creditors or obligors of Investor. The Company has on the date hereof and will,
at all times during the Commitment Period and while the Warrants are
outstanding, maintain an adequate reserve of duly authorized shares of Common
Stock, reserved for issuance to the Investor and the holders of the Warrants, to
enable it to perform its exercise and other obligations under this Agreement and
the Warrants.
Section IV.5 Filings, Consents and Approvals. Neither the Company nor any
-------------------------------
Subsidiary is required to obtain any consent, waiver, authorization or order of,
give any notice to, or make any filing or registration with, any court or other
federal, state, local or other governmental authority or other Person in
connection with the execution, delivery and performance by the Company of the
Transaction Documents, other than (i) the filing of the Registration Statement
with the SEC, (ii) filings as may be required under state securities laws, and
(iii) in all other cases where the failure to obtain such consent, waiver,
authorization or order, or to give such notice or make such filing or
registration would not reasonably be expected to have or result in, individually
or in the aggregate, a Material Adverse Effect (collectively, the "Required
--------
Approvals").
---------
Section IV.6 No Default or Violation. Except as described in the SEC
-----------------------
Documents, neither the Company nor any Subsidiary (i) is in default under or in
violation of (and no event has occurred which has not been waived which, with
notice or lapse of time or both, would result in a default by the Company or any
Subsidiary under), nor has the Company or any Subsidiary received notice of a
claim that it is in default under or that it is in violation of, any indenture,
loan or credit agreement or any other agreement or instrument to which it is a
party or by which it or any of its properties is bound, (ii) is in violation of
any order of any court, arbitrator or governmental body, or (iii) is in
violation of any statute, rule or regulation of any governmental authority, in
each case of clauses (i),
-12-
(ii) or (iii) above, except as would not reasonably be expected to, individually
or in the aggregate, have or result in a Material Adverse Effect.
Section IV.7 SEC Documents; Financial Statements. The Company has filed
-----------------------------------
all reports required to be filed by it under the Exchange Act including pursuant
to Section 13(a) or 15(d) thereof, for the two years preceding the date hereof
(the foregoing materials being collectively referred to herein as the "SEC
---
Documents" and, together with the Schedules to this Agreement, the "Disclosure
--------- ----------
Materials") on a timely basis or has received a valid extension of such time of
---------
filing and has filed any such SEC Documents prior to the expiration of any such
extension. As of their respective dates, the SEC Documents complied in all
material respects with the requirements of the Securities Act and the Exchange
Act and the rules and regulations of the SEC promulgated thereunder, and none of
the SEC Documents, when filed, contained any untrue statement of a material fact
or omitted to state a material fact required to be stated therein or necessary
in order to make the statements therein, in light of the circumstances under
which they were made, not misleading. All material agreements to which the
Company is a party or to which the property or assets of the Company are subject
have been filed as exhibits to the SEC Documents as required unless properly
excused from filing by SEC regulation. The financial statements of the Company
included in the SEC Documents comply in all material respects with applicable
accounting requirements and the rules and regulations of the SEC with respect
thereto as in effect at the time of filing. Such financial statements have been
prepared in accordance with generally accepted accounting principles applied on
a consistent basis during the periods involved ("GAAP"), except as may be
----
otherwise specified in such financial statements or the notes thereto, and
fairly present in all material respects the financial position of the Company
and its consolidated subsidiaries as of and for the dates thereof and the
results of operations and cash flows for the periods then ended, subject, in the
case of unaudited statements, to normal, immaterial, year-end audit adjustments.
Since March 31, 2000, except as specifically disclosed in the SEC Documents, (a)
there has been no event, occurrence or development that has resulted or that
would be reasonably likely to result in a Material Adverse Effect, (b) the
Company has not incurred any liabilities (contingent or otherwise) other than
(x) liabilities incurred in the ordinary course of business consistent with past
practice and (y) liabilities not required to be reflected in the Company's
financial statements pursuant to GAAP or otherwise required to be disclosed in
filings made with the SEC, (c) the Company has not altered its method of
accounting or the identity of its auditors and (d) the Company has not declared
or made any payment or distribution of cash or other property to its
stockholders or officers or directors (other than in compliance with existing
compensation agreements or Company stock option plans) with respect to its
capital stock, or purchased, redeemed (or made any agreements to purchase or
redeem) any shares of its capital stock.
Section IV.8 Investment Company. The Company is not, and is not an
------------------
Affiliate of, an "investment company" within the meaning of the Investment
Company Act of 1940, as amended.
Section IV.9 Certain Fees. Other than fees payable to the escrow agent
------------
contemplated by Section 2.3(b) pursuant to the terms hereof, no fees or
commissions will be payable by the Company to any broker, financial advisor or
consultant, finder, placement agent, investment banker, bank or other similar
Person with respect to the transactions contemplated by this Agreement. The
Investor shall have no obligation with respect to any fees or with respect to
any claims made by or on behalf
-13-
of other Persons for fees of a type contemplated in this Section that may be due
in connection with the transactions contemplated by this Agreement. The Company
shall indemnify and hold harmless the Investor, its employees, officers,
directors, agents, and partners, and its respective Affiliates, from and against
all claims, losses, damages, costs (including the costs of preparation and
attorneys' fees) and expenses suffered in respect of any such claimed or
existing fees, as such fees and expenses are incurred.
