Exhibit 4.4
EXECUTION VERSION
SECURITIES PURCHASE AGREEMENT
This Securities Purchase Agreement (this "Agreement") is dated as of
December 11, 2001 among Mercator Software, Inc., a Delaware corporation (the
"Company"), and the purchasers identified on the signature pages hereto (each a
"Purchaser" and collectively the "Purchasers").
WHEREAS, subject to the terms and conditions set forth in this Agreement
and pursuant to Section 4(2) of the Securities Act of 1933 (the "Securities
Act"), the Company desires to issue and sell to the Purchasers, and the
Purchasers, severally and not jointly, desire to purchase from the Company,
securities of the Company as more fully described in this Agreement.
NOW, THEREFORE, IN CONSIDERATION of the mutual covenants contained in this
Agreement, and for other good and valuable consideration the receipt and
adequacy of which are hereby acknowledged, the Company and the Purchasers agree
as follows:
ARTICLE I
DEFINITIONS
1.1 Definitions. In addition to the terms defined elsewhere in this
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Agreement, the following terms have the meanings indicated:
"Actual Minimum" means, as of any date, the maximum aggregate number
of shares of Common Stock then issued or potentially issuable in the future
pursuant to the Transaction Documents, including any Underlying Shares
issuable upon exercise in full of all Warrants, ignoring any limits on the
number of shares of Common Stock that may be owned by a Purchaser at any
one time.
"Affiliate" means any Person that, directly or indirectly through one
or more intermediaries, controls or is controlled by or is under common
control with a Person, as such terms are used in and construed under Rule
144 under the Securities Act. With respect to a Purchaser, any investment
fund or managed account that is managed on a discretionary basis by the
same investment manager as such Purchaser will be deemed to be an Affiliate
of such Purchaser.
"Closing" means the closing of the purchase and sale of the Securities
pursuant to Section 2.1.
"Closing Date" means the date of the Closing.
"Closing Price" means, for any date, the price determined by the first
of the following clauses that applies: (a) if the Common Stock is then
listed or quoted on an Eligible Market or any other national securities
exchange, the closing bid price per share of the Common Stock for such date
(or the nearest preceding date) on the primary Eligible Market or exchange
on which the Common Stock is then listed or quoted; (b) if prices for the
Common Stock are then quoted on the OTC Bulletin Board, the closing bid
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price per share of the Common Stock for such date (or the nearest preceding
date) so quoted; (c) if prices for the Common Stock are then reported in
the "Pink Sheets" published by the National Quotation Bureau Incorporated
(or a similar organization or agency succeeding to its functions of
reporting prices), the most recent bid price per share of the Common Stock
so reported; or (d) in all other cases, the fair market value of a share of
Common Stock as determined by an independent appraiser selected in good
faith by a majority-in-interest of the Purchasers.
"Commission" means the Securities and Exchange Commission.
"Common Stock" means the common stock of the Company, par value $0.01
per share.
"Company Counsel" means Jenkens & Xxxxxxxxx Xxxxxx Xxxxxx LLP, counsel
to the Company.
"Effective Date" means the date that the Registration Statement is
declared effective by the Commission.
"Eligible Market" means the New York Stock Exchange, the American
Stock Exchange, the Nasdaq National Market or the Nasdaq SmallCap Market.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Filing Date" means the 30th day following the Closing Date.
"Losses" means any and all losses, claims, damages, liabilities,
settlement costs and expenses, including, without limitation, costs of
preparation of legal action and reasonable attorneys' fees.
"Person" means an individual or corporation, partnership, trust,
incorporated or unincorporated association, joint venture, limited
liability company, joint stock company, government (or an agency or
subdivision thereof) or other entity of any kind.
"Proceeding" means an action, claim, suit, investigation or proceeding
(including, without limitation, an investigation or partial proceeding,
such as a deposition), whether commenced or threatened.
"Prospectus" means the prospectus included in the Registration
Statement (including, without limitation, a prospectus that includes any
information previously omitted from a prospectus filed as part of an
effective registration statement in reliance upon Rule 430A promulgated
under the Securities Act), as amended or supplemented by any prospectus
supplement, with respect to the terms of the offering of any portion of the
Registrable Securities covered by the Registration Statement, and all other
amendments and supplements to the Prospectus, including post-effective
amendments, and all material incorporated by reference or deemed to be
incorporated by reference in such Prospectus.
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"Purchaser Counsel" means Proskauer Rose LLP, counsel to the
Purchasers, or any other counsel selected by a Purchaser hereunder.
"Registrable Securities" means any Common Stock (including Underlying
Shares) issued or issuable pursuant to the Transaction Documents, together
with any securities issued or issuable upon any stock split, dividend or
other distribution, recapitalization or similar event with respect to the
foregoing.
"Registration Statement" means each registration statement required to
be filed under Article VI, including (in each case) the Prospectus,
amendments and supplements to such registration statement or Prospectus,
including pre- and post-effective amendments, all exhibits thereto, and all
material incorporated by reference or deemed to be incorporated by
reference in such registration statement.
"Required Effectiveness Date" means the 90th day following the Closing
Date.
"Rule 144," "Rule 415," "Rule 424" and "Rule 461" means Rule 144, Rule
415, Rule 424 and Rule 461, respectively, promulgated by the Commission
pursuant to the Securities Act, as such Rules may be amended from time to
time, or any similar rule or regulation hereafter adopted by the Commission
having substantially the same effect as such Rule.
"Securities" means the Shares, the Warrants and the Underlying Shares.
"Securities Act" means the Securities Act of 1933, as amended.
"Shares" means an aggregate of 2,228,412 shares of Common Stock, which
are being purchased by the Purchasers pursuant to this Agreement and any
additional shares of Common Stock that are issued pursuant to Section 4.9
below.
"Significant Subsidiary" means any subsidiary of the Company that is
required to be listed in Part A of Schedule 3.1(a) of the Disclosure
Schedule.
"Subsidiary" means any subsidiary of the Company that is required to
be listed in Schedule 3.1(a) of the Disclosure Schedule.
"Trading Day" means (a) any day on which the Common Stock is traded on
its primary Trading Market, or (b) if the Common Stock is not then listed
or quoted on any national securities exchange, market or trading or
quotation facility, then a day on which trading occurs on the New York
Stock Exchange (or any successor thereto).
"Trading Market" means the Nasdaq National Market or any other
national securities exchange, market or trading or quotation facility on
which the Common Stock is then listed or quoted.
"Trading Market Maximum" means the number of shares of Common Stock,
the issuance of which would require stockholder approval pursuant to rules
or regulations of the Trading Market.
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"Transaction Documents" means this Agreement, the Warrants and any
other documents or agreements executed in connection with the transactions
contemplated hereunder.
"Underlying Shares" means the shares of Common Stock issuable upon
exercise of the Warrants.
"Warrant" means a Common Stock purchase warrant, in the form of
Exhibit A.
ARTICLE II
PURCHASE AND SALE
2.1 Closing. Subject to the terms and conditions set forth in this
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Agreement, at the Closing the Company shall issue and sell to the Purchasers,
and the Purchasers shall, severally and not jointly, purchase from the Company,
the Shares and the Warrants for an aggregate purchase price of $15,999,998.16.
The Closing shall take place at the offices of Purchaser Counsel immediately
following the execution hereof, or at such other location or time as the parties
may agree.
2.2 Closing Deliveries.
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(a) At the Closing, the Company shall deliver or cause to be
delivered to each Purchaser the following:
(i) one or more stock certificates evidencing the number of
Shares indicated below such Purchaser's name on the signature page of this
Agreement, registered in the name of such Purchaser;
(ii) a Warrant, registered in the name of such Purchaser,
pursuant to which such Purchaser shall have the right to acquire the number
of shares of Common Stock indicated below such Purchaser's name on the
signature page of this Agreement, on the terms set forth therein;
(iii) a legal opinion of each of Company Counsel and General
Counsel of the Company, in the form of Exhibit B-1 and Exhibit B-2,
respectively, executed by each such counsel and delivered to the
Purchasers.
(b) At the Closing, each Purchaser shall deliver or cause to be
delivered to the Company the purchase price indicated below such Purchaser's
name on the signature page of this Agreement, in United States dollars and in
immediately available funds, by wire transfer to an account designated in
writing by the Company for such purpose.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
3.1 Representations and Warranties of the Company. The Company hereby
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makes the following representations and warranties to each of the Purchasers, as
of the date of this Agreement, that except as set forth in the disclosure
schedule of even date hereof delivered to the
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Purchasers by the Company (the "Disclosure Schedule"), which exceptions shall be
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deemed to be a part of and to qualify the representations and warranties to
which they refer as if made hereunder:
(a) Subsidiaries. The Company has no direct or indirect subsidiaries
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other than those listed in Schedule 3.1(a) of the Disclosure Schedule. Not more
than five percent (5%) of the aggregate business, revenue, income, assets or
liabilities of the Company and its Subsidiaries is, or during the preceding 12
months has been, conducted through or earned, realized or held by any of the
Subsidiaries listed in Part B of Schedule 3.1(a) of the Disclosure Schedule. Not
more than twenty percent (20%) of the aggregate business, revenue, income,
assets or liabilities of the Company and its Subsidiaries is, or during the
preceding 12 months has been, conducted through or earned, realized or held by
all the Subsidiaries (in the aggregate) listed in Part B of Schedule 3.1(a) of
the Disclosure Schedule. All other Subsidiaries are listed on Part A of Schedule
3.1(a) of the Disclosure Schedule. Except as disclosed in Schedule 3.1(a) of the
Disclosure Schedule, the Company owns, directly or indirectly, all of the
capital stock of each Subsidiary free and clear of any lien, charge, claim,
security interest, encumbrance, right of first refusal or other restriction
(collectively, "Liens"), and all the issued and outstanding shares of capital
stock of each Subsidiary are validly issued and are fully paid, non-assessable
and free of preemptive and similar rights.
(b) Organization and Qualification. Each of the Company and the
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Subsidiaries is an entity duly incorporated or otherwise organized, validly
existing and in good standing under the laws of the jurisdiction of its
incorporation or organization (as applicable), with the requisite power and
authority to own and use its properties and assets and to carry on its business
as currently conducted. Neither the Company nor any Subsidiary is in violation
of any of the provisions of its respective certificate or articles of
incorporation, bylaws or other organizational or charter documents. Each of the
Company and the Subsidiaries is duly qualified to do business and is in good
standing as a foreign corporation or other entity in each jurisdiction in which
the nature of the business conducted or property owned by it makes such
qualification necessary, except where the failure to be so qualified or in good
standing, as the case may be, would not, individually or in the aggregate, (i)
adversely affect the legality, validity or enforceability of any Transaction
Document, (ii) have or result in a material adverse effect on the results of
operations, assets, prospects, business or condition (financial or otherwise) of
the Company and the Subsidiaries, taken as a whole, or (iii) adversely impair
the Company's ability to perform fully on a timely basis its obligations under
any of the Transaction Documents (any of (i), (ii) or (iii), a "Material Adverse
Effect").
(c) Authorization; Enforcement. The Company has the requisite
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corporate power and authority to enter into and to consummate the transactions
contemplated by each of the Transaction Documents and otherwise to carry out its
obligations hereunder and thereunder. The execution and delivery of each of the
Transaction Documents by the Company and the consummation by it of the
transactions contemplated thereby have been duly authorized by all necessary
action on the part of the Company and no further consent or action is required
by the Company, its Board of Directors or its stockholders. Each of the
Transaction Documents has been (or upon delivery will be) duly executed by the
Company and, when delivered in accordance with the terms hereof, will constitute
the valid and binding obligation of the Company enforceable against the Company
in accordance with its terms.
