EXHIBIT 10.16
PURCHASE AGREEMENT
THIS PURCHASE AGREEMENT ("Agreement") is made as of the 8th day of
August, 2002 by and among Artisoft, Inc., a Delaware corporation (the
"Company"), and the Investors set forth on the signature pages affixed hereto
(each an "Investor" and collectively the "Investors").
RECITALS
A. The Company and the Investors are executing and delivering this
Agreement in reliance upon the exemption from securities registration afforded
by the provisions of Regulation D ("Regulation D"), as promulgated by the U.S.
Securities and Exchange Commission (the "SEC") under the Securities Act of 1933,
as amended; and
B. The Investors wish to purchase from the Company, and the Company
wishes to sell and issue to the Investors, upon the terms and subject to the
conditions stated in this Agreement, an aggregate of 1,904,800 shares of common
stock, par value $.01 per share, of the Company (the "Shares") at a per share
purchase price of $1.05 (the "Purchase Price"); and
C. At the closing of the purchase of the Shares, the parties hereto
will execute and deliver a Registration Rights Agreement, in the form attached
hereto as Exhibit A (the "Registration Rights Agreement"), pursuant to which the
Company will provide certain registration rights under the Securities Act of
1933, as amended and the rules and regulations promulgated thereunder, and
applicable state securities laws.
In consideration of the mutual promises made herein and for other good
and valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties hereto agree as follows:
1. DEFINITIONS. In addition to those terms defined above and elsewhere in
this Agreement, for the purposes of this Agreement, the following terms shall
have the meanings here set forth:
"AFFILIATE" means, with respect to any Person, any other Person which
directly or indirectly Controls, is controlled by, or is under common control
with, such Person.
"AGGREGATE PURCHASE PRICE" means Two Million Forty Dollars
($2,000,040).
"AGREEMENTS" means this Agreement, and the Registration Rights
Agreement.
"COMMON STOCK" means the common stock, $0.01 par value per share, of
the Company, and any capital stock of any class of the Company hereafter
authorized that shall not be entitled to a fixed sum in respect of the rights of
the holders thereof to participate in dividends or in the distribution of assets
upon the voluntary or involuntary liquidation, dissolution or winding up of the
Company.
"CONTROL" means the possession, direct or indirect, of the power to
direct or cause the direction of the management and policies of a Person,
whether through the ownership of voting securities, by contract or otherwise.
"COMPANY'S KNOWLEDGE" means the actual knowledge of the "executive
officers" (as such term is defined in Rule 405 promulgated under the 0000 Xxx)
of the Company after due inquiry.
"INTELLECTUAL PROPERTY" means all of the following: (i) patents,
patent applications, patent disclosures and inventions (whether or not
patentable and whether or not reduced to practice); (ii) trademarks, service
marks, trade dress, trade names, corporate names, logos, slogans and Internet
domain names, together with all goodwill associated with each of the foregoing;
(iii) copyrights and copyrightable works; (iv) registrations, applications and
renewals for any of the foregoing; (v) trade secrets, confidential information
and know-how (including but not limited to ideas, formulae, compositions,
manufacturing and production processes and techniques, research and development
information, drawings, specifications, designs, business and marketing plans,
and customer and supplier lists and related information); and (vi) computer
software (including but not limited to data, data bases and documentation).
"MATERIAL ADVERSE EFFECT" means a material adverse effect on the
assets, liabilities, results of operations, condition (financial or otherwise),
business, or prospects of the Company and its subsidiaries taken as a whole.
"NASDAQ" means The Nasdaq Stock Market, Inc., its successors and
assigns.
"PERSON" means an individual, corporation, partnership, limited
liability company, trust, business trust, association, joint stock company,
joint venture, sole proprietorship, unincorporated organization, governmental
authority or any other form of entity not specifically listed herein.
"REQUIRED INVESTORS" means the Investors holding a majority of the
Shares held by all Investors at the time of determination.
"PRIOR AGREEMENTS" means (i) the Purchase Agreement, dated as of
August 8, 2001, among the Company and the investors named therein, including the
schedules and exhibits thereto and the other certificates and instruments
delivered pursuant thereto (the "Prior Purchase Agreement"), (ii) the
Certificate of Designations, Preferences and Rights of Series B Convertible
Preferred Stock of the Company filed by the Company pursuant to the Prior
Purchase Agreement, (iii) the warrants issued by the Company pursuant to the
Prior Purchase Agreement, and any replacement warrants issued in respect
thereof, (iv) the Registration Rights Agreement, dated as of August 8, 2001, by
and among the Company and the investors named therein and (v) the Voting
Agreement, dated as of February 28, 2002, by and among the Company and the
stockholders named therein.
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"SEC FILINGS" has the meaning set forth in Section 4.6.
"SHARES" means the shares of Common Stock being purchased by the
Investors hereunder.
"SUBSIDIARY" has the meaning set forth in Section 4.1.
"1933 ACT" means the Securities Act of 1933, as amended, and the rules
and regulations promulgated thereunder.
"1934 ACT" means the Securities Exchange Act of 1934, as amended, and
the rules and regulations promulgated thereunder.
2. PURCHASE AND SALE OF THE SHARES. Subject to the terms and conditions of
this Agreement, on the Closing Date, each of the Investors shall severally, and
not jointly, purchase, and the Company shall sell and issue to the Investors,
the Shares in the respective amounts and for the respective portion of the
Aggregate Purchase Price set forth opposite each Investor's name on the
signature pages attached hereto.
3. CLOSING. Upon confirmation that the conditions to closing specified
herein have been satisfied, the Company shall deliver to Xxxxxxxxxx Xxxxxxx PC,
in trust, a certificate or certificates, registered in such name or names as the
Investors may designate, representing the Shares, with instructions that such
certificates are to be held for release to the Investors only upon payment of
the Aggregate Purchase Price to the Company. Upon receipt by Xxxxxxxxxx Xxxxxxx
PC of the certificates, each Investor shall promptly cause a wire transfer in
same day funds to be sent to the account of the Company as instructed in writing
by the Company, in an amount representing such Investor's pro rata portion of
the Aggregate Purchase Price as set forth on the signature pages to this
Agreement. On the date (the "Closing Date") the Company receives such funds, the
certificates evidencing the Shares shall be released to the Investors (the
"Closing"). The purchase and sale of the Shares shall take place at the offices
of Xxxxxxxxxx Xxxxxxx PC, 1330 Avenue of the Americas, 21st Floor, New York, New
York, or at such other location and on such other date as the Company and the
Investors shall mutually agree.
4. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company hereby
represents and warrants to the Investors that, except as set forth in the
Schedules delivered herewith:
4.1 ORGANIZATION, GOOD STANDING AND QUALIFICATION. Each of the Company
and its Subsidiaries is a corporation duly incorporated, validly existing and in
good standing under the laws of the jurisdiction of its incorporation and has
all requisite corporate power and authority to carry on its business as now
conducted and own its properties. Each of the Company and its Subsidiaries is
duly qualified to do business as a foreign corporation and is in good standing
in each jurisdiction in which the conduct of its business or its ownership or
leasing of property makes such qualification or leasing necessary unless the
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failure to so qualify has not and could not reasonably be expected to have a
Material Adverse Effect. The Company's subsidiaries are reflected on SCHEDULE
4.1 hereto (the "Subsidiaries").
4.2 AUTHORIZATION. The Company has full power and authority and has
taken all requisite action on the part of the Company, its officers, directors
and stockholders necessary for (i) the authorization, execution and delivery of
the Agreements, (ii) authorization of the performance of all obligations of the
Company hereunder or thereunder, other than the approval of the Proposal (as
defined in Section 7.11 of this Agreement) by the Company's stockholders in
accordance with applicable law and stock market rules and regulations, and (iii)
the authorization, issuance and delivery of the Shares, other than the approval
of the Proposal by the Company's stockholders in accordance with applicable law
and stock market rules and regulations. The Agreements constitute the legal,
valid and binding obligations of the Company, enforceable against the Company in
accordance with their terms, subject to bankruptcy, insolvency, fraudulent
transfer, reorganization, moratorium and similar laws of general applicability,
relating to or affecting creditors' rights generally.