Section IV.10 Solicitation Materials. Neither the Company nor any Person
----------------------
acting on the Company's behalf has solicited any offer to buy or sell the
Securities by means of any form of general solicitation or advertising (as
defined in Rule 501 under the Securities Act).
Section IV.11 Listing and Maintenance Requirements Compliance. Except
-----------------------------------------------
for the foregoing or as set forth in the SEC Documents, the Company has not, in
the two years preceding the date hereof, received notice (written or oral) from
its Principal Market to the effect that the Company is not in compliance with
the listing or maintenance requirements of such exchange or market.
Section IV.12 Patents and Trademarks. The Company and its Subsidiaries
----------------------
have, or have rights to use, all patents, patent applications, trademarks,
trademark applications, service marks, trade names, copyrights, licenses and
rights which are necessary or material for use in connection with their
respective business as described in the SEC Documents and which the failure to
so have would have a Material Adverse Effect (collectively, the "Intellectual
------------
Property Rights"). Neither the Company nor any Subsidiary has received a
---------------
written notice that the Intellectual Property Rights used by the Company or its
Subsidiaries violates or infringes upon any of the rights of any Person, to the
best knowledge of the Company. All such Intellectual Property Rights are
enforceable and to the best knowledge of the Company there is no existing
infringement by another Person of any of the Intellectual Property Rights.
Section IV.13 Registration Rights. Except as disclosed under Section 6(c)
-------------------
of the Registration Rights Agreement, the Company has not granted or agreed to
grant to any Person any rights (including "piggy-back" registration rights) to
have any securities of the Company registered with the SEC or any other
governmental authority which have not been satisfied.
Section IV.14 Regulatory Permits. The Company and its Subsidiaries
------------------
possess all certificates, authorizations and permits issued by the appropriate
Federal, state or foreign regulatory authorities necessary to conduct their
respective businesses as described in the SEC Documents, except where the
failure to possess such permits would not reasonably be expected to,
individually or in the aggregate, have or result in a Material Adverse Effect
("Material Permits"), and neither the Company nor any such Subsidiary has
-----------------
received any notice of proceedings relating to the revocation or modification of
any Material Permit.
Section IV.15 Title. The Company and the Subsidiaries have good and
-----
marketable title in fee simple to all real property owned by them which is
material to the business of the Company and its Subsidiaries and good and
marketable title in all personal property owned by them which is material to the
business of the Company and its Subsidiaries, in each case free and clear of all
Liens, except for Liens as do not materially affect the value of such property
and do not interfere with the
-14-
use made and proposed to be made of such property by the Company and its
Subsidiaries. Any real property and facilities held under lease by the Company
and its Subsidiaries are held by them under valid, subsisting and enforceable
leases of which, except as set forth in Schedule 4.15, the Company and its
-------------
Subsidiaries are in compliance and do not interfere with the use made and
proposed to be made of such property and buildings by the Company and its
Subsidiaries.
Section IV.16 Absence of Certain Proceedings. There is no action, suit,
------------------------------
inquiry, notice of violation, proceeding or investigation pending or, to the
knowledge of the Company, threatened against or affecting the Company or any of
its Subsidiaries or any of their respective properties before or by any court,
arbitrator, governmental or administrative agency or regulatory authority
(federal, state, county, local or foreign) (collectively, an "Action") which (i)
------
adversely affects or challenges the legality, validity or enforceability of any
of the Transaction Documents or the Securities or (ii) would be reasonably
likely to, if there were an unfavorable decision, individually or in the
aggregate, have or result in a Material Adverse Effect. Within five years prior
to the date of this Agreement, neither the Company nor any Subsidiary, nor any
director or officer thereof, is or has been the subject of any Action involving
a claim of violation of or liability under federal or state securities laws or a
claim of breach of fiduciary duty. The Company does not have pending before the
Commission any request for confidential treatment of information and the Company
has no knowledge of any such expected request that would be made prior to the
date the Registration Statement (as defined in the Registration Rights
Agreement) is declared effective by the SEC. There has not been, and to the
best of the Company's knowledge there is not pending or contemplated, any
investigation by the Commission involving the Company or any current or former
director or officer of the Company.
