STOCK PURCHASE AGREEMENT
Aptimus, Inc.
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Ladies & Gentlemen:
Each undersigned investor set forth of the Schedule of Investors attached
as Annex I hereto (each, an "Investor" and, collectively, the "Investors"),
hereby confirms its agreement with you as follows:
1. This Stock Purchase Agreement (the "Agreement") is made as of December 4,
2003 between Aptimus, Inc., a Washington corporation (the "Company"), and each
of the Investors.
2. The Company has authorized the sale and issuance of up to 776,690 shares (the
"Shares") of common stock of the Company, no par value per share (the "Common
Stock"), to the Investors in a private placement (the "Offering").
3. The Company and the Investors agree that each Investor will, severally and
not jointly, purchase from the Company and the Company will issue and sell to
the Investors that number of Shares as set forth opposite each Investor's name
on the Schedule of Investors, for a purchase price of $3.55 per share, pursuant
to the Terms and Conditions for Purchase of Shares attached hereto as Annex II
and incorporated herein by reference as if fully set forth herein (the "Terms
and Conditions"). 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 on Annex I.
4. Each Investor represents that, except as set forth below, (a) it has had no
position, office or other material relationship within the past three years with
the Company or persons known to it to be affiliates of the Company, (b) neither
it, nor any group of which it is a member or to which it is related,
beneficially owns (including the right to acquire or vote) any securities of the
Company and (c) it has no direct or indirect affiliation or association with any
National Association of Securities Dealers, Inc. ("NASD") member as of the date
hereof. Exceptions:
________________________________________________________________________________
_______________________________________________________________________________.
(If no exceptions, write "none." If left blank, response will be deemed to be
"none.")
Please confirm that the foregoing correctly sets forth the agreement
between us by signing in the space provided below for that purpose. By executing
this Agreement, you acknowledge that the Company may use the information in
paragraph 4 above and the name and address information below in preparation of
the Registration Statement (as defined in Annex II).
AGREED AND ACCEPTED:
APTIMUS, INC. INVESTORS:
By: ___________________________________ Permal U.S. Opportunities Limited
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ By: Apex Capital, LLC, its
Authorized Investment Advisor
Chief Executive Officer
By: ______________________________
Print Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Title: Manager and Principal
Address: c/o Apex Capital, LLC
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Name in which securities should be
registered (if different):
__________________________________
Zaxis Institutional Partners, LP
By: Apex Capital, LLC, its General
Partner
By: ______________________________
Print Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Title: Manager and Principal
Address: ▇▇ ▇▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇ ▇▇▇,
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Name in which securities should be
registered (if different):
__________________________________
Zaxis Institutional Offshore
By: Apex Capital, LLC, its
Authorized Investment Advisor
By: ______________________________
Print Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Title: Manager and Principal
Address: c/o Apex Capital, LLC
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Name in which securities should be
registered (if different):
__________________________________
Zaxis Partners, LP
By: Apex Capital, LLC, its General
Partner
By: ______________________________
Print Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Title: Manager and Principal
Address: ▇▇ ▇▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇ ▇▇▇,
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Name in which securities should be
registered (if different):
__________________________________
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Net Market Partners, LP
By: Net Map, LLC, its General
Partner
By: Apex Capital, LLC, its Manager
By: ______________________________
Print Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Title: Manager and Principal
Address: ▇▇ ▇▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇ ▇▇▇,
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Name in which securities should be
registered (if different):
__________________________________
By: ______________________________
Print Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Address: c/o Apex Capital, LLC
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Name in which securities should be
registered (if different):
__________________________________
Special Situations Technology
Fund, LP
By:
By: ______________________________
Print Name: ______________________
Title: ___________________________
Address: _________________________
Name in which securities should be
registered (if different):
__________________________________
Special Situations Technology
Fund II, LP
By:
By: ______________________________
Print Name: ______________________
Title: ___________________________
Address: _________________________
Name in which securities should be
registered (if different):
__________________________________
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ANNEX I
SCHEDULE OF INVESTORS
NAME OF PURCHASER NUMBER OF SHARES AGGREGATE PURCHASE PRICE
Permal U.S. Opportunities Limited 140,000 $497,000
Zaxis Institutional Offshore 14,000 $49,700
Zaxis Partners, LP 51,000 $181,050
Net Market Partners, LP 200,000 $710,000
Zaxis Institutional Partners, LP 40,000 $142,000
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ 50,000 $177,500
Special Situations Technology Fund, LP 46,100 $163,655
Special Situations Technology Fund II, LP 235,590 $836,344.50
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THE SHARES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT, AND, UNLESS SO
REGISTERED, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EXEMPTION FROM, OR
IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES
ACT. THE SHARES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON OR
ENDORSED THE MERITS OF THIS OFFERING OR THE ACCURACY OR ADEQUACY OF THIS
CONFIDENTIAL SUMMARY OF TERMS AND CONDITIONS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE. THE SHARES ARE BEING OFFERED PURSUANT TO EXEMPTIONS FROM
REGISTRATION REQUIREMENTS PROVIDED BY SECTION 4(2) OF THE SECURITIES ACT,
REGULATION D AND RULE 506 THEREUNDER, CERTAIN STATE SECURITIES LAWS AND CERTAIN
RULES AND REGULATIONS PROMULGATED PURSUANT THERETO. THE SHARES MAY NOT BE
TRANSFERRED, SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF
AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT AND ANY APPLICABLE
STATE SECURITIES LAWS OR AN OPINION OF COUNSEL REASONABLY ACCEPTABLE TO THE
COMPANY AND ITS COUNSEL THAT SUCH REGISTRATION IS NOT REQUIRED. THIS DOCUMENT
DOES NOT CONSTITUTE AN OFFER TO SELL OR SOLICITATION OF AN OFFER TO BUY THE
SECURITIES IN ANY JURISDICTION WHERE, OR TO ANY PERSON TO WHOM, IT IS UNLAWFUL
TO MAKE SUCH OFFER OR SOLICITATION.
