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EXHIBIT 10.59
STOCK PURCHASE AGREEMENT
BY AND BETWEEN
CRESCENT INTERNATIONAL LTD.
AND
APPLIEDTHEORY CORPORATION
DATED AS OF FEBRUARY 22, 2001
This STOCK PURCHASE AGREEMENT is entered into as of the 22nd day of
February, 2001 (this "Agreement"), by and between Crescent International Ltd.
(the "Investor"), an entity organized and existing under the laws of Bermuda,
and AppliedTheory Corporation, a corporation organized and existing under the
laws of the State of Delaware (the "Company").
WHEREAS, the parties desire that, upon the terms and subject to the
conditions contained herein, the Company shall issue and sell to the Investor,
from time to time as provided herein, and the Investor shall purchase, up to
$30,000,000 of the Common Stock (as defined below); and
WHEREAS, such investments will be made in reliance upon the provisions of
Section 4(2) ("Section 4(2)") and Regulation D ("Regulation D") of the U.S.
Securities Act of 1933, as amended, and the rules and regulations promulgated
thereunder (the "Securities Act"), and/or upon such other exemption from the
registration requirements of the Securities Act as may be available with respect
to any or all of the investments in Common Stock to be made hereunder.
NOW, THEREFORE, in consideration of the premises, representations,
warranties, covenants and agreements contained herein, and for other good and
valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, intending to be legally bound hereby, the parties hereto agree as
follows:
ARTICLE I
CERTAIN DEFINITIONS
Section 1.1. "Affiliate" shall mean any Person that, directly or
indirectly through one or more intermediaries, controls or is controlled by, or
is under direct or indirect common control with any other Person. For the
purposes of this definition, "control," when used with respect to any Person,
means the power to direct the management and policies of such Person, directly
or indirectly, whether through the ownership of voting securities, by contract
or otherwise, and the term "controls" and "controlled" have meanings correlative
to the foregoing.
Section 1.2. "Capital Shares" shall mean the Common Stock and any shares
of any other class of common stock whether now or hereafter authorized, having
the right to participate
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in the distribution of dividends (as and when declared) or assets (upon
liquidation of the Company).
Section 1.3. "Closing" shall mean one of the closings of a purchase and
sale of the Common Stock and the issuance of the Warrants pursuant to Section
2.1 of this Agreement.
Section 1.4. "Closing Date" shall mean, with respect to a Closing, the
second Trading Day following the Sale Date related to such Closing, provided all
conditions to such Closing have been satisfied on or before such Trading Day.
Section 1.5. "Closing Price" shall mean, with respect to the Common Stock,
the per share price for such Common Stock as reported under Section 10.2 of this
Agreement.
Section 1.6. "Closing Statement" shall mean the closing statement executed
by the Company and the Investor on the Subscription Date and on each Closing
Date, setting forth the actions taken by the Company and the Investor on the
Subscription Date and on such Closing Date, as applicable, and the amounts due
to the payee entities set forth on Schedule 10.1 hereto, on the Subscription
Date and such Closing Date, as applicable, in the form of Exhibit A attached
hereto.
Section 1.7. "Commitment Period" shall mean the period commencing on the
Subscription Date and expiring on the earlier to occur of (i) the date on which
the Investor shall have purchased Commitment Shares pursuant to this Agreement
for an aggregate Purchase Price of the Maximum Commitment Amount, (ii) the date
this Agreement is terminated pursuant to Section 2.5 hereof, or (iii) the date
occurring 24 months from the Subscription Date.
Section 1.8. "Commitment Shares" shall mean the First Sale Shares and the
Subsequent Sale Shares, collectively.
Section 1.9. "Common Stock" shall mean the Company's common stock, $0.01
par value per share.
Section 1.10. "Condition Satisfaction Date" shall have the meaning set
forth in Section 7.2 of this Agreement.
Section 1.11. "Daily Trading Value" shall mean, on any Trading Day, the
Closing Price multiplied by the trading volume of the Common Stock.
Section 1.12. "Damages" shall mean any and all losses, claims, damages,
liabilities, costs and expenses (including, without limitation, any and all
investigative, legal and other expenses reasonably incurred in connection with,
and any and all amounts paid in defense or settlement of, any action, suit or
proceeding between any indemnified party and any indemnifying party or between
any indemnified party and any third party, or otherwise, or any claim asserted).
Section 1.13. "Effective Date" with respect to each Sale of Registrable
Securities shall mean the earlier to occur of: (i) the applicable date on which
the SEC has declared effective a Registration Statement registering resale of
Registrable Securities as set forth in the Registration
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Rights Agreement and (ii) the date on which such Registrable Securities first
become eligible for resale pursuant to Rule 144 of the Securities Act.
Section 1.14. "Exchange Act" shall mean the U.S. Securities Exchange Act
of 1934, as amended, and the rules and regulations promulgated thereunder.
Section 1.15. "First Sale" shall have the meaning set forth in Section
2.1(a) of this Agreement.
Section 1.16. "First Sale Shares" shall have the meaning set forth in
Section 2.1(a) of this Agreement.
Section 1.17. "Incentive Warrant" shall mean the Incentive Warrant in the
form of Exhibit B hereto issued pursuant to Section 2.1(c) of this Agreement.
Section 1.18. "Incentive Warrant Shares" shall mean all shares of Common
Stock issued or issuable pursuant to exercise of the Incentive Warrant.
Section 1.19. "Investment Amount" shall mean the dollar amount to be
invested by the Investor to purchase Commitment Shares with respect to any Sale
Date as notified by the Company to the Investor in accordance with Section 2.3
hereof.
Section 1.20. "Legend" shall have the meaning specified in Section 8.1 of
this Agreement.
Section 1.21. "Material Adverse Effect" shall mean any effect on the
business, operations, properties, prospects, or financial condition of the
Company that is material and adverse to the Company or to the Company and such
other entities controlled by the Company, taken as a whole, and/or any
condition, circumstance, or situation that would prohibit or otherwise interfere
with the ability of the Company to enter into and perform its obligations under
any of (i) this Agreement, (ii) the Registration Rights Agreement and (iii) the
Warrants.
Section 1.22. "Maximum Commitment Amount" shall mean $30,000,000.
Section 1.23. "Maximum Sale Amount" shall mean (i) with respect to the
First Sale, up to 2.75 times the average of the Daily Trading Values and (ii)
with respect to each Subsequent Sale, up to 2.00 times the average of the Daily
Trading Values, during the 22 Trading Day period immediately preceding the Sale
Notice Date relating to each such Sale, and in each case subject to a maximum
amount of $2,500,000, unless a higher amount is agreed to in writing by the
Company and the Investor. If (A) the Threshold Closing Price Condition is not
met or (B) the average of the Daily Trading Values during the 22 Trading Day
period immediately preceding the applicable Sale Notice Date is less than
$150,000, then the Maximum Sale Amount shall be $50,000.
Section 1.24. "Minimum Time Interval" shall mean (i) if the previous Sale
related to the sale of unregistered Common Stock, 22 Trading Days from the
Effective Date relating to such Sale or (ii) if the previous Sale related to the
sale of registered Common Stock, 22 Trading Days from the previous Sale Date.
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Section 1.25. "NASD" shall mean the National Association of Securities
Dealers, Inc.
Section 1.26. "Outstanding" when used with reference to Common Stock or
Capital Shares (collectively the "Shares"), shall mean, at any date as of which
the number of such Shares is to be determined, all issued and outstanding
Shares, and shall include all such Shares issuable in respect of outstanding
scrip or any certificates representing fractional interests in such Shares;
provided, however, that "Outstanding" shall not refer to any such Shares then
directly or indirectly owned or held by or for the account of the Company.
Section 1.27. "Person" shall mean an individual, a corporation, a
partnership, an association, a trust or other entity or organization, including
a government or political subdivision or an agency or instrumentality thereof.
Section 1.28. "Principal Market" shall mean the Nasdaq National Market,
the Nasdaq SmallCap Market, the American Stock Exchange, the Electronic Bulletin
Board or the New York Stock Exchange, whichever is at the time the principal
trading exchange or market for the Common Stock.
Section 1.29. "Protective Warrant" or "Protective Warrants" shall mean any
and all Protective Warrant(s) in the form of Exhibit C hereto issued pursuant to
Section 2.1(b) of this Agreement.
Section 1.30. "Protective Warrant Shares" shall mean all shares of Common
Stock issued or issuable pursuant to exercise of the Protective Warrants.
Section 1.31. "Purchase Price" shall mean 93% of the lowest three
consecutive Closing Prices during (i) with respect to a Sale, the 22 Trading Day
period immediately preceding and ending on the applicable Sale Date and (ii)
with respect to an Effective Date, the 22 Trading Day period immediately
preceding such Effective Date.
Section 1.32. "Registrable Securities" shall mean (i) the Commitment
Shares, (ii) the Warrant Shares and (iii) any securities issued or issuable with
respect to any of the foregoing by way of exchange, stock dividend or stock
split or in connection with a combination of shares, recapitalization, merger,
consolidation or other reorganization or otherwise. As to any particular
Registrable Securities, once issued such securities shall cease to be
Registrable Securities when (w) the applicable Registration Statement has been
declared effective by the SEC and all such Registrable Securities have been
disposed of pursuant to the applicable Registration Statement, (x) all such
Registrable Securities have been sold under circumstances under which all of the
applicable conditions of Rule 144 (or any similar provision then in force) under
the Securities Act ("Rule 144") are met, (y) all such Registrable Securities
have been otherwise transferred to holders who may trade such shares without
restriction under the Securities Act, and the Company has delivered a new
certificate or other evidence of ownership for such securities not bearing a
restrictive legend or (z) in the opinion of counsel to the Company, which
counsel shall be reasonably acceptable to the Investor, all such Registrable
Securities may be sold by the Investor without registration and without any
time, volume or manner limitations pursuant to Rule 144(k) (or any similar
provision then in effect) under the Securities Act.
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Section 1.33. "Registration Rights Agreement" shall mean the registration
rights agreement by and between the Company and the Investor, in the form of
Exhibit D hereto.
Section 1.34. "Registration Statement" or "Registration Statements" shall
have the meaning set forth in the Registration Rights Agreement.
Section 1.35. "Regulation D" shall have the meaning set forth in the
recitals of this Agreement.
