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EXHIBIT 10.7(c)
PRIVATE EQUITY LINE OF CREDIT AGREEMENT
BETWEEN
KINGSBRIDGE CAPITAL LIMITED
AND
COMPRESSENT CORPORATION
Dated as of December 3, 1997
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TABLE OF CONTENTS
PAGE
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ARTICLE I Certain Definitions..........................................................2
Section 1.1 "Bid Price".....................................................2
Section 1.2 "Call"..........................................................2
Section 1.3 "Call Shares"...................................................2
Section 1.4 "Capital Shares"................................................2
Section 1.5 "Ceiling Price".................................................2
Section 1.6 "Closing".......................................................3
Section 1.7 "Closing Date"..................................................3
Section 1.8 "Commitment Amount".............................................3
Section 1.9 "Commitment Period".............................................3
Section 1.10 "Common Stock"..................................................3
Section 1.11 "Common Stock Equivalents"......................................3
Section 1.12 "Effective Date"................................................4
Section 1.13 "Equity Credit".................................................4
Section 1.14 "Exchange Act"..................................................4
Section 1.15 "Investment Amount".............................................4
Section 1.16 "Market Price"..................................................4
Section 1.17 "Material Adverse Effect".......................................4
Section 1.18 "Optional Purchase Date"........................................5
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Section 1.19 "Optional Purchase Notice"......................................5
Section 1.20 "Outstanding"...................................................5
Section 1.21 "Person"........................................................5
Section 1.22 "Principal Market"..............................................5
Section 1.23 "Purchase Price"................................................5
Section 1.24 "Registrable Securities"........................................6
Section 1.25 "Registration Rights Agreement".................................6
Section 1.26 "Registration, Statement".......................................6
Section 1.27 "Regulation D"..................................................7
Section 1.28 "SEC"...........................................................7
Section 1.29 "Section 4(2)"..................................................7
Section 1.30 "Securities Act"................................................7
Section 1.31 "SEC Documents".................................................7
Section 1.32 "Subscription Date".............................................7
Section 1.33 "Trading Cushion"...............................................7
Section 1.34 "Trading Day" ..................................................7
Section 1.35 "Valuation Event"...............................................8
Section 1.36 "Valuation Period"..............................................9
Section 1.37 "Warrant".......................................................9
Section 1.38 "Warrant Shares"................................................9
ARTICLE II Purchase and Sale of Common Stock..............................10
Section 2.1 Investments....................................................10
Section 2.2 Mechanics......................................................11
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Section 2.3 Closings..........................................................11
Section 2.4 Adjustment Period.................................................12
Section 2.5 Termination of Investment Obligation..............................13
Section 2.6 Commitment Fee....................................................14
ARTICLE III Conditions to Delivery of Optional
Purchase Notices and Conditions to Closing....................................14
Section 3.1 Conditions Precedent to the Obligation of the
Company to Issue and Sell Common Stock...........................14
Section 3.2 Conditions Precedent to the Right of the
Company to Deliver an Optional Purchase
Notice and the Obligation of the Investor to
Purchase Call Shares.............................................15
Section 3.3 Due Diligence Review and Non-Disclosure of Non-
Public Information...............................................20
ARTICLE IV Representations and Warranties of Investor.........................22
Section 4.1 Intent...........................................................22
Section 4.2 Sophisticated Investor...........................................23
Section 4.3 Authority........................................................23
Section 4.4 Not an Affiliate.................................................23
Section 4.5 Organization and Standing........................................23
Section 4.6 Absence of Conflicts.............................................23
Section 4.7 Disclosure; Access to Information................................24
Section 4.8 Manner Of Sale...................................................24
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ARTICLE V Representations and Warranties of the Company...............24
Section 5.1 Common Stock................................................24
Section 5.2 SEC Documents...............................................25
Section 5.3 No General Solicitation or Advertising in
Regard to this Transaction..................................26
Section 5.4 Capitalization..............................................26
Section 5.5 Valid Issuances.............................................28
Section 5.6 Organization and Qualification..............................28
Section 5.7 Authorization; Enforcement..................................29
Section 5.8 Corporate Documents.........................................29
Section 5.9 No Conflicts................................................29
Section 5.10 No Material Adverse Change..................................31
Section 5.11 No Undisclosed Liabilities..................................31
Section 5.12 No Undisclosed Events or Circumstances......................31
Section 5.13 No Integrated Offering......................................32
Section 5.14 Litigation and Other Proceedings............................32
Section 5.15 No Misleading or Untrue Communication.......................32
Section 5.16 Non-Public Information......................................33
Section 5.17 Broker-Dealer Status........................................33
ARTICLE VI Covenants of the Company ...................................33
Section 6.1 Registration Rights .........................................33
Section 6.2 Reservation of Common Stock .................................33
Section 6.3 Listing of Common Stock .....................................34
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Section 6.4 Exchange Act Registration.....................................34
Section 6.5 Legends.......................................................35
Section 6.6 Corporate Existence...........................................35
Section 6.7 Additional SEC Documents......................................35
Section 6.8 "Blackout Period".............................................35
Section 6.9 Expectations Regarding Optional Purchase Notices..............36
Section 6.10 Consolidation; Merger.........................................37
Section 6.11 Issuance of Call Shares and Warrant Shares....................37
ARTICLE VII Covenants of the Investor ..............................................37
Section 7.1 ................................................................38
Section 7.2 ................................................................38
ARTICLE VIII Legends ................................................................38
Section 8.1 Legends.........................................................38
Section 8.2 No Other Legend or Stock Transfer Restrictions..................40
Section 8.3 Investor's Compliance...........................................41
ARTICLE IX Adjustments.............................................................41
Section 9.1 Adjustment of the Ceiling Price.................................41
Section 9.2 Notice of Adjustments...........................................51
ARTICLE X Choice of Law ..........................................................51
Section 10.1 Choice of Law .................................................51
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ARTICLE XI Assignment; Entire Agreement, Amendment, Termination.....................51
Section 11.1 Assignment.....................................................52
Section 11.2 Termination....................................................52
Section 11.3 Entire Agreement, Amendment....................................52
ARTICLE XII Notices; Indemnification.................................................52
Section 12.1 Notices.......................................................53
Section 12.2 Indemnification...............................................54
Section 12.3 Method of Asserting Indemnification Claims....................55
ARTICLE XIII Miscellaneous............................................................62
Section 13.1 Counterparts..................................................62
Section 13.2 Entire Agreement..............................................62
Section 13.3 Survival; Severability........................................62
Section 13.4 Title and Subtitles...........................................63
Section 13.5 Reporting Entity for the Common Stock.........................63
EXHIBITS
EXHIBIT A Form of Warrant
EXHIBIT B Form of Opinion of the Company's Independent Counsel
EXHIBIT C Form Certificate of Executive Officer of the Company
EXHIBIT D Form of Transfer Agent Instructions
EXHIBIT E Form of Adjustment Period Notice
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PRIVATE EQUITY LINE OF CREDIT AGREEMENT
Between
KINGSBRIDGE CAPITAL LIMITED
And
COMPRESSENT CORPORATION
Dated as of December 3, 1997
PRIVATE EQUITY LINE OF CREDIT AGREEMENT dated as of December 3, 1997
(the "Agreement"), between Kingsbridge Capital Limited (the "Investor"), an
entity organized and existing under the laws of the British Virgin Islands, and
Compressent Corporation. a corporation organized and existing under the laws of
the State of Florida (the "Company").
WHEREAS, the parties desire that, upon the terms and subject to the
conditions contained herein, the Company shall issue and sell to the Investor,
from time to time as provided herein, and the Investor shall purchase, up to
$10,000,000 of the Common Stock; and
WHEREAS, such investments will be made in reliance upon the provisions
of Section 4(2) ("Section 4(2)") and Regulation D ("Regulation D") of the United
States Securities Act of 1933, as amended (the "Securities Act"), and/or upon
such other exemption from the registration requirements of the Securities Act as
may be available with respect to any or all of the investments in Common Stock
to be made hereunder.
NOW, THEREFORE, the parties hereto agree as follows:
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ARTICLE I
CERTAIN DEFINITIONS
Section 1.1 "Bid Price" shall mean the closing bid price (as reported by
Bloomberg L.P.) of the Common Stock on the Principal Market.
Section 1.2 "Call" shall mean each occasion the Company elects to
exercise its right to tender an Optional Purchase Notice requiring the Investor
to purchase a discretionary amount of the Company's Common Stock, subject to the
terms of this Agreement.
Section 1.3 "Call Shares" shall mean all shares of Common Stock issued
or issuable pursuant to a Call that has occurred or may occur in accordance with
the terms and conditions of this Agreement.
Section 1.4 "Capital Shares" shall mean the Common Stock and any shares
of any other class of common stock whether now or hereafter authorized, having
the right to participate in the distribution of earnings and assets of the
Company with the exception of except for any common stock issued pursuant (i) to
warrants, stock options, and convertible securities outstanding and described in
the SEC Documents on file with the Commission as of the date of this Agreement
(ii) an offering of up to $3 million of Convertible Subordinated Notes
convertible into Common Stock at between $7 and $10 per share, or (iii) pursuant
to an Employee Stock Purchase Plan qualified under Section 423 of the Internal
Revenue Code.
Section 1.5 "Ceiling Price" shall mean one-hundred and fifty percent
(150%) of the Market Price with respect to the Call Shares as of the Effective
Date.
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Section 1.6 "Closing" shall mean one of the closings of a purchase and
sale of the Common Stock pursuant to Section 2.1.
Section 1.7 "Closing Date" shall mean, with respect to a Closing, the
third Trading Day following the Optional Purchase Date related to such Closing,
provided all conditions to such Closing have been satisfied on or before such
Trading Day.
Section 1.8 "Commitment Amount" shall mean the $10,000,000 up to which
the Investor has agreed to provide to the Company in order to purchase Call
Shares pursuant to the terms and conditions of this Agreement.
Section 1.9 "Commitment Period" shall mean the period commencing on the
earlier to occur of (i) the Effective Date or (ii) such earlier date as the
Company and the Investor may mutually agree in writing, and expiring on the
earlier to occur of (x) the date on which the Investor shall have purchased Call
Shares pursuant to this Agreement for an aggregate Purchase Price of
$10,000,000, (y) the date this Agreement is terminated pursuant to Section
2.5(b), or (z) the date occurring eighteen months from the date of commencement
of the Commitment Period.
Section 1.10 "Common Stock" shall mean the Company's common stock, par
value $.001 per share.
Section 1.11 "Common Stock Equivalents" shall mean any securities that
are convertible into or exchangeable for Common Stock or any warrants, options
or other rights to subscribe for or purchase Common Stock or any such
convertible or exchangeable securities.
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Section 1.12 "Effective Date" shall mean the date on which the
Securities Exchange Commission first declares effective a Registration Statement
registering resale of the Registrable Securities as set forth in Section 3.2(a).
Section 1.13 "Equity Credit." See Section 2.1(a)(2).
Section 1.14 "Exchange Act" shall mean the Securities Exchange Act of
1934, as amended.
Section 1.15 "Investment Amount" shall mean the dollar amount (within
the range specified in Section 2.2) to be invested by the Investor to purchase
Call Shares with respect to any Optional Purchase Date as notified by the
Company to the Investor in accordance with Section 2.2 hereof.
Section 1.16 "Legend." See Section 8.1.
Section 1.17 "Market Price" on any given date shall mean the average of
the lowest intra-day prices of the Common Stock over the Valuation Period.
"Lowest intraday price" shall mean the lowest price of the Common Stock (as
reported by Bloomberg L.P.) during any Trading Day.
Section 1.18 "Material Adverse Effect" shall mean any effect on the
business, operations, properties, prospects, or financial condition of the
Company that is material and adverse to the Company or to the Company and such
other entities controlling or controlled by the Company, taken as a whole,
and/or any condition, circumstance, or situation that would prohibit or
otherwise interfere with the ability of the Company to enter, into and perform
its obligations under any of (a) this Agreement, (b) the Registration Rights
Agreement, and (c) the Warrant.
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Section 1.19 "Optional Purchase Date" shall mean the Trading Day during
the Commitment Period that an Optional Purchase Notice to sell Common Stock to
the Investor is deemed delivered pursuant to Section 2.2(b) hereof.
Section 1.20 "Optional Purchase Notice" shall mean a written notice to
the Investor setting forth the Investment Amount that the Company intends to
sell to the Investor.
Section 1.21 "Outstanding" when used with reference to Common Shares or
Capital Shares (collectively the "Shares"), shall mean, at any date as of which
the number of such Shares is to be determined, all issued and outstanding
Shares, and shall include all such Shares issuable in respect of outstanding
scrip or any certificates representing fractional interests in such Shares;
provided, however, that "Outstanding" shall not mean any such Shares then
directly or indirectly owned or held by or for the account of the Company.
Section 1.22 "Person" shall mean an individual, a corporation, a
partnership, an association, a trust or other entity or organization, including
a government or political subdivision or an agency or instrumentality thereof.
Section 1.23 "Principal Market" shall mean the Nasdaq National Market,
the Nasdaq Small-Cap Market, the American Stock Exchange or the New York Stock
Exchange, whichever is at the time the principal trading exchange or market for
the Common Stock.
Section 1.24 "Purchase Price" shall mean the lesser of (i) eighty-eight
percent (88%) (the "Purchase Price Percentage") of the Market Price upon an
Optional Purchase
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Date (or such other date on which the Purchase Price is calculated in accordance
with the terms and conditions of this Agreement) and (ii) the Ceiling Price.
Section 1.25 "Registrable Securities" shall mean the Call Shares and the
Warrant Shares until (i) the Registration Statement has been declared effective
by the SEC and all Call Shares and Warrant Shares have been disposed of pursuant
to the Registration Statement, (ii) all Call Shares and Warrant Shares have been
sold under circumstances under which all of the applicable conditions of Rule
144 (or any similar provision then in force) under the Securities Act ("Rule
144") are met, (iii) all Call Shares and Warrant Shares have been otherwise
transferred to holders who may trade such shares without restriction under the
Securities Act, and the Company has delivered a new certificate or other
evidence of ownership for such securities not bearing a restrictive legend or
(iv) such time as, in the opinion of counsel to the Company, which counsel shall
be reasonably acceptable to the Investor, all Call Shares and Warrant Shares may
be sold without any time, volume or manner limitations pursuant to Rule 144(k)
(or any similar provision then in effect) under the Securities Act.
Section 1.26 "Registration Rights Agreement" shall mean the agreement
regarding the filing of the Registration Statement for the resale of the
Registrable Securities, entered into between the Company and the Investor on the
Subscription Date.
Section 1.27 "Registration Statement" shall mean a registration statement
on Form S-3 (if use of such form is then available to the Company pursuant to
the rules of the SEC and, if not, on such other form promulgated by the SEC for
which the Company then qualifies and which counsel for the Company shall deem
appropriate and which form
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shall be available for the resale of the Registrable Securities to be
registered thereunder in accordance with the provisions of this Agreement, the
Registration Rights Agreement, and the Warrant and in accordance with the
intended method of distribution of such securities), for the registration of the
resale by the Investor of the Registrable Securities under the Securities Act.
Section 1.28 "Regulation D" shall mean Regulation D of the Securities
Act.
Section 1.29 "SEC" shall mean the Securities and Exchange Commission
("SEC").
Section 1.30 "Section 4(2)" shall mean Section 4(2) of the Securities
Act.
Section 1.31 "Securities Act" shall have the definition ascribed to it
in the recitals hereof.
Section 1.32 "SEC Documents" shall mean the Company's latest Form 10-K
as of the time in question, all Forms 10-Q and 8-K filed thereafter, and the
Proxy Statement for its latest fiscal year as of the time in question until such
time the Company no longer has an obligation to maintain the effectiveness of a
Registration Statement as set forth in the Registration Rights Agreement.
Section 1.33 "Subscription Date" shall mean the date in which this
Agreement is executed.
Section 1.34 "Trading Cushion" shall mean the mandatory twenty (20)
Trading Days between Optional Purchase Dates.
Section 1.35 "Trading Day" shall mean any day during which the New York
Stock Exchange shall be open for business.
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Section 1.36 "Valuation Event" shall mean an event in which the Company
at any time during a Valuation Period takes any of the following actions:
(a) subdivides or combines its Common Stock;
(b) pays a dividend in its Capital Stock or makes any other
distribution of its Capital Shares;
(c) issues any additional Capital Shares ("Additional Capital
Shares"), otherwise than as provided in the foregoing Subsections (a) and (b)
above, at a price per share less, or for other consideration lower, than the Bid
Price in effect immediately prior to such issuance, or without consideration;
(d) issues any warrants, options or other rights to subscribe for or
purchase any Additional Capital Shares and the price per share for which
Additional Capital Shares may at any time thereafter be issuable pursuant to
such warrants, options or other rights shall be less than the Bid Price in
effect immediately prior to such issuance;
(e) issues any securities convertible into or exchangeable for
Capital Shares and the consideration per share for which Additional Capital
Shares may at any time thereafter be issuable pursuant to the terms of such
convertible or exchangeable securities shall be less than the Bid Price in
effect immediately prior to such issuance;
(f) makes a distribution of its assets or evidences of indebtedness
to the holders of its Capital Shares as a dividend in liquidation or by way of
return of capital or other than as a dividend payable out of earnings or surplus
legally available for dividends under applicable law or any distribution to such
holders made in respect of the
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sale of all or substantially all of the Company's assets (other than under the
circumstances provided for in the foregoing subsections (a) through (e); or
(g) takes any action affecting the number of Outstanding Capital
Shares, other than an action described in any of the foregoing Subsections (a)
through (f) hereof, inclusive, which in the opinion of the Company's Board of
Directors, determined in good faith, would have a materially adverse effect upon
the rights of the Investor at the time of a Call or exercise of the Warrant.
