EXECUTION COPY
SECURITIES PURCHASE AGREEMENT
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This SECURITIES PURCHASE AGREEMENT ("Agreement") is entered into as of
December 29, 1999, by and among ON Technology Corporation, a Delaware
corporation (the "Company"), with headquarters located at Waltham ▇▇▇▇▇, ▇▇▇
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"Purchaser" and collectively, the "Purchasers") set forth on the execution pages
hereof, with regard to the following:
RECITALS
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A. The Company and Purchasers are executing and delivering this
Agreement in reliance upon the exemption from securities registration afforded
by the provisions of Regulation D ("Regulation D"), as promulgated by the United
States Securities and Exchange Commission (the "SEC") under the Securities Act
of 1933, as amended (the "Securities Act").
B. Each of the Purchasers desires to purchase, upon the terms and
conditions stated in this Agreement, (i) shares of the Company's common stock,
$0.01 par value (the "Common Stock"), (ii) a Warrant in the form of Exhibit A
hereto (the "Series I Warrant") entitling the holder thereof to purchase from
the Company shares of Common Stock, and (iii) a Warrant in the form of Exhibit B
hereto entitling the holder thereof to purchase additional shares of Common
Stock from the Company (the "Series II Warrant", and together with the Series I
Warrant, the "Warrants"). The shares of Common Stock being purchased hereunder
are referred to herein as the "Shares" and the shares of Common Stock issuable
upon exercise of the Warrants are referred to herein as the "Warrant Shares".
The Shares, the Warrants and the Warrant Shares are collectively referred to
herein as the "Securities."
C. Contemporaneous with the execution and delivery of this Agreement,
the parties hereto are executing and delivering a Registration Rights Agreement
in the form attached hereto as Exhibit C (the "Registration Rights Agreement"),
pursuant to which the Company has agreed to provide certain registration rights
under the Securities Act, the rules and regulations promulgated thereunder and
applicable state securities laws.
AGREEMENTS
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NOW, THEREFORE, in consideration of their respective promises contained
herein and other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the Company and Purchasers hereby agree as
follows:
ARTICLE I
PURCHASE AND SALE OF SECURITIES
1.1 Purchase of Shares and Warrant. On the Closing Date (as defined
below), subject to the terms and the satisfaction (or waiver) of the conditions
set forth in Articles VI and VII of this Agreement, the Company shall issue and
sell to each Purchaser, and each Purchaser shall purchase from the Company (i)
the number of Shares as set forth below such Purchaser's name on the signature
pages hereof at the Market Price (as defined below) on the Closing Date (the
"Per Share Purchase Price"), (ii) a Series I Warrant entitling the holder
thereof to purchase the number of Warrant Shares as set forth in such Warrant at
an exercise price equal to $15.15 (130% of the Per Share Purchase Price), and
(iii) a Series II Warrant entitling the holder thereof to purchase the number of
Warrant Shares as set forth in such Warrant, for an aggregate consideration of
Twelve Million Dollars ($12,000,000) (the "Total Purchase Price"). The purchase
price to be paid by each Purchaser (the "Purchase Price") for the Shares and
Warrants being purchased by such Purchaser at the Closing is equal to the Per
Share Purchase Price times the number of Shares set forth on the signature page
executed by such Purchaser.
As used in this Agreement, the "Market Price" for any given date means
the average closing bid price of the Common Stock during the fifteen (15)
consecutive trading days immediately preceding, but not including, the day prior
to such date.
1.2 Form of Payment. At the Closing, each Purchaser shall pay the
applicable Purchase Price for the Shares and Warrants being purchased by such
Purchaser at the Closing by wire transfer to the Company, in accordance with the
Company's written wiring instructions, against delivery of duly executed stock
certificates and Warrants from the Company, and the Company shall deliver to
such Purchaser such executed stock certificates and Warrants against delivery of
such Purchase Price from such Purchaser.
1.3 Closing Date. Subject to the satisfaction (or waiver) of the
conditions set forth in Articles VI and VII of this Agreement, the date and time
of the issuance, sale and purchase of the Shares and Warrants (the "Closing")
pursuant to this Agreement shall be December 29, 1999 (the"Closing Date"). The
Closing shall occur at 10:00 a.m. Chicago time, at the offices of Altheimer &
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ARTICLE II
PURCHASERS' REPRESENTATIONS AND WARRANTIES
Each Purchaser represents and warrants, solely with respect to itself
and its purchase hereunder and not with respect to any other Purchaser or the
purchase hereunder by any other Purchaser (and no Purchaser shall be deemed to
make or have any liability for any representation or warranty made by any other
Purchaser), to the Company as set forth in this Article II. No Purchaser makes
any other representations or warranties, express or implied, to the Company in
connection with the transactions contemplated hereby and any and all prior
representations and warranties, if any,
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which may have been made by a Purchaser to the Company in connection with the
transactions contemplated hereby shall be deemed to have been merged in this
Agreement and any such prior representations and warranties, if any, shall not
survive the execution and delivery of this Agreement.
2.1 Investment Purpose. Purchaser is purchasing the Shares and
Warrants for Purchaser's own account as a principal for investment only and not
with a present view toward or in connection with the public re-sale or
distribution thereof, except pursuant to sales that are exempt from the
registration requirements of the Securities Act and/or sales registered under
the Securities Act. Purchaser will not resell any of the Securities except
pursuant to sales that are exempt from the registration requirements of the
Securities Act and/or sales registered under the Securities Act. Purchaser
understands that Purchaser must bear the economic risk of this investment
indefinitely, unless the applicable Securities are registered pursuant to the
Securities Act and any applicable state securities laws or an exemption from
such registration is available, and that the Company has no present intention of
registering any such Securities other than as contemplated by the Registration
Rights Agreement. By making the representations in this Section 2.1, Purchaser
does not agree to hold any Securities for any minimum or other specific term and
reserves the right to dispose of any or all of the Securities at any time in
accordance with or pursuant to a registration statement or an applicable
exemption from registration under the Securities Act.
2.2 Accredited Investor Status. Purchaser is an "accredited investor"
as that term is defined in Rule 501(a) of Regulation D.
2.3 Reliance on Exemptions. Purchaser understands that the Shares and
Warrants are being offered and sold to Purchaser in reliance upon specific
exemptions from the registration requirements of the United States federal and
state securities laws and that the Company is relying upon the truth and
accuracy of the representations and warranties of Purchaser set forth herein in
order to determine the availability of such exemptions and the eligibility of
Purchaser to acquire the Securities.
2.4 Information. Purchaser and its counsel have been furnished all
materials relating to the business, finances and operations of the Company and
materials relating to the offer and sale of the Shares and Warrants which have
been specifically requested by Purchaser. Purchaser has been afforded the
opportunity to ask questions of the Company, and its officers, directors,
employees and agents, and has received what Purchaser believes to be complete
and satisfactory answers to any such inquiries. Neither such inquiries nor any
other due diligence investigation conducted by Purchaser or any of its
representations and warranties shall modify, amend or affect Purchaser's right
to rely on the Company's representations and warranties contained in Article
III. Purchaser understands that Purchaser's investment in the Securities
involves a high degree of risk.
2.5 Governmental Review. Purchaser understands that no United States
federal or state agency or any other government or governmental agency has
passed upon or made any recommendation or endorsement of the Securities or an
investment therein.
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2.6 Transfer or Resale. Purchaser understands that (i) except as
provided in the Registration Rights Agreement, the Securities have not been and
are not being registered under the Securities Act or any state securities laws,
and may not be transferred unless subsequently registered thereunder or an
exemption from such registration is available (which exemption the Company
expressly agrees may be established as contemplated in clauses (b) and (c) of
Section 5.1 hereof); (ii) any sale of such Securities made in reliance on Rule
144 under the Securities Act (or a successor rule) ("Rule 144") may be made only
in accordance with the terms of said Rule and further, if said Rule is not
applicable, any resale of such Securities without registration under the
Securities Act may require compliance with some other exemption under the
Securities Act or the rules and regulations of the SEC thereunder; and (iii)
neither the Company nor any other person is under any obligation to register
such Securities under the Securities Act or any state securities laws or to
comply with the terms and conditions of any exemption thereunder (in each case,
other than pursuant to this Agreement or the Registration Rights Agreement).
