EXECUTION COPY
---------------------------------------------
PRIVATE EQUITY LINE AGREEMENT
by and between
KINGSBRIDGE CAPITAL LIMITED
and
MUSE TECHNOLOGIES, INC.
--------------------------------------------
dated as of June 1st, 2000
TABLE OF CONTENTS
Page
Section 1.1. "Average Daily Trading Volume"........................................1
Section 1.2. "Bid Price"...........................................................2
Section 1.3. "Blackout Shares".....................................................2
Section 1.4. "Capital Shares"......................................................2
Section 1.5. "Closing".............................................................2
Section 1.6. "Closing Date"........................................................2
Section 1.7. "Commitment Period"...................................................2
Section 1.8. "Common Stock"........................................................2
Section 1.9. "Common Stock Equivalents"............................................2
Section 1.10. "Condition Satisfaction Date".........................................2
Section 1.11. "Damages".............................................................2
Section 1.12. "Discount"............................................................2
Section 1.13. "Effective Date"......................................................2
Section 1.14. "Escrow Agreement"....................................................3
Section 1.15. "Exchange Act"........................................................3
Section 1.16. "Investment Amount"...................................................3
Section 1.17. "Legend"..............................................................3
Section 1.18. "Market Price"........................................................3
Section 1.19. "Maximum Commitment Amount"...........................................3
Section 1.20. "Maximum Put Amount"..................................................3
Section 1.21. "Minimum Commitment Amount"...........................................3
Section 1.22. "Minimum Put Amount"..................................................3
Section 1.23. "Material Adverse Effect".............................................3
Section 1.24. "NASD"................................................................3
Section 1.25. "Outstanding".........................................................3
Section 1.26. "Person"..............................................................3
Section 1.27. "Principal Market"....................................................4
Section 1.28. "Purchase Price"......................................................4
Section 1.29. "Put".................................................................4
Section 1.30. "Put Date"............................................................4
Section 1.31. "Put Notice"..........................................................4
Section 1.32. "Put Shares"..........................................................4
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TABLE OF CONTENTS
(continued)
Page
Section 1.33. "Registrable Securities"..............................................4
Section 1.34. "Registration Rights Agreement".......................................4
Section 1.35. "Registration Statement"..............................................4
Section 1.36. "Regulation D"........................................................5
Section 1.37. "SEC".................................................................5
Section 1.38. "SEC Documents".......................................................5
Section 1.39. "Section 4(2)"........................................................5
Section 1.40. "Securities Act"......................................................5
Section 1.41. "Subscription Date"...................................................5
Section 1.42. "Trading Cushion".....................................................5
Section 1.43. "Trading Day".........................................................5
Section 1.44. "Underwriter".........................................................5
Section 1.45. "Valuation Event".....................................................5
Section 1.46. "Valuation Period"....................................................6
Section 1.47. "Warrant".............................................................6
Section 1.48. "Warrant Shares"......................................................6
ARTICLE II PURCHASE AND SALE OF COMMON STOCK; TERMINATION OF OBLIGATIONS;
WARRANT; BLACKOUT SHARES..................................................6
Section 2.1. Investments...........................................................6
Section 2.2. Mechanics.............................................................7
Section 2.3. Closings..............................................................7
Section 2.4. Termination...........................................................7
Section 2.5. The Warrant...........................................................8
Section 2.6. Blackout Shares.......................................................8
Section 2.7. Liquidated Damages....................................................9
ARTICLE III REPRESENTATIONS AND WARRANTIES OF INVESTOR................................9
Section 3.1. Intent................................................................9
Section 3.2. Sophisticated Investor................................................9
Section 3.3. Authority.............................................................9
Section 3.4. Not an Affiliate......................................................9
Section 3.5. Organization and Standing.............................................9
Section 3.6. Absence of Conflicts.................................................10
Section 3.7. Disclosure; Access to Information....................................10
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TABLE OF CONTENTS
(continued)
Page
Section 3.8. Manner of Sale.......................................................10
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF THE COMPANY............................10
Section 4.1. Organization of the Company..........................................10
Section 4.2. Authority............................................................10
Section 4.3. Capitalization.......................................................11
Section 4.4. Common Stock.........................................................11
Section 4.5. SEC Documents........................................................11
Section 4.6. Exemption from Registration; Valid Issuances.........................11
Section 4.7. No General Solicitation or Advertising in Regard to this
Transaction..........................................................12
Section 4.8. Corporate Documents..................................................12
Section 4.9. No Material Breach or Violation with Law.............................12
Section 4.10. No Material Adverse Change...........................................12
Section 4.11. No Undisclosed Liabilities...........................................12
Section 4.12. No Undisclosed Events or Circumstances...............................13
Section 4.13. No Integrated Offering...............................................13
Section 4.14. Litigation and Other Proceedings.....................................13
Section 4.15. No Misleading or Untrue Communication................................13
Section 4.16. Material Non-Public Information......................................13
ARTICLE V COVENANTS OF THE INVESTOR................................................13
ARTICLE VI COVENANTS OF THE COMPANY.................................................13
Section 6.1. Registration Rights..................................................13
Section 6.2. Reservation of Common Stock..........................................14
Section 6.3. Listing of Common Stock..............................................14
Section 6.4. Exchange Act Registration............................................14
Section 6.5. Legends..............................................................14
Section 6.6. Corporate Existence..................................................14
Section 6.7. Additional SEC Documents.............................................14
Section 6.8. Notice of Certain Events Affecting Registration; Suspension of
Right to Make a Put..................................................14
Section 6.9. Expectations Regarding Put Notices...................................15
Section 6.10. Consolidation; Merger................................................15
Section 6.11. Issuance of Put Shares, Warrant Shares and Blackout Shares...........15
Section 6.12. Legal Opinion on Subscription Date...................................15
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TABLE OF CONTENTS
(continued)
Page
ARTICLE VII CONDITIONS TO DELIVERY OF PUT NOTICES AND CONDITIONS TO CLOSING..........15
Section 7.1. Conditions Precedent to the Obligation of the Company to Issue
and Sell Common Stock................................................15
Section 7.2. Conditions Precedent to the Right of the Company to Deliver a
Put Notice and the Obligation of the Investor to Purchase Put
Shares...............................................................16
Section 7.3. Review of Registration Statement; Non-Disclosure of Non-Public
Information..........................................................18
ARTICLE VIII LEGENDS..................................................................19
Section 8.1. Legends..............................................................19
Section 8.2. No Other Legend or Stock Transfer Restrictions.......................20
Section 8.3. Investor's Compliance................................................21
ARTICLE IX INDEMNIFICATION..........................................................21
Section 9.1. Indemnification......................................................21
Section 9.2. Method of Asserting Indemnification Claims...........................21
ARTICLE X MISCELLANEOUS............................................................25
Section 10.1. Fees and Expenses....................................................25
Section 10.2. Reporting Entity for the Common Stock................................25
Section 10.3. Brokerage............................................................25
Section 10.4. Notices..............................................................25
Section 10.5. Assignment...........................................................26
Section 10.6. Amendment; No Waiver.................................................26
Section 10.7. Annexes and Exhibits; Entire Agreement...............................27
Section 10.8. Termination; Survival................................................27
Section 10.9. Severability.........................................................27
Section 10.10.Title and Subtitles..................................................27
Section 10.11.Counterparts.........................................................27
Section 10.12.Choice of Law........................................................27
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PRIVATE EQUITY LINE AGREEMENT
by and between
KINGSBRIDGE CAPITAL LIMITED
and
MUSE TECHNOLOGIES, INC.
dated as of June 1st, 2000
This PRIVATE EQUITY LINE AGREEMENT is entered into as of this 1st
day of June, 2000 (this "Agreement"), by and between KINGSBRIDGE CAPITAL LIMITED
(the "Investor"), an entity organized and existing under the laws of the British
Virgin Islands, and MUSE TECHNOLOGIES, INC., a corporation organized and
existing under the laws of the State of Delaware (the "Company").
WHEREAS, the parties desire that, upon the terms and subject to the
conditions set forth herein, the Company may issue and sell to the Investor,
from time to time as provided herein, and the Investor shall purchase from the
Company, up to $18,000,000 of the Common Stock (as defined below); and
WHEREAS, such investments will be made in reliance upon the
provisions of Section 4(2) ("Section 4(2)") and Regulation D ("Regulation D") of
the United States Securities Act of 1933, as amended and the rules and
regulations promulgated thereunder (the "Securities Act"), and/or upon such
other exemption from the registration requirements of the Securities Act as may
be available with respect to any or all of the investments in Common Stock to be
made hereunder; and
WHEREAS, in consideration for the Investor's execution and delivery
of, and its performance of its obligations under, this Agreement, the Company is
concurrently issuing to the Investor a Warrant (as defined below) pursuant to
which the Investor may purchase from the Company up to 200,000 shares of Common
Stock, upon the terms and subject to the conditions set forth therein; and
WHEREAS, the parties hereto are concurrently entering into a
Registration Rights Agreement (as defined below) pursuant to which the Company
shall register the Common Stock issued and sold to the Investor under this
Agreement and under the Warrant, upon the terms as subject to the conditions set
forth therein;
NOW, THEREFORE, the parties hereto agree as follows:
ARTICLE I
CERTAIN DEFINITIONS
Section 1.1. Average Daily Trading Volume. shall mean, with respect to any
date, the average of the daily trading volumes for the Common Stock on the
Principal Market for the thirty (30) Trading Days immediately preceding such
date.
Section 1.2. Bid Price. shall mean the closing bid price (as reported by
Bloomberg L.P.) of the Common Stock on the Principal Market.
Section 1.3. Blackout Shares. shall have the meaning assigned to them in
Section 2.6.
Section 1.4. "Capital Shares" shall mean the Common Stock and any shares
of any other class of common stock whether now or hereafter authorized, having
the right to participate in the distribution of dividends (as and when declared)
and assets (upon liquidation of the Company).
Section 1.5. "Closing" shall mean one of the closings of a purchase and
sale of the Common Stock pursuant to Section 2.1.
Section 1.6. "Closing Date" shall mean, with respect to a Closing, the
second (2nd) Trading Day following the Valuation Period related to such Closing,
provided that all of the conditions precedent to such Closing have been
satisfied on or before such Trading Day.
Section 1.7. "Commitment Period" shall mean the period commencing on the
earlier to occur of (i) the Effective Date or (ii) such earlier date as the
Company and the Investor may mutually agree in writing, and expiring on the
earlier to occur of (x) the date on which the Investor shall have purchased Put
Shares pursuant to this Agreement for an aggregate Investment Amount equal to
the Maximum Commitment Amount, (y) the date this Agreement is terminated by the
Investor or the Company pursuant to Section 2.4, or (z) the date occurring
twenty four (24) months from the date of commencement of the Commitment Period.
Section 1.8. "Common Stock" shall mean the Company's common stock, $.015
par value per share.
Section 1.9. "Common Stock Equivalents" shall mean any securities that are
convertible into or exchangeable for Common Stock or any warrants, options or
other rights to subscribe for or purchase Common Stock or any such convertible
or exchangeable securities.
Section 1.10. "Condition Satisfaction Date" shall have the meaning set
forth in Section 7.2 of this Agreement.
Section 1.11. "Damages" shall mean any loss, claim, damage, liability,
costs and expenses (including, without limitation, reasonable attorneys' fees
and disbursements and costs and expenses of expert witnesses and investigation).
