EXHIBIT 10.69
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ANNEX I
TERMS AND CONDITIONS FOR PURCHASE OF SHARES
1. Authorization and Sale of the Shares. Subject to the terms and conditions
of this Agreement, the Company has authorized the sale of 100,000 Shares.
The Company reserves the right to increase or decrease this number.
2. Agreement to Sell and Purchase the Shares; Subscription Date.
2.1 At the Closing (as defined in Section 3), the Company will sell to the
Investor, and the Investor will purchase from the Company, upon the terms
and conditions hereinafter set forth, the number of Shares set forth on the
signature page hereto at the purchase price set forth on such signature
page.
2.3 The Company proposes to enter into this same form of Stock Purchase
Agreement with certain other investors (the "Other Investors") and expects
to complete sales of Shares to them. (The Investor and the Other Investors
are hereinafter sometimes collectively referred to as the "Investors," and
this Agreement and the Stock Purchase Agreements executed by the Other
Investors are hereinafter sometimes collectively referred to as the
"Agreements.") The Company will accept executed Agreements from Investors
for the purchase of Shares commencing upon the date on which the Company
provides the Investors with the proposed purchase price per Share and
concluding upon the date (the "Subscription Date") on which the Company has
executed Agreements with Investors for the purchase of Shares in the amount
of at least $1,000,000.
3. Delivery of the Shares at Closing. The completion of the purchase and sale
of the Shares (the "Closing") shall occur at the offices of the Company in
Chantilly, VA on or about December 31, 2001 (the "Closing Date"). At the
Closing, the Company shall deliver to the Investor one or more stock
certificates representing the number of Shares set forth on the signature
page hereto, each such certificate to be issued in the name of the Investor
or, if so indicated on the signature page hereto, in the name of a nominee
designated by the Investor.
The Company's obligation to issue the Shares to the Investor shall be
subject to the following conditions, any one or more of which may be waived
by the Company: (a) receipt by the Company of the purchase price for the
Shares being purchased hereunder as set forth on the signature page hereto;
(b) completion of the purchases and sales under the Agreements with the
Other Investors; and (c) the accuracy of the representations and warranties
made by the Investors and the fulfillment of those undertakings of the
Investors to be fulfilled prior to the Closing.
4. Representations, Warranties and Covenants of the Company. The Company
hereby represents and warrants to, and covenants with, the Investor, as
follows:
4.2 Organization. The Company is duly incorporated and validly existing and in
good standing under the laws
of the jurisdiction of its organization. Each of the Company and its
Subsidiaries (as defined in Rule 405 under the Securities Act of 1933, as
amended (the "Securities Act")) has full power and authority to own,
operate and occupy its properties and to conduct its business as presently
conducted and as described in the confidential offering memorandum, dated
December 14, 2001 distributed in connection with the sale of the Shares
(including the documents incorporated by reference therein, the "Placement
Memorandum") and is registered or qualified to do business and in good
standing in each jurisdiction in which it owns or leases property or
transacts business and where the failure to be so qualified would have a
material adverse effect upon the business, financial condition, properties
or operations of the Company and its Subsidiaries, considered as one
enterprise ("Material Adverse Effect"), and no proceeding has been
instituted in any such jurisdiction revoking, limiting or curtailing, or
seeking to revoke, limit or curtail, such power and authority or
qualification.
4.2 Due Authorization. The Company has all requisite power and authority to
execute, deliver and perform its obligations under the Agreements, and the
Agreements have been duly authorized and validly executed and delivered by
the Company and constitute legal, valid and binding agreements of the
Company enforceable against the Company in accordance with their terms,
except as rights to indemnity and contribution may be limited by state or
federal securities laws or the public policy underlying such laws, except
as enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting creditors' and
contracting parties' rights generally and except as enforceability may be
subject to general principles of equity (regardless of whether such
enforceability is considered in a proceeding in equity or at law).
4.3 Non-Contravention. The execution and delivery of the Agreements, the
issuance and sale of the Shares to be sold by the Company under the
Agreements, the fulfillment of the terms of the Agreements and the
consummation of the transactions contemplated thereby will not (A) conflict
with or constitute a violation of, or default (with the passage of time or
otherwise) under, (i) any material bond, debenture, note or other evidence
of indebtedness, or any material lease, contract, indenture, mortgage, deed
of trust, loan agreement, joint venture or other agreement or instrument to
which the Company or any Subsidiary is a party or by which it or any of its
Subsidiaries or their respective properties are bound, (ii) the charter,
by-laws or other organizational documents of the Company or any Subsidiary,
or (iii) any law, administrative regulation, ordinance or order of any
court or governmental agency, arbitration panel or authority binding upon
the Company or any Subsidiary or their respective properties, where such
conflict, violation or default is likely to result in a Material Adverse
Effect, or (B) result in the creation or imposition of any material lien,
encumbrance, claim, security interest or restriction whatsoever upon any of
the material properties or assets of the Company or any Subsidiary or a
material acceleration of indebtedness pursuant to any obligation, agreement
or condition contained in any material bond, debenture, note or any other
material evidence of indebtedness or any material indenture, mortgage, deed
of trust or any other material agreement or instrument to which the Company
or any Subsidiary is a party or by which any of them is bound or to which
any of the material property or assets of the Company or any Subsidiary is
subject. No consent, approval, authorization or other order of, or
registration, qualification or filing with, any regulatory body,
administrative agency, or other governmental body in the United States is
required for the execution and delivery of the Agreements and the valid
issuance and sale of the Shares to be sold pursuant to the Agreements,
other than such as have been made or obtained, except for any securities
filings required to be made under federal or state securities laws, and
except where any failure to obtain any of the foregoing would not have a
Material Adverse Effect.