2.7 Legends. Purchaser understands that, subject to Article V hereof,
the certificates for the Warrants, and until such time as the Shares and the
Warrant Shares, as applicable, have been registered under the Securities Act as
contemplated by the Registration Rights Agreement or otherwise may be sold by
Purchaser pursuant to Rule 144, the certificates for the Shares and the Warrant
Shares will bear a restrictive legend (the "Legend") in the following form:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE
SECURITIES LAWS OF ANY STATE OF THE UNITED STATES. THE
SECURITIES REPRESENTED HEREBY MAY NOT BE OFFERED OR SOLD OR
OTHERWISE TRANSFERRED IN THE ABSENCE OF AN EFFECTIVE
REGISTRATION STATEMENT FOR THE SECURITIES UNDER APPLICABLE
SECURITIES LAWS OR UNLESS OFFERED, SOLD OR TRANSFERRED PURSUANT
TO AN AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF
THOSE LAWS.
2.8 Authorization; Enforcement. This Agreement and the Registration
Rights Agreement have been duly and validly authorized, executed and delivered
on behalf of Purchaser and are valid and binding agreements of Purchaser
enforceable against Purchaser in accordance with their respective terms.
2.9 Residency. Purchaser is a resident of the jurisdiction set forth
under Purchaser's name on the signature page hereof executed by Purchaser.
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ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to each Purchaser that:
3.1 Organization and Qualification. Each of the Company and its
subsidiaries is a corporation duly organized, validly existing and in good
standing under the laws of the jurisdiction in which it is incorporated, and has
the requisite corporate power and authority to own its properties and to carry
on its business as now being conducted. Each of the Company and its subsidiaries
is duly qualified as a foreign corporation to do business and is in good
standing in every jurisdiction where the failure to so qualify could reasonably
be expected to have a Material Adverse Effect. "Material Adverse Effect" means
any material adverse effect on (i) the business, operations, properties,
financial condition, operating results or prospects of the Company and its
subsidiaries, taken as a whole on a consolidated basis, (ii) the transactions
contemplated by this Agreement, the Warrants or the Registration Rights
Agreement (collectively, the "Transaction Documents"), (iii) the ability of the
Company to perform its obligations under the Transaction Documents or (iv) the
Purchaser's interest in the Securities.
3.2 Authorization; Enforcement. (a) The Company has the requisite
corporate power and authority (i) to enter into and perform its obligations
under each of the Transaction Documents, (ii) to issue and sell, and to perform
its obligations with respect to, the Shares and the Warrants in accordance with
the terms hereof and thereof, as applicable, and (iii) to issue the Warrant
Shares in accordance with the terms of the Warrants; (b) the execution, delivery
and performance of each of the Transaction Documents by the Company and the
consummation by it of the transactions contemplated hereby and thereby
(including without limitation the issuance of the Warrants and the reservation
for issuance and the issuance of the Shares and the Warrant Shares) have been
duly authorized by all necessary corporate action and no further consent or
authorization of the Company, its board of directors, or its stockholders or any
other person, body or agency is required with respect to any of the transactions
contemplated hereby or thereby (whether under rules of The Nasdaq National
Market ("Nasdaq"), the National Association of Securities Dealers or otherwise),
other than the Nasdaq Authorizations (as herein defined) and the declaration or
ordering of effectiveness by the SEC of the Registration Statement or Statements
as contemplated by the Registration Rights Agreement (collectively, the
"Consents"); (c)each of the Transaction Documents has been duly executed and
delivered by the Company; and (d) each of the Transaction Documents constitutes
a legal, valid and binding obligation of the Company enforceable against the
Company in accordance with its terms.
3.3 Capitalization. The capitalization of the Company as of the date
of this Agreement, including the authorized capital stock, the number of shares
issued and outstanding, the number of shares reserved for issuance pursuant to
the Company's stock option plans, the number of shares reserved for issuance
pursuant to securities (other than the Warrants) exercisable for, or convertible
into or exchangeable for any shares of Common Stock of the Company and the
number of shares to be initially reserved for issuance upon exercise of the
Warrants, is set forth on Schedule 3.3. All of
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such outstanding shares of capital stock have been, or upon issuance will be,
validly issued, fully paid and non-assessable. No shares of capital stock of the
Company (including the Shares and the Warrant Shares) are subject to preemptive
rights or any other similar rights of the stockholders of the Company or any
liens or encumbrances. Except as disclosed in Schedule 3.3, as of the date of
this Agreement, (i) there are no outstanding options, warrants, scrip, rights to
subscribe for, calls or commitments of any character whatsoever relating to, or
securities or rights convertible into or exercisable or exchangeable for, any
shares of capital stock of the Company or any of its subsidiaries, or contracts,
commitments, understandings or arrangements by which the Company or any of its
subsidiaries is or may become bound to issue additional shares of capital stock
of the Company or any of its subsidiaries, and (ii) there are no agreements or
arrangements under which the Company or any of its subsidiaries is obligated to
register the sale of any of its or their securities under the Securities Act
(except the Registration Rights Agreement). The Company has furnished to
Purchaser true and correct copies of the Company's Certificate of Incorporation
as currently in effect ("Certificate of Incorporation"), and the Company's
By-laws as currently in effect (the "By-laws"). The Company has set forth in the
Company's Quarterly Report on Form 10-Q for the period ended on September 30,
1999 (the "Latest Form 10-Q") or Schedule 3.3 all instruments and agreements
(other than the Certificate of Incorporation and By-laws) governing securities
convertible into or exercisable or exchangeable for Common Stock of the Company
(and the Company shall provide to Purchaser copies thereof upon the request of
Purchaser). Except as disclosed in the Latest Form 10-Q or Schedule 3.3, the
Company has no indebtedness for borrowed money and no agreement providing for
indebtedness for borrowed money. Except as disclosed in the Latest Form 10-Q or
Schedule 3.3 and this Agreement, the Company has no share purchase agreements,
rights plans or agreements containing similar provisions and no agreements
containing anti-dilution provisions. No anti-dilution provisions which have,
individually or in the aggregate, any dilutive effect on Purchaser's investment
are triggered as a result of any of the transactions contemplated by the
Transaction Documents, including exercise of the Warrants. The Company shall
provide Purchaser with a written update of this representation signed by the
Company's Chief Executive Officer or Chief Financial Officer on behalf of the
Company as of the date of the Closing and it shall be a condition to Purchaser's
obligations at Closing that there are no material changes in such capitalization
since the Company's representation on the date hereof. The Company has no
subsidiaries, except as provided in the Latest Form 10-Q or Schedule 3.3. All
such subsidiaries included in the Latest Form 10-Q or Schedule 3.3. are one
hundred percent (100%) owned by the Company. Except as provided in the Latest
Form 10-Q or Schedule 3.3, the Company has no investments, either debt or
equity, in any other entity.
3.4 Issuance of Shares. The Shares and the Warrant Shares are duly
authorized and reserved for issuance, and, upon issuance in accordance with the
terms hereof and exercise of the Warrants in accordance with the terms thereof,
as applicable, will be validly issued, fully paid and non-assessable, and free
from all liens, claims and encumbrances and will not be subject to preemptive
rights or other similar rights of stockholders of the Company. The Warrants are
duly authorized and are validly issued, fully paid and non-assessable, and free
from all liens, claims and encumbrances and are not and will not be subject to
preemptive rights or other similar rights of stockholders of the Company. The
board of directors of the Company has unanimously approved the issuance of
Shares pursuant to the terms hereof and the issuance of Shares issuable upon
exercise of the Warrants
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pursuant to the terms thereof (without giving effect to any limitations on
exercise contained therein, including for purposes of Nasdaq Rule 4460(i) and
Nasdaq Rule 4310(c)(25)(H)(1)(b)) (the "Nasdaq Authorizations"), has unanimously
recommended to the stockholders of the Company the approval of the Nasdaq
Authorizations and will seek Stockholder Approval (as defined in Section 4.12)
at the Company's next annual meeting, which is currently scheduled for April,
2000. No further corporate authorization or approval (other than the Stockholder
Approval) is required under the rules of the Nasdaq with respect to the
transaction contemplated by the Transaction Documents, including, without
limitation, the issuance of the Shares and the Warrant Shares and the inclusion
thereof for trading on the Nasdaq.
