INVESTMENT AGREEMENT
dated as of
January 12, 2001
among
DATAWATCH CORPORATION,
WC CAPITAL, LLC
and
CARNEGIE HILL ASSOCIATES, LLC
TABLE OF CONTENTS
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ARTICLE 1
DEFINITIONS
SECTION 1.01. Definitions.................................................1
ARTICLE 2
PURCHASE AND SALE
SECTION 2.01. Purchase and Sale...........................................5
SECTION 2.02. Closing.....................................................5
SECTION 2.03. Legending of Securities.....................................5
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
SECTION 3.01. Corporate Existence and Power...............................6
SECTION 3.02. Corporate Authorization.....................................6
SECTION 3.03. Governmental Authorization..................................7
SECTION 3.04. Non-contravention...........................................7
SECTION 3.05. Capitalization..............................................7
SECTION 3.06. Subsidiaries................................................8
SECTION 3.07. SEC Filings.................................................8
SECTION 3.08. Financial Statements........................................9
SECTION 3.09. Absence of Certain Changes..................................9
SECTION 3.10. No Undisclosed Material Liabilities........................10
SECTION 3.11. Litigation.................................................10
SECTION 3.12. Compliance with Laws.......................................11
SECTION 3.13. Finders' Fees..............................................11
SECTION 3.14. Employee Benefit Plans.....................................11
SECTION 3.15. Taxes......................................................12
SECTION 3.16. Environmental Matters......................................12
SECTION 3.17. Title to Properties........................................14
SECTION 3.18. Intellectual Property......................................14
SECTION 3.19. Significant Agreements.....................................15
SECTION 3.20. Exemption from Registration................................16
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ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS
SECTION 4.01. Organization...............................................16
SECTION 4.02. Power and Authorization....................................16
SECTION 4.03. Finders' Fees..............................................16
SECTION 4.04. Purchase for Investment....................................17
SECTION 4.05. Disclosure of Information..................................17
SECTION 4.06. Restricted Securities......................................17
ARTICLE 5
CONDITIONS TO CLOSING
SECTION 5.01. Conditions to the Obligations of the Purchasers............17
SECTION 5.02. Conditions to the Obligations of the Company...............21
ARTICLE 6
COVENANTS OF THE COMPANY
SECTION 6.01. Notices of Certain Events..................................21
SECTION 6.02. Registration Rights........................................22
SECTION 6.03. Access to Book and Records.................................22
ARTICLE 7
ADDITIONAL COVENANTS
SECTION 7.01. Board Representation; Committees...........................22
SECTION 7.02. Reports....................................................23
SECTION 7.03. Preemptive Rights..........................................24
SECTION 7.04. Fees and Expenses..........................................26
SECTION 7.05. Use of Proceeds............................................26
ARTICLE 8
TERMINATION
SECTION 8.01. Grounds for Termination....................................27
SECTION 8.02. Effect of Termination......................................27
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ARTICLE 9
MISCELLANEOUS
SECTION 9.01. Notices....................................................27
SECTION 9.02. Survival...................................................29
SECTION 9.03. Amendments and Waivers.....................................29
SECTION 9.04. Successors and Assigns.....................................29
SECTION 9.05. Governing Law..............................................29
SECTION 9.06. Counterparts; Third Party Beneficiaries....................29
SECTION 9.07. Public Announcements.......................................30
SECTION 9.08. Entire Agreement; Exhibits.................................30
SECTION 9.09. Headings...................................................30
Exhibit A Registration Rights
Exhibit B Share Allocation
Exhibit C Form of Indemnity Contract
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INVESTMENT AGREEMENT
INVESTMENT AGREEMENT ("Agreement"), dated as of January 12,
2001, among Datawatch Corporation, a Delaware corporation (the "Company"), WC
Capital, LLC, a Delaware limited liability company ("WC"), and Carnegie Hill
Associates, LLC, a Delaware limited liability company ("CHA" and, together with
WC, the "Purchasers").
WHEREAS, the Company desires to sell to the Purchasers, and
the Purchasers desire to purchase from the Company, an aggregate of 1,875,000
shares of Common Stock upon the terms and subject to the conditions of this
Agreement.
NOW, THEREFORE, in consideration of the premises and the
respective representations, warranties, covenants, agreements and conditions
contained herein, each of the Company and the Purchasers agrees as follows:
ARTICLE 1
DEFINITIONS
SECTION 1.01. Definitions. (a) The following terms, as used
herein, have the following meanings:
"1933 Act" means the Securities Act of 1933, as amended, and
the rules and regulations promulgated thereunder.
"1934 Act" means the Securities Exchange Act of 1934, as
amended, and the rules and regulations promulgated thereunder.
"Affiliate" means, with respect to any Person, any other
Person directly or indirectly controlling, controlled by or under common control
with such Person.
"Balance Sheet" means the audited consolidated balance sheet
of the Company as of September 30, 2000.
"Balance Sheet Date" means September 30, 2000.
"beneficial ownership" and "beneficially own" shall be
determined in accordance with Rules 13d-3 and 13d-5 under the 1934 Act.
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"Benefit Arrangement" means any employment, severance or
similar contract or arrangement (whether or not written) or any plan, policy,
fund, program or contract or arrangement (whether or not written) providing for
compensation, bonus, profit-sharing, stock option or other stock-related rights
or other forms of incentive or deferred compensation, vacation benefits,
insurance coverage (including any self-insured arrangements), health or medical
benefits, disability benefits, worker's compensation, supplemental unemployment
benefits, severance benefits and post-employment or retirement benefits
(including compensation, pension, health, medical or life insurance or other
benefits) that (i) is not an Employee Plan; (ii) is entered into, maintained,
administered or contributed to, as the case may be, by the Company or any of its
Affiliates; and (iii) covers any employee or former employee of the Company or
any Subsidiary.
"Closing Date" means the date of the Closing.
"Code" means the United States Internal Revenue Code of 1986,
as amended.
"Commission" means the United States Securities and Exchange
Commission.
"Common Stock" means the Common Stock of the Company, par
value $.01 per share.
"Common Stock Plan" means any present or future Employee Plan,
employment agreement, restricted stock, stock option, stock purchase or dividend
reinvestment plan or other similar type of plan or arrangement of the Company
which provides for the issuance of equity securities or options or rights to
purchase equity securities of the Company.
"Convertible Securities" means any securities convertible into
or exercisable or exchangeable for Voting Securities.
"Employee Plan" means any "employee benefit plan," as defined
in Section 3(3) of ERISA, that (i) is subject to any provision of ERISA; (ii) is
maintained, administered or contributed to by the Company or any of its
Affiliates; and (iii) covers any employee or former employee of the Company or
any Subsidiary.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended, and any successor statute thereto, and the rules and
regulations promulgated thereunder.
"ERISA Affiliate" of any entity means any other entity which,
together with such entity, would be treated as a single employer under Section
414 of the Code.
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"Lien" means, with respect to any property or asset, any
mortgage, lien, pledge, charge, security interest, encumbrance or other adverse
claim of any kind in respect of such property or asset. For the purposes of this
Agreement, a Person shall be deemed to own subject to a Lien any property or
asset which it has acquired or holds subject to the interest of a vendor or
lessor under any conditional sale agreement, capital lease or other title
retention agreement relating to such property or asset.
"Material Adverse Effect" means a material adverse effect on
the condition (financial or otherwise), business, assets, results of operations
or prospects of the Company and the Subsidiaries, taken as a whole.
"Multiemployer Plan" means a multiemployer plan, as defined in
Section 3(37) of ERISA.
"New Shares" means any newly issued shares of capital stock of
the Company, including Common Stock and any class or series of preferred stock,
whether authorized or not, and Rights to acquire shares of Common Stock or
preferred stock.
"Originally Issued Shares" means, with respect to any
Purchaser and as of any time, the aggregate number of Shares issued to such
Purchaser on the Closing Date.
"PBGC" means the Pension Benefit Guaranty Corporation.
"Person" means an individual, corporation, partnership,
limited liability company, association, trust or other entity or organization,
including a government or political subdivision or an agency or instrumentality
thereof.
"Registration Rights Agreement" means the registration rights
set forth in Exhibit A.
"Rights" means any options, warrants, convertible or
exchangeable securities or other rights, however denominated, to subscribe for,
purchase or otherwise acquire any equity interest, including any Common Stock or
preferred stock of any class or series, with or without payment of additional
consideration in cash or property, either immediately or upon the occurrence of
a specified date or specified event or the satisfaction or happening of any
other condition or contingency.
"Subsidiary" means any entity of which securities or other
ownership interests having ordinary voting power to elect a majority of the
board of directors or other persons performing similar functions are at the time
directly or indirectly owned by the Company.
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"Tax" (and, with correlative meaning, "Taxes" and "Taxable")
means (i) any net income, alternative or add-on minimum tax, gross income, gross
receipts, sales, use, ad valorem, value added, transfer, franchise, profits,
license, withholding on amounts paid to or by any Person, payroll, employment,
excise, severance, stamp, occupation, premium, property, environmental or
windfall profit tax, custom, duty or other tax, governmental fee or other like
assessment or charge of any kind whatsoever, together with any interest or any
penalty, addition to tax or additional amount imposed by any governmental
authority (a "Taxing Authority") responsible for the imposition of any such tax
(domestic or foreign); (ii) any liability of any Person for the payment of any
amounts of the type described in clause (i) as a result of being a member of any
affiliated, consolidated, combined or unitary group or being a party to any
agreement or arrangement whereby liability of a Person for payments of such
amounts was determined or taken into account with reference to the liability of
any other Person for any period; and (iii) any liability of any Person for the
payment of any amounts of the type described in clause (i) as a result of any
express or implied obligation to indemnify any other Person.
"Voting Securities" means all securities of the Company
entitled, in the ordinary course, to vote in the election of Directors of the
Company.
(b) Each of the following terms is defined in the Section set
forth opposite such term:
Term Section
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Accredited Investor............................ 4.04
Additional Shares.............................. 7.03(c)
Closing........................................ 2.02
Company Securities............................. 3.05(b)
Company 10-K................................... 3.07(a)
Contract....................................... 3.04
Environmental Laws............................. 3.16(c)(ii)
Intellectual Property.......................... 3.18
Notice......................................... 7.03(a)
Purchase Price................................. 2.01
Purchaser Nominee.............................. 7.01(a)
Returns........................................ 3.15
SEC Reports.................................... 3.07(a)
Shares......................................... 2.01
Significant Agreements......................... 3.19
Subsidiary Securities.......................... 3.06(b)
Transaction.................................... 7.03(b)
Transaction Shares............................. 7.03(b)
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ARTICLE 2
PURCHASE AND SALE
SECTION 2.01. Purchase and Sale. Upon the terms and subject to
the conditions of this Agreement, the Company agrees to sell and the Purchasers
agree, severally and not jointly, to purchase from the Company, for an aggregate
purchase price of $1,162,500 (the "Purchase Price"), an aggregate of 1,875,000
shares of Common Stock (the "Shares"). The number of Shares to be purchased at
the Closing by each Purchaser, and the portion of the Purchase Price to be paid
by each Purchaser, are set forth opposite such Purchaser's name on Exhibit B
hereto.
SECTION 2.02. Closing. The closing (the "Closing") of the
transactions contemplated hereby shall take place at the offices of Xxxxxx
Xxxxxx & Xxxxxxx, 00 Xxxx Xxxxxx, Xxx Xxxx, XX 00000-0000, at 4:30 p.m., New
York time, on January 12, 2001, or at such other time or place as the parties
may agree. At the Closing:
(a) The Company shall deliver to each Purchaser one or more
certificates for the Shares, registered in the name of such Purchaser and
representing the number of the Shares to be purchased by such Purchaser; and
(b) Each Purchaser shall deliver to the Company an amount
equal to the number of the Shares to be purchased by such Purchaser at the
Closing multiplied by $0.62 per share in immediately available funds by wire
transfer to an account of the Company designated by the Company, by notice to
each Purchaser, no later than two business days prior to the Closing.
SECTION 2.03. Legending of Securities. All Shares to be issued
to each Purchaser by the Company hereunder shall bear the following legend:
"The securities represented hereby have not been registered under the
Securities Act of 1933, as amended, or securities laws of any state and
may not be offered, sold, transferred or otherwise disposed of except
in compliance therewith."
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ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Except as set forth in the Disclosure Schedule delivered by
the Company to each of the Purchasers prior to the execution of this Agreement,
(the "Disclosure Schedule") (each section or subsection of which qualifies the
corresponding representation and warranty), the Company represents and warrants
to each Purchaser as of the date hereof and as of the Closing Date that:
SECTION 3.01. Corporate Existence and Power. The Company is a
corporation duly incorporated, validly existing and in good standing under the
laws of Delaware and has all corporate powers and all governmental licenses,
authorizations, permits, consents and approvals required to carry on its
business as now conducted, except for those licenses, authorizations, permits,
consents and approvals the absence of which would not, individually or in the
aggregate, reasonably be expected to have a Material Adverse Effect. The Company
is duly qualified to do business as a foreign corporation and is in good
standing in each jurisdiction where such qualification is necessary, except for
those jurisdictions where failure to be so qualified or in good standing would
not, individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect. The Company has heretofore delivered to each Purchaser true and
complete copies of the restated certificate of incorporation and by-laws of the
Company as currently in effect.
SECTION 3.02. Corporate Authorization. (a) The execution,
delivery and performance by the Company of this Agreement are within the
Company's corporate powers and have been duly authorized by all necessary
corporate action on the part of the Company. This Agreement constitutes a valid
and binding agreement of the Company enforceable against the Company in
accordance with its terms, except that (i) the enforcement hereof may be subject
to (x) bankruptcy, insolvency, reorganization, moratorium or other similar laws
now or hereafter in effect relating to creditors' rights generally and (y)
general principles of equity and the discretion of the court before which any
proceeding therefor may be brought; and (ii) any rights to indemnity or
contribution under hereunder or under the registration rights agreement may be
limited by federal and state securities laws and public policy considerations.
(b) The Shares, when issued and delivered to and paid for by
each Purchaser pursuant to this Agreement, will be validly issued, fully paid
and non-assessable, and the issuance of such Shares is not subject to any
pre-emptive or similar rights.
SECTION 3.03. Governmental Authorization. The execution,
delivery and performance by the Company of this Agreement require no action by
or in respect of, or filing
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with, any governmental body, agency or official other than (i) compliance with
any applicable requirements of the 1934 Act; (ii) compliance with any applicable
existing requirements of the Nasdaq Stock Market; and (iii) any action or filing
as to which the failure to make or obtain would not, individually or in the
aggregate, reasonably be expected to have a Material Adverse Effect.
SECTION 3.04. Non-contravention. The execution, delivery and
performance by the Company of this Agreement do not and will not (i) violate the
certificate of incorporation or by-laws or any similar organizational document
of the Company or any Subsidiary; (ii) assuming compliance with the matters
referred to in Section 3.03, violate any applicable law, rule, regulation,
judgment, injunction, order or decree; (iii) constitute a default under, or give
rise to any right of termination, cancellation or acceleration of any right or
obligation of the Company or any Subsidiary or to a loss of any benefit to which
the Company or any Subsidiary is entitled under, any loan or credit agreement,
note, mortgage, bond, indenture, lease, benefit plan or other agreement,
obligation, instrument, permit, concession, franchise or license (each, a
"Contract") binding upon or held by the Company or any Subsidiary; or (iv)
result in the creation or imposition of any Lien on any asset of the Company or
any Subsidiary.
SECTION 3.05. Capitalization. (a) The authorized capital stock
of the Company consists of (i) 20,000,000 shares of Common Stock, of which
9,426,274 shares were issued and outstanding as of January 10, 2001 (which
amount does not include 32,052 shares held in treasury); (ii) 1,000,000 shares
of preferred stock, par value $.01 per share, of which no shares were issued or
outstanding as of January 10, 2001. All outstanding shares of Common Stock and
any other class of capital stock of the Company have been duly authorized and
are validly issued, fully paid and non-assessable.
(b) Except as set forth in Section 3.05(a) above or Section
3.05(b) of the Disclosure Schedule, there are no outstanding (i) shares of
capital stock or Voting Securities of the Company; (ii) securities of the
Company convertible into or exercisable or exchangeable for shares of capital
stock or Voting Securities of the Company; or (iii) warrants, options or other
rights to acquire from the Company, or other obligations of the Company to
issue, any capital stock, Voting Securities or securities convertible into or
exercisable or exchangeable for capital stock or Voting Securities of the
Company (the items in clauses 3.05(b)(i), (ii) and (iii) being referred to
collectively as the "Company Securities"). There are no outstanding obligations
of the Company or any Subsidiary to repurchase, redeem or otherwise acquire any
Company Securities.
SECTION 3.06. Subsidiaries. (a) Each Subsidiary (i) is duly
incorporated or organized, validly existing and, to the extent applicable, in
good standing under the laws of its jurisdiction of incorporation or
organization, has all corporate or other organizational powers
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and all governmental licenses, authorizations, permits, consents and approvals
required to carry on its business as now conducted, except for those licenses,
authorizations, permits, consents and approvals the absence of which would not,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect; and (ii) is duly qualified to do business as a foreign
corporation or other legal entity and, to the extent applicable, is in good
standing in each jurisdiction where such qualification is necessary, except for
those jurisdictions where the failure to be so qualified or, to the extent
applicable, in good standing would not, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect. All Subsidiaries and
their respective jurisdictions of incorporation or organization are identified
in Section 3.06(a) of the Disclosure Schedule.
(b) Except as set forth in Section 3.06(b) of the Disclosure
Schedule, all of the outstanding capital stock of, or other voting securities or
ownership interests in, each Subsidiary are owned by the Company, directly or
indirectly, free and clear of any Lien and free of any other limitation or
restriction, including any restriction on the right to vote, sell or otherwise
dispose of such capital stock or other voting securities or ownership interests
(other than such transfer restrictions as may exist under federal and state
securities laws). Except as set forth in Section 3.06(b) of the Disclosure
Schedule, there are no outstanding (i) securities of the Company or any
Subsidiary convertible into or exercisable or exchangeable for shares of capital
stock or other voting securities or ownership interests in any Subsidiary; or
(ii) options or other rights to acquire from the Company or any Subsidiary, or
other obligation of the Company or any Subsidiary to issue, any capital stock or
other voting securities or ownership interests in, or any securities convertible
into or exercisable or exchangeable for any capital stock or other voting
securities or ownership interests in, any Subsidiary (the items in clauses
3.06(b)(i) and (ii) being referred to collectively as the "Subsidiary
Securities").
SECTION 3.07. SEC Filings. (a) The Company has delivered to
each Purchaser (i) the Company's annual report on Form 10-K for its fiscal year
ended September 30, 2000 (the "Company 10-K"); and (ii) all of its other
reports, statements, schedules and registration statements filed with the
Commission since October 1, 2000 (the items in clauses 3.07(a)(i) and (ii) being
referred to collectively as the "SEC Reports").
(b) As of its filing date, or, if such SEC Report was amended,
on the date of filing of such amendment, each SEC Report did not contain any
untrue statement of a material fact or omit to state any material fact necessary
in order to make the statements made therein, in the light of the circumstances
under which they were made, not misleading.
SECTION 3.08. Financial Statements. The audited consolidated
balance sheets as of September 30, 1999 and 2000 and the related audited
consolidated statements of operations, changes in shareholders' equity and cash
flows for each of the years ended September 30, 1998, 1999 and 2000 included in
the Company 10-K fairly present, in all
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material respects and in all material respects and in conformity with generally
accepted accounting principles applied on a consistent basis (except as may be
indicated in the notes thereto), the consolidated financial position of the
Company as of the dates thereof and its consolidated results of operations and
cash flows for the periods then ended.
