ACORN FACTOR, INC. SUBSCRIPTION AGREEMENT
EXHIBIT
10.47
The
undersigned (hereinafter “Subscriber”)
hereby
confirms its subscription for the purchase of a 10% Convertible Redeemable
Subordinated Debenture, convertible into shares of common stock, par value
$.01
per share, (“Common
Stock”),
of
ACORN FACTOR, INC., a
Delaware corporation (the “Company”),
at a
price of $3.80 per share (the “Debenture”),
and
warrants exercisable for Common Stock (“Warrants”),
on
the terms described below
Capitalized
terms used and not otherwise defined herein shall have the meanings set forth
for such terms in the Company’s Confidential Private Placement Memorandum, dated
March 8, 2007 (as amended or supplemented, and together with all documents
and
exhibits thereto, the “Memorandum”).
The
Debentures, Warrants (and shares issuable upon the respective conversion and
exercise of the Debentures (“Debenture
Shares”)
and
Warrants (“Warrant
Shares”))
are
sometimes referred to collectively herein as the “Securities.”
In
connection with this subscription, Subscriber and the Company agree as
follows:
1. Purchase
and Sale of the Debenture with Warrants.
(a) The
Company hereby agrees to issue and to sell to Subscriber, and Subscriber hereby
agrees to purchase from the Company, the Debenture in the principal amount
set
forth on the signature page hereto (the “Principal
Amount”).
The
Company further agrees to issue to Subscriber a Warrant exercisable for a term
of five years from the date of issuance for an amount of Common Stock equal
to
25% of the number of Shares obtained by dividing the Principal Amount of the
Debenture by the conversion price, $3.80. The exercise price of the Warrants
shall be equal to $4.50 per share (the “Exercise
Price”).
Upon
acceptance of this Subscription Agreement by the Company, the Company shall
issue and deliver to Subscriber a Debenture evidencing the Principal Amount,
and
a warrant certificate evidencing the applicable number of Warrants subscribed
for, against payment in U.S. Dollars of the Principal Amount.
(b) Subscriber
has hereby delivered and paid concurrently herewith the aggregate purchase
price
(the “Purchase
Price”)
set
forth on the signature page hereof required to purchase the Debenture and
Warrants subscribed
for hereunder which amount has been paid in U.S. Dollars by cash, wire transfer
or check of immediately available funds. The minimum Debenture principal amount
denomination is $25,000.
(c) Subscriber
understands and acknowledges that this subscription is part of a proposed
placement by the Company of Common Stock and Warrants, which offering is being
made on a “best efforts” basis for a minimum of $2,000,000 of gross proceeds
(the “Minimum Offering”)
and up
to $6,000,000 of gross proceeds (the “Maximum Offering”). The Maximum Offering
is subject to an increase of 15% (or $950,000 (the “Overallotment Amount”))
upon
the
agreement of the Company and the Placement Agent (as defined below) for an
aggregate Maximum Offering of $6,950,000 During the period of the Offering,
which period shall commence on the date of the Memorandum and shall expire
at
3:00 p.m., New York time, on March 30, 2007; provided however, that if the
Minimum Offering has not been deposited into escrow on or before March 30,
2007,
the Company and Placement Agent may agree to extend the Offering until April
16,
2007, and provided further that if subscriptions representing the Minimum
Offering have been deposited into escrow on or before March 30, 2007, or April
16, 2007, as the case may be, then the offering period may be extended at the
option of the Placement Agent until May 30, 2007. Such period, as the same
may
be so extended, shall hereinafter be referred to as the “Offering
Period.”
During
the Offering Period funds will be held in an escrow account established by
the
Company and the Placement Agent with Signature Bank, and released at the
discretion of the Company and the Placement Agent from time to time. If a
subscription is not accepted, whether in whole or in part, the subscription
funds held therein will be returned to the investor without interest or
deduction.
2. Covenants,
Representations and Warranties of Subscriber.
Subscriber covenants with, represents and warrants to, the Company and Placement
Agent as follows:
(a) Subscriber
is an “accredited investor” as defined by Rule 501 under the Securities Act of
1933, as amended (the “Act”),
and
Subscriber is capable of evaluating the merits and risks of Subscriber’s
investment in the Company and has the capacity to protect Subscriber’s own
interests.
(b) Subscriber
understands that the Securities are not presently registered, but Subscriber
is
entitled to certain rights with respect to the registration of the Debenture
Shares and Warrant Shares (in accordance with Section 5 below). Subscriber
further understands that the Debentures and Warrants are redeemable and
callable, respectively, by the Company upon the terms as described in the
Memorandum, and that the redemption by the Company may occur at time when the
subscriber may be unable, due to his own personal financial condition, to
exercise the Warrants or, due to the then-current market price of the Common
Stock, the Subscriber may not find it in his or her interest to convert the
Debentures or exercise the Warrants.
(c) Subscriber
is purchasing the Securities for investment purposes and not with a view to
distribution or resale, nor with the intention of selling, transferring or
otherwise disposing of all or any part thereof for any particular price, or
at
any particular time, or upon the happening of any particular event or
circumstances, except selling, transferring, or disposing the Securities in
full
compliance with the applicable provisions of the Act, the rules and regulations
promulgated thereunder, and applicable state securities laws.
(d) Subscriber
acknowledges that the Securities must be held indefinitely unless subsequently
registered under the Act or unless an exemption from such registration is
available. Subscriber is aware of the provisions of Rule 144 promulgated under
the Act which permit limited resale of common stock purchased in a private
placement subject to the satisfaction of certain conditions, including, among
other things, the existence of a public market for the common stock, the
availability of certain current public information about the Company, the resale
occurring not less than one year after a party has purchased and paid for the
security to be sold, the sale being effected through a “broker’s transaction” or
in transactions directly with a “market maker” and the number of shares of
common stock being sold during any three-month period not exceeding specified
limitations.
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(e) Subscriber
acknowledges that Subscriber has had the opportunity to ask questions of, and
receive answers from the Company or any person acting on its behalf concerning
the Company and its business and to obtain any additional information, to the
extent possessed by the Company (or to the extent it could have been acquired
by
the Company without unreasonable effort or expense) necessary to verify the
accuracy of the information received by Subscriber. In connection therewith,
Subscriber acknowledges that Subscriber has had the opportunity to discuss
the
Company’s business, management and financial affairs with the Company’s
management or any person acting on its behalf. Subscriber has received and
reviewed the Memorandum, and all the information that it desires. Without
limiting the generality of the foregoing, Subscriber has been furnished with
or
has had the opportunity to acquire, and to review: (i) copies of all of the
Company’s publicly available documents, and (ii) all information that it desires
with respect to the Company’s business, management, financial affairs and
prospects. In determining whether to make this investment, Subscriber has relied
solely on Subscriber’s own knowledge and understanding of the Company and its
business based upon the Memorandum and any other information furnished to
Subscriber in writing. Subscriber understands that no person has been authorized
to give any information or to make any representations which were not furnished
pursuant to this paragraph and Subscriber has not relied on any other
representations or information.
(f) Subscriber
has all requisite legal and other power and authority to execute and deliver
this Subscription Agreement and to carry out and perform Subscriber’s
obligations under the terms of this Subscription Agreement. This Subscription
Agreement constitutes a valid and legally binding obligation of Subscriber,
enforceable in accordance with its terms, and subject to laws of general
application relating to bankruptcy, insolvency and the relief of debtors and
rules of law governing specific performance, injunctive relief or other general
principals of equity, whether such enforcement is considered in a proceeding
in
equity or law.
(g) Subscriber
has carefully considered and has discussed with the Subscriber’s professional
legal, tax, accounting and financial advisors, to the extent the Subscriber
has
deemed necessary, the suitability of this investment and the transactions
contemplated by this Subscription Agreement for the Subscriber’s particular
federal, state, local and foreign tax and financial situation and has determined
that this investment and the transactions contemplated by this Subscription
Agreement are suitable for the Subscriber. Subscriber relies solely on such
advisors and not on any statements or representations of the Company or any
of
its agents. Subscriber understands that Subscriber (and not the Company) shall
be responsible for Subscriber’s own tax liability that may arise as a result of
this investment or the transactions contemplated by this Subscription Agreement.
