PRIVATE EQUITY LINE OF CREDIT AGREEMENT
Between
Treadstone Investments Limited
And
Medisys Technologies, Inc.
PRIVATE EQUITY LINE OF CREDIT AGREEMENT dated as of February 24, 2000
(the "Agreement"), between Treadstone Investments Limited, a British Virgin
Islands corporation (the "Investor") and Medisys Technologies, Inc., a
corporation organized and existing under the laws of the State of Utah (the
"Company").
WHEREAS, the parties desire that, upon the terms and subject to the
conditions contained herein, the Company shall issue and sell to Investor from
time to time as provided herein, and Investor shall purchase, up to 6,000,000
shares (the "Aggregate Purchase Amount") of the Common Stock (as defined below);
and
WHEREAS, such investments will be made by the Investor as statutory
underwriter of a registered indirect primary offering of such Common Stock by
the Company.
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 on the date in
question.
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.
Section 1.4 "Closing" shall mean one of the closings of a purchase and
sale of the Common Stock pursuant to Section 2.1.
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Section 1.5 "Closing Date" shall mean, with respect to a Closing, the
fifth Trading Day following the end of the Valuation Period related to such
Closing, provided all conditions to such Closing have been satisfied on or
before such Trading Day.
Section 1.6 "Commitment Amount" shall mean the dollar amount necessary
which the Investor has agreed to provide to the Company in order to purchase up
to 6,000,000 Put Shares pursuant to the terms and conditions of this Agreement.
Section 1.7 "Commitment Period" shall mean the period commencing on the
Effective Date and expiring on the earliest to occur of (x) the date on which
the Investor shall have purchased 6,000,000 Put Shares pursuant to this
Agreement, (y) the date this Agreement is terminated pursuant to Section 2.4, or
(z) the date occurring eighteen (18) months from the date of commencement of the
Commitment Period.
Section 1.8 "Common Stock" shall mean the Company's common stock, par
value $.0005 per share.
Section 1.9 "Condition Satisfaction Date" shall have the meaning set
forth in Section 7.2.
Section 1.10 "Effective Date" shall mean the date on which the SEC
first declares effective a Registration Statement registering the sale by the
Company and resale by the Investor of the Registrable Securities as set forth in
Section 7.2(f).
Section 1.11 "Escrow Agent" shall mean the escrow agent designated in
the Escrow Agreement.
Section 1.12 "Escrow Agreement" shall mean the escrow agreement in the
form attached hereto as Exhibit A.
Section 1.13 "Exchange Act" shall mean the Securities Exchange Act of
1934, as amended, and the rules and regulations promulgated thereunder.
Section 1.14 "Investment Amount" shall mean the dollar amount to be
invested by the Investor to purchase Put Shares with respect to any Put Date as
notified by the Company to the Investor, all in accordance with Section 2.2
hereof.
Section 1.15 "Market Price" on any given date shall mean the average of
the three (3) lowest Bid Prices (as reported by Bloomberg L.P.) of the Common
Stock on any Trading Day during the Valuation Period relating to such date.
Section 1.16 "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 Escrow Agreement in any material
respect.
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Section 1.17 "Maximum Put Amount" shall mean, as of any Put Date, four
and one half percent (4.5%) of the weighted average price for the three (3)
month period prior to the Put Date multiplied by the total trading volume for
the three (3) month period prior to the Put Date.
Section 1.18 "NASD" shall mean the National Association of Securities
Dealers, Inc.
Section 1.19 "Outstanding" when used with reference to shares of Common
Stock or Capital Shares (collectively the "Shares"), shall mean, at any date as
of which the number of such Shares is to be determined, all issued and
outstanding Shares, and shall include all such Shares issuable in respect of
outstanding scrip or any certificates representing fractional interests in such
Shares; provided, however, that "Outstanding" shall not mean any such Shares
then directly or indirectly owned or held by or for the account of the Company.
Section 1.20 "Person" shall mean an individual, a corporation, a
partnership, a limited liability company, an association, a trust or other
entity or organization, including a government or political subdivision or an
agency or instrumentality thereof.
Section 1.21 "Principal Market" shall mean the NASDAQ National Market,
the NASDAQ SmallCap Market, the American Stock Exchange, the New York Stock
Exchange or the OTC Bulletin Board whichever is at the time the principal
trading exchange or market for the Common Stock.
Section 1.22 "Purchase Price" shall mean with respect to Put Shares,
eighty-five percent (85%) (the "Purchase Price Percentage") of the Market Price
during the Valuation Period related to a Put (or such other date on which the
Purchase Price is calculated in accordance with the terms and conditions of this
Agreement).
Section 1.23 "Put" shall mean each occasion the Company elects to
exercise its right to tender a Put Notice requiring the Investor to purchase
shares of the Company's Common Stock, subject to the terms of this Agreement.
Section 1.24 "Put Date" shall mean the Trading Day during the
Commitment Period that a Put Notice to sell Common Stock to the Investor is
deemed delivered pursuant to Section 2.2(b) hereof.
Section 1.25 "Put Notice" shall mean a written notice to the Investor
setting forth the Investment Amount that the Company intends to sell to the
Investor in the form attached hereto as Exhibit B.
Section 1.26 "Put Shares" shall mean all shares of Common Stock or
other securities issued or issuable pursuant to a Put that has occurred or may
occur in accordance with the terms and conditions of this Agreement.
Section 1.27 "Registrable Securities" shall mean the Put Shares and the
Warrant Shares until (i) all Put Shares and Warrant Shares have been disposed of
pursuant to the Registration Statement, (ii) all Put 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 Put Shares and Warrant Shares have been
otherwise transferred to persons 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 Put 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.
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Section 1.28 "Registration Rights Agreement" shall mean the agreement
regarding the filing of the Registration Statement for the sale and resale of
the Registrable Securities annexed hereto as Exhibit C.
Section 1.29 "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, such as Form S-1 or SB-2, for which the Company then qualifies and
which counsel for the Company shall deem appropriate, and which form shall be
available for the resale by the Investor of the Registrable Securities to be
registered thereunder in accordance with the provisions of this Agreement, the
Registration Rights Agreement, and in accordance with the intended method of
distribution of such securities), for the registration of the resale by the
Investor of the Registrable Securities under the Securities Act.
Section 1.30 "SEC" shall mean the Securities and Exchange Commission.
Section 1.31 "Securities Act" shall mean the Securities Act of 1933, as
amended.
Section 1.32 "SEC Documents" shall mean the Company's latest Form 10-K
or 10-KSB as of the time in question, all Forms 10-Q or 10-QSB and 8-K filed
thereafter, and the Proxy Statement for its latest fiscal year as of the time in
question until such time as the Company no longer has an obligation to maintain
the effectiveness of a Registration Statement as set forth in the Registration
Rights Agreement.
Section 1.33 "Trading Cushion" shall mean the mandatory twenty (20)
Trading Days between Put Dates, unless waived by the Investor.
Section 1.34 "Trading Day" shall mean any day during which the
Principal Market shall be open for business.
Section 1.35 "Valuation Event" shall mean an event in which the Company
at any time prior to the end of the Commitment Period takes any of the following
actions:
(a) subdivides or combines its Common Stock;
(b) pays a dividend on its Capital Shares or
makes any other distribution of its Capital Shares;
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(c) issues any additional Capital Shares
("Additional Capital Shares"), otherwise than as provided in the foregoing
Subsections (a) and (b) above or (d) and (e) below, at a price per share less,
or for other consideration lower, than the Bid Price in effect immediately prior
to such issuance, or without consideration (other than pursuant to this
Agreement);
(d) issues any warrants, options or other rights
to subscribe for or purchase any Additional Capital Shares and the price per
share for which Additional Capital Shares may at any time thereafter be issuable
pursuant to such warrants, options or other rights shall be less than the Bid
Price in effect immediately prior to such issuance;
(e) issues any securities convertible into or
exchangeable for Capital Shares and the consideration per share for which
Additional Capital Shares may at any time thereafter be issuable pursuant to the
terms of such convertible or exchangeable securities shall be less than the Bid
Price in effect immediately prior to such issuance;
(f) makes a distribution of its assets or
evidences of indebtedness to the holders of its Capital Shares as a dividend in
liquidation or by way of return of capital or other than as a dividend payable
out of earnings or surplus legally available for dividends under applicable law
or any distribution to such holders made in respect of the sale of all or
substantially all of the Company's assets (other than under the circumstances
provided for in the foregoing subsections (a) through (e); or
(g) takes any action affecting the number of
Outstanding Capital Shares, other than an action described in any of the
foregoing Subsections (a) through (f) hereof, inclusive, which in the opinion of
the Company's Board of Directors, determined in good faith, would have a
Material Adverse Effect upon the rights of the Investor at the time of a Put.
Section 1.36 "Valuation Period" shall mean the period of twenty-one
(21) Trading Days beginning fifteen (15) Trading Days before the Trading Day on
which a Put Notice is deemed to be delivered and ending five (5) Trading Days
after such date; provided, however, that if a Valuation Event occurs during a
Valuation Period, a new Valuation Period shall begin on the Trading Day
immediately after the occurrence of such Valuation Event and end on the twenty
first (21st) Trading Day thereafter.
Section 1.37 "Warrants" shall mean the 1,125,000 Common Stock Purchase
Warrants in the form of Exhibit D hereto to be delivered to the Investor at the
initial Closing. "Warrant Shares" shall mean the shares of Common Stock issuable
upon exercise of the Warrants.