ANNEX II
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 and issuance of up to 776.690
Shares.
2. Agreement to Sell and Purchase the Shares. At the Closing (as defined
in Section 3), the Company will sell to each Investor, and such Investor will
severally purchase from the Company, upon the terms and conditions hereinafter
set forth, the number of Shares set forth opposite such Investor's name in Annex
I to the Agreement, to which these Terms and Conditions are attached as Annex
II, at the purchase price set forth thereon.
3. Delivery of the Shares at Closing. The completion of the purchase and
sale of the Shares (the "Closing") shall occur on December 4, 2003 (the "Closing
Date"), at the offices of the Company's counsel. At the Closing, the Company
shall deliver to each Investor, versus payment therefor, one or more stock
certificates representing the number of Shares set forth opposite such
Investor's name in Annex I of the Agreement, each such certificate to be
registered in the name of such Investor or, if so indicated on the signature
page of the Agreement, in the name of a nominee designated by the Investor. The
Shares shall bear an appropriate restrictive legend as required by applicable
securities laws.
The Company's obligation to issue the Shares to the Investors 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 and (b) 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.
Each Investor's obligation to purchase the Shares shall be subject to the
following conditions, any one or more of which may be waived by such Investor:
(a) the representations and warranties of the Company set forth herein shall be
true and correct as of the Closing Date in all material respects and (b) the
Investor shall have received such documents as such Investor shall reasonably
have requested, including compliance and Secretary's certificates and a standard
opinion of Company counsel as to the matters set forth in the first clause of
Section 4.1, in Sections 4.2 and 4.3 hereof and, subject to the accuracy of the
information and the representations and warranties required to be provided by
each Investor, as to exemption from the registration requirements of the
Securities Act of 1933, as amended (the "Securities Act"), of the sale of the
Shares.
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4. Representations, Warranties and Covenants of the Company. Except as
otherwise described in the Disclosure Schedule delivered to the Investors prior
to the execution of this Agreement, the Company hereby represents and warrants
to, and covenants with, the Investors, as follows:
4.1 Organization. The Company is duly organized and validly existing
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 the end of its most recently completed fiscal year through the date
hereof, including, without limitation, its most recent reports on Form 10-K and
Form 10-Q (collectively, 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, 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. The Company has all
requisite power and authority to execute, deliver and perform its obligations
under the Agreement, and the Agreement has been duly authorized and validly
executed and delivered by the Company and constitutes legal, valid and binding
agreement of the Company enforceable against the Company in accordance with its
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). The Shares being purchased by the Investors
hereunder will, upon issuance and payment therefor pursuant to the terms hereof,
be duly authorized and validly issued, fully paid and nonassessable.
4.3 Non-Contravention. The execution and delivery of the Agreement,
the issuance and sale of the Shares under the Agreement, the fulfillment of the
terms of the Agreement and the consummation of the transactions contemplated
hereby will not (A) conflict with or constitute a violation of, or default (with
the passage of time or otherwise) under, (i) any material bond, debenture, note
or other evidence of indebtedness, lease, contract, indenture, mortgage, deed of
trust, loan agreement, joint venture or other agreement or instrument to which
the Company or any Subsidiary is a party or by which it or any of its
Subsidiaries or their respective properties are bound, (ii) the charter, bylaws
or other organizational documents of the Company or any Subsidiary, or (iii) any
law, administrative regulation, ordinance or order of any court or governmental
agency, arbitration panel or authority applicable to the Company or any
Subsidiary or their respective properties, except in the case of clauses (i) and
(iii) for any such conflicts, violations or defaults which are not reasonably
likely to have a Material Adverse Effect, individually or in the aggregate, or
(B) result in the creation or imposition of any lien, encumbrance, claim,
security interest or restriction whatsoever upon any of the material properties
or assets of the Company or any Subsidiary or an acceleration of indebtedness
pursuant to any obligation, agreement or condition contained in any material
bond, debenture, note or any other evidence of indebtedness or any material
indenture, mortgage, deed of trust or any other agreement or instrument to which
the Company or any Subsidiary is a party or by which any of them is bound or to
which any of the material property or assets of the Company or any Subsidiary is
subject. 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 Agreement and the valid issuance and sale of
the Shares to be sold and issued pursuant to the Agreement, 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 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
Disclosure Schedule Documents or (ii) outstanding warrants, options or other
securities disclosed in the Disclosure Schedule. The Shares to be sold and
issued pursuant to the Agreement, have been duly authorized, and when issued and
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paid for in accordance with the terms of the Agreement, 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 Agreement or as described in the Disclosure Schedule,
there are no outstanding rights (including, without limitation, preemptive
rights), warrants or options to acquire, or instruments convertible into or
exchangeable for, any unissued shares of capital stock or other equity interest
in the Company or any Subsidiary, or any contract, commitment, agreement,
understanding or arrangement of any kind to which the Company is a party or of
which the Company has knowledge and relating to the issuance or sale of any
capital stock of the Company or any Subsidiary, any such convertible or
exchangeable securities or any such rights, warrants or options. Without
limiting the foregoing, except as set forth in or contemplated by the Agreement
or as described in the Disclosure Schedule, 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. 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.