4.3 CAPITALIZATION. Set forth on SCHEDULE 4.3 hereto is (a) the
authorized capital stock of the Company on the date hereof; (b) the number of
shares of capital stock issued and outstanding on the last business day
immediately prior to the date hereof; (c) the number of shares of capital stock
issuable pursuant to the Company's stock plans on the last business day
immediately prior to the date hereof; and (d) the number of shares of capital
stock issuable and reserved for issuance pursuant to securities (other than the
Shares) exercisable for, or convertible into or exchangeable for any shares of
capital stock of the Company on the last business day immediately prior to the
date hereof. All of the issued and outstanding shares of the Company's capital
stock have been duly authorized and validly issued and are fully paid,
nonassessable and free of pre-emptive rights and were issued in full compliance
with applicable law. All of the issued and outstanding shares of capital stock
of each Subsidiary have been duly authorized and validly issued and are fully
paid, nonassessable and free of pre-emptive rights, were issued in full
compliance with applicable law and are owned by the Company, beneficially and of
record, subject to no lien, encumbrance or other adverse claim. Except as set
forth in the Prior Agreements, no Person is entitled to pre-emptive or similar
statutory or contractual rights with respect to any securities of the Company.
Except as set forth in the Prior Agreements, there are no outstanding warrants,
options, convertible securities or other rights, agreements or arrangements of
any character under which the Company or any of its Subsidiaries is or may be
obligated to issue any equity securities of any kind and except as contemplated
by this Agreement, neither the Company nor any of its Subsidiaries is currently
in negotiations for the issuance of any equity securities of any kind. Except
for the Registration Rights Agreement and the Prior Agreements, there are no
voting agreements, buy-sell agreements, option or right of first purchase
agreements or other agreements of any kind among the Company and any of the
securityholders of the Company relating to the securities of the Company held by
them. Except for the Prior Agreements, the Company has not granted any Person
the right, which is presently in effect or could arise in the future, to require
the Company to register any securities of the Company under the 1933 Act,
whether on a demand basis or in connection with the registration of securities
of the Company for its own account or for the account of any other Person.
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4.4 VALID ISSUANCE. The Shares have been duly and validly authorized
and, when issued and paid for pursuant to this Agreement, will be validly
issued, fully paid and nonassessable free and clear of all encumbrances and
restrictions, except for restrictions on transfer set forth in this Agreement or
imposed by applicable securities laws.
4.5 CONSENTS. Other than the approval of the Proposal by the Company's
stockholders in accordance with applicable law and stock market rules and
regulations and related filings under applicable federal securities laws, the
execution, delivery and performance by the Company of the Agreements and the
offer, issuance and sale of the Shares require no consent of, action by or in
respect of, or filing with, any Person, governmental body, agency, or official
other than filings that have been made pursuant to applicable state securities
laws and post-sale filings pursuant to applicable state and federal securities
laws which the Company undertakes to file within the applicable time periods.
The Company has taken all action necessary to exempt the sale of the Shares and
the other transactions contemplated by this Agreement from the provisions of
Section 203 of the Delaware General Corporation Law.
4.6 DELIVERY OF SEC FILINGS; BUSINESS. The Company has provided the
Investors with copies of the Company's most recent Annual Report on Form 10-K
for the fiscal year ended June 30, 2001 (the "10-K"), and all other reports
filed by the Company pursuant to the 1934 Act since the filing of the 10-K and
prior to the date hereof (collectively, the "SEC Filings"). The SEC Filings are
the only filings required of the Company pursuant to the 1934 Act for such
period. The Company and its Subsidiaries are engaged only in the business
described in the SEC Filings and the SEC Filings contain a complete and accurate
description in all material respects of the business of the Company and its
Subsidiaries, taken as a whole.
4.7 USE OF PROCEEDS. The proceeds of the sale of the Common Stock and
the Warrants hereunder shall be used by the Company for working capital and
general corporate purposes.
4.8 NO MATERIAL ADVERSE CHANGE. Since June 30, 2001, except as
identified and described in the SEC Filings and except for the Prior Agreements
and the transactions specified therein, there has not been:
(i) any change in the consolidated assets, liabilities, financial
condition or operating results of the Company from that reflected in the
financial statements included in the Company's most recent Quarterly Report on
Form 10-Q, except changes in the ordinary course of business which have not and
could not reasonably be expected to have a Material Adverse Effect;
(ii) any declaration or payment of any dividend, or any
authorization or payment of any distribution, on any of the capital stock of the
Company, or any redemption or repurchase of any securities of the Company;
(iii) any material damage, destruction or loss, whether or not
covered by insurance to any assets or properties of the Company or its
Subsidiaries;
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(iv) any waiver, not in the ordinary course of business, by the
Company or any Subsidiary of a material right or of a material debt owed to it;
(v) any satisfaction or discharge of any lien, claim or
encumbrance or payment of any obligation by the Company or a Subsidiary, except
in the ordinary course of business and which is not material to the assets,
properties, financial condition, operating results or business of the Company
and its Subsidiaries taken as a whole (as such business is presently conducted);
(vi) any change or amendment to the Company's Certificate of
Incorporation or by-laws, or material change to any material contract or
arrangement by which the Company or any Subsidiary is bound or to which any of
their respective assets or properties is subject;
(vii) any material labor difficulties or, to the Company's
Knowledge, labor union organizing activities with respect to employees of the
Company or any Subsidiary;
(viii) any material transaction entered into by the Company or a
Subsidiary other than in the ordinary course of business;
(ix) the loss of the services of any key employee, or material
change in the composition or duties of the senior management of the Company or
any Subsidiary;
(x) the loss or threatened loss of any customer which has had or
is reasonably expected to have a Material Adverse Effect; or
(xi) any other event or condition of any character that has had
or is reasonably be expected to have a Material Adverse Effect.
4.9 SEC FILINGS; S-3 ELIGIBILITY.
(a) At the time of filing thereof, the SEC Filings complied as to
form in all material respects with the requirements of the 1934 Act and did 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 the light of the
circumstances under which they were made, not misleading.
(b) During the preceding two years, each registration statement
and any amendment thereto filed by the Company pursuant to the 1933 Act and the
rules and regulations thereunder, as of the date such statement or amendment
became effective, complied as to form in all material respects with the 1933 Act
and did not contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary in order to make the
statements made therein, in light of the circumstances under which they were
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made, not misleading; and each prospectus filed pursuant to Rule 424(b) under
the 1933 Act, as of its issue date and as of the closing of any sale of
securities pursuant thereto did not contain any untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary in order to make the statements made therein, in the light of the
circumstances under which they were made, not misleading.
(c) The Company meets the registrant requirements for use of Form
S-3 set forth in General Instruction I.A. of Form S-3. As of the date hereof,
the sale by the Investors of the Registrable Securities (as such term is defined
in the Registration Rights Agreement) meets the transaction requirements for use
of Form S-3 set forth in General Instruction I.B.3. of Form S-3.
4.10 NO CONFLICT, BREACH, VIOLATION OR DEFAULT. The execution,
delivery and performance of the Agreements by the Company and the issuance and
sale of the Shares will not conflict with or result in a breach or violation of
any of the terms and provisions of, or constitute a default under (i) the
Company's Certificate of Incorporation or the Company's Bylaws, both as in
effect on the date hereof (copies of which have been provided to the Investors
before the date hereof), or (ii)(a) any statute, rule, regulation or order of
any governmental agency or body or any court, domestic or foreign, having
jurisdiction over the Company, any Subsidiary or any of their respective assets
or properties, or (b) any agreement or instrument to which the Company or any
Subsidiary is a party or by which the Company or a Subsidiary is bound or to
which any of their respective assets or properties is subject, other than, in
the case of (ii), such conflicts, breaches or violations as, individually or in
the aggregate, have not and could not reasonably be expected to have a Material
Adverse Effect.
4.11 TAX MATTERS. The Company and each Subsidiary has timely prepared
and filed (within all applicable extension periods) all tax returns required to
have been filed by the Company or such Subsidiary with all appropriate
governmental agencies and timely paid all taxes owed by it. The charges,
accruals and reserves on the books of the Company in respect of taxes for all
fiscal periods are adequate in all material respects, and there are no material
unpaid assessments against the Company or any Subsidiary nor, to the Company's
Knowledge, any basis for the assessment of any additional taxes, penalties or
interest for any fiscal period or audits by any federal, state or local taxing
authority except for any assessment which is not material to the Company and its
Subsidiaries, taken as a whole. All taxes and other assessments and levies that
the Company or any Subsidiary is required to withhold or to collect for payment
have been duly withheld and collected and paid to the proper governmental entity
or third party when due. There are no tax liens or claims pending or, to the
Company's Knowledge, threatened against the Company or any Subsidiary or any of
their respective assets or property. There are no outstanding tax sharing
agreements or other such arrangements between the Company and any Subsidiary or
other corporation or entity.
