Exhibit 10.5
PRIVATE EQUITY CREDIT AGREEMENT
BY AND BETWEEN
MICROWARE SYSTEMS CORPORATION,
an Iowa corporation
AND
ELDER COURT, LLC,
a Cayman Islands limited liability company
Dated as of December 15, 2000
This PRIVATE EQUITY CREDIT AGREEMENT is entered into as of the 15th day
of December, 2000 (this "AGREEMENT"), by and between ELDER COURT, LLC, a Cayman
Islands limited liability company ("INVESTOR"), and MICROWARE SYSTEMS
CORPORATION, an Iowa corporation (the "COMPANY").
WHEREAS, the parties desire that, upon the terms and subject to the
conditions contained herein, the Company may issue and sell to Investor, from
time to time as provided herein, and Investor shall purchase, shares of the
Common Stock (as defined below) with an aggregate purchase price not to exceed
$10,000,000; and
WHEREAS, such investments will be made in reliance upon the provisions
of Section 4(2) ("SECTION 4(2)") of the Securities Act of 1933 and the rules and
regulations promulgated thereunder (the "SECURITIES ACT"), and/or upon such
other exemption from the registration requirements of the Securities Act as may
be available with respect to any or all of the investments in Common Stock to be
made hereunder.
NOW, THEREFORE, the parties hereto agree as follows:
ARTICLE I
CERTAIN DEFINITIONS
Section 1.1 DEFINED TERMS. As used in this Agreement, the following
terms shall have the following meanings specified or indicated (such meanings to
be equally applicable to both the singular and plural forms of the terms
defined)
"AFFILIATE" shall mean, with respect to the Person referred
to, any officer, director, or employee of the Person, and any Person who
controls that Person within the meaning of Section 20 of the Exchange Act and
Section 15 of the Securities Act.
"AGREEMENT" shall have the meaning specified in the preamble
hereof.
"BID PRICE" shall mean the closing bid price of the Common
Stock on the Principal Market.
"BY-LAWS" shall have the meaning specified in Section 4.8.
"CERTIFICATE" shall have the meaning specified in Section 4.8.
"CLAIM NOTICE" shall have the meaning specified in
Section 9.3(a).
"CLOSING" shall mean one of the closings of a purchase and
sale of shares of Common Stock pursuant to Section 2.3.
"CLOSING DATE" shall mean, with respect to a Closing, the
eleventh (11th) Trading Day following the Put Date related to such Closing, or
such earlier date as the Company and Investor shall agree, provided all
conditions to such Closing have been satisfied on or before such Trading Day.
"COMMITMENT PERIOD" shall mean the period commencing on the
earlier to occur of (a) the Effective Date, or (b) such earlier date as the
Company and Investor shall agree in writing, and expiring on the earlier to
occur of (i) the date on which Investor shall have purchased Common Stock for an
aggregate purchase price of $10,000,000, (ii) the date this Agreement is
terminated pursuant to Section 2.6 or 2.7 hereof, or Section 2(c) of the
Registration Rights Agreement, or (iii) the date occurring one (1) year from the
date of commencement of the Commitment Period.
"COMMON STOCK" shall mean the Company's common stock, no par
value per share, and any shares of any other class of common stock whether now
or hereafter authorized, having the right to participate in the distribution of
dividends (as and when declared) and assets (upon liquidation of the Company).
"COMMON STOCK EQUIVALENTS" shall mean any securities that are
convertible into or exchangeable for Common Stock or any warrants, options or
other rights to subscribe for or purchase Common Stock or any such convertible
or exchangeable securities.
"COMPANY" shall have the meaning specified in the preamble to
this Agreement.
"CONDITION SATISFACTION DATE" shall have the meaning specified
in Section 7.2.
"DAMAGES" shall mean any loss, claim, damage, liability, costs
and expenses (including, without limitation, reasonable attorneys' fees and
disbursements and costs and expenses of expert witnesses and investigation).
"DISCOUNT" shall mean fifteen percent (15%).
"DISPUTE PERIOD" shall have the meaning specified in
Section 9.3(a).
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"DTC" shall have the meaning specified in Section 2.3.
"DWAC" shall have the meaning specified in Section 2.3.
"EFFECTIVE DATE" shall mean the date on which the SEC first
declares effective a Registration Statement registering resale of the
Registrable Securities as set forth in Section 7.2(a).
"EXCHANGE ACT" shall mean the Securities Exchange Act of 1934
and the rules and regulations promulgated thereunder.
"FAST" shall have the meaning specified in Section 2.3.
"INDEMNIFIED PARTY" shall have the meaning specified in
Section 9.3(a).
"INDEMNIFYING PARTY" shall have the meaning specified in
Section 9.3(a).
"INDEMNITY NOTICE" shall have the meaning specified in
Section 9.3(b).
"INITIAL REGISTRATION STATEMENT" shall have the meaning
specified in the Registration Rights Agreement.
"INVESTMENT AMOUNT" shall mean the dollar amount (within the
range specified in Section 2.2(a)) to be invested by Investor to purchase Put
Shares with respect to any Put Date as notified by the parties in accordance
with Section 2.2 and 2.5.
"INVESTOR" shall have the meaning specified in the preamble to
this Agreement.
"LEGEND" shall have the meaning specified in Section 8.1.
"MARKET PRICE" on any given date shall mean the average of the
three (3) lowest Bid Prices (not necessarily consecutive) during the ten (10)
Trading Day period immediately following the Put Date.
"MATERIAL ADVERSE EFFECT" shall mean any effect on the
business, operations, properties, prospects or financial condition of the
Company that is material and adverse to the Company and such other entities
controlling or controlled by the Company, taken as a whole, and/or any
condition, circumstance, or situation that would prohibit or otherwise
materially interfere with the ability of the Company to enter into and perform
its obligations under either of (a) this Agreement or (b) the Registration
Rights Agreement.
"MAXIMUM COMMITMENT AMOUNT" shall mean Ten Million Dollars
($10,000,000), subject to increase as agreed to by the Company and Investor.
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"MAXIMUM PUT AMOUNT" shall mean, with respect to any Put, the
lesser of (a) One Million Dollars ($1,000,000) Dollars, or (b) one hundred fifty
percent (150%) of the Weighted Average Volume for the twenty (20) Trading Days
prior to the Put Date, subject to adjustment as agreed by the Company and
Investor.
"MINIMUM CALL OPTION AMOUNT" shall mean with respect to any
Put, Thirty Five Thousand Dollars ($35,000), subject to decrease as agreed to in
writing by the Company and Investor.
"MINIMUM COMMITMENT AMOUNT" shall mean One Million Five
Hundred Thousand Dollars ($1,500,000).
"MINIMUM PUT AMOUNT" shall mean, with respect to any Put,
Seventy Thousand Dollars ($70,000), subject to decrease as agreed to by the
Company and Investor.
"NASD" shall mean the National Association of Securities
Dealers, Inc.
"OUTSTANDING" shall mean, with respect to the Common Stock, at
any date as of which the number of shares of Common Stock is to be determined,
all issued and outstanding shares of Common Stock, including all shares of
Common Stock issuable in respect of outstanding scrip or any certificates
representing fractional interests in shares of Common Stock; provided, however,
that Outstanding shall not include any shares of Common Stock then directly or
indirectly owned or held by or for the account of the Company.
"PERSON" shall mean an individual, a corporation, a
partnership, an association, a trust or other entity or organization, including
a government or political subdivision or an agency or instrumentality thereof.
"PRINCIPAL MARKET" shall mean the Nasdaq National Market, the
Nasdaq SmallCap Market, the American Stock Exchange or the New York Stock
Exchange, whichever is at the time the principal trading exchange or market for
the Common Stock.
"PURCHASE PRICE" shall mean, with respect to a Put, the Market
Price on the applicable Put Date less the product of the Discount and the Market
Price.
"PUT" shall mean each occasion that the Company elects to
exercise its right to tender a Put Notice requiring Investor to purchase shares
of Common Stock, subject to the terms and conditions of this Agreement.
"PUT DATE" shall mean the Trading Day during the Commitment
Period that a Put Notice is deemed delivered pursuant to Section 2.2(b).
"PUT NOTICE" shall mean a written notice, substantially in the
form of Exhibit B
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hereto, to Investor setting forth the Investment Amount with respect to which
the Company intends to require Investor to purchase shares of Common Stock
pursuant to the terms of this Agreement.
"PUT SHARES" shall mean all shares of Common Stock issued or
issuable pursuant to a Put that has been exercised or may be exercised in
accordance with the terms and conditions of this Agreement and all shares of
Common Stock issued or issuable pursuant to a Call Option that has been
exercised or may be exercised in accordance with Section 2.5.
"REGISTRABLE SECURITIES" shall mean the Put Shares and the
Warrants and any securities issued or issuable with respect to any of the
foregoing by way of exchange, stock dividend or stock split or in connection
with a combination of shares, recapitalization, merger, consolidation or other
reorganization or otherwise. As to any particular Registrable Securities, once
issued such securities shall cease to be Registrable Securities when (i) a
Registration Statement has been declared effective by the SEC and such
Registrable Securities have been disposed of pursuant to a Registration
Statement, (ii) such Registrable Securities have been sold under circumstances
under which all of the applicable conditions of Rule 144 are met, (iii) such
time as such Registrable Securities have been otherwise transferred to holders
who may trade such shares without restriction under the Securities Act, and the
Company has delivered a new certificate or other evidence of ownership for such
securities not bearing a restrictive legend or (iv) in the opinion of counsel to
the Company, which counsel shall be reasonably acceptable to Investor, such
Registrable Securities may be sold without registration under the Securities Act
or the need for an exemption from any such registration requirements and without
any time, volume or manner limitations pursuant to Rule 144(k) (or any similar
provision then in effect) under the Securities Act.