(h) Subscriber
acknowledges (i) that each Debenture and its associated Warrants are an
“investment unit” within the meaning of Section 1273(c)(2) of the Internal
Revenue Code of 1986, as amended (the “Code”) and (ii) that, as described in the
Memorandum, the Debenture is being issued at an “original issue discount” within
the meaning Code.
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(i) The
information provided by the Subscriber in the Confidential Purchaser
Questionnaire accompanying this Subscription Agreement does not contain any
untrue statement of a material fact or omit any material fact concerning
Subscriber.
(j) There
are
no actions, suits, proceedings or investigations pending against Subscriber
or
Subscriber’s properties before any court or governmental agency (nor, to
Subscriber’s knowledge, is there any threat thereof) which would impair in any
way Subscriber’s ability to enter into and fully perform Subscriber’s
commitments and obligations under this Subscription Agreement or the
transactions contemplated hereby.
(k) The
execution, delivery and performance of and compliance with this Subscription
Agreement and the issuance of the Securities will not result in any material
violation of, or conflict with, or constitute a material default under, any
of
Subscriber’s articles of incorporation or bylaws, if applicable, or any of
Subscriber’s material agreements nor result in the creation of any mortgage,
pledge, lien, encumbrance or charge against any of the assets or properties
of
Subscriber or the Securities.
(l) Subscriber
acknowledges that the Securities are speculative and involve a high degree
of
risk and that Subscriber can bear the economic risk of the purchase of the
Securities, including a total loss of its investment.
(m) Subscriber
acknowledges that it has carefully reviewed the Memorandum and considered the
risk factors discussed in the “Risk Factors” section prior to making an
investment decision.
(n) Subscriber
recognizes that no federal, state or foreign agency has recommended or endorsed
the purchase of the Securities. Subscriber is not being represented by counsel
to the Company or the Placement Agent and has been instructed to obtain
independent advice regarding the Offering and the making of this investment.
(o) Subscriber
is aware that the Securities when issued will be “restricted securities” as that
term is defined in Rule 144 of the general rules and regulations under the
Act.
(p) Subscriber
understands that any and all certificates representing the Securities and any
and all securities issued in replacement thereof or in exchange therefore shall
bear the following legend or one substantially similar thereto, which Subscriber
has read and understands:
“THE
SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT
OF 1933, AS AMENDED, OR ANY STATE SECURITIES LAWS AND NEITHER THE SECURITIES
NOR
ANY INTEREST THEREIN MAY BE OFFERED, SOLD, TRANSFERRED, PLEDGED OR OTHERWISE
DISPOSED OF EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH
ACT OR SUCH LAWS OR AN EXEMPTION FROM REGISTRATION UNDER SUCH ACT AND SUCH
LAWS
WHICH, IN THE OPINION OF COUNSEL FOR ACORN FACTOR, INC., IS
AVAILABLE.”
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(q) Because
of the restrictions imposed on resale, Subscriber understands that the Company
shall have the right to note stop-transfer instructions in its stock transfer
records, and that the Company intends to do so. Any sales, transfers, or any
other dispositions of the Securities by Subscriber, if any, will be in
compliance with the Act.
(r) Subscriber
acknowledges that Subscriber has such knowledge and experience in financial
and
business matters that he is capable of evaluating the merits and risks of an
investment in the Securities and of making an informed investment
decision.
(s) Subscriber
represents that: (i) Subscriber is able to bear the economic risks of an
investment in the Securities and to afford the complete loss of the investment,
and (ii) (A) Subscriber could be reasonably assumed to have the capacity to
protect its own interests in connection with this subscription; or (B)
Subscriber has a pre-existing personal or business relationship with either
the
Company or any affiliate thereof of such duration and nature as would enable
a
reasonably prudent purchaser to be aware of the character, business acumen
and
general business and financial circumstances of the Company or such affiliate
and is otherwise personally qualified to evaluate and assess the risks, nature
and other aspects of this subscription.
(t) Subscriber
further represents that the address set forth below is its principal residence
(or, if Subscriber is a company, partnership or other entity, the address of
its
principal place of business); that Subscriber is purchasing the Securities
for
Subscriber’s own account and not, in whole or in part, for the account of any
other person; Subscriber is purchasing the Securities for investment and not
with a view to resale or distribution; and that Subscriber has not formed any
entity for the purpose of purchasing the Securities.
(u) Subscriber
understands that the Company and the Placement Agent shall have the
unconditional right to accept or reject this subscription, in whole or in part,
for any reason or without a specific reason, in the sole and absolute discretion
of the Company (even after receipt and clearance of Subscriber’s funds). This
Subscription Agreement is not binding upon the Company until accepted by an
authorized officer of the Company. In the event that the subscription is
rejected, Subscriber’s subscription funds will be returned without interest
thereon or deduction therefrom.
(v) In
making
its decision whether to make an investment in the Securities being offered
in
this Offering, Subscriber is not relying upon any information other than that
contained in the Memorandum and Subscription Agreement, which Subscriber has
carefully read, or other information provided in writing by the
Company.
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(w) Subscriber
represents that Subscriber is not subscribing for Securities in this Offering
as
a result of any advertisement, article, notice or other communication published
in any newspaper, magazine or similar media or broadcast over the Internet,
television or radio or presented at any seminar or meeting.
(x) Subscriber
has carefully read this Subscription Agreement and the Memorandum, and
Subscriber has accurately completed the Confidential Purchaser Questionnaire
which accompanies this Subscription Agreement.
(y) No
representations or warranties have been made to Subscriber by the Company,
or
any officer, employee, agent, affiliate or subsidiary of the Company, other
than
the representations of the Company contained herein, and in subscribing for
the
Securities the Subscriber is not relying upon any representations other than
those contained in the Memorandum or in this Subscription
Agreement.
(z) Subscriber
represents and warrants, to the best of its knowledge, that other than the
Placement Agent, no finder, broker, agent, financial advisor or other
intermediary, nor any purchaser representative or any broker-dealer acting
as a
broker, is entitled to any compensation in connection with the transactions
contemplated by this Subscription Agreement.
(aa) Subscriber
(either directly or indirectly) : (i) has not distributed or reproduced the
Memorandum, in whole or in part, at any time, without the prior written consent
of the Company and the Placement Agent; and (ii) shall keep confidential the
existence of the Memorandum and the information contained therein or made
available in connection with any further investigation of the Company and not
use the information about the Company (including the terms of the Offering)
for
any other purpose, including trading of the Company’s securities (including any
short selling or other hedging transactions), until the terms of the Offering
have been publicly disclosed.
3. Covenants,
Representations and Warranties of the Company.
The
Company covenants with, represents and warrants to, Subscriber as
follows:
(a) The
Company and its Controlled Subsidiaries, are (a) corporations duly organized,
validly existing and in good standing under the laws of their respective states
of incorporation, each have full power and authority to own or lease all of
the
assets owned or leased by each of them and to conduct their respective business
as described in the Memorandum and (b) are duly qualified to do business and
in
good standing as a foreign corporation in all jurisdictions in which the nature
of the activities conducted or the character of the assets owned or leased
makes
such qualification necessary, except where the failure to be so qualified would
not have a material adverse effect on the Company's presently conducted business
(taken as a whole with the business of the Controlled Subsidiaries).
The
term
“Controlled Subsidiaries” means any corporation or other organization in which
the Company owns, directly or indirectly, (i) an equity or other ownership
interest equal to or greater than 50% or (ii) the right to vote more than 50%
of
the outstanding voting stock or to elect or appoint a majority of the members
of
the board of directors.
6
(b) The
Company has all such corporate power and authority to enter into, deliver and
perform this Subscription Agreement.
(c) All
necessary corporate action has been duly and validly taken by the Company to
authorize the execution, delivery and performance of this Subscription Agreement
by the Company, and the issuance and sale of the Securities to be sold by the
Company pursuant to this Subscription Agreement. This Subscription Agreement
has
been duly and validly authorized, executed and delivered by the Company and
constitutes the legal, valid and binding obligation of the Company enforceable
against the Company in accordance with its terms, except as the enforceability
thereof may be limited by bankruptcy, insolvency, reorganization, moratorium
or
other similar laws affecting the enforcement of creditors’ rights generally and
by general equitable principles.
