The undersigned, SF Capital Partners Ltd. (the “Investor”), hereby confirms its agreement with you as follows:
EXHIBIT 4.2
▇▇▇▇ Medical Systems, Inc.
Ladies &
Gentlemen:
The undersigned, SF Capital Partners Ltd. (the “Investor”), hereby confirms its agreement
with you as follows:
1. This Stock Purchase Agreement is made as of January 23, 2003 between ▇▇▇▇ Medical
Systems, Inc., a Delaware corporation (the “Company”), and the Investor.
2. The Company has authorized
the sale and issuance of up to 2,045,453 shares (the “Shares”) of common stock of the Company, $0.001 par value per share (the “Common Stock”), to certain investors in a private placement (the “Offering”).
3. The Company and the Investor agree that the Investor will purchase from the Company and the Company will issue and sell to
the Investor 1,136,363 Shares, for a purchase price of $4.40 per share, or an aggregate purchase price of $4,999,997.20, pursuant to the Terms and Conditions for Purchase of Shares attached hereto as Annex I and incorporated herein by reference as
if fully set forth herein (the “Terms and Conditions”). This Stock Purchase Agreement, together with the Terms of Conditions which are incorporated herein by reference as if fully set forth herein, may hereinafter be referred to as the
“Agreement”. Unless otherwise requested by the Investor, certificates representing the Shares purchased by the Investor will be registered in the Investor’s name and address as set forth below.
4. The Investor represents that, except as set forth below, (a) it has had no position, office or other material relationship within the
past three years with the Company or persons known to Investor to be affiliates of the Company, (b) neither it, nor any group of which it is a member or to which it is related or with which it is affiliated, beneficially owns (including the right to
acquire or vote) any securities of the Company and (c) it has no direct or indirect affiliation or association with any NASD member as of the date hereof. Exceptions:
(If no exceptions, write “none.” If left blank, response will be deemed to be “none.”)
Please confirm that the foregoing correctly sets forth the agreement between us by signing in the space provided below for that purpose. By executing this Agreement, the Investor acknowledges that the Company may use the information
in paragraph 4 above and the name and address information below in preparation of the Registration Statement (as defined in Annex 1).
| AGREED AND ACCEPTED: |
Investor: SF CAPITAL PARTNERS LTD. | |||
| ▇▇▇▇ Medical Systems, Inc. |
||||
| /s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇ |
By: /s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ | |||
| By: ▇▇▇▇▇ ▇▇▇▇▇▇▇ |
Print Name: ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ | |||
| Title: President and Chief Executive Officer |
Title: Authorized Signatory | |||
| Address: |
c/o Staro Asset Management, L.L.C. ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇, ▇▇. ▇▇▇▇▇▇▇, ▇▇
▇▇▇▇▇ | |||
| Tax ID No.: ▇▇-▇▇▇▇▇▇▇ | ||||
| Contact name: ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ | ||||
| Telephone: ▇▇▇-▇▇▇-▇▇▇▇ | ||||
| Name in which shares should be registered (if different): SF Capital
Partners Ltd. | ||||
ANNEX I
TERMS AND CONDITIONS FOR PURCHASE OF SHARES
1. Authorization and Sale of the Shares. Subject to these Terms and Conditions, the Company has authorized the sale of up to 2,045,453 Shares. The Company reserves the right to
increase or decrease this number.
2. Agreement to Sell and Purchase the Shares;
Subscription Date.
2.1 At the Closing (as defined in Section 3), the Company will sell
to the Investor, and the Investor will purchase from the Company, upon the terms and conditions hereinafter set forth, the number of Shares set forth in Section 3 of the Stock Purchase Agreement to which these Terms and Conditions are attached at
the purchase price set forth thereon.
2.2 The Company may enter into the same form of
Stock Purchase Agreement, including these Terms and Conditions, with certain other investors (the “Other Investors”) and expects to complete sales of Shares to them. (The Investor and the Other Investors are hereinafter sometimes
collectively referred to as the “Investors,” and the Stock Purchase Agreement to which these Terms and Conditions are attached and the Stock Purchase Agreements (including attached Terms and Conditions) executed by the Other Investors are
hereinafter sometimes collectively referred to as the “Agreements.”) The Company may accept executed Agreements from Investors for the purchase of Shares commencing upon the date on which the Company provides the Investors with the
proposed purchase price per Share and concluding upon the date (the “Subscription Date”) on which the Company has (i) executed Agreements with Investors for the purchase of at least 2,045,453 Shares, and (ii) notified ▇▇▇▇▇ Fargo
Securities, LLC, in its capacity as placement agent for this transaction, in writing that it is no longer accepting additional Agreements from Investors for the purchase of Shares. The Company may not enter into any Agreements after the Subscription
Date.
2.3 The obligations of each Investor under any Agreement are several and not joint
with the obligations of any Other Investor, and no Investor shall be responsible in any way for the performance of the obligations of any other Investor under any Agreement. Nothing contained herein, and no action taken by any Investor hereto, shall
be deemed to constitute the Investors as a partnership, an association, a joint venture or any other kind of entity, or create a presumption that the Investors are in any way acting in concert or as a group with respect to such obligations or the
transactions contemplated hereby, provided that such obligations or the transactions contemplated hereby may be modified, amended or waived in accordance with Section 9 below. Each Investor shall be entitled to independently protect and enforce its
rights, including without limitation the rights arising out of this Agreement (provided, that such rights may be modified, amended or waived in accordance with Section 9 below), and it shall not be necessary for any Other Investor to be joined as an
additional party in any proceeding for such purpose.
3. Delivery of the Shares at
Closing. The completion of the purchase and sale of the Shares (the “Closing”) shall occur (the “Closing Date”) on January 24, 2003, at the offices of the Company’s counsel. At the Closing, the
Company shall deliver to the Investor one or more stock certificates representing the number of Shares set forth in Section 3 of the Stock Purchase Agreement, each such certificate to be registered in the name of the Investor or, if so indicated on
the signature page of the Stock Purchase Agreement, in the name of a nominee designated by the Investor.
The
Company’s obligation to issue the Shares to the Investor shall be subject to the following conditions, any one or more of which may be waived by the Company: (a) receipt by the Company of a certified or official bank check or wire transfer of
funds in the full amount of the purchase price for the Shares being purchased hereunder as set forth in Section 3 of the Stock Purchase Agreement; (b) completion of the purchases and sales under the Agreements with the Other Investors; (c) the
accuracy of the representations and warranties made by the Investors and the fulfillment of those undertakings of the Investors to be fulfilled prior to the Closing; and (d) the Closing Date shall have occurred by January 27, 2003.
The Investor’s obligation to purchase the Shares shall be subject to the following conditions, any one or more of which
may be waived by the Investor: (a) Investors shall have executed Agreements for the purchase of at least 2,045,453 Shares, (b) the representations and warranties of the Company set forth herein shall be true and correct as of the Closing Date in all
material respects (except for representations and warranties that speak as of a specific date, which representations and warranties shall be true and correct as of such date) and (c) the Investor shall have received such documents as such Investor
shall reasonably have requested, including, a standard opinion of the Company’s counsel as to the matters set forth in Section 4.2 and as to exemption from the registration requirements of the Securities Act of 1933, as amended (the
“Securities Act”), of the sale of the Shares.
4. Representations, Warranties
and Covenants of the Company. The Company hereby represents and warrants to, and covenants with, the Investor, as follows:
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4.1 Organization. The
Company is duly organized and validly existing in good standing under the laws of the jurisdiction of its organization. Each of the Company and its Subsidiaries (as defined in Rule 405 under the Securities Act) has full power and authority to own,
operate and occupy its properties and to conduct its business as presently conducted and as described in the documents filed by the Company under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), since December 31, 2001
through the date hereof, including, without limitation, its most recent report on Form 10-Q for the quarter ended September 30, 2002 (the “Exchange Act Documents”) and is registered or qualified to do business and in good standing in each
jurisdiction in which the nature of the business conducted by it or the location of the properties owned or leased by it requires such qualification and where the failure to be so qualified would have a material adverse effect upon the condition
(financial or otherwise), earnings, business or business prospects (such business prospects being as described in the Exchange Act Documents and in any press release issued by the Company since September 30, 2002 (collectively, the “Press
Releases”)), properties or operations of the Company and its Subsidiaries, considered as one enterprise (a “Material Adverse Effect”), and no proceeding has been instituted in any such jurisdiction, revoking, limiting or curtailing,
or seeking to revoke, limit or curtail, such power and authority or qualification.