Section IV.17 Taxes. Except as set forth on Schedule 4.17, all Federal,
----- -------------
state, local and foreign tax returns, information returns, reports and estimated
Tax returns have been timely filed (which shall be deemed to mean, in the case
of any such return for which extension was granted, within the period of such
extension) on behalf of the Company and all Taxes shown on any such return or
report have been paid on a timely basis (which shall be deemed to mean, in the
case of any such return for which extension was granted, within the period of
such extension). There is no action, suit, proceeding, investigation, audit or
claim now pending or, to the knowledge of the Company, proposed or threatened
with respect to any Tax of the Company and the Company is not aware of any
threatened claim for Tax deficiencies. There are no outstanding agreements or
waivers for the extension of time for assessment of any Tax payable by the
Company, nor has any such waiver or agreement been requested by the Internal
Revenue Service or any other taxing authority. The Company files consolidated
Tax returns including itself and its Subsidiaries. The Company has collected or
withheld all material amounts required to be collected or withheld by it for any
Taxes, and all such material amounts have been paid to the appropriate
governmental agencies or set aside in appropriate accounts for future payment
when due. The Company is in material compliance with, and its records contain
all material information and documents necessary to comply with, all applicable
information reporting and Tax withholding requirements. As used herein, the
terms "Tax" and "Taxes" shall mean (i) any income, alternative or add-on minimum
--- -----
tax, gross income, gross receipts, franchise, profits, including estimated taxes
relating to any of the foregoing, or other similar tax or other like assessment
or charge of similar kind whatsoever, (ii) any sales, use, ad valorem, business
license, withholding, payroll, employment, excise, stamp, transfer, recording,
-15-
occupation, premium, property, value added, custom duty, severance, windfall
profit tax, license, or other tax, governmental fee or other similar assessment
or charge, and (iii) any interest and any penalty, addition to tax or additional
amount imposed by any federal, state, local or foreign governmental authority
responsible for the imposition of any such tax (domestic or foreign).
Section IV.18 Labor Relations. No material labor problem exists or, to
---------------
the knowledge of the Company, is imminent with respect to any of the employees
of the Company.
Section IV.19 Disclosure. The Company confirms that neither it nor any
----------
other Person acting on its behalf has provided the Investor or its agents or
counsel with any information that constitutes or might constitute material non-
public information. The Company understands and confirms that the Investor
shall be relying on the foregoing representations in effecting transactions in
securities of the Company. All disclosure provided to the Investor regarding the
Company, its business and the transactions contemplated hereby, including the
Schedules to this Agreement, furnished by or on behalf of the Company are true
and correct in all material respects and do not contain any untrue statement of
a material fact or omit to state any material fact necessary in order to make
the statements made therein, in light of the circumstances under which they were
made, not misleading.
ARTICLE V
Other Agreements of the Parties
Section V.1 Listing of Common Stock. The Company shall maintain the
-----------------------
listing of the Common Stock on a Principal Market, and as soon as practicable
(but in any event prior to the commencement of the Commitment Period) shall list
the Put Shares and all potentially issuable Warrant Shares on such Principal
Market. The Company further agrees, if the Company applies to have the Common
Stock traded on any other Principal Market, it will include in such application
the issued and issuable Put Shares and Warrant Shares. The Company will take
all action to continue the listing and trading of its Common Stock on the
Principal Market and will comply in all respects with the Company's reporting,
filing and other obligations under the bylaws or rules of the Principal Market
and shall provide the Investor with copies of any correspondence to or from such
Principal Market which questions or threatens delisting of the Common Stock,
within one Trading Day of the Company's receipt thereof.
Section V.2 Exchange Act Registration; Rule 144 Compliance. The Company
----------------------------------------------
will cause its Common Stock to continue to be registered under Section 12(g) or
12(b) of the Exchange Act, will use its best efforts to timely comply in all
respects with its reporting and filing obligations under the Exchange Act, and
will not take any action or file any document (whether or not permitted by
Exchange Act or the rules thereunder) to terminate or suspend such registration
or to terminate or suspend its reporting and filing obligations thereunder. As
long as the Investor own Securities, if the Company is not required to file
reports pursuant to such sections, it will prepare and furnish to the Investor
and make publicly available in accordance with Rule 144(c) promulgated under the
Securities Act such information as is required for the Investor to sell the
Securities under Rule 144 promulgated under the Securities Act. The Company
further covenants that it will take such further
-16-
action as any holder of Securities may reasonably request, all to the extent
required from time to time to enable such Person to sell such Securities without
registration under the Securities Act within the limitation of the exemptions
provided by Rule 144 promulgated under the Securities Act, including causing its
attorneys to render and deliver any legal opinion required in order to permit
such Person to sell its Securities under Rule 144 upon notice of an intention to
sell on Form 144 or other form of notice having a similar effect. Upon the
request of any such Person, the Company shall deliver to such Person a written
certification of a duly authorized officer as to whether it has complied with
such requirements.
Section V.3 Legends. The certificates evidencing the Common Stock to be
-------
sold or otherwise issued to the Investor hereunder (including the Warrant Shares
under the Warrants) at any time while a Registration Statement is then effective
shall be issued free of restrictive legends of any kind and no instructions or
"stop transfer orders," so called, "stock transfer restrictions," or other
restrictions have been or shall be given to the Company's transfer agent with
respect thereto. Prior to the first Closing, the Company will issue to the
transfer agent for its Common Stock (and to any substitute or replacement
transfer agent for its Common Stock upon the Company's appointment of any such
substitute or replacement transfer agent) instructions to deliver the Put Shares
and Warrant Shares without restrictive legends as required by this Section and
shall cause its counsel to deliver to such transfer agent any legal opinion
required in order for the transfer agent to deliver shares in such manner.
Unless such instructions cover Securities issuable at future Closings, the
Company must deliver new such instructions prior to each Closing.