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(d) No Conflicts. The execution, delivery and performance of the
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Transaction Documents by the Company and the consummation by the Company of the
transactions contemplated thereby do not and will not (i) conflict with or
violate any provision of the Company's or any Subsidiary's certificate or
articles of incorporation, bylaws or other organizational or charter documents,
or (ii) conflict with, or constitute a default (or an event that with notice or
lapse of time or both would become a default) under, or give to others any
rights of termination, amendment, acceleration or cancellation (with or without
notice, lapse of time or both) of, any agreement, credit facility, debt or other
instrument (evidencing a Company or Subsidiary debt or otherwise) or other
understanding to which the Company or any Subsidiary is a party or by which any
property or asset of the Company or any Subsidiary is bound or affected, or
(iii) result in a violation of any law, rule, regulation, order, judgment,
injunction, decree or other restriction of any court or governmental authority
to which the Company or a Subsidiary is subject (including federal and state
securities laws and regulations and the rules and regulations of any self-
regulatory organization to which the Company or its securities are subject), or
by which any property or asset of the Company or a Subsidiary is bound or
affected; except in the case of each of clauses (ii) and (iii), such as could
not, individually or in the aggregate, reasonably be expected to have or result
in a Material Adverse Effect.
(e) Issuance of the Securities. The Securities (including the
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Underlying Shares) are duly authorized and, when issued and paid for in
accordance with the Transaction Documents, will be duly and validly issued,
fully paid and nonassessable, free and clear of all Liens and shall not be
subject to preemptive rights or similar rights of stockholders. The Company has
reserved from its duly authorized capital stock the maximum number of shares of
Common Stock issuable pursuant to this Agreement and upon exercise of the
Warrants.
(f) Capitalization. The number of shares and type of all authorized,
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issued and outstanding capital stock, options and other securities of the
Company (whether or not presently convertible or exchangeable for shares of
capital Schedule. All outstanding shares of capital stock are duly authorized,
stock of the Company) is set forth in Schedule 3.1(f) of the Disclosure validly
issued, fully paid and nonassessable and have been issued in compliance with all
applicable securities laws. Except as disclosed in Schedule 3.1(f) of the
Disclosure Schedule, there are no outstanding options, warrants, script rights
to subscribe to, calls or commitments of any character whatsoever relating to,
or securities, rights or obligations convertible into or exchangeable for, or
giving any Person any right to subscribe for or acquire, any shares of Common
Stock, or contracts, commitments, understandings or arrangements by which the
Company or any Subsidiary is or may become bound to issue additional shares of
Common Stock, or securities or rights convertible or exchangeable into shares of
Common Stock. Except as disclosed in Schedule 3.1(f) of the Disclosure Schedule,
there are no anti-dilution or price adjustment provisions contained in any
security issued by the Company (or in any agreement providing rights to security
holders) and the issue and sale of the Securities (including the Underlying
Shares) will not obligate the Company to issue shares of Common Stock or other
securities to any Person (other than the Purchasers) and will not result in a
right of any holder of Company securities to adjust the exercise, conversion,
exchange or reset price under such securities. To the knowledge of the Company,
except as specifically disclosed in Schedule 3.1(f) of the Disclosure Schedule,
no Person or group of related Persons beneficially owns (as determined pursuant
to Rule 13d-3 under the Exchange Act), or has the right to acquire, by agreement
with or by obligation binding upon the Company, beneficial ownership of in
excess of
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5% of the outstanding Common Stock, ignoring for such purposes any limitation on
the number of shares of Common Stock that may be owned at any single time.
(g) SEC Reports; Financial Statements. The Company has filed all
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reports required to be filed by it under the Securities Act and the Exchange
Act, including pursuant to Section 13(a) or 15(d) thereof, for the two years
preceding the date hereof (or such shorter period as the Company was required by
law to file such material) (the foregoing materials being collectively referred
to herein as the "SEC Reports" and, together with this Agreement and the
Schedules to this Agreement, the "Disclosure Materials") on a timely basis or
has received a valid extension of such time of filing and has filed any such SEC
Reports prior to the expiration of any such extension. The Company has delivered
to the Purchasers a copy of all SEC Reports filed within the 10 days preceding
the date hereof. As of their respective dates, the SEC Reports complied in all
material respects with the requirements of the Securities Act and the Exchange
Act and the rules and regulations of the Commission promulgated thereunder, and,
except as disclosed on Schedule 3.1(g) of the Disclosure Schedule, none of the
SEC Reports, when filed, contained any untrue statement of a material fact or
omitted to state a material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under which
they were made, not misleading. The financial statements of the Company included
in the SEC Reports comply in all material respects with applicable accounting
requirements and the rules and regulations of the Commission with respect
thereto as in effect at the time of filing. Such financial statements have been
prepared in accordance with generally accepted accounting principles applied on
a consistent basis during the periods involved ("GAAP"), except as may be
otherwise specified in such financial statements or the notes thereto, and
fairly present in all material respects the financial position of the Company
and its consolidated subsidiaries as of and for the dates thereof and the
results of operations and cash flows for the periods then ended, subject, in the
case of unaudited statements, to normal, immaterial, year-end audit adjustments.
All material agreements to which the Company or any Subsidiary is a party or to
which the property or assets of the Company or any Subsidiary are subject are
included as part of or specifically identified in the SEC Reports.
(h) Material Changes. Since the date of the latest audited financial
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statements included within the SEC Reports, except as specifically disclosed in
the SEC Reports or as described in Schedule 3.1(h) of the Disclosure Schedule,
(i) there has been no event, occurrence or development that has had or that
could reasonably be expected to result in a Material Adverse Effect, (ii) the
Company has not incurred any liabilities (contingent or otherwise) other than
(A) trade payables and accrued expenses incurred in the ordinary course of
business consistent with past practice and (B) liabilities not required to be
reflected in the Company's financial statements pursuant to GAAP or required to
be disclosed in filings made with the Commission, (iii) the Company has not
altered its method of accounting or the identity of its auditors, (iv) the
Company has not declared or made any dividend or distribution of cash or other
property to its stockholders or purchased, redeemed or made any agreements to
purchase or redeem any shares of its capital stock, and (v) the Company has not
issued any equity securities to any officer, director or Affiliate, except
pursuant to existing Company stock option plans.
(i) Absence of Litigation. There is no action, suit, claim,
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proceeding, inquiry or investigation before or by any court, public board,
government agency, self-regulatory organization or body pending or, to the
knowledge of the Company, threatened against or
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affecting the Company or any of its Subsidiaries that could, individually or in
the aggregate, reasonably be expected to have a Material Adverse Effect.
Schedule 3.1(i) of the Disclosure Schedule contains a complete list and summary
description of any pending or, to the knowledge of the Company, threatened
proceeding against or affecting the Company or any of its Subsidiaries, without
regard to whether it would have a Material Adverse Effect.
(j) Compliance. Neither the Company nor any Subsidiary (i) is in
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default under or in violation of (and no event has occurred that has not been
waived that, with notice or lapse of time or both, would result in a default by
the Company or any Subsidiary under), nor has the Company or any Subsidiary
received notice of a claim that it is in default under or that it is in
violation of, any indenture, loan or credit agreement or any other agreement or
instrument to which it is a party or by which it or any of its properties is
bound (whether or not such default or violation has been waived), (ii) is in
violation of any order of any court, arbitrator or governmental body, or (iii)
is or has been in violation of any statute, rule or regulation of any
governmental authority, including, without limitation, all foreign, federal,
state and local laws relating to taxes, environmental protection, occupational
health and safety, product quality and safety and employment and labor matters,
except in each case as could not, individually or in the aggregate, reasonably
be expected to have or result in a Material Adverse Effect.
(k) Title to Assets. Except as disclosed in Schedule 3.1(k) of the
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Disclosure Schedule,the Company and the Subsidiaries own no real property and
have good and marketable title in all personal property owned by them that is
material to the business of the Company and the Subsidiaries, in each case free
and clear of all Liens, except for Liens as do not materially affect the value
of such property and do not materially interfere with the use made and proposed
to be made of such property by the Company and the Subsidiaries. Any real
property and facilities held under lease by the Company and the Significant
Subsidiaries are held by them under valid, subsisting and enforceable leases of
which the Company and the Significant Subsidiaries are in compliance.
(l) Certain Fees. Except for the fees described in Schedule 3.1(l)
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of the Disclosure Schedule, all of which are payable to registered broker-
dealers, no brokerage or finder's fees or commissions are or will be payable by
the Company to any broker, financial advisor or consultant, finder, placement
agent, investment banker, bank or other Person with respect to the transactions
contemplated by this Agreement, and the Company has not taken any action that
would cause any Purchaser to be liable for any such fees or commissions.
(m) Private Placement. Neither the Company nor any Person acting on
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the Company's behalf has sold or offered to sell or solicited any offer to buy
the Securities by means of any form of general solicitation or advertising.
Neither the Company nor any of its Affiliates nor any person acting on the
Company's behalf has, directly or indirectly, at any time within the past six
months, made any offer or sale of any security or solicitation of any offer to
buy any security under circumstances that would (i) eliminate the availability
of the exemption from registration under Regulation D under the Securities Act
in connection with the offer and sale of the Securities as contemplated hereby
or (ii) cause the offering of the Securities pursuant to the Transaction
Documents to be integrated with prior offerings by the Company for purposes of
any applicable law, regulation or shareholder approval provisions, including,
without limitation, under the rules and regulations of any Trading Market. The
Company is not, and is not an
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Affiliate of, an "investment company" within the meaning of the Investment
Company Act of 1940, as amended. The Company is not a United States real
property holding corporation within the meaning of the Foreign Investment in
Real Property Tax Act of 1980.
(n) Form S-3 Eligibility. The Company is eligible to register its
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Common Stock for resale by the Purchasers under Form S-3 promulgated under the
Securities Act.
(o) Listing and Maintenance Requirements. The Company has not, in
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the two years preceding the date hereof, received notice (written or oral) from
any Trading Market on which the Common Stock is or has been listed or quoted to
the effect that the Company is not in compliance with the listing or maintenance
requirements of such Trading Market. The Company is, and has no reason to
believe that it will not in the foreseeable future continue to be, in compliance
with all such listing and maintenance requirements.
(p) Registration Rights. Except as described in Schedule 3.1(p) of
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the Disclosure Schedule, the Company has not granted or agreed to grant to any
Person any rights (including "piggy-back" registration rights) to have any
securities of the Company registered with the Commission or any other
governmental authority that have not been satisfied.
(q) Application of Takeover Protections. Except as disclosed on
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Schedule 3.1(q) of the Disclosure Schedule, there is no control share
acquisition, business combination, poison pill (including any distribution under
a rights agreement) or other similar anti-takeover provision under the Company's
charter documents or the laws of its state of incorporation that is or could
become applicable to any of the Purchasers as a result of the Purchasers and the
Company fulfilling their obligations or exercising their rights under the
Transaction Documents, including, without limitation, as a result of the
Company's issuance of the Securities and the Purchasers' ownership of the
Securities.
