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EXHIBIT 10.1
ENDOCARE, INC.
COMMON STOCK PURCHASE AGREEMENT
November 22, 2000
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TABLE OF CONTENTS
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Page
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1. Purchase and Sale of Stock.........................................1
1.1 Closing...................................................1
2. Representations and Warranties of the Company......................1
2.1 Organization, Good Standing and Qualification.............1
2.2 Authorization.............................................1
2.3 Valid Issuance of Common Stock............................2
2.4 Governmental Consents.....................................2
2.5 Compliance with Instruments and Law.......................2
2.6 SEC Documents; Financial Statements.......................3
2.7 Absence of Certain Developments...........................3
2.8 Intellectual Property.....................................3
2.9 Capitalization............................................4
2.10 Litigation................................................4
2.11 Disclosure................................................4
2.12 Listing...................................................5
2.13 Form S-3 Eligibility......................................5
2.14 Private Placement.........................................5
2.15 Brokers...................................................5
2.16 Tax Status................................................5
2.17 Key Employees.............................................5
2.18 Environmental Matters.....................................6
3. Representations and Warranties of Investors........................6
3.1 Authorization.............................................6
3.2 Purchase Entirely for Own Account.........................6
3.3 Disclosure of Information.................................7
3.4 Investment Experience.....................................7
3.5 Accredited Investor.......................................7
3.6 Restricted Securities.....................................7
3.7 Legend....................................................8
3.8 Risk Factors..............................................8
4. Conditions of Investor's Obligations at Closing....................8
4.1 Representations and Warranties............................8
4.2 Performance...............................................8
4.3 Qualifications............................................8
4.4 Proceedings and Documents.................................8
4.5 Delivery of Stock Certificates............................9
4.6 Execution and Delivery of Agreement.......................9
4.7 Listing...................................................9
4.8 Injunction................................................9
4.9 Opinion of Counsel........................................9
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4.10 Warrant...................................................9
4.11 No Material Adverse Change................................9
4.12 Secretary's Certificate...................................9
5. Conditions of the Company's Obligations at Closing.................9
5.1 Representations and Warranties............................9
5.2 Payment of Purchase Price................................10
5.3 Qualifications...........................................10
6. Affirmative Covenants of the Company..............................10
6.1 Registration Requirements................................10
6.2 Indemnification and Contribution.........................14
7. Participation Right in Stock Offerings............................16
7.1 Definition of New Securities.............................17
7.2 Notice; Exercise of Right................................17
7.3 Expiration of Right......................................18
7.4 Assignment of Right......................................18
8. Miscellaneous.....................................................18
8.1 Use of Proceeds..........................................18
8.2 Listing..................................................18
8.3 No Integrated Offerings..................................18
8.4 Survival of Warranties...................................18
8.5 Successors and Assigns...................................19
8.6 Governing Law; Jurisdiction..............................19
8.7 Counterparts.............................................19
8.8 Titles and Subtitles.....................................19
8.9 Notices..................................................19
8.10 Expenses; Attorneys' Fees................................20
8.11 Amendments and Waivers...................................20
8.12 Severability.............................................20
8.13 Entire Agreement.........................................20
8.14 Publicity................................................20
8.15 Termination..............................................21
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Schedule A List of Investors
Exhibit A Legal Opinion of Brobeck, Phleger & Harrison LLP
Exhibit B Form of Warrant
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COMMON STOCK PURCHASE AGREEMENT
THIS COMMON STOCK PURCHASE AGREEMENT (this "Agreement") is made as of
the 22nd day of November 2000 by and between Endocare, Inc., a Delaware
corporation (the "Company"), and the investors listed on the signature pages
hereof (each, an "Investor," and, collectively, the "Investors").
THE PARTIES HEREBY AGREE AS FOLLOWS:
1. Purchase and Sale of Stock. Subject to the terms and conditions of
this Agreement, each Investor agrees to purchase, and the Company agrees to sell
and issue to each Investor, the number of shares of the Company's Common Stock
(the "Shares") set forth opposite the Investor's name on Schedule A at a price
of $13.25 per share.
1.1 Closing. The purchase and sale of the Shares shall take place on
November 24, 2000 (the "Closing"). At the Closing, each Investor will wire to
the Company the purchase price for the Shares it is purchasing.
2. Representations and Warranties of the Company. The Company hereby
represents and warrants to each Investor that:
2.1 Organization, Good Standing and Qualification. The Company and its
subsidiary, Advanced Medical Procedures, Inc. ("AMP"), are corporations duly
organized, validly existing and in good standing under the laws of the State of
Delaware. The Company and AMP have all requisite corporate power and authority
to carry on their respective business as now conducted. The Company and AMP are
duly qualified to transact business and are in good standing in each
jurisdiction in which the failure to so qualify would have a Material Adverse
Effect.
"Material Adverse Effect" means any material adverse effect on (a) the
ability of the Company to perform its obligations hereunder or (b) the business,
operations, properties, prospects or financial condition of the Company. The
Company neither owns, nor has any contract to acquire, any equity securities of
any other entity other than as set forth on Schedule 2.1.
2.2 Authorization. The Company has the corporate power and authority to
execute, deliver and perform this Agreement, and to consummate the transactions
contemplated hereby and to issue, sell, and deliver to Investor the Shares
pursuant to the terms of this Agreement. All corporate action on the part of the
Company, its officers, directors and stockholders (including without limitation,
Rule 4460 promulgated by the National Association of Securities Dealers, Inc.
("NASD")) necessary for the authorization, execution and delivery of this
Agreement, the performance of all obligations of the Company hereunder, and the
authorization, issuance (or reservation for issuance), sale and delivery of the
Common Stock being sold hereunder has been taken or will be taken prior to the
Closing, and this Agreement constitutes the valid and legally binding obligation
of the Company, enforceable in accordance with its terms, except (a) as limited
by applicable bankruptcy, insolvency, reorganization,
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moratorium, and other laws of general application affecting enforcement of
creditors' rights generally, (b) as limited by laws relating to the availability
of specific performance, injunctive relief, or other equitable remedies and (c)
as to those limitations set forth in Section 6.2 relating to indemnity or
contribution to the extent the enforceability of such provisions is limited by
SEC rules or other laws.
2.3 Valid Issuance of Common Stock. The Shares being purchased by the
Investors hereunder, when issued, sold and delivered in accordance with the
terms of this Agreement for the consideration expressed herein, will be duly and
validly issued, fully paid, and nonassessable, and will be free of restrictions
on transfer other than restrictions on transfer under this Agreement and under
applicable state and federal securities laws. The issuance and delivery of the
Shares is not subject to preemptive, co-sale, right of first refusal or any
other similar rights of the stockholders of the Company or any taxes, liens or
encumbrances created by the Company. The Company has not granted any
registration rights with respect to its securities other than the registration
rights set forth herein and piggyback registration rights with respect to
approximately 270,000 shares of Common Stock issuable upon the exercise of
outstanding warrants granted to service providers, consultants and issued in
connection with licensing patent rights and all of which are listed on Schedule
2.3. The Company's Common Stock is quoted on the Nasdaq National Market ("NMS").
2.4 Governmental Consents. No consent, approval, order or authorization
of, or registration, qualification, designation, declaration or filing with, any
federal, state or local governmental authority on the part of the Company is
required in connection with the consummation of the transactions contemplated by
this Agreement, except for the filing of a Form D and any other filings required
to be made under the securities laws of the state in which each Investor
resides, which will be made by the Company as required by such laws, and the
filing of a registration statement and all amendments thereto with the SEC as
contemplated by this Agreement.