4.2 Due Authorization and Valid Issuance. Assuming the correctness of the representations and warranties of the Investors set forth in the Agreements, (a) the Company has all
requisite power and authority to execute, deliver and perform its obligations under the Agreements, and the Agreements have been duly authorized and validly executed and delivered by the Company and constitute legal, valid and binding agreements of
the Company enforceable against the Company in accordance with their terms, except as rights to indemnity and contribution may be limited by state or federal securities laws or the public policy underlying such laws, except as enforceability may be
limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting creditors’ and contracting parties’ rights generally and except as enforceability may be subject to general principles of equity (regardless
of whether such enforceability is considered in a proceeding in equity or at law), and (b) the Shares being purchased by the Investor hereunder will, upon issuance and payment therefor pursuant to the terms hereof, be duly authorized, validly
issued, fully-paid and nonassessable.
4.3 Non-Contravention. The execution and delivery of the Agreements, the issuance and sale of the Shares under the Agreements, the fulfillment of the terms of the Agreements and
the consummation of the transactions contemplated thereby will not (A) conflict with or constitute a violation of, or default (with the passage of time or otherwise) under, (i) any contract, agreement or other instrument filed or incorporated by
reference as an exhibit to any of the Exchange Act Documents (any such contract, agreement or instrument, an “Exchange Act Exhibit”), (ii) the charter, by-laws or other organizational documents of the Company or any Subsidiary, or (iii)
assuming the correctness of the representations and warranties of the Investors set forth in the Agreements, any law, administrative regulation, ordinance or order of any court or governmental agency, arbitration panel or authority applicable to the
Company or any Subsidiary or their respective properties, except in the case of clauses (i) and (iii) for any such conflicts, violations or defaults which are not reasonably likely to have a Material Adverse Effect or (B) result in the creation or
imposition of any lien, encumbrance, claim, security interest or restriction whatsoever upon any of the material properties or assets of the Company or any Subsidiary or an acceleration of indebtedness pursuant to any obligation, agreement or
condition contained in any Exchange Act Exhibit. Assuming the correctness of the representations and warranties of the Investors set forth in the Agreements, no consent, approval, authorization or other order of, or registration, qualification or
filing with, any regulatory body, administrative agency, or other governmental body in the United States or any other person is required for the execution and delivery of the Agreements and the valid issuance and sale of the Shares to be sold
pursuant to the Agreements, other than such as have been made or obtained, and except for any post-closing securities filings or notifications required to be made under federal or state securities laws.
4.4 Capitalization. The capitalization of the Company as of September 30, 2002 is as
set forth in the most recent applicable Exchange Act Documents, increased as set forth in the next sentence. The Company has not issued any capital stock since that date other than pursuant to (i) employee benefit plans disclosed in the Exchange Act
Documents, or (ii) outstanding warrants, options or other securities disclosed in the Exchange Act Documents. The Shares to be sold pursuant to the Agreements have been duly authorized, and when issued and paid for in accordance with the terms of
the Agreements will be duly and validly issued, fully paid and nonassessable. The outstanding shares of capital stock of the Company have been duly and validly issued and are fully paid and nonassessable, have been issued in compliance with all
federal and state securities laws, and were not issued in violation of any preemptive rights or similar rights to subscribe for or purchase securities. Except as set forth in or contemplated by the Exchange Act Documents, there are no outstanding
rights (including, without limitation, preemptive rights), warrants or options to acquire, or instruments convertible into or exchangeable for, any unissued shares of capital stock or other equity interest in the Company or any Subsidiary, or any
contract, commitment, agreement, understanding or arrangement of any kind to which the Company is a party and relating to the issuance or sale of any capital stock of the Company or any Subsidiary, any such convertible or exchangeable securities or
any such rights, warrants or options. Without limiting the foregoing, no preemptive right, co-sale right, right of first refusal, registration right, or other similar right exists with respect to the Shares or the issuance and sale thereof,
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except for certain “piggy-back” registration rights granted by the Company on or before June 20, 2000, which registration rights
(including all rights to notice related thereto) have been waived by all of the holders thereof in connection with the filing of, and the proposal to file, the Registration Statement (defined below). No further approval or authorization of any
stockholder, the Board of Directors of the Company or others is required for the issuance and sale of the Shares. The Company owns the entire equity interest in each of its Subsidiaries, free and clear of any pledge, lien, security interest,
encumbrance, claim or equitable interest, other than as described in the Exchange Act Documents. Except as disclosed in the Exchange Act Documents, there are no stockholders agreements, voting agreements or other similar agreements with respect to
the voting of the Common Stock to which the Company is a party or, to the knowledge of the Company, between or among any of the Company’s stockholders.
4.5 Legal Proceedings. There is no material legal or governmental proceeding pending or, to the knowledge of the Company, threatened to which the
Company or any Subsidiary is or may be a party or of which the business or property of the Company or any Subsidiary is subject that is not disclosed in the Exchange Act Documents or in any of the Press Releases.
4.6 No Violations. Neither the Company nor any Subsidiary is in violation of its
charter, bylaws, or other organizational document, or in violation of any law, administrative regulation, ordinance or order of any court or governmental agency, arbitration panel or authority applicable to the Company or any Subsidiary, which
violation, individually or in the aggregate, would be reasonably likely to have a Material Adverse Effect, or is in default (and there exists no condition which, with the passage of time or otherwise, would constitute a default) in any material
respect in the performance of Exchange Act Exhibit, which would be reasonably likely to have a Material Adverse Effect.
4.7 Governmental Permits, Etc. With the exception of the matters which are dealt with separately in Sections 4.1, 4.12, 4.13, and 4.14, each of the Company and its Subsidiaries has
all necessary franchises, licenses, certificates and other authorizations from any foreign, federal, state or local government or governmental agency, department, or body that are currently necessary for the operation of the business of the Company
and its Subsidiaries as currently conducted and as described in the Exchange Act Documents except where the failure to currently possess could not reasonably be expected to have a Material Adverse Effect.
4.8 Intellectual Property. Except as specifically disclosed in the Exchange Act
Documents, (i) each of the Company and its Subsidiaries owns or possesses sufficient rights to use all material patents, patent rights, trademarks, copyrights, licenses, inventions, trade secrets, trade names and know-how (collectively,
“Intellectual Property”) described or referred to in the Exchange Act Documents as owned or possessed by it or that are necessary for the conduct of its business as described in the Exchange Act Documents except where the failure to
currently own or possess would not have a Material Adverse Effect, (ii) to the knowledge of the Company, neither the Company nor any of its Subsidiaries is infringing any rights of a third party with respect to any Intellectual Property that,
individually or in the aggregate, would have a Material Adverse Effect, (iii) neither the Company nor any of its Subsidiaries has received any notice of, or has any knowledge of, any asserted infringement by the Company or any of its Subsidiaries
of, any rights of a third party with respect to any Intellectual Property that, individually or in the aggregate, would have a Material Adverse Effect if determined adversely to the Company and (iv) neither the Company nor any of its Subsidiaries
has received any notice of, or has any knowledge of, infringement by a third party with respect to any Intellectual Property rights of the Company or of any Subsidiary that, individually or in the aggregate, would have a Material Adverse Effect.
4.9 Financial Statements. The financial statements of the
Company and the related notes contained in the Exchange Act Documents present fairly, in accordance with generally accepted accounting principles, the financial position of the Company and its Subsidiaries as of the dates indicated, and the results
of its operations and cash flows for the periods therein specified consistent with the books and records of the Company and its Subsidiaries except that the unaudited interim financial statements were or are subject to normal and recurring year-end
adjustments which are not expected to be material in amount. Such financial statements (including the related notes) have been prepared in accordance with generally accepted accounting principles applied on a consistent basis throughout the periods
therein specified, except as may be disclosed in the notes to such financial statements, or in the case of unaudited statements, as may be permitted by the Securities and Exchange Commission (the “SEC”) on Form 10-Q under the Exchange Act
and except as disclosed in the Exchange Act Documents. The other financial information contained in the Exchange Act Documents has been prepared on a basis consistent with the financial statements of the Company.
4.10 No Material Adverse Change. Except as disclosed in the Exchange Act Documents
and the Press Releases, since September 30, 2002, there has not been (i) any material adverse change in the financial condition or earnings of the Company and its Subsidiaries considered as one enterprise, (ii) any material adverse event affecting
the Company or its Subsidiaries, (iii) any obligation, direct or contingent, that is material to the Company and its Subsidiaries considered as one enterprise, incurred by the Company, except obligations incurred in the ordinary course of business,
(iv) any dividend or distribution of any kind declared, paid or made on the capital stock of the Company or any of its Subsidiaries, or (v) any loss or
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damage (whether or not insured) to the physical property of the Company or any of its Subsidiaries which has been sustained which has a Material
Adverse Effect; provided, however, that changes in the ordinary course of business, including but not limited to the use of cash and increases in liabilities in the ordinary course of business, shall not be deemed to be a material adverse
change or to have a Material Adverse Effect.