Section 1.37 "Valuation Period" shall mean the period of five Trading
Days during which the Purchase Price of the Common Stock is valued, which period
shall be (i) with respect to the Purchase Price on any Optional Purchase Date,
the two Trading Days preceding and the two Trading Days following the Trading
Day on which an Optional Purchase Notice is deemed to be delivered, as well as
the Trading Day on which such notice is deemed to be delivered; and (ii) with
respect to the Exercise Price of Warrant Shares, the two Trading Days preceding
and the two Trading Days following the Subscription Date, as well as the
Subscription Date; provided, however, that if a Valuation Event occurs during
any Valuation Period, a new Valuation Period shall begin on the Trading Day
immediately after the occurrence of such Valuation Event and end on the fifth
Trading Day thereafter.
Section 1.38 "Warrant". See Section 2.6.
Section 1.39 "Warrant Shares" shall mean all shares of Common Stock
issued or issuable pursuant to exercise of the Warrant.
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ARTICLE II
PURCHASE AND SALE OF COMMON STOCK
Section 2.1 Investments.
(a) Calls. Upon the terms and conditions set forth herein
(including, without limitation, the provisions of Article III hereof), on any
Optional Purchase Date the Company may make a Call by the delivery of an
Optional Purchase Notice. The number of Call Shares that the Investor shall
receive pursuant to such Call shall be determined by dividing the Investment
Amount specified in the Optional Purchase Notice by the Purchase Price on such
Optional Purchase Date.
(b) Minimum Amount of Calls. The Company shall, in accordance with
Section 2.2(a), issue and sell Call Shares to the Investor totaling (in
aggregate Purchase Prices) at least $1,000,000. If the Company for any reason
fails to issue and deliver such Call Shares during the Commitment Period, on
the, first Trading Day after the expiration of the Commitment Period, the
Company shall deliver to Investor a sum in cash equal to the greater of:
1. ($1,000,000 minus the aggregate Investment Amounts of the Call
Shares delivered hereunder) X $0.12; and
2. ($1,000,000 minus the aggregate Investment Amounts of the Call
Shares delivered hereunder) X (the Bid Price on the last Trading Day of the
Commitment Period minus the Ceiling Price).
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(c) Maximum Amount of Calls. Unless the Company obtains Shareholder
approval to the Agreement, no more than 1,008,000 shares of Common Stock may be
issued and sold pursuant to Calls.
Section 2.2 Mechanics.
Optional Purchase Notice. At any time during the Commitment Period, the
Company may deliver an Optional Purchase Notice to the Investor, subject to the
conditions set forth in Section 3.2; provided, however, the Investment Amount
for each Call as designated by the Company in the applicable Optional Purchase
Notice shall be neither less than $300,000 nor more than $1,000,000.
Date of Delivery of Optional Purchase Notice. An Optional Purchase
Notice shall be deemed delivered on (i) the Trading Day it is received by
facsimile or otherwise by the Investor if such notice is received prior to 12:00
noon New York time, or (ii) the immediately succeeding Trading Day if it is
received by facsimile or otherwise after 12:00 noon New York time on a Trading
Day or at any time on a day which is not a Trading Day. No Optional Purchase
Notice may be deemed delivered, on a day that is not a Trading Day.
Section 2.3 Closings. On each Closing Date for a Call the Company shall
deliver to the Investor one or more certificates, at the Investor's option,
representing the Call Shares to be purchased by the Investor pursuant to Section
2.1 herein, registered in the name of the Investor or, at the Investor's option,
deposit such certificate(s) into such account or accounts previously designated
by the Investor and (ii) the Investor shall deliver to escrow the Investment
Amount specified in the Optional Purchase Notice by
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wire transfer of immediately available funds to an account designated by the
Company on or before the Closing Date. In addition, on or prior to the Closing
Date, each of the Company and the Investor shall deliver all documents,
instruments and writings required to be delivered or reasonably requested by
either of them pursuant to this Agreement in order to implement and effect the
transactions contemplated herein. Payment of funds to the Company and delivery
of the certificates to the Investor shall occur out of escrow immediately
following the latter of the Company's deposit of the certificates representing
the Call Shares and the Investor's deposit of the Investment Amount.
Section 2.4 Adjustment Period.
The Adjustment Period Notice. Provided the Company gives the Investor at
least twenty-one (21) days' advance notice in the form of Exhibit E hereto, the
Company may initiate an Adjustment Period (the "Adjustment Period" as defined
below). The Company shall be permitted to deliver such Adjustment Period Notice
only in the case the Company in good faith anticipates executing a merger or
acquisition agreement within ninety (90) days of the giving of such Adjustment
Period Notice and the giving of such notice would not constitute the giving of
non-public information to the Investor.
During the Adjustment Period, the Purchase Price shall be the lesser of
(i) eighty-three percent (83%) of the Market Price upon a Optional Purchase Date
and (ii) 150% of the Market Price on the Subscription Date.
The duration of the Trading Cushion shall be shortened to ten (10)
Trading Days until the expiration of five consecutive weeks (the "Adjustment
Period")
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During the Adjustment Period, the Company may not deliver an Optional
Purchase Notice such that the number of Call Shares to be purchased by the
Investor upon the applicable Closing, when aggregated with all other shares of
Common Stock then owned by the Investor beneficially or deemed beneficially
owned by the Investor, would result in the Investor owning more than 4.9% of all
of such Common Stock as would be outstanding on such Closing Date, as determined
in accordance with Section 13(d) of the Exchange Act and the regulations
promulgated thereunder. For purposes of this Section 2.4(c), in the event that
the amount of Common Stock outstanding as determined in accordance with Section
13(d) of the Exchange Act and the regulations promulgated thereunder is greater
on a Closing Date than on the date upon which the Optional Purchase Notice
associated with such Closing Date is given, the amount of Common Stock
outstanding on such Closing Date shall govern for purposes of determining
whether the Investor, when aggregating all purchases of Common Stock made
pursuant to this Agreement and, if any, Warrant Shares, would own more than 4.9%
of the Common Stock following such Closing Date.
Section 2.5 Termination of Investment Obligation. The obligation of the
Investor to purchase shares of Common Stock shall terminate permanently
(including with respect to a Closing Date that has not yet occurred) in the
event that (i) there shall occur any stop order or suspension of the
effectiveness of the Registration Statement for an aggregate of thirty (30)
Trading Days during the Commitment Period, for any reason other than deferrals
or suspension in accordance with Section 1.1(f) of the Registration Rights
Agreement, as a result of corporate developments subsequent to the Subscription
Date that
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would require such Registration Statement to be amended to reflect such event in
order to maintain its compliance with the disclosure requirements of the
Securities Act or (ii) the company shall at any time fail to comply with the
requirements of Section 6.3, 6.4, 6.5 or 6.6.
Section 2.6 Commitment Fee. On the Subscription Date, the Company will
issue to the Investor a warrant, substantially in the form of Exhibit A hereto,
exercisable beginning six months from the Subscription Date (the "Warrant") and
then exercisable any time over the three-year period there following, to
purchase an aggregate of 45,000 Warrant Shares at a price equal to 115% of the
Market Price on the Subscription Date. The warrant shall be delivered by the
Company to the Investor upon execution of this Agreement by the parties hereto.
The Warrant Shares shall be registered for resale pursuant to the Registration
Rights Agreement.
Section 2.7 Additional Shares. In the event that, (a) within five
Trading Days of any Closing Date, the Company gives notice to the Investor of an
impending "blackout period" in accordance with Section 1.1(f) of the
Registration Rights Agreement, and (b) the Bid Price on the Trading Day
immediately preceding such "blackout period" ("Old Bid Price") is greater than
the Bid Price on the first Trading Day following such "blackout period" that the
Investor may sell its Registrable Securities pursuant to an effective
Registration Statement ("New Bid Price"), then the Company shall issue to the
Investor a number of additional shares of Registrable Securities equal to the
difference between (X) the product of the number of Registrable Securities held
by Investor immediately prior to the "blackout period" multiplied by the Old Bid
Price, divided by
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the New Bid Price and (Y) the number Of Registrable Securities held by Investor
immediately prior to the "blackout period".
Section 2.8 Liquidated Damages. The parties hereto acknowledge and agree
that the sum payable under Section 2.1(b) and the obligation to issue
Registrable Securities under Section 2.7 above shall constitute liquidated
damages and not penalties. The parties further acknowledge that (a) the amount
of loss or damages likely to be incurred is incapable or is difficult to
precisely estimate, (b) the amounts specified in such Sections bear a reasonable
proportion and are not plainly or grossly disproportionate to the probable loss
likely to be incurred by the Investor in connection with the failure by the
Company to make Calls with aggregate Purchase Prices totalling at least
$10,000,000 or in connection with a "blackout" period under Section 1.1(f) of
the Registration Rights Agreement, and (c) the parties are sophisticated
business parties and have been represented by sophisticated and able legal and
financial counsel and negotiated this Agreement at arm's length.
ARTICLE III
CONDITIONS TO DELIVERY OF OPTIONAL
PURCHASE NOTICES AND CONDITIONS TO CLOSING
Section 3.1 Conditions Precedent to the Obligation of the Company to Issue
and Sell Common Stock. The obligation hereunder of the Company to issue and
sell the Call Shares to the Investor incident to each Closing is subject to the
satisfaction, at or before each such Closing, of each of the conditions set
forth below.
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(a) Accuracy of the Investor's Representation and Warranties. The
representations and warranties of the Investor shall be true and correct in all
material respects as of the date of this Agreement and as of the date of each
such Closing as though made at each such time.
(b) Performance by the Investor. The Investor shall have performed,
satisfied and complied in all respects with all covenants, agreements and
conditions required by this Agreement to be performed, satisfied or complied
with by the Investor at or prior to such Closing.
Section 3.2 Conditions Precedent to the Right of the Company to Deliver
an Optional Purchase Notice and the Obligation of the Investor to Purchase Call
Shares. The right of the Company to deliver an Optional Purchase Notice and the
obligation of the Investor hereunder to acquire and pay for the Call Shares
incident to a Closing is subject to the satisfaction, on (i) the date of
delivery of such Optional Purchase Notice and (ii) the applicable Closing Date
(each a "Condition Satisfaction Date"), of each of the following conditions:
(a) Registration of the Common Stock with the SEC. As set forth in
the Registration Rights Agreement, the Company shall have filed with the SEC a
Registration Statement with respect to the resale of the Registrable Securities
that shall have been declared effective by the SEC prior to the first Optional
Purchase Date, but in no event later than ninety (90) days after Subscription
Date.
(b) Effective Registration Statement. As set forth in the
Registration Rights Agreement, the Registration Statement shall have previously
become effective and
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shall remain effective on each Condition Satisfaction Date and (i) neither the
Company nor the Investor shall have received notice that the SEC has issued or
intends to issue a stop order with respect to the Registration Statement or that
the SEC otherwise has suspended or withdrawn the effectiveness of the
Registration Statement, either temporarily or permanently, or intends or has
threatened to do so (unless the SEC's concerns have been addressed and the
Investor is reasonably satisfied that the SEC no longer is considering or
intends to take such action), and (ii) no other suspension of the use or
withdrawal of the effectiveness of the Registration Statement or related
prospectus shall exist.
(c) Accuracy of the Company's Representations and Warranties. The
representations and warranties of the Company shall be true and correct as of
each Condition Satisfaction Date as though made at each such time (except for
representations and warranties specifically made as of a particular date) with
respect to all periods, and as to all events and circumstances occurring or
existing to and including each Condition Satisfaction Date, except for any
conditions which have temporarily caused any representations or warranties
herein to be incorrect and which have been connected with no continuing
impairment to the Company or the Investor.
(d) Performance by the Company. The Company shall have performed,
satisfied and complied, in all respects with all covenants, agreements and
conditions required by this Agreement, the Registration Rights Agreement and the
Warrant to be performed, satisfied or complied with by the Company at or prior
to each Condition Satisfaction Date.
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(e) No Injunction. No statute, rule, regulation, executive order,
decree, ruling or injunction shall have been enacted, entered, promulgated or
endorsed by any court or governmental authority of competent jurisdiction that
prohibits or directly and adversely affects any of the transactions contemplated
by this Agreement, and no proceeding shall have been commenced that may have the
effect of prohibiting or adversely affecting any of the transactions
contemplated by this Agreement.
(f) Adverse Changes. Since the date of filing of the Company's most
recent SEC Document, no event that had or is reasonably likely to have a
Material Adverse Effect has occurred.
(g) No Suspension of Trading In or Delisting of Common Stock. The
trading of the Common Stock shall not have been suspended by the SEC, the
Principal Market or the National Association of Securities Dealers, Inc. (the
"NASD") and the Common Stock shall have been approved for listing or quotation
on and shall not have been delisted from the Principal Market. The issuance of
shares of Common Stock with respect to the applicable Closing, if any, shall not
violate the shareholder approval requirements of the Principal Market.
(h) Legal Opinions. The Company shall have caused to be delivered to
the Investor, (i) within five (5) Trading Days of the effective date of the
Registration Statement and (ii) to the extent provided by Section 3.3, an
opinion of the Company's independent counsel in the form of Exhibit B hereto,
addressed to the Investor; provided, however, that in the event that such an
opinion cannot be delivered by the Company's independent counsel to the
Investor, the Company shall promptly revise the Registration
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Statement and shall not deliver an Optional Purchase Notice. If an Optional
Purchase Notice shall have been delivered in good faith without knowledge by
the Company that an opinion of independent counsel can not be delivered as
required, at the option of the Investor, either the applicable Closing Date
shall automatically be postponed for a period of up to five (5) Trading Days
until such an opinion is delivered to the Investor, or such Closing shall
otherwise be canceled. In the event of such a postponement, the Purchase Price
of the Common Stock to be issued at such Closing as determined pursuant of
Section 2.2 shall be the lower of the Purchase Price as calculated as of the
originally scheduled Closing Date and as of the actual Closing Date. The
Company's independent counsel shall also deliver to the investor upon execution
of this Agreement an opinion in form and substance satisfactory to the Investor
addressing, among other things, corporate matters and the exemption from
registration under the Securities Act of the issuance of the Registrable
Securities and the Warrant by the Company to the Investor under this Agreement.
(i) Due Diligence. No dispute between the Company and the Investor
shall exist pursuant to Section 3.3 as to the adequacy of the disclosure
contained in the Registration Statement.
(j) Ten Percent Limitation. On each Closing Date, the number of Call
Sham then to be purchased by the Investor exceeding the number of such shares
which, when aggregated with all other shares of Common Stock then owned by the
Investor beneficially or deemed beneficially owned by the Investor, would result
in the Investor owning no more than 9.9% of all of such Common Stock as would be
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outstanding on such Closing Date, as determined in accordance with Section 16 of
the Exchange Act and the regulations promulgated thereunder. For purposes of
this Section 3.2(k), in the event that the amount of Common Stock outstanding as
determined in accordance with Section 16 of the Exchange Act and the regulations
promulgated thereunder is greater on a Closing Date than on the date upon which
the Optional Purchase Notice associated with such Closing Date is given, the
amount of Common Stock outstanding on such Closing Date shall govern for
purposes of determining whether the Investor, when aggregating all purchases of
Common Stock made pursuant to this Agreement and, if any, Warrant Shares, would
own more than 9.9% of the Common Stock following such Closing Date.
(k) Minimum Bid Price. The Bid Price equals or exceeds $6 U.S.
from the Trading Day immediately preceding the date on which such Notice is
deemed delivered until the Trading Day immediately preceding the Closing Date
(as adjusted for stock splits, stock dividends, reverse stock splits, and
similar events).
(l) Minimum Average Trading Volume. The average trading volume
for the Common Stock over the previous twenty (20) Trading Days equals or
exceeds 22,500 shares per Trading Day.
(m) No Knowledge. The Company has no knowledge of any event more
likely than not to have the effect of causing such Registration Statement to be
suspended or otherwise ineffective (which event is more likely than not to
occur within the fifteen Trading Days following the Trading Day on which such
Notice is deemed delivered).
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(n) Trading Cushion. The Trading Cushion shall have elapsed since
the immediately preceding Optional Purchase Date.
(o) Shareholder Vote. The issuance of shares of Common Stock with
respect to the applicable Closing, if any, shall not violate the shareholder
approval requirements of the Principal Market.
(p) Escrow Agreement. The parties hereto shall have entered into a
mutually acceptable escrow agreement for the Purchase Prices due hereunder,
providing for reasonable interest on any funds deposited into the escrow account
established under such agreement.
(q) Other. On each Condition Satisfaction Date, the Investor shall
have received and been reasonably satisfied with such other certificates and
documents as shall have been reasonably requested by the Investor in order for
the Investor to confirm the Company's satisfaction of the conditions set forth
in this Section 3.2., including, without limitation, a certificate in
substantially the form and substance of Exhibit C hereto, executed in either
case by an executive officer of the Company and to the effect that all the
conditions to such Closing shall have been satisfied as at the date of each such
certificate.
Section 3.3 Due Diligence Review and Non-Disclosure of Non-Public
Information.
(a) The Company shall make available for inspection and review by
the Investor, advisors to and representatives of the Investor (who may or may
not be affiliated with the Investor and who are reasonably acceptable to the
Company), any
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underwriter participating in any disposition of the Registrable Securities on
behalf of the Investor pursuant to the Registration Statement, any such
registration statement or supplement thereto or any blue sky, NASD or other
filing, all financial and other records, all SEC Documents and other filings
with the SEC, and all other corporate documents and properties of the Company as
may be reasonably necessary for the purpose of such review, and cause the
Company's officers, directors and employees to supply all such information
reasonably requested by the Investor or any such representative, advisor or
underwriter in connection with such Registration Statement (including, without
limitation, in response to all questions and other inquiries reasonably made or
submitted by any of them), prior to and from time to time after the filing and
effectiveness of the Registration Statement for the sole purpose of enabling the
Investor and such representatives, advisors and underwriters and their
respective accountants and attorneys to conduct initial and ongoing due
diligence with respect to the Company and the accuracy of the Registration
Statement.
(b) The Company shall in no event disclose non-public information to
the Investor, advisors to or representatives of the Investor (including, without
limitation, in connection with the giving of the Adjustment Period Notice
pursuant to Section 2.4) unless prior to disclosure of such information the
Company identifies such information as being non-public information and
provides the Investor, such advisors and representatives with the opportunity to
accept or refuse to accept such non-public information for review. The Company
may, as a condition to disclosing any non-public information hereunder, require
the Investor's advisors and representatives to enter into
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a confidentiality agreement in form reasonably satisfactory to the Company and
the Investor.
