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PREFERRED STOCK PURCHASE AGREEMENT
BETWEEN
INTEGRATED SURGICAL SYSTEMS, INC.
AND THE
INVESTORS SIGNATORY HERETO
PREFERRED STOCK PURCHASE AGREEMENT dated as of May 30, 2000 (the
"Agreement"), between Integrated Surgical Systems, Inc., a corporation organized
and existing under the laws of the State of Delaware (the "Company"), and the
persons signatory hereto (each an "Investor").
WHEREAS, the parties desire that, upon the terms and subject to the
conditions contained herein, the Company shall issue and sell to the Investors,
and the Investors shall purchase, for a total purchase price of $1,800,000,
1,800 shares of the Company's Series G Convertible Preferred Stock and warrants
to purchase an aggregate of 63,000 shares of the Company's common stock.
WHEREAS, the issuance and sale of the Series G Convertible Preferred
Stock and the warrants to the Investor will be made in reliance upon the
provisions of Section 4(2) of the Securities Act of 1933, as amended, and
Regulation D promulgated thereunder by the Securities and Exchange Commission.
NOW, THEREFORE, the parties hereto agree as follows:
ARTICLE I
CERTAIN DEFINITIONS
Section 1.1. "Bid Price" shall mean the closing bid price (as reported by
Bloomberg L.P.) of the Common Stock on the Principal Market.
Section 1.2. "Capital Shares" shall mean the Common Stock and any shares of any
other class of common stock whether now or hereafter authorized, having the
right to participate in the distribution of earnings and assets of the Company.
Section 1.3. "Capital Shares Equivalents" shall mean any securities, rights or
obligations that are convertible into or exchangeable for or give any right to
subscribe for any Capital Shares of the Company or any warrants, options or
other rights to subscribe for or purchase Capital Shares or any such convertible
or exchangeable securities.
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Section 1.4. "Closing" shall mean the closing of the purchase and sale of the
Preferred Stock pursuant to Section 2.1.
Section 1.5. "Closing Date" shall mean the date on which all conditions to
closing have been satisfied and the Closing shall have occurred.
Section 1.6. "Common Stock" shall mean the Company's common stock, par value
$.01 per share.
Section 1.7. "Conversion Shares" shall mean the shares of Common Stock issuable
upon conversion of the Preferred Stock.
Section 1.8. "Damages" shall mean any loss, claim, damage, liability, costs and
expenses (including, without limitation, reasonable attorney's fees and
disbursements and costs and expenses of expert witnesses and investigation).
Section 1.9. "Effective Date" shall mean the date on which the SEC first
declares effective a Registration Statement registering the resale of the
Registrable Securities as set forth in Section 6.1.
Section 1.10 "Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended, and the rules and regulations promulgated by the SEC thereunder.
Section 1.11 "Legend" See Section 9.1.
Section 1.12. "Market Price" on any given date shall mean the single lowest
price (as reported by Bloomberg L.P.) of the Common Stock on any Trading Day
during the five Trading Days prior to the date for which Market Price is to be
determined.
Section 1.13. "Material Adverse Effect" shall mean any effect on the business,
Bid Price, operations, properties, prospects, or financial condition of the
Company that is material and adverse to the Company and its subsidiaries and
affiliates, taken as a whole, and/or any condition, circumstance, or situation
that would prohibit or otherwise interfere with the ability of the Company to
enter into and perform any of its obligations under this Agreement, the
Registration Rights Agreement or the Warrant in any material respect.
Section 1.14. "NASD" shall mean the National Association of Securities Dealers,
Inc.
Section 1.15. "Outstanding" when used with reference to shares of Common Stock
or Capital Shares (collectively the "Shares"), shall mean, at any date as of
which the number of such Shares is to be determined, all issued and outstanding
Shares, and shall include all such Shares issuable in respect of outstanding
scrip or any certificates representing fractional interests in such Shares;
provided, however, that "Outstanding" shall not mean any such Shares then
directly or indirectly owned or held by or for the account of the Company.
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Section 1.16. "Person" shall mean an individual, a corporation, a partnership,
an association, a trust or other entity or organization, including a government
or political subdivision or an agency or instrumentality thereof.
Section 1.17. "Preferred Stock" shall mean the Company's Series G Convertible
Preferred Stock, par value $.01 per share, issued pursuant to the Certificate of
Designations attached hereto as Exhibit A.
Section 1.18. "Principal Market" shall mean the Nasdaq National Market, The
Nasdaq SmallCap Market, the American Stock Exchange or the New York Stock
Exchange, whichever is at the time the principal trading exchange or market for
the Common Stock.
Section 1.19. "Purchase Price" shall mean one thousand dollars ($1,000) per
share.
Section 1.20. "Registrable Securities" shall mean the Conversion Shares and the
Warrant Shares until (i) the Registration Statement has been declared effective
by the SEC, and all Conversion Shares and Warrant Shares have been disposed of
pursuant to the Registration Statement, (ii) all Conversion Shares and Warrant
Shares have been sold under circumstances under which all of the applicable
conditions of Rule 144 (or any similar provision then in force) under the
Securities Act ("Rule 144") are met, (iii) all Conversion Shares and Warrant
Shares have been otherwise transferred to holders who may trade such shares
without restriction under the Securities Act, and the Company has delivered a
new certificate or other evidence of ownership for such securities not bearing a
restrictive legend or (iv) such time as, in the opinion of counsel to the
Company, all Conversion Shares and Warrant Shares may be sold without any time,
volume or manner limitations pursuant to Rule 144(k) (or any similar provision
then in effect) under the Securities Act.
Section 1.21. "Registration Rights Agreement" shall mean the agreement regarding
the filing of the Registration Statement for the resale of the Registrable
Securities, entered into between the Company and each Investor on the Closing
Date annexed hereto as Exhibit C.
Section 1.22. "Registration Statement" shall mean a registration statement on
Form S-3 (if use of such form is then available to the Company pursuant to the
rules of the SEC and, if not, on such other form promulgated by the SEC for
which the Company then qualifies and which counsel for the Company shall deem
appropriate, and which form shall be available for the resale of the Registrable
Securities to be registered thereunder in accordance with the provisions of this
Agreement, the Registration Rights Agreement, and the Warrant and in accordance
with the intended method of distribution of such securities), for the
registration of the resale by the Investors of the Registrable Securities under
the Securities Act.
Section 1.23 "Regulation D" shall mean Regulation D promulgated by the SEC under
Section 4(2) of the Securities Act.
Section 1.24 "SEC" shall mean the Securities and Exchange Commission.
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Section 1.25 "Section 4(2)" shall mean Section 4(2) of the Securities Act.
Section 1.26 "Securities Act" shall mean the Securities Act of 1933, as amended,
and the rules and regulations promulgated by the SEC thereunder.
Section 1.27 "SEC Documents" shall mean the Company's Form 10-KSB for the fiscal
year ended December 31, 1999, as amended, and any other reports subsequently
filed with the SEC by the Company under the Exchange Act, as the same may be
amended, prior to the date of this Agreement.
Section 1.28. "Trading Day" shall mean any day during which the New York Stock
Exchange shall be open for business.
Section 1.29, "Warrant" shall have the meaning set forth in Section 2.2 and
substantially in the form of Exhibit B.
Section 1.30. "Warrant Shares" shall mean all shares of Common Stock or other
securities issued or issuable pursuant to exercise of the Warrant.
ARTICLE II
PURCHASE AND SALE OF COMMON STOCK
Section 2.1. Investment.
(a) The Company agrees to sell and each Investor, separately and not
jointly, agrees to purchase the number of shares of Preferred Stock set forth on
the signature page hereto at the Purchase Price on the Closing Date.
(b) On the Closing Date, the Company shall issue and sell to each
Investor, against payment of the total Purchase Price of the shares of Preferred
Stock purchased by that Investor by wire transfer of immediately available funds
in accordance with instructions from the Company, the shares of Preferred Stock
set forth on the signature page hereto and the Warrant.
(c) The Closing of the sale and purchase of the Preferred Stock and
Warrant shall be subject to the completion of the following conditions:
(i) acceptance and execution by the Company and the Investor
of this Agreement and all Exhibits hereto;
(ii) all representations and warranties of the Investor and of
the Company contained herein shall remain true and correct as
of the Closing Date;
(iii) the Company shall have obtained all permits and
qualifications required by any state for the offer and sale of
the Preferred Stock and Warrant, or shall have the
availability of exemptions therefrom;
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(iv)the sale and issuance of the Preferred Stock and Warrant,
and the proposed issuance of the Common Stock underlying the
Preferred Stock and the Warrant shall be legally permitted by
all laws and regulations to which the Investor and the Company
are subject and there shall be no ruling, judgment or writ of
any court prohibiting the transactions contemplated by this
Agreement;
(v) receipt by the Investor of an opinion of Snow Xxxxxx
Xxxxxx P.C., counsel to the Company, in the form of Exhibit D
hereto;
(vi) delivery to the Investor of the Irrevocable Instructions
to Transfer Agent in the form attached hereto as Exhibit E;
(vii) there not having occurred (i) any general suspension of
trading in, or limitation on prices listed for, the Common
Stock on The Nasdaq Small Cap Market, (ii) the declaration of
a banking moratorium or any suspension of payments in respect
of banks in the United States, (iii) the commencement of a
war, armed hostilities or other international or national
calamity directly or indirectly involving the United States or
any of its territories, protectorates or possessions, or (iv)
in the case of the foregoing existing at the date of this
Agreement, a material acceleration or worsening thereof; and;
(viii) there not having occurred any event or development, and
there being in existence no condition, having or which
reasonably and forseeably could have a Material Adverse
Effect.
Section 2.2. The Warrant. On the Closing Date, the Company will issue to the
Investor a warrant, exercisable beginning six months from the Closing Date and
then exercisable any time over the three-year period there following, to
purchase the Investor's pro rata share of an aggregate of 63,000 Warrant Shares
at the Exercise Price (as defined in the Warrant) in the form of Exhibit B
hereto. The Warrant Shares shall be registered for resale pursuant to the
Registration Rights Agreement.
Section 2.3. Liquidated Damages. The parties hereto acknowledge and agree that
the sums payable pursuant to the Registration Rights Agreement shall constitute
liquidated damages and not penalties. The parties further acknowledge that (a)
the amount of loss or damages likely to be incurred is incapable or is difficult
to precisely estimate, (b) the amounts specified in such Sections bear a
reasonable proportion and are not plainly or grossly disproportionate to the
probable loss likely to be incurred by the Investor in connection with the
failure by the Company to timely cause the registration of the Registrable
Securities and (c) the parties are sophisticated business parties and have been
represented by sophisticated and able legal and financial counsel and negotiated
this Agreement at arm's length.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF INVESTOR
The Investor represents and warrants to the Company that:
Section 3.1. Intent. The Investor is entering into this Agreement 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
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representations herein, the Investor does not agree to hold the Common Stock for
any minimum or other specific term and reserves the right to dispose of the
Common Stock at any time in accordance with federal and state securities laws
applicable to such disposition.
Section 3.2. 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 Regulation D), and Investor has such experience in
business and financial matters that it is capable of evaluating the merits and
risks of an investment in Common Stock. The Investor acknowledges that an
investment in the Common Stock is speculative and involves a high degree of
risk.
Section 3.3. Authority. This Agreement and each Exhibit hereto which is
required to be executed by Investor has been duly authorized and validly
executed and delivered by the Investor and is a valid and binding agreement of
the Investor enforceable against it in accordance with its terms, subject to
applicable bankruptcy, insolvency, or similar laws relating to, or affecting
generally the enforcement of, creditors' rights and remedies or by other
equitable principles of general application.
Section 3.4. Not an Affiliate. The Investor is not an officer, director or
"affiliate" (as that term is defined in Rule 405 of the Securities Act) of the
Company.
Section 3.5. Absence of Conflicts. The execution and delivery of this Agreement
and any other document or instrument executed in connection herewith, and the
consummation of the transactions contemplated thereby, and compliance with the
requirements thereof, will not violate any law, rule, regulation, order, writ,
judgment, injunction, decree or award binding on Investor, or, to the Investor's
knowledge, (a) violate any provision of any indenture, instrument or agreement
to which Investor is a party or is subject, or by which Investor or any of its
assets is bound; (b) conflict with or constitute a material default thereunder;
(c) result in the creation or imposition of any lien pursuant to the terms of
any such indenture, instrument or agreement, or constitute a breach of any
fiduciary duty owed by Investor to any third party; or (d) require the approval
of any third-party (which has not been obtained) pursuant to any material
contract, agreement, instrument, relationship or legal obligation to which
Investor is subject or to which any of its assets, operations or management may
be subject.
Section 3.6. Disclosure; Access to Information. Investor has received all
documents, records, books and other publicly available information pertaining to
Investor's investment in the Company that have been requested by Investor. The
Company is subject to the periodic reporting requirements of the Exchange Act,
and Investor has reviewed or received copies of any such reports that have been
requested by it.
Section 3.7. 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.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
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The Company represents and warrants to the Investor that, except as set forth on
the Schedule of Exceptions attached hereto:
Section 4.1. Organization of the Company. The Company is a corporation duly
incorporated and existing in good standing under the laws of the State of
Delaware and has all requisite corporate authority to own its properties and to
carry on its business as now being conducted as described in the Company's SEC
Documents. The Company does not have any subsidiaries and does not own more that
fifty percent (50%) of or control any other business entity, except as set forth
in the SEC Documents. The Company is duly qualified as a foreign corporation to
do business and is in good standing in every jurisdiction in which the nature of
the business conducted or property owned by it makes such qualification
necessary, other than those in which the failure so to qualify could not
reasonably be expected to have a Material Adverse Effect.
Section 4.2. Authority. (i) The Company has the requisite corporate power and
authority to enter into and perform its obligations under this Agreement, the
Registration Rights Agreement and the Warrant and to issue the Preferred Stock,
the Conversion Shares, the Warrant and the Warrant Shares, (ii) the execution,
issuance and delivery of this Agreement, the Registration Rights Agreement and
the Warrant by the Company and the consummation by it of the transactions
contemplated hereby have been duly authorized by all necessary corporate action
and no further consent or authorization of the Company or its Board of Directors
or stockholders is required, and (iii) this Agreement, the Registration Rights
Agreement and the Warrant have been duly executed and delivered by the Company
and constitute valid and binding obligations of the Company enforceable against
the Company in accordance with their terms, except as such enforceability may be
limited by applicable bankruptcy, insolvency, or similar laws relating to, or
affecting generally the enforcement of, creditors' rights and remedies or by
other equitable principles of general application. The Company has duly and
validly authorized and reserved for issuance shares of Common Stock sufficient
in number for the conversion of 1,800 shares of Preferred Stock and for the
exercise of the Warrants. The Company understands and acknowledges the
potentially dilutive effect to the Common Stock of the issuance of the
Conversion Shares and the Warrant Shares. The Company further acknowledges that
its obligation to issue Conversion Shares upon conversion of the Preferred Stock
and Warrant Shares upon exercise of the Warrants in accordance with this
Agreement and the Certificate of Designations is absolute and unconditional
regardless of the dilutive effect that such issuance may have on the ownership
interests of other stockholders of the Company and notwithstanding the
commencement of any case under 11 U.S.C. Section 101 et seq. (the "Bankruptcy
Code"). In the event the Company is a debtor under the Bankruptcy Code, the
Company hereby waives to the fullest extent permitted any rights to relief it
may have under 11 U.S.C. Section 362 in respect of the conversion of the
Preferred Stock and the exercise of the Warrants. The Company agrees, without
cost or expense to the Investor, to take or consent to any and all action
necessary to effectuate relief under 11 U.S.C. Section 362.
Section 4.3. Capitalization. The authorized capital stock of the Company
consists of 50,000,000 shares of Common Stock, par value $0.01, of which
16,898,460 shares were issued and outstanding as of May 1, 2000 and 987,730
shares of Preferred Stock, par value $0.01, of which 734 shares of Series F
Convertible Preferred Stock were issued and outstanding as of May
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1, 2000, and 1,800 shares of Preferred Stock have been properly designated
as Series G Convertible Preferred Stock. Except as set forth in the SEC
Documents and the Schedule of Exceptions, there are no outstanding Capital
Shares Equivalents. All of the outstanding shares of Common Stock of the Company
have been duly and validly authorized and issued and are fully paid and
non-assessable.
Section 4.4. Common Stock. The Company has registered its Common Stock pursuant
to Section 12(b) or (g) of the Exchange Act and is in full compliance with all
reporting requirements of the Exchange Act, and the Company has maintained all
requirements for the continued listing or quotation of its Common Stock, and
such Common Stock is currently quoted on The Nasdaq SmallCap Market and the
Company has not received any notice regarding, and to its knowledge there is no
threat, of the termination or discontinuance of the eligibility of the Common
Stock for inclusion on The Nasdaq SmallCap Market.
Section 4.5. SEC Documents. The Company has delivered or made available to the
Investor true and complete copies of the SEC Documents. The Company has not
provided to the Investor any information that, according to applicable law, rule
or regulation, should have been disclosed publicly prior to the date hereof by
the Company, but which has not been so disclosed. As of their respective dates,
the SEC Documents complied in all material respects with the requirements of the
Exchange Act, and rules and regulations of the SEC promulgated thereunder and
the SEC Documents did not contain any untrue statement of a material fact or
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. The financial statements of the Company included
in the SEC Documents complied in all material respects with applicable
accounting requirements and the published rules and regulations of the SEC or
other applicable rules and regulations with respect thereto. Such financial
statements have been prepared in accordance with generally accepted accounting
principles applied on a consistent basis during the periods involved (except (i)
as may be otherwise indicated in such financial statements or the notes thereto
or (ii) as set forth in Section 4.5 to the Schedule of Exceptions) and fairly
present in all material respects the financial position of the Company as of the
dates thereof and the results of operations and cash flows for the periods then
ended. Neither the Company nor any of its subsidiaries has any indebtedness,
obligations or liabilities of any kind (whether accrued, absolute, contingent or
otherwise, and whether due or to become due) that would have been required to be
reflected in, reserved against or otherwise described in the financial
statements or in the notes thereto in accordance with GAAP, which was not fully
reflected in, reserved against or otherwise described in the financial
statements or the notes thereto or was not incurred in the ordinary course of
business consistent with the Company's past practices since the late date of the
financial statements.
Section 4.6. Exemption from Registration; Valid Issuances. The sale of the
Preferred Stock, the Conversion Shares, the Warrant and the Warrant Shares will
be properly issued pursuant to Rule 4(2), Regulation D and/or any applicable
state securities law. When issued, the Preferred Stock, the Conversion Shares
and the Warrant Shares will be duly and validly issued, fully paid, and
non-assessable. Neither the sales of the Preferred Stock, the Conversion Shares,
the Warrant or the Warrant Shares pursuant to, nor the Company's performance of
its obligations under, this
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Agreement, the Registration Rights Agreement or the Warrant will (i) result in
the creation or imposition by the Company of any liens, charges, claims or other
encumbrances upon the Preferred Stock, the Conversion Shares, the Warrant Shares
or any of the assets of the Company, or (ii) entitle the holders of Outstanding
Capital Shares to preemptive or other rights to subscribe to or acquire the
Capital Shares or other securities of the Company. The Preferred Stock, the
Conversion Shares, and the Warrant Shares shall not subject the Investor to
personal liability by reason of the possession thereof.
Section 4.7. No General Solicitation or Advertising in Regard to this
Transaction. Neither the Company nor any of its affiliates nor any distributor
or any person acting on its or their behalf (i) has conducted or will conduct
any general solicitation (as that term is used in Rule 502(c) of Regulation D)
or general advertising with respect to any of the Preferred Stock, the
Conversion Shares, the Warrant or the Warrant Shares, or (ii) made any offers or
sales of any security or solicited any offers to buy any security under any
circumstances that would require registration of the Preferred Stock, the
Conversion Shares, the Warrant or the Warrant Shares under the Securities Act.
Section 4.8. Corporate Documents. The Company has furnished or made available
to the Investor true and correct copies of the Company's Restated Certificate of
Incorporation, as amended and in effect on the date hereof, and the Company's
By-Laws, as amended and in effect on the date hereof.
