SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K/A
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): January 26, 1998
TII INDUSTRIES, INC.
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(Exact Name of Registrant as Specified in Charter)
DELAWARE
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(State of Incorporation)
1-8048 66-0328885
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(Commission File No.) (IRS Employer Identification No.)
1385 AKRON STREET, COPIAGUE, NEW YORK 11726
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(Address of Principal Executive Offices) (Zip Code)
(516) 789-5000
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(Registrant's telephone number, including area code
NOT APPLICABLE
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(Former Name or Former Address, if Changed Since Last Report)
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ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial statements of business acquired: None.
(b) Exhibits.
*4.1 Certificate of Designation, as filed with the Secretary
of State of the State of Delaware on January 26, 1998.
*99.1 Form of Warrant issued to the investors in the Company's
January 26, 1998 private placement.
+99.2 Securities Purchase Agreement dated as of January 26,
1998 by and among the Company and the investors in the
Company's January 26, 1998 private placement.
+99.3 Registration Rights Agreement dated as of January 26,
1998 by and among the Company and the investors in the
Company's January 26, 1998 private placement.
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* Filed with the original filing of this Report.
+ Filed herewith.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
TII INDUSTRIES, INC.
Dated: May 14, 1998 By: /S/ PAUL SEBETIC
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Paul G. Sebetic,
Vice President Finance
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EXHIBIT INDEX
EXHIBIT NO.
*4.1 Certificate of Designation, as filed with the Secretary of
State of the State of Delaware on January 26, 1998.
*99.1 Form of Warrant issued to the investors in the Company's
January 26, 1998 private placement.
+99.2 Securities Purchase Agreement dated as of January 26, 1998 by
and among the Company and the investors in the Company's
January 26, 1998 private placement.
+99.3 Registration Rights Agreement dated as of January 26, 1998 by
and among the Company and the investors in the Company's
January 26, 1998 private placement.
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* Filed with the original filing of this Report.
+ Filed herewith.
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SECURITIES PURCHASE AGREEMENT
SECURITIES PURCHASE AGREEMENT (the "AGREEMENT"), dated as of January
26, 1998, by and among TII INDUSTRIES, INC., a Delaware corporation, with
headquarters located at 1385 Akron Street, Copiague, NY, 11726 (the "COMPANY"),
and the investors listed on the Schedule of Buyers attached hereto
(individually, a "BUYER" and collectively, the "BUYERS").
WHEREAS:
A. The Company and the Buyers are executing and delivering this
Agreement in reliance upon the exemption from securities registration afforded
by Rule 506 of Regulation D ("REGULATION D") as promulgated by the United States
Securities and Exchange Commission (the "SEC") under the Securities Act of 1933,
as amended and the rules and regulations thereunder, or any similar statute
(collectively, the "1933 ACT");
B. The Company has authorized the following new series of its
Preferred Stock, par value $1.00 per share (the "PREFERRED STOCK"): the
Company's Series C Convertible Preferred Stock (the "PREFERRED SHARES"), which
shall be convertible into shares of the Company's Common Stock, par value $0.01
per share (the "COMMON STOCK") (as converted, the "CONVERSION SHARES"), in
accordance with the terms of the Company's Certificate of Designation
substantially in the form attached hereto as Exhibit A (the "CERTIFICATE OF
DESIGNATION");
C. The Company has authorized the issuance of Warrants, in
substantially the form attached hereto as Exhibit B (the "WARRANTS"), to
purchase shares of Common Stock (as exercised, the "WARRANT SHARES").
D. The Buyers wish to purchase, upon the terms and conditions
stated in this Agreement, initially an aggregate of 5,000 of the Preferred
Shares and Warrants exercisable for the purchase of an aggregate of 200,000
shares of Common Stock, at the rate of one Preferred Share and a Warrant to
purchase 40 shares of Common Stock for each $1,000 to be invested by such Buyer
as set forth opposite each Buyer's name on the Schedule of Buyers;
E. Contemporaneously with the execution and delivery of this
Agreement, the parties hereto are executing and delivering a Registration Rights
Agreement substantially in the form attached hereto as Exhibit C (the
"REGISTRATION RIGHTS AGREEMENT") pursuant to which the Company has agreed to
provide certain registration rights under the 1933 Act and the rules and
regulations promulgated thereunder, and applicable state securities laws.
NOW THEREFORE, the Company and the Buyers hereby agree as follows:
1. PURCHASE AND SALE OF PREFERRED SHARES.
a. PURCHASE OF PREFERRED SHARES. Subject to satisfaction
(or waiver) of the conditions set forth in Sections 6(a)
and 7(a) below, the Company shall issue
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and sell to the Buyers and the Buyers severally shall
purchase from the Company an aggregate of 5,000
Preferred Shares and Warrants to purchase an aggregate
of 200,000 shares of Common Stock at the rate of one
Preferred Share and a Warrant to purchase 40 shares of
Common Stock for each $1,000 to be invested by such
Buyer, as set forth opposite each Buyer's name on the
Schedule of Buyers (the "CLOSING").
b. THE CLOSING DATE. The date and time of the Closing (the
"CLOSING DATE") shall be 10:00 a.m. New York City Time,
within two (2) business days following the date hereof,
subject to satisfaction (or waiver) of the conditions to
the Closing set forth in Sections 6(a) and 7(a) below
(or such later date as is mutually agreed to by the
Company and the Buyers); provided, however, that the
Company may extend the Closing for up to two (2)
additional business days if needed to obtain
confirmation of the filing of the Certificate of
Designation, but any such additional days shall not be
included in any time frame contained in any Transaction
Document which runs from the Closing Date. The Closing
shall occur on the Closing Date at the offices of Parker
Chapin Flattau & Klimpl, LLP, 1211 Avenue of the
Americas, New York, New York (or such other place as is
mutually agreed to by the Company and the Buyers).
c. Intentionally Omitted.
d. Intentionally Omitted.
e. Intentionally Omitted
f. FORM OF PAYMENT. On the Closing Date, (i) each Buyer
shall pay the Purchase Price to the Company for the
Preferred Shares and Warrants to be issued and sold to
such Buyer at the Closing, by wire transfer of
immediately available funds in accordance with the
Company's written wire instructions, and (ii) the
Company shall deliver to each Buyer, (x) stock
certificates (in the denominations as such Buyer shall
request) (the "STOCK CERTIFICATES") representing such
number of the Preferred Shares and (y) the Warrants
which such Buyer is then purchasing, each duly executed
on behalf of the Company and registered in the name of
such Buyer or its designee.
2. BUYER'S REPRESENTATIONS AND WARRANTIES.
Each Buyer represents and warrants with respect to only itself
that:
a. INVESTMENT PURPOSE. Such Buyer is acquiring the
Preferred Shares and Warrants (and intends to acquire the Conversion Shares and
the Warrant Shares) for its own account
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for investment only and not with a view towards, or for resale in connection
with, the public sale or distribution thereof (the Preferred Shares, the
Warrants, the Conversion Shares and the Warrant Shares being collectively
referred to herein as the "SECURITIES").
b. INVESTOR STATUS. Raphael L.P. and Ramius Fund, Ltd. are
each a "qualified institutional buyer", as that term is defined in Rule
144A(a)(1) promulgated under the 1933 Act and Leonardo, L.P., GAM Arbitrage
Investments, Inc. and AG Super Fund International Partners, L.P. are each an
"accredited investor", as that term is defined in Rule 501(a)(3) of Regulation D
promulgated under the 1933 Act. No Buyer is a resident of or domiciled in the
United States. Such Buyer was not offered securities or solicited by the
Company, any proposed underwriter or any other person with respect to the
Company's Registration Statement (since withdrawn) filed on October 22, 1997 and
has not reviewed nor been provided with a copy of the preliminary prospectus
contained therein or the preliminary prospectus dated November 7, 1997.
c. RELIANCE ON EXEMPTIONS. Such Buyer understands that the
Securities are being offered and sold to it in reliance on specific exemptions
from the registration requirements of United States federal and state securities
laws and that the Company is relying in part upon the truth and accuracy of, and
such Buyer's compliance with, the representations, warranties, agreements,
acknowledgments and understandings of such Buyer set forth herein in order to
determine the availability of such exemptions and the eligibility of such Buyer
to acquire such securities.
d. INFORMATION. Such Buyer and its advisors, if any, have
been afforded the opportunity to review all materials relating to the business,
finances and operations of the Company and materials relating to the offer and
sale of the Securities which have been requested by such Buyer, including all
SEC Documents (as defined below). Such Buyer and its advisors, if any, have been
afforded the opportunity to review the Company's Annual Report on Form 10-K for
the year ended June 27, 1997 (as amended), Quarterly Report on Form 10-Q for the
quarter ended September 26, 1997, Proxy Statement being used in connection with
the Company's Annual Meeting of Stockholders to be held on January 21, 1998 and
Current Reports on Form 8-K dated (date of earliest event reported) July 29,
1997 and January 6, 1998, each of which have been filed as SEC Documents and the
"Risk Factors" annexed hereto as Exhibit D, and has been afforded the
opportunity to ask questions of the Company. Neither such inquiries nor any
other due diligence investigations conducted by such Buyer or its advisors, if
any, or its representatives shall modify, amend or affect such Buyer's right to
rely on the Company's representations and warranties contained in Section 3
below. Such Buyer understands that its investment in the Securities involves a
high degree of risk. Such Buyer has sought such accounting, legal and tax advice
as it has considered necessary to make an informed investment decision with
respect to its acquisition of the Securities.
e. NO GOVERNMENTAL REVIEW. Such Buyer understands that no
United States federal or state agency or any other government or governmental
agency has passed on or made any recommendation or endorsement of the Securities
or the fairness or suitability of the investment in the Securities nor have such
authorities passed upon or endorsed the merits of the offering of the
Securities.
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f. TRANSFER OR RESALE. Such Buyer understands that except
as provided in the Registration Rights Agreement: (i) the Securities have not
been and are not being registered under the 1933 Act or any state securities
laws, and may not be offered for sale, sold, assigned or transferred unless (A)
subsequently registered thereunder, (B) such Buyer shall have delivered to the
Company an opinion of counsel, in a generally acceptable form, to the effect
that such Securities to be sold, assigned or transferred may be sold, assigned
or transferred pursuant to an exemption from such registration, or (C) such
Buyer provides the Company with reasonable assurance that such Securities can be
sold, assigned or transferred pursuant to Rule 144 promulgated under the 1933
Act (or a successor rule thereto) ("RULE 144"); (ii) any sale of the Securities
made in reliance on Rule 144 may be made only in accordance with the terms of
Rule 144 and further, if Rule 144 is not applicable, any resale of the
Securities under circumstances in which the seller (or the person through whom
the sale is made) may be deemed to be an underwriter (as that term is defined in
the 1933 Act) may require compliance with some other exemption under the 1933
Act or the rules and regulations of the SEC thereunder; and (iii) neither the
Company nor any other person is under any obligation to register such Securities
under the 1933 Act or any state securities laws or to comply with the terms and
conditions of any exemption thereunder.
g. LEGENDS. Such Buyer understands that the certificates or
other instruments representing the Preferred Shares and the Warrants and, until
such time as the sale of the Conversion Shares and Warrant Shares have been
registered under the 1933 Act as contemplated by the Registration Rights
Agreement, the stock certificates representing the Conversion Shares and the
Warrant Shares, except as set forth below, shall bear a restrictive legend in
substantially the following form or, in the case of the Warrants, the legend on
the face of the Warrant as set forth in Exhibit B hereto (and a stop-transfer
order may be placed against transfer of such stock certificates):
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE
SECURITIES LAWS. THE SECURITIES HAVE BEEN ACQUIRED FOR INVESTMENT AND MAY NOT BE
OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED IN THE ABSENCE OF AN EFFECTIVE
REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR APPLICABLE STATE SECURITIES LAWS, OR AN OPINION OF COUNSEL, IN A
GENERALLY ACCEPTABLE FORM, THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR
APPLICABLE STATE SECURITIES LAWS.
The legend set forth above shall be removed and the Company shall issue a
certificate without such legend to the holder of the Securities upon which it is
stamped, if, unless otherwise required by state securities laws, (i) such
Securities are registered for sale under the 1933 Act, (ii) in connection with a
sale transaction, such holder provides the Company with an opinion of counsel,
in a generally acceptable form, to the effect that a public sale, assignment or
transfer of such Securities may be made without registration under the 1933 Act,
or (iii) such holder provides the Company with reasonable assurances that such
Securities can be sold pursuant to paragraph (k) of Rule 144. Each
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Buyer acknowledges, covenants and agrees to sell the Securities represented by a
certificate(s) from which the legend has been removed, only pursuant to (i) a
registration statement that is effective and current under the 1933 Act, or (ii)
advice of counsel that such sale is exempt from registration required by Section
5 of the 1933 Act.
h. AUTHORIZATION; ENFORCEMENT. This Agreement has been duly
and validly authorized, executed and delivered on behalf of such Buyer and is a
valid and binding agreement of such Buyer enforceable in accordance with its
terms, subject as to enforceability to general principles of equity and to
applicable bankruptcy, insolvency, reorganization, moratorium, liquidation and
other similar laws relating to, or affecting generally, the enforcement of
applicable creditors' rights and remedies.
i. RESIDENCY. Such Buyer is a resident of the jurisdiction
specified in the Schedule of Buyers.
j. SECTION 9 OF THE SECURITIES EXCHANGE ACT. So long as a
Buyer holds any Preferred Shares, such Buyer will comply at all times with the
provisions of Section 9 of the Securities Exchange Act of 1934, as amended (the
"1934 ACT"), and the rules promulgated thereunder with respect to transactions
involving the securities of the Company.