(c) Nothing herein shall require the Company to disclose non-public
information to the Investor or its advisors or representatives, and the Company
represents that it does not disseminate non-public information to any investors
who purchase stock in the Company in a public offering, to money managers or to
securities analysts, provided, however, that notwithstanding anything herein to
the contrary, the Company will, as hereinabove provided, immediately notify the
advisors and representatives of the Investor and, if any, underwriters, of any
event or the existence of any circumstance (without any obligation to disclose
the specific event or circumstance) of which it becomes aware, constituting
non-public information (whether or not requested of the Company specifically or
generally during the course of due diligence by such persons or entities),
which, if not disclosed in the prospectus included in the Registration Statement
would cause such prospectus to include a material misstatement or to omit a
material fact required to be stated therein in order to make the statements,
therein, in light of the circumstances in which they were made, not misleading.
Nothing contained in this Section 3.3 shall be construed to mean that such
persons or entities other than the Investor (without the written consent of the
Investor prior to disclosure of such information) may not obtain non-public
information in the course of conducting due diligence in accordance with the
terms of this Agreement and nothing herein shall prevent any such persons or
entities from notifying the Company of their opinion that based on such due
diligence by such persons or entities, that the Registration Statement contains
an untrue statement of
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a material fact or omits a material fact required to be stated in the
Registration Statement or necessary to make the statements contained therein, in
light of the circumstances in which they were made, not misleading.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF INVESTOR
The Investor represents and warrants to the Company that:
Section 4.1 Intent. The Investor is entering into this Agreement for its
own account and the Investor has no present arrangement (whether or not legally
binding) at any time to sell the Common Stock to or through any person or
entity; provided, however, that by making the representations herein, the
Investor does not agree to hold the Common Stock for any minimum or other
specific term and reserves the right to dispose of the Common Stock at any time
in accordance with federal and state securities laws applicable to such
disposition.
Section 4.2 Sophisticated Investor. The Investor is a sophisticated
investor (as described in Rule 506(b)(2)(ii) of Regulation D) and an accredited
investor (as defined in Rule 501 of Regulation D), and Investor has such
experience in business and financial matters that it is capable of evaluating
the merits and risks of an investment in Common Stock. The Investor acknowledges
that an investment in the Common Stock is speculative and involves a high degree
of risk.
Section 4.3 Authority. This Agreement has been duly authorized and
validly executed and delivered by the Investor and is a valid and binding
agreement of the Investor enforceable against it in accordance with its terms,
subject to applicable
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bankruptcy, insolvency, or similar laws relating to, or affecting generally the
enforcement of, creditors' rights and remedies or by other equitable principles
of general application.
Section 4.4 Not an Affiliate. The Investor is not an officer, director
or "affiliate" (as that term is defined in Rule 405 of the Securities Act) of
the Company.
Section 4.5 Organization and Standing. Investor is duly organized,
validly existing, and in good standing under the laws of the British Virgin
Islands.
Section 4.6 Absence of Conflicts. The execution and delivery of this
Agreement and any other document or instrument executed in connection herewith,
and the consummation of the transactions contemplated thereby, and compliance
with the requirements thereof, will not violate any law, rule, regulation,
order, writ, judgment, injunction, decree or award binding on Investor, or, to
the Investor's knowledge, (a) violate any provision of any indenture, instrument
or agreement to which Investor is a party or is subject, or by which Investor or
any of its assets is bound, (b) conflict with or constitute a material default
thereunder, (c) result in the creation or imposition of any lien pursuant to the
terms of any such indenture, instrument or agreement, or constitute a breach of
any fiduciary duty owed by Investor to any third party, or (d) require the
approval of any third-party (which has not been obtained) pursuant to any
material contract, agreement, instrument, relationship or legal obligation to
which Investor is subject or to which any of its assets, operations or
management may be subject.
Section 4.7 Disclosure: Access to Information. Investor has received all
documents, records, books and other information pertaining to Investors
investment in the Company that have been requested by Investor. The Company is
subject to the
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periodic reporting requirements of the Exchange Act, and Investor has reviewed
or received copies of any such reports that have been requested by it.
Section 4.8 Manner of Sale. At no time was Investor presented with or
solicited by or through any leaflet, public promotional meeting, television
advertisement or any other form of general solicitation or advertising.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to the Investor that:
Section 5.1 Common Stock. The Company has registered its Common Stock
pursuant to Section 12(b) or 12(g) of the Exchange Act and is in full compliance
with all reporting requirements of the Exchange Act, and the Company has
maintained all requirements for the continued listing or quotation of its Common
Stock, and such Common Stock is currently listed or quoted on the Principal
Market. As of the date hereof, the Principal Market is the Nasdaq Small Cap
Market.
Section 5.2 SEC Documents. The Company has delivered or made available
to the Investor true and complete copies of the SEC Documents (including,
without limitation, proxy information and solicitation materials). The Company
has not provided to the Investor any information that, according to applicable
law, rule or regulation should have been disclosed publicly prior to the date
hereof by the Company, but which has not been so disclosed. As of their
respective dates, the SEC Documents complied in all material respects with the
requirements of the Securities Act or the Exchange Act, as the case may be, and
rules and regulations of the SEC promulgated thereunder and other
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federal, state and local laws, rules and regulations applicable to such SEC
Documents, and none of the SEC Documents contained any untrue statement of a
material fact or omitted to state a material fact required to be stated therein
or necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading. The financial
statements of the Company included in the SEC Documents comply as to form in all
material respects with applicable accounting requirements and the published
rules and regulations of the SEC or other applicable rules and regulations with
respect thereto. Such financial statements have been prepared in accordance with
generally accepted accounting principles applied on a consistent basis during
the periods involved (except (i) as may be otherwise indicated in such financial
statements or the notes thereto or (ii) in the case of unaudited interim
statements, to the extent they may not include footnotes or may be condensed or
summary statements) and fairly present in all material respects the financial
position of the Company as of the dates thereof and the results of operations
and cash flows for the periods then ended (subject, in the case of unaudited
statements, to normal year-end audit adjustments).
Section 5.3 No General Solicitation or Advertising in Regard to this
Transaction. Neither the Company nor any of its affiliates nor any distributor
or any person acting on its or their behalf (i) has conducted or will conduct
any general solicitation (as that term is used in Rule 502(c) of Regulation D)
or general advertising with respect to any of the Call Shares, the Warrant, or
the Warrant Shares, or (ii) made any offers or sales of any security or
solicited any offers to buy any security under any circumstances that would
require registration of the Common Stock under the Securities Act.
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Section 5.4 Capitalization. As of the date Of the Agreement, the Company
has authorized capital consisting of 50,000,000 shares of Common Stock, par
value $0.001, and 150,000 shares of Series A Preferred Stock, par value $0.001.
As of November 25, 1997, 5,042,202 shares of Common Stock were issued and
outstanding, and no shares of Preferred Stock were issued and outstanding. Under
the Company's 1996 Stock Option Plan, the Company has authorized options to
purchase 1,140,000 shares of its Common Stock, of which the Company has granted
options to purchase 1,308,500 shares to certain employees and consultants of the
Company (of which 292,333 shares have been cancelled). As of November 25, there
were options to purchase 500,834 shares of Common Stock exercisable, and 123,833
options available for future grant by the Company. The Company has granted
options to purchase 948,600 shares to certain employees and outside service
providers of the Company outside its 1996 Stock Option Plan. As of November 25,
1997, there were outstanding warrants to purchase Common Stock as follows: (i)
redeemable stock purchase warrants to purchase approximately 1,079,798 shares of
common stock at an exercise price of $6.00 per share, (ii) underwriters'
warrants to purchase 100,000 shares of Common Stock at an exercise price of
$9.00 per share, (iii) underlying warrants to purchase 100,000 warrants, at a
purchase price of $0.18375 per warrant (where each warrant purchased may be
exercised to purchase one share of Common Stock at an exercise price of $9.00
per share), and (iv) placement agent warrants to purchase 8,791 shares of Common
Stock at $10.00 per share. The Company also has outstanding subordinated
promissory notes, in the principal amount of $1,000,000, which are convertible
into Common, Stock at a conversion price
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per share of the lower of $10.00, or the closing high bid of the Common Stock on
the day before the conversion date. As of November 25, 1997, the Company has
reserved 3,024,742 shares of Common Stock for issuance upon redemption of
warrants, exercise of options, and conversion of debt. Except as stated above,
there are no outstanding options, warrants, script rights to subscribe to, calls
or commitments of any character whatsoever relating to, or securities, rights or
obligations convertible into or exchangeable for, or giving any right to
subscribe for or acquire any shares of Common Stock or contracts, commitments,
understanding, or arrangements by which the Company is or may become bound to
issue additional shares of Common Stock, or securities or rights convertible or
exchangeable into shares of Common Stock. All of the outstanding shares of
Common Stock of the Company have been duly and validly authorized and issued and
are fully paid and nonassessable.
Section 5.5 Valid Issuances. The sale of the Warrant may and will be
properly issued pursuant to Rule 4(2), Regulation D and/or any applicable state
law. When issued, the Call Shares and the Warrant Shares will be duly and
validly issued, fully paid, and nonassessable. Neither the sales of the Call
Shares, the Warrant or the Warrant Shares pursuant to, nor the Company's
performance of its obligations under, this Agreement, the Registration Rights
Agreement, or the Warrant will (i) result in the creation or imposition of any
liens, charges, claims or other encumbrances upon the Call Shares, the Warrant
Shares or any of the assets of the Company, or (ii) entitle the holders of
Outstanding Capital Shares to preemptive or other rights to subscribe to or
acquire the Capital Shares
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or other securities of the Company. The Call Shares and the Warrant Shares shall
not subject the Investor to personal liability by reason of the possession
thereof.
Section 5.6 Organization and Qualification. The Company is a corporation
duly incorporated and existing in good standing under the laws of the State of
Florida and has the requisite corporate power to own its properties and to carry
on its business as now being conducted. The Company does not have any
subsidiaries. The Company does not own more than fifty percent (50%) of or
control any other business entity. The Company is duly qualified as a foreign
corporation to do business and is in good standing in every jurisdiction in
which the nature of the business conducted or property owned by it makes such
qualification necessary, other than those in which the failure so to qualify
would not have a Material Adverse Effect.
Section 5.7 Authorization: Enforcement. (i) The Company has the
requisite corporate power and authority to enter into and perform its
obligations under this Agreement, the Registration Rights Agreement, and the
Warrant and to issue the Call Shares, the Warrant and the Warrant Shares,
(ii) the execution, issuance and delivery of this Agreement, the Registration
Rights Agreement and the Warrant by the Company and the consummation by it of
the transactions contemplated hereby have been duly authorized by all necessary
corporate action and no further consent or authorization of the Company or its
Board of Directors or stockholders is required, and (iii) this Agreement, the
Registration Rights Agreement, and the Warrant have been duly executed and
delivered by the Company and constitute valid and binding obligations of the
Company enforceable against the Company in accordance with their terms, except
as such enforceability may
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be limited by applicable bankruptcy, insolvency, or similar laws relating to, or
affecting generally the enforcement of, creditors' rights and remedies or by
other equitable principles of general application.
Section 5.8 Corporate Documents. The Company has finished or made
available to the Investor true and correct copies of the Company's Articles of
Incorporation, as amended and in effect on the date hereof (the "Certificate"),
and the Company's By-Laws, as amended and in effect on the date hereof (the
"By-Laws").
Section 5.9 No Conflicts. The execution, delivery and performance of
this Agreement by the Company and the consummation by the Company of the
transactions contemplated hereby, including without limitation the issuance of
Common Stock, the Warrant and each Additional Warrant do not and will not (i)
result in a violation of the Company's Articles of Incorporation or By-Laws or
(ii) conflict with, or constitute a default (or an event that with notice or
lapse of time or both would become a default) under, or give to others any
rights of termination, amendment, acceleration or cancellation of, any material
agreement, indenture, instrument or any "lock-up" or similar provision of any
underwriting or similar agreement to which the Company is a party, or (iii)
result in a violation of any federal, state, local or foreign law, rule,
regulation, order, judgment or decree (including federal and state securities
laws and regulations) applicable to the Company or by which any property or
asset of the Company is bound or affected (except for such conflicts, defaults,
terminations, amendments, accelerations, cancellations and violations as would
not, individually or in the aggregate, have a Material Adverse Effect) nor is
the Company otherwise in violation of, conflict with or in default under any
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of the foregoing; provided that, for purposes, of the Company's representations
and warranties as to violations of foreign law, rule or regulation referenced in
clause (iii), such representations and warranties are made only to the best of
the Company's knowledge insofar as the execution, delivery and performance of
this Agreement by the Company and the consummation by the Company of the
transactions contemplated hereby are or may be affected by the status of the
Investor under or pursuant to any such foreign law, rule or regulation. The
business of the Company is not being conducted in violation of any law,
ordinance or regulation of any governmental entity, except for possible
violations that either singly or in the aggregate do not and will not have a
Material Adverse Effect. The Company is not required under federal, state or
local law, rule or regulation to obtain any consent, authorization or order of,
or make any filing or registration with, any court or governmental agency in
order for it to execute, deliver or perform any of its obligations under this
Agreement or issue and sell the Common Stock or the Warrant in accordance with
the terms hereof (other than any SEC, NASD or state securities filings that may
be required to be made by the Company subsequent to any Closing, any
registration statement that may be filed pursuant hereto, and any shareholder
approval required by the rules applicable to companies whose common stock trades
on the Nasdaq Small Cap Market referenced in Section 5. 1); provided that, for
purposes of the representation made in this sentence, the Company is assuming
and relying upon the accuracy of the relevant representations and agreements of
the Investor herein.
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Section 5.10 No Material Adverse Change. Since September 30, 1996, no
Material Adverse Effect has occurred or exists with respect to the Company,
except as disclosed in the SEC Documents.
Section 5.11 No Undisclosed Liabilities. The Company has no liabilities
or obligations which are material, individually or in the aggregate, and are not
disclosed in the SEC Documents or otherwise publicly announced, other than those
incurred in the ordinary course of the Company's businesses since September 30,
1996 and which, individually or in the aggregate, do not or would not have a
Material Adverse Effect on the Company (other than convertible debt in the
amount of $1,000,000).
Section 5.12 No Undisclosed Events or Circumstances. Since September 30,
1996, no event or circumstance has occurred or exists with respect to the or its
businesses, properties, prospects, operations or financial condition, that,
under applicable law, rule or regulation, requires public disclosure or
announcement prior to the date hereof by the Company but which has not been so
publicly announced or disclosed in the SEC Documents.
Section 5.13 No Integrated Offering. Neither the Company, nor any of its
affiliates, nor any person acting on its or their behalf has, directly or
indirectly, made any offers or sales of any security or solicited any offers to
buy any security, other than pursuant to this Agreement, under circumstances
that would require registration of the Common Stock under the Securities Act.
Section 5.14 Litigation and Other Proceedings. Except as may be set,
forth in the SEC Documents, there are no lawsuits or proceedings pending or to
the best knowledge
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of the Company threatened, against the Company, nor has the Company received any
written or oral notice of any such action, suit, proceeding or investigation,
which might have a Material Adverse Effect. Except as set forth in the SEC
Documents, no judgment, order, writ, injunction or decree or award has been
issued by or, so far as is known by the Company, requested of any court,
arbitrator or governmental agency which might result in a Material Adverse
Effect.
Section 5.15 No Misleading Untrue Communication. The Company, any person
representing the Company, and, to the best knowledge of the Company, any other
person selling or offering to sell the Call Shares, the Warrant or the Warrant
Shares in connection with the transaction contemplated by this Agreement, have
not made, at any time, any oral communication in connection with the offer or
sale of the same which contained any untrue statement of a material fact or
omitted to state any material fact necessary in order to make the statements, in
the light of the circumstances under which they were made, not misleading.
Section 5.16 Non-Public Information. The Company neither possesses nor
has disclosed to the Investor any material non-public information that (i) if
disclosed, would, or could reasonably be expected to have, an effect on the
price of the Common Stock or (ii) according to applicable law, rule or
regulation, should have been disclosed publicly by the Company prior to the date
hereof but which has not been so disclosed.
Section 5.17 Broker-Dealer Status. The Company has duly investigated its
agent, Trinity Capital Advisors, Inc. ("Trinity"), and represents and warrants
to the Investor that Trinity is a duly registered broker or dealer (or a duly
registered representative of
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such a broker or dealer) under the Exchange Act, in accordance with the rules
and regulation of the SEC.
ARTICLE VI
COVENANTS OF THE COMPANY
Section 6.1 Registration Rights. The Company shall cause the
Registration Rights Agreement to remain in full force and effect and the Company
shall comply in all respects with the terms thereof.
Section 6.2 Reservation of Common Stock. As of the date hereof, the
Company has reserved and the Company shall continue to reserve and keep
available at all times, free of preemptive rights, shares of Common Stock for
the purpose of enabling the Company to satisfy any obligation to issue the Call,
and the Warrant Shares; such amount of shares of Common Stock to be reserved
shall be calculated based upon the minimum Purchase Price therefor under the
terms of this Agreement and the Warrant respectively. The number of shares so
reserved from time to time, as theretofore increased or reduced as hereinafter
provided, may be reduced by the number of shares actually delivered hereunder
and the number of shares so reserved shall be increased or decreased to reflect
potential increases or decreases in the Common Stock that the Company may
thereafter be so obligated to issue by reason of adjustments to Warrant or
adjustments pursuant to Article IX hereof.
Section 6.3 Listing of Common Stock. The Company hereby agrees to
maintain the listing of the Common Stock on a Principal Market, and as soon as
practicable (but in any event prior to the commencement of the Commitment
Period) to list the Call
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Shares and the Warrant Shares. The Company further agrees, if the Company
applies to have the Common Stock traded on any other Principal Market, it will
include in such application the Call Shares and the Warrant Shares, and will
take such other action as is necessary or desirable in the opinion of the
investor to cause the Common Stock to be listed on such other Principal Market
as promptly as possible. The Company will take all action to continue the
listing and trading of its Common Stock on the Principal Market (including,
without limitation, maintaining sufficient net tangible assets) and will comply
in all respects with the Company's reporting, filing and other obligations under
the bylaws or rules of the NASD and the Principal Market.