(r) Disclosure. The Company confirms that neither it nor any other
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Person acting on its behalf has provided any of the Purchasers or their agents
or counsel with any information that constitutes or might constitute material,
nonpublic information. The Company understands and confirms that each of the
Purchasers will rely on the foregoing representations in effecting transactions
in securities of the Company. All disclosure provided to the Purchasers
regarding the Company, its business and the transactions contemplated hereby,
including the Schedules in the Disclosure Schedule to this Agreement, furnished
by or on behalf of the Company are true and correct and do not contain any
untrue statement of a material fact or omit to state any material fact necessary
in order to make the statements made therein, in light of the circumstances
under which they were made, not misleading. No event or circumstance has
occurred or information exists with respect to the Company or any of its
Subsidiaries or its or their business, properties, prospects, operations or
financial conditions, which, under applicable law, rule or regulation, requires
public disclosure or announcement by the Company but which has not been so
publicly announced or disclosed (assuming for this purpose that the Company's
reports filed under the 1934 Act are being incorporated into an effective
registration statement filed by the Company under the 1933 Act). The Company
acknowledges and agrees that no Purchaser makes or has made any representations
or warranties with respect to the transactions contemplated hereby other than
those specifically set forth in Section 3.2.
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(s) Acknowledgment Regarding Purchasers' Purchase of Securities. The
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Company acknowledges and agrees that each of the Purchasers is acting solely in
the capacity of an arm's length purchaser with respect to this Agreement and the
transactions contemplated hereby. The Company further acknowledges that no
Purchaser is acting as a financial advisor or fiduciary of the Company (or in
any similar capacity) with respect to this Agreement and the transactions
contemplated hereby and any advice given by any Purchaser or any of their
respective representatives or agents in connection with this Agreement and the
transactions contemplated hereby is merely incidental to the Purchasers'
purchase of the Securities. The Company further represents to each Purchaser
that the Company's decision to enter into this Agreement has been based solely
on the independent evaluation of the Company and its representatives.
(t) Internal Accounting Controls. The Company and each of its
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Subsidiaries maintains a system of internal accounting controls sufficient, in
the reasonable judgment of the Company's board of directors, to provide
reasonable assurance that (i) transactions are executed in accordance with
management's general or specific authorizations, (ii) transactions are recorded
as necessary to permit preparation of financial statements in conformity with
generally accepted accounting principles and to maintain asset accountability,
(iii) access to assets is permitted only in accordance with management's general
or specific authorization and (iv) the recorded accountability for assets is
compared with the existing assets at reasonable intervals and appropriate action
is taken with respect to any differences.
3.2 Representations and Warranties of the Purchasers. Each Purchaser
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hereby, as to itself only and for no other Purchaser, represents and warrants to
the Company as follows:
(a) Organization; Authority. Such Purchaser is an entity duly
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organized, validly existing and in good standing under the laws of the
jurisdiction of its organization with the requisite corporate or partnership
power and authority to enter into and to consummate the transactions
contemplated by the Transaction Documents and otherwise to carry out its
obligations thereunder. The purchase by such Purchaser of the Securities
hereunder has been duly authorized by all necessary action on the part of such
Purchaser. This Agreement has been duly executed and delivered by such Purchaser
and constitutes the valid and legally binding obligation of such Purchaser,
enforceable against it in accordance with its terms.
(b) Investment Intent. Such Purchaser is acquiring the Securities as
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principal for its own account for investment purposes only and not with a view
to or for distributing or reselling such Securities or any part thereof, without
prejudice, however, to such Purchaser's right, subject to the provisions of this
Agreement, at all times to sell or otherwise dispose of all or any part of such
Securities pursuant to an effective registration statement under the Securities
Act or under an exemption from such registration and in compliance with
applicable federal and state securities laws. Nothing contained herein shall be
deemed a representation or warranty by such Purchaser to hold Securities for any
period of time. Such Purchaser does not have any agreement or understanding,
directly or indirectly, with any Person to distribute any of the Securities.
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(c) Purchaser Status. At the time such Purchaser was offered the
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Securities, it was, and at the date hereof it is, an "accredited investor" as
defined in Rule 501(a) under the Securities Act.
(d) Experience of such Purchaser. Such Purchaser, either alone or
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together with its representatives, has such knowledge, sophistication and
experience in business and financial matters so as to be capable of evaluating
the merits and risks of the prospective investment in the Securities, and has so
evaluated the merits and risks of such investment. Such Purchaser is able to
bear the economic risk of an investment in the Securities and, at the present
time, is able to afford a complete loss of such investment.
(e) Access to Information. Such Purchaser acknowledges that it has
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reviewed the Disclosure Materials and has been afforded (i) the opportunity to
ask such questions as it has deemed necessary of, and to receive answers from,
representatives of the Company concerning the terms and conditions of the
offering of the Securities and the merits and risks of investing in the
Securities; (ii) access to information about the Company and the Subsidiaries
and their respective financial condition, results of operations, business,
properties and management sufficient to enable it to evaluate its investment;
and (iii) the opportunity to obtain such additional information that the Company
possesses or can acquire without unreasonable effort or expense that is
necessary to make an informed investment decision with respect to the
investment. Neither such inquiries nor any other investigation conducted by or
on behalf of such Purchaser or its representatives or counsel shall modify,
amend or affect such Purchaser's right to rely on the truth, accuracy and
completeness of the Disclosure Materials and the Company's representations and
warranties contained in the Transaction Documents.
(f) General Solicitation. Such Purchaser is not purchasing the
--------------------
Securities as a result of any advertisement, article, notice or other
communication regarding the Securities published in any newspaper, magazine or
similar media or broadcast over television or radio or presented at any seminar
or any other general solicitation or general advertisement.
(g) Broker-Dealer. Such Purchaser is not a registered broker-dealer
-------------
under the rules and regulations of the NASD.
ARTICLE IV
OTHER AGREEMENTS OF THE PARTIES
4.1 Transfer Restrictions.
---------------------
(a) Securities may only be disposed of pursuant to an effective
registration statement under the Securities Act or pursuant to an available
exemption from the registration requirements of the Securities Act, and in
compliance with any applicable state securities laws. In connection with any
transfer of Securities other than pursuant to an effective registration
statement or to the Company or pursuant to Rule 144(k), except as otherwise set
forth herein, the Company may require the transferor to provide to the Company
an opinion of counsel selected by the transferor, the form and substance of
which opinion shall be reasonably satisfactory to the Company, to the effect
that such transfer does not require registration under the Securities Act.
Notwithstanding the foregoing, the Company hereby consents to and agrees to
register on the
11
books of the Company and with its transfer agent, without any such legal
opinion, any transfer of Securities by a Purchaser to an Affiliate of such
Purchaser, provided that the transferee certifies to the Company that it is an
"accredited investor" as defined in Rule 501(a) under the Securities Act.
(b) The Purchasers agree to the imprinting, so long as is required by
this Section 4.1(b), of the following legend on any certificate evidencing
--------------
Securities:
THESE SECURITIES HAVE NOT BEEN REGISTERED WITH THE SECURITIES AND
EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN
RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND, ACCORDINGLY,
MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN
AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE
WITH APPLICABLE STATE SECURITIES LAWS. THESE SECURITIES AND THE
SECURITIES ISSUABLE UPON EXERCISE OF THESE SECURITIES MAY BE
PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER
LOAN SECURED BY SUCH SECURITIES.
Certificates evidencing Securities shall not be required to contain such legend
or any other legend (i) following any sale of such Securities pursuant to Rule
144 or pursuant to an effective Registration Statement, or (ii) if such
Securities are eligible for sale under Rule 144(k), or (iii) if such legend is
not required under applicable requirements of the Securities Act (including
judicial interpretations and pronouncements issued by the Staff of the
Commission). At such time as a legend is no longer required for certain
Securities, the Company will, no later than three Trading Days following the
delivery by a Purchaser to the Company or the Company's transfer agent of a
legended certificate representing such Securities, deliver or cause to be
delivered to such Purchaser a certificate representing such Securities that is
free from all restrictive and other legends. The Company may not make any
notation on its records or give instructions to any transfer agent of the
Company that enlarge the restrictions on transfer set forth in this Section. For
so long as any Purchaser owns Securities, in the event that the Company has
effected an exchange, recapitalization or other similar transaction the Company
will use its commercially reasonable best efforts to not require or reward
physical delivery of certificates evidencing the Common Stock in connection with
such exchange, recapitalization or other similar transaction.
(c) The Company acknowledges and agrees that a Purchaser may from
time to time pledge pursuant to a bona fide margin agreement or grant a security
interest in some or all of the Securities and, if required under the terms of
such arrangement, such Purchaser may transfer pledged or secured Securities to
the pledgees or secured parties. Such a pledge or transfer would not be subject
to approval of the Company and no legal opinion of the pledgee, secured party or
pledgor shall be required in connection therewith. Further, no notice shall be
required of such pledge. At the appropriate Purchaser's expense, the Company
will execute and
12
deliver such reasonable documentation as a pledgee or secured party of
Securities may reasonably request in connection with a pledge or transfer of the
Securities, including the preparation and filing of any required prospectus
supplement under Rule 424(b)(3) of the Securities Act or other applicable
provision of the Securities Act to appropriately amend the list of Selling
Stockholders thereunder.
4.2 Furnishing of Information. As long as any Purchaser owns Securities,
-------------------------
Company covenants to timely file (or obtain extensions in respect thereof and
file within the applicable grace period) all reports required to be filed by the
Company after the date hereof pursuant to the Exchange Act. Upon the request of
any Purchaser, the Company shall deliver to such Purchaser a written
certification of a duly authorized officer as to whether it has complied with
the preceding sentence. As long as any Purchaser owns Securities, if the Company
is not required to file reports pursuant to such laws, it will prepare and
furnish to the Purchasers and make publicly available in accordance with
paragraph (c) of Rule 144 such information as is required for the Purchasers to
sell the Securities under Rule 144.
4.3 Integration. The Company shall not, and shall use its best efforts
-----------
to that no Affiliate of the Company shall, sell, offer for sale or solicit
offers to buy or otherwise negotiate in respect of any security (as defined in
Section 2 of the Securities Act) that would be integrated with the offer or sale
of the Securities in a manner that would require the registration under the
Securities Act of the sale of the Securities to the Purchasers, or that would be
integrated with the offer or sale of the Securities for purposes of the rules
and regulations of any Trading Market.
4.4 Reservation of Common Stock. The Company shall maintain a reserve
---------------------------
from duly authorized shares of Common Stock for issuance pursuant to the
Transaction Documents in such amount as may be required to fulfill its
obligations in full under the Transaction Documents. In the event that at any
time the then authorized shares of Common Stock are insufficient for the Company
to satisfy its obligations in full under the Transaction Documents, the Company
shall promptly take such actions as may be required to increase the number of
authorized shares.
4.5 Subsequent Placements.
---------------------
(a) From the date hereof until 90 Trading Days after the Effective
Date, the Company will not, directly or indirectly, offer, sell, grant any
option to purchase, or otherwise dispose of (or announce any offer, sale, grant
or any option to purchase or other disposition of) any of its or the
Subsidiaries' equity or equity equivalent securities, including, without
limitation, any debt, preferred stock or other instrument or security that is,
at any time during its life and under any circumstances, convertible into or
exchangeable for Common Stock (any such offer, sale, grant, disposition or
announcement being referred to as a "Subsequent Placement").
