Exhibit 10.12
STOCK PURCHASE AGREEMENT
STOCK PURCHASE AGREEMENT, dated March 1, 2000 between C&R INVESTMENTS I,
L.P., a Pennsylvania limited partnership ("Buyer") and XXXXXXXXXXX.XXX INC., a
Delaware corporation (the "Company").
NOW, THEREFORE, in consideration of the mutual covenants contained herein,
the parties, intending to be legally bound, hereby agree as follows:
1. DEFINITIONS.
For purposes of this Agreement, the following terms shall have the meanings
specified or referred to in this Section 1:
"BALANCE SHEET" -- as defined in Section 3.6.
"BUYER" -- as defined in the first paragraph of this Agreement.
"COMPANY" -- as defined in the first paragraph of this Agreement.
"CONSENT" -- any approval, consent, ratification, permission, waiver or
other authorization (including any Governmental Authorization).
"CONTEMPLATED TRANSACTIONS" -- all of the transactions contemplated by this
Agreement, including, but not limited to:
(i) the issuance and sale of the Shares by the Company to Buyer;
(ii) the payment of the Purchase Price; and
(iii) the performance by Buyer and the Company of their respective
covenants and obligations hereunder.
"CONTRACT" -- any agreement, contract, instrument, indenture, guaranty,
power of attorney, commitment, promise, assurance, obligation or undertaking.
"DAMAGES" -- as defined in Section 6.2.
"DISCLOSURE LETTER" -- the disclosure letter delivered by the Company to
Buyer concurrently with the execution and delivery of this Agreement.
"GOVERNMENTAL AUTHORIZATION" -- any permit, license, franchise, approval,
consent, ratification, permission, confirmation, endorsement, waiver,
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certification, registration, qualification or other authorization issued,
granted, given or otherwise made available by or under the authority of any
Governmental Body or pursuant to any Legal Requirement.
"GOVERNMENTAL BODY" -- any:
(i) federal, state, local, municipal, foreign or other government;
(ii) governmental or quasi-governmental authority of any nature
(including any governmental division, subdivision, department,
agency, ministry, service, system, corps, administration,
bureau, branch, office, commission, council, board,
instrumentality, officer, official, representative,
organization, unit, organ, body or entity and any court or
other tribunal);
(iii) multi-national organization or body; or
(iv) body exercising, or entitled or purporting to exercise, any
executive, legislative, judicial, administrative, regulatory,
police or taxing authority or power of any nature.
"INDEMNIFIED PERSONS" -- as defined in Section 6.2.
"KNOWLEDGE" -- an individual shall be deemed to have "Knowledge" of a
particular fact or other matter if:
(i) such individual is actually aware of such fact or other
matter; or
(ii) a prudent individual could be expected to discover or
otherwise become aware of such fact or other matter in the
course of conducting a reasonably comprehensive investigation
concerning the truth or existence of such fact or other
matter.
A Person (other than an individual) shall be deemed to have "Knowledge" of a
particular fact or other matter if any individual who is serving as a director
or officer of such Person has Knowledge of such fact or other matter.
"LEGAL REQUIREMENT" -- any federal, state, local, municipal, foreign or
other law, statute, legislation, xxxx, act, enactment, constitution, resolution,
proposition, initiative, canon, ordinance, code, edict, decree, proclamation,
treaty, convention, rule, regulation, ruling, directive, or interpretation
applicable under the authority of any Governmental Body or by the eligible
voters of any jurisdiction.
"ORDER" -- any order, judgment, injunction, edict, decree, ruling,
pronouncement, determination, decision, opinion, sentence, subpoena, writ or
award issued, made, entered
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or rendered by any court, administrative agency or other Governmental Body or by
any arbitrator.
"ORDINARY COURSE OF BUSINESS" -- an action taken by a Person shall be
deemed to have been taken in the "Ordinary Course of Business" only if:
(i) such action is recurring in nature, is consistent with the
past practices of such Person and is taken in the ordinary
course of the normal day-to-day operations of such Person;
(ii) such action is not required to be authorized by the board of
directors of such Person (or by any Person or group of Persons
exercising similar authority) and does not require any other
separate or special authorization of any nature; and
(iii) such action is similar in nature and magnitude to actions
customarily taken, without any separate or special
authorization, in the ordinary course of the normal day-to-day
operations of other Persons that are in the same line of
business as such Person.
"ORGANIZATIONAL DOCUMENTS" -- (i) the articles or certificate of
incorporation and the bylaws of a corporation; (ii) the partnership agreement
and any statement of partnership of a general partnership; (iii) the limited
partnership agreement and the certificate of limited partnership of a limited
partnership; (iv) any charter or similar document adopted or filed in connection
with the formation, creation, constitution or organization of a Person,
including, without limitation, a Limited Liability Company; and (v) any
amendment to any of the foregoing.
"PERSON" -- any individual, corporation (including any non-profit
corporation), general partnership, limited partnership, joint venture, estate,
trust, cooperative, foundation, union, syndicate, league, consortium, coalition,
committee, society, firm, company or other enterprise, association, organization
or other entity or Governmental Body.
"PROCEEDING" -- any action, suit, litigation, arbitration, proceeding
(including any civil, criminal, administrative, investigative or appellate
proceeding and any informal proceeding), prosecution, contest, hearing, inquiry,
inquest, audit, examination, investigation commenced, brought, conducted or
heard by or before, or otherwise involving, any Governmental Body or arbitrator.
"SECURITIES ACT" -- the Securities Act of 1933, as amended.
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"SHARES" -- as defined in Section 2.1.
"SUBSIDIARY" -- with respect to any Person ("owner"), any corporation or
other Person of which securities or other interests having the power to elect a
majority of that corporation's or other Person's board of directors or similar
governing body, or otherwise having the power to direct the business and
policies of that corporation or other Person (other than securities or other
interests having that power only upon the happening of a contingency that has
not occurred) are owned by such Person; when used without reference to a
particular Person, "Subsidiary" means Subsidiary of the Company.