Except as described in the Disclosure Schedule, there are no stockholders
agreements, voting agreements or other similar agreements with respect to the
Common Stock to which the Company is a party or, to the knowledge of the
Company, between or among any of the Company's stockholders.
4.5 Legal Proceedings. There is no material legal or governmental
proceeding pending or, to the knowledge of the Company, threatened (i) to which
the Company or any Subsidiary is or may be a party or of which the business or
property of the Company or any Subsidiary is subject or (ii) which adversely
affects or challenges the legality, validity or enforceability of the Agreement.
4.6 No Violations. Neither the Company nor any Subsidiary is, and no
facts have come to the Company's attention that would be reasonably likely (with
the passage of time or otherwise) to result, 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 any bond,
debenture, note or any other evidence of indebtedness in any indenture,
mortgage, deed of trust or any other material agreement or instrument to which
the Company or any Subsidiary is a party or by which the Company or any
Subsidiary is bound or by which the properties of the Company or any Subsidiary
are bound, which would be reasonably likely to have a Material Adverse Effect.
4.7 Governmental Permits, Etc. With the exception of the matters
which are dealt with separately in Section 4.1, 4.12 and 4.13, 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
Disclosure Schedule, (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,
designs, manufacturing or other processes, systems, data compilation, research
results, know-how or other proprietary rights (collectively, "Intellectual
Property") that are necessary for the conduct of its business as now conducted
or as proposed to be conducted as described in the Exchange Act Documents except
where the failure to currently own or possess would not have a Material Adverse
Effect, (ii) neither the Company nor any of its Subsidiaries is infringing, or
has received any notice of, or has any knowledge of, any asserted infringement
by the Company or any of its Subsidiaries of, any rights of a third party with
respect to any Intellectual Property that, individually or in the aggregate,
would have a Material Adverse Effect and (iii) neither the Company nor any of
its Subsidiaries has received any notice of, or has any knowledge of,
infringement by a third party with respect to any Intellectual Property rights
of the Company or of any Subsidiary that, individually or in the aggregate,
would have a Material Adverse Effect.
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All material licenses or other material agreements under which (i) the
Company is granted rights in Intellectual Property, other than Intellectual
Property generally available on commercial terms from other sources, and (ii)
the Company has granted rights to others in Intellectual Property owned or
licensed by the Company, are in full force and effect and, to the knowledge of
the Company, there is no material default by the Company thereunder.
The Company believes it has taken all steps required in accordance with
sound business practice and business judgment to establish and preserve its
ownership of all material copyright, trade secret and other proprietary rights
with respect to its products and technology. To the knowledge of the Company,
the Company is not making unauthorized use of any confidential information or
trade secrets of any person. Neither the Company nor, to the knowledge of the
Company, any of its employees have any agreements or arrangements with any
persons other than the Company related to confidential information or trade
secrets of such persons or restricting any such employee's engagement in
business activities of any nature.
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 on a consolidated basis, 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 on a consolidated basis, except that the unaudited interim
financial statements were or are subject to normal and recurring year-end
adjustments which are not expected to be material in amount. Such financial
statements (including the related notes) have been prepared in accordance with
generally accepted accounting principles applied on a consistent basis
throughout the periods therein specified, except in the case of unaudited
statements, as may be permitted by the SEC on Form 10-Q under the Exchange Act.
4.10 No Material Adverse Change. Since September 30, 2003, there has
not been (i) any Material Adverse Effect affecting the Company and its
Subsidiaries considered as one enterprise, (ii) except as described in the
Disclosure Schedule, any obligation, direct or contingent, that is material to
the Company and its Subsidiaries considered as one enterprise, incurred by the
Company, (iii) any dividend or distribution of any kind declared, paid or made
on the capital stock of the Company or any of its Subsidiaries, or (iv) any loss
or damage (whether or not insured) to the physical property of the Company or
any of its Subsidiaries which has been sustained which has a Material Adverse
Effect.
4.11 Disclosure. The representations and warranties of the Company
contained in this Section 4 as of the date hereof, 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.
4.12 Common Stock Listing. The Company's Common Stock is registered
pursuant to Section 12(g) of the Exchange Act and is quoted on The
Over-the-Counter Bulletin Board (the "OTCBB"), 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 removal of the Common
Stock from the OTCBB, nor has the Company received any notification that the SEC
is contemplating terminating such registration.
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, 2002;
(b) Definitive Proxy Statement for the Annual Meeting held
on June 10, 2003;
(c) Quarterly Reports on Form 10-Q for the quarters ended
March 31, 2003, June 30, 2003 and September 30, 2003;
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(d) Current Reports on Form 8-K, filed on August 14, 2003
and October 23, 2003; and
(e) All other documents, if any, filed by the Company with
the SEC since December 31, 2002 pursuant to the
reporting requirements of the Exchange Act.
4.14 No Manipulation of Stock. Neither the Company, nor any of its
directors, officers or controlling persons, has taken or will, in violation of
applicable law, take, any action designed to or that might reasonably be
expected to cause or result in, or which has constituted, stabilization or
manipulation of the price of the Common Stock to facilitate the sale or resale
of the Shares.
4.15 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.
4.16 Foreign Corrupt Practices; ▇▇▇▇▇▇▇▇-▇▇▇▇▇ Act.
(a) 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.
(b) The Company is in compliance in all material respects with
all provisions of the ▇▇▇▇▇▇▇▇-▇▇▇▇▇ Act of 2002 that are applicable to it as of
the Closing Date.