Section 6.4 Exchange Act Registration. The Company will cause its Common
Stock to continue to be registered under Section 12(g) or 12(b) of the Exchange
Act, will comply in all respects with its reporting and filing obligations under
said Act, and will not take any action or file any document (whether or not
permitted by said Act or the rules thereunder) to terminate or suspend such
registration or to terminate or suspend its reporting and filing obligations
under said Act. The Company will take all action to continue the listing and
trading of its Common Stock on the Principal Market and will comply in all
respects with the Company's reporting, filing and other obligations under the
bylaws or rules of the NASD and the Principal Market.
Section, 6.5 Legends. The certificates evidencing the Common Stock to be
sold by the Investor pursuant to Section 8.1 shall be free of legends, except as
set forth in Article VIII.
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Section 6.6 Corporate Existence. The Company will take all steps
necessary to preserve and continue the corporate existence of the Company
Section 6.7 Additional SEC Documents. The Company will deliver to the
Investor, as and when the originals thereof are submitted to the SEC for filing,
copies of all SEC Documents so furnished or submitted to the SEC.
Section 6.8 "Blackout Period". (a) The Company will immediately notify
the Investor upon the occurrence of any of the following events in respect of a
registration statement or related prospectus in respect of an offering of
Registrable Securities; (i) receipt of any request for additional information by
the SEC or any other federal or state governmental authority during the period
of effectiveness of the registration statement for amendments or supplements to
the registration statement or related prospectus; (ii) the issuance by the SEC
or any other federal or state governmental authority of any stop order
suspending the effectiveness of the Registration Statement or the initiation of
any proceedings for that purpose; (iii) receipt of any notification with respect
to the suspension of the qualification or exemption from qualification of any of
the Registrable Securities for sale in any jurisdiction or the initiation or
threatening of any proceeding for such purpose; (iv) the happening of any event
that makes any statement made in such registration statement or related
prospectus or any document incorporated or deemed to be incorporated therein by
reference untrue in any material respect or that requires the making of any
changes in the registration statement, related prospectus or documents so that,
in the case of the registration statement, it will not contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary
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to make the statements therein not misleading, and that in the case of the
related prospectus, it will not contain any untrue statement of a material fact
or omit to state any material fact required to be stated therein or necessary to
make the statements therein, in the light of the circumstances under which they
were made, not misleading; and (v) the Company's reasonable determination that a
post-effective amendment to the registration statement would be appropriate; and
the Company will promptly make available to the Investor any such supplement or
amendment to the related prospectus. The Company shall not deliver to the
Investor any Optional Purchase Notice during the of any of the foregoing events.
Section 6.9 Expectations Regarding Optional Purchase Notices. Within ten
(10) days after the commencement of each calendar quarter occurring subsequent
to the commencement of the Commitment Period, the Company undertakes to notify
the Investor as to its reasonable expectations as to the dollar amount it
intends to raise during such calendar quarter, if any, through the issuance of
Optional Purchase Notices. Such notification shall constitute only the.
Company's good faith estimate and shall in no way obligate the Company to raise
such amount, or any amount, or otherwise limit its ability to deliver Optional
Purchase Notices. The failure by the Company to comply with this provision can
be cured by the Company's notifying the Investor at any time as to its
reasonable expectations with respect to the current calendar quarter.
Section 6.10 Consolidation; Merger. The Company shall not, at any time
after the date hereof, effect any merger or consolidation of the Company with or
into, or a transfer of all or substantially all of the assets of the Company to,
another entity (a
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"Consolidation Event") unless the resulting successor or acquiring entity (if
not the Company) assumes by written instrument the obligation to deliver to the
Investor such shares of stock and/or securities as the Investor is entitled to
receive pursuant to this Agreement.
Section 6.11 Issuance of Call Shares Warrant Shares. The sale of the
Call Shares and the issuance of the Warrant Shares pursuant to exercise of the
Warrant shall be made in accordance with the provisions and requirements of
Regulation D and any applicable state law. Issuance of the Warrant Shares
pursuant to exercise of the Warrant through a cashless exercise shall be made in
accordance with the provisions and requirements of Section 3(a)(9) under the
Securities Act and any applicable state law.
ARTICLE VII
COVENANTS OF THE INVESTOR
Section 7.1 The Investor's trading activities with respect to shares of
the Company's Common Stock will be in compliance with all applicable state and
federal securities laws, rules and regulations and rules and regulations of the
Principal Market on which the Company's Common Stock is listed.
Section 7.2 The Investor and its affiliates will not engage in short
sales of the Company's Common Stock.
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ARTICLE VIII
LEGENDS
Section 8.1 Legends. Each of the Warrant and, unless otherwise provided
below, each certificate representing Registrable Securities will bear the
following legend (the "Legend"):
THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE
U.S. SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY OTHER
APPLICABLE SECURITIES LAWS AND HAVE BEEN ISSUED IN RELIANCE UPON AN EXEMPTION
FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND SUCH OTHER
SECURITIES LAWS. NEITHER THIS SECURITY NOR ANY INTEREST OR PARTICIPATION HEREIN
MAY BE REOFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED, HYPOTHECATED
OR OTHERWISE DISPOSED OF, EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OR PURSUANT TO A TRANSACTION THAT IS EXEMPT FROM, OR
NOT SUBJECT TO, SUCH REGISTRATION. THE HOLDER OF THIS CERTIFICATE IS THE
BENEFICIARY OF CERTAIN OBLIGATIONS OF THE COMPANY SET FORTH IN A PRIVATE
EQUITY LINE OF CREDIT AGREEMENT BETWEEN COMPRESSENT CORPORATION AND KINGSBRIDGE
CAPITAL LIMITED DATED DECEMBER 3, 1997. A COPY OF THE PORTION OF THE AFORESAID
AGREEMENT
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EVIDENCING SUCH OBLIGATIONS MAY BE OBTAINED FROM THE COMPANY'S EXECUTIVE
OFFICES.
Upon the execution and delivery hereof, the Company is issuing to the
transfer agent for its Common Stock (and to any substitute or replacement
transfer agent for its Common Stock upon the Company's appointment of any such
substitute or replacement transfer agent) instructions in substantially the form
of Exhibit D hereto. Such instructions shall be irrevocable by the Company from
and after the date hereof or from and after the issuance thereof to any such
substitute or replacement transfer agent, as the case may be, except as
otherwise expressly provided in the Registration Rights Agreement. It is the
intent and purpose of such instructions, as provided therein, to require the
transfer agent for the Common Stock from time to time upon transfer of
Registrable Securities by the Investor to issue certificates evidencing such
Registrable Securities free of the Legend during the following periods and under
the following circumstances and without consultation by the transfer agent with
the Company or its counsel and without the need for any further advice or
instruction or documentation to the transfer agent by or from the Company or its
counsel or the Investor:
(a) At any time after the Effective Date, upon surrender of one or
more certificates evidencing Common Stock that bear the Legend, to the extent
accompanied by a notice requesting the issuance of new certificates free of the
Legend to replace those surrendered; provided that (i) the Registration
Statement shall then be effective; (ii) the Investor confirms to the transfer
agent that it has sold, pledged or otherwise transferred or agreed to sell,
pledge or otherwise transfer such Common Stock in a bona fide
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transaction to a third party that is not an affiliate of the Company; and (iii)
the Investor confirms to the transfer agent that the Investor has complied with
the prospectus delivery requirement.
(b) At any time upon any surrender of one or more certificates
evidencing Registrable Securities that bear the Legend, to the extent
accompanied by a notice requesting the issuance of new certificates free of the
Legend to replace those surrendered and containing representations that (i) the
Investor is permitted to dispose of such Registrable Securities without
limitation as to amount or manner of sale pursuant to Rule 144(k) under the
Securities Act or (ii) the Investor has sold, pledged or otherwise transferred
or agreed to sell, pledge or otherwise transfer such Registrable Securities in a
manner other than pursuant to an effective registration statement, to a
transferee who will upon such transfer be entitled to freely tradeable
securities.
Section 8.2 No Other Legend or Stock Transfer Restrictions. No legend
other than the one specified in Section 8.1 has been or shall be placed on the
share certificates representing the Common Stock and no instructions or "stop
transfers orders," so called, "stock transfer restrictions," or other
restrictions have been or shall be given to the Company's transfer agent with
respect thereto other than as expressly set forth in this Article VIII.
Section 8.3 Investor's Compliance. Nothing in this Article VIII shall
affect in any way the Investor's obligations under any agreement to comply with
all applicable securities laws upon resale of the Common Stock.
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ARTICLE IX
ADJUSTMENTS
Section 9.1 Adjustment of the Ceiling Price. The Ceiling Price and,
accordingly, the number of Call Shares issuable upon a Call, shall be subject to
adjustment from time to time upon the happening of certain events as follows:
(a) Reclassification, Consolidation, Merger or Mandatory Share
Exchange. If the Company, at any time during the Commitment Period, (i)
reclassifies or changes its Outstanding Capital Shares (other than a change in
par value, or from par value to no par value per share, or from no par value per
share to par value or a subdivision or combination of outstanding securities
issuable upon a Call), (ii) consolidates, merges or effects a mandatory share
exchange with or into another corporation (other than a merger or mandatory
share exchange with another corporation in which the Company is a continuing
corporation and that does not result in any reclassification or change, other
than a change in par value, or from par value to no par value per share, or from
no par value per share to par value, or a subdivision or combination of
Outstanding Capital Shares issuable upon a Call), or (iii) sells or transfers to
another corporation the property of the Company as an entirety or substantially
as an entirety, then in any such event the Company, or such successor or
purchasing corporation, as the case may be, shall, without payment of any
additional consideration therefore, amend this Agreement or enter into a new
Private Equity Line of Credit Agreement providing that the Investor shall have
rights not less favorable to the Investor than those then applicable to this
Agreement. Such amendment of this Agreement or new
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Private Equity Line of Credit Agreement shall include, without limitation, the
right to receive upon Calls under such, in lieu of each share of Common Stock
theretofore issuable upon a Call hereunder, the kind and amount of shares of
stock, other securities, money or property receivable upon such
reclassification, change, consolidation, merger, mandatory share exchange, sale
or transfer by the holder of one share of Common Stock issuable upon a Call had
the Call been made immediately prior to such reclassification, change,
consolidation, merger, mandatory share exchange or sale or transfer. Such
amended agreement shall provide for adjustments which shall be as nearly
equivalent as may be practicable to the adjustments provided for in this Section
9. 1. The provisions of this subsection (a) shall similarly apply to successive
reclassifications, changes, consolidations, mergers, mandatory share exchanges
and sales and transfers.
(b) Subdivision or Combination of Shares. If the Company, at any
time during the Commitment Period, shall subdivide its Common Stock, the Ceiling
Price shall be proportionately reduced as of the effective date of such
subdivision, or, if the Company shall take a record of holders of its Common
Stock for the purpose of so subdividing, as of such record date, whichever is
earlier. If the Company, at any time during the Commitment Period, shall combine
its Common Stock, the Ceiling Price shall be proportionately increased as of the
effective date of such combination, or, if the Company shall take a record of
holders of its Common Stock for the purpose of so combining, as of such record
date, whichever is earlier.
(c) Stock Dividends. If the Company at any time during the
Commitment Period shall pay a dividend in its Capital Shares, or make any other
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distribution of its Capital Shares, then the Ceiling Price shall be adjusted, as
of the date the Company shall take a record of the holders of its Capital Shares
for the purpose of receiving such dividend or other distribution (or if no such
record is taken, as at the date of such payment or other distribution), to that
price determined by multiplying the Ceiling Price in effect immediately prior
to such payment or other distribution by a fraction:
1. the numerator of which shall be the total number of
Outstanding Capital Shares immediately prior to such dividend or distribution,
and
2. the denominator of which shall be the total number of
Outstanding Capital Shares immediately after such dividend or distribution. The
provisions of this subsection (c) shall not apply under any of the circumstances
for which an adjustment is provided in subsections (a) or (b).
(d) Issuance of Additional Capital Shares. If the Company, at any
time during the Commitment Period, shall issue any Additional Capital Shares,
otherwise than as provided in the foregoing subsections (a) through (c) above,
at a price per share less, or for other consideration, lower than both the Bid
Price and the Ceiling Price in effect immediately prior to such issuance, or
without consideration, then upon such issuance the Ceiling Price shall be
reduced to that price determined by multiplying the Ceiling Price in effect
immediately prior to such event by a fraction:
1. the numerator of which shall be the number of
Outstanding Capital Shares immediately prior to the issuance of the Additional
Capital Shares plus the number of Capital Shares that the aggregate
consideration for the total number of such Additional Capital Shares so issued
would purchase at the then effective Bid Price, and
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2. the denominator of which shall be the number of
Outstanding Capital Shares immediately after the issuance of the Additional
Capital Shares.
The provisions of this subsection (d) shall not apply under any of the
circumstances for which an adjustment is provided in subsections (a), (b) or
(c). The provisions of this subsection (d) shall not apply to the issuance of
any Additional Capital Shares which are issued pursuant to the exercise of any
warrants, options or other subscription or purchase rights or pursuant to the
exercise of any conversion or exchange rights in any convertible or exchangeable
securities.
(e) Issuance of Warrants, Options or Other Rights. If the Company,
at any time during the Commitment Period, shall issue any warrants, options or
other rights to subscribe for or purchase any Additional Capital Shares and the
price per share for which Additional Capital Shares may at any time thereafter
be issuable pursuant to such warrants, options or other rights shall be less
than the Bid Price in effect immediately prior to such issuance, then, upon the
issuance of such warrants, options or other rights, the Ceiling Price shall be
adjusted as provided in subsection (d) hereof on the basis that:
1. the maximum number of Additional Capital Shares issuable
on the date of determination (subject to adjustment on the date(s) of exercise)
pursuant to all such warrants, options or other rights shall be deemed to have
been issued as of the date of actual issuance of such warrants, and or other
rights, and
2. the aggregate consideration for such maximum number of
Additional Capital Shares issuable pursuant to such warrants, options or other
rights, shall be deemed to be the consideration received by the Company for the
issuance of such
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warrants, options, or other rights plus the minimum consideration to be received
by the Company for the issuance of Additional Capital Shares pursuant to such
warrants, options, or other rights.
(f) Issuance of Convertible or Exchangeable Securities. If the
Company, at any time during the Commitment Period, shall issue any securities
convertible into or exchangeable for Capital Shares and the consideration per
share for which Additional Capital Shares may at any time thereafter be issuable
pursuant to the terms of such convertible or exchangeable securities shall be
less than the Bid Price in effect immediately prior to such issuance, then, upon
the issuance of such convertible or exchangeable securities, the Ceiling Price
shall be adjusted as provided in subsection (d) hereof on the basis that:
1. the maximum number of Additional Capital Shares necessary on
the date of determination (subject to adjustment on the date(s) of conversion or
exchange) to effect the conversion or exchange of all such convertible or
exchangeable securities shall be deemed to have been issued as of the date of
issuance of such convertible or exchangeable securities, and
2. the aggregate consideration for such maximum number of
Additional Capital Shares shall be deemed to be the consideration received by
the Company for the issuance of such convertible or exchangeable securities plus
the minimum consideration received by the Company for the issuance of such
Additional Capital Shares pursuant to the terms of such convertible or
exchangeable securities.
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No adjustment of the Ceiling Price shall be made under this subsection
(f) upon the issuance of any convertible or exchangeable securities that are
issued pursuant to the exercise of any warrants, options or other subscription
or purchase rights therefor, if the issuance of such warrants, options or other
rights was subject to subsection (e) hereof.
(g) Reserved.
(h) Liquidating Dividends, Etc. If the Company at any time during
the Commitment Period makes a distribution of its assets or evidences of
indebtedness to the holders of its Capital Shares as a dividend in liquidation
or by way of return of capital or other than as a dividend payable out of
earnings or surplus legally available for dividends under applicable law or any
distribution to such holders made in respect of the sale of all or substantially
all of the Company's assets (other than under the circumstances provided for in
the foregoing subsections (a) through (g)), then the Investor shall be entitled
to receive upon such Call (for which the Purchase Price is the Ceiling Price),
in addition to the Call Shares receivable in connection therewith, and without
payment of any consideration other than the Purchase Price, an amount in cash
equal to the value of such distribution per Capital Share multiplied by the
number of Call Shares that, on the record date for such distribution, are
issuable upon such Call (with no further adjustment being made following any
event that causes a subsequent adjustment in the number of Call Shares
issuable), and an appropriate provision therefor shall be made a part of any
such distribution. The value of a distribution that is paid in other than cash
shall be determined in good faith by the Board of Directors of the Company.
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(i) Other Provisions Applicable to Adjustments Under this Section.
The following provisions will be applicable to the making of adjustments in a
Ceiling Price hereinabove provided in this Section 9.1:
1. Computation of Consideration. To the extent that any
Additional Capital Shares or any convertible or exchangeable securities or any
warrants, options or other rights to subscribe for or purchase any Additional
Capital Shares or any convertible or exchangeable securities shall be issued
for a cash consideration, the consideration received by the Company therefor
shall be deemed to be the amount of the cash received by the Company therefor,
or, if such Additional Capital Shares or convertible or exchangeable securities
are offered by the Company for subscription, the subscription price, or, if such
Additional Capital Shares or convertible or exchangeable securities are sold to
or through underwriters or dealers for public offering without a subscription
offering, the initial public offering price, in any such case excluding any
amounts paid or incurred by the Company for and in the underwriting of, or
otherwise in connection with the issue thereof. To the extent that such issuance
shall be for a consideration other than cash, then, the amount of such
consideration shall be deemed to be the fair value of such consideration at the
time of such issuance as determined in good faith by the Company's Board of
Directors. The consideration
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for any Additional Capital Shares issuable pursuant to the terms of any
convertible or exchangeable securities shall be the consideration paid or
payable to the Company in respect of the subscription for or purchase of such
convertible or exchangeable securities, plus the additional consideration, if
any, payable to the Company upon the exercise of the right of conversion or
exchange in such convertible or exchangeable securities. In case of the issuance
at any time of any Additional Capital Shares or convertible or exchangeable
securities in payment or satisfaction of any dividend upon any class of stock
preferred as to dividends in a fixed amount, the Company shall be deemed to have
received for such Additional Capital Shares or convertible or exchangeable
securities a consideration equal to the amount of such dividend so paid or
satisfied.