"REGISTRATION RIGHTS AGREEMENT" shall mean the registration
rights agreement in the form of Exhibit A hereto.
"REGISTRATION STATEMENT" shall mean a registration statement
on Form S-3 (if use of such form is then available to the Company pursuant to
the rules of the SEC and, if not, on such other form promulgated by the SEC for
which the Company then qualifies and which counsel for the Company shall deem
appropriate and which form shall be available for the resale of the Registrable
Securities to be registered thereunder in accordance with the provisions of this
Agreement and the Registration Rights Agreement and in accordance with the
intended method of distribution of such securities), for the registration of the
resale by Investor of the Registrable Securities under the Securities Act.
"REGULATION D" shall mean Regulation D under the Securities
Act.
"RULE 144" shall mean Rule 144 under the Securities Act or any
similar provision then in force under the Securities Act.
"SEC" shall mean the Securities and Exchange Commission.
"SECTION 4(2)" shall have the meaning specified in the
recitals of this Agreement.
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"SECURITIES ACT" shall have the meaning specified in the
recitals of this Agreement.
"SEC DOCUMENTS" shall mean, as of a particular date, all
reports and other documents filed by the Company pursuant to Section 13(a) or
15(d) of the Exchange Act since the beginning of the Company's then most
recently completed fiscal year as of the time in question (provided that if the
date in question is within ninety days of the beginning of the Company's fiscal
year, the term shall include all documents filed since the beginning of the
second preceding fiscal year).
"SUBSCRIPTION DATE" shall mean the date on which this
Agreement is executed and delivered by the Company and Investor.
"THIRD PARTY CLAIM" shall have the meaning specified in
Section 9.3(a).
"TRADING CUSHION" shall mean a minimum of fifteen (15) Trading
Days between Put Dates, unless a shorter period is agreed to by the Company and
Investor.
"TRADING DAY" shall mean any day during which the Principal
Market shall be open for business.
"TRANSACTION DOCUMENTS" means this Private Equity Credit
Agreement, the Registration Rights Agreement, the Warrant, Closing Certificate,
and the Transfer Agent Instructions.
"TRANSFER AGENT" shall mean the transfer agent for the Common
Stock (and any substitute or replacement transfer agent for the Common Stock
upon the Company's appointment of any such substitute or replacement transfer
agent).
"UNDERWRITER" shall mean any underwriter participating in any
disposition of the Registrable Securities on behalf of Investor pursuant to a
Registration Statement.
"VALUATION EVENT" shall mean an event in which the Company at
any time during a Valuation Period takes any of the following actions:
(a) subdivides or combines the Common Stock;
(b) pays a dividend in shares of Common Stock or
makes any other distribution of shares of
Common Stock, except for shares issued
pursuant to this transaction and upon the
exercise of employee stock options;
(c) issues any warrants, options or other rights
to subscribe for or purchase shares of
Common Stock and the price per share for
which shares of Common Stock may at any time
thereafter be issuable
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pursuant to such warrants, options or other
rights shall be less than the Bid Price in
effect immediately prior to such issuance;
(d) issues any securities convertible into or
exchangeable for shares of Common Stock and
the consideration per share for which shares
of Common Stock may at any time thereafter
be issuable pursuant to the terms of such
convertible or exchangeable securities shall
be less than the Bid Price in effect
immediately prior to such issuance;
(e) issues shares of Common Stock otherwise than
as provided in the foregoing subsections (a)
through (d), at a price per share less, or
for other consideration lower, than the Bid
Price in effect immediately prior to such
issuance, or without consideration;
(f) makes a distribution of its assets or
evidences of indebtedness to the holders of
Common Stock as a dividend in liquidation or
by way of return of capital or other than as
a dividend payable out of earnings or
surplus legally available for dividends
under applicable law or any distribution to
such holders made in respect of the sale of
all or substantially all of the Company's
assets (other than under the circumstances
provided for in the foregoing subsections
(a) through (e); or
(g) takes any action affecting the number of
shares of Outstanding Common Stock, other
than an action described in any of the
foregoing subsections (a) through (f)
hereof, inclusive, which in the opinion of
the Company's Board of Directors, determined
in good faith, would have a materially
adverse effect upon the rights of Investor
at the time of a Put.
"VALUATION PERIOD" shall mean the period of ten (10) Trading
Days immediately following the date on which the applicable Put Notice is deemed
to be delivered and during which the Purchase Price of the Common Stock is
valued; provided, however, that if a Valuation Event occurs during any Valuation
Period, a new Valuation Period shall begin on the Trading Day immediately after
the occurrence of such Valuation Event and end on the tenth (10th) Trading Day
thereafter.
"WARRANTS" shall mean warrants to purchase Common Stock, in
the form attached hereto as Exhibit F, to be issued, from time to time, to
Investor pursuant to this Agreement.
"WEIGHTED AVERAGE VOLUME" shall mean the average of the
product of (a) the closing Bid Price times (b) the volume on the Principal
Market for the relevant number of days.
"WEIGHTED VOLUME" shall mean the product of (a) the Closing
Bid Price times (b) the volume on the Principal Market.
ARTICLE II
PURCHASE AND SALE OF COMMON STOCK
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Section 2.1 INVESTMENTS.
(a) PUTS. Upon the terms and conditions set forth herein
(including, without limitation, the provisions of Article VII), on any Put Date,
the Company may exercise a Put by the delivery of a Put Notice. The number of
Put Shares that Investor shall receive pursuant to such Put shall be determined
by dividing the Investment Amount specified in the Put Notice by the Purchase
Price with respect to such Put Date.
(b) MINIMUM AMOUNT OF PUTS. If the Company for any reason,
other than Investor's breach of this Agreement, fails to issue and deliver Put
Shares with an aggregate Investment Amount equal to or exceeding the Minimum
Commitment Amount during the Commitment Period, then on the first business day
after the expiration of the Commitment Period, the Company shall, in addition to
any other amounts due hereunder, issue to Investor Warrants to purchase a number
of shares equal to (i) seven and one-half percent (7 1/2%), multiplied by
(ii)(A) the Minimum Commitment Amount, less the aggregate Investment Amount of
the Put Shares actually delivered hereunder (the "Undrawn Minimum Amount"),
divided by (B) the lowest closing Bid Price during the ninety (90) day period
immediately prior to the expiration of the Commitment Period (the "Lowest
Closing Bid"). The Warrants shall be for a term of five (5) years from date of
issuance, shall have cashless exercise provisions, and shall be deemed shares
under the Registration Rights Agreement annexed hereto, and shall be exercisable
at a price equal to the Lowest Closing Bid. In addition to all of Investor's
rights and remedies hereunder and in the Securities Purchase Agreement, if the
Company shall enter into an "equity line" agreement with any other party whereby
the Company has the option, from time-to-time to "put" common stock to such
other party for a "purchase price" at a "discount" to "market price" during the
period commencing on the date hereof and ending upon the expiration or
termination of the Commitment Term, the Company shall, within five (5) days
after entering into such agreement, pay the Investor a break-up fee in the
amount of Two Hundred Fifty Thousand Dollars ($250,000).
(c) MAXIMUM AMOUNT OF PUTS. Unless the Company obtains the
requisite approval of its shareholders in accordance with the corporate laws of
the State of Iowa and the applicable rules of the Principal Market, the Company
may not issue shares pursuant to any Put which is in excess of (i) 19.9% of the
then Outstanding Common Stock on the date of the Put, less (ii) (A) the
aggregate amount of shares of Common Stock previously issued under this
Agreement, plus (B) the aggregate amount of shares which have been previously
issued as of the date of the Put, and would then be issuable (assuming the
entire balance of interest and principal were converted as of such date) under
that certain Debenture, dated as of November 28, 2000, purchased by the Investor
from the Company pursuant to that certain Securities Purchase Agreement, dated
as of November 28, 2000 (the "Securities Purchase Agreement"), plus (C) the
number of shares deliverable to Investor (and any brokers or other parties
receiving warrants as a fee in connection with this Agreement and the Securities
Purchase Agreement) if it exercised all of the Warrants issued to it hereunder
and pursuant to the Securities Purchase Agreement.
Section 2.2 MECHANICS.
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(a) PUT NOTICE. At any time during the Commitment Period, the
Company may deliver a Put Notice to Investor, subject to the conditions set
forth in Section 7.2; provided, however, the Investment Amount for each Put as
designated by the Company in the applicable Put Notice shall be neither less
than the Minimum Put Amount nor more than the Maximum Put Amount.
(b) DATE OF DELIVERY OF PUT NOTICE. A Put Notice shall be
deemed delivered on (i) the Trading Day it is received by facsimile or otherwise
by Investor if such notice is received on or prior to 12:00 noon New York time,
or (ii) the immediately succeeding Trading Day if it is received by facsimile or
otherwise after 12:00 noon New York time on a Trading Day or at anytime on a day
which is not a Trading Day.
Section 2.3 CLOSINGS. At least one (1) business day prior to each
applicable Closing Date for a Put, (a) the Company shall deliver, to the escrow
agent (the "Escrow Agent") identified in the Joint Escrow Instructions attached
hereto as Exhibit G (the "Joint Escrow Instructions"), one or more certificates,
at Investor's option, representing the Put Shares to be purchased by Investor
pursuant to Section 2.1 herein, registered in the name of Investor and (b)
Investor shall deliver to the Escrow Agent the Investment Amount specified in
the Put Notice by wire transfer of immediately available funds to an account
designated in the Joint Escrow Instructions. In lieu of delivering physical
certificates representing the Common Stock issuable in accordance with clause
(a) of this Section 2.3, and provided that the Transfer Agent then is
participating in the Depository Trust Company ("DTC") Fast Automated Securities
Transfer ("FAST") program, upon request of Investor, the Company shall use its
commercially reasonable efforts to cause the Transfer Agent to electronically
transmit the Put Shares by crediting the Escrow Agent's designated brokerage
account with DTC through its Deposit Withdrawal Agent Commission ("DWAC")
system. In addition, at least one (1) business day prior to such Closing Date,
each of the Company and Investor shall deliver to the Escrow Agent all
documents, instruments and writings required to be delivered in order to
implement and effect the transactions contemplated herein. The Escrow Agent will
be authorized to release the Escrow Property (as defined in the Escrow
Agreement) only upon the delivery of the Put Shares, the Investment Amount and
other documents pursuant to this Section 2.3 and the satisfaction of the
conditions set forth in this Agreement.