4.5 Capitalization. The capitalization of the Company as of September 30, 2001
is as set forth in the Placement Memorandum (excluding unvested options and
treasury shares). The Company has not issued any capital stock since that
date other than pursuant to options granted or to be granted pursuant to
the Company's 1998 Amended Stock Option Plan. The Shares to be sold
pursuant to the Agreements have been duly authorized, and when issued and
paid for in accordance with the terms of the Agreements, will be duly and
validly issued, fully paid and nonassessable. Except for any actions
required to be taken by the Company in connection with the settlement of
claims described in the Placement Memorandum, the outstanding shares of
capital stock of the Company have been duly and validly issued and are
fully paid and nonassessable, have been issued in compliance with all
federal and state securities laws, and were not issued in violation of any
preemptive rights or similar rights to subscribe for or purchase
securities. Except as set forth in or contemplated by the Placement
Memorandum, there are no outstanding rights (including, without limitation,
preemptive rights), warrants or options to acquire, or instruments
convertible into or exchangeable for, any unissued shares of capital stock
or other equity interest in the Company or any Subsidiary, or any contract,
commitment, agreement, understanding or arrangement of any kind to which
the Company is a party and relating to the issuance or sale of any capital
stock of the Company or any Subsidiary, any such convertible or
exchangeable securities or any such rights, warrants or options. Without
limiting the foregoing and other than certain registration rights
previously granted by the Company to certain Company shareholders which may
(under certain circumstances) delay the registration of the Investors'
Shares, no preemptive right, co-sale right, right of first refusal or other
similar right exists with respect to the issuance and sale of the Shares.
The Company owns the entire equity interest in each of its Subsidiaries,
free and clear of any pledge, lien, security interest, encumbrance or
claim, other than as described in the Placement Memorandum. Except as
disclosed in the Placement Memorandum, there are no stockholders
agreements, voting agreements or other similar agreements with respect to
the Common Stock to which the Company is a party.
4.5 Legal Proceedings. There is no material legal or governmental proceeding
pending to which the Company or any Subsidiary is a party or of which the
business or property of the Company or any Subsidiary is subject that is
not disclosed in the Placement Memorandum.
4.6 No Violations. Neither the Company nor any Subsidiary is in violation of
its charter, bylaws or other organizational document, or in violation of
any law, administrative regulation, ordinance or order of any court or
governmental agency, arbitration panel or authority applicable to the
Company or any Subsidiary, which violation, individually or in the
aggregate, would be reasonably likely to have a Material Adverse Effect, or
is in default (and there exists no condition which, with the passage of
time or otherwise, would constitute a default) in the performance of any
material bond, debenture, note or any other evidence of indebtedness, or in
any indenture, mortgage, deed of trust or any other material agreement or
instrument to which the Company or any Subsidiary is a party or by which
the Company or any Subsidiary is bound or by which the properties of the
Company or any Subsidiary are bound, which would be reasonably likely to
have a Material Adverse Effect.
4.7 Governmental Permits, Etc. Each of the Company and its Subsidiaries has all
necessary franchises, licenses, certificates and other authorizations from
any foreign, federal, state or local government or governmental agency,
department or body that are currently necessary for the operation of the
business of the Company and its Subsidiaries as currently conducted and as
described in the Placement Memorandum except where the failure to currently
possess could not reasonably be expected to have a Material Adverse Effect.
4.8 Intellectual Property.
(a) The Company has exclusive ownership or a valid license to use all
patent, copyright, trade secret, trademark or other proprietary rights
that are used in the business of the Company and are material to the
Company (collectively, "Intellectual Property") other than
Intellectual Property generally available on commercial terms from
other sources. All of such material patents, registered trademarks and
registered copyrights have been duly registered in, filed in or issued
by the United States Patent and Trademark Office, the United States
Register of Copyrights or the corresponding offices of other
jurisdictions and have been maintained and renewed in accordance with
all applicable provisions of law and administrative regulations in the
United States and all such jurisdictions.