2 Readjustment of Ceiling Price. Upon the expiration of
the right to convert or exchange any convertible or exchangeable securities, or
upon the expiration of any rights, options or warrants, the issuance of which
convertible or exchangeable securities, rights, options or warrants effected an
adjustment in Ceiling Price, if any such convertible or exchangeable securities
shall not have been converted or exchanged, or if any such rights, options or
warrants shall not have been exercised, the number of Capital Shares deemed to
be issued and Outstanding by reason of the fact that they were issuable upon
conversion or exchange of any such convertible or exchangeable securities or
upon exercise of any such rights, options, or warrants shall no longer be
computed as set forth above, and such Ceiling Price shall forthwith be
readjusted and thereafter be the price that it would have been (but reflecting
any other adjustments in the Ceiling Price made pursuant to the provisions of
this Section 9.1 after
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the issuance of such convertible or exchangeable securities, rights, options or
warrants) had the adjustment of the Ceiling Price made upon the issuance or sale
of such convertible or exchangeable securities or issuance of rights, options or
warrants been made on the basis of the issuance only of the number of Additional
Capital Shares actually issued upon conversion or exchange of such convertible
or exchangeable securities, or upon the exercise of such rights, options or
warrants, and thereupon only the number of Additional Capital Shares actually so
issued, if any, shall be deemed to have been issued and only the consideration
actually received by the Company (computed as set forth in sub-subsection (i)
hereof) shall be deemed to have been received by the Company. If the purchase
price provided for in any rights, options or warrants, or the additional
consideration (if any) payable upon the conversion or exchange of any
convertible or exchangeable securities, or the rate at which any convertible or
exchangeable securities are convertible into or exchangeable for Capital Shares
changes at any time (other than under or by reason of provisions designed to
protect against dilution), the Ceiling Price in effect at the time of the change
shall be adjusted to the Ceiling Price that would have been in effect at such
time had such rights, options, warrants or convertible or exchangeable
securities still outstanding provided for such changed purchase price,
additional consideration or conversion rate, as the case may be, at the time
initially granted, issued or sold.
(j) Other Action Affecting Capital Shares. In case after the date
hereof the Company shall take any action affecting the number of Outstanding
Capital Shares, other than an action described in any of the foregoing
subsections (a) through (h) hereof,
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inclusive, that in the opinion of the Company's Board of Directors would have a
materially adverse effect upon the rights of the Investor at the time of a Call,
the Ceiling Price shall be adjusted in such manner and at such time as the Board
or Directors on the advice of the Company's independent public accountants may
in good faith determine to be equitable in the circumstances.
(k) No Adjustments. No adjustments shall be made to the Ceiling
Price shall be made whatsoever as a result of (i) warrants and stock options
granted or reserved for issuance to employees and directors as described in the
SEC Documents on file with the Commission as of the date of this Agreement, (ii)
an outstanding offering of up to $3 million of Convertible Subordinated Notes
convertible into Common Stock at between $7 and $10 per share (iii) pursuant to
an Employee Stock Purchase Plan qualified under Section 423 of the Internal
Revenue Code, (iv) the purchase and sale of the Call Shares hereunder, (v) the
Warrant, or (vi) any Common Stock issuable upon conversion or exercise of any of
the foregoing.
Section 9.2 Notice of Adjustments. Whenever the Ceiling Price under the
terms of this Agreement shall be adjusted pursuant to Section 9.1 hereof, the
Company shall promptly make a certificate signed by its President or a Vice
President and by its Treasurer or Assistant Treasurer or its Secretary or
Assistant Secretary, setting forth in reasonable detail the event requiring the
adjustment, the amount of the adjustment, the method by which such adjustment
was calculated (including a description of the basis on which the Company's
Board of Directors made any determination hereunder), and the Ceiling Price and
number of Call Shares purchasable at that Ceiling Price after giving
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effect to such adjustment, and shall promptly cause copies of such certificate
to be mailed (by first class and postage prepaid) to the Investor.
ARTICLE X
CHOICE OF LAW
Section 10.1 Choice of Law. This Agreement shall be construed under the
laws of the State of California, without giving effect to provisions regarding
conflicts of law or choice of law.
ARTICLE XI
ASSIGNMENT; ENTIRE AGREEMENT, AMENDMENT; TERMINATION
Section 11.1 Assignment. Neither this Agreement nor any rights of the
Investor or the Company hereunder may be assigned by either party to any other
person. Notwithstanding the foregoing, (a) the provisions of this Agreement
shall inure to the benefit of, and be enforceable by, any transferee of any of
the Common Stock purchased or acquired by the Investor hereunder with respect to
the Common Stock held by such person, and (b) the Investor's interest in this
Agreement may be assigned at any time, in whole or in part, to any other person
or entity (including any affiliate of the Investor) upon the prior written
consent of the Company, which consent shall not to be unreasonably withheld.
Section 11.2 Termination. This Agreement shall terminate eighteen months
after the commencement of the Commitment Period; provided, however, that the
provisions of Articles VI, VII, VIII, X, XI, and XII shall survive the
termination of this Agreement.
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Section 11.3 Entire Agreement, Amendment. This Agreement, the
Registration Rights Agreement, and the Warrant constitute the full and entire
understanding and agreement between the parties with regard to the subjects
hereof and thereof, and no party shall be liable or bound to any other party in
any manner by any warranties, representations or covenants except as
specifically set forth in this Agreement or therein. Except as expressly
provided in this Agreement, neither this Agreement nor any term hereof may be
amended, waived, discharged or terminated other than by a written instrument
signed by both parties hereto.
ARTICLE XII
NOTICES; INDEMNIFICATION
Section 12.1 Notices. All notices, demands, requests, consents,
approvals, and other communications required or permitted hereunder shall be in
writing and, unless otherwise specified herein, shall be (i) personally served,
(ii) deposited in the mail, registered or certified, return receipt requested,
postage prepaid, (iii) delivered by reputable air courier service with charges
prepaid, or (iv) transmitted by hand delivery, telegram, or facsimile, addressed
as set forth below or to such other address as such party shall have specified
most recently by written notice. Any notice or other communication required or
permitted to be given hereunder shall be deemed effective (a) upon hand delivery
or delivery by facsimile, with accurate confirmation generated by the
transmitting facsimile machine, at the address or number designated below (if
delivered on a business day during normal business hours where such notice is
to be received), or the first business day following such delivery (if
delivered other
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than on a business day during normal business hours where such notice is to be
received), or (b) on the second business day following the date of mailing by
express courier service, fully prepaid, addressed to such address, or upon
actual receipt of such mailing, whichever shall first occur. The addresses for
such communications shall be:
If to Compressent Corporation:
Xxxxxxx Xxxxxxxxx
Chairman and Chief Executive Officer
0000 Xxxxxxxx Xxxxxx, Xxxxx 000
Xxx Xxxx, XX 00000-0000
Fax No. (000) 000-0000
with a copy to (shall not constitute notice):
Xxxx Xxxxxxx, Esq.
Wilson, Sonsini, Xxxxxxxx & Xxxxxx
000 Xxxx Xxxx Xxxx
Xxxx Xxxx, XX 00000-0000
Fax No. (000) 000-0000
If to the Investor:
Xxxx Xxxxxx
Kingsbridge Capital Limited
Xxxx Xxxxxx
Xxxxxxxxx, Xxxxxx Xxxxxxx
Xxxxxxxx xx Xxxxxxx
Fax No. 000-00000000000
with a copy to (shall not constitute notice):
Xxxx Xxxxx, Esq.
Xxxxxx & Xxxxx
000 Xxxx Xxxxxx
Xxx Xxxx, XX 00000
Fax No. (000) 000-0000
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Either party hereto may from time to time change its address or
facsimile number for notices under this Section 12.1 by giving at least ten (10)
days prior written notice of such changed address or facsimile number to the
other party hereto.
Section 12.2 Indemnification. The Company agrees to indemnify and hold
harmless the Investor, its partners, Affiliates, officers, directors, employees,
and duly authorized agents, and each Person or entity, if any, who controls the
Investor within the meaning of Section 15 of the Securities Act or Section 20 of
the Exchange Act, together with the Controlling Persons (as defined in the
Registration Rights Agreement) from and against any Damages (as defined in the
Registration Rights Agreement), joint or several, and any action in respect
thereof to which the Investor, its partners, Affiliates, officers, directors,
employees, and duly authorized agents, and any such Controlling Person becomes
subject to, resulting from, arising out of or relating to any misrepresentation,
breach of warranty or nonfulfillment of or failure to perform any covenant or
agreement on the part of Company contained in this Agreement, as such Damages
are incurred, unless such Damages result primarily from the Investor's gross
negligence, recklessness or bad faith in performing its obligations under this
Agreement.
Section 12.3 Method of Asserting Indemnification Claims. All claims for
indemnification by any Indemnified Party (as defined below) under Section 12.2
will be asserted and resolved as follows:
(a) In the event any claim or demand in respect of which any person
claiming indemnification under any provision of Section 12.2 (an "Indemnified
Party")
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might seek indemnity under Section 12.2 is asserted against or sought to be
collected from such Party by a person other than the Company, the Investor or
any affiliate of the Company or (a "Third Party Claim"), the Indemnified Party
shall deliver a written notification, enclosing a copy of all papers served, if
any, and specifying the nature of and basis for such Third Party Claim and for
the Indemnified Party's claim for indemnification that is being asserted under
any provision of Section 12.2 against any person (the "Indemnifying Party"),
together with the amount or, if not then reasonably ascertainable, the estimated
amount, determined in good faith, of such Third Party Claim (a "Claim Notice")
with reasonable promptness to the Indemnifying Party. If the Indemnified Party
fails to provide the Claim Notice with reasonable promptness after the
Indemnified Party receives notice of such Third Party Claim, the Indemnifying
Party will not be obligated to indemnify the Indemnified Party with respect to
such Third Party Claim to the extent that the Indemnifying Party's ability to
defend has been irreparably prejudiced by such failure of the Indemnified Party.
The Indemnifying Party will notify the Indemnified Party as soon as practicable
within the period ending thirty (30) calendar days following receipt by the
Indemnifying Party of either a Claim Notice or an Indemnity Notice (as defined
below) (the "Dispute Period") whether the Indemnifying Party disputes its
liability or the amount of its liability to the Indemnified Party under Section
12.2 and whether the Indemnifying Party desires, at its sole cost and expense,
to defend the Indemnified Party against such Third Party Claim.
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1. If the Indemnifying Party notifies the Indemnified
Party within the Dispute Period that the Indemnifying Party desires to defend
the Indemnified Party with respect to the Third Party Claim pursuant to this
Section 12.3(a), then the Indemnifying Party will have the right to defend, with
counsel reasonably satisfactory to the Indemnified Party, at the sole cost and
expense of the Indemnifying Party, such Third Party Claim by all appropriate
proceedings, which proceedings will be vigorously and diligently prosecuted by
the Indemnifying Party to a final conclusion or will be settled at the
discretion of the Indemnifying Party (but only with the consent of the
Indemnified Party in the case of any settlement that provides for any relief
other than the payment of monetary damages or that provides for the payment of
monetary damages as to which the Indemnified Party will not be indemnified in
full pursuant to Section 12.2). The Indemnifying Party will have full control of
such defense and proceedings, including any compromise or settlement thereof,
provided, however, that the Indemnified Party may, at the sole cost and expense
of the Indemnified Party, at any time prior to the Indemnifying Party's delivery
of the notice referred to in the first sentence of this clause (i), file any
motion, answer or other pleadings or take any other action that the Indemnified
Party reasonably believes to be necessary or appropriate to protect its
interests; and provided further, that if requested by the Indemnifying Party,
the Indemnified Party will, at the sole cost and expense of the Indemnifying
Party, provide reasonable cooperation to the Indemnifying Party in contesting
any Third Party Claim that the Indemnifying Party, elects to contest. The
Indemnified Party may participate in, but not control, any
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defense or settlement of any Third Party Claim controlled by the Indemnifying
Party pursuant to this clause (i), and except as provided in the preceding
sentence, the Indemnified Party will bear its own costs and expenses with
respect to such participation. Notwithstanding the foregoing, the Indemnified
Party may take over the control of the defense or settlement of a Third Party
Claim at any time if it irrevocably waives its right, to indemnity under Section
12.2 with respect to such Third Party Claim.
2. If the Indemnifying Party fails to notify the
Indemnified Party within the Dispute Period that the Indemnifying Party desires
to defend the Third Party Claim pursuant to Section 12.3(a), or if the
Indemnifying Party gives such notice but fails to prosecute vigorously and
diligently or settle the Third Party Claim, or if the Indemnifying Party fails
to give any notice whatsoever within the Dispute Period, then the Indemnified
Party will have the right to defend, at the sole cost and expense of the
Indemnifying Party, the Third Party Claim by all appropriate proceedings, which
proceedings will be prosecuted by the Indemnified Party in a reasonable manner
and in good faith or will be settled at the discretion of the Indemnified Party
(with the consent of the Indemnifying Party, which consent will not be
unreasonably withheld). The Indemnified Party will have full control of such
defense and proceedings, including any compromise or settlement thereof;
provided, however, that if requested by the Party, the Indemnifying Party will,
at the sole cost and expense of the Indemnifying Party, provide reasonable
cooperation to the Indemnified Party and its counsel in contesting any Third
Party Claim which the
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Indemnified Party is contesting. Notwithstanding the foregoing provisions of
this clause (ii), if the Indemnifying Party has notified the Indemnified Party
within the Dispute Period that the Indemnifying Party disputes its liability or
the amount of its liability hereunder to the Indemnified Party with respect to
such Third Party Claim and if such dispute is resolved in favor of the
Indemnifying Party in the manner provided in clause (iii) below, the
Indemnifying Party will not be required to bear the costs and expenses of the
Party's defense pursuant to this clause (ii) or of the Indemnifying Party's
participation therein at the Indemnified Party's request, and the Indemnified
Party will reimburse the Indemnifying Party in full for all reasonable costs and
expenses incurred by the Indemnifying Party in connection with such litigation.
The Indemnifying Party may participate in, but not control, any defense or
settlement controlled by the Indemnified Party pursuant to this clause (ii), and
the Indemnifying Party will bear its own costs and expenses with respect to such
participation.
3. If the Indemnifying Party notifies the Indemnified Party
that it does not dispute its liability or the amount of its liability to the
Indemnified Party with respect to the Third Party Claim under Section 12.2 or
fails to notify the Indemnified Party within the Dispute Period whether the
Indemnifying Party disputes its liability or the amount of its liability to the
Indemnified Party with respect to such Third Party Claim, the Loss in the amount
specified in the Claim Notice will be conclusively deemed a liability of the
Indemnifying Party under Section 12.2 and the Indemnifying Party shall pay the
amount of such Loss to the Indemnified Party on
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demand. If the Indemnifying Party has timely disputed its liability or the
amount of its liability with respect to such claim, the Indemnifying Party and
the Indemnified Party will proceed in good faith to negotiate a resolution of
such dispute, and if not resolved through negotiations within the Resolution
Period, such dispute shall be resolved by arbitration in accordance with
paragraph (c) of this Section 12.3.
(b) In the event any Indemnified Party should have a claim under
Section 12.2 against the Indemnifying Party that does not involve a Third Party
Claim, the Indemnified Party shall deliver a written notification of a claim for
indemnity under Section 12.2 specifying the nature of and basis for such claim,
together with the amount or, if not then reasonably ascertainable, the estimated
amount, determined in good faith, of such claim (an "Indemnity Notice") with
reasonable promptness to the Indemnifying Party. The failure by any Party to
give the Indemnity Notice shall not impair such party's rights hereunder except
to the extent that the Indemnifying Party demonstrates that it has been
irreparably prejudiced thereby. If the Indemnifying Party notifies the
Indemnified Party that it does not dispute the claim or the amount of the claim
described in such Indemnity Notice or fails to notify the Indemnified Party
within the Dispute Period whether the Indemnifying Party disputes the claim or
the amount of the claim described in such Indemnity Notice, the Loss in the
amount specified in the Indemnity Notice will be conclusively deemed a liability
of the Indemnifying Party under Section 12.2 and the Indemnifying Party shall
pay the amount of such Loss to the Indemnified Party on demand. If the
Indemnifying Party has timely disputed its liability or the amount of its
liability with respect to such
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claim, the Indemnifying Party and the Indemnified Party will proceed in good
faith to negotiate a resolution of such dispute, and if not resolved through
negotiations within the Resolution Period, such dispute shall be resolved by
arbitration in accordance with paragraph (c) of this Section 12.3.
(c) Any dispute under this Agreement or the Warrant shall be
submitted to arbitration (including, without limitation, pursuant to this
Section 12.3) and shall be finally and conclusively determined by the decision
of a board of arbitration consisting of three (3) members (the "Board of
Arbitration") selected as hereinafter provided. Each of the Indemnified Party
and the Indemnifying Party shall select one (1) member and the third member
shall be selected by mutual agreement of the other members, or if the other
members fail to reach agreement on a third member within twenty (20) days after
their selection, such third member shall thereafter be selected by the American
Arbitration Association upon application made to it for such purpose by the
Indemnified Party. The Board of Arbitration shall meet on consecutive business
days in Santa Xxxxx County, California or such other place as a majority of the
members of the Board of Arbitration determines more appropriate, and shall reach
and render a decision in writing (concurred in by a majority of the members of
the Board of Arbitration) with respect to the amount, if any, which the
Indemnifying Party is required to pay to the Indemnified Party in respect of a
claim filed by the Indemnified Party. In connection with rendering its
decisions, the Board of Arbitration shall adopt and follow such rules and
procedures as a majority of the members of the Board of Arbitration deem
necessary or appropriate. To the extent
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practical, decisions of the Board of Arbitration shall be rendered no more than
thirty (30) calendar days following commencement of proceedings with respect
thereto. The Board of Arbitration shall cause its written decision to be
delivered to the Indemnified Party and the Indemnifying Party. Any decision made
by the Board of Arbitration (either prior to or after the expiration of such
thirty (30) calendar day period) shall be final, binding and conclusive on the
Indemnified Party and the Indemnifying Party and entitled to be enforced to the
fullest extent permitted by law and entered in any court of competent
jurisdiction. Each party to any arbitration shall bear its own expense in
relation thereto, including but not limited to such party's attorneys' fees, if
any, and the expenses and fees of the Board of Arbitration shall be divided
between the Indemnifying Party and the Indemnified Party in the same proportion
as the portion of the related claim determined by the Board of Arbitration to be
payable to the Indemnified Party bears to the portion of such claim determined
not to be so payable.