Section 1.36. "Representative" of a party shall mean any officer,
director, employee, agent, counsel, accountant, financial advisor, consultant or
other representative of such party.
Section 1.37. "Sale" shall mean the First Sale together with any and all
Subsequent Sales.
Section 1.38. "Sale Date" shall mean the Trading Day on which a Sale
Notice Period expires.
Section 1.39. "Sale Fees" shall have the meaning specified in Section
10.1(b) hereof.
Section 1.40. "Sale Notice" shall mean a written notice to the Investor
setting forth the intended Closing Date, the Investment Amount and the number of
shares of Common Stock that the Company intends to require the Investor to
purchase pursuant to the terms of this Agreement.
Section 1.41. "Sale Notice Date" shall mean the Trading Day during the
Commitment Period upon which a Sale Notice to sell Common Stock to the Investor
is deemed delivered pursuant to Section 2.3(b) hereof.
Section 1.42. "Sale Notice Period" shall mean a period beginning on a Sale
Notice Date and ending 7 Trading Days after a Sale Notice Date.
Section 1.43. "SEC" shall mean the U.S. Securities and Exchange
Commission.
Section 1.44. "SEC Documents" shall mean the Company's latest Form 10-K as
of the time in question, all Forms 10-Q and 8-K filed thereafter, and the Proxy
Statement for its latest fiscal year as of the time in question until such time
the Company no longer has an obligation to maintain the effectiveness of a
Registration Statement as set forth in the Registration Rights Agreement.
Section 1.45. "Section 4(2)" shall have the meaning set forth in the
recitals of this Agreement.
Section 1.46. "Securities Act" shall have the meaning set forth in the
recitals of this Agreement.
Section 1.47. "Strategic Investor" shall mean any Person (i) that intends
to participate in the corporate governance of the Company or in the conduct of
its business or (ii) as to whom the Company's Board of Directors has made a
determination in good faith that such Person will
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develop a material strategic relationship with the Company in connection with
its present or future business.
Section 1.48. "Subscription Date" shall mean the date on which this
Agreement is executed and delivered by the parties hereto.
Section 1.49. "Subscription Fee" shall have the meaning set forth in
Section 10.1(a) hereof.
Section 1.50. "Subsequent Sale" shall have the meaning set forth in
Section 2.1(d) of this Agreement.
Section 1.51. "Subsequent Sale Shares" shall have the meaning set forth in
Section 2.1(d) of this Agreement.
Section 1.52. "Subsidiary" shall mean any Person in which the Company,
directly or indirectly through Subsidiaries or otherwise, beneficially owns more
than 50% of either the equity interests in, or the voting control of, such
Person.
Section 1.53. "Threshold Closing Price Condition" shall mean that on each
Trading Day during any Sale Notice Period the Closing Price must not be less
than $1.00.
Section 1.54. "Trading Day" shall mean any day during which the Principal
Market shall be open for business.
Section 1.55. "Transfer Agent Instructions" shall have the meaning set
forth in Section 2.4(a) of this Agreement.
Section 1.56. "Underwriter" shall mean any underwriter participating in
any disposition of the Registrable Securities on behalf of the Investor pursuant
to a Registration Statement.
Section 1.57. "Warrants" shall mean the Protective Warrants and Incentive
Warrant.
Section 1.58. "Warrant Shares" shall mean the Protective Warrant Shares
and the Incentive Warrant Shares.
ARTICLE II
SALE AND PURCHASE OF COMMON STOCK AND WARRANTS;
TERMINATION OF OBLIGATIONS
Section 2.1. Sales.
(a) First Sale. Upon the terms and conditions set forth herein
(including without limitation the provisions of Article VII hereof),
the Company shall exercise the First Sale by the delivery of a Sale
Notice. On the Closing Date relating to the First Sale, the Company
shall issue and sell and, if so issued and
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sold, the Investor shall purchase such number of shares of Common
Stock for the Investment Amount stated in the applicable Sale
Notice, which amount shall not exceed the Maximum Sale Amount, and
at the applicable Purchase Price as determined in accordance with
the terms and conditions set forth herein (such transaction is
referred to herein as the "First Sale," and all such shares are
referred to herein as the "First Sale Shares").
(b) Protective Warrants. In partial consideration for the Investor
entering into this Agreement if the Company elects to exercise its
right with respect to any Sale to require the Investor to purchase
shares of Common Stock that have not been previously registered and
are not covered by an effective Registration Statement filed with
the SEC, on each Closing Date relating to each such Sale, the
Company shall issue and deliver to the Investor a Protective
Warrant, with an exercise price of $0.01 for each share of Common
Stock, for the purchase of such number of shares of Common Stock as
described in such Protective Warrant.
(c) Incentive Warrant. In partial consideration for the Investor
entering into this Agreement, on the applicable Closing Date of the
First Sale, the Company shall issue and deliver to the Investor the
Incentive Warrant, with an exercise price equal to 150% of the
Purchase Price of the First Sale, for the purchase of such number of
shares of Common Stock as is equal to $3,000,000 divided by the
Purchase Price of the First Sale.
(d) Subsequent Sales. Upon the terms and conditions set forth herein
(including, without limitation, the provisions of Article VII
hereof), on any Sale Notice Date the Company may exercise a
Subsequent Sale by the delivery of a Sale Notice. On the Closing
Date relating to each Subsequent Sale, the Company shall issue and
sell and the Investor shall purchase such number of shares of Common
Stock for the Investment Amount stated in the applicable Sale
Notice, which amount shall not exceed the Maximum Sale Amount, at
the applicable Purchase Price as determined in accordance with the
terms and conditions set forth herein (each such transaction is
referred to herein as a "Subsequent Sale," and all such shares are
referred to herein as the "Subsequent Sale Shares").
Section 2.2. Twenty Percent Limitation. Unless the Company obtains the
requisite approval of its shareholders in accordance with the corporate laws of
Delaware and the applicable rules of the Principal Market, no more than 19.9% of
the Outstanding shares of Common Stock may be issued and sold pursuant to Sales
and the Warrants; provided, that with respect to the issuance of more than 19.9%
of the Outstanding shares of Common Stock pursuant to the Warrants, the Investor
has the right to require the Company to seek such shareholder approval and upon
the written request of the Investor the Company shall as soon as practicable
after such request prepare and file with the SEC a proxy statement to be
distributed to shareholders of the Company for the purpose of soliciting proxies
for use at an annual or special meeting of shareholders of the Company at which
such shareholder approval is sought, and in which proxy statement the Company
will recommend to its shareholders the foregoing approval.
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Section 2.3. Sale Notice.
(a) Timing. At any time during the Commitment Period, the Company
may deliver a Sale Notice to the Investor, subject to the conditions set forth
in Section 7.2.
(b) Date of Delivery of Sale Notice. A Sale Notice shall be deemed
delivered on (i) the Trading Day it is received by facsimile or otherwise by the
Investor if such notice is received prior to 12:00 noon New York time, or (ii)
the immediately succeeding Trading Day if it is received by facsimile or
otherwise after 12:00 noon New York time on a Trading Day or at any time on a
day which is not a Trading Day. No Sale Notice will be deemed delivered, on a
day that is not a Trading Day.
Section 2.4. Closings.
(a) Subscription Date. On the Subscription Date (i) the Company and
the Investor shall execute the Registration Rights Agreement, (ii) the Company
shall execute and deliver irrevocable instructions to the transfer agent, in the
form of Exhibit E attached hereto (the "Transfer Agent Instructions"), to
prepare and deliver to the Investor, following each Sale, a share certificate in
the name of the Investor and in the amount of the applicable Commitment Shares,
the transfer agent shall confirm and accept such instructions, and a copy of
such instructions shall be delivered to the Investor's legal counsel, (iii) the
Investor shall deliver to the Company and the Company shall execute a Closing
Statement, and (iv) the Company shall pay to the Investor the applicable fees
and costs determined in accordance with Section 10.1, by wire transfer of
immediately available funds to the account designated in writing by the
Investor. In addition, on or prior to the Subscription Date, each of the Company
and the Investor shall deliver to the other all documents, instruments and
writings required to be delivered or reasonably requested by either of them
pursuant to this Agreement in order to implement and effect the transactions
contemplated herein.
(b) Closing Date. On each Closing Date (i) the Company shall issue
and deliver to the Investor a Protective Warrant, if required by Section 2.1(b)
hereof, (ii) the Company shall instruct the transfer agent to prepare and
deliver to the Investor a share certificate in the name of the Investor and in
the amount of the applicable Commitment Shares, in accordance with the Transfer
Agent Instructions, and the Company shall take all other actions necessary to
ensure the prompt delivery of such share certificate to the Investor, (iii) the
Investor shall deliver to the Company and the Company shall execute a Closing
Statement, and (iv) the Investor shall deliver to the Company the Investment
Amount specified in the Closing Statement, less applicable fees and costs
determined in accordance with Section 10.1 and Schedule 10.1, by wire transfer
of immediately available funds to the account designated in writing in the Sale
Notice. On the Closing Date relating to the First Sale, the Company shall
deliver the Incentive Warrant to the Investor. In addition, on or prior to each
Closing Date, each of the Company and the Investor shall deliver to the other
all documents, instruments and writings required to be delivered or reasonably
requested by either of them pursuant to this Agreement in order to implement and
effect the transactions contemplated herein.
Section 2.5. Termination of Agreement and Investment Obligation. The
Company shall have the right to terminate this Agreement at any time upon 30
days' written notice to the
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Investor. The Investor shall have the right to immediately terminate this
Agreement (including with respect to any Sale, notice of which has been given
but the applicable Closing Date has not yet occurred) in accordance with Section
6.12 or in the event that: (i) any Registration Statement has not been declared
effective by the SEC within the applicable time periods set forth in Section 1.1
of the Registration Rights Agreement, (ii) there shall occur any stop order or
suspension of the effectiveness of the Registration Statement for an aggregate
of 30 Trading Days during the Commitment Period, or (iii) the Company shall at
any time fail to comply with the requirements of Section 6.2, 6.3, 6.4, 6.5,
6.6, 6.8 or 6.9.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF INVESTOR
The Investor represents and warrants to the Company that:
Section 3.1. Intent. The Investor is entering into this Agreement for its
own account, and the Investor has no view to the distribution of the Registrable
Securities or Warrants and has no present arrangement (whether or not legally
binding) at any time to sell, assign, transfer, pledge, encumber, hypothecate or
otherwise dispose of the Registrable Securities or Warrants to or through any
person or entity; provided, however, that by making the representations herein,
the Investor does not agree to hold the Registrable Securities or Warrants for
any minimum or other specific term and reserves the right to dispose of the
Registrable Securities or Warrants at any time pursuant to the Registration
Statement and in accordance with federal and state securities laws applicable to
such disposition.
