Exhibit 10.1
EXECUTION COPY
SECURITIES PURCHASE AGREEMENT
This Securities Purchase Agreement (this "Agreement") is dated as of
March 31, 2003 among Central European Distribution Corporation, a Delaware
corporation (the "Company"), Jeffrey Peterson (the "Selling Stockholder" and
together with the Company, the "Sellers") and the purchasers identified on the
signature pages hereto (each, a "Purchaser" and collectively, the "Purchasers").
WHEREAS, subject to the terms and conditions set forth in this
Agreement and pursuant to Section 4(2) of the Securities Act of 1933, as amended
(the "Securities Act"), the Sellers desire to sell to the Purchasers, and the
Purchasers, severally and not jointly, desire to purchase from the Sellers,
securities of the Company as more fully described in this Agreement.
NOW, THEREFORE, IN CONSIDERATION of the mutual covenants contained in
this Agreement, and for other good and valuable consideration the receipt and
adequacy of which are hereby acknowledged, the Sellers and the Purchasers agree
as follows:
ARTICLE I
DEFINITIONS
1.1 Definitions. In addition to the terms defined elsewhere in this
Agreement, the following terms have the meanings indicated:
"Additional Investment Rights" means each of the Company Additional
Investment Rights and the Selling Stockholder Additional Investment
Rights.
"Affiliate" means any Person 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.
"Business Day" means any day other than Saturday, Sunday or other
day on which commercial banks in The City of New York are authorized or
required by law to remain closed.
"Closing" means the closing of the purchase and sale of the Shares
and the Additional Investment Rights pursuant to Section 2.1.
"Closing Date" means the date of the closing.
"Closing Price" means, for any date, the price determined by the
first of the following clauses that applies: (a) if the Common Stock is
then listed or quoted on an Eligible Market or any other national
securities exchange, the closing price per share of the Common Stock
for such date (or the nearest preceding date) on the primary Eligible
Market or exchange on which the Common Stock is then listed or quoted;
(b) if prices for the Common Stock are then quoted on the OTC Bulletin
Board, the closing bid price per share of the Common Stock for such
date (or the nearest preceding date) so quoted; (c) if
prices for the Common Stock are then reported in the "Pink Sheets"
published by the National Quotation Bureau Incorporated (or a similar
organization or agency succeeding to its functions of reporting
prices), the most recent closing bid price per share of the Common
Stock so reported; or (d) in all other cases, the fair market value of
a share of Common Stock as determined by an independent appraiser
selected in good faith by Purchasers holding a majority of the
Securities.
"Company Additional Investment Rights" means collectively, the
Additional Investment Rights issued and sold by the Company under this
Agreement, in the form of Exhibit A-1.
"Company Securities" means the Company Shares, the Company
Additional Investment Rights and the Underlying Shares.
"Company Shares" means an aggregate of 750,000 shares of Common
Stock, which are being issued and sold by the Company to the Purchasers
at the Closing.
"Company Unit" means one Company Share and a Company Additional
Investment Right to acquire 0.20 of a share of Common Stock.
"Commission" means the Securities and Exchange Commission.
"Common Stock" means the common stock of the Company, par value
$0.01 per share.
"Common Stock Equivalents" means, collectively, Options and
Convertible Securities.
"Convertible Securities" means any stock or securities (other than
Options) convertible into or exercisable or exchangeable for Common
Stock.
"Effective Date" means the date that the Registration Statement is
first declared effective by the Commission.
"Effectiveness Period" has the meaning set forth in Section 6.1(b).
"Eligible Market" means any of the New York Stock Exchange, the
American Stock Exchange, the NASDAQ National Market or the NASDAQ
SmallCap Market.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"Filing Date" means April 30, 2003.
"Lien" means any lien, charge, claim, security interest,
encumbrance, right of first refusal or other restriction.
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"Lead Purchasers" means Mainfield Enterprises, Inc., Smithfield
Fiduciary LLC, Cranshire Capital, L.P., Deephaven Small Cap Growth Fund
LLC and Omicron Master Trust.
"Losses" means any and all losses, claims, damages, liabilities,
settlement costs and expenses, including, without limitation, costs of
preparation and reasonable attorneys' fees.
"Options" means any rights, warrants or options to subscribe for or
purchase Common Stock or Convertible Securities.
"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 thereof) or any court or other federal, state, local or
other governmental authority or other entity of any kind.
"Per Unit Purchase Price" means $23.25.
"Proceeding" means an action, claim, suit, investigation or
proceeding (including, without limitation, an investigation or partial
proceeding, such as a deposition), whether commenced or threatened.
"Prospectus" means the prospectus included in the Registration
Statement (including, without limitation, a prospectus that includes
any information previously omitted from a prospectus filed as part of
an effective registration statement in reliance upon Rule 430A
promulgated under the Securities Act), as amended or supplemented by
any prospectus supplement, with respect to the terms of the offering of
any portion of the Registrable Securities covered by the Registration
Statement, and all other amendments and supplements to the Prospectus
including post effective amendments, and all material incorporated by
reference or deemed to be incorporated by reference in such Prospectus.
"Purchaser Counsel" means Proskauer Rose LLP, counsel to the
Purchasers, or any other counsel selected by a Purchaser hereunder.
"Registrable Securities" means any Common Stock (including
Underlying Shares) issued or issuable pursuant to the Transaction
Documents, together with any securities issued or issuable upon any
stock split, dividend or other distribution, recapitalization or
similar event with respect to the foregoing.
"Registration Statement" means each registration statement required
to be filed under Article VI, including (in each case) the Prospectus,
amendments and supplements to such registration statement or
Prospectus, including pre- and post-effective amendments, all exhibits
thereto, and all material incorporated by reference or deemed to be
incorporated by reference in such registration statement.
"Required Effectiveness Date" means June 29, 2003.
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"Rule 144," "Rule 415," and "Rule 424" means Rule 144, Rule 415 and
Rule 424, respectively, promulgated by the Commission pursuant to the
Securities Act, as such Rules may be amended from time to time, or any
similar rule or regulation hereafter adopted by the Commission having
substantially the same effect as such Rule.
"Securities" means each of the Selling Stockholder Securities and
Company Securities.
"Seller Polish Counsel" means Wierzbowski & Wspolnicy, special
Polish counsel to the Company.
"Seller U.S. Counsel" means Kronish Lieb Weiner & Hellman LLP,
counsel to the Sellers.
"Selling Stockholder Additional Investment Rights" means
collectively, the Additional Investment Rights issued and sold by the
Selling Stockholder under this Agreement, in the form of Exhibit A-2.
"Selling Stockholder Securities" means the Selling Stockholder
Shares, the Selling Stockholder Additional Investment Rights and the
Underlying Shares.
"Selling Stockholder Shares" means an aggregate of 80,000 shares of
Common Stock, which are being transferred by the Selling Stockholder to
the Purchasers at the Closing.
"Selling Stockholder Unit" means one Selling Stockholder Share and
a Selling Stockholder Additional Investment Right to acquire 0.20 of a
share of Common Stock.
"Shares" means each of the Selling Stockholder Shares and Company
Shares.
"Subsidiary" means any Person in which the Company, directly or
indirectly, owns capital stock or holds an equity or similar interest.
"Trading Day" means (a) any day on which the Common Stock is listed
or quoted and traded on its primary Trading Market, (b) if the Common
Stock is not then listed or quoted and traded on any Eligible Market,
then a day on which trading occurs on the NASDAQ National Market (or
any successor thereto), or (c) if trading ceases to occur on the NASDAQ
National Market (or any successor thereto), any Business Day.
"Trading Market" means the Nasdaq National Market or any other
Eligible Market, or any national securities exchange, market or trading
or quotation facility on which the Common Stock is then listed or
quoted.
"Transaction Documents" means this Agreement, the Company
Additional Investment Rights, the Selling Stockholder Additional
Investment Rights, the Transfer Agent Instructions and any other
documents or agreements executed in connection with the transactions
contemplated hereunder.
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"Transfer Agent" means American Stock Transfer & Trust Company.
"Transfer Agent Instructions" means, with respect to the Company,
the Irrevocable Transfer Agent Instructions, in the form of Exhibit
D-1, executed by the Company and delivered to and acknowledged in
writing by the Transfer Agent, and with respect to the Selling
Stockholder, the Irrevocable Transfer Agent Instructions, in the form
of Exhibit D-2, executed by the Selling Stockholder and delivered to
and acknowledged in writing by the Transfer Agent.
"Underlying Shares" means the shares of Common Stock issuable upon
exercise of the applicable Additional Investment Rights.
"Unit" means each of the Selling Stockholder Units and Company
Units.
ARTICLE II
PURCHASE AND SALE
2.1 Closing. Subject to the terms and conditions set forth in this
Agreement, at the Closing the Sellers shall issue and sell to each Purchaser,
and each Purchaser shall, severally and not jointly, purchase from the Sellers,
such number of Units set forth opposite such Purchaser's name on Schedule A
hereto under the heading "Company Units" and "Selling Stockholder Units" at a
per Unit purchase price equal to the Per Unit Purchase Price. The Closing shall
take place at the offices of Purchaser Counsel immediately following the
execution hereof, or at such other location or time as the parties may agree.
2.2 Closing Deliveries.
(a) At the Closing, the Company shall deliver or cause to be
delivered to each Purchaser the following:
(i) one or more stock certificates, free and clear of all
restrictive and other legends (except as expressly provided in Section
4.1(b) hereof), evidencing such number of Company Shares equal to the
number of Company Units set forth opposite such Purchaser's name on
Schedule A hereto under the heading "Company Units," registered in the
name of such Purchaser;
(ii) a Company Additional Investment Right, registered in the
name of such Purchaser, pursuant to which such Purchaser shall have the
right to acquire such number of Underlying Shares set forth opposite
such Purchaser's name on Schedule A hereto under the heading "Company
Additional Investment Right Shares;"
(iii) a legal opinion of Seller U.S. Counsel, in the form of
Exhibit B-1, executed by such counsel and delivered to the Purchasers,
and a legal opinion of Seller Polish Counsel, in the form of Exhibit
B-2, executed by such counsel and delivered to the Purchasers; and
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(iv) duly executed Transfer Agent Instructions acknowledged by
the Company's transfer agent.
(b) At the Closing, the Selling Stockholder shall deliver or cause
to be delivered to each Purchaser the following:
(i) one or more stock certificates, free and clear of all
restrictive and other legends (except as expressly provided in Section
4.1(b) hereof), evidencing such number of Selling Stockholder Shares
equal to the number of Selling Stockholder Units set forth opposite
such Purchaser's name on Schedule A hereto under the heading "Selling
Stockholder Units," registered in the name of such Purchaser;
(ii) a Selling Stockholder Additional Investment Right,
registered in the name of such Purchaser, pursuant to which such
Purchaser shall have the right to acquire such number of Underlying
Shares set forth opposite such Purchaser's name on Schedule A hereto
under the heading "Selling Stockholder Additional Investment Right
Shares;"
(iii) a legal opinion of Seller U.S. Counsel, in the form of
Exhibit B-1, executed by such counsel and delivered to the Purchasers,
and a legal opinion of Seller Polish Counsel, in the form of Exhibit
B-2, executed by such counsel and delivered to the Purchasers; and
(iv) duly executed Transfer Agent Instructions acknowledged by
the Company's transfer agent.
(c) At the Closing, each Purchaser shall deliver or cause to be
delivered to (i) the Company the purchase price set forth opposite such
Purchaser's name on Schedule A hereto under the heading "Company Purchase Price"
and (ii) the Selling Stockholder the purchase price set forth opposite such
Purchaser's name on Schedule A hereto under the heading "Selling Stockholder
Purchase Price," each in United States dollars and in immediately available
funds, by wire transfer to an account designated in writing to such Purchaser by
the Company and Selling Stockholder, as applicable, for such purpose.
(d) At the Closing, in connection with the Company's obligations
pursuant to Section 4.8, the Company and the Purchasers shall have the right to
require the Selling Shareholder to deliver the Underlying Shares transferable to
the Purchasers upon the exercise of the Selling Stockholder Additional
Investment Rights, to be held by the Company in escrow pursuant to the terms and
conditions of an escrow agreement, in such form and substance mutually
acceptable to the Company and the Selling Stockholder.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
3.1 Representations and Warranties of the Company. The Company hereby
represents and warrants to each of the Purchasers as follows:
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(a) Subsidiaries. The Company has no direct or indirect Subsidiaries
other than those listed in Schedule 3.1(a). Except as disclosed in Schedule
3.1(a), the Company owns, directly or indirectly, all of the capital stock or
comparable equity interests of each Subsidiary free and clear of any Lien and
all the issued and outstanding shares of capital stock or comparable equity
interest of each Subsidiary are validly issued and are fully paid,
non-assessable and free of preemptive and similar rights.
(b) Organization and Qualification. Each of the Company and the
Subsidiaries is an entity duly organized, validly existing and in good standing
under the laws of the jurisdiction of its incorporation or organization (as
applicable), with the requisite power and authority to own and use its
properties and assets and to carry on its business as currently conducted.