ARTICLE XIII
Miscellaneous
Section 13.1 Counterparts. This Agreement may be executed in multiple
counterparts, each of which may be executed by less than all of the parties and
shall be deemed to be an original instrument which shall be enforceable against
the parties actually executing such counterparts and all of which together shall
constitute one and the same instrument.
Section 13.2 Entire Agreement. This Agreement, the Exhibits hereto, the
Warrant, and the Registration Rights Agreement set forth the entire agreement
and
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understanding of the parties relating to the subject matter hereof and
supersedes all prior and contemporaneous agreements, negotiations and
understandings between the parties, both oral and written relating to the
subject matter hereof. The terms and conditions of all Exhibits to this
Agreement are incorporated herein by this reference and shall constitute part of
this Agreement as if fully set forth herein.
Section 13.3 Survival: Severability. The representations, warranties,
covenants and agreements of the parties hereto shall survive each Closing
hereunder. In the event that any provision of this Agreement becomes or is
declared by a court of competent jurisdiction to be illegal, unenforceable or
void, this Agreement shall continue in full force and effect without said
provision; provided that such severability shall be ineffective if it materially
changes the economic benefit of this Agreement to any party.
Section 13.4 Title and Subtitles. The titles and subtitles used in this
Agreement are used for convenience only and are not to be considered in
construing or interpreting this Agreement.
Section 13.5 Reporting Entity for the Common Stock. The reporting entity
relied upon for the determination of the trading price or trading volume of the
Common Stock on any given Trading Day for the purposes of this Agreement shall
be Bloomberg, L.P. or any successor thereto. The written mutual consent of the
Investor and the Company shall be required to employ any other reporting
entity.
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IN WITNESS WHEREOF, the parties hereto have caused this Private Equity
Line of Credit Agreement to be executed by the undersigned, thereunto duly
authorized, as of the date first set forth above.
KINGSBRIDGE CAPITAL LIMITED:
By: /s/ XXXX XXXXXX
-------------------------------------
Xxxx Xxxxxx
Director
COMPRESSENT CORPORATION
By:
-------------------------------------
Xxxxxxx Xxxxxxxxx
Chairman and Chief Executive Officer
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IN WITNESS WHEREOF, the parties hereto have caused this Private Equity
Line of Credit Agreement to be executed by the undersigned, thereunto duly
authorized, as of the date first set forth above.
KINGSBRIDGE CAPITAL LIMITED:
By:
-------------------------------------
Xxxx Xxxxxx
Director
COMPRESSENT CORPORATION
By: /s/ XXXXXXX XXXXXXXXX
-------------------------------------
Xxxxxxx Xxxxxxxxx
Chairman and Chief Executive Officer
74
EXHIBIT A
THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE
U.S. SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY OTHER
APPLICABLE SECURITIES LAWS AND HAVE BEEN ISSUED IN RELIANCE UPON AN EXEMPTION
FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND SUCH OTHER
SECURITIES LAWS. NEITHER THIS SECURITY NOR ANY INTEREST OR PARTICIPATION HEREIN
MAY BE REOFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED, HYPOTHECATED
OR OTHERWISE DISPOSED OF, EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OR PURSUANT TO A TRANSACTION WHICH IS EXEMPT FROM, OR
NOT SUBJECT TO, SUCH REGISTRATION. THE HOLDER OF THIS CERTIFICATE IS THE
BENEFICIARY OF CERTAIN OBLIGATIONS OF THE COMPANY SET FORTH IN A PRIVATE EQUITY
LINE OF CREDIT AGREEMENT, DATED AS OF DECEMBER 3, 1997, BETWEEN COMPRESSENT
CORPORATION AND KINGSBRIDGE CAPITAL LIMITED. A COPY OF THE PORTION OF THE
AFORESAID AGREEMENT EVIDENCING SUCH OBLIGATIONS MAY BE OBTAINED FROM THE
COMPANY'S EXECUTIVE OFFICES.
DECEMBER 3, 1997
Warrant to Purchase up to 45,000 Shares of Common Stock of Compressent
Corporation.
Compressent Corporation, a Florida corporation (the "Company"), hereby
acknowledges that Kingsbridge Capital Limited (the "Investor") or any other
Warrant Holder is entitled, on the terms and conditions set forth below, to
purchase from the Company at any time during the Exercise Period up to 45,000
fully paid and nonassessable shares of Common Stock, par value $.001 per share,
of the Company (the "Common Stock"), as the same may be adjusted pursuant to
Section 6 herein, at the Exercise Price (hereinafter defined), as the same may
be adjusted pursuant to Section 6 herein. The resale of the shares of Common
Stock or other securities issuable upon exercise or exchange of this Warrant is
subject to the provisions of the Registration Rights Agreement (as defined
below).
Section 1. Definitions.
"Agreement" shall mean the Private Equity Line of Credit
Agreement, dated as of December 3, 1997, between the Company and the Investor.
"Capital Shares" shall mean the Common Stock and any shares of
any other class of common stock whether now or hereafter authorized, having the
right to participate in the distribution of earnings and assets of the Company
with the exception of except for any common stock issued pursuant (i) to
warrants, stock options, and convertible securities outstanding and
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described in the SEC Documents on file with the Commission as the date of this
Agreement (ii) an offering of up to $3 million of Convertible Subordinated
Notes convertible into Common Stock at between $7 and $10 per share, or (iii)
pursuant to an Employee Stock Purchase Plan qualified under Section 423 of the
Internal Revenue Code.
"Date of Exercise" shall mean the date that the advance copy of the
Exercise Form is sent by facsimile to the Company, provided that the original
Warrant and Exercise Form are received by the Company within reasonable time
thereafter. If the Warrant Holder has not sent advance notice by facsimile, the
Date of Exercise shall be the date the original Exercise Form is received by
the Company.
"Exercise Period" shall mean that period beginning on June 2, 1998 and
ending on June 2, 2001; provided that such period shall be extended one day for
each day after June 2, 1998, that a Registration Statement is not effective
during the period such Registration Statement is required to be effective
pursuant to the Registration Rights Agreement.
"Exercise Price" shall mean 115% of the Market Price for the Common Stock
on the Subscription Date.
"Per Share Warrant Value" shall mean the difference resulting from
subtracting the Exercise Price from the Bid Price of one share of Common Stock
on the Trading Day next preceding the Date of Exercise.
"Registration Rights Agreement" shall mean the registration rights
agreement, dated as of December 3, 1997, between the Company and the Investor.
"Warrant Holder" shall mean the Investor or any assignee or transferee of
all or any portion of this Warrant; and
other capitalized terms used herein that are defined in the Agreement
shall have the same means herein as therein.
Section 2. Cash Exercise: Net Exercise.
This Warrant may be exercised by the Warrant Holder, in whole or in part,
at any time and from time to time during the Exercise Period by surrender of
this Warrant, together with the form of exercise attached hereto as Exhibit A
(the "Exercise Form") duly executed by Warrant Holder, together with the full
Exercise Price for each share of Common Stock as to which this Warrant is
exercised to the Company at the address set forth in Section 13 hereof. In the
event that the Warrant is not exercised in full, the number of Warrant Shares
shall be reduced by the number of such Warrant Shares for which this Warrant is
exercised, and the Company, at its expense, shall forthwith issue and deliver
to or upon the order of the Warrant Holder a new Warrant of like tenor in the
name of the Warrant Holder or as the Warrant Holder may request, reflecting
such adjusted number of Warrant Shares.
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This Warrant may be exercised at any time during the Exercise Period, by
presentation and surrender of this Warrant to the Company at its principal
executive offices with a written notice of the Warrant Holder's intention to
effect a cashless exercise, including a calculation of the number of shares of
Common Stock to be issued upon such exercise in accordance with the terms
hereof (a "Cashless Exercise"). In the event of a Cashless Exercise, the holder
shall surrender this Warrant for that number of shares of Common Stock
determined by (i) multiplying the number of Warrant Shares for which this
Warrant is being exercised by the Per Share Warrant Value and (ii) dividing the
product by the Bid Price of one share of the Common Stock on the Trading Day
next preceding the Date of Exercise. In the event that the Warrant is not
exercised in full, the number of Warrant Shares shall be reduced by the number
of such Warrant Shares for which this Warrant is exercised, and the Company, at
its expense, shall forthwith issue and deliver to or upon the order of the
Warrant Holder a new Warrant of like tenor in the name of the Warrant Holder or
as the Warrant Holder may request, reflecting such adjusted number of Warrant
Shares.
Section 3. Ten Percent Limitation. The Warrant Holder may not exercise
this Warrant such that the number of Warrant Shares to be received pursuant to
such exercise aggregated with all other shares of Common Stock then owned by the
Warrant Holder beneficially or deemed beneficially owned by the Warrant Holder
would result in the Warrant Holder owning more than 9.9% of all of such Common
Stock as would be outstanding on such Closing Date, as determined in accordance
with Section 16 of the Exchange Act and the rules and regulations promulgated
thereunder. As of any date prior to the Date of Exercise, the aggregate number
of shares of Common Stock into which this Warrant is exercisable, together with
all other shares of Common Stock then beneficially owned (as such term is
defined in Rule 16a-1 under the Exchange Act) by such Warrant Holder and its
affiliates, shall not exceed 9.9% of the total outstanding shares of Common
Stock as of such date.
Section 4. Delivery of Stock Certificates.
(a) Subject to the terms and conditions of this Warrant, as soon as
practicable after the exercise of this Warrant in full or in part, and in any
event within three (3) Trading Days thereafter, the Company at its expense
(including, without limitation, the payment by it of any applicable issue taxes)
will cause to be issued in the name of and delivered to the Warrant Holder, or
as the Warrant Holder may lawfully direct, a certificate or certificates for the
number of validly issued, fully paid and non-assessable Warrant Shares to which
the Warrant Holder shall be entitled on such exercise, together with any other
stock or other securities or property (including cash, where applicable) to
which the Warrant Holder is entitled upon such exercise in accordance with the
provisions hereof.
(b) This Warrant may not be exercised as to fractional shares of Common
Stock. In the event that the exercise of this Warrant, in full or in part,
would result in the issuance of any fractional share of Common Stock, then in
such event the Warrant Holder shall receive in cash an amount equal to the Bid
Price of such fractional share within three (3) Trading Days.
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Section 5. Covenants of the Company.
(a) The Company shall use its reasonable best efforts to insure that
a Registration Statement under the Securities Act covering the resale or other
disposition thereof of the Warrant Shares by the Warrant Holder is effective to
the extent required by the Registration Rights Agreement.
(b) The Company shall take all necessary action and proceedings as
may be required and permitted by applicable law, rule and regulation,
including, without limitation the notification of the Nasdaq Small Cap Market,
for the legal and valid issuance of this Warrant and the Warrant Shares to the
Warrant Holder.
(c) From the date hereof through the last date on which this
Warrant is exercisable, the Company shall take all steps reasonably necessary
and within its control to insure that the Common Stock remains listed or quoted
on the Principal Market.
(d) The Warrant Shares, when issued in accordance with the terms
hereof, will be duly authorized and, when paid for or issued in accordance with
the terms hereof, shall be validly issued, fully paid and non-assessable.
(e) The Company has authorized and reserved for issuance to the
Warrant Holder the requisite number of shares of Common Stock to be issued
pursuant to this Warrant. The Company shall at all times reserve and keep
available, solely for issuance and delivery as Warrant Shares hereunder, such
shares of Common Stock as shall from time to time be issuable as Warrant Shares.
(f) With a view to making available to the Warrant Holder the
benefits of Rule 144 promulgated under the Securities Act ("Rule 144") and any
other rule or regulation of the Securities and Exchange Commission (the "SEC"),
that may at any time permit the Warrant Holder to sell securities of the
Company to the public without registration, the Company agrees to use its
reasonable best efforts to (i) make and keep public information available, as
those terms are understood and defined in Rule 144, at all times; and (ii) file
with the SEC in a timely manner all reports and other documents required of
the Company under the Securities Act and the Exchange Act.
Section 6. Adjustment of the Exercise Price. The Exercise Price
and, accordingly, the number of Warrant Shares issuable upon exercise of the
Warrant, shall be subject to adjustment from time to time upon the happening of
certain events as follows:
(a) Reclassification, Consolidation, Merger or Mandatory Share
Exchange. If the Company, at any time while this Warrant is unexpired and not
exercised in full, (i) reclassifies or changes its Outstanding Capital Shares
(other than a change in par value, or from par value to no par value per share,
or from no par value per share to par value or as a result of a subdivision or
combination of outstanding securities issuable upon exercise of the Warrant)
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or (ii) consolidates, merges or effects a mandatory share exchange with or into
another corporation (other than a merger or mandatory share exchange with
another corporation in which the Company is a continuing corporation and that
does not result in any reclassification or change, other than a change in par
value, or from par value to no par value per share, or from no par value per
share to par value, or as a result of a subdivision or combination of
Outstanding Capital Shares issuable upon exercise of the Warrant) at any time
while this Warrant is unexpired and not exercised in full, then in any such
event the Company, or such successor or purchasing corporation, as the case may
be, shall, without payment of any additional consideration therefore, amend this
Warrant or enter into a new Warrant providing that the Warrant Holder shall have
rights not less favorable to the holder than those then applicable to this
Warrant and to receive upon exercise under such amendment of this Warrant or new
Warrant, in lieu of each share of Common Stock theretofore issuable upon
exercise of the Warrant hereunder, the kind and amount of shares of stock, other
securities, money or property receivable upon such reclassification, change,
consolidation, merger, mandatory share exchange, sale or transfer by the holder
of one share of Common Stock issuable upon exercise of the Warrant had the
Warrant been exercised immediately prior to such reclassification, change,
consolidation, merger, mandatory share exchange or sale or transfer. Such
amended Warrant shall provide for adjustments which shall be as nearly
equivalent as may be practicable to the adjustments provided for in this
Section 6.1. The provisions of this subsection (a) shall similarly apply to
successive reclassifications, changes, consolidations, mergers, mandatory share
exchanges and sales and transfers.
(b) Subdivision or Combination of Shares. If the Company, at any time
while this Warrant is unexpired and not exercised in full, shall subdivide its
Common Stock, the Exercise Price shall be proportionately reduced as of the
effective date of such subdivision, or, if the Company shall take a record of
holders of its Common Stock for the purpose of so subdividing, as of such
record date, whichever is earlier. If the Company, at any time while this
Warrant is unexpired and not exercised in full, shall combine its Common Stock,
the Exercise Price shall be proportionately increased as of the effective date
of such combination, or, if the Company shall take a record of holders of its
Common Stock for the purpose of so combining, as of such record date, whichever
is earlier.
(c) Stock Dividends. If the Company, at any while this Warrant is
unexpired and not exercised in full, shall pay a dividend in its Capital
Shares, or make any other distribution of its Capital Shares, then the Exercise
Price shall be adjusted, as of the date the Company shall take a record of the
holders of its Capital Shares for the purpose of receiving such dividend or
other distribution (or if no such record is taken, as at the date of such
payment or other distribution), to that price determined by multiplying the
Exercise Price in effect immediately prior to such payment or other
distribution by a fraction:
1. the numerator of which shall be the total number of
Outstanding Capital Shares immediately prior to such dividend or distribution,
and
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2. the denominator of which shall be the total number of
Outstanding Capital Shares immediately after such dividend or distribution. The
provisions of this subsection (c) shall not apply under any of the
circumstances for which an adjustment is provided in subsections (a) or (b).
(d) Issuance of Additional Capital Shares. If the Company, at any time
while this Warrant is unexpired and not exercised in full, shall issue any
additional Capital Shares ("Additional Capital Shares"), otherwise than as
provided in the foregoing subsections (a) through (c) above, at a price per
share less, or for other consideration lower, than the Bid Price in effect
immediately prior to such issuance, or without consideration, then upon such
issuance the Exercise Price shall be reduced to that price determined by
multiplying the Exercise Price in effect immediately prior to such event by a
fraction:
1. the numerator of which shall be the number of Outstanding
Capital Shares immediately prior to the issuance of the Additional Capital
Shares plus the number of Capital Shares that the aggregate consideration for
the total number of such Additional Capital Shares so issued would purchase at
the then effective Bid Price, and
2. the denominator of which shall be the number of Outstanding
Capital Shares immediately after the issuance of the Additional Capital Shares.
The provisions of this subsection (d) shall not apply under any of the
circumstances for which an adjustment is provided in subsections (a), (b) or
(c). The provisions of this subsection (d) shall not apply to the issuance of
any Additional Capital Shares that are issued pursuant to the exercise of any
warrants, options or other subscription or purchase rights or pursuant to the
exercise of any conversion or exchange rights in any convertible or
exchangeable securities.
