EXHIBIT 4.1
================================================================================
PREFERRED STOCK AND WARRANT PURCHASE AGREEMENT
DATED AS OF
September 11, 2003
BY AND AMONG
VASCO DATA SECURITY INTERNATIONAL, INC., AS ISSUER AND SELLER
AND
EACH OF THE PARTIES LISTED ON SCHEDULE 1, AS PURCHASERS
WITH RESPECT TO
SERIES D 5% CUMULATIVE CONVERTIBLE VOTING PREFERRED STOCK
AND SERIES D WARRANTS TO PURCHASE COMMON STOCK
================================================================================
TABLE OF CONTENTS, EXHIBITS AND SCHEDULES
<Table>
<Caption>
PAGE
----
Article 1 PURCHASE AND SALE.......................................................................................1
Section 1.1. PURCHASE AND SALE........................................................................1
Section 1.2. TERMS OF THE PREFERRED STOCK AND WARRANTS................................................1
Section 1.3. TRANSFERS; LEGENDS.......................................................................1
Article 2 PURCHASE PRICE AND CLOSING..............................................................................2
Section 2.1. PURCHASE PRICE...........................................................................2
Section 2.2. THE CLOSING..............................................................................2
Section 2.3. DELIVERIES...............................................................................3
Article 3 REPRESENTATIONS AND WARRANTIES OF THE SELLER............................................................4
Section 3.1. CORPORATE EXISTENCE AND POWER............................................................4
Section 3.2. CORPORATE AUTHORIZATION..................................................................4
Section 3.3. GOVERNMENTAL AUTHORIZATION; NASD AND NASDAQ..............................................5
Section 3.4. NON-CONTRAVENTION........................................................................6
Section 3.5. COMPLIANCE...............................................................................6
Section 3.6. SEC DOCUMENTS............................................................................6
Section 3.7. FINANCIAL STATEMENTS.....................................................................7
Section 3.8. NO MATERIAL ADVERSE CHANGE...............................................................7
Section 3.9. LITIGATION...............................................................................7
Section 3.10. CAPITALIZATION...........................................................................8
Section 3.11. FORM S-3.................................................................................8
Section 3.12. NASDAQ COMPLIANCE........................................................................8
Section 3.13. TRANSACTIONS WITH AFFILIATES.............................................................8
Section 3.14. INTELLECTUAL PROPERTY....................................................................8
Section 3.15. TITLE....................................................................................9
Section 3.16. TAX STATUS...............................................................................9
Section 3.17. INSURANCE................................................................................9
Section 3.18. SOLVENCY.................................................................................9
Section 3.19. ACKNOWLEDGMENT REGARDING EACH PURCHASER'S PURCHASE OF THE SECURITIES....................10
Section 3.20. NO GENERAL SOLICITATION OR INTEGRATED OFFERING..........................................10
Section 3.21. NO BROKERS..............................................................................10
Section 3.22. ACKNOWLEDGMENT REGARDING SECURITIES.....................................................10
Article 4 REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS.......................................................11
Section 4.1. EXISTENCE AND POWER.....................................................................11
Section 4.2. AUTHORIZATION...........................................................................11
Section 4.3. PURCHASE FOR OWN ACCOUNT, ETC...........................................................12
</Table>
<Table>
<Caption>
PAGE
----
Section 4.4. ACCREDITED INVESTOR STATUS; SELLING STOCKHOLDER QUESTIONNAIRE...........................12
Section 4.5. BUSINESS OR FINANCIAL EXPERTISE; QUALIFIED INSTITUTIONAL BUYER..........................12
Section 4.6. NONCONTRAVENTION........................................................................12
Section 4.7. NO LEGAL, TAX OR INVESTMENT ADVICE......................................................12
Section 4.8. GOVERNMENTAL REVIEW.....................................................................13
Section 4.9. FOREIGN INVESTORS.......................................................................13
Section 4.10. NO BROKERS..............................................................................13
Section 4.11. LITIGATION..............................................................................13
Section 4.12. GOVERNMENTAL AUTHORIZATION..............................................................13
Article 5 COVENANTS OF THE SELLER AND PURCHASERS.................................................................13
Section 5.1. INSURANCE...............................................................................13
Section 5.2. REPORTING OBLIGATIONS...................................................................14
Section 5.3. DISPOSITIONS............................................................................14
Section 5.4. INVESTIGATION...........................................................................14
Section 5.5. PUBLIC ANNOUNCEMENTS....................................................................14
Section 5.6. USE OF PROCEEDS.........................................................................15
Section 5.7. CORPORATE EXISTENCE.....................................................................15
Section 5.8. PERFORM COVENANTS.......................................................................15
Section 5.9. LISTING OF SHARES.......................................................................15
Section 5.10. RESERVATION OF SHARES...................................................................15
Section 5.11. FILING OF FORM D........................................................................15
Section 5.12. NO SOLICITATION OF TRANSACTION..........................................................16
Section 5.13. CONDUCT OF THE SELLER...................................................................16
Section 5.14. BENEFICIAL OWNERSHIP CAP................................................................17
Section 5.15. REDEMPTIONS AND DIVIDENDS...............................................................17
Section 5.16. SHAREHOLDERS RIGHTS PLAN................................................................17
Section 5.17. PLEDGE OF SECURITIES....................................................................17
Section 5.18. EXPENSES................................................................................17
Section 5.19. PROHIBITED TRANSFERS....................................................................18
Section 5.20. REGISTRATION DAMAGES....................................................................18
Article 6 REGISTRATION OF SHARES.................................................................................18
Section 6.1. CERTAIN DEFINITIONS.....................................................................18
Section 6.2. REGISTRATION OF SHARES..................................................................18
Section 6.3............................................................................................19
Section 6.4............................................................................................19
Article 7 SECURITIES TRANSFER MATTERS............................................................................21
Section 7.1. CONVERSION AND EXERCISE.................................................................21
Section 7.2. TRANSFER OR RESALE......................................................................21
Section 7.3. LEGENDS.................................................................................22
</Table>
-ii-
<Table>
<Caption>
PAGE
----
Section 7.4. TRANSFER AGENT INSTRUCTION..............................................................22
Article 8 CONDITIONS TO THE CLOSING..............................................................................22
Section 8.1. CONDITIONS TO OBLIGATIONS OF THE PURCHASERS.............................................22
Section 8.2. CONDITIONS TO OBLIGATIONS OF THE SELLER.................................................24
Article 9 INDEMNIFICATION........................................................................................24
Section 9.1. SURVIVAL OF REPRESENTATIONS.............................................................24
Section 9.2. INDEMNIFICATION.........................................................................24
Section 9.3. INDEMNITY PROCEDURE.....................................................................26
Article 10 TERMINATION...........................................................................................27
Section 10.1. BEST EFFORTS............................................................................27
Section 10.2. TERMINATION.............................................................................28
Section 10.3. EFFECT OF TERMINATION...................................................................28
Article 11 MISCELLANEOUS.........................................................................................29
Section 11.1. FURTHER ASSURANCES......................................................................29
Section 11.2. NOTICES.................................................................................29
Section 11.3. GOVERNING LAW...........................................................................30
Section 11.4. JURISDICTION AND VENUE..................................................................30
Section 11.5. SUCCESSORS AND ASSIGNS..................................................................30
Section 11.6. SEVERABILITY............................................................................33
Section 11.7. ENTIRE AGREEMENT........................................................................31
Section 11.8. OTHER REMEDIES..........................................................................31
Section 11.9. AMENDMENT AND WAIVERS...................................................................31
Section 11.10. NO WAIVER...............................................................................31
Section 11.11. CONSTRUCTION OF AGREEMENT; KNOWLEDGE....................................................31
Section 11.12. COUNTERPARTS; FACSIMILE.................................................................31
Section 11.13. NO THIRD PARTY BENEFICIARY..............................................................32
</Table>
SCHEDULE 1
DISCLOSURE SCHEDULE
EXHIBIT A: CERTIFICATE OF DESIGNATIONS, RIGHTS AND PREFERENCES OF SERIES D 5%
CUMULATIVE CONVERTIBLE VOTING PREFERRED STOCK
EXHIBIT B: COMMON STOCK PURCHASE WARRANT
EXHIBIT C: OPINION OF SELLER'S COUNSEL
EXHIBIT D: FORM OF SELLING STOCKHOLDER QUESTIONNAIRE
-iii-
PREFERRED STOCK AND WARRANT PURCHASE AGREEMENT (the "Agreement") dated
as of September 11, 2003, by and among VASCO Data Security International, Inc.,
a Delaware corporation (the "Seller"), and each of the persons listed on
Schedule 1 hereto (each, a "Purchaser" and collectively, the "Purchasers").
WITNESSETH:
WHEREAS, each of the Purchasers is willing to purchase from the Seller,
and the Seller desires to sell to the Purchasers, the numbers of shares set
forth opposite each Purchaser's name on Schedule 1 attached hereto, which
aggregate 800 shares of Seller's Series D 5% Cumulative Convertible Voting
Preferred Stock, stated value $10,000.00 per share (the "Preferred Stock"), and
Series D Common Stock Purchase Warrants (the "Warrants"), entitling the holders
thereof to purchase that number of shares of the Seller's class of common stock,
$0.001 par value per share (the "Common Stock"), at an exercise price of $3.47
per share (the "Exercise Price"), equal in number to 600,000 shares of Common
Stock (subject to adjustment as more fully set forth herein and in the
Warrants).
NOW, THEREFORE, in consideration of the foregoing and the mutual
promises, representations, warranties, covenants and agreements set forth
herein, the parties hereto, intending to be legally bound, hereby agree as
follows:
ARTICLE 1
PURCHASE AND SALE
Section 1.1. PURCHASE AND SALE. On the terms and subject to the
conditions set forth in this Agreement, at the Closing (as defined in Section
2.2), the Seller will sell and each of the Purchasers will purchase (i) the
Preferred Stock in the amounts set forth opposite each Purchaser's name on
Schedule 1 hereto, and (ii) the numbers of Warrants set forth opposite each
Purchaser's name on Schedule 1 hereto. The shares of Common Stock issuable upon
conversion of the Preferred Stock are referred to herein as the "Conversion
Shares," and the shares of Common Stock issuable upon exercise of the Warrants
are referred to herein as the "Warrant Shares." The Preferred Stock, the
Warrants, the Conversion Shares, the Dividend Shares (as hereinafter defined)
and the Warrant Shares are collectively referred to as the "Securities."
Section 1.2. TERMS OF THE PREFERRED STOCK AND WARRANTS. The terms and
provisions of the Preferred Stock are set forth in the Form of Certificate of
Designations, Rights and Preferences of Series D 5% Cumulative Convertible
Voting Preferred Stock, attached hereto as Exhibit A. The terms and provisions
of the Warrants are more fully set forth in the Form of Common Stock Purchase
Warrant, attached hereto as Exhibit B.
Section 1.3. TRANSFERS; LEGENDS.
1.3.1. The Preferred Stock and Warrants may be transferred, in
whole or in part, by any of the Purchasers at any time by delivering written
transfer instructions to the Seller, and the Seller shall reflect such transfer
on its books and records and reissue certificates evidencing the Preferred Stock
or Warrants being transferred. The Seller hereby consents to and agrees to
register on the books of the Seller and with any transfer agent for the
securities of the
Seller any transfer of Preferred Stock or Warrants. Any transferee other than a
purchaser of shares of Common Stock which have been registered under the
Securities Act shall have the rights of a Purchaser under this Agreement. The
Seller shall reissue certificates evidencing the Preferred Stock or Warrants
transferred upon surrender of certificates evidencing the Preferred Stock or
Warrants being transferred. Any such transfer shall be made by a Purchaser in
accordance with applicable federal and state securities laws and other
applicable laws. An "Affiliate" means any Person (as such term is defined below)
that, directly or indirectly through one or more intermediaries, controls or is
controlled by or is under common control with a Person, as such terms are used
in and construed under Rule 144 under the Securities Act of 1933, as amended
(the "Securities Act"). With respect to a Purchaser, any investment fund or
managed account that is managed on a discretionary basis by the same investment
manager as such Purchaser will be deemed to be an Affiliate of such Purchaser. A
"Person" means any individual or corporation, partnership, trust, incorporated
or unincorporated association, joint venture, limited liability company, joint
stock company, government (or an agency or subdivision of any thereof) or other
entity of any kind.