(b) The Company will not, directly or indirectly, effect any
Subsequent Placement from the ninetieth (90/th/) Trading Day after the Effective
Date until the first anniversary of the Effective Date, unless the Company shall
have first complied with this Section 4.5(b).
13
(i) The Company shall deliver to each Purchaser a written
notice (the "Offer") of any proposed or intended issuance or sale or
exchange of the securities being offered ("the Offered Securities") in a
Subsequent Placement, which Offer shall (w) identify and describe the
Offered Securities, (x) describe the price and other terms upon which they
are to be issued, sold or exchanged, and the number or amount of the
Offered Securities to be issued, sold or exchanged, (y) identify the
persons or entities (if known) to which or with which the Offered
Securities are to be offered, issued, sold or exchanged and (z) offer to
issue and sell to or exchange with such Purchaser (A) a pro rata portion of
the lesser of (1) fifty percent (50%) of the Offered Securities and (2)
$10,000,000 of Offered Securities, based on such Purchaser's pro rata
portion of the aggregate purchase price paid by the Purchasers for all of
the Securities purchased hereunder (the "Basic Amount"), and (B) with
respect to each Purchaser, any additional portion of the Offered Securities
attributable to the Basic Amounts of other Purchasers as such Purchaser
shall indicate it will purchase or acquire should the other Purchasers
subscribe for less than their Basic Amounts (the "Undersubscription
Amount").
(ii) To accept an Offer, in whole or in part, a Purchaser must
deliver a written notice to the Company prior to the end of the ten (10)
Trading Day period of the Offer, setting forth the portion of the
Purchaser's Basic Amount that such Purchaser elects to purchase and, if
such Purchaser shall elect to purchase all of its Basic Amount, the
Undersubscription Amount, if any, that such Purchaser elects to purchase
(in either case, the "Notice of Acceptance"). If the Basic Amounts
subscribed for by all Purchasers are less than the total of all of the
Basic Amounts, then each Purchaser who has set forth an Undersubcription
Amount in its Notice of Acceptance shall be entitled to purchase, in
addition to the Basic Amounts subscribed for, the Undersubscription Amount
it has subscribed for; provided, however, that if the Undersubscription
-------- -------
Amounts subscribed for exceed the difference between the total of all the
Basic Amounts and the Basic Amounts subscribed for (the "Available
Undersubscription Amount"), each Purchaser who has subscribed for any
Undersubscription Amount shall be entitled to purchase on that portion of
the Available Undersubscription Amount as the Basic Amount of such
Purchaser bears to the total Basic Amounts of all Purchasers that have
subscribed for Undersubscription Amounts, subject to rounding by the Board
of Directors to the extent its deems reasonably necessary.
(iii) The Company shall have five (5) days from the expiration
of the period set forth in Section 4.5(b)(ii) above to issue, sell or
exchange all or any part of such Offered Securities as to which a Notice of
Acceptance has not been given by the Purchasers (the "Refused Securities"),
but only to the offerees described in the Offer (if so described therein)
and only upon terms and conditions (including, without limitation, unit
prices and interest rates) that are not more favorable to the acquiring
person or persons or less favorable to the Company than those set forth in
the Offer.
(iv) In the event the Company shall propose to sell less than
all the Refused Securities (any such sale to be in the manner and on the
terms specified in Section 4.5(b)(iii) above), then each Purchaser may, at
its sole option and in its sole discretion, reduce the number or amount of
the Offered Securities specified in its Notice of Acceptance to an amount
that shall be not less than the number or amount of the
14
Offered Securities that the Purchaser elected to purchase pursuant to
Section 4.5(b)(ii) above multiplied by a fraction, (i) the numerator of
which shall be the number or amount of Offered Securities the Company
actually proposes to issue, sell or exchange (including Offered Securities
to be issued or sold to Purchasers pursuant to Section 4.5(b)(ii) above
prior to such reduction) and (ii) the denominator of which shall be the
original amount of the Offered Securities. In the event that any Purchaser
so elects to reduce the number or amount of Offered Securities specified in
its Notice of Acceptance, the Company may not issue, sell or exchange more
than the reduced number or amount of the Offered Securities unless and
until such securities have again been offered to the Purchasers in
accordance with Section 4.5(b)(i) above.
(v) Upon the closing of the issuance, sale or exchange of all
or less than all of the Refused Securities, the Purchasers shall acquire
from the Company, and the Company shall issue to the Purchasers, the number
or amount of Offered Securities specified in the Notices of Acceptance, as
reduced pursuant to Section 4.5(b)(iv) above if the Purchasers have so
elected, upon the terms and conditions specified in the Offer. The purchase
by the Purchasers of any Offered Securities is subject in all cases to the
preparation, execution and delivery by the Company and the Purchasers of a
purchase agreement relating to such Offered Securities reasonably
satisfactory in form and substance to the Purchasers and their respective
counsel.
(vi) Any Offered Securities not acquired by the Purchasers or
other persons in accordance with Section 4.5(b)(iii) above may not be
issued, sold or exchanged until they are again offered to the Purchasers
under the procedures specified in this Agreement.
(c) The 90 Trading Day period set forth in the preceding paragraphs
(a) and (b) shall be extended for the number of Trading Days during such period
in which (i) trading in the Common Stock is suspended by any Trading Market, or
(ii) the Registration Statement is not effective after the Effective Date or
(iii) the prospectus included in the Registration Statement may not be used by
the Purchasers for the resale of Registrable Securities thereunder.
(d) The restrictions contained in paragraphs (a) and (b) of this
Section shall not apply to the issuance of Excluded Stock (as defined in Section
4.9 below).
4.6 Securities Laws Disclosure; Publicity. The Company shall, on the
-------------------------------------
Closing Date, issue a press release acceptable to the Purchasers disclosing all
material terms of the transactions contemplated hereby. Thereafter, the Company
shall timely file any filings and notices required by the Commission or
applicable law with respect to the transactions contemplated hereby and provide
copies thereof to the Purchasers promptly after filing. The Company shall, at
least two Trading Days prior to the filing or dissemination of any disclosure
required by this paragraph, provide a copy thereof to the Purchasers for their
review. The Company and the Purchasers shall consult with each other in issuing
any press releases or otherwise making public statements or filings and other
communications with the Commission or any regulatory agency or Trading Market
with respect to the transactions contemplated hereby, and neither party shall
issue any such press release or otherwise make any such public statement, filing
or other communication without the prior consent of the other (which consent
shall not be unreasonably withheld), except
15
if such disclosure is required by law, in which case the disclosing party shall
promptly provide the other party with prior notice of such public statement,
filing or other communication. Notwithstanding the foregoing, the Company shall
not publicly disclose the name of any Purchaser, or include the name of any
Purchaser in any filing with the Commission or any regulatory agency or Trading
Market, without the prior written consent of such Purchaser, except to the
extent such disclosure (but not any disclosure as to the controlling Persons
thereof) is required by law or Trading Market regulations, in which case the
Company shall provide the Purchasers with prior notice of such disclosure.
Neither the Company nor any Person acting on its behalf will provide any
Purchaser with material, nonpublic information about the Company unless such
Purchaser consents to receive such information in writing in advance.
4.7 Use of Proceeds. The Company shall use the net proceeds from the sale
---------------
the Securities hereunder for working capital purposes and not for the
satisfaction of any portion of the Company's debt (other than payment of trade
payables and payments under capital leases and accrued expenses in the ordinary
course of the Company's business and prior practices), to redeem any Company
equity or equity-equivalent securities or to settle any outstanding litigation.
4.8 Reimbursement. If any Purchaser or any of its Affiliates or any
-------------
director, partner, controlling person, employee or agent of a Purchaser or any
of its Affiliates (a "Related Person") becomes involved in any capacity in any
Proceeding brought by or against any Person in connection with or as a result of
the transactions contemplated by the Transaction Documents, the Company will
indemnify and hold harmless such Purchaser or Related Person for its reasonable
legal and other expenses (including the costs of any investigation, preparation
and travel) and for any Losses incurred in connection therewith, as such
expenses or Losses are incurred, excluding only Losses that result from such
Purchaser's or Related Person's gross negligence or willful misconduct. In
addition, the Company shall indemnify and hold harmless each Purchaser and
Related Person from and against any and all Losses, as incurred, arising out of
or relating to any breach by the Company of any of the representations,
warranties or covenants made by the Company in this Agreement or any other
Transaction Document, or any allegation by a third party that, if true, would
constitute such a breach. The conduct of any Proceedings for which
indemnification is available under this paragraph shall be governed by Section
6.4(c) below. The indemnification obligations of the Company under this
paragraph shall be in addition to any liability that the Company may otherwise
have and shall be binding upon and inure to the benefit of any successors,
assigns, heirs and personal representatives of the Purchasers and any such
Related Persons. The Company also agrees that neither the Purchasers nor any
Related Persons shall have any liability to the Company or any Person asserting
claims on behalf of or in right of the Company in connection with or as a result
of the transactions contemplated by the Transaction Documents, except to the
extent that any losses, claims, damages, liabilities or expenses incurred by the
Company result from the gross negligence or willful misconduct of the applicable
Purchaser or Related Person in connection with such transactions. If the Company
breaches its obligations under any Transaction Document, then, in addition to
any other liabilities the Company may have under any Transaction Document or
applicable law, the Company shall pay or reimburse the Purchasers on demand for
all costs of collection and enforcement (including reasonable attorneys fees and
expenses). Without limiting the generality of the foregoing, the Company
specifically agrees to reimburse the Purchasers on demand for all costs of
enforcing the indemnification obligations in this paragraph.
16
4.9 Additional Issuance of Shares.
-----------------------------
(a) For purposes of this Section 4.9 and Section 4.5(d), as
applicable, the following definitions shall apply:
(i) "Common Stock Equivalents" shall mean, collectively,
shares of Common Stock and Convertible Securities.
(ii) "Convertible Securities" shall mean any evidence of
indebtedness, shares, options, warrants or other securities directly or
indirectly convertible into or exercisable or exchangeable for shares of
Common Stock.
(iii) "Eligible Shares" shall mean, for each Purchaser, at the
time of an issuance of additional shares of Common Stock or Convertible
Securities, the sum of (x) the lesser of (A) the number of shares of Common
Stock then held by such Purchaser and its Affiliates (other than shares of
Common Stock (i) acquired by such Purchaser upon exercise of a Warrant or
(ii) issued to such Purchaser pursuant to this Section 4.9 or (iii)
purchased by such Purchaser on the open market (other than purchases which
can be matched against any sale occurring within three Trading Days
thereof)) and (B) the number of shares of Common Stock purchased by such
Purchaser hereunder and (y) the number of shares of Common Stock acquired
by such Purchaser upon exercise of a Warrant or issued to such Purchaser
pursuant to this Section 4.9.