4.11 Disclosure. The representations and warranties of the Company contained in this Section 4 as of the date hereof and as of the Closing Date, do not contain any untrue statement
of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading. Except with respect to the material terms and
conditions of the transaction contemplated by the Agreements, which shall be publicly disclosed by the Company pursuant to Section 16 hereof, the Company confirms that neither it nor any person acting on its behalf has provided Investor with any
information that the Company believes constitutes material, non-public information. The Company understands and confirms that Investor will rely on the foregoing representations in effecting transactions in securities of the Company.
4.12 NASDAQ Compliance. The Company’s Common Stock is registered
pursuant to Section 12(g) of the Exchange Act and is listed on The Nasdaq Stock Market, Inc. National Market (the “Nasdaq National Market”), and the Company has taken no action designed to, or likely to have the effect of, terminating the
registration of the Common Stock under the Exchange Act or de-listing the Common Stock from the Nasdaq National Market, nor has the Company received any notification that the SEC or the National Association of Securities Dealers, Inc.
(“NASD”) is contemplating terminating such registration or listing.
4.13 Reporting Status. The Company has filed in a timely manner all documents that the Company was required to file under the Exchange Act during the 12 months preceding the date
of this Agreement. The following documents complied in all material respects with the SEC’s requirements as of their respective filing dates, and the information contained therein as of the date thereof did not contain an untrue statement of a
material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein in light of the circumstances under which they were made not misleading:
(a) Annual Report on Form 10-K for the year ended December 31, 2001, Quarterly Reports on Form 10-Q for the quarters ended September 30, 2002, June 30,
2002 and March 31, 2002, and Proxy Statement on Schedule 14A filed on April 26, 2002; and
(b) all
other documents, if any, filed by the Company with the SEC during the one-year period preceding the date of this Agreement pursuant to the reporting requirements of the Exchange Act.
4.14 Listing. Assuming the correctness of the representations and warranties of the Investors set forth in the
Agreements, the Company shall comply with all requirements of the National Association of Securities Dealers, Inc. with respect to the issuance of the Shares and the listing thereof on the Nasdaq National Market.
4.15 No Manipulation of Stock. The Company has not taken and will not, in violation
of applicable law, take, any action designed to or that might reasonably be expected to cause or result in stabilization or manipulation of the price of the Common Stock to facilitate the sale or resale of the Shares.
4.16 Company not an “Investment Company”. The Company has been advised of
the rules and requirements under the Investment Company Act of 1940, as amended (the “Investment Company Act”). The Company is not, and immediately after receipt of payment for the Shares will not be, an “investment company” or
an entity “controlled” by an “investment company” within the meaning of the Investment Company Act and shall conduct its business in a manner so that it will not become subject to the Investment Company Act.
4.17 Foreign Corrupt Practices. Neither the Company, nor to the knowledge
of the Company, any agent or other person acting on behalf of the Company, has (i) directly or indirectly, used any corrupt funds for unlawful contributions, gifts, entertainment or other unlawful expenses related to foreign or domestic political
activity, (ii) made any unlawful payment to foreign or domestic government officials or employees or to any foreign or domestic political parties or campaigns from corporate funds, (iii) failed to disclose fully any contribution made by the Company
(or made by any person acting on its behalf of which the Company is aware) which is in violation of law, or (iv) violated in any material respect any provision of the Foreign Corrupt Practices Act of 1977, as amended.
4.18 Accountants. To the Company’s knowledge, PricewaterhouseCoopers LLC, who
the Company expects will express their opinion with respect to the financial statements to be incorporated by reference from the Company’s Annual
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Report on Form 10-K for the year ended December 31, 2002 into the Registration Statement and the prospectus which forms a part thereof, are
independent accountants as required by the Securities Act and the rules and regulations promulgated thereunder.
4.19 Contracts. The contracts described in the Exchange Act Documents that are material to the Company are in full force and effect on the date hereof, and neither the Company nor,
to the Company’s knowledge, any other party to such contracts is in breach of or default under any of such contracts which would have a Material Adverse Effect.
4.20 Taxes. The Company has filed all necessary federal, state and foreign income and franchise tax returns and has
paid or accrued all taxes shown as due thereon, and the Company has no knowledge of a tax deficiency which has been or might be asserted or threatened against it which would have a Material Adverse Effect.
4.21 Transfer Taxes. On the Closing Date, all stock transfer or other taxes (other
than income taxes) which are required to be paid in connection with the sale and transfer of the Shares to be sold to the Investor hereunder will be, or will have been, fully paid or provided for by the Company and all laws imposing such taxes will
be or will have been fully complied with.
4.22 Private
Offering. Assuming the correctness of the representations and warranties of the Investors set forth in Section 5 hereof, the offer and sale of Shares hereunder is exempt from registration under the Securities Act. The
Company has not distributed and will not distribute prior to the Closing Date any offering material in connection with this Offering and sale of the Shares other than the documents of which this Agreement is a part, the Exchange Act Documents and
the Press Releases. The Company has not in the past nor will it hereafter take any action independent of the placement agent to sell, offer for sale or solicit offers to buy any securities of the Company which would bring the offer, issuance or sale
of the Shares as contemplated by this Agreement, within the provisions of Section 5 of the Securities Act, unless such offer, issuance or sale was or shall be within the exemptions of Section 4 of the Securities Act.
4.23 Disclosure Controls and Procedures; Internal Controls. The Company has
established disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) 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 Form 10-K or Form 10-Q, as the case may be, is being prepared. The Company’s certifying officers have evaluated
the effectiveness of the Company’s disclosure controls and procedures as of a date within ninety (90) days prior to the filing date of the Form 10-Q for the quarter ended September 30, 2002 (such date, the “Evaluation Date”). The
Company presented in the Form 10-Q for the quarter ended September 30, 2002 the conclusions of the certifying officers about the effectiveness of the disclosure controls and procedures based on their evaluations as of the Evaluation Date. Since the
Evaluation Date, there have been no significant changes in the Company’s internal controls (as such term is used in Item 307(b) of Regulation S-K under the Exchange Act) or, to the Company’s knowledge, in other factors that could
significantly affect the Company’s internal controls.
4.24 Transactions With
Affiliates. Except as disclosed in the Exchange Act Documents, none of the officers or directors of the Company is presently a party to any transaction with the Company or any Subsidiary (other than for services as
employees, officers and directors), including any contract, agreement or other arrangement providing for the furnishing of services to or by, providing for rental of real or personal property to or from, or otherwise requiring payments to or from
any officer or director or, to the knowledge of the Company, any entity in which any officer or director has a substantial interest or is an officer, director, trustee or partner.
4.25 Solvency. Based on the financial condition of the Company as of the Closing Date, (i) the Company’s fair
saleable value of its assets exceeds the amount that will be required to be paid on or in respect of the Company’s existing debts and other liabilities (including known contingent liabilities) as they mature; (ii) the Company’s assets do
not constitute unreasonably small capital to carry on its business for the current fiscal year as now conducted and as proposed to be conducted including its capital needs taking into account the particular capital requirements of the business
conducted by the Company, and projected capital requirements and capital availability thereof; and (iii) the current cash flow of the Company, together with the proceeds the Company would receive, were it to liquidate all of its assets, after taking
into account all anticipated uses of the cash, would be sufficient to pay all amounts on or in respect of its debt when such amounts are required to be paid.
