EXHIBIT 99.2
SERVICEWARE TECHNOLOGIES, INC.
SECURITIES PURCHASE AGREEMENT
This Securities Purchase Agreement (this "AGREEMENT") is made
and entered into as of January 30, 2004, by and among ServiceWare Technologies,
Inc., a Delaware corporation (the "COMPANY"), and each of the purchasers listed
on Exhibit A attached hereto (collectively, the "PURCHASERS" and individually, a
"PURCHASER").
RECITALS
WHEREAS, the Company desires to issue and sell to the
Purchasers, and the Purchasers desire to purchase from the Company, up to twelve
million three hundred seven thousand six hundred ninety-two (12,307,692) units
(each, a "UNIT"), each unit consisting of one share of common stock, par value
$0.01 per share, of the Company (the "COMMON STOCK") and a five year warrant (a
"WARRANT") to purchase one-half (0.5) share of Common Stock, on the terms and
conditions set forth in this Agreement; and
WHEREAS, the Company and each Purchaser are executing and
delivering this Agreement in reliance upon the exemption from securities
registration afforded by the provisions of Regulation D ("REGULATION D"), as
promulgated by the United States Securities and Exchange Commission (the "SEC")
under the Securities Act of 1933, as amended (the "SECURITIES ACT").
NOW, THEREFORE, in consideration of the foregoing, the mutual
promises hereinafter set forth, and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:
AGREEMENT TO PURCHASE AND SELL STOCK.
Authorization. The Company's Board of Directors has authorized the issuance and
sale, pursuant to the terms and conditions of this Agreement, of up to twelve
million three hundred seven thousand six hundred ninety-two (12,307,692) Units,
consisting in the aggregate of up to twelve million three hundred seven thousand
six hundred ninety-two (12,307,692) shares of Common Stock (the "PURCHASED
SHARES") and six million one hundred fifty-three thousand eight hundred
forty-six (6,153,846) Warrants, substantially in the form attached hereto as
Exhibit B. Each two Warrants included in the Units shall be exercisable to
purchase one share of Common Stock at $0.72 per share (the "PURCHASED WARRANTS"
and together with the Purchased Shares, the "PURCHASED SECURITIES").
Agreement to Purchase and Sell Securities. Subject to the terms and conditions
of this Agreement, each Purchaser severally agrees to purchase, and the Company
agrees to sell and issue to each Purchaser, at the Closing (as defined below),
that number of Units set forth opposite such Purchaser's name on Exhibit A
attached hereto. The purchase price of each Unit (the "PER UNIT PRICE") shall be
$0.65.
Use of Proceeds. The Company intends to apply the net proceeds from the sale of
the Purchased Securities for working capital and general corporate purposes,
and, if applicable, to prepay any outstanding balance on the Notes (as defined
below) pursuant to Section 9(a) herein.
Obligations Several Not Joint. The obligations of each Purchaser under this
Agreement are several and not joint with the obligations of any other Purchaser,
and no Purchaser shall be responsible in any way for the performance of the
obligations of any other Purchaser under this Agreement. Nothing contained
herein, and no action taken by any Purchaser pursuant hereto, shall be deemed to
constitute the Purchasers as a partnership, an association, a joint venture or
any other kind of entity, or create a presumption that the Purchasers are in any
way acting in concert or as a group with respect to such obligations or the
transactions contemplated by this Agreement. Each Purchaser shall be entitled to
independently protect and enforce its rights, including without limitation the
rights arising out of this Agreement, and it shall not be necessary for any
other Purchaser to be joined as an additional party in any proceeding for such
purpose.
CLOSING. THE PURCHASE AND SALE OF THE PURCHASED SECURITIES SHALL TAKE PLACE AT
THE OFFICES OF XXXXXX XXXXX XXXXXXXX & XXXXXXX LLP, AT 2:00 P.M. EASTERN TIME,
ON JANUARY 30, 2004, OR AT SUCH OTHER TIME AND PLACE AS THE COMPANY AND
PURCHASERS REPRESENTING A MAJORITY OF THE UNITS TO BE PURCHASED, MUTUALLY AGREE
UPON (WHICH TIME AND PLACE ARE REFERRED TO IN THIS AGREEMENT AS THE "Closing").
AT THE CLOSING, THE COMPANY SHALL, AGAINST DELIVERY OF PAYMENT FOR THE PURCHASED
SECURITIES BY WIRE TRANSFER OF IMMEDIATELY AVAILABLE FUNDS IN ACCORDANCE WITH
THE COMPANY'S INSTRUCTIONS, (I) AUTHORIZE ITS TRANSFER AGENT TO ISSUE TO EACH
PURCHASER ONE OR MORE STOCK CERTIFICATES (THE "Certificates") REGISTERED IN THE
NAME OF EACH PURCHASER (OR IN SUCH NOMINEE NAME(S) AS DESIGNATED BY SUCH
PURCHASER IN THE STOCK CERTIFICATE QUESTIONNAIRE (ATTACHED HERETO AS APPENDIX I)
(THE "Stock Certificate Questionnaire"), REPRESENTING THE NUMBER OF PURCHASED
SHARES SET FORTH OPPOSITE THE APPROPRIATE PURCHASER'S NAME ON EXHIBIT A HERETO,
AND BEARING THE LEGEND SET FORTH IN SECTION 4(J) HEREIN AND (II) ISSUE THE
NUMBER OF PURCHASED WARRANTS SET FORTH OPPOSITE SUCH PURCHASER'S NAME ON EXHIBIT
A HERETO. CLOSING DOCUMENTS MAY BE DELIVERED BY FACSIMILE
WITH ORIGINAL SIGNATURE PAGES SENT BY OVERNIGHT COURIER. THE DATE OF THE CLOSING
IS REFERRED TO HEREIN AS THE CLOSING DATE.
REPRESENTATIONS AND WARRANTIES OF THE COMPANY. THE COMPANY HEREBY REPRESENTS AND
WARRANTS TO EACH PURCHASER THAT THE STATEMENTS IN THIS SECTION 3 ARE TRUE AND
CORRECT, EXCEPT AS SET FORTH IN THE SEC DOCUMENTS (AS DEFINED BELOW) AND THE
DISCLOSURE LETTER ATTACHED HERETO AS EXHIBIT C:
Organization Good Standing and Qualification. The Company is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware and has all corporate power and authority required to (i) carry on its
business as presently conducted and (ii) enter into this Agreement and the other
agreements, instruments and documents contemplated hereby, and to consummate the
transactions contemplated hereby and thereby. The Company is qualified to do
business and is in good standing in each jurisdiction in which the failure to so
qualify would have a Material Adverse Effect. As used in this Agreement,
"MATERIAL ADVERSE EFFECT" means a material adverse effect on, or a material
adverse change in, or a group of such effects on or changes in, the business,
operations, financial condition, results of operations, assets or liabilities of
the Company and the Subsidiary, taken as a whole.
Capitalization. The capitalization of the Company, without listing the Purchased
Securities to be purchased pursuant to this Agreement, is as follows:
The authorized capital stock of the Company consists of 100,000,000 shares of
Common Stock and 5,000,000 shares of preferred stock, par value $0.01 per share
("PREFERRED STOCK").
As of January 27, 2004, the issued and outstanding capital stock of the Company
consisted of 24,540,414 shares of Common Stock and no shares of Preferred Stock.
The shares of issued and outstanding capital stock of the Company have been duly
authorized and validly issued, are fully paid and nonassessable and have not
been issued in violation of or are not otherwise subject to any preemptive or
other similar rights.
As of January 27, 2004, the Company had (a) 5,671,660 shares of Common Stock
reserved for issuance upon exercise of outstanding options granted under the
Company's 2000 Stock Incentive Plan (the "OPTION PLAN") and (b) 289,814 shares
of Common Stock reserved for issuance upon exercise of outstanding warrants.
As of January 27, 2004, the Company had 5,688,220 shares of Common Stock
available for future grant under the Option Plan.
As of January 27, 2004, the Company had 436,940 shares of Common Stock reserved
for future purchase by employees of the Company under the Company's Employee
Stock Purchase Plan.
As of January 27, 2004, the Company's 10% Senior Unsecured Convertible Notes
were convertible into 15,295,806 shares of Common Stock.
With the exception of the foregoing in this Section 3(b),
there are no outstanding subscriptions, options, warrants, convertible or
exchangeable securities or other rights granted to or by the Company to purchase
shares of Common Stock or other securities of the Company and
there are no commitments, plans or arrangements to issue any shares of Common
Stock or any security convertible into or exchangeable for Common Stock.
Subsidiaries. Except for ServiceWare Limited, a company organized under the laws
of England and Wales, (the "SUBSIDIARY"), the Company does not have any
subsidiaries, and the Company does not own any capital stock of, assets
comprising the business of, obligations of, or any other interest (including any
equity or partnership interest) in, any person or entity.