2.5 Compliance with Instruments and Law. Neither the Company nor AMP is
in violation or default in any material respect of (a) any provision of its
Certificate of Incorporation, as currently in effect and as amended or restated
through the date hereof, or its Bylaws or (b) any instrument, judgment, order,
writ, decree or contract to which it is a party or by which it is bound, the
failure to comply with which would have a Material Adverse Effect, or (c) any
provision of any federal or state statute, rule or regulation applicable to it,
the failure to comply with which would have a Material Adverse Effect. The
execution, delivery and performance of this Agreement and the consummation of
the transactions contemplated hereby will not result in any such violation or be
in conflict with or constitute, with or without the passage of time and giving
of notice, either a default under any such provision, instrument, judgment,
order, writ, decree or contract or an event that results in the creation of any
lien, charge or encumbrance upon any assets of the Company or the suspension,
revocation, impairment, forfeiture, or nonrenewal of any material permit,
license, authorization, or approval applicable to the Company, its business or
operations or its assets or properties or give to others any rights of
termination, amendment (including, without limitation, the triggering of any
anti-dilution provisions), acceleration or cancellation of, any agreement,
indenture or instrument to which the Company is a party. The Company is not in
violation of the listing requirements of
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the NMS and does not anticipate that the Common Stock will be delisted by the
NMS in the foreseeable future.
2.6 SEC Documents; Financial Statements. The Company has filed each
statement, annual, quarterly and other report, registration statement and
definitive proxy statement with the U.S. Securities and Exchange Commission
("SEC") that the Company has been required to file since January 1, 1996 ("SEC
Documents"). As of their respective filing dates, none of the SEC Documents
contained any untrue statement of a material fact or omitted to state a material
fact required to be stated therein or necessary to make the statements made
therein, in light of the circumstances in which they were made, not misleading.
As of their respective dates, the SEC Documents complied in all material
respects with the requirements of the Securities Exchange Act of 1934, as
amended (the "Exchange Act") or the Securities Act of 1933, as amended (the
"Securities Act"), as the case may be, and the rules and regulations of the SEC
promulgated thereunder applicable to the SEC Documents. None of the statements
made in any such SEC Documents is, or has been, required to be amended or
updated under applicable law (except for such statements as have been amended or
updated in subsequent filings made prior to the date hereof). The financial
statements of the Company included in the SEC Documents (the "Financial
Statements") comply as to form in all material respects with applicable
accounting requirements and with the published rules and regulations of the SEC
with respect thereto, have been prepared in accordance with generally accepted
accounting principles consistently applied (except as may be indicated in the
notes thereto or, in the case of unaudited statements, as permitted by the SEC)
and fairly present the financial position of the Company at the dates thereof
and the results of operations and cash flows for the periods then ended
(subject, in the case of unaudited statements, to immaterial, normal, recurring
audit adjustments). There has been no change in the Company's accounting
policies except as may be described in the notes to the Financial Statements.
Except as disclosed in the SEC Documents filed through the date hereof, the
Company has not incurred any liabilities of any kind whatsoever, whether
accrued, contingent, absolute, determined, determinable or otherwise, that,
individually or in the aggregate, would have a Material Adverse Effect, other
than liabilities under or contemplated by this Agreement.
2.7 Absence of Certain Developments. Since September 30, 2000, there
has been no (a) material adverse change in the condition, financial or
otherwise, of the Company or of the Company's assets, liabilities, properties,
business, financial condition, results of operations or, to the Company's
knowledge, prospects, (b) declaration, setting aside or payment of any dividend
or other distribution with respect to the capital stock of the Company, or (c)
loss, destruction or damage to any property of the Company, whether or not
insured, which has or may have a Material Adverse Effect.
2.8 Intellectual Property. The Company and AMP each owns or is licensed
to use all patents, patent applications, trademarks, trademark applications,
trade names, service marks, copyrights, copyright applications, licenses,
permits, inventions, discoveries, processes, scientific, technical, engineering
and marketing data, object and source codes, know-how (including trade secrets
and other unpatented and/or unpatentable proprietary or confidential
information, systems or procedures) and other similar rights and proprietary
knowledge necessary for the conduct of its business as now being conducted
(collectively, "Intangibles"). Except as disclosed in the SEC Documents, neither
the Company nor AMP infringes or is in
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conflict with any right of any other person with respect to any Intangibles
which, if the subject of an unfavorable decision, ruling or finding, would have
a Material Adverse Effect. Except as disclosed in the SEC Documents, neither the
Company nor AMP has received written notice of any pending conflict with or
infringement upon such third party Intangibles. Neither the Company nor AMP has
entered into any consent agreement, indemnification agreement, forbearance to
sue or settlement agreement with respect to the validity of the Company's or
AMP's ownership or right to use its respective Intangibles and, to the best
knowledge of the Company, there is no reasonable basis for any such claim to be
successful. Except as disclosed in the SEC Documents, the Intangibles are valid
and enforceable and no registration relating thereto has lapsed, expired or been
abandoned or canceled or is the subject of cancellation or other adversarial
proceedings, and all applications therefor are pending and in good standing.
Each of the Company and AMP has complied, in all material respects, with its
contractual obligations relating to the protection of its respective Intangibles
used pursuant to licenses. Except as disclosed in the SEC Documents, to the best
knowledge of the Company, no person is infringing on or violating the
Intangibles owned or used by the Company or AMP.
2.9 Capitalization. All of the Company's outstanding shares of capital
stock have been duly authorized 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 or subject to any
preemptive right or other rights to subscribe for or purchase securities. The
authorized capital stock of the Company consists of 50,000,000 shares of Common
Stock of which 13,366,073 shares are outstanding as of the date hereof, and
1,000,000 shares of Preferred Stock of which none are outstanding as of the date
hereof. Except as set forth on Schedule 2.9, there are no outstanding options to
purchase, or any preemptive rights or other rights to subscribe for or to
purchase, any securities or obligations convertible into, or any contracts or
commitments to issue or sell shares of the Company's capital stock or any such
options, rights, convertible securities or obligations.
2.10 Litigation. Except as set forth in the SEC Documents, there is no
pending or, to the Company's knowledge, threatened action, suit or other
proceeding before any court, governmental body or authority, or arbitration to
which the Company, AMP, or any officers or directors of the Company or AMP in
their capacities as such, is a party or to which the Company's property or
assets are subject. To the knowledge of the Company, except as set forth on
Schedule 2.10, there are no facts which, if known by a potential claimant or
governmental authority, could give rise to a claim or proceeding, which, if
asserted or conducted with results unfavorable to the Company, would have a
Material Adverse Effect.
2.11 Disclosure. All information relating to or concerning the Company
set forth in this Agreement or provided to any Investor pursuant to Section 3.3
hereof or otherwise in connection with the transactions contemplated hereby is
true and correct in all material respects and the Company has not omitted to
state any material fact necessary in order to make the statements made herein or
therein, in light of the circumstances under which they were made, not
misleading. No event or circumstance has occurred or exists with respect to the
Company or its business, properties, prospects, operations or financial
condition, which has not been publicly disclosed but, under applicable law, rule
or regulation, would be required to be disclosed by the Company in a
registration statement filed on the date hereof by the Company under the
Securities Act with respect to a primary issuance of the Company's securities.
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2.12 Listing. Promptly after the Closing, the Company will give notice
of issuance of the Shares or file the documents necessary to list the Shares on
the NMS.
2.13 Form S-3 Eligibility. The Company is eligible to register the
resale of its Common Stock on a registration statement on Form S-3 under the
Securities Act. There exist no facts or circumstances that would prohibit or
delay the preparation and filing of a registration statement on Form S-3 with
respect to the Shares. The Company has no basis to believe that its past or
present independent public auditors will withhold their consent to the
inclusion, or incorporation by reference, of their audit opinion concerning the
Company's financial statements which will be included in the Registration
Statement required to be filed pursuant to this Agreement. The Company shall
take all actions necessary to continue to meet the eligibility requirements for
the use of Form S-3 for the resale of the Shares.