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ARTICLE II
Purchase and Sale of Common Stock
Section 2.1 Puts. Upon the terms and conditions set forth herein
(including, without limitation, the provisions of Article VII hereof), on any
Put Date the Company may make a Put by the delivery of a Put Notice. The number
of Put Shares that the Investor shall receive pursuant to such Put shall be
determined by dividing the Investment Amount specified in the Put Notice by the
Purchase Price for such Valuation Period; provided, however, the Investor may,
at its sole discretion, purchase up to an additional fifty percent (50%) of the
Maximum Put Amount during any Put Period by notice to the Company prior to the
end of the Valuation Period. The Investment Amount shall not exceed the Maximum
Put Amount on the date of the Put Notice.
Section 2.2 Mechanics.
(a) Put Notice. At any time during the
Commitment Period, the Company may deliver a Put Notice to the Investor, subject
to the conditions set forth in Section 7.2; provided, however, that the
Investment Amount for each Put as designated by the Company in the applicable
Put Notice shall be neither less than $100,000 nor more than the Maximum Put
Amount.
(b) Date of Delivery of Put Notice. A Put Notice
shall be deemed delivered on (i) the Trading Day it is received by facsimile or
otherwise by the Investor if such notice is received prior to 12:00 noon Eastern
Time, or (ii) the immediately succeeding Trading Day if it is received by
facsimile or otherwise after 12:00 noon Eastern Time on a Trading Day or at any
time on a day which is not a Trading Day. No Put Notice may be deemed delivered
on a day that is not a Trading Day.
Section 2.3 Closings. On or before each Closing Date for a Put the
Investor shall deliver the Investment Amount specified in the Put Notice by wire
transfer of immediately available funds to the Escrow Agent. In addition, on or
prior to the Closing Date, each of the Company and the Investor shall deliver to
the Escrow Agent all documents, instruments and writings required to be
delivered or reasonably requested by either of them pursuant to this Agreement
in order to implement and effect the transactions contemplated herein. Upon
receipt of notice from the Escrow Agent that the Escrow Agent has possession of
the Investment Amount, the Company shall, if possible, deliver the Put Shares to
the Investor's account through the Depository Trust Company DWAC system, per
written account instructions delivered by the Investor to the Company, and if
the Company is not eligible to participate in the DWAC system, to deliver to the
Escrow Agent one or more certificates, as requested by the Investor,
representing the Put Shares to be purchased by the Investor pursuant to Section
2.1 herein, registered in the name of the Investor or, at the Investor's option,
registered in the name of such account or accounts as may be designated by the
Investor. Payment of funds to the Company and delivery of the certificates to
the Investor (unless delivered by DWAC) shall occur out of escrow in accordance
with the Escrow Agreement, provided, however, that to the extent the Company has
not paid the fees, expenses, and disbursements of the Investor's counsel in
accordance with Section 13.7, the amount of such fees, expenses, and
disbursements shall be paid in immediately available funds, at the direction of
the Investor, to Investor's counsel with no reduction in the number of Put
Shares issuable to the Investor on such Closing Date.
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Section 2.4 Termination of Investment Obligation.
(a) The obligation of the Investor to purchase
shares of Common Stock shall terminate permanently (including with respect to a
Closing Date that has not yet occurred) in the event that (i) there shall occur
any stop order or suspension of the effectiveness of the Registration Statement
for an aggregate of thirty (30) Trading Days during the Commitment Period, for
any reason other than deferrals or suspensions in accordance with the
Registration Rights Agreement as a result of corporate developments subsequent
to the Effective Date that would require such Registration Statement to be
amended to reflect such event in order to maintain its compliance with the
disclosure requirements of the Securities Act or (ii) the Company shall at any
time fail to comply with the requirements of Section 6.2, 6.3 or 6.5 or (iii)
the Registration Statement shall not have become effective by July 31, 2000.
(b) The obligation of the Company to sell Put
Shares to the Investor shall terminate if the Investor fails to honor any Put
Notice within two (2) Trading Days of the Closing Date scheduled for such Put,
and the Company notifies Investor of such termination. Upon such termination,
the Company shall maintain the Registration Statement in effect for such
reasonable period, not to exceed forty-five (45) days, as the Investor may
request in order to dispose of any remaining Put Shares. Such termination shall
be the Company's sole remedy for the Investor's failure to honor a Put.
Section 2.5 Additional Shares. In the event that (a) within five
Trading Days of any Closing Date, the Company gives notice to the Investor of an
impending "blackout period" in accordance with Section 3(f) of the Registration
Rights Agreement and (b) the Bid Price on the Trading Day immediately preceding
such "blackout period" (the "Old Bid Price") is greater than the Bid Price on
the first Trading Day following such "blackout period" (the "New Bid Price") the
Company shall issue to the Investor a number of additional shares (the "Blackout
Shares") equal to the difference between (y) the product of the number of
Registrable Securities purchased by the Investor on such most recent Closing
Date and still held by the Investor during such "blackout period" that are not
otherwise freely tradable during such "blackout period" and the Old Bid Price,
divided by the New Bid Price and (z) the number of Registrable Securities
purchased by the Investor on such most recent Closing Date and still held by the
Investor during such "blackout period" that are not otherwise freely tradable
during such "blackout period".
Section 2.5 Liquidated Damages. The parties hereto acknowledge and
agree that the obligation to issue Registrable Securities under Section 2.5
above 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 or in connection with a "blackout period" under the
Registration Rights Agreement, and (c) the parties are sophisticated business
parties and have been represented by legal and financial counsel and negotiated
this Agreement at arm's length.
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ARTICLE III
Representations and Warranties of Investor
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 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 has the capacity to protect
its own interests in connection with this transaction and is capable of
evaluating the merits and risks of an investment in 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 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. 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 Organization and Standing. Investor is a corporation duly
organized, validly existing, and in good standing under the laws of the British
Virgin Islands.
Section 3.6 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.
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Section 3.7 Disclosure; Access to Information. Investor has received
and reviewed all documents, records, books and other publicly available
information pertaining to Investor's investment in the Company that have been
requested by Investor. The Company is subject to the periodic reporting
requirements of the Exchange Act, and Investor has reviewed copies of any such
reports that have been requested by it.
Section 3.8 Manner of Sale. At no time was Investor presented with or
solicited by or through any leaflet, public promotional meeting, television
advertisement or any other form of general solicitation or advertising.
Section 3.9 Financial Capacity. Investor currently has the financial
capacity to meet its obligations to the Company hereunder, and the Investor has
no present knowledge of any circumstances which could cause it to become unable
to meet such obligations in the future.
Section 3.10 Underwriter Liability. Investor understands that it is the
position of the SEC that the Investor is an underwriter within the meaning of
Section 2(11) of the Securities Act and that the Investor will be identified as
an underwriter of the Put Shares in the Registration Statement.
ARTICLE IV
Representations and Warranties of the Company
The Company represents and Warrants to the Investor that, except as set forth on
the Disclosure Schedule prepared by the Company and attached hereto:
Section 4.1 Organization of the Company. The Company is a corporation
duly incorporated and existing in good standing under the laws of the State of
Utah and has all requisite corporate authority to own its properties and to
carry on its business as now being conducted. The Company does not have any
subsidiaries and does not own more that fifty percent (50%) of or control any
other business entity except as set forth in the SEC Documents. The Company is
duly qualified and is in good standing as a foreign corporation to do business
in every jurisdiction in which the nature of the business conducted or property
owned by it makes such qualification necessary, other than those in which the
failure so to qualify would not have a Material Adverse Effect.
Section 4.2 Authority. (i) The Company has the requisite corporate
power and corporate authority to enter into and perform its obligations under
this Agreement, the Registration Rights Agreement, the Escrow Agreement, and the
Warrants and to issue the Put Shares, the Warrants and the Warrant Shares
pursuant to their respective terms, (ii) the execution, issuance and delivery of
this Agreement, the Registration Rights Agreement, the Escrow Agreement and the
Warrants by the Company and the consummation by it of the transactions
contemplated hereby will have been duly authorized by all necessary corporate
action before the Closing Date and no further consent or authorization of the
Company or its Board of Directors or stockholders will be required, and (iii)
this Agreement, the Registration Rights Agreement, the Escrow Agreement and the
Warrants have been duly executed and delivered by the Company and at the initial
Closing shall constitute valid and binding obligations of the Company
enforceable against the Company in accordance with their terms, except as such
enforceability may be limited by applicable bankruptcy, insolvency, or similar
laws relating to, or affecting generally the enforcement of, creditors' rights
and remedies or by other equitable principles of general application. The
Company has duly and validly authorized and reserved for issuance shares of
Common Stock sufficient in number for the issuance of the Put Shares and for the
exercise of the Warrants
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Section 4.3 Capitalization. The authorized capital stock of the Company
consists of 100,000,000 shares of Common Stock, $0.0005 par value per share, of
which 43,817,289 shares are issued and outstanding as of December 31, 1999 and
no preferred stock. Except for (i) outstanding options and warrants as set forth
in the SEC Documents and (ii) as set forth in the Disclosure Schedule, there are
no outstanding Capital Share Equivalents nor any agreements or understandings
pursuant to which any Capital Shares Equivalents may become outstanding. The
Company is not a party to any agreement granting registration or anti-dilution
rights to any person with respect to any of its equity or debt securities other
than up to $2,000,000 worth of Convertible Debentures convertible into shares of
Common Stock and 250,000 shares issuable upon exercise of outstanding warrants,
and two other existing agreements with piggyback rights. All of the outstanding
shares of Common Stock of the Company have been duly and validly authorized and
issued and are fully paid and non-assessable.