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
The Company represents and warrants to each of the Buyers
that:
a. ORGANIZATION AND QUALIFICATION. The Company and its
subsidiaries other than subsidiaries which, if considered as a single subsidiary
would not constitute a "significant subsidiary" within the meaning of Rule
1-02(w) of Regulation S-X promulgated by the SEC (a complete list of
subsidiaries not so excluded is set forth in Schedule 3(a); all references in
this Agreement to subsidiaries are limited to those subsidiaries set forth on
Schedule 3(a)) are corporations duly organized and validly existing in good
standing under the laws of the jurisdiction in which they are incorporated, and
have the requisite corporate power to own their properties and to carry on their
business as now being conducted. Each of the Company and its subsidiaries is
duly qualified as a foreign corporation to do business and is in good standing
in every jurisdiction in which the nature of the business conducted by it makes
such qualification necessary, except to the extent that the failure to be so
qualified or be in good standing would not have a Material Adverse Effect. As
used in this Agreement, "MATERIAL ADVERSE EFFECT" means any material adverse
effect on the business, properties, assets, operations, results of operations,
financial condition or prospects of the Company and its subsidiaries, if any,
taken as a whole, or on the transactions contemplated hereby or by the
agreements and instruments to be entered into in connection herewith.
b. AUTHORIZATION; ENFORCEMENT; COMPLIANCE WITH OTHER
INSTRUMENTS. (i) The Company has the requisite corporate power and authority to
enter into and perform this Agreement, the Warrants, the Registration Rights
Agreement, the Irrevocable Transfer Agent Instructions (as
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defined in Section 5) and each of the other agreements entered into by the
parties hereto in connection with the transactions contemplated by this
Agreement (collectively, the "TRANSACTION DOCUMENTS"), and to issue the
Securities in accordance with the terms hereof and thereof, (ii) the execution
and delivery of the Transaction Documents and the Certificate of Designations by
the Company and the consummation by it of the transactions contemplated hereby
and thereby, including without limitation the issuance of the Preferred Shares
and the Warrants and the reservation for issuance and the issuance of the
Conversion Shares issuable upon conversion of the Preferred Shares and the
Warrant Shares upon exercise of the Warrants, have been duly authorized by the
Company's Board of Directors and no further consent or authorization is required
by the Company, its Board of Directors or its stockholders, except as
contemplated Section 4(f), (iii) the Transaction Documents have been duly
executed and delivered by the Company, (iv) the Transaction Documents constitute
the valid and binding obligations of the Company enforceable against the Company
in accordance with their terms, except as such enforceability may be limited by
general principles of equity or applicable bankruptcy, insolvency,
reorganization, moratorium, liquidation or other laws relating to, or affecting
generally, the enforcement of creditors' rights and remedies, and (v) prior to
the Closing Date, the Certificate of Designation will be filed with the
Secretary of State of the State of Delaware and will be in full force and
effect, enforceable against the Company in accordance with its terms.
c. CAPITALIZATION. As of the date hereof, the authorized
capital stock of the Company consists of (i) 30,000,000 shares of Common Stock,
of which, as of the close of business on January 23, 1998, 7,607,414 shares were
issued and outstanding, and (in addition to the Conversion Shares and the
Warrant Shares) 2,795,126 shares are reserved and available for issuance
pursuant to outstanding options, warrants and other securities convertible into
or exchangeable for Common Stock set forth on Schedule 3(c) and an additional
121,500 shares were reserved for issuance under the Company's stock option plans
and (ii) 1,000,000 shares of Preferred Stock, none of which were issued, or
outstanding or reserved for issuance. All of such outstanding shares have been,
or upon issuance will be, validly issued and are fully paid and nonassessable.
Except as disclosed in Schedule 3(c), no shares of Common Stock or Preferred
Stock are subject to preemptive rights or any other similar rights (except for
anti-dilution provisions contained in such options, warrants and convertible
securities) or any liens or encumbrances suffered or permitted by the Company.
Except as disclosed in Schedule 3(c), as of the effective date of this
Agreement, (i) there are no outstanding options, warrants, scrip, rights to
subscribe to, calls or commitments of any character whatsoever relating to, or
securities or rights convertible into, any shares of capital stock of the
Company or any of its subsidiaries, or contracts, commitments, understandings or
arrangements by which the Company or any of its subsidiaries is or may become
bound to issue additional shares of capital stock of the Company or any of its
subsidiaries or options, warrants, scrip, rights to subscribe to, calls or
commitments of any character whatsoever relating to, or securities or rights
convertible into, any shares of capital stock of the Company or any of its
subsidiaries, (ii) there are no outstanding debt securities, (iii) there are no
agreements or arrangements under which the Company or any of its subsidiaries is
obligated to register the sale of any of their securities under the 1933 Act
(except as contained in the warrants disclosed in Schedule 3(c)) and (iv) there
are no outstanding securities of the Company or any of its subsidiaries which
contain any redemption or similar provisions, and there are no contracts,
commitments, understandings or arrangements by
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which the Company or any of its subsidiaries is or may become bound to redeem a
security of the Company or any of its subsidiaries. Except as disclosed in
Schedule 3(c), there are no securities or instruments containing anti-dilution
or similar provisions that will be triggered by the issuance of the Securities
as described in this Agreement except, potentially, under the warrants issued
(originally) to Ladenburg, Thalmann & Co. Inc disclosed in Schedule 3(c). The
Company has furnished to the Buyers true and correct copies of the Company's
Certificate of Incorporation, as amended and as in effect on the date hereof
(the "CERTIFICATE OF INCORPORATION"), and the Company's By-laws, as in effect on
the date hereof (the "BY-LAWS"), and the terms of all securities convertible
into or exercisable for Common Stock and the material rights of the holders
thereof in respect thereto.
d. ISSUANCE OF SECURITIES. The Preferred Shares are duly
authorized and, upon issuance in accordance with the terms hereof, shall be (i)
validly issued, fully paid and non-assessable, (ii) free from all taxes, liens
and charges with respect to the issue thereof and (iii) entitled to the rights
and preferences set forth in the Certificate of Designation. Two million two
hundred eighty thousand (2,280,000) shares of Common Stock (subject to
adjustment pursuant to the Company's covenant set forth in Section 4(f) below)
have been duly authorized and reserved for issuance upon conversion of the
Preferred Shares and two hundred thousand (200,000) shares of Common Stock
(subject to adjustment pursuant to the Company's covenant set forth in Section
4(f) below) have been duly authorized and reserved for issuance upon exercise of
the Warrants. Upon conversion in accordance with the Certificate of Designation,
the Conversion Shares and, upon exercise in accordance with the Warrants, the
Warrant Shares, will be validly issued, fully paid and nonassessable and free
from all taxes, liens and charges with respect to the issue thereof, with the
holders being entitled to all rights accorded to a holder of Common Stock.
Based, in part, upon the representations, warranties and covenants of the Buyers
contained herein, the issuance by the Company of the Preferred Shares and the
Warrants, is exempt from registration under the 1933 Act and the Conversion
Shares and the Warrant Shares will be exempt from registration under the 1933
Act.
e. NO CONFLICTS. The execution, delivery and performance of
the Transaction Documents by the Company and the consummation by the Company of
the transactions contemplated hereby and thereby (including, without limitation,
the reservation for issuance and issuance of the Conversion Shares) will not (i)
result in a violation of the Certificate of Incorporation, any Certificate of
Designations, Preferences and Rights of any outstanding series of Preferred
Stock, or the By-laws of the Company, (ii) conflict with, or constitute a
default (or an event which with notice or lapse of time or both would become a
default) under, or give to others any rights of termination, amendment,
acceleration or cancellation of, any agreement, indenture or instrument to which
the Company or any of its subsidiaries is a party (except that the redemption of
the Preferred Shares may violate (x) the Revolving Credit Loan Agreement dated
January 31, 1995, as amended, between TII International, Inc., the Company and
The Chase Manhattan Bank and (y) the Finance Agreement dated June 2, 1991, as
amended, between the Company and Overseas Private Investment Corporation and any
conversion of Preferred Shares at an exercise price below $2.50 per share
(adjusted for stock dividends, stock splits and combinations and the like) may
violate said Finance Agreement) or (iii) result in a violation of any law, rule,
regulation, order, judgment or decree (including federal and state securities
laws and regulations and the rules and regulations of the principal market or
exchange on
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which the Common Stock is traded or listed) applicable to the Company or any of
its subsidiaries or by which any property or asset of the Company or any of its
subsidiaries is bound or affected, except to the extent that matters within
clauses (ii) and (iii) immediately above would not have a Material Adverse
Effect. Except as disclosed in Schedule 3(e), neither the Company nor its
subsidiaries is in violation of any term of or in default under (i) the
Certificate of Incorporation or the By-laws or their organizational charter or
by-laws, respectively, or (ii) any contract, agreement, mortgage, indebtedness,
indenture, instrument, judgment, decree or order or any statute, rule or
regulation applicable to the Company or its subsidiaries, except to the extent
that such violation or default would not have a Material Adverse Effect. The
business of the Company and its subsidiaries is not being conducted, and shall
not be conducted, in violation of any law, ordinance, regulation of any
governmental entity, except to the extent that such violation would not have a
Material Adverse Effect. Except as specifically contemplated by this Agreement
and as required under the 1933 Act and the 1934 Act, the Company is not required
to obtain any consent, authorization or order of, or make any filing or
registration with, any court or governmental agency in order for it to execute,
deliver or perform any of its obligations under or contemplated by the
Transaction Documents or the Certificate of Designations in accordance with the
terms hereof or thereof. Except as disclosed in Schedule 3(e), all consents,
authorizations, orders, filings and registrations which the Company is required
to obtain pursuant to the preceding sentence have been obtained or effected on
or prior to the date hereof. The Company and its subsidiaries are unaware of any
facts or circumstances which might give rise to any of the foregoing. The
Company is not in violation of the listing requirements of the Nasdaq National
Market and is not aware of any facts which would reasonably lead to delisting of
the Common Stock by the Nasdaq National Market in the foreseeable future.
f. SEC DOCUMENTS; FINANCIAL STATEMENTS. Since June 29,
1996, the Company has filed all reports, schedules, forms, statements and other
documents required to be filed by it with the SEC pursuant to the reporting
requirements of the 1934 Act (all of the foregoing filed prior to the date
hereof and all exhibits included therein and financial statements and schedules
thereto and documents incorporated by reference therein being hereinafter
referred to as the "SEC DOCUMENTS"). The Company has made available to each
Buyer or its respective representatives true and complete copies of the SEC
Documents. As of their respective dates, the SEC Documents complied in all
material respects with the requirements of the 1934 Act and the rules and
regulations of the SEC promulgated thereunder applicable to the SEC Documents,
and none of the SEC Documents, at the time they were filed with the SEC,
contained any untrue statement of a material fact or omitted to state a material
fact required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading. As of their respective dates, the financial statements of the
Company included in the SEC Documents complied as to form in all material
respects with applicable accounting requirements and the published rules and
regulations of the SEC with respect thereto. Such financial statements have been
prepared in accordance with generally accepted accounting principles,
consistently applied, during the periods involved (except (i) as may be
otherwise indicated in such financial statements or the notes thereto, or (ii)
in the case of unaudited interim statements, to the extent they may exclude
footnotes or may be condensed or summary statements) and fairly present in all
material respects the financial position of the Company as of the dates thereof
and the results of its operations and cash flows for the periods
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then ended (subject, in the case of unaudited statements, to normal year-end
audit adjustments). No other information provided by or on behalf of the Company
to the Buyers which is not included in the SEC Documents, including, without
limitation, information referred to in Section 2(d) of this Agreement, contains
any untrue statement of a material fact or omits to state any material fact
necessary in order to make the statements therein, in the light of the
circumstance under which they are or were made, not misleading. Neither the
Company nor any of its subsidiaries or any of their officers, directors,
employees or agents have provided the Buyers with any material, nonpublic
information.
g. ABSENCE OF CERTAIN CHANGES. Except as disclosed in
Schedule 3(g) or reflected or contemplated in any SEC Documents, since June 27,
1997 there has been no material adverse change and no material adverse
development in the business, properties, operations, financial condition or
results of operations of the Company or its subsidiaries. The Company has not
taken any steps, and does not currently expect to take any steps, to seek
protection pursuant to any bankruptcy law nor does the Company or any of its
subsidiaries have any knowledge or reason to believe that its creditors intend
to initiate involuntary bankruptcy proceedings.
h. ABSENCE OF LITIGATION. There is no action, suit,
proceeding, inquiry or investigation before or by any court, public board,
government agency, self-regulatory organization or body pending or, to the
knowledge of the Company or any of its subsidiaries, threatened against or
affecting the Company, the Common Stock or any of the Company's subsidiaries or
any of the Company's or the Company's subsidiaries' officers or directors in
their capacities as such, except as expressly set forth in Schedule 3(h).
i. ACKNOWLEDGMENT REGARDING BUYERS' PURCHASE OF PREFERRED
SHARES. The Company acknowledges and agrees that each of the Buyers is acting
solely in the capacity of arm's length purchaser with respect to the Transaction
Documents and the transactions contemplated thereby. The Company further
acknowledges that each Buyer is not acting as a financial advisor or fiduciary
of the Company (or in any similar capacity) with respect to the Transaction
Documents and the transactions contemplated thereby and any advice given by any
of the Buyers or any of their respective representatives or agents in connection
with the Transaction Documents and the transactions contemplated thereby is
merely incidental to such Buyer's purchase of the Securities. The Company
further represents to each Buyer that the Company's decision to enter into the
Transaction Documents has been based solely on the independent evaluation by the
Company and its representatives.
j. NO UNDISCLOSED EVENTS, LIABILITIES, DEVELOPMENTS OR
CIRCUMSTANCES. No material event, liability, development or circumstance has
occurred or exists, with respect to the Company or its subsidiaries or their
respective business, properties, prospects, operations or financial condition,
that would be required to be disclosed by the Company under applicable
securities laws on a registration statement (including by way of incorporation
by reference) filed with the SEC relating to an issuance and sale by the Company
of its Common Stock and which has not been publicly announced.