1.3.2. The certificates representing the Securities shall bear
the following legend:
"THE SECURITIES REPRESENTED BY, OR ACQUIRABLE UPON CONVERSION OR
EXERCISE OF SECURITIES EVIDENCED BY, THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE
OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED IN THE ABSENCE OF AN
EFFECTIVE REGISTRATION STATEMENT UNDER SAID ACT UNLESS THE ISSUER OF
THIS CERTIFICATE RECEIVES AN OPINION OF LEGAL COUNSEL REASONABLY
ACCEPTABLE TO THE ISSUER AND ITS LEGAL COUNSEL THAT SUCH SALE IS EXEMPT
FROM REGISTRATION UNDER SUCH ACT AND IS IN COMPLIANCE WITH APPLICABLE
STATE SECURITIES OR BLUE SKY LAWS UNLESS SUCH REGISTRATION IS NOT
REQUIRED."
ARTICLE 2
PURCHASE PRICE AND CLOSING
Section 2.1. PURCHASE PRICE. The aggregate purchase price (the
"Purchase Price") to be paid by the Purchasers to the Seller to acquire the
Preferred Stock and the Warrants shall be the total amount set forth on Schedule
1 hereto. The purchase price for each share of Preferred Stock shall be
$10,000.00 and the purchase price for each Warrant shall be $0.01.
Section 2.2. THE CLOSING. The closing of the transactions contemplated
under this Agreement (the "Closing") shall take place by means of facsimile
transfer on a date mutually agreed upon by the parties. The date on which the
Closing occurs is herein called the "Closing Date." All proceedings to be taken
and all documents to be executed at the Closing shall be
-2-
deemed to have been taken, delivered and executed simultaneously, and no
proceeding shall be deemed taken nor documents deemed executed or delivered
until all have been taken, delivered and executed.
Section 2.3. DELIVERIES.
2.3.1. DELIVERIES BY THE SELLER. At the Closing, the Seller shall
deliver or cause to be delivered to each of the Purchasers the following:
(a) One or more certificates evidencing the aggregate number
of shares of the Preferred Stock, duly authorized, fully paid and
non-assessable, as is indicated on Schedule 1 for such Purchaser, registered in
the name of such Purchaser, in such denominations as is indicated on Schedule 1
for such Purchaser;
(b) One or more Warrants in the form of Exhibit B hereto,
registered in the name of such Purchaser, in such denominations as is indicated
on Schedule 1 for such Purchaser, pursuant to which such Purchaser shall be
entitled to purchase an aggregate of that number of shares of Common Stock as is
indicated on Schedule 1 for such Purchaser;
(c) A certificate of the Secretary of the Seller (the
"Secretary's Certificate"), in form and substance satisfactory to the
Purchasers, certifying as follows:
(i) that the Certificate of Designation authorizing the
Preferred Stock has been duly filed in the office of the Secretary of State of
the State of Delaware, and that attached to the Secretary's Certificate is a
true and complete copy of the Certificate of Incorporation of the Seller
together with all amendments thereto and the Certificate of Designation;
(ii) that a true copy of the Bylaws of the Seller, as
amended to the Closing Date, is attached to the Secretary's Certificate;
(iii) that attached to the Secretary's Certificate are true
and complete copies of the resolutions of the Board of Directors of the Seller
(the "Board of Directors") authorizing the execution, delivery and performance
of this Agreement and the Related Documents (as defined below), instruments and
certificates required to be executed by it in connection herewith and therewith
and approving the consummation of the transactions in the manner contemplated
hereby including, but not limited to, the authorization and issuance of the
Preferred Stock;
(iv) the names and true signatures of the officers of the
Seller signing this Agreement and all other documents to be delivered in
connection with this Agreement;
(d) Proof of due filing with the Secretary of State of the
State of Delaware of the Certificate of Designation authorizing the Preferred
Stock;
(e) A legal opinion of the Seller's counsel, dated as of the
Closing Date, in the form attached hereto as Exhibit C (the "Opinion"); and
-3-
(f) An itemized list of any and all brokerage commissions,
finder's fees or similar payments owed by Purchaser relating to this Agreement
or the transactions contemplated hereby (the "Broker Fee List").
2.3.2. DELIVERIES BY THE PURCHASERS. At the Closing, each of the
Purchasers shall deliver or cause to be delivered to the Seller the following:
(a) Payment of the purchase price set forth opposite such
Purchaser's name on Schedule 1, in cash by wire transfer of immediately
available funds to an account designated in writing by Seller; and
(b) an executed copy of the Selling Stockholder Questionnaire,
in the form attached hereto as Exhibit D.
Article 3
REPRESENTATIONS AND WARRANTIES OF THE SELLER
Except as set forth on a Disclosure Schedule executed and
delivered by the Seller to each Purchaser (the "Disclosure Schedule"), the
Seller represents and warrants to each Purchaser as follows:
Section 3.1. CORPORATE EXISTENCE AND POWER. The Seller and each of its
direct and indirect subsidiaries (collectively, the "Subsidiaries") is a
corporation duly incorporated, validly existing and in good standing under the
laws of the jurisdiction in which it is incorporated or organized, and has all
corporate powers and authority required to carry on its business as now
conducted. True and complete copies of the Seller's Certificate of
Incorporation, as amended, and Bylaws, as amended (collectively, the "Charter
Documents") have previously or contemporaneously herewith been provided to the
Purchasers. The Seller and each of its Subsidiaries is duly qualified as a
foreign corporation to do business and is in good standing in every jurisdiction
in which the failure so to quality or be in good standing would have a Material
Adverse Effect. For purposes of this Agreement, "Material Adverse Effect" means
any effect which, individually or in the aggregate with all other effects,
reasonably would be expected to be materially adverse to (i) the Securities,
(ii) the ability of the Seller to perform its obligations under this Agreement
or the Related Documents or (iii) the business, operations, properties,
prospects, financial condition or results of operations of the Seller and its
Subsidiaries, taken as a whole.
Section 3.2. CORPORATE AUTHORIZATION.
3.2.1. The execution, delivery and performance by the Seller of
this Agreement, the Warrants, the Certificate of Designation and each of the
other documents executed pursuant to and in connection with this Agreement (the
"Related Documents"), and the consummation of the transactions contemplated
hereby and thereby (including, but not limited to, the sale and delivery of the
Preferred Stock and the Warrants, and the subsequent issuance of the Conversion
Shares, and the subsequent issuance of the Warrant Shares upon exercise of the
Warrants, and the subsequent issuance, if the Seller so elects, of shares of
Common Stock in payment of the dividends on the Preferred Stock, which shares of
Common Stock are herein referred to as "Dividend Shares") (the "Transactions")
have been duly authorized, and no
-4-
additional corporate action is required for the approval of this Agreement or
the Related Documents. The Conversion Shares, the Dividend Shares and the
Warrant Shares have been duly reserved for issuance by the Seller. This
Agreement and the Related Documents have been or, to the extent contemplated
hereby or by the Related Documents, will be duly executed and delivered and
constitute the legal, valid and binding agreement of the Seller, enforceable
against the Seller in accordance with their terms, except as may be limited by
bankruptcy, reorganization, insolvency, moratorium and similar laws of general
application relating to or affecting the enforcement of rights of creditors, and
except as enforceability of its obligations hereunder are subject to general
principles of equity (regardless of whether enforcement is sought in a
proceeding at law or in equity).
3.2.2. The Preferred Stock that will be issued and delivered to
the Purchasers at Closing in accordance with the terms hereof, will be duly
authorized, validly issued, fully paid and non-assessable and free from all
taxes, liens, claims and encumbrances and free of restrictions on transfer other
than those imposed by applicable state and federal securities laws. The Common
Stock issuable upon conversion of the Preferred Stock and exercise of the
Warrants has been duly and validly reserved for issuance, and upon issuance in
accordance with the terms of the Certificate of Designation or the Warrants,
will be duly authorized, validly issued, fully paid and non-assessable and free
from all taxes, liens, claims and encumbrances and free of restrictions on
transfer other than those imposed by applicable federal and state securities
laws and, assuming the accuracy of the representations and warranties of the
Purchasers, will be issued in compliance with all applicable federal and state
securities laws.
3.2.3. The issuance of the Preferred Stock, the Warrants or the
Common Stock upon conversion or exercise of the Preferred Stock or Warrants, as
applicable, will not result in or obligate the Seller to (i) issue or offer to
issue, with or without consideration, any securities or rights to acquire any
securities to any person, whether as a pre-emptive right, right of first refusal
or similar rights of stockholders, or pursuant to any to rights plan, or
pursuant to any agreement, undertaking or other obligation of any nature, or
(ii) adjust the number or kind of securities held by or issuable (with or
without the payment of any consideration) to any person.
Section 3.3. GOVERNMENTAL AUTHORIZATION; NASD AND NASDAQ.
3.3.1. Except as otherwise specifically contemplated in this
Agreement and the Related Documents, and except for: (i) the filing of the
Registration Statement ( as defined in Article 6) with the Commission; (ii) any
filings required under Regulation D or any state securities laws that are
permitted to be made after the date hereof, and (iii) the filing of the
Certificate of Designation in the office of the Secretary of State of the State
of Delaware; the execution, delivery and performance by the Seller of this
Agreement and the Related Documents, and the consummation of the Transactions
require no action by or in respect of, or filing with, any governmental body,
agency, official or authority.
3.3.2. The Seller will provide an Additional Listing Notice,
which shall include, if required, true copies of this Agreement, the form of
Certificate of Designation and the form of Warrant to the Nasdaq Stock Market,
Inc. with respect to the Conversion Shares, Warrant Shares and Dividend Shares
(collectively, the "Shares").
-5-
Section 3.4. NON-CONTRAVENTION. The execution, delivery and performance
by the Seller of this Agreement and the Related Documents, and the consummation
by the Seller of the Transactions do not and will not (a) violate or conflict
with the Charter Documents or any Material Agreement (which, for purposes of
this Agreement, means any material undischarged written or oral contracts,
agreements, leases or other instruments to which the Seller or any Subsidiary is
a party or by which the Seller or any Subsidiary is bound or to which any of the
properties or assets of the Seller or any Subsidiary is subject) to which the
Seller is a party or bound; (b) violate or conflict with or constitute a
material violation of any provision of any law, regulation, judgment,
injunction, order or rule or regulation of any self-regulatory organizations or
decree binding upon or applicable to the Seller; (c) constitute a default under
or give rise to a right of termination, amendment (including, without
limitation, the triggering of any anti-dilution provisions) cancellation or
acceleration or loss of any benefit under any Material Agreement, contract or
other instrument binding upon the Seller or under any material license,
franchise, permit or other similar authorization held by the Seller; or (d)
result in the creation or imposition of any Lien (as defined below) on any
material asset of the Seller. For purposes of this Agreement, the term "Lien"
means, with respect to any asset, any mortgage, lien, pledge, charge, security
interest, claim or encumbrance of any kind in respect of such asset.
Section 3.5. COMPLIANCE. The Seller is not in violation of its Charter
Documents or other organizational documents and no Subsidiary is in violation of
any of its organizational documents. Neither the Seller nor any of its
Subsidiaries is in default (and no event has occurred that with notice or lapse
of time or both would put the Seller or any of its Subsidiaries in default)
under, nor has there occurred any event giving others (with notice or lapse of
time or both) any rights of termination, amendment, acceleration or cancellation
of, any agreement, indenture or instrument to which the Seller or any of its
Subsidiaries is a party (including, without limitation, any Material Agreement),
except for actual or possible violations, defaults or rights that would not,
individually or in the aggregate, have a Material Adverse Effect. The businesses
of the Seller and its Subsidiaries are not being conducted, and shall not be
conducted so long as any Purchaser owns any of the Preferred Stock or Warrants,
in violation of any law, ordinance or regulation of any governmental entity,
except for possible violations the sanctions for which either individually or in
the aggregate have not had and would not have a Material Adverse Effect. To
their knowledge, neither the Seller, nor any of its Subsidiaries, nor any
director, officer, agent, employee or other person acting on behalf of the
Seller or any Subsidiary has, in the course of his actions for, or on behalf of,
the Seller or any Subsidiary, used any corporate funds for any unlawful
contribution, gift, entertainment or other unlawful expenses relating to
political activity, made any direct or indirect unlawful payment to any foreign
or domestic government official or employee from corporate funds, violated or is
in violation of any provision of the U.S. Foreign Corrupt Practices Act of 1977,
or made any bribe, rebate, payoff, influence payment, kickback or other unlawful
payment to any foreign or domestic government official or employee. The Seller
and its Subsidiaries possess all certificates, authorizations and permits issued
by the appropriate federal, state, provincial or foreign regulatory authorities
that are material to the conduct of its business, and neither the Seller nor any
of its Subsidiaries has received any notice of proceeding relating to the
revocation or modification of any such certificate, authorization or permit.