4.17 Environmental. Except as would not, individually or in the
aggregate, reasonably be expected to have a Material Adverse Effect (i) the
Company and its Subsidiaries are in compliance with and not subject to any known
liability under applicable Environmental Laws (as defined below), (ii) the
Company has made all filings and provided all notices required under any
applicable Environmental Law, and has, and is in compliance with, all permits
required under any applicable Environmental Laws and each of them is in full
force and effect, (iii) (a) there is no pending civil, criminal or
administrative action, or pending hearing or suit, (b) the Company has not
received any demand, claim or notice of violation and (c) to the knowledge of
the Company, there is no investigation, proceeding, notice or demand letter or
request for information threatened against the Company, in the case of each of
(a), (b) and (c), under any Environmental Law, (iv) no lien, charge, encumbrance
or restriction has been recorded under any Environmental Law with respect to any
assets, facility or property owned, operated, leased or controlled by the
Company, (v) the Company has not received notice that it has been identified as
a potentially responsible party under the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended ("CERCLA"), or any comparable
state law and (vi) no property or facility of the Company is (a) listed or, to
the knowledge of the Company, proposed for listing on the National Priorities
List under CERCLA or is (b) listed in the Comprehensive Environmental Response,
Compensation, Liability Information System List promulgated pursuant to CERCLA,
or on any comparable list maintained by any state or local governmental
authority.
For purposes of this Agreement, "Environmental Laws" means all applicable
federal, state and local laws or regulations, codes, orders, decrees, judgments
or injunctions issued, promulgated, approved or entered thereunder, relating to
pollution or protection of public or employee health and safety or the
environment, including, without limitation, laws relating to (i) emissions,
discharges, releases or threatened releases of Hazardous Materials (as defined
below) into the environment (including, without limitation, ambient air, surface
water, ground water, land surface or subsurface strata), (ii) the manufacture,
processing, distribution, use, generation, treatment, storage, disposal,
transport or handling of Hazardous Materials and (iii) underground and above
ground storage tanks and related piping, and emissions, discharges, releases or
threatened releases therefrom. The term "Hazardous Material" means (a) any
"hazardous substance," as defined in the Comprehensive Environmental Response,
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the Resource Conservation and Recovery Act, as amended, (b) any "hazardous
waste," as defined by the Resource Conservation and Recovery Act, as amended,
(c) any petroleum or petroleum product, (d) any polychlorinated biphenyl and (e)
any pollutant or contaminant or hazardous, dangerous or toxic chemical,
material, waste or substance.
4.18 Accountants. The Company believes that ▇▇▇▇ ▇▇▇▇▇ LLP and
PricewaterhouseCoopers LLP, who the Company expects will express their opinion
with respect to the financial statements to be incorporated by reference from
the Company's Annual Report on Form 10-K for the year ended December 31, 2002
(and 2003, if and as applicable) into the Registration Statement (as defined
below) 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 that are currently material to the
Company are in full force and effect on the date hereof, and neither the Company
nor, to the Company's knowledge, any other party to such contracts is in breach
of or default under any of such contracts which would have a Material Adverse
Effect.
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 Investors
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 materials in connection with this Offering and
sale of the Shares other than the documents of which this Agreement is a part,
including the Disclosure Schedule, or the Exchange Act Documents. The Company
has not in the past nor will it hereafter take any action 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 Use of Proceeds. The Company shall use the proceeds from the
Offering for working capital, strategic acquisitions, if any, and general
corporate purposes.
4.24 Lock-Up. Upon execution of this Agreement, the Company shall
have entered, and shall have caused certain of its officers and directors to
enter, into an agreement with the Investors not to sell or otherwise transfer or
dispose of any shares of the Company's capital stock until the later to occur of
(i) 90 days following the Closing Date and (ii) the effectiveness of the
Registration Statement (as defined below); provided, however, that each such
officer and director, exclusive of ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, shall be permitted to sell
or otherwise transfer or dispose of up to an aggregate of ten percent (10%) of
his holdings (determined on the date hereof) of the Company's common stock,
without the prior consent of the Investors; and provided, further, that ▇▇▇▇▇▇▇
▇. ▇▇▇▇▇▇ shall be permitted to sell or otherwise transfer or dispose of up to
an aggregate of five percent (5%) of his holdings (determined on the date
hereof) of the Company's common stock, without the prior consent of the
Investors.
4.25 Issuances Below Purchase Price. From and after the date of
hereof and for a period of time ending not earlier than forty-five days after
the effectiveness of the Registration Statement (as defined below), the Company
shall not, without the prior written consent of a majority in interest of the
Investors, issue or sell any shares of the Company's capital stock or other
securities exercisable for, convertible into or otherwise giving the holder
thereof the right to acquire the Company's capital stock at a price per share,
including the exercise or conversion price per share, which is below the per
share purchase price for the Shares; provided, however, that this restriction
shall not apply to any capital stock issued pursuant to (i) employee benefit
plans disclosed in the Disclosure Schedule or (ii) outstanding warrants, options
or other securities disclosed in the Disclosure Schedule; and provided, further,
10
that in the event that the Company violates its covenant set forth in this
Section 4.25, in addition to any other rights or remedies the Investors may have
hereunder or under applicable law, and subject to the Company's ability to
repurchase shares under applicable Washington law (solvency requirements), the
majority in interest of the Investors may, in their sole discretion, elect to
require the Company to repurchase all, but not less than all, of the Shares then
held by such Investors at the original purchase price per Share paid by such
Investors.