Section 2.4 WARRANTS.
(a) INITIAL WARRANTS. Upon execution of this Agreement, the
Company agrees to issue Warrants to the Investor for the purchase of One Million
Four Hundred Thousand shares of Common Stock. Such warrants shall bear an
exercise price per share of Common Stock equal to No Dollars and Sixty Six Cents
($0.66), and shall be exercisable immediately upon issuance, and for a period of
five (5) years thereafter, together with cashless exercise and piggyback
registration rights under the Registration Rights Agreement.
(b) WARRANTS ISSUABLE UPON DELIVERY OF PUT SHARES. The Company
agrees to issue Warrants to the Investor for the purchase of 750 shares of
Common Stock
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for each 10,000 Put Shares delivered by the Company to Investor pursuant to
Section 2.3 of this Agreement. Such warrants shall bear an exercise price per
share of Common Stock equal to 105% of the Market Price as of the Put Date, and
shall be exercisable immediately upon issuance, and for a period of five (5)
years thereafter, together with cashless exercise and piggyback registration
rights under the Registration Rights Agreement.
Section 2.5 INVESTOR CALL OPTION. Within Three (3) Trading Days after
the delivery of a Put Notice, Investor may elect by delivery of a Call Notice in
the form annexed hereto as Exhibit B-1, to increase the Investment Amount at the
applicable Closing to 125% of the Investment Amount set forth in the Put Notice.
Section 2.6 TERMINATION OF INVESTMENT OBLIGATION. The obligation of
Investor to purchase shares of Common Stock shall terminate permanently
(including with respect to a Closing Date that has not yet occurred) in the
event that (a) there shall occur any stop order or suspension of the
effectiveness of any Registration Statement for an aggregate of thirty (30)
Trading Days during the Commitment Period, for any reason other than deferrals
or suspension during a Blackout Period in accordance with the Registration
Rights Agreement, or as a result of corporate developments subsequent to the
Subscription Date that would require such Registration Statement to be amended
to reflect such event in order to maintain its compliance with the disclosure
requirements of the Securities Act, (b) the Company shall at any time fail to
comply with the requirements of Section 6.3, 6.4, 6.5 or 6.6 and such failure
shall continue for more than thirty (30) days, or (c) as permitted by Section
2(c) of the Registration Rights Agreement.
Section 2.7 TERMINATION OF COMPANY'S OBLIGATIONS. If Investor fails to
deliver the Investment Amount on the Closing Date for any Put, the Company may
terminate this Agreement and the Registration Rights Agreement, and may refuse
to honor the exercise of any unexercised portion of the warrant issued in
respect of the immediately preceding Put Notice. Company may terminate under
this Section 2.7 effective as of the date of delivery of a written notice. The
Company's obligation to maintain the effectiveness of any Registration Statement
terminates ninety (90) days after termination of the Agreement under this
Section 2.7.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF INVESTOR
Investor represents and warrants to the Company that:
Section 3.1 INTENT. Investor is entering into this Agreement for its
own account and Investor has no present arrangement (whether or not legally
binding) at any time to sell the Common Stock to or through any person or
entity; provided, however, that by making the representations herein, Investor
does not agree to hold the Common Stock for any minimum or other specific term
and reserves the right to dispose of the Common Stock at any time in accordance
with federal and state securities laws applicable to such disposition.
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Section 3.2 SOPHISTICATED INVESTOR. Investor and each of its members
are sophisticated investors (as described in Rule 506(b)(2)(ii) of Regulation D)
and an accredited investor (as defined in Rule 501 of Regulation D), and
Investor and each of its members have such experience in business and financial
matters that they are capable of evaluating the merits and risks of an
investment in Common Stock. Investor acknowledges that an investment in the
Common Stock is speculative and involves a high degree of risk. Investor has
reviewed the Company's filings under the 1934 Act filed since November 1998, and
in particular has reviewed and understands the risk factors articulated in such
filings, including risk factors which may affect the future results of
operations.
Section 3.3 AUTHORITY. (a) Investor has the requisite power and
authority to enter into and perform its obligations under this Agreement and the
transactions contemplated hereby in accordance with its terms; (b) the execution
and delivery of this Agreement and the Registration Rights Agreement, and the
consummation by it of the transactions contemplated hereby and thereby have been
duly authorized by all necessary action and no further consent or authorization
of Investor or its partners is required; and (c) this Agreement has been duly
authorized and validly executed and delivered by Investor and is a valid and
binding agreement of Investor enforceable against it in accordance with its
terms, subject to applicable bankruptcy, insolvency, or similar laws relating
to, or affecting generally the enforcement of, creditors' rights and remedies or
by other equitable principles of general application.
Section 3.4 NOT AN AFFILIATE. Investor is not an officer, director or
"affiliate" (as that term is defined in Rule 405 of the Securities Act) of the
Company, or of any broker-dealer registered with the Securities and Exchange
Commission.
Section 3.5 ORGANIZATION AND STANDING. Investor is a limited liability
corporation organized, validly existing and in good standing under the laws of
the Cayman Islands, and has all requisite power and authority to own, lease and
operate its properties and to carry on its business as now being conducted.
Investor is duly qualified as a foreign corporation to do business and is in
good standing in every jurisdiction in which the nature of the business
conducted or property owned by it makes such qualification necessary, other than
those in which the failure so to qualify would not have a material adverse
effect on Investor.
Section 3.6 ABSENCE OF CONFLICTS. The execution and delivery of this
Agreement and any other document or instrument contemplated hereby, and the
consummation of the transactions contemplated hereby and thereby, and compliance
with the requirements hereof and thereof, will not (a) violate any law, rule,
regulation, order, writ, judgment, injunction, decree or award binding on
Investor, (b) violate any provision of any indenture, instrument or agreement to
which Investor is a party or is subject, or by which Investor or any of its
assets is bound, or conflict with or constitute a material default thereunder,
(c) result in the creation or imposition of any lien pursuant to the terms of
any such indenture, instrument or agreement, or constitute a breach of any
fiduciary duty owed by Investor to any third party, or (d) require the approval
of any third-party (that has not been obtained) pursuant to any material
contract, instrument, agreement, relationship
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or legal obligation to which Investor is subject or to which any of its assets,
operations or management may be subject.
Section 3.7 DISCLOSURE; ACCESS TO INFORMATION. Investor has received
all documents, records, books and other information pertaining to Investor's
investment in the Company that have been requested by Investor. Investor has
reviewed or received copies of the SEC Documents.
Section 3.8 MANNER OF SALE. At no time was Investor presented with or
solicited by or through any leaflet, public promotional meeting, television
advertisement or any other form of general solicitation or advertising in
connection with the transactions contemplated hereby.
Section 3.9 FINANCIAL CAPABILITY. Investor presently has the financial
capacity and the necessary capital to perform its obligations hereunder and
shall and has provided to the Company such financial and other information that
the Company has requested to demonstrate such capacity.
Section 3.10 BROKERS. Investor represents that it neither is nor will
be obligated for any finders' fee or commission nor is it aware of any such fee
or commission payable in connection with this transaction other than as set
forth on the Escrow Instructions. Investor agrees to indemnify and to hold
harmless the Company from any liability for any commission or compensation in
the nature of a finders' fee (and the costs and expenses of defending against
such liability or asserted liability) for which such Buyer or any of its
officers, partners, employees, or representatives is responsible for by virtue
of a written agreement.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to Investor that:
Section 4.1 ORGANIZATION OF THE COMPANY. The Company is a corporation
duly organized and validly existing and in good standing under the laws of the
State of Iowa, and has all requisite power and authority to own, lease and
operate its properties and to carry on its business as now being conducted.
Except as set forth in Schedule 4.1, the Company does not own more than fifty
percent (50%) of the outstanding capital stock of or control any other business
entity. The Company is duly qualified as a foreign corporation to do business
and is in good standing in every jurisdiction in which the nature of the
business conducted or property owned by it makes such qualification necessary,
other than those in which the failure so to qualify would not have a Material
Adverse Effect.
Section 4.2 AUTHORITY. (a) The Company has the requisite corporate
power and authority to enter into and perform its obligations under this
Agreement and the Registration Rights Agreement and to issue the Put Shares and
the Blackout Shares, if any; (b) the execution and
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delivery of this Agreement and the Registration Rights Agreement by the Company
and the consummation by it of the transactions contemplated hereby and thereby
have been duly authorized by all necessary corporate action and no further
consent or authorization of the Company or its Board of Directors or
stockholders is required; and (c) each of this Agreement and the Registration
Rights Agreement has been duly executed and delivered by the Company and
constitute valid and binding obligations of the Company enforceable against the
Company in accordance with their respective terms, except as such enforceability
may be limited by applicable bankruptcy, insolvency, or similar laws relating
to, or affecting generally the enforcement of, creditors' rights and remedies or
by other equitable principles of general application.
