Page 14 of 75 Pages
PURCHASE AGREEMENT
THIS PURCHASE AGREEMENT (this "Agreement") is made as of the 7th day of
June, 2000, by and between CONTINENTAL CHOICE CARE, INC., a New Jersey
corporation with its principal executive offices located at 00 Xxxxx Xxxxx,
Xxxxxxxxxx, Xxx Xxxxxx 00000 (the "Company") and XXXXX & COMPANY I.G., LLC, a
New York limited liability company with its principal executive offices located
at Xxx Xxxx Xxxxx, 00xx Xxxxx, Xxx Xxxx, Xxx Xxxx 00000 (the "Purchaser").
Capitalized terms used in this Agreement but not defined upon their first usage
are defined in Section 9.1, unless otherwise noted.
The parties hereto, intending to be legally bound, agree as follows:
ARTICLE 1
PURCHASE AND SALE OF COMMON STOCK
AND COMMON STOCK PURCHASE WARRANT
1.1 Purchase. Subject to the terms and conditions hereof, on the
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Closing Date the Company shall sell to the Purchaser, and the Purchaser shall
purchase from the Company, (a) 200,000 shares (the "Shares") of the Company's
common stock, no par value per share (the "Common Stock") upon the terms
hereinafter set forth, and (b) a warrant (the "Warrant") to purchase 6,800,000
shares of Common Stock (the "Warrant Shares") in substantially the form attached
hereto as Exhibit A (the "Sale").
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1.2 Form of Payment. The purchase price for the Shares shall be
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$750,000 and the purchase price for the Warrant shall be $350,000, for an
aggregate purchase price of $1,100,000 (the "Purchase Price"). On the Closing
Date, the Purchaser shall pay the Purchase Price by delivering to the Company
(a) $50,000 in cash or other immediately available U.S. funds, and (b) a 7%
Secured Promissory Note (the "Note") in the principal amount of $1,050,000 in
substantially the form attached hereto as Exhibit B and a pledge agreement (the
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"Pledge Agreement") in substantially the form attached hereto as Exhibit C.
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1.3 Closing Date. The closing (the "Closing") of the Sale will take
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place no later than the fifth business day following the date the Company
obtains Shareholder Approval or such other time and date as shall be mutually
agreed upon by the Purchaser and the Company. Such time and date is herein
called the "Closing Date." The Closing shall occur at the offices of Pitney,
Xxxxxx, Xxxx & Xxxxx LLP, 200 Campus Drive, Florham Park, New Jersey, or at such
other location as may be agreed upon by the parties.
Page 15 of 75 Pages
ARTICLE 2
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants that:
2.1 Organization and Qualification. The Company is a corporation duly
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organized, validly existing and in good standing under the laws of the State of
New Jersey. The Company has all requisite corporate power and authority to carry
on its business as described in the Company Reports (as defined herein). The
Company is duly qualified as a foreign corporation to do business and is in good
standing in every jurisdiction where the failure to so qualify or be in good
standing would materially adversely affect its business.
2.2 Capitalization. The authorized capital stock of the Company
--------------
consists of 20,000,000 shares of Common Stock and 5,000,000 shares of preferred
stock. As of June 6, 2000, there were:
(a) 3,612,544 shares of Common Stock outstanding
(b) 1,707,100 shares of Common Stock reserved for
issuance pursuant to outstanding securities that are
convertible into or exchangeable for shares of Common
Stock, other than the Shares and shares of Common
Stock reserved for issuance upon exercise of the
Warrant and the Key Employee Warrants (as defined
herein), and
(c) 3,500,000 shares to be reserved for issuance
under a stock incentive plan to be approved by the
Company's board of directors and subject to approval
by the Company's shareholders (the "Incentive Plan").
As of June 6, 2000, (i) of the 3,612,544 shares of Common Stock referred to in
clause (a) above, 1,527,500 shares are beneficially owned by Techtron, Inc.,
(ii) of the 1,707,100 shares referred to in clause (b) above, an aggregate of
950,000 are reserved for issuance pursuant to outstanding securities
beneficially owned by Xxxxxx X. Xxxxx, Xxxxx X. Xxxxx and Xxxxxx X. Xxxxxx,
M.D., collectively, and (iii) Xxxxxx X. Xxxxx, Xxxxx X. Xxxxx and Xxxxxx X.
Xxxxxx, M.D. collectively own approximately 80% of the outstanding capital stock
of Techtron, Inc. Except for interests pursuant to which shares have been
reserved for issuance as set forth in the preceding sentence or as so excluded
therefrom, there are no outstanding or authorized options, warrants, purchase
rights, subscription rights, conversion rights, exchange rights or other
contracts or commitments that could require the Company to issue, sell or
otherwise cause to become outstanding any of its capital stock or equity
interests or other instruments convertible into such interests. Except as set
forth on Schedule 2.2, there are no shareholder agreements, voting agreements,
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voting trusts, trust deeds, irrevocable proxies or any other similar agreement
or instruments to which the Company is a party or of which it is aware, or any
agreements or arrangements under which the Company is obligated to register the
sale of any of its securities under the Securities Act.
Page 16 of 75 Pages
2.3 Authorization; Binding Effect; No Breach. Subject to Shareholder
-----------------------------------------
Approval: The Company's execution, delivery and performance of each Transaction
Document to which it is a party has been duly authorized by it; Each Transaction
Document to which the Company is a party constitutes a valid and binding
obligation of the Company which is enforceable against the Company in accordance
with its terms, except to the extent that such validity or enforceability may be
subject to or affected by any bankruptcy, insolvency, reorganization,
moratorium, liquidation or similar laws relating to, or affecting generally the
enforcement of, creditors' rights or remedies of creditors generally, or by
other equitable principles of general application; The execution, delivery and
performance by the Company of the Transaction Documents to which it is a party
do not and will not (a) conflict with or result in a breach of the terms,
conditions or provisions of, (b) constitute a default under, (c) result in a
violation of, (d) require any authorization, consent, approval, exemption or
other action by or declaration or notice to any Government Entity pursuant to,
or (e) create any Lien under, the charter or bylaws of the Company or any
agreement, instrument, or other document, or any Legal Requirement, to which the
Company is, or any of its assets are, subject.
2.4 Validity of the Shares, the Warrant, and the Warrant Shares. The
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Shares, the Warrant, and the Warrant Shares are duly authorized, reserved for
issuance and will, when issued in accordance with the terms hereof and thereof,
be validly issued, fully paid and non-assessable, free and clear of all Liens
and any pre-emptive rights of the shareholders of the Company, except for the
Pledge Agreement and with respect to the Warrant the exercise price thereof.
2.5 Governmental Filings. Except for the filing of an Additional
---------------------
Listing Application with The Nasdaq Stock Market, Inc. and a Notice of Sale of
Securities Pursuant to Regulation D on Form D with the SEC, no notices, reports
or other filings are required to be made by the Company with, nor are any
consents, registrations, approvals, permits or authorizations required to be
obtained by the Company from, any Government Entity in connection with the
execution and delivery of this Agreement by the Company and the consummation of
the transactions contemplated by the Transaction Documents. Attached hereto as
Exhibit D-1 is a certificate by the Company certifying that, within the meaning
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of the Xxxx-Xxxxx-Xxxxxx Antitrust Improvement Act of 0000 (xxx "XXX Xxx"), the
Company is not a person with total assets or net sales of $100 million or more,
and attached hereto as Exhibit D-2 is a certificate by the Purchaser certifying
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that, within the meaning of the HSR Act, the Purchaser is not a person with
total assets of $10 million or more.
2.6 Company Reports; Financial Statements. The Company has filed with
--------------------------------------
the SEC each report, proxy statement or information statement required to be
filed by it since January 1, 2000 through the date hereof, including (a) the
Company's Annual Report on Form 10-KSB for the year ended December 31, 1999, as
amended, and (b) the Company's Quarterly Report on Form 10-Q for the calendar
quarter ended March 31, 2000 (collectively, the "Company Reports"), copies of
which have been made available to the Purchaser. As of their respective dates,
the Company Reports did 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 made therein, in light of the circumstances in which they were
made, not misleading. As of their respective dates, the consolidated financial
statements included in the Company Reports complied as to form in all material
respects with then applicable accounting requirements and the published rules
Page 17 of 75 Pages
and regulations of the SEC with respect thereto. Each of the consolidated
balance sheets included in or incorporated by reference into the Company Reports
(including the related notes and schedules) fairly presents in all material
respects the consolidated financial position of the Company and its subsidiaries
as of its date and each of the consolidated statements of income and of changes
in cash flows included in or incorporated by reference into the Company Reports
(including any related notes and schedules) fairly presents in all material
respects the results of operations and changes in cash flows, as the case may
be, of the Company for the periods set forth therein (subject, in the case of
unaudited statements, to the absence of notes and normal year-end audit
adjustments), in each case in accordance with GAAP, except as may be noted
therein.