5. Representations, Warranties and Covenants of the Investor.
5.1 The Investor represents and warrants to, and covenants with, the Company that: (i) the Investor is an “accredited investor” as defined in Regulation D under the
Securities Act and the Investor is also knowledgeable, sophisticated and experienced in making, and is qualified to make decisions with respect to investments in shares presenting an investment decision
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like that involved in the purchase of the Shares, including investments in securities issued by the Company and investments in comparable
companies, and has requested, received, reviewed and considered all information it deemed relevant in making an informed decision to purchase the Shares; (ii) the Investor is acquiring the number of Shares set forth in Section 3 of the Stock
Purchase Agreement in the ordinary course of its business and for its own account for investment only and with no present intention of distributing any of such Shares or any arrangement or understanding with any other persons regarding the
distribution of such Shares; (iii) the Investor will not, directly or indirectly, offer, sell, pledge, transfer or otherwise dispose of (or solicit any offers to buy, purchase or otherwise acquire or take a pledge of) any of the Shares except in
compliance with the Securities Act, applicable state securities laws and the respective rules and regulations promulgated thereunder; (iv) the Investor has answered all questions on the Investor Questionnaire for use in preparation of the
Registration Statement and the answers thereto are true, correct and complete as of the date hereof and will be true, correct and complete as of the Closing Date; (v) the Investor will notify the Company immediately of any change in any of such
information until such time as the Investor has sold all of its Shares or until the Company is no longer required to keep the Registration Statement effective; and (vi) the Investor has, in connection with its decision to purchase the number of
Shares set forth in Section 3 of the Stock Purchase Agreement, relied only upon the Exchange Act Documents, the Press Releases and the representations and warranties of the Company contained herein. The Investor understands that its acquisition of
the Shares has not been registered under the Securities Act or registered or qualified under any state securities law in reliance on specific exemptions therefrom, which exemptions may depend upon, among other things, the bona fide nature of the
Investor’s investment intent as expressed herein. Subject to compliance with the Securities Act, applicable securities laws and the respective rules and regulations promulgated thereunder, nothing contained herein shall be deemed a
representation or warranty by such Investor to hold the Shares for any period of time.
5.2 The Investor acknowledges, represents and agrees that no action has been or will be taken in any jurisdiction outside the United States by the Company that would permit an offering of the Shares, or
possession or distribution of offering materials in connection with the issue of the Shares, in any jurisdiction outside the United States where legal action by the Company for that purpose is required. Each Investor outside the United States will
comply with all applicable laws and regulations in each foreign jurisdiction in which it purchases, offers, sells or delivers Shares or has in its possession or distributes any offering material, in all cases at its own expense.
5.3 The Investor hereby covenants with the Company not to make any sale of the Shares without complying
with the provisions of this Agreement and without causing the prospectus delivery requirement under the Securities Act to be satisfied (whether by delivery of the Prospectus or pursuant to and in compliance with an exemption from such requirement),
and the Investor acknowledges that the certificates evidencing the Shares will be imprinted with a legend that prohibits their transfer except in accordance therewith. The Investor acknowledges that there may occasionally be times when the Company
determines that it must suspend the use of the Prospectus forming a part of the Registration Statement, as set forth in Section 7.2(c).
5.4 The Investor further represents and warrants to, and covenants with, the Company that (i) the Investor has full right, power, authority and capacity to enter into this Agreement and to consummate
the transactions contemplated hereby and has taken all necessary action to authorize the execution, delivery and performance of this Agreement, and (ii) this Agreement constitutes a valid and binding obligation of the Investor enforceable against
the Investor in accordance with its terms, except as enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting creditors’ and contracting parties’ rights generally and except
as enforceability may be subject to general principles of equity (regardless of whether such enforceability is considered in a proceeding in equity or at law) and except as the indemnification agreements of the Investors herein may be legally
unenforceable.
5.5 Investor will not use any of the Shares acquired pursuant to this
Agreement to cover any short position in the Common Stock of the Company if doing so would be in violation of applicable securities laws.
5.6 The Investor understands that nothing in the Exchange Act Documents, the Press Releases, this Agreement or any other materials presented to the Investor in connection with the purchase and sale of
the Shares constitutes legal, tax or investment advice. The Investor has consulted such legal, tax and investment advisors as it, in its sole discretion, has deemed necessary or appropriate in connection with its purchase of Shares.
5.7 The Company acknowledges and agrees that Investor does not make or has not made any representations
or warranties with respect to the transactions contemplated hereby other than those specifically set forth in this Sections 5 and 16(a), in the Stock Purchase Agreement or in the Investor Questionnaire.
6. Survival of Representations, Warranties and Agreements. Notwithstanding any
investigation made by any party to this Agreement, all covenants, agreements, representations and warranties made by the Company and the Investor herein shall survive the execution of this Agreement, the delivery to the Investor of the Shares being
purchased and the payment therefor.
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7. Registration of the Shares; Compliance with the
Securities Act.
7.1 Registration Procedures and Other
Matters. The Company shall:
(a) subject to receipt of necessary
information from the Investor after prompt request from the Company to the Investors to provide such information, prepare and file with the SEC, within 10 days after the Closing Date (or, if such tenth day is a Saturday, Sunday or holiday, then by
the next succeeding business day), a registration statement on Form S-3 (the “Registration Statement”) to enable the resale of the Shares by the Investors from time to time through the automated quotation system of the Nasdaq National
Market or in privately-negotiated transactions;
(b) subject to receipt of necessary
information from the Investor after prompt request from the Company to the Investors to provide such information, use its best efforts to cause the Registration Statement to become effective within 45 days after the Registration Statement is filed
by the Company, such efforts to include, without limiting the generality of the foregoing, preparing and filing with the SEC in such 45-day period any financial statements that are required to be filed prior to the effectiveness of such Registration
Statement;
(c) use its best efforts to prepare and file with the SEC such amendments and supplements
to the Registration Statement and the prospectus used in connection therewith (the “Prospectus”) as may be necessary to keep the Registration Statement current, effective and free from any material misstatement or omission to state a
material fact for a period not exceeding, with respect to each Investor’s Shares purchased hereunder, the earlier of (i) the second anniversary of the Closing Date, (ii) the date on which the Investor may sell all Shares then held by the
Investor without restriction by the volume limitations of Rule 144(e) of the Securities Act, or (iii) such time as all Shares purchased by such Investor in this Offering have been sold pursuant to a registration statement;
(d) furnish to the Investor with respect to the Shares registered under the Registration Statement such number of copies of
the Registration Statement, Prospectuses and Preliminary Prospectuses in conformity with the requirements of the Securities Act and such other documents as the Investor may reasonably request in writing, in order to facilitate the public sale or
other disposition of all or any of the Shares by the Investor; provided, however, that the obligation of the Company to deliver copies of Prospectuses or Preliminary Prospectuses to the Investor shall be subject to the receipt by the Company
of reasonable assurances from the Investor that the Investor will comply with the applicable provisions of the Securities Act and of such other securities or blue sky laws as may be applicable in connection with any use of such Prospectuses or
Preliminary Prospectuses;
(e) file documents required of the Company for normal blue sky clearance in
states specified in writing by the Investor and use its best efforts to maintain such blue sky qualifications during the period the Company is required to maintain the effectiveness of the Registration Statement pursuant to Section 7.1(c);
provided, however, that the Company shall not be required to qualify to do business or consent to service of process in any jurisdiction in which it is not now so qualified or has not so consented;
(f) bear all expenses in connection with the procedures in paragraph (a) through (e) of this Section 7.1 (other than any
underwriting discounts or commissions, brokers’ fees and similar selling expenses, and any other fees or expenses incurred by the Investor, including attorneys’ fees) and the registration of the Shares pursuant to the Registration
Statement; and
(g) advise the Investor, promptly after it shall receive notice or obtain knowledge of
the issuance of any stop order by the SEC delaying or suspending the effectiveness of the Registration Statement or of the initiation or threat of any proceeding for that purpose; and it will promptly use its best efforts to prevent the issuance of
any stop order or to obtain its withdrawal at the earliest possible moment if such stop order should be issued.
Notwithstanding anything to the contrary herein, the Registration Statement shall cover only the Shares. In no event at any time before the Registration Statement becomes effective with respect to the Shares shall the Company
publicly announce or file any other registration statement, other than registrations on Form S-8 or for transactions covered by Rule 145 of the Securities Act, without the prior written consent of a majority in interest of the Investors. The
Investor acknowledges and agrees that the Company shall not be regarded to have breached its “best efforts” obligation under Section 7.1(b) if, owing to a review of the Registration Statement by the SEC staff, the Registration Statement
does not become effective within 45 days after the Registration Statement is filed with the SEC, provided that following receipt of notice of such review, the Company shall have used its best efforts to cause the Registration Statement to
become effective at the earliest practicable date.
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The Company understands that the Investor disclaims being an underwriter, but the
Investor being deemed an underwriter by the SEC shall not relieve the Company of any obligations it has hereunder; provided, however, that if the Company receives notification from the SEC that the Investor is deemed an underwriter, then the
period by which the Company is obligated to submit an acceleration request to the SEC shall be extended to the earlier of (i) the 90th day after such SEC notification, or (ii) 120 days after the initial filing of the Registration Statement with the
SEC.
7.2 Transfer of Shares After Registration; Suspension.
(a) The Investor agrees that it will not effect any disposition of the Shares or its right to purchase the Shares
that would constitute a sale within the meaning of the Securities Act except as contemplated in the Registration Statement referred to in Section 7.1 and as described below or as otherwise permitted by law, and that it will promptly notify the
Company of any changes in the information set forth in the Registration Statement regarding the Investor or its plan of distribution.