Due Authorization. All corporate actions on the part of the Company necessary
for the authorization, execution, delivery of, and the performance of all
obligations of the Company under this Agreement and the authorization, issuance,
reservation for issuance and delivery of all of the Purchased Securities being
sold under this Agreement have been taken, no further consent or authorization
of the Company or the Board of Directors or its stockholders is required, and
this Agreement constitutes the legal, valid and binding obligation of the
Company, enforceable against the Company in accordance with its terms, except
(i) as may be limited by (1) applicable bankruptcy, insolvency, reorganization
or other laws of general application relating to or affecting the enforcement of
creditors' rights generally and (2) the effect of rules of law governing the
availability of equitable remedies and (ii) as rights to indemnity or
contribution may be limited under federal or state securities laws or by
principles of public policy thereunder.
Valid Issuance of Purchased Securities.
Purchased Shares. The Purchased Shares will be, upon payment therefor by the
Purchasers in accordance with this Agreement, duly authorized, validly issued,
fully paid and non-assessable, free from all taxes, liens, claims, encumbrances
with respect to the issuance of such Purchased Shares and will not be subject to
any pre-emptive rights or similar rights.
Purchased Warrants. The warrants to be issued pursuant to this Agreement will
be, upon payment therefor by the Purchasers in accordance with this Agreement,
duly authorized and validly issued, free from all taxes, liens, claims,
encumbrances with respect to the issuance of such Purchased Warrants and will
not be subject to any pre-emptive rights or similar rights.
Underlying Shares of Common Stock. The issuance of the shares of Common Stock
issued or issuable from time to time upon the exercise of the Purchased Warrants
(the "UNDERLYING SHARES") will be, and at all times prior to such exercise, will
have been, duly authorized, duly reserved for issuance upon such exercise and
payment of the exercise price of the Purchased Warrants, and will be, upon such
exercise and payment, validly issued, fully-paid and non-assessable free from
all taxes, liens, claim, encumbrances with respect to the issuance of such
shares and will not be subject to any pre-emptive rights or similar rights.
Compliance with Securities Laws. Subject to the accuracy of the representations
made by the Purchasers in Section 4 hereof, the Purchased Securities (assuming
no change in applicable law and no unlawful distribution of the Purchased
Securities by the Purchasers or other parties) will be issued to the Purchasers
in compliance with applicable exemptions from (1) the registration and
prospectus delivery requirements of the Securities Act and (2) the registration
and qualification requirements of all applicable securities laws of the states
of the United States.
Governmental Consents. No consent, approval, order or authorization of, or
registration, qualification, designation, declaration or filing with, or notice
to, any federal, state or local governmental authority or self regulatory agency
on the part of the Company is required in connection with the issuance of the
Purchased Securities to the Purchasers, or the consummation of the other
transactions contemplated by this Agreement, except (i) such filings as have
been made prior to the date hereof and (ii) such additional post-Closing filings
as may be required to comply with applicable state and federal securities laws.
Non-Contravention. The execution, delivery and performance of this Agreement by
the Company, and the consummation by the Company of the transactions
contemplated hereby (including issuance of the Purchased Securities), do not (i)
contravene or conflict with the certificate of incorporation, as amended (the
"CERTIFICATE OF INCORPORATION") or bylaws, as amended (the "BYLAWS") of the
Company; (ii) constitute a violation of any provision of any federal, state,
local or foreign law, rule, regulation, order or decree applicable to the
Company; or (iii) constitute a default or require any consent under, give rise
to any right of termination, cancellation or acceleration of, or to a loss of
any material benefit to which the Company is entitled under, or result in the
creation or imposition of any lien, claim or encumbrance on any assets of the
Company under, any material contract to which the Company is a party or any
material permit, license or similar right relating to the Company or by which
the Company may be bound or affected.
Litigation. There is no action, suit, proceeding, claim, arbitration or
investigation ("ACTION") pending or, to the Company's knowledge, threatened in
writing: (i) against the Company, its activities, properties or assets, or any
officer, director or employee of the Company in connection with such officer's,
director's or employee's relationship with, or actions taken on behalf of, the
Company, that is reasonably likely to have a Material Adverse Effect on the
Company, or (ii) that seeks to prevent, enjoin, alter, challenge or delay the
transactions contemplated by this Agreement (including the issuance of the
Purchased Securities). The Company is not a party to or subject to the
provisions of, any order, writ, injunction, judgment or decree of any court or
government agency or instrumentality. No Action is currently pending nor does
the Company intend to initiate any Action that is reasonably likely to have a
Material Adverse Effect on the Company.
Compliance with Law and Charter Documents. The Company is not in violation or
default of any provisions of the Certificate of Incorporation or the Bylaws. The
Company has complied and is currently in compliance with all applicable
statutes, laws, rules, regulations and orders of the United States of America
and all states thereof, foreign countries and other governmental bodies and
agencies having jurisdiction over the Company's business or properties, except
for any instance of non-compliance that has not had, and would not reasonably be
expected to have, a Material Adverse Effect.
Material Non-Public Information. The Company has not provided, and will not
provide, to the Purchasers any material non-public information other than
information related to the transactions contemplated by this Agreement, all of
which information related to the transactions contemplated hereby shall be
disclosed by the Company pursuant to Section 9(n) hereof.
SEC Documents.
Reports. The Company has filed in a timely manner all reports, schedules, forms,
statements and other documents required to be filed by it with the SEC pursuant
to the reporting requirements of the Securities Exchange Act of 1934, as amended
(the "EXCHANGE ACT"), and the rules and regulations promulgated thereunder. The
Company has made available to the Purchasers prior to the date hereof copies of
its Annual Report on Form 10-K for the fiscal year ended December 31, 2002 (the
"FORM 10-K"), its quarterly reports on Form 10-Q for the fiscal quarters ended
March 31, 2003, June 30, 2003 and September 30, 2003 (the "FORM 10-QS"), its
Proxy Statement for its Annual Meeting of Stockholders held on June 11, 2003
(the "PROXY STATEMENT"), and any Current Report on Form 8-K for events occurring
since December 31, 2002 ("FORM 8-KS") filed by the Company with the SEC (the
Form 10-K, the Form 10-Qs, the Proxy Statement and the Form 8-Ks are
collectively referred to herein as the "SEC DOCUMENTS"). Each of the SEC
Documents, as of the respective dates thereof (or, if amended or superseded by a
filing prior to the Closing Date, then on the date of such filing), did not
contain any untrue statement of a material fact or omit 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. Each SEC Document, as
it may have been subsequently amended by filings made by the Company with the
SEC prior to the date hereof, complied in all material respects with the
requirements of the Exchange Act and the rules and regulations of the SEC
promulgated thereunder applicable to such SEC Document.
Xxxxxxxx-Xxxxx. The Chief Executive Officer and the Chief Financial Officer of
the Company have signed, and the Company has furnished to the SEC, all
certifications required by Sections 302 and 906 of the Xxxxxxxx-Xxxxx Act of
2002. Such certifications contain no qualifications or exceptions to the matters
certified therein and have not been modified or withdrawn; and neither the
Company nor any of its officers has received notice from any governmental entity
questioning or challenging the accuracy, completeness, form or manner of filing
or submission of such certifications.
Financial Statements. The financial statements of the Company in the SEC
Documents present fairly, in accordance with United States generally accepted
accounting principles ("GAAP"), consistently applied, the financial position of
the Company as of the dates indicated, and the results of its operations and
cash flows for the periods therein specified, subject, in the case of unaudited
financial statements for interim periods, to normal year-end audit adjustments.
Absence of Certain Changes Since the Balance Sheet Date. Since September 30,
2003, the business and operations of the Company have been conducted in the
ordinary course consistent with past practice, and there has not been:
any declaration, setting aside or payment of any dividend or other distribution
of the assets of the Company with respect to any shares of capital stock of the
Company or any repurchase, redemption or other acquisition by the Company or any
subsidiary of the Company of any outstanding shares of the Company's capital
stock;
any damage, destruction or loss, whether or not covered by insurance, except for
such occurrences, individually and collectively, that have not had, and would
not reasonably be expected to have, a Material Adverse Effect;
any waiver by the Company of a valuable right or of a material debt owed to it,
except for such waivers, individually and collectively, that have not had, and
would not reasonably be expected to have, a Material Adverse Effect;
any material change or amendment to, or any waiver of any material right under a
material contract or arrangement by which the Company or any of its assets or
properties is bound or subject;
any change by the Company in its accounting principles, methods or practices or
in the manner in which it keeps its accounting books and records, except any
such change required by a change in GAAP or by the SEC; or
any other event or condition of any character, except for such events and
conditions that have not resulted, and are not expected to result, either
individually or collectively, in a Material Adverse Effect.