2.14 Private Placement. Neither the Company nor any distributor
participating on the Company's behalf in the transactions contemplated hereby
(if any) nor any person acting for the Company, or any such distributor, has
conducted any "general solicitation," as such term is defined in Regulation D,
with respect to any of the Shares being offered hereby. Neither the Company, nor
any of its affiliates, nor any person acting on its or their behalf, has
directly or indirectly made any offers or sales of any security or solicited any
offers to buy any security under circumstances that would require registration
of the Shares being offered hereby under the Securities Act or cause this
offering of Shares to be integrated with any prior offering of securities of the
Company for purposes of the Securities Act, the result of such integration which
would require registration under the Securities Act, or any applicable
stockholder approval provisions, including, without limitation, Rule 4460(i) of
the NASD or any similar rule.
2.15 Brokers. Except as set forth on Schedule 2.15, the Company has
taken no action that would give rise to any claim by any person for brokerage
commissions, finder's fees or similar payments relating to this Agreement or the
transactions contemplated hereby.
2.16 Tax Status. Except as set forth in the SEC Documents, the Company
has made or filed all foreign, U.S. federal, state and local income and all
other tax returns, reports and declarations required by any jurisdiction to
which it is subject (unless and only to the extent that the Company has set
aside on its books provisions reasonably adequate for the payment of all unpaid
and unreported taxes) and has paid all taxes and other governmental assessments
and charges that are material in amount, shown or determined to be due on such
returns, reports and declarations, except those being contested in good faith
and has set aside on its books provisions reasonably adequate for the payment of
all taxes for periods subsequent to the periods to which such returns, reports
or declarations apply. There are no unpaid taxes in any material amount claimed
to be due by the taxing authority of any jurisdiction, and the officers of the
Company know of no basis for any such claim. The Company has not executed a
waiver with respect to any statute of limitations relating to the assessment or
collection of any federal, state or local tax. None of the Company's tax returns
is presently being audited by any taxing authority.
2.17 Key Employees. Each of the Company's directors, officers and any
Key Employee (as defined below) is currently serving the Company in the capacity
disclosed in the SEC Documents. No Key Employee, to the best knowledge of the
Company, is, or is now expected to be, in violation of any material term of any
employment contract, confidentiality,
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disclosure or proprietary information agreement, non-competition agreement, or
any other contract or agreement or any restrictive covenant, and the continued
employment of each Key Employee does not subject the Company to any material
liability with respect to any of the foregoing matters. Except as described on
Schedule 2.17, no Key Employee has, to the best knowledge Company any intention
to terminate or limit his employment with, or services to, the Company nor is
any such Key Employee subject to any constraints which would cause such employee
to be unable to devote his full time and attention to such employment or
services. "Key Employee" means the persons listed on Schedule 2.17 and any
individual who assumes or performs any of the duties of a Key Employee.
2.18 Environmental Matters. There is no environmental litigation or
other environmental proceeding pending or, to the best knowledge of the Company,
threatened by any governmental regulatory authority or others with respect to
the current or any former business of the Company or any entity currently or at
any time affiliated with the Company. No state of facts exists as to
environmental matters or Hazardous Substances (as defined below) that involves
the reasonable likelihood of a material capital expenditure by the Company or
that may otherwise have a Material Adverse Effect. Except as disclosed on
Schedule 2.18, no Hazardous Substances have been treated, stored or disposed of,
or otherwise deposited, by the Company (or, to the Company's knowledge, by any
entity or person other than the Company) in or on the properties owned or leased
by the Company or by any entity currently or at any time affiliated with the
Company in violation of any applicable environmental laws. The environmental
compliance programs of the Company comply in all respects with all environmental
laws, whether federal, state or local, currently in effect. As used herein,
"Hazardous Substances" means any substance, waste, contaminant, pollutant or
material that has been determined by any governmental authority to be capable of
posing a risk of injury to health, safety, property or the environment.
3. Representations and Warranties of Investors. Each Investor severally
and not jointly hereby represents and warrants that:
3.1 Authorization. Investor has full power and authority to enter into
this Agreement and such agreement constitutes its valid and legally binding
obligation, enforceable in accordance with its terms, except (a) as limited by
applicable bankruptcy, insolvency, reorganization, moratorium, and other laws of
general application affecting enforcement of creditors' rights generally, (b) as
limited by laws relating to the availability of specific performance, injunctive
relief, or other equitable remedies and (c) as to those provisions of Section
6.2 relating to indemnity or contribution.
3.2 Purchase Entirely for Own Account. The Investor is purchasing the
Shares and the Warrant (as defined in Section 4.10 below) (and, if the Warrant
is exercised, the Common Stock issuable upon exercise of such Warrant (the
"Warrant Shares")) for the Investor's own account for investment purposes only
and not with a present view towards the public sale or distribution thereof,
except pursuant to sales that are exempt from the registration requirements of
the Securities Act and/or sales registered under the Securities Act. The
Investor understands that the Investor must bear the economic risk of this
investment indefinitely, unless the Shares and the Warrant Shares are registered
pursuant to the Securities Act and any applicable state securities or blue sky
laws or an exemption from such registration is available,
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and that the Company has no present intention of registering the resale of the
Shares and the Warrant Shares other than as contemplated by this Agreement.
Notwithstanding anything in this Section 3.2 to the contrary, by making the
representations herein, the Investor does not agree to hold the Shares or the
Warrants or Warrant Shares for any minimum or other specific term and reserves
the right to dispose of the Shares and the Warrant Shares at any time in
accordance with or pursuant to a registration statement or an exemption from the
registration requirements under the Securities Act.
3.3 Disclosure of Information. Investor has received all the
information it has requested in deciding whether to purchase the Shares, the
Warrants and the Warrant Shares. Investor further represents that it has had an
opportunity to ask questions and receive answers from the Company regarding the
terms and conditions of the offering of the Shares, the Warrants and the Warrant
Shares and the business, properties, prospects and financial condition of the
Company; provided, however, that Investor has relied on the Company's
representations and warranties contained in this Agreement and no provision in
this Section 3 shall be construed to limit that reliance.
3.4 Investment Experience. Investor is an investor in securities of
companies in the development stage and acknowledges that it is able to fend for
itself, can bear the economic risk of its investment, and has such knowledge and
experience in financial or business matters that it is capable of evaluating the
merits and risks of the investment in the Shares, the Warrants and the Warrant
Shares. Investor also represents it has not been organized for the purpose of
acquiring the Shares, the Warrants and the Warrant Shares.
3.5 Accredited Investor. Investor is an "accredited investor" within
the meaning of SEC Rule 501 of Regulation D, as presently in effect.
3.6 Restricted Securities. Investor understands that (a) except as
provided herein, the sale or resale of the Shares, the Warrants or the Warrant
Shares have not been and are not being registered under the Securities Act or
any state securities laws, and the Shares, Warrants and Warrant Shares may not
be transferred unless (i) the resale of the Shares, Warrants or Warrant Shares,
as the case may be, has been registered thereunder, (ii) Investor shall have
delivered to the Company an opinion of counsel to the effect that the Shares,
Warrants or Warrant Shares, as the case may be, to be sold or transferred may be
sold or transferred pursuant to an exemption from such registration, (iii) sold
under and in compliance with Rule 144 promulgated under the Securities Act (or a
successor rule) ("Rule 144"), or (iv) sold or transferred to an affiliate of
Investor who agrees to sell or otherwise transfer the Shares, Warrants or
Warrant Shares, as the case may be, only in accordance with the provisions of
this Section 3.6 and who is an accredited investor; and (b) neither the Company
nor any other person is under any obligation to register such Shares, Warrants
or Warrant Shares under the Securities Act or any state securities laws (other
than pursuant to this Agreement). Notwithstanding the foregoing or anything else
contained herein to the contrary, the Shares, Warrants or Warrant Shares may be
pledged as collateral in connection with a bona fide margin account or other
lending arrangement, provided such pledge is consistent with applicable laws,
rules and regulations.