3.5 No Conflicts. Except as disclosed in Schedule 3.5, the execution,
delivery and performance of this Agreement, the Warrants and the Registration
Rights Agreement by the Company, and the consummation by the Company of the
transactions contemplated hereby and thereby (including, without limitation, the
issuance of the Warrants and the issuance and reservation for issuance, as
applicable, of the Shares and Warrant Shares and the Purchaser's purchase and
acquisition of the Shares, the Warrants and the Warrant Shares) do not and will
not (a) result in a violation of the Certificate of Incorporation or By-laws,
(b) conflict with, or constitute a default (or an event which, with notice or
lapse of time or both would become a default) under, or give to others any
rights of termination, amendment, acceleration or cancellation of, any
agreement, indenture or instrument to which the Company or any of its
subsidiaries is a party (except for such conflicts, defaults, terminations,
amendments, accelerations, and cancellations as would not, individually or in
the aggregate, have a Material Adverse Effect), or (c) result in a violation of
any law, rule, regulation, order, judgment or decree (including, without
limitation, U.S. federal and state securities laws and regulations) applicable
to the Company or any of its subsidiaries, or by which any property or asset of
the Company or any of its subsidiaries, is bound or affected. Neither the
Company nor any of its subsidiaries is in violation of its Certificate of
Incorporation, by-laws or other organizational documents, and neither the
Company nor any of its subsidiaries is in default (and no event has occurred
which, with notice or lapse of time or both, would put the Company or any of its
subsidiaries in default) under, nor has there occurred any event giving others
(with notice or lapse of time or both) any rights of termination, amendment,
acceleration or cancellation of, any agreement, indenture or instrument to which
the Company or any of its subsidiaries is a party, except for possible defaults
or rights as would not, individually or in the aggregate, have a Material
Adverse Effect. The business of the Company and its subsidiaries is not being
conducted, and shall not be conducted so long as a Purchaser owns any of the
Securities, in violation of any law, ordinance, rule, regulation, order,
judgment or decree of any governmental entity, court or arbitration tribunal
except for possible violations the sanctions for which either singly or in the
aggregate would not have a Material Adverse Effect. Except as disclosed in
Schedule 3.5, the Company is not required to obtain any consent, authorization
or order of, or make any filing or registration with, any court or governmental
agency or any regulatory or self-regulatory agency in order for it to execute,
deliver or perform any of its obligations under this Agreement, the Warrants or
the Registration Rights Agreement or to perform its obligations in accordance
with the terms hereof or thereof, other than the Consents. The purchase and
acquisition of the Securities by the Purchaser do not violate any law, rule,
regulation, order, judgment or decree applicable to the Company, or require
further filing by the Company or Purchaser
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under such law, rule, regulation, order, judgment or decree, by virtue of the
Company's business or assets, other than the Consents. Except as disclosed in
Schedule 3.5, the Company is in full compliance with the continued listing
criteria of Nasdaq and does not reasonably anticipate that the Common Stock will
be de-listed by Nasdaq for the foreseeable future, and the Company has made all
necessary filings and notifications with, is not aware of any inquiry by or
received any notice from Nasdaq regarding any failure or alleged failure by the
Company to comply with such criteria and has obtained all necessary approvals
from, Nasdaq with respect to the transactions contemplated by the Transaction
Documents, including, without limitation, the issuance of the Securities and the
listing of the Shares and the Warrant Shares on the Nasdaq.
3.6 Registration and SEC Documents. The Common Stock is registered
under Section 12 of the Securities Exchange Act of 1934, as amended (the
"Exchange Act") and has been so registered since August 1, 1995. Except as
disclosed in the Filed SEC Documents or Schedule 3.6, since January 1, 1998, the
Company has timely filed all reports, schedules, forms, statements and other
documents required to be filed by it with the SEC pursuant to the reporting
requirements of the Exchange Act (all of the foregoing filed after January 1,
1998, and all exhibits included therein and financial statements and schedules
thereto and documents incorporated by reference therein, being referred to
herein as the "SEC Documents" and such documents filed prior to the date hereof,
the "Filed SEC Documents"), including for purposes of determining the
availability of Form S-3. The Company has delivered to the Purchaser true and
complete copies of the SEC Documents filed since January 1, 1998. As of their
respective dates, the SEC Documents complied in all material respects with the
requirements of the Exchange Act and the rules and regulations of the SEC
promulgated thereunder applicable to the SEC Documents, and none of the SEC
Documents, at the time they were filed with the SEC or as subsequently
corrected, contained any untrue statement of a material fact or omitted to state
a material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading. None of the statements made in any such SEC Document is, or,
except pursuant to Filed SEC Documents has been, required to be updated or
amended under applicable law, except for amendments and updates already made.
The financial statements of the Company included in the SEC Documents were
prepared in accordance with U.S. generally accepted accounting principles
("GAAP"), consistently applied, and the rules and regulations of the SEC during
the periods involved (except (i) as may be otherwise indicated in such financial
statements or the notes thereto, or (ii) in the case of unaudited interim
statements, to the extent they do not include footnotes or are condensed or
summary statements) and fairly present in accordance with GAAP the consolidated
financial position of the Company and its consolidated subsidiaries as of the
dates thereof and the consolidated results of their operations and cash flows
for the periods then ended (subject, in the case of unaudited statements, to
normal, immaterial year-end audit adjustments). Except as set forth in the
financial statements of the Company included in the Filed SEC Documents, the
Company has no liabilities, contingent or otherwise, other than (i) liabilities
incurred subsequent to the date of such financial statements in the ordinary
course of business consistent with past practice, (ii) obligations under
contracts and commitments incurred in the ordinary course of business and not
required under generally accepted accounting principles to be reflected in such
financial statements, and (iii) obligatioins which, individually or in the
aggregate, are not material to the financial condition,
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business, operations, properties, operating results or prospects of the Company
and its subsidiaries taken on a whole. The Filed SEC Documents, as supplemented
by Schedule 3.6 hereto, contain a complete and accurate list of all material
undischarged written or oral contracts, agreements, leases or other instruments
to which the Company or any subsidiary is a party or by which the Company or any
subsidiary is bound or to which any of the properties or assets of the Company
or any subsidiary is subject (each a "Contract"), except to the extent not
required to be filed pursuant to the applicable Rules and Regulations of the
SEC. None of the Company, its subsidiaries or, to the best knowledge of the
Company, any of the other parties thereto, is in breach or violation of any
Contract, which breach or violation relates to indebtedness for borrowed money
would have a Material Adverse Effect. No event, occurrence or condition exists
which, with the lapse of time, the giving of notice, or both, or the happening
of any further event or condition, would become a breach or default by the
Company or its subsidiaries under any Contract which breach or default would
have a Material Adverse Effect.
3.7 Absence of Certain Changes. Since December 31, 1998, there has
been no material adverse change and no material adverse development in the
business, properties, operations, financial condition, results of operations or
prospects of the Company, except as disclosed in Schedule 3.7.
3.8 Absence of Litigation. Except as disclosed in the Filed SEC
Documents or Schedule 3.8, there is no action, suit, proceeding, inquiry or
investigation before or by any court, public board, governmental agency or
authority, or self-regulatory organization or body pending or, to the knowledge
of the Company or any of its subsidiaries, threatened against or affecting the
Company, any of its subsidiaries, or any of their respective directors or
officers in their capacities as such, wherein an unfavorable decision, ruling or
finding could reasonably be expected to have a Material Adverse Effect or would
adversely affect the transactions contemplated by the Transaction Documents or
which would adversely affect the validity or enforceability of, or the authority
or ability of the Company to perform its obligations under, the Transaction
Documents. To the Company's knowledge, there are no facts which, if known by a
potential claimant or governmental agency or authority, could give rise to a
claim or proceeding which, if asserted or conducted with results unfavorable to
the Company or any of its subsidiaries, could reasonably be expected to have a
Material Adverse Effect.
