EXHIBIT 3
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SECURITIES PURCHASE AGREEMENT
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THIS SECURITIES PURCHASE AGREEMENT (the "Agreement") is made as of
February 9, 2006 by and among Artisoft, Inc., a Delaware corporation (the
"Company"), and the investors set forth on Exhibit A hereto (individually, an
"Investor" and collectively, the "Investors").
WITNESSETH:
WHEREAS, the Company desires to sell to the Investors, and the
Investors desire to purchase from the Company (the "Offering"): (i) 5,000 shares
(the "Shares") of Series D Convertible Preferred Stock, par value $1.00 per
share, of the Company (the "Series D Preferred Stock") at a price per share of
$1,000.00 and (ii) warrants (the "Warrants") to purchase an aggregate of
1,041,667 shares of common stock, par value $0.01 per share, of the Company (the
"Common Stock"), for a total purchase price of $5,000,000.00 pursuant to the
terms of this Agreement; and
WHEREAS, the parties hereto desire to enter into this Agreement for the
purpose of setting forth certain representations, warranties and covenants made
by each to the other as an inducement to the execution and delivery of this
Agreement and the conditions precedent to the consummation of the transactions
set forth in this Agreement.
NOW, THEREFORE, in consideration of the premises and of the mutual
provisions, agreements and covenants contained herein and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
ARTICLE I
PURCHASE AND SALE OF THE SHARES AND WARRANTS
1.1 Authorization and Sale of the Shares and Warrants. Subject to the
terms and conditions set forth in this Agreement, the Company has authorized the
sale of up to 5,000 Shares. The shares of Common Stock issuable upon conversion
of the Shares are referred to as "Preferred Conversion Shares", the shares of
the Company's Common Stock issuable upon the exercise of the Warrants are
referred to the "Warrant Shares" and the Preferred Conversion Shares and the
Warrant Shares are collectively referred to as the "Conversion Shares".
1.2 Agreement to Sell and Purchase the Shares and Warrants. Subject to
the terms and conditions of this Agreement, each Investor, severally and not
jointly, agrees to purchase at the Closing (as such term is defined in Section
1.3), and the Company agrees to issue and sell to such Investor at the Closing,
for the purchase price set forth opposite such Investor's name on Exhibit A,
that number of Shares and Warrants set forth opposite such Investor's name on
Exhibit A.
1.3 Delivery of the Shares and Warrants at Closing.
(a) Except as set forth in this Section 1.3, the completion of
the purchase and sale of the Shares and the Warrants (the "Closing") shall occur
on the date hereof (the "Closing Date"), at the offices of Xxxxxxx Procter LLP,
00 Xxxxx Xxxxxx, Xxxxxx, XX 00000 at 10:00 AM Eastern time, or at such other
time and place as may be mutually agreed upon by the Company and the Investors.
At the Closing, the Company shall (1) either (x) deliver to the Investors one or
more stock certificates representing the number of Shares set forth on Exhibit
A, each such certificate to be registered in the
Securities Purchase Agreement - Page 2
name of each Investor or, if so indicated on the signature page of this
Agreement, in the name of a nominee designated by such Investor or (y) direct
its transfer agent to deliver such certificates to the Investors (at the address
of each Investor set forth on the signature pages hereto) within three (3)
business days after the Closing Date; and (2) deliver to each Investor a Warrant
substantially in the form attached hereto as Exhibit B to purchase the number of
shares of Common Stock set forth opposite such Investor's name on Exhibit A or,
if so indicated on the signature page of this Agreement, in the name of a
nominee designated by such Investor.
(b) The Company's obligation to issue the Shares and the
Warrants to the Investors shall be subject to the following conditions, any one
or more of which may be waived by the Company: (1) receipt by the Company of a
wire transfer of funds to an account designated by the Company in the full
amount of the purchase price for all of the Shares and Warrants being purchased
hereunder as set forth on Exhibit A; and (2) the accuracy of the representations
and warranties made by the Investors and the satisfaction of the undertakings of
the Investors to be fulfilled prior to the Closing.
(c) The Investors' obligations to purchase the Shares and the
Warrants shall be subject to the following conditions, any one or more of which
may be waived by any Investor hereunder as to itself only: (1) the Company
having authorized, unissued and unreserved shares sufficient to permit issuance
of all of the Shares proposed to be sold hereunder; (2) the representations and
warranties of the Company set forth herein shall be true, correct and complete
as of the Closing Date in all respects (except for representations and
warranties that speak as of a specific date, which representations and
warranties shall be true, correct and complete as of such date); (3) performance
and compliance by the Company with all covenants, agreements obligations and
conditions required to be performed on or before the date hereof; (4) the
execution of the Consent and Waiver, in the form attached hereto as Exhibit C
(the "Consent and Waiver") providing for, among other things, the consent and
waiver of certain rights and obligations, by the Company and the parties
thereto; (5) the execution of the individual Voting Agreements in the form
attached hereto as Exhibit D-1 by and between the Company and certain of the
Investors (collectively, the "Voting Agreements") or Amendment No. 1 to Voting
Agreement in the form attached hereto as Exhibit D-2 by and between and certain
of the Investors (collectively, the "Amended Voting Agreements"); (6) the
Investors shall have received such documents as the Investors shall reasonably
have requested, including, a standard opinion of Company counsel as to the
matters set forth in the form attached as Exhibit E hereto and as to exemption
from the registration requirements of the Securities Act of 1933, as amended
(the "Securities Act"), of the sale of the Shares and the Warrants; (7) the
Company shall have caused the Certificate of Powers, Designations, Preferences
and Rights of the Series D Preferred Stock in the form attached hereto as
Exhibit F (the "Certificate of Designations") to be duly adopted and approved by
the Company's Board of Directors (the "Board of Directors") and to be duly filed
with the Secretary of State of the State of Delaware (and the Investors shall
have received written confirmation of the same certified by the Secretary of
State of the State of Delaware); and (8) the Company and Silicon Valley Bank
("SVB") shall have executed all necessary amendments, waivers and/or consents
relating to certain loan documents and related documentation between the Company
and SVB evidencing SVB's consent and approval of the transactions contemplated
hereby (such amendments, waivers and/or consents are collectively as the "SVB
Documents"), all in form and substance acceptable to the Investors and the
Investors shall have received copies of all executed SVB Documents. The
Warrants, the Consent and Waiver, the Voting Agreements, the Amended Voting
Agreements and the SVB Documents shall collectively be referred to herein as the
"Ancillary Agreements."
Securities Purchase Agreement - Page 3
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Except as disclosed by the Company in a written Disclosure Schedule
provided by the Company to the Investors (the "Disclosure Schedule"), the
Company hereby represents, warrants and covenants to the Investors, as follows:
2.1 Organization. The Company is duly organized and validly existing in
good standing under the laws of the jurisdiction of its organization. Each of
the Company and its Subsidiaries (as defined in Rule 405 under the Securities
Act) has all requisite corporate power and authority to own, operate and occupy
its properties and to conduct its business as presently conducted and as
described in the documents filed by the Company under the Securities Exchange
Act of 1934, as amended, and the rules and regulations promulgated thereunder
(the "Exchange Act"), since June 30, 2004 through the date hereof, including,
without limitation, its most recent report on Form 10-K (the "Exchange Act
Documents") and is registered or qualified to do business and in good standing
in each jurisdiction in which the nature of the business conducted by it or the
location of the properties owned or leased by it requires such qualification and
where the failure to be so qualified would have a material adverse effect upon
the condition (financial or otherwise), results of operations, business or
business prospects, properties or operations of the Company and its
Subsidiaries, considered as one enterprise (a "Material Adverse Effect"), and no
proceeding to which the Company or any Subsidiary is a party has been instituted
in any such jurisdiction, revoking, limiting or curtailing, or seeking to
revoke, limit or curtail, such power and authority or qualification.
2.2 Due Authorization and Valid Issuance. The Company has all requisite
corporate power and authority to execute, deliver and perform its obligations
under this Agreement and the Ancillary Agreements, and this Agreement and the
Ancillary Agreements have been duly authorized and validly executed and
delivered by the Company and constitutes the legal, valid and binding agreement
of the Company enforceable against the Company in accordance with its terms,
except as rights to indemnity and contribution may be limited by state or
federal securities laws or the public policy underlying such laws, except as
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting creditors' and contracting
parties' rights generally and except as enforceability may be subject to general
principles of equity (regardless of whether such enforceability is considered in
a proceeding in equity or at law). The Shares and the Warrants being purchased
by the Investors hereunder will, and the and the Preferred Conversion Shares and
the Warrant Shares, upon issuance and payment therefor pursuant to the terms
hereof or thereof, as applicable, be duly authorized, validly issued, fully-paid
and nonassessable.
2.3 Non-Contravention. Except as set forth on Schedule 2.3, the
execution and delivery of this Agreement and the Ancillary Agreements, the
issuance and sale of the Shares under this Agreement, the issuance of the
Preferred Conversion Shares upon conversion of the Share, the issuance of the
Warrants, the issuance of the Warrant Shares upon exercise of the Warrants, the
fulfillment of the terms of this Agreement and the Ancillary Agreements and the
consummation of the transactions contemplated hereby and thereby do not and will
not (A) conflict with or constitute a violation of, or default (with the passage
of time or otherwise) under, (i) any bond, debenture, note or other evidence of
indebtedness, lease, contract, indenture, mortgage, deed of trust, loan
agreement, joint venture or other agreement or instrument to which the Company
or any Subsidiary is a party or by which it or any of its Subsidiaries or their
respective properties are bound, (ii) the charter, by-laws or other
organizational documents of the Company or any Subsidiary, or (iii) any law,
administrative regulation, ordinance or order of any court or governmental
agency, arbitration panel or authority applicable to the Company or any
Subsidiary or their
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respective properties, except in the case of clauses (i) and (iii) for any such
conflicts, violations or defaults which are not reasonably likely to have a
Material Adverse Effect or (B) result in the creation or imposition of any lien,
encumbrance, claim, security interest or restriction whatsoever upon any of the
material properties or assets of the Company or any Subsidiary or an
acceleration of indebtedness pursuant to any obligation, agreement or condition
contained in any bond, debenture, note or any other evidence of indebtedness or
any indenture, mortgage, deed of trust or any other agreement or instrument to
which the Company or any Subsidiary is a party or by which any of them is bound
or to which any of the material property or assets of the Company or any
Subsidiary is subject. No consent, approval, authorization or other order of, or
registration, qualification or filing with, any regulatory body, administrative
agency, or other governmental body or any other person is required for the
execution and delivery of this Agreement or the Ancillary Agreements by the
Company, the valid issuance and sale of the Shares to be sold pursuant to this
Agreement, the issuance of the Preferred Conversion Shares upon conversion of
the Shares, the issuance of the Warrants to be sold pursuant to this Agreement,
the issuance of the Warrant Shares upon exercise of the Warrants and the
performance by the Company of its other obligations hereunder and thereunder,
other than such as have been made or obtained, and except for any post-closing
securities filings or notifications required to be made under federal or state
securities laws.
2.4 Capitalization. The capitalization of the Company as of January 31,
2006 is as set forth on Schedule 2.4, increased as set forth in the next
sentence. The Company has not issued any capital stock since that date other
than pursuant to (i) employee benefit plans disclosed in the Exchange Act
Documents, or (ii) outstanding warrants, options or other securities disclosed
in the Exchange Act Documents. The Company has authorized, unissued, unreserved
and undesignated shares of preferred stock sufficient to sell all Shares
proposed to be issued under this Agreement. The designations, powers,
preferences, rights, qualifications, limitations and restrictions in respect of
the Series D Preferred Stock are as set forth in the Certificate of
Designations, and all such designations, powers, preferences, rights,
qualifications, limitations and restrictions are valid, binding and enforceable
and in accordance with all applicable laws. The Shares to be sold pursuant to
this Agreement, the Preferred Conversion Shares to be issued upon conversion of
the Shares, the Warrants and the Warrant Shares to be issued upon exercise of
the Warrants have all been duly authorized, and when issued and paid for in
accordance with the terms of this Agreement or upon conversion of the Shares or
upon exercise of the Warrants, as applicable, will be duly and validly issued,
fully paid and nonassessable. The Shares and the Warrants shall represent
approximately 8.4% of the outstanding capital stock of the Company immediately
following the Closing (calculated on a fully diluted basis). The outstanding
shares of capital stock of the Company have been duly and validly issued and are
fully paid and nonassessable, have been issued in compliance with all federal
and state securities laws, and were not issued in violation of any preemptive
rights or similar rights to subscribe for or purchase securities. Except as set
forth in or contemplated by the Exchange Act Documents, there are no outstanding
rights (including, without limitation, preemptive rights), warrants or options
to acquire, or instruments convertible into or exchangeable for, any unissued
shares of capital stock or other equity interest in the Company or any
Subsidiary, or any contract, commitment, agreement, understanding or arrangement
of any kind to which the Company is a party or of which the Company has
knowledge and relating to the issuance or sale of any capital stock of the
Company or any Subsidiary, any such convertible or exchangeable securities or
any such rights, warrants or options. Except as set forth on Schedule 2.4,
without limiting the foregoing and except as provided herein, no preemptive
right, co-sale right, right of first refusal, registration right, or other
similar right exists with respect to the Shares or the Warrants or the issuance
and sale thereof or the issuance of the Preferred Conversion Shares upon
conversion of the Shares or the Warrant Shares upon exercise of the Warrants. No
further approval or authorization of any stockholder, the Board of Directors or
others is required for the issuance and sale of the Shares and the Warrants. The
Company owns the entire equity interest in each of its Subsidiaries, free and
clear of any pledge, lien, security interest, encumbrance, claim or equitable
Securities Purchase Agreement - Page 5
interest, other than as described in the Exchange Act Documents. Except as
disclosed in the Exchange Act Documents, there are no stockholders agreements,
voting agreements or other similar agreements with respect to the Common Stock
to which the Company is a party or, to the knowledge of the Company, between or
among any of the Company's stockholders.