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3.7 Legend. It is understood that the certificates evidencing the
Shares, Warrants and Warrant Shares may bear the following legend:
"These securities have not been registered under the
Securities Act of 1933, as amended. They may not be sold, offered for
sale, pledged or hypothecated in the absence of a registration
statement in effect with respect to the securities under such Act or an
opinion of counsel satisfactory to the Company that such registration
is not required or unless sold pursuant to Rule 144 of such Act."
3.8 Risk Factors. Investor understands that its purchase of the Shares,
Warrants and Warrant Shares involves a high degree of risk and that the Company
has given no assurance as to the future value of the Shares, Warrants and
Warrant Shares or future performance of the Company. Some of the risks inherent
in an investment in the Shares, Warrants and Warrant Shares are set forth in the
Company's Current Report on Form 10-Q for the quarter ended September 30, 2000
filed with the SEC, which Investor acknowledges it has read and understands.
4. Conditions of Investor's Obligations at Closing. The obligations of
each Investor under this Agreement are subject to the fulfillment on or before
the Closing of each of the following conditions, the waiver of which shall not
be effective against such Investor unless consented in writing thereto:
4.1 Representations and Warranties. The representations and warranties
of the Company contained in Section 2 shall be true in all material respects on
and as of the Closing with the same effect as though such representations and
warranties had been made on and as of the date of the Closing. Such Investor
shall have received a certificate, executed by the Chief Financial Officer of
the Company, dated as of the Closing, to the foregoing effect and to such other
matters as may be reasonably requested by such Investor.
4.2 Performance. The Company shall have performed and complied with all
agreements, obligations and conditions contained in this Agreement that are
required to be performed or complied with by it on or before the Closing. Such
Investor shall have received a certificate, executed by the Chief Financial
Officer of the Company, dated as of the Closing, to the foregoing effect and to
such other matters as may be reasonably requested by such Investor.
4.3 Qualifications. All authorizations, approvals, or permits, if any,
of any governmental authority or regulatory body of the United States or of any
state that are required in connection with the lawful issuance and sale of the
Shares pursuant to this Agreement shall be duly obtained and effective as of the
Closing.
4.4 Proceedings and Documents. All corporate and other proceedings in
connection with the transactions contemplated at the Closing and all documents
incident thereto shall be reasonably satisfactory in form and substance to
Investors' special counsel, and they shall have received all such counterpart
original and certified or other copies of such documents as they may reasonably
request.
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4.5 Delivery of Stock Certificates. Investor shall have received a
stock certificate representing the Shares being purchased by such Investor.
4.6 Execution and Delivery of Agreement. The Company shall have
executed and delivered this Agreement to such Investor.
4.7 Listing. The Common Stock shall be listed on the NMS, and trading
in the Common Stock (or the NMS generally) shall not have been suspended by the
SEC or the NMS.
4.8 Injunction. No statute, rule, regulation, executive order, decree,
ruling, injunction, action or proceeding shall have been enacted, entered,
promulgated or endorsed by any court or governmental authority of competent
jurisdiction or any self-regulatory organization having authority over the
matters contemplated hereby which questions the validity of, challenges or
prohibits the consummation of, any of the transactions contemplated by this
Agreement.
4.9 Opinion of Counsel. Investor shall have received an opinion of the
Company's counsel, dated as of the Closing Date, in substantially the form of
Exhibit A attached hereto.
4.10 Warrant. Investor shall have received a warrant, substantially in
the form attached hereto as Exhibit B (the "Warrant" and collectively with the
warrants issued to other Investors in accordance with this section, the
"Warrants"), to purchase up to the number of shares of the Company's Common
Stock set forth opposite such Investor's name under the column entitled "No. of
Warrant Shares" on Schedule A at an exercise price of $13.9125 per share.
4.11 No Material Adverse Change. There shall have been no material
adverse change and no material adverse development in the business, properties,
operations, prospects, financial condition or results of operations of the
Company, since the date hereof, and no information, of which Investors are not
currently aware, shall come to the attention of Investor that is materially
adverse to the Company.
4.12 Secretary's Certificate. Investor shall have received a
certificate, dated as of the Closing Date, executed by the Secretary of the
Company, certifying as to: (a) the Company's Certificate of Incorporation, (b)
Bylaws or other governing documents and (c) resolutions, duly adopted by the
Board of Directors of the Company, which shall be in full force and effect at
the time of the Closing, authorizing the execution, delivery and performance by
the Company of this Agreement and the consummation by the Company of the
transactions contemplated hereby.
5. Conditions of the Company's Obligations at Closing. The obligations
of the Company to Investors under this Agreement are subject to the fulfillment
on or before each Closing of each of the following conditions by Investors:
5.1 Representations and Warranties. The representations and warranties
of Investors contained in Section 3 shall be true in all material respects on
and as of the Closing
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with the same effect as though such representations and warranties had been made
on and as of the Closing.
5.2 Payment of Purchase Price. Investors shall have delivered the total
aggregate purchase price for the Shares specified on Schedule A.
5.3 Qualifications. All authorizations, approvals, or permits, if any,
of any governmental authority or regulatory body of the United States or of any
state that are required in connection with the lawful issuance and sale of the
Shares pursuant to this Agreement shall be duly obtained and effective as of the
Closing.
6. Affirmative Covenants of the Company. The Company hereby covenants
and agrees as follows:
6.1 Registration Requirements.
(a) Obligations of the Company.
(i) The Company shall prepare and file as soon as
possible after the Closing, but no later than thirty (30) days thereafter, a
Registration Statement on Form S-3 (the "Registration Statement") with the SEC
under the Securities Act to register the resale by Investors of the Shares and
the Warrant Shares (together with the Shares, the "Registrable Shares"). After
the Registration Statement is filed, the Company shall respond promptly to any
and all comments made by the staff of the SEC to such Registration Statement.
(ii) Such Registration Statement shall comply in all
material respects with the requirements of the Securities Act and the rules and
regulations of the SEC promulgated thereunder and shall 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 not misleading. The
financial statements of the Company included in the Registration Statement or
incorporated by reference therein will comply as to form in all material
respects with the applicable accounting requirements and the published rules and
regulations of the SEC applicable with respect thereto. Such financial
statements will be prepared in accordance with generally accepted accounting
principles consistently applied during the periods involved (except as may be
otherwise indicated in the financial statements or the notes thereto or, in the
case of unaudited interim statements, as permitted by the SEC) and fairly
present the financial position of the Company at the dates thereof and the
results of operations and cash flows for the periods then ended (subject, in the
case of unaudited interim statements, to immaterial year-end adjustments).
(iii) If the Registration Statement receives a "no
review" from the SEC, the Company will use its best efforts to have the SEC
declare the Registration Statement effective within five (5) days following the
SEC's confirmation of the "no review" status. If the SEC reviews the
Registration Statement, the Company will use its best efforts to cause the
Registration Statement to be declared effective within ninety (90) days of the
Closing. If, despite best efforts on the part of the Company, (A) the
Registration Statement is not declared effective within one hundred twenty (120)
days of the Closing or, except as permitted under Section 6.1(a)(xiii), sales of
any Registrable Shares cannot be made during the Registration
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<PAGE> 14
Period (as defined in Section 6.1(a)(iv) hereof) and (B) Investor desires to
sell Registrable Shares and cannot sell such Registrable Shares under Rule 144,
the Company will be liable to pay, for each day after such one hundred twenty
(120)-day period that the Registration Statement is not declared effective by
the SEC or each day during the Registration Period that sales of any Registrable
Shares cannot be made, liquidated damages to such Investor in the amount of
0.066% of the aggregate purchase price of the Registrable Shares that such
Investor desires to sell and cannot sell under Rule 144. The liquidated damages
owing to any particular Investor will be payable upon demand by such Investor.