SECTION 3.09. Absence of Certain Changes. Except as set forth
in Section 3.09 of the Disclosure Schedule, since the Balance Sheet Date, other
than as disclosed, or provided for, in the Company 10-K or other SEC Report, the
businesses of the Company and its Subsidiaries have been conducted in the
ordinary course consistent with past practices and there has not been:
(a) any event, occurrence, development or state of
circumstances or facts which has had or would reasonably be expected to have,
individually or in the aggregate, a Material Adverse Effect;
(b) any declaration, setting aside or payment of any dividend
or other distribution with respect to any shares of capital stock of the
Company, or any repurchase, redemption or other acquisition by the Company or
any Subsidiary of any outstanding shares of capital stock or other securities
of, or other ownership interests in, the Company or any Subsidiary;
(c) any amendment of any material term of any outstanding
security of the Company or any Subsidiary;
(d) any incurrence, assumption or guarantee by the Company or
any Subsidiary of any indebtedness for borrowed money, except in the ordinary
course of business consistent with past practices;
(e) any creation or assumption by the Company or any
Subsidiary of any Lien on any material asset other than in the ordinary course
of business consistent with past practices;
(f) any making of any loan, advance or capital contribution to
or investment in any Person other than loans, advances or capital contributions
to or investments in Subsidiaries made in the ordinary course of business
consistent with past practices;
(g) any damage, destruction or other casualty loss (whether or
not covered by insurance) affecting the business or assets of the Company or any
Subsidiary which, individually or in the aggregate, has had or would reasonably
be expected to have, individually or in the aggregate, a Material Adverse
Effect;
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(h) any change in any method of accounting or application
thereof by the Company or any Subsidiary, except for any such change required by
reason of a concurrent change in generally accepted accounting principles;
(i) any (A) employment, deferred compensation, severance,
retirement or other similar agreement entered into with any director, officer or
employee of the Company or any Subsidiary (or any amendment to any such existing
agreement), (B) grant of any severance or termination pay to any director,
officer or employee of the Company or any Subsidiary or (C) change in
compensation or other benefits payable to any director, officer or employee of
the Company or any Subsidiary pursuant to any severance or retirement plans or
policies thereof, other than in the ordinary course of business consistent with
past practices; or
(j) any labor dispute, other than routine individual
grievances, or any activity or proceeding by a labor union or representative
thereof to organize any employees of the Company or any Subsidiary or any
lockouts, strikes, slowdowns, work stoppages or threats thereof by or with
respect to any employees of the Company or any Subsidiary.
SECTION 3.10. No Undisclosed Material Liabilities. There are
no liabilities of the Company or any Subsidiary of any kind whatsoever, whether
accrued, contingent, absolute, determined, determinable or otherwise, and there
is no existing condition, situation or set of circumstances which could
reasonably be expected to result in such a liability, other than:
(a) liabilities disclosed or provided for in the Balance
Sheet;
(b) liabilities incurred in the ordinary course of business
consistent with past practice since the Balance Sheet Date, which in the
aggregate are not material; and
(c) liabilities under this Agreement.
SECTION 3.11. Litigation. There is no action, suit,
investigation or proceeding pending against, or, to the knowledge of the
Company, threatened against or affecting, the Company or any Subsidiary or any
of their respective properties before any court or arbitrator or any
governmental body, agency or official (i) which would, individually or in the
aggregate, reasonably be expected to have a Material Adverse Effect; or (ii)
which in any manner challenges or seeks to prevent, enjoin, alter or materially
delay the transactions contemplated by this Agreement.
SECTION 3.12. Compliance with Laws. Neither the Company nor
any Subsidiary is in violation of or has violated any applicable law, rule or
regulation, except for violations which, individually or in the aggregate, would
not reasonably be expected to have a Material Adverse Effect.
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SECTION 3.13. Finders' Fees. There is no investment banker,
broker, finder or other intermediary which has been retained by or is authorized
to act on behalf of the Company which might be entitled to any fee or commission
in connection with the transactions contemplated by this Agreement.
SECTION 3.14. Employee Benefit Plans. (a) The Company has
provided the Purchasers with a list identifying each Employee Plan and Benefit
Arrangement.
(b) No Employee Plan (i) constitutes a Multiemployer Plan; or
(ii) is maintained in connection with any trust described in Section 501(c)(9)
of the Code. Neither the Company nor any ERISA Affiliate of the Company
maintains, contributes to or is required to contribute to or in the past has
maintained, contributed to or been required to contribute to any plan subject to
Title IV of ERISA.
(c) Each Employee Plan which is intended to be qualified under
Section 401(a) of the Code is so qualified and has been so qualified during the
period from its adoption to date, and each trust forming a part thereof is
exempt from tax pursuant to Section 501(a) of the Code and has been so exempt
since its creation. The Company has furnished to the Purchasers copies of the
most recent Internal Revenue Service determination letter with respect to each
such Employee Plan. To the Company's knowledge, each Employee Plan and Benefit
Arrangement has been maintained in substantial compliance with its terms and
with the requirements prescribed by any and all statutes, orders, rules and
regulations, including, but not limited to, ERISA and the Code, which are
applicable to such Employee Plan or Benefit Arrangement, as applicable.
(d) Except as disclosed in Section 3.14 of the Disclosure
Schedule, there is no contract, agreement, plan or arrangement covering any
employee or former employee of the Company or any Subsidiary that, individually
or collectively, could give rise to the payment of any amount that would not be
deductible pursuant to the terms of Section 162(m) or 280G of the Code.
(e) Neither the Company nor any Subsidiary maintains or
contributes to any Employee Plan which provides, or has any liability to
provide, life insurance, medical or other welfare benefits to any employee upon
retirement or termination of employment, except as may be required by law.
(f) Except as disclosed in writing to the Purchasers, since
the Balance Sheet Date, there has been no amendment to, written interpretation
or announcement (whether or not written) by the Company or any of its Affiliates
relating to, or change in employee participation or coverage under, any Employee
Plan or Benefit Arrangement which would increase materially the expense of
maintaining such Employee Plan or Benefit Arrangement
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above the level of the expense incurred in respect thereof for the fiscal year
ended on the Balance Sheet Date.
(g) Except as set forth in Section 3.14(g) of the Disclosure
Schedule or disclosed in the Company's SEC Reports, neither the Company nor any
Subsidiary is a party to or subject to any union contract or any employment
contract providing for annual future compensation of $100,000 or more with any
officer, consultant, director or employee.
SECTION 3.15. Taxes. Except as disclosed in the financial
statements included in the Company 10-K (including the notes thereto) or as set
forth in Section 3.15 of the Disclosure Schedule or except in respect of Taxes,
the liability for which would not, individually or in the aggregate, reasonably
be expected to have a Material Adverse Effect, (i) all Tax returns, statements,
reports and forms required to be filed with any Taxing Authority by or on behalf
of the Company or any Subsidiary (collectively, the "Returns"), on or prior to
the Closing Date, have been or will be filed when due in accordance with all
applicable laws except where failure to so file would not subject the Company or
any Subsidiary to liabilities or penalties; (ii) as of the time of filing, the
Returns correctly reflected (and, as to any Returns not filed as of the date
hereof, will correctly reflect) the facts regarding the income, business,
assets, operations, activities and status of the Company and each Subsidiary;
(iii) the Company and each Subsidiary has timely paid, withheld or made
provision for all Taxes shown as due and payable on the Returns that have been
filed; (iv) neither the Company nor any Subsidiary is delinquent in the payment
of any Tax or has requested any extension of time within which to file or send
any Return, which Return has not since been filed or sent; (v) neither the
Company nor any Subsidiary (or any member of any affiliated or combined group of
which the Company or any Subsidiary is or has been a member) has been granted
any extension or waiver of the limitation period applicable to the assessment or
collection of any Taxes payable by the Company or any Subsidiary which will
remain in effect after the Closing Date; (vi) there is no claim, audit, action,
suit, proceeding or investigation now pending or threatened against or with
respect to the Company or any Subsidiary of which the Company is aware in
respect of any Tax or assessment; and (vii) there are no liens for Taxes upon
the assets of the Company or any Subsidiary except liens for current Taxes not
yet due.
SECTION 3.16. Environmental Matters. (a) Except as set forth
in the Company 10-K or other SEC Report:
(i) no notice, notification, demand, request for
information, citation, summons or order has been received, no complaint
has been filed, no penalty has been assessed and no investigation,
action, claim, suit, proceeding or review is pending or, to the
knowledge of the Company, threatened by any governmental entity or
other Person with respect to any matters relating to the Company or any
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Subsidiary and relating to or arising out of any Environmental Law
which, individually or in the aggregate, would reasonably be expected
to result in a Material Adverse Effect;
(ii) the Company is in compliance with all Environmental Laws
and has, and is in compliance with, all environmental permits, except
where any noncompliance or failure to receive environmental permits
would not, individually or in the aggregate, reasonably be expected to
result in a Material Adverse Effect; and
(iii) to the Company's knowledge, there are no liabilities of,
or relating to, the Company or any Subsidiary of any kind whatsoever,
whether accrued, contingent, absolute, determined, determinable or
otherwise, arising under or relating to any Environmental Law which,
individually or in the aggregate, would reasonably be expected to have
a Material Adverse Effect, and there are no facts, conditions,
situations or set of circumstances which could reasonably be expected
to result in or be the basis for any such liability.
(b) There has been no environmental investigation, study,
audit, test, review or other analysis conducted of which the Company has
knowledge in relation to the current or prior business of the Company or any
property or facility now or previously owned or leased by the Company or any
Subsidiary.
(c) For purposes of this Section, the following terms shall
have the meanings set forth below:
(i) "Company" and "Subsidiary" shall include any entity
which is, in whole or in part, a predecessor of the Company or any
Subsidiary; and
(ii) "Environmental Laws" means any and all federal, state,
local and foreign statutes, laws, judicial decisions, regulations,
ordinances, rules, judgments, orders, decrees, codes, plans,
injunctions, permits, concessions, grants, franchises, licenses,
agreements and governmental restrictions, relating to human health, the
environment or to emissions, discharges or releases of pollutants,
contaminants or other hazardous substances or wastes into the
environment, including without limitation ambient air, surface water,
groundwater or land, or otherwise relating to the manufacture,
processing, distribution, use, treatment, storage, disposal, transport
or handling of pollutants, contaminants or other hazardous substances
or wastes or the clean-up or other remediation thereof.
SECTION 3.17. Title to Properties. Each of the Company and the
Subsidiaries has good and marketable title in fee simple to all real property
and good and marketable title to all personal property owned by it which is
material to its business, in each case free and clear of all Liens and defects
except such as are set forth in Section 3.17 of the
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Disclosure Schedule or such as would not, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect. Any real property and
facilities held under lease by any of the Company or the Subsidiaries are held
by it under valid, subsisting and enforceable leases with such exceptions as
would not have a Material Adverse Effect.
SECTION 3.18. Intellectual Property. Except as has not had and
would not reasonably be expected to have, individually or in the aggregate, a
Material Adverse Effect, (i) each of the Company and the Subsidiaries owns, or
is licensed to use (in each case, free and clear of any Liens), all Intellectual
Property used in or necessary for the conduct of its business as currently
conducted; (ii) the use of any Intellectual Property by the Company and the
Subsidiaries does not infringe on or otherwise violate the rights of any Person
and is in accordance with any applicable license pursuant to which the Company
or any Subsidiary acquired the right to use any Intellectual Property; (iii) to
the knowledge of the Company, no Person is challenging, infringing on or
otherwise violating any right of the Company or any of the Subsidiaries with
respect to any Intellectual Property owned by and/or licensed to the Company or
the Subsidiaries; and (iv) neither the Company nor any of the Subsidiaries has
received any written notice or otherwise has knowledge of any pending claim,
order or proceeding with respect to any Intellectual Property used by the
Company or the Subsidiaries and to its knowledge no Intellectual Property owned
and/or licensed by the Company or the Subsidiaries is being used or enforced in
a manner that would reasonably be expected to result in the abandonment,
cancellation or unenforceability of such Intellectual Property. For purposes of
this Section, the term "Intellectual Property" shall mean trademarks, service
marks, brand names, certification marks, trade dress and other indications of
origin, the goodwill associated with the foregoing and registrations in any
jurisdiction of, and applications in any jurisdiction to register, the
foregoing, including any extension, modification or renewal of any such
registration or application; inventions, discoveries and ideas, whether
patentable or not, in any jurisdiction; patents, applications for patents
(including, without limitation, divisions, continuations, continuations in part
and renewal applications), and any renewals, extensions or reissues thereof, in
any jurisdiction; nonpublic information, trade secrets and confidential
information and rights in any jurisdiction to limit the use or disclosure
thereof by any Person; writings and other works, whether copyrightable or not,
in any jurisdiction; registrations or applications for registration of
copyrights in any jurisdiction, and any renewals or extensions thereof; and any
similar intellectual property or proprietary rights.
SECTION 3.19. Significant Agreements. Section 3.19 of the
Disclosure Schedule sets forth a complete and correct list of (i) all Contracts
applicable on the date of this Agreement to the Company or any of the
Subsidiaries or any of their respective properties or assets and that are
required to be filed as exhibits to the SEC Reports; (ii) all Contracts
applicable to the Company or any of the Subsidiaries or any of their respective
properties or assets and in effect as of the date of this Agreement that are
reasonably expected to require the
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payment (whether by or to the Company or any of the Subsidiaries) of $1 million
or more in the aggregate in any twelve-month period; and (iii) all in-licenses
or Contracts in effect on the date of this Agreement calling for the purchase or
other acquisition by the Company or any of the Subsidiaries of rights to
products that generate or are reasonably expected to generate $1 million or more
of annualized revenues (the Contracts described in clauses (i) through (iii)
being collectively referred to herein as the "Significant Agreements"). The
Company has heretofore made available to the Purchasers complete and correct
copies of each of the Significant Agreements, each as amended or modified to the
date hereof (including any waivers with respect thereto). Each of the
Significant Agreements is in full force and effect and enforceable against the
Company and the Subsidiaries, as applicable, and, to the knowledge of the
Company, against the other party or parties thereto, in each case in accordance
with its terms, except as such enforceability may be limited by bankruptcy,
insolvency, reorganization, moratorium and similar laws relating to or affecting
creditors generally or by general equity principles (regardless of whether such
enforceability is considered in a proceeding in equity or at law) and except in
each case where the failure to be in full force and effect and enforceable has
not had and would not reasonably be expected to have, individually or in the
aggregate, a Material Adverse Effect. None of the Company or any of the
Subsidiaries has received any notice (written or oral) of cancellation or
termination of, or expression or indication of any intention or desire to cancel
or terminate, any of the Significant Agreements except in each case for those
that have not had and would not reasonably be expected to have, individually or
in the aggregate, a Material Adverse Effect. No Significant Agreement is the
subject of, or, to the knowledge of the Company, has been threatened to be made
the subject of, any arbitration, suit or other legal proceeding except in each
case for those that have not had and would not reasonably be expected to have,
individually or in the aggregate, a Material Adverse Effect. With respect to any
Significant Agreement which by its terms will terminate as of a certain date
unless renewed or unless an option to extend such Significant Agreement is
exercised, neither the Company nor any of the Subsidiaries has received any
notice (written or oral), or otherwise has any knowledge, that any such
Significant Agreement will not be, or is not likely to be, so renewed or that
any such extension option will not be exercised except in each case for those
that have not had and would not reasonably be expected to have, individually or
in the aggregate, a Material Adverse Effect. There exists no event of default or
occurrence, condition or act on the part of the Company or any of the
Subsidiaries or, to the knowledge of the Company, the other party or parties to
the Significant Agreements which constitutes or would constitute (with notice or
lapse of time or both) a breach of or default under any of the Significant
Agreements except in each case for those that have not had and would not
reasonably be expected to have, individually or in the aggregate, a Material
Adverse Effect.
SECTION 3.20. Exemption from Registration. None of the
Company, the Subsidiaries or any of their respective Affiliates has directly, or
through any agent, (i) sold, offered for sale, solicited offers to buy or
otherwise negotiated in respect of, any "security" (as
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defined in the 0000 Xxx) that is or could be integrated with the sale of the
Shares in a manner that would require the registration under the 1933 Act of the
Shares; or (ii) engaged in any form of general solicitation or general
advertising (as those terms are used in Regulation D under the 0000 Xxx) in
connection with the offering of the Shares or in any manner involving a public
offering within the meaning of Section 4(2) of the 1933 Act. Assuming the
accuracy of the representations and warranties of the Purchasers in Article 4,
it is not necessary in connection with the offer, sale and delivery of the
Shares to the Purchasers in the manner contemplated by this Agreement to
register any of the Shares under the 1933 Act.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS
Each Purchaser represents and warrants to the Company,
severally as to itself and not jointly, as of the date hereof and as of the
Closing Date that:
SECTION 4.01. Organization. Such Purchaser is organized under
the laws of the State of Delaware.
SECTION 4.02. Power and Authorization. The execution, delivery
and performance by such Purchaser of this Agreement are within the powers of
such Purchaser and have been duly authorized by all necessary action on the part
of such Purchaser. This Agreement constitutes a valid and binding agreement of
such Purchaser enforceable against such Purchaser in accordance with its terms,
except that (i) the enforcement hereof may be subject to (x) bankruptcy,
insolvency, reorganization, moratorium or other similar laws now or hereafter in
effect relating to creditors' rights generally and (y) general principles of
equity and the discretion of the court before which any proceeding therefor may
be brought; and (ii) any rights to indemnity or contribution under hereunder or
under the registration rights agreement may be limited by federal and state
securities laws and public policy considerations.
SECTION 4.03. Finders' Fees. There is no investment banker,
broker, finder or other intermediary which has been retained by or is authorized
to act on behalf of such Purchaser who might be entitled to any fee or
commission from such Purchaser or any of its Affiliates upon consummation of the
transactions contemplated by this Agreement.
SECTION 4.04. Purchase for Investment. Such Purchaser is
acquiring the Shares for investment for its own account and not with a view to,
or for sale in connection with, any distribution thereof. Such Purchaser is an
"Accredited Investor" as such term is defined in Regulation D under the 1933
Act.
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SECTION 4.05. Disclosure of Information. Each Purchaser
believes it has received all the information it considers necessary or
appropriate for deciding whether to purchase the Shares. Each Purchaser further
represents that it has had an opportunity to ask questions and receive answers
from the Company regarding the terms and conditions of the sale of the
Restricted Securities.
SECTION 4.06. Restricted Securities. Each Purchaser
understands that the Shares it is purchasing are characterized as "restricted
securities" under the federal securities laws inasmuch as they are being
acquired from the Company in a transaction not involving a public offering and
that under such laws and applicable regulations such securities may be resold
without registration under the 1933 Act, only in certain limited circumstances.
In this connection, each Purchaser represents that it is familiar with Rule 144
under the 1933 Act, as presently in effect, and understands the resale
limitations imposed thereby and by the 1933 Act.
ARTICLE 5
CONDITIONS TO CLOSING
SECTION 5.01. Conditions to the Obligations of the Purchasers.
The obligations of each of the Purchasers to purchase and pay for the Shares
shall, in its sole discretion, be subject to the satisfaction of the following
conditions at or prior to the Closing (unless expressly waived in writing by
such Purchasers at or prior to the Closing):
(a) On the Closing Date, the Purchasers shall have received
the opinion, dated as of the Closing Date and addressed to the Purchasers, of
Xxxxx, Xxxxxxx & Xxxxxxxxx, counsel for the Company, in form and substance
satisfactory to counsel for the Purchasers, to the effect that:
(i) The Company is a corporation duly incorporated,
validly existing and in good standing under the laws of
Delaware and has all corporate powers and all governmental
licenses, authorizations, permits, consents and approvals
required to carry on its business as now conducted, except for
those licenses, authorizations, permits, consents and
approvals the absence of which would not, individually or in
the aggregate, have a Material Adverse Effect. The Company is
duly qualified to do business as a foreign corporation and is
in good standing in each jurisdiction where such qualification
is necessary, except for those jurisdictions where failure to
be so qualified or in good standing would not, individually or
in the aggregate, have a Material Adverse Effect.