(d) The
Memorandum
and/or
information provided by the Company to the undersigned hereof, including,
without limitation, all filings of the Company filed with the Securities and
Exchange Commission under the Securities and Exchange Act of 1934, as amended
(the “Exchange Act”), included therewith or filed prior to the completion of the
Offering ( collectively, “SEC Reports”) do not contain any untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary to make the statements therein not misleading. Except
as
may have been corrected or supplemented in a subsequent SEC Report, as of their
respective dates, the SEC Reports complied in all material respects with the
requirements of the Exchange Act and the rules and regulations of the Commission
promulgated thereunder. The
Company
has established disclosure controls and procedures (as defined in Exchange
Act
Rules 13a-15(e) and 15d-15(e)) for the Company and designed such disclosure
controls and procedures to ensure that material information relating to the
Company, including its Subsidiaries, is made known to the certifying officers
by
others within those entities, particularly during the period in which the
Company’s most recently filed periodic report under the Exchange Act, as the
case may be, is being prepared. The Company’s certifying officers have evaluated
the effectiveness of the Company’s controls and procedures as of the date prior
to the filing date of the most recently filed periodic report under the Exchange
Act (such date, the “Evaluation Date”).
(e) As
of the
date hereof there is no litigation, arbitration, claim, governmental or other
proceeding (formal or informal), or investigation pending or to the Company's
knowledge threatened, with respect to the Company, or its respective operations,
businesses, properties, or assets, except as properly described in the
Memorandum or such as individually or in the aggregate do not now have and
will
not in the future have a material adverse effect upon the operations, business,
properties, or assets of the Company. The Company is not, nor as of each closing
date shall be, in violation of, or in default with respect to, any law, rule,
regulation, order, judgment, or decree, except as properly described in the
Memorandum or such as individually or in the aggregate do not have and will
not
in the future have a material adverse effect upon the operations, business,
properties, or assets of the Company; nor is the Company required to take any
action in order to avoid any such violation or default
7
(f) To
the
best of its knowledge, the Company has not infringed, is not infringing, and
has
not received notice of infringement with respect to asserted intangibles of
others. To the best knowledge of the Company, none of the patents, patent
applications, trademarks, service marks, trade names and copyrights, and
licenses and rights to the foregoing presently owned or held by the Company,
materially infringe upon any like right of any other person or entity. The
Company (i) owns or has the right to use, free and clear of all liens, charges,
claims, encumbrances, pledges, security interests, defects or other restrictions
of any kind whatsoever, sufficient patents, trademarks, service marks, trade
names, copyrights, licenses and right with respect to the foregoing, to conduct
its business as presently conducted except as set forth in the Memorandum,
and
(ii) except as set forth in the Memorandum, is not obligated or under any
liability whatsoever to make any payments by way of royalties, fees or otherwise
to any owner or licensee of, or other claimant to, any patent, trademark,
service ▇▇▇▇, trade name, copyright, know-how, technology or other intangible
asset, with respect to the use thereof or in connection with the conduct of
its
business as now conducted or otherwise. The Company has direct ownership of
title to all its intellectual property (including all United States and foreign
patent applications and patents), other proprietary rights, confidential
information and know-how; owns all the rights to its Intangibles as are
currently used in or have potential for use in its business.
(g) The
Debentures and Warrants to be issued and sold to the undersigned as provided
in
the Memorandum have been duly authorized and when issued and delivered against
payment therefor, will be validly issued, fully paid and non-assessable and
will
conform to the description thereof in the Memorandum. The Warrant Shares and
the
Debenture Shares have been duly authorized and when issued and delivered upon
either conversion or exercise and due payment therefor will be validly issued,
fully paid and non-assessable and will conform to the description thereof in
the
Memorandum; and there are no preemptive or other rights to subscribe for or
to
purchase, nor any restriction upon the voting or transfer of, any shares of
the
Common Stock issuable upon exercise of the Warrants or conversion of Debentures
pursuant to the Company's certificate of incorporation or by-laws or any
agreement or other outstanding instrument to which the Company is a party or
is
otherwise known to the Company. The Company has reserved sufficient shares
of
Common Stock to be issued upon exercise of the Warrants and conversion of the
Debentures.
(h)
The
Company, until payment in full of all principal and interest due on the
Debentures, will not pay or declare any dividends or other distributions of
cash
or other assets with respect to its capital stock; provided, however, that
the
Company may declare and pay a dividend or distribution to its shareholders
of
its shares in its equity affiliate, Comverge, Inc., a Delaware corporation,
if and only if (i) the holders of the Warrants receive notice of the Company’s
intent to make such a dividend or distribution of Comverge shares no later
than
30 days prior to the record date determined by the Board of Directors of the
Company for such dividend or distribution and (ii) there is, as of the record
date for the dividend or distribution, a registration statement which has been
declared effective by the SEC providing for the immediate resale of the shares
of Common Stock underlying the Warrants.
(i) The
Company shall provide for the transfer, upon request of the Subscriber, or
removal of any legends upon the Securities, all as may be allowed in accordance
with SEC Rule 144, and provide any required opinions of counsel to the Company’s
transfer agents, at no cost to the Subscriber. The Company shall make generally
available such information as may be necessary under SEC Rule 144 to allow
for
the resale of Securities by the Subscriber for at least three (3) years after
the final Closing of the Offering.
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(j) The
Company’s capitalization prior to the Offering is as stated in the Memorandum,
under the column titled “Actual” in the table under the caption
“Capitalization.”
(k) The
outstanding options, warrants and other convertible securities of the Company
are as set forth in the Memorandum and the Company’s SEC Reports included as
exhibits to the Memorandum (collectively, the “Company
Documents”).
Other
than as described in the Company Documents, neither the Company nor any
subsidiary is a party to an agreement, instrument or understanding which calls
for, and no securities of the Company or any subsidiary contain provisions
relating to, the
resetting or repricing
of any debt or equity security instrument of the Company or any Subsidiary.
The
issuance of the Securities or the consummation of the Offering will not trigger
any resetting or repricing of any debt or equity security instrument of the
Company or any Subsidiary and will not result in any preemptive rights to
acquire securities of the Company in favor of any third party, except with
respect to those certain investors, who purchased securities pursuant to the
prior private offering completed by the Company in July, 2006.
(l) Neither
the Company nor any of its subsidiaries are (i) in violation of its certificate
of incorporation or by-laws, (ii) to the best knowledge of the Company, in
violation of any statute, law, rule, code, administrative regulation, ordinance,
judgment, order or decree of any government, governmental instrumentality,
court, domestic or foreign, or arbitration panel or other body applicable to
it
where such violation would have a material adverse effect or (iii) to the best
knowledge of the Company, in default in the performance or observance of any
obligation, agreement, covenant or condition contained in any indenture,
mortgage, deed of trust, voting agreement, voting trust agreement, loan
agreement, bond, debenture, note or other evidence of indebtedness, lease,
sublease, license agreement, contract or other agreement or instrument to which
it is a party or by which it or any of its respective properties are bound
or
affected (“contracts”), where such defaults, singly or in the aggregate, would
have a material adverse effect. To the knowledge of the Company, no other party
under any contract is in default in any material respect thereunder which
affects the Company or any subsidiary.
(m)
The
Company and its subsidiaries (A) has paid all federal, state, local and foreign
taxes for which it is liable and has furnished all information returns it is
required to furnish pursuant to the Code, (B) has established adequate reserves
for such taxes which are not due and payable and (C) does not have any tax
deficiency or claims outstanding, proposed or assessed against it.
(n) The
Company and the subsidiaries maintain a system of internal accounting and other
controls sufficient to provide reasonable assurances that: (i) transactions
are
executed in accordance with management’s general or specific authorizations,
(ii) transactions are recorded as necessary to permit preparation of reliable
financial statements in conformity with United States generally accepted
accounting principles and to maintain accountability for assets, (iii) access
to
assets is permitted only in accordance with management’s general or specific
authorization, and (iv) the recorded accounting for assets is compared with
existing assets at reasonable intervals and appropriate action is taken with
respect to any material differences.
9
(o)
The
Company is in compliance with applicable requirements of the ▇▇▇▇▇▇▇▇-▇▇▇▇▇
Act
of 2002 and applicable rules and regulations promulgated by the Commission
thereunder in effect as of the date of this Agreement, except where such
noncompliance could not be reasonably expected to have, individually or in
the aggregate, a material adverse effect upon the Company.