2.7 Nasdaq Listing. The Common Stock is listed on the Nasdaq SmallCap
---------------
and the Company has not received any notice from The Nasdaq Stock Market, Inc.
advising the Company of the initiation of any delisting proceedings with respect
to the Common Stock.
2.8 Absence of Certain Changes. Except as disclosed in the Company
---------------------------
Reports filed prior to the date hereof, since January 1, 2000 the Company has
conducted its business only in, and has not engaged in any material transaction
other than in, the ordinary and usual course of its business and there has not
been any material adverse change in the financial condition, business, prospects
or results of operations of the Company and its Subsidiaries, taken as a whole,
since January 1, 2000.
2.9 Absence of Undisclosed Liabilities. The Company and its
---------------------------------------
Subsidiaries, taken as a whole, do not have any material liability (whether
accrued, absolute, contingent, unliquidated or otherwise, whether or not known,
whether due or to become due, and regardless of when asserted) other than: (a)
the liabilities included on the latest balance sheet contained in the Company
Reports (the "Latest Balance Sheet"), (b) current liabilities which have arisen
in the ordinary course of business and consistent with the Company's past
practice after the date of the Latest Balance Sheet (none of which is a
liability resulting from breach of contract, breach of warranty, tort,
infringement, violation of law, claim or lawsuit), all of which have been
disclosed to the Purchaser, and (c) other liabilities and obligations expressly
disclosed in this Agreement or in any Transaction Document.
2.10 Litigation. There are no civil, criminal or administrative
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actions, suits, claims, hearings, investigations, arbitrations, or proceedings
pending or, to the knowledge of the Company, threatened against the Company
preventing, or which, if determined adversely to the Company would prevent the
Company from consummating the transactions contemplated by the Transaction
Documents or would have a material adverse effect on the financial condition,
business, prospects or results of operations of the Company or its Subsidiaries,
taken as a whole.
2.11 Brokerage. There is no claim for brokerage commissions, finders'
---------
fees or similar compensation in connection with the transactions contemplated by
the Transaction Documents which is binding upon the Company.
2.12 Disclosure. Neither this Article 2 nor any certificate or other
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item delivered to the Purchaser by or on behalf of the Company with respect to
the transactions contemplated by the Transaction Documents contains any untrue
statement of a material fact or omits a material fact which is necessary to make
any statement contained herein or therein, in light of the circumstances in
which they were made, not misleading.
Page 18 of 75 Pages
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF THE PURCHASER
The Purchaser represents and warrants that:
3.1 Organization and Qualification. The Purchaser is a limited
--------------------------------
liability company duly organized, validly existing and in good standing under
the laws of the State of New York. The Purchaser has all requisite power and
authority to carry on its business as presently conducted. The Purchaser is duly
qualified to do business and is in good standing in every other jurisdiction
where the failure to so qualify or be in good standing would materially
adversely affect its business.
3.2 Authorization; Binding Effect; No Breach. The Purchaser's
---------------------------------------------
execution, delivery and performance of each Transaction Document to which it is
a party has been duly authorized by it. Xxxxx & Company I.G., Inc. is the
managing member of the Purchaser (the "Managing Member") and the Purchaser
hereby represents that the Managing Member is duly authorized to execute and
deliver, on behalf of the Purchaser, each Transaction Document to which the
Purchaser is a party. Each Transaction Document to which the Purchaser is a
party constitutes a valid and binding obligation of the Purchaser which is
enforceable against the Purchaser in accordance with its terms, except to the
extent that such validity or enforceability may be subject to or affected by any
bankruptcy, insolvency, reorganization, moratorium, liquidation or similar laws
relating to, or affecting generally the enforcement of, creditors' rights or
remedies of creditors generally, or by other equitable principles of general
application. The execution, delivery and performance by the Purchaser of the
Transaction Documents to which it is a party do not and will not (a) conflict
with or result in a breach of the terms, conditions or provisions of, (b)
constitute a default under, (c) result in a violation of, or (d) require any
authorization, consent, approval, exemption or other action by or declaration or
notice to any Government Entity pursuant to, the charter or bylaws of the
Purchaser or any agreement, instrument, or other document, or any Legal
Requirement, to which the Purchaser or any of its assets is subject.
3.3 Investment Purpose. The Purchaser is capable of evaluating the risk
------------------
of its investment in the Shares and the Warrant and is able to bear the economic
risk of such investment, that it is purchasing the Shares and the Warrant for
its own account and that the Shares and the Warrant are being purchased by the
Purchaser for investment and not with a view to any resale or distribution
thereof. If the Purchaser should in the future decide to dispose of the Shares
or the Warrant (which it does not now contemplate), it is understood that the
Purchaser may do so only in compliance with the Securities Act and any
applicable state blue sky or securities laws.
3.4 Accredited Investor Status. The Purchaser and each of the equity
----------------------------
owners of the Purchaser is an "accredited investor" within the meaning of
Regulation D of the General Rules and Regulations promulgated under the
Securities Act ("Regulation D"). Each of the equity owners of the Purchaser
meets either of the following standards for determination of "accredited
investor" status of Regulation D: (a) a natural person whose individual net
worth, or joint net worth with that person's spouse, at the time of his purchase
Page 19 of 75 Pages
exceeds $1,000,000; or (b) a natural person who had an individual income in
excess of $200,000 in each of the two most recent years or joint income with
that person's spouse in excess of $300,000 in each of those years and has a
reasonable expectation of reaching the same income level in the current year.
3.5 Information. The Purchaser (a) has received and carefully reviewed
-----------
the Company Reports, and (b) has had the opportunity to ask questions and
receive answers from the Company concerning the Company Reports and the terms
and conditions of the offering of the Shares and the Warrant to obtain any
documents relating to the Company which are publicly available and any
additional information or documents relating to the Company which the Company
possesses or can acquire without unreasonable effort or expense.
ARTICLE 4
COVENANTS
4.1 Confidentiality.
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(a) Confidential Information furnished to the Purchaser prior
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to the Closing. The Purchaser and the Company acknowledge that Confidential
--------------
Information (as defined herein) may be furnished by the Company to the Purchaser
in connection with transactions contemplated by this Agreement or pursuant
hereto. The term "Confidential Information" shall mean all information
concerning the Company or any of its Subsidiaries or Affiliates, whether in
verbal, visual, written, electronic or other form which is made available by the
Company to the Purchaser or any its Representatives (as defined herein) and
which the Company identifies to the Purchaser, whether verbally or in writing,
as being confidential. The term "Confidential Information" shall not apply to
(i) any information which (A) the Purchaser can establish by convincing evidence
was already in its rightful possession prior to the disclosure thereof to it by
the Company; (B) was then generally known to the public other than as a result
of a disclosure by the Purchaser or its Representative; (C) became known to the
public through no fault of the Purchaser; or (D) was disclosed to the Purchaser
by a third-party who, to the Purchaser's knowledge, was not bound by an
obligation of confidentiality; or (ii) information disclosed pursuant to a
legal, regulatory requirement or in accordance with an order of a court of
competent jurisdiction, provided that in the event of any disclosure required by
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this clause (ii), the Purchaser will give reasonable prior written notice of
such disclosure to the Company, and disclosure under this clause (ii) does not
constitute the public knowledge under clause (i). The term "Representative"
shall mean the Purchaser's agents and representatives, including, without
limitation, officers, directors, employees, attorneys, accountants and financial
advisors. The Purchaser acknowledges that it has informed and hereafter shall
inform its Representatives of the terms of this Section 4.1. Any breach of this
Section 4.1 by a Representative of the Purchaser shall be deemed to be a breach
thereof by the Purchaser.
(b) Confidential Information furnished to the Purchaser after
----------------------------------------------------------
the Closing. The Purchaser acknowledges that Confidential Information may be
-----------
furnished by the Company to the Purchaser after the Closing in connection with
the Purchaser's investment in the Shares, the Warrant, and the Warrant Shares.
The Purchaser further acknowledges its awareness of the restrictions imposed by
federal and state securities laws on persons in possession of material nonpublic
information, and the Purchaser hereby agrees that while it is in possession of
material nonpublic information with respect to the Company, the Purchaser shall
Page 20 of 75 Pages
not purchase or sell any securities of the Company or communicate such
information to any third-party, in violation of any such laws.
(c) Use of Confidential Information. Confidential Information
-------------------------------
shall be (i) kept confidential, (ii) used solely by the Purchaser and its
Representatives, (iii) used solely for the purposes specified by the Company at
the time the Company furnishes the Confidential Information to the Purchaser,
and (iv) treated as the sole property of the Company.
(d) Equitable Relief. In addition to all other remedies that
-----------------
may be available to the Company in connection with a breach by the Purchaser of
its or its Representative's obligations under this Section 4.1, the Company
shall be entitled to specific performance and injunctive and other equitable
relief with respect to this Section 4.1. The Purchaser waives, and agrees to use
all reasonable efforts to cause its Representatives to waive, any requirement to
secure or post a bond in connection with any such relief.