Section 1.12. "Discount" shall mean with respect to any Put (i) twelve
percent (12%) if the Market Price shall be less than eight dollars ($8.00) per
share in respect of the applicable Put Date or (ii) ten percent (10%) if the
Market Price shall be equal to or greater than eight dollars ($8.00) per share
in respect of the applicable Put Date. Notwithstanding the foregoing, in the
event that the Company fails to issue and sell to the Investor Common Stock in
respect of Puts for an aggregate Investment Amount at least the Minimum
Commitment Amount in accordance with Section 2.1(b), or any amount becomes due
under Section 2.1(b) after termination of this Agreement by the Investor in
accordance with Section 2.4, the Discount shall be equal to twelve percent
(12%).
Section 1.13. "Effective Date" shall mean the date on which the SEC first
declares effective a Registration Statement registering the resale of the
Registrable Securities as set forth in Section 7.2(a).
2
Section 1.14. "Escrow Agreement" shall mean the escrow agreement in the
form of Exhibit A entered into pursuant to Section 7.2(o) hereof.
Section 1.15. "Exchange Act" shall mean the Securities Exchange Act of
1934, as amended and the rules and regulations promulgated thereunder.
Section 1.16. "Investment Amount" shall mean the dollar amount (within the
range specified in Section 2.2) to be invested by the Investor to purchase Put
Shares with respect to any Put Notice as provided by the Company to the Investor
in accordance with Section 2.2 hereof.
Section 1.17. "Legend" shall have the meaning specified in Section 8.1.
Section 1.18. "Market Price" on any given date shall mean the average of
the Lowest Intra-Day Prices of the Common Stock over the Valuation Period.
"Lowest Intra-Day Price" shall mean the lowest trade price of the Common Stock
(as reported by Bloomberg L.P.) during any Trading Day; provided, however, that
for the purposes of determining the Lowest Intra-Day Price, all intra-day trades
of less than one thousand (1000) shares shall be disregarded.
Section 1.19. "Maximum Commitment Amount" shall mean EIGHTEEN MILLION
DOLLARS ($18,000,000).
Section 1.20. "Maximum Put Amount" shall mean, with respect to any Put,
the amount determined in accordance with the table set forth on Annex A hereto.
Section 1.21. "Minimum Commitment Amount" shall mean SEVEN MILLION FIVE
HUNDRED THOUSAND DOLLARS ($7,500,000).
Section 1.22. "Minimum Put Amount" shall mean SEVENTY-FIVE THOUSAND
DOLLARS ($75,000).
Section 1.23. "Material Adverse Effect" shall mean any effect on the
business, operations, properties or financial condition of the Company that is
material and adverse to the Company or to the Company and such other entities
controlling or controlled by the Company, taken as a whole, and/or any
condition, circumstance, or situation that would prohibit or otherwise
materially interfere with the ability of the Company to perform its obligations
under any of (i) this Agreement, (ii) the Registration Rights Agreement, (iii)
the Escrow Agreement and (iv) the Warrant.
Section 1.24. "NASD" shall mean the National Association of Securities
Dealers, Inc.
Section 1.25. "Outstanding" when used with reference to Common Stock or
Capital Shares (collectively the "Shares"), shall mean, at any date as of which
the number of such Shares is to be determined, all issued and outstanding
Shares, and shall include all such Shares issuable in respect of outstanding
scrip or any certificates representing fractional interests in such Shares;
provided, however, that "Outstanding" shall not refer to any such Shares then
directly or indirectly owned or held by or for the account of the Company.
Section 1.26. "Person" shall mean an individual, a corporation, a
partnership, an association, a trust or other entity or organization, including
a government or political subdivision or an agency or instrumentality thereof.
3
Section 1.27. "Principal Market" shall mean the Nasdaq National Market,
the Nasdaq SmallCap Market or the New York Stock Exchange, whichever is at the
time the principal trading exchange or market for the Common Stock, it being
acknowledged and agreed by the parties that, as of the date hereof, the
Principal Market is the Nasdaq SmallCap Market.
Section 1.28. "Purchase Price" shall mean, with respect to a Put, the
Market Price less the product of the Discount and the Market Price.
Section 1.29. "Put" shall mean each occasion the Company elects to
exercise its right to tender a Put Notice requiring the Investor to purchase the
Company's Common Stock for the Investment Amount specified in such Put Notice,
upon the terms and subject to the conditions set forth in this Agreement.
Section 1.30. "Put Date" shall mean the Trading Day during the Commitment
Period on which a Put Notice to sell Common Stock to the Investor is deemed
delivered by the Company to the Investor pursuant to Section 2.2(b) hereof.
Section 1.31. "Put Notice" shall mean a written notice to the Investor
setting forth the Investment Amount that the Company intends to require the
Investor to pay to purchase Common Stock upon the terms and subject to the
conditions set forth in this Agreement.
Section 1.32. "Put Shares" shall mean all shares of Common Stock issued or
issuable pursuant to a Put that has been exercised or may be exercised upon the
terms and subject to the conditions set forth in this Agreement.
Section 1.33. "Registrable Securities" shall mean the (i) Put Shares, (ii)
the Warrant Shares, (iii) the Blackout Shares and (iv) any securities issued or
issuable with respect to any of the foregoing by way of exchange, stock dividend
or stock split or in connection with a combination of shares, recapitalization,
merger, consolidation or other reorganization or otherwise. As to any particular
Registrable Securities, once issued such securities shall cease to be
Registrable Securities when (w) the Registration Statement has been declared
effective by the SEC and all Registrable Securities have been disposed of
pursuant to the Registration Statement, (x) all Registrable Securities have been
sold under circumstances under which all of the applicable conditions of Rule
144 (or any similar provision then in force) under the Securities Act ("Rule
144") are met, (y) such time as all Registrable Securities have been otherwise
transferred to holders who may trade such shares without restriction under the
Securities Act, and the Company has delivered a new certificate or other
evidence of ownership for such securities not bearing a restrictive legend or
(z) in the opinion of counsel to the Company, which counsel shall be reasonably
acceptable to the Investor, all Registrable Securities may be sold without
registration and without any time, volume or manner limitations pursuant to Rule
144(k) (or any similar provision then in effect) under the Securities Act.
Section 1.34. "Registration Rights Agreement" shall mean the registration
rights agreement in the form of Exhibit B hereto.
Section 1.35. "Registration Statement" shall mean a registration statement
on Form S-1, Form SB-2 (or such other form promulgated by the SEC for which the
Company then qualifies and which counsel for the Company shall deem appropriate,
and which form shall be available for the resale of the Registrable Securities
to be registered thereunder in accordance with the provisions of this Agreement,
the Registration Rights Agreement, and the Warrant and in accordance with the
intended method of distribution of such securities), for the registration of the
resale by the Investor of the Registrable Securities under the Securities Act.
4
Section 1.36. "Regulation D" shall have the meaning set forth in the
recitals of this Agreement.
Section 1.37. "SEC" shall mean the Securities and Exchange Commission.
Section 1.38. "SEC Documents" shall mean the Company's latest Form 10-KSB
as of the time in question, all Forms 10-QSB and 8-K filed thereafter, the Proxy
Statement for its latest fiscal year as of the time in question and the
Registration Statement until such time the Company no longer has an obligation
to maintain the effectiveness of a Registration Statement as set forth in the
Registration Rights Agreement.
Section 1.39. "Section 4(2)" shall have the meaning set forth in the
recitals of this Agreement.
Section 1.40. "Securities Act" shall have the meaning set forth in the
recitals of this Agreement.
Section 1.41. "Subscription Date" shall mean the date on which this
Agreement is executed and delivered by the parties hereto.
Section 1.42. "Trading Cushion" shall mean the mandatory fifteen (15)
Trading Days that must expire after any given Put Date before the Company may
tender a subsequent Put Notice to the Investor.
Section 1.43. "Trading Day" shall mean any day during which the Principal
Market shall be open for trading.
Section 1.44. "Underwriter" shall mean any underwriter participating in
any disposition of the Registrable Securities on behalf of the Investor pursuant
to the Registration Statement.
Section 1.45. "Valuation Event" shall mean an event in which the Company
at any time during a Valuation Period takes any of the following actions:
(a) subdivides or combines its Common Stock;
(b) pays a dividend in its Capital Stock or makes any other
distribution of its Capital Shares, except for dividends paid
with respect to the Preferred Stock;
(c) issues any additional Capital Shares ("Additional Capital
Shares"), otherwise than as provided in the foregoing
Subsections (a) and (b) above, at a price per share less, or
for other consideration lower, than the Bid Price in effect
immediately prior to such issuance, or without consideration;
(d) issues any warrants, options or other rights to subscribe for
or purchase any Additional Capital Shares and the price per
share for which Additional Capital Shares may at any time
thereafter be issuable pursuant to such warrants, options or
other rights shall be less than the Bid Price in effect
immediately prior to such issuance;
(e) issues any securities convertible into or exchangeable for
Capital Shares and the consideration per share for which
Additional Capital Shares may at any time thereafter be
issuable pursuant to the terms of such convertible or
exchangeable securities shall be less than the Bid Price in
effect immediately prior to such issuance;
5
(f) makes a distribution of its assets or evidences of
indebtedness to the holders of its Capital Shares as a
dividend in liquidation or by way of return of capital or
other than as a dividend payable out of earnings or surplus
legally available for dividends under applicable law or any
distribution to such holders made in respect of the sale of
all or substantially all of the Company's assets (other than
under the circumstances provided for in the foregoing
subsections (a) through (e)); or
(g) takes any action affecting the number of Outstanding Capital
Shares, other than an action described in any of the foregoing
Subsections (a) through (f) hereof, inclusive, which in the
opinion of the Company's Board of Directors, determined in
good faith, would have a materially adverse effect upon the
rights of the Investor at the time of a Put or exercise of the
Warrant.
Section 1.46. "Valuation Period" shall mean the period of five (5) Trading
Days during which the Market Price of the Common Stock is valued, which period
shall be with respect to the Market Price on any Put Date, the two (2) Trading
Days preceding and the two (2) Trading Days following the Trading Day on which
the applicable Put Notice is deemed to be delivered, as well as the Trading Day
on which such notice is deemed to be delivered; provided, however, that if a
Valuation Event occurs during any Valuation Period, a new Valuation Period shall
begin on the Trading Day immediately after the occurrence of such Valuation
Event and end on the fifth (5th) Trading Day after the occurrence of such
Valuation Event.
Section 1.47. "Warrant" shall mean the Warrant in the form of Exhibit C
hereto issued pursuant to Section 2.5 of this Agreement.
Section 1.48. "Warrant Shares" shall mean all shares of Common Stock
issued or issuable pursuant to exercise of the Warrant.
ARTICLE II
PURCHASE AND SALE OF COMMON STOCK; TERMINATION OF
OBLIGATIONS; WARRANT; BLACKOUT SHARES
Section 2.1. Investments.
(a) Puts. Upon the terms and subject to the conditions set forth
herein (including, without limitation, the provisions of
Article VII hereof), on any Put Date the Company may exercise
a Put by the delivery of a Put Notice. The number of Put
Shares that the Investor shall receive pursuant to such Put
shall be determined by dividing the Investment Amount
specified in the Put Notice by the Purchase Price with respect
to such Put Date, rounded to the nearest whole share.