4. Indemnification.
Subscriber agrees to indemnify and hold harmless the Company, the Placement
Agent, and their respective officers, directors, employees, shareholders, agents
representatives and affiliates, and any person acting on behalf of the Company
or Placement Agent, from and against any and all damage, loss, liability, cost
and expense (including reasonable attorneys’ fees) which any of them may incur
by reason of the failure by Subscriber to fulfill any of the terms and
conditions of this Subscription Agreement, or by reason of any breach of the
representations and warranties made by Subscriber herein, or in any other
document provided by Subscriber to the Company. All representations, warranties
and covenants of each of Subscriber and the Company contained herein shall
survive the acceptance of this subscription.
5. Registration
Rights Granted to Subscriber.
In
consideration of the investment in the Company described in this Agreement
and
the Memorandum, the Company hereby grants to the Subscriber the registration
rights set forth on Annex
A
attached
hereto.
6. Anti-Dilution
Adjustments; Right of Participation.
(a)
In
the
event that, during the term commencing on the Closing of this Offering and
ending on a date which is 6 months after the effective date of the registration
statement required to be filed by the Company in accordance with this
Subscription Agreement (as described in Annex A), if the Company sells or issues
additional shares of Common Stock, or securities (debt and/or equity)
convertible into Common Stock, with a purchase, exercise or conversion price
(the “Share Antidilution Price”) of less than the Conversion Price (as adjusted
for stock splits, stock dividends and the like), with certain exceptions set
forth in clause (b) below, the Conversion Price of the Debentures and the
exercise price of the Warrants shall be reduced on a “full rachet basis” to the
Share Antidilution Price; provided, however, the exercise price of the Warrants
shall be reduced to 118% of the Share Antidilution Price, as provided in the
Warrants.
(b) The
adjustments to Conversion Price and the Exercise Price as provided in clause
(a)
above shall not be applicable in the following instances: (i) Common Stock
issuable or issued to employees, consultants or directors of the Company
directly or pursuant to a stock plan or other compensation arrangement which
shall be approved by the Board of Directors of the Company, (ii) capital stock,
debt instruments convertible into capital stock or warrants or options to
purchase capital stock issued in connection with bona fide acquisitions,
mergers, technology licenses or purchases, corporate partnering agreements,
joint ventures or similar transactions, the terms of which are approved by
the
Board of Directors of the Company, and (ii) Common Stock issued or issuable
upon
conversion of the Warrants or any other securities exercisable or exchangeable
for, or convertible into shares of Common Stock outstanding as of the date
of
the Memorandum.
10
(c) The
Company hereby agrees that until the effectiveness of the registration statement
required to be filed in connection herewith, as described in Annex A hereto,
notwithstanding anything else to the contrary contained in this Subscription
Agreement, other than with respect to issuances provided for under clause (b)
above, it shall not issue or agree to issue any shares of its Common Stock
or
securities (whether debt or equity) convertible into shares of Common Stock
with
a issue, purchase or conversion price of less than the Conversion Price of
the
Debentures without the written consent of Subscribers holding 75% of the then
outstanding Debentures.
7. Patriot
Act Compliance
To
induce
the Company to accept the undersigned’s investment, the undersigned hereby makes
the following representations, warranties and covenants to the
Company:
(a) The
undersigned represents and warrants that no holder of any beneficial interest
in
the undersigned’s equity securities of the Company (each a “Beneficial
Interest Holder”)
and,
no Related Person (in the case the undersigned is an entity) is or will
be:
| (1) |
A
person or entity whose name appears on the list of specially designated
nationals and blocked persons maintained by the Office of Foreign
Asset
Control from time to time;
|
| (2) |
A
Foreign Shell Bank; or
|
| (3) |
A
person or entity resident in or whose subscription funds are transferred
from or through an account in a Non-Cooperative Jurisdiction.
|
(b) The
undersigned represents that the bank or other financial institution (the
“Wiring
Institution”)
from
which the undersigned’s funds will be wired is located in a FATF
Country.
(c) The
undersigned represents that:
| (1) |
Neither
it, any Beneficial Interest Holder nor any Related Person (in the
case of
the undersigned is an entity) is a Senior Foreign Political Figure,
any
member of a Senior Foreign Political Figure’s Immediate Family or any
Close Associate of a Senior Foreign Political Figure;
or
|
| (2) |
Neither
it, any Beneficial Interest Holder nor any Related Person (in the
case the
undersigned is an entity) is resident in, or organized or chartered
under
the laws of, a jurisdiction that has been designated by the Secretary
of
the Treasury under Section 311 or 312 of the USA PATRIOT Act as warranting
special measures due to money laundering
concerns.
|
11
| (3) |
Its
investment funds do not originate from, nor will they be routed through,
an account maintained at a Foreign Shell Bank, an “offshore bank,” or a
bank organized or chartered under the laws of a Non-Cooperative
Jurisdiction.
|
(d) Form
purposes of this Section 7, the following definitions shall apply;
Close
Associate:
With
respect to a Senior Foreign Political Figure, a person who is widely and
publicly known internationally to maintain an unusually close relationship
with
the Senior Foreign Political Figure, and includes a person who is in a position
to conduct substantial domestic and international financial transactions on
behalf of the Senior Foreign Political Figure.
FATF:
The
Financial Action Task Force on Money Laundering.
FATF
Country:
A
country that is a member of FATF. As of September 1, 2003, the countries which
are members of FATF are: Argentina; Australia; Austria; Belgium; Brazil; Canada;
Denmark; Finland; France; Germany; Greece; Hong Kong; Iceland; Ireland; Italy;
Japan; Luxembourg; Mexico; Kingdom of the Netherlands; New Zealand; Norway;
Portugal; Singapore; South Africa; Spain; Sweden; Switzerland; Turkey; United
Kingdom and United States. For a current list of FATF members see
▇▇▇▇://▇▇▇▇.▇▇▇▇.▇▇▇/▇▇▇▇/▇▇▇▇▇▇▇_▇▇.▇▇▇.
Foreign
Bank:
An
organization that (i) is organized under the laws of a country outside the
United States; (ii) engages in the business of banking; (iii) is recognized
as a
bank by the bank supervisory or monetary authority of the country of its
organization or principal banking operations; (iv) receives deposits to a
substantial extent in the regular course of its business; and (v) has the power
to accept demand deposits, but does not include the U.S. branches or agencies
of
a foreign bank.
Foreign
Shell Bank:
A
Foreign Bank without a Physical Presence in any country, but does not include
a
Regulated Affiliate.
Government
Entity:
Any
government or any state, department or other political subdivision thereof,
or
any governmental body, agency, authority or instrumentality in any jurisdiction
exercising executive, legislative, regulatory or administrative functions of
or
pertaining to government.
Immediate
Family:
With
respect to a Senior Foreign Political Figure, typically includes the political
figure’s parents, siblings, spouse, children and in-laws.
Non-Cooperative
Jurisdiction:
Any
foreign country or territory that has been designated as non-cooperative with
international anti-money laundering principles or procedures by an
intergovernmental group or organization, such as FATF, of which the United
States is a member and with which designation the United States representative
to the group or organization continues to concur. See
▇▇▇▇://▇▇▇▇.▇▇▇▇.▇▇▇/▇▇▇▇/▇▇▇▇_▇▇.▇▇▇ for FATF’s list of non-cooperative
countries and territories.
12
Physical
Presence:
A place
of business that is maintained by a Foreign Bank and is located at a fixed
address, other than solely a post office box or an electronic address, in a
country in which the Foreign Bank is authorized to conduct banking activities,
at which location the Foreign Bank: (a) employs one or more individuals on
a
full-time basis; (b) maintains operating records related to its banking
activities; and (c) is subject to inspection by the banking authority that
licensed the Foreign Bank to conduct banking activities.
Publicly
Traded Company:
An
entity whose securities are listed on a recognized securities exchange or quoted
on an automated quotation system in the U.S. or country other than a
Non-Cooperative Jurisdiction or a wholly-owned subsidiary of such an
entity.