Section 4.9. No Conflicts. The execution, delivery and performance of this
Agreement by the Company and the consummation by the Company of the transactions
contemplated hereby, including without limitation the issuance of the Preferred
Stock, the Conversion Shares, the Warrant and the Warrant Shares, do not and
will not (i) result in a violation of the Company's Restated Certificate of
Incorporation or By-Laws, each as amended and in effect as of the date hereof,
or (ii) conflict with, or constitute a material default (or an event that with
notice or lapse of time or both would become a default) under, or give to others
any rights of termination, amendment, acceleration or cancellation of, any
material agreement, indenture, instrument or any "lock-up" or similar provision
of any underwriting or similar agreement to which the Company is a party, or
(iii) result in a violation of any federal, state or local law, rule,
regulation, order, judgment or decree (including federal and state securities
laws and regulations) applicable to the Company or by which any property or
asset of the Company is bound or affected (except for such conflicts, defaults,
terminations, amendments, accelerations, cancellations and violations as could
not reasonably be expected to have, individually or in the aggregate, a Material
Adverse Effect) nor is the Company otherwise in violation of, conflict with or
in default under any of the foregoing. The business of the Company is not being
conducted in violation of any law, ordinance or regulation of any governmental
entity, except for possible violations that either singly or in the aggregate
could not reasonably be expected to have a Material Adverse Effect. The Company
is not required under federal, state or local law, rule or regulation to obtain
any consent, authorization or order of, or make any filing or registration with,
any court or governmental agency in order for it to execute, deliver or perform
any of its obligations under this Agreement or issue and sell the Preferred
Stock or the Warrant in accordance with the terms hereof (other than any SEC,
NASD, The Nasdaq Stock Market Inc., or state securities filings that
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may be required to be made by the Company subsequent to any Closing, any
registration statement that may be filed pursuant hereto, and any shareholder
approval required by the rules applicable to companies whose common stock trades
on The Nasdaq SmallCap Market); provided that, for purposes of the
representation made in this sentence, the Company is assuming and relying upon
the accuracy of the relevant representations and agreements of the Investor
herein.
Section 4.10. No Material Adverse Change. Since January 1, 2000, no Material
Adverse Effect has occurred or exists with respect to the Company, except as
disclosed in the SEC Documents. No "Event of Default" (as defined in any
agreement or instrument to which the Company or any of its subsidiaries is a
party) and no event which, with notice, lapse of time or both, would constitute
an Event of Default (as so defined), has occurred and is continuing which could
have a Material Adverse Effect.
Section 4.11. No Undisclosed Liabilities. The Company has no liabilities or
obligations which are material, individually or in the aggregate, and are not
disclosed in the SEC Documents or otherwise publicly announced, other than those
incurred in the ordinary course of the Company's business since January 1, 2000,
and which, individually or in the aggregate, could not reasonably be expected to
have a Material Adverse Effect.
Section 4.12. No Undisclosed Events or Circumstances. Since January 1, 2000 no
event or circumstance has occurred or exists with respect to the Company or its
businesses, properties, prospects, operations or financial condition, that,
under applicable law, rule or regulation, requires public disclosure or
announcement prior to the date hereof by the Company but which has not been so
publicly announced or disclosed in the SEC Documents.
Section 4.13. No Integrated Offering. Except as set forth in the SEC Documents,
the Company has not issued, offered or sold any shares of convertible preferred
stock, warrants to purchase shares of Common Stock or any shares of Common Stock
(including for this purpose any securities convertible into a exchangeable or
exercisable for the Preferred Stock or Common Stock or any such other
securities) within the six-month period next preceding the date hereof, and the
Company shall not permit any of its directors, officers or Affiliates directly
or indirectly to take, any action (including, without limitation, any offering
or sale to any person or entity of the Preferred Stock, Warrant or shares of
Common Stock), so as to make unavailable the exemption from Securities Act
registration being relied upon by the Company for the offer and sale to the
Investors of the Preferred Stock (and the Conversion Shares) or the Warrant (and
the Warrant Shares) as contemplated by this Agreement. No form of general
solicitation or advertising has been used or authorized by the Company or any of
its officers, directors or Affiliates in connection with the offer or sale of
the Preferred Stock (and the Conversion Shares) as contemplated by this
Agreement or any other agreement to which the Company is a party.
Section 4.14. Litigation and Other Proceedings. There are no lawsuits or
proceedings pending or to the best knowledge of the Company threatened, against
the Company, nor has the Company received any written or oral notice of any such
action, suit, proceeding or investigation, which could reasonably be expected to
have a Material Adverse Effect. Except as set forth in the SEC
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Documents, no judgment, order, writ, injunction or decree or award has been
issued by or, so far as is known by the Company, requested of any court,
arbitrator or governmental agency which might result in a Material Adverse
Effect.
Section 4.15. No Misleading or Untrue Communication. The Company, any person
representing the Company, and, to the best knowledge of the Company, any other
person selling or offering to sell the Preferred Stock or the Warrant in
connection with the transaction contemplated by this Agreement, have not made,
at any time, any oral communication in connection with the offer or sale of the
same which contained any untrue statement of a material fact or omitted to state
any material fact necessary in order to make the statements, in the light of the
circumstances under which they were made, not misleading.
Section 4.16. Material Non-Public Information. The Company has not disclosed to
the Investor any material non-public information that (i) if disclosed, would,
or could reasonably be expected to have, an effect on the price of the Common
Stock or (ii) according to applicable law, rule or regulation, should have been
disclosed publicly by the Company prior to the date hereof but which has not
been so disclosed.
Section 4.17. Insurance. The Company maintains property and casualty, general
liability, workers' compensation, environmental hazard, personal injury and
other similar types of insurance with financially sound and reputable insurers
that is adequate, consistent with industry standards and the Company's
historical claims experience. The Company has not received notice from, and has
no knowledge of any threat by, any insurer (that has issued any insurance policy
to the Company) that such insurer intends to deny coverage under or cancel,
discontinue or not renew any insurance policy presently in force.
Section 4.18. Environmental Matters.
1. The operations of the Company and each of its subsidiaries are in
material compliance with all applicable Environmental Laws and all permits
issued pursuant to Environmental Laws or otherwise;
2. to its knowledge, the Company and each of its subsidiaries has
obtained or applied for all material permits required under all applicable
Environmental Laws necessary to operate its business;
3. neither the Company nor either of its subsidiaries is the subject of
any outstanding written order of or agreement with any governmental authority or
person respecting (i) Environmental Laws, (ii) Remedial Action or (iii) any
Release or threatened Release of Hazardous Materials;
4. neither the Company nor either of its subsidiaries has received,
since December 31, 1997, any written communication alleging that it may be in
violation of any Environmental Law or any permit issued pursuant to any
Environmental Law, or may have any liability under
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any Environmental Law;
5. neither the Company nor either of its subsidiaries has any current
contingent liability in connection with any Release of any Hazardous Materials
into the indoor or outdoor environment (whether on-site or off-site);
6. to the Company's knowledge, there are no investigations of the
business, operations, or currently or previously owned, operated or leased
property of the Company or either of its subsidiaries pending or threatened
which could lead to the imposition of any liability pursuant to any
Environmental Law;
7. there is not located at any of the properties of the Company any (A)
underground storage tanks, (B) asbestos-containing material or (C) equipment
containing polychlorinated biphenyls; and
8. the Company has provided to Investor all environmentally related
audits, studies, reports, analyses, and results of investigations that have been
performed with respect to the currently or previously owned, leased or operated
properties of the Company.
For purposes of this Section 4.18:
"Environmental Law" means any foreign, federal, state or local statute,
regulation, ordinance, or rule of common law as now or hereafter in effect in
any way relating to the protection of human health and safety or the environment
including, without limitation, the Comprehensive Environmental Response,
Compensation and Liability Act (42 U.S.C. Section 9601 et seq.), the Hazardous
Materials Transportation Act (49 U.S.C. App. Section 1801 et seq.), the Resource
Conservation and Recovery Act (42 U.S.C. Section 6901 et seq.), the Clean Water
Act (33 U.S.C. Section 1251 et seq.), the Clean Air Act (42 U.S.C. Section 7401
et seq.), the Toxic Substances Control Act (15 U.S.C. Section 2601 et seq.), the
Federal Insecticide, Fungicide, and Rodenticide Act (7 U.S.C. Section 136 et
seq.), and the Occupational Safety and Health Act (29 U.S.C. Section 651 et
seq.), and the regulations promulgated pursuant thereto.
"Hazardous Material" means any substance, material or waste which is
regulated by the United States, Canada or any of its provinces, or any state or
local governmental authority including, without limitation, petroleum and its
by-products, asbestos, and any material or substance which is defined as a
"hazardous waste," "hazardous substance," "hazardous material," "restricted
hazardous waste," "industrial waste," "solid waste," "contaminant," "pollutant,"
"toxic waste" or toxic substance" under any provision of any Environmental Law;
13
"Release" means any release, spill, filtration, emission, leaking,
pumping, injection, deposit, disposal, discharge, dispersal, or leaching into
the indoor or outdoor environment, or into or out of any property;
"Remedial Action" means all actions to (x) clean up, remove, treat or
in any other way address any Hazardous Material; (y) prevent the Release of any
Hazardous Material so it does not endanger or threaten to endanger public health
or welfare or the indoor or outdoor environment; or (z) perform pre-remedial
studies and investigations or post-remedial monitoring and care.
Section 4.19. Labor Matters. Neither the Company nor any of its subsidiaries is
a party to any labor or collective bargaining agreement and there are no labor
or collective bargaining agreements which pertain to employees of the Company.
No employees of the Company are represented by any labor organization and none
of such employees has made a pending demand for recognition, and there are no
representation proceedings or petitions seeking a representation proceeding
presently pending or, to the Company's knowledge, threatened to be brought or
filed, with the National Labor Relations Board or other labor relations
tribunal. There is no organizing activity involving the Company pending or to
the Company's knowledge, threatened by any labor organization or group of
employees of the Company. There are no (i) strikes, work stoppages, slowdowns,
lockouts or arbitrations or (ii) material grievances or other labor disputes
pending or, to the knowledge of the Company, threatened against or involving the
Company. There are no unfair labor practice charges, grievances or complaints
pending or, to the knowledge of the Company, threatened by or on behalf of any
employee or group of employees of the Company.
Section 4.20. ERISA Matters. The Company and its ERISA Affiliates are in
compliance in all material respects with all provisions of ERISA applicable to
it. No Reportable Event has occurred, been waived or exists as to which the
Company or any ERISA Affiliate was required to file a report with the Pension
Benefits Guaranty Corporation, and the present value of all liabilities under
all Plans (based on those assumptions used to fund such Plans) did not, as of
the most recent annual valuation date applicable thereto, exceed the value of
the assets of all such Plans in the aggregate. None of the Company or ERISA
Affiliates has incurred any Withdrawal Liability that could result in a Material
Adverse Effect. None of the Company or ERISA Affiliates has received any
notification that any Multiemployer Plan is in reorganization or has been
terminated within the meaning of Title IV of ERISA, and no Multiemployer Plan is
reasonably expected to be in reorganization or termination where such
reorganization or termination has resulted or could reasonably be expected to
result in increases to the contributions required to be made to such Plan or
otherwise.
For purposes of this Section 4.20:
"ERISA" means the Employee Retirement Income Security Act of 1974, or
any successor statute, together with the regulations thereunder, as the same may
be amended from time to time.
"ERISA Affiliate" means any trade or business (whether or not
incorporated) that was, is or hereafter may become, a member of a group of which
the Company is a member and which is treated as a single employer under Section
414 of the Internal Revenue Code of 1986, as amended (the
14
"Internal Revenue Code").
"Multiemployer Plan" means a multiemployer plan as defined in Section
4001(a)(3) of ERISA to which the Company or any ERISA Affiliate (other than one
considered an ERISA Affiliate only pursuant to subsection (m) or (o) of Section
414 of the Internal Revenue Code) is making or accruing an obligation to make
contributions, or has within any of the preceding five plan years made or
accrued an obligation to make contributions.
"PBGC" means the Pension Benefit Guaranty Corporation referred to and
defined in ERISA or any successor thereto.
"Plan" means any pension plan (other than a Multiemployer Plan) subject
to the provision of Title IV of ERISA or Section 412 of the Internal Revenue
Code that is maintained for employees of the Company or any ERISA Affiliate.
"Reportable Event" means any reportable event as defined in Section
4043(b) of ERISA or the regulations issued thereunder with respect to a Plan
(other than a Plan maintained by an ERISA Affiliate that is considered an ERISA
Affiliate only pursuant to subsection (m) or (o) of Section 414 of the Internal
Revenue Code.
"Withdrawal Liability" means liability to a Multiemployer Plan as a
result of a complete or partial withdrawal from such Multiemployer Plan, as such
terms are defined in Part I of Subtitle E of Title IV of ERISA.
Section 4.21. Tax Matters.
1. The Company has filed all Tax Returns which it is required to file
under applicable Laws, or has requested extensions for filing such Tax Returns;
all such Tax Returns are true and accurate and have been prepared in compliance
with all applicable Laws; the Company has paid all Taxes due and owing by it
(whether or not such Taxes are required to be shown on a Tax Return) and have
withheld and paid over to the appropriate taxing authorities all Taxes which it
is required to withhold from amounts paid or owing to any employee, stockholder,
creditor or other third parties; and since December 31, 1999, the charges,
accruals and reserves for Taxes with respect to the Company (including any
provisions for deferred income taxes) reflected on the books of the Company are
adequate to cover any Tax liabilities of the Company if its current tax year
were treated as ending on the date hereof.
2. No claim has been made by a taxing authority in a jurisdiction where
the Company does not file tax returns that such corporation is or may be subject
to taxation by that jurisdiction. There are no foreign, federal, state or local
tax audits or administrative or judicial proceedings pending or being conducted
with respect to the Company; no information related to Tax matters has been
requested by any foreign, federal, state or local taxing authority; and, except
as disclosed above, no written notice indicating an intent to open an audit or
other review has been received by the Company from any foreign, federal, state
or local taxing authority. There are no material unresolved questions or claims
concerning the Company's Tax liability.
15
The Company (A) has not executed or entered into a closing agreement pursuant to
Section 7121 of the Internal Revenue Code or any predecessor provision thereof
or any similar provision of state, local or foreign law; or (B) has not agreed
to or is required to make any adjustments pursuant to Section 481 (a) of the
Internal Revenue Code or any similar provision of state, local or foreign law by
reason of a change in accounting method initiated by the Company or any of its
subsidiaries or has any knowledge that the IRS has proposed any such adjustment
or change in accounting method, or has any application pending with any taxing
authority requesting permission for any changes in accounting methods that
relate to the business or operations of the Company. The Company has not been a
United States real property holding corporation within the meaning of Section
897(c)(2) of the Internal Revenue Code during the applicable period specified in
Section 897(c)(1)(A)(ii) of the Internal Revenue Code.
3. The Company has not made an election under Section 341(f) of the
Internal Revenue Code. The Company is not liable for the Taxes of another person
that is not a subsidiary of the Company under (A) Treas. Reg. Section 1.1502-6
(or comparable provisions of state, local or foreign law), (B) as a transferee
or successor, (C) by contract or indemnity or (D) otherwise. The Company is not
a party to any tax sharing agreement. The Company has not made any payments, is
obligated to make payments or is a party to an agreement that could obligate it
to make any payments that would not be deductible under Section 280G of the
Internal Revenue Code.
For purposes of this Section 4.21:
"IRS" means the United States Internal Revenue Service.
"Tax" or "Taxes" means federal, state, county, local, foreign, or other
income, gross receipts, ad valorem, franchise, profits, sales or use, transfer,
registration, excise, utility, environmental, communications, real or personal
property, capital stock, license, payroll, wage or other withholding,
employment, social security, severance, stamp, occupation, alternative or add-on
minimum, estimated and other taxes of any kind whatsoever (including, without
limitation, deficiencies, penalties, additions to tax, and interest attributable
thereto) whether disputed or not.
"Tax Return" means any return, information report or filing with
respect to Taxes, including any schedules attached thereto and including any
amendment thereof.
Section 4.22. Property. Neither the Company nor either of its subsidiaries owns
any real property. Each of the Company and its subsidiaries has good and
marketable title to all personal property owned by it, free and clear of all
liens, encumbrances and defects except such as do not materially affect the
value of such property and do not materially interfere with the use made and
proposed to be made of such property by the Company; and any real property and
buildings held under lease by the Company are held by it under valid, subsisting
and enforceable leases with such exceptions as are not material and do not
interfere with the use made and proposed to be made of such property and
buildings by the Company.
Section 4.23. Intellectual Property. Each of the Company and its subsidiaries
owns or possesses adequate and enforceable rights to use all patents, patent
applications, trademarks,
16
trademark applications, trade names, service marks, copyrights, copyright
applications, licenses, know-how (including trade secrets and other unpatented
and/or unpatentable proprietary or confidential information, systems or
procedures) and other similar rights and proprietary knowledge (collectively,
"Intangibles") necessary for the conduct of its business as now being conducted.
To the best of the Company's knowledge, neither the Company nor any of its
subsidiaries is infringing upon or in conflict with any right of any other
person with respect to any Intangibles. No claims have been asserted by any
person to the ownership or use of any Intangibles and the Company has no
knowledge of any basis for such claim.
Section 4.24. Internal Controls and Procedures. The Company maintains accurate
books and records and internal accounting controls which provide reasonable
assurance that (i) all transactions to which the Company is a party or by which
its properties are bound are executed with management's authorization; (ii) the
reported accountability of the Company's assets is compared with existing assets
at regular intervals; (iii) access to the Company's assets is permitted only in
accordance with management's authorization; and (iv) all transactions to which
the Company is a party or by which its properties are bound are recorded as
necessary to permit preparation of the financial statements of the Company in
accordance with U.S. generally accepted accounting principles.
Section 4.25. Payments and Contributions. Neither the Company nor any of its
directors, officers or, to its knowledge, other employees has (i) used any
Company funds for any unlawful contribution, endorsement, gift, entertainment or
other unlawful expense relating to political activity; (ii) made any direct or
indirect unlawful payment of Company funds to any foreign or domestic government
official or employee; (iii) violated or is in violation of any provision of the
Foreign Corrupt Practices Act of 1977, as amended; or (iv) made any bribe,
rebate, payoff, influence payment, kickback or other similar payment to any
person with respect to Company matters.
Section 4.26. Related Party Transactions. Except as disclosed in the SEC
Documents, neither the Company nor any of its officers, directors or
"Affiliates" (as such term is defined in Rule 12b-2 under the Exchange Act) has
borrowed any moneys from or has outstanding any indebtedness or other similar
obligations to the Company. Except as disclosed in the SEC Documents, neither
the Company nor any of its officers, directors or Affiliates (i) owns any direct
or indirect interest constituting more than a one percent equity (or similar
profit participation) interest in, or controls or is a director, officer,
partner, member or employee of, or consultant to or lender to or borrower from,
or has the right to participate in the profits of, any person or entity which is
(x) a competitor, supplier, customer, landlord, tenant, creditor or debtor of
the Company or any of its subsidiaries, (y) engaged in a business related to the
business of the Company or any of its subsidiaries, or (z) a participant in any
transaction to which the Company is a party (other than in the ordinary course
of the Company's business) or (ii) is a party to any contract, agreement,
commitment or other arrangement with the Company.
Section 4.27. No Misrepresentation. No representation or warranty of the
Company contained in this Agreement, any schedule, annex or exhibit hereto or
any agreement, instrument or certificate furnished by the Company to the
Investors pursuant to this Agreement, contains any untrue statement of a
material fact or omits to state a material fact required to be stated therein or
17
necessary to make the statements therein, not misleading.
ARTICLE V
COVENANTS OF THE INVESTOR
Section 5.1. Compliance with Law. The Investor's trading activities with
respect to shares of the Company's Common Stock will be in compliance with all
applicable state and federal securities laws, rules and regulations and rules
and regulations of the Principal Market on which the Company's Common Stock is
listed.
Section 5.2. Short Sales. As long as the Investor beneficially owns any
securities of the Company that are convertible into or exercisable for shares of
Common Stock, the Investor and its affiliates shall not engage in short sales of
the Company's Common Stock; provided, however, that the Investor may enter into
any short sale or other hedging or similar arrangement it deems appropriate with
respect to Conversion Shares commencing on the day it delivers a Conversion
Notice with respect to such Conversion Shares, so long as such arrangements do
not involve more than the number of such Conversion Shares (determined as of the
date of such Conversion Notice).