4.12 TITLE TO PROPERTIES. Except as disclosed in the SEC Filings, the
Company and each Subsidiary has good and marketable title to all real properties
and all other properties and assets owned by it, in each case free from liens,
encumbrances and defects that would materially affect the value thereof or
materially interfere with the use made or currently planned to be made thereof
by them; and except as disclosed in the SEC Filings, the Company and each
Subsidiary holds any leased real or personal property under valid and
enforceable leases with no exceptions that would materially interfere with the
use made or currently planned to be made thereof by them.
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4.13 CERTIFICATES, AUTHORITIES AND PERMITS. Except as has not and
could not reasonably be expected to have a Material Adverse Effect, the Company
and each Subsidiary possesses adequate certificates, authorities or permits
issued by appropriate governmental agencies or bodies necessary to conduct the
business now operated by it, and neither the Company nor any Subsidiary has
received any notice of proceedings relating to the revocation or modification of
any such certificate, authority or permit that, if determined adversely to the
Company or such Subsidiary, could reasonably be expected to have a Material
Adverse Effect, individually or in the aggregate.
4.14 NO LABOR DISPUTES. No material labor dispute with the employees
of the Company or any Subsidiary exists or, to the Company's Knowledge, is
imminent.
4.15 INTELLECTUAL PROPERTY.
(a) All registered or issued Intellectual Property of the Company
and its Subsidiaries is currently in compliance in all material respects with
all legal requirements (including timely filings, proofs and payments of fees)
and is valid and enforceable. No registered Intellectual Property of the Company
or its Subsidiaries which is necessary for the conduct of Company's and each of
its Subsidiaries' respective businesses as currently conducted or as currently
proposed to be conducted has been or is now involved in any cancellation,
dispute or litigation, and, to the Company's Knowledge, no such action is
threatened. No patent of the Company or its Subsidiaries has been or is now
involved in any interference, reissue, re-examination or opposition proceeding.
(b) All of the licenses, sublicenses, consent, royalty or other
agreements concerning Intellectual Property which is necessary for the conduct
of Company's and each of its Subsidiaries' respective businesses as currently
conducted or as currently proposed to be conducted to which the Company or any
Subsidiary is a party or by which any of their assets are bound (other than
generally commercially available, non-custom, off-the-shelf software application
programs having a retail acquisition price of less than $10,000 per license)
(collectively, "LICENSE AGREEMENTS") are valid and binding obligations of the
Company or its Subsidiaries that are parties thereto and, to the Company's
Knowledge, the other parties thereto, enforceable in accordance with their
terms, except to the extent that enforcement thereof may be limited by
bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance or
other similar laws affecting the enforcement of creditors' rights generally,
and, to the Company's Knowledge, there exists no event or condition which will
result in a material violation or breach of, or constitute (with or without due
notice or lapse of time or both) a default by the Company or any of its
Subsidiaries under any such License Agreement.
(c) The Company and its Subsidiaries own or have the valid right
to use all of the Intellectual Property necessary for the conduct of the
Company's and each of its Subsidiaries' businesses substantially as currently
conducted and for the ownership, maintenance and operation of the Company's and
its Subsidiaries' properties and assets.
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(d) The Intellectual Property which is necessary for the conduct
of the Company's and each of its Subsidiaries' respective businesses as
currently conducted or as currently proposed to be conducted is owned by the
Company or its Subsidiaries, as the case may be, free and clear of all liens,
encumbrances, adverse claims or obligations to license all such owned
Intellectual Property, other than licenses entered into in the ordinary course
of the Company's and its Subsidiaries' businesses. The Company and its
Subsidiaries have a valid and enforceable right to use all other Intellectual
Property used or held for use in the respective businesses of the Company and
its Subsidiaries. The Company and its Subsidiaries have the right to use all of
the owned and licensed Intellectual Property which is necessary for the conduct
of Company's and each of its Subsidiaries' respective businesses as currently
conducted or as currently proposed to be conducted in all jurisdictions in which
they conduct their businesses.
(e) The Company and each of its Subsidiaries have taken all
reasonable steps to maintain, police and protect the Intellectual Property which
it owns and which is necessary for the conduct of Company's and each of its
Subsidiaries' respective businesses as currently conducted or as currently
proposed to be conducted, including the execution of appropriate confidentiality
agreements and intellectual property and work product assignments and releases.
The conduct of the Company's and its Subsidiaries' businesses as currently
conducted does not, to the Company's Knowledge, infringe or otherwise impair or
conflict with (collectively, "Infringe") any Intellectual Property rights of any
third party, and, to the Company's Knowledge, the Intellectual Property rights
of the Company and its Subsidiaries which are necessary for the conduct of
Company's and each of its Subsidiaries' respective businesses as currently
conducted or as currently proposed to be conducted are not being Infringed by
any third party. There is no litigation or order pending or outstanding or, to
the Company's Knowledge, threatened or imminent, that seeks to limit or
challenge or that concerns the ownership, use, validity or enforceability of any
Intellectual Property of the Company and its Subsidiaries and the Company's and
its Subsidiaries' use of any Intellectual Property owned by a third party, and,
to the Company's Knowledge, there is no valid basis for the same.
(f) The consummation of the transactions contemplated hereby will
not result in the alteration, loss, impairment of or restriction on the
Company's or any of its Subsidiaries' ownership or right to use any of the
Intellectual Property which is necessary for the conduct of Company's and each
of its Subsidiaries' respective businesses as currently conducted or as
currently proposed to be conducted.
(g) All software owned by the Company or any of its Subsidiaries,
and, to the Company's Knowledge, all software licensed from third parties by the
Company or any of its Subsidiaries, (i) is free from any material defect, bug,
virus, or programming, design or documentation error; (ii) operates and runs in
a reasonable and efficient business manner; and (iii) conforms in all material
respects to the specifications and purposes thereof.
(h) The Company and its Subsidiaries have taken reasonable steps
to protect the Company's and its Subsidiaries' rights in their confidential
information and trade secrets. Each employee, consultant and contractor who has
had access to proprietary Intellectual Property which is necessary for the
conduct of Company's and each of its Subsidiaries' respective businesses as
currently conducted or as currently proposed to be conducted has executed an
agreement to maintain the confidentiality of such Intellectual Property and has
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executed appropriate agreements that are substantially consistent with the
Company's standard forms thereof. Except under confidentiality obligations,
there has been no material disclosure of any of the Company's or its
Subsidiaries' confidential information or trade secrets to any third party.
4.16 ENVIRONMENTAL MATTERS. Neither the Company nor any Subsidiary is
in violation of any statute, rule, regulation, decision or order of any
governmental agency or body or any court, domestic or foreign, relating to the
use, disposal or release of hazardous or toxic substances or relating to the
protection or restoration of the environment or human exposure to hazardous or
toxic substances (collectively, "Environmental Laws"), owns or operates any real
property contaminated with any substance that is subject to any Environmental
Laws, is liable for any off-site disposal or contamination pursuant to any
Environmental Laws, and is subject to any claim relating to any Environmental
Laws, which violation, contamination, liability or claim has had or could
reasonably be expected to have a Material Adverse Effect, individually or in the
aggregate; and there is no pending or, to the Company's Knowledge, threatened
investigation that might lead to such a claim.
4.17 LITIGATION. Except as disclosed in the SEC Filings, there are no
pending actions, suits or proceedings against or affecting the Company, its
Subsidiaries or any of its or their properties; and to the Company's Knowledge,
no such actions, suits or proceedings are threatened or contemplated.
4.18 FINANCIAL STATEMENTS. The financial statements included in each
SEC Filing fairly present the consolidated financial position of the Company as
of the dates shown and its consolidated results of operations and cash flows for
the periods shown, and such financial statements have been prepared in
conformity with United States generally accepted accounting principles applied
on a consistent basis (except as may be disclosed therein or in the notes
thereto, and, in the case of quarterly financial statements, as permitted by
Form 10-Q under the 1934 Act). Except as set forth in the financial statements
of the Company included in the SEC Filings filed prior to the date hereof,
neither the Company nor any Subsidiaries has any liabilities, contingent or
otherwise, except those which have not had and could not reasonably be expected
to have a Material Adverse Effect, individually or in the aggregate.
4.19 INSURANCE COVERAGE. The Company and each Subsidiary maintains in
full force and effect insurance coverage that is customary for comparably
situated companies for the business being conducted and properties owned or
leased by the Company and each Subsidiary, and the Company reasonably believes
such insurance coverage to be adequate against all liabilities, claims and risks
against which it is customary for comparably situated companies to insure.
4.20 COMPLIANCE WITH NASDAQ CONTINUED LISTING REQUIREMENTS. The
Company is in compliance with applicable Nasdaq National Market continued
listing requirements. There are no proceedings pending or, to the Company's
Knowledge, threatened against the Company relating to the continued listing of
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the Company's Common Stock on the Nasdaq National Market and the Company has not
received any notice of, nor to the Company's Knowledge is there any basis for,
the delisting of the Common Stock from the Nasdaq National Market.