4.26 Transactions with Affiliates. Other than as disclosed in the
Disclosure Schedule, the Company has not entered, and has no current plans to
enter, into any agreement, contract or arrangement with any of its officers,
directors or other affiliates.
4.27 Brokers or Finders. Except as disclosed in the Disclosure
Schedule, the Company has not dealt with any broker or finder in connection with
the transactions contemplated by the Agreement, and Company has not incurred,
and shall not incur, directly or indirectly, any liability for any brokerage or
finders' fees or agents commissions or any similar charges in connection with
the transactions contemplated by the Agreement.
5. Representations, Warranties and Covenants of the Investors.
5.1 Each Investor, severally and not jointly, represents and
warrants to, and covenants with, the Company that: (i) the Investor is an
"accredited investor" as defined in Rule 501(a) of Regulation D under the
Securities Act and the Investor is also knowledgeable, sophisticated and
experienced in making, and is qualified to make decisions with respect to
investments in shares presenting an investment decision like that involved in
the purchase of the 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 Shares set
forth in Annex I to the 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, except in accordance
with applicable securities law; (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 in the Agreement for use in preparation of
the Registration Statement and the answers thereto are true, correct and
complete in all material respects as of the date hereof and will be true,
correct and complete in all material respects as of the Closing Date; and (v)
the Investor has, in connection with its decision to purchase the Shares set
forth in Annex I to the Agreement, relied only upon the Exchange Act Documents,
the representations and warranties of the Company contained herein and the
Disclosure Schedules. Each 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. Investor
understands that the Shares purchased hereunder have to be held indefinitely
unless there is an effective Registration Statement under the Securities Act
with respect to the Shares or an exemption from registration available under the
Securities Act and applicable state securities laws, and the Investor is able to
bear the economic risk of an investment in the Shares.
5.2 Each Investor, severally and not jointly, 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 Each Investor, severally and not jointly, hereby covenants with
the Company not to make any sale of the Shares without complying with the
provisions of this Agreement, including Section 7.2 hereof, and if selling
pursuant to the Registration Statement, without causing the prospectus delivery
requirement under the Securities Act to be satisfied, and the Investor
acknowledges that the certificates evidencing the Shares will be imprinted with
a legend that prohibits their transfer except in accordance therewith. Upon the
earlier of (i) the Registration Statement becoming effective and (ii) Rule
144(k) becoming available, the Investors shall be entitled to exchange their
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certificates representing the Shares for certificates that do not contain any
restrictive legend. Each 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 Each Investor, severally and not jointly, 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 restricted 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 Each Investor understands that nothing in the Exchange Act
Documents, this Agreement or any other materials presented to the Investors 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.
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 Investors
herein shall survive the execution of this Agreement, the delivery to the
Investors of the Shares being purchased and the payment therefor.
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
Investors after prompt request from the Company to the Investors to provide such
information, prepare and file with the SEC, not later than March 31, 2004 (the
"Filing Date"), a registration statement on Form S-3 or such other successor
form (except that if the Company is not then eligible to register for resale the
Registrable Securities (as defined below) on Form S-3, in which case such
registration shall be on Form S-1 or any successor form) (the "Registration
Statement") to enable the resale of the Shares (the "Registrable Securities") by
the Investors from time to time through the OTCBB quotation system or in other
privately-negotiated transactions;
(b) use its reasonable best efforts, subject to receipt of
necessary information from the Investors after prompt request from the Company
to the Investors to provide such information, to cause the Registration
Statement to become effective within 120 days after the Registration Statement
is filed by the Company(the "Effectiveness Date"), such efforts to include,
without limiting the generality of the foregoing, preparing and filing with the
SEC in such 120-day period any financial statements that are required to be
filed prior to the effectiveness of such Registration Statement;
(c) use its reasonable best efforts to prepare and file with
the SEC such amendments and supplements to the Registration Statement and the
prospectus used in connection therewith 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 Registrable Securities purchased hereunder, the
earlier of (i) the second anniversary of the Closing Date, (ii) the date on
which the Investors may sell all Registrable Securities then held by the
Investors without restriction by the volume limitations of Rule 144(e) of the
Securities Act, or (iii) such time as all Registrable Securities purchased by
the Investors in this Offering have been sold pursuant to a registration
statement;
12
(d) furnish to the Investors with respect to the Registrable
Securities 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 Investors may reasonably request, in order to facilitate the public sale
or other disposition of all or any of the Registrable Securities by the
Investors; provided, however, that the obligation of the Company to deliver
copies of prospectuses or preliminary prospectuses to the Investors shall be
subject to the receipt by the Company of reasonable assurances from the
Investors that the Investors 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 Investors and use its reasonable
best efforts to maintain such blue sky qualifications during the period the
Company is required to maintain the effectiveness of the Registration Statement
pursuant to Section 7.1(c); provided, however, that the Company shall not be
required to qualify to do business or consent to service of process in any
jurisdiction in which it is not now so qualified or has not so consented;
(f) otherwise use commercially reasonable efforts to comply
with all applicable rules and regulations of the Commission under the Securities
Act and the Exchange Act, and take such other actions as may be reasonably
necessary to facilitate the registration of the Registrable Securities
hereunder;
(g) bear all expenses of Company in connection with the
procedures in paragraph (a) through (e) of this Section 7.1 and the registration
of the Registrable Securities pursuant to the Registration Statement;
(h) advise the Investors, 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;
and
(i) if: (i) the Registration Statement is not filed on or
prior to the Filing Date in violation of this Agreement or (ii) the Registration
Statement filed hereunder is not declared effective by the SEC on or before the
Effectiveness Date or (iii) after the Registration Statement is first declared
effective by the SEC, it ceases for any reason to remain continuously effective
as to all Registrable Securities for which it is required to be effective or the
Investors are not permitted to utilize the prospectus therein to resell such
Registrable Securities, other than, in each case, within the time limits
permitted by Sections 7.2(d), (any such failure or breach being referred to as
an "Event"), then in addition to any other rights the Investors may have
hereunder or under applicable law: (x) on each such Event date the Company shall
pay to each Investor an amount in cash, as liquidated damages and not as a
penalty, equal to 1.5% of the aggregate purchase price paid by such Investor
pursuant to the Agreement for any Registrable Securities then held by such
Investor; and (y) on each monthly anniversary of each such Event (if the
applicable Event shall not have been cured by such date) until the applicable
Event is cured, the Company shall pay to each Investor an amount in cash, as
liquidated damages and not as a penalty, equal to 1.5% of the aggregate purchase
price paid by such Investor pursuant to the Agreement for any Registrable
Securities then held by such Investor. If the Company fails to pay any
liquidated damages pursuant to this Section in full within seven business days
after the date payable, the Company will pay interest thereon at a rate of 10%
per annum (or such lesser maximum amount that is permitted to be paid by
applicable law) to the Investors, accruing daily from the date such liquidated
damages are due until such amounts, plus all such interest thereon, are paid in
full.