ARTICLE VI
COVENANTS OF THE COMPANY
Section 6.1. Registration Rights. The Company shall cause the Registration
Rights Agreement to remain in full force and effect and the Company shall comply
in all material respects with the terms thereof.
Section 6.2. Reservation of Common Stock. As of the date hereof, the Company
has reserved and the Company shall continue to reserve and keep available at all
times, free of preemptive rights, shares of Common Stock for the purpose of
enabling the Company to satisfy any obligation to issue the Conversion Shares
and the Warrant Shares; such amount of shares of Common Stock to be reserved
shall be calculated based upon the Market Price therefor under the terms of this
Agreement and the Warrant, respectively, assuming for purposes of this Section
6.2 a Market Price of $1.00 and shall be increased by the Board of Directors if
the Market Price declines below $1.00. The number of shares so reserved from
time to time, as theretofore increased or reduced as hereinafter provided, may
be reduced by the number of shares actually delivered hereunder and the number
of shares so reserved shall be increased or decreased to reflect potential
increases or decreases in the Common Stock that the Company may thereafter be so
obligated to issue by reason of adjustments to the Warrant.
Section 6.3. Listing of Common Stock. The Company hereby agrees to maintain the
listing of the Common Stock on a Principal Market, and as soon as practicable
(but in any event prior to the date upon which the Preferred Stock may be
converted into Common Stock) to list the Conversion Shares and the Warrant
Shares. The Company further agrees, if the Company applies to have the Common
Stock traded on any other Principal Market, it will include in such application
the Conversion Shares and the Warrant Shares, and will take such other action as
is
18
necessary or desirable in the opinion of the investor to cause the Common Stock
to be listed on such other Principal Market as promptly as possible. The Company
will take all action to continue the listing and trading of its Common Stock on
the Principal Market (including, without limitation, maintaining sufficient net
tangible assets) and will comply in all respects with the Company's reporting,
filing and other obligations under the bylaws or rules of the Principal Market
and shall provide Investor with copies of any correspondence to or from such
Principal Market which questions or threatens delisting of the Common Stock,
within one business day of the Company's receipt thereof.
Section 6.4. Exchange Act Registration. The Company will cause its Common Stock
to continue to be registered under Section 12(b) or (g) of the Exchange Act,
will use its best efforts to comply in all respects with its reporting and
filing obligations under the Exchange Act, and will not take any action or file
any document (whether or not permitted by the Exchange Act or the rules
thereunder) to terminate or suspend such registration or to terminate or suspend
its reporting and filing obligations under said Act.
Section 6.5. Legends. Upon conversion, the certificates evidencing the Common
Stock to be sold by the Investor pursuant to Section 9.1 shall be free of
legends, except as set forth in Article IX.
Section 6.6. Corporate Existence. The Company will take all steps necessary to
preserve and continue the corporate existence of the Company.
Section 6.7. Notice of Certain Events Affecting Registration. 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 by the SEC or any other federal or state governmental
authority during the period of effectiveness of the Registration Statement to be
supplied by 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 the suspension of the
qualification or exemption from qualification of any of the Registrable
Securities for sale in any jurisdiction or the initiation or threatening of any
proceeding for such purpose; (iv) the happening of any event that makes any
statement made in the Registration Statement or related prospectus or any
document incorporated or deemed to be incorporated therein 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 amendment to the Registration Statement
would be appropriate; and the Company will promptly make available to the
Investor any such supplement
19
or amendment to the related prospectus.
(a) Consolidation; Merger. The Company shall not, at any time after the
date hereof, effect any merger or consolidation of the Company with or into, or
a transfer of all or substantially all of the assets of the Company to, another
entity (a "Consolidation Event") unless the resulting successor or acquiring
entity (if not the Company) assumes by written instrument or by operation of law
the obligation to deliver to the Investor such shares of stock and/or securities
as the Investor is entitled to receive pursuant to this Agreement.
Section 6.8. Issuance of Preferred Shares and Warrant Shares. The sale of the
Preferred Stock and the issuance of the Warrant Shares pursuant to exercise of
the Warrant and the Conversion Shares upon conversion of the Preferred Stock
shall be made in accordance with the provisions and requirements of Section 4(2)
of Regulation D and any applicable state securities law. The Company shall make
all necessary SEC and "blue sky" filings required to be made by the Company in
connection with the sale of the Securities to the Investor as required by all
applicable Laws, and shall provide a copy thereof to the Investor promptly after
such filing.
Section 6.9. Limitation on Future Financing. The Company agrees that it will
not, without the consent of 85% of the shares of Preferred Stock then
outstanding, enter into any financing at a discount to Market Price until six
months after the effective date of the Registration Statement, except for shares
of Common Stock and warrants issued or issuable in connection with an equity
line of credit; provided, however, anything to the contrary appearing herein
notwithstanding, neither this Section nor any other provision hereof shall be
construed to restrict or prohibit the Company's right to restructure, amend or
modify any facility existing on the date hereof that does not materially impair
the rights of the holders of the Preferred Stock.
ARTICLE VII
SURVIVAL; INDEMNIFICATION; RELEASE
Section 7.1. Survival. The representations, warranties and covenants made by
each of the Company and Investor in this Agreement, the annexes, schedules and
exhibits hereto and in each instrument, agreement and certificate entered into
and delivered by them pursuant to this Agreement, shall survive the Closing and
the consummation of the transactions contemplated hereby. In the event of a
breach or violation of any of such representations, warranties or covenants, the
party to whom such representations, warranties or covenants have been made shall
have all rights and remedies for such breach or violation available to it under
the provisions of this Agreement or otherwise, whether at law or in equity,
irrespective of any investigation made by or on behalf of such party on or prior
to the Closing Date.
Section 7.2. Indemnity. The Company hereby agrees to indemnify and hold
harmless the Investor, its Affiliates and their respective officers, directors,
partners and members (collectively, the "Investor Indemnitees"), from and
against any and all losses, claims, damages, judgments, penalties, liabilities
and deficiencies (collectively, "Losses"), and agrees to reimburse the Investor
Indemnitees for all out-of-pocket expenses (including the fees and expenses of
legal counsel and the cost of any investigation and preparation), in each case
promptly as incurred by the Investor Indemnitees and to the extent arising out
of or in connection with:
20
1. any misrepresentation, omission of fact or breach of any of
the Company's representations or warranties contained in this
Agreement, the annexes, schedules or exhibits hereto or any instrument,
agreement or certificate entered into or delivered by the Company
pursuant to this Agreement;
2. any failure by the Company to perform in any material
respect any of its covenants, agreements, undertakings or obligations
set forth in this Agreement, the annexes, schedules or exhibits hereto
or any instrument, agreement or certificate entered into or delivered
by the Company pursuant to this Agreement; or
3. any litigation directly against the Investor by
non-affiliates of the Company relating to this Agreement and the
transactions contemplated hereby.
Investor hereby agrees to indemnify and hold harmless the
Company, its Affiliates and their respective officers, directors, partners and
members (collectively, the "Company Indemnitees"), from and against any and all
Losses, and agrees to reimburse the Company Indemnitees for all out-of-pocket
expenses (including the fees and expenses of legal counsel and the cost of any
investigation and preparation), in each case promptly as incurred by the Company
Indemnitees and to the extent arising out of or in connection with:
1. any misrepresentation, omission of fact, or breach of any
of Investor's representations or warranties contained in this Agreement, the
annexes, schedules or exhibits hereto or any instrument, agreement or
certificate entered into or delivered by Investor pursuant to this Agreement; or
2. any failure by Investor to perform in any material respect
any of its covenants, agreements, undertakings or obligations set forth in this
Agreement or any instrument, certificate or agreement entered into or delivered
by Investor pursuant to this Agreement.
Section 7.3. Notice. Promptly after receipt by either party hereto seeking
indemnification pursuant to Section 7.2 (an "Indemnified Party") of written
notice of any investigation, claim, proceeding or other action in respect of
which indemnification is being sought (each, a "Claim"), the Indemnified Party
promptly shall notify the party against whom indemnification pursuant to Section
7.2 is being sought (the "Indemnifying Party") of the commencement thereof; but
the omission to so notify the Indemnifying Party shall not relieve it from any
liability that it otherwise may have to the Indemnified Party, except to the
extent that the Indemnifying Party is materially prejudiced and forfeits
substantive rights and defenses by reason of such failure. In connection with
any Claim as to which both the Indemnifying Party and the Indemnified Party are
parties, the Indemnifying Party shall be entitled to assume the defense thereof.
Notwithstanding the assumption of the defense of any Claim by the Indemnifying
Party, the Indemnified Party shall have the right to employ separate legal
counsel and to participate in the defense of such Claim, and the Indemnifying
Party shall bear the reasonable fees, out-of-pocket costs and expenses of such
separate legal counsel to the Indemnified Party if (and only if): (x) the
Indemnifying Party shall have agreed to pay such fees, out-of-pocket costs and
expenses, (y) the
21
Indemnified Party and the Indemnifying Party reasonably shall have concluded
that representation of the Indemnified Party and the Indemnifying Party by the
same legal counsel would not be appropriate due to actual or, as reasonably
determined by legal counsel to the Indemnified Party, potentially differing
interests between such parties in the conduct of the defense of such Claim, or
if there may be legal defenses available to the Indemnified Party that are in
addition to or disparate from those available to the Indemnifying Party, or (z)
the Indemnifying Party shall have failed to employ legal counsel reasonably
satisfactory to the Indemnified Party within a reasonable period of time after
notice of the commencement of such Claim. If the Indemnified Party employs
separate legal counsel in circumstances other than as described in clauses (x),
(y) or (z) above, the fees, costs and expenses of such legal counsel shall be
borne exclusively by the Indemnified Party. Except as provided above, the
Indemnifying Party shall not, in connection with any Claim in the same
jurisdiction, be liable for the fees and expenses of more than one firm of legal
counsel for the Indemnified Party (together with appropriate local counsel). The
Indemnifying Party shall not, without the prior written consent of the
Indemnified Party (which consent shall not unreasonably be withheld), settle or
compromise any Claim or consent to the entry of any judgment that does not
include an unconditional release of the Indemnified Party from all liabilities
with respect to such Claim or judgment.
Section 7.4. Direct Claims. In the event one party hereunder should have a
claim for indemnification that does not involve a claim or demand being asserted
by a third party, the Indemnified Party promptly shall deliver notice of such
claim to the Indemnifying Party. If the Indemnified Party disputes the claim,
such dispute shall be resolved by mutual agreement of the Indemnified Party and
the Indemnifying Party.
ARTICLE VIII
DILIGENCE REVIEW; NON-DISCLOSURE OF NON-PUBLIC INFORMATION
Section 8.1. Due Diligence Review. The Company shall make available for
inspection and review by the Investor, advisors to and representatives of the
Investor (who may or may not be affiliated with the Investor and who are
reasonably acceptable to the Company), any underwriter participating in any
disposition of the Registrable Securities on behalf of the Investor pursuant to
the Registration Statement, any such registration statement or amendment or
supplement thereto or any blue sky, NASD or other filing, all SEC Documents and
other filings with the SEC, and all other publicly available corporate documents
and properties of the Company as may be reasonably necessary for the purpose of
such review, and cause the Company's officers, directors and employees to supply
all such publicly available information reasonably requested by the Investor or
any such representative, advisor or underwriter in connection with such
Registration Statement (including, without limitation, in response to all
questions and other inquiries reasonably made or submitted by any of them),
prior to and from time to time after the filing and effectiveness of the
Registration Statement for the sole purpose of enabling the Investor and such
representatives, advisors and underwriters and their respective accountants and
attorneys to
22
conduct initial and ongoing due diligence with respect to the Company and the
accuracy of the Registration Statement.
Section 8.2. Non-Disclosure of Non-Public Information
(a) The Company shall not disclose non-public information to the
Investor, advisors to or representatives of the Investor unless prior to
disclosure of such information the Company identifies such information as being
non-public information and provides the Investor, such advisors and
representatives with the opportunity to accept or refuse to accept such
non-public information for review. Other than disclosure of any comment letters
received from the SEC staff with respect to the Registration Statement, the
Company may, as a condition to disclosing any non-public information hereunder,
require the Investor's advisors and representatives to enter into a
confidentiality agreement in form reasonably satisfactory to the Company and the
Investor.
(b) Nothing herein shall require the Company to disclose non-public
information to the Investor or its advisors or representatives, and the Company
represents that it does not disseminate non-public information to any investors
who purchase stock in the Company in a public offering, to money managers or to
securities analysts, provided, however, that notwithstanding anything herein to
the contrary, the Company will, as hereinabove provided, immediately notify the
advisors and representatives of the Investor and, if any, underwriters, of any
event or the existence of any circumstance (without any obligation to disclose
the specific event or circumstance) of which it becomes aware, constituting
non-public information (whether or not requested of the Company specifically or
generally during the course of due diligence by such persons or entities),
which, if not disclosed in the prospectus included in the Registration Statement
would cause such prospectus to include a material misstatement or to omit a
material fact required to be stated therein in order to make the statements,
therein in light of the circumstances in which they were made, not misleading.
Nothing contained in this Section 8.2 shall be construed to mean that such
persons or entities other than the Investor (without the written consent of the
Investor prior to disclosure of such information) may not obtain non-public
information in the course of conducting due diligence in accordance with the
terms of this Agreement and nothing herein shall prevent any such persons or
entities from notifying the Company of their opinion that based on such due
diligence by such persons or entities, that the Registration Statement contains
an untrue statement of a material fact or omits a material fact required to be
stated in the Registration Statement or necessary to make the statements
contained therein, in light of the circumstances in which they were made, not
misleading.
ARTICLE IX
LEGENDS
Section 9.1. Legends. Unless otherwise provided below, each certificate
representing Registrable Securities will bear the following legend or equivalent
(the "Legend"):
THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE
U.S. SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"),
23
OR ANY OTHER APPLICABLE SECURITIES LAWS AND HAVE BEEN ISSUED IN RELIANCE UPON AN
EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND SUCH
OTHER SECURITIES LAWS. NEITHER THIS SECURITY NOR ANY INTEREST OR PARTICIPATION
HEREIN MAY BE REOFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED,
HYPOTHECATED OR OTHERWISE DISPOSED OF, EXCEPT PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO A TRANSACTION
THAT IS EXEMPT FROM, OR NOT SUBJECT TO, SUCH REGISTRATION.
Upon the execution and delivery hereof, the Company is issuing 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 in substantially the form of Exhibit E
hereto. Such instructions shall be irrevocable by the Company from and after the
date hereof or from and after the issuance thereof to any such substitute or
replacement transfer agent, as the case may be, except as otherwise expressly
provided in the Registration Rights Agreement. It is the intent and purpose of
such instructions, as provided therein, to require the transfer agent for the
Common Stock from time to time upon transfer of Registrable Securities by the
Investor to issue certificates evidencing such Registrable Securities free of
the Legend during the following periods and under the following circumstances
and without consultation by the transfer agent with the Company or its counsel
and without the need for any further advice or instruction or documentation to
the transfer agent by or from the Company or its counsel or the Investor:
(a) at any time after the Effective Date, upon surrender of one or more
certificates evidencing Common Stock that bear the Legend, to the extent
accompanied by a notice requesting the issuance of new certificates free of the
Legend to replace those surrendered; provided that (i) the Registration
Statement shall then be effective; (ii) the Investor confirms to the transfer
agent that it has sold, pledged or otherwise transferred or agreed to sell,
pledge or otherwise transfer such Common Stock in a bona fide transaction to a
third party that is not an affiliate of the Company; and (iii) the Investor
confirms to the transfer agent that the Investor has complied with the
prospectus delivery requirement.
(b) at any time upon any surrender of one or more certificates
evidencing Registrable Securities that bear the Legend, to the extent
accompanied by a notice requesting the issuance of new certificates free of the
Legend to replace those surrendered and containing representations that (i) the
Investor is permitted to dispose of such Registrable Securities without
limitation as to amount or manner of sale pursuant to Rule 144(k) under the
Securities Act or (ii) the Investor has sold, pledged or otherwise transferred
or agreed to sell, pledge or otherwise transfer such Registrable Securities in a
manner other than pursuant to an effective registration statement, to a
transferee who will upon such transfer be entitled to freely tradeable
securities. Any of the notices referred to above in this Section 9.1 may be sent
by facsimile to the Company's transfer agent.
Section 9.2. No Other Legend or Stock Transfer Restrictions. No legend other
than the one specified in Section 9.1 has been or shall be placed on the share
certificates representing the
24
Common Stock 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 other than as expressly set forth
in this Article IX.
Section 9.3. Investor's Compliance. Nothing in this Article shall affect in any
way the Investor's obligations under any agreement to comply with all applicable
securities laws upon resale of the Common Stock.
ARTICLE X
CHOICE OF LAW
Section 10.1. Governing Law. This Agreement shall be governed by and construed
in accordance with the laws of the State of New York without regard to the
conflicts of law principles of such state. Each party hereto hereby submits to
the exclusive jurisdiction of the United States District Court for the Southern
District of New York and of any New York State Court sitting in New York City
for purposes of all legal proceedings arising out of or relating to this
Agreement or the transactions contemplated hereby. Each party hereto irrevocably
waives, to the fullest extent permitted by law, any objection which it may now
or hereafter have to the laying of the venue of any such proceeding brought in
such a court has been brought in an inconvenient forum. Each party hereto hereby
irrevocably waives 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.
ARTICLE XI
ASSIGNMENT; ENTIRE AGREEMENT
Section 11.1. Assignment. Neither this Agreement nor any rights of the Investor
or the Company hereunder may be assigned by either party to any other person.
Notwithstanding the foregoing, (a) the provisions of this Agreement shall inure
to the benefit of, and be enforceable by, any transferee of any of the Preferred
Stock purchased or acquired by the Investor hereunder with respect to the
Preferred Stock held by such person, and (b) upon the prior written consent of
the Company, which consent shall not unreasonably be withheld or delayed, the
Investor's interest in this Agreement may be assigned at any time, in whole or
in part, to any other person or entity (including any affiliate of the Investor)
who agrees to make the representations and warranties contained in Article III
and who agrees to be bound by the covenants of Article V.
ARTICLE XII
NOTICES
Section 12.1. Notices. All notices, demands, requests, consents, approvals, and
other communications required or permitted hereunder shall be in writing and,
unless otherwise specified herein, shall be (i) 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.
25
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: Integrated Surgical Systems, Inc.
0000 Xxxxxxxx Xxxx Xxxxx
Xxxxx, XX 00000-0000
Attention: Xxxxxx X. Xxxxxxx
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
with a copy to:
(shall not constitute notice) Snow Xxxxxx Xxxxxx P.C.
000 Xxxxx Xxxxxx
Xxx Xxxx, XX 00000
Attention: Xxxx Xxxxxx
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
if to the Investor: As set forth on the signature page hereto.
Either party hereto may from time to time change its address or facsimile number
for notices under this Section 12.1 by giving at least ten (10) days' prior
written notice of such changed address or facsimile number to the other party
hereto.
ARTICLE XIII
TERMINATION
Section 13.1. Termination by Mutual Written Consent. This Agreement may be
terminated and the transactions contemplated hereby may be abandoned, for any
reason and at any time prior to the Closing Date, by the mutual written consent
of the Company and the Investor.
Section 13.2. Termination by the Company or the Investors. This Agreement may
be terminated and the transactions contemplated hereby may be abandoned by
action of the Company or the Investors if (i) the Closing shall not have
occurred at or prior to 5:00 p.m., New York City time, on May 31, 2000;
provided, however, that the right to terminate this Agreement pursuant to this
Section 13.2 shall not be available to any party whose failure to fulfill any of
its obligations under this Agreement has been the cause of or resulted in the
failure of the Closing to occur at or before such time and date or (ii) any
court or public or governmental authority shall have issued an order,
26
ruling, judgment or writ, or there shall be in effect any law, restraining,
enjoining or otherwise prohibiting the consummation of any of the transactions
contemplated by this Agreement.