2.5 Legal Proceedings; Disagreements with Advisors. Except as set forth
on Schedule 2.5, there is no material legal or governmental proceeding pending
or, to the knowledge of the Company, threatened to which the Company or any
Subsidiary is or may be a party or of which the business or property of the
Company or any Subsidiary is subject that is not disclosed in the Exchange Act
Documents. There are no disagreements of any kind presently existing, or
reasonably anticipated by the Company to arise, between the accountants and
lawyers formerly or presently employed by the Company and the Company is current
with respect to any fees owed to its accountants and lawyers.
2.6 No Violations. Neither the Company nor any Subsidiary is in
violation of (i) its charter, bylaws, or other organizational document; (ii) in
violation of any law, administrative regulation, ordinance or order of any court
or governmental agency, arbitration panel or authority applicable to the Company
or any Subsidiary, which violation, individually or in the aggregate, would be
reasonably likely to have a Material Adverse Effect; or (iii) is in default (and
there exists no condition which, with the passage of time or otherwise, would
constitute a default) in the performance of any bond, debenture, note or any
other evidence of indebtedness in any indenture, mortgage, deed of trust or any
other agreement or instrument to which the Company or any Subsidiary is a party
or by which the Company or any Subsidiary is bound or by which the properties of
the Company or any Subsidiary are bound, which would be reasonably likely to
have a Material Adverse Effect.
2.7 Governmental Permits, Etc. With the exception of the matters which
are dealt with separately in Sections 2.1, 2.12, 2.13, and 2.14, each of the
Company and its Subsidiaries has all necessary franchises, licenses,
certificates and other authorizations from any foreign, federal, state or local
government or governmental agency, department, or body that are currently
necessary for the operation of the business of the Company and its Subsidiaries
as currently conducted and as described in the Exchange Act Documents except
where the failure to currently possess could not reasonably be expected to have
a Material Adverse Effect.
2.8 Intellectual Property. Except as specifically disclosed in the
Exchange Act Documents or on Schedule 2.8, (i) each of the Company and its
Subsidiaries owns or possesses sufficient rights to use all patents, patent
rights, trademarks, copyrights, licenses, inventions, trade secrets, trade names
and know-how (collectively, "Intellectual Property") described or referred to in
the Exchange Act Documents as owned or possessed by it or that are necessary for
the conduct of its business as now conducted or as proposed to be conducted as
described in the Exchange Act Documents, except where the failure to currently
own or possess would not have a Material Adverse Effect, (ii) neither the
Company nor any of its Subsidiaries is infringing, or has received any notice
of, or has any knowledge of, any asserted infringement by the Company or any of
its Subsidiaries of, any rights of a third party with respect to any
Intellectual Property that, individually or in the aggregate, would have a
Material Adverse Effect and (iii) neither the Company nor any of its
Subsidiaries has received any notice of, or has any knowledge of, infringement
by a third party with respect to any Intellectual Property rights of the Company
or of any Subsidiary that, individually or in the aggregate, would have a
Material Adverse Effect. Except as specifically disclosed in the Exchange Act
Documents, all software applications and portions of applications, including,
without limitation, interfaces, functions, and class definitions included in
whole or in part in any Company Software are either: (i) owned by the Company,
(ii) currently in the public domain or otherwise available for use, modification
and distribution by the Company without a license from or the approval or
consent of any third party, or (iii) licensed or otherwise used by the Company
Securities Purchase Agreement - Page 6
pursuant to the terms of valid, binding written agreements ("Software
Contract"). Except as specifically disclosed in the Exchange Act Documents, no
Software Contract creates, or purports to create, obligations or immunities with
respect to any intellectual property rights of the Company enforceable in any
jurisdiction of the world, including but not limited to, obligations requiring
the disclosure or distribution of all or a portion of the source code for any
Company Software. For purposes of this Agreement, "Company Software" means any
and all computer programs or portions thereof owned, licensed, distributed,
copied, modified, displayed, sublicensed or otherwise used by the Company in
connection with the operation of its business as now conducted or as now
proposed to be conducted as described in the Exchange Act Documents.
2.9 Financial Statements; Solvency; Obligations to Related Parties.
(a) The financial statements of the Company and the related
notes contained in the Exchange Act Documents present fairly, in accordance with
U.S. generally accepted accounting principles ("GAAP"), the financial position
of the Company and its Subsidiaries as of the dates indicated, and the results
of its operations and cash flows for the periods therein specified consistent
with the books and records of the Company and its Subsidiaries except that the
unaudited interim financial statements were or are subject to normal and
recurring year-end adjustments which are not expected to be material in amount
except as otherwise described in the Exchange Act Documents. Such financial
statements (including the related notes) have been prepared in accordance with
GAAP applied on a consistent basis throughout the periods therein specified,
except as may be disclosed in the notes to such financial statements, or in the
case of unaudited statements, as may be permitted by the Securities and Exchange
Commission (the "SEC") on Form 10-Q under the Exchange Act and except as
disclosed in the Exchange Act Documents. The other financial information
contained in the Exchange Act Documents has been prepared on a basis consistent
with the financial statements of the Company.
(b) The (i) fair saleable value of the Company's assets
exceeds the amount that will be required to be paid on or in respect of the
Company's existing liabilities and other obligations as such matures or is
otherwise payable; (ii) Company's assets do not constitute unreasonably small
capital to carry on its business for the current fiscal year as now conducted
and as proposed to be conducted taking into account the current and projected
capital requirements of the business conducted by the Company and projected
capital availability; and (iii) current cash flow of the Company, together with
the proceeds the Company would receive upon liquidation of its assets, after
taking into account all anticipated uses of such amounts, would be sufficient to
pay all such liabilities and obligations when such is required to be paid. The
Company does not intend to incur liabilities and other obligations beyond its
ability to pay such as they mature or are required to be paid. The Company has
no knowledge of any facts or circumstances which lead it to believe that it will
be required to file for reorganization or liquidation under the bankruptcy or
reorganization laws of any jurisdiction, and has no present intention to so
file.
(c) Except as set forth in any Exchange Act Documents, there
are no obligations of the Company to officers, directors, stockholders or
employees of the Company other than:
(i) for payment of salary for services rendered and
for bonus payments;
(ii) reimbursements for reasonable expenses incurred
on behalf of the Company;
(iii) for other standard employee benefits made
generally available to all employees (including stock option agreements
outstanding under any stock option plan approved by the Board of Directors);
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(iv) obligations listed in Company's financial
statements; and
(v) under applicable laws.
(d) Except as described above or in any Exchange Act Filings,
(i) none of the officers, directors or, to the best of the Company's knowledge,
key employees or stockholders of the Company or any members of their immediate
families, are indebted to the Company, individually or in the aggregate, in
excess of $60,000; and (ii) none of the officers, directors or, to the best of
the Company's knowledge, key employees have any direct or indirect ownership
interest in any firm or corporation with which the Company is affiliated or with
which Company has a business relationship, or any firm or corporation which
competes with the Company, other than passive investments in publicly traded
companies (representing less than one percent (1%) of such company) which may
compete with the Company. Except as described above, no officer, director, or
any member of their immediate families, is, directly or indirectly, interested
in any material contract with Company and no agreements, understandings or
proposed transactions are contemplated between the Company and any such person.
Except as set forth in any Exchange Act Documents, the Company is not a
guarantor or indemnitor of any indebtedness of any other person, firm or
corporation.
2.10 No Material Adverse Change. Except as disclosed in the Exchange
Act Documents or on Schedule 2.10, since March 31, 2004, there has not been (i)
any material adverse change in the financial condition or results of operations
of the Company and its Subsidiaries considered as one enterprise, (ii) any
material adverse event affecting the Company or its Subsidiaries, (iii) any
obligation, direct or contingent, that is material to the Company and its
Subsidiaries considered as one enterprise, incurred by the Company, except
obligations incurred in the ordinary course of business or with respect to the
transactions contemplated by this Agreement, (iv) any dividend or distribution
of any kind declared, paid or made on the capital stock of the Company or any of
its Subsidiaries, or (v) any loss or damage (whether or not insured) to the
physical property of the Company or any of its Subsidiaries which has been
sustained which has a Material Adverse Effect.
2.11 Disclosure. The representations and warranties of the Company
contained in this Article II as of the date hereof and as of the Closing Date,
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. The Company understands and confirms that the Investors will rely on
the foregoing representations in effecting transactions in the securities of the
Company.
2.12 34 Act and OTCBB Compliance. The Company's Common Stock is
registered pursuant to Section 12(g) of the Exchange Act and is quoted on The
Nasdaq Stock Market, Inc.'s OTC Bulletin Board quotation service (the "OTCBB"),
and the Company has taken no action designed to, or likely to have the effect
of, terminating the registration of the Common Stock under the Exchange Act or
removal from quotation of the Common Stock from the OTCBB, nor has the Company
received any notification that the SEC, the OTCBB or the National Association of
Securities Dealers, Inc. ("NASD") is contemplating terminating such registration
or quotation.
2.13 Reporting Status. Except as set forth on Schedule 2.13, the
Company has filed in a timely manner all documents that the Company was required
to file under the Exchange Act during the 12 months preceding the date of this
Agreement. The following documents complied as to form in all material respects
with the SEC's requirements as of their respective filing dates, and the
information contained therein as of the date thereof did not contain an untrue
statement of a material fact or omit to
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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:
(a) all Forms 10-K, 10-Q, 8-K (including any and all
amendments thereto) and all Definitive Proxy Statements on Schedule 14A and
additional Definitive Proxy Materials filed with the SEC since June 30, 2004;
and
(b) all other documents, if any, filed by the Company with the
SEC since June 30, 2004.
2.14 Issuance and Quotation. The Company shall comply with all
requirements of the NASD and the SEC with respect to the issuance of the Shares
and the OTCBB with respect to the quotation of the Shares on the OTCBB.
2.15 No Manipulation of Stock. The Company has not taken and will not,
in violation of applicable law, take, any action designed to or that might
reasonably be expected to cause or result in stabilization or manipulation of
the price of the Common Stock to facilitate the sale or resale of the Shares.
2.16 Company Not an "Investment Company". The Company has been advised
of the rules and requirements under the Investment Company Act of 1940, as
amended (the "Investment Company Act"). The Company is not, and immediately
after receipt of payment for the Shares and the Warrants will not be, an
"investment company" within the meaning of the Investment Company Act and shall
conduct its business in a manner so that it will not become subject to the
Investment Company Act.
2.17 Foreign Corrupt Practices; Embargoed Person.
(a) Neither the Company, nor to the knowledge of the Company,
any agent or other person acting on behalf of the Company, has (i) directly or
indirectly, corruptly used any funds for unlawful contributions, gifts,
entertainment or other unlawful expenses related to foreign or domestic
political activity, (ii) made any unlawful payment to foreign or domestic
government officials or employees or to any foreign or domestic political
parties or campaigns from corporate funds, (iii) failed to disclose to the
extent required by law any contribution made by the Company (or made by any
person acting on its behalf of which the Company is aware) which is in violation
of law, or (iv) violated in any material respect any provision of the Foreign
Corrupt Practices Act of 1977, as amended.
(b) None of the funds or other assets of the Company
constitute or shall constitute property of, or shall be beneficially owned,
directly or indirectly, by any person with whom U.S. persons are restricted from
engaging in financial or other transactions under United States law, including,
but not limited to, the International Emergency Economic Powers Act, 50 U.S.C.
ss. 1701 ET SEQ., The Trading with the Enemy Act, 50 U.S.C. App. 1 ET SEQ., and
any executive orders or regulations promulgated under any such United States
laws (each, an "Embargoed Person"), with the result that the investments
evidenced by the Shares are or would be in violation of law and (i) no Embargoed
Person has or shall have any interest of any nature whatsoever in the Company
with the result that the investments evidenced by the Shares are or would be in
violation of law; and (ii) none of the funds of the Company are or shall be
derived from any unlawful activity with the result that the investments
evidenced by the Shares are or would be in violation of law; provided, that with
respect to the covenants contained in this Section 2.17(b), the Company may
assume that the Investors are not
Securities Purchase Agreement - Page 9
Embargoed Persons. The Company certifies that, to the Company's knowledge, the
Company has not been designated, and is not owned or controlled, by an Embargoed
Person.
2.18 Accountants. To the Company's knowledge, the Company's auditors
(both KPMG LLP and Xxxxxx, Xxxxxxxx & Company, Ltd.), who the Company expect
will express their respective opinions with respect to the financial statements
to be incorporated by reference from the Company's Annual Report on Form 10-K
for the year ended June 30, 2004, 2005 or 2006, as applicable, into the
Registration Statement (as defined below) and the prospectus which forms a part
thereof, are independent accountants as required by the Securities Act and the
rules and regulations promulgated thereunder and are registered with the Public
Company Accounting Oversight Board.
2.19 Contracts. The contracts filed as exhibits to the Exchange Act
Documents are in full force and effect on the date hereof, and neither the
Company nor, to the Company's knowledge, any other party to such contracts is in
breach of or default under any of such contracts which would have a Material
Adverse Effect. The Company has filed with the SEC all contracts and agreements
required to be filed by the Exchange Act.
2.20 Taxes. The Company has filed all necessary federal, state and
foreign income and franchise tax returns due to be filed as of the date hereof
and has paid or accrued all taxes shown as due thereon, and the Company has no
knowledge of a tax deficiency which has been or might be asserted or threatened
against it which would have a Material Adverse Effect.
2.21 Transfer Taxes. On the Closing Date, all stock transfer or other
taxes (other than income taxes) which are required to be paid in connection with
the sale and transfer of the Shares to be sold to the Investor hereunder will
be, or will have been, fully paid or provided for by the Company and all laws
imposing such taxes will be or will have been fully complied with.
2.22 Private Offering. Assuming the correctness of the representations
and warranties of the Investors set forth in Article V hereof, the offer and
sale of Shares and Warrants hereunder is exempt from registration under the
Securities Act. The Company has not in the past nor will it hereafter take any
action to sell, offer for sale or solicit offers to buy any securities of the
Company which would bring the offer, issuance or sale of the Shares and the
Warrants as contemplated by this Agreement, within the provisions of Section 5
of the Securities Act, unless such offer, issuance or sale was or shall be
within the exemptions of Section 4 of the Securities Act. Neither the Company
nor any person acting on behalf of the Company has offered or sold any of the
Shares and/or the Warrants by any form of general solicitation or general
advertising (as those terms are used in Regulation D under the Securities Act).