(b) Minimum Amount of Puts. The Company shall, in accordance with
Section 2.2(a), issue and sell Put Shares to the Investor and
the Investor shall purchase Put Shares from the Company for an
amount totaling (in aggregate Investment Amounts) at least the
Minimum Commitment Amount. If the Company for any reason fails
to issue and deliver such Put Shares during the Commitment
Period, unless solely the result of the Company being unable
to issue and sell Put Shares to the Investor as a result of
the condition precedent set forth in Section 7.2(i), on
6
the first Trading Day after the expiration of the Commitment
Period, the Company shall pay to Investor by wire transfer of
immediately available funds to an account designated by the
Investor an amount equal to the product of (X) the Minimum
Commitment Amount minus the aggregate Investment Amounts of
the Put Shares delivered to the Investor hereunder and (Y) the
Discount.
(c) Maximum Sale of Common Stock. Unless the Company obtains the
requisite approval of its shareholders in accordance with the
corporate laws of Delaware and the applicable rules of the
Principal Market and the NASD, no more than 19.9% of the
Outstanding shares of Common Stock may be issued and sold in
the aggregate pursuant to this Agreement.
Section 2.2. Mechanics.
(a) Put Notice. At any time during the Commitment Period, the
Company may deliver a Put Notice to the Investor, subject to
the conditions set forth in Section 7.2; provided, however,
the Investment Amount for each Put as designated by the
Company in the applicable Put Notice shall be neither less
than the Minimum Put Amount nor more than the Maximum Put
Amount.
(b) Date of Delivery of Put Notice. A Put Notice shall be deemed
delivered on (i) the Trading Day it is received by facsimile
or otherwise by the Investor if such notice is received prior
to 12:00 noon New York time, or (ii) the immediately
succeeding Trading Day if it is received by facsimile or
otherwise after 12:00 noon New York time on a Trading Day or
at any time on a day which is not a Trading Day. No Put Notice
may be deemed to have been delivered on any day that is not a
Trading Day.
Section 2.3. Closings. On each Closing Date for a Put, (i) the Company
shall deliver into escrow one or more certificates, at the Investor's option,
representing the Put Shares to be purchased by the Investor pursuant to Section
2.1 herein, registered in the name of the Investor and (ii) the Investor shall
deliver into escrow the Investment Amount specified in the Put Notice by wire
transfer of immediately available funds to the account provided for in the
Escrow Agreement. In addition, on or prior to such Closing Date, each of the
Company and the Investor shall deliver to the other all documents, instruments
and writings required to be delivered or reasonably requested by either of them
pursuant to this Agreement in order to implement and effect the transactions
contemplated herein. Payment of the Investment Amount to the Company and
delivery of such certificate(s) to the Investor shall occur out of escrow in
accordance with the Escrow Agreement; provided, however, that to the extent the
Company has not paid the fees, expenses and disbursements of the Investor's
counsel in accordance with Section 12.1 as billed to date, the amount of such
fees, expenses and disbursements shall be paid in immediately available funds,
at the direction of the Investor, to Investor's counsel with no reduction in the
number of Put Shares issuable to the Investor on such Closing Date; provided
further, that so long as the Investor shall maintain professional liability,
errors and omissions liability and or directors' and officers' insurance
("Private Equity Insurance") for its activities related to the Put Shares, the
Warrant Shares or the Blackout Shares, one and three quarter percent (1 3/4%) of
such Investment Amount shall be retained by the Investor in respect of premium
for such Private Equity Insurance with no reduction in the number of Put Shares
issuable to the Investor on such Closing Date. Notwithstanding the immediately
preceding proviso, in the event that the premium charged to the Investor in
respect of the Private Equity Insurance is reduced, the amount of the Purchase
Price retained by the Investor shall be reduced proportionately.
Section 2.4. Termination.
7
(a) (i) The Investor may, at its sole discretion, terminate
this Agreement upon written notice to the Company in the
event that (i) there shall occur any stop order or
suspension of the effectiveness of the Registration
Statement for an aggregate of thirty (30) Trading Days
during the Commitment Period, for any reason other than
deferrals or suspension during a Blackout Period in
accordance with the Registration Rights Agreement, as a
result of corporate developments subsequent to the
Subscription Date that would require such Registration
Statement to be amended to reflect such event in order
to maintain its compliance with the disclosure
requirements of the Securities Act or (ii) the Company
shall at any time fail to comply with the requirements
of Section 6.3 (with respect to maintaining its listing
on a Principal Market), 6.4 (with respect to continued
registration and reporting obligations to the SEC), or
6.6 (with respect to maintenance of its corporate
existence). In the event that the Investor terminates
this Agreement in accordance with the immediately
preceding sentence of this Section 2.4, in addition to
any and all amounts due and payable by the Company to
the Investor under the Registration Rights Agreement,
any and all amounts that would have been due and payable
by the Company to the Investor in respect of Section
2.1(b) hereof had such termination occurred at the end
of the Commitment Period shall also become immediately
due and payable.
(ii) The Investor may also, at its sole discretion, terminate
this Agreement upon written notice to the Company at any
time beginning one hundred and twenty one (121) days
after the Subscription Date in the event that the
Registration Statement is not effective in accordance
with the Registration Rights Agreement, and the Company
shall pay to the Investor liquidated damages as set
forth in Section 1.1(c) of the Registration Rights
Agreements, which payment shall be the sole remedy
available to the Investor upon such termination;
provided, however, that notwithstanding the foregoing,
the Company shall continue to have obligations to the
Investor as set forth in Section 1.1(c) of the
Registration Rights Agreement with respect to the
registration of the Warrant Shares and nothing in this
paragraph shall affect the Investor's enforcement of its
rights with respect thereto.
(b) The Company may, at its sole discretion, terminate this
Agreement upon written notice to the Investor in the event
that the Company has, in accordance with Section 2.1(b) of
this Agreement, issued and sold Put Shares to the Investor for
an amount equal to or greater than (in aggregate Investment
Amounts) the Minimum Commitment Amount. Notwithstanding the
foregoing, so long as the Investor (i) holds Registrable
Securities issued hereunder or under the Warrant, and/or (ii)
the Warrant has not expired and is unexercised in whole or in
part, the Company's obligations hereunder with respect to
Sections 6.3 and 6.4 and under Sections 4.1(b), 4.1(d) and
4.1(e) of the Registration Rights Agreement shall survive such
termination of this Agreement.
Section 2.5. The Warrant. On the Subscription Date, the Company shall
issue the Warrant to the Investor. The Warrant shall be delivered by the Company
to the Investor upon execution of this Agreement by the parties hereto. The
Warrant Shares shall be registered for resale pursuant to the Registration
Rights Agreement.
8
Section 2.6. Blackout Shares. (a) In the event that, within five (5)
Trading Days following any Closing Date, the Company gives a Blackout Notice to
the Investor of a Blackout Period in accordance with the Registration Rights
Agreement, and (b) the Bid Price on the Trading Day immediately preceding such
Blackout Period ("Old Bid Price") is greater than the Bid Price on the first
Trading Day following such Blackout Period that the Investor may sell its
Registrable Securities pursuant to an effective Registration Statement ("New Bid
Price"), then the Company shall issue to the Investor the number of additional
shares of Registrable Securities (the "Blackout Shares") equal to the difference
between (X) the product of the number of Registrable Securities held by Investor
immediately prior to the Blackout Period multiplied by the Old Bid Price,
divided by the New Bid Price, and (Y) the number of Registrable Securities held
by Investor immediately prior to the Blackout Period.
Section 2.7. Liquidated Damages. The parties hereto acknowledge and agree
that the sum payable under Section 2.1(b) and the requirement to issue Blackout
Shares under Section 2.6 above shall give rise to liquidated damages and not
penalties. The parties further acknowledge that (a) the amount of loss or
damages likely to be incurred is incapable or is difficult to precisely
estimate, (b) the amounts specified in such Sections bear a reasonable
proportion and are not plainly or grossly disproportionate to the probable loss
likely to be incurred by the Investor in connection with the failure by the
Company to make Puts with aggregate Purchase Prices totalling at least the
Minimum Commitment Amount or in connection with a Blackout Period under the
Registration Rights Agreement, and (c) the parties are sophisticated business
parties and have been represented by sophisticated and able legal and financial
counsel and negotiated this Agreement at arm's length.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF INVESTOR
The Investor represents and warrants to the Company that:
Section 3.1. Intent. The Investor is entering into this Agreement for its
own account and the Investor has no present arrangement (whether or not legally
binding) at any time to sell the Common Stock to or through any person or
entity; provided, however, that by making the representations herein, the
Investor does not agree to hold the Common Stock for any minimum or other
specific term and reserves the right to dispose of the Common Stock at any time
in accordance with federal and state securities laws applicable to such
disposition.
Section 3.2. Sophisticated Investor. The Investor is a sophisticated
investor (as described in Rule 506(b)(2)(ii) of Regulation D) and an accredited
investor (as defined in Rule 501 of Regulation D), and Investor has such
knowledge and experience in business and financial matters that it is capable of
evaluating the merits and risks of an investment in Common Stock. The Investor
acknowledges that an investment in the Common Stock is speculative and involves
a high degree of risk.
Section 3.3. Authority. Each of this Agreement, the Registration Rights
Agreement, and the Escrow Agreement has been duly authorized by all necessary
corporate action and no further consent or authorization of the Company, or its
Board of Directors or stockholders is required. Each of this Agreement, the
Registration Rights Agreement, and the Escrow Agreement was validly executed and
delivered by the Investor and each is a valid and binding agreement of the
Investor enforceable against it in accordance with its terms, subject to
applicable bankruptcy, insolvency, or similar laws relating to, or affecting
generally the enforcement of, creditors' rights and remedies or by other
equitable principles of general application.
9
Section 3.4. Not an Affiliate. The Investor is not an officer, director or
"affiliate" (as that term is defined in Rule 405 of the Securities Act) of the
Company.
Section 3.5. Organization and Standing. Investor is duly organized,
validly existing, and in good standing under the laws of the British Virgin
Islands.
Section 3.6. Absence of Conflicts. The execution and delivery of this
Agreement and any other document or instrument contemplated hereby, and the
consummation of the transactions contemplated thereby, and compliance with the
requirements thereof, will not (a) violate any law, rule, regulation, order,
writ, judgment, injunction, decree or award binding on Investor, or, to the
Investor's knowledge, (b) violate any provision of any indenture, instrument or
agreement to which Investor is a party or is subject, or by which Investor or
any of its assets is bound, (c) conflict with or constitute a material default
thereunder, (d) result in the creation or imposition of any lien pursuant to the
terms of any such indenture, instrument or agreement, or constitute a breach of
any fiduciary duty owed by Investor to any third party, or (e) require the
approval of any third-party (that has not been obtained) pursuant to any
material contract to which Investor is subject or to which any of its assets,
operations or management may be subject.
Section 3.7. Disclosure; Access to Information. Investor has received all
documents, records, books and other information pertaining to Investor's
investment in the Company that have been requested by Investor and all of the
Investor's inquiries with respect to the Company have been satisfactorily
responded to by the Company. The Investor has reviewed or received copies of the
SEC Documents.