Section 3.2. Sophisticated Investor. The Investor is a sophisticated
investor (as described in Rule 506(b)(2)(ii) of Regulation D) and an accredited
investor (as defined in Rule 501 of Regulation D), and the Investor has such
experience in business and financial matters that it is capable of evaluating
the merits and risks of an investment in the Common Stock. The Investor
acknowledges that an investment in the Common Stock is speculative and involves
a high degree of risk.
Section 3.3. Authority. Each of this Agreement and the Registration Rights
Agreement has been duly authorized by all necessary corporate action and no
further consent or authorization of the Investor, or its Board of Directors or
stockholders is required. Each of this Agreement and the Registration Rights
Agreement was validly executed and delivered by the Investor and each is a valid
and binding agreement of the Investor enforceable against it in accordance with
its terms, subject to applicable bankruptcy, insolvency, or similar laws
relating to, or affecting generally the enforcement of, creditors' rights and
remedies or by other equitable principles of general application.
Section 3.4. Not an Affiliate. The Investor is not an officer, director or
"affiliate" (as that term is defined in Rule 405 of the Securities Act) of the
Company.
Section 3.5. Organization and Standing. The Investor is duly organized,
validly existing, and in good standing under the laws of Bermuda.
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Section 3.6. Absence of Conflicts. The execution and delivery of this
Agreement and any other document or instrument contemplated hereby, and the
consummation of the transactions contemplated thereby, and compliance with the
requirements thereof, will not to the Investor's knowledge (a) violate any law,
rule, regulation, order, writ, judgment, injunction, decree or award binding on
the Investor, (b) violate any provision of any indenture, instrument or
agreement to which the Investor is a party or is subject, or by which the
Investor or any of its assets is bound, (c) conflict with or constitute a
material default thereunder, (d) result in the creation or imposition of any
lien pursuant to the terms of any such indenture, instrument or agreement, or
constitute a breach of any fiduciary duty owed by the Investor to any third
party, or (e) require the approval of any third-party (that has not been
obtained) pursuant to any material contract to which the Investor is subject or
to which any of its assets, operations or management may be subject.
Section 3.7. Disclosure; Access to Information. The Investor has received
or had access to all documents, records, books and other information pertaining
to Investor's investment in the Company that have been requested by Investor.
The Investor has received and reviewed copies of the SEC Documents.
Section 3.8. Manner of Sale. At no time was Investor presented with or
solicited by or through any leaflet, public promotional meeting, television
advertisement or any other form of general solicitation or advertising.
Section 3.9. Resale Restrictions. Investor acknowledges that any
Registrable Securities and Warrants to be acquired by Investor have not been
registered under the federal securities laws or any applicable state securities
laws in reliance upon exemptions available for non-public or limited offerings.
Investor understands that it must bear the economic risk of the investment in
the Registrable Securities and Warrants because the Registrable Securities and
Warrants have not been so registered and therefore are subject to restrictions
upon transfer such that they may not be sold or otherwise transferred unless
registered under the applicable securities laws or an exemption from such
registration is available. The Investor will not reoffer, sell, assign,
transfer, pledge, encumber, hypothecate or otherwise dispose of any Registrable
Securities or the Warrants in the absence of an effective registration
statement, qualification or authorization relating thereto under federal and
applicable state securities laws or an opinion of qualified counsel satisfactory
to the Company to the effect that the proposed transaction in the Registrable
Securities or the Warrants will neither constitute or result in any violation of
the federal or state securities laws. Subject to Section 8.1 of this Agreement,
any certificate or other document that may be issued representing any shares of
Registrable Securities or the Warrants may be endorsed with a legend to this
effect.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to the Investor that:
Section 4.1. Organization of the Company. The Company is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Delaware and has
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all requisite power and authority to own, lease and operate its properties and
to carry on its business as now being conducted. Except as set forth in the SEC
Documents or on Schedule 4.1 hereto, the Company does not own more than 50% of
the outstanding capital stock of or control any other Person. The Company is
duly qualified as a foreign corporation to do business and is in good standing
in every jurisdiction in which the nature of the business conducted or property
owned by it makes such qualification necessary, other than those in which the
failure so to qualify would not have a Material Adverse Effect.
Section 4.2. Authority. (i) The Company has the requisite corporate power
and authority to enter into and perform its obligations under this Agreement,
the Registration Rights Agreement and the Warrants and to issue the Commitment
Shares, the Warrants and the Warrant Shares; (ii) the execution and delivery of
this Agreement and the Registration Rights Agreement, and the execution,
issuance and delivery of the Warrants, by the Company and the consummation by it
of the transactions contemplated hereby and thereby have been duly authorized by
all necessary corporate action, and no further consent or authorization of the
Company or its Board of Directors or stockholders is required; and (iii) each of
this Agreement and the Registration Rights Agreement has been duly executed and
delivered, and the Warrants at the time of their delivery will be duly executed,
issued and delivered, by the Company and at the time of their delivery will
constitute valid and binding obligations of the Company enforceable against the
Company in accordance with their respective terms, except as such enforceability
may be limited by applicable bankruptcy, insolvency, or similar laws relating
to, or affecting generally the enforcement of, creditors' rights and remedies or
by other equitable principles of general application.
Section 4.3. Corporate Documents. The Company has furnished or made
available to the Investor true and correct copies of the Company's Certificate
of Incorporation, as amended and in effect on the date hereof (the
"Certificate"), and the Company's By-Laws, as amended and in effect on the date
hereof (the "By-Laws").
Section 4.4. Books and Records. The minute books and other similar records
of the Company and its subsidiaries as made available to Investor prior to the
execution of this Agreement contain a true and complete record, in all material
respects, of all action taken at all meetings and by all written consents in
lieu of meetings of the stockholders, the boards of directors and committees of
the boards of directors of the Company and the subsidiaries. The stock transfer
ledgers and other similar records of the Company and the subsidiaries as made
available to Investor prior to the execution of this Agreement accurately
reflect all record transfers prior to the execution of this Agreement in the
capital stock of the Company and the subsidiaries. Except as set forth on
Schedule 4.4 hereto, neither the Company nor any subsidiary has any of its books
or records recorded, stored, maintained, operated or otherwise wholly or partly
dependent upon or held by any means (including any electronic, mechanical or
photographic process, whether computerized or not) which (including all means of
access thereto and therefrom) are not under the exclusive ownership and direct
control of the Company or a subsidiary.
Section 4.5. Capitalization. The authorized capital stock of the Company
consists of 90,000,000 shares of Common Stock, of which 26,167,571 shares are
issued and outstanding, and 1,000,000 shares of preferred stock, none of which
are issued and outstanding. Except as
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follows, there are no options, warrants, or rights to subscribe to, securities,
rights or obligations convertible into or exchangeable for or giving any right
to subscribe for any shares of capital stock of the Company: (i) options to
purchase not more than 4,762,147 shares of Common Stock with purchase prices
between $0.056 and $35.75 per share; (ii) as disclosed in the Company's current
report on Form 8-K, filed with the SEC on January 26, 2001 (SEC File No.
000-25759) (the "8-K"), 5% Convertible Debentures due June 5, 2003 (the
"Debentures") for an aggregate principal amount of $30,000,000, the conversion
price for which is initially $16.69 per share of Common Stock, the conversion
price being subject to adjustment as set forth in the Debentures; and (iii) as
disclosed in the 8-K, Common Stock Purchase Warrants (the "Company Warrants")
exercisable for shares of Common Stock having a value of no more than
$13,000,000, which Company Warrants are initially exercisable at a price of
$6.00 per share of Common Stock, the exercise price being subject to adjustment
as further described in the 8-K and as set forth in the Company Warrants. All of
the outstanding shares of Common Stock of the Company have been duly and validly
authorized and issued and are fully paid and nonassessable.
Section 4.6. Registration and Listing of Common Stock. The Company has
registered its Common Stock pursuant to Section 12(b) or 12(g) of the Exchange
Act and is in full compliance with all reporting requirements of the Exchange
Act, and the Company has maintained all requirements for the continued listing
or quotation of its Common Stock, and such Common Stock is currently listed or
quoted on the Principal Market. As of the date hereof, the Principal Market is
the NASDAQ National Market.
Section 4.7. Financial Statements. Prior to the execution of this
Agreement, the Company has delivered to the Investor true and complete copies of
the unaudited balance sheets of the Company and its consolidated subsidiaries as
of September 30, 2000, and the related unaudited consolidated statements of
operations and stockholders' equity for the portion of the fiscal year then
ended. The financial statements of the Company delivered to the Investor have
been prepared in accordance with generally accepted accounting principles
applied on a consistent basis during the periods involved (except (i) as may be
otherwise indicated in such financial statements or the notes thereto or (ii) in
the case of unaudited interim statements, to the extent they may not include
footnotes or may be condensed or summary statements) and fairly present in all
material respects the financial position of the Company as of the dates thereof
and the results of operations and cash flows for the periods then ended
(subject, in the case of unaudited statements, to normal year-end audit
adjustments).
Section 4.8. SEC Documents. The Company has delivered or made available to
the Investor true and complete copies of the SEC Documents (including, without
limitation, audited financial statements, proxy information and solicitation
materials). The Company has not provided to the Investor any information that,
according to applicable law, rule or regulation, should have been disclosed
publicly prior to the date hereof by the Company, but which has not been so
disclosed. As of their respective dates, the SEC Documents complied as to form
and substance in all material respects with the requirements of the Securities
Act or the Exchange Act, as the case may be, and other federal, state and local
laws, rules and regulations applicable to such SEC Documents, and none of the
SEC Documents contained any untrue statement of a material fact or omitted to
state a material fact required to be stated therein or necessary in order to
make the statements therein, in light of the circumstances under which they were
made, not misleading. The financial statements of the Company included in the
SEC Documents comply
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as to form and substance in all material respects with applicable accounting
requirements and the published rules and regulations of the SEC or other
applicable rules and regulations with respect thereto. Such financial statements
have been prepared in accordance with generally accepted accounting principles
applied on a consistent basis during the periods involved (except (i) as may be
otherwise indicated in such financial statements or the notes thereto or (ii) in
the case of unaudited interim statements, to the extent they may include summary
notes and may be condensed or summary statements) and fairly present in all
material respects the financial position of the Company as of the dates thereof
and the results of operations and cash flows for the periods then ended
(subject, in the case of unaudited statements, to normal year-end audit
adjustments).