The Company has offered the Shares and the Warrants for sale only to the
Investors and certain other "accredited investors" within the meaning of Rule
501 under the Securities Act.
2.23 Controls and Procedures. The Company is in material compliance
with all provisions of the Xxxxxxxx-Xxxxx Act of 2002 which are applicable to it
as of the Closing Date. The Company has established and maintains an effective
system of internal control over financial reporting (as such term is defined in
the Exchange Act ) regarding the reliability of financial reporting and
preparation of financial statements for external purposes in accordance with
GAAP and includes policies and procedures that (i) pertain to maintenance of
records that in reasonable detail accurately and fairly reflect the transactions
and dispositions of the assets of the issuer; (ii) provide reasonable assurance
that transactions are recorded as necessary to permit preparation of financial
statements in accordance with GAAP, and that receipts and expenditures of the
issuer are being made only in accordance with authorizations of management and
directors of the issuer; and (iii) provide reasonable assurance regarding
prevention or timely detection of unauthorized acquisition, use, or disposition
of the issuer's assets that could have a
Securities Purchase Agreement - Page 10
Material Adverse Effect on the financial statements. Except as set forth in the
Exchange Act Documents, the Company has established and maintains disclosure
controls and procedures (as defined in Exchange Act) that are effective in
ensuring that information required to be disclosed by the Company in the reports
that it files or submits under the Exchange Act is recorded, processed,
summarized and reported, within the time periods specified in the SEC's rules
and forms, including, without limitation, controls and procedures designed to
ensure that information required to be disclosed by the Company in the reports
that it files or submits under the Act is accumulated and communicated to the
Company's management, including its principal executive and principal financial
officers, or persons performing similar functions, as appropriate to allow
timely decisions regarding required disclosure. The Company's certifying
officers have evaluated the effectiveness of the Company's disclosure controls
and procedures and presented in the applicable Exchange Act Documents their
conclusions about the effectiveness of the disclosure controls and procedures,
as of the end of the periods covered by such Exchange Act Documents based on
such evaluation. Since the last such evaluation date, there has been no change
in the Company's internal control over financial reporting that has materially
affected, or is reasonably likely to materially affect, the Company's internal
control over financial reporting, and no significant deficiencies or material
weaknesses in internal controls over financial reporting, or other factors that
could significantly affect the Company's internal control over financial
reporting, have been identified.
ARTICLE III
AFFIRMATIVE COVENANTS OF THE COMPANY
The Company hereby covenants (i) with respect to Section 3.3, with all
of the Investors for so long as such Investors beneficially own any Shares
and/or Conversion Shares, (ii) with respect to Section 3.1, with each of (1)
Greenway (as defined in Exhibit A) for so long as Greenway owns at least 50% of
the Shares initially purchased by it hereunder and (2) those Investors who,
after the issuance and sale of the Shares and the Warrants pursuant to this
Agreement, will beneficially own at least 20% of the Common Stock (calculated on
a fully-diluted basis) (the "20% Investors") for so long as such Investors
beneficially own at least 20% of the Common Stock (calculated on a fully-diluted
basis); (iii) in addition to and not in lieu of the foregoing (it being
understood that immediately following the Closing, M/C Venture Partners (as
defined in Exhibit A) shall also qualify as a 20% Investor), with respect to
Sections 3.1-3.2 and Sections 3.4-3.7, M/C Venture Partners for so long as M/C
Venture Partners owns at least 50% of the Shares initially purchased by it
hereunder, as follows:
3.1 Right of First Refusal.
(a) Right of First Refusal. The Company shall not issue, sell
or exchange, agree or obligate itself to issue, sell or exchange, or reserve or
set aside for issuance, sale or exchange, in a transaction not involving a
public offering, any (i) shares of Common Stock, (ii) any other equity security
of the Company, including without limitation, preferred shares, (iii) any debt
security of the Company (other than debt with no equity feature) including
without limitation, any debt security which by its terms is convertible into or
exchangeable for any equity security of the Company, (iv) any security of the
Company that is a combination of debt and equity, or (v) any option, warrant or
other right to subscribe for, purchase or otherwise acquire any such equity
security or any such debt security of the Company, unless in each case the
Company shall have first offered to sell such securities (the "Offered
Securities") to the 20% Investors and each other person or entity that has such
a right (including, without limitation, Greenway for as long as Greenway meets
the requirements set forth in clause (ii)(1) of the first paragraph of this
Article III) (each an "Offeree" and collectively, the "Offerees") as follows:
Each Offeree shall have the right to purchase (x) that portion of the Offered
Securities as the number of shares of Common Stock then held (including shares
then issuable upon the exercise or conversion of outstanding securities)
Securities Purchase Agreement - Page 11
by such Offeree bears to the total number of shares of issued and outstanding
Common Stock of the Company calculated on a fully diluted basis to include (i)
the total number of shares of Common Stock subject to outstanding awards granted
under stock plans of the Company and (ii) the total number of shares that could
be issued upon the exercise or conversion of outstanding securities (the "Basic
Amount"), and (y) such additional portion of the Offered Securities as such
Offeree shall indicate it will purchase should the other Offerees subscribe for
less than their Basic Amounts (the "Undersubscription Amount"), at a price and
on such other terms as shall have been specified by the Company in writing
delivered to such Offeree (the "Offer"), which Offer by its terms shall remain
open and irrevocable for a period of twenty (20) days from receipt of the offer.
(b) Notice of Acceptance. Notice of each Offeree's intention
to accept, in whole or in part, any Offer made shall be evidenced by a writing
signed by such Offeree and delivered to the Company prior to the end of the
20-day period of such offer, setting forth such of the Offeree's Basic Amount as
such Offeree elects to purchase and, if such Offeree shall elect to purchase all
of its Basic Amount, such Undersubscription Amount as such Offeree shall elect
to purchase (the "Notice of Acceptance"). If the Basic Amounts subscribed for by
all Offerees are less than the total Offered Securities, then each Offeree who
has set forth Undersubscription Amounts in its Notice of Acceptance shall be
entitled to purchase, in addition to the Basic Amounts subscribed for, all
Undersubscription Amounts it has subscribed for; provided, however, that should
the Undersubscription Amounts subscribed for exceed the difference between the
Offered Securities and the Basic Amounts subscribed for (the "Available
Undersubscription Amount"), each Offeree who has subscribed for any
Undersubscription Amount shall be entitled to purchase only that portion of the
Available Undersubscription Amount as the Undersubscription Amount subscribed
for by such Offeree bears to the total Undersubscription Amounts subscribed for
by all Offerees, subject to rounding by the Board of Directors to the extent it
reasonably deems necessary.
(c) Conditions to Acceptances and Purchase.
(i) Permitted Sales of Refused Securities. In the
event that Notices of Acceptance are not given by the Offerees in respect of all
the Offered Securities, the Company shall have ninety (90) days from the
expiration of the period set forth above to close the sale of all or any part of
such Offered Securities as to which a Notice of Acceptance has not been given by
the Offerees (the "Refused Securities") to the Person or Persons specified in
the Offer, but only for cash and otherwise in all respects upon terms and
conditions, including, without limitation, unit price and interest rates, which
are no more favorable, in the aggregate, to such other person or persons or less
favorable to the Company than those set forth in the Offer.
(ii) Reduction in Amount of Offered Securities. In
the event the Company shall propose to sell less than all the Refused Securities
(any such sale to be in the manner and on the terms specified above), then each
Offeree may, at its sole option and in its sole discretion, reduce the number
of, or other units of the Offered Securities specified in its respective Notices
of Acceptance to an amount which shall be not less than the amount of the
Offered Securities which the Offeree elected to purchase pursuant to (b) above
multiplied by a fraction, (i) the numerator of which shall be the amount of
Offered Securities which the Company actually proposes to sell, and (ii) the
denominator of which shall be the amount of all Offered Securities the Company
proposed to sell in its writing delivered pursuant to Section 3.1(a) above. In
the event that any Offeree so elects to reduce the number or amount of Offered
Securities specified in its respective Notices of Acceptance, the Company may
not sell or otherwise dispose of more than the reduced amount of the Offered
Securities until such securities have again been offered to the Offerees in
accordance with Section 3.1(a).
Securities Purchase Agreement - Page 12
(iii) Closing. Upon the closing, which shall include
full payment to the Company, of the sale to such other person or persons of all
or less than all the Refused Securities, the Offerees shall purchase from the
Company, and the Company shall sell to the Offerees, the number of Offered
Securities specified in the Notices of Acceptance, as reduced pursuant to
Section 3.1(b) above if the Offerees have so elected, upon the terms and
conditions specified in the Offer. The purchase by the Offerees of any Offered
Securities is subject in all cases to the preparation, execution and delivery by
the Company and the Offerees of a purchase agreement relating to such Offered
Securities reasonably satisfactory in form and substance to the Company and the
Offerees and their respective counsel.
(d) Further Sale. In each case, any Offered Securities not
purchased by the Offerees or other person or persons in accordance with Section
3.1(c)(iii) above may not be sold or otherwise disposed of until they are again
offered to the Offerees under the procedures specified in Section
3.1(c)(i)-(iii) above.
(e) Exceptions. The rights of the Investors under this Section
3.1 shall not apply to:
(i) Common Stock issued as a stock dividend to
holders of Common Stock or upon any subdivision or combination of shares of
Common Stock,
(ii) any capital stock or derivative thereof granted
to an employee, director or consultant under a stock plan approved by the Board
of Directors and the Company's stockholders,
(iii) any securities issued as consideration for the
acquisition of another entity by the Company by merger or share exchange
(whereby the Company owns no less than 51% of the voting power of the surviving
entity) or purchase of substantially all of such entity's stock or assets, if
such acquisition is approved by the Board of Directors,
(iv) any securities issued in connection with a
strategic partnership, joint venture or other similar agreement, provided that
the purpose of such arrangement is not primarily the raising of capital and that
such arrangement is approved unanimously by the Board of Directors,
(v) any securities issued to a financial institution
in connection with a bank loan or lease with such financial institution provided
that such is approved unanimously by the Board of Directors;
(vi) securities issuable upon the exercise or
conversion of securities outstanding on the Closing Date;
(vii) the Shares, the Warrants, the Preferred
Conversion Shares issued upon conversion of the Shares and the Warrant Shares
issued upon the exercise of the Warrants; and
(viii) the Additional Warrants (as defined below) and
the shares of Common Stock issued or issuable upon the exercise of the
Additional Warrants.
(f) Additional Greenway Rights with Respect to the Future
Financing Transaction.
(i) Notwithstanding anything to the contrary set
forth in Section 3.1(a), and subject to the provisions of this Section 3.1(f),
with respect to the Future Financing Transaction (as defined in Section 3.6(b))
only, Greenway's Basic Amount of the Offered Securities proposed to be issued in
such Future Financing Transaction shall be equal to the lesser of (x) 20% of
such Offered
Securities Purchase Agreement - Page 13
Securities or (y) $3 million of such Offered Securities. All other provisions of
this Section 3.1 shall apply to Greenway in connection with such Future
Financing Transaction. For the avoidance of doubt, (1) the calculation of
Greenway's Basic Amount pursuant to this Section 3.1(f) shall apply to the
Future Financing Transaction only and shall not apply in connection with any
other proposed issuance of Offered Securities (and the calculation of Greenway's
Basic Amount of such other Offered Securities shall be made in accordance with
Section 3.1(a)); and (2) the provisions of this Section 3.1(f) shall be null and
void and without any further force or effect from and after the consummation of
such Future Financing Transaction.
(ii) The Company hereby represents and warrants to
Greenway that, based on the facts known to the Company as of the date hereof,
the rights granted to Greenway in Section 3.1(f)(i), if exercised on the date
hereof, would not conflict with or violate any contract, agreement or instrument
to which the Company is a party or by which it may be bound. So long as Greenway
retains the rights provided in Section 3(f)(i), (1) the Company shall not enter
into or amend any contract, agreement or instrument that would conflict with or
limit in any manner the rights granted to Greenway pursuant to this Section
3.1(f); and (2) in the event that the terms of any contract, agreement or
instrument existing on the date of this Agreement to which the Company is a
party or by which it is bound conflicts with or would limit in any manner the
rights granted to Greenway under Section 3.1(f)(i), the Company shall use its
commercially reasonable efforts to obtain an amendment or waiver of the
provisions of such other contract, agreement or instrument to the extent
necessary to permit Greenway to fully exercise its rights under this Section
3.1(f)(i). If the Company fails to obtain any such amendments or waivers, then
Greenway's Basic Amount (as calculated in accordance with Section 3.1(f)(i)) of
the Offered Securities in the Future Financing Transaction shall be limited to
the extent, but only to the extent, that the rights granted to Greenway under
Section 3.1(f)(i) do not conflict with the terms of such other contract,
agreement or instrument; provided, however, that no such limitation shall affect
Greenway's right to invest up to its Basic Amount (calculated without regard to
Section 3.1(f)(i)).
3.2 Restated Charter; Further Assurances. The Company hereby agrees to
seek stockholder approval at the Annual Meeting (as defined below) to amend and
restate its certificate of incorporation (the "Restated Charter") to implement
any and all terms of the transactions contemplated by this Agreement, including,
without limitation, (i) eliminating all authorized shares of Series B Preferred
Stock, par value $1.00 per share, and Series C Preferred Stock, par value $1.00
per share, of the Company, (ii) to increase the amount of authorized but
unissued capital and Common Stock to 250,000,000 or such other number as is
recommended or approved by the Board of Directors including the directors
designated by M/C Venture Partners, (iii) to increase the amount of authorized
but unissued and undesignated shares of preferred stock to 30,000,000 or such
other number as is recommended or approved by the Board of Directors including
the directors designated by M/C Venture Partners, and (iv) to incorporate the
powers, designations, preferences and rights of the Series D Preferred Stock as
the same that are set forth in the Certificate of Designations. In connection
with the foregoing, the Company shall (i) take all further actions, execute all
further documents and perform all further things necessary to give effect to the
provisions of this Agreement and (ii) consult with and keep informed, and shall
cause the appropriate officers, directors and legal counsel to consult with and
keep informed, legal counsel to the Investors (including, without limitation,
legal counsel to M/C Venture Partners).
3.3 Registration of the Conversion Shares; Compliance with the
Securities Act.