Intellectual Property. The Company owns or possesses sufficient rights to use
all patents, patent rights, inventions, trade secrets, know-how, trademarks,
service marks, trade names, copyrights or other information (collectively,
"INTELLECTUAL PROPERTY"), which are necessary to conduct its businesses as
currently conducted, except where the failure to currently own or possess would
not reasonably be expected to result, either individually or in the aggregate,
in a Material Adverse Effect. The Company has not received any written notice
of, and has no actual knowledge of, any infringement of or conflict with
asserted rights of others with respect to any Intellectual Property which,
either individually or in the aggregate, if the subject of an unfavorable
decision, ruling or finding, would reasonably be expected to have a Material
Adverse Effect, and to the Company's knowledge, none of the patent rights owned
or licensed by the Company are unenforceable or invalid.
Registration Rights. Except as provided in Section 5 herein, effective upon the
Closing, the Company is not currently subject to any agreement providing any
person or entity any rights (including piggyback registration rights) to have
any securities of the Company registered with the SEC or registered or qualified
with any other governmental authority.
Title to Property and Assets. The properties and assets of the Company are owned
by the Company free and clear of all mortgages, deeds of trust, liens, charges,
encumbrances and security interests except for (i) statutory liens for the
payment of current taxes that are not yet delinquent and (ii) liens,
encumbrances and security interests that arise in the ordinary course of
business and do not in any material respect affect the use of the properties and
assets of the Company. With respect to the property and assets it leases, the
Company is in compliance with such leases in all material respects.
Taxes. The Company has filed or has valid extensions of the time to file all
necessary federal, state, and foreign income and franchise tax returns due prior
to the date hereof and has paid or accrued all taxes shown as due thereon, and
the Company has no knowledge of any material tax deficiency which has been or
might be asserted or threatened against it.
Insurance. The Company maintains insurance of the types and in the amounts that
the Company reasonably believes is prudent and adequate for its business, all of
which insurance is in full force and effect.
Labor Relations. No material labor dispute exists or, to the knowledge of the
Company, is imminent with respect to any of the employees of the Company.
Internal Accounting Controls. The Company and the Subsidiary maintain a system
of internal accounting controls sufficient to provide reasonable assurance that
(i) transactions are executed in accordance with management's general or
specific authorizations, (ii) transactions are recorded as necessary to permit
preparation of financial statements in conformity with generally accepted
accounting principles and to maintain asset accountability, (iii) access to
assets is permitted only in accordance with management's general or specific
authorization, and (iv) the recorded accountability for assets is compared with
the existing assets at reasonable intervals and appropriate action is taken with
respect to any differences.
Transactions With Officers and Directors. None of the officers or directors of
the Company has entered into any transaction with the Company or the Subsidiary
that would be required to be disclosed pursuant to Item 404(a), (b) or (c) of
Regulation S-K of the SEC.
General Solicitation. Neither the Company nor any other person or entity
authorized by the Company to act on its behalf has engaged in a general
solicitation or general advertising (within the meaning of Regulation D of the
Securities Act) of investors with respect to offers or sales of the Purchased
Securities.
Registration Statement Matters. Assuming the completion and timely delivery of
the Registration Statement Questionnaire (attached hereto as Appendix II) (the
"REGISTRATION STATEMENT QUESTIONNAIRE") by each Purchaser to the Company, the
Company is not aware of any facts or circumstances that would prohibit or delay
the preparation and filing of a registration statement with respect to the
Registrable Shares (as defined below).
No Integrated Offering. Neither the Company, nor any Affiliate (as hereafter
defined) of the Company, nor any person acting on its or their behalf has,
directly or indirectly, made any offers or sales of any security or solicited
any offers to buy any security, under circumstances that would cause this
offering of the Purchased Securities to be integrated with prior offerings by
the Company for purposes of the Securities Act, any applicable state securities
laws or any applicable stockholder approval provisions, including, without
limitation, under the rules and regulations of any national securities exchange
or automated quotation system on which any of the securities of the Company are
listed or designated, nor will the Company take any action or steps that would
cause the offering of the Purchased Securities to be integrated with other
offerings.
Trading Matters. The Common Stock of the Company is eligible for trading on the
OTC Bulletin Board under the ticker symbol "SVCW.OB."
REPRESENTATIONS, WARRANTIES AND CERTAIN AGREEMENTS OF THE PURCHASERS. EACH
PURCHASER HEREBY REPRESENTS AND WARRANTS TO THE COMPANY, SEVERALLY AND NOT
JOINTLY, AND AGREES THAT:
Organization Good Standing and Qualification. The Purchaser has all corporate,
limited liability company, partnership, trust or individual power and authority
required to enter into this Agreement and the other agreements, instruments and
documents contemplated hereby, and to consummate the transactions contemplated
hereby and thereby.
Authorization. The execution of this Agreement has been duly authorized by all
necessary corporate, limited liability company, partnership, trust or individual
action on the part of the Purchaser. This Agreement constitutes the Purchaser's
legal, valid and binding obligation, enforceable in accordance with its terms,
except (i) as may be limited by (1) applicable bankruptcy, insolvency,
reorganization or other laws of general application relating to or affecting the
enforcement of creditors' rights generally and (2) the effect of rules of law
governing the availability of equitable remedies and (ii) as rights to indemnity
or contribution may be limited under federal or state securities laws or by
principles of public policy thereunder.
Litigation. There is no Action pending to which such Purchaser is a party that
is reasonably likely to prevent, enjoin, alter or delay the transactions
contemplated by this Agreement.
Purchase for Own Account. The Purchased Securities are being acquired for
investment for the Purchaser's own account, not as a nominee or agent, in the
ordinary course of business, and not with a view to the public resale or
distribution thereof within the meaning of the Securities Act. The Purchaser
also represents that it has not been formed for the specific purpose of
acquiring the Purchased Securities. The Purchaser does not have any agreement or
understanding, direct or indirect, with any other person or entity, to sell or
otherwise distribute the Purchased Securities. Notwithstanding the foregoing,
the parties hereto acknowledge the Purchaser's right at all times to sell or
otherwise dispose of all or any part of such securities in compliance with
applicable federal and state securities laws and as otherwise contemplated by
this Agreement.
Investment Experience. The Purchaser understands that the purchase of the
Purchased Securities involves substantial risk. The Purchaser has experience as
an investor in securities of companies and acknowledges that it can bear the
economic risk of its investment in the Purchased Securities and has such
knowledge and experience in financial or business matters that it is capable of
evaluating the merits and risks of this investment in the Purchased Securities
and protecting its own interests in connection with this investment.
Accredited Purchaser Status. The Purchaser is an "accredited investor" within
the meaning of Regulation D promulgated under the Securities Act.
Reliance Upon Purchaser's Representations. The Purchaser understands that the
issuance and sale of the Purchased Securities to it will not be registered under
the Securities Act on the ground that such issuance and sale will be exempt from
registration under the Securities Act pursuant to Section 4(2) thereof, and that
the Company's reliance on such exemption is based on each Purchaser's
representations set forth herein.
Receipt of Information. The Purchaser has had an opportunity to ask questions
and receive answers from the Company regarding the terms and conditions of the
issuance and sale of the Purchased Securities and the business, properties,
prospects and financial condition of the Company and to obtain any additional
information requested and has received and considered all information it deems
relevant to make an informed decision to purchase the Purchased Securities.
Neither such inquiries nor any other investigation conducted by or on behalf of
such Purchaser or its representatives or counsel shall modify, amend or affect
such Purchaser's right to rely on the truth, accuracy and completeness of such
information and the Company's representations and warranties contained in this
Agreement.
Restricted Securities. The Purchaser understands that the Purchased Securities
have not been registered under the Securities Act and will not sell, offer to
sell, assign, pledge, hypothecate or otherwise transfer any of the Purchased
Securities unless (i) pursuant to an effective registration statement under the
Securities Act, (ii) such holder provides a reasonably acceptable legal opinion
to the Company, to the effect that a sale, assignment or transfer of the
Purchased Securities may be made without registration under the Securities Act
and the transferee agrees to be bound by the terms and conditions of this
Agreement, (iii) such holder provides the Company with reasonable assurances (in
the form of seller and broker representation letters) that the
Purchased Shares or the Underlying Shares, as the case may be, can be sold
pursuant to Rule 144 promulgated under the Securities Act ("RULE 144"), (iv)
pursuant to Rule 144(k) promulgated under the Securities Act following the
applicable holding period or (v) pursuant to any other exception contained in
the Securities Act provided that the Purchaser provides a reasonably acceptable
legal opinion to the Company. Notwithstanding anything to the contrary contained
in this Agreement, including but not limited to in Section 5(c)(i) below, the
Purchaser may transfer the Purchased Shares or the Underlying Shares to its
Affiliates (as defined below) provided that (i) the Purchaser provides the
Company with a reasonably acceptable legal opinion, (ii) such Affiliate is an
"accredited investor" under Regulation D of the Securities Act and (ii) each
such Affiliate agrees to be bound by the terms and conditions of this Agreement,
and in particular, confirms to the Company that all of the representations set
forth in Section 4 of this Agreement are true and correct as to such Affiliate
as of the date of the transfer to such Affiliate.