(b) All material licenses or other material agreements under which (i) the
Company is granted rights in Intellectual Property, other than
Intellectual Property generally available on commercial terms from
other sources, and (ii) the Company has granted rights to others in
Intellectual Property owned or licensed by the Company, are in full
force and effect and there is no material default by the Company
thereto.
(c) No proceedings have been instituted or are pending which challenge in
a material manner the rights of the Company in respect to the
Company's right to the use of the Intellectual Property. The Company
has the right to use, free and clear of material claims or rights of
other persons, all of its customer lists, designs, computer software,
systems, data compilations, and other information that are required
for its products or its business as presently conducted.
(d) The Company believes it has taken such reasonable steps as are
required in accordance with sound business practice and business
judgment to establish and preserve its ownership of all material
copyright, trade secret and other proprietary rights with respect to
its products and technology.
(e) To the knowledge of the Company, the present business, activities and
products of the Company do not infringe any intellectual property of
any other person, except where such infringement would not have a
Material Adverse Effect on the Company. No material proceeding
charging the Company with infringement of any adversely held
Intellectual Property has been filed. To the knowledge of the Company,
the Company is not making unauthorized use of any material
confidential information or trade secrets of any third party. To the
Company's knowledge, the activities of the Company or any of its
employees on behalf of the Company do not violate any material
agreements or arrangements known to the Company which any such
employees have with other persons, if any.
4.9 Financial Statements. The financial statements of the Company and the
related notes contained in the Placement Memorandum present fairly, in
accordance with generally accepted accounting principles, the financial
position of the Company and its Subsidiaries as of the dates indicated.
Such financial statements (including the related notes) have been prepared
in accordance with generally accepted accounting principles applied on a
consistent basis throughout the periods therein specified. The other
financial information contained in the Placement Memorandum has been
prepared on a basis consistent with the financial statements of the
Company.
4.10 No Material Adverse Change. Except as disclosed in the Placement
Memorandum, since September 30, 2001, there has not been any Material
Adverse Effect affecting the Company, (ii) any obligation, direct or
contingent, that is material to the Company and its Subsidiaries considered
as one enterprise, incurred by the Company, except obligations incurred in
the ordinary course of business, (iii) any dividend or distribution of any
kind declared, paid or made on the capital stock of the Company or any of
its Subsidiaries, or (iv) any loss or damage (whether or not insured) to
the physical property of the Company or any of its Subsidiaries which has
been sustained which has a Material Adverse Effect.
4.11 Disclosure. The information contained in the Placement Memorandum as of the
date of such information did not contain an untrue statement of a material
fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances
under which they were made, not misleading.
4.12 NASDAQ Compliance. The Company's Common Stock is registered pursuant to
Section 12(g) of the Exchange Act (as defined in Section 4.13) and is
listed on the Nasdaq SmallCap Market of the Nasdaq Stock Market (the
"Nasdaq Stock Market"), and the Company has taken no action designed to, or
likely to have the effect of, terminating the registration of the Common
Stock under the Exchange Act or de-listing the Common Stock from the Nasdaq
Stock Market, nor has the Company received any notification within the 12
months preceding the date of this Agreement that the Securities and
Exchange Commission (the "SEC") or the National Association of Securities
Dealers, Inc. ("NASD") is contemplating terminating such registration or
listing.
4.13 Reporting Status. The Company has filed in a timely manner all documents
that the Company was required to file under the Securities Exchange Act of
1934, as amended (the "Exchange Act") during the 12 months preceding the
date of this Agreement. The following documents complied in all material
respects with the SEC's requirements as of their respective filing dates,
and the information contained therein as of the date thereof did not
contain an untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the statements
therein in light of the circumstances under where they were made not
misleading:
(a) Quarterly Report on Form 10-Q for the Quarter Ended September 30,
2001, filed with the SEC on November 13, 2001
(b) Quarterly Report on Form 10-Q for the Quarter Ended June 30, 2001,
filed with the SEC on August 14, 2001
(c) Quarterly Report on Form 10-Q for the Quarter Ended March 31, 2001,
filed with the SEC on May 15, 2001
(c) Annual Report on Form 10-K for the Year Ended December 31, 2000, filed
with the SEC on March 23, 2001, with amendment thereto filed on April
13, 2001.
(d) Proxy Statement filed with the SEC on March 30, 2001.
4.14 Listing. The Company shall use commercially reasonable efforts to comply
with all requirements of the NASD with respect to the issuance of the
Shares and the listing thereof on the Nasdaq Stock Market.
4.15 No Manipulation of Stock. The Company has not taken and will not, in
violation of applicable law, take, any action designed to or that might
reasonably be expected to cause or result in manipulation of the price of
the Common Stock to facilitate the sale or resale of the Shares.