"TAX" -- any tax (including any income tax, franchise tax, capital gains
tax, gross receipts tax, value-added tax, surtax, excise tax, ad valorem tax,
transfer tax, stamp tax, sales tax, use tax, property tax, inventory tax,
occupancy tax, withholding tax, payroll tax, gift tax, estate tax or inheritance
tax), levy, assessment, tariff, impost, imposition, toll, duty (including any
customs duty), or tax deficiency and any related charge or amount (including any
fine, penalty or interest), imposed, assessed or collected by or under the
authority of any Governmental Body or payable pursuant to any tax-sharing
agreement or pursuant to any other Contract relating to the sharing or payment
of any such tax, levy, assessment, tariff, impost, imposition, toll, duty,
deficiency or fee.
"TAX RETURN" -- any return (including any information return), report,
statement, declaration, schedule, notice, notification, form, certificate or
other document or information filed with or submitted to, or required to be
filed with or submitted to, any Governmental Body in connection with the
determination, assessment, collection or payment of any Tax or in connection
with the administration, implementation or enforcement of or compliance with any
Legal Requirement relating to any Tax.
"THREATENED" -- a claim, Proceeding, dispute, action or other matter shall
be deemed to have been "Threatened" if any demand or statement shall have been
made (orally or in writing) or any notice shall have been given (orally or in
writing), or if any other event shall have occurred or any other circumstances
shall exist, that might lead a prudent Person to conclude that such a claim,
Proceeding, dispute, action or other matter might be asserted, commenced, taken
or otherwise pursued in the future.
2. SALE OF SHARES.
2.1. SHARES. Subject to the terms and conditions of this Agreement, the
Company, contemporaneously with the execution and delivery of this Agreement,
shall issue, sell and deliver to Buyer, and Buyer shall purchase from the
Company and pay for 500,000 shares of Common Stock (as defined) of the Company
(each a "Share", and collectively the "Shares").
2.2. PURCHASE PRICE. The purchase price (the "Purchase Price") for the
Shares shall be Two Million Five Hundred Thousand ($2,500,000.00) Dollars,
($5.00 for each Share) payable by Bank Treasurer's check or wire transfer.
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3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
The Company represents and warrants to Buyer:
3.1. ORGANIZATION AND GOOD STANDING. The Company and each Subsidiary is a
corporation (or a Limited Liability Company) duly organized, validly existing
and in good standing under the laws of its jurisdiction of organization with
full corporate (or Limited Liability Company) power and authority to carry on
its business as it is now being conducted, to own or hold under lease the
properties and assets which it owns or holds under lease and perform all its
obligations under the agreements and instruments to which it is a party or by
which it is bound. The Company and each of the Subsidiaries is duly qualified to
do business and is in good standing under the laws of each state or other
jurisdiction in which the ownership or leasing of the properties owned or leased
by it or the nature of the activities conducted by it requires such
qualification and the failure so to qualify would have a material adverse effect
on the Company's or such Subsidiary's business or rights. Section 3.1 of the
Disclosure Letter lists each such jurisdiction. The Company has delivered to
Buyer copies of the Organizational Documents of the Company and each of the
Subsidiaries, as currently in effect. The Company has no Subsidiaries except as
disclosed in Section 3.1 of the Disclosure Letter. The Company owns all of the
outstanding stock of or beneficial interests in each of the Subsidiaries.
3.2. AUTHORITY; NO CONFLICT. This Agreement constitutes the legal, valid
and binding obligation of the Company, enforceable against the Company in
accordance with its terms. The Company has the full right, power, authority and
capacity to execute and deliver this Agreement, to issue the Shares to Buyer,
and to perform its obligations hereunder. Neither the execution and delivery of
this Agreement nor the consummation or performance of any of the Contemplated
Transactions will, directly or indirectly:
(a) contravene, conflict with or result (with or without notice or
lapse of time) in a violation of (i) any of the provisions of
the Organizational Documents of the Company or (ii) any
resolution adopted by the board of directors or the
stockholders of the Company;
(b) contravene, conflict with or result (with or without notice or
lapse of time) in a violation of any Legal Requirement or any
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Order to which the Company or any of the assets owned or used
by the Company, may be subject;
(c) contravene, conflict with or result (with or without notice or
lapse of time) in a violation of any of the terms or
requirements of, or give any Governmental Body the right (with
or without notice or lapse of time) to revoke, withdraw,
suspend, cancel, terminate or modify, any Governmental
Authorization that is held by the Company or that otherwise
relates to the business of, or any of the assets owned or used
by, the Company;
(d) contravene, conflict with or result (with or without notice or
lapse of time) in a violation or breach of any of the
provisions of, or give any Person the right (with or without
notice or lapse of time) to declare a default or exercise any
remedy under, or to accelerate the maturity or performance of
or cancel, terminate or modify, any Contract to which the
Company or any Subsidiary is a party or under which the
Company or any Subsidiary has any rights, or by which the
Company or any Subsidiary, or any of the assets owned or used
by the Company or any Subsidiary, may be bound; or
(e) result (with or without notice or lapse of time) in the
imposition or creation of any lien or encumbrance upon or with
respect to any of the assets owned or used by the Company or
any Subsidiary.
The Company and each Subsidiary is not and will not be required to give any
notice to or obtain any Consent from any Person in connection with the execution
and delivery of this Agreement or the consummation or performance of any of the
Contemplated Transactions.
3.3. ISSUANCE OF SHARES. The Shares, when issued to Buyer pursuant to this
Agreement will be duly and validly authorized and issued, fully paid and
nonassessable.
3.4. DISCLOSURE DOCUMENTS. Each of the Company's Registration Statement on
Form 10 filed with the Securities and Exchange Commission, as amended by
Amendment No. 1 and Amendment No. 2 thereto (the "Form 10"), and the Company's
Confidential Private Placement Memorandum dated August 20, 1999 did not contain
any untrue statement of a material fact or fail to state a material fact
necessary in order to make the statements made therein, in light of the
circumstances under which they were made, not misleading. Since February 10,
2000, there has not been any change in the business, operations, properties,
prospects, assets or financial
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condition of the Company which individually or in the aggregate is materially
adverse or any event, condition or contingency that is likely to result in such
material adverse change.
