EXHIBIT 10.1
The following form of Securities Purchase Agreement was entered into with each
of the following Investors:
Number of Number of
Shares Warrants Total
Name Purchased Purchased Purchase Price
---- --------- --------- --------------
BayStar Capital II, L.P. 1,250,000 250,000 $3,500,000
Crestview Capital Fund, LP 35,715 7,143 $100,000
Crestview Capital Fund II, LP 419,643 83,929 $1,175,000
Crestview Capital Offshore Fund, Inc. 8,928 1,785 $25,000
UMBTRU for benefit of SBL Fund Series J 875,000 175,000 $2,450,000
UMBTRU for benefit of Security Mid Cap Growth Fund 375,000 75,000 $1,050,000
SF Capital Partners Ltd. 571,428 114,286 $1,600,000
Special Situations Cayman Fund, L.P. 142,857 28,572 $400,000
Special Situations Fund III, L.P. 571,428 114,286 $1,600,000
U.S. Bank, N.A., FBO Heartland Value Plus Fund 642,857 128,572 $1,800,000
--------- ------- -----------
TOTAL: 4,892,856 978,573 $13,700,000
--------- ------- -----------
INSTRUCTION SHEET FOR INVESTOR
(to be read in conjunction with the entire Securities Purchase Agreement)
A. Complete the following items in the Securities Purchase Agreement:
1. Provide the information regarding the Investor requested
on the signature page (page 2). Please submit a separate Securities
Purchase Agreement for each individual fund/entity that will hold the
Securities. The Securities Purchase Agreement must be executed by an
individual authorized to bind the Investor.
2. Return the signed Securities Purchase Agreement, via
overnight mail, to:
Orthovita, Inc.
▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇, Chief Financial Officer
Tel: (▇▇▇) ▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
and fax copies to:
▇▇ ▇▇▇▇▇ Securities Corporation
▇▇▇▇ ▇▇▇▇▇▇ ▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Managing Director, Private
Equity
Tel: (▇▇▇) ▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
and
▇▇▇▇▇▇, ▇▇▇▇▇ & Bockius LLP
▇▇▇▇ ▇▇▇▇▇▇ ▇▇.
▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq.
Tel: (▇▇▇) ▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
An executed original Securities Purchase Agreement or a fax thereof must
be received by 5:00 p.m. Eastern Time on a date to be determined and
distributed to the Investor at a later date.
B. Instructions regarding the transfer of funds for the purchase of
Securities will be faxed to the Investor by the Company at a later date.
C. To resell the Securities after the Registration Statement covering the
Shares and the Common Stock underlying the Warrants is effective:
1. Provided that a Suspension of the Registration Statement
pursuant to Section 7.2(c) of the Securities Purchase Agreement is not
then in effect pursuant to the terms of the Securities Purchase
Agreement, the Investor may sell Shares and Common Stock received upon
exercise of the Warrants under the Registration Statement, subject to
the notification provisions in the Securities Purchase Agreement,
provided that it arranges for delivery of a current Prospectus to the
transferee. Upon receipt of a request therefor, the Company has agreed
to provide an adequate number of current Prospectuses to each Investor
and to supply copies to any other parties requiring such Prospectuses.
2. The Investor must also deliver to the Company's transfer
agent, with a copy to the Company, a Certificate of Subsequent Sale in
the form attached as Exhibit B to the Securities Purchase Agreement, so
that the Shares and Common Stock received upon exercise of the Warrants
may be properly transferred.
CONFIDENTIAL
SECURITIES PURCHASE AGREEMENT
Orthovita, Inc.
▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Ladies & Gentlemen:
The undersigned, _________________________________ (the "Investor"),
hereby confirms its agreement with you as follows:
1. This Securities Purchase Agreement (the "Agreement") is made as of June
26, 2003 between Orthovita, Inc., a Pennsylvania corporation (the "Company"),
and the Investor.
2. The Company has authorized the sale and issuance of up to (i) 4,892,856
shares (the "Shares") of common stock of the Company, $.01 par value per share
(the "Common Stock"), and (ii) warrants (each, a "Warrant," and collectively,
the "Warrants"), in substantially the form attached hereto as Exhibit A to the
Securities Purchase Agreement, to purchase an aggregate of approximately
978,573 shares of Common Stock, to certain investors in a private placement
(the "Offering"). This Agreement and the Warrant purchased by the Investor
hereunder are referred to together as the "Transaction Documents."
3. The Company and the Investor agree that the Investor will purchase from
the Company and the Company will issue and sell to the Investor __________
Shares, for a purchase price of $2.80 per share, or an aggregate purchase
price of $______________, and Warrants to purchase one share of Common Stock for
every five Shares purchased by the Investor having an exercise price of
$4.00 per underlying share, pursuant to the Terms and Conditions for
Purchase of Securities attached hereto as Annex I and incorporated herein by
reference as if fully set forth herein (the "Terms and Conditions"). The sale
and purchase of the Shares and Warrants shall occur in two closings, with _____
Shares and Warrants to purchase ______ shares of Common Stock to be purchased at
the first closing (for a purchase price of $_________), and ________ Shares and
Warrants to purchase ______ shares of Common Stock to be purchased at the second
closing (for a purchase price of $_________). The Investor agrees and
acknowledges that the second closing is subject to the approval of the Company's
shareholders. Unless otherwise requested by the Investor, certificates
representing the Securities purchased by the Investor will be registered in the
Investor's name and address as set forth below.
4. The Investor represents that, except as set forth below, (a) it has had
no position, office or other material relationship within the past three years
with the Company or persons known to it to be affiliates of the Company, (b)
neither it, nor any group (as defined in Section 13(d)(3) of the Securities
Exchange Act of 1934, as amended) of which it is a member or to which it is
related, beneficially owns (including the right to acquire or vote) any
securities of the Company, (c) it is not a registered broker-dealer, and (d) it
has no direct or indirect affiliation or association with any National
Association of Securities Dealers, Inc. ("NASD") member as of the date hereof.
Exceptions:
_______________________________________________________________________________
_______________________________________________________________________________.
(If no exceptions, write "none." If left blank, response will be deemed to be
"none.")
5. The Investor represents that the following person will have, or the
following persons will share, voting power and investment control over the
Shares and the shares of Common Stock issuable upon the exercise of the Warrants
as of the date on which the Company files the Registration Statement (as defined
in Annex I) with the Securities and Exchange Commission:
_______________________________________________________________________________
_______________________________________________________________________________.
CONFIDENTIAL
1
Please confirm that the foregoing correctly sets forth the agreement
between us by signing in the space provided below for that purpose. By executing
this Agreement, you acknowledge that the Company may use the information in
paragraphs 4 and 5 above and the name and address information below in
preparation of the Registration Statement (as defined in Annex I).
AGREED AND ACCEPTED:
ORTHOVITA, INC. INVESTOR
By: By:
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▇▇▇▇▇▇ ▇▇▇▇▇▇▇
Chief Executive Officer Print Name:
--------------------------
Title:
-------------------------------
Address:
-----------------------------
Tax ID No.:
--------------------------
Contact name:
------------------------
Telephone:
---------------------------
Name in which securities should be
registered (if different):
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CONFIDENTIAL
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THE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "SECURITIES ACT"), OR ANY STATE SECURITIES LAWS AND, UNLESS SO
REGISTERED, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EXEMPTION FROM, OR
IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES
ACT. THE SHARES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE UNITED STATES
SECURITIES AND EXCHANGE COMMISSION (THE "SEC") OR ANY STATE SECURITIES
COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE
SECURITIES COMMISSION PASSED UPON OR ENDORSED THE MERITS OF THIS OFFERING OR THE
ACCURACY OR ADEQUACY OF THE TERMS AND CONDITIONS FOR PURCHASE OF SECURITIES OR
OF THE SECURITIES PURCHASE AGREEMENT. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE. THE SECURITIES ARE BEING OFFERED PURSUANT TO EXEMPTIONS FROM
REGISTRATION REQUIREMENTS PROVIDED BY SECTION 4(2) OF THE SECURITIES ACT,
REGULATION D AND RULE 506 THEREUNDER, CERTAIN STATE SECURITIES LAWS AND CERTAIN
RULES AND REGULATIONS PROMULGATED PURSUANT THERETO. THE SECURITIES MAY NOT BE
TRANSFERRED, SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF
AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT AND ANY APPLICABLE
STATE SECURITIES LAWS OR AN OPINION OF COUNSEL REASONABLY ACCEPTABLE TO THE
COMPANY AND ITS COUNSEL THAT SUCH REGISTRATION IS NOT REQUIRED. THIS DOCUMENT
DOES NOT CONSTITUTE AN OFFER TO SELL OR SOLICITATION OF AN OFFER TO BUY THE
SECURITIES IN ANY JURISDICTION WHERE, OR TO ANY PERSON TO WHOM, IT IS UNLAWFUL
TO MAKE SUCH OFFER OR SOLICITATION.
ANNEX I
TERMS AND CONDITIONS FOR PURCHASE OF SECURITIES
1. Authorization and Sale of the Securities. Subject to these Terms
and Conditions, the Company has authorized the sale and issuance of (i) up to
4,892,856 Shares and (ii) Warrants to purchase up to 978,573 shares of Common
Stock, and the reservation of the shares of Common Stock for which the Warrants
are exercisable (the "Underlying Shares"). The Shares, Warrants and Underlying
Shares are collectively referred to herein as the "Securities."
2. Agreement to Sell and Purchase the Securities; Subscription
Date.
2.1 At each of the First Closing and the Second Closing (as
such terms are defined in Section 3), the Company will sell to the Investor, and
the Investor will purchase from the Company, upon the terms and conditions
hereinafter set forth, the number of Shares and Warrants to purchase the number
of shares of Common Stock set forth, with respect to each such closing, in
Section 3 of the Securities Purchase Agreement to which these Terms and
Conditions are attached as Annex I at the purchase price set forth thereon.
2.2 The Company may enter into the same form of Securities
Purchase Agreement, including these Terms and Conditions, with certain other
investors (the "Other Investors") and expects to complete sales of Securities to
them. (The Investor and the Other Investors are hereinafter sometimes
collectively referred to as the "Investors," and the Securities Purchase
Agreement to which these Terms and Conditions are attached and the Securities
Purchase Agreements (including attached Terms and Conditions) executed by the
Other Investors are hereinafter sometimes collectively referred to as the
"Agreements.") The Company may accept executed Agreements from Investors for the
purchase of Shares and Warrants commencing upon the date on which the Company
provides the Investors with the proposed purchase price per Share and exercise
price per Underlying Share and concluding upon the date (the "Subscription
Date") on which the Company has notified ▇▇ ▇▇▇▇▇ Securities Corporation, in its
capacity as placement agent for this transaction (the "Placement Agent"), in
writing that it is no longer accepting additional Agreements from Investors for
the purchase of Securities. The Company may not enter into any Agreements after
the Subscription Date.
2.3 The obligations of the Investor under this Agreement or
any related document are several and not joint with the obligations of the Other
Investors under the Agreements or any related documents to which
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such Other Investors are party, and the Investor shall not be responsible in any
way for the performance of the obligations of any Other Investor under any such
other Agreements or documents. Nothing contained herein or in any related
documents, and no action taken by the Investor pursuant hereto or thereto, shall
be deemed to constitute any two or more of the Investors as a partnership, an
association, a joint venture or any other kind of entity, or create a
presumption that the Investors are in any way acting in concert or as a group
with respect to such obligations or the transactions contemplated by the
Agreements. The Investor shall be entitled to independently protect and enforce
its rights, including without limitation the rights arising out of this
Agreement or out of the related documents, and it shall not be necessary for any
Other Investor to be joined as an additional party in any proceeding for such
purpose.