For the purposes of this Agreement, an "AFFILIATE" of any specified
Purchaser means any other person or entity directly or indirectly controlling,
controlled by or under direct or indirect common control with such specified
Purchaser. For purposes of this definition, "CONTROL" means the power to direct
the management and policies of such person or firm, directly or indirectly,
whether through the ownership of voting securities, by contract or otherwise.
Legends.
Purchased Shares and Underlying Shares. The Purchaser agrees that the
certificates for the Purchased Shares and the Underlying Shares shall bear 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 WITH ANY STATE SECURITIES COMMISSION, AND
MAY NOT BE TRANSFERRED OR DISPOSED OF BY THE HOLDER IN THE
ABSENCE OF A REGISTRATION STATEMENT WHICH IS EFFECTIVE UNDER
THE SECURITIES ACT AND APPLICABLE STATE LAWS AND RULES, OR,
UNLESS, IMMEDIATELY PRIOR TO THE TIME SET FOR TRANSFER, THE
HOLDER PROVIDES A REASONABLY ACCEPTABLE LEGAL OPINION TO THE
COMPANY THAT SUCH TRANSFER MAY BE EFFECTED WITHOUT VIOLATION
OF THE SECURITIES ACT AND OTHER APPLICABLE STATE LAWS AND
RULES."
In addition, the Purchaser agrees that the Company may place
stop transfer orders with its transfer agent with respect to such certificates
in order to implement the restrictions on transfer set forth in this Agreement.
The appropriate portion of the legend and the stop transfer orders will be
removed promptly upon delivery to the Company of such satisfactory evidence as
reasonably may be required by the Company that such legend or stop orders are
not required to ensure compliance with the Securities Act.
Warrant. The Purchaser agrees that Warrants shall bear the following legend:
"THIS WARRANT AND THE SHARES ISSUABLE UPON EXERCISE HEREOF
HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "ACT") OR WITH ANY STATE SECURITIES COMMISSION,
AND MAY NOT BE TRANSFERRED OR DISPOSED OF BY THE HOLDER IN THE
ABSENCE OF A REGISTRATION STATEMENT WHICH IS EFFECTIVE UNDER
THE SECURITIES ACT AND APPLICABLE STATE LAWS AND RULES, OR,
UNLESS, IMMEDIATELY PRIOR TO THE TIME SET FOR TRANSFER, THE
HOLDER PROVIDES A REASONABLY ACCEPTABLE LEGAL OPINION TO THE
COMPANY THAT SUCH TRANSFER MAY BE EFFECTED WITHOUT VIOLATION
OF THE SECURITIES ACT AND OTHER APPLICABLE STATE LAWS AND
RULES."
Questionnaires. The Purchaser has completed or caused to be completed the Stock
Certificate Questionnaire and the Registration Statement Questionnaire for use
in preparation of the Registration Statement (as defined in Section 5(a)(ii)
below), and the answers to such questionnaires are true and correct as of the
date of this Agreement; provided, that the Purchasers shall be entitled to
update such information by providing written notice thereof to the Company
before the effective date of the Registration Statement.
Restrictions on Short Sales. The Purchaser represents, warrants and covenants
neither the Purchaser nor any Affiliate of such Purchaser which (x) had
knowledge of the transactions contemplated hereby, (y) has or shares discretion
relating to such Purchaser's investments or trading or information concerning
such Purchaser's investments, including in respect of the Purchased Securities,
or (z) is subject to such Purchaser's review or input concerning such
Affiliate's investments or trading, has or will, directly or indirectly, during
the period beginning on the date on which Emerging Growth Partners and/or X.X.
Xxxxxxxxx, Towbin, financial advisors to the Company, first contacted such
Purchaser regarding the transactions contemplated by this Agreement (and
involving the Company) until, and including, the Closing Date, engage in (i) any
"short sales" (as such term is defined in Rule 3b-3 promulgated under the
Exchange Act) of the Common Stock, including, without limitation, the
maintaining of any short position with respect to, establishing or maintaining a
"put equivalent position" (within the meaning of Rule 16a-1(h) under the
Exchange Act) with respect to, entering into any swap, derivative transaction or
other arrangement (whether any such transaction is to be settled by delivery of
Common Stock, other securities, cash or other consideration) that transfers to
another, in whole or in part, any economic consequences or ownership, or
otherwise dispose of, any of the Purchased Securities by the Purchaser or (ii)
any hedging transaction which establishes a net short position with respect to
the Purchased Securities (clauses (i) and (ii) together, a "SHORT SALE"); except
for (A) Short Sales by the Purchaser or Affiliate of such Purchaser which was,
prior to the date on which such Purchaser was first contacted by Emerging Growth
Partners and/or X.X. Xxxxxxxxx, Towbin regarding the transactions contemplated
by this Agreement, a market maker for the Common Stock, provided that such Short
Sales are in the ordinary course of business of such Purchaser or Affiliate of
such Purchaser and are in compliance with the Securities Act, the rules and
regulations of the Securities Act and such other securities laws as may be
applicable, (B) Short Sales by the Purchaser or an Affiliate of such Purchaser
which by
virtue of the procedures of such Purchaser are made without knowledge of the
transactions contemplated by this Agreement or (C) Short Sales by the Purchaser
or an Affiliate of such Purchaser to the extent that such Purchaser or Affiliate
of such Purchaser is acting in the capacity of a broker-dealer executing
unsolicited third-party transactions.
Confidentiality. The Purchaser agrees to use any information it receives in the
course of and in connection with this transaction for the sole purpose of
evaluating a possible investment in the Purchased Securities and the Purchaser
hereby acknowledges that it is prohibited from reproducing or distributing any
such information, this Agreement, or any other offering materials provided by
the Company in connection with the Purchaser's consideration of its investment
in the Company, in whole or in part, or divulging or discussing any of their
contents except to its advisors and representatives for the purpose of
evaluating such investment. The foregoing agreements shall not apply to any
information that is or becomes publicly available through no fault of the
Purchaser, or that the Purchaser is legally required to disclose; provided,
however, that if the Purchaser is requested or ordered to disclose any such
information pursuant to any court or other governmental order or any other
applicable legal procedure, it shall provide the Company with reasonably prompt
notice of any such request or order to enable the Company to seek an appropriate
protective order and shall provide the Company with reasonable assistance in
obtaining such protective order at the Company's sole expense.
FORM D FILING; REGISTRATION; COMPLIANCE WITH THE SECURITIES ACT.
Form D Filing; Registration of the Purchased Shares and the Underlying Shares.
The Company hereby agrees that it shall:
file in a timely manner a Form D relating to the sale of the Purchased
Securities under this Agreement, pursuant to Regulation D promulgated under the
Securities Act;
prepare and file with the SEC as soon as practicable and in no event later than
the earlier of (i) the date the Company files its Form 10-K for the fiscal year
ended December 31, 2003 with the SEC or (ii) sixty (60) days following the
Closing Date, a registration statement on Form S-1 or such other form that is
available to the Company under the Securities Act (the "REGISTRATION
STATEMENT"), to enable the resale of the Purchased Shares and the sale of the
Underlying Shares (together with any shares of Common Stock issued as a dividend
or other distribution with respect to, or in exchange for, or in replacement of,
the Purchased Shares or the Underlying Shares, the "REGISTRABLE SHARES") by the
Purchasers from time to time. In the event that the Company files the
Registration Statement on a form other than Form S-3, the Company shall convert
such other form to Form S-3, or file a replacement registration statement on
Form S-3, promptly after the first date on which it meets the requirements for
the use of Form S-3 for the resale of the Registrable Shares. The Company shall
use all commercially reasonable efforts to cause such Registration Statement to
be declared effective as promptly as possible after filing, but in any event, no
later than the 120th day following the Closing Date (the "REQUIRED EFFECTIVE
DATE"), however, in the event of a review of the Registration Statement by the
SEC, the Required Effective Date will be no later than the 150th day following
the Closing Date. Following the declaration of effectiveness of the Registration
Statement, the Company shall use all commercially reasonable efforts to cause
the Registration Statement to remain continuously effective until the earlier of
(1) the second anniversary of the effective date of the Registration
Statement, (2) the date on which all Registrable Shares purchased by the
Purchasers pursuant to this Agreement have been sold thereunder or (3) the date
on which the Registrable Shares can be sold by nonaffiliates of the Company
pursuant to Rule 144(k) promulgated under the Securities Act (the "REGISTRATION
PERIOD");
prepare and file with the SEC such amendments, post-effective amendments
(including, but not limited to, post-effective amendments updating the financial
statements included in the Registration Statement) and supplements to the
Registration Statement and the Prospectus (as defined below) used in connection
therewith as may be necessary to keep the Registration Statement effective at
all times until the end of the Registration Period;
furnish to the Purchasers with respect to the Registrable Shares registered
under the Registration Statement such reasonable number of copies of any
prospectus in conformity with the requirements of the Securities Act and such
other documents as the Purchaser may reasonably request, in order to facilitate
the public sale or other disposition of all or any of the Registrable Shares by
the Purchasers;
use its commercially reasonable efforts to file documents required of the
Company for normal blue sky clearance in states specified in writing by the
Purchasers; provided, however, that the Company shall not be required to qualify
to do business or consent to service of process in any jurisdiction in which it
is not now so qualified or has not so consented;
promptly notify the Purchasers in writing when the Registration Statement has
been declared effective;
promptly notify the Purchasers in writing of the existence of any fact or the
happening of any event, during the Registration Period (but not as to the
substance of any such fact or event), that makes any statement of a material
fact made in the Registration Statement, the Prospectus, any amendment or
supplement thereto, or any document incorporated by reference therein untrue, or
that requires the making of any additions to or changes in the Registration
Statement or the Prospectus in order to make the statements therein not
misleading (provided, however, that no notice by the Company shall be required
pursuant to this subsection (vii) in the event that the Company either
contemporaneously files a prospectus supplement to update the Prospectus or, if
applicable, a Form 8-K or other appropriate Exchange Act report that is
incorporated by reference into the Registration Statement, which, in either
case, contains the requisite information with respect to such material event
that results in such Registration Statement no longer containing any such untrue
or misleading statements);
furnish to each Purchaser upon written request, from the date of this Agreement
until the end of the Registration Period, one copy of its periodic reports filed
with the SEC pursuant to the Exchange Act and the rules and regulations
promulgated thereunder; and
bear all expenses in connection with the procedures described in paragraphs (i)
through (viii) of this Section 5(a) and the registration of the Registrable
Shares pursuant to the Registration Statement other than fees and expenses, if
any, of legal counsel or other advisers to the Purchasers or underwriting
discounts, brokerage fees and commissions incurred by the Purchasers, if any.