Qualified
Plan:
A tax
qualified pension or retirement plan in which at least 100 employees participate
that is maintained by an employer that is organized in the U.S. or is a U.S.
Government Entity.
Regulated
Affiliate:
A
Foreign Shell Bank that: (a) is an affiliate of a depository institution, credit
union, or Foreign Bank that maintains a Physical Presence in the U.S. or a
foreign country, as applicable; and (b) is subject to supervision by a banking
authority in the country regulating such affiliated depository institution,
credit union, or Foreign Bank.
Related
Person:
With
respect to any entity, any interest holder, director, senior officer, trustee,
beneficiary or grantor of such entity; provided that in the case of an entity
that is a Publicly Traded Company or a Qualified Plan, the term “Related Person”
shall exclude any interest holder holding less than 5% of any class of
securities of such Publicly Traded Company and beneficiaries of such Qualified
Plan.
Senior
Foreign Political Figure:
A
senior official in the executive, legislative, administrative, military or
judicial branches of a non-U.S. government (whether elected or not), a senior
official of a major non-U.S. political party, or a senior executive of a
non-U.S. government-owned corporation. In addition, a Senior Foreign Political
Figure includes any corporation, business or other entity that has been formed
by, or for the benefit of, a Senior Foreign Political Figure.
USA
PATRIOT Act:
The
Uniting and Strengthening America by Providing Appropriate Tools Required to
Intercept and Obstruct Terrorism (USA PATRIOT Act) Act of 2001 (Pub. L.
No. 107-56).
8. Miscellaneous.
(a) Subscriber
agrees not to transfer or assign this Subscription Agreement or any of
Subscriber’s interest herein and further agrees that the transfer or assignment
of the Securities acquired pursuant hereto shall be made only in accordance
with
all applicable laws.
13
(b) Subscriber
agrees that Subscriber cannot cancel, terminate, or revoke this Subscription
Agreement or any agreement of Subscriber made hereunder, and this Subscription
Agreement shall survive the death or legal disability of Subscriber and shall
be
binding upon Subscriber’s heirs, executors, administrators, successors, and
permitted assigns.
(c) This
Subscription Agreement constitutes the entire agreement among the parties hereto
with respect to the subject matter hereof and may be amended only by a written
execution by all parties.
(d) Subscriber
acknowledges that it has been advised to consult with its own attorney regarding
this subscription and Subscriber has done so to the extent that Subscriber
deems
appropriate. Subscriber understands and agrees that Subscriber has not been
represented in this transaction by counsel to the Company or the Placement
Agent.
(e) Any
notice or other document required or permitted to be given or delivered to
the
Subscriber shall be in writing and sent: (i) by registered or certified mail
with return receipt requested (postage prepaid) or (ii) by a recognized
overnight delivery service (with charges prepaid).
If
to the
Company, at:
▇▇▇
▇▇▇▇▇
▇▇▇▇
▇▇▇▇▇▇▇▇▇▇,
▇▇ ▇▇▇▇▇
Attn.:
▇▇▇▇ ▇. ▇▇▇▇▇, Chief Executive Officer
If
to the
Subscriber, at its address set forth on the signature page to this Subscription
Agreement, or such other address as it shall have specified to the Company
in
writing, with a copy (which shall not constitute notice) to each of the
following:
If
to
First Montauk Securities Corp. at:
Parkway
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇
▇▇▇▇,
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
Tel
No.:
▇▇▇-▇▇▇-▇▇▇▇
Attn:
Director of Corporate Finance
(f) Failure
of the Company to exercise any right or remedy under this Subscription Agreement
or any other agreement between the Company and the Subscriber, or otherwise,
or
delay by the Company in exercising such right or remedy, will not operate as
a
waiver thereof. No waiver by the Company will be effective unless and until
it
is in writing and signed by the Company.
(g) This
Subscription Agreement shall be enforced, governed and construed in all respects
in accordance with the laws of the State of New York, as such laws are applied
by the New York courts except with respect to the conflicts of law provisions
thereof, and shall be binding upon the Subscriber, the Subscriber’s heirs,
estate, legal representatives, successors and assigns and shall inure to the
benefit of the Company, its successors and assigns.
14
(h) Any
legal
suit, action or proceeding arising out of or relating to this Subscription
Agreement or the transactions contemplated hereby shall be instituted
exclusively in New York, New York, or in the United States District Court for
the Southern District of New York (the “New York Courts”). The parties hereto
hereby: (i) waives any objection which they may now have or hereafter have
to
the venue of any such suit, action or proceeding, and (ii) irrevocably consents
to the jurisdiction of the New York Courts in any such suit, action or
proceeding. The parties further agree to accept and acknowledge service of
any
and all process which may be served in any such suit, action or proceeding
in
the New York Courts and agree that service of process upon a party mailed by
certified mail to such party’s address shall be deemed in every respect
effective service of process upon such party in any such suit, action or
proceeding.
(i) If
any
provision of this Subscription Agreement is held to be invalid or unenforceable
under any applicable statute or rule of law, then such provision shall be deemed
modified to conform to such statute or rule of law. Any provision hereof that
may prove invalid or unenforceable under any law shall not affect the validity
or enforceability of any other provisions hereof.
(j)
The
parties understand and agree that money damages would not be a sufficient remedy
for any breach of the Subscription Agreement by the Company or the Subscriber
and that the party against which such breach is committed shall be entitled
to
equitable relief, including injunction and specific performance, as a remedy
for
any such breach. Such remedies shall not be deemed to be the exclusive remedies
for a breach by either party of the Subscription Agreement but shall be in
addition to all other remedies available at law or equity to the party against
which such breach is committed.
(k) All
pronouns and any variations thereof used herein shall be deemed to refer to
the
masculine, feminine, singular or plural, as identity of the person or persons
may require.
(l) This
Subscription Agreement may be executed in counterparts and by facsimile, each
of
which shall be deemed an original, but all of which shall constitute one and
the
same instrument.
Notwithstanding
anything else contained in this Subscription Agreement or the Memorandum, each
prospective investor (and its employees, representatives or other agents) and
the Company may disclose to any and all persons, without limitation of any
kind,
the tax treatment and tax structure (as such terms are used in
Sections 6011, 6111 and 6112 of the Code and the Treasury Regulations
promulgated thereunder) of the undersigned subscribers investment in the Company
and any transactions entered into by the Company and all materials of any kind
(including opinions or other tax analyses) that are provided to such prospective
investor relating to such tax treatment and tax structure; provided
that no prospective investor or its employees, representatives or agents shall
disclose any information for which nondisclosure is reasonably necessary in
order to comply with U.S. securities laws; and provided further
that this authorization is not intended to permit disclosure of any term or
detail not relevant to the tax treatment or the tax structure of the Company,
the Offering or transactions entered into by the parties
hereto.
15
The
undersigned understands and agrees that this authorization to disclose such
tax
treatment and tax structure is not intended to permit disclosure of any other
information including (without limitation) (i) any portion of any materials
to the extent not related to the tax treatment or tax structure of the Company,
the Offering or transactions entered into by the undersigned and the Company,
(ii) the identities of any investors in the Offering or (iii) any
other term or detail not relevant to the tax treatment or the tax structure
of
the Partnership or transactions entered into by it.
[Signature
Pages Follow]
16
Signature
Page for Individuals:
IN
WITNESS WHEREOF, Subscriber has caused this Subscription Agreement to be
executed as of the date indicated below.
| $ |
$
|
|||
|
Purchase
Price (Same as Principal Amount)
|
Principal
Amount of Debenture
|
|||
|
Print
or Type Name
|
Print
or Type Name (Joint-owner)
|
|||
|
Signature
|
Signature
(Joint-owner)
|
|||
|
Date
|
Date
(Joint-owner)
|
|||
|
Social
Security Number
|
Social
Security Number (Joint-owner)
|
|||
|
|
|
|||
|
Address
|
Address
(Joint-owner)
|
|||
|
_______
Joint Tenancy
|
______ Tenants in Common |
Wiring
Instructions:
|
Bank
Name:
|
Signature
Bank
|
|
|
ABA
#:
|
▇▇▇▇▇▇▇▇▇
|
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|
Tel
Number
|
▇▇▇-▇▇▇-▇▇▇▇
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Address
|
▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
|
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|
Acct
#:
|
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|
Acct.
