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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): June 27, 1999
THERMATRIX INC.
(Exact Name of Registrant as Specified in Charter)
Delaware 0-20819 94-2958515
-------- ------- ----------
(State or Other Jurisdiction (Commission File (I.R.S. Employer
of Incorporation) Number) Identification No.)
2025 Gateway Place
Suite 132
San Jose, California 95110-1005
(Address of principal executive offices, including zip code)
(408) 453-0490
(Registrant's telephone number, including area code)
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Item 5. OTHER EVENTS
On July 8, 1999, Thermatrix Inc. (the "Registrant") announced that it had
sold and issued 6,000 shares of Series E 8% Convertible Preferred Stock (the
"Series E Stock") at a purchase price of $10,000 per share in the aggregate
amount of $6,000,000 to certain investors (the "Investors"). The Series E Stock
is convertible into Common Stock of the Registrant on certain terms and at a
conversion price to be determined at the time of conversion in accordance with
the Registrant's Certificate of Designation. The issuance of the Series E Stock
was made pursuant to an exemption from the registration requirements of the
Securities Act of 1933, as amended (the "Act"), provided by Section 4(2)
thereof.
Under the Certificate of Designation, the Series E Stock is payable in
cash, or at the option of an Investor, converted into shares of the common stock
of the Registrant based upon a conversion price of $5.00 per share, or, if
lower, 85% of the arithmetic mean of the 15 lowest closing bid prices during the
30 trading days preceding such date of conversion. Fifty percent of the Series E
Stock may be converted after November 27, 1999 and remaining Series E Stock may
be converted after January 26, 2000. The Registrant has the right to redeem the
Series E Stock at any time for 130% of the original purchase price. The Series E
Stock bears a dividend of 8% payable in kind. Under the Common Stock Purchase
Warrant dated June 30, 1999 between the Registrant and each of the Investors,
the Registrant sold warrants to purchase common stock equivalent to 35,000
shares of common stock per $1,000,000 of Series E Stock purchased (the
"Warrants"). The Warrants may be exercised at $5.31 per share prior to June 30,
2002.
The Registrant has agreed to file a registration statement on Form S-3 for
the resale of the shares of common stock issuable on conversion of the Series E
Stock and upon exercise of the Warrants.
Item 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS
(c) Exhibits
4.1(a) Securities Purchase Agreement dated June 30, 1999, by and between the
Registrant and The Shaar Fund Ltd.
4.1(b) Securities Purchase Agreement dated June 30, 1999 by and between
Registrant and Technology Funding Venture Partners III, L.P.
4.1(c) Securities Purchase Agreement dated June 30, 1999 by and between
Registrant and CIBC WMV Inc.
4.2(a) Registration Rights Agreement dated June 30, 1999, by and between the
Registrant and The Shaar Fund.
4.2(b) Registration Rights Agreement dated June 30, 1999, by and between the
Registrant and Technology Funding Venture Partners III, L.P.
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4.2(c) Registration Rights Agreement dated June 30, 1999, by and between the
Registrant and CIBC WMV Inc.
4.3 Certificate of Designation, Preferences and Rights of Series E 8%
Convertible Preferred Stock of Thermatrix Inc. filed with the Office
of the Secretary of State of the State of Delaware on July 1, 1999.
4.4(a) Common Stock Purchase Warrant dated June 30, 1999 by and between
Registrant and The Shaar Fund Ltd.
4.4(b) Common Stock Purchase Warrant dated June 30, 1999 by and between
Registrant and Technology Funding Venture Partners III, L.P.
4.4(c) Common Stock Purchase Warrant dated June 30, 1999 by and between
Registrant and CIBC WBV Inc.
99.1 Press Release, issued July 8, 1999, announcing the closing of the sale
of shares of Series E Convertible Preferred Stock of the Registrant
pursuant to the Securities Purchase Agreement.
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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.
THERMATRIX INC.
Dated: August 27, 1999 By: /s/ Daniel S. Tedone
--------------------
Daniel S. Tedone, Senior
Vice President and Chief Financial
Officer
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EXHIBIT 4.1(a)
SECURITIES PURCHASE AGREEMENT
This Securities Purchase Agreement, dated as of June 30, 1999, between
Thermatrix Inc., a Delaware corporation with principal executive offices located
at 308 North Peters Road, Suite 100, Knoxville, Tennessee 37922 (the "Company"),
and The Shaar Fund Ltd. ("Buyer").
Whereas, Buyer desires to purchase from the Company, and the Company
desires to issue and sell to the Buyer, upon the terms and subject to the
conditions of this Agreement, (i) 3,000 shares of the Company's Series E 8%
Convertible Preferred Stock, par value $.001 per share (collectively, the
"Preferred Shares"), and (ii) Common Stock Purchase Warrants in the form
attached hereto as Exhibit A (collectively, the "Warrants");
Whereas, upon the terms and subject to the designations, preferences
and rights set forth in the Company's Certificate of Designation of Series E 8%
Convertible Preferred Stock in the form attached hereto as Exhibit B (the
"Certificate of Designation"), the Preferred Shares are convertible into shares
of the Company's common stock, par value $.001 per share (the Company's common
stock hereinafter referred to as the "Common Stock");
Whereas, the Warrants, upon the terms and subject to the conditions in
the Warrants, will for a period of three years be exercisable to purchase
105,000 shares of Common Stock;
Now, Therefore, in consideration of the premises and the mutual
covenants contained herein, the parties hereto, intending to be legally bound,
hereby agree as follows:
I. Purchase and Sale of Preferred Shares and Warrants
A. Transaction. Buyer hereby agrees to purchase from the Company,
and the Company has offered and hereby agrees to issue and sell to the Buyer in
a transaction exempt from the registration and prospectus delivery requirements
of the Securities Act of 1933, as amended (the "Securities Act"), the Preferred
Shares and the Warrants to purchase 105,000 shares of Common Stock.
B. Purchase Price; Form of Payment. The purchase price for the
Preferred Shares and the Warrants to be purchased by Buyer hereunder shall be
$3,000,000 (the "Purchase Price"). Buyer shall pay the Purchase Price by wire
transfer of immediately available funds to the escrow agent (the "Escrow Agent")
identified in those certain Escrow Instructions of even date herewith, a copy of
which is attached hereto as Exhibit C (the "Escrow Instructions").
Simultaneously with the execution of this Agreement and against receipt by the
Escrow Agent of the Purchase Price, the Company shall deliver one or more duly
authorized, issued and executed certificates (I/N/O Buyer or, if the Company
otherwise has been notified, I/N/O Buyer's nominee) evidencing the Preferred
Shares and the Warrants which the Buyer is purchasing, to the Escrow
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Agent or its designated depository. By executing and delivering this Agreement,
Buyer and the Company each hereby agrees to observe the terms and conditions of
the Escrow Instructions, all of which are incorporated herein by reference as if
fully set forth herein.
C. Method of Payment. Payment into escrow of the Purchase Price
shall be made by wire transfer of immediately available funds to:
The Bank of New York
48 Wall Street
New York, NY 10038
ABA No.: 021000018
For the Account of: Cadwalader, Wickersham & Taft
Trust Account IOLA Fund
Account No.: 0902061070
Simultaneously with the execution of this Agreement, the Buyer shall deposit
with the Escrow Agent the Purchase Price and the Company shall deposit with the
Escrow Agent the Preferred Shares and the Warrants.
II. Buyer's Representations, Warranties; Access to
Information; Independent Investigation
Buyer represents and warrants to and covenants and agrees with the
Company as follows:
A. Buyer is purchasing the Preferred Shares, the Warrants, the Common
Stock issuable upon exercise of the Warrants (the "Warrant Shares") and the
shares of Common Stock issuable upon conversion of the Preferred Shares (the
"Conversion Shares" and, collectively with the Preferred Shares, the Warrants
and the Warrant Shares, the "Securities") for its own account, for investment
purposes only and not with a view towards or in connection with the public sale
or distribution thereof in violation of the Securities Act.
B. Buyer is (i) an "accredited investor" within the meaning of Rule
501 of Regulation D under the Securities Act, (ii) experienced in making
investments of the kind contemplated by this Agreement, (iii) capable, by reason
of its business and financial experience, of evaluating the relative merits and
risks of an investment in the Securities, and (iv) able to afford the loss of
its investment in the Securities.
C. Buyer understands that the Securities are being offered and sold
by the Company in reliance on an exemption from the registration requirements of
the Securities Act and equivalent state securities and "blue sky" laws, and that
the Company is relying upon the accuracy of, and Buyer's compliance with,
Buyer's representations, warranties and covenants set forth in this Agreement to
determine the availability of such exemption and the eligibility of Buyer to
purchase the Securities;
D. Buyer has been furnished with or provided access to all materials
relating to the business, financial position and results of operations of the
Company, and all other materials
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requested by Buyer to enable it to make an informed investment decision with
respect to the Securities.
E. Buyer understands that the Securities have not been approved or
disapproved by the Securities and Exchange Commission (the "Commission") or any
state securities commission and that the foregoing authorities have not reviewed
any documents or instruments in connection with the offer and sale to it of the
Securities and have not confirmed or determined the adequacy or accuracy of any
such documents or instruments.
F. This Agreement has been duly and validly authorized, executed and
delivered by Buyer and is a valid and binding agreement of Buyer enforceable
against it in accordance with its terms, subject to applicable bankruptcy,
insolvency, fraudulent conveyance, reorganization, moratorium and similar laws
affecting creditors' rights and remedies generally and except as rights to
indemnity and contribution may be limited by federal or state securities laws or
the public policy underlying such laws.
G. Neither Buyer nor its affiliates nor any person acting on its or
their behalf has the intention of entering, or will enter into, prior to the
closing or during any Valuation Period (as defined in the Certificate of
Designation), any put option, short position or other similar instrument or
position with respect to the Common Stock and neither Buyer nor any of its
affiliates nor any person acting on its or their behalf will use at any time
shares of Common Stock acquired pursuant to this Agreement to settle any put
option, short position or other similar instrument or position that may have
been entered into prior to the execution of this Agreement; provided, however,
that nothing in this Section II.G shall operate to forbid Buyer or any of its
affiliates or any person acting on its or their behalf from selling, or entering
into any other transaction with respect to, the Common Stock contemporaneously
with or following such date and time as the Person or Persons in whose name or
names the Common Stock Issued at Conversion (as defined in the Certificate of
Designation) shall be issuable shall be deemed to have become the holder or
holders of record of the Common Shares (as defined in the Certificate of
Designation) represented thereby and all voting and other rights associated with
the beneficial ownership of such Common Shares shall have vested with such
Person or Persons.
III. The Company's Representations
The Company represents and warrants to Buyer that:
A. Capitalization.
1. The authorized capital stock of the Company consists of: (i)
25,000,000 shares of Common Stock, of which 7,767,440 shares are issued and
outstanding on the date hereof; and (ii) 5,000,000 shares of "blank check"
preferred stock, of which no shares are issued and outstanding on the date
hereof. All of the issued and outstanding shares of Common Stock and
preferred stock, if any, have been duly authorized and validly issued and
are fully paid and nonassessable. As of the date hereof, the Company has
outstanding stock options and warrants to purchase 965,480 shares of Common
Stock. The Conversion Shares and Warrant Shares have been duly and validly
authorized and reserved for issuance by the Company, and when issued by the
Company upon conversion of, or in lieu of accrued
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dividends on, the Preferred Shares and on exercise of the Warrants will be
duly and validly issued, fully paid and nonassessable and will not subject
the holder thereof to personal liability by reason of being such holder.
There are no preemptive, subscription, "call" or other similar rights to
acquire the Common Stock (including the Conversion Shares and Warrant
Shares) that have been issued or granted to any person, except as disclosed
on Schedule III.A.1. hereto or otherwise previously disclosed in writing to
Buyer.
2. Except as disclosed on Schedule III.A.2. hereto, the Company
does not own or control, directly or indirectly, any interest in any other
corporation, partnership, limited liability company, unincorporated
business organization, association, trust or other business entity.
B. Organization; Reporting Company Status.
1. The Company is a corporation duly organized, validly existing
and in good standing under the laws of the State of Delaware and is duly
qualified as a foreign corporation in all jurisdictions in which the
failure to so qualify would have a material adverse effect on the business,
properties, prospects, condition (financial or otherwise) or results of
operations of the Company or on the consummation of any of the transactions
contemplated by this Agreement (a "Material Adverse Effect").
2. The Company has registered the Common Stock pursuant to
Section 12 of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), and has timely filed with the Commission all reports and
information required to be filed by it pursuant to all reporting
obligations under Section 13(a) or 15(d), as applicable, of the Exchange
Act for the 12-month period immediately preceding the date hereof. The
Common Stock is listed and traded on the Nasdaq National Market ("Nasdaq")
and the Company has not received any notice regarding, and to its knowledge
there is no threat of, the termination or discontinuance of the eligibility
of the Common Stock for such listing, except as disclosed on Schedule
III.B.2. As of December 15, 1999, the Company will be in compliance with
Nasdaq listing requirements and will be listed and traded on either Nasdaq
National Market or Nasdaq SmallCap Market.
C. Authorized Shares. The Company has duly and validly authorized
and reserved for issuance 1,555,000 shares of Common Stock sufficient in number
for the conversion of the Preferred Shares and the exercise of the Warrants.
The Company understands and acknowledges the potentially dilutive effect to the
Common Stock of the issuance of the Preferred Shares and Warrant Shares upon
conversion of the Preferred Shares and exercise of the Warrants, respectively.
The Company further acknowledges that its obligation to issue Conversion Shares
upon conversion of the Preferred Shares and Warrant Shares upon exercise of the
Warrants in accordance with this Agreement, the Preferred Shares and the
Warrants is absolute and unconditional regardless of the dilutive effect that
such issuance may have on the ownership interests of other stockholders of the
Company and notwithstanding the commencement of any case under 11 U.S.C. (S) 101
et seq. (the "Bankruptcy Code"). In the event the Company is a debtor under the
Bankruptcy Code, the Company hereby waives to the fullest extent permitted any
rights to relief it may have under 11 U.S.C. (S) 362 in respect of the
conversion of the Preferred Shares and the exercise of the Warrants. The
Company agrees, without cost or expense to Buyer, to take or consent to any and
all action
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necessary to effectuate relief under 11 U.S.C. (S) 362. Schedule III.C. hereto
sets forth (i) all issuances and sales by the Company since December 31, 1998 of
its capital stock, and other securities convertible, exercisable or exchangeable
for capital stock of the Company, (ii) the amount of such securities sold,
including any underlying shares of capital stock, (iii) the purchaser thereof,
and (iv) the amount paid therefor.
D. Authority; Validity and Enforceability. The Company has the
requisite corporate power and authority to file and perform its obligations
under the Certificate of Designation and to enter into the Documents (as
hereinafter defined), and to perform all of its obligations hereunder and
thereunder (including the issuance, sale and delivery to Buyer of the
Securities). The execution, delivery and performance by the Company of the
Documents, and the consummation by the Company of the transactions contemplated
hereby and thereby (including, without limitation, the filing of the Certificate
of Designation with the Delaware Secretary of State's office, the issuance of
the Preferred Shares, the Warrants and the issuance and reservation for issuance
of the Conversion Shares and Warrant Shares), has been duly authorized by all
necessary corporate action on the part of the Company. Each of the Documents
has been duly and validly executed and delivered by the Company and the
Certificate of Designation has been duly filed with the Delaware Secretary of
State's office by the Company and each instrument constitutes a valid and
binding obligation of the Company enforceable against it in accordance with its
terms, subject to applicable bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium and similar laws affecting creditors' rights and
remedies generally and except as rights to indemnity and contribution may be
limited by federal or state securities laws or the public policy underlying such
laws. The Securities have been duly and validly authorized for issuance by the
Company and, when executed and delivered by the Company, will be valid and
binding obligations of the Company enforceable against it in accordance with
their terms, subject to applicable bankruptcy, insolvency, fraudulent
conveyance, reorganization, moratorium and similar laws affecting creditors'
rights and remedies generally. For purposes of this Agreement, the term
"Documents" means (i) this Agreement; (ii) the Registration Rights Agreement of
even date herewith between the Company and Buyer, a copy of which is annexed
hereto as Exhibit D (the "Registration Rights Agreement"); (iii) the Certificate
of Designation; (iv) the Warrants; and (v) the Escrow Instructions.
E. Authorization of the Securities. The authorization, issuance,
sale and delivery of the Preferred Shares and Warrants has been duly authorized
by all requisite corporate action on the part of the Company. As of the Closing
Date, the Preferred Shares and the Warrants, and the Conversion Shares and the
Warrant Shares upon their issuance in accordance with the Certificate of
Designation and the Warrants, respectively, will be validly issued and
outstanding, fully paid and nonassessable, and not subject to any preemptive
rights, rights of first refusal or other similar rights.
F. Non-contravention. The execution and delivery by the Company of
the Documents, the issuance of the Securities, and the consummation by the
Company of the other transactions contemplated hereby and thereby, including,
without limitation, the filing of the Certificate of Designation with the
Delaware Secretary of State's office, do not and will not conflict with or
result in a breach by the Company of any of the terms or provisions of, or
constitute a default (or an event which, with notice, lapse of time or both,
would constitute a default) under (i) the articles of incorporation or by-laws
of the Company or (ii) any indenture, mortgage, deed of trust or other material
agreement or instrument to which the Company is a party or by which its
properties or
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assets are bound, or any law, rule, regulation, decree, judgment or order of any
court or public or governmental authority having jurisdiction over the Company
or any of the Company's properties or assets, except as to clause (ii) above
such conflict, breach or default which would not have a Material Adverse Effect.
G. Approvals. No authorization, approval or consent of any court or
public or governmental authority is required to be obtained by the Company for
the issuance and sale of the Preferred Shares or the Warrants (and the
Conversion Shares and Warrant Shares) to Buyer as contemplated by this
Agreement, except such authorizations, approvals and consents that have been
obtained by the Company prior to the date hereof.
H. Commission Filings. None of the Company's reports and documents
heretofore filed with the Commission pursuant to the Securities Act or the
Exchange Act (collectively, the "Commission Filings") contained at the time they
were filed any untrue statement of a material fact or omitted to state any
material fact required to be stated therein or necessary to make the statements
made therein, in light of the circumstances under which they were made, not
misleading.
I. Absence of Certain Changes. Since the Balance Sheet Date (as
defined in Section III.M.), there has not occurred any change, event or
development in the business, financial condition, prospects or results of
operations of the Company, and there has not existed any condition, having or
reasonably likely to have a Material Adverse Effect.
J. Full Disclosure. There is no fact known to the Company (other
than general economic or industry conditions known to the public generally) that
has not been fully disclosed in writing to the Buyer that (i) reasonably could
be expected to have a Material Adverse Effect or (ii) reasonably could be
expected to materially and adversely affect the ability of the Company to
perform its obligations pursuant to the Documents.
K. Absence of Litigation. There is no action, suit, claim,
proceeding, inquiry or investigation pending or, to the Company's knowledge,
threatened, by or before any court or public or governmental authority which, if
determined adversely to the Company, would have a Material Adverse Effect.
L. Absence of Events of Default. No "Event of Default" (as defined
in any agreement or instrument to which the Company is a party) and no event
which, with notice, lapse of time or both, would constitute an Event of Default
(as so defined), has occurred and is continuing, which could have a Material
Adverse Effect.
M. Financial Statements; No Undisclosed Liabilities. The Company has
delivered to Buyer true and complete copies of its audited balance sheet as at
December 31, 1997 and 1998 and the related audited statements of operations and
cash flows for the three fiscal years ended December 31, 1998, including the
related notes and schedules thereto (collectively, the "Financial Statements"),
and all management letters, if any, from the Company's independent auditors
relating to the dates and periods covered by the Financial Statements. Each of
the Financial Statements is complete and correct in all material respects, has
been prepared in accordance with United States General Accepted Accounting
Principles ("GAAP") (subject, in the case of the interim
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Financial Statements, to normal year end adjustments and the absence of
footnotes) and in conformity with the practices consistently applied by the
Company without modification of the accounting principles used in the
preparation thereof, and fairly presents the financial position, results of
operations and cash flows of the Company as at the dates and for the periods
indicated. For purposes hereof, the audited balance sheet of the Company as at
December 31, 1998 is hereinafter referred to as the "Balance Sheet" and December
31, 1998 is hereinafter referred to as the "Balance Sheet Date". The Company has
no indebtedness, obligations or liabilities of any kind (whether accrued,
absolute, contingent or otherwise, and whether due or to become due) that would
have been required to be reflected in, reserved against or otherwise described
in the Balance Sheet or in the notes thereto in accordance with GAAP, which was
not fully reflected in, reserved against or otherwise described in the Balance
Sheet or the notes thereto or was not incurred in the ordinary course of
business consistent with the Company's past practices since the Balance Sheet
Date.
N. Compliance with Laws; Permits. The Company is in compliance with
all laws, rules, regulations, codes, ordinances and statutes (collectively,
"Laws") applicable to it or to the conduct of its business, except for such
noncompliance which would not have a Material Adverse Effect. The Company
possesses all permits, approvals, authorizations, licenses, certificates and
consents from all public and governmental authorities which are necessary to
conduct its business, except for those the absence of which would not have a
Material Adverse Effect.
O. Related Party Transactions. Except as set forth on Schedule
III.O. hereto, neither the Company nor any of its officers, directors or
"Affiliates" (as such term is defined in Rule 12b-2 under the Exchange Act) has
borrowed any moneys from or has outstanding any indebtedness or other similar
obligations to the Company. Except as set forth on Schedule III.O. hereto,
neither the Company nor any of its officers, directors or Affiliates (i) owns
any direct or indirect interest constituting more than a 1% equity (or similar
profit participation) interest in, or controls or is a director, officer,
partner, member or employee of, or consultant to or lender to or borrower from,
or has the right to participate in the profits of, any person or entity which is
(x) a competitor, supplier, customer, landlord, tenant, creditor or debtor of
the Company, (y) engaged in a business related to the business of the Company,
or (z) a participant in any transaction to which the Company is a party (other
than in the ordinary course of the Company's business) or (ii) is a party to any
contract, agreement, commitment or other arrangement with the Company.
P. Insurance. The Company maintains property and casualty, general
liability, workers' compensation, environmental hazard, personal injury and
other similar types of insurance with financially sound and reputable insurers
that is adequate, consistent with industry standards and the Company's
historical claims experience. The Company has not received notice from, and has
no knowledge of any threat by, any insurer (that has issued any insurance policy
to the Company) that such insurer intends to deny coverage under or cancel,
discontinue or not renew any insurance policy presently in force.
Q. Securities Law Matters. Based, in part, upon the representations
and warranties of Buyer set forth in Section II hereof, the offer and sale by
the Company of the Securities is exempt from (i) the registration and prospectus
delivery requirements of the Securities Act and the rules and regulations of the
Commission thereunder and (ii) the registration and/or qualification provisions
of all applicable state securities and "blue sky" laws. Other than pursuant to
an effective registration statement under the Securities Act, the Company has
not issued, offered or
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sold the Preferred Shares or any shares of Common Stock (including for this
purpose any securities of the same or a similar class as the Preferred Shares or
Common Stock, or any securities convertible into or exchangeable or exercisable
for the Preferred Shares or Common Stock or any such other securities) within
the one-year next preceding the date hereof, except as disclosed on Schedule
III.Q. hereto or otherwise previously disclosed in writing to Buyer, and the
Company shall not directly or indirectly take, and shall not permit any of its
directors, officers or Affiliates directly or indirectly to take, any action
(including, without limitation, any offering or sale to any person or entity of
the Preferred Shares or shares of Common Stock), so as to make unavailable the
exemption from Securities Act registration being relied upon by the Company for
the offer and sale to Buyer of the Preferred Shares (and the Conversion Shares)
as contemplated by this Agreement. No form of general solicitation or
advertising has been used or authorized by the Company or any of its officers,
directors or Affiliates in connection with the offer or sale of the Preferred
Shares (and the Conversion Shares) as contemplated by this Agreement or any
other agreement to which the Company is a party.
R. Environmental Matters.
1. The operations of the Company are in compliance with all
applicable Environmental Laws and all permits issued pursuant to
Environmental Laws or otherwise;
2. The Company has obtained or applied for all permits required
under all applicable Environmental Laws necessary to operate its business;
3. The Company is not the subject of any outstanding written
order of or agreement with any governmental authority or person respecting
(i) Environmental Laws, (ii) Remedial Action or (iii) any Release or
threatened Release of Hazardous Materials, except as disclosed on Schedule
III.R.3.;
4. The Company has not received, since December 31, 1998, any
written communication alleging that it may be in violation of any
Environmental Law or any permit issued pursuant to any Environmental Law,
or may have any liability under any Environmental Law;
5. The Company does not have any current contingent liability in
connection with any Release of any Hazardous Materials into the indoor or
outdoor environment (whether on-site or off-site);
6. Except as set forth on Schedule III.R.6 hereto, to the
Company's knowledge, there are no investigations of the business,
operations, or currently or previously owned, operated or leased property
of the Company pending or threatened which could lead to the imposition of
any liability pursuant to any Environmental Law;
7. To the best of the Company's knowledge, after due inquiry,
there is not located at any of the properties of the Company any (A)
underground storage tanks, (B) asbestos-containing material or (C)
equipment containing polychlorinated biphenyls; and,
8. The Company has provided to Buyer all environmentally related
audits, studies, reports, analyses, and results of investigations that have
been performed with
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respect to the currently or previously owned, leased or operated properties
of the Company, including those listed on Schedule III.R.8.
For purposes of this Section III.R.:
"Environmental Law" means any foreign, federal, state or local
statute, regulation, ordinance, or rule of common law as now or hereafter in
effect in any way relating to the protection of human health and safety or the
environment including, without limitation, the Comprehensive Environmental
Response, Compensation and Liability Act, the Hazardous Materials Transportation
Act, the Resource Conservation and Recovery Act, the Clean Water Act, the Clean
Air Act, the Toxic Substances Control Act, the Federal Insecticide, Fungicide,
and Rodenticide Act, and the Occupational Safety and Health Act, and the
regulations promulgated pursuant thereto.
"Hazardous Material" means any substance, material or waste which is
regulated by the United States, Canada or any of its provinces, or any state or
local governmental authority including, without limitation, petroleum and its
by-products, asbestos, and any material or substance which is defined as a
"hazardous waste," "hazardous substance," "hazardous material," "restricted
hazardous waste," "industrial waste," "solid waste," "contaminant," "pollutant,"
"toxic waste" or "toxic substance" under any provision of any Environmental Law;
"Release" means any release, spill, filtration, emission, leaking,
pumping, injection, deposit, disposal, discharge, dispersal, or leaching into
the indoor or outdoor environment, or into or out of any property;
"Remedial Action" means all actions to (x) clean up, remove, treat or
in any other way address any Hazardous Material; (y) prevent the Release of any
Hazardous Material so it does not endanger or threaten to endanger public health
or welfare or the indoor or outdoor environment; or (z) perform pre-remedial
studies and investigations or post-remedial monitoring and care.
S. Labor Matters. The Company is not party to any labor or
collective bargaining agreement and there are no labor or collective bargaining
agreements which pertain to employees of the Company. No employees of the
Company are represented by any labor organization and none of such employees has
made a pending demand for recognition, and there are no representation
proceedings or petitions seeking a representation proceeding presently pending
or, to the Company's knowledge, threatened to be brought or filed, with the
National Labor Relations Board or other labor relations tribunal. There is no
organizing activity involving the Company pending or to the Company's knowledge,
threatened by any labor organization or group of employees of the Company.
There are no (i) strikes, work stoppages, slowdowns, lockouts or arbitrations or
(ii) material grievances or other labor disputes pending or, to the knowledge of
the Company, threatened against or involving the Company. There are no unfair
labor practice charges, grievances or complaints pending or, to the knowledge of
the Company, threatened by or on behalf of any employee or group of employees of
the Company.
T. ERISA Matters. The Company and its ERISA Affiliates are in
compliance in all material respects with all provisions of ERISA applicable to
it. No Reportable Event has occurred, been waived or exists as to which the
Company or any ERISA Affiliate was required to file a report with the Pension
Benefits Guaranty Corporation, and the present value of all liabilities
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under all Plans (based on those assumptions used to fund such Plans) did not, as
of the most recent annual valuation date applicable thereto, exceed the value of
the assets of all such Plans in the aggregate. None of the Company or ERISA
Affiliates has incurred any Withdrawal Liability that could result in a Material
Adverse Effect. None of the Company or ERISA Affiliates has received any
notification that any Multiemployer Plan is in reorganization or has been
terminated within the meaning of Title IV of ERISA, and no Multiemployer Plan is
reasonably expected to be in reorganization or termination where such
reorganization or termination has resulted or could reasonably be expected to
result in increases to the contributions required to be made to such Plan or
otherwise.
For purposes of this Section III.T.:
"ERISA" means the Employee Retirement Income Security Act of 1974, or
any successor statute, together with the regulations thereunder, as the same may
be amended from time to time.
"ERISA Affiliate" means any trade or business (whether or not
incorporated) that was, is or hereafter may become, a member of a group of which
the Company is a member and which is treated as a single employer under Section
414 of the Internal Revenue Code of 1986, as amended (the "Internal Revenue
Code").
"Multiemployer Plan" means a multiemployer plan as defined in Section
4001(a)(3) of ERISA to which the Company or any ERISA Affiliate (other than one
considered an ERISA Affiliate only pursuant to subsection (m) or (o) of Section
414 of the Internal Revenue Code) is making or accruing an obligation to make
contributions, or has within any of the preceding five plan years made or
accrued an obligation to make contributions.
"PBGC" means the Pension Benefit Guaranty Corporation referred to and
defined in ERISA or any successor thereto.
"Plan" means any pension plan (other than a Multiemployer Plan)
subject to the provision of Title IV of ERISA or Section 412 of the Internal
Revenue Code that is maintained for employees of the Company or any ERISA
Affiliate.
"Reportable Event" means any reportable event as defined in Section
4043(b) of ERISA or the regulations issued thereunder with respect to a Plan
(other than a Plan maintained by an ERISA Affiliate that is considered an ERISA
Affiliate only pursuant to subsection (m) or (o) of Section 414 of the Internal
Revenue Code).
"Withdrawal Liability" means liability to a Multiemployer Plan as a
result of a complete or partial withdrawal from such Multiemployer Plan, as such
terms are defined in Part I of Subtitle E of Title IV of ERISA.
U. Tax Matters.
1. The Company has filed all Tax Returns which it is required to
file under applicable Laws, except for such Tax Returns in respect of which
the failure to so file does not and could not have a Material Adverse
Effect; all such Tax Returns are true and
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accurate in all material respects and have been prepared in compliance with
all applicable Laws; the Company has paid all Taxes due and owing by it
(whether or not such Taxes are required to be shown on a Tax Return) and
have withheld and paid over to the appropriate taxing authorities all Taxes
which it is required to withhold from amounts paid or owing to any
employee, stockholder, creditor or other third parties; and since the
Balance Sheet Date, the charges, accruals and reserves for Taxes with
respect to the Company (including any provisions for deferred income taxes)
reflected on the books of the Company are adequate to cover any Tax
liabilities of the Company if its current tax year were treated as ending
on the date hereof.
2. No claim has been made by a taxing authority in a
jurisdiction where the Company does not file tax returns that such
corporation is or may be subject to taxation by that jurisdiction. There
are no foreign, federal, state or local tax audits or administrative or
judicial proceedings pending or being conducted with respect to the
Company; no information related to Tax matters has been requested by any
foreign, federal, state or local taxing authority; and, except as disclosed
above, no written notice indicating an intent to open an audit or other
review has been received by the Company from any foreign, federal, state or
local taxing authority. There are no material unresolved questions or
claims concerning the Company's Tax liability, except as disclosed on
Schedule III.U.2. The Company (A) has not executed or entered into a
closing agreement pursuant to Section 7121 of the Internal Revenue Code or
any predecessor provision thereof or any similar provision of state, local
or foreign law; or (B) has not agreed to or is required to make any
adjustments pursuant to Section 481(a) of the Internal Revenue Code or any
similar provision of state, local or foreign law by reason of a change in
accounting method initiated by the Company or any of its subsidiaries or
has any knowledge that the IRS has proposed any such adjustment or change
in accounting method, or has any application pending with any taxing
authority requesting permission for any changes in accounting methods that
relate to the business or operations of the Company. The Company has not
been a United States real property holding corporation within the meaning
of Section 897(c)(2) of the Internal Revenue Code during the applicable
period specified in Section 897(c)(1)(A)(ii) of the Internal Revenue Code.
3. The Company has not made an election under Section 341(f) of
the Internal Revenue Code. The Company is not liable for the Taxes of
another person that is not a subsidiary of the Company under (A) Treas.
Reg. Section 1.1502-6 (or comparable provisions of state, local or foreign
law), (B) as a transferee or successor, (C) by contract or indemnity or (D)
otherwise. The Company is not a party to any tax sharing agreement. The
Company has not made any payments, is obligated to make payments or is a
party to an agreement that could obligate it to make any payments that
would not be deductible under Section 280G of the Internal Revenue Code.
For purposes of this Section III.U.:
"IRS" means the United States Internal Revenue Service.
"Tax" or "Taxes" means federal, state, county, local, foreign, or
other income, gross receipts, ad valorem, franchise, profits, sales or use,
transfer, registration, excise, utility,
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environmental, communications, real or personal property, capital stock,
license, payroll, wage or other withholding, employment, social security,
severance, stamp, occupation, alternative or add-on minimum, estimated and other
taxes of any kind whatsoever (including, without limitation, deficiencies,
penalties, additions to tax, and interest attributable thereto) whether disputed
or not.
"Tax Return" means any return, information report or filing with
respect to Taxes, including any schedules attached thereto and including any
amendment thereof.
V. Property. The Company has good and marketable title to all real
and personal property owned by it, free and clear of all liens, encumbrances and
defects except such as are described on Schedule III.V. hereto 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 any real
property and buildings held under lease by the Company are held by it 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.
W. Intellectual Property. The Company owns or possesses adequate and
enforceable rights to use all patents, patent applications, trademarks,
trademark applications, trade names, service marks, copyrights, copyright
applications, licenses, know-how (including trade secrets and other unpatented
and/or unpatentable proprietary or confidential information, systems or
procedures) and other similar rights and proprietary knowledge (collectively,
"Intangibles") necessary for the conduct of its business as now being conducted
including, but not limited to, those described on Schedule III.W. hereto or
where the failure to own or possess such rights would not have a Material
Adverse Effect. To the best of the Company's knowledge, after due inquiry, the
Company is not infringing upon or in conflict with any right of any other person
with respect to any Intangibles. Except as disclosed on Schedule III.W. hereto,
no claims have been asserted by any person to the ownership or use of any
Intangibles and the Company has no knowledge of any basis for such claim.
X. Internal Controls and Procedures. The Company maintains accurate
books and records and internal accounting controls which provide reasonable
assurance that (i) all transactions to which the Company is a party or by which
its properties are bound are executed with management's authorization; (ii) the
reported accountability of the Company's assets is compared with existing assets
at regular intervals; (iii) access to the Company's assets is permitted only in
accordance with management's authorization; and (iv) all transactions to which
the Company is a party or by which its properties are bound are recorded as
necessary to permit preparation of the financial statements of the Company in
accordance with GAAP.
Y. Payments and Contributions. Neither the Company nor any of its
directors, officers or, to its knowledge, other employees has (i) used any
Company funds for any unlawful contribution, endorsement, gift, entertainment or
other unlawful expense relating to political activity; (ii) made any direct or
indirect unlawful payment of Company funds to any foreign or domestic government
official or employee, (iii) violated or is in violation of any provision of the
Foreign Corrupt Practices Act of 1977, as amended; or (iv) made any bribe,
rebate, payoff, influence payment, kickback or other similar payment to any
person with respect to Company matters.
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<PAGE>
Z. No Misrepresentation. No representation or warranty of the
Company contained in this Agreement, any schedule, annex or exhibit hereto or
any agreement, instrument or certificate furnished by the Company to Buyer
pursuant to this Agreement, contains any untrue statement of a material fact or
omits to state a material fact required to be stated therein or necessary to
make the statements therein, not misleading.
IV. Certain Covenants and Acknowledgments
A. Restrictive Legend. Buyer acknowledges and agrees that, upon
issuance pursuant to this Agreement, the Securities (and any shares of Common
Stock issued in conversion of the Preferred Shares or exercise of the Warrants)
shall have endorsed thereon a legend in substantially the following form (and a
stop-transfer order may be placed against transfer of the Preferred Shares, the
Warrant Shares and the Conversion Shares until such legend has been removed):
"THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE "SECURITIES ACT"), OR THE SECURITIES LAWS OF ANY
STATE, AND ARE BEING OFFERED AND SOLD PURSUANT TO AN EXEMPTION FROM THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND SUCH LAWS. THESE
SECURITIES MAY NOT BE SOLD OR TRANSFERRED EXCEPT PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE
EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT OR SUCH
OTHER LAWS."
B. Filings. The Company shall make all necessary Commission Filings
and "blue sky" filings required to be made by the Company in connection with
the sale of the Securities to the Buyer as required by all applicable Laws, and
shall provide a copy thereof to the Buyer promptly after such filing.
C. Reporting Status. So long as the Buyer beneficially owns any of
the Securities, the Company shall timely file all reports required to be filed
by it with the Commission pursuant to Section 13 or 15(d) of the Exchange Act.
D. Use of Proceeds. The Company shall use the net proceeds from the
sale of the Securities (excluding amounts paid by the Company for Buyer's out-
of-pocket costs and expenses incurred in connection with the transactions
contemplated by this Agreement and finder's fees in connection with such sale)
solely for general corporate and working capital purposes.
E. Listing. Except to the extent the Company lists its Common Stock
on The New York Stock Exchange, the Company shall use its best efforts to
maintain its listing of the Common Stock on Nasdaq.
F. Reserved Conversion Shares. The Company at all times from and
after the date hereof shall have a sufficient number of shares of Common Stock
duly and validly authorized and reserved for issuance to satisfy the conversion,
in full, of the 3,000 Preferred Shares and upon the exercise of the Warrants.
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G. Right of First Refusal. If the Company should propose (the
"Proposal") to issue Common Stock or securities convertible into Common Stock at
a price less than the Current Market Price (as defined in Certificate of
Designation), or debt at less than par value or having an effective annual
interest rate in excess of 9.9% (each a "Right of First Refusal Security" and
collectively, the "Right of First Refusal Securities"), in each case on the date
of issuance during the period ending two years after the Closing Date (the
"Right of First Refusal Period"), the Company shall be obligated to offer the
Buyer on the terms set forth in the Proposal (the "Offer") and the Buyer shall
have the right, but not the obligation, to accept such Offer on such terms. If
during the Right of First Refusal Period, the Company provides written notice to
the Buyer that it proposes to issue any Right of First Refusal Securities on the
terms set forth in the Proposal, then the Buyer shall have 10 business days to
accept or reject such offer in writing. If the Company fails to: (i) issue a
Proposal during the Right of First Refusal Period, (ii) offer the Buyer the
opportunity to complete the transaction as set forth in the Proposal, or (iii)
enter into an agreement with the Buyer, at such terms after the Buyer has
accepted the Offer, then the Company shall pay to the Buyer, as liquidated
damages, an amount in total equal to 10% of the amount paid to the Company for
the Right of First Refusal Securities. The foregoing right of first refusal is
and shall be senior in right to any other right of first refusal issued by the
Company to any other Person (as defined in the Certificate of Designation).
Notwithstanding the foregoing, the Buyer shall have no rights under this Section
IV.G. in respect of Common Stock or any other securities of the Company issuable
(i) upon the exercise or conversion of options, warrants or other rights to
purchase securities of the Company outstanding as of the date hereof or (ii) to
officers, directors or employees of the Company or any of its subsidiaries.
Buyer hereby acknowledges that other holders of the Series E Preferred Stock may
also have the right of first refusal set forth in this Section IV.G., and Buyer
hereby agrees that it shall only be entitled to accept an Offer with respect to
its pro rata share of Right of First Refusal Securities (based on the number of
Series E Preferred Shares held by Buyer relative to the number of Series E
Preferred Shares held by all other holders of Series E Preferred Stock with such
right of first refusal and accepting such Offer).
H. Issuances of Additional Convertible Preferred Shares or
Convertible Debentures. So long as the Buyer beneficially owns any of the
Preferred Shares, the Company shall not issue any additional convertible
preferred stock or convertible debt securities, in each case, convertible into
Common Stock at a floating conversion price, without the prior written consent
of the Buyer.
V. Transfer Agent Instructions
A. The Company undertakes and agrees that no instruction other than
the instructions referred to in this Section V and customary stop transfer
instructions prior to the registration and sale of the Common Stock pursuant to
an effective Securities Act registration statement will be given to its transfer
agent for the Common Stock and that the Common Stock issuable upon conversion of
the Preferred Shares and exercise of the Warrants otherwise shall be freely
transferable on the books and records of the Company as and to the extent
provided in this Agreement, the Registration Rights Agreement and applicable
law. Nothing contained in this Section V.A. shall affect in any way Buyer's
obligations and agreement to comply with all applicable securities laws upon
resale of such Common Stock. If, at any time, Buyer provides the Company with an
opinion of counsel reasonably satisfactory to the Company that registration of
the resale by Buyer of such Common Stock is not required under the Securities
Act and that the removal
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of restrictive legends is permitted under applicable law, the Company shall
permit the transfer of such Common Stock and, promptly instruct the Company's
transfer agent to issue one or more certificates for Common Stock without any
restrictive legends endorsed thereon.
B. The Company shall permit Buyer to exercise its right to convert
the Preferred Shares by telecopying an executed and completed Notice of
Conversion (as defined in the Certificate of Designation) to the Company. Each
date on which a Notice of Conversion is telecopied to and received by the
Company in accordance with the provisions hereof shall be deemed a Conversion
Date (as defined in the Certificate of Designation). The Company shall transmit
the certificates evidencing the shares of Common Stock issuable upon conversion
of any Preferred Shares (together with certificates evidencing any Preferred
Shares not being so converted) to Buyer via express courier, by electronic
transfer or otherwise, within five business days after receipt by the Company of
the Notice of Conversion (the "Delivery Date"). Within 30 days after Buyer
delivers the Notice of Conversion to the Company, Buyer shall deliver to the
Company the Preferred Shares being converted.
C. The Company shall permit Buyer to exercise its right to purchase
shares of Common Stock pursuant to exercise of the Warrants in accordance with
its applicable terms of the Warrants. The last date that the Company may deliver
shares of Common Stock issuable upon any exercise of Warrants is referred to
herein as the "Warrant Delivery Date."
D. The Company understands that a delay in the issuance of the shares
of Common Stock issuable in lieu of cash dividends on the Preferred Shares, upon
the conversion of the Preferred Shares or exercise of the Warrants beyond the
applicable Dividend Payment Due Date (as defined in the Certificate of
Designation), Delivery Date or Warrant Delivery Date could result in economic
loss to Buyer. As compensation to Buyer for such loss (and not as a penalty),
the Company agrees to pay to Buyer for late issuance of Common Stock issuable in
lieu of cash dividends on the Preferred Shares, upon conversion of the Preferred
Shares or exercise of the Warrants in accordance with the following schedule
(where "No. Business Days" is defined as the number of business days beyond five
days from the Dividend Payment Due Date, the Delivery Date or the Warrant
Delivery Date, as applicable):
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<TABLE>
<CAPTION>
Compensation For Each 10 Shares
of Preferred Shares Not
Converted
Timely or 500 Shares of Common
Stock Issuable In Payment of
Dividends or Upon Exercise of
No. Business Days Warrants Not Issued Timely
------------------- ---------------------------------
<S> <C>
1 $ 25
2 50
3 75
4 100
5 125
6 150
7 175
8 200
9 225
10 250
more than 10 $250 + $100 for each Business
Day Late beyond 10 days
</TABLE>
The Company shall pay to Buyer the compensation described above by the transfer
of immediately available funds upon Buyer's demand. Nothing herein shall limit
Buyer's right to pursue actual damages for the Company's failure to issue and
deliver Common Stock to Buyer, and in addition to any other remedies which may
be available to Buyer, in the event the Company fails for any reason to effect
delivery of such shares of Common Stock within five business days after the
relevant Dividend Payment Due Date, the Delivery Date or the Warrant Delivery
Date, as applicable, Buyer shall be entitled to rescind the relevant Notice of
Conversion or exercise of Warrants by delivering a notice to such effect to the
Company whereupon the Company and Buyer shall each be restored to their
respective original positions immediately prior to delivery of such Notice of
Conversion on delivery.
VI. Delivery Instructions
The Securities shall be delivered by the Company to the Escrow Agent
pursuant to Section I.B. hereof on a "delivery-against-payment basis" at the
Closing.
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VII. Closing Date
The date and time of the issuance and sale of the Preferred Shares
(the "Closing Date") shall be the date hereof or such other as shall be mutually
agreed upon in writing. The issuance and sale of the Securities shall occur on
the Closing Date at the offices of the Escrow Agent. Notwithstanding anything
to the contrary contained herein, the Escrow Agent shall not be authorized to
release to the Company the Purchase Price and to Buyer the certificate(s) (I/N/O
Buyer or I/N/O Buyer's nominee) evidencing the Securities being purchased by
Buyer unless the conditions set forth in Section VIII.C. and IX.G. hereof have
been satisfied.
VIII. Conditions to the Company's Obligations
The Buyer understands that the Company's obligation to sell the
Securities on the Closing Date to Buyer pursuant to this Agreement is
conditioned upon:
A. Delivery by Buyer to the Escrow Agent of the Purchase Price;
B. The accuracy in all material respects on the Closing Date of the
representations and warranties of Buyer contained in this Agreement as if made
on the Closing Date (except for representations and warranties which, by their
express terms, speak as of and relate to a specified date, in which case such
accuracy shall be measured as of such specified date) and the performance by
Buyer in all material respects on or before the Closing Date of all covenants
and agreements of Buyer required to be performed by it pursuant to this
Agreement on or before the Closing Date;
C. There shall not be in effect any Law or order, ruling, judgment or
writ of any court or public or governmental authority restraining, enjoining or
otherwise prohibiting any of the transactions contemplated by this Agreement.
IX. Conditions to Buyer's Obligations
The Company understands that Buyer's obligation to purchase the
Securities on the Closing Date pursuant to this Agreement is conditioned upon:
A. Delivery by the Company to Buyer of evidence that the Certificate
of Designation has been filed and is effective.
B. Delivery by the Company to the Escrow Agent of one or more
certificates (I/N/O Buyer or I/N/O Buyer's nominee) evidencing the Securities to
be purchased by Buyer pursuant to this Agreement;
C. The accuracy in all respects on the Closing Date of the
representations and warranties of the Company contained in this Agreement as if
made on the Closing Date (except for representations and warranties which, by
their express terms, speak as of and relate to a specified date, in which case
such accuracy shall be measured as of such specified date) and the performance
by the Company in all respects on or before the Closing Date of all covenants
and agreements of the Company required to be performed by it pursuant to this
Agreement on or before the Closing Date;
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<PAGE>
D. Buyer having received an opinion of counsel for the Company, dated
the Closing Date, in form, scope and substance reasonably satisfactory to the
Buyer as to the matters set forth in Annex A;
E. There not having occurred (i) any general suspension of trading
in, or limitation on prices listed for, the Common Stock on Nasdaq, (ii) the
declaration of a banking moratorium or any suspension of payments in respect of
banks in the United States, (iii) the commencement of a war, armed hostilities
or other international or national calamity directly or indirectly involving the
United States or any of its territories, protectorates or possessions, or (iv)
in the case of the foregoing existing at the date of this Agreement, a material
acceleration or worsening thereof;
F. There not having occurred any event or development, and there
being in existence no condition, having or which reasonably and foreseeably
could have a Material Adverse Effect;
G. The Company shall have delivered to Buyer (as provided in the
Escrow Instructions) reimbursement of Buyer's out-of-pocket costs and expenses
incurred in connection with the transactions contemplated by this Agreement
(including the fees and disbursements of Buyer's legal counsel) of $45,000;
H. There shall not be in effect any Law or order, ruling, judgment or
writ of any court or public or governmental authority restraining, enjoining or
otherwise prohibiting any of the transactions contemplated by this Agreement;
I. Delivery to the Buyer of a letter agreement signed by CIBC WMV,
Inc. ("CIBC") and Technology Funding Venture Partners III ("Tech Funding")
whereby CIBC and Tech Funding agree not to sell their holdings of the Company's
Common Stock or other securities prior to the date on which the Company releases
its first quarter earnings results for the quarter ended March 31, 2000;
J. Delivery to the Buyer of an agreement signed by the Company giving
the Buyer the option to force the Company to redeem the Shares purchased by the
Buyer, in cash, at the Optional Redemption Price, as defined in Section 6.6 of
the Certificate of Designation, in the event that, any time after December 14,
1999, the Company's Common Stock has been delisted from Nasdaq and is not traded
on either the Nasdaq National Market or the Nasdaq SmallCap Market;
K. The Company shall have consummated the sale of (a) 2,000 shares of
the Company's Series E 8% Convertible Preferred Stock, par value $.001 per
share, and common stock purchase warrants to CIBC for the purchase price of
$2,000,000, and (b) 1,000 shares of the Company's Series E 8% Convertible
Preferred Stock, par value $.001 per share, and common stock purchase warrants
to Tech Funding for the purchase price of $1,000,000;
L. The Company shall have paid to Willow Bay Associates, LLC ("Willow
Bay") the amount specified in paragraph 1 of the letter agreement, dated June
30, 1999, between the Company and Willow Bay; and
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<PAGE>
M. Delivery of irrevocable instructions to the Company's transfer
agent to reserve 1,555,000 shares of Common Stock for issuance of the Conversion
Shares and the Warrant Shares.
X. Termination
A. Termination by Mutual Written Consent. This Agreement may be
terminated and the transactions contemplated hereby may be abandoned, for any
reason and at any time prior to the Closing Date, by the mutual written consent
of the Company and Buyer.
B. Termination by the Company or Buyer. This Agreement may be
terminated and the transactions contemplated hereby may be abandoned by action
of the Company or Buyer if (i) the Closing shall not have occurred at or prior
to 5:00 p.m., New York City time, on July 16 , 1999 (the "Latest Closing Date");
provided, however, that the right to terminate this Agreement pursuant to this
Section X.B.(i) shall not be available to any party whose failure to fulfill any
of its obligations under this Agreement has been the cause of or resulted in the
failure of the Closing to occur at or before such time and date or (ii) any
court or public or governmental authority shall have issued an order, ruling,
judgment or writ, or there shall be in effect any Law, restraining, enjoining or
otherwise prohibiting the consummation of any of the transactions contemplated
by this Agreement; provided, further, however, that if the Closing shall not
have occurred on or prior to the Latest Closing Date, the Closing may only occur
after the Latest Closing Date with the written acceptance of Buyer.
C. Termination by Buyer. This Agreement may be terminated and the
transactions contemplated hereby may be abandoned by Buyer at any time prior to
the Closing Date, if (i) the Company shall have failed to comply with any of its
covenants or agreements contained in this Agreement, (ii) there shall have been
a breach by the Company with respect to any representation or warranty made by
it in this Agreement, (iii) there shall have occurred any event or development,
or there shall be in existence any condition, having or reasonably and
foreseeably likely to have a Material Adverse Effect or (iv) the Company shall
have failed to satisfy the conditions provided in Section IX hereof.
D. Termination by the Company. This Agreement may be terminated and
the transactions contemplated hereby may be abandoned by the Company at any time
prior to the Closing Date, if (i) Buyer shall have failed to comply with any of
its covenants or agreements contained in this Agreement or (ii) there shall have
been a breach by Buyer with respect to any representation or warranty made by it
in this Agreement.
E. Fees and Expenses of Termination. If this Agreement is terminated
for any reason, the Company shall reimburse Buyer for all of Buyer's out-of-
pocket costs and expenses incurred in connection with the transactions
contemplated by this Agreement and the other Documents (including, without
limitation, the fees and disbursements of Buyer's legal counsel).
XI. Survival; Indemnification
A. The representations, warranties and covenants made by each of the
Company and Buyer in this Agreement, the annexes, schedules and exhibits hereto
and in each instrument, agreement and certificate entered into and delivered by
them pursuant to this Agreement, shall survive the Closing and the consummation
of the transactions contemplated hereby. In the event of
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a breach or violation of any of such representations, warranties or covenants,
the party to whom such representations, warranties or covenants have been made
shall have all rights and remedies for such breach or violation available to it
under the provisions of this Agreement or otherwise, whether at law or in
equity, irrespective of any investigation made by or on behalf of such party on
or prior to the Closing Date.
B. The Company hereby agrees to indemnify and hold harmless the
Buyer, its Affiliates and their respective officers, directors, partners and
members (collectively, the "Buyer Indemnitees"), from and against any and all
losses, claims, damages, judgments, penalties, liabilities and deficiencies
(collectively, "Losses"), and agrees to reimburse the Buyer Indemnitees for all
out of-pocket expenses (including the fees and expenses of legal counsel), in
each case promptly as incurred by the Buyer Indemnitees and to the extent
arising out of or in connection with:
1. any misrepresentation, omission of fact or breach of any of
the Company's representations or warranties contained in this Agreement or
the other Documents, or the annexes, schedules or exhibits hereto or
thereto or any instrument, agreement or certificate entered into or
delivered by the Company pursuant to this Agreement or the other Documents;
or
2. any failure by the Company to perform any of its covenants,
agreements, undertakings or obligations set forth in this Agreement or the
other Documents, or the annexes, schedules or exhibits hereto or thereto or
any instrument, agreement or certificate entered into or delivered by the
Company pursuant to this Agreement or the other Documents;
3. any misrepresentation, omission of fact or breach of any of
the Company's representations or warranties contained in, or any failure by
the Company to perform any of its covenants, agreements, undertakings or
obligations set forth in, the Reciprocal Confidentiality Agreement, dated
May 19, 1999, between the Company and Willow Bay Associates, LLC; or
4. resales of the Common Shares by Buyer in the manner and as
contemplated by this Agreement and the Registration Rights Agreement.
C. Buyer hereby agrees to indemnify and hold harmless the Company,
its Affiliates and their respective officers, directors, partners and members
(collectively, the "Company Indemnitees"), from and against any and all Losses,
and agrees to reimburse the Company Indemnitees for all out-of-pocket expenses
(including the fees and expenses of legal counsel), in each case promptly as
incurred by the Company Indemnitees and to the extent arising out of or in
connection with:
1. any misrepresentation, omission of fact, or breach of any of
Buyer's representations or warranties contained in this Agreement or the
other Documents, or the annexes, schedules or exhibits hereto or thereto or
any instrument, agreement or certificate entered into or delivered by Buyer
pursuant to this Agreement or the other Documents; or
2. any failure by Buyer to perform in any material respect any
of its covenants, agreements, undertakings or obligations set forth in this
Agreement or the other
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Documents or any instrument, certificate or agreement entered into or
delivered by Buyer pursuant to this Agreement or the other Documents.
D. Promptly after receipt by either party hereto seeking
indemnification pursuant to this Section XI (an "Indemnified Party") of written
notice of any investigation, claim, proceeding or other action in respect of
which indemnification is being sought (each, a "Claim"), the Indemnified Party
promptly shall notify the party against whom indemnification pursuant to this
Section XI is being sought (the "Indemnifying Party") of the commencement
thereof; but the omission to so notify the Indemnifying Party shall not relieve
it from any liability that it otherwise may have to the Indemnified Party except
to the extent that the Indemnifying Party is materially prejudiced and forfeits
substantive rights and defenses by reason of such failure. In connection with
any Claim as to which both the Indemnifying Party and the Indemnified Party are
parties, the Indemnifying Party shall be entitled to assume the defense thereof.
Notwithstanding the assumption of the defense of any Claim by the Indemnifying
Party, the Indemnified Party shall have the right to employ separate legal
counsel and to participate in the defense of such Claim, and the Indemnifying
Party shall bear the reasonable fees, out-of-pocket costs and expenses of such
separate legal counsel to the Indemnified Party if (and only if): (x) the
Indemnifying Party shall have agreed to pay such fees, out-of-pocket costs and
expenses, (y) the Indemnified Party and the Indemnifying Party reasonably shall
have concluded that representation of the Indemnified Party and the Indemnifying
Party by the same legal counsel would not be appropriate due to actual or, as
reasonably determined by legal counsel to the Indemnified Party, potentially
differing interests between such parties in the conduct of the defense of such
Claim, or if there may be legal defenses available to the Indemnified Party that
are in addition to or disparate from those available to the Indemnifying Party,
or (z) the Indemnifying Party shall have failed to employ legal counsel
reasonably satisfactory to the Indemnified Party within a reasonable period of
time after notice of the commencement of such Claim. If the Indemnified Party
employs separate legal counsel in circumstances other than as described in
clauses (x), (y) or (z) above, the fees, costs and expenses of such legal
counsel shall be borne exclusively by the Indemnified Party. Except as provided
above, the Indemnifying Party shall not, in connection with any Claim in the
same jurisdiction, be liable for the fees and expenses of more than one firm of
legal counsel for the Indemnified Party (together with appropriate local
counsel). The Indemnifying Party shall not, without the prior written consent
of the Indemnified Party (which consent shall not unreasonably be withheld),
settle or compromise any Claim or consent to the entry of any judgment that does
not include an unconditional release of the Indemnified Party from all
liabilities with respect to such Claim or judgment.
E. In the event one party hereunder should have a claim for
indemnification that does not involve a claim or demand being asserted by a
third party, the Indemnified Party promptly shall deliver notice of such claim
to the Indemnifying Party. If the Indemnified Party disputes the claim, such
dispute shall be resolved by mutual agreement of the Indemnified Party and the
Indemnifying Party or by binding arbitration conducted in accordance with the
procedures and rules of the American Arbitration Association. Judgment upon any
award rendered by any arbitrators may be entered in any court having competent
jurisdiction thereof.
XII. Governing Law; Miscellaneous
This Agreement shall be governed by and interpreted in accordance with
the laws of the State of New York, without regard to the conflicts of law
principles of such state. Each of the
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parties consents to the jurisdiction of the federal courts whose districts
encompass any part of the City of New York or the state courts of the State of
New York sitting in the City of New York in connection with any dispute arising
under this Agreement and hereby waives, to the maximum extent permitted by law,
any objection, including any objection based on forum non conveniens, to the
bringing of any such proceeding in such jurisdictions. A facsimile transmission
of this signed Agreement shall be legal and binding on all parties hereto. This
Agreement may be signed in one or more counterparts, each of which shall be
deemed an original. The headings of this Agreement are for convenience of
reference and shall not form part of, or affect the interpretation of, this
Agreement. 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 or the validity or
enforceability of this Agreement in any other jurisdiction. This Agreement may
be amended only by an instrument in writing signed by the party to be charged
with enforcement. This Agreement supersedes all prior agreements and
understandings among the parties hereto with respect to the subject matter
hereof.
XIII. Notices
Except as may be otherwise provided herein, any notice or other
communication or delivery required or permitted hereunder shall be in writing
and shall be delivered personally or sent by certified mail, postage prepaid, or
by a nationally recognized overnight courier service, and shall be deemed given
when so delivered personally or by overnight courier service, or, if mailed,
three (3) days after the date of deposit in the United States mails, as follows:
A. Thermatrix Inc.
308 North Peters Road, Suite 100
Knoxville, TN 37922
Attention: Edward E. Greene
(423) 539-9603
(423) 539-9643 (Fax)
with a copy to:
Wilson Sonsini Goodrich & Rosati, PC
650 Page Mill Road
Palo Alto, CA 94304-1050
Attention: Michael J. Danaher, Esq.
(650) 493-9300
(650) 493-6811 (Fax)
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B. if to the Buyer, to:
The Shaar Fund Ltd.,
c/o Levinson Capital Management
2 World Trade Center, Suite 1820
New York, NY 10048
Attention: Samuel Levinson
(212) 432-7711
(212) 432-7771 (Fax)
with a copy to:
Cadwalader, Wickersham & Taft
100 Maiden Lane
New York, NY 10038
Attention: Dennis J. Block, Esq.
(212) 504-5555
(212) 504-5557 (Fax)
C. if to the Escrow Agent, to:
Cadwalader, Wickersham & Taft
100 Maiden Lane
New York, NY 10038
Attention: Dennis J. Block, Esq.
(212) 504-5555
(212) 504-5557 (Fax)
The Company, the Buyer or the Escrow Agent may change the foregoing address by
notice given pursuant to this Section XIII.
XIV. Confidentiality
Each of the Company and Buyer agrees to keep confidential and not to
disclose to or use for the benefit of any third party the terms of this
Agreement or any other information which at any time is communicated by the
other party as being confidential without the prior written approval of the
other party; provided, however, that this provision shall not apply to
information which, at the time of disclosure, is already part of the public
domain (except by breach of this Agreement) and information which is required to
be disclosed by law (including, without limitation, pursuant to Item 601(b)(10)
of Regulation S-K under the Securities Act and the Exchange Act).
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XV. Assignment
This Agreement shall not be assignable by either of the parties hereto
prior to the Closing without the prior written consent of the other party, and
any attempted assignment contrary to the provisions hereby shall be null and
void; provided, however, that Buyer may assign its rights and obligations
hereunder, in whole or in part, to any affiliate of Buyer who furnishes to the
Company the representations and warranties set forth in Section II hereof and
otherwise agrees to be bound by the terms of this Agreement.
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In Witness Whereof, the parties hereto have duly executed and
delivered this Agreement on the date first above written.
Thermatrix Inc.
By:_____________________________
Name:
Title:
The Shaar Fund Ltd.
By:_____________________________
Name: Samuel Levinson
Title: Managing Director
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<PAGE>
EXHIBIT A
COMMON STOCK PURCHASE WARRANTS
26
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EXHIBIT B
CERTIFICATE OF DESIGNATION
27
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EXHIBIT C
ESCROW INSTRUCTIONS
28
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EXHIBIT D
REGISTRATION RIGHTS AGREEMENT
29
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SCHEDULE III.A.1.
PREEMPTIVE, SUBSCRIPTION, "CALL" OR SIMILAR RIGHTS
30
<PAGE>
SCHEDULE III.A.2.
SUBSIDIARIES
31
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SCHEDULE III.C.
ISSUANCES AND SALES OF SECURITIES
32
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SCHEDULE III.O.
RELATED PARTY TRANSACTIONS
33
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SCHEDULE III.Q.
SECURITIES LAW MATTERS
34
<PAGE>
SCHEDULE III.R.6.
ENVIRONMENTAL MATTERS
35
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SCHEDULE III.V.
PROPERTY
36
<PAGE>
SCHEDULE III.W.
INTELLECTUAL PROPERTY
37
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ANNEX A
FORM OF OPINION
1. The Company has been duly incorporated and is validly existing as
a corporation in good standing under the laws of the State of Delaware, is duly
qualified to do business as a foreign corporation and is in good standing in all
jurisdictions where the Company owns or leases properties or conducts business,
except for jurisdictions in which the failure to so qualify would not have a
Material Adverse Effect, and has all requisite corporate power and authority to
own its properties and conduct its business as described in the Commission
Filings.
2. The authorized capital stock of the Company consists of 25,000,000
shares of Common Stock, par value $.001 per share (the "Common Stock"), and
5,000,000 shares of Preferred Stock, par value $.001 per share.
3. When delivered to you or upon your order against payment of the
agreed consideration therefor in accordance with the provisions of the
Documents, the Securities will be duly authorized and validly issued, fully paid
and nonassessable.
4. The Company has the requisite corporate power and authority to
enter into the Documents and to sell and deliver the Securities as described in
the Documents; each of the Documents has been duly and validly authorized by all
necessary corporate action by the Company; each of the Documents has been duly
and validly executed and delivered by and on behalf of the Company, and is valid
and binding agreement of the Company, enforceable in accordance with its terms,
except as enforceability may be limited by general equitable principles,
bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium or
other laws affecting creditors rights generally.
5. The executive, delivery and performance of the Documents by the
Company and the performance of its obligations thereunder do not and will not
constitute a breach or violation of any of the terms and provisions of, or
constitute a default (or with notice, lapse of time or both would constitute a
default) under or conflict with or violate any provision of (i) the Company's
certificate of incorporation or bylaws, (ii) any indenture, mortgage, deed of
trust, agreement or other instrument known to us to which the Company is a party
or by which it or any of its property is bound, (iii) or, to the best of our
knowledge, any judgment, decree or order of any court or governmental body
having jurisdiction over the Company or any of its property. To the best of our
knowledge, no consent, approval, authorization, order, registration, filing,
qualification, license or permit of or with any court or any public,
governmental or regulatory agency or body having jurisdiction over the Company
or any of its properties or assets is required for the execution, delivery and
performance by the Company of the Documents or the consummation by the Company
of the transactions contemplated thereby.
6. When issued, the Preferred Shares and the Warrants shall be duly
authorized, validly issued, fully paid and nonassessable, and free and clear of
all encumbrances and restrictions, except for restrictions on transfer imposed
by applicable securities laws. The Conversion Shares and Warrant Shares
issuable upon conversion or exercise, respectively, of the Preferred Shares and
the
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Warrants, respectively, will be duly authorized, validly issued, fully paid and
nonassessable, and free and clear of all encumbrances and restrictions, except
for restrictions on transfer imposed by applicable securities laws.
7. Based on Buyer's representations contained in this Agreement, the
offer and sale of the Preferred Shares and the Warrants are exempt from the
registration requirements of the Securities Act.
8. To the best of our knowledge, other than as described in the
Commission Filings, there are no outstanding options, warrants or other
securities exercisable or convertible into Common Stock of the Company.
9. There is no action, suit, claim, inquiry or investigation pending
or, to the best of our knowledge, threatened by or before any court or public or
governmental authority which, if determined adversely to the Company, would have
a Material Adverse Effect.
10. Neither the Company nor any of its subsidiaries is, or will be
after the consummation of the transactions contemplated by this Agreement and
the other Documents and the use of the proceeds from the sale of the Securities,
an "investment company" or an entity "controlled" by an "investment company," as
such terms are defined in the Investment Company Act of 1940, as amended.
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<PAGE>
EXHIBIT 4.1(b)
SECURITIES PURCHASE AGREEMENT
This Securities Purchase Agreement, dated as of June , 1999, between
Thermatrix Inc., a Delaware corporation with principal executive offices located
at 308 North Peters Road, Suite 100, Knoxville, Tennessee 37922 (the "Company"),
and Technology Funding Venture Partners III, L.P. ("Buyer").
Whereas, Buyer desires to purchase from the Company, and the Company
desires to issue and sell to the Buyer, upon the terms and subject to the
conditions of this Agreement, (i) 1,000 shares of the Company's Series E 8%
Convertible Preferred Stock, par value $.001 per share (collectively, the
"Preferred Shares"), and (ii) Common Stock Purchase Warrants in the form
attached hereto as Exhibit A (collectively, the "Warrants");
Whereas, upon the terms and subject to the designations, preferences
and rights set forth in the Company's Certificate of Designation of Series E 8%
Convertible Preferred Stock in the form attached hereto as Exhibit B (the
"Certificate of Designation"), the Preferred Shares are convertible into shares
of the Company's common stock, par value $.001 per share (the "Common Stock");
Whereas, the Warrants, upon the terms and subject to the conditions in
the Warrants, will for a period of three years be exercisable to purchase 35,000
shares of Common Stock;
Now, Therefore, in consideration of the premises and the mutual
covenants contained herein, the parties hereto, intending to be legally bound,
hereby agree as follows:
I. Purchase and Sale of Preferred Shares and Warrants
A. Transaction. Buyer hereby agrees to purchase from the Company,
and the Company has offered and hereby agrees to issue and sell to the Buyer in
a transaction exempt from the registration and prospectus delivery requirements
of the Securities Act of 1933, as amended (the "Securities Act"), the Preferred
Shares and the Warrants to purchase 35,000 shares of Common Stock.
B. Purchase Price; Form of Payment. The purchase price for the
Preferred Shares and the Warrants to be purchased by Buyer hereunder shall be
$1,000,000 (the "Purchase Price"). Buyer shall pay the Purchase Price by wire
transfer of immediately available funds to the escrow agent (the "Escrow Agent")
identified in those certain Escrow Instructions of even date herewith, a copy of
which is attached hereto as Exhibit C (the "Escrow Instructions").
Simultaneously with the execution of this Agreement and against receipt by the
Escrow Agent of the Purchase Price, the Company shall deliver one or more duly
authorized, issued and executed certificates (I/N/O Buyer or, if the Company
otherwise has been notified, I/N/O Buyer's nominee) evidencing the Preferred
Shares and the Warrants which the Buyer is purchasing, to the Escrow Agent or
its designated depository. By executing and delivering this Agreement,
<PAGE>
Buyer and the Company each hereby agrees to observe the terms and conditions of
the Escrow Instructions, all of which are incorporated herein by reference as if
fully set forth herein.
C. Method of Payment. Payment into escrow of the Purchase Price
shall be made by wire transfer of immediately available funds to:
The Bank of America
530 Lytton Avenue
Palo Alto, CA 94301
ABA No.: 121000358
For the Account of: Wilson Sonsini Goodrich & Rosati
Trust Account
Account No.: 14843-00544
Simultaneously with the execution of this Agreement, the Buyer shall deposit
with the Escrow Agent the Purchase Price and the Company shall deposit with the
Escrow Agent the Preferred Shares and the Warrants.
II. Buyer's Representations, Warranties; Access to
Information; Independent Investigation
Buyer represents and warrants to and covenants and agrees with the
Company as follows:
A. Buyer is purchasing the Preferred Shares, the Warrants, the
Common Stock issuable upon exercise of the Warrants (the "Warrant Shares") and
the shares of Common Stock issuable upon conversion of the Preferred Shares (the
"Conversion Shares" and, collectively with the Preferred Shares, the Warrants
and the Warrant Shares, the "Securities") for its own account, for investment
purposes only and not with a view towards or in connection with the public sale
or distribution thereof in violation of the Securities Act.
B. Buyer is (i) an "accredited investor" within the meaning of Rule
501 of Regulation D under the Securities Act, (ii) experienced in making
investments of the kind contemplated by this Agreement, (iii) capable, by reason
of its business and financial experience, of evaluating the relative merits and
risks of an investment in the Securities, and (iv) able to afford the loss of
its investment in the Securities.
C. Buyer understands that the Securities are being offered and sold
by the Company in reliance on an exemption from the registration requirements of
the Securities Act and equivalent state securities and "blue sky" laws, and that
the Company is relying upon the accuracy of, and Buyer's compliance with,
Buyer's representations, warranties and covenants set forth in this Agreement to
determine the availability of such exemption and the eligibility of Buyer to
purchase the Securities;
D. Buyer has been furnished with or provided access to all materials
relating to the business, financial position and results of operations of the
Company, and all other materials requested by Buyer to enable it to make an
informed investment decision with respect to the Securities.
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<PAGE>
E. Buyer understands that the Securities have not been approved or
disapproved by the Securities and Exchange Commission (the "Commission") or any
state securities commission and that the foregoing authorities have not reviewed
any documents or instruments in connection with the offer and sale to it of the
Securities and have not confirmed or determined the adequacy or accuracy of any
such documents or instruments.
F. This Agreement has been duly and validly authorized, executed and
delivered by Buyer and is a valid and binding agreement of Buyer enforceable
against it in accordance with its terms, subject to applicable bankruptcy,
insolvency, fraudulent conveyance, reorganization, moratorium and similar laws
affecting creditors' rights and remedies generally and except as rights to
indemnity and contribution may be limited by federal or state securities laws or
the public policy underlying such laws.
G. Neither Buyer nor its affiliates nor any person acting on its or
their behalf has the intention of entering, or will enter into, prior to the
closing or during any Valuation Period (as defined in the Certificate of
Designation), any put option, short position or other similar instrument or
position with respect to the Common Stock and neither Buyer nor any of its
affiliates nor any person acting on its or their behalf will use at any time
shares of Common Stock acquired pursuant to this Agreement to settle any put
option, short position or other similar instrument or position that may have
been entered into prior to the execution of this Agreement; provided, however,
that nothing in this Section II.G shall operate to forbid Buyer or any of its
affiliates or any person acting on its or their behalf from selling, or entering
into any other transaction with respect to, the Common Stock contemporaneously
with or following such date and time as the Person or Persons in whose name or
names the Common Stock Issued at Conversion (as defined in the Certificate of
Designation) shall be issuable shall be deemed to have become the holder or
holders of record of the Common Shares (as defined in the Certificate of
Designation) represented thereby and all voting and other rights associated with
the beneficial ownership of such Common Shares shall have vested with such
Person or Persons.
III. The Company's Representations
The Company represents and warrants to Buyer that:
A. Capitalization.
1. The authorized capital stock of the Company consists of: (i)
25,000,000 shares of Common Stock, of which 7,767,440 shares are issued and
outstanding on the date hereof; and (ii) 5,000,000 shares of "blank check"
preferred stock, of which no shares are issued and outstanding on the date
hereof. All of the issued and outstanding shares of Common Stock and
preferred stock, if any, have been duly authorized and validly issued and
are fully paid and nonassessable. As of the date hereof, the Company has
outstanding stock options and warrants to purchase 965,480 shares of Common
Stock. The Conversion Shares and Warrant Shares have been duly and validly
authorized and reserved for issuance by the Company, and when issued by the
Company upon conversion of, or in lieu of accrued dividends on, the
Preferred Shares and on exercise of the Warrants will be duly and validly
issued, fully paid and nonassessable and will not subject the holder
thereof to personal liability by reason of being such holder.
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There are no preemptive, subscription, "call" or other similar rights to
acquire the Common Stock (including the Conversion Shares and Warrant
Shares) that have been issued or granted to any person, except as disclosed
on Schedule III.A.1. hereto or otherwise previously disclosed in writing to
Buyer.
2. Except as disclosed on Schedule III.A.2. hereto, the Company
does not own or control, directly or indirectly, any interest in any other
corporation, partnership, limited liability company, unincorporated
business organization, association, trust or other business entity.
B. Organization; Reporting Company Status.
1. The Company is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware and
is duly qualified as a foreign corporation in all jurisdictions in which
the failure to so qualify would have a material adverse effect on the
business, properties, prospects, condition (financial or otherwise) or
results of operations of the Company or on the consummation of any of the
transactions contemplated by this Agreement (a "Material Adverse Effect").
2. The Company has registered the Common Stock pursuant to
Section 12 of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), and has timely filed with the Commission all reports and
information required to be filed by it pursuant to all reporting
obligations under Section 13(a) or 15(d), as applicable, of the Exchange
Act for the 12-month period immediately preceding the date hereof. The
Common Stock is listed and traded on the Nasdaq National Market ("Nasdaq")
and the Company has not received any notice regarding, and to its knowledge
there is no threat of, the termination or discontinuance of the eligibility
of the Common Stock for such listing, except as disclosed on Schedule
III.B.2. As of December 15, 1999, the Company will be in compliance with
Nasdaq listing requirements and will be listed and traded on either Nasdaq
National Market or Nasdaq Small Cap Market.
C. Authorized Shares. The Company has duly and validly authorized
and reserved for issuance 519,000 shares of Common Stock sufficient in number
for the conversion of the Preferred Shares and the exercise of the Warrants.
The Company understands and acknowledges the potentially dilutive effect to the
Common Stock of the issuance of the Preferred Shares and Warrant Shares upon
conversion of the Preferred Shares and exercise of the Warrants, respectively.
The Company further acknowledges that its obligation to issue Conversion Shares
upon conversion of the Preferred Shares and Warrant Shares upon exercise of the
Warrants in accordance with this Agreement, the Preferred Shares and the
Warrants is absolute and unconditional regardless of the dilutive effect that
such issuance may have on the ownership interests of other stockholders of the
Company and notwithstanding the commencement of any case under 11 U.S.C. (S)101
et seq. (the "Bankruptcy Code"). In the event the Company is a debtor under the
Bankruptcy Code, the Company hereby waives to the fullest extent permitted any
rights to relief it may have under 11 U.S.C. (S)362 in respect of the
conversion of the Preferred Shares and the exercise of the Warrants. The
Company agrees, without cost or expense to Buyer, to take or consent to any and
all action necessary to effectuate relief under 11 U.S.C. (S)362. Schedule
III. C. hereto sets forth (i) all issuances and sales by the
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Company since December 31, 1998 of its capital stock, and other securities
convertible, exercisable or exchangeable for capital stock of the Company, (ii)
the amount of such securities sold, including any underlying shares of capital
stock, (iii) the purchaser thereof, and (iv) the amount paid therefor.
D. Authority; Validity and Enforceability. The Company has the
requisite corporate power and authority to file and perform its obligations
under the Certificate of Designation and to enter into the Documents (as
hereinafter defined), and to perform all of its obligations hereunder and
thereunder (including the issuance, sale and delivery to Buyer of the
Securities). The execution, delivery and performance by the Company of the
Documents, and the consummation by the Company of the transactions contemplated
hereby and thereby (including, without limitation, the filing of the Certificate
of Designation with the Delaware Secretary of State's office, the issuance of
the Preferred Shares, the Warrants and the issuance and reservation for issuance
of the Conversion Shares and Warrant Shares), has been duly authorized by all
necessary corporate action on the part of the Company. Each of the Documents has
been duly and validly executed and delivered by the Company and the Certificate
of Designation has been duly filed with the Delaware Secretary of State's office
by the Company and each instrument constitutes a valid and binding obligation of
the Company enforceable against it in accordance with its terms, subject to
applicable bankruptcy, insolvency, fraudulent conveyance, reorganization,
moratorium and similar laws affecting creditors' rights and remedies generally
and except as rights to indemnity and contribution may be limited by federal or
state securities laws or the public policy underlying such laws. The Securities
have been duly and validly authorized for issuance by the Company and, when
executed and delivered by the Company, will be valid and binding obligations of
the Company enforceable against it in accordance with their terms, subject to
applicable bankruptcy, insolvency, fraudulent conveyance, reorganization,
moratorium and similar laws affecting creditors' rights and remedies generally.
For purposes of this Agreement, the term "Documents" means (i) this Agreement;
(ii) the Registration Rights Agreement of even date herewith between the Company
and Buyer, a copy of which is annexed hereto as Exhibit D (the "Registration
Rights Agreement"); (iii) the Certificate of Designation; (iv) the Warrants; and
(v) the Escrow Instructions.
E. Authorization of the Securities. The authorization, issuance,
sale and delivery of the Preferred Shares and Warrants has been duly authorized
by all requisite corporate action on the part of the Company. As of the Closing
Date, the Preferred Shares and the Warrants, and the Conversion Shares and the
Warrant Shares upon their issuance in accordance with the Certificate of
Designation and the Warrants, respectively, will be validly issued and
outstanding, fully paid and nonassessable, and not subject to any preemptive
rights, rights of first refusal or other similar rights.
F. Non-contravention. The execution and delivery by the Company of
the Documents, the issuance of the Securities, and the consummation by the
Company of the other transactions contemplated hereby and thereby, including,
without limitation, the filing of the Certificate of Designation with the
Delaware Secretary of State's office, do not and will not conflict with or
result in a breach by the Company of any of the terms or provisions of, or
constitute a default (or an event which, with notice, lapse of time or both,
would constitute a default) under (i) the articles of incorporation or by-laws
of the Company or (ii) any indenture, mortgage, deed of trust or other material
agreement or instrument to which the Company is a
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party or by which its properties or assets are bound, or any law, rule,
regulation, decree, judgment or order of any court or public or governmental
authority having jurisdiction over the Company or any of the Company's
properties or assets, except as to clause (ii) above such conflict, breach or
default which would not have a Material Adverse Effect.
G. Approvals. No authorization, approval or consent of any court or
public or governmental authority is required to be obtained by the Company for
the issuance and sale of the Preferred Shares or the Warrants (and the
Conversion Shares and Warrant Shares) to Buyer as contemplated by this
Agreement, except such authorizations, approvals and consents that have been
obtained by the Company prior to the date hereof.
H. Commission Filings. None of the Company's reports and documents
heretofore filed with the Commission pursuant to the Securities Act or the
Exchange Act (collectively, the "Commission Filings") contained at the time they
were filed any untrue statement of a material fact or omitted to state any
material fact required to be stated therein or necessary to make the statements
made therein, in light of the circumstances under which they were made, not
misleading.
I. Absence of Certain Changes. Since the Balance Sheet Date (as
defined in Section III.M.), there has not occurred any change, event or
development in the business, financial condition, prospects or results of
operations of the Company, and there has not existed any condition, having or
reasonably likely to have a Material Adverse Effect.
J. Full Disclosure. There is no fact known to the Company (other
than general economic or industry conditions known to the public generally) that
has not been fully disclosed in writing to the Buyer that (i) reasonably could
be expected to have a Material Adverse Effect or (ii) reasonably could be
expected to materially and adversely affect the ability of the Company to
perform its obligations pursuant to the Documents.
K. Absence of Litigation. There is no action, suit, claim,
proceeding, inquiry or investigation pending or, to the Company's knowledge,
threatened, by or before any court or public or governmental authority which, if
determined adversely to the Company, would have a Material Adverse Effect.
L. Absence of Events of Default. No "Event of Default" (as defined
in any agreement or instrument to which the Company is a party) and no event
which, with notice, lapse of time or both, would constitute an Event of Default
(as so defined), has occurred and is continuing, which could have a Material
Adverse Effect.
M. Financial Statements; No Undisclosed Liabilities. The Company has
delivered to Buyer true and complete copies of its audited balance sheet as at
December 31, 1997 and 1998 and the related audited statements of operations and
cash flows for the three fiscal years ended December 31, 1998, including the
related notes and schedules thereto (collectively, the "Financial Statements"),
and all management letters, if any, from the Company's independent auditors
relating to the dates and periods covered by the Financial Statements. Each of
the Financial Statements is complete and correct in all material respects, has
been prepared in accordance with United States General Accepted Accounting
Principles ("GAAP") (subject, in
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<PAGE>
the case of the interim Financial Statements, to normal year end adjustments and
the absence of footnotes) and in conformity with the practices consistently
applied by the Company without modification of the accounting principles used in
the preparation thereof, and fairly presents the financial position, results of
operations and cash flows of the Company as at the dates and for the periods
indicated. For purposes hereof, the audited balance sheet of the Company as at
December 31, 1998 is hereinafter referred to as the "Balance Sheet" and December
31, 1998 is hereinafter referred to as the "Balance Sheet Date". The Company has
no indebtedness, obligations or liabilities of any kind (whether accrued,
absolute, contingent or otherwise, and whether due or to become due) that would
have been required to be reflected in, reserved against or otherwise described
in the Balance Sheet or in the notes thereto in accordance with GAAP, which was
not fully reflected in, reserved against or otherwise described in the Balance
Sheet or the notes thereto or was not incurred in the ordinary course of
business consistent with the Company's past practices since the Balance Sheet
Date.
N. Compliance with Laws; Permits. The Company is in compliance with
all laws, rules, regulations, codes, ordinances and statutes (collectively,
"Laws") applicable to it or to the conduct of its business, except for such
noncompliance which would not have a Material Adverse Effect. The Company
possesses all permits, approvals, authorizations, licenses, certificates and
consents from all public and governmental authorities which are necessary to
conduct its business, except for those the absence of which would not have a
Material Adverse Effect.
O. Related Party Transactions. Except as set forth on Schedule III.
O. hereto, neither the Company nor any of its officers, directors or
"Affiliates" (as such term is defined in Rule 12b-2 under the Exchange Act) has
borrowed any moneys from or has outstanding any indebtedness or other similar
obligations to the Company. Except as set forth on Schedule III. O. hereto,
neither the Company nor any of its officers, directors or Affiliates (i) owns
any direct or indirect interest constituting more than a 1% equity (or similar
profit participation) interest in, or controls or is a director, officer,
partner, member or employee of, or consultant to or lender to or borrower from,
or has the right to participate in the profits of, any person or entity which is
(x) a competitor, supplier, customer, landlord, tenant, creditor or debtor of
the Company, (y) engaged in a business related to the business of the Company,
or (z) a participant in any transaction to which the Company is a party (other
than in the ordinary course of the Company's business) or (ii) is a party to any
contract, agreement, commitment or other arrangement with the Company.
P. Insurance. The Company maintains property and casualty, general
liability, workers' compensation, environmental hazard, personal injury and
other similar types of insurance with financially sound and reputable insurers
that is adequate, consistent with industry standards and the Company's
historical claims experience. The Company has not received notice from, and has
no knowledge of any threat by, any insurer (that has issued any insurance policy
to the Company) that such insurer intends to deny coverage under or cancel,
discontinue or not renew any insurance policy presently in force.
Q. Securities Law Matters. Based, in part, upon the representations
and warranties of Buyer set forth in Section II hereof, the offer and sale by
the Company of the Securities is exempt from (i) the registration and prospectus
delivery requirements of the
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<PAGE>
Securities Act and the rules and regulations of the Commission thereunder and
(ii) the registration and/or qualification provisions of all applicable state
securities and "blue sky" laws. Other than pursuant to an effective registration
statement under the Securities Act, the Company has not issued, offered or sold
the Preferred Shares or any shares of Common Stock (including for this purpose
any securities of the same or a similar class as the Preferred Shares or Common
Stock, or any securities convertible into or exchangeable or exercisable for the
Preferred Shares or Common Stock or any such other securities) within the one-
year next preceding the date hereof, except as disclosed on Schedule III. Q.
hereto or otherwise previously disclosed in writing to Buyer, and the Company
shall not directly or indirectly take, and shall not permit any of its
directors, officers or Affiliates directly or indirectly to take, any action
(including, without limitation, any offering or sale to any person or entity of
the Preferred Shares or shares of Common Stock), so as to make unavailable the
exemption from Securities Act registration being relied upon by the Company for
the offer and sale to Buyer of the Preferred Shares (and the Conversion Shares)
as contemplated by this Agreement. No form of general solicitation or
advertising has been used or authorized by the Company or any of its officers,
directors or Affiliates in connection with the offer or sale of the Preferred
Shares (and the Conversion Shares) as contemplated by this Agreement or any
other agreement to which the Company is a party.
R. Environmental Matters.
1. The operations of the Company are in compliance with all
applicable Environmental Laws and all permits issued pursuant to
Environmental Laws or otherwise;
2. The Company has obtained or applied for all permits required
under all applicable Environmental Laws necessary to operate its business;
3. The Company is not the subject of any outstanding written
order of or agreement with any governmental authority or person respecting
(i) Environmental Laws, (ii) Remedial Action or (iii) any Release or
threatened Release of Hazardous Materials, except as disclosed on Schedule
III. R. 3.;
4. The Company has not received, since December 31, 1998, any
written communication alleging that it may be in violation of any
Environmental Law or any permit issued pursuant to any Environmental Law,
or may have any liability under any Environmental Law;
5. The Company does not have any current contingent liability in
connection with any Release of any Hazardous Materials into the indoor or
outdoor environment (whether on-site or off-site);
6. Except as set forth on Schedule III. R. 6 hereto, to the
Company's knowledge, there are no investigations of the business,
operations, or currently or previously owned, operated or leased property
of the Company pending or threatened which could lead to the imposition of
any liability pursuant to any Environmental Law;
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<PAGE>
7. To the best of the Company's knowledge, after due inquiry,
there is not located at any of the properties of the Company any (A)
underground storage tanks, (B) asbestos-containing material or (C)
equipment containing polychlorinated biphenyls; and,
8. The Company has provided to Buyer all environmentally related
audits, studies, reports, analyses, and results of investigations that have
been performed with respect to the currently or previously owned, leased or
operated properties of the Company, including those listed on Schedule III.
R. 8.
For purposes of this Section III. R.:
"Environmental Law" means any foreign, federal, state or local
statute, regulation, ordinance, or rule of common law as now or hereafter in
effect in any way relating to the protection of human health and safety or the
environment including, without limitation, the Comprehensive Environmental
Response, Compensation and Liability Act, the Hazardous Materials Transportation
Act, the Resource Conservation and Recovery Act, the Clean Water Act, the Clean
Air Act, the Toxic Substances Control Act, the Federal Insecticide, Fungicide,
and Rodenticide Act, and the Occupational Safety and Health Act, and the
regulations promulgated pursuant thereto.
"Hazardous Material" means any substance, material or waste which is
regulated by the United States, Canada or any of its provinces, or any state or
local governmental authority including, without limitation, petroleum and its
by-products, asbestos, and any material or substance which is defined as a
"hazardous waste," "hazardous substance," "hazardous material," "restricted
hazardous waste," "industrial waste," "solid waste," "contaminant," "pollutant,"
"toxic waste" or "toxic substance" under any provision of any Environmental Law;
"Release" means any release, spill, filtration, emission, leaking,
pumping, injection, deposit, disposal, discharge, dispersal, or leaching into
the indoor or outdoor environment, or into or out of any property;
"Remedial Action" means all actions to (x) clean up, remove, treat or
in any other way address any Hazardous Material; (y) prevent the Release of any
Hazardous Material so it does not endanger or threaten to endanger public health
or welfare or the indoor or outdoor environment; or (z) perform pre-remedial
studies and investigations or post-remedial monitoring and care.
S. Labor Matters. The Company is not party to any labor or
collective bargaining agreement and there are no labor or collective bargaining
agreements which pertain to employees of the Company. No employees of the
Company are represented by any labor organization and none of such employees has
made a pending demand for recognition, and there are no representation
proceedings or petitions seeking a representation proceeding presently pending
or, to the Company's knowledge, threatened to be brought or filed, with the
National Labor Relations Board or other labor relations tribunal. There is no
organizing activity involving the Company pending or to the Company's knowledge,
threatened by any labor organization or
9
<PAGE>
group of employees of the Company. There are no (i) strikes, work stoppages,
slowdowns, lockouts or arbitrations or (ii) material grievances or other labor
disputes pending or, to the knowledge of the Company, threatened against or
involving the Company. There are no unfair labor practice charges, grievances or
complaints pending or, to the knowledge of the Company, threatened by or on
behalf of any employee or group of employees of the Company.
T. ERISA Matters. The Company and its ERISA Affiliates are in
compliance in all material respects with all provisions of ERISA applicable to
it. No Reportable Event has occurred, been waived or exists as to which the
Company or any ERISA Affiliate was required to file a report with the Pension
Benefits Guaranty Corporation, and the present value of all liabilities under
all Plans (based on those assumptions used to fund such Plans) did not, as of
the most recent annual valuation date applicable thereto, exceed the value of
the assets of all such Plans in the aggregate. None of the Company or ERISA
Affiliates has incurred any Withdrawal Liability that could result in a Material
Adverse Effect. None of the Company or ERISA Affiliates has received any
notification that any Multiemployer Plan is in reorganization or has been
terminated within the meaning of Title IV of ERISA, and no Multiemployer Plan is
reasonably expected to be in reorganization or termination where such
reorganization or termination has resulted or could reasonably be expected to
result in increases to the contributions required to be made to such Plan or
otherwise.
For purposes of this Section III. T.:
"ERISA" means the Employee Retirement Income Security Act of 1974, or
any successor statute, together with the regulations thereunder, as the same may
be amended from time to time.
"ERISA Affiliate" means any trade or business (whether or not
incorporated) that was, is or hereafter may become, a member of a group of which
the Company is a member and which is treated as a single employer under Section
414 of the Internal Revenue Code of 1986, as amended (the "Internal Revenue
Code").
"Multiemployer Plan" means a multiemployer plan as defined in Section
4001(a)(3) of ERISA to which the Company or any ERISA Affiliate (other than one
considered an ERISA Affiliate only pursuant to subsection (m) or (o) of Section
414 of the Internal Revenue Code) is making or accruing an obligation to make
contributions, or has within any of the preceding five plan years made or
accrued an obligation to make contributions.
"PBGC" means the Pension Benefit Guaranty Corporation referred to and
defined in ERISA or any successor thereto.
"Plan" means any pension plan (other than a Multiemployer Plan)
subject to the provision of Title IV of ERISA or Section 412 of the Internal
Revenue Code that is maintained for employees of the Company or any ERISA
Affiliate.
"Reportable Event" means any reportable event as defined in Section
4043(b) of ERISA or the regulations issued thereunder with respect to a Plan
(other than a Plan maintained by an ERISA Affiliate that is considered an ERISA
Affiliate only pursuant to subsection (m) or (o) of Section 414 of the Internal
Revenue Code).
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<PAGE>
"Withdrawal Liability" means liability to a Multiemployer Plan as a
result of a complete or partial withdrawal from such Multiemployer Plan, as such
terms are defined in Part I of Subtitle E of Title IV of ERISA.
U. Tax Matters.
1. The Company has filed all Tax Returns which it is required to
file under applicable Laws, except for such Tax Returns in respect of which
the failure to so file does not and could not have a Material Adverse
Effect; all such Tax Returns are true and accurate in all material respects
and have been prepared in compliance with all applicable Laws; the Company
has paid all Taxes due and owing by it (whether or not such Taxes are
required to be shown on a Tax Return) and have withheld and paid over to
the appropriate taxing authorities all Taxes which it is required to
withhold from amounts paid or owing to any employee, stockholder, creditor
or other third parties; and since the Balance Sheet Date, the charges,
accruals and reserves for Taxes with respect to the Company (including any
provisions for deferred income taxes) reflected on the books of the Company
are adequate to cover any Tax liabilities of the Company if its current tax
year were treated as ending on the date hereof.
2. No claim has been made by a taxing authority in a
jurisdiction where the Company does not file tax returns that such
corporation is or may be subject to taxation by that jurisdiction. There
are no foreign, federal, state or local tax audits or administrative or
judicial proceedings pending or being conducted with respect to the
Company; no information related to Tax matters has been requested by any
foreign, federal, state or local taxing authority; and, except as disclosed
above, no written notice indicating an intent to open an audit or other
review has been received by the Company from any foreign, federal, state or
local taxing authority. There are no material unresolved questions or
claims concerning the Company's Tax liability, except as disclosed on
Schedule III. U. 2. The Company (A) has not executed or entered into a
closing agreement pursuant to Section 7121 of the Internal Revenue Code or
any predecessor provision thereof or any similar provision of state, local
or foreign law; or (B) has not agreed to or is required to make any
adjustments pursuant to Section 481(a) of the Internal Revenue Code or any
similar provision of state, local or foreign law by reason of a change in
accounting method initiated by the Company or any of its subsidiaries or
has any knowledge that the IRS has proposed any such adjustment or change
in accounting method, or has any application pending with any taxing
authority requesting permission for any changes in accounting methods that
relate to the business or operations of the Company. The Company has not
been a United States real property holding corporation within the meaning
of Section 897(c)(2) of the Internal Revenue Code during the applicable
period specified in Section 897(c)(1)(A)(ii) of the Internal Revenue Code.
3. The Company has not made an election under Section 341(f) of
the Internal Revenue Code. The Company is not liable for the Taxes of
another person that is not a subsidiary of the Company under (A) Treas.
Reg. Section 1.1502-6 (or comparable provisions of state, local or foreign
law), (B) as a transferee or successor, (C) by contract or indemnity or (D)
otherwise. The Company is not a party to any tax sharing
11
<PAGE>
agreement. The Company has not made any payments, is obligated to make
payments or is a party to an agreement that could obligate it to make any
payments that would not be deductible under Section 280G of the Internal
Revenue Code.
For purposes of this Section III. U.:
"IRS" means the United States Internal Revenue Service.
"Tax" or "Taxes" means federal, state, county, local, foreign, or
other income, gross receipts, ad valorem, franchise, profits, sales or use,
transfer, registration, excise, utility, environmental, communications, real or
personal property, capital stock, license, payroll, wage or other withholding,
employment, social security, severance, stamp, occupation, alternative or add-on
minimum, estimated and other taxes of any kind whatsoever (including, without
limitation, deficiencies, penalties, additions to tax, and interest attributable
thereto) whether disputed or not.
"Tax Return" means any return, information report or filing with
respect to Taxes, including any schedules attached thereto and including any
amendment thereof.
V. Property. The Company has good and marketable title to all real
and personal property owned by it, free and clear of all liens, encumbrances and
defects except such as are described on Schedule III. V. hereto 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 any real
property and buildings held under lease by the Company are held by it 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.
W. Intellectual Property. The Company owns or possesses adequate and
enforceable rights to use all patents, patent applications, trademarks,
trademark applications, trade names, service marks, copyrights, copyright
applications, licenses, know-how (including trade secrets and other unpatented
and/or unpatentable proprietary or confidential information, systems or
procedures) and other similar rights and proprietary knowledge (collectively,
"Intangibles") necessary for the conduct of its business as now being conducted
including, but not limited to, those described on Schedule III. W. hereto or
where the failure to own or possess such rights would not have a Material
Adverse Effect. To the best of the Company's knowledge, after due inquiry, the
Company is not infringing upon or in conflict with any right of any other person
with respect to any Intangibles. Except as disclosed on Schedule III. W.
hereto, no claims have been asserted by any person to the ownership or use of
any Intangibles and the Company has no knowledge of any basis for such claim.
X. Internal Controls and Procedures. The Company maintains accurate
books and records and internal accounting controls which provide reasonable
assurance that (i) all transactions to which the Company is a party or by which
its properties are bound are executed with management's authorization; (ii) the
reported accountability of the Company's assets is compared with existing assets
at regular intervals; (iii) access to the Company's assets is permitted only in
accordance with management's authorization; and (iv) all transactions to which
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<PAGE>
the Company is a party or by which its properties are bound are recorded as
necessary to permit preparation of the financial statements of the Company in
accordance with GAAP.
Y. Payments and Contributions. Neither the Company nor any of its
directors, officers or, to its knowledge, other employees has (i) used any
Company funds for any unlawful contribution, endorsement, gift, entertainment or
other unlawful expense relating to political activity; (ii) made any direct or
indirect unlawful payment of Company funds to any foreign or domestic government
official or employee, (iii) violated or is in violation of any provision of the
Foreign Corrupt Practices Act of 1977, as amended; or (iv) made any bribe,
rebate, payoff, influence payment, kickback or other similar payment to any
person with respect to Company matters.
Z. No Misrepresentation. No representation or warranty of the
Company contained in this Agreement, any schedule, annex or exhibit hereto or
any agreement, instrument or certificate furnished by the Company to Buyer
pursuant to this Agreement, contains any untrue statement of a material fact or
omits to state a material fact required to be stated therein or necessary to
make the statements therein, not misleading.
IV. Certain Covenants and Acknowledgments
A. Restrictive Legend. Buyer acknowledges and agrees that, upon
issuance pursuant to this Agreement, the Securities (and any shares of Common
Stock issued in conversion of the Preferred Shares or exercise of the Warrants)
shall have endorsed thereon a legend in substantially the following form (and a
stop-transfer order may be placed against transfer of the Preferred Shares, the
Warrant Shares and the Conversion Shares until such legend has been removed):
"THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR THE SECURITIES
LAWS OF ANY STATE, AND ARE BEING OFFERED AND SOLD PURSUANT TO AN
EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES
ACT AND SUCH LAWS. THESE SECURITIES MAY NOT BE SOLD OR
TRANSFERRED EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE
EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES
ACT OR SUCH OTHER LAWS."
B. Filings. The Company shall make all necessary Commission Filings
and "blue sky" filings required to be made by the Company in connection with
the sale of the Securities to the Buyer as required by all applicable Laws, and
shall provide a copy thereof to the Buyer promptly after such filing.
C. Reporting Status. So long as the Buyer beneficially owns any of
the Securities, the Company shall timely file all reports required to be filed
by it with the Commission pursuant to Section 13 or 15(d) of the Exchange Act.
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D. Use of Proceeds. The Company shall use the net proceeds from the
sale of the Securities (excluding amounts paid by the Company for The Shaar
Fund's out-of-pocket costs and expenses incurred in connection with the
transactions contemplated by this Agreement and finder's fees in connection with
such sale) solely for general corporate and working capital purposes.
E. Listing. Except to the extent the Company lists its Common Stock
on The New York Stock Exchange, the Company shall use its best efforts to
maintain its listing of the Common Stock on Nasdaq.
F. Reserved Conversion Shares. The Company at all times from and
after the date hereof shall have a sufficient number of shares of Common Stock
duly and validly authorized and reserved for issuance to satisfy the conversion,
in full, of the 1,000 Preferred Shares and upon the exercise of the Warrants.
G. Right of First Refusal. If the Company should propose (the
"Proposal") to issue Common Stock or securities convertible into Common Stock at
a price less than the Current Market Price (as defined in Certificate of
Designation), or debt at less than par value or having an effective annual
interest rate in excess of 9.9% (each a "Right of First Refusal Security" and
collectively, the "Right of First Refusal Securities"), in each case on the date
of issuance during the period ending two years after the Closing Date (the
"Right of First Refusal Period"), the Company shall be obligated to offer the
Buyer on the terms set forth in the Proposal (the "Offer") and the Buyer shall
have the right, but not the obligation, to accept such Offer on such terms. If
during the Right of First Refusal Period, the Company provides written notice to
the Buyer that it proposes to issue any Right of First Refusal Securities on the
terms set forth in the Proposal, then the Buyer shall have 10 business days to
accept or reject such offer in writing. If the Company fails to: (i) issue a
Proposal during the Right of First Refusal Period, (ii) offer the Buyer the
opportunity to complete the transaction as set forth in the Proposal, or (iii)
enter into an agreement with the Buyer, at such terms after the Buyer has
accepted the Offer, then the Company shall pay to the Buyer, as liquidated
damages, an amount in total equal to 10% of the amount paid to the Company for
the Right of First Refusal Securities. The foregoing right of first refusal is
and shall be senior in right to any other right of first refusal issued by the
Company to any other Person (as defined in the Certificate of Designation).
Notwithstanding the foregoing, the Buyer shall have no rights under this Section
IV. G. in respect of Common Stock or any other securities of the Company
issuable (i) upon the exercise or conversion of options, warrants or other
rights to purchase securities of the Company outstanding as of the date hereof
or (ii) to officers, directors or employees of the Company or any of its
subsidiaries. Buyer hereby acknowledges that other holders of the Series E
Preferred Stock may also have the right of first refusal set forth in this
Section I.V., and Buyer hereby agrees that it shall only be entitled to accept
an Offer with respect to its pro rata share of Right of First Refusal Securities
(based on the number of Series E Preferred Shares held by Buyer relative to the
number of Series E Preferred Shares held by all other holders of Series E
Preferred Stock with such right of first refusal and accepting such Offer).
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<PAGE>
V. Transfer Agent Instructions
A. The Company undertakes and agrees that no instruction other than
the instructions referred to in this Section V and customary stop transfer
instructions prior to the registration and sale of the Common Stock pursuant to
an effective Securities Act registration statement will be given to its transfer
agent for the Common Stock and that the Common Stock issuable upon conversion of
the Preferred Shares and exercise of the Warrants otherwise shall be freely
transferable on the books and records of the Company as and to the extent
provided in this Agreement, the Registration Rights Agreement and applicable
law. Nothing contained in this Section V.A. shall affect in any way Buyer's
obligations and agreement to comply with all applicable securities laws upon
resale of such Common Stock. If, at any time, Buyer provides the Company with an
opinion of counsel reasonably satisfactory to the Company that registration of
the resale by Buyer of such Common Stock is not required under the Securities
Act and that the removal of restrictive legends is permitted under applicable
law, the Company shall permit the transfer of such Common Stock and, promptly
instruct the Company's transfer agent to issue one or more certificates for
Common Stock without any restrictive legends endorsed thereon.
B. The Company shall permit Buyer to exercise its right to convert
the Preferred Shares by telecopying an executed and completed Notice of
Conversion (as defined in the Certificate of Designation) to the Company. Each
date on which a Notice of Conversion is telecopied to and received by the
Company in accordance with the provisions hereof shall be deemed a Conversion
Date (as defined in the Certificate of Designation). The Company shall transmit
the certificates evidencing the shares of Common Stock issuable upon conversion
of any Preferred Shares (together with certificates evidencing any Preferred
Shares not being so converted) to Buyer via express courier, by electronic
transfer or otherwise, within five business days after receipt by the Company of
the Notice of Conversion (the "Delivery Date"). Within 30 days after Buyer
delivers the Notice of Conversion to the Company, Buyer shall deliver to the
Company the Preferred Shares being converted.
C. The Company shall permit Buyer to exercise its right to purchase
shares of Common Stock pursuant to exercise of the Warrants in accordance with
its applicable terms of the Warrants. The last date that the Company may deliver
shares of Common Stock issuable upon any exercise of Warrants is referred to
herein as the "Warrant Delivery Date."
D. The Company understands that a delay in the issuance of the shares
of Common Stock issuable in lieu of cash dividends on the Preferred Shares, upon
the conversion of the Preferred Shares or exercise of the Warrants beyond the
applicable Dividend Payment Due Date (as defined in the Certificate of
Designation), Delivery Date or Warrant Delivery Date could result in economic
loss to Buyer. As compensation to Buyer for such loss (and not as a penalty),
the Company agrees to pay to Buyer for late issuance of Common Stock issuable in
lieu of cash dividends on the Preferred Shares, upon conversion of the Preferred
Shares or exercise of the Warrants in accordance with the following schedule
(where "No. Business Days" is defined as the number of business days beyond five
days from the Dividend Payment Due Date, the Delivery Date or the Warrant
Delivery Date, as applicable):
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<TABLE>
<CAPTION>
Compensation For Each 10 Shares
of Preferred Shares Not Converted
Timely or 500 Shares of Common
Stock Issuable In Payment of
Dividends or Upon Exercise of
No. Business Days Warrants Not Issued Timely
----------------- -------------------------------
<S> <C>
1 $ 25
2 50
3 75
4 100
5 125
6 150
7 175
8 200
9 225
10 250
more than 10 $250 + $100 for each Business
Day Late beyond 10 days
</TABLE>
The Company shall pay to Buyer the compensation described above by the transfer
of immediately available funds upon Buyer's demand. Nothing herein shall limit
Buyer's right to pursue actual damages for the Company's failure to issue and
deliver Common Stock to Buyer, and in addition to any other remedies which may
be available to Buyer, in the event the Company fails for any reason to effect
delivery of such shares of Common Stock within five business days after the
relevant Dividend Payment Due Date, the Delivery Date or the Warrant Delivery
Date, as applicable, Buyer shall be entitled to rescind the relevant Notice of
Conversion or exercise of Warrants by delivering a notice to such effect to the
Company whereupon the Company and Buyer shall each be restored to their
respective original positions immediately prior to delivery of such Notice of
Conversion on delivery.
VI. Delivery Instructions
The Securities shall be delivered by the Company to the Escrow Agent
pursuant to Section I. B. hereof on a "delivery-against-payment basis" at the
Closing.
VII. Closing Date
The date and time of the issuance and sale of the Preferred Shares
(the "Closing Date") shall be the date hereof or such other as shall be mutually
agreed upon in writing. The issuance and sale of the Securities shall occur on
the Closing Date at the offices of the Escrow Agent. Notwithstanding anything
to the contrary contained herein, the Escrow Agent shall not be authorized to
release to the Company the Purchase Price and to Buyer the certificate(s) (I/N/O
Buyer or I/N/O Buyer's nominee) evidencing the Securities being purchased by
Buyer unless the conditions set forth in Section VIII. C. and IX. G. hereof have
been satisfied.
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<PAGE>
VIII. Conditions to the Company's Obligations
The Buyer understands that the Company's obligation to sell the
Securities on the Closing Date to Buyer pursuant to this Agreement is
conditioned upon:
A. Delivery by Buyer to the Escrow Agent of the Purchase Price;
B. The accuracy in all material respects on the Closing Date of the
representations and warranties of Buyer contained in this Agreement as if made
on the Closing Date (except for representations and warranties which, by their
express terms, speak as of and relate to a specified date, in which case such
accuracy shall be measured as of such specified date) and the performance by
Buyer in all material respects on or before the Closing Date of all covenants
and agreements of Buyer required to be performed by it pursuant to this
Agreement on or before the Closing Date;
C. There shall not be in effect any Law or order, ruling, judgment or
writ of any court or public or governmental authority restraining, enjoining or
otherwise prohibiting any of the transactions contemplated by this Agreement.
IX. Conditions to Buyer's Obligations
The Company understands that Buyer's obligation to purchase the
Securities on the Closing Date pursuant to this Agreement is conditioned upon:
A. Delivery by the Company to Buyer of evidence that the Certificate
of Designation has been filed and is effective.
B. Delivery by the Company to the Escrow Agent of one or more
certificates (I/N/O Buyer or I/N/O Buyer's nominee) evidencing the Securities to
be purchased by Buyer pursuant to this Agreement;
C. The accuracy in all respects on the Closing Date of the
representations and warranties of the Company contained in this Agreement as if
made on the Closing Date (except for representations and warranties which, by
their express terms, speak as of and relate to a specified date, in which case
such accuracy shall be measured as of such specified date) and the performance
by the Company in all respects on or before the Closing Date of all covenants
and agreements of the Company required to be performed by it pursuant to this
Agreement on or before the Closing Date;
D. Buyer having received an opinion of counsel for the Company, dated
the Closing Date, in form, scope and substance reasonably satisfactory to the
Buyer as to the matters set forth in Annex A;
E. There not having occurred (i) any general suspension of trading
in, or limitation on prices listed for, the Common Stock on Nasdaq, (ii) the
declaration of a banking moratorium or any suspension of payments in respect of
banks in the United States, (iii) the commencement of a war, armed hostilities
or other international or national calamity directly or indirectly involving the
United States or any of its territories, protectorates or possessions, or (iv)
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<PAGE>
in the case of the foregoing existing at the date of this Agreement, a material
acceleration or worsening thereof;
F. There not having occurred any event or development, and there
being in existence no condition, having or which reasonably and foreseeably
could have a Material Adverse Effect;
G. There shall not be in effect any Law or order, ruling, judgment or
writ of any court or public or governmental authority restraining, enjoining or
otherwise prohibiting any of the transactions contemplated by this Agreement;
and
H. Delivery of irrevocable instructions to the Company's transfer
agent to reserve 519,000 shares of Common Stock for issuance of the Conversion
Shares and the Warrant Shares.
X. Termination
A. Termination by Mutual Written Consent. This Agreement may be
terminated and the transactions contemplated hereby may be abandoned, for any
reason and at any time prior to the Closing Date, by the mutual written consent
of the Company and Buyer.
B. Termination by the Company or Buyer. This Agreement may be
terminated and the transactions contemplated hereby may be abandoned by action
of the Company or Buyer if (i) the Closing shall not have occurred at or prior
to 5:00 p.m., New York City time, on June 28, 1999 (the "Latest Closing Date");
provided, however, that the right to terminate this Agreement pursuant to this
Section X. B.(i) shall not be available to any party whose failure to fulfill
any of its obligations under this Agreement has been the cause of or resulted in
the failure of the Closing to occur at or before such time and date or (ii) any
court or public or governmental authority shall have issued an order, ruling,
judgment or writ, or there shall be in effect any Law, restraining, enjoining or
otherwise prohibiting the consummation of any of the transactions contemplated
by this Agreement; provided, further, however, that if the Closing shall not
have occurred on or prior to the Latest Closing Date, the Closing may only occur
after the Latest Closing Date with the written acceptance of Buyer.
C. Termination by Buyer. This Agreement may be terminated and the
transactions contemplated hereby may be abandoned by Buyer at any time prior to
the Closing Date, if (i) the Company shall have failed to comply with any of its
covenants or agreements contained in this Agreement, (ii) there shall have been
a breach by the Company with respect to any representation or warranty made by
it in this Agreement, (iii) there shall have occurred any event or development,
or there shall be in existence any condition, having or reasonably and
forseeably likely to have a Material Adverse Effect or (iv) the Company shall
have failed to satisfy the conditions provided in Section IX hereof.
D. Termination by the Company. This Agreement may be terminated and
the transactions contemplated hereby may be abandoned by the Company at any time
prior to the Closing Date, if (i) Buyer shall have failed to comply with any of
its covenants or agreements contained in this Agreement or (ii) there shall have
been a breach by Buyer with respect to any representation or warranty made by it
in this Agreement.
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<PAGE>
XI. Survival; Indemnification
A. The representations, warranties and covenants made by each of the
Company and Buyer in this Agreement, the annexes, schedules and exhibits hereto
and in each instrument, agreement and certificate entered into and delivered by
them pursuant to this Agreement, shall survive the Closing and the consummation
of the transactions contemplated hereby. In the event of a breach or violation
of any of such representations, warranties or covenants, the party to whom such
representations, warranties or covenants have been made shall have all rights
and remedies for such breach or violation available to it under the provisions
of this Agreement or otherwise, whether at law or in equity, irrespective of any
investigation made by or on behalf of such party on or prior to the Closing
Date.
B. The Company hereby agrees to indemnify and hold harmless the
Buyer, its Affiliates and their respective officers, directors, partners and
members (collectively, the "Buyer Indemnitees"), from and against any and all
losses, claims, damages, judgments, penalties, liabilities and deficiencies
(collectively, "Losses"), and agrees to reimburse the Buyer Indemnitees for all
out of-pocket expenses (including the fees and expenses of legal counsel), in
each case promptly as incurred by the Buyer Indemnitees and to the extent
arising out of or in connection with:
1. any misrepresentation, omission of fact or breach of any of
the Company's representations or warranties contained in this Agreement or
the other Documents, or the annexes, schedules or exhibits hereto or
thereto or any instrument, agreement or certificate entered into or
delivered by the Company pursuant to this Agreement or the other Documents;
or
2. any failure by the Company to perform any of its covenants,
agreements, undertakings or obligations set forth in this Agreement or the
other Documents, or the annexes, schedules or exhibits hereto or thereto or
any instrument, agreement or certificate entered into or delivered by the
Company pursuant to this Agreement or the other Documents; or
3. resales of the Common Shares by Buyer in the manner and as
contemplated by this Agreement and the Registration Rights Agreement.
C. Buyer hereby agrees to indemnify and hold harmless the Company,
its Affiliates and their respective officers, directors, partners and members
(collectively, the "Company Indemnitees"), from and against any and all Losses,
and agrees to reimburse the Company Indemnitees for all out-of-pocket expenses
(including the fees and expenses of legal counsel), in each case promptly as
incurred by the Company Indemnitees and to the extent arising out of or in
connection with:
1. any misrepresentation, omission of fact, or breach of any of
Buyer's representations or warranties contained in this Agreement or the
other Documents, or the annexes, schedules or exhibits hereto or thereto or
any instrument, agreement or certificate entered into or delivered by Buyer
pursuant to this Agreement or the other Documents; or
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<PAGE>
2. any failure by Buyer to perform in any material respect any
of its covenants, agreements, undertakings or obligations set forth in this
Agreement or the other Documents or any instrument, certificate or
agreement entered into or delivered by Buyer pursuant to this Agreement or
the other Documents.
D. Promptly after receipt by either party hereto seeking
indemnification pursuant to this Section XI (an "Indemnified Party") of written
notice of any investigation, claim, proceeding or other action in respect of
which indemnification is being sought (each, a "Claim"), the Indemnified Party
promptly shall notify the party against whom indemnification pursuant to this
Section XI is being sought (the "Indemnifying Party") of the commencement
thereof; but the omission to so notify the Indemnifying Party shall not relieve
it from any liability that it otherwise may have to the Indemnified Party except
to the extent that the Indemnifying Party is materially prejudiced and forfeits
substantive rights and defenses by reason of such failure. In connection with
any Claim as to which both the Indemnifying Party and the Indemnified Party are
parties, the Indemnifying Party shall be entitled to assume the defense thereof.
Notwithstanding the assumption of the defense of any Claim by the Indemnifying
Party, the Indemnified Party shall have the right to employ separate legal
counsel and to participate in the defense of such Claim, and the Indemnifying
Party shall bear the reasonable fees, out-of-pocket costs and expenses of such
separate legal counsel to the Indemnified Party if (and only if): (x) the
Indemnifying Party shall have agreed to pay such fees, out-of-pocket costs and
expenses, (y) the Indemnified Party and the Indemnifying Party reasonably shall
have concluded that representation of the Indemnified Party and the Indemnifying
Party by the same legal counsel would not be appropriate due to actual or, as
reasonably determined by legal counsel to the Indemnified Party, potentially
differing interests between such parties in the conduct of the defense of such
Claim, or if there may be legal defenses available to the Indemnified Party that
are in addition to or disparate from those available to the Indemnifying Party,
or (z) the Indemnifying Party shall have failed to employ legal counsel
reasonably satisfactory to the Indemnified Party within a reasonable period of
time after notice of the commencement of such Claim. If the Indemnified Party
employs separate legal counsel in circumstances other than as described in
clauses (x), (y) or (z) above, the fees, costs and expenses of such legal
counsel shall be borne exclusively by the Indemnified Party. Except as provided
above, the Indemnifying Party shall not, in connection with any Claim in the
same jurisdiction, be liable for the fees and expenses of more than one firm of
legal counsel for the Indemnified Party (together with appropriate local
counsel). The Indemnifying Party shall not, without the prior written consent of
the Indemnified Party (which consent shall not unreasonably be withheld), settle
or compromise any Claim or consent to the entry of any judgment that does not
include an unconditional release of the Indemnified Party from all liabilities
with respect to such Claim or judgment.
E. In the event one party hereunder should have a claim for
indemnification that does not involve a claim or demand being asserted by a
third party, the Indemnified Party promptly shall deliver notice of such claim
to the Indemnifying Party. If the Indemnified Party disputes the claim, such
dispute shall be resolved by mutual agreement of the Indemnified Party and the
Indemnifying Party or by binding arbitration conducted in accordance with the
procedures and rules of the American Arbitration Association. Judgment upon any
award rendered by any arbitrators may be entered in any court having competent
jurisdiction thereof.
20
<PAGE>
XII. Governing Law; Miscellaneous
This Agreement shall be governed by and interpreted in accordance with
the laws of the State of New York, without regard to the conflicts of law
principles of such state. Each of the parties consents to the jurisdiction of
the federal courts whose districts encompass any part of the City of Palo Alto
or the state courts of the State of California sitting in the City of Palo Alto
in connection with any dispute arising under this Agreement and hereby waives,
to the maximum extent permitted by law, any objection, including any objection
based on forum non conveniens, to the bringing of any such proceeding in such
jurisdictions. A facsimile transmission of this signed Agreement shall be legal
and binding on all parties hereto. This Agreement may be signed in one or more
counterparts, each of which shall be deemed an original. The headings of this
Agreement are for convenience of reference and shall not form part of, or affect
the interpretation of, this Agreement. 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 or the validity or enforceability of this Agreement
in any other jurisdiction. This Agreement may be amended only by an instrument
in writing signed by the party to be charged with enforcement. This Agreement
supersedes all prior agreements and understandings among the parties hereto with
respect to the subject matter hereof.
XIII. Notices
Except as may be otherwise provided herein, any notice or other
communication or delivery required or permitted hereunder shall be in writing
and shall be delivered personally or sent by certified mail, postage prepaid, or
by a nationally recognized overnight courier service, and shall be deemed given
when so delivered personally or by overnight courier service, or, if mailed,
three (3) days after the date of deposit in the United States mails, as follows:
A. Thermatrix Inc.
308 North Peters Road, Suite 100
Knoxville, TN 37922
Attention: Edward E. Greene
(423) 539-9603
(423) 539-9643 (Fax)
with a copy to:
Wilson Sonsini Goodrich & Rosati, PC
650 Page Mill Road
Palo Alto, CA 94304-1050
Attention: Michael J. Danaher, Esq.
(650) 493-9300
(650) 493-6811 (Fax)
B. if to the Buyer, to:
Technology Funding Venture Partners III, L.P.
2000 Alameda de las Pulgas
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<PAGE>
Suite 250
San Mateo, CA 94403
Attention: Charlie Kokesh
(650) 345-2200
(650) 345-1797 (Fax)
C. if to the Escrow Agent, to:
Wilson Sonsini Goodrich & Rosati
650 Page Mill Road
Palo Alto, CA 94304-1050
Attention: Michael J. Danaher, Esq.
(650) 493-9300
(650) 493-6811 (Fax)
The Company, the Buyer or the Escrow Agent may change the foregoing address by
notice given pursuant to this Section XIII.
XIV. Confidentiality
Each of the Company and Buyer agrees to keep confidential and not to
disclose to or use for the benefit of any third party the terms of this
Agreement or any other information which at any time is communicated by the
other party as being confidential without the prior written approval of the
other party; provided, however, that this provision shall not apply to
information which, at the time of disclosure, is already part of the public
domain (except by breach of this Agreement) and information which is required to
be disclosed by law (including, without limitation, pursuant to Item 601(b)(10)
of Regulation S-K under the Securities Act and the Exchange Act).
XV. Assignment
This Agreement shall not be assignable by either of the parties hereto
prior to the Closing without the prior written consent of the other party, and
any attempted assignment contrary to the provisions hereby shall be null and
void; provided, however, that Buyer may assign its rights and obligations
hereunder, in whole or in part, to any affiliate of Buyer who furnishes to the
Company the representations and warranties set forth in Section II hereof and
otherwise agrees to be bound by the terms of this Agreement.
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<PAGE>
In Witness Whereof, the parties hereto have duly executed and
delivered this Agreement on the date first above written.
Thermatrix Inc.
By:__________________________________________
Name:
Title:
Technology Funding Venture Partners III, L.P.
By:__________________________________________
Name:
Title:
23
<PAGE>
EXHIBIT A
COMMON STOCK PURCHASE WARRANTS
<PAGE>
EXHIBIT B
CERTIFICATE OF DESIGNATION
<PAGE>
EXHIBIT C
ESCROW INSTRUCTIONS
<PAGE>
EXHIBIT D
REGISTRATION RIGHTS AGREEMENT
<PAGE>
SCHEDULE III.A.1.
PREEMPTIVE, SUBSCRIPTION, "CALL" OR SIMILAR RIGHTS
<PAGE>
SCHEDULE III.A.2.
SUBSIDIARIES
<PAGE>
SCHEDULE III.C.
ISSUANCES AND SALES OF SECURITIES
<PAGE>
SCHEDULE III.O.
RELATED PARTY TRANSACTIONS
<PAGE>
SCHEDULE III.Q.
SECURITIES LAW MATTERS
<PAGE>
SCHEDULE III.R.6.
ENVIRONMENTAL MATTERS
<PAGE>
SCHEDULE III.V.
PROPERTY
<PAGE>
SCHEDULE III.W.
INTELLECTUAL PROPERTY
<PAGE>
ANNEX A
FORM OF OPINION
1. The Company has been duly incorporated and is validly existing as
a corporation in good standing under the laws of the State of Delaware, is duly
qualified to do business as a foreign corporation and is in good standing in all
jurisdictions where the Company owns or leases properties or conducts business,
except for jurisdictions in which the failure to so qualify would not have a
Material Adverse Effect, and has all requisite corporate power and authority to
own its properties and conduct its business as described in the Commission
Filings.
2. The authorized capital stock of the Company consists of
25,000,000 shares of Common Stock, par value $.001 per share (the "Common
Stock"), and 5,000,000 shares of Preferred Stock, par value $.001 per share.
3. When delivered to you or upon your order against payment of the
agreed consideration therefor in accordance with the provisions of the
Documents, the Securities will be duly authorized and validly issued, fully paid
and nonassessable.
4. The Company has the requisite corporate power and authority to
enter into the Documents and to sell and deliver the Securities as described in
the Documents; each of the Documents has been duly and validly authorized by all
necessary corporate action by the Company; each of the Documents has been duly
and validly executed and delivered by and on behalf of the Company, and is valid
and binding agreement of the Company, enforceable in accordance with its terms,
except as enforceability may be limited by general equitable principles,
bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium or
other laws affecting creditors rights generally.
5. The executive, delivery and performance of the Documents by the
Company and the performance of its obligations thereunder do not and will not
constitute a breach or violation of any of the terms and provisions of, or
constitute a default (or with notice, lapse of time or both would constitute a
default) under or conflict with or violate any provision of (i) the Company's
certificate of incorporation or bylaws, (ii) any indenture, mortgage, deed of
trust, agreement or other instrument known to us to which the Company is a party
or by which it or any of its property is bound, (iii) or, to the best of our
knowledge, any judgment, decree or order of any court or governmental body
having jurisdiction over the Company or any of its property. To the best of our
knowledge, no consent, approval, authorization, order, registration, filing,
qualification, license or permit of or with any court or any public,
governmental or regulatory agency or body having jurisdiction over the Company
or any of its properties or assets is required for the execution, delivery and
performance by the Company of the Documents or the consummation by the Company
of the transactions contemplated thereby.
6. When issued, the Preferred Shares and the Warrants shall be duly
authorized, validly issued, fully paid and nonassessable, and free and clear of
all encumbrances and restrictions, except for restrictions on transfer imposed
by applicable securities laws. The Conversion Shares and Warrant Shares
issuable upon conversion or exercise, respectively, of the Preferred Shares and
the Warrants, respectively, will be duly authorized, validly issued, fully
<PAGE>
paid and nonassessable, and free and clear of all encumbrances and restrictions,
except for restrictions on transfer imposed by applicable securities laws.
7. Based on Buyer's representations contained in this Agreement, the
offer and sale of the Preferred Shares and the Warrants are exempt from the
registration requirements of the Securities Act.
8. To the best of our knowledge, other than as described in the
Commission Filings, there are no outstanding options, warrants or other
securities exercisable or convertible into Common Stock of the Company.
9. There is no action, suit, claim, inquiry or investigation pending
or, to the best of our knowledge, threatened by or before any court or public or
governmental authority which, if determined adversely to the Company, would have
a Material Adverse Effect.
10. Neither the Company nor any of its subsidiaries is, or will be
after the consummation of the transactions contemplated by this Agreement and
the other Documents and the use of the proceeds from the sale of the Securities,
an "investment company" or an entity "controlled" by an "investment company," as
such terms are defined in the Investment Company Act of 1940, as amended.
<PAGE>
EXHIBIT 4.1(c)
SECURITIES PURCHASE AGREEMENT
This Securities Purchase Agreement, dated as of June , 1999, between
Thermatrix Inc., a Delaware corporation with principal executive offices located
at 308 North Peters Road, Suite 100, Knoxville, Tennessee 37922 (the "Company"),
and CIBC WMV, Inc. ("Buyer").
Whereas, Buyer desires to purchase from the Company, and the Company
desires to issue and sell to the Buyer, upon the terms and subject to the
conditions of this Agreement, (i) 2,000 shares of the Company's Series E 8%
Convertible Preferred Stock, par value $.001 per share (collectively, the
"Preferred Shares"), and (ii) Common Stock Purchase Warrants in the form
attached hereto as Exhibit A (collectively, the "Warrants");
Whereas, upon the terms and subject to the designations, preferences
and rights set forth in the Company's Certificate of Designation of Series E 8%
Convertible Preferred Stock in the form attached hereto as Exhibit B (the
"Certificate of Designation"), the Preferred Shares are convertible into shares
of the Company's common stock, par value $.001 per share (the "Common Stock");
Whereas, the Warrants, upon the terms and subject to the conditions in
the Warrants, will for a period of three years be exercisable to purchase 70,000
shares of Common Stock;
Now, Therefore, in consideration of the premises and the mutual
covenants contained herein, the parties hereto, intending to be legally bound,
hereby agree as follows:
I. Purchase and Sale of Preferred Shares and Warrants
A. Transaction. Buyer hereby agrees to purchase from the Company,
and the Company has offered and hereby agrees to issue and sell to the Buyer in
a transaction exempt from the registration and prospectus delivery requirements
of the Securities Act of 1933, as amended (the "Securities Act"), the Preferred
Shares and the Warrants to purchase 70,000]shares of Common Stock.
B. Purchase Price; Form of Payment. The purchase price for the
Preferred Shares and the Warrants to be purchased by Buyer hereunder shall be
$2,000,000 (the "Purchase Price"). Buyer shall pay the Purchase Price by wire
transfer of immediately available funds to the escrow agent (the "Escrow Agent")
identified in those certain Escrow Instructions of even date herewith, a copy of
which is attached hereto as Exhibit C (the "Escrow Instructions").
Simultaneously with the execution of this Agreement and against receipt by the
Escrow Agent of the Purchase Price, the Company shall deliver one or more duly
authorized, issued and executed certificates (I/N/O Buyer or, if the Company
otherwise has been notified, I/N/O Buyer's nominee) evidencing the Preferred
Shares and the Warrants which the Buyer is purchasing, to the Escrow Agent or
its designated depository. By executing and delivering this Agreement, Buyer
and the
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<PAGE>
Company each hereby agrees to observe the terms and conditions of the Escrow
Instructions, all of which are incorporated herein by reference as if fully set
forth herein.
C. Method of Payment. Payment into escrow of the Purchase Price
shall be made by wire transfer of immediately available funds to:
The Bank of America
530 Lytton Avenue
Palo Alto, CA 94301
ABA No.: 121000358
For the Account of: Wilson Sonsini Goodrich & Rosati
Trust Account
Account No.: 14843-00544
Simultaneously with the execution of this Agreement, the Buyer shall deposit
with the Escrow Agent the Purchase Price and the Company shall deposit with the
Escrow Agent the Preferred Shares and the Warrants.
II. Buyer's Representations, Warranties; Access to
Information; Independent Investigation
Buyer represents and warrants to and covenants and agrees with the
Company as follows:
A. Buyer is purchasing the Preferred Shares, the Warrants, the Common
Stock issuable upon exercise of the Warrants (the "Warrant Shares") and the
shares of Common Stock issuable upon conversion of the Preferred Shares (the
"Conversion Shares" and, collectively with the Preferred Shares, the Warrants
and the Warrant Shares, the "Securities") for its own account, for investment
purposes only and not with a view towards or in connection with the public sale
or distribution thereof in violation of the Securities Act.
B. Buyer is (i) an "accredited investor" within the meaning of Rule
501 of Regulation D under the Securities Act, (ii) experienced in making
investments of the kind contemplated by this Agreement, (iii) capable, by reason
of its business and financial experience, of evaluating the relative merits and
risks of an investment in the Securities, and (iv) able to afford the loss of
its investment in the Securities.
C. Buyer understands that the Securities are being offered and sold
by the Company in reliance on an exemption from the registration requirements of
the Securities Act and equivalent state securities and "blue sky" laws, and that
the Company is relying upon the accuracy of, and Buyer's compliance with,
Buyer's representations, warranties and covenants set forth in this Agreement to
determine the availability of such exemption and the eligibility of Buyer to
purchase the Securities;
D. Buyer has been furnished with or provided access to all materials
relating to the business, financial position and results of operations of the
Company, and all other materials requested by Buyer to enable it to make an
informed investment decision with respect to the Securities.
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<PAGE>
E. Buyer understands that the Securities have not been approved or
disapproved by the Securities and Exchange Commission (the "Commission") or any
state securities commission and that the foregoing authorities have not reviewed
any documents or instruments in connection with the offer and sale to it of the
Securities and have not confirmed or determined the adequacy or accuracy of any
such documents or instruments.
F. This Agreement has been duly and validly authorized, executed and
delivered by Buyer and is a valid and binding agreement of Buyer enforceable
against it in accordance with its terms, subject to applicable bankruptcy,
insolvency, fraudulent conveyance, reorganization, moratorium and similar laws
affecting creditors' rights and remedies generally and except as rights to
indemnity and contribution may be limited by federal or state securities laws or
the public policy underlying such laws.
G. Neither Buyer nor its affiliates nor any person acting on its or
their behalf has the intention of entering, or will enter into, prior to the
closing or during any Valuation Period (as defined in the Certificate of
Designation), any put option, short position or other similar instrument or
position with respect to the Common Stock and neither Buyer nor any of its
affiliates nor any person acting on its or their behalf will use at any time
shares of Common Stock acquired pursuant to this Agreement to settle any put
option, short position or other similar instrument or position that may have
been entered into prior to the execution of this Agreement; provided, however,
that nothing in this Section II.G shall operate to forbid Buyer or any of its
affiliates or any person acting on its or their behalf from selling, or entering
into any other transaction with respect to, the Common Stock contemporaneously
with or following such date and time as the Person or Persons in whose name or
names the Common Stock Issued at Conversion (as defined in the Certificate of
Designation) shall be issuable shall be deemed to have become the holder or
holders of record of the Common Shares (as defined in the Certificate of
Designation) represented thereby and all voting and other rights associated with
the beneficial ownership of such Common Shares shall have vested with such
Person or Persons.
III. The Company's Representations
The Company represents and warrants to Buyer that:
A. Capitalization.
1. The authorized capital stock of the Company consists of: (i)
25,000,000 shares of Common Stock, of which 7,767,440 shares are issued and
outstanding on the date hereof; and (ii) 5,000,000 shares of "blank check"
preferred stock, of which no shares are issued and outstanding on the date
hereof. All of the issued and outstanding shares of Common Stock and
preferred stock, if any, have been duly authorized and validly issued and
are fully paid and nonassessable. As of the date hereof, the Company has
outstanding stock options and warrants to purchase 965,480 shares of Common
Stock. The Conversion Shares and Warrant Shares have been duly and validly
authorized and reserved for issuance by the Company, and when issued by the
Company upon conversion of, or in lieu of accrued dividends on, the
Preferred Shares and on exercise of the Warrants will be duly and validly
issued, fully paid and nonassessable and will not subject the holder
thereof to personal liability by reason of being such holder. There are no
preemptive, subscription, "call" or
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other similar rights to acquire the Common Stock (including the Conversion
Shares and Warrant Shares) that have been issued or granted to any person,
except as disclosed on Schedule III.A.1. hereto or otherwise previously
disclosed in writing to Buyer.
2. Except as disclosed on Schedule III.A.2. hereto, the Company
does not own or control, directly or indirectly, any interest in any other
corporation, partnership, limited liability company, unincorporated
business organization, association, trust or other business entity.
B. Organization; Reporting Company Status.
1. The Company is a corporation duly organized, validly existing
and in good standing under the laws of the State of Delaware and is duly
qualified as a foreign corporation in all jurisdictions in which the
failure to so qualify would have a material adverse effect on the business,
properties, prospects, condition (financial or otherwise) or results of
operations of the Company or on the consummation of any of the transactions
contemplated by this Agreement (a "Material Adverse Effect").
2. The Company has registered the Common Stock pursuant to
Section 12 of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), and has timely filed with the Commission all reports and
information required to be filed by it pursuant to all reporting
obligations under Section 13(a) or 15(d), as applicable, of the Exchange
Act for the 12-month period immediately preceding the date hereof. The
Common Stock is listed and traded on the Nasdaq National Market ("Nasdaq")
and the Company has not received any notice regarding, and to its knowledge
there is no threat of, the termination or discontinuance of the eligibility
of the Common Stock for such listing, except as disclosed on Schedule
III.B.2. As of December 15, 1999, the Company will be in compliance with
Nasdaq listing requirements and will be listed and traded on either Nasdaq
National Market or Nasdaq Small Cap Market.
C. Authorized Shares. The Company has duly and validly authorized
and reserved for issuance [1,037,000] shares of Common Stock sufficient in
number for the conversion of the Preferred Shares and the exercise of the
Warrants. The Company understands and acknowledges the potentially dilutive
effect to the Common Stock of the issuance of the Preferred Shares and Warrant
Shares upon conversion of the Preferred Shares and exercise of the Warrants,
respectively. The Company further acknowledges that its obligation to issue
Conversion Shares upon conversion of the Preferred Shares and Warrant Shares
upon exercise of the Warrants in accordance with this Agreement, the Preferred
Shares and the Warrants is absolute and unconditional regardless of the dilutive
effect that such issuance may have on the ownership interests of other
stockholders of the Company and notwithstanding the commencement of any case
under 11 U.S.C. (S) 101 et seq. (the "Bankruptcy Code"). In the event the
Company is a debtor under the Bankruptcy Code, the Company hereby waives to the
fullest extent permitted any rights to relief it may have under 11 U.S.C. (S)
362 in respect of the conversion of the Preferred Shares and the exercise of the
Warrants. The Company agrees, without cost or expense to Buyer, to take or
consent to any and all action necessary to effectuate relief under 11 U.S.C. (S)
362. Schedule III. C. hereto sets forth (i) all issuances and sales by the
Company since December 31, 1998 of its capital stock, and other securities
convertible, exercisable or exchangeable for capital stock of the Company, (ii)
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the amount of such securities sold, including any underlying shares of capital
stock, (iii) the purchaser thereof, and (iv) the amount paid therefor.
D. Authority; Validity and Enforceability. The Company has the
requisite corporate power and authority to file and perform its obligations
under the Certificate of Designation and to enter into the Documents (as
hereinafter defined), and to perform all of its obligations hereunder and
thereunder (including the issuance, sale and delivery to Buyer of the
Securities). The execution, delivery and performance by the Company of the
Documents, and the consummation by the Company of the transactions contemplated
hereby and thereby (including, without limitation, the filing of the Certificate
of Designation with the Delaware Secretary of State's office, the issuance of
the Preferred Shares, the Warrants and the issuance and reservation for issuance
of the Conversion Shares and Warrant Shares), has been duly authorized by all
necessary corporate action on the part of the Company. Each of the Documents has
been duly and validly executed and delivered by the Company and the Certificate
of Designation has been duly filed with the Delaware Secretary of State's office
by the Company and each instrument constitutes a valid and binding obligation of
the Company enforceable against it in accordance with its terms, subject to
applicable bankruptcy, insolvency, fraudulent conveyance, reorganization,
moratorium and similar laws affecting creditors' rights and remedies generally
and except as rights to indemnity and contribution may be limited by federal or
state securities laws or the public policy underlying such laws. The Securities
have been duly and validly authorized for issuance by the Company and, when
executed and delivered by the Company, will be valid and binding obligations of
the Company enforceable against it in accordance with their terms, subject to
applicable bankruptcy, insolvency, fraudulent conveyance, reorganization,
moratorium and similar laws affecting creditors' rights and remedies generally.
For purposes of this Agreement, the term "Documents" means (i) this Agreement;
(ii) the Registration Rights Agreement of even date herewith between the Company
and Buyer, a copy of which is annexed hereto as Exhibit D (the "Registration
Rights Agreement"); (iii) the Certificate of Designation; (iv) the Warrants; and
(v) the Escrow Instructions.
E. Authorization of the Securities. The authorization, issuance,
sale and delivery of the Preferred Shares and Warrants has been duly authorized
by all requisite corporate action on the part of the Company. As of the Closing
Date, the Preferred Shares and the Warrants, and the Conversion Shares and the
Warrant Shares upon their issuance in accordance with the Certificate of
Designation and the Warrants, respectively, will be validly issued and
outstanding, fully paid and nonassessable, and not subject to any preemptive
rights, rights of first refusal or other similar rights.
F. Non-contravention. The execution and delivery by the Company of
the Documents, the issuance of the Securities, and the consummation by the
Company of the other transactions contemplated hereby and thereby, including,
without limitation, the filing of the Certificate of Designation with the
Delaware Secretary of State's office, do not and will not conflict with or
result in a breach by the Company of any of the terms or provisions of, or
constitute a default (or an event which, with notice, lapse of time or both,
would constitute a default) under (i) the articles of incorporation or by-laws
of the Company or (ii) any indenture, mortgage, deed of trust or other material
agreement or instrument to which the Company is a party or by which its
properties or assets are bound, or any law, rule, regulation, decree, judgment
or order of any court or public or governmental authority having jurisdiction
over the Company or any of the Company's properties or
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assets, except as to clause (ii) above such conflict, breach or default which
would not have a Material Adverse Effect.
G. Approvals. No authorization, approval or consent of any court or
public or governmental authority is required to be obtained by the Company for
the issuance and sale of the Preferred Shares or the Warrants (and the
Conversion Shares and Warrant Shares) to Buyer as contemplated by this
Agreement, except such authorizations, approvals and consents that have been
obtained by the Company prior to the date hereof.
H. Commission Filings. None of the Company's reports and documents
heretofore filed with the Commission pursuant to the Securities Act or the
Exchange Act (collectively, the "Commission Filings") contained at the time they
were filed any untrue statement of a material fact or omitted to state any
material fact required to be stated therein or necessary to make the statements
made therein, in light of the circumstances under which they were made, not
misleading.
I. Absence of Certain Changes. Since the Balance Sheet Date (as
defined in Section III.M.), there has not occurred any change, event or
development in the business, financial condition, prospects or results of
operations of the Company, and there has not existed any condition, having or
reasonably likely to have a Material Adverse Effect.
J. Full Disclosure. There is no fact known to the Company (other
than general economic or industry conditions known to the public generally) that
has not been fully disclosed in writing to the Buyer that (i) reasonably could
be expected to have a Material Adverse Effect or (ii) reasonably could be
expected to materially and adversely affect the ability of the Company to
perform its obligations pursuant to the Documents.
K. Absence of Litigation. There is no action, suit, claim,
proceeding, inquiry or investigation pending or, to the Company's knowledge,
threatened, by or before any court or public or governmental authority which, if
determined adversely to the Company, would have a Material Adverse Effect.
L. Absence of Events of Default. No "Event of Default" (as defined
in any agreement or instrument to which the Company is a party) and no event
which, with notice, lapse of time or both, would constitute an Event of Default
(as so defined), has occurred and is continuing, which could have a Material
Adverse Effect.
M. Financial Statements; No Undisclosed Liabilities. The Company has
delivered to Buyer true and complete copies of its audited balance sheet as at
December 31, 1997 and 1998 and the related audited statements of operations and
cash flows for the three fiscal years ended December 31, 1998, including the
related notes and schedules thereto (collectively, the "Financial Statements"),
and all management letters, if any, from the Company's independent auditors
relating to the dates and periods covered by the Financial Statements. Each of
the Financial Statements is complete and correct in all material respects, has
been prepared in accordance with United States General Accepted Accounting
Principles ("GAAP") (subject, in the case of the interim Financial Statements,
to normal year end adjustments and the absence of footnotes) and in conformity
with the practices consistently applied by the Company without modification of
the
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accounting principles used in the preparation thereof, and fairly presents
the financial position, results of operations and cash flows of the Company as
at the dates and for the periods indicated. For purposes hereof, the audited
balance sheet of the Company as at December 31, 1998 is hereinafter referred to
as the "Balance Sheet" and December 31, 1998 is hereinafter referred to as the
"Balance Sheet Date". The Company has no indebtedness, obligations or
liabilities of any kind (whether accrued, absolute, contingent or otherwise, and
whether due or to become due) that would have been required to be reflected in,
reserved against or otherwise described in the Balance Sheet or in the notes
thereto in accordance with GAAP, which was not fully reflected in, reserved
against or otherwise described in the Balance Sheet or the notes thereto or was
not incurred in the ordinary course of business consistent with the Company's
past practices since the Balance Sheet Date.
N. Compliance with Laws; Permits. The Company is in compliance with
all laws, rules, regulations, codes, ordinances and statutes (collectively,
"Laws") applicable to it or to the conduct of its business, except for such
noncompliance which would not have a Material Adverse Effect. The Company
possesses all permits, approvals, authorizations, licenses, certificates and
consents from all public and governmental authorities which are necessary to
conduct its business, except for those the absence of which would not have a
Material Adverse Effect.
O. Related Party Transactions. Except as set forth on Schedule III.
O. hereto, neither the Company nor any of its officers, directors or
"Affiliates" (as such term is defined in Rule 12b-2 under the Exchange Act) has
borrowed any moneys from or has outstanding any indebtedness or other similar
obligations to the Company. Except as set forth on Schedule III. O. hereto,
neither the Company nor any of its officers, directors or Affiliates (i) owns
any direct or indirect interest constituting more than a 1% equity (or similar
profit participation) interest in, or controls or is a director, officer,
partner, member or employee of, or consultant to or lender to or borrower from,
or has the right to participate in the profits of, any person or entity which is
(x) a competitor, supplier, customer, landlord, tenant, creditor or debtor of
the Company, (y) engaged in a business related to the business of the Company,
or (z) a participant in any transaction to which the Company is a party (other
than in the ordinary course of the Company's business) or (ii) is a party to any
contract, agreement, commitment or other arrangement with the Company.
P. Insurance. The Company maintains property and casualty, general
liability, workers' compensation, environmental hazard, personal injury and
other similar types of insurance with financially sound and reputable insurers
that is adequate, consistent with industry standards and the Company's
historical claims experience. The Company has not received notice from, and has
no knowledge of any threat by, any insurer (that has issued any insurance policy
to the Company) that such insurer intends to deny coverage under or cancel,
discontinue or not renew any insurance policy presently in force.
Q. Securities Law Matters. Based, in part, upon the representations
and warranties of Buyer set forth in Section II hereof, the offer and sale by
the Company of the Securities is exempt from (i) the registration and prospectus
delivery requirements of the Securities Act and the rules and regulations of the
Commission thereunder and (ii) the registration and/or qualification provisions
of all applicable state securities and "blue sky" laws. Other than pursuant to
an effective registration statement under the Securities Act, the Company has
not issued, offered or sold the Preferred Shares or any shares of Common Stock
(including for this purpose any securities of the same or a similar class as the
Preferred Shares or Common Stock, or any securities convertible
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into or exchangeable or exercisable for the Preferred Shares or Common Stock or
any such other securities) within the one-year next preceding the date hereof,
except as disclosed on Schedule III. Q. hereto or otherwise previously disclosed
in writing to Buyer, and the Company shall not directly or indirectly take, and
shall not permit any of its directors, officers or Affiliates directly or
indirectly to take, any action (including, without limitation, any offering or
sale to any person or entity of the Preferred Shares or shares of Common Stock),
so as to make unavailable the exemption from Securities Act registration being
relied upon by the Company for the offer and sale to Buyer of the Preferred
Shares (and the Conversion Shares) as contemplated by this Agreement. No form of
general solicitation or advertising has been used or authorized by the Company
or any of its officers, directors or Affiliates in connection with the offer or
sale of the Preferred Shares (and the Conversion Shares) as contemplated by this
Agreement or any other agreement to which the Company is a party.
R. Environmental Matters.
1. The operations of the Company are in compliance with all
applicable Environmental Laws and all permits issued pursuant to
Environmental Laws or otherwise;
2. The Company has obtained or applied for all permits required
under all applicable Environmental Laws necessary to operate its business;
3. The Company is not the subject of any outstanding written
order of or agreement with any governmental authority or person respecting
(i) Environmental Laws, (ii) Remedial Action or (iii) any Release or
threatened Release of Hazardous Materials, except as disclosed on Schedule
III. R. 3.;
4. The Company has not received, since December 31, 1998, any
written communication alleging that it may be in violation of any
Environmental Law or any permit issued pursuant to any Environmental Law,
or may have any liability under any Environmental Law;
5. The Company does not have any current contingent liability in
connection with any Release of any Hazardous Materials into the indoor or
outdoor environment (whether on-site or off-site);
6. Except as set forth on Schedule III. R. 6 hereto, to the
Company's knowledge, there are no investigations of the business,
operations, or currently or previously owned, operated or leased property
of the Company pending or threatened which could lead to the imposition of
any liability pursuant to any Environmental Law;
7. To the best of the Company's knowledge, after due inquiry,
there is not located at any of the properties of the Company any (A)
underground storage tanks, (B) asbestos-containing material or (C)
equipment containing polychlorinated biphenyls; and,
8. The Company has provided to Buyer all environmentally related
audits, studies, reports, analyses, and results of investigations that have
been performed with respect to the currently or previously owned, leased or
operated properties of the Company, including those listed on Schedule III.
R. 8.
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For purposes of this Section III. R.:
"Environmental Law" means any foreign, federal, state or local
statute, regulation, ordinance, or rule of common law as now or hereafter in
effect in any way relating to the protection of human health and safety or the
environment including, without limitation, the Comprehensive Environmental
Response, Compensation and Liability Act, the Hazardous Materials Transportation
Act, the Resource Conservation and Recovery Act, the Clean Water Act, the Clean
Air Act, the Toxic Substances Control Act, the Federal Insecticide, Fungicide,
and Rodenticide Act, and the Occupational Safety and Health Act, and the
regulations promulgated pursuant thereto.
"Hazardous Material" means any substance, material or waste which
is regulated by the United States, Canada or any of its provinces, or any state
or local governmental authority including, without limitation, petroleum and its
by-products, asbestos, and any material or substance which is defined as a
"hazardous waste," "hazardous substance," "hazardous material," "restricted
hazardous waste," "industrial waste," "solid waste," "contaminant," "pollutant,"
"toxic waste" or "toxic substance" under any provision of any Environmental Law;
"Release" means any release, spill, filtration, emission,
leaking, pumping, injection, deposit, disposal, discharge, dispersal, or
leaching into the indoor or outdoor environment, or into or out of any property;
"Remedial Action" means all actions to (x) clean up, remove,
treat or in any other way address any Hazardous Material; (y) prevent the
Release of any Hazardous Material so it does not endanger or threaten to
endanger public health or welfare or the indoor or outdoor environment; or (z)
perform pre-remedial studies and investigations or post-remedial monitoring and
care.
S. Labor Matters. The Company is not party to any labor or
collective bargaining agreement and there are no labor or collective bargaining
agreements which pertain to employees of the Company. No employees of the
Company are represented by any labor organization and none of such employees has
made a pending demand for recognition, and there are no representation
proceedings or petitions seeking a representation proceeding presently pending
or, to the Company's knowledge, threatened to be brought or filed, with the
National Labor Relations Board or other labor relations tribunal. There is no
organizing activity involving the Company pending or to the Company's knowledge,
threatened by any labor organization or group of employees of the Company.
There are no (i) strikes, work stoppages, slowdowns, lockouts or arbitrations or
(ii) material grievances or other labor disputes pending or, to the knowledge of
the Company, threatened against or involving the Company. There are no unfair
labor practice charges, grievances or complaints pending or, to the knowledge of
the Company, threatened by or on behalf of any employee or group of employees of
the Company.
T. ERISA Matters. The Company and its ERISA Affiliates are in
compliance in all material respects with all provisions of ERISA applicable to
it. No Reportable Event has occurred, been waived or exists as to which the
Company or any ERISA Affiliate was required to file a report with the Pension
Benefits Guaranty Corporation, and the present value of all liabilities under
all Plans (based on those assumptions used to fund such Plans) did not, as of
the most recent annual valuation date applicable thereto, exceed the value of
the assets of all such Plans in the aggregate. None of the Company or ERISA
Affiliates has incurred any Withdrawal Liability that
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could result in a Material Adverse Effect. None of the Company or ERISA
Affiliates has received any notification that any Multiemployer Plan is in
reorganization or has been terminated within the meaning of Title IV of ERISA,
and no Multiemployer Plan is reasonably expected to be in reorganization or
termination where such reorganization or termination has resulted or could
reasonably be expected to result in increases to the contributions required to
be made to such Plan or otherwise.
For purposes of this Section III. T.:
"ERISA" means the Employee Retirement Income Security Act of 1974, or
any successor statute, together with the regulations thereunder, as the same may
be amended from time to time.
"ERISA Affiliate" means any trade or business (whether or not
incorporated) that was, is or hereafter may become, a member of a group of which
the Company is a member and which is treated as a single employer under Section
414 of the Internal Revenue Code of 1986, as amended (the "Internal Revenue
Code").
"Multiemployer Plan" means a multiemployer plan as defined in Section
4001(a)(3) of ERISA to which the Company or any ERISA Affiliate (other than one
considered an ERISA Affiliate only pursuant to subsection (m) or (o) of Section
414 of the Internal Revenue Code) is making or accruing an obligation to make
contributions, or has within any of the preceding five plan years made or
accrued an obligation to make contributions.
"PBGC" means the Pension Benefit Guaranty Corporation referred to and
defined in ERISA or any successor thereto.
"Plan" means any pension plan (other than a Multiemployer Plan)
subject to the provision of Title IV of ERISA or Section 412 of the Internal
Revenue Code that is maintained for employees of the Company or any ERISA
Affiliate.
"Reportable Event" means any reportable event as defined in Section
4043(b) of ERISA or the regulations issued thereunder with respect to a Plan
(other than a Plan maintained by an ERISA Affiliate that is considered an ERISA
Affiliate only pursuant to subsection (m) or (o) of Section 414 of the Internal
Revenue Code).
"Withdrawal Liability" means liability to a Multiemployer Plan as a
result of a complete or partial withdrawal from such Multiemployer Plan, as such
terms are defined in Part I of Subtitle E of Title IV of ERISA.
U. Tax Matters.
1. The Company has filed all Tax Returns which it is required to
file under applicable Laws, except for such Tax Returns in respect of which
the failure to so file does not and could not have a Material Adverse
Effect; all such Tax Returns are true and accurate in all material respects
and have been prepared in compliance with all applicable Laws; the Company
has paid all Taxes due and owing by it (whether or not such Taxes are
required to be shown on a Tax Return) and have withheld and paid over to
the appropriate
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taxing authorities all Taxes which it is required to withhold from amounts
paid or owing to any employee, stockholder, creditor or other third
parties; and since the Balance Sheet Date, the charges, accruals and
reserves for Taxes with respect to the Company (including any provisions
for deferred income taxes) reflected on the books of the Company are
adequate to cover any Tax liabilities of the Company if its current tax
year were treated as ending on the date hereof.
2. No claim has been made by a taxing authority in a
jurisdiction where the Company does not file tax returns that such
corporation is or may be subject to taxation by that jurisdiction. There
are no foreign, federal, state or local tax audits or administrative or
judicial proceedings pending or being conducted with respect to the
Company; no information related to Tax matters has been requested by any
foreign, federal, state or local taxing authority; and, except as disclosed
above, no written notice indicating an intent to open an audit or other
review has been received by the Company from any foreign, federal, state or
local taxing authority. There are no material unresolved questions or
claims concerning the Company's Tax liability, except as disclosed on
Schedule III. U. 2. The Company (A) has not executed or entered into a
closing agreement pursuant to Section 7121 of the Internal Revenue Code or
any predecessor provision thereof or any similar provision of state, local
or foreign law; or (B) has not agreed to or is required to make any
adjustments pursuant to Section 481(a) of the Internal Revenue Code or any
similar provision of state, local or foreign law by reason of a change in
accounting method initiated by the Company or any of its subsidiaries or
has any knowledge that the IRS has proposed any such adjustment or change
in accounting method, or has any application pending with any taxing
authority requesting permission for any changes in accounting methods that
relate to the business or operations of the Company. The Company has not
been a United States real property holding corporation within the meaning
of Section 897(c)(2) of the Internal Revenue Code during the applicable
period specified in Section 897(c)(1)(A)(ii) of the Internal Revenue Code.
3. The Company has not made an election under Section 341(f) of
the Internal Revenue Code. The Company is not liable for the Taxes of
another person that is not a subsidiary of the Company under (A) Treas.
Reg. Section 1.1502-6 (or comparable provisions of state, local or foreign
law), (B) as a transferee or successor, (C) by contract or indemnity or (D)
otherwise. The Company is not a party to any tax sharing agreement. The
Company has not made any payments, is obligated to make payments or is a
party to an agreement that could obligate it to make any payments that
would not be deductible under Section 280G of the Internal Revenue Code.
For purposes of this Section III. U.:
"IRS" means the United States Internal Revenue Service.
"Tax" or "Taxes" means federal, state, county, local, foreign, or
other income, gross receipts, ad valorem, franchise, profits, sales or use,
transfer, registration, excise, utility, environmental, communications, real or
personal property, capital stock, license, payroll, wage or other withholding,
employment, social security, severance, stamp, occupation, alternative or add-on
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minimum, estimated and other taxes of any kind whatsoever (including, without
limitation, deficiencies, penalties, additions to tax, and interest attributable
thereto) whether disputed or not.
"Tax Return" means any return, information report or filing with
respect to Taxes, including any schedules attached thereto and including any
amendment thereof.
V. Property. The Company has good and marketable title to all real
and personal property owned by it, free and clear of all liens, encumbrances and
defects except such as are described on Schedule III. V. hereto 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 any real
property and buildings held under lease by the Company are held by it 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.
W. Intellectual Property. The Company owns or possesses adequate and
enforceable rights to use all patents, patent applications, trademarks,
trademark applications, trade names, service marks, copyrights, copyright
applications, licenses, know-how (including trade secrets and other unpatented
and/or unpatentable proprietary or confidential information, systems or
procedures) and other similar rights and proprietary knowledge (collectively,
"Intangibles") necessary for the conduct of its business as now being conducted
including, but not limited to, those described on Schedule III. W. hereto or
where the failure to own or possess such rights would not have a Material
Adverse Effect. To the best of the Company's knowledge, after due inquiry, the
Company is not infringing upon or in conflict with any right of any other person
with respect to any Intangibles. Except as disclosed on Schedule III. W.
hereto, no claims have been asserted by any person to the ownership or use of
any Intangibles and the Company has no knowledge of any basis for such claim.
X. Internal Controls and Procedures. The Company maintains accurate
books and records and internal accounting controls which provide reasonable
assurance that (i) all transactions to which the Company is a party or by which
its properties are bound are executed with management's authorization; (ii) the
reported accountability of the Company's assets is compared with existing assets
at regular intervals; (iii) access to the Company's assets is permitted only in
accordance with management's authorization; and (iv) all transactions to which
the Company is a party or by which its properties are bound are recorded as
necessary to permit preparation of the financial statements of the Company in
accordance with GAAP.
Y. Payments and Contributions. Neither the Company nor any of its
directors, officers or, to its knowledge, other employees has (i) used any
Company funds for any unlawful contribution, endorsement, gift, entertainment or
other unlawful expense relating to political activity; (ii) made any direct or
indirect unlawful payment of Company funds to any foreign or domestic government
official or employee, (iii) violated or is in violation of any provision of the
Foreign Corrupt Practices Act of 1977, as amended; or (iv) made any bribe,
rebate, payoff, influence payment, kickback or other similar payment to any
person with respect to Company matters.
Z. No Misrepresentation. No representation or warranty of the
Company contained in this Agreement, any schedule, annex or exhibit hereto or
any agreement, instrument or certificate furnished by the Company to Buyer
pursuant to this Agreement, contains any untrue
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statement of a material fact or omits to state a material fact required to be
stated therein or necessary to make the statements therein, not misleading.
IV. Certain Covenants and Acknowledgments
A. Restrictive Legend. Buyer acknowledges and agrees that, upon
issuance pursuant to this Agreement, the Securities (and any shares of Common
Stock issued in conversion of the Preferred Shares or exercise of the Warrants)
shall have endorsed thereon a legend in substantially the following form (and a
stop-transfer order may be placed against transfer of the Preferred Shares, the
Warrant Shares and the Conversion Shares until such legend has been removed):
"THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE "SECURITIES ACT"), OR THE SECURITIES LAWS OF ANY
STATE, AND ARE BEING OFFERED AND SOLD PURSUANT TO AN EXEMPTION FROM THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND SUCH LAWS. THESE
SECURITIES MAY NOT BE SOLD OR TRANSFERRED EXCEPT PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE
EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT OR SUCH
OTHER LAWS."
B. Filings. The Company shall make all necessary Commission Filings
and "blue sky" filings required to be made by the Company in connection with
the sale of the Securities to the Buyer as required by all applicable Laws, and
shall provide a copy thereof to the Buyer promptly after such filing.
C. Reporting Status. So long as the Buyer beneficially owns any of
the Securities, the Company shall timely file all reports required to be filed
by it with the Commission pursuant to Section 13 or 15(d) of the Exchange Act.
D. Use of Proceeds. The Company shall use the net proceeds from the
sale of the Securities (excluding amounts paid by the Company for Buyer's out-
of-pocket costs and expenses incurred in connection with the transactions
contemplated by this Agreement and finder's fees in connection with such sale)
solely for general corporate and working capital purposes.
E. Listing. Except to the extent the Company lists its Common Stock
on The New York Stock Exchange, the Company shall use its best efforts to
maintain its listing of the Common Stock on Nasdaq.
F. Reserved Conversion Shares. The Company at all times from and
after the date hereof shall have a sufficient number of shares of Common Stock
duly and validly authorized and reserved for issuance to satisfy the conversion,
in full, of the 2,000 Preferred Shares and upon the exercise of the Warrants.
G. Right of First Refusal. If the Company should propose (the
"Proposal") to issue Common Stock or securities convertible into Common Stock at
a price less than the Current
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Market Price (as defined in Certificate of Designation), or debt at less
than par value or having an effective annual interest rate in excess of 9.9%
(each a "Right of First Refusal Security" and collectively, the "Right of First
Refusal Securities"), in each case on the date of issuance during the period
ending two years after the Closing Date (the "Right of First Refusal Period"),
the Company shall be obligated to offer the Buyer on the terms set forth in the
Proposal (the "Offer") and the Buyer shall have the right, but not the
obligation, to accept such Offer on such terms. If during the Right of First
Refusal Period, the Company provides written notice to the Buyer that it
proposes to issue any Right of First Refusal Securities on the terms set forth
in the Proposal, then the Buyer shall have 10 business days to accept or reject
such offer in writing. If the Company fails to: (i) issue a Proposal during the
Right of First Refusal Period, (ii) offer the Buyer the opportunity to complete
the transaction as set forth in the Proposal, or (iii) enter into an agreement
with the Buyer, at such terms after the Buyer has accepted the Offer, then the
Company shall pay to the Buyer, as liquidated damages, an amount in total equal
to 10% of the amount paid to the Company for the Right of First Refusal
Securities. The foregoing right of first refusal is and shall be senior in right
to any other right of first refusal issued by the Company to any other Person
(as defined in the Certificate of Designation). Notwithstanding the foregoing,
the Buyer shall have no rights under this Section IV. G. in respect of Common
Stock or any other securities of the Company issuable (i) upon the exercise or
conversion of options, warrants or other rights to purchase securities of the
Company outstanding as of the date hereof or (ii) to officers, directors or
employees of the Company or any of its subsidiaries. Buyer hereby acknowledges
that other holders of the Series E Preferred Stock may also have the right of
first refusal set forth in this Section I.V., and Buyer hereby agrees that it
shall only be entitled to accept an Offer with respect to its pro rata share of
Right of First Refusal Securities (based on the number of Series E Preferred
Shares held by Buyer relative to the number of Series E Preferred Shares held by
all other holders of Series E Preferred Stock with such right of first refusal
and accepting such Offer).
V. Transfer Agent Instructions
A. The Company undertakes and agrees that no instruction other than
the instructions referred to in this Section V and customary stop transfer
instructions prior to the registration and sale of the Common Stock pursuant to
an effective Securities Act registration statement will be given to its transfer
agent for the Common Stock and that the Common Stock issuable upon conversion of
the Preferred Shares and exercise of the Warrants otherwise shall be freely
transferable on the books and records of the Company as and to the extent
provided in this Agreement, the Registration Rights Agreement and applicable
law. Nothing contained in this Section V.A. shall affect in any way Buyer's
obligations and agreement to comply with all applicable securities laws upon
resale of such Common Stock. If, at any time, Buyer provides the Company with an
opinion of counsel reasonably satisfactory to the Company that registration of
the resale by Buyer of such Common Stock is not required under the Securities
Act and that the removal of restrictive legends is permitted under applicable
law, the Company shall permit the transfer of such Common Stock and, promptly
instruct the Company's transfer agent to issue one or more certificates for
Common Stock without any restrictive legends endorsed thereon.
B. The Company shall permit Buyer to exercise its right to convert
the Preferred Shares by telecopying an executed and completed Notice of
Conversion (as defined in the Certificate of Designation) to the Company. Each
date on which a Notice of Conversion is telecopied to and received by the
Company in accordance with the provisions hereof shall be deemed a Conversion
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Date (as defined in the Certificate of Designation). The Company shall transmit
the certificates evidencing the shares of Common Stock issuable upon conversion
of any Preferred Shares (together with certificates evidencing any Preferred
Shares not being so converted) to Buyer via express courier, by electronic
transfer or otherwise, within five business days after receipt by the Company of
the Notice of Conversion (the "Delivery Date"). Within 30 days after Buyer
delivers the Notice of Conversion to the Company, Buyer shall deliver to the
Company the Preferred Shares being converted.
C. The Company shall permit Buyer to exercise its right to purchase
shares of Common Stock pursuant to exercise of the Warrants in accordance with
its applicable terms of the Warrants. The last date that the Company may deliver
shares of Common Stock issuable upon any exercise of Warrants is referred to
herein as the "Warrant Delivery Date."
D. The Company understands that a delay in the issuance of the shares
of Common Stock issuable in lieu of cash dividends on the Preferred Shares, upon
the conversion of the Preferred Shares or exercise of the Warrants beyond the
applicable Dividend Payment Due Date (as defined in the Certificate of
Designation), Delivery Date or Warrant Delivery Date could result in economic
loss to Buyer. As compensation to Buyer for such loss (and not as a penalty),
the Company agrees to pay to Buyer for late issuance of Common Stock issuable in
lieu of cash dividends on the Preferred Shares, upon conversion of the Preferred
Shares or exercise of the Warrants in accordance with the following schedule
(where "No. Business Days" is defined as the number of business days beyond five
days from the Dividend Payment Due Date, the Delivery Date or the Warrant
Delivery Date, as applicable):
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<TABLE>
<CAPTION>
Compensation For Each 10 Shares
of Preferred Shares Not
Converted
Timely or 500 Shares of Common
Stock Issuable In Payment of
Dividends or Upon Exercise of
No. Business Days Warrants Not Issued Timely
------------------- -------------------------------
<S> <C>
1 $ 25
2 50
3 75
4 100
5 125
6 150
7 175
8 200
9 225
10 250
more than 10 $250 + $100 for each Business
Day Late beyond 10 days
</TABLE>
The Company shall pay to Buyer the compensation described above by the transfer
of immediately available funds upon Buyer's demand. Nothing herein shall limit
Buyer's right to pursue actual damages for the Company's failure to issue and
deliver Common Stock to Buyer, and in addition to any other remedies which may
be available to Buyer, in the event the Company fails for any reason to effect
delivery of such shares of Common Stock within five business days after the
relevant Dividend Payment Due Date, the Delivery Date or the Warrant Delivery
Date, as applicable, Buyer shall be entitled to rescind the relevant Notice of
Conversion or exercise of Warrants by delivering a notice to such effect to the
Company whereupon the Company and Buyer shall each be restored to their
respective original positions immediately prior to delivery of such Notice of
Conversion on delivery.
VI. Delivery Instructions
The Securities shall be delivered by the Company to the Escrow Agent
pursuant to Section I. B. hereof on a "delivery-against-payment basis" at the
Closing.
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VII. Closing Date
The date and time of the issuance and sale of the Preferred Shares
(the "Closing Date") shall be the date hereof or such other as shall be mutually
agreed upon in writing. The issuance and sale of the Securities shall occur on
the Closing Date at the offices of the Escrow Agent. Notwithstanding anything
to the contrary contained herein, the Escrow Agent shall not be authorized to
release to the Company the Purchase Price and to Buyer the certificate(s) (I/N/O
Buyer or I/N/O Buyer's nominee) evidencing the Securities being purchased by
Buyer unless the conditions set forth in Section VIII. C. and IX. G. hereof have
been satisfied.
VIII. Conditions to the Company's Obligations
The Buyer understands that the Company's obligation to sell the
Securities on the Closing Date to Buyer pursuant to this Agreement is
conditioned upon:
A. Delivery by Buyer to the Escrow Agent of the Purchase Price;
B. The accuracy in all material respects on the Closing Date of the
representations and warranties of Buyer contained in this Agreement as if made
on the Closing Date (except for representations and warranties which, by their
express terms, speak as of and relate to a specified date, in which case such
accuracy shall be measured as of such specified date) and the performance by
Buyer in all material respects on or before the Closing Date of all covenants
and agreements of Buyer required to be performed by it pursuant to this
Agreement on or before the Closing Date;
C. There shall not be in effect any Law or order, ruling, judgment or
writ of any court or public or governmental authority restraining, enjoining or
otherwise prohibiting any of the transactions contemplated by this Agreement.
IX. Conditions to Buyer's Obligations
The Company understands that Buyer's obligation to purchase the
Securities on the Closing Date pursuant to this Agreement is conditioned upon:
A. Delivery by the Company to Buyer of evidence that the Certificate
of Designation has been filed and is effective.
B. Delivery by the Company to the Escrow Agent of one or more
certificates (I/N/O Buyer or I/N/O Buyer's nominee) evidencing the Securities to
be purchased by Buyer pursuant to this Agreement;
C. The accuracy in all respects on the Closing Date of the
representations and warranties of the Company contained in this Agreement as if
made on the Closing Date (except for representations and warranties which, by
their express terms, speak as of and relate to a specified date, in which case
such accuracy shall be measured as of such specified date) and the performance
by the Company in all respects on or before the Closing Date of all covenants
and agreements of the Company required to be performed by it pursuant to this
Agreement on or before the Closing Date;
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D. Buyer having received an opinion of counsel for the Company, dated
the Closing Date, in form, scope and substance reasonably satisfactory to the
Buyer as to the matters set forth in Annex A;
E. There not having occurred (i) any general suspension of trading
in, or limitation on prices listed for, the Common Stock on Nasdaq, (ii) the
declaration of a banking moratorium or any suspension of payments in respect of
banks in the United States, (iii) the commencement of a war, armed hostilities
or other international or national calamity directly or indirectly involving the
United States or any of its territories, protectorates or possessions, or (iv)
in the case of the foregoing existing at the date of this Agreement, a material
acceleration or worsening thereof;
F. There not having occurred any event or development, and there
being in existence no condition, having or which reasonably and foreseeably
could have a Material Adverse Effect;
G. There shall not be in effect any Law or order, ruling, judgment or
writ of any court or public or governmental authority restraining, enjoining or
otherwise prohibiting any of the transactions contemplated by this Agreement;
and
H. Delivery of irrevocable instructions to the Company's transfer
agent to reserve 1,037,000 shares of Common Stock for issuance of the Conversion
Shares and the Warrant Shares.
X. Termination
A. Termination by Mutual Written Consent. This Agreement may be
terminated and the transactions contemplated hereby may be abandoned, for any
reason and at any time prior to the Closing Date, by the mutual written consent
of the Company and Buyer.
B. Termination by the Company or Buyer. This Agreement may be
terminated and the transactions contemplated hereby may be abandoned by action
of the Company or Buyer if (i) the Closing shall not have occurred at or prior
to 5:00 p.m., New York City time, on June 28, 1999 (the "Latest Closing Date");
provided, however, that the right to terminate this Agreement pursuant to this
Section X. B.(i) shall not be available to any party whose failure to fulfill
any of its obligations under this Agreement has been the cause of or resulted in
the failure of the Closing to occur at or before such time and date or (ii) any
court or public or governmental authority shall have issued an order, ruling,
judgment or writ, or there shall be in effect any Law, restraining, enjoining or
otherwise prohibiting the consummation of any of the transactions contemplated
by this Agreement; provided, further, however, that if the Closing shall not
have occurred on or prior to the Latest Closing Date, the Closing may only occur
after the Latest Closing Date with the written acceptance of Buyer.
C. Termination by Buyer. This Agreement may be terminated and the
transactions contemplated hereby may be abandoned by Buyer at any time prior to
the Closing Date, if (i) the Company shall have failed to comply with any of its
covenants or agreements contained in this Agreement, (ii) there shall have been
a breach by the Company with respect to any representation or warranty made by
it in this Agreement, (iii) there shall have occurred any event or development,
or there shall be in existence any condition, having or reasonably and
forseeably likely
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to have a Material Adverse Effect or (iv) the Company shall have failed to
satisfy the conditions provided in Section IX hereof.
D. Termination by the Company. This Agreement may be terminated and
the transactions contemplated hereby may be abandoned by the Company at any time
prior to the Closing Date, if (i) Buyer shall have failed to comply with any of
its covenants or agreements contained in this Agreement or (ii) there shall have
been a breach by Buyer with respect to any representation or warranty made by it
in this Agreement.
XI. Survival; Indemnification
A. The representations, warranties and covenants made by each of the
Company and Buyer in this Agreement, the annexes, schedules and exhibits hereto
and in each instrument, agreement and certificate entered into and delivered by
them pursuant to this Agreement, shall survive the Closing and the consummation
of the transactions contemplated hereby. In the event of a breach or violation
of any of such representations, warranties or covenants, the party to whom such
representations, warranties or covenants have been made shall have all rights
and remedies for such breach or violation available to it under the provisions
of this Agreement or otherwise, whether at law or in equity, irrespective of any
investigation made by or on behalf of such party on or prior to the Closing
Date.
B. The Company hereby agrees to indemnify and hold harmless the
Buyer, its Affiliates and their respective officers, directors, partners and
members (collectively, the "Buyer Indemnitees"), from and against any and all
losses, claims, damages, judgments, penalties, liabilities and deficiencies
(collectively, "Losses"), and agrees to reimburse the Buyer Indemnitees for all
out of-pocket expenses (including the fees and expenses of legal counsel), in
each case promptly as incurred by the Buyer Indemnitees and to the extent
arising out of or in connection with:
1. any misrepresentation, omission of fact or breach of any of
the Company's representations or warranties contained in this Agreement or
the other Documents, or the annexes, schedules or exhibits hereto or
thereto or any instrument, agreement or certificate entered into or
delivered by the Company pursuant to this Agreement or the other Documents;
or
2. any failure by the Company to perform any of its covenants,
agreements. undertakings or obligations set forth in this Agreement or the
other Documents, or the annexes, schedules or exhibits hereto or thereto or
any instrument, agreement or certificate entered into or delivered by the
Company pursuant to this Agreement or the other Documents; or
3. resales of the Common Shares by Buyer in the manner and as
contemplated by this Agreement and the Registration Rights Agreement.
C. Buyer hereby agrees to indemnify and hold harmless the Company,
its Affiliates and their respective officers, directors, partners and members
(collectively, the "Company Indemnitees"), from and against any and all Losses,
and agrees to reimburse the Company Indemnitees for all out-of-pocket expenses
(including the fees and expenses of legal counsel), in
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each case promptly as incurred by the Company Indemnitees and to the extent
arising out of or in connection with:
1. any misrepresentation, omission of fact, or breach of any of
Buyer's representations or warranties contained in this Agreement or the
other Documents, or the annexes, schedules or exhibits hereto or thereto or
any instrument, agreement or certificate entered into or delivered by Buyer
pursuant to this Agreement or the other Documents; or
2. any failure by Buyer to perform in any material respect any
of its covenants, agreements, undertakings or obligations set forth in this
Agreement or the other Documents or any instrument, certificate or
agreement entered into or delivered by Buyer pursuant to this Agreement or
the other Documents.
D. Promptly after receipt by either party hereto seeking
indemnification pursuant to this Section XI (an "Indemnified Party") of written
notice of any investigation, claim, proceeding or other action in respect of
which indemnification is being sought (each, a "Claim"), the Indemnified Party
promptly shall notify the party against whom indemnification pursuant to this
Section XI is being sought (the "Indemnifying Party") of the commencement
thereof; but the omission to so notify the Indemnifying Party shall not relieve
it from any liability that it otherwise may have to the Indemnified Party except
to the extent that the Indemnifying Party is materially prejudiced and forfeits
substantive rights and defenses by reason of such failure. In connection with
any Claim as to which both the Indemnifying Party and the Indemnified Party are
parties, the Indemnifying Party shall be entitled to assume the defense thereof.
Notwithstanding the assumption of the defense of any Claim by the Indemnifying
Party, the Indemnified Party shall have the right to employ separate legal
counsel and to participate in the defense of such Claim, and the Indemnifying
Party shall bear the reasonable fees, out-of-pocket costs and expenses of such
separate legal counsel to the Indemnified Party if (and only if): (x) the
Indemnifying Party shall have agreed to pay such fees, out-of-pocket costs and
expenses, (y) the Indemnified Party and the Indemnifying Party reasonably shall
have concluded that representation of the Indemnified Party and the Indemnifying
Party by the same legal counsel would not be appropriate due to actual or, as
reasonably determined by legal counsel to the Indemnified Party, potentially
differing interests between such parties in the conduct of the defense of such
Claim, or if there may be legal defenses available to the Indemnified Party that
are in addition to or disparate from those available to the Indemnifying Party,
or (z) the Indemnifying Party shall have failed to employ legal counsel
reasonably satisfactory to the Indemnified Party within a reasonable period of
time after notice of the commencement of such Claim. If the Indemnified Party
employs separate legal counsel in circumstances other than as described in
clauses (x), (y) or (z) above, the fees, costs and expenses of such legal
counsel shall be borne exclusively by the Indemnified Party. Except as provided
above, the Indemnifying Party shall not, in connection with any Claim in the
same jurisdiction, be liable for the fees and expenses of more than one firm of
legal counsel for the Indemnified Party (together with appropriate local
counsel). The Indemnifying Party shall not, without the prior written consent
of the Indemnified Party (which consent shall not unreasonably be withheld),
settle or compromise any Claim or consent to the entry of any judgment that does
not include an unconditional release of the Indemnified Party from all
liabilities with respect to such Claim or judgment.
E. In the event one party hereunder should have a claim for
indemnification that does not involve a claim or demand being asserted by a
third party, the Indemnified Party promptly
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shall deliver notice of such claim to the Indemnifying Party. If the Indemnified
Party disputes the claim, such dispute shall be resolved by mutual agreement of
the Indemnified Party and the Indemnifying Party or by binding arbitration
conducted in accordance with the procedures and rules of the American
Arbitration Association. Judgment upon any award rendered by any arbitrators may
be entered in any court having competent jurisdiction thereof.
XII. Governing Law; Miscellaneous
This Agreement shall be governed by and interpreted in accordance with
the laws of the State of New York, without regard to the conflicts of law
principles of such state. Each of the parties consents to the jurisdiction of
the federal courts whose districts encompass any part of the City of Palo Alto
or the state courts of the State of California sitting in the City of Palo Alto
in connection with any dispute arising under this Agreement and hereby waives,
to the maximum extent permitted by law, any objection, including any objection
based on forum non conveniens, to the bringing of any such proceeding in such
jurisdictions. A facsimile transmission of this signed Agreement shall be legal
and binding on all parties hereto. This Agreement may be signed in one or more
counterparts, each of which shall be deemed an original. The headings of this
Agreement are for convenience of reference and shall not form part of, or affect
the interpretation of, this Agreement. 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 or the validity or enforceability of this Agreement
in any other jurisdiction. This Agreement may be amended only by an instrument
in writing signed by the party to be charged with enforcement. This Agreement
supersedes all prior agreements and understandings among the parties hereto with
respect to the subject matter hereof.
XIII. Notices
Except as may be otherwise provided herein, any notice or other
communication or delivery required or permitted hereunder shall be in writing
and shall be delivered personally or sent by certified mail, postage prepaid, or
by a nationally recognized overnight courier service, and shall be deemed given
when so delivered personally or by overnight courier service, or, if mailed,
three (3) days after the date of deposit in the United States mails, as follows:
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A. Thermatrix Inc.
308 North Peters Road, Suite 100
Knoxville, TN 37922
Attention: Edward E. Greene
(423) 539-9603
(423) 539-9643 (Fax)
with a copy to:
Wilson Sonsini Goodrich & Rosati, PC
650 Page Mill Road
Palo Alto, CA 94304-1050
Attention: Michael J. Danaher, Esq.
(650) 493-9300
(650) 493-6811 (Fax)
B. if to the Buyer, to:
CIBC WMV, Inc.
C/O CIBC World Markets/Merchant Banking
425 Lexington Avenue
New York, NY 10017
Robi Blumenstein
(212) 856-4000
(212) 697-1544 (Fax)
C. if to the Escrow Agent, to:
Wilson Sonsini Goodrich & Rosati
650 Page Mill Road
Palo Alto, CA 94304-1050
Attention: Michael J. Danaher, Esq.
(650) 493-9300
(650) 493-6811 (Fax)
The Company, the Buyer or the Escrow Agent may change the foregoing address by
notice given pursuant to this Section XIII.
XIV. Confidentiality
Each of the Company and Buyer agrees to keep confidential and not to
disclose to or use for the benefit of any third party the terms of this
Agreement or any other information which at any time is communicated by the
other party as being confidential without the prior written approval of the
other party; provided, however, that this provision shall not apply to
information which, at the time of disclosure, is already part of the public
domain (except by breach of this Agreement) and information which is required to
be disclosed by law (including, without limitation, pursuant to Item 601(b)(10)
of Regulation S-K under the Securities Act and the Exchange Act).
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XV. Assignment
This Agreement shall not be assignable by either of the parties hereto
prior to the Closing without the prior written consent of the other party, and
any attempted assignment contrary to the provisions hereby shall be null and
void; provided, however, that Buyer may assign its rights and obligations
hereunder, in whole or in part, to any affiliate of Buyer who furnishes to the
Company the representations and warranties set forth in Section II hereof and
otherwise agrees to be bound by the terms of this Agreement.
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In Witness Whereof, the parties hereto have duly executed and delivered
this Agreement on the date first above written.
Thermatrix Inc.
By:_______________________________
Name:
Title:
CIBC WMV, Inc.
By:_______________________________
Name:
Title:
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EXHIBIT A
COMMON STOCK PURCHASE WARRANTS
-25-
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EXHIBIT B
CERTIFICATE OF DESIGNATION
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EXHIBIT C
ESCROW INSTRUCTIONS
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EXHIBIT D
REGISTRATION RIGHTS AGREEMENT
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SCHEDULE III.A.1.
PREEMPTIVE, SUBSCRIPTION, "CALL" OR SIMILAR RIGHTS
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SCHEDULE III.A.2.
SUBSIDIARIES
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SCHEDULE III.C.
ISSUANCES AND SALES OF SECURITIES
-31-
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SCHEDULE III.O.
RELATED PARTY TRANSACTIONS
-32-
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SCHEDULE III.Q.
SECURITIES LAW MATTERS
-33-
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SCHEDULE III.R.6.
ENVIRONMENTAL MATTERS
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SCHEDULE III.V.
PROPERTY
-35-
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SCHEDULE III.W.
INTELLECTUAL PROPERTY
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ANNEX A
FORM OF OPINION
1. The Company has been duly incorporated and is validly existing as
a corporation in good standing under the laws of the State of Delaware, is duly
qualified to do business as a foreign corporation and is in good standing in all
jurisdictions where the Company owns or leases properties or conducts business,
except for jurisdictions in which the failure to so qualify would not have a
Material Adverse Effect, and has all requisite corporate power and authority to
own its properties and conduct its business as described in the Commission
Filings.
2. The authorized capital stock of the Company consists of 25,000,000
shares of Common Stock, par value $.001 per share (the "Common Stock"), and
5,000,000 shares of Preferred Stock, par value $.001 per share.
3. When delivered to you or upon your order against payment of the
agreed consideration therefor in accordance with the provisions of the
Documents, the Securities will be duly authorized and validly issued, fully paid
and nonassessable.
4. The Company has the requisite corporate power and authority to
enter into the Documents and to sell and deliver the Securities as described in
the Documents; each of the Documents has been duly and validly authorized by all
necessary corporate action by the Company; each of the Documents has been duly
and validly executed and delivered by and on behalf of the Company, and is valid
and binding agreement of the Company, enforceable in accordance with its terms,
except as enforceability may be limited by general equitable principles,
bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium or
other laws affecting creditors rights generally.
5. The executive, delivery and performance of the Documents by the
Company and the performance of its obligations thereunder do not and will not
constitute a breach or violation of any of the terms and provisions of, or
constitute a default (or with notice, lapse of time or both would constitute a
default) under or conflict with or violate any provision of (i) the Company's
certificate of incorporation or bylaws, (ii) any indenture, mortgage, deed of
trust, agreement or other instrument known to us to which the Company is a party
or by which it or any of its property is bound, (iii) or, to the best of our
knowledge, any judgment, decree or order of any court or governmental body
having jurisdiction over the Company or any of its property. To the best of our
knowledge, no consent, approval, authorization, order, registration, filing,
qualification, license or permit of or with any court or any public,
governmental or regulatory agency or body having jurisdiction over the Company
or any of its properties or assets is required for the execution, delivery and
performance by the Company of the Documents or the consummation by the Company
of the transactions contemplated thereby.
6. When issued, the Preferred Shares and the Warrants shall be duly
authorized, validly issued, fully paid and nonassessable, and free and clear of
all encumbrances and restrictions, except for restrictions on transfer imposed
by applicable securities laws. The Conversion Shares and Warrant Shares
issuable upon conversion or exercise, respectively, of the Preferred Shares and
the
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Warrants, respectively, will be duly authorized, validly issued, fully paid and
nonassessable, and free and clear of all encumbrances and restrictions, except
for restrictions on transfer imposed by applicable securities laws.
7. Based on Buyer's representations contained in this Agreement, the
offer and sale of the Preferred Shares and the Warrants are exempt from the
registration requirements of the Securities Act.
8. To the best of our knowledge, other than as described in the
Commission Filings, there are no outstanding options, warrants or other
securities exercisable or convertible into Common Stock of the Company.
9. There is no action, suit, claim, inquiry or investigation pending
or, to the best of our knowledge, threatened by or before any court or public or
governmental authority which, if determined adversely to the Company, would have
a Material Adverse Effect.
10. Neither the Company nor any of its subsidiaries is, or will be
after the consummation of the transactions contemplated by this Agreement and
the other Documents and the use of the proceeds from the sale of the Securities,
an "investment company" or an entity "controlled" by an "investment company," as
such terms are defined in the Investment Company Act of 1940, as amended.
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EXHIBIT 4.2(a)
REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement, dated as of June 30, 1999 (this
"Agreement"), between Thermatrix Inc., a Delaware corporation, with principal
executive offices located at 308 North Peters Road, Suite 100, Knoxville,
Tennessee (the "Company"), and The Shaar Fund Ltd. (the "Initial Investor").
Whereas, upon the terms and subject to the conditions of the
Securities Purchase Agreement dated as of June 30, 1999, between the Initial
Investor and the Company (the "Securities Purchase Agreement"), the Company has
agreed to issue and sell to the Initial Investor (i) 3,000 shares of Series E 8%
Convertible Preferred Stock, par value $.001 per share (the "Preferred Shares")
which, upon the terms of and subject to the conditions of the Company's
Certificate of Designation of Series E 8% Convertible Preferred Stock (the
"Certificate of Designation"), are convertible into shares of the Company's
common stock, par value $.001 per share (the "Common Stock") and (ii) Common
Stock Purchase Warrants (the "Warrants") to purchase shares of Common Stock; and
Whereas, to induce the Initial Investor to execute and deliver the
Securities Purchase Agreement, the Company has agreed to provide with respect to
the Common Stock issued or issuable in lieu of cash dividend payments on the
Preferred Shares, upon conversion of the Preferred Shares and exercise of the
Warrants certain registration rights under the Securities Act;
Now, Therefore, in consideration of the premises and the mutual
covenants contained herein, the parties hereto, intending to be legally bound,
hereby agree as follows:
1. Definitions
(a) As used in this Agreement, the following terms shall have the
meanings:
(i) "Affiliate," of any specified Person means any other Person who
directly, or indirectly through one or more intermediaries, is in control
of, is controlled by, or is under common control with, such specified
Person. For purposes of this definition, control of a Person means the
power, directly or indirectly, to direct or cause the direction of the
management and policies of such Person whether by contract, securities,
ownership or otherwise; and the terms "controlling" and "controlled" have
the respective meanings correlative to the foregoing.
(ii) "Closing Date" means the date and time of the issuance and sale of
the Preferred Shares.
(iii) "Commission" means the Securities and Exchange Commission.
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(iv) "Current Market Price" on any date of determination means the
closing bid price of a share of the Common Stock on such day as reported on
the Nasdaq National Market ("Nasdaq"), or, if such security is not listed
or admitted to trading on the Nasdaq, on the principal national security
exchange or quotation system on which such security is quoted or listed or
admitted to trading, or, if not quoted or listed or admitted to trading on
any national securities exchange or quotation system, the closing bid price
of such security on the over-the-counter market on the day in question as
reported by the National Quotation Bureau Incorporated, or a similar
generally accepted reporting service, or if not so available, in such
manner as furnished by any Nasdaq member firm of the National Association
of Securities Dealers, Inc. selected from time to time by the Board of
Directors of the Company for that purpose, or a price determined in good
faith by the Board of Directors of the Company as being equal to the fair
market value thereof, as the case may be.
(v) "Exchange Act" means the Securities Exchange Act of 1934, as
amended, and the rules and regulations of the Commission thereunder, or any
similar successor statute.
(vi) "Investors" means the Initial Investor and any transferee or
assignee of Registrable Securities who agrees to become bound by all of the
terms and provisions of this Agreement in accordance with Section 8 hereof.
(vii) "Person" means any individual, partnership, corporation, limited
liability company, joint stock company, association, trust, unincorporated
organization, or a government or agency or political subdivision thereof.
(viii) "Prospectus" means the prospectus (including, without limitation,
any preliminary prospectus and any final prospectus filed pursuant to Rule
424(b) under the Securities Act, including any prospectus that discloses
information previously omitted from a prospectus filed as part of an
effective registration statement in reliance on Rule 430A under the
Securities Act) included in the Registration Statement, as amended or
supplemented by any prospectus supplement with respect to the terms of the
offering of any portion of the Registrable Securities covered by the
Registration Statement and by all other amendments and supplements to such
prospectus, including all material incorporated by reference in such
prospectus and all documents filed after the date of such prospectus by the
Company under the Exchange Act and incorporated by reference therein.
(ix) "Public Offering" means an offer registered with the Commission and
the appropriate state securities commissions by the Company of its Common
Stock and made pursuant to the Securities Act.
(x) "Registrable Securities" means the Common Stock issued or issuable
(i) in lieu of cash dividend payments on the Preferred Shares, (ii) upon
conversion of the Preferred Shares or (iii) upon exercise of the Warrants;
provided, however, a share of Common Stock shall cease to be a Registrable
Security for purposes of this Agreement when it no longer is a Restricted
Security.
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(xi) "Registration Statement" means a registration statement of the
Company filed on an appropriate form under the Securities Act providing for
the registration of, and the sale on a continuous or delayed basis by the
holders of, all of the Registrable Securities pursuant to Rule 415 under
the Securities Act, including the Prospectus contained therein and forming
a part thereof, any amendments to such registration statement and
supplements to such Prospectus, and all exhibits and other material
incorporated by reference in such registration statement and Prospectus.
(xii) "Restricted Security" means any share of Common Stock issued or
issuable in lieu of cash dividend payments on the Preferred Shares, upon
conversion of the Preferred Shares or exercise of the Warrants except any
such share that (i) has been registered pursuant to an effective
registration statement under the Securities Act and sold in a manner
contemplated by the prospectus included in such registration statement,
(ii) has been transferred in compliance with the resale provisions of Rule
144 under the Securities Act (or any successor provision thereto) or is
transferable pursuant to paragraph (k) of Rule 144 under the Securities Act
(or any successor provision thereto), or (iii) otherwise has been
transferred and a new share of Common Stock not subject to transfer
restrictions under the Securities Act has been delivered by or on behalf of
the Company.
(xiii) "Securities Act" means the Securities Act of 1933, as amended, and
the rules and regulations of the Commission thereunder, or any similar
successor statute.
(b) All capitalized terms used and not defined herein have the
respective meaning assigned to them in the Securities Purchase Agreement.
2. Registration
(a) Filing and Effectiveness of Registration Statement. The Company
shall prepare and file with the Commission not later than 60 days after the
Closing Date, a Registration Statement relating to the offer and sale of the
Registrable Securities and shall use its best efforts to cause the Commission to
declare such Registration Statement effective under the Securities Act as
promptly as practicable but not later than 150 days after the Closing Date,
assuming for purposes hereof a Conversion Price under the Certificate of
Designation of $1.50 per share. The Company shall not include any other
securities in the Registration Statement relating to the offer and sale of the
Registrable Securities. The Company shall notify the Initial Investor by
written notice that such Registration Statement has been declared effective by
the Commission within 24 hours of such declaration by the Commission.
(b) Registration Default. If the Registration Statement covering the
Registrable Securities or the Additional Registrable Securities (as defined in
Section 2(d) hereof) required to be filed by the Company pursuant to Section
2(a) or 2(d) hereof, as the case may be, is not (i) filed with the Commission
within 60 days after the Closing Date or (ii) declared effective by the
Commission within 150 days after the Closing Date (either of which, without
duplication, an "Initial Date"), then the Company shall make the payments to the
Initial Investor as provided in the next sentence as liquidated damages and not
as a penalty. The amount to be paid by the Company to the Initial Investor
shall be determined as of each Computation Date (as defined below), and such
amount shall
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be equal to 2% (the "Liquidated Damage Rate") of the Purchase Price (as defined
in the Securities Purchase Agreement) from the Initial Date to the first
Computation Date and for each Computation Date thereafter, calculated on a pro
rata basis to the date on which the Registration Statement is filed with (in the
event of an Initial Date pursuant to clause (i) above) or declared effective by
(in the event of an Initial Date pursuant to clause (ii) above) the Commission
(the "Periodic Amount") provided, however, that in no event shall the liquidated
damages be less than $25,000; provided, further, however, that if the
Registration Statement is not declared effective by the Commission within 210
days after the Initial Date set forth in clause (ii) above, then the Liquidated
Damage Rate shall increase to 4%; provided, further, however, that the
Liquidated Damage Rate shall increase by 1% for each 30 day period after the
210/th/ day after the Initial Date set forth in clause (ii) above that the
Registration Statement is not declared effective by the Commission. The full
Periodic Amount shall be paid by the Company to the Initial Investor by wire
transfer of immediately available funds within three days after each Computation
Date.
As used in this Section 2(b), "Computation Date" means the date which
is 30 days after the Initial Date and, if the Registration Statement required to
be filed by the Company pursuant to Section 2(a) has not theretofore been
declared effective by the Commission, each date which is 30 days after the
previous Computation Date until such Registration Statement is so declared
effective.
Notwithstanding the above, if the Registration Statement covering the
Registrable Securities or the Additional Registrable Securities required to be
filed by the Company pursuant to Section 2(a) or 2(d) hereof, as the case may
be, is not filed with the Commission by the 30th day after the Closing Date, the
Company shall be in default of this Registration Rights Agreement.
(c) Eligibility for Use of Form S-3. The Company agrees that at such
time as it meets all the requirements for the use of Securities Act Registration
Statement on Form S-3 it shall file all reports and information required to be
filed by it with the Commission in a timely manner and take all such other
action so as to maintain such eligibility for the use of such form.
(d) In the event the Current Market Price declines to $1.75 per
share, the Company shall, to the extent required by the Securities Act (because
the additional shares were not covered by the Registration Statement filed
pursuant to Section 2(a)), as reasonably determined by the Initial Investor,
file an additional Registration Statement with the Commission for such
additional number of Registrable Securities as would be issuable upon conversion
of the Preferred Shares and exercise of the Warrants (the "Additional
Registrable Securities") in addition to those previously registered, assuming a
Conversion Price of $0.75 per share. The Company shall, to the extent required
by the Securities Act, as reasonably determined by the Initial Investor, prepare
and file with the Commission not later than the 30th day thereafter, a
Registration Statement relating to the offer and sale of such Additional
Registrable Securities and shall use its best efforts to cause the Commission to
declare such Registration Statement effective under the Securities Act as
promptly as practicable but not later than 60 days thereafter. The Company shall
not include any other securities in the Registration Statement relating to the
offer and sale of such Additional Registrable Securities.
If the Additional Registration Statement is not (i) filed with the
Commission within 30 days after the Decline Date or (ii) declared effective by
the Commission within 90 days after the Decline Date (either of which, without
duplication, an "Additional Registration Date"), then the Company shall make the
payments to the Initial Investor at the Liquidated Damage Rate from the
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Additional Registration Date to the first Additional Computation Date and for
each Additional Computation Date thereafter, calculated on a pro rata basis to
the date on which the Additional Registration Statement is filed with (in the
event of an Additional Registration Date pursuant to clause (i) above) or
declared effective by (in the event of an Additional Registration Date pursuant
to clause (ii) above) the Commission (the "Additional Periodic Amount")
provided, however, that in no event shall the liquidated damages be less than
$25,000; provided, further, however, that if the Additional Registration
Statement is not declared effective by the Commission within 120 days after the
Additional Registration Date set forth in clause (ii) above, then the Liquidated
Damage Rate shall increase to 4%; provided, further, however, that the
Liquidated Damage Rate shall increase by 1% for each 30 day period after the
120/th/ day after the Additional Registration Date set forth in clause (ii)
above that the Additional Registration Statement is not declared effective by
the Commission. The full Additional Periodic Amount shall be paid by the Company
to the Initial Investor by wire transfer of immediately available funds within
three days after each Additional Computation Date.
As used in this Section 2(d), "Additional Computation Date" means the
date which is 30 days after the Additional Registration Date and, if the
Additional Registration Statement required to be filed by the Company pursuant
to this Section 2(d) has not theretofore been declared effective by the
Commission, each date which is 30 days after the previous Additional Computation
Date until such Additional Registration Statement is so declared effective.
(e) (i) If the Company proposes to register any of its warrants,
Common Stock or any other shares of common stock of the Company under the
Securities Act (other than a registration (A) on Form S-8 or S-4 or any
successor or similar forms, (B) relating to Common Stock or any other
shares of common stock of the Company issuable upon exercise of employee
share options or in connection with any employee benefit or similar plan of
the Company or (C) in connection with a direct or indirect acquisition by
the Company of another Person or any transaction with respect to which Rule
145 (or any successor provision) under the Securities Act applies), whether
or not for sale for its own account, it will each such time, give prompt
written notice at least 20 days prior to the anticipated filing date of the
registration statement relating to such registration to the Initial
Investor, which notice shall set forth such Initial Investor's rights under
this Section 3(e) and shall offer the Initial Investor the opportunity to
include in such registration statement such number of Registrable
Securities as the Initial Investor may request. Upon the written request
of an Initial Investor made within 10 days after the receipt of notice from
the Company (which request shall specify the number of Registrable
Securities intended to be disposed of by such Initial Investor), the
Company will use its best efforts to effect the registration under the
Securities Act of all Registrable Securities that the Company has been so
requested to register by the Initial Investor, to the extent requisite to
permit the disposition of the Registrable Securities so to be registered;
provided, however, that (A) if such registration involves a Public
Offering, the Initial Investor must sell their Registrable Securities to
the underwriters selected as provided in Section 3(b) hereof on the same
terms and conditions as apply to the Company and (B) if, at any time after
giving written notice of its intention to register any Registrable
Securities pursuant to this Section 3 and prior to the effective date of
the registration statement filed in connection with such registration, the
Company shall determine for any reason not to register such Registrable
Securities, the Company shall give written notice to the Initial Investor
and, thereupon, shall be relieved of its obligation to
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register any Registrable Securities in connection with such registration.
The Company's obligations under this Section 2(e) shall terminate on the
date that the registration statement to be filed in accordance with Section
2(a) is declared effective by the Commission.
(ii) If a registration pursuant to this Section 2(e) involves a
Public Offering and the managing underwriter thereof advises the
Company that, in its view, the number of shares of Common Stock,
Warrants or other shares of Common Stock that the Company and the
Initial Investor intend to include in such registration exceeds
the largest number of shares of Common Stock or Warrants
(including any other shares of Common Stock or Warrants of the
Company) that can be sold without having an adverse effect on
such Public Offering (the "Maximum Offering Size"), the Company
will include in such registration, only that number of shares of
Common Stock or Warrants, as applicable, such that the number of
shares of Registrable Securities registered does not exceed the
Maximum Offering Size, with the difference between the number of
shares in the Maximum Offering Size and the number of shares to
be issued by the Company to be allocated (after including all
shares to be issued and sold by the Company) among the Company
and the Initial Investor pro rata on the basis of the relative
number of shares of Common Stock or Warrants offered for sale
under such registration by each of the Company and the Initial
Investor.
If as a result of the proration provisions of this Section 2(e)(ii),
any Initial Investor is not entitled to include all such Registrable Securities
in such registration, such Initial Investor may elect to withdraw its request to
include any Registrable Securities in such registration. With respect to
registrations pursuant to this Section 2(e), the number of securities required
to satisfy any underwriters' over-allotment option shall be allocated pro rata
among the Company and the Initial Investor on the basis of the relative number
of shares of Common Stock or Warrants otherwise to be included by each of them
in the registration with respect to which such over-allotment option relates.
3. Obligations of the Company
In connection with the registration of the Registrable Securities, the
Company shall:
(a) Promptly (i) prepare and file with the Commission such amendments
(including post-effective amendments) to the Registration Statement and
supplements to the Prospectus as may be necessary to keep the Registration
Statement continuously effective and in compliance with the provisions of the
Securities Act applicable thereto so as to permit the Prospectus forming part
thereof to be current and useable by Investors for resales of the Registrable
Securities for a period of two years from the date on which the Registration
Statement is first declared effective by the Commission (the "Effective Time")
or such shorter period that will terminate when all the Registrable Securities
covered by the Registration Statement have been sold pursuant thereto in
accordance with the plan of distribution provided in the Prospectus, transferred
pursuant to Rule 144 under the Securities Act or otherwise transferred in a
manner that results in the delivery of new securities not subject to transfer
restrictions under the Securities Act (the "Registration Period") and (ii) take
all lawful action such that each of (A) the Registration Statement and any
amendment thereto does not, when it becomes effective, contain an untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary
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to make the statements therein, not misleading and (B) the Prospectus forming
part of the Registration Statement, and any amendment or supplement thereto,
does not at any time during the Registration Period include an untrue statement
of a material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading. Notwithstanding the
foregoing provisions of this Section 3(a), the Company may, during the
Registration Period, suspend the use of the Prospectus for a period not to
exceed 60 days (whether or not consecutive) in any 12-month period if the Board
of Directors of the Company determines in good faith that because of valid
business reasons, including pending mergers or other business combination
transactions, the planned acquisition or divestiture of assets, pending material
corporate developments and similar events, it is in the best interests of the
Company to suspend such use, and prior to or contemporaneously with suspending
such use the Company provides the Investors with written notice of such
suspension, which notice need not specify the nature of the event giving rise to
such suspension. At the end of any such suspension period, the Company shall
provide the Investors with written notice of the termination of such suspension;
(b) During the Registration Period, comply with the provisions of the
Securities Act with respect to the Registrable Securities of the Company covered
by the Registration Statement until such time as all of such Registrable
Securities have been disposed of in accordance with the intended methods of
disposition by the Investors as set forth in the Prospectus forming part of the
Registration Statement;
(c) (i) Prior to the filing with the Commission of any Registration
Statement (including any amendments thereto) and the distribution or delivery of
any Prospectus (including any supplements thereto), provide (A) draft copies
thereof to the Investors and reflect in such documents all such comments as the
Investors (and their counsel) reasonably may propose and (B) to the Investors a
copy of the accountant's consent letter to be included in the filing and (ii)
furnish to each Investor whose Registrable Securities are included in the
Registration Statement and its legal counsel identified to the Company, (A)
promptly after the same is prepared and publicly distributed, filed with the
Commission, or received by the Company, one copy of the Registration Statement,
each Prospectus, and each amendment or supplement thereto, and (B) such number
of copies of the Prospectus and all amendments and supplements thereto and such
other documents, as such Investor may reasonably request in order to facilitate
the disposition of the Registrable Securities owned by such Investor;
(d) (i) Register or qualify the Registrable Securities covered by the
Registration Statement under such securities or "blue sky" laws of such
jurisdictions as the Investors who hold a majority-in-interest of the
Registrable Securities being offered reasonably request, (ii) prepare and file
in such jurisdictions such amendments (including post-effective amendments) and
supplements to such registrations and qualifications as may be necessary to
maintain the effectiveness thereof at all times during the Registration Period,
(iii) take all such other lawful actions as may be necessary to maintain such
registrations and qualifications in effect at all times during the Registration
Period, and (iv) take all such other lawful actions reasonably necessary or
advisable to qualify the Registrable Securities for sale in such jurisdictions;
provided, however, that the Company shall not be required in connection
therewith or as a condition thereto to (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
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itself to general taxation in any such jurisdiction or (C) file a general
consent to service of process in any such jurisdiction;
(e) As promptly as practicable after becoming aware of such event,
notify each Investor of the occurrence of any event, as a result of which the
Prospectus included in the Registration Statement, as then in effect, includes
an untrue statement of a material fact or omits 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 an amendment to the Registration Statement and supplement to
the Prospectus to correct such untrue statement or omission, and deliver a
number of copies of such supplement and amendment to each Investor as such
Investor may reasonably request;
(f) As promptly as practicable after becoming aware of such event,
notify each Investor who holds Registrable Securities being sold (or, in the
event of an underwritten offering, the managing underwriters) of the issuance by
the Commission of any stop order or other suspension of the effectiveness of the
Registration Statement at the earliest possible time and take all lawful action
to effect the withdrawal, recession or removal of such stop order or other
suspension;
(g) Cause all the Registrable Securities covered by the Registration
Statement to be listed on the principal national securities exchange, and
included in an inter-dealer quotation system of a registered national securities
association, on or in which securities of the same class or series issued by the
Company are then listed or included;
(h) Maintain a transfer agent and registrar, which may be a single
entity, for the Registrable Securities not later than the effective date of the
Registration Statement;
(i) Cooperate with the Investors who hold Registrable Securities
being offered to facilitate the timely preparation and delivery of certificates
for the Registrable Securities to be offered pursuant to the registration
statement and enable such certificates for the Registrable Securities to be in
such denominations or amounts, as the case may be, as the Investors reasonably
may request and registered in such names as the Investor may request; and,
within three business days after a registration statement which includes
Registrable Securities is declared effective by the Commission, deliver and
cause legal counsel selected by the Company to deliver to the transfer agent for
the Registrable Securities (with copies to the Investors whose Registrable
Securities are included in such registration statement) an appropriate
instruction and, to the extent necessary, an opinion of such counsel;
(j) Take all such other lawful actions reasonably necessary to
expedite and facilitate the disposition by the Investors of their Registrable
Securities in accordance with the intended methods therefor provided in the
Prospectus which are customary under the circumstances;
(k) Make generally available to its security holders as soon as
practicable, but in any event not later than three (3) months after (i) the
effective date (as defined in Rule 158(c) under the Securities Act) of the
Registration Statement, and (ii) the effective date of each post-effective
amendment to the Registration Statement, as the case may be, an earnings
statement of the Company and its subsidiaries complying with Section 11(a) of
the Securities Act and the rules and regulations of the Commission thereunder
(including, at the option of the Company, Rule 158);
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(1) In the event of an underwritten offering, promptly include or
incorporate in a Prospectus supplement or post-effective amendment to the
Registration Statement such information as the managers reasonably agree should
be included therein and to which the Company does not reasonably object and make
all required filings of such Prospectus supplement or post-effective amendment
as soon as practicable after it is notified of the matters to be included or
incorporated in such Prospectus supplement or post-effective amendment;
(m) (i) Make reasonably available for inspection by Investors, any
underwriter participating in any disposition pursuant to the Registration
Statement, and any attorney, accountant or other agent retained by such
Investors or any such underwriter all relevant financial and other records,
pertinent corporate documents and properties of the Company and its
subsidiaries, and (ii) cause the Company's officers, directors and employees to
supply all information reasonably requested by such Investors or any such
underwriter, attorney, accountant or agent in connection with the Registration
Statement, in each case, as is customary for similar due diligence examinations;
provided, however, that all records, information and documents that are
designated in writing by the Company, in good faith, as confidential,
proprietary or containing any material nonpublic information shall be kept
confidential by such Investors and any such underwriter, attorney, accountant or
agent (pursuant to an appropriate confidentiality agreement in the case of any
such holder or agent), unless such disclosure is made pursuant to judicial
process in a court proceeding (after first giving the Company an opportunity
promptly to seek a protective order or otherwise limit the scope of the
information sought to be disclosed) or is required by law, or such records,
information or documents become available to the public generally or through a
third party not in violation of an accompanying obligation of confidentiality;
and provided, further, that, if the foregoing inspection and information
gathering would otherwise disrupt the Company's conduct of its business, such
inspection and information gathering shall, to the maximum extent possible, be
coordinated on behalf of the Investors and the other parties entitled thereto by
one firm of counsel designed by and on behalf of the majority in interest of
Investors and other parties;
(n) In connection with any underwritten offering, make such
representations and warranties to the Investors participating in such
underwritten offering and to the managers, in form, substance and scope as are
customarily made by the Company to underwriters in secondary underwritten
offerings;
(o) In connection with any underwritten offering, obtain opinions of
counsel to the Company (which counsel and opinions (in form, scope and
substance) shall be reasonably satisfactory to the managers) addressed to the
underwriters, covering such matters as are customarily covered in opinions
requested in secondary underwritten offerings (it being agreed that the matters
to be covered by such opinions shall include, without limitation, as of the date
of the opinion and as of the Effective Time of the Registration Statement or
most recent post-effective amendment thereto, as the case may be, the absence
from the Registration Statement and the Prospectus, including any documents
incorporated by reference therein, of an untrue statement of a material fact or
the omission of a material fact required to be stated therein or necessary to
make the statements therein (in the case of the Prospectus, in light of the
circumstances under which they were made) not misleading, subject to customary
limitations);
(p) In connection with any underwritten offering, obtain "cold
comfort" letters and updates thereof from the independent public accountants of
the Company (and, if necessary,
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from the independent public accountants of any subsidiary of the Company or of
any business acquired by the Company, in each case for which financial
statements and financial data are, or are required to be, included in the
Registration Statement), addressed to each underwriter participating in such
underwritten offering (if such underwriter has provided such letter,
representations or documentation, if any, required for such cold comfort letter
to be so addressed), in customary form and covering matters of the type
customarily covered in "cold comfort" letters in connection with secondary
underwritten offerings;
(q) In connection with any underwritten offering, deliver such
documents and certificates as may be reasonably required by the managers, if
any; and
(r) In the event that any broker-dealer registered under the Exchange
Act shall be an "Affiliate" (as defined in Rule 2729(b)(1) of the rules and
regulations of the National Association of Securities Dealers, Inc. (the "NASD
Rules") (or any successor provision thereto)) of the Company or has a "conflict
of interest" (as defined in Rule 2720(b)(7) of the NASD Rules (or any successor
provision thereto)) and such broker-dealer shall underwrite, participate as a
member of an underwriting syndicate or selling group or assist in the
distribution of any Registrable Securities covered by the Registration
Statement, whether as a holder of such Registrable Securities or as an
underwriter, a placement or sales agent or a broker or dealer in respect
thereof, or otherwise, the Company shall assist such broker-dealer in complying
with the requirements of the NASD Rules, including, without limitation, by (A)
engaging a "qualified independent underwriter" (as defined in Rule 2720(b)(15)
of the NASD Rules (or any successor provision thereto)) to participate in the
preparation of the Registration Statement relating to such Registrable
Securities, to exercise usual standards of due diligence in respect thereof and
to recommend the public offering price of such Registrable Securities, (B)
indemnifying such qualified independent underwriter to the extent of the
indemnification of underwriters provided in Section 5 hereof, and (C) providing
such information to such broker-dealer as may be required in order for such
broker-dealer to comply with the requirements of the NASD Rules.
4. Obligations of the Investors
In connection with the registration of the Registrable Securities, the
Investors shall have the following obligations:
(a) 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. As least seven
days prior to the first anticipated filing date of the Registration Statement,
the Company shall notify each Investor of the information the Company requires
from each such Investor (the "Requested Information") if such Investor elects to
have any of its Registrable Securities included in the Registration Statement.
If at least two business days prior to the anticipated filing date the Company
has not received the Requested Information from in Investor (a "Non-Responsive
Investor"), then the Company may file the Registration Statement
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without including Registrable Securities of such Non-Responsive Investor and
have no further obligations to the Non-Responsive Investor;
(b) Each Investor by its acceptance of the Registrable Securities
agrees to cooperate with the Company in connection with the preparation and
filing of the Registration Statement hereunder, unless such Investor has
notified the Company in writing of its election to exclude all of its
Registrable Securities from the Registration Statement; and
(c) Each Investor agrees that, upon receipt of any notice from the
Company of the occurrence of any event of the kind described in Section 3(e) or
3(f), it shall immediately discontinue its disposition of Registrable Securities
pursuant to the Registration Statement covering such Registrable Securities
until such Investor's receipt of the copies of the supplemented or amended
Prospectus contemplated by Section 3(e) and, if so directed by the Company, such
Investor shall deliver to the Company (at the expense of the Company) or destroy
(and deliver to the Company a certificate of destruction) all copies in such
Investor's possession, of the Prospectus covering such Registrable Securities
current at the time of receipt of such notice.
5. Expenses of Registration
All expenses, other than underwriting discounts and commissions,
incurred in connection with registrations, filings or qualifications pursuant to
Section 3, but including, without limitation, all registration, listing, and
qualifications fees, printing and engraving fees, accounting fees, and the fees
and disbursements of counsel for the Company, and the reasonable fees of one
firm of counsel to the holders of a majority in interest of the Registrable
Securities shall be borne by the Company.
6. Indemnification and Contribution
(a) The Company shall indemnify and hold harmless each Investor and
each underwriter, if any, which facilitates the disposition of Registrable
Securities, and each of their respective officers and directors and each person
who controls such Investor or underwriter within the meaning of Section 15 of
the Securities Act or Section 20 of the Exchange Act (each such person being
sometimes hereinafter referred to as an "Indemnified Person") from and against
any losses, claims, damages or liabilities, joint or several, to which such
Indemnified Person may become subject under the Securities Act or otherwise,
insofar as such losses, claims, damages or liabilities (or actions in respect
thereof) arise out of or are based upon an untrue statement or alleged untrue
statement of a material fact contained in any Registration Statement or an
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein, not misleading, or
arise out of or are based upon an untrue statement or alleged untrue statement
of a material fact contained in any Prospectus or an omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading; and the Company hereby agrees to
reimburse such Indemnified Person for all reasonable legal and other expenses
incurred by them in connection with investigating or defending any such action
or claim as and when such expenses are incurred; provided, however, that the
Company shall not be liable to any such Indemnified Person in any such case to
the extent that any such loss, claim, damage or liability arises out of or is
based upon (i) an untrue statement or alleged untrue statement made in, or an
omission or
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alleged omission from, such Registration Statement or Prospectus in reliance
upon and in conformity with written information furnished to the Company by such
Indemnified Person expressly for use therein or (ii) in the case of the
occurrence of an event of the type specified in Section 3(e), the use by the
Indemnified Person of an outdated or defective Prospectus after the Company has
provided to such Indemnified Person an updated Prospectus correcting the untrue
statement or alleged untrue statement or omission or alleged omission giving
rise to such loss, claim, damage or liability.
(b) Indemnification by the Investors and Underwriters. Each Investor
agrees, as a consequence of the inclusion of any of its Registrable Securities
in a Registration Statement, and each underwriter, if any, which facilitates the
disposition of Registrable Securities shall agree, as a consequence of
facilitating such disposition of Registrable Securities, severally and not
jointly, to (i) indemnify and hold harmless the Company, its directors
(including any person who, with his or her consent, is named in the Registration
Statement as a director nominee of the Company), its officers who sign any
Registration Statement and each person, if any, who controls the Company within
the meaning of either Section 15 of the Securities Act or Section 20 of the
Exchange Act, against any losses, claims, damages or liabilities to which the
Company or such other persons may become subject, under the Securities Act or
otherwise, insofar as such losses, claims, damages or liabilities (or actions in
respect thereof) arise out of or are based upon an untrue statement or alleged
untrue statement of a material fact contained in such Registration Statement or
Prospectus or arise out of or are based upon the omission or alleged omission to
state therein 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, in the case of the Prospectus), not misleading, in each case to the
extent, but only to the extent, that such untrue statement or alleged untrue
statement or omission or alleged omission was made in reliance upon and in
conformity with written information furnished to the Company by such holder or
underwriter expressly for use therein; provided, however, that no Investor or
underwriter shall be liable under this Section 6(b) for any amount in excess of
the net proceeds paid to such Investor or underwriter in respect of shares sold
by it, and (ii) reimburse the Company for any legal or other expenses incurred
by the Company in connection with investigating or defending any such action or
claim as such expenses are incurred.
(c) Notice of Claims, etc. Promptly after receipt by a party seeking
indemnification pursuant to this Section 6 (an "Indemnified Party") of written
notice of any investigation, claim, proceeding or other action in respect of
which indemnification is being sought (each, a "Claim"), the Indemnified Party
promptly shall notify the party against whom indemnification pursuant to this
Section 6 is being sought (the "Indemnifying Party") of the commencement
thereof; but the omission to so notify the Indemnifying Party shall not relieve
it from any liability that it otherwise may have to the Indemnified Party,
except to the extent that the Indemnifying Party is materially prejudiced and
forfeits substantive rights and defenses by reason of such failure. In
connection with any Claim as to which both the Indemnifying Party and the
Indemnified Party are parties, the Indemnifying Party shall be entitled to
assume the defense thereof. Notwithstanding the assumption of the defense of
any Claim by the Indemnifying Party, the Indemnified Party shall have the right
to employ separate legal counsel and to participate in the defense of such
Claim, and the Indemnifying Party shall bear the reasonable fees, out-of-pocket
costs and expenses of such separate legal counsel to the Indemnified Party if
(and only if): (x) the Indemnifying Party shall have agreed to pay such fees,
costs and expenses, (y) the Indemnified Party and the Indemnifying Party shall
reasonably have concluded that representation of the Indemnified Party by the
Indemnifying Party by the same legal counsel would not be appropriate due to
actual or,
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as reasonably determined by legal counsel to the Indemnified Party, potentially
differing interests between such parties in the conduct of the defense of such
Claim, or if there may be legal defenses available to the Indemnified Party that
are in addition to or disparate from those available to the Indemnifying Party,
or (z) the Indemnifying Party shall have failed to employ legal counsel
reasonably satisfactory to the Indemnified Party within a reasonable period of
time after notice of the commencement of such Claim. If the Indemnified Party
employs separate legal counsel in circumstances other than as described in
clauses (x), (y) or (z) above, the fees, costs and expenses of such legal
counsel shall be borne exclusively by the Indemnified Party. Except as provided
above, the Indemnifying Party shall not, in connection with any Claim in the
same jurisdiction, be liable for the fees and expenses of more than one firm of
counsel for the Indemnified Party (together with appropriate local counsel). The
Indemnified Party shall not, without the prior written consent of the
Indemnifying Party (which consent shall not unreasonably be withheld), settle or
compromise any Claim or consent to the entry of any judgment that does not
include an unconditional release of the Indemnifying Party from all liabilities
with respect to such Claim or judgment.
(d) Contribution. If the indemnification provided for in this Section
6 is unavailable to or insufficient to hold harmless an Indemnified Person under
subsection (a) or (b) above in respect of any losses, claims, damages or
liabilities (or actions in respect thereof) referred to therein, then each
Indemnifying Party shall contribute to the amount paid or payable by such
Indemnified Party as a result of such losses, claims, damages or liabilities (or
actions in respect thereof) in such proportion as is appropriate to reflect the
relative fault of the Indemnifying Party and the Indemnified Party in connection
with the statements or omissions which resulted in such losses, claims, damages
or liabilities (or actions in respect thereof), as well as any other relevant
equitable considerations. The relative fault of such Indemnifying Party and
Indemnified Party shall be determined by reference to, among other things,
whether the untrue or alleged untrue statement of a material fact or omission or
alleged omission to state a material fact relates to information supplied by
such Indemnifying Party or by such Indemnified Party, and the parties' relative
intent, knowledge, access to information and opportunity to correct or prevent
such statement or omission. The parties hereto agree that it would not be just
and equitable if contribution pursuant to this Section 6(d) were determined by
pro rata allocation (even if the Investors or any underwriters were treated as
one entity for such purpose) or by any other method of allocation which does not
take account of the equitable considerations referred to in this Section 6(d).
The amount paid or payable by an Indemnified Party as a result of the losses,
claims, damages or liabilities (or actions in respect thereof) referred to above
shall be deemed to include any legal or other fees or expenses reasonably
incurred by such Indemnified Party in connection with investigating or defending
any such action or claim. No person guilty of fraudulent misrepresentation
(within the meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation. The obligations of the Investors and any underwriters in
this Section 6(d) to contribute shall be several in proportion to the percentage
of Registrable Securities registered or underwritten, as the case may be, by
them and not joint.
(e) Notwithstanding any other provision of this Section 6, in no event
shall any (i) Investor be required to undertake liability to any person under
this Section 6 for any amounts in excess of the dollar amount of the proceeds to
be received by such Investor from the sale of such Investor's Registrable
Securities (after deducting any fees, discounts and commissions applicable
thereto) pursuant to any Registration Statement under which such Registrable
Securities are to be registered under the Securities Act and (ii) underwriter be
required to undertake liability to any
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Person hereunder for any amounts in excess of the aggregate discount, commission
or other compensation payable to such underwriter with respect to the
Registrable Securities underwritten by it and distributed pursuant to the
Registration Statement.
(f) The obligations of the Company under this Section 6 shall be in
addition to any liability which the Company may otherwise have to any
Indemnified Person and the obligations of any Indemnified Person under this
Section 6 shall be in addition to any liability which such Indemnified Person
may otherwise have to the Company. The remedies provided in this Section 6 are
not exclusive and shall not limit any rights or remedies which may otherwise be
available to an indemnified party at law or in equity.
7. Rule 144
With a view to making available to the Investors the benefits of Rule
144 under the Securities Act or any other similar rule or regulation of the
Commission that may at any time permit the Investors to sell securities of the
Company to the public without registration ("Rule 144"), the Company agrees to
use its best efforts to:
(a) comply with the provisions of paragraph (c) (1) of Rule 144; and
(b) file with the Commission in a timely manner all reports and other
documents required to be filed by the Company pursuant to Section 13 or 15(d)
under the Exchange Act; and, if at any time it is not required to file such
reports but in the past had been required to or did file such reports, it will,
upon the request of any Investor, make available other information as required
by, and so long as necessary to permit sales of, its Registrable Securities
pursuant to Rule 144.
8. Assignment
The rights to have the Company register Registrable Securities
pursuant to this Agreement shall be automatically assigned by the Investors to
any permitted transferee of all or any portion of such securities (or all or any
portion of any Preferred Shares or Warrant of the Company which is convertible
into such securities) of Registrable Securities only if: (a) 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, (b) the Company is, within a reasonable time after such
transfer or assignment, furnished with written notice of (i) the name and
address of such transferee or assignee and (ii) the securities with respect to
which such registration rights are being transferred or assigned, (c)
immediately following such transfer or assignment, the securities so transferred
or assigned to the transferee or assignee constitute Restricted Securities, and
(d) at or before the time the Company received the written notice contemplated
by clause (b) of this sentence the transferee or assignee agrees in writing with
the Company to be bound by all of the provisions contained herein.
9. Amendment and Waiver
Any provision of this Agreement may be amended and the observance
thereof may be waived (either generally or in a particular instance and either
retroactively or prospectively), only with the written consent of the Company
and Investors who hold a majority-in-interest of the
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Registrable Securities. Any amendment or waiver effected in accordance with this
Section 9 shall be binding upon each Investor and the Company.
10. Miscellaneous
(a) A person or entity shall be 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) If, after the date hereof and prior to the Commission declaring
the Registration Statement to be filed pursuant to Section 2(a) effective under
the Securities Act, the Company grants to any Person any registration rights
with respect to any Company securities which are more favorable to such other
Person than those provided in this Agreement, then the Company forthwith shall
grant (by means of an amendment to this Agreement or otherwise) identical
registration rights to all Investors hereunder.
(c) Except as may be otherwise provided herein, any notice or other
communication or delivery required or permitted hereunder shall be in writing
and shall be delivered personally or sent by certified mail, postage prepaid, or
by a nationally recognized overnight courier service, and shall be deemed given
when so delivered personally or by overnight courier service, or, if mailed,
three days after the date of deposit in the United States mails, as follows:
(i) if to the Company, to:
Thermatrix Inc.
308 North Peters Road, Suite 100
Knoxville, TN 37922
Attention: Edward E. Greene
(423) 539-9603
(423) 539-9643 (Fax)
with a copy to:
Wilson Sonsini Goodrich & Rosati, PC
650 Page Mill Road
Palo Alto, CA 94304-1050
Attention: Michael J. Danaher, Esq.
(650) 493-9300
(650) 493-6811 (Fax)
(ii) if to the Initial Investor, to:
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The Shaar Fund Ltd.,
c/o Levinson Capital Management
2 World Trade Center, Suite 1820
New York, NY 10048
Attention: Samuel Levinson
(212) 432-7711
(212) 432-7771 (Fax)
with a copy to:
Cadwalader, Wickersham & Taft
100 Maiden Lane
New York, NY 10038
Attention: Dennis J. Block, Esq.
(212) 504-5555
(212) 504-5557 (Fax)
(iii) if to any other Investor, at such address as such Investor shall have
provided in writing to the Company.
The Company, the Initial Investor or any Investor may change the foregoing
address by notice given pursuant to this Section 10(c).
(d) Failure of any party to exercise any right or remedy under this
Agreement or otherwise, or delay by a party in exercising such right or remedy,
shall not operate as a waiver thereof.
(e) This Agreement shall be governed by and interpreted in accordance
with the laws of the State of New York. Each of the parties consents to the
jurisdiction of the federal courts whose districts encompass any part of the
City of New York or the state courts of the State of New York sitting in the
City of New York in connection with any dispute arising under this Agreement and
hereby waives, to the maximum extent permitted by law, any objection including
any objection based on forum non conveniens, to the bringing of any such
proceeding in such jurisdictions.
(f) The remedies provided in this Agreement are cumulative and not
exclusive of any remedies provided by law. If any term, provision, covenant or
restriction of this Agreement is held by a court of competent jurisdiction to be
invalid, illegal, void or unenforceable, the remainder of the terms, provisions,
covenants and restrictions set forth herein shall remain in full force and
effect and shall in no way be affected, impaired or invalidated, and the parties
hereto shall use their best efforts to find and employ an alternative means to
achieve the same or substantially the same result as that contemplated by such
term, provision, covenant or restriction. It is hereby stipulated and declared
to be the intention of the parties that they would have executed the remaining
terms, provisions, covenants and restrictions without including any of such that
may be hereafter declared invalid, illegal, void or unenforceable.
(g) The Company shall not enter into any agreement with respect to
its securities that is inconsistent with the rights granted to the holders of
Registrable Securities in this Agreement or otherwise conflicts with the
provisions hereof. The Company is not currently a party to any
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<PAGE>
agreement granting any registration rights with respect to any of its securities
to any person which conflicts with the Company's obligations hereunder or gives
any other party the right to include any securities in any Registration
Statement filed pursuant hereto, except for such rights and conflicts as have
been irrevocably waived. Without limiting the generality of the foregoing,
without the written consent of the holders of a majority in interest of the
Registrable Securities, the Company shall not grant to any person the right to
request it to register any of its securities under the Securities Act unless the
rights so granted are subject in all respect to the prior rights of the holders
of Registrable Securities set forth herein, and are not otherwise in conflict or
inconsistent with the provisions of this Agreement. The restrictions on the
Company's rights to grant registration rights under this paragraph shall
terminate on the date the Registration Statement to be filed pursuant to Section
2(a) is declared effective by the Commission.
(h) This Agreement, the Securities Purchase Agreement, the Escrow
Instructions, dated as of a date even herewith (the "Escrow Instructions"),
between the Company, the Initial Investor and Cadwalader, Wickersham & Taft, the
Preferred Shares and the Warrants constitute the entire agreement among the
parties hereto with respect to the subject matter hereof. There are no
restrictions, promises, warranties or undertakings, other than those set forth
or referred to herein. This Agreement, the Securities Purchase Agreement, the
Escrow Instructions, the Certificate of Designation and the Warrants supersede
all prior agreements and undertakings among the parties hereto with respect to
the subject matter hereof.
(i) Subject to the requirements of Section 8 hereof, this Agreement
shall inure to the benefit of and be binding upon the successors and assigns of
each of the parties hereto.
(j) All pronouns and any variations thereof refer to the masculine,
feminine or neuter, singular or plural, as the context may require.
(k) The headings in this Agreement are for convenience of reference
only and shall not limit or otherwise affect the meaning thereof.
(1) The Company acknowledges that any failure by the Company to
perform its obligations under Section 3, or any delay in such performance could
result in direct damages to the Investors and the Company agrees that, in
addition to any other liability the Company may have by reason of any such
failure or delay, the Company shall be liable for all direct damages caused by
such failure or delay.
(m) This Agreement may be executed in two or more counterparts, each
of which shall be deemed an original but all of which shall constitute one and
the same agreement. A facsimile transmission of this signed Agreement shall be
legal and binding on all parties hereto.
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<PAGE>
In Witness Whereof, the parties have caused this Agreement to be duly
executed and delivered as of the date first above written.
Thermatrix Inc.
By:___________________________________________
Name:
Title:
The Shaar Fund Ltd.
By:___________________________________________
Name: Samuel Levinson
Title: Managing Director
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EXHIBIT 4.2(b)
REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement, dated as of June , 1999 (this
"Agreement"), between Thermatrix Inc., a Delaware corporation, with principal
executive offices located at 308 North Peters Road, Suite 100, Knoxville,
Tennessee (the "Company"), and Technology Funding Venture Partners III, L.P.
(the "Initial Investor").
Whereas, upon the terms and subject to the conditions of the
Securities Purchase Agreement dated as of June , 1999, between the Initial
Investor and the Company (the "Securities Purchase Agreement"), the Company has
agreed to issue and sell to the Initial Investor (i) 1,000 shares of Series E 8%
Convertible Preferred Stock, par value $.001 per share (the "Preferred Shares")
which, upon the terms of and subject to the conditions of the Company's
Certificate of Designation of Series E 8% Convertible Preferred Stock (the
"Certificate of Designation"), are convertible into shares of the Company's
common stock, par value $.001 per share (the "Common Stock") and (ii) Common
Stock Purchase Warrants (the "Warrants") to purchase shares of Common Stock; and
Whereas, to induce the Initial Investor to execute and deliver the
Securities Purchase Agreement, the Company has agreed to provide with respect to
the Common Stock issued or issuable in lieu of cash dividend payments on the
Preferred Shares, upon conversion of the Preferred Shares and exercise of the
Warrants certain registration rights under the Securities Act;
Now, Therefore, in consideration of the premises and the mutual
covenants contained herein, the parties hereto, intending to be legally bound,
hereby agree as follows:
1. Definitions
(a) As used in this Agreement, the following terms shall have the
meanings:
(i) "Affiliate," of any specified Person means any other Person who
directly, or indirectly through one or more intermediaries, is in control
of, is controlled by, or is under common control with, such specified
Person. For purposes of this definition, control of a Person means the
power, directly or indirectly, to direct or cause the direction of the
management and policies of such Person whether by contract, securities,
ownership or otherwise; and the terms "controlling" and "controlled" have
the respective meanings correlative to the foregoing.
(ii) "Closing Date" means the date and time of the issuance and sale of
the Preferred Shares.
(iii) "Commission" means the Securities and Exchange Commission.
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<PAGE>
(iv) "Current Market Price" on any date of determination means the
closing bid price of a share of the Common Stock on such day as reported on
the Nasdaq National Market ("Nasdaq"), or, if such security is not listed
or admitted to trading on the Nasdaq, on the principal national security
exchange or quotation system on which such security is quoted or listed or
admitted to trading, or, if not quoted or listed or admitted to trading on
any national securities exchange or quotation system, the closing bid price
of such security on the over-the-counter market on the day in question as
reported by the National Quotation Bureau Incorporated, or a similar
generally accepted reporting service, or if not so available, in such
manner as furnished by any Nasdaq member firm of the National Association
of Securities Dealers, Inc. selected from time to time by the Board of
Directors of the Company for that purpose, or a price determined in good
faith by the Board of Directors of the Company as being equal to the fair
market value thereof, as the case may be.
(v) "Exchange Act" means the Securities Exchange Act of 1934, as
amended, and the rules and regulations of the Commission thereunder, or any
similar successor statute.
(vi) "Investors" means the Initial Investor and any transferee or
assignee of Registrable Securities who agrees to become bound by all of the
terms and provisions of this Agreement in accordance with Section 8 hereof.
(vii) "Person" means any individual, partnership, corporation, limited
liability company, joint stock company, association, trust, unincorporated
organization, or a government or agency or political subdivision thereof.
(viii) "Prospectus" means the prospectus (including, without limitation,
any preliminary prospectus and any final prospectus filed pursuant to Rule
424(b) under the Securities Act, including any prospectus that discloses
information previously omitted from a prospectus filed as part of an
effective registration statement in reliance on Rule 430A under the
Securities Act) included in the Registration Statement, as amended or
supplemented by any prospectus supplement with respect to the terms of the
offering of any portion of the Registrable Securities covered by the
Registration Statement and by all other amendments and supplements to such
prospectus, including all material incorporated by reference in such
prospectus and all documents filed after the date of such prospectus by the
Company under the Exchange Act and incorporated by reference therein.
(ix) "Public Offering" means an offer registered with the Commission
and the appropriate state securities commissions by the Company of its
Common Stock and made pursuant to the Securities Act.
(x) "Registrable Securities" means the Common Stock issued or issuable
(i) in lieu of cash dividend payments on the Preferred Shares, (ii) upon
conversion of the Preferred Shares or (iii) upon exercise of the Warrants;
provided, however, a share of Common Stock shall cease to be a Registrable
Security for purposes of this Agreement when it no longer is a Restricted
Security.
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<PAGE>
(xi) "Registration Statement" means a registration statement of the
Company filed on an appropriate form under the Securities Act providing for
the registration of, and the sale on a continuous or delayed basis by the
holders of, all of the Registrable Securities pursuant to Rule 415 under
the Securities Act, including the Prospectus contained therein and forming
a part thereof, any amendments to such registration statement and
supplements to such Prospectus, and all exhibits and other material
incorporated by reference in such registration statement and Prospectus.
(xii) "Restricted Security" means any share of Common Stock issued or
issuable in lieu of cash dividend payments on the Preferred Shares, upon
conversion of the Preferred Shares or exercise of the Warrants except any
such share that (i) has been registered pursuant to an effective
registration statement under the Securities Act and sold in a manner
contemplated by the prospectus included in such registration statement,
(ii) has been transferred in compliance with the resale provisions of Rule
144 under the Securities Act (or any successor provision thereto) or is
transferable pursuant to paragraph (k) of Rule 144 under the Securities Act
(or any successor provision thereto), or (iii) otherwise has been
transferred and a new share of Common Stock not subject to transfer
restrictions under the Securities Act has been delivered by or on behalf of
the Company.
(xiii) "Securities Act" means the Securities Act of 1933, as amended, and
the rules and regulations of the Commission thereunder, or any similar
successor statute.
(b) All capitalized terms used and not defined herein have the
respective meaning assigned to them in the Securities Purchase Agreement.
2. Registration
(a) Filing and Effectiveness of Registration Statement. The Company
shall prepare and file with the Commission not later than 60 days after the
Closing Date, a Registration Statement relating to the offer and sale of the
Registrable Securities and shall use its best efforts to cause the Commission to
declare such Registration Statement effective under the Securities Act as
promptly as practicable but not later than 150 days after the Closing Date,
assuming for purposes hereof a Conversion Price under the Certificate of
Designation of $1.50 per share. The Company shall not include any other
securities in the Registration Statement relating to the offer and sale of the
Registrable Securities. The Company shall notify the Initial Investor by written
notice that such Registration Statement has been declared effective by the
Commission within 24 hours of such declaration by the Commission.
(b) Registration Default. If the Registration Statement covering
the Registrable Securities or the Additional Registrable Securities (as defined
in Section 2(d) hereof) required to be filed by the Company pursuant to Section
2(a) or 2(d) hereof, as the case may be, is not (i) filed with the Commission
within 60 days after the Closing Date or (ii) declared effective by the
Commission within 150 days after the Closing Date (either of which, without
duplication, an "Initial Date"), then the Company shall make the payments to the
Initial Investor as provided in the next sentence as liquidated damages and not
as a penalty. The amount to be paid by the Company to the Initial Investor shall
be determined as of each Computation Date (as defined below), and such amount
shall
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be equal to 2% (the "Liquidated Damage Rate") of the Purchase Price (as defined
in the Securities Purchase Agreement) from the Initial Date to the first
Computation Date and for each Computation Date thereafter, calculated on a pro
rata basis to the date on which the Registration Statement is filed with (in the
event of an Initial Date pursuant to clause (i) above) or declared effective by
(in the event of an Initial Date pursuant to clause (ii) above) the Commission
(the "Periodic Amount") provided, however, that in no event shall the liquidated
damages be less than $25,000; provided, further, however, that if the
Registration Statement is not declared effective by the Commission within 210
days after the Initial Date set forth in clause (ii) above, then the Liquidated
Damage Rate shall increase to 4%; provided, further, however, that the
Liquidated Damage Rate shall increase by 1% for each 30 day period after the
210th day after the Initial Date set forth in clause (ii) above that the
Registration Statement is not declared effective by the Commission. The full
Periodic Amount shall be paid by the Company to the Initial Investor by wire
transfer of immediately available funds within three days after each Computation
Date.
As used in this Section 2(b), "Computation Date" means the date which
is 30 days after the Initial Date and, if the Registration Statement required to
be filed by the Company pursuant to Section 2(a) has not theretofore been
declared effective by the Commission, each date which is 30 days after the
previous Computation Date until such Registration Statement is so declared
effective.
Notwithstanding the above, if the Registration Statement covering the
Registrable Securities or the Additional Registrable Securities required to be
filed by the Company pursuant to Section 2(a) or 2(d) hereof, as the case may
be, is not filed with the Commission by the 30th day after the Closing Date, the
Company shall be in default of this Registration Rights Agreement.
(c) Eligibility for Use of Form S-3. The Company agrees that at such
time as it meets all the requirements for the use of Securities Act Registration
Statement on Form S-3 it shall file all reports and information required to be
filed by it with the Commission in a timely manner and take all such other
action so as to maintain such eligibility for the use of such form.
(d) In the event the Current Market Price declines to $1.75 per share,
the Company shall, to the extent required by the Securities Act (because the
additional shares were not covered by the Registration Statement filed pursuant
to Section 2(a)), as reasonably determined by the Initial Investor, file an
additional Registration Statement with the Commission for such additional number
of Registrable Securities as would be issuable upon conversion of the Preferred
Shares and exercise of the Warrants (the "Additional Registrable Securities") in
addition to those previously registered, assuming a Conversion Price of $0.75
per share. The Company shall, to the extent required by the Securities Act, as
reasonably determined by the Initial Investor, prepare and file with the
Commission not later than the 30th day thereafter, a Registration Statement
relating to the offer and sale of such Additional Registrable Securities and
shall use its best efforts to cause the Commission to declare such Registration
Statement effective under the Securities Act as promptly as practicable but not
later than 60 days thereafter. The Company shall not include any other
securities in the Registration Statement relating to the offer and sale of such
Additional Registrable Securities.
If the Additional Registration Statement is not (i) filed with the
Commission within 30 days after the Decline Date or (ii) declared effective by
the Commission within 90 days after the Decline Date (either of which, without
duplication, an "Additional Registration Date"), then the Company shall make the
payments to the Initial Investor at the Liquidated Damage Rate from the
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Additional Registration Date to the first Additional Computation Date and for
each Additional Computation Date thereafter, calculated on a pro rata basis to
the date on which the Additional Registration Statement is filed with (in the
event of an Additional Registration Date pursuant to clause (i) above) or
declared effective by (in the event of an Additional Registration Date pursuant
to clause (ii) above) the Commission (the "Additional Periodic Amount")
provided, however, that in no event shall the liquidated damages be less than
$25,000; provided, further, however, that if the Additional Registration
Statement is not declared effective by the Commission within 120 days after the
Additional Registration Date set forth in clause (ii) above, then the Liquidated
Damage Rate shall increase to 4%; provided, further, however, that the
Liquidated Damage Rate shall increase by 1% for each 30 day period after the
120th day after the Additional Registration Date set forth in clause (ii) above
that the Additional Registration Statement is not declared effective by the
Commission. The full Additional Periodic Amount shall be paid by the Company to
the Initial Investor by wire transfer of immediately available funds within
three days after each Additional Computation Date.
As used in this Section 2(d), "Additional Computation Date" means the
date which is 30 days after the Additional Registration Date and, if the
Additional Registration Statement required to be filed by the Company pursuant
to this Section 2(d) has not theretofore been declared effective by the
Commission, each date which is 30 days after the previous Additional Computation
Date until such Additional Registration Statement is so declared effective.
(e) (i) If the Company proposes to register any of its warrants,
Common Stock or any other shares of common stock of the Company under the
Securities Act (other than a registration (A) on Form S-8 or S-4 or any
successor or similar forms, (B) relating to Common Stock or any other
shares of common stock of the Company issuable upon exercise of employee
share options or in connection with any employee benefit or similar plan of
the Company or (C) in connection with a direct or indirect acquisition by
the Company of another Person or any transaction with respect to which Rule
145 (or any successor provision) under the Securities Act applies), whether
or not for sale for its own account, it will each such time, give prompt
written notice at least 20 days prior to the anticipated filing date of the
registration statement relating to such registration to the Initial
Investor, which notice shall set forth such Initial Investor's rights under
this Section 3(e) and shall offer the Initial Investor the opportunity to
include in such registration statement such number of Registrable
Securities as the Initial Investor may request. Upon the written request
of an Initial Investor made within 10 days after the receipt of notice from
the Company (which request shall specify the number of Registrable
Securities intended to be disposed of by such Initial Investor), the
Company will use its best efforts to effect the registration under the
Securities Act of all Registrable Securities that the Company has been so
requested to register by the Initial Investor, to the extent requisite to
permit the disposition of the Registrable Securities so to be registered;
provided, however, that (A) if such registration involves a Public
Offering, the Initial Investor must sell their Registrable Securities to
the underwriters selected as provided in Section 3(b) hereof on the same
terms and conditions as apply to the Company and (B) if, at any time after
giving written notice of its intention to register any Registrable
Securities pursuant to this Section 3 and prior to the effective date of
the registration statement filed in connection with such registration, the
Company shall determine for any reason not to register such Registrable
Securities, the Company shall give written notice to the Initial Investor
and, thereupon, shall be relieved of its obligation to
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register any Registrable Securities in connection with such registration.
The Company's obligations under this Section 2(e) shall terminate on the
date that the registration statement to be filed in accordance with Section
2(a) is declared effective by the Commission.
(ii) If a registration pursuant to this Section 2(e) involves a Public
Offering and the managing underwriter thereof advises the Company that, in
its view, the number of shares of Common Stock, Warrants or other shares of
Common Stock that the Company and the Initial Investor intend to include in
such registration exceeds the largest number of shares of Common Stock or
Warrants (including any other shares of Common Stock or Warrants of the
Company) that can be sold without having an adverse effect on such Public
Offering (the "Maximum Offering Size"), the Company will include in such
registration, only that number of shares of Common Stock or Warrants, as
applicable, such that the number of shares of Registrable Securities
registered does not exceed the Maximum Offering Size, with the difference
between the number of shares in the Maximum Offering Size and the number of
shares to be issued by the Company to be allocated (after including all
shares to be issued and sold by the Company) among the Company and the
Initial Investor pro rata on the basis of the relative number of shares of
Common Stock or Warrants offered for sale under such registration by each
of the Company and the Initial Investor.
If as a result of the proration provisions of this Section 2(e)(ii),
any Initial Investor is not entitled to include all such Registrable Securities
in such registration, such Initial Investor may elect to withdraw its request to
include any Registrable Securities in such registration. With respect to
registrations pursuant to this Section 2(e), the number of securities required
to satisfy any underwriters' over-allotment option shall be allocated pro rata
among the Company and the Initial Investor on the basis of the relative number
of shares of Common Stock or Warrants otherwise to be included by each of them
in the registration with respect to which such over-allotment option relates.
3. Obligations of the Company
In connection with the registration of the Registrable Securities, the
Company shall:
(a) Promptly (i) prepare and file with the Commission such amendments
(including post-effective amendments) to the Registration Statement and
supplements to the Prospectus as may be necessary to keep the Registration
Statement continuously effective and in compliance with the provisions of the
Securities Act applicable thereto so as to permit the Prospectus forming part
thereof to be current and useable by Investors for resales of the Registrable
Securities for a period of two years from the date on which the Registration
Statement is first declared effective by the Commission (the "Effective Time")
or such shorter period that will terminate when all the Registrable Securities
covered by the Registration Statement have been sold pursuant thereto in
accordance with the plan of distribution provided in the Prospectus, transferred
pursuant to Rule 144 under the Securities Act or otherwise transferred in a
manner that results in the delivery of new securities not subject to transfer
restrictions under the Securities Act (the "Registration Period") and (ii) take
all lawful action such that each of (A) the Registration Statement and any
amendment thereto does not, when it becomes effective, contain an untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein, not misleading and
(B) the Prospectus forming part of the Registration Statement, and any amendment
or supplement thereto, does not at any time during the Registration Period
include an untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary
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<PAGE>
to make the statements therein, not misleading and (B) the Prospectus forming
part of the Registration Statement, and any amendment or supplement thereto,
does not at any time during the Registration Period include an untrue statement
of a material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading. Notwithstanding the
foregoing provisions of this Section 3(a), the Company may, during the
Registration Period, suspend the use of the Prospectus for a period not to
exceed 60 days (whether or not consecutive) in any 12-month period if the Board
of Directors of the Company determines in good faith that because of valid
business reasons, including pending mergers or other business combination
transactions, the planned acquisition or divestiture of assets, pending material
corporate developments and similar events, it is in the best interests of the
Company to suspend such use, and prior to or contemporaneously with suspending
such use the Company provides the Investors with written notice of such
suspension, which notice need not specify the nature of the event giving rise to
such suspension. At the end of any such suspension period, the Company shall
provide the Investors with written notice of the termination of such suspension;
(b) During the Registration Period, comply with the provisions of the
Securities Act with respect to the Registrable Securities of the Company covered
by the Registration Statement until such time as all of such Registrable
Securities have been disposed of in accordance with the intended methods of
disposition by the Investors as set forth in the Prospectus forming part of the
Registration Statement;
(c) (i) Prior to the filing with the Commission of any Registration
Statement (including any amendments thereto) and the distribution or delivery of
any Prospectus (including any supplements thereto), provide (A) draft copies
thereof to the Investors and reflect in such documents all such comments as the
Investors (and their counsel) reasonably may propose and (B) to the Investors a
copy of the accountant's consent letter to be included in the filing and (ii)
furnish to each Investor whose Registrable Securities are included in the
Registration Statement and its legal counsel identified to the Company, (A)
promptly after the same is prepared and publicly distributed, filed with the
Commission, or received by the Company, one copy of the Registration Statement,
each Prospectus, and each amendment or supplement thereto, and (B) such number
of copies of the Prospectus and all amendments and supplements thereto and such
other documents, as such Investor may reasonably request in order to facilitate
the disposition of the Registrable Securities owned by such Investor;
(d) (i) Register or qualify the Registrable Securities covered by the
Registration Statement under such securities or "blue sky" laws of such
jurisdictions as the Investors who hold a majority-in-interest of the
Registrable Securities being offered reasonably request, (ii) prepare and file
in such jurisdictions such amendments (including post-effective amendments) and
supplements to such registrations and qualifications as may be necessary to
maintain the effectiveness thereof at all times during the Registration Period,
(iii) take all such other lawful actions as may be necessary to maintain such
registrations and qualifications in effect at all times during the Registration
Period, and (iv) take all such other lawful actions reasonably necessary or
advisable to qualify the Registrable Securities for sale in such jurisdictions;
provided, however, that the Company shall not be required in connection
therewith or as a condition thereto to (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
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itself to general taxation in any such jurisdiction or (C) file a general
consent to service of process in any such jurisdiction;
(e) As promptly as practicable after becoming aware of such event,
notify each Investor of the occurrence of any event, as a result of which the
Prospectus included in the Registration Statement, as then in effect, includes
an untrue statement of a material fact or omits 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 an amendment to the Registration Statement and supplement to
the Prospectus to correct such untrue statement or omission, and deliver a
number of copies of such supplement and amendment to each Investor as such
Investor may reasonably request;
(f) As promptly as practicable after becoming aware of such event,
notify each Investor who holds Registrable Securities being sold (or, in the
event of an underwritten offering, the managing underwriters) of the issuance by
the Commission of any stop order or other suspension of the effectiveness of the
Registration Statement at the earliest possible time and take all lawful action
to effect the withdrawal, recession or removal of such stop order or other
suspension;
(g) Cause all the Registrable Securities covered by the Registration
Statement to be listed on the principal national securities exchange, and
included in an inter-dealer quotation system of a registered national securities
association, on or in which securities of the same class or series issued by the
Company are then listed or included;
(h) Maintain a transfer agent and registrar, which may be a single
entity, for the Registrable Securities not later than the effective date of the
Registration Statement;
(i) Cooperate with the Investors who hold Registrable Securities being
offered to facilitate the timely preparation and delivery of certificates for
the Registrable Securities to be offered pursuant to the registration statement
and enable such certificates for the Registrable Securities to be in such
denominations or amounts, as the case may be, as the Investors reasonably may
request and registered in such names as the Investor may request; and, within
three business days after a registration statement which includes Registrable
Securities is declared effective by the Commission, deliver and cause legal
counsel selected by the Company to deliver to the transfer agent for the
Registrable Securities (with copies to the Investors whose Registrable
Securities are included in such registration statement) an appropriate
instruction and, to the extent necessary, an opinion of such counsel;
(j) Take all such other lawful actions reasonably necessary to
expedite and facilitate the disposition by the Investors of their Registrable
Securities in accordance with the intended methods therefor provided in the
Prospectus which are customary under the circumstances;
(k) Make generally available to its security holders as soon as
practicable, but in any event not later than three (3) months after (i) the
effective date (as defined in Rule 158(c) under the Securities Act) of the
Registration Statement, and (ii) the effective date of each post-effective
amendment to the Registration Statement, as the case may be, an earnings
statement of the Company and its subsidiaries complying with Section 11(a) of
the Securities Act and the rules and regulations of the Commission thereunder
(including, at the option of the Company, Rule 158);
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<PAGE>
(1) In the event of an underwritten offering, promptly include or
incorporate in a Prospectus supplement or post-effective amendment to the
Registration Statement such information as the managers reasonably agree should
be included therein and to which the Company does not reasonably object and make
all required filings of such Prospectus supplement or post-effective amendment
as soon as practicable after it is notified of the matters to be included or
incorporated in such Prospectus supplement or post-effective amendment;
(m) (i) Make reasonably available for inspection by Investors, any
underwriter participating in any disposition pursuant to the Registration
Statement, and any attorney, accountant or other agent retained by such
Investors or any such underwriter all relevant financial and other records,
pertinent corporate documents and properties of the Company and its
subsidiaries, and (ii) cause the Company's officers, directors and employees to
supply all information reasonably requested by such Investors or any such
underwriter, attorney, accountant or agent in connection with the Registration
Statement, in each case, as is customary for similar due diligence examinations;
provided, however, that all records, information and documents that are
designated in writing by the Company, in good faith, as confidential,
proprietary or containing any material nonpublic information shall be kept
confidential by such Investors and any such underwriter, attorney, accountant or
agent (pursuant to an appropriate confidentiality agreement in the case of any
such holder or agent), unless such disclosure is made pursuant to judicial
process in a court proceeding (after first giving the Company an opportunity
promptly to seek a protective order or otherwise limit the scope of the
information sought to be disclosed) or is required by law, or such records,
information or documents become available to the public generally or through a
third party not in violation of an accompanying obligation of confidentiality;
and provided, further, that, if the foregoing inspection and information
gathering would otherwise disrupt the Company's conduct of its business, such
inspection and information gathering shall, to the maximum extent possible, be
coordinated on behalf of the Investors and the other parties entitled thereto by
one firm of counsel designed by and on behalf of the majority in interest of
Investors and other parties;
(n) In connection with any underwritten offering, make such
representations and warranties to the Investors participating in such
underwritten offering and to the managers, in form, substance and scope as are
customarily made by the Company to underwriters in secondary underwritten
offerings;
(o) In connection with any underwritten offering, obtain opinions of
counsel to the Company (which counsel and opinions (in form, scope and
substance) shall be reasonably satisfactory to the managers) addressed to the
underwriters, covering such matters as are customarily covered in opinions
requested in secondary underwritten offerings (it being agreed that the matters
to be covered by such opinions shall include, without limitation, as of the date
of the opinion and as of the Effective Time of the Registration Statement or
most recent post-effective amendment thereto, as the case may be, the absence
from the Registration Statement and the Prospectus, including any documents
incorporated by reference therein, of an untrue statement of a material fact or
the omission of a material fact required to be stated therein or necessary to
make the statements therein (in the case of the Prospectus, in light of the
circumstances under which they were made) not misleading, subject to customary
limitations);
(p) In connection with any underwritten offering, obtain "cold
comfort" letters and updates thereof from the independent public accountants of
the Company (and, if necessary,
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from the independent public accountants of any subsidiary of the Company or of
any business acquired by the Company, in each case for which financial
statements and financial data are, or are required to be, included in the
Registration Statement), addressed to each underwriter participating in such
underwritten offering (if such underwriter has provided such letter,
representations or documentation, if any, required for such cold comfort letter
to be so addressed), in customary form and covering matters of the type
customarily covered in "cold comfort" letters in connection with secondary
underwritten offerings;
(q) In connection with any underwritten offering, deliver such
documents and certificates as may be reasonably required by the managers, if
any; and
(r) In the event that any broker-dealer registered under the Exchange
Act shall be an "Affiliate" (as defined in Rule 2729(b)(1) of the rules and
regulations of the National Association of Securities Dealers, Inc. (the "NASD
Rules") (or any successor provision thereto)) of the Company or has a "conflict
of interest" (as defined in Rule 2720(b)(7) of the NASD Rules (or any successor
provision thereto)) and such broker-dealer shall underwrite, participate as a
member of an underwriting syndicate or selling group or assist in the
distribution of any Registrable Securities covered by the Registration
Statement, whether as a holder of such Registrable Securities or as an
underwriter, a placement or sales agent or a broker or dealer in respect
thereof, or otherwise, the Company shall assist such broker-dealer in complying
with the requirements of the NASD Rules, including, without limitation, by (A)
engaging a "qualified independent underwriter" (as defined in Rule 2720(b)(15)
of the NASD Rules (or any successor provision thereto)) to participate in the
preparation of the Registration Statement relating to such Registrable
Securities, to exercise usual standards of due diligence in respect thereof and
to recommend the public offering price of such Registrable Securities, (B)
indemnifying such qualified independent underwriter to the extent of the
indemnification of underwriters provided in Section 5 hereof, and (C) providing
such information to such broker-dealer as may be required in order for such
broker-dealer to comply with the requirements of the NASD Rules.
4. Obligations of the Investors
In connection with the registration of the Registrable Securities, the
Investors shall have the following obligations:
(a) 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. As least seven
days prior to the first anticipated filing date of the Registration Statement,
the Company shall notify each Investor of the information the Company requires
from each such Investor (the "Requested Information") if such Investor elects to
have any of its Registrable Securities included in the Registration Statement.
If at least two business days prior to the anticipated filing date the Company
has not received the Requested Information from in Investor (a "Non-Responsive
Investor"), then the Company may file the Registration Statement
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without including Registrable Securities of such Non-Responsive Investor and
have no further obligations to the Non-Responsive Investor;
(b) Each Investor by its acceptance of the Registrable Securities
agrees to cooperate with the Company in connection with the preparation and
filing of the Registration Statement hereunder, unless such Investor has
notified the Company in writing of its election to exclude all of its
Registrable Securities from the Registration Statement; and
(c) Each Investor agrees that, upon receipt of any notice from the
Company of the occurrence of any event of the kind described in Section 3(e) or
3(f), it shall immediately discontinue its disposition of Registrable Securities
pursuant to the Registration Statement covering such Registrable Securities
until such Investor's receipt of the copies of the supplemented or amended
Prospectus contemplated by Section 3(e) and, if so directed by the Company, such
Investor shall deliver to the Company (at the expense of the Company) or destroy
(and deliver to the Company a certificate of destruction) all copies in such
Investor's possession, of the Prospectus covering such Registrable Securities
current at the time of receipt of such notice.
5. Expenses of Registration
All expenses, other than underwriting discounts and commissions,
incurred in connection with registrations, filings or qualifications pursuant to
Section 3, but including, without limitation, all registration, listing, and
qualifications fees, printing and engraving fees, accounting fees, and the fees
and disbursements of counsel for the Company, and the reasonable fees of one
firm of counsel to the holders of a majority in interest of the Registrable
Securities shall be borne by the Company.
6. Indemnification and Contribution
(a) The Company shall indemnify and hold harmless each Investor and
each underwriter, if any, which facilitates the disposition of Registrable
Securities, and each of their respective officers and directors and each person
who controls such Investor or underwriter within the meaning of Section 15 of
the Securities Act or Section 20 of the Exchange Act (each such person being
sometimes hereinafter referred to as an "Indemnified Person") from and against
any losses, claims, damages or liabilities, joint or several, to which such
Indemnified Person may become subject under the Securities Act or otherwise,
insofar as such losses, claims, damages or liabilities (or actions in respect
thereof) arise out of or are based upon an untrue statement or alleged untrue
statement of a material fact contained in any Registration Statement or an
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein, not misleading, or
arise out of or are based upon an untrue statement or alleged untrue statement
of a material fact contained in any Prospectus or an omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading; and the Company hereby agrees to
reimburse such Indemnified Person for all reasonable legal and other expenses
incurred by them in connection with investigating or defending any such action
or claim as and when such expenses are incurred; provided, however, that the
Company shall not be liable to any such Indemnified Person in any such case to
the extent that any such loss, claim, damage or liability arises out of or is
based upon (i) an untrue statement or alleged untrue statement made in, or an
omission or
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alleged omission from, such Registration Statement or Prospectus in reliance
upon and in conformity with written information furnished to the Company by such
Indemnified Person expressly for use therein or (ii) in the case of the
occurrence of an event of the type specified in Section 3(e), the use by the
Indemnified Person of an outdated or defective Prospectus after the Company has
provided to such Indemnified Person an updated Prospectus correcting the untrue
statement or alleged untrue statement or omission or alleged omission giving
rise to such loss, claim, damage or liability.
(b) Indemnification by the Investors and Underwriters. Each Investor
agrees, as a consequence of the inclusion of any of its Registrable Securities
in a Registration Statement, and each underwriter, if any, which facilitates the
disposition of Registrable Securities shall agree, as a consequence of
facilitating such disposition of Registrable Securities, severally and not
jointly, to (i) indemnify and hold harmless the Company, its directors
(including any person who, with his or her consent, is named in the Registration
Statement as a director nominee of the Company), its officers who sign any
Registration Statement and each person, if any, who controls the Company within
the meaning of either Section 15 of the Securities Act or Section 20 of the
Exchange Act, against any losses, claims, damages or liabilities to which the
Company or such other persons may become subject, under the Securities Act or
otherwise, insofar as such losses, claims, damages or liabilities (or actions in
respect thereof) arise out of or are based upon an untrue statement or alleged
untrue statement of a material fact contained in such Registration Statement or
Prospectus or arise out of or are based upon the omission or alleged omission to
state therein 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, in the case of the Prospectus), not misleading, in each case to the
extent, but only to the extent, that such untrue statement or alleged untrue
statement or omission or alleged omission was made in reliance upon and in
conformity with written information furnished to the Company by such holder or
underwriter expressly for use therein; provided, however, that no Investor or
underwriter shall be liable under this Section 6(b) for any amount in excess of
the net proceeds paid to such Investor or underwriter in respect of shares sold
by it, and (ii) reimburse the Company for any legal or other expenses incurred
by the Company in connection with investigating or defending any such action or
claim as such expenses are incurred.
(c) Notice of Claims, etc. Promptly after receipt by a party seeking
indemnification pursuant to this Section 6 (an "Indemnified Party") of written
notice of any investigation, claim, proceeding or other action in respect of
which indemnification is being sought (each, a "Claim"), the Indemnified Party
promptly shall notify the party against whom indemnification pursuant to this
Section 6 is being sought (the "Indemnifying Party") of the commencement
thereof; but the omission to so notify the Indemnifying Party shall not relieve
it from any liability that it otherwise may have to the Indemnified Party,
except to the extent that the Indemnifying Party is materially prejudiced and
forfeits substantive rights and defenses by reason of such failure. In
connection with any Claim as to which both the Indemnifying Party and the
Indemnified Party are parties, the Indemnifying Party shall be entitled to
assume the defense thereof. Notwithstanding the assumption of the defense of
any Claim by the Indemnifying Party, the Indemnified Party shall have the right
to employ separate legal counsel and to participate in the defense of such
Claim, and the Indemnifying Party shall bear the reasonable fees, out-of-pocket
costs and expenses of such separate legal counsel to the Indemnified Party if
(and only if): (x) the Indemnifying Party shall have agreed to pay such fees,
costs and expenses, (y) the Indemnified Party and the Indemnifying Party shall
reasonably have concluded that representation of the Indemnified Party by the
Indemnifying Party by the same legal counsel would not be appropriate due to
actual or,
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as reasonably determined by legal counsel to the Indemnified Party, potentially
differing interests between such parties in the conduct of the defense of such
Claim, or if there may be legal defenses available to the Indemnified Party that
are in addition to or disparate from those available to the Indemnifying Party,
or (z) the Indemnifying Party shall have failed to employ legal counsel
reasonably satisfactory to the Indemnified Party within a reasonable period of
time after notice of the commencement of such Claim. If the Indemnified Party
employs separate legal counsel in circumstances other than as described in
clauses (x), (y) or (z) above, the fees, costs and expenses of such legal
counsel shall be borne exclusively by the Indemnified Party. Except as provided
above, the Indemnifying Party shall not, in connection with any Claim in the
same jurisdiction, be liable for the fees and expenses of more than one firm of
counsel for the Indemnified Party (together with appropriate local counsel). The
Indemnified Party shall not, without the prior written consent of the
Indemnifying Party (which consent shall not unreasonably be withheld), settle or
compromise any Claim or consent to the entry of any judgment that does not
include an unconditional release of the Indemnifying Party from all liabilities
with respect to such Claim or judgment.
(d) Contribution. If the indemnification provided for in this Section
6 is unavailable to or insufficient to hold harmless an Indemnified Person under
subsection (a) or (b) above in respect of any losses, claims, damages or
liabilities (or actions in respect thereof) referred to therein, then each
Indemnifying Party shall contribute to the amount paid or payable by such
Indemnified Party as a result of such losses, claims, damages or liabilities (or
actions in respect thereof) in such proportion as is appropriate to reflect the
relative fault of the Indemnifying Party and the Indemnified Party in connection
with the statements or omissions which resulted in such losses, claims, damages
or liabilities (or actions in respect thereof), as well as any other relevant
equitable considerations. The relative fault of such Indemnifying Party and
Indemnified Party shall be determined by reference to, among other things,
whether the untrue or alleged untrue statement of a material fact or omission or
alleged omission to state a material fact relates to information supplied by
such Indemnifying Party or by such Indemnified Party, and the parties' relative
intent, knowledge, access to information and opportunity to correct or prevent
such statement or omission. The parties hereto agree that it would not be just
and equitable if contribution pursuant to this Section 6(d) were determined by
pro rata allocation (even if the Investors or any underwriters were treated as
one entity for such purpose) or by any other method of allocation which does not
take account of the equitable considerations referred to in this Section 6(d).
The amount paid or payable by an Indemnified Party as a result of the losses,
claims, damages or liabilities (or actions in respect thereof) referred to above
shall be deemed to include any legal or other fees or expenses reasonably
incurred by such Indemnified Party in connection with investigating or defending
any such action or claim. No person guilty of fraudulent misrepresentation
(within the meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation. The obligations of the Investors and any underwriters in
this Section 6(d) to contribute shall be several in proportion to the percentage
of Registrable Securities registered or underwritten, as the case may be, by
them and not joint.
(e) Notwithstanding any other provision of this Section 6, in no event
shall any (i) Investor be required to undertake liability to any person under
this Section 6 for any amounts in excess of the dollar amount of the proceeds to
be received by such Investor from the sale of such Investor's Registrable
Securities (after deducting any fees, discounts and commissions applicable
thereto) pursuant to any Registration Statement under which such Registrable
Securities are to be registered under the Securities Act and (ii) underwriter be
required to undertake liability to any
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Person hereunder for any amounts in excess of the aggregate discount, commission
or other compensation payable to such underwriter with respect to the
Registrable Securities underwritten by it and distributed pursuant to the
Registration Statement.
(f) The obligations of the Company under this Section 6 shall be in
addition to any liability which the Company may otherwise have to any
Indemnified Person and the obligations of any Indemnified Person under this
Section 6 shall be in addition to any liability which such Indemnified Person
may otherwise have to the Company. The remedies provided in this Section 6 are
not exclusive and shall not limit any rights or remedies which may otherwise be
available to an indemnified party at law or in equity.
7. Rule 144
With a view to making available to the Investors the benefits of Rule
144 under the Securities Act or any other similar rule or regulation of the
Commission that may at any time permit the Investors to sell securities of the
Company to the public without registration ("Rule 144"), the Company agrees to
use its best efforts to:
(a) comply with the provisions of paragraph (c) (1) of Rule 144; and
(b) file with the Commission in a timely manner all reports and other
documents required to be filed by the Company pursuant to Section 13 or 15(d)
under the Exchange Act; and, if at any time it is not required to file such
reports but in the past had been required to or did file such reports, it will,
upon the request of any Investor, make available other information as required
by, and so long as necessary to permit sales of, its Registrable Securities
pursuant to Rule 144.
8. Assignment
The rights to have the Company register Registrable Securities
pursuant to this Agreement shall be automatically assigned by the Investors to
any permitted transferee of all or any portion of such securities (or all or any
portion of any Preferred Shares or Warrant of the Company which is convertible
into such securities) of Registrable Securities only if: (a) 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, (b) the Company is, within a reasonable time after such
transfer or assignment, furnished with written notice of (i) the name and
address of such transferee or assignee and (ii) the securities with respect to
which such registration rights are being transferred or assigned, (c)
immediately following such transfer or assignment, the securities so transferred
or assigned to the transferee or assignee constitute Restricted Securities, and
(d) at or before the time the Company received the written notice contemplated
by clause (b) of this sentence the transferee or assignee agrees in writing with
the Company to be bound by all of the provisions contained herein.
9. Amendment and Waiver
Any provision of this Agreement may be amended and the observance
thereof may be waived (either generally or in a particular instance and either
retroactively or prospectively), only with the written consent of the Company
and Investors who hold a majority-in-interest of the
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Registrable Securities. Any amendment or waiver effected in accordance with this
Section 9 shall be binding upon each Investor and the Company.
10. Miscellaneous
(a) A person or entity shall be 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) If, after the date hereof and prior to the Commission declaring
the Registration Statement to be filed pursuant to Section 2(a) effective under
the Securities Act, the Company grants to any Person any registration rights
with respect to any Company securities which are more favorable to such other
Person than those provided in this Agreement, then the Company forthwith shall
grant (by means of an amendment to this Agreement or otherwise) identical
registration rights to all Investors hereunder.
(c) Except as may be otherwise provided herein, any notice or other
communication or delivery required or permitted hereunder shall be in writing
and shall be delivered personally or sent by certified mail, postage prepaid, or
by a nationally recognized overnight courier service, and shall be deemed given
when so delivered personally or by overnight courier service, or, if mailed,
three days after the date of deposit in the United States mails, as follows:
(i) if to the Company, to:
Thermatrix Inc.
308 North Peters Road, Suite 100
Knoxville, TN 37922
Attention: Edward E. Greene
(423) 539-9603
(423) 539-9643 (Fax)
with a copy to:
Wilson Sonsini Goodrich & Rosati, PC
650 Page Mill Road
Palo Alto, CA 94304-1050
Attention: Michael J. Danaher, Esq.
(650) 493-9300
(650) 493-6811 (Fax)
(ii) if to the Initial Investor, to:
Technology Funding Venture Partners III, L.P.
2000 Alameda de las Pulgas
Suite 250
San Mateo, CA 94403
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Attention: Charlie Kokesh
(650) 345-2200
(650) 345-1797 (Fax)
(iii) if to any other Investor, at such address as such Investor shall have
provided in writing to the Company.
The Company, the Initial Investor or any Investor may change the foregoing
address by notice given pursuant to this Section 10(c).
(d) Failure of any party to exercise any right or remedy under this
Agreement or otherwise, or delay by a party in exercising such right or remedy,
shall not operate as a waiver thereof.
(e) This Agreement shall be governed by and interpreted in accordance
with the laws of the State of California. Each of the parties consents to the
jurisdiction of the federal courts whose districts encompass any part of San
Mateo County or the state courts of the State of California in connection with
any dispute arising under this Agreement and hereby waives, to the maximum
extent permitted by law, any objection including any objection based on forum
non conveniens, to the bringing of any such proceeding in such jurisdictions.
(f) The remedies provided in this Agreement are cumulative and not
exclusive of any remedies provided by law. If any term, provision, covenant or
restriction of this Agreement is held by a court of competent jurisdiction to be
invalid, illegal, void or unenforceable, the remainder of the terms, provisions,
covenants and restrictions set forth herein shall remain in full force and
effect and shall in no way be affected, impaired or invalidated, and the parties
hereto shall use their best efforts to find and employ an alternative means to
achieve the same or substantially the same result as that contemplated by such
term, provision, covenant or restriction. It is hereby stipulated and declared
to be the intention of the parties that they would have executed the remaining
terms, provisions, covenants and restrictions without including any of such that
may be hereafter declared invalid, illegal, void or unenforceable.
(g) The Company shall not enter into any agreement with respect to
its securities that is inconsistent with the rights granted to the holders of
Registrable Securities in this Agreement or otherwise conflicts with the
provisions hereof. The Company is not currently a party to any agreement
granting any registration rights with respect to any of its securities to any
person which conflicts with the Company's obligations hereunder or gives any
other party the right to include any securities in any Registration Statement
filed pursuant hereto, except for such rights and conflicts as have been
irrevocably waived. Without limiting the generality of the foregoing, without
the written consent of the holders of a majority in interest of the Registrable
Securities, the Company shall not grant to any person the right to request it to
register any of its securities under the Securities Act unless the rights so
granted are subject in all respect to the prior rights of the holders of
Registrable Securities set forth herein, and are not otherwise in conflict or
inconsistent with the provisions of this Agreement. The restrictions on the
Company's rights to grant registration rights under this paragraph shall
terminate on the date the Registration Statement to be filed pursuant to Section
2(a) is declared effective by the Commission.
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(h) This Agreement, the Securities Purchase Agreement, the Escrow
Instructions, dated as of a date even herewith (the "Escrow Instructions"),
between the Company, the Initial Investor andWilson Sonsini Goodrich & Rosati,
the Preferred Shares and the Warrants constitute the entire agreement among the
parties hereto with respect to the subject matter hereof. There are no
restrictions, promises, warranties or undertakings, other than those set forth
or referred to herein. This Agreement, the Securities Purchase Agreement, the
Escrow Instructions, the Certificate of Designation and the Warrants supersede
all prior agreements and undertakings among the parties hereto with respect to
the subject matter hereof.
(i) Subject to the requirements of Section 8 hereof, this Agreement
shall inure to the benefit of and be binding upon the successors and assigns of
each of the parties hereto.
(j) All pronouns and any variations thereof refer to the masculine,
feminine or neuter, singular or plural, as the context may require.
(k) The headings in this Agreement are for convenience of reference
only and shall not limit or otherwise affect the meaning thereof.
(1) The Company acknowledges that any failure by the Company to
perform its obligations under Section 3, or any delay in such performance could
result in direct damages to the Investors and the Company agrees that, in
addition to any other liability the Company may have by reason of any such
failure or delay, the Company shall be liable for all direct damages caused by
such failure or delay.
(m) This Agreement may be executed in two or more counterparts, each
of which shall be deemed an original but all of which shall constitute one and
the same agreement. A facsimile transmission of this signed Agreement shall be
legal and binding on all parties hereto.
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In Witness Whereof, the parties have caused this Agreement to be duly
executed and delivered as of the date first above written.
Thermatrix Inc.
By:___________________________________________
Name:
Title:
Technology Funding Venture Partners III, L.P.
By:___________________________________________
Name:
Title:
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EXHIBIT 4.2(c)
REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement, dated as of June , 1999 (this
"Agreement"), between Thermatrix Inc., a Delaware corporation, with principal
executive offices located at 308 North Peters Road, Suite 100, Knoxville,
Tennessee (the "Company"), and CIBC WMV Inc. (the "Initial Investor").
Whereas, upon the terms and subject to the conditions of the
Securities Purchase Agreement dated as of June , 1999, between the Initial
Investor and the Company (the "Securities Purchase Agreement"), the Company has
agreed to issue and sell to the Initial Investor (i) 2,000 shares of Series E 8%
Convertible Preferred Stock, par value $.001 per share (the "Preferred Shares")
which, upon the terms of and subject to the conditions of the Company's
Certificate of Designation of Series E 8% Convertible Preferred Stock (the
"Certificate of Designation"), are convertible into shares of the Company's
common stock, par value $.001 per share (the "Common Stock") and (ii) Common
Stock Purchase Warrants (the "Warrants") to purchase shares of Common Stock; and
Whereas, to induce the Initial Investor to execute and deliver the
Securities Purchase Agreement, the Company has agreed to provide with respect to
the Common Stock issued or issuable in lieu of cash dividend payments on the
Preferred Shares, upon conversion of the Preferred Shares and exercise of the
Warrants certain registration rights under the Securities Act;
Now, Therefore, in consideration of the premises and the mutual
covenants contained herein, the parties hereto, intending to be legally bound,
hereby agree as follows:
1. Definitions
(a) As used in this Agreement, the following terms shall have the
meanings:
(i) "Affiliate," of any specified Person means any other Person who
directly, or indirectly through one or more intermediaries, is in control
of, is controlled by, or is under common control with, such specified
Person. For purposes of this definition, control of a Person means the
power, directly or indirectly, to direct or cause the direction of the
management and policies of such Person whether by contract, securities,
ownership or otherwise; and the terms "controlling" and "controlled" have
the respective meanings correlative to the foregoing.
(ii) "Closing Date" means the date and time of the issuance and sale of
the Preferred Shares.
(iii) "Commission" means the Securities and Exchange Commission.
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(iv) "Current Market Price" on any date of determination means the
closing bid price of a share of the Common Stock on such day as reported on
the Nasdaq National Market ("Nasdaq"), or, if such security is not listed
or admitted to trading on the Nasdaq, on the principal national security
exchange or quotation system on which such security is quoted or listed or
admitted to trading, or, if not quoted or listed or admitted to trading on
any national securities exchange or quotation system, the closing bid price
of such security on the over-the-counter market on the day in question as
reported by the National Quotation Bureau Incorporated, or a similar
generally accepted reporting service, or if not so available, in such
manner as furnished by any Nasdaq member firm of the National Association
of Securities Dealers, Inc. selected from time to time by the Board of
Directors of the Company for that purpose, or a price determined in good
faith by the Board of Directors of the Company as being equal to the fair
market value thereof, as the case may be.
(v) "Exchange Act" means the Securities Exchange Act of 1934, as
amended, and the rules and regulations of the Commission thereunder, or any
similar successor statute.
(vi) "Investors" means the Initial Investor and any transferee or
assignee of Registrable Securities who agrees to become bound by all of the
terms and provisions of this Agreement in accordance with Section 8 hereof.
(vii) "Person" means any individual, partnership, corporation, limited
liability company, joint stock company, association, trust, unincorporated
organization, or a government or agency or political subdivision thereof.
(viii) "Prospectus" means the prospectus (including, without limitation,
any preliminary prospectus and any final prospectus filed pursuant to Rule
424(b) under the Securities Act, including any prospectus that discloses
information previously omitted from a prospectus filed as part of an
effective registration statement in reliance on Rule 430A under the
Securities Act) included in the Registration Statement, as amended or
supplemented by any prospectus supplement with respect to the terms of the
offering of any portion of the Registrable Securities covered by the
Registration Statement and by all other amendments and supplements to such
prospectus, including all material incorporated by reference in such
prospectus and all documents filed after the date of such prospectus by the
Company under the Exchange Act and incorporated by reference therein.
(ix) "Public Offering" means an offer registered with the Commission and
the appropriate state securities commissions by the Company of its Common
Stock and made pursuant to the Securities Act.
(x) "Registrable Securities" means the Common Stock issued or issuable
(i) in lieu of cash dividend payments on the Preferred Shares, (ii) upon
conversion of the Preferred Shares or (iii) upon exercise of the Warrants;
provided, however, a share of Common Stock shall cease to be a Registrable
Security for purposes of this Agreement when it no longer is a Restricted
Security .
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<PAGE>
(xi) "Registration Statement" means a registration statement of the
Company filed on an appropriate form under the Securities Act providing for
the registration of, and the sale on a continuous or delayed basis by the
holders of, all of the Registrable Securities pursuant to Rule 415 under
the Securities Act, including the Prospectus contained therein and forming
a part thereof, any amendments to such registration statement and
supplements to such Prospectus, and all exhibits and other material
incorporated by reference in such registration statement and Prospectus.
(xii) "Restricted Security" means any share of Common Stock issued or
issuable in lieu of cash dividend payments on the Preferred Shares, upon
conversion of the Preferred Shares or exercise of the Warrants except any
such share that (i) has been registered pursuant to an effective
registration statement under the Securities Act and sold in a manner
contemplated by the prospectus included in such registration statement,
(ii) has been transferred in compliance with the resale provisions of Rule
144 under the Securities Act (or any successor provision thereto) or is
transferable pursuant to paragraph (k) of Rule 144 under the Securities Act
(or any successor provision thereto), or (iii) otherwise has been
transferred and a new share of Common Stock not subject to transfer
restrictions under the Securities Act has been delivered by or on behalf of
the Company.
(xiii) "Securities Act" means the Securities Act of 1933, as amended, and
the rules and regulations of the Commission thereunder, or any similar
successor statute.
(b) All capitalized terms used and not defined herein have the
respective meaning assigned to them in the Securities Purchase Agreement.
2. Registration
(a) Filing and Effectiveness of Registration Statement. The
Company shall prepare and file with the Commission not later than 60 days after
the Closing Date, a Registration Statement relating to the offer and sale of the
Registrable Securities and shall use its best efforts to cause the Commission to
declare such Registration Statement effective under the Securities Act as
promptly as practicable but not later than 150 days after the Closing Date,
assuming for purposes hereof a Conversion Price under the Certificate of
Designation of $1.50 per share. The Company shall not include any other
securities in the Registration Statement relating to the offer and sale of the
Registrable Securities. The Company shall notify the Initial Investor by written
notice that such Registration Statement has been declared effective by the
Commission within 24 hours of such declaration by the Commission.
(b) Registration Default. If the Registration Statement covering
the Registrable Securities or the Additional Registrable Securities (as defined
in Section 2(d) hereof) required to be filed by the Company pursuant to Section
2(a) or 2(d) hereof, as the case may be, is not (i) filed with the Commission
within 60 days after the Closing Date or (ii) declared effective by the
Commission within 150 days after the Closing Date (either of which, without
duplication, an "Initial Date"), then the Company shall make the payments to the
Initial Investor as provided in the next sentence as liquidated damages and not
as a penalty. The amount to be paid by the Company to the Initial Investor shall
be determined as of each Computation Date (as defined below), and such amount
shall
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be equal to 2% (the "Liquidated Damage Rate") of the Purchase Price (as defined
in the Securities Purchase Agreement) from the Initial Date to the first
Computation Date and for each Computation Date thereafter, calculated on a pro
rata basis to the date on which the Registration Statement is filed with (in the
event of an Initial Date pursuant to clause (i) above) or declared effective by
(in the event of an Initial Date pursuant to clause (ii) above) the Commission
(the "Periodic Amount") provided, however, that in no event shall the liquidated
damages be less than $25,000; provided, further, however, that if the
Registration Statement is not declared effective by the Commission within 210
days after the Initial Date set forth in clause (ii) above, then the Liquidated
Damage Rate shall increase to 4%; provided, further, however, that the
Liquidated Damage Rate shall increase by 1% for each 30 day period after the
210th day after the Initial Date set forth in clause (ii) above that the
Registration Statement is not declared effective by the Commission. The full
Periodic Amount shall be paid by the Company to the Initial Investor by wire
transfer of immediately available funds within three days after each Computation
Date.
As used in this Section 2(b), "Computation Date" means the date which
is 30 days after the Initial Date and, if the Registration Statement required to
be filed by the Company pursuant to Section 2(a) has not theretofore been
declared effective by the Commission, each date which is 30 days after the
previous Computation Date until such Registration Statement is so declared
effective.
Notwithstanding the above, if the Registration Statement covering the
Registrable Securities or the Additional Registrable Securities required to be
filed by the Company pursuant to Section 2(a) or 2(d) hereof, as the case may
be, is not filed with the Commission by the 30th day after the Closing Date, the
Company shall be in default of this Registration Rights Agreement.
(c) Eligibility for Use of Form S-3. The Company agrees that at such
time as it meets all the requirements for the use of Securities Act Registration
Statement on Form S-3 it shall file all reports and information required to be
filed by it with the Commission in a timely manner and take all such other
action so as to maintain such eligibility for the use of such form.
(d) In the event the Current Market Price declines to $1.75 per share,
the Company shall, to the extent required by the Securities Act (because the
additional shares were not covered by the Registration Statement filed pursuant
to Section 2(a)), as reasonably determined by the Initial Investor, file an
additional Registration Statement with the Commission for such additional number
of Registrable Securities as would be issuable upon conversion of the Preferred
Shares and exercise of the Warrants (the "Additional Registrable Securities") in
addition to those previously registered, assuming a Conversion Price of $0.75
per share. The Company shall, to the extent required by the Securities Act, as
reasonably determined by the Initial Investor, prepare and file with the
Commission not later than the 30th day thereafter, a Registration Statement
relating to the offer and sale of such Additional Registrable Securities and
shall use its best efforts to cause the Commission to declare such Registration
Statement effective under the Securities Act as promptly as practicable but not
later than 60 days thereafter. The Company shall not include any other
securities in the Registration Statement relating to the offer and sale of such
Additional Registrable Securities.
If the Additional Registration Statement is not (i) filed with the
Commission within 30 days after the Decline Date or (ii) declared effective by
the Commission within 90 days after the Decline Date (either of which, without
duplication, an "Additional Registration Date"), then the Company shall make the
payments to the Initial Investor at the Liquidated Damage Rate from the
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Additional Registration Date to the first Additional Computation Date and for
each Additional Computation Date thereafter, calculated on a pro rata basis to
the date on which the Additional Registration Statement is filed with (in the
event of an Additional Registration Date pursuant to clause (i) above) or
declared effective by (in the event of an Additional Registration Date pursuant
to clause (ii) above) the Commission (the "Additional Periodic Amount")
provided, however, that in no event shall the liquidated damages be less than
$25,000; provided, further, however, that if the Additional Registration
Statement is not declared effective by the Commission within 120 days after the
Additional Registration Date set forth in clause (ii) above, then the Liquidated
Damage Rate shall increase to 4%; provided, further, however, that the
Liquidated Damage Rate shall increase by 1% for each 30 day period after the
120th day after the Additional Registration Date set forth in clause (ii) above
that the Additional Registration Statement is not declared effective by the
Commission. The full Additional Periodic Amount shall be paid by the Company to
the Initial Investor by wire transfer of immediately available funds within
three days after each Additional Computation Date.
As used in this Section 2(d), "Additional Computation Date" means the
date which is 30 days after the Additional Registration Date and, if the
Additional Registration Statement required to be filed by the Company pursuant
to this Section 2(d) has not theretofore been declared effective by the
Commission, each date which is 30 days after the previous Additional Computation
Date until such Additional Registration Statement is so declared effective.
(e) (i) If the Company proposes to register any of its warrants,
Common Stock or any other shares of common stock of the Company under the
Securities Act (other than a registration (A) on Form S-8 or S-4 or any
successor or similar forms, (B) relating to Common Stock or any other
shares of common stock of the Company issuable upon exercise of employee
share options or in connection with any employee benefit or similar plan of
the Company or (C) in connection with a direct or indirect acquisition by
the Company of another Person or any transaction with respect to which Rule
145 (or any successor provision) under the Securities Act applies), whether
or not for sale for its own account, it will each such time, give prompt
written notice at least 20 days prior to the anticipated filing date of the
registration statement relating to such registration to the Initial
Investor, which notice shall set forth such Initial Investor's rights under
this Section 3(e) and shall offer the Initial Investor the opportunity to
include in such registration statement such number of Registrable
Securities as the Initial Investor may request. Upon the written request
of an Initial Investor made within 10 days after the receipt of notice from
the Company (which request shall specify the number of Registrable
Securities intended to be disposed of by such Initial Investor), the
Company will use its best efforts to effect the registration under the
Securities Act of all Registrable Securities that the Company has been so
requested to register by the Initial Investor, to the extent requisite to
permit the disposition of the Registrable Securities so to be registered;
provided, however, that (A) if such registration involves a Public
Offering, the Initial Investor must sell their Registrable Securities to
the underwriters selected as provided in Section 3(b) hereof on the same
terms and conditions as apply to the Company and (B) if, at any time after
giving written notice of its intention to register any Registrable
Securities pursuant to this Section 3 and prior to the effective date of
the registration statement filed in connection with such registration, the
Company shall determine for any reason not to register such Registrable
Securities, the Company shall give written notice to the Initial Investor
and, thereupon, shall be relieved of its obligation to
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<PAGE>
register any Registrable Securities in connection with such registration.
The Company's obligations under this Section 2(e) shall terminate on the
date that the registration statement to be filed in accordance with Section
2(a) is declared effective by the Commission.
(ii) If a registration pursuant to this Section 2(e) involves a Public
Offering and the managing underwriter thereof advises the Company that, in
its view, the number of shares of Common Stock, Warrants or other shares of
Common Stock that the Company and the Initial Investor intend to include in
such registration exceeds the largest number of shares of Common Stock or
Warrants (including any other shares of Common Stock or Warrants of the
Company) that can be sold without having an adverse effect on such Public
Offering (the "Maximum Offering Size"), the Company will include in such
registration, only that number of shares of Common Stock or Warrants, as
applicable, such that the number of shares of Registrable Securities
registered does not exceed the Maximum Offering Size, with the difference
between the number of shares in the Maximum Offering Size and the number of
shares to be issued by the Company to be allocated (after including all
shares to be issued and sold by the Company) among the Company and the
Initial Investor pro rata on the basis of the relative number of shares of
Common Stock or Warrants offered for sale under such registration by each
of the Company and the Initial Investor.
If as a result of the proration provisions of this Section 2(e)(ii),
any Initial Investor is not entitled to include all such Registrable Securities
in such registration, such Initial Investor may elect to withdraw its request to
include any Registrable Securities in such registration. With respect to
registrations pursuant to this Section 2(e), the number of securities required
to satisfy any underwriters' over-allotment option shall be allocated pro rata
among the Company and the Initial Investor on the basis of the relative number
of shares of Common Stock or Warrants otherwise to be included by each of them
in the registration with respect to which such over-allotment option relates.
3. Obligations of the Company
In connection with the registration of the Registrable Securities, the
Company shall:
(a) Promptly (i) prepare and file with the Commission such amendments
(including post-effective amendments) to the Registration Statement and
supplements to the Prospectus as may be necessary to keep the Registration
Statement continuously effective and in compliance with the provisions of the
Securities Act applicable thereto so as to permit the Prospectus forming part
thereof to be current and useable by Investors for resales of the Registrable
Securities for a period of two years from the date on which the Registration
Statement is first declared effective by the Commission (the "Effective Time")
or such shorter period that will terminate when all the Registrable Securities
covered by the Registration Statement have been sold pursuant thereto in
accordance with the plan of distribution provided in the Prospectus, transferred
pursuant to Rule 144 under the Securities Act or otherwise transferred in a
manner that results in the delivery of new securities not subject to transfer
restrictions under the Securities Act (the "Registration Period") and (ii) take
all lawful action such that each of (A) the Registration Statement and any
amendment thereto does not, when it becomes effective, contain an untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein, not misleading and
(B) the Prospectus forming part of the Registration Statement, and any amendment
or supplement thereto, does not at any time during the Registration Period
include an untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary
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to make the statements therein, not misleading and (B) the Prospectus forming
part of the Registration Statement, and any amendment or supplement thereto,
does not at any time during the Registration Period include an untrue statement
of a material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therin, in light of the
circumstances under which they were made, not misleading. Notwithstanding the
foregoing provisions of this Section 3(a), the Company may, during the
Registration Period, suspend the use of the Prospectus for a period not to
exceed 60 days (whether or not consecutive) in any 12-month period if the Board
of Directors of the Company determines in good faith that because of valid
business reasons, including pending mergers or other business combination
transactions, the planned acquisition or divestiture of assets, pending material
corporate developments and similar events, it is in the best interests of the
Company to suspend such use, and prior to or contemporaneously with suspending
such use the Company provides the Investors with written notice of such
suspension, which notice need not specify the nature of the event giving rise to
such suspension. At the end of any such suspension period, the Company shall
provide the Investors with written notice of the termination of such suspension;
(b) During the Registration Period, comply with the provisions of the
Securities Act with respect to the Registrable Securities of the Company covered
by the Registration Statement until such time as all of such Registrable
Securities have been disposed of in accordance with the intended methods of
disposition by the Investors as set forth in the Prospectus forming part of the
Registration Statement;
(c) (i) Prior to the filing with the Commission of any Registration
Statement (including any amendments thereto) and the distribution or delivery of
any Prospectus (including any supplements thereto), provide (A) draft copies
thereof to the Investors and reflect in such documents all such comments as the
Investors (and their counsel) reasonably may propose and (B) to the Investors a
copy of the accountant's consent letter to be included in the filing and (ii)
furnish to each Investor whose Registrable Securities are included in the
Registration Statement and its legal counsel identified to the Company, (A)
promptly after the same is prepared and publicly distributed, filed with the
Commission, or received by the Company, one copy of the Registration Statement,
each Prospectus, and each amendment or supplement thereto, and (B) such number
of copies of the Prospectus and all amendments and supplements thereto and such
other documents, as such Investor may reasonably request in order to facilitate
the disposition of the Registrable Securities owned by such Investor;
(d) (i) Register or qualify the Registrable Securities covered by the
Registration Statement under such securities or "blue sky" laws of such
jurisdictions as the Investors who hold a majority-in-interest of the
Registrable Securities being offered reasonably request, (ii) prepare and file
in such jurisdictions such amendments (including post-effective amendments) and
supplements to such registrations and qualifications as may be necessary to
maintain the effectiveness thereof at all times during the Registration Period,
(iii) take all such other lawful actions as may be necessary to maintain such
registrations and qualifications in effect at all times during the Registration
Period, and (iv) take all such other lawful actions reasonably necessary or
advisable to qualify the Registrable Securities for sale in such jurisdictions;
provided, however, that the Company shall not be required in connection
therewith or as a condition thereto to (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
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itself to general taxation in any such jurisdiction or (C) file a general
consent to service of process in any such jurisdiction;
(e) As promptly as practicable after becoming aware of such event,
notify each Investor of the occurrence of any event, as a result of which the
Prospectus included in the Registration Statement, as then in effect, includes
an untrue statement of a material fact or omits 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 an amendment to the Registration Statement and supplement to
the Prospectus to correct such untrue statement or omission, and deliver a
number of copies of such supplement and amendment to each Investor as such
Investor may reasonably request;
(f) As promptly as practicable after becoming aware of such event,
notify each Investor who holds Registrable Securities being sold (or, in the
event of an underwritten offering, the managing underwriters) of the issuance by
the Commission of any stop order or other suspension of the effectiveness of the
Registration Statement at the earliest possible time and take all lawful action
to effect the withdrawal, recession or removal of such stop order or other
suspension;
(g) Cause all the Registrable Securities covered by the Registration
Statement to be listed on the principal national securities exchange, and
included in an inter-dealer quotation system of a registered national securities
association, on or in which securities of the same class or series issued by the
Company are then listed or included;
(h) Maintain a transfer agent and registrar, which may be a single
entity, for the Registrable Securities not later than the effective date of the
Registration Statement;
(i) Cooperate with the Investors who hold Registrable Securities being
offered to facilitate the timely preparation and delivery of certificates for
the Registrable Securities to be offered pursuant to the registration statement
and enable such certificates for the Registrable Securities to be in such
denominations or amounts, as the case may be, as the Investors reasonably may
request and registered in such names as the Investor may request; and, within
three business days after a registration statement which includes Registrable
Securities is declared effective by the Commission, deliver and cause legal
counsel selected by the Company to deliver to the transfer agent for the
Registrable Securities (with copies to the Investors whose Registrable
Securities are included in such registration statement) an appropriate
instruction and, to the extent necessary, an opinion of such counsel;
(j) Take all such other lawful actions reasonably necessary to
expedite and facilitate the disposition by the Investors of their Registrable
Securities in accordance with the intended methods therefor provided in the
Prospectus which are customary under the circumstances;
(k) Make generally available to its security holders as soon as
practicable, but in any event not later than three (3) months after (i) the
effective date (as defined in Rule 158(c) under the Securities Act) of the
Registration Statement, and (ii) the effective date of each post-effective
amendment to the Registration Statement, as the case may be, an earnings
statement of the Company and its subsidiaries complying with Section 11(a) of
the Securities Act and the rules and regulations of the Commission thereunder
(including, at the option of the Company, Rule 158);
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<PAGE>
(1) In the event of an underwritten offering, promptly include or
incorporate in a Prospectus supplement or post-effective amendment to the
Registration Statement such information as the managers reasonably agree should
be included therein and to which the Company does not reasonably object and make
all required filings of such Prospectus supplement or post-effective amendment
as soon as practicable after it is notified of the matters to be included or
incorporated in such Prospectus supplement or post-effective amendment;
(m) (i) Make reasonably available for inspection by Investors, any
underwriter participating in any disposition pursuant to the Registration
Statement, and any attorney, accountant or other agent retained by such
Investors or any such underwriter all relevant financial and other records,
pertinent corporate documents and properties of the Company and its
subsidiaries, and (ii) cause the Company's officers, directors and employees to
supply all information reasonably requested by such Investors or any such
underwriter, attorney, accountant or agent in connection with the Registration
Statement, in each case, as is customary for similar due diligence examinations;
provided, however, that all records, information and documents that are
designated in writing by the Company, in good faith, as confidential,
proprietary or containing any material nonpublic information shall be kept
confidential by such Investors and any such underwriter, attorney, accountant or
agent (pursuant to an appropriate confidentiality agreement in the case of any
such holder or agent), unless such disclosure is made pursuant to judicial
process in a court proceeding (after first giving the Company an opportunity
promptly to seek a protective order or otherwise limit the scope of the
information sought to be disclosed) or is required by law, or such records,
information or documents become available to the public generally or through a
third party not in violation of an accompanying obligation of confidentiality;
and provided, further, that, if the foregoing inspection and information
gathering would otherwise disrupt the Company's conduct of its business, such
inspection and information gathering shall, to the maximum extent possible, be
coordinated on behalf of the Investors and the other parties entitled thereto by
one firm of counsel designed by and on behalf of the majority in interest of
Investors and other parties;
(n) In connection with any underwritten offering, make such
representations and warranties to the Investors participating in such
underwritten offering and to the managers, in form, substance and scope as are
customarily made by the Company to underwriters in secondary underwritten
offerings;
(o) In connection with any underwritten offering, obtain opinions of
counsel to the Company (which counsel and opinions (in form, scope and
substance) shall be reasonably satisfactory to the managers) addressed to the
underwriters, covering such matters as are customarily covered in opinions
requested in secondary underwritten offerings (it being agreed that the matters
to be covered by such opinions shall include, without limitation, as of the date
of the opinion and as of the Effective Time of the Registration Statement or
most recent post-effective amendment thereto, as the case may be, the absence
from the Registration Statement and the Prospectus, including any documents
incorporated by reference therein, of an untrue statement of a material fact or
the omission of a material fact required to be stated therein or necessary to
make the statements therein (in the case of the Prospectus, in light of the
circumstances under which they were made) not misleading, subject to customary
limitations);
(p) In connection with any underwritten offering, obtain "cold
comfort" letters and updates thereof from the independent public accountants of
the Company (and, if necessary,
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<PAGE>
from the independent public accountants of any
subsidiary of the Company or of any business acquired by the Company, in each
case for which financial statements and financial data are, or are required to
be, included in the Registration Statement), addressed to each underwriter
participating in such underwritten offering (if such underwriter has provided
such letter, representations or documentation, if any, required for such cold
comfort letter to be so addressed), in customary form and covering matters of
the type customarily covered in "cold comfort" letters in connection with
secondary underwritten offerings;
(q) In connection with any underwritten offering, deliver such
documents and certificates as may be reasonably required by the managers, if
any; and
(r) In the event that any broker-dealer registered under the Exchange
Act shall be an "Affiliate" (as defined in Rule 2729(b)(1) of the rules and
regulations of the National Association of Securities Dealers, Inc. (the "NASD
Rules") (or any successor provision thereto)) of the Company or has a "conflict
of interest" (as defined in Rule 2720(b)(7) of the NASD Rules (or any successor
provision thereto)) and such broker-dealer shall underwrite, participate as a
member of an underwriting syndicate or selling group or assist in the
distribution of any Registrable Securities covered by the Registration
Statement, whether as a holder of such Registrable Securities or as an
underwriter, a placement or sales agent or a broker or dealer in respect
thereof, or otherwise, the Company shall assist such broker-dealer in complying
with the requirements of the NASD Rules, including, without limitation, by (A)
engaging a "qualified independent underwriter" (as defined in Rule 2720(b)(15)
of the NASD Rules (or any successor provision thereto)) to participate in the
preparation of the Registration Statement relating to such Registrable
Securities, to exercise usual standards of due diligence in respect thereof and
to recommend the public offering price of such Registrable Securities, (B)
indemnifying such qualified independent underwriter to the extent of the
indemnification of underwriters provided in Section 5 hereof, and (C) providing
such information to such broker-dealer as may be required in order for such
broker-dealer to comply with the requirements of the NASD Rules.
4. Obligations of the Investors
In connection with the registration of the Registrable Securities, the
Investors shall have the following obligations:
(a) 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. As least seven
days prior to the first anticipated filing date of the Registration Statement,
the Company shall notify each Investor of the information the Company requires
from each such Investor (the "Requested Information") if such Investor elects to
have any of its Registrable Securities included in the Registration Statement.
If at least two business days prior to the anticipated filing date the Company
has not received the Requested Information from in Investor (a "Non-Responsive
Investor"), then the Company may file the Registration Statement
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<PAGE>
without including Registrable Securities of such Non-Responsive Investor and
have no further obligations to the Non-Responsive Investor;
(b) Each Investor by its acceptance of the Registrable Securities
agrees to cooperate with the Company in connection with the preparation and
filing of the Registration Statement hereunder, unless such Investor has
notified the Company in writing of its election to exclude all of its
Registrable Securities from the Registration Statement; and
(c) Each Investor agrees that, upon receipt of any notice from the
Company of the occurrence of any event of the kind described in Section 3(e) or
3(f), it shall immediately discontinue its disposition of Registrable Securities
pursuant to the Registration Statement covering such Registrable Securities
until such Investor's receipt of the copies of the supplemented or amended
Prospectus contemplated by Section 3(e) and, if so directed by the Company, such
Investor shall deliver to the Company (at the expense of the Company) or destroy
(and deliver to the Company a certificate of destruction) all copies in such
Investor's possession, of the Prospectus covering such Registrable Securities
current at the time of receipt of such notice.