Section 4.4 Common Stock. The Company has registered its Common Stock
pursuant to Section 12(b) or (g) of the Exchange Act and is in full compliance
with all reporting requirements of the Exchange Act, and the Company is in
compliance with all requirements for the continued listing or quotation of its
Common Stock, and such Common Stock is currently listed or quoted on, the
Principal Market. As of the date hereof, the Principal Market is the OTC
Bulletin Board and the Company has not received any notice regarding, and to its
knowledge there is no threat, of the termination or discontinuance of the
eligibility of the Common Stock for such listing.
Section 4.5 SEC Documents. The Company has made available to the
Investor true and complete copies of the SEC Documents. The Company has not
provided to the Investor any information that, according to applicable law, rule
or regulation, should have been disclosed publicly prior to the date hereof by
the Company, but which has not been so disclosed. As of their respective dates,
the SEC Documents complied in all material respects with the requirements of the
Exchange Act, and rules and regulations of the SEC promulgated thereunder and
the SEC Documents did not contain any untrue statement of a material fact or
omit to state a material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under which
they were made, not misleading. The financial statements of the Company included
in the SEC Documents complied in all material respects with applicable
accounting requirements and the published rules and regulations of the SEC or
other applicable rules and regulations with respect thereto at the time of such
inclusion. Such financial statements have been prepared in accordance with
generally accepted accounting principles applied on a consistent basis during
the periods involved (except (i) as may be otherwise indicated in such financial
statements or the notes thereto or (ii) in the case of unaudited interim
statements, to the extent they exclude footnotes or may be condensed or summary
statements) and fairly present in all material respects the financial position
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of the Company as of the dates thereof and the results of operations and cash
flows for the periods then ended (subject, in the case of unaudited interim
statements, to normal year-end audit adjustments). Neither the Company nor any
of its subsidiaries has any material indebtedness, obligations or liabilities of
any kind (whether accrued, absolute, contingent or otherwise, and whether due or
to become due) that would have been required to be reflected in, reserved
against or otherwise described in the financial statements or in the notes
thereto in accordance with GAAP, which was not fully reflected in, reserved
against or otherwise described in the financial statements or the notes thereto
included in the SEC Documents or was not incurred in the ordinary course of
business consistent with the Company's past practices since the last date of
such financial statements.
Section 4.6 Valid Issuances. When issued and paid for in accordance
with the terms hereof or of the Warrants, the Put Shares and the Warrant Shares
will be duly and validly issued, fully paid, and non-assessable. Neither the
sales of the Put Shares, the Warrants or the Warrant Shares pursuant to, nor the
Company's performance of its obligations under, this Agreement, the Registration
Rights Agreement, the Escrow Agreement or the Warrants will (i) result in the
creation or imposition by the Company of any liens, charges, claims or other
encumbrances upon the Put Shares, the Warrants or the Warrant Shares or, except
as contemplated herein, any of the assets of the Company, or (ii) entitle the
holders of Outstanding Capital Shares to preemptive or other rights to subscribe
for or acquire the Capital Shares or other securities of the Company. The Put
Shares, the Warrants and the Warrant Shares shall not subject the Investor to
personal liability to the Company or its creditors by reason of the possession
thereof.
Section 4.7 No 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 Put Shares, the Warrants and the Warrant Shares, do not and will not (i)
result in a violation of the Company's Articles of Incorporation or By-Laws or
(ii) conflict with, or constitute a material default (or an event that with
notice or lapse of time or both would become a default) under, or give to others
any rights of termination, amendment, acceleration or cancellation of, any
material agreement, indenture or instrument, or any "lock-up" or similar
provision of any underwriting or similar agreement to which the Company is a
party, or (iii) result in a violation of any federal, state or local law, rule,
regulation, order, judgment or decree (including federal and state securities
laws and regulations) applicable to the Company or by which any material
property or asset of the Company is bound or affected, nor is the Company
otherwise in violation of, conflict with or default under any of the foregoing
(except in each case for such conflicts, defaults, terminations, amendments,
accelerations, cancellations and violations as would not have, individually or
in the aggregate, a Material Adverse Effect). The business of the Company is not
being conducted in violation of any law, ordinance or regulation of any
governmental entity, except for possible violations that either singly or in the
aggregate would not have a Material Adverse Effect. The Company is not required
under any Federal, state or local law, rule or regulation to obtain any consent,
authorization or order of, or make any filing or registration with, any court or
governmental agency in order for it to execute, deliver or perform any of its
obligations under this Agreement or issue and sell the Put Shares or the
Warrants in accordance with the terms hereof (other than any SEC, Principal
Market or state securities filings that may be required to be made by the
Company subsequent to the initial Closing, any registration statement that may
be filed pursuant hereto, and any shareholder approval required by the rules
applicable to companies whose common stock trades on the Principal Market);
provided that, for purposes of the representation made in this sentence, the
Company is assuming and relying upon the accuracy of the relevant
representations and agreements of the Investor herein.
11
Section 4.8 No Material Adverse Change. Since September 30, 1999, no
Material Adverse Effect has occurred or exists with respect to the Company,
except as disclosed in the SEC Documents.
Section 4.9 No Undisclosed Events or Circumstances. Since September 30,
1999, no event or circumstance has occurred or exists with respect to the
Company or its businesses, properties, prospects, operations or financial
condition, that, under applicable law, rule or regulation, requires public
disclosure or announcement prior to the date hereof by the Company but which has
not been so publicly announced or disclosed in the SEC Documents.
Section 4.10 Litigation and Other Proceedings. Except as disclosed in
the SEC Documents or the Disclosure Schedule, there are no lawsuits or
proceedings pending or, to the knowledge of the Company, threatened, against the
Company or any subsidiary, nor has the Company received any written or oral
notice of any such action, suit, proceeding or investigation, which could
reasonably be expected to have a Material Adverse Effect. Except as set forth in
the SEC Documents, no judgment, order, writ, injunction or decree or award has
been issued by or, to the knowledge of the Company, requested of any court,
arbitrator or governmental agency which could result in a Material Adverse
Effect.
Section 4.11 No Misleading or Untrue Communication. The Company and, to
the knowledge of the Company, any person representing the Company, or any other
person selling or offering to sell the Put Shares or the Warrants in connection
with the transaction contemplated by this Agreement, have not made, at any time,
any oral communication in connection with the offer or sale of the same which
contained any untrue statement of a material fact or omitted to state any
material fact necessary in order to make the statements, in the light of the
circumstances under which they were made, not misleading.
Section 4.12 Material Non-Public Information. The Company has not
disclosed to the Investor any material non-public information that (i) if
disclosed publicly, would reasonably be expected to have a material effect on
the price of the Common Stock or (ii) according to applicable law, rule or
regulation, should have been disclosed publicly by the Company prior to the date
hereof but which has not been so disclosed.
Section 4.13 Insurance. The Company and each subsidiary maintains
property and casualty, general liability, workers' compensation, environmental
hazard, personal injury and other similar types of insurance with financially
sound and reputable insurers that is adequate, consistent with industry
standards and the Company's historical claims experience. The Company has not
received notice from, and has no knowledge of any threat by, any insurer (that
has issued any insurance policy to the Company) that such insurer intends to
deny coverage under or cancel, discontinue or not renew any insurance policy
presently in force.
Section 4.14 Tax Matters.
------------
The Company and each subsidiary has filed all Tax Returns which it is
required to file under applicable laws; all such Tax Returns are true and
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accurate and has been prepared in compliance with all applicable laws; the
Company has paid all Taxes due and owing by it or any subsidiary (whether or not
such Taxes are required to be shown on a Tax Return) and have withheld and paid
over to the appropriate taxing authorities all Taxes which it is required to
withhold from amounts paid or owing to any employee, stockholder, creditor or
other third parties; and since December 31, 1998, the charges, accruals and
reserves for Taxes with respect to the Company (including any provisions for
deferred income taxes) reflected on the books of the Company are adequate to
cover any Tax liabilities of the Company if its current tax year were treated as
ending on the date hereof.
No claim has been made by a taxing authority in a jurisdiction where
the Company does not file tax returns that the Company or any subsidiary is or
may be subject to taxation by that jurisdiction. There are no foreign, federal,
state or local tax audits or administrative or judicial proceedings pending or
being conducted with respect to the Company or any subsidiary; no information
related to Tax matters has been requested by any foreign, federal, state or
local taxing authority; and, except as disclosed above, no written notice
indicating an intent to open an audit or other review has been received by the
Company or any subsidiary from any foreign, federal, state or local taxing
authority. There are no material unresolved questions or claims concerning the
Company's Tax liability. The Company (A) has not executed or entered into a
closing agreement pursuant to ss. 7121 of the Internal Revenue Code or any
predecessor provision thereof or any similar provision of state, local or
foreign law; or (B) has not agreed to or is required to make any adjustments
pursuant to ss. 481 (a) of the Internal Revenue Code or any similar provision of
state, local or foreign law by reason of a change in accounting method initiated
by the Company or any of its subsidiaries 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 ss. 897(c)(2) of the Internal Revenue Code
during the applicable period specified in ss. 897(c)(1)(A)(ii) of the Internal
Revenue Code.