3. Closings; Delivery of the Shares at Closings.
3.1 The first closing of the purchase and sale of the Shares
and Warrants contemplated under this Agreement (the "First Closing") will take
place on or before June 30, 2003, at the offices of ▇▇▇▇▇▇, ▇▇▇▇▇ & Bockius LLP,
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇, Company counsel. The date on which
the First Closing occurs is the "First Closing Date." At the First Closing, the
Company shall deliver to the Investor, versus payment therefor, one or more
stock certificates representing the number of Shares and a Warrant to purchase
the number of shares of Common Stock set forth, with respect to the First
Closing, in Section 3 of the Securities Purchase Agreement, each such
certificate to be registered in the name of the Investor or, if so indicated on
the signature page of the Securities Purchase Agreement, in the name of a
nominee designated by the Investor.
(a) The Company's obligation to issue the Shares and
Warrants to the Investor at the First Closing shall be subject to the following
conditions, any one or more of which may be waived by the Company: (i) receipt
by the Company of a certified or official bank check or wire transfer of funds
in the full amount of the purchase price for the Securities being purchased
hereunder at the First Closing as set forth in Section 3 of the Securities
Purchase Agreement; (ii) completion of the purchases and sales for the First
Closing under the Agreements with the Other Investors; and (iii) the accuracy of
the representations and warranties made by the Investors and the fulfillment of
those undertakings of the Investors to be fulfilled prior to the First Closing.
(b) The Investor's obligation to purchase the Shares
and Warrants at the First Closing shall be subject to the following conditions,
any one or more of which may be waived by the Investor: (i) the representations
and warranties of the Company set forth herein shall be true and correct as of
the First Closing Date in all material respects; (ii) the purchases and sales
for the First Closing under the Agreements with the Investors shall be completed
for an amount not less than $7,500,000, with up to $7,500,000 subject to the
Second Closing; (iii) the Investor shall have received such documents as such
Investor shall reasonably have requested, including compliance and Secretary's
certificates and a standard opinion of Company counsel as to the matters set
forth in Section 4.2(a) hereof, and, with respect to the Securities purchased at
the First Closing, the matters set forth in Sections 4.2(b) and 4.2(c) hereof
and, subject to the accuracy of the information and the representations and
warranties required to be provided by each Investor, as to exemption from the
registration requirements of the Securities Act of the sale of the Securities
and (iv) the Investor, or the nominee designated by the Investor, shall receive
delivery, within one business day after the First Closing Date, of one or more
stock certificates representing the number of Shares and Warrants to purchase
the number of shares of Common Stock with respect to the First Closing as set
forth in Section 3 of the Securities Purchase Agreement.
3.2 The second closing of the purchase and sale of the
Shares and Warrants contemplated under this Agreement (the "Second Closing")
will take place as promptly as practicable, but no later than three (3) business
days following satisfaction or waiver of the conditions set forth in Section
3.2(a) and 3.2(b), at the offices of the Company's counsel. The date on which
the Second Closing occurs is the "Second Closing Date." At the Second Closing,
the Company shall deliver to the Investor, versus payment therefor, one or more
stock certificates representing the number of Shares and a Warrant to purchase
the number of shares of Common Stock set forth, with respect to the Second
Closing, in Section 3 of the Securities Purchase Agreement, each such
certificate to be registered in the name of the Investor or, if so indicated on
the signature page of the Securities Purchase Agreement, in the name of a
nominee designated by the Investor.
(a) The Company's obligation to issue the Shares and
Warrants to the Investor at the Second Closing shall be subject to the following
conditions, any one or more of which may be waived by the Company: (i) receipt
by the Company of a certified or official bank check or wire transfer of funds
in the full amount of the purchase price for the Securities being purchased
hereunder at the Second Closing as set forth in
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Section 3 of the Securities Purchase Agreement; (ii) completion of the purchases
and sales for the Second Closing under the Agreements with the Other Investors;
(iii) receipt of a certificate of an officer of the Investor certifying that
each of the representations and warranties of the Investor set forth herein is
true and correct as of the Second Closing Date; (iv) the fulfillment of those
undertakings of the Investors to be fulfilled prior to the Second Closing; and
(v) if required under Nasdaq Marketplace Rule 4350(i)(D), the Company shall have
obtained Shareholder Approval (as defined in Section 4.18 below) of the issuance
of all Securities contemplated hereunder with respect to the Second Closing.
(b) The Investor's obligation to purchase the Shares
and Warrants at the Second Closing shall be subject to the following conditions,
any one or more of which may be waived by the Investor: (i) the representations
and warranties of the Company set forth herein shall be true and correct as of
the Second Closing Date in all material respects, except for representations and
warranties that speak as of a certain date, which representations and warranties
shall be true as of such date, (ii) the Investor shall have received such
documents as such Investor shall reasonably have requested, including compliance
and Secretary's certificates and a standard opinion of Company counsel as to the
matters set forth in Sections 4.2(b) and 4.2(c) hereof with respect to the
Securities purchased at the Second Closing and (iii) if required under Nasdaq
Marketplace Rule 4350(i)(D), the Company shall have obtained Shareholder
Approval (as defined in Section 4.18 below) of the issuance of the Securities
contemplated hereunder with respect to the Second Closing by no later than
August 15, 2003, (iv) the purchases and sales for the Second Closing under the
Agreements with the Investors shall be completed for a total amount of up to
$7,500,000; and (v) the Investor, or the nominee designated by the Investor,
shall receive delivery, within one business day after the Second Closing Date,
of one or more stock certificates representing the number of Shares and Warrants
to purchase the number of shares of Common Stock with respect to the Second
Closing as set forth in Section 3 of the Securities Purchase Agreement.
3.3 Notwithstanding anything to the contrary contained
herein, in no event shall the Company be obligated to issue, or the Investor be
obligated to purchase, any Securities at the Second Closing in the absence of
Shareholder Approval (as defined in Section 4.18 below).
4. Representations, Warranties and Covenants of the Company. Except
as otherwise described in the documents filed by the Company under the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), since the end
of its most recently completed fiscal year through the date hereof, including,
without limitation, its most recent reports on Form 10-K, Form 10-Q and Form 8-K
(together with all exhibits thereto) (collectively, the "Exchange Act
Documents"), which qualifies the following representations and warranties in
their entirety (other than those set forth in Sections 4.1, 4.2, 4.3, 4.11, 4.12
and 4.22), the Company hereby represents and warrants to, and covenants with,
the Investor, as follows:
4.1 Organization. The Company and its Subsidiaries (as
defined in Rule 405 under the Securities Act) are duly organized and validly
existing and in good standing under the laws of the jurisdiction of their
respective organization. Each of the Company and its Subsidiaries has full power
and authority to own, operate and occupy its properties and to conduct its
business as presently conducted and as described in the Exchange Act Documents
and is registered or qualified to do business and in good standing in each
jurisdiction in which the nature of the business conducted by it or the location
of the properties owned or leased by it requires such qualification and where
the failure to be so qualified would have a material adverse effect upon (i) the
legality, validity or enforceability of any Transaction Documents, or (ii) the
ability of the Company to perform on a timely basis its obligations under the
Transaction Documents or (iii) the condition (financial or otherwise), earnings,
business or business prospects, properties or operations of the Company and its
Subsidiaries, considered as one enterprise (collectively, with (i) and (ii), a
"Material Adverse Effect"), and no proceeding has been instituted in any such
jurisdiction, revoking, limiting or curtailing, or seeking to revoke, limit or
curtail, such power and authority or qualification.
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4.2 Due Authorization and Valid Issuance.
(a) The Company has all requisite power and
authority to execute, deliver and perform its obligations under the Transaction
Documents, and the Transaction Documents have been duly authorized and validly
executed and delivered by the Company and constitute legal, valid and binding
agreements of the Company enforceable against the Company in accordance with
their terms, except as rights to indemnity and contribution may be limited by
court decision or applicable law, including, without limitation, state or
federal securities laws or the public policy underlying such laws, except as
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting creditors' and contracting
parties' rights generally and except as enforceability may be subject to general
principles of equity (regardless of whether such enforceability is considered in
a proceeding in equity or at law) or the discretion of the court before which
any proceeding is brought.
(b) The Securities being purchased by the Investor
hereunder will, upon issuance and payment therefor pursuant to the terms hereof,
be duly authorized and validly issued, and the Shares will, upon issuance
pursuant to the terms hereof, be fully paid and nonassessable and free of (i)
preemptive rights, co-sale rights, rights of first refusal or similar rights
imposed by law or the Company and (ii) all liens, and encumbrances and
restrictions imposed by law or the Company except for the restrictions on
transfer set forth herein or imposed by applicable securities laws.
(c) The Underlying Shares have been duly and validly
authorized and reserved for issuance, and upon exercise of the Warrants pursuant
to their terms, including payment of the exercise price therefor, will be
validly issued, fully paid and nonassessable and free of (i) preemptive rights,
co-sale rights, rights of first refusal or similar rights imposed by law or the
Company and (ii) all liens, and encumbrances and restrictions imposed by law or
the Company except for the restrictions on transfer set forth herein or imposed
by applicable Securities laws.
4.3 Non-Contravention. The execution and delivery of the
Transaction Documents, the issuance and sale of the Securities under the
Agreements, the issuance of the Underlying Shares, the fulfillment of the terms
of the Agreements and the consummation of the transactions contemplated thereby
will not (A) conflict with or constitute a violation of, or default (with the
passage of time or otherwise) under, (i) any material bond, debenture, note or
other evidence of indebtedness, lease, contract, indenture, mortgage, deed of
trust, loan agreement, joint venture or other agreement or instrument to which
the Company or any Subsidiary is a party or by which it or any of its
Subsidiaries or their respective properties are bound, (ii) the charter, by-laws
or other organizational documents of the Company or any Subsidiary, or (iii) any
law, administrative regulation, ordinance or order of any court or governmental
agency, arbitration panel or authority applicable to the Company or any
Subsidiary or their respective properties, except in the case of clause (iii)
for any such conflicts, violations or defaults which are not reasonably likely
to have a Material Adverse Effect or (B) result in the creation or imposition of
any lien, encumbrance, claim, security interest or restriction whatsoever upon
any of the material properties or assets of the Company or any Subsidiary or an
acceleration of indebtedness pursuant to any obligation, agreement or condition
contained in any material bond, debenture, note or any other evidence of
indebtedness or any material indenture, mortgage, deed of trust or any other
agreement or instrument to which the Company or any Subsidiary is a party or by
which any of them is bound or to which any of the material property or assets of
the Company or any Subsidiary is subject. Assuming the correctness of the
representations and warranties of each of the Investors set forth in Section 5
hereof, the offer and sale of the Securities hereunder is exempt from
registration under the Securities Act. No consent, approval, authorization or
other order of, or registration, qualification or filing with, any regulatory
body, administrative agency, or other governmental body in the United States or
any other person is required for the execution and delivery of the Transaction
Documents and the valid issuance and sale of the Securities to be sold and
issued pursuant to the Agreements, including the issuance of the Underlying
Shares, other than such as have been made or obtained, and except for any
post-closing securities filings or notifications required to be made under
federal or state securities laws and applicable NASD rules, which will be made
in a timely manner except as set forth in Section 4.17.