Section 3.8. Manner of Sale. At no time was Investor presented with or
solicited by or through any leaflet, public promotional meeting, television
advertisement or any other form of general solicitation or advertising.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to the Investor that:
Section 4.1. Organization of the Company. The Company is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Delaware and has all requisite corporate power and authority to own,
lease and operate its properties and to carry on its business as now being
conducted. Except as set forth in the SEC Documents, the Company does not own
more than fifty percent (50%) of the outstanding capital stock of or control any
other business entity. The Company is duly qualified as a foreign corporation to
do business and is in good standing in every jurisdiction in which the nature of
the business conducted or property owned by it makes such qualification
necessary, other than those in which the failure so to qualify would not have a
Material Adverse Effect.
Section 4.2. Authority. (i) The Company has the requisite corporate power
and authority to enter into and perform its obligations under this Agreement,
the Registration Rights Agreement, the Warrant and the Escrow Agreement and to
issue the Put Shares, the Warrant, the Warrant Shares and the Blackout Shares;
(ii) the execution and delivery of this Agreement and the Registration Rights
Agreement, and the execution, issuance and delivery of the Warrant, by the
Company and the consummation by it of the transactions contemplated hereby and
thereby have been duly authorized by all necessary corporate action and no
further consent or authorization of the Company or its Board of Directors or
stockholders is required; and (iii) each of this Agreement and the Registration
Rights Agreement has been duly executed and delivered, and the Warrant has been
duly executed, issued and
10
delivered, by the Company and constitute valid and binding obligations of the
Company enforceable against the Company in accordance with their respective
terms, except as such enforceability may be limited by applicable bankruptcy,
insolvency, or similar laws relating to, or affecting generally the enforcement
of, creditors' rights and remedies or by other equitable principles of general
application.
Section 4.3. Capitalization. Schedule 4.3 sets forth the authorized and
issued and outstanding capital stock of the Company as of December 31, 1999.
Except as set forth on Schedule 4.3 and except for options to purchase Common
Stock issued to officers, directors and employees, of the Company pursuant to
stock option plans in the ordinary course of the Company's business consistent
with past practice, there are no options, warrants, or rights to subscribe to,
securities, rights or obligations convertible into or exchangeable for or giving
any right to subscribe for any shares of capital stock of the Company. All of
the outstanding shares of Common Stock of the Company have been duly and validly
authorized and issued and are fully paid and nonassessable.
Section 4.4. Common Stock. The Company has registered its Common Stock
pursuant to Section 12(b) or 12(g) of the Exchange Act and is in full compliance
with all reporting requirements of the Exchange Act, and the Company has
maintained all requirements for the continued listing or quotation of its Common
Stock, and such Common Stock is currently listed or quoted on the Principal
Market. As of the date hereof, the Principal Market is the Nasdaq SmallCap
Market.
Section 4.5. SEC Documents. The Company has delivered or made available to
the Investor true and complete copies of the SEC Documents (including, without
limitation, proxy information and solicitation materials). The Company has not
provided to the Investor any information that, according to applicable law, rule
or regulation, should have been disclosed publicly prior to the date hereof by
the Company, but which has not been so disclosed. As of their respective dates,
the SEC Documents complied in all material respects with the requirements of the
Securities Act or the Exchange Act, as the case may be, and other federal, state
and local laws, rules and regulations applicable to such SEC Documents, and none
of the SEC Documents 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 Documents comply as to form and substance in all material respects
with applicable accounting requirements and the published rules and regulations
of the SEC or other applicable rules and regulations with respect thereto. Such
financial statements have been prepared in accordance with generally accepted
accounting principles applied on a consistent basis during the periods involved
(except (i) as may be otherwise indicated in such financial statements or the
notes thereto or (ii) in the case of unaudited interim statements, to the extent
they may not include footnotes or may be condensed or summary statements) and
fairly present in all material respects the financial position of the Company as
of 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
year-end audit adjustments).
Section 4.6. Exemption from Registration; Valid Issuances. The sale and
issuance of the Warrant, the Warrant Shares, the Put Shares and any Blackout
Shares in accordance with the terms and on the bases of the representations and
warranties set forth in this Agreement, may and shall be properly issued
pursuant to Section 4(2), Regulation D and/or any other applicable federal and
state securities laws. When issued and paid for as herein provided, the Put
Shares, the Warrant Shares and any Blackout Shares shall be duly and validly
issued, fully paid, and nonassessable. Neither the sales of the Put Shares, the
Warrant, the Warrant Shares or any Blackout Shares pursuant to, nor the
Company's performance of its obligations under, this Agreement, the Registration
Rights Agreement, or the Warrant shall (i) result in the creation or imposition
of any liens, charges, claims or other encumbrances upon the Put Shares, the
Warrant Shares, any Blackout Shares or any of the assets of the Company, or (ii)
entitle the holders of
11
Outstanding Capital Shares to preemptive or other rights to subscribe to or
acquire the Capital Shares or other securities of the Company. The Put Shares,
the Warrant Shares and any Blackout Shares shall not subject the Investor to
personal liability by reason of the ownership thereof.
Section 4.7. No General Solicitation or Advertising in Regard to this
Transaction. Neither the Company nor any of its affiliates nor any distributor
or any person acting on its or their behalf (i) has conducted or will conduct
any general solicitation (as that term is used in Rule 502(c) of Regulation D)
or general advertising with respect to any of the Put Shares, the Warrant, the
Warrant Shares or any Blackout Shares, or (ii) made any offers or sales of any
security or solicited any offers to buy any security under any circumstances
that would require registration of the Common Stock under the Securities Act.
Section 4.8. Corporate Documents. The Company has furnished or made
available to the Investor true and correct copies of the Company's Articles of
Incorporation, as amended and in effect on the date hereof (the "Certificate"),
and the Company's By-Laws, as amended and in effect on the date hereof (the
"By-Laws").
Section 4.9. No Material Breach or Violation with Law. The execution,
delivery and performance of this Agreement by the Company and the consummation
by the Company of the transactions contemplated hereby, including without
limitation the issuance of the Put Shares, the Warrant, the Warrant Shares and
the Blackout Shares do not and will not (i) result in a violation of the
Certificate or By-Laws or (ii) constitute a material 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 of,
any material agreement, indenture, instrument or any "lock-up" or similar
provision of any underwriting or similar agreement to which the Company is a
party, or (iii) result in a violation of any federal, state, local or foreign
law, rule, regulation, order, judgment or decree (including federal and state
securities laws and regulations) applicable to the Company or by which any
property or asset of the Company is bound or affected (except for such defaults,
terminations, amendments, accelerations, cancellations and violations as would
not, individually or in the aggregate, have a Material Adverse Effect) nor is
the Company otherwise in violation of, in default under, any of the foregoing;
provided, however, that for purposes of the Company's representations and
warranties as to violations of foreign law, rule or regulation referenced in
clause (iii), such representations and warranties are made only to the best of
the Company's knowledge insofar as the execution, delivery and performance of
this Agreement by the Company and the consummation by the Company of the
transactions contemplated hereby are or may be affected by the status of the
Investor under or pursuant to any such foreign law, rule or regulation. The
business of the Company is not being conducted in violation of any law,
ordinance or regulation of any governmental entity, except for possible
violations that either singly or in the aggregate do not and will not have a
Material Adverse Effect. The Company is not required under federal, state or
local law, rule or regulation to obtain any consent, authorization or order of,
or make any filing or registration with, any court or governmental agency in
order for it to execute, deliver or perform any of its obligations under this
Agreement or issue and sell the Common Stock or the Warrant in accordance with
the terms hereof (other than any SEC, NASD or state securities filings that may
be required to be made by the Company subsequent to any Closing, any
registration statement that may be filed pursuant hereto, and any shareholder
approval required by the rules applicable to companies whose common stock trades
on the Nasdaq SmallCap Market); provided that, for purposes of the
representation made in this sentence, the Company is assuming and relying upon
the accuracy of the relevant representations and agreements of the Investor
herein.
Section 4.10. No Material Adverse Change. Since September 30, 1999 no
event has occurred that would have a Material Adverse Effect on the Company,
except as disclosed in the SEC Documents.
12
Section 4.11. No Undisclosed Liabilities. The Company has no liabilities
or obligations that are material, individually or in the aggregate, and that are
not disclosed in the SEC Documents or otherwise publicly announced, other than
those incurred in the ordinary course of the Company's businesses since
September 30, 1999 and which, individually or in the aggregate, do not or would
not have a Material Adverse Effect on the Company.
Section 4.12. No Undisclosed Events or Circumstances. Since September 30,
1999, no event or circumstance has occurred or exists with respect to the
Company or its businesses, properties, operations or financial condition, that,
under applicable law, rule or regulation, requires public disclosure or
announcement prior to the date hereof by the Company but which has not been so
publicly announced or disclosed in the SEC Documents.
Section 4.13. No Integrated Offering. Neither the Company, nor any of its
affiliates, nor any person acting on its or their behalf has, directly or
indirectly, made any offers or sales of any security or solicited any offers to
buy any security, other than pursuant to this Agreement and employee benefit
plans, under circumstances that would require registration under the Securities
Act of the Common Stock issuable hereunder with any other offers or sales of
securities of the Company.
Section 4.14. Litigation and Other Proceedings. Except as may be set forth
in the SEC Documents, there are no lawsuits or proceedings pending or to the
best knowledge of the Company threatened, against the Company, nor has the
Company received any written or oral notice of any such action, suit, proceeding
or investigation, which might have a Material Adverse Effect. Except as set
forth in the SEC Documents, no judgment, order, writ, injunction or decree or
award has been issued by or, so far as is known by the Company, requested of any
court, arbitrator or governmental agency which might result in a Material
Adverse Effect.
Section 4.15. No Misleading or Untrue Communication. With respect to the
issuance of the Put Shares, the Warrant, the Warrant Shares and the Blackout
Shares in connection with the transactions contemplated by this Agreement,
neither the Company nor, to the knowledge of the Company, any Person
representing the Company has made, at any time, any written communication in
connection with the offer or sale of the same which contained any untrue
statement of a material fact or omitted to state any material fact necessary in
order to make the statements, in the light of the circumstances under which they
were made, not misleading.
Section 4.16. Material Non-Public Information. Except as may be requested
from time to time by the Investor pursuant to Section 7.3(a), neither the
Company nor its agents have disclosed to the Investor, any material non-public
information that, if disclosed, would, or could reasonably be expected to have,
an effect on the price of the Common Stock.
13
ARTICLE V
COVENANTS OF THE INVESTOR
The Investor's trading activities with respect to shares of the Company's
Common Stock will be in compliance with all applicable state and federal
securities laws, rules and regulations (including, without limitation, the
regulations set forth in Regulation M under the Securities Act) and the rules
and regulations of the Principal Market on which the Company's Common Stock is
listed.
ARTICLE VI
COVENANTS OF THE COMPANY
Section 6.1. Registration Rights. The Company shall cause the Registration
Rights Agreement to remain in full force and effect and the Company shall comply
in all respects with the terms thereof.
Section 6.2. Reservation of Common Stock. As of the date hereof, the
Company has available and the Company shall reserve and keep available at all
times, free of preemptive rights, shares of Common Stock for the purpose of
enabling the Company to satisfy any obligation to issue the Put Shares, the
Warrant Shares and the Blackout Shares; such amount of shares of Common Stock to
be reserved shall be calculated based upon a good faith estimate by the Company
of the minimum aggregate Purchase Price for the Put Shares under the terms and
conditions of this Agreement and the Exercise Price of the Warrant and a good
faith estimate by the Company in consultation with the Investor of the number of
Blackout Shares that will need to be issued. The number of shares so reserved
from time to time, as theretofore increased or reduced as hereinafter provided,
may be reduced by the number of shares actually delivered hereunder.