(iv) "Excluded Stock" shall mean any shares of Common Stock
issued or issuable (A) upon exercise, conversion or exchange of any Common
Stock Equivalents described in Schedule 3.1(f) of the Disclosure Schedule
(provided that such exercise of conversion occurs in accordance with the
terms thereof, without amendment or modification, and that the applicable
exercise or conversion price or ratio is described in such schedule); (B)
to officers, directors or employees of, or advisers, consultants or
independent contractors acting in a similar capacity to, the Company
pursuant to restricted stock issuances, stock grants, stock options or
similar employee stock incentives; (C) as a pro rata dividend or
distribution to all holders of Common Stock; (D) in connection with the
anti-dilution adjustment provisions of the Securities; (E) solely in
consideration for the acquisition (whether by merger or otherwise) by the
Company of all or substantially all of the stock or assets of any other
entity; (F) in connection with strategic transactions not significantly for
the purpose of raising capital; (G) pursuant to options or warrants issued
in connection with equipment leases or vendor financing, up to an aggregate
of 139,276 shares of Common Stock; (H) to the Purchasers on or before
December 18, 2001, up to an aggregate purchase price of $4,000,000; (I) as
part of a bona fide firm commitment underwritten public offering at a per
share offering price equal to at least the market price (excluding any
equity line); and (J) as an equitable adjustment including stock splits,
subdivisions, reclassification, consolidations or other equitable
distributions, in each case on terms approved by the Board of Directors of
the Company.
(v) "Reference Price" shall initially be the Purchase Price
and, at any time after additional shares of Common Stock are issued to a
Purchaser pursuant to this Section 4.9, shall be equal to the lowest
Issuance Price (as defined below).
17
(b) In the event that after the date hereof and prior to the first
anniversary of the date hereof the Company issues or agrees to issue any Common
Stock Equivalents, other than shares of Excluded Stock, for a consideration (net
of any discounts, fees, commissions and other expenses that are not customary)
to the Company per share less than the Reference Price (the "Issuance Price"),
each Purchaser shall be entitled to receive such number of additional shares of
Common Stock (upon payment to the Company of an amount per share equal to the
par value of such additional shares of Common Stock), equal to the excess of (A)
the quotient obtained by dividing the aggregate purchase price paid by such
Purchaser for such Purchaser's Eligible Shares divided by the Issuance Price
over (B) the number of Eligible Shares then held by such Purchaser.
(c) For purposes of any issuances of additional shares of Common
Stock to a Purchaser under Section 4.9(b) above, the following provisions shall
be applicable:
(i) In connection with any issuance of any Common Stock
Equivalents, (x) the maximum number of shares of Common Stock potentially
issuable at any time upon conversion, exercise or exchange of such Common
Stock Equivalents (the "Deemed Number") shall be deemed to be outstanding
upon issuance of such Common Stock Equivalents, and (y) the price per share
applicable to such Common Stock Equivalents shall be deemed to equal the
minimum dollar value of consideration payable to the Company to purchase
such Common Stock Equivalents and to convert, exercise or exchange them
into Common Stock, divided by the Deemed Number.
(ii) In the case of the issuance of Common Stock Equivalents
for cash, the amount of the consideration received by the Company shall be
deemed to be the aggregate amount of cash received by the Company for such
Common Stock Equivalents.
(iii) In the case of the issuance of Common Stock Equivalents
for a consideration in whole or in part other than cash, including
securities acquired in exchange therefor (other than securities by their
terms so exchangeable), the consideration other than cash shall be deemed
to be the fair market value thereof as determined in good faith by the
Board of Directors of the Company, irrespective of any accounting
treatment.
(d) Notwithstanding anything to the contrary contained in this
Section 4.9, the number of shares of Common Stock that shall be issued to a
Purchaser pursuant hereto shall be limited to the extent necessary to insure
that, following such issuance, the total number of shares of Common Stock then
beneficially owned by such Purchaser and its Affiliates and any other Persons
whose beneficial ownership of Common Stock would be aggregated with the
Purchaser's for purposes of Sections 13(d) and 16 of the Exchange Act, does not
exceed 9.999% (the "Maximum Percentage") of the total number of issued and
outstanding shares of Common Stock (including for such purpose the shares of
Common Stock issuable upon exercise of all Warrants and other Convertible
Securities held by such Purchaser and its Affiliates and any other Persons whose
beneficial ownership of Common Stock would be so aggregated). For such purposes,
beneficial ownership shall be determined in accordance with Section 13(d) of the
Exchange Act and the rules and regulations promulgated thereunder. The Company
shall,
18
instead of issuing shares of Common Stock in excess of the limitation referred
to in this Section 4.9(d), pay to such Purchaser an amount in cash equal to the
fair market value of the number of shares of Common Stock in excess of such
limitation; provided, however, that the Purchaser may, at its option, elect to
-------- -------
waive the requirement to deliver such cash and the Company's obligation to issue
shares in excess of the foregoing limitation shall be suspended until such time,
if any, as such shares of Common Stock may be issued in compliance with such
limitation. Additionally, by written notice to the Company, the Purchaser may
waive the provisions of this Section or increase or decrease the Maximum
Percentage to any other percentage specified in such notice, but (i) any such
waiver or increase will not be effective until the 61st day after such notice is
delivered to the Company, and (ii) any such waiver or increase or decrease will
apply only to the Purchaser and not to any other Purchaser.
(e) All shares to be issued pursuant to this Section 4.9, upon
issuance, shall be validly issued, fully-paid and non-assessable and free of any
Liens or preemptive or similar rights. Upon the issuance of any shares of Common
Stock pursuant to this Section 4.9, such shares shall be "Shares" and
"Registrable Securities" for all purposes hereunder; provided, however, that if
-------- -------
such shares of Common Stock are issued after the Effective Date, such additional
shares shall be afforded piggyback registration rights (in lieu of the immediate
need to file a registration statement on Form S-3) unless and until the
aggregate number of shares issued pursuant to this Section 4.9 equals or exceeds
250,000 shares (as adjusted for stock splits, stock combinations and similar
events). Without limiting the generality of the foregoing, the Purchasers shall
have all of the rights provided in Article VI below with respect to such
additional Shares, mutatis mutandis.
------ ---------
4.10 Trading Market Limitations.
--------------------------
(a) Notwithstanding any provisions of Section 4.9 to the contrary, if
the Trading Market is the Nasdaq National Market or the Nasdaq SmallCap Market
or any other market or exchange with similar applicable rules, then the maximum
number of shares of Common Stock that the Company may issue pursuant to the
Transaction Documents at an effective purchase price less than the Closing Price
on the Trading Day immediately preceding the Closing Date equals 6,123,402
shares (the "Issuable Maximum"), unless the Company obtains shareholder approval
in accordance with the rules and regulations of such Trading Market. If at the
time any Purchaser requests an exercise of any Securities or additional shares
of Common Stock become issuable pursuant to Section 4.9 hereof, the Actual
Minimum (excluding any shares issued or issuable at an effective purchase price
in excess of the Closing Price on the Trading Day immediately preceding the
Closing Date) exceeds the Issuable Maximum (and if the Company has not
previously obtained the required shareholder approval), then the Company shall
issue to the Purchaser requesting such exercise or entitled to such additional
shares a number of shares of Common Stock not exceeding such Purchaser's pro-
rata portion of the Issuable Maximum (based on such Purchaser's share (vis-a-vis
other Purchasers) of the aggregate purchase price paid hereunder and taking into
account any Underlying Shares previously issued to such Purchaser), and the
remainder of the Underlying Shares issuable in connection with such exercise or
conversion (if any) shall constitute "Excess Shares" pursuant to Section 4.10(b)
below.
19
(b) In the event that any Purchaser's receipt of shares of Common
Stock upon exercise of Securities or pursuant to Section 4.9 is restricted based
on the Issuable Maximum, the Company shall either: (i) use its best efforts to
obtain the required shareholder approval necessary to permit the issuance of
such Excess Shares as soon as is reasonably possible, but in any event not later
than the 60th day after the event giving rise to such Excess Shares, or (ii)
within five Trading Days after such event, pay cash to such Purchaser, as
liquidated damages and not as a penalty, in an amount equal to the number of
Excess Shares multiplied by the average Closing Price over the five Trading Days
immediately prior to the date of such event or, if greater, the five Trading
Days immediately prior to the date of payment (the "Cash Amount"). If the
Company elects the first option under the preceding sentence and the Company
fails to obtain the required shareholder approval on or prior to the 60th day
after such event, then within three Trading Days after such 60th day, the
Company shall pay the Cash Amount to such Purchaser, as liquidated damages and
not as penalty.
4.11 Certain Trading Limitations. Each Purchaser agrees that prior to the
---------------------------
earlier to occur of (x) 90 days from the Closing Date and (y) the Effective
Date, it will not enter into any Short Sales. For purposes of this Section 4.11,
a "Short Sale" by a Purchaser means a sale of Common Stock that is marked as a
short sale and that is executed at a time when such Purchaser has no equivalent
offsetting long position in the Common Stock. For purposes of determining
whether a Purchaser has an equivalent offsetting long position in the Common
Stock, all Common Stock and Underlying Shares that would be issuable upon
exercise in full of all Securities then held by such Purchaser (assuming that
such Securities were then fully exercisable, notwithstanding any provisions to
the contrary, and giving effect to any exercise price adjustments scheduled to
take effect in the future) shall be deemed to be held long by such Purchaser.
ARTICLE V
CONDITIONS
5.1 Conditions Precedent to the Obligations of the Purchasers. The
---------------------------------------------------------
obligation of each Purchaser to acquire Securities at the Closing is subject to
the satisfaction or waiver by such Purchaser, at or before the Closing, of each
of the following conditions:
(a) Representations and Warranties. The representations and
------------------------------
warranties of the Company contained herein shall be true and correct in all
material respects as of the date when made and as of the Closing as though made
on and as of such date; and
(b) Performance. The Company and each other Purchaser shall have
-----------
performed, satisfied and complied in all material respects with all covenants,
agreements and conditions required by the Transaction Documents to be performed,
satisfied or complied with by it at or prior to the Closing.
5.2 Conditions Precedent to the Obligations of the Company. The
------------------------------------------------------
obligation of the Company to sell Securities at the Closing is subject to the
satisfaction or waiver by the Company, at or before the Closing, of each of the
following conditions:
20
(a) Representations and Warranties. The representations and
------------------------------
warranties of the Purchasers contained herein shall be true and correct in all
material respects as of the date when made and as of the Closing Date as though
made on and as of such date; and
(b) Performance. The Purchasers shall have performed, satisfied and
-----------
complied in all material respects with all covenants, agreements and conditions
required by the Transaction Documents to be performed, satisfied or complied
with by the Purchasers at or prior to the Closing.
ARTICLE VI
REGISTRATION RIGHTS
6.1 Shelf Registration
------------------
(a) As promptly as possible, and in any event on or prior to the
Filing Date, the Company shall prepare and file with the Commission a "Shelf"
Registration Statement covering the resale of all Registrable Securities for an
offering to be made on a continuous basis pursuant to Rule 415. The Registration
Statement shall be on Form S-3 (except if the Company is not then eligible to
register for resale the Registrable Securities on Form S-3, in which case such
registration shall be on another appropriate form in accordance herewith as the
Purchasers may consent) and shall contain (except if otherwise directed by the
Purchasers) the "Plan of Distribution" attached hereto as Exhibit C.
(b) The Company shall use its best efforts to cause the Registration
Statement to be declared effective by the Commission as promptly as possible
after the filing thereof, but in any event prior to the Required Effectiveness
Date, and shall use its best efforts to keep the Registration Statement
continuously effective under the Securities Act until the earliest of (i) the
fifth anniversary of the Effective Date, or (ii) all Registrable Securities are
eligible for resale pursuant to Rule 144(k) promulgated under the Securities
Act, or (iii) such earlier date when all Registrable Securities covered by such
Registration Statement have been sold (the "Effectiveness Period").
(c) The Company shall notify each Purchaser in writing promptly (and
in any event within one business day) after receiving notification from the
Commission that the Registration Statement has been declared effective.