Section 13.3. Termination by the Investors. This Agreement may be terminated
and the transactions contemplated hereby may be abandoned by the Investors at
any time prior to the Closing Date, if (i) the Company shall have failed to
comply in any material respect with any of its covenants or agreements contained
in this Agreement, (ii) there shall have been a breach by the Company with
respect to any representation or warranty made by it in this Agreement or (iii)
there shall be in existence any condition, having or reasonably and forseeably
likely to have a Material Adverse Effect.
Section 13.4. Termination by the Company. This Agreement may be terminated and
the transactions contemplated hereby may be abandoned by the Company at any time
prior to the Closing Date, if (i) the Investors shall have failed to comply in
any material respect with any of their respective covenants or agreements
contained in this Agreement or (ii) there shall have been a breach by the
Investors with respect to any representation or warranty made by them in this
Agreement.
Section 13.5. Fees and Expenses of Termination. If this Agreement is terminated
for any reason, the Company shall reimburse the Investors for all of their
out-of-pocket costs and expenses incurred in connection with the transactions
contemplated by this Agreement (including, but not limited to, the fees and
disbursements of one law firm that has acted as legal counsel to the Investors
as set forth in Section 14.7).
ARTICLE XIV
MISCELLANEOUS
Section 14.1. Counterparts/Facsimile/Amendments. This Agreement may be executed
in multiple counterparts, each of which may be executed by less than all of the
parties and shall be deemed to be an original instrument which shall be
enforceable against the parties actually executing such counterparts and all of
which together shall constitute one and the same instrument. Except as otherwise
stated herein, in lieu of the original documents, a facsimile transmission or
copy of the original documents shall be as effective and enforceable as the
original. This Agreement may be amended only by a writing executed by all
parties.
Section 14.2. Entire Agreement. This Agreement, the Exhibits hereto, which
include, but are not limited to the Warrant, and the Registration Rights
Agreement, set forth the entire agreement and understanding of the parties
relating to the subject matter hereof and supersedes all prior and
contemporaneous agreements, negotiations and understandings between the parties,
both oral and written relating to the subject matter hereof. The terms and
conditions of all Exhibits to this Agreement are incorporated herein by this
reference and shall constitute part of this Agreement as is fully set forth
herein.
27
Section 14.3. Survival; Severability. The representations, warranties, covenants
and agreements of the parties hereto shall survive each Closing hereunder. In
the event that any provision of this Agreement becomes or is declared by a court
of competent jurisdiction to be illegal, unenforceable or void, this Agreement
shall continue in full force and effect without said provision; provided that
such severability shall be ineffective if it materially changes the economic
benefit of this Agreement to any party.
Section 14.4. Title and Subtitles. The titles and subtitles used in this
Agreement are used for convenience only and are not to be considered in
construing or interpreting this Agreement.
Section 14.5. Reporting Entity for the Common Stock. The reporting entity relied
upon for the determination of the trading price or trading volume of the Common
Stock on any given Trading Day for the purposes of this Agreement shall be
Bloomberg, L.P. or any successor thereto. The written mutual consent of the
Investor and the Company shall be required to employ any other reporting entity.
Section 14.6. Replacement of Certificates. Upon (i) receipt of evidence
reasonably satisfactory to the Company of the loss, theft, destruction or
mutilation of a certificate representing the Preferred Stock or any Conversion
Shares or Warrant or any Warrant Shares and (ii) in the case of any such loss,
theft or destruction of such certificate, upon delivery of an indemnity
agreement or security reasonably satisfactory in form 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 of like tenor.
Section 14.7. Fees and Expenses. Each of the Company and the Investor agrees to
pay its own expenses incident to the performance of its obligations hereunder,
except that the Company shall pay the fees, expenses and disbursements of
Investor's counsel in an amount not to exceed $3,000.
Section 14.8. Brokerage or Financial Advisory Fees. Each of the parties hereto
represents that it has had no dealings in connection with this transaction with
any broker or financial advisor who will demand payment of any fee or commission
from the other party, except for Trinity Capital Advisors, Inc., which has
furnished financial advisory services to the Company and whose fee shall be paid
by the Company. The Company on the one hand, and the Investor, on the other
hand, agree to indemnify the other against and hold the other harmless from any
and all liabilities to any person claiming brokerage commissions or finder's
fees on account of services purported to have been rendered on behalf of the
indemnifying party in connection with this Agreement or the transactions
contemplated hereby.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed by the undersigned, thereunto duly authorized, as of
the date first set forth above.
28
INTEGRATED SURGICAL SYSTEMS, INC.
By: ________________________
Xxxxx Xxxxxxxx
Chief Financial Officer
Jurisdiction of Incorporation
of Investor:___________________ INVESTOR
Address: ___________________ Name: ________________________
___________________ By: ________________________
___________________ Title: ________________________
___________________ Authorized Signatory
Telephone: ___________________
Telecopier: ___________________
Amount of investment: $__________
29
EXHIBIT A
CERTIFICATE OF DESIGNATIONS,
PREFERENCES AND RIGHTS OF
SERIES G CONVERTIBLE PREFERRED STOCK OF
INTEGRATED SURGICAL SYSTEMS, INC.
PURSUANT TO SECTION 151 OF THE DELAWARE
GENERAL CORPORATION LAW
Integrated Surgical Systems, Inc., a corporation organized and
existing under and by virtue of the General Corporation Law of the State of
Delaware (hereinafter the "Corporation"), in accordance with the provisions of
Section 151(g) thereof, DOES HEREBY CERTIFY that by written consent in lieu of a
meeting of the Board of Directors of the Corporation dated as of May 22, 2000:
FIRST: The following resolution was duly adopted by the Board of
Directors of the Corporation:
"RESOLVED: That pursuant to the authority vested in the Board of
Directors of the Corporation by Article 4 of the Corporation's restated
certificate of incorporation, as amended (the "Certificate of Incorporation"), a
series of Preferred Stock of the Corporation be, and it hereby is, created out
of the authorized but unissued shares of the capital stock of the Corporation,
such series to be designated Series G Convertible Preferred Stock (the "Series G
Convertible Preferred Stock"), to consist of 1,800 shares, par value $0.01 per
share, of which the preferences and relative and other rights, and the
qualifications, limitations or restrictions thereof, shall be as set forth in
the Certificate of Designations annexed hereto:
1. NUMBER OF SHARES OF SERIES G CONVERTIBLE PREFERRED STOCK. Of the
987,730 shares of authorized but unissued Preferred Stock, $0.01 par value
("Preferred Stock") of the Corporation, one thousand eight hundred (1,800)
shares shall be designated and known as Series G Convertible Preferred Stock,
par value $0.01 per share ("Series G Convertible Preferred Stock").
2. VOTING.
(a) Unless required by law, no holder of any shares of Series G
Convertible Preferred Stock shall be entitled to vote at any meeting of
stockholders of the Corporation (or any written actions of stockholders in lieu
of meetings) with respect to any matters presented to the stockholders of the
Corporation for their action or consideration. Notwithstanding the foregoing,
the Corporation shall provide each holder of record of Series G Convertible
Preferred Stock with timely notice of every meeting of stockholders of the
Corporation and shall provide
30
each holder with copies of all proxy materials distributed in connection
therewith.
(b) So long as shares of Series G Convertible Preferred Stock are
outstanding, the Corporation shall not, without first obtaining the approval (by
vote or written consent, as provided by the Delaware General Corporation Law) of
the holders of at least 85% of the then outstanding shares of Series G
Convertible Preferred Stock:
(i) alter or change the rights, preferences or privileges of the
Series G Convertible Preferred Stock;
(ii) create any new class or series of capital stock ranking on a
parity with ("Pari Passu Securities") or a preference over the Series G
Convertible Preferred Stock as to distribution of assets upon liquidation,
dissolution or winding up of the Corporation ("Senior Securities") or alter or
change the rights, preferences or privileges of any Senior Securities so as to
affect adversely the Series G Convertible Preferred Stock;
(iii) increase the authorized number of shares of Series G
Convertible Preferred Stock; or
(iv) do any act or thing not authorized or contemplated by this
Certificate of Designations which would result in taxation of the holders of
shares of the Series G Convertible Preferred Stock under Section 305 of the
Internal Revenue Code of 1986, as amended (or any comparable provision of the
Internal Revenue Code as hereafter from time to time amended).
In the event holders of at least 85% of the then outstanding shares of
Series G Convertible Preferred Stock agree to allow the Corporation to alter or
change the rights, preferences or privileges of the shares of Series G
Convertible Preferred Stock, pursuant to subsection (b) above, so as to affect
the Series G Convertible Preferred Stock, then the Corporation will deliver
notice of such approved change to the holders of the Series G Convertible
Preferred Stock that did not agree to such alteration or change (the "Dissenting
Holders") and Dissenting Holders shall have the right for a period of thirty
(30) days to convert any and all shares of then held Series G Convertible
Preferred Stock pursuant to the terms of this Certificate of Designations as in
effect prior to such alteration or change, or else to continue to hold their
shares of Series G Convertible Preferred Stock.
3. DIVIDENDS
No holder of any shares of Series G Convertible Preferred Stock shall
be entitled to receive any dividends.
4. LIQUIDATION.
(a) If the Corporation shall commence a voluntary case under the
Federal bankruptcy laws or any other applicable Federal or state bankruptcy,
insolvency or similar law, or
31
consent to the entry of an order for relief in an involuntary case under any law
or to the appointment of a receiver, liquidator, assignee, custodian, trustee,
sequestrator (or other similar official) of the Corporation or of any
substantial part of its property, or make an assignment for the benefit of its
creditors, or admit in writing its inability to pay its debts generally as they
become due, or if a decree or order for relief in respect of the Corporation
shall be entered by a court having jurisdiction in the premises in an
involuntary case under the Federal bankruptcy laws or any other applicable
Federal or state bankruptcy, insolvency or similar law resulting in the
appointment of a receiver, liquidator, assignee, custodian, trustee,
sequestrator (or other similar official) of the Corporation or of any
substantial part of its property, or ordering the winding up or liquidation of
its affairs, and any such decree or order shall be unstayed and in effect for a
period of thirty (30) consecutive days and, on account of any such event, the
Corporation shall liquidate, dissolve or wind up, or if the Corporation shall
otherwise liquidate, dissolve or wind up (each such event being considered a
"Liquidating Event"), no distribution shall be made to the holders of any shares
of capital stock of the Corporation upon liquidation, dissolution or winding up
unless prior thereto, the holders of shares of Series G Convertible Preferred
Stock shall have received the Liquidation Preference (as defined in Paragraph
4(c)) with respect to each share. If upon the occurrence of a Liquidation Event,
the assets and funds available for distribution among the holders of the Series
G Convertible Preferred Stock and holders of Pari Passu Securities shall be
insufficient to permit the payment to such holders of the preferential amounts
payable thereon, then the entire assets and funds of the Corporation legally
available for distribution to the Series G Convertible Preferred Stock and the
Pari Passu Securities shall be distributed ratably among such shares in
proportion to the ratio that that Liquidation Preference payable on each such
share bears to the aggregate Liquidation Preference payable on all such shares.
(b) At the option of each holder of the Series G Convertible Preferred
Stock, the sale, conveyance of disposition of all or substantially all of the
assets of the Corporation, the effectuation by the Corporation of a transaction
or series or related transactions in which more than 50% of the voting power of
the Corporation is disposed of, or the consolidation, merger or other business
combination of the Corporation with or into any other Person or Persons when the
Corporation is not the survivor shall be deemed to be a liquidation, dissolution
or winding up of the Corporation pursuant to which the Corporation shall be
required to distribute, upon consummation of and as a condition to such
transaction an amount equal to the Liquidation Preference with respect to each
outstanding share of Series G Convertible Preferred Stock held by such Holder in
accordance with and subject to the terms of this Article 4.
(c) The Liquidation Preference shall be the Stated Value of $1,000 per
share of Series G Convertible Preferred Stock.
(d) The Series G Convertible Preferred Stock shall rank on a parity
with the Corporation's Series F Convertible Preferred Stock as to the
distribution of the assets of the Corporation upon liquidation, dissolution or
winding up of the Corporation.
5. OPTIONAL CONVERSION. The holders of shares of Series G Convertible
Preferred
32
Stock shall have the following conversion rights:
(a) RIGHT TO CONVERT; CONVERSION PRICE. Subject to the terms,
conditions, and restrictions of this Paragraph 5, commencing on the earlier of
the Effective Date (as hereinafter defined) or 90 days after the Original
Issuance Date (as hereinafter defined), the holder of any shares of Series G
Convertible Preferred Stock shall have the right to convert each such share of
Series G Convertible Preferred Stock (except that upon any liquidation of the
Corporation, the right of conversion shall terminate at the close of business on
the business day fixed for payment of the amount distributable on the Series G
Convertible Preferred Stock) into a number of shares of Common Stock equal to
the Stated Value of such share or shares of Series G Convertible Preferred Stock
divided by (i) the lowest price at which a trade of the Common Stock is
executed, as reported by Bloomberg L.P., on the principal market for the
Corporation's Common Stock (the "Principal Market") during the period of five
Trading Days ending with the last Trading Day prior to the date of conversion
(the "Market Price"), after (ii) discounting the Market Price by 15% to
determine the conversion price (the "Conversion Price"). To illustrate, if the
Market Price as of the Conversion Date is $1.35 and 100 shares of Series G
Convertible Preferred Stock are being converted, the Stated Value for which
would be $100,000, then the Conversion Price shall be $1.15 per share of Common
Stock ($1.35 x .85), whereupon the Stated Value of $100,000 of Series G
Convertible Preferred Stock would entitle the holder thereof to convert the 100
shares of Series G Convertible Preferred Stock into 86,957 shares of Common
Stock ($100,000 divided by 1.15 equals 86,957). However, in no event shall the
Conversion Price be greater than 130% of the lowest price at which a trade of
the Common Stock is executed, as reported by Bloomberg L.P. on the Principal
Market during the period of five Trading Days ending with the last Trading Day
prior to the Original Issuance Date (the "Maximum Conversion Price").The right
of each holder to convert shares of Series G Convertible Preferred Stock into
shares of Common Stock is subject to the limitations set forth in Paragraph 5(b)
below, and for the purpose of complying with the limitation set forth in
Paragraph 5(b)(ii), shall be prorated among the original purchasers of the
shares of Series G Convertible Preferred Stock (the "Initial Holders') and their
subsequent transferees, if any, based upon the number of shares of Series G
Convertible Preferred Stock purchased by the Initial Purchasers. In addition,
instead of issuing shares of Common Stock upon conversion, upon prior written
notice to the holder, the Corporation may elect to pay the holder an amount in
cash equal to (i) the closing sale price on the Principal Market on the day
prior to the date of conversion (the "Conversion Date") multiplied by (ii) the
number of shares of Common Stock which would otherwise be issuable to the holder
upon such conversion, or any combination of cash and shares of Common Stock. If
notice of the Corporation's election to pay the holder in cash is not received
by the holder prior to the receipt by the Corporation of a Conversion Notice,
the Corporation shall pay the holder in shares of Common Stock. As used herein,
"Effective Date" means the date a registration statement for the resale of the
shares of Common Stock that may be acquired upon conversion of the Series G
Convertible Preferred Stock is declared effective by the Securities and Exchange
Commission; and "Original Issuance Date" means the date upon which shares of
Series G Convertible Preferred Stock are initially issued.
(b) NUMERICAL LIMITATIONS. (i) No shares of Series G Convertible
Preferred
33
Stock may be converted into Common Stock, to the extent that, after giving
effect to the conversion and issuance of the Common Stock to be issued pursuant
to the applicable Conversion Notice (as defined in Paragraph 5(c) below), the
total number of shares of Common Stock deemed beneficially owned by the holder
requesting conversion (other than by virtue of the ownership of unconverted
shares of Series G Convertible Preferred Stock or the ownership of other
securities that have limitations on a holder's rights to exchange, convert or
exercise similar to those limitations set forth herein), together with all
shares of Common Stock deemed beneficially owned by such holder's Affiliates (as
defined in Rule 405 of the Securities Act of 1933, as amended) that would be
aggregated for purposes of determining whether a group under Section 13(d) of
the Securities Exchange Act of 1934, as amended, and the rules promulgated
thereunder, would exceed 5% of the total issued and outstanding shares of Common
Stock. If any court of competent jurisdiction shall determine that the foregoing
limitation is ineffective to prevent a holder from being deemed the beneficial
owner of more than 5% of the then outstanding shares of Common Stock, then the
Corporation shall redeem so many of such holder's shares of Series G Convertible
Preferred Stock pursuant to Paragraph 7(a) hereof as are necessary to cause such
holder to be deemed the beneficial owner of not more than 5% of the then
outstanding shares of Common Stock.
(ii) Unless the Corporation shall have obtained the approval of its
voting stockholders to such issuance, if required in accordance with the rules
of the Principal Market, the Corporation shall not issue shares of Common Stock
upon conversion of any shares of Series G Convertible Preferred Stock if such
issuance of Common Stock, when added to the number of shares of Common Stock
previously issued by the Corporation upon conversion of shares of the Series G
Convertible Preferred Stock, together with shares of Common Stock issued and
issuable upon exercise of warrants issued in connection with the sale of shares
of Series G Convertible Preferred Stock, would result in the issuance of more
than 19.9% of the number of shares of Common Stock which were issued and
outstanding on the Original Issuance Date. To the extent the number of shares of
Common Stock issuable upon conversion would but for the limitation set forth in
this Paragraph 5(b)(ii) exceed such limit, the Corporation shall redeem promptly
(but not later than the fifth Trading Day after receipt of the applicable
Conversion Notice) the shares of Series G Convertible Preferred Stock that may
not be converted into shares of Common Stock as a result of such limitation for
an amount in cash equal to the greater of (i) $1,500 per share of Series G
Convertible Preferred Stock and (ii) an amount equal to the product of the
closing sale price of a share of Common Stock on the Trading Date immediately
preceding the date of the Conversion Notice and the number of shares of Common
Stock into which such shares of Series G Convertible Preferred Stock could have
been converted but for such limitation on the date of the Conversion Notice, and
the holders of the Series G Convertible Preferred Stock shall be creditors of
the Corporation with respect to that amount.
(c) NOTICE OF CONVERSION. The right of conversion shall be exercised by the
holder thereof by giving written notice (the "Conversion Notice") to the
Corporation, by facsimile or by registered mail or overnight delivery service,
as designated by the Corporation
34
from time to time, that the holder elects to convert a specified number of
shares of Series G Convertible Preferred Stock representing a specified Stated
Value thereof into Common Stock and, if such conversion will result in the
conversion of all of such holder's shares of Series G Convertible Preferred
Stock, by surrender of a certificate or certificates for the shares so to be
converted to the Corporation at its principal office (or such other office or
agency of the Corporation as the Corporation may designate by notice in writing
to the holders of the Series G Convertible Preferred Stock) at any time during
its usual business hours on the date set forth in the Conversion Notice,
together with a statement of the name or names (with address) in which the
certificate or certificates for shares of Common Stock shall be issued. The
Conversion Notice shall include therein the Stated Value of shares of Series G
Convertible Preferred Stock to be converted, and a calculation (i) of the Market
Price, (ii) the Conversion Price, and (iii) the number of shares of Common Stock
to be issued in connection with such conversion.
(d) ISSUANCE OF CERTIFICATES; TIME CONVERSION EFFECTED. (i) Promptly, but
in no event more than three business days, after the receipt of the Conversion
Notice referred to in Subparagraph 5(c) (and surrender of the certificate or
certificates for the share or shares of Series G Convertible Preferred Stock to
be converted within three business days after the receipt of the Conversion
Notice, if requested), the Corporation shall issue and deliver, or cause to be
issued and delivered, to the holder, registered in such name or names as such
holder may direct, a certificate or certificates for the number of whole shares
of Common Stock into which such shares of Series G Convertible Preferred Stock
are converted. To the extent permitted by law, such conversion shall be deemed
to have been effected on the date on which such Conversion Notice shall have
been received by the Corporation and at the time specified stated in such
Conversion Notice, which must be during the calendar day of such notice, and at
such time the rights of the holder of such share or shares of Series G
Convertible Preferred Stock shall cease, and the person or persons in whose name
or names any certificate or certificates for shares of Common Stock shall be
issuable upon such conversion shall be deemed to have become the holder or
holders of record of the shares represented thereby. Issuance of shares of
Common Stock issuable upon conversion which are requested to be registered in a
name other than that of the registered holder shall be subject to compliance
with all applicable federal and state securities laws.