Name:
|
Signature
Bank as Escrow Agent for Acorn Factor, Inc.
|
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|
Reference
|
S-1
Signature
Page for Partnerships, Corporations or Other Entities:
IN
WITNESS WHEREOF, Subscriber has caused this Subscription Agreement to be
executed as of the date indicated below.
$
_______________________________________
$_________________________________
Total
Purchase Price (Same
as
Principal Amount)
Principal Amount of Debenture
_____________________________________________________________________________
Print
or
Type Name of Entity
______________________________________________________________________________
Address
____________________________________ ____________________________________
Taxpayer
I.D. No. (if applicable)
Date
| By: | ||||
|
Signature:
Name:
Title:
|
Print
or Type Name and Indicate
Title
or Position with Entity
|
|||
| Signature (other authorized signatory) |
Print
or Type Name and Indicate
Title
or Position with Entity
|
|||
All
subscriptions from partnerships, corporations, trusts or limited liability
companies must be accompanied by resolutions of the appropriate corporate
authority (board of directors, trustee or managing partner or members, as
applicable) and trust documents evidencing the authorization and power to make
the subscription.
Wiring
Instructions:
|
Bank
Name:
|
Signature
Bank
|
|
|
ABA
#:
|
▇▇▇▇▇▇▇▇▇
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Tel
Number
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Address
|
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|
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Acct
#:
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|
Acct.
Name:
|
Signature
Bank as Escrow Agent for Acorn Factor, Inc.
|
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Reference
|
S-2
SUBSCRIPTION
SIGNATURE PAGE AND ACCEPTANCE ACORN FACTOR, INC.
IN
WIITNESS WHEREOF, the Company has caused this Subscription Agreement to be
executed, and the foregoing subscription accepted, as of the date indicated
below.
| |
|
|
| By: | ||
|
Name: |
||
| Title | ||
Date:
__________________________, 2007
S-3
Annex
A
Registration
Rights
ACORN
FACTORS, INC. (the “Company”) hereby grants to the Subscriber the following
registration rights.
1. Definitions.
Capitalized
terms used herein without definition shall have the respective meanings given
such terms as set forth in the Subscription Agreement between ACORN
FACTOR, INC. and
the
subscriber signatory thereto (the “Subscription
Agreement”)
or in
the Company’s Confidential Private Placement Memorandum, dated as of March 8,
2007 (as amended or supplemented, and together with all documents and exhibits
attached thereto, the “Memorandum”).
As
used herein, the following terms shall have the following meanings:
Business
Day:
Any day
other than a day on which banks are authorized or required to be closed in
the
State of New York.
Commission:
The
United States Securities and Exchange Commission.
Common
Stock:
The
Common Stock, par value $.01 per share, of the Company.
Debentures:
The
convertible Debentures to be purchased in the offering, such shares to which
the
Debentures are convertible to be known as “Debenture Shares.”
Exchange
Act:
The
Securities Exchange Act of 1934, as amended, and the rules and regulations
of
the Commission promulgated thereunder.
Holder
or
Holders:
Any
holder of the Registrable Securities.
Offering:
means
the private placement offering of securities by the Company as described in
the
Memorandum.
Person:
Any
individual, corporation, partnership, joint venture, association, joint stock
company, trust, unincorporated organization or government or other agency or
political subdivision thereof.
Prospectus:
The
prospectus included in any Registration Statement (including, without
limitation, a prospectus that discloses information previously omitted from
a
prospectus filed as part of an effective registration statement in reliance
upon
Rule 430A promulgated under the Securities Act), as amended or supplemented
by
any prospectus supplement, with respect to the terms of the offering of any
portion of the Registrable Securities covered by such Registration Statement,
and all other amendments and supplements to the prospectus, including
post-effective amendments, and all material incorporated by reference or deemed
to be incorporated by reference in such prospectus.
-1-
Questionnaire:
A
questionnaire prepared by the Company, and included herewith, which is to be
completed by each Holder in order to provide the information required by
Sections 507 and 508 of Regulation S-K, as promulgated under the Securities
Act
and the Exchange Act, for inclusion in a Registration Statement, including
the
identification of all beneficial owners of Registrable Securities.
Registrable
Securities:
The
Debenture Shares, the Warrant Shares, and the shares underlying the Placement
Agent Warrants, and any and all shares of Common Stock issued as dividends
with
respect to the foregoing or issued or issuable upon any stock split, until
such
time as (1) a Registration Statement covering such Registrable Securities has
been declared effective by the Commission or (2) such Registrable Securities
are
saleable pursuant to Rule 144(k) (or any similar provision then in force) under
the Securities Act, without any restriction, whichever is earlier.
Registration
Statement:
Any
registration statement of the Company that covers any of the Registrable
Securities pursuant to the provisions of this Agreement, including the
Prospectus, amendments and supplements to such registration statements,
including post effective amendments, all exhibits, and all material incorporated
by reference or deemed to be incorporated by reference in such registration
statement.
Securities
Act:
The
Securities Act of 1933, as amended, and the rules and regulations of the
Commission promulgated thereunder.
Warrants:
The
warrant to purchase Common Stock included in the Offering
Warrant
Shares:
The
shares of Common Stock issuable upon exercise of the Warrant
Shares.
2. Registration
Rights.
(a) Required
Registration Within
30
days from the later of (i) the date of filing of the Company’s Annual Report for
the fiscal year ended December 31, 2006 (the “2006 Form 10-K”) or (ii) the final
Closing of the Offering, the Company shall prepare and file with the Commission
a Registration Statement on appropriate form as determined under the regulations
of the Commission for the purpose of registering for public resale: (i) the
Debenture Shares and the Warrant Shares issuable in connection with the
Debentures and Warrants sold in the Offering, and (ii) the shares underlying
warrants issuable to the Placement Agent in connection with the Offering. The
Company shall use its best efforts to ensure that such Registration Statement
is
declared effective within 120 days of such date. In the event that the
Registration Statement is not declared effective by the Commission within the
earlier of 120 days from (i) the due date of the 2006 Form 10-K (as such date
may have been extended pursuant to Rule 12b-25 promulgated under the ▇▇▇▇ ▇▇▇)
and (ii) the actual date of filing of the 2006 Form 10-K, or, thereafter, the
Registration Statement does not stay effective for 30 consecutive days for
any
reason during the two year period commencing after its effectiveness, then
Holder shall be entitled to liquidated damages equal to one percent (1%) of
the
Holder’s original subscription price in the Offering for each 30 day period, pro
rated on a daily basis; provided, however, that such damages shall not exceed
11.25% of such Holder’s original subscription payment. The Company will agree to
take all actions as are necessary to keep the Registration Statement effective
until the later of: (i) the first anniversary of the first date on which no
Warrants remain unexercised or unexpired and no Debentures remain unconverted
or
unredeemed or (ii) the date all Debenture Shares and Warrant Shares may be
sold
without any restrictions under Rule 144 during any 90-day period in accordance
with all rules and regulations regarding sales of securities pursuant to Rule
144(k). The Company shall bear all expenses of the Registration Statement,
including fees and expenses of counsel or other advisors to the investors in
the
Placement and the Placement Agent, (which counsel fees shall be the sum of
$15,000 and payable in advance at the final closing of the Offering) as well
as
any filing fees payable in connection with any required NASD filings by the
Placement Agent.
-2-
(b) Withdrawal.
If a
registration pursuant to this Section 2 involves an underwritten public
offering, any Holder requesting to be included in such registration may elect,
in writing prior to the effective date of the registration statement filed
in
connection with such registration, not to register the Holder’s securities in
connection with such registration. The foregoing provisions notwithstanding,
the
Company may withdraw any registration statement referred to in this Section
2
without thereby incurring any liability to the Holders.
(c) Holdback
Agreements.
If any
registration of Registrable Securities shall be in connection with an
underwritten public offering, each Holder agrees, provided that all other
security holders of the Company whose securities are included in the
Registration Statement similarly agree, not to effect any public sale or
distribution, including any sale pursuant to Rule 144 under the Securities
Act,
of any Registrable Securities, and not to effect any transfer, sale, assignment
or pledge of any securities of the Company beneficially owned by the Holder
during the thirty (30) days prior to, and continuing for the 180 days following
the effective date of such Registration Statement (except as part of such
registration).