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(ii) The execution, delivery and performance by the
Company of this Agreement are within the Company's corporate
powers and have been duly authorized by all necessary
corporate action on the part of the Company. This Agreement
constitutes a valid and binding agreement of the Company
enforceable against the Company in accordance with its terms,
except that (i) the enforcement hereof may be subject to (x)
bankruptcy, insolvency, reorganization, moratorium or other
similar laws now or hereafter in effect relating to creditors'
rights generally and (y) general principles of equity and the
discretion of the court before which any proceeding therefor
may be brought; and (ii) any rights to indemnity or
contribution under hereunder or under the registration rights
agreement may be limited by federal and state securities laws
and public policy considerations.
(iii) The Shares, when issued and delivered to and paid
for by each Purchaser pursuant to this Agreement, will be
validly issued, fully paid and non-assessable, and the
issuance of such Shares is not subject to any pre-emptive or
similar rights.
(iv) The execution, delivery and performance by the
Company of this Agreement require no action by or in respect
of, or filing with, any governmental body, agency or official
other than (i) compliance with any applicable requirements of
the 1934 Act; (ii) compliance with any applicable existing
requirements of the Nasdaq Stock Market; and (iii) any action
or filing as to which the failure to make or obtain would not,
individually or in the aggregate, have a Material Adverse
Effect.
(v) The execution, delivery and performance by the
Company of this Agreement do not and will not (i) violate the
certificate of incorporation or bylaws of the Company or any
Subsidiary; (ii) (x) assuming compliance with any applicable
requirements of the 1934 Act, (y) assuming compliance with any
applicable existing requirements of the Nasdaq Stock Market
and (z) except for any action or filing as to which the
failure to make or obtain would not, individually or in the
aggregate, have a Material Adverse Effect, violate any
applicable law, rule, regulation, judgment, injunction, order
or decree; (iii) constitute a default under, or give rise to
any right of termination, cancellation or acceleration of any
right or obligation of the Company or any Subsidiary or to a
loss of any benefit to which the Company or any Subsidiary is
entitled under, any Contract binding upon or held by the
Company or any Subsidiary; or (iv) result in the creation or
imposition of any material Lien on any asset of the Company or
any Subsidiary.
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(vi) No registration under the 1933 Act of the Shares is
required in connection with the sale of the Shares to the
Purchasers as contemplated by this Agreement assuming the
accuracy of the Purchasers' representations in Article 4 and
those of the Company contained in this Agreement regarding the
absence of a general solicitation in connection with the sale
of such Shares to the Purchasers.
(b) The representations and warranties of the Company
contained in this Agreement that are qualified by materiality or Material
Adverse Effect shall be true and correct in all respects and the representations
and warranties of the Company contained in this Agreement that are not so
qualified shall be true and correct in all material respects, in each case on
and as of the date hereof and on and as of the Closing Date as if made on and as
of the Closing Date; the statements of the Company's officers made pursuant to
any certificate delivered in accordance with the provisions hereof shall be true
and correct on and as of the date made and on and as of the Closing Date; the
Company shall have performed all covenants and agreements and satisfied all
conditions on its part to be performed or satisfied hereunder at or prior to the
Closing Date; and subsequent to the Balance Sheet Date, there shall have been no
event or development, and no information shall have become known, that,
individually or in the aggregate, has or would be reasonably likely to have a
Material Adverse Effect.
(c) The sale of the Shares hereunder shall not be enjoined
(temporarily or permanently) on the Closing Date.
(d) Subsequent to the Balance Sheet Date, none of the Company
or any of the Subsidiaries shall have sustained any loss or interference with
respect to its business or properties from fire, flood, hurricane, accident or
other calamity, whether or not covered by insurance, or from any strike, labor
dispute, slow down or work stoppage or from any legal or governmental
proceeding, order or decree, which loss or interference, individually or in the
aggregate, has or would be reasonably likely to have a Material Adverse Effect.
(e) The Purchasers shall have received a certificate of the
Company, dated the Closing Date, signed on behalf of the Company by its Chief
Executive Officer and its Chief Financial Officer, to the effect that:
(i) The representations and warranties of the Company
contained in this Agreement that are qualified by materiality
or Material Adverse Effect are true and correct in all
respects and the representations and warranties of the Company
contained in this Agreement that are not so qualified are true
and correct in all material respects, in each case on and as
of the date hereof and on and as of the Closing Date, and the
Company has performed all covenants and agreements and
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satisfied all conditions on its part to be performed or
satisfied hereunder at or prior to the Closing Date;
(ii) At the Closing Date, since the date hereof or since
the Balance Sheet Date, no event or development has occurred,
and no information has become known, except as set forth in
Section 3.09 of the Disclosure Schedule that, individually or
in the aggregate, has or would be reasonably likely to have a
Material Adverse Effect; and
(iii) The sale of the Shares hereunder has not been
enjoined (temporarily or permanently).
(f) The Company shall have obtained, with financially sound
and reputable insurers, directors' and officers' liability insurance in the
amount of coverage at least equal to $2,000,000. The Company shall have entered
into indemnity contracts with each of the Purchaser Nominees substantially in
the form of Exhibit C hereto.
(g) Prior to the Closing Date, (i) trading in securities
generally on either the New York Stock Exchange or the Nasdaq Stock Market shall
not have been suspended or limited or minimum or maximum prices shall not have
been generally established on such exchange or market, or additional material
governmental restrictions, not in force on the date of this Agreement, shall not
have been imposed upon trading in securities generally by such exchange or
market or by order of the Commission or any court or other governmental
authority; (ii) trading in the Common Stock shall not have been suspended by the
Commission or the Nasdaq Stock Market; (iii) a general banking moratorium shall
not have been declared by either federal or New York state authorities; or (iv)
any material adverse change in the financial or securities markets in the United
States or in political, financial or economic conditions in the United States or
any outbreak or material escalation of hostilities or declaration by the Unites
States of a national emergency or war or other calamity or crisis shall not have
occurred.
On or before the Closing Date, the Purchasers and counsel for
the Purchasers shall have received such further documents, opinions,
certificates, letters and schedules or instruments relating to the business,
corporate, legal and financial affairs of the Company and the Subsidiaries as
they shall have heretofore reasonably requested from the Company.
All such documents, opinions, certificates, letters, schedules
or instruments delivered pursuant to this Agreement will comply with the
provisions hereof only if they are reasonably satisfactory in all material
respects to the Purchasers and counsel for the Purchasers.
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SECTION 5.02. Conditions to the Obligations of the Company.
The obligations of the Company to be discharged under this Agreement on or prior
to the Closing are subject to satisfaction of the following conditions at or
prior to the Closing (unless expressly waived in writing by the Company at or
prior to the Closing):
(a) The representations and warranties of Purchasers contained
in this Agreement that are qualified by materiality or Material Adverse Effect
shall be true and correct in all respects and the representations and warranties
of the Company contained in this Agreement that are not so qualified shall be
true and correct in all material respects, in each case on and as of the date
hereof and on and as of the Closing Date as if made on and as of the Closing
Date.
(b) The sale of the Shares hereunder shall not be enjoined
(temporarily or permanently) on the Closing Date.
ARTICLE 6
COVENANTS OF THE COMPANY
The Company agrees that:
SECTION 6.01. Notices of Certain Events. Prior to the Closing,
the Company shall promptly notify each Purchaser of:
(a) any notice or other communication from any Person alleging
that the consent of such Person is or may be required in connection with the
transactions contemplated by this Agreement;
(b) any notice or other communication from any governmental or
regulatory agency or authority in connection with the transactions contemplated
by this Agreement; and
(c) any actions, suits, claims, investigations or proceedings
commenced or, to its knowledge, threatened against, relating to or involving or
otherwise affecting the Company or any Subsidiary that, if pending on the date
of this Agreement, would have been required to have been disclosed pursuant to
Section 3.11.
SECTION 6.02. Registration Rights. Each Purchaser shall have
the Registration Rights set forth in Exhibit A.
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SECTION 6.03. Access to Book and Records. The Company agrees
that, after Closing and for so long as a WC beneficially owns, directly or
indirectly, at least 40% of the Originally Issued Shares, WC will have access on
reasonable terms to the books, records and employees of the Company and the
Subsidiaries and to the provision by the Company of all information reasonably
requested by WC, subject to confidentiality obligations that at the time may be
owed by the Company to third parties, to appropriate confidentiality
arrangements and requirements of law.
ARTICLE 7
ADDITIONAL COVENANTS
SECTION 7.01. Board Representation; Committees. (a) The
Company agrees that for so long as WC beneficially owns, directly or indirectly,
at least 50% of the Originally Issued Shares, WC shall have the right to cause
the Company to include, as nominees for the Company's Board of Directors
recommended by the Board, two Directors (the "Purchaser Nominees").
(b) At or prior to the Closing, the Company shall, if
necessary, increase the size of the Board of Directors of the Company as
determined pursuant to Section 7.01(a) and shall elect as Directors of the
Company (with a term expiring at the following annual meeting of the Company's
stockholders) the Purchaser Nominees designated by WC. In connection with the
annual meeting of stockholders of the Company next following such election, the
Company shall nominate the Purchaser Nominees for election as Directors by the
stockholders and use its best efforts to cause the Purchaser Nominees to be so
elected and re-elected at each subsequent stockholder meeting at which Directors
are elected for so long as WC shall have the rights set forth in Section
7.01(a).
(c) For so long as WC shall have the rights set forth in
Section 7.01(a), if a vacancy shall exist in the office of a Purchaser Nominee,
WC shall be entitled to designate a successor and the Company shall elect such
successor as a Director of the Company (with a term expiring at the following
annual meeting of the Company's stockholders).
(d) For so long as WC shall have the rights set forth in
Section 7.01(a), at least one Purchaser Nominee shall be entitled to serve as a
member of each committee (whether standing or special) of the Board of Directors
of the Company and WC shall have the right to designate one Purchaser Nominee to
serve as the Chairman of the Board of the Company; provided that such Purchaser
Nominee is then serving as a Director of the Company.
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(e) For so long as WC shall have the rights set forth in
Section 7.01(a), any Purchaser Nominee then serving as the Chairman of the Board
of the Company shall be entitled to serve, in such capacity, as an executive
officer of the Company with such duties as are related to the Company's
strategic planning; provided that, unless otherwise determined by the Board of
Directors of the Company, any such Purchaser Nominee serving as an executive
officer of the Company shall not be entitled to receive any compensation in
connection therewith; provided, further, that this Agreement shall not be deemed
to be an employment contract between the Company and such Purchaser Nominee and
nothing herein shall obligate such Purchaser Nominee to dedicate any defined
portion of his business time and effort to the performance of the duties
described herein. The Chief Executive Officer and President of the Company shall
report directly to such Purchaser Nominee..
SECTION 7.02. Reports. The Company agrees that, after the
Closing and for so long as WC beneficially owns, directly or indirectly, at
least 40% of the Originally Issued Shares, the Company will furnish to WC the
following reports, subject, in the case of paragraphs (d), (e) and (g) below, to
confidentiality obligations that at the time may be owed by the Company to third
parties and appropriate confidentiality arrangements:
(a) Within the applicable time period required under the 1934
Act, after the end of each fiscal year of the Company, the information
required by Form 10-K (or any successor form thereto) under the 1934
Act with respect to such period (including a "Management's Discussion
and Analysis of Financial Condition and Results of Operations" section
that describes the consolidated financial position and results of
operations of the Company), together with a report thereon by the
Company's independent accountants.
(b) Within the applicable time period required under the 1934
Act, after the end of each of the first three fiscal quarters of each
fiscal year of the Company, the information required by Form 10-Q (or
any successor form thereto) under the 1934 Act with respect to such
period (including a "Management's Discussion and Analysis of Financial
Condition and Results of Operations" section that describes the
consolidated financial position and results of operations of the
Company).
(c) Any current report on Form 8-K (or any successor form
thereto) required to filed under the 1934 Act.
(d) As soon as practicable upon approval or adoption by the
Company's Board of Directors, the Company's budget and operating plan
(including projected balance sheets and profit and loss and cash flow
statements), if any, for such fiscal year.
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(e) Simultaneously with the delivery thereof to any of the
Company's lenders or other holders of the Company's indebtedness, such
other financial and operating data of the Company and the Subsidiaries
delivered to such lenders or holders.
(f) Promptly after the same are filed with the SEC, copies of
all reports, statements and other documents filed with the Commission
pursuant to the 1933 Act or the 0000 Xxx.
(g) Promptly after receipt thereof, a copy of any
communication received by the Company from any holder of the Company's
outstanding indebtedness notifying the Company that a default or event
of default exists under the terms of the instrument or instruments
governing such indebtedness.
SECTION 7.03. Preemptive Rights. (a) Subject to the terms and
conditions specified in this Section 7.03, the Company hereby grants to each
Purchaser a right to purchase up to the number of Additional Shares (as defined
below) in connection with any Transaction (as defined below) undertaken by the
Company; provided, however, that the rights set forth in this Section 7.03 shall
only apply to WC so long as WC holds at least five percent (5%) of the
Originally Issued Shares and shall only apply to CHA so long as CHA holds at
least twenty-five percent (25%) of the Originally Issued Shares.
(b) Subject to the terms and conditions specified in this
Section 7.03, each time the Company proposes to offer, sell or otherwise issue
any New Shares in a public or private transaction (a "Transaction"), the Company
shall deliver a notice (the "Notice") to each Purchaser stating (i) the
Company's bona fide intention to undertake such Transaction, (ii) the number of
New Shares to be offered in the Transaction (the "Transaction Shares"), (iii)
the number of Additional Shares up to which such Purchaser may elect to purchase
in such Transaction (which would be added to the Transaction Shares) and (iv)
the price and terms, if any, upon which it proposes to offer, sell or otherwise
issue New Shares in the Transaction.
(c) Within 7 days after receipt by such Purchaser of the
Notice, such Purchaser may elect to purchase, at the price and on the terms
specified in the Notice, up to the number of Additional Shares set forth in the
Notice. The number of New Shares ("Additional Shares") that the Purchaser may
elect to purchase and include in the Transaction shall be calculated as follows:
Additional Shares = Transaction Shares -- Transaction Shares
------------------
1-- X%
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X% represents the percentage (stated as a decimal) of the
outstanding shares of Common Stock then held by such Purchaser (assuming the
conversion, exercise or exchange of all New Shares then held by such Purchaser
and acquired pursuant to this Section 7.03).
(d) In the event that the price or terms upon which the
Company proposes to offer, sell or otherwise issue New Shares in the Transaction
or the number of Transaction Shares to be included in such Transaction changes
for any reason (other than including the Additional Shares) after the Notice is
delivered to the Purchasers, the number of Additional Shares shall, with respect
to a change in the number of Transaction Shares, be recalculated using the new
number of Transaction Shares and, in any case, the Company shall promptly
provide a revised Notice to each Purchaser reflecting any such recalculated
Additional Shares and any change to such price or terms. If the Company proposes
to offer, sell or issue any New Shares for consideration other than cash, each
Purchaser may exercise the right set forth in this Section 7.03 and purchase
Additional Shares for cash at a per share purchase price equal to (i)(A) the
face amount of any cash received for such New Shares plus (B) the fair market
value of the non-cash consideration expressly received for such New Shares, as
reasonably determined by the Board of Directors of the Company in good faith,
divided by (ii) the number of Transaction Shares issued in such Transaction
(excluding any Additional Shares).
(e) The rights of the Purchasers set forth in this Section
7.03 shall not be applicable to (i) shares of Common Stock issued as a stock
dividend to all holders of shares of Common Stock or upon any subdivision or
combination of shares of Common Stock; (ii) securities issued for the
acquisition by the Company of another entity or business by merger or such other
transaction as would result in the ownership by the Company of not less than a
majority of the voting power of the other entity or for the purchase of all the
assets of an entity or business, (iii) shares of Common Stock or Rights that are
sold by the Company pursuant to a bona fide public offering pursuant to a
registration statement filed under the 1933 Act; (iv) shares of Common Stock or
Rights issued pursuant to the Company's stock option plans in existence at the
date of this Agreement or other such stock option plans as approved by the
stockholders of the Company; (v) shares of Common Stock issued upon exercise of
any Rights as to which the Purchasers shall have been afforded the opportunity
to exercise their rights of first refusal pursuant to this Section 7.03; (vi) up
to an aggregate of 70,000 shares of Common Stock or Rights issued to Silicon
Valley Bank; and (vii) up to aggregate of 50,000 shares of Common Stock or
Rights issued to Xxxxxxx Xxxx.
(f) The rights and obligations of the Purchasers under this
Section 7.03 shall not be assignable, except that the right to purchase any
Additional Shares may be assigned by each Purchaser to any of its Affiliates
that agrees in writing to be bound by the provisions of this Section 7.03.
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SECTION 7.04. Fees and Expenses. (a) The Company shall be
responsible for the payment of all expenses incurred by the Company in
connection with the transactions contemplated by this Agreement, regardless of
whether such transactions are consummated, including, without limitation, all
fees and expenses of the Company's legal counsel, all third-party consultants
engaged by the Company to assist in such transactions and all fees and expenses
incurred in connection with any filings to be made with any governmental agency.
The Company also agrees to reimburse the Purchasers for all out-of-pocket
expenses reasonably incurred by the Purchasers in connection with the
transactions contemplated by this Agreement, including, without limitation, all
fees and expenses of the Purchasers' legal counsel, financial advisors,
accountants and all third-party consultants engaged by the Purchasers to assist
in such transactions and all fees and expenses, including fees and expenses of
legal counsel, incurred in connection with enforcing the provisions of, and
collecting amounts payable pursuant to, this Agreement; provided that the
aggregate amount of such expenses shall not exceed $30,000. Such reimbursements
shall be due to the Purchasers at the Closing, or promptly following any earlier
termination of this Agreement for any reason or, in the case of fees and
expenses incurred thereafter, promptly upon demand therefor.
(b) All amounts payable under this Agreement shall be paid in
immediately available funds to an account or accounts designated by the
recipient of such amounts.
SECTION 7.05. Use of Proceeds. The Company shall use the
proceeds from the sale of the Shares for general corporate purposes.
ARTICLE 8
TERMINATION
SECTION 8.01. Grounds for Termination. This Agreement may be
terminated at any time by mutual written agreement of the Company and each
Purchaser.
SECTION 8.02. Effect of Termination. If this Agreement is
terminated as permitted by Section 8.01, termination shall be without liability
of any party (or any stockholder, director, officer, employee, agent, consultant
or representative of such party) to the other parties to this Agreement;
provided that if such termination shall result from the willful failure of any
party to fulfill a condition to the performance of the obligations of any other
party or to perform a covenant of this Agreement or from a willful breach by any
party to this Agreement, such party shall be fully liable for any and all
damage, loss or expense incurred or suffered by the other party or parties as a
result of such failure or breach. The provisions of Sections 9.02 shall survive
any termination hereof pursuant to Section 8.01. The
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provisions of Section 6.02 and the Registration Rights shall survive any
termination of this Agreement subsequent to the Closing.
ARTICLE 9
MISCELLANEOUS
SECTION 9.01. Notices. All notices and other communications
hereunder shall be in writing and shall be deemed duly given (i) on the date of
delivery if delivered personally, or by telecopy or telefacsimile, upon
confirmation of receipt; or (ii) on the first business day following the date of
dispatch if delivered by an internationally recognized next-day courier service.
All notices hereunder shall be delivered as set forth below, or pursuant to such
other instructions as may be designated in writing by the party to receive such
notice.
if to WC, to:
WC Capital, LLC
000 Xxxx Xxxxxx Xxxxx Xxxx
Xxxxxx Xxxxx, XX 00000
Attention: Xxxxx Xxxx
Fax: (000) 000-0000
with a copy to:
Xxxxxx Xxxxxx & Xxxxxxx
00 Xxxx Xxxxxx
Xxx Xxxx, XX 00000-0000
Attention: Xxxxxxxxxxx X. Xxx, Esq.