4.21 BROKERS AND FINDERS. No Person will have, as a result of the
transactions contemplated by this Agreement, any valid right, interest or claim
against or upon the Company, any Subsidiary or an Investor for any commission,
fee or other compensation pursuant to any agreement, arrangement or
understanding entered into by or on behalf of the Company.
4.22 NO DIRECTED SELLING EFFORTS OR GENERAL SOLICITATION. Neither the
Company nor any Person acting on its behalf has conducted any general
solicitation or general advertising (as those terms are used in Regulation D) in
connection with the offer or sale of any of the Shares.
4.23 NO INTEGRATED OFFERING. Neither the Company nor any of its
Affiliates (other than any Investor), nor any Person acting on its or their
behalf has, directly or indirectly, made any offers or sales of any Company
security or solicited any offers to buy any security, under circumstances that
would adversely affect reliance by the Company on Section 4(2) for the exemption
from registration for the transactions contemplated hereby or would require
registration under the 1933 Act of the sale of the Shares as provided in this
Agreement.
4.24 QUESTIONABLE PAYMENTS. Neither the Company nor any of its
Subsidiaries nor, to the Company's Knowledge, any of their respective current or
former shareholders, directors, officers, employees, agents or other Persons
acting on behalf of the Company or any Subsidiary, has on behalf of the Company
or any Subsidiary or in connection with their respective businesses: (a) used
any corporate funds for unlawful contributions, gifts, entertainment or other
unlawful expenses relating to political activity; (b) made any direct or
indirect unlawful payments to any governmental officials or employees from
corporate funds; (c) established or maintained any unlawful or unrecorded fund
of corporate monies or other assets; (d) made any false or fictitious entries on
the books and records of the Company or any Subsidiary; or (e) made any unlawful
bribe, rebate, payoff, influence payment, kickback or other unlawful payment of
any nature.
4.25 AFFILIATE TRANSACTIONS. Except as disclosed in the SEC Filings,
none of the officers, directors or employees of the Company is presently a party
to any transaction with the Company or a Subsidiary or to a presently
contemplated transaction (other than for services as employees, officers and
directors) that would be required to be disclosed pursuant to Item 404 of
Regulation S-K promulgated under the 1933 Act, without regard to the dollar
thresholds contained in such Item.
4.26 DISCLOSURES. None of the written materials delivered to the
Investors in connection with the transactions contemplated by the Agreements
contains any untrue statement of a material fact or omits to state a material
fact necessary in order to make the statements contained therein, in light of
the circumstances under which they were made, not misleading.
5. REPRESENTATIONS AND WARRANTIES OF THE INVESTORS. Each of the Investors
hereby severally, and not jointly, represents and warrants to the Company that:
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5.1 ORGANIZATION AND EXISTENCE. The Investor is a validly existing
corporation, limited partnership or limited liability company and has all
requisite corporate, partnership or limited liability company power and
authority to invest in the Shares pursuant to this Agreement.
5.2 AUTHORIZATION. The execution, delivery and performance by the
Investor of the Agreements have been duly authorized and the Agreements will
each constitute the valid and legally binding obligation of the Investor,
enforceable against the Investor in accordance with their terms, subject to
bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and
similar laws of general applicability, relating to or affecting creditors'
rights generally.
5.3 PURCHASE ENTIRELY FOR OWN ACCOUNT. The Shares to be received by
the Investor hereunder will be acquired for the Investor's own account, not as
nominee or agent, and not with a view to the resale or distribution of any part
thereof in violation of the 1933 Act, and the Investor has no present intention
of selling, granting any participation in, or otherwise distributing the same in
violation of the 1933 Act. The Investor is not a registered broker dealer or an
entity engaged in the business of being a broker dealer.
5.4 INVESTMENT EXPERIENCE. The Investor acknowledges that it can bear
the economic risk and complete loss of its investment in the Shares and has such
knowledge and experience in financial or business matters that it is capable of
evaluating the merits and risks of the investment contemplated hereby.
5.5 DISCLOSURE OF INFORMATION. The Investor has had an opportunity to
receive documents related to the Company and to ask questions of and receive
answers from the Company regarding the Company, its business and the terms and
conditions of the offering of the Shares. The Investor acknowledges receipt of
copies of the SEC Filings. Neither such inquiries nor any other due diligence
investigation conducted by the Investor shall modify, amend or affect the
Investor's right to rely on the Company's representations and warranties
contained in this Agreement.
5.6 RESTRICTED SECURITIES. The Investor understands that the Shares
are characterized as "restricted securities" under the U.S. federal securities
laws inasmuch as they are being acquired from the Company in a transaction not
involving a public offering and that under such laws and applicable regulations
such securities may be resold without registration under the 1933 Act only in
certain limited circumstances.
5.7 LEGENDS. It is understood that, until the earlier of (i) the time
(other than an Allowed Delay (as defined in the Registration Rights Agreement))
the Investor has a present intention to dispose of Shares pursuant to the Plan
of Distribution included in a currently available final Prospectus prepared by
the Company and relating to a Registration Statement effected pursuant to the
Registration Rights Agreement (a "Final Prospectus") applicable to such Shares
or (ii) the time when such Shares may be sold pursuant to Rule 144(k),
certificates evidencing such Shares may bear the following or any similar
legend:
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(a) "The securities represented hereby may not be transferred
unless (i) such securities have been registered for sale pursuant to the
Securities Act of 1933, as amended, (ii) such securities may be sold pursuant to
Rule 144(k), or (iii) the Company has received an opinion of counsel
satisfactory to it that such transfer may lawfully be made without registration
under the Securities Act of 1933 or qualification under applicable state
securities laws."
(b) If required by the authorities of any state in connection
with the issuance of sale of the Shares, the legend required by such state
authority.
Upon the earlier of (i) registration of the Shares for sale pursuant
to the Registration Rights Agreement or (ii) Rule 144(k) becoming available with
respect to the Shares, the Company shall, upon an Investor's written request
(which in the case of clause (i) shall be accompanied by a written certification
by the Investor that (A) the Investor has a present intention to dispose of
Shares covered by such registration statement pursuant to the Plan of
Distribution included in a currently available Final Prospectus related thereto,
and (B) the Investor will comply with the prospectus delivery requirements
applicable to such disposition, and which, in the case of clause (ii), shall be
accompanied by such reasonable and appropriate customary representations as may
be reasonably requested by the Company), promptly cause certificates evidencing
such Shares to be replaced with certificates which do not bear such restrictive
legends. When the Company is required to cause unlegended certificates to
replace previously issued legended certificates, if unlegended certificates are
not delivered to an Investor within ten (10) business days of submission by that
Investor of legended stock certificate(s) to the Company's transfer agent
together with a representation letter in customary form, the Company shall be
liable to the Investor for a penalty equal to 1% of the aggregate purchase price
of the Shares evidenced by such certificate(s) for each thirty (30) day period
(or portion thereof) beyond such ten (10) days that the unlegended certificates
have not been so delivered.
5.8 ACCREDITED INVESTOR. The Investor is an accredited investor as
defined in Rule 501(a) of Regulation D, as amended, under the 0000 Xxx.
5.9 NO GENERAL SOLICITATION. The Investor did not learn of the
investment in the Shares as a result of any public advertising or general
solicitation.
5.10 BROKERS AND FINDERS. No Person will have, as a result of the
transactions contemplated by this Agreement, any valid right, interest or claim
against or upon the Company, any Subsidiary or an Investor for any commission,
fee or other compensation pursuant to any agreement, arrangement or
understanding entered into by or on behalf of the Investors.
6. CONDITIONS TO THE CLOSING.
6.1 CONDITIONS TO THE INVESTORS' OBLIGATIONS. The obligation of the
Investors to purchase the Shares at the Closing is subject to the fulfillment to
the Investors' satisfaction, on or prior to the Closing Date, of the following
conditions, any of which may be waived by the Required Investors:
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(a) The representations and warranties made by the Company in
Section 4 hereof shall be true and correct when made, and shall be true and
correct on the Closing Date with the same force and effect as if they had been
made on and as of said date, except to the extent any such representation or
warranty expressly speaks of an earlier date, and, to the extent not already
qualified by materiality, except for changes which, in the aggregate, could not
reasonably be expected to have a Material Adverse Effect, individually or in the
aggregate. The Company shall have performed in all material respects all
obligations and conditions herein required to be performed or observed by it on
or prior to the Closing Date.
