Exhibit 99.2
PREFERRED STOCK PURCHASE AGREEMENT
AVATECH SOLUTIONS, INC.
This Preferred Stock Purchase Agreement (this "Agreement") is made and
entered into as of the _____ day of ______________, 2003, by and among Avatech
Solutions Inc., a Delaware corporation (the "Company"), and each of the persons
and/or entities identified on Schedule 1 hereto (the "Purchasers").
RECITALS
WHEREAS, the Company wishes to sell to the Purchasers shares of Series C
Convertible Preferred Stock (the "Shares"), pursuant to the terms and conditions
set forth below; and
WHEREAS, the Purchasers wish to purchase the Shares on the terms and
subject to the conditions set forth below;
AGREEMENT
NOW THEREFORE, in consideration of the mutual covenants, agreements,
conditions, representations, and warranties contained in this Agreement, the
Company and the Purchasers hereby agree as follows:
SECTION 1: PURCHASE AND SALE OF PREFERRED STOCK
1.1. Authorization of Shares. On or after the Closing Date (as defined in
Section 1.4), (a) the Company shall have authorized the issuance of the Shares
to Purchasers, and (b) the Company shall have reserved the proper number of
shares of Common Stock of the Company issuable upon conversion of the Shares
(the "Conversion Shares"). The Shares shall have the rights, preferences,
privileges and restrictions set forth in a certificate of designations filed
with the Secretary of the State of Delaware, substantially in the form attached
hereto as Exhibit A (the "Designation").
1.2. Purchase and Sale. Subject to the terms and conditions hereof, the
Company agrees to issue to each Purchaser that number of Shares set forth
opposite each Purchaser's name on Schedule 1. In exchange for the issuance of
the Shares, each Purchaser agrees to purchase the Shares at a purchase price of
$1.69 per share, for a total price as set forth opposite the Purchaser's name on
Schedule 1 (the "Total Purchase Price").
1.3 Election to Purchase Additional Shares. The Purchaser may elect to
purchase additional shares of Series C Convertible Preferred Stock of the
Company (the "Additional Shares") on the same terms and conditions contained in
this Agreement, except as specifically set forth in this Section 1.3. This
election (the "Additional Share Election") must be received by the Company, in
writing on or before the first anniversary of the Closing Date.
(a) Price. In the event that a Purchaser makes an Additional Share
Election, the "Conversion Price" of any Shares purchased will be $2.50 per
share. The "Additional Share Purchase Price" shall be the Conversion Price
multiplied by the number of Additional Shares.
(b) Number of Shares. Each Purchaser may elect under this Section 1.3
to purchase any whole number of Additional Shares, up to the amount of the Total
Purchase Price.
(c) Delivery. The Additional Shares and the Additional Share Purchase
Price shall be issued and delivered (the "Additional Share Closing") at such
time (the "Additional Share Closing Date") and place and by such method as
agreed upon by the Company and the Purchaser. As soon as practicable after the
issuance of the Additional Shares, the Company will deliver to each Purchaser a
certificate representing the Additional Shares.
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(d) Application of Entire Agreement. Except where specifically
superceded by a provision of this Section 1.3, the term "Share" or "Shares" in
this Agreement shall be construed to include Additional Shares. Notwithstanding
this construction, no portion of this Agreement shall be construed to provide
rights to a Purchaser with respect to Additional Shares which have not yet been
issued or which are not yet eligible for registration.
1.4. Closing. The issuance of the Shares (but not any Additional Shares)
under this Agreement (the "Closing") shall take place on ________________, 2003
(the "Closing Date"). At or as soon as practicable after the Closing, subject to
the terms and conditions hereof, the Company will deliver to each Purchaser a
certificate representing the number of Shares set forth opposite that
Purchaser's name on Schedule 1, against delivery to the Company of this executed
Agreement, and the Purchaser will deliver the Total Purchase Price to the
Company.
1.5 Covenants of the Company related to Conversion. The Company agrees, at
all times from the Closing Date until all of the Shares are converted into
Conversion Shares, to reserve and keep available out of its authorized but
unissued shares of Common Stock, solely for the purpose of effecting the
Conversion of the Shares into Conversion Shares, the number of shares of its
common stock as are then required to effect the conversion of all outstanding
Shares.
SECTION 2: REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company, as applicable, hereby represents and warrants to each Purchaser as
follows:
2.1. Organization, Good Standing, and Qualification. The Company is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware. The Company has all requisite corporate power and
authority to own and operate its properties and assets, to execute and deliver
this Agreement and to file the Designation (collectively, the "Preferred Stock
Agreement"), to issue and sell the Shares, to carry out the provisions of the
Preferred Stock Agreement, and to carry on its business as presently conducted.
The Company is duly qualified and is authorized to do business and is in good
standing in each jurisdiction in which the nature of its activities and of its
properties (both owned and leased) makes such qualification necessary; except
for those jurisdictions in which failure to do so would not have a material
adverse effect on the Company or its business.