Section 3.6. SEC DOCUMENTS. The Seller is obligated under the
Securities Exchange Act of 1934, as amended (the "Exchange Act") to file
reports, Schedules, forms,
-6-
statements and other documents (all such documents filed or required to be filed
by the Seller, including all exhibits thereto or incorporated therein by
reference, and all documents filed by the Seller under the Securities Act are
hereinafter called the "SEC Documents"). The Seller has timely filed all SEC
Documents required to be filed with the SEC under the Exchange Act during the
two (2) years immediately preceding the date of this Agreement. As of their
respective filing dates, all such SEC Documents filed by the Seller (i) were
prepared in all material respects in accordance with the requirements of the
Exchange Act and the Securities Act, as the case may be, and the rules and
regulations of the SEC promulgated thereunder, and (ii) did not at the time they
were filed (or, if amended or superseded by a filing prior to the date hereof,
then on the date of such filing) contain any untrue statement of a material fact
or omit 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. All of the information about the Seller or its
Subsidiaries which has been disclosed to the Purchasers herein or in the course
of discussions and negotiations with respect hereto which is material to the
Seller has been disclosed in the SEC Documents.
Section 3.7. FINANCIAL STATEMENTS. Each of the Seller's consolidated
balance sheets and related consolidated statements of income, cash flows and
changes in stockholders' equity (including the related notes), as contained in
the SEC Documents filed during the twelve (12) months immediately preceding the
date of this Agreement (collectively, the "Seller's Financial Statements" or the
"Financial Statements") (a) present fairly in all material respects the
financial position of the Seller and its consolidated Subsidiaries as of the
dates thereof and the results of operations, cash flows and stockholders' equity
as of and for each of the periods then ended, except that any unaudited
financial statements are subject to normal year-end adjustments, and (b) were
prepared in accordance with generally accepted accounting principles ("GAAP")
applied on a consistent basis throughout the periods involved, in each case,
except as otherwise indicated in the notes thereto.
Section 3.8. NO MATERIAL ADVERSE CHANGE. Except as otherwise disclosed
herein or on the Disclosure Schedule, since June 30, 2003, there have not been
any changes in the assets, liabilities, financial condition, business prospects
or operations of the Seller from that reflected in the Financial Statements
except changes in the ordinary course of business which have not been, either
individually or in the aggregate, materially adverse to the financial position
of the Seller taken as a whole.
Section 3.9. LITIGATION. Except as disclosed on the Disclosure
Schedule, there is no action, suit, proceeding, judgment, claim or investigation
pending or, to the knowledge of the Seller, threatened against the Seller and
any of its Subsidiaries which could reasonably be expected to have a Material
Adverse Effect on the Seller or its Subsidiaries. There is no action, suit,
proceeding, judgment, claim or investigation pending or, to the knowledge of the
Seller, threatened, which in any manner challenges or seeks to prevent, enjoin,
alter or materially delay any of the transactions contemplated hereby. There are
no facts which, if known by a potential claimant or governmental authority,
could give rise to a claim or proceeding which, if asserted or conducted with
results unfavorable to the Seller or any of its Subsidiaries, could reasonably
be expected to have a Material Adverse Effect.
-7-
Section 3.10. CAPITALIZATION. The authorized capital stock of the
Seller consists of 75,000,000 shares of Common Stock, of which 30,396,984 shares
are issued and outstanding as of the date hereof, and 500,000 shares of a class
of preferred stock, issuable in one or more classes or series, with such
relative rights and preferences as the Seller's board of directors may
determine, none of which (other than the Preferred Stock) has been authorized
for issuance or designated and provided with terms.
Section 3.11. FORM S-3. The Seller is eligible to use Form S-3 for the
registration of its securities under the Securities Act which are offered in
transactions by or for the account of selling security holders.
Section 3.12. NASDAQ COMPLIANCE. The Common Stock is registered as a
class pursuant to Section 12(g) of the Exchange Act, is listed on the Nasdaq
SmallCap Market of the Nasdaq Stock Market, Inc. ("Nasdaq") and the Seller has
taken no action to terminate the registration of the Common Stock under the
Exchange Act or delist the Common Stock from Nasdaq. The Seller is not in
violation of the listing requirements of Nasdaq, does not reasonably anticipate
that the Common Stock will be delisted by Nasdaq for the foreseeable future, and
has not received any notice regarding the possible delisting of the Common Stock
from Nasdaq. The Seller has noticed the listing of the Conversion Shares and
Warrant Shares on Nasdaq (subject to official notice of issuance).
Section 3.13. TRANSACTIONS WITH AFFILIATES. Except as set forth in the
SEC Documents, none of the officers, directors, or employees of the Seller or
any of its Subsidiaries is presently a party to any transaction with the Seller
or any of its Subsidiaries (other than for ordinary course services solely in
their capacity as officers, directors or employees), including any contract,
agreement or other arrangement providing for the furnishing of services to or
by, providing for rental of real or personal property to or from, or otherwise
requiring payments to or from any such officer, director or employee or any
corporation, partnership, trust or other entity in which any such officer,
director, or employee has an ownership interest of five percent or more or is an
officer, director, trustee or partner.
Section 3.14. INTELLECTUAL PROPERTY. Each of the Seller and its
Subsidiaries owns or is duly licensed (and, in such event, has the right to
grant sublicenses) to use all patents, patent applications, trademarks,
trademark applications, trade names, service marks, copyrights, copyright
applications, licenses, permits, inventions, discoveries, processes, scientific,
technical, engineering and marketing data, object and source codes, know-how
(including trade secrets and other unpatented and/or unpatentable proprietary or
confidential information, systems or procedures) and other similar rights and
proprietary knowledge (collectively, "Intangibles") necessary for the conduct of
its business as now being conducted and as presently contemplated to be
conducted in the future. The SEC Documents accurately set forth all Intangibles
owned and/or used by the Seller in its business. To the knowledge of the Seller
and its Subsidiaries, neither the Seller nor any Subsidiary infringes or is in
conflict with any right of any other person with respect to any third party
Intangibles. Neither the Seller nor any of its Subsidiaries has received written
notice of any pending conflict with or infringement upon such third party
Intangibles. Neither the Seller nor any of its Subsidiaries has entered into any
consent agreement, indemnification agreement, forbearance to sue or settlement
agreement with respect to the validity of the Seller's or its Subsidiaries'
ownership of or right to use its
-8-
Intangibles and there is no reasonable basis for any such claim to be
successful. The Intangibles are valid and enforceable and no registration
relating thereto has lapsed, expired or been abandoned or canceled or is the
subject of cancellation or other adversarial proceedings, and all applications
therefor are pending and in good standing. The Seller and its Subsidiaries have
complied, in all material respects, with their respective contractual
obligations relating to the protection of the Intangibles used pursuant to
licenses. To the knowledge of the Seller and its Subsidiaries, no person is
infringing on or violating the Intangibles owned or used by the Seller or its
Subsidiaries.
Section 3.15. TITLE. The Seller and its Subsidiaries have good and
marketable title in fee simple to all real property and good and merchantable
title to all personal property owned by them that is material to the business of
the Seller and its Subsidiaries, in each case free and clear of all liens,
encumbrances and defects except such as do not materially affect the value of
such property and do not materially interfere with the use made and proposed to
be made of such property by the Seller and its Subsidiaries. Any real property
and facilities held under lease by the Seller and its Subsidiaries are held by
them under valid, subsisting and enforceable leases with such exceptions as are
not material and do not materially interfere with the use made and proposed to
be made of such property and buildings by the Seller and its Subsidiaries.
Section 3.16. TAX STATUS. Except as set forth in the SEC Documents, the
Seller and each of its Subsidiaries has made or filed all foreign, U.S. federal,
state, provincial and local income and all other tax returns, reports and
declarations required by any jurisdiction to which it is subject (unless and
only to the extent that the Seller and each of its Subsidiaries has set aside on
its books provisions reasonably adequate for the payment of all unpaid and
unreported taxes) and has paid all taxes and other governmental assessments and
charges that are material in amount, shown or determined to be due on such
returns, reports and declarations, except those being contested in good faith
and has set aside on its books provisions reasonably adequate for the payment of
all taxes for periods subsequent to the periods to which such returns, reports
or declarations apply. There are no unpaid taxes in any material amount claimed
to be due by the taxing authority of any jurisdiction, and the officers of the
Seller know of no basis for any such claim. The Seller has not executed a waiver
with respect to any statute of limitations relating to the assessment or
collection of any foreign, federal, state, provincial or local tax. None of the
Seller's tax returns is presently being audited by any taxing authority.
Section 3.17. INSURANCE. The Seller and each of its Subsidiaries has in
force fire, casualty, product liability and other insurance policies, with
extended coverage, sufficient in amount to allow it to replace any of its
material properties or assets which might be damaged or destroyed or sufficient
to cover liabilities to which the Seller may reasonably become subject, and such
types and amounts of other insurance with respect to its business and
properties, on both a per occurrence and an aggregate basis, as are customarily
carried by persons engaged in the same or similar business as the Seller. No
default or event has occurred that could give rise to a default under any such
policy.
Section 3.18. SOLVENCY. Based on the financial condition of the Seller
as of the Closing Date and taking into consideration the net proceeds from the
sale of the Preferred Stock and Warrants, (i) the Seller's fair saleable value
of its assets exceeds the amount that will be required to be paid on or in
respect of the Seller's existing debts and other liabilities
-9-
(including known contingent liabilities) as they mature; (ii) the Seller's
assets do not constitute unreasonably small capital to carry on its business for
the current fiscal year as now conducted and as proposed to be conducted
including its capital needs taking into account the particular capital
requirements of the business conducted by the Seller, and projected capital
requirements and capital availability thereof; and (iii) the current cash flow
of the Seller, together with the proceeds the Seller would receive, were it to
liquidate all of its assets, after taking into account all anticipated uses of
the cash, would be sufficient to pay all amounts on or in respect of its debt
when such amounts are required to be paid. The Seller does not intend to incur
debts beyond its ability to pay such debts as they mature (taking into account
the timing and amounts of cash to be payable on or in respect of its debt).
Section 3.19. ACKNOWLEDGMENT REGARDING EACH PURCHASER'S PURCHASE OF THE
SECURITIES. The Seller acknowledges and agrees that each Purchaser is acting
solely in the capacity of arm's length purchaser with respect to this Agreement
and the Related Documents and the transactions contemplated hereby and thereby,
and that no Purchaser is (i) an officer or director of the Seller, (ii) an
"affiliate" of the Seller (as defined in Rule 144 under the Securities Act
(including any successor rule, "Rule 144")) or (iii) to the knowledge of the
Seller a "beneficial owner" of more than 5% of the Common Stock (as defined for
purposes of Rule 13d-3 of the Exchange Act). The Seller further acknowledges
that no Purchaser is acting as a financial advisor or fiduciary of the Seller
(or in any similar capacity) with respect to this Agreement or the Related
Documents and the Transactions, and any advice given by a Purchaser or any of
its representatives or agents in connection with this Agreement or the Related
Documents and the Transactions is merely incidental to such Purchaser's purchase
of the Securities. The Seller further represents to each Purchaser that the
Seller's decision to enter into this Agreement and the Related Documents has
been based solely on the independent evaluation by the Seller and its
representatives.
Section 3.20. NO GENERAL SOLICITATION OR INTEGRATED OFFERING. Neither
the Seller nor any distributor participating on the Seller's behalf in the
Transactions (if any) nor any person acting for the Seller, or any such
distributor, has conducted any "general solicitation" (as described in
Regulation D) with respect to any of the Securities being offered hereby.
Neither the Seller 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 under circumstances that
would require registration of the Securities being offered hereby under the
Securities Act or cause this offering of Securities to be integrated with any
prior offering of securities of the Seller for purposes of the Securities Act,
which result of such integration would require registration under the Securities
Act, or any applicable stockholder approval provisions.
Section 3.21. NO BROKERS. Other than as set forth on the Broker Fee
List, the Seller has taken no action that would give rise to any claim by any
person for brokerage commissions, finder's fees or similar payments by any
Purchaser relating to this Agreement or the Transactions.
Section 3.22. ACKNOWLEDGMENT REGARDING SECURITIES. The number of
Conversion Shares issuable upon conversion of the Preferred Stock and the number
of Warrant Shares issuable upon exercise of the Warrants may increase in certain
circumstances.