(b) Except in the event that paragraph (c) below applies, the Company shall (i) if deemed necessary by the Company, prepare and file from time to time with the SEC a post-effective amendment to the Registration
Statement or a supplement to the related Prospectus or a supplement or amendment to any document incorporated therein by reference or file any other required document so that such Registration Statement will not contain an untrue statement of a
material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading, and so that, as thereafter delivered to purchasers of the Shares being sold thereunder, such Prospectus will not
contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading; (ii) provide the
Investor copies of any documents filed pursuant to Section 7.2(b)(i) as the Investor may reasonably request; and (iii) inform each Investor that the Company has complied with its obligations in Section 7.2(b)(i) (or that, if the Company has filed a
post-effective amendment to the Registration Statement which has not yet been declared effective, the Company will notify the Investor to that effect, will use its best efforts to secure the effectiveness of such post-effective amendment as promptly
as possible and will promptly notify the Investor pursuant to Section 7.2(b)(i) hereof when the amendment has become effective).
(c) Subject to paragraph (d) below, in the event (i) of any request by the SEC or any other federal or state governmental authority during the period of effectiveness of the Registration Statement for amendments or
supplements to a Registration Statement or related Prospectus or for additional information; (ii) of the issuance by the SEC or any other federal or state governmental authority of any stop order suspending the effectiveness of a Registration
Statement or the initiation of any proceedings for that purpose; (iii) of the receipt by the Company of any notification with respect to the suspension of the qualification or exemption from qualification of any of the Shares for sale in any
jurisdiction or the initiation or threatening of any proceeding for such purpose; or (iv) of any event or circumstance which, upon the advice of its counsel, necessitates the making of any changes in the Registration Statement or Prospectus, or any
document incorporated or deemed to be incorporated therein by reference, so that, in the case of the Registration Statement, it will not contain any untrue statement of a material fact or any omission to state a material fact required to be stated
therein or necessary to make the statements therein not misleading, and that in the case of the Prospectus, it will not contain any untrue statement of a material fact or any omission to state a material fact required to be stated therein or
necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading; then the Company shall deliver a certificate in writing to the Investor (the “Suspension Notice”) to the effect of the
foregoing and, upon receipt of such Suspension Notice, the Investor will refrain from selling any Shares pursuant to the Registration Statement (a “Suspension”) until the Investor’s receipt of copies of a supplemented or amended
Prospectus prepared and filed by the Company, or until it is advised in writing by the Company that the current Prospectus may be used, and has received copies of any additional or supplemental filings that are incorporated or deemed incorporated by
reference in any such Prospectus. In the event of any Suspension, the Company will use its best efforts to cause the use of the Prospectus so suspended to be resumed as soon as reasonably practicable within 20 business days after the delivery of a
Suspension Notice to the Investor.
(d) Notwithstanding the foregoing paragraphs of this Section 7.2,
the Investor shall not be prohibited from selling Shares under the Registration Statement as a result of Suspensions on more than two occasions of not more than 30 days each in any twelve month period, unless, in the good faith judgment of the
Company’s Board of Directors, upon the written opinion of counsel of counsel, the sale of Shares under the Registration Statement in reliance on this paragraph 7.2(d) would be reasonably likely to cause a violation of the Securities Act or the
Exchange Act and result in liability to the Company.
(e) Provided that a Suspension is not then in
effect, the Investor may sell Shares under the Registration Statement, provided that it arranges for delivery of a current Prospectus to the transferee of such Shares. The Company shall provide such number of current Prospectuses to the Investor as
the Investor may reasonably request, and shall supply copies to any other parties reasonably requiring such Prospectuses.
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(f) In the event of a sale of Shares by the Investor pursuant to the
Registration Statement, the Investor must also deliver to the Company’s transfer agent, with a copy to the Company, a Certificate of Subsequent Sale substantially in the form attached hereto as Exhibit A, so that the Shares may be
properly transferred.
7.3 Indemnification. For the purpose
of this Section 7.3:
(i) the term “Selling Stockholder” means the Investor and any affiliate
of such Investor; and
(ii) the term “Registration Statement” shall include the Prospectus in
the form first filed with the SEC pursuant to Rule 424(b) of the Securities Act or filed as part of the Registration Statement at the time of effectiveness if no Rule 424(b) filing is required, and any exhibit, supplement or amendment included in or
relating to the Registration Statement referred to in Section 7.1; and
(iii) the term “Untrue
Statement” means any untrue statement or alleged untrue statement, or any omission or alleged omission to state in the Registration Statement, as amended or supplemented from time to time, a material fact required to be stated therein or
necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading.
(a) The Company agrees to indemnify and hold harmless each Selling Stockholder from and against any losses, claims, damages or liabilities to which such Selling Stockholder may become subject (under the Securities Act or
otherwise) insofar as such losses, claims, damages or liabilities (or actions or proceedings in respect thereof) arise out of, or are based upon (i) any breach of the representations or warranties of the Company contained herein or failure to comply
with the covenants and agreements of the Company contained herein, (ii) any Untrue Statement, or (iii) any failure by the Company to fulfill any undertaking included in the Registration Statement, as amended or supplemented from time to time, and
the Company will reimburse such Selling Stockholder for any reasonable legal or other expenses reasonably incurred in investigating, defending or preparing to defend any such action, proceeding or claim, or preparing to defend any such action,
proceeding or claim, provided, however, that the Company shall not be liable in any such case to the extent that such loss, claim, damage or liability arises out of, or is based upon, an Untrue Statement made in reliance upon and in conformity with
written information furnished to the Company by or on behalf of such Selling Stockholder specifically for use in preparation of the Registration Statement, as amended or supplemented from time to time (including, without limitation, information set
forth in the Investor Questionnaire), or the failure of such Selling Stockholder to comply with its covenants and agreements contained in Section 7.2 hereof respecting sale of the Shares or any statement or omission in any Prospectus that is
corrected in any subsequent Prospectus that was delivered to the Selling Stockholder prior to the pertinent sale or sales by the Selling Stockholder. The Company shall reimburse each Selling Stockholder for the indemnifiable amounts provided for
herein on demand as such expenses are incurred.
(b) The Investor agrees to indemnify and hold
harmless the Company (and each person, if any, who controls the Company within the meaning of Section 15 of the Securities Act, each officer of the Company who signs the Registration Statement and each director of the Company) from and against any
losses, claims, damages or liabilities to which the Company (or any such officer, director or controlling person) may become subject (under the Securities Act or otherwise), insofar as such losses, claims, damages or liabilities (or actions or
proceedings in respect thereof) arise out of, or are based upon, (i) any failure to comply with the covenants and agreements contained in Section 7.2 hereof respecting sale of the Shares, or (ii) any Untrue Statement if such Untrue Statement was
made in reliance upon and in conformity with written information furnished by or on behalf of the Investor specifically for use in preparation of the Registration Statement, as amended or supplemented from time to time (including, without
limitation, information set forth in the Investor Questionnaire), and the Investor will reimburse the Company or such officer, director or controlling person, as the case may be, for any legal or other expenses reasonably incurred in investigating,
defending or preparing to defend any such action, proceeding or claim. The Investor shall reimburse the Company or such officer, director or controlling person, as the case may be, for the indemnifiable amounts provided for herein on demand as such
expenses are incurred. Notwithstanding the foregoing, the Investor’s aggregate obligation to indemnify the Company and such officers, directors and controlling persons shall be limited to the net amount received by the Investor from the sale of
the Shares.