4.2 Board Representation. At, or prior to, the Closing, the Company
---------------------
shall enlarge the size of its Board of Directors to seven members and, of the
vacancies so created, fill two vacancies with two persons selected by the
Purchaser to serve until its next annual meeting of shareholders for the
election of directors. The Company shall include among nominees in the slate of
directors recommended by the management of the Company in the proxy statement
for the next held annual meeting for the election of directors, and for as long
as the Warrant is outstanding for each next held annual meeting for the election
of directors, two directors selected by the Purchaser by giving written notice
to the Company of such nominations, together with the written consent of such
nominees to serve as directors, not less than 120 calendar days before the date
of the Company's proxy statement released to shareholders in connection with the
previous year's annual meeting.
4.3 Stock Incentive Plan. The Company shall submit for approval from
----------------------
its shareholders in the proxy statement for the next held meeting the
establishment of the Incentive Plan pursuant to which common stock and options
to purchase up to 3,500,000 shares of common stock may be issued. Common Stock
and options under such plan shall be available for issuance to employees,
strategic partners and advisors to the Company.
4.4 Key Employee Warrants. At, or prior to, the Closing, the Company
----------------------
shall issue warrants to purchase up to an aggregate of 1,350,000 shares of the
Company's Common Stock to certain key employees of the Company (the "Key
Employee Warrants") in substantially the form attached hereto as Exhibit E.
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4.5 Non-Competition.
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(a) Scope of Agreement. During the period beginning on the
-------------------
date of this Agreement and continuing so long as the Warrant is outstanding (the
"Non-Competition Period"), the Purchaser will not, directly or indirectly,
either for itself or for any other Person, participate in the acquisition of any
business the acquisition of which is within the Company's acquisition strategy,
as agreed upon between the Purchaser and the Company from time to time;
provided, the restriction set forth in this Section 4.5 shall not apply (i) to
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any investment by the Purchaser prior to the date of this Agreement, (ii) to any
wholly passive investment by the Purchaser after the date of this Agreement, and
Page 21 of 75 Pages
(iii) to any investment by the Purchaser after the date of this Agreement if the
Sale is not consummated.
(b) Specific Performance. The parties hereto agree that the
---------------------
Company would suffer irreparable harm from a breach by the Purchaser of any of
the covenants or agreements contained in this Section 4.5. In the event of an
alleged or threatened breach by any such Persons of any of the provisions of
this Section 4.5, the Company or its successors or assigns may, in addition to
all other rights and remedies existing in its favor, apply to any court of
competent jurisdiction for specific performance and/or injunctive or other
relief in order to enforce or prevent any violations of the provisions hereof.
The Purchaser agrees that these restrictions are reasonable.
(c) Reasonableness. If, at the time of enforcement of any of
--------------
the provisions of Section 4.5(a) or Section 4.5(b), a court holds that the
restrictions stated therein are unreasonable under the circumstances then
existing, the parties hereto agree that the maximum period, scope or
geographical area reasonable under such circumstances will be substituted for
the stated period, scope or area.
4.6 Securities Laws. The Company shall timely file a Notice of Sale of
----------------
Securities Pursuant to Regulation D on Form D with respect to the Shares and the
Warrant with the SEC as required under Regulation D and to provide a copy
thereof to the Purchaser promptly after such filing. The Company agrees to file
a Current Report on Form 8-K disclosing this Agreement and the transactions
contemplated hereby with the SEC within fifteen calendar days after the Sale is
consummated.
4.7 Legends. The Company may endorse on all certificates evidencing the
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Shares, the Warrants, and the Warrant Shares a legend restricting their transfer
that shall read as follows: "The securities represented by this certificate have
not been registered under the Securities Act of 1933, as amended (the
"Securities Act") or the securities laws of any state of the United States. The
securities represented hereby have been acquired for investment and may not be
sold, transferred, pledged, assigned or otherwise disposed of in the absence of
an effective registration statement for the securities under the Securities Act
or an opinion, if requested, of counsel satisfactory to the Company that
registration is not required under the Securities Act." Where applicable, the
Company shall remove such legends so as to facilitate the transfer of such
securities pursuant to an effective registration statement or, if and to the
extent applicable, pursuant to Rule 144 under the Securities Act, provided (in
the case of Rule 144 transfers) that the Purchaser has provided such
documentation as the Company and its transfer agent shall reasonably require in
connection therewith.
4.8 Consummation of Transaction. Each of the parties hereto agrees to
---------------------------
use its best efforts to take promptly, or cause to be taken, all actions and to
do promptly, or cause to be done, all things necessary, proper or advisable
under applicable laws and regulations to consummate and make effective the
transactions contemplated by this Agreement.
4.9 Proxy Statement. As soon as practicable following the date of this
---------------
Agreement, the Company shall prepare a proxy statement (the "Proxy Statement")
which shall be utilized to solicit proxies in connection with a meeting at which
the Company's shareholders will vote upon the Sale and the transactions
Page 22 of 75 Pages
contemplated by this Agreement. The Company will afford the Purchaser and its
counsel a reasonable opportunity to comment on (a) the Proxy Statement in
preliminary form prior to its being filed with the SEC, (b) any response to any
comments from the staff of the SEC with respect to such Proxy Statement, and (c)
any proposed revisions to the Proxy Statement in response to any comments from
the staff of the SEC with respect to such Proxy Statement.
4.10 Registration Rights.
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(a) Registration Period. The registration rights granted to
--------------------
the Purchaser pursuant to this Section 4.10 shall cease as to some or all of the
Shares or the Warrant Shares when (i) a registration statement with respect to
the sale of such Shares or Warrant Shares shall have become effective under the
Securities Act and such Shares or Warrant Shares shall have been disposed of in
accordance with such registration statement, (ii) such Shares or Warrants Shares
are permitted to be sold to the public under the Securities Act pursuant to Rule
144 (or any successor provision) without any limitations or restrictions, (iii)
such Shares or Warrant Shares shall have been otherwise transferred, new
certificates for them not bearing a legend restricting further transfer shall
have been delivered by the Company and subsequent disposition of them shall not
require registration or qualification of them under the Securities Act or any
state securities or blue sky law then in force, or (iv) such Shares or Warrant
Shares shall have ceased to be outstanding (the period prior to the cessation of
such rights being the "Registration Period").
(b) Registration by the Company. Prior to the Closing Date,
----------------------------
the Company shall file a registration statement covering the resale of the
Shares and the Warrant Shares on Form S-3 under the Securities Act (if such form
is then available for use by the Company, or if such form is not then available
for use by the Company, such form as is then available to the Company for such
registration), and thereafter diligently pursue the effectiveness of such
registration statement; provided, however, solely in the event that the SEC does
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not permit the Company to file such registration statement prior to the Closing
Date, the Company shall file such registration statement on or before the tenth
business day following the Closing Date. The registration statement shall have
been declared effective by the SEC on or before the ninetieth calendar day
following the Closing Date, unless the registration statement is not declared
effective due to action within the control of the SEC and unrelated to action
within the control of the Company or the Company's agents or representatives;
provided, however, that if the registration statement shall not have been
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declared effective on or before such ninetieth calendar day, the Company shall
thereafter use its best efforts to cause such registration statement to be
declared effective as promptly as possible, until such registration statement is
declared effective.
(c) Terms and Conditions of Registration. Except as otherwise
------------------------------------
provided herein, in connection with any registration statement filed pursuant to
this Section 4.10, the following provisions shall apply:
(i) The Company will afford the Purchaser and its
counsel a reasonable opportunity to comment on (A) such registration statement
prior to its being filed with the SEC, (B) any response to any comments from the
Page 23 of 75 Pages
staff of the SEC with respect to such registration statement, and (C) any
proposed revisions to such registration statement in response to any comments
from the staff of the SEC with respect to such registration statement.
(ii) All expenses in connection with the preparation and
filing of such registration statement, including all registration and filing
fees, fees and expenses of compliance with securities or blue sky laws, printing
expenses, messenger and delivery expenses, counsel for the Company, independent
certified public accountants, and other Persons retained by the Company, shall
be borne solely by the Company, except for any transfer taxes payable with
respect to the disposition of such Shares and Warrant Shares, and any selling
commissions applicable to such Shares and Warrant Shares, which shall be paid by
the Purchaser.
(iii) The Company shall use its best efforts to cause the
Shares and Warrant Shares covered by such registration statement to be listed on
the Nasdaq SmallCap (or such other market or exchange on which the Common Stock
is then listed) and comply in all material respects with the Company's
reporting, filing and other obligations under the bylaws and rules of the Nasdaq
SmallCap (or such other market or exchange).