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k. NO GENERAL SOLICITATION. Subject, in part, to the
accuracy of the Buyer's representation and warranty contained in Section 2(b),
neither the Company, nor any of its affiliates, nor any person acting on its or
their behalf, has engaged in any form of general solicitation or general
advertising (within the meaning of Regulation D under the 1933 Act) in
connection with the offer or sale of the Securities.
l. NO INTEGRATED OFFERING. Subject, in part, to the
accuracy of the Buyer's representations and warranties, 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 any of the Securities under the 1933 Act or cause this offering
of Securities to be integrated with prior offerings by the Company for purposes
of the 1933 Act or any applicable stockholder approval provisions, including,
without limitation, under the rules and regulations of the Nasdaq National
Market, nor will the Company or any of its subsidiaries take any action or steps
that would require registration of the Securities under the 1933 Act for
issuance hereunder or cause the offering of the Securities to be integrated with
other offerings.
m. EMPLOYEE RELATIONS. Neither the Company nor any of its
subsidiaries is involved in any union labor dispute nor, to the knowledge of the
Company or any of its subsidiaries, is any such dispute threatened. Neither the
Company nor any of its subsidiaries is a party to a collective bargaining
agreement, and the Company and its subsidiaries believe that relations with
their employees are good.
n. INTELLECTUAL PROPERTY RIGHTS. To the knowledge of the
Company, the Company and its subsidiaries own or possess adequate rights or
licenses to use all trademarks, trade names, service marks, service mark
registrations, service names, patents, patent rights, copyrights, inventions,
licenses, approvals, governmental authorizations, trade secrets and rights
necessary to conduct their respective businesses as now conducted, except to the
extent that the failure to possess such rights or licenses would not have a
Material Adverse Effect, and except further to the extent that the Company or
its subsidiaries lack such rights or licenses, they are using or shall use
commercially reasonable efforts to secure such rights or licenses. The Company
and its subsidiaries do not have any knowledge of any infringement by the
Company or its subsidiaries of trademark, trade name rights, patents, patent
rights, copyrights, inventions, licenses, service names, service marks, service
mark registrations, trade secret or other similar rights of others, or of any
such development of similar or identical trade secrets or technical information
by others and, there is no claim, action or proceeding being made or brought
against, or to the Company's knowledge, being threatened against, the Company or
its subsidiaries regarding trademark, trade name, patents, patent rights,
invention, copyright, license, service names, service marks, service mark
registrations, trade secret or other infringement; and the Company and its
subsidiaries are unaware of any facts or circumstances which might give rise to
any of the foregoing, except for such facts and circumstances which would not
have a Material Adverse Effect.
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o. ENVIRONMENTAL LAWS. The Company and its subsidiaries (i)
are in compliance with applicable foreign, federal, state and local laws and
regulations relating to the protection of human health and safety, the
environment or hazardous or toxic substances or wastes, pollutants or
contaminants ("ENVIRONMENTAL LAWS"), (ii) have received all permits, licenses or
other approvals required of them under applicable Environmental Laws to conduct
their respective businesses and (iii) are in compliance with all terms and
conditions of any such permit, license or approval, except to the extent that a
failure with respect to the matters within clauses (i), (ii) and (iii) above
would not have a Material Adverse Effect.
p. TITLE. The Company and its subsidiaries have good and
marketable title in fee simple to all real property and good and marketable
title to all personal property owned by them, except to the extent that the
failure to have good and marketable title would not have a Material Adverse
Effect, in each case free and clear of all liens, encumbrances and defects
except such as are described in Schedule 3(p) or such as do not materially
affect the value of such property and do not interfere with the use made and
proposed to be made of such property by the Company or any of its subsidiaries.
Except as discussed in the SEC Documents, any real property and facilities held
under lease by the Company or any of its subsidiaries are held by them under
valid, subsisting and enforceable leases with such exceptions as are not
material and do not interfere with the use made and proposed to be made of such
property and buildings by the Company and its subsidiaries.
q. INSURANCE. The Company and each of its subsidiaries are
insured by insurers of recognized financial responsibility against such losses
and risks and in such amounts as management of the Company believes to be
prudent and customary in the businesses in which the Company and its
subsidiaries are engaged. Neither the Company nor any of its subsidiaries has
any reason to believe that it will not be able to renew its existing insurance
coverage as and when such coverage expires or to obtain similar coverage from
similar insurers as may be necessary to continue its business at a cost that
would not materially and adversely affect the condition, financial or otherwise,
or the earnings, business or operations of the Company and its subsidiaries,
taken as a whole.
r. REGULATORY PERMITS. The Company and its subsidiaries
possess all certificates, authorizations and permits issued by the appropriate
federal, state or foreign regulatory authorities necessary to conduct their
respective businesses, except to the extent that the failure to possess such
certificates, authorizations and permits would not have a Material Adverse
Effect; and neither the Company nor any such subsidiary has received any notice
of proceedings relating to the revocation or modification of any such
certificate, authorization or permit.
s. INTERNAL ACCOUNTING CONTROLS. The Company and each of
its subsidiaries maintain a system of internal accounting controls sufficient to
provide reasonable assurance that (i) transactions are executed in accordance
with management's general or specific authorizations, (ii) transactions are
recorded as necessary to permit preparation of financial statements in
conformity with generally accepted accounting principles and to maintain asset
accountability, (iii) access to assets is permitted only in accordance with
management's general or specific authorization and (iv) the
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recorded accountability for assets is compared with the existing assets at
reasonable intervals and appropriate action is taken with respect to any
differences.
t. NO MATERIALLY ADVERSE CONTRACTS, ETC. Neither the
Company nor any of its subsidiaries is subject to any charter, corporate or
other legal restriction, or any judgment, decree, order, rule or regulation
which in the judgment of the Company's officers has or is expected in the future
to have a Material Adverse Effect.
u. TAX STATUS. The Company and each of its subsidiaries has
made or filed all federal and state 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 and each of its subsidiaries 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 the Company and its subsidiaries have set aside on their books provision
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.
v. DILUTIVE EFFECT. The Company understands and
acknowledges that the number of Conversion Shares issuable upon conversion of
the Preferred Shares issuable will increase in certain circumstances. The
Company further acknowledges that its obligation to issue Conversion Shares upon
conversion of the Preferred Shares in accordance with this Agreement and the
Certificate of Designations is absolute and unconditional regardless of the
dilutive effect that such issuance may have on the ownership interests of other
stockholders of the Company.
w. NO OTHER AGREEMENTS. The Company has not, directly or
indirectly, made any agreements with any Buyers relating to the terms or
conditions of the transactions contemplated by the Transaction Documents except
as set forth in the Transaction Documents.
4. COVENANTS.
a. BEST EFFORTS. Each party shall use its best efforts
timely to satisfy each of the conditions to be satisfied by it as provided in
Sections 6 and 7 of this Agreement.
b. FORM D. The Company agrees to file a Form D with respect
to the Securities as required under Regulation D and to provide a copy thereof
to each Buyer promptly after such filing. The Company shall, on or before each
of the Closing Dates, take such action as the Company shall reasonably determine
is necessary to qualify the Securities for, or obtain exemption for the
Securities for, sale to the Buyers at each of the Closings pursuant to this
Agreement under applicable securities or "Blue Sky" laws of the states of the
United States, and shall provide evidence of any such action so taken to the
Buyers on or prior to the Closing Date.
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c. REPORTING STATUS. Until the earlier of (i) the date as
of which the Investors (as that term is defined in the Registration Rights
Agreement) may sell all of the Conversion Shares and Warrant Shares without
restriction pursuant to Rule 144(k) promulgated under the 1933 Act (or successor
thereto), or (ii) the date on which (A) the Investors shall have sold all the
Conversion Shares and Warrant Shares and (B) none of the Preferred Shares and
Warrants are outstanding (the "REGISTRATION PERIOD"), the Company shall file all
reports required to be filed with the SEC pursuant to the 1934 Act, and the
Company shall not terminate its status as an issuer required to file reports
under the 1934 Act even if the 1934 Act or the rules and regulations thereunder
would otherwise permit such termination.
d. USE OF PROCEEDS. The Company will use the proceeds from
the sale of the Preferred Shares for substantially the same purposes and in
substantially the same amounts as indicated in Schedule 4(d).
e. FINANCIAL INFORMATION. The Company agrees to send the
following to each Investor (as that term is defined in the Registration Rights
Agreement) during the Registration Period: (i) within two (2) days after the
filing thereof with the SEC, a copy of its Annual Reports on Form 10-K, its
Quarterly Reports on Form 10-Q, any Current Reports on Form 8-K and any
registration statements or amendments filed pursuant to the 1933 Act; (ii) on
the same day as the release thereof, facsimile copies of all press releases
issued by the Company or any of its subsidiaries and (iii) copies of any notices
and other information made available or given to the stockholders of the Company
generally, contemporaneously with the making available or giving thereof to the
stockholders.
f. RESERVATION OF SHARES. The Company shall take all action
necessary to at all times have authorized, and reserved for the purpose of
issuance, the Warrant Shares and no less than 150% of the number of shares of
Common Stock needed to provide for the issuance of the Conversion Shares.
g. RIGHT OF FIRST REFUSAL. So long as at least an aggregate
of 10% of the Preferred Shares issued at the Closings remain outstanding, but
subject to the exceptions described below, the Company shall not enter into a
binding agreement or otherwise agree with any party for any equity financing
(including any debt financing with an equity component) or issue any equity
securities of the Company or securities convertible or exchangeable into or for
equity securities of the Company (including debt securities with an equity
component) in any form ("FUTURE OFFERINGS") during the period beginning on the
Closing Date and ending on and including the date which is 365 days after the
Closing Date, unless it shall have first delivered to each Buyer or a designee
appointed by such Buyer written notice (the "FUTURE OFFERING NOTICE") describing
the proposed Future Offering, including the terms and conditions thereof, and
providing each Buyer an option to purchase up to its Aggregate Percentage (as
defined below), as of the date of delivery of the Future Offering Notice, in the
Future Offering on the same terms and conditions set forth in the Future
Offering Notice (the limitations referred to In this sentence are collectively
referred to as the "CAPITAL RAISING LIMITATION"). For purposes of this Section
4(g), "AGGREGATE
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PERCENTAGE" at any time with respect to any Buyer shall mean the percentage
obtained by dividing (i) the aggregate number of Conversion Shares issued or
issuable, as if a conversion occurred on such date, upon conversion of the
Preferred Shares held by such Buyer (without giving effect to the limitations on
conversion contained herein or in the Certificate of Designations) by (ii) the
aggregate number of Conversion Shares issued or issuable, as if a conversion
occurred on such date, upon conversion of all of the Preferred Shares held by
the Buyers. A Buyer can exercise its option to participate in a Future Offering
by delivering written notice thereof to participate to the Company within ten
(10) business days of receipt of a Future Offering Notice, which notice shall
state the quantity of securities being offered in the Future Offering that such
Buyer will purchase, up to its Aggregate Percentage, and that number of
securities it is willing to purchase in excess of its Aggregate Percentage. In
the event that one or more Buyers fail to elect to purchase up to each such
Buyer's Aggregate Percentage then each Buyer which has indicated that it is
willing to purchase a number of securities in excess of its Aggregate Percentage
shall be entitled to purchase its pro rata portion (based on the number of
securities which each Buyer electing to purchase securities has elected to
purchase) of the securities in the Future Offering which one or more Buyers have
not elected to purchase. In the event the Buyers fail to elect to fully
participate in the Future Offering within the periods described in this Section
4(g), the Company shall have 45 days thereafter to sell the securities of the
Future Offering respecting which such Buyer's rights were not exercised, upon
terms and conditions, no more favorable to the purchasers thereof than specified
in the Future Offering Notice. In the event the Company has not sold such
securities of the Future Offering within such 45 day period, the Company shall
not thereafter issue or sell such securities without first offering such
securities to the Buyers in the manner provided in this Section 4(g). The
Capital Raising Limitation shall not apply to (i) a loan from a commercial bank,
(ii) any transaction involving the Company's issuances of securities (A) as
consideration in a merger or consolidation, (B) in connection with any strategic
partnership or joint venture (the primary purpose of which is not to raise
equity capital), or (C) as consideration for the acquisition of a business,
product or license by the Company, (iii) the issuance of Common Stock in an
underwritten public offering, (iv) the issuance of securities upon exercise or
conversion of the Company's options, warrants or other convertible securities
outstanding as of the date hereof, and (v) the grant of additional options or
warrants, or the issuance of additional securities, under any Company stock
option or restricted stock plan for the benefit of the Company's employees,
directors or consultants. The Buyers shall not be required to participate or
exercise their right of first refusal with respect to a particular Future
Offering in order to exercise their right of first refusal with respect to later
Future Offerings.
h. LISTING. The Company shall promptly secure the listing
of all of the Registrable Securities (as defined in the Registration Rights
Agreement) upon the Nasdaq National Market, The New York Stock Exchange, Inc.