(e) Issuance of Warrants, Options or Other Rights. If the Company, at
any time while this Warrant is unexpired and not exercised in full, shall issue
any warrants, options or other rights to subscribe for or purchase any
Additional Capital Shares and the price per share for which Additional Capital
Shares may at any time thereafter be issuable pursuant to such warrants,
options or other rights shall be less than the Bid Price in effect immediately
prior to such issuance, then, upon the issuance of such warrants, options or
other rights, the Exercise Price shall be adjusted as provided in subsection
(d) hereof on the basis that:
1. the maximum number of Additional Capital Shares issuable on
the date of determination (subject to adjustment on the date(s) of exercise)
pursuant to all such warrants, options or other rights shall be deemed to have
been issued as of the date of actual issuance of such warrants, options or
other rights, and
2. the aggregate consideration for such maximum number of
Additional Capital Shares issuable pursuant to such warrants, options or other
rights, shall be deemed to be the consideration received by the Company for the
issuance of such warrants, options, or other rights plus the minimum
consideration to be received by the Company for the issuance of Additional
Capital Shares pursuant to such warrants, options, or other rights.
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(f) Issuance of Convertible or Exchangeable Securities. If the
Company, at any time while this Warrant is unexpired and not exercised in full,
shall issue any securities convertible into or exchangeable for Capital Shares
and the consideration per share for which Additional Capital Shares may at any
time thereafter be issuable pursuant to the terms of such convertible or
exchangeable securities shall be less than the Bid Price in effect immediately
prior to such issuance, then, upon the issuance of such convertible or
exchangeable securities, the Exercise Price shall be adjusted as provided in
subsection (d) hereof on the basis that:
1. the maximum number of Additional Capital Shares necessary on
the date of determination (subject to adjustment on the date(s) of conversion or
exchange) to effect the conversion or exchange of all such convertible or
exchangeable securities shall be deemed to have been issued as of the date of
issuance of such convertible or exchangeable securities, and
2. the aggregate consideration for such maximum number of
Additional Capital Shares shall be deemed to be the consideration received by
the Company for the issuance of such convertible or exchangeable securities plus
the minimum consideration received by the Company for the issuance of such
Additional Capital Shares pursuant to the terms of such convertible or
exchangeable securities.
No adjustment of the Exercise Price shall be made under this
subsection (f) upon the issuance of any convertible or exchangeable securities
that are issued pursuant to the exercise of any warrants, options or other
subscription or purchase rights therefor, if the issuance of such warrants,
options or other rights was subject to subsection (e) hereof.
(g) Adjustment of Number of Shares. Upon each adjustment of
the Exercise Price pursuant to any provisions of this Section 6.1, the number
of Warrant Shares issuable hereunder at the option of the Warrant Holder shall
be calculated, to the nearest one hundredth of a whole share, multiplying the
number of Warrant Shares issuable prior to an adjustment by a fraction:
1. the numerator of which shall be the Exercise Price before
any adjustment pursuant to this Section 6.1; and
2. the denominator of which shall be the Exercise Price after
such adjustment.
(h) Liquidating Dividends, Etc. If the Company, at any while
this Warrant is unexpired and not exercised in full, makes a distribution of
its assets or evidences of indebtedness to the holders of its Capital Shares as
a dividend in liquidation or by way of return of capital or other than as a
dividend payable out of earnings or surplus legally available for dividends
under applicable law or any distribution to such holders made in respect of the
sale of all or substantially all of the Company's assets (other than under the
circumstances provided for in the foregoing subsections (a) through (g) while
an exercise is pending, then the Warrant Holder shall be entitled to receive
upon such exercise of the Warrant in addition to the Warrant
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Shares receivable in connection therewith, and without payment of any
consideration other than the Exercise Price, an amount in cash equal to the
value of such distribution per Capital Share multiplied by the number of Warrant
Shares that, on the record date for such distribution, are issuable upon such
exercise of the Warrant (with no further adjustment being made following any
event which causes a subsequent adjustment in the number of Warrant Shares
issuable), and an appropriate provision therefor shall be made a part of any
such distribution. The value of a distribution that is paid in other than cash
shall be determined in good faith by the Board of Directors of the Company.
(i) Other Provisions Applicable to Adjustments Under this Section. The
following provisions will be applicable to the making of adjustments in a
Exercise Price hereinabove provided in this Section 6.1:
1. Computation of Consideration. To the extent that any Additional
Capital Shares or any convertible or exchangeable securities or any warrants,
options or other rights to subscribe for or purchase any Additional Capital
Shares or any convertible or exchangeable securities shall be issued for a cash
consideration, the consideration received by the Company therefor shall be
deemed to be the amount of the cash received by the Company therefor, or, if
such Additional Capital Shares or convertible or exchangeable securities
are offered by the Company for subscription, the subscription price,
or, if such Additional Capital Shares or convertible or exchangeable securities
are sold to or through underwriters or dealers for public offering without a
subscription offering, the initial public offering price, in any such case
excluding any amounts paid or incurred by the Company for and in the
underwriting of, or otherwise in connection with the issue thereof. To the
extend that such issuance shall be for a consideration other than cash, then,
the amount of such consideration shall be deemed to be the fair value of such
consideration at the time of such issuance as determined in good faith by the
Company's Board of Directors. The consideration for any Additional Capital
Shares issuable pursuant to any warrants, options or other rights to subscribe
for or purchase the same shall be the consideration received by the Company for
issuing such warrants, options or other rights, plus the addition consideration
payable to the Company upon the exercise of such warrants, options or other
rights. The consideration for any Additional Capital Shares issuable pursuant to
the terms of any convertible or exchangeable securities shall be the
consideration paid or payable to the Company in respect of the subscription for
or purchase of such convertible or exchangeable securities, plus the additional
consideration, if any, payable to the Company upon the exercise of the right of
conversion or exchange in such convertible or exchangeable securities. In case
of the issuance at any time of any Additional Capital Shares or convertible or
exchangeable securities in payment or satisfaction of any dividend upon any
class of stock preferred as to dividends in a fixed amount, the Company shall be
deemed to have received for such Additional Capital Shares or convertible or
exchangeable securities a consideration equal to the amount of such dividend so
paid or satisfied.
2. Readjustment of Exercise Price. Upon the expiration of the right to
convert or exchange any convertible or exchangeable securities, or upon the
expiration of any rights, options or warrants, the issuance of which
convertible or exchangeable securities, rights.
8
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options or warrants effected an adjustment in Exercise Price, if any such
convertible or exchangeable securities shall not have been converted or
exchanged, or if any such rights, options or warrants shall not have been
exercised, the number of Capital Shares deemed to be issued and Outstanding by
reason of the fact that they were issuable upon conversion or exchange of any
such convertible or exchangeable securities or upon exercise of any such rights,
options, or warrants shall no longer be computed as set forth above, and such
Exercise Price shall forthwith be readjusted and thereafter be the price that
it would have been (but reflecting any other adjustments in the Exercise Price
made pursuant to the provisions of this Section 6.1 after the issuance of such
convertible or exchangeable securities, rights, options or warrants) had the
adjustment of the Exercise Price made upon the issuance or sale of such
convertible or exchangeable securities or issuance of rights, options or
warrants been made on the basis of the issuance only of the number of
Additional Capital Shares actually issued upon conversion or exchange of such
convertible or exchangeable securities, or upon the exercise of such rights,
options or warrants, and thereupon only the number of Additional Capital Shares
actually so issued, if any, shall be deemed to have been issued and only the
consideration actually received by the Company (computed as set forth in
sub-subsection (i) hereof) shall be deemed to have been received by the
Company. If the purchase price provided for in any rights, options or warrants,
or the additional consideration (if any) payable upon the conversion or
exchange of any convertible or exchangeable securities, or the rate at which
any convertible or exchangeable securities are convertible into or exchangeable
for Capital Shares changes at any time (other than under or by reason of
provisions designed to protect against dilution), the Exercise Price in effect
at the time of the change shall be adjusted to the Exercise Price that would
have been in effect at such time had such rights, options, warrants or
convertible or exchangeable securities still outstanding provided for such
changed purchase price, additional consideration or conversion rate, as the
case may be, at the time initially granted, issued or sold.
3. Other Action Affecting Capital Shares. In case after the date hereof
the Company shall take any action affecting the number of Outstanding Capital
Shares, other than an action described in any of the foregoing subsections (a)
through (h) hereof, inclusive, which in the opinion of the Company's Board of
Directors would have a materially adverse effect upon the rights of the Warrant
Holder at the time of exercise of the Warrant, the Exercise Price shall be
adjusted in such manner and at such time as the Board or Directors on the
advice of the Company's independent public accountants may in good faith
determine to be equitable in the circumstances.
(j) No Adjustments. No adjustments shall be made to the Exercise Price
shall be made whatsoever as a result of (i) warrants and stock options granted
or reserved for issuance to employees and directors as described in the SEC
Documents on file with the Commission as of the date of this Agreement, (ii) an
outstanding offering of with up to $3 million of Convertible Subordinated Notes
convertible into Common Stock at between $7 and $10 per share, (iii) an
Employee Stock Option Plan qualified under Section 423 of the Internal Revenue
Code, (iv) the purchase and sale of the Call Shares hereunder, (v) and the
Warrant, or (vi) any Common Stock issuable upon conversion or exercise of any
of the foregoing.
9
83
(k) In the event the Company shall, at a time while the Warrant is
unexpired and outstanding, take any action which pursuant to subsections (a)
through (g) of this Section 6.1 may result in an adjustment of the Exercise
Price, the Company shall give to the Warrant Holder at its last address known
to the Company written notice of such action ten (10) days in advance of its
effective date in order to afford to the Warrant Holder an opportunity to
exercise the Warrant prior to such action becoming effective.
Section 6.1 Notice of Adjustments. Whenever the Exercise Price or
number of Warrant Shares shall be adjusted pursuant to Section 6.1 hereof, the
Company shall promptly make a certificate signed by its President or a Vice
President and by its Treasurer or Assistant Treasurer or its Secretary or
Assistant Secretary, setting forth in reasonable detail the event requiring the
adjustment, the amount of the adjustment, the method by which such adjustment
was calculated (including a description of the basis on which the Company's
Board of Directors made any determination hereunder), and the Exercise Price
and number of Warrant Shares purchasable at that Exercise Price after giving
effect to such adjustment, and shall promptly cause copies of such certificate
to be mailed (by first class and postage prepaid) to the Holder of the Warrant.
In the event the Company shall, at a time while the Warrant is unexpired and
not exercised in full, take any action that pursuant to subsections (a) through
(g) of Section 6.1 may result in an adjustment of the Exercise Price, the
Company shall give to the Holder of the Warrant at its last address known to
the Company written notice of such action ten (10) days in advance of its
effective date in order to afford to the Holder of the Warrant an opportunity
to exercise the Warrant prior to such action becoming effective.
Section 7. No Impairment. The Company will not, by amendment of
its Articles of Incorporation or By-Laws or through any reorganization,
transfer of assets, consolidation, merger, dissolution, issue or sale of
securities or any other voluntary action, avoid or seek to avoid the observance
or performance of any of the terms of this Warrant, but will at all times in
good faith assist in the carrying out of all such terms and in the taking of
all such action as may be necessary or appropriate in order to protect the
rights of the Warrant Holder against impairment. Without limiting the
generality of the foregoing, the Company (a) will not increase the par value of
any Warrant Shares above the amount payable therefor on such exercise, and (b)
will take all such action as may be reasonably necessary or appropriate in
order that the Company may validly and legally issue fully paid and
nonassessable Warrant Shares on the exercise of this Warrant.
Section 8. Rights As Stockholder. Prior to exercise of this
Warrant, the Warrant Holder shall not be entitled to any rights as a
stockholder of the Company with respect to the Warrant Shares, including
(without limitation) the right to vote such shares, receive dividends or other
distributions thereon or be notified of stockholder meetings. However, in the
event of any taking by the Company of a record of the holders of any class of
securities for the purpose of determining the holders thereof who are entitled
to receive any dividend (other than a cash dividend) or other distribution, any
right to subscribe for, purchase or otherwise acquire any shares of stock of any
class or any other securities or property, or to receive any other right, the
Company shall mail to each Warrant Holder, at least 10 days prior to the date
specified
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84
therein, a notice specifying the date on which any such record is to be taken
for the purpose of such dividend, distribution or right, and the amount and
character of such dividend, distribution or right.
Section 9. Replacement of Warrant. Upon receipt of evidence
reasonably satisfactory to the Company of the loss, theft, destruction or
mutilation of the Warrant and, in the case of any such loss, theft or
destruction of the Warrant, upon delivery of an indemnity agreement or security
reasonably satisfactory in form and amount to the Company or, in the case of
any such mutilation, on surrender and cancellation of such Warrant, the Company
at its expense will execute and deliver, in lieu thereof, a new Warrant of like
tenor.
Section 10. Choice of Law. This Agreement shall be construed under
the laws of the State of California, without giving effect to provisions
regarding conflicts of law or choice of law.
Section 11. Entire Agreement: Amendments. This Warrant, the
Registration Rights Agreement, and the Agreement contain the entire
understanding of the parties with respect to the matters covered hereby and
thereby. No provision of this Warrant may be waived or amended other than by a
written instrument signed by the party against whom enforcement of any such
amendment or waiver is sought.
Section 12. Restricted Securities.
(a) Registration or Exemption Required. This Warrant has been
issued in a transaction exempt from the registration requirements of the
Securities Act in reliance upon the provisions of Section 4(2) promulgated by
the SEC under the Securities Act. This Warrant and the Warrant Shares issuable
upon exercise of this Warrant may not be resold except pursuant to an effective
registration statement or an exemption to the registration requirements of the
Securities Act and applicable state laws.
(b) Legend. The Warrant and any Warrant Shares issued upon exercise
thereof, shall bear the following legend:
"THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED
(THE "SECURITIES ACT"), OR ANY OTHER APPLICABLE SECURITIES LAWS
AND HAVE BEEN ISSUED IN RELIANCE UPON AN EXEMPTION FROM THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND SUCH OTHER
SECURITIES LAWS. NEITHER THIS SECURITY NOR ANY INTEREST OR
PARTICIPATION HEREIN MAY BE REOFFERED, SOLD, ASSIGNED, TRANS-
FERRED, PLEDGED, ENCUMBERED, HYPOTHECATED OR OTHERWISE DISPOSED
OF, EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT
11
85
UNDER THE SECURITIES ACT OR PURSUANT TO A TRANSACTION WHICH IS
EXEMPT FROM, OR NOT SUBJECT TO, SUCH REGISTRATION. THE HOLDER
OF THIS CERTIFICATE IS THE BENEFICIARY OF CERTAIN OBLIGATIONS
OF THE COMPANY SET FORTH IN A PRIVATE EQUITY LINE OF CREDIT
AGREEMENT, DATED AS OF DECEMBER 3, 1997, BETWEEN COMPRESSENT
CORPORATION AND KINGSBRIDGE CAPITAL LIMITED. A COPY OF THE
PORTION OF THE AFORESAID AGREEMENT EVIDENCING SUCH OBLIGATIONS
MAY BE OBTAINED FROM THE COMPANY'S EXECUTIVE OFFICES."
Removal of such legend shall be in accordance with the legend removal
provisions in the Agreement.
(c) No Other Legend or Stock Transfer Restrictions. No legend other
than the one specified in Section 12(b) has been or shall be placed on the
share certificates representing the Common Stock and no instructions or "stop
transfer orders," so called, "stock transfer restrictions," or other
restrictions have been or shall be given to the Company's transfer agent with
respect thereto other than as expressly set forth in this Section 12.
(d) Assignment. Assuming the conditions of Section 12(a) above
regarding registration or exemption have been satisfied, the Warrant Holder may
sell, transfer, assign, pledge or otherwise dispose of this Warrant, in whole
or in part. The Warrant Holder shall deliver a written notice to Company,
substantially in the form of the Assignment attached hereto as Exhibit B,
indicating the person or persons to whom the Warrant shall be assigned and the
respective number of warrants to be assigned to each assignee. The Company
shall effect the assignment within ten (10) days, and shall deliver to the
assignee(s) designated by the Warrant Holder a Warrant or Warrants of like
tenor and terms for the appropriate number of shares.
(e) Investor's Compliance. Nothing in this Section 12 shall affect
in any way the Investor's obligations under any agreement to comply with all
applicable securities laws upon resale of the Common Stock.
Section 13. Notices. All notices, demands, requests, consents,
approvals, and other communications required or permitted hereunder shall be in
writing and shall be (i) personally served (ii) deposited in the mail,
registered or certified, return receipt requested, postage prepaid, (iii)
delivered by reputable air courier service with charges prepaid, or (iv)
transmitted by hand delivery, telegram or facsimile, addressed as set forth
below or to such other address as such party shall have specified most recently
by written notice. Any notice or other communication required or permitted to be
given hereunder shall be deemed effective (a) upon hand delivery or delivery by
facsimile (with accurate confirmation generated by the transmitting facsimile
machine) at the address or number designated below (if delivered on a business
day during normal business hours where such notice is to be received), or the
first business day following such delivery (if delivered other than on a
business day during normal
12
86
business hours where such notice is to be received) or (b) on the second
business day following the date of mailing by express courier service, fully
prepaid, addressed to such address, or upon actual receipt of such mailing,
whichever shall first occur. The addresses for such communications shall be:
if to Compressent
Corporation: Xxxxxxx Xxxxxxxxx
Chairman and Chief Executive Officer
0000 Xxxxxxxx Xxxxxx, Xxxxx 000
Xxx Xxxx, XX 00000-0000
Fax No. (000) 000-0000
with a copy to: Xxxx Xxxxxxx, Esq.
(shall not constitute notice)
Wilson, Sonsini, Xxxxxxxx & Xxxxxx
000 Xxxx Xxxx Xxxx
Xxxx Xxxx, XX 00000-0000
Fax No. (000) 000-0000
if to the Investor: Xxxx Xxxxxx
Kingsbridge Capital Limited
Xxxx Xxxxxx
Xxxxxxxxx Xxxxxx Xxxxxxx
Xxxxxxxx xx Xxxxxxx
Fax No. 000 00 000 000
with a copy to: Xxxx Xxxxx, Esq.
(shall not constitute notice)
Xxxxxx & Xxxxx
000 Xxxx Xxxxxx
Xxx Xxxx, XX 00000
Fax No. (000) 000-0000
13
87
Either party hereto may from time to time change its address or facsimile
number for notices under this Section 13 by giving at least ten (10) days'
prior written notice of such changed address or facsimile number to the other
party hereto.