Section 4.3 CAPITALIZATION. As of December 13, 2000, the authorized
capital stock of the Company consisted of 50,000,000 shares of Common Stock, of
which 17,703,485 shares were issued and outstanding, and 500,000 shares of
preferred stock, of which Two Hundred Fourteen (214) shares were outstanding.
Except as shown on the attached Schedule 4.3, all of the outstanding shares of
Common Stock of the Company have been duly and validly authorized and issued and
are fully paid and nonassessable. As of December 13, 2000, the Company had
outstanding warrants to purchase 1,336,236 shares of Common Stock and options to
purchase 2,724,297 shares of Common Stock.
Section 4.4 COMMON STOCK. The Company has registered the Common Stock
pursuant to Section 12(b) or 12(g) of the Exchange Act and is in full compliance
with all reporting requirements of the Exchange Act, and the Company has
maintained all requirements for the continued listing or quotation of the Common
Stock, and such Common Stock is currently listed or quoted on the Principal
Market. As of the date of this Agreement, the Principal Market is the National
Market System.
Section 4.5 SEC DOCUMENTS. The Company has delivered or made available
to Investor true and complete copies of the SEC Documents (including, without
limitation, proxy information and solicitation materials). The Company has not
provided to Investor any information that, according to applicable law, rule or
regulation, should have been disclosed publicly prior to the date hereof by the
Company, but which has not been so disclosed. As of their respective dates, the
SEC Documents complied in all material respects with the requirements of the
Securities Act or the Exchange Act, as the case may be, and other federal, state
and local laws, rules and regulations applicable to such SEC Documents, and none
of the SEC Documents contained any untrue statement of a material fact or
omitted to state a material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under which
they were made, not misleading. The financial statements of the Company included
in the SEC Documents comply as to form and substance in all material respects
with applicable accounting requirements and the published rules and regulations
of the SEC or other applicable rules and regulations with respect thereto. Such
financial statements have been prepared in accordance with generally accepted
accounting principles applied on a consistent basis during the periods involved
(except (a) as may be otherwise indicated in such financial statements or the
notes thereto or (b) in the case of unaudited interim statements, to the extent
they may not include footnotes or may be condensed or summary statements) and
fairly present in all material respects the financial position
13
of the Company as of the dates thereof and the results of operations and cash
flows for the periods then ended (subject, in the case of unaudited statements,
to normal year-end audit adjustments).
Section 4.6 EXEMPTION FROM REGISTRATION; VALID ISSUANCES. The sale and
issuance of the Put Shares, if any, in accordance with the terms and on the
bases of the representations and warranties set forth in this Agreement, may and
shall be properly issued by the Company to Investor pursuant to Section 4(2),
Regulation D and/or any applicable state law. When issued and paid for as herein
provided, the Put Shares, if any, shall be duly and validly issued, fully paid,
and nonassessable. Except as described on SCHEDULE 4.6, neither the sales of the
Put Shares, if any, pursuant to, nor the Company's performance of its
obligations under, this Agreement or the Registration Rights Agreement shall (a)
result in the creation or imposition of any liens, charges, claims or other
encumbrances upon the Put Shares, if any, or any of the assets of the Company,
or (b) entitle the holders of Outstanding Common Stock to preemptive or other
rights to subscribe to or acquire the Common Stock or other securities of the
Company. The Put Shares shall not subject Investor to personal liability solely
by reason of the ownership thereof.
Section 4.7 NO GENERAL SOLICITATION OR ADVERTISING IN REGARD TO THIS
TRANSACTION. Neither the Company nor any of its affiliates nor any person acting
on its or their behalf (a) has conducted or will conduct any general
solicitation (as that term is used in Rule 502(c) of Regulation D) or general
advertising with respect to any of the Put Shares or the Blackout Shares, if
any, or (b) made any offers or sales of any security or solicited any offers to
buy any security under any circumstances that would require registration of the
Common Stock under the Securities Act.
Section 4.8 CORPORATE DOCUMENTS. The Company has furnished or made
available to Investor true and correct copies of the Company's Certificate of
Incorporation, as amended and in effect on the date hereof (the "CERTIFICATE"),
and the Company's By-Laws, as in effect on the date hereof (the "BY-LAWS").
Section 4.9 NO CONFLICTS. The execution, delivery and performance of
this Agreement by the Company and the consummation by the Company of the
transactions contemplated hereby, including without limitation the issuance of
the Put Shares and the Blackout Shares, if any, do not and will not (a) result
in a violation of the Certificate or By-Laws or (b) conflict with, or constitute
a material default (or an event that with notice or lapse of time or both would
become a material default) under, or give to others any rights of termination,
amendment, acceleration or cancellation of, any material agreement, indenture,
instrument or any "lock-up" or similar provision of any underwriting or similar
agreement to which the Company is a party, or (c) result in a violation of any
federal, state, local or foreign law, rule, regulation, order, judgment or
decree (including federal and state securities laws and regulations) applicable
to the Company or by which any property or asset of the Company is bound or
affected (except for such conflicts, defaults, terminations, amendments,
accelerations, cancellations and violations as would not, individually or in the
aggregate, have a Material Adverse Effect) nor is the Company otherwise in
violation of, conflict with or in default under any of the foregoing; provided,
however, that for purposes of the Company's representations and warranties as to
violations of foreign law, rule or
14
regulation referenced in clause (c), such representations and warranties are
made only to the best of the Company's knowledge insofar as the execution,
delivery and performance of this Agreement by the Company and the consummation
by the Company of the transactions contemplated hereby are or may be affected by
the status of Investor under or pursuant to any such foreign law, rule or
regulation. The business of the Company is not being conducted in violation of
any law, ordinance or regulation of any governmental entity, except for possible
violations that either singly or in the aggregate do not and will not have a
Material Adverse Effect. The Company is not required under federal, state or
local law, rule or regulation to obtain any consent, authorization or order of,
or make any filing or registration with, any court or governmental agency in
order for it to execute, deliver or perform any of its obligations under this
Agreement or issue and sell the Common Stock in accordance with the terms hereof
(other than any SEC, NASD, Principal Market or state securities filings that may
be required to be made by the Company subsequent to any Closing, any
registration statement that may be filed pursuant hereto, and any shareholder
approval required by the rules applicable to companies whose common stock trades
on the Principal Market); provided that, for purposes of the representation made
in this sentence, the Company is assuming and relying upon the accuracy of the
relevant representations and agreements of Investor herein.
Section 4.10 NO MATERIAL ADVERSE CHANGE. Except as set forth in
Schedule 4.10, since September 30, 2000, no event has occurred that would have a
Material Adverse Effect on the Company, except as disclosed in the SEC
Documents.
Section 4.11 NO UNDISCLOSED LIABILITIES. The Company has no liabilities
or obligations that are material, individually or in the aggregate, and that are
not disclosed in the SEC Documents or otherwise publicly announced, other than
those incurred in the ordinary course of the Company's businesses since
September 30, 2000 and which, individually or in the aggregate, do not or would
not have a Material Adverse Effect on the Company.
Section 4.12 NO UNDISCLOSED EVENTS OR CIRCUMSTANCES. Since November 18,
1999, no event or circumstance has occurred or exists with respect to the
Company or its businesses, properties, prospects, operations or financial
condition, that, under applicable law, rule or regulation, requires public
disclosure or announcement prior to the date hereof by the Company but which has
not been so publicly announced or disclosed in the SEC Documents.
Section 4.13 EXEMPT OFFERING. Neither the Company, nor any of its
affiliates, nor any person acting on its or their behalf has, directly or
indirectly, made any offers or sales of any security or solicited any offers to
buy any security that would eliminate the availability of the exemption from
registration under Regulation D or Section 4(2) of the Securities Act in
connection with the offer and sale of the Common Stock as contemplated hereby.
Section 4.14 LITIGATION AND OTHER PROCEEDINGS. Except as may be set
forth in the SEC Documents, there are no lawsuits or proceedings pending or to
the best knowledge of the Company threatened, against the Company, nor has the
Company received any written or oral notice of any such action, suit, proceeding
or investigation, which would have a Material Adverse Effect. Except as set
forth in the SEC Documents, no judgment, order, writ, injunction or decree or
15
award has been issued by or, so far as is known by the Company, requested of any
court, arbitrator or governmental agency which would have a Material Adverse
Effect.
Section 4.15 NO MISLEADING OR UNTRUE COMMUNICATION. The Company, any
Person representing the Company, and, to the knowledge of the Company, any other
Person selling or offering to sell the Put Shares , if any, in connection with
the transactions contemplated by this Agreement, have not made, at any time, any
oral communication in connection with the offer or sale of the same which
contained any untrue statement of a material fact or omitted to state any
material fact necessary in order to make the statements, in the light of the
circumstances under which they were made, not misleading.
Section 4.16 MATERIAL NON-PUBLIC INFORMATION. The Company is not in
possession of, nor has the Company or its agents disclosed to Investor, any
material non-public information that (a) if disclosed, would reasonably be
expected to have a materially adverse effect on the price of the Common Stock or
(b) according to applicable law, rule or regulation, should have been disclosed
publicly by the Company prior to the date hereof but which has not been so
disclosed.
ARTICLE V
COVENANTS OF INVESTOR
Section 5.1 COMPLIANCE WITH LAW. Investor's trading activities with
respect to shares of the Common Stock will be in compliance with all applicable
state and federal securities laws, rules and regulations and the rules and
regulations of the NASD and the Principal Market on which the Common stock is
listed.
ARTICLE VI
COVENANTS OF THE COMPANY
Section 6.1 REGISTRATION RIGHTS. The Company shall cause the
Registration Rights Agreement to remain in full force and effect and the Company
shall comply in all respects with the terms thereof.