Section 6.3. Listing of Common Stock. The Company shall maintain the
listing of the Common Stock on a Principal Market, and as soon as practicable
(but in any event prior to the commencement of the Commitment Period) will cause
the Put Shares, the Warrant Shares and any Blackout Shares to be listed on the
Principal Market. The Company further shall, if the Company applies to have the
Common Stock traded on any other Principal Market, include in such application
the Put Shares, the Warrant Shares and any Blackout Shares, and shall take such
other action as is necessary or desirable in the opinion of the Investor to
cause the Common Stock to be listed on such other Principal Market as promptly
as possible. The Company shall use commercially reasonable efforts to continue
the listing and trading of its Common Stock on the Principal Market (including,
without limitation, maintaining sufficient net tangible assets) and will comply
in all respects with the Company's reporting, filing and other obligations under
the bylaws or rules of the NASD and the Principal Market.
Section 6.4. Exchange Act Registration. The Company shall (i) cause its
Common Stock to continue to be registered under Section 12(g) or 12(b) of the
Exchange Act, will comply in all respects with its reporting and filing
obligations under said Act, and will not take any action or file any document
(whether or not permitted by said Act or the rules thereunder) to terminate or
suspend such registration or to terminate or suspend its reporting and filing
obligations under said Act, except in connection with any merger, tender offer,
business combination or going private transaction involving the Company.
Section 6.5. Legends. The certificates evidencing the Put Shares, the
Warrant Shares and the Blackout Shares shall be free of legends, except as
provided for in Article VIII.
14
Section 6.6. Corporate Existence. The Company shall take all steps
necessary to preserve and continue the corporate existence of the Company.
Section 6.7. Additional SEC Documents. The Company shall deliver to the
Investor, as and when the originals thereof are submitted to the SEC for filing,
copies of all SEC Documents so furnished or submitted to the SEC.
Section 6.8. Notice of Certain Events Affecting Registration; Suspension
of Right to Make a Put. The Company shall immediately notify the Investor upon
the occurrence of any of the following events in respect of a registration
statement or related prospectus in respect of an offering of Registrable
Securities: (i) receipt of any request for additional information by the SEC or
any other federal or state governmental authority during the period of
effectiveness of the registration statement for amendments or supplements to the
registration statement or related prospectus; (ii) the issuance by the SEC or
any other federal or state governmental authority of any stop order suspending
the effectiveness of the Registration Statement or the initiation of any
proceedings for that purpose; (iii) receipt of any notification with respect to
the suspension of the qualification or exemption from qualification of any of
the Registrable Securities for sale in any jurisdiction or the initiation or
threatening of any proceeding for such purpose; (iv) the happening of any event
that makes any statement made in such Registration Statement or related
prospectus or any document incorporated or deemed to be incorporated therein by
reference untrue in any material respect or that requires the making of any
changes in the registration statement, related prospectus or documents so that,
in the case of the Registration Statement, 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 not misleading, and
that in the case of the related prospectus, 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 the light of the
circumstances under which they were made, not misleading; and (v) the Company's
reasonable determination that a post-effective amendment to the registration
statement would be appropriate, and the Company shall promptly make available to
the Investor any such supplement or amendment to the related prospectus. The
Company shall not deliver to the Investor any Put Notice during the continuation
of any of the foregoing events.
Section 6.9. Expectations Regarding Put Notices. Within ten (10) days
after the commencement of each calendar quarter occurring subsequent to the
commencement of the Commitment Period, the Company undertakes to notify the
Investor as to its reasonable expectations as to the dollar amount it intends to
raise during such calendar quarter, if any, through the issuance of Put Notices.
Such notification shall constitute only the Company's good faith estimate with
respect to such calendar quarter and shall in no way obligate the Company to
raise such amount during such calendar quarter or otherwise limit its ability to
deliver Put Notices during such calendar quarter. The failure by the Company to
comply with this provision can be cured by the Company's notifying the Investor
at any time as to its reasonable expectations with respect to the current
calendar quarter.
Section 6.10. Consolidation; Merger. The Company shall not, at any time
after the date hereof, effect any merger or consolidation of the Company with or
into, or a transfer of all or substantially all of the assets of the Company to,
another entity unless the resulting successor or acquiring entity (if not the
Company) assumes by written instrument the obligation to deliver to the Investor
such shares of stock and/or securities as the Investor is entitled to receive
pursuant to this Agreement and the Warrant.
Section 6.11. Issuance of Put Shares, Warrant Shares and Blackout Shares.
The sale of the Put Shares, the issuance of the Warrant Shares pursuant to
exercise of the Warrant and the issuance of any Blackout Shares shall be made in
accordance with the provisions and requirements of Regulation D and/or any other
applicable exemption(s) from the registration requirements of the Securities Act
and any applicable state securities laws. Issuance of the Warrant Shares
pursuant to exercise of the Warrant
15
through a cashless exercise shall be made in accordance with the provisions and
requirements of Section 3(a)(9) under the Securities Act and any applicable
state law.
Section 6.12. Legal Opinion on Subscription Date. The Company's
independent counsel shall deliver to the Investor on the Subscription Date an
opinion in form and substance reasonably acceptable to the Investor's counsel.
ARTICLE VII
CONDITIONS TO DELIVERY OF
PUT NOTICES AND CONDITIONS TO CLOSING
Section 7.1. Conditions Precedent to the Obligation of the Company to
Issue and Sell Common Stock. The obligation hereunder of the Company to issue
and sell the Put Shares to the Investor incident to each Closing is subject to
the satisfaction, at or before each such Closing, of each of the conditions set
forth below.
(a) Accuracy of the Investor's Representation and Warranties. The
representations and warranties of the Investor shall be true
and correct in all material respects as of the date of this
Agreement and as of the date of each such Closing as though
made at each such time.
(b) Performance by the Investor. The Investor shall have
performed, satisfied and complied in all respects with all
covenants, agreements and conditions required by this
Agreement to be performed, satisfied or complied with by the
Investor at or prior to such Closing.
Section 7.2. Conditions Precedent to the Right of the Company to Deliver a
Put Notice and the Obligation of the Investor to Purchase Put Shares. The right
of the Company to deliver a Put Notice and the obligation of the Investor
hereunder to acquire and pay for the Put Shares incident to a Closing is subject
to the satisfaction, on (i) the applicable Put Date and (ii) the applicable
Closing Date (each a "Condition Satisfaction Date"), of each of the following
conditions:
(a) Registration of the Registrable Securities with the SEC. As
set forth in the Registration Rights Agreement, the Company
shall have filed with the SEC a Registration Statement with
respect to the resale of the Registrable Securities by the
Investor that shall have been declared effective by the SEC
prior to the first Put Date, but in no event later than one
hundred twenty (120) days after Subscription Date.
(b) Effective Registration Statement. Upon the terms and subject
to the conditions as set forth in the Registration Rights
Agreement, the Registration Statement shall have previously
become effective and shall remain effective on each Condition
Satisfaction Date and (i) neither the Company nor the Investor
shall have received notice that the SEC has issued or intends
to issue a stop order with respect to the Registration
Statement or that the SEC otherwise has suspended or withdrawn
the effectiveness of the Registration Statement, either
temporarily or permanently, or intends or has threatened to do
so (unless the SEC's concerns have been addressed and the
Investor is reasonably satisfied that the SEC no longer is
considering or intends to take such action), and (ii) no other
suspension
16
of the use or withdrawal of the effectiveness of the
Registration Statement or related prospectus shall exist.
(c) Accuracy of the Company's Representations and Warranties. The
representations and warranties of the Company shall be true
and correct in all material respects as of each Condition
Satisfaction Date as though made at each such time (except for
representations and warranties specifically made as of a
particular date).
(d) Performance by the Company. The Company shall have performed,
satisfied and complied in all material respects with all
covenants, agreements and conditions required by this
Agreement, the Registration Rights Agreement and the Warrant
to be performed, satisfied or complied with by the Company at
or prior to each Condition Satisfaction Date.
(e) No Injunction. No statute, rule, regulation, executive order,
decree, ruling or injunction shall have been enacted, entered,
promulgated or adopted by any court or governmental authority
of competent jurisdiction that prohibits the transactions
contemplated by this Agreement or otherwise has a Material
Adverse Effect, and no actions, suits or proceedings shall be
in progress, pending or threatened by any Person, that seek to
enjoin or prohibit the transactions contemplated by this
Agreement or otherwise could reasonably be expected to have a
Material Adverse Effect. For purposes of this paragraph (e),
no proceeding shall be deemed pending or threatened unless one
of the parties has received written or oral notification
thereof prior to the applicable Closing Date.
(f) No Suspension of Trading In or Delisting of Common Stock. The
trading of the Common Stock shall not have been suspended by
the SEC, the Principal Market or the NASD and the Common Stock
shall have been approved for listing or quotation on and shall
not have been delisted from the Principal Market. The issuance
of shares of Common Stock with respect to the applicable
Closing, if any, shall not violate the shareholder approval
requirements of the Principal Market.
(g) Legal Opinion. The Company shall have caused to be delivered
to the Investor, within five (5) Trading Days of the effective
date of the Registration Statement, an opinion of the
Company's independent counsel in form and substance reasonably
acceptable to the Investor's counsel.
(h) Intentionally Omitted.
(i) Ten Percent Limitation. On each Closing Date, the number of
Put Shares then to be purchased by the Investor shall not
exceed the number of such shares that, when aggregated with
all other shares of Registerable Securities then owned by the
Investor beneficially or deemed beneficially owned by the
Investor, would result in the Investor owning no more than
9.9% of all of such Common Stock as would be outstanding on
such Closing Date, as determined in accordance with Section 16
of the Exchange Act and the regulations promulgated
thereunder. For purposes of this Section, in the event that
the amount of Common Stock outstanding as determined in
accordance with Section 16 of the Exchange Act and the
regulations promulgated thereunder is greater on a Closing
Date than on
17
the date upon which the Put Notice associated with such
Closing Date is given, the amount of Common Stock outstanding
on such Closing Date shall govern for purposes of determining
whether the Investor, when aggregating all purchases of Common
Stock made pursuant to this Agreement and, if any, Warrant
Shares and Blackout Shares, would own more than 9.9% of the
Common Stock following such Closing Date.
(j) Minimum Average Daily Trading Volume. The Average Daily
Trading Volume for the Common Stock with respect to the
applicable Put Date and Closing Date equals or exceeds 30,000
shares per Trading Day.
(k) Intentionally Omitted.
(l) Trading Cushion. The Trading Cushion shall have elapsed since
the immediately preceding Put Date.
(m) Shareholder Vote. The issuance of shares of Common Stock with
respect to the applicable Closing, if any, shall not violate
the shareholder approval requirements of the NASD or the
Principal Market.
(n) Escrow Agreement. The parties hereto shall have entered into
the Escrow Agreement.
(o) Other. On each Condition Satisfaction Date, the Investor shall
have received and been reasonably satisfied with such other
certificates and documents as shall have been reasonably
requested by the Investor in order for the Investor to confirm
the Company's satisfaction of the conditions set forth in this
Section 7.2., including, without limitation, a certificate in
substantially the form and substance of Exhibit F hereto,
executed in either case by an executive officer of the Company
and to the effect that all the conditions to such Closing
shall have been satisfied as at the date of each such
certificate.