The parties hereto acknowledge that the Company may register
for resale on the Registration Statement, in addition to the Registrable
Securities, other shares of Common Stock described in Section 3(n) of the
Disclosure Letter for the account of holders thereof who have registration
rights described therein.
It shall be a condition precedent to the obligations of the
Company to take any action pursuant to this Section 5(a) with respect to
Registrable Shares held by a Purchaser that such Purchaser shall timely furnish
to the Company a completed Registration Statement Questionnaire on or before the
Closing Date and such other written information regarding itself, the
Registrable Shares to be sold by such Purchaser, and the intended method of
disposition of the Registrable Shares as shall be required to effect the
registration of the Registrable Shares. The Purchasers shall update such
information as and when necessary by written notice to the Company.
Liquidated Damages.
Delay in Effectiveness of Registration Statement. In the event that the
Registration Statement is not declared effective by the Required Effective Date,
the Company shall pay to each Purchaser liquidated damages (in addition to the
rights and remedies available to each Purchaser under applicable law and this
Agreement), at a rate equal to one percent (1%) per month of the total purchase
price of the Purchased Securities purchased by such Purchaser pursuant to this
Agreement for the period from and including the first day following the Required
Effective Date, until, but excluding, the date the SEC declares the Registration
Statement effective. Such liquidated damages shall be payable monthly in cash.
Lapse in Effectiveness of Registration Statement. In the event that the
Registration Statement is filed and declared effective and the Company has not
exercised its suspension rights pursuant to Section 5(c)(ii) below, if, during
the Registration Period, the Registration Statement shall thereafter cease to be
effective or useable or the prospectus included in the Registration Statement
(the "PROSPECTUS", as amended or supplemented by any prospectus supplement and
by all other amendments thereto and all material incorporated by reference in
such Prospectus) ceases to be usable, in either case, in connection with resales
of Registrable Shares, without such lapse being cured within ten (10) business
days (the "CURE PERIOD") by a post-effective amendment to the Registration
Statement, a supplement to the Prospectus or a report filed with the SEC
pursuant to Section 13(a), 13(c), 14 or 15(d) of the Exchange Act that cures
such lapse, then the Company shall pay to each Purchaser, liquidated damages (in
addition to the rights and remedies available to each Purchaser under applicable
law and this Agreement), for the period from and including the first day
following the expiration of the Cure Period until, but excluding, the earlier of
(1) the date on which such failure is cured and (2) the date on which the
Registration Period expires, at a rate equal to two percent (2%) per annum (pro
rata on a 360-day year basis) of the total purchase price of the Purchased
Securities purchased by such Purchaser pursuant to this Agreement. Such
liquidated damages shall be payable monthly in cash.
Transfer of Registrable Shares After Registration; Suspension.
The Purchasers agree that they will not offer to sell or make any sale,
assignment, pledge, hypothecation or other transfer with respect to the
Registrable Shares that would constitute a sale
within the meaning of the Securities Act except pursuant to either (1) the
Registration Statement, (2) Rule 144 of the Securities Act or (3) any other
exemption from registration under the Securities Act, and that they will
promptly notify the Company of any changes in the information set forth in the
Registration Statement after it is prepared regarding the Purchaser or its plan
of distribution to the extent required by applicable law.
In addition to any suspension rights under paragraph (iii) below, upon the
happening of any pending corporate development, public filing with the SEC or
similar event, that, in the judgment of Company's Board of Directors, renders it
advisable to suspend use of the Prospectus or upon the request by an underwriter
in connection with an underwritten public offering of the Company's securities,
the Company may, on not more than two (2) occasions for not more than thirty
(30) days on each such occasion, suspend use of the Prospectus, on written
notice to each Purchaser (which notice will not disclose the content of any
material non-public information and will indicate the date of the beginning and
end of the intended period of suspension, if known), in which case each
Purchaser shall discontinue disposition of Registrable Shares covered by the
Registration Statement or Prospectus until copies of a supplemented or amended
Prospectus are distributed to the Purchasers or until the Purchasers are advised
in writing by the Company that sales of Registrable Shares under the applicable
Prospectus may be resumed and have received copies of any additional or
supplemental filings that are incorporated or deemed incorporated by reference
in any such Prospectus. The suspension and notice thereof described in this
Section 5(c)(ii) shall be held in strictest confidence and shall not be
disclosed by the Purchasers.
Subject to paragraph (iv) below, in the event of: (1) any request 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 a
Registration Statement or related prospectus or for additional information, (2)
the issuance by the SEC or any other federal or state governmental authority of
any stop order suspending the effectiveness of a Registration Statement or the
initiation of any proceedings for that purpose, (3) the receipt by the Company
of any notification with respect to the suspension of the qualification or
exemption from qualification of any of the Registrable Shares for sale in any
jurisdiction or the initiation of any proceeding for such purpose, or (4) any
event or circumstance which necessitates the making of any changes in the
Registration Statement or Prospectus, or any document incorporated or deemed to
be incorporated therein by reference, so that, in the case of the Registration
Statement, it will not contain any untrue statement of a material fact or any
omission to state a material fact required to be stated therein or necessary to
make the statements therein not misleading, and that in the case of the
Prospectus, it will not contain any untrue statement of a material fact or any
omission to state a 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, then the Company shall deliver a certificate in
writing to the Purchasers (the "SUSPENSION NOTICE") to the effect of the
foregoing (which notice will not disclose the content of any material non-public
information and will indicate the date of the beginning and end of the intended
period of suspension, if known), and, upon receipt of such Suspension Notice,
the Purchasers will discontinue disposition of Registrable Shares covered by to
the Registration Statement or Prospectus (a "SUSPENSION") until the Purchasers'
receipt of copies of a supplemented or amended Prospectus prepared and filed by
the Company, or until the Purchasers are advised in writing by the Company that
the current Prospectus may be used, and have received copies of any additional
or supplemental filings that are incorporated or deemed incorporated by
reference in any such prospectus. In the
event of any Suspension, the Company will use its commercially reasonable
efforts to cause the use of the Prospectus so suspended to be resumed as soon as
possible after delivery of a Suspension Notice to the Purchasers. The Suspension
and Suspension Notice described in this Section 5(c)(iii) shall be held in
strictest confidence and shall not be disclosed by the Purchasers.
Provided that a Suspension is not then in effect, the Purchasers may sell
Registrable Shares under the Registration Statement, provided that the selling
Purchaser arranges for delivery of a current Prospectus to the transferee of
such Registrable Shares to the extent such delivery is required by applicable
law.
In the event of a sale of Registrable Shares by a Purchaser, such Purchaser must
also deliver to the Company's transfer agent, with a copy to the Company, a
certificate of subsequent sale reasonably satisfactory to the Company, so that
ownership of the Registrable Shares may be properly transferred. The Company
will cooperate to facilitate the timely preparation and delivery of certificates
(unless otherwise required by applicable law) representing Registrable Shares
sold.