(d) Exceptions.
Notwithstanding the foregoing, the Company may delay the registration of
Registrable Securities pursuant to Section 2 hereof for the time periods
described in Section 2(e) hereof upon the occurrence of any of the
following:
(i) The
Company shall have previously entered into an agreement or letter of intent
contemplating an underwritten public offering on a firm commitment basis of
Common Stock or securities convertible into or exchangeable for Common Stock
and
the managing underwriter of such proposed public offering advises the Company
in
writing that in its opinion such proposed underwritten offering would be
materially and adversely affected by a concurrent registered offering of
Registrable Securities (such opinion to state the reasons
therefore);
(ii) The
Company shall have entered into an agreement or letter of intent, which has
not
expired or otherwise terminated, contemplating a material business acquisition
by the Company or its subsidiaries whether by way of merger, consolidation,
acquisition of assets, acquisition of securities or otherwise; or
(iii) The
Company is in possession of material nonpublic information that the Company
would be required to disclose in the Registration Statement and that is not,
but
for the registration, otherwise required to be disclosed at the time of such
registration, the disclosure of which, in its good faith judgment, would have
a
material adverse effect on the business, operations, prospects or competitive
position of the Company.
(e)
Period
of Delay.
If an
event described in clauses (i) through (iii) of Section 2(d) shall occur, the
Company may, by written notice to the Holders, delay the filing of a
Registration Statement with respect to the Registrable Securities to be covered
thereby for a period of time not exceeding 60 days.
-3-
(f) Inclusion
in Registration Statement.
Each
Holder agrees, by acquisition of the Registrable Securities, that it shall
not
be entitled to be named as a selling security holder in a Registration Statement
or use the Prospectus for offers and resales of Registrable Securities at any
time, unless such Holder has returned to the Company a completed and signed
Questionnaire on or prior to at least three (3) business days prior to the
filing of the Registration Statement. If a Holder of Registrable Securities
returns a Questionnaire after the deadline specified in the previous sentence,
the Company shall use its best efforts to take such actions as are required
to
name such Holder as a selling security holder in the Registration Statement
or
any pre-effective or post-effective amendment thereto and to include (to the
extent not theretofore included) in the Registration Statement the Registrable
Securities identified in such late Questionnaire, provided that the Company
will
take such action on or prior to the 45th day following receipt of the applicable
Questionnaire.
3. Registration
Procedures.
In
connection with the registration obligations of the Company pursuant to the
terms and conditions of this Agreement, the Company shall:
(a) prior
to
filing a Registration Statement or Prospectus or any amendments or supplements
thereto, including documents incorporated by reference after the initial filing
of the Registration Statement, the Company will furnish to the Holders covered
by such Registration Statement (the “Selling
Holders”),
Holders’ legal counsel and the underwriters, if any, draft copies of all such
documents proposed to be filed at least three (3) Business Days prior thereto,
which documents will be subject to the review of such Holders’ legal counsel and
the underwriters, if any. The Company will notify each Selling Holder of any
stop order issued or threatened by the Commission in connection therewith and
take all reasonable actions required to prevent the entry of such stop order
or
to remove it if entered;
(b) as
promptly as practicable prepare and file with the Commission such amendments
and
post-effective amendments to the Registration Statement as may be necessary
to
keep such Registration Statement effective for the period required pursuant
to
Section 2; cause the Prospectus to be supplemented by any required Prospectus
supplement, and, as so supplemented, to be filed pursuant to Rule 424 under
the
Securities Act; and comply with the provisions of the Securities Act applicable
to it with respect to the disposition of all Registrable Securities covered
by
such Registration Statement during the applicable period in accordance with
the
intended methods of disposition by the Selling Holders set forth in such
Registration Statement or supplement to the Prospectus;
(c) as
promptly as practicable furnish to any Selling Holder and the underwriters,
if
any, without charge, such number or conformed copies of such Registration
Statement and any post-effective amendment thereto and such number of copies
of
the Prospectus (including each preliminary Prospectus) and any amendments or
supplements thereto, and any documents incorporated by reference therein, as
such Selling Holder or underwriter may reasonably request in order to facilitate
the disposition of the Registrable Securities being sold by such Selling Holder
(it being understood that the Company consents to the use of the Prospectus
and
any amendment or supplement thereto by each Selling Holder and the underwriters,
if any, in connection with the offering and sale of the Registrable Securities
covered by the Prospectus or any amendment or supplement thereto);
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(d) on
or
prior to the date on which the Registration Statement is declared effective,
register or qualify such Registrable Securities under such other securities
or
blue sky laws of such jurisdictions as any Selling Holder or underwriter
reasonably requests and do any and all other acts and things which may be
necessary or advisable to enable such Selling Holder to consummate the
disposition in such jurisdictions of such Registrable Securities owned by such
Selling Holder; keep each such registration or qualification (or exemption
therefrom) effective during the period which the Registration Statement is
required to be kept effective; and do any and all other acts or things
reasonably necessary or advisable to enable the disposition in such
jurisdictions of the Registrable Securities covered by the applicable
Registration Statement; provided
that the
Company shall not be required to (i) qualify to do business as a foreign
corporation or as a broker-dealer in any jurisdiction where it is not then
so
qualified or (ii) take any action which would subject it to general service
of
process or to taxation in any jurisdiction where it is not then so
subject;
(e) cause
the
Registrable Securities covered by such Registration Statement to be registered
with or approved by such other governmental agencies or authorities as may
be
necessary by virtue of the business and operations of the Company to enable
the
Selling Holders to consummate the disposition of such Registrable
Securities;
(f) as
promptly as practicable notify each Selling Holder and any underwriter and
(if
requested by any such Person) confirm such notice in writing, (i) when a
Prospectus or any Prospectus supplement or post-effective amendment has been
filed and, with respect to a Registration Statement or any post-effective
amendment, when the same has become effective, (ii) of the issuance by the
Commission of any stop order suspending the effectiveness of a Registration
Statement or the initiation or threatening of any proceedings for that purpose,
(iii) of the issuance by any state securities commission or other regulatory
authority of any order suspending the qualification or exemption from
qualification of any of the Registrable Securities under state securities or
blue sky laws or the initiation of any proceedings for that purpose and (iv)
of
the happening of any event which makes any statement made in a Registration
Statement or related Prospectus or any document incorporated or deemed to be
incorporated by reference therein untrue or which requires the making of any
changes in such Registration Statement, Prospectus or documents so that they
will not contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make the statements
therein not misleading; and, as promptly as practicable thereafter, prepare
and
file with the Commission and furnish a supplement or amendment to such
Prospectus so that, as thereafter deliverable to the purchasers of such
Registrable Securities, such Prospectus will not contain any untrue statement
of
a material fact or omit to state a material fact necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading;
(g) use
its
reasonable efforts to prevent the issuance of any order suspending the
effectiveness of a Registration Statement, and, if one is issued, to obtain
the
withdrawal of any order suspending the effectiveness of a Registration Statement
at the earliest possible moment;
Each
Selling Holder, upon receipt of any notice from the Company of the happening
of
any event of the kind described in subsection (f) of this Section 3, shall
forthwith discontinue disposition of the Registrable Securities until such
Selling Holder’s receipt of the copies of the supplemented or amended Prospectus
contemplated by subsection (f) of this Section 3 or until it is advised in
writing (the “Advice”)
by the
Company that the use of the Prospectus may be resumed, and has received copies
of any additional or supplemental filings which are incorporated by reference
in
the Prospectus, and, if so directed by the Company, such Selling Holder will,
or
will request the managing underwriter or underwriters, if any, to, deliver
to
the Company (at the Company’s expense) all copies, other than permanent file
copies then in such Selling Holder’s possession, of the Prospectus covering such
Registrable Securities current at the time of receipt of such notice.
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4. Registration
Expenses.