("NYSE") or The American Stock Exchange, Inc. ("AMEX"), upon which shares of
Common Stock are then listed (subject to official notice of issuance) and shall
maintain, so long as any other shares of Common Stock shall be so listed, such
listing of all Registrable Securities from time to time issuable under the terms
of the Transaction Documents. The Company shall use its best efforts to maintain
the Common Stock's authorization for quotation on the Nasdaq National Market,
NYSE or AMEX (but shall not be responsible for deficiencies caused by changes in
the market price of its Common Stock, the effects of operational results or
changes in
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the listing and qualification maintenance standards adopted by any of such
self-regulatory organizations). Neither the Company nor any of its subsidiaries
shall take any intentional action which may result in the delisting or
suspension of the Common Stock on the Nasdaq National Market, NYSE or AMEX. The
Company shall promptly provide to each Buyer copies of any notices it receives
from the Nasdaq National Market, NYSE or AMEX regarding the continued
eligibility of the Common Stock for listing on such automated quotation system
or securities exchange. The Company shall pay all fees and expenses in
connection with satisfying its obligations under this Section 4(h).
i. SHORT SALES. Buyers agree not to enter into any short
position involving the Common Stock (including by selling put equivalent
positions, as that term has meaning under the rules promulgated by the SEC under
Section 16(a) of the 1934 Act), at a sales price per share of Common Stock of
less than $4.45 until, and including, 120 days after the Closing.
j. FILING OF FORM 8-K. On or before the tenth (10th) day
following each of the Closing Dates, the Company shall file a Form 8-K with the
SEC describing the terms of the transaction contemplated by the Transaction
Documents and consummated at such Closing, in each case in the form required by
the 1934 Act and including a copy of Certificate of Designation as an exhibit to
such report. Neither such Report nor any other report filed by the Company with
the SEC shall include the name of any Buyer nor file a copy of this unless in
response to a comment received from the SEC.
k. UNDERWRITING LOCK-UP AGREEMENTS. At any time during the
period beginning on and including the Closing Date and ending on the date which
is four years after the Closing Date, the Company may require that all, but not
less than all, of the holders of the Preferred Shares and Warrants agree to sign
a "lock-up" agreement with the underwriters of a public offering of the Common
Stock pursuant to which the holders would agree not to sell any Conversion
Shares or Warrant Shares during the period beginning on the date designated by
the underwriters, which date shall be not less than 10 days after the holders'
receipt of such notice (no longer than 10 days prior to the anticipated
effective date of the registration statement for such offering), and ending on
the date which is not longer than (i) the number of days during which the
Company's principal officers have agreed to similar restrictions or (ii) 60 days
after the beginning of the lock-up period as designated by the underwriters (the
"UNDERWRITING LOCK-UP PERIOD"). The Company shall exercise this right by
delivering written notice (the "LOCK-UP REQUEST NOTICE") of such request to all
of the holders of the Preferred Shares and Warrants then outstanding at least 10
days prior to the date on which the Underwriting Lock-Up Period will begin, but
in no event prior to the initial filing of the registration statement for such
proposed offering. The Lock-up Request Notice shall state (i) that the
underwriters of such offering have requested that the holders of the Preferred
Shares and Warrants enter into "lock-up" agreements, (ii) the date on which the
Underwriting Lock-Up Period will begin and (iii) the name of the managing
underwriters of the proposed offering. Notwithstanding the foregoing, the
Company shall not be entitled to require the holders to enter into lock-up
agreements unless (A) the Underwriting Lock-Up Period is not more than 60 days
or such lesser number of days during which the Company's principal officers have
agreed to similar
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restrictions, (B) the Underwriting Lock-Up Period shall terminate immediately
upon the termination or abandonment or indefinite delay of the underwritten
offering, (C) the managing underwriters for such proposed offering are included
on the Schedule of Underwriters attached to this Agreement, (D) the preliminary
prospectus for such underwritten public offering reflects a price per share to
the public of not less than $7.50 per share (to be adjusted for stock dividends,
splits, combinations and similar events) and an aggregate gross proceeds to the
Company of at least $10,000,000, (E) there has been no other Underwriting
Lock-Up Period in the 365 days prior to the date of the Lock-Up Request Notice,
and (F) there has been no Grace Period (as defined in the Registration Rights
Agreement) during the period beginning on and including the date which is ten
days prior to the initial filing of the registration statement for the proposed
offering and ending on and including the first day of the Underwriting Lock-Up
Period. In the event the Company requires an Underwriting Lock-Up Period, the
Mandatory Conversion Date (as defined in the Certificate of Designations) shall
be delayed two days for each day in the Underwriting Lock-Up Period as provided
in Section 2(g) of the Certificate of Designations. If the Company delivers a
Lock-Up Request Notice and the underwritten public offering is not consummated
within 90 days of the first day of the Underwriting Lock-Up Period, then the
Company may require an Underwriting Lock-Up Period pursuant to this Section 4(k)
on only one other occasion.
l. LISTING OF SHARES ON NASDAQ. Promptly following the
Closing, but no later than ten (10) days thereafter, the Company shall file all
necessary applications and documents so that all of the Conversion Shares (up to
the Exchange Cap) and the Warrants Shares issuable upon conversion of the
Preferred Shares to be sold at the Closing shall be listed upon the Nasdaq
National Market.
m. ADDITIONAL GOOD STANDING CERTIFICATES. If the Company
has not obtained good standing certificates for TII-Ditel, Inc. and Crown Tool &
Die, Inc. on or prior to the Closing Date pursuant to Section 7(a)(x), then
promptly following the Closing, but no later than ten (10) days thereafter, the
Company shall provide to the Buyers an updated good standing certificate for
TII-Ditel, Inc. and a good standing certificate for Crown Tool & Die, Inc.
5. TRANSFER AGENT INSTRUCTIONS.
The Company shall issue irrevocable instructions to its
transfer agent, and any subsequent transfer agent, to issue certificates,
registered in the name of each Buyer or its respective nominee(s), for the
Conversion Shares in such amounts as specified from time to time by each Buyer
to the Company upon conversion of the Preferred Shares (the "IRREVOCABLE
TRANSFER AGENT INSTRUCTIONS"), subject to the maximum number of shares provided
for in Sections 2(j) and 12 of the Certificate of Designation. Prior to
registration of the Conversion Shares under the 1933 Act, all such certificates
shall bear the restrictive legend specified in Section 2(g) of this Agreement.
The Company warrants that no instruction other than the Irrevocable Transfer
Agent Instructions referred to in this Section 5, and stop transfer instructions
to give effect to Section 2(f) hereof (in the case of the Conversion Shares,
prior to registration of the Conversion Shares under the 1933 Act) or Sections 4
or 12 of the Certificate of Designation will be given by the Company to its
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transfer agent and that the Securities shall otherwise be freely transferable on
the books and records of the Company as and to the extent provided in this
Agreement and the Registration Rights Agreement. Nothing in this Section 5 shall
affect in any way each Buyer's obligations and agreements set forth in Section
2(g) to comply with all applicable prospectus delivery requirements, if any,
upon resale of the Securities. If a Buyer provides the Company with an opinion
of counsel, reasonably satisfactory in form and substance to the Company, that
registration of a resale by such Buyer of any of such Securities is not required
under the 1933 Act, the Company shall permit the transfer, and, in the case of
the Conversion Shares, promptly instruct its transfer agent to issue one or more
certificates in such name and in such denominations as specified by such Buyer
and without any restrictive legends. The Company acknowledges that a breach by
it of its obligations hereunder will cause irreparable harm to the Buyers by
vitiating the intent and purpose of the transaction contemplated hereby.
Accordingly, the Company acknowledges that the remedy at law for a breach of its
obligations under this Section 5 will be inadequate and agrees, in the event of
a breach or threatened breach by the Company of the provisions of this Section
5, that the Buyers shall be entitled, in addition to all other available
remedies, to an injunction restraining any breach and requiring immediate
issuance and transfer, without the necessity of showing economic loss and
without any bond or other security being required.
6. CONDITIONS TO THE COMPANY'S OBLIGATION TO SELL.
a. CLOSING DATE. The obligation of the Company hereunder to
issue and sell the Preferred Shares and the Warrants to each Buyer at the
Closing is subject to the satisfaction, at or before the Closing Date, of each
of the following conditions, provided that these conditions are for the
Company's sole benefit and may be waived by the Company at any time in its sole
discretion by providing each Buyer with prior written notice thereof:
(i) Such Buyer shall have executed this Agreement and the
Registration Rights Agreement and delivered the same to the Company.
(ii) Such Buyer shall have delivered to the Company the
Purchase Price for the Preferred Shares and the Warrants being purchased by such
Buyer at the Closing by wire transfer of immediately available funds pursuant to
the wire instructions provided by the Company.
(iii) The representations and warranties of such Buyer shall
be true and correct in all material respects as of the date when made and as of
the Closing Date as though made at that time (except for representations and
warranties that speak as of a specific date), and such Buyer shall have
performed, satisfied and complied in all material respects with the covenants,
agreements and conditions required by the Transaction Documents to be performed,
satisfied or complied with by such Buyer at or prior to the Closing Date.
b. Intentionally Omitted.
c. Intentionally Omitted.
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7. CONDITIONS TO EACH BUYER'S OBLIGATION TO PURCHASE.
a. CLOSING DATE. The obligation of each Buyer hereunder to
purchase the Preferred Shares and the Warrants at the Closing is subject to the
satisfaction, at or before the Closing Date, of each of the following
conditions, provided that these conditions are for each Buyer's sole benefit and
may be waived by such Buyer at any time in its sole discretion:
(i) The Company shall have executed each of the Transaction
Documents, and delivered the same to such Buyer.
(ii) The Certificate of Designation shall have been filed
with the Secretary of State of the State of Delaware, and a copy thereof
certified by such Secretary of State shall have been delivered to counsel for
such Buyer.
(iii) The Common Stock shall be authorized for quotation on
the Nasdaq National Market, NYSE or AMEX, and trading in the Common Stock on the
Nasdaq National Market, NYSE or AMEX shall not have been suspended by the SEC,
the Nasdaq Stock Market, Inc., NYSE or AMEX.
(iv) The representations and warranties of the Company shall
be true and correct in all material respects (except to the extent that any of
such representations and warranties is already qualified as to materiality in
Section 3 above, in which case, such representations and warranties shall be
true and correct without further qualification) as of the date when made and as
of the Closing Date as though made at that time (except for representations and
warranties that speak as of a specific date) and the Company shall have
performed, satisfied and complied in all material respects with the covenants,
agreements and conditions required by the Transaction Documents to be performed,
satisfied or complied with by the Company at or prior to the Closing Date. Such
Buyer shall have received a certificate, executed by the Chief Executive Officer
of the Company, dated as of the Closing Date, to the foregoing effect and as to
such other matters as may be reasonably requested by such Buyer including,
without limitation, an update as of the Closing Date regarding the
representation contained in Section 3(c) above.
(v) Such Buyer shall have received the opinions of the
Company's outside counsel and inside counsel dated as of the Closing Date, in
form, scope and substance reasonably satisfactory to such Buyer and in
substantially the form of Exhibits E-1 and E-2, respectively, attached hereto.
(vi) The Company shall have executed and delivered to such
Buyer (x) the Stock Certificates for the Preferred Shares and (y) the Warrants
being purchased by such Buyer at the Closing.
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(vii) The Board of Directors of the Company shall have adopted
resolutions consistent with Section 3(b)(ii) above and in a form reasonably
acceptable to such Buyer (the "RESOLUTIONS").
(viii)As of the Closing Date, the Company shall have reserved
out of its authorized and unissued Common Stock, at least 2,280,000 shares of
Common Stock solely for the purpose of effecting the conversion of the Preferred
Shares, and 200,000 shares of Common Stock solely for the purpose of the
exercise of the Warrants.
(ix) The Irrevocable Transfer Agent Instructions, in the form
of Exhibit F attached hereto, shall have been delivered to and acknowledged in
writing by the Company's transfer agent.
(x) The Company shall have delivered to such Buyer a
certificate evidencing the incorporation and good standing of the Company and
each subsidiary in such corporation's state of incorporation issued by the
Secretary of State of such state of incorporation as of a date within 10 days of
the Closing.
(xi) The Company shall have delivered to such Buyer a
secretary's certificate certifying as to (a) the Resolutions, (b) its
Certificate of Incorporation and (c) its Bylaws, each as in effect at the
Closing.
(xii) The Company shall have delivered to such Buyer such
other documents relating to the transactions contemplated by the Transaction
Documents as such Buyer or its counsel may reasonably request.
b. Intentionally Omitted.
c. Intentionally Omitted.
8. INDEMNIFICATION.
In consideration of each Buyer's execution and delivery of the
Transaction Documents and acquiring the Securities thereunder and in addition to
all of the Company's other obligations under the Transaction Documents, the
Company shall defend, protect, indemnify and hold harmless each Buyer and each
other holder of the Securities and all of their officers, directors, employees
and agents (including, without limitation, those retained in connection with the
transactions contemplated by this Agreement) (collectively, the "INDEMNITEES")
from and against any and all actions, causes of action, suits, claims, losses,
costs, penalties, fees, liabilities and damages, and expenses in connection
therewith (irrespective of whether any such Indemnitee is a party to the action
for which indemnification hereunder is sought), and including reasonable
attorneys' fees and disbursements (the "INDEMNIFIED LIABILITIES"), incurred by
any Indemnitee as a result of, or arising out of, or relating to (a) any
misrepresentation or breach of any representation or warranty made by the
Company in the Transaction Documents, the Certificate of Designation or any
other certificate,
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instrument or document contemplated hereby or thereby, (b) any breach of any
covenant, agreement or obligation of the Company contained in the Transaction
Documents, the Certificate of Designations or any other certificate, instrument
or document contemplated hereby or thereby, or (c) except as may directly result
from a material breach of any representations, warrants, covenant, agreement or
obligation of a Buyer contained in a Transaction Document, the Certificate of
Designation or any other certificate, instrument or document contemplated hereby
or thereby, any cause of action, suit or claim brought or made against such
Indemnitee and arising out of or resulting from the execution, delivery,
performance or enforcement of this Agreement or any other instrument, document
or agreement executed pursuant hereto by any of the Indemnitees, any transaction
financed or to be financed in whole or in part, directly or indirectly, with the
proceeds of the issuance of the Securities or the status of such Buyer or holder
of the Securities as an investor in the Company. To the extent that the
foregoing undertaking by the Company may be unenforceable for any reason, the
Company shall make the maximum contribution to the payment and satisfaction of
each of the Indemnified Liabilities which is permissible under applicable law.
9. GOVERNING LAW; MISCELLANEOUS.
a. GOVERNING LAW. This Agreement shall be governed by and
interpreted in accordance with the laws of the State of New York without regard
to the principles of conflict of laws (other than Section 5-1401 of the New York
General Obligations Law or Article 8 of the New York Uniform Commercial Code).