The Company has not made an election underss. 341(f) of the Internal
Revenue Code. The Company is not liable for the Taxes of another person that is
not a subsidiary of the Company under (A) Treas. Reg. ss. 1.1502-6 (or
comparable provisions of state, local or foreign law), (B) as a transferee or
successor, (C) by contract or indemnity or (D) otherwise. The Company is not a
party to any tax sharing agreement. The Company has not made any payments, is
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 ss. 280G of the Internal
Revenue Code.
For purposes of this Section 4.14:
"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
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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 4.15 Property. Neither the Company nor any of its subsidiaries
owns any real property, except that Xxxxxxxx Pharmatec owns a building subject
to a $200,000 mortgage. Each of the Company and its subsidiaries has good and
marketable title to all personal property owned by it, free and clear of all
liens, encumbrances and defects except such as do not materially affect the
value of such property and do not materially interfere with the use made and
proposed to be made of such property by the Company; and to the Company's
knowledge any real property and buildings held under lease by the Company as
tenant are held by it under valid, subsisting and enforceable leases with such
exceptions as are not material and do not interfere with the use made and
intended to be made of such property and buildings by the Company.
Section 4.16 Intellectual Property. To the best of the Company's
knowledge, each of the Company and its subsidiaries owns or possesses adequate
and enforceable rights to use all patents, patent applications, trademarks,
trademark applications, trade names, service marks, copyrights, copyright
applications, licenses, know-how (including trade secrets and other unpatented
and/or unpatentable proprietary or confidential information, systems or
procedures) and other similar rights and proprietary knowledge (collectively,
"Intangibles") necessary for the conduct of its business as now being conducted.
To the Company's knowledge, except as disclosed in the SEC Documents neither the
Company nor any of its subsidiaries is infringing upon or in conflict with any
right of any other person with respect to any Intangibles. Except as disclosed
in the SEC Documents, no adverse claims have been asserted by any person to the
ownership or use of any Intangibles and the Company has no knowledge of any
basis for such claim.
Section 4.17 Internal Controls and Procedures. The Company maintains
books and records and internal accounting controls which provide reasonable
assurance that (i) all transactions to which the Company or any subsidiary is a
party or by which its properties are bound are executed with management's
authorization; (ii) the recorded accounting of the Company's consolidated assets
is compared with existing assets at regular intervals; (iii) access to the
Company's consolidated assets is permitted only in accordance with management's
authorization; and (iv) all transactions to which the Company or any subsidiary
is a party or by which its properties are bound are recorded as necessary to
permit preparation of the financial statements of the Company in accordance with
U.S. generally accepted accounting principles.
Section 4.18 Payments and Contributions. Neither the Company, any
subsidiary, nor any of its directors, officers or, to its knowledge, other
employees has (i) used any Company funds for any unlawful contribution,
endorsement, gift, entertainment or other unlawful expense relating to political
activity; (ii) made any direct or indirect unlawful payment of Company funds to
any foreign or domestic government official or employee; (iii) violated or is in
violation of any provision of the Foreign Corrupt Practices Act of 1977, as
amended; or (iv) made any bribe, rebate, payoff, influence payment, kickback or
other similar payment to any person with respect to Company matters.
14
Section 4.19 No Misrepresentation. The representations and warranties of the
Company contained in this Agreement, any schedule, annex or exhibit hereto and
any agreement, instrument or certificate furnished by the Company to the
Investor pursuant to this Agreement, do not contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading.
ARTICLE V
Covenants of the Investor
Investor covenants with the Company that:
Section 5.1 Compliance with Law. The Investor's trading activities with
respect to shares of the Company's Common Stock will be in compliance with all
applicable state and federal securities laws, rules and regulations and rules
and regulations of the Principal Market on which the Company's Common Stock is
listed. Without limiting the generality of the foregoing, the Investor agrees
that it will, whenever required by federal securities laws, deliver the
prospectus included in the Registration Statement to any purchaser of Put Shares
from the Investor.
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 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 commencement of the Commitment
Period) to list the Put 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 Put Shares and the
Warrant Shares and will take such other action as is necessary or desirable in
the opinion of the investor to cause the 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 Trading
Day of the Company's receipt thereof.
15
Section 6.3 Exchange Act Registration. The Company will cause its
Common Stock to continue to be registered under Section 12(g) or 12(b) of the
Exchange Act, will use its best efforts to comply in all respects with its
reporting and filing obligations under the Exchange Act, and will not take any
action or file any document (whether or not permitted by Exchange Act or the
rules thereunder) to terminate or suspend such registration or to terminate or
suspend its reporting and filing obligations under said Act.
Section 6.4 Legends. The certificates evidencing the Common Stock to be
sold to the Investor shall be free of restrictive legends.
Section 6.5 Corporate Existence. The Company will take all steps
necessary to preserve and continue the corporate existence of the Company.
Section 6.6 Additional SEC Documents. During the Commitment Period, the Company
will deliver to the Investor, as and when the originals thereof are submitted to
the SEC for filing, copies of all SEC Documents so furnished or submitted to the
SEC, or else notify the Investor that such documents are available on the XXXXX
system.
Section 6.7 Notice of Certain Events Affecting Registration; Suspension
of Right to Make a Put. The Company will immediately notify the Investor upon
the occurrence of any of the following events in respect of a registration
statement or related prospectus in respect of an offering of Registrable
Securities; (i) receipt of any request for additional information from the SEC
or any other federal or state governmental authority during the period of
effectiveness of the Registration Statement the response to which would require
any amendments or supplements to the registration statement or related
prospectus; (ii) the issuance by the SEC or any other federal or state
governmental authority of any stop order suspending the effectiveness of the
Registration Statement or the initiation of any proceedings for that purpose;
(iii) receipt of any notification with respect to 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 or amendment to the related prospectus. The Company
shall not deliver to the Investor any Put Notice during the continuation of any
of the foregoing events.
Section 6.8 Expectations Regarding Put Notices. Within ten (10) days
after the commencement of each calendar quarter occurring subsequent to the
commencement of the Commitment Period, the Company must notify the Investor, in
writing, as to its reasonable expectations as to the dollar amount it intends to
raise during such calendar quarter, if any, through the issuance of Put Notices.
16
Such notification shall constitute only the Company's good faith estimate and
shall in no way obligate the Company to raise such amount, or any amount, or
otherwise limit its ability to deliver Put Notices. The failure by the Company
to comply with this provision can be cured by the Company's notifying the
Investor, in writing, at any time as to its reasonable expectations with respect
to the current calendar quarter.
Section 6.9 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.
ARTICLE VII
Conditions to Delivery of Puts
and Conditions to Closing
Section 7.1 Conditions Precedent to the Obligation of the Company to
Issue and Sell Common Stock. The obligation hereunder of the Company to issue
and sell the Put Shares to the Investor incident to each Closing is subject to
the satisfaction, at or before each such Closing, of each of the conditions set
forth below.
(a) Accuracy of the Investor's Representation
and Warranties. The representations and warranties of the Investor shall be true
and correct in all material respects as of the date of this Agreement and as of
the date of each such Closing as though made at each such time.
(b) Performance by the Investor. The Investor
shall have performed, satisfied and complied in all material respects with all
covenants, agreements and conditions required by this Agreement to be performed,
satisfied or complied with by the Investor at or prior to such Closing, and
Investor shall provide a certificate to the Company, substantially in the form
of that delivered by the Investor at the Closing of the sale of the Initial
Shares, to such effect.
Section 7.2 Conditions Precedent to the Right of the Company to Deliver
a Put Notice and the Obligation of the Investor to Purchase Put Shares. The
right of the Company to deliver a Put Notice and the obligation of Investor
hereunder to acquire and pay for the Put Shares incident to a Closing is subject
to the satisfaction, on both (i) the date of delivery of such Put Notice and
(ii) the applicable Closing Date (each a "Condition Satisfaction Date"), of each
of the following conditions:
17
(a) Closing Certificate. All representations and
warranties of the Company contained herein shall remain true and correct as of
the Closing Date as though made as of such date and the Company shall have
delivered into escrow an Officer's Certificate signed by its Chief Executive
Officer certifying that all of the Company's representations and warranties
herein remain true and correct as of the Closing Date and that the Company has
performed all covenants and satisfied all conditions to be performed or
satisfied by the Company prior to such Closing;
(b) Blue Sky. The Company shall have obtained
all permits and qualifications required by any state for the offer and sale of
the Common Stock to the Investor and by the Investor as set forth in the
Registration Rights Agreement or shall have the availability of exemptions
therefrom;
(c) Delivery of Put Shares. Delivery into escrow
or to DTC of the Put Shares;
(d) Opinion of Counsel. Receipt by the Investor
of an opinion of counsel to the Company, in the form of Exhibit D hereto; and
(e) Transfer Agent. Delivery to the Company's
transfer agent of instructions to such transfer agent in form and substance
reasonably satisfactory to the Investor.