(a) Registration Procedures and Other Matters. The Company
shall:
(i) subject to receipt of necessary information from
the Investors after prompt request from the Company to the Investors to provide
such information, prepare and file with the
Securities Purchase Agreement - Page 14
SEC as promptly as possible after the Closing and in no event later than 45 days
after the Closing (the "Target Date"; the earlier of the date such registration
statement is actually filed with the SEC and the Target Date is the "Filing
Date"), a registration statement on Form X-0, Xxxx X-0, or Form S-1 (the
"Registration Statement") to enable the resale of the Conversion Shares by the
Investors from time to time through any quotation system on which the Common
Stock is quoted or listed, if applicable, or in privately-negotiated
transactions (as used in this Section 3.3 and in Section 3.7 only, the term
"Conversion Shares" shall include any securities into which the Conversion
Shares are reclassified after the date hereof);
(ii) use its best efforts, subject to receipt of
necessary information from the Investors after prompt request from the Company
to the Investors to provide such information (provided that failure on the part
of one Investor shall not relieve the Company from its obligation to use best
efforts with respect to complying Investors), to cause the Registration
Statement to become effective on or before the date that is the earliest of (1)
in the event of no review by the staff of the SEC (the "Staff"), within 5 days
of being informed by the Staff that the Staff has decided not to review the
Registration Statement, but in no event later than 30 days after the Filing
Date, (2) in the event of a review by the Staff, within 5 days of being informed
by the Staff that the Staff have no further comments on such Registration
Statement, but in no event later than 90 days after the Closing Date (the
earliest of (1) and (2) thereof, the "Required Effective Date" and the date the
Registration Statement is initially declared effective by the SEC, the
"Effective Date"), such efforts to include, without limiting the generality of
the foregoing, preparing and filing with the SEC in such period any financial
statements that are required to be filed prior to the effectiveness of such
Registration Statement; and, in the event that the filing referred to in Section
3.3(a)(i) above is on a form other than Form S-3, the Company shall use its best
efforts, subject to receipt of necessary information from the Investors after
prompt request from the Company to the Investors to provide such information
(provided that failure on the part of one Investor shall not relieve the Company
from its obligation to use best efforts with respect to complying Investors), to
prepare and file with the SEC, within 10 days after the Company first becomes
eligible to file a registration statement on Form S-3, a registration statement
on Form S-3 (the "S-3 Registration Statement") to enable the resale of the
Conversion Shares by the Investors from time to time through any quotation
system on which the Common Stock is quoted or listed or in privately-negotiated
transactions; and to use its best efforts to cause the S-3 Registration
Statement to become effective as soon as practicable thereafter, such efforts to
include, without limiting the generality of the foregoing, preparing and filing
with the SEC as promptly as practicable any financial statements that are
required to be filed prior to the effectiveness of such S-3 Registration
Statement (the term "Registration Statement" shall mean the S-1 or S-2
Registration Statement until the S-3 Registration Statement is declared
effective by the SEC, after which time it shall mean the S-3 Registration
Statement);
(iii) use its best efforts to prepare and file with
the SEC such amendments and supplements to the Registration Statement and the
Prospectus (as used herein, the term "Prospectus" shall mean (1) the prospectus
included in any Registration Statement, as amended or supplemented by any
prospectus supplement, with respect to the terms of the offering of any portion
of the Conversion Shares covered by such Registration Statement and by all other
amendments and supplements to the prospectus, including post-effective
amendments and all material incorporated by reference in such prospectus, and
(2) any "free writing prospectus" as defined in Rule 163 under the Securities
Act) used in connection therewith as may be necessary to keep the Registration
Statement current, effective and free from any material misstatement or omission
to state a material fact for a period not exceeding, with respect to each
Investor's Conversion Shares purchased hereunder, the earlier of (x) the date on
which such Investor may sell all Conversion Shares then held by the Investor
without restriction by the volume limitations of Rule 144(e) of the Securities
Act and (y) such time as all Conversion Shares held by such Investor have been
sold pursuant to a registration statement;
Securities Purchase Agreement - Page 15
(iv) comply with Rule 172 of the Securities Act and
(x) advise the Investors promptly of any failure by the Company to satisfy the
conditions of such Rule 172 and (y) promptly furnish to the Investors with
respect to the Conversion Shares registered under the Registration Statement
such number of copies of the Registration Statement, Prospectuses and
Preliminary Prospectuses in conformity with the requirements of the Securities
Act and such other documents as the Investors may reasonably request, in order
to facilitate the public sale or other disposition of all or any of the
Conversion Shares by the Investors;
(v) file documents required of the Company for blue
sky clearance in states specified in writing by any Investor and use its best
efforts to maintain such blue sky qualifications during the period the Company
is required to maintain the effectiveness of the Registration Statement pursuant
to Section 3.3(a)(iii); provided, however, that the Company shall not be
required to qualify to do business or consent to service of process in any
jurisdiction in which it is not now so qualified or has not so consented;
(vi) bear all expenses in connection with the
procedures in paragraph (i) through (v), (viii) and the last paragraph of this
Section 3.3(a) and the registration of the Conversion Shares pursuant to the
Registration Statement;
(vii) advise the Investors, promptly after it shall
receive notice or obtain knowledge of the issuance of any stop order by the SEC
delaying or suspending the effectiveness of the Registration Statement or of the
initiation or threat of any proceeding for that purpose; and it will promptly
use its best efforts to prevent the issuance of any stop order or to obtain its
withdrawal at the earliest possible moment if such stop order should be issued;
and
(viii) provide a "Plan of Distribution" section of
the Registration Statement substantially in the form attached hereto as Exhibit
H hereto (subject to the comments of the SEC).
Notwithstanding anything to the contrary herein, the Registration
Statement shall cover only the Conversion Shares and any other securities with
respect to which the Company has registration obligations as of the date hereof.
In no event at any time before the Registration Statement becomes effective with
respect to the Conversion Shares shall the Company publicly announce or file any
other registration statement, other than registrations on Form S-8, without the
prior written of a majority-in-interest of the Shares to be purchased by the
Investors hereunder (the "Majority Investors' Consent").
The Company understands that the Investors disclaim being underwriters,
but any Investor being deemed an underwriter by the SEC shall not relieve the
Company of any obligations it has hereunder; provided, however that if the
Company receives notification from the SEC that an Investor is deemed an
underwriter, then the period by which the Company is obligated to submit an
acceleration request to the SEC shall be extended to the earlier of (x) the 90th
day after such SEC notification, or (y) 120 days after the initial filing of the
Registration Statement with the SEC.
Within three business days of the Effective Date, the Company shall
advise its transfer agent that the shares are subject to an effective
registration statement and can be reissued free of restrictive legend upon
notice of a sale by an Investor and confirmation by such Investor that it has
complied with the prospectus delivery requirements, provided that the Company
has not advised the transfer agent orally or in writing that the registration
statement has been suspended; provided, however, in the event the Company's
transfer agent requires an opinion of counsel to the Company for an such
reissuance, within
Securities Purchase Agreement - Page 16
three business days of any such request for an opinion by the transfer agent,
the Company shall cause its counsel to issue a blanket opinion to the transfer
agent stating the foregoing.
(b) Transfer of Conversion Shares After Registration;
Suspension.
(i) Each Investor, severally and not jointly, agrees
that it will not effect any disposition of the Conversion Shares or its right to
purchase the Conversion Shares that would constitute a sale within the meaning
of the Securities Act except as contemplated in the Registration Statement
referred to in Section 3.3(a) and as described below or as otherwise permitted
by law, and that it will promptly notify the Company of any material changes in
the information set forth in the Registration Statement regarding the Investor
or its plan of distribution.
(ii) Except in the event that paragraph (iii) below
applies, the Company shall (x) if deemed necessary by the Company, prepare and
file from time to time with the SEC a post-effective amendment to the
Registration Statement or a supplement to the related Prospectus or a supplement
or amendment to any document incorporated therein by reference or file any other
required document so that such Registration Statement will not contain an untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein not misleading, and
so that such Prospectus will not contain an untrue statement of a material fact
or omit to state a material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances under which they were
made, not misleading; (y) provide the Investors copies of any documents filed
pursuant to Section 3.3(b)(ii)(x); and (z) inform each Investor that the Company
has complied with its obligations in Section 3.3(b)(ii)(x) (or that, if the
Company has filed a post-effective amendment to the Registration Statement which
has not yet been declared effective, the Company will notify the Investor to
that effect, will use its best efforts to secure the effectiveness of such
post-effective amendment as promptly as possible and will promptly notify the
Investor pursuant to Section 3.3(b)(ii)(x) hereof when the amendment has become
effective).
(iii) Subject to paragraph (iv) below, in the event
(w) of any request by the SEC or any other federal or state governmental
authority during the period of effectiveness of the Registration Statement for
amendments or supplements to a Registration Statement or related Prospectus or
for additional information; (x) of the issuance by the SEC or any other federal
or state governmental authority of any stop order suspending the effectiveness
of a Registration Statement or the initiation of any proceedings for that
purpose; (y) of the receipt by the Company of any notification with respect to
the suspension of the qualification or exemption from qualification of any of
the Conversion Shares for sale in any jurisdiction or the initiation or
threatening of any proceeding for such purpose; or (z) of any event or
circumstance which, upon the advice of its counsel, necessitates the making of
any changes in the Registration Statement or Prospectus, or any document
incorporated or deemed to be incorporated therein by reference, so that, in the
case of the Registration Statement, it will not contain any untrue statement of
a material fact or any omission to state a material fact required to be stated
therein or necessary to make the statements therein not misleading, and that in
the case of the Prospectus, it will not contain any untrue statement of a
material fact or any omission to state a material fact required to be stated
therein or necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading; then the Company shall
deliver a notice in writing to each Investor (the "Suspension Notice") to the
effect of the foregoing and, upon receipt of such Suspension Notice, the
Investor will refrain from selling any Conversion Shares pursuant to the
Registration Statement (a "Suspension") until the Investor is advised in writing
by the Company that the Suspension is no longer effective. In the event of any
Suspension, the Company will use its best efforts to cause the Suspension to be
terminated as soon as reasonably practicable within 20 business days after the
delivery of a Suspension Notice to the Investors. In addition to and without
limiting any other remedies (including,
Securities Purchase Agreement - Page 17
without limitation, at law or at equity) available to the Investors, each
Investor shall be entitled to specific performance in the event that the Company
fails to comply with the provisions of this Section 3.3(b)(iii).
(iv) Notwithstanding the foregoing paragraphs of this
Section 3.3(b), the Investors shall not be prohibited from selling Conversion
Shares under the Registration Statement as a result of Suspensions on more than
two occasions of not more than 30 days each in any twelve month period, unless,
in the good faith judgment of the Company's Board of Directors, upon the advice
of counsel, the sale of Conversion Shares under the Registration Statement in
reliance on this Section 3.3(b)(iv) would be reasonably likely to cause a
violation of the Securities Act or the Exchange Act and result in liability to
the Company.
(v) Provided that a Suspension is not then in effect,
any Investor may sell Conversion Shares under the Registration Statement upon
compliance with its obligations under this Section 3.3.
(vi) In the event of a sale of Conversion Shares by
an Investor pursuant to the Registration Statement, the Investor must also
deliver to the Company's transfer agent, with a copy to the Company, a
Certificate of Subsequent Sale substantially in the form attached hereto as
Exhibit G, so that the Conversion Shares may be properly transferred.
(c) Indemnification. For the purpose of this Section 3.3(c):
(x) the term "Selling Stockholder" shall include each
Investor and any affiliate of such Investor;
(y) the term "Registration Statement" shall include
the Prospectus in the form first filed with the SEC pursuant to Rule 424(b) of
the Securities Act or filed as part of the Registration Statement at the time of
effectiveness if no Rule 424(b) filing is required, exhibit, supplement or
amendment included in or relating to the Registration Statement referred to in
Section 3.3(a); and
(z) the term "untrue statement" shall include any
untrue statement or alleged untrue statement, or any omission or alleged
omission to state in the Registration Statement a material fact required to be
stated therein or necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading.
(i) The Company agrees to indemnify and hold harmless
each Selling Stockholder from and against any losses, claims, damages or
liabilities to which such Selling Stockholder may become subject (under the
Securities Act or otherwise) insofar as such losses, claims, damages or
liabilities (or actions or proceedings in respect thereof) arise out of, or are
based upon (x) any breach of the representations or warranties of the Company
contained in this Section 3.3 or failure to comply with the covenants and
agreements of the Company contained in this Section 3.3, (y) any untrue
statement of a material fact contained in the Registration Statement as amended
at the time of effectiveness or any omission of a material fact required to be
stated therein or necessary to make the statements therein not misleading, or
(z) any failure by the Company to fulfill any undertaking included in the
Registration Statement as amended at the time of effectiveness, and the Company
will reimburse such Selling Stockholder for any reasonable legal or other
expenses reasonably incurred in investigating, defending or preparing to defend
any such action, proceeding or claim, or preparing to defend any such action,
proceeding or claim, provided, however, that the Company shall not be liable in
any such case to
Securities Purchase Agreement - Page 18
the extent that such loss, claim, damage or liability arises out of, or is based
upon, an untrue statement made in such Registration Statement or any omission of
a material fact required to be stated therein or necessary to make the
statements therein not misleading in reliance upon and in conformity with
written information furnished to the Company by or on behalf of such Selling
Stockholder specifically for use in preparation of the Registration Statement or
the failure of such Selling Stockholder to comply with its covenants and
agreements contained in Section 3.3(b) hereof respecting sale of the Conversion
Shares or, in the event the Company has advised the Investors in writing that
the Company does not meet the conditions for using Rule 172 of the Securities
Act and has provided the Investors with a copy of a current Prospectus, any
statement or omission in any earlier Prospectus that is corrected in the
Prospectus so delivered to the Investors and delivered to the Selling
Stockholder prior to the pertinent sale or sales by the Selling Stockholder. The
Company shall reimburse each Selling Stockholder for the amounts provided for
herein on demand as such expenses are incurred.