Section 6.2 RESERVATION OF COMMON STOCK. As of the date hereof, the
Company has available and the Company shall reserve and keep available at all
times, free of preemptive rights, shares of Common Stock for the purpose of
enabling the Company to satisfy any obligation to issue the Put Shares. The
number of shares so reserved from time to time, as theretofore increased or
reduced as hereinafter provided, may be reduced by the number of shares actually
delivered hereunder.
Section 6.3 LISTING OF COMMON STOCK. The Company shall maintain the
listing of the Common Stock on a Principal Market, and will cause the Put Shares
and the Blackout Shares, if
16
any, to be listed on a Principal Market. The Company further shall, if the
Company applies to have the Common Stock traded on any other Principal Market,
include in such application the Put Shares , if any, and shall take such other
action as is necessary or desirable in the reasonable opinion of Investor to
cause the Common Stock to be listed on such other Principal Market as promptly
as possible. The Company shall use its commercially reasonable efforts to
continue the listing and trading of the Common Stock on a Principal Market
(including, without limitation, maintaining sufficient net tangible assets) and
will comply in all respects with the Company's reporting, filing and other
obligations under the bylaws or rules of the NASD and the Principal Market.
Section 6.4 EXCHANGE ACT REGISTRATION. The Company shall take all
commercially reasonable steps to cause the Common Stock to continue to be
registered under Section 12(g) or 12(b) of the Exchange Act, will use its
commercially reasonable efforts to comply in all material respects with its
reporting and filing obligations under said Act, and will not take any action or
file any document (whether or not permitted by said Act or the rules
thereunder)to terminate or suspend such registration or to terminate or suspend
its reporting and filing obligations under said Act.
Section 6.5 LEGENDS. The certificates evidencing the Put Shares and the
Blackout Shares, if any, shall be free of legends, except as provided for in
Article VIII.
Section 6.6 CORPORATE EXISTENCE. The Company shall take all
commercially reasonable steps necessary to preserve and continue the corporate
existence of the Company.
Section 6.7 ADDITIONAL SEC DOCUMENTS. The Company shall deliver to
Investor, promptly after the originals thereof are submitted to the SEC for
filing, copies of all SEC Documents so furnished or submitted to the SEC.
Section 6.8 NOTICE OF CERTAIN EVENTS AFFECTING REGISTRATION; SUSPENSION
OF RIGHT TO MAKE A PUT. The Company shall promptly notify Investor upon the
occurrence of any of the following events in respect of a registration statement
or related prospectus in respect of an offering of Registrable Securities: (a)
receipt of any request for additional information by the SEC or any other
federal or state governmental authority during the period of effectiveness of
the registration statement for amendments or supplements to the registration
statement or related prospectus; (b) the issuance by the SEC or any other
federal or state governmental authority of any stop order suspending the
effectiveness of any Registration Statement or the initiation of any proceedings
for that purpose; (c) receipt of any notification with respect to the suspension
of the qualification or exemption from qualification of any of the Registrable
Securities for sale in any jurisdiction or the initiation or threatening of any
proceeding for such purpose; (d) the happening of any event that makes any
statement made in such Registration Statement or related prospectus or any
document incorporated or deemed to be incorporated therein by reference untrue
in any material respect or that requires the making of any changes in the
registration statement, related prospectus or documents so that, in the case of
a Registration Statement, it will not contain any untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary to make the statements therein not
17
misleading, and that in the case of the related prospectus, it will not contain
any untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary to make the statements therein, in
the light of the circumstances under which they were made, not misleading; and
(e) the Company's reasonable determination that a post-effective amendment to
the registration statement would be appropriate, and the Company shall promptly
make available to Investor any such supplement or amendment to the related
prospectus. The Company shall not deliver to Investor any Put Notice during the
continuation of any of the foregoing events. Notwithstanding the foregoing,
nothing provided in this Section 6.8 shall obligate the Company to release
information that constitutes material non-public information in violation of
Regulation FD of the SEC.
Section 6.9 EXPECTATIONS REGARDING PUT NOTICES. Within ten (10) days
after the commencement of each calendar quarter occurring subsequent to the
commencement of the Commitment Period, the Company undertakes, upon written
request by Investor, to notify Investor as to its reasonable expectations as to
the dollar amount it intends to raise during such calendar quarter, if any,
through the issuance of Put Notices. Such notification shall constitute only the
Company's good faith estimate with respect to such calendar quarter and shall in
no way obligate the Company to raise such amount during such calendar quarter or
otherwise limit its ability to deliver Put Notices during such calendar quarter.
The failure by the Company to comply with this provision can be cured by the
Company's notifying Investor at any time as to its reasonable expectations with
respect to the current calendar quarter.
Section 6.10 CONSOLIDATION; MERGER. The Company shall not, at any time
after the date hereof, effect any merger or consolidation of the Company with or
into, or a transfer of all or substantially all of the assets of the Company to,
another entity unless the resulting successor or acquiring entity (if not the
Company) assumes by written instrument the obligation to deliver to Investor
such shares of stock and/or securities as Investor is entitled to receive
pursuant to this Agreement.
Section 6.11 ISSUANCE OF PUT SHARES AND BLACKOUT SHARES. The sale of
the Put Shares, the issuance of the Blackout Shares and Call Option Shares, if
any, shall be made in accordance with the provisions and requirements of
Regulation D and any applicable state law.
Section 6.12 [INTENTIONALLY DELETED],
Section 6.13 REIMBURSEMENT. If (i) Investor, other than by reason of
its negligence or willful misconduct, becomes involved in any capacity in any
action, proceeding or investigation brought by any shareholder of the Company,
in connection with or as a result of the consummation of the transactions
contemplated by the Transaction Documents, or if Investor is impleaded in any
such action, proceeding or investigation by any person, or (ii) Investor, other
than by reason of its negligence or willful misconduct or by reason of its
trading of the Common Stock in a manner that is illegal under the federal
securities laws, becomes involved in any capacity in any action, proceeding or
investigation brought by the SEC against or involving the Company or in
connection with or as a result of the consummation of the transactions
contemplated by the Transaction
18
Documents, or if Investor is impleaded in any such action, proceeding or
investigation by any person, then in any such case, the Company will reimburse
Investor for its reasonable legal and other expenses (including the cost of any
investigation and preparation) incurred in connection therewith, as such
expenses are incurred. In addition, other than with respect to any matter in
which Investor is a named party, the Company will pay to Investor the charges,
as reasonably determined by Investor, for the time of any officers or employees
of Investor devoted to appearing and preparing to appear as witnesses, assisting
in preparation for hearings, trials or pretrial matters, or otherwise with
respect to inquiries, hearing, trials, and other proceedings relating to the
subject matter of this Agreement. The reimbursement obligations of the Company
under this section shall be in addition to any liability which the Company may
otherwise have, shall extend upon the same terms and conditions to any
affiliates of Investor that are actually named in such action, proceeding or
investigation, and partners, directors, agents, employees and controlling
persons (if any), as the case may be, of Investor and any such affiliate, and
shall be binding upon and inure to the benefit of any successors, assigns, heirs
and personal representatives of the Company, Investor and any such affiliate and
any such person.
Section 6.14 DILUTION. The number of shares of Common Stock issuable as
Put Shares may increase substantially in certain circumstances, including, but
not necessarily limited to, the circumstance wherein the trading price of the
Common Stock declines during the period between the Effective Date and the end
of the Commitment Period. The Company's executive officers and directors fully
understand the nature of the transactions contemplated by this Agreement and
recognize that they have a potential dilutive effect. The board of directors of
the Company has concluded, in its good faith business judgment, that such
issuance is in the best interests of the Company. The Company specifically
acknowledges that its obligation to issue the Put Shares is binding upon the
Company and enforceable regardless of the dilution such issuance may have on the
ownership interests of other shareholders of the Company
Section 6.15 USE OF PROCEEDS The Company will use the proceeds received
hereunder (excluding amounts paid by the Company for legal fees, finder's fees
and escrow fees in connection with the sale of the Common Stock) for working
capital and general corporate purposes, and, unless specifically consented to in
advance in each instance by the Investor, the Company shall not, directly or
indirectly, use such proceeds for any loan to or investment in any other
corporation, partnership enterprise or other person or for the repayment of any
outstanding loan by the Company to any other party, except for Company
subsidiaries identified in Schedule 4.1.
Section 6.16 CERTAIN AGREEMENTS The Company shall not breach the provisions
of Section 4g of the Securities Purchase Agreement. In the event the Company
breaches the provisions of such Section 4g, the Discount shall be amended to
110% of the Discount set forth herein and Investor may terminate his obligations
under this Agreement and demand such amounts as may be owing, if any, under
Section 2.1(c).
19
ARTICLE VII
CONDITIONS TO DELIVERY OF
PUT NOTICES AND CONDITIONS TO CLOSING
Section 7.1 CONDITIONS PRECEDENT TO THE OBLIGATION OF THE COMPANY TO
ISSUE AND SELL COMMON STOCK. The obligation hereunder of the Company to issue
and sell the Put Shares to Investor incident to each Closing is subject to the
satisfaction, at or before each such Closing, of each of the conditions set
forth below.
(a) ACCURACY OF INVESTOR'S REPRESENTATION AND WARRANTIES. The
representations and warranties of Investor shall be true and correct in all
material respects as of the date of this Agreement and as of the date of each
such Closing as though made at each such time, except for changes which have not
had a Material Adverse Effect.
(b) PERFORMANCE BY INVESTOR. Investor shall have performed,
satisfied and complied in all respects with all covenants, agreements and
conditions required by this Agreement to be performed, satisfied or complied
with by Investor at or prior to such Closing.
(e) NO INJUNCTION. No statute, rule, regulation, executive
order, decree, ruling or injunction shall have been enacted, entered,
promulgated or adopted by any court or governmental authority of competent
jurisdiction that prohibits or directly and materially adversely affects any of
the transactions contemplated by this Agreement, and no proceeding shall have
been commenced that may have the effect of prohibiting or materially adversely
affecting any of the transactions contemplated by this Agreement.