With a view to making available to the Investors the benefits of Rule 144
(or its successor rule) and any other rule or regulation of the SEC that may at
any time permit the Investors to sell Registrable Securities to the public
without registration, the Company covenants and agrees to: (i) make and keep
public information available, as those terms are understood and defined in Rule
144, until the earlier of (A) such date as all of the Investors' Registrable
Securities may be resold pursuant to Rule 144(k) or any other rule of similar
13
effect or (B) such date as all of the Investors' Registrable Securities shall
have been resold; (ii) file with the SEC in a timely manner all reports and
other documents required of the Company under the Securities Act and under the
Exchange Act; and (iii) furnish to the Investors upon request, as long as the
Investors owns any Registrable Securities, (A) a written statement by the
Company that it has complied with the reporting requirements of the Securities
Act and the Exchange Act; (B) a copy of the Company's most recent Annual Report
on Form 10-K or Quarterly Report on Form 10-Q, and (C) such other information as
may be reasonably requested in order to avail the Investors of any rule or
regulation of the SEC that permits the selling of such Registrable Securities
without registration.
In no event at any time before the Registration Statement becomes
effective with respect to the Shares shall the Company publicly announce or file
any other registration statement, other than registrations on Form S-8, without
the prior written consent of a majority in interest of the Investors.
The Company understands that the Investors disclaim being underwriters,
but an Investor being deemed an underwriter by the SEC shall not relieve the
Company of any obligations it has hereunder.
7.2 Transfer of Shares After Registration; Suspension.
(a) Each Investor agrees that it will not effect any
disposition of the Registrable Securities or its right to purchase the
Registrable Securities that would constitute a sale within the meaning of the
Securities Act except as contemplated in the Registration Statement referred to
in Section 7.1 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 Registrable Securities being sold
thereunder, such prospectus will not contain an untrue statement of a material
fact or omit to state a material fact required to be stated therein or necessary
to make the statements therein, in light of the circumstances under which they
were made, not misleading; (ii) provide the Investors copies of any documents
filed pursuant to Section 7.2(b)(i); and (iii) inform each Investor that the
Company has complied with its obligations in Section 7.2(b)(i) (or that, if the
Company has filed a post-effective amendment to the Registration Statement which
has not yet been declared effective, the Company will notify the Investors 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
Investors 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 related 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 Investors (the "Suspension Notice") to the effect of the
foregoing and, upon receipt of such Suspension Notice, the Investors will
refrain from selling any Registrable Securities pursuant to the Registration
Statement (a "Suspension") until the Investors' receipt of copies of a
supplemented or amended prospectus prepared and filed by the Company, or until
it is advised in writing by the Company that the current prospectus may be used,
and has received copies of any additional or supplemental filings that are
incorporated or deemed incorporated by reference in any such prospectus. In the
event of any Suspension, the Company will use its reasonable best efforts to
cause the use of the prospectus so suspended to be resumed as soon as reasonably
14
practicable within 20 business days after the delivery of a Suspension Notice to
the Investors. In addition to and without limiting any other remedies
(including, without limitation, at law or at equity) available to the Investors,
the Investors shall be entitled to specific performance in the event that the
Company fails to comply with the provisions of this Section 7.2(c).
(d) Notwithstanding the foregoing paragraphs of this Section
7.2, the Investors shall not be prohibited from selling Registrable Securities
under the Registration Statement as a result of Suspensions on more than two
occasions of not more than 30 days each in any twelve month period, unless, in
the good faith judgment of the Company's Board of Directors, upon the written
advice of counsel, continuing a Suspension is necessary to prevent the
disclosure of material nonpublic information where such disclosure would be
materially injurious to the Company, in which event the Company shall use
reasonable best efforts to terminate such Suspension at the earliest date
practicable.
(e) Provided that a Suspension is not then in effect, the
Investors may sell Registrable Securities under the Registration Statement in
the manner set forth under the caption "Plan of Distribution" in the prospectus,
provided that they arrange for delivery of a current prospectus to the
transferee of such Registrable Securities. Upon receipt of a request therefor,
the Company has agreed to provide an adequate number of current prospectuses to
the Investors and to supply copies to any other parties requiring such
prospectuses.