-10-
The Seller's directors and executive officers have studied and fully understand
the nature of the Securities being sold hereunder. The Seller acknowledges that,
subject to the Beneficial Ownership Cap and Nasdaq Cap, its obligation to issue
Conversion Shares upon conversion of the Preferred Stock in accordance with the
terms thereof and the Warrant Shares upon the exercise of the Warrants in
accordance with the terms thereof is absolute and unconditional, regardless of
the dilution that such issuance may have on the ownership interests of other
stockholders and the availability of remedies provided for in this Agreement or
any of the Related Documents relating to a failure or refusal to issue
Conversion Shares or Warrant Shares. Taking the foregoing into account, the
Board of Directors has determined in its good faith business judgment that the
issuance of the Securities hereunder and the consummation of the Transactions
are in the best interests of the Seller and its stockholders.
3.22.1. DISCLOSURE. All information relating to or concerning the
Seller and/or any of its Subsidiaries set forth in this Agreement or provided to
the Purchasers pursuant to Section 4.4 hereof or otherwise in connection with
the Transactions is true and correct in all material respects and the Seller has
not omitted to state any material fact necessary in order to make the statements
made herein or therein, in light of the circumstances under which they were
made, not misleading. No event or circumstance has occurred or exists with
respect to the Seller or its Subsidiaries or their respective businesses,
properties, prospects, operations or financial conditions, which has not been
publicly disclosed but, under applicable law, rule or regulation, would be
required to be disclosed by the Seller in a registration statement filed on the
date hereof by the Seller under the Securities Act with respect to a primary
issuance of the Seller's securities.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS
Each Purchaser, for itself, hereby severally, and not jointly,
represents and warrants to the Seller as follows:
Section 4.1. EXISTENCE AND POWER. If not a natural person, the
Purchaser is duly organized, validly existing and in good standing under the
laws of the jurisdiction of such Purchaser's organization. The Purchaser has all
powers required to carry on such Purchaser's business as now conducted.
Section 4.2. AUTHORIZATION. The execution, delivery and performance by
the Purchaser of this Agreement, the Related Documents to which such Purchaser
is a party, and the consummation by the Purchaser of the Transactions have been
duly authorized, and no additional action is required for the approval of this
Agreement. This Agreement and the Related Documents to which the Purchaser is a
party have been or, to the extent contemplated hereby, will be duly executed and
delivered and constitute valid and binding agreements of the Purchaser,
enforceable against such Purchaser in accordance with their terms, except as may
be limited by bankruptcy, reorganization, insolvency, moratorium and similar
laws of general application relating to or affecting the enforcement of rights
of creditors and except that enforceability of their obligations thereunder are
subject to general principles of equity (regardless of whether enforcement is
sought in a proceeding at law or in equity).
-11-
Section 4.3. PURCHASE FOR OWN ACCOUNT, ETC. Purchaser is purchasing the
Securities for such Purchaser's own account for investment purposes only and not
with a present view towards the public sale or distribution thereof, except
pursuant to sales that are exempt from the registration requirements of the
Securities Act and/or sales registered under the Securities Act. Such Purchaser
understands that such Purchaser must bear the economic risk of this investment
indefinitely, unless the Securities are registered pursuant to the Securities
Act and any applicable state securities or blue sky laws or an exemption from
such registration is available, and that the Seller has no present intention of
registering the resale of any such Securities other than as contemplated by
Article 6 hereof. Notwithstanding anything in this Section 4.3 to the contrary,
by making the representations herein, such Purchaser does not agree to hold the
Securities for any minimum or other specific term and reserves the right to
dispose of the Securities at any time in accordance with or pursuant to a
registration statement or an exemption from the registration requirements under
the Securities Act.
Section 4.4. ACCREDITED INVESTOR STATUS; SELLING STOCKHOLDER
QUESTIONNAIRE. Purchaser is an "Accredited Investor" as that term is defined in
Rule 501(a) of Regulation D. Purchaser has completed or caused to be completed
the Selling Stockholder Questionnaire attached hereto as Exhibit D for use in
preparation of the Registration Statement, and the responses provided therein
shall be true and correct as of the Closing Date and will be true and correct as
of the effective date of the Registration Statement. Purchaser has, in
connection with its decision to purchase the Securities, relied solely upon the
SEC Documents and the representations and warranties of the Seller contained
herein.
Section 4.5. BUSINESS OR FINANCIAL EXPERTISE; QUALIFIED INSTITUTIONAL
BUYER. Purchaser has, by reason of Purchaser's business or financial expertise
or the business or financial experience of its professional advisors who are
unaffiliated with and who are not, to such Purchaser's knowledge, compensated by
the Seller or any affiliate or selling agent of the Seller, directly or
indirectly, the capacity to protect its own interests in connection with its
acquisition of the Securities. If the Purchaser is identified on Schedule 1 as
being a "qualified institutional buyer," such Purchaser is a "qualified
institutional buyer" as defined in Rule 144A promulgated under the Securities
Act. The Purchaser acknowledges that it has been afforded: (a) the opportunity
to ask such questions as it has deemed necessary of, and to receive answers
from, representatives of the Seller concerning the terms and conditions of the
offering of the Securities and the merits and risks of investing in the
Securities; (b) access to information about the Seller and its Subsidiaries and
their respective financial condition sufficient to enable it to evaluate its
investment; and (c) the opportunity to obtain such additional information that
the Seller possesses or can acquire without unreasonable effort or expense that
is necessary to make an informed investment decision with respect to the
Securities.
Section 4.6. NONCONTRAVENTION. Neither the execution and the delivery
of this Agreement, nor the consummation of the transactions contemplated hereby,
will violate any constitution, statute, regulation, rule, injunction, judgment,
order, decree, ruling, charge, or other restriction of any government,
governmental agency, or court to which Purchaser is subject or any provision of
its organizational documents or other similar governing instruments.
Section 4.7. NO LEGAL, TAX OR INVESTMENT ADVICE. Purchaser understands
that nothing in this Agreement or any other materials presented to Purchaser in
-12-
connection with the purchase and sale of the Securities constitutes legal, tax
or investment advice. Purchaser has consulted such legal, tax and investment
advisors as it, in its sole discretion, has deemed necessary or appropriate in
connection with its purchase of the Securities.
Section 4.8. GOVERNMENTAL REVIEW. Purchaser understands that no United
States federal or state agency or any other government or governmental agency
has passed upon or made any recommendation or endorsement of the Securities.
Section 4.9. FOREIGN INVESTORS. If Purchaser is not a United States
person (as defined by Section 7701(a)(30) of the Internal Revenue Code of 1986,
as amended), Purchaser hereby represents that it has satisfied itself as to the
full observance of the laws of its jurisdiction in connection with any
invitation to subscribe for the Preferred Stock and the Warrants or any use of
this Agreement, including (a) the legal requirements within its jurisdiction for
the purchase of the Preferred Stock and the Warrants, (b) any foreign exchange
restrictions applicable to such purchase, (c) any government or other consents
that may need to be obtained, and (d) the income tax and other tax consequences,
if any, that may be relevant to the purchase, holding, redemption, sale or
transfer of the Securities. Purchaser's subscription and payment for and
continued beneficial ownership of the Securities will not violate any applicable
securities or other laws of Purchaser's jurisdiction.
Section 4.10. NO BROKERS. The Purchaser has taken no action that would
give rise to any claim by any person for brokerage commissions, finder's fees or
similar payments by the Seller relating to this Agreement or the transactions
contemplated hereby.
Section 4.11. LITIGATION. There is no action, suit, proceeding,
judgment, claim or investigation pending or, to the knowledge of the Purchaser,
threatened against the Purchaser which could reasonably be expected in any
manner to challenge or seek to prevent, enjoin, alter or materially delay any of
the Transactions.
Section 4.12. GOVERNMENTAL AUTHORIZATION. The execution, delivery and
performance by the Purchaser of this Agreement and the Related Documents to
which it is a party, and the consummation of the Transactions, require no
material action by or in respect of, or material filing with, any governmental
body, agency, official or authority, by the Purchaser other than (a) any
filings, authorizations, consents and approvals as may be required under the
Hart-Scott-Rodino Improvements Act of 1976, as amended; (b) the filing by the
Purchaser with the SEC of such reports under the Exchange Act as may be required
in connection with this Agreement and Related Documents and the Transactions to
be effected at or prior to the Closing, and filings required to be made pursuant
to Nasdaq rules; and (c) any filings required by the securities or blue sky laws
of the various states and filings under the Securities Act and/or the Exchange
Act.
ARTICLE 5
COVENANTS OF THE SELLER AND PURCHASERS
Section 5.1. INSURANCE. The Seller shall maintain insurance coverage
which is adequate and customary coverage for the business in which the Seller
shall then be engaged in.
-13-
Section 5.2. REPORTING OBLIGATIONS. So long as any Purchaser (or any of
its respective Affiliates) beneficially owns any Preferred Stock, the Seller
shall continue to timely file and furnish to the SEC all reports and other
filings that Seller does or is required to so file or furnish pursuant to the
Exchange Act or the Securities Act, and the Seller shall use its best efforts to
maintain its status as an issuer required to file such reports under the
Exchange Act. . In addition, the Seller shall take all actions necessary to meet
the "registrant eligibility" requirements set forth in the general instructions
to Form S-3 or any successor form thereto, to continue to be eligible to
register the resale of the Shares under the Securities Act on such Form.
Notwithstanding the foregoing, the Seller shall be allowed to pursue other forms
of organization it deems appropriate and if such new form of organization is
implemented, such action shall be deemed a Merger, Consolidation or Disposition
of Assets as set forth in the Certificate of Designation of the Preferred Stock
attached hereto as Exhibit A and the Purchasers shall be allowed to exercise
their rights as therein defined.
Section 5.3. DISPOSITIONS. Purchaser will not, prior to the
effectiveness of the Registration Statement, if then prohibited by law or
regulation, sell, offer to sell, solicit offers to buy, dispose of, loan, pledge
or grant any right with respect to the Shares. In addition, the Purchaser agrees
that for so long as it owns any Securities, it will not enter into any Short
Sales. For such purposes, a "Short Sale" by the Purchaser means a short sale of
Shares executed at a time when the Purchaser has no equivalent offsetting long
position in the Common Stock. For purposes of determining whether the Purchaser
has an equivalent offsetting long position in the Common Stock, except as set
forth in Section 5.17, shares that the Purchaser is entitled to receive within
sixty (60) days (whether pursuant to contract or upon conversion or exercise of
convertible securities) will be included as if held long by the Purchaser.
Section 5.4. INVESTIGATION. The representations, warranties, covenants
and agreements set forth in this Agreement shall not be affected or diminished
in any way by any investigation (or failure to investigate) at any time by or on
behalf of the party for whose benefit such representations, warranties,
covenants and agreements were made. Without limiting the generality of the
foregoing, the inability or failure of the Purchasers to discover any breach,
default or misrepresentation by the Seller under this Agreement or the Related
Documents (including under any certificate furnished pursuant to this Agreement)
shall not in any way diminish any liability hereunder.
Section 5.5. PUBLIC ANNOUNCEMENTS. Neither the Purchasers nor the
Seller shall (and each such party shall use its reasonable efforts to cause its
Subsidiaries, Affiliates, directors, officers, employees and authorized
representatives not to), issue any press release, make any public announcement
or furnish any written statement to its employees or stockholders generally
concerning the Transactions without the consent of the other party (which
consent shall not be unreasonably withheld), except to the extent required by
applicable law or the applicable requirements of applicable stock exchange rules
(including Nasdaq) or as otherwise contemplated herein (and in either such case
such party shall, to the extent consistent with timely compliance with such
requirement, consult with the other party prior to making the required release,
announcement or statement). Notwithstanding the foregoing, the Seller shall,
promptly after the Closing, and, if not simultaneous with the Closing, promptly
after the execution of this Agreement, issue a press release disclosing the
Transactions, provided,
-14-
however, the Seller shall provide each of the Purchasers with the text of such
press release prior to such issuance.
Section 5.6. USE OF PROCEEDS. The Seller covenants and agrees that the
proceeds of the Purchase Price shall be used by the Seller for working capital
and general corporate purposes. Furthermore, The Seller agrees that a portion of
the net proceeds shall be used to repay in full all of its existing indebtedness
to Dexia Bank, including, but not limited to, its term loan in the principal
amount of $3,400,000.
Section 5.7. CORPORATE EXISTENCE. So long as a Purchaser owns Preferred
Stock, the Seller shall preserve and maintain and cause its Subsidiaries to
preserve and maintain their corporate existence and good standing in the
jurisdiction of their incorporation and the rights, privileges and franchises of
the Seller and its Subsidiary in each case where failure to so preserve or
maintain could have a Material Adverse Effect.
