Exhibit 4.1.6
▇▇▇▇▇ ▇▇, ▇▇▇▇
▇▇▇▇▇▇▇ SERVICES GROUP, INC
ARTISAN (UK) PLC
SUBSCRIPTION AGREEMENT
CONTENTS
CLAUSE PAGE
1. DEFINITIONS AND INTERPRETATION 1
2. CONDITIONS PRECEDENT 2
3. SUBSCRIPTION 2
4. WARRANTIES 3
5. APPLICATION 3
6. REGISTRATION RIGHTS 3
7. FURTHER ASSURANCE 3
8. ENTIRE AGREEMENT 3
9. SEVERABILITY 4
10. WAIVER 4
11. VARIATION 5
12. NO PARTNERSHIP 5
13. CONFIDENTIALITY 5
14. ANNOUNCEMENTS 6
15. ASSIGNMENT 7
16. NOTICES 7
17. AGENT FOR SERVICE 8
18. COSTS AND EXPENSES 9
19. TIME OF THE ESSENCE 9
20. RIGHTS OF THIRD PARTIES (EXCLUDING) 9
21. GOVERNING LAW AND JURISDICTION 9
SCHEDULE 1 - WARRANTIES 11
SCHEDULE 2 - REGISTRATION RIGHTS 21
THIS AGREEMENT is made on March 28, 2002
BETWEEN:
(1) STRATUS SERVICES GROUP, INC whose principal office is at ▇▇▇ ▇▇▇▇▇
▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇ ("Stratus"); and
(2) ARTISAN (UK) PLC whose registered office is at ▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇ TR United Kingdom
("Artisan")
RECITALS:-
(A) Stratus wishes to raise up to US$4,700,000 of additional equity
capital to finance the repayment of US$4,700,000 nominal of its Series
A Preferred Stock and to pay outstanding dividends and interest.
(B) Artisan wishes to subscribe up to US$4,700,000 for equity share
capital of Stratus on the terms set out below.
IT IS AGREED as follows:-
1. DEFINITIONS AND INTERPRETATION
1.1 In this agreement the following words and expressions shall
respectively have the following meanings:-
Market Value The average closing market price per
Stratus Common Stock shares over the five
trading days immediately preceding that on
which the relevant Stratus Common Stock
shares are allotted and issued.
Stratus Shares Shares of Series C Preferred Stock of Stratus
of US$0.01 par value.
1.2 References herein to the masculine gender, to an individual and to the
singular number shall include references to the feminine gender, to a
corporation and to the plural number respectively.
1.3 References to Clauses and Schedules are references respectively to
Clauses of and Schedules to this Agreement. References to paragraphs
are (unless otherwise stated) to paragraphs of the Clause in which the
references appears.
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1.4 Words and phrases defined in the Companies ▇▇▇ ▇▇▇▇ shall (unless the
context otherwise requires) have the same meanings herein.
1.5 The Schedules hereto shall form part of this Agreement as if the
contents thereof were expressly set out herein.
1.6 The headings in this Agreement and the Schedules hereto have been
inserted for convenience only and shall not affect its interpretation
or construction in any way.
1.7 Where any provision of the Articles conflicts with the provisions
hereof, the parties hereby agree that the provisions hereof shall
prevail, to the intent that they shall if necessary in any case
procure the amendment of the Articles to the extent required to enable
the Company to be administered as provided herein
2. CONDITIONS PRECEDENT
This agreement is conditional on Stratus delivering to Artisan:
2.1 an opinion signed by Counsel satisfactory to Artisan and in a form
satisfactory to Artisan as to the due incorporation, good standing and
such other matters relating to Stratus and the due execution of this
Agreement and the due authorisation and valid issue of the Stratus
Shares as Artisan may require, including that registration under the
1933 Act is not required;
2.2 certified copies of the constitutional documents of Stratus and of the
documents constituting its Series A Preferred Stock dated June 26,
2001 and its Series B Preferred Stock dated March 11, 2002;
2.3 a certified copy of the minutes of the meeting of the Board of Stratus
approving this Agreement.
If this condition shall not be satisfied on the date hereof (or such
later date if any as the parties may agree) this agreement shall be
void ab initio and neither party shall have any liability under it.
3. SUBSCRIPTION
Subject to the satisfaction of the conditions precedent referred to in
clause 2 above, and subject to Stratus procuring shareholder approval,
there shall be allotted and issued to Artisan Stratus Shares for
subscription at US$100 per share, the aggregate of all of such Stratus
Shares not exceeding US$4,700,000. The proceeds therefrom, as set
forth in Paragraph 5 below, shall be used to redeem all existing
Series A Preferred Shares.
PAGE 3
4. WARRANTIES AND UNDERTAKINGS
4.1 In consideration of Artisan agreeing to subscribe for the Stratus
Shares under this agreement, Stratus represents warrants and
undertakes to Artisan, in the terms of the representations, warranties
and undertakings set out in Part 2 of Schedule 1 to this agreement
("the Warranties") and so that the rights and remedies of Artisan in
respect of the Warranties shall continue to subsist notwithstanding
completion of the subscription for the Stratus Shares under this
agreement.
4.2 Artisan makes the representations set out in Part 3 of Schedule 1.
4.3 Stratus shall give Artisan notice of each meeting of its Board of
Directors, or any committee thereof, and shall provide copies of all
materials provided to the directors in connection with such meetings;
and Artisan shall be entitled to have one individual attend such
meetings as an observer.
4.4 Board Membership. Stratus agrees that it will appoint one
representative of Artisan to the Board of Directors of Stratus and
Artisan agrees that it will appoint one representative of Stratus to
the Board of Directors of Artisan.
5. APPLICATION
Stratus hereby undertakes to Artisan that the Subscription monies
shall be applied in or towards the repayment of the Series A Preferred
Stock and the balance of the monies will be used to pay outstanding
interest/dividends.
6. REGISTRATION RIGHTS
Artisan and it successors in title to the Stratus Shares subscribed by
it under this Agreement shall be entitled to the registration rights
set out in Schedule 2 to this Agreement.
7. FURTHER ASSURANCE
Each party agrees to execute and deliver to the others or do as
appropriate all such other documents, assurances and acts as may be
reasonably necessary or desirable to fulfill the provisions of this
Agreement or to carry into effect the intentions of the parties as
expressed herein.
8. ENTIRE AGREEMENT
This Agreement constitutes the entire agreement between the parties
with respect to its subject matter. It supersedes all previous
agreements and understandings between the parties and each party
acknowledges that, in entering into this Agreement, it does not do so
on the
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basis of or in reliance upon any representations, promises,
undertakings, warranties or other statements (whether written or oral)
of any nature whatsoever except as expressly provided in this
Agreement and accordingly all conditions, warranties or other terms
implied by statute or common law are hereby excluded to the fullest
extent permitted by law.
9. SEVERABILITY
9.1 If at any time any provision of this Agreement is or becomes illegal,
invalid or unenforceable in any respect under the law of any
jurisdiction, that shall not affect or impair:-
9.1.1 the legality, validity or enforceability in that jurisdiction of any
other provision of this Agreement; or
9.1.2 the legality, validity or enforceability under the law of any other
jurisdiction of that or any other provision of this Agreement.
9.2 Without prejudice to Clause 9.1, should any competent authority or
court indicate that this Agreement will only be exempt from, or fall
outside the scope of, any applicable laws or regulations if it is
amended in certain respects or any provision of this Agreement be
discovered or declared (whether formally or informally) by any
competent authority or court to be legally void or unenforceable in
whole or in part, then the parties shall meet with a view to reaching
agreement upon amendments that are acceptable to the competent
authority or court and most nearly achieve the object of the
objectionable, allegedly void or unenforceable provision and upon such
other amendments as may be appropriate, having regard to the changed
nature of the Agreement.