5. Representations, Warranties and Covenants of the Investor.
5.1 The Investor represents and warrants to, and covenants with, the Company
that: (i) the Investor is an "accredited investor" as defined in Regulation
D under the Securities Act and the Investor is also knowledgeable,
sophisticated and experienced in making, and is qualified to make decisions
with respect to, investments in shares presenting an investment decision
like that involved in the purchase of the Shares, including investments in
securities issued by the Company and investments in comparable companies,
and has requested, received, reviewed and considered all information it
deemed relevant in making an informed decision to purchase the Shares; (ii)
the Investor is acquiring the number of Shares set forth on the signature
page hereto in the ordinary course of its business and for its own account
for investment only and with no present intention of distributing any of
such Shares and no arrangement or understanding exists with any other
person regarding the distribution of such Shares; (iii) the Investor will
not, directly or indirectly, offer, sell, pledge, transfer or otherwise
dispose of (or solicit any offers to buy, purchase or otherwise acquire or
take a pledge of) any of the Shares except in compliance with the
Securities Act, applicable state securities laws and the respective rules
and regulations promulgated thereunder; (iv) the Investor has answered all
questions on the signature page hereto for use in preparation of the
Registration Statement (as defined in Section 7.1) and the answers thereto
are true and correct as of the date hereof and will be true and correct as
of the Closing Date; (v) the Investor will notify the Company immediately
of any change in any of such information until such time as the Investor
has sold all of its Shares or until the Company is no longer required to
keep the Registration Statement effective; and (vi) the Investor has, in
connection with its decision to purchase the number of Shares set forth on
the signature page hereto, relied only upon the Placement Memorandum and
the representations and warranties of the Company contained herein.
Investor understands that its acquisition of the Shares has not been
registered under the Securities Act or registered or qualified under any
state securities law in reliance on specific exemptions therefrom, which
exemptions may depend upon, among other things, the bona fide nature of the
Investor's investment intent as expressed herein. Investor has completed or
caused to be completed and delivered to the Company the Investor
Questionnaire attached as Exhibit E to the Placement Memorandum, which
questionnaire is true and correct in all material respects.
5.4 The Investor acknowledges, represents and agrees that no action has been or
will be taken in any jurisdiction outside the United States by the Company
that would permit an offering of the Shares, or possession or distribution
of offering materials in connection with the issue of the Shares, in any
jurisdiction outside the United States where action for that purpose is
required. Each Investor outside the United States will comply with all
applicable laws and regulations in each foreign jurisdiction in which it
purchases, offers, sells or delivers Shares or has in its possession or
distributes any offering material, in all cases at its own expense.
5.5 The Investor hereby covenants with the Company not to make any sale of the
Shares without complying with the provisions of this Agreement, including
Section 7.2 hereof, and without effectively causing the prospectus delivery
requirement under the Securities Act to be satisfied, and the Investor
acknowledges that the certificates evidencing the Shares will be imprinted
with a legend that prohibits their transfer except in accordance therewith.
The Investor acknowledges that there may occasionally be times when the
Company, based on the advice of its counsel, determines that it must
suspend the use of the Prospectus forming a part of the Registration
Statement until such time as an amendment to the Registration Statement has
been filed by the Company and declared effective by the SEC or until the
Company has amended or supplemented such Prospectus.
5.4 The Investor further represents and warrants to, and covenants with, the
Company that (i) the Investor has full right, power, authority and capacity
to enter into this Agreement and to consummate the transactions
contemplated hereby and has taken all necessary action to authorize the
execution, delivery and performance of this Agreement, and (ii) this
Agreement constitutes a valid and binding obligation of the Investor
enforceable against the Investor in accordance with its terms, except as
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting creditors' and
contracting parties' rights generally and except as enforceability may be
subject to general principles of equity (regardless of whether such
enforceability is considered in a proceeding in equity or at law) and
except as the indemnification agreements of the Investors herein may be
legally unenforceable.
5.5 Investor will not, prior to the effectiveness of the Registration
Statement, sell, offer to sell, solicit offers to buy, dispose of, loan,
pledge or grant any right with respect to (collectively, a "Disposition"),
the Common Stock of the Company, nor will Investor engage in any hedging or
other transaction which is designed to or could reasonably be expected to
lead to or result in a Disposition of Common Stock of the Company by the
Investor or any other person or entity. Such prohibited hedging or other
transactions would include, without limitation, effecting any short sale or
having in effect any short position (whether or not such sale or position
is against the box and regardless of when such position was entered into)
or any purchase, sale or grant of any right (including, without limitation,
any put or call option) with respect to the Common Stock of the Company or
with respect to any security (other than a broad-based market basket or
index) that includes, relates to or derives any significant part of its
value from the Common Stock of the Company.