Section V.4 Notice of Certain Events Affecting Registration; Suspension
-----------------------------------------------------------
of Right to Make a Put. The Company will immediately notify the Investor upon
----------------------
the occurrence of any of the following events in respect of a Registration
Statement or related prospectus in respect of an offering of Registrable
Securities: (i) receipt of any request for additional information from the SEC
or any other federal or state governmental authority during the period of
effectiveness of the Registration Statement the response to which would require
any amendments or supplements to the registration statement or related
prospectus; (ii) the issuance by the SEC or any other federal or state
governmental authority of any stop order suspending the effectiveness of the
Registration Statement or the initiation of any proceedings for that purpose;
(iii) receipt of any notification with respect to (A) the suspension of the
qualification or exemption from qualification of any of the Registrable
Securities for sale in any jurisdiction or (B) the initiation or threatening of
any proceeding for such purpose; (iv) the Company becomes aware of any event
that makes any statement made in the Registration Statement or related
prospectus or any document incorporated by reference untrue in any material
respect or that requires the making of any changes in the Registration
Statement, related prospectus or documents so that, in the case of the
Registration Statement, it will not contain any untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary to make the statements therein not misleading, and that in the case of
the related prospectus, it will not contain any untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading; and (v) the Company's reasonable
determination that a post-effective supplement to the prospectus or a post-
effective amendment to the Registration Statement, as the case may be, would be
appropriate; and the Company will
-17-
promptly make available to the Investor any such supplement or amendment to the
related prospectus or Registration Statement.
Section V.5 Expectations Regarding Put Notices. Within ten days after
----------------------------------
the commencement of each calendar quarter following the Effective Date, the
Company must notify the Investor, in writing, as to its reasonable expectations
as to the dollar amount it intends to raise during such calendar quarter, if
any, through the issuance of Put Notices. Such notification shall constitute
only the Company's good faith estimate and shall in no way obligate the Company
to raise such amount, or any amount, or otherwise limit its ability to deliver
Put Notices. The failure by the Company to comply with this provision can be
cured by the Company's notifying the Investor, in writing, at any time as to its
reasonable expectations with respect to the current calendar quarter.
Section V.6 Consolidation; Merger. During the Commitment Period and for
---------------------
period of 30 days following the last Closing, the Company shall not effect any
merger or consolidation of the Company with or into, or a transfer of all or
substantially all of the assets of the Company to, another entity unless the
resulting successor or acquiring entity assumes by written instrument or by
operation of law the obligation to deliver to the Investor such Securities as
the Investor is entitled to receive pursuant to this Agreement.
Section V.7 Integration. The Company shall not, and shall use its best
-----------
efforts to ensure that, no affiliate of the Company shall, sell, offer for sale
or solicit offers to buy or otherwise negotiate in respect of any security (as
defined in Section 2 of the Securities Act) that would be integrated with the
offer or sale of the Securities in a manner that would require the registration
under the Securities Act of the sale of the Securities hereunder to the
Investor.
Section V.8 Certain Securities Laws Disclosures; Publicity. The Company
----------------------------------------------
shall: (i) on the day of execution of this Agreement, issue a press release
reasonably acceptable to the Investor disclosing the transactions contemplated
hereby, (ii) file with the Commission a Report on Form 8-K disclosing the
transactions contemplated hereby within ten Business Days after the day of
execution of this Agreement, and (iii) timely file with the Commission a Form D
promulgated under the Securities Act. The Company shall, no less than two
Business Days prior to the filing of any disclosure required by clauses (ii) and
(iii) above, provide a copy thereof to the Investor for their review. The
Company and the Investor shall consult with each other in issuing any other
press releases or otherwise making public statements or filings and other
communications with the Commission or any regulatory agency or stock market or
trading facility with respect to the transactions contemplated hereby and
neither party shall issue any such press release or otherwise make any such
public statement, filings or other communications without the prior written
consent of the other, except that if such disclosure is required by law or stock
market regulation, in which such case the disclosing party shall promptly
provide the other party with prior notice of such public statement, filing or
other communication. Notwithstanding the foregoing, other than in the Underlying
Shares Registration Statement, the Company shall not publicly disclose the names
of the Investor, or include the names of the Investor in any filing with the
Commission, or any regulatory agency, trading facility or stock market without
the prior written consent of the Purchasers, except to the extent such
disclosure (but not any disclosure as to the controlling Persons thereof) is
required by
-18-
law or stock market regulations, in which case the Company shall provide the
Purchasers with prior notice of such disclosure.
Section V.9 Use of Proceeds. The Company shall use the net proceeds from
---------------
the sale of the Securities for working capital purposes and not for the
satisfaction of any portion of the Company's debt (other than payment of trade
payables in the ordinary course of the Company's business and prior practices),
to redeem any Company equity or Common Stock Equivalents.