Each party hereby irrevocably submits to the non-exclusive jurisdiction of the
state and federal courts sitting the City of New York, borough of Manhattan, for
the adjudication of any dispute hereunder or in connection herewith or with any
transaction contemplated hereby or discussed herein, and hereby irrevocably
waives, and agrees not to assert in any suit, action or proceeding, any claim
that it is not personally subject to the jurisdiction of any such court, that
such suit, action or proceeding is brought in an inconvenient forum or that the
venue of such suit, action or proceeding is improper. Each party hereby
irrevocably waives personal service of process and consents to process being
served in any such suit, action or proceeding by mailing a copy thereof to such
party at the address for such notices to it under this Agreement and agrees that
such service shall constitute good and sufficient service of process and notice
thereof. Nothing contained herein shall be deemed to limit in any way any right
to serve process in any manner permitted by law.
b. COUNTERPARTS. This Agreement may be executed in two or
more identical counterparts, all of which shall be considered one and the same
agreement and shall become effective when counterparts have been signed by each
party and delivered to the other party. In the event any signature page is
delivered by facsimile transmission, the party using such means of delivery
shall cause four (4) additional original executed signature pages to be
physically delivered to the other party within five (5) days of the execution
and delivery hereof.
c. HEADINGS. The headings of this Agreement are for
convenience of reference and shall not form part of, or affect the
interpretation of, this Agreement.
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d. SEVERABILITY. If any provision of this Agreement shall
be invalid or unenforceable in any jurisdiction, such invalidity or
unenforceability shall not affect the validity or enforceability of the
remainder of this Agreement in that jurisdiction or the validity or
enforceability of any provision of this Agreement in any other jurisdiction.
e. ENTIRE AGREEMENT; AMENDMENTS. This Agreement supersedes
all other prior oral or written agreements between the Buyers, the Company,
their affiliates and persons acting on their behalf with respect to the matters
discussed herein, and this Agreement and the instruments referenced herein
contain the entire understanding of the parties with respect to the matters
covered herein and therein and, except as specifically set forth herein or
therein, neither the Company nor any Buyer makes any representation, warranty,
covenant or undertaking with respect to such matters. No provision of this
Agreement may be amended other than by an instrument in writing signed by the
Company and the holders of at least two-thirds (2/3) of the Preferred Shares
then outstanding, and no provision hereof may be waived other than by an
instrument in writing signed by the party against whom enforcement is sought. No
such amendment shall be effective to the extent that it applies to less than all
of the holders of the Preferred Shares then outstanding.
f. NOTICES. Any notices consents, waivers or other
communications required or permitted to be given under the terms of this
Agreement must be in writing and will be deemed to have been delivered (i) upon
receipt, when delivered personally; (ii) upon receipt, when sent by facsimile
(provided confirmation of transmission is mechanically generated and kept on
file by the sending party); (iii) three (3) days after being sent by U.S.
certified mail, return receipt requested, or (iv) one (1) day after deposit with
a nationally recognized overnight delivery service, in each case properly
addressed to the party to receive the same. The addresses and facsimile numbers
for such communications shall be:
If to the Company:
Paul Sebetic, CFO
TII Industries, Inc.
1385 Akron Street
Copiague, NY 11726
(516) 789-2228
With a copy to:
Richard A. Rubin, Esq.
Parker Chapin Flattau & Klimpl, LLP
1211 Avenue of Americas
New York, NY 10036
(212) 704-6288
If to the Transfer Agent:
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Mr. Dennis M. Sneyers
Harris Trust and Savings Bank
311 West Monroe Street
Chicago, IL 60606
(312) 765-8052
If to a Buyer, to its address and facsimile number on the Schedule
of Buyers, with copies to such Buyer's representatives as set forth on the
Schedule of Buyers.
Each party shall provide five (5) days' prior written notice to the
other party of any change in address or facsimile number.
g. SUCCESSORS AND ASSIGNS. This Agreement shall be binding
upon and inure to the benefit of the parties and their respective successors and
assigns, including any purchasers of the Preferred Shares. The Company shall not
assign this Agreement or any rights or obligations hereunder without the prior
written consent of the holders of two-thirds (2/3) of the Preferred Shares then
outstanding, except pursuant to a Major Transaction (as defined in Section 3(c)
of the Certificate of Designations) in compliance with Section 3 of the
Certificate of Designations. A Buyer may assign some or all of its rights
hereunder to affiliates or associates of such Buyer, without the consent of the
Company, and to others, with the consent of the Company; provided, however, that
(i) any such assignment shall not release such Buyer from its obligations
hereunder unless such obligations are assumed by such assignee and the Company
has consented to such assignment and assumption and (ii) the assignee executes a
copy of this Agreement and makes each of the representations, warranties and
covenants of its assignor contained herein, and agrees to be bound by all of the
provisions of the Transaction Documents and the Certificate of Designation.
h. NO THIRD PARTY BENEFICIARIES. This Agreement is intended
for the benefit of the parties hereto and their respective permitted successors
and assigns, and is not for the benefit of, nor may any provision hereof be
enforced by, any other person.
i. SURVIVAL. Unless this Agreement is terminated under
Section 9(l), the representations and warranties of the Company and the Buyers
contained in Sections 2 and 3, the agreements and covenants set forth in
Sections 4, 5 and 9, and the indemnification provisions set forth in Section 8,
shall survive each of the Closing. Each Buyer shall be responsible only for its
own representations, warranties, agreements and covenants hereunder.
j. PUBLICITY. The Company and one representative selected
by the Buyers shall have the right to approve before issuance any press releases
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 any Buyer, to issue the press release in the form annexed hereto as
Exhibit G and make any press release or other public disclosure with respect to
such transactions as is required by applicable law and regulations (although
each Buyer shall be consulted by the
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<PAGE>
Company in connection with any such press release or other public disclosure
prior to its release and shall be provided with a copy thereof).
k. FURTHER ASSURANCES. Each party shall do and perform, or
cause to be done and performed, all such further acts and things, and shall
execute and deliver all such other agreements, certificates, instruments and
documents, as the other party may reasonably request in order to carry out the
intent and accomplish the purposes of this Agreement and the consummation of the
transactions contemplated hereby.
l. TERMINATION. In the event that the Closing shall not
have occurred with respect to any Buyer on or before four (4) business days from
the date hereof due to the Company's or such Buyer's failure to satisfy the
conditions set forth in Sections 6 and 7 above (and the nonbreaching party's
failure to waive such unsatisfied condition(s)), the nonbreaching party shall
have the option to terminate this Agreement with respect to such breaching party
at the close of business on such date without liability of any party to any
other party; provided, however, that if this Agreement is terminated pursuant to
this Section 9(l), the Company shall remain obligated to reimburse the
non-breaching Buyers for the expenses described in Section 4(i) above.
m. PLACEMENT AGENT. The Company acknowledges that it has
engaged Jesup & Lamont Securities Corp. as placement agent in connection with
the sale of the Preferred Shares.
n. NO STRICT CONSTRUCTION. The language used in this
Agreement will be deemed to be the language chosen by the parties to express
their mutual intent, and no rules of strict construction will be applied against
any party.
o. EXPENSES. Each party will bear its own expenses incurred
in the preparation and closing of the Transaction Documents and in reviewing the
Registration Statement provided for in the Registration Rights Agreement.
p. COUNTERPARTS. This Agreement may be executed in two or
more identical counterparts, each of which shall be deemed an original but all
of which shall constitute one and the same agreement. This Agreement, once
executed by a party, may be delivered to the other party hereto by facsimile
transmission of a copy of this Agreement bearing the signature of the party so
delivering this Agreement.
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<PAGE>
IN WITNESS WHEREOF, the Buyers and the Company have caused this
Securities Purchase Agreement to be duly executed as of the date first written
above.
COMPANY: BUYERS:
TII INDUSTRIES, INC. LEONARDO, L.P.
By: Angelo, Gordon & Co., L.P.
Its: General Partner
By: /S/ TIMOTHY J. ROACH By: /S/ MICHAEL L. GORDON
------------------------ ------------------------
Name: TIMOTHY J. ROACH Name: Michael L. Gordon
Its: PRESIDENT Its: Chief Operating Officer
GAM ARBITRAGE INVESTMENTS, INC.
By: Angelo, Gordon & Co., L.P.
Its: Investment Advisor
By: /S/ MICHAEL L. GORDON
------------------------
Name: Michael L. Gordon
Its: Chief Operating Officer
AG SUPER FUND INTERNATIONAL
PARTNERS, L.P.
By: Angelo, Gordon & Co., L.P.
Its: General Partner
By: /S/ MICHAEL L. GORDON
------------------------
Name: Michael L. Gordon
Its: Chief Operating Officer
RAPHAEL, L.P.
By: /S/ MICHAEL L. GORDON
------------------------
Name: Michael L. Gordon
Its: Chief Operating Officer
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<PAGE>
RAMIUS FUND, LTD.
By: AG Ramius Partners, L.L.C.
Its: Investment Advisor
By: /S/ MICHAEL L. GORDON
------------------------
Name: Michael L. Gordon
Its: Managing Officer
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REGISTRATION RIGHTS AGREEMENT
REGISTRATION RIGHTS AGREEMENT (this "AGREEMENT"), dated as of
January 26, 1998, by and among TII INDUSTRIES, INC., a Delaware corporation,
with headquarters located at 1385 Akron Street, Copiague, NY, 11726 (the
"COMPANY"), and the undersigned buyers (each, a "BUYER" and collectively, the
"BUYERS").
WHEREAS:
A. In connection with the Securities Purchase Agreement by and
among the parties of even date herewith (the "SECURITIES PURCHASE AGREEMENT"),
the Company has agreed, upon the terms and subject to the conditions of the
Securities Purchase Agreement, to issue and sell to the Buyers (a) shares of the
Company's Series C Convertible Preferred Stock, par value $1.00 per share (the
"PREFERRED SHARES"), which will be convertible into shares of the Company's
common stock, par value $0.01 per share (the "COMMON STOCK") (as converted, the
"CONVERSION SHARES"), in accordance with the terms of the Company's Certificate
of Designation of the Series C Convertible Preferred Stock (the "CERTIFICATE OF
DESIGNATION"); and (b) Warrants (the "WARRANTS") to purchase shares of Common
Stock (as exercised, the "WARRANT SHARES");
B. To induce the Buyers to execute and deliver the Securities
Purchase Agreement, the Company has agreed to provide certain registration
rights under the Securities Act of 1933, as amended, and the rules and
regulations thereunder, or any similar successor statute (collectively, the
"1933 ACT"), and applicable state securities laws:
NOW, THEREFORE, in consideration of the premises and the mutual
covenants contained herein and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the Company and the
Buyers hereby agree as follows:
1. DEFINITIONS.
As used in this Agreement, the following terms shall have the
following meanings:
a. "INVESTOR" means a Buyer and any transferee or assignee
thereof to whom a Buyer assigns its rights under this
Agreement and who agrees to become bound by the
provisions of this Agreement in accordance with Section
9.
b. "PERSON" means a corporation, a limited liability
company, an association, a partnership, an organization,
a business, an individual, a governmental or political
subdivision thereof or a governmental agency.
<PAGE>
c. "REGISTER," "REGISTERED," and "REGISTRATION" refer to a
registration effected by preparing and filing one or
more Registration Statements in compliance with the 1933
Act and pursuant to Rule 415 under the 1933 Act or any
successor rule providing for offering securities on a
continuous basis ("RULE 415"), and the declaration or
ordering of effectiveness of such Registration
Statement(s) by the United States Securities and
Exchange Commission (the "SEC").
d. "REGISTRABLE SECURITIES" means the Conversion Shares
issued or issuable upon conversion of the Preferred
Shares and the Warrant Shares issued or issuable upon
conversion of the Warrants and any shares of capital
stock issued or issuable with respect to the Conversion
Shares, the Preferred Shares, the Warrant Shares or the
Warrants as a result of any stock split, stock dividend,
recapitalization, exchange or similar event or
otherwise. Conversion Shares or Warrant Shares shall
cease to be Registrable Securities on the earlier to
occur of (i) when sold pursuant to a Registration
Statement or (ii) when they may be sold without
registration pursuant to paragraph (k) of Rule 144
promulgated under the 1933 Act (as defined in the
Certificate of Designation) thereof, whichever is
earlier.
e. "REGISTRATION STATEMENT" means a registration statement
of the Company filed under the 1933 Act.
Capitalized terms used herein and not otherwise defined herein
shall have the respective meanings set forth in the Securities Purchase
Agreement.