Section 14. Miscellaneous. This Warrant and any term hereof may be
changed, waived, discharged or terminated only by an instrument in writing
signed by the party against which enforcement of such change, waiver, discharge
or termination is sought. This Warrant shall be construed and enforced in
accordance with and governed by the laws of the State of California. The
headings in this Warrant are for purposes of reference only, and shall not
limit or otherwise affect any of the terms hereof. The invalidity or
unenforceability of any provision hereof shall in no way affect the validity or
enforceability of any other provision.
14
88
IN WITNESS WHEREOF, this Warrant was duly executed by the undersigned,
thereunto duly authorized, as of the date first set forth above.
COMPRESSANT CORPORATION
By:
----------------------------------------------
Name: Xxxxxxx Xxxxxxxxx
Title: Chairman and Chief Executive Officer
Attested:
By:
----------------------------------------------
Name:
Title: Secretary
89
EXHIBIT A TO THE WARRANT
EXERCISE FORM
COMPRESSENT CORPORATION
The undersigned hereby irrevocably exercises the right to purchase
_____________ shares of Common Stock of COMPRESSENT CORPORATION, a Florida
corporation, evidenced by the attached Warrant, and herewith makes payment of
the Exercise Price with respect to such shares in full in the form of [cash or
check in the amount of $_______], [_______ Warrant Shares, which represent the
amount of Warrant Shares as provided in the attached Warrant to be canceled in
connection with such exercise], all in accordance with the conditions and
provisions of said Warrant.
The undersigned requests that stock certificates for such Warrant Shares
be issued, and a Warrant representing any unexercised portion hereof be issued,
pursuant to this Warrant in the name of the registered Holder and delivered to
the undersigned at the address set forth below.
Dated:
-------------------------------------
-------------------------------------------
Signature of Registered Holder
Name of Registered Holder (Print)
-------------------------------------------
Address
16
90
NOTICE
The signature to the foregoing Exercise Form must correspond to the name
as written upon the face of the attached Warrant in every particular, without
alteration or enlargement or any change whatsoever.
17
91
EXHIBIT B TO THE WARRANT
ASSIGNMENT
(To be executed by the registered Warrant Holder desiring to transfer
the Warrant)
FOR VALUED RECEIVED, the undersigned Warrant Holder of the attached
Warrant hereby sells, assigns and transfers unto the persons below named the
right to purchase ____________ shares of the Common Stock of COMPRESSENT
CORPORATION evidenced by the attached Warrant and does hereby irrevocably
constitute and appoint ___________________________ attorney to transfer the said
Warrant on the books of the Company, with full power of substitution in the
premises.
Dated:
_______________________________________________
Signature
18
92
Fill in for new Registration of Warrant:
--------------------------------------------------------------------------------
Name
--------------------------------------------------------------------------------
Address
--------------------------------------------------------------------------------
Please print name and address of assignee
(including zip code number)
19
93
NOTICE
This signature to the foregoing Assignment must correspond to the name
as written upon the face of the attached Warrant in every particular, without
alteration or enlargement or any change whatsoever.
20
94
[XXXXXX XXXXXXX XXXXXXXX & XXXXXX LETTERHEAD]
December 3, 1997
Kingsbridge Capital Limited
Xxxx Xxxxxx
Xxxxxxxxx, Xxxxxx Xxxxxxx
Xxxxxxxx xx Xxxxxxx
Re: Private Equity Line of Credit Agreement between Kingsbridge Capital
Limited and Compressent Corporation dated December 3, 1997
Ladies and Gentlemen:
This opinion is furnished to you pursuant to Section 3.2(h) of the Private
Equity Line of Credit Agreement Between Kingsbridge Capital Limited, a British
Virgin Islands entity (the "Investor") and Compressent Corporation (the
"Company"), dated December 3, 1997 (the "Line of Credit Agreement"), complete
with exhibits thereto, which provides for the issuance and sale by the Company
of up to 1,008,000 shares of Common Stock of the Company (the "Call Shares"), a
warrant to purchase 45,000 shares of Common Stock of the Company (the
"Warrant"), and the shares of Common Stock issued or issuable pursuant to
exercise of the Warrant (the "Warrant Shares"). All terms used herein have the
meanings defined for them in the Line of Credit Agreement unless otherwise
defined herein.
We have acted as counsel for the Company in connection with the
negotiation of the Line of Credit Agreement and the Registration Rights
Agreement between the Investor and the Company, dated December 3, 1997 (the
"Registration Rights Agreement") (collectively, the "Agreements"). As counsel,
we have made such legal and factual examinations and inquiries as we have
deemed advisable or necessary for the purpose of rendering this opinion. In
addition, we have examined, among other things, originals or copies of such
corporate records of the Company, certificates of public officials and such
other documents and questions of law that we consider necessary or advisable
for the purpose of rendering this opinion. In such examination we have assumed
the genuineness of all signatures on original documents, the authenticity and
completeness of all documents submitted to us as originals, the conformity to
original documents of all copies submitted to us as copies thereof, the legal
capacity of natural persons, and the due execution and delivery of all
documents (except as to due execution and delivery by the Company) where due
execution and delivery are a prerequisite to the effectiveness thereof.
As used in this opinion, the expression "to our knowledge" or similar
language with reference to matters of fact means that, after an examination of
documents made available to us by the Company including, without limitation,
the Articles of Incorporation and Bylaws of the Company, and after inquiries of
officers of the Company, but without any further independent factual
investigation, we find no reason to believe that the opinions expressed herein
are factually
95
XXXXXX XXXXXXX XXXXXXXX & XXXXXX
Kingsbridge Capital Limited
December 3, 1997
Page 2
incorrect. Further, the expression "to our knowledge" or similar language with
reference to matters of fact refers to the current actual knowledge of the
attorneys of this firm who have worked on matters for the Company solely in
connection with the Agreements and the transactions contemplated thereby. Except
to the extent expressly set forth herein or as we otherwise believe to be
necessary to our opinion, we have not undertaken any independent investigation
to determine the existence or absence of any fact, and no inference as to our
knowledge of the existence or absence of any fact should be drawn from our
representation of the Company or the rendering of the opinion set forth below.
For purposes of this opinion, we are assuming that you have all requisite
power and authority, and have taken any and all necessary corporate or
partnership action, to execute and deliver the Agreements, and we are assuming
that the representations and warranties made by the Investor in the Agreements
and pursuant thereto are true and correct. We are also assuming that the
Investor will be purchasing the Call Shares and the Warrant Shares for value,
in good faith and without notice of any adverse claims within the meaning of
the California Uniform Commercial Code.
The opinions hereinafter expressed are subject to the following
qualifications:
(a) We express no opinion as to the effect of applicable
bankruptcy, insolvency, reorganization, moratorium or other similar federal or
state laws affecting the rights of creditors;
(b) We express no opinion as to the effect or availability of
rules of law governing specific performance, injunctive relief or other
equitable remedies (regardless of whether any such remedy is considered in a
proceeding at law or in equity);
(c) We express no opinion as to compliance with applicable
anti-fraud provisions of federal or state securities laws;
(d) We express no opinion as to the enforceability of the
indemnification provisions of Section 12 of the Line of Credit Agreement and
Article III of the Registration Rights Agreement, to the extent the provisions
thereof may be subject to limitations of public policy and the effect of
applicable statutes and judicial decisions;
(e) We express no opinion as to the enforceability of the
various liquidated damages and penalty provisions in the Line of Credit
Agreement and Registration Rights Agreement; and
(f) We are member of the Bar of the State of California, and we
express no opinion as to any matter relating to the laws of any jurisdiction
other than the federal laws of the United States of America and laws of the
State of California.
96
XXXXXX XXXXXXX XXXXXXXX & XXXXXX
Kingsbridge Capital Limited
December 3, 1997
Page 3
Based upon and subject to the foregoing, we are of the opinion that:
1. The Company is a corporation duly organized, validly existing and in
good standing under the law of the State of Florida and has all requisite power
and authority (corporate and other) to carry on its business and to own, lease
and operate its properties and assets as described in the Company's SEC
Documents. To our knowledge, the Company does not have any subsidiaries. The
Company is duly qualified as a foreign corporation to do business and is in
good standing in every jurisdiction in which the Company owns or leases
property, other than those in which the failure so to qualify would not have a
Material Adverse Effect.
2. To our knowledge, except as disclosed in the SEC Documents, there are
no claims, actions, suits, proceedings or investigations that are pending
against the Company or its properties, or against any officer or director of
the Company in his or her capacity as such, nor has the Company received any
written threat of any such claims, actions, suits, proceedings, or
investigations which are required to be and have not been disclosed in the SEC
Documents.
3. To our knowledge, there are no outstanding options, warrants, calls
or commitments of any character whatsoever relating to, or securities, rights
or obligations convertible into or exchangeable for, or giving any right to
subscribe for or acquire any shares of Common Stock or contracts, commitments,
understanding, or arrangements by which the Company is or may become bound to
issue additional shares of Common Stock, or securities or rights convertible
or exchangeable into shares of Common Stock, except (i) as described in the
Company's representations in the Line of Credit Agreement.
4. The issuance of the Warrant is, and the issuance of the Warrant
Shares on exercise of the Warrant as provided in the Warrant and the issuance
of Call Shares pursuant to any calls that may be made by the Company in
accordance with the Agreements will be, exempt from registration under the
Securities Act of 1933 and will be in compliance with California state
securities laws. The Warrant is, and when so issued the Call Shares and the
Warrant Shares will be, duly and validly issued, fully paid and nonassessable,
and free of any liens, encumbrances and preemptive or similar rights contained
in the Company's Articles of Incorporation (the "Articles") or Bylaws or, to
our knowledge, in any agreement to which the Company is party which has been
filed with the SEC.
5. The Company has the requisite corporate power and authority to enter
into and perform its obligations under the Agreements and to issue the Call
Shares, the Warrant, and the Warrant Shares. The execution, issuance and
delivery of the Agreements and the Warrant by the Company and the consummation
by it of the transactions contemplated thereby have been duly authorized by
all necessary corporate action and not further consent or authorization of the
Company's Board of Directors or stockholders is required. The Agreements and
the Warrant have been duly executed and delivered by the Company and constitute
valid and binding
97
WILSON, SONSINI, XXXXXXXX & XXXXXX
Kingsbridge Capital Limited
December 3, 1997
Page 4
obligations of the Company enforceable against the Company in accordance with
their terms, except as such enforceability may be limited by applicable
bankruptcy, insolvency, or similar laws relating to, or affecting generally the
enforcement of, creditors' rights and remedies or by other equitable principles
of general application.
6. To our knowledge, the Company is not in violation of any terms of its
Articles or Bylaws. The execution, delivery and performance of and compliance
with the terms of the Agreements, and the issuance of the Call Shares, Warrant,
and the Warrant Shares, do not violate any provision of the Articles or Bylaws
or, to our knowledge, any provision of any applicable federal or state law,
rule or regulation.
This opinion is furnished to the Purchaser solely for its benefit in
connection with the purchase of the Shares, and may not be relied upon by any
other person or for any other purpose without our prior written consent.
Very truly yours,
WILSON, SONSINI, XXXXXXXX & XXXXXX
Professional Corporation
/s/ WILSON, SONSINI, XXXXXXXX & XXXXXX
98
EXHIBIT C
COMPLIANCE CERTIFICATE
COMPRESSENT CORPORATION
The undersigned, Xxxxxxx Xxxxxxxxx, hereby certifies, with respect to
shares of common stock of the Company issuable in connection with the Optional
Purchase Notice date _______ (the "Notice"), delivered pursuant to Article II
of the Agreement, as follows:
1. The undersigned is the duly elected Chairman and Chief Executive
Officer of the Company.
2. The representations and warranties of the Company set forth in
Article V of the Agreement dated as of December 3, 1997, are true and correct
in all material respects as though made on and as of the date hereof.
3. The Company has performed with all covenants and agreements to be
performed by the Company on or prior to the Closing Date related to the Notice
and has complied with all obligations and conditions contained in Article III
of the Agreement.
The undersigned has executed this Certificate this ____ day of ________,
199__.
--------------------------------------
Xxxxxxx Xxxxxxxxx
Chairman and Chief Executive Officer
66
99
EXHIBIT D
INSTRUCTIONS TO TRANSFER AGENT
COMPRESSENT CORPORATION
____________________ , 1997
[Name, address and phone and fax number of Transfer Agent]
Dear Sirs:
Reference is made to the Private Equity Line of Credit Agreement (the
"Agreement") dated as of December 3, 1997 between the Kingsbridge Capital
Limited (the "Investor") and Compressent Corporation (the "Company"). Pursuant
to the Agreement, subject to the terms and conditions set forth in the
Agreement the Investor has agreed to purchase from the Company and the Company
has agreed to sell to the Investor from time to time during the term of the
Agreement shares of Common Stock of the Company, par value $.001 per share
(the "Common Stock") and (ii) the Company has issued to the Investor a warrant
to purchase Common Stock (the "Warrant"). As a condition to the effectiveness
of the Agreement, the Company has agreed to issue to you, as the transfer agent
for the Common Stock (the "Transfer Agent"), these instructions relating to the
Common Stock to be issued to the Investor (or a permitted assignee) pursuant to
the Agreement or upon exercise of the Warrants. All terms used herein and not
otherwise defined shall have the meaning set forth in the Agreement.
1. ISSUANCE OF COMMON STOCK WITHOUT THE LEGEND
Pursuant to the Agreement, the Company is required to prepare and file
with the Commission, and maintain the effectiveness of, a registration statement
or registration statements registering the resale of the Common Stock to be
acquired by the Investor (i) under the Agreement and (ii) upon exercise of the
Warrants. The Company will advise the Transfer Agent in writing of the
effectiveness of any such registration statement promptly upon its being
declared effective. The Transfer Agent shall be entitled to rely on such
advice and shall assume that the effectiveness of such registration statement
remains in effect unless the Transfer Agent is otherwise advised in writing by
the Company and shall not be required to independently confirm the continued
effectiveness of such registration statement. In the circumstances set forth in
the following two
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paragraphs, the Transfer Agent shall deliver to the Investor certificates
representing Common Stock not bearing the Legend without requiring further
advice or instruction or additional documentation from the Company or its
counsel or the Investor or its counsel or any other party (other than as
described in such paragraphs).
At any time after the effective date of the applicable registration
statement (provided that the Company has not informed the Transfer Agent in
writing that such registration statement is not effective) upon any surrender
of one or more certificates evidencing Common Stock which bear the Legend, to
the extent accompanied by a notice requesting the issuance of new certificates
free of the Legend to replace those surrendered, the Transfer Agent shall
deliver to the Investor the certificates representing the Common Stock not
bearing the Legend, in such names and denominations as the Investor shall
request, provided that:
(a) in connection with such event, the Investor (or its permitted
assignee) shall confirm in writing to the Transfer Agent that (i) the
Investor confirms to the transfer agent that it has sold, pledged or
otherwise transferred or agreed to sell, pledge or otherwise transfer such
Common Stock in a bona fide transaction to a designated transferee that is
not an affiliate of the Company; and (ii) the Investor confirms to the
transfer agent that the Investor has complied with the prospectus delivery
requirement;
(b) the Investor (or its permitted assignee) shall represent that it is
permitted to dispose thereof with limitation as to amount of manner of sale
pursuant to Rule 144(k) under the Securities Act; or
(c) the Investor, its permitted assignee, or either of their brokers
confirms to the transfer agent that (i) the Investor has held the shares of
Common Stock for at least one year, (ii) counting the shares surrendered as
being sold upon the date the unlegended Certificates would be delivered to
the Investor (or the Trading Day immediately following such date is not a
Trading Day), the Investor will not have sold more than the greater of (a)
one percent (1%) of the total number of outstanding shares of Common Stock
or (b) the average weekly trading volume of the Common Stock for the
preceding four weeks during the three months ending upon such delivery date
(or the Trading Day immediately following if such date
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is not a Trading Day), and (iii) the Investor has complied with the manner
of sale and notice requirements of Rule 144 under the Securities Act.
2. MECHANICS OF DELIVERY CERTIFICATES
REPRESENTING COMMON STOCK
In connection with any Closing pursuant to which the Investor acquires
Common Stock under the Agreement, the Transfer Agent shall deliver certificates
representing Common Stock (with or without the Legend, as appropriate) as
promptly as practicable, but in no event later than three business days, after
such Closing.
3. FEES OF TRANSFER AGENT; INDEMNIFICATION
The Company agrees to pay the Transfer Agent for all fees incurred in
connection with these Irrevocable Instructions. The Company agrees to indemnify
the Transfer Agent and its officers, employees and agents, against any losses,
claims, damages or liabilities, joint or several, to which it or they become
subject based upon the performance by the Transfer Agent of its duties in
accordance with the Irrevocable Instructions.
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4. THIRD PARTY BENEFICIARY
The Company and the Transfer Agent acknowledge and agree that the
Investor is an express third party beneficiary of these Irrevocable
Instructions and shall be entitled to rely upon, and enforce, the provisions
thereof.
COMPRESSENT CORPORATION
By:
------------------------------------
Xxxxxxx Xxxxxxxxx
Chairman and Chief Executive Officer
AGREED:
[NAME OF TRANSFER AGENT]
By:
------------------------------------
Name:
Title:
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EXHIBIT E
ADJUSTMENT PERIOD NOTICE
COMPRESSENT CORPORATION
Notice is hereby granted that the Board of Directors of Compressent
Corporation (the "Company") anticipates executing a merger or acquisition
agreement within ninety (90) days of the date hereof.
The following five-week period is hereby designated as an Adjustment
Period pursuant to Section 2.4 of the PRIVATE EQUITY LINE OF CREDIT AGREEMENT
dated December 3, 1997, by and between the Company and Kingsbridge Capital
Limited.
Beginning:
-----------------------------------
(no sooner than twenty-one (21) days from the date this notice is deemed
to be delivered)
Expiring:
------------------------------------
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The undersigned has executed this Certificate this ___ day of
________________ , 199__ .
________________________________________
Xxxxxxx Xxxxxxxxx
Chairman and Chief Executive Officer
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