(iv) The Company shall use its best efforts to register
or qualify the Shares and the Warrant Shares covered by such registration
statement under the securities or blue sky laws of such jurisdictions as the
Purchaser reasonably requests, and do any and all other acts and things which
may be reasonably necessary or advisable to enable the Purchaser to consummate
the disposition in such jurisdictions of such Shares or Warrant Shares,
provided, that the Company shall not be required to (A) qualify generally to do
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business in any jurisdiction where it would not otherwise be required to qualify
but for this Section 4.10, (B) subject itself to taxation in any such
jurisdiction, or (C) consent to general service of process in any such
jurisdiction.
(v) Following the effective date of such registration
statement, the Company shall, upon the request of the Purchaser, forthwith
supply such number of prospectuses (including exhibits thereof and preliminary
prospectuses and amendments and supplements thereto) meeting the requirements of
the Securities Act and such other documents as are referred to in the prospectus
as shall be reasonably requested by the Purchaser to permit the Purchaser to
make a public distribution of the Shares and Warrant Shares.
(vi) The Company shall prepare, if necessary, and file
such amendments and supplements to such registration statement as may be
necessary to keep such registration statement effective, subject to applicable
laws, rules and orders, during the Registration Period.
(vii) The Purchaser shall cooperate with the Company and
provide the Company with all information reasonably requested by the Company for
inclusion in the registration statement or as necessary to comply with the
Securities Act.
(viii) The Company shall cooperate with any underwriters
selected by the Purchaser and counsel to such underwriters and shall provide
reasonable and customary access to the Company's books and records (upon receipt
Page 24 of 75 Pages
from such underwriters of customary confidentiality agreements) in order to
facilitate such underwriters' review and examination of the Company in
connection with such underwriting, and shall provide customary comfort letters
from its legal counsel and accountants to such underwriters.
(ix) The Company will indemnify the Purchaser, each of
its officers, directors, managers, partners, members, legal counsel, and
accountants and each person controlling the Purchaser within the meaning of
Section 15 of the Securities Act, with respect to which registration,
qualification, or compliance has been effected pursuant to this Section 4.10,
and each underwriter, if any, and each person who controls within the meaning of
Section 15 of the Securities Act any underwriter, against all expenses, claims,
losses, damages, and liabilities (or actions, proceedings, or settlements in
respect thereof) arising out of or based on any untrue statement (or alleged
untrue statement) of a material fact contained in any prospectus, offering
circular, or other document (including any related registration statement,
notification, or the like) incident to any such registration, qualification, or
compliance, or based on any omission (or alleged omission) to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading, or any violation by the Company of the Securities Act or
any rule or regulation thereunder applicable to the Company and relating to
action or inaction required of the Company in connection with any such
registration, qualification, or compliance, and will reimburse the Purchaser,
each of its officers, directors, managers, partners, members, legal counsel, and
accountants and each person controlling the Purchaser, each such underwriter,
and each person who controls any such underwriter, for any legal and any other
expenses reasonably incurred in connection with investigating and defending or
settling any such claim, loss, damage, liability, or action, provided that the
--------
Company will not be liable in any such case to the extent that any such claim,
loss, damage, liability, or expense arises out of or is based on any untrue
statement or omission based upon written information furnished to the Company by
the Purchaser and stated to be specifically for use therein. It is agreed that
the indemnity agreement contained in this clause (A) shall not apply to amounts
paid in settlement of any such loss, claim, damage, liability, or action if such
settlement is effected without the consent of the Company (which consent shall
not be unreasonably withheld). Notwithstanding the foregoing, to the extent that
the provisions on indemnification and contribution contained in any underwriting
agreement entered into in connection with such registration statement are in
conflict with the foregoing provisions, the provisions of the underwriting
agreement shall control.
(x) The Purchaser will, if any Shares or Warrant Shares
held by the Purchaser are included in the securities as to which such
registration, qualification, or compliance is being effected, indemnify the
Company, each of its directors, officers, partners, legal counsel, and
accountants and each underwriter, if any, of the Company's securities covered by
such a registration statement, each person who controls the Company or such
underwriter within the meaning of Section 15 of the Securities Act, against all
claims, losses, damages and liabilities (or actions in respect thereof) arising
out of or based on any untrue statement (or alleged untrue statement) of a
material fact contained in any such registration statement, prospectus, offering
circular, or other document, or any omission (or alleged omission) to state
therein a material fact required to be stated therein or necessary to make the
Page 25 of 75 Pages
statements therein not misleading, and will reimburse the Company, such
directors, officers, partners, legal counsel, and accountants, persons,
underwriters, or control persons for any legal or any other expenses reasonably
incurred in connection with investigating or defending any such claim, loss,
damage, liability, or action, in each case to the extent, but only to the
extent, that such untrue statement (or alleged untrue statement) or omission (or
alleged omission) is made in such registration statement, prospectus, offering
circular, or other document in reliance upon and in conformity with written
information furnished to the Company by the Purchaser and stated to be
specifically for use therein, provided, however, that the obligations of the
-------- -------
Purchaser hereunder shall not apply to amounts paid in settlement of any such
claims, losses, damages, or liabilities (or actions in respect thereof) if such
settlement is effected without the consent of the Purchaser (which consent shall
not be unreasonably withheld); and provided, further, that the liability of the
-------- -------
Purchaser hereunder shall be limited to the net proceeds received by the
Purchaser from the sale of securities covered by such registration statement.
Notwithstanding the foregoing, to the extent the provisions on indemnification
and contribution contained in any underwriting agreement entered into in
connection with such registration statement are in conflict with the foregoing
provisions, the provisions of the underwriting agreement shall control.
(xi) If the indemnification provided for in Section
4.10(ix) and Section 4.10(x) is held by a court of competent jurisdiction to be
unavailable to an indemnified party with respect to any loss, liability, claim,
damage, or expense referred to therein, then the indemnifying party, in lieu of
indemnifying such indemnified party hereunder, shall contribute to the amount
paid or payable by such indemnified party as a result of such loss, liability,
claim, damage, or expense, in such proportion as is appropriate to reflect the
relative fault of the indemnifying party on the one hand and of the indemnified
party on the other in connection with the statements or omissions that resulted
in such loss, liability, claim, damage, or expense as well as any other relevant
equitable considerations. The relative fault of the indemnifying party and of
the indemnified party shall be determined by reference to, among other things,
whether the untrue or alleged untrue statement of a material fact or the
omission or alleged omission to state a material fact relates to information
supplied by the indemnifying party or by the indemnified party and the parties'
relative intent, knowledge, access to information, and opportunity to correct or
prevent such statement or omission; provided, however, that no party guilty of
-------- -------
fraudulent misrepresentation shall be entitled to contribution from any party
who was not guilty of such fraudulent misrepresentation.
(xii) The Company shall notify the Purchaser, at any time
after effectiveness when a prospectus relating thereto is required to be
delivered under the Securities Act, of the happening of any event as a result of
which the prospectus included in such registration statement, as then in effect,
includes an untrue statement of a material fact or omits to state any material
fact required to be stated therein or necessary to make the statements therein
not misleading in light of circumstances then existing (and upon receipt of such
notice and until a supplemented or amended prospectus as set forth below is
available, the Purchaser shall not offer or sell any securities covered by such
registration statement and shall return all copies of such prospectus to the
Company if requested to do so by it), and at the request of the Purchaser
prepare and furnish the Purchaser promptly a reasonable number of copies of a
supplement to or an amendment of such prospectus as may be necessary so that, as
thereafter delivered to the purchasers of such shares, such prospectus shall not
include an untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein not
misleading in light of the circumstances than existing.
Page 26 of 75 Pages
(xiii) The Company will use its best efforts to comply in
a timely manner with the reporting requirements of Sections 13 and 15(d) of the
Exchange Act and all other public information reporting requirements of the SEC
of Rule 144 promulgated by the SEC under the Securities Act from time to time in
effect and relating to the availability of an exemption from the Securities Act
for the sale of any of the Shares or Warrant Shares. The Company will also
cooperate with the Purchaser in supplying such information and documentation as
may be necessary for the Purchaser to complete and file any information
reporting forms presently or hereafter required by the SEC as a condition to the
availability of an exemption from the Securities Act for the sale of any Shares
or Warrant Shares held by the Purchaser. Upon request of the Purchaser, the
Company shall furnish the Purchaser with a copy of all documents filed by the
Company after the date of this Agreement with the SEC pursuant to Sections
13(a), 13(c), 14 and 15(d) of the Exchange Act.
(xiv) The Company will use its best efforts to comply
with the requirements of the Securities Act with respect to any registration
statement filed pursuant to Section 4.10, including any undertakings pursuant to
Section 415 under the Securities Act.
(xv) The Company will use its best efforts to keep such
registration statement continuously effective under the Securities Act during
the Registration Period.
(xvi) In the event that the Purchaser engages an
underwriter with respect to the sale of any Shares or Warrant Shares pursuant to
such registration statement, the Company shall amend such registration statement
with respect to, among other things, the plan of distribution and any related
exhibits, as soon as practicable following receipt of such information from the
Purchaser.
4.11 Negative Covenants. During the period beginning on the date of
-------------------
this Agreement and so long as the Warrant is outstanding or, thereafter, so long
as the Purchaser holds at least 25% of the then outstanding Common Stock (on a
Fully Diluted Basis), the Company shall not, without the prior written consent
of the Purchaser, which consent shall not be unreasonably withheld, take any of
the following actions:
(a) make or propose any change or amendment to the Company's
Certificate of Incorporation or bylaws which has or would have an adverse effect
on the Shares;
(b) incur or assume any indebtedness for a term in excess of
12 months and in excess of $2,000,000 in any single transaction or $10,000,000
in the aggregate;
(c) enter into any merger or consolidation with or of any
other corporation, association or business entity where the Company would not be
the surviving corporation or where the shareholders of the Company prior to such
merger or consolidation would hold less than fifty percent of the voting power
of the surviving corporation immediately after such merger or consolidation or
sell or transfer all or substantially all of any material Subsidiary or all or
substantially all of the Company's or any material Subsidiary's assets; or
Page 27 of 75 Pages
(d) enter into any contract, agreement or commitment with
respect to, or propose or authorize, any of the actions described in the
foregoing clauses (a) through (c).
4.12 Transactions with Related Parties. The Company shall not, without
---------------------------------
the approval of all of the disinterested members of the Company's Board of
Directors, engage in any loans, leases, contracts or other transactions with any
director, officer or key employee of the Company, or any member of any such
person's immediately family, including the parents, spouse, children and other
relatives of any such person, on terms less favorable than the Company would
obtain in a transaction with an unrelated party, as determined in good faith by
such members of the Board of Directors.
4.13 Preemptive Rights
-----------------
(a) Right to Purchase. Subject to the provisions of this
------------------
Section 4.13, the Company hereby grants to the Purchaser the right (the
"Preemptive Right") to purchase a pro rata share of New Securities (as defined
herein) which the Company may, from time to time, propose to sell and issue. The
Purchaser's "pro rata share", for purposes of this Section, shall be the ratio
of the number of shares of Common Stock owned by the Purchaser immediately prior
to the issuance of New Securities (assuming full exercise of all outstanding
rights, options and warrants to acquire Common Stock by the Purchaser, including
any Warrant Shares then exercisable by the Purchaser, and after giving effect to
the proposed issuance of New Securities) to the total number of shares of Common
Stock outstanding immediately prior to the issuance of New Securities (assuming
full exercise of all outstanding rights, options and warrants to acquire Common
Stock of the Company).
(b) Definition of New Securities. As used in this Agreement,
-----------------------------
the term "New Securities" shall mean any capital stock of the Company, whether
now authorized or not, and rights, options or warrants to purchase such capital
stock, and securities of any type whatsoever that are, or may become,
convertible into or exchangeable or exercisable for capital stock; provided that
the term "New Securities" does not include (i) the Shares, the Warrant, or the
Warrant Shares; (ii) the Key Employee Warrants; (iii) securities issued pursuant
to the acquisition of another business entity or business segment of any such
entity by the Company by merger, purchase of substantially all the assets or
other reorganization whereby the Company will own more than 50% of the voting
power of such business entity or business segment of any such entity; (iv)
securities issued pursuant to the sale of all or substantially all of the
Company's assets or in a merger or consolidation of the Company with or into
another corporation in which the Company is not the surviving corporation; (v)
any borrowings, direct or indirect, from financial institutions or other persons
by the Company, whether or not presently authorized, including any type of loan
or payment evidenced by any type of debt instrument, provided such borrowings do
not have any equity features including warrants, options or other rights to
purchase capital stock and are not convertible into capital stock of the
Company; (vi) securities issued to employees, consultants, officers or directors
of the Company pursuant to any stock option, stock purchase or stock bonus plan,
agreement or arrangement approved by the Board of Directors, including
securities issued pursuant to the Incentive Plan; (vii) securities issued to
Strategic Investors (as defined below); (viii) securities issued in connection
Page 28 of 75 Pages
with any stock split, stock dividend or recapitalization of the Company; (ix)
securities issued other than for cash and for not less than the fair market
value of such securities, as determined in good faith by the Board of Directors;
(x) securities issued to a provider of services to the Company for such
services, in exchange for cash in an amount equivalent to the amount the Company
has paid or is to pay for such services, and for not less than the fair market
value of such securities as determined in good faith by the Board of Directors;
and (xi) any right, option or warrant to acquire any security convertible into
the securities excluded from the definition of New Securities pursuant to
clauses (i) through (x) above. As used herein, the term "Strategic Investor"
means any Person (other than an entity engaged primarily in venture capital or
other investment activities) that is not an Affiliate of the Company (i) to
which the Company proposes to issue securities for the primary purpose of
forming a relationship that the Board of Directors of the Company determines
will enhance its (a) perception in its marketplace, (b) ability to attract
sales, technology or future investments or (c) perceived value and (ii) who, in
connection with such investor's equity investment, also enters into a licensing,
distribution, marketing, development or services agreement or the like with the
Company.
(c) Procedures. In the event the Company proposes to undertake
----------
an issuance of New Securities, it shall give the Purchaser written notice of its
intention, describing the type of New Securities, and their price and the
general terms upon which the Company proposes to issue the same. The Purchaser
shall have 10 business days after any such notice is effective to agree to
purchase up to the Purchaser's pro rata share of such New Securities for the
price and upon the terms specified in the notice by giving written notice to the
Company and stating therein the quantity of New Securities to be purchased. In
the event the Purchaser fails to exercise the Preemptive Right within said 10
business day period, the Company shall have 90 days thereafter to sell or enter
into an agreement (pursuant to which the sale of New Securities covered thereby
shall be closed, if at all, within 120 days from the date of said agreement) to
sell the New Securities respecting which the Preemptive Right set forth in this
Section 4.13 was not exercised, at a price and upon terms no more favorable to
the purchasers thereof than specified in the Company's notice to Purchaser
pursuant to this Section 4.13. In the event the Company has not entered into an
agreement to sell the New Securities and sold the New Securities within the time
periods set forth above, the Company shall not thereafter issue or sell any New
Securities, without first again offering such securities to the Purchaser in the
manner provided in this Section 4.13.
(d) Termination of Preemptive Right. The Preemptive Right
--------------------------------
granted under this Section 4.13 shall expire at such time as the Warrant has
expired, or, thereafter, at such time as the Purchaser no longer holds at least
25% of the then outstanding Common Stock (on a Fully Diluted Basis).
Page 29 of 75 Pages
ARTICLE 5
CONDITIONS
5.1 Conditions to Each Party's Obligations to Effect the Sale. The
---------------------------------------------------------
respective obligations of each party to effect the Sale shall be subject to the
Company obtaining Shareholder Approval.
5.2 Conditions to Obligations of the Purchaser to Effect the Sale.
-------------------------------------------------------------
The obligations of the Purchaser to effect the Sale shall be subject to the
fulfillment or waiver at or prior to the Closing of the additional following
conditions:
(a) Each representation and warranty of the Company set forth
in Article 2 shall be true and correct in all material respects as of the
Closing.
(b) The Company shall have performed in all material respects
each covenant or other obligation required to be performed by it pursuant to the
Transaction Documents prior to the Closing.
(c) The consummation of the transactions contemplated by the
Transaction Documents shall not be prohibited by any Legal Requirement or
subject the Purchaser to any penalty or liability arising under any Legal
Requirement or imposed by any Government Entity.
(d) No action, suit or proceeding shall be pending or
threatened before any Government Entity the result of which could prevent or
prohibit the consummation of any transaction pursuant to the Transaction
Documents, cause any such transaction to be rescinded following such
consummation or adversely affect the Company's performance of its obligations
pursuant to the Transaction Documents, and no judgment, order, decree,
stipulation, injunction or charge having any such effect shall exist.
(e) All filings, notices, licenses, consents, authorizations,
accreditation, waivers, approvals and the like of, to or with any Government
Entity or any other Person that are required for the Company to effect the Sale
or any other transaction contemplated by the Transaction Documents shall have
been duly made or obtained and the Company shall have delivered copies thereof
to the Purchaser.
(f) The Company shall have delivered to the Purchaser a
certificate dated the Closing Date, signed by the President of the Company
stating that the conditions set forth in Section 5.2 (a) through (e) have been
satisfied.
(g) The Company shall have delivered to the Purchaser a copy
of the resolutions duly adopted by the Company's board of directors authorizing
the Company's execution, delivery and performance of the Transaction Documents
to which the Company is a party, the Sale, and all other transactions
contemplated by the Transaction Documents, as in effect as of the Closing,
certified by an officer of the Company.
Page 30 of 75 Pages
(h) The Company shall have delivered to the Purchaser a
certificate (dated not less than five business days prior to the Closing) of the
Treasurer of the State of New Jersey as to the good standing of the Company in
New Jersey.
(i) The Company shall have delivered to the Purchaser (i) a
certificate representing the Shares, and (ii) the Warrant.
(j) The Shares and the Warrant Shares shall have been listed,
or approved for listing subject to issuance, on the Nasdaq SmallCap (or such
other market or exchange on which the Common Stock is then listed).
(k) The Purchaser shall have received an opinion of counsel
for the Company as to the valid existence of the Company, the Company's
corporate power and authority to enter into the Transaction Documents, the due
execution of the Transaction Documents, the enforceability of the Transaction
Documents in accordance with their respective terms (as may be limited by
bankruptcy), and the valid issuance of the Shares and the Warrant, in form and
substance reasonably satisfactory to the Purchaser.
(l) The Company shall have filed a registration statement
pursuant to Section 4.10(b), or shall have delivered written notice to the
Purchaser that the SEC prohibited the Company from filing such registration
statement prior to the Closing Date.
5.3 Conditions to Obligations of the Company to Effect the Sale. The
-------------------------------------------------------------
obligations of the Company to effect the Sale shall be subject to the
fulfillment or waiver at or prior to the Closing of the additional following
conditions:
(a) Each representation and warranty by the Purchaser
(including those relating to equity holders of the Purchaser) set forth in
Article 3 shall be true and correct in all material respects as of the Closing.
(b) The Purchaser shall have performed in all material
respects each covenant or other obligation required to be performed by it
pursuant to the Transaction Documents prior to the Closing.
(c) The consummation of the transactions contemplated by the
Transaction Documents shall not be prohibited by any Legal Requirement or
subject the Company or any of its assets to any penalty or liability arising
under any Legal Requirement or imposed by any Government Entity.
(d) No action, suit or proceeding shall be pending or
threatened before any Government Entity the result of which could prevent or
prohibit the consummation of any transaction pursuant to the Transaction
Documents, cause any such transaction to be rescinded following such
consummation or adversely affect the Company's performance of its obligations
pursuant to the Transaction Documents, and no judgment, order, decree,
stipulation, injunction or charge having any such effect shall exist.
Page 31 of 75 Pages
(e) All filings, notices, licenses, consents, authorizations,
accreditation, waivers, approvals and the like of, to or with any Government
Entity or any other Person that are required for the Purchaser to effect the
Sale or any other transaction contemplated by the Transaction Documents shall
have been duly made or obtained and the Purchaser shall have delivered copies
thereof to the Company.
(f) The Purchaser shall have delivered to the Company a
certificate, dated the Closing Date, signed by the Managing Member of the
Purchaser stating that the conditions set forth in Sections 5.3(a) through (e)
have been satisfied.
(g) The Purchaser shall have delivered to the Company a copy
of the resolutions duly adopted by the Managing Member of the Purchaser
authorizing the Purchaser's execution, delivery and performance of the
Transaction Documents to which the Purchaser is a party, the Sale, and all other
transactions contemplated by the Transaction Documents, as in effect as of the
Closing, certified by an officer of the Purchaser.
(h) The Purchaser shall have delivered to the Company a
certificate (dated not less than five business days prior to the Closing) of the
Secretary of State of the State of New York as to the good standing of the
Purchaser in New York.
(i) The Purchaser shall have delivered to the Company the Note
and the Pledge Agreement.
(j) The Company shall have issued and delivered the Key
Employee Warrants.
(k) The Company shall have received an opinion of counsel for
the Purchaser as to the valid existence of the Purchaser, the Purchaser's power
and authority to enter into the Transaction Documents, the due execution of the
Transaction Documents, and the enforceability of the Transaction Documents in
accordance with their respective terms (as may be limited by bankruptcy), in
form and substance reasonably satisfactory to the Company.
ARTICLE 6
SURVIVAL AND INDEMNIFICATION
6.1 Survival of Representations, Warranties and Covenants.
-----------------------------------------------------
(a) Survival Term. All representations, warranties and
--------------
covenants contained herein or made in writing by any party in connection
herewith shall survive the execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby (regardless of any
investigation made by any party or on its behalf) and will continue in full
force and effect for:
(i) perpetuity, in the case of the representations,
warranties and covenants in Sections 2.3, 2.4 and 3.2;
Page 32 of 75 Pages
(ii) for a period of two years following the Closing
Date for all other representations and warranties set forth in Articles 2 and 3;
and
(iii) in the case of the covenant in Section 4.1, for a
period of two years (A) following termination of negotiations in connection with
the Sale in the event the Sale is not consummated, or (B) following the Closing
Date in the event the Sale is consummated.
(iv) for the term set forth therein, or if no term is
set forth therein for a period of two years following the Closing Date, in the
case of all other covenants set forth in Article 4.
(b) Special Rule for Fraud. Notwithstanding anything in this
----------------------
Section 6.1 to the contrary, in the event of a breach by any party of a
representation or warranty which breach is intentional, or constitutes fraud,
the representation or warranty that has been breached will survive the execution
and delivery of this Agreement and the consummation of the transactions
contemplated hereby (regardless of any investigation made by any party or on its
behalf) and will continue in full force and effect for six years following the
Closing Date or the discovery of such fraud, whichever is later.
(c) No Waiver. Neither a party's participation in the
----------
consummation of any transaction pursuant to any Transaction Document nor any
waiver of any condition to such participation (including any condition that a
representation or warranty of any other party be true and correct) will
constitute a waiver by such participating party of any representation or
warranty of any party or otherwise affect the survival of any such
representation or warranty.
6.2 Indemnification Obligations of the Purchaser.
--------------------------------------------
(a) Specific Indemnifiable Losses. The Purchaser will
---------------------------------
indemnify the Company and its Affiliates, shareholders, officers, directors,
employees, agents, representatives and permitted successors and assigns
(collectively, the "Company Indemnitees") in respect of, and save and hold each
Company Indemnitee harmless against and pay on behalf of or reimburse each
Company Indemnitee as and when incurred, any Loss which any Purchaser Indemnitee
suffers, sustains or becomes subject to as a result of, in connection with,
relating or incidental to or by virtue of, without duplication:
(i) subject to the survival provisions of Section 6.1,
any misrepresentation or breach of any representation or warranty (other than
intentional misrepresentations or breaches of representations and warranties
arising out of fraud) by the Purchaser set forth in this Agreement or any
certificate or other instrument or document furnished to the Company by the
Purchaser pursuant to any Transaction Document;
(ii) any intentional misrepresentation or breach of any
representation or warranty arising out of fraud by the Purchaser set forth in
this Agreement or any certificate or other instrument or document furnished to
the Company by the Purchaser pursuant to any Transaction Document; or
Page 33 of 75 Pages
(iii) any nonfulfillment or breach of any covenant or
agreement of the Purchaser set
forth in any Transaction Document.
(b) Limitation of Liability. In no event, except with respect
-----------------------
to any claim described in Sections 6.2(a)(ii) and 6.1(b) of this Agreement,
shall any indemnification be made under Section 6.2 until the aggregate amount
of Losses with respect to an indemnity obligation of the Purchaser exceeds
$10,000, then indemnification for such obligation shall be made to the full
extent of Losses (including the initial $10,000).
6.3 Indemnification Obligations of the Company.
------------------------------------------
(a) Specific Indemnifiable Losses. The Company will indemnify
------------------------------
the Purchaser and its Affiliates, members, officers, directors, employees,
agents, representatives and permitted successors and assigns (collectively, the
"Purchaser Indemnitees") in respect of, and save and hold each Purchaser
Indemnitee harmless against and pay on behalf of or reimburse each Purchaser
Indemnitee as and when incurred, any Loss which any Purchaser Indemnitee
suffers, sustains or becomes subject to as a result of, in connection with,
relating to or by virtue of, without duplication:
(i) subject to the survival provisions of Section 6.1,
any misrepresentation or breach of any representation or warranty (other than
intentional misrepresentations or breaches of representations and warranties
arising out of fraud) by the Company set forth in this Agreement or any
certificate or other instrument or document furnished to the Purchaser by the
Company pursuant to any Transaction Document;
(ii) any intentional misrepresentation or breach of any
representation or warranty arising out of fraud by the Company set forth in this
Agreement or any certificate furnished to the Purchaser by the Company pursuant
to any Transaction Document; or
(iii) any nonfulfillment or breach of any covenant or
agreement of the Company set forth in any Transaction Document.
(b) Limitation of Liability. In no event, except with respect
-----------------------
to any claim described in Sections 6.3(a)(ii) and 6.1(b) of this Agreement,
shall any indemnification be made under Section 6.2 until the aggregate amount
of Losses with respect to an indemnity obligation of the Company exceeds
$10,000, then indemnification for such obligation shall be made to the full
extent of Losses in excess of $10,000.
6.4 Indemnification Procedures.
--------------------------
(a) Notice of Claim. Any Person making a claim for
-----------------
indemnification pursuant to Section 6.2 or Section 6.3 (an "Indemnified Party")
must give the party from whom indemnification is sought (an "Indemnifying
Party") written notice of such claim (an "Indemnification Claim Notice")
promptly after the Indemnified Party receives any written notice of any action,
lawsuit, proceeding, investigation or other claim (a "Proceeding") against or
Page 34 of 75 Pages
involving the Indemnified Party by a Government Entity or other third-party or
otherwise discovers the liability, obligation or facts giving rise to such claim
for indemnification; provided, that the failure to notify or delay in notifying
an Indemnifying Party will not relieve the Indemnifying Party of its obligations
pursuant to Section 6.2 or Section 6.3, as applicable, except to the extent that
such failure actually xxxxx the Indemnifying Party. Such notice must contain a
description of the claim and the nature and amount of such Loss (to the extent
that the nature and amount of such Loss is known at such time).
(b) Control of Defense; Conditions. With respect to the
---------------------------------
defense of any Proceeding against or involving an Indemnified Party in which a
Government Entity or other third-party in question seeks only the recovery of a
sum of money for which indemnification is provided in Section 6.2 or Section
6.3, at its option an Indemnifying Party may appoint as lead counsel of such
defense any legal counsel selected by the Indemnifying Party; provided, that
before the Indemnifying Party assumes control of such defense it must first:
(i) enter into an agreement with the Indemnified Party
(in form and substance satisfactory to the Indemnified Party) pursuant to which
the Indemnifying Party agrees to be fully responsible (with no reservation of
any rights other than the right to be subrogated to the rights of the
Indemnified Party) for all Losses relating to such Proceeding and
unconditionally guarantees the payment and performance of any liability or
obligation which may arise with respect to such Proceeding or the facts giving
rise to such claim for indemnification; and
(ii) furnish the Indemnified Party with evidence that
the Indemnifying Party, in the Indemnified Party's sole judgment, is and will be
able to satisfy any such liability.
(c) Control of Defense; Related Matters. Notwithstanding
---------------------------------------
Section 6.4(b):
(i) the Indemnified Party will be entitled to
participate in the defense of such claim and to employ counsel of its choice for
such purpose at its own expense; provided, that the Indemnifying Party will bear
the reasonable fees and expenses of such separate counsel incurred prior to the
date upon which the Indemnifying Party effectively assumes control of such
defense;
(ii) the Indemnifying Party will not be entitled to
assume control of the defense of such claim, and will pay the reasonable fees
and expenses of legal counsel retained by the Indemnified Party, if
(A) the Indemnified Party reasonably believes that
an adverse determination of such Proceeding could be materially detrimental to
or injure the Indemnified Party's reputation or future business prospects, or
(B) a court of competent jurisdiction rules that the
Indemnifying Party has failed or is failing to prosecute or defend vigorously
such claim; and
(iii) the Indemnifying Party must obtain the prior
written consent of the Indemnified Party (which the Indemnified Party will not
unreasonably withhold) prior to entering into any settlement of such claim or
Proceeding or ceasing to defend such claim or Proceeding.
Page 35 of 75 Pages
ARTICLE 7
TERMINATION
7.1 Events of Termination. This Agreement may be terminated at
----------------------
any time prior to the Closing, whether before or after the Company obtains
Shareholder Approval:
(a) By mutual consent of the Company and the Managing Member
of the Purchaser;
(b) By either the Company or the Purchaser (provided the
terminating party is not otherwise in material breach of its obligations under
this Agreement and the terminating party has not otherwise taken action to
prevent the Closing) if the Sale shall not have been consummated on or before
September 30, 2000 (the "Termination Date"); provided, however, the Termination
---------------- -------- -------
Date may be extended until November 30, 2000 by the Company in its sole
discretion if the Sale shall not been consummated on or before the Termination
Date because of (i) delays resulting from comments from the staff of the SEC
with respect to the Proxy Statement, or (ii) the Company has scheduled, but has
not yet concluded, the meeting at which the Company intends to solicit
Shareholder Approval.
(c) By either the Company or the Purchaser if the Company does
not obtain Shareholder Approval; and
(d) By the Company or the Purchaser in the event of (i) a
breach by the other party of any representation or warranty contained herein,
which breach has not been cured within 30 days after the giving of written
notice to the breaching party of such breach and which breach, individually or
in the aggregate when combined with other such breaches, would cause the
conditions set forth in Section 5.2 or Section 5.3, as the case may be, not to
be met if the date of the action described above were the date of the Closing or
(ii) a material breach by the other party of any of the covenants or agreements
contained herein, which breach has not been cured within 30 days after the
giving of written notice to the breaching party of such breach.
7.2 Effect of Termination. In the event of the termination of this
----------------------
Agreement pursuant to Section 7.1, this Agreement, except for the provisions of
Section 4.1, shall become void and have no effect, without any liability on the
part of any party or its directors, officers or shareholders. Notwithstanding
the foregoing, nothing in this Section 7.2 shall relieve any party to this
Agreement of liability for a material breach of any provision of this Agreement
and provided, further, however, that if it shall be judicially determined that
termination of this Agreement was caused by an intentional breach of this
Agreement, then, in addition to other remedies at law or equity for breach of
this Agreement, the party so found to have intentionally breached this Agreement
shall indemnify and hold harmless the other party for its out-of-pocket costs,
fees and expenses of its counsel, accountants, financial advisors and other
experts and advisors (as well as fees and expenses) incident to negotiation,
preparation and execution of this Agreement and related documentation and
shareholders' meetings and consents.
Page 36 of 75 Pages
ARTICLE 8
MISCELLANEOUS
8.1 Rights and Remedies. No course of dealing between the parties or
--------------------
failure or delay in exercising any right, remedy, power or privilege (each, a
"right") pursuant to this Agreement will operate as a waiver of any rights of
any party, nor will any single or partial exercise of any right under this
Agreement preclude any other or further exercise of such right or the exercise
of any other right. Except as expressly set forth herein, the rights provided
pursuant to this Agreement are cumulative and not exhaustive of any other rights
which may be provided by law.
8.2 Waivers, Amendments to be in Writing. No waiver, amendment,
----------------------------------------
modification or supplement of this Agreement will be binding upon a party unless
such waiver, amendment, modification or supplement is set forth in writing and
is executed by such party.
8.3 Successors and Assigns. Except as otherwise expressly provided in
----------------------
this Agreement, all covenants and agreements set forth in this Agreement by or
on behalf of the Purchaser and the Company will bind and inure to the benefit of
the respective successors and assigns of the Purchaser and the Company, whether
so expressed or not. Prior to the Closing, this Agreement and any of the rights,
interests or obligations hereunder may not be assigned by the Purchaser.
Following the Closing, this Agreement, and any of the rights, interests or
obligations hereunder (except for the Shares, the Warrant or the Warrant Shares,
which may be assigned except as otherwise provided therein or elsewhere in the
Transaction Documents) may not be assigned by the Purchaser except to (i) an
individual who was a direct or indirect equity holder of the Purchaser on the
date of this Agreement, (ii) Xxxxxx Xxxxx, a member of his immediate family or a
trust for the benefit of same, or any entity controlled by any of the foregoing,
or (iii) to any third-party with the prior written consent of the Company, which
consent shall not be unreasonably withheld; so long as prior to any such
assignment the Company receives (A) notice of and a description of the
particular rights, interest or obligations being assigned, and (B) a written
agreement by the assignee whereby such assignee agrees to be bound by this
provision.
8.4 Governing Law. This Agreement will be governed by and construed in
--------------
accordance with the domestic laws of the State of New Jersey, without giving
effect to any choice of law or conflict rule of any jurisdiction that would
cause the laws of any other jurisdiction to be applied. In furtherance of the
foregoing, the internal law of the State of New Jersey will control the
interpretation and construction of this Agreement, even if under any choice of
law or conflict of law analysis, the substantive law of some other jurisdiction
would ordinarily apply.
8.5 Jurisdiction. Each of the parties hereby (a) irrevocably submits to
------------
the exclusive jurisdiction of the state courts of, and the federal courts
located in, the State of New Jersey in any action or proceeding arising out of
or relating to, this Agreement, (b) waives, and agrees to assert, by way of
motion, as a defense, or otherwise, in any such suit, action or proceeding, any
claim that it is not subject personally to the jurisdiction of the above-named
courts, that its property is exempt or immune from attachment or execution under
the law of another jurisdiction, that the suit, action or proceeding is brought
in an inconvenient forum, that the venue of the suit, action or proceeding is
Page 37 of 75 Pages
improper or that this Agreement or the subject matter hereof may not be enforced
in or by such court, and agrees not to seek any review by any court of any other
jurisdiction which may be called upon to grant an enforcement of the judgment of
any such court.
8.6 Notices.
-------
(a) All demands, notices, communications and reports
("notices") provided for in this Agreement will be in writing and will be either
personally delivered, mailed by registered or certified mail (return receipt
requested) or sent by reputable overnight courier service (delivery charges
prepaid) to any party at the address specified below, or at such address, to the
attention of such other Person, and with such other copy, as the recipient party
has specified by prior written notice to the sending party pursuant to the
provisions of this Section 8.6.
If to the Purchaser:
--------------------
Xxxxx & Company I.G., LLC
Xxx Xxxx Xxxxx, 00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: President
with a copy, which will not constitute notice to the
--------------------------------------------------------------
Purchaser, to:
--------------
Akin, Gump, Strauss, Xxxxx & Xxxx, L.L.P.
000 Xxxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Facsimile Number: (000) 000-0000
Attention: Xxxxxx X. Xxxxxxxxx
If to the Company:
------------------
Continental Choice Care, Inc.
00 Xxxxx Xxxxx
Xxxxxxxxxx, Xxx Xxxxxx 00000
Attention: President
with a copy, which will not constitute notice to the Company,
--------------------------------------------------------------
to:
---
Pitney, Xxxxxx, Xxxx & Xxxxx LLP
000 Xxxxxx Xxxxx
X.X. Xxx 0000
Xxxxxxxxxx, Xxx Xxxxxx 00000-0000
Attention: Xxxxxx Xxxxx
Facsimile Number: (000) 000-0000
(b) Any such notice will be deemed to have been given when
delivered personally, on the third business day after deposit postage pre-paid
Page 38 of 75 Pages
in the U.S. mail, or on the business day after deposit with a reputable
overnight courier service delivery charges pre-paid, as the case may be.
8.7 Severability of Provisions. If any provision of this
----------------------------
Agreement is held to be invalid for any reason whatsoever, then such provision
will be deemed severable from the remaining provisions of this Agreement and
will in no way affect the validity or enforceability of any other provision of
this Agreement.
8.8 Counterparts. The parties may execute this Agreement in
------------
separate counterparts (no one of which need contain the signatures of all
parties), each of which will be an original and all of which together will
constitute one and the same instrument.
8.9 No Third-Party Beneficiaries. Except as otherwise expressly
-----------------------------
provided in this Agreement, no Person which is not a party will have any right
or obligation pursuant to this Agreement.
8.10 Headings. The headings used in this Agreement are for the
--------
purpose of reference only and will not affect the meaning or interpretation of
any provision of this Agreement.
8.11 Merger and Integration. Except as otherwise provided in this
----------------------
Agreement, this Agreement sets forth the entire understanding of the parties
relating to the subject matter hereof, and all prior understandings, whether
written or oral, are superseded by this Agreement.
8.12 Transaction Expenses. The Purchaser and the Company, whether
--------------------
or not the Sale is consummated, shall bear their own legal and other fees and
expenses with respect to the Sale.
8.13 Further Assurances. From and after the Closing, the
--------------------
Purchaser and the Company will, and will cause their respective Affiliates to,
execute all documents and take any other action which they are reasonably
requested to execute or take to further effectuate the transactions contemplated
by the Transaction Documents.
8.14 Announcements. The Company and the Purchaser shall have the
-------------
right to review any press release or other public statement with respect to the
transactions contemplated by this Agreement for a reasonable period of time
before issuance thereof; provided, however, that the Company shall be entitled,
-------- -------
without the prior approval of the Purchaser, to make any press release or other
public statement with respect to such transactions as is required by applicable
law and regulations (although the Purchaser shall be consulted by the Company in
connection with any such press release or other public statement prior to its
release and shall be provided with a copy thereof and be given an opportunity to
comment thereon).
8.15 SEC. The Purchaser acknowledges that following the Closing
---
Date the Purchaser and its Affiliates will have obligations to file certain
reports pursuant to Section 13 and Section 16 of the Exchange Act with the SEC.
8.16 Cooperation on SEC Filings. The Company and the Purchaser
----------------------------
acknowledge that the Company may now or in the future be required to include
information concerning the Purchaser in SEC reports or other filings. The
Purchaser shall provide the Company with any information, certificates,
Page 39 of 75 Pages
documents or other materials about the Purchaser that are reasonably necessary
to be included in such SEC reports or other filings.
ARTICLE 9
DEFINITIONS
9.1 Definitions. For purposes hereof, the following terms, when
-----------
used herein with initial capital letters, shall have the respective meanings set
forth herein:
"Affiliate" of any Person means any other Person controlling,
controlled by or under common control with such first Person.
"Agreement" means this Purchase Agreement (including Exhibits
and Schedules) as it may be amended from time to time in accordance with its
terms.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"Fully Diluted Basis" means (i) assuming the conversion or
exercise of outstanding securities that are convertible into or exchangeable for
shares of Common Stock (whether such outstanding securities are "in the money"
or not), (ii) not assuming the exercise of options to be issued under any plan,
and (iii) not taking into account authorized, but unissued, shares of capital
stock.
"GAAP" means, at a given time, United States generally
accepted accounting principles, consistently applied.
"Government Entity" means the United States of America or any
other nation, any state or other political subdivision thereof, or any entity
exercising executive, legislative, judicial, regulatory or administrative
functions of government.
"Legal Requirement" means any requirement arising under any
action, law, treaty, rule or regulation, determination or direction of an
arbitrator or Government Entity.
"Lien" means any mortgage, pledge, security interest,
encumbrance, easement, restriction on use, restriction on transfer, charge, or
other lien.
"Loss" means, with respect to any Person, any diminution in
value, consequential or other damage, liability, demand, claim, action, cause of
action, cost, damage, deficiency, Tax, penalty, fine or other loss or expense,
whether or not arising out of a third-party claim, including all interest,
penalties, reasonable attorneys' fees and expenses and all amounts paid or
incurred in connection with any action, demand, proceeding, investigation or
claim by any third-party (including any Government Entity) against or affecting
such Person or which, if determined adversely to such Person, would give rise
to, evidence the existence of, or relate to, any other Loss and the
investigation, defense or settlement of any of the foregoing, together with
Page 40 of 75 Pages
interest thereon from the date on which such Person provides the written notice
of the related claim as described in Section 6.4 through and including the date
on which the total amount of the claim, including such interest, is recovered or
recouped pursuant to Article 6.
"Person" means an individual, a partnership, a corporation, an
association, a limited liability company, a joint stock company, a trust, a
joint venture, an unincorporated organization and a governmental entity or any
department, agency or political subdivision thereof.
"SEC" means the United States Securities and Exchange
Commission.
"Securities Act" means the Securities Act of 1933, as amended.
"Shareholder Approval" means approval and adoption of the Sale
and the issuance of the Key Employee Warrants by the requisite vote of the
holders of the Company's Common Stock.
"Subsidiary" of any Person means any corporation, partnership,
association or other business entity which such Person, directly or indirectly,
controls or in which such Person has a majority ownership interest. For purposes
of this definition, a Person is deemed to have a majority ownership interest in
a partnership, association or other business entity if such Person is allocated
a majority of the gains or losses of such entity or is or controls the managing
director or general partner of such entity.
"Transaction Documents" means this Agreement, and all other
agreements, instruments, certificates and other documents to be entered into or
delivered by any party hereto in connection with the Sale.
9.2 Other Definitional Provisions.
-----------------------------
(a) "Hereof," etc. The terms "hereof," "herein" and
--------------
"hereunder" and terms of similar import are references to this Agreement as a
whole (including Exhibits and Schedules) and not to any particular provision of
this Agreement. Section and clause references contained in this Agreement are
references to Sections and clauses in this Agreement, unless otherwise
specified.
(b) "Including." The term "including" means including,
---------
without limitation.
(c) Successor Laws. Any reference to any particular
----------------
law or regulation will be interpreted to include any revision of or successor to
that section regardless of how it is numbered or classified.
Page 41 of 75 Pages
IN WITNESS WHEREOF, the parties have executed this Purchase
Agreement as of the date first written above.
XXXXX & COMPANY I.G., LLC
By: XXXXX & COMPANY I.G., INC.
Managing Member
By: /s/ Xxxxxx Xxxxx
-----------------------
Xxxxxx Xxxxx
Chief Executive Officer
CONTINENTAL CHOICE CARE, INC.
By: /s/ Xxxxxx X. Xxxxx
-----------------------
Xxxxxx X. Xxxxx
President
Page 42 of 75 Pages
Schedule 2.2
------------
1. Techtron, Inc. holds approximately 47% of the Company's Common Stock. Xxxxxx
X. Xxxxx, Xxxxx X. Xxxxx and Xxxxxx X. Xxxxxx, M.D., officers, directors and
principal shareholders of Techtron, Inc., have voted in unanimity in the past
with respect to the voting of Techtron, Inc. of its shares of the Company's
Common Stock, although not bound by any agreement to do so.
2. The Company granted registration rights to Xxxx, Xxxx & Co. and Josephthal &
Co. Inc. Xxxx, Xxxx & Co. and Josephthal & Co. Inc. have demanded registration
pursuant to such rights and the Company is in the process of registering
securities pursuant thereto.