(f) Registration of the Common Stock with the
SEC. The Registration Statement shall have previously become effective and shall
remain effective and available for making resales of the Put Shares and Warrant
Shares by the Investor on each Condition Satisfaction Date and (i) neither the
Company nor the Investor shall have received notice that the SEC has issued or
intends to issue a stop order with respect to the Registration Statement or that
the SEC otherwise has suspended or withdrawn the effectiveness of the
Registration Statement, either temporarily or permanently, or intends or has
threatened to do so (unless the SEC's concerns have been addressed and the
Investor is reasonably satisfied that the SEC no longer is considering or
intends to take such action), and (ii) no other suspension of the use or
withdrawal of the effectiveness of the Registration Statement or related
prospectus shall exist.
(g) Authority. The Company will satisfy all laws
and regulations pertaining to the sale and issuance of the Put Shares.
(h) Performance by the Company. The Company shall
have performed, satisfied and complied in all material respects with all
covenants, agreements and conditions required by this Agreement, the
Registration Rights Agreement and the Escrow Agreement to be performed,
satisfied or complied with by the Company at or prior to each Condition
Satisfaction Date.
(i) No Injunction. No statute, rule, regulation,
executive order, decree, ruling or injunction shall have been enacted, entered,
promulgated or endorsed by any court or governmental authority of competent
jurisdiction that prohibits or directly and adversely affects any of the
transactions contemplated by this Agreement, and no proceeding shall have been
commenced that may have the effect of prohibiting or adversely affecting any of
the transactions contemplated by this Agreement.
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(j) Adverse Changes. Since the date of filing of
the Company's most recent SEC Document, no event that had or is reasonably
likely to have a Material Adverse Effect has occurred.
(k) No Suspension of Trading In or Delisting of
Common Stock. The trading of the Common Stock (including, without limitation,
the Put Shares) is not suspended by the SEC or the Principal Market, and the
Common Stock (including, without limitation, the Put Shares) shall have been
approved for listing or quotation on and shall not have been delisted from the
Principal Market. The issuance of shares of Common Stock with respect to the
applicable Closing, if any, shall not violate the shareholder approval
requirements of the Principal Market. The Company shall not have received any
notice threatening to delist the Common Stock from the Principal Market.
(l) No Knowledge. The Company has no knowledge
of any event more likely than not to have the effect of causing such
Registration Statement to be suspended or otherwise ineffective (which event is
reasonably likely to occur within the thirty (30) Trading Days following the
Trading Day on which such Notice is deemed delivered).
(m) Trading Cushion. The Trading Cushion shall
have elapsed since the next preceding Put Date.
(n) Other. On each Condition Satisfaction Date,
the Investor shall have received and been reasonably satisfied with such other
certificates and documents as shall have been reasonably requested by the
Investor in order for the Investor to confirm the Company's satisfaction of the
conditions set forth in this Section 7.2.
ARTICLE VIII
Due 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 conduct initial and ongoing due diligence with respect to the
Company and the accuracy of the Registration Statement.
19
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. 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) 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
Transfer Agent Instructions
Section 9.1 Transfer Agent Instructions. Upon each Closing, the Company
will issue to the transfer agent for its Common Stock (and to any substitute or
replacement transfer agent for its Common Stock upon the Company's appointment
of any such substitute or replacement transfer agent) instructions to deliver
the Put Shares without restrictive legends to the Escrow Agent.
20
Section 9.2 No Legend or Stock Transfer Restrictions. No legend shall be
placed on the share certificates representing the Put Shares 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.
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 Put Shares.
ARTICLE X
Choice of Law
Section 10.1 Governing Law/Arbitration. This Agreement shall be governed by
and construed in accordance with the laws of the State of New York applicable to
contracts made in New York by persons domiciled in New York City and without
regard to its principles of conflicts of laws. Any dispute under this Agreement
or any Exhibit attached hereto shall be submitted to arbitration under the
American Arbitration Association (the "AAA") in New York City, New York, and
shall be finally and conclusively determined by the decision of a board of
arbitration consisting of three (3) members (hereinafter referred to as the
"Board of Arbitration") selected as according to the rules governing the AAA.
The Board of Arbitration shall meet on consecutive business days in New York
City, New York, and shall reach and render a decision in writing (concurred in
by a majority of the members of the Board of Arbitration) with respect to the
amount, if any, which the losing party is required to pay to the other party in
respect of a claim filed. In connection with rendering its decisions, the Board
of Arbitration shall adopt and follow the laws of the State of New York. To the
extent practical, decisions of the Board of Arbitration shall be rendered no
more than thirty (30) calendar days following commencement of proceedings with
respect thereto. The Board of Arbitration shall cause its written decision to be
delivered to all parties involved in the dispute. The Board of Arbitration shall
be authorized and is directed to enter a default judgment against any party
refusing to participate in the arbitration proceeding within thirty days of any
deadline for such participation. Any decision made by the Board of Arbitration
(either prior to or after the expiration of such thirty (30) calendar day
period) shall be final, binding and conclusive on the parties to the dispute,
and entitled to be enforced to the fullest extent permitted by law and entered
in any court of competent jurisdiction. The prevailing party shall be awarded
its costs, including attorneys' fees, from the non-prevailing party as part of
the arbitration award. Any party shall have the right to seek injunctive relief
from any court of competent jurisdiction in any case where such relief is
available. The prevailing party in such injunctive action shall be awarded its
costs, including attorney's fees, from the non-prevailing party.
ARTICLE XI
Assignment
Section 11.1 Assignment. Neither this Agreement nor any rights of the
Investor or the Company hereunder may be assigned by either party to any other
person except by operation of law. Notwithstanding the foregoing, upon the prior
written consent of the Company, which consent shall not unreasonably be withheld
or delayed in the case of an assignment to an affiliate of the Investor, the
21
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 hereby.
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. 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 Medisys Technologies, Inc.: 000 Xxxxxxxx Xxxxxx
Xxxxx Xxxxx, Xxxxxxxxx 00000
Attention: Xxxxxx X. Xxxxxxxxxx
Telephone: (000) 000-0000
Facsimile: (000)000-0000
if to the Investor: Treadstone Investments Limited
c/o Dr. Xx. Xxxxxxxx & Partner
Xxxxxxxxxxxx 00, Xxxxxxxx 00
XX-0000 Xxxxx
Furstentum Liechtenstein
Telephone: 000-000-000-0000
Facsimile: 000-000-000-0000
with a copy to: Xxxxxx X. Xxxxx, Esq.
(shall not constitute notice) Xxxxxxx Xxxxxx & Green, P.C.
000 Xxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
22
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
Miscellaneous
Section 13.1 Counterparts/ Facsimile/ Amendments. This Agreement may be
executed in multiple counterparts, each of which may be executed by less than
all of the parties and shall be deemed to be an original instrument which shall
be enforceable against the parties actually executing such counterparts and all
of which together shall constitute one and the same instrument. Except as
otherwise stated herein, in lieu of the original documents, a facsimile
transmission or copy of the original documents shall be as effective and
enforceable as the original. This Agreement may be amended only by a writing
executed by all parties.
Section 13.2 Entire Agreement. This Agreement, the Exhibits hereto, which
include, but are not limited to the Escrow Agreement, the Registration Rights
Agreement and the Warrants, set forth the entire agreement and understanding of
the parties relating to the subject matter hereof and supersedes all prior and
contemporaneous agreements, negotiations and understandings between the parties,
both oral and written relating to the subject matter hereof. The terms and
conditions of all Exhibits to this Agreement are incorporated herein by this
reference and shall constitute part of this Agreement as is fully set forth
herein.
Section 13.3 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 13.4 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 13.5 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 13.6 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 Put 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.
23
Section 13.7 Fees and Expenses. Each of the Company and the Investors
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 Investors' counsel in the amount of $15,000 plus $1,500 per
Closing of a Put.
Section 13.8 Brokerage. Each of the parties hereto represents that it has
had no dealings in connection with this transaction with any finder or broker
who will demand payment of any fee or commission from the other party except
Jesup & Xxxxxx Securities Corporation 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.
Section 13.9 Publicity. The Company agrees that it will not issue any press
release or other public announcement of the transactions contemplated by this
Agreement without the prior consent of the Investor, which shall not be
unreasonably withheld nor delayed by more than two (2) Trading Days from its
receipt of such proposed release; provided, however, that if the Company is
advised by its outside counsel that it is required by law or the applicable
rules of any Principal Market to issue any such press release or public
announcement, then, it may do so without the prior consent of the Investor,
although it shall be required to provide prior notice (which may be by
telephone) to the Investor that it intends to issue such press release or public
announcement. No release shall name the Investor without its express consent.
Section 13.10 Effectiveness of Agreement. This Agreement shall become
effective only upon satisfaction of the conditions precedent to the Initial
Closing set forth in Article I of the Escrow Agreement.
24
IN WITNESS WHEREOF, the parties hereto have caused this Private Equity
Line of Credit Agreement to be executed by the undersigned, thereunto duly
authorized, as of the date first set forth above.
MEDISYS TECHNOLOGIES, INC.
By:/s/ Xxxxxx X. Xxxxxxxxxx
---------------------------
Xxxxxx X. Xxxxxxxxxx, Chairman and CEO
Treadstone Investments Limited
By:/s/ Xxxx Xxxxxxx
-------------------
Xxxx Xxxxxxx, Authorized Signatory
EXHIBIT A
ESCROW AGREEMENT
THIS ESCROW AGREEMENT (this "Agreement") is made as of February 24,
2000, by and among Medisys Technologies, Inc., a corporation incorporated under
the laws of the State of Utah, (the "Company"), Treadstone Investments Limited
("Investor"), and Xxxxxxx Xxxxxx & Green, P.C., (the "Escrow Agent").