Neither the Company nor any Subsidiary is in violation of any of the provisions
of its respective certificate or articles of incorporation, bylaws or other
organizational or charter documents. Each of the Company and the Subsidiaries is
duly qualified to do business and is in good standing as a foreign corporation
or other entity in each jurisdiction in which the nature of the business
conducted or property owned by it makes such qualification necessary, except
where the failure to be so qualified or in good standing, as the case may be,
could not, individually or in the aggregate, (i) adversely affect the legality,
validity or enforceability of any Transaction Document, (ii) have or result in a
material adverse effect on the results of operations, assets, prospects,
business or condition (financial or otherwise) of the Company and the
Subsidiaries, taken as a whole on a consolidated basis, or (iii) adversely
impair the Company's ability to perform fully on a timely basis its obligations
under any of the Transaction Documents (any of (i), (ii) or (iii), a "Material
Adverse Effect").
(c) Authorization; Enforcement. The Company has the requisite corporate
power and authority to enter into and to consummate the transactions
contemplated by each of the Transaction Documents to which it is a party and
otherwise to carry out its obligations hereunder and thereunder. The execution
and delivery of each of the Transaction Documents to which it is a party by the
Company and the consummation by it of the transactions contemplated hereby and
thereby have been duly authorized by all necessary action on the part of the
Company and no further consent or action is required by the Company, its Board
of Directors or its stockholders. Each of the Transaction Documents to which it
is a party has been (or upon delivery will be) duly executed by the Company and
is, or when delivered in accordance with the terms hereof, will constitute, the
valid and binding obligation of the Company enforceable against the Company in
accordance with its terms.
(d) No Conflicts. The execution, delivery and performance of the
Transaction Documents to which it is a party by the Company and the consummation
by the Company of the transactions contemplated hereby and thereby do not and
will not (i) conflict with or violate any provision of the Company's or any
Subsidiary's certificate or articles of incorporation, bylaws or other
organizational or charter documents, (ii) conflict with, or constitute a default
(or an event that with notice or lapse of time or both would become a default)
under, or give to others any rights of termination, amendment, acceleration or
cancellation (with or without notice, lapse of time or both) of, any agreement,
credit facility, debt or other instrument (evidencing a Company or Subsidiary
debt or otherwise) or other understanding to which the Company or any Subsidiary
is a party or by which any property or asset of the Company or any Subsidiary is
bound or affected, except to the extent that such conflict, default or
termination right could not reasonably
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be expected to have a Material Adverse Effect, or (iii) result in a violation of
any law, rule, regulation, order, judgment, injunction, decree or other
restriction of any court or governmental authority to which the Company or a
Subsidiary is subject (including federal and state securities laws and
regulations and the rules and regulations of any self-regulatory organization to
which the Company or its securities are subject), or by which any property or
asset of the Company or a Subsidiary is bound or affected.
(e) Issuance of the Securities. The Company Securities (including the
Underlying Shares) are duly authorized and, when issued and paid for in
accordance with the Transaction Documents, will be duly and validly issued,
fully paid and nonassessable, free and clear of all Liens and shall not be
subject to preemptive rights or similar rights of stockholders. The Company has
reserved from its duly authorized capital stock the maximum number of shares of
Common Stock issuable upon exercise of the Company Additional Investment Rights.
(f) Capitalization. The number of shares and type of all authorized,
issued and outstanding capital stock, options and other securities of the
Company (whether or not presently convertible into or exercisable or
exchangeable for shares of capital stock of the Company) is set forth in
Schedule 3.1(f). All outstanding shares of capital stock, including the Selling
Stockholder Securities, are duly authorized, validly issued, fully paid and
nonassessable and have been issued in compliance with all applicable securities
laws. Except as disclosed in Schedule 3.1(f), there are no outstanding options,
warrants, script rights to subscribe to, calls or commitments of any character
whatsoever relating to, or securities, rights or obligations convertible into or
exercisable or exchangeable for, or giving any Person any right to subscribe for
or acquire, any shares of Common Stock, or contracts, commitments,
understandings or arrangements by which the Company or any Subsidiary is or may
become bound to issue additional shares of Common Stock, or securities or rights
convertible or exchangeable into shares of Common Stock. Except as set forth on
Schedule 3.1(f), there are no anti-dilution or price adjustment provisions
contained in any security issued by the Company (or in any agreement providing
rights to security holders) and the issue and sale of the Company Securities and
the transfer of the Selling Stockholder Securities (including the Underlying
Shares) will not obligate the Company to issue shares of Common Stock or other
securities to any Person (other than the Purchasers) and will not result in a
right of any holder of Company securities to adjust the exercise, conversion,
exchange or reset price under such securities. To the knowledge of the Company,
except as specifically disclosed in Schedule 3.1(f), no Person or group of
related Persons beneficially owns (as determined pursuant to Rule 13d-3 under
the Exchange Act), or has the right to acquire, by agreement with or by
obligation binding upon the Company, beneficial ownership of in excess of 5% of
the outstanding Common Stock, ignoring for such purposes any limitation on the
number of shares of Common Stock that may be owned at any single time.
(g) SEC Reports; Financial Statements. The Company has filed all reports
required to be filed by it under the Exchange Act, including pursuant to Section
13(a) or 15(d) thereof, for the two years preceding the date hereof (the
foregoing materials (together with any materials filed by the Company under the
Exchange Act, whether or not required) being collectively referred to herein as
the "SEC Reports" and, together with this Agreement and the Schedules to this
Agreement, the "Disclosure Materials") on a timely basis or has received a valid
extension of such time of filing and has filed any such SEC Reports prior to the
expiration
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of any such extension. The Company has delivered to each Lead Purchaser true,
correct and complete copies of all SEC Reports filed within the 10 days
preceding the date hereof. As of their respective dates, the SEC Reports
complied in all material respects with the requirements of the Securities Act
and the Exchange Act and the rules and regulations of the Commission promulgated
thereunder, and none of the SEC Reports, when filed, contained any untrue
statement of a material fact or omitted to state a material fact required to be
stated therein or necessary in order to make the statements therein, in the
light of the circumstances under which they were made, not misleading. The
financial statements of the Company included in the SEC Reports comply in all
material respects with applicable accounting requirements and the rules and
regulations of the Commission with respect thereto as in effect at the time of
filing. Such financial statements have been prepared in accordance with United
States generally accepted accounting principles applied on a consistent basis
during the periods involved ("GAAP"), except as may be otherwise specified in
such financial statements or the notes thereto, and fairly present in all
material respects the financial position of the Company and its consolidated
subsidiaries as of and for the dates thereof and the results of operations and
cash flows for the periods then ended, subject, in the case of unaudited
statements, to normal, year-end audit adjustments. All material agreements to
which the Company or any Subsidiary is a party or to which the property or
assets of the Company or any Subsidiary are subject are included as part of or
specifically identified in the SEC Reports.
(h) Material Changes. Since the date of the latest audited financial
statements included within the SEC Reports, except as specifically disclosed in
the SEC Reports or in Schedule 3.1(h), (i) there has been no event, occurrence
or development that, individually or in the aggregate, has had or that could
result in a Material Adverse Effect, (ii) the Company has not incurred any
liabilities (contingent or otherwise) other than (A) trade payables and accrued
expenses incurred in the ordinary course of business consistent with past
practice and (B) liabilities not required to be reflected in the Company's
financial statements pursuant to GAAP or required to be disclosed in filings
made with the Commission, (iii) the Company has not altered its method of
accounting or the identity of its auditors, except as disclosed in its SEC
Reports, (iv) the Company has not declared or made any dividend or distribution
of cash or other property to its stockholders or purchased, redeemed or made any
agreements to purchase or redeem any shares of its capital stock, and (v) the
Company has not issued any equity securities to any officer, director or
Affiliate, except pursuant to existing Company stock-based plans.
(i) Absence of Litigation. There is no action, suit, claim, proceeding,
inquiry or investigation before or by any court, public board, government
agency, self-regulatory organization or body pending or, to the knowledge of the
Company, threatened against or affecting the Company or any of its Subsidiaries
that could, individually or in the aggregate, have a Material Adverse Effect.
(j) Compliance. Neither the Company nor any Subsidiary (i) is in default
under or in violation of (and no event has occurred that has not been waived
that, with notice or lapse of time or both, would result in a default by the
Company or any Subsidiary under), nor has the Company or any Subsidiary received
written notice of a claim that it is in default under or that it is in violation
of, any indenture, loan or credit agreement or any other agreement or instrument
to which it is a party or by which it or any of its properties is bound (whether
or not such default or violation has been waived), (ii) is in violation of any
order of any court, arbitrator
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or governmental body, or (iii) is or has been in violation of any statute, rule
or regulation of any governmental authority, including without limitation all
foreign, federal, state and local laws relating to taxes, environmental
protection, occupational health and safety, product quality and safety and
employment and labor matters, except in each case as could not, individually or
in the aggregate, have or result in a Material Adverse Effect.
(k) Title to Assets. The Company and the Subsidiaries have good and
marketable title in fee simple to all real property owned by them that is
material to the business of the Company and the Subsidiaries and good and
marketable title in all personal property owned by them that is material to the
business of the Company and the Subsidiaries, in each case free and clear of all
Liens, except for Liens that do not materially affect the value of such
property, do not materially interfere with the use made and proposed to be made
of such property by the Company and the Subsidiaries and could not, individually
or in the aggregate, have or result in a Material Adverse Effect. Any real
property and facilities held under lease by the Company and the Subsidiaries are
held by them under valid, subsisting and enforceable leases of which the Company
and the Subsidiaries are in compliance.
(l) Certain Fees. Except for the fees described in Schedule 3.1(l), all
of which are payable to registered broker-dealers, no brokerage or finder's fees
or commissions are or will be payable by the Company to any broker, financial
advisor or consultant, finder, placement agent, investment banker, bank or other
Person with respect to the transactions contemplated by this Agreement, and the
Company has not taken any action that would cause any Purchaser to be liable for
any such fees or commissions.
(m) Private Placement. Neither the Company nor any Person acting on the
Company's behalf has sold or offered to sell or solicited any offer to buy the
Securities by means of any form of general solicitation or advertising. Neither
the Company nor any of its Affiliates nor any person acting on the Company's
behalf has, directly or indirectly, at any time within the past six months, made
any offer or sale of any security or solicitation of any offer to buy any
security under circumstances that would (i) eliminate the availability of the
exemption from registration under Regulation D under the Securities Act in
connection with the offer and sale by the Company of the Securities as
contemplated hereby or (ii) cause the offering of the Securities pursuant to the
Transaction Documents to be integrated with prior offerings by the Company for
purposes of any applicable law, regulation or stockholder approval provisions,
including, without limitation, under the rules and regulations of any Trading
Market. The Company is not, and is not an Affiliate of, an "investment company"
within the meaning of the Investment Company Act of 1940, as amended. The
Company is not a United States real property holding corporation within the
meaning of the Foreign Investment in Real Property Tax Act of 1980.
(n) Form S-3 Eligibility. Except as to complying with Section I(A)(1) of
Form S-3 requiring the Company's principal business operations to be conducted
in the United States, the Company is eligible to register its Common Stock for
resale by the Purchasers using Form S-3 promulgated under the Securities Act.
Based on verbal conversations with the Commission, the Company has no reason to
believe that it cannot register its Common Stock for resale by the Purchasers
using Form S-3 promulgated under the Securities Act.
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(o) Listing and Maintenance Requirements. The Company has not, in the
two years preceding the date hereof, received notice (written or oral) from any
Trading Market on which the Common Stock is or has been listed or quoted to the
effect that the Company is not in compliance with the listing or maintenance
requirements of such Trading Market. The Company is in compliance with all such
listing and maintenance requirements.
(p) Registration Rights. Except as described in Schedule 3.1(p), the
Company has not granted or agreed to grant to any Person any rights (including
"piggy-back" registration rights) to have any securities of the Company
registered with the Commission or any other governmental authority that have not
been satisfied.
(q) Application of Takeover Protections. There is no control share
acquisition, business combination, poison pill (including any distribution under
a rights agreement) or other similar anti-takeover provision under the Company's
charter documents or the laws of its state of incorporation that is or could
become applicable to any of the Purchasers as a result of the Purchasers and the
Company fulfilling their obligations or exercising their rights under the
Transaction Documents, including, without limitation, as a result of the
Company's issuance of the Securities and the Purchasers' ownership of the
Securities.
(r) Disclosure. The Company confirms that neither it nor any other
Person acting on its behalf has provided any of the Purchasers or their agents
or counsel with any information that constitutes or might constitute material,
nonpublic information. The Company understands and confirms that each of the
Purchasers will rely on the foregoing representations in effecting transactions
in securities of the Company. All disclosure provided to the Purchasers
regarding the Company, its business and the transactions contemplated hereby,
including the Schedules to this Agreement, furnished by or on behalf of the
Company are true and correct and do not contain any untrue statement of a
material fact or omit to state any material fact necessary in order to make the
statements made therein, in the light of the circumstances under which they were
made, not misleading. No event or circumstance has occurred or information
exists with respect to the Company or any of its Subsidiaries or its or their
business, properties, prospects, operations or financial conditions, which,
under applicable law, rule or regulation, requires public disclosure or
announcement by the Company but which has not been so publicly announced or
disclosed. The Company acknowledges and agrees that no Purchaser makes or has
made any representations or warranties with respect to the transactions
contemplated hereby other than those specifically set forth in Section 3.3.