3.9 Disclosure. No information relating to or concerning the Company
set forth in this Agreement or provided to Purchaser in connection with the
transactions contemplated hereby contains an untrue statement of a material fact
or omits to state a material fact necessary in order to make the statements made
herein or therein, in light of the circumstances under which they were made, not
misleading. Except for the execution and performance of this Agreement and the
transactions contemplated hereby, no material fact (within the meaning of the
federal securities laws of the United States) exists with respect to the Company
or any of its subsidiaries which has not been publicly disclosed.
3.10 Acknowledgment Regarding Purchaser's Purchase of the Securities.
The Company acknowledges and agrees that each Purchaser is acting independently
and is not acting as a financial
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advisor or fiduciary of the Company (or in any similar capacity) with respect to
this Agreement or the transactions contemplated hereby, that this Agreement and
the transaction contemplated hereby, and the relationship between each Purchaser
and the Company, are "arms-length", and that any statement made by any
Purchaser, or any of its representatives or agents, in connection with this
Agreement or the transactions contemplated hereby does not constitute advice or
a recommendation, is merely incidental to such Purchaser's purchase of the
Securities and has not been relied upon in any way by the Company, its officers,
directors or other representatives. The Company further represents to Purchaser
that the Company's decision to enter into this Agreement and the transactions
contemplated hereby has been based solely on an independent evaluation by the
Company and its representatives.
3.11 Current Public Information. The Company is currently eligible to
register the resale of the Shares and the Warrant Shares by the Purchaser in a
secondary offering under General Instruction B3 and B4 of Form S-3 on a
registration statement on Form S-3 under the Securities Act, all as contemplated
by Section 2.1 of the Registration Rights Agreement.
3.12 No General Solicitation. Neither the Company nor any person acting
on behalf of the Company has conducted any "general solicitation," as described
in Rule 502(c) under Regulation D, with respect to any of the Securities being
offered hereby.
3.13 No Integrated Offering. Neither the Company, nor any of its
affiliates, nor any person acting on their behalf, has directly or indirectly
made any offers or sales of any security or solicited any offers to buy any
security under circumstances that would prevent the parties hereto from
consummating the transactions contemplated hereby pursuant to an exemption from
registration under the Securities Act pursuant to the provisions of Regulation
D. The transactions contemplated hereby are exempt from the registration
requirements of the Securities Act, assuming the accuracy of the representations
and warranties herein contained of each Purchaser to the extent relevant for
such determination.
3.14 No Brokers. The Company has taken no action which would give
rise to any claim by any person for brokerage commissions, finder's fees or
similar payments by Purchaser relating to this Agreement or the transactions
contemplated hereby, except for dealings with ▇▇▇▇▇▇ ▇▇▇▇▇▇ Partners LLC (the
fees of which shall be paid in full by the Company). The Company will indemnify
each Purchaser from and against any fees and expenses sought or other claims
made by ▇▇▇▇▇▇ ▇▇▇▇▇▇ Partners LLC.
3.15 Acknowledgment of Dilution. The number of Warrant Shares issuable
upon exercise of the Warrants may increase substantially in certain
circumstances. The Company's executive officers and directors have studied and
fully understand the terms of this Agreement and the transactions contemplated
hereby and the nature of the securities being sold hereunder and recognize that
they have a potentially dilutive effect. The board of directors of the Company
has unanimously concluded in its good faith business judgment that the issuance
of the Shares, the Warrants and the Warrant Shares as contemplated hereby is in
the best interests of the Company. The Company
10
acknowledges that its obligation to issue Warrant Shares upon exercise of the
Warrants is binding upon it and enforceable regardless of the dilution that such
issuance may have on the ownership interests of other stockholders.
3.16 Intellectual Property. Each of the Company and its subsidiaries
owns or possesses adequate and enforceable rights to use all material patents,
patent applications, trademarks, trademark applications, trade names, service
marks, copyrights, copyright applications, licenses, know-how (including trade
secrets and other unpatented and/or unpatentable proprietary or confidential
information, systems or procedures) and other similar rights and proprietary
knowledge (collectively, "Intangibles") used or necessary for the conduct of its
business as now being conducted and as previously described in the Company's
Annual Report on Form 10-K most recently filed and any subsequently filed
reports on Form 10-Q and Form 8-K except where failure to own or have such
rights would not have a Material Adverse Effect. Neither the Company nor any
subsidiary of the Company infringes on or is in conflict with any right of any
other person with respect to any Intangibles nor is there any claim of
infringement made by a third party against or involving the Company or any of
its subsidiaries, which infringement, conflict or claim, individually or in the
aggregate is likely to have a Material Adverse Effect.
3.17 Foreign Corrupt Practices. Neither the Company, nor any of its
subsidiaries, nor any director, officer, agent, employee or other person acting
on behalf of the Company or any subsidiary has, in the course of his actions
for, or on behalf of, the Company, used any corporate funds for any unlawful
contribution, gift, entertainment or other unlawful expenses relating to
political activity; made any direct or indirect unlawful payment to any foreign
or domestic government official or employee from corporate funds; violated or is
in violation of any provision of the U.S. Foreign Corrupt Practices Act of 1977,
as amended; or made any bribe, rebate, payoff, influence payment, kickback or
other unlawful payment to any foreign or domestic government official or
employee. Without limiting the generality of the foregoing, the Company and its
subsidiaries have not directly or indirectly made or agreed to make (whether or
not said payment is lawful) any payment to obtain, or with respect to, sales
other than usual and regular compensation to its or their employees and sales
representatives with respect to such sales.
3.18 Key Employees. Each Key Employee (as defined below) is currently
serving the Company in the capacity disclosed in the Filed SEC Documents or
Schedule 3.18. No Key Employee, to the best of the knowledge of the Company and
its subsidiaries, is, or is now expected to be, in violation of any material
term of any employment contract, confidentiality, disclosure or proprietary
information agreement, non-competition agreement, or any other contract or
agreement or any restrictive covenant, and the continued employment of each Key
Employee does not subject the Company or any of its subsidiaries to any
liability with respect to any of the foregoing matters. No Key Employee has, to
the best of the knowledge of the Company and its subsidiaries, any intention to
terminate or limit his employment with, or services to, the Company or any of
its subsidiaries, nor is any such Key Employee subject to any constraints (e.g.,
litigation) which would cause such employee to be unable to devote his full time
and attention to such employment or services, except where such termination,
limitation or constraints would not reasonably be expected
11
to have a Material Adverse Effect. "Key Employee" means ▇▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇
▇. ▇▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇ and ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇.
3.19 Year 2000 Compliance. The information set forth in the Filed SEC
Documents with respect to Year 2000-related compliance by the Company does not
contain any untrue statement of a material fact or omit any material fact
necessary to make the statements contained therein not misleading. The Company's
testing compliance program and contingency plan, in each case regarding Year
2000-related matters, are adequate to prevent a Material Adverse Effect and such
Year 2000-related matters will not cause a Material Adverse Effect.
ARTICLE IV
COVENANTS
4.1 Best Efforts. The parties shall use all commercially reasonable
efforts timely to satisfy each of the conditions described in Articles VI and
VII of this Agreement.
4.2 Securities Laws. The Company agrees to file a Form D with respect
to the Securities with the SEC as required under Regulation D and to provide a
copy thereof to each Purchaser on or prior to its filing. The Company agrees to
file a Form 8-K disclosing this Agreement and the transactions contemplated
hereby with the SEC no later than January 4, 2000. Such Form 8-K shall contain
as exhibits this Agreement, the Warrants and the Registration Rights Agreement.
The Company shall, on or prior to the date of Closing, take such action as is
necessary to sell the Securities to each Purchaser in accordance with applicable
securities laws of the states of the United States, and shall provide evidence
of any such action so taken to each Purchaser on or prior to the date of the
Closing. Without limiting any of the Company's obligations under this Agreement,
the Registration Rights Agreement or the Warrants, from and after the date of
Closing, neither the Company nor any person acting on its behalf shall take any
action which would adversely affect any exemptions from registration under the
Securities Act with respect to the transactions contemplated hereby.