(f) In the event of a sale of Registrable Securities by the
Investors pursuant to the Registration Statement, the Investors 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 Registrable Securities may be properly transferred.
7.3 Indemnification. For the purpose of this Section 7.3:
(i) the term "Selling Stockholder" shall include the Investors and
any affiliate of such Investors;
(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, exhibit, supplement or amendment included
in or relating to the Registration Statement referred to in Section 7.1; and
(iii) the term "untrue statement" shall include any untrue statement
or alleged untrue statement of a material fact, or any omission or alleged
omission to state (1) if in the Registration Statement (and excluding the
prospectus from such defined term solely for the purposes of describing the
applicable standard), a material fact required to be stated therein or necessary
to make the statements therein not misleading, and (2) if in the prospectus, 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
untrue statement contained in the Registration Statement as amended at the time
of effectiveness, or (ii) any failure by the Company to fulfill any undertaking
included in the Registration Statement as amended at the time of effectiveness,
and the Company will reimburse such Selling Stockholder for any reasonable legal
or other expenses reasonably incurred in investigating, defending or preparing
to defend any such action, proceeding or claim, provided, however, that the
Company shall not be liable in any such case to the extent that such loss,
claim, damage or liability arises out of, or is based upon, an untrue statement
made in such Registration Statement 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 or
the failure of such Selling Stockholder to comply with its covenants and
agreements contained in Sections 5.1, 5.2, 5.3 and 7.2 hereof or any statement
or omission in any prospectus that is corrected in any subsequent prospectus
that was delivered to the Selling Stockholder prior to the pertinent sale or
sales by the Selling Stockholder. The Company shall reimburse each Selling
Stockholder for the amounts provided for herein on demand as such expenses are
incurred.
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(b) Each 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 Sections 5.1, 5.2, 5.3 or 7.2 hereof, or (ii) any untrue statement
contained in the Registration 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, and the Investor will reimburse the Company (or such officer,
director or controlling person), as the case maybe, for any legal or other
expenses reasonably incurred in investigating, defending or preparing to defend
any such action, proceeding or claim; provided that the Investor's obligation to
indemnify the Company shall be limited to the net amount received by the
Investor from the sale of the Registrable Securities giving rise to such
liability. The Investor shall reimburse the Company for the amounts provided for
herein on demand as such expenses are incurred.
(c) Promptly after receipt by any indemnified person of a
notice of a claim or the beginning of any action in respect of which indemnity
is to be sought against an indemnifying person pursuant to this Section 7.3,
such indemnified person shall notify the indemnifying person in writing of such
claim or of the commencement of such action, but the omission to so notify the
indemnifying person will not relieve it from any liability which it may have to
any indemnified person under this Section 7.3 (except to the extent that such
omission materially and adversely affects the indemnifying person's ability to
defend such action) or from any liability otherwise than under this Section 7.3.
Subject to the provisions hereinafter stated, in case any such action shall be
brought against an indemnified person, the indemnifying person shall be entitled
to participate therein, and, to the extent that it shall elect by written notice
delivered to the indemnified person promptly after receiving the aforesaid
notice from such indemnified person, shall be entitled to assume the defense
thereof, with counsel reasonably satisfactory to such indemnified person. After
notice from the indemnifying person to such indemnified person of its election
to assume the defense thereof, such indemnifying person shall not be liable to
such indemnified person for any legal expenses subsequently incurred by such
indemnified person in connection with the defense thereof, provided, however,
that if there exists or shall exist a conflict of interest that would make it
inappropriate, in the opinion of counsel to the indemnified person, for the same
counsel to represent both the indemnified person and such indemnifying person or
any affiliate or associate thereof, the indemnified person shall be entitled to
retain its own counsel at the expense of such indemnifying person; provided,
however, that no indemnifying person shall be responsible for the fees and
expenses of more than one separate counsel (together with appropriate local
counsel) for all indemnified parties. In no event shall any indemnifying person
be liable in respect of any amounts paid in settlement of any action unless the
indemnifying person shall have approved the terms of such settlement; provided
that such consent shall not be unreasonably withheld. No indemnifying person
shall, without the prior written consent of the indemnified person, effect any
settlement of any pending or threatened proceeding in respect of which any
indemnified person is or could have been a party and indemnification could have
been sought hereunder by such indemnified person, unless such settlement
includes an unconditional release of such indemnified person from all liability
on claims that are the subject matter of such proceeding.
(d) If the indemnification provided for in this Section 7.3 is
unavailable to or insufficient to hold harmless an indemnified person under
subsection (a) or (b) above in respect of any losses, claims, damages or
liabilities (or actions or proceedings in respect thereof) referred to therein,
then each indemnifying person shall contribute to the amount paid or payable by
such indemnified person as a result of such losses, claims, damages or
liabilities (or actions in respect thereof) in such proportion as is appropriate
to reflect the relative fault of the Company on the one hand and the Investors
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 the Investors 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 Investors agree
that it would not be just and equitable if contribution pursuant to this
subsection (d) were determined by pro rata allocation (even if the Investors
were treated as one entity for such purpose) or by any other method of
allocation which does not take into account the equitable considerations
referred to above in this subsection (d). The amount paid or payable by an
indemnified person as a result of the losses, claims, damages or liabilities (or
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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 Investors
shall not be required to contribute any amount in excess of the amount by which
the net amount received by the Investors from the sale of the Registrable
Securities to which such loss relates exceeds the amount of any damages which
such Investors have 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. Each
Investor's obligations in this subsection to contribute shall be in proportion
to its sale of Registrable Securities to which such loss relates and shall not
be joint with any other Selling Stockholders.