(ii) Each Investor, severally but not jointly, agrees
to indemnify and hold harmless the Company (and each person, if any, who
controls the Company within the meaning of Section 15 of the Securities Act,
each officer of the Company who signs the Registration Statement and each
director of the Company) from and against any losses, claims, damages or
liabilities to which the Company (or any such officer, director or controlling
person) may become subject (under the Securities Act or otherwise), insofar as
such losses, claims, damages or liabilities (or actions or proceedings in
respect thereof) arise out of, or are based upon, (x) any failure to comply with
the covenants and agreements contained in Section 3.3(b) hereof respecting sale
of the Conversion Shares, or (y) any untrue statement of a material fact
contained in the Registration Statement or any omission of a material fact
required to be stated therein or necessary to make the statements therein not
misleading if such untrue statement or omission was made in reliance upon and in
conformity with written information furnished by or on behalf of such Investor
specifically for use in preparation of the Registration Statement, and such
Investor will reimburse the Company (or such officer, director or controlling
person), as the case may be, for any legal or other expenses reasonably incurred
in investigating, defending or preparing to defend any such action, proceeding
or claim; provided that such Investor's obligation to indemnify the Company
shall be limited to the net amount received by such Investor from the sale of
the Conversion Shares giving rise to such obligation.
(iii) Promptly after receipt by any indemnified
person of a notice of a claim or the beginning of any action in respect of which
indemnity is to be sought against an indemnifying person pursuant to this
Section 3.3(c), such indemnified person shall notify the indemnifying person in
writing of such claim or of the commencement of such action, but the omission to
so notify the indemnifying person will not relieve it from any liability which
it may have to any indemnified person under this Section 3.3(c) (except to the
extent that such omission materially and adversely affects the indemnifying
person's ability to defend such action) or from any liability otherwise than
under this Section 3.3(c). Subject to the provisions hereinafter stated, in case
any such action shall be brought against an indemnified person, the indemnifying
person shall be entitled to participate therein, and, to the extent that it
shall elect by written notice delivered to the indemnified person promptly after
receiving the aforesaid notice from such indemnified person, shall be entitled
to assume the defense thereof, with counsel reasonably satisfactory to such
indemnified person. After notice from the indemnifying person to such
indemnified person of its election to assume the defense thereof, such
indemnifying person shall not be liable to such indemnified person for any legal
expenses subsequently incurred by such indemnified person in connection with the
defense thereof, provided, however, that if there exists or shall exist a
conflict of interest that would make it inappropriate, in the opinion of counsel
to the indemnified person, for the same counsel to represent both the
indemnified person and such indemnifying person or any affiliate or associate
thereof, the indemnified person shall be entitled to retain its own counsel at
the reasonable expense of such indemnifying person; provided, however, that no
Securities Purchase Agreement - Page 19
indemnifying person shall be responsible for the fees and expenses of more than
one separate counsel (together with appropriate local counsel) for all
indemnified parties. In no event shall any indemnifying person be liable in
respect of any amounts paid in settlement of any action unless the indemnifying
person shall have approved the terms of such settlement; provided that such
consent shall not be unreasonably withheld. No indemnifying person shall,
without the prior written consent of the indemnified person, effect any
settlement of any pending or threatened proceeding in respect of which any
indemnified person is or could have been a party and indemnification could have
been sought hereunder by such indemnified person, unless such settlement
includes an unconditional release of such indemnified person from all liability
on claims that are the subject matter of such proceeding.
(iv) If the indemnification provided for in this
Section 3.3(c) is unavailable to or insufficient to hold harmless an indemnified
person under subsection (i) or (ii) above in respect of any losses, claims,
damages or liabilities (or actions or proceedings in respect thereof) referred
to therein, then each indemnifying person shall contribute to the amount paid or
payable by such indemnified person as a result of such losses, claims, damages
or liabilities (or actions in respect thereof) in such proportion as is
appropriate to reflect the relative fault of the Company on the one hand and the
applicable Investor, as well as any other Selling Shareholders under such
registration statement on the other in connection with the statements or
omissions or other matters which resulted in such losses, claims, damages or
liabilities (or actions in respect thereof), as well as any other relevant
equitable considerations. The relative fault shall be determined by reference
to, among other things, in the case of an untrue statement, whether the untrue
statement relates to information supplied by the Company on the one hand or an
Investor or other Selling Shareholder on the other and the parties' relative
intent, knowledge, access to information and opportunity to correct or prevent
such untrue statement. The Company and each Investor, severally but not jointly,
agree that it would not be just and equitable if contribution pursuant to this
subsection (iv) were determined by pro rata allocation (even if the Investor and
other Selling Shareholders were treated as one entity for such purpose) or by
any other method of allocation which does not take into account the equitable
considerations referred to above in this subsection (iv). The amount paid or
payable by an indemnified person as a result of the losses, claims, damages or
liabilities (or actions in respect thereof) referred to above in this subsection
(iv) shall be deemed to include any legal or other expenses reasonably incurred
by such indemnified person in connection with investigating or defending any
such action or claim. Notwithstanding the provisions of this subsection (iv),
each Investor shall not be required to contribute any amount in excess of the
amount by which the net amount received by such Investor from the sale of the
Conversion Shares to which such loss relates exceeds the amount of any damages
which such Investor has otherwise been required to pay by reason of such untrue
statement. No person guilty of fraudulent misrepresentation (within the meaning
of Section 11(f) of the Securities Act) shall be entitled to contribution from
any person who was not guilty of such fraudulent misrepresentation. Each
Investor's obligations in this subsection to contribute shall be in proportion
to its sale of Conversion Shares to which such loss relates and shall not be
joint with any other Selling Shareholders.
(v) The parties to this Agreement hereby acknowledge
that they are sophisticated business persons who were represented by counsel
during the negotiations regarding the provisions hereof including, without
limitation, the provisions of this Section 3.3(c), and are fully informed
regarding said provisions. They further acknowledge that the provisions of this
Section 3.3(c) fairly allocate the risks in light of the ability of the parties
to investigate the Company and its business in order to assure that adequate
disclosure is made in the Registration Statement as required by the Act and the
Exchange Act. The parties are advised that federal or state public policy as
interpreted by the courts in certain jurisdictions may be contrary to certain of
the provisions of this Section 3.3(c), and the parties hereto hereby expressly
waive and relinquish any right or ability to assert such public policy as a
defense to a claim under this Section 3.3(c) and further agree not to attempt to
assert any such defense.
Securities Purchase Agreement - Page 20
(d) Delayed Effectiveness. The Company and each Investor,
severally but not jointly, agree that such Investor will suffer damages if the
Company fails to fulfill its obligations pursuant to Sections 3.3(a) and 3.3(b)
hereof and that it would not be possible to ascertain the extent of such damages
with precision. Accordingly, the Company hereby agrees to liquidated damages
("Liquidated Damages") to each Investor under the following circumstances: (i)
if the Registration Statement is not filed on or before the Target Date (such an
event, a "Filing Default"); (ii) if the Registration Statement is not declared
effective by the SEC on or prior to Required Effective Date (the "Effectiveness
Deadline") (such an event, an "Effectiveness Default"); or (iii) if the
Registration Statement (after its effectiveness date) ceases to be effective and
available to such Investor for any continuous period that exceeds 30 days or for
one or more periods that exceed in the aggregate 60 days in any 12-month period
(such an event, a "Suspension Default" and together with a Filing Default and an
Effectiveness Default, a "Registration Default"). In the event of a Registration
Default, the Company shall as Liquidated Damages pay to such Investor, for each
30-day period of a Registration Default, an amount in cash equal to 1% of the
aggregate purchase price paid by the Investor pursuant to this Agreement;
provided that in no event shall the aggregate amount of cash to be paid as
Liquidated Damages pursuant to this Section 3.3(d) exceed 9% of the aggregate
purchase price paid by such Investor. The Company shall pay the Liquidated
Damages as follows: (i) in connection with a Filing Default, on the business day
following the Filing Default, and each 30th day thereafter until the
Registration Statement has been filed with the SEC; (ii) in connection with an
Effectiveness Default, on the business day following the Effectiveness Deadline,
and each 30th day thereafter until the Registration Statement is declared
effective by the SEC; or (ii) in connection with a Suspension Default, on either
(x) the 31st consecutive day of any Suspension or (y) the 61st day (in the
aggregate) of any Suspensions in any 12-month period, and each 30th day
thereafter until the Suspension is terminated in accordance with Section 3.3(b).
Notwithstanding the foregoing, all periods shall be tolled during delays
directly caused by the action or inaction of any Investor, and the Company shall
have no liability to any Investor in respect of any such delay. The Liquidated
Damages payable herein shall apply on a pro rata basis for any portion of a
30-day period of a Registration Default.
(e) Termination of Conditions and Obligations. The conditions
precedent imposed by Section 5.5 or this Section 3.3 upon the transferability of
the Conversion Shares shall cease and terminate as to any particular number of
the Conversion Shares when such Conversion Shares shall have been effectively
registered under the Securities Act and sold or otherwise disposed of in
accordance with the intended method of disposition set forth in the Registration
Statement covering such Conversion Shares, at the time such Conversion Shares
are eligible for sale pursuant to Rule 144(k) (and the Investor provides the
Company with such reasonable and appropriate customary representations as may be
reasonably requested by the Company) or at such time as an opinion of counsel
reasonably satisfactory to the Company shall have been rendered to the effect
that such conditions are not necessary in order to comply with the Securities
Act.
(f) Information Available. So long as the Registration
Statement is effective covering the resale of Conversion Shares owned by any
Investor, the Company will furnish to such Investors, upon the reasonable
request of an Investor, an adequate number of copies of the Prospectuses to
supply to any other party requiring such Prospectuses; and upon the reasonable
request of such Investor, the President or the Chief Financial Officer of the
Company (or an appropriate designee thereof) will meet with such Investor or a
representative thereof at the Company's headquarters to discuss all information
relevant for disclosure in the Registration Statement covering the Conversion
Shares and will otherwise cooperate with any Investor conducting an
investigation for the purpose of reducing or eliminating such Investor's
exposure to liability under the Securities Act, including the reasonable
production of information at the Company's headquarters; provided, that the
Company shall
Securities Purchase Agreement - Page 21
not be required to disclose any confidential information to or meet at its
headquarters with any Investor until and unless the Investor shall have entered
into a confidentiality agreement in form and substance reasonably satisfactory
to the Company with the Company with respect thereto.
3.4 Annual Meeting; Liquidated Damages.
(a) The Company shall, in accordance with applicable law and
the Company's certificate of incorporation and by-laws, duly call, give notice
of, convene and hold its annual meeting of the Company's stockholders (the
"Annual Meeting") as soon as possible after the date hereof for, among other
purposes, the purpose of considering the approval of the Restated Charter
described in Section 3.2. In connection with the definitive proxy statement or
information statement, as the case may be, for the Annual Meeting, the Company
shall use its best efforts to obtain a unanimous recommendation of the Board of
Directors for inclusion in such proxy statement, recommending that the Company's
stockholders approve such amendment to the Company's certificate of
incorporation. Furthermore, in connection with the preparation of such
definitive proxy statement or information statement, as the case may be, and
other matters relating to the Annual Meeting, the Company shall consult with and
keep informed, and shall cause the appropriate officers, directors and legal
counsel to consult with and keep informed, legal counsel to the Investors
(including, without limitation, legal counsel to M/C Venture Partners).
(b) The Company shall file promptly (and not later than 25
days after the SEC has indicated to the Company that the SEC has no comments or
no additional comments are forthcoming on the Company's preliminary proxy or
information statement, as the case may be, relating to the Restated Charter and
the Annual Meeting) the Restated Charter with the Secretary of State of the
State of Delaware, and the Company shall deliver to the Investors a copy of the
Restated Charter duly certified by the Secretary of State of the State of
Delaware.
(c) The Company and each Investor, severally but not jointly,
agree that such Investor will suffer damages if the Company fails to fulfill its
obligations pursuant to Sections 1.3 and 3.4(b) hereof and that it would not be
possible to ascertain the extent of such damages with precision. Accordingly,
the Company hereby agrees to pay Liquidated Damages to each Investor under the
following circumstances: (i) if the Company fails to deliver to the Investors
the certificates evidencing the Shares and the Warrants being purchased by the
Investors hereunder within three (3) business days after the date hereof (such
an event, a "Delivery Default"); and (ii) if the Restated Charter is not filed
with the Secretary of State of the State of Delaware within the time period set
forth in Section 3.4(b) (such an event, a "Charter Filing Default" and together
with a Delivery Default, a "Covenant Default"). In the event of a Covenant
Default, the Company shall as Liquidated Damages pay to such Investor, for each
30-day period of a Covenant Default, an amount in cash equal to 1% of the
aggregate purchase price paid by the Investor pursuant to this Agreement. The
Company shall pay the Liquidated Damages as follows: (i) in connection with a
Delivery Default, on the business day following the Delivery Default, and each
30th day thereafter until the certificates evidencing the Shares and the
Warrants purchased by the Investors hereunder have been delivered to the
Investors; and (ii) in connection with an Charter Filing Default, on the
business day following the expiration of the 25-day period set forth in Section
3.4(b), and each 30th day thereafter until the Restated Charter is filed with
the Secretary of State of the State of Delaware. Notwithstanding the foregoing,
all periods shall be tolled during delays directly caused by the action or
inaction of any Investor, and the Company shall have no liability to any
Investor in respect of any such delay. The Liquidated Damages payable herein
shall apply on a pro rata basis for any portion of a 30-day period of a Covenant
Default.
Securities Purchase Agreement - Page 22
3.5 Reservation of Shares of Common Stock. From and after the filing of
the Restated Charter, the Company will at all times reserve and keep available,
solely for issuance and delivery upon the conversion of the Shares and exercise
of the Warrants and the Additional Warrants (if any), all Common Stock issuable
from time to time upon such conversion and exercise. If at any time the number
of authorized but unissued shares of Common Stock shall not be sufficient to
effect the conversion of the Shares and/or exercise of the Warrants and the
Additional Warrants (if any) without limitation of any remedies available to any
Investor, the Company will forthwith take such corporate action (and shall use
its best efforts to cause the Company's stockholders to take such action) as may
be necessary to increase its authorized but unissued shares of Common Stock to
such number of shares as shall be sufficient for such purposes. The Company
shall obtain any authorization, consent, approval or other action by, or make
any filing with, any court or administrative body that may be required under
applicable state securities laws in connection with the issuance of shares of
Common Stock upon conversion of the Shares and exercise of the Warrants and the
Additional Warrants (if any).