Fax: (000) 000-0000
if to CHA, to:
Carnegie Hill Associates, LLC
00 Xxxx 00xx Xxxxxx
Xxx. Xx. 00X
Xxx Xxxx, XX 00000
Attention: Xxxxxxx de X. Xxxxxxx
Fax: (000) 000-0000
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with a copy to:
Xxxxxx Xxxxxx & Xxxxxxx
00 Xxxx Xxxxxx
Xxx Xxxx, XX 00000-0000
Attention: Xxxxxxxxxxx X. Xxx, Esq.
Fax: (000) 000-0000
if to the Company, to:
Datawatch Corporation
000 Xxxxx Xxxxxx
Xxxxx 000
Xxxxxx, XX 00000
Attention: Xxxxx X. Xxxxxxx
Fax: (000) 000-0000
with a copy to:
Xxxxx, Xxxxxxx & Xxxxxxxxx
Exchange Place
00 Xxxxx Xxxxxx
Xxxxxx, XX 00000
Attention: Xxxxxxx X. Xxxxxxx, Xx., Esq.
Fax: (000) 000-0000
SECTION 9.02. Survival. The representations and warranties of
the parties hereto contained in this Agreement or in any certificate or other
writing delivered pursuant hereto or in connection herewith shall survive the
Closing until twelve months after the Closing Date.
SECTION 9.03. Amendments and Waivers. (a) Any provision of
this Agreement may be amended or waived prior to the Closing Date if, but only
if, such amendment or waiver is in writing and is signed, in the case of an
amendment, by each party to this Agreement or, in the case of a waiver, by the
party against whom the waiver is to be effective.
(b) No failure or delay by any party in exercising any right,
power or privilege hereunder shall operate as a waiver thereof nor shall any
single or partial exercise thereof preclude any other or further exercise
thereof or the exercise of any other right, power or privilege. The rights and
remedies herein provided shall be cumulative and not exclusive of any rights or
remedies provided by law.
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SECTION 9.04. Successors and Assigns. The provisions of this
Agreement shall be binding upon and inure to the benefit of the parties hereto
and their respective successors and assigns; provided that except as expressly
provided herein no party may assign, delegate or otherwise transfer any of its
rights or obligations under this Agreement without the consent of each other
party hereto.
SECTION 9.05. Governing Law. This Agreement shall be governed
by and construed in accordance with the law of the State of New York, without
regard to the conflicts of law rules of such state.
SECTION 9.06. Counterparts; Third Party Beneficiaries. This
Agreement may be signed in any number of counterparts, each of which shall be an
original, with the same effect as if the signatures thereto and hereto were upon
the same instrument. No provision of this Agreement is intended to confer upon
any Person other than the parties hereto any rights or remedies hereunder.
SECTION 9.07. Public Announcements. The Company and each
Purchaser shall agree on the form and content of any public announcements which
shall be made concerning this Agreement or the transactions contemplated hereby,
and neither the Company nor any Purchaser shall make any such public
announcement without the consent of the other, except with respect to any public
announcement or other public disclosure, to the extent either party determines,
in good faith and with the advice of counsel, such announcement or disclosure is
required by law or the rules or regulations of any exchange or market on which
such party's securities are listed or to avoid undue risk that the transactions
contemplated hereby will be enjoined or that such party, its officers, directors
or representatives will be liable for damages as a result thereof.
SECTION 9.08. Entire Agreement; Exhibits. This Agreement
constitutes the entire agreement among the parties with respect to the subject
matter of this Agreement and supersedes all prior agreements and understandings,
both oral and written, among the parties with respect to the subject matter of
this Agreement. No representation, inducement, promise, understanding, condition
or warranty not set forth herein has been made or relied upon by any party
hereto. All exhibits hereto constitute part of this Agreement and are expressly
incorporated herein.
SECTION 9.09. Headings. The headings and the table of contents
appearing in this Agreement are inserted only as a matter of convenience and for
reference and in no way define, limit or describe the scope and intent of this
Agreement or any of the provisions hereof.
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IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed by their respective authorized officers as of the
day and year first above written.
DATAWATCH CORPORATION
By: /s/ Xxxxx X. Xxxxxxx
---------------------------------
Name: Xxxxx X. Xxxxxxx
Title: Chief Executive Officer
WC CAPITAL, LLC
By: /s/ Xxxxx Xxxx
---------------------------------
Name: Xxxxx Xxxx
Title: Managing Principal
CARNEGIE HILL ASSOCIATES, LLC
By: /s/ Xxxxxxx de X. Xxxxxxx
---------------------------------
Name: Xxxxxxx de X. Xxxxxxx
Title: Managing Principal
Exhibit A
REGISTRATION RIGHTS
ARTICLE 1
DEFINITIONS
SECTION 1.01. Definitions. Terms used in the Investment
Agreement (the "Agreement"), dated as of January 12, 2001, among Datawatch
Corporation, a Delaware corporation (the "Company"), WC Capital, LLC, a Delaware
limited liability company ("WC") and Carnegie Hill Associates, LLC, a Delaware
limited liability company ("CHA" and, together with WC, the "Purchasers"), are
used herein as therein defined. In addition, the following terms, as used
herein, have the following meanings:
"Commencement Date" means the 90th day following the Closing
Date.
"Company Indemnified Parties" has the meaning set forth in
Section 6.02.
"Demand Registration" has the meaning set forth in Section
2.01.
"Disadvantageous Effect" has the meaning set forth in Section
2.07.
"Holders" means
(i) the Purchasers;
(ii) each other Person, other than the Company or an
Affiliate of the Company, who at any time acquires any Registrable
Shares directly or indirectly from any Purchaser or Holder in a
transaction or chain of transactions not involving a public offering
within the meaning of and registered under the 1933 Act, and who:
(A) so acquires the lesser of (x) all of the
Registrable Shares held by such Holder and (y) 5% of the
original number of Registrable Shares initially held by all
Purchasers; or
(B) is a constituent stockholder, partner or member
(including limited partners and retired partners or members)
of a Holder to whom Registrable Shares are distributed as part
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of a distribution by such Holder to its constituent
stockholders, partners or members generally, or is a
liquidating trust established in connection with the
dissolution or winding up of any Holder; and
(iii) any Holder's successors, Affiliates and, in the case of
any Holder who is a natural person, such individual's spouse,
ancestors, lineal descendants, siblings, executors, administrators and
heirs who acquire Registrable Shares by gift, will or intestate
succession,
in each of the foregoing cases, if such Person (if not a Purchaser) agrees in
writing to be bound by this Agreement as a Holder and for so long as such Person
continues to hold any Registrable Shares.
"Holder Indemnified Parties" has the meaning set forth in
Section 6.01.
"Indemnified Party" has the meaning set forth in Section 6.03.
"Indemnifying Party" has the meaning set forth in Section
6.03.
"Initiating Holders" has the meaning set forth in Section
2.02.
"Losses" has the meaning set forth in Section 6.01.
"Majority Holders" means any one or more Holders who hold a
total number of Registrable Shares equal to at least a majority of the aggregate
number of Registrable Shares then held by all Holders.
"Majority Selling Holders" means, with respect to any Demand
Registration or Piggyback Registration, any one or more Selling Holders who hold
a total number of Registrable Shares equal to at least a majority of the
aggregate number of Registrable Shares which are held by all Selling Holders and
which are or are to be included in such Demand Registration or Piggyback
Registration.
"Piggyback Registration" has the meaning set forth in Section
3.01.
"Registrable Shares" means (i) any and all Shares; (ii) any
and all shares of Common Stock (other than the Shares) held by the Purchasers on
the Closing Date; (iii) any and all Common Stock issued or issuable upon the
exercise of any Rights or other securities, acquired by or issuable to the
Purchasers pursuant to Section 7.03 of the Agreement; and (iv) any other shares
of Common Stock issued in respect of any such shares set forth in clauses (i),
(ii) or (iii) (because of stock splits, stock dividends, reclassifications,
recapitalizations, or similar events); provided, however, that shares of Common
Stock held by a particular Holder which are Registrable Shares shall cease to be
Registrable Shares (x) upon any sale
-3-
pursuant to a Registration Statement or Rule 144 under the 1933 Act, (y) at such
time as such Holder is able to sell such shares (whether or not sold) pursuant
to Rule 144(k) under the 1933 Act or (z) upon any sale, transfer or assignment
in any manner to a Person which is not entitled to the rights provided by this
Agreement. For purposes hereof, any Person shall be deemed to hold, as of any
time, (i) all issued and outstanding shares of Common Stock, Registrable Shares
or other securities then held or deemed to be held by such Person; (ii) all
additional shares of Common Stock, Registrable Shares or other securities which
would then be held by such Person if it were assumed that all Rights, if any,
then held or deemed to be held by such Person had been duly and effectively
exercised in full at and effective as of such time; and (iii) all additional
shares of Common Stock, Registrable Shares or other securities, if any, which
such Person then has a right to purchase pursuant to the rights granted pursuant
to Section 7.03 of the Agreement by virtue of any prior exercise thereof,
assuming, in the case of clause (ii), that all adjustments to the kind, number
and amount of shares of capital stock or other securities issuable upon
exercise, exchange or conversion of any of the Rights referred to in such clause
required by reason of any event or transaction occurring at or prior to such
time had been duly and effectively made as and when required by the terms
thereof.
"Registration Expenses" shall mean, with respect to any Demand
Registration or Piggyback Registration all (i) registration, qualification and
filing fees; (ii) fees and expenses of compliance with securities or blue sky
laws (including the reasonable fees and disbursements of counsel for any
underwriters, dealers or placement agents in connection therewith); (iii)
printing expenses (or comparable duplication expenses) and escrow fees; (iv)
internal expenses of the Company (including all salaries and expenses of
officers and employees performing legal or accounting duties); (v) fees and
disbursements of counsel for the Company; (vi) fees and expenses for independent
certified public accountants retained by the Company (including all fees and
expenses associated with special audits or the delivery by independent certified
public accountants of a "cold comfort" letter or letters); (vii) fees and
expenses of any special experts retained by the Company in connection with such
registration; (viii) fees and expenses of listing the Registrable Shares on a
securities exchange or otherwise in connection with Section 4.01(r); (ix) the
reasonable fees and expenses of a single firm of legal counsel for the Holders
participating in such Demand Registration or Piggyback Registration; and (x) all
other reasonable fees, costs, expenses and disbursements incurred in connection
with or incident to the Company's compliance with Article 4. Registration
Expenses do not include underwriting commissions or discounts payable in respect
to Registrable Shares of a Holder included in a Demand Registration or Piggyback
Registration.
"Registration Statement" means a registration statement of the
Company under the 1933 Act on any form for which the Company then qualifies and
which permits the sale thereunder of the number of Registrable Shares (and any
other securities of the Company) to be included therein in accordance herewith
by the Selling Holders and, in the case of the Registrable Shares, according to
the method(s) of distribution determined in accordance herewith
-4-
and in the case of any other securities covered thereby, according to the
plan(s) of distribution described therein, including all exhibits and schedules
to, all financial statements included in or otherwise filed with, and all
documents incorporated by reference in any such registration statement, in each
case as amended or supplemented as of any reference date.
"Selling Holders" means, with respect to any Demand
Registration or Piggyback Registration, any Holders holding any Registrable
Shares which are or are to be included in such Demand Registration or Piggyback
Registration in accordance with this Agreement.
"Shelf Registration" has the meaning set forth in Section
2.10.
ARTICLE 2
DEMAND REGISTRATION
SECTION 2.01. Right to Demand Registration. The Holders shall
have the right to require the Company to register Registrable Shares under the
1933 Act (a "Demand Registration"), which right shall be exercisable in the
manner set forth in this Article 2 at any time or from time to time on or after
the Commencement Date.
SECTION 2.02. Registrations. Any Holder or Holders holding in
the aggregate 20% of the Registrable Shares (the "Initiating Holders") then held
by all Holders may request, in writing, that the Company effect a Demand
Registration on any form available for such registration under the 1933 Act, of
Registrable Shares constituting at least 20% of the Registrable Shares owned by
the Holders. If the Initiating Holders intend to distribute the Registrable
Shares by means of an underwritten offering, they shall so advise the Company in
their request. In the event such Demand Registration is underwritten, the right
of any other Holder to participate in such Demand Registration shall be
conditioned on such Holder's participation in such underwriting on the same
terms as the Initiating Holders. Upon receipt of any such request, the Company
shall promptly give written notice of such proposed registration to all other
Holders. Such Holders shall have the right, by giving written notice to the
Company within thirty days after the Company provides its notice, to elect to
have included in such Demand Registration such of their Registrable Shares as
such Holders may request in such notice of election. Subject to Section 2.03,
the Holders shall be entitled in the aggregate to require the Company to effect
four Demand Registrations pursuant to this Section 2.02 (any of which may be a
Shelf Registration as provided in Section 2.10) and, except as provided in
Section 5.01, a Demand Registration shall not be deemed to have been effected
unless such registration has been declared or ordered effective and, except for
any Shelf Registration Statement, the securities offered pursuant to such
registration have been sold. Notwithstanding
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anything to the contrary contained herein, the Company shall not be required to
effect more than two Demand Registrations during any single twelve-month period.
SECTION 2.03. Continuing Demand Registration. Subject to
Sections 2.06 and 4.04, if the number of Registrable Shares sought to be
included by the Holders in any Demand Registration is reduced pursuant to
Section 2.06, by reason of the inclusion in such Demand Registration of shares
of Common Stock held by any Person(s) other than Holders, by more than 10%, the
registration shall not count as a Demand Registration.
SECTION 2.04. Reasonable Efforts by the Company. Subject to
Section 2.05 and Section 2.07, if a Demand Registration is requested pursuant to
Section 2.02 the Company shall, as soon as practicable after the period of
thirty days referred to in such Section, file with the Commission and use its
reasonable efforts to cause to become effective a Registration Statement which
shall cover the Registrable Shares requested to be registered by the Selling
Holders and shall take all other actions (including those required by Article 4)
as may be necessary or advisable to permit the Selling Holders to dispose of all
such Registrable Shares requested to be included in such Demand Registration in
accordance with the intended method(s) of distribution and in compliance with
the 1933 Act and state "blue sky" and securities laws.
SECTION 2.05. Withdrawals. The Majority Selling Holders may,
at any time and from time to time reasonably in advance of the planned date of
consummation of the sale or other distribution of Registrable Shares pursuant to
any Demand Registration, (i) permit any Selling Holder to withdraw, in whole or
in part, from participation in such Demand Registration; (ii) permit any Holder
who was not originally a Selling Holder to become a Selling Holder and include
in such Demand Registration any or all of such Holder's Registrable Shares; or
(iii) otherwise increase or decrease the number of Registrable Shares to be
included in such Demand Registration; provided, however, that if any such
decrease would result in the reduction of the number of Registrable Shares to be
registered in such Demand Registration to a number that would not be sufficient
to satisfy the condition stated in Section 2.02, then such decrease shall not be
effective unless approved by the Company and, if not so approved, the Selling
Holder(s) shall be deemed to have abandoned and terminated such Demand
Registration. The Majority Selling Holders may terminate or abandon such Demand
Registration upon written notice to the Company to that effect, in which event
such Demand Registration shall be deemed not to have been requested.
SECTION 2.06. Methods of Distribution; Reduction in Shares to
be Registered. (a) Subject to the last sentence of this Section 2.06(a) and to
the provisions of Section 2.06(b), the Registrable Shares of any Selling Holder
included in a Demand Registration may be registered for sale by such Selling
Holder directly or through sale or placement agents or to or through one or more
underwriters designated from time to time by such Selling Holder and
-6-
approved by the Company in its reasonable discretion and for resale by any such
underwriter or broker-dealer, through broker-dealers or in any other manner, in
one or more transactions and at a fixed price or prices, which may be changed,
at market prices prevailing at the time of sale, at prices related to such
prevailing market prices, at prices determined on a negotiated or competitive
bid basis or at a price or prices otherwise determined by such Selling Holder.
Notwithstanding the preference of any Selling Holder in any Demand Registration,
if the Majority Selling Holders, in their sole discretion, determine that the
offering and sale of Registrable Shares pursuant to such Demand Registration
should be pursuant to an underwriting or through a selling or placement agent or
syndicate, then such Majority Selling Holders shall have the right to select the
underwriters or managing underwriter, selling or placement agent or managing
selling or placement agent or syndicate manager for such offering and sale and
to establish, by agreement with such underwriters, managing underwriter, selling
or placement agents, managing selling or placement agent or syndicate manager or
otherwise the price or prices and other terms of such underwriting, offering and
sale, and in such event no Selling Holder who otherwise would be entitled to
include Registrable Shares in such Demand Registration shall be entitled to have
such Registrable Shares so included unless they are included in such
underwritten offering or offered and sold through such selling or placement
agent or syndicate at such price or prices and on such terms. Any such managing
underwriter, managing selling or placement agent or syndicate manager selected
by the Majority Selling Holders, shall be subject to the Company's approval,
which shall not be unreasonably withheld or delayed.
(b) If a Demand Registration is for or includes an
underwritten offering or an offering through a sales or placement agent or
syndicate, and the managing underwriter, such sales or placement agent, or the
managing sales agent or the syndicate manager determines in good faith that
inclusion in such registration of all Registrable Shares and other securities,
if any, requested or proposed to be included in such offering exceeds the number
that could be sold without having an adverse effect on such offering, including
the price at which the Majority Selling Holders propose to sell their
Registrable Shares included in such offering, then the number of Registrable
Shares to be offered for the accounts of the Selling Holders shall be reduced or
limited on such basis in proportion to the respective numbers of Registrable
Shares requested to be included in such offering by the Selling Holders, to the
extent necessary to reduce the total number of shares to be included in such
offering to the amount recommended by such managing underwriter, agent, managing
sales agent or syndicate manager; provided, however, that if, without violation
of Section 2.09, in connection with such Demand Registration securities other
than Registrable Shares held by Selling Holders are being offered (whether for
the account of the Company or any Person other than a Holder), such reduction
shall be made (i) first, from any shares proposed to be sold for the accounts of
the Company or other Persons who are not Holders, allocated among the Company
and such other Persons in such manner as may be acceptable to the Company; and
(ii) second, from the Registrable Shares requested to be included in such
registration by the Holders (allocated, if necessary,
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pro rata among all such Holders on the basis of the relative numbers of shares
each such Person has requested to be included in such registration), it being
understood and agreed that the securities referred to in clause (i) above shall
not be included in any such offering unless or until all the Registrable Shares
requested to be included in such offering by the Holders are so included.
SECTION 2.07. Right of the Company to Suspend Registration.
The Company shall be entitled to suspend, for a reasonable period of time not in
excess of ninety days after its receipt of a request for a Demand Registration
pursuant to Section 2.02, the filing of any Registration Statement which it
otherwise would be required to file pursuant to this Article 2, if (i) at any
time prior to the filing of such Registration Statement (A) the Company is
engaged or has fixed plans to engage in a registered public offering of its
securities, (B) the Company is in possession of material nonpublic information
not ripe for disclosure in a registration statement and the Board of Directors
of the Company determines, in good faith and in the exercise of reasonable
business judgment, that the disclosure of such information would be materially
detrimental to the business and affairs of the Company and that any Registration
Statement absent the inclusion of such information would be materially
misleading, (C) the Company is then prohibited (pursuant to the terms of an
underwriting agreement in connection with a public offering of its securities or
otherwise) from filing such Registration Statement or (D) the Company is engaged
in any other activity which, in the good faith determination of the Board of
Directors of the Company, would be adversely affected by the requested Demand
Registration to the material detriment of the Company (each, a "Disadvantageous
Effect"); and (ii) the Company gives all Selling Holders written notice of such
suspension; provided, however, that a suspension pursuant to this Section 2.07
or pursuant to Section 4.02 by reason of the existence of one or more
Disadvantageous Effects shall be authorized only once during any twelve-month
period. In the event of any suspension pursuant to this Section 2.07, then
unless the request for the Demand Registration is withdrawn pursuant to the last
sentence of this Section 2.07, the Company shall file such Registration
Statement as soon as practicable after the first to occur of (w) the
consummation of the transaction which is the asserted basis for such
Disadvantageous Effect, (x) the abandonment or termination of such transaction
prior to consummation, (y) the determination by the Board of Directors of the
Company that such filing would not or would no longer result in such
Disadvantageous Effect and (z) the ninety-first day after the receipt of the
applicable request for such Demand Registration. If the Company shall suspend
the filing of any Registration Statement pursuant to this Section 2.07, the
Majority Selling Holders shall have the right to withdraw the request for such
Demand Registration by giving written notice to the Company prior to expiration
of such suspension period.