5.6 The Investor agrees that if the Company engages in an underwritten public
offering for the sale by the Company of shares of Common Stock, during the
one-year period following the Closing Date and thereafter so long as the
Investor owns more than one percent (1%) of the Common Stock, the Investor
will, if so requested by the managing underwriter for such offering,
execute and deliver to such managing underwriter a "lock-up" letter in a
form acceptable to such managing underwriter. The obligations of and
restrictions on the Investor under such letter shall be in effect for a
maximum of 180 days as specified by the managing underwriter.
5.7 The Investor understands that nothing in the Placement Memorandum, this
Agreement or any other materials presented to the Investor in connection
with the purchase and sale of the Shares constitutes legal, tax or
investment advice. The Investor has consulted such legal, tax and
investment advisors as it, in its sole discretion, has deemed necessary or
appropriate in connection with its purchase of Shares.
6. Survival of Representations, Warranties and Agreements. Notwithstanding any
investigation made by any party to this Agreement, all covenants,
agreements, representations and warranties made by the Company and the
Investor herein shall survive the execution of this Agreement, the delivery
to the Investor of the Shares being purchased and the payment therefor.
7. Registration of the Shares; Compliance with the Securities Act.
7.1 Registration Procedures and Expenses. The Company shall:
(a) subject to receipt of necessary information from the Investors,
prepare and effectuate with the SEC, within ninety (90) days after the
Closing Date, a registration statement on Form S-3 or other Form, as
determined by the Issuer in accordance with SEC regulations (the
"Registration Statement"), to enable the resale of the Shares by the
Investors from time to time. If the Company does not deliver on this
term, a penalty of $500 per day payable in cash or stock, at the
Conversion Price, at the discretion of the Issuer, will be due and
payable to the Purchaser.
(c) use its reasonable efforts to prepare and file with the SEC such
amendments and supplements to the Registration Statement and the
Prospectus used in connection therewith as may be necessary to keep
the Registration Statement current and effective for a period not
exceeding, with respect to each Investor's Shares purchased hereunder,
the earlier of (i) the second anniversary of the Closing Date, (ii)
the date on which the Investor may sell all Shares then held by the
Investor without restriction by the volume limitations of Rule 144(e)
of the Securities Act, or (iii) such time as all Shares purchased by
such Investor in this Offering have been sold pursuant to a
registration statement.
(c) furnish to the Investor with respect to the Shares registered under
the Registration Statement such number of copies of the Registration
Statement, Prospectuses and Preliminary Prospectuses in conformity
with the requirements of the Securities Act and such other documents
as the Investor may reasonably request, in order to facilitate the
public sale or other disposition of all or any of the Shares by the
Investor, provided, however, that the obligation of the Company to
deliver copies of Prospectuses or Preliminary Prospectuses to the
Investor shall be subject to the receipt by the Company of reasonable
assurances from the Investor that the Investor will comply with the
applicable provisions of the Securities Act and of such other
securities or blue sky laws as may be applicable in connection with
any use of such Prospectuses or Preliminary Prospectuses;
(d) file documents required of the Company for normal blue sky clearance
in states specified in writing by the Investor, provided, however,
that the Company shall not be required to qualify to do business or
consent to service of process in any jurisdiction in which it is not
now so qualified or has not so consented;
(e) bear all expenses in connection with the procedures in paragraph (a)
through (d) of this Section 7.1 and the registration of the Shares
pursuant to the Registration Statement; and
(f) advise the Investors, promptly after it shall receive notice or obtain
knowledge of the issuance of any stop order by the SEC delaying or
suspending the effectiveness of the Registration Statement or of the
initiation of any proceeding for that purpose; and it will promptly
use its reasonable efforts to prevent the issuance of any stop order
or to obtain its withdrawal at the earliest possible moment if such
stop order should be issued.
The Company understands that the Investor disclaims being an
underwriter, but the Investor being deemed an underwriter by the SEC
shall not relieve the Company of any obligations it has hereunder,
provided, however, that if the Company receives notification from the
SEC that the Investor is deemed an underwriter, then the period by
which the Company is obligated to submit an acceleration request to
the SEC shall be extended to the earlier of (i) the 90th day after
such SEC notification, or (ii) 120 days after the initial filing of
the Registration Statement with the SEC.
7.2 Transfer of Shares After Registration; Suspension.
(a) The Investor agrees that it will not effect any Disposition of the
Shares or its right to purchase the Shares that would constitute a
sale within the meaning of the Securities Act except as contemplated
in the Registration Statement referred to in Section 7.1 and as
described below, and that it will promptly notify the Company of any
changes in the information set forth in the Registration Statement
regarding the Investor or its plan of distribution.