Capitalized terms used but not defined herein shall have the meanings set forth
in the Private Equity Line of Credit Agreement referred to in the first recital.
W I T N E S S E T H:
WHEREAS, the Investor will from time to time as requested by the
Company, purchase shares of the Company's Common Stock from the Company as set
forth in that certain Private Equity Line of Credit Agreement (the "Purchase
Agreement") dated the date hereof between the Investor and the Company, which
will be issued as per the terms and conditions contained herein and in the
Purchase Agreement; and
WHEREAS, the Company and the Investor have requested that the Escrow
Agent hold in escrow and then distribute the initial documents and certain funds
which are conditions precedent to the effectiveness of the Purchase Agreement,
and have further requested that upon each exercise of a Put, the Escrow Agent
hold the relevant documents and the applicable purchase price pending receipt by
the Investor of certificates representing the securities issuable upon such Put;
25
NOW, THEREFORE, in consideration of the covenants and mutual promises
contained herein and other good and valuable consideration, the receipt and
legal sufficiency of which are hereby acknowledged and intending to be legally
bound hereby, the parties agree as follows:
ARTICLE XIV
TERMS OF THE ESCROW FOR THE INITIAL CLOSING
Section 14.1 The parties hereby agree to establish an escrow account with the
Escrow Agent whereby the Escrow Agent shall hold the funds and documents which
are referenced in Section 7.2 of the Purchase Agreement.
Section 14.2 At the Initial Closing, the Company shall deliver to the Escrow
Agent:
(i) the original Warrant certificate in the form of Exhibit D to the
Purchase Agreement;
(ii) the original executed Registration Rights Agreement in the form of
Exhibit C to the Purchase Agreement;
(iii) the original executed opinion of Xxxxxxx X. Xxxxxxx, counsel of the
Company, in the form of Exhibit E to the Purchase Agreement;
(iv) the sum of $15,000;
(v) the original executed Company counterpart of this Escrow Agreement;
(vi) the original executed Company counterpart of the Purchase Agreement;
and
(vii) a warrant certificate for 425,000 Warrants registered to Jesup & Xxxxxx
Securities Corporation (the "J&L Warrant").
Section 14.3 Upon receipt of the foregoing, and receipt of executed
counterparts from Investor of the Purchase Agreement, the Registration Rights
Agreement and this Escrow Agreement, the Escrow Agent shall enter the Exercise
Price, Commencement Date and Termination Date of the Warrant on the face of the
Warrant and immediately transfer the sum of fifteen thousand dollars ($15,000)
to Xxxxxxx Xxxxxx & Green, P.C. ("EB&G"), 000 Xxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx
00000 for the Investor's legal and administrative costs and the Escrow Agent
shall then arrange to have the Warrant certificate, the Purchase Agreement, this
Escrow Agreement, the Registration Rights Agreement and the opinion of counsel
delivered to the Investor and the J&L Warrant delivered to Jesup & Xxxxxx..
26
ARTICLE XV
TERMS OF THE ESCROW FOR EACH PUT
Section 15.1 (a)Each time the Company shall send a Put Notice to the
Investor as provided in the Purchase Agreement, it shall send a copy, by
facsimile, to the Escrow Agent.
(b) Each time the Investor shall purchase shares pursuant to
a Put, the Investor shall send the applicable Investment Amount of the Put
Shares to the Escrow Agent on or before the Closing Date for such Put. The
Company shall promptly, but no later than five (5) Trading Days after receipt of
notice from the Escrow Agent that it has the funds for the Investment Amount
cause its Transfer Agent to deliver the Put Shares to Investor's account through
the Depository Trust Company, if possible, or else to deliver such certificates
to the Escrow Agent. In the event that the certificates representing the Put
Shares are not in the Investor's or the Escrow Agent's possession within five
(5) Trading Days of the date of the Escrow Agent's notice, then Investor shall
have the right to demand, by notice, the return of the Investment Amount, and
the Put Notice shall be deemed cancelled. The Escrow Agent shall within one (1)
Trading Day of Closing wire the Investment Amount per the written instructions
of the Company net of:
(i) a brokerage fee equal to nine percent (9%) of the Investment Amount of
each Put, to Jesup & Xxxxxx Securities Corporation; and
(ii) One Thousand Five Hundred Dollars ($1,500) as escrow expenses to the
Escrow Agent.
The Escrow Agent shall remit Broker's fee to Broker in accordance with wire
instructions that will be sent to Escrow Agent from Broker.
ARTICLE XVI
MISCELLANEOUS
Section 16.1 No waiver or any breach of any covenant or provision herein
contained shall be deemed a waiver of any preceding or succeeding breach
thereof, or of any other covenant or provision herein contained. No extension of
time for performance of any obligation or act shall be deemed an extension of
the time for performance of any other obligation or act.
All notices or other communications required or permitted hereunder shall be in
writing, and shall be sent by fax, overnight courier, registered or certified
mail, postage prepaid, return receipt requested, and shall be deemed received
upon receipt thereof, as set forth in the Purchase Agreement.
27
Section 16.2 This Escrow Agreement shall be binding upon and shall inure to
the benefit of the permitted successors and permitted assigns of the parties
hereto.
Section 16.3 This Escrow Agreement is the final expression of, and contains
the entire agreement between, the parties with respect to the subject matter
hereof and supersedes all prior understandings with respect thereto. This Escrow
Agreement may not be modified, changed, supplemented or terminated, nor may any
obligations hereunder be waived, except by written instrument signed by the
parties to be charged or by their respective agents duly authorized in writing
or as otherwise expressly permitted herein.
Section 16.4 Whenever required by the context of this Escrow Agreement, the
singular shall include the plural and masculine shall include the feminine. This
Escrow Agreement shall not be construed as if it had been prepared by one of the
parties, but rather as if both parties had prepared the same. Unless otherwise
indicated, all references to Articles are to this Escrow Agreement.
Section 16.5 The parties hereto expressly agree that this Escrow Agreement
shall be governed by, interpreted under and construed and enforced in accordance
with the laws of the State of New York. Except as expressly set forth herein,
any action to enforce, arising out of, or relating in any way to, any provisions
of this Escrow Agreement shall brought through the American Arbitration
Association at the designated locale of New York, New York as is more fully set
forth in the Purchase Agreement.
Section 16.6 The Escrow Agent's duties hereunder may be altered, amended,
modified or revoked only by a writing signed by the Company, each Investor and
the Escrow Agent.
Section 16.7 The Escrow Agent shall be obligated only for the performance
of such duties as are specifically set forth herein and may rely and shall be
protected in relying or refraining from acting on any instrument reasonably
believed by the Escrow Agent to be genuine and to have been signed or presented
by the proper party or parties. The Escrow Agent shall not be personally liable
for any act the Escrow Agent may do or omit to do hereunder as the Escrow Agent
while acting in good faith, excepting only its own gross negligence or willful
misconduct, and any act done or omitted by the Escrow Agent pursuant to the
advice of the Escrow Agent's attorneys-at-law (other than Escrow Agent itself)
shall be conclusive evidence of such good faith.
Section 16.8 The Escrow Agent is hereby expressly authorized to disregard
any and all warnings given by any of the parties hereto or by any other person
or corporation, excepting only orders or process of courts of law and is hereby
expressly authorized to comply with and obey orders, judgments or decrees of any
court. In case the Escrow Agent obeys or complies with any such order, judgment
or decree, the Escrow Agent shall not be liable to any of the parties hereto or
to any other person, firm or corporation by reason of such decree being
subsequently reversed, modified, annulled, set aside, vacated or found to have
been entered without jurisdiction.
Section 16.9 The Escrow Agent shall not be liable in any respect on account
of the identity, authorization or rights of the parties executing or delivering
or purporting to execute or deliver the Purchase Agreement or any documents or
papers deposited or called for thereunder or hereunder.
28
Section 16.10 The Escrow Agent shall be entitled to employ such legal
counsel and other experts as the Escrow Agent may deem necessary properly to
advise the Escrow Agent in connection with the Escrow Agent's duties hereunder,
may rely upon the advice of such counsel, and may pay such counsel reasonable
compensation therefor. The Escrow Agent has acted as legal counsel for the
Investor, and may continue to act as legal counsel for the Investor, from time
to time, notwithstanding its duties as the Escrow Agent hereunder. The Company
consents to the Escrow Agent in such capacity as legal counsel for the Investors
and waives any claim that such representation represents a conflict of interest
on the part of the Escrow Agent. The Company understands that the Investor and
the Escrow Agent are relying explicitly on the foregoing provision in entering
into this Escrow Agreement.
Section 16.11 The Escrow Agent's responsibilities as escrow agent hereunder
shall terminate if the Escrow Agent shall resign by written notice to the
Company and the Investor. In the event of any such resignation, the Investors
and the Company shall appoint a successor Escrow Agent.
Section 16.12 If the Escrow Agent reasonably requires other or further
instruments in connection with this Escrow Agreement or obligations in respect
hereto, the necessary parties hereto shall join in furnishing such instruments.