SECTION 2.08. Form of Registration Statement. If, in
connection with a Demand Registration, the Company proposes to effect such
registration through the filing of a Registration Statement on a particular
registration form available for such registration under
-8-
the 1933 Act and either the underwriters or managing underwriter, selling or
placement agent or managing selling or placement agent or syndicate manager, if
any, in connection with such Demand Registration shall advise the Company in
writing of its or their reasonable and good faith opinion that the use of
another available form is of material importance to the success of the proposed
offering or sale or other distribution contemplated, then such Demand
Registration shall be effected on such other form.
SECTION 2.09. No Other Participants in Demand Registration.
Unless otherwise agreed by the Majority Holders, neither the Company nor any
other Person except Holders shall be permitted to include any shares of Common
Stock, Rights or other securities for registration, offering, sale or
distribution in any Demand Registration.
SECTION 2.10. Shelf Registration. (a) The Company shall use
its reasonable best efforts to qualify for registration on Form S-3 or any
comparable or successor form or forms. Any request made at such time as the
Company is eligible to effect a registration of Registrable Shares on Form S-3
or any comparable or successor form or forms by any Holder for a Demand
Registration on Form S-3 or any comparable or successor form or forms pursuant
to Section 2.02 may, at the election of the Initiating Holder by specification
in the applicable request, include a request that all or any of the Registrable
Shares requested to be included in such Demand Registration be registered under
the 1933 Act for offering and sale on a delayed or continuous basis pursuant to
Rule 415 under the 1933 Act (a "Shelf Registration") to be filed on or after the
Commencement Date. In the event of any such request for a Shelf Registration,
the notice given by the Initiating Holder pursuant to Section 2.02 shall state
that such request was for or included a Shelf Registration. To the extent that a
request for a Demand Registration is for or includes a Shelf Registration, no
Selling Holder participating in such Shelf Registration shall be required to
provide information with respect to the desired price range for the Registrable
Shares requested to be included therein by any Selling Holder or the intended
method(s) of disposition or distribution thereof except to the extent and at the
time or times required in order to satisfy the applicable requirements of
Regulation S-K promulgated by the Commission. The method(s) of distribution of
the Registrable Shares of any Selling Holder included in any Shelf Registration
may be any method or methods permitted by Rule 415 of the 1933 Act and any such
Selling Holder may change such method or methods of distribution at any time and
from time to time while the Registration Statement relating to such Shelf
Registration is required to remain effective in accordance with the terms of
Section 2.10(b) hereof; provided that such Selling Holder provides to the
Company the information reasonably required to permit compliance with the
applicable requirements of Regulation S-K promulgated by the Commission.
(b) Subject to Section 4.02, the Company shall use all
reasonable efforts to keep each Registration Statement filed with respect to any
Shelf Registration continuously effective until two years from the date on which
the Commission declares such Registration
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Statement effective. Such period shall be automatically extended by the
aggregate number of days, if any, during which any delay, deferral, postponement
or suspension is in effect with respect to such Registration Statement.
(c) The Company shall effect any Shelf Registration requested
pursuant to this Agreement on a Registration Statement of the Company under the
1933 Act on any form, including Form S-3, for which the Company then qualifies
and which permits the offering and distribution thereunder of the number of
Registrable Shares to be included therein in accordance with the method(s) of
distribution determined in accordance with this Agreement.
(d) The fact that a Registration Statement with regard to a
Shelf Registration is effective as of a particular time shall not prejudice or
otherwise affect the rights of the Selling Holders to participate in any such
Demand Registration requested by any other Holders or to participate in any
Piggyback Registration.
ARTICLE 3
PIGGYBACK REGISTRATION
SECTION 3.01. Right to Require Piggyback Registration. (a) If,
at any time or from time to time, the Company shall determine to register any of
its securities, either for its own account or the account of a security holder
or holders (other than (w) a registration statement on Form S-4 or S-8 (or any
substitute form that may be adopted by the Commission), (x) a Registration
Statement filed by the Company solely registering up to 70,000 shares of Common
Stock for the account of Silicon Valley Bank, (y) a Registration Statement filed
by the Company solely registering up to 50,000 shares of Common Stock for the
account of Xxxxxxx Xxxx or (z) a registration statement filed in connection with
an offer of securities solely to the Company's existing security holders) in a
transaction that may be used for the registration of Registrable Shares for
distribution by any one or more of the methods permitted by Section 3.02(a),
then upon each and every such occasion the Company shall give prior written
notice of such proposed registration to each Holder of its intention to do so
promptly and in any event not later than the fourteenth day before the
anticipated filing date of the applicable Registration Statement. Such notice
shall specify whether the proposed registration is for the account of the
Company, for the account of one or more other Persons or both and also specify
the kind and number or amount of securities proposed to be registered on behalf
of each thereof and the proposed offering price or prices and distribution
methods and arrangements. Upon the terms and subject to the conditions and
limitations set forth in this Article 3, each Holder may elect to participate in
such registration by giving the Company, within ten days after such notice has
been given by the Company, a written request to register any or all of such
Holder's Registrable Shares in connection with such registration (any such
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registration as to which any such request is made being sometimes referred to as
an "Piggyback Registration")
(b) Any such request by a Holder shall state (i) the kind and
number of Registrable Shares to be included in such registration by such Holder;
(ii) such Holder's preferred method of distribution of such Registrable Shares
permitted by Section 3.02(b); and (iii) any other information that the Company
reasonably requests in such notice given by it to the Holders. Upon receipt of
one or more of such requests, the Company shall, subject to Section 3.02 and
Section 3.03, as soon as practicable, file with the Commission and use its
reasonable efforts to cause to become effective, a Registration Statement which
shall cover the Registrable Shares requested to be registered by the requesting
Holders and shall take all such other actions (including those required by
Article 4) as may be necessary or advisable to permit the requesting Holders to
dispose of all such Registrable Shares requested to be included in such
Piggyback Registration in accordance with the permitted intended method or
methods of distribution in compliance with the 1933 Act and state "blue sky" and
securities laws.
SECTION 3.02. Methods of Distribution; Reduction in Number of
Shares to be Registered. (a) Subject to Section 3.02(b), Section 3.02(c) and
Section 4.05, the Registrable Shares of any Holder included in a Piggyback
Registration may be registered for sale by such Holder directly or through sales
or placement agents designated from time to time or to or through one or more
underwriters or broker-dealers designated from time to time by such Holder and
for resale by any such underwriter or broker-dealer, in one or more transactions
and at a fixed price, which may be changed, at market prices prevailing at the
time of sale, at prices related to such prevailing market prices, at prices
determined on a negotiated or competitive bid basis or at a price otherwise
determined by such Holder.
(b) If the registration of which the Company gives notice is
for a registered public offering involving an underwriting, the Company shall so
advise the Holders as a part of the written notice given pursuant to Section
3.01. In such event, the right of any Holder to participate in such registration
pursuant to this Article 3 shall be conditioned upon such Holder's participation
in such underwriting and the inclusion of Registrable Shares in the underwriting
to the extent provided herein. Subject to Section 4.04, if any Piggyback
Registration is for (or includes) an underwritten offering, the Company will
permit each Holder who elects to include any of its Registrable Shares in such
Piggyback Registration to elect to include any or all of such Registrable Shares
in such underwritten offering on the same terms and conditions as any similar
securities included therein. In a registration pursuant to Section 3.01
involving an underwritten public offering, if the managing underwriter or
underwriters of such underwritten offering have informed, in writing, the
Company and each Holder who requested Registrable Shares to be included in such
offering that in such underwriter's or underwriters' reasonable opinion the
total number of securities which the Company, the Holders who requested
Registrable Shares to be included in such offering and any other Persons
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desiring to participate in such registration intend to include in such offering
is such as to materially and adversely affect the success of such offering,
including the price at which such securities can be sold, then the Company will
be required to include in such registration only the amount of securities which
it so advised should be included in such registration. In such event:
(i) if the registration was initiated by any security
holder(s) of the Company exercising "demand" registration rights,
securities shall be registered in such offering in the following order
of priority:
(A) first, the securities, if any, which the Company
proposes to register and the securities such security
holder(s) initiating such registration propose to register,
allocated, if necessary, pro rata among the Company and such
holder(s) on the basis of the relative numbers of shares each
such Person proposes to include in the registration; provided
that if such initiating holder or holders are Holders, the
Company shall not be entitled to include any securities in
such registration without the prior written consent of the
Majority Holders and, as among Holders there shall be no
priority and Registrable Securities sought to be included by
Holders shall be included pro rata based on the amount of
securities sought to be registered by such Persons;
(B) second, provided that no securities sought to be
included by the Company or such initiating holder(s) have been
excluded from such registration, the securities which have
been requested to be included in such registration by Holders
pursuant to this Agreement (unless the initiating holder(s)
are Holders, in which case clause (i)(A) shall govern the
priority of the Holders) (allocated, if necessary, pro rata
among all such Holders on the basis of the relative numbers of
shares each such Person has requested to include in
registration); and
(C) third, provided that no securities sought to be
included under clause (i)(A) or (i)(B) have been excluded, the
securities of all other Persons sought to be included in such
registration (allocated, if necessary, among such Persons in
such manner as the Company deems acceptable); or
(ii) if the registration was initiated by the Company,
otherwise than by reason of any such exercise of "demand" registration
rights, securities shall be registered in such offering in the
following order of priority:
(A) first, the securities, if any, which the Company
proposes to register;
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(B) second, provided that no securities sought to be
included by the Company have been excluded from such
registration, the securities which have been requested to be
included in such registration by Holders pursuant hereto
(allocated, if necessary, pro rata among all such Holders on
the basis of the relative numbers of shares each such Person
has requested to include in registration); and
(C) third, provided that no securities sought to be
included under clause (ii)(A) or (ii)(B) have been excluded,
the securities of all other Persons sought to be included in
such registration (allocated, if necessary, among such Persons
in such manner as the Company deems acceptable).
(c) If, as a result of the provisions of Section 3.02(b), any
Holder shall not be entitled to include all Registrable Securities in a
Piggy-Back Registration that such Holder has requested to be included, such
Holder may elect to withdraw his request to include Registrable Securities in
such registration.
SECTION 3.03. Withdrawal of Registration. The Company may,
without the consent of any Holder, delay, suspend, abandon or withdraw any
Piggyback Registration and any related proposed offering or other distribution
in which any Holder has requested inclusion of Registrable Shares pursuant to
this Article 3.
ARTICLE 4
OBLIGATIONS WITH RESPECT TO REGISTRATION
SECTION 4.01. In General. Whenever the Company is obligated by
the provisions of Article 2 or Article 3 to effect the registration of any
Registrable Shares under the 1933 Act, the Company shall use its reasonable
efforts to effect the registration of all Registrable Shares which any Holder
has requested to be included therein for offering, sale and distribution in
accordance with the permitted intended methods of distribution thereof as
quickly as practicable, and in connection therewith the Company will do the
following as expeditiously as possible:
(a) (i) prepare and file with the Commission a Registration
Statement on any form for which the Company then qualifies and which is
available for the registration of the Registrable Shares requested to be
registered in accordance with the intended methods of distribution thereof; (ii)
include in the Registration Statement all Registrable Shares requested to be
included pursuant to Article 2 or Article 3 (as the case may be); and (iii) use
its reasonable efforts to cause such Registration Statement to become effective;
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(b) prepare and file with the Commission such amendments and
post-effective amendments and supplements to the Registration Statement or any
prospectus as may be necessary to keep the Registration Statement effective,
current and in compliance with the provisions of the 1933 Act, until the last to
occur of (i) the sale or other distribution of all of the Registrable Shares
covered by such Registration Statement in accordance with the intended methods
of distribution thereof; (ii) the expiration of all periods during which
transactions in Registrable Shares by a dealer are not exempt from the
provisions of Section 5 of the 1933 Act by virtue of Section 4(3) of the 1933
Act or during which any dealer is obligated under the 1933 Act to deliver a
prospectus in connection with transactions involving Registrable Shares; and
(iii) the expiration of all other periods, if any, during which the Registration
Statement is required to remain effective in order to avoid a violation of
applicable law by any Holder or the Company related to the sale or other
distribution of all of the Registrable Shares covered by such Registration
Statement in accordance with the intended methods of distribution thereof;
(c) at least five days prior to filing any Registration
Statement or prospectus or any amendment or supplement thereto, furnish to each
Holder and each underwriter, if any, of the Registrable Shares covered by such
Registration Statement copies of the current draft of such Registration
Statement or prospectus (including documents to be incorporated by reference
therein), which documents will be subject to the reasonable review and comments
of such Holders (and their respective counsel) during such five-day period, and
if any Holder objects in writing to any statements in any such documents with
respect to such Holder or the distribution of the Registrable Shares to be
included by it in such Registration Statement, the Company shall, subject to
applicable law, promptly revise such statements to such Holder's reasonable
satisfaction;
(d) promptly notify each Holder of the effectiveness of the
Registration Statement;
(e) furnish to each Holder without charge and as soon as such
documents become available to the Company, at least one copy of the Registration
Statement and each amendment thereto, and such number of conformed copies
thereof, copies of the prospectus (including each preliminary prospectus and
each amendment or supplement thereto), in each case together with all exhibits
thereto and all documents incorporated by reference in any of such documents as
such Holder may reasonably (in light of such Holder's intended method of
distribution) request in order to facilitate the disposition of the Registrable
Shares being sold by such Holder (it being understood that the Company consents
to the use, in compliance with the 1933 Act, of each preliminary prospectus and
prospectus and each amendment or supplement thereto by each Holder, each
underwriter, broker, dealer, placement agent and other securities industry
professional and each agent of each Holder in connection with the offering, sale
and distribution of the Registrable Shares covered thereby);
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(f) promptly notify each Holder, at any time when a prospectus
relating to Registrable Shares of such Holder covered by the Registration
Statement is required to be delivered under the 1933 Act, of the happening of
any event as a result of which the preliminary prospectus or prospectus included
in such Registration Statement or any prospectus supplement contains any untrue
statement of a material fact or omits to state a material fact necessary to make
the statements therein, in light of the circumstances under which they were
made, not misleading, and the Company will, as promptly as practicable
thereafter, prepare and file with the Commission and furnish to each Holder a
supplement or amendment to such preliminary prospectus, prospectus or prospectus
supplement so that, as thereafter delivered to the prospective purchasers of the
Registrable Shares being distributed by such Holder, such preliminary
prospectus, prospectus or prospectus supplement will not contain any untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading;
(g) enter into customary agreements (including, in the case of
an underwritten offering, an underwriting agreement in customary form) and make
such representations and warranties to any underwriters, brokers, dealers,
placement agents and other Persons involved in the distribution of the
Registrable Shares included in such Registration Statement as in form, substance
and scope are customarily made by issuers in similar circumstances or which may
be reasonably requested;
(h) furnish to each underwriter, broker, dealer or placement
agent participating in any offering or sale or other distribution pursuant to
such Registration Statement a signed counterpart of (i) an opinion of counsel to
the Company addressed to such underwriter, broker, dealer or placement agent (as
the case may be); and (ii) a "cold comfort" letter or letters from the Company's
independent certified public accountants, each in customary form and covering
such matters of the type customarily covered by legal opinions or "cold comfort"
letters (as the case may be) in similar offerings, sales or distributions of
securities of similarly situated issuers and such other matters as the Majority
Selling Holders may reasonably request;
(i) prepare and file with the Commission promptly upon the
request of any such Holder, any amendments or supplements to such Registration
Statement or the applicable prospectus which, in the reasonable opinion of
counsel for such Holder, is required under the 1933 Act in connection with the
distribution of Registrable Shares by such Holder;
(j) effective on or prior to the date the Registration
Statement becomes effective, use its reasonable efforts to register or qualify
the Registrable Shares covered by a Registration Statement under the securities
or blue sky laws of such jurisdictions in the United States as the Majority
Selling Holders or any underwriter, broker, dealer or placement agent
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participating in the offering or sale or other distribution of the Registrable
Shares covered thereby shall reasonably request, and do any and all other acts
and things which may be reasonably necessary to enable each Selling Holder to
consummate the offering and disposition of such Registrable Shares in such
jurisdictions of such Registrable Shares in accordance with the permitted
methods of distribution described in such Registration Statement; provided,
however, that the Company shall in no event be required to qualify generally to
do business as a foreign corporation in any jurisdiction where it is not
otherwise required to be so qualified or, to conform its capitalization or the
composition of its assets at the time to the securities or blue sky laws of such
jurisdiction;
(k) make generally available to the Company's securityholders
earnings statements satisfying the provisions of the last sentence of Section
11(a) of the 1933 Act no later than forty-five days after the end of the
twelve-month period beginning with the first month of the first fiscal quarter
commencing after the effective date of the Registration Statement, which
earnings statements shall cover said twelve-month period;
(l) promptly notify each Selling Holder and each underwriter,
broker, dealer and placement agent participating in any offering or sale or
other distribution of securities covered by such Registration Statement of the
issuance or threatened issuance of any stop order or other order suspending the
effectiveness of the Registration Statement or preventing or suspending the use
of any preliminary prospectus, prospectus or prospectus supplement; use
reasonable efforts to prevent the issuance of any such threatened stop order or
other order, and if any such order is issued, use its best efforts to obtain the
lifting or withdrawal of such order at the earliest possible moment and promptly
notify each Selling Holder and each such underwriter, broker, dealer and
placement agent of any such lifting or withdrawal;
(m) as promptly as practicable after filing with the
Commission of any document which is incorporated by reference into a
Registration Statement, notify each Selling Holder of such filing and deliver a
copy of such document to each Selling Holder;
(n) cooperate with each Selling Holder and the underwriters,
brokers, dealers and placement agents participating in any offering or sale or
other distribution of securities covered by such Registration Statement to
facilitate the timely preparation and delivery of certificates, not bearing any
restrictive legends, unless otherwise required by such Holder, representing the
securities covered by such Registration Statement, and enable all Registrable
Shares of such Selling Holder covered thereby to be in such denominations and
registered in such names as such Selling Holder may request;
(o) use its reasonable efforts to cause the Registrable Shares
covered by the Registration Statement to be registered with or approved by such
other governmental authorities within the United States and its territories as
may be necessary to enable the Selling Holders
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to consummate the disposition of such securities in accordance with the intended
methods of disposition;
(p) cooperate with the Selling Holders and the underwriters,
brokers, dealers and placement agents participating in any offering or sale or
other distribution of securities covered by such Registration Statement in
making any filings or submissions required to be made, and in furnishing all
appropriate information in connection therewith, with the National Association
of Securities Dealers, Inc., any national securities exchange, any other
"self-regulatory organization" (as defined in the Exchange Act) or with any
governmental authority;
(q) promptly notify each Selling Holder and each underwriter,
broker, dealer and placement agent participating in any offering or sale or
other distribution of securities covered by such Registration Statement of the
issuance or threatened issuance of any order suspending the registration or
qualification of any Registrable Shares covered by such Registration Statement
for disposition in any jurisdiction; use its reasonable efforts to prevent the
issuance of any such threatened order and; if any such order is issued, use its
reasonable best efforts to obtain the lifting or withdrawal of such order at the
earliest possible moment and promptly notify each Selling Holder and each such
underwriter, broker, dealer and placement agent of any such lifting or
withdrawal;
(r) if any shares of Common Stock or any other capital stock
or securities of the same class, series, issue or other type as any Registrable
Shares covered by such Registration Statement are or upon consummation of all
sales and other distributions covered by such Registration Statement will be
listed, qualified or otherwise eligible for trading or quotation on a national
securities exchange or The Nasdaq Stock Market, use its reasonable best efforts
to cause, by the date of the first sale of any Registrable Shares pursuant to
such Registration Statement, all Registrable Shares covered by such Registration
Statement to be listed, qualified or eligible for trading or quotation on each
such exchange or quotation system;
(s) take, and use its reasonable efforts to cause each of the
respective Affiliates of the Company to take, all action necessary to effect
each registration, offering, sale and distribution of the Registrable Shares
contemplated hereby, including preparing and filing any required financial or
other information;
(t) make available to each registrar, transfer agent, trustee
or similar agent or fiduciary for each class, series, issue or other type of
Registrable Shares a supply of certificates or other instruments evidencing or
constituting such Registrable Shares which shall be in a form complying with the
requirements of such registrar, transfer agent, trustee or similar agent or
fiduciary promptly after the registration of such Registrable Shares;
(u) in the case of an underwritten offering, use its best
efforts to cause the senior executive officers of the Company to participate in
the customary "road show" presentations
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that may be reasonably requested by the managing underwriter or underwriters in
any such underwritten offering and otherwise to facilitate, cooperate with, and
participate in each proposed offering contemplated herein and customary selling
efforts related thereto; and
(v) take all other actions which are reasonably necessary or
which may be reasonably requested by the Majority Selling Holders or the
Majority Holders or any underwriter, broker, dealer or placement agent
participating in any offering or sale or other distribution of securities
covered by such Registration Statement to effect the registration and
qualification of the Registrable Shares covered by such Registration Statement
and to facilitate the disposition thereof in accordance with the respective
plans of distribution of the Selling Holders.