(s) Acknowledgment Regarding Purchasers' Purchase of Securities. The
Company acknowledges and agrees that each of the Purchasers is acting solely in
the capacity of an arm's length purchaser with respect to this Agreement and the
transactions contemplated hereby. The Company further acknowledges that no
Purchaser is acting as a financial advisor or fiduciary of the Company (or in
any similar capacity) with respect to this Agreement and the transactions
contemplated hereby and any advice given by any Purchaser or any of their
respective representatives or agents in connection with this Agreement and the
transactions contemplated hereby is merely incidental to the Purchasers'
purchase of the Securities. The Company further represents to each Purchaser
that the Company's decision to enter into this Agreement has been based solely
on the independent evaluation of the transactions contemplated hereby by the
Company and its representatives.
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(t) Patents and Trademarks. The Company and the Subsidiaries have, or
have rights to use, all patents, patent applications, trademarks, trademark
applications, service marks, trade names, copyrights, licenses and other similar
rights that are necessary or material for use in connection with their
respective businesses as described in the SEC Reports and which the failure to
so have could have a Material Adverse Effect (collectively, the "Intellectual
Property Rights"). Neither the Company nor any Subsidiary has received a written
notice that the Intellectual Property Rights used by the Company or any
Subsidiary violates or infringes upon the rights of any Person. To the knowledge
of the Company, all such Intellectual Property Rights are enforceable and there
is no existing infringement by another Person of any of the Intellectual
Property Rights.
(u) Insurance. The Company and the Subsidiaries are insured by insurers
of recognized financial responsibility against such losses and risks and in such
amounts as are prudent and customary in the businesses and location in which the
Company and the Subsidiaries are engaged. Neither the Company nor any Subsidiary
has any knowledge that it will not be able to renew its existing insurance
coverage as and when such coverage expires or to obtain similar coverage from
similar insurers as may be necessary to continue its business without a
significant increase in cost.
(v) Regulatory Permits. The Company and the Subsidiaries possess all
certificates, authorizations and permits issued by the appropriate federal,
state, local or foreign regulatory authorities necessary to conduct their
respective businesses as described in the SEC Reports, except where the failure
to possess such permits could not, individually or in the aggregate, have or
result in a Material Adverse Effect ("Material Permits"), and neither the
Company nor any Subsidiary has received any written notice of proceedings
relating to the revocation or modification of any Material Permit.
(w) Transactions With Affiliates and Employees. Except as set forth in
SEC Reports filed at least ten days prior to the date hereof, none of the
officers or directors of the Company is presently a party to any transaction
with the Company or any Subsidiary (other than for services as employees,
officers and directors) exceeding $60,000, 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 officer, director or such employee or, to the knowledge
of the Company, any entity in which any officer, director, or any such employee
has a substantial interest or is an officer, director, trustee or partner.
(x) Solvency. Based on the financial condition of the Company as of the
Closing Date, (i) the Company's fair saleable value of its assets exceeds the
amount that will be required to be paid on or in respect of the Company's
existing debts and other liabilities (including known contingent liabilities) as
they mature; (ii) the Company'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 Company,
and projected capital requirements and capital availability thereof; and (iii)
the current cash flow of the Company, together with the proceeds the Company
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
12
in respect of its debt when such amounts are required to be paid. The Company
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).
(y) Internal Accounting Controls. The Company and the Subsidiaries
maintain a system of internal accounting controls sufficient to provide
reasonable assurance that (i) transactions are executed in accordance with
management's general or specific authorizations, (ii) transactions are recorded
as necessary to permit preparation of financial statements in conformity with
generally accepted accounting principles and to maintain asset accountability,
(iii) access to assets is permitted only in accordance with management's general
or specific authorization, and (iv) the recorded accountability for assets is
compared with the existing assets at reasonable intervals and appropriate action
is taken with respect to any differences.
3.2 Representations and Warranties of the Selling Stockholder. The Selling
Stockholder hereby represents and warrants to each of the Purchasers as follows:
(a) Authorization; Enforcement. The Selling Stockholder has the
requisite power and authority to enter into and to consummate the transactions
contemplated by each of the Transaction Documents to which he is a party and
otherwise to carry out his obligations hereunder and thereunder. The execution
and delivery of each of the Transaction Documents to which he is a party by the
Selling Stockholder and the consummation by him of the transactions contemplated
hereby and thereby have been duly authorized by all necessary action on the part
of the Selling Stockholder and no further consent or action is required by the
Selling Stockholder. Each of the Transaction Documents to which he is a party
has been (or upon delivery will be) duly executed by the Selling Stockholder and
is, or when delivered in accordance with the terms hereof, will constitute, the
valid and binding obligation of the Selling Stockholder enforceable against the
Selling Stockholder in accordance with its terms.
(b) No Conflicts. The execution, delivery and performance of the
Transaction Documents to which he is a party by the Selling Stockholder and the
consummation by the Selling Stockholder of the transactions contemplated hereby
and thereby do not and will not (i) conflict with, or constitute a default (or
an event that with notice or lapse of time or both would become a default)
under, or give to others any rights of termination, amendment, acceleration or
cancellation (with or without notice, lapse of time or both) of, any agreement,
credit facility, debt or other instrument (evidencing a Selling Stockholder debt
or otherwise) or other understanding to which the Selling Stockholder is a party
or by which any property or asset of the Selling Stockholder is bound or
affected, except to the extent that such conflict, default or termination right
could not reasonably be expected to have a Material Adverse Effect, or (ii)
result in a violation of any law, rule, regulation, order, judgment, injunction,
decree or other restriction of any court or governmental authority to which the
Selling Stockholder is subject (including federal and state securities laws and
regulations and the rules and regulations of any self-regulatory organization to
which the Selling Stockholder is subject), or by which any property or asset of
the Selling Stockholder is bound or affected.
(c) Ownership of the Securities. The Selling Stockholder is the sole
owner of the Selling Stockholder Securities and has good, valid and marketable
title to the Selling Stockholder Securities, free and clear of all Liens. Upon
transfer to the Purchasers in accordance
13
with this Agreement, each Purchaser will have good, valid and marketable title
to the Selling Stockholder Securities, free and clear of all Liens (other than
those created by such Purchaser). The Selling Stockholder Additional Investment
Rights are duly issued, and when paid for in accordance with the Selling
Stockholder Additional Investment Rights, the Underlying Shares will be duly and
validly transferred, fully paid and nonassessable, free and clear of any Liens.
The Selling Stockholder owns and has reserved the maximum number of shares of
Common Stock issuable upon exercise of the Selling Stockholder Additional
Investment Rights.
(d) Absence of Litigation. There is no action, suit, claim,
proceeding, inquiry or investigation before or by any court, public board,
government agency, self-regulatory organization or body pending or, to the
knowledge of the Selling Stockholder, threatened against or affecting the
Selling Stockholder that could, individually or in the aggregate, have a
material adverse effect on the Selling Stockholder's ability to sell the Selling
Stockholder Securities.
(e) Compliance. The Selling Stockholder is not and the transfer of the
Selling Stockholder Securities pursuant to this Agreement will not cause the
Selling Stockholder to be (i) in default under or in violation of (and no event
has occurred that has not been waived that, with notice or lapse of time or
both, would result in a default by the Selling Stockholder under), nor has the
Selling Stockholder received notice of a claim that it is in default under or
that it is in violation of, any indenture, loan or credit agreement or any other
agreement or instrument to which it is a party or by which it or any of its
properties is bound (whether or not such default or violation has been waived),
(ii) in violation of any order of any court, arbitrator or governmental body, or
(iii) in violation of any statute, rule or regulation of any governmental
authority, including without limitation all foreign, federal, state and local
laws relating to taxes, environmental protection, occupational health and
safety, product quality and safety and employment and labor matters, except in
each case as could not, individually or in the aggregate, have or result in a
material adverse effect on the Selling Stockholder, or on the Purchasers or on
the transaction contemplated hereby.
(f) Certain Fees. Except for the fees described in Schedule 3.1(l),
all of which are payable to registered broker-dealers, no brokerage or finder's
fees or commissions are or will be payable by the Selling Stockholder to any
broker, financial advisor or consultant, finder, placement agent, investment
banker, bank or other Person with respect to the transactions contemplated by
this Agreement, and the Selling Stockholder has not taken any action that would
cause any Purchaser to be liable for any such fees or commissions.
(g) Disclosure. The Selling Stockholder confirms that neither it nor
any other Person acting on its behalf has provided any of the Purchasers or
their agents or counsel with any information that constitutes or might
constitute material, nonpublic information regarding the Company. The Selling
Stockholder understands and confirms that each of the Purchasers will rely on
the foregoing representations in effecting transactions in securities of the
Company. All disclosure provided to the Purchasers regarding the Selling
Stockholder, and the transactions contemplated hereby, including the Schedules
to this Agreement, furnished by or on behalf of the Selling Stockholder are true
and correct and do not contain any untrue statement of a material fact or omit
to state any material fact necessary in order to make the statements made
therein, in the light of the circumstances under which they were made, not
misleading. The Selling Stockholder acknowledges and agrees that no Purchaser
makes or has made any representations
14
or warranties with respect to the transactions contemplated hereby other than
those specifically set forth in Section 3.3.
(h) Private Placement. Neither the Selling Stockholder nor any Person
acting on the Selling Stockholder's behalf has sold or offered to sell or
solicited any offer to buy the Selling Stockholder Securities by means of any
form of general solicitation or advertising. Neither the Selling Stockholder nor
any of its Affiliates nor any person acting on the Selling Stockholder `s behalf
has, directly or indirectly, at any time within the past six months, made any
offer or sale of any security or solicitation of any offer to buy any security
under circumstances that would (i) eliminate the availability of the exemption
from registration under the Securities Act in connection with the offer and sale
of the Selling Stockholder Securities as contemplated hereby or (ii) cause the
offering of the Selling Stockholder Securities pursuant to the Transaction
Documents to be integrated with prior offerings by the Selling Stockholder for
purposes of any applicable law, regulation or stockholder approval provisions,
including, without limitation, under the rules and regulations of any Trading
Market.
(i) Acknowledgment Regarding Purchasers' Purchase of Securities. The
Selling Stockholder acknowledges and agrees that each of the Purchasers is
acting solely in the capacity of an arm's length purchaser with respect to this
Agreement and the transactions contemplated hereby. The Selling Stockholder
further acknowledges that no Purchaser is acting as a financial advisor or
fiduciary of the Selling Stockholder (or in any similar capacity) with respect
to this Agreement and the transactions contemplated hereby and any advice given
by any Purchaser or any of their respective representatives or agents in
connection with this Agreement and the transactions contemplated hereby is
merely incidental to the Purchasers' purchase of the Selling Stockholder
Securities. The Selling Stockholder further represents to each Purchaser that
the Selling Stockholder's decision to enter into this Agreement has been based
solely on the independent evaluation of the transactions contemplated hereby by
the Selling Stockholder and his representatives
3.3 Representations and Warranties of the Purchasers. Each Purchaser
hereby, as to itself only and for no other Purchaser, represents and warrants to
the Company and the Selling Stockholder as follows:
(a) Organization; Authority. Such Purchaser is an entity duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its organization with the requisite corporate or partnership
power and authority to enter into and to consummate the transactions
contemplated by the Transaction Documents and otherwise to carry out its
obligations hereunder and thereunder. The purchase by such Purchaser of the
Shares and the Additional Investment Rights hereunder has been duly authorized
by all necessary action on the part of such Purchaser. This Agreement has been
duly executed and delivered by such Purchaser and constitutes the valid and
binding obligation of such Purchaser, enforceable against it in accordance with
its terms.
(b) Investment Intent. Such Purchaser is acquiring the Securities as
principal for its own account for investment purposes only and not with a view
to or for distributing or reselling such Securities or any part thereof, without
prejudice, however, to such Purchaser's right, subject to the provisions of this
Agreement, at all times to sell or otherwise dispose of all
15
or any part of such Securities pursuant to an effective registration statement
under the Securities Act or under an exemption from such registration and in
compliance with applicable federal and state securities laws. Nothing contained
herein shall be deemed a representation or warranty by such Purchaser to hold
Securities for any period of time. Such Purchaser does not have any agreement or
understanding, directly or indirectly, with any Person to distribute any of the
Securities.
(c) Purchaser Status. At the time such Purchaser was offered the
Shares and the Additional Investment Rights, it was, and at the date hereof it
is, an "accredited investor" as defined in Rule 501(a) under the Securities Act.
(d) Experience of such Purchaser. Such Purchaser, either alone or
together with its representatives has such knowledge, sophistication and
experience in business and financial matters so as to be capable of evaluating
the merits and risks of the prospective investment in the Securities, and has so
evaluated the merits and risks of such investment. Such Purchaser is able to
bear the economic risk of an investment in the Securities and, at the present
time, is able to afford a complete loss of such investment.