Section 16.13 It is understood and agreed that should any dispute arise
with respect to the delivery and/or ownership or right of possession of the
documents or the escrow funds held by the Escrow Agent hereunder, the Escrow
Agent is authorized and directed in the Escrow Agent's sole discretion (1) to
retain in the Escrow Agent's possession without liability to anyone all or any
part of said documents or the escrow funds until such disputes shall have been
settled either by mutual written agreement of the parties concerned by a final
order, decree or judgment or a court of competent jurisdiction after the time
for appeal has expired and no appeal has been perfected, but the Escrow Agent
shall be under no duty whatsoever to institute or defend any such proceedings or
(2) to deliver the escrow funds and any other property and documents held by the
Escrow Agent hereunder to a state or federal court having competent subject
matter jurisdiction and located in the State and City of New York in accordance
with the applicable procedure therefor.
Section 16.14 The Company and the Investor agree jointly and severally to
indemnify and hold harmless the Escrow Agent and its partners, employees, agents
and representatives from any and all claims, liabilities, costs or expenses in
any way arising from or relating to the duties or performance of the Escrow
Agent hereunder or the transactions contemplated hereby or by the Purchase
Agreement other than any such claim, liability, cost or expense to the extent
the same shall have been determined by final, unappealable judgment of a court
of competent jurisdiction to have resulted from the gross negligence or willful
misconduct of the Escrow Agent.
29
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date written above.
MEDISYS TECHNOLOGIES, INC.
By:/s/ Xxxxxx X. Xxxxxxxxxx
---------------------------
Xxxxxx X. Xxxxxxxxxx, Chairman and CEO
Treadstone Investments Limited
By: /s/ Xxxx Xxxxxxx
--------------------
Xxxx Xxxxxxx, Authorized Signatory
ESCROW AGENT:
XXXXXXX XXXXXX & GREEN, P.C.
By: /s/ Xxxxxx X. Xxxxx
-----------------------
Xxxxxx X. Xxxxx,
Authorized Signatory
EXHIBIT B
PUT NOTICE/COMPLIANCE CERTIFICATE
Medisys Technologies, Inc.
The undersigned hereby certifies, with respect to shares of Common Stock of
Medisys Technologies, Inc. (the "Company") issuable in connection with this Put
Notice and Compliance Certificate dated _____________ (the "Notice"), delivered
pursuant to Article II of the Private Equity Line of Credit Agreement dated as
of February 24, 2000 (the "Agreement"), as follows:
1. The undersigned is the duly appointed Chief Executive Officer of the Company.
2. The representations and warranties of the Company set forth in the Agreement
are true and correct in all material respects as though made on and as of the
date hereof and all SEC Documents are as represented in Section 4.5 of the
Agreement.
3. The Company has performed in all material respects all covenants and
agreements to be performed by the Company on or prior to the date of this Put
Notice and has complied in all material respects with all obligations and
conditions contained in the Agreement.
4. The Investment Amount is $___________.
The undersigned has executed this Certificate this ____ day of ________, _____.
MEDISYS TECHNOLOGIES, INC.
--------------------
Chief Executive Officer
EXHIBIT C
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT, dated as of the 24th day of February, 2000,
between Treadstone Investments Limited ("Holder") and Medisys Technologies,
Inc., a corporation incorporated under the laws of the State of Utah (the
"Company").
WHEREAS, simultaneously with the execution and delivery of this
Agreement, pursuant to a Private Equity Line of Credit Agreement dated the date
hereof (the "Purchase Agreement") the Holder has committed to purchase up to
6,000,000 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 Put Shares and the Blackout Shares
issuable upon exercise of the Company's Put rights from time to time and the
Warrant Shares (hereinafter referred to as the "Put Shares" or "Stock" or
"Securities" of the Company).
NOW, THEREFORE, the parties hereto mutually agree as follows:
ARTICLE XVII Registrable Securities. As used herein the term "Registrable
Security" means the Securities until (i) all Put Shares and Warrant Shares have
been disposed of pursuant to the Registration Statement, (ii) all Put 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 Put Shares and Warrant Shares
have been otherwise transferred to persons who may trade such Securities without
restriction under the Securities Act, and the Company has delivered a new
certificate or other evidence of ownership for such Put Shares and Warrant
Shares not bearing a restrictive legend or (iv) such time as, in the opinion of
counsel to the Company, all Put 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. 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.
ARTICLE XVIII Restrictions on Transfer. The Holder acknowledges and understands
that in the absence of an effective Registration Statement authorizing the
resale 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, in form and
substance reasonably satisfactory to the Company, that such transfer may be made
without registration under the Securities Act or (ii) such registration.
With a view to making available to the Holder the benefits of Rule 144
under the 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:
32
Section 18.1 comply with the provisions of paragraph (c)(1) of Rule 144; and
Section 18.2 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.
ARTICLE XIX Registration Rights With Respect to the Securities.
Section 19.1 The Company agrees that it will prepare and file with the
Securities and Exchange Commission ("Commission"), within sixty (60) days after
the date hereof, a registration statement (on Form X-0, X-0, or other
appropriate form of registration statement) under the Securities Act (the
"Registration Statement"), at the sole expense of the Company (except as
provided in Section 3(c) hereof), so as to permit a public offering and resale
of the Securities under the Act by Holder.
The Company shall use its best efforts to cause the Registration
Statement to become effective within ninety (90) days from the date hereof, or,
if earlier, within five (5) days of SEC clearance to request acceleration of
effectiveness. If the Registration Statement is not declared effective by July
31, 2000, this Agreement and the Purchase Agreement shall terminate. The number
of shares designated in the Registration Statement to be registered shall be
8,250,000 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 Trading Day of such
event.
Section 19.2 The Company will maintain the Registration Statement or
post-effective amendment filed under this Section 3 hereof effective under the
Securities Act until the earlier of (i) the date that none of the Securities are
or may become issued and outstanding, (ii) the date that all of the Securities
have been sold pursuant to the Registration Statement, (iii) the date the
holders thereof receive an opinion of counsel to the Company, which counsel
shall be reasonably acceptable to the Holder, that the Securities may be sold
under the provisions of Rule 144 without limitation as to volume, (iv) all
Securities have been otherwise transferred to persons 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 (v) all Securities 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 in the opinion of counsel to the Company, which
counsel shall be reasonably acceptable to the Holder (the "Effectiveness
Period").
Section 19.3 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
of the Company) shall be borne by the Company. The Holder shall bear the cost of
underwriting and/or brokerage discounts, fees and commissions, if any,
applicable to the Securities being registered and the fees and expenses of its
33
counsel. The Holder and its counsel shall have a reasonable period, not to
exceed ten (10) Trading 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 within two (2) Trading Days of receipt thereof.
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, or which will require the Company to qualify to do
business in such state or require the Company to file therein any general
consent to service of process. The Company at its expense will supply the Holder
with copies of the Registration Statement and the prospectus included therein
and other related documents in such quantities as may be reasonably requested by
the Holder.
Section 19.4 The Company shall not be required by this Section 3 to include a
Holder's 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 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 Securities Act.
Section 19.5 The Company shall not include any other securities in any
Registration Statement in which it is required to include Securities pursuant to
this Section 3.
34
Section 19.6 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(g) below), the
Holder shall not offer or sell any Securities or engage in any other transaction
involving or relating to 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. 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 thirty (30) days. The Company must
give Holder notice in writing at least two (2) Trading Days prior to the first
day of the blackout period, if lawful to do so.
Section 19.7 "Potential Material Event" means any of the following: (a) the
possession by the Company of material information that is not ripe for
disclosure in a registration statement, as determined in good faith by the Chief
Executive Officer or the Board of Directors of the Company or 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.
ARTICLE XX 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 (which shall include all
information regarding the Holder and proposed manner of sale of the Registrable
Securities required to be disclosed in the Registration Statement) and executing
and returning all documents reasonably requested in connection with the
registration and sale of the Registrable Securities and entering 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. The Holder consents
to be named as a statutory underwriter in the Registration Statement.
ARTICLE XXI 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, subject to the
Holder's assistance and cooperation as reasonably required:
Section 21.1 (a) 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 Registrable 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
35
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.
Section 21.2 (a) 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 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, as applicable, 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;
Section 21.3 register and qualify the Registrable 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;
Section 21.4 list such Registrable Securities on the Primary Market, and any
other exchange on which the Common Stock of the Company is then listed, if the
listing of such Registrable Securities is then permitted under the rules of such
exchange;
Section 21.5 notify each Holder 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;
Section 21.6 as promptly as practicable after becoming aware of such event,
notify Holder (or, in the event of an underwritten offering, the managing
underwriters) of the issuance by the Commission or any state authority 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;
Section 21.7 cooperate with the Holder 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
Holder reasonably may request and registered in such names as the Holder may
request; and, within three Trading 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 Holder) an appropriate
instruction and, to the extent necessary, an opinion of such counsel;
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Section 21.8 take all such other lawful actions reasonably necessary to expedite
and facilitate the disposition by the Holder of its Registrable Securities in
accordance with the intended methods therefor provided in the prospectus which
are customary for issuers to perform under the circumstances;
Section 21.9 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
Section 21.10 maintain a transfer agent and registrar for its Common Stock.
ARTICLE XXII Indemnification.
Section 22.1 The Company agrees to indemnify and hold harmless the Holder and
each person, if any, who controls the Holder within the meaning of the
Securities Act ("Distributing Holder") against any losses, claims, damages or
liabilities, joint or several (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 Distributing
Holder may become subject, under the Securities 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 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 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
Securities 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
Securities Act or the rules and regulations promulgated thereunder. This
indemnity agreement will be in addition to any liability which the Company may
otherwise have.