Section 7.3. Review of Registration Statement; Non-Disclosure of
Non-Public Information.
(a) To the extent reasonably requested by the Investor, the
Company shall make available for inspection and review by the
Investor, advisors to and representatives of the Investor (who
may or may not be affiliated with the Investor and who are
reasonably acceptable to the Company), or any Underwriter, any
Registration Statement or amendment or supplement thereto or
any blue sky, NASD or other filing, all financial and other
records, all SEC Documents and other filings with the SEC, and
all other corporate documents and properties of the Company as
may be reasonably necessary for the purpose of such review,
and cause the Company's officers, directors and employees to
supply all such information reasonably requested by the
Investor or any such representative, advisor or Underwriters
in connection with such Registration Statement (including,
without limitation, in response to all questions and other
inquiries reasonably made or submitted by any of them), prior
to and from time to time after the filing and effectiveness of
the Registration Statement for the sole purpose of enabling
the Investor and such representatives, advisors and
Underwriters and their respective accountants and attorneys to
conduct initial and ongoing due diligence with respect to the
Company and the accuracy of the
18
Registration Statement. Notwithstanding the foregoing, in the
event that the Company is obligated to make such information
available to the Investor, its advisors, representatives or
Underwriters, to the extent that the Company reasonably
believes in good faith that such information is proprietary or
confidential in nature, the Investor shall, and it shall cause
its advisors, representatives and Underwriter to hold such
information in strict confidence and not to disclose such
information to any other Person without the prior consent of
the Company in its sole discretion. The Investor acknowledges
and agrees that disclosures made by the Company at the
direction of the Investor in accordance with this Section
7.3(a) may cause the Investor to learn material non-public
information concerning the Company that may prohibit the
Investor from trading the Company's Common Stock until such
information is disclosed to the public.
(b) Each of the Company, its officers, directors, employees and
agents shall in no event disclose non-public information to
the Investor, advisors to or representatives of the Investor
unless prior to disclosure of such information the Company
identifies such information as being non-public information
and provides the Investor, such advisors and representatives
with the opportunity to accept or refuse to accept such
non-public information for review. The Company may, as a
condition to disclosing any non-public information hereunder,
require the Investor's advisors and representatives to enter
into a confidentiality agreement in form reasonably
satisfactory to the Company and the Investor.
(c) Nothing herein shall require the Company to disclose
non-public information to the Investor or its advisors or
representatives, and the Company represents that it does not
disseminate non-public information to any investors who
purchase stock in the Company in a public offering, to money
managers or to securities analysts; provided, however, that
notwithstanding anything herein to the contrary, the Company
shall, as hereinabove provided, immediately notify the
advisors and representatives of the Investor and any
Underwriters of any event or the existence of any circumstance
(without any obligation to disclose the specific event or
circumstance) of which it becomes aware, constituting
non-public information (whether or not requested of the
Company specifically or generally during the course of due
diligence by such persons or entities), which, if not
disclosed in the prospectus included in the Registration
Statement would cause such prospectus to include a material
misstatement or to omit a material fact required to be stated
therein in order to make the statements, therein, in light of
the circumstances in which they were made, not misleading.
Nothing contained in this Section 7.3 shall be construed to
mean that such persons or entities other than the Investor
(without the written consent of the Investor prior to
disclosure of such information) may not obtain non-public
information in the course of conducting due diligence in
accordance with the terms and conditions of this Agreement and
nothing herein shall prevent any such persons or entities from
notifying the Company of their opinion that based on such due
diligence by such persons or entities, that the Registration
Statement contains an untrue statement of a material fact or
omits a material fact required to be stated in the
Registration Statement or necessary to make the statements
contained therein, in light of the circumstances in which they
were made, not misleading.
19
ARTICLE VIII
LEGENDS
Section 8.1. Legends. Each of the Warrant and, unless otherwise provided
below, each certificate representing Registrable Securities will bear the
following legend (the "Legend"):
THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"),
OR ANY OTHER APPLICABLE SECURITIES LAWS AND HAVE BEEN ISSUED IN RELIANCE
UPON AN EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT
AND SUCH OTHER SECURITIES LAWS. NEITHER THIS SECURITY NOR ANY INTEREST OR
PARTICIPATION HEREIN MAY BE REOFFERED, SOLD, ASSIGNED, TRANSFERRED,
PLEDGED, ENCUMBERED, HYPOTHECATED OR OTHERWISE DISPOSED OF, EXCEPT
PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT
OR PURSUANT TO A TRANSACTION THAT IS EXEMPT FROM, OR NOT SUBJECT TO, SUCH
REGISTRATION. THE HOLDER OF THIS CERTIFICATE IS THE BENEFICIARY OF CERTAIN
OBLIGATIONS OF THE COMPANY SET FORTH IN A PRIVATE EQUITY LINE AGREEMENT
BETWEEN MUSE TECHNOLOGIES, INC. AND KINGSBRIDGE CAPITAL LIMITED DATED AS
OF JUNE 1st, 2000. A COPY OF THE PORTION OF THE AFORESAID AGREEMENT
EVIDENCING SUCH OBLIGATIONS MAY BE OBTAINED FROM THE COMPANY'S EXECUTIVE
OFFICES.
As soon as practicable after the execution and delivery hereof, but in any
event within five (5) Trading Days hereafter, the Company shall issue to the
transfer agent for its Common Stock (and to any substitute or replacement
transfer agent for its Common Stock upon the Company's appointment of any such
substitute or replacement transfer agent) instructions in substantially the form
of Exhibit F hereto (subject to the reasonable modifications required by the
transfer agent), with a copy to the Investor. Such instructions shall be
irrevocable by the Company from and after the date hereof or from and after the
issuance thereof to any such substitute or replacement transfer agent, as the
case may be, except as otherwise expressly provided in the Registration Rights
Agreement. It is the intent and purpose of such instructions, as provided
therein, to require the transfer agent for the Common Stock from time to time
upon transfer of Registrable Securities by the Investor to issue certificates
evidencing such Registrable Securities free of the Legend during the following
periods and under the following circumstances and without consultation by the
transfer agent with the Company or its counsel and without the need for any
further advice or instruction or documentation to the transfer agent by or from
the Company or its counsel or the Investor, unless an opinion of Investor's
counsel is reasonably required by the Transfer Agent or the Company:
(a) At any time after the Effective Date to the extent accompanied
by a notice requesting the issuance of certificates free of
the Legend; provided that (i) the Company is reasonably able
to confirm to the transfer agent that the Registration
Statement shall then be effective and (ii) if reasonably
requested by the transfer agent the Investor confirms to the
transfer agent that the Investor has complied with or will
comply with the prospectus delivery requirement under the
Securities Act.
20
(b) At any time upon any surrender of one or more certificates
evidencing Registrable Securities that bear the Legend, to the
extent accompanied by a notice requesting the issuance of new
certificates free of the Legend to replace those surrendered
and containing representations that (i) the Investor is
permitted to dispose of such Registrable Securities without
limitation as to amount or manner of sale pursuant to Rule
144(k) under the Securities Act or (ii) the Investor has sold,
pledged or otherwise transferred or agreed to sell, pledge or
otherwise transfer such Registrable Securities in a manner
other than pursuant to an effective registration statement, to
a transferee who shall upon such transfer be entitled to
freely tradeable securities.
Section 8.2. No Other Legend or Stock Transfer Restrictions. No legend
other than the one specified in Section 8.1 has been or shall be placed on the
share certificates representing the Common Stock issued to the Investor and no
instructions or "stop transfers orders," so called, "stock transfer
restrictions," or other restrictions have been or shall be given to the
Company's transfer agent with respect thereto other than as expressly set forth
in this Article VIII.
Section 8.3. Investor's Compliance. Nothing in this Article VIII shall
affect in any way the Investor's obligations under any agreement to comply with
all applicable securities laws upon resale of the Common Stock.
ARTICLE IX
INDEMNIFICATION
Section 9.1. Indemnification.
(a) The Company agrees to indemnify and hold harmless the
Investor, its partners, affiliates, officers, directors,
employees, and duly authorized agents, and each Person or
entity, if any, who controls the Investor within the meaning
of Section 15 of the Securities Act or Section 20 of the
Exchange Act, together with the Controlling Persons (as
defined in the Registration Rights Agreement) from and against
any Damages, joint or several, and any action in respect
thereof to which the Investor, its partners, affiliates,
officers, directors, employees, and duly authorized agents,
and any such Controlling Person becomes subject to, resulting
from, arising out of or relating to any misrepresentation,
breach of warranty or nonfulfillment of or failure to perform
any covenant or agreement on the part of Company contained in
this Agreement, as such Damages are incurred, except to the
extent that such damages result solely from the Investor's
failure to perform any covenant or agreement contained in this
Agreement, provided, however, that the Company shall not be
liable in any such case to the extent that any such Damages
arise out of or are based upon information furnished to the
Company by or on behalf of the Investor in writing.
(b) the Investor agrees to indemnify and hold harmless the
Company, its partners, affiliates, officers, directors,
employees and duly authorized agents and its Controlling
Persons (as defined in the Registration Rights Agreement) from
and against any Damages, joint or several, and any action in
respect thereof to which the Company, its partners,
affiliates, officers, directors, employees, and duly
authorized agents, and any such Controlling Person becomes
subject to, resulting from, arising out of or relating to any
misrepresentation, breach of warranty or
21
nonfulfillment of or failure to perform any covenant or
agreement on the part of Investor contained in this Agreement,
as such Damages are incurred, except to the extent that such
damages result solely from the Company's failure to perform
any covenant or agreement contained in this Agreement;
provided, however, that the indemnification obligation of the
Investor under this Section 9.1 shall not exceed an aggregate
maximum amount of $750,000.
Section 9.2. Method of Asserting Indemnification Claims. All claims for
indemnification by any Indemnified Party (as defined below) under Section 9.1
shall be asserted and resolved as follows:
(a) In the event any claim or demand in respect of which any
person claiming indemnification under any provision of Section
9.1 (an "Indemnified Party") might seek indemnity under
Section 9.1 is asserted against or sought to be collected from
such Indemnified Party by a person other than the Company, the
Investor or any affiliate of the Company or (a "Third Party
Claim"), the Indemnified Party shall deliver a written
notification, enclosing a copy of all papers served, if any,
and specifying the nature of and basis for such Third Party
Claim and for the Indemnified Party's claim for
indemnification that is being asserted under any provision of
Section 9.1 against any person (the "Indemnifying Party"),
together with the amount or, if not then reasonably
ascertainable, the estimated amount, determined in good faith,
of such Third Party Claim (a "Claim Notice") with reasonable
promptness to the Indemnifying Party. If the Indemnified Party
fails to provide the Claim Notice with reasonable promptness
after the Indemnified Party receives notice of such Third
Party Claim, the Indemnifying Party shall not be obligated to
indemnify the Indemnified Party with respect to such Third
Party Claim to the extent that the Indemnifying Party's
ability to defend has been irreparably prejudiced by such
failure of the Indemnified Party. The Indemnifying Party shall
notify the Indemnified Party as soon as practicable within the
period ending thirty (30) calendar days following receipt by
the Indemnifying Party of either a Claim Notice or an
Indemnity Notice (as defined below) (the "Dispute Period")
whether the Indemnifying Party disputes its liability or the
amount of its liability to the Indemnified Party under Section
9.1 and whether the Indemnifying Party desires, at its sole
cost and expense, to defend the Indemnified Party against such
Third Party Claim.