3.6 Issuance of Additional Warrants.
(a) If in connection with a Future Financing Transaction, the
conversion price per share of the Future Financing Security (as defined below)
issued in such transaction is equal to or greater than the Series D Conversion
Price (as defined in the Certificate of Designations or the Restated Charter, as
the case may be), then the Company shall issue to each Investor (whether or not
such Investor is participating in such Future Financing Transaction) a warrant
(an "Additional Warrant") to purchase a number of shares of Common Stock equal
to the difference (not to be less than zero) between (A) the number of shares of
Common Stock issuable upon conversion of the Shares held by such Investor
(calculated in accordance with the terms of the Certificate of Designations or
the Restated Charter, as the case may be, immediately prior to the consummation
of such Future Financing Transaction) and (B) assuming (i) such Investor
purchased a number of Future Financing Securities issued in such transaction
(including, without limitation, purchase price per share or unit paid by all
other investors in such transaction) for an aggregate purchase price equal to
the amount set forth opposite such Investor's name on Exhibit A under the
heading "Purchase Price" and (ii) the Future Financing Securities purchased by
such Investor in such transaction (calculated in accordance with clause (i)
hereof) were converted into shares of Common Stock in accordance with their
terms immediately after consummation of such transaction, the number of shares
of Common Stock issuable upon such conversion of such shares of Future Financing
Securities. The Additional Warrants shall be in form and substance substantially
similar to the form of Warrant attached hereto as Exhibit B and shall have an
initial exercise price of $0.01 per share of Common Stock. All Additional
Warrants shall be issued and delivered to the Investors at the closing of such
Future Financing Transaction. For the avoidance of doubt, the Investors
acknowledge and agree that the Company shall have no obligation under this
Section 3.6 to issue Additional Warrants if a Future Financing Transaction is
not consummated within the time period specified in the Certificate of
Designations (i.e., 180 days after the date hereof). The Additional Warrants and
the shares of Common Stock to be issued upon exercise of the Additional Warrants
will all be duly authorized, and when issued in accordance with the terms hereof
and upon exercise of the Additional Warrants, will be duly and validly issued,
fully paid and nonassessable.
(b) For purposes hereof, the following terms shall have the
following meanings:
(i) "Future Financing Transaction" shall mean any
financing (or series of related financings) of the Company (other than in
connection the purchase and sale of the Shares and Warrants contemplated hereby)
that closes within 180 days after the date hereof and involves the issuance of
any securities or instruments (other than debt securities with no equity
feature) of the Company in which the aggregate gross proceeds to the Company
equals or exceeds $10 million.
Securities Purchase Agreement - Page 23
(ii) "Future Financing Security" shall mean the class
and type of any security, instrument or indebtedness (but not debt securities
with no equity feature) of the Company issued to investors at the closing of a
Future Financing Transaction (but excluding the conversion of the Shares and the
issuance of the Additional Warrants).
3.7 Removal of Legends. Upon the earlier of (i) registration of the
Conversion Shares for sale pursuant to Section 3.3 or (ii) Rule 144(k) becoming
available with respect to an Investor's Conversion Shares, the Company shall,
(A) deliver to the transfer agent for the Common Stock (the "Transfer Agent")
irrevocable instructions that the Transfer Agent shall reissue a certificate
representing shares of Common Stock without legends upon receipt by such
Transfer Agent of the legended certificates for such shares, together with
either (1) a customary representation by such Investor that Rule 144(k) of the
Securities Act applies to the shares of Common Stock represented thereby or (2)
the Certificate of Subsequent Sale in substantially the form of Exhibit G
hereto, and (B) cause its counsel to deliver to the Transfer Agent one or more
blanket opinions to the effect that the removal of such legends in such
circumstances may be effected under the Securities Act. From and after the
earlier of such dates, upon an Investor's written request, the Company shall
promptly cause certificates evidencing such Investor's securities to be replaced
with certificates which do not bear such restrictive legends, and Conversion
Shares subsequently issued upon conversion of the Shares or the due exercise of
the Warrants shall not bear such restrictive legends. When the Company is
required to cause unlegended certificates to replace previously issued legended
certificates, if unlegended certificates are not delivered to an Investor within
three (3) business days of submission by that Investor of legended
certificate(s) to the Transfer Agent as provided above (or to the Company, in
the case of the Warrants), the Company shall be liable to such Investor for a
penalty equal to 1% of the aggregate purchase price of the Conversion Shares
evidenced by such certificate(s) for each thirty (30) day period (or portion
thereof) beyond such three (3) business day period that the unlegended
certificates have not been so delivered; provided that in no event shall the
aggregate amount of cash to be paid to such Investor pursuant to this Section
3.7 exceed 9% of such aggregate purchase price.
ARTICLE IV
NEGATIVE COVENANTS OF THE COMPANY
For so long as at least 2,500 Shares are issued and outstanding, the
Company hereby covenants with (i) M/C Venture Partners that so long as M/C
Venture Partners owns at least 50% of the Shares initially purchased by it
hereunder and (ii) with respect to Sections 4.6 and 4.11, with all of the 20%
Investors for so long as such Investors beneficially own at least 20% of the
Common Stock (calculated on a fully diluted basis), in addition to any other
vote required by law or the Company's certificate of incorporation, without the
prior written consent of M/C Venture Partners, the Company will not:
4.1 Change in Control; Sale of Assets; Merger. Enter into any
transaction, or series of related transactions, constituting a Change of Control
(or agree to enter into any such transaction or series of related transactions,
or permit any Subsidiary to do so). For purposes of this Section 4.1, "Change of
Control" shall mean the existence or occurrence of any of the following: (a) the
sale, conveyance or disposition of all or substantially all of the assets of the
Company; (b) the effectuation of a transaction or series or related transactions
in which more than fifty percent (50%) of the voting power of the Company is
disposed of (other than as a direct result of normal, uncoordinated trading
activities in the Common Stock generally); (c) the consolidation, merger or
other business combination of the Company with or into any other entity,
immediately following which the prior stockholders of the Company fail to own,
directly or indirectly, at least fifty percent (50%) of the voting equity of the
Securities Purchase Agreement - Page 24
surviving entity; and (d) a transaction or series of related transactions in
which any person or group, other than the Investors and their affiliates,
acquires more than fifty percent (50%) of the voting equity of the Company,
provided, that the Company shall not be deemed to have violated this Section
4.1(d) in the event the Investors sell, convey or transfer more than 50% of the
outstanding equity securities of the Company to an unaffiliated third party.
4.2 Creation of Senior or Pari Passu Equity; Issuance of Equity
Securities. Create or authorize the creation of any additional class or series
of shares of stock (or any debt security which by its terms is convertible into
or exchangeable for any equity security of the Company and any security which is
a combination of debt and equity) unless the same ranks junior to the Common
Stock as to dividends and the distribution of assets on the liquidation,
dissolution or winding up of the Company; or issue, or agree to issue, any
equity security (or any security convertible, exercisable or exchangeable for or
into any equity security) of the Company other than securities set forth in
Section 3.1(e).
4.3 Repurchases, Redemptions, Dividends. Purchase or redeem, or set
aside any sums for the purchase or redemption of, or pay any dividend or make
any distribution on, any shares of capital stock of the Company or permit any
Subsidiary to do any of the foregoing, except for (1) dividends or other
distributions payable on the Common Stock solely in the form of additional
shares of Common Stock; (2) redemption of the Shares as contemplated by the
Certificate of Designations and/or the Company's certificate of incorporation;
(3) the dividends and/or distributions with respect to the Shares contemplated
by the Certificate of Designations and/or the Company's certificate of
incorporation; and (4) the repurchase of shares of Common Stock from employees
or consultants at the original purchase price thereof pursuant to awards granted
prior to the date hereof under a stock plan approved by the Board of Directors.
4.4 Transfers of Intellectual Property. Transfer any ownership or
interest in, or material rights relating to, or the granting of any liens or
encumbrances on, any of the Intellectual Property to any person or entity which
is not a member of the consolidated group of the Company and its Subsidiaries;
provided, however, that this restriction shall not apply to transfers of
Intellectual Property accomplished in the ordinary course of business (such as
pursuant to software license agreements in the ordinary course of business).
4.5 Liquidation or Dissolution. Consent to or effect any liquidation,
dissolution or winding up of the Company or any recapitalization or
reorganization of the Company, or permit any Subsidiary to do any of the
foregoing.
4.6 Change in Size of Board. Increase or decrease the number of
directors constituting the size of the Board of Directors from seven (7)
members.
4.7 Change to Charter/By-laws. Amend, alter or repeal any provision of
the certificate of incorporation or by-laws of the Company.
4.8 Change in Nature of Business. Make, or permit any Subsidiary to
make, any change in the nature of its business from that contemplated in the
Exchange Act Documents existing on the date hereof.
4.9 Restrictions on Indebtedness. Create, incur, assume or suffer to
exist, or permit any Subsidiary to create, incur, assume or suffer to exist, any
liability with respect to indebtedness for money borrowed which exceeds, in the
aggregate, $3,000,000, provided that indebtedness for borrowed money assumed,
guaranteed, endorsed or upon which the Company or any Subsidiary has otherwise
become
Securities Purchase Agreement - Page 25
directly or contingently liable on, shall count as indebtedness for money
borrowed for the purpose of this restriction.
4.10 Change in Authorized Capital Stock. Increase or decrease in the
authorized amount of any shares of capital stock of the Company, whether any
such change shall be by means of amendment to the Company's certificate of
incorporation or by merger, consolidation or otherwise other than as required
pursuant to Section 3.2.
4.11 No Disparate Voting Rights. Take any action, including, without
limitation, amendments to the Certificate of Incorporation, that would enable
any holder of a share of capital stock of the Company to vote such shares on any
matter at a rate exceeding the number of votes that such share would be entitled
to had it been purchased at a purchase price equal to one share of Common Stock
of the Company on the date of its purchase (and the Company shall not use
indebtedness to evade this covenant).
4.12 Issuance of Compensatory Equity Awards. Grant any options or other
rights to purchase capital stock except to employees, directors and consultants
as authorized by vote of the Board of Directors or its Compensation Committee,
if such committee has been formed.
4.13 Adjustments to Warrants. Take any action which would cause any
adjustment under Section 8 of the Warrants.
ARTICLE V
REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE INVESTORS
Each Investor, severally and not jointly, represents and warrants to,
and covenants with, the Company that:
5.1 Authorization. The Investor has all requisite power and authority
to execute, deliver and perform its obligations under this Agreement. The
execution of this Agreement and the consummation of the transactions
contemplated hereby have been duly authorized by all necessary action on the
part of such Investor and this Agreement has been duly executed and delivered
and constitutes the valid and binding obligation of the Investor enforceable in
accordance with its terms, except as rights to indemnity and contribution may be
limited by state or federal securities laws or the public policy underlying such
laws, except as enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or similar laws affecting creditors' and
contracting parties' rights generally and except as enforceability may be
subject to general principles of equity (regardless of whether such
enforceability is considered in a proceeding in equity or at law).
5.2 Purchase Entirely for Own Account. The Shares and Warrants to be
purchased by the Investor will be acquired for investment for the Investor's own
account, not as a nominee or agent, and not with a view to the resale or
distribution of any part thereof in violation of the Securities Act, and such
Investor has no present intention of selling, granting any participation in, or
otherwise distributing the same. Such Investor does not have any contract,
undertaking, agreement, or arrangement with any person to sell, transfer, or
grant participation to any person with respect to any of the Shares or the
Warrants. Nothing contained herein shall be deemed a representation or warranty
by such Investor to hold the Shares, the Warrants or any Conversion Shares for
any period of time.
Securities Purchase Agreement - Page 26
5.3 Disclosure of Information. The Investor acknowledges that it has
received all the information that it has requested relating to the Company and
the purchase of the Shares and the Warrants. The Investor further represents
that it has had an opportunity to ask questions and receive answers from the
Company regarding the terms and conditions of the offering of the Shares and the
Warrants. The foregoing, however, does not limit or modify the representations
and warranties of the Company in this Agreement or the right of the Investor to
rely thereon.
5.4 Accredited Investor. The Investor is an "accredited investor"
within the meaning of Rule 501 of Regulation D of the SEC, as presently in
effect and the Investor is also knowledgeable, sophisticated and experienced in
making, and is qualified to make decisions with respect to the transactions
contemplated hereby.
5.5 Restricted Securities. Investor understands that the Shares and the
Warrants are characterized as "restricted securities" under the federal
securities laws inasmuch as they are being acquired from the Company in a
transaction not involving a public offering, and that under such laws and
applicable regulations such securities may be resold without registration under
the Securities Act, only in certain limited circumstances. In this connection,
the Investor represents that it is familiar with SEC Rule 144, as presently in
effect, and understands the resale limitations imposed thereby and by the
Securities Act.
5.6 Legends. It is understood that the certificates evidencing the
Shares shall bear a legend, reading substantially as follows:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR
THE SECURITIES LAWS OF ANY STATE AND ARE SUBJECT TO RESTRICTIONS ON
TRANSFERABILITY AS SET FORTH IN THIS CERTIFICATE. THE SECURITIES
REPRESENTED HEREBY MAY NOT BE SOLD, TRANSFERRED, ASSIGNED, PLEDGED,
HYPOTHECATED, OR OTHERWISE DISPOSED OF IN THE ABSENCE OF AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE ACT AND APPLICABLE STATE SECURITIES
LAWS EXCEPT PURSUANT TO RULE 144(K) OR PURSUANT TO AN OPINION OF
COUNSEL, REASONABLY ACCEPTABLE TO COUNSEL FOR THE COMPANY, TO THE
EFFECT THAT THE PROPOSED SALE, TRANSFER, OR DISPOSITION MAY BE
EFFECTUATED WITHOUT REGISTRATION UNDER THE ACT AND APPLICABLE STATE
SECURITIES LAWS."
5.7 Investor Questionnaire. The Investor covenants to execute and
deliver to the Company at or promptly following the Closing an investor
questionnaire supplied by the Company to facilitate the registration of the
Shares pursuant to the registration rights set forth herein and the information
contained therein shall be true and correct.