Section 5.8. PERFORM COVENANTS. The Seller shall (a) make full and
timely payment of any and all payments on the Preferred Stock, and all other
indebtedness of the Seller to the Purchasers in connection therewith, whether
now existing or hereafter arising, and (b) duly comply with all the terms and
covenants contained herein and in each of the instruments and documents given to
the Purchasers in connection with or pursuant to this Agreement, all at the
times and places and in the manner set forth herein or therein.
Section 5.9. LISTING OF SHARES. The Seller shall use its commercially
reasonable best efforts to list the Shares on Nasdaq. The Seller shall use its
best efforts to continue the listing and trading of its Common Stock on Nasdaq
and shall comply in all respects with the reporting, filing and other
obligations under the bylaws or rules of the Nasdaq Stock Market, Inc. Subject
to Section 5.11, the Seller shall promptly provide to each Purchaser copies of
any notices it receives regarding the continued eligibility of the Common Stock
for trading on Nasdaq.
Section 5.10. RESERVATION OF SHARES. The Seller shall hereafter take
all action necessary to at all times have authorized, and reserved for the
purpose of issuance, no less than 110% of the number of shares of Common Stock
needed to provide for the issuance of the shares of Common Stock upon conversion
of all outstanding Preferred Stock and exercise of all outstanding Warrants
(without regard to any limitations on conversions or exercise).
Section 5.11. FILING OF FORM D. The Seller will timely file a Form D in
accordance with the provisions of Regulation D promulgated by the SEC under the
Securities Act. The Seller shall, on or before the Closing Date, take such
action as the Seller shall reasonably determine is necessary to qualify the
Securities for sale to each Purchaser pursuant to this Agreement under
applicable securities or "blue sky" laws of the states of the United States or
obtain exemption therefrom, and shall provide evidence of any such action so
taken to each Purchaser on or prior to the Closing Date. Within two days after
the Closing Date, the Seller shall file a Form 8-K with the SEC concerning this
Agreement and the Transactions, which Form 8-K shall attach this Agreement and
its Exhibits as exhibits to such Form 8-K (the "8-K Filing"). Upon the
submission of the 8-K Filing, the Seller hereby acknowledges that no Purchaser
shall be in possession of any material nonpublic information received from the
Seller, any of its
-15-
Subsidiaries or any of its respective officers, directors, employees or agents,
that is not disclosed in the 8-K Filing. The Seller shall not, and shall cause
each of its Subsidiaries and its and each of their respective officers,
directors, employees and agents not to, provide any Purchaser with any material
nonpublic information regarding the Seller or any of its Subsidiaries from and
after the 8-K Filing without the express written consent of such Purchaser.
Subject to the foregoing, neither the Seller nor any Purchaser shall issue any
press releases or any other public statements with respect to the Transactions,
provided, however, that the Seller shall be entitled, without the prior approval
of any Purchaser, to make any press release or other public disclosure with
respect to the Transactions (i) in substantial conformity with the 8-K Filing
and contemporaneously therewith and (ii) as is required by applicable law and
regulations (provided that in the case of clause (i) each Purchaser shall be
consulted by the Seller in connection with any such press release or other
public disclosure prior to its release).
Section 5.12. NO SOLICITATION OF TRANSACTION. Prior to the earlier of
(i) the Closing, or (ii) the termination of this Agreement pursuant to Section
10, the Seller shall not, and shall use its commercially reasonable best efforts
to cause its representatives not to, directly or indirectly, take any of the
following actions with any person other than the Purchasers without the prior
written consent of all the Purchasers: (A) solicit, initiate, facilitate or
encourage, or furnish information with respect to the Seller, in connection
with, any inquiry, proposal or offer with respect to any equity transaction
involving the Seller (an "Alternative Transaction") (other than the information
which the Seller provides to other persons in the ordinary course of its
business consistent with past custom and practice, so long as the Seller and its
stockholders have no reason to believe that the information may be utilized to
evaluate an Alternative Transaction); (B) negotiate, discuss explore or
otherwise communicate or cooperate in any way with any third party with respect
to any Alternative Transaction; or (C) enter into any agreement, arrangement or
understanding with respect to an Alternative Transaction or requiring the Seller
to abandon, terminate or refrain from consummating a transaction with the
Purchasers. The Seller shall, and shall use its commercially reasonable best
efforts to cause its representatives to, notify the Purchasers orally and in
writing promptly upon receipt of any inquiry, offer or proposal with respect to
an Alternative Transaction, including the identity of the party making such
inquiry, offer or proposal and stating the terms thereof. The Seller shall
immediately cease any existing discussions or negotiations with any third party
relating to any proposed Alternative Transaction; provided, however, that the
foregoing restrictions with respect to Alternative Transactions shall have no
effect if the Board of Directors reasonably concludes in good faith, after
consultation with its outside legal counsel, that, in light of such Alternative
Transaction, the failure to take any such action would reasonably be expected to
be a violation of the fiduciary obligations of the Board of Directors to the
Seller's stockholders.
Section 5.13. CONDUCT OF THE SELLER. The Seller covenants and agrees
that until the earlier of the time of Closing or the termination of the
Agreement pursuant to Section 10, the Seller shall conduct its business only in
the ordinary course consistent with past practice and shall use its commercially
reasonable best efforts to preserve intact its business organizations and
relationships with third parties. The Seller shall conduct its business and the
business if its Subsidiaries in compliance with all laws, ordinances or
regulations of governmental entities applicable to such business, except where
the failure to do so would not have a Material Adverse Effect.
-16-
Section 5.14. BENEFICIAL OWNERSHIP CAP. In no event shall the Seller
issue Common Stock to any holder of Preferred Stock as payment of any Dividend,
and in no event shall a holder of shares of Preferred Stock have the right to
convert shares of Preferred Stock into shares of Common Stock or to dispose of
any shares of Preferred Stock to the extent that such payment of Dividends or
right to effect such conversion or disposition would result in the holder and
its Affiliates together beneficially owning more than 4.95% of the outstanding
shares of Common Stock. For purposes of this Section 5.14, beneficial ownership
shall be determined in accordance with Section 13(d) of the Securities Exchange
Act of 1934, as amended, and Regulation 13D-G thereunder. The restriction
contained in this Section 5.14 may not be altered, amended, deleted or changed
in any manner whatsoever unless the holders of a majority of the outstanding
shares of Common Stock and the holders of a majority of the Preferred Stock
shall approve, in writing, such alteration, amendment, deletion or change. In
the event the Seller is prohibited from issuing Common Stock to any holder of
Preferred Stock as payment of any Dividend, it shall pay such Dividend to such
holder in cash.
Section 5.15. REDEMPTIONS AND DIVIDENDS. So long as any Purchasers (or
any of their respective Affiliates) beneficially own any of the Preferred Stock,
the Seller shall not, without first obtaining the written approval of the
holders of a majority of the shares of Preferred Stock then outstanding (which
approval may be given or withheld by such holders in their sole and absolute
discretion), repurchase, redeem or declare or pay any cash dividend or
distribution on any shares of capital stock of the Seller.
Section 5.16. SHAREHOLDERS RIGHTS PLAN. No claim shall be made or
enforced by the Seller or any other person that any Purchaser is an "Acquiring
Person" under any shareholders rights plan or similar plan or arrangement in
effect or hereafter adopted by the Seller, or that any Purchaser could be deemed
to trigger the provisions of any such plan or arrangement, by virtue of
receiving Securities under this Agreement or any Related Documents or under any
other agreement between the Seller and the Purchasers.
Section 5.17. PLEDGE OF SECURITIES. The Seller acknowledges and agrees
that the Securities may be pledged by any Purchaser in connection with a bona
fide margin agreement or other loan or financing arrangement that is secured by
the Securities. The pledge of Securities shall not be deemed to be a transfer,
sale or assignment of the Securities hereunder, and no Purchaser effecting a
pledge of Securities shall be required to provide the Seller with any notice
thereof or otherwise make any delivery to the Seller pursuant to this Agreement
or any Related Document. The Seller shall execute and deliver such documentation
as a pledgee of the Securities may reasonably request in connection with a
pledge of the Securities to such pledgee by a Purchaser. The foregoing
notwithstanding, for purposes of Section 5.3 above, any Securities so pledged
shall not be considered part of any Purchaser's equivalent long position in the
Common Stock.
Section 5.18. EXPENSES. At the Closing, the Seller shall pay to each
Purchaser reimbursement for the out-of-pocket expenses reasonably incurred by
such Purchaser, its Affiliates and its or their advisors in connection with the
negotiation, preparation, execution and delivery of this Agreement and the
Related Documents and the consummation of the Transactions, including, without
limitation, each Purchaser's and their respective Affiliates' and advisors'
reasonable due diligence and attorneys' fees and expenses (the "Expenses");
provided,
-17-
however, that each Purchaser shall provide a detailed list of its Expenses prior
to Closing to be reviewed and approved by Seller and may, in such Purchasers'
discretion with advance notice to Seller, deduct such Expenses from the Purchase
Price payable by such Purchaser hereunder.
Section 5.19. PROHIBITED TRANSFERS. Notwithstanding anything to the
contrary herein, the Holder shall at all times be prohibited from transferring
any Convertible Preferred Stock , Warrants, Conversion Shares, Warrant Shares or
Dividend Shares to any Person who, at the time of such determination, is
currently engaging, or is reasonably likely to engage, in the same or a
substantially similar business as that of the Company.
Section 5.20. REGISTRATION DAMAGES. If the Registration Statement (as
hereinafter defined) has not been declared effective by the SEC on or before the
120th day from the Closing Date, the Seller shall pay to the Purchasers, as
liquidated damages, on the 121st day an amount, in cash, equal to one percent
(1%) of the Purchase Price paid by each Purchaser, and shall pay each Purchaser
an additional amount, in cash, equal to one-half of one percent (0.5%) in
arrears of such Purchase Price for each month that the Registration Statement
has not been so declared effective.
ARTICLE 6
REGISTRATION OF SHARES
Section 6.1. CERTAIN DEFINITIONS. For the purposes of this Article 6,
the term "Registrable Securities" means (a) the Conversion Shares, (b) the
Warrant Shares, and (c) any shares of capital stock issued or issuable, from
time to time, as a distribution on or in exchange for or otherwise with respect
to any of the foregoing or the Preferred Stock and Warrants, whether as
dividends, default payments, on account of anti-dilution or other adjustments or
otherwise.
Section 6.2. REGISTRATION OF SHARES. The Seller shall prepare promptly
and file with the SEC as soon as practicable, but in no event later than sixty
(60) days after the Closing Date, a Registration Statement on Form S-3 (or, if
Form S-3 is not then available, on such form of Registration Statement as is
then available to effect a registration of all of the Registrable Securities,
subject to the consent of the Purchasers, the "Registration Statement") with the
SEC for the resale of the Registrable Securities. The Registration Statement
filed hereunder, to the extent allowable under the Securities Act and the rules
and regulations promulgated thereunder (including Rule 416), shall state that
the Registration Statement also covers such indeterminate number of additional
shares of Common Stock as may become issuable upon conversion of the Preferred
Stock and exercise of the Warrants to prevent dilution resulting from stock
splits, stock dividends or similar transactions. The Registration Statement (and
each amendment or supplement thereto, and each request for acceleration of
effectiveness thereof) shall be provided to (and subject to the approval of) SDS
Merchant Fund, LP ("SDS") and its counsel prior to its filing or other
submission. If the Registration Statement has not been filed with the SEC within
ninety (90) days after the Closing Date the Seller shall be liable to the
Purchasers for liquidated damages in an amount equal to two percent (2%) per
month (prorated on a daily basis) of the Purchase Price from the 90th day after
the Closing Date until the earlier to
-18-
occur of the filing of the Registration Statement or the redemption of 100% of
the Preferred Stock. Such liquidated damages shall be paid in cash upon demand
pro rata according to each Purchaser's respective interests.
Section 6.3. The Seller shall use its best efforts to cause the
Registration Statement to become effective as soon as practicable. At the time
of effectiveness, the Seller shall ensure that such Registration Statement
covers at least 110% of the Registrable Securities issuable upon full conversion
of the Preferred Stock (without giving effect to any limitations on conversion
contained in the Certificate of Designation) and exercise of the Warrants
(without giving effect to any limitations on exercise contained in the
Warrants), including, if necessary, by filing an amendment prior to the
effective date of the Registration Statement to increase the number of
Registrable Securities covered thereby.