SECTION 4.02. Suspension of Registration Proceedings.
Notwithstanding anything to the contrary contained herein, if at any time after
the filing of a Registration Statement in a Demand Registration, the Company
determines, in its reasonable business judgment, that such offering, sale or
other distribution covered thereby would result in a Disadvantageous Effect,
then the Company may suspend the offering, sale or distribution of any of the
Registrable Shares pursuant to such Registration Statement by giving written
notice to such effect to each Selling Holder and upon receipt of such notice
such Selling Holder shall not offer or sell any shares of Common Stock, or
engage in any other transaction involving or relating to the Common Stock;
provided, however, that (i) the Company may not require such suspension unless
such suspension is also required on the part of each and every Person (including
the Company) who proposes to offer, sell or otherwise distribute any securities
pursuant to such Registration Statement; and (ii) a suspension pursuant to this
Section 4.02 or pursuant to Section 2.07 by reason of the existence of one or
more Disadvantageous Effects shall be authorized only once during any
twelve-month period. Any such suspension pursuant to this Section 4.02 shall
terminate upon the first to occur of (w) the consummation of the transaction or
event which is the asserted basis for such Disadvantageous Effect, (x) the
abandonment or termination of such transaction or event prior to consummation,
(y) the determination by the Board of Directors of the Company that such event,
offering, sale or other distribution would not or would no longer result in such
Disadvantageous Effect, and (z) the ninety-first day after the written notice of
such suspension is given in accordance with this Section.
SECTION 4.03. Procedures if Stop Order Issued. Each Selling
Holder, upon receipt of any written notice from the Company of the happening of
any event of the kind described in Section 4.01(f), will forthwith discontinue
disposition of Registrable Shares pursuant to the applicable Registration
Statement until such Selling Holder's receipt of the copies of the supplemented
or amended preliminary prospectus, prospectus or prospectus supplement
contemplated by Section 4.01(f), and, if so directed by the Company, such
Selling Holder will deliver to the Company all copies in its possession of the
most recent preliminary prospectus, prospectus or prospectus supplement covering
such Registrable Shares at the time of receipt of such notice. In the event the
Company shall give any such notice after a Registration
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Statement has become effective, the Company shall extend the period during which
the effectiveness of such Registration Statement shall be maintained pursuant to
Section 4.01(b) hereof by the number of days during the period from and
including the date of the giving of notice pursuant to Section 4.01(f) to the
date when the Company shall make available to each Selling Holder the copies of
the supplemented or amended preliminary prospectus, prospectus or prospectus
supplement contemplated by Section 4.01(f).
SECTION 4.04. Participation in Underwritten Offers. No Holder
or other Person who otherwise has a right to participate in any underwritten
offering in connection with a Demand Registration or a Piggyback Registration
shall be entitled to so participate unless such Person (i) agrees to sell its
securities on the basis provided in any underwriting arrangements applicable to
all stockholders who participate therein (including so-called "lock-up"
arrangements); and (ii) completes and executes all questionnaires, powers of
attorney, indemnities, underwriting agreements and other documents reasonably
required under the terms of such underwriting arrangements and this Agreement;
provided, that in the case of any Demand Registration, the Majority Selling
Holders shall have the right to determine those arrangements by agreement with
the managing underwriter(s) as provided in Section 2.06(a).
SECTION 4.05. Restriction on Other Sales. If, in the case of
either (or each) of the first two underwritten offerings after the date hereof
that consist of or include offerings of Common Stock for the account of the
Company registered pursuant to Section 5 of the 1933 Act, the managing
underwriter(s) for such offering determine in good faith that public sales of
Common Stock by the Holders otherwise than as part of such offering would
adversely affect the success of such offering, and if the Holders, collectively,
then own Registrable Shares constituting 10% or more of the fully diluted shares
of Common Stock then outstanding (after giving effect to all sales, including
any by Holders, and issuances of Common Stock or Rights to acquire Common Stock
pursuant to the Registration Statement covering such offering), then to the
extent requested by such managing underwriter(s), no Holder shall effect any
sale or distribution into the public market of any Common Stock owned by such
Holder, other than as part of such underwritten offering (to the extent that
such Holder has the right or is otherwise allowed to participate therein), for
such period after the effective date of the Registration Statement covering such
offering as such managing underwriter(s) shall specify; provided that (i) such
period shall not exceed 180 days; and (ii) each of the executive officers and
the Directors of the Company who beneficially own Common Stock or Rights to
acquire Common Stock, and each Person who holds a number of shares of Common
Stock (including shares issuable upon exercise of Rights but excluding shares
acquired in a public market) equal to or greater than the number of Registrable
Shares held (after giving effect to any sales pursuant to such Registration
Statement) by the Holders, collectively, also agree to be subject to the same
restrictions for the same period and any waiver or release from such restriction
granted to any such officer, director or Person is also granted to each of the
Holders with respect to the same number of shares. Any contract or agreement
entered into on or after
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the date hereof (other than any agreement between the Company and Silicon Valley
Bank relating to 70,000 shares of Common Stock) pursuant to which the Company
issues any securities or becomes or may become obligated to register or to
permit the participation in the registration of any securities of the Company
shall contain restrictions upon the holders of such securities equivalent to
those imposed upon the Holders under this Section. The provisions of this
Section 4.05 shall not prevent the conversion, exchange or exercise of any
securities pursuant to their respective terms into or for other securities of
the Company or any public sale or other distribution by any of the Holders with
the prior consent of the Company, and are supplemental to any similar
requirements imposed by the 1933 Act.
ARTICLE 5
EXPENSES OF REGISTRATION
SECTION 5.01. Expenses. Except as provided in the last
sentence of this Section 5.01, all Registration Expenses incurred in connection
with or otherwise incident to any Demand Registration or Piggyback Registration
and the offering or sale or other distribution of any Registrable Shares in
connection therewith shall be borne by the Company, whether or not any
Registration Statement filed in connection therewith ever becomes effective or
any such sale or other distribution ever is consummated. Underwriting discounts
and selling commissions attributable to the Registrable Shares included in such
registration shall be borne by the holders of such Registrable Shares pro rata
on the basis of the respective numbers of such included Registrable Shares.
Subject to the last sentence of this Section 5.01, the Company shall not be
required to pay the Registration Expenses of any Demand Registration begun
pursuant to Section 2.02 that is withdrawn at the request of the Majority
Selling Holders, unless the Majority Holders elect in writing to have such
registration counted as a Demand Registration. In any such case, (i) the Holders
of Registrable Shares to have been registered shall bear all such Registration
Expenses pro rata on the basis of the number of shares to have been registered;
and (ii) the Company shall not be deemed to have effected a Demand Registration
for purposes of the last sentence of Section 2.02. Notwithstanding the
foregoing, however, the Company shall pay such Registration Expenses (and shall
not be deemed to have effected a Demand Registration for purposes of the last
sentence of Section 2.02) if the withdrawal is pursuant to Section 2.07 or
Section 3.02.
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ARTICLE 6
INDEMNIFICATION AND CONTRIBUTION
SECTION 6.01. Indemnification by the Company. The Company
shall indemnify and hold harmless each Holder, each former Holder, each Person
(if any) who controls such Holder or former Holder within the meaning of the
1933 Act or the 1934 Act and each of their respective Affiliates, partners,
directors, officers, employees and agents (collectively, the "Holder Indemnified
Parties") from and against any liabilities, obligations, losses, damages,
assessments, fines and penalties of any kind or nature, including all amounts
paid or agreed to be paid in settlement of any claim, action, suit, hearing,
proceeding or investigation (collectively, "Losses"), whether direct, indirect,
joint or several, and subject to Section 6.03, also shall indemnify and
reimburse each Holder Indemnified Party for all reasonable fees, costs and
expenses (including reasonable fees and disbursements of counsel) in connection
with preparing for, defending against or settling, prosecuting any appeal of any
judgment entered in, or otherwise as a result of, any claim, action, suit,
hearing, proceeding or investigation, in each case which in any manner results
from, arises out of, or is based upon or related or attributable to (i) any
untrue statement or alleged untrue statement of any material fact contained in
any Registration Statement as originally filed or in any amendment thereof, or
in any preliminary, final or summary prospectus, or in any amendment thereof or
supplement thereto, or any omission or alleged omission to state in any thereof
a material fact required to be stated therein or necessary to make the
statements therein not misleading; or (ii) any violation by the Company of any
federal or state law, rule or regulation or common law applicable to the Company
and relating to action required of or inaction by the Company in connection with
any Demand Registration or Piggyback Registration; provided, however, that, in
the case of clause (i), the Company shall not be obligated to indemnify any
Holder or any of its controlling Persons, Affiliates, partners, directors,
officers, employees or agents for any Loss to the extent (and only to the
extent) that such Loss arises from (A) any such untrue statement made in or
omission from the Registration Statement or any amendment thereof, or any
related preliminary, final or summary prospectus or any amendment thereof or
supplement thereto, which statement or omission related directly to information
about such Holder or its proposed plan of distribution of the Registrable Shares
of such Holder covered by such Registration Statement and was made or omitted in
reliance upon and in conformity with the latest information about such Holder or
its proposed plan of distribution of the Registrable Shares of such Holder
covered by such Registration Statement which was provided to the Company by such
Holder in writing and stated in writing to be specifically for use in such
Registration Statement (or amendment thereto) or such prospectus (or amendment
thereof or supplement thereto) or (B) in the case of a sale directly by a Holder
(including a sale of shares through any underwriter retained by such Holder to
engage in a distribution on behalf of such Holder), such untrue statement or
alleged untrue statement or omission or alleged omission was
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contained in a preliminary prospectus and corrected in a final prospectus or
amended prospectus, copies of which were delivered to such Holder or such
underwriter on a timely basis, and such Holder or such underwriter failed to
deliver a copy of the final or amended prospectus at or prior to the
confirmation of the sale of the Registrable Shares to the Person asserting any
such Losses in any case where delivery is required by the Securities Act. The
Company will also indemnify each underwriter, selling broker, dealer manager,
placement agent and similar securities industry professional participating in
the distribution of Registrable Shares, its officers and directors and each
Person who controls such Person (within the meaning of the 0000 Xxx) to the
extent reasonably required by such underwriter; provided, however, that if the
Company and any such underwriter, selling broker, dealer manager or similar
industry professional enters into an underwriting, purchase or other agreement
relating to such distribution which contains provisions relating to
indemnification and contribution between the Company and such Person, such
provisions shall be deemed to govern indemnification and contribution as between
the Company and such Person.
SECTION 6.02. Indemnification by Each Holder. Each Holder,
individually and not jointly, shall indemnify and hold harmless the Company,
each of its directors, each of its officers and its legal counsel and
independent accountants, each underwriter of the Registrable Shares so
registered (including any broker or dealer through whom such of the shares may
be sold), and each Person, if any, who controls the Company within the meaning
of the 1933 Act and the 1934 Act (the "Company Indemnified Parties") and the
Holder Indemnified Parties (other than such indemnifying Holder and its
controlling Persons, Affiliates, partners, directors, officers, employees and
agents) from and against any Loss to which such Company Indemnified Parties
and/or Holder Indemnified Parties may become subject, and subject to Section
6.03, also shall indemnify and reimburse each Company Indemnified Party and each
such Holder Indemnified Party for all reasonable fees, costs and expenses
(including reasonable fees and disbursements of counsel) in connection with
preparing for, defending against or settling, prosecuting any appeal of any
judgment entered in, or otherwise as a result of any claim, action, suit,
hearing, proceeding or investigation, in each case insofar and to the extent
(and only insofar and to the extent) as such Loss or such claim, action, suit,
hearing, proceeding or investigation arises out of or is based upon any untrue
statement or alleged untrue statement of a material fact contained in any
Registration Statement pursuant to which any Registrable Shares of such Holder
were offered and sold or in any related preliminary, final or summary
prospectus, or in any amendment thereof or supplement thereto, or any omission
or alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading, if the statement or
omission related to information about such Holder or its proposed plan of
distribution of the Registrable Shares of such Holder covered by such
Registration Statement and was made or omitted in reliance upon and in
conformity with the latest information about such Holder or its proposed plan of
distribution of the Registrable Shares of such Holder covered by such
Registration Statement which was provided by such Holder in
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writing and stated in writing to be specifically for inclusion therein;
provided, however, that such Holder will not indemnify or hold harmless any
Company Indemnified Party and/or Holder Indemnified Party from or against any
such Loss, fee, cost or expense if the untrue statement, omission or alleged
untrue statement or omission upon which such Losses or expenses are based was
contained in or omitted from (as the case may be) any preliminary prospectus,
prospectus or summary prospectus, or any amendment thereof or supplement
thereto, used after such time as the Company was advised in writing by or on
behalf of such Holder that the information about such Selling Holder contained
therein needs to be corrected, revised or supplemented.
SECTION 6.03. Procedures. Each party claiming a right to
indemnification under this Article 6 (the "Indemnified Party") shall give notice
to the party from whom such indemnification is or may be sought (the
"Indemnifying Party") promptly after such Indemnified Party has actual knowledge
of any claim as to which indemnification may be sought, and the Indemnifying
Party may participate at its own expense in the defense or, if it so elects,
assume the defense (with counsel reasonably satisfactory to the Indemnified
Party) of any such claim and any action or proceeding resulting therefrom,
including the payment of all expenses. The failure of any Indemnified Party to
give notice as provided herein shall not relieve the Indemnifying Party from its
obligations to indemnify such Indemnified Party, except to the extent the
Indemnified Party's failure to so notify results in the forfeiture by the
Indemnifying Party of substantial rights and defenses. In the event that the
Indemnifying Party elects to assume the defense in any action or proceeding, an
Indemnified Party shall have the right to employ separate counsel in any such
action or proceeding and to participate in the defense thereof, but such
Indemnified Party shall pay the fees and expenses of such separate counsel
unless (i) the Indemnifying Party has agreed to pay such fees and expenses; (ii)
any relief other than the payment of money is sought against the Indemnified
Party; (iii) the use of counsel chosen by the Indemnifying Party to represent
the Indemnified Party would present such counsel with a conflict of interest; or
(iv) the defendants in any such action or proceeding include the Indemnifying
Party and the Indemnified Party and the Indemnified Party shall have been
advised by counsel that there may be one or more legal defenses available to it
and/or any other Indemnified Party that are different from or additional to
those available to the Indemnifying Party (in which case, if such Indemnified
Party notifies the Indemnifying Party in writing that it elects to employ
separate counsel at the expense of the Indemnifying Party, the Indemnifying
Party shall not assume the defense of such action or proceeding on such
Indemnified Party's behalf, it being understood, however, that the Indemnifying
Party shall not, in connection with any one such action or proceeding or
separate but substantially similar or related actions or proceedings arising out
of the same general allegations or circumstances, be liable for the reasonable
fees and expenses of more than one separate firm of attorneys (in addition to
local counsel) at any time for all Indemnified Parties, which firm or firms
shall be designated in writing by the applicable Indemnified Parties). If the
Indemnifying Party elects not to defend, or if, after commencing or undertaking
any such defense, the Indemnifying
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Party fails to prosecute or withdraws from such defense or fails to appeal any
judgment adverse or unfavorable to the Indemnified Party, the Indemnified Party
shall have the right to undertake the defense, settlement or appeal thereof (as
the case may be), at the Indemnifying Party's expense. If the Indemnified Party
assumes the defense of any such claim, investigation, action, suit, hearing or
proceeding pursuant to this Section 6.03 and proposes to settle the same prior
to a final judgment thereon or to forgo or abandon any appeal available after
final judgment thereon, then the Indemnified Party shall give the Indemnifying
Party prompt written notice thereof and the Indemnifying Party shall have the
right to participate in the settlement, assume or reassume the defense thereof
or prosecute such appeal, in each case at the Indemnifying Party's expense. The
Indemnifying Party shall not, without written consent of such Indemnified Party,
settle or compromise or consent to entry of any judgment with respect to any
such claim, investigation, action, suit, hearing or proceeding (i) in which any
relief other than the payment of money damages is or may be sought against such
Indemnified Party or (ii) which does not include as an unconditional term
thereof the giving by the claimant, Person conducting such investigation or
initiating such hearing, plaintiff or petitioner to such Indemnified Party of a
release from all liability with respect to such claim, investigation, action,
suit or proceeding and all other claims or causes of action (known or unknown)
arising or which might arise out of the same facts.
SECTION 6.04. Contribution. In order to provide for just and
equitable contribution if a claim for indemnification pursuant to the
indemnification provisions of this Article 6 is made but it is found in a final
judgment by a court of competent jurisdiction (not subject to further appeal)
that such indemnification may not be enforced in such case, even though the
express provisions hereof provide for indemnification in such case or the
indemnification provided for under this Article 6, even though so provided for,
otherwise is unavailable to or insufficient to hold any Indemnified Party
harmless to the full extent provided herein with respect to any Loss (or any
fees, costs or expenses) for which such indemnification is provided for, then
the Indemnifying Party shall contribute to the amount paid or payable by such
Indemnified Party as a result of such Losses (i) in such proportion as is
appropriate to reflect the relative fault of the Indemnifying Party, on the one
hand, and such Indemnified Party, on the other, in connection with the
statements or omissions which resulted in such Losses; or (ii) if the allocation
provided by clause (i) above is not permitted by applicable law, in such
proportion as is appropriate to reflect not only the relative fault referred to
in clause (i) above but also the relative benefits received by the Indemnifying
Party, on the one hand, and such Indemnified Party, on the other, from the
subject offering or distribution, as well as any other relevant equitable
considerations. Relative fault shall be determined by reference to, among other
things, whether the untrue or alleged untrue statement of a material fact or the
omission or alleged omission to state a material fact relates to information
supplied by (or omitted to be supplied by) the Indemnifying Party or the
Indemnified Party and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such statement or omission.