(i) If the Indemnifying Party notifies the Indemnified Party
within the Dispute Period that the Indemnifying Party
desires to defend the Indemnified Party with respect to
the Third Party Claim pursuant to this Section 9.2(a),
then the Indemnifying Party shall have the right to
defend, with counsel reasonably satisfactory to the
Indemnified Party, at the sole cost and expense of the
Indemnifying Party, such Third Party Claim by all
appropriate proceedings, which proceedings shall be
vigorously and diligently prosecuted by the Indemnifying
Party to a final conclusion or will be settled at the
discretion of the Indemnifying Party (but only with the
consent of the Indemnified Party in the case of any
settlement that provides for any relief other than the
payment of monetary damages or that provides for the
payment of monetary damages as to which the Indemnified
Party shall not be indemnified in full pursuant to
Section 9.1). The Indemnifying Party shall have full
control of such defense and proceedings, including any
compromise or
22
settlement thereof; provided, however, that the
Indemnified Party may, at the sole cost and expense of
the Indemnified Party, at any time prior to the
Indemnifying Party's delivery of the notice referred to
in the first sentence of this clause (i), file any
motion, answer or other pleadings or take any other
action that the Indemnified Party reasonably believes to
be necessary or appropriate to protect its interests;
and provided further, that if requested by the
Indemnifying Party, the Indemnified Party will, at the
sole cost and expense of the Indemnifying Party, provide
reasonable cooperation to the Indemnifying Party in
contesting any Third Party Claim that the Indemnifying
Party elects to contest. The Indemnified Party may
participate in, but not control, any defense or
settlement of any Third Party Claim controlled by the
Indemnifying Party pursuant to this clause (i), and
except as provided in the preceding sentence, the
Indemnified Party shall bear its own costs and expenses
with respect to such participation. Notwithstanding the
foregoing, the Indemnified Party may take over the
control of the defense or settlement of a Third Party
Claim at any time if it irrevocably waives its right to
indemnity under Section 9.1 with respect to such Third
Party Claim.
(ii) If the Indemnifying Party fails to notify the
Indemnified Party within the Dispute Period that the
Indemnifying Party desires to defend the Third Party
Claim pursuant to Section 9.2(a), or if the Indemnifying
Party gives such notice but fails to prosecute
vigorously and diligently or settle the Third Party
Claim, or if the Indemnifying Party fails to give any
notice whatsoever within the Dispute Period, then the
Indemnified Party shall have the right to defend, at the
sole cost and expense of the Indemnifying Party, the
Third Party Claim by all appropriate proceedings, which
proceedings shall be prosecuted by the Indemnified Party
in a reasonable manner and in good faith or will be
settled at the discretion of the Indemnified Party (with
the consent of the Indemnifying Party, which consent
will not be unreasonably withheld). The Indemnified
Party will have full control of such defense and
proceedings, including any compromise or settlement
thereof; provided, however, that if requested by the
Indemnified Party, the Indemnifying Party will, at the
sole cost and expense of the Indemnifying Party, provide
reasonable cooperation to the Indemnified Party and its
counsel in contesting any Third Party Claim which the
Indemnified Party is contesting. Notwithstanding the
foregoing provisions of this clause (ii), if the
Indemnifying Party has notified the Indemnified Party
within the Dispute Period that the Indemnifying Party
disputes its liability or the amount of its liability
hereunder to the Indemnified Party with respect to such
Third Party Claim and if such dispute is resolved in
favor of the Indemnifying Party in the manner provided
in clause (iii) below, the Indemnifying Party will not
be required to bear the costs and expenses of the
Indemnified Party's defense pursuant to this clause (ii)
or of the Indemnifying Party's participation therein at
the Indemnified Party's request, and the Indemnified
Party shall reimburse the Indemnifying Party in full for
all reasonable costs and expenses incurred by the
Indemnifying Party in connection with such litigation.
The Indemnifying Party may participate in, but not
control, any defense or settlement controlled by the
Indemnified Party pursuant to this clause (ii), and the
23
Indemnifying Party shall bear its own costs and expenses
with respect to such participation.
(iii) If the Indemnifying Party notifies the Indemnified Party
that it does not dispute its liability or the amount of
its liability to the Indemnified Party with respect to
the Third Party Claim under Section 9.1, or fails to
notify the Indemnified Party within the Dispute Period
whether the Indemnifying Party disputes its liability or
the amount of its liability to the Indemnified Party
with respect to such Third Party Claim, the Loss in the
amount specified in the Claim Notice shall be
conclusively deemed a liability of the Indemnifying
Party under Section 9.1 and the Indemnifying Party shall
pay the amount of such Loss to the Indemnified Party on
demand. If the Indemnifying Party has timely disputed
its liability or the amount of its liability with
respect to such claim, the Indemnifying Party and the
Indemnified Party shall proceed in good faith to
negotiate a resolution of such dispute, and if not
resolved through negotiations within the Resolution
Period, such dispute shall be resolved by arbitration in
accordance with paragraph (c) of this Section 9.2.
(b) In the event any Indemnified Party should have a claim under
Section 9.1 against the Indemnifying Party that does not
involve a Third Party Claim, the Indemnified Party shall
deliver a written notification of a claim for indemnity under
Section 9.1 specifying the nature of and basis for such claim,
together with the amount or, if not then reasonably
ascertainable, the estimated amount, determined in good faith,
of such claim (an "Indemnity Notice") with reasonable
promptness to the Indemnifying Party. The failure by any
Indemnified Party to give the Indemnity Notice shall not
impair such party's rights hereunder except to the extent that
the Indemnifying Party demonstrates that it has been
irreparably prejudiced thereby. If the Indemnifying Party
notifies the Indemnified Party that it does not dispute the
claim or the amount of the claim described in such Indemnity
Notice, or fails to notify the Indemnified Party within the
Dispute Period whether the Indemnifying Party disputes the
claim or the amount of the claim described in such Indemnity
Notice, the Loss in the amount specified in the Indemnity
Notice will be conclusively deemed a liability of the
Indemnifying Party under Section 9.1 and the Indemnifying
Party shall pay the amount of such Loss to the Indemnified
Party on demand. If the Indemnifying Party has timely disputed
its liability or the amount of its liability with respect to
such claim, the Indemnifying Party and the Indemnified Party
shall proceed in good faith to negotiate a resolution of such
dispute, and if not resolved through negotiations within the
Resolution Period, such dispute shall be resolved by
arbitration in accordance with paragraph (c) of this Section
9.2.
(c) Any dispute under this Agreement or the Warrant shall be
submitted to arbitration (including, without limitation,
pursuant to this Section 9.2) and shall be finally and
conclusively determined by the decision of a board of
arbitration consisting of three (3) members (the "Board of
Arbitration") selected as hereinafter provided. Each of the
Indemnified Party and the Indemnifying Party shall select one
(1) member and the third member shall be selected by mutual
agreement of the other members, or if the other members fail
to reach agreement on a third member within twenty (20) days
after their selection, such third member shall thereafter be
selected by the American Arbitration Association
24
upon application made to it for such purpose by the
Indemnified Party. The Board of Arbitration shall meet on
consecutive business days in New York County, New York or such
other place as a majority of the members of the Board of
Arbitration determines more appropriate, and shall reach and
render a decision in writing (concurred in by a majority of
the members of the Board of Arbitration) with respect to the
amount, if any, which the Indemnifying Party is required to
pay to the Indemnified Party in respect of a claim filed by
the Indemnified Party. In connection with rendering its
decisions, the Board of Arbitration shall adopt and follow
such rules and procedures as a majority of the members of the
Board of Arbitration deems necessary or appropriate. To the
extent practical, decisions of the Board of Arbitration shall
be rendered no more than thirty (30) calendar days following
commencement of proceedings with respect thereto. The Board of
Arbitration shall cause its written decision to be delivered
to the Indemnified Party and the Indemnifying Party. Any
decision made by the Board of Arbitration (either prior to or
after the expiration of such thirty (30) calendar day period)
shall be final, binding and conclusive on the Indemnified
Party and the Indemnifying Party and entitled to be enforced
to the fullest extent permitted by law and entered in any
court of competent jurisdiction. Each party to any arbitration
shall bear its own expense in relation thereto, including but
not limited to such party's attorneys' fees, if any, and the
expenses and fees of the Board of Arbitration.
ARTICLE X
MISCELLANEOUS
Section 10.1. Fees and Expenses. Each of the Company and the Investor
agrees to pay its own expenses incident to the performance of its obligations
hereunder, except that the Company shall pay the fees, expenses and
disbursements of the Investor's counsel incurred in connection with the
drafting, negotiation, execution and delivery of this Agreement, the
Registration Rights Agreement, the Warrant and the Escrow Agreement up to an
aggregate maximum amount of twenty-five thousand dollars ($25,000) and that the
Company shall pay the fees, expenses and disbursements of the Investor's counsel
incurred in connection with such counsel's review of the Registration Statement
in accordance with the terms of the Registration Rights Agreement, including the
limitation contained therein.
Section 10.2. Reporting Entity for the Common Stock. The reporting entity
relied upon for the determination of the trading price or trading volume of the
Common Stock on any given Trading Day for the purposes of this Agreement shall
be Bloomberg, L.P. or any successor thereto. The written mutual consent of the
Investor and the Company shall be required to employ any other reporting entity.
Section 10.3. Brokerage. Each of the parties hereto represents that it has
had no dealings in connection with this transaction with any finder or broker
who will demand payment of any fee or commission from the other party. The
Company on the one hand, and the Investor, on the other hand, agree to indemnify
the other against and hold the other harmless from any and all liabilities to
any persons claiming brokerage commissions or finder's fees on account of
services purported to have been rendered on behalf of the indemnifying party in
connection with this Agreement or the transactions contemplated hereby.
Section 10.4. Notices. All notices, demands, requests, consents,
approvals, and other communications required or permitted hereunder shall be in
writing and, unless otherwise specified herein, shall be (i) personally served,
(ii) deposited in the mail, registered or certified, return receipt
25
requested, postage prepaid, (iii) delivered by reputable air courier service
with charges prepaid, or (iv) transmitted by hand delivery or facsimile,
addressed as set forth below or to such other address as such party shall have
specified most recently by written notice given in accordance herewith. Any
notice or other communication required or permitted to be given hereunder shall
be deemed effective (a) upon hand delivery or delivery by facsimile, with
accurate confirmation generated by the transmitting facsimile machine, at the
address or number designated below (if delivered on a business day during normal
business hours where such notice is to be received), or the first business day
following such delivery (if delivered other than on a business day during normal
business hours where such notice is to be received) or (b) on the second
business day following the date of mailing by express courier service, fully
prepaid, addressed to such address, or upon actual receipt of such mailing,
whichever shall first occur. The addresses for such communications shall be:
If to the Company:
Muse Technologies, Inc.