3.5. CAPITALIZATION. The authorized capital stock of the Company consists
of 5,000,000 shares of Preferred Stock, par value $.001, of which no shares are
outstanding, and 55,000,000 shares of Common Stock, par value $.001 per share
("Common Stock") of which 27,176,737 shares are issued and outstanding. All of
the outstanding equity securities of the Company have been duly authorized and
validly issued and are fully paid and nonassessable. Except as disclosed in
Section 3.5 of the Disclosure Letter, there are no outstanding options, rights,
conversion rights, agreements or commitments of any kind relating to the
issuance, sale or transfer of any equity securities or other securities of the
Company. None of the outstanding equity securities or other securities of the
Company was issued in violation of the Securities Act or the securities or blue
sky Legal Requirements of any state or other jurisdiction. Except for its
Subsidiaries the Company neither owns, nor has any option, right, agreement or
commitment of any kind to acquire, any equity securities or other securities of
any Person or any direct or indirect equity or ownership interest in any other
business.
3.6. FINANCIAL STATEMENTS AND PROJECTIONS.
(a) The Consolidated Balance Sheets of the Company at December 31, 1997,
1998 and 1999, as included the Company's Form 10, as attached to the Disclosure
Letter as Section 3.6(a) (the latter Balance Sheet being referred to herein as
the "Balance Sheet") and the related statements of operations for the respective
periods then ended, including in each case the notes thereto, fairly present the
financial condition and results of operations of the Company as at the
respective dates thereof and for the periods therein referred to. The financial
statements referred to in this Section reflect the consistent application of
accounting principles throughout the periods involved except as disclosed in the
notes to such financial statements.
(b) The financial information of the Company set forth as Section 3.6(b) of
the Disclosure Letter accurately reflects the books of account of the Company
and the application of accounting principles consistent with prior periods.
(c) The projections of revenue and expenses of the Company as set forth in
Section 3.6(c) of the Disclosure Letter are based upon estimates believed by the
Company as of the date of this Agreement to be realizable.
3.7. BOOKS AND RECORDS. The books of account, minute books, stock record
books and other records of the Company, all of which have been made available to
Buyer, are complete and correct and have been
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maintained in accordance with sound business practices. The minute books of the
Company contain accurate and complete records of all meetings held of, and
corporate action taken by, the stockholders, the Board of Directors and
committees of the Board of Directors of the Company, and no meetings of any such
stockholders, Board of Directors or committee has been held for which minutes
have not been prepared and are not contained in such minute books.
3.8. NO UNDISCLOSED LIABILITIES.
(a) The Company and the Subsidiaries have no liabilities or obligations of
any nature (known or unknown, absolute, accrued, contingent or otherwise)
arising on the basis of facts in existence on the date of this Agreement that
were not fully reflected or reserved against in the Balance Sheet, except for
liabilities and obligations incurred in the Ordinary Course of Business of the
Company since the date of the Balance Sheet.
(b) The Company and the Subsidiaries own or have the contractual right to
use all of the assets, tangible and intangible (including, without limitation,
intellectual property assets), used by the Company and the Subsidiaries to
conduct their business as presently conducted.
3.9. TAXES. The Company has paid, or made provision for the payment of, all
Taxes that have or may have become due and payable by the Company (including,
without limitation, taxes which may be payable by the Company in respect of the
Tax liability of any predecessor entity of the Company). The charges, accruals
and reserves with respect to Taxes on the books of the Company and each
Subsidiary are adequate and are at least equal to the Company's and such
Subsidiary's liability for Taxes. All Taxes that the Company and any Subsidiary
is or was required by Legal Requirements to withhold or collect have been duly
withheld or collected and, to the extent required, have been paid to the proper
Governmental Body or other Person. All Tax Returns filed by the Company are
true, correct and complete.
3.10. COMPLIANCE WITH LEGAL REQUIREMENTS; GOVERNMENTAL AUTHORIZATIONS.
(a) The Company and each Subsidiary is in compliance with each Legal
Requirement that is applicable to it or to the conduct or operation of its
business or the ownership or use of any of its assets;
(b) No event has occurred, and no condition or circumstance exists, that
might (with or without notice or lapse of time) constitute or result directly or
indirectly in a violation by the Company or any Subsidiary of, or a failure to
comply with, any Legal Requirement;
(c) The Company and each Subsidiary is, and at all times has been, in
compliance with all of the terms and requirements of each
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Governmental Authorization which is necessary to permit the Company or such
Subsidiary to conduct and operate its business as presently conducted; and
(d) No event has occurred, and no condition or circumstance exists, that
might (with or without notice or lapse of time) (A) constitute or result
directly or indirectly in a violation of or a failure by the Company or any
Subsidiary to comply with any term or requirement of any such Governmental
Authorization or (B) result directly or indirectly in the revocation,
withdrawal, suspension, cancellation or termination of, or any modification to,
any such Governmental Authorization.
3.11. LEGAL PROCEEDINGS; ORDERS.
(a) There is no pending Proceeding:
(i) that has been commenced by or against the Company or any
Subsidiary or that otherwise relates to or might affect in any
material respect the business of, or any of the assets owned
or used by, the Company or any Subsidiary; or
(ii) that challenges, or that might have the effect of preventing,
delaying, making illegal or otherwise interfering with, any of
the Contemplated Transactions.
To the Knowledge of the Company (1) no such Proceeding has been Threatened and
(2) no event has occurred, and no condition or circumstance exists, that might
give rise to or serve as a basis for the commencement of any such Proceeding.