4.4 Capitalization. The capitalization of the Company is as
set forth in the most recent applicable Exchange Act Documents, increased as set
forth in the next sentence. The Company has not issued any capital stock since
the date of the most recent applicable Exchange Act Document other than pursuant
to (i) employee benefit plans disclosed in the Exchange Act Documents, (ii)
outstanding warrants, options or other
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securities disclosed in the Exchange Act Documents or (iii) quarterly dividends
paid in shares of Common Stock on its outstanding shares of Preferred Stock as
disclosed in the Exchange Act Documents. The outstanding shares of capital stock
of the Company have been duly and validly issued and are fully paid and
nonassessable, have been issued in compliance with all federal and state
securities laws, and were not issued in violation of any preemptive rights or
similar rights to subscribe for or purchase securities. Except as set forth in
or contemplated by the Agreements and the Exchange Act Documents, there are no
outstanding rights (including, without limitation, preemptive rights), warrants
or options to acquire, or instruments convertible into or exchangeable for, any
unissued shares of capital stock or other equity interest in the Company or any
Subsidiary, or any contract, commitment, agreement, understanding or arrangement
of any kind to which the Company is a party or of which the Company has
knowledge and relating to the issuance or sale of any capital stock of the
Company or any Subsidiary, any such convertible or exchangeable securities or
any such rights, warrants or options. Without limiting the foregoing, except as
set forth in or contemplated by the Agreements and the Exchange Act Documents or
as set forth on Schedule 4.4, no preemptive right, co-sale right, right of first
refusal, registration right, or other similar right exists with respect to the
Securities or the issuance and sale thereof or the issuance of the Underlying
Shares. No further approval or authorization of any shareholder, the Board of
Directors of the Company or others is required for the issuance and sale of the
Securities except as set forth in Section 4.18. The Company owns the entire
equity interest in each of its Subsidiaries, free and clear of any pledge, lien,
security interest, encumbrance, claim or equitable interest, other than as
described in the Exchange Act Documents. Except as disclosed in the Exchange Act
Documents, there are no shareholders agreements, voting agreements or other
similar agreements with respect to the Common Stock to which the Company is a
party or, to the knowledge of the Company, between or among any of the Company's
shareholders.
4.5 Legal Proceedings. Except as set forth in the Exchange
Act Documents, there is no material legal or governmental proceeding pending or,
to the knowledge of the Company, threatened (i) to which the Company or any
Subsidiary is or may be a party or of which the business or property of the
Company or any Subsidiary is subject that is not disclosed in the Exchange Act
Documents or (ii) which adversely affects or challenges the legality, validity
or enforceability of the Transaction Documents.
4.6 No Violations. Neither the Company nor any Subsidiary is
in violation of its charter, bylaws, or other organizational document, or in
violation of any law, administrative regulation, ordinance or order of any court
or governmental agency, arbitration panel or authority applicable to the Company
or any Subsidiary, which violation, individually or in the aggregate, would be
reasonably likely to have a Material Adverse Effect, or is in default (and there
exists no condition which, with the passage of time or otherwise, would
constitute a default) in the performance of any bond, debenture, note or any
other evidence of indebtedness in any indenture, mortgage, deed of trust or any
other agreement or instrument to which the Company or any Subsidiary is a party
or by which the Company or any Subsidiary is bound or by which the properties of
the Company or any Subsidiary are bound, which would be reasonably likely to
have a Material Adverse Effect.
4.7 Governmental Permits, Etc. With the exception of the
matters which are dealt with separately in Sections 4.1, 4.12, 4.13, and 4.14,
each of the Company and its Subsidiaries has all necessary franchises, licenses,
certificates and other authorizations from any foreign, federal, state or local
government or governmental agency, department, or body that are currently
necessary for the operation of the business of the Company and its Subsidiaries
as currently conducted and as described in the Exchange Act Documents except
where such failure to currently possess would not have a Material Adverse
Effect.
4.8 Property. Except as disclosed in the Exchange Act
Documents, the Company and its Subsidiaries (i) have good and marketable title
to all real properties and all other properties and assets owned by them, in
each case free from liens, encumbrances and defects that would interfere with
the use made thereof by them and (ii) hold any leased real or personal property
under valid and enforceable leases with no exceptions that would interfere with
the use made thereof by them, except in each case when the failure to so have or
hold such properties would not have a Material Adverse Effect.
4.9 Intellectual Property. Except as specifically disclosed
in the Exchange Act Documents (i) each of the Company and its Subsidiaries owns
or possesses sufficient rights to use all patents, patent rights, trademarks,
copyrights, licenses, inventions, trade secrets, trade names, designs,
manufacturing or other processes, systems, data compilation, research results,
know-how or other proprietary rights (collectively, "Intellectual Property")
that are necessary for the conduct of its business as now conducted or as
proposed to be conducted as
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described in the Exchange Act Documents except where the failure to currently
own or possess would not have a Material Adverse Effect, (ii) neither the
Company nor any of its Subsidiaries is infringing, or has received any notice
of, or has any knowledge of, any asserted infringement by the Company or any of
its Subsidiaries of, any rights of a third party with respect to any
Intellectual Property that, individually or in the aggregate, would have a
Material Adverse Effect and (iii) neither the Company nor any of its
Subsidiaries has received any notice of, or has any knowledge of, infringement
by a third party with respect to any Intellectual Property rights of the Company
or of any Subsidiary that, individually or in the aggregate, would have a
Material Adverse Effect. The consummation of the transactions contemplated by
this Agreement will not result in the alteration, loss, impairment of or
restriction on the Company's or any of its Subsidiaries' ownership or right to
use any of the Intellectual Property.
Except as disclosed in the Exchange Act Documents, all material licenses
or other material agreements under which (i) the Company is granted rights in
Intellectual Property, other than Intellectual Property generally available on
commercial terms from other sources, and (ii) the Company has granted rights to
others in Intellectual Property owned or licensed by the Company, are in full
force and effect and, to the knowledge of the Company, there is no material
default by the Company thereunder.
The Company and the Subsidiaries have taken commercially reasonable
steps required in accordance with sound business practice and business judgment
to establish and preserve their ownership of all Intellectual Property with
respect to their business plans, strategies, products and technology. Each
employee, consultant and contractor who has had access to material confidential
information or trade secrets of the Company or its Subsidiaries has executed an
agreement to maintain the confidentiality of such information and, except under
confidentiality obligations, to the knowledge of the Company, there has been no
material disclosure of any of the Company's or its Subsidiary's confidential
information or trade secrets to any third party. To the knowledge of the
Company, the Company is not making unauthorized use of any confidential
information or trade secrets of any person. Neither the Company nor, to the
knowledge of the Company, any of its employees have any agreements or
arrangements with any persons other than the Company related to confidential
information or trade secrets of such persons or restricting any such employee's
engagement in business activities of any nature that, individually or in the
aggregate, would have a Material Adverse Effect. To the knowledge of the
Company, no person is making unauthorized use of any confidential information or
trade secrets of the Company.
4.10 Financial Statements. The financial statements of the
Company and the related notes contained in the Exchange Act Documents present
fairly, in accordance with generally accepted accounting principles, the
financial position of the Company and its Subsidiaries on a consolidated basis,
as of the dates indicated, and the results of its operations, cash flows and
shareholders' equity for the periods therein specified consistent with the books
and records of the Company and its Subsidiaries on a consolidated basis, except
that the unaudited interim financial statements were or are subject to normal
and recurring year-end adjustments which are not expected to be material in
amount. Such financial statements (including the related notes) have been
prepared in accordance with generally accepted accounting principles applied on
a consistent basis throughout the periods therein specified, except in the case
of unaudited statements, as may be permitted by the SEC on Form 10-Q under the
Exchange Act and except as disclosed in the Exchange Act Documents. Based on the
financial condition of the Company as of the Closing Date and assuming the
Closing has occurred, (i) the Company's fair saleable value of its assets
exceeds the amount that will be required to be paid on or in respect of the
Company's existing debts and other liabilities (including known contingent
liabilities) as they mature; (ii) the Company's assets do not constitute
unreasonably small capital to carry on its business for the current fiscal year
as now conducted and as proposed to be conducted as disclosed in the Company's
Form 10-K for the year ended December 31, 2002 including its capital needs
taking into account the particular capital requirements of the business
conducted by the Company, and projected capital requirements and capital
availability thereof; and (iii) the current cash flow of the Company, together
with the proceeds the Company would receive, were it to liquidate all of its
assets, after taking into account all anticipated uses of the cash, would be
sufficient to pay all amounts on or in respect of its debt when such amounts are
required to be paid. The Company does not intend to incur debts beyond its
ability to pay such debts as they mature (taking into account the timing and
amounts of cash to be payable on or in respect of its debt).
4.11 Internal Accounting Controls. The Company and its
Subsidiaries maintain a system of internal accounting controls sufficient to
provide reasonable assurance that (i) transactions are executed in accordance
with management's general or specific authorizations, (ii) transactions are
recorded as necessary to permit preparation of financial statements in
conformity with GAAP and to maintain asset and liability accountability, (iii)
access to assets or incurrence of liabilities is permitted only in accordance
with management's
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general or specific authorization, and (iv) the recorded accountability for
assets and liabilities is compared with the existing assets and liabilities at
reasonable intervals and appropriate action is taken with respect to any
difference.
4.12 ▇▇▇▇▇▇▇▇-▇▇▇▇▇ Act. The Company is in compliance with
the applicable requirements of the ▇▇▇▇▇▇▇▇-▇▇▇▇▇ Act of 2002, and the
applicable rules and regulations promulgated by the Securities and Exchange
Commission thereunder, except where such noncompliance would not have a Material
Adverse Effect.
4.13 No Material Adverse Change. Except as disclosed in the
Exchange Act Documents, since December 31, 2002, there has not been (i) any
Material Adverse Effect affecting the Company and its Subsidiaries considered as
one enterprise, (ii) any obligation, direct or contingent, that is material to
the Company and its Subsidiaries considered as one enterprise, incurred by the
Company, (iii) any dividend or distribution of any kind declared, paid or made
on the capital stock of the Company or any of its Subsidiaries, or (iv) any loss
or damage (whether or not insured) to the physical property of the Company or
any of its Subsidiaries which has been sustained which has a Material Adverse
Effect.
4.14 Disclosure. The representations and warranties of the
Company contained in this Section 4 as of the date hereof and as of the
applicable Closing Date, do not contain any untrue statement of a material fact
or omit to state a material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances under which they were
made, not misleading. Except for the material terms and conditions of the
transactions contemplated by this Agreement, all of which will be publicly
disclosed by the Company promptly following the First Closing Date, the Company
confirms that neither it nor any Person acting on its behalf has provided the
Investor or its agents or counsel with any information that constitutes
material, non-public information concerning the Company. The Company hereby
confirms its understanding that the Investor will rely on the foregoing
representations and covenants in effecting transactions in securities of the
Company.
4.15 NASDAQ Compliance. The Company's Common Stock is
registered pursuant to Section 12(g) of the Exchange Act and is listed on The
Nasdaq Stock Market, Inc. National Market (the "Nasdaq National Market"), and
the Company has taken no action designed to, or likely to have the effect of,
terminating the registration of the Common Stock under the Exchange Act or
de-listing the Common Stock from the Nasdaq National Market, nor has the Company
any knowledge of any fact or circumstance that may give rise to such event or
received any notification that the SEC or the NASD is contemplating terminating
such registration or listing.
4.16 Reporting Status; Form S-3 Eligibility. The Company has
filed in a timely manner all documents that the Company was required to file
under the Exchange Act during the 12 months preceding the date of this
Agreement. The Company satisfies the eligibility requirements for the use of
Form S-3 under the Securities Act set forth in General Instruction I.A. to Form
S-3. All documents filed with the SEC in the 12 months preceding the applicable
closing date, including the documents listed in parts (a) through (e) of this
Section 4.15, complied in all material respects with the SEC's requirements as
of their respective filing dates and do not contain any non-GAAP financial
measures prohibited by Regulation G, and the information contained therein as of
the date thereof did not contain an untrue statement of a material fact or omit
to state a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading:
(a) Annual Report on Form 10-K for the year ended
December 31, 2002, as amended by Form 10-K/A
filed on March 31, 2003;
(b) Definitive Proxy Statement, filed on April 25,
2003;
(c) Quarterly Report on Form 10-Q for the quarter
ended March 31, 2003;
(d) Current Reports on Form 8-K, filed on March 11,
2003; and
(e) All other documents, if any, filed by the
Company with the SEC since December 31, 2002
pursuant to the reporting requirements of the
Exchange Act.