(b) Except in the event that paragraph (c) below applies, the Company
shall: (i) if deemed necessary by the Company, prepare and file from
time to time with the SEC a post-effective amendment to the
Registration Statement or a supplement to the related Prospectus or a
supplement or amendment to any document incorporated therein by
reference or file any other required document so that such
Registration Statement will not contain an untrue statement of a
material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein not misleading,
and so that, as thereafter delivered to purchasers of the Shares being
sold thereunder, such Prospectus will not contain an untrue statement
of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein, in light
of the circumstances under which they were made, not misleading; (ii)
provide the Investor copies of any documents filed pursuant to Section
7.2(b)(i); and (iii) inform each Investor that the Company has
complied with its obligations in Section 7.2(b)(i) (or that, if the
Company has filed a post-effective amendment to the Registration
Statement which has not yet been declared effective, the Company will
notify the Investor to that effect, will use its reasonable efforts to
secure the effectiveness of such post-effective amendment as promptly
as possible and will promptly notify the Investor pursuant to Section
7.2(b)(i) hereof when the amendment has become effective).
(c) Subject to paragraph (d) below, in the event: (i) of any request by
the SEC or any other federal or state governmental authority during
the period of effectiveness of the Registration Statement for
amendments or supplements to a Registration Statement or related
Prospectus or for additional information; (ii) of the issuance by the
SEC or any other federal or state governmental authority of any stop
order suspending the effectiveness of a Registration Statement or the
initiation of any proceedings for that purpose; (iii) of the receipt
by the Company of any notification with respect to the suspension of
the qualification or exemption from qualification of any of the Shares
for sale in any jurisdiction or the initiation of any proceeding for
such purpose; or (iv) of any event or circumstance which necessitates
the making of any changes in the Registration Statement or Prospectus,
or any document incorporated or deemed to be incorporated therein by
reference, so that, in the case of the Registration Statement, it will
not contain any untrue statement of a material fact or any omission to
state a material fact required to be stated therein or necessary to
make the statements therein not misleading, and that in the case of
the Prospectus, it will not contain any untrue statement of a material
fact or any omission to state a material fact required to be stated
therein or necessary to make the statements therein, in the light of
the circumstances under which they were made, not misleading; then the
Company shall deliver a certificate in writing to the Investor (the
"Suspension Notice") to the effect of the foregoing and, upon receipt
of such Suspension Notice, the Investor will refrain from selling any
Shares pursuant to the Registration Statement (a "Suspension") until
the Investor's receipt of copies of a supplemented or amended
Prospectus prepared and filed by the Company, or until it is advised
in writing by the Company that the current Prospectus may be used, and
has received copies of any additional or supplemental filings that are
incorporated or deemed incorporated by reference in any such
Prospectus. In the event of any Suspension, the Company will use its
reasonable efforts to cause the use of the Prospectus so suspended, to
be resumed as soon as reasonably practicable.
(d) Provided that a Suspension is not then in effect, the Investor may
sell Shares under the Registration Statement, provided that it
arranges for delivery of a current Prospectus to the transferee of
such Shares (or arranges for delivery of such to the transferee's
broker). Upon receipt of a written request therefor, the Company has
agreed to provide an adequate number of current Prospectuses to the
Investor and to supply copies to any other parties requiring such
Prospectuses.
(e) In the event of a sale of Shares by the Investor, the Investor must
also deliver to the Company's transfer agent, with a copy to the
Company, a Certificate of Subsequent Sale substantially in the form
attached as Exhibit H to the Placement Memorandum, so that the Shares
may be properly transferred.
7.3 Indemnification. For the purpose of this Section 7.3:
(i) the term "Selling Stockholder" shall include the Investor and any
affiliate of such Investor;
(ii) the term "Registration Statement" shall include any final Prospectus,
exhibit, supplement or amendment included in or relating to the
Registration Statement referred to in Section 7.1; and
(iii) the term "untrue statement" shall include any untrue statement or
alleged untrue statement, or any omission or alleged omission to state
in the Registration Statement a material fact required to be stated
therein or necessary to make the statements therein, in the light of
the circumstances under which they were made, not misleading.
(a) The Company agrees to indemnify and hold harmless each Selling
Stockholder from and against any losses, claims, damages or
liabilities to which such Selling Stockholder may become subject
(under the Securities Act or otherwise) insofar as such losses,
claims, damages or liabilities (or actions or proceedings in respect
thereof) arise out of, or are based upon (i) any untrue statement of a
material fact contained in the Registration Statement, or (ii) any
failure by the Company to fulfill any undertaking included in the
Registration Statement, and the Company will reimburse such Selling
Stockholder for any reasonable legal or other expenses reasonably
incurred in investigating, defending or preparing to defend any such
action, proceeding or claim, provided, however, that the Company shall
not be liable in any such case to the extent that such loss, claim,
damage or liability arises out of, or is based upon, an untrue
statement made in such Registration Statement in reliance upon and in
conformity with written information furnished to the Company by or on
behalf of such Selling Stockholder or the failure of such Selling
Stockholder to comply with its covenants and agreements contained in
Sections 5 or 7.2 hereof or any statement or omission in any
Prospectus that is corrected in any subsequent Prospectus that was
delivered to the Investor prior to the pertinent sale or sales by the
Investor.