Section 4.9. Exemption from Registration; Valid Issuances; New Issuances.
The sale and issuance of the Warrants, the Warrant Shares, and the Commitment
Shares in accordance with the terms and on the basis of the representations and
warranties set forth in this Agreement, may and will be properly issued pursuant
to Section 4(2), Regulation D and/or any applicable state law. When issued and
paid for as provided herein and in the Warrants, the Commitment Shares and the
Warrant Shares will be duly and validly issued, fully paid, and nonassessable.
Neither the sales of the Commitment Shares, the Warrants, or the Warrant Shares
pursuant to, nor the Company's performance of its obligations under, this
Agreement, the Registration Rights Agreement or the Warrants will (i) result in
the creation or imposition of any liens, charges, claims or other encumbrances
upon the Commitment Shares, the Warrant Shares, or any of the assets of the
Company, or (ii) entitle the holders of Outstanding Capital Shares to preemptive
or other rights to subscribe to or acquire the Capital Shares or other
securities of the Company, other than changes to the conversion ratios
applicable to Outstanding Capital Shares or Outstanding rights convertible into
Capital Shares as described on Schedule 4.9 hereto. The Commitment Shares and
the Warrant Shares will not subject the Investor to personal liability by reason
of the ownership thereof. The Commitment Shares and Warrant Shares have been
duly authorized by the Company, but have not been issued (whether or not
subsequently repurchased by the Company) to any Person, and when issued to the
Investor in accordance with this Agreement and the Warrants will not have been
issued (whether or not subsequently repurchased by the Company) to any Person
other than the Investor.
Section 4.10. No General Solicitation or Advertising. In regard to the
transactions contemplated hereby, neither the Company nor any of its Affiliates
nor any distributor or any person acting on its or their behalf (i) has
conducted or will conduct any general solicitation (as that term is used in Rule
502(c) of Regulation D) or general advertising with respect to any of the
Commitment Shares, the Warrants, or the Warrant Shares, or (ii) made any offers
or sales of any security or solicited any offers to buy any security under any
circumstances that would require registration of the Common Stock under the
Securities Act.
Section 4.11. No Conflicts. The execution, delivery and performance of
this Agreement by the Company and the consummation by the Company of the
transactions contemplated hereby, including without limitation the issuance of
the Commitment Shares, the Warrants and the Warrant Shares do not and will not
(i) result in a violation of the Certificate or By-Laws or (ii) except as set
forth on Schedule 4.9, conflict with, or constitute a material 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 of, any material agreement,
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indenture, instrument or any "lock-up" or similar provision of any underwriting
or similar agreement to which the Company is a party, or (iii) result in a
violation of any federal, state, local or foreign law, rule, regulation, order,
judgment or decree (including federal and state securities laws and regulations)
applicable to the Company or by which any property or asset of the Company is
bound or affected (except for such conflicts, defaults, terminations,
amendments, accelerations, cancellations and violations as would not,
individually or in the aggregate, have a Material Adverse Effect) nor is the
Company otherwise in violation of, conflict with or in default under any of the
foregoing; provided, however, that for purposes of the Company's representations
and warranties as to violations of foreign law, rule or regulation referenced in
clause (iii), such representations and warranties are made only to the best of
the Company's knowledge insofar as the execution, delivery and performance of
this Agreement by the Company and the consummation by the Company of the
transactions contemplated hereby are or may be affected by the status of the
Investor under or pursuant to any such foreign law, rule or regulation. The
business of the Company is not being conducted in violation of any law,
ordinance or regulation of any governmental entity, except for possible
violations that either singly or in the aggregate do not and will not have a
Material Adverse Effect. The Company is not required under federal, state or
local law, rule or regulation to obtain any consent, authorization or order of,
or make any filing or registration with, any court or governmental agency in
order for it to execute, deliver or perform any of its obligations under this
Agreement or issue and sell the Common Stock, the Commitment Shares, the
Warrants, or the Warrant Shares in accordance with the terms hereof (other than
any SEC, NASD or state securities filings that may be required to be made by the
Company subsequent to any Closing, any registration statement that may be filed
pursuant hereto, and any shareholder approval required by the rules applicable
to companies whose common stock trades on the Nasdaq National Market); provided
that, for purposes of the representation made in this sentence, the Company is
assuming and relying upon the accuracy of the relevant representations and
agreements of the Investor herein.
Section 4.12. No Material Adverse Change. Except as set forth in the SEC
Documents, since September 30, 1999 no event has occurred that would have a
Material Adverse Effect on the Company.
Section 4.13. No Undisclosed Liabilities. Except as set forth in the SEC
Documents and on Schedule 4.13 hereto, the Company has no liabilities or
obligations that are material, individually or in the aggregate, other than
those incurred in the ordinary course of the Company's businesses since December
31, 1999 and which, individually or in the aggregate, do not or would not have a
Material Adverse Effect on the Company.
Section 4.14. No Undisclosed Events or Circumstances. Except as set forth
in the SEC Documents, since December 31, 1999, no event or circumstance has
occurred or exists with respect to the Company or its businesses, properties,
prospects, operations or financial condition, that, under applicable law, rule
or regulation, requires public disclosure or announcement prior to the date
hereof by the Company but which has not been so publicly disclosed or announced.
Section 4.15. No Integrated Offering. Neither the Company, nor any of its
Affiliates, nor any person acting on its or their behalf has, directly or
indirectly, made any offers or sales of any security or solicited any offers to
buy any security under circumstances that would require
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registration of the Common Stock, the Commitment Shares, the Warrants or the
Warrant Shares under the Securities Act.
Section 4.16. Litigation and Other Proceedings. Except as set forth in the
SEC Documents and on Schedule 4.16 hereto, there are no lawsuits or proceedings
pending or to the best knowledge of the Company threatened, against the Company,
nor has the Company received any written or oral notice of any such action,
suit, proceeding or investigation, which have had or might have a Material
Adverse Effect. Except as set forth in the SEC Documents and on Schedule 4.16
hereto, no judgment, order, writ, injunction or decree or award has been issued
by or, so far as is known by the Company, requested of any court, arbitrator or
governmental agency which has resulted in or might result in a Material Adverse
Effect.
Section 4.17. No Misleading or Untrue Communication. The Company, any
Person representing the Company, and, to the knowledge of the Company, any other
Person selling or offering to sell the Commitment Shares, the Warrants or the
Warrant Shares in connection with the transactions contemplated by this
Agreement, have not made, at any time, any oral communication in connection with
the offer or sale of the same which contained any untrue statement of a material
fact or omitted to state any material fact necessary in order to make the
statements, in the light of the circumstances under which they were made, not
misleading.
Section 4.18. Material Non-Public Information. The Company is not in
possession of, nor has the Company or its agents disclosed to the Investor, any
material non-public information that (i) if disclosed, would, or could
reasonably be expected to have, an effect on the price of the Common Stock and
(ii) according to applicable law, rule or regulation, should have been disclosed
publicly by the Company prior to the date hereof but which has not been so
disclosed.
ARTICLE V
COVENANTS OF THE INVESTOR
Section 5.1. Compliance. The Investor's trading activities with respect to
shares of the Company's Common Stock will be in compliance with all applicable
state and federal securities laws, rules and regulations and the rules and
regulations of the Principal Market on which the Company's Common Stock is
listed.
ARTICLE VI
COVENANTS OF THE COMPANY
Section 6.1. Registration Rights. The Company shall take all actions in
its power to cause the Registration Rights Agreement to remain in full force and
effect, and the Company shall comply in all respects with the terms thereof.
Section 6.2. Reservation of Common Stock. Until the later of the date on
which all Warrants issued have been exercised in full or have expired, the
Company shall reserve and keep available at all times, free of preemptive
rights, shares of Common Stock for the purpose of enabling the Company to
satisfy its obligation to issue the Warrant Shares. Such amount of shares of
Common Stock to be reserved shall be sufficient to comply with the Company's
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obligation to issue Common Stock to the Investor pursuant to the Incentive
Warrant and the Protective Warrants. The number of shares so reserved from time
to time, as theretofore increased or reduced as hereinafter provided, may be
reduced by the number of shares actually delivered.
Section 6.3. Listing of Common Stock. The Company shall exercise
reasonable best efforts to maintain the listing or quotation of the Common Stock
on a Principal Market, and as soon as practicable (but in any event prior to the
Closing Date for any Sale) will use reasonable best efforts to cause the
Commitment Shares and the Warrant Shares with respect to each Sale to be listed
on the Principal Market. The Company further shall, if the Company applies to
have the Common Stock traded on any other Principal Market, include in such
application the Commitment Shares and the Warrant Shares, and shall take such
other action as is reasonably necessary or desirable in the opinion of the
Investor to cause the Common Stock to be listed on such other Principal Market
as promptly as possible. The Company shall use commercially reasonable efforts
to continue the listing and trading of its Common Stock on the Principal Market
(including, without limitation, maintaining sufficient net tangible assets) and
will comply in all respects with the Company's reporting, filing and other
obligations under the bylaws or rules of the NASD and the Principal Market.
Section 6.4. Exchange Act Registration. The Company shall comply with all
applicable requirements set forth in the Registration Rights Agreement,
including without limitation its obligation to file each Registration Statement
with the SEC within the applicable time periods set forth in the Registration
Rights Agreement. After each Registration Statement becomes effective, the
Company shall use its best efforts to cause the Common Stock covered by such
Registration Statement to continue to be registered under Section 12(g) or 12(b)
of the Exchange Act, will comply in all material respects with its reporting and
filing obligations under the Exchange Act, and will not take any action or file
any document (whether or not permitted by the Exchange Act or the rules
thereunder) to terminate or suspend such registration or to terminate or suspend
its reporting and filing obligations under the Exchange Act.