(b) The Company shall have obtained in a timely fashion any and
all consents, permits and waivers necessary or appropriate for consummation of
the purchase and sale of the Shares, including, but not limited to the approval
of the Proposal by the vote and in the manner required by applicable laws and
the applicable Nasdaq Marketplace Rules.
(c) The Company shall have executed and delivered a counterpart
of the Registration Rights Agreement.
(d) No judgment, writ, order, injunction, award or decree of or
by any court, or judge, justice or magistrate, including any bankruptcy court or
judge, or any order of or by any governmental authority, shall have been issued,
and no action or proceeding should have been instituted by any governmental
authority, enjoining or preventing the consummation of the transactions
contemplated hereby or in the other Agreements.
(e) The Company shall have delivered a Certificate, executed on
behalf of the Company by its Chief Executive Officer or its Chief Financial
Officer, dated as of the Closing Date, certifying to the fulfillment of the
conditions specified in subsections (a) and (b) of Section 6.1.
(f) The Company shall have delivered a Certificate, executed on
behalf of the Company by its Secretary, dated as of the Closing Date, certifying
the resolutions adopted by the Board of Directors of the Company approving the
transactions contemplated by this Agreement and the other Agreements and the
issuance of the Shares, certifying the current versions of the Certificate of
Incorporation and Bylaws of the Company and certifying as to the signatures and
authority of persons signing the Agreements and related documents on behalf of
the Company.
(g) The Investors shall have received an opinion from Xxxx and
Xxxx LLP, the Company's counsel, dated as of the Closing Date, in form and
substance reasonably acceptable to the Investors, addressing those legal matters
set forth in SCHEDULE 6 hereto.
(h) No stop order or suspension of trading shall have been
imposed by Nasdaq, the SEC or any other governmental regulatory body and be
continuing with respect to public trading in the Common Stock.
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6.2 CONDITIONS TO OBLIGATIONS OF THE COMPANY. The Company's obligation
to sell and issue the Shares at the Closing is subject to the fulfillment to the
satisfaction of the Company on or prior to the Closing Date of the following
conditions, any of which may be waived by the Company:
(a) The representations and warranties made by the Investors in
Section 5 hereof, other than the representations and warranties contained in
Sections 5.3, 5.4, 5.5, 5.6, 5.7, 5.8 and 5.9 (the "Investment
Representations"), shall be true and correct in all material respects when made,
and shall be true and correct in all material respects on the Closing Date with
the same force and effect as if they had been made on and as of said date. The
Investment Representations shall be true and correct in all respects when made,
and shall be true and correct in all respects on the Closing Date with the same
force and effect as if they had been made on and as of said date. The Investors
shall have performed in all material respects all obligations and conditions
herein required to be performed or observed by them on or prior to the Closing
Date. The Investors shall have delivered to the Company one or more
certificates, executed on behalf of each Investor by an authorized signatory,
dated as of the Closing Date, certifying to fulfillment of the conditions
specified in this subsection (a) with respect to such Investor.
(b) The Company shall have obtained in a timely fashion any and
all consents, permits and waivers necessary or appropriate for consummation of
the purchase and sale of the Shares, including, but not limited to the approval
of the Proposal by the vote and in the manner required by applicable laws and
the applicable Nasdaq Marketplace Rules.
(c) No judgment, writ, order, injunction, award or decree of or
by any court, or judge, justice or magistrate, including any bankruptcy court or
judge, or any order of or by any governmental authority, shall have been issued,
and no action or proceeding should have been instituted by any governmental
authority, enjoining or preventing the consummation of the transactions
contemplated hereby or in the other Agreements.
(d) The Investors shall have executed and delivered a counterpart
of the Registration Rights Agreement.
(e) The Investors shall have delivered the Aggregate Purchase
Price to the Company.
6.3 TERMINATION OF OBLIGATIONS TO EFFECT CLOSING; EFFECTS.
(a) The obligations of the Company, on the one hand, and the
Investors, on the other hand, to effect the Closing shall terminate as follows:
(i) Upon the mutual written consent of the Company and the
Required Investors;
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(ii) By the Company if any of the conditions set forth in
Section 6.2 shall have become incapable of fulfillment, and shall not have been
waived by the Company;
(iii) By the Required Investors if any of the conditions set
forth in Section 6.1 shall have become incapable of fulfillment, and shall not
have been waived by the Required Investors; or
(iv) By either the Company or the Required Investors if the
Closing has not occurred on or prior to September 30, 2002;
provided, however, that, (x) except in the case of clause (i) above, the party
seeking to terminate its obligation to effect the Closing shall not then be in
breach of any of its representations, warranties, covenants or agreements
contained in this Agreement or the other Agreements if such breach has resulted
in the circumstances giving rise to such party's seeking to terminate its
obligation to effect the Closing, and (y) in the event that (A) either the
Company or the Required Investors terminate this Agreement pursuant to Section
6.3(a)(ii) or (iii) as a result of the failure of the Company's stockholders to
approve the Proposal at the Stockholders Meeting (as defined below) and (B) the
Company's Board of Directors has withdrawn or modified its recommendation to
stockholders pursuant to the provisions of Section 7.11(b), upon such
termination the Company shall pay to the Investors, pro rata based on their pro
rata share of the Aggregate Purchase Price, a breakup fee of $500,000 in cash.
(b) In the event of termination by the Company or the Required
Investors of their obligations to effect the Closing pursuant to this Section
6.3, written notice thereof shall forthwith be given to the other parties hereto
and, except as specified above, the obligation of all parties to effect the
Closing shall be terminated, without further action by any party. Nothing in
this Section 6.3 shall be deemed to release any party from any liability for any
breach by such party of the terms and provisions of this Agreement or the other
Agreements or to impair the right of any party to compel specific performance by
any other party of its obligations under this Agreement or the other Agreements.
7. COVENANTS AND AGREEMENTS OF THE COMPANY.
7.1 RIGHT OF THE INVESTORS TO PARTICIPATE IN FUTURE TRANSACTIONS. (a)
So long as the Investors and/or their assignees continue to be the beneficial
owners (determined in accordance with the rules and regulations of the
Securities and Exchange Commission) of at least a majority of the Shares
purchased by them under this Agreement, the Investors shall have the right to
participate in future capital raising transactions on the terms and conditions
set forth in this Section 7.1. During such period, the Company shall give ten
(10) business days advance written notice to such Investors and/or assignees
prior to any non-public offer or sale of any of the Company's securities by
providing to such Investors and/or their assignees a term sheet containing all
material business terms of the proposed transaction. Such Investors and/or their
assignees shall have the right (pro rata in accordance with such Investors'
participation in this offering) to purchase such securities which are the
subject of the proposed transaction for the same consideration and on the same
terms and conditions as contemplated for such third-party sale. The Investor(s)'
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rights hereunder must be exercised in writing by the Investor(s) within five (5)
business days following receipt of the notice from the Company. If, subsequent
to the Company giving notice to an Investor hereunder but prior to the Investor
exercising its right to participate (or the expiration of the five-day period
without response from the Investor), the terms and conditions of the proposed
third-party sale are changed in any material respect from that disclosed in the
term sheet provided to such Investor, the Company shall be required to provide a
new notice to the Investor hereunder and the Investors shall have the right,
which must be exercised within five (5) business days of such new notice, to
exercise their rights to purchase the securities on such changed terms and
conditions as provided hereunder. In the event the Investors do not exercise
their rights hereunder, or affirmatively decline to engage in the proposed
transaction with the Company, then the Company may proceed with such proposed
transaction on the same terms and conditions as noticed to the Investors.
(b) The rights provided for in this Section 7.1 shall not be
exercisable unless and until the expiration or termination in full of the
provisions of Section 7.1 of the Prior Purchase Agreement.
7.2 REPORTS. So long as the Investors and/or their assignees continue
to be the beneficial owners (determined in accordance with the rules and
regulations of the Securities and Exchange Commission) of at least a majority of
the Shares acquired by them under this Agreement, the Company will furnish to
such Investors and/or their assignees such information relating to the Company
and its Subsidiaries as from time to time may reasonably be requested by such
Investors and/or their assignees; provided, however, that such Investors and/or
assignees shall hold in confidence any confidential or proprietary information
received from the Company and identified as such at the time of disclosure such
information and shall use any such confidential or proprietary information
solely for the purpose of monitoring and evaluating their investment in the
Company and; provided, further, that the Company shall not be required to
provide any information to the Investors which, if disclosed to such Investors
and/or their assignees pursuant to the terms of this Section 7.2, would, in the
good faith judgment of the Company, cause the Company or any Subsidiary to
violate the terms of a confidentiality undertaking binding on the Company or
such Subsidiary. Each Investor and/or assignee acknowledges that it is aware,
and that it will advise its representatives who are given access to such
information, that the United States securities laws may prohibit a person who
has material, non-public information concerning matters that may be disclosed to
it pursuant to this Section 7.2 from purchasing or selling securities of the
Company or a company which may be, or may be affiliated with, a party to a
business arrangement or proposed business arrangement with the Company or from
communicating such information to any other person under circumstances in which
it is reasonably foreseeable that such person is likely to purchase or sell such
securities.