5.8 Prohibited Transactions. During the last thirty (30) days prior to
the date hereof, neither such Investor nor any Affiliate of such Investor which
(x) had knowledge of the transactions contemplated hereby, (y) has or shares
discretion relating to such Investor's investments or trading or information
concerning such Investor's investments, including in respect of the Securities,
or (z) is subject to such Investor's review or input concerning such Affiliate's
investments or trading (collectively, "Trading Affiliates") has, directly or
indirectly, effected or agreed to effect any short sale, whether or not against
the box, established any "put equivalent position" (as defined in Rule 16a-1(h)
under the Exchange Act) with respect to the Common Stock, granted any other
right (including,
Securities Purchase Agreement - Page 27
without limitation, any put or call option) with respect to the Common Stock or
with respect to any security that includes, relates to or derived any
significant part of its value from the Common Stock or otherwise sought to hedge
its position in the Securities (each, a "Prohibited Transaction"). Prior to the
earliest to occur of (i) the termination of this Agreement, (ii) the Effective
Date or (iii) the Effectiveness Deadline, such Investor shall not, and shall
cause its Trading Affiliates not to, engage, directly or indirectly, in a
Prohibited Transaction. Such Investor acknowledges that the representations,
warranties and covenants contained in this Section 5.8 are being made for the
benefit of the Investors as well as the Company and that each of the other
Investors shall have an independent right to assert any claims against such
Investor arising out of any breach or violation of the provisions of this
Section 5.8.
5.9 Restrictions on Certain Payments. The Investor acknowledges and
agrees that, pursuant to the provisions of the Loan and Security Agreement dated
as of September 28, 2005 (as amended, and as hereafter amended from time to
time, the "SVB Loan Agreement") among the Company, Vertical Communications
Acquisition Corp. and SVB, the Company will be prohibited from (a) paying or
declaring any dividends on or with respect to the Conversion Shares (except for
dividends payable solely in stock of the Company) or (b) redeeming, retiring,
purchasing or otherwise acquiring any of the Conversion Shares until such time
as all indebtedness under the SVB Loan Agreement, and any extensions, renewals
or refinancings thereof, has been repaid in full, without, in any case,
obtaining the prior written consent of SVB.
ARTICLE VI
SURVIVAL; INDEMNITY
6.1 Survival of Representations, Warranties and Agreements.
Notwithstanding any investigation made by any party to this Agreement, all
covenants, agreements, representations and warranties made by the Company herein
shall survive the execution of this Agreement, the delivery to the Investors of
the Shares and the Warrants being purchased and the payment therefor; provided,
that the representations and warranties of the parties hereunder shall only
survive for a period of one year following the Closing Date.
6.2 Indemnity. Company agrees to indemnify and hold each Investor, and
its respective directors, managers, officers, shareholders, members, partners,
affiliates, employees, attorneys and agents (each, an "Indemnified Person"),
harmless from and against any and all suits, actions, proceedings, claims,
damages, losses, liabilities and expenses of any kind or nature whatsoever
(including attorneys' fees and disbursements and other costs of investigation or
defense, including those incurred upon any appeal) which may be instituted or
asserted against or incurred by any such Indemnified Person as the result of
their investment in the Shares and the Warrants under this Agreement or with
respect to any breach (or alleged breach) of any representation, warranty or
covenant of the Company contained in this Agreement or with respect to the
execution, delivery, enforcement, performance and administration of, or in any
other way arising out of or relating to, this Agreement or transactions
contemplated by or referred to herein and any actions or failures to act with
respect to any of the foregoing, except to the extent that any such indemnified
liability is finally determined by a court of competent jurisdiction to have
resulted from such Indemnified Person's gross negligence or willful misconduct.
The Company shall reimburse each Investor for amounts provided for herein on
demand as such expenses are incurred. NO INDEMNIFIED PERSON SHALL BE RESPONSIBLE
OR LIABLE TO THE COMPANY OR TO ANY OTHER PARTY OR TO ANY SUCCESSOR, ASSIGNEE OR
THIRD PARTY BENEFICIARY OR ANY OTHER PERSON ASSERTING CLAIMS DERIVATIVELY
THROUGH SUCH PARTY, FOR
Securities Purchase Agreement - Page 28
INDIRECT, PUNITIVE, EXEMPLARY OR CONSEQUENTIAL DAMAGES WHICH MAY BE ALLEGED AS A
RESULT OF THEIR INVESTMENT IN THE SHARES UNDER THIS AGREEMENT OR AS A RESULT OF
ANY OTHER TRANSACTION CONTEMPLATED HEREUNDER. THE COMPANY SHALL NOT BE
RESPONSIBLE OR LIABLE TO ANY INDEMNIFIED PERSON OR TO ANY OTHER PARTY OR TO ANY
SUCCESSOR, ASSIGNEE OR THIRD PARTY BENEFICIARY OR ANY OTHER PERSON ASSERTING
CLAIMS DERIVATIVELY THROUGH SUCH PARTY, FOR INDIRECT, PUNITIVE, EXEMPLARY,
CONSEQUENTIAL OR SPECIAL DAMAGES WHETHER OR NOT SUCH DAMAGES WERE REASONABLY
FORESEEABLE.
ARTICLE VII
MISCELLANEOUS
7.1 Notices. All notices, requests, consents and other communications
hereunder shall be in writing, shall be mailed (A) if within the United States
by first-class registered or certified airmail, or nationally recognized
overnight express courier, postage prepaid, or by facsimile, or (B) if delivered
from outside the United States, by International Federal Express or facsimile,
and shall be deemed given and received (i) if delivered by first-class
registered or certified mail, three business days after so mailed, (ii) if
delivered by nationally recognized overnight carrier, one business day after so
mailed, (iii) if delivered by International Federal Express, two business days
after so mailed, (iv) if delivered by facsimile, upon electronic confirmation of
receipt and shall be delivered as addressed as follows:
(a) if to the Company, to:
Artisoft, Inc.
0 Xxxxxxxxx Xxxxxx
Xxxxxxxxx, XX 00000
Attn: Chief Executive Officer
(b) with a copy to:
Xxxxxxx Xxxxx LLP
0000 Xxxx Xxxxxx, Xxxxx 0000
Xxxxxx, XX 00000
Attn: Xxxxxx X. Xxxxxxx, Esq.
(c) if to the Investors, at their respective addresses on the
signature page hereto, or at such other address or addresses as may have been
furnished to the Company in writing, with a copy to counsel to M/C Venture
Partners:
Goodwin | Procter LLP
Exchange Place
00 Xxxxx Xxxxxx
Xxxxxx, XX 00000
Attn: Xxxxxxx X. Xxxx, Esq.
7.2 Changes. This Agreement may not be modified, waived or amended
except pursuant to an instrument in writing signed by the Company and with
Investors constituting the Majority Investors'
Securities Purchase Agreement - Page 29
Consent (provided, that, if such modification, waiver or amendment does not
equally affect all Investors to whom such modification, waiver or amendment is
applicable (taking into account the relative ownership interests of such
Investors), such modification, waiver or amendment must be signed by all
Investors).
7.3 Headings. The headings of the various sections of this Agreement
have been inserted for convenience of reference only and shall not be deemed to
be part of this Agreement.
7.4 Severability. In case any provision contained in this Agreement
should be invalid, illegal or unenforceable in any respect, the validity,
legality and enforceability of the remaining provisions contained herein shall
not in any way be affected or impaired thereby.
7.5 Governing Law; Consent to Jurisdiction; Waiver of Jury Trial. This
Agreement shall be governed by, and construed in accordance with, the laws of
the State of New York. Each of the parties hereto irrevocably submits to the
exclusive jurisdiction of the courts of the State of New York located in New
York County and the United States District Court for the Southern District of
New York for the purpose of any suit, action, proceeding or judgment relating to
or arising out of this Agreement and the transactions contemplated hereby.
Service of process in connection with any such suit, action or proceeding may be
served on each party hereto anywhere in the world by the same methods as are
specified for the giving of notices under this Agreement. Each of the parties
hereto irrevocably consents to the jurisdiction of any such court in any such
suit, action or proceeding and to the laying of venue in such court. Each party
hereto irrevocably waives any objection to the laying of venue of any such suit,
action or proceeding brought in such courts and irrevocably waives any claim
that any such suit, action or proceeding brought in any such court has been
brought in an inconvenient forum. EACH OF THE PARTIES HERETO WAIVES ANY RIGHT TO
REQUEST A TRIAL BY JURY IN ANY LITIGATION WITH RESPECT TO THIS AGREEMENT AND
REPRESENTS THAT COUNSEL HAS BEEN CONSULTED SPECIFICALLY AS TO THIS WAIVER.
7.6 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall constitute an original, but all of which, when
taken together, shall constitute but one instrument, and shall become effective
when one or more counterparts have been signed by each party hereto and
delivered to the other parties.
7.7 Press Release. The Company shall on the Closing Date issue a press
release disclosing the material terms of the transactions contemplated hereby
(including at least the number of Shares sold and proceeds therefrom).
7.8 Prior Agreements. This Agreement constitutes the entire agreement
between the parties and supersedes any prior understandings or agreements
(including without limitation oral agreements) concerning the purchase and sale
of the Shares.
7.9 Costs, Expenses and Taxes. The Company agrees to pay the reasonable
out-of-pocket costs and expenses of M/C Venture Partners incurred in connection
with the transactions contemplated by this Agreement, including the reasonable
fees and expenses of Xxxxxxx Procter LLP, special counsel for M/C Venture
Partners, as well as the reasonable fees and out-of-pocket expenses of legal
counsel, independent public accountants, technical professionals and other
outside experts retained by M/C Venture Partners in connection with the
transactions contemplated by this Agreement and the amendment or enforcement of
this Agreement.
Securities Purchase Agreement - Page 30
7.10 Transfer of Rights. All covenants and agreements contained in this
Agreement by or on behalf of any of the parties hereto shall bind and inure to
the benefit of the respective successors and assigns of the parties hereto
(including, without limitation, transferees of any Shares, Warrants, Preferred
Conversion Shares and/or Warrant Shares), whether so expressed or not.
7.11 Independent Nature of Investors' Obligations and Rights. The
obligations of each Investor under this Agreement are several and not joint with
the obligations of any other Investor, and no Investor shall be responsible in
any way for the performance of the obligations of any other Investor under this
Agreement. Nothing contained herein or in any other document, and no action
taken by any Investor pursuant thereto, shall be deemed to constitute the
Investors as a partnership, an association, a joint venture or any other kind of
entity, or create a presumption that the Investors are in any way acting in
concert or as a group with respect to such obligations or the transactions
contemplated by this Agreement. Each Investor shall be entitled to independently
protect and enforce its rights, including without limitation, the rights arising
out of this Agreement or out of the other related documents, and it shall not be
necessary for any other Investor to be joined as an additional party in any
proceeding for such purpose. Each Investor has been represented by its own
separate legal counsel in their review and negotiation of this Agreement. The
Company has elected to provide all Investors with the same terms and documents
for the convenience of the Company and not because it was required or requested
to do so by the Investors.
Signature Page to Securities Purchase Agreement
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above written.
ARTISOFT, INC. Investor: M/C Venture Partners V, L.P.
By: M/C VP V, LLC, its General Partner
By: /s/ Xxx Xxxxxxxxx By: /s/ Xxxx X. Xxxxxxx
Name: Xxx Xxxxxxxxx Print Name: Xxxx X.Xxxxxxx
Title: CFO - Interim Title: General Partner
Address: 00 Xxxxx Xxxxxx, Xxxxx 0000,
Xxxxxx, XX 00000
Tax ID No.:
Contact name:
Telephone: (000) 000-0000
Name in which
shares should be
registered (if
different):
Investor:
By:
By:
Print Name:
Title:
Address:
Tax ID No.:
Contact name:
Telephone:
Name in which
shares should be
registered (if
different):
Signature Page to Securities Purchase Agreement
Investor: M/C Venture Investors, LLC
By: /s/ Xxxx X. Xxxxxxx
Print Name: Xxxx X. Xxxxxxx
Title: General Partner
Address: 00 Xxxxx Xxxxxx, Xxxxx 0000,
Xxxxxx, XX 00000
Tax ID No.:
Contact name:
Telephone: (000) 000-0000
Name in which
shares should be
registered (if
different):
Investor:
By:
By:
Print Name:
Title:
Address:
Tax ID No.:
Contact name:
Telephone:
Name in which
shares should be
registered (if
different):
Signature Page to Securities Purchase Agreement
Investor: Chestnut Venture Partners, L.P.
By: Chestnut Street Partners, Inc., its
General Partner
By: /s/ Xxxx X. Xxxxxxx
Print Name: Xxxx X. Xxxxxxx
Title: General Partner
Address: 00 Xxxxx Xxxxxx, Xxxxx 0000,
Xxxxxx, XX 00000
Tax ID No.:
Contact name:
Telephone: (000) 000-0000
Name in which
shares should be
registered (if
different):
Investor:
By:
By:
Print Name:
Title:
Address:
Tax ID No.:
Contact name:
Telephone:
Name in which
shares should be
registered (if
different):
Signature Page to Securities Purchase Agreement
Investor: Pathfinder Ventures III, L.L.C.
By: RRS Investments II, L.L.C., an Arizona
limited liability company
By: Xxxxxxxxxx Revocable Trust,
its Manager
By: R. Xxxxx Xxxxxxxxxx, its Trustee
By: /s/ R. Xxxxx Xxxxxxxxxx
R. Xxxxx Xxxxxxxxxx
Address: Pathfinder Ventures III, L.L.C._
c/o RRS & Company
0000 X. 00xx Xxxxxx, Xxxxx X-000
Xxxxxxx, XX 00000
Tax ID No.: 00-0000000
Contact name: R. Xxxxx Xxxxxxxxxx
Telephone: 000-000-0000
Name in which
shares should be
registered (if
different):
Investor:
By:
By:
Print Name:
Title:
Address:
Tax ID No.:
Contact name:
Telephone:
Signature Page to Securities Purchase Agreement
SRB Greenway Capital, L.P.
By: SRB Management, L.P., General Partner
By: BC Advisors, L.L.C., General Partner
By: /s/ Xxxxxx X. Xxxxxx
Xxxxxx X. Xxxxxx, Member
SRB Greenway Capital, L.P.