Section 6.5. Legends. The certificates evidencing the Warrants, the
Commitment Shares and the Warrant Shares shall be free of legends, except as
provided for in Article VIII.
Section 6.6. Corporate Existence. The Company shall take all steps
necessary to preserve and continue the corporate existence of the Company.
Section 6.7. Additional SEC Documents. Until all Registrable Securities
issued or issuable to the Investor pursuant to this Agreement may be sold by the
Investor without registration and without any time, volume or manner limitations
pursuant to Rule 144(k) (or any similar provision then in effect) under the
Securities Act, the Company shall, as and when the originals thereof are
submitted to the SEC for filing, notify the Investor in writing of its
submission of any SEC Documents furnished or submitted to the SEC, and upon the
request of the Investor the Company shall deliver to the Investor copies of all
SEC Documents so furnished or submitted to the SEC.
Section 6.8. Notice of Certain Events Affecting Registration; Suspension
of Right to Make a Subsequent Sale. The Company shall immediately notify the
Investor, but in no event
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later than two business days by facsimile and by overnight courier, upon the
occurrence of any of the following events in respect of a Registration Statement
or related prospectus in respect of an offering of Registrable Securities: (i)
receipt of any request for additional information by the SEC or any other
federal or state governmental authority during the period of effectiveness of
the Registration Statement for amendments or supplements to the Registration
Statement or related prospectus; (ii) the issuance by the SEC or any other
federal or state governmental authority of any stop order suspending the
effectiveness of a Registration Statement or the initiation of any proceedings
for that purpose; (iii) receipt of any notification with respect to the
suspension of the qualification or exemption from qualification of any of the
Registrable Securities for sale in any jurisdiction or the initiation or
threatening of any proceeding for such purpose; (iv) the happening of any event
that makes any statement made in such Registration Statement or related
prospectus or any document incorporated or deemed to be incorporated therein by
reference untrue in any material respect or that requires the making of any
changes in the Registration Statement, related prospectus or documents so that,
in the case of a Registration Statement, it will not contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein not misleading, and
that in the case of the related prospectus, it will not contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading; (v) the declaration by
the SEC of the effectiveness of a Registration Statement; and (vi) the Company's
reasonable determination that a post-effective amendment to the Registration
Statement would be appropriate, and the Company shall promptly make available to
the Investor any such supplement or amendment to the related prospectus. The
Company shall not deliver to the Investor any Sale Notice during the
continuation of any of the foregoing events.
Section 6.9. Consolidation; Merger. The Company shall not, at any time
after the date hereof, effect any merger or consolidation of the Company with or
into, or a transfer of all or substantially all of the assets of the Company to,
another entity unless the resulting successor or acquiring entity (if not the
Company) executes a written instrument acknowledging and assuming the obligation
to issue to the Investor, upon any Sale or the exercise of any Warrant, in lieu
of each share of Common Stock theretofore issuable upon such Sale or exercise of
any such Warrant, other securities, money or property receivable upon such
merger, consolidation or transfer had the Sale or exercise of such Warrant
occurred immediately prior to such merger, consolidation or transfer.
Section 6.10. Issuance of Commitment Shares, Warrant Shares and Additional
Shares. The sale of the Commitment Shares, and the issuance of the Warrant
Shares pursuant to exercise of the Warrants shall be made in accordance with the
provisions and requirements of Regulation D and any applicable state law.
Issuance of the Warrant Shares pursuant to exercise of the Warrants through a
cashless exercise shall be made in accordance with the provisions and
requirements of Section 3(a)(9) under the Securities Act and any applicable
state law.
Section 6.11. Legal Opinion on Subscription Date. The Company's
independent counsel shall deliver to the Investor on the Subscription Date an
opinion in the form of Exhibit F, except for paragraph 7 thereof.
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Section 6.12. No Similar Arrangement; Right of First Refusal. The Company
shall refrain from entering into any other agreements, arrangements or
understandings granting to the Company the right to sell shares of its
securities to one or more investors, other than a Strategic Investor, in
placements exempt from registration under the Securities Act until 60 calendar
days after this Agreement is terminated pursuant to Section 2.5 hereof (the
"Exclusivity Period"). If the Company, for the purpose of obtaining any
additional financing, wishes to sell shares of its securities in placements
exempt from registration under the Securities Act during the Exclusivity Period
(a "Third Party Sale") to a party other than a Strategic Investor and other than
the Investor (the "Third Party"), the Company shall first offer (the "Offer") to
the Investor, in writing, the right to purchase such shares (the "Offered
Shares") at the bona fide price offered by the Third Party (the "Offer Price").
The Offer shall grant the Investor the right during the 5 Trading Days
immediately following the date of the Offer to elect to purchase any or all of
the Offered Shares. The Company, in connection with such a Third Party Sale,
shall refrain from circumventing or attempting to circumvent the Investor's
right of first refusal by way of making such a Third Party Sale to any of its
Affiliates without first making an Offer to the Investor. If the Investor so
exercises its right to purchase any or all of the Offered Shares, the purchase
will be treated as a Subsequent Sale except that the purchase price for the
Offered Shares shall be the Offer Price. The closing and method of payment shall
be as provided for in Sections 2.3 and 2.4 hereof and the Closing Date shall be
7 Trading Days after the Investor exercises such right. If the Investor fails to
exercise its right to purchase any or all of the Offered Shares, then during the
60 calendar days immediately following the expiration of such right, the Company
shall be free to sell any or all of the Offered Shares to a purchaser for a
purchase price not lower than the Offer Price payable on terms and conditions
that are not more favorable to such purchaser than those contained in the Offer.
In the event that the Company effects a Third Party Sale other than in
accordance with this Section 6.12, the Investor may immediately terminate this
Agreement. Notwithstanding the foregoing, the Company shall be permitted to
issue shares of its securities in connection with an acquisition of another
entity or assets related to the Company's current or future business.
Section 6.13. Public Announcements. The Company, its Representatives and
legal advisors, and the Investor will not issue or make any reports, statements
or releases to the public or to any third party with respect to this Agreement
or the transactions contemplated hereby without the consent of both the Company
and the Investor, which consent shall not be unreasonably withheld. The Company,
its Representatives and legal advisers, and the Investor also will obtain the
other party's prior approval of any press release to be issued announcing the
consummation of the transactions contemplated by this Agreement or in any way
referring to the other party or affiliates of the other party. If either party
is unable to obtain the approval of its public report, statement, or press or
other release from the other party and such report, statement, or press or other
release is, in the opinion of legal counsel to such party, required by
applicable law or by any rule or regulation of the Principal Market in order to
discharge such party's disclosure obligations, then such party may make or issue
the legally required report, statement, or press or other release and promptly
furnish the other party with a copy thereof.
ARTICLE VII
CONDITIONS TO DELIVERY OF
SALE NOTICES AND CONDITIONS TO CLOSING
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Section 7.1. Conditions Precedent to the Obligation of the Company to
Issue and Sell Common Stock. The obligation hereunder of the Company to issue
and sell the Commitment Shares to the Investor incident to each Closing is
subject to the satisfaction, at or before each such Closing, of each of the
conditions set forth below.
(a) Accuracy of the Investor's Representation and Warranties. The
representations and warranties of the Investor shall be true and
correct in all material respects as of the date of this Agreement
and as of the date of each such Closing as though made at each such
time.
(b) Performance by the Investor. The Investor shall have performed,
satisfied and complied in all material respects with all covenants,
agreements and conditions required by this Agreement to be
performed, satisfied or complied with by the Investor at or prior to
such Closing.
Section 7.2. Conditions Precedent to the Right of the Company to Deliver a
Sale Notice and the Obligation of the Investor to Purchase Commitment Shares.
The right of the Company to deliver a Sale Notice and the obligation of the
Investor hereunder to acquire and pay for the Commitment Shares incident to a
Closing is subject to the satisfaction, on (i) the Subscription Date, (ii) the
applicable Sale Notice Date and (iii) the applicable Closing Date (each a
"Condition Satisfaction Date"), of each of the following conditions; provided,
however, that with respect to the Subscription Date and the Closing relating to
the First Sale only, the Investor waives the conditions set forth in paragraphs
(a), (b) and (k) of this Section 7.2:
(a) Filing of Registration Statements with the SEC. In accordance
with the provisions set forth in the Registration Rights Agreement,
the Company shall have filed with the SEC Registration Statements
covering the resale of Registrable Securities relating to all prior
Sales.
(b) Effective Registration Statements. (1) The Company shall have
notified the Investor in accordance with Section 6.8 hereof that all
prior Registration Statements covering Registrable Securities
relating to the First Sale and any Subsequent Sales have been
declared effective by the SEC. (2) In accordance with the
Registration Rights Agreement, all such Registration Statements
shall remain effective on each Condition Satisfaction Date. (3)
Neither the Company nor the Investor shall have received notice that
the SEC has issued or intends to issue a stop order with respect to
a Registration Statement or that the SEC otherwise has suspended or
withdrawn the effectiveness of a Registration Statement, either
temporarily or permanently, or intends or has threatened to do so
(unless the SEC's concerns have been addressed and the Investor is
reasonably satisfied that the SEC no longer is considering or
intends to take such action). (4) No other suspension of the use or
withdrawal of the effectiveness of such Registration Statement or
related prospectus shall exist.
(c) Accuracy of the Company's Representations and Warranties. The
representations and warranties of the Company shall be true and
correct as of each
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Condition Satisfaction Date as though made at each such time (except
for representations and warranties specifically made as of a
particular date).
(d) Performance by the Company. The Company shall have performed,
satisfied and complied in all respects with all covenants,
agreements and conditions required by this Agreement, the
Registration Rights Agreement and the Warrants to be performed,
satisfied or complied with by the Company at or prior to each
Condition Satisfaction Date.
(e) No Injunction. No statute, rule, regulation, executive order,
decree, ruling or injunction shall have been enacted, entered,
promulgated or adopted by any court or governmental authority of
competent jurisdiction that prohibits the transactions contemplated
by this Agreement or otherwise has a Material Adverse Effect, and no
actions, suits or proceedings shall be in progress, pending or
threatened by any Person, that seek to enjoin or prohibit the
transactions contemplated by this Agreement or otherwise could
reasonably be expected to have a Material Adverse Effect. For
purposes of this paragraph (e), no proceeding shall be deemed
pending or threatened unless one of the parties has received written
or oral notification thereof prior to the applicable Closing Date.