Section V.10 Reimbursement. If the Investor, other than by reason of its
-------------
gross negligence or willful misconduct, becomes involved in any capacity in any
action, proceeding or investigation brought by or against any Person, including
stockholders of the Company, as a result of the consummation of the transactions
contemplated by the Transaction Documents, the Company will reimburse the
Investor for its reasonable legal and other expenses (including the cost of any
investigation and preparation and travel in connection therewith) incurred in
connection therewith, as such expenses are incurred. The reimbursement
obligations of the Company under this paragraph shall be in addition to any
liability which the Company may otherwise have, shall extend upon the same terms
and conditions to any affiliates of the Investor actually named in such action,
proceeding or investigation, and partners, directors, agents, employees and
controlling persons (if any), as the case may be, of the Investor and any such
affiliate, and shall be binding upon and inure to the benefit of any successors,
assigns, heirs and personal representatives of the Company, the Investor and any
such affiliate and any such Person. The Company also agrees that neither the
Investor nor any such affiliates, partners, directors, agents, employees or
controlling persons shall have any liability to the Company or any Person
asserting claims on behalf of or in right of the Company in connection with or
as a result of the consummation of the Transaction Documents except to the
extent that any losses, claims, damages, liabilities or expenses incurred by the
Company result from the gross negligence or willful misconduct of the applicable
Investor, Person or entity in connection with the transactions contemplated by
this Agreement.
ARTICLE VI
Conditions Precedent to the Right of the Company to Deliver a Put Notice and the
Obligation of the Investor to Close
Section VI.1 Conditions Precedent to the Right of the Company to Deliver
-----------------------------------------------------------
a Put Notice and the Obligation of the Investor to Close. In addition to the
--------------------------------------------------------
specific conditions contained elsewhere in this Agreement, the right of the
Company to deliver a Put Notice and the obligation of Investor hereunder to
perform its obligations at any Closing hereunder is subject to the satisfaction,
on both (i) the date of delivery of such Put Notice and (ii) the applicable
Closing Date (other than with respect to the conditions set forth in Section
6.1(m) and (n), which need only be true as of a Put Date) (each a "Condition
---------
Satisfaction Date"), of each of the following conditions, or the waiver by the
-----------------
Investor of such conditions:
(1) Representations and Warranties. The representations and
------------------------------
warranties of the Company in the Transaction Documents shall be true and correct
as of the date when made
-19-
and as of the applicable Condition Satisfaction Date as though first made at
that time (except for representations and warranties that speak of a specific
date, which need only be true and correct as of such date).
(2) Performance by the Company. The Company shall have
--------------------------
performed, satisfied and complied in all material respects with all covenants
and agreements required by the Transaction Documents to be performed, satisfied
or complied with by the Company at or prior to each Condition Satisfaction Date.
(3) Compliance Certificate. The Company shall have delivered
----------------------
to or as directed by the Investor an Officer's Certificate signed by its Chief
Executive Officer, dated as of the applicable Closing Date, certifying that the
Company has satisfied the conditions set forth in paragraphs (a), (b), (h)(ii) -
(iv), and (l) of this Section.
(4) Blue Sky. The Company shall have obtained all permits
--------
and qualifications required by any state for the offer and sale of the
Securities to the Investor and by the Investor of the Registrable Securities as
contemplated by the Registration Rights Agreement or shall have the availability
of exemptions therefrom.
(5) Delivery of Shares. The Company shall have transmitted
------------------
the Put Shares pursuant to Section 2.3 and the other conditions to such Closing
as set forth in such Section shall have been satisfied.
(6) Opinion of Counsel. The Investor shall have received (or
------------------
receipt shall have been confirmed by its agent on its behalf) an opinion of
counsel to the Company, in the form of Exhibit D hereto.
---------
(7) Transfer Agent. The Investor shall have received
--------------
satisfactory evidence of the Company's delivery to its transfer agent for the
Common Stock of instructions and legal opinion meeting the requirements of this
Agreement and acceptable to such transfer agent.
(8) Registration Statement.
----------------------
(i) The Registration Statement shall have been
declared effective by the SEC and shall at all times since the Put Date, and the
prospectus thereunder shall be available to the Investor to resell all of the
Registrable Securities thereunder (including the Put Shares and Warrant Shares
issuable at such Closing).
(ii) Neither the Company nor the Investor shall have
received notice that the SEC has issued or intends to issue a stop order with
respect to the Registration Statement or that the SEC otherwise has suspended or
withdrawn the effectiveness of the Registration Statement, either temporarily or
permanently, or intends or has threatened to do so (unless the SEC's concerns
have been addressed and the Investor is reasonably satisfied that the SEC no
longer is considering or intends to take such action).
-20-
(iii) The Registration Statement (including the information
or documents incorporated by reference therein) and any amendments or
supplements thereto shall not contain any untrue statement of material fact or
omit to state any material fact required to be state d therein or necessary to
make the statements therein not misleading.
(iv) The Company shall have no knowledge of any event
which is reasonably likely to occur within 30 Trading Days after the Put Date
that would reasonably be expected to cause the Registration Statement to be
suspended or otherwise ineffective or inaccurate (including the anticipated
filing of quarterly or annual reports under the Exchange Act).
(9) No Injunction. No statute, rule, regulation, executive
-------------
order, decree, ruling or injunction shall have been enacted, entered,
promulgated or endorsed by any court or governmental authority of competent
jurisdiction or by the Principal Market that prohibits, materially impairs or
renders impractical the transactions contemplated by this Agreement, and, to the
knowledge of the Company, no proceeding or rule making process shall have been
commenced that may reasonably be expected to have such result if enacted.