(c) Promptly after receipt by any indemnified person of a notice of a claim or the
beginning of any action in respect of which indemnity is to be sought against an indemnifying person pursuant to this Section 7.3, such indemnified person shall notify the indemnifying person in writing of such claim or of the commencement of such
action, but the omission to so notify the indemnifying person will not relieve it from any liability which it may have to any indemnified person under this Section 7.3 (except to the extent that such omission materially and adversely affects the
indemnifying person’s ability to defend such action) or from any liability otherwise than under this Section 7.3. Subject to the provisions hereinafter stated, in case any
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such action shall be brought against an indemnified person, the indemnifying person shall be entitled to participate therein, and, to the extent
that it shall elect by written notice delivered to the indemnified person promptly after receiving the aforesaid notice from such indemnified person, shall be entitled to assume the defense thereof, with counsel reasonably satisfactory to such
indemnified person. After notice from the indemnifying person to such indemnified person of its election to assume the defense thereof, such indemnifying person shall not be liable to such indemnified person for any legal expenses subsequently
incurred by such indemnified person in connection with the defense thereof, provided, however, that if there exists or shall exist a conflict of interest that would make it inappropriate, in the opinion of counsel to the indemnified person,
for the same counsel to represent both the indemnified person and such indemnifying person or any affiliate or associate thereof, the indemnified person shall be entitled to retain its own counsel at the expense of such indemnifying person;
provided, however, that no indemnifying person shall be responsible for the fees and expenses of more than one separate counsel (together with appropriate local counsel) for all indemnified parties. In no event shall any indemnifying person
be liable in respect of any amounts paid in settlement of any action unless the indemnifying person shall have approved the terms of such settlement; provided that such consent shall not be unreasonably withheld or delayed. No indemnifying
person shall, without the prior written consent of the indemnified person, effect any settlement of any pending or threatened proceeding in respect of which any indemnified person is or could have been a party and indemnification could have been
sought hereunder by such indemnified person, unless such settlement includes an unconditional release of such indemnified person from all liability on claims that are the subject matter of such proceeding.
(d) If the indemnification provided for in this Section 7.3 is unavailable to or insufficient to hold harmless an indemnified
person under subsection (a) or (b) above in respect of any losses, claims, damages or liabilities (or actions or proceedings in respect thereof) referred to therein, then each indemnifying person shall contribute to the amount paid or payable by
such indemnified person as a result of such losses, claims, damages or liabilities (or actions in respect thereof) in such proportion as is appropriate to reflect the relative fault of the Company on the one hand and the Investor, as well as any
other Selling Shareholders under such Registration Statement on the other in connection with the statements or omissions or other matters which resulted in such losses, claims, damages or liabilities (or actions in respect thereof), as well as any
other relevant equitable considerations. The relative fault shall be determined by reference to, among other things, in the case of an Untrue Statement, whether the Untrue Statement relates to information supplied by the Company on the one hand or
an Investor or other Selling Shareholder on the other and the parties’ relative intent, knowledge, access to information and opportunity to correct or prevent such Untrue Statement. The Company and the Investor agree that it would not be just
and equitable if contribution pursuant to this subsection (d) were determined by pro rata allocation (even if the Investor and other Selling Shareholders were treated as one entity for such purpose) or by any other method of allocation which does
not take into account the equitable considerations referred to above in this subsection (d). The amount paid or payable by an indemnified person as a result of the losses, claims, damages or liabilities (or actions in respect thereof) referred to
above in this subsection (d) shall be deemed to include any legal or other expenses reasonably incurred by such indemnified person in connection with investigating or defending any such action or claim. Notwithstanding the provisions of this
subsection (d), the Investor shall not be required to contribute any amount in excess of the amount by which the net amount received by the Investor from the sale of the Shares to which such loss relates exceeds the amount of any damages which such
Investor has otherwise been required to pay by reason of such Untrue Statement. No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any person who was
not guilty of such fraudulent misrepresentation. The Investor’s obligations in this subsection to contribute shall be in proportion to its Investor sale of Shares to which such loss relates and shall not be joint with any other Selling
Shareholders.
(e) The parties to this Agreement hereby acknowledge that they are sophisticated
business persons who were represented by counsel during the negotiations regarding the provisions hereof including, without limitation, the provisions of this Section 7.3, and are fully informed regarding said provisions. They further acknowledge
that the provisions of this Section 7.3 fairly allocate the risks in light of the ability of the parties to investigate the Company and its business in order to assure that adequate disclosure is made in the Registration Statement as required by the
Securities Act and the Exchange Act. The parties are advised that federal or state public policy as interpreted by the courts in certain jurisdictions may be contrary to certain of the provisions of this Section 7.3, and the parties hereto hereby
expressly waive and relinquish any right or ability to assert such public policy as a defense to a claim under this Section 7.3 and further agree not to attempt to assert any such defense.
7.4 Termination of Conditions and Obligations. The conditions precedent imposed by Section 5 or this Section 7 upon the
transferability of the Shares shall cease and terminate as to any particular number of the Shares when such Shares shall have been effectively registered under the Securities Act and sold or otherwise disposed of in accordance with the intended
method of disposition set forth in the Registration Statement covering such Shares or at such time as an opinion of counsel reasonably satisfactory to the Company shall have been rendered to the effect that such conditions are not necessary in order
to comply with the Securities Act.
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7.5 Information
Available. So long as the Registration Statement is effective covering the resale of Shares owned by the Investor, the Company will furnish to the Investor:
(a) as soon as practicable after it is available, one copy of (i) its Annual Report to Stockholders (which Annual Report shall contain financial statements
audited in accordance with generally accepted accounting principles by a national firm of certified public accountants), (ii) its Annual Report on Form 10-K and (iii) its Quarterly Reports on Form 10-Q (the foregoing, in each case, excluding
exhibits);
(b) upon the request of the Investor, all exhibits excluded by the parenthetical to
subparagraph (a) of this Section 7.5 as filed with the SEC and all other information that is made available to shareholders; and
(c) upon the reasonable request of the Investor, an adequate number of copies of the Prospectuses to supply to any other party requiring such Prospectuses; and upon the reasonable request of the Investor, the President or
the Chief Financial Officer of the Company (or an appropriate designee thereof) will meet with the Investor or a representative thereof at the Company’s headquarters to discuss all information relevant for disclosure in the Registration
Statement covering the Shares and will otherwise cooperate with any Investor conducting an investigation for the purpose of reducing or eliminating such Investor’s exposure to liability under the Securities Act, including the reasonable
production of information at the Company’s headquarters; provided that the Company shall not be required to disclose any confidential information to or meet at its headquarters with any Investor until and unless the Investor shall have
entered into a confidentiality agreement in form and substance reasonably satisfactory to the Company with the Company with respect thereto.
7.6 Legend; Restrictions on Transfer. The certificate or certificates for the Shares (and any securities issued in respect of or exchange for the
Shares) shall be subject to a legend or legends restricting transfer under the Securities Act and referring to restrictions on transfer herein, such legend to be substantially as follows:
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 (THE “ACT”) AND MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED, OR
HYPOTHECATED UNLESS AND UNTIL REGISTERED UNDER THE ACT OR, IN THE OPINION OF COUNSEL, IN FORM AND SUBSTANCE SATISFACTORY TO THE ISSUER OF THESE SECURITIES, SUCH OFFER, SALE OR TRANSFER OR HYPOTHECATION IS IN COMPLIANCE THEREWITH.
The Company and the Investor acknowledge and agree that the Investor may, as permitted by law, from time to time pledge pursuant to a bona fide margin
agreement or grant a security interest in some or all of the Shares and, if required under the terms of such arrangement, Investor may, as permitted by law, transfer pledged or secured Shares to the pledgees or secured parties. So long as Investor
is not an affiliate of the Company, such a pledge or transfer would not be subject to approval or consent of the Company and would not require the legal opinion of legal counsel to the pledgee, secured party or pledgor. At the Investor’s
expense, so long as the Shares are subject to the legend required by this Section 7.6, the Company will use its best efforts to execute and deliver such reasonable documentation as a pledgee or secured party of Shares may reasonably request in
connection with a pledge or transfer of the Shares including such amendments or supplements to the Registration Statement and Prospectus as may be reasonably required. The foregoing does not affect Investor’s obligations pursuant to Section
7.2(a).
7.7 Liquidated Damages. The Company and Investor
agree that Investor will suffer damages if the Company fails to fulfill its obligations pursuant to Section 7.1 and 7.2 hereof and that it would not be possible to ascertain the extent of such damages with precision. Accordingly, the Company hereby
agrees to pay liquidated damages (“Liquidated Damages”) to Investor under the following circumstances: (a) if the Registration Statement is not filed by the Company on or prior to 30 days after the Closing Date (such an event, a
“Filing Default”); (b) if the Registration Statement is not declared effective by the SEC on or prior to 90 days after the Closing Date (such an event, an “Effectiveness Default”); or (c) if the Registration Statement (after its
effectiveness date) ceases to be effective and available to Investor for any continuous period that exceeds 30 days or for one or more period that exceeds in the aggregate 60 days in any 12-month period (such an event, a “Suspension
Default” and together with a Filing Default and an Effectiveness Default, a “Registration Default”). In the event of a Registration Default, the Company shall as Liquidated Damages pay to Investor, for each 30-day period of a
Registration Default, an amount in cash equal to 1% of the aggregate purchase price paid by Investor pursuant to this Agreement; provided that in no event shall the aggregate amount of cash to be paid as Liquidated Damages pursuant to this Section
7.7 exceed 9% of the aggregate purchase price paid by Investor. The Company shall pay the Liquidated Damages as follows: (i) in connection with a Filing Default, on the 31st day after the Closing Date, and each 30th day thereafter until the
Registration Statement is filed with the SEC; (ii) in connection with an Effectiveness Default, on the 91st day after the Closing Date, and each 30th day thereafter until the Registration Statement is declared effective by the SEC; or (iii) in
connection with a Suspension Default, on either (x) the 31st consecutive day of any Suspension or (y) the 61st
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day (in the aggregate) of any Suspensions in any 12-month period, and each 30th day thereafter until the Suspension is terminated in accordance with Section 7.2. Notwithstanding the foregoing, all periods shall be tolled during
delays directly caused by the action or inaction of any Investor, and the Company shall have no liability to any Investor in respect of any such delay. The Liquidated Damages payable herein shall apply on a pro rata basis for any portion of a 30-day
period of a Registration Default.