0000 Xxxxxxxx, XX, Xxxxx 000
Xxxxxxxxxxx, Xxx Xxxxxx 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Attention: Xx.Xxxxx X. Xxxxx, President
with a copy (which shall not constitute notice) to:
Proskauer Rose LLP
0000 Xxxxxxxx
Xxx Xxxx, Xxx Xxxx 00000-0000
Telephone: (000-000-0000)
Facsimile: (000)-000-0000
Attention: Xxxx X. Xxxxxxx, Esq.
if to the Investor:
Kingsbridge Capital Limited
c/o Kingsbridge Corporate Services Limited
Xxxx Xxxxxx
Xxxxxxxxx, Xxxxxx Xxxxxxx
Xxxxxxxx xx Xxxxxxx
Telephone: 000-000-00-000-000
Facsimile: 011-353-45-482-003
Attention: Xx. Xxxx Xxxxxx
with a copy (which shall not constitute notice) to:
Xxxxxxxx Chance Xxxxxx & Xxxxx LLP
000 Xxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, XX 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Attention: Xxxxx X. Xxxxxxxxxx, Esq.
26
Either party hereto may from time to time change its address or facsimile
number for notices under this Section by giving at least ten (10) days' prior
written notice of such changed address or facsimile number to the other party
hereto.
Section 10.5. Assignment. Neither this Agreement nor any rights of the
Investor or the Company hereunder may be assigned by either party to any other
person. Notwithstanding the foregoing, (a) the provisions of this Agreement
shall inure to the benefit of, and be enforceable by, any transferee of any of
the Common Stock purchased or acquired by the Investor hereunder with respect to
the Common Stock held by such person, and (b) the Investor's interest in this
Agreement may be assigned at any time, in whole or in part, to any other person
or entity (including any affiliate of the Investor) upon the prior written
consent of the Company, which consent shall not be unreasonably withheld.
Section 10.6. Amendment; No Waiver. No party shall be liable or bound to
any other party in any manner by any warranties, representations or covenants
except as specifically set forth in this Agreement or therein. Except as
expressly provided in this Agreement, neither this Agreement nor any term hereof
may be amended, waived, discharged or terminated other than by a written
instrument signed by both parties hereto. The failure of the either party to
insist on strict compliance with this Agreement, or to exercise any right or
remedy under this Agreement, shall not constitute a waiver of any rights
provided under this Agreement, nor estop the parties from thereafter demanding
full and complete compliance nor prevent the parties from exercising such a
right or remedy in the future.
Section 10.7. Annexes and Exhibits; Entire Agreement. All annexes and
exhibits to this Agreement are incorporated herein by reference and shall
constitute part of this Agreement. This Agreement, the Warrant, the Registration
Rights Agreement and the Escrow Agreement set forth the entire agreement and
understanding of the parties relating to the subject matter hereof and thereof
and supersede all prior and contemporaneous agreements, negotiations and
understandings between the parties, both oral and written, relating to the
subject matter hereof.
Section 10.8. Termination; Survival. This Agreement shall terminate on the
earlier of (i) twenty four (24) months after the commencement of the Commitment
Period (ii) such date the Investor or the Company terminates this Agreement in
accordance with its terms and (iii) the date on which the Company has made Puts
with an aggregate Investment Amount equal to the Maximum Commitment Amount;
provided, however, that the provisions of Articles VI, VIII, IX and X, and of
Section 2.1(b) and Section 7.3, shall survive the termination of this Agreement.
Section 10.9. Severability. In the event that any provision of this
Agreement becomes or is declared by a court of competent jurisdiction to be
illegal, unenforceable or void, this Agreement shall continue in full force and
effect without said provision; provided that such severability shall be
ineffective if it materially changes the economic benefit of this Agreement to
any party.
Section 10.10. Title and Subtitles. The titles and subtitles used in this
Agreement are used for the convenience of reference and are not to be considered
in construing or interpreting this Agreement.
Section 10.11. Counterparts. This Agreement may be executed in multiple
counterparts, each of which may be executed by less than all of the parties and
shall be deemed to be an original instrument which shall be enforceable against
the parties actually executing such counterparts and all of which together shall
constitute one and the same instrument.
Section 10.12. Choice of Law. This Agreement shall be construed under the
laws of the State of New York.
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IN WITNESS WHEREOF, the parties hereto have caused this Private Equity
Line Agreement to be executed by the undersigned, thereunto duly authorized, as
of the date first set forth above.
KINGSBRIDGE CAPITAL LIMITED
By: /s/ X. X'Xxxxxxxx
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Valentine X'Xxxxxxxx
Director
MUSE TECHNOLOGIES, INC.
By: /s/ Xxxxx X. Xxxxx
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Xxxxx X. Xxxxx
President
ANNEX A
MAXIMUM PUT AMOUNT
The Maximum Put Amount with respect to a Put shall be determined based
upon the Average Daily Trading Volume of shares of Common Stock with respect to
the relevant Put Date and the Market Price as of such Put Date of shares of
Common Stock as follows:
Average Daily Trading Volume
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30,000-60,0000 60,001-75,000 75,001 and above
Market price
[$ per share]
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$1.00-2.50 $100,000 $150,000 $200,000
$2.51-3.25 $300,000 $450,000 $550,000
$3.26-4.00 $380,000 $525,000 $650,000
$4.01-4.50 $450,000 $600,000 $750,000
$4.51-5.00 $600,000 $750,000 $850,000
$5.01-5.75 $725,000 $900,000 $1,000,000
$5.76-6.25 $850,000 $1,000,000 $1,200,000
$6.26 and above $950,000 $1,200,000 $1,500,000
EXHIBIT A
[FORM OF ESCROW AGREEMENT]
EXHIBIT B
[FORM OF REGISTRATION RIGHTS AGREEMENT]
EXHIBIT C
[FORM OF WARRANT]
EXHIBIT D
Reserved.
EXHIBIT E
COMPLIANCE CERTIFICATE
MUSE TECHNOLOGIES, INC.
The undersigned, Xxxxx X. Xxxxx hereby certifies, with respect to the
common stock of Muse Technologies, Inc. (the "Company") issuable in connection
with the Put Notice, dated _____________ (the "Notice"), delivered pursuant to
Article II of the Private Equity Line Agreement, dated June 1, 2000, by and
between the Company and Kingsbridge Capital Limited (the "Agreement"), as
follows:
1. The undersigned is the duly elected President of the Company.
2. The representations and warranties of the Company set forth in Article
IV of the Agreement are true and correct in all material respects as though made
on and as of the date hereof.
3. The Company has performed in all material respects all covenants and
agreements to be performed by the Company on or prior to the Closing Date
related to the Notice and has complied in all material respects with all
obligations and conditions contained in Article VII of the Agreement.
The undersigned has executed this Certificate this ____ day of ________,
2000.
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Xxxxx X. Xxxxx
President of Muse Technologies, Inc.
EXHIBIT F
[SUBJECT TO MODIFICATIONS REQUIRED BY TRANSFER AGENT]
INSTRUCTIONS TO TRANSFER AGENT
MUSE TECHNOLOGIES, INC.
_______________, 2000
[Name, address and phone and facsimile number of Transfer Agent]
Ladies and Gentlemen::
Reference is made to the Private Equity Line Agreement (the "Agreement"),
dated as of June 1, 2000 between Kingsbridge Capital Limited (the "Investor")
and Muse Technologies, Inc. (the "Company"). Pursuant to the Agreement, subject
to the terms and conditions set forth in the Agreement the Investor has agreed
to purchase from the Company and the Company has agreed to sell to the Investor
from time to time during the term of the Agreement shares of common stock of the
Company, $.015 par value per share (the "Common Stock"). As a condition to the
effectiveness of the Agreement, the Company has agreed to issue to you, as the
transfer agent for the Common Stock (the "Transfer Agent"), these instructions
relating to the Common Stock to be issued to the Investor (or a permitted
assignee) pursuant to the Agreement. All terms used herein and not otherwise
defined shall have the meaning set forth in the Agreement.
1. ISSUANCE OF COMMON STOCK WITHOUT THE LEGEND
Pursuant to the Agreement, the Company is required to prepare and file
with the Commission, and maintain the effectiveness of, a registration statement
or registration statements registering the resale of the Common Stock to be
acquired by the Investor under the Agreement. The Company will advise the
Transfer Agent in writing of the effectiveness of any such registration
statement promptly upon its being declared effective. The Transfer Agent shall
be entitled to rely on such advice and shall assume that the effectiveness of
such registration statement remains in effect unless the Transfer Agent is
otherwise advised in writing by the Company and shall not be required to
independently confirm the continued effectiveness of such registration
statement. In the circumstances set forth in the following two paragraphs, the
Transfer Agent shall deliver to the Investor certificates representing Common
Stock not bearing the Legend without requiring further advice or instruction or
additional documentation from the Company or its counsel or the Investor or its
counsel or any other party (other than as described in such paragraphs).
At any time after the effective date of the applicable registration
statement (provided that the Company has not informed the Transfer Agent in
writing that such registration statement is not effective) upon a notice
requesting the issuance of certificates free of the Legend, the Transfer Agent
shall deliver to the Investor the certificates representing the Common Stock not
bearing the Legend, in such names and denominations as the Investor shall
request, provided that:
(a) in connection with such event, if so requested by the Transfer Agent, the
Investor (or its permitted assignee) shall confirm in writing to the Transfer
Agent that the Investor has complied with the prospectus delivery requirement
under the Securities Act;
(b) if so requested by the Transfer Agent, the Investor (or its permitted
assignee) shall represent that it is permitted to dispose thereof without
limitation as to amount or manner of sale pursuant to Rule 144(k) under the
Securities Act; or
(c) the Investor, its permitted assignee, or either of their brokers confirms
to the transfer agent that (i) the Investor has held the shares of Common
Stock for at least one year, (ii) counting the shares surrendered as being
sold upon the date the unlegended Certificates would be delivered to the
Investor (or the Trading Day immediately following if such date is not a
Trading Day), the Investor will not have sold more than the greater of (a)
one percent (1%) of the total number of outstanding shares of Common Stock or
(b) the average weekly trading volume of the Common Stock for the preceding
four weeks during the three months ending upon such delivery date (or the
Trading Day immediately following if such date is not a Trading Day), and
(iii) the Investor has complied with the manner of sale and notice
requirements of Rule 144 under the Securities Act.
Any advice, notice or instructions to the Transfer Agent required or
permitted to be given hereunder may be transmitted via facsimile to the Transfer
Agent's facsimile number of (___)___-____.
2. MECHANICS OF DELIVERY OF CERTIFICATES
REPRESENTING COMMON STOCK
In connection with any Closing pursuant to which the Investor acquires
Common Stock under the Agreement, the Transfer Agent shall deliver certificates
representing Common Stock (with or without the Legend, as appropriate) as
promptly as practicable, but in no event later than three business days, after
such Closing.
3. FEES OF TRANSFER AGENT; INDEMNIFICATION
The Company agrees to pay the Transfer Agent for all fees incurred in
connection with these Irrevocable Instructions. The Company agrees to indemnify
the Transfer Agent and its officers, employees and agents, against any losses,
claims, damages or liabilities, joint or several, to which it or they become
subject based upon the performance by the Transfer Agent of its duties in
accordance with the Irrevocable Instructions.
4. THIRD PARTY BENEFICIARY
The Company and the Transfer Agent acknowledge and agree that the Investor
is an express third party beneficiary of these Irrevocable Instructions and
shall be entitled to rely upon, and enforce, the provisions hereof.
By:
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Name
Title
AGREED:
[NAME OF TRANSFER AGENT]
By:
----------------------
Name:
Title:
