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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED): DECEMBER 24, 1997
SPATIALIGHT, INC.
(Exact name of registrant as specified in its charter)
NEW YORK 000-19828 16-1363082
(State or other jurisdiction of (Commission File Number) (I.R.S. Employer)
incorporation or organization) Identification No.)
8-C COMMERCIAL BLVD., NOVATO, CA 94949-6125
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (415) 883-1693
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ITEM 7. EXHIBITS.
(a) Financial Statements of Business Acquired.
Not applicable.
(b) Pro Forma Financial Information.
Not applicable.
(c) Exhibits
--------
Exhibit No. Description
----------- -----------
4.5 Form of Debenture
4.6 Registration Rights Agreement
10.18(1) Form of Securities Purchase Agreement
99.1 Press Release dated December 31, 1997
announcing the execution of the Securities
Purchase Agreement.
(1) Other Exhibits to the Securities Purchase Agreement not filed herewith are
identified in the Securities Purchase Agreement. The registrant will
supplementally furnish any omitted Exhibit to the Commission upon request.
ITEM 9. SALES OF EQUITY SECURITIES PURSUANT TO REGULATION S
On December 24, 1997 the issuer closed the private placement of $450,000
principal amount of convertible debentures to purchasers outside the United
States. The debentures have a two year term and carry a 3% interest rate.
Beginning 45 days after the date of issuance, principal and accrued interest
are convertible into the issuer's common stock at a conversion price equal to
120% of the average closing bid price for the stock over the five trading
days preceding the issuance date or, if lower, 75% of the average closing bid
price of the stock over the five trading days preceding the time the debt is
converted. The Company is required to maintain a share reserve of at least
150% of the number of shares that would be needed at any time to fully
convert the debentures then outstanding, and the Company is subject to
penalties if the Company does not timely deliver certificates representing
conversion shares. The terms of conversion are set out in section 4 of the
form of debenture attached as exhibit 4.5 hereto, which is incorporated
herein by reference. Net of fees and expenses, the issuer received $387,000
from this placement. In addition to a cash placement fee, the placement
agent received 5 year warrants to purchase 45,000 shares of issuer common
stock at the closing bid price on December 24. The issuer expects that the
proceeds of the placement will be used for working capital. The issuer
anticipates that it may from time to time issue additional debentures on
similar terms based on its working capital needs in the next several
quarters. Under the terms of the Securities Purchase Agreement, and the
related Registration Rights Agreement, the Company is required within 30 days
of the issuance date to prepare and file with the Securities and Exchange
Commission a registration statement covering the resale of the issuer's
common stock issuable on conversion of the debentures.
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The debentures offered have not been and will not be registered under
the Securities Act of 1933, as amended (the "Act"), and may not be offered or
sold in the United States or to a U.S. Person absent registration or an
applicable exemption from the registration requirements. The debentures were
issued under the exemption from registration provided by Regulation S
promulgated under the Act. The Company and the placement agent were each
obligated to conduct the offering and sale of the debentures in a manner
consistent with that exemption. Each purchaser of the debentures (a "Buyer")
has represented to the issuer that (i) the Buyer is not a "U.S. person" as
that term is defined in Rule 902(o) of Regulation S and the Buyer was not
formed by a "U.S. person" for the purpose of investing in securities not
registered under the Act, unless the Buyer is or was organized or
incorporated by "U.S. persons" who are accredited investors (as defined in
Rule 501(a) under the Act) and who are not natural persons, estates or
trusts, and all owners of interests in such entity who are not "U.S. persons"
are institutional investors, and not natural persons, estates or trusts; (ii)
the debentures were not offered to the Buyer in the United States and at the
time of issuance of the debentures and of any offer to the Buyer to purchase
the debentures, the Buyer was physically outside the United States; (iii) the
Buyer purchased the debentures for its own account and not on behalf of or
for the benefit of any U.S. person and the sale and resale of the debentures
were not prearranged with any buyer in the United States; (iv) the Buyer knew
of no public solicitation or advertisement of an offer in the U.S. in
connection with the placement. Each Buyer agreed that all offers and sales
of the debentures (or the issuer Common Stock issuable upon conversion
thereof) prior to the expiration of a period commencing on December 24, 1997
and ending forty days thereafter (the "Regulation S Restricted Period") would
not be made to U.S. persons or for the account or benefit of U.S. persons and
would otherwise be made in compliance with the provisions of Regulation S
whether currently in effect or hereafter amended. Each Buyer also
represented that it had not been engaged as a distributor or dealer with
respect to the placement.
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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 hereunto duly authorized.
Spatialight, Inc.
January 8, 1998 By: /s/ William E. Hollis
-------------------------------------
William E. Hollis
Chairman, Chief Executive Officer and
Chief Financial Officer
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INDEX TO EXHIBITS
Exhibit No. Description
- ----------- -----------
4.5 Form of Debenture
4.6 Registration Rights Agreement
10.18(1) Form of Securities Purchase Agreement
99.1 Press Release dated December 31, 1997 announcing the
execution of the Securities Purchase Agreement.
(1) Other Exhibits to the Securities Purchase Agreement not filed herewith are
identified in the Securities Purchase Agreement. The registrant will
supplementally furnish any omitted Exhibit to the Commission upon request.
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THESE SECURITIES HAVE NOT BEEN REGISTERED WITH THE UNITED STATES SECURITIES AND
EXCHANGE COMMISSION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"),
OR THE SECURITIES COMMISSION OF ANY STATE UNDER ANY STATE SECURITIES LAW. THEY
ARE BEING OFFERED PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER REGULATION S
("REGULATION") PROMULGATED UNDER THE ACT. THE SECURITIES MAY NOT BE OFFERED,
SOLD OR OTHERWISE TRANSFERRED UNLESS THE SECURITIES ARE REGISTERED UNDER THE
ACT AND APPLICABLE STATE SECURITIES LAWS, OR SUCH OFFERS, SALES AND TRANSFERS
ARE MADE PURSUANT TO AVAILABLE EXEMPTIONS FROM THE REGISTRATION REQUIREMENTS OF
THE ACT AND THOSE LAWS.
THESE SECURITIES HAVE NOT BEEN RECOMMENDED BY ANY FEDERAL OR STATE SECURITIES
COMMISSION OR REGULATORY AUTHORITY. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
No. - - $_______ U.S.
SPATIALIGHT, INC.
3% SUBORDINATED CONVERTIBLE DEBENTURE DUE DECEMBER 24, 1999
THIS DEBENTURE is one of a duly authorized issue of Debentures of
Spatialight, Inc., a corporation duly organized and existing under the laws of
the State of New York (the "Company"), designated as its 3% Subordinated
Convertible Debentures Due December 24, 1999, in an aggregate principal amount
not exceeding U.S. $800,000 (the "Debentures").
FOR VALUE RECEIVED, the Company promises to pay to ___________ the registered
holder hereof (the "Holder"), the principal sum of ___________ Dollars
($_______ U.S.), on or prior to December 24, 1999, (the "Maturity Date"), and
to pay interest on the principal sum
(CONTINUED ON REVERSE)
IN WITNESS WHEREOF, the Company has caused this instrument to be duly executed
by an officer thereunto duly authorized.
SPATIALIGHT, INC.
Dated: December 24, 1997 By:
-----------------------------------------
William E. Hollis
Chairman of the Board, Chief Executive
Officer, and Chief Financial Officer
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outstanding from time to time in arrears on the Maturity Date, at the rate of
3% per annum. Accrual of interest on this Debenture shall commence on the
date that, in connection with the consummation of the initial purchase of
this Debenture from the Company, the escrow agent first had in its possession
funds representing full payment for this Debenture, and interest shall
continue to accrue until payment in full of the principal sum has been made
or duly provided for. The interest so payable will be paid on the Maturity
Date to the person in whose name this Debenture (or one or more predecessor
Debentures) is registered on the records of the Company regarding
registration and transfers of the Debentures (the "Debenture Register") at
the Company's option in either cash or Common Stock. All accrued and unpaid
interest shall bear interest at the same rate of 3% per annum from the
Maturity Date until the date of payment. The principal of, and interest on,
this Debenture are payable in such coin or currency of the United States of
America as at the time of payment is legal tender for payment of public and
private debts, at the address of the Holder last appearing on the Debenture
Register of the Company as designated in writing by the Holder from time to
time. The Debenture Register shall represent the record of ownership and
right to receive principal and interest on this Debenture. Interest and
principal shall be payable only to the registered Holder as reflected in the
Debenture Register. The right to receive principal and interest under this
Debenture shall be transferable only through an appropriate entry in the
Debenture Register as provided herein. The forwarding of such payment shall
constitute a payment of interest hereunder and shall satisfy and discharge
the liability for principal and interest on this Debenture to the extent of
the sum represented by such payment.
This Debenture is subject to the following additional provisions:
1. DEBENTURES. The Debentures are issuable in denominations of One Hundred
Thousand Dollars ($100,000 U.S.) and integral multiples of Fifty Thousand
Dollars ($50,000 U.S.) in excess thereof. The Debentures are exchangeable for
an equal aggregate principal amount of Debentures of different authorized
denominations, as requested by the Holders surrendering the same, but shall not
be issuable in denominations less than integral multiples of Fifty Thousand
Dollars ($50,000 U.S.). No service charge or other charges of any kind will be
made for such registration of transfer or exchange.
2. WITHHOLDINGS. The Company shall be entitled to withhold from all payments
of principal of, and interest on, this Debenture any amounts required to be
withheld under the applicable provisions of the United States income tax laws
or other applicable laws at the time of such payments. The Holder shall pay
any other taxes, charges, or levies in connection with the issuance or transfer
thereof.
3. TRANSFER. This Debenture is issued subject to investment representations
of the original Holder hereof and may be transferred or exchanged only in
compliance with the Securities Act of 1933, as amended (the "Act"), including
Regulation S promulgated under the Act. Any Holder of this Debenture, by
acceptance hereof, agrees to the representations, warranties and covenants
herein. Prior to due presentment to the Company for transfer of this
Debenture, the Company
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and any agent of the Company may treat the person in whose name this
Debenture is duly registered on the Company's Debenture Register as the owner
hereof for the purpose of receiving payment as herein provided and for all
other purposes, whether or not this Debenture be overdue, and neither the
Company nor any such agent shall be affected by notice to the contrary.
4. CONVERSION. The record Holder of this Debenture shall have conversion
rights as follows (the "Conversion Rights"):
(a) RIGHT TO CONVERT. The record Holder of this Debenture shall be
entitled, at the option of the Holder, subject to the Company's right of
redemption set forth in Section 5(a), to convert 100% of the aggregate
principal amount of Debentures held by such Holder, at any time beginning on
February 7, 1998, at the office of the Company or any transfer agent for the
Debentures, into that number of fully-paid and non-assessable shares of Common
Stock of the Company calculated in accordance with the following formula:
Number of shares issued upon conversion = (Principal + Interest)/Conversion
Price, where
- Principal = The principal amount of the Debenture(s) to be
converted,
- Interest = Principal x (N/365) x .03, where N = the number of days
between (i) the date of issuance of this Debenture, and (ii) the
applicable date of conversion for the Debenture for which
conversion is being elected, and
- Conversion Price = the lesser of (x) 75% of the average Closing
Bid Price for the Company's Common Stock for the five (5) trading
days immediately preceding the Date of Conversion, as defined
below, or (y) 120% of the average Closing Bid Price for the Common
Stock of the Company for the five (5) trading days immediately
preceding the Closing Date (as defined in the Security Purchase
Agreement between the Holder and the Company, dated of even date
herewith, the "Securities Purchase Agreement"). For purposes
hereof, the term "Closing Bid Price" shall mean the closing bid
price of Company's Common Stock as reported by NASDAQ (or, if not
reported by NASDAQ, as reported by such other exchange or market
where traded).
(b) MECHANICS OF CONVERSION. No fractional shares of Common Stock shall
be issued upon conversion of this Debenture. In lieu of any fractional share
to which the Holder would otherwise be entitled, the Company shall pay cash to
such Holder in an amount equal to such fraction multiplied by the Conversion
Price then in effect. In the case of a dispute as to the calculation of the
Conversion Rate, the Company's calculation shall be deemed conclusive absent
manifest error. In order to convert Debentures into full shares of Common
Stock, the Holder shall surrender the certificate or certificates therefor,
duly endorsed, by either overnight courier or 2-day courier, to the office of
the Company or of any transfer agent for the Debentures, and shall give written
notice to the Company (the "Notice of Conversion") at such office that he
elects to convert the same, the number and principal amount of Debentures so
converted and a calculation
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of the Conversion Rate (with an advance copy of the certificate(s) and the
notice by facsimile); provided, however, that the Company shall not be
obligated to issue certificates evidencing the shares of Common Stock
issuable upon such conversion unless either the certificates evidencing such
Debentures are delivered to the Company or its transfer agent as provided
above, or the Holder notifies the Company or its transfer agent that such
certificates have been lost, stolen or destroyed and executes an agreement
satisfactory to the Company to indemnify the Company from any loss incurred
by it in connection with such certificates.
The Company shall use reasonable efforts to issue and deliver within three
(3) business days after delivery to the Company of such certificates, or after
such agreement and indemnification, to such Holder of Debentures at the address
of the Holder on the books of the Company, a certificate or certificates for
the number of shares of Common Stock to which the Holder shall be entitled as
aforesaid. The date on which notice of conversion is given (the "Date of
Conversion") shall be deemed to be the date set forth in such notice of
conversion, provided that the original Debentures to be converted are received
by the transfer agent or the Company within five (5) business days thereafter
and the person or persons entitled to receive the shares of Common Stock
issuable upon such conversion shall be treated for all purposes as the record
holder or holders of such shares of Common Stock on such date. If the original
Debentures to be converted are not received by the transfer agent or the
Company within five business days after the Date of Conversion, the notice of
conversion shall become null and void.
Following conversion of a Debenture, or a portion thereof, the principal
and interest owed on that Debenture or portion of the Debenture so converted
will be deemed paid in full and satisfied, and such Debenture or portion
thereof will no longer be outstanding.
(c) RESERVATION OF STOCK ISSUABLE UPON CONVERSION. The Company shall at
all times reserve and keep available out of its authorized but unissued shares
of Common Stock, solely for the purpose of effecting the conversion of the
Debentures (as defined in the Securities Purchase Agreement), no less than 150%
of the number of its shares of Common Stock as shall from time to time be
sufficient to effect the conversion of all then outstanding Debentures; and if
at any time the number of authorized but unissued shares of Common Stock shall
not be sufficient to effect the conversion of all then outstanding Debentures,
the Company will take such corporate action as may be necessary to increase its
authorized but unissued shares of Common Stock to such number of shares as
shall be sufficient for such purpose.
(d) Nothing contained in this Debenture or paragraph 4(e) hereof, shall
be deemed to establish or require the payment of interest to the Purchaser at
a rate in excess of the maximum rate permitted by governing law. In the event
that the rate of interest required to be paid under the Debenture exceeds the
maximum rate permitted by governing law, the rate of interest required to be
paid thereunder shall be automatically reduced to the maximum rate permitted
under the governing law and any amounts selected in excess of the permissible
amount shall be deemed a payment of principal. To the extent that such excess
amount exceeds the aggregate principal amount of this Debenture, such excess
shall be returned with reasonable promptness by the
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Holder to the Company.
(e) In the event the Company does not make delivery of the certificates
of Common Stock, as instructed by Holder, within ten (10) business days after
the Date of Conversion, then in such event the Company shall pay to the Holder
an amount, in immediately available funds in accordance with the following
schedule, wherein "No. Business Days Late" is defined as the number of business
days beyond the 3 business days delivery period.
LATE PAYMENT FOR EACH
$10,000 OF DEBENTURE
PRINCIPAL AMOUNT BEING
NO. BUSINESS DAYS LATE CONVERTED
1 $100
2 $200
3 $300
4 $400
5 $500
6 $600
7 $700
8 $800
9 $900
10 $1,000
11 $1,000 + $200 for each
Business Days Late Beyond 10 days
To the extent that the failure of the Company to issue the certificates of
Common Stock pursuant to this Section 4(e) is due to the unavailability of
authorized but unissued shares of Common Stock, the provisions of this Section
4(e) shall not apply but instead the provisions of Section 4(f) shall apply.
The Company shall pay any payments incurred under this Section 4(e) in
immediately available funds within three (3) business days from the date of
issuance of the certificates of applicable Common Stock. Nothing herein shall
limit a Holder's right to pursue actual damages for the Company's failure to
issue and deliver Common Stock to the Holder within six (6) business days after
the Date of Conversion.
(f) If, at any time, a Holder submits a Notice of Conversion and the
Company does not have sufficient authorized but unissued shares of Common Stock
available to effect, in full, a conversion of the Debentures (a "Conversion
Default," the date of such default being referred to herein as the "Conversion
Default Date"), the Company shall issue to the Holder a certificate
representing all of the shares of Common Stock which are available, and the
Notice of Conversion as to any Debentures requested to be converted but not
converted (the "Unconverted Debentures") shall become null and void. The
Company shall provide notice of such Conversion Default ("Notice of Conversion
Default" to all existing Holders of outstanding Debentures, by facsimile,
within one (1) business day of such default (with the original delivered by
overnight or
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two day courier). No Holder may submit a Notice of Conversion after receipt
of Notice of Conversion Default until the date additional shares of Common
Stock are authorized by the Company. The Company agrees to pay to all
Holders of outstanding Debentures payments for a Conversion Default
("Conversion Default Payments") in the amount of (N/365 x (.24) x the initial
issuance price of the outstanding Debentures held by each Holder where N =
the number of days from the Conversion Default Date to the date (the
"Authorization Date") that the Company authorizes a sufficient number of
shares of Common Stock to affect conversion of all remaining Debentures. The
Company shall send notice ("Authorization Notice") to each Holder of
outstanding Debentures that additional shares of Common Stock have been
authorized, the Authorization Date and the amount of Holder's accrued
Conversion Default Payments. The accrued Conversion Default shall be paid in
immediately available funds, or shall be convertible into Common Stock at the
Conversion Rate, at the Purchaser's option, payable as follows: (i) in the
event Purchaser elects to take such payment in immediately available funds,
payments shall be made to such Purchaser of outstanding Debentures by the
fifth day of the following calendar month, or (ii) in the event Purchaser
elects to take such payment in stock, the Purchaser may convert such payment
amount into Common Stock at the Conversion Rate at anytime after the 5th day
of the calendar month following the month in which the Authorization Notice
was received, until the expiration of the Mandatory Conversion Date (as
defined herein).
Nothing herein shall limit the Purchaser's right to pursue actual
damages for the Company's failure to maintain a sufficient number of authorized
shares of common stock.
(g) MANDATORY PAYMENT OR CONVERSION ON MATURITY DATE. Each Holder of a
Debenture outstanding on December 24, 1999, shall have the right to demand, by
written notice to the Company which is received by the Company no later than
December 10, 1999, (the "Payment Notice"), that payment of all principal and
accrued interest on this Debenture be paid to such Holder in cash or in
immediately available funds on December 24, 1999. Each outstanding Debenture
for which a Payment Notice is not timely received by the Company on or before
December 10, 1999, automatically shall be converted into Common Stock on
December 24, 1999, at the Conversion Price for each share of Common Stock
calculated in accordance with the formula in Section 4(a) above, and
December 24, 1999, shall be deemed the Date of Conversion with respect to such
conversion. The Company shall not be entitled to require conversion of the
Debentures.
(h) ADJUSTMENT TO FIXED CONVERSION PRICE.
(i) If, prior to the conversion of all of the Debentures, the
number of outstanding shares of Common Stock is increased by a stock
split, stock dividend, or other similar event, the Fixed Conversion Price
shall be proportionately reduced, or if the number of outstanding shares
of Common Stock is decreased by a combination or reclassification of
shares, or other similar event, the Fixed Conversion Price shall be
proportionately increased.
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(ii) If, prior to the conversion of all Debentures, there shall be
any merger, consolidation, exchange of shares, recapitalization,
reorganization, or other similar event, as a result of which shares of
Common Stock of the Company shall be changed into the same or a different
number of shares of the same or another class or classes of stock or
securities of the Company or another entity, then the Holders of
Debentures shall thereafter have the right to purchase and receive upon
conversion of Debentures, upon the basis and upon the terms and conditions
specified herein and in lieu of the shares of Common Stock immediately
theretofore issuable upon conversion, such shares of stock and/or
securities as may be issued or payable with respect to or in exchange for
the number of shares of Common Stock immediately theretofore purchasable
and receivable upon the conversion of Debentures held by such Holders had
such merger, consolidation, exchange of shares, recapitalization or
reorganization not taken place, and in any such case appropriate
provisions shall be made with respect to the rights and interests of the
Holders of the Debentures to the end that the provisions hereof shall
thereafter be applicable, as nearly as may be practicable in relation to
any shares of stock or securities thereafter deliverable upon the exercise
hereof. The Company shall not effect any transaction described in this
subsection 4(h) unless the resulting successor or acquiring entity (if not
the Company) assumes by written instrument the obligation to deliver to
the Holders of the Debentures such shares of stock and/or securities as,
in accordance with the foregoing provisions, the Holders of the Debentures
may be entitled to purchase.
(iii) If any adjustment under this Section 4(h) would create a
fractional share of Common Stock or a right to acquire a fractional share
of Common Stock, such fractional share shall be disregarded and the number
of shares of Common Stock issuable upon conversion shall be the next
higher number of shares.
5. REDEMPTION.
(a) RIGHT TO REDEEM. The Company shall have the right, in its sole
discretion, upon receipt of a notice of conversion pursuant to Section 4, to
redeem in whole any Debentures submitted for conversion, immediately prior to
conversion.
(b) MECHANICS OF REDEMPTION. The Company shall effect each such
redemption by giving notice of its election to redeem, by facsimile within one
(1) business day following receipt of a notice of conversion from a Holder,
with a copy by 2-day courier, to the Holder of Debentures submitted for
conversion at the address and facsimile number of such Holder appearing in the
Company's register for the Debentures. Such redemption notice shall indicate
whether the Company will redeem all or part of the Debentures submitted for
conversion and the applicable redemption price. The Company shall not be
entitled to send any notice of redemption and begin the redemption procedure
unless it has the full amount of the redemption price, in cash, available in a
demand or other immediately available account in a bank or similar financial
institution on the date the redemption notice is sent to the Holder.
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The redemption price per Debenture shall be calculated as 100% of the five
day average Closing Bid Price immediately preceding the Date of Conversion.
For the purposes of the above formula, "Principal,"and "Interest," shall
have the meanings set forth in Section 4(a).
The redemption price shall be paid to the Holder of Debentures redeemed
within two (2) business days of the delivery of the notice of such redemption
to such Holder; provided, however, that the Company shall not be obligated to
deliver any portion of such redemption price unless either the certificates
evidencing the Debentures redeemed are delivered to the Company or its transfer
agent as provided in Section 4(b), or the Holder notifies the Company or its
transfer agent that such certificates have been lost, stolen or destroyed and
executes an agreement satisfactory to the Company to indemnify the Company from
any loss incurred by it in connection with such certificates.
6. NO PREPAYMENT. The Company shall have no right to prepay this Debenture,
in whole or in part, prior to the Maturity Date: provided, however, that this
Section 6 shall not prevent the Company from exercising the redemption rights
set forth in Section 5 in the event a holder of this Debenture seeks to convert
this Debenture.
7. The following shall constitute an "Event of Default":
(a) The Company shall default in the payment of Principal or Interest on
this Debenture; or
(b) Any of the representations, warranties, or covenants made by the
Company herein, in the Securities Purchase Agreement, Registration Rights
Agreement, Escrow Agreement, or any other related agreements, or in any
certificate or financial or other written statements heretofore or hereafter
furnished by the Company in connection with the execution and delivery of this
Debenture or the Security Purchase Agreement shall be false or misleading in
any material respect at the time made; or
(c) The Company shall fail to perform or observe, in any material
respect, any other covenant, term, provision, condition, agreement, or
obligation of the Company under this Debenture, the Registration Rights
Agreement, the Escrow Agreement, or any other related agreement and such
failure shall continue uncured for a period of ten (10) business days after
written notice from the Holder of such failure; or
(d) The Company shall (1) admit in writing its inability to pay its debts
generally as they mature; (2) make an assignment for the benefit of creditors
or commence proceedings for its dissolution; or (3) apply for or consent to the
appointment of a trustee, liquidator or receiver for its or for a substantial
part of its property or business; or
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(e) A trustee, liquidator or receiver shall be appointed for the Company
or for a substantial part of its property or business without its consent and
shall not be discharged within sixty (60) days after such appointment; or
(f) Any governmental agency or any court of competent jurisdiction at the
instance of any governmental agency shall assume custody or control of the
whole or any substantial portion of the properties or assets of the Company and
shall not be dismissed within sixty (60) days thereafter; or
(g) Any money judgement, writ or warrant of attachment, or similar
process in excess of One Hundred Thousand ($100,000) Dollars in the aggregate
shall be entered or filed against the Company or any of its properties or other
assets and shall remain unpaid, unvacated, unbonded or unstayed for a period of
sixty (60) days or in any event later than five (5) days prior to the date of
any proposed sale thereunder; or
(h) Bankruptcy, reorganization, insolvency liquidation proceedings or
other proceedings for relief under any bankruptcy law or any law for the relief
of debtors shall be instituted by or against the Company and, if instituted
against the Company, the Company shall by any action or answer approve of,
consent to, or acquiesce in any such proceedings or admit the material
allegations of, or default in answering a petition filed in any such
proceeding; or
(i) The Company shall have its Common Stock suspended or delisted from
trading on the over-the-counter market. Then, or any time thereafter, and in
each and every such case, unless such Event of Default shall have been waived
in writing by the holder (which waiver shall not be deemed to be a waiver of
any subsequent default) at the option of the Holder and in the Holder's sole
discretion, the Holder may consider this Debenture immediately due and payable
without presentment, demand, protest or notice of any kinds, all of which are
hereby expressly waived, anything herein or in any note or other instruments
contained to the contrary notwithstanding, and the Holder may immediately
enforce any and all of the Holder's rights and remedies provided herein or any
other rights or remedies afforded by law.
8. NO IMPAIRMENT. Except as expressly provided herein, no provision of this
Debenture shall alter or impair the obligation of the Company, which is
absolute and unconditional, to pay the principal of, and interest on, this
Debenture at the time, place, and rate, and in the coin or currency, herein
prescribed. This Debenture and all other Debentures now or hereafter issued in
similar terms are direct obligations of the Company.
9. TERMINATION. After this Debenture shall have been surrendered for
conversion as herein provided or notice of conversion shall have been given by
the Company pursuant to Section 4(g) herein, this Debenture shall no longer be
deemed to be outstanding and all rights with respect to this Debenture,
including, without limitation, the right to receive interest hereon and the
principal hereof, shall forthwith terminate as of the Date of Conversion,
except only the right of the Holder hereof to receive shares of Common Stock in
exchange herefor.
9
<PAGE>
10. PROTECTIVE PROVISIONS. So long as Debentures are outstanding, the Company
shall not without first obtaining the approval (by vote or written consent, as
provided by law) of the Holders of at least a majority of principal amount of
the then outstanding Debentures (i) alter or change the rights, preferences or
privileges of the Debentures so as to affect adversely the Debentures or (ii)
incur indebtedness which is senior to the Debentures. Notwithstanding the
above, the Company may incur debt with respect to trade credit, purchase money
security interests, inventory and other debt incurred in the ordinary course of
business, including up to $500,000 of secured borrowings from commercial banks
or similar institutional lenders.
11. NO VOTING RIGHTS. This Debenture shall not entitle the Holder hereof to
any of the rights of a stockholder of the Company, including without
limitation, the right to vote, to receive dividends and other distributions, or
to receive any notice of, or to attend, meetings of stockholders or any other
proceedings of the Company.
12. LOST OR DESTROYED DEBENTURE. If this Debenture shall be mutilated, lost,
stolen or destroyed, the Company shall execute and deliver, in exchange and
substitution for and upon cancellation of a mutilated Debenture, or in lieu of
or in substitution for a lost, stolen or destroyed Debenture, a new Debenture
for the principal amount of this Debenture so mutilated, lost, stolen or
destroyed but only upon receipt of evidence of such loss, theft or destruction
of such Debenture, and of the ownership thereof, and indemnity, if requested,
all reasonably satisfactory to the Company.
13. SALES IN COMPLIANCE WITH APPLICABLE LAW. Any Holder of this Debenture, by
acceptance hereof, agrees that such Holder will not offer, sell or otherwise
dispose of this Debenture or the shares of Common Stock issuable upon exercise
thereof except under circumstances which will not result in a violation of the
Act, including Regulation S, if applicable, promulgated under the Act, or any
applicable state Blue Sky law or similar laws relating to the sale of
securities and the Holder agrees to provide the Company with the documentation
required by the Security Purchase Agreement executed by the original Holder
hereof to demonstrate that such offer, sale or disposition complies with
applicable securities laws.
14. 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. Any dispute or controversy between the parties
arising in connection with this agreement or the subject matter contemplated by
this agreement shall be resolved by arbitration before a three-member panel of
the American Arbitration Association in accordance with the commercial
arbitration rules of said forum and the Federal Arbitration Act, 9 U.S.C. 1, ET
SEQ., with the resulting award being final and conclusive. Said arbitrators
shall be empowered to award all forms of relief and damages claimed, including,
but not limited to, attorney's fees, expenses of litigation and arbitration,
exemplary damages, and prejudgment interest. Notwithstanding the foregoing,
Holder may at any time and at its option, whether or not an arbitration action
is then pending, initiate a civil action for temporary and permanent injunctive
and other equitable relief
10
<PAGE>
against Company. Company acknowledges that upon any breach of Holder's
conversion rights hereunder, Holder's resulting injury may not be adequately
compensated by a remedy at law. Accordingly, upon such breach, Holder, at
its election and without limitation of its other remedies, shall be entitled
to pursue a claim for specific performance of this Agreement, and Company
hereby waives the right to assert any defense thereto that Holder has an
adequate remedy at law. The parties further agree that any arbitration
action between them shall be heard in Atlanta, Georgia, and expressly consent
to the jurisdiction and venue of the Superior Court of Fulton County,
Georgia, and the United States District Court for the Northern District of
Georgia, Atlanta Division for the adjudication of any civil action asserted
pursuant to this Paragraph.
15. BUSINESS DAY DEFINITION. For purposes hereof, the term "business day"
shall mean any day on which banks are generally open for business in the State
of New York, USA and excluding any Saturday and Sunday.
16. NOTICES. Any notice, demand or request required or permitted to be given
by either the Company or the Subscriber pursuant to the terms of this Agreement
shall be in writing and shall be deemed given when delivered personally, or by
facsimile (with a hard copy to follow by two day courier), addressed to the
Company at 8-C Commercial Boulevard, Novato, California 94949-6125, Telecopy
No. (415) 883-3363 and with respect to the Holder as disclosed in the
Securities Purchase Agreement or such other addresses as a party may request by
notifying the other in writing.
17. WAIVER. Any waiver by the Company or the Holder hereof of a breach of any
provision of this Debenture shall not operate as or be construed to be a waiver
of any other breach of such provision or of any breach of any other provision
of this Debenture. The failure of the Company or the Holder hereof to insist
upon strict adherence to any term of this Debenture on one or more occasions
shall not be considered a waiver or deprive that party of the right thereafter
to insist upon strict adherence to that term or any other term of this
Debenture. Any waiver must be in writing.
18. UNENFORCEABLE PROVISIONS. If any provision of this Debenture is invalid,
illegal or unenforceable, the balance of this Debenture shall remain in effect,
and if any provision is inapplicable to any person or circumstance, it shall
nevertheless remain applicable to all other persons and circumstances.
11
<PAGE>
EXHIBIT "A"
NOTICE OF CONVERSION
(To be Executed by the Registered Holder
in order to Convert the Convertible Debentures)
The undersigned hereby irrevocably elects to convert $_________ U.S. in
principal amount of Convertible Debentures ("Convertible Debentures"),
represented by Debenture No(s). ____ (the "Convertible Debentures
Certificate(s)") into shares of common stock ("Common Stock"), $0.01 par value,
of Spatialight, Inc. (the "Company") according to the conditions of the
Convertible Debentures, as of the date written below. If shares are to be
issued in the name of a person other than undersigned, the undersigned will pay
all transfer taxes payable with respect thereto and is delivering herewith such
certificates. No fee will be charged to the undersigned for any conversion,
except for transfer taxes, if any.
The undersigned represents that it and each person or entity on whose behalf it
holds Convertible Debentures to be converted into Common Stock (each an
"Investor"): (i) is familiar with and understands the terms, conditions and
requirements contained in Regulation S ("Regulation S") promulgated under the
Securities Act of 1933, as amended (the "Act"); (ii) is not a "U.S. Person" or
"distributor" as defined in Regulation S; (iii) purchased the Convertible
Debentures for which conversion is being elected, and is purchasing the Common
Stock referenced herein, for its own account and for the account of each
Investor and not for the account or benefit of any U.S. Person; (iv) will
comply with the transfer restrictions contained in Section 4(1) of the Act to
the extent applicable; (v) during the Restricted Period (as defined in the
Securities Purchase Agreement), has not had a "short" position in the Company's
securities (including any short call position or any long put position or any
contract or arrangement that had the effect of eliminating or substantially
diminishing the risk of ownership of the Convertible Debentures); (vi) has no
prior understanding with respect to the sale of the Common Stock to any third
party; (vii) has not engaged in any "directed selling efforts" (as such term is
defined in Regulation S) with respect to the Convertible Debentures or the
Common Stock issuable upon conversion of the Convertible Debentures; (viii)
purchased the Convertible Debentures with investment intent and will dispose of
the Common Stock only in compliance with Regulation S and all other applicable
provisions of the federal securities laws; (ix) will make any sale, transfer or
other disposition of the Common Stock in full compliance with the Act, the
Exchange Act, as amended, and the rules and regulations of the Securities and
Exchange Commission promulgated thereunder; and (x) received the offer to
purchase the Convertible Debentures outside the United States and, at the time
the Subscription Agreement pursuant to which the Convertible Debentures was
executed was, and upon execution of this Notice of Conversion is, outside the
United States. The undersigned has obtained representations from each Investor
with respect to compliance with paragraphs (i) - (x) of this Notice.
Conversion Calculations: ________________________________________
Date of Conversion
________________________________________
Applicable Conversion Price
________________________________________
Signature
________________________________________
Name
Address:
________________________________________
________________________________________
<PAGE>
REGISTRATION RIGHTS AGREEMENT
REGISTRATION RIGHTS AGREEMENT (this "Agreement"), dated as of December
____, 1997 by and among Spatialight, Inc., a New York corporation, with
headquarters at 8-C Commercial Boulevard, Novato, California 94949-6125 (the
"COMPANY"), and the undersigned buyer (the "BUYER" ).
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, (i) to issue and sell to the Buyer's shares of
the Company's 3% Convertible Debenture (the "DEBENTURES"), which will be
convertible into shares of the Company's common stock, $.01 par value per share
(the "COMMON STOCK") (as converted, the "CONVERSION SHARES") in accordance with
the terms of the Debentures; and
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 the Buyer and any transferee or assignee
thereof to whom the 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.
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").
<PAGE>
d. REGISTRABLE SECURITIES" means the Conversion Shares issued or
issuable upon conversion of the Debentures and any shares of capital stock
issued or issuable with respect to the Conversion Shares or the Debentures
as a result of any stock split, stock dividend, recapitalization,
exchange, or similar event.
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 for the in the Securities Purchase Agreement.
2. REGISTRATION.
a. MANDATORY REGISTRATION. The Company shall prepare, and, on or
prior to thirty (30) days after the date of issuance of any Debentures,
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 each Buyer and the provisions of Section 2(e),
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 indeterminate number of
additional shares of Common Stock as may become issuable upon conversion
of the Debentures (i) to prevent dilution resulting from stock splits,
stock dividends or similar transactions and (ii) by reason of changes in
the Conversion Price or Conversion Rate of the Debentures in accordance
with the terms thereof Such Registration Statement shall initially
register for resale at least 5,000,000 shares of Common Stock, subject to
adjustment as provided in Section 3(b), and 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 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
shall use its best reasonable efforts to have the Registration Statement
declared effective by the SEC within ninety (90) days after the issuance
of the Debentures (the "Registration Deadline"). The Company shall permit
the registration statement to become effective within five (5) business
days after receipt of a "no review" notice from the SEC. In the event
that the Registration Statement is not declared effective by the SEC by
the Registration Deadline then the Applicable Discount to be used in
determining the Conversion Price (as defined in the Debenture) shall be
INCREASED by (i) an additional 3% if the Registration Statement is not
declared effective by the SEC within thirty (30) days following the
Registration Deadline, or (ii) an additional 6% if the Registration
Statement is not declared effective by the SEC within ninety (90) days of
the Registration Deadline.
b. UNDERWRITTEN OFFERING. If any offering pursuant to a
Registration Statement pursuant to Section 2(a) involves an underwritten
offering, the Buyers shall have the right to select one legal counsel and
an investment banker or bankers and manager or managers
<PAGE>
to administer their interest in the offering, which investment banker or
bankers or manager or managers shall be reasonably satisfactory to the
Company.
c. PIGGY-BACK REGISTRATIONS. If at any time 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 an 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 OR COMPANY ACCOUNT. If the registration referred to in
Section 2(c) is to be an underwritten public offering for the account of
the Company 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 is necessary to facilitate
and not 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 Registration
Statement by reason of demand registration rights, and (3) third, the
securities requested to be registered by the Investors and other holders
of securities entitled to participate in the registration, 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,
warrants, and covenants that it has filed and shall file all reports
required to be filed by the Company with the SEC in a timely manner so as
to obtain and maintain potential 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 (i) the Company, with the consent of each
Investor pursuant to Section 2(a), shall register the sale of the
Registrable Securities on another appropriate form and
<PAGE>
(ii) the Company shall undertake to register the Registrable Securities
on Form S-3 as soon as such form is available.
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 reasonable 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 thirtieth (30th) day following the date of issuance of any
Debentures, for the registration of Registrable Securities pursuant to
Section 2(a)) and use its best reasonable efforts to cause such
Registration Statement(s) relating to Registrable Securities to become
effective as soon as possible after such filing (by the ninetieth (90th)
day following the issuance of the relevant Debentures for the registration
of Registrable Securities pursuant to Section 2(a), and keep the
Registration Statement(s) 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 Debentures is outstanding (the "REGISTRATION PERIOD"),
which Registration Statement(s) (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 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.
b. The Company shall prepare and file with the SEC such
amendments (including post-effective amendments) and supplements to the
Registration Statement(s) and the prospectus(es) used in connection with
the Registration Statement(s), which prospectus(es) are to be filed
pursuant to Rule 424 promulgated under the 1933 Act, as may be necessary
to keep the Registration Statement(s) 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 the Registration Statement(s) until
such time as all of such Registrable Securities shall have been disposed
of in accordance with the intended methods of disposition by the seller or
sellers thereof as set forth in the Registration Statement(s). 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 amend the Registration Statement, or file a
new Registration Statement (on the short form available therefor, if
applicable), or both, 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 reasonable 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
<PAGE>
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 Debentures is greater than the quotient
determined by dividing (i) the number of shares of Common Stock available
for resale under such Registration Statement by (ii) 1.5; provided that in
the case of the initial registration of the Registrable Securities
pursuant to Section 2(a), the Company shall be required to register at
least 5,000,000 shares of Common Stock for resale. For purposes of the
calculation set forth in the foregoing sentence, any restrictions on the
convertibility of the Debentures shall be disregarded and such calculation
shall assume that the Debentures are then convertible into shares of
Common Stock at the then prevailing Conversion Rate (as defined in the
Debentures).
c. The Company shall furnish to each Investor whose Registrable
Securities are included in the Registration Statement(s) and its legal
counsel without charge (i) promptly after the same is prepared and filed
with the SEC at least one copy of the Registration Statement and any
amendment thereto, including financial statements and schedules, all
documents incorporated therein by reference and all exhibits, the
prospectus(es) included in such Registration Statement(s) (including
each preliminary prospectus ) and, with regards to the Registration
Statement, 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 and all amendments
and 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 the Registration
Statement(s) 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 quality 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 (a)
qualify to do business in any jurisdiction where it would not otherwise be
required to qualify but for this Section 3(d), (b) subject itself to
general taxation in any such jurisdiction, or (c) 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.
<PAGE>
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.
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, of which the Company has knowledge, 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
the 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, (iii) of the Company's
reasonable determination that a post-effective amendment to a Registration
Statement would be appropriate.
g. The Company shall use its best reasonable 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 a single firm of
counsel or such other counsel as thereafter designated as selling
stockholders' counsel by the Investors who hold a majority of the
Registrable Securities being sold, to review and comment upon the
Registration Statement(s) and all amendments and supplements thereto at
least seven (7) 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(s) 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 their best
reasonable efforts to furnish, on the date that Registrable 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
<PAGE>
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 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 mutually determined to be 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. 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 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 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 reasonable efforts either to
(i) cause all the Registrable Securities covered by a Registration
Statement to be listed on each national securities exchange on which
securities of the same class or series issued by the Company
<PAGE>
are then listed, if any, if the listing of such Registrable Securities
is then permitted under the rules of such exchange, (ii) if at any time
during the Registration Period the Company is able to satisfy the
relevant listing criteria, secure designation and quotation of all the
Registrable Securities covered by the Registration Statement on the
Nasdaq National Market System, (iii) if, despite the Company's best
reasonable efforts to satisfy the preceding clause (i) or (ii), the
Company is unsuccessful in satisfying the preceding clause (i) or (ii),
if at any time during the Registration Period the Company is able to
satisfy the relevant listing criteria, to secure the inclusion for
quotation on the Nasdaq SmallCap Market for such Registrable Securities
or, (iv) if, despite the Company's best reasonable efforts to satisfy
the preceding clause (iii), the Company is unsuccessful in satisfying
the preceding clause (iii), to secure the inclusion for quotation on the
over-the-counter market for such Registrable Securities, and, without
limiting the generality of the foregoing, in the case of clause (iii) or
(iv), 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. Not later than the date on which any Registration
Statement registering the resale of Registrable Securities is declared
effective, the Company shall deliver to its transfer agent instructions,
accompanied by any reasonably required opinion of counsel, that permit
sales of unlegended securities in a timely fashion that complies with then
mandated securities settlement procedures for regular way market
transactions.
n. The Company shall take all other reasonable actions
necessary to expedite and facilitate disposition by the Investors of
Registrable Securities pursuant to a Registration Statement.
o. The Company shall provide a transfer agent and registrar of
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 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 with respect to any other terms of the underwritten (or
best reasonable efforts underwritten) offering of the Registrable
Securities to be sold in such offering; make all required filings of such
prospectus supplement or post-effective amendment as soon as notified of
the
<PAGE>
matters to be incorporated in such prospectus supplement or
post-effective amendment; and supplement or make amendments to any
Registration Statement if requested by a shareholder or any underwriter
of such Registrable Securities.
q. The Company shall use its best reasonable 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.
r. The Company shall otherwise use its best reasonable efforts
to comply with all applicable rules and regulations of the SEC in
connection with any registration hereunder.
4. OBLIGATIONS OF THE INVESTORS.
a. At least seven (7) days prior to the first anticipated
filing date of the Registration Statement, the Company shall notify each
Investor in writing of the information the Company requires from each such
Investor if such Investor elects to have any of such Investor's
Registrable Securities included in the 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 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
the Registration Statement(s) 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 the Registration Statement.
c. In the event Investors holding a majority of the
Registrable Securities being registered determine to engage the services
of an underwriter, each Investor agrees to enter into and perform such
Investor's obligations under an underwriting agreement, in usual and
customary form, including, without limitation, customary indemnification
and contribution obligations, 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,
unless such Investor notifies the Company in writing of such Investor's
election to exclude all of such Investor's Registrable Securities from the
Registration Statement(s).
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 the
Registration Statement(s) covering such Registrable Securities until such
Investor's receipt of the copies of the supplemented or amended prospectus
contemplated by Section
<PAGE>
3(g) or the first sentence of 3(f) and, if so directed by the Company,
such Investor shall deliver to the Company (at the expense of the
Company) or destroy all copies in such Investor's possession, of the
prospectus covering such Registrable Securities current at the time of
receipt of such notice.
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.
All reasonable expenses, other than underwriting discounts and
commissions, 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,
and fees and disbursements of counsel for the Company and fees and
disbursements of one counsel for the Investors, shall be borne 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 will,
and hereby does, indemnify, hold harmless and defend each Investor who
holds such Registrable Securities, the directors, officers, partners,
employees, agents 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, judgments, fines, penalties,
charges, costs, attorneys' fees, amounts paid in settlement or expenses,
joint or several, (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
<PAGE>
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 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 mission 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 (i) 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 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
<PAGE>
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; 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 indemnity
agreement contained in this Section 6(b) and Section 7 shall not apply
to amounts paid in settlement of any Claim if such settlement is
effected without the prior written consent of such Investor, which
consent shall not be unreasonably withheld; provided, further, 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. Such indemnity
shall remain in full force and effect regardless of any investigation
made by or on behalf of such 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 in this Section 6(b) 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.
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 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
<PAGE>
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 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.
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
<PAGE>
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 1933 Act and 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 Rule
144, the 1933 Act and 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 to have the Company register Registrable Securities pursuant to
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 such transferee or assignee, and (b) the securities with respect to
which such registration rights are being transferred or assigned; (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; (v) such transfer shall have been made in
accordance with the applicable requirements of the Securities Purchase
Agreement; (vi) such transferee shall be an "ACCREDITED INVESTOR" as that term
is defined in Rule 501 of Regulation D promulgated under the 1933 Act; and
(vii) in the event the assignment occurs subsequent to the date of
effectiveness of the Registration Statement required to be filed pursuant to
Section 2(a), the transferee agrees to pay all reasonable expenses of amending
or supplementing such Registration Statement to reflect such assignment.
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 two-thirds of the Registrable Securities.
<PAGE>
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 copy is mailed by U.S. certified mail, return receipt
requested; (iii) three (3) days after being sent by U.S. certified mail,
return receipt requested, or (d) 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: Spatialight, Inc.
8-C Commercial Boulevard
Novato, California 94949-6125
Facsimile: (415) 883-3363
With a copy to: Brad Rock, Esq.
Gray, Cary, Ware & Freidenrich
400 Hamilton Street
Palo Alto, California 94301
Facsimile: (650) 327-3699
If to a Buyer, to its address and facsimile number on the Schedule of
Buyers, with copies to such Buyer's counsel 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.
c. Failure of any party to exercise any right or remedy under
this Agreement or otherwise, 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. 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.
<PAGE>
e. This Agreement and the Securities Purchase Agreement
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 and the Securities
Purchase Agreement 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 and 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.
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:
SPATIALIGHT, INC. ____________________________
By: By:
-------------------------- ---------------------------------
Name: William E. Hollis Name: ___________________________
Its: Chairman of the Board, Its:
Chief Executive Officer,
and Chief Financial Officer
<PAGE>
SECURITIES PURCHASE AGREEMENT
SECURITIES PURCHASE AGREEMENT (the "Agreement"), dated as of December 24,
1997, by and among Spatialight, Inc., a New York corporation, with headquarters
located at 8-C Commercial Boulevard, Novato, California 94949-6125 (the
"Company"), and the investor listed on the Schedule of Buyers attached hereto
(individually, a "Buyer" or collectively "Buyers").
WHEREAS:
A. The Company and the Buyers are executing and delivering this
Agreement in reliance upon the exemption from securities registration pursuant
to Regulation S ("Regulation S") promulgated under the Securities Act of 1933,
as amended (the "1933 Act"),
B. The Company is offering for sale to the Buyer 3% Convertible
Debentures (the "Debentures") of the Company, due on December 24, 1999, and
offered in denominations of $100,000 and integral multiples of $50,000 in
excess thereof for at least $300,000 in aggregate amount and up to an aggregate
principal amount of $800,000. The terms of the Debentures, including the terms
on which the Debentures may be converted into the common stock of the Company,
$.01 par value, are set forth in the Debenture, in substantially the form
attached as Exhibit "A" hereto.
C. The Buyer wishes to purchase, upon the terms and conditions stated
in this Agreement, an aggregate principal amount of up to $450,000 of
Debentures in the respective amounts set forth opposite each Buyer's name on
the Schedule of Buyers;
D. 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 "B" (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; and
NOW THEREFORE, the Company and the Buyer hereby agree as follows:
1. PURCHASE AND SALE OF DEBENTURES.
a. PURCHASE OF DEBENTURES. Subject to the satisfaction (or
waiver) of the conditions set forth in Sections 6 and 7 below, the Company
shall issue and sell to the Buyers and the Buyers shall purchase from the
Company an aggregate principal amount of $450,000 Debentures, in the
respective amounts set forth opposite each Buyer's name on the Schedule of
Buyers (the "Closing").
<PAGE>
b. CLOSING DATE. The date and time of the Closing (the "Closing
Date") shall be 10:00 a.m. Central Standard Time, within five (5) business
days following the date hereof, subject to notification of satisfaction
(or waiver) of the conditions to the Closing set forth in Sections 6 and 7
below (or such later date as is mutually agreed to by the Company and the
Buyer
c. FORM OF PAYMENT. On the Closing Date, (i) each Buyer shall pay
the Purchase Price to the Company for the Debentures 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, certificates representing such
Debentures which such Buyer is then purchasing (as indicated opposite such
Buyer's name on the Schedule of Buyers), duly executed on behalf of the
Company and registered in the name of such Buyer or its designee (the
"Certificates").
2. BUYER'S REPRESENTATIONS AND WARRANTEES.
Each Buyer represents and warrants with respect to only itself that:
a. INVESTMENT PURPOSE. Such Buyer is acquiring the Debentures, and
upon conversion of the Debentures will acquire the Conversion Shares then
issuable, for its own account for investment only and not with a view
towards, or for resale in connection with, the public sale or distribution
thereof, except pursuant to sales registered or exempted under the 1933
Act; provided, however, that by making the representations herein, such
Buyer does not agree to hold any Debentures or Conversion Shares for any
minimum or other specific term other than required by Regulation S and
reserves the right to dispose of Debentures or Conversion Shares at any
time in accordance with or pursuant to a registration statement or an
exemption under the 1933 Act.
b. ACCREDITED INVESTOR STATUS. Such Buyer is an "accredited
investor" as that term is defined in Rule 501(a)(3) of Regulation D. The
Buyer represents and warrants to the Company that (i) the Buyer is not a
"U.S. person" as that term is defined in Rule 902(o) of Regulation S and
the Buyer was not formed by a "U.S. person" for the purpose of investing
in securities not registered under the Act, unless the Buyer is or was
organized or incorporated by "U.S. persons" who are accredited investors
(as defined in Rule 501(a) under the 1933 Act) and who are not natural
persons, estates or trusts, and all owners of interests in such entity who
are not "U.S. persons" are Institutional Investors, and not natural
persons, estates or trusts; (ii) the Debentures were not offered to the
Buyer in the United States and at the time of execution of this Debenture
Agreement and of any offer to the Buyer to purchase the Debentures
hereunder, the Buyer was physically outside the United States; (iii) the
Buyer is purchasing the Debentures for its own account and not on behalf
of or for the benefit of any U.S. person and the sale and resale of the
Debentures have not been prearranged with any buyer in the United States;
(iv)Buyer knows of not public solicitation or advertisement of an offer in
the U.S. in connection with the transactional contemplated herein; and the
Buyer, and to the best
<PAGE>
knowledge of the Buyer each distributor, if any, participating in the
offering of the Securities, has agreed and the Buyer hereby agrees that
all offers and sales of the Securities prior to the expiration of a
period commencing on the Closing of all Debentures offered and ending
forty days thereafter (the "Regulation S Restricted Period") shall not
be made to U.S. persons or for the account or benefit of U.S. persons
and shall otherwise be made in compliance with the provisions of
Regulation S whether currently in effect or hereafter amended. The
Buyer has not been engaged as a distributor or dealer with respect to
this transaction.
c. RELIANCE ON EXEMPTIONS. Such Buyer understands that the
Debentures and the Conversion Shares 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
furnished with all materials relating to the business, finances and
operations of the Company and materials relating to the offer and sale of
the Debentures and the Conversion Shares, which have been requested by
such Buyer. Such Buyer and its advisors, if any, have 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 Debentures and the Conversion Shares 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 Debentures and the Conversion Shares.
Buyer understands that the SEC has proposed to revise Regulation S and
that such revisions and recent pronouncements will have a material impact
on the Buyers utilization of Reg S, if applicable, among other things.
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
Debentures and the Conversion Shares, or the fairness or suitability of
the investment in the Debentures and the Conversion Shares, nor have such
authorities passed upon or endorsed the merits of the offering of the
Debentures and the Conversion Shares.
f. TRANSFER OR RESALE. Such Buyer understands that except as
provided in the Registration Rights Agreement: (i) the Debentures and the
Conversion Shares 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
<PAGE>
registration, or (c) such Buyer provides the Company with reasonable
assurance that such securities can be sold, assigned or transferred
pursuant to Rule 144 (or Regulation S promulgated under the 1933 Act (or
a successor rule thereto); (ii) any sale of such securities made in
reliance on Rule 144 promulgated under the 1933 Act (or a successor rule
thereto) ("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 such
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. The certificate(s) representing the Debentures shall
bear the legend set forth below. Assuming at the time of conversion
Subscriber is not a "U.S. Person" and has not been a "U.S. Person" since
the date of subscription, the Company shall cause its legal counsel to
issue such opinion as shall be required by the Company's transfer agent in
order for the transfer agent to deliver to Subscriber, upon conversion, a
certificate representing the Shares into which the Debenture is converted
after the restricted period as defined below without restrictive legend of
any kind.
"The Convertible Debentures of Spatialight, Inc. (the "Issuer") represented
by this certificate have been issued pursuant to Regulation S, promulgated
under the Securities Act of 1933, as amended (the "Act"), and have not been
registered under the Act or any applicable state securities laws. These
debentures may not be offered or sold within the United States or to or for
the account of a "U.S. Person" (as that term is defined in Regulation S)
during the period commencing on the sale of these securities and ending on
the forty-fifth (45th) day following completion of the Regulation S offering
of the Issuer pursuant to which these debentures have been issued, which day
is December 24, 1997 (the "Restricted Period"). The principal amount of
debentures represented by this certificate may first be converted into common
stock of the issuer on the forty-fifth (45th) day following completion of the
Regulation S offering of the Issuer pursuant to which these debentures have
been issued, which day is February 7, 1997 (the "Conversion Holding Period").
The Issuer will notify the transfer agent of the date of completion of such
offering and of the expiration of such Restricted Period and Conversion
Holding Period. Following expiration of the Restricted Period, these
debentures may not be offered or sold unless such offer or sale is registered
or exempt from registration under the Act."
h. SUBSCRIBER'S RIGHTS IN THE EVENT SHARES ISSUED WITH A
RESTRICTIVE LEGEND. In the event that the Company issues Conversion
Shares with a restrictive legend upon Conversion by the Subscriber and
Subscriber is not a "U.S. Person" and has not been a "U.S. Person" since
the date of subscription, then Subscriber, at its option, may require the
Company immediately to (i) redeem the Debentures submitted for conversion
at the Conversion Price (as defined in the Debenture) determined under
Section 4(a) of the Debenture, provided, however, that nothing hereunder
shall affect any other Subscriber's rights under the terms of the
Registration Rights Agreement.
<PAGE>
i. TRANSFERS. The Company agrees, and shall instruct its agents,
that the Securities may be transferred to any person or entity who is not
an affiliate of the Company if such transfer occurs after the Restricted
Period, without (a) any further restriction on transfer (provided the
transfer is made in compliance with the Act) or (b) the entry of a "stop
transfer" order against such Securities, and the Securities delivered to
the transferee shall not bear a legend. The Company may place a stop
transfer order on any Common Stock issued upon conversion of Debentures
during the Restricted Period for the duration of the Restricted Period.
Upon election by the Subscriber to convert the Debentures into Shares, the
Subscriber shall deliver to the Company a duly completed Notice of
Conversion (a "Notice of Conversion") in the form attached to the
Debenture.
j. 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 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.
k. RESIDENCY. Such Buyer is a resident of that state and country
specified in its address on the Schedule of Buyers.
l. NO SCHEME TO EVADE REGISTRATION. Buyer represents and warrants
to the Company that the acquisition of the Debentures and the Conversion
Shares is not a transaction (or any element of a series of transactions)
that is part of a plan or scheme by the Buyer to evade the registration
provisions of the 1933 Act.
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 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
on the Company and its subsidiaries taken as a whole.
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 Registration Rights Agreement and any
related agreements, and to issue the Debentures and the Conversion Shares
in accordance with the terms hereof and
<PAGE>
thereof, (ii) the execution and delivery of this Agreement, the
Registration Rights Agreement and any related agreements by the Company
and the consummation by it of the transactions contemplated hereby and
thereby, including without limitation the issuance of the Debentures and
the reservation for issuance and the issuance of the Conversion Shares
issuable upon conversion or exercise thereof, 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, (iii) this Agreement and the Registration Rights Agreement
and any related agreements have been duly executed and delivered by the
Company, and (iv) this Agreement, the Registration Rights Agreement and
any related agreements 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 similar laws relating to, or
affecting generally, the enforcement of creditors' rights and remedies.
c. CAPITALIZATION. As of the date hereof, the authorized capital
stock of the Company consists of 20,000,000 shares of Common Stock, of
which as of the date hereof 9,201,111 shares were issued and outstanding,
and no shares of Preferred Stock were issued and outstanding. All of such
outstanding shares have been 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 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 and (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 the Registration Rights Agreement).
There are no securities or instruments containing anti-dilution or similar
provisions that will be triggered by the issuance of the Debentures or the
Conversion Shares as described in this Agreement. The Company has
furnished to the Buyer true and correct copies of the Company's Articles
of Incorporation, as amended and as in effect on the date hereof (the
"Articles 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 Debentures are duly authorized and,
upon issuance in accordance with the terms hereof, shall be (i) validly
issued, fully paid and nonassessable, are free from all taxes, liens and
charges with respect to the issue thereof and
<PAGE>
are entitled to the rights and preferences set forth in the Debentures.
The Conversion Shares issuable upon conversion of the Debentures have
been duly authorized and reserved for issuance. Upon conversion or
exercise in accordance with the Debentures, the Conversion 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.
e. NO CONFLICTS. Except as disclosed in Schedule 3(e), the
execution, delivery and performance of this Agreement by the Company and
the consummation by the Company of the transactions contemplated hereby
will not (i) result in a violation of the Articles of Incorporation or By-
laws or (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 material agreement, indenture or instrument to which the Company
or any of its subsidiaries is a party, or 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 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 as disclosed in Schedule 3(e), neither the Company
nor its subsidiaries is in violation of any term of or in default under
its Articles of Incorporation or Bylaws or their organizational charter or
by-laws, respectively, or any material contract, agreement, mortgage,
indebtedness, indenture, instrument, judgment, decree or order or any
statute, rule or regulation applicable to the Company or its subsidiaries.
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 as specifically contemplated by this
Agreement and as required under the 1933 Act and any applicable state
securities laws, 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 this Agreement or
the Registration Rights Agreement 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 that any facts or circumstances have occurred or
exist which might reasonably be expected to give rise to any of the
foregoing.
f. SEC DOCUMENTS: FINANCIAL STATEMENTS. Since January 1, 1996, the
Company had 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 Securities Exchange Act of 1934, as amended
(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 and the Company's
Registration Statements on Form S-3 filed on April 29, 1997, as amended,
and all exhibits included therein and financial statements and schedules
thereto and documents incorporated by
<PAGE>
reference therein, being hereinafter referred to as the "SEC
Documents"). The Company represents and warrants to the Buyer that the
Company is a "reporting issuer" as defined in Rule 902(1) of Regulation
S and it has a class of securities registered under Section 12(b) or
12(g) of the 1934 Act or is required to file reports pursuant to Section
15(d) of the 1934 Act, and has filed all the materials required to be
filed as reports pursuant to the Exchange Act for a period of at least
twelve months preceding the date hereof (or for such shorter period as
the Company was required by law to file such material). 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 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 Buyer 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.
g. ABSENCE OF CERTAIN CHANGES. Except as disclosed in Schedule
3(g) and in the SEC documents, since January 1, 1996, there has been no
material adverse change and no material adverse development in the
business, properties, operations, financial condition, results of
operations or prospects 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
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,
wherein an unfavorable decision, ruling or finding would (i) have a
material adverse effect on the transactions contemplated hereby (ii)
adversely affect
<PAGE>
the validity or enforceability of, or the authority or ability of the
Company to perform its obligations under, this Agreement or any of the
documents contemplated herein or (iii), except as expressly set forth in
the SEC Documents or in Schedule 3(h), have a material adverse effect on
the business, operations, properties, financial condition or results of
operation of the Company and its subsidiaries taken as a whole.
i. ACKNOWLEDGMENT REGARDING BUYER'S PURCHASE OF DEBENTURES. The
Company acknowledges and agrees that the Buyer is acting solely in the
capacity of an arm's length purchaser with respect to this Agreement and
the transactions contemplated hereby. The Company further acknowledges
that the Buyer is not acting as a financial advisor or fiduciary of the
Company (or in any similar capacity) with respect to this Agreement and
the transactions contemplated hereby and any advice given by the Buyer or
any of their respective representatives or agents in connection with this
Agreement and the transactions contemplated hereby is merely incidental to
such Buyer's purchase of the Debentures or the Conversion Shares. The
Company further represents to the Buyer that the Company's decision to
enter into this Agreement has been based solely on the independent
evaluation by the Company and its representatives.
j. NO UNDISCLOSED EVENTS, LIABILITIES, DEVELOPMENTS OR
CIRCUMSTANCES. No known event, liability, development or circumstance has
occurred or exists, or is contemplated to occur, with respect to the
Company or its subsidiaries or their respective business, properties,
prospects, operations or financial condition, which could be material but
which has not been publicly announced or disclosed in writing to the
Buyer. The Company represents that it has not offered the Debentures or
Conversion Shares to the Buyer in the U.S. or, to the best knowledge of
the Company, to any person in the United States or any U.S. person.
k. NO GENERAL SOLICITATION. 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 Debentures or the Conversion Shares.
l. NO INTEGRATED OFFERING. Neither the Company, nor any of its
affiliates, nor any person acting on its or their behalf has, directly or
indirectly, made any offers or sales of any security or solicited any
offers to buy any security, under circumstances that would require
registration of the Debentures or the Conversion Shares under the 1933 Act
or cause this offering of Debentures or the Conversion Shares to be
integrated with prior offerings by the Company for purposes of the 1933
Act or any applicable stockholder approval provisions.
m. EMPLOYEE RELATIONS. Neither the Company nor any of its
subsidiaries is involved in any labor dispute nor, to the knowledge of the
Company or any of its subsidiaries, is any such dispute threatened. None
of the Company's or its subsidiaries' employees is a member of a union and
the Company and its subsidiaries believe that their relations with their
employees are good.
<PAGE>
n. INTELLECTUAL PROPERTY RIGHTS. To the best of the Company's
knowledge, 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 as set forth on Schedule 3(n), none of the Company's
trademarks, trade names, service marks, service mark registrations,
service names, patents, patent rights, copyrights, inventions, licenses,
approvals, government authorizations, trade secrets or other intellectual
property rights have expired or terminated, or are expected to expire or
terminate in the near future. 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, and except
as set forth on Schedule 3(n), 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. The
Company and its subsidiaries have taken reasonable security measures to
protect the secrecy, confidentiality and value of all of their
intellectual properties.
o. ENVIRONMENTAL LAWS. The Company and its subsidiaries are (i) in
compliance with any and all 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.
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 which is material
to the business of the Company and its subsidiaries, 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 and its subsidiaries. Any real property and
facilities held under lease by the Company and 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
<PAGE>
businesses in which the Company and its subsidiaries are engaged.
Neither the Company nor any such subsidiary has been refused any
insurance coverage sought or applied for and neither the Company nor any
such subsidiary 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, 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 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 on the business, properties,
operations, financial condition, results of operations or prospects of the
Company or its subsidiaries. Neither the Company nor any of its
subsidiaries is a party to any contract or agreement which in the judgment
of the Company's officers has or is expected to have a material adverse
effect on the business, properties, operations, financial condition,
results of operations or prospects of the Company or its subsidiaries.
u. TAX STATUS. Except as set forth on Schedule 3(u), 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 has set aside on its 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
<PAGE>
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. CERTAIN TRANSACTIONS. Except as set forth on Schedule 3(v) and
in the SEC Documents and except for arm's length transactions pursuant to
which the Company makes payments in the ordinary course of business upon
terms no less favorable than the Company could obtain from third parties
and other than the grant of stock options disclosed on Schedule 3(c), none
of the officers, directors, or employees of the Company is presently a
party to any transaction with the Company (other than for services as
employees, officers and directors), including any contract, agreement or
other arrangement providing for the furnishing of services to or by,
providing for rental of real or personal property to or from, or otherwise
requiring payments to or from any officer, director or such employee or,
to the knowledge of the Company, any corporation, partnership, trust or
other entity in which any officer, director, or any such employee has a
substantial interest or is an officer, director, trustee or partner.
w. DILUTIVE EFFECT. The Company understands and acknowledges that
the number of Conversion Shares issuable upon conversion of the Debentures
will increase in certain circumstances. The Company further acknowledges
that its obligation to issue Conversion Shares upon conversion of the
Debentures in accordance with this Agreement and the Debentures is
absolute and unconditional regardless of the dilutive effect that such
issuance may have on the ownership interests of other stockholders of the
Company.
x. FEES AND RIGHTS OF FIRST REFUSAL. The Company is not obligated
to offer the securities offered hereunder on a right of first refusal
basis or otherwise to any third parties including, but not limited to,
current or former shareholders of the Company, underwriters, brokers,
agents, or other third parties.
y. NO DIRECTED SELLING EFFORTS IN REGARD TO THIS TRANSACTION.
Neither the Company nor, to the best knowledge of the Company, any
distributor participating in this offering, nor any person acting for the
Company or any such distributor, has conducted any "directed selling
efforts" in the United States as the term "directed selling efforts" is
defined in Rule 902 of Regulation S, which in general, means any activity
undertaken for the purpose of, or that could reasonably be expected to
have the effect of, conditioning the market in the United States for any
of the securities being offered herein. Such activity includes, without
limitation, the mailing of printed material to investors residing in the
United States, the holding of promotional seminars in the United States,
and the placement of advertisements with radio or television stations
broadcasting in the United States or in publications with a general
circulation in the United States, which discuss the offering of the such
securities.
z. FEES AND RIGHTS OF FIRST REFUSAL. The Company is not obligated
to offer the securities offered hereunder on a right of first refusal
basis or otherwise to any third parties including, but not limited to,
current or former shareholders of the Company, underwriters, brokers,
agents or other third parties.
<PAGE>
4. COVENANTS.
a. BEST EFFORTS. Each party shall use its best reasonable efforts
timely to satisfy each of the conditions to be satisfied by it as provided
in Sections 6 and 7 of this Agreement.
b. [LEFT INTENTIONALLY BLANK]
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 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 (B) none of the Debentures is 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 Debentures 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 Buyer who still holds Debentures or Conversion Shares during the
Registration Period: (i) within five (5) 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) within one
(1) day after release thereof, copies of all press releases issued by the
Company or any of its subsidiaries and (ii) copies of the same notices and
other information given to the stockholders of the Company generally,
contemporaneously with the giving thereof to the stockholders.
f. [LEFT INTENTIONALLY BLANK]
g. LISTINGS. The Company shall promptly secure the listing of the
Conversion Shares upon each national securities exchange or automated
quotation system, if any, 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 Conversion Shares from time to time issuable under the terms of
this Agreement and the Registration Rights Agreement. The Company shall
use its best reasonable efforts to maintain the Common Stock's
authorization for quotation in the over-the counter market. The Company
shall promptly provide to each Buyer copies of any notices it receives
regarding the continued eligibility of the Common Stock for trading in the
over-the-counter market.
<PAGE>
h. EXPENSES. Each of the Company and the Buyer shall pay all costs
and expenses incurred by such party in connection with the negotiation,
investigation, preparation, execution and delivery of this Agreement and
the Registration Rights Agreement. The costs and expenses of J.P. Carey,
Inc. and its counsel shall be paid for by the Company at Closing.
i. AUTHORIZED SHARES OF COMMON STOCK, RESERVATION OF SHARES. The
Company shall at all times, so long as any of the Debentures are
outstanding, reserve and keep available out of its authorized and unissued
Common Stock, solely for the purpose of effecting the conversion of the
Debentures, such number of shares of Common Stock equal to or greater than
150% of the number of shares of Common Stock for which are issuable upon
conversion of all of the then outstanding Debentures which are then
outstanding or which could be issued at any time under this Agreement or
the Debentures.
j. CORPORATE EXISTENCE. So long as any Debentures remain
outstanding, the Company shall not directly or indirectly consummate any
merger, reorganization, restructuring, consolidation, sale of all or
substantially all of the Company's assets or any similar transaction or
related transactions (each such transaction, a "Sale of the Company")
except if the surviving or successor entity in such transaction (i)
expressly assumes, in writing, the Company's obligations hereunder and
under the Registration Rights Agreement, the Debentures and any other
agreements and instruments entered into or delivered by the Company in
connection herewith and (ii) is a publicly traded corporation whose Common
Stock is listed for trading on the New York Stock Exchange, Inc., the
American Stock Exchange or the NASDAQ National Market or electric bulletin
board.
k. TRANSACTIONS WITH AFFILIATES. So long as (i) any Debentures are
outstanding or (ii) any Buyer owns Conversion Shares with a market value
equal to or greater than $200,000 for every $770,000 raised by the
Placement Agent on behalf of the Company hereunder, the Company shall not,
and shall cause each of its subsidiaries not to, enter into, amend, modify
or supplement, or permit any subsidiary to enter into, amend, modify or
supplement any agreement, transaction, commitment, or arrangement with any
of its or any subsidiary's officers, directors, person who were officers
or directors at any time during the previous two years, stockholders who
beneficially own 5% or more of the Common Stock, or affiliates or with any
individual related by blood, marriage, or adoption to any such individual
or with any entity in which any such entity or individual owns a 5% or
more beneficial interest (each a "Related Party"), except for (a)
customary employment arrangements and benefit programs on reasonable
terms, (b) any agreement, transaction, commitment, or arrangement on an
arms-length basis on terms no less favorable than terms which would
have been obtainable from a person other than such Related Party,
(c) any agreement transaction, commitment, or arrangement which is
approved by a majority of the disinterested directors of the Company,
for purposes hereof, any director who is also an officer of the
Company or any subsidiary of the Company shall not be a disinterested
director with respect to any such agreement, transaction, commitment, or
<PAGE>
arrangement. "Affiliate" for purposes hereof means, with respect to any
person or entity, another person or entity that, directly or indirectly,
(i) has a 5% or more equity interest in that person or entity, (ii) has
5% or more common ownership with that person or entity, (iii) controls
that person or entity, or (iv) shares common control with that person or
entity. "Control" or "controls" for purposes hereof means that a person
or entity has the power, direct or indirect, to conduct or govern the
policies of another person or entity.
l. NO SHORT SALES OF THE COMMON STOCK. So long as (i) a Buyer or
any of its affiliates beneficially owns any Debentures, (ii) the Company
has not issued any publicly traded convertible securities and (iii) the
Company is not in default under the Debentures, such Buyer and its
affiliates shall not engage in any short sales or third party short sales
of the Common Stock or hold a "put equivalent position" with respect to
the Common Stock (as defined in Rule 16a-1 under the 1934 Act).
m. SHAREHOLDER APPROVAL. The Company covenants to submit to it,
shareholders at its next shareholder meeting a proposal for ratification
of the issuance of the Debentures and the Conversion Shares, if and as
required by the rules of the National Association of Securities Dealers,
Inc. (the "NASD") applicable to the transaction.
n. Buyer covenants to resell Debentures and Conversion Shares in
compliance with applicable securities laws.
5. TRANSFER AGENT INSTRUCTIONS.
The Company shall issue irrevocable instructions to its transfer
agent to issue certificates, registered in the name of the Buyer or its
respective nominee(s), for the Conversion Shares in such amounts as specified
from time to time by the Buyer to the Company upon conversion of the Debentures
(the "Irrevocable Transfer Agent Instructions"). 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(i) hereof (in the case of the Conversion Shares, prior to registration of
such shares under the 1933 Act) will be given by the Company to its transfer
agent and that the Debentures and the Conversion Shares 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 the Buyer's obligations and
agreement to comply with all applicable securities laws upon resale of the
Debentures or Conversion Shares. The Company acknowledges that a breach by it
of its obligations hereunder will cause irreparable harm to the Buyer 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 Buyer 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.
<PAGE>
6. CONDITIONS TO THE COMPANY'S OBLIGATION TO SELL.
The obligation of the Company hereunder to issue and sell the
Debentures to the 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:
a. The Buyer shall have executed this Agreement and the
Registration Rights Agreement and delivered the same to the Company.
b. The Buyer shall have delivered to the Company the Purchase Price
for the Debentures being purchased by the Buyer at the Closing by wire
transfer of immediately available funds pursuant to the wire instructions
provided by the Company.
c. The representations and warranties of the 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 the Buyer shall have
performed, satisfied and complied in all material respects with the
<PAGE>
covenants, agreements and conditions required by this Agreement to be
performed, satisfied or complied with by the Buyer at or prior to the
Closing Date.
7. CONDITIONS TO THE BUYER'S OBLIGATION TO PURCHASE.
The obligation of the Buyer hereunder to purchase the Debentures 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
Buyer's sole benefit and may be waived by the Buyer at any time in its sole
discretion:
a. The Company shall have executed this Agreement and the
Registration Rights Agreement, and delivered the same to the Buyer.
b. The Common Stock shall be authorized for quotation on the over-
the-counter market, AMEX the NASDAQ National Market or The New York Stock
Exchange, Inc., trading in the Common Stock shall not have been suspended
for any reason and all of the Conversion Shares issuable upon conversion
of the Debentures shall be approved for listing on the over-the-counter
market, AMEX, the NASDAQ National Market or The New York Stock Exchange,
Inc.
c. 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 this
Agreement to be performed, satisfied or complied with by the Company at or
prior to the Closing Date. The 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 the Buyer including, without limitation an
update as of the Closing Date regarding the representation contained in
Section 3(c) above.
d. The Buyer shall have received the opinion of the Company's
counsel dated as of the Closing Date, in form, scope and substance
reasonably satisfactory to the Buyer and in substantially the form of
Exhibit "D" attached hereto.
e. The Company shall have executed and delivered to the Buyer the
Certificates (in such denominations as the Buyer shall request) for the
Debentures being purchased by the Buyer at the Closing.
<PAGE>
f. The Board of Directors of the Company shall have adopted the
resolutions in substantially the form of Exhibit "E" attached hereto.
g. As of the Closing Date, the Company shall have reserved out of
its authorized and unissued Common Stock, solely for the purpose of
effecting the conversion of the Debentures, such number of shares of
Common Stock equal to or greater than 150% of the number of shares of
Common Stock for which are issuable upon conversion of all of the
Debentures which could be issued (based upon a conversion effective as
of the day before the Closing Date) under this Agreement or the
Debentures.
h. The Irrevocable Transfer Agent Instructions, in form and
substance satisfactory to the Buyer, shall have been delivered to and
acknowledged in writing by the Company's transfer agent.
8. INDEMNIFICATION.
In consideration of the Buyer's execution and delivery of this
Agreement and acquiring the Debentures and the Conversion Shares hereunder and
in addition to all of the Company's other obligations under this Agreement, the
Company shall defend, protect, indemnify and hold harmless the Buyer and each
other holder of the Debentures and the Conversion Shares 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 the Indemnitees or any of them 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 this Agreement,
the Debentures or the Registration Rights Agreement or any other certificate,
instrument or document contemplated hereby or thereby, (b) any breach of any
covenant, agreement or obligation of the Company contained in this Agreement,
the Debentures or the Registration Rights Agreement or any other certificate,
instrument or document contemplated hereby or thereby, or (c) any cause of
action, suit or claim brought or made against such Indemnitee by any third
party 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 Indemnities, any transaction financed or
to be financed in whole or in part, directly or indirectly, with the proceeds
of the issuance of the Debentures or the status of the Buyer or holder of the
Debentures or the Conversion Shares, 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.
<PAGE>
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. Any dispute or controversy
between the parties arising in connection with this agreement or the
subject matter contemplated by this agreement shall be resolved by
arbitration before a three-member panel of the American Arbitration
Association in accordance with the commercial arbitration rules of said
forum and the Federal Arbitration Act, 9 U.S.C. 1 ET SEQ., with the
resulting award being final and conclusive. Said arbitrators shall be
empowered to award all forms of relief and damages claimed, including, but
not limited to, attorney's fees, expenses of litigation and arbitration,
exemplary damages, and prejudgment interest. Notwithstanding the
foregoing, Buyer may at any time and at its option, whether or not an
arbitration action is then pending, initiate a civil action for temporary
and permanent injunctive and other equitable relief against Company.
Company acknowledges that upon any breach of Buyer's conversion rights
hereunder, Buyer's resulting injury may not be adequately compensated by a
remedy at law. Accordingly, upon such breach, Buyer, at its election and
without limitation of its other remedies, shall be entitled to pursue a
claim for specific performance of this Agreement, and Company hereby
waives the right to assert any defense thereto that Purchaser has an
adequate remedy at law. The parties further agree that any arbitration
action between them shall be heard in Atlanta, Georgia, and expressly
consent to the jurisdiction and venue of the Superior Court of Fulton
County, Georgia, and the United States District Court for the Northern
District of Georgia, Atlanta Division for the adjudication of any civil
action asserted pursuant to this Paragraph.
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.
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 Buyer, 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
<PAGE>
Agreement may be waived or amended other than by an instrument in
writing signed by the party to be charged with enforcement.
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 a copy is mailed by U.S. certified mail, return receipt
requested; (iii) three (3) days after being sent by U.S. certified mail,
return receipt requested, or (iv) one (I) 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:
Spatialight, Inc.
8-C Commercial Boulevard
Novato, California 94949-6125
Attn: President
Telephone: (415) 883-1693
Facsimile: (415) 883-3363
With a copy to:
Brad Rock, Esq.
Gray, Cary, Ware & Freidenrich
400 Hamilton Street
Palo Alto, California 94301
Telephone: (650) 833-2111
Facsimile: (650) 327-3699
If to the Transfer Agent:
American Stock Transfer & Trust
6201 15th Street
Brooklyn, New York 11219
Telephone: (718) 921-8200
Facsimile: (718) 236-4855
If to the Buyer, to its address and facsimile number on the Schedule of
Buyers, with copies to the Buyer's counsel 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.
<PAGE>
g. SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon
and inure to the benefit of the parties and their respective successors
and assigns. The Company shall not assign this Agreement or any rights or
obligations hereunder without the prior written consent of the Buyer. The
Buyer may assign its rights hereunder without the consent of the Company,
provided, however, that any such assignment shall not release the Buyer
from its obligations hereunder unless such obligations are assumed by such
assignee and the Company has consented to such assignment and assumption.
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 Buyer
contained in Sections 2 and 3, the agreements and covenants set forth in
Sections 4, 5 and 9, the indemnification provisions set forth in Section
8, shall survive the Closing. The Buyer shall be responsible only for its
own representations, warranties, agreements and covenants hereunder.
j. PUBLICITY. The Company and the Buyer 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 the
Buyer, to make any press release or other public disclosure with respect
to such transactions as is required by applicable law and regulations
(although the Buyer shall be consulted by the 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.
1. TERMINATION. In the event that the Closing shall not have
occurred with respect to the Buyer on or before five (5) business days
from the date hereof due to the Company's or the 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
<PAGE>
9(l), the Company shall remain obligated to reimburse the Buyer for the
expenses described in Section 4(h) above.
m. FINDER. The Company acknowledges that it has engaged a Finder
in connection with the sale of the Debentures, which placement agent may
have formally or informally engaged other agents on its behalf. The
Company shall be responsible for the payment of any Finder's fees (which
includes cash and warrants to purchase Common Stock) relating to or
arising out of the transactions contemplated hereby.
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.
IN WITNESS WHEREOF, the Buyer and the Company have caused this Securities
Purchase Agreement to be duly executed as of the date first written above.
"COMPANY"
SPATIALIGHT, INC.
By:
Name: William E. Hollis
Its: Chairman of the Board, Chief Executive
Officer, and Chief Financial Officer
"BUYER"
___________________________
By:
Name:
Title:
<PAGE>
FOR IMMEDIATE RELEASE
SPATIALIGHT ANNOUNCES PRIVATE DEBENTURE FINANCING
Novato, California, December 31, 1997 - [OBB:HDTV] SpatiaLight, Inc.
announced today that it had closed the private placement of $450,000 principal
amount of convertible debentures to purchasers outside the United States. The
debentures have a two year term, carry a 3% interest rate and are convertible
into the company's common stock at 120% of the five day average closing bid
price for the stock at the issuance date or, if lower, 75% of the five day
average closing bid price of the stock at the time the debt is converted. Net
of fees and expenses, the company received $387,000 from this placement. In
addition to a cash placement fee, the placement agent received 5 year warrants
to purchase 45,000 shares of company common stock at the closing bid price on
December 24. The company anticipates that it may from time to time issue
additional debentures on similar terms based on its working capital needs in
the next several quarters.
The debentures offered have not been and will not be registered under the
Securities Act of 1933, and may not be offered or sold in the United States or
to a U.S. Person absent registration or an applicable exemption from the
registration requirements.
SpatiaLight, Inc. is designing and developing high resolution, miniature
reflective liquid crystal display devices intended for use in large screen
computer displays, home theatre systems and other display applications.
SpatiaLight is quoted on the OTC/BB under the market symbol HDTV.
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CONTACT: WILLIAM E. HOLLIS, CEO
SPATIALIGHT, INC.
(415) 883-3693 OR
SANDRA HARRISON, SHAREHOLDER RELATIONS
(415) 884-6180
INTERNEThttp://www.spatialight.com/
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