Indemnification. For the purpose of this Section 5(d), the term "REGISTRATION
STATEMENT" shall include any preliminary or final Prospectus, exhibit,
supplement or amendment included in or relating to the Registration Statement
referred to in Section 5(a).
Indemnification by the Company. The Company agrees to indemnify and hold
harmless each of the Purchasers, their respective officers, directors, agents
and employees, and each person, if any, who controls any Purchaser within the
meaning of the Securities Act, to the fullest extent permitted by law, against
any and all losses, claims, damages, liabilities or expenses, joint or several,
to which such Purchasers, such officers, directors, agents or employees, or such
controlling persons may become subject, under the Securities Act, the Exchange
Act or any other federal or state statutory law or regulation, or at common law
or otherwise (including in settlement of any litigation, if such settlement is
effected with the written consent of the Company, which consent shall not be
unreasonably withheld), insofar as such losses, claims, damages, liabilities or
expenses (or actions in respect thereof as contemplated below) arise out of or
are based upon any untrue statement or alleged untrue statement of any material
fact contained in the Registration Statement, the Prospectus, or any amendment
or supplement thereto, or arise out of or are based upon the omission or alleged
omission to state in any of them a material fact required to be stated therein
or necessary to make the statements in any of them, in light of the
circumstances under which they were made, not misleading, and will reimburse
each Purchaser, each of its respective directors, officers, agents and
employees, and each such controlling person for any reasonable legal and other
expenses as such reasonable expenses are incurred by such Purchaser, such
director, officer, agent or employee, or such controlling person in connection
with investigating, defending, settling, compromising or paying any such loss,
claim, damage, liability, expense or action; provided, however, that the Company
will not be liable in any such case to the extent that any such loss, claim,
damage, liability, expense or action arises out of or is based upon (1) an
untrue statement or alleged untrue statement or omission or alleged omission
made in the Registration Statement, the Prospectus or any amendment to or
supplement of the Registration Statement or Prospectus made in reliance upon and
in conformity with written information furnished to the Company by or on behalf
of the Purchaser expressly for use in the Registration Statement or the
Prospectus, (2) the failure of such Purchaser to comply with the
covenants and agreements contained in this Agreement respecting resale of the
Purchased Shares or the sale of the Underlying Shares, or (3) any untrue
statement or omission of a material fact required to make such statement not
misleading in any Prospectus that is corrected in any subsequent Prospectus that
was delivered to the Purchaser before the pertinent sale or sales by the
Purchaser.
Indemnification by the Purchaser. Each Purchaser will severally and not jointly
indemnify and hold harmless the Company, each of its directors, officers, agents
and employees, and each person, if any, who controls the Company within the
meaning of the Securities Act, against any losses, claims, damages, liabilities
or expenses to which the Company, its directors, officers, agents and employees,
or any controlling persons may become subject, under the Securities Act, the
Exchange Act, or any other federal or state statutory law or regulation, or at
common law or otherwise (including in settlement of any litigation, if such
settlement is effected with the written consent of such Purchaser, which consent
shall not be unreasonably withheld) insofar as such losses, claims, damages,
liabilities or expenses (or actions in respect thereof as contemplated below)
arise out of or are based upon any untrue or alleged untrue statement of any
material fact contained in the Registration Statement, the Prospectus, or any
amendment or supplement to the Registration Statement or Prospectus, or arise
out of or are based upon the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading, in each case to the extent, but only to the extent, that
such untrue statement or alleged untrue statement or omission or alleged
omission was made in the Registration Statement, the Prospectus, or any
amendment or supplement thereto, in reliance upon and in conformity with written
information furnished to the Company by or on behalf of such Purchaser expressly
for use therein, and the Purchaser will reimburse the Company, each of its
directors, officers, agents and employees, and any controlling persons for any
reasonable legal and other expense incurred by the Company, its directors,
officers, agents and employees, and any controlling persons, in connection with
investigating, defending, settling, compromising or paying any such loss, claim,
damage, liability, expense or action; provided, however, that the Purchaser
shall not be liable for any such untrue or alleged untrue statement or omission
or alleged omission with respect to which the Purchaser has delivered to the
Company in writing a correction before the occurrence of the event from which
such loss was incurred. Notwithstanding the provisions of this Section 5(d), the
Purchaser shall not be liable for any indemnification obligation under this
Agreement in excess of the aggregate amount of net proceeds received by the
Purchaser from the sale of the Registrable Shares pursuant to the Registration
Statement.
Indemnification Procedure.
Promptly after receipt by an indemnified party under this Section 5(d) of notice
of the threat or commencement of any action, such indemnified party will, if a
claim in respect thereof is to be made against an indemnifying party under this
Section 5(d), promptly notify the indemnifying party in writing of the claim;
but the omission so to notify the indemnifying party will not relieve it from
any liability which it may have to any indemnified party for contribution or
otherwise under the indemnity agreement contained in this Section 5(d) or
otherwise, to the extent it is not prejudiced as a result of such failure.
In case any such action is brought against any indemnified party and such
indemnified party seeks or intends to seek indemnity from an indemnifying party,
the indemnifying party will be entitled to participate in, and, to the extent
that it may wish, jointly with all other indemnifying parties similarly
notified, to assume the defense thereof with counsel reasonably satisfactory to
such indemnified party; provided, however, if the defendants in any such action
include both the indemnified party and the indemnifying party and the
indemnified party shall have reasonably concluded that there may be a conflict
between the positions of the indemnifying party and the indemnified party in
conducting the defense of any such action or that there may be legal defenses
available to it or other indemnified parties that are different from or
additional to those available to the indemnifying party, the indemnified party
or parties shall have the right to select separate counsel to assume such legal
defenses and to otherwise participate in the defense of such action on behalf of
such indemnified party or parties. Upon receipt of notice from the indemnifying
party to such indemnified party of its election so to assume the defense of such
action and approval by the indemnified party of counsel, the indemnifying party
will not be liable to such indemnified party under this Section 5(d) for any
legal or other expenses subsequently incurred by such indemnified party in
connection with the defense thereof unless:
the indemnified party shall have employed such counsel in connection with the
assumption of legal defenses in accordance with the proviso to the preceding
sentence (it being understood, however, that the indemnifying party shall not be
liable for the expenses of more than one separate counsel, approved by such
indemnifying party, representing all of the indemnified parties who are parties
to such action); or
the indemnifying party shall not have employed counsel reasonably satisfactory
to the indemnified party to represent the indemnified party within a reasonable
time after notice of commencement of the action against the indemnified party,
in each of which cases the reasonable fees and expenses of
counsel for the indemnified party shall be at the expense of the indemnifying
party.
Contribution. If the indemnification provided for in this Section 5(d) is
required by its terms but is for any reason held to be unavailable to, or is
otherwise insufficient to hold harmless, an indemnified party under this Section
5(d) with respect to any losses, claims, damages, liabilities or expenses
referred to in this Agreement, then each indemnifying party shall contribute to
the amount paid or payable by such indemnified party as a result of any losses,
claims, damages, liabilities or expenses referred to in this Agreement:
in such proportion as is appropriate to reflect the relative faults of the
Company and the Purchaser in connection with the statements or omissions or
inaccuracies in the representations and warranties in this Agreement that
resulted in such losses, claims, damages, liabilities or expenses, as well as
any other relevant equitable considerations, or
if the allocation provided by clause (1) above is not permitted by applicable
law, in such proportion as is appropriate to reflect not only the relative
faults referred to in clause (1) above but the relative benefits received by the
Company and the Purchaser from the sale of the Purchased Securities.
The respective relative benefits received by the Company on
the one hand and each Purchaser on the other shall be deemed to be in the same
proportion as the amount to which the consideration paid by such Purchaser to
the Company pursuant to this Agreement for the Purchased Securities purchased by
such Purchaser that were sold pursuant to the Registration Statement bears to
the difference (the "DIFFERENCE") between the amount such Purchaser paid for the
Purchased Securities that were sold pursuant to the Registration Statement and
the amount received by such Purchaser from such sale. The relative fault of the
Company and each Purchaser shall be determined by reference to, among other
things, whether the untrue or alleged untrue statement of a material fact or the
omission or alleged omission to state a material fact or the inaccurate or the
alleged inaccurate material fact relates to information supplied by the Company
or by such Purchaser and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such statement or omission.