10. WAIVER
10.1 No delay, omission or forbearance by either party hereunder to
exercise or enforce any right, power or remedy arising under or in
connection with this Agreement shall operate as a waiver of that or
any other right, power or remedy, and any single or partial exercise
or enforcement thereof shall not preclude any other or further
exercise or enforcement thereof or the exercise or enforcement of any
right, power or other remedy.
10.2 A waiver of a breach of or default under any of the terms of this
Agreement does not constitute a waiver of any other breach or default
and shall not affect the other terms of this Agreement.
10.3 A waiver of a breach of or default under any of the terms of this
Agreement will not prevent a party from subsequently requiring
compliance with the waived obligation in respect of that breach or
continued default.
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10.4 The rights, powers and remedies provided in this Agreement are
cumulative and (subject as otherwise provided in this Agreement) are
not exclusive of any right, power or remedy provided by law or by any
other agreement or document.
11. VARIATION
This Agreement may not be released, discharged, supplemented, amended,
varied or modified except by an instrument in writing signed by a duly
authorized representative of each of the parties hereto.
12. NO PARTNERSHIP
It is acknowledged and agreed by each of the parties that neither the
entry into nor the performance of the terms of this Agreement
constitutes or shall constitute a partnership or joint venture between
the parties.
13. CONFIDENTIALITY
13.1 Each party undertakes to the other to keep secret and confidential all
information (whether written, pictorial, in machine readable form or
oral) and in whatever form received during the continuance of this
Agreement or obtained as a result of entering into or performing this
Agreement concerning the business or affairs of the other party
including without limitation.
13.1.1 non-public information concerning the trade secrets, customers,
suppliers or business associations of the other party; and
13.1.2 non-public information concerning the financial, operational,
technical or commercial affairs of the other party
all of which shall be the "Confidential Information".
13.2 Each party undertakes to the other not to use the Confidential
Information of the other party except for the purposes of this
Agreement and shall not (without the prior written consent of the
other party) disclose the same to any person save to the extent
necessary for the performance of this Agreement and except to the
extent that such information:-
13.2.1 is required to be disclosed by the law of any relevant jurisdiction;
13.2.2 is required to be disclosed by any securities exchange or regulatory
or governmental body to which either party is subject or submits,
wherever situated, including (without limitation) the Securities and
Exchange Commission, Nasdaq, the London Stock Exchange, the Financial
Services Authority and the Panel on Takeovers and Mergers whether or
not the requirement for information has the force of law, in which
case the party concerned shall take all such
PAGE 6
steps as may be reasonable and practicable in the circumstances to
agree the contents of such announcement with the other party before
making such announcement provided that, in any event, any such
announcement shall be made only after notice to the other party;
13.2.3 is trivial or obvious;
13.2.4 is already in the public domain at the time of disclosure or
thereafter shall fall into the public domain other than as a result of
breach of this clause; or
13.2.5 is already in the disclosing party's possession (as evidenced by
written records) otherwise than as a result of a breach of this
clause; or
13.2.6 becomes known to the disclosing party from a source other than the
other party otherwise than as a result of a breach of this clause;
13.2.7 was disclosed after the express prior written approval of the party to
whom such information belongs and in any event subject to the
disclosing party having notified the other in writing prior to making
such disclosure.
13.3 Each of the parties undertakes to the other to take all such steps as
shall from time to time be necessary to ensure compliance with the
provisions of this clause 13 by its Group Companies, employees, agents
and sub-contractors.
13.4 Notwithstanding anything contained elsewhere in this Agreement, the
provisions of this clause 13 shall survive the termination or expiry
of this Agreement.
14. ANNOUNCEMENTS
14.1 Save as provided below, no public statement or announcement (or any
statement or disclosure to any public or regulatory body or any other
body which has an obligation to or which is likely to make public any
such statement or disclosure) concerning the fact or subject matter of
this Agreement or any ancillary matter shall be made by any party
without the prior written approval of the other, such approval not to
be unreasonably withheld or delayed.
14.2 Any party may make an announcement concerning the subject matter of
this Agreement or any ancillary matter if required by:
14.2.1 the law of any relevant jurisdiction;
14.2.2 any securities, exchange or regulatory or governmental body to which
that party is subject or submits, wherever situated, including
(without limitation) the Securities and Exchange Commission, NASDAQ,
the London Stock Exchange, the Financial Services Authority and
PAGE 7
the Panel on Takeovers and Mergers, whether or not the requirement has
the force of law, in which case the party concerned shall take all
such steps as may be reasonable and practicable in the circumstances
to agree the contents of such announcement with the other party before
making such announcement provided that, in any event, any such
announcement shall be made only after notice to the other party.
15. ASSIGNMENT
15.1 Except as specifically provided in paragraph 7.4 of Schedule 2 to this
Agreement Stratus may not without the prior written consent of Artisan
assign or in any way dispose of to any third party its rights under
this Agreement. Artisan may assign any of its rights to any person to
whom or which it is transferring any of the Stratus Shares.
15.2 The assigning party shall promptly give notice to the other party of
any permitted assignment under sub-clause 16.1 above and any purported
assignment shall not be valid unless the assignee agrees in writing to
be bound by the provisions of this Agreement.
16. NOTICES
16.1 Any notice to be given hereunder shall be in writing (other than
writing on the screen of a visual display unit or other similar device
which shall not be treated as writing for the purposes of this clause
unless receipt of the relevant communication is acknowledged by the
relevant party either by electronic mail or by other written means)
and delivered by hand or by pre-paid first class post or by facsimile
letter or by electronic mail letter (and notices sent by facsimile or
by electronic mail shall be confirmed immediately by pre-paid first
class post) addressed and sent to the party to be served at the
addresses provided in sub-clause 16.3.
16.2 Notices addressed as provided in sub-clause 16.3 shall be deemed to
have been duly served:-
16.2.1 if sent by personal delivery, upon delivery at the address of the
relevant party;
16.2.2 if sent by first class post, two business days after the date of
posting if posted in the country of destination otherwise after seven
days;
16.2.3 if sent by facsimile, when despatched provided that if any such notice
would otherwise be deemed to be served outside working hours, such
notice shall be deemed to be served at the start of working hours on
the next business day; and
16.2.4 if sent by electronic mail, when receipt of the notice is acknowledged
in accordance with Clause 15.1.
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16.3 The relevant addressee, address, electronic mail address and facsimile
number of each party for the purpose of this Agreement are:-
NAME OF PARTY ADDRESS AND E-MAIL ADDRESS FACSIMILE NUMBER
------------- -------------------------- ----------------
Stratus Services Group, ▇▇▇ ▇▇▇▇▇ ▇▇▇▇, +1 732 294 1133
Inc. ▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇▇,
▇▇▇ ▇▇▇▇▇▇,
▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇@▇▇▇▇▇▇▇▇▇▇▇▇▇▇▇.▇▇▇;
▇▇▇▇▇▇▇▇▇▇@▇▇▇▇▇▇▇▇▇▇▇▇▇▇▇.▇▇▇;
Artisan (UK) plc ▇▇▇▇ House ▇▇▇(▇)▇▇▇▇-▇▇▇-▇▇▇
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇▇▇,
▇▇▇▇ ▇▇▇ TR
United Kingdom
or such other address as any party may have previously notified to the
other.
17. AGENT FOR SERVICE
17.1 Stratus irrevocably agrees that any notice or process may be
sufficiently and effectively served on it by service on its agent
Corporation Service Company, if no replacement agent has been
appointed and notified to the other party pursuant to Clause 17.5, or
on the replacement agent if one has been appointed and notified to
Artisan.