(b) The Investor agrees to indemnify and hold harmless the Company
(and each person, if any, who controls the Company within the meaning
of Section 15 of the Securities Act, each officer of the Company who
signs the Registration Statement and each director of the Company)
from and against any losses, claims, damages or liabilities to which
the Company (or any such officer, director or controlling person) may
become subject (under the Securities Act or otherwise), insofar as
such losses, claims, damages or liabilities (or actions or proceedings
in respect thereof) arise out of, or are based upon, (i) any failure
to comply with the covenants and
agreements contained in Sections 5 or 7.2 hereof, or (ii) any untrue
statement of a material fact contained in the Registration Statement
if such untrue statement was made in reliance upon and in conformity
with written information furnished by or on behalf of the Investor,
and the Investor will reimburse the Company (or such officer, director
or controlling person), as the case may be, for any legal or other
expenses reasonably incurred in investigating, defending or preparing
to defend any such action, proceeding or claim.
(c) Promptly after receipt by any indemnified person of a notice of a
claim or the beginning of any action in respect of which indemnity is
to be sought against an indemnifying person pursuant to this Section
7.3, such indemnified person shall notify the indemnifying person in
writing of such claim or of the commencement of such action, but the
omission to so notify the indemnifying party will not relieve it from
any liability which it may have to any indemnified party under this
Section 7.3 (except to the extent that such omission materially and
adversely affects the indemnifying party's ability to defend such
action) or from any liability otherwise than under this Section 7.3.
Subject to the provisions hereinafter stated, in case any such action
shall be brought against an indemnified person, the indemnifying
person shall be entitled to participate therein, and, to the extent
that it shall elect by written notice delivered to the indemnified
party promptly after receiving the aforesaid notice from such
indemnified party, shall be entitled to assume the defense thereof,
with counsel reasonably satisfactory to such indemnified person. After
notice from the indemnifying person to such indemnified person of its
election to assume the defense thereof, such indemnifying person shall
not be liable to such indemnified person for any legal expenses
subsequently incurred by such indemnified person in connection with
the defense thereof, provided, however, that if there exists or shall
exist a conflict of interest that would make it inappropriate, in the
reasonable opinion of counsel to the indemnified person, for the same
counsel to represent both the indemnified person and such indemnifying
person or any affiliate or associate thereof, the indemnified person
shall be entitled to retain its own counsel at the reasonable expense
of such indemnifying person; provided, however, that no indemnifying
person shall be responsible for the fees and expenses of more than one
separate counsel (together with appropriate local counsel) for all
indemnified parties. In no event shall any indemnifying person be
liable in respect of any amounts paid in settlement of any action
unless the indemnifying person shall have approved the terms of such
settlement; provided that such consent shall not be unreasonably
withheld. No indemnifying person shall, without the prior written
consent of the indemnified person, effect any settlement of any
pending or threatened proceeding in respect of which any indemnified
person is or could have been a party and indemnification could have
been sought hereunder by such indemnified person, unless such
settlement includes an unconditional release of such indemnified
person from all liability on claims that are the subject matter of
such proceeding.
(d) If the indemnification provided for in this Section 7.3 is
unavailable to or insufficient to hold harmless an indemnified party
under subsection (a) or (b) above in respect of any losses, claims,
damages or liabilities (or actions or proceedings in respect thereof)
referred to therein, then each indemnifying party shall contribute to
the amount paid or payable by such indemnified party as a result of
such losses, claims, damages or liabilities (or actions in respect
thereof) in such proportion as is appropriate to reflect the relative
fault of the Company on the one hand and the Investors on the other in
connection with the statements or omissions or other matters which
resulted in such losses, claims, damages or liabilities (or actions in
respect thereof), as well as any other relevant equitable
considerations. The relative fault shall be determined by reference
to, among other things, in the case of an untrue statement, whether
the untrue statement relates to information supplied by the Company on
the one hand or an Investor on the other and the parties' relative
intent, knowledge, access to information and opportunity to correct or
prevent such untrue statement. The Company and the Investors agree
that it would not be just and equitable if contribution pursuant to
this subsection (d) were determined by pro rata allocation (even if
the Investors were treated as one entity for such purpose) or by any
other method of allocation which does not take into account the
equitable considerations referred to above in this subsection (d). The
amount paid or payable by an indemnified party as a result of the
losses, claims, damages or liabilities (or actions in respect thereof)
referred to above in this subsection (d)
shall be deemed to include any legal or other expenses reasonably
incurred by such indemnified party in connection with investigating or
defending any such action or claim. Notwithstanding the provisions of
this subsection (d), no Investor shall be required to contribute any
amount in excess of the amount by which the gross amount received by
the Investor from the sale of the Shares to which such loss relates
exceeds the amount of any damages which such Investor has otherwise
been required to pay by reason of such untrue statement. No person
guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the Securities Act) shall be entitled to contribution from
any person who was not guilty of such fraudulent misrepresentation.