(e) Access to Information. Such Purchaser acknowledges that it has
reviewed the Disclosure Materials and has been afforded: (i) the opportunity to
ask such questions as it has deemed necessary of, and to receive answers from,
representatives of the Company and the Selling Stockholder concerning the terms
and conditions of the offering of the Securities and the merits and risks of
investing in the Securities; (ii) access to information about the Company and
the Subsidiaries and their respective financial condition, results of
operations, business, properties, management and prospects sufficient to enable
it to evaluate its investment; and (iii) the opportunity to obtain such
additional information that the Company possesses or can acquire without
unreasonable effort or expense that is necessary to make an informed investment
decision with respect to the investment. Neither such inquiries nor any other
investigation conducted by or on behalf of such Purchaser or its representatives
or counsel shall modify, amend or affect such Purchaser's right to rely on the
truth, accuracy and completeness of the Disclosure Materials and the Company's
and the Selling Stockholder's representations and warranties contained in the
Transaction Documents.
ARTICLE IV
OTHER AGREEMENTS OF THE PARTIES
4.1 Transfer Restrictions.
(a) Securities may only be disposed of pursuant to an effective
registration statement under the Securities Act or pursuant to an available
exemption from the registration requirements of the Securities Act, and in
compliance with any applicable state securities laws. In connection with any
transfer of Securities other than pursuant to an effective registration
statement or to the Company or pursuant to Rule 144(k), except as otherwise set
forth herein, the Company may require the transferor to provide to the Company
an opinion of counsel selected by the transferor, the form and substance of
which opinion shall be reasonably satisfactory to the Company, to the effect
that such transfer does not require registration under the Securities Act.
16
Notwithstanding the foregoing, the Company hereby consents to and agrees to
register on the books of the Company and with its transfer agent, without any
such legal opinion, any transfer of Securities by a Purchaser to an Affiliate of
such Purchaser, provided that the transferee certifies to the Company that it is
an "accredited investor" as defined in Rule 501(a) under the Securities Act.
(b) The Purchasers agree to the imprinting, so long as is required by
this Section 4.1(b), of the following legend on any certificate evidencing
Securities:
[NEITHER] THESE SECURITIES [NOR THE SECURITIES INTO WHICH THESE
SECURITIES ARE EXERCISABLE] HAVE [NOT] BEEN REGISTERED WITH THE
SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY
STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND,
ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT
TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO,
THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN COMPLIANCE
WITH APPLICABLE STATE SECURITIES LAWS OR BLUE SKY LAWS.
NOTWITHSTANDING THE FOREGOING, THESE SECURITIES [AND THE SECURITIES
ISSUABLE UPON EXERCISE OF THESE SECURITIES] MAY BE PLEDGED IN
CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN OR FINANCING
ARRANGEMENT SECURED BY SUCH SECURITIES.
Certificates evidencing Securities shall not be required to contain such legend
or any other legend (i) while a Registration Statement covering the resale of
such Securities is effective under the Securities Act, or (ii) following any
sale of such Securities pursuant to Rule 144, or (iii) if such Securities are
eligible for sale under Rule 144(k), or (iv) if such legend is not required
under applicable requirements of the Securities Act (including judicial
interpretations and pronouncements issued by the Staff of the Commission). The
Company shall cause its counsel to issue the legal opinion included in the
Transfer Agent Instructions to the Company's transfer agent on the Effective
Date. Following the Effective Date or at such earlier time as a legend is no
longer required for certain Securities, the Company will no later than three
Trading Days following the delivery by a Purchaser to the Company or the
Company's transfer agent of a legended certificate representing such Securities
and an opinion of counsel to the extent required by Section 4.1(a), deliver or
cause to be delivered to such Purchaser a certificate representing such
Securities that is free from all restrictive and other legends. The Company may
not make any notation on its records or give instructions to any transfer agent
of the Company that enlarge the restrictions on transfer set forth in this
Section. For so long as any Purchaser owns Securities, the Company will not
effect or publicly announce its intention to effect any exchange,
recapitalization or other transaction that effectively requires or rewards
physical delivery of certificates evidencing the Common Stock.
17
(c) The Company acknowledges and agrees that a Purchaser may from time
to time pledge or grant a security interest in some or all of the Securities in
connection with a bona fide margin agreement or other loan or financing
arrangement secured by the Securities and, if required under the terms of such
agreement, loan or arrangement, such Purchaser may transfer pledged or secured
Securities to the pledgees or secured parties. Such a pledge or transfer would
not be subject to approval of the Company and no legal opinion of the pledgee,
secured party or pledgor shall be required in connection therewith. Further, no
notice shall be required of such pledge. At the appropriate Purchaser's expense,
the Company will execute and deliver such reasonable documentation as a pledgee
or secured party of Securities may reasonably request in connection with a
pledge or transfer of the Securities, including the preparation and filing of
any required prospectus supplement under Rule 424(b)(3) of the Securities Act or
other applicable provision of the Securities Act to appropriately amend the list
of Selling Stockholders thereunder.
4.2 Furnishing of Information. As long as any Purchaser owns Securities,
the Company covenants to timely file (or obtain extensions in respect thereof
and file within the applicable grace period) all reports required to be filed by
the Company after the date hereof pursuant to the Exchange Act. Upon the request
of any Purchaser, the Company shall deliver to such Purchaser a written
certification of a duly authorized officer as to whether it has complied with
the preceding sentence. The Company further covenants that it will take such
further action as any holder of Securities may reasonably request to satisfy the
provisions of Rule 144 applicable to the issuer of securities relating to
transactions for the sale of securities pursuant to Rule 144.
4.3 Integration. The Company and the Selling Stockholder shall not, and
shall use its commercially reasonably efforts to ensure that no Affiliate
thereof shall, sell, offer for sale or solicit offers to buy or otherwise
negotiate in respect of any security (as defined in Section 2 of the Securities
Act) that would be integrated with the offer or sale of the Securities in a
manner that would require the registration under the Securities Act of the sale
of the Securities to the Purchasers or that would be integrated with the offer
or sale of the Securities for purposes of the rules and regulations of any
Trading Market.
4.4 Reservation of Securities. The Company shall maintain a reserve from
its duly authorized shares of Common Stock for issuance pursuant to the
Transaction Documents in such amount as may be required to fulfill its
obligations in full under the Transaction Documents. In the event that at any
time the then authorized shares of Common Stock are insufficient for the Company
to satisfy its obligations in full under the Transaction Documents, the Company
shall promptly take such actions as may be required to increase the number of
authorized shares.
4.5 Subsequent Placements.
(a) Except up to 50,000 shares of Common Stock, from the date hereof
until the Effective Date, the Company will not, directly or indirectly, offer,
sell, grant any option to purchase, or otherwise dispose of (or announce any
offer, sale, grant or any option to purchase or other disposition of) any of its
or the Subsidiaries' equity or equity equivalent securities, including without
limitation any debt, preferred stock or other instrument or security that is, at
any time during its life and under any circumstances, convertible into or
exchangeable or
18
exercisable for Common Stock or Common Stock Equivalents (any such offer, sale,
grant, disposition or announcement being referred to as a "Subsequent
Placement").
(b) From the Effective Date until 90 Trading Days after the Effective
Date (the "Blockout Period"), the Company and Selling Stockholder will not,
directly or indirectly, effect any Subsequent Placement except as set forth in
Section 4.5(e).
(c) The Blockout Period set forth in Section 4.5(b) above shall be
extended for the number of Trading Days during such period in which (i) trading
in the Common Stock is suspended by any Trading Market, (ii) the Registration
Statement is not effective, or (iii) the prospectus included in the Registration
Statement may not be used by the Purchasers for the resale of Registrable
Securities thereunder.
(d) From the end of the Blockout Period until December 31, 2003, the
Company will not, directly or indirectly, effect any Subsequent Placement unless
the Company shall have first complied with this Section 4.5(d).
(i) The Company shall deliver to each Lead Purchaser a written
notice (the "Offer") of any proposed or intended issuance or sale or
exchange of the securities being offered (the "Offered Securities") in a
Subsequent Placement, which Offer shall (w) identify and describe the
Offered Securities, (x) describe the price and other terms upon which they
are to be issued, sold or exchanged, and the number or amount of the
Offered Securities to be issued, sold or exchanged, (y) identify the
persons or entities (if known) to which or with which the Offered
Securities are to be offered, issued, sold or exchanged and (z) offer to
issue and sell to or exchange with the Lead Purchasers a pro rata portion
of the greater of (A) twenty-five percent (25%) of the Offered Securities
and (B) $5,000,000, in each case allocated among the Lead Purchasers (a)
based on such Lead Purchaser's pro rata portion of the aggregate purchase
price paid by the Lead Purchasers for all of the Shares purchased hereunder
(the "Basic Amount"), and (b) with respect to each Lead Purchaser that
elects to purchase its Basic Amount, any additional portion of the Offered
Securities attributable to the Basic Amounts of other Lead Purchasers as
such Lead Purchaser shall indicate it will purchase or acquire should the
other Lead Purchasers subscribe for less than their Basic Amounts (the
"Undersubscription Amount").
(ii) To accept an Offer, in whole or in part, a Lead Purchaser
must deliver a written notice to the Company prior to the end of the ten
(10) Trading Day period of the Offer (the "Offer Period"), setting forth
the portion of the Lead Purchaser's Basic Amount that such Lead Purchaser
elects to purchase and, if such Lead Purchaser shall elect to purchase all
of its Basic Amount, the Undersubscription Amount, if any, that such Lead
Purchaser elects to purchase (in either case, the "Notice of Acceptance").
If the Basic Amounts subscribed for by all Lead Purchasers are less than
the total of all of the Basic Amounts, then each Lead Purchaser who has set
forth an Undersubcription Amount in its Notice of Acceptance shall be
entitled to purchase, in addition to the Basic Amounts subscribed for, the
Undersubscription Amount it has subscribed for; provided, however, that if
the Undersubscription Amounts subscribed for exceed the difference between
the total of all the Basic Amounts and the Basic Amounts subscribed for
(the
19
"Available Undersubscription Amount"), each Lead Purchaser who has subscribed
for any Undersubscription Amount shall be entitled to purchase only that portion
of the Available Undersubscription Amount as the Basic Amount of such Lead
Purchaser bears to the total Basic Amounts of all Lead Purchasers that have
subscribed for Undersubscription Amounts, subject to rounding by the Board of
Directors to the extent its deems reasonably necessary.
(iii) The Company shall have five (5) Trading Days from the expiration
of the Offer Period above to offer, issue, sell or exchange all or any part of
such Offered Securities as to which a Notice of Acceptance has not been given by
the Lead Purchasers (the "Refused Securities"), but only to the offerees
described in the Offer (if so described therein) and only upon terms and
conditions (including, without limitation, unit prices and interest rates) that
are not more favorable to the acquiring person or persons or less favorable to
the Company than those set forth in the Offer.
(iv) In the event the Company shall propose to sell less than all the
Refused Securities (any such sale to be in the manner and on the terms specified
in Section 4.5(d)(iii) above), then each Lead Purchaser may, at its sole option
and in its sole discretion, reduce the number or amount of the Offered
Securities specified in its Notice of Acceptance to an amount that shall be not
less than the number or amount of the Offered Securities that the Lead Purchaser
elected to purchase pursuant to Section 4.5(d)(ii) above multiplied by a
fraction, (i) the numerator of which shall be the number or amount of Offered
Securities the Company actually proposes to issue, sell or exchange (including
Offered Securities to be issued or sold to Lead Purchasers pursuant to Section
4.5(c)(ii) above prior to such reduction) and (ii) the denominator of which
shall be the original amount of the Offered Securities. In the event that any
Lead Purchaser so elects to reduce the number or amount of Offered Securities
specified in its Notice of Acceptance, the Company may not issue, sell or
exchange more than the reduced number or amount of the Offered Securities unless
and until such securities have again been offered to the Lead Purchasers in
accordance with Section 4.5(d)(i) above.
(v) Upon the closing of the issuance, sale or exchange of all or
less than all of the Refused Securities, the Lead Purchasers shall acquire from
the Company, and the Company shall issue to the Lead Purchasers, the number or
amount of Offered Securities specified in the Notices of Acceptance, as reduced
pursuant to Section 4.5(d)(iv) above if the Lead Purchasers have so elected,
upon the terms and conditions specified in the Offer. The purchase by the Lead
Purchasers of any Offered Securities is subject in all cases to the preparation,
execution and delivery by the Company and the Lead Purchasers of a purchase
agreement relating to such Offered Securities reasonably satisfactory in form
and substance to the Lead Purchasers and their respective counsel.
(vi) Any Offered Securities not acquired by the Lead Purchasers or
other persons in accordance with Section 4.5(d)(iii) above may not be issued,
sold or exchanged until they are again offered to the Lead Purchasers under the
procedures specified in this Agreement.