7.3 PRESS RELEASES. Any press release or other publicity concerning
this Agreement or the transactions contemplated by this Agreement shall be
submitted to the Investors for comment a reasonable period of time prior to
issuance, unless the release is required to be issued within a shorter period of
time by law or pursuant to the rules of a national securities exchange.
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7.4 NO CONFLICTING AGREEMENTS. The Company will not take any action,
enter into any agreement or make any commitment that would conflict or interfere
in any material respect with the obligations to the Investors under the
Agreements.
7.5 INSURANCE. So long as the Investors and/or their assignees
continue to be the beneficial owners (determined in accordance with the rules
and regulations of the Securities and Exchange Commission) of at least a
majority of the Shares acquired by them under this Agreement, the Company shall
not materially reduce the insurance coverages described in Section 4.19.
7.6 COMPLIANCE WITH LAWS. So long as the Investors and/or their
assignees continue to be the beneficial owners (determined in accordance with
the rules and regulations of the Securities and Exchange Commission) of at least
a majority of the Shares acquired by them under this Agreement, the Company will
use reasonable efforts to comply with all applicable laws, rules, regulations,
orders and decrees of all governmental authorities, except to the extent
non-compliance (in one instance or in the aggregate) would not have a Material
Adverse Effect.
7.7 LISTING OF UNDERLYING SHARES AND RELATED MATTERS. Promptly
following the date hereof, the Company shall take such action as may be required
to cause the Shares to be listed on the Nasdaq National Market as promptly as
possible but no later than the effective date of the registration thereof
contemplated by the Registration Rights Agreement. Further, if the Company
applies to have its Common Stock or other securities traded on any other
principal stock exchange or market, it shall include in such application the
Shares and will take such other action as is necessary to cause such Common
Stock to be so listed. So long as the Investors and/or their assignees continue
to be the beneficial owners (determined in accordance with the rules and
regulations of the Securities and Exchange Commission) of at least a majority of
the Shares acquired by them under this Agreement, the Company will use
commercially reasonable efforts to continue the listing and trading of its
Common Stock on the Nasdaq National Market and, in accordance, therewith, will
use commercially reasonable efforts to comply in all respects with the Company's
reporting, filing and other obligations under the bylaws or rules of such
exchange, as applicable.
7.8 DESIGNATED DIRECTOR.
(a) So long as the Investors hold at least 33% of the Shares, the
Investors shall have the right to designate one person for election to the board
of directors of the Company. Each of the Investors acknowledges that so long as
Special Situations Fund III, L.P. ("SSF") and/or one of its Affiliates hold any
of such securities, SSF shall have the right to designate such nominee (the "SSF
Designee"). The Company shall use its best efforts to cause such SSF Designee to
be elected to the Company's board of directors; provided that if the Investors
change the SSF Designee, the Company need not use such best efforts until such
time as the Company has received the effective resignation from the Company's
Board of Directors of the prior SSF Designee. The rights of the Investors under
this Section 7.8(a) are in addition to any other rights of the Investors under
the Prior Agreement.
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(b) Subject to any limitations imposed by applicable law, the SSF
Designee shall be entitled to the same perquisites, including stock options,
reimbursement of expenses and other similar rights in connection with such
person's membership on the Board of Directors of the Company, as every other
non-executive member of the Board of Directors of the Company.
7.9 RIGHTS PLAN. So long as the Investors and/or their assignees
continue to be the beneficial owners (determined in accordance with the rules
and regulations of the Securities and Exchange Commission) of at least a
majority of the Shares acquired by them under this Agreement, the Company shall
not, without the prior written consent of the Investors holding at least a
majority of the outstanding Shares, adopt any other shareholder rights plan or
"poison pill", enter into any rights agreement or other arrangement with respect
thereto, issue any such rights to stockholders thereunder or take any other
actions with respect thereto.
7.10 PURCHASE PRICE ADJUSTMENTS.
(a) Subject to Section 7.10(e) below, if during the MFN Period
(defined below) the Company issues or sells any shares of its Common Stock
(other than in an Exempted Transaction (as defined below)) at a Per Share
Selling Price (as defined below) lower than $1.05 (appropriately adjusted for
any stock split, reverse stock split, stock dividend or other reclassification
or combination of the Common Stock occurring after the date hereof), the
Purchase Price of the Shares sold to the Investors hereunder shall be adjusted
downward to equal such lower Per Share Selling Price and the Investors shall be
entitled to receive additional shares of Common Stock as provided in Section
7.10(c). In no event shall the Purchase Price of the Shares be reduced to less
than $.01. The Company shall give to the Investors written notice of any such
sale within two Business Days after the closing of any such issuance or sale.
The term "Shares" as used in this Agreement shall include shares issued to the
Investors pursuant to this Section 7.10.
(b) (i) For the purposes of this Section 7.10, the term "Per
Share Selling Price" shall include the amount actually paid by third parties for
each share of Common Stock without deduction of any expenses incurred or any
underwriting commissions or concessions paid or allowed by the Company in
connection therewith. A sale of shares of Common Stock shall include the sale or
issuance of rights, options, warrants or convertible securities under which the
Company is or may become obligated to issue shares of Common Stock, and in such
circumstances the Per Share Selling Price of the Common Stock covered thereby
shall also include the exercise or conversion price thereof (in addition to the
consideration received by the Company upon such sale or issuance). In case of
any such security issued within the MFN Period in a "Variable Rate Transaction"
or an "MFN Transaction" (each as defined below), the Per Share Selling Price
shall be deemed to be the lowest conversion or exercise price in effect at any
time during the MFN Period in the case of a Variable Rate Transaction, or the
lowest adjustment price in effect at any time during the MFN Period in the case
of an MFN Transaction (regardless of whether shares of Common Stock are actually
issued at such price). If an adjustment is made in accordance with the preceding
sentence and the relevant conversion, exercise or adjustment price is
subsequently reduced at any time during the MFN Period below the price in effect
at the time such adjustment was made, further adjustments shall be made pursuant
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hereto to reflect any such subsequent reductions. If shares are issued for a
consideration other than cash, the Per Share Selling Price shall be the fair
value of such consideration as determined in good faith by independent certified
public accountants mutually acceptable to the Company and the Required
Investors.
(ii) The term "Variable Rate Transaction" shall mean a
transaction in which the Company issues or sells any debt or equity securities
that are convertible into, exchangeable or exercisable for, or include the right
to receive additional shares of Common Stock either (x) at a conversion,
exercise or exchange rate or other price that is based upon and/or varies with
the trading prices of or quotations for the Common Stock at any time after the
initial issuance of such debt or equity securities, or (y) with a fixed
conversion, exercise or exchange price that is subject to being reset at some
future date after the initial issuance of such debt or equity security or upon
the occurrence of specified or contingent events directly or indirectly related
to the business of the Company or the market for the Common Stock (but excluding
standard adjustment provisions in the event of any stock split, reverse stock
split, stock dividend or reclassification).
(iii) The term "MFN Transaction" shall mean a transaction in
which the Company issues or sells any securities in a capital raising
transaction or series of related transactions (the "New Offering") which grants
to the investor (the "New Investor") the right to receive additional securities
based upon future capital raising transactions of the Company on terms more
favorable than those granted to the New Investor in the New Offering.
(iv) The term "MFN Period" shall mean the period ending
twenty four (24) months following the first effective date of the Registration
Statement to be filed pursuant to Section 2(a)(i) of the Registration Rights
Agreement.
(v) The term "Exempt Transaction" shall mean any of the
following: (i) the granting of options and the issuance and sale of Common Stock
upon the exercise of options granted to directors, officers, employees or
consultants of the Company in connection with their service as directors of the
Company, their employment by the Company or their retention as consultants by
the Company pursuant to an equity compensation program approved by the Company's
Board of Directors or the compensation committee of the Company's Board of
Directors, (ii) the issuance or sale of Common Stock upon the conversion or
exercise of securities issued prior to the date hereof, and (iii) the issuance
or sale of Common Stock in any stock split, stock dividend or similar
recapitalization of the Company's capital stock, to the extent, but only to the
extent that such issuance or sale also results in a change in the Per Share
Selling Price as set forth above.