4.3 Reporting Status. So long as any Purchaser beneficially owns any
of the Securities, the Company shall timely file all reports required to be
filed with the SEC pursuant to the Exchange Act, and the Company shall not
terminate its status as an issuer required to file reports under the Exchange
Act even if the Exchange Act or the rules and regulations thereunder would
permit such termination.
4.4 Use of Proceeds. The Company shall use the proceeds from the sale
of the Securities for general corporate purposes only, in the ordinary course of
its business and consistent with past practice and, without limiting the
generality of the foregoing, shall not use such proceeds to make a loan to any
employee, officer, director or stockholder of the Company, to repay any loan or
other obligation of the Company to any such person or to repurchase or pay a
dividend on shares of Common Stock or other securities of the Company.
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4.5 Restriction on Issuance of Securities.
(a) During the period beginning on the Closing Date and ending on the
date which is six (6) months following the effective date of the registration
statement contemplated by Section 2.1 of the Registration Rights Agreement (the
"Effective Date") (such period, the "Financing Restriction Period"), the Company
shall not issue or agree to issue (except (i) to the Purchasers pursuant to this
Agreement, (ii) pursuant to any employee stock option, stock purchase or
restricted stock plan of the Company, so long as the issuance of such stock or
option is approved by a majority of the non-employee members of the board of
directors of the Company or a majority of the members of a committee of
non-employee directors established for such purpose, (iii) pursuant to strategic
investments from industry participants, the primary purpose of each of which is
not to raise equity capital, (iv) to a seller or sellers of a business being
acquired by the Company in such transaction, provided, however, that issuances
pursuant to this clause (iv) shall not exceed, in the aggregate, 1,384,816
Shares of Common Stock or securities convertible into such number of Shares of
Common Stock without written consent of the Purchasers, which consent shall not
be unreasonably withheld or delayed; (v) the issuance to one purchaser or a
group of related purchasers of securities, which, immediately following such
issuance, constitute greater than 80% of the outstanding voting securities or
economic interest in the Company, and which issuance is approved by a majority
vote of the holders of voting capital stock of the Company, or (vi) in a public
offering) any equity-like or equity-linked securities of the Company or any
security convertible into or exercisable or exchangeable, directly or
indirectly, for equity, equity-like or equity-linked securities of the Company
(any such securities, "Restricted Securities").
(b) During the six (6) month period beginning on the date immediately
following the final day of the Financing Restriction Period, other than to a
seller or sellers of a business being acquired by the Company in such
transaction, the Company will not issue or agree to issue or offer to issue or
solicit any offer or inquiry with regard to any Restricted Securities unless the
Company has satisfied all of the following requirements with respect to such
issuance:
(I) The Company shall have delivered a notice to each
Purchaser (the "Transfer Notice"), which notice shall include (A) the
terms and number of units of the security and the consideration per
unit which the Company desires to receive for the securities (which, in
the case where the Company shall have received an offer to purchase
such securities other than from the Purchasers (a "Third Party Offer"),
shall be the consideration set forth in such offer) and (B) all of the
material terms and conditions, including the terms and conditions of
payment, upon which the Company proposes to transfer said securities
(which, in the case of a Third Party Offer, shall be the terms and
conditions set forth in the Third Party Offer).
(II) Upon the delivery of the Transfer Notice, each Purchaser
shall have an option to purchase up to its pro rata portion of the
securities described therein based on the number of shares of Common
Stock purchased by all Purchasers hereunder on the terms and conditions
described therein. Such option shall be exercisable by such Purchaser
by service of written notice upon the Company within five (5) business
days of receipt of the Transfer
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Notice. In the event that any Purchaser declines to exercise such
option, such option may be exercised by the remaining Purchasers.
Notwithstanding the foregoing, (i) if during such Financing Restriction
Period the Company delivers a Transfer Notice notifying the Purchasers
that it will issue or agree to issue or offer to issue or solicit any
offer or inquiry with regard to any Restricted Securities for an
aggregate amount of Five Million Dollars ($5,000,000)or less, the
Purchasers' option pursuant to this clause (II) shall be to purchase in
the aggregate all, but not less than all, of the securities described
therein on the terms and conditions described therein, and (ii) if
during such Financing Restriction Period the Company delivers a
Transfer Notice notifying the Purchasers that it will issue or agree to
issue or offer to issue or solicit any offer or inquiry with regard to
any Restricted Securities for an aggregate amount of more than Five
Million Dollars ($5,000,000), the Purchasers' option pursuant to this
clause (II) shall be to purchase in the aggregate either (x) all or (y)
an amount which is half or fewer, of the securities described therein
on the terms and conditions described therein.
(III) If the options created in clause (II) hereof are not
exercised by Purchaser within five (5) business days of service of the
Transfer Notice, or if such options are exercised only in part, then,
within a period of thirty (30) days beginning on the day following the
date of expiration of the option period, the Company may issue some or
all of the securities sought to be issued as to which such options were
not exercised, at a price which is not less than one hundred percent
(100%) of the price specified in the Transfer Notice and on terms and
conditions not less favorable to the Company than those specified in
the Transfer Notice.
4.6 Further Restrictions on Issuance of Securities. While any
Purchaser holds any Shares, Warrants, or Warrant Shares, the Company shall not,
and shall cause each of its direct and indirect subsidiaries not to, issue,
agree to issue or authorize for issuance, or otherwise transfer or enter into
any commitment to issue or otherwise transfer, or offer to issue or transfer or
solicit any issuance or proposal with regard to, any debt or equity security,
bond, note or other security of any of the Company's direct or indirect
subsidiaries (including, without limitation, any such subsidiaries as listed in
the Latest Form 10-Q or Schedule 3.3), except for trade indebtedness and bank
financing, in each case incurred on customary terms and conditions in the
ordinary course of business (but, without limitation and by way of
clarification, not including any equity-like or equity-linked terms and
conditions).
4.7 Expenses. The Company shall pay to Castle Creek Technology
Partners LLC ("CCTP") at the Closing reimbursement for the expenses incurred by
it and its affiliates and advisors in connection with the negotiation,
preparation, execution, and delivery of this Agreement and the other agreements
and documents to be executed in connection herewith, including, without
limitation, due diligence and attorneys' fees and expenses (the "Expenses"). In
addition, from time to time thereafter, upon CCTP's written request, the Company
shall pay to CCTP such Expenses, if any, not so paid at Closing and/or covered
by such payment, in each case to the extent incurred by CCTP. The Company shall
not be required to reimburse Expenses to the extent such Expenses exceed fifty
thousand dollars ($50,000) in the aggregate.
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4.8 Information. The Company agrees to send the following reports to
each Purchaser until the earlier of (i) the date on which such Purchaser
transfers, assigns or sells all of its Securities; or (ii) the second
anniversary of the Closing Date: (a) within three (3) business days after the
filing with the SEC, a copy of its Annual Report on Form 10-K, its Quarterly
Reports on Form 10-Q, any proxy statements and any Current Reports on Form 8-K;
and (b) within two (2) business days after release, copies of all press releases
issued by the Company or any of its subsidiaries.
4.9 Listing. For a period of beginning on the Closing Date and ending
on the fifth (5th) anniversary of the Closing Date, the Company shall continue
the listing and trading of its Common Stock on The Nasdaq National Market, the
Nasdaq SmallCap Market, the New York Stock Exchange or the American Stock
Exchange, secure and maintain listing and trading of the Shares and Warrant
Shares on such exchange, and comply in all respects with the Company's
reporting, filing and other obligations under the by-laws or rules of such
exchange; provided, however, that if the Company is a party to a transaction
following which no Purchaser holds any shares of capital stock or securities
convertible into shares of capital stock of the Company, such obligation shall
cease with respect to the Company; provided, further, that if the Shares and the
Warrant Shares are converted in such transaction into shares of capital stock or
other equivalent equity interest of another entity, such entity shall be bound
by the provisions of this Section 4.9 for the remainder of the five (5) year
term. If the Company fails to maintain the listing or trading of the Common
Stock as required by this Section 4.9, then beginning on the tenth (10th)
business day following such failure, if the Common Stock is still not listed or
traded, then the Company shall pay to each Purchaser an amount equal to one
percent (1%) of the fair market value of the Shares and Warrant Shares then held
by such Purchaser per day that such failure continues. For purposes hereof, the
number of Warrant Shares held by a Purchaser shall be calculated as though all
Warrants held by such Purchaser were fully exercised at the Exercise Price then
in effect, without regard to any limitations on the exercise thereof.