4.17 Listing. Within three (3) days after the First Closing
Date, the Company shall have filed with the NASD a Notification Form for the
Listing of Additional Shares with respect to the Shares and the
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Underlying Shares and the listing thereof on the Nasdaq National Market. The
Company shall use commercially reasonable efforts to maintain the listing of the
Shares and Underlying Shares.
4.18 Shareholder Approval. No approval of the shareholders of
the Company is required pursuant to law, rule of the NASD or SEC or otherwise
for the Company to issue the Securities contemplated by the Agreements to be
issued and sold by the Company at the First Closing. The Company shall use its
reasonable best efforts to call a meeting of its shareholders to be held as soon
as practicable in approximately thirty (30) days after the First Closing Date
for the purpose of voting upon and approving (i) the issuance of the Shares and
the Warrants at the Second Closing and the issuance in full, without regard to
whether such issuance is below-market, of the Shares and Underlying Shares upon
the exercise of the Warrants or otherwise (the "Shareholder Approval"). The
Company shall recommend to its shareholders approval of such matters. The
Company shall use its reasonable best efforts to solicit from its shareholders
proxies in favor of such matters sufficient to comply with all relevant legal
requirements, including, without limitation, Nasdaq Marketplace Rule 4350(i)
promulgated by the NASD, and shall vote such proxies and, shall use its
reasonable best efforts to cause all "affiliates" (as such term is defined in
Rule 12b-2 promulgated under the Exchange Act) of the Company to vote any shares
of Common Stock beneficially owned by such persons or entities, in favor of such
matters.
4.19 Company not an "Investment Company". The Company has
been advised of the rules and requirements under the Investment Company Act of
1940, as amended (the "Investment Company Act"). The Company is not, and
immediately after receipt of payment for the Securities will not be, an
"investment company" or an entity "controlled" by an "investment company" within
the meaning of the Investment Company Act and shall conduct its business in a
manner so that it will not become subject to the Investment Company Act.
4.20 Environmental. None of the premises or any properties
owned, occupied or leased by the Company or its Subsidiaries (the "Premises")
has been used by the Company or the Subsidiaries or, to the Company's knowledge,
by any other person, to manufacture, treat, store, or dispose of any substance
that has been designated to be a "hazardous substance" under applicable
Environmental Laws ("Hazardous Substances") in violation of any applicable
Environmental Laws (hereinafter defined). To its knowledge, the Company has not
disposed of, discharged, emitted or released any Hazardous Substances which
would require, under applicable Environmental Laws, remediation, investigation
or similar response activity. No Hazardous Substances are present as a result of
the actions of the Company or, to the Company's knowledge, any other Person, in,
on or under the Premises which would give rise to any liability or clean-up
obligations of the Company under applicable Environmental Laws. The Company and,
to the Company's knowledge, any other person for whose conduct it may be
responsible pursuant to an agreement or by operation of law, are in compliance
with all laws, regulations and other federal, state or local governmental
requirements, and all applicable judgments, orders, writs, notices, decrees,
permits, licenses, approvals, consents or injunctions in effect on the date of
this Agreement relating to the generation, management, handling, transportation,
treatment, disposal, storage, delivery, discharge, release or emission of any
Hazardous Substance (the "Environmental Laws"). Neither the Company nor, to the
Company's knowledge, any other person for whose conduct it may be responsible
pursuant to an agreement or by operation of law has received any written
complaint, notice, order, or citation of any actual, threatened or alleged
noncompliance with any of the Environmental Laws, and there is no proceeding,
suit or investigation pending or, to the Company's knowledge, threatened against
the Company or, to the Company's knowledge, any such person with respect to any
violation or alleged violation of the Environmental Laws, and, to the knowledge
of the Company, there is no basis for the institution of any such proceeding,
suit or investigation.
4.21 Insurance. The insurance policies providing insurance
coverage to the Company or its Subsidiaries including, without limitation, for
product liability are adequate for the business conducted by the Company and its
Subsidiaries and are sufficient for compliance by the Company and its
Subsidiaries with all requirements of law and all material agreements to which
the Company or its Subsidiaries are a party or by which any of their assets are
bound. All of such policies are in full force and effect and are valid and
enforceable in accordance with their terms, and the Company and its Subsidiaries
have complied with all material terms and conditions of such policies, including
premium payments. None of the insurance carriers has indicated to the Company or
its Subsidiaries an intention to cancel any such policy.
4.22 Absence of Certain Business Practices. Neither the
Company, nor to the knowledge of the Company, any agent or employee of the
Company, any other person acting on behalf of or associated with the Company, or
any individual related to any of the foregoing persons, acting alone or
together, has: (i) received,
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directly or indirectly, any rebates, payments, commissions, promotional
allowances or any other economic benefits, regardless of their nature or type,
from any customer, supplier, trading company, shipping company, governmental
employee or other person with whom the Company has done business directly or
indirectly; or (ii) directly or indirectly, given or agreed to give any gift or
similar benefit to any customer, supplier, trading company, shipping company,
governmental employee or other person who is or may be in a position to help or
hinder the business of the Company (or assist the Company in connection with any
actual or proposed transaction) which (A) may subject the Company to any damage
or penalty in any civil, criminal or governmental litigation or proceeding, (B)
if not given in the past, may have had an adverse effect on the Company or (C)
if not continued in the future, may adversely affect the assets, business,
operations or prospects of the Company or subject the Company to suit or penalty
in any private or governmental litigation or proceeding.
4.23 Products and Services. To the knowledge of the Company,
there exists no set of facts (i) which could furnish a basis for the withdrawal,
suspension or cancellation of any registration, license, permit or other
governmental approval or consent of any governmental or regulatory agency,
domestic or foreign, with respect to any product or service developed or
provided by the Company or its Subsidiaries, (ii) which could furnish a basis
for the withdrawal, suspension or cancellation by order of any state, federal or
foreign court of law of any product or service, or (iii) which could have a
Material Adverse Effect on the continued operation of any facility of the
Company or its Subsidiaries or which could otherwise cause the Company or its
Subsidiaries to withdraw, suspend or cancel any such product or service from the
market or to change the marketing classification of any such product or service.
Each product or service provided by Company or its Subsidiaries has been
provided in accordance in all material respects with the specifications under
which such product or service normally is and has been provided and the
provisions of all applicable domestic or foreign laws or regulations.
4.24 Accountants. KPMG LLP, who the Company expects will
issue their report with respect to the financial statements to be incorporated
by reference from the Company's Annual Report on Form 10-K for the year ended
December 31, 2002 into the Registration Statement (as defined below) and the
prospectus which forms a part thereof ("Prospectus"), are independent
accountants or auditors as required by the Securities Act and the rules and
regulations promulgated thereunder.
4.25 Contracts. The contracts described in the Exchange Act
Documents that are currently material to the Company are in full force and
effect on the date hereof, and neither the Company nor, to the Company's
knowledge, any other party to such contracts is in breach of or default under
any of such contracts which would have a Material Adverse Effect. The Company is
not party to any contract that is required to be filed as an exhibit to any
Exchange Act Document, except such contracts as are filed as exhibits to the
Exchange Act Documents.
4.26 Transactions with Related Parties. Except as disclosed
in the Exchange Act Documents, there have been no transactions between the
Company and any of its directors or executive officers (or members of their
immediate families) or any security holder who is known to the Company to own of
record or beneficially more than five percent of any class of the Company's
voting securities that are required to be disclosed in the Exchange Act
Documents.
4.27 Taxes. The Company has filed all necessary federal,
state and foreign income and franchise tax returns and has paid or accrued all
taxes shown as due thereon, and the Company has no knowledge of a tax deficiency
which has been or might be asserted or threatened against it which would have a
Material Adverse Effect.
4.28 Transfer Taxes. On the applicable Closing Date, all
stock transfer or other taxes (other than income taxes) which are required to be
paid in connection with the sale and transfer of the Securities to be sold to
the Investor hereunder will be, or will have been, fully paid or provided for by
the Company and all laws imposing such taxes will be or will have been fully
complied with.
4.29 Private Offering. Assuming the correctness of the
representations and warranties of each of the Investors set forth in Section 5,
the offer and sale of Securities hereunder is exempt from registration under the
Securities Act. The Company has not distributed and will not distribute prior to
the First Closing Date any offering materials in connection with this Offering
and sale of the Securities other than the documents of which this Agreement is a
part or the Exchange Act Documents. The Company has not in the past nor will it
hereafter take any
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11
action, directly or indirectly, to sell, offer for sale or solicit offers to buy
any securities of the Company which would bring the offer, issuance or sale of
the Securities as contemplated by this Agreement, within the provisions of
Section 5 of the Securities Act, unless such offer, issuance or sale was or
shall be within the exemptions of Section 4 of the Securities Act.
4.30 No Labor Disputes. No material labor dispute with the
employees of the Company or any Subsidiary exists or, to the Company's
knowledge, is imminent.
4.31 Removal of Legends. The Company shall promptly after the
effectiveness of the Registration Statement (as defined in Section 7.1(a)) cause
an opinion of counsel to be delivered to and maintained with its transfer agent,
together with any other authorizations, certificates and directions required by
the transfer agent, which authorize and direct the transfer agent to issue the
Registrable Securities (as defined in Section 7.1(a)) without legend upon sale
by the holder of such shares of Registrable Securities under the Registration
Statement. The Company agrees that, no later than four business days following
the delivery by the Investor (i) to the Company or the Company's transfer agent
of a certificate representing Securities (including Underlying Shares) issued
with a restrictive legend and (ii) any opinion of counsel, such opinion and such
counsel to be reasonably acceptable to the Company, and other documentation as
the Company may reasonably request, deliver or cause to be delivered to such
Investor or its designee a certificate representing such Securities that is free
from all restrictive and other legends.
4.32 Use of Proceeds. The Company shall use the proceeds from
the Offering for working capital, general corporate purposes and strategic
acquisitions, if any.
4.33 Brokers or Finders. Except for the Placement Agent and
MC Services (which has acted as a finder for the transactions contemplated by
the Agreement), the Company has not dealt with any broker or finder in
connection with the transactions contemplated by the Agreements, and except for
certain fees and expenses payable by the Company to the Placement Agent, the
Company has not incurred, and shall not incur, directly or indirectly, any
liability for any brokerage or finders' fees or agents commissions or any
similar charges in connection with the transactions contemplated by the
Agreements. The Company is obligated to pay the Placement Agent or its
designees, in accordance with the terms of the Placement Agent Agreement dated
as of May 7, 2003 between the Company and the Placement Agent, the following
placement agent fees: (i) cash commissions equal to 7% of the gross proceeds
received from the sale of the Securities sold at each of the First Closing and
the Second Closing; and (ii) warrants to purchase 3% of that number of Shares
sold at each of the First Closing and the Second Closing, such warrants to have
the same terms, conditions, rights and preferences as the Warrants (the
"Placement Agent Warrants"); provided, however, that the Placement Agent shall
only receive cash in an amount equal to 3.5% of the gross proceeds received from
the sale of the Securities sold at each of the First Closing and the Second
Closing to MC Services Purchasers (as defined below) and warrants to purchase
1.5% of that number of Shares sold at each of the First Closing Date and the
Second Closing Date to MC Services Purchasers. Pursuant to an agreement between
the Company and MC Services dated as of May 7, 2003 (the "Finder's Agreement"),
the Company is obligated to pay MC Services, as a finder for investors in the
Offering, cash commissions equal to 3.5% of the gross proceeds received from the
sale of the Securities sold at each of the First Closing and the Second Closing
of the Offering to certain Investors identified by MC Services (the "MC Services
Purchasers").