The amount paid or payable by a party as a result of the losses, claims,
damages, liabilities and expenses referred to above shall be deemed to include,
subject to the limitations set forth in Section 5(d)(iii), any reasonable legal
or other fees or expenses incurred by such party in connection with
investigating or defending any such action or claim. The provisions set forth in
Section 5(d)(iii) with respect to the notice of the threat or commencement of
any threat or action shall apply if a claim for contribution is to be made under
this Section 5(d)(iv); provided, however, that no additional notice shall be
required with respect to any threat or action for which notice has been given
under Section 5(d)(iii) for purposes of indemnification. The Company and each
Purchaser agree that it would not be just and equitable if contribution pursuant
to this Section 5(d)(iv) were determined solely by pro rata allocation (even if
the Purchasers were treated as one entity for such purpose) or by any other
method of allocation which does not take account of the equitable considerations
referred to in this paragraph. Notwithstanding the provisions of this Section
5(d)(iv), no Purchaser shall be required to contribute any amount in excess of
the amount by which the Difference exceeds the amount of any damages that such
Purchaser has otherwise been required to pay by reason of such untrue or alleged
untrue statement or omission or alleged omission. No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
shall be entitled to contribution from any person who is not guilty of such
fraudulent misrepresentation. The Purchasers' obligations to contribute pursuant
to this Section 5(d)(iv) are several and not joint.
Rule 144 Information. For two years after the date of this Agreement, the
Company shall file in a timely manner all reports required to be filed by it
under the Securities Act and the Exchange Act and the rules and regulations
promulgated thereunder and shall take such further action to the extent required
to enable the Purchasers to sell the Purchased Shares and the Underlying Shares
pursuant to Rule 144 under the Securities Act (as such rule may be amended from
time to time).
ADVISORY FEE. THE PURCHASERS ACKNOWLEDGE THAT THE COMPANY INTENDS TO PAY TO
EMERGING GROWTH PARTNERS AND X.X. XXXXXXXXX, TOWBIN, AS FINANCIAL ADVISORS, A
FEE IN RESPECT OF THE SALE OF THE PURCHASED SECURITIES. EACH OF THE PARTIES TO
THIS AGREEMENT HEREBY REPRESENTS THAT, ON THE BASIS OF ANY ACTIONS AND
AGREEMENTS BY IT, THERE ARE NO OTHER BROKERS OR FINDERS ENTITLED TO COMPENSATION
IN CONNECTION WITH THE SALE OF THE PURCHASED SECURITIES TO THE PURCHASERS. THE
COMPANY SHALL INDEMNIFY AND HOLD HARMLESS THE PURCHASERS FROM AND AGAINST ALL
FEES, COMMISSIONS OR OTHER PAYMENTS OWING BY THE COMPANY TO EMERGING GROWTH
PARTNERS, X.X. XXXXXXXXX, TOWBIN OR ANY OTHER PERSON OR
FIRM ACTING ON BEHALF OF THE COMPANY HEREUNDER. EACH PURCHASER SHALL SEVERALLY
AND NOT JOINTLY INDEMNIFY AND HOLD HARMLESS THE COMPANY FROM AND AGAINST ALL
FEES, COMMISSION OR OTHER PAYMENTS OWING BY SUCH PURCHASERS TO ANY PERSON, OTHER
THAN EMERGING GROWTH PARTNERS AND X.X. XXXXXXXXX, TOWBIN, ACTING ON BEHALF OF
THE PURCHASERS HEREUNDER.
CONDITIONS TO THE PURCHASER'S OBLIGATIONS AT CLOSING. THE OBLIGATIONS OF THE
PURCHASERS UNDER SECTION 1(B) OF THIS AGREEMENT ARE SUBJECT TO THE FULFILLMENT
OR WAIVER, ON OR BEFORE THE CLOSING, OF EACH OF THE FOLLOWING CONDITIONS:
Representations and Warranties True. Each of the representations and warranties
of the Company contained in Section 3 shall be true and correct in all material
respects on and as of the date hereof (provided, however, that such
qualification shall only apply to representations or warranties not otherwise
qualified by materiality) and on and as of the date of the Closing with the same
effect as though such representations and warranties had been made as of the
Closing.
Performance. The Company shall have performed and complied in all material
respects with all agreements, obligations and conditions contained in this
Agreement that are required to be performed or complied with by it on or before
the Closing and shall have obtained all approvals, consents and qualifications
necessary to complete the purchase and sale described herein; provided, however,
that the Company may furnish to each Purchaser a facsimile copy of the warrant
representing the Purchased Warrants and of the stock certificate representing
the Purchased Shares no later than the next business day following the Closing
Date, with the original warrant and original stock certificate to be delivered
to each Purchaser by overnight courier no later than the third business day
following the Closing Date.
Note Conversion. The Company shall have received prior to the Closing, executed
copies of a side letter, in the form attached hereto as Exhibit E, from holders
of the Company's 10% Senior Unsecured Convertible Notes, dated May 6, 2002 and
June 19, 2002 (the "NOTES") holding at least 80% of the outstanding aggregate
principal amount of the Notes.
Compliance Certificate. The Company will have delivered to the Purchasers a
certificate signed on its behalf by its Chief Executive Officer or Chief
Financial Officer certifying that the conditions specified in Sections 7(a) and
7(b) hereof have been fulfilled.
Agreement. The Company shall have executed and delivered to the Purchasers this
Agreement.
Securities Exemptions. The offer and sale of the Purchased Securities to the
Purchasers pursuant to this Agreement shall be exempt from the registration
requirements of the Securities Act and the registration and/or qualification
requirements of all applicable state securities laws.
Good Standing Certificates. The Company shall have delivered to the Purchasers a
certificate of the Secretary of State of the State of Delaware, dated as of a
date within five days of the date of the Closing, with respect to the good
standing of the Company.
Secretary's Certificate. The Company shall have delivered to the Purchasers a
certificate of the Company executed by the Company's Secretary attaching and
certifying to the truth and correctness of (1) the Certificate of Incorporation,
(2) the Bylaws and (3) the resolutions adopted
by the Company's Board of Directors in connection with the transactions
contemplated by this Agreement.
Opinion of Company Counsel. The Purchasers will have received an opinion on
behalf of the Company, dated as of the date of the Closing, from Ellis, Funk,
Xxxxxxxx, Xxxxxxxx & Dokson, P.C., counsel to the Company, in the form attached
as Exhibit D.
No Statute or Rule Challenging Transaction. No statute, rule, regulation,
executive order, decree, ruling, injunction, action, proceeding or
interpretation shall have been enacted, entered, promulgated, endorsed or
adopted by any court or governmental authority of competent jurisdiction or any
self-regulatory organization or the staff of any of the foregoing, having
authority over the matters contemplated hereby which questions the validity of,
or challenges or prohibits the consummation of, any of the transactions
contemplated by this Agreement.
Amount Invested. The Purchasers under this Agreement shall have tendered at
closing not less than $6,500,000 in the aggregate for the Purchased Securities.
Other Actions. The Company shall have executed such certificates, agreements,
instruments and other documents, and taken such other actions as shall be
customary or reasonably requested by the Purchasers in connection with the
transactions contemplated hereby.
CONDITIONS TO THE COMPANY'S OBLIGATIONS AT CLOSING. THE OBLIGATIONS OF THE
COMPANY TO THE PURCHASERS UNDER THIS AGREEMENT ARE SUBJECT TO THE FULFILLMENT OR
WAIVER, ON OR BEFORE THE CLOSING, OF EACH OF THE FOLLOWING CONDITIONS:
Representations and Warranties True. The representations and warranties of the
Purchasers contained in Section 4 shall be true and correct in all material
respects on and as of the date hereof (provided, however, that such
qualification shall only apply to representations and warranties not otherwise
qualified by materiality) and on and as of the date of the Closing with the same
effect as though such representations and warranties had been made as of the
Closing.
Performance. The Purchasers shall have performed and complied in all material
respects with all agreements, obligations and conditions contained in this
Agreement that are required to be performed or complied with by it on or before
the Closing and shall have obtained all approvals, consents and qualifications
necessary to complete the purchase and sale described herein.
Agreement. The Purchasers shall have executed and delivered to the Company this
Agreement (and Appendix II hereto).
Securities Exemptions. The offer and sale of the Purchased Securities to the
Purchasers pursuant to this Agreement shall be exempt from the registration
requirements of the Securities Act and the registration and/or qualification
requirements of all applicable state securities laws.
Payment of Purchase Price. The Purchasers shall have delivered to the Company by
wire transfer of immediately available funds, full payment of the purchase price
for the Purchased Securities as specified in Section 1(b).
Other Actions. The Purchasers shall have executed such certificates, agreements,
instruments and other documents, and taken such other actions as shall be
customary or reasonably requested by the Company in connection with the
transactions contemplated hereby.
No Statute or Rule Challenging Transaction. No statute, rule, regulation,
executive order, decree, ruling, injunction, action, proceeding or
interpretation shall have been enacted, entered, promulgated, endorsed or
adopted by any court or governmental authority of competent jurisdiction or any
self-regulatory organization or the staff of any of the foregoing, having
authority over the matters contemplated hereby which questions the validity of,
or challenges or prohibits the consummation of, any of the transactions
contemplated by this Agreement.
MISCELLANEOUS.