(a) All
expenses incident to the Company’s performance of, or compliance with, the
provisions hereof, including without limitation, (i) all Commission and
securities exchange or NASD registration and filing fees, (ii) fees and expenses
of compliance with securities or blue sky laws (including fees and disbursements
of counsel in connection with blue sky qualifications of the Registrable
Securities), (iii) printing expenses, messenger and delivery expenses, (iv)
internal expenses (including, without limitation, all salaries and expenses
of
the Company’s officers and employees performing legal or accounting duties), (v)
fees and expenses incurred in connection with the listing of the securities
to
be registered, if any, on each securities exchange on which similar securities
issued by the Company are then listed, (vi) fees and disbursements of counsel
for the Company and its independent certified public accountants (including
the
expense of any special audit or “cold comfort” letters required by, or incident
to, such performance), (vii) Securities Act liability insurance (if the Company
elects to obtain such insurance), (viii) fees and expenses of any special
experts retained by the Company in connection with such registration, (ix)
fees
and expenses of other persons retained by the Company in connection with each
registration hereunder and (xi) the fees of Placement agent’s counsel in the
amount of $15,000 to review, on behalf of the Placement Agent and the Holders
the Registration Statement and to make the necessary filings under Rule 2710
on
behalf of the Placement Agent; provided, however, the Company shall not be
responsible for any underwriting fees, discounts or commissions attributable
to
the sale of Registrable Securities by the Holders). The foregoing expenses
are
herein called “Registration Expenses.”
(b) The
Company will pay all Registration Expenses in connection with the Registration
Statement filed pursuant to Section 2 except as otherwise set forth therein.
Other than as specifically provided for in Section 2(a) hereto, all expenses
to
be borne by the Holders in connection with any Registration Statement filed
pursuant to Section 2 (including, without limitation, all underwriting fees,
discounts or commissions attributable to such sale of Registrable Securities)
shall be borne by the participating Holders pro rata in relation to the number
of Registrable Securities to be registered by each Holder. In addition, the
Company shall bear the costs and expenses of any required legal opinion or
transfer agent fees in connection with any transfer of Registrable Securities
pursuant to Rule 144.
5. Indemnification;
Contribution.
(a) Indemnification
by the Company.
The
Company agrees to indemnify and hold harmless, to the full extent permitted
by
law, each Holder, its officers, directors and each Person who controls such
Holder (within the meaning of the Securities Act), and any agent or investment
adviser thereof, against all losses, claims, damages, liabilities and expenses
(including reasonable attorneys’ fees and costs of investigation) arising out of
or based upon any untrue or alleged untrue statement of material fact contained
in any Registration Statement, any amendment or supplement thereto, any
Prospectus or preliminary Prospectus or any omission or alleged omission to
state therein a material fact required to be stated therein or necessary to
make
the statements therein not misleading, except insofar as the same arise out
of
or are based upon any such untrue statement or omission based upon information
with respect to such Holder furnished in writing to the Company by or on behalf
of such Holder expressly for use therein; provided
that, in
the event that the Prospectus shall have been amended or supplemented and copies
thereof as so amended or supplemented, shall have been furnished to a Holder
prior to the confirmation of any sales of Registrable Securities, such indemnity
with respect to the Prospectus shall not inure to the benefit of such Holder
if
the Person asserting such loss, claim, damage or liability and who purchased
the
Registrable Securities from such holder did not, at or prior to the confirmation
of the sale of the Registrable Securities to such Person, receive a copy of
the
Prospectus as so amended or supplemented and the untrue statement or omission
of
a material fact contained in the Prospectus was corrected in the Prospectus
as
so amended or supplemented.
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(b) Indemnification
by Holders of Registrable Securities.
In
connection with any Registration Statement in which a Holder is participating,
each such Holder will furnish to the Company in writing such information with
respect to the name and address of such Holder and such other information as
may
be reasonably required for use in connection with any such Registration
Statement or Prospectus and agrees to indemnify, to the full extent permitted
by
law, the Company, its directors and officers and each Person who controls the
Company (within the meaning of the Securities Act) against any losses, claims,
damages, liabilities and expenses resulting from any untrue statement of a
material fact in the Registration Statement or Prospectus or any amendment
thereof or supplement thereto or necessary to make the statements therein not
misleading, to the extent, but only to the extent, that such untrue or alleged
untrue statement relates to any information with respect to such Holder so
furnished in writing by such Holder specifically for inclusion in any Prospectus
or Registration Statement; provided,
however,
that
such Holder shall not be liable in any such case to the extent that prior to
the
filing of any such Registration Statement or Prospectus or amendment thereof
or
supplement thereto, such Holder has furnished in writing to the Company
information expressly for use in such Registration Statement or Prospectus
or
any amendment thereof or supplement thereto which corrected or made not
misleading information previously furnished to the Company. In no event shall
the liability of any Selling Holder hereunder be greater in amount than the
dollar amount of the proceeds received by such Selling Holder upon the sale
of
the Registrable Securities giving rise to such indemnification
obligation.
(c) Conduct
of Indemnification Proceedings.
Any
Person entitled to indemnification hereunder agrees to give prompt written
notice to the indemnifying party after the receipt by such Person of any written
notice of the commencement of any action, suit, proceeding or investigation
or
threat thereof made in writing for which such Person will claim indemnification
or contribution pursuant to the provisions hereof and, unless in the judgment
of
counsel of such indemnified party a conflict of interest may exist between
such
indemnified party and the indemnifying party with respect to such claim, permit
the indemnifying party to assume the defense of such claim. Whether or not
such
defense is assumed by the indemnifying party, the indemnifying party will not
be
subject to any liability for any settlement made without its consent (but such
consent will not be unreasonably withheld). No indemnifying party will consent
to entry of any judgment or enter into any settlement which does not include
as
an unconditional term thereof the giving by the claimant or plaintiff to such
indemnified party of a release from all liability in respect of such claim
or
litigation. If the indemnifying party is not entitled to, or elects not to,
assume the defense of a claim, it will not be obligated to pay the fees and
expenses of more than one counsel (plus such local counsel, if any, as may
be
reasonably required in other jurisdictions) with respect to such claim, unless
in the judgment of any indemnified party a conflict of interest may exist
between such indemnified party and any other of such indemnified parties with
respect to such claim, in which event the indemnifying party shall be obligated
to pay the fees and expenses of such additional counsel or counsels. For the
purposes of this Section 5(c), the term “conflict of interest” shall mean that
there are one or more legal defenses available to the indemnified party that
are
different from or additional to those available to the indemnifying party or
such other indemnified parties, as applicable, which different or additional
defenses make joint representation inappropriate.
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(d) Contribution.
If the
indemnification from the indemnifying party provided for in this Section 5
is
unavailable to an indemnified party hereunder in respect of any losses, claims,
damages, liabilities or expenses referred to therein, then the indemnifying
party, in lieu of indemnifying such indemnified party, shall contribute to
the
amount paid or payable by such indemnified party as a result of such losses,
claims, damages, liabilities or expenses in such proportion as is appropriate
to
reflect the relative fault of the indemnifying party and indemnified parties
in
connection with the actions which resulted in such losses, claims, damages,
liabilities or expenses, as well as any other relevant equitable considerations.
The relative fault of such indemnifying party and indemnified parties shall
be
determined by reference to, among other things, whether any action in question,
including any untrue or alleged untrue statement of a material fact, has been
made by, or relates to information supplied by, such indemnifying party or
indemnified parties, and the parties intent, knowledge, access to information
and opportunity to correct or prevent such action. The amount paid or payable
by
a party as a result of the losses, claims, damages, liabilities and expenses
referred to above shall be deemed to include, subject to the limitations set
forth in Section 5(c), any reasonable legal or other fees or expenses reasonably
incurred by such party in connection with any investigation or proceeding.
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.
(e) If
indemnification is available under this Section 5, the indemnifying parties
shall indemnity each indemnified party to the full extent provided in Sections
5(a) and (b) without regard to the relative fault of said indemnifying party
or
indemnified party or any other equitable consideration provided for in this
Section 5.
6. Transfer
of Rights.
The
rights to cause the Company to register Registrable Securities granted pursuant
to the provisions hereof may be transferred or assigned by any Holder to a
transferee or assignee; provided;
however,
that
the transferee or assignee of such rights assumes the obligations of such
transferor or assignor, as the case may be, hereunder.
7. Amendment
Except
as
otherwise provided herein, the provisions hereof may not be amended, modified
or
supplemented, and waivers or consents to departures from the provisions hereof
may not be given unless the Company has obtained the written consent of Holders
of at least a majority of the aggregate number of the Registrable Securities
then outstanding.
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