(iv) The Company will use its best efforts to keep
the Registration Statement effective until the earlier of (A) such date as all
of the Registrable Shares have been resold or (B) such time as all of the
Registrable Shares held by Investors can be sold without compliance with the
registration requirements of the Securities Act pursuant to Rule 144(k) or any
successor provision (the "Registration Period").
(v) The Company shall prepare and file with the SEC
such amendments (including post-effective amendments) and supplements to the
Registration Statement and the prospectus used in connection with the
Registration Statement as may be necessary to keep the Registration Statement
effective during the Registration Period, and, during such period, comply with
the provisions of the Securities Act with respect to the disposition of all
Registrable Shares covered by the Registration Statement.
(vi) The Company shall furnish to each Investor whose
Registrable Shares are included in the Registration Statement (A) promptly after
the same is prepared and publicly distributed, filed with the SEC, or received
by the Company, one copy of the Registration Statement and any amendment thereto
and each preliminary prospectus and prospectus and each amendment or supplement
thereto, (B) on the date of effectiveness of the Registration Statement or any
amendment thereto, a notice, sent by facsimile to each Investor whose
Registrable Shares are included in such Registration Statement, stating that the
Registration Statement or amendment has been declared effective, and (C) such
number of copies of a prospectus, including a preliminary prospectus, and all
amendments and supplements thereto and such other documents as such Investor may
reasonably request in order to facilitate the disposition of the Registrable
Shares owned by such Investor.
(vii) The Company shall use its best efforts to cause
all Registrable Shares registered as described herein to be (A) listed on each
national securities exchange on which securities of the same class or series
issued by the Company are then listed, if any, if the listing of such
Registrable Shares is then permitted under the rules of such exchange, and (B)
quoted on each quotation service on which securities of the same class or series
issued by the Company are then quoted, if any, if the quotation of such
Registrable Shares is then permitted under the rules of such service.
(viii) The Company shall use its best efforts to
provide a transfer agent and registrar, which may be a single entity, for all
Registrable Shares registered pursuant to the Registration Statement on or prior
to the effective date of the Registration Statement and to provide a CUSIP
number for all such Registrable Shares.
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(ix) With a view to making available to Investors the
benefits of Rule 144 and any other rule or regulation of the SEC that may at any
time permit Investors to sell Registrable Shares to the public without
registration or pursuant to registration, the Company covenants and agrees to:
(A) make and keep public information available, as those terms are understood
and defined in Rule 144, until such date as all of the Registrable Shares shall
have been resold; (B) file with the SEC in a timely manner all reports and other
documents required of the Company under the Securities Exchange Act of 1934, as
amended (the "Exchange Act"); and (C) furnish to Investors upon request, as long
as Investors own any Registrable Shares, (1) a written statement by the Company
that it has complied with the reporting requirements of the Exchange Act, (2) a
copy of the most recent annual or quarterly report of the Company, and (3) such
other information as may be reasonably requested in order to avail Investors of
any rule or regulation of the SEC that permits the selling of any such
Registrable Shares without registration.
(x) The Company shall use its best efforts to (A)
register and qualify the Registrable Shares covered by the Registration
Statement under such other securities or "blue sky" laws of such jurisdictions
in the United States as any Investor who holds the Registrable Shares reasonably
requests, (B) prepare and file in those jurisdictions such amendments (including
post-effective amendments) and supplements to such registrations and
qualifications as may be necessary to maintain the effectiveness thereof during
the Registration Period, (C) take such other actions as may be necessary to
maintain such registrations and qualifications in effect at all times during the
Registration Period, and (D) take all other actions reasonably necessary or
advisable to qualify the Registrable Shares for sale in such jurisdictions;
provided, however, that the Company shall not be required in connection
therewith or as a condition thereto to (1) qualify to do business in any
jurisdiction where it would not otherwise be required to qualify but for this
subsection (x), (2) subject itself to general taxation in any such jurisdiction,
(3) file a general consent to service of process in any such jurisdiction, (4)
provide any undertakings that cause the Company undue expense or burden, or (5)
make any change in its Certificate of Incorporation or Bylaws, which in each
case the Board of Directors of the Company determines to be contrary to the best
interest of the Company and its stockholders.
(xi) As promptly as practicable after becoming aware
of such event, the Company shall notify each Investor of the happening of any
event, of which the Company has knowledge, as a result of which the prospectus
included in the Registration Statement, as then in effect, includes an untrue
statement of a material fact or omission to state a material fact required to be
stated therein or necessary to make the statements therein not misleading, and
use its best efforts to promptly prepare a supplement or amendment to the
Registration Statement to correct such untrue statement or omission, and deliver
such number of copies of such supplement or amendment to each Investor as such
Investor may reasonably request.
(xii) The Company shall use its best efforts to
prevent the issuance of any stop order or other suspension of effectiveness of
the Registration Statement, and, if such an order is issued, to obtain the
withdrawal of such order as soon as practicable (including in each case by
amending or supplementing the Registration Statement) and to notify each
Investor who holds Registrable Shares being sold of the issuance of such order
and the resolution thereof, and if the Registration Statement is supplemented or
amended, deliver such
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<PAGE> 16
number of copies of such supplement or amendment to each Investor as such
Investor may reasonably request.
(xiii) Without limiting the generality of subsections
(xi) and (xii) above, the Company may refuse to permit Investors to resell any
Registrable Shares pursuant to the Registration Statement at any time; provided,
however, that in order to exercise this right at any time, the Company must
deliver a certificate in writing to Investors to the effect that suspension of
the sale of shares under the Registration Statement, until such time as the
Company can make an appropriate filing with the SEC, is necessary because a sale
pursuant to the Registration Statement, in its then-current form, could
constitute a violation of the Federal securities laws. In such an event, the
Company shall use its best efforts to amend the Registration Statement if
necessary and take all other actions necessary to allow such sale under the
Federal securities laws as soon as practicable, and shall notify Investor
promptly after it has determined that such sale has become permissible under the
Federal securities laws. Notwithstanding the foregoing, the Company shall not
under any circumstances be entitled to exercise its right to suspend sales under
this subsection more than three (3) times in any twelve (12)-month period, and
the period during which the Registration Statement under this subsection may be
withdrawn shall not exceed forty-five (45) days in the aggregate; provided,
however, that if the Company is required to amend the Registration Statement and
the Company does not qualify for Form S-3, the period during which the
Registration Statement may be withdrawn shall be increased one time only by
fifty (50) days if upon filing such amendment the SEC advised the Company that
it intends to review the amendment.
(b) Obligations of Investors.
(i) Each Investor will provide the Company all
information reasonably necessary from such Investor to register such shares and
shall execute such documents in connection with such registration as the Company
may reasonably request. At least five (5) trading days prior to the first
anticipated filing date of the Registration Statement, the Company shall notify
each Investor of the information the Company requires from each such Investor.
Each Investor further agrees to furnish promptly to the Company in writing all
information required from time to time to be disclosed in order to make the
information previously furnished to the Company by each Investor not misleading.
(ii) Each Investor, by such Investor's acceptance of
the Registrable Shares, agrees to cooperate with the Company as reasonably
requested by the Company in connection with the preparation and filing of the
Registration Statement hereunder, unless such Investor has notified the Company
in writing of such Investor's election to exclude all of such Investor's
Registrable Shares from such Registration Statement.