(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 or the Registrable Securities, as applicable, shall cease and terminate
as to any particular Shares or the Registrable Securities, as applicable, when
such Shares or the Registrable Securities, as applicable, shall have been
effectively registered under the Securities Act and sold or otherwise disposed
of in accordance with the intended method of disposition set forth in the
Registration Statement covering the Registrable Securities or at such time as an
opinion of counsel reasonably satisfactory to the Company shall have been
rendered to the effect that such conditions are not necessary in order to comply
with the Securities Act.
7.5 Information Available. So long as the Registration Statement is
effective covering the resale of Registrable Securities owned by the Investors,
the Company will furnish to the Investors:
(a) Unless otherwise electronically available on ▇▇▇▇▇, 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) if not included in substance in the Annual
Report to Stockholders, 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 Investors, 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 Investors, an adequate
number of copies of the prospectuses to supply to any other party requiring such
prospectuses. Further, and upon the reasonable request of the Investors, the
President or the Chief Financial Officer of the Company (or an appropriate
designee thereof) will meet with the Investors or their representative at the
Company's headquarters to discuss all information relevant for disclosure in the
Registration Statement covering the Registrable Securities 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.
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8. Notices. All notices, requests, consents and other communications
hereunder shall be in writing, shall be mailed (A) if within the United States
by first-class registered or certified airmail, or nationally recognized
overnight express courier, postage prepaid, or by facsimile, or (B) if delivered
from outside the United States, by International Federal Express or facsimile,
and shall be deemed given (i) if delivered by first-class registered or
certified mail, three business days after so mailed, (ii) if delivered by
nationally recognized overnight carrier, one business day after so mailed, (iii)
if delivered by International Federal Express, two business days after so
mailed, (iv) if delivered by facsimile, upon electronic confirmation of receipt
and shall be delivered as addressed as follows:
(a) if to the Company, to:
Aptimus, Inc.
▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Tel: (▇▇▇) ▇▇▇-▇▇▇▇ ▇▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
Attn: ▇▇▇▇▇ ▇. ▇▇▇▇▇
(b) with a copy to:
▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇.
▇▇▇▇▇▇ & ▇▇▇▇▇▇▇
US Bank Center
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Tel: (▇▇▇) ▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
(c) if to the Investor, at its address on the signature page
hereto, or at such other address or addresses as may have been furnished to the
Company in writing.
9. Changes. This Agreement may not be modified or amended except pursuant
to an instrument in writing signed by the Company and the majority in interest
of the Investors.
10. Headings. The headings of the various sections of this Agreement have
been inserted for convenience of reference only and shall not be deemed to be
part of this Agreement.
11. Severability. In case any provision contained in this Agreement should
be invalid, illegal or unenforceable in any respect, the validity, legality and
enforceability of the remaining provisions contained herein shall not in any way
be affected or impaired thereby.
12. Governing Law. 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. Expenses. Each of the Company and the Investors shall bear its own
expenses, including fees and costs of attorneys, accountants and financial
advisors, incurred in connection with the transactions contemplated hereunder;
provided, however, that the Company shall be responsible for the payment of the
Investors' reasonable legal fees that they incur with respect to the
negotiation, execution and delivery of the Agreement, up to (i) a maximum sum of
$10,000 for counsel to the investment funds managed by Apex Capital, LLC and
(ii) a maximum sum of $5,000 for counsel to the Special Situations Technology
Funds.
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15. Confidential Information. Each Investor represents to the Company
that, at all times during the Offering, the Investor has maintained in
confidence the existence of this Offering.
16. Publicity. The Company and the Investors shall consult with each other
in issuing any press releases with respect to the transactions contemplated
hereby, and neither the Company nor any Investor shall issue any such press
release or otherwise make any such public statement without the prior consent of
the Company, with respect to any press release of any Investor, or without the
prior consent of a majority in interest of the Investors, with respect to any
press release of the Company, which consent shall not unreasonably be withheld,
except if such disclosure is required by law, in which case the disclosing party
shall, to the extent not inconsistent with the disclosing party's legal
obligations, promptly provide the other party with prior notice of such public
statement or communication.
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Aptimus, Inc.
__________, 200_
Re: Aptimus, Inc.; Registration Statement on Form S-_
Dear Selling Stockholder:
Enclosed please find five (5) copies of a prospectus dated
_______________, _____ (the "Prospectus") for your use in reselling your shares
of common stock, no par value per share (the "Shares"), of Aptimus, Inc. (the
"Company"), under the Company's Registration Statement on Form S-__
(Registration No. 333- ) (the "Registration Statement"), which has been declared
effective by the Securities and Exchange Commission. As a selling stockholder
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
Company's Transfer Agent, Mellon Investors LLC, (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 "Certificate of
Subsequent Sale"). 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 Aptimus, Inc., ▇▇
▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇. Thank you.
Sincerely,
Chief Executive Officer
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Exhibit A
CERTIFICATE OF SUBSEQUENT SALE
Mellon Investors LLC
_______________________
_______________________
RE: Sale of Shares of Common Stock of Aptimus, Inc. (the
"Company") pursuant to the Company's Prospectus dated
_______________, 200__ (the "Prospectus")
Dear Sir/Madam:
The undersigned hereby certifies, in connection with the sale of shares of
Common Stock of the Company included in the table of Selling Stockholders 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 Stockholder (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: Aptimus, Inc.
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▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
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