Section 6.4. In connection with the registration of the Registrable
Securities, the Seller shall have the following obligations:
6.4.1. The Seller shall respond promptly to any and all comments
made by the staff of the SEC to the Registration Statement, and shall submit to
the SEC, before the close of business on the third business day immediately
following the business day on which the Seller learns (either by telephone or in
writing) that no review of such Registration Statement will be made by the SEC
staff or that the staff of the SEC has no further comments on such Registration
Statement, as the case may be, a request for acceleration of the effective time
of such Registration Statement to a time and date as soon as practicable. The
Seller shall keep such Registration Statement effective pursuant to Rule 415 at
all times until such date as is the earlier of (i) the date on which all of the
Registrable Securities have been sold and (ii) the date on which all of the
Registrable Securities may be immediately sold to the public without
registration or restriction pursuant to Rule 144(k) under the Securities Act or
any successor provision (the "Registration Period"), which Registration
Statement (including any amendments or supplements thereto and prospectuses
contained therein and all documents incorporated by reference therein) (A) shall
comply in all material respects with the requirements of the Securities Act and
the rules and regulations of the SEC promulgated thereunder and (B) shall 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 not
misleading. The financial statements of the Seller included in any such
Registration Statement or incorporated by reference therein (x) shall comply as
to form in all material respects with the applicable accounting requirements and
the published rules and regulations of the SEC applicable with respect thereto,
(y) shall be prepared in accordance with U.S. generally accepted accounting
principles, consistently applied during the periods involved (except as may be
otherwise indicated in such financial statements or the notes thereto or, in the
case of unaudited interim statements, to the extent they may not include
footnotes or may be condensed on summary statements) and (z) fairly present in
all material respects the consolidated financial position of the Seller and its
consolidated subsidiaries as of the dates thereof and the consolidated results
of their operations and cash flows for the periods then ended (subject, in the
case of unaudited statements, to immaterial year-end adjustments).
6.4.2. The Seller shall (i) prepare and file with the SEC such
amendments (including post-effective amendments) and supplements to the
Registration Statement and the prospectus which forms a part thereof as may be
necessary to keep such Registration Statement
-19-
effective at all times during the Registration Period, and (ii) during the
Registration Period, comply with the provisions of the Securities Act with
respect to the disposition of all Registrable Securities covered by the
Registration Statement during the Registration Period. In the event the number
of shares available under the Registration Statement is, for any three (3)
consecutive trading days (the last of such three (3) trading days being the
"Registration Trigger Date"), insufficient to cover 110% of the Registrable
Securities then issued or issuable upon conversion of the Preferred Stock
(without giving effect to any limitations on conversion contained in the
Certificate of Designation) and exercise of the Warrants (without giving effect
to any limitations on exercise contained in the Warrants), the Seller shall
provide each Purchaser written notice of such Registration Trigger Date within
three business days thereafter and shall file a new Registration Statement (on
the short form available therefor, if applicable),so as to cover 110% of the
Registrable Securities issued or issuable upon conversion of the Preferred Stock
(without giving effect to any limitations on conversion contained in the
Certificate of Designation) or exercise of the Warrants (without giving effect
to any limitations on exercise contained in the Warrants) as of the Registration
Trigger Date, in each case, as soon as practicable, but in any event within 15
days after the Registration Trigger Date. The Seller shall cause such new
Registration Statement(s) to become effective as soon as practicable following
the filing thereof.
6.4.3. The Seller shall furnish to each Purchaser whose
Registrable Securities are included in a Registration Statement and to counsel
for SDS as the lead Purchaser (i) promptly after the same is prepared and
publicly distributed, filed with the SEC or received by the Seller, as
applicable, one copy of the Registration Statement and any amendment thereto,
each preliminary prospectus and prospectus and each amendment or supplement
thereto, and, in the case of the Registration Statement required to be filed
pursuant to Section 6.2, each letter written by or on behalf of the Seller to
the SEC or the staff of the SEC (including, without limitation, any request to
accelerate the effective time of the Registration Statement or amendment
thereto), and each item of correspondence from the SEC or the staff of the SEC,
in each case relating to the Registration Statement (other than any portion
thereof that contains information for which the Seller has sought confidential
treatment), (ii) on the date of effectiveness of the Registration Statement or
any amendment thereto, a notice stating that the Registration Statement or
amendment has been declared effective, and (iii) such number of copies of a
prospectus, including a preliminary prospectus, all amendments and supplements
thereto and all such other documents as such Purchaser may reasonably request in
order to facilitate the disposition of the Registrable Securities owned by such
Purchaser.
6.4.4. As promptly as practicable after becoming aware of such
event, the Seller shall (i) notify each Purchaser by telephone or facsimile of
the happening of any event, as a result of which the prospectus included in any
Registration Statement that includes Registrable Securities, as then in effect,
includes an untrue statement of a material fact or omits to state a material
fact required to be stated therein or necessary to make the statements therein
not misleading, and (ii) promptly prepare a supplement or amendment to such
Registration Statement to correct such untrue statement or omission, and deliver
such number of copies of such supplement or amendment to each Purchaser as such
Purchaser may reasonably request.
6.4.5. The Seller shall use its best efforts (i) to prevent the
issuance of any stop order or other suspension of effectiveness of any
Registration Statement that includes Registrable Securities, and, if such an
order is issued, to obtain the withdrawal of such order at
-20-
the earliest practicable moment (including in each case by amending or
supplementing such Registration Statement), and (ii) to notify each Purchaser
who holds Registrable Securities being sold (or, in the event of an underwritten
offering, the managing underwriters) of the issuance of such order and the
resolution thereof (and if such Registration Statement is supplemented or
amended, deliver such number of copies of such supplement or amendment to each
Purchaser as such Purchaser may reasonably request).
6.4.6. The Seller shall provide a transfer agent and registrar,
which may be a single entity, for the Registrable Securities not later than the
effective date of the Registration Statement required to be filed pursuant to
Section 6.2 hereof.
6.4.7. At the request of any Purchaser, the Seller shall prepare
and file with the SEC such post-effective amendments to any Registration
Statement required to be filed hereunder and the prospectus used in connection
with such Registration Statement as may be necessary in order to change the plan
of distribution set forth in such Registration Statement.
6.4.8. The Seller shall comply with all applicable laws related
to a Registration Statement and offering and sale of securities and all
applicable rules and regulations of governmental authorities in connection
therewith (including, without limitation, the Securities Act and the Exchange
Act and the rules and regulations thereunder promulgated by the SEC.)
ARTICLE 7
SECURITIES TRANSFER MATTERS
Section 7.1. CONVERSION AND EXERCISE. Upon conversion of the Preferred
Stock or exercise of the Warrants by any person, (i) if the DTC Transfer
Conditions (as defined below) are satisfied, the Seller shall cause its transfer
agent to electronically transmit all Conversion Shares and Warrant Shares by
crediting the account of such person or its nominee with the Depository Trust
Company ("DTC") through its Deposit Withdrawal Agent Commission system; or (ii)
if the DTC Transfer Conditions are not satisfied, the Seller shall issue and
deliver, or instruct its transfer agent to issue and deliver, certificates
(subject to the legend and other applicable provisions hereof and the
Certificate of Designation and Warrants), registered in the name of such person
its nominee, physical certificates representing the Conversion Shares and
Warrant Shares, as applicable. Even if the DTC Transfer Conditions are
satisfied, any person effecting a conversion of Preferred Stock or exercising
Warrants may instruct the Seller to deliver to such person or its nominee
physical certificates representing the Conversion Shares and Warrant Shares, as
applicable, in lieu of delivering such shares by way of DTC Transfer. For
purposes of this Agreement, "DTC Transfer Conditions" means that the Seller's
transfer agent is participating in the DTC Fast Automated Securities Transfer
program.
Section 7.2. TRANSFER OR RESALE. Each Purchaser understands that (i)
except as provided in Article 6 hereof, the sale or resale of the Securities
have not been and are not being registered under the Securities Act or any state
securities laws, and the Securities may not be transferred unless (A) the
transfer is made pursuant to and as set forth in an effective registration
statement under the Securities Act covering the Securities; or (B) such
Purchaser shall have delivered to the Seller an opinion of counsel (which
opinion shall be in form, substance and scope customary for opinions of counsel
in comparable transactions) to the effect
-21-
that the Securities to be sold or transferred may be sold or transferred
pursuant to an exemption from such registration; or (C) sold under and in
compliance with Rule 144; or (D) sold or transferred to an Affiliate of such
Purchaser that agrees to sell or otherwise transfer the Securities only in
accordance with the provisions of this Section 7.2; and (ii) neither the Seller
nor any other person is under any obligation to register such Securities under
the Securities Act or any state securities laws (other than pursuant to the
terms of Article 6 hereof).
Section 7.3. LEGENDS.
7.3.1. Each Purchaser understands that, until such time as the
Registration Statement is declared effective by the SEC and the Shares are
subsequently sold and transferred pursuant to the Registration Statement or the
Securities may be sold pursuant to Rule 144(k) under the Securities Act, the
Securities will bear a restrictive legend in substantially the following form
set forth in Section 1.3.3.
7.3.2. The Seller shall, immediately prior to a registration
statement covering the Shares (including, without limitation, the Registration
Statement contemplated by Article 6 hereof) being declared effective, deliver to
its transfer agent an opinion letter of counsel, opining that at any time such
registration statement is effective, the certificates representing any
Conversion Shares and Warrant Shares sold and transferred pursuant to such
effective registration statement shall be issued without the restrictive legend
above.
7.3.3. The legend set forth above shall be removed and the Seller
shall issue a replacement certificate without such legend (i) upon the sale and
transfer of the Shares pursuant to the Registration Statement, or (ii) to any
Holder who so requests in writing and provides the Seller with an opinion of
counsel, in customary form, substance and scope, to the effect that such legend
may be removed in accordance with Rule 144(k) promulgated under the Securities
Act.
Section 7.4. TRANSFER AGENT INSTRUCTION. Upon compliance by any
Purchaser with the provisions of this Section 7 with respect to the transfer of
any Securities, the Seller shall permit the transfer of such Securities and, in
the case of the transfer of Conversion Shares or Warrant Shares, promptly
instruct its transfer agent to issue one or more certificates (or effect a DTC
Transfer) in such name and in such denominations as specified by such Purchaser.
The Seller shall not give any instructions to its transfer agent with respect to
the Securities, other than any permissible or required instructions provided in
this Section 7, and the Securities shall otherwise be freely transferable on the
books and records of the Seller as and to the extent provided in this Agreement.
ARTICLE 8
CONDITIONS TO THE CLOSING
Section 8.1. CONDITIONS TO OBLIGATIONS OF THE PURCHASERS. The
obligations of the Purchasers are subject to the fulfillment or satisfaction, on
and as of the Closing Date, except as otherwise expressly indicated below or in
Section 2.3 hereof, of each of the following conditions (any one or more of
which may be waived by any Purchaser, in its sole
-22-
discretion, but only with respect to its investments and only in a writing
signed by such Purchaser):
8.1.1. PROOF OF FILING. At the Closing, the Seller shall deliver
or cause to be delivered to each of the Purchasers proof of due filing with the
Secretary of State of the State of Delaware of the Certificate of Designation
authorizing the Preferred Stock.
8.1.2. SUPPORTING DOCUMENTS. The Purchasers shall have received
the following:
(a) A certificate evidencing compliance with the conditions
set forth in this Article 8, to the extent such conditions must be satisfied on
or before the Closing Date, as may be reasonably requested by the Purchasers,
executed by the chief executive officer and chief financial officer of the
Seller.
(b) A certificate of good standing with respect to the Seller
issued by the Secretary of State of Delaware; and copies of the resolutions of
the Board of Directors approving this Agreement, the creation and issuance of
the Preferred Stock, the filing of the Certificate of Designation and the
transactions, contemplated herein and therein, certified by an appropriate
officer.
(c) The Opinion.
(d) The Broker Fee List.
8.1.3. PREFERRED STOCK, WARRANTS. The Seller shall have executed
and delivered certificates evidencing the Preferred Stock and the Warrants
purchased hereby.
8.1.4. PERFORMANCE; REPRESENTATION AND WARRANTIES. COVENANTS;
REPRESENTATIONS AND WARRANTIES. (i) The Seller shall have performed and observed
in all material respects all of its obligations hereunder required to be
performed by it at or prior to the Closing Date; (ii) the representations and
warranties of the Seller contained in this Agreement and in any certificate
delivered by the Seller pursuant hereto shall be true and correct in all
material respects (except to the extent such representations and warranties
contain a materiality qualification, in which case they shall be true and
correct in all respects) at and as of the Closing Date as if made at and as of
such time (except to the extent expressly made as of an earlier date, in which
case as of such earlier date); and (iii) the Purchasers shall have received a
certificate signed by the Seller's chief executive officer and the chief
financial officer to the foregoing effect.