20
(e) The restrictions contained in paragraphs (a), (b) and (d) of this
Section 4.5 shall not apply to (A) any issuance of Common Stock or grant of
Options to employees, officers, directors of or consultants or advisors to the
Company, in each case, pursuant to a stock-based plan duly approved by the
Company's board of directors; (B) upon exercise, conversion or exchange of any
Common Stock Equivalents described in Schedule 3.1(f) (provided that such
exercise or conversion occurs in accordance with the terms thereof, without
amendment or modification); (C) the issuance of securities pursuant to the
Company's bona fide acquisition of another corporation, or all or a portion of
its assets, by merger, purchase of assets or other corporate reorganization in
each case, as approved by the Company's board of directors and not for the
principal purpose of raising cash, or (D) the issuance of securities in
connection with a joint venture or development agreement or strategic
partnership or similar agreement approved by the Company's board of directors, a
primary purpose of which is not to raise equity capital,
4.6 Securities Laws Disclosure; Publicity. The Company shall, on the
Closing Date, issue a press release reasonably acceptable to the Lead Purchasers
disclosing all material terms of the transactions contemplated hereby. On or
before 8:30 a.m., Eastern Standard time, on the first Trading Day following the
Closing Date, the Company shall file a Current Report on Form 8-K with the
Commission (the "8-K Filing") describing the terms of the transactions
contemplated by the Transaction Documents and including as exhibits to such
Current Report on Form 8-K this Agreement and the form of Additional Investment
Rights, in the form required by the Exchange Act. Thereafter, the Company shall
timely file any filings and notices required by the Commission or applicable law
with respect to the transactions contemplated hereby and provide copies thereof
to the Lead Purchasers promptly after filing. The Company shall, at least two
Trading Days prior to the filing or dissemination of any disclosure required by
this paragraph, provide a copy thereof to the Lead Purchasers for their review.
The Company, the Selling Stockholders and the Lead Purchasers shall consult with
each other in issuing any press releases or otherwise making public statements
or filings and other communications with the Commission or any regulatory agency
or Trading Market with respect to the transactions contemplated hereby, and no
party shall issue any such press release or otherwise make any such public
statement, filing or other communication without the prior consent of the other,
except if such disclosure is required by law, in which case the disclosing party
shall promptly provide the other party with prior notice of such public
statement, filing or other communication. Notwithstanding the foregoing, neither
the Company nor the Selling Stockholder shall publicly disclose the name of any
Purchaser, or include the name of any Purchaser in any filing with the
Commission or any regulatory agency or Trading Market, without the prior written
consent of such Purchaser, except to the extent such disclosure is required by
law or Trading Market regulations, in which case the Company and the Selling
Stockholder shall provide the Purchasers with prior notice of such disclosure.
The Company and the Selling Stockholder 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 Company or any of its Subsidiaries from and after the filing of
the 8-K Filing without the express written consent of such Purchaser. In the
event of a breach of the foregoing covenant by the Company, the Selling
Stockholder, any of its Subsidiaries, or any of its or their respective
officers, directors, employees and agents, in addition to any other remedy
provided herein or in the Transaction Documents, a Purchaser shall have the
right to make a public disclosure, in the form of a press release, public
advertisement or otherwise, of such material nonpublic information without the
prior approval by the Company, the Selling Stockholder, its
21
Subsidiaries, or any of its or their respective officers, directors, employees
or agents. No Purchaser shall have any liability to the Company, the Selling
Stockholder, its Subsidiaries, or any of its or their respective officers,
directors, employees, shareholders or agents for any such disclosure. Subject to
the foregoing, the Company, the Selling Stockholder and the Purchasers shall not
issue any press releases or any other public statements with respect to the
transactions contemplated hereby; provided, however, that the Company shall be
entitled, without the prior approval of any Purchaser and the Selling
Stockholder, to make any press release or other public disclosure with respect
to such 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 Lead Purchaser shall
be consulted by the Company in connection with any such press release or other
public disclosure prior to its release).
4.7 Use of Proceeds. Except as set forth on Schedule 4.7, the Company shall
use the net proceeds from the sale of the Company Securities hereunder for
working capital purposes and not (i) for the satisfaction of any portion of the
Company's debt (other than payment of trade payables, indebtedness not exceeding
$100,000, and accrued expenses in the ordinary course of the Company's business
and prior practices), (ii) to redeem any Company equity or equity-equivalent
securities, or (iii) to settle any outstanding litigation.
4.8 Selling Stockholder Additional Investment Rights. In the event the
Selling Stockholder fails to deliver the Underlying Shares upon the exercise by
a Purchaser of the Selling Stockholder Additional Investment Rights, the Company
agrees to issue such Underlying Shares to the Purchaser; provided, however, that
to the extent the exercise price under the Selling Stockholder Additional
Investment Right has not been previously paid to the Selling Stockholder by a
Purchaser, such Purchaser shall pay the exercise price to the Company. The
Company's obligation to issue and deliver such Underlying Shares upon the
Selling Stockholder's breach of the Selling Stockholder Additional Investment
Rights are absolute and unconditional. Nothing herein shall limit a Purchaser's
right to pursue any other remedies available to it hereunder or thereunder, at
law or in equity including, without limitation, a decree of specific performance
and/or injunctive relief with respect to the Selling Stockholder's failure to
timely deliver certificates representing shares of Common Stock upon exercise of
the Selling Stockholder Additional Investment Right as required pursuant to the
terms thereof.
4.9 Reimbursement. If any Purchaser or any of its Affiliates or any
officer, director, partner, controlling person, employee or agent of a Purchaser
or any of its Affiliates (a "Related Person") becomes involved in any capacity
in any Proceeding brought by or against any Person in connection with or as a
result of the transactions contemplated by the Transaction Documents, the
Company will indemnify and hold harmless such Purchaser or Related Person for
its reasonable legal and other expenses (including the costs of any
investigation, preparation and travel) and for any Losses incurred in connection
therewith, as such expenses or Losses are incurred, excluding only Losses that
result directly from such Purchaser's or Related Person's gross negligence or
willful misconduct. In addition, (i) the Company shall indemnify and hold
harmless each Purchaser and Related Person from and against any and all Losses,
as incurred, arising out of or relating to any breach by the Company of any of
the representations, warranties or covenants made by the Company in this
Agreement or any other Transaction Document, or any allegation by a third party
that, if true, would constitute such a breach, and (ii) the Selling Stockholder
shall indemnify and hold harmless each Purchaser and Related Person from and
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against any and all Losses, as incurred, arising out of or relating to any
breach by the Selling Stockholder of any of the representations, warranties or
covenants made by the Selling Stockholder in this Agreement or any other
Transaction Document, or any allegation by a third party that, if true, would
constitute such a breach. The conduct of any Proceedings for which
indemnification is available under this paragraph shall be governed by Section
6.4(c) below. The indemnification obligations of the Company and Selling
Stockholder under this paragraph shall be in addition to any liability that the
Company and Selling Stockholder may otherwise have and shall be binding upon and
inure to the benefit of any successors, assigns, heirs and personal
representatives of the Purchasers and any such Related Persons. The Company and
Selling Stockholder also agree that neither the Purchasers nor any Related
Persons shall have any liability to the Company, the Selling Stockholder or any
Person asserting claims on behalf of or in right of the Company and Selling
Stockholder in connection with or as a result of the transactions contemplated
by the Transaction Documents, except to the extent that any Losses incurred by
the Company and Selling Stockholder result from the gross negligence or willful
misconduct of the applicable Purchaser or Related Person in connection with such
transactions. If the Company or Selling Stockholder breaches its respective
obligations under any Transaction Document, then, in addition to any other
liabilities the Company or Selling Stockholder, as the case may be, may have
under any Transaction Document or applicable law, the Company or Selling
Stockholder shall pay or reimburse the Purchasers on demand for all costs of
collection and enforcement (including reasonable attorneys fees and expenses).
Without limiting the generality of the foregoing, the Company and Selling
Stockholder specifically agrees to reimburse the Purchasers on demand for all
costs of enforcing the indemnification obligations in this paragraph.
ARTICLE V
CONDITIONS
5.1 Conditions Precedent to the Obligations of the Purchasers. The
obligation of each Purchaser to acquire Securities at the Closing is subject to
the satisfaction or waiver by such Purchaser, at or before the Closing, of each
of the following conditions:
(a) Representations and Warranties. The representations and warranties
of the Company and the Selling Stockholder contained herein shall be true and
correct in all material respects as of the date when made and as of the Closing
as though made on and as of such date; and
(b) Performance. The Company, the Selling Stockholder and each other
Purchaser shall have performed, satisfied and complied in all material respects
with all covenants, agreements and conditions required by the Transaction
Documents to be performed, satisfied or complied with by it at or prior to the
Closing.
5.2 Conditions Precedent to the Obligations of the Company. The obligation
of the Company and the Selling Stockholder to sell Company Securities and
Selling Stockholder Securities, respectively, at the Closing is subject to the
satisfaction or waiver by such Seller, at or before the Closing, of each of the
following conditions:
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(a) Representations and Warranties. The representations and warranties
of the Purchasers contained herein shall be true and correct in all material
respects as of the date when made and as of the Closing Date as though made on
and as of such date; and
(b) Performance. The Purchasers shall have performed, satisfied and
complied in all material respects with all covenants, agreements and conditions
required by the Transaction Documents to be performed, satisfied or complied
with by the Purchasers at or prior to the Closing.
ARTICLE VI
REGISTRATION RIGHTS
6.1 Shelf Registration
(a) As promptly as possible, and in any event on or prior to the
Filing Date, the Company shall prepare and file with the Commission a "Shelf"
Registration Statement covering the resale of all Registrable Securities for an
offering to be made on a continuous basis pursuant to Rule 415. The Registration
Statement shall be on Form S-3 (except if the Company is not then eligible to
register for resale the Registrable Securities on Form S-3, in which case such
registration shall be on another appropriate form in accordance herewith as the
Purchasers may consent) and shall contain (except if otherwise directed by the
Purchasers) the "Plan of Distribution" attached here to as Exhibit C.
(b) The Company shall use its best efforts to cause the Registration
Statement to be declared effective by the Commission as promptly as possible
after the filing thereof, but in any event prior to the Required Effectiveness
Date, and shall use its best efforts to keep the Registration Statement
continuously effective under the Securities Act until the earlier of the date
that all Registrable Securities covered by such Registration Statement have been
sold or can be sold publicly under Rule 144(k) (the "Effectiveness Period").
(c) The Company shall notify each Purchaser in writing promptly (and
in any event within one business day) after receiving notification from the
Commission that the Registration Statement has been declared effective.
(d) Upon the occurrence of any Event (as defined below) and on every
monthly anniversary thereof until the applicable Event is cured, as partial
relief for the damages suffered therefrom by the Purchasers (which remedy shall
not be exclusive of any other remedies available under this Agreement, at law or
in equity), the Company shall pay to each Purchaser an amount in cash, as
liquidated damages and not as a penalty, equal to 0.5% of the aggregate purchase
price paid by such Purchaser for all the Securities. The payments to which a
Purchaser shall be entitled pursuant to this Section 6.1(d) are referred to
herein as "Event Payments". Any Event Payments payable pursuant to the terms
hereof shall apply on a pro-rata basis for any portion of a month prior to the
cure of an Event. In the event the Company fails to make Event Payments in a
timely manner, such Event Payments shall bear interest at the rate of 1.5% per
month (prorated for partial months) until paid in full.
For such purposes, each of the following shall constitute an "Event":
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(i) the Registration Statement is not filed on or prior to
the Filing Date or is not declared effective on or prior to the
Required Effectiveness Date; provided, however, that for the purposes
of the Event Payment under this Section 6.1(d) only, the Company shall
have an additional 30 days to cure the failure to declare the
Registration Statement effective on or prior to the Required
Effectiveness Date before such Event Payment is due to the Purchasers
under this Section 6.1(d);
(ii) except (A) as provided for in Section 6.1(f), (B) if the
Company is involved in a "Rule 13e-3 transaction" as defined in Rule
13e-3 under the Exchange Act, or (C) a merger or consolidation of the
Company or a sale of more than one-half of the assets of the Company
in one or a series of related transactions, unless following such
transaction or series of transactions, the holders of the Company's
securities prior to the first such transaction continue to hold at
least 50% of the voting rights and equity interests of the surviving
entity or acquirer (clauses (B) and (C), collectively, the "Excluded
Events"), after the Effective Date, a Purchaser is not permitted to
sell Registrable Securities under the Registration Statement (or a
subsequent Registration Statement filed in replacement thereof) for
any reason for five or more Trading Days (whether or not consecutive);
(iii) except as a result of the Excluded Events, the Common
Stock is not listed or quoted, or is suspended from trading, on an
Eligible Market for a period of three Trading Days (which need not be
consecutive Trading Days) during the Effectiveness Period;
(iv) the Company fails for any reason to deliver a
certificate evidencing any Securities to a Purchaser within three
Trading Days after delivery of such certificate is required pursuant
to any Transaction Document or the exercise rights of the Purchasers
pursuant to the Additional Investment Rights are otherwise suspended
for any reason; or
(v) the Company fails to have available a sufficient number
of authorized but unissued and otherwise unreserved shares of Common
Stock available to issue Underlying Shares upon any exercise of the
Additional Investment Rights or, except as a result of the Excluded
Events, during the Effectiveness Period, any Shares or Underlying
Shares are not listed on an Eligible Market.