(d) Upon the occurrence of any Event (as defined below) and on every
monthly anniversary thereof until the applicable Event is cured, as partial
relief for the damages suffered therefrom by the Purchasers (which remedy shall
not be exclusive of any other remedies available at law or in equity), the
Company shall pay to each Purchaser an amount in cash, as liquidated damages and
not as a penalty, equal to 1.0%, upon the occurrence of the Event, and 2.0%,
upon each monthly anniversary thereafter, of the aggregate purchase price paid
by such Purchaser hereunder (adjusted to reflect the number of shares of Common
Stock then held by such Purchaser and its Affiliated transferees). The
liquidated damages payable pursuant to the terms hereof shall apply on a pro-
rata basis for any portion of a month prior to the cure of an Event. For such
purposes, each of the following shall constitute an "Event":
21
(i) the Registration Statement is not filed on or prior to the
Filing Date or is not declared effective on or prior to the Required
Effectiveness Date;
(ii) after the Effective Date, a Purchaser is not permitted to
sell Registrable Securities under the Registration Statement (or a
subsequent Registration Statement filed in replacement thereof) for five or
more Trading Days (whether or not consecutive) as a result of any action of
or failure to act by the Company which is not curable by the Company;
(iii) the Common Stock is not listed or quoted, or is suspended
from trading, on an Eligible Market for a period of three Trading Days
(which need not be consecutive Trading Days) as a result of any action of
or failure to act by the Company which is not curable by the Company;
(iv) the Company fails for any reason to deliver a certificate
evidencing any Securities to a Purchaser within three Trading Days after
delivery of such certificate is required pursuant to any Transaction
Document or the exercise rights of the Purchasers pursuant to the
Transaction Documents are otherwise suspended for any reason; or
(v) the Company fails to have available a sufficient number of
authorized but unissued and otherwise unreserved shares of Common Stock
available to issue Underlying Shares upon any exercise of the Warrants or
to satisfy its obligations under Section 4.9 above or, at any time
following the Effective Date, any Shares or Underlying Shares are not
listed on an Eligible Market.
6.2 Registration Procedures. In connection with the Company's registration
-----------------------
obligations hereunder, the Company shall:
(a) Not less than three Trading Days prior to the filing of a
Registration Statement or any related Prospectus or any amendment or supplement
thereto (including any document that would be incorporated or deemed to be
incorporated therein by reference), the Company shall (i) furnish to the
Purchasers and Purchaser Counsel copies of all such documents proposed to be
filed, which documents (other than those incorporated or deemed to be
incorporated by reference) will be subject to the review of such Purchasers and
Purchaser Counsel, and (ii) cause its officers and directors, counsel and
independent certified public accountants to respond to such inquiries as shall
be necessary, in the reasonable opinion of respective counsel, to conduct a
reasonable investigation within the meaning of the Securities Act. The Company
shall not file a Registration Statement or any such Prospectus or any amendments
or supplements thereto to which Purchasers holding a majority of the Registrable
Securities shall reasonably object.
(b) (i) Prepare and file with the Commission such amendments,
including post-effective amendments, to each Registration Statement and the
Prospectus used in connection therewith as may be necessary to keep the
Registration Statement continuously effective as to the applicable Registrable
Securities for the Effectiveness Period and prepare and file with the Commission
such additional Registration Statements in order to register for resale under
the Securities Act all of the Registrable Securities; (ii) cause the related
Prospectus to be
22
amended or supplemented by any required Prospectus supplement, and as so
supplemented or amended to be filed pursuant to Rule 424; and (iii) respond as
promptly as reasonably possible, and in any event within ten Trading Days, to
any comments received from the Commission with respect to the Registration
Statement or any amendment thereto and as promptly as reasonably possible
provide the Purchasers true and complete copies of all correspondence relating
to the Purchasers and the transactions contemplated hereunder from and to the
Commission relating to the Registration Statement.
(c) Notify the Purchasers of Registrable Securities to be sold
and Purchaser Counsel as promptly as reasonably possible, and (if requested by
any such Person) confirm such notice in writing no later than one Trading Day
thereafter, of any of the following events: (i) the Commission notifies the
Company whether there will be a "review" of any Registration Statement; (ii) the
Commission comments in writing on any Registration Statement (in which case the
Company shall deliver to each Purchaser a copy of such comments and of all
written responses thereto); (iii) the Commission or any other Federal or state
governmental authority requests any amendment or supplement to any Registration
Statement or Prospectus or requests additional information related thereto; (iv)
the Commission issues any stop order suspending the effectiveness of any
Registration Statement or initiates any Proceedings for that purpose; (v) the
Company receives notice of any suspension of the qualification or exemption from
qualification of any Registrable Securities for sale in any jurisdiction, or the
initiation or threat of any Proceeding for such purpose; or (vi) the financial
statements included in any Registration Statement become ineligible for
inclusion therein or any statement made in any Registration Statement or
Prospectus or any document incorporated or deemed to be incorporated therein by
reference is untrue in any material respect or any revision to a Registration
Statement, Prospectus or other document is required so that it will not contain
any untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading.
(d) Use its commercially reasonable best efforts to avoid the
issuance of or, if issued, obtain the withdrawal of (i) any order suspending the
effectiveness of any Registration Statement or (ii) any suspension of the
qualification (or exemption from qualification) of any of the Registrable
Securities for sale in any jurisdiction, at the earliest practicable moment.
(e) Furnish to each Purchaser and Purchaser Counsel, without
charge, at least one conformed copy of each Registration Statement and each
amendment thereto, including financial statements and schedules, all documents
incorporated or deemed to be incorporated therein by reference, and all exhibits
to the extent requested by such Person (including those previously furnished or
incorporated by reference) promptly after the filing of such documents with the
Commission.
(f) Promptly deliver to each Purchaser and Purchaser Counsel,
without charge, as many copies of the Prospectus or Prospectuses (including each
form of prospectus) and each amendment or supplement thereto as such Persons may
reasonably request. The Company hereby consents to the use of such Prospectus
and each amendment or supplement thereto by each of the selling Purchasers in
connection with the offering and sale of the Registrable Securities covered by
such Prospectus and any amendment or supplement thereto.
23
(g) (i) In the time and manner required by each Trading Market,
prepare and file with such Trading Market an additional shares listing
application covering all of the Registrable Securities; (ii) take all steps
necessary to cause such Registrable Securities to be approved for listing on
each Trading Market as soon as possible thereafter, (iii) provide to the
Purchasers evidence of such listing, and (iv) maintain the listing of such
Registrable Securities on each such Trading Market or another Eligible Market.
(h) Prior to any public offering of Registrable Securities, use
its best efforts to register or qualify or cooperate with the selling Purchasers
and Purchaser Counsel in connection with the registration or qualification (or
exemption from such registration or qualification) of such Registrable
Securities for offer and sale under the securities or Blue Sky laws of such
jurisdictions within the United States as any Purchaser requests in writing, to
keep each such registration or qualification (or exemption therefrom) effective
during the Effectiveness Period and to do any and all other acts or things
necessary or advisable to enable the disposition in such jurisdictions of the
Registrable Securities covered by a Registration Statement.
(i) Upon the occurrence of any event described in Section
6.2(c)(vi), as promptly as reasonably possible, prepare a supplement or
amendment, including a post-effective amendment, to the Registration Statement
or a supplement to the related Prospectus or any document incorporated or deemed
to be incorporated therein by reference, and file any other required document so
that, as thereafter delivered, neither the Registration Statement nor such
Prospectus will contain an untrue statement of a material fact or omit to state
a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading.
(j) Comply with all applicable rules and regulations of the
Commission.
6.3 Registration Expenses. The Company shall pay (or reimburse the
---------------------
Purchasers for) all fees and expenses incident to the performance of or
compliance with this Agreement by the Company, including, without limitation,
(a) all registration and filing fees and expenses, including, without
limitation, those related to filings with the Commission, any Trading Market and
in connection with applicable state securities or Blue Sky laws, (b) printing
expenses (including, without limitation, expenses of printing certificates for
Registrable Securities and of printing prospectuses requested by the
Purchasers), (c) messenger, telephone and delivery expenses, (d) fees and
disbursements of counsel for the Company and Purchaser Counsel for the
Purchasers, not to exceed $10,000 in the aggregate and (e) fees and expenses of
all other Persons retained by the Company in connection with the consummation of
the transactions contemplated by this Agreement.
6.4 Indemnification
---------------
(a) Indemnification by the Company. The Company shall,
------------------------------
notwithstanding any termination of this Agreement, indemnify and hold harmless
each Purchaser, the officers, directors, partners, members, agents, brokers
(including brokers who offer and sell Registrable Securities as principal as a
result of a pledge or any failure to perform under a margin call of Common
Stock), investment advisors and employees of each of them, each Person who
controls any such Purchaser (within the meaning of Section 15 of the Securities
Act or Xxxxxxx 00 xx xxx
00
Xxxxxxxx Xxx) and the officers, directors, partners, members, agents and
employees of each such controlling Person, to the fullest extent permitted by
applicable law, from and against any and all Losses, as incurred, arising out of
or relating to any untrue or alleged untrue statement of a material fact
contained in the Registration Statement, any Prospectus or any form of
prospectus or in any amendment or supplement thereto or in any preliminary
prospectus, or arising out of or relating to any omission or alleged omission of
a material fact required to be stated therein or necessary to make the
statements therein (in the case of any Prospectus or form of prospectus or
supplement thereto, in light of the circumstances under which they were made)
not misleading, except to the extent, but only to the extent, that (i) such
untrue statements or omissions are based solely upon information regarding such
Purchaser furnished in writing to the Company by such Purchaser expressly for
use therein, or to the extent that such information relates to such Purchaser or
such Purchaser's proposed method of distribution of Registrable Securities and
was reviewed and expressly approved in writing by such Purchaser expressly for
use in the Registration Statement, such Prospectus or such form of Prospectus or
in any amendment or supplement thereto or (ii) in the case of an occurrence of
an event of the type specified in Section 6.2(c)(iv)-(vi), the use by such
Purchaser of an outdated or defective Prospectus after the Company has notified
such Purchaser in writing that the Prospectus is outdated or defective and prior
to the receipt by such Purchaser of the Advice contemplated in Section 6.5. The
Company shall notify the Purchasers promptly of the institution, threat or
assertion of any Proceeding of which the Company is aware in connection with the
transactions contemplated by this Agreement.
(b) Indemnification by Purchasers. Each Purchaser shall,
-----------------------------
severally and not jointly, indemnify and hold harmless the Company, its
directors, officers, agents and employees, each Person who controls the Company
(within the meaning of Section 15 of the Securities Act and Section 20 of the
Exchange Act), and the directors, officers, agents or employees of such
controlling Persons, to the fullest extent permitted by applicable law, from and
against all Losses (as determined by a court of competent jurisdiction in a
final judgment not subject to appeal or review) arising solely out of any untrue
statement of a material fact contained in any Registration Statement, any
Prospectus, or any form of prospectus, or in any amendment or supplement
thereto, or arising solely out of any omission of a material fact required to be
stated therein or necessary to make the statements therein not misleading to the
extent, but only to the extent, that such untrue statement or omission is
contained in any information so furnished in writing by such Purchaser to the
Company specifically for inclusion in such Registration Statement or such
Prospectus or to the extent that (i) such untrue statements or omissions are
based solely upon information regarding such Purchaser furnished in writing to
the Company by such Purchaser expressly for use therein, or to the extent that
such information relates to such Purchaser or such Purchaser's proposed method
of distribution of Registrable Securities and was reviewed and expressly
approved in writing by such Purchaser expressly for use in the Registration
Statement, such Prospectus or such form of Prospectus or in any amendment or
supplement thereto or (ii) in the case of an occurrence of an event of the type
specified in Section 6.2(c)(iv)-(vi), the use by such Purchaser of an outdated
----------------------
or defective Prospectus after the Company has notified such Purchaser in writing
that the Prospectus is outdated or defective and prior to the receipt by such
Purchaser of the Advice contemplated in Section 6.5. In no event shall the
-----------
liability of any selling Purchaser hereunder be greater in amount than the
dollar amount of the net proceeds received by such Purchaser upon the sale of
the Registrable Securities giving rise to such indemnification obligation.