(f) No Suspension of Trading in or Delisting of Common Stock. The
trading of the Common Stock shall not have been suspended by the
SEC, the Principal Market or the NASD, and the Common Stock shall
have been approved for listing or quotation on and shall not have
been delisted from the Principal Market. The issuance of shares of
Common Stock with respect to the applicable Closing shall not
violate the shareholder approval requirements of the Principal
Market.
(g) Legal Opinion. The Company shall have caused to be delivered to
the Investor, within 5 Trading Days of the effective date of a
Registration Statement, an opinion of the Company's independent
counsel in the form of Exhibit F hereto, addressed to the Investor.
(h) Due Diligence. No dispute in good faith between the
Company and the Investor shall exist pursuant to Section 7.3 as
to the adequacy of the disclosure contained in the Registration
Statement.
(i) Ten Percent Limitation. On each Closing Date, the number of
Commitment Shares then to be purchased by the Investor shall not
exceed the number of such shares that, when aggregated with all
other shares of Common Stock and Registrable Securities then owned
by the Investor beneficially or deemed beneficially owned by the
Investor, as determined in accordance with the definition of
beneficial ownership in Rule 13d-3 promulgated under the Exchange
Act, would result in the Investor owning no more than 9.9% of all of
such Common Stock as would be outstanding on such Closing Date, as
determined in accordance with Section 13(d) of the Exchange Act and
the regulations promulgated thereunder. For purposes of this
Section, in the event that the amount of Common Stock outstanding as
determined in accordance with Section
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13(d) of the Exchange Act and the regulations promulgated thereunder
is greater on a Closing Date than on the Sale Notice Date associated
with such Closing Date, the amount of Common Stock outstanding on
such Closing Date shall govern for purposes of determining whether
the Investor, when aggregating all purchases of Common Stock made
pursuant to this Agreement and, if any, Warrant Shares would own
more than 9.9% of the Common Stock following such Closing Date.
(j) No Knowledge. The Company shall have no knowledge of any event
reasonably likely to have the effect of causing any Registration
Statement to be suspended or otherwise ineffective (which event is
more likely than not to occur within the fifteen Trading Days
following the Trading Day on which such notice is deemed delivered).
(k) Minimum Time Interval. The Minimum Time Interval shall have
elapsed.
(l) Shareholder Vote. The issuance of shares of Common Stock with
respect to the applicable Closing, if any, shall not violate the
shareholder approval requirements of the Principal Market. Following
each Sale Notice, the Company shall promptly provide the Investor
with a written schedule stating as of such applicable Sale Notice
Date (i) the total number of shares of Outstanding Common Stock,
(ii) the number of Subsequent Sale Shares issuable with respect to
the applicable Closing, (iii) the number of First Sale Shares
issued, if any, (iv) the number of Protective Warrant Shares issued
or issuable, if any, and (v) the number of Incentive Warrant Shares
issued or issuable, if any. If the issuance by the Company of a
number of shares of Common Stock equal to the sum of the amounts
stated in clauses (ii) through (v), inclusive, hereof would result
in a violation by the Company of the shareholder approval
requirements of the Principal Market, the applicable Sale Notice
shall be deemed null and void.
(m) Other. On each Condition Satisfaction Date, the Investor shall
have received and been reasonably satisfied with such other
certificates and documents as shall have been reasonably requested
by the Investor in order for the Investor to confirm the Company's
satisfaction of the conditions set forth in this Section 7.2.,
including, without limitation, a certificate in substantially the
form and substance of Exhibit G hereto, executed in either case by
an executive officer of the Company and to the effect that all the
conditions to such Closing shall have been satisfied as at the date
of each such certificate.
Section 7.3. Due Diligence Review; Non-Disclosure of Non-Public
Information.
(a) The Company shall make available 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), and any Underwriter, any
Registration Statement or amendment or supplement thereto or any
blue sky, NASD or other filing, all financial and other records, all
SEC Documents and other filings with the SEC, and all other
corporate
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documents and properties of the Company as may be reasonably
necessary for the purpose of such review, and cause the Company's
officers, directors and employees to supply all such information
reasonably requested by 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 such 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 such Registration Statement.
(b) None of the Company, its officers, directors, employees and
agents shall in any event disclose non-public information to the
Investor, advisors to or representatives of the Investor unless
prior to disclosure of such information the Company identifies such
information as being non-public information and provides the
Investor, such advisors and representatives with the opportunity to
accept or refuse to accept such non-public information for review.
As a condition to disclosing any non-public information hereunder,
the Company may require the Investor's advisors and representatives
to enter into a confidentiality agreement in form reasonably
satisfactory to the Company and the Investor.
(c) Nothing herein shall require the Company to disclose non-public
information to the Investor or its advisors or representatives, and
the Company represents that it does not disseminate non-public
information to any investors who purchase stock in the Company in a
public offering, to money managers or to securities analysts;
provided, however, that notwithstanding anything herein to the
contrary, the Company shall, as hereinabove provided, immediately
notify the advisors and representatives of the Investor and any
Underwriters of any event or the existence of any circumstance
(without any obligation to disclose the specific event or
circumstance) of which it becomes aware, constituting non-public
information (whether or not requested of the Company specifically or
generally during the course of due diligence by such persons or
entities), which, if not disclosed in the prospectus included in the
applicable Registration Statement would cause such prospectus to
include a material misstatement or to omit a material fact required
to be stated therein in order to make the statements, therein, in
light of the circumstances in which they were made, not misleading.
Nothing contained in this Section 7.3 shall be construed to mean
that such persons or entities other than the Investor (without the
written consent of the Investor prior to disclosure of such
information) may not obtain non-public information in the course of
conducting due diligence in accordance with the terms and conditions
of this Agreement and nothing herein shall prevent any such persons
or entities from notifying the Company of their opinion that based
on such due diligence by such persons or entities, that such
Registration Statement contains an untrue statement of a material
fact or omits a material fact required to be stated in such
Registration Statement or necessary to make the statements contained
therein, in light of the circumstances in which they were made, not
misleading.
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ARTICLE VIII
LEGENDS
Section 8.1. Legends. Each of the Warrants and, unless otherwise provided
below, each certificate representing Registrable Securities will bear the
following legend (the "Legend"):
"THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"),
OR ANY OTHER APPLICABLE SECURITIES LAWS AND HAVE BEEN ISSUED IN RELIANCE
UPON AN EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT
AND SUCH OTHER SECURITIES LAWS. NEITHER THIS SECURITY NOR ANY INTEREST OR
PARTICIPATION HEREIN MAY BE REOFFERED, SOLD, ASSIGNED, TRANSFERRED,
PLEDGED, ENCUMBERED, HYPOTHECATED OR OTHERWISE DISPOSED OF, EXCEPT
PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT
OR PURSUANT TO A TRANSACTION THAT IS EXEMPT FROM, OR NOT SUBJECT TO, SUCH
REGISTRATION. THE HOLDER OF THIS CERTIFICATE IS THE BENEFICIARY OF CERTAIN
OBLIGATIONS OF THE COMPANY SET FORTH IN A STOCK PURCHASE AGREEMENT, DATED
AS OF FEBRUARY 22, 2001, BETWEEN APPLIEDTHEORY CORPORATION AND CRESCENT
INTERNATIONAL LTD. A COPY OF THE PORTION OF THE AFORESAID AGREEMENT
EVIDENCING SUCH OBLIGATIONS MAY BE OBTAINED FROM APPLIEDTHEORY
CORPORATION'S EXECUTIVE OFFICES."
On the Subscription Date the Company shall issue to the transfer agent for
its Common Stock (and to any substitute or replacement transfer agent for its
Common Stock upon the Company's appointment of any such substitute or
replacement transfer agent) Transfer Agent Instructions, with a copy to the
Investor. Other than as required as a result of change in law, such instructions
shall be irrevocable by the Company from and after the date hereof or from and
after the issuance thereof to any such substitute or replacement transfer agent,
as the case may be, except as otherwise expressly provided in the Registration
Rights Agreement. It is the intent and purpose of such instructions, as provided
therein, to require the transfer agent for the Common Stock from time to time
upon transfer of Registrable Securities by the Investor to issue certificates
evidencing such Registrable Securities free of the Legend during the following
periods and under the following circumstances and without consultation by the
transfer agent with the Company or its counsel and without the need for any
further advice or instruction or documentation to the transfer agent by or from
the Company or its counsel or the Investor:
(a) At any time after the applicable Effective Date, upon surrender
of one or more certificates evidencing Registrable Securities that
bear the Legend, to the extent accompanied by a notice requesting
the issuance of new certificates free of the Legend to replace those
surrendered; provided that (i) the applicable Registration Statement
shall then be effective and (ii) if reasonably requested by the
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transfer agent the Investor confirms to the transfer agent that the
Investor has transferred the Registrable Securities pursuant to such
Registration Statement and has complied with the prospectus delivery
requirement; or
(b) At any time upon any surrender of one or more certificates
evidencing Registrable Securities that bear the Legend, to the
extent accompanied by a notice requesting the issuance of new
certificates free of the Legend to replace those surrendered and
containing representations that the Investor is permitted to dispose
of such Registrable Securities without limitation as to amount or
manner of sale pursuant to Rule 144(k) under the Securities Act.
Section 8.2. No Other Legend or Stock Transfer Restrictions. No legend
other than the one specified in Section 8.1 has been or shall be placed on the
share certificates representing the Registrable Securities, and no instructions
or "stop transfer orders," so called, "stock transfer restrictions," or other
restrictions have been or shall be given to the Company's transfer agent with
respect thereto other than as expressly set forth in this Article VIII.
Section 8.3. Investor's Compliance. Nothing in this Article VIII shall
affect in any way the Investor's obligations to comply with all applicable
securities laws.
ARTICLE IX
INDEMNIFICATION; ARBITRATION
Section 9.1. Indemnification.