(e) If (i) any Event occurs and remains uncured for 60 days; (ii)
the Company fails to make any cash payment required under the Transaction
Documents and such failure is not cured within five days after notice of such
default is first given to the Company by a Purchaser; (iii) the Company defaults
in the timely performance of any other obligation under the Transaction
Documents and such default continues uncured for a period of 20 days after the
date on which notice of such default is first given to the Company by a
Purchaser (it being understood that no prior notice need be given in the case of
a default that cannot reasonably be cured within 20 days), then at any time or
times thereafter any Purchaser may deliver to the Company a notice (a
"Repurchase Notice") requiring the Company to repurchase all or any portion of
the Shares and any Underlying Shares then held by such Purchaser at a price (the
"Repurchase Price") per share equal to 115% of the average of the Closing Prices
for the five Trading Days preceding either (a) the date of delivery of the
notice requiring such repurchase, or (b) the date on which
25
the applicable repurchase price (together with any other payments, expenses and
liquidated damages then due and payable under the Transaction Documents) is paid
in full, whichever is greater. If a Purchaser delivers a Repurchase Notice
pursuant to this Section, the Company shall pay the aggregate Repurchase Price
(together with any other payments, expenses and liquidated damages then due and
payable pursuant to the Transaction Documents) to such Purchaser no later than
the fifth Trading Day following the date of delivery of the Repurchase Notice,
and upon receipt thereof such Purchaser shall deliver original certificates
evidencing the Securities so repurchased to the Company (to the extent such
certificates have been delivered to such Purchaser).
(f) Notwithstanding anything in this Agreement to the contrary, after
60 consecutive Trading Days of continuous effectiveness of the initial
Registration Statement filed and declared effective pursuant to this Agreement,
the Company may, by written notice to the Purchasers, suspend sales under a
Registration Statement after the Effective Date thereof and/or require that the
Purchasers immediately cease the sale of shares of Common Stock pursuant thereto
and/or defer the filing of any subsequent Registration Statement if the Company
is engaged in a material merger, acquisition or sale and the Board of Directors
determines in good faith, by appropriate resolutions, that, as a result of such
activity, (A) it would be materially detrimental to the Company (other than as
relating solely to the price of the Common Stock) to file a Registration
Statement at such time and (B) it is in the best interests of the Company to
defer proceeding with such registration at such time. Upon receipt of such
notice, each Purchaser shall immediately discontinue any sales of Registrable
Securities pursuant to such registration until such Purchaser has received
copies of a supplemented or amended Prospectus or until such Purchaser is
advised in writing by the Company that the then-current Prospectus may be used
and has received copies of any additional or supplemental filings that are
incorporated or deemed incorporated by reference in such Prospectus. In no
event, however, shall this right be exercised to suspend sales beyond the period
during which (in the good faith determination of the Company's Board of
Directors) the failure to require such suspension would be materially
detrimental to the Company. The Company's rights under this Section 6(e) may be
exercised for a period of no more than 30 days in any twelve-month period, of
which no more than 5 days may be consecutive. Immediately after the end of any
suspension period under this Section 6(e), the Company shall take all necessary
actions (including filing any required supplemental prospectus) to restore the
effectiveness of the applicable Registration Statement and the ability of the
Purchasers to publicly resell their Registrable Securities pursuant to such
effective Registration Statement.
(g) The Company shall not, prior to the Effective Date of the
Registration Statement, prepare and file with the Commission a registration
statement relating to an offering for its own account or the account of others
under the Securities Act of any of its equity securities.
6.2 Registration Procedures. In connection with the Company's registration
obligations hereunder, the Company shall:
(a) Not less than three Trading Days prior to the filing of a
Registration Statement or any related Prospectus or any amendment or supplement
thereto (including any document that would be incorporated or deemed to be
incorporated therein by reference), the
26
Company shall (i) furnish to the Lead Purchasers and Purchaser Counsel copies of
all such documents proposed to be filed, which documents (other than those
incorporated or deemed to be incorporated by reference) will be subject to the
review of such Lead Purchasers and Purchaser Counsel, and (ii) cause its
officers and directors, counsel and independent certified public accountants to
respond to such inquiries as shall be necessary, in the reasonable opinion of
respective counsel, to conduct a reasonable investigation within the meaning of
the Securities Act. The Company shall not file a Registration Statement or any
such Prospectus or any amendments or supplements thereto to which Purchasers
holding a majority of the Registrable Securities shall reasonably object within
three Trading Days of receipt.
(b) (i) Subject to Section 6.1(f), prepare and file with the
Commission such amendments, including post-effective amendments, to each
Registration Statement and the Prospectus used in connection therewith as may be
necessary to keep the Registration Statement continuously effective, as to the
applicable Registrable Securities for the Effectiveness Period and prepare and
file with the Commission such additional Registration Statements in order to
register for resale under the Securities Act all of the Registrable Securities;
(ii) cause the related Prospectus to be amended or supplemented by any required
Prospectus supplement, and as so supplemented or amended to be filed pursuant to
Rule 424; (iii) respond as promptly as reasonably possible, and in any event
within 12 Trading Days, to any comments received from the Commission with
respect to the Registration Statement or any amendment thereto and as promptly
as reasonably possible provide the Purchasers true and complete copies of all
correspondence from and to the Commission relating to the Registration
Statement; and (iv) comply in all material respects with the provisions of the
Securities Act and the Exchange Act with respect to the disposition of all
Registrable Securities covered by the Registration Statement during the
applicable period in accordance with the intended methods of disposition by the
Purchasers thereof set forth in the Registration Statement as so amended or in
such Prospectus as so supplemented
(c) Notify the Purchasers of Registrable Securities to be sold and
Purchaser Counsel as promptly as reasonably possible, and (if requested by any
such Person) confirm such notice in writing no later than one Trading Day
thereafter, of any of the following events: (i) the Commission notifies the
Company whether there will be a "review" of any Registration Statement; (ii) the
Commission comments in writing on any Registration Statement (in which case the
Company shall deliver to each Purchaser a copy of such comments and of all
written responses thereto); (iii) any Registration Statement or any
post-effective amendment is declared effective; (iv) the Commission or any other
Federal or state governmental authority requests any amendment or supplement to
any Registration Statement or Prospectus or requests additional information
related thereto; (v) the Commission issues any stop order suspending the
effectiveness of any Registration Statement or initiates any Proceedings for
that purpose; (vi) the Company receives notice of any suspension of the
qualification or exemption from qualification of any Registrable Securities for
sale in any jurisdiction, or the initiation or threat of any Proceeding for such
purpose; or (vii) the financial statements included in any Registration
Statement become ineligible for inclusion therein or any statement made in any
Registration Statement or Prospectus or any document incorporated or deemed to
be incorporated therein by reference is untrue in any material respect or any
revision to a Registration Statement, Prospectus or other document is required
so that it will not contain any untrue statement of a material fact or
27
omit to state any material fact required to be stated therein or necessary to
make the statements therein, in the light of the circumstances under which they
were made, not misleading.
(d) Use its best efforts to avoid the issuance of or, if issued,
obtain the withdrawal of (i) any order suspending the effectiveness of any
Registration Statement, or (ii) any suspension of the qualification (or
exemption from qualification) of any of the Registrable Securities for sale in
any jurisdiction, as soon as possible.
(e) If requested by the Lead Purchasers, furnish to each Lead
Purchaser and Purchaser Counsel, without charge, at least one conformed copy of
each Registration Statement and each amendment thereto, including financial
statements and schedules, all documents incorporated or deemed to be
incorporated therein by reference, and all exhibits to the extent requested by
such Person (including those previously furnished or incorporated by reference)
promptly after the filing of such documents with the Commission.
(f) Promptly deliver to each Purchaser and Purchaser Counsel, without
charge, as many copies of the Prospectus or Prospectuses (including each form of
prospectus) and each amendment or supplement thereto as such Persons may
reasonably request. The Company hereby consents to the use of such Prospectus
and each amendment or supplement thereto by each of the selling Purchasers in
connection with the offering and sale of the Registrable Securities covered by
such Prospectus and any amendment or supplement thereto to the extent permitted
by federal and state securities laws and regulations.
(g) (i) In the time and manner required by each Trading Market,
prepare and file with such Trading Market an additional shares listing
application covering all of the Registrable Securities; (ii) take all steps
necessary to cause such Registrable Securities to be approved for listing on
each Trading Market as soon as possible thereafter; (iii) provide to the
Purchasers evidence of such listing; and (iv) except as a result of the Excluded
Events, during the Effectiveness Period, maintain the listing of such
Registrable Securities on each such Trading Market or another Eligible Market.
(h) Prior to any public offering of Registrable Securities, use its
best efforts to register or qualify or cooperate with the selling Purchasers and
Purchaser Counsel in connection with the registration or qualification (or
exemption from such registration or qualification) of such Registrable
Securities for offer and sale under the securities or Blue Sky laws of such
jurisdictions within the United States as any Purchaser requests in writing, to
keep each such registration or qualification (or exemption therefrom) effective
during the Effectiveness Period and to do any and all other acts or things
necessary or advisable to enable the disposition in such jurisdictions of the
Registrable Securities covered by a Registration Statement; provided, however,
that the Company shall not be obligated to file any general consent to service
of process or to qualify as a foreign corporation or as a dealer in securities
in any jurisdiction in which it is not so qualified or to subject itself to
taxation in respect of doing business in any jurisdiction in which it is not
otherwise so subject.
(i) Cooperate with the Purchasers to facilitate the timely
preparation and delivery of certificates representing Registrable Securities to
be delivered to a transferee pursuant to a Registration Statement, which
certificates shall be free, to the extent permitted by this
28
Agreement under law, of all restrictive legends, and to enable such Registrable
Securities to be in such denominations and registered in such names as any such
Purchasers may request.
(j) Upon the occurrence of any event described in Section 6.2(c)(vii),
as promptly as reasonably possible, prepare a supplement or amendment, including
a post-effective amendment, to the Registration Statement or a supplement to the
related Prospectus or any document incorporated or deemed to be incorporated
therein by reference, and file any other required document so that, as
thereafter delivered, neither the Registration Statement nor such Prospectus
will contain an untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the statements therein,
in the light of the circumstances under which they were made, not misleading.
(k) Cooperate with any due diligence investigation undertaken by the
Purchasers in connection with the sale of Registrable Securities, including,
without limitation, by making available any documents and information; provided
that the Company will not deliver or make available to any Purchaser material,
nonpublic information unless such Purchaser specifically requests in advance to
receive material, nonpublic information in writing.
(l) Comply with all applicable rules and regulations of the
Commission.
6.3 Registration Expenses. The Company shall pay (or reimburse the
Purchasers for) all fees and expenses incident to the performance of or
compliance with Article VI of this Agreement by the Company, including without
limitation (a) all registration and filing fees and expenses, including without
limitation those related to filings with the Commission, any Trading Market and
in connection with applicable state securities or Blue Sky laws, (b) printing
expenses (including without limitation expenses of printing certificates for
Registrable Securities and of printing prospectuses requested by the
Purchasers), (c) messenger, telephone and delivery expenses, (d) fees and
disbursements of counsel for the Company, (e) fees and expenses of all other
Persons retained by the Company in connection with the consummation of the
transactions contemplated by this Agreement, and (f) all listing fees to be paid
by the Company to the Trading Market.
6.4 Indemnification
(a) Indemnification by the Company. The Company shall, notwithstanding
any termination of this Agreement, indemnify and hold harmless each Purchaser,
the officers, directors, partners, members, agents and employees of each of
them, each Person who controls any such Purchaser (within the meaning of Section
15 of the Securities Act or Section 20 of the Exchange Act) and the officers,
directors, partners, members, agents and employees of each such controlling
Person, to the fullest extent permitted by applicable law, from and against any
and all Losses, as incurred, arising out of or relating to any untrue or alleged
untrue statement of a material fact contained in the Registration Statement, any
Prospectus or any form of prospectus or in any amendment or supplement thereto
or in any preliminary prospectus, or arising out of or relating to any omission
or alleged omission of a material fact required to be stated therein or
necessary to make the statements therein (in the case of any Prospectus or form
of prospectus or supplement thereto, in the light of the circumstances under
which they were made) not
29
misleading, except to the extent, but only to the extent, that (i) such untrue
statements, alleged untrue statements, omissions or alleged omissions are based
solely upon information regarding such Purchaser furnished in writing to the
Company by such Purchaser expressly for use therein, or to the extent that such
information relates to such Purchaser or such Purchaser's proposed method of
distribution of Registrable Securities and was reviewed and expressly approved
in writing by such Purchaser expressly for use in the Registration Statement,
such Prospectus or such form of Prospectus or in any amendment or supplement
thereto or (ii) in the case of an occurrence of an event of the type specified
in Section 6.2(c)(v)-(vii), the use by such Purchaser of an outdated or
defective Prospectus after the Company has notified such Purchaser in writing
that the Prospectus is outdated or defective and prior to the receipt by such
Purchaser of the Advice contemplated in Section 6.5. The Company shall notify
the Purchasers promptly of the institution, threat or assertion of any
Proceeding of which the Company is aware in connection with the transactions
contemplated by this Agreement.