2. REGISTRATION.
a. MANDATORY REGISTRATION. The Company shall prepare, and,
on or prior to 60 days after the date of first issuance of Preferred Shares,
file with the SEC a Registration Statement or Registration Statements (as is
necessary) on Form S-3 (or, if such form is unavailable for such a registration,
on such other form as is available for such a registration, subject to the
consent of the Investors holding a majority of the Registrable Securities and
the provisions of Section 2(c), which consent will not be unreasonably
withheld), covering the resale of all of the Registrable Securities, which
Registration Statement(s) shall state that, in accordance with Rule 416
promulgated under the 1933 Act, such Registration Statement(s) also covers such
undeterminate number of additional shares of Common Stock as may become issuable
upon conversion of the Preferred Shares to prevent dilution resulting from stock
splits, stock dividends or similar transactions. Such Registration Statement
shall initially register for resale at least 2,280,000 shares of Common Stock,
subject to adjustment as provided in Section 3(b). Such registered shares of
Common Stock shall be allocated among the Investors pro rata based on the total
number of Registrable Securities issued or issuable upon conversion of the
Preferred Shares as of each date that a Registration Statement, as amended,
relating to the resale of the Registrable Securities is declared effective by
the SEC. The Company
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<PAGE>
shall use its best efforts to have the Registration Statement(s) declared
effective by the SEC as soon as practicable, but in no event later than 120 days
after the issuance of the relevant Preferred Shares.
b. COUNSEL AND INVESTMENT BANKERS. Subject to Section 5
hereof, in connection with any offering pursuant to Section 2, the Investors
shall have the right to select one legal counsel and an investment banker or
bankers and manager or managers to administer their interest in the offering,
which investment banker or bankers or manager or managers shall be reasonably
satisfactory to the Company. The Company shall reasonably cooperate with any
such counsel and investment bankers. The expenses, including underwriting
discounts and commissions, fees and disbursements of such counsel in excess of
$2,000, and reasonable fees and disbursements of investment bankers shall be
paid by the Buyers.
c. PIGGY-BACK REGISTRATIONS. If a Registration Statement in
compliance with this Agreement is not effective, and prior to the expiration of
the Registration Period (as hereinafter defined), the Company proposes to file
with the SEC a Registration Statement relating to an offering for its own
account or the account of others under the 1933 Act of any of its securities
(other than on Form S-4 or Form S-8 or their then equivalents relating to
securities to be issued solely in connection with any acquisition of any entity
or business or equity securities issuable in connection with stock option or
other employee benefit plans), the Company shall promptly send to each Investor
who is entitled to registration rights under this Section 2(c) written notice of
the Company's intention to file a Registration Statement and of such Investor's
rights under this Section 2(c) and, if within twenty (20) days after receipt of
such notice, such Investor shall so request in writing, the Company shall
include in such Registration Statement all or any part of the Registrable
Securities such Investor requests to be registered, subject to the priorities
set forth in Section 2(d) below. No right to registration of Registrable
Securities under this Section 2(c) shall be construed to limit any registration
required under Section 2(a). The obligations of the Company under this Section
2(c) may be waived by Investors holding a majority of the Registrable
Securities. If an offering in connection with which an Investor is entitled to
registration under this Section 2(c) is an underwritten offering, then each
Investor whose Registrable Securities are included in such Registration
Statement shall, unless otherwise agreed by the Company, offer and sell such
Registrable Securities in such underwritten offering using the same underwriter
or underwriters and, subject to the provisions of this Agreement, on the same
terms and conditions as other shares of Common Stock included in such
underwritten offering.
d. PRIORITY IN PIGGY-BACK REGISTRATION RIGHTS IN CONNECTION
WITH REGISTRATIONS FOR COMPANY ACCOUNT. If the registration referred to in
Section 2(c) is to be an underwritten public offering and the managing
underwriter(s) advise the Company in writing, that in their reasonable good
faith opinion, marketing or other factors dictate that a limitation on the
number of shares of Common Stock which may be included in the Registration
Statement (which may include a total "cut-back" of all Registrable Securities)
is necessary to facilitate and not materially adversely affect the proposed
offering, then the Company shall include in such registration: (1) first, all
securities the Company proposes to sell for its own account, (2) second, up to
the full number of securities proposed to be registered for the account of the
holders of securities entitled to inclusion of their securities in the
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<PAGE>
Registration Statement by reason of demand registration rights, and (3) third,
the securities requested to be registered by the Investors (which may not exceed
the maximum number of Conversion Shares they are then entitled to sell under the
Certificate of Designation) and other holders of securities entitled to
participate in the registration, as of the date hereof, drawn from them pro rata
based on the number each has requested to be included in such registration.
e. ELIGIBILITY FOR FORM S-3. The Company represents and
warrants that, to the best of its knowledge, on and after the date hereof it
meets the requirements for the use of Form S-3 for registration of the sale by
the Investors of the Registrable Securities and the Company has filed all
reports required to be filed by the Company with the SEC in a timely manner so
as to obtain such eligibility for the use of Form S-3. The Company shall use its
best efforts to meet the requirements for use of Form S-3 for registration of
the sale by the Investors of the Registrable Securities and the Company shall
file all reports required to be filed by the Company with the SEC in a timely
manner so as to maintain eligibility for the use of Form S-3. In the event that
Form S-3 is not available for sale by the Investors of the Registrable
Securities, then the Company (i) with the consent of the Investors holding a
majority of the Registrable Securities pursuant to Section 2(a), which consent
shall not be unreasonably withheld, shall register the sale of the Registrable
Securities on another appropriate form and (ii) the Company shall undertake to
register the Registrable Securities on Form S-3 (or convert such other form to
Form S-3) as soon as such form is available, provided that the Company shall
maintain the effectiveness of the Registration Statement then in effect until
such time as a Registration Statement on Form S-3 covering the Registrable
Securities has been declared effective by the SEC.
3. RELATED OBLIGATIONS.
Whenever an Investor has requested that any Registrable
Securities be registered pursuant to Section 2(c) or at such time as the Company
is obligated to file a Registration Statement with the SEC pursuant to Section
2(a), the Company will use its best efforts to effect the registration of the
Registrable Securities in accordance with the intended method of disposition
thereof and, pursuant thereto, the Company shall have the following obligations:
a. The Company shall promptly prepare and file with the SEC
a Registration Statement with respect to the Registrable Securities (on or prior
to the thirtieth (30th) day after the date of issuance of any Preferred Shares
for the registration of Registrable Securities pursuant to Section 2(a)) and use
its best efforts to cause such Registration Statement relating to the
Registrable Securities to become effective as soon as possible after such filing
(but in no event later than 120 days after the issuance of any Preferred
Shares), and keep such Registration Statement effective pursuant to Rule 415 at
all times until the earlier of (i) the date as of which the Investors may sell
all of the Registrable Securities without restriction pursuant to Rule 144(k)
promulgated under the 1933 Act (or successor thereto) or (ii) the date on which
(A) the Investors shall have sold all the Registrable Securities and (B) none of
the Preferred Shares is outstanding (the "REGISTRATION PERIOD"), which
Registration Statement (including any amendments or supplements thereto and
prospectuses contained therein) shall not contain any untrue statement of a
material fact or omit to state a material
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<PAGE>
fact required to be stated therein, or necessary to make the statements therein,
in light of the circumstances in which they were made, not misleading; provided,
however, that the Company shall not be responsible for untrue statements or
omissions which are contained therein based upon and in conformity with
information furnished in writing to the Company by an Investor and used in the
Registration Statement.
b. Subject to Section 3(f), the Company shall prepare and
file with the SEC such amendments (including post-effective amendments) and
supplements to a Registration Statement and the prospectus used in connection
with such Registration Statement, which prospectus is to be filed pursuant to
Rule 424 promulgated under the 1933 Act, as may be necessary to keep such
Registration Statement effective at all times during the Registration Period,
and, during such period, comply with the provisions of the 1933 Act with respect
to the disposition of all Registrable Securities of the Company covered by such
Registration Statement. In the event the number of shares available under a
Registration Statement filed pursuant to this Agreement is insufficient to cover
all of the Registrable Securities, the Company shall file a new Registration
Statement (on the short form available therefor, if applicable), so as to cover
all of the Registrable Securities, in each case, as soon as practicable, but in
any event within fifteen (15) days after the necessity therefor arises (based on
the market price of the Common Stock and other relevant factors on which the
Company reasonably elects to rely). The Company shall use its best efforts to
cause such amendment and/or new Registration Statement to become effective as
soon as practicable following the filing thereof. For purposes of the foregoing
provision, the number of shares available under a Registration Statement shall
be deemed "insufficient to cover all of the Registrable Securities" if at any
time the number of Registrable Securities issued or issuable upon conversion of
the Preferred Shares is equal to the lesser of the then Exchange Cap (as defined
in the Certificate of Designation) or the quotient determined by dividing (i)
the number of shares of Common Stock available for resale under such
Registration Statement by (ii) 1.5. For purposes of the calculation set forth in
the foregoing sentence, any restrictions on the convertibility of the Preferred
Shares shall be disregarded and such calculation shall assume that the Preferred
Shares are then convertible into shares of Common Stock at the then prevailing
Conversion Rate (as defined in the Certificate of Designations); provided that
the Company need not file a new Registration Statement covering less than 25,000
shares of Common Stock; provided further that if there are less than 25,000
shares of Common Stock available as Registrable Securities, the Company shall
file a new Registration Statement covering such number of shares.
c. The Company shall furnish to each Investor whose
Registrable Securities are included in any Registration Statement and its legal
counsel without charge (i) promptly after the same is prepared and filed with
the SEC at least one copy of such Registration Statement and any amendment(s)
thereto, including financial statements and schedules, all documents
incorporated therein by reference and all exhibits, the prospectus included in
such Registration Statement (including each preliminary prospectus) and, with
regards to such Registration Statement(s), any correspondence by or on behalf of
the Company to the SEC or the staff of the SEC and any correspondence from the
SEC or the staff of the SEC to the Company or its representatives, (ii) upon the
effectiveness of any Registration Statement, ten (10) copies of the prospectus
included in such Registration Statement (or filed under Rule 424 under the 1933
Act) and all amendments and
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<PAGE>
supplements thereto (or such other number of copies as such Investor may
reasonably request) and (iii) such other documents, including any preliminary
prospectus, as such Investor may reasonably request in order to facilitate the
disposition of the Registrable Securities owned by such Investor.
d. The Company shall use reasonable efforts to (i) register
and qualify the Registrable Securities covered by a Registration Statement under
such other securities or "blue sky" laws of such jurisdictions in the United
States as any Investor reasonably requests, (ii) 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, (iii) take
such other actions as may be necessary to maintain such registrations and
qualifications in effect at all times during the Registration Period, and (iv)
take all other actions reasonably necessary or advisable to qualify the
Registrable Securities for sale in such jurisdictions; provided, however, that
the Company shall not be required in connection therewith or as a condition
thereto to (x) qualify to do business in any jurisdiction where it would not
otherwise be required to qualify but for this Section 3(d), (y) subject itself
to general taxation in any such jurisdiction, or (z) file a general consent to
service of process in any such jurisdiction. The Company shall promptly notify
each Investor who holds Registrable Securities of the receipt by the Company of
any notification with respect to the suspension of the registration or
qualification of any of the Registrable Securities for sale under the securities
or "blue sky" laws of any jurisdiction in the United States or its receipt of
actual notice of the initiation or threatening of any proceeding for such
purpose.
e. In the event Investors who hold a majority of the
Registrable Securities being offered in the offering select underwriters for the
offering, the Company shall enter into and perform its obligations under an
underwriting agreement, in usual and customary form, including, without
limitation, customary indemnification and contribution obligations, with the
underwriters of such offering; provided, that the Company shall not be obligated
to pay any fees, disbursements or expenses such underwriters incur in connection
with such offering.
f. As promptly as practicable after becoming aware of such
event, the Company shall notify each Investor in writing of the happening of any
event as a result of which the prospectus included in a 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, in light of the circumstances under which they were made,
not misleading, and promptly prepare a supplement or amendment to such
Registration Statement to correct such untrue statement or omission, and deliver
ten (10) copies of such supplement or amendment to each Investor (or such other
number of copies as such Investor may reasonably request). The Company shall
also promptly notify each Investor in writing (i) when a prospectus or any
prospectus supplement or post-effective amendment has been filed, and when a
Registration Statement or any post-effective amendment has become effective
(notification of such effectiveness shall be delivered to each Investor by
facsimile on the same day of such effectiveness and by overnight mail), (ii) of
any request by the SEC for amendments or supplements to a Registration Statement
or related prospectus or related information, and (iii) of the Company's
reasonable determination that a post-effective amendment to a Registration
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<PAGE>
Statement would be appropriate. Notwithstanding anything to the contrary in this
Section 3(f), at any time after the Registration Statement has been declared
effective, the Company may delay the disclosure of material non-public
information concerning the Company the disclosure of which at the time is not,
in the good faith opinion of the Board of Directors of the Company and its
counsel, in the best interest of the Company and, in the opinion of counsel to
the Company, otherwise required (a "GRACE PERIOD"); provided, that the Company
shall promptly (i) notify the Investors in writing of the existence of material
non-public information giving rise to a Grace Period and the date on which the
Grace Period will begin, and (ii) notify the Investors in writing of the date on
which the Grace Period ends; and, provided further, that (A) during any
consecutive 120 day period, the Grace Period shall not exceed fifteen (15)
calendar days in the aggregate, and (B) during any consecutive 365 day period,
the Grace Period shall not exceed twenty-three (23) calendar days in the
aggregate, and (C) there has been no Underwriting Lock-Up Period (as defined in
the Securities Purchase Agreement) in the 20 day period prior to the Company's
notice to the Investors of a Grace Period. For purposes of determining the
length of a Grace Period above, the Grace Period shall begin on and include the
date the holders receive the notice referred to in clause (i) and shall end on
and include the date the holders receive the notice referred to in clause (ii).