The relative benefits received by the Indemnifying Party, on the one
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hand, and the Indemnified Party, on the other, shall be deemed to be in the same
proportion as the net proceeds of the offering or other distribution received by
the Indemnifying Party bears to the net proceeds of the offering or other
distribution received by the Indemnified Party. No Person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the 0000 Xxx) shall be
entitled to contribution from any person who was not guilty of such fraudulent
misrepresentation. The Company and the Holders agree that it would not be just
and equitable if contributions pursuant to this Section 6.04 were to be
determined by pro rata allocation (even if all Holders were treated as one
entity for such purpose) or by any other method of allocation which does not
take account of the equitable considerations referred to above in this Section
6.04.
SECTION 6.05. Limit on Liability of Holders. The parties
agree, to the maximum extent permitted by law, that the obligations and
liability of each Selling Holder with respect to any Demand Registration or
Piggyback Registration, whether for indemnification pursuant to Section 6.02,
contribution pursuant to Section 6.04 or otherwise, shall not in any event
exceed in the aggregate the amount of net proceeds received by such Selling
Holder from the sale of the Registrable Shares sold by such Selling Holder in
such Demand Registration or Piggyback Registration.
ARTICLE 7
RULE 144
SECTION 7.01. Rule 144. The Company covenants that it will use
best efforts to file any reports required to be filed by it under the 1933 Act
and the 1934 Act and that it will take such further action as Holders may
reasonably request, all to the extent required from time to time to enable
Holders to sell Registrable Shares without registration under the 1933 Act
within the limitation of the exemptions provided by Rule 144 under the 1933 Act,
as such Rule may be amended from time to time, or any similar rule or regulation
hereafter adopted by the Commission. Upon the request of a Holder, the Company
will deliver to such Holder a written statement as to whether it has complied
with such requirements.
Exhibit B
PURCHASER SHARES PURCHASE PRICE
--------- ------ --------------
WC Capital, LLC................................ 1,552,420 $962,500.40
Carnegie Hill Associates, LLC.................. 322,580 $199,999.60
Exhibit C
FORM OF INDEMNIFICATION AGREEMENT
This Indemnification Agreement, made and entered into as of
this [ ] day of January, 2001 ("Agreement"), by and between Datawatch
Corporation, a Delaware corporation ("Company"), and ____________________
("Indemnitee"):
WHEREAS, highly competent persons have become more reluctant
to serve corporations as directors, officers or in other capacities unless they
are provided with adequate protection through insurance or adequate
indemnification against inordinate risks of claims and actions against them
arising out of their service to and activities on behalf of the corporation;
WHEREAS, the Board of Directors of the Company (the "Board")
has determined that, in order to attract and retain qualified individuals, the
Company will attempt to maintain on an ongoing basis, at its sole expense,
liability insurance to protect persons serving the Company and its subsidiaries
from certain liabilities. Although the furnishing of such insurance has been a
customary and widespread practice among United States-based corporations and
other business enterprises, the Company believes that, given current market
conditions and trends, such insurance may be available to it in the future only
at higher premiums and with more exclusions. At the same time, directors,
officers, and other persons in service to corporations or business enterprises
are being increasingly subjected to expensive and time-consuming litigation
relating to, among other things, matters that traditionally would have been
brought only against the corporation or business enterprise itself;
WHEREAS, the uncertainties relating to such insurance and to
indemnification have increased the difficulty of attracting and retaining such
persons;
WHEREAS, the Board has determined that the increased
difficulty in attracting and retaining such persons is detrimental to the best
interests of the Company's stockholders and that the Company should act to
assure such persons that there will be increased certainty of such protection in
the future;
WHEREAS, it is reasonable, prudent and necessary for the
Company contractually to obligate itself to indemnify such persons to the
fullest extent permitted by applicable law so that they will serve or continue
to serve the Company free from undue concern that they will not be so
indemnified;
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WHEREAS, this Agreement is a supplement to and in furtherance
of the By-Laws of the Company and any resolutions adopted pursuant thereto, and
shall not be deemed a substitute therefore, nor to diminish or abrogate any
rights of Indemnitee thereunder;
WHEREAS, the Company's By-Laws and the Delaware corporate
indemnification statute (Section 145 of the Delaware General Corporation Law)
each is nonexclusive and, therefore, contemplates that contracts may be entered
into with respect to indemnification of directors, officers, employees and
agents;
WHEREAS, it is reasonable, prudent and necessary for the
Company contractually to obligate itself to indemnify, and to advance expenses
on behalf of, such persons to the fullest extent permitted by applicable law so
that they will serve or continue to serve the Company free from undue concern
that they will not be so indemnified; and
WHEREAS, Indemnitee is willing to serve, continue to serve and
to take on additional service for or on behalf of the Company on the condition
that Indemnitee be so indemnified.
NOW, THEREFORE, in consideration of the premises and the
covenants contained herein, the Company and Indemnitee do hereby covenant and
agree as follows:
Section 1. Services by Indemnitee. Indemnitee agrees to serve
as a director, officer, employee and/or agent of the Company and/or any of its
subsidiaries, as the case may be, and may serve, at the request of the Company,
as a director, officer, employee and/or agent of another corporation,
partnership, joint venture, trust, employee benefit plan or other enterprise (a
"Relevant Enterprise"). Indemnitee may at any time and for any reason resign
from such position (subject to any other contractual obligation or any
obligation imposed by operation of law), in which event the Company shall have
no obligation under this Agreement to continue Indemnitee in such position. This
Agreement shall not be deemed an employment contract between the Company (or any
of its subsidiaries) and Indemnitee. Indemnitee specifically acknowledges that
Indemnitee's employment with the Company (or any of its subsidiaries), if any,
is "at will", and the Indemnitee may be discharged at any time for any reason,
with or without cause, except as may be otherwise provided in any written
employment contract between Indemnitee and the Company (or any of its
subsidiaries), other applicable formal severance policies duly adopted by the
Board, or, with respect to service as a director of the Company and/or any of
its subsidiaries, Indemnitee specifically acknowledges that this Agreement does
not impose any obligation of the Company to continue Indemnitee's service to the
Company except as may otherwise be provided by the Company's or its
subsidiaries', as the case may be, Certificate of Incorporation, By-laws, and
the General Corporation Law of the State of Delaware. The foregoing
notwithstanding, subject to Section 12 hereof, this Agreement shall continue in
force after Indemnitee has ceased to serve as a director, officer,
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employee and/or agent, as the case may be, of the Company and its subsidiaries
or of a Relevant Enterprise.
Section 2. Indemnification - General. The Company shall
indemnify, and advance Expenses (as hereinafter defined) to, Indemnitee (a) as
provided in this Agreement and (b) (subject to the provisions of this Agreement)
to the fullest extent permitted by applicable law in effect on the date hereof
and as amended from time to time. The rights of Indemnitee provided under the
preceding sentence shall include, but shall not be limited to, the rights set
forth in the other Sections of this Agreement.
Section 3. Proceedings Other Than Proceedings by or in the
Right of the Company and/or any of its Subsidiaries. Indemnitee shall be
entitled to the rights of indemnification provided in this Section 3 if, by
reason of his Corporate Status (as hereinafter defined), he is, or is threatened
to be made, a party to or a participant in any threatened, pending, or completed
Proceeding (as hereinafter defined), other than a Proceeding by or in the right
of the Company and/or any of its subsidiaries. Pursuant to this Section 3,
Indemnitee shall be indemnified against all Expenses, judgments, penalties,
fines and amounts paid in settlement actually and reasonably incurred by him or
on his behalf in connection with such Proceeding or any claim, issue or matter
therein, if he acted in good faith and in a manner he reasonably believed to be
in or not opposed to the best interests of the Company and/or any of its
subsidiaries and, with respect to any criminal Proceeding, had no reasonable
cause to believe his conduct was unlawful.
Section 4. Proceedings by or in the Right of the Company
and/or any of its Subsidiaries. Indemnitee shall be entitled to the rights of
indemnification provided in this Section 4 if, by reason of his Corporate
Status, he is, or is threatened to be made, a party to or a participant in any
threatened, pending or completed Proceeding brought by or in the right of the
Company and/or any of its subsidiaries to procure a judgment in its favor.
Pursuant to this Section, Indemnitee shall be indemnified against all Expenses
(including all interest, assessments and other charges paid or payable in
connection with or in respect of such Expenses) actually and reasonably incurred
by him or on his behalf in connection with such Proceeding if he acted in good
faith and in a manner he reasonably believed to be in or not opposed to the best
interests of the Company and/or any of its subsidiaries; provided, however,
that, if applicable law so provides, no indemnification against such Expenses
shall be made in respect of any claim, issue or matter in such Proceeding as to
which Indemnitee shall have been adjudged to be liable to the Company and/or any
of its subsidiaries unless and to the extent that the Court of Chancery of the
State of Delaware, or the court in which such Proceeding shall have been brought
or is pending, shall determine that such indemnification may be made.
Section 5. Partial Indemnification. Notwithstanding any other
provision of this Agreement, to the extent that Indemnitee is, by reason of his
Corporate Status, a party to
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(or a participant in) and is successful, on the merits or otherwise, in defense
of any Proceeding, he shall be indemnified against all Expenses actually and
reasonably incurred by him or on his behalf in connection therewith. If
Indemnitee is not wholly successful in defense of such Proceeding but is
successful, on the merits or otherwise, as to one or more but less than all
claims, issues or matters in such Proceeding, the Company shall indemnify
Indemnitee against all Expenses actually and reasonably incurred by him or on
his behalf in connection with each successfully resolved claim, issue or matter.
For purposes of this Section and without limitation, the termination of any
claim, issue or matter in such a Proceeding by dismissal, with or without
prejudice, shall be deemed to be a successful result as to such claim, issue or
matter. If Indemnitee is entitled under any provision of this agreement to
indemnification by the Company for some or a portion of the Expenses, judgments,
penalties, fines and amounts paid in settlement (including all interest,
assessments and other charges paid or payable in connection with or in respect
of such Expenses, judgments, penalties, fines and amounts paid in settlement)
actually and reasonably incurred by him or on his behalf in connection with such
Proceeding or any claim, issue or matter therein, but not, however, for the
total amount thereof, the Company shall nevertheless indemnify Indemnitee for
the portion to which Indemnitee is entitled.
Section 6. Indemnification for Additional Expenses.
(a) The Company shall indemnify Indemnitee against any and all
Expenses which are reasonably incurred by Indemnitee in connection with any
action brought by Indemnitee for (i) indemnification or advance payment of
Expenses by the Company under this Agreement or any other agreement or By-Law of
the Company now or hereafter in effect, or (ii) recovery under any directors'
and officers' liability insurance policies maintained by the Company; but only
to the extent that Indemnitee prevails in such action and ultimately is
determined to be entitled to such indemnification, advance payment of Expenses
or insurance recovery, as the case may be. Indemnitee shall be entitled to
advancement of such Expenses pursuant to and in accordance with the provisions
of Section 7 hereof.
(b) Notwithstanding any other provision of this Agreement, to
the extent that Indemnitee is, by reason of his Corporate Status, a witness in
any Proceeding to which Indemnitee is not a party, he shall be indemnified
against all Expenses actually and reasonably incurred by him or on his behalf in
connection therewith.
Section 7. Advancement of Expenses. The Company shall advance,
without duplication, all reasonable Expenses incurred by or on behalf of
Indemnitee in connection with any Proceeding within seven (7) days after the
receipt by the Company of a statement or statements from Indemnitee requesting
such advance or advances from time to time, whether prior to or after final
disposition of such Proceeding. Such statement or statements shall reasonably
evidence the Expenses incurred by Indemnitee and shall include or be preceded or
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accompanied by an undertaking by or on behalf of Indemnitee to repay any
Expenses advanced if it shall ultimately be determined that Indemnitee is not
entitled to be indemnified against such Expenses. Notwithstanding the foregoing,
the obligation of the Company to advance Expenses pursuant to this Section 7
shall be subject to the condition that, if, when and to the extent that the
Company determines that Indemnitee would not be permitted to be indemnified
under applicable law, the Company shall be entitled to be reimbursed, within
thirty (30) days of such determination, by Indemnitee (who hereby agrees to
reimburse the Company) for all such amounts theretofore paid; provided, however,
that if Indemnitee has commenced or thereafter commences legal proceedings in a
court of competent jurisdiction to secure a determination that Indemnitee should
be indemnified under applicable law, any determination made by the Company that
Indemnitee would not be permitted to be indemnified under applicable law shall
not be binding and Indemnitee shall not be required to reimburse the Company for
any advance of Expenses until a final judicial determination is made with
respect thereto (as to which all rights of appeal therefrom have been exhausted
or lapsed).
Section 8. Procedure for Determination of Entitlement to
Indemnification.
(a) To obtain indemnification under this Agreement, Indemnitee
shall submit to the Company a written request, including therein or therewith
such documentation and information as is reasonably available to Indemnitee and
is reasonably necessary to determine whether and to what extent Indemnitee is
entitled to indemnification. The Secretary or Assistant Secretary of the Company
shall, promptly upon receipt of such a request for indemnification, advise the
Board in writing that Indemnitee has requested indemnification.
(b) Upon written request by Indemnitee for indemnification
pursuant to the first sentence of Section 8(a) hereof, a determination, if
required by applicable law, with respect to Indemnitee's entitlement thereto
shall be made in the specific case: (i) if a Change in Control (as hereinafter
defined) shall have occurred, by Independent Counsel (as hereinafter defined) in
a written opinion to the Board of Directors, a copy of which shall be delivered
to Indemnitee; or (ii) if a Change of Control shall not have occurred, (A) by a
majority vote of the Disinterested Directors (as hereinafter defined), even
though less than a quorum of the Board, or (B) if there are no such
Disinterested Directors or, if such Disinterested Directors so direct, by
Independent Counsel in a written opinion to the Board, a copy of which shall be
delivered to Indemnitee or (C) if so directed by the Board, by a majority vote
of a quorum of the outstanding shares of stock of all classes entitled to vote
for directors, voting as a single class, which quorum shall consist of
stockholders who are not at that time parties to the Proceeding in question;
and, if it is so determined that Indemnitee is entitled to indemnification,
payment to Indemnitee shall be made within seven (7) days after such
determination. Indemnitee shall cooperate with the person, persons or entity
making such determination with respect to Indemnitee's entitlement to
indemnification, including providing to such person, persons or entity upon
reasonable advance request any documentation or information which is not
privileged
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or otherwise protected from disclosure and which is reasonably available to
Indemnitee and reasonably necessary to such determination. Any costs or expenses
(including reasonable attorneys' fees and disbursements) incurred by Indemnitee
in so cooperating with the person, persons or entity making such determination
shall be borne by the Company (irrespective of the determination as to
Indemnitee's entitlement to indemnification), and the Company hereby indemnifies
and agrees to hold Indemnitee harmless therefrom.
(c) In the event the determination of entitlement to
indemnification is to be made by Independent Counsel pursuant to Section 8(b)
hereof, the Independent Counsel shall be selected as provided in this Section
8(c). If a Change of Control shall not have occurred, the Independent Counsel
shall be selected by the Board, and the Company shall give written notice to
Indemnitee advising him of the identity of the Independent Counsel so selected.
If a Change of Control shall have occurred, the Independent Counsel shall be
selected by Indemnitee (unless Indemnitee shall request that such selection be
made by the Board, in which event the preceding sentence shall apply), and
Indemnitee shall give prompt written notice to the Company advising it of the
identity of the Independent Counsel so selected. In either event, Indemnitee or
the Company, as the case may be, may, within 10 days after such written notice
of selection shall have been given, deliver to the Company or to Indemnitee, as
the case may be, a written objection to such selection; provided, however, that
such objection may be asserted only on the ground that the Independent Counsel
so selected does not meet the requirements of "Independent Counsel" as defined
in Section 17 of this Agreement, and the objection shall set forth with
particularity the factual basis of such assertion. If such written objection is
so made and substantiated, the Independent Counsel so selected may not serve as
Independent Counsel unless and until such objection is withdrawn or a court has
determined that such objection is without merit. If, within 20 days after
submission by Indemnitee of a written request for indemnification pursuant to
Section 8(a) hereof, no Independent Counsel shall have been selected and not
objected to, either the Company or Indemnitee, as the case may be, may petition
the Court of Chancery of the State of Delaware for resolution of any objection
which shall have been made by the Company or Indemnitee to the other's selection
of Independent Counsel and/or for the appointment as Independent Counsel of a
person selected by the Court or by such other person as the Court shall
designate, and the person with respect to whom all objections are so resolved or
the person so appointed shall act as Independent Counsel under Section 8(b)
hereof. The Company shall pay any and all reasonable fees and expenses of
Independent Counsel incurred by such Independent Counsel in connection with
acting pursuant to Section 8(b) hereof, and the Company shall pay all reasonable
fees and expenses incident to the procedures of this Section 8(c), regardless of
the manner in which such Independent Counsel was selected or appointed. Upon the
due commencement of any judicial proceeding or arbitration pursuant to Section
10(a) of this Agreement, Independent Counsel shall be discharged and relieved of
any further responsibility in such capacity (subject to the applicable standards
of professional conduct then prevailing).
-7-
(d) The Company shall not be required to obtain the consent of
the Indemnitee to the settlement of any Proceeding which the Company has
undertaken to defend if the Company assumes full and sole responsibility for
such settlement and the settlement grants the Indemnitee a complete and
unqualified release in respect of the potential liability. The Company shall not
be liable for any amount paid by the Indemnitee in settlement of any Proceeding
that is not defended by the Company, unless the Company has consented to such
settlement, which consent shall not be unreasonably withheld.
Section 9. Presumptions and Effect of Certain Proceedings.
(a) In making a determination with respect to entitlement to
indemnification or the advancement of expenses hereunder, the person or persons
or entity making such determination shall presume that Indemnitee is entitled to
indemnification or advancement of expenses under this Agreement if Indemnitee
has submitted a request for indemnification or the advancement of expenses in
accordance with Section 8(a) of this Agreement, and the Company shall have the
burden of proof to overcome that presumption in connection with the making by
any person, persons or entity of any determination contrary to that presumption.
Neither the failure of the Company (including the Board or independent legal
counsel) to have made a determination prior to the commencement of any action
pursuant to this Agreement that indemnification is proper in the circumstances
because Indemnitee has met the applicable standard of conduct, nor an actual
determination by the Company (including the Board or independent legal counsel)
that Indemnitee has not met such applicable standard of conduct, shall be a
defense to the action or create a presumption that Indemnitee has not met the
applicable standard of conduct.
(b) If the person, persons or entity empowered or selected
under Section 8 of this Agreement to determine whether Indemnitee is entitled to
indemnification shall not have made a determination within sixty (60) days after
receipt by the Company of the request therefor, the requisite determination of
entitlement to indemnification shall be deemed to have been made and Indemnitee
shall be entitled to such indemnification, absent (i) a misstatement by
Indemnitee of a material fact, or an omission of a material fact necessary to
make Indemnitee's statement not materially misleading, in connection with the
request for indemnification, or (ii) a prohibition of such indemnification under
applicable law; provided, however, that such 60-day period may be extended for a
reasonable time, not to exceed an additional thirty (30) days, if the person,
persons or entity making the determination with respect to entitlement to
indemnification in good faith requires such additional time for the obtaining or
evaluating of documentation and/or information relating thereto; provided,
FURTHER, that the foregoing provisions of this Section 9(b) shall not apply (i)
if the determination of entitlement to indemnification is to be made by the
stockholders pursuant to Section 8(b) of this Agreement and if (A) within
fifteen (15) days after receipt by the Company of the request for such
determination, the Board of Directors has resolved to submit such determination
to the
-8-
stockholders for their consideration at an annual meeting thereof to be held
within seventy-five (75) days after such receipt and such determination is made
thereat, or (B) a special meeting of stockholders is called within fifteen (15)
days after such receipt for the purpose of making such determination, such
meeting is held for such purpose within sixty (60) days after having been so
called and such determination is made thereat, or (ii) if the determination of
entitlement to indemnification is to be made by Independent Counsel pursuant to
Section 8(b) of this Agreement.