(b) Indemnification by Purchasers. Each Purchaser shall, severally and
not jointly, indemnify and hold harmless the Company, its directors, officers,
agents and employees, each Person who controls the Company (within the meaning
of Section 15 of the Securities Act and Section 20 of the Exchange Act), and the
directors, officers, agents or employees of such controlling Persons, to the
fullest extent permitted by applicable law, from and against all Losses (as
determined by a court of competent jurisdiction in a final judgment not subject
to appeal or review) arising solely out of any untrue statement of a material
fact contained in the Registration Statement, any Prospectus, or any form of
prospectus, or in any amendment or supplement thereto, or arising solely out of
any omission of a material fact required to be stated therein or necessary to
make the statements therein (in the case of any Prospectus or form of prospectus
or supplement thereto, in the light of the circumstances under which they were
made) not misleading to the extent, but only to the extent, that such untrue
statement or omission is contained in any information so furnished in writing by
such Purchaser to the Company specifically for inclusion in such Registration
Statement or such Prospectus or to the extent that (i) such untrue statements or
omissions are based solely upon information regarding such Purchaser furnished
in writing to the Company by such Purchaser expressly for use therein, or to the
extent that such information relates to such Purchaser or such Purchaser's
proposed method of distribution of Registrable Securities and was reviewed and
expressly approved in writing by such Purchaser expressly for use in the
Registration Statement, such Prospectus or such form of Prospectus or in any
amendment or supplement thereto or (ii) in the case of an occurrence of an event
of the type specified in Section 6.2(c)(v)-(vii), the use by such Purchaser of
an outdated or defective Prospectus after the Company has notified such
Purchaser in writing that the Prospectus is outdated or defective and prior to
the receipt by such Purchaser of the Advice contemplated in Section 6.5. In no
event shall the liability of any selling Purchaser hereunder be greater in
amount than the dollar amount of the net proceeds received by such Purchaser
upon the sale of the Registrable Securities giving rise to such indemnification
obligation.
(c) Conduct of Indemnification Proceedings. If any Proceeding shall be
brought or asserted against any Person entitled to indemnity hereunder (an
"Indemnified Party"), such Indemnified Party shall promptly notify the Person
from whom indemnity is sought (the "Indemnifying Party") in writing, and the
Indemnifying Party shall assume the defense thereof, including the employment of
counsel reasonably satisfactory to the Indemnified Party and the payment of all
fees and expenses incurred in connection with defense thereof;
30
provided, that the failure of any Indemnified Party to give such notice shall
not relieve the Indemnifying Party of its obligations or liabilities pursuant to
this Agreement, except (and only) to the extent that it shall be finally
determined by a court of competent jurisdiction (which determination is not
subject to appeal or further review) that such failure shall have proximately
and materially adversely prejudiced the Indemnifying Party.
An Indemnified Party shall have the right to employ separate counsel
in any such Proceeding and to participate in the defense thereof, but the fees
and expenses of such counsel shall be at the expense of such Indemnified Party
or Parties unless: (i) the Indemnifying Party has agreed in writing to pay such
fees and expenses; or (ii) the Indemnifying Party shall have failed promptly to
assume the defense of such Proceeding and to employ counsel reasonably
satisfactory to such Indemnified Party in any such Proceeding; or (iii) the
named parties to any such Proceeding (including any impleaded parties) include
both such Indemnified Party and the Indemnifying Party, and such Indemnified
Party shall have been advised by counsel that a conflict of interest is likely
to exist if the same counsel were to represent such Indemnified Party and the
Indemnifying Party (in which case, if such Indemnified Party notifies the
Indemnifying Party in writing that it elects to employ separate counsel at the
expense of the Indemnifying Party, the Indemnifying Party shall not have the
right to assume the defense thereof and such counsel shall be at the expense of
the Indemnifying Party). It being understood, however, that the Indemnifying
Party shall not, in connection with any one such Proceeding be liable for the
fees and expenses of more than one separate firm of attorneys at any time for
all Indemnified Parties, which firm shall be appointed by a majority of the
Indemnified Parties; provided, however, that in the case a single firm of
attorneys would be inappropriate due to actual or potential differing interests
or conflicts between such Indemnified Parties and any other party represented by
such counsel in such Proceeding or otherwise, then the Indemnifying Party shall
be liable for the fees and expenses of one additional firm of attorneys with
respect to such Indemnified Parties. The Indemnifying Party shall not be liable
for any settlement of any such Proceeding effected without its written consent,
which consent shall not be unreasonably withheld. No Indemnifying Party shall,
without the prior written consent of the Indemnified Party, effect any
settlement of any pending Proceeding in respect of which any Indemnified Party
is a party, unless such settlement includes an unconditional release of such
Indemnified Party from all liability on claims that are the subject matter of
such Proceeding.
All fees and expenses of the Indemnified Party (including reasonable
fees and expenses to the extent incurred in connection with investigating or
preparing to defend such Proceeding in a manner not inconsistent with this
Section) shall be paid to the Indemnified Party, as incurred, within ten Trading
Days of written notice thereof to the Indemnifying Party (regardless of whether
it is ultimately determined that an Indemnified Party is not entitled to
indemnification hereunder; provided, that the Indemnifying Party may require
such Indemnified Party to undertake to reimburse all such fees and expenses to
the extent it is finally judicially determined that such Indemnified Party is
not entitled to indemnification hereunder).
(d) Contribution. If a claim for indemnification under Section 6.4(a)
or (b) is unavailable to an Indemnified Party (by reason of public policy or
otherwise), then each Indemnifying Party, in lieu of indemnifying such
Indemnified Party, shall contribute to the amount paid or payable by such
Indemnified Party as a result of such Losses, in such proportion as is
appropriate to reflect the relative fault of the Indemnifying Party and
Indemnified Party in
31
connection with the actions, statements or omissions that resulted in such
Losses as well as any other relevant equitable considerations. The relative
fault of such Indemnifying Party and Indemnified Party shall be determined by
reference to, among other things, whether any action in question, including any
untrue or alleged untrue statement of a material fact or omission or alleged
omission of a material fact, has been taken or made by, or relates to
information supplied by, such Indemnifying Party or Indemnified Party, and the
parties' relative intent, knowledge, access to information and opportunity to
correct or prevent such action, statement or omission. The amount paid or
payable by a party as a result of any Losses shall be deemed to include, subject
to the limitations set forth in Section 6.4(c), any reasonable attorneys' or
other reasonable fees or expenses incurred by such party in connection with any
Proceeding to the extent such party would have been indemnified for such fees or
expenses if the indemnification provided for in this Section was available to
such party in accordance with its terms.
The parties hereto agree that it would not be just and equitable if
contribution pursuant to this Section 6.4(d) were determined by pro rata
allocation or by any other method of allocation that does not take into account
the equitable considerations referred to in the immediately preceding paragraph.
Notwithstanding the provisions of this Section 6.4(d), no Purchaser shall be
required to contribute, in the aggregate, any amount in excess of the amount by
which the proceeds actually received by such Purchaser from the sale of the
Registrable Securities subject to the Proceeding exceeds the amount of any
damages that such Purchaser has otherwise been required to pay by reason of such
untrue or alleged untrue statement or omission or alleged omission. No Person
guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of
the Securities Act) shall be entitled to contribution from any Person who was
not guilty of such fraudulent misrepresentation.
The indemnity and contribution agreements contained in this Section
are in addition to any liability that the Indemnifying Parties may have to the
Indemnified Parties.
6.5 Dispositions. Each Purchaser agrees that it will comply with the
prospectus delivery requirements of the Securities Act as applicable to it in
connection with sales of Registrable Securities pursuant to the Registration
Statement. Each Purchaser further agrees that, upon receipt of a notice from the
Company of the occurrence of any event of the kind described in Sections
6.2(c)(v), (vi) or (vii), such Purchaser will discontinue disposition of such
Registrable Securities under the Registration Statement until such Purchaser's
receipt of the copies of the supplemented Prospectus and/or amended Registration
Statement contemplated by Section 6.2(j), or until it is advised in writing (the
"Advice") by the Company that the use of the applicable Prospectus may be
resumed, and, in either case, has received copies of any additional or
supplemental filings that are incorporated or deemed to be incorporated by
reference in such Prospectus or Registration Statement. The Company may provide
appropriate stop orders to enforce the provisions of this paragraph.
6.6 No Piggyback on Registrations. Neither the Company nor any of its
security holders (other than the Purchasers in such capacity pursuant hereto)
may include securities of the Company in the Registration Statement other than
the Registrable Securities, and the Company shall not after the date hereof
enter into any agreement providing any such right to any of its security
holders.
32
6.7 Piggy-Back Registrations. If at any time during the Effectiveness
Period there is not an effective Registration Statement covering all of the
Registrable Securities and the Company shall determine to prepare and file with
the Commission a registration statement relating to an offering for its own
account or the account of others under the Securities Act of any of its equity
securities, other than on Form S-4 or Form S-8 (each as promulgated under the
Securities Act) or their then equivalents relating to equity securities to be
issued solely in connection with any acquisition of any entity or business or
equity securities issuable in connection with stock option or other employee
benefit plans, then the Company shall send to each Purchaser written notice of
such determination and if, within ten days after receipt of such notice, any
such Purchaser shall so request in writing, the Company shall include in such
registration statement all or any part of such Registrable Securities such
Purchaser requests to be registered.
ARTICLE VII
MISCELLANEOUS
7.1 Termination. This Agreement may be terminated by the Company, the
Selling Stockholder or any Purchaser, by written notice to the other parties, if
the Closing has not been consummated by the third Business Day following the
date of this Agreement; provided that no such termination will affect the right
of any party to sue for any breach by the other party (or parties).
7.2 Fees and Expenses. At the Closing, the Sellers shall pay to Mainfield
Enterprises, Inc. an aggregate of $37,500 for their legal fees and expenses
incurred in connection with its due diligence and the preparation and
negotiation of the Transaction Documents, of which amount $20,000 has been
previously paid by the Company to the Purchaser Counsel. In lieu of the
foregoing payment, Mainfield Enterprises, Inc. may retain such amount at the
Closing or require the Company to pay such amount directly to Purchaser Counsel.
Except as expressly set forth in the Transaction Documents to the contrary, each
party shall pay the fees and expenses of its advisers, counsel, accountants and
other experts, if any, and all other expenses incurred by such party incident to
the negotiation, preparation, execution, delivery and performance of this
Agreement. The Sellers shall pay all transfer agent fees, stamp taxes and other
taxes and duties levied in connection with the sale and issuance of their
applicable Securities.
7.3 Entire Agreement. The Transaction Documents, together with the Exhibits
and Schedules thereto, contain the entire understanding of the parties with
respect to the subject matter hereof and supersede all prior agreements and
understandings, oral or written, with respect to such matters, which the parties
acknowledge have been merged into such documents, exhibits and schedules. At or
after the Closing, and without further consideration, the Sellers will execute
and deliver to the Purchasers such further documents as may be reasonably
requested in order to give practical effect to the intention of the parties
under the Transaction Documents.
7.4 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 6:30 p.m. (New York City
33
time) on a Trading Day, (b) the next Trading 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 Trading Day or later
than 6:30 p.m. (New York City time) on any Trading Day, (c) the Trading Day
following the date of deposit with a nationally recognized overnight courier
service, or (d) upon actual receipt by the party to whom such notice is required
to be given. The addresses and facsimile numbers for such notices and
communications are those set forth on the signature pages hereof, or such other
address or facsimile number as may be designated in writing hereafter, in the
same manner, by any such Person.
7.5 Amendments; Waivers. No provision of this Agreement may be waived or
amended except in a written instrument signed, in the case of an amendment, by
the Company and each of the Purchasers or, in the case of a waiver, by the party
against whom enforcement of any such waiver is sought. No waiver of any default
with respect to any provision, condition or requirement of this Agreement shall
be deemed to be a continuing waiver in the future or a waiver of any subsequent
default or a waiver of any other provision, condition or requirement hereof, nor
shall any delay or omission of either party to exercise any right hereunder in
any manner impair the exercise of any such right. Notwithstanding the foregoing,
a waiver or consent to depart from the provisions hereof with respect to a
matter that relates exclusively to the rights of Purchasers under Article VI may
be given by Purchasers holding at least a majority of the Registrable Securities
to which such waiver or consent relates.
7.6 Construction. The headings herein are for convenience only, do not
constitute a part of this Agreement and shall not be deemed to limit or affect
any of the provisions hereof. The language used in this Agreement will be deemed
to be the language chosen by the parties to express their mutual intent, and no
rules of strict construction will be applied against any party.
7.7 Successors and Assigns. This Agreement shall be binding upon and inure
to the benefit of the parties and their successors and permitted assigns. The
Sellers may not assign this Agreement or any rights or obligations hereunder
without the prior written consent of the Purchasers. Any Purchaser may assign
its rights under this Agreement to any Person to whom such Purchaser assigns or
transfers any Securities, provided such transferee agrees in writing to be
bound, with respect to the transferred Securities, by the provisions hereof that
apply to the "Purchasers." Notwithstanding anything to the contrary herein,
Securities may be assigned to any Person in connection with a bona fide margin
account or other loan or financing arrangement secured by such Securities.