Note Prepayment. To the extent the Company has not received a notice of
conversion from any of the holders of the Notes by February 10, 2004, the
Company shall provide notice to such holders on or before February 10, 2004,
that the Company intends to prepay the outstanding balance of such Notes in
accordance with their terms in cash on February 17, 2004.
Successors and Assigns. The terms and conditions of this Agreement will inure to
the benefit of and be binding upon the respective successors and permitted
assigns of the parties. The Company shall not assign this Agreement or any
rights or obligations hereunder without the prior written consent of the
Purchasers holding at least a majority of the total aggregate number of
Purchased Shares and Underlying Shares then outstanding (excluding any shares
sold to the public pursuant to Rule 144 or otherwise). Any Purchaser may assign
its rights under this Agreement to any person to whom the Purchaser assigns or
transfers any Purchased Securities, provided that such transferee agrees in
writing to be bound by the terms and provisions of this Agreement, and such
transfer is in compliance with the terms and provisions of this Agreement and
permitted by federal and state securities laws.
Governing Law. This Agreement will be governed by and construed and enforced
under the internal laws of the State of New York, without reference to
principles of conflict of laws or choice of laws. EACH PARTY HEREBY IRREVOCABLY
WAIVES ANY RIGHT IT MAY HAVE, AND AGREES NOT TO REQUEST, A JURY TRIAL FOR THE
ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN CONNECTION HEREWITH OR ARISING OUT
OF THIS AGREEMENT OR ANY TRANSACTION CONTEMPLATED HEREBY.
Survival. The representations and warranties of the Company and the Purchasers
contained in Sections 3 and 4 of this Agreement shall survive until the first
(1st) anniversary of the Closing Date.
Counterparts. This Agreement may be executed in two or more counterparts, each
of which will be deemed an original, but all of which together will constitute
one and the same instrument.
Headings. The headings and captions used in this Agreement are used for
convenience only and are not to be considered in construing or interpreting this
Agreement. All references in this Agreement to sections, paragraphs, exhibits
and schedules will, unless otherwise provided, refer to sections and paragraphs
hereof and exhibits and schedules attached hereto, all of which exhibits and
schedules are incorporated herein by reference.
Notices. Any notices and other communications required or permitted under this
Agreement shall be in writing and shall be delivered (i) personally by hand or
by courier, (ii) mailed by United States first-class mail, postage prepaid or
(iii) sent by facsimile directed (A) if to the Purchaser, at the Purchaser's
address or facsimile number set forth on Exhibit A to this Agreement, or at such
address or facsimile number as the Purchaser may designate by giving at least
ten (10) days' advance written notice to the Company or (b) if to the Company,
to its address or facsimile number set forth below, or at such other address or
facsimile number as the
Company may designate by giving at least ten (10) days' advance written notice
to the Purchaser. All such notices and other communications shall be deemed
given upon (i) receipt or refusal of receipt, if delivered personally, (ii)
three days after being placed in the mail, if mailed, or (iii) confirmation of
facsimile transfer, if faxed.
The address of the Company for the purpose of this Section
9(f) is as follows:
ServiceWare Technologies, Inc.
One North Shore Centre
00 Xxxxxxx Xxxxxx, Xxxxx 000
Xxxxxxxxxx, Xxxxxxxxxxxx 00000
Tel: (000) 000-0000
Fax: (000) 000-0000
Attention: Xxxx Xxxxxx
with a copy to:
Ellis, Funk, Xxxxxxxx, Xxxxxxxx & Dokson, P.C.
0000 Xxxxxxxx Xxxx, Xxxxx 000
Xxxxxxx, Xxxxxxx 00000
Tel: (000) 000-0000
Fax: (000) 000-0000
Attention: Xxxxxx X. Xxxxxxxx
Amendments and Waivers. This Agreement may be amended and the observance of any
term of this Agreement may be waived only with the written consent of the
Company and the Purchasers holding at least seventy-five percent (75%) of the
total aggregate number of Purchased Shares and Underlying Shares then
outstanding (excluding any shares sold to the public pursuant to Rule 144 or
otherwise). Any amendment effected in accordance with this Section 9(g) will be
binding upon all Purchasers, the Company and their respective successors and
assigns.
Severability. If any provision of this Agreement is held to be unenforceable
under applicable law, such provision will be excluded from this Agreement and
the balance of the Agreement will be interpreted as if such provision were so
excluded and will be enforceable in accordance with its terms.
Entire Agreement. This Agreement, together with all exhibits and schedules
hereto and thereto constitutes the entire agreement and understanding of the
parties with respect to the subject matter hereof and supersedes any and all
prior negotiations, correspondence, agreements, understandings, duties or
obligations between the parties with respect to the subject matter hereof.
Further Assurances. From and after the date of this Agreement, upon the request
of the Company or the Purchasers, the Company and the Purchasers will execute
and deliver such instruments, documents or other writings, and take such other
actions, as may be reasonably necessary or desirable to confirm and carry out
and to effectuate fully the intent and purposes of this Agreement.
Meaning of Include and Including. Whenever in this Agreement the word "include"
or "including" is used, it shall be deemed to mean "include, without limitation"
or "including, without limitation," as the case may be, and the language
following "include" or "including" shall not be deemed to set forth an
exhaustive list.
Fees, Costs and Expenses. Except as otherwise provided for in this Agreement,
all fees, costs and expenses (including attorneys' fees and expenses) incurred
by any party hereto in connection with the preparation, negotiation and
execution of this Agreement and the exhibits and schedules hereto and the
consummation of the transactions contemplated hereby and thereby (including the
costs associated with any filings with, or compliance with any of the
requirements of any governmental authorities), shall be the sole and exclusive
responsibility of such party.
8-K Filing and Publicity. On the Closing Date, the Company shall file a Current
Report on Form 8-K with the SEC describing the terms of the transactions
contemplated by this Agreement and attaching this Agreement and the press
release referred to below as exhibits to such filing (the "8-K FILING" including
all attachments). Neither the Company nor any Purchaser shall issue any press
releases or any other public statements with respect to the transactions
contemplated by this Agreement; provided, however, that the Company shall be
entitled, without the prior approval of any Purchaser, to issue any press
release or make any other public disclosure (including a press release
(concerning the offering of the Purchased Securities) pursuant to Rule 135(c)
under the Securities Act) with respect to such transactions (i) in substantial
conformity with the 8-K Filing and (ii) as is required by applicable law and
regulations; and, provided further, that no such
release may identify a Purchaser unless such Purchaser has consented thereto in
writing, or as required by law.
Stock Splits, Dividends and other Similar Events. The provisions of this
Agreement shall be appropriately adjusted to reflect any stock split, stock
dividend, reorganization or other similar event that may occur with respect to
the Company after the date hereof.
Remedies. In addition to being entitled to exercise all rights provided herein
or granted by law, including recovery of damages, each Purchaser and the Company
will be entitled to specific performance under this Agreement. The parties agree
that monetary damages may not be adequate compensation for any loss incurred by
reason of any breach of obligations described in the foregoing sentence and
hereby agrees to waive in any action for specific performance of any such
obligation the defense that a remedy at law would be adequate.
[Remainder of page intentionally left blank.]
* * *
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the date and year first above written.
SERVICEWARE TECHNOLOGIES, INC.
By: /s/ Xxxx Xxxxxx
-------------------------------------
Name: Xxxx Xxxxxx
-------------------------------------
Title: President and Chief Executive Officer
-------------------------------------
[PURCHASER SIGNATURE PAGES TO FOLLOW]
SIGNATURE PAGE TO
SECURITIES PURCHASE AGREEMENT
DATED AS OF JANUARY 30, 2004
BY AND AMONG
SERVICEWARE TECHNOLOGIES, INC.
AND EACH PURCHASER NAMED THEREIN
The undersigned hereby executes and delivers to ServiceWare
Technologies, Inc., the Purchase Agreement (the "AGREEMENT") to which this
signature page is attached effective as of the date of the Agreement, which
Agreement and signature sage, together with all counterparts of such Agreement
and signature pages of the other Purchasers named in such Agreement, shall
constitute one and the same document in accordance with the terms of such
Agreement.
Number of Units:
----------------
---------------------------------
"Purchaser"
Signature:
---------------------------
Name:
--------------------------------
Title:
-------------------------------
Address:
-----------------------------
Telephone:
---------------------------
Facsimile:
---------------------------
E-mail:
------------------------------
Tax ID Number:
-----------------------
EXHIBIT A
SCHEDULE OF PURCHASERS
Number of
Name and Address Number of Units Purchased Shares Number of Warrants Purchase Price
---------------- --------------- ---------------- ------------------ --------------
EXHIBIT B
FORM OF WARRANT
EXHIBIT C
DISCLOSURE LETTER
EXHIBIT D
FORM OF OPINION OF ELLIS, FUNK, XXXXXXXX, XXXXXXXX & DOKSON, P.C.
EXHIBIT E
SIDE LETTER