(c) The termination of any Proceeding or of any claim, issue
or matter therein, by judgment, order, settlement or conviction, or upon a plea
of NOLO CONTENDERE or its equivalent, shall not (except as otherwise expressly
provided in this Agreement) of itself adversely affect the right of Indemnitee
to indemnification or create a presumption that Indemnitee did not act in good
faith and in a manner which he reasonably believed to be in or not opposed to
the best interests of the Company or, with respect to any criminal Proceeding,
that Indemnitee had reasonable cause to believe that his conduct was unlawful.
(d) For purposes of any determination of good faith,
Indemnitee shall be deemed to have acted in good faith if Indemnitee's action is
based on the records or books of account of the Company or relevant subsidiary
or Relevant Enterprise, including financial statements, or on information
supplied to Indemnitee by the officers of the Company or relevant subsidiary or
Relevant Enterprise in the course of their duties, or on the advice of legal
counsel for the Company or relevant subsidiary or Relevant Enterprise, by an
independent certified public accountant or by an appraiser or other expert
selected with reasonable care by the Company or relevant subsidiary or Relevant
Enterprise. The provisions of this Section 9(d) shall not be deemed to be
exclusive or to limit in any way the other circumstances in which the Indemnitee
may be deemed to have met the applicable standard of conduct set forth in this
Agreement.
(e) The knowledge and/or actions, or failure to act, of any
other director, officer, agent or employee of the Company or any of its
subsidiaries or Relevant Enterprise shall not be imputed to Indemnitee for
purposes of determining the right to indemnification under this Agreement.
Section 10. Remedies of Indemnitee.
(a) In the event that (i) a determination is made pursuant to
Section 8 of this Agreement that Indemnitee is not entitled to indemnification
under this Agreement, (ii) advancement of Expenses is not timely made pursuant
to Section 7 of this Agreement, (iii) no determination of entitlement to
indemnification shall have been made pursuant to Section 8(b) of this Agreement
within 90 days after receipt by the Company of the request for indemnification;
provided, however, that such 90-day period may be extended for a reasonable
time, not to exceed an additional thirty (30) days, if the person, persons or
entity making the
-9-
determination with respect to entitlement to indemnification in good faith
requires such additional time for the obtaining or evaluating of documentation
and/or information relating thereto; provided, further, that the 90-day period
in this subsection (iii) shall not apply if the determination of entitlement of
indemnification is to be made by the stockholders pursuant to Section 8(b) of
this Agreement and if (A) within fifteen (15) days after receipt by the Company
of the request for such determination, the Board of Directors has resolved to
submit such determination to the stockholders for their consideration at an
annual meeting thereof to be held within seventy-five (75) days after such
receipt and such determination is made thereat, or (B) a special meeting of
stockholders is called within fifteen (15) days after such receipt for the
purpose of making such determination, such meeting is held for such purpose
within sixty (60) days after having been so called and such determination is
made thereat, (iv) payment of indemnification is not made pursuant to Section 5
or 6 of this Agreement within ten (10) days after receipt by the Company of a
written request therefor or (v) payment of indemnification is not made within
ten (10) days after a determination has been made that Indemnitee is entitled to
indemnification, Indemnitee shall be entitled to an adjudication by the Court of
Chancery of the State of Delaware of his entitlement to such indemnification or
advancement of Expenses. Alternatively, Indemnitee, at his option, may seek an
award in arbitration to be conducted by a single arbitrator pursuant to the
Commercial Arbitration Rules of the American Arbitration Association. Indemnitee
shall commence such proceeding seeking an adjudication or an award in
arbitration within 180 days following the date on which Indemnitee first has the
right to commence such proceeding pursuant to this Section 10(a); provided,
however, that the foregoing clause shall not apply in respect of a proceeding
brought by Indemnitee to enforce his rights under Section 5 of this Agreement.
(b) In the event that a determination shall have been made
pursuant to Section 8(b) of this Agreement that Indemnitee is not entitled to
indemnification, any judicial proceeding or arbitration commenced pursuant to
this Section 10 shall be conducted in all respects as a DE NOVO trial, or
arbitration, on the merits, and Indemnitee shall not be prejudiced by reason of
that adverse determination. If a Change of Control shall have occurred, in any
judicial proceeding or arbitration commenced pursuant to this Section 10, the
Company shall have the burden of proving that Indemnitee is not entitled to
indemnification or advancement of Expenses, as the case may be.
(c) If a determination shall have been made pursuant to
Section 8(b) of this Agreement that Indemnitee is entitled to indemnification,
the Company shall be bound by such determination in any judicial proceeding or
arbitration commenced pursuant to this Section 10, absent (i) a misstatement by
Indemnitee of a material fact, or an omission of a material fact necessary to
make Indemnitee's statement not materially misleading, in connection with the
request for indemnification, or (ii) a prohibition of such indemnification under
applicable law.
-10-
(d) In the event that Indemnitee, pursuant to this Section 10,
seeks a judicial adjudication of or an award in arbitration to enforce his
rights under, or to record damages for breach of, this Agreement, Indemnitee
shall be entitled to recover from the Company, and shall be indemnified by the
Company against, any and all expenses (of the types described in the definition
of Expenses in Section 17 of this Agreement) actually and reasonably incurred by
him in such judicial adjudication or arbitration, but only if he prevails
therein. If it shall be determined in said judicial adjudication or arbitration
that Indemnitee is entitled to receive part but not all of the indemnification
or advancement of expenses sought, the expenses incurred by Indemnitee in
connection with such judicial adjudication or arbitration shall be appropriately
prorated.
(e) The Company shall be precluded from asserting in any
judicial proceeding or arbitration commenced pursuant to this Section 10 that
the procedures and presumptions of this Agreement are not valid, binding and
enforceable and shall stipulate in any such court or before any such arbitrator
that the Company is bound by all the provisions of this Agreement.
Section 11. Non-Exclusivity; Survival of Rights; Insurance;
Subrogation.
(a) The rights of indemnification and to receive advancement
of Expenses as provided by this Agreement shall not be deemed exclusive of any
other rights to which Indemnitee may at any time be entitled under applicable
law, the relevant company's Certificate of Incorporation, By-Laws, any
agreement, a vote of stockholders or a resolution of directors, or otherwise. No
amendment, alteration or repeal of this Agreement or of any provision hereof
shall limit or restrict any right of Indemnitee under this Agreement in respect
of any action taken or omitted by such Indemnitee in his Corporate Status prior
to such amendment, alteration or repeal. To the extent that a change in the
General Corporation Law of the State of Delaware, whether by statute or judicial
decision, permits greater indemnification or advancement of Expenses than would
be afforded currently under the relevant company's By-Laws and this Agreement,
it is the intent of the parties hereto that Indemnitee shall enjoy by this
Agreement the greater benefits so afforded by such change. No right or remedy
herein conferred is intended to be exclusive of any other right or remedy, and
every other right and remedy shall be cumulative and in addition to every other
right and remedy given hereunder or now or hereafter existing at law or in
equity or otherwise. The assertion or employment of any right or remedy
hereunder, or otherwise, shall not prevent the concurrent assertion or
employment of any other right or remedy.
(b) To the extent that the Company maintains an insurance
policy or policies providing liability insurance for directors, officers,
employees, or agents of the Company and its subsidiaries or of a Relevant
Enterprise, Indemnitee shall be covered by such policy
-11-
or policies in accordance with its or their terms to the maximum extent of the
coverage available for any such director, officer, employee or agent under such
policy or policies.
(c) In the event of any payment under this Agreement, the
Company shall be subrogated to the extent of such payment to all of the rights
of recovery of Indemnitee, who shall execute all papers required and take all
action necessary to secure such rights, including execution of such documents as
are necessary to enable the Company to bring suit to enforce such rights.
(d) The Company shall not be liable under this Agreement to
make any payment of amounts otherwise indemnifiable hereunder if and to the
extent that Indemnitee has otherwise actually received such payment under any
insurance policy, contract, agreement or otherwise.
(e) The Company's obligations to indemnify or advance expenses
hereunder to Indemnitee who is or was serving a Relevant Enterprise shall be
reduced by any amount Indemnitee has actually received as indemnification or
advancement of expenses from such Relevant Enterprise.
Section 12. Duration of Agreement. This Agreement shall
continue until and terminate upon the later of: (a) 10 years after the date that
Indemnitee shall have ceased to serve as a director, officer, employee and/or
agent of the Company and its subsidiaries or of any Relevant Enterprise; or (b)
the final termination of any Proceeding then pending in respect of which
Indemnitee is granted rights of indemnification or advancement of expenses
hereunder and of any proceeding commenced by Indemnitee pursuant to Section 10
of this Agreement relating thereto. This Agreement shall be binding upon the
Company and its successors and assigns and shall inure to the benefit of
Indemnitee and his heirs, executors and administrators.
Section 13. Severability. If any provision or provisions of
this Agreement shall be held to be invalid, illegal or unenforceable for any
reason whatsoever: (a) the validity, legality and enforceability of the
remaining provisions of this Agreement (including, without limitation, each
portion of any Section of this Agreement containing any such provision held to
be invalid, illegal or unenforceable, that is not itself invalid, illegal or
unenforceable) shall not in any way be affected or impaired thereby; (b) such
provision or provisions shall be deemed reformed to the extent necessary to
conform to applicable law and to give the maximum effect to the intent of the
parties hereto; and (c) to the fullest extent possible, the provisions of this
Agreement (including, without limitation, each portion of any Section of this
Agreement containing any such provision held to be invalid, illegal or
unenforceable, that is not itself invalid, illegal or unenforceable) shall be
construed so as to give effect to the intent manifested thereby.
-12-
Section 14. Exception to Right of Indemnification or
Advancement of Expenses. Except as provided in Section 6(a) of this Agreement,
Indemnitee shall not be entitled to indemnification or advancement of Expenses
under this Agreement (including, with respect to subsection (c) of this Section
14, payment of profits) with respect to any Proceeding (a) brought by Indemnitee
(other than a Proceeding by Indemnitee to enforce his rights under this
Agreement), (b) brought by the Company or any of its subsidiaries against the
Indemnitee alleging (x) a willful violation by the Indemnitee of the terms and
conditions of any employment contract, (y) a willful misappropriation of
corporate assets by the Indemnitee or (z) any other willful and deliberate
breach in bad faith of any of the Indemnitee's duties to the Company (or its
subsidiaries) or its stockholders, if the bringing of such Proceeding against
Indemnitee shall have been approved or subsequently ratified by the Board, (c)
arising out of the purchase and sale by Indemnitee of securities in violation of
Section 16(b) of the Securities Act of 1934, as amended, or any similar
successor statute or (d) arising out of acts or omissions, or transactions, from
which Indemnitee may not be relieved of liability under applicable law.
Section 15. Identical Counterparts. This Agreement may be
executed in one or more counterparts, each of which shall for all purposes be
deemed to be an original but all of which together shall constitute one and the
same Agreement. Only one such counterpart signed by the party against whom
enforceability is sought needs to be produced to evidence the existence of this
Agreement.
Section 16. Headings. The headings of the paragraphs of this
Agreement are inserted for convenience only and shall not be deemed to
constitute part of this Agreement or to affect the construction thereof.
Section 17. Definitions. For purposes of this Agreement:
(a) "Change in Control" shall mean the occurrence of any of
the following events:
(i) a majority of the members of the Board at any time cease
for any reason other than due to death or disability to be persons who
were members of the Board twenty-four months prior to such time (the
"Incumbent Directors"); provided that any director whose election, or
nomination for election by the Company's stockholders, was approved by
a vote of at least a majority of the members of the Board then still in
office who are Incumbent Directors shall be treated as an Incumbent
Director;
(ii) any "person," including a "group" (as such terms are used
in Sections 13(d) and 14(d)(2) of the Securities Exchange Act of 1934,
as amended (the "Act"), but excluding (a) the Company, its
subsidiaries, any employee benefit plan of the Company or any of its
subsidiaries, employees of the Company or any of its subsidiaries (or
-13-
any group of which any of the foregoing is a member) and (b) Xxxxx
Xxxx, Xxxxxxx de X. Xxxxxxx, WC Capital, LLC, Carnegie Hill Associates,
LLC (or any group of which any of the foregoing is directly or
indirectly a member) is or becomes the "beneficial owner" (as defined
in Rule 13(d)(3) under the Act), directly or indirectly, including
without limitation, by means of a tender or exchange offer, of
securities of the Company representing a majority of the combined
voting power of the Company's then outstanding securities; or
(iii) the stockholders of the Company shall approve a
definitive agreement (x) for the merger or other business combination
of the Company with or into another corporation immediately following
which merger or combination (A) the stock of the surviving entity is
not readily tradable on an established securities market, (B) a
majority of the directors of the surviving entity are persons who (1)
were not directors of the Company immediately prior to the merger and
(2) are not nominees or representatives of the Company or (C) any
"person,", including a "group" (as such terms are used in Sections
13(d) and 14(d)(2) of the Act, but excluding the Company, its
subsidiaries, any employee benefit plan of the Company or any of its
subsidiaries, employees of the Company or any of its subsidiaries or
any group of which any of the foregoing is a member) is or becomes the
"beneficial owner" (as defined in Rule 13(d)(3) under the Act),
directly or indirectly, of a majority of the securities of the
surviving entity or (y) for the direct or indirect sale or other
disposition of all or substantially all of the assets of the Company.
Notwithstanding the foregoing, a "Change in Control" shall not be deemed to
occur in the event the Company files for bankruptcy, liquidation or
reorganization under the United States Bankruptcy Code.
(b) "Corporate Status" describes the status of a person who is
or was a director, officer, employee, fiduciary or agent of the Company and its
subsidiaries or of a Relevant Enterprise.
(c) "Disinterested Director" means a director of the Company
who is not and was not a party to the Proceeding in respect of which
indemnification is sought by Indemnitee.
(d) "Effective Date" means January [ ], 2001.
(e) "Expenses" shall include all reasonable attorneys' fees,
retainers, court costs, transcript costs, fees of experts, witness fees, travel
expenses, duplicating costs, printing and binding costs, telephone charges,
postage, delivery service fees, and all other disbursements or expenses of the
types customarily incurred in connection with prosecuting, defending,
-14-
preparing to prosecute or defend, investigating, being or preparing to be a
witness in, or otherwise participating in, a Proceeding.
(f) "Independent Counsel" means a law firm, or a member of a
law firm, that is experienced in matters of corporation law and neither
presently is, nor in the past five years has been, retained to represent: (i)
the Company or Indemnitee in any matter material to either such party, or (ii)
any other party to the Proceeding giving rise to a claim for indemnification
hereunder. Notwithstanding the foregoing, the term "Independent Counsel" shall
not include any person who, under the applicable standards of professional
conduct then prevailing, would have a conflict of interest in representing
either the Company or Indemnitee in an action to determine Indemnitee's rights
under this Agreement. The Company agrees to pay the reasonable fees of the
Independent Counsel referred to above and to fully indemnify such counsel
against any and all Expenses, claims, liabilities and damages arising out of or
relating to this Agreement or its engagement pursuant hereto.
(g) "Proceeding" includes any threatened, pending or completed
action, suit, arbitration, alternate dispute resolution mechanism,
investigation, inquiry, administrative hearing or any other actual, threatened
or completed proceeding, whether brought by or in the right of the Company or
otherwise and whether civil, criminal, administrative or investigative, in which
Indemnitee was, is, may be or will be involved as a party or otherwise, by
reason of the fact that Indemnitee is or was a director, officer, employee
and/or agent of the Company and/or any of its subsidiaries or of a Relevant
Enterprise or by reason of any action taken by him or of any inaction on his
part while acting in such capacity, in each case whether or not he is acting or
serving in any such capacity at the time any liability or expense is incurred
for which indemnification or advancement of expenses can be provided under this
Agreement, except for (i) one initiated by an Indemnitee pursuant to Section 10
of this Agreement to enforce his rights under this Agreement or (ii) one pending
on or before the Effective Date.
Section 18. Enforcement.
(a) The Company expressly confirms and agrees that it has
entered into this Agreement and assumed the obligations imposed on it hereby in
order to induce Indemnitee to serve as a director, officer, employee and/or
agent of the Company and/or any of its subsidiaries and/or a Relevant
Enterprise, and the Company acknowledges that Indemnitee is relying upon this
Agreement in serving in such capacity.
(b) This Agreement constitutes the entire agreement between
the parties hereto with respect to the subject matter hereof and supersedes all
prior agreements and understandings, oral, written and implied, between the
parties hereto with respect to the subject matter hereof.
-15-
Section 19. Modification and Waiver. No supplement,
modification or amendment of this Agreement shall be binding unless executed in
writing by both of the parties hereto. No waiver of any of the provisions of
this Agreement shall be deemed or shall constitute a waiver of any other
provisions hereof (whether or not similar) nor shall such waiver constitute a
continuing waiver.
Section 20. Notice by Indemnitee. Indemnitee agrees to notify
the Company in writing immediately upon being served with any summons, citation,
subpoena, complaint, indictment, information or other document relating to any
Proceeding or matter which may be subject to indemnification or advancement of
Expenses covered hereunder. The failure of Indemnitee to so notify the Company
shall not relieve the Company of any obligation which it may have to the
Indemnitee under this Agreement or otherwise.
Section 21. Notices. All notices, requests, demands and other
communications hereunder shall be in writing and shall be deemed to have been
duly given (i) upon delivery, if delivered by hand and receipted for by the
party to whom said notice or other communication shall have been directed, (ii)
on the first business day after the date on which it is mailed by overnight
courier service or transmitted via facsimile or (iii) on the third business day
after the date on which it is mailed by certified or registered mail with
postage prepaid:
(a) If to Indemnitee, at the address specified on the
signature page of this Agreement; and
(b) If to the Company to:
Datawatch Corporation
000 Xxxxx Xxxxxx
Xxxxx 000
Xxxxxx, XX 00000
Attention: Chief Executive Officer
with a copy to:
Xxxxx, Xxxxxxx & Xxxxxxxxx
High Street Tower
000 Xxxx Xxxxxx
Xxxxxx, XX 00000
Attention: Xxxxxxx X. Xxxxxxx, Xx., Esq.
or to such other address as may have been furnished to Indemnitee by the Company
or to the Company by Indemnitee, as the case may be.
-16-
Section 22. Governing Law; Submission to Jurisdiction;
Appointment of Agent for Service of Process. This Agreement and the legal
relations among the parties shall be governed by, and construed and enforced in
accordance with, the laws of the State of Delaware, without regard to its
conflict of laws rules. Except with respect to any arbitration commenced by
Indemnitee pursuant to Section 10(a) of this Agreement, the Company and
Indemnitee hereby irrevocably and unconditionally (i) agree that any action or
proceeding arising out of or in connection with this Agreement shall be brought
only in the Chancery Court of the State of Delaware (the "Delaware Court"), and
not in any other state or federal court in the United States of America or any
court in any other country, (ii) consent to submit to the exclusive jurisdiction
of the Delaware Court for purposes of any action or proceeding arising out of or
in connection with this Agreement, (iii) appoint, to the extent such party is
not a resident of the State of Delaware, irrevocably, The Corporation Trust
Company, 0000 Xxxxxx Xxxxxx, Xxxxxxxxxx, Xxxxxxxx 00000 as its agent in the
State of Delaware for acceptance of legal process in connection with any such
action or proceeding against such party with the same legal force and validity
as if served upon such party personally within the State of Delaware, (iv) waive
any objection to the laying of venue of any such action or proceeding in the
Delaware Court and (v) waive, and agree not to plead or to make, any claim that
any such action or proceeding brought in the Delaware Court has been brought in
an improper or otherwise inconvenient forum.
Section 23. Miscellaneous. Use of the masculine pronoun shall
be deemed to include usage of the feminine pronoun where appropriate.
-17-
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement on the day and year first above written.
DATAWATCH CORPORATION
By:
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Name: Xxxxx X. Xxxxxxx
Title: Chief Executive Officer
INDEMNITEE:
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Address:
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