(a) The Company agrees to indemnify and hold harmless the Investor,
its partners, Affiliates, officers, directors, employees, and duly
authorized agents, and each Person or entity, if any, who controls
the Investor within the meaning of Section 15 of the Securities Act
or Section 20 of the Exchange Act, together with its controlling
persons from and against any Damages, joint or several, and any
action in respect thereof to which the Investor, its partners,
Affiliates, officers, directors, employees, and duly authorized
agents, and any such controlling person becomes subject to,
resulting from, arising out of or relating to any misrepresentation,
breach of warranty or nonfulfillment of or failure to perform any
covenant or agreement on the part of the Company contained in this
Agreement, as such Damages are incurred, unless such Damages result
primarily from the Investor's gross negligence, recklessness or bad
faith in performing its obligations under this Agreement; provided,
however, that the maximum aggregate liability of the Company shall
be limited to the amount actually invested by the Investor under
this Agreement, and provided, further, that in no event shall this
provision be deemed to limit any rights to indemnification arising
under the Registration Rights Agreement.
(b) The Investor agrees to indemnify and hold harmless the Company,
its partners, Affiliates, officers, directors, employees, and duly
authorized agents,
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and each Person or entity, if any, who controls the Company within
the meaning of Section 15 of the Securities Act or Section 20 of the
Exchange Act, together with its controlling persons from and against
any Damages, joint or several, and any action in respect thereof to
which the Investor, its partners, Affiliates, officers, directors,
employees, and duly authorized agents, and any such controlling
person becomes subject to under the Securities Act, the Exchange Act
or other federal or state statutory law or regulation, at common law
or otherwise, as and when incurred, insofar as such Damages (or
other actions or proceedings in respect thereof) arise out of (1)
any misrepresentation, breach of warranty or nonfulfillment of or
failure to perform any covenant or agreement on the part of the
Investor contained in this Agreement, as such Damages are incurred,
unless such Damages result primarily from the Company's gross
negligence, recklessness or bad faith in performing its obligations
under this Agreement or (2) an untrue statement or alleged untrue
statement or omission or alleged omission made in a Registration
Statement, or any preliminary prospectus, final prospectus, summary
prospectus, amendment or supplement in reliance upon and in
conformity with written information furnished to the Company by the
Investor in any questionnaire or other request by the Company, or
otherwise specifically stating that it is for use in the preparation
thereof; provided, however, that such written information furnished
to the Company by the Investor is not materially altered by the
Company; and provided, further, that the maximum aggregate liability
of the Investor shall be limited to the amount by which the total
price at which the Registrable Securities held by the Investor were
sold to the public exceeds the amount actually paid by the Investor
under this Agreement for such Registrable Securities sold to the
public.
Section 9.2. Method of Asserting Indemnification Claims. All claims for
indemnification by any Indemnified Party (as defined below) under Section 9.1
shall be asserted and resolved as follows:
(a) In the event any claim or demand in respect of which any person
claiming indemnification under any provision of Section 9.1 (an
"Indemnified Party") might seek indemnity under Section 9.1 is
asserted against or sought to be collected from such Indemnified
Party by a person other than the Company, the Investor or any
Affiliate of the Company (a "Third Party Claim"), the Indemnified
Party shall deliver a written notification, enclosing a copy of all
papers served, if any, and specifying the nature of and basis for
such Third Party Claim and for the Indemnified Party's claim for
indemnification that is being asserted under any provision of
Section 9.1 against any person (the "Indemnifying Party"), together
with the amount or, if not then reasonably ascertainable, the
estimated amount, determined in good faith, of such Third Party
Claim (a "Claim Notice") with reasonable promptness to the
Indemnifying Party. If the Indemnified Party fails to provide the
Claim Notice with reasonable promptness after the Indemnified Party
receives notice of such Third Party Claim, the Indemnifying Party
shall not be obligated to indemnify the Indemnified Party with
respect to such Third Party Claim to the extent that the
Indemnifying Party's ability to defend has been irreparably
prejudiced by such failure of the
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Indemnified Party. The Indemnifying Party shall notify the
Indemnified Party as soon as practicable within the period ending 30
calendar days following receipt by the Indemnifying Party of either
a Claim Notice or an Indemnity Notice (as defined below) (the
"Dispute Period") whether the Indemnifying Party disputes its
liability or the amount of its liability to the Indemnified Party
under Section 9.1 and whether the Indemnifying Party desires, at its
sole cost and expense, to defend the Indemnified Party against such
Third Party Claim.
(i) If the Indemnifying Party notifies the Indemnified Party
within the Dispute Period that the Indemnifying Party desires
to defend the Indemnified Party with respect to the Third
Party Claim pursuant to this Section 9.2(a), then the
Indemnifying Party shall have the right to defend, with
counsel reasonably satisfactory to the Indemnified Party, at
the sole cost and expense of the Indemnifying Party, such
Third Party Claim by all appropriate proceedings, which
proceedings shall be vigorously and diligently prosecuted by
the Indemnifying Party to a final conclusion or will be
settled at the discretion of the Indemnifying Party (but only
with the consent of the Indemnified Party in the case of any
settlement that provides for any relief other than the payment
of monetary damages or that provides for the payment of
monetary damages as to which the Indemnified Party shall not
be indemnified in full pursuant to Section 9.1). The
Indemnifying Party shall have full control of such defense and
proceedings, including any compromise or settlement thereof;
provided, however, that the Indemnified Party may, at the sole
cost and expense of the Indemnified Party, at any time prior
to the Indemnifying Party's delivery of the notice referred to
in the first sentence of this clause (i), file any motion,
answer or other pleadings or take any other action that the
Indemnified Party reasonably believes to be necessary or
appropriate to protect its interests; and provided further,
that if requested by the Indemnifying Party, the Indemnified
Party will, at the sole cost and expense of the Indemnifying
Party, provide reasonable cooperation to the Indemnifying
Party in contesting any Third Party Claim that the
Indemnifying Party elects to contest. The Indemnified Party
may participate in, but not control, any defense or settlement
of any Third Party Claim controlled by the Indemnifying Party
pursuant to this clause (i), and except as provided in the
preceding sentence, the Indemnified Party shall bear its own
costs and expenses with respect to such participation.
Notwithstanding the foregoing, the Indemnified Party may take
over the control of the defense or settlement of a Third Party
Claim at any time if it irrevocably waives its right to
indemnity under Section 9.1 with respect to such Third Party
Claim.
(ii) If the Indemnifying Party fails to notify the Indemnified
Party within the Dispute Period that the Indemnifying Party
desires to defend the Third Party Claim pursuant to Section
9.2(a), or if the Indemnifying Party gives such notice but
fails to prosecute vigorously and diligently or settle the
Third Party Claim, or if the Indemnifying Party fails to give
any
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notice whatsoever within the Dispute Period, then the
Indemnified Party shall have the right to defend, at the sole
cost and expense of the Indemnifying Party, the Third Party
Claim by all appropriate proceedings, which proceedings shall
be prosecuted by the Indemnified Party in a reasonable manner
and in good faith or will be settled at the discretion of the
Indemnified Party (with the consent of the Indemnifying Party,
which consent will not be unreasonably withheld). The
Indemnified Party will have full control of such defense and
proceedings, including any compromise or settlement thereof;
provided, however, that if requested by the Indemnified Party,
the Indemnifying Party will, at the sole cost and expense of
the Indemnifying Party, provide reasonable cooperation to the
Indemnified Party and its counsel in contesting any Third
Party Claim which the Indemnified Party is contesting.
Notwithstanding the foregoing provisions of this clause (ii),
if the Indemnifying Party has notified the Indemnified Party
within the Dispute Period that the Indemnifying Party disputes
its liability or the amount of its liability hereunder to the
Indemnified Party with respect to such Third Party Claim, and
if such dispute is resolved in favor of the Indemnifying Party
in the manner provided in clause (iii) below, the Indemnifying
Party will not be required to bear the costs and expenses of
the Indemnified Party's defense pursuant to this clause (ii)
or of the Indemnifying Party's participation therein at the
Indemnified Party's request, and the Indemnified Party shall
reimburse the Indemnifying Party in full for all reasonable
costs and expenses incurred by the Indemnifying Party in
connection with such litigation. The Indemnifying Party may
participate in, but not control, any defense or settlement
controlled by the Indemnified Party pursuant to this clause
(ii), and the Indemnifying Party shall bear its own costs and
expenses with respect to such participation.
(iii) If the Indemnifying Party notifies the Indemnified Party
that it does not dispute its liability or the amount of its
liability to the Indemnified Party with respect to the Third
Party Claim under Section 9.1 or fails to notify the
Indemnified Party within the Dispute Period whether the
Indemnifying Party disputes its liability or the amount of its
liability to the Indemnified Party with respect to such Third
Party Claim, the Damages in the amount specified in the Claim
Notice shall be conclusively deemed a liability of the
Indemnifying Party under Section 9.1 and the Indemnifying
Party shall pay the amount of such Damages to the Indemnified
Party on demand. If the Indemnifying Party has timely disputed
its liability or the amount of its liability with respect to
such claim, the Indemnifying Party and the Indemnified Party
shall proceed in good faith to negotiate a resolution of such
dispute, and if not resolved through negotiations within the
period of 30 calendar days immediately following the Dispute
Period, such dispute shall be resolved by arbitration in
accordance with Section 9.3.
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(b) In the event any Indemnified Party should have a claim under
Section 9.1 against the Indemnifying Party that does not involve a
Third Party Claim, the Indemnified Party shall deliver a written
notification of a claim for indemnity under Section 9.1 specifying
the nature of and basis for such claim, together with the amount or,
if not then reasonably ascertainable, the estimated amount,
determined in good faith, of such claim (an "Indemnity Notice") with
reasonable promptness to the Indemnifying Party. The failure by any
Indemnified Party to give the Indemnity Notice shall not impair such
party's rights hereunder except to the extent that the Indemnifying
Party demonstrates that it has been irreparably prejudiced thereby.
If the Indemnifying Party notifies the Indemnified Party that it
does not dispute the claim or the amount of the claim described in
such Indemnity Notice or fails to notify the Indemnified Party
within the Dispute Period whether the Indemnifying Party disputes
the claim or the amount of the claim described in such Indemnity
Notice, the Damages in the amount specified in the Indemnity Notice
will be conclusively deemed a liability of the Indemnifying Party
under Section 9.1 and the Indemnifying Party shall pay the amount of
such Damages to the Indemnified Party on demand. If the Indemnifying
Party has timely disputed its liability or the amount of its
liability with respect to such claim, the Indemnifying Party and the
Indemnified Party shall proceed in good faith to negotiate a
resolution of such dispute, and if not resolved through negotiations
within the period of 30 calendar days immediately following the
Dispute Period, such dispute shall be resolved by arbitration in
accordance with Section 9.3.