The provisions of Sections 2(c) and 3(d)(ii) of the Certificate of Designations
shall not be applicable during the period of any Grace Period. Upon expiration
of the Grace Period, the Company shall again be bound by the first sentence of
this Section 3(f) with respect to the information giving rise thereto. In the
event there is a Grace Period, the Mandatory Conversion Date (as defined in the
Certificate of Designation) shall be delayed two days for each day in the Grace
Period as provided in Section 2(g) of the Certificate of Designation.
g. The Company shall use its best efforts to prevent the
issuance of any stop order or other suspension of effectiveness of a
Registration Statement, or the suspension of the qualification of any of the
Registrable Securities for sale in any jurisdiction and, if such an order or
suspension is issued, to obtain the withdrawal of such order or suspension at
the earliest possible moment and to notify each Investor who holds Registrable
Securities being sold (and, in the event of an underwritten offering, the
managing underwriters) of the issuance of such order and the resolution thereof
or its receipt of actual notice of the initiation or threat of any proceeding
for such purpose.
h. The Company shall permit each Investor and a single firm
of counsel designated as selling stockholders' counsel by the Investors who hold
a majority of the Registrable Securities being sold, to review and comment upon
a Registration Statement and all amendments and supplements thereto at least
seven business days prior to their filing with the SEC, and not file any
document in a form to which such counsel reasonably objects. The Company shall
not submit a request for acceleration of the effectiveness of a Registration
Statement or any amendment or supplement thereto without the prior approval of
such counsel, which consent shall not be unreasonably withheld.
i. At the request of the Investors who hold a majority of
the Registrable Securities being sold, the Company shall use its best efforts to
furnish, on the date that Registrable
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Securities are delivered to an underwriter, if any, for sale in connection with
the Registration Statement (i) if required by an underwriter, a letter, dated
such date, from the Company's independent certified public accountants in form
and substance as is customarily given by independent certified public
accountants to underwriters in an underwritten public offering, addressed to the
underwriters, and (ii) an opinion, dated as of such date, of counsel
representing the Company for purposes of such Registration Statement, in form,
scope and substance as is customarily given in an underwritten public offering,
addressed to the underwriters and the Investors.
j. The Company shall make reasonably available for
inspection by (i) any Investor, (ii) any underwriter participating in any
disposition pursuant to a Registration Statement, (iii) one firm of attorneys
and one firm of accountants or other agents retained by the Investors, and (iv)
one firm of attorneys retained by all such underwriters (collectively, the
"INSPECTORS") all pertinent financial and other records, and pertinent corporate
documents and properties of the Company (collectively, the "RECORDS"), as shall
be reasonably deemed necessary by each Inspector to enable each Inspector to
exercise its due diligence responsibility, and cause the Company's officers,
directors and employees to supply all information which any Inspector may
reasonably request for purposes of such due diligence; provided, however, that
each Inspector shall hold in strict confidence and shall not make any disclosure
(except to an Investor) or use of any Record or other information which the
Company determines in good faith to be confidential, and of which determination
the Inspectors are so notified, unless (a) the disclosure of such Records is
necessary to avoid or correct a misstatement or omission in any Registration
Statement or is otherwise required under the 1933 Act, (b) the release of such
Records is ordered pursuant to a final, non-appealable subpoena or order from a
court or government body of competent jurisdiction, or (c) the information in
such Records has been made generally available to the public other than by
disclosure in violation of this or any other agreement of which the Inspector
has knowledge. The Company shall not be required to disclose any confidential
information in such Records to an Inspector unless and until such Inspector
shall have entered into a confidentiality agreement with the Company with
respect thereto, substantially in the form of this Section 3(j). Each Investor
agrees that it shall, upon learning that disclosure of such Records is sought in
or by a court or governmental body of competent jurisdiction or through other
means, give prompt notice to the Company and allow the Company, at its expense,
to undertake appropriate action to prevent disclosure of, or to obtain a
protective order for, the Records deemed confidential.
k. The Company shall hold in confidence and not make any
disclosure of information concerning an Investor provided to the Company unless
(i) disclosure of such information is necessary to comply with federal or state
securities laws, (ii) the disclosure of such information is necessary to avoid
or correct a misstatement or omission in any Registration Statement, (iii) the
release of such information is ordered pursuant to a subpoena or other final,
non-appealable order from a court or governmental body of competent
jurisdiction, or (iv) such information has been made generally available to the
public other than by disclosure in violation of this Agreement or any other
agreement. The Company agrees that it shall, upon learning that disclosure of
such information concerning an Investor is sought in or by a court or
governmental body of competent jurisdiction or through other means, give prompt
written notice to such Investor and allow such Investor, at the
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Investor's expense, to undertake appropriate action to prevent disclosure of, or
to obtain a protective order for, such information.
l. The Company shall use its best efforts either to (i)
cause all the Registrable Securities covered by a Registration Statement to be
listed on each 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 Securities is then permitted under the rules of such exchange, or
(ii) secure designation and quotation of all the Registrable Securities covered
by the Registration Statement on the Nasdaq National Market or, if, despite the
Company's best efforts to satisfy the preceding clause (i) or (ii), the Company
is unsuccessful in satisfying the preceding clause (i) or (ii), to secure the
inclusion for quotation on The Nasdaq SmallCap Market for such Registrable
Securities, in either case to the maximum extent the inclusion of such shares
are then permitted under the rules of Nasdaq, and, without limiting the
generality of the foregoing, to arrange for at least two market makers to
register with the National Association of Securities Dealers, Inc. ("NASD") as
such with respect to such Registrable Securities. The Company shall pay all fees
and expenses in connection with satisfying its obligation under this Section
3(l).
m. The Company shall cooperate with the Investors who hold
Registrable Securities being offered and, to the extent applicable, any managing
underwriter or underwriters, to facilitate the timely preparation and delivery
of certificates (not bearing any restrictive legend) representing the
Registrable Securities to be offered pursuant to a Registration Statement and
enable such certificates to be in such denominations or amounts, as the case may
be, as the managing underwriter or underwriters, if any, or, if there is no
managing underwriter or underwriters, the Investors may reasonably request and
registered in such names as the managing underwriter or underwriters, if any, or
the Investors may request.
n. Intentionally omitted.
o. The Company shall provide a transfer agent and registrar
for all such Registrable Securities not later than the effective date of such
Registration Statement.
p. If requested by the managing underwriters or an
Investor, the Company shall (i) immediately incorporate in a prospectus
supplement or post-effective amendment such information as the managing
underwriters and the Investors agree should be included therein relating to the
sale and distribution of Registrable Securities, including, without limitation,
information with respect to the number of Registrable Securities being sold to
such underwriters, the purchase price being paid therefor by such underwriters
and any other terms of the underwritten (or best efforts underwritten) offering
of the Registrable Securities to be sold in such offering; (ii) make all
required filings of such prospectus supplement or post-effective amendment as
soon as notified of the matters to be incorporated in such prospectus supplement
or post-effective amendment; and (iii) supplement or make amendments to any
Registration Statement if requested by an Investor or any underwriter of such
Registrable Securities.
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q. Subject to Section 3(d), the Company shall use its best
efforts to cause the Registrable Securities covered by the applicable
Registration Statement to be registered with or approved by such other
governmental agencies or authorities as may be necessary to consummate the
disposition of such Registrable Securities; provided that the Company shall have
no obligation to seek such registration or approval with governmental agencies
or authorities outside of the United States.
r. The Company shall make generally available to its
security holders as soon as practical, but not later than 90 days after the
close of the period covered thereby, an earnings statement (in form complying
with the provisions of Rule 158 under the 1933 Act) covering a twelve-month
period beginning not later than the first day of the Company's fiscal quarter
next following the effective date of the Registration Statement.
s. The Company shall otherwise use its best efforts to
comply with all applicable rules and regulations of the SEC in connection with
any registration hereunder.
t. Within two (2) business days after the Registration
Statement which includes the Registrable Securities is ordered effective by the
SEC, the Company shall deliver, and shall cause legal counsel for the Company to
deliver, to the transfer agent for such Registrable Securities (with copies to
the Investors whose Registrable Securities are included in such Registration
Statement) confirmation that the Registration Statement has been declared
effective by the SEC.
4. OBLIGATIONS OF THE INVESTORS.
a. At least seven (7) days prior to the first anticipated
filing date of a Registration Statement, the Company shall notify each Investor
in writing of the information the Company requires from each such Investor in
order to have any of such Investor's Registrable Securities included in such
Registration Statement. It shall be a condition precedent to the obligations of
the Company to complete the registration pursuant to this Agreement with respect
to the Registrable Securities of a particular Investor that such Investor shall
furnish to the Company such information regarding itself, the Registrable
Securities held by it and the intended method of disposition of the Registrable
Securities held by it as shall be reasonably required to timely effect the
registration of such Registrable Securities and shall execute such documents in
connection with such registration as the Company may reasonably request.
b. Each Investor, by such Investor's acceptance of the
Registrable Securities, agrees to cooperate with the Company as reasonably
requested by the Company in connection with the preparation and filing of any
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 Securities from such Registration Statement.
c. In the event any Investor elects to participate (as a
condition precedent to such Investor's participation) in an underwritten public
offering pursuant to Section 2, each such Investor agrees to enter into and
perform such Investor's obligations under an underwriting agreement, in usual
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and customary form, including, without limitation, customary indemnification and
contribution obligations (only with respect to violations which occur in
reliance upon and in conformity with information furnished in writing to the
Company by such Investor expressly for use in the Registration Statement for
such underwritten public offering), with the managing underwriter of such
offering and take such other actions as are reasonably required in order to
expedite or facilitate the disposition of the Registrable Securities.
d. Each Investor agrees that, upon receipt of any notice
from the Company of the happening of any event of the kind described in Section
3(g) or the first sentence of 3(f), such Investor will immediately discontinue
disposition of Registrable Securities pursuant to any Registration Statement(s)
covering such Registrable Securities until such Investor's receipt of the copies
of the supplemented or amended prospectus contemplated by Section 3(g) or the
first sentence of 3(f).
e. No Investor may participate in any underwritten
registration hereunder unless such Investor (i) agrees to sell such Investor's
Registrable Securities on the basis provided in any underwriting arrangements
approved by the Investors entitled hereunder to approve such arrangements, (ii)
completes and executes all questionnaires, powers of attorney, indemnities,
underwriting agreements and other documents reasonably required under the terms
of such underwriting arrangements, and (iii) agrees to pay its pro rata share of
all underwriting discounts and commissions.
5. EXPENSES OF REGISTRATION.
Except as otherwise provided in this Agreement, all expenses,
other than underwriting discounts and commissions, and fees and disbursements of
counsel for the Buyers in excess of $2,000, incurred in connection with
registrations, filings or qualifications pursuant to Sections 2 and 3,
including, without limitation, all registration, listing and qualifications
fees, printers and accounting fees, fees and disbursements of counsel for the
Company and fees and disbursements of counsel for the Buyers up to $2,000, shall
be paid by the Company.
6. INDEMNIFICATION.
In the event any Registrable Securities are included in a
Registration Statement under this Agreement:
a. To the fullest extent permitted by law, the Company
agrees to indemnify, hold harmless and defend each Investor who holds such
Registrable Securities, the directors, officers, partners, employees, agents of,
and each Person, if any, who controls, any Investor within the meaning of the
1933 Act or the Securities Exchange Act of 1934, as amended (the "1934 ACT"),
and any underwriter (as defined in the 1933 Act) for the Investors, and the
directors and officers of, and each Person, if any, who controls, any such
underwriter within the meaning of the 1933 Act or the 1934 Act (each, an
"INDEMNIFIED PERSON"), against any losses, claims, damages, liabilities,
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judgments, fines, penalties, charges, costs, attorneys' fees, amounts paid in
settlement or expenses (collectively, "CLAIMS") incurred in investigating,
preparing or defending any action, claim, suit, inquiry, proceeding,
investigation or appeal taken from the foregoing by or before any court or
governmental, administrative or other regulatory agency, body or the SEC,
whether pending or threatened, whether or not an indemnified party is or may be
a party thereto ("INDEMNIFIED DAMAGES"), to which any of them may become subject
insofar as such Claims (or actions or proceedings, whether commenced or
threatened, in respect thereof) arise out of or are based upon: (i) any untrue
statement or alleged untrue statement of a material fact in a Registration
Statement or any post-effective amendment thereto or in any filing made in
connection with the qualification of the offering under the securities or other
"blue sky" laws of any jurisdiction in which Registrable Securities are offered
("BLUE SKY FILING"), or the omission or alleged omission to state a material
fact required to be stated therein or necessary to make the statements therein,
in light of the circumstances under which the statements therein were made, not
misleading, (ii) any untrue statement or alleged untrue statement of a material
fact contained in any preliminary prospectus if used prior to the effective date
of such Registration Statement, or contained in the final prospectus (as amended
or supplemented, if the Company files any amendment thereof or supplement
thereto with the SEC) or the omission or alleged omission to state therein any
material fact necessary to make the statements made therein, in light of the
circumstances under which the statements therein were made, not misleading, or
(iii) any violation or alleged violation by the Company of the 1933 Act, the
1934 Act, any other law, including, without limitation, any state securities
law, or any rule or regulation thereunder relating to the offer or sale of the
Registrable Securities pursuant to a Registration Statement (the matters in the
foregoing clauses (i) through (iii) being, collectively, "VIOLATIONS"). Subject
to the restrictions set forth in Section 6(d) with respect to the number of
legal counsel, the Company shall reimburse the Investors and each such
underwriter or controlling person, promptly as such expenses are incurred and
are due and payable, for any reasonable legal fees or other reasonable expenses
incurred by them in connection with investigating or defending any such Claim.