5. Representations, Warranties and Covenants of the Investor.
5.1 The Investor represents and warrants to, and covenants
with, the Company that: (i) the Investor is an "accredited investor" as defined
in Rule 501(a) of Regulation D under the Securities Act and the Investor is also
knowledgeable, sophisticated and experienced in making, and is qualified to make
decisions with respect to investments in shares presenting an investment
decision like that involved in the purchase of the Securities, including
investments in securities issued by the Company, and has requested, received,
reviewed and considered all information it deemed relevant in making an informed
decision to purchase the Securities; (ii) the Investor is acquiring the
Securities set forth in Section 3 of the Securities Purchase Agreement in the
ordinary course of its business and for its own account for investment only and
with no present intention of distributing any of such Securities or any
arrangement or understanding with any other persons regarding the distribution
of such Securities, however, nothing shall limit the Investor's right at all
times to sell or otherwise dispose of all or any part of such Securities in
compliance with applicable federal and state securities laws and nothing
contained herein shall be deemed a representation or warranty by such Investor
to hold the Securities for any period of time; (iii) the Investor
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will not, directly or indirectly, offer, sell, pledge, transfer or otherwise
dispose of (or solicit any offers to buy, purchase or otherwise acquire or take
a pledge of) any of the Securities except in compliance with the Securities Act,
applicable state securities laws and the respective rules and regulations
promulgated thereunder; (iv) the Investor has answered all questions in the
Securities Purchase Agreement for use in preparation of the Registration
Statement and the answers thereto are true, correct and complete in all material
respects as of the date hereof and will be true, correct and complete in all
material respects as of the applicable Closing Date; (v) the Investor will
notify the Company in writing immediately of any material change in any of such
information until such time as the Investor has sold all of its Securities or
until the Company is no longer required to keep the Registration Statement
effective; and (vi) the Investor has, in connection with its decision to
purchase the Securities set forth in Section 3 of the Securities Purchase
Agreement, relied only upon the Exchange Act Documents and the representations
and warranties of the Company contained herein. The Investor understands that
its acquisition of the Securities has not been registered under the Securities
Act or registered or qualified under any state securities law in reliance on
specific exemptions therefrom, which exemptions may depend upon, among other
things, the bona fide nature of the Investor's investment intent as expressed
herein. Investor understands that the Securities purchased hereunder have to be
held indefinitely unless there is an effective Registration Statement or an
applicable exemption from the registration requirements under the Securities Act
with respect to the Securities, and the Investor is able to bear the economic
risk of an investment in the Securities.
5.2 The Investor acknowledges, represents and agrees that no
action has been or will be taken in any jurisdiction outside the United States
by the Company that would permit an offering of the Securities, or possession or
distribution of offering materials in connection with the issue of the
Securities, in any jurisdiction outside the United States where legal action by
the Company for that purpose is required. Each Investor outside the United
States will comply with all applicable laws and regulations in each foreign
jurisdiction in which it purchases, offers, sells or delivers Securities or has
in its possession or distributes any offering material, in all cases at its own
expense.
5.3 The Investor hereby covenants with the Company not to
make any sale of the Securities without complying with the provisions of this
Agreement, including Section 7.2 hereof, and if selling pursuant to the
Registration Statement, without causing the prospectus delivery requirement
under the Securities Act to be satisfied, and the Investor acknowledges that the
certificates evidencing the Securities will be imprinted with a legend that
prohibits their transfer except in accordance therewith. The Investor
acknowledges that there may occasionally be times when the Company determines
that it must suspend the use of the Prospectus forming a part of the
Registration Statement, as set forth in Section 7.2(c).
5.4 The Investor further represents and warrants to, and
covenants with, the Company that (i) the Investor has full right, power,
authority and capacity to enter into this Agreement and to consummate the
transactions contemplated hereby and has taken all necessary action to authorize
the execution, delivery and performance of this Agreement, and (ii) this
Agreement constitutes a valid and binding obligation of the Investor enforceable
against the Investor in accordance with its terms, except as enforceability may
be limited by applicable bankruptcy, insolvency, reorganization, moratorium or
similar laws affecting creditors' and contracting parties' rights generally and
except as enforceability may be subject to general principles of equity
(regardless of whether such enforceability is considered in a proceeding in
equity or at law) and except as the indemnification and contribution agreements
of the Investors herein may be legally unenforceable.
5.5 Investor will not use any of the restricted Securities
acquired pursuant to this Agreement to cover any short position in the Common
Stock of the Company if doing so would be in violation of applicable securities
laws.
5.6 The Investor understands that nothing in the Exchange
Act Documents, this Agreement or any other materials presented to the Investor
in connection with the purchase and sale of the Securities constitutes legal,
tax or investment advice. The Investor has consulted such legal, tax and
investment advisors as it, in its sole discretion, has deemed necessary or
appropriate in connection with its purchase of Shares.
6. Survival of Representations and Warranties. Notwithstanding any
investigation made by any party to this Agreement, all representations and
warranties made by the Company and the Investor herein shall survive the
execution of this Agreement, the delivery to the Investor of the Securities
being purchased and the
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payment therefor, until the second anniversary of the date hereof. All covenants
and agreements made by the Company and the Investor herein shall survive in
accordance with the terms hereof.
7. Registration of the Shares; Compliance with the Securities Act.
7.1 Registration Procedures and Other Matters. The Company
shall:
(a) (i) subject to receipt of necessary information
from the Investors after prompt request from the Company to the Investors to
provide such information, promptly following the First Closing but no later than
30 days after the First Closing Date (the "Filing Date"), prepare and file with
the SEC a registration statement on Form S-3 or such other successor form
(except that if the Company is not then eligible to register for resale the
Registrable Securities (as defined below) on Form S-3, in which case such
registration shall be on Form S-1 or any successor form) (a "Registration
Statement") to enable the resale of the Shares and the Underlying Shares
(collectively, the "Registrable Securities") issued or issuable in connection
with the Shares and Warrants issued at the First Closing (the "First Closing
Registrable Securities"), by the Investors or their transferees from time to
time through the automated quotation system of the Nasdaq National Market or in
privately-negotiated transactions and, if the Company has not filed the
Registration Statement by the Filing Date, then the Company shall pay in cash as
liquidated damages for such failure and not as a penalty to each Investor an
amount equal to one and one-half percent (1.5%) of such Investor's pro rata
share of the purchase price paid by all Investors for Shares purchased pursuant
to the Agreements and then outstanding and owned by such Investor, for each
thirty (30) day period thereafter, which shall be pro rated for such periods
less than thirty (30) days, until a Registration Statement has been filed;
(ii) if the Second Closing occurs, subject to receipt of
necessary information from the Investors after prompt request from the Company
to the Investors to provide such information, promptly following the Second
Closing but no later than 20 days after the Second Closing Date (the "Additional
Filing Date"), prepare and file with the SEC a Registration Statement, or amend
the Registration Statement filed pursuant to clause (i) above, if such
Registration Statement has not previously been declared effective, to enable the
resale of the Registrable Securities issued or issuable in connection with the
Shares and Warrants issued at the Second Closing (the "Second Closing
Registrable Securities"), by the Investors or their transferees from time to
time through the automated quotation system of the Nasdaq National Market or in
privately-negotiated transactions and, if the Company is required to but has not
filed such Registration Statement or amendment by the Additional Filing Date,
then the Company shall pay in cash as liquidated damages for such failure and
not as a penalty to each Investor an amount equal to one and one-half percent
(1.5%) of such Investor's pro rata share of the purchase price paid by all
Investors for Shares purchased pursuant to the Agreements and then outstanding
and owned by such Investor, for each thirty (30) day period thereafter, which
shall be pro rated for such periods less than thirty (30) days, until such
Registration Statement or amendment has been filed;
(b) use commercially reasonable efforts, subject to
receipt of necessary information from the Investors after prompt request from
the Company to the Investors to provide such information, to cause the
Registration Statement to become effective as soon as practicable; provided,
however, that if (x) a Registration Statement covering the First Closing
Registrable Securities has not been declared effective by the SEC within ninety
(90) days following the First Closing Date (or one hundred and twenty (120) days
if the SEC reviews the Registration Statement), or (y) a Registration Statement
covering the Second Closing Registrable Securities has not been declared
effective by the SEC within ninety (90) days following the Second Closing Date
(or one hundred and twenty (120) days if the SEC reviews the Registration
Statement), then the Company shall pay in cash as liquidated damages for each
such failure and not as a penalty to each Investor an amount equal to one and
one-half percent (1.5%) of such Investor's pro rata share of the purchase price
paid by all Investors for Shares purchased pursuant to the Agreements and then
outstanding, for each thirty (30) day period thereafter, which shall be pro
rated for such periods less than thirty (30) days, until the Registration
Statement has been declared effective.
(c) use its reasonable best efforts to cause such
Registration Statement to remain continuously effective, subject to the terms of
Section 7.2(c) below, prepare and file with the SEC such amendments and
supplements to the Registration Statement and the Prospectus used in connection
therewith (and the applicable Exchange Act reports incorporated therein by
reference, so filed on a timely basis) as may be necessary to keep the
Registration Statement current, effective and free from any material
misstatement or omission to state a material fact for a period ending on the
date that is, with respect to each Investor's Registrable Securities purchased
hereunder,
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14
the earlier of (i) the date on which the Investor may sell all Registrable
Securities then held by the Investor without restriction under Rule 144(k), or
(ii) such time as all Registrable Securities purchased by such Investor in this
Offering have been sold pursuant to a registration statement;
(d) so long as the Investor holds Registrable
Securities, provide copies to and permit legal counsel designated by the
Investor to review the Registration Statement and all amendments and supplements
thereto, no fewer than three business days prior to their filing with the SEC,
and not file any Registration Statement, amendment or supplement thereto to
which a holder of the Investor's Registrable Securities reasonably objects in
writing within such three business day period;
(e) furnish to the Investor with respect to the
Registrable Securities registered under the Registration Statement such number
of copies of the Registration Statement, Prospectuses (under cover of the form
of letter attached hereto as Exhibit D) and preliminary Prospectuses
("Preliminary Prospectuses" and individually, "Preliminary Prospectus") in
conformity with the requirements of the Securities Act and such other documents
as the Investor may reasonably request, in order to facilitate the public sale
or other disposition of all or any of the Registrable Securities by the
Investor; provided, however, that the obligation of the Company to deliver
copies of Prospectuses or Preliminary Prospectuses to the Investor shall be
subject to the receipt by the Company of reasonable assurances from the Investor
that the Investor will comply with the applicable prospectus delivery
requirements under the Securities Act and of such other securities or blue sky
laws as may be applicable in connection with any use of such Prospectuses or
Preliminary Prospectuses;
(f) file documents required of the Company for
normal blue sky clearance in states specified in writing by the Investor and use
its reasonable best efforts to maintain such blue sky qualifications during the
period the Company is required to maintain the effectiveness of the Registration
Statement pursuant to Section 7.1(c); provided, however, that the Company shall
not be required to qualify to do business or consent to service of process in
any jurisdiction in which it is not now so qualified or has not so consented;
(g) bear all expenses in connection with the
procedures in paragraph (a) through (e) of this Section 7.1 and the registration
of the Registrable Securities pursuant to the Registration Statement, including
up to $25,000 for all Investors in the aggregate (or pro rata in relation to the
purchase price paid for the Securities purchased by each Investor if, in the
aggregate, such expenses exceed $25,000) in connection with any review by the
Investor's counsel of the Registration Statement;
(h) promptly notify the Investors after it receives
notice of the time when the Registration Statement has been declared effective
by the SEC, or when a supplement or amendment to any Registration Statement has
been filed with the SEC;
(i) advise the Investor, promptly: (a) after it
shall receive notice or obtain knowledge of the issuance of any stop order by
the SEC delaying or suspending the effectiveness of the Registration Statement
or of the initiation or threat of any proceeding for that purpose; and it will
promptly use its reasonable best efforts to prevent the issuance of any stop
order or to obtain its withdrawal at the earliest possible moment if such stop
order should be issued; and (b) at any time when a Prospectus relating to
Registrable Securities is required to be delivered under the Securities Act,
upon discovery that, or upon the happening of an event as a result of which, the
Prospectus included in the Registration Statement, as then in effect, includes
an untrue statement of a material fact or omits to state any material fact
required to be stated therein or necessary to make the statements therein not
misleading in light of the circumstances then existing; and
(j) use its reasonable best efforts to comply in all
material respects with all applicable rules and regulations of the SEC under the
Securities Act and the Exchange Act and make generally available to its security
holders earning statements satisfying the provisions of Section 11(a) of the
Securities Act and Rule 158 not later than 45 days after the end of any 3-month
period (or 90 days after the end of any 12-month period if such period is a
fiscal year) commencing on the first day of the first fiscal quarter of the
Company after the effective date of the Registration Statement, which statement
shall conform to the requirements of Rule 158.