(b) Except as set forth in Section 3.11(b) of the Disclosure Letter
(i) there is no Order to which the Company or any Subsidiary, or
any of the assets owned or used by the Company, is subject;
(ii) to the Knowledge of the Company or any Subsidiary, no officer,
director or employee of the Company or any Subsidiary is
subject to any Order that prohibits or restricts such officer,
director or employee from engaging in or continuing any
conduct, activity or practice relating to the business of the
Company or any Subsidiary;
(iii) the Company is, and at all times has been, in compliance in
all material respects with all of the terms and requirements
of each Order to which it, or any of the assets owned or used
by it, is or has been subject; and
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(iv) no event has occurred, and no condition or circumstance
exists, that might (with or without notice or lapse of time)
constitute or result directly or indirectly in a violation of
or a failure to comply with any term or requirement of any
Order to which the Company, or any of the assets owned or used
by the Company, is subject.
3.12. INSURANCE. The Company maintains in force policies of insurance with
reputable carriers having coverages and policy limitations which in the opinion
of management of the Company are adequate for the business conducted by the
Company and the Subsidiaries.
3.13. DISCLOSURE.
(a) No representation or warranty of the Company contained in this
Agreement or statement in the Disclosure Letter contains any untrue statement of
a material fact or omits to state a material fact necessary in order to make the
statements herein or therein, in light of the circumstances under which they are
made, not misleading.
There is no fact known to the Company which has specific application to the
Company (other than general economic or industry conditions) and which
materially adversely affects or, so far as the Company can reasonably foresee,
materially Threatens, the assets, business, prospects, financial condition or
results of operations of the Company which has not been set forth in this
Agreement or the Disclosure Letter.
4. REPRESENTATIONS AND WARRANTIES BY BUYER.
Buyer hereby represents and warrants to the Company as follows:
4.1. ORGANIZATION AND GOOD STANDING. Buyer is a limited partnership duly
organized, validly existing and in good standing under the laws of the
Commonwealth of Pennsylvania.
4.2. AUTHORITY; NO CONFLICT. Buyer has full partnership power and authority
to execute and deliver this Agreement and to perform its obligations hereunder.
This Agreement has been duly authorized, executed, and delivered by Buyer and
constitutes the legal, valid and binding obligation of Buyer enforceable against
Buyer in accordance with its terms. Neither the execution and delivery of this
Agreement by Buyer nor the consummation of the Contemplated Transactions will,
directly or indirectly:
(a) violate or conflict with any provision of the Organizational Documents
of Buyer;
(b) violate or conflict with any provision of any Legal Requirement or
Order binding upon Buyer; or
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(c) result in a breach of, or constitute a default under (or with notice or
lapse of time or both result in a breach of or constitute a default under) or
otherwise give any Person the right to terminate, any Contract to which Buyer is
a party or by which it is bound and which is material to the business or
condition of Buyer.
Buyer is not required to give prior notice to, or obtain any Consent of, any
Person in connection with the execution and delivery of this Agreement or the
consummation of the Contemplated Transactions.
4.3. INVESTMENT INTENT.
(a) Buyer is acquiring the Shares for its own account, not as nominee or
agent, for investment and not with a view to or for resale in connection with
any distribution or public offering thereof within the meaning of the Securities
Act, except pursuant to an effective registration statement or exemption from
registration under the Securities Act.
(b) Buyer understands that (i) the Shares have not been registered under
the Securities Act by reason of a specific exemption therefrom, and may not be
transferred or resold except pursuant to an effective registration statement or
exemption from registration; (ii) each certificate representing the Shares will
be endorsed with the following legend:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT"), OR ANY APPLICABLE STATE SECURITIES LAW. THE
SECURITIES HAVE BEEN ACQUIRED FOR INVESTMENT AND NOT WITH A VIEW TO OR
FOR RESALE IN CONNECTION WITH THE DISTRIBUTION THEREOF. NO DISPOSITION
OF THESE SECURITIES MAY BE MADE UNLESS (i) A REGISTRATION STATEMENT
UNDER THE SECURITIES ACT AND APPLICABLE STATE SECURITIES LAW IS THEN IN
EFFECT WITH RESPECT THERETO, (ii) A WRITTEN OPINION REASONABLY
SATISFACTORY TO THE COMPANY FROM COUNSEL FOR THE COMPANY OR OTHER
COUNSEL FOR THE HOLDER REASONABLY ACCEPTABLE TO THE COMPANY HAS BEEN
OBTAINED TO THE EFFECT THAT NO SUCH REGISTRATION IS REQUIRED OR (iii) A
"NO-ACTION" LETTER OR ITS THEN EQUIVALENT HAS BEEN ISSUED BY THE STAFF
OF THE SECURITIES AND EXCHANGE COMMISSION."
and (iii) the Company will instruct any transfer agent not to register the
transfer of any of the Shares unless the conditions specified in the foregoing
legend are satisfied.
(c) Buyer has been furnished with such materials and has been given access
to such information relating to the Company as it or its
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qualified representative has requested and has been afforded the opportunity to
ask questions regarding the Company and the Shares, all as Buyer has found
necessary to make an informed investment decision. Buyer has received no
representation or warranty from the Company or its officers, employees or agents
with respect to its investment and has received no information relating to the
operations or business of the Company and its Subsidiaries other than as set
forth in this Agreement or the Disclosure letter.
(d) Buyer has experience in investing in securities of companies in the
developmental stage, such as the Company, and acknowledges that Buyer is able to
fend for itself and to assess the economic risk of investment in the Shares and
has such knowledge and experience in financial and business matters that it can
be assumed to be capable of evaluating the merits and risks of an investment in
the Shares and of protecting its interests in such an investment.
(e) Each of the partners of Buyer is an "Accredited Investor" as such term
is defined in Rule 501 under the Securities Act.
(f) Buyer understands that its investment involves a high degree of risk
and that there is no assurance as to the future performance of the Company.
4.4. BROKERS OR FINDERS. Buyer and its agents have incurred no obligation
or liability, contingent or otherwise, for brokerage or finders' fees or agents'
commissions or other like payment in connection with this Agreement and will
indemnify and hold the Company harmless from any such payment alleged to be due
by or through Buyer as a result of the action of Buyer, its officers and agents.