4.10 Prospectus Delivery Requirement. Each Purchaser understands that
the Securities Act may require delivery of a prospectus relating to the Common
Stock in connection with any sale thereof pursuant to a registration statement
under the Securities Act covering the resale by such Purchaser of the Common
Stock being sold.
4.11 Intentional Acts or Omissions. The Company shall not intentionally
perform any act which if performed, or intentionally omit to perform any act
which, if omitted to be performed, would prevent or excuse the performance of
this Agreement or any of the transactions contemplated hereby.
4.12 Share Authorization. The Company covenants and agrees that it
shall (i) solicit by proxy the Stockholder Approval (as defined below) and (ii)
use its best efforts to obtain the Stockholder Approval at its next annual
stockholder meeting, which shall be held no later than May 1, 2000 ("Stockholder
Approval Date"). For purposes hereof, "Stockholder Approval" means authorization
by the stockholders of the Company for the issuance of Common Stock to the
Purchasers at the Closing, upon the Effective Date and upon the exercise of the
Warrants pursuant to the terms thereof in the aggregate in excess of twenty
percent (20%) of the Company's total
15
Common Stock outstanding and, if necessary, the elimination of any prohibitions
under the rules or regulations of any stock exchange, interdealer quotation
system or other self-regulatory organization with jurisdiction over the Company
or any of its securities on the Company's ability to issue Common Stock in
excess of twenty percent (20%). In addition, the Company shall, unless otherwise
consented to by Purchasers, have a definitive proxy statement mailed to each
stockholder of the Company at least twenty (20) days prior to the Stockholder
Approval Date. The Company shall deliver one copy of any SEC comments it
receives with respect to its proxy statement to each Purchaser and will not file
such proxy statement (or any amendments thereto), whether such proxy statement
is in preliminary or definitive form, without the approval of each Purchaser.
ARTICLE V
LEGEND REMOVAL AND TRANSFER INSTRUCTIONS
5.1 Removal of Legend. The Legend shall be removed and the Company
shall issue a certificate without any legend to the holder of any Security upon
which such Legend is stamped, and a certificate for a Security shall be
originally issued without any legend, if, unless otherwise required by
applicable state securities laws, (a) the sale of such Security is registered
under the Securities Act, (b) such holder provides the Company with an opinion
of counsel, in form, substance and scope customary for opinions of counsel in
comparable transactions, and reasonably satisfactory to the Company (the cost of
which shall be borne by the Holder), to the effect that a public sale or
transfer of such Security may be made without registration under the Securities
Act or (c) such Security can be sold pursuant to Rule 144. Each Purchaser agrees
to sell all Securities, including those represented by a certificate(s) from
which the Legend has been removed, or which were originally issued without the
Legend, (i) pursuant to an effective registration statement and to deliver a
prospectus in connection with such sale or (ii) in compliance with an exemption
from the registration requirements of the Securities Act. In the event the
Legend is removed from any Security or any Security is issued without the Legend
and thereafter the effectiveness of a registration statement covering the resale
of such Security is suspended or a supplement or amendment thereto is required
by applicable securities laws, then upon reasonable advance notice to Purchaser
holding such Security, the Company may require that the Legend be placed on any
such Security that cannot then be sold pursuant to an effective registration
statement or Rule 144 or with respect to which the opinion referred to in clause
(b) next above has not been rendered, which Legend shall be removed when such
Security may be sold pursuant to an effective registration statement or Rule 144
or such holder provides the opinion with respect thereto described in clause (b)
next above. Except for the Legend required pursuant to Section 2.7 and this
Section 5.1, the Securities shall bear no legend.
5.2 Transfer Agent Instructions. The Company shall instruct its
transfer agent to issue certificates, registered in the name of each Purchaser
or its nominee, for the Shares and Warrant Shares in such amounts as specified
from time to time by each Purchaser to the Company. Such certificates shall bear
a legend only in the form of the Legend and only to the extent permitted by
Section 2.7 and Section 5.1 above. The Company warrants that no instruction
other than such instructions referred to in this Article V, and no stop transfer
instructions other than stop transfer instructions to give effect to Section 2.6
hereof in the case of the Shares and Warrant Shares prior
16
to registration thereof under the Securities Act, will be given by the Company
to its transfer agent and that the Securities shall otherwise be freely
transferable on the books and records of the Company. Nothing in this Section
shall affect in any way any Purchaser's obligations and agreement set forth in
Section 5.1 hereof to resell the Securities pursuant to an effective
registration statement and to deliver a prospectus in connection with such sale
or in compliance with an exemption from the registration requirements of
applicable securities laws. Without limiting any other rights of a Purchaser or
obligations of the Company, if (a) a Purchaser provides the Company with an
opinion of counsel, which opinion of counsel shall be in form, substance and
scope customary for opinions of counsel in comparable transactions (the
reasonable cost of which shall be borne by the Company), to the effect that the
Securities to be sold or transferred may be sold or transferred pursuant to an
exemption from registration or (b) a Purchaser transfers Securities pursuant to
Rule 144, the Company shall permit the transfer, and promptly instruct its
transfer agent to issue one or more certificates in such name and in such
denomination as specified by such Purchaser in order to effect such a transfer
or sale. The Company acknowledges that a breach by it of its obligations
hereunder will cause irreparable harm to a Purchaser by vitiating the intent and
purpose of the transaction contemplated hereby. Accordingly, the Company
acknowledges that the remedy at law for a breach of its obligations under this
Article V will be inadequate and agrees, in the event of a breach or threatened
breach by the Company of the provisions of this Article V, that the Purchaser
shall be entitled, in addition to all other available remedies, to an injunction
restraining any breach and requiring immediate issuance and transfer, without
the necessity of showing economic loss and without any bond or other security
being required.
5.3 Failure to Remove Legend. If the Company fails to remove any legend
as required by this Article V (a "Legend Removal Failure"), then beginning on
the tenth (10th) day following such failure, if the Company continues to fail to
remove such legend, the Company shall pay to each Purchaser holding shares
subject to a Legend Removal Failure an amount equal to one percent (1%) of the
fair market value of the Shares and Warrant Shares then held by such Purchaser
per day that such failure continues. For purposes hereof, the number of Warrant
Shares held by a Purchaser shall be calculated as though all Warrants held by
such Purchaser were fully exercised, without regard to any limitations on the
exercise thereof. If during any twelve (12) month period, the Company fails to
remove any legend as required by this Article V for an aggregate of thirty (30)
days, each Purchaser holding shares subject to a Legend Removal Failure may, at
its option, require the Company to purchase all or any portion of the Shares and
Warrant Shares held by such Purchaser at a price per share equal to the greater
of (i) one hundred fifty percent (150%) of the Per Share Purchase Price and (ii)
the fair market value of such Share.
ARTICLE VI
CONDITIONS TO THE COMPANY'S OBLIGATION TO SELL
17
6.1 Conditions to the Company's Obligation to Sell. The obligation of
the Company hereunder to issue and sell the Shares and Warrants to a Purchaser
at the Closing is subject to the satisfaction, as of the Closing Date and with
respect to such Purchaser, of each of the following conditions thereto, provided
that these conditions are for the Company's sole benefit and may be waived by
the Company at any time in its sole discretion:
(i) Such Purchaser shall have executed the signature page to
this Agreement and the Registration Rights Agreement and delivered the
same to the Company.
(ii) Such Purchaser shall deliver the applicable Purchase
Price for the Shares and Warrants purchased at the Closing.
(iii) The representations and warranties of such Purchaser
shall be true and correct as of the date when made and as of the
Closing as though made at that time, and Purchaser shall have
performed, satisfied and complied in all material respects with the
covenants and agreements required by this Agreement to be performed or
complied with by Purchaser at or prior to the Closing.