Section 9.3. Arbitration. Any controversy, claim or dispute arising out of
or in connection with this Agreement, the Registration Rights Agreement or the
Warrants, including any question regarding its existence, validity,
interpretation, breach, or termination, shall be referred to and finally
resolved in accordance with the International Arbitration Rules of the American
Arbitration Association, and judgment upon the award rendered by the arbitral
tribunal may be entered by any court having jurisdiction thereof or having
jurisdiction over any party or any party's assets.
(a) The tribunal shall consist of three arbitrators, two of whom
shall be appointed by the respective parties and the third, who
shall be the chairperson of the tribunal, by the two party-appointed
arbitrators within 30 days of the last of their appointments. Save
that, if either party should fail to appoint an arbitrator within 30
days of receiving written notice of the appointment of an arbitrator
by the other party, the second arbitrator shall, at the written
request of the party which has already made an appointment, be
appointed forthwith by the American Arbitration Association.
Likewise, if the party-appointed arbitrators fail to make an agreed
appointment for the chairperson within 30 days of the last of their
appointments, the chairperson shall, at the written request of
either party, be appointed forthwith by the American Arbitration
Association.
(b) The place of arbitration shall be New York, New York.
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(c) This arbitration clause and the conduct of the arbitral
proceedings shall be governed by the Federal Arbitration Act, 9
U.S.C.A. sec. 1 et seq.
(d) The language of the arbitration shall be English.
(e) Nothing in these dispute resolution provisions shall be
construed as preventing either party from seeking conservatory or
similar interim relief in any court of competent jurisdiction.
(f) To the extent practicable, the arbitral tribunal shall render
its award no more than 60 calendar days from the date that the three
member tribunal is constituted. The arbitral tribunal shall not lose
jurisdiction over the matter based on a failure to render an award
within this time period.
ARTICLE X
MISCELLANEOUS
Section 10.1. Fees and Transaction Costs. In connection with the execution
of this agreement the following Sale Fees and Transaction Costs (as defined
below) are payable by the Company. The Investor is authorized by the Company to
retain and to pay, on behalf of the Company, the Subscription Fee, Sale Fees and
Transaction Costs to the payee entities in accordance with Schedule 10.1, and
may deduct such amounts from any sums due to the Company on the Closing Date.
(a) Subscription Fee. On the Subscription Date, the Company shall
pay to the Investor the subscription fee amount set forth on
Schedule 10.1 (the "Subscription Fee").
(b) Sale Fees. On each Closing Date, the Company shall pay certain
fees (the "Sale Fees") to the payee entities in accordance with
Schedule 10.1.
(c) Transaction Costs. The fees, expenses and disbursements of the
Investor's counsel (the "Investor Legal Fees") shall be paid as
follows: (i) the Investor shall pay the initial $10,000 of Investor
Legal Fees and (ii) the Company shall pay all Investor Legal Fees in
excess of $10,000. The Company shall pay the Investor due diligence
costs in connection with the consummation of this Agreement and the
transactions contemplated hereby (the "Due Diligence Costs," and
together with the Investor Legal Fees, the "Transaction Costs"), up
to a maximum amount of $10,000. The Company shall pay to the
Investor the Company's share of the Transaction Costs on the
Subscription Date, to the extent such share of the Transaction Costs
can be determined on the Subscription Date. The Company shall pay
its share of the remaining Transaction Costs to the Investor not
later than 10 days after receipt of notice from the Investor that
such amount is due. The Company agrees to pay its own expenses
incident to the performance of its obligations hereunder.
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Section 10.2. Reporting Entity for the Common Stock. The reporting entity
relied upon for the determination of the Closing Price or trading volume of the
Common Stock on the Principal Market on any given Trading Day for the purposes
of this Agreement shall be the Bloomberg L.P. The written mutual consent of the
Investor and the Company shall be required to employ any other reporting entity.
Section 10.3. Brokerage. Except as disclosed in Section 10.1, each of the
parties hereto represents that it has had no dealings in connection with this
transaction with any finder or broker which would impose a legal obligation to
pay any fee or commission. The Company on the one hand, and the Investor, on the
other hand, agree to indemnify the other against and hold the other harmless
from any and all liabilities to any persons claiming brokerage commissions or
finder's fees on account of services purported to have been rendered on behalf
of the indemnifying party in connection with this Agreement or the transactions
contemplated hereby.
Section 10.4. Notices. All notices, demands, requests, consents,
approvals, and other communications required or permitted hereunder shall be in
writing and, unless otherwise specified herein, shall be (i) personally served,
(ii) deposited in the mail, registered or certified, return receipt requested,
postage prepaid, (iii) delivered by reputable air courier service with charges
prepaid, or (iv) transmitted by hand delivery, telegram, or facsimile, addressed
as set forth below or to such other address as such party shall have specified
most recently by written notice given in accordance herewith. Any notice or
other communication required or permitted to be given hereunder shall be deemed
effective (a) upon hand delivery or delivery by facsimile at the address or
number designated below (if delivered on a business day during normal business
hours where such notice is to be received), or the first business day following
such delivery (if delivered other than on a business day during normal business
hours where such notice is to be received) or (b) on the third business day
following the date of mailing by express courier service, fully prepaid,
addressed to such address, or upon actual receipt of such mailing, whichever
shall first occur. The addresses for such communications shall be:
If to the Company:
AppliedTheory Corporation
0000 Xxxxxxxx
Xxx Xxxx, XX 00000
Attention: Xxxxxx X. Xxxxxx, Esq., General Counsel
Telephone: (000) 000-0000, ext. 5229
Facsimile: (000) 000-0000
with a copy (which shall not constitute notice) to:
Xxxxx Xxxxxxxxxx LLP
0000 Xxxxxx xx xxx Xxxxxxxx
Xxx Xxxx, XX 00000
Attention: Xxxxx X. Xxxxxx XX, Esq.
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
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if to the Investor:
Crescent International Ltd.
c/o GreenLight (Switzerland) SA
00, xx Xxxxx-Xxxxx
0000 Xxxxxx, Xxxxxxxx
Xxxxxxxxxxx
Attention: Xxx Xxxx/Maxi Brezzi
Telephone: x00 00 000 00 00
Facsimile: x00 00 000 00 00
with a copy (which shall not constitute notice) to:
Xxxxxxxx Chance Xxxxxx & Xxxxx LLP
000 Xxxx Xxxxxx
Xxx Xxxx, XX 00000
Attention: Xxxx X. Xxxxx, Esq./Xxxx X. Xxxxxxxxx, Esq.
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Either party hereto from time to time may change its address or facsimile
number for notices under this Section by giving at least ten (10) days' prior
written notice of such changed address or facsimile number to the other party
hereto.
Section 10.5. Assignment. Neither this Agreement nor any rights of the
Investor or the Company hereunder may be assigned by either party to any other
Person. Notwithstanding the foregoing, the Investor's interest in this Agreement
may be assigned at any time, in whole or in part, to any Affiliate of the
Investor upon the prior written consent of the Company, which consent shall not
to be unreasonably withheld provided, however, that any such assignment or
transfer shall relieve the Investor of its duties under this Agreement only upon
performance thereof by any such assignee or transferee.
Section 10.6. Amendment; No Waiver. No party shall be liable or bound to
any other party in any manner by any warranties, representations or covenants
except as specifically set forth in this Agreement. Except as expressly provided
in this Agreement, neither this Agreement nor any term hereof may be amended,
waived, discharged or terminated other than by a written instrument signed by
both parties hereto. The failure of the either party to insist on strict
compliance with this Agreement, or to exercise any right or remedy under this
Agreement, shall not constitute a waiver of any rights provided under this
Agreement, nor estop the parties from thereafter demanding full and complete
compliance nor prevent the parties from exercising such a right or remedy in the
future.
Section 10.7. Annexes and Exhibits; Entire Agreement. All annexes and
exhibits to this Agreement are incorporated herein by reference and shall
constitute part of this Agreement. This Agreement, the Warrants and the
Registration Rights Agreement set forth the entire agreement and understanding
of the parties relating to the subject matter hereof and thereof and supersede
all prior and contemporaneous agreements, negotiations and understandings
between the parties, both oral and written, relating to the subject matter
hereof.
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Section 10.8. Survival. The provisions of Articles VI, VIII, IX and X, and
of Section 7.3, shall survive the termination of this Agreement.
Section 10.9. Severability. In the event that any provision of this
Agreement becomes or is declared by a court of competent jurisdiction to be
illegal, unenforceable or void, this Agreement shall continue in full force and
effect without said provision; provided that such severability shall be
ineffective if it materially changes the economic benefit of this Agreement to
any party.
Section 10.10. Title and Subtitles. The titles and subtitles used in this
Agreement are used for the convenience of reference and are not to be considered
in construing or interpreting this Agreement.
Section 10.11. Counterparts. This Agreement may be executed in multiple
counterparts, each of which may be executed by less than all of the parties and
shall be deemed to be an original instrument which shall be enforceable against
the parties actually executing such counterparts and all of which together shall
constitute one and the same instrument.
Section 10.12. Choice of Law. This Agreement shall be construed under the
laws of the State of New York.
Section 10.13. Other Expenses. In the event that a dispute between the
parties is not determined by a Board of Arbitration, the non-prevailing party in
any action, suit or proceeding shall bear all investigative, legal and other
expenses reasonably incurred in connection with, and any and all amounts paid in
defense or settlement of such action, suit or proceeding.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by the undersigned, thereunto duly authorized, as of the date first set
forth above.
CRESCENT INTERNATIONAL LTD.
By: /s/ Xxx Xxxx /s/ Xxxxxx Xxxxx
-------------------------------------------------
Name: Xxx Xxxx / Xxxxxx Xxxxx
Title:
APPLIEDTHEORY CORPORATION
By: /s/ Xxxxx X. Xxxxxx
-------------------------------------------------
Name: Xxxxx X. Xxxxxx
Title: Sr. VP / CFO