(c) If an adjustment of the Purchase Price is required pursuant
to Section 7.10(a), to effect such adjustment the Company shall deliver to each
Investor within twenty (20) calendar days of the closing of the transaction
giving rise to the adjustment ("Delivery Date") additional shares of Common
Stock in an amount equal to (i) the portion of the Aggregate Purchase Price paid
by the Investor divided by the Per Share Selling Price determined under Section
7.10(a), minus (ii) the aggregate of (A) the total number of shares of Common
Stock originally purchased by that Investor hereunder plus (B) the total number
of shares of Common Stock previously issued to such Investor in respect of prior
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adjustments to the Purchase Price pursuant to this Section 7.10 ("Prior
Adjustment Shares"); provided, however, that if at the time of the closing of
the transaction giving rise to the adjustment, the Investor and its assignees
hereunder collectively own less than all of the Shares originally purchased by
the Investor hereunder, the additional shares to be delivered pursuant to this
adjustment shall be pro rated by a fraction, the numerator of which is the sum
of (X) the number of original Shares owned by the Investor and such assignees at
the time of the closing of the transaction giving rise to the adjustment and (Y)
the Prior Adjustment Shares owned by the Investor and such assignees at the time
of the closing of the transaction giving rise to the adjustment and the
denominator of which is the sum of (A) the total number of Shares originally
purchased by the Investor hereunder as set forth on the signature pages hereto
and (B) the total Prior Adjustment Shares issued to the Investor and such
assignees hereunder (the "Adjustment Factor"), and; provided, further, that for
purposes of calculating any such adjustment, the Investor or an assignee shall
be deemed to have sold a number of Shares equal to any short position in the
Common Stock maintained by the Investor or any such assignee, as the case may
be, at the time of the transaction giving rise to the adjustment. In the event
the Company fails to deliver the additional shares by the Delivery Date, the
Company shall be liable to the Investors and/or their assignees for a penalty
equal to 1.5% of the Aggregate Purchase Price (in each instance to such Investor
or its assignees pro rata in accordance with its participation in this offering)
multiplied by the Adjustment Factor, per 30-day period or pro rata for any
portion thereof following the Delivery Date until the delivery of the additional
shares, payable in cash. In lieu of any fractional share interest to which an
Investor or its assignee may be entitled, the Company shall pay to the Investor
or such assignee an amount in cash equal to the fractional interest times the
Per Share Selling Price then in effect (after giving effect to the transaction
giving rise to such fractional interest).
(d) In case of any stock split or reverse stock split, stock
dividend, reclassification of the Common Stock, recapitalization, merger or
consolidation, or like capital adjustment affecting the Common Stock of the
Company, the provisions of Section 7.10 shall be applied in a fair, equitable
and reasonable manner so as to give effect, as nearly as may be, to the purposes
hereof.
7.11 PROXY STATEMENT; STOCKHOLDERS MEETING. (a) Promptly following the
execution and delivery of this Agreement, the Company shall take all action
necessary to call a meeting of its stockholders (the "Stockholders Meeting") for
the purpose of seeking approval of the Company's stockholders for the issuance
and sale of the Shares to the Investors (the "Proposal"). In connection
therewith, the Company will promptly prepare and file with the SEC proxy
materials (including a proxy statement and form of proxy) for use at the
Stockholders Meeting and, after receiving and promptly responding to any
comments of the SEC thereon, shall promptly mail such proxy materials to the
stockholders of the Company. Each Investor shall promptly furnish in writing to
the Company such information relating to such Investor and its investment in the
Company as the Company may reasonably request for inclusion in the Proxy
Statement. The Company will comply with Section 14(a) of the 1934 Act and the
rules promulgated thereunder in relation to any proxy statement (as amended or
supplemented, the "Proxy Statement") and any form of proxy to be sent to the
stockholders of the Company in connection with the Stockholders Meeting, and the
Proxy Statement shall not, on the date of the Proxy Statement (or any amendment
thereof or supplement thereto) is first mailed to shareholders or at the time of
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the Stockholders Meeting, contain any untrue statement of a material fact or
omit to state any material fact necessary in order to make the statements made
therein not false or misleading, or omit to state any material fact necessary to
correct any statement in any earlier communication with respect to the
solicitation of proxies or the Stockholders Meeting which has become false or
misleading. If the Company should discover, at any time prior to the Closing,
any event relating to the Company or any of its Subsidiaries or any of their
respective affiliates, officers or directors that is required to be set forth in
a supplement or amendment to the Proxy Statement, in addition to the Company's
obligations under the 1934 Act, the Company will promptly inform the Investors
thereof.
(b) Subject to their fiduciary obligations under applicable law
(as determined in good faith by the Company's Board of Directors after
consultation with the Company's outside counsel), the Company's Board of
Directors shall recommend to the Company's stockholders (and not revoke or amend
such recommendation) that the stockholders vote in favor of the Proposal and
shall cause the Company to take all commercially reasonable action (including,
without limitation, the hiring of a proxy solicitation firm of nationally
recognized standing) to solicit the approval of the stockholders for the
Proposal. Whether or not the Company's Board of Directors determines at any time
after the date hereof that, due to its fiduciary duties, it must revoke or amend
its recommendation to the Company's stockholders, the Company is required to,
and will take, in accordance with applicable law and its Certificate of
Incorporation and Bylaws, all action necessary to convene the Stockholders
Meeting as promptly as practicable to consider and vote upon the approval of the
Proposal.
8. SURVIVAL AND INDEMNIFICATION.
8.1 SURVIVAL. All representations, warranties, covenants and
agreements contained in this Agreement shall be deemed to be representations,
warranties, covenants and agreements as of the date hereof and shall survive the
execution and delivery of this Agreement for a period of eighteen months from
the date of this Agreement; provided, however, that the provisions contained in
Section 7 hereof shall survive in accordance therewith.
8.2 INDEMNIFICATION. The Company agrees to indemnify and hold
harmless, on an after-tax and after insurance recovery basis, each Investor and
its Affiliates and their respective directors, officers, employees and agents
from and against any and all losses, claims, damages, liabilities and expenses
(including without limitation reasonable attorney fees and disbursements and
other expenses incurred in connection with investigating, preparing or defending
any action, claim or proceeding, pending or threatened and the costs of
enforcement hereof) (collectively, "Losses") to which such Person may become
subject as a result of any breach of representation, warranty, covenant or
agreement made by or to be performed on the part of the Company under the
Agreements or otherwise resulting from any action, claim or proceeding arising
out of the matters or transactions contemplated by the Agreements, and will
reimburse any such Person for all such amounts as they are incurred by such
Person.
8.3 CONDUCT OF INDEMNIFICATION PROCEEDINGS. Promptly after receipt by
any Person (the "Indemnified Person") of notice of any demand, claim or
circumstances which would or might give rise to a claim or the commencement of
any action, proceeding or investigation in respect of which indemnity may be
sought pursuant to Section 8.2, such Indemnified Person shall promptly notify
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the Company in writing and the Company shall assume the defense thereof,
including the employment of counsel reasonably satisfactory to such Indemnified
Person, and shall assume the payment of all fees and expenses; PROVIDED,
HOWEVER, that the failure of any Indemnified Person so to notify the Company
shall not relieve the Company of its obligations hereunder except to the extent
that the Company is materially prejudiced by such failure to notify. In any such
proceeding, any Indemnified Person shall have the right to retain its own
counsel, but the fees and expenses of such counsel shall be at the expense of
such Indemnified Person unless: (i) the Company and the Indemnified Person shall
have mutually agreed in writing to the retention of such counsel; or (ii) in the
reasonable judgment of such Indemnified Person representation of both parties by
the same counsel would be inappropriate due to actual or potential differing
interests between them. The Company shall not be liable for any settlement of
any proceeding effected without its written consent, which consent shall not be
unreasonably withheld, but if settled with such consent, or if there be a final
judgment for the plaintiff, the Company shall indemnify and hold harmless such
Indemnified Person from and against any loss or liability (to the extent stated
above) by reason of such settlement or judgment. Without the prior written
consent of the Indemnified Person, which consent shall not be unreasonably
withheld, the Company shall not effect any settlement of any pending or
threatened proceeding in respect of which any Indemnified Person is or could
have been a party and indemnity could have been sought hereunder by such
Indemnified Party, unless such settlement includes an unconditional release of
such Indemnified Person from all liability arising out of such proceeding.