(iv) No statute, rule, regulation, executive order, decree,
ruling or injunction shall have been enacted, entered, promulgated or
endorsed by any court or governmental authority of competent
jurisdiction or any self-regulatory organization having authority over
the matters contemplated hereby which restricts or prohibits the
consummation of any of the transactions contemplated by this Agreement.
ARTICLE VII
CONDITIONS TO EACH PURCHASER'S OBLIGATION TO PURCHASE
7.1 Conditions to the Closing. The obligation of each Purchaser
hereunder to purchase the Shares and Warrants to be purchased by it on the
Closing Date is subject to the satisfaction of each of the following conditions,
provided that these conditions are for each Purchaser's sole benefit and may be
waived by such Purchaser (with respect to it) at any time in such Purchaser's
sole discretion:
(i) The Company shall have executed the signature page to this
Agreement and the Registration Rights Agreement and delivered the same
to such Purchaser.
(ii) The Company shall have delivered duly executed
certificates for the Shares (in such denominations as such Purchaser
shall reasonably request) and Warrants being so purchased by Purchaser
at the Closing.
(iii) The Common Stock, including all Shares and Warrant
Shares, shall be listed on the Nasdaq and trading in the Common Stock
shall not have been suspended by the
18
Nasdaq, the SEC or other regulatory authority and no de-listing or
suspension shall be reasonably likely for the foreseeable future.
(iv) The representations and warranties of the Company shall
be true and correct as of the date when made and as of the Closing as
though made at that time and the Company shall have performed,
satisfied and complied with the covenants and agreements required by
this Agreement to be performed or complied with by the Company at or
prior to the Closing. Such Purchaser shall have received a certificate,
executed by the Chief Executive Officer or Chief Financial Officer of
the Company, dated as of the Closing to the foregoing effect.
(v) No statute, rule, regulation, executive order, decree,
ruling or injunction shall have been enacted, entered, promulgated or
endorsed by any court or governmental authority of competent
jurisdiction or any self-regulatory organization having authority over
the matters contemplated hereby which prohibits the consummation of any
of the transactions contemplated by this Agreement.
(vi) Such Purchaser shall have received the officer's
certificate described in Section 3.3, dated as of the Closing and there
shall be no material changes from the date of signing of this Agreement
to the date of the Closing other than as a result of issuance of Common
Stock pursuant to options, warrants and other obligations disclosed on
Schedule 3.3 as of the date of this Agreement.
(vii) Each other Purchaser shall have tendered payment of its
applicable Purchase Price for the number of Shares set forth on such
other Purchaser's signature page hereto so that the aggregate amount
tendered by all of the Purchasers hereunder is no less than twelve
million dollars ($12,000,000).
(viii) Such Purchaser shall have received opinions of the
Company's counsel, dated as of the Closing, in the form attached hereto
as Exhibit D.
(ix) The Company's transfer agent shall have agreed to act in
accordance with irrevocable instructions in the form attached hereto as
Exhibit E.
(x) The Company has filed an Additional Listing Application
(and no additional time is required for the effectiveness thereof) with
respect to all Shares and Warrant Shares with the National Association
of Securities Dealers and has provided a copy thereof to the Purchaser.
ARTICLE VIII
GOVERNING LAW; MISCELLANEOUS
8.1 Governing Law; Jurisdiction. This Agreement shall be governed by
and construed in accordance with the laws of the State of New York applicable to
contracts made and to be performed
19
in the State of New York. The parties hereto irrevocably consent to the
jurisdiction of the United States federal courts located in the State of New
York and the state courts located in the County of New York in the State of New
York in any suit or proceeding based on or arising under this Agreement or the
transactions contemplated hereby and irrevocably agree that all claims in
respect of such suit or proceeding may be determined in such courts. The Company
irrevocably waives the defense of an inconvenient forum to the maintenance of
such suit or proceeding. The Company further agrees that service of process upon
the Company mailed by the first class mail shall be deemed in every respect
effective service of process upon the Company in any suit or proceeding arising
hereunder. Nothing herein shall affect any Purchaser's right to serve process in
any other manner permitted by law. The parties hereto agree that a final
non-appealable judgment in any such suit or proceeding shall be conclusive and
may be enforced in other jurisdictions by suit on such judgment or in any other
lawful manner.
8.2 Officer and Director Transactions. If any officer (as defined in
Rule 16a-1(f) promulgated under the Exchange Act) or director of the Company,
directly or indirectly, including through family members, trusts or other
entities related to such executive officer or director, disposes, or provides or
files any public notice, including pursuant to Rule 144 of the Securities Act,
of a bona fide intent to dispose of, any Common Stock beneficially owned by him
during the period beginning on the Closing Date and ending on the date which is
six (6) months after the Effective Date, the Company shall pay to each Purchaser
an amount equal to (x) the number of Shares and Warrant Shares (without giving
effect to any exercise or limitation on exercise thereof) then held by such
Purchaser times (y) the difference between (m) the closing bid price of the
Common Stock on the trading day (the "Announcement Date") immediately preceding
the day on which such disposal was publicly announced and (n) the lowest closing
bid price of the Common Stock during the thirty (30) trading day period
beginning on the Announcement Date; provided, however, that the P/A Fund, L.P.
may transfer the Common Stock beneficially owned by it to its partners without
triggering the Company's payment obligations pursuant to this Section 8.2; and
provided, further that an officer or director (and all such entities for the
benefit of any member of his/her family, collectively) may in the aggregate sell
during the six (6) month period following the Effective Date up to ten percent
(10%) of his/her total holdings as of the date hereof without triggering any
payment pursuant to this section.
8.3 Counterparts. This Agreement may be executed in two or more
counterparts, including, without limitation, by facsimile transmission, all of
which counterparts shall be considered one and the same agreement and shall
become effective when counterparts have been signed by each party and delivered
to the other party. In the event any signature page is delivered by facsimile
transmission, the party using such means of delivery shall cause additional
original executed signature pages to be promptly delivered to the other parties.
8.4 Headings. The headings of this Agreement are for convenience of
reference and shall not form part of, or affect the interpretation of, this
Agreement.
8.5 Severability. If any provision of this Agreement shall be invalid
or unenforceable in any jurisdiction, such invalidity or unenforceability shall
not affect the validity or enforceability of the
20
remainder of this Agreement or the validity or enforceability of this Agreement
in any other jurisdiction.
8.6 Scope of Agreement; Amendments. This Agreement and the documents
and instruments referenced herein contain the entire understanding of the
parties with respect to the matters covered herein and therein and, except as
specifically set forth herein or therein, no Purchaser makes any representation,
warranty, covenant or undertaking with respect the transactions contemplated
hereby. No provision of this Agreement may be waived other than by an instrument
in writing signed by the party to be charged with enforcement and no provision
of this Agreement may be amended other than by an instrument in writing signed
by the Company and each Purchaser.
8.7 Notice. Any notice herein required or permitted to be given shall
be in writing and may be personally served or delivered by courier or by
facsimile-machine confirmed telecopy, and shall be deemed delivered at the time
and date of receipt (which shall include telephone line facsimile transmission).
The addresses for such communications shall be:
If to the Company:
ON Technology Corporation
Waltham ▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Telecopy: (▇▇▇)▇▇▇-▇▇▇▇
Attention: President
with a copy to:
▇▇▇▇▇▇▇ ▇▇▇▇▇▇ & Green, P.C.
▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Telecopy: (▇▇▇)▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇ ▇▇▇▇▇, Esq.
If to any Purchaser, to such address set forth under such Purchaser's name on
the signature page hereto executed by such Purchaser. Each party shall provide
notice to the other parties of any change in address.
8.8 Successors and Assigns. This Agreement shall be binding upon and
inure to the benefit of the parties and their successors and assigns. Neither
the Company nor any Purchaser shall assign this Agreement or any rights or
obligations hereunder without the prior written consent of the other.