25
(c) Conduct of Indemnification Proceedings. If any Proceeding
--------------------------------------
shall be brought or asserted against any Person entitled to indemnity hereunder
(an "Indemnified Party"), such Indemnified Party shall promptly notify the
Person from whom indemnity is sought (the "Indemnifying Party") in writing, and
the Indemnifying Party shall assume the defense thereof, including the
employment of counsel reasonably satisfactory to the Indemnified Party and the
payment of all fees and expenses incurred in connection with defense thereof;
provided, that the failure of any Indemnified Party to give such notice shall
not relieve the Indemnifying Party of its obligations or liabilities pursuant to
this Agreement, except (and only) to the extent that it shall be finally
determined by a court of competent jurisdiction (which determination is not
subject to appeal or further review) that such failure shall have proximately
and materially adversely prejudiced the Indemnifying Party.
An Indemnified Party shall have the right to employ separate
counsel in any such Proceeding and to participate in the defense thereof, but
the fees and expenses of such counsel shall be at the expense of such
Indemnified Party or Parties unless: (i) the Indemnifying Party has agreed in
writing to pay such fees and expenses; or (ii) the Indemnifying Party shall have
failed promptly to assume the defense of such Proceeding and to employ counsel
reasonably satisfactory to such Indemnified Party in any such Proceeding; or
(iii) the named parties to any such Proceeding (including any impleaded parties)
include both such Indemnified Party and the Indemnifying Party, and such
Indemnified Party shall have been advised by counsel that a conflict of interest
is likely to exist if the same counsel were to represent such Indemnified Party
and the Indemnifying Party (in which case, if such Indemnified Party notifies
the Indemnifying Party in writing that it elects to employ separate counsel at
the expense of the Indemnifying Party, the Indemnifying Party shall not have the
right to assume the defense thereof and such counsel shall be at the expense of
the Indemnifying Party). The Indemnifying Party shall not be liable for any
settlement of any such Proceeding effected without its written consent, which
consent shall not be unreasonably withheld. No Indemnifying Party shall, without
the prior written consent of the Indemnified Party, effect any settlement of any
pending Proceeding in respect of which any Indemnified Party is a party, unless
such settlement includes an unconditional release of such Indemnified Party from
all liability on claims that are the subject matter of such Proceeding.
All fees and expenses of the Indemnified Party (including
reasonable fees and expenses to the extent incurred in connection with
investigating or preparing to defend such Proceeding in a manner not
inconsistent with this Section) shall be paid to the Indemnified Party, as
incurred, within ten Trading Days of written notice thereof to the Indemnifying
Party (regardless of whether it is ultimately determined that an Indemnified
Party is not entitled to indemnification hereunder; provided, that the
Indemnifying Party may require such Indemnified Party to undertake to reimburse
all such fees and expenses to the extent it is finally judicially determined
that such Indemnified Party is not entitled to indemnification hereunder).
(d) Contribution. If a claim for indemnification under Section
------------ -------
6.4(a) or (b) is unavailable to an Indemnified Party (by reason of public policy
------ ---
or otherwise), then each Indemnifying Party, in lieu of indemnifying such
Indemnified Party, shall contribute to the amount paid or payable by such
Indemnified Party as a result of such Losses, in such proportion as is
appropriate to reflect the relative fault of the Indemnifying Party and
Indemnified Party in connection with the actions, statements or omissions that
resulted in such Losses as well as any
26
other relevant equitable considerations. The relative fault of such Indemnifying
Party and Indemnified Party shall be determined by reference to, among other
things, whether any action in question, including any untrue or alleged untrue
statement of a material fact or omission or alleged omission of a material fact,
has been taken or made by, or relates to information supplied by, such
Indemnifying Party or Indemnified Party, and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
action, statement or omission. The amount paid or payable by a party as a result
of any Losses shall be deemed to include, subject to the limitations set forth
in Section 6.4(c), any reasonable attorneys' or other reasonable fees or
-------------
expenses incurred by such party in connection with any Proceeding to the extent
such party would have been indemnified for such fees or expenses if the
indemnification provided for in this Section was available to such party in
accordance with its terms.
The parties hereto agree that it would not be just and equitable if
contribution pursuant to this Section 6.4(d) were determined by pro rata
-------------
allocation or by any other method of allocation that does not take into account
the equitable considerations referred to in the immediately preceding paragraph.
Notwithstanding the provisions of this Section 6.4(d), no Purchaser shall be
required to contribute, in the aggregate, any amount in excess of the amount by
which the proceeds actually received by such Purchaser from the sale of the
Registrable Securities subject to the Proceeding exceeds the amount of any
damages that such Purchaser has otherwise been required to pay by reason of such
untrue or alleged untrue statement or omission or alleged omission. 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.
The indemnity and contribution agreements contained in this Section
are in addition to any liability that the Indemnifying Parties may have to the
Indemnified Parties.
6.5 Dispositions. Each Purchaser agrees that it will comply with the
------------
prospectus delivery requirements of the Securities Act as applicable to it in
connection with sales of Registrable Securities pursuant to the Registration
Statement. Each Purchaser further agrees that, upon receipt of a notice from the
Company of the occurrence of any event of the kind described in Sections
--------
6.2(c)(iv), (v) or (vi), such Purchaser will discontinue disposition of such
--------- - --
Registrable Securities under the Registration Statement until such Purchaser's
receipt of the copies of the supplemented Prospectus and/or amended Registration
Statement contemplated by Section 6.2(i), or until it is advised in writing (the
-------------
"Advice") by the Company that the use of the applicable Prospectus may be
resumed, and, in either case, has received copies of any additional or
supplemental filings that are incorporated or deemed to be incorporated by
reference in such Prospectus or Registration Statement. The Company may provide
appropriate stop orders to enforce the provisions of this paragraph.
6.6 No Piggyback on Registrations. Except as and to the extent specified
-----------------------------
in Schedule 3.1(p) of the Disclosure Schedule, neither the Company nor any of
its security holders (other than the Purchasers in such capacity pursuant
hereto) may include securities of the Company in the Registration Statement
other than the Registrable Securities, and the Company shall not after the date
hereof enter into any agreement providing any such right to any of its security
holders.
27
6.7 Piggy-Back Registrations. If at any time during the Effectiveness
------------------------
Period there is not an effective Registration Statement covering all of the
Registrable Securities and the Company shall determine to prepare and file with
the Commission a registration statement relating to an offering for its own
account or the account of others under the Securities Act of any of its equity
securities, other than on Form S-4 or Form S-8 (each as promulgated under the
Securities Act) or their then equivalents relating to equity securities to be
issued solely in connection with any acquisition of any entity or business or
equity securities issuable in connection with stock option or other employee
benefit plans, then the Company shall send to each Purchaser written notice of
such determination and if, within fifteen days after receipt of such notice, any
such Purchaser shall so request in writing, the Company shall include in such
registration statement all or any part of such Registrable Securities such
Purchaser requests to be registered, subject to customary underwriter cutbacks
on terms no less favorable to the Purchasers than to any other holder of the
Company's securities.
ARTICLE VII
MISCELLANEOUS
7.1 Termination. This Agreement may be terminated by the Company or any
-----------
Purchaser, by written notice to the other parties, if the Closing has not been
consummated by the third business day following the date of this Agreement;
provided that no such termination will affect the right of any party to xxx for
any breach by the other party (or parties).
7.2 Fees and Expenses. At the Closing, the Company shall pay to Pine Ridge
-----------------
Financial Inc. an aggregate of $35,000 for their legal fees and expenses
incurred in connection with the preparation and negotiation of the Transaction
Documents. In lieu of the foregoing payment, Pine Ridge Financial Inc. may
retain such amount at the Closing or require the Company to pay such amount
directly to Purchaser Counsel. Except as expressly set forth in the Transaction
Documents to the contrary, each party shall pay the fees and expenses of its
advisers, counsel, accountants and other experts, if any, and all other expenses
incurred by such party incident to the negotiation, preparation, execution,
delivery and performance of this Agreement. The Company shall pay all transfer
agent fees, stamp taxes and other taxes and duties levied in connection with the
issuance of the Securities.
7.3 Entire Agreement. The Transaction Documents, together with the
----------------
Exhibits and Schedules thereto, contain the entire understanding of the parties
with respect to the subject matter hereof (including, without limitation, any
right to purchase Common Stock or other securities of the Company) and supersede
all prior agreements and understandings, oral or written, with respect to such
matters, which the parties acknowledge have been merged into such documents,
exhibits and schedules. At or after the Closing, and without further
consideration, the Company will execute and deliver to the Purchasers such
further documents as may be reasonably requested in order to give practical
effect to the intention of the parties under the Transaction Documents.
7.4 Notices. Any and all notices or other communications or deliveries
-------
required or permitted to be provided hereunder shall be in writing and shall be
deemed given and effective on the earliest of (a) the date of transmission, if
such notice or communication is delivered via facsimile at the facsimile number
specified in this Section prior to 5:30 p.m. (New York City
28
time) on a Trading Day, (b) the next Trading Day after the date of transmission,
if such notice or communication is delivered via facsimile at the facsimile
number specified in this Section on a day that is not a Trading Day or later
than 5:30 p.m. (New York City time) on any Trading Day, (c) the Trading Day
following the date of mailing, if sent by U.S. nationally recognized overnight
courier service, or (d) upon actual receipt by the party to whom such notice is
required to be given. The addresses for such notices and communications are
those set forth on the signature pages hereof, or such other address as may be
designated in writing hereafter, in the same manner, by such Person.
7.5 Amendments; Waivers. No provision of this Agreement may be waived or
-------------------
amended except in a written instrument signed, in the case of an amendment, by
the Company and each of the Purchasers or, in the case of a waiver, by the party
against whom enforcement of any such waiver is sought. No waiver of any default
with respect to any provision, condition or requirement of this Agreement shall
be deemed to be a continuing waiver in the future or a waiver of any subsequent
default or a waiver of any other provision, condition or requirement hereof, nor
shall any delay or omission of either party to exercise any right hereunder in
any manner impair the exercise of any such right. Notwithstanding the foregoing,
a waiver or consent to depart from the provisions hereof with respect to a
matter that relates exclusively to the rights of Purchasers under Article VI and
----------
that does not directly or indirectly affect the rights of other Purchasers may
be given by Purchasers holding at least a majority of the Registrable Securities
to which such waiver or consent relates.
7.6 Construction. The headings herein are for convenience only, do not
------------
constitute a part of this Agreement and shall not be deemed to limit or affect
any of the provisions hereof. The language used in this Agreement will be deemed
to be the language chosen by the parties to express their mutual intent, and no
rules of strict construction will be applied against any party.