17.2 The relevant addressee, address, electronic mail address and facsimile
number of _______________________ for the purpose of this Clause 17
are:-
NAME OF PARTY ADDRESS [AND E-MAIL ADDRESS] FACSIMILE NUMBER
17.3 Any notice or process served on ___________________ in accordance with
this Clause 17 shall be deemed to have been duly served on Stratus
according to the same times as those specified in Clause 16.2 above.
17.4 A copy of any notice or process served on an agent pursuant to this
Clause 17 shall be sent by post to Stratus at its address for the time
being for the service of notices under Clause 16, but no failure or
delay in so doing shall prejudice the effectiveness of service of the
relevant notice or process in accordance with Clause 17.1 above.
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17.5 If the agent referred to in Clause 17.1 (or any replacement agent
appointed pursuant to this Clause 17.5) at any time ceases for any
reason to act as such, Stratus shall appoint a replacement agent to
accept service having an address for service in England and Wales and
shall notify Artisan of the name and address of the replacement agent.
Failing any such appointment and notification, Artisan shall be
entitled by notice to Stratus to appoint such replacement agent to act
on Stratus' behalf.
18. COSTS AND EXPENSES
Save as otherwise stated in any other provision of this Agreement,
each party shall bear its own costs and expenses in relation to the
negotiation, preparation, execution and carrying into effect of this
Agreement and all other documents referred to in it.
19. TIME OF THE ESSENCE
It is agreed that time is of the essence of this Agreement with regard
to the performance by Stratus of its obligations under this Agreement.
20. RIGHTS OF THIRD PARTIES (EXCLUDING)
20.1 No person who is not a party to this Agreement shall have any right
under the Contracts (Rights of Third Parties) ▇▇▇ ▇▇▇▇ to enforce any
term of this Agreement.
20.2 Nothing contained in Clause 20.1 shall affect any right or remedy of
any third party which exists or is available other than under the
Contracts (Rights of Third Parties) ▇▇▇ ▇▇▇▇.
21. GOVERNING LAW AND JURISDICTION
21.1 This Agreement is governed by and shall be construed in accordance
with English law.
21.2 The courts of England have non-exclusive jurisdiction to hear and
decide any suit, action or proceedings, and to settle any disputes,
which may arise out of or in connection with this Agreement
(respectively, "Proceedings" and "Disputes") and, for these purposes,
each party hereby irrevocably submits to the jurisdiction of the
courts of England.
21.3 Each party irrevocably waives any objection which it might at any time
have to the courts of England being nominated as the forum to hear and
decide any Proceedings and to settle any Disputes and agrees not to
claim that the courts of England are not a convenient or appropriate
forum.
21.4 Process by which any Proceedings are begun in England may be served in
accordance with Clauses 15 and 17, provided that nothing contained in
this sub-clause affects the right to serve process in another manner
permitted by law.
PAGE 10
The common seal of )
STRATUS SERVICES GROUP, INC)
was hereunto affixed presence of )
/s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
--------------------------------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇.
Chairman and Chief Executive Officer
/s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
--------------------------------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Executive Vice President and Chief Financial Officer
Executed and delivered as a deed by )
ARTISAN (UK) plc )
Acting by two directors/ a director and the )
Secretary )
/s/ ▇▇▇▇▇▇▇ ▇▇▇▇
------------------------------------------
Director
...........................................
Director/Secretary
PAGE 11
SCHEDULE 1
WARRANTIES
PART 1
1. DEFINITIONS
As used in this Schedule 1, all capitalized terms not otherwise
defined in this Agreement shall have the following meanings:
"Affiliate" means, as applied to any Person, (a) any
other Person directly or indirectly
controlling, controlled by or under common
control with, that Person, (b) any other
Person that owns or controls (i) 10% or more
of any class of equity securities of that
Person or any of its Affiliates or (ii) 10%
or more of any class of equity securities
(including any equity securities issuable
upon the exercise of any option or
convertible security) of that Person or any
of its Affiliates, or (c) any director,
partner, member, officer, manager, agent,
employee or relative of such Person. For the
purposes of this definition, "control"
(including with correlative meanings, the
terms "controlling", "controlled by", and
"under common control with") as applied to
any Person, means the possession, directly or
indirectly, of the power to direct or cause
the direction of the management and policies
of that Person, whether through ownership of
voting securities or by contract or
otherwise.
"Contract" means any agreement (including licenses with
non-governmental Persons), lease, evidence of
indebtedness, mortgage, indenture, security
agreement or other instrument or contract,
whether written or oral.
"Exchange Act" means the Securities Exchange Act of
1934, as amended, and the rules and
regulations of the SEC thereunder.
PAGE 12
"Encumbrance" means any security interest, lien, pledge,
claim, charge, escrow, encumbrance, option,
right of first offer, right of first refusal,
preemptive right, mortgage, indenture,
security agreement or other similar
agreement, arrangement, contract, commitment,
understanding or obligation, whether written
or oral and whether or not relating in any
way to credit or the borrowing of money.
"Governmental or means any court, tribunal, arbitrator,
Regulatory Authority" authority, agency, commission, official
or other instrumentality of the United
States, any foreign country or any domestic
or foreign state, county, city or other
political subdivision.
"Indebtedness" means (a) all indebtedness of Stratus,
including the principal of, and premium, if
any, and interest (including interest
accruing after the filing of a petition
initiating any proceeding under any state,
federal or foreign bankruptcy laws, whether
or not allowable as a claim in such
proceeding) on, all indebtedness, whether
outstanding currently or hereafter created
(i) for borrowed money, (ii) for money
borrowed by others and guaranteed, directly
or indirectly, by Stratus, (iii) for money
borrowed by others for which Stratus provides
security, (iv) constituting purchase money
indebtedness the payment of which Stratus is
directly or contingently liable, (v)
constituting reimbursement obligations under
bank letters of credit, (vi) under interest
rate and currency swaps, caps, floors,
collars or similar agreements or arrangements
intended to protect Stratus against
fluctuations in interest or currency exchange
rates, (vii) under any lease of any real or
personal property, which obligations are
capitalised on Stratus' books in accordance
with generally accepted accounting
principles, or (viii) under any other
arrangement under which obligations are
recorded as indebtedness on Stratus' books in
PAGE 13
accordance with generally accepted accounting
principles, and (b) any modifications,
refundings, deferrals, renewals or extensions
of any such Indebtedness, or securities,
notes or other evidences of indebtedness
issued in exchange for such Indebtedness.
"Law" or "Laws" means all laws, statutes, rules, regulations,
ordinances and other pronouncements having
the effect of law of the United States, any
foreign country or any domestic or foreign
state, county, city or other political
subdivision or of any Governmental or
Regulatory Authority.
"Material means a material adverse effect on the
Adverse Effect" business or financial position of a Person
and such Person's subsidiaries, taken as a
whole.
"Nasdaq" means the Nasdaq SmallCap Market.
"OTC Bulletin Board" means the NASD Over the Counter Bulletin
Board.
"Person" means any natural person, corporation,
general partnership, limited partnership,
limited liability company or partnership,
proprietorship, other business organization,
trust, union, association or Governmental or
Regulatory Authority.
"SEC" means the Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as
amended, and the rules and regulations of the
SEC thereunder.
"Transfer" means, directly or indirectly, any sale,
transfer, assignment, hypothecation, pledge
or other disposition of any securities of
Stratus or any interests therein.