(f) NO SUSPENSION OF TRADING IN OR DELISTING OF COMMON STOCK.
The trading of the Common Stock shall not have been suspended by the SEC, the
Principal Market or the NASD and the Common Stock (including the Put Shares)
shall have been approved for listing or quotation on and shall not have been
delisted from a Principal Market.
(g) SHAREHOLDER VOTE. The issuance of shares of Common
Stock with respect to the applicable Closing, if any, shall not violate the
shareholder approval requirements of the Principal Market.
Section 7.2 CONDITIONS PRECEDENT TO THE RIGHT OF THE COMPANY TO DELIVER
A PUT NOTICE AND THE OBLIGATION OF INVESTOR TO PURCHASE PUT SHARES. The right of
the Company to deliver a Put Notice and the obligation of Investor hereunder to
acquire and pay for the Put Shares incident to a Closing is subject to the
satisfaction, on (a) the date of delivery of such Put Notice and (b) the
applicable Closing Date (each a "CONDITION SATISFACTION DATE"), of each of the
following conditions:
(a) REGISTRATION OF REGISTRABLE SECURITIES WITH THE SEC. As
set forth in the Registration Rights Agreement, the Company shall have filed
with the SEC the
20
Registration Statement with respect to the resale of the Registrable Securities
by Investor and such Registration Statement shall have been declared effective
by the SEC prior to the first Put Date. For the purposes of any Put Notice with
respect to the Registrable Securities, the Company shall have filed with the SEC
a Registration Statement and paid all applicable fees with respect to the resale
of such Registrable Securities by Investor which shall have been declared
effective by the SEC prior to the Put Date therefore.
(b) EFFECTIVE REGISTRATION STATEMENT. As set forth in the
Registration Rights Agreement, a Registration Statement shall have previously
become effective for the resale by Investor of the Registrable Securities
subject to such Put Notice and such Registration Statement shall remain
effective on each Condition Satisfaction Date and (i) neither the Company nor
Investor shall have received notice that the SEC has issued or intends to issue
a stop order with respect to such Registration Statement or that the SEC
otherwise has suspended or withdrawn the effectiveness of such Registration
Statement, either temporarily or permanently, or intends or has threatened to do
so (unless the SEC's concerns have been addressed and Investor is reasonably
satisfied that the SEC no longer is considering or intends to take such action),
and (ii) no other suspension of the use or withdrawal of the effectiveness of
such Registration Statement or related prospectus shall exist.
(c) ACCURACY OF THE COMPANY'S REPRESENTATIONS AND WARRANTIES.
The representations and warranties of the Company shall be true and correct in
all material respects as of each Condition Satisfaction Date as though made at
each such time (except for representations and warranties specifically made as
of a particular date) with respect to all periods, and as to all events and
circumstances occurring or existing prior to and including each Condition
Satisfaction Date, except for any conditions which have temporarily caused any
representations or warranties herein to be incorrect and which have been
corrected with no continuing impairment to the Company or Investor.
(d) PERFORMANCE BY THE COMPANY. The Company shall have
performed, satisfied and complied in all material respects with all covenants,
agreements and conditions required by this Agreement and the Registration Rights
Agreement to be performed, satisfied or complied with by the Company at or prior
to each Condition Satisfaction Date.
(e) NO INJUNCTION. No statute, rule, regulation, executive
order, decree, ruling or injunction shall have been enacted, entered,
promulgated or adopted by any court or governmental authority of competent
jurisdiction that prohibits or directly and materially adversely affects any of
the transactions contemplated by this Agreement, and no proceeding shall have
been commenced that may have the effect of prohibiting or materially adversely
affecting any of the transactions contemplated by this Agreement.
(f) ADVERSE CHANGES. Since the date of filing of the
Company's most recent SEC Document, no event that had or is reasonably likely
to have a Material Adverse Effect has occurred.
21
(g) NO SUSPENSION OF TRADING IN OR DELISTING OF COMMON STOCK.
The trading of the Common Stock shall not have been suspended by the SEC, a
Principal Market or the NASD and the Common Stock (including the Put Shares)
shall have been approved for listing or quotation on and shall not have been
delisted from a Principal Market.
(h) LEGAL OPINION. The Company shall have caused to be
delivered to Investor, within five (5) Trading Days of the effective date of the
Initial Registration Statement and each subsequent Registration Statement, an
opinion of the Company's legal counsel in the form of Exhibit C hereto,
addressed to Investor.
(i) DUE DILIGENCE. No good faith dispute between the
Company and Investor shall exist pursuant to Section 7.3 as to the adequacy of
the disclosure contained in any Registration Statement.
(j) MINIMUM BID PRICE. The average of the Bid Prices for the
ten (10) Trading Days immediately preceding the Put Notice and the Closing Date,
shall have equaled or exceeded $0.50 (as adjusted for stock splits, stock
dividends, reverse stock splits, and similar events).
(k) The Weighted Average Volume for the twenty (20)
trading days prior to the Closing Date shall equal or exceed one hundred
fifty (150%) percent of the Put Amount.
(l) NO KNOWLEDGE. The Company shall have no knowledge of
any event more likely than not to have the effect of causing such
Registration Statement to be suspended or otherwise ineffective (which event
is more likely than not to occur within the fifteen (15) Trading Days
following the Trading Day on which such Notice is deemed delivered).
(m) TRADING CUSHION. The Trading Cushion shall have
elapsed since the immediately preceding Put Date.
(n) SHAREHOLDER VOTE. The issuance of shares of Common
Stock with respect to the applicable Closing, if any, shall not violate the
shareholder approval requirements of the Principal Market.
(o) NO VALUATION EVENT. No Valuation Event shall have
occurred since the Put Date.
(p) OTHER. On each Condition Satisfaction Date, Investor
shall have received and been reasonably satisfied with such other
certificates and documents as shall have been reasonably requested by
Investor in order for Investor to confirm the Company's satisfaction of the
conditions set forth in this Section 7.2, including, without limitation, a
certificate substantially in the form and substance of Exhibit D hereto,
executed by an executive officer of the Company and to the effect that all
the conditions to such Closing shall have been satisfied as at the date of
each such certificate and the execution and delivery of the Transfer Agent
Instructions.
22
Section 7.3 DUE DILIGENCE REVIEW; NON-DISCLOSURE OF NON-PUBLIC
INFORMATION.
(a) The Company shall make available for inspection and
review by Investor, advisors to and representatives of Investor (who may or
may not be affiliated with Investor and who are reasonably acceptable to the
Company), any Underwriter, any Registration Statement or amendment or
supplement thereto or any blue sky, NASD or other filing, all financial and
other records, all SEC Documents and other filings with the SEC, and all
other corporate documents and properties of the Company as may be reasonably
necessary for the purpose of such review, and cause the Company's officers,
directors and employees to supply all such information reasonably requested
by Investor or any such representative, advisor or Underwriter in connection
with such Registration Statement (including, without limitation, in response
to all questions and other inquiries reasonably made or submitted by any of
them), prior to and from time to time after the filing and effectiveness of
such Registration Statement for the sole purpose of enabling Investor and
such representatives, advisors and Underwriters and their respective
accountants and attorneys to conduct initial and ongoing due diligence with
respect to the Company and the accuracy of such Registration Statement.
(b) Each of the Company, its officers, directors,
employees and agents shall in no event disclose non-public information to
Investor, advisors to or representatives of Investor unless prior to
disclosure of such information the Company identifies such information as
being non-public information and provides Investor, such advisors and
representatives with the opportunity to accept or refuse to accept such
non-public information for review. The Company may, as a condition to
disclosing any non-public information hereunder, require Investor's advisors
and representatives to enter into a confidentiality agreement in form and
substance reasonably satisfactory to the Company and Investor.
(c) Nothing herein shall require the Company to disclose
non-public information to Investor or its advisors or representatives, and
the Company represents that it does not disseminate non-public information to
any investors who purchase stock in the Company in a public offering, to
money managers or to securities analysts; provided, however, that
notwithstanding anything herein to the contrary, the Company shall, as
hereinabove provided, immediately notify the advisors and representatives of
Investor and any Underwriters of any event or the existence of any
circumstance (without any obligation to disclose the specific event or
circumstance) of which it becomes aware, constituting non-public information
(whether or not requested of the Company specifically or generally during the
course of due diligence by such persons or entities), which, if not disclosed
in the prospectus included in a Registration Statement would cause such
prospectus to include a material misstatement or to omit a material fact
required to be stated therein in order to make the statements therein, in
light of the circumstances in which they were made, not misleading. Nothing
contained in this Section 7.3 shall be construed to mean that such persons or
entities other than Investor (without the written consent of Investor prior
to disclosure of such information) may not obtain non-public information in
the course of conducting due diligence in accordance with the terms and
conditions of this Agreement and nothing herein shall prevent any such
persons or entities from notifying the Company of their opinion that based on
such due diligence by such
23
persons or entities, any Registration Statement contains an untrue statement
of a material fact or omits a material fact required to be stated in such
Registration Statement or necessary to make the statements contained therein,
in light of the circumstances in which they were made, not misleading.
ARTICLE VIII
LEGENDS
Section 8.1 LEGENDS. Unless otherwise provided below, each
certificate representing Registrable Securities will bear the following legend
(the "LEGEND"):
The securities represented by this certificate have not been
registered under the Securities Act of 1933 (the "Securities
Act") or qualified under applicable state securities laws.