(10) Adverse Changes. Since the earlier to occur of (i) the date
---------------
of filing of the Company's most recent SEC Document and (ii) the last Closing
hereunder, no occurrence or event shall have occurred that has had or could
reasonably be expected to have or result in a material adverse effect on the
results of operations, assets or condition (financial or otherwise) of the
Company and the subsidiaries, taken as a whole. Material Adverse Effect shall
have occurred.
(11) No Suspension of Trading In or Delisting of Common Stock.
--------------------------------------------------------
The Common Stock shall be authorized for trading or quotation on the Principal
Market and trading in the Common Stock shall not have been suspended by the SEC
or the Principal Market at any time from the Put Date through the Closing Date.
The Company shall not have received any notice threatening to delist the Common
Stock from the Principal Market.
(12) Principal Market Requirements; Compliance. The Company shall
-----------------------------------------
have received all authorizations from and made all filings required in order to
issue to the Investor the Securities at such Closing and shall have caused the
Put Shares and the Warrant Shares issuable upon the exercise of the Warrants to
be issued at such Closing to be listed for trading on the Principal Market. The
issuance of shares of Common Stock with respect to the applicable Closing, if
any, shall not violate the stockholder approval requirements of the Principal
Market.
(13) Timing. At least twenty Trading Days shall have elapsed
------
since the immediately preceding Closing Date.
(14) Closing Threshold. For the twenty Trading Days immediately
-----------------
preceding both the Put Date and the Closing Date the weighted average daily
trading volume of the Common Stock on the Principal Exchange (volume multiplied
by Bid Price) shall not be less than $100,000.
-21-
ARTICLE VII
Due Diligence Review; Non-Disclosure of Non-Public Information.
Section VII.1 Due Diligence Review. During the Commitment Period, the
--------------------
Company shall make available for inspection and review by the Investor, and its
advisors and representatives of the Investor, any underwriter participating in
any disposition of the Registrable Securities on behalf of the Investor all SEC
Documents and other filings with the SEC, and all other publicly available
corporate documents and properties of the Company as may be reasonably necessary
for the purpose of such review. In connection therewith, the Company shall
cause its officers, directors and employees to supply all such publicly
available information reasonably requested by the Investor or any such Person
(including, without limitation, in response to all questions and other inquiries
reasonably made or submitted by any of them), prior to and from time to time
after the filing and effectiveness of the Registration Statement. The review
contemplated hereby is solely to enable the Investor and such Persons to conduct
initial and ongoing due diligence with respect to the Company and the accuracy
of the Registration Statement.
Section VII.2 Non-Disclosure of Non-Public Information.
----------------------------------------
(1) The Company shall not disclose non-public information
regarding the Company or any of its Subsidiaries to the Investor or its advisors
or representatives unless prior to disclosure of such information the Company
identifies such information as being material non-public information and
provides the Investor, such advisors and representatives with the opportunity to
accept or refuse to accept such material non-public information for review. The
Company may, as a condition to disclosing any material non-public information
hereunder, require the Investor to enter into a confidentiality agreement in
form mutually acceptable to the Company and the Investor.
(2) The Company represents that it does not disseminate
material non-public information to any investors who purchase stock in the
Company in a public offering, to money managers or to securities analysts.
Notwithstanding the foregoing or anything herein to the contrary, the Company
will immediately notify the Investor of any event or the existence of any
circumstance (without any obligation to disclose the specific event or
circumstance) of which it becomes aware, (whether or not requested of the
Company specifically or generally during the course of due diligence by such
persons or entities), which, if not disclosed in the prospectus included in the
Registration Statement would cause such prospectus to include a material
misstatement or to omit a material fact required to be stated therein in order
to make the statements, therein in light of the circumstances in which they were
made, not misleading. Nothing contained in this Section shall be construed to
mean that such Persons other than the Investor may not obtain non-public
information in the course of conducting due diligence in accordance with the
terms of this Agreement and nothing herein shall prevent any such Persons from
notifying the Company of their opinion that based on such due diligence, that
the Registration Statement contains an untrue statement of a material fact or
omits a material fact required to be stated in the Registration
-22-
Statement or necessary to make the statements contained therein, in light of the
circumstances in which they were made, not misleading.
ARTICLE VIII
Miscellaneous
Section VIII.1 Governing Law. All questions concerning the construction,
-------------
validity, enforcement and interpretation of the Transaction Documents shall be
governed by and construed and enforced in accordance with the internal laws of
the State of New York, without regard to the principles of conflicts of law
thereof. Each party hereby irrevocably submits to the exclusive jurisdiction of
the state and federal courts sitting in the City of New York, borough of
Manhattan, for the adjudication of any dispute hereunder or in connection
herewith or with any transaction contemplated hereby or discussed herein
(including with respect to the enforcement of the any of the Transaction
Documents), and hereby irrevocably waives, and agrees not to assert in any suit,
action or proceeding, any claim that it is not personally subject to the
jurisdiction of any such court, that such suit, action or proceeding is
improper. Each party hereby irrevocably waives personal service of process and
consents to process being served in any such suit, action or proceeding by
mailing a copy thereof via registered or certified mail or overnight delivery
(with evidence of delivery) to such party at the address in effect for notices
to it under this Agreement and agrees that such service shall constitute good
and sufficient service of process and notice thereof. Nothing contained herein
shall be deemed to limit in any way any right to serve process in any manner
permitted by law. Each party irrevocably waives, to the fullest extent permitted
by applicable law, any and all right to trial by jury in any legal proceeding
arising out of or relating to this Agreement or the transactions contemplated
hereby. If either party shall commence an action or proceeding to enforce any
provisions of a Transaction Document, then the prevailing party in such action
or proceeding shall be reimbursed by the other party for its' attorneys fees and
other costs and expenses incurred with the investigation, preparation and
prosecution of such action or proceeding.