PART 2
2. REPRESENTATIONS AND WARRANTIES OF STRATUS
Stratus hereby represents and warrants to Artisan that:
PAGE 14
2.1 ORGANIZATION AND QUALIFICATION.
Stratus is a corporation duly organized, validly existing and in good
standing under the Laws of the State of Delaware. Stratus is duly
qualified and is authorized to do business and is in good standing as
a foreign corporation in each state or jurisdiction where the nature
of its business or the ownership of property make such qualification
necessary, except where the failure of Stratus to be so qualified
would not have a Material Adverse Effect on Stratus, and except for
Massachusetts and New Hampshire, for which the Company has already
made the requisite filings to obtain good standing but for which good
standing certificates have not yet been issued.
2.2 AUTHORITY.
Stratus has full power and authority to execute and deliver this
Agreement, to perform its obligations hereunder and to consummate the
transactions contemplated hereby (including the issuance, sale and
delivery of the Stratus Shares being sold hereunder). The execution,
delivery and performance by Stratus of this Agreement and the
consummation by it of the transactions contemplated hereby (including
the issuance, sale and delivery of the Stratus Shares being sold
hereunder) have been duly and validly authorized by all necessary
action by its Board of Directors, and no other action is necessary to
authorise the execution, delivery and performance of this Agreement
and the consummation by Stratus of the transactions contemplated
hereby (including the issuance, sale and delivery of the Stratus
Shares being sold hereunder, other than as set forth above regarding
the shareholder approval required for the Subscription). This
Agreement has been duly and validly executed and delivered by Stratus
and constitutes a legal, valid and binding obligation of Stratus
enforceable against Stratus in accordance with its terms, except as
the enforceability thereof may be limited by bankruptcy, insolvency,
reorganization, moratorium or other similar laws relating to the
enforcement of creditors' rights generally and by general principles
of equity.
2.3 VALID ISSUANCE OF STRATUS SHARES; CAPITALISATION.
The Stratus Shares that are being purchased by Artisan hereunder, when
issued, sold and delivered in accordance with the terms of this
Agreement for the consideration expressed herein, will be duly and
validly issued, fully paid, and nonassessable, and will be free of
restrictions on transfer other than restrictions on transfer under
this Agreement and under applicable federal and state securities laws.
The Stratus Shares that are being purchased by Artisan hereunder will
be quoted on Nasdaq or any other securities exchange that the Stratus
Shares are then listed upon.
PAGE 15
The authorized capital stock of Stratus consists of 30,000,000 shares,
par value $.01 per share, of which 25,000,000 shares are common stock
and 5,000,000 shares are preferred stock and may be issued from time
to time in one or more series. As of the date of this Agreement,
11,529,767 shares of common stock and 1,458,933 shares of Series A
Preferred Stock and 263,300 shares of Series B Preferred Stock are
issued and outstanding, and 4,264,167 shares of common stock are
reserved for issuance upon the exercise of outstanding warrants and
employee stock options. Except as designated in the prior sentence,
there are no rights, subscriptions, warrants, options, conversion
rights, calls or other agreements or commitments of any kind
outstanding to purchase or otherwise acquire any shares of Stratus'
stock, or any other interest or securities or obligations of any kind
exchangeable for, or convertible into any shares of stock, of any
class of or any other equity interest in Stratus or obligating Stratus
to grant, extend or enter into any such agreement or commitment.
2.4 NO CONFLICTS.
The execution and delivery by Stratus of this Agreement, the
performance by Stratus of its obligations under this Agreement and the
consummation of the transactions contemplated hereby (including the
issuance, sale and delivery of the Stratus Shares being sold
hereunder) do not and will not (i) conflict with, or constitute a
default under, any Contract to which Stratus is a party, (ii) result
in a violation of Stratus' organizational documents, or any order,
judgment or decree of any court or Governmental or Regulatory
Authority having jurisdiction over Stratus or any of its assets or
properties or (iii) result in, or require, the creation or imposition
of any Encumbrance upon any of the assets or properties of Stratus.
2.5 BROKERS.
Except for ▇▇▇▇▇▇▇ Securities, Inc., who acted as an advisor and
placement agent in this matter, no agent, broker, finder, investment
banker, financial advisor or other similar Person will be entitled to
any fee, commission or other compensation in connection with the
transactions contemplated by this Agreement on the basis of any act or
statement made or alleged to have been made by Stratus or any of its
Affiliates.
2.6 EXEMPTION FROM REGISTRATION.
Assuming the accuracy on the date hereof and on any other date Artisan
purchases Stratus Shares under this Agreement of the representations
and warranties of the Purchaser set forth in Section 3 of this
Schedule 1, the issuance and sale of the Stratus Shares will be exempt
from the registration requirements of the Securities Act.
2.7 LITIGATION.
PAGE 16
There are no actions, suits, proceedings or investigations pending, or
to the knowledge of Stratus, threatened, against or affecting Stratus,
except for those that could not reasonably be expected to have either
individually or in the aggregate a Material Adverse Effect on Stratus.
Stratus is not in default with respect to any order, writ, injunction,
judgment, decree or rule of any Governmental or Regulatory Authority,
except for such defaults that could not reasonably be expected to have
either individually or in the aggregate a Material Adverse Effect on
Stratus.
2.8 NO DEFAULTS.
Stratus is not in default, and no event has occurred and no condition
exists which constitutes, or which with the passage of time or the
giving of notice or both would constitute, a default in the payment of
any material Indebtedness.
2.9 SEC REPORTS AND FINANCIAL STATEMENTS.
(a) Stratus has filed all forms, reports and documents required to be
filed by it pursuant to Section 13 or Section 15(d) of the
Exchange Act within the last 12 months on a timely basis or has
received a valid extension of time for filing. Stratus has made
available to the Purchaser Stratus' Annual Report on Form 10-K as
amended by Form 10-K/A for the fiscal year ended September 30,
2001 and its Quarterly Report on Form 10-Q for the quarter ended
December 31, 2001 (the "SEC Reports"). Each SEC Report complied
as to form in all material respects with the rules and
regulations of the SEC under the Exchange Act on the date of
filing and as of such date (or if amended or superseded by a
filing prior to the date of this Agreement, on the date of such
filing) did not contain any untrue statement of 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.
(b) Each of the consolidated financial statements (including, in each
case, any related notes thereto) (the "Financial Statements")
contained in the SEC Report (i) was prepared in accordance with
generally accepted accounting principles ("GAAP") applied on a
consistent basis throughout the periods involved (except as may
be expressly described in the notes thereto) and (ii) fairly
presents in all material respects the consolidated financial
position of Stratus as at the respective dates thereof and the
consolidated results of its operations and cash flows for the
periods indicated.
2.10 EVENTS SUBSEQUENT TO THE DATE OF THE LAST FINANCIAL STATEMENT.
PAGE 17
Since December 31, 2001 (the "Financial Statements Date"), Stratus has
not (i) sold, assigned, transferred or granted any exclusive license
with respect to any patent, trademark, trade name, service ▇▇▇▇,
copyright, trade secret or other intangible asset necessary for the
operation of Stratus' business substantially as now conducted, (ii)
suffered any loss of property that had a Material Adverse Effect on
Stratus or waived any right of substantial value to Stratus other than
in the ordinary course of business or (iii) entered into any
commitment, obligation, understanding or other arrangement, contingent
or otherwise, to effect, directly or indirectly, any of the foregoing
except the sale of Stratus' engineering division, the details of which
are set forth in ▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇-▇/▇ filed with the Securities and
Exchange Commission on March 5, 2002. Since the Financial Statements
Date, no events have occurred which individually or collectively have
had a Material Adverse Effect on Stratus.