(ii) The Corporation understands that a delay in the issuance of the
shares of Common Stock beyond three business days could result in economic loss
to the holder. As compensation to the holder for such loss, the Corporation
agrees to pay late payments to the holder for late issuance of shares of Common
Stock upon conversion in accordance with the following schedule (where "No.
Business Days Late" is defined as the number of business days beyond three (3)
business days from the date of receipt of the Conversion Notice):
35
No. Business Days Xxxx Xxxx Payment For
Each
$5,000 of Liquidation
Preference
Amount Being Converted
1 $100
2 $200
3 $300
4 $400
5 $500
6 $600
7 $700
8 $800
9 $900
10 $1,000
>10 $1,000 + $200 for each Business Day
Late beyond 10 days
The Corporation shall pay any payments incurred under this Paragraph in
immediately available funds upon demand. Nothing herein shall limit holder's
right to pursue injunctive relief and/or actual damages for the Corporation's
failure to issue and deliver Common Stock to the holder. Furthermore, in
addition to any other remedies which may be available to the holder, in the
event that the Corporation fails for any reason to effect delivery of such
shares of Common Stock within five business days the date of receipt of the
Conversion Notice, the holder will be entitled to revoke the relevant Conversion
Notice by delivering a notice to such effect to the Corporation whereupon the
Corporation and the holder shall each be restored to their respective positions
immediately prior to delivery of such Conversion Notice.
(iii) If, at any time (a) the Corporation challenges, disputes or
denies the right of the holder to effect the conversion of the Series G
Convertible Preferred Stock into Common Shares or otherwise dishonors or rejects
any Conversion Notice delivered in accordance with this Paragraph 5 or (b) any
third party who is not and has never been an Affiliate of the holder commences
any lawsuit or proceeding or otherwise asserts any claim before any court or
public or governmental authority which seeks to challenge, deny, enjoin, limit,
modify, delay or dispute the right of the holder hereof to effect the conversion
of the Series G Convertible Preferred Stock into Common Stock, then the holder
shall have the right, by written notice to the Corporation, to require the
Corporation to promptly (but not later than the fifth Trading Day after receipt
of such notice) redeem the Series G Convertible Preferred Stock for cash at a
redemption price equal to one hundred thirty-five percent (135%) of the Stated
Value thereof (the "Mandatory Purchase Amount"). Under any of the circumstances
set forth above, the Corporation shall be responsible for the payment of all
costs and expenses of the holder, including reasonable legal fees and expenses,
as and when incurred in disputing any such action or pursuing its rights
hereunder (in addition to any other rights of the holder).
(iv) The holder shall be entitled to exercise its conversion privilege
notwithstanding the commencement of any case under 11 U.S.C. Section 101 et seq.
(the "Bankruptcy Code"). In the event the Corporation is a debtor under the
Bankruptcy Code, the Corporation
36
hereby waives to the fullest extent permitted any rights to relief it may have
under 11 U.S.C. Section 362 in respect of the holder's conversion privilege. The
Corporation hereby waives to the fullest extent permitted any rights to relief
it may have under 11 U.S.C. Section 362 in respect of the conversion of the
Series G Convertible Preferred Stock. The Corporation agrees, without cost or
expense to the holder, to take or consent to any and all action necessary to
effectuate relief under 11 U.S.C. Section 362.
(e) FRACTIONAL SHARES. No fractional shares shall be
issued upon conversion of Series G Convertible Preferred Stock into Common
Stock. All fractional shares shall be rounded up to the nearest whole share.
(f) REORGANIZATION OR RECLASSIFICATION. If any capital
reorganization or reclassification of the capital stock of the Corporation shall
be effected in such a way that holders of Common Stock shall be entitled to
receive stock, securities or assets with respect to or in exchange for Common
Stock, or, in the case of any consolidation, merger or mandatory share exchange
of the Corporation into any other company, then, as a condition of such
reorganization, reclassification or exchange, lawful and adequate provisions
shall be made whereby each holder of a share or shares of Series G Convertible
Preferred Stock shall thereupon have the right to receive, upon the basis and
upon the terms and conditions specified herein and in lieu of the shares of
Common Stock immediately theretofore receivable upon the conversion of such
share or shares of Series G Convertible Preferred Stock, such shares of stock,
securities or assets as may be issued or payable with respect to or in exchange
for a number of outstanding shares of such Common Stock equal to the number of
shares of such Common Stock immediately theretofore receivable upon such
conversion had such reorganization, reclassification or exchange not taken
place, and in any such case appropriate provisions shall be made with respect to
the rights and interests of such holder to the end that the provisions hereof
(including without limitation provisions for adjustments of the conversion
rights) shall thereafter be applicable, as nearly as may be, in relation to any
shares of stock, securities or assets thereafter deliverable upon the exercise
of such conversion rights.
(g) ADJUSTMENTS FOR SPLITS, COMBINATIONS, ETC. The
Conversion Price and the number of shares of Common Stock into which the Series
G Convertible Preferred Stock shall be convertible shall be adjusted for stock
splits, combinations, or other similar events. Additionally, an adjustment will
be made in the case of an exchange of Common Stock, consolidation or merger of
the Corporation with or into another corporation or sale of all or substantially
all of the assets of the Corporation in order to enable the holder of Series G
Convertible Preferred Stock to acquire the kind and the number of shares of
stock or other securities or property receivable in such event by a holder of
the number of shares of Common Stock that might otherwise have been issued upon
the conversion of the Series G Convertible Preferred Stock. No adjustment to the
Conversion Price will be made for dividends (other than stock dividends), if
any, paid on the Common Stock or for securities issued pursuant to exercise for
fair value of options, warrants, or restricted stock.
(h) ADJUSTMENTS TO CONVERSION RATIO. For so long as any
shares of Series G Convertible Preferred Stock are outstanding, but no later
than one year from the effective date of a registration statement registering
for resale by the holders the shares of Common Stock issuable upon conversion of
the Series G Convertible Preferred Stock, if the Corporation (i) issues and
sells pursuant to an exemption from registration under the Securities Act (A)
Common Stock at a
37
purchase price on the date of issuance thereof that is lower than the Conversion
Price at such date (other than shares of Common Stock issued in connection with
an equity line of credit or upon exercise of warrants issued in connection with
an equity line of credit, shares of Common Stock issued upon conversion of the
Corporation's convertible preferred stock outstanding on the Original Issuance
Date, or shares of Common Stock issued in connection with the exercise of any
warrants or options outstanding on the Original Issuance Date or pursuant to the
Corporation's 1998 Employee Stock Purchase Plan), (B) warrants or options with
an exercise price on the date of issuance of the warrants or options that is
lower than the Conversion Price on such date (other than options and stock
awards granted pursuant to the Corporation's 1995 and 1998 Stock Option Plans or
warrants issued in connection with an equity line of credit), or (C)
convertible, exchangeable or exercisable securities with a right to convert,
exchange or exercise at a price or rate lower than the Conversion Price on the
date of issuance or conversion, as applicable, of such convertible, exchangeable
or exercisable securities (other than the options and stock awards granted
pursuant to the Corporation's 1995 and 1998 Stock Option Plans); and (ii) grants
the right to the purchaser(s) thereof to demand that the Corporation register
under the Securities Act such Common Stock issued or the Common Stock for which
such warrants or options may be exercised or such convertible, exchangeable or
exercisable securities may be converted, exercised or exchanged, then the
Conversion Price shall be reduced to a rate equal to the lowest of any lower
rates since the most recently received Conversion Notice, and such Adjusted
Conversion Price shall apply to any future Conversion Notices received by the
Corporation, unless the unadjusted Conversion Price would be lower than the
Adjusted Conversion Price. The Adjusted Conversion Price as it may exist from
time to time shall not apply retroactively to any shares of Series G Convertible
Preferred Stock converted prior to the implementation of such Adjusted
Conversion Price. Notwithstanding the foregoing, the Corporation may issue up to
an aggregate total of Three Hundred Thousand (300,000) shares of Common Stock
(subject to adjustment only for stock splits, stock dividends and reverse stock
splits) at any price determined by the Board of Directors, after the Original
Issuance Date, without causing an Adjusted Conversion Price.
6. MANDATORY CONVERSION.
(a) MANDATORY CONVERSION DATE. If on or after the third
anniversary of the Original Issuance Date (such date as selected by the
Corporation being the "Mandatory Conversion Date"), there remain issued and
outstanding any shares of Series G Convertible Preferred Stock, then the
Corporation shall be entitled to require all (but not less than all) holders of
shares of Series G Convertible Preferred Stock then outstanding to convert their
shares of Series G Convertible Preferred Stock into shares of Common Stock or,
at the option of the Corporation, to buy out all such holders in cash, at the
price set forth in Paragraph 5(a). The Corporation shall provide written notice
(the "Mandatory Conversion Notice") to the holders of shares of Series G
Convertible Preferred Stock of such mandatory conversion or such mandatory
buy-out. The Mandatory Conversion Notice shall include (i) the Stated Value of
the shares of Series G Convertible Preferred Stock to be converted or bought
out, (ii) the Conversion Price at the Mandatory Conversion Date, and (iii) the
number of shares of the Corporation's Common Stock to be issued (or the amount
of cash to be paid in the event of a buy-out) upon such mandatory conversion or
such mandatory buy-out at the then applicable Conversion Price. Notwithstanding
the foregoing, in no event shall the Corporation convert that portion of the
Series G Convertible Preferred Stock to the extent that the issuance of Common
Stock upon the conversion of such Series G Convertible Preferred Stock, when
combined with shares of
38
Common Stock received upon other conversions of Series G Convertible Preferred
Stock and exercise of the warrants issued in connection with the purchase of
Series G Convertible Preferred Stock by such holder and any other holders of
Series G Convertible Preferred Stock, would exceed 19.99% of the number of
shares of Common Stock outstanding on the Original Issuance Date, or as to any
individual holder, make such holder the beneficial owner of more than 5% of the
Corporation's then outstanding Common Stock.
(b) SURRENDER OF CERTIFICATES. On or before the Mandatory
Conversion Date, each holder of shares of Series G Convertible Preferred Stock
shall surrender his or its certificate or certificates for all such shares to
the Corporation at the place designated in such Mandatory Conversion Notice (or
an affidavit of lost certificate in form and content reasonably satisfactory to
the Corporation), and shall thereafter receive certificates for the number of
shares of Common Stock to which such holder is entitled or, in the event of a
buy-out by the Corporation, the amount of cash to which such holder is entitled
within three business days. On the Mandatory Conversion Date, all rights with
respect to the Series G Convertible Preferred Stock so converted will terminate.
All certificates evidencing shares of Series G Convertible Preferred Stock that
are required to be surrendered for conversion in accordance with the provisions
hereof, from and after the Mandatory Conversion Date, shall be deemed to have
been retired and canceled, notwithstanding the failure of the holder or holders
thereof to surrender such certificates on or prior to such date. The Corporation
may thereafter take such appropriate action as may be necessary to reduce the
authorized Series G Convertible Preferred Stock accordingly.
7. REDEMPTION OF SERIES G CONVERTIBLE PREFERRED STOCK.
(a) RIGHT TO REDEEM SERIES G CONVERTIBLE PREFERRED STOCK.
At any time, and from time to time, on and after the expiration of the earlier
of (i) six months from the Original Issuance Date, or (ii) the closing of a
registered firm commitment underwritten secondary offering of equity securities
by the Corporation for cash, the Corporation may, in its sole discretion, but
shall not be obligated to, redeem, in whole or in part, the then issued and
outstanding shares of Series G Convertible Preferred Stock, at a price (the
"Redemption Price") equal to the greater of (x) $1,500 per share of such Series
G Convertible Preferred Stock and (y) an amount equal to the product of the
closing sale price of a share of Common Stock on the Principal Market on the
Trading Day prior to the date of the Redemption Notice (as hereinafter defined)
and the number of shares of Common Stock into which such shares of Series G
Convertible Preferred Stock could be converted on the date of the Redemption
Notice.
(b) NOTICE OF REDEMPTION. The Corporation shall provide
each holder of record of the Series G Convertible Preferred Stock being redeemed
with written notice of redemption (the "Redemption Notice") not less than 30
days prior to any date stipulated by the Corporation for the redemption of the
Series G Convertible Preferred Stock (the "Redemption Date"). The Redemption
Notice shall contain (i) the Redemption Date, (ii) the number of shares of
Series G Convertible Preferred Stock to be redeemed from the holder to whom the
Redemption Notice is delivered, (iii) instructions for surrender to the
Corporation of the certificate or certificates representing the shares of Series
G Convertible Preferred Stock to be redeemed, and (iv) a procedure for the
holder to specify the number of shares of Series G Convertible Preferred Stock
to be converted into Common Stock pursuant to Paragraph 5.
(c) RIGHT TO CONVERT SERIES G CONVERTIBLE PREFERRED STOCK
UPON RECEIPT
39
OF REDEMPTION NOTICE. Upon receipt of the Redemption Notice, the recipient
thereof shall have the option, at its sole election, to specify what portion of
the Series G Convertible Preferred Stock called for redemption in the Redemption
Notice shall be redeemed as provided in this Paragraph 7 or converted into
Common Stock in the manner provided in Paragraph 5. If the holder of the Series
G Convertible Preferred Stock called for redemption elects to convert any of
such shares, then such conversion shall take place on the Conversion Date
specified by the holder, but in no event after the Redemption Date, in
accordance with the terms of Paragraph 5.
(d) SURRENDER OF CERTIFICATES; PAYMENT OF REDEMPTION
PRICE. On or before the Redemption Date, each holder of the shares of Series G
Convertible Preferred Stock to be redeemed shall surrender the required
certificate or certificates representing such shares to the Corporation, in the
manner and at the place designated in the Redemption Notice, and upon payment to
the holder of the Redemption Price, each such surrendered certificate shall be
canceled and retired. If payment of such redemption price is not made in full by
the Redemption Date, the holder shall again have the right to convert the Series
G Convertible Preferred Stock as provided in Paragraph 5 hereof and the
Corporation's right of redemption under this Paragraph 7 shall cease to exist
from and after the Redemption Date. If a certificate is surrendered and all the
shares evidenced thereby are not being redeemed, the Corporation shall issue new
certificates to be registered in the names of the person(s) whose name(s)
appear(s) as the owners on the respective surrendered certificates and deliver
such certificate to such person(s).
8. NOTICES. In case at any time:
(a) the Corporation shall declare any dividend upon its
Common Stock payable in cash or stock or make any other pro rata distribution to
the holders of its Common Stock; or
(b) the Corporation shall offer for subscription pro rata
to the holders of its Common Stock any additional shares of stock of any class
or other rights; or
(c) there shall be any capital reorganization or
reclassification of the capital stock of the Corporation, or a consolidation or
merger of the Corporation with or into, or a sale of all or substantially all
its assets to, another entity or entities; or
(d) there shall be a voluntary or involuntary
dissolution, liquidation or winding up of the Corporation;
40
then, in any one or more of said cases, the Corporation shall give, by first
class mail, postage prepaid, or by telex or facsimile or by recognized overnight
delivery service to non-U.S. residents, addressed to each holder of any shares
of Series G Convertible Preferred Stock at the address of such holder as shown
on the books of the Corporation, (i) at least 10 days' prior written notice of
the date on which the books of the Corporation shall close or a record shall be
taken for such dividend, distribution or subscription rights or for determining
rights to vote in respect of any such reorganization, reclassification,
consolidation, merger, sale, dissolution, liquidation or winding up and (ii) in
the case of any such reorganization, reclassification, consolidation, merger,
sale, dissolution, liquidation or winding up, at least 10 days' prior written
notice of the date when the same shall take place. Such notice in accordance
with the foregoing clause (i) shall also specify, in the case of any such
dividend, distribution or subscription rights, the date on which the holders of
Common Stock shall be entitled thereto and (ii) shall also specify the date on
which the holders of Common Stock shall be entitled to exchange their Common
Stock for securities or other property deliverable upon such reorganization,
reclassification, consolidation, merger, sale, dissolution, liquidation or
winding up, as the case may be.
7. STOCK TO BE RESERVED. The Corporation, upon the effective date
of this Certificate of Designations, has a sufficient number of shares of Common
Stock available to reserve for issuance upon the conversion of all outstanding
shares of Series G Convertible Preferred Stock. The Corporation will at all
times reserve and keep available out of its authorized Common Stock, solely for
the purpose of issuance upon the conversion of Series G Convertible Preferred
Stock as herein provided, such number of shares of Common Stock as shall then be
issuable upon the conversion of all outstanding shares of Series G Convertible
Preferred . The Corporation covenants that all shares of Common Stock which
shall be so issued shall be duly and validly issued, fully paid and
non-assessable. The Corporation will take all such action as may be so taken
without violation of any applicable law or regulation, or of any requirement of
any national securities exchange upon which the Common Stock may be listed to
have a sufficient number of authorized but unissued shares of Common Stock to
issue upon conversion of the Series G Convertible Preferred Stock. The
Corporation will not take any action which results in any adjustment of the
conversion rights if the total number of shares of Common Stock issued and
issuable after such action upon conversion of the Series G Convertible Preferred
Stock would exceed the total number of shares of Common Stock then authorized by
the Corporation's Restated Certificate of Incorporation, as amended.
8. NO REISSUANCE OF SERIES G CONVERTIBLE PREFERRED STOCK. Shares
of Series G Convertible Preferred Stock which are converted into shares of
Common Stock as provided herein shall not be reissued.
9. ISSUE TAX. The issuance of certificates for shares of Common
Stock upon conversion of Series G Convertible Preferred Stock shall be made
without charge to the holder for any United States issuance tax in respect
thereof, provided that the Corporation shall not be required to pay any tax
which may be payable in respect of any transfer involved in the issuance and
delivery of any certificate in a name other than that of the holder of the
Series G Convertible Preferred Stock which is being converted.
41
10. CLOSING OF BOOKS. The Corporation will at no time close its
transfer books against the transfer of any Series G Convertible Preferred Stock
or of any shares of Common Stock issued or issuable upon the conversion of any
shares of Series G Convertible Preferred Stock in any manner which interferes
with the timely conversion of such Series G Convertible Preferred Stock, except
as may otherwise be required to comply with applicable securities laws.
11. DEFINITIONS. As used in this Certificate of Designations, the
term "Common Stock" shall mean and include the Corporation's authorized Common
Stock, $0.01 par value, as constituted on the date of filing of this Certificate
of Designations authorizing the issuance of the Series G Convertible Preferred
Stock, and shall also include any capital stock of any class of the Corporation
thereafter authorized which shall neither be limited to a fixed sum or
percentage of par value in respect of the rights of the holders thereof to
participate in dividends nor entitled to a preference in the distribution of
assets upon the voluntary or involuntary liquidation, dissolution or winding up
of the Corporation; provided that the shares of Common Stock receivable upon
conversion of shares of Series G Convertible Preferred Stock shall include only
shares designated as Common Stock of the Corporation on the date of filing of
this instrument, or in case of any reorganization, reclassification, or stock
split of the outstanding shares thereof, the stock, securities or assets
provided for in Subparagraph 5(f) and (g). Any capitalized terms used in this
Certificate of Designations but not defined herein shall have the meanings set
forth in that certain Preferred Stock Purchase Agreement among the Corporation
and the other persons signatory thereto relating to the issuance and sale of the
Series G Convertible Preferred Stock to the holders of the Series G Convertible
Preferred Stock on the Original Issuance Date, a copy of which will be provided
to any stockholder of the Corporation upon request to the Secretary of the
Corporation, without charge.
12. LOSS, THEFT, DESTRUCTION OF PREFERRED STOCK. Upon receipt of
evidence satisfactory to the Corporation of the loss, theft, destruction or
mutilation of certificates representing shares of Series G Convertible Preferred
Stock and, in the case of any such loss, theft or destruction, upon receipt of
indemnity reasonably satisfactory to the Corporation (which shall not include
the posting of any bond), or, in the case of any such mutilation, upon surrender
and cancellation of the Series G Convertible Preferred Stock certificate, the
Corporation shall make, issue and deliver, in lieu of such lost, stolen,
destroyed or mutilated certificates for Series G Convertible Preferred Stock,
new certificates for Series G Convertible Preferred Stock of like tenor.