Section VIII.2 Notices. All notices, demands, requests, consents,
-------
approvals, and other communications required or permitted hereunder shall be in
writing and, unless otherwise specified herein, shall be (i) personally served,
(ii) deposited in the mail, registered or certified, return receipt requested,
postage prepaid, (iii) delivered by reputable air courier service with charges
prepaid, or (iv) transmitted by hand delivery, telegram, or facsimile, addressed
as set forth below or to such other address as such party shall have specified
most recently by written notice. Any notice or other communication required or
permitted to be given hereunder shall be deemed effective (a) upon hand delivery
or delivery by facsimile, with accurate confirmation generated by the
transmitting facsimile machine, at the address or number designated below (if
delivered on a business day during normal business hours where such notice is to
be received), or the first business day following such delivery (if delivered
other than on a business day during normal business hours where such notice is
to be received) or (b) on the second business day following the date of mailing
by reputable courier service, fully prepaid, addressed to such address, or upon
actual receipt of such mailing, whichever shall first occur. The addresses for
such communications shall be:
If to the Company: The Ashton Technology Group, Inc.
-23-
Eleven Penn Center
0000 Xxxxxx Xxxxxx, Xxxxx 000
Xxxxxxxxxxxx, Xxxxxxxxxxxx 00000
Facsimile No.: (000) 000 0000
Attn: President
With copies to: Xxxxxx, Xxxxx & Xxxxxxx LLP
0000 Xxxxxx Xxxxxx
Xxxxxxxxxxxx, Xxxxxxxxxxxx 00000-0000
Facsimile No.: (000) 000 0000
Attn: Xxxx Xxxxx Xxxxx, Esq.
If to the Investor: To the address set
forth under the
Investor's name on the
signature page hereto.
A party may from time to time change its address or facsimile number for notices
under this Section by giving at least ten days' prior written notice of such
changed address or facsimile number to the other party hereto.
Section VIII.3 Reporting Entity for the Common Stock. The reporting
-------------------------------------
entity relied upon for the determination of the trading price or trading volume
of the Common Stock on any given Trading Day for the purposes of this Agreement
shall be Bloomberg, L.P. or any successor to its function of reporting share
prices. The written mutual consent of the Investor and the Company shall be
required to employ any other reporting entity.
Section VIII.4 Replacement of Certificates. Upon (i) receipt of evidence
---------------------------
reasonably satisfactory to the Company of the loss, theft, destruction or
mutilation of a certificate representing any Securities and (ii) in the case of
any such loss, theft or destruction of such certificate, upon delivery of an
indemnity agreement or security reasonably satisfactory in form and amount to
the Company (which shall not exceed that required by the Company's transfer
agent in the ordinary course) or (iii) in the case of any such mutilation, on
surrender and cancellation of such certificate, the Company at its expense will
execute and deliver, in lieu thereof, a new certificate.
Section VIII.5 Execution. This Agreement may be executed in two or more
---------
counterparts, all of which when taken together shall be considered one and the
same agreement and shall become effective when counterparts have been signed by
each party and delivered to the other party, it being understood that both
parties need not sign the same counterpart. In the event that any signature is
delivered by facsimile transmission, such signature shall create a valid and
binding obligation of the party executing (or on whose behalf such signature is
executed) the same with the same force and effect as if such facsimile signature
page were an original thereof.
Section VIII.6 Entire Agreement. The Transaction Documents, together with
----------------
the Exhibits and Schedules thereto contain the entire understanding of the
parties with respect to the subject matter hereof and supersede all prior
agreements and understandings, oral or written, with respect to
-24-
such matters, which the parties acknowledge have been merged into such
documents, exhibits and schedules.
Section VIII.7 Amendments; Waivers. No provision of this Agreement may be
-------------------
waived or amended except in a written instrument signed, in the case of an
amendment, by the Company and the Investor (and, with respect to the provisions
of Section 2.3(c), Xxxxxxxx Xxxxxxxxx) or, in the case of a waiver, by the party
against whom enforcement of any such waiver is sought. No waiver of any default
with respect to any provision, condition or requirement of this Agreement shall
be deemed to be a continuing waiver in the future or a waiver of any other
provision, condition or requirement hereof, nor shall any delay or omission of
either party to exercise any right hereunder in any manner impair the exercise
of any such right accruing to it thereafter.
Section VIII.8 Survival. The representations, warranties and agreements
--------
contained herein shall survive each Closing and the delivery and exercise of all
Securities issuable hereunder.