7.8 No Third-Party Beneficiaries. This Agreement is intended for the
benefit of the parties hereto and their respective successors and permitted
assigns and is not for the benefit of, nor may any provision hereof be enforced
by, any other Person, except that each Related Person is an intended third party
beneficiary of Section 4.9 and each Indemnified Party is an intended third party
beneficiary of Section 6.4 and (in each case) may enforce the provisions of such
Sections directly against the parties with obligations thereunder.
7.9 Governing Law; Venue; Waiver of Jury Trial. THE CORPORATE LAWS OF THE
STATE OF DELAWARE SHALL GOVERN ALL ISSUES CONCERNING THE RELATIVE RIGHTS OF THE
COMPANY AND ITS STOCKHOLDERS. ALL QUESTIONS CONCERNING THE CONSTRUCTION,
VALIDITY, ENFORCEMENT AND
34
INTERPRETATION OF THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED AND ENFORCED
IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK. THE SELLERS AND PURCHASERS
HEREBY IRREVOCABLY SUBMIT TO THE EXCLUSIVE JURISDICTION OF THE STATE AND FEDERAL
COURTS SITTING IN THE CITY OF NEW YORK, BOROUGH OF MANHATTAN FOR THE
ADJUDICATION OF ANY DISPUTE BROUGHT BY THE SELLERS OR ANY PURCHASER HEREUNDER,
IN CONNECTION HEREWITH OR WITH ANY TRANSACTION CONTEMPLATED HEREBY OR DISCUSSED
HEREIN (INCLUDING WITH RESPECT TO THE ENFORCEMENT OF ANY OF THE TRANSACTION
DOCUMENTS), AND HEREBY IRREVOCABLY WAIVE, AND AGREE NOT TO ASSERT IN ANY SUIT,
ACTION OR PROCEEDING BROUGHT BY THE SELLERS OR ANY PURCHASER, ANY CLAIM THAT IT
IS NOT PERSONALLY SUBJECT TO THE JURISDICTION OF ANY SUCH COURT, OR THAT SUCH
SUIT, ACTION OR PROCEEDING IS IMPROPER. EACH PARTY HEREBY IRREVOCABLY WAIVES
PERSONAL SERVICE OF PROCESS AND CONSENTS TO PROCESS BEING SERVED IN ANY SUCH
SUIT, ACTION OR PROCEEDING BY MAILING A COPY THEREOF VIA REGISTERED OR CERTIFIED
MAIL OR OVERNIGHT DELIVERY (WITH EVIDENCE OF DELIVERY) TO SUCH PARTY AT THE
ADDRESS IN EFFECT FOR NOTICES TO IT UNDER THIS AGREEMENT AND AGREES THAT SUCH
SERVICE SHALL CONSTITUTE GOOD AND SUFFICIENT SERVICE OF PROCESS AND NOTICE
THEREOF. NOTHING CONTAINED HEREIN SHALL BE DEEMED TO LIMIT IN ANY WAY ANY RIGHT
TO SERVE PROCESS IN ANY MANNER PERMITTED BY LAW. THE SELLERS AND PURCHASERS
HEREBY WAIVE ALL RIGHTS TO A TRIAL BY JURY.
7.10 Survival. The representations, warranties, agreements and covenants
contained herein shall survive the Closing and the delivery and/or exercise of
the Securities, as applicable.
7.11 Execution. This Agreement may be executed in two or more counterparts,
all of which when taken together shall be considered one and the same agreement
and shall become effective when counterparts have been signed by each party and
delivered to the other party, it being understood that both parties need not
sign the same counterpart. 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.
7.12 Severability. If any provision of this Agreement is held to be invalid
or unenforceable in any respect, the validity and enforceability of the
remaining terms and provisions of this Agreement shall not in any way be
affected or impaired thereby and the parties will attempt to agree upon a valid
and enforceable provision that is a reasonable substitute therefor, and upon so
agreeing, shall incorporate such substitute provision in this Agreement.
7.13 Rescission and Withdrawal Right. Notwithstanding anything to the
contrary contained in (and without limiting any similar provisions of) the
Transaction Documents, whenever any Purchaser exercises a right, election,
demand or option under a Transaction Document and the related Seller does not
timely perform its related obligations within the periods therein provided, then
such Purchaser may rescind or withdraw, in its sole discretion
35
from time to time upon written notice to such Seller, any relevant notice,
demand or election in whole or in part without prejudice to its future actions
and rights.
7.14 Replacement of Securities. If any certificate or instrument evidencing
any Securities is mutilated, lost, stolen or destroyed, the Company shall issue
or cause to be issued in exchange and substitution for and upon cancellation
thereof, or in lieu of and substitution therefor, a new certificate or
instrument, but only upon receipt of evidence reasonably satisfactory to the
Company of such loss, theft or destruction and customary indemnity, if
requested. The applicants for a new certificate or instrument under such
circumstances shall also pay any reasonable third-party costs associated with
the issuance of such replacement Securities.
7.15 Remedies. In addition to being entitled to exercise all rights
provided herein or granted by law, including recovery of damages, each of the
Purchasers and the Sellers will be entitled to specific performance under the
Transaction Documents. The parties agree that monetary damages may not be
adequate compensation for any loss incurred by reason of any breach of
obligations described in the foregoing sentence and hereby agrees to waive in
any action for specific performance of any such obligation the defense that a
remedy at law would be adequate.
7.16 Payment Set Aside. To the extent that any Seller makes a payment or
payments to any Purchaser hereunder or pursuant to the Additional Investment
Rights or any Purchaser enforces or exercises its rights hereunder or
thereunder, and such payment or payments or the proceeds of such enforcement or
exercise or any part thereof are subsequently invalidated, declared to be
fraudulent or preferential, set aside, recovered from, disgorged by or are
required to be refunded, repaid or otherwise restored to such Seller by a
trustee, receiver or any other person under any law (including, without
limitation, any bankruptcy law, state or federal law, common law or equitable
cause of action), then to the extent of any such restoration the obligation or
part thereof originally intended to be satisfied shall be revived and continued
in full force and effect as if such payment had not been made or such
enforcement or setoff had not occurred.
7.17 Adjustments in Share Numbers and Prices. In the event of any stock
split, subdivision, dividend or distribution payable in shares of Common Stock
(or other securities or rights convertible into, or entitling the holder thereof
to receive directly or indirectly shares of Common Stock), combination or other
similar recapitalization or event occurring after the date hereof, each
reference in any Transaction Document to a number of shares or a price per share
shall be amended to appropriately account for such event.
7.18 Independent Nature of Purchasers' Obligations and Rights. The
obligations of each Purchaser under any Transaction Document are several and not
joint with the obligations of any other Purchaser, and no Purchaser shall be
responsible in any way for the performance of the obligations of any other
Purchaser under any Transaction Document. The decision of each Purchaser to
purchase Shares pursuant to this Agreement has been made by such Purchaser
independently of any other Purchaser and independently of any information,
materials, statements or opinions as to the business, affairs, operations,
assets, properties, liabilities, results of operations, condition (financial or
otherwise) or prospects of the Company or of the Subsidiary which may have been
made or given by any other Purchaser or by any agent or
36
employee of any other Purchaser, and no Purchaser or any of its agents or
employees shall have any liability to any other Purchaser (or any other person)
relating to or arising from any such information, materials, statements or
opinions. Nothing contained herein or in any Transaction Document, and no action
taken by any Purchaser pursuant thereto, shall be deemed to constitute the
Purchasers as a partnership, an association, a joint venture or any other kind
of entity, or create a presumption that the Purchasers are in any way acting in
concert or as a group with respect to such obligations or the transactions
contemplated by the Transaction Document. Each Purchaser acknowledges that no
other Purchaser has acted as agent for such Purchaser in connection with making
its investment hereunder and that no other Purchaser will be acting as agent of
such Purchaser in connection with monitoring its investment hereunder. Each
Purchaser shall be entitled to independently protect and enforce its rights,
including without limitation the rights arising out of this Agreement or out of
the other Transaction Documents, and it shall not be necessary for any other
Purchaser to be joined as an additional party in any proceeding for such
purpose.
[Signature pages to follow]
37
IN WITNESS WHEREOF, the parties hereto have caused this Securities Purchase
Agreement to be duly executed by their respective authorized signatories as of
the date first indicated above.
CENTRAL EUROPEAN DISTRIBUTION CORPORATION
By: /s/ William V. Carey
--------------------
Name: William V. Carey
Title: Chairman, Chief Executive Officer and President
Address for Notice:
1343 Main Street
Sarasota, Florida 34236
Facsimile No.: (941) 330-9617
Telephone No.: (941) 330-1558
Attn: Chief Financial Officer
With a copy to: Kronish Lieb Weiner & Hellman LLP
1114 Avenue of the Americas
New York, NY 10036-7798
Facsimile No.: (212) 479-6275
Telephone No.: (212) 479-6280
Attn: Michael S. Novins
/s/ Jeffrey Peterson
--------------------
Jeffrey Peterson
Address for Notice:
1707 Waldemere Street
Sarasota, Florida 34239
Facsimile No.: [ ]
Telephone No.: (941) 363-0040
Attn: Jeffrey Peterson
With a copy to: Kronish Lieb Weiner & Hellman LLP
1114 Avenue of the Americas
New York, NY 10036-7798
Facsimile No.: (212) 479-6275
Telephone No.: (212) 479-6280
Attn: Michael S. Novins
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK
SIGNATURE PAGES FOR PURCHASERS FOLLOW]
MAINFIELD ENTERPRISES, INC.
By: __________________________
Name:
Title:
Address for Notice:
Mainfield Enterprises, Inc.
c/o Eldad Gal
660 Madison Avenue
New York, New York
Facsimile No.: (212) 651-9010
Telephone No.: (212) 651-9000
With a copy to: Proskauer Rose LLP
1585 Broadway
New York, New York 10036-8299
Facsimile No.: (212) 969-2900
Telephone No.: (212) 969-3000
Attn: Adam J. Kansler, Esq.
SMITHFIELD FIDUCIARY LLC
By: __________________________
Name:
Title:
Address for Notice:
Smithfield Fiduciary LLC
c/o Highbridge Capital Management, LLC
9 West 57/th/ Street, 27/th/ Floor
New York, New York 10019
Facsimile No.: (212) 751-0755
Telephone No.: (212) 287-4720
Attn: Ari J. Storch / Adam J. Chill
CRANSHIRE CAPITAL, L.P.
By: ___________________________
Name: Mitchell P. Kopin
Title:
Address for Notice:
Address: 666 Dundee Road, Suite 1901
Northbrook, IL 60062
Facsimile Number: 847-562-9031
Telephone Number: 847-562-9030
Attn: Mitchell Kopin
DEEPHAVEN SMALL CAP GROWTH FUND LLC
By: _______________________________
Name: Bruce Lieberman
Title: Director Private Placements
Address for Notice:
Address: 130 Cheshire Lane, Suite 102
Minnetonka, MN 55305
Facsimile Number: (952) 249-5320
Telephone Number: (952) 249-5543
Attn: Bruce Lieberman
OMICRON MASTER TRUST
By: ____________________________
Name: Bruce Bernstein
Title: President
Address for Notice:
Omicron Capital
810 Seventh Avenue
39/th/ Floor
New York, New York 10019
Facsimile Number: (212) 803-5269
Telephone Number: (212) 803-5261
Attn: Bruce Bernstein
Exhibits:
A-1 Form of Company Additional Investment Right
A-2 Form of Selling Stockholder Additional Investment Right
B-1 Opinion of Seller U.S. Counsel
B-2 Opinion of Seller Polish Counsel
C Plan of Distribution
D-1 Company Transfer Agent Instructions
D-2 Selling Stockholder Transfer Agent Instructions
Schedule A
- ---------------------------------------------------------------------------------------------------------------------
Purchaser Company Company Selling Selling Company Selling
--------- ------- ------- ------- ------- ------- -------
Units Additional Stockholder Stockholder Purchase Stockholder
----- ---------- ----------- ----------- -------- -----------
Investment Units Additional Price Purchase
---------- ----- ---------- ----- --------
Right Investment Price
----- ---------- -----
Shares Right Shares
------ ------------
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
Mainfield 370,000 74,000 80,000 16,000 8,602,500 1,860,000
Enterprises, Inc.
- ---------------------------------------------------------------------------------------------------------------------
Smithfield 102,500 20,500 - 0 - - 0 - 2,383,125 - 0 -
Fiduciary LLC
- ---------------------------------------------------------------------------------------------------------------------
Cranshire 200,000 40,000 - 0 - - 0 - 4,650,000 - 0 -
Capital, L.P.
- ---------------------------------------------------------------------------------------------------------------------
Deephaven Small 50,000 10,000 - 0 - - 0 - 1,162,500 - 0 -
Cap Growth Fund
LLC
- ---------------------------------------------------------------------------------------------------------------------
Omicron Master 27,500 5,500 - 0 - - 0 - 639,375 - 0 -
Trust
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
Total 750,000 150,000 80,000 16,000 17,437,500 1,860,000
-----
- ---------------------------------------------------------------------------------------------------------------------