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Section 22.2 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 Securities 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
Securities 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 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 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. This indemnity agreement will be in addition to any
liability which the Distributing Holder may otherwise have.
Section 22.3 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 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.
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ARTICLE XXIII Contribution. In order to provide for just and equitable
contribution under the Securities 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 Securities 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, 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 Securities Act) 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 net 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.
39
ARTICLE XXIV 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 delivered as set forth in 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.
ARTICLE XXV Assignment. Neither this Agreement nor any rights of the Holder 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 Common
Stock purchased by the Investor pursuant to the Purchase Agreement, and (b) upon
the prior written consent of the Company, which consent shall not be
unreasonably withheld or delayed in the case of an assignment to an affiliate of
the Holder, the Holder'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 Holder) who agrees to be bound hereby.
ARTICLE XXVI 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.
ARTICLE XXVII Counterparts/Facsimile. This Agreement may be executed in two or
more counterparts, each of which shall 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.
ARTICLE XXVIII 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.
ARTICLE XXIX 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
prevents the Company from complying with all of its obligations hereunder.
40
ARTICLE XXX 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.
ARTICLE XXXI Governing Law, Arbitration. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York applicable to
contracts made in New York by persons domiciled in New York City and without
regard to its principles of conflicts of laws. Any dispute under this Agreement
shall be submitted to arbitration under the American Arbitration Association
(the "AAA") in New York City, New York, and shall be finally and conclusively
determined by the decision of a board of arbitration consisting of three (3)
members (hereinafter referred to as the "Board of Arbitration") selected as
according to the rules governing the AAA. The Board of Arbitration shall meet on
consecutive business days in New York City, New York, and shall reach and render
a decision in writing (concurred in by a majority of the members of the Board of
Arbitration) with respect to the amount, if any, which the losing party is
required to pay to the other party in respect of a claim filed. In connection
with rendering its decisions, the Board of Arbitration shall adopt and follow
the laws of the State of New York. To the extent practical, decisions of the
Board of Arbitration shall be rendered no more than thirty (30) calendar days
following commencement of proceedings with respect thereto. The Board of
Arbitration shall cause its written decision to be delivered to all parties
involved in the dispute. The Board of Arbitration shall be authorized and is
directed to enter a default judgment against any party refusing to participate
in the arbitration proceeding with thirty days of any deadline for such
participation. Any decision made by the Board of Arbitration (either prior to or
after the expiration of such thirty (30) calendar day period) shall be final,
binding and conclusive on the parties to the dispute, and entitled to be
enforced to the fullest extent permitted by law and entered in any court of
competent jurisdiction. The non-prevailing party to any arbitration (as
determined by the Board of Arbitration) shall pay the expenses of the prevailing
party, including reasonable attorneys' fees, in connection with such
arbitration. Any party shall have the right to seek injunctive relief from any
court of competent jurisdiction in any case where such relief is available.
ARTICLE XXXII 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.
41
IN WITNESS WHEREOF, the parties hereto have caused this Registration
Rights Agreement to be duly executed, on the day and year first above written.
MEDISYS TECHNOLOGIES, INC.
By: /s/Xxxxxx X. Xxxxxxxxxx
-----------------------
Xxxxxx X. Xxxxxxxxxx, Chairman and CEO
Treadstone Investments Limited
By: /s/Xxxx Xxxxxxx
---------------
Xxxx Xxxxxxx, Authorized Signatory
EXHIBIT D
NEITHER THIS WARRANT NOR THE SHARES ISSUABLE UPON EXERCISE HEREOF HAVE BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT")
OR ANY OTHER APPLICABLE SECURITIES LAWS IN RELIANCE UPON AN EXEMPTION FROM THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND SUCH OTHER SECURITIES LAWS.
NEITHER THIS WARRANT NOR THE SHARES ISSUABLE UPON EXERCISE HEREOF MAY BE SOLD,
PLEDGED, TRANSFERRED, ENCUMBERED OR OTHERWISE DISPOSED OF EXCEPT PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR IN A TRANSACTION
WHICH IS EXEMPT FROM REGISTRATION UNDER THE PROVISIONS OF THE SECURITIES ACT.
42
STOCK PURCHASE WARRANT
To Purchase 1,125,000 Shares of Common Stock of
MEDISYS TECHNOLOGIES, INC.
THIS CERTIFIES that, for value received, TREADSTONE INVESTMENTS LIMITED (the
"Holder"), is entitled, upon the terms and subject to the conditions hereinafter
set forth, at any time on or after the earlier of (i) the effective date of the
Registration Statement or (ii) February 25, 2000 (the "Initial Exercise Date")
and on or prior to the close of business on February 25, 2003 (the "Termination
Date") but not thereafter, to subscribe for and purchase from Medisys
Technologies, Inc., a Utah corporation (the "Company"), up to one million one
hundred twenty-five thousand (1,125,000) shares (the "Warrant Shares") of Common
Stock, $.0005 par value, of the Company (the "Common Stock"). The purchase price
of one share of Common Stock (the "Exercise Price") under this Warrant shall be
$2.00. The Exercise Price and the number of shares for which the Warrant is
exercisable shall be subject to adjustment as provided herein. In the event of
any conflict between the terms of this Warrant and the Private Equity Line of
Credit Agreement dated February 24, 2000 pursuant to which this Warrant has been
issued (the "Purchase Agreement"), the Purchase Agreement shall control.
Capitalized terms used and not otherwise defined herein shall have the meanings
set forth for such terms in the Purchase Agreement.
43
ARTICLE XXXIII____
Title to Warrant. Prior to the Termination Date 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.
ARTICLE XXXIV 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).
ARTICLE XXXV Exercise of Warrant. Except as provided in Section 4 herein,
exercise of the purchase rights represented by this Warrant may be made at any
time or times on or after the Initial Exercise Date, and before the close of
business on the Termination Date. Exercise of this Warrant or any part hereof
shall be effected 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 wire transfer or cashier's check drawn on a United States bank, 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) Trading Days
after the date on which this Warrant shall have been exercised as aforesaid.
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 Exercise 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. If the Registration Statement is not then effective, this Warrant
may also be exercised by means of a "cashless exercise" in which the holder
shall be entitled to receive a certificate for the number of shares equal to the
quotient obtained by dividing [(A-B) (X)] by (A), where:
(A) = the average of the high and low trading prices per share of Common Stock
on the Trading Day preceding the date of such election;
(B) = the Exercise Price of the Warrants; and
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(X) = the number of shares issuable upon exercise of the Warrants in accordance
with the terms of this Warrant.
ARTICLE XXXVI 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 Exercise Price.
ARTICLE XXXVII 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 the Company may require, as a condition thereto, the payment of a
sum sufficient to reimburse it for any transfer tax incidental thereto.
ARTICLE XXXVIII Closing of Books. The Company will not close its shareholder
books or records in any manner which prevents the timely exercise of this
Warrant.
ARTICLE XXXIX 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 or denominations 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 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.
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(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.
ARTICLE XL 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 hereof. 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.
ARTICLE XLI Loss, Theft, Destruction or Mutilation of Warrant. The Company
covenants 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
(which shall not include the posting of any bond), 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.
ARTICLE XLII 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.
ARTICLE XLIII Adjustments of Exercise Price and Number of Warrant Shares. (a)
Stock Splits, etc. 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) pay a dividend in shares of Common Stock or make a
46
distribution in shares of Common Stock to holders of its outstanding Common
Stock, (ii) subdivide its outstanding shares of Common Stock into a greater
number of 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 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 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.
Section 43.2 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 this 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 in good faith 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.
47
ARTICLE XLIV 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.
ARTICLE XLV 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 the absence
of manifest error, shall be conclusive evidence of the correctness of such
adjustment.
ARTICLE XLV 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, 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
16(d).
ARTICLE XLVII 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 the Principal Market
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 all commercially
reasonable 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 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.
48
ARTICLE XLVIII Miscellaneous.
Section 48.1 Jurisdiction. 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 Purchase
Agreement.
Section 48.2 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.
Section 48.3 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 willfully fails to comply with any material 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.
Section 48.4 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 Purchase Agreement.
Section 48.5 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.
Section 48.6 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.
Section 48.7 Successors and Assigns. Subject to applicable securities laws,
this Warrant and the rights and obligations evidenced hereby shall inure to the
benefit of and be binding upon the successors of the Company and the successors
and permitted 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 Shares.
49
Section 48.8 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.
Section 48.9 Amendment. This Warrant may be modified or amended or the
provisions hereof waived with the written consent of the Company and the Holder.
Section 48.10 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.
Section 48.11 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: February __, 2000
MEDISYS TECHNOLOGIES, INC.
By: /s/Xxxxxx X. Xxxxxxxxxx
-----------------------
Xxxxxx X. Xxxxxxxxxx, Chairman and CEO
50
NY:96583.2
NOTICE OF EXERCISE
To: Medisys Technologies, Inc.
(1)______The undersigned hereby elects to purchase ________ shares of Common
Stock (the "Common Stock"), of Medisys Technologies, 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:
51
------------------------------
Signature
4
NY:96583.2
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:
--------------------------
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 other representative
capacity should file proper evidence of authority to assign the foregoing
Warrant.