(iii) Each Investor agrees that, upon receipt of any
notice from the Company of the happening of any event of the kind described in
Sections 6.1(a)(xi), (a)(xii), and (a)(xiii), such Investor will immediately
discontinue disposition of the Registrable Shares pursuant to the Registration
Statement covering such Registrable Shares until such Investor's receipt of the
copies of the supplemented or amended prospectus contemplated by Sections
6.1(a)(xi), (a)(xii), and (a)(xiii) and, if so directed by the Company, such
Investor shall deliver to the Company (at the expense of the Company) or destroy
(and deliver to the Company a
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<PAGE> 17
certificate of destruction) all copies in such Investor's possession, of the
prospectus covering such Registrable Shares current at the time of receipt of
such notice.
(c) Expenses of Registration. The Company shall pay all
Registration Expenses (as defined below) in connection with any registration,
qualification or compliance hereunder, and Investors shall pay all Selling
Expenses (as defined below) and other expenses that are not Registration
Expenses relating to the Registrable Shares to be resold by Investors.
"Registration Expenses" shall mean all expenses, except for Selling Expenses,
incurred by the Company in complying with the registration provisions set forth
herein, including, without limitation, all registration, qualification and
filing fees, printing expenses, escrow fees, fees and disbursements of counsel
for the Company, fees and disbursements of up to $15,000 for one counsel
selected by the Investors, blue sky fees and expenses and the expense of any
special audits incident to or required in connection with any such registration.
"Selling Expenses" shall mean selling commissions, underwriting fees and stock
transfer taxes applicable to the Registrable Shares.
6.2 Indemnification and Contribution.
(a) The Company agrees to indemnify and hold harmless each
Investor, any director or officers of such Investors and any person who controls
such Investor (each, an "Indemnified Person") from and against any losses,
claims, damages or liabilities (or actions or proceedings in respect thereof) to
which any of them 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, any untrue
statement, or alleged untrue statement, of a material fact contained in the
Registration Statement, on the effective date thereof, or any post-effective
amendment thereon or prospectus included therein or the omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, or arise out of any
failure by the Company to fulfill any undertaking included in the Registration
Statement, or arise out of any violation or alleged violation by the Company of
the Securities Act, the Exchange Act, and any other law, rule or regulation,
including state securities laws, and the Company will, as incurred, reimburse
such Indemnified Person for any legal or other expenses reasonably incurred for
a single counsel for such Indemnified Persons 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 an Indemnified Person
to the extent that such loss, claim, damage or liability arises out of, or is
based upon (i) an untrue statement made in the Registration Statement in
reliance upon and in conformity with written information concerning such
Indemnified Person furnished to the Company by or on behalf of such Indemnified
Person specifically for use in preparation of the Registration Statement, (ii)
the failure of such Indemnified Person to comply with the covenants and
agreements contained in Section 6.1 hereof, (iii) any untrue statement in any
prospectus that is corrected in any subsequent prospectus that was delivered to
such Indemnified Person prior to the pertinent sale or sales by such Indemnified
Person, or (iv) any violation or alleged violation by the Indemnified Person of
the Securities Act, the Exchange Act, and any other law, rule or regulation,
including state securities laws. The Company will reimburse such Indemnified
Person for any legal or other expenses reasonably incurred for a single counsel
for all Indemnified Persons (unless, in the reasonable opinion of such counsel,
the representation by such counsel of any Indemnified Person would be
inappropriate due to actual or potential
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conflicts of interest or any Indemnified Person reasonably determines that there
may be legal defenses available to such Indemnified Person which are in conflict
with another party represented by such counsel, in which case, the Company will
cover the expenses of separate counsel) in investigating, defending or preparing
to defend any such action, proceeding or claim notwithstanding the absence of a
judicial determination as to the propriety and enforceability of the obligations
under this section and the possibility that such payments might later be held to
be improper, provided, that (i) to the extent any such payment is ultimately
held to be improper, the persons receiving such payments shall promptly refund
them and (ii) such persons shall provide to the Company, upon request,
reasonable assurances of their ability to effect any refund, when and if due.
(b) Each Investor severally and not jointly agrees to
indemnify and hold harmless the Company from and against any losses, claims,
damages or liabilities (or actions or proceedings in respect thereof) to which
the Company 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) an untrue statement made in
the Registration Statement in reliance upon and in conformity with written
information concerning such Investor furnished to the Company by or on behalf of
such Investor specifically for use in preparation of the Registration Statement,
provided, however, that Investor shall not be liable in any such case for any
untrue statement included in any prospectus which statement has been corrected,
in writing, by Investor and delivered to the Company before the sale from which
such loss occurred, (ii) the failure of such Investor to comply with the
covenants and agreements contained in Section 6.1 hereof, (iii) any untrue
statement in any prospectus that is corrected in any subsequent prospectus that
was delivered to such Investor prior to the pertinent sale or sales by such
Investor, or (iv) any violation by the Investor concerning the sale by the
Investor of Registrable Shares under the Securities Act, the Exchange Act, and
any other law, rule or regulation, including state securities laws, other than
violations by the Investors resulting from the Company's own violation of such
law, rule or regulation. Such Investor will reimburse the Company for any legal
or other expenses reasonably incurred in investigating, defending or preparing
to defend any such action, proceeding or claim notwithstanding the absence of a
judicial determination as to the propriety and enforceability of the obligations
under this section and the possibility that such payments might later be held to
be improper, provided, that (i) to the extent any such payment is ultimately
held to be improper, the persons receiving such payments shall promptly refund
them and (ii) such persons shall provide to Investors, upon request, reasonable
assurances of their ability to effect any refund, when and if due.
(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
to be sought against an indemnifying person pursuant to this section, such
indemnified person shall notify the indemnifying person in writing of such claim
or of the commencement of such action, and, subject to the provisions
hereinafter stated, in case any such action shall be brought against an
indemnified person and the indemnifying person shall have been notified thereof,
the indemnifying person shall be entitled to participate therein, and, to the
extent that it shall wish, to assume the defense thereof, with counsel
reasonably satisfactory to the indemnified person. After notice from the
indemnifying person to such indemnified person of the indemnifying person's
election to assume the defense thereof, the indemnifying person shall not be
liable to such indemnified person for any legal expenses subsequently incurred
by such indemnified
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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 reasonable judgment of 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.
(d) If the indemnification provided for in this section is
unavailable to or insufficient to hold harmless an indemnified party 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 party shall contribute to the amount paid or payable by
such indemnified party 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 Investors on
the other in connection with the statements or omissions 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, whether the untrue or alleged
untrue statement of a material fact or the omission or alleged omission to state
a material fact relates to information supplied by the Company on the one hand
or Investors on the other and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such statement or omission.
The Company and Investors agree that it would not be just and equitable if
contribution pursuant to this subsection (d) were determined by pro rata
allocation or by any other method of allocation which does not take account of
the equitable considerations referred to above in this subsection (d). The
amount paid or payable by an indemnified party as a result of the losses,
claims, damages, or liabilities (or actions in respect thereof) referred to
above in this subsection (d) shall not be deemed to include any legal or other
expenses reasonably incurred by such indemnified party in connection with
investigating or defending any such action or claim. No person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the
Securities Act) shall be entitled to contribution from any person who was not
guilty of such fraudulent misrepresentation.
(e) The obligations of the Company and Investors under this
section shall be in addition to any liability which the Company and Investor may
otherwise have and shall extend, upon the same terms and conditions, to each
person, if any, who controls the Company or Investors within the meaning of the
Securities Act.