These securities may not be offered, sold, pledged,
hypothecated, transferred or otherwise disposed of except
pursuant to (i) an effective registration statement and
qualification in effect with respect thereto under the
Securities Act and under any applicable state securities law,
(ii) to the extent applicable, Rule 144 under the Securities
Act, or (iii) an opinion of counsel reasonably acceptable to
the Company that such registration and qualification is not
required under applicable federal and state securities laws."
As soon as practicable after the execution and delivery hereof, the Company
shall issue to the Transfer Agent, instructions in substantially the form of
Exhibit E hereto. Such instructions shall be irrevocable by the Company from and
after the date thereof or from and after the issuance thereof except as
otherwise expressly provided in the Registration Rights Agreement. It is the
intent and purpose of such instructions, as provided therein, to require the
Transfer Agent to issue to Investor certificates evidencing shares of Common
Stock incident to a Closing, free of the Legend, without consultation by the
transfer agent with the Company or its counsel and without the need for any
further advice or instruction or documentation to the Transfer Agent by or from
the Company or its counsel or Investor; provided that (a) a Registration
Statement shall then be effective, (b) Investor confirms to the Transfer Agent
and the Company that it has or intends to sell such Common Stock to a third
party which is not an affiliate of Investor or the Company and Investor agrees
to redeliver the certificate representing such shares of Common Stock to the
Transfer Agent to add the Legend in the event the Common Stock is not sold, and
(c) if reasonably requested by the transfer agent or the Company, Investor
confirms to the transfer agent and the Company that Investor has complied with
the prospectus delivery requirement under the Securities Act. At any time after
the Effective Date, upon surrender of one or more certificates evidencing Common
Stock that bear the Legend, to the extent accompanied by a notice requesting the
issuance of new certificates free of the Legend to replace those surrendered
Section 8.2 NO OTHER LEGEND OR STOCK TRANSFER RESTRICTIONS. No
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legend other than the one specified in Section 8.1 has been or shall be placed
on the share certificates representing the Common Stock and no instructions or
"stop transfers orders," so called, "stock transfer restrictions," or other
restrictions have been or shall be given to the Company's transfer agent with
respect thereto other than as expressly set forth in this Article VIII.
Section 8.3 INVESTOR'S COMPLIANCE. Nothing in this Article VIII shall
affect in any way Investor's obligations under any agreement to comply with all
applicable securities laws upon resale of the Common Stock.
ARTICLE IX
NOTICES; INDEMNIFICATION
Section 9.1 NOTICES. All notices, demands, requests, consents,
approvals, and other communications required or permitted hereunder shall be in
writing and, unless otherwise specified herein, shall be (a) personally served,
(b) deposited in the mail, registered or certified, return receipt requested,
postage prepaid, (c) delivered by reputable air courier service with charges
prepaid, or (d) transmitted by hand delivery, telegram, or facsimile, addressed
as set forth below or to such other address as such party shall have specified
most recently by written notice given in accordance herewith. Any notice or
other communication required or permitted to be given hereunder shall be deemed
effective (i) upon hand delivery or delivery by facsimile, with accurate
confirmation generated by the transmitting facsimile machine, at the address or
number designated below (if delivered on a business day during normal business
hours where such notice is to be received), or the first business day following
such delivery (if delivered other than on a business day during normal business
hours where such notice is to be received) or (ii) on the second business day
following the date of mailing by express courier service or on the fifth
business day after deposited in the mail, in each case, fully prepaid, addressed
to such address, or upon actual receipt of such mailing, whichever shall first
occur. The addresses for such communications shall be:
If to the Company: Microware Systems Corporation
0000 Xxxxxxxxx 000xx Xxxxxx
Xxx Xxxxxx, Xxxx 00000
ATTN: CFO
Telephone No.: (000) 000-0000
Telecopier No.: (000) 000-0000
with a copy to:
Arthur Don, Esq.
X'Xxxxxx & Xxxxxx, LLC
000 X. Xxxxxx Xxxxx, Xxx. 0000
Xxxxxxx, Xxxxxxxx 00000
Telephone No.: (000) 000-0000
Telecopier No.: (000) 000-0000
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if to Investor: Elder Court, LLC
x/x Xxxxxxxxx Xxxxxxxxxx
X.X. Xxx 000
Xxxx Xxxx
Xxxxxxx, Xxxxxxx Xxxxxx Xxxxxxx
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Either party hereto may from time to time change its address or facsimile number
for notices under this Section 9.1 by giving at least ten (10) days' prior
written notice of such changed address or facsimile number to the other party
hereto.
Section 9.2 INDEMNIFICATION.
(a) The Company agrees to indemnify and hold harmless Investor
and its Affiliates and agents from and against any Damages, joint or several,
and any action in respect thereof to which Investor, its Affiliates or agents,
becomes subject to, resulting from, arising out of or relating to any
misrepresentation, breach of warranty or nonfulfillment of or failure to perform
any covenant or agreement on the part of the Company contained in this
Agreement, as such Damages are incurred, except to the extent such Damages
result primarily from Investor's failure to perform any covenant or agreement
contained in this Agreement or Investor's or its Affiliates' or agents'
negligence, recklessness or bad faith in performing any of their obligations
under this Agreement.
(b) Investor agrees to indemnify and hold harmless the Company
and its Affiliates and agents from and against any Damages, joint or several,
and any action in respect thereof to which the Company and its Affiliates and
agents, becomes subject to, resulting from, arising out of or relating to any
misrepresentation, breach of warranty or nonfulfillment of or failure to perform
any covenant or agreement on the part of Investor contained in this Agreement,
as such Damages are incurred, except to the extent such Damages result primarily
from the Company's failure to perform any covenant or agreement contained in
this Agreement or the Company's or its Affiliates' or agents' negligence,
recklessness or bad faith in performing their obligations under this Agreement.
Section 9.3 METHOD OF ASSERTING INDEMNIFICATION CLAIMS. All claims for
indemnification by any Indemnified Party (as defined below) under Section 9.2
shall be asserted and resolved as follows:
26
(a) In the event any claim or demand in respect of which
any person claiming indemnification under any provision of Section 9.2 (an
"INDEMNIFIED PARTY") might seek indemnity under Section 9.2 is asserted
against or sought to be collected from such Indemnified Party by a person
other than a party hereto or an Affiliate or agent thereof (a "THIRD PARTY
CLAIM"), the Indemnified Party shall deliver a written notification,
enclosing a copy of all papers served, if any, and specifying the nature of
and basis for such Third Party Claim and for the Indemnified Party's claim
for indemnification that is being asserted under any provision of Section 9.2
against any person (the "INDEMNIFYING PARTY"), together with the amount or,
if not then reasonably ascertainable, the estimated amount, determined in
good faith, of such Third Party Claim (a "CLAIM NOTICE") with reasonable
promptness to the Indemnifying Party. If the Indemnified Party fails to
provide the Claim Notice with reasonable promptness after the Indemnified
Party receives notice of such Third Party Claim, the Indemnifying Party shall
not be obligated to indemnify the Indemnified Party with respect to such
Third Party Claim to the extent that the Indemnifying Party's ability to
defend has been prejudiced by such failure of the Indemnified Party. The
Indemnifying Party shall notify the Indemnified Party as soon as practicable
within the period ending thirty (30) calendar days following receipt by the
Indemnifying Party of either a Claim Notice or an Indemnity Notice (as
defined below) (the "DISPUTE PERIOD") whether the Indemnifying Party disputes
its liability or the amount of its liability to the Indemnified Party under
Section 9.2 and whether the Indemnifying Party desires, at its sole cost and
expense, to defend the Indemnified Party against such Third Party Claim.
(i) If the Indemnifying Party notifies the
Indemnified Party within the Dispute Period that the Indemnifying Party
desires to defend the Indemnified Party with respect to the Third Party Claim
pursuant to this Section 9.3(a), then the Indemnifying Party shall have the
right to defend, with counsel reasonably satisfactory to the Indemnified
Party, at the sole cost and expense of the Indemnifying Party, such Third
Party Claim by all appropriate proceedings, which proceedings shall be
vigorously and diligently prosecuted by the Indemnifying Party to a final
conclusion or will be settled at the discretion of the Indemnifying Party
(but only with the consent of the Indemnified Party in the case of any
settlement that provides for any relief other than the payment of monetary
damages or that provides for the payment of monetary damages as to which the
Indemnified Party shall not be indemnified in full pursuant to Section 9.2).
The Indemnifying Party shall have full control of such defense and
proceedings, including any compromise or settlement thereof; provided,
however, that the Indemnified Party may, at the sole cost and expense of the
Indemnified Party, at any time prior to the Indemnifying Party's delivery of
the notice referred to in the first sentence of this clause (i), file any
motion, answer or other pleadings or take any other action that the
Indemnified Party reasonably believes to be necessary or appropriate to
protect its interests; and provided further, that if requested by the
Indemnifying Party, the Indemnified Party will, at the sole cost and expense
of the Indemnifying Party, provide reasonable cooperation to the Indemnifying
Party in contesting any Third Party Claim that the Indemnifying Party elects
to contest. The Indemnified Party may participate in, but not control, any
defense or settlement of any Third Party Claim controlled by the Indemnifying
Party pursuant to this clause (i), and except as provided in the preceding
sentence, the Indemnified Party shall bear its own costs and expenses with
respect to such participation. Notwithstanding the foregoing, the Indemnified
Party may takeover the control of the defense or settlement of a Third Party
Claim at any time if it
27
irrevocably waives its right to indemnity under Section 9.2 with respect to
such Third Party Claim.