13. WHO DEEMED ABSOLUTE OWNER. The Corporation may deem the person
in whose name the Series G Convertible Preferred Stock shall be registered upon
the registry books of the Corporation to be, and may treat it as, the absolute
owner of the Series G Convertible Preferred Stock for the purpose of conversion
of the Series G Convertible Preferred Stock and for all other purposes, and the
Corporation shall not be affected by any notice to the contrary. All such
payments and such conversion shall be valid and effectual to satisfy and
discharge the liability upon the Series G Convertible Preferred Stock to the
extent of the sum or sums so paid or the conversion so made.
14. REGISTER. The Corporation shall keep at its principal office a
register in which the Corporation shall provide for the registration of the
Series G Convertible Preferred Stock.
42
Upon any transfer of the Series G Convertible Preferred Stock in accordance with
the provisions hereof, the Corporation shall register such transfer on the
Series G Convertible Preferred Stock register.
15. WITHHOLDING. To the extent required by applicable law, the
Corporation may withhold amounts for or on account of any taxes imposed or
levied by or on behalf of any taxing authority in the United States having
jurisdiction over the Corporation from any payments made pursuant to the Series
G Convertible Preferred Stock.
16. HEADINGS. The headings of the Sections of this Certificate of
Designations are inserted for convenience only and do not constitute a part of
this Certificate of Designations.
IN WITNESS WHEREOF, Xxxxx Xxxxxxxx, Chief Financial Officer of the
Corporation, under penalties of perjury, does hereby declare and certify that
this is the act and deed of the Corporation and the facts stated herein are true
and accordingly has signed this Certificate of Designations as of this 22nd day
of May, 2000.
INTEGRATED SURGICAL SYSTEMS, INC.
By: /s/ Xxxxx Xxxxxxxx
---------------------------------
Xxxxx Xxxxxxxx
Chief Financial Officer
43
EXHIBIT B
NEITHER THIS WARRANT NOR THE SHARES ISSUABLE UPON EXERCISE HEREOF HAVE BEEN
REGISTERED WITH THE UNITED STATES SECURITIES AND EXCHANGE COMMISSION (THE
"COMMISSION") OR THE SECURITIES COMMISSION OF ANY STATE PURSUANT TO AN EXEMPTION
FROM REGISTRATION UNDER REGULATION D PROMULGATED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE "SECURITIES ACT"). THIS WARRANT SHALL NOT CONSTITUTE AN
OFFER TO SELL NOR A SOLICITATION OF AN OFFER TO BUY THE WARRANT OR THE SHARES
ISSUABLE UPON EXERCISE HEREOF IN ANY JURISDICTION IN WHICH SUCH OFFER OR
SOLICITATION WOULD BE UNLAWFUL.
NEITHER THIS WARRANT NOR THE SHARES ISSUABLE UPON EXERCISE HEREOF MAY BE SOLD,
PLEDGED, TRANSFERRED OR ASSIGNED EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE SECURITIES ACT AND UNDER APPLICABLE STATE SECURITIES LAWS,
OR IN A TRANSACTION WHICH IS EXEMPT FROM REGISTRATION UNDER THE PROVISIONS OF
THE SECURITIES ACT AND UNDER PROVISIONS OF APPLICABLE STATE SECURITIES LAWS; AND
IN THE CASE OF AN EXEMPTION, ONLY IF THE COMPANY HAS RECEIVED AN OPINION OF
COUNSEL THAT SUCH TRANSACTION DOES NOT REQUIRE REGISTRATION OF THE WARRANT OR
SUCH SHARES, WHICH OPINION AND WHICH COUNSEL SHALL BE SATISFACTORY TO THE
COMPANY IN ITS SOLE DISCRETION.
STOCK PURCHASE WARRANT
To Purchase _______ Shares of Common Stock of
INTEGRATED SURGICAL SYSTEMS, INC.
THIS CERTIFIES that, for value received, ________________________ (the
"Holder"), is entitled, upon the terms and subject to the conditions hereinafter
set forth, at any time on or after November , 2000 and on or prior to November ,
2003 (the "Termination Date") but not thereafter, to subscribe for and purchase
from INTEGRATED SURGICAL SYSTEMS, INC., a corporation incorporated in Delaware
(the "Company"),_________ (________) shares (the "Warrant Shares") of Common
Stock, par value US $0.01 per share of the Company (the "Common Stock"). The
purchase price of one share of Common Stock (the "Exercise Price") under this
Warrant shall be equal to One Hundred Thirty (130%) percent of the Market Price
on the Closing Date (as those terms are defined in the Preferred Stock Purchase
Agreement dated as of May ___, 2000 ("Agreement"), between the Company and the
Holder), as reported by Bloomberg, L.P. The Exercise Price and the number of
shares for which the Warrant is exercisable shall be subject to adjustment as
provided herein. This Warrant is being issued in connection with the Agreement
and is subject to its terms and conditions. In the event of any conflict between
the terms of this Warrant and the Agreement, the Agreement shall control.
1
44
1. Title of Warrant. Prior to the expiration hereof and subject to
compliance with applicable laws, this Warrant and all rights hereunder are
transferable, in whole or in part, at the office or agency of the Company by the
holder hereof in person or by duly authorized attorney, upon surrender of this
Warrant together with the Assignment Form annexed hereto properly endorsed.
2. Authorization of Shares. The Company covenants that all shares of Common
Stock which may be issued upon the exercise of rights represented by this
Warrant will, upon exercise of the rights represented by this Warrant, be duly
authorized, validly issued, fully paid and nonassessable and free from all
taxes, liens and charges in respect of the issue thereof (other than taxes in
respect of any transfer occurring contemporaneously with such issue).
3. Exercise of Warrant. (a) Except as provided in Section 4 herein,
exercise of the purchase rights represented by this Warrant may be made at any
time or times, before the close of business on the Termination Date, or such
earlier date on which this Warrant may terminate as provided in this Warrant, by
the surrender of this Warrant and the Notice of Exercise Form annexed hereto
duly executed, at the office of the Company (or such other office or agency of
the Company as it may designate by notice in writing to the registered holder
hereof at the address of such holder appearing on the books of the Company) and
upon payment of the Exercise Price of the shares thereby purchased by cash,
check or bank draft payable to the Company or by wire transfer or cashier's
check drawn on a United States bank; whereupon the holder of this Warrant shall
be entitled to receive a certificate for the number of shares of Common Stock so
purchased. Certificates for shares purchased hereunder shall be delivered to the
holder hereof within three (3) business days after the date on which this
Warrant shall have been exercised as aforesaid. Payment of the Exercise Price of
the shares may be by certified check or cashier's check or by wire transfer to
an account designated by the Company in an amount equal to the Exercise Price
multiplied by the number of Warrant Shares. This Warrant shall be deemed to have
been exercised and such certificate or certificates shall be deemed to have been
issued, and Holder or any other person so designated to be named therein shall
be deemed to have become a holder of record of such shares for all purposes, as
of the date the Warrant has been exercised by payment to the Company of the
Warrant purchase price and all taxes required to be paid by Holder, if any,
pursuant to Section 5 prior to the issuance of such shares have been paid. If
this Warrant shall have been exercised in part, the Company shall, at the time
of delivery of the certificate or certificates representing Warrant Shares,
deliver to Holder a new Warrant evidencing the rights of Holder to purchase the
unpurchased shares of Common Stock called for by this Warrant, which new Warrant
shall in all other respects be identical with this Warrant.
(b) The Holder shall be entitled to exercise the Warrant notwithstanding
the commencement of any case under 11 U.S.C. Section 101 et seq. (the
"Bankruptcy Code"). In the event the Company is a debtor undEr the Bankruptcy
Code, the Company hereby waives to the fullest extent permitted any rights to
relief it may have under 11 U.S.C. Section 362 in respect of the Holder's
exercise right. The Company hereby waives to the fullest eXtent permitted any
rights to relief it may have under 11 U.S.C. Section 362 in respect of the
exercise of the Warrant. The Company agrees,
2
45
without cost or expense to the Holder, to take or consent to any and all action
necessary to effectuate relief under 11 U.S.C. Section 362.
4. No Fractional Shares or Scrip. No fractional shares or scrip
representing fractional shares shall be issued upon the exercise of this
Warrant. As to any fraction of a share which Holder would otherwise be entitled
to purchase upon such exercise, the Company shall pay a cash adjustment in
respect of such final fraction in an amount equal to the same fraction of the
Market Price per share of Common Stock as of the Closing Date.
5. Charges, Taxes and Expenses. Issuance of certificates for shares of
Common Stock upon the exercise of this Warrant shall be made without charge to
the holder hereof for any issue or transfer tax or other incidental expense in
respect of the issuance of such certificate, all of which taxes and expenses
shall be paid by the Company, and such certificates shall be issued in the name
of the holder of this Warrant or in such name or names as may be directed by the
holder of this Warrant; provided, however, that in the event certificates for
shares of Common Stock are to be issued in a name other than the name of the
holder of this Warrant, this Warrant when surrendered for exercise shall be
accompanied by the Assignment Form attached hereto duly executed by the holder
hereof; and provided further, that upon any transfer involved in the issuance or
delivery of any certificates for shares of Common Stock, the Company may
require, as a condition thereto, the payment of a sum sufficient to reimburse it
for any transfer tax incidental thereto.
6. Closing of Books. The Company will not close its shareholder books or
records in any manner which prevents the timely exercise of this Warrant.
7. Transfer, Division and Combination. (a) Subject to compliance with any
applicable securities laws, transfer of this Warrant and all rights hereunder,
in whole or in part, shall be registered on the books of the Company to be
maintained for such purpose, upon surrender of this Warrant at the principal
office of the Company, together with a written assignment of this Warrant
substantially in the form attached hereto duly executed by Holder or its agent
or attorney and funds sufficient to pay any transfer taxes payable upon the
making of such transfer. Upon such surrender and, if required, such payment, the
Company shall execute and deliver a new Warrant or Warrants in the name of the
assignee or assignees and in the denomination specified in such instrument of
assignment, and shall issue to the assignor a new Warrant evidencing the portion
of this Warrant not so assigned, and this Warrant shall promptly be cancelled. A
Warrant, if properly assigned, may be exercised by a new Holder for the purchase
of shares of Common Stock without having a new Warrant issued.
(b) This Warrant may be divided or combined with other Warrants upon
presentation hereof at the aforesaid office of the Company, together with a
written notice specifying the names and denominations in which new Warrants are
to be issued, signed by Holder or its agent or attorney. Subject to compliance
with Section 7(a), as to any transfer which may be involved in such division or
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46
combination, the Company shall execute and deliver a new Warrant or Warrants in
exchange for the Warrant or Warrants to be divided or combined in accordance
with such notice.
(c) The Company shall prepare, issue and deliver at its own expense
(other than transfer taxes) the new Warrant or Warrants under this Section 7.
(d) The Company agrees to maintain, at its aforesaid office, books for
the registration and the registration of transfer of the Warrants.
8. No Rights as Shareholder until Exercise. This Warrant does not entitle
the holder hereof to any voting rights or other rights as a shareholder of the
Company prior to the exercise thereof. Upon the surrender of this Warrant and
the payment of the aggregate Exercise Price, the Warrant Shares so purchased
shall be and be deemed to be issued to such holder as the record owner of such
shares as of the close of business on the later of the date of such surrender or
payment.
9. Loss, Theft, Destruction or Mutilation of Warrant. The Company
represents and warrants that upon receipt by the Company of evidence reasonably
satisfactory to it of the loss, theft, destruction or mutilation of this Warrant
certificate or any stock certificate relating to the Warrant Shares, and in case
of loss, theft or destruction, of indemnity or security reasonably satisfactory
to it, and upon surrender and cancellation of such Warrant or stock certificate,
if mutilated, the Company will make and deliver a new Warrant or stock
certificate of like tenor and dated as of such cancellation, in lieu of such
Warrant or stock certificate.
10. Saturdays, Sundays, Holidays, etc. If the last or appointed day for the
taking of any action or the expiration of any right required or granted herein
shall be a Saturday, Sunday or a legal holiday, then such action may be taken or
such right may be exercised on the next succeeding day not a Saturday, Sunday or
legal holiday.
11. (a) Adjustments of Exercise Price and Number of Warrant Shares. The
number and kind of securities purchasable upon the exercise of this Warrant and
the Exercise Price shall be subject to adjustment from time to time upon the
happening of any of the following. In case the Company shall (i) declare or pay
a dividend in shares of Common Stock or make a distribution in shares of Common
Stock to holders of its outstanding Common Stock, (ii) subdivide its outstanding
shares of Common Stock, (iii) combine its outstanding shares of Common Stock
into a smaller number of shares of Common Stock or (iv) issue any shares of its
capital stock in a reclassification of the Common Stock, then the number of
Warrant Shares purchasable upon exercise of this Warrant immediately prior
thereto shall be adjusted so that the holder of this Warrant shall be entitled
to receive the kind and number of Warrant Shares or other securities of the
Company which he would have owned or have been entitled to receive had such
Warrant been exercised in advance thereof. Upon each such adjustment of the kind
and number of Warrant Shares or other securities of the Company which are
purchasable hereunder, the
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holder of this Warrant shall thereafter be entitled to purchase the number of
Warrant Shares or other securities resulting from such adjustment at an Exercise
Price per such Warrant Share or other security obtained by multiplying the
Exercise Price in effect immediately prior to such adjustment by the number of
Warrant Shares purchasable pursuant hereto immediately prior to such adjustment
and dividing by the number of Warrant Shares or other securities of the Company
resulting from such adjustment. An adjustment made pursuant to this paragraph
shall become effective immediately after the effective date of such event
retroactive to the record date, if any, for such event.
(b) Reorganization, Reclassification, Merger, Consolidation or
Disposition of Assets. In case the Company shall reorganize its capital,
reclassify its capital stock, consolidate or merge with or into another
corporation (where the Company is not the surviving corporation or where there
is a change in or distribution with respect to the Common Stock of the Company),
or sell, transfer or otherwise dispose of all or substantially all its property,
assets or business to another corporation and, pursuant to the terms of such
reorganization, reclassification, merger, consolidation or disposition of
assets, shares of common stock of the successor or acquiring corporation, or any
cash, shares of stock or other securities or property of any nature whatsoever
(including warrants or other subscription or purchase rights) in addition to or
in lieu of common stock of the successor or acquiring corporation ("Other
Property"), are to be received by or distributed to the holders of Common Stock
of the Company, then Holder shall have the right thereafter to receive, upon
exercise of the Warrant, the number of shares of common stock of the successor
or acquiring corporation or of the Company, if it is the surviving corporation,
and Other Property receivable upon or as a result of such reorganization,
reclassification, merger, consolidation or disposition of assets by a holder of
the number of shares of Common Stock for which this Warrant is exercisable
immediately prior to such event. In case of any such reorganization,
reclassification, merger, consolidation or disposition of assets, the successor
or acquiring corporation (if other than the Company) shall expressly assume the
due and punctual observance and performance of each and every covenant and
condition of this Warrant to be performed and observed by the Company and all
the obligations and liabilities hereunder, subject to such modifications as may
be deemed appropriate (as determined by resolution of the Board of Directors of
the Company) in order to provide for adjustments of shares of Common Stock for
which this Warrant is exercisable which shall be as nearly equivalent as
practicable to the adjustments provided for in this Section 11. For purposes of
this Section 11, "common stock of the successor or acquiring corporation" shall
include stock of such corporation of any class which is not preferred as to
dividends or assets over any other class of stock of such corporation and which
is not subject to redemption and shall also include any evidences of
indebtedness, shares of stock or other securities which are convertible into or
exchangeable for any such stock, either immediately or upon the arrival of a
specified date or the happening of a specified event and any warrants or other
rights to subscribe for or purchase any such stock. The foregoing provisions of
this Section 11 shall similarly apply to successive reorganizations,
reclassifications, mergers, consolidations or disposition of assets.
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48
(c) Certain Limitations. Notwithstanding anything herein to the
contrary, the Company agrees not to enter into any transaction which, by reason
of any adjustment hereunder, would cause the Exercise Price to be less than the
par value per share of Common Stock.
12. Voluntary Adjustment by the Company. The Company may at any time during
the term of this Warrant, reduce the then current Exercise Price to any amount
and for any period of time deemed appropriate by the Board of Directors of the
Company.
13. Notice of Adjustment. Whenever the number of Warrant Shares or number
or kind of securities or other property purchasable upon the exercise of this
Warrant or the Exercise Price is adjusted, as herein provided, the Company shall
promptly mail by registered or certified mail, return receipt requested, to the
holder of this Warrant notice of such adjustment or adjustments setting forth
the number of Warrant Shares (and other securities or property) purchasable upon
the exercise of this Warrant and the Exercise Price of such Warrant Shares (and
other securities or property) after such adjustment, setting forth a brief
statement of the facts requiring such adjustment and setting forth the
computation by which such adjustment was made. Such notice, in absence of
manifest error, shall be conclusive evidence of the correctness of such
adjustment.
14. Notice of Corporate Action. If at any time
(a) the Company shall take a record of the holders of its Common Stock
for the purpose of entitling them to receive a dividend or other distribution,
or any right to subscribe for or purchase any evidences of its indebtedness, any
shares of stock of any class or any other securities or property, or to receive
any other right, or
(b) there shall be any capital reorganization of the Company, any
reclassification or recapitalization of the capital stock of the Company or any
consolidation or merger of the Company with, or any sale, transfer or other
disposition of all or substantially all the property, assets or business of the
Company to, another corporation or,
(c) there shall be a voluntary or involuntary dissolution, liquidation
or winding up of the Company; then, in any one or more of such cases, the
Company shall give to Holder (i) at least 30 days' prior written notice of the
date on which a record date shall be selected for such dividend, distribution or
right or for determining rights to vote in respect of any such reorganization,
reclassification, merger, consolidation, sale, transfer, disposition,
liquidation or winding up, and (ii) in the case of any such reorganization,
reclassification, merger, consolidation, sale, transfer, disposition,
dissolution, liquidation or winding up, at least 30 days' prior written notice
of the date when the same shall take place. Such notice in accordance with the
foregoing clause also shall specify (i) the date on which any such record is to
be taken for the purpose of such dividend, distribution or right, the date on
which the holders of Common Stock shall be entitled to any such dividend,
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49
distribution or right, and the amount and character thereof, and (ii) the date
on which any such reorganization, reclassification, merger, consolidation, sale,
transfer, disposition, dissolution, liquidation or winding up is to take place
and the time, if any such time is to be fixed, as of which the holders of Common
Stock shall be entitled to exchange their shares of Common Stock for securities
or other property deliverable upon such disposition, dissolution, liquidation or
winding up. Each such written notice shall be sufficiently given if addressed to
Holder at the last address of Holder appearing on the books of the Company and
delivered in accordance with Section 17(d).
15. Authorized Shares. The Company covenants that during the period the
Warrant is outstanding, it will reserve from its authorized and unissued Common
Stock a sufficient number of shares to provide for the issuance of the Warrant
Shares upon the exercise of any purchase rights under this Warrant. The Company
further covenants that its issuance of this Warrant shall constitute full
authority to its officers who are charged with the duty of executing stock
certificates to execute and issue the necessary certificates for the Warrant
Shares upon the exercise of the purchase rights under this Warrant. The Company
will take all such reasonable action as may be necessary to assure that such
Warrant Shares may be issued as provided herein without violation of any
applicable law or regulation, or of any requirements of NASDAQ or any domestic
securities exchange upon which the Common Stock may be listed.
The Company shall not by any action, including, without limitation,
amending its certificate of incorporation or through any reorganization,
transfer of assets, consolidation, merger, dissolution, issue or sale of
securities or any other voluntary action, avoid or seek to avoid the observance
or performance of any of the terms of this Warrant, but will at all times in
good faith assist in the carrying out of all such terms and in the taking of all
such actions as may be necessary or appropriate to protect the rights of Holder
against impairment. Without limiting the generality of the foregoing, the
Company will (a) not increase the par value of any shares of Common Stock
receivable upon the exercise of this Warrant above the amount payable therefor
upon such exercise immediately prior to such increase in par value, (b) take all
such action as may be necessary or appropriate in order that the Company may
validly and legally issue fully paid and nonassessable shares of Common Stock
upon the exercise of this Warrant, and (c) use its best efforts to obtain all
such authorizations, exemptions or consents from any public regulatory body
having jurisdiction thereof as may be necessary to enable the Company to perform
its obligations under this Warrant.