2.2. Capitalization. The authorized capital stock of the Company,
immediately prior to the Closing and prior to filing the Designation, consists
of a total of 25,000,000 shares, of which (a) 22,500,000 shares are Common
Stock, of which 2,965,958 shares are issued and outstanding and 657,808 shares
of which are reserved for future issuance upon the exercise of any stock options
granted under the 1998, 2000, and 2002 Stock Option Plans, the 2003 Restricted
Stock Award Plan, and upon the exercise of outstanding warrants and (b)
2,500,000 shares are Preferred Stock, of which 100,000 shares are designated
Series A Junior Participating Preferred Stock and 1,202,463 are designated as
Series B Preferred Stock, none of which are issued and outstanding. All issued
and outstanding shares of the Company's Common Stock (x) have been duly
authorized and validly issued, (y) are fully paid and nonassessable, and (z)
were issued in compliance with all applicable state and federal laws concerning
the issuance of securities. The Conversion Shares have been duly and validly
reserved for issuance. When issued in compliance with the provisions of this
Agreement and the Designation, the Conversion Shares will be validly issued,
fully paid and nonassessable, and will be free of any liens or encumbrances,
provided, however, that the Conversion Shares may be subject to restrictions on
transfer under state and federal securities laws.
2.3. Authorization. All corporate action on the part of the Company, its
officers, directors and stockholders, necessary for the authorization of this
Agreement and the Designation, the performance of all obligations of the Company
thereunder, and the authorization, sale, issuance and delivery of the Shares and
Conversion Shares thereto have been taken or will be taken prior to the Closing.
This Agreement, when executed and delivered, will be a valid and binding
obligation of the Company, enforceable against the Company in accordance with
its terms, except as limited by (a) applicable bankruptcy, insolvency,
reorganization, moratorium or other laws of general application affecting
enforcement of creditors' rights, (b) general principles of equity that restrict
the availability of equitable remedies, and (c) applicable law related to the
enforceability of the indemnification provisions set forth in Section 5 of this
Agreement. The sale of the Shares and the subsequent conversion of the Shares
into Conversion Shares are not and will not be subject to any preemptive rights
or rights of first refusal that have not been properly waived or complied with.
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2.4. Registration Statement on Form S-1. A draft or filed version of a
Registration Statement on Form S-1, dated February ___, 2003 (the "Registration
Statement") was provided to each Purchaser and, when filed, will be available at
xxxx://xxx.xxx.xxx. The Registration Statement contains information regarding
the current businesses of the Company and certain information regarding future
plans of the company.
2.5. Compliance With Other Instruments. The Company is not in violation of
or default under (a) any term of its certificate of incorporation or bylaws, (b)
any material provision of any mortgage, indenture, contract, agreement,
instrument or contract to which it is party or by which it is bound, (c) any
judgment, decree, order, writ or, to the Company's knowledge, or (d) any
statute, rule or regulation applicable to the Company, which violation of or
default under would materially and adversely affect the business, assets,
liabilities, financial condition, operations or prospects of the Company. The
execution, delivery, and performance of and compliance with the Preferred Stock
Agreement, and the issuance and sale of the Shares and the Conversion Shares
pursuant thereto will not, with or without the passage of time or giving of
notice, result in any such material violation or be in conflict with or
constitute a default under any such term or result in the creation of any
mortgage, pledge, lien, encumbrance, or charge upon any of the properties or
assets of the Company or the suspension, revocation, impairment, forfeiture, or
non-renewal of any permit license, authorization, or approval applicable to the
Company, its business or operations or any of its assets or properties.
2.6. Litigation. Except as set forth in the Registration Statement, there
are no actions, suits, or legal, administrative, or other proceedings or
investigations pending or, to the Company's knowledge, threatened before any
court, agency, or other tribunal to which the Company is a party or against or
affecting any of the property, assets, businesses, or financial condition of the
Company. The Company is not in default with respect to any order, writ,
injunction, or decree of any federal, state, local or foreign court, department,
agency, or instrumentality to which it is a party.
2.7. Governmental Approvals: Third Party Consents. Except for certain
filings required by federal and state securities laws, all consents, approvals,
or authorizations of, or registrations, qualifications, designations,
declarations, or filings with, any federal or state governmental authority, and
all consents, approvals or authorizations of any third party required in
connection with the execution of the Preferred Stock Agreement and the
performance of the transactions contemplated thereby (including the issuance and
sale of the Shares and Conversion Shares) have been obtained by the Company or
shall be obtained prior to the Closing or the Additional Share Closing, as
applicable. The Company has, or has rights to acquire, all licenses, permits,
and other similar authority necessary for the conduct of its business as now
being conducted by it, the lack of which could materially and adversely affect
the operations or condition, financial or otherwise, of the Company, and it is
not in default in any material respect under any of such licenses, permits or
other similar authority.
2.8. Offering Valid. Assuming the accuracy of the representations and
warranties of Purchasers contained in Section 3 hereof, the offer, sale, and
issuance of the Shares and the Conversion Shares will be exempt from the
registration requirements of the Securities Act and will have been registered or
qualified or are exempt from registration and qualification under the
registration, permit, or qualification requirements of all applicable state
securities laws.