With a view to making available to the Investor the benefits of Rule 144
(or its successor rule) and any other rule or regulation of the SEC that may at
any time permit the Investor to sell Registrable Securities to the public
without registration, the Company covenants and agrees to: (i) make and keep
public information available,
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15
as those terms are understood and defined in Rule 144, until the earlier of (A)
such date as all of the Investor's Registrable Securities may be resold pursuant
to Rule 144(k) or any other rule of similar effect or (B) such date as all of
the Investor's Registrable Securities shall have been resold; (ii) file with the
SEC in a timely manner all reports and other documents required of the Company
under the Exchange Act; and (iii) furnish to the Investor upon request, as long
as the Investor owns any Registrable Securities, (A) a written statement by the
Company that it has complied with the reporting requirements of the Exchange
Act; (B) a copy of the Company's most recent Annual Report on Form 10-K or
Quarterly Report on Form 10-Q (exclusive of exhibits thereto), and (C) such
other information as may be reasonably requested in order to avail the Investor
of any rule or regulation of the SEC that permits the selling of such
Registrable Securities without registration.
In no event at any time before the Registration Statement becomes
effective with respect to the Shares shall the Company publicly announce or file
any other registration statement, other than registrations on Form ▇-▇, ▇▇▇▇ ▇-▇
or any successor forms thereof, without the prior written consent of a majority
in interest of the Investors.
The Company understands that the Investor disclaims being an
underwriter, but the Investor being deemed an underwriter by the SEC shall not
relieve the Company of any obligations it has hereunder.
(k) The Plan of Distribution set forth in the
Registration Statement shall be as set forth in Exhibit C to the Securities
Purchase Agreement attached hereto.
7.2 Transfer of Shares After Registration, Suspension.
(a) The Investor agrees that it will not effect any
disposition of the Registrable Securities or its right to purchase the
Registrable Securities that would constitute a sale within the meaning of the
Securities Act except as contemplated in the Registration Statement referred to
in Section 7.1 (including, without limitation, the plan of distribution
contained therein) and as described below or as otherwise permitted by law, and
that it will promptly notify the Company in writing of any changes in the
information set forth in the Registration Statement regarding the Investor or
its plan of distribution.
(b) Except in the event that paragraph (c) below
applies, the Company shall (i) if deemed necessary by the Company, prepare and
file from time to time with the SEC a post-effective amendment to the
Registration Statement or a supplement to the related Prospectus or a supplement
or amendment to any document incorporated therein by reference or file any other
required document so that such Registration Statement will not contain an untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading, and so that, as
thereafter delivered to purchasers of the Registrable Securities being sold
thereunder, such Prospectus will not contain an untrue statement of a material
fact or omit to state a material fact required to be stated therein or necessary
to make the statements therein, in light of the circumstances under which they
were made, not misleading, (ii) provide the Investor copies of any documents
filed pursuant to Section 7.2(b)(i), and (iii) inform each Investor that the
Company has complied with its obligations in Section 7.2(b)(i) (or that, if the
Company has filed a post-effective amendment to the Registration Statement which
has not yet been declared effective, the Company will notify the Investor to
that effect, will use its reasonable best efforts to secure the effectiveness of
such post-effective amendment as promptly as possible and will promptly notify
the Investor pursuant to Section 7.2(b)(i) hereof when the amendment has become
effective).
(c) Subject to paragraph (d) below, in the event (i)
of any request 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 a Registration Statement or related Prospectus or for
additional information; (ii) of 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) of the receipt by the Company 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; or (iv) of any event or
circumstance which, upon the advice of its counsel, necessitates the making of
any changes in the Registration Statement or Prospectus, or any document
incorporated or deemed to be incorporated therein by reference, so that, in the
case of the Registration Statement, it will not contain any untrue statement
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16
of a material fact or any omission to state a material fact required to be
stated therein or necessary to make the statements therein not misleading, and
that in the case of the Prospectus, it will not contain any untrue statement of
a material fact or any omission to state a material fact required to be stated
therein or necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading, then the Company shall
promptly deliver a certificate in writing to the Investor (the "Suspension
Notice") to the effect of the foregoing and, upon receipt of such Suspension
Notice, the Investor will refrain from selling any Registrable Securities
pursuant to the Registration Statement (a "Suspension") until the Investor's
receipt of copies of a supplemented or amended Prospectus prepared and filed by
the Company, or until it is advised in writing by the Company that the current
Prospectus may be used, and has received copies of any additional or
supplemental filings that are incorporated or deemed incorporated by reference
in any such Prospectus. In the event of any Suspension, the Company will use its
reasonable best efforts to cause the use of the Prospectus so suspended to be
resumed as soon as reasonably possible within 20 business days after the
delivery of a Suspension Notice to the Investor. In addition to and without
limiting any other remedies (including, without limitation, at law or at equity)
available to the Investor, the Investor shall be entitled to specific
performance in the event that the Company fails to comply with the provisions of
this Section 7.2(c).
(d) Notwithstanding the other paragraphs of this
Section 7.2, the Investor shall not be prohibited from selling Registrable
Securities under the Registration Statement as a result of Suspensions on more
than two occasions of not more than 30 days each in any twelve month period;
provided, however, to the extent any Suspension exceeds thirty (30) days in
duration (the "Excess Period") and during any Suspension after the second
Suspension in any 12-month period (the "Excess Suspension"), the Company shall
pay in cash as liquidated damages and not as a penalty to each Investor an
amount equal to one and one half percent (1.5%) of such Investor's pro rata
share of the purchase price paid by all Investors for shares purchased pursuant
to the Agreements and then outstanding and owned by such Investor, for each
thirty (30) day period of any Excess Period or Excess Suspension, which shall be
pro rated for such period less than thirty (30) days, until the Suspension ends.
(e) Subject to Section 7.2(d), provided that a
Suspension is not then in effect, the Investor may sell Registrable Securities
under the Registration Statement in the manner set forth under the caption "Plan
of Distribution" in the Prospectus, provided that it arranges for delivery of a
current Prospectus to the transferee of such Registrable Securities. Upon
receipt of a request therefor, the Company has agreed to provide an adequate
number of current Prospectuses to the Investor and to supply copies to any other
parties requiring such Prospectuses.
(f) In the event of a sale of Registrable Securities
by the Investor pursuant to the Registration Statement, the Investor must also
deliver to the Company's transfer agent, with a copy to the Company, a
Certificate of Subsequent Sale substantially in the form attached hereto as
Exhibit B, so that the Registrable Securities may be properly transferred.
7.3 Indemnification. For the purpose of this Section 7.3:
(i) the term "Selling Shareholder" shall include the
Investor and any affiliate of such Investor;
(ii) the term "Registration Statement" shall include the
Prospectus in the form first filed with the SEC pursuant to Rule 424(b) of the
Securities Act or filed as part of the Registration Statement at the time of
effectiveness if no Rule 424(b) filing is required, any exhibit, supplement or
amendment included in or relating to the Registration Statement referred to in
Section 7.1; and
(iii) the term "untrue statement" shall include any untrue
statement or alleged untrue statement of a material fact in the Registration
Statement, or any omission or alleged omission to state in the Registration
Statement a material fact required to be stated therein or necessary to make the
statements therein not misleading.
(a) The Company agrees to indemnify and hold
harmless each Selling Shareholder and its officers, directors, members and their
respective successors and assigns (collectively, the "Selling Shareholder
Indemnified Parties") from and against any third party losses, claims, damages
or liabilities to which such Selling Shareholder Indemnified Parties may become
subject (under the Securities Act or otherwise) insofar as such losses, claims,
damages or liabilities (or actions or proceedings in respect thereof) arise out
of, or are based upon (i) any breach of the representations or warranties of the
Company contained herein, or failure to comply with
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17
the covenants and agreements of the Company contained herein, (ii) any untrue
statement of a material fact contained in the Registration Statement as amended
at the time of effectiveness or any omission of a material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances in which they were made, not misleading, or (iii) any failure by
the Company to fulfill any undertaking included in the Registration Statement as
amended at the time of effectiveness, and the Company will reimburse such
Selling Shareholder Indemnified Parties for any reasonable legal or other
expenses reasonably incurred in investigating, defending or preparing to defend
any such action, proceeding or claim, provided, however, that the Company shall
not be liable in any such case to the extent that such loss, claim, damage or
liability arises out of, or is based upon, an untrue statement made in such
Registration Statement or any omission of a material fact required to be stated
therein or necessary to make the statements therein not misleading in reliance
upon and in conformity with written information furnished to the Company by or
on behalf of such Selling Shareholder Indemnified Parties specifically for use
in preparation of the Registration Statement, a breach of any representations or
warranties made by such Selling Shareholder herein, or the failure of such
Selling Shareholder Indemnified Parties to comply with its covenants and
agreements contained in Sections 5.1, 5.2, 5.3 and 7.2 hereof or any statement
or omission in any Prospectus that is corrected in any subsequent Prospectus
that was delivered to the Selling Shareholder Indemnified Party prior to the
pertinent sale or sales by the Selling Shareholder Indemnified Party. The
Company shall reimburse each Selling Shareholder Indemnified Party for the
amounts provided for herein on demand as such expenses are incurred.
(b) The Investor agrees to indemnify and hold
harmless the Company (and each person, if any, who controls the Company within
the meaning of Section 15 of the Securities Act, each officer of the Company who
signs the Registration Statement and each director of the Company) from and
against any third party losses, claims, damages or liabilities to which the
Company (or any such officer, director or controlling person) may become subject
(under the Securities Act or otherwise), insofar as such losses, claims, damages
or liabilities (or actions or proceedings in respect thereof) arise out of, or
are based upon, (i) any breach of the representations and warranties of the
Investor contained herein, (ii) any failure to comply with the covenants and
agreements of the Investor contained herein, or (iii) any untrue statement of a
material fact contained in the Registration Statement or any omission of a
material fact required to be stated therein or necessary to make the statements
therein not misleading if such untrue statement or omission was made in reliance
upon and in conformity with written information furnished by or on behalf of the
Investor specifically for use in preparation of the Registration Statement, and
the Investor will reimburse the Company (or such officer, director or
controlling person), as the case maybe, for any reasonable legal or other
expenses reasonably incurred in investigating, defending or preparing to defend
any such action, proceeding or claim; provided that the Investor's obligation to
indemnify the Company or any other persons hereunder shall be limited to the
amount by which the net amount received by the Investor from the sale of the
Registrable Securities to which such loss relates exceeds the amount of any
damages which such Investor has otherwise been required to pay by reason of such
untrue statement or omission, provided further that, with respect to any
indemnification obligation arising under clause (iii) of this paragraph (b),
such obligation shall be limited to the net amount received by the Investor from
the sale of the Registrable Securities included in the Registration Statement in
question.