2.11 ABSENCE OF UNDISCLOSED LIABILITIES.
Since the Financial Statements Date, Stratus has not had any loss
contingency (as defined in Statement of Financial Accounting Standards
No. 5), whether matured or unmatured, fixed or contingent, that could
have a Material Adverse Effect on Stratus, except (i) obligations to
perform under commitments or other obligations incurred in the
ordinary course of business and (ii) tax and related liabilities.
2.12 TITLE TO ASSETS, PROPERTIES AND RIGHTS.
Stratus has good and marketable title (or a valid leasehold interest)
to all of the assets (whether real, personal or mixed) necessary for
the conduct of Stratus' business substantially as now conducted, free
and clear of all Encumbrances, except for (i) liens for current taxes,
assessments and other governmental charges not yet due and payable for
which reserves have been established as required by generally accepted
accounting principles; (ii) easements, covenants, conditions and
restrictions (whether or not of record) as to which no material
violation or encroachment exists or, if such violation or encroachment
exists, as to which the cure of such violation or encroachment would
not materially interfere with the conduct of Stratus' business; (iii)
any Zoning or other governmentally established restrictions or
encumbrances; (iv) workers or unemployment compensation liens arising
in the ordinary course of business; or (v) mechanic's, materialman's,
supplier's, vendor's or similar liens arising in the ordinary course
of business securing amounts which are not delinquent. (The matters
set forth in the foregoing clauses (i) through (v) being referred to
herein as the "Permitted Encumbrances"). Such assets are in such
operating condition and repair as is suitable for the uses for which
they are used in Stratus' business, are not subject to any condition
which materially interferes with the use thereof by Stratus, and
constitute all
PAGE 18
assets, properties, interests in properties and rights necessary to
permit Stratus to carry on its business after the date of this
Agreement substantially as conducted by Stratus prior thereto.
2.13 PATENTS, TRADEMARKS, COPYRIGHTS AND LICENSES.
Stratus (i) owns or possesses all the patents, trademarks, service
marks, trade names, copyrights and licenses therefor necessary for the
conduct of Stratus' business substantially as now conducted without
any known conflict with the rights of others that are likely to have a
Material Adverse Effect on Stratus and (ii) has allocated or licensed
all such patents, trademarks, service marks, trade names, copyrights
and licenses to Stratus for use by Stratus in its business. To the
best knowledge of Stratus, Stratus has not interfered with, infringed
upon or misappropriated any intellectual property rights of any Person
or committed any acts of unfair competition with respect to the
operation of Stratus' business, and Stratus has not received from any
Person in the past five years (or since its inception, if shorter) any
notice, charge, complaint, claim or assertion thereof, and no such
claim is impliedly threatened by an offer to license from another
Person under a claim of use. No activity, service or procedure
currently conducted by Stratus violates in any material respect any
Contract of Stratus with any third Person relating to any intellectual
property rights.
2.14 GOVERNMENTAL CONSENTS.
Stratus has, and is in good standing with respect to, all governmental
consents, approvals, licenses, authoriSations, permits, certificates,
inspections and franchises necessary to continue to conduct Stratus'
business substantially as now conducted and to own or lease and
operate the assets and properties necessary for the conduct by Stratus
of its business substantially as now conducted except for such
failures that could not reasonably be expected to have either
individually or in the aggregate a Material Adverse Effect on Stratus.
2.15 NO CONSENT OR APPROVAL REQUIRED.
No consent, approval or authorization of, or declaration to or filing
with, any Person is required by Stratus for the valid authorization,
execution and delivery by Stratus of this Agreement or its
consummation of the transactions contemplated hereby (including the
issuance, sale and delivery of the Stratus Shares being sold
hereunder, other than those set forth above regarding the Subscription
for which shareholder approval is required), other than those
consents, approvals, authorizations, declarations or filings which
have been obtained or made, as the case may be, required filings with
the SEC and Nasdaq, and that the failure to obtain or make would not
have a Material Adverse Effect on Stratus.
2.16 COMPLIANCE WITH LAWS.
PAGE 19
Stratus has duly complied with, and the assets and properties,
business operations and leaseholds used in connection with the
business of Stratus are in compliance with, the provisions of all laws
applicable to Stratus, its assets and properties or the conduct of its
business and there have been no citations, notices or orders of
non-compliance issued to Stratus under any such law, rule or
regulation, except for such non-compliance which could not reasonably
be expected to have either individually or in the aggregate a Material
Adverse Effect on Stratus.
2.17 LABOUR RELATIONS.
Stratus' employees are not subject to any collective bargaining
agreement. There are no material grievances, disputes or controversies
with any union or any other organization of Stratus' employees, or
threats of strikes, work stoppages or any asserted pending demands for
collective bargaining by any union or organization, that could have a
Material Adverse Effect on Stratus.
PART 3
3. REPRESENTATIONS AND WARRANTIES OF ARTISAN
Artisan hereby represents and warrants to Stratus that:
3.1 Artisan is acquiring the Stratus Shares for its own account as
principal, for investment purposes only, and not for or with a view to
the resale, distribution or granting of a participation therein, in
whole or in part, in violation of the Securities Act.
3.2 Artisan acknowledges its understanding that the offering and sale of
the Stratus Shares has not been registered under the Securities Act,
on the basis of the exemption in Section 4(2) thereof relating to
transactions not involving a public offering, or any state securities
laws. Artisan understands that Stratus' reliance on the Section 4(2)
exemption is based on the representations herein made by Artisan.
Artisan is an "Accredited Investor" as that term is defined in
Regulation D under the Securities Act.
3.3 Artisan acknowledges that it is familiar with the limitations which
are imposed by the Securities Act on any Transfer of an interest in
the Stratus Shares. Artisan understands and acknowledges that it may
have to bear the economic risk of its investment in the Stratus Shares
for an indefinite period of time unless the Stratus Shares are
subsequently registered under the Securities Act or an exemption
therefrom is available. Artisan hereby agrees that the Stratus Shares
will not be Transferred other than (i) pursuant to a registration
under the Securities Act or pursuant to an exemption therefrom and
(ii) in compliance with any applicable state securities laws.
PAGE 20
3.4 Artisan has been given access to all information regarding Stratus and
the business, condition and operations of Stratus that Artisan has
requested in order to evaluate its investment in the Stratus Shares.
Artisan has been given the opportunity to ask questions of, and to
receive answers from, representatives of Stratus concerning the terms
and conditions of the offering of the Stratus Shares and other matters
pertaining to such Artisan's investment in the Stratus Shares.
3.5 Artisan understands that the Stratus Shares will initially bear the
following legend:
"THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED, OR UNDER ANY STATE SECURITIES LAWS. THIS SECURITY
MAY NOT BE OFFERED, SOLD OR TRANSFERRED EXCEPT PURSUANT TO (i) AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933, AS
AMENDED AND IN COMPLIANCE WITH APPLICABLE STATE SECURITIES LAWS OR
(ii) AN APPLICABLE EXEMPTION FROM REGISTRATION THEREUNDER AND UNDER
APPLICABLE STATE SECURITIES LAWS AS TO WHICH AN OPINION OF COUNSEL
SATISFACTORY TO THE COMPANY SHALL HAVE BEEN DELIVERED TO STRATUS."
PAGE 21
SCHEDULE 2
REGISTRATION RIGHTS
1. DEFINITIONS
As used in this Schedule 2, the following terms shall have the
following meanings:
"Common Stock" shall mean the Company's Common Stock, par
value $0.01 per share.
"Company" shall mean Stratus Services Group, Inc.
"Investor" shall mean Artisan and each of its affiliates
or permitted transferees who is a subsequent
holder of any Registrable Securities.