5. COVENANTS OF PARTIES.
5.1. FURTHER ASSURANCES. Each party will, upon request of another party
from time to time after the Closing, execute and deliver, and use their
commercially reasonable efforts to cause other Persons to execute and deliver,
to another party all such further documents and instruments, and will do or use
their commercially reasonable efforts to cause to be done such other acts, as
such other party may reasonably request more completely to consummate and make
effective the Contemplated Transactions.
5.2. EXPENSES. Except as expressly otherwise provided herein, each party to
this Agreement shall bear its respective expenses incurred in connection with
the preparation, execution and performance of this Agreement and the
Contemplated Transactions, including all fees and expenses of agents,
representatives, counsel and accountants. Notwithstanding the foregoing, the
Company shall reimburse Buyer for Buyer's out of pocket expenses (including,
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without limitation, attorneys' fees and due diligence expenses), not to exceed
$25,000, in connection with the purchase of the Shares.
5.3. PUBLIC ANNOUNCEMENTS. Any public announcement or similar publicity
with respect to this Agreement shall be issued, if at all, at such time and in
such manner as Buyer and the Company mutually shall agree, provided, however,
that the foregoing provision shall not prohibit the Company from making only
such disclosure as counsel for the Company may advise the Company is necessary
to comply with federal and state securities laws.
5.4. REGISTRATION RIGHTS.
(a) (1) As used in this Section 5.4, the following terms have the following
respective meanings:
(i) "Commission" shall mean the Securities and Exchange
Commission.
(ii) "Holder" shall mean Buyer and each of its affiliates to whom
Buyer may transfer any of the Registrable Shares and any
person controlling any of the foregoing within the meaning of
the Securities Act.
(iii) "Registration Expenses" and "Selling Expenses" shall mean the
expenses so described in subsection (4) of this paragraph (a).
(iv) "Registrable Shares" shall mean 500,000 shares of Common Stock
purchased by Holder under this Agreement (subject to
appropriate adjustments for stock splits, stock dividends,
combinations and other recapitalizations).
(v) "Securities Act" shall mean the Securities Act of 1933, as
amended, and the rules and regulations of the Commission
thereunder, all as the same shall be in effect at the time.
(2) The Company shall:
(i) Subject to the provisions of paragraphs (d) and (e) of this
Section 5.4, upon the written request of Holder not earlier
than December 31, 2000, prepare and file with the Commission
not later than the earlier of 90 days after the date of such
request or the filing of a registration statement by the
Company under the Securities Act, a registration statement
with respect to not less than 175,000 nor more than 350,000 of
the Registrable Shares (the "Registration Statement") and use
its best efforts to cause the Registration Statement to become
and remain effective as soon thereafter as possible. In the
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event that the Company shall have filed a registration
statement before the expiration of 90 days, the Registrable
Shares shall be included in such Registration Statement on the
terms set forth in this subsection.
(ii) Prepare and file with the Commission such amendments and
supplements to the Registration Statement and the prospectus
used in connection therewith as may be necessary to keep the
Registration Statement effective for not more than six (6)
months from the date of its effectiveness (plus such
additional time during which Holder must cease making offers
and sales, as provided in subparagraph (v) below) or (unless
otherwise required by the Securities Act) until the
Registrable Shares covered thereunder have been sold,
whichever is earlier.
(iii) Furnish to Holder such number of copies of each prospectus
contained in the Registration Statement (other than a
preliminary prospectus), in conformity with the requirements
of the Securities Act, and such other documents as Holder may
reasonably request in order to facilitate the disposition of
the Registrable Shares owned by Holder.
(iv) If such registration or qualification is required, use its
best efforts to register or qualify the Registrable Shares
covered by the Registration Statement under the securities or
blue sky laws of such jurisdictions as Holder shall reasonably
request, and use its best efforts to do any and all other acts
and things which may be necessary or advisable so to register
or qualify the Registrable Shares to enable Holder to
consummate the disposition of the Registrable Shares owned by
Holder in such jurisdictions during the period covered in
subparagraph (ii) above; provided that the Company shall not
be obligated to qualify to do business in any jurisdiction
where it is not then so qualified or to take any action which
would subject it to the service of process in suits other than
those arising out of the offer or sale of the securities
covered by the Registration Statement in any jurisdiction
where it is not then so subject.
(v) Notify Holder at any time when a prospectus relating thereto
is required to be delivered under the Securities Act of the
happening of any event as a result of which the prospectus
contained in such registration statement, as then in effect,
includes an untrue statement of a material fact or omits to
state any material fact required to be stated therein or
necessary to make the statements therein not misleading in the
light of the circumstances then existing. Holder agrees, upon
receipt of such notice, forthwith to cease making offers and
sales of the Registrable Shares pursuant to the Registration
Statement or deliveries of the prospectus contained therein
for any purpose and to return to the Company, for modification
and exchange, the copies of such prospectus not theretofore
delivered by Holder; provided, that the Company shall
forthwith prepare and furnish, after securing such approvals
as may be necessary, to Holder a reasonable number of copies
of any supplement to or
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amendment of such prospectus that may be necessary so that, as
thereafter delivered to the Holder of such Registrable Shares,
such prospectus shall not include an untrue statement of a
material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein not
misleading in the light of the circumstances then existing.
(vi) Promptly notify Holder of any stop order or similar proceeding
initiated by state or federal regulatory bodies and use its
best efforts to take all necessary steps expeditiously to
remove such stop order or similar proceeding.
(vii) Otherwise use reasonable efforts in good faith to comply with
all applicable rules and regulations of the Commission, and,
if required, make available to its security holders, as soon
as reasonably practicable, an earnings statement covering a
period of at least twelve months, but not more than eighteen
months, beginning with the first day of the Company's first
fiscal quarter after the effective date of the Registration
Statement, which earnings statement shall satisfy the
provisions of Section 11(a) of the Securities Act and Rule 158
thereunder; provided, however, that the Company shall not be
required to conduct a special audit in order to satisfy its
obligation under this paragraph (vii).