000 Xxxxxxxx Xxxxx, Xxxxx 0000
Xxxxxx, XX 00000
000-000-0000 (telephone)
000-000-0000 (fax)
Attn: Xxx Xxxxxxx (xxx@xxxxxxxxxxx.xxx)
Tax ID#: 00-0000000
Investor:
By:
By:
Print Name:
Title:
Address:
Tax ID No.:
Contact name:
Telephone:
Name in which
shares should be
registered (if
different):
Signature Page to Securities Purchase Agreement
SRB Greenway Capital (Q.P.), L.P.
By: SRB Management, L.P., General Partner
By: BC Advisors, L.L.C., General Partner
By: /s/ Xxxxxx X. Xxxxxx
Xxxxxx X. Xxxxxx, Member
SRB Greenway Capital (Q.P.), L.P.
000 Xxxxxxxx Xxxxx, Xxxxx 0000
Xxxxxx, XX 00000
000-000-0000 (telephone)
000-000-0000 (fax)
Attn: Xxx Xxxxxxx (xxx@xxxxxxxxxxx.xxx)
Tax ID#: 00-0000000
Investor:
By:
By:
Print Name:
Title:
Address:
Tax ID No.:
Contact name:
Telephone:
Name in which
shares should be
registered (if
different):
Signature Page to Securities Purchase Agreement
SRB Greenway Offshore Operating Fund, L.P
By: SRB Management, L.P., General Partner
By: BC Advisors, L.L.C., General Partner
By: /s/ Xxxxxx Xxxxxx
Xxxxxx Xxxxxx, Member
SRB Greenway Offshore Operating Fund, L.P
000 Xxxxxxxx Xxxxx, Xxxxx 0000
Xxxxxx, XX 00000
000-000-0000 (telephone)
000-000-0000 (fax)
Attn: Xxx Xxxxxxx (xxx@xxxxxxxxxxx.xxx)
Tax ID#: n/a - offshore entity
Investor:
By:
By:
Print Name:
Title:
Address:
Tax ID No.:
Contact name:
Telephone:
Signature Page to Securities Purchase Agreement
Xxxxxx Xxxxx Capital, L.P.
By: WS Capital Management, L.P.,
General Partner
By: WS Capital, L.L.C., General Partner
By: /s/ Xxxx X. Xxxxxx
Xxxx X. Xxxxxx, Member
Xxxxxx Xxxxx Capital, L.P.
000 Xxxxxxxx Xxxxx, Xxxxx 0000
Xxxxxx, XX 00000
000-000-0000 (telephone)
000-000-0000 (fax)
Attn: Xxx Xxxxxxx (xxx@xxxxxxxxxxx.xxx)
Tax ID#: 00-0000000
Investor:
By:
By:
Print Name:
Title:
Address:
Tax ID No.:
Contact name:
Telephone:
Name in which
shares should be
registered (if
different):
Signature Page to Securities Purchase Agreement
Xxxxxx Xxxxx Capital (Q.P.), L.P.
By: WS Capital Management, L.P.,
General Partner
By: WS Capital, L.L.C., General Partner
By: /s/ Xxxx X. Xxxxxx
Xxxx X. Xxxxxx, Member
Xxxxxx Xxxxx Capital (Q.P.), L.P.
000 Xxxxxxxx Xxxxx, Xxxxx 0000
Xxxxxx, XX 00000
000-000-0000 (telephone)
000-000-0000 (fax)
Attn: Xxx Xxxxxxx (xxx@xxxxxxxxxxx.xxx)
Tax ID#: 00-0000000
Investor:
By:
By:
Print Name:
Title:
Address:
Tax ID No.:
Contact name:
Telephone:
Name in which
shares should be
registered (if
different):
Signature Page to Securities Purchase Agreement
Xxxxxx Xxxxx International Fund, Ltd.
By: WS Capital Management, L.P., as agent
and attorney-in-fact
By: WS Capital, L.L.C., General Partner
By: /s/ Xxxx X. Xxxxxx
Xxxx X. Xxxxxx, Member
Xxxxxx Xxxxx International Fund, Ltd.
000 Xxxxxxxx Xxxxx, Xxxxx 0000
Xxxxxx, XX 00000
000-000-0000 (telephone)
000-000-0000 (fax)
Attn: Xxx Xxxxxxx (xxx@xxxxxxxxxxx.xxx)
Tax ID#: n/a - offshore entity
Investor:
By:
By:
Print Name:
Title:
Address:
Tax ID No.:
Contact name:
Telephone:
Name in which
shares should be
registered (if
different):
Signature Page to Securities Purchase Agreement
HHMI Investments, L.P.
By: WS Capital Management, L.P.,
Investment Manager
By: WS Capital, L.L.C., General Partner
By: /s/ Xxxx X. Xxxxxx
Xxxx X. Xxxxxx, Member
Xxxxxx Xxxxx International Fund, Ltd.
000 Xxxxxxxx Xxxxx, Xxxxx 0000
Xxxxxx, XX 00000
000-000-0000 (telephone)
000-000-0000 (fax)
Attn: Xxx Xxxxxxx (xxx@xxxxxxxxxxx.xxx)
Tax ID#: 00-0000000
Investor:
By:
By:
Print Name:
Title:
Address:
Tax ID No.:
Contact name:
Telephone:
Name in which
shares should be
registered (if
different):
Exhibit A
---------
SCHEDULE OF INVESTORS
---------------------
--------------------------------------------------------------------------------
Investor Shares Warrants Purchase Price
------------------------------------------- -------- ---------- ----------------
M/C VENTURE PARTNERS(1)
M/C Venture Partners V, L.P. 2,831 589,918 $ 2,831,607
Chestnut Venture Partners, L.P. 116 24,093 115,644
M/C Venture Investors, LLC 53 10,989 52,749
------ -------- -----------
TOTAL M/C VENTURE PARTNERS 3,000 625,000 $ 3,000,000
--------------------------------------------------------------------------------
PATHFINDER VENTURES III, L.L.C. 500 104,167 $ 500,000
--------------------------------------------------------------------------------
GREENWAY(2)
SRB Greenway Capital, L.P. 80 16,750 $ 80,400
SRB Greenway Capital (Q.P.), L.P. 631 131,417 630,800
SRB Greenway Offshore Operating Fund, L.P. 39 8,083 38,800
Xxxxxx Xxxxx Capital, L.P. 41 8,438 40,500
Xxxxxx Xxxxx Capital (Q.P.), L.P. 231 48,125 231,000
Xxxxxx Xxxxx International Fund, Ltd. 348 72,583 348,400
HHMI Investments, L.P. 130 27,104 130,100
------ -------- -----------
TOTAL GREENWAY 1,500 312,500 $ 1,500,000
------ -------- -----------
TOTALS 5,000 1,041,667 $ 5,000,000
--------------------------------------------------------------------------------
(1) For the purposes of the Agreement, the entities listed below are
collectively referred to as "M/C Venture Partners."
(2) For the purposes of the Agreement, the entitles listed below are
collectively referred to as "Greenway"
Exhibit B
---------
Form of Warrant
---------------
See attached.
Exhibit C
---------
Form of ROFR Waiver
-------------------
See attached.
Exhibit D-1
-----------
Form of Voting Agreement
------------------------
See attached.
Exhibit D-2
-----------
Form of Amended Voting Agreement
--------------------------------
See attached.
Exhibit E
---------
Form of Company Counsel Legal Opinion
-------------------------------------
See attached.
Exhibit F
---------
Form of Certificate of Designations
-----------------------------------
See attached.
Exhibit G
---------
CERTIFICATE OF SUBSEQUENT SALE
------------------------------
[Name and Address of Transfer Agent]
RE: Sale of Shares of Common Stock of Artisoft, Inc. (the "Company")
pursuant to the Company's Prospectus dated _____________, ____
(the "Prospectus")
Dear Sir/Madam:
The undersigned hereby certifies, in connection with the sale of shares
of Common Stock of the Company included in the table of Selling Shareholders in
the Prospectus, that the undersigned has sold the shares pursuant to the
Prospectus and in a manner described under the caption "Plan of Distribution" in
the Prospectus and that such sale complies with all securities laws applicable
to the undersigned.
Selling Shareholder (the beneficial owner):
Record Holder (e.g., if held in name of nominee):
Restricted Stock Certificate No.(s):
Number of Shares Sold:
Date of Sale:
In the event that you receive a stock certificate(s) representing more
shares of Common Stock than have been sold by the undersigned, then you should
return to the undersigned a newly issued certificate for such excess shares in
the name of the Record Holder and BEARING A RESTRICTIVE LEGEND. Further, you
should place a stop transfer on your records with regard to such certificate.
Very truly yours,
Dated: By:
Print Name:
Title:
cc: [Company Name and Address]
Exhibit H
---------
Plan of Distribution
--------------------
The selling stockholders, which as used herein includes donees,
pledgees, transferees or other successors-in-interest selling shares of common
stock or interests in shares of common stock received after the date of this
prospectus from a selling stockholder as a gift, pledge, partnership
distribution or other transfer, may, from time to time, sell, transfer or
otherwise dispose of any or all of their shares of common stock or interests in
shares of common stock on any stock exchange, market or trading facility on
which the shares are traded or in private transactions. These dispositions may
be at fixed prices, at prevailing market prices at the time of sale, at prices
related to the prevailing market price, at varying prices determined at the time
of sale, or at negotiated prices.
The selling stockholders may use any one or more of the following
methods when disposing of shares or interests therein:
- ordinary brokerage transactions and transactions in which the
broker-dealer solicits purchasers;
- block trades in which the broker-dealer will attempt to sell the
shares as agent, but may position and resell a portion of the block as principal
to facilitate the transaction;
- purchases by a broker-dealer as principal and resale by the
broker-dealer for its account;
- an exchange distribution in accordance with the rules of the
applicable exchange;
- privately negotiated transactions;
- short sales effected after the date the registration statement of
which this Prospectus is a part is declared effective by the SEC;
- through the writing or settlement of options or other hedging
transactions, whether through an options exchange or otherwise;
- broker-dealers may agree with the selling stockholders to sell a
specified number of such shares at a stipulated price per share;
- a combination of any such methods of sale; and
- any other method permitted pursuant to applicable law.
The selling stockholders may, from time to time, pledge or grant a
security interest in some or all of the shares of common stock owned by them
and, if they default in the performance of their secured obligations, the
pledgees or secured parties may offer and sell the shares of common stock, from
time to time, under this prospectus, or under an amendment to this prospectus
under Rule 424(b)(3) or other applicable provision of the Securities Act
amending the list of selling stockholders to include the pledgee, transferee or
other successors in interest as selling stockholders under this prospectus. The
selling stockholders also may transfer the shares of common stock in other
circumstances, in which case the transferees, pledgees or other successors in
interest will be the selling beneficial owners for purposes of this prospectus.
In connection with the sale of our common stock or interests therein,
the selling stockholders may enter into hedging transactions with broker-dealers
or other financial institutions, which may in turn engage in short sales of the
common stock in the course of hedging the positions they assume. The selling
stockholders may also sell shares of our common stock short and deliver these
securities to close out their short positions, or loan or pledge the common
stock to broker-dealers that in turn may sell these securities. The selling
stockholders may also enter into option or other transactions with
broker-dealers or other financial institutions or the creation of one or more
derivative securities which require the delivery to such broker-dealer or other
financial institution of shares offered by this prospectus, which shares such
broker-dealer or other financial institution may resell pursuant to this
prospectus (as supplemented or amended to reflect such transaction).
The aggregate proceeds to the selling stockholders from the sale of the
common stock offered by them will be the purchase price of the common stock less
discounts or commissions, if any. Each of the selling stockholders reserves the
right to accept and, together with their agents from time to time, to reject, in
whole or in part, any proposed purchase of common stock to be made directly or
through agents. We will not receive any of the proceeds from this offering. Upon
any exercise of the warrants by payment of cash, however, we will receive the
exercise price of the warrants.
The selling stockholders also may resell all or a portion of the shares
in open market transactions in reliance upon Rule 144 under the Securities Act
of 1933, provided that they meet the criteria and conform to the requirements of
that rule.
The selling stockholders and any underwriters, broker-dealers or agents
that participate in the sale of the common stock or interests therein may be
"underwriters" within the meaning of Section 2(11) of the Securities Act. Any
discounts, commissions, concessions or profit they earn on any resale of the
shares may be underwriting discounts and commissions under the Securities Act.
Selling stockholders who are "underwriters" within the meaning of Section 2(11)
of the Securities Act will be subject to the prospectus delivery requirements of
the Securities Act.
To the extent required, the shares of our common stock to be sold, the
names of the selling stockholders, the respective purchase prices and public
offering prices, the names of any agents, dealer or underwriter, any applicable
commissions or discounts with respect to a particular offer will be set forth in
an accompanying prospectus supplement or, if appropriate, a post-effective
amendment to the registration statement that includes this prospectus.
In order to comply with the securities laws of some states, if
applicable, the common stock may be sold in these jurisdictions only through
registered or licensed brokers or dealers. In addition, in some states the
common stock may not be sold unless it has been registered or qualified for sale
or an exemption from registration or qualification requirements is available and
is complied with.
We have advised the selling stockholders that the anti-manipulation
rules of Regulation M under the Exchange Act may apply to sales of shares in the
market and to the activities of the selling stockholders and their affiliates.
In addition, we will make copies of this prospectus (as it may be supplemented
or amended from time to time) available to the selling stockholders for the
purpose of satisfying the prospectus delivery requirements of the Securities
Act. The selling stockholders may indemnify any broker-dealer that participates
in transactions involving the sale of the shares against certain liabilities,
including liabilities arising under the Securities Act.
We have agreed to indemnify the selling stockholders against
liabilities, including liabilities under the Securities Act and state securities
laws, relating to the registration of the shares offered by this prospectus.
We have agreed with the selling stockholders to keep the registration
statement of which this prospectus constitutes a part effective until the
earlier of (1) such time as all of the shares covered by this prospectus have
been disposed of pursuant to and in accordance with the registration statement
or (2) the date on which the shares may be sold pursuant to Rule 144(k) of the
Securities Act.