"Prospectus" shall mean the prospectus included in any
Registration Statement, as amended or
supplemented by any prospectus supplement,
with respect to the terms of the offering of
any portion of the Registrable Securities or
Additional Registrable Securities covered by
such Registration Statement and by all other
amendments and supplements to the prospectus,
including post-effective amendments and all
material incorporated by reference in such
prospectus.
"Register," "registered" refer to a registration made by preparing
and "registration" and filing a registration statement or
similar document in compliance with the
1933 Act (as defined below), and the
declaration or ordering of effectiveness of
such registration statement or document.
"Registrable Securities" shall mean the Common Stock shares issuable
to Artisan upon the conversion of Preferred
Shares held by it, and any other securities
issued or issuable with respect to or in
exchange for Registrable Securities.
"Registration Statement" shall mean any registration statement of the
Company filed under the 1933 Act that covers
the resale of any of the Registrable
Securities, pursuant to the provisions of
this agreement, amendments and
PAGE 22
supplements to such Registration Statement,
including post-effective amendments, all
exhibits and all material incorporated by
reference in such Registration Statement.
"SEC" means the U.S. Securities and Exchange
Commission.
"1933 Act" means the Securities Act of 1933, as amended,
and the rules and regulations promulgated
thereunder.
"1934 Act" means the Securities Exchange Act of 1934, as
amended, and the rules and regulations
promulgated thereunder.
2. REGISTRATION.
2.1 Registration Statements.
2.1.1 Registrable Securities.
Promptly on request of either of the Investor (but no later than
thirty (30) days after such request), the Company shall prepare and
file with the SEC one Registration Statement on Form S-3 (or, if Form
S-3 is not then available to the Company, on such form of registration
statement as is then available to effect a registration for resale of
all of the Registrable Securities, subject to the Investor's consent),
covering the resale of the Registrable Securities in an amount equal
to the number of shares of Common Stock underlying the Preferred
Shares held by the Investor. A second Registration Statement will be
filed by Stratus when, and if, necessary to register the maximum
number of shares which might be issued pursuant to clause 4 of this
agreement. Such Registration Statements also shall cover, to the
extent allowable under the 1933 Act and the Rules promulgated
thereunder (including Rule 416), such indeterminate number of
additional shares of Common Stock resulting from stock splits, stock
dividends or similar transactions with respect to the Registrable
Securities. No securities held by a third party shall be included in
the Registration Statement without the consent of the Investor. The
Registration Statement (and each amendment or supplement thereto, and
each request for acceleration of effectiveness thereof) shall be
provided in accordance with Section 3(c) to the Investor and its
counsel prior to its filing or other submission.
PAGE 23
2.2 Expenses.
The Company will pay all expenses associated with registration
hereunder, including the Investor's reasonable expenses in connection
with the registration but excluding discounts, commissions, fees of
underwriters, selling brokers, dealer managers or similar securities
industry professionals.
2.3 Effectiveness.
2.3.1 The Company shall use its best efforts to have each Registration
Statement declared effective as soon as practicable. If (A) the
Registration Statement covering Registrable Securities is not declared
effective by the SEC within one hundred and twenty (120) days
following a request (the "Registration Date"), (B) after a
Registration Statement has been declared effective by the SEC, sales
cannot be made pursuant to such Registration Statement for any reason
(including without limitation by reason of a stop order, or the
Company's failure to update the Registration Statement) but except as
excused pursuant to subparagraph (ii) below, or (C) the Common Stock
generally or the Registrable Securities specifically are not listed or
included for quotation on the American Stock Exchange, the Nasdaq
National Market System, the Nasdaq SmallCap Market, the OTC Bulletin
Board or the New York Stock Exchange then the Company will make pro
rata payments to each Investor, as liquidated damages and not as a
penalty, in an amount equal to 2% of the aggregate amount paid by such
Investor to the Company for shares of Common Stock still held by such
Investor for any month or pro rata for any portion thereof following
the Registration Date during which any of the events described in (A)
or (B) or (C) above occurs and is continuing (the "Blackout Period").
Each such payment shall be due and payable within five (5) days of the
end of each month (or ending portion thereof) of the Blackout Period.
Such payments shall be in partial compensation to the Investor, and
shall not constitute the Investor's exclusive remedy for such events.
The Blackout Period shall terminate upon (x) the effectiveness of the
applicable Registration Statement (or in the case of (B), an
amendment) in the case of (A) and (B) above; (y) listing or inclusion
of the Common Stock on the American Stock Exchange, the Nasdaq
National Market System, the Nasdaq Small Cap Market or the New York
Stock Exchange in the case of (C) above; and (z) in the case of the
events described in (A) or (B) above, the earlier termination of the
Registration Period (as defined in Section 3(a) below). The amounts
payable as liquidated damages pursuant to this paragraph shall be
payable, at the option of the Investor, in lawful money of the United
States or in shares of Common Stock at the Market Value and amounts
payable as liquidated damages shall be paid monthly within two (2)
business days of the last day of each month following the commencement
of the Blackout Period until the termination of the Blackout
PAGE 24
Period. Amounts payable as liquidated damages hereunder shall cease
when an Investor no longer holds Registrable Securities.
2.3.2 For not more than ten (10) consecutive trading days or for a total of
not more than twenty (20) trading days in any twelve (12) month
period, the Company may delay updating the Registration Statement to
disclose material non-public information concerning the Company, the
disclosure of which at the time is not, in the good faith opinion of
the Company, in the best interests of the Company (an "Allowed
Delay"); provided, that the Company shall promptly (a) notify the
Investor in writing of the existence of (but in no event, without the
prior written consent of an Investor, shall the Company disclose to
such Investor any of the facts or circumstances regarding) material
non-public information giving rise to an Allowed Delay, and (b) advise
the Investor in writing to cease all sales under the Registration
Statement until the end of the Allowed Delay.