(viii) Upon receipt of such confidentiality agreements as the
Company may reasonably request, make available for inspection,
upon the written request of Holder, by Holder and by any
attorney, accountant or other agent retained by Holder, all
pertinent financial and other records, pertinent corporation
documents and properties of the Company and its Subsidiaries
as shall be reasonably necessary to enable Holder to exercise
and fulfill his due diligence responsibility, and cause all of
the Company's and its Subsidiaries, officers, directors and
employees to supply all information reasonably requested by
Holder, or his attorney, accountant or agent in connection
with the Registration Statement.
(3) As a condition to the Company's obligation hereunder to file and use
its best efforts to cause to become effective the Registration Statement, Holder
shall provide such information and execute such documents, including
questionnaires and indemnities not inconsistent herewith, as may reasonably be
required in connection with such registration.
(4) All expenses incurred by the Company in complying with any of the
foregoing provisions of this Paragraph (a), including without limitation all
federal (including the Commission and the National Association of Securities
Dealers, Inc.) and state registration, qualification and filing fees, printing
expenses, fees and disbursements of counsel for the Company, and accountants'
fees and expenses (but excluding the compensation of regular employees of the
Company which shall be paid in any event by the Company), incident to or
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required by any such registration are herein called "Registration Expenses". All
underwriting discounts, fees and disbursements of any counsel to the Holder,
selling commissions and transfer taxes applicable to the sale of Registrable
Shares hereunder are herein called "Selling Expenses". The Registration Expenses
and Selling Expenses in connection with the registration of the Registrable
Shares shall be borne as follows:
(i) All Registration Expenses shall be borne by the Company.
(ii) All Selling Expenses incurred in connection with the
Registration Statement shall be borne by Holder; provided,
however, that if other shares of capital stock of the Company
are included in the Registration Statement, such Selling
Expenses shall be borne by Holder pro rata with all other
Persons (including the Company) for whose account the
securities covered by the Registration Statement are offered
in accordance with the amount of securities being so offered
for the account of each such Person.
(5) (i) The Company agrees to indemnify and hold harmless Holder against
any and all losses, claims, damages, liabilities or expenses, joint or several
(including any investigation, legal and other expenses incurred in connection
with any action, suit or proceeding or any claim asserted), arising out of or
based upon any untrue statement or alleged untrue statement of a material fact
contained in the Registration Statement, or any prospectus included therein, or
any omission or alleged omission of any material fact required to be stated
therein or necessary to make the statements therein not misleading, unless such
statement or omission was made in reliance upon a statement in writing furnished
by or on behalf of Holder for inclusion therein or an omission or failure by
Holder to furnish any statement with respect to Holder required to be included
therein. Such indemnity shall remain in full force and effect regardless of any
investigation made by or on behalf of Holder and shall survive the transfer of
the Registrable Shares. Promptly after receipt by Holder of written notice of
the commencement of any action in respect of which indemnity may be sought
against the Company, Holder shall notify the Company in writing of the
commencement thereof, and, subject to the provisions hereinafter stated and
Holder's reasonable cooperation, the Company shall assume the defense of such
action (including the employment of counsel, who shall be counsel reasonably
satisfactory to Holder and the payment of expenses and such counsel's fees)
insofar as such action shall relate to any alleged liability in respect of which
indemnity may be sought against the Company; provided, however, that the failure
of Holder to give written notice to the Company of the commencement of any
action shall not relieve the Company of its obligations hereunder except to the
extent that the Company is actually prejudiced by such failure to give notice.
Holder shall have the right to employ separate counsel in any such action and to
participate in the defense thereof, but the fees and expenses of such counsel
shall not be at
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the expense of the Company unless in the reasonable judgment of Holder, a
conflict of interest between the Company and Holder exists in respect of such
claim, in which event the fees and expenses of such counsel shall be at the
expense of the Company. In connection with any offering under this Paragraph (a)
which is to be underwritten, the Company further agrees to enter into an
underwriting agreement in usual and standard form respecting such offering;
provided that the terms of such underwriting agreement shall not be inconsistent
or conflict with the provisions of this Agreement.
(ii) The obligations of the Company under this Paragraph (a) are subject to
the following conditions, which Holder hereby agrees to fulfill: (i) that Holder
whose Registrable Shares are to be included in any registration referred to in
this Section agrees, in writing, prior to the filing of such registration or
qualification, and hereby does agree to indemnify and hold harmless the Company,
each Person, if any, who controls the Company within the meaning of the
Securities Act and the officers and directors of the Company, against any and
all losses, claims, damages, liabilities or expenses arising out of or based
upon any untrue statement or alleged untrue statement of a material fact in any
related registration statement, prospectus, offering circular, notification or
other document or any omission or alleged omission of any material fact required
to be stated therein or necessary to make the statements therein not misleading,
but only with reference to statements or omissions made in reliance upon a
statement in writing furnished by or on behalf of Holder (but only to the extent
such statement was made in Holder's capacity as a holder of Registrable Shares
and not in Holder's capacity as an officer or director of the Company, if
applicable) for inclusion therein and with reference to statements or omissions
made in reliance upon an omission or failure by Holder to furnish any statement
with respect to Holder required to be included therein (which indemnification
shall remain in full force and effect regardless of any investigation made by
the Company or any person controlling the Company and shall survive the transfer
of the Registrable Shares), and (ii) if such registration or qualification
relates to an offering which is to be underwritten, that Holder agrees to enter
into an underwriting agreement in usual and standard form respecting such
offering; provided that the terms of such underwriting agreement shall not be
inconsistent or conflict with the provisions of this Agreement. Promptly after
receipt of written notice of the commencement of any action in respect of which
indemnity may be sought against Holder, the Company will notify Holder in
writing of the commencement thereof, and Holder shall, subject to the provisions
hereinafter stated and the Company's reasonable cooperation, assume the defense
of such action (including the employment of counsel, who shall be counsel
reasonably satisfactory to the Company, and the payment of expenses and such
counsel's fees) insofar as such action shall relate to the alleged liability in
respect of which indemnity may be sought against Holder, provided, however, that
the failure of the Company to give written notice to Holder of the commencement
of any action shall not relieve Holder of its obligations hereunder except to
the
-17-
extent that Holder is actually prejudiced by such failure to give notice. The
Company and each such director, officer, or controlling Person shall have the
right to employ separate counsel in any such action and to participate in the
defense thereof, but the fees and expense of such counsel shall not be the
expense of Holder unless in the reasonable judgment of the Company or such
director or officer or controlling Person, a conflict of interest between Holder
and the Company or such director or officer or controlling Person exists in
respect of such claim, in which event the fees and expenses of such counsel
shall be at the expense of Holder.