(c) Promptly after receipt by any indemnified person
of a notice of a claim or the beginning of any action in respect of which
indemnity is to be sought against an indemnifying person pursuant to this
Section 7.3, such indemnified person shall notify the indemnifying person in
writing of such claim or of the commencement of such action, but the omission to
so notify the indemnifying person will not relieve it from any liability which
it may have to any indemnified person under this Section 7.3 (except to the
extent that such omission materially and adversely affects the indemnifying
person's ability to defend such action) or from any liability otherwise than
under this Section 7.3. Subject to the provisions hereinafter stated, in case
any such action shall be brought against an indemnified person, the indemnifying
person shall be entitled to participate therein, and, to the extent that it
shall elect by written notice delivered to the indemnified person promptly after
receiving the aforesaid notice from such indemnified person, shall be entitled
to assume the defense thereof, with counsel reasonably satisfactory to such
indemnified person. After notice from the indemnifying person to such
indemnified person of its election to assume the defense thereof, such
indemnifying person shall not be liable to such indemnified person for any legal
expenses subsequently incurred by such indemnified person in connection with the
defense thereof, provided, however, that if there exists or shall exist a
conflict of interest that would make it inappropriate, in the opinion of counsel
to the indemnified person, for the same counsel to represent both the
indemnified person and such indemnifying person or any affiliate or associate
thereof, the indemnified person shall be entitled to retain its own counsel at
the expense of such indemnifying person; provided, however, that no indemnifying
person shall be responsible for the fees and expenses of more than one separate
counsel (together with appropriate local counsel) for
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all indemnified parties. In no event shall any indemnifying person be liable in
respect of any amounts paid in settlement of any action unless the indemnifying
person shall have approved the terms of such settlement; provided that such
consent shall not be unreasonably withheld. No indemnifying person shall,
without the prior written consent of the indemnified person, effect any
settlement of any pending or threatened proceeding in respect of which any
indemnified person is or could have been a party and indemnification could have
been sought hereunder by such indemnified person, unless such settlement
includes an unconditional release of such indemnified person from all liability
on claims that are the subject matter of such proceeding.
(d) If the indemnification provided for in this
Section 7.3 is unavailable to or insufficient to hold harmless an indemnified
person under subsection (a) or (b) above in respect of any losses, claims,
damages or liabilities (or actions or proceedings in respect thereof) referred
to therein, then each indemnifying person shall contribute to the amount paid or
payable by such indemnified person as a result of such losses, claims, damages
or liabilities (or actions in respect thereof) in such proportion as is
appropriate to reflect the relative fault of the Company on the one hand and the
Investor on the other in connection with the statements or omissions or other
matters which resulted in such losses, claims, damages or liabilities (or
actions in respect thereof), as well as any other relevant equitable
considerations. The relative fault shall be determined by reference to, among
other things, in the case of an untrue statement, whether the untrue statement
relates to information supplied by the Company on the one hand or an Investor on
the other and the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such untrue statement. The Company and the
Investor agree that it would not be just and equitable if contribution pursuant
to this subsection (d) were determined by pro rata allocation (even if the
Investors were treated as one entity for such purpose) or by any other method of
allocation which does not take into account the equitable considerations
referred to above in this subsection (d). The amount paid or payable by an
indemnified person as a result of the losses, claims, damages or liabilities (or
actions in respect thereof) referred to above in this subsection (d) shall be
deemed to include any legal or other expenses reasonably incurred by such
indemnified person in connection with investigating or defending any such action
or claim. Notwithstanding the provisions of this subsection (d), the Investor
shall not be required to contribute any amount in excess of the amount by which
the net amount received by the Investor from the sale of the Registrable
Securities to which such loss relates exceeds the amount of any damages which
such Investor has otherwise been required to pay by reason of such untrue
statement. No person guilty of fraudulent misrepresentation (within the meaning
of Section 11(f) of the Securities Act) shall be entitled to contribution from
any person who was not guilty of such fraudulent misrepresentation. The
Investor's obligations in this subsection to contribute shall be in proportion
to its sale of Registrable Securities to which such loss relates and shall not
be joint with any other Selling Shareholders.
(e) The parties to this Agreement hereby acknowledge
that they are sophisticated business persons who were represented by counsel
during the negotiations regarding the provisions hereof including, without
limitation, the provisions of this Section 7.3, and are fully informed regarding
said provisions. They further acknowledge that the provisions of this Section
7.3 fairly allocate the risks in light of the ability of the parties to
investigate the Company and its business in order to assure that adequate
disclosure is made in the Registration Statement as required by the Securities
Act. The parties are advised that federal or state public policy as interpreted
by the courts in certain jurisdictions may be contrary to certain of the
provisions of this Section 7.3, and the parties hereto hereby expressly waive
and relinquish any right or ability to assert such public policy as a defense to
a claim under this Section 7.3 and further agree not to attempt to assert any
such defense.
7.4 Termination of Conditions and Obligations. The
conditions precedent imposed by Section 5 or this Section 7 upon the
transferability of the Securities or the Registrable Securities, as applicable,
shall cease and terminate as to any particular Securities or the Registrable
Securities, as applicable, when such Securities or the Registrable Securities,
as applicable, shall have been effectively registered under the Securities Act
and sold or otherwise disposed of in accordance with the intended method of
disposition set forth in the Registration Statement covering the Registrable
Securities or at such time as an opinion of counsel reasonably satisfactory to
the Company shall have been rendered to the effect that such conditions are not
necessary in order to comply with the Securities Act.
7.5 Information Available. So long as the Registration
Statement is effective covering the resale of Registrable Securities owned by
the Investor, the Company will furnish to the Investor:
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(a) as soon as practicable after it is available,
one copy of (i) its Annual Report to Shareholders (which Annual Report shall
contain financial statements audited in accordance with generally accepted
accounting principles by a national firm of certified public accountants), (ii)
if not included in substance in the Annual Report to Shareholders, its Annual
Report on Form 10-K and (iii) its Quarterly Reports on Form 10-Q (the foregoing,
in each case, excluding exhibits);
(b) upon the request of the Investor, all exhibits
excluded by the parenthetical to subparagraph (a) of this Section 7.5 as filed
with the SEC and all other information that is made available to shareholders;
and
(c) upon the reasonable request of the Investor, an
adequate number of copies of the Prospectuses to supply to any other party
requiring such Prospectuses.
8. Notices. All notices, requests, consents and other
communications hereunder shall be in writing, shall be mailed (A) if within the
United States by first-class registered or certified airmail, or nationally
recognized overnight express courier, postage prepaid, or by facsimile, or (B)
if delivered from outside the United States, by International Federal Express or
facsimile, and shall be deemed given (i) if delivered by first-class registered
or certified mail, three business days after so mailed, (ii) if delivered by
nationally recognized overnight carrier, one business day after so mailed, (iii)
if delivered by International Federal Express, two business days after so
mailed, (iv) if delivered by facsimile, upon electronic confirmation of receipt
and shall be delivered as addressed as follows:
(a) if to the Company, to:
Orthovita, Inc.
▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: Chief Financial Officer
Tel: (▇▇▇) ▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
(b) with a copy to:
▇▇▇▇▇▇, ▇▇▇▇▇ & ▇▇▇▇▇▇▇ LLP
▇▇▇▇ ▇▇▇▇▇▇ ▇▇.
▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Esquire
Tel: (▇▇▇) ▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
(c) if to the Investor, at its address on the signature page
hereto, or at such other address or addresses as may
have been furnished to the Company in writing.
9. Changes. This Agreement may not be modified or amended except
pursuant to an instrument in writing signed by the Company and the majority in
interest of the Investors.
10. Headings. The headings of the various sections of this Agreement
have been inserted for convenience of reference only and shall not be deemed to
be part of this Agreement.
11. Severability. In case any provision contained in this Agreement
should be invalid, illegal or unenforceable in any respect, the validity,
legality and enforceability of the remaining provisions contained herein shall
not in any way be affected or impaired thereby.
12. Governing Law; Jurisdiction and Venue. This Agreement shall be
governed by, and construed in accordance with, the internal laws of the State of
New York, without giving effect to the principles of conflicts of law. Each
party hereby irrevocably submits to the exclusive jurisdiction of the state and
federal courts sitting in the City of Philadelphia, Pennsylvania, for the
adjudication of any dispute hereunder or in connection herewith or with any
transactions contemplated hereby or discussed herein, and hereby irrevocably
waives, and agrees not to assert in
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any proceeding any claim that it is not personally subject to the jurisdiction
of any such court, that such proceeding is improper. Nothing contained herein
shall be deemed to limit in any way any right to serve process in any manner
permitted by law.
13. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall constitute an original, but all of which, when
taken together, shall constitute but one instrument, and shall become effective
when one or more counterparts have been signed by each party hereto and
delivered to the other parties.
14. Expenses In addition to the Company's obligation to reimburse
the Investors for certain legal fees as set forth in Section 7.1(g) above, the
Company shall be responsible for the payment of the Investors' reasonable legal
fees and other out-of-pocket expenses that they incur with respect to the
negotiation, execution and delivery of the Agreements and the transactions
contemplated thereby, up to a maximum of $25,000 for all Investors in the
aggregate (or pro rata in relation to the purchase price paid for the securities
purchased by each Investor if, in the aggregate, such expenses exceed $25,000).
15. Successors and Assigns. This Agreement shall inure to the
benefit of and be binding upon the successors and permitted assigns of each of
the parties. Each Investor's rights under Section 7 hereunder to have the
Company register for resale Registrable Securities in accordance with the terms
of this Agreement, shall be automatically assignable by each Investor if: (i)
the Investor agrees in writing with the transferee or assignee to assign such
rights, and a copy of such agreement is furnished to the Company within a
reasonable time after such assignment; (ii) the Company is, within a reasonable
time after such transfer or assignment, furnished with written notice of (A) the
name and address of such transferee or assignee and (B) the securities with
respect to which such registration rights are being transferred or assigned;
(iii) following such transfer or assignment the further disposition of such
securities by the transferee or assignees is restricted under the Securities Act
and applicable state securities laws; (iv) at or before the time the Company
receives the written notice contemplated by clause (ii) of this Section, the
transferee or assignee agrees in writing with the Company to be bound by all of
the provisions of this Agreement; and (v) such transfer shall have been made in
accordance with the applicable requirements of this Agreement.
16. Confidential Information. The Investor represents to the Company
that, at all times during the Company's offering of the Securities, the Investor
has maintained in confidence all non-public information, if any, regarding the
Company received by the Investor from the Company or its agents, and covenants
that it will continue to maintain in confidence such information until such
information (a) becomes generally publicly available other than through a
violation of this provision by the Investor or its agents or (b) is required to
be disclosed in legal proceedings (such as by deposition, interrogatory, request
for documents, subpoena, civil investigation demand, filing with any
governmental authority or similar process), provided, however, that before
making any use or disclosure in reliance on this subparagraph (b) the Investor
shall give the Company at least 15 days prior written notice (or such shorter
period as required by law) specifying the circumstances giving rise thereto and
will furnish only that portion of the non-public information which is legally
required and will exercise its reasonable best efforts to obtain reliable
assurance that confidential treatment will be accorded any non-public
information so furnished.