Notwithstanding anything to the contrary contained herein, the indemnification
agreement contained in this Section 6(a): (i) shall not apply to a Claim arising
out of or based upon a Violation which occurs in reliance upon and in conformity
with information furnished in writing to the Company by any Indemnified Person
or underwriter for such Indemnified Person expressly for use in connection with
the preparation of the Registration Statement or any such amendment thereof or
supplement thereto, if such prospectus was timely made available by the Company
pursuant to Section 3(c); (ii) with respect to any preliminary prospectus, shall
not inure to the benefit of any such person from whom the person asserting any
such Claim purchased the Registrable Securities that are the subject thereof (or
to the benefit of any person controlling such person) if the untrue statement or
omission of material fact contained in the preliminary prospectus was corrected
in the prospectus, as then amended or supplemented, if such prospectus was
timely made available by the Company pursuant to Section 3(c), and the
Indemnified Person was promptly advised in writing not to use the incorrect
prospectus prior to the use giving rise to a violation and such Indemnified
Person, notwithstanding such advice, used it; (iii) shall not be available to
the extent such Claim is based on a failure of the Investor to deliver or to
cause to be delivered the prospectus made available by the Company; and (iv)
shall not apply to amounts paid in settlement of any Claim if such settlement is
effected without the prior written consent of the Company, which consent shall
not be unreasonably withheld. Such
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<PAGE>
indemnity shall remain in full force and effect regardless of any investigation
made by or on behalf of the Indemnified Person and shall survive the transfer of
the Registrable Securities by the Investors pursuant to Section 9.
b. In connection with any Registration Statement in which
an Investor is participating, each such Investor agrees to severally and not
jointly indemnify, hold harmless and defend, to the same extent and in the same
manner as is set forth in Section 6(a), the Company, each of its directors, each
of its officers who signs the Registration Statement, each Person, if any, who
controls the Company within the meaning of the 1933 Act or the 1934 Act
(collectively and together with an Indemnified Person, an "INDEMNIFIED PARTY"),
against any Claim or Indemnified Damages to which any of them may become
subject, under the 1933 Act, the 1934 Act or otherwise, insofar as such Claim or
Indemnified Damages arise out of or are based upon any Violation, in each case
to the extent, and only to the extent, that such Violation occurs in reliance
upon and in conformity with written information furnished to the Company by such
Investor expressly for use in connection with such Registration Statement or a
failure of the Investor to deliver or cause to be delivered any preliminary or
final prospectus required to be delivered by such Investor to an offeree or
purchaser of Conversion Shares; and, subject to Section 6(d), such Investor will
reimburse any legal or other expenses reasonably incurred by them in connection
with investigating or defending any such Claim; provided, however, that the
Investor shall be liable under this Section 6(b) for only that amount of a Claim
or Indemnified Damages as does not exceed the net proceeds to such Investor as a
result of the sale of Registrable Securities pursuant to such Registration
Statement.
c. The Company shall be entitled to receive indemnities
from underwriters, selling brokers, dealer managers and similar securities
industry professionals participating in any distribution, to the same extent as
provided above, with respect to information such persons so furnished in writing
expressly for inclusion in the Registration Statement.
d. Promptly after receipt by an Indemnified Person or
Indemnified Party under this Section 6 of notice of the commencement of any
action or proceeding (including any governmental action or proceeding) involving
a Claim, such Indemnified Person or Indemnified Party shall, if a Claim in
respect thereof is to be made against any indemnifying party under this Section
6, deliver to the indemnifying party a written notice of the commencement
thereof, and the indemnifying party shall have the right to participate in, and,
to the extent the indemnifying party so desires, jointly with any other
indemnifying party similarly noticed, to assume control of the defense thereof
with counsel mutually satisfactory to the indemnifying party and the Indemnified
Person or the Indemnified Party, as the case may be; provided, however, that an
Indemnified Person or Indemnified Party shall have the right to retain its own
counsel with the fees and expenses to be paid by the indemnifying party, if, in
the reasonable opinion of counsel retained by the indemnifying party, the
representation by such counsel of the Indemnified Person or Indemnified Party
and the indemnifying party would be inappropriate due to actual or potential
differing interests between such Indemnified Person or Indemnified Party and any
other party represented by such counsel in such proceeding. The Company shall
pay reasonable fees for only one separate legal counsel for the Investors, and
such legal counsel shall be selected by the Investors holding a majority in
interest of the Registrable Securities included
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in the Registration Statement to which the Claim relates. The Indemnified Party
or Indemnified Person shall cooperate fully with the indemnifying party in
connection with any negotiation or defense of any such action or claim by the
indemnifying party and shall furnish to the indemnifying party all information
reasonably available to the Indemnified Party or Indemnified Person which
relates to such action or claim. The indemnifying party shall keep the
Indemnified Party or Indemnified Person fully apprised at all times as to the
status of the defense or any settlement negotiations with respect thereto. No
indemnifying party shall be liable for any settlement of any action, claim or
proceeding effected without its written consent, provided, however, that the
indemnifying party shall not unreasonably withhold, delay or condition its
consent. No indemnifying party shall, without the consent of the Indemnified
Party or Indemnified Person, consent to entry of any judgment or enter into any
settlement or other compromise which does not include as an unconditional term
thereof the giving by the claimant or plaintiff to such Indemnified Party or
Indemnified Person of a release from all liability in respect to such claim or
litigation. Following indemnification as provided for hereunder, the
indemnifying party shall be subrogated to all rights of the Indemnified Party or
Indemnified Person with respect to all third parties, firms or corporations
relating to the matter for which indemnification has been made. The failure to
deliver written notice to the indemnifying party within a reasonable time of the
commencement of any such action shall not relieve such indemnifying party of any
liability to the Indemnified Person or Indemnified Party under this Section 6,
except to the extent that the indemnifying party is prejudiced in its ability to
defend such action.
e. The indemnification of expenses required by this Section
6 shall be made by periodic payments of the amount thereof during the course of
the investigation or defense, as and when bills are received or Indemnified
Damages are incurred.
f. The indemnity agreements contained herein shall be in
addition to (i) any cause of action or similar right of the Indemnified Party or
Indemnified Person against the indemnifying party or others, and (ii) any
liabilities the indemnifying party may be subject to pursuant to the law.
g. The indemnification provisions contained herein shall
remain in full force and effect regardless of any investigation made by or on
behalf of an Indemnified Party and shall survive the transfer of the Registrable
Securities by the Investors pursuant to Section 9. Notwithstanding anything to
the contrary contained herein, the indemnification agreement contained herein
with respect to any preliminary prospectus shall not inure to the benefit of any
Indemnified Party if the untrue statement or omission of material fact contained
in the preliminary prospectus was corrected on a timely basis in the prospectus,
as then amended or supplemented.
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7. CONTRIBUTION.
To the extent any indemnification by an indemnifying party is
prohibited or limited by law, the indemnifying party agrees to make the maximum
contribution with respect to any amounts for which it would otherwise be liable
under Section 6 to the fullest extent permitted by law; provided, however, that:
(i) no contribution shall be made under circumstances where the maker would not
have been liable for indemnification under the fault standards set forth in
Section 6; (ii) no seller of Registrable Securities guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the 1933 Act) shall be
entitled to contribution from any seller of Registrable Securities who was not
guilty of fraudulent misrepresentation; and (iii) contribution by any seller of
Registrable Securities shall be limited in amount to the net amount of proceeds
received by such seller from the sale of such Registrable Securities.
8. REPORTS UNDER THE 1934 ACT.
With a view to making available to the Investors the benefits
of Rule 144 promulgated under the 1933 Act or any other similar rule or
regulation of the SEC that may at any time permit the Investors to sell
securities of the Company to the public without registration ("RULE 144"), the
Company agrees to:
a. make and keep public information available, as those
terms are understood and defined in Rule 144;
b. file with the SEC in a timely manner all reports and
other documents required of the Company under the 1934 Act so long as the
Company remains subject to such requirements (it being understood that nothing
herein shall limit the Company's obligations under Section 4(c) of the
Securities Purchase Agreement) and the filing of such reports and other
documents is required for the applicable provisions of Rule 144; and
c. furnish to each Investor so long as such Investor owns
Registrable Securities, promptly upon request, (i) a written statement by the
Company that it has complied with the reporting requirements of the 1934 Act,
(ii) a copy of the most recent annual or quarterly report of the Company and
such other reports and documents so filed by the Company, and (iii) such other
information as may be reasonably requested to permit the investors to sell such
securities pursuant to Rule 144 without registration.
9. ASSIGNMENT OF REGISTRATION RIGHTS.
The rights under this Agreement shall be automatically
assignable by the Investors to any transferee of all or any portion of
Registrable Securities if: (i) the Investor agrees in writing with the
transferee or assignee to assign such rights, and a copy of such agreement is
furnished to the Company within a reasonable time after such assignment; (ii)
the Company is, within a reasonable time after such transfer or assignment,
furnished with written notice of (a) the name and address of
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such transferee or assignee, and (b) the securities with respect to which such
registration rights are being transferred or assigned in accordance with the
terms of the Securities Purchase Agreement; (iii) immediately following such
transfer or assignment the further disposition of such securities by the
transferee or assignee is restricted under the 1933 Act and applicable state
securities laws; (iv) at or before the time the Company receives the written
notice contemplated by clause (ii) of this sentence the transferee or assignee
agrees in writing with the Company to be bound by all of the provisions
contained herein, including providing the Company with a current address for all
required notices; (v) such transfer shall have been made in accordance with the
applicable requirements of the Securities Purchase Agreement; and (vi) such
transferee shall be an "accredited investor" as that term is defined in Rule 501
of Regulation D promulgated under the 1933 Act.
10. AMENDMENT OF REGISTRATION RIGHTS.
Provisions of this Agreement may be amended and the observance
thereof may be waived (either generally or in a particular instance and either
retroactively or prospectively), only with the written consent of the Company
and Investors who hold a majority of the then Registrable Securities. Any
amendment or waiver effected in accordance with this Section 10 shall be binding
upon each Investor and the Company.
11. MISCELLANEOUS.
a. A person or entity is deemed to be a holder of
Registrable Securities whenever such person or entity owns of record such
Registrable Securities. If the Company receives conflicting instructions,
notices or elections from two or more persons or entities with respect to the
same Registrable Securities, the Company shall act upon the basis of
instructions, notice or election received from the registered owner of such
Registrable Securities.
b. Any notices, consents, waivers or other communications
required or permitted to be given under the terms of this Agreement must be in
writing and will be deemed to have been delivered (i) upon receipt, when
delivered personally; (ii) upon receipt, when sent by facsimile (provided a
confirmation of transmission is mechanically generated and kept on file by the
sending party); (iii) three (3) days after being sent by U.S. certified mail,
return receipt requested; or (iv) one (1) business day after deposit with a
nationally recognized overnight delivery service, in each case properly
addressed to the party to receive the same. The addresses and facsimile numbers
for such communications shall be:
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If to the Company:
Paul Sebetic, CFO
TII Industries, Inc.
1385 Akron Street
Copiague, NY 11726
(516) 789-2228
With a copy to:
Richard A. Rubin, Esq.
Parker Chapin Flattau & Klimpl, LLP
1211 Avenue of Americas
New York, NY 10036
(212) 704-6288
If to a Buyer, to its address and facsimile number on the
Schedule of Buyers attached hereto, with copies to such Buyer's counsel as set
forth on the Schedule of Buyers.
Each party shall provide five (5) days prior notice to the
other party of any change in address, phone number or facsimile number.
c. Failure of any party to exercise any right or remedy
under this Agreement or otherwise, or delay by a party in exercising such right
or remedy, shall not operate as a waiver thereof.
d. This Agreement shall be governed by and interpreted in
accordance with the laws of the State of New York without regard to the
principles of conflict of laws (other than Section 5-1401 of the New York
General Obligations Law). Each party hereby irrevocably submits to the
non-exclusive jurisdiction of the state and federal courts sitting the City of
New York, borough of Manhattan, for the adjudication of any dispute hereunder or
in connection herewith or with any transaction contemplated hereby or discussed
herein, and hereby irrevocably waives, and agrees not to assert in any suit,
action or proceeding, any claim that it is not personally subject to the
jurisdiction of any such court, that such suit, action or proceeding is brought
in an inconvenient forum or that the venue of such suit, action or proceeding is
improper. Each party hereby irrevocably waives personal service of process and
consents to process being served in any such suit, action or proceeding by
mailing a copy thereof to such party at the address for such notices to it under
this Agreement and agrees that such service shall constitute good and sufficient
service of process and notice thereof. Nothing contained herein shall be deemed
to limit in any way any right to serve process in any manner permitted by law.
If any provision of this Agreement shall be invalid or unenforceable in any
jurisdiction, such invalidity or unenforceability shall not affect the validity
or enforceability of the remainder of this Agreement in that jurisdiction or the
validity or enforceability of any provision of this Agreement in any other
jurisdiction.
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e. This Agreement, the Certificate of Designation, the
Securities Purchase Agreement and the Warrants constitute the entire agreement
among the parties hereto with respect to the subject matter hereof and thereof.
There are no restrictions, promises, warranties or undertakings, other than
those set forth or referred to herein and therein. This Agreement, the
Certificate of Designation, the Securities Purchase Agreement and the Warrants
supersede all prior agreements and understandings among the parties hereto with
respect to the subject matter hereof and thereof.
f. Subject to the requirements of Section 9, this Agreement
shall inure to the benefit of and be binding upon the permitted successors and
assigns of each of the parties hereto.
g. The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.
h. This Agreement may be executed in two or more identical
counterparts, each of which shall be deemed an original but all of which shall
constitute one and the same agreement. This Agreement, once executed by a party,
may be delivered to the other party hereto by facsimile transmission of a copy
of this Agreement bearing the signature of the party so delivering this
Agreement.
i. Each party shall do and perform, or cause to be done and
performed, all such further acts and things, and shall execute and deliver all
such other agreements, certificates, instruments and documents, as the other
party may reasonably request in order to carry out the intent and accomplish the
purposes of this Agreement and the consummation of the transactions contemplated
hereby.
j. All consents and other determinations to be made by the
Investors pursuant to this Agreement shall be made, unless otherwise specified
in this Agreement, by Investors holding a majority of the Registrable
Securities, determined as if all of the Preferred Shares then outstanding have
been converted into Registrable Securities.
k. The language used in this Agreement will be deemed to be
the language chosen by the parties to express their mutual intent and no rules
of strict construction will be applied against any party.
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<PAGE>
IN WITNESS WHEREOF, the parties have caused this Registration
Rights Agreement to be duly executed as of day and year first above written.
COMPANY: BUYERS:
TII INDUSTRIES, INC. LEONARDO, L.P.
By: Angelo, Gordon & Co., L.P.
Its: General Partner
By: /S/ TIMOTHY J. ROACH By: /S/ MICHAEL L. GORDON
------------------------ ------------------------
Name: TIMOTHY J. ROACH Name: Michael L. Gordon
Its: PRESIDENT Its: Chief Operating Officer
GAM ARBITRAGE INVESTMENTS, INC.
By: Angelo, Gordon & Co., L.P.
Its: Investment Advisor
By: /S/ MICHAEL L. GORDON
------------------------
Name: Michael L. Gordon
Its: Chief Operating Officer
AG SUPER FUND INTERNATIONAL
PARTNERS, L.P.
By: Angelo, Gordon & Co., L.P.
Its: General Partner
By: /S/ MICHAEL L. GORDON
------------------------
Name: Michael L. Gordon
Its: Chief Operating Officer
RAPHAEL, L.P.
By: /S/ MICHAEL L. GORDON
------------------------
Name: Michael L. Gordon
Its: Chief Operating Officer
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<PAGE>
RAMIUS FUND, LTD.
By: AG Ramius Partners, L.L.C.
Its: Investment Advisor
By: /S/ MICHAEL L. GORDON
------------------------
Name: Michael L. Gordon
Its: Managing Officer
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