The Investors' obligations in this subsection to contribute are
several in proportion to their sales of Shares to which such loss
relates and not joint.
(e) The parties to this Agreement hereby acknowledge that they are
sophisticated business persons who were represented by counsel during
the negotiations regarding the provisions hereof including, without
limitation, the provisions of this Section 7.3, and are fully informed
regarding said provisions. They further acknowledge that the
provisions of this Section 7.3 fairly allocate the risks in light of
the ability of the parties to investigate the Company and its business
in order to assure that adequate disclosure is made in the
Registration Statement as required by the Act and the Exchange Act.
The parties are advised that federal or state public policy as
interpreted by the courts in certain jurisdictions may be contrary to
certain of the provisions of this Section 7.3, and the parties hereto
hereby expressly waive and relinquish any right or ability to assert
such public policy as a defense to a claim under this Section 7.3 and
further agree not to attempt to assert any such defense.
7.4 Termination of Conditions and Obligations. The conditions precedent
imposed by Section 5 or this Section 7 upon the transferability of the
Shares shall cease and terminate as to any particular number of the
Shares when such Shares shall have been effectively registered under
the Securities Act and sold or otherwise disposed of in accordance
with the intended method of disposition set forth in the Registration
Statement covering such Shares or at such time as an opinion of
counsel satisfactory to the Company shall have been rendered to the
effect that such conditions are not necessary in order to comply with
the Securities Act.
7.5 Information Available. So long as the Registration Statement is
effective covering the resale of Shares owned by the Investor, the
Company will furnish to the Investor:
(a) as soon as practicable after it is available, one copy of (i) its
Annual Report to Stockholders (which Annual Report shall contain
financial statements audited in accordance with generally
accepted accounting principles by a national firm of certified
public accountants), and (ii) if not included in substance in the
Annual Report to Stockholders, its Annual Report on Form 10-K;
and
(b) upon the reasonable request of the Investor, an adequate number
of copies of the Prospectuses to supply to any other party
requiring such Prospectuses; and the Company, upon the reasonable
request of the Investor, will meet with the Investor or a
representative thereof at the Company's headquarters to discuss
all information relevant for disclosure in the Registration
Statement covering the Shares and will otherwise cooperate with
any Investor conducting an investigation for the purpose of
reducing or eliminating such Investor's exposure to liability
under the Securities Act, including the reasonable production of
information at the Company's headquarters; provided, that the
Company shall not be required to disclose any confidential
information to or meet at its headquarters with any Investor
until and unless the Investor shall have entered into a
confidentiality agreement in form and substance reasonably
satisfactory to the Company with the Company with respect
thereto.
8. Notices. All notices, requests, consents and other communications hereunder
shall be in writing, shall be mailed (A) if within domestic United States
by first-class registered or certified airmail, or nationally recognized
overnight express courier, postage prepaid, or by facsimile, or (B) if
delivered from outside the United States, by International Federal Express
or facsimile, and shall be deemed given (i) if delivered by first-class
registered or certified mail domestic, three business days after so mailed,
(ii) if delivered by nationally recognized overnight carrier, one business
day after so mailed, (iii) if delivered by International Federal Express,
two business days after so mailed, (iv) if delivered by facsimile, upon
electric confirmation of receipt and shall be delivered as addressed as
follows:
(a) if to the Company, to:
Xxxxxxxxx.xxx, Inc.
0000 Xxxxxxxxx Xxxxxx Xx. Xxxxx 000.
Xxxxxxxxx, XX 00000
Attn: Secretary
Phone: 000-000-0000
Telecopy: 000-000-0000
(b) if to the Investor, at its address on the signature page hereto, or at
such other address or addresses as may have been furnished to the
Company in writing in accordance with this Section 8.
9. Changes. This Agreement may not be modified or amended except pursuant to
an instrument in writing signed by the Company and the Investor.
10. Headings. The headings of the various sections of this Agreement have been
inserted for convenience of reference only and shall not be deemed to be
part of this Agreement.
11. Severability. In case any provision contained in this Agreement should be
invalid, illegal or unenforceable in any respect, the validity, legality
and enforceability of the remaining provisions contained herein shall not
in any way be affected or impaired thereby.
12. Governing Law. This Agreement shall be governed by, and construed in
accordance with, the laws of the State of Virginia.
14. Counterparts. This Agreement may be executed in two or more counterparts,
each of which shall constitute an original, but all of which, when taken
together, shall constitute but one instrument.