7.7 Successors and Assigns. This Agreement shall be binding upon and inure
----------------------
to the benefit of the parties and their successors and permitted assigns. The
Company may not assign this Agreement or any rights or obligations hereunder
without the prior written consent of the Purchasers. Any Purchaser may assign
its rights under this Agreement to any Person to whom such Purchaser assigns or
transfers any Securities, provided such transferee agrees in writing to be
bound, with respect to the transferred Securities, by the provisions hereof that
apply to the "Purchasers."
7.8 No Third-Party Beneficiaries. This Agreement is intended for the
----------------------------
benefit of the parties hereto and their respective successors and permitted
assigns and is not for the benefit of, nor may any provision hereof be enforced
by, any other Person, except that each Related Person is an intended third party
beneficiary of Section 4.8 and each Indemnified Party is an intended third party
beneficiary of Section 6.4 and (in each case) may enforce the provisions of such
Sections directly against the parties with obligations thereunder.
7.9 Governing Law; Venue; Waiver Of Jury Trail. The Corporate Laws Of The
------------------------------------------
State Of Delaware Shall Govern All Issues Concerning The Relative Rights Of The
Company And Its Stockholders. All Questions Concerning The Construction,
Validity, Enforcement And Interpretation Of This Agreement Shall Be Governed By
And Construed And Enforced In Accordance With The Laws Of The State Of New York.
Each Party Hereby Irrevocably Submits To The Exclusive Jurisdiction Of The State
And Federal
29
Courts Sitting In The City Of New York, Borough Of Manhattan, For The
Adjudication Of Any Dispute Hereunder Or In Connection Herewith Or With Any
Transaction Contemplated Hereby Or Discussed Herein (Including With Respect To
The Enforcement Of Any Of The Transaction Documents), And Hereby Irrevocably
Waives, And Agrees Not To Assert In Any Suit, Action Or Proceeding, Any Claim
That It Is Not Personally Subject To The Jurisdiction Of Any Such Court, That
Such Suit, Action Or Proceeding Is Improper. Each Party Hereby Irrevocably
Waives Personal Service Of Process And Consents To Process Being Served In Any
Such Suit, Action Or Proceeding By Mailing A Copy Thereof Via Registered Or
Certified Mail Or Overnight Delivery (With Evidence Of Delivery) To Such Party
At The Address In Effect For Notices To It Under This Agreement And Agrees That
Such Service Shall Constitute Good And Sufficient Service Of Process And Notice
Thereof. Nothing Contained Herein Shall Be Deemed To Limit In Any Way Any Right
To Serve Process In Any Manner Permitted By Law. The Company Hereby Waives All
Rights To A Trial By Jury.
7.10 Survival. The representations, warranties, agreements and covenants
--------
contained herein shall survive the Closing and the delivery and/or exercise of
the Securities, as applicable.
7.11 Execution. This Agreement may be executed in two or more
---------
counterparts, all of which when taken together shall be considered one and the
same agreement and shall become effective when counterparts have been signed by
each party and delivered to the other party, it being understood that both
parties need not sign the same counterpart. In the event that any signature is
delivered by facsimile transmission, such signature shall create a valid and
binding obligation of the party executing (or on whose behalf such signature is
executed) with the same force and effect as if such facsimile signature page
were an original thereof.
7.12 Severability. If any provision of this Agreement is held to be
------------
invalid or unenforceable in any respect, the validity and enforceability of the
remaining terms and provisions of this Agreement shall not in any way be
affected or impaired thereby and the parties will attempt to agree upon a valid
and enforceable provision that is a reasonable substitute therefor, and upon so
agreeing, shall incorporate such substitute provision in this Agreement.
7.13 Rescission and Withdrawal Right. Notwithstanding anything to the
-------------------------------
contrary contained in (and without limiting any similar provisions of) the
Transaction Documents, whenever any Purchaser exercises a right, election,
demand or option under a Transaction Document and the Company does not timely
perform its related obligations within the periods therein provided, then such
Purchaser may rescind or withdraw, in its sole discretion from time to time upon
written notice to the Company, any relevant notice, demand or election in whole
or in part without prejudice to its future actions and rights.
7.14 Replacement of Securities. If any certificate or instrument
-------------------------
evidencing any Securities is mutilated, lost, stolen or destroyed, the Company
shall issue or cause to be issued in exchange and substitution for and upon
cancellation thereof, or in lieu of and substitution therefor, a new certificate
or instrument, but only upon receipt of evidence reasonably satisfactory to the
Company of such loss, theft or destruction and customary and reasonable
indemnity, if requested. The applicants for a new certificate or instrument
under such circumstances shall also pay any reasonable third-party costs
associated with the issuance of such replacement Securities.
30
7.15 Remedies. In addition to being entitled to exercise all rights
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provided herein or granted by law, including recovery of damages, each of the
Purchasers and the Company will be entitled to specific performance under the
Transaction Documents. The parties agree that monetary damages may not be
adequate compensation for any loss incurred by reason of any breach of
obligations described in the foregoing sentence and hereby agrees to waive in
any action for specific performance of any such obligation the defense that a
remedy at law would be adequate.
7.16 Independent Nature of Purchasers' Obligations and Rights. The
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obligations of each Purchaser under any Transaction Document are several and not
joint with the obligations of any other Purchaser, and no Purchaser shall be
responsible in any way for the performance of the obligations of any other
Purchaser under any Transaction Document. The decision of each Purchaser to
purchase Shares pursuant to this Agreement has been made by such Purchaser
independently of any other Purchaser and independently of any information,
materials, statements or opinions as to the business, affairs, operations,
assets, properties, liabilities, results of operations, condition (financial or
otherwise) or prospects of the Company or of the Subsidiary which may have been
made or given by any other Purchaser or by any agent or employee of any other
Purchaser, and no Purchaser or any of its agents or employees shall have any
liability to any other Purchaser (or any other person) relating to or arising
from any such information, materials, statements or opinions. Nothing contained
herein or in any Transaction Document, and no action taken by any Purchaser
pursuant thereto, shall be deemed to constitute the Purchasers as a partnership,
an association, a joint venture or any other kind of entity, or create a
presumption that the Purchasers are in any way acting in concert or as a group
with respect to such obligations or the transactions contemplated by the
Transaction Document. Each Purchaser acknowledges that no other Purchaser has
acted as agent for such Purchaser in connection with making its investment
hereunder and that no other Purchaser will be acting as agent of such Purchaser
in connection with monitoring its investment hereunder. Each Purchaser shall be
entitled to independently protect and enforce its rights, including, without
limitation, the rights arising out of this Agreement or out of the other
Transaction Documents, and it shall not be necessary for any other Purchaser to
be joined as an additional party in any proceeding for such purpose.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK
SIGNATURE PAGES FOLLOW]
31
IN WITNESS WHEREOF, the parties hereto have caused this Securities Purchase
Agreement to be duly executed by their respective authorized signatories as of
the date first indicated above.
MERCATOR SOFTWARE, INC.
By: __________________________
Name: __________________________
Title: __________________________
Address for Notice:
00 Xxxxxxx Xxxx
Xxxxxx, Xxxxxxxxxxx 00000
Facsimile No.: (000) 000-0000
Telephone No.: (000) 000-0000
Attn:
With a copy to: Jenkens & Xxxxxxxxx Xxxxxx Xxxxxx LLP
The Chrysler Building
000 Xxxxxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Facsimile No.: (000) 000-0000
Telephone No.: (000) 000-0000
Attn: Xxxxxxx Xxxxxxxx, Esq.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK
SIGNATURE PAGES FOR PURCHASERS FOLLOW]
32
PINE RIDGE FINANCIAL INC.
By: _____________________________
Name: _____________________________
Title: _____________________________
Purchase Price: $8,499,999.92
Number of Shares to be acquired: 1,183,844
Underlying Shares subject to Warrant: 295,961
Address for Notice:
Pine Ridge Financial Inc.
c/x Xxxxxxx Capital Corp.
000 Xxxxxxx Xxxxxx
Xxx Xxxx, XX 00000
Facsimile No.: (000) 000-0000
Telephone No.:
Attn: Avi Vigder
With a copy to: Proskauer Rose LLP
0000 Xxxxxxxx
Xxx Xxxx, Xxx Xxxx 00000-0000
Facsimile No.: (000) 000-0000
Telephone No.: (000) 000-0000
Attn: Xxxx X. Xxxxxxx, Esq.
33
CRANSHIRE CAPITAL, L.P.
By: Downsview Capital, Inc., its general partner
By: __________________________
Name: __________________________
Title: __________________________
Purchase Price: $2,999,997.86
Number of Shares to be acquired: 417,827
Underlying Shares subject to Warrant: 104,457
Address for Notice:
Cranshire Capital, L.P.
000 Xxxxxx Xxxx, Xxxxx 0000
Xxxxxxxxxx, XX 00000
Facsimile No.: (000) 000-0000
Telephone No.: (000) 000-0000
Attn: Xxxxxxxx X. Xxxxx
34
ZLP MASTER TECHNOLOGY FUND, LTD.
By: ___________________________
Name: ___________________________
Title: ___________________________
Purchase Price: $2,999,997.86
Number of Shares to be acquired: 417,827
Underlying Shares subject to Warrant: 104,457
Address for Notice:
ZLP Master Technology Fund, Ltd.
C/o Xxxxxx Xxxxx Partners, LLC
00 Xxxxxxxx, 00/xx/ Xxxxx
Xxx Xxxx, XX 00000
Facsimile No.: (000) 000-0000
Telephone No.:
Attn: Xxxx Xxxxx
35
CLEVELAND OVERSEAS LTD.
By: __________________________
Name: __________________________
Title: __________________________
By: __________________________
Name: __________________________
Title: __________________________
Purchase Price: $1,000,001.68
Number of Shares to be acquired: 139,276
Underlying Shares subject to Warrant: 34,819
Address for Notice:
Cleveland Overseas Ltd.
c/o Vertical Ventures, LLC
000 Xxxxx Xxxxxx, 00/xx/ Xxxxx
Xxx Xxxx, XX 00000
Facsimile No.: (000) 000-0000
Telephone No.: (000) 000-0000
Attn: Xxxxxx Xxxxxxxxx
36
ST CAPITAL PARTNERS, LP
By: ST Advisers, LLC, its general partner
By: __________________________
Name: Xxxxx Xxxxxxx, Jr.
Title: Managing Director
Purchase Price: $500,000.84
Number of Shares to be acquired: 69,638
Underlying Shares subject to Warrant: 17,410
Address for Notice:
ST Capital Partners
c/o ST Advisers, LLC
000 Xxxxx Xxxxxx, 0/xx/ Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Facsimile No.: (000) 000-0000
Telephone No.: (000) 000-0000
Attn: Xxxxx Xxxxxxx
37
Exhibits:
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A Form of Closing Warrant
B-1 Opinion of Company Counsel
B-2 Opinion of General Counsel of the Company
C Plan of Distribution
Disclosure Schedules:
--------------------
3.1(a) Subsidiaries
3.1(f) Capitalization
3.1(g) SEC Reports
3.1(h) Material Changes
3.1(i) Absence of Litigation
3.1(k) Title to Assets
3.1(l) Brokers and Finders Fees
3.1(p) Registration Rights
3.1(q) Takeover Protections
38