Upon the request of Holder, the Company will at any time during the period
this Warrant is outstanding acknowledge in writing, in form reasonably
satisfactory to Holder, the continuing validity of this Warrant and the
obligations of the Company hereunder.
Before taking any action which would cause an adjustment reducing the
current Exercise Price below the then par value, if any, of the shares of Common
Stock issuable upon
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exercise of the Warrants, the Company shall take any corporate action which may
be necessary in order that the Company may validly and legally issue fully paid
and non-assessable shares of such Common Stock at such adjusted Exercise Price.
Before taking any action which would result in an adjustment in the number
of shares of Common Stock for which this Warrant is exercisable or in the
Exercise Price, the Company shall obtain all such authorizations or exemptions
thereof, or consents thereto, as may be necessary from any public regulatory
body or bodies having jurisdiction thereof.
16. Required Registration. Pursuant to the terms and conditions set forth
in the Registration Rights Agreement entered into between the Company and the
Holders as of the date of issuance of this Warrant, the Company shall prepare
and file with the Commission not later than the 45th day after the Closing Date,
a Registration Statement relating to the offer and sale of the Common Stock
issuable upon exercise of the Warrants and shall use its best efforts to cause
the Commission to declare such Registration Statement effective under the
Securities Act as promptly as practicable but no later than 90 days after the
closing date.
17. Miscellaneous.
(a) Issue Date; Jurisdiction. The provisions of this Warrant shall be
construed and shall be given effect in all respects as if it had been issued and
delivered by the Company on the date hereof. This Warrant shall be binding upon
any successors or assigns of the Company. This Warrant shall constitute a
contract under the laws of New York without regard to its conflict of law,
principles or rules, and be subject to arbitration pursuant to the terms set
forth in the Agreement.
(b) Restrictions. The holder hereof acknowledges that the Warrant
Shares acquired upon the exercise of this Warrant, if not registered, will have
restrictions upon resale imposed by state and federal securities laws.
(c) Nonwaiver and Expenses. No course of dealing or any delay or
failure to exercise any right hereunder on the part of Holder shall operate as a
waiver of such right or otherwise prejudice Holder's rights, powers or remedies,
notwithstanding all rights hereunder terminate on the Termination Date. If the
Company fails to make, when due, any payments provided for hereunder, or fails
to comply with any other provision of this Warrant, the Company shall pay to
Holder such amounts as shall be sufficient to cover any costs and expenses
including, but not limited to, reasonable attorneys' fees, including those of
appellate proceedings, incurred by Holder in collecting any amounts due pursuant
hereto or in otherwise enforcing any of its rights, powers or remedies
hereunder.
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(d) Notices. Any notice, request or other document required or
permitted to be given or delivered to the holder hereof by the Company shall be
delivered in accordance with the notice provisions of the Agreement.
(e) Limitation of Liability. No provision hereof, in the absence of
affirmative action by Holder to purchase shares of Common Stock, and no
enumeration herein of the rights or privileges of Holder hereof, shall give rise
to any liability of Holder for the purchase price of any Common Stock or as a
stockholder of the Company, whether such liability is asserted by the Company or
by creditors of the Company.
(f) Remedies. Holder, in addition to being entitled to exercise all
rights granted by law, including recovery of damages, will be entitled to
specific performance of its rights under this Warrant. The Company agrees that
monetary damages would not be adequate compensation for any loss incurred by
reason of a breach by it of the provisions of this Warrant and hereby agrees to
waive the defense in any action for specific performance that a remedy at law
would be adequate.
(g) Successors and Assigns. Subject to applicable securities laws, this
Warrant and the rights evidenced hereby shall inure to the benefit of and be
binding upon the successors of the Company and the successors and assigns of
Holder. The provisions of this Warrant are intended to be for the benefit of all
Holders from time to time of this Warrant and shall be enforceable by any such
Holder or holder of Warrant Stock.
(h) Cooperation. The Company shall cooperate with Holder in supplying
such information as may be reasonably necessary for Holder to complete and file
any information reporting forms presently or hereafter required by the
Commission as a condition to the availability of an exemption from the
Securities Act for the sale of any Warrant or Restricted Common Stock.
(i) Indemnification. The Company agrees to indemnify and hold harmless
Holder from and against any liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, claims, costs, attorneys' fees, expenses
and disbursements of any kind which may be imposed upon, incurred by or asserted
against Holder in any manner relating to or arising out of any failure by the
Company to perform or observe in any material respect any of its covenants,
agreements, undertakings or obligations set forth in this Warrant; provided,
however, that the Company will not be liable hereunder to the extent that any
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
claims, costs, attorneys' fees, expenses or disbursements are found in a final
non-appealable judgment by a court to have resulted from Holder's negligence,
bad faith or willful misconduct in its capacity as a stockholder or
warrantholder of the Company.
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(j) Amendment. This Warrant and all other Warrants may be modified or
amended or the provisions hereof waived with the written consent of the Company
and the Holder.
(k) Severability. Wherever possible, each provision of this Warrant
shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Warrant shall be prohibited by or
invalid under applicable law, such provision shall be ineffective to the extent
of such prohibition or invalidity, without invalidating the remainder of such
provisions or the remaining provisions of this Warrant.
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(l) Headings. The headings used in this Warrant are for the convenience of
reference only and shall not, for any purpose, be deemed a part of this Warrant.
IN WITNESS WHEREOF, the Company has caused this Warrant to be executed
by its officer thereunto duly authorized.
Dated: May , 2000
INTEGRATED SURGICAL SYSTEMS, INC.
By:______________________________________________
Xxxxx Xxxxxxxx
Chief Financial Officer
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NOTICE OF EXERCISE
To: INTEGRATED SURGICAL SYSTEMS, INC.
(1) The undersigned hereby elects to purchase ________ shares of Common
Stock, par value $0.01 per share (the "Common Stock"), of INTEGRATED SURGICAL
SYSTEMS, INC. pursuant to the terms of the attached Warrant, and tenders
herewith payment of the exercise price in full, together with all applicable
transfer taxes, if any.
(2) Please issue a certificate or certificates representing said
shares of Common Stock in the name of the undersigned or in such other name as
is specified below:
_______________________________
(Name)
_______________________________
(Address)
_______________________________
Dated:
______________________________
Signature
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ASSIGNMENT FORM
(To assign the foregoing warrant, execute
this form and supply required information.
Do not use this form to exercise the warrant.)
FOR VALUE RECEIVED, the foregoing Warrant and all rights evidenced
thereby are hereby assigned to
_______________________________________________ whose address is
_______________________________________________________________.
_______________________________________________________________
Dated: ________________________,
Holder's Signature: _____________________________
Holder's Address: _____________________________
_____________________________
Signature Guaranteed: ___________________________________________
NOTE: The signature to this Assignment Form must correspond with the name as it
appears on the face of the Warrant, without alteration or enlargement or any
change whatsoever, and must be guaranteed by a bank or trust company. Officers
of corporations and those acting in an fiduciary or
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56
other representative capacity should file proper evidence of authority to assign
the foregoing Warrant.
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EXHIBIT C
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT, dated as of the __ day of May, 2000, between
INTEGRATED SURGICAL SYSTEMS, INC., a corporation incorporated under the laws of
the State of Delaware, and having its principal place of business at 0000
Xxxxxxxx Xxxx Xxxxx, Xxxxx, Xxxxxxxxxx 00000-0000 (the "Company") and the person
signatory hereto (the "Holder").
WHEREAS, simultaneously with the execution and delivery of this
Agreement, the Holder is purchasing from the Company, pursuant to a Preferred
Stock Purchase Agreement dated the date hereof (the "Purchase Agreement"),
_____ shares of Series G Convertible Preferred Stock, $0.01 par value and a
Warrant to purchase ______ shares of the Company's Common Stock (terms not
defined herein shall have the meanings ascribed to them in the Purchase
Agreement); and
WHEREAS, the Company desires to grant to the Holder the registration
rights set forth herein with respect to the shares of Common Stock issuable upon
conversion of the Series G Convertible Preferred Stock and shares of Common
Stock underlying the Warrant (hereinafter referred to as the "Stock" or
"Securities" of the Company).
NOW, THEREFORE, the parties hereto mutually agree as follows:
Section 1. Registrable Securities. As used herein the term "Registrable
Security" means the Securities; provided, however, that with respect to any
particular Registrable Security, such security shall cease to be a Registrable
Security when, as of the date of determination, (i) it has been effectively
registered under the Securities Act of 1933, as amended (the "1933 Act") and
disposed of pursuant thereto, (ii) registration under the 1933 Act is no longer
required for the immediate public distribution of such security without
limitation as to volume as a result of the provisions of Rule 144 promulgated
under the 1933 Act, or (iii) it has ceased to be outstanding. The term
"Registrable Securities" means any and/or all of the securities falling within
the foregoing definition of a "Registrable Security." In the event of any
merger, reorganization, consolidation, recapitalization or other change in
corporate structure affecting the Common Stock, such adjustment shall be deemed
to be made in the definition of "Registrable Security" as is appropriate in
order to prevent any dilution or enlargement of the rights granted pursuant to
this Agreement.
Section 2. Restrictions on Transfer. The Holder acknowledges and
understands that prior to the registration of the Securities as provided herein,
the Securities are "restricted securities" as defined in Rule 144 promulgated
under the Act. The Holder understands that no disposition or transfer of the
Securities may be made by Holder in the absence of (i) an opinion of counsel to
the Holder that such transfer may be made without registration under the 1933
Act or (ii) such registration.
With a view to making available to the Holder the benefits of Rule 144
under the
58
Securities Act or any other similar rule or regulation of the Commission that
may at any time permit the Holder to sell securities of the Company to the
public without registration ("Rule 144"), the Company agrees to:
(a) comply with the provisions of paragraph (c)(1) of
Rule 144; and
(b) file with the Commission in a timely manner all
reports and other documents required to be filed by the Company pursuant to
Section 13 or 15(d) under the Exchange Act; and, if at any time it is not
required to file such reports but in the past had been required to or did file
such reports, it will, upon the request of any Holder, make available other
information as required by, and so long as necessary to permit sales of, its
Registrable Securities pursuant to Rule 144.
Section 3. Registration Rights.
(a) The Company agrees that it will prepare and file with
the Securities and Exchange Commission ("Commission"), within 45 days after the
date hereof, a registration statement on Form S-3 (or other appropriate form of
registration statement) under the 1933 Act (the "Registration Statement"), at
the sole expense of the Company (except as provided in Section 3(c) hereof), in
respect of all holders of Registrable Securities, so as to permit a public
offering and resale of the Registrable Securities under the Act.
The Company shall use its best efforts to cause the
Registration Statement to become effective, not later than 90 days after the
date hereof, or if the Commission notifies the Company that it will not review
the Registration Statement, not later than ten business days thereafter. The
number of shares designated in the Registration Statement to be registered shall
include all the Warrant Shares and the number of shares of Common Stock which
would be issued assuming a Market Price of $1.00 per share of Common Stock, and
shall include appropriate language regarding reliance upon Rule 416 to the
extent permitted by the Commission. The Company will notify Holder of the
effectiveness of the Registration Statement within one business day of such
event. The number of Registrable Securities that the Holder may sell under the
Registration Statement may not exceed that number of shares of Common Stock
which the Selling Securityholder section of the Registration Statement states
are to be offered by the Holder.
(b) The Company will maintain the Registration Statement
or post-effective amendment filed under this Section 3 hereof current under the
1933 Act until the earlier of (i) the date that all of the Registrable
Securities have been sold pursuant to the Registration Statement, (ii) the date
the holders thereof receive an opinion of counsel to the Company, which counsel
shall be reasonably acceptable to the Holder, that all Registrable Securities
may be sold under the provisions of Rule 144 without limitation as to volume,
(iii) all Registrable Securities have been otherwise transferred to Holders who
may trade such shares without restriction under the Securities Act, and the
Company has delivered a new certificate or other evidence of ownership for such
securities not bearing a restrictive legend, or (iv) all Registrable Securities
may be sold without any time, volume or manner limitations pursuant to Rule
144(k) or any similar provision
59
then in effect under the Securities Act in the opinion of counsel to the
Company, which counsel shall be reasonably acceptable to the Holder.
(c) All fees, disbursements and out-of-pocket expenses
and costs incurred by the Company in connection with the preparation and filing
of the Registration Statement under subparagraph 3(a) and in complying with
applicable securities and Blue Sky laws (including, without limitation, all
attorneys' fees) shall be borne by the Company. The Holder shall bear the cost
of underwriting discounts and commissions, if any, applicable to the Registrable
Securities being registered and the fees and expenses of its counsel. The Holder
and its counsel shall have a reasonable period, not to exceed three (3) business
days, to review the proposed Registration Statement or any amendment thereto,
prior to filing with the Commission, and the Company shall provide each Holder
with copies of any comment letters received from the Commission with respect
thereto. The Company shall make reasonably available for inspection by Holder,
any underwriter participating in any disposition pursuant to the Registration
Statement, and any attorney, accountant or other agent retained by such Holder
or any such underwriter all relevant financial and other records, pertinent
corporate documents and properties of the Company and its subsidiaries, and
cause the Company's officers, directors and employees to supply all information
reasonably requested by such Holder or any such underwriter, attorney,
accountant or agent in connection with the Registration Statement, in each case,
as is customary for similar due diligence examinations; provided, however, that
all records, information and documents that are designated in writing by the
Company, in good faith, as confidential, proprietary or containing any material
non-public information shall be kept confidential by such Holder and any such
underwriter, attorney, accountant or agent (pursuant to an appropriate
confidentiality agreement in the case of any such Holder or agent), unless such
disclosure is made pursuant to judicial process in a court proceeding (after
first giving the Company an opportunity promptly to seek a protective order or
otherwise limit the scope of the information sought to be disclosed) or is
required by law, or such records, information or documents become available to
the public generally or through a third party not in violation of an
accompanying obligation of confidentiality; and provided further that, if the
foregoing inspection and information gathering would otherwise disrupt the
Company's conduct of its business, such inspection and information gathering
shall, to the maximum extent possible, be coordinated on behalf of the Holder
and the other parties entitled thereto by one firm of counsel designed by and on
behalf of the majority in interest of Holder and other parties. The Company
shall qualify any of the securities for sale in such states as such Holder
reasonably designates and shall furnish indemnification in the manner provided
in Section 6 hereof. However, the Company shall not be required to qualify in
any state which will require an escrow or other restriction relating to the
Company and/or the sellers. The Company at its expense will supply the Holder
with copies of the Registration Statement and the prospectus or offering
circular included therein and other related documents in such quantities as may
be reasonably requested by the Holder.
(d) The Company shall not be required by this Section 3
to include a Holder's Registrable Securities in any Registration Statement which
is to be filed if, in the opinion of counsel for both the Holder and the Company
(or, should they not agree, in the opinion of another counsel experienced in
securities law matters acceptable to counsel for the Holder and the Company) the
proposed offering or other transfer as to which such registration is requested
is
60
exempt from applicable federal and state securities laws and would result in all
purchasers or transferees obtaining securities which are not "restricted
securities", as defined in Rule 144 under the 1933 Act.
(e) In the event that (i) the Registration Statement to
be filed by the Company pursuant to Section 3(a) above is not filed with the
Commission within 45 days after the date hereof, or the Registration Statement
is not declared effective by the Commission not later than 90 days after the
date hereof, or if the Commission notifies the Company that it will not review
the Registration Statement and the Registration Statement is not declared
effective not later than ten (10) business days thereafter, (ii) the
Registration Statement is not maintained as effective by the Company for the
period set forth in Section 3(b) above or (iii) an amendment to the Registration
Statement was not filed by the Company with the Commission and declared
effective by the Commission on a timely basis to include any additional number
of Registrable Securities as described in Section 3(i), if necessary, then the
Company will pay Holder (pro rated on a daily basis), as liquidated damages for
such failure and not as a penalty, two (2%) percent of the purchase price of the
then outstanding shares of Preferred Stock for the first thirty (30) days, and
in the event of late filing, three percent (3%) percent of the purchase price of
the outstanding shares of Preferred Stock for every thirty (30) day period
thereafter until the Registration Statement has been filed and in the event of
late effectiveness, two percent (2%) of the purchase price of the outstanding
shares of Preferred Stock for every thirty (30) day period thereafter until the
Registration Statement has been declared effective. Such payment of the
liquidated damages shall be made to the Holder in cash, immediately upon demand,
provided, however, that the payment of such liquidated damages shall not relieve
the Company from its obligations to register the Registrable Securities pursuant
to this Section.
Notwithstanding the above, if the Registration
Statement covering the Additional Registrable Securities (as defined in Section
3(i) hereof) required to be filed by the Company pursuant to Section 3(i) hereof
is not filed with the Commission within 45 days after the Market Price declines
to $1.00 or less for five consecutive Trading Days, the Company shall be in
default of this Registration Rights Agreement and the liquidated damages
provisions of the foregoing paragraph shall apply.
If the Company does not remit the damages to the
Holder as set forth above, the Company will pay the Holder reasonable costs of
collection, including attorneys fees, in addition to the liquidated damages. The
registration of the Securities pursuant to this provision shall not affect or
limit Holder's other rights or remedies as set forth in this Agreement.
(f) No provision contained herein shall preclude the
Company from selling securities pursuant to any Registration Statement in which
it is required to include Registrable Securities pursuant to this Section 3.
(g) If at any time or from time to time after the
effective date of the Registration Statement, the Company notifies the Holder in
writing of the existence of a Potential Material Event (as defined in Section
3(h) below), the Holder shall not offer or sell any Registrable Securities or
engage in any other transaction involving or relating to Registrable
61
Securities, from the time of the giving of notice with respect to a Potential
Material Event until such Holder receives written notice from the Company that
such Potential Material Event either has been disclosed to the public or no
longer constitutes a Potential Material Event; provided, however, that the
Company may not so suspend the right to such holders of Securities for more than
twenty (20) days in the aggregate during any twelve month period, during the
periods the Registration Statement is required to be in effect. If a Potential
Material Event shall occur prior to the date the Registration Statement is
filed, then the Company's obligation to file the Registration Statement shall be
delayed without penalty for not more than twenty (20) days. The Company must
give Holder notice in writing at least two (2) business days prior to the first
day of the blackout period.
(h) "Potential Material Event" means any of the
following: (a) the possession by the Company of material information not ripe
for disclosure in a registration statement, which shall be evidenced by
determinations in good faith by the Chief Executive Officer or the Board of
Directors of the Company that disclosure of such information in the Registration
Statement would be detrimental to the business and affairs of the Company; or
(b) any material engagement or activity by the Company which would, in the good
faith determination of the Chief Executive Officer or the Board of Directors of
the Company, be adversely affected by disclosure in a registration statement at
such time, which determination shall be accompanied by a good faith
determination by the Chief Executive Officer or the Board of Directors of the
Company that the Registration Statement would be materially misleading absent
the inclusion of such information.
(i) In the event the Market Price declines to $1.00 or
less for five consecutive Trading Days (the "Decline Date"), the Company shall,
to the extent required by the Securities Act (because the additional shares were
not covered by the Registration Statement filed pursuant to Section 3(a)), file
an additional Registration Statement with the Commission for such additional
number of Registrable Securities issuable upon conversion of the Preferred Stock
(the "Additional Registrable Securities"), in addition to those previously
registered, as would be necessary to satisfy conversions of the then outstanding
shares of Preferred Stock based upon the then prevailing market price of the
Common Stock. The Company shall prepare and file with the Commission not later
than the 30th day after the Decline Date, a registration statement relating to
the offer and sale of such Additional Registrable Securities (the "Additional
Registration Statement") and shall use its best efforts to cause the Commission
to declare such Additional Registration Statement effective under the Securities
Act as promptly as practicable but not later than 60 days thereafter. If the
Additional Registration Statement is not (i) filed with the Commission by the
30th day after the Decline Date or (ii) declared effective by the Commission
within 90 days after the Decline Date (either of which, without duplication, an
"Additional Registration Date"), then the Company shall make payments to the
Holder as set forth in Section 3(e) hereof, for late filing or effectiveness, as
the case may be, relating to the Additional Securities.