Notwithstanding anything in this Agreement to the contrary, each prospective
Investor (and any employee, representative or other agent of such or any
prospective Investor) may disclose to any and all persons, without limitation of
any kind, the United States federal income tax treatment and tax structure of
the transactions contemplated by this Agreement and all materials of any kind
(including opinions or other tax analyses) that are provided to it relating to
such United States federal income tax treatment and tax structure. However, any
such information relating to the United States federal income tax treatment or
tax structure is required to be kept confidential to the extent necessary to
comply with any applicable federal or state securities laws.
17. Securities Laws Disclosure; Publicity. The Company shall (i) on
or promptly after the First Closing Date, issue a press release disclosing the
transactions contemplated hereby and acceptable to Investors purchasing a
majority of the Shares at the First Closing, and (ii) after the First Closing
Date, file with the Commission a Report on Form 8-K disclosing the transactions
contemplated hereby. Except as provided in the preceding sentence, neither the
Company nor the Investors shall make any press release or other publicity about
the terms of this Agreement or the transactions contemplated hereby without the
prior approval of the other unless otherwise required by law.
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18. Heartland Value Plus Fund. The Company understands and agrees
that Heartland Group, Inc. is entering into this Agreement solely on behalf of
Heartland Value Plus Fund and that any claims that the Company may have against
Heartland Group, Inc. under the Securities Purchase Agreement or otherwise in
connection with the transactions contemplated hereby shall only be made against
the assets of the Heartland Value Plus Fund.
19. Entire Agreement. This Agreement constitutes the entire
understanding and agreement of the parties with respect to the subject matter
hereof and supersedes all prior agreements and understandings.
20. Remedies. In addition to being entitled to exercise all rights
provided herein or granted by law, including recovery of damages, each of the
Investor and the Company will be entitled to specific performance hereunder. The
parties agree that monetary damages may not be adequate compensation for any
loss incurred by reason of any breach of obligations described in the foregoing
sentence and hereby agrees to waive in any action for specific performance of
any such obligation the defense that a remedy at law would be adequate. The
remedies provided herein are cumulative and not exclusive of any remedies
provided by law.
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Exhibit B - to the Securities Purchase Agreement
CERTIFICATE OF SUBSEQUENT SALE
StockTrans, Inc.
▇ ▇. ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
RE: Sale of Shares of Common Stock of Orthovita, Inc. (the
"Company") pursuant to the Company's Prospectus dated
_______________, 200__ (the "Prospectus")
Dear Sir/Madam:
The undersigned hereby certifies, in connection with the sale of shares
of Common Stock of the Company included in the table of Selling Security Holders
in the Prospectus, that the undersigned has sold the shares pursuant to the
Prospectus and in a manner described under the caption "Plan of Distribution" in
the Prospectus and that the undersigned has delivered the Prospectus provided by
the Company for such purposes in accordance with the prospectus delivery
requirements of the Securities Act of 1933, as amended.
Selling Security Holder (the beneficial owner): ________________________________
Record Holder (e.g., if held in name of nominee): ______________________________
Restricted Stock Certificate No.(s): ___________________________________________
Number of Shares Sold: _________________________________________________________
Date of Sale: __________________________________________________________________
In the event that you receive a stock certificate(s) representing more
shares of Common Stock than have been sold by the undersigned, then you should
return to the undersigned a newly issued certificate for such excess shares in
the name of the Record Holder and BEARING A RESTRICTIVE LEGEND. Further, you
should place a stop transfer on your records with regard to such certificate.
Very truly yours,
Dated: By:
-------------------- ------------------------------------
Print Name:
---------------------------
Title:
--------------------------------
cc: Orthovita, Inc.
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▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
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Exhibit C - to the Securities Purchase Agreement
PLAN OF DISTRIBUTION
We are registering the shares of common stock on behalf of the selling
security holders. Sales of shares may be made by selling security holders,
including their respective donees, transferees, pledgees or other
successors-in-interest directly to purchasers or to or through underwriters,
broker-dealers or through agents. Sales may be made from time to time on the
Nasdaq National Market, any other exchange upon which our shares may trade in
the future, in the over-the-counter market or otherwise, at market prices
prevailing at the time of sale, at prices related to market prices, or at
negotiated or fixed prices. The shares may be sold by one or more of, or a
combination of, the following:
. a block trade in which the broker-dealer so engaged will attempt
to sell the shares as agent but may position and resell a
portion of the block as principal to facilitate the transaction;
. purchases by a broker-dealer as principal and resale by such
broker-dealer, including resales for its account, pursuant to
this prospectus;
. ordinary brokerage transactions and transactions in which the
broker solicits purchases;
. through options, swaps or derivatives;
. in privately negotiated transactions;
. in making short sales or in transactions to cover short sales;
and
. put or call option transactions relating to the shares.
The selling security holders may effect these transactions by selling
shares directly to purchasers or to or through broker-dealers, which may act as
agents or principals. These broker-dealers may receive compensation in the form
of discounts, concessions or commissions from the selling security holders
and/or the purchasers of shares for whom such broker-dealers may act as agents
or to whom they sell as principals, or both (which compensation as to a
particular broker-dealer might be in excess of customary commissions). The
selling security holders may also sell shares of common stock short and deliver
shares covered by this prospectus to close out short positions, provided that
the short sale is made after the registration statement is declared effective
and a copy of this prospectus is delivered in connection with the short sale.
The selling security holders have advised us that they have not entered into any
agreements, understandings or arrangements with any underwriters or
broker-dealers regarding the sale of their securities.
The selling security holders may enter into hedging transactions with
broker-dealers or other financial institutions. In connection with those
transactions, the broker-dealers or other financial institutions may engage in
short sales of the shares or of securities convertible into or exchangeable for
the shares in the course of hedging positions they assume with the selling
security holders. The selling security holders may also enter into options or
other transactions with broker-dealers or other financial institutions which
require the delivery of shares offered by this prospectus to those
broker-dealers or other financial institutions. The broker-dealer or other
financial institution may then resell the shares pursuant to this prospectus (as
amended or supplemented, if required by applicable law, to reflect those
transactions).
The selling security holders and any broker-dealers that act in
connection with the sale of shares may be deemed to be "underwriters" within the
meaning of Section 2(11) of the Securities Act of 1933, and any commissions
received by broker-dealers or any profit on the resale of the shares sold by
them while acting as principals may be deemed to be underwriting discounts or
commissions under the Securities Act. The selling security holders may agree to
indemnify any agent, dealer or broker-dealer that participates in transactions
involving sales of the shares against liabilities, including liabilities arising
under the Securities Act. Orthovita has agreed to indemnify each of the selling
security holders and each selling security holder has agreed, severally and not
jointly, to indemnify Orthovita against some liabilities in connection with the
offering of the shares, including liabilities arising under the Securities Act.
The selling security holders will be subject to the prospectus delivery
requirements of the Securities Act. We have informed the selling security
holders that the anti-manipulative provisions of Regulation M promulgated under
the Securities Exchange Act of 1934 may apply to their sales in the market.
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Selling security holders also may resell all or a portion of the shares
in open market transactions in reliance upon Rule 144 under the Securities Act,
provided they meet the criteria and conform to the requirements of Rule 144.
Upon being notified by a selling security holder that a material
arrangement has been entered into with a broker-dealer for the sale of shares
through a block trade, special offering, exchange distribution or secondary
distribution or a purchase by a broker or dealer, we will file a supplement to
this prospectus, if required pursuant to Rule 424(b) under the Securities Act,
disclosing:
. the name of each such selling security holder and of the
participating broker-dealer(s);
. the number of shares involved;
. the initial price at which the shares were sold;
. the commissions paid or discounts or concessions allowed
to the broker-dealer(s), where applicable;
. that such broker-dealer(s) did not conduct any
investigation to verify the information set out or
incorporated by reference in this prospectus; and
. other facts material to the transactions.
In addition, we will file a supplement to this prospectus when a selling
security holder notifies us that a donee or pledgee intends to sell more than
500 shares of common stock.
Expenses Associated with Registration. We are paying all
expenses and fees in connection with the registration of the shares. The selling
security holders will bear all brokerage or underwriting discounts or
commissions paid to broker-dealers in connection with the sale of the shares.
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Exhibit D to Securities Purchase Agreement
Orthovita, Inc.
__________, 200_
Re: Orthovita, Inc.; Registration Statement on Form S-3
Dear Selling Security Holder:
Enclosed please find five (5) copies of a prospectus dated
_______________, _____ (the "Prospectus") for your use in reselling your shares
of common stock, $.01 par value per share, including those received upon
exercise of warrants to purchase common stock (the "Shares"), of Orthovita, Inc.
(the "Company"), under the Company's Registration Statement on Form S-3
(Registration No. 333- ) (the "Registration Statement"), which has been
declared effective by the Securities and Exchange Commission. As a selling
security Holder under the Registration Statement, you have an obligation to
deliver a copy of the Prospectus to each purchaser of your Shares, either
directly or through the broker-dealer who executes the sale of your Shares.
The Company is obligated to notify you in the event that it suspends
trading under the Registration Statement in accordance with the terms of the
Securities Purchase Agreement between the Company and you. During the period
that the Registration Statement remains effective and trading thereunder has not
been suspended, you will be permitted to sell your Shares which are included in
the Prospectus under the Registration Statement. Upon a sale of any Shares under
the Registration Statement, you or your broker will be required to deliver to
the Transfer Agent, EquiServe, (1) your restricted stock certificate(s)
representing the Shares, (2) instructions for transfer of the Shares sold, and
(3) a representation letter from your broker, or from you if you are selling in
a privately negotiated transaction, or from such other appropriate party, in
substantially the form of Exhibit B to the Securities Purchase Agreement
attached hereto (the "Representation Letter"). The Representation Letter
confirms that the Shares have been sold pursuant to the Registration Statement
and in a manner described under the caption "Plan of Distribution" in the
Prospectus and that such sale was made in accordance with all applicable
securities laws, including the prospectus delivery requirements.
Please note that you are under no obligation to sell your Shares during
the registration period. However, if you do decide to sell, you must comply with
the requirements described in this letter or otherwise applicable to such sale.
Your failure to do so may result in liability under the Securities Act of 1933,
as amended, and the Securities Exchange Act of 1934, as amended. Please remember
that all sales of your Shares must be carried out in the manner set forth under
the caption "Plan of Distribution" in the Prospectus if you sell under the
Registration Statement. The Company may require an opinion of counsel reasonably
satisfactory to the Company if you choose another method of sale. Please also
note that in order to sell the shares underlying your warrant, you must first
exercise the warrant and receive the underlying common stock. You should consult
with your own legal advisor(s) on an ongoing basis to ensure your compliance
with the relevant securities laws and regulations.
In order to maintain the accuracy of the Prospectus, you must notify the
undersigned upon the sale, gift, or other transfer of any Shares by you,
including the number of Shares being transferred, and in the event of any other
change in the information regarding you which is contained in the Prospectus.
For example, you must notify the undersigned if you enter into any arrangement
with a broker-dealer for the sale of Shares through a block trade, special
offering, exchange distribution or secondary distribution or a purchase by a
broker-dealer. Depending on the circumstances, such transactions may require the
filing of a supplement to the prospectus in order to update the information set
forth under the caption "Plan of Distribution" in the Prospectus.
Should you need any additional copies of the Prospectus, or if you have
any questions concerning the foregoing, please write to me at Orthovita, Inc.,
▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇. Thank you.
Sincerely,
Chief Executive Officer
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