8.1.5. NO MATERIAL ADVERSE EFFECT. There shall not have been, nor
shall there have occurred any event which could result in, a Material Adverse
Effect of the Seller taken as a whole from and after the date of this Agreement
and until the Closing Date.
8.1.6. NO LITIGATION. No litigation, arbitration or other legal
or administrative proceeding against the Seller or its Subsidiaries shall have
been commenced or be pending by or before any court, arbitration panel or
governmental authority or official, and no
-23-
statute, rule or regulation of any foreign or domestic, national or local
government or agency thereof shall have been enacted, and no judicial or
administrative decision shall have been rendered which, in the case of any of
the foregoing, enjoins or prohibits, or seeks to enjoin or prohibit, the
consummation of all or any of the transactions contemplated by this Agreement.
Section 8.2. CONDITIONS TO OBLIGATIONS OF THE SELLER. The obligations
of the Seller hereunder with respect to each Purchaser are subject to the
fulfillment or satisfaction, on and as of the Closing Date, of the following
condition (which may be waived by the Seller, in its sole discretion):
8.2.1. PERFORMANCE; REPRESENTATION AND WARRANTIES. Such Purchaser
shall have performed and complied in all respects with all agreements and
conditions contained in this Agreement which are required to be performed or
complied with by such Purchaser prior to or at the Closing, the representation
and warranties of such Purchaser contained herein shall be true and correct on
and as of the Closing Date as though made on such date.
8.2.2. NO LITIGATION. No litigation, arbitration or other legal
or administrative proceeding against the Purchasers shall have been commenced or
be pending by or before any court, arbitration panel or governmental authority
or official, and no statute, rule or regulation of any foreign or domestic,
national or local government or agency thereof shall have been enacted after the
date of this Agreement, and no judicial or administrative decision shall have
been rendered which, in the case of any of the foregoing, enjoins or prohibits,
or seeks to enjoin or prohibit, the consummation of all or any of the
transactions contemplated by this Agreement.
8.2.3. ADDITIONAL DOCUMENT. Such other documents as the
Purchasers may reasonably request in connection with the Closing.
ARTICLE 9
INDEMNIFICATION
Section 9.1. SURVIVAL OF REPRESENTATIONS. Except as otherwise provided
herein, and for so long as the Preferred Stock is outstanding, the
representations and warranties of the Seller and the Purchasers contained in or
made pursuant to this Agreement shall survive the execution and delivery of this
Agreement and the Closing Date and shall in no way be affected by any
investigation of the subject matter thereof made by or on behalf of the Seller
or the Purchasers.
Section 9.2. INDEMNIFICATION.
9.2.1. INDEMNIFICATION BY THE SELLER. In consideration of each
Purchaser's execution and delivery of this Agreement and the Related Documents
and the purchase of the Securities hereunder, and in addition to all of the
Seller's other obligations under this Agreement and the Related Documents, from
and after the Closing, the Seller shall defend, protect, indemnify and hold
harmless each Purchaser and each other holder of the Securities and all of their
stockholders, partners, members, officers, directors, employees and direct or
indirect investors and any of the foregoing persons' agents or other
representatives (including, without
-24-
limitation, those retained in connection with the Transactions, collectively,
the "Indemnitees") from and against any and all actions, causes of action,
suits, claims, losses, costs, penalties, fees, liabilities and damages, and
expenses in connection therewith (irrespective of whether any such Indemnitee is
a party to the action for which indemnification hereunder is sought), and
including reasonable attorneys' fees and disbursements (the "Indemnified
Liabilities"), incurred by any Indemnitee as a result of, or arising out of, or
relating to
(a) any misrepresentation or breach of any representation or
warranty made by the Seller in this Agreement, any Related Document or any other
certificate, instrument or document contemplated hereby or thereby,
(b) any breach of any covenant, agreement or obligation of the
Seller contained in this Agreement, any Related Document or any other
certificate, instrument or document contemplated hereby or thereby,
(c) any cause of action, suit or claim brought or made against
such Indemnitee by a third party (including for these purposes a derivative
action brought on behalf of the Seller) and arising out of or resulting from (i)
the execution, delivery, performance or enforcement of this Agreement, any
Related Document or any other certificate, instrument or document contemplated
hereby or thereby, (ii) any transaction financed or to be financed in whole or
in part, directly or indirectly, with the proceeds of the issuance and sale of
the Securities, or (iii) the status of such Purchaser or holder of the
Securities as an investor in the Seller, or
(d) (i) except with respect to the Purchaser Information (as
hereinafter defined), any untrue statement or alleged untrue statement of a
material fact in the Registration Statement or the omission or alleged omission
to state therein a material fact required to be stated or necessary to make the
statements therein not misleading, (ii) except with respect to the Purchaser
Information, any untrue statement or alleged untrue statement of a material fact
contained in any preliminary prospectus if used prior to the effective date of
such Registration Statement, or contained in the final prospectus (as amended or
supplemented, if the Seller files any amendment thereof or supplement thereto
with the SEC) or the omission or alleged omission to state therein any material
fact necessary to make the statements made therein, in light of the
circumstances under which the statements therein were made, not misleading, or
(iii) any violation or alleged violation by the Seller of the Securities Act,
the Exchange Act or any other law (including, without limitation, any state
securities law), rule or regulation relating to the offer or sale of the
Registrable Securities.
To the extent that the foregoing undertaking by the Seller may be
unenforceable for any reason, the Seller shall make the maximum contribution to
the payment and satisfaction of each of the Indemnified Liabilities which is
permissible under applicable law.
9.2.2. INDEMNIFICATION BY THE PURCHASERS. Each of the Purchasers
(severally, but not jointly) agrees to indemnify and hold harmless the Seller,
its Affiliates, and each of their Indemnitees, from and against any Indemnified
Liabilities (net of any related insurance proceeds) which are caused by or arise
out of (i) any breach or default in the performance by it of any covenant or
agreement made by it in this Agreement or in any of the
-25-
Related Documents; (ii) any breach of warranty or representation made by it in
this Agreement or in any of the Related Documents; provided, however, that a
Purchaser's liability under this Section 9.2.2 shall not exceed the Purchase
Price paid by such Purchaser hereunder.
9.2.3. INDEMNIFICATION REGARDING REGISTRATION STATEMENTS. In
connection with any Registration Statement in which a Purchaser is
participating, (i) each such Purchaser shall, severally and not jointly,
indemnify, hold harmless and defend, to the same extent and in the same manner
set forth in Section 9.2.1, the Seller, each of its directors, each of its
officers who signs the Registration Statement, its employees and each person, if
any, who controls the Seller within the meaning of Section 15 of the Securities
Act or Section 20 of the Exchange Act, and any other stockholder selling
securities pursuant to the Registration Statement or any of its directors or
officers or any person who controls such stockholder within the meaning of the
Securities Act or the Exchange Act (each, a "Seller Indemnified Person"),
against any Indemnified Liabilities to which any of them may become subject
insofar as such Indemnified Liabilities arise out of or are based upon any
written information furnished to the Seller by any such Purchaser expressly for
use in connection with such Registration Statement (the "Purchaser
Information"); and (ii) subject to the restrictions set forth in Section 9.3,
such Purchaser shall reimburse the Seller Indemnified Persons, promptly as such
expenses are incurred and are due and payable, for any legal fees or other
reasonable expenses incurred by them in connection with investigating or
defending any such Claim; provided, however, that the indemnification
obligations contained in this Section 9.2.3 shall not apply to amounts paid in
settlement of any Indemnified Liabilities if such settlement is effected without
the prior written consent of such Purchaser, which consent shall not be
unreasonably withheld; and provided, further, that the Purchaser shall be liable
under this Agreement (including this Section 9) for only that amount as does not
exceed the net proceeds actually received by such Purchaser as a result of the
sale of Registrable Securities pursuant to such Registration Statement. Such
indemnity shall remain in full force and effect regardless of any investigation
made by or on behalf of such Seller Indemnified Person. Notwithstanding anything
to the contrary contained herein, the indemnification obligations contained in
this Section 9.2.3 with respect to any preliminary prospectus shall not inure to
the benefit of any Seller Indemnified Person if the untrue statement or omission
of material fact contained in the preliminary prospectus was corrected on a
timely basis in the prospectus, as then amended or supplemented.
Section 9.3. INDEMNITY PROCEDURE. A party or parties hereto agreeing to
be responsible for or to indemnify against any matter pursuant to this Agreement
is referred to herein as the "Indemnifying Party" and the other party or parties
claiming indemnity is referred to as the "Indemnified Party".
9.3.1. An Indemnified Party under this Agreement shall, with
respect to claims asserted against such party by any third party, give written
notice to the Indemnifying Party of any liability which might give rise to a
claim for indemnity under this Agreement within sixty (60) business days of the
receipt of any written claim from any such third party, but not later than
twenty (20) days prior to the date any answer or responsive pleading is due, and
with respect to other matters for which the Indemnified Party may seek
indemnification, give prompt written notice to the Indemnifying Party of any
liability which might give rise to a claim for indemnity; provided, however,
that any failure to give such notice will not waive any rights of
-26-
the Indemnified Party except to the extent the rights of the Indemnifying Party
are materially prejudiced.
9.3.2. The Indemnifying Party shall have the right to conduct and
control, through counsel of its choosing, the defense, compromise or settlement
of any third person claim, action or suit against an Indemnified Party as to
which indemnification will be sought by any Indemnified Party from any
Indemnifying Party hereunder, and in any such case the Indemnified Party shall
cooperate in connection therewith and shall furnish such records, information
and testimony and attend such conferences, discovery proceedings, hearings,
trials and appeals as may be reasonably requested by the Indemnifying Party in
connection therewith; provided, that the Indemnified Party may participate,
through counsel chosen by it and at its own expense, in the defense of any such
claim, action or suit as to which the Indemnifying Party has so elected to
conduct and control the defense thereof; and provided, further, that the
Indemnified Party shall not, without the written consent of the Indemnifying
Party (which written consent shall not be unreasonably withheld), pay,
compromise or settle any such claim, action or suit, except that no such consent
shall be required if, following a written request from the Indemnified Party,
the Indemnifying Party shall fail, within 14 days after the making of such
request, to acknowledge and agree in writing that, if such claim, action or suit
shall be adversely determined, such Indemnifying Party has an obligation to
provide indemnification hereunder to such Indemnified Party. Notwithstanding the
foregoing, the Indemnified Party shall have the right to pay, settle or
compromise any such claim, action or suit without such consent, provided, that
in such event the Indemnified Party shall waive any right to indemnity therefore
hereunder unless such consent is unreasonably withheld.
9.3.3. The parties agree to cooperate in defending such third
party claims and the Indemnified Party shall provide such cooperation and such
access to its books, records and properties as the Indemnifying Party shall
reasonably request with respect to any matter for which indemnification is
sought hereunder; and the parties hereto agree to cooperate with each other in
order to ensure the proper and adequate defense thereof.
9.3.4. With regard to claims of third parties for which
indemnification is payable hereunder, such indemnification shall be paid by the
Indemnifying Party upon the earlier to occur of: (i) the entry of a judgment
against the Indemnified Party and the expiration of any applicable appeal
period, or if earlier, five (5) days prior to the date that the judgment
creditor has the right to execute the judgment; (ii) the entry of an
unappealable judgment or final appellate decision against the Indemnified Party;
or (iii) a settlement of the claim. Notwithstanding the foregoing, the
reasonable expenses of counsel to the Indemnified Party shall be reimbursed on a
current basis by the Indemnifying Party if such expenses are required to be paid
pursuant to this Agreement. With regard to other claims for which
indemnification is payable hereunder, such indemnification shall be paid
promptly by the Indemnifying Party upon demand by the Indemnified Party.
ARTICLE 10
TERMINATION
Section 10.1. BEST EFFORTS. Subject to the terms and conditions
provided in this Agreement, each of the parties shall use their respective best
efforts in good faith to take or
-27-
cause to be taken as promptly as practicable all reasonable actions that are
within its power to cause to be fulfilled those of the conditions precedent to
its obligations or the obligations of the other parties to consummate the
transactions contemplated by this Agreement that are dependent upon its actions,
including obtaining all necessary consents, authorizations, orders, approvals
and waivers.