7. Participation Right in Stock Offerings. The Company hereby grants to
each Investor who owns, at the time New Securities (as hereinafter defined) are
offered by the Company, at least 100,000 Shares (as adjusted for stock
dividends, stock splits and the like), the right to purchase a pro rata share of
New Securities which the Company may, from time to time, propose to sell and
issue. An Investor's pro rata share, for purposes of this right of first
refusal, is the ratio of the number of shares of Common Stock owned by such
Investor immediately prior to the issuance of New Securities to the total number
of shares of Common Stock outstanding immediately prior to the issuance of New
Securities, assuming full conversion of any securities convertible into Common
Stock and the exercise of all outstanding rights, options and warrants to
acquire Common Stock of the Company. Each Investor shall have a right of
over-allotment such that if any Investor fails to exercise its right hereunder
to purchase its pro rata share of New Securities, the other Investors may
purchase the non-purchasing Investor's portion on a pro rata
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basis within ten (10) days from the date such non-purchasing Investor fails to
exercise its right hereunder to purchase its pro rata share of New Securities.
This purchase right is subject to the following provisions:
7.1 Definition of New Securities. "New Securities" shall mean any
capital stock (including Common Stock and/or Preferred Stock) of the Company
whether now authorized or not, and rights, options or warrants to purchase such
capital stock, and securities of any type whatsoever that are, or may become,
convertible into capital stock; provided that the term "New Securities" does not
include (i) securities issued pursuant to the acquisition of another business
entity or business segment of any such entity by the Company by merger, purchase
of assets or other method; (ii) securities issued in connection with a strategic
partnering arrangement, joint venture or similar business alliance; (iii)
securities issued in connection with any equipment leasing arrangement or debt
financing from a bank or similar financial institution; (iv) securities issued
to employees, consultants, officers or directors of the Company pursuant to any
stock option, stock purchase or stock bonus plan, agreement or arrangement; (v)
securities issued as an incentive to vendors or customers or to other persons in
similar commercial situations with the Company; (vi) securities issued in an
underwritten public offering pursuant to a registration under the Securities Act
with an aggregate offering price to the public equal to or greater than $25
million; (vii) securities issued in connection with any stock split, stock
dividend or recapitalization of the Company; and (viii) any right, option or
warrant to acquire any security convertible into the securities excluded from
the definition of New Securities pursuant to subsections (i) through (vii)
above.
7.2 Notice; Exercise of Right.
(a) In the event the Company proposes to undertake an issuance
of New Securities, it shall give each Investor written notice of its intention,
describing the type of New Securities, and their price and the general terms
upon which the Company proposes to issue the same. Each Investor shall have
twenty (20) days after any such notice is effective to agree to purchase such
Investor's pro rata share of such New Securities for the price and upon the
terms specified in the notice by giving written notice to the Company and
stating therein the quantity of New Securities to be purchased. Any Investor
exercising its purchase right must purchase its full pro rata share of New
Securities.
(b) In the event the Investors fail to exercise fully the
right of first refusal within the twenty (20)-day period and after the
expiration of the ten (10)-day period for the exercise of the over-allotment
provisions of this section, the Company shall have one hundred twenty (120) days
thereafter to sell or enter into an agreement (pursuant to which the sale of New
Securities covered thereby shall be closed, if at all, within one hundred twenty
(120) days from the date of said agreement) to sell the New Securities as to
which the Investors' right of first refusal option set forth in this section was
not exercised, at a price and upon terms no more favorable to the purchasers
thereof than specified in the Company's notice to Investors pursuant to this
section. In the event the Company has not sold within the 120-day period or
entered into an agreement to sell the New Securities within the 120-day period
(or sold and issued New Securities in accordance with the foregoing within one
hundred twenty (120) days from the date of such agreement), the Company shall
not thereafter issue or sell any New
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Securities, without first again offering such securities to the Investors in the
manner provided in this section.
7.3 Expiration of Right. The participation right to purchase New
Securities granted under this Agreement shall expire on the first anniversary of
the effective date of the Registration Statement filed by the Company under this
Agreement to register the resale of the Shares.
7.4 Assignment of Right. The participation right set forth in this
section may not be assigned or transferred, except that (i) such right is
assignable by each Investor to any wholly owned subsidiary or parent of, or to
any corporation or entity that is, within the meaning of the Securities Act,
controlling, controlled by or under common control with, any such Investor, and
(ii) such right is assignable to any person or entity who purchases at least
20,000 Shares (as adjusted for stock dividends, stock splits and the like) from
an Investor in a privately negotiated sale (as opposed to a public sale pursuant
to the Registration Statement filed hereunder).
8. Miscellaneous.
8.1 Use of Proceeds. The Company shall use the proceeds from the sale
of the Shares as set forth in Schedule 8.1.
8.2 Listing. The Company shall maintain, so long as any Investor (or
any of its affiliates) owns any Shares, the listing of all Shares on each
national securities exchange or automated quotation system on which shares of
Common Stock are currently listed. The Company will use its best efforts to
continue the listing and trading of its Common Stock on the NMS or the New York
Stock Exchange and will comply in all respects with the reporting, filing and
other obligations under the bylaws or rules of the NASD or such exchanges, as
applicable. The Company shall promptly provide to the Investors copies of any
notices it receives regarding the continued eligibility of the Common Stock for
trading on the NMS or, if applicable, any securities exchange or automated
quotation system on which securities of the same class or series issued by the
Company are then listed or quoted, if any.
8.3 No Integrated Offerings. The Company shall not make any offers or
sales of any security (other than the Registrable Shares) under circumstances
that would require registration of the Shares being offered or sold hereunder
under the Securities Act or cause this offering of the Shares to be integrated
with any other offering of securities by the Company for purposes of any
stockholder approval provision applicable to the Company or its securities.
8.4 Survival of Warranties. The representations and warranties of the
Company and the agreements and covenants set forth in Sections 2, 3, 6, 7 and 8
hereof shall survive the Closing notwithstanding any due diligence investigation
conducted by or on behalf of the Investors. Moreover, none of the
representations and warranties made by the Company herein shall act as a waiver
of any rights or remedies the Investors may have under applicable U.S. federal
or state securities laws. The Company shall indemnify and hold harmless each
Investor and each of its officers, directors, employees, partners, members,
agents and affiliates for all losses or damages arising as a result of or
related to any breach by the Company (other
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<PAGE> 22
than any breach or other situation under which the Company will become liable to
pay liquidated damages or otherwise indemnify the Investors pursuant to Section
6 herein) of any of its representations, warranties or covenants set forth
herein, including advancement of expenses as they are incurred.
8.5 Successors and Assigns. This Agreement shall be binding upon and
inure to the benefit of the parties and their successors and assigns. Except as
provided herein or therein, neither the Company nor any Investor shall assign
this Agreement or any rights or obligations hereunder. Notwithstanding the
foregoing, any Investor may assign its rights hereunder to any of its
"affiliates," as that term is defined under the Exchange Act or to any person or
entity who purchases at least 20,000 Shares (as adjusted for stock dividends,
stock splits and the like) from any Investor in a privately negotiated sale,
without the consent of the Company or to any other person or entity with the
consent of the Company, which consent shall not be unreasonably withheld. In
addition, and notwithstanding anything to the contrary contained in this
Agreement, the Shares may be pledged and all rights of any Investor under this
Agreement or any other agreement or document related to the transactions
contemplated hereby may be assigned, without further consent of the Company, to
a bona fide pledgee in connection with such Investor's margin or brokerage
account.