3. COMPANY OBLIGATIONS
The Company will use its best efforts to effect the registration of
the Registrable Securities in accordance with the terms hereof, and
pursuant thereto the Company will, as expeditiously as possible:
3.1 use its best efforts to cause such Registration Statement to become
effective and to remain continuously effective for a period that will
terminate upon the earlier of (i) the date on which all Registrable
Securities covered by such Registration Statement, as amended from
time to time, have been sold, and (ii) the date on which all
Registrable Securities may be sold pursuant to Rule 144(k) (the
"Registration Period");
3.2 prepare and file with the SEC such amendments and post-effective
amendments to the Registration Statement and the Prospectus as may be
necessary to keep the Registration Statement effective for the period
specified in Section 3(a) and to comply with the provisions of the
1933 Act and the 1934 Act with respect to the distribution of all
Registrable Securities, Second Closing Registrable Securities and
Additional Registrable Securities; provided that, at least five (5)
business days prior to the filing of a Registration Statement or
Prospectus, or any amendments or supplements thereto, the Company will
furnish to the Investors copies of all documents proposed to be filed,
which documents will be subject to the comments of the Investor, which
must be received within such five (5) business day period;
3.3 permit counsel designated by the Investor to review each Registration
Statement and all amendments and supplements thereto no fewer than
seven (7) days prior to their filing with the SEC and not file any
document to which such counsel reasonably objects;
PAGE 25
3.4 furnish to the Investor and their legal counsel (i) promptly after the
same is prepared and publicly distributed, filed with the SEC, or
received by the Company, one copy of any Registration Statement and
any amendment thereto, each preliminary prospectus and Prospectus and
each amendment or supplement thereto, and each letter written by or on
behalf of the Company to the SEC or the staff of the SEC, and each
item of correspondence from the SEC or the staff of the SEC, in each
case relating to such Registration Statement (other than any portion
of any thereof which contains information for which the Company has
sought confidential treatment), and (ii) such number of copies of a
Prospectus, including a preliminary prospectus, and all amendments and
supplements thereto and such other documents as each Investor may
reasonably request in order to facilitate the disposition of the
Registrable Securities owned by such Investor;
3.5 in the event the Company selects an underwriter for the offering, the
Company shall enter into and perform its reasonable obligations under
an underwriting agreement, in usual and customary form, including,
without limitation, customary indemnification and contribution
obligations, with the underwriter of such offering;
3.6 if required by the underwriter, or if any Investor is described in the
Registration Statement as an underwriter, the Company shall furnish,
on the effective date of the Registration Statement, on the date that
Registrable Securities are delivered to an underwriter, if any, for
sale in connection with the Registration Statement and at periodic
intervals thereafter from time to time on request, (i) an opinion,
dated as of such date, from independent legal counsel representing the
Company for purposes of such Registration Statement, in form, scope
and substance as is customarily given in an underwritten public
offering, addressed to the underwriter and the Investor and (ii) a
letter, dated such date, from the Company's independent certified
public accountants in form and substance as is customarily given by
independent certified public accountants to underwriters in an
underwritten public offering, addressed to the underwriter and the
Investor;
3.7 make effort to prevent the issuance of any stop order or other
suspension of effectiveness and, if such order is issued, obtain the
withdrawal of any such order at the earliest possible moment;
3.8 furnish to each Investor at least five copies of the Registration
Statement and any post-effective amendment thereto, including
financial statements and schedules by air mail within two business
days of the effective date thereof;
3.9 prior to any public offering of Registrable Securities use its
reasonable best efforts to register or qualify or cooperate with the
Investor and their counsel in connection with the registration or
qualification of such Registrable Securities for offer and sale under
the securities or blue
PAGE 26
sky laws of such jurisdictions requested by the Investor and do any
and all other reasonable acts or things necessary or advisable to
enable the distribution in such jurisdictions of the Registrable
Securities covered by the Registration Statement;
3.10 cause all Registrable Securities covered by a Registration Statement
to be listed on each securities exchange, interdealer quotation system
or other market on which similar securities issued by the Company are
then listed;
3.11 immediately notify the Investor, at any time when a Prospectus
relating to the Registrable Securities is required to be delivered
under the Securities Act, upon discovery that, or upon the happening
of any event as a result of which, the Prospectus included in such
Registration Statement, as then in effect, includes an untrue
statement of a material fact or omits to state any material fact
required to be stated therein or necessary to make the statements
therein not misleading in the light of the circumstances then
existing, and at the request of any such holder, promptly prepare and
furnish to such holder a reasonable number of copies of a supplement
to or an amendment of such Prospectus as may be necessary so that, as
thereafter delivered to the purchasers of such Registrable Securities
such Prospectus shall not include 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 not misleading in the light
of the circumstances then existing; and
3.12 otherwise use its best efforts to comply with all applicable rules and
regulations of the SEC under the 1933 Act and the 1934 Act, take such
other actions as may be reasonably necessary to facilitate the
registration of the Registrable Securities hereunder; and make
available to its security holders, as soon as reasonably practicable,
but not later than the Availability Date (as defined below), an
earnings statement covering a period of at least twelve months,
beginning after the effective date of each Registration Statement,
which earnings statement shall satisfy the provisions of Section 11(a)
of the 1933 Act (for the purpose of this subsection 3(l),
"Availability Date" means the 45th day following the end of the fourth
fiscal quarter that includes the effective date of such Registration
Statement, except that, if such fourth fiscal quarter is the last
quarter of the Company's fiscal year, "Availability Date" means the
90th day after the end of such fourth fiscal quarter).
4. DUE DILIGENCE REVIEW; INFORMATION
The Company shall make available, during normal business hours, for
inspection and review by the Investor, advisors to and representatives
of the Investor (who may or may not be affiliated with the Investor
and who are reasonably acceptable to the Company), any underwriter
participating in any disposition of Common Stock on behalf of the
Investor pursuant to the Registration Statement or amendments or
supplements thereto or any blue
PAGE 27
sky, NASD, OTC Bulletin Board or other filing, all financial and other
records, all SEC Documents and other filings with the SEC, and all
other corporate documents and properties of the Company as may be
reasonably necessary for the purpose of such review, and cause the
Company's officers, directors and employees, within a reasonable time
period, to supply all such information reasonably requested by the
Investor or any such representative, advisor or underwriter in
connection with such Registration Statement (including, without
limitation, in response to all questions and other inquiries
reasonably made or submitted by any of them), prior to and from time
to time after the filing and effectiveness of the Registration
Statement for the sole purpose of enabling the Investor and such
representatives, advisors and underwriters and their respective
accountants and attorneys to conduct initial and ongoing due diligence
with respect to the Company and the accuracy of the Registration
Statement.
5. OBLIGATIONS OF THE INVESTOR.
5.1 The Investor shall furnish in writing to the Company such information
regarding itself, the Registrable Securities held by it and the
intended method of disposition of the Registrable Securities held by
it, as shall be reasonably required to effect the registration of such
Registrable Securities and shall execute such documents in connection
with such registration as the Company may reasonably request. At least
fifteen (15) business days prior to the first anticipated filing date
of any Registration Statement, the Company shall notify each Investor
of the information the Company requires from such Investor if such
Investor elects to have any of the Registrable Securities included in
the Registration Statement. An Investor shall provide such information
to the Company at least five (5) business days prior to the first
anticipated filing date of such Registration Statement if such
Investor elects to have any of the Registrable Securities included in
the Registration Statement.
5.2 Each Investor, by its acceptance of the Registrable Securities, if
any, agrees to cooperate with the Company as reasonably requested by
the Company in connection with the preparation and filing of a
Registration Statement hereunder, unless such Investor has notified
the Company in writing of its election to exclude all of its
Registrable Securities from the Registration Statement.
5.3 Each Investor agrees that, upon receipt of any notice from the Company
of the happening of any event rendering a Registration Statement no
longer effective, such Investor will immediately discontinue
disposition of Registrable Securities, pursuant to the Registration
Statement covering such Registrable Securities until the Investor's
receipt of the copies of the supplemented or amended prospectus filed
with the SEC and declared effective and, if so directed by the
Company, the Investor shall deliver to the Company (at the expense of
the Company) or destroy (and deliver to the Company a certificate of
destruction) all copies in
PAGE 28
the Investor's possession of the prospectus covering the Registrable
Securities current at the time of receipt of such notice.
6. INDEMNIFICATION
6.1 Indemnification by Company.
The Company agrees to indemnify and hold harmless, to the fullest
extent permitted by law, the Investor, each of its officers,
directors, partners and employees each person who controls the
Investor and each underwriter for the Investor (within the meaning of
the ▇▇▇▇ ▇▇▇) against all losses, claims, damages, liabilities, costs
(including, without limitation, reasonable attorney's fees) and
expenses imposed on such person caused by (i) any untrue or alleged
untrue statement of a material fact contained in any Registration
Statement, Prospectus or any preliminary prospectus or any amendment
or supplement thereto or any omission or alleged omission to state
therein a material fact required to be stated therein or necessary to
make the statements therein not misleading, except insofar as the same
are based upon any information furnished in writing to the Company by
such Investor or such Underwriters as the case may be, expressly for
use therein, or (ii) any violation by the Company of any federal,
state or common law, rule or regulation applicable to the Company in
connection with any Registration Statement, Prospectus or any
preliminary prospectus, or any amendment or supplement thereto, and
shall reimburse in accordance with subparagraph (c) below, each of the
foregoing persons for any legal and any other expenses reasonably
incurred in connection with investigating or defending any such
claims. Indemnity under this Section 5(a) shall remain in full force
and effect regardless of any investigation made by or on behalf of any
indemnified party and shall survive the permitted transfer of the
Registrable Securities.