Section 4. Cooperation with Company. Holder will cooperate with the
Company in all respects in connection with this Agreement, including timely
supplying all information reasonably requested by the Company and executing and
returning all documents reasonably requested in connection with the registration
and sale of the Registrable Securities and entering
62
into and performing its obligations under any underwriting agreement, if the
offering is an underwritten offering, in usual and customary form, with the
managing underwriter or underwriters of such underwritten offering.
Section 5. Registration Procedures. If and whenever the Company is
required by any of the provisions of this Agreement to effect the registration
of any of the Registrable Securities under the Act, the Company shall (except as
otherwise provided in this Agreement), as expeditiously as possible:
(a) (i) prepare and file with the Commission such amendments
and supplements to the Registration Statement and the prospectus used in
connection therewith as may be necessary to keep such registration statement
effective and to comply with the provisions of the Act with respect to the sale
or other disposition of all securities covered by such registration statement
whenever the Holder of such securities shall desire to sell or otherwise dispose
of the same (including prospectus supplements with respect to the sales of
securities from time to time in connection with a registration statement
pursuant to Rule 415 promulgated under the Act) and (ii) take all lawful action
such that each of (A) the Registration Statement and any amendment thereto does
not, when it becomes effective, 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 (B) the Prospectus forming part
of the Registration Statement, and any amendment or supplement thereto, does not
at any time during the Registration Period include 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.
(b) (i) prior to the filing with the Commission of any
Registration Statement (including any amendments thereto) and the distribution
or delivery of any prospectus (including any supplements thereto), provide draft
copies thereof to the Holders and reflect in such documents all such comments as
the Holders (and their counsel) reasonably may propose respecting the Selling
Shareholders and Plan of Distribution sections (or equivalents) and (ii) furnish
to each Holder such numbers of copies of a prospectus including a preliminary
prospectus or any amendment or supplement to any prospectus, in conformity with
the requirements of the Act, and such other documents, as such Holder may
reasonably request in order to facilitate the public sale or other disposition
of the securities owned by such Holder;
(c) register and qualify the securities covered by the
Registration Statement under such other securities or blue sky laws of such
jurisdictions as the Holder shall reasonably request (subject to the limitations
set forth in Section 3(d) above), and do any and all other acts and things which
may be necessary or advisable to enable each Holder to consummate the public
sale or other disposition in such jurisdiction of the securities owned by such
Holder, except that the Company shall not for any such purpose be required to
qualify to do business as a foreign corporation in any jurisdiction wherein it
is not so qualified or to file therein any general consent to service of
process;
(d) list such securities on The Nasdaq SmallCap Market or
other national securities exchange on which any securities of the Company are
then listed, if the listing of such
63
securities is then permitted under the rules of such exchange or Nasdaq;
(e) enter into and perform its obligations under an
underwriting agreement, if the offering is an underwritten offering, in usual
and customary form, with the managing underwriter or underwriters of such
underwritten offering, including, but not limited to, the following:
(i) making such representations and warranties to the
Holder participating in such underwritten offering and to the managers, in form,
substance and scope as are customarily made by the Company to underwriters in
secondary underwritten offerings;
(ii) obtaining opinions of counsel to the Company
(which counsel and opinions (in form, scope and substance) shall be reasonably
satisfactory to the managers) addressed to the underwriters, covering such
matters as are customarily covered in opinions requested in secondary
underwritten offerings (it being agreed that the matters to be covered by such
opinions shall include, without limitation, as of the date of the opinion and as
of the Effective Time of the Registration Statement or most recent
post-effective amendment thereto, as the case may be, the absence from the
Registration Statement and the Prospectus, including any documents incorporated
by reference therein, of an untrue statement of a material fact or the omission
of a material fact required to be stated therein or necessary to make the
statements therein (in the case of the Prospectus, in light of the circumstances
under which they were made) not misleading, subject to customary limitations);
(iii) obtaining "cold comfort" letters and updates
thereof from the independent public accountants of the Company (and, if
necessary, from the independent public accountants of any subsidiary of the
Company or of any business acquired by the Company, in each case for which
financial statements and financial data are, or are required to be, included in
the Registration Statement), addressed to each underwriter participating in such
underwritten offering (if such underwriter has provided such letter,
representations or documentation, if any, required for such cold comfort letter
to be so addressed), in customary form and covering matters of the type
customarily covered in "cold comfort" letters in connection with secondary
underwritten offerings; and
(iv) delivering such documents and certificates as
may be reasonably required by the managers, if any;
(f) notify each Holder of Registrable Securities covered
by the Registration Statement, at any time when a prospectus relating thereto
covered by the Registration Statement is required to be delivered under the Act,
of the happening of any event of which it has knowledge as a result of which the
prospectus included in the Registration Statement, as then in effect, includes
an untrue statement of a material fact or omits to state a material fact
required to be stated therein or necessary to make the statements therein not
misleading in the light of the circumstances then existing, and the Company
shall prepare and file a curative amendment under Section 5(a) as quickly as
commercially possible;
64
(g) as promptly as practicable after becoming aware of
such event, notify each Holder who holds Registrable Securities being sold (or,
in the event of an underwritten offering, the managing underwriters) of the
issuance by the Commission of any stop order or other suspension of the
effectiveness of the Registration Statement at the earliest possible time and
take all lawful action to effect the withdrawal, recession or removal of such
stop order or other suspension;
(h) cooperate with the Holders who hold Registrable
Securities being offered to facilitate the timely preparation and delivery of
certificates for the Registrable Securities to be offered pursuant to the
Registration Statement and enable such certificates for the Registrable
Securities to be in such denominations or amounts, as the case may be, as the
Holders reasonably may request and registered in such names as the Holder may
request; and, within three business days after a Registration Statement which
includes Registrable Securities is declared effective by the Commission, deliver
and cause legal counsel selected by the Company to deliver to the transfer agent
for the Registrable Securities (with copies to the Holders whose Registrable
Securities are included in such Registration Statement) an appropriate
instruction and, to the extent necessary, an opinion of such counsel;
(i) take all such other lawful actions reasonably
necessary to expedite and facilitate the disposition by the Holders of their
Registrable Securities in accordance with the intended methods therefor provided
in the prospectus which are customary under the circumstances;
(j) make generally available to its security holders as
soon as practicable, but in any event not later than 18 months after (i) the
effective date (as defined in Rule 158(c) under the Securities Act) of the
Registration Statement, and (ii) the effective date of each post-effective
amendment to the Registration Statement, as the case may be, an earnings
statement of the Company and its subsidiaries complying with Section 11(a) of
the Securities Act and the rules and regulations of the commission thereunder
(including, at the option of the Company, Rule 158);
(k) in the event of an underwritten offering, promptly
include or incorporate in a Prospectus supplement or post-effective amendment to
the Registration Statement such information as the managers reasonably agree
should be included therein and to which the Company does not reasonably object
and make all required filings of such Prospectus supplement or post-effective
amendment as soon as practicable after it is notified of the matters to be
included or incorporated in such Prospectus supplement or post-effective
amendment; and
(l) maintain a transfer agent and registrar for its
Common Stock.
Section 6. Indemnification.
(a) The Company agrees to indemnify and hold harmless the
Holder and each person, if any, who controls the Holder within the meaning of
the 1933 Act ("Distributing Holder") against any losses, claims, damages or
liabilities, joint or several (which shall, for all
65
purposes of this Agreement, include, but not be limited to, all reasonable costs
of defense and investigation and all reasonable attorneys' fees), to which the
Distributing Holder may become subject, under the 1933 Act or otherwise, insofar
as such losses, claims, damages or liabilities (or actions in respect thereof)
arise out of or are based upon any untrue statement or alleged untrue statement
of any material fact contained in the Registration Statement, or any related
preliminary prospectus, final prospectus, offering circular, notification or
amendment or supplement thereto, or arise out of or are based upon the omission
or alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading; provided,
however, that the Company will not be liable in any such case to the extent that
any such loss, claim, damage or liability arises out of or is based upon an
untrue statement or alleged untrue statement or omission or alleged omission
made in the Registration Statement, preliminary prospectus, final prospectus,
offering circular, notification or amendment or supplement thereto in reliance
upon, and in conformity with, written information furnished to the Company by
the Distributing Holder, specifically for use in the preparation thereof. This
Section 6(a) shall not inure to the benefit of any Distributing Holder with
respect to any person asserting such loss, claim, damage or liability who
purchased the Registrable Securities which are the subject thereof if the
Distributing Holder failed to send or give (in violation of the 1933 Act or the
rules and regulations promulgated thereunder) a copy of the prospectus contained
in such Registration Statement to such person at or prior to the written
confirmation to such person of the sale of such Registrable Securities, where
the Distributing Holder was obligated to do so under the 1933 Act or the rules
and regulations promulgated thereunder.
(b) Each Distributing Holder agrees that it will
indemnify and hold harmless the Company, and each officer, director of the
Company or person, if any, who controls the Company within the meaning of the
1933 Act, against any losses, claims, damages or liabilities (which shall, for
all purposes of this Agreement, include, but not be limited to, all reasonable
costs of defense and investigation and all reasonable attorneys' fees) to which
the Company or any such officer, director or controlling person may become
subject under the 1933 Act or otherwise, insofar as such losses, claims, damages
or liabilities (or actions in respect thereof; arise out of or are based upon
any untrue statement or alleged untrue statement of any material fact contained
in the Registration Statement, or any related preliminary prospectus, final
prospectus, offering circular, notification or amendment or supplement thereto,
or arise out of or are based upon the omission or the alleged omission to state
therein a material fact required to be stated therein or necessary to make the
statements therein not misleading, but in each case only to the extent that such
untrue statement or alleged untrue statement or omission or alleged omission was
made in the Registration Statement, preliminary prospectus, final prospectus,
offering circular, notification or amendment or supplement thereto in reliance
upon, and in conformity with, written information furnished to the Company by
such Distributing Holder, specifically for use in the preparation thereof.
(c) Promptly after receipt by an indemnified party under
this Section 6 of notice of the commencement of any action, such indemnified
party will, if a claim in respect thereof is to be made against the indemnifying
party under this Section 6, notify the indemnifying party of the commencement
thereof; but the omission so to notify the indemnifying party will not relieve
the indemnifying party from any liability which it may have to any indemnified
party
66
except to the extent of actual prejudice demonstrated by the indemnifying party.
In case any such action is brought against any indemnified party, and it
notifies the indemnifying party of the commencement thereof, the indemnifying
party will be entitled to participate in, and, to the extent that it may wish,
jointly with any other indemnifying party similarly notified, assume the defense
thereof, subject to the provisions herein stated and after notice from the
indemnifying party to such indemnified party of its election so to assume the
defense thereof, the indemnifying party will not be liable to such indemnified
party under this Section 6 for any legal or other expenses subsequently incurred
by such indemnified party in connection with the defense thereof other than
reasonable costs of investigation, unless the indemnifying party shall not
pursue the action to its final conclusion. The indemnified party shall have the
right to employ separate counsel in any such action and to participate in the
defense thereof, but the fees and expenses of such counsel shall not be at the
expense of the indemnifying party if the indemnifying party has assumed the
defense of the action with counsel reasonably satisfactory to the indemnified
party; provided that if the indemnified party is the Distributing Holder, the
fees and expenses of such counsel shall be at the expense of the indemnifying
party if (i) the employment of such counsel has been specifically authorized in
writing by the indemnifying party, or (ii) the named parties to any such action
(including any impleaded parties) include both the Distributing Holder and the
indemnifying party and the Distributing Holder shall have been advised by such
counsel that there may be one or more legal defenses available to the
indemnifying party different from or in conflict with any legal defenses which
may be available to the Distributing Holder (in which case the indemnifying
party shall not have the right to assume the defense of such action on behalf of
the Distributing Holder, it being understood, however, that the indemnifying
party shall, in connection with any one such action or separate but
substantially similar or related actions in the same jurisdiction arising out of
the same general allegations or circumstances, be liable only for the reasonable
fees and expenses of one separate firm of attorneys for the Distributing Holder,
which firm shall be designated in writing by the Distributing Holder). No
settlement of any action against an indemnified party shall be made without the
prior written consent of the indemnified party, which consent shall not be
unreasonably withheld.
Section 7. Contribution. In order to provide for just and equitable
contribution under the 1933 Act in any case in which (i) the indemnified party
makes a claim for indemnification pursuant to Section 6 hereof but is judicially
determined (by the entry of a final judgment or decree by a court of competent
jurisdiction and the expiration of time to appeal or the denial of the last
right of appeal) that such indemnification may not be enforced in such case
notwithstanding the fact that the express provisions of Section 6 hereof provide
for indemnification in such case, or (ii) contribution under the 1933 Act may be
required on the part of any indemnified party, then the Company and the
applicable Distributing Holder shall contribute to the aggregate losses, claims,
damages or liabilities to which they may be subject (which shall, for all
purposes of this Agreement, include, but not be limited to, all reasonable costs
of defense and investigation and all reasonable attorneys' fees), in either such
case (after contribution from others) on the basis of relative fault as well as
any other relevant equitable considerations. The relative fault shall be
determined by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or the omission or alleged omission to state
a material fact relates to information supplied by the Company on the one hand
or the applicable Distributing Holder on the other hand, and the parties'
relative intent,
67
knowledge, access to information and opportunity to correct or prevent such
statement or omission. The Company and the Distributing Holder agree that it
would not be just and equitable if contribution pursuant to this Section 7 were
determined by pro rata allocation or by any other method of allocation which
does not take account of the equitable considerations referred to in this
Section 7. 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 Section 7 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. No person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the 0000
Xxx) shall be entitled to contribution from any person who was not guilty of
such fraudulent misrepresentation.
Notwithstanding any other provision of this Section 7, in no
event shall any (i) Holder be required to undertake liability to any person
under this Section 7 for any amounts in excess of the dollar amount of the
proceeds to be received by such Holder from the sale of such Holder's
Registrable Securities (after deducting any fees, discounts and commissions
applicable thereto) pursuant to any Registration Statement under which such
Registrable Securities are to be registered under the Securities Act and (ii)
underwriter be required to undertake liability to any person hereunder for any
amounts in excess of the aggregate discount, commission or other compensation
payable to such underwriter with respect to the Registrable Securities
underwritten by it and distributed pursuant to the Registration Statement.
Section 8. 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: Integrated Surgical Systems, Inc.
0000 Xxxxxxxx Xxxx Xxxxx
Xxxxx, XX 00000-0000
Attention: Xxxxxx X. Xxxxxxx
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
68
with a copy to: Snow Xxxxxx Xxxxxx P.C.
(shall not constitute notice) 000 Xxxxx Xxxxxx
Xxx Xxxx, XX 00000
Attention: Xxxx Xxxxxx
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
If to the Holder: As set forth in the signature page of
the Purchase Agreement.
Either party hereto may from time to time change its address
or facsimile number for notices under this Section 8 by giving at least ten (10)
days' prior written notice of such changed address or facsimile number to the
other party hereto.
Section 9. Assignment. This Agreement is binding upon and inures to the
benefit of the parties hereto and their respective heirs, successors and
permitted assigns. The rights granted the Holder under this Agreement may be
assigned to any purchaser of substantially all of the Registrable Securities (or
the rights thereto) from Holder. In the event of a transfer of the rights
granted under this Agreement, the Holder agrees that the Company may require
that the transferee comply with reasonable conditions as determined in the
discretion of the Company.
Section 10. Additional Covenants of the Company. The Company agrees
that at such time as it meets all the requirements for the use of Securities Act
Registration Statement on Form S-3 it shall file all reports and information
required to be filed by it with the Commission in a timely manner and take all
such other action so as to maintain such eligibility for the use of such form.
Section 11. Counterparts/Facsimile. This Agreement may be executed in
two or more counterparts, each of which shall be constitute an original, but all
of which, when together shall constitute but one and the same instrument, and
shall become effective when one or more counterparts have been signed by each
party hereto and delivered to the other party. In lieu of the original, a
facsimile transmission or copy of the original shall be as effective and
enforceable as the original.
Section 12. Termination of Registration Rights. The rights granted
pursuant to this Agreement shall terminate as to each Holder (and permitted
transferees or assignees ) upon the occurrence of any of the following:
(a) all Holder's securities subject to this Agreement
have been registered and sold; or
(b) such Holder's securities subject to this Agreement
may be sold without such registration and without limitation as to volume
pursuant to Rule 144(k) promulgated by the SEC pursuant to the Securities Act.
69
Section 13. Remedies. The remedies provided in this Agreement are
cumulative and not exclusive of any remedies provided by law. If any term,
provision, covenant or restriction of this Agreement is held by a court of
competent jurisdiction to be invalid, illegal, void or unenforceable, the
remainder of the terms, provisions, covenants and restrictions set forth herein
shall remain in full force and effect and shall in no way be affected, impaired
or invalidated, and the parties hereto shall use their best efforts to find and
employ an alternative means to achieve the same or substantially the same result
as that contemplated by such term, provision, covenant or restriction. It is
hereby stipulated and declared to be the intention of the parties that they
would have executed the remaining terms, provisions, covenants and restrictions
without including any of such that may be hereafter declared invalid, illegal,
void or unenforceable.
Section 14. Conflicting Agreements. The Company shall not enter into
any agreement with respect to its securities that is inconsistent with the
rights granted to the holders of Registrable Securities in this Agreement or
otherwise conflicts with the provisions hereof. Without limiting the generality
of the foregoing, without the written consent of the Holders of a majority in
interest of the Registrable Securities, the Company shall not grant to any
person the right to request it to register any of its securities under the
Securities Act unless the rights so granted are subject in all respect to the
prior rights of the holders of Registrable Securities set forth herein, and are
not otherwise in conflict or inconsistent with the provisions of this Agreement.
The restrictions on the Company's rights to grant registration rights under this
paragraph shall terminate on the date of the Registration Statement to be filed
pursuant to Section 3(a) is declared effective by the Commission.
Section 15. Headings. The headings in this Agreement are for reference
purposes only and shall not affect in any way the meaning or interpretation of
this Agreement.
Section 16. Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York, without regard
to the conflicts of law principles of such state. Each party hereto hereby
submits to the exclusive jurisdiction of the United States District Court for
the Southern District of New York and of any New York State Court sitting in New
York City for purposes of all legal proceedings arising out of or relating to
this Agreement. Each party hereto irrevocably waives, to the fullest extent
permitted by law, any objection which it may now or hereafter have to the laying
of the venue of any such proceeding
70
brought in such a court has been brought in an inconvenient forum. Each party
hereto hereby irrevocably waives any and all right to trial by jury in any legal
proceeding arising out of or relating to this Agreement.
Section 17. Amendment and Waivers. This Agreement may be amended and
the Company may take any action herein prohibited, or omit to perform any act
herein required to be performed by it, only if the Company shall have obtained
the written consent to such amendment, action or omission to act, of the holder
or holders of the sum of the 85% or more of
71
the shares of (i) Registrable Securities issued at such time, plus (ii)
Registrable Securities issuable upon exercise or conversion of the Securities
then constituting derivative securities (if such Securities were not fully
exercised or converted in full as of the date such consent is sought). Each
holder of any Registrable Securities at the time or thereafter outstanding shall
be bound by any consent authorized by this Section 17, whether or not such
Registrable Securities shall have been marked to indicate such consent.
Section 18. Severability. If any provision of this Agreement shall for
any reason be held invalid or unenforceable, such invalidity or unenforceablity
shall not affect any other provision hereof and this Agreement shall be
construed as if such invalid or unenforceable provision had never been contained
herein. Terms not otherwise defined herein shall be defined in accordance with
the Agreement.
Section 19. Capitalized Terms. All capitalized terms not otherwise
defined herein shall have the meaning assigned to them in the Purchase
Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed, on the day and year first above written.
INTEGRATED SURGICAL SYSTEMS, INC.
By:
---------------------------------
Xxxxx Xxxxxxxx
Chief Financial Officer
HOLDER:
------------------------------------
By:
---------------------------------
Authorized Signatory