8.6 Governing Law; Jurisdiction. This Agreement shall be governed by
and construed in accordance with the laws of the State of Delaware applicable to
contracts made and to be performed in the State of Delaware. The Company and the
Investors irrevocably consent to the jurisdiction of the United States federal
courts and the state courts located in the County of New Castle in the State of
Delaware in any suit or proceeding based on or arising under this Agreement and
irrevocably agree that all claims in respect of such suit or proceeding may be
determined in such courts. The Company irrevocably waives the defense of an
inconvenient forum to the maintenance of such suit or proceeding. The Company
further agrees that service of process upon the Company mailed by first class
mail shall be deemed in every respect effective service of process upon the
Company in any such suit or proceeding. Nothing herein shall affect the right of
the Investors to serve process in any other manner permitted by law. The Company
agrees that a final non-appealable judgment in any such suit or proceeding shall
be conclusive and may be enforced in other jurisdictions by suit on such
judgment or in any other lawful manner.
8.7 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
8.8 Titles and Subtitles. The titles and subtitles used in this
Agreement are used for convenience only and are not to be considered in
construing or interpreting this Agreement.
8.9 Notices. Unless otherwise provided, any notice required or
permitted under this Agreement shall be given in writing and shall be deemed
effectively given upon personal delivery to the party to be notified, at the
time of receipt if sent by facsimile with confirmation of receipt, on the
business day after deposit with an overnight courier of national repute, or upon
the second business day after deposit with the United States Post Office by
19
<PAGE> 23
registered or certified mail, postage prepaid, in each case addressed to the
party to be notified at the address indicated for such party on the signature
page hereof, or at such other address as such party may designate by ten (10)
days' advance written notice to the other parties.
8.10 Expenses; Attorneys' Fees. The Company and Investor shall each pay
all of its own costs and expenses that it incurs with respect to the
negotiation, execution, delivery and performance of this Agreement, except that
the Company will reimburse the Investors, collectively, up to $50,000 for
reasonable documented legal fees of a single counsel to the Investors; provided,
however, that the Investors shall be permitted to deduct all such fees (subject
to such maximum amount) from the purchase price payable by the Investors
hereunder. In addition, from time to time thereafter, upon the Investors'
written request, the Company shall pay to the Investors such additional fees, if
any, not covered by such payment, in each case to the extent reasonably incurred
by the Investors or their affiliates or agents in connection with the
negotiation, preparation, execution and delivery of this Agreement and the other
agreements executed in connection herewith. Notwithstanding the foregoing, the
Company shall not be obligated to reimburse the Investors for more than $50,000
pursuant to this Section 8.10. If any action at law or in equity is necessary to
enforce or interpret the terms of this Agreement, the prevailing party shall be
entitled to reasonable attorney's fees, costs and necessary disbursements in
addition to any other relief to which such party may be entitled.
8.11 Amendments and Waivers. Any term of this Agreement may be amended
and the observance of any term of this Agreement may be waived (either generally
or in a particular instance and either retroactively or prospectively), only
with the written consent of the Company and the Investors who are purchasing or
have purchased a majority of the Shares sold or to be sold hereunder. Any
amendment or waiver effected in accordance with this paragraph shall be binding
upon each holder of any securities purchased under this Agreement at the time
outstanding, each future holder of all such securities, and the Company.
8.12 Severability. If one or more provisions of this Agreement are held
to be unenforceable under applicable law, such provision shall be excluded from
this Agreement and the balance of the Agreement shall be interpreted as if such
provision were so excluded and shall be enforceable in accordance with its
terms.
8.13 Entire Agreement. This Agreement and the documents referred to
herein constitute the entire agreement among the parties and no party shall be
liable or bound to any other party in any manner by any warranties,
representations, or covenants except as specifically set forth herein or
therein.
8.14 Publicity. The Company and the Investors shall have the right to
approve before issuance any press releases, SEC or NASD filings, or any other
public statements with respect to the transactions contemplated hereby;
provided, however, that the Company shall be entitled, without the prior
approval of the Investors, to make any press release or SEC or NASD filings with
respect to such transactions as is required by applicable law and regulation
(although the Investors shall be consulted by the Company in connection with any
such press release and filing prior to its release and shall be provided with a
copy thereof).
20
<PAGE> 24
8.15 Termination. In the event that the Closing shall not have occurred
on or before November 29, 2000, unless the parties agree otherwise, this
Agreement shall terminate at the close of business on such date. Notwithstanding
any termination of this Agreement, any party not in breach of this Agreement
shall preserve all rights and remedies it may have against another party hereto
for a breach of this Agreement prior to or relating to the termination hereof.
[SIGNATURE PAGES FOLLOW]
21
<PAGE> 25
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
"COMPANY"
ENDOCARE, INC.
By: /s/ PAUL W. MIKUS
----------------------------------------
Paul W. Mikus, President and Chief
Executive Officer
Address: 7 Studebaker
Irvine, California 92618
Facsimile No.: (949) 597-0607
"INVESTORS"
SAFECO COMMON STOCK TRUST - SAFECO Growth
Opportunities Fund
By: /s/ DARCY MACLAREN
----------------------------------------
Name: Darcy MacLaren
Title: Vice President, SAFECO Asset
Management Company
Address: 10865 Willows Road NE
Redmond, WA 98052
Facsimile No.: (206) 545-6277 (legal dept.)
SAFECO RESOURCE SERIES TRUST - Growth
Opportunities Portfolio
By: /s/ DARCY MACLAREN
----------------------------------------
Name: Darcy MacLaren
Title: Vice President, SAFECO Asset
Management Company
Address: 10865 Willows Road NE
Redmond, WA 98052
Facsimile No.: (206) 545-6277 (legal dept.)
22
<PAGE> 26
SAFECO 401(k) Savings Plan
By: /s/ DAVID W. KRAFT /s/ ROD A. PIERSON
-----------------------------------------
Name: David W. Kraft Rod A. Pierson
Title:
-------------------------------------
Address: SAFECO Plaza
Seattle, WA 98185
Facsimile No.: (206) 545-6277 (legal dept.)
Narrangansett I, L.P.
By: /s/ JOSEPH L. DOWLING III
-----------------------------------------
Name: Joseph L. Dowling III
Title: Managing Member
Address: 153 East 53rd, 26th Floor
New York, NY 10022
Facsimile No.: (212) 521-5029
Narrangansett Offshore, Ltd.
By: /s/ JOSEPH L. DOWLING III
-----------------------------------------
Name: Joseph L. Dowling III
Title: Managing Member
Address: 153 East 53rd, 26th Floor
New York, NY 10022
Facsimile No.: (212) 521-5029
SDS Merchant Fund, LP
By: /s/ STEVE DERBY
-----------------------------------------
Name: Steve Derby
Title: Managing Partner
Address: 1 Sound Shore Dr.
Greenwich, CT 06830
Facsimile No.: (203) 629-8400
<PAGE> 27
SCHEDULE A
List of Investors
<TABLE>
<CAPTION>
No. of Shares to No. of Warrant
Investor be Purchased Purchase Price Shares
-------- ---------------- -------------- --------------
<S> <C> <C> <C>
SAFECO 401(k) Savings Plan(1) 94,400 $ 1,250,800.00 11,800
SAFECO COMMON STOCK TRUST - SAFECO Growth
Opportunities Fund(2) 741,000 $ 9,818,250.00 92,625
SAFECO RESOURCE SERIES TRUST - Growth
Opportunities Portfolio(3) 399,040 $ 5,287,280.00 49,880
Narragansett I, L.P. 39,000 $ 516,750.00 4,875
Narragansett Offshore, Ltd. 61,000 $ 808,250.00 7,625
SDS Merchant Fund, L.P. 175,000 $ 2,318,750.00 21,875
TOTALS 1,509,440 $20,000,080.00 188,680
--------- -------------- -------
</TABLE>
------------------
(1) Stock certificate and Warrant to be issued in the name of Mac & Co.
pursuant to instructions from Investor.
(2) Stock certificate and Warrant to be issued in the name of
Coralbasin & Co. pursuant to instructions from Investor.
(3) Stock certificate and Warrant to be issued in the name of Coralrock
& Co. pursuant to instructions from Investor.