2.9. Disclosure. All information relating to or concerning the Company and
its subsidiaries set forth in this Agreement or provided to the Purchasers in
writing in connection with the transactions contemplated hereby is true and
correct in all material respects and the Company has not omitted to state any
material fact necessary in order to make the statements made herein or therein,
in light of the circumstances under which they were made, not misleading;
provided, however, that this representation and warranty shall not apply to any
information contained within any of the foregoing related to future events, or
the projected future financial performance of the Company, including any
financial projections, or descriptions of potential strategic or business
relationships between the Company and third parties.
2.10. No Integrated Offering. Neither the Company, any of its affiliates,
nor any person acting on its or their behalf, has, directly or indirectly, made
any offers or sales of any security or solicited any offers to buy any security
under circumstances that would require registration of the Shares being offered
hereby under the Securities Act or cause this offering of Shares to be
integrated with any prior offering of securities of the Company for purposes of
the Securities Act or any applicable stockholder approval provisions.
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SECTION 3: REPRESENTATIONS AND WARRANTIES OF PURCHASERS.
Each Purchaser hereby represents and warrants to the Company as follows:
3.1. Requisite Power and Authority.
(a) If the Purchaser is an individual, the Purchaser has all requisite
power and authority under all application provisions of law to execute and
deliver this Agreement and to carry out the provisions hereof.
(b) If the Purchaser is a corporation, limited liability company, or
limited partnership, the Purchaser is duly organized, validly existing, and in
good standing under the laws of the jurisdiction of its formation and has all
requisite limited liability company, partnership or corporate power and
authority to own its assets and operate its business. If the Purchaser is a
corporation, limited liability company, or limited partnership, the Purchaser
has all necessary corporate, limited liability company, or partnership power and
authority under all applicable provisions of law to execute and deliver this
Agreement and to carry out the provisions hereof. All action on Purchaser's part
required for the lawful execution and delivery of this Agreement has been or
will be effectively taken prior to the Closing or the Additional Share Closing,
as applicable.
(c) Upon its execution and delivery, this Agreement will be a valid
and binding obligation of Purchaser, enforceable in accordance with its terms,
except as limited by (a) applicable bankruptcy, insolvency, reorganization,
moratorium or other laws of general application affecting enforcement of
creditors' rights, (b) general principles of equity that restrict the
availability of equitable remedies and (c) applicable law related to the
enforceability of the indemnification provisions set forth in Section 5 of this
Agreement.
3.2. Investment Representations. Purchaser understands that the Shares have
not been registered under the Securities Act. Purchaser also understands that
the Shares and/or the Conversion Shares are being offered and sold pursuant to
an exemption from registration contained in the Securities Act based in part
upon Purchaser's representations contained in this Agreement. Each Purchaser, as
to itself, hereby represents and warrants to the Company as follows:
(a) Acquisition for Own Account. Purchaser is acquiring the Shares for
the Purchaser's own account for investment purposes only, and not with a view
towards their distribution.
(b) Accredited Investor Purchaser represents that it is an "accredited
investor" within the meaning of Regulation D under the Securities Act.
(c) Company Information. Purchaser has had an opportunity to ask
questions of, and receive answers from, directors, officers and management of
the Company relating to the Company's business, management, and financial
affairs and to the terms and conditions of this investment. Purchaser has had a
chance to review the Registration Statement provided to the Purchaser.
(d) Rule 144. Purchaser acknowledges and agrees that the Shares and/or
the Conversion Shares must be held indefinitely unless they are subsequently
registered under the Securities Act or an exemption from such registration is
available. Purchaser has been advised or is aware of the provisions of Rule 144
promulgated under the Securities Act, which permits limited resale of securities
purchased in a private placement subject to the satisfaction of certain
conditions, including, among other things: the availability of certain current
public information about the Company; the resale occurring not less than one
year after a party has purchased and paid for the security to be sold; the sale
being through an unsolicited "broker's transaction" or in transactions directly
with a market maker (as said term is defined under the Securities Act); and the
number of securities being sold during any three-month period not exceeding
specified limitations.
(e) Residence. The residence of Purchaser (if an individual), or the
office or offices of Purchaser in which its investment decision was made is
located at the address or addresses of Purchaser as stated on the signature
pages hereto.
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SECTION 4: CONDITIONS TO CLOSING.
4.1. Conditions to Purchasers' Obligations at the Closing. Purchasers'
obligations to accept the Shares at the Closing, or the Additional Shares at the
Additional Share Closing, are subject to the satisfaction, at or prior to the
Closing or the Additional Share Closing, as applicable, of the following
conditions:
(a) Representations and Warranties True; Performance of Obligations.
The representations and warranties made by the Company in Section 2 hereof shall
be true and correct in all material respects as of the Closing or the Additional
Share Closing, as applicable, with the same force and effect as if they had been
made as of the Closing Date or the Additional Share Closing Date, as applicable,
and the Company shall have performed all obligations and conditions herein
required to be performed or observed by it on or prior to the Closing or the
Additional Share Closing, as applicable.
(b) Legal Investment. On the Closing Date or the Additional Share
Closing Date, as applicable, the issuance of the Shares, and the proposed
issuance of the Conversion Shares, shall be legally permitted by all laws and
regulations to which Purchasers and the Company are subject.