Notwithstanding the foregoing, each Purchaser may assign its rights and
obligations hereunder and may transfer any or all of its Securities to any of
its "affiliates," as that term is defined
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under the Exchange Act, without the consent of the Company so long as such
affiliate is an accredited investor. This provision shall not limit each
Purchaser's right to transfer the Securities pursuant to the terms of this
Agreement. In addition, and notwithstanding anything to the contrary contained
in this Agreement, the Warrants or the Registration Rights Agreement, the
Securities may be pledged, and all rights of a Purchaser under this Agreement or
any other agreement or document related to the transaction contemplated hereby
may be assigned, without further consent of the Company, to a bona fide pledgee
in connection with a Purchaser's margin or brokerage accounts.
8.9 Third Party Beneficiaries. This Agreement is intended for the
benefit of the parties hereto and their respective permitted successors and
assigns and is not for the benefit of, nor may any provision hereof be enforced
by, any other person.
8.10 Survival. The representations, warranties, agreements and
covenants of the Company in this Agreement shall survive the Closing hereunder
notwithstanding any due diligence investigation conducted by or on behalf of any
Purchaser. The Company agrees to indemnify and hold harmless each Purchaser and
each of such Purchaser's officers, directors, stockholders, members, employees,
partners, agents and affiliates and any direct or indirect investors,
stockholders, officers, directors, agents, partners, employees, members, agents
or affiliates of any of the foregoing for loss or damage arising as a result of
or related to (a) any breach by the Company of any of its representations or
covenants set forth herein or the unenforceability or invalidity of any
provision of any of this Agreement, the Registration Rights Agreement, or the
Warrants (collectively, the "Investment Agreements"), (b) any cause of action,
suit or claim brought or made against such indemnitee (other than directly by
the Company solely for breach of this Agreement, the Warrants or the
Registration Rights Agreement by the indemnitee or by governmental or regulatory
authorities), and arising out of or resulting from (whether in whole or in part)
the execution, delivery, performance or enforcement of this Agreement or any
other Investment Agreements or any other instrument, document or agreement
executed pursuant hereto or thereto or contemplated hereby or thereby (including
without limitation the acquisition of the the Warrants, the Shares, and the
Warrant Shares), any transaction financed or to be financed in whole or in part,
directly or indirectly, with the proceeds of the issuance of the Securities or
the status of the Purchaser as an investor in the Company, except to the extent
that such actual loss or damage results from a breach by such indemnitee of this
Agreement, the Warrants or the Registration Rights Agreement or from a
Purchaser's violation of law, or (c) any characterization concerning any
Investment Agreement other than as expressly provided herein or therein, as the
case may be, including, without limitation, any characterization that the
exercise of Purchaser rights and remedies under any of the Investment Agreements
(or through a combination) results in Purchaser acting (or agreeing to act)
other than independently and on its own behalf. The right to indemnification
shall include the right to advancement of expenses as they are incurred.
8.11 Public Filings; Publicity. Immediately following execution of this
Agreement, the Company shall issue a press release with respect to the
transactions contemplated hereby. The Company and each Purchaser shall have the
right to approve before issuance any press releases (including the foregoing
press release), SEC or other filings, or any other public statements, with
22
respect to the transactions contemplated hereby; provided, however, that the
Company shall be entitled, without the prior approval of any Purchaser, to make
any press release or SEC, Nasdaq, NASD or exchange filings with respect to such
transactions as is required by applicable law and regulations (although each
Purchaser shall (to the extent time permits) be consulted by the Company in
connection with any such press release prior to its release and shall be
provided with a copy thereof).
8.12 Further Assurances. Each party shall do and perform, or cause to
be done and performed, all such further acts and things, and shall execute and
deliver all such other agreements, certificates, instruments and documents, as
the other party may reasonably request in order to carry out the intent and
accomplish the purposes of this Agreement and the consummation of the
transactions contemplated hereby, including, without limitation, the filing of
all appropriate documentation and notifications with Nasdaq with respect to the
Warrant Shares immediately following either of the Stockholder Approval or the
Nasdaq Approval.
8.13 Remedies. No provision of this Agreement providing for any remedy
to a Purchaser shall limit any remedy which would otherwise be available to such
Purchaser at law or in equity. Nothing in this Agreement shall limit any rights
a Purchaser may have with any applicable federal or state securities laws with
respect to the investment contemplated hereby.
8.14 Directly or Indirectly. Where any provision in this Agreement
refers to action to be taken by any person or entity, or which such person or
entity is prohibited from taking, such provision shall be applicable whether the
action in question is taken directly or indirectly by such person or entity.
8.15 Remedies, Characterizations, Other Obligations, Breaches and
Injunctive Relief. The remedies provided in this Agreement shall be cumulative
and in addition to all other remedies available under this Agreement, at law or
in equity (including a decree of specific performance and/or other injunctive
relief), no remedy contained herein shall be deemed a waiver of compliance with
the provisions giving rise to such remedy and nothing herein shall limit a
Purchaser's right to actual damages for any failure by the Company to comply
with the terms of this Agreement. The Company covenants to each Purchaser that
there shall be no characterization concerning this instrument other than as
expressly provided herein. Amounts set forth or provided for herein with respect
to payments and the like (and the computation thereof) shall be the amounts to
be received by each Purchaser and shall not, except as expressly provided
herein, be subject to any other obligation of the Company (or the performance
thereof). The Company acknowledges that a breach by it of its obligations
hereunder will cause irreparable harm to each Purchaser and that the remedy at
law for any such breach may be inadequate. The Company therefore agrees that, in
the event of any such breach or threatened breach, each Purchaser shall be
entitled, in addition to all other available remedies, to an injunction
restraining any breach, without the necessity of showing economic loss and
without any bond or other security being required.
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8.16 Payment of Cash; Defaults. Whenever the Company is required to
make any cash payment to a Purchaser under this Agreement, such cash payment
shall be due on the date (the "Cash Due Date") that such Purchaser delivers
written notice from the Purchaser to the Company. Such cash payment shall be
made to the Purchaser by the method (by certified or cashier's check or wire
transfer of immediately available funds) elected by such Purchaser.
8.17 Failure or Indulgence Not Waiver. No failure or delay on the part
of a Purchaser in the exercise of any power, right or privilege hereunder shall
operate as a waiver thereof, nor shall any single or partial exercise of any
such power, right or privilege preclude other or further exercise thereof or of
any other right, power or privilege.
8.18 Termination. In the event that the Closing shall not have occurred
on or before two (2) business days after the date of this agreement, unless the
parties agree otherwise, this Agreement shall terminate at the close of business
on such date.
* * *
24
IN WITNESS WHEREOF, the undersigned Purchasers and the Company have
caused this Agreement to be duly executed as of the date first above written.
PURCHASER:
CASTLE CREEK TECHNOLOGY PARTNERS LLC
BY: Castle Creek Partners, L.L.C.
ITS: Investment Manager
BY: _____________________________
NAME: ▇▇▇▇ ▇▇▇▇▇▇▇
TITLE: Member
Address: ▇▇ ▇. ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Facsimile: (▇▇▇)▇▇▇-▇▇▇▇
Copy to:
Altheimer & ▇▇▇▇
▇▇ ▇. ▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇. ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Facsimile: (▇▇▇)▇▇▇-▇▇▇▇
Attn: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, Esq.
JURISDICTION: ILLINOIS
AGGREGATE NUMBER OF SHARES PURCHASED AT CLOSING: 514,837
AGGREGATE NUMBER OF WARRANT SHARES REPRESENTED BY SERIES I WARRANT: 257,419
25
PURCHASER:
▇▇▇▇▇▇▇▇ CAPITAL MANAGEMENT, INC.
By: __________________________
Name: ▇▇▇▇▇ ▇▇▇▇▇
Title: President
Address:
c/o Credit Suisse First Boston
▇▇ ▇▇▇▇▇▇▇ ▇▇▇., ▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Copy to:
c/o Credit Suisse First Boston
▇▇▇ ▇. ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Facsimile: (▇▇▇)▇▇▇-▇▇▇▇
JURISDICTION: NEW YORK
AGGREGATE NUMBER OF SHARES PURCHASED AT CLOSING: 514,837
AGGREGATE NUMBER OF WARRANT SHARES REPRESENTED BY SERIES I WARRANT: 257,419
26
COMPANY:
ON TECHNOLOGY CORPORATION
By: _________________________
Name: _______________________
Title: ______________________
27