(6) A party required to indemnify another party ("indemnifying party")
shall not be liable for any settlement of any action or claim relating to any
such liability or expense effected without its consent, but if any settlement is
effected with its consent or if a final judgment for the plaintiff is entered in
any such action, such indemnifying party agrees to indemnify and hold harmless
the indemnified party from and against any loss or liability by reason of any
such settlement or judgment.
(b) The rights to cause the Company to register Registrable Securities
pursuant to this Section 5.4 may be assigned (but only with all related
obligations) by a Holder, without the consent of the Company, to a transferee or
assignee of such securities who (a) after such assignment or transfer, holds at
least 200,000 shares of Registrable Securities (subject to appropriate
adjustment for stock splits, stock dividends, combinations and other
recapitalizations), (b) is a subsidiary, parent, general partner, limited
partner or retired partner of a Holder or (c) is a Holder's family member or
trust for the benefit of an individual Holder; provided (i) the Company is,
within a reasonable time after such transfer, furnished with written notice of
the name and address of such transferee or assignee and the securities with
respect to which such registration rights are being assigned; (ii) such
transferee or assignee agrees in writing to be bound by and subject to the terms
and conditions of this Agreement, including without limitation the provisions of
paragraph (d) below; and (iii) such assignment shall be effective only if
immediately following such transfer the further disposition of such securities
by the transferee or assignee is restricted under the Securities Act.
(c) From and after the date of this Agreement, the Company shall not,
without the prior written consent of the Holders of a majority of the
outstanding Registrable Securities, enter into any agreement with any holder or
prospective holder of any securities of the Company which would allow such
holder or prospective holder (i) to include such securities in any registration
filed under Paragraph (a) hereof, unless under the terms of such agreement, such
holder or prospective holder may include such securities in any such
registration statement on no more than a pro-rata basis with the amount of the
Registrable Securities of the Holders which are included or (ii) to make a
demand registration which could result in such registration statement
-18-
being declared effective prior to the expiration of one hundred twenty (120)
days of the effective date of any registration effected pursuant to Paragraph
(a) hereof.
(d) During the period of duration (not exceeding one hundred and eighty
(180) days) specified by the Company and an underwriter of common stock or other
securities of the Company following the effective date of a registration
statement of the Company filed under the Securities Act (other than on Form S-8
or Form S-4), Holder shall not, to the extent requested by the Company and such
underwriter, make any demand for registration under Paragraph (a) above or
directly or indirectly sell, offer to sell, contract to sell (including, without
limitation, any short sale), grant any option to purchase or otherwise transfer
or dispose of (other than to donees who agree to be similarly bound) any
securities of the Company held by it at any time during such period, except
Common Stock included in such registration; provided, however, that (i) such
agreement shall be applicable only to the first registration statement of the
Company which does not include any shares owned by selling shareholders to
become effective after the date of this Agreement, and (ii) all directors,
officers and affiliates of the Company and all other persons with registration
rights enter into similar agreements.
(e) No Holder shall be entitled to exercise any right provided for in this
Section 5.4 after three (3) years following the date of this Agreement.
5.5. RIGHT OF FIRST OFFER. Subject to the terms and conditions specified in
this Section 5.5, the Company hereby grants to each Holder a right of first
offer with respect to future sales by the Company of its Common Stock. A Holder
shall be entitled to apportion the right of first offer hereby granted to it
among itself and its partners and affiliates in such proportions as it deems
appropriate.
(a) Each time that the Company proposes to offer any shares of Common Stock
to any investor which is a venture capital fund, insurance company, pension
fund, investment partnership, or other non-strategic institutional investor, the
Company shall first make an offering of shares of such Common Stock to Holder in
accordance with the following provisions:
(i) The Company shall deliver a notice by certified mail
("Notice") to the Holders stating (i) its bona fide intention
to offer such shares, (ii) the number of shares of Common
Stock to be offered, and (iii) the price and terms, if any,
upon which it proposes to offer such Common Stock.
(ii) By written notification received by the Company, within 15
calendar days after giving of the Notice, the Holders may
elect to
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purchase or obtain, at the price and on the terms specified in
the Notice, up to that percentage of such Common Stock which
equals a fraction, the numerator of which is the number of
shares of Common Stock held by such Holder, and the
denominator of which is the total number of shares of Common
Stock of the Company then outstanding.
(iii) The right of first offer in this Section 5.5 shall not be
applicable to (i) securities issued upon conversion or
exchange of securities outstanding on the date hereof, (ii)
securities offered to the public pursuant to a registration
statement filed under the Securities Act; (iii) securities
issued pursuant to the acquisition of another corporation by
the Company by merger, purchase of substantially all of the
assets, or other reorganization; or (iv) securities issued or
issuable at any time to employees, directors or consultants of
the Company, or any subsidiary, pursuant to any employee stock
option plan or arrangement.