(ii) If the Indemnifying Party fails to notify
the Indemnified Party within the Dispute Period that the Indemnifying Party
desires to defend the Third Party Claim pursuant to this Section 9.3(a), or
if the Indemnifying Party gives such notice but fails to prosecute vigorously
and diligently or settle the Third Party Claim, or if the Indemnifying Party
fails to give any notice whatsoever within the Dispute Period, then the
Indemnified Party shall have the right to defend, at the sole cost and
expense of the Indemnifying Party, the Third Party Claim by all appropriate
proceedings, which proceedings shall be prosecuted by the Indemnified Party
in a reasonable manner and in good faith or will be settled at the discretion
of the Indemnified Party (with the consent of the Indemnifying Party, which
consent will not be unreasonably withheld). The Indemnified Party will have
full control of such defense and proceedings, including any compromise or
settlement thereof; provided, however, that if requested by the Indemnified
Party, the Indemnifying Party will, at the sole cost and expense of the
Indemnifying Party, provide reasonable cooperation to the Indemnified Party
and its counsel in contesting any Third Party Claim which the Indemnified
Party is contesting. Notwithstanding the foregoing provisions of this clause
(ii), if the Indemnifying Party has notified the Indemnified Party within the
Dispute Period that the Indemnifying Party disputes its liability or the
amount of its liability hereunder to the Indemnified Party with respect to
such Third Party Claim and if such dispute is resolved in favor of the
Indemnifying Party in the manner provided in clause (iii) below, the
Indemnifying Party will not be required to bear the costs and expenses of the
Indemnified Party's defense pursuant to this clause (ii) or of the
Indemnifying Party's participation therein at the Indemnified Party's
request, and the Indemnified Party shall reimburse the Indemnifying Party in
full for all reasonable costs and expenses incurred by the Indemnifying Party
in connection with such litigation. The Indemnifying Party may participate
in, but not control, any defense or settlement controlled by the Indemnified
Party pursuant to this clause (ii), and the Indemnifying Party shall bear its
own costs and expenses with respect to such participation.
(iii) If the Indemnifying Party has timely
disputed its liability or the amount of its liability with respect to such
claim, the Indemnifying Party and the Indemnified Party shall proceed in good
faith to negotiate a resolution of such dispute; provided, however, that it
the dispute is not resolved within thirty (30) days after the Claim Notice,
the Indemnifying Party shall be entitled to institute such legal action as it
deems appropriate.
(b) In the event any Indemnified Party should have a claim
under Section 9.2 against the Indemnifying Party that does not involve a
Third Party Claim, the Indemnified Party shall deliver a written notification
of a claim for indemnity under Section 9.2 specifying the nature of and basis
for such claim, together with the amount or, if not then reasonably
ascertainable, the estimated amount, determined in good faith, of such claim
(an "INDEMNITY NOTICE") with reasonable promptness to the Indemnifying Party.
The failure by any Indemnified Party to give the Indemnity Notice shall not
impair such party's rights hereunder except to the extent that the
Indemnifying Party demonstrates that it has been irreparably prejudiced
thereby. If the Indemnifying Party has timely disputed its liability or the
amount of its liability with respect to such claim, the Indemnifying Party
and the Indemnified Party shall proceed in good faith to negotiate a
28
resolution of such dispute; provided, however, that it the dispute is not
resolved within thirty (30) days after the Claim Notice, the Indemnifying
Party shall be entitled to institute such legal action as it deems
appropriate.
ARTICLE X
MISCELLANEOUS
Section 10.1 GOVERNING LAW; JURISDICTION. This Agreement shall be
governed by and interpreted in accordance with the laws of the State of
California without regard to the principles of conflicts of law. Each of the
Company and Investor hereby submit to the exclusive jurisdiction of the United
States Federal and state courts located in Los Angeles, California with respect
to any dispute arising under this Agreement, the agreements entered into in
connection herewith or the transactions contemplated hereby or thereby.
Section 10.2 ASSIGNMENT. This Agreement shall be binding upon and inure
to the benefit of the Company and Investor and their respective successors and
permitted assigns. Neither this Agreement nor any rights of Investor or the
Company hereunder may be assigned by either party to any other person.
Notwithstanding the foregoing, (a) the provisions of this Agreement shall inure
to the benefit of, and be enforceable by, any transferee of any of the Common
Stock purchased or acquired by Investor hereunder with respect to the Common
Stock held by such person, and (b) Investor's interest in this Agreement, but
not its obligations under this Agreement, may be assigned at any time, in whole
but not in part, to any affiliate of Investor.
Section 10.3 THIRD PARTY BENEFICIARIES. This Agreement is intended for
the benefit of the Company and Investor and their respective successors and
permitted assigns, and is not for the benefit of, nor may any provision hereof
be enforced by, any other person.
Section 10.4 TERMINATION. This Agreement shall terminate twelve (12)
months after the delivery of the final Put Notice (unless extended by the
agreement of the Company and Investor); provided, however, that the provisions
of Article V, VI, VIII, IX and Sections 10.9 and 10.12 shall survive the
termination of this Agreement.
Section 10.5 ENTIRE AGREEMENT, AMENDMENT; NO WAIVER. This Agreement and
the instruments referenced herein contain the entire understanding of the
Company and Investor with respect to the matters covered herein and therein and,
except as specifically set forth herein or therein, neither the Company nor
Investor makes any representation, warranty, covenant or undertaking with
respect to such matters. No provision of this Agreement may be waived or amended
other than by an instrument in writing signed by the party to be charged with
enforcement.
Section 10.6 FEES AND EXPENSES. Each of the Company and Investor agrees
to pay its own expenses in connection with the preparation of this Agreement and
performance of its obligations hereunder, except that the Company shall pay the
Escrow Agent the fee of $2,500 at each of the Closings.
29
Section 10.7 NO BROKERS. Each of the Company and Investor represents
that it has had no dealings in connection with this transaction with any finder
or broker who will demand payment of any fee or commission from the other party,
except Xxxx Capital Partners, Inc. The Company on the one hand, and Investor, on
the other hand, agree to indemnify the other against and hold the other harmless
from any and all liabilities to any persons claiming brokerage commissions or
finder's fees on account of services purported to have been rendered on behalf
of the indemnifying party in connection with this Agreement or the transactions
contemplated hereby.
Section 10.8 COUNTERPARTS. This Agreement may be executed in multiple
counterparts, each of which may be executed by less than all of the parties and
shall be deemed to be an original instrument which shall be enforceable against
the parties actually executing such counterparts and all of which together shall
constitute one and the same instrument. This Agreement, once executed by a
party, may be delivered to the other parties hereto by facsimile transmission of
a copy of this Agreement bearing the signature of the parties so delivering this
Agreement.
Section 10.9 SURVIVAL; SEVERABILITY. The representations, warranties,
covenants and agreements of the parties hereto shall survive each Closing
hereunder for a period of one year. In the event that any provision of this
Agreement becomes or is declared by a court of competent jurisdiction to be
illegal, unenforceable or void, this Agreement shall continue in full force and
effect without said provision; provided that such severability shall be
ineffective if it materially changes the economic benefit of this Agreement to
any party.
Section 10.10 FURTHER ASSURANCES. Each party shall do and perform, or
cause to be done and performed, all such further acts and things, and shall
execute and deliver all such other agreements, certificates, instruments and
documents, as the other party may reasonably request in order to carry out the
intent and accomplish the purposes of this Agreement and the consummation of the
transactions contemplated hereby.
Section 10.11 NO STRICT CONSTRUCTION. The language used in this
Agreement will be deemed to be the language chosen by the parties to express
their mutual intent, and no rules of strict construction will be applied against
any party.
Section 10.12 EQUITABLE RELIEF. Each party recognizes that in the event
that it fails to perform, observe, or discharge any or all of its obligations
under this Agreement, any remedy at law may prove to be inadequate relief. Each
party therefore agrees that the other shall be entitled to temporary and
permanent injunctive relief in any such case without the necessity of proving
actual damages.
Section 10.13 TITLE AND SUBTITLES. The titles and subtitles used in
this Agreement are used for the convenience of reference and are not to be
considered in construing or interpreting this Agreement.
30
Section 10.14 REPORTING ENTITY FOR THE COMMON STOCK. The reporting
entity relied upon for the determination of the trading price of the Common
Stock on any given Trading Day for the purposes of this Agreement shall be
Bloomberg L.P. or any successor thereto. If such information is unavailable to
the Company, Investor shall promptly, upon request, forward confirmation of such
trading data to the Company. The written mutual consent of Investor and the
Company shall be required to employ any other reporting entity.
Section 10.15 OWNERSHIP LIMITATION. Notwithstanding the provisions
hereof or any prior agreement between Investor and the Company, in no event
shall the Company deliver a Put to Investor in an amount that, after such Put,
the sum of the number of shares of Common Stock beneficially owned by Investor
and its affiliates would be more than 9.9% of the outstanding shares of Common
Stock. For purposes of the proviso to the immediately preceding sentence,
beneficial ownership shall be determined in accordance with Section 13(d) of the
Exchange Act. If the Company delivers a Put that would cause Investor to exceed
9.9% of the outstanding shares of Common Stock, then Investor shall notify the
Company and the parties hereby agree to reduce the amount of the Put so that
such 9.9% limit shall not be exceeded.
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IN WITNESS WHEREOF, the parties hereto have caused this Private Equity
Credit Agreement to be executed by the undersigned, thereunto duly authorized,
as of the date first set forth above.
MICROWARE SYSTEMS CORPORATION, an Iowa corporation
By: __________________________________
Name:
Title:
ELDER COURT, LLC, a Cayman Islands limited liability company
By: ___________________________________
Name:
Title:
32
EXHIBITS
EXHIBIT A Registration Rights Agreement
EXHIBIT B Put Notice
EXHIBIT B-1 Call Option Notice
EXHIBIT C Opinion
EXHIBIT D Closing Certificate
EXHIBIT E Transfer Agent Instructions
EXHIBIT F Warrant
EXHIBIT G Escrow Instructions
33