6.2 Indemnification by Holder.
In connection with any registration pursuant to the terms of this
Agreement, each Investor will furnish to the Company in writing such
information as the Company reasonably requests concerning the holders
of Registrable Securities or the proposed manner of distribution for
use in connection with any Registration Statement or Prospectus and
agrees, severally but not jointly, to indemnify and hold harmless, to
the fullest extent permitted by law, the Company, its directors,
officers, employees, stockholders and each person who controls the
Company (within the meaning of the ▇▇▇▇ ▇▇▇) against any losses,
claims, damages, liabilities and expense (including reasonable
attorney's fees) resulting from any untrue statement of a material
fact or any omission of a material fact required to be stated in the
Registration Statement or Prospectus or preliminary prospectus or
amendment or supplement thereto or necessary to make the statements
therein not misleading, to the extent, but only to
PAGE 29
the extent that such untrue statement or omission is contained in any
information furnished in writing by such Investor to the Company
specifically for inclusion in such Registration Statement or
Prospectus or amendment or supplement thereto and that such
information was substantially relied upon by the Company in
preparation of the Registration Statement or Prospectus or any
amendment or supplement thereto. In no event shall the liability of an
Investor be greater in amount than the dollar amount of the proceeds
(net of all expense paid by such Investor and the amount of any
damages such holder has otherwise been required to pay by reason of
such untrue statement or omission) received by such Investor upon the
sale of the Registrable Securities, Second Closing Registrable
Securities or Additional Registrable Securities included in the
Registration Statement giving rise to such indemnification obligation.
6.3 Conduct of Indemnification Proceedings.
Any person entitled to indemnification hereunder shall (i) give prompt
notice to the indemnifying party of any claim with respect to which it
seeks indemnification and (ii) permit such indemnifying party to
assume the defense of such claim with counsel reasonably satisfactory
to the indemnified party; PROVIDED that any person entitled to
indemnification hereunder shall have the right to employ separate
counsel and to participate in the defense of such claim, but the fees
and expenses of such counsel shall be at the expense of such person
unless (a) the indemnifying party has agreed to pay such fees or
expenses, or (b) the indemnifying party shall have failed to assume
the defense of such claim and employ counsel reasonably satisfactory
to such person or (c) in the reasonable judgment of any such person,
based upon written advice of its counsel, a conflict of interest
exists between such person and the indemnifying party with respect to
such claims (in which case, if the person notifies the indemnifying
party in writing that such person elects to employ separate counsel at
the expense of the indemnifying party, the indemnifying party shall
not have the right to assume the defense of such claim on behalf of
such person); and PROVIDED, FURTHER, that the failure of any
indemnified party to give notice as provided herein shall not relieve
the indemnifying party of its obligations hereunder, except to the
extent that such failure to give notice shall materially adversely
affect the indemnifying party in the defense of any such claim or
litigation. It is understood that the indemnifying party shall not, in
connection with any proceeding in the same jurisdiction, be liable for
fees or expenses of more than one separate firm of attorneys at any
time for all such indemnified parties. No indemnifying party will,
except with the consent of the indemnified party, consent to entry of
any judgment or enter into any settlement that does not include as an
unconditional term thereof the giving by the claimant or plaintiff to
such indemnified party of a release from all liability in respect of
such claim or litigation.
PAGE 30
6.4 Contribution.
If for any reason the indemnification provided for in the preceding
paragraphs (a) and (b) is unavailable to an indemnified party or
insufficient to hold it harmless, other than as expressly specified
therein, then the indemnifying party shall contribute to the amount
paid or payable by the indemnified party as a result of such loss,
claim, damage or liability in such proportion as is appropriate to
reflect the relative fault of the indemnified party and the
indemnifying party, as well as any other relevant equitable
considerations. No person guilty of fraudulent misrepresentation
within the meaning of Section 11(f) of the 1933 Act shall be entitled
to contribution from any person not guilty of such fraudulent
misrepresentation. In no event shall the contribution obligation of a
holder of Registrable Securities be greater in amount than the dollar
amount of the proceeds (net of all expenses paid by such holder and
the amount of any damages such holder has otherwise been required to
pay by reason of such untrue or alleged untrue statement or omission
or alleged omission) received by it upon the sale of the Registrable
Securities giving rise to such contribution obligation.
7. MISCELLANEOUS.
7.1 Amendments and Waivers.
This Agreement may be amended only by a writing signed by the parties
hereto. The Company may take any action herein prohibited, or omit to
perform any act herein required to be performed by it, only if the
Company shall have obtained the written consent to such amendment,
action or omission to act, of each Investor.
7.2 Notices.
All notices and other communications provided for or permitted
hereunder shall be made as set forth in Section 7.4 of the Purchase
Agreement.
7.3 Assignments and Transfers by Investor.
This Agreement and all the rights and obligations of the Investor
hereunder may not be assigned or transferred to any transferee or
assignee except to an affiliate or permitted transferee of an Investor
who is a subsequent holder of any Registrable Securities, Second
Closing Registrable Securities or Additional Registrable Securities.
7.4 Assignments and Transfers by the Company.
This Agreement may not be assigned by the Company without the prior
written consent of each Investor, except that without the prior
written consent of the Investor, but after notice duly given, the
Company shall assign its rights and delegate its duties hereunder to
any
PAGE 31
successor-in-interest corporation, and such successor-in-interest
shall assume such rights and duties, in the event of a merger or
consolidation of the Company with or into another corporation or the
sale of all or substantially all of the Company's assets.
7.5 Benefits of the Agreement.
The terms and conditions of this Agreement shall inure to the benefit
of and be binding upon the respective permitted successors and assigns
of the parties. Nothing in this Agreement, express or implied, is
intended to confer upon any party other than the Company and the
Investor or their respective successors and assigns any rights,
remedies, obligations, or liabilities under or by reason of this
Agreement, except for right to indemnify and as otherwise expressly
provided in this Agreement.
7.6 Counterparts.
This Agreement may be executed in two or more counterparts, each of
which shall be deemed an original, but all of which together shall
constitute one and the same instrument.
7.7 Titles and Subtitles.
The titles and subtitles used in this Agreement are used for
convenience only and are not to be considered in construing or
interpreting this Agreement.
7.8 Severability.
If one or more provisions of this Agreement are held to be
unenforceable under applicable law, such provision shall be excluded
from this Agreement and the balance of this Agreement shall be
interpreted as if such provision were so excluded and shall be
enforceable in accordance with its terms to the fullest extent
permitted by law.
7.9 Further Assurances.
The parties shall execute and deliver all such further instruments and
documents and take all such other actions as may reasonably be
required to carry out the transactions contemplated hereby and to
evidence the fulfilment of the agreements herein contained.
7.10 Entire Agreement.
This Agreement is intended by the parties as a final expression of
their agreement and intended to be a complete and exclusive statement
of the agreement and understanding of the parties hereto in respect of
the subject matter contained herein. This Agreement supersedes all
prior agreements and understandings between the parties with respect
to such subject matter.
PAGE 32
7.11 Applicable Law.
The provision of this schedule shall be governed by, and construed in
accordance with, the laws of the State of
New Jersey without regard to
principles of conflicts of law and the parties hereby submit to the
non-exclusive jurisdiction of the courts of England and the courts of
New Jersey.