Section VIII.9 Successors and Assigns. This Agreement shall be binding
----------------------
upon and inure to the benefit of the parties and their successors and permitted
assigns. Neither the Investor nor the Company may assign this Agreement or any
rights or obligations hereunder without the prior written consent of the Company
or the Investor, as the case may be except that Investor may assign its
obligations hereunder to an Affiliate.
Section VIII.10 Remedies. In addition to being entitled to exercise all
--------
rights provided herein or granted by law, including recovery of damages, the
Investor will be entitled to specific performance of the obligations of the
Company under the Transaction Documents. The Company and the Investor agree that
monetary damages may not be adequate compensation for any loss incurred by
reason of any breach of its obligations described in the foregoing sentence and
hereby agree to waive in any action for specific performance of any such
obligation the defense that a remedy at law would be adequate.
Section VIII.11 Severability. In case any one or more of the provisions
------------
of this Agreement shall be invalid or unenforceable in any respect, the validity
and enforceability of the remaining terms and provisions of this Agreement shall
not in any way be affected or impaired thereby and the parties will attempt to
agree upon a valid and enforceable provision which shall be a reasonable
substitute therefor, and upon so agreeing, shall incorporate such substitute
provision in this Agreement such substitute provision to have the same force and
effect as if it were part of this Agreement as of the date hereof.
Section VIII.12 Headings. The headings herein are for convenience only,
--------
do not constitute a part of this Agreement and shall not be deemed to limit or
affect any of the provisions hereof.
Section VIII.13 Fees and Expenses. The Company shall reimburse the
-----------------
Investor for its legal fees and expenses incurred in connection with the
preparation and negotiation of the Transaction Documents and the preparation and
review of Closing items by paying to Xxxxxxxx Xxxxxxxxx $30,000 concurrently
with the execution and delivery by the Investor of this Agreement
-25-
and $2,000 at each Closing for which it shall act as escrow agent pursuant to
the terms hereof. The amounts contemplated by the immediately preceding sentence
shall be retained by the Investor and shall not be delivered to the Company at a
Closing. Other than the amount contemplated in the immediately preceding
sentence, and except as otherwise set forth in the Registration Rights
Agreement, each party shall pay the fees and expenses of its advisers, counsel,
accountants and other experts, if any, and all other expenses incurred by such
party incident to the negotiation, preparation, execution, delivery and
performance of this Agreement. The Company shall pay all stamp and other taxes
and duties levied in connection with the issuance of the Securities issuable
hereunder.
Section VIII.14 No Third-Party Beneficiaries. This Agreement is
----------------------------
intended for the benefit of the parties hereto and their respective successors
and permitted assigns and is not for the benefit of, nor may any provision
hereof be enforced by, any other Persons other than with respect to the
indemnity and conflict provisions of Section 2.3, which are intended for the
benefit of and may be enforced by Xxxxxxxx Xxxxxxxxx or such other escrow agent
as may after the date of this Agreement be appointed by the parties hereto.
[REMAINDER OF PAGE INTENTIONALLY BLANK
SIGNATURE PAGES FOLLOW]
-26-
IN WITNESS WHEREOF, the parties hereto have caused this Securities Purchase
Agreement to be executed by the undersigned, thereunto duly authorized, as of
the date first set forth above.
THE ASHTON TECHNOLOGY GROUP, INC.
By: /s/ Xxxxxx X. Xxxxx
---------------------------------------------
Name: Xxxxxx X. Xxxxx
Title: President and Chief Operating Officer
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK
SIGNATURE PAGE FOR INVESTOR FOLLOWS]
-00-
Xxxxxxx Xxxxx LLC
By:_____________________________________
Name:
Title:
Address for Notice: Xxxxxxx Drive LLC
x/x Xxxxx Xxxxxxxx (Xxxxxx) Limited
Commercial Centre
P.O. Box 31106 SMB
Grand Cayman
Cayman Islands
British West Indies
Facsimile No.: (000) 000-0000
With copies to: Xxxxxxxx Xxxxxxxxx Xxxxxx Xxxxxxxx & Xxxxxx LLP
0000 Xxxxxx xx xxx Xxxxxxxx
Xxx Xxxx, XX 00000
Facsimile No.: (000) 000-0000 and (000) 000-0000
Attn: Xxxx X. Xxxxx, Esq.
-28-
EXHIBIT A
---------
PUT NOTICE
The Ashton Technology Group, Inc., a Delaware corporation (the "Company"),
hereby elects to exercise its right pursuant to the Securities Purchase
Agreement dated as of February 9, 2001 (the "Agreement") to require __________
to purchase Put Shares pursuant to terms of the Agreement.
The Company hereby certifies that:
1. The Investment Amount is: $_______________ ("IA")
2. The Valuation Period runs from _________ to __________.
The undersigned has executed this Put Notice as of this _____ day of
______, _______.
THE ASHTON TECHNOLOGY GROUP, INC.
By: __________________________________
Name:
Title:
-29-
Schedule 4.3
------------
1. Authorized shares of Common Stock - [ ]
2. Issued and outstanding shares of Common Stock - [ ]
-30-