8. Notices. All notices,
requests, consents and other communications hereunder shall be in writing, shall be mailed (A) if within the United States by first-class registered or certified airmail, or nationally recognized overnight express courier, postage prepaid, or by
facsimile, or (B) if delivered from outside the United States, by International Federal Express (or other recognized international express courier)or facsimile, and shall be deemed given (i) if delivered by first-class registered or certified mail,
three business days after so mailed, (ii) if delivered by nationally recognized overnight carrier, one business day after so mailed, (iii) if delivered by International Federal Express (or other recognized international express courier), two
business days after so mailed, (iv) if delivered by facsimile, upon electronic confirmation of receipt and shall be delivered as addressed as follows:
(a) |
if to the Company, to |
▇▇▇▇ Medical Systems, Inc.
▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ ▇▇▇▇.
▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: Chief
Financial Officer
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
(b) |
with a copy to: |
Venture Law Group
▇▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇
▇▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇ ▇. ▇▇▇▇▇,
Esq.
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
(c) |
if to the Investor, at its address on the signature page hereto, or at such other address or addresses as may have been furnished to the Company in writing.
|
9. Changes. This Agreement may be
modified, amended or waived only pursuant to a written instrument signed by the Company and (a) Investors holding a majority of the Shares issued and sold in the Offering, provided that such modification, amendment or waiver is made with
respect to all Agreements and does not adversely affect the Investor without adversely affecting all Investors in a similar manner; or (b) the Investor.
10. Headings. The headings of the various sections of this Agreement have been inserted for convenience of reference only and shall not be deemed to
be part of this Agreement.
11. Severability. In case any
provision contained in this Agreement should be invalid, illegal or unenforceable in any respect, the validity, legality and enforceability of the remaining provisions contained herein shall not in any way be affected or impaired thereby.
12. Governing Law. This Agreement shall be governed by, and
construed in accordance with, the internal laws of the State of Delaware, without giving effect to the principles of conflicts of law.
13. Counterparts. This Agreement may be executed in two or more counterparts, each of which shall constitute an original, but all of which, when taken together, shall
constitute but one instrument, and shall become effective when one or more counterparts have been signed by each party hereto and delivered to the other parties.
14. Entire Agreement. This Agreement constitutes the entire agreement between the parties hereto and supersedes any prior understandings or
agreements concerning the purchase and sale of the Shares and the resale registration thereof.
15. Rule 144. The Company covenants that it will timely file the reports required to be filed by it under the Securities Act and the Exchange Act and the rules and regulations
adopted by the SEC thereunder (or, if the Company is not
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required to file such reports, it will, upon the request of any Investor holding Shares purchased hereunder made after the first anniversary of
the Closing Date, make publicly available such information as necessary to permit sales pursuant to Rule 144 under the Securities Act), and it will take such further action as any such Investor may reasonably request, all to the extent required from
time to time to enable such Investor to sell Shares purchased hereunder without registration under the Securities Act within the limitation of the exemptions provided by (a) Rule 144 under the Securities Act, as such Rule may be amended from time to
time, or (b) any similar rule or regulation hereafter adopted by the SEC. Upon the request of the Investor, the Company will deliver to such holder a written statement as to whether it has complied with such information and requirements.
16. Confidential Information.
(a) The Investor represents to the Company that, at all times during the Company’s offering of the Shares, the Investor has maintained in confidence
all non-public information regarding the Company received by the Investor from the Company or its agents.
(b) The Company shall on the Closing Date issue a press release disclosing the material terms of the transactions contemplated hereby (including at least the number of Shares sold and proceeds therefrom). The Company shall
not publicly disclose the name of Investor, or include the name of Investor in any filing with the SEC or any regulatory agency or the Nasdaq (other than the filing of the Agreements with the SEC pursuant to the Exchange Act), without the prior
written consent of Investor, except to the extent such disclosure is required by law or Nasdaq regulations.
17. No Third-Party Beneficiaries. This Agreement is intended for the benefit of the parties hereto and their respective successors and permitted assigns and is not for the benefit
of, nor may any provision hereof be enforced by, any other person.
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▇▇▇▇ Medical Systems, Inc.
INVESTOR QUESTIONNAIRE
(ALL INFORMATION WILL BE TREATED
CONFIDENTIALLY)
To: |
▇▇▇▇ Medical Systems, Inc. |
▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ ▇▇▇▇.
▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
This Investor Questionnaire (“Questionnaire”) must be completed by each potential investor in connection with the offer and sale of the shares of common stock,
par value $0.001 per share, of ▇▇▇▇ Medical Systems, Inc. (the “Securities”). The Securities are being offered and sold by ▇▇▇▇ Medical Systems, Inc. (the “Corporation”) without registration under the Securities Act of 1933, as
amended (the “Act”), and the securities laws of certain states, in reliance on the exemptions contained in Section 4(2) of the Act and on Regulation D promulgated thereunder and in reliance on similar exemptions under applicable state
laws. The Corporation must determine that a potential investor meets certain suitability requirements before offering or selling Securities to such investor. The purpose of this Questionnaire is to assure the Corporation that each investor meets the
applicable suitability requirements. The information supplied by you will be used in determining whether you meet such criteria, and reliance upon the private offering exemption from registration is based in part on the information herein supplied.
This Questionnaire does not constitute an offer to sell or a solicitation of an offer to buy any security. Your
answers will be kept strictly confidential. However, by signing this Questionnaire you will be authorizing the Corporation to provide a completed copy of this Questionnaire to such parties as the Corporation deems appropriate in order to ensure that
the offer and sale of the Securities will not result in a violation of the Act or the securities laws of any state and that you otherwise satisfy the suitability standards applicable to purchasers of the Securities. All potential investors must
answer all applicable questions and complete, date and sign this Questionnaire. Please print or type your responses and attach additional sheets of paper if necessary to complete your answers to any item.
| A. BACKGROUND INFORMATION Name:
Business Address:
(Number and Street)
(City)
(State)
(Zip
Code) Telephone Number: ( )
Residence Address:
(Number and Street) (City)
(State)
(Zip Code) Telephone Number: ( )
If an
individual: Age:
Citizenship: Where registered to vote:
If a corporation, partnership, limited liability company, trust or other entity: Type of entity:
State of formation:
Date of formation:
Social Security or Taxpayer Identification No.:
Send all correspondence to
(check one): Residence Address Business Address |
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Current ownership of securities of the Corporation:
shares of common stock, par value $0.001 per share (the “Common Stock”)
options to purchase
shares of Common Stock
B. STATUS AS ACCREDITED INVESTOR
The undersigned is an “accredited investor” as such term is defined in Regulation D under the Act, as at the time of the sale of the Securities the undersigned falls within one or more of the following categories
(Please initial one or more, as applicable):1
(1) a bank as defined in Section 3(a)(2) of the
Act, or a savings and loan association or other institution as defined in Section 3(a)(5)(A) of the Act whether acting in its individual or fiduciary capacity; a broker or dealer registered pursuant to Section 15 of the Securities Exchange Act of
1934; an insurance company as defined in Section 2(13) of the Act; an investment company registered under the Investment Corporation Act of 1940 or a business development company as defined in Section 2(a)(48) of that Act; a Small Business
Investment Corporation licensed by the U.S. Small Business Administration under Section 301(c) or (d) of the Small Business Investment Act of 1958; a plan established and maintained by a state, its political subdivisions, or any agency or
instrumentality of a state or its political subdivisions for the benefit of its employees, if such plan has total assets in excess of $5,000,000; an employee benefit plan within the meaning of the Employee Retirement Income Security Act of 1974 if
the investment decision is made by a plan fiduciary, as defined in Section 3(21) of such Act, which is either a bank, savings and loan association, insurance company, or registered investment adviser, or if the employee benefit plan has total assets
in excess of $5,000,000 or, if a self-directed plan, with the investment decisions made solely by persons that are accredited investors;
(2) a private business development company as defined in Section 202(a)(22) of the Investment Adviser Act of 1940;
(3) an organization described in Section 501(c)(3) of the
Internal Revenue Code of 1986, as amended, corporation, Massachusetts or similar business trust, or partnership, not formed for the specific purpose of acquiring the Securities offered, with total assets in excess of $5,000,000;
(4) a natural person whose individual net worth,
or joint net worth with that person’s spouse, at the time of such person’s purchase of the Securities exceeds $1,000,000;
(5) a natural person who had an individual income in excess of $200,000 in each of the two most recent years or joint income with that
person’s spouse in excess of $300,000 in each of those years and has a reasonable expectation of reaching the same income level in the current year;
(6) a trust, with total assets in excess of $5,000,000, not formed for the specific purpose of acquiring the Securities
offered, whose purchase is directed by a sophisticated person as described in Rule 506(b)(2)(ii) of Regulation D; and
(7) an entity in which all of the equity owners are accredited investors (as defined above).