9. MISCELLANEOUS.
9.1 SUCCESSORS AND ASSIGNS. This Agreement may not be assigned by a
party hereto without the prior written consent of the Company or the Required
Investors, as applicable, except that without the prior written consent of the
Company, but after notice duly given, an Investor may assign its rights and
delegate its duties hereunder in whole or in part to an Affiliate or to a third
party acquiring some or all of its Shares in a private transaction. The terms
and conditions of this Agreement shall inure to the benefit of and be binding
upon the respective permitted successors and assigns of the parties. Nothing in
this Agreement, express or implied, is intended to confer upon any party other
than the parties hereto or their respective successors and permitted assigns any
rights, remedies, obligations, or liabilities under or by reason of this
Agreement, except as expressly provided in this Agreement.
9.2 COUNTERPARTS; FAXES. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument. This Agreement may also
be executed via facsimile, which shall be deemed an original.
9.3 TITLES AND SUBTITLES. The titles and subtitles used in this
Agreement are used for convenience only and are not to be considered in
construing or interpreting this Agreement.
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9.4 NOTICES. Unless otherwise provided, any notice required or
permitted under this Agreement shall be given in writing and shall be deemed
effectively given as hereinafter described (i) if given by personal delivery,
then such notice shall be deemed given upon such delivery, (ii) if given by
telex or telecopier, then such notice shall be deemed given upon receipt of
confirmation of complete transmittal, (iii) if given by mail, then such notice
shall be deemed given upon the earlier of (A) receipt of such notice by the
recipient or (B) three days after such notice is deposited in first class mail,
postage prepaid, and (iv) if given by an internationally recognized overnight
air courier, then such notice shall be deemed given one day after delivery to
such carrier. All notices shall be addressed to the party to be notified at the
address as follows, or at such other address as such party may designate by ten
days' advance written notice to the other party pursuant to this Section 9.4:
If to the Company:
Artisoft, Inc.
0 Xxxxxxxxx Xxxxxx
Xxxxxxxxx, Xxxxxxxxxxxxx 00000
Attn: President
Fax: (000) 000-0000
With a copy to:
Xxxx and Xxxx LLP
00 Xxxxx Xxxxxx
Xxxxxx, Xxxxxxxxxxxxx 00000
Attn: Xxxxx X. Xxxx, Esq.
Fax: (000) 000-0000
If to the Investors, to the addresses set forth on
the signature pages hereto.
9.5 EXPENSES. The parties hereto shall pay their own costs and
expenses in connection herewith, except that the Company shall pay the
reasonable fees and expenses of counsel to SSF, but not in excess of $20,000.
Such payment shall be made no later than the Closing Date. The Company shall
reimburse the Investors upon demand for all reasonable out-of-pocket expenses
incurred by the Investors, including without limitation reimbursement of
reasonable fees and expenses for one counsel selected by SSF, in connection with
any amendment, modification or waiver of the Agreements requested by the
Company. In the event that legal proceedings are commenced by any party to this
Agreement against another party to this Agreement in connection with the
Agreements, the party or parties which do not prevail in such proceedings shall
severally, but not jointly, pay their pro rata share of the reasonable
attorneys' fees and other reasonable out-of-pocket costs and expenses incurred
by the prevailing party in such proceedings.
9.6 AMENDMENTS AND WAIVERS. Any term of this Agreement may be amended
and the observance of any term of this Agreement may be waived (either generally
or in a particular instance and either retroactively or prospectively), only
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with the written consent of the Company and (i) prior to the Closing, SSF, and
(ii) after the Closing, the Required Investors. Any amendment or waiver effected
in accordance with this paragraph shall be binding upon each holder of any
Shares purchased under this Agreement at the time outstanding, each future
holder of all such securities, and the Company.
9.7 PUBLICITY. No public release or announcement concerning the
transactions contemplated hereby shall be issued by the Company or the Investors
without the prior consent of the Company (in the case of a release or
announcement by the Investors) or SSF (in the case of a release or announcement
by the Company) (which consents shall not be unreasonably withheld), except as
such release or announcement may be required by law or the applicable rules or
regulations of any securities exchange or securities market, in which case the
Company or the Investors, as the case may be, shall allow SSF or the Company, as
applicable, reasonable time to comment on such release or announcement in
advance of such issuance.
9.8 SEVERABILITY. Any provision of this Agreement that is prohibited
or unenforceable in any jurisdiction shall, as to such jurisdiction, be
ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof but shall be interpreted as if it
were written so as to be enforceable to the maximum extent permitted by
applicable law, and any such prohibition or unenforceability in any jurisdiction
shall not invalidate or render unenforceable such provision in any other
jurisdiction. To the extent permitted by applicable law, the parties hereby
waive any provision of law which renders any provisions hereof prohibited or
unenforceable in any respect.
9.9 ENTIRE AGREEMENT. This Agreement, including the Exhibits and
Schedules hereto, and the Registration Rights Agreement constitute the entire
agreement among the parties hereto with respect to the subject matter hereof and
thereof and supersede all prior agreements and understandings, both oral and
written, between the parties with respect to the subject matter hereof and
thereof.
9.10 FURTHER ASSURANCES. The parties shall execute and deliver all
such further instruments and documents and take all such other actions as may
reasonably be required to carry out the transactions contemplated hereby and to
evidence the fulfilment of the agreements herein contained.
9.11 APPLICABLE LAW. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of Delaware without regard
to principles of conflicts of laws.
9.12 PREEMPTIVE RIGHTS. The Investors acknowledge that the acquisition
of the Shares pursuant to the terms of this Agreement satisfies the provisions
of Section 7.1 of the Prior Purchase Agreement. In addition, the Investors
hereby consent to a waiver by the other parties to the Prior Purchase Agreement
of their rights under Section 7.1 of the Prior Purchase Agreement.
[signature page follows]
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IN WITNESS WHEREOF, the parties have executed this Agreement or caused
their duly authorized officers to execute this Agreement as of the date first
above written.
The Company: ARTISOFT, INC.
By: /s/ Xxxxxx X. Xxxxxx
--------------------------------
Name: Xxxxxx X. Xxxxxx
Title: President & CEO
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The Investors: SPECIAL SITUATIONS FUND III, L.P.
By: /s/ Xxxxxx Xxxxx
--------------------------------
Name: Xxxxxx Xxxxx
Title: General Partner
Pro Rata Purchase Price: $1,085,700
Number of Shares: 1,034,000
Address for Notice:
000 X. 00xx Xxxxxx
00xx Xxxxx
Xxx Xxxx, XX 00000
with a copy to:
Xxxxxxxxxx Xxxxxxx PC
00 Xxxxxxxxxx Xxxxxx
Xxxxxxxx, XX 00000
Attn: Xxxx X. Xxxxxxxx, Esq.
Telephone: 000.000.0000
Facsimile: 973.597.2400
SPECIAL SITUATIONS CAYMAN FUND, L.P.
By: /s/ Xxxxxx Xxxxx
--------------------------------
Name: Xxxxxx Xxxxx
Title: General Partner
Pro Rata Purchase Price: $361,935
Number of Shares: 344,700
Address for Notice:
000 X. 00xx Xxxxxx
00xx Xxxxx
Xxx Xxxx, XX 00000
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with a copy to:
Xxxxxxxxxx Xxxxxxx PC
00 Xxxxxxxxxx Xxxxxx
Xxxxxxxx, XX 00000
Attn: Xxxx X. Xxxxxxxx, Esq.
Telephone: 000.000.0000
Facsimile: 973.597.2400
SPECIAL SITUATIONS PRIVATE
EQUITY FUND, L.P.
By: /s/ Xxxxxx Xxxxx
--------------------------------
Name: Xxxxxx Xxxxx
Title: General Partner
Pro Rata Purchase Price: $361,935
Number of Shares: 344,700
Address for Notice:
000 X. 00xx Xxxxxx
00xx Xxxxx
Xxx Xxxx, XX 00000
with a copy to:
Xxxxxxxxxx Xxxxxxx PC
00 Xxxxxxxxxx Xxxxxx
Xxxxxxxx, XX 00000
Attn: Xxxx X. Xxxxxxxx, Esq.
Telephone: 000.000.0000
Facsimile: 973.597.2400
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SPECIAL SITUATIONS TECHNOLOGY FUND,
L.P.
By: /s/ Xxxxxx Xxxxx
--------------------------------
Name: Xxxxxx Xxxxx
Title: General Partner
Pro Rata Purchase Price: $190,470
Number of Shares: 181,400
Address for Notice:
000 X. 00xx Xxxxxx
00xx Xxxxx
Xxx Xxxx, XX 00000
with a copy to:
Xxxxxxxxxx Xxxxxxx PC
00 Xxxxxxxxxx Xxxxxx
Xxxxxxxx, XX 00000
Attn: Xxxx X. Xxxxxxxx, Esq.
Telephone: 000.000.0000
Facsimile: 973.597.2400
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