Section 10.2. TERMINATION. This Agreement and the transactions
contemplated hereby may be terminated:
10.2.1. at any time by the mutual consent of the Seller and the
Purchasers;
10.2.2. by the Purchasers at any time at or prior to Closing in
their sole discretion if:
(a) any of the representations or warranties of the Seller in
this Agreement are not true, accurate and complete in all material respects and
such breach, if curable, is not cured by the Closing Date;
(b) the Seller materially breaches any covenant contained in
this Agreement and such breach, if curable, is not cured by the Closing Date;
(c) any of the conditions precedent to the Purchasers'
obligations to conduct the Closing have not been satisfied by the date required
thereof; or
(d) any legal proceeding is commenced or threatened by any
governmental agency or other person directed against the consummation of the
Closing or any other transaction contemplated hereby, and the Purchasers
reasonably and in good faith deem it impractical or inadvisable to proceed in
view of such legal proceeding or threat thereof.
10.2.3. by the Seller at any time at or prior to Closing in its
sole discretion if:
(a) any of the representations or warranties of the Purchaser
in this Agreement are not true, accurate and complete in all material respects
(except to the extent such representations and warranties contain a materiality
qualification, in which case they shall be true and correct in all respects) and
such breach, if curable, is not cured by the Closing Date;
(b) Purchasers materially breach any covenant contained in
this Agreement and such breach, if curable, is not cured by the Closing Date; or
(c) any of the conditions precedent to Seller's obligations to
conduct the Closing have not been satisfied by the date required thereof.
Section 10.3. EFFECT OF TERMINATION. In the event of termination of
this Agreement as expressly permitted under 10.2 hereof, this Agreement shall
forthwith become void and no party hereto shall be liable to any other party
hereto or their respective officers, directors or Affiliates, provided, that, if
such termination shall result from the willful breach by a party of the
covenants of such party contained in this Agreement, such party shall be fully
liable
-28-
for any and all damages sustained or incurred as a result of such breach,
including without limitation all expenses incurred in connection with this
Agreement.
ARTICLE 11
MISCELLANEOUS
Section 11.1. FURTHER ASSURANCES. Each party agrees to cooperate fully
with the other parties and to execute such further instruments, documents and
agreements and to give such further written assurances as may be reasonably
requested by any other party to better evidence and reflect the transactions
described herein and contemplated hereby and to carry into effect the intents
and purposes of this Agreement, and further agrees to take promptly, or cause to
be taken, all actions, and to do promptly, or cause to be done, all things
necessary, proper or advisable under applicable law to consummate and make
effective the transactions contemplated hereby, to obtain all necessary waivers,
consents and approvals, to effect all necessary registrations and filings, and
to remove any injunctions or other impediments or delays, legal or otherwise, in
order to consummate and make effective the transactions contemplated by this
Agreement for the purpose of securing to the parties hereto the benefits
contemplated by this Agreement.
Section 11.2. NOTICES. Any and all notices or other communications or
deliveries required or permitted to be provided hereunder shall be in writing
and shall be deemed given and effective on the earliest of (a) the date of
transmission, if such notice or communication is delivered via facsimile at the
facsimile number specified in this Section prior to 5:00 p.m. (New York City
time) on a business day, (b) the next business day after the date of
transmission, if such notice or communication is delivered via facsimile at the
facsimile number specified in this Section on a day that is not a business day
or later than 5:00 p.m. (New York City time) on any business day, or (c) the
business day following the date of mailing, if sent by U.S. nationally
recognized overnight courier service such as Federal Express. The address for
such notices and communications shall be as follows:
If to the Seller:
VASCO Data Security International, Inc.
1901 South Meyers Road, Suite 210
Oakbrook Terrace, Illinois 60181
Attention: Mr. Cliff Bown
Telephone: 630-932-8844
Facsimile: 630-932-8852
with a copy to:
Pepper Hamilton LLP
Hamilton Square
600 Fourteenth Street, N.W.
Washington, DC 20005
Attention: Robert B. Murphy, Esq.
-29-
Telephone: 202-220-1454
Facsimile: 202-220 1665
If to the Purchasers:
SDS Capital Partners, LLC
One Sound Shore Drive
Second Floor
Greenwich, Connecticut 06830
Attention: Mr. Brinton Coxe
Telephone: 203.967.5883
Facsimile: 203.967.5851
with a copy to:
Drinker Biddle & Reath LLP
One Logan Square
18th and Cherry Streets
Philadelphia, Pennsylvania 19103
Attention: Marc Marshall, Esq.
Telephone: 215-988-2966
Facsimile: 215-988-2757
Unless otherwise stated above, such communications shall be
effective when they are received by the addressee thereof in conformity with
this Section. Any party may change its address for such communications by giving
notice thereof to the other parties in conformity with this Section.
Section 11.3. GOVERNING LAW. All questions concerning the construction,
validity, enforcement and interpretation of this Agreement shall be governed by
and enforced in accordance with the laws of the State of Delaware without
reference to the choice of law principles thereof.
Section 11.4. JURISDICTION AND VENUE. The Seller and each Purchaser
irrevocably consent to the jurisdiction of the United States federal courts and
the state courts located in the County of New Castle, State of Delaware, in any
suit or proceeding based on or arising under this Agreement and irrevocably
agree that all claims in respect of such suit or proceeding may be determined in
such courts. The Seller irrevocably waives the defense of an inconvenient forum
to the maintenance of such suit or proceeding in such forum. The Seller further
agrees that service of process upon the Seller mailed by first class mail shall
be deemed in every respect effective service of process upon the Seller in any
such suit or proceeding. Nothing herein shall affect the right of any Purchaser
to serve process in any other manner permitted by law. The Seller agrees that a
final non-appealable judgment in any such suit or proceeding shall be conclusive
and may be enforced in other jurisdictions by suit on such judgment or in any
other lawful manner.
Section 11.5. SUCCESSORS AND ASSIGNS. This Agreement is personal to
each of the parties and may not be assigned without the written consent of the
other parties;
-30-
provided, however, that any of the Purchasers shall be permitted to assign their
rights under this Agreement to any transferee of such Purchaser to whom it
assigns or transfers the Securities, as provided in Section 1.3 hereof.
Section 11.6. SEVERABILITY. If any provision of this Agreement, or the
application thereof, shall for any reason or to any extent be invalid or
unenforceable, the remainder of this Agreement and application of such provision
to other persons or circumstances shall continue in full force and effect and in
no way be affected, impaired or invalidated.
Section 11.7. ENTIRE AGREEMENT. This Agreement and the other agreements
and instruments referenced herein constitute the entire understanding and
agreement of the parties with respect to the subject matter hereof and
supersedes all prior agreements and understandings.
Section 11.8. OTHER REMEDIES. Except as otherwise provided herein, any
and all remedies herein expressly conferred upon a party shall be deemed
cumulative with and not exclusive of any other remedy conferred hereby or by
law, or in equity on such party, and the exercise of any one remedy shall not
preclude the exercise of any other.
Section 11.9. AMENDMENT AND WAIVERS. Any term or provision of this
Agreement may be amended, and the observance of any term of this Agreement may
be waived (either generally or in a particular instance and either retroactively
or prospectively) only by a writing signed by the Seller and the holders of at
least a majority of the outstanding Preferred Stock. The waiver by a party of
any breach hereof or default in the performance hereof shall not be deemed to
constitute a waiver of any other default or any succeeding breach or default.
Section 11.10. NO WAIVER. The failure of any party to enforce any of
the provisions hereof shall not be construed to be a waiver of the right of such
party thereafter to enforce such provisions.
Section 11.11. CONSTRUCTION OF AGREEMENT; KNOWLEDGE. For purposes of
this Agreement, the term "knowledge" of any person or entity shall mean and
include (i) actual knowledge and (ii) that knowledge which a reasonably prudent
business person could have obtained in the management of his or her business
affairs after making due inquiry and exercising due diligence which a prudent
business person should have made or exercised, as applicable, with respect
thereto.
Section 11.12. COUNTERPARTS; FACSIMILE. This Agreement may be executed
in any number of counterparts, each of which shall be an original as against any
party whose signature appears thereon and all of which together shall constitute
one and the same instrument. This Agreement shall become binding when one or
more counterparts hereof, individually or taken together, shall bear the
signatures of all of the parties reflected hereon as signatories. In the event
that any signature is delivered by facsimile transmission, such signature shall
create a valid and binding obligation of the party executing (or on whose behalf
such signature is executed) with the same force and effect as if such facsimile
signature page were an original thereof.
-31-
Section 11.13. NO THIRD PARTY BENEFICIARY. Nothing expressed or implied
in this Agreement is intended, or shall be construed, to confer upon or give any
person other than the parties hereto and their respective heirs, personal
representatives, legal representatives, successors and permitted assigns, any
rights or remedies under or by reason of this Agreement.
IN WITNESS WHEREOF, the undersigned Purchasers and the Seller have
caused this Preferred Stock and Warrant Purchase Agreement to be duly executed
as of the date first above written.
VASCO DATA SECURITY INTERNATIONAL, INC.
By:
-----------------------------------------
T. Kendall Hunt, Chairman and
Chief Executive Officer
-32-
OMNIBUS SIGNATURE PAGE TO
VASCO DATA SECURITY INTERNATIONAL INC.
PREFERRED STOCK AND WARRANT PURCHASE AGREEMENT
The undersigned hereby executes and delivers the Preferred Stock and
Warrant Purchase Agreement to which this signature page is attached, which,
together with all counterparts of the Agreement and signature pages of the other
parties named in said Agreement, shall constitute one and the same document in
accordance with the terms of the Agreement.
Print Name:
By:
-----------------------------------------------------------
Name:
---------------------------------------------------------
Title:
--------------------------------------------------------
Address:
------------------------------------------------------
Telephone:
----------------------------------------------------
Facsimile:
----------------------------------------------------
SOC/EIN #:
----------------------------------------------------
Number of Shares of Series Preferred Stock:
--- ---------------
Purchased:
----------------------------------------------------
Series Warrants Purchased:
--- -------------------------------
Aggregate Purchase Price: $
------------------------------
SCHEDULE 1
TO
PREFERRED STOCK AND WARRANT PURCHASE AGREEMENT
PURCHASERS AND SHARES OF PREFERRED STOCK AND WARRANTS
PURCHASED
<Table>
<Caption>
NO. OF SHARES OF
PURCHASER NAME PREFERRED STOCK NO. OF WARRANTS
- -------------- ---------------- ---------------
Cranshire Capital, L.P. 30 22,500
E*Capital Corporation 30 22,500
Langley Partners, LP 80 60,000
Omicron Master Trust 50 37,500
Truk Opportunity Fund, LLC 4 3,000
AIG DKR SoundShore Strategic Holding 10 7,500
Fund Ltd.
Tuva Financial 8 6,000
Redwood Partners II, LLC 20 15,000
JAS Securities, LLC 15 11,250
Platinum Partners Value Arbitrage Fund 10 7,500
LP
OTAPE Investments LLC 25 18,750
TCMP(3) Partners 8 6,000
JMB Capital Partners, L.P. 80 60,000
Gryphon Master Fund LP 30 22,500
SDS Merchant Fund, LP 120 90,000
BayStar Capital II, L.P. 120 90,000
Crest View Capital Fund 2, LP 80 60,000
J R Squared, LLC 80 60,000
TOTAL: 800 600,000
</Table>
1-1
DISCLOSURE SCHEDULE
TO
VASCO DATA SECURITY INTERNATIONAL, INC.
PREFERRED STOCK AND WARRANT PURCHASE AGREEMENT
Litigation and Intellectual Property
On March 13, 2002, a suit was filed against the Seller claiming patent
infringement, false designation of origin and trade dress infringement. The case
is currently being evaluated by the Seller and its legal counsel. The Seller
believes the suit is without merit. As the suit is in its early stages,
management is unable to estimate the effect of this suit at this time.
Broker Fee List
Wedbush Morgan Securities: $280,000.00
1000 Wilshire Blvd.
Los Angeles, CA 90017
Gilford Securities Incorporated $280,000.00
850 Third Avenue
New York, New York 10022
EXHIBIT A
CERTIFICATE OF DESIGNATIONS, RIGHTS AND PREFERENCES
OF
SERIES D 5% CUMULATIVE CONVERTIBLE VOTING PREFERRED STOCK
A-1
EXHIBIT B
COMMON STOCK PURCHASE WARRANT
B-1
EXHIBIT C
OPINION OF SELLER'S COUNSEL
C-1
EXHIBIT D
FORM OF SELLING STOCKHOLDER QUESTIONNAIRE
D-1