C. REPRESENTATIONS
The undersigned hereby represents and warrants to the Corporation as follows:
1. |
Any purchase of the Securities would be solely for the account of the undersigned and not for the account of any other person or with a view to any resale,
fractionalization, division, or distribution thereof. |
1 As used in this Questionnaire, the term “net worth” means the excess of total assets over total liabilities. In computing net worth for the purpose of subsection (4), the principal residence of the investor
must be valued at cost, including cost of improvements, or at recently appraised value by an institutional lender making a secured loan, net of encumbrances. In determining income, the investor should add to the investor’s adjusted gross income
any amounts attributable to tax exempt income received, losses claimed as a limited partner in any limited partnership, deductions claimed for depiction, contributions to an ▇▇▇ or ▇▇▇▇▇ retirement plan, alimony payments, and any amount by which
income from long-term capital gains has been reduced in arriving at adjusted gross income.
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2. |
The information contained herein is complete and accurate and may be relied upon by the Corporation, and the undersigned will notify the Corporation immediately
of any material change in any of such information occurring prior to the closing, if any, with respect to the purchase of Securities by the undersigned or any co-purchaser. |
3. |
There are no suits, pending litigation, or claims against the undersigned that could materially affect the net worth of the undersigned as reported in this
Questionnaire. |
4. |
The undersigned acknowledges that there may occasionally be times when the Corporation determines that it must suspend the use of the Prospectus forming a part
of the Registration Statement (as such terms are defined in the Stock Purchase Agreement to which this Questionnaire is attached), as set forth in Section 7.2(c) of the Stock Purchase Agreement. The undersigned is aware that, in such event, the
Securities will not be subject to ready liquidation, and that any Securities purchased by the undersigned would have to be held during such suspension. The overall commitment of the undersigned to investments which are not readily marketable is not
excessive in view of the undersigned’s net worth and financial circumstances, and any purchase of the Securities will not cause such commitment to become excessive. The undersigned is able to bear the economic risk of an investment in the
Securities. |
5. |
The undersigned has carefully considered the potential risks relating to the Corporation and a purchase of the Securities, and fully understands that the
Securities are speculative investments which involve a high degree of risk of loss of the undersigned’s entire investment. Among others, the undersigned has carefully considered each of the risks identified in the Exchange Act Documents.
|
IN WITNESS WHEREOF, the undersigned has executed this Questionnaire this
day of January, 2003, and declares under oath that it is truthful and correct.
| SF CAPITAL PARTNERS
LTD.
Print Name | ||
| By: |
| |
| Signature Name/Title:
(required for any purchaser that is a corporation, partnership, trust or other entity) | ||
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[Company Letterhead]
, 200_
Re: |
▇▇▇▇ Medical Systems, Inc.; Registration Statement on Form S-3 |
Dear Selling Shareholder:
Enclosed please find five (5) copies of a prospectus dated ,
(the “Prospectus”) for your use in reselling your shares of common stock, $0.001 par value (the “Shares”), of ▇▇▇▇ Medical Systems, Inc. (the
“Company”), under the Company’s Registration Statement on Form S-3 (Registration No. 333-______) (the “Registration Statement”), which has been declared effective by the Securities and Exchange Commission.
As a selling shareholder under the Registration Statement, you have an obligation to deliver a copy of the Prospectus to each purchaser of your Shares, either directly or through the broker-dealer who executes the sale of your Shares.
The Company is obligated to notify you in the event that it suspends trading under the Registration Statement in
accordance with the terms of the Stock Purchase Agreement between the Company and you. During the period that the Registration Statement remains effective and trading thereunder has not been suspended, you will be permitted to sell your Shares which
are included in the Prospectus under the Registration Statement. Upon a sale of any Shares under the Registration Statement, you or your broker will be required to deliver to the Transfer Agent, U.S. Stock Transfer Corporation (1) your restricted
stock certificate(s) representing the Shares, (2) instructions for transfer of the Shares sold, and (3) a representation letter from your broker, or from you if you are selling in a privately negotiated transaction, or from such other appropriate
party, in the form of Exhibit A attached hereto (the “Representation Letter”). The Representation Letter confirms that the Shares have been sold pursuant to the Registration Statement and in a manner described under the caption
“Plan of Distribution” in the Prospectus and that such sale was made in accordance with all applicable securities laws, including the prospectus delivery requirements.
Please note that you are under no obligation to sell your Shares during the registration period. However, if you do decide to sell, you must comply with the requirements
described in this letter or otherwise applicable to such sale. Your failure to do so may result in liability under the Securities Act of 1933, as amended, and the Securities Exchange Act of 1934, as amended. Please remember that all sales of your
Shares must be carried out in the manner set forth under the caption “Plan of Distribution” in the Prospectus if you sell under the Registration Statement. The Company may require an opinion of counsel reasonably satisfactory to the
Company if you choose another method of sale. You should consult with your own legal advisor(s) on an ongoing basis to ensure your compliance with the relevant securities laws and regulations.
In order to maintain the accuracy of the Prospectus, you must notify the undersigned upon the sale, gift, or other transfer of any
Shares by you, including the number of Shares being transferred, and in the event of any other change in the information regarding you which is contained in the Prospectus. For example, you must notify the undersigned if you enter into any
arrangement with a broker-dealer for the sale of shares through a block trade, special offering, exchange distribution or secondary distribution or a purchase by a broker-dealer. Depending on the circumstances, such transactions may require the
filing of a supplement to the Prospectus in order to update the information set forth under the caption “Plan of Distribution” in the Prospectus.
Should you need any additional copies of the Prospectus, or if you have any questions concerning the foregoing, please write to me at ▇▇▇▇ Medical Systems, Inc., ▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ ▇▇▇▇., ▇▇▇▇▇▇▇▇ ▇▇▇▇,
▇▇ ▇▇▇▇▇. Thank you.
Sincerely,
Chief Financial Officer
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Exhibit A
CERTIFICATE OF SUBSEQUENT SALE
U.S. Stock Transfer Corporation
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇.
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
RE: |
Sale of Shares of Common Stock of ▇▇▇▇ Medical Systems, Inc. (the “Company”) pursuant to the Company’s Prospectus dated
, (the “Prospectus”)
|
Dear Sir/Madam:
The undersigned hereby certifies, in connection with the sale of shares of Common Stock of the Company included in the table of Selling Shareholders in the Prospectus, that the undersigned has sold the
shares pursuant to the Prospectus and in a manner described under the caption “Plan of Distribution” in the Prospectus and that such sale complies with all securities laws applicable to the undersigned, including, without limitation, the
Prospectus delivery requirements of the Securities Act of 1933, as amended.
Selling Shareholder (the beneficial owner):
Record Holder (e.g., if held in name of nominee):
Restricted Stock Certificate No.(s):
Number of Shares Sold:
Date of Sale:
In the event that you receive a stock certificate(s) representing more shares of Common Stock than have been sold by the undersigned, then you should return to the undersigned a newly issued certificate for such excess shares in the
name of the Record Holder and BEARING A RESTRICTIVE LEGEND. Further, you should place a stop transfer on your records with regard to such certificate.
Very truly yours,
| Dated:
|
By:
| |
| Print Name:
| ||
| Title:
|
cc: |
▇▇▇▇ Medical Systems, Inc. |
▇▇▇ |
▇. ▇▇▇▇▇▇▇▇▇ ▇▇▇▇. |
▇▇▇▇▇▇▇▇
▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: |
Chief Financial Officer |
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