5.6. REPORTS UNDER SECURITIES EXCHANGE ACT OF 1934. With a view to making
available to the Holders the benefits of Rule 144 under the Securities Act and
any other rule or regulation that may at any time permit a Holder to sell
securities of the Company to the public without registration or pursuant to a
registration, the Company agrees to:
(a) make and keep public information available, as those terms are
understood and defined in Rule 144, and to file all reports and other documents
required by the Securities Exchange Act of 1934; and
(b) furnish to any Holder, so long as the Holder owns any Registrable
Securities, forthwith upon request (i) a written statement by the Company that
it has complied with the reporting requirements of Rule 144, (ii) a copy of the
most recent annual or quarterly report of the Company and such other reports and
documents so filed by the Company, and (iii) such other information as may be
reasonably requested in availing any Holder of any rule or regulation which
permits the selling of any such securities without registration or pursuant to
such form.
5.7. COMPLETION OF PRIVATE PLACEMENT. Without the prior written consent of
Buyer, which shall not unreasonably be withheld, the Company will not sell
during the six months commencing March 1, 2000, (except pursuant to options and
warrants outstanding as of the date of this Agreement and except pursuant to an
offering registered under the Securities Act) any shares of its Common Stock for
a price less than $6.00 per share.
5.8. NOMINATION AS DIRECTOR. The Company will cause Xxxxxx Xxxxxxxx to be
elected as a director of the Company promptly after the date of this Agreement
and will cause Xxxxxx Xxxxxxxx to be a nominee for
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election as a director of the Company at all meetings of shareholders for the
election of directors at any time prior to December 31, 2001.
6. INDEMNIFICATION; REMEDIES.
6.1. SURVIVAL. All representations, warranties and agreements contained in
this Agreement shall survive the issuance and sale of the Shares notwithstanding
any investigation conducted with respect thereto or any knowledge acquired as to
the accuracy or inaccuracy of any such representation or warranty.
6.2. INDEMNIFICATION BY THE COMPANY. The Company shall indemnify and hold
harmless Buyer and its agents, representatives, employees, officers, directors,
stockholders, controlling persons and affiliates (collectively, the "Indemnified
Persons"), and shall reimburse the Indemnified Persons for, any loss, liability,
claim, damage, expense (including, but not limited to, costs of investigation
and defense and reasonable attorneys' fees) or diminution of value, whether or
not involving a third-party claim (collectively, "Damages") arising from or in
connection with (a) any inaccuracy in any of the representations and warranties
of the Company in this Agreement, (b) any failure by the Company to perform or
comply with any agreement in this Agreement, or (c) any claim by any Person for
brokerage or finder's fees or commissions or similar payments based upon any
agreement or understanding alleged to have been made by any such Person with the
Company (or any Person acting on its behalf) in connection with any of the
Contemplated Transactions.
6.3. INDEMNIFICATION BY BUYER. Buyer shall indemnify and hold harmless the
Company, and shall reimburse the Company for, any Damages arising from or in
connection with (a) any inaccuracy in any of the representations and warranties
of Buyer in this Agreement, (b) any failure by Buyer to perform or comply with
any agreement in this Agreement, and (c) any claim by any Person for brokerage
or finder's fees or commissions or similar payments based upon any agreement or
understanding alleged to have been made by such Person with Buyer (or any Person
acting on its behalf) in connection with any of the Contemplated Transactions.
7. MISCELLANEOUS.
7.1. NOTICES. All notices, consents and other communications under this
Agreement shall be in writing and shall be deemed to have been duly given when
(a) delivered by hand, (b) sent by telecopier (with receipt confirmed), provided
that a copy is mailed by registered mail, return receipt requested, or (c) when
and telecopier numbers as a party may designate as to itself by notice to the
other parties):
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Company
xxxxxxxxxxx.xxx inc.
000 Xxxxx Xxxx
Xxxxxxx, XX 00000
Attn: Xxxxx X. Xxxxxxx, President
and Chief Executive Officer
Telecopy No. (000) 000-0000
with a copy to:
Duane, Morris & Xxxxxxxx LLP
0000 Xxx Xxxxxxx Xxxxx
Xxxxxxxxxxxx, XX 00000
Attn: Xxxxxxxxx X. Xxxxxx
Telecopy No. (000) 000-0000
Buyer
C&R Investments I, L.P.
c/o Cross Atlantic Capital Partners
Five Radnor Corporate Center
000 Xxxxxxxxxx Xxxx
Xxxxxx, XX 00000
Attn: President
Telecopy No. (000) 000-0000
with a copy to:
Xxxxxx X. Xxxxxxxx
Eckert, Seamans, Xxxxxx & Xxxxxxx
0000 Xxxxxx Xxxxxx, Xxxxx Xxxxx
Xxxxxxxxxxxx, XX 00000-0000
Telecopy No. (000) 000-0000
7.2. JURISDICTION; SERVICE OF PROCESS. Any action or proceeding seeking to
enforce any provision of, or based on any right arising out of, this Agreement
may be brought against any of the parties in the courts of the Commonwealth of
Pennsylvania or, if it has or can acquire jurisdiction,
-22-
in the United States District Court for the Eastern District of Pennsylvania,
and each of the parties hereby consents to the jurisdiction of such courts (and
of the appropriate appellate courts) in any such action or proceeding and waives
any objection to venue laid therein.
7.3. ENTIRE AGREEMENT AND MODIFICATION. This Agreement supersedes all prior
and contemporaneous agreements among the parties with respect to its subject
matter (including, without limitation that certain letter agreement between the
Company and Cross Atlantic Capital Partners Inc. dated February 3, 2000) and is
intended as a complete and exclusive statement of the terms of the agreement
among the parties with respect thereto. This Agreement may not be changed or
terminated except by a written agreement executed by Buyer and the Company.
7.4. GOVERNING LAW. This Agreement shall be governed by, and construed
under, the laws of the Commonwealth of Pennsylvania without regard to the
conflicts of laws principles thereof, all rights and remedies being governed by
such laws.
C&R INVESTMENTS I, L.P.
By Cross Atlantic Capital Partners, Inc.
-------------------------------------
its General Partner
By: /s/ Xxxxx X. Xxxxxx
---------------------------
its President
XXXXXXXXXXX.XXX INC.
By: /s/ Xxxxx X. Xxxxxxx
-------------------------------
Xxxxx X. Xxxxxxx, President
and Chief Executive Officer
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