(c) Consents, Permits, and Waivers. The Company shall have obtained
any and all consents, permits and waivers necessary or appropriate for
consummation of the transactions contemplated by the Preferred Stock Agreement
(except for such as may be properly obtained subsequent to the Closing or the
Additional Share Closing, as applicable).
(d) Filing of Designation. The Designation shall have been filed with
the Secretary of State of the State of Delaware.
(e) Corporate Documents. The Company shall have delivered to
Purchasers or their counsel, copies of all corporate documents of the Company,
as Purchasers shall have reasonably requested.
(f) Reservation of Conversion Shares. The Conversion Shares issuable
upon conversion of the Shares shall have been duly authorized and reserved for
issuance upon such conversion.
(g) Closing Certificates. The Company shall have delivered to
Purchasers:
(i) a certificate of the Secretary of the Company dated as of the
Closing Date, or the Additional Share Closing Date, as applicable, certifying as
to the incumbency of the officers of the Company executing the Agreement and
attaching thereto a copy of the Designation, as filed with the Secretary of
State of the State of Delaware and a copy of the resolutions or consent of the
board of directors of the Company authorizing and approving the Company's
execution, delivery and performance of this Agreement and the filing of the
Designation; and
(ii) a certificate, executed by the Chief Executive Officer of
the Company as of the Closing Date, or the Additional Share Closing Date, as
applicable, certifying as to the fulfillment of all of the conditions of
Purchasers' obligations under this Agreement.
(h) Proceedings and Documents. All corporate and other proceedings in
connection with the transactions contemplated at the Closing or the Additional
Share Closing and all documents and instruments incident to such transactions
shall be reasonably satisfactory in substance and form to Purchasers and their
special counsel, and Purchasers and their special counsel shall have received
all such counterpart originals or certified or other copies of such documents as
they may reasonably request.
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4.2. Conditions to Obligations of the Company at Closing. The Company's
obligation to issue the Shares at the Closing, or the Additional Share Closing,
as applicable, is subject to the satisfaction, on or prior to the Closing, of
the following conditions:
(a) Representations and Warranties True; Performance of Obligations.
The representations and warranties made by Purchasers in Section 3 hereof shall
be true and correct in all material respects at the Closing or the Additional
Share Closing, as applicable, with the same force and effect as if they had been
made on and as of the Closing Date or the Additional Share Closing Date, as
applicable, and Purchasers shall have performed all obligations and conditions
herein required to be performed or observed by Purchasers on or prior to the
Closing or the Additional Share Closing, as applicable.
(b) Filing of Designation. The Designation shall have been filed with
the Secretary of State of the State of Delaware.
(c) Consents, Permits, and Waivers. The Company shall have obtained
any and all consents, permits and waivers necessary or appropriate for
consummation of the transactions contemplated by the Preferred Stock Agreement
(except for such as may be properly obtained subsequent to the Closing or the
Additional Share Closing, as applicable).
SECTION 5: COVENANTS OF THE PARTIES FOR THE REGISTRATION PERIOD.
5.1. Covenants of the Company to Register the Conversion Shares.
(a) The Company shall file with the SEC, on or prior to the date which
is one hundred and twenty (120) days after the Closing a registration statement
on Form S-1 (or, if Form S-1 is not then available, on such form of registration
statement as is then available, to effect a registration (the "New Registration
Statement") of all of the shares covering the resale of the Registrable
Securities (as defined below). The New Registration Statement (and each
amendment or supplement thereto and each request for acceleration of
effectiveness thereof) shall be provided to (and subject to the review by) the
Purchasers and a single firm of counsel designated by the Purchasers (the
"Purchasers' Counsel") at least five business days prior to its filing or other
submission in the case of the New Registration Statement, and at least two
business days prior to its filing (or such lesser time as may be necessary) in
the case of each amendment or supplement thereto.
(b) "Registrable Securities" means the Conversion Shares and any
shares of capital stock issued or issuable, from time to time (with any
adjustments), as a distribution or in exchange for or otherwise with respect to
the foregoing; provided, however, that Registrable Securities shall not include
any such Registrable Securities that (i) have previously been registered
pursuant to the Securities Act, (ii) are eligible for public resale under Rule
144(k) under the Securities Act, or (iii) are eligible for public resale under
the Securities Act pursuant to an exemption from registration under the
Securities Act.
(c) The Purchasers may offer and sell the Registrable Securities
pursuant to the New Registration Statement in an underwritten offering. In any
such underwritten offering, the Purchasers who hold a majority in interest of
the Registrable Securities subject to such underwritten offering, shall have the
right to select the Purchasers' Counsel and an investment banker or bankers and
manager or managers to administer the offering, which investment banker or
bankers or manager or managers shall be reasonably satisfactory to the Company.
In the event that any Purchasers elect not to participate in such underwritten
offering, the New Registration Statement covering all of the Registrable
Securities shall contain appropriate plans of distribution reasonably
satisfactory to the Purchasers participating in such underwritten offering and
the Purchasers electing not to participate in such underwritten offering
(including, without limitation, the ability of nonparticipating Purchasers to
sell from time to time and at any time during the effectiveness of such New
Registration Statement).
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(d) In connection with the registration of the Registrable
Securities, the Company has the following obligations:
(i) The Company will prepare and file with the SEC, on
or before 120 days following the Closing, the New Registration Statement, and
will use its best efforts to cause such New Registration Statement to become
effective as soon as practicable after such filing. The Company will keep such
New Registration Statement effective pursuant to Rule 415 at all times until the
earlier of (A) the date on which all of the Registrable Securities (in the
reasonable opinion of counsel to the Purchasers) may be immediately sold to the
public without registration or restriction pursuant to Rule 144(k) under the
Securities Act and (B) such time as all the Registrable Securities have been
sold (the "Registration Period").
(ii) The Company will prepare and file with the SEC such
amendments (including post-effective amendments) and supplements to the New
Registration Statement and the prospectus used in connection with the New
Registration Statement as may be necessary to keep the New Registration
Statement effective at all times during the Registration Period and, during such
period, will comply with the provisions of the Securities Act with respect to
the disposition of all Registrable Securities of the Company covered by the New
Registration Statement until such time as all of such Registrable Securities
have been disposed of in accordance with the intended methods of disposition by
the seller or sellers thereof as set forth in the New Registration Statement.
The Company will furnish to each Purchaser whose
Registrable Securities are included in the New Registration Statement and to
Purchasers' Counsel promptly after the same is prepared and publicly
distributed, filed with the SEC, or received by the Company, one copy of the New
Registration Statement and any amendments thereto, each preliminary prospectus
and prospectus and each amendment or supplement thereto. At the request of any
Purchaser, the Company will provide to that Purchaser (A) a copy of each letter
written by or on behalf of the Company to the SEC or the staff of the SEC no
later than the date of submission of such letter (including, without limitation,
any request to accelerate the effectiveness of any New Registration Statement or
amendments thereto), and, promptly upon receipt, each item of correspondence
from the SEC or the staff of the SEC, in each case relating to the New
Registration Statement (other than any portion, if any, thereof which contains
information for which the Company has sought confidential treatment), and the
Company will cooperate with each Purchaser in making all reasonable
modifications requested by such Purchaser or Purchasers' Counsel to any portion
of any letter or other correspondence from the Company to the SEC that addresses
the transactions contemplated by this Agreement, (B) on or as soon as
practicable after the date the New Registration Statement (or any amendments to
the New Registration Statement) becomes effective (the "New Registration
Effective Date"), a notice stating that the New Registration Statement or
amendment has been declared effective, and (C) such number of copies of a
prospectus, including a preliminary prospectus, and all amendments and
supplements thereto and such other documents as such Purchaser may reasonably
request in order to facilitate the disposition of the Registrable Securities
owned by such Purchaser.
(iv) The Company will use its best efforts to (A)
register and qualify the Registrable Securities covered by the New Registration
Statement under the securities or "blue sky" laws of those jurisdictions in the
United States as each Purchaser who holds Registrable Securities being offered
reasonably requests, (B) prepare and file in those jurisdictions any amendments
(including post-effective amendments) and supplements to the registrations or
qualifications as may be necessary to maintain the effectiveness of the
registrations or qualifications during the Registration Period, (C) take such
other actions as may be necessary to maintain such registrations and
qualifications in effect at all times during the Registration Period, and (D)
take all other actions reasonably necessary or advisable to qualify the
Registrable Securities for sale in the requested jurisdictions; provided,
however, that the Company will not be required in connection herewith or as a
condition thereto to (V) qualify to do business in any jurisdiction where it
would not otherwise be required to qualify but for this Section 5.1(d)(iv), (W)
subject itself to general taxation in any such jurisdiction, (X) file a general
consent to service of process in any such jurisdiction, (Y) provide any
undertakings that cause the Company undue expense or burden, or (Z) make any
change in its certificate of incorporation or bylaws, which in each case the
board of directors of the Company determines to be contrary to the best
interests of the Company and its stockholders.
(v) In the event that the Purchasers who hold a majority
in interest of the Registrable Securities being offered in an offering select
underwriters for the offering, the Company shall enter into
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and perform its obligations under an underwriting agreement, in usual and
customary form, including, without limitation, customary indemnification and
contribution obligations, with the underwriters of such offering.
(vi) As promptly as practicable after becoming aware of
such event, the Company will notify each Purchaser by telephone or facsimile of
the happening of any event of which the Company has knowledge and as a result of
which the prospectus included in the New Registration Statement, as then in
effect, includes an untrue statement or omission of a material fact required to
be stated therein or necessary to make the statements therein not misleading and
will use its best efforts promptly to prepare a supplement or amendment to the
New Registration Statement to correct the untrue statement or omission and
deliver the number of copies of any supplement or amendment to each Purchaser as
the Purchaser may reasonably request.
(vii) The Company will use its best efforts to prevent the
issuance of any stop order or other suspension of effectiveness of the New
Registration Statement and, if such an order is issued, to obtain the withdrawal
of the order at the earliest practicable date (including in each case by
amending or supplementing such New Registration Statement) and to notify each
Purchaser who holds Registrable Securities being sold (or, in the event of an
underwritten offering, the managing underwriters) of the issuance of the order
and its resolution (and if the New Registration Statement is supplemented or
amended, deliver such number of copies of any supplement or amendment to each
Purchaser as the Purchaser may reasonably request).
(viii) In the event of an underwritten offering, at the
request of any Purchaser whose Registrable Securities are included in the
Registration Statement, the Company shall furnish, on the New Registration
Effective Date (A) an opinion, dated as of the New Registration Effective Date,
from counsel representing the Company, addressed to the Purchaser in the form
delivered to the underwriters, if any opinion is delivered to the underwriters
and (B) a letter, dated as of the New Registration Effective Date, from the
Company's independent certified public accountants in the form delivered to the
underwriters, if any such "Comfort Letter" is delivered to the underwriters.
(ix) The Company will provide a transfer agent and
registrar, which may be a single entity, for the Registrable Securities not
later than the New Registration Effective Date.
(x) The Company will cooperate with the Purchasers who
hold Registrable Securities being offered and the managing underwriter or
underwriters, if any, to facilitate the timely preparation and delivery of
certificates (not bearing any restrictive legends) representing the Registrable
Securities to be offered pursuant to the New Registration Statement and enable
such certificates to be in such denominations or amounts, as the case may be, as
the managing underwriter or underwriters, if any, or the Purchasers may
reasonably request and registered in such names as the managing underwriter or
underwriters, if any, or the Purchasers may request, and, within three (3)
business days after the New Registration Effective Date, the Company shall
deliver, and shall cause legal counsel selected by the Company to deliver, to
the transfer agent for the Registrable Securities (with copies to the Purchasers
whose Registrable Securities are included in such New Registration Statement) an
opinion of such counsel that such Registrable Securities have been registered
under the Securities Act and that the restrictive legends on the certificates
representing such Registrable Securities may be removed.
(xi) At the request of Purchasers who hold a
majority-in-interest of the Registrable Securities, the Company will prepare and
file with the SEC any amendments (including post-effective amendments) and
supplements to the New Registration Statement and the prospectus used in
connection with the New Registration Statement as are necessary to change the
plan of distribution set forth in the New Registration Statement.
(xii) The Company will comply with all applicable laws
related to the New Registration Statement and the offer and sale of securities
and all applicable rules and regulations of governmental authorities in
connection therewith (including without limitation the Securities Act and the
Exchange Act, and the rules and regulations promulgated by the SEC).
(e) All reasonable expenses incurred by the Company or the Purchasers
in connection with registrations, filings or qualifications pursuant to this
Section 5 (excluding brokers' fees, underwriting discounts and commissions, and
similar selling expenses), including, without limitation, all registration,
listing and qualifications
E-18
fees, printers and accounting fees, the fees and disbursements of counsel for
the Company, and the fees and disbursements of Purchasers' Counsel, not in
excess of $15,000, shall be borne by the Company.
5.2. Covenants of The Purchasers Related to Registration. In connection
with the registration of the Registrable Securities, the Purchasers shall have
the following obligations.
(a) The obligation of the Company under this Agreement to complete
the registration of the Registrable Securities of a particular Purchaser is
expressly conditioned on (i) the provision by the Purchaser to the Company of
all information regarding itself, the Registrable Securities held by it, and the
intended method of disposition of the Registrable Securities held by it as are
reasonably required to effect the registration of such Registrable Securities
and (ii) the execution by the Purchaser of all documents in connection with the
registration as the Company may reasonably request. At least five (5) business
days before the first anticipated filing date of the New Registration Statement
the Company will notify each Purchaser of any information the Company requires
from each such Purchaser.
(b) Each Purchaser, by the Purchaser's acceptance of the
Registrable Securities, agrees to cooperate with the Company as reasonably
requested by the Company in connection with the preparation and filing of the
New Registration Statement, unless the Purchaser has notified the Company in
writing of such Purchaser's election to exclude all of the Purchaser's
Registrable Securities from the New Registration Statement.
(c) In the event that Purchasers holding a majority in interest of
the Registrable Securities being offered determine to engage the services of an
underwriter, each Purchaser agrees to enter into and perform such Purchaser's
obligations under an underwriting agreement, in usual and customary form,
including, without limitation, indemnification and contribution obligations,
with the underwriter(s) of such offering and the Company, and take such other
actions as are reasonably required in order to expedite or facilitate the
disposition of the Registrable Securities, unless such Purchaser has notified
the Company in writing of the Purchaser's election not to participate in such
underwritten distribution.
(d) A Purchaser may not participate in any underwritten
distribution under this Agreement unless the Purchaser (i) agrees to sell the
Purchaser's Registrable Securities on the basis provided in any underwriting
arrangements in usual and customary form entered into by Company, (ii) completes
and executes all questionnaires, powers of attorney, indemnities, underwriting
agreements and other documents reasonably required under the terms of such
underwriting arrangements, and (iii) agrees to pay its pro rata share of all
underwriting discounts and commissions and any expenses in excess of those
payable by the Company pursuant to Section 5.1(d).
5.3. Mutual Indemnification Related to Registration.
(a) Indemnification by the Company. In the event of any
registration of Registrable Securities under the Securities Act pursuant to this
Agreement, to the full extent permitted by law, the Company agrees to indemnify
each Purchaser, its affiliates, and their officers, directors, trustees,
partners, employees, advisors and agents (including brokers or dealers acting on
their behalf), and each person who controls the Purchaser (within the meaning of
the Securities Act and the Exchange Act) against all losses, claims, damages,
liabilities and expenses caused by (i) any violation by the Company of the
Securities Act, the Exchange Act, any state securities or blue sky laws or any
rule or regulation thereunder, or (ii) any untrue or allegedly untrue statement
of material fact contained in any registration statement under which such
Registrable Securities were registered under the Securities Act, any prospectus
or preliminary prospectus contained therein or any omission or alleged omission
to state a material fact required to be stated therein or necessary to make the
statements therein not misleading in light of the circumstances under which such
statements were made, provided, however, that the Company will not be liable in
any such case if and to the extent that any such loss, claim, damage, liability
or expense arises out of or is based upon (i) an untrue or allegedly untrue
statement or omission or alleged omission resulted from information that the
Purchaser furnished in writing to the Company expressly for use therein or (ii)
an untrue statement or alleged untrue statement or omission or alleged omission
that was contained in a preliminary prospectus and corrected in a final
prospectus, and such seller failed to deliver a copy of the final prospectus,
which was provided to seller in a timely manner and in accordance with the
delivery requirements of the Securities Act. In connection with a firm or best
efforts underwritten offering, to the extent customarily required by the
managing underwriter, the Company will indemnify
E-19
the underwriters, their officers and directors and each person who controls the
underwriters (within the meaning of the Securities Act and the Exchange Act), to
the extent customary in such agreements.
(b) Indemnification by Purchasers. In connection with any
registration statement, each participating Purchaser will furnish to the Company
in writing such information and affidavits as the Company reasonably requests
for use in connection with any registration statement or prospectus and each
Purchaser agrees to indemnify, to the extent permitted by law, the Company, its
directors, officers, trustees, partners, employees, advisors and agents
(including brokers or dealers acting on their behalf), and each person who
controls the Company (within the meaning of the Securities Act and the Exchange
Act) against any losses, claims, damages, liabilities and expenses resulting
from any untrue or allegedly untrue statement of a material fact or any omission
or alleged omission to state a material fact required to be stated in the
registration statement or prospectus or any amendment thereof or supplement
thereto necessary to make the statements therein not misleading in light of the
circumstances under which such statements were made, but only to the extent that
the untrue or allegedly untrue statement or omission or alleged omission is
contained in or omitted from any information or affidavit the Purchaser
furnished in writing to the Company expressly for use therein and only in an
amount not exceeding the net proceeds received by the Purchaser with respect to
securities sold pursuant to such registration statement. In connection with a
firm or best efforts underwritten offering, to the extent customarily required
by the managing underwriter, each participating Purchaser will indemnify the
underwriters, their officers and directors and each person who controls the
underwriters (within the meaning of the Securities Act and the Exchange Act), to
the extent customary in such agreements.
(c) Indemnification Proceedings. Any person entitled to
indemnification under this Agreement will (i) give prompt notice to the
indemnifying party of any claim with respect to which it seeks indemnification
and (ii) unless in the indemnified party's reasonable judgment a conflict of
interest may exist between the indemnified and indemnifying parties with respect
to the claim, permit the indemnifying party to assume the defense of the claim
with counsel reasonably satisfactory to the indemnified party. If the
indemnifying party does not assume the defense, the indemnifying party will not
be liable for any settlement made without its consent (but that consent may not
be unreasonably withheld). No indemnifying party will consent to entry of any
judgment or will enter into any settlement (i) that does not include as an
unconditional term thereof the claimant's or plaintiff's release of the
indemnified party from all liability concerning the claim or litigation or (ii)
that contains any admission of guilt on the part of any indemnified party. An
indemnifying party who is not entitled to or elects not to assume the defense of
a claim will not be under an obligation to pay the fees and expenses of more
than one counsel in each applicable jurisdiction for all parties indemnified by
the indemnifying party with respect to the claim, unless in the reasonable
judgment of any indemnified party a conflict of interest may exist between the
indemnified party and any other indemnified party with respect to the claim, in
which event the indemnifying party shall be obligated to pay the fees and
expenses of no more than one additional counsel for the indemnified parties.
(d) Contribution. If the indemnification provided for in Section
5.3(a) or 5.3(b) is unavailable to an indemnified party in respect of any
losses, claims, damages, liabilities or expenses referred to therein, (the
"Unindemnified Losses") then each party responsible for indemnification under
Section 5.3(a) or 5.3(b) shall contribute to the amount paid or payable by the
indemnified party as a result of any Unindemnified Losses in the proportion
appropriate to reflect the relative fault of the Company and the participating
Purchasers in connection with the statements or omissions that resulted in the
Unindemnified Losses, as well as any other relevant equitable considerations.
The relative fault of the Company and the participating Purchasers will be
determined by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or the omission or alleged omission to state
a material fact relates to information supplied by the Company or by the
participating Purchasers and the parties' relative intent, knowledge, and
opportunity to correct the untrue or alleged untrue statement of a material fact
or the omission or alleged omission to state a material fact.
The parties to this Agreement agree that it would not be just and
equitable if contribution pursuant this Section 5.3(d) were determined by pro
rata allocation or by any other method of allocation that does not take account
of the equitable considerations referred to in the immediately preceding
paragraph. Notwithstanding anything to the contrary in this Agreement, no
Purchaser contributing pursuant to this Section 5.3(d) will be required to
contribute any amount in excess of the lesser of (i) the net proceeds of the
offering (before deducting expenses, if any) received by that Purchaser, less
the amount of any damages that the Purchaser has otherwise been required to pay
by reason of such untrue or alleged untrue statement or omission or alleged
omission, and (ii) the proportion of
E-20
the total losses, claims, damages, liabilities or expenses indemnified against
equal to the proportion of the total amount of securities sold under such
registration statement sold by the participating Purchaser. Notwithstanding any
other provision of this Agreement, 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.
SECTION 6. MISCELLANEOUS.
6.1. Governing Law. This Agreement shall be governed by the laws of the
State of Maryland as such laws are applied to agreements between Maryland
residents entered into and performed entirely in Maryland, without reference to
the law of conflicts, except that the Delaware General Corporation Law will
govern as to matters of corporate law.
6.2. Successors and Assigns. Except as otherwise expressly provided
herein, the provisions hereof shall inure to the benefit of, and be binding
upon, the successors, assigns, heirs, executors and administrators of the
parties hereto and shall inure to the benefit of and be enforceable by each
person who shall be a holder of the Shares from time to time.
6.3. Entire Agreement. This Agreement, the Designation, Exhibits,
Schedules, and the other documents delivered pursuant hereto constitute the full
and entire understanding and agreement between the parties with regard to the
subjects hereof and no party shall be liable or bound to any other in any manner
by any representations, warranties, covenants and agreements except as
specifically set forth herein and therein.
6.4. Severability. In case any provision of this Agreement shall be
invalid, illegal or unenforceable, the validity, legality and enforceability of
the remaining provisions shall not in any way be affected or impaired thereby.
6.5. Amendment. This Agreement may be amended or modified only upon the
written consent of the Company, and the holders representing at least a majority
of the Shares (treated as if converted and including any Conversion Shares into
which the Shares have been converted), except that Schedule 1 of this Agreement
may be amended prior to the Closing Date to add or remove a Purchaser or change
the number of Shares purchased by a Purchaser with the written consent of the
Company and the affected Purchaser(s).
6.6. Delays or Omissions. The failure of any party to exercise any right
or remedy under this Agreement or otherwise, or delay by a party in exercising
such right or remedy, shall not operate as a waiver thereof. It is further
agreed that any waiver of any provisions or conditions of this Agreement must be
in writing and shall be effective only to the extent specifically set forth in
such writing.
6.7. Notices. All notices required or permitted hereunder shall be in
writing and shall be deemed effectively given upon the earlier of receipt and:
(a) the day sent by confirmed facsimile if sent during normal business hours of
the recipient, if not, then on the next business day; (b) three business days
after having been sent by registered or certified mail, return receipt
requested, postage prepaid; or (c) one day after deposit with a nationally
recognized overnight courier, specifying next day delivery, with written
verification of receipt. All communications shall be sent to the Company at its
principal place of business and to Purchasers at the addresses set forth on the
signature pages hereto or at such other address as the Company or Purchaser may
designate by ten days advance written notice to the other parties hereto
pursuant to this Section 6.7.
6.8. Titles and Subtitles. The titles of the sections and subsections of
this Agreement are for convenience of reference only and are not to be
considered in construing this Agreement.
6.9. Counterparts. This Agreement may be delivered via facsimile and may
be executed in any number of counterparts, each of which shall be an original,
but all of which together shall constitute one instrument.
6.10. Pronouns. All pronouns contained herein, and any variations thereof,
shall be deemed to refer to the masculine, feminine or neutral, singular or
plural, as the identity of the parties hereto may require.
[Signatures Appear on Following Page]
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
date above first written.
COMPANY:
AVATECH SOLUTIONS, INC.
By:___________________________________
Xxxxxx X. "Xxxxxx" Xxxxx
Chief Executive Officer
PURCHASER:
______________________________________
Signature
______________________________________
Name and Title
Address of Purchaser:
______________________________________
______________________________________
______________________________________
X-00
XXXXXXXX 0
Xxxxxxxxx Xxxxxx Price
--------- ------ -----
1. ____________________ ___________ __________
2. ____________________ ___________ __________
3. ____________________ ___________ __________
4. ____________________ ___________ __________
5. ____________________ ___________ __________
6. ____________________ ___________ __________
7. ____________________ ___________ __________
TOTAL: ___________ __________
E-23