5. Expenses of Registration
All expenses, other than underwriting discounts and commissions,
incurred in connection with registrations, filings or qualifications pursuant to
Section 3, but including, without limitation, all registration, listing, and
qualifications fees, printing and engraving fees, accounting fees, and the fees
and disbursements of counsel for the Company, and the reasonable fees of one
firm of counsel to the holders of a majority in interest of the Registrable
Securities shall be borne by the Company.
6. Indemnification and Contribution
(a) The Company shall indemnify and hold harmless each Investor and
each underwriter, if any, which facilitates the disposition of Registrable
Securities, and each of their respective officers and directors and each person
who controls such Investor or underwriter within the meaning of Section 15 of
the Securities Act or Section 20 of the Exchange Act (each such person being
sometimes hereinafter referred to as an "Indemnified Person") from and against
any losses, claims, damages or liabilities, joint or several, to which such
Indemnified Person may become subject under the Securities Act or otherwise,
insofar as such losses, claims, damages or liabilities (or actions in respect
thereof) arise out of or are based upon an untrue statement or alleged untrue
statement of a material fact contained in any Registration Statement or an
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein, not misleading, or
arise out of or are based upon an untrue statement or alleged untrue statement
of a material fact contained in any Prospectus or an omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading; and the Company hereby agrees to
reimburse such Indemnified Person for all reasonable legal and other expenses
incurred by them in connection with investigating or defending any such action
or claim as and when such expenses are incurred; provided, however, that the
Company shall not be liable to any such Indemnified Person in any such case to
the extent that any such loss, claim, damage or liability arises out of or is
based upon (i) an untrue statement or alleged untrue statement made in, or an
omission or
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<PAGE>
alleged omission from, such Registration Statement or Prospectus in reliance
upon and in conformity with written information furnished to the Company by such
Indemnified Person expressly for use therein or (ii) in the case of the
occurrence of an event of the type specified in Section 3(e), the use by the
Indemnified Person of an outdated or defective Prospectus after the Company has
provided to such Indemnified Person an updated Prospectus correcting the untrue
statement or alleged untrue statement or omission or alleged omission giving
rise to such loss, claim, damage or liability.
(b) Indemnification by the Investors and Underwriters. Each Investor
agrees, as a consequence of the inclusion of any of its Registrable Securities
in a Registration Statement, and each underwriter, if any, which facilitates the
disposition of Registrable Securities shall agree, as a consequence of
facilitating such disposition of Registrable Securities, severally and not
jointly, to (i) indemnify and hold harmless the Company, its directors
(including any person who, with his or her consent, is named in the Registration
Statement as a director nominee of the Company), its officers who sign any
Registration Statement and each person, if any, who controls the Company within
the meaning of either Section 15 of the Securities Act or Section 20 of the
Exchange Act, against any losses, claims, damages or liabilities to which the
Company or such other persons may become subject, under the Securities Act or
otherwise, insofar as such losses, claims, damages or liabilities (or actions in
respect thereof) arise out of or are based upon an untrue statement or alleged
untrue statement of a material fact contained in such Registration Statement or
Prospectus or arise out of or are based upon the omission or alleged omission to
state therein 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, in the case of the Prospectus), not misleading, in each case to the
extent, but only to the extent, that such untrue statement or alleged untrue
statement or omission or alleged omission was made in reliance upon and in
conformity with written information furnished to the Company by such holder or
underwriter expressly for use therein; provided, however, that no Investor or
underwriter shall be liable under this Section 6(b) for any amount in excess of
the net proceeds paid to such Investor or underwriter in respect of shares sold
by it, and (ii) reimburse the Company for any legal or other expenses incurred
by the Company in connection with investigating or defending any such action or
claim as such expenses are incurred.
(c) Notice of Claims, etc. Promptly after receipt by a party seeking
indemnification pursuant to this Section 6 (an "Indemnified Party") of written
notice of any investigation, claim, proceeding or other action in respect of
which indemnification is being sought (each, a "Claim"), the Indemnified Party
promptly shall notify the party against whom indemnification pursuant to this
Section 6 is being sought (the "Indemnifying Party") of the commencement
thereof; but the omission to so notify the Indemnifying Party shall not relieve
it from any liability that it otherwise may have to the Indemnified Party,
except to the extent that the Indemnifying Party is materially prejudiced and
forfeits substantive rights and defenses by reason of such failure. In
connection with any Claim as to which both the Indemnifying Party and the
Indemnified Party are parties, the Indemnifying Party shall be entitled to
assume the defense thereof. Notwithstanding the assumption of the defense of
any Claim by the Indemnifying Party, the Indemnified Party shall have the right
to employ separate legal counsel and to participate in the defense of such
Claim, and the Indemnifying Party shall bear the reasonable fees, out-of-pocket
costs and expenses of such separate legal counsel to the Indemnified Party if
(and only if): (x) the Indemnifying Party shall have agreed to pay such fees,
costs and expenses, (y) the Indemnified Party and the Indemnifying Party shall
reasonably have concluded that representation of the Indemnified Party by the
Indemnifying Party by the same legal counsel would not be appropriate due to
actual or,
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<PAGE>
as reasonably determined by legal counsel to the Indemnified Party, potentially
differing interests between such parties in the conduct of the defense of such
Claim, or if there may be legal defenses available to the Indemnified Party that
are in addition to or disparate from those available to the Indemnifying Party,
or (z) the Indemnifying Party shall have failed to employ legal counsel
reasonably satisfactory to the Indemnified Party within a reasonable period of
time after notice of the commencement of such Claim. If the Indemnified Party
employs separate legal counsel in circumstances other than as described in
clauses (x), (y) or (z) above, the fees, costs and expenses of such legal
counsel shall be borne exclusively by the Indemnified Party. Except as provided
above, the Indemnifying Party shall not, in connection with any Claim in the
same jurisdiction, be liable for the fees and expenses of more than one firm of
counsel for the Indemnified Party (together with appropriate local counsel). The
Indemnified Party shall not, without the prior written consent of the
Indemnifying Party (which consent shall not unreasonably be withheld), settle or
compromise any Claim or consent to the entry of any judgment that does not
include an unconditional release of the Indemnifying Party from all liabilities
with respect to such Claim or judgment.
(d) Contribution. If the indemnification provided for in this Section
6 is unavailable to or insufficient to hold harmless an Indemnified Person under
subsection (a) or (b) above in respect of any losses, claims, damages or
liabilities (or actions in respect thereof) referred to therein, then each
Indemnifying Party shall contribute to the amount paid or payable by such
Indemnified Party as a result of such losses, claims, damages or liabilities (or
actions in respect thereof) in such proportion as is appropriate to reflect the
relative fault of the Indemnifying Party and the Indemnified Party in connection
with the statements or omissions which resulted in such losses, claims, damages
or liabilities (or actions in respect thereof), as well as any other relevant
equitable considerations. The relative fault of such Indemnifying Party and
Indemnified Party shall be determined by reference to, among other things,
whether the untrue or alleged untrue statement of a material fact or omission or
alleged omission to state a material fact relates to information supplied by
such Indemnifying Party or by such Indemnified Party, and the parties' relative
intent, knowledge, access to information and opportunity to correct or prevent
such statement or omission. The parties hereto agree that it would not be just
and equitable if contribution pursuant to this Section 6(d) were determined by
pro rata allocation (even if the Investors or any underwriters were treated as
one entity for such purpose) or by any other method of allocation which does not
take account of the equitable considerations referred to in this Section 6(d).
The amount paid or payable by an Indemnified Party as a result of the losses,
claims, damages or liabilities (or actions in respect thereof) referred to above
shall be deemed to include any legal or other fees or expenses reasonably
incurred by such Indemnified Party in connection with investigating or defending
any such action or claim. No person guilty of fraudulent misrepresentation
(within the meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation. The obligations of the Investors and any underwriters in
this Section 6(d) to contribute shall be several in proportion to the percentage
of Registrable Securities registered or underwritten, as the case may be, by
them and not joint.
(e) Notwithstanding any other provision of this Section 6, in no event
shall any (i) Investor be required to undertake liability to any person under
this Section 6 for any amounts in excess of the dollar amount of the proceeds to
be received by such Investor from the sale of such Investor's Registrable
Securities (after deducting any fees, discounts and commissions applicable
thereto) pursuant to any Registration Statement under which such Registrable
Securities are to be registered under the Securities Act and (ii) underwriter be
required to undertake liability to any
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<PAGE>
Person hereunder for any amounts in excess of the aggregate discount, commission
or other compensation payable to such underwriter with respect to the
Registrable Securities underwritten by it and distributed pursuant to the
Registration Statement.
(f) The obligations of the Company under this Section 6 shall be in
addition to any liability which the Company may otherwise have to any
Indemnified Person and the obligations of any Indemnified Person under this
Section 6 shall be in addition to any liability which such Indemnified Person
may otherwise have to the Company. The remedies provided in this Section 6 are
not exclusive and shall not limit any rights or remedies which may otherwise be
available to an indemnified party at law or in equity.
7. Rule 144
With a view to making available to the Investors the benefits of Rule
144 under the Securities Act or any other similar rule or regulation of the
Commission that may at any time permit the Investors to sell securities of the
Company to the public without registration ("Rule 144"), the Company agrees to
use its best efforts to:
(a) comply with the provisions of paragraph (c) (1) of Rule 144; and
(b) file with the Commission in a timely manner all reports and other
documents required to be filed by the Company pursuant to Section 13 or 15(d)
under the Exchange Act; and, if at any time it is not required to file such
reports but in the past had been required to or did file such reports, it will,
upon the request of any Investor, make available other information as required
by, and so long as necessary to permit sales of, its Registrable Securities
pursuant to Rule 144.
8. Assignment
The rights to have the Company register Registrable Securities
pursuant to this Agreement shall be automatically assigned by the Investors to
any permitted transferee of all or any portion of such securities (or all or any
portion of any Preferred Shares or Warrant of the Company which is convertible
into such securities) of Registrable Securities only if: (a) 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, (b) the Company is, within a reasonable time after such
transfer or assignment, furnished with written notice of (i) the name and
address of such transferee or assignee and (ii) the securities with respect to
which such registration rights are being transferred or assigned, (c)
immediately following such transfer or assignment, the securities so transferred
or assigned to the transferee or assignee constitute Restricted Securities, and
(d) at or before the time the Company received the written notice contemplated
by clause (b) of this sentence the transferee or assignee agrees in writing with
the Company to be bound by all of the provisions contained herein.
9. Amendment and Waiver
Any provision of this Agreement may be amended and the observance
thereof may be waived (either generally or in a particular instance and either
retroactively or prospectively), only with the written consent of the Company
and Investors who hold a majority-in-interest of the
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Registrable Securities. Any amendment or waiver effected in accordance with this
Section 9 shall be binding upon each Investor and the Company.
10. Miscellaneous
(a) A person or entity shall be 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) If, after the date hereof and prior to the Commission declaring
the Registration Statement to be filed pursuant to Section 2(a) effective under
the Securities Act, the Company grants to any Person any registration rights
with respect to any Company securities which are more favorable to such other
Person than those provided in this Agreement, then the Company forthwith shall
grant (by means of an amendment to this Agreement or otherwise) identical
registration rights to all Investors hereunder.
(c) Except as may be otherwise provided herein, any notice or other
communication or delivery required or permitted hereunder shall be in writing
and shall be delivered personally or sent by certified mail, postage prepaid, or
by a nationally recognized overnight courier service, and shall be deemed given
when so delivered personally or by overnight courier service, or, if mailed,
three days after the date of deposit in the United States mails, as follows:
(i) if to the Company, to:
Thermatrix Inc.
308 North Peters Road, Suite 100
Knoxville, TN 37922
Attention: Edward E. Greene
(423) 539-9603
(423) 539-9643 (Fax)
with a copy to:
Wilson Sonsini Goodrich & Rosati, PC
650 Page Mill Road
Palo Alto, CA 94304-1050
Attention: Michael J. Danaher, Esq.
(650) 493-9300
(650) 493-6811 (Fax)
(ii) if to the Initial Investor, to:
CIBC WMV Inc.
C/O CIBC World Markets/Merchant Banking
425 Lexington Avenue
New York, NY 10017
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<PAGE>
Attention: Robi Blumenstein
(212) 856-4000
(212) 697-1544 (Fax)
(iii) if to any other Investor, at such address as such Investor shall have
provided in writing to the Company.
The Company, the Initial Investor or any Investor may change the foregoing
address by notice given pursuant to this Section 10(c).
(d) Failure of any party to exercise any right or remedy under this
Agreement or otherwise, or delay by a party in exercising such right or remedy,
shall not operate as a waiver thereof.
(e) This Agreement shall be governed by and interpreted in accordance
with the laws of the State of California. Each of the parties consents to the
jurisdiction of the federal courts whose districts encompass any part of San
Mateo County or the state courts of the State of California in connection with
any dispute arising under this Agreement and hereby waives, to the maximum
extent permitted by law, any objection including any objection based on forum
non conveniens, to the bringing of any such proceeding in such jurisdictions.
(f) The remedies provided in this Agreement are cumulative and not
exclusive of any remedies provided by law. If any term, provision, covenant or
restriction of this Agreement is held by a court of competent jurisdiction to be
invalid, illegal, void or unenforceable, the remainder of the terms, provisions,
covenants and restrictions set forth herein shall remain in full force and
effect and shall in no way be affected, impaired or invalidated, and the parties
hereto shall use their best efforts to find and employ an alternative means to
achieve the same or substantially the same result as that contemplated by such
term, provision, covenant or restriction. It is hereby stipulated and declared
to be the intention of the parties that they would have executed the remaining
terms, provisions, covenants and restrictions without including any of such that
may be hereafter declared invalid, illegal, void or unenforceable.
(g) The Company shall not enter into any agreement with respect to
its securities that is inconsistent with the rights granted to the holders of
Registrable Securities in this Agreement or otherwise conflicts with the
provisions hereof. The Company is not currently a party to any agreement
granting any registration rights with respect to any of its securities to any
person which conflicts with the Company's obligations hereunder or gives any
other party the right to include any securities in any Registration Statement
filed pursuant hereto, except for such rights and conflicts as have been
irrevocably waived. Without limiting the generality of the foregoing, without
the written consent of the holders of a majority in interest of the Registrable
Securities, the Company shall not grant to any person the right to request it to
register any of its securities under the Securities Act unless the rights so
granted are subject in all respect to the prior rights of the holders of
Registrable Securities set forth herein, and are not otherwise in conflict or
inconsistent with the provisions of this Agreement. The restrictions on the
Company's rights to grant registration rights under this paragraph shall
terminate on the date the Registration Statement to be filed pursuant to Section
2(a) is declared effective by the Commission.
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<PAGE>
(h) This Agreement, the Securities Purchase Agreement, the Escrow
Instructions, dated as of a date even herewith (the "Escrow Instructions"),
between the Company, the Initial Investor andWilson Sonsini Goodrich & Rosati,
the Preferred Shares and the Warrants constitute the entire agreement among the
parties hereto with respect to the subject matter hereof. There are no
restrictions, promises, warranties or undertakings, other than those set forth
or referred to herein. This Agreement, the Securities Purchase Agreement, the
Escrow Instructions, the Certificate of Designation and the Warrants supersede
all prior agreements and undertakings among the parties hereto with respect to
the subject matter hereof.
(i) Subject to the requirements of Section 8 hereof, this Agreement
shall inure to the benefit of and be binding upon the successors and assigns of
each of the parties hereto.
(j) All pronouns and any variations thereof refer to the masculine,
feminine or neuter, singular or plural, as the context may require.
(k) The headings in this Agreement are for convenience of reference
only and shall not limit or otherwise affect the meaning thereof.
(1) The Company acknowledges that any failure by the Company to
perform its obligations under Section 3, or any delay in such performance could
result in direct damages to the Investors and the Company agrees that, in
addition to any other liability the Company may have by reason of any such
failure or delay, the Company shall be liable for all direct damages caused by
such failure or delay.
(m) This Agreement may be executed in two or more counterparts, each
of which shall be deemed an original but all of which shall constitute one and
the same agreement. A facsimile transmission of this signed Agreement shall be
legal and binding on all parties hereto.
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In Witness Whereof, the parties have caused this Agreement to be duly
executed and delivered as of the date first above written.
Thermatrix Inc.
By:___________________________________________
Name:
Title:
CIBC WMV Inc.
By:___________________________________________
Name:
Title:
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EXHIBIT 4.3
CERTIFICATE OF DESIGNATION
OF
SERIES E 8% CONVERTIBLE PREFERRED STOCK
OF
THERMATRIX INC.
----------------------------------------------------
Pursuant to Section 151 of the
General Corporation Law of the State of Delaware
----------------------------------------------------
Thermatrix Inc., a corporation organized and existing under the
General Corporation Law of the State of Delaware (the "Corporation"), hereby
certifies that the following resolutions were adopted by the Board of Directors
of the Corporation on June 18, 1999 pursuant to authority of the Board of
Directors as required by Section 151 of the General Corporation Law of the State
of Delaware:
Resolved, that pursuant to the authority granted to and vested in the
Board of Directors of this Corporation (the "Board of Directors" or the "Board")
in accordance with the provisions of its Certificate of Incorporation, the Board
of Directors hereby authorizes a series of the Corporation's previously
authorized Preferred Stock, par value $.001 per share (the "Preferred Stock"),
and hereby states the designation and number of shares, and fixes the relative
rights, preferences, privileges, powers and restrictions thereof as follows:
Series E 8% Convertible Preferred Stock:
1. Definitions
The terms defined in this Article whenever used in this Certificate of
Designation have the following respective meanings:
(i) "Additional Capital Shares" has the meaning set forth in
Section 6.1(c).
(ii) "Affiliate" has the meaning ascribed to such term in Rule
12b-2 under the Securities Exchange Act of 1934, as amended.
(iii) "Business Day" means a day other than Saturday, Sunday or
any day on which banks located in the State of New York are authorized or
obligated to close.
(iv) "Capital Shares" means the Common Shares and any other
shares of any other class or series of common stock, whether now or hereafter
authorized and however designated, which have the right to participate in the
distribution of earnings and assets (upon dissolution, liquidation or winding-
up) of the Corporation.
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(v) "Closing Date" means June 30, 1999.
(vi) "Common Shares" or "Common Stock" means shares of common
stock, par value $.001 per share, of the Corporation.
(vii) "Common Stock Issued at Conversion" when used with
reference to the securities issuable upon conversion of the Series E Preferred
Stock, means all Common Shares now or hereafter Outstanding and securities of
any other class or series into which the Series E Preferred Stock hereafter
shall have been changed or substituted, whether now or hereafter created and
however designated.
(viii) "Conversion Date" means any day on which all or any
portion of shares of the Series E Preferred Stock is converted in accordance
with the provisions hereof.
(ix) "Conversion Notice" has the meaning set forth in Section
6.2.
(x) "Conversion Price" means on any date of determination the
applicable price for the conversion of shares of Series E Preferred Stock into
Common Shares on such day as set forth in Section 6.1.
(xi) "Conversion Ratio" means on any date of determination the
applicable percentage of the Market Price for conversion of shares of Series E
Preferred Stock into Common Shares on such day as set forth in Section 6.1.
(xii) "Corporation" means Thermatrix Inc., a Delaware
corporation, and any successor or resulting corporation by way of merger,
consolidation, sale or exchange of all or substantially all of the Corporation's
assets, or otherwise.
(xiii) "Current Market Price" means on any date of determination
the closing bid price of a Common Share on such day as reported on the Nasdaq
National Market ("Nasdaq"); provided, if such security bid is not listed or
admitted to trading on the Nasdaq, as reported on the principal national
security exchange or quotation system on which such security is quoted or listed
or admitted to trading, or, if not quoted or listed or admitted to trading on
any national securities exchange or quotation system, the closing bid price of
such security on the over-the-counter market on the day in question as reported
by Bloomberg LP, or a similar generally accepted reporting service, as the case
may be.
(xiv) "Default Dividend Rate" shall be equal to the Preferred
Stock Dividend Rate plus an additional 4% per annum.
(xv) "Holder" means a holder of Series E Preferred Stock, any
successor thereto, or any Person or Persons to whom the Series E Preferred Stock
is subsequently transferred in accordance with the provisions hereof.
(xvi) "Market Disruption Event" means any event that results in
a material suspension or limitation of trading of the Common Shares on Nasdaq.
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(xvii) "Market Price" per Common Share means the arithmetic mean
of the lowest closing bid prices of the Common Shares as reported on Nasdaq for
15 Trading Days during any Valuation Period, it being understood that such 15
Trading Days during any Valuation Period need not be consecutive; provided, if
such security bid is not listed or admitted to trading on the Nasdaq, as
reported on the principal national security exchange or quotation system on
which such security is quoted or listed or admitted to trading, or, if not
quoted or listed or admitted to trading on any national securities exchange or
quotation system, the closing bid price of such security on the over-the-counter
market on the day in question as reported by Bloomberg LP, or a similar
generally accepted reporting service, as the case may be, for 15 Trading Days
during any Valuation Period, it being understood that such 15 Trading Days
during any Valuation Period need not be consecutive.
(xviii) "Outstanding" when used with reference to Common Shares
or Capital Shares (collectively, "Shares"), means, on any date of determination,
all issued and outstanding Shares, and includes all such Shares issuable in
respect of outstanding scrip or any certificates representing fractional
interests in such Shares; provided, however, that any such Shares directly or
indirectly owned or held by or for the account of the Corporation or any
Subsidiary of the Corporation shall not be deemed "Outstanding" for purposes
hereof.
(xix) "Person" means an individual, a corporation, a
partnership, an association, a limited liability company, an unincorporated
business organization, a trust or other entity or organization, and any
government or political subdivision or any agency or instrumentality thereof.
(xx) "Registration Rights Agreement" means that certain
Registration Rights Agreement dated a date even herewith between the Corporation
and The Shaar Fund Ltd.
(xxi) "SEC" means the United States Securities and Exchange
Commission.
(xxii) "Securities Act" means the Securities Act of 1933, as
amended, and the rules and regulations of the SEC thereunder, all as in effect
at the time.
(xxiii) "Securities Purchase Agreement" means that certain
Securities Purchase Agreement dated a date even herewith between the Corporation
and The Shaar Fund Ltd.
(xxiv) "Series E Preferred Shares" or "Series E Preferred Stock"
means the shares of Series E 8% Convertible Preferred Stock of the Corporation
or such other convertible Preferred Stock exchanged therefor.
(xxv) "Stated Value" has the meaning set forth in Article 2.
(xxvi) "Subsidiary" means any entity of which securities or
other ownership interests having ordinary voting power to elect a majority of
the board of directors or other persons performing similar functions are owned
directly or indirectly by the Corporation.
(xxvii) "Trading Day" means any day on which purchases and sales
of securities authorized for quotation on Nasdaq are reported thereon and on
which no Market Disruption Event has occurred.
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(xxviii) "Valuation Event" has the meaning set forth in Section
6.1.
(xxix) "Valuation Period" means the 30 Trading Day period
immediately preceding the Conversion Date.
All references to "cash" or "$" herein means currency of the United
States of America.
2. Designation and Amount
The designation of this series, which consists of 12,000 shares of
Preferred Stock, is Series E 8% Convertible Preferred Stock (the "Series E
Preferred Stock") and the stated value shall be $1,000 per share (the "Stated
Value").
3. Rank
The Series E Preferred Stock shall rank (i) prior to the Common Stock;
(ii) prior to any class or series of capital stock of the Corporation hereafter
created other than "Pari Passu Securities" (collectively, with the Common Stock,
"Junior Securities"); and (iii) pari passu with any class or series of capital
stock of the Corporation hereafter created specifically ranking on parity with
the Series E Preferred Stock ("Pari Passu Securities").
4. Dividends
(i) The Holder shall be entitled to receive, when, as and if
declared by the Board of Directors, out of funds legally available for the
payment of dividends, dividends (subject to Article 4(a)(ii) hereof) at the
rate of 8% per annum (computed on the basis of a 360-day year) (the
"Dividend Rate") on the Liquidation Value (as defined below) of each share
of Series E Preferred Stock on and as of the most recent Dividend Payment
Due Date (as defined below) with respect to each Dividend Period (as
defined below). Dividends on the Series E Preferred Stock shall be
cumulative from the date of issue, whether or not declared for any reason,
including if such declaration is prohibited under any outstanding
indebtedness or borrowings of the Corporation or any of its Subsidiaries,
or any other contractual provision binding on the Corporation or any of its
Subsidiaries, and whether or not there shall be funds legally available for
the payment thereof.
(ii) Each dividend shall be payable in equal quarterly amounts
on each March 31, June 30, September 30 and December 31 of each year (each,
a "Dividend Payment Due Date"), commencing September 30, 1999, to the
holders of record of shares of the Series E Preferred Stock, as they appear
on the stock records of the Corporation at the close of business on any
record date, not more than 60 days or less than 10 days preceding the
payment dates thereof, as shall be fixed by the Board of Directors. For the
purposes hereof, "Dividend Period" means the quarterly period commencing on
and including the Issue Date (as defined below) or, if a dividend has
previously been paid, the day after the
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immediately preceding Dividend Payment Due Date and ending on and including
the immediately subsequent Dividend Payment Due Date. Accrued and unpaid
dividends for any past Dividend Period may be declared and paid at any
time, without reference to any Dividend Payment Due Date, to holders of
record on such date, not more than 15 days preceding the payment date
thereof, as may be fixed by the Board of Directors.
(iii) At the option of the Corporation, the dividend shall be
paid in cash or through the issuance of duly and validly authorized and
issued, fully paid and nonassessable, freely tradeable shares of the Common
Stock valued at the Market Price. The Common Stock to be issued in lieu of
cash payments shall be registered for resale in the Registration Statement
(as defined in the Registration Rights Agreement) to be filed by the
Corporation to register the Common Stock issuable upon conversion of the
shares of Series E Preferred Stock and exercise of the Warrants as set
forth in the Registration Rights Agreement. Notwithstanding the foregoing,
until such Registration Statement (as defined in the Registration Rights
Agreement) has been declared effective under the Securities Act by the SEC,
payment of dividends on the Series E Preferred Stock shall be in cash.
(iv) Except as provided in Section 4(e) hereof, the Holder shall
not be entitled to any dividends in excess of the cumulative dividends, as
herein provided, on the Series E Preferred Stock. Except as provided in
this Article 4, no interest, or sum of money in lieu of interest, shall be
payable in respect of any dividend payment or payments on the Series E
Preferred Stock that may be in arrears.
(v) So long as any shares of the Series E Preferred Stock are
outstanding, no dividends, except as described in the next succeeding sentence,
shall be declared or paid or set apart for payment on Pari Passu Securities for
any period unless full cumulative dividends required to be paid in cash have
been or contemporaneously are declared and paid or declared and a sum sufficient
for the payment thereof set apart for such payment on the Series E Preferred
Stock for all Dividend Periods terminating on or prior to the date of payment of
the dividend on such class or series of Pari Passu Securities. When dividends
are not paid in full or a sum sufficient for such payment is not set apart, as
aforesaid, all dividends declared upon shares of the Series E Preferred Stock
and all dividends declared upon any other class or series of Pari Passu
Securities shall be declared ratably in proportion to the respective amounts of
dividends accumulated and unpaid on the Series E Preferred Stock and accumulated
and unpaid on such Pari Passu Securities.
(vi) So long as any shares of the Series E Preferred Stock are
outstanding, no dividends shall be declared or paid or set apart for payment or
other distribution declared or made upon Junior Securities, nor shall any Junior
Securities be redeemed, purchased or otherwise acquired (other than a
redemption, purchase or other acquisition of shares of Common Stock made for
purposes of an employee incentive or benefit plan (including a stock option
plan) of the Corporation or any subsidiary), (all such dividends, distributions,
redemptions or purchases being hereinafter referred to as a "Junior Securities
Distribution") for any consideration (or any moneys be paid to or made available
for a sinking fund for the redemption of any shares of any such stock) by the
Corporation, directly or indirectly, unless in each case (i) the full cumulative
dividends required to be paid in cash on all outstanding shares of the Series E
Preferred Stock and any other Pari Passu Securities shall have been paid or set
apart for payment for all past Dividend Periods with respect to the Series E
Preferred Stock and all past dividend periods with respect to such Pari Passu
Securities,
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and (ii) sufficient funds shall have been paid or set apart for the payment of
the dividend for the current Dividend Period with respect to the Series E
Preferred Stock and the current dividend period with respect to such Pari Passu
Securities.
(v) If at any time the Corporation shall declare or pay a
dividend on, or other distribution on, the Common Shares payable in Common
Shares (a "Stock Dividend"), the Board of Directors shall declare a dividend
(the "Series E Stock Dividend") on the aggregate Series E Preferred Shares then
outstanding of that number of Common Shares equal to the number of Common Shares
the Holder would have received had it converted all its then outstanding Series
E Preferred Shares, and exercised the Warrant in full for all the Common Shares
then underlying the Warrant, immediately prior to the Stock Dividend. The Series
E Stock Dividend shall be payable to the Holder concurrently with the payment of
the Stock Dividend to the holders of Common Shares, and the Common Shares issued
pursuant to the Series E Stock Dividend shall be duly and validly authorized and
issued, fully paid and nonassessable.
5. Liquidation Preference
(i) If the Corporation shall commence a voluntary case under the
Federal bankruptcy laws or any other applicable Federal or state bankruptcy,
insolvency or similar law, or consent to the entry of an order for relief in an
involuntary case under any law or to the appointment of a receiver, liquidator,
assignee, custodian, trustee, sequestrator (or other similar official) of the
Corporation or of any substantial part of its property, or make an assignment
for the benefit of its creditors, or admit in writing its inability to pay its
debts generally as they become due, or if a decree or order for relief in
respect of the Corporation shall be entered by a court having jurisdiction in
the premises in an involuntary case under the Federal bankruptcy laws or any
other applicable Federal or state bankruptcy, insolvency or similar law
resulting in the appointment of a receiver, liquidator, assignee, custodian,
trustee, sequestrator (or other similar official) of the Corporation or of any
substantial part of its property, or ordering the winding up or liquidation of
its affairs, and any such decree or order shall be unstayed and in effect for a
period of 30 consecutive days and, on account of any such event, the Corporation
shall liquidate, dissolve or wind up, or if the Corporation shall otherwise
liquidate, dissolve or wind up (each such event being considered a "Liquidation
Event"), no distribution shall be made to the holders of any shares of capital
stock of the Corporation upon liquidation, dissolution or winding-up unless
prior thereto, the holders of shares of Series E Preferred Stock, subject to
this Article 5, shall have received the Liquidation Preference (as defined in
Article 5(c)) with respect to each share. If upon the occurrence of a
Liquidation Event, the assets and funds available for distribution among the
holders of the Series E Preferred Stock and holders of Pari Passu Securities
shall be insufficient to permit the payment to such holders of the preferential
amounts payable thereon, then the entire assets and funds of the Corporation
legally available for distribution to the Series E Preferred Stock and the Pari
Passu Securities shall be distributed ratably among such shares in proportion to
the ratio that the Liquidation Preference payable on each such share bears to
the aggregate Liquidation Preference payable on all such shares.
(ii) At the option of each Holder, the sale, conveyance of
disposition of all or substantially all of the assets of the Corporation, the
effectuation by the Corporation of a transaction or series of related
transactions in which more than 50% of the voting power of the Corporation is
disposed of, or the consolidation, merger or other business combination of the
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Corporation with or into any other Person or Persons when the Corporation is not
the survivor shall either: (i) be deemed to be a liquidation, dissolution or
winding up of the Corporation pursuant to which the Corporation shall be
required to distribute, upon consummation of and as a condition to, such
transaction an amount equal to 120% of the Liquidation Preference with respect
to each outstanding share of Series E Preferred Stock in accordance with and
subject to the terms of this Article 5 or (ii) be treated pursuant to Article
5(c)(iii) hereof; provided, that all holders of Series E Preferred Stock shall
be deemed to elect the option set forth in clause (i) hereof if at least a
majority in interest of such holders elect such option.
(iii) For purposes hereof, the "Liquidation Preference" with
respect to a share of the Series E Preferred Stock shall mean an amount equal to
the sum of (i) the Stated Value thereof, plus (ii) an amount equal to 30% of
such Stated Value, plus (iii) the aggregate of all accrued and unpaid dividends
on such share of Series E Preferred Stock until the most recent Dividend Payment
Due Date; provided that, in the event of an actual liquidation, dissolution or
winding up of the Corporation, the amount referred to in clause (iii) above
shall be calculated by including accrued and unpaid dividends to the actual date
of such liquidation, dissolution or winding up, rather than the Dividend Payment
Due Date referred to above.
6. Conversion of Preferred Stock
(a) Conversion; Conversion Price
At the option of the Holder, the shares of Preferred Stock may be
converted, either in whole or in part, into Common Shares (calculated as to each
such conversion to the nearest 1/100th of a share), at any time, and from time
to time following the 210th day after the date of issuance of the Series E
Preferred Stock (the "Issue Date") at a Conversion Price per share of Common
Stock equal to the lessor of: (i) $5.00, or (ii) 85% of the Market Price;
provided that any unconverted Series E Preferred Stock remaining 12 months after
the Issue Date may be converted, at the sole option of the Holder, at a
Conversion Price per share of Common Stock equal to 75% of the Market Price;
and, provided, further, that if the Corporation's Common Stock is delisted off
of Nasdaq and remains delisted for 45 consecutive days (the "Minimum Delisting
Period"), for any reason, then any remaining unconverted Series E Preferred
Stock, as of the first day of the Minimum Delisting Period, may be converted, at
the sole option of the Holder, at a Conversion Price per share of Common Stock
equal to 65% of the Market Price and any amounts paid by the Holder to convert
Series E Preferred Stock during the Minimum Delisting Period in excess of that
which would have been paid at a Conversion Price per share of Common Stock equal
to 65% of the Market Price shall be refunded to the Holder as soon as
practicable, but in any event within 15 days of the last day of the Minimum
Delisting Period. At the Corporation's option, the amount of accrued and unpaid
dividends as of the Conversion Date shall not be subject to conversion but
instead may be paid in cash as of the Conversion Date; if the Corporation elects
to convert the amount of accrued and unpaid dividends at the Conversion Date
into Common Stock, the Common Stock issued to the Holder shall be valued at the
applicable Conversion Price.
The Holder of the Series E Preferred Stock may exercise its right of
conversion of such shares as follows: (i) 50% of the aggregate number of Series
E Preferred Shares issued to the Holder up to 210 days after the Issue Date and
(ii) thereafter, 100% of the aggregate number of
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Series E Preferred Shares issued to the Holder; provided, however, that the
Series E Preferred Stock may not be converted on or before the 150th day after
the Issue Date.
The number of shares of Common Stock due upon conversion of Series E
Preferred Stock shall be (i) the number of shares of Series E Preferred Stock to
be converted, multiplied by (ii) the Stated Value and divided by (iii) the
applicable Conversion Price.
Within two Business Days of the occurrence of a Valuation Event, the
Corporation shall send notice (the "Valuation Event Notice") of such occurrence
to the Holder. Notwithstanding anything to the contrary contained herein, if a
Valuation Event occurs during any Valuation Period, a new Valuation Period shall
begin on the Trading Day immediately following the occurrence of such Valuation
Event and end on the Conversion Date; provided that, if a Valuation Event occurs
on the fifth day of any Valuation Period, then the Conversion Price shall be the
Current Market Price of the Common Shares on such day; and provided, further,
that the Holder may, in its discretion, postpone such Conversion Date to a
Trading Day which is no more than five Trading Days after the occurrence of the
latest Valuation Event by delivering a notification to the Corporation within
two Business Days of the receipt of the Valuation Event Notice. In the event
that the Holder deems the Valuation Period to be other than the five Trading
Days immediately prior to the Conversion Date, the Holder shall give written
notice of such fact to the Corporation in the related Conversion Notice at the
time of conversion.
For purposes of this Section 6.1, a "Valuation Event" shall mean an
event in which the Corporation at any time during a Valuation Period takes any
of the following actions:
(i) subdivides or combines its Capital Shares;
(ii) makes any distribution on its Capital Shares;
(iii) issues any additional Capital Shares (the "Additional
Capital Shares"), otherwise than as provided in the foregoing Sections 6.1(a)
and 6.1(b) above, at a price per share less, or for other consideration lower,
than the Current Market Price in effect immediately prior to such issuances, or
without consideration, except for issuances under employee benefit plans
consistent with those presently in effect and issuances under presently
outstanding warrants, options or convertible securities;
(iv) issues any warrants, options or other rights to subscribe
for or purchase any Additional Capital Shares and the price per share for which
Additional Capital Shares may at any time thereafter be issuable pursuant to
such warrants, options or other rights shall be less than the Current Market
Price in effect immediately prior to such issuance;
(v) issues any securities convertible into or exchangeable or
exercisable for Additional Capital Shares and the consideration per share for
which Additional Capital Shares may at any time thereafter be issuable pursuant
to the terms of such convertible, exchangeable or exercisable securities shall
be less than the Current Market Price in effect immediately prior to such
issuance;
(vi) makes a distribution of its assets or evidences of
indebtedness to the holders of its Capital Shares as a dividend in liquidation
or by way of return of capital or other than
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as a dividend payable out of earnings or surplus legally available for the
payment of dividends under applicable law or any distribution to such holders
made in respect of the sale of all or substantially all of the Corporation's
assets (other than under the circumstances provided for in the foregoing
Sections 6.1(a) through 6.1(e)); or
(vii) takes any action affecting the number of Outstanding
Capital Shares, other than an action described in any of the foregoing Sections
6.1(a) through 6.1(f) hereof, inclusive, which in the opinion of the
Corporation's Board of Directors, determined in good faith, would have a
material adverse effect upon the rights of the Holder at the time of a
conversion of the Preferred Stock.
(b) Exercise of Conversion Privilege
(i) Conversion of the Series E Preferred Stock may be
exercised, in whole or in part, by the Holder by telecopying an executed and
completed notice of conversion in the form annexed hereto as Annex I (the
"Conversion Notice") to the Corporation. Each date on which a Conversion Notice
is telecopied to the Corporation in accordance with the provisions of this
Section 6.2 shall constitute a Conversion Date. The Corporation shall convert
the Preferred Stock and issue the Common Stock Issued at Conversion, and all
voting and other rights associated with the beneficial ownership of the Common
Stock Issued at Conversion shall vest with the Holder, effective as of the
Conversion Date at the time specified in the Conversion Notice. The Conversion
Notice also shall state the name or names (with addresses) of the persons who
are to become the holders of the Common Stock Issued at Conversion in connection
with such conversion. The Holder shall deliver the shares of Series E Preferred
Stock to the Corporation by express courier within 30 days following the date on
which the telecopied Conversion Notice has been transmitted to the Corporation.
Upon surrender for conversion, the Preferred Stock shall be accompanied by a
proper assignment thereof to the Corporation or be endorsed in blank. As
promptly as practicable after the receipt of the Conversion Notice as aforesaid,
but in any event not more than five Business Days after the Corporation's
receipt of such Conversion Notice, the Corporation shall (i) issue the Common
Stock issued at Conversion in accordance with the provisions of this Article 6,
and (ii) cause to be mailed for delivery by overnight courier to the Holder (x)
a certificate or certificate(s) representing the number of Common Shares to
which the Holder is entitled by virtue of such conversion, (y) cash, as provided
in Section 6.3, in respect of any fraction of a Common Share issuable upon such
conversion and (z) cash in the amount of accrued and unpaid dividends as of the
Conversion Date. Such conversion shall be deemed to have been effected at the
time at which the Conversion Notice indicates so long as the Series E Preferred
Stock shall have been surrendered as aforesaid at such time, and at such time
the rights of the Holder of the Series E Preferred Stock, as such, shall cease
and the Person or Persons in whose name or names the Common Stock Issued at
Conversion shall be issuable shall be deemed to have become the holder or
holders of record of the Common Shares represented thereby and all voting and
other rights associated with the beneficial ownership of such Common Shares
shall at such time vest with such Person or Persons. The Conversion Notice shall
constitute a contract between the Holder and the Corporation, whereby the Holder
shall be deemed to subscribe for the number of Common Shares which it will be
entitled to receive upon such conversion and, in payment and satisfaction of
such subscription (and for any cash adjustment to which it is entitled pursuant
to Section 6.4), to surrender the Series E Preferred Stock and to release the
Corporation from all liability thereon. No cash payment aggregating less than
$1.00 shall be required to be given unless specifically requested by the Holder.
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(ii) If, at any time (i) the Corporation challenges, disputes or
denies the right of the Holder hereof to effect the conversion of the Series E
Preferred Stock into Common Shares or otherwise dishonors or rejects any
Conversion Notice delivered in accordance with this Section 6.2 or (ii) any
third party who is not and has never been an Affiliate of the Holder commences
any lawsuit or proceeding or otherwise asserts any claim before any court or
public or governmental authority which seeks to challenge, deny, enjoin, limit,
modify, delay or dispute the right of the Holder hereof to effect the conversion
of the Series E Preferred Stock into Common Shares, then the Holder shall have
the right, by written notice to the Corporation, to require the Corporation to
promptly redeem the Series E Preferred Stock for cash at a redemption price
equal to 130% of the Stated Value thereof together with all accrued and unpaid
dividends thereon (the "Mandatory Purchase Amount"). Under any of the
circumstances set forth above, the Corporation shall be responsible for the
payment of all costs and expenses of the Holder, including reasonable legal fees
and expenses, as and when incurred in disputing any such action or pursuing its
rights hereunder (in addition to any other rights of the Holder).
(c) Fractional Shares
No fractional Common Shares or scrip representing fractional Common
Shares shall be issued upon conversion of the Series E Preferred Stock. Instead
of any fractional Common Shares which otherwise would be issuable upon
conversion of the Series E Preferred Stock, the Corporation shall pay a cash
adjustment in respect of such fraction in an amount equal to the same fraction.
No cash payment of less than $1.00 shall be required to be given unless
specifically requested by the Holder.
(d) Reclassification, Consolidation, Merger or Mandatory Share
Exchange
At any time while the Series E Preferred Stock remains outstanding and
any shares thereof have not been converted, in case of any reclassification or
change of Outstanding Common Shares issuable upon conversion of the Series E
Preferred Stock (other than a change in par value, or from par value to no par
value per share, or from no par value per share to par value or as a result of a
subdivision or combination of outstanding securities issuable upon conversion of
the Series E Preferred Stock) or in case of any consolidation, merger or
mandatory share exchange of the Corporation with or into another corporation
(other than a merger or mandatory share exchange with another corporation in
which the Corporation is a continuing corporation and which does not result in
any reclassification or change, other than a change in par value, or from par
value to no par value per share, or from no par value per share to par value, or
as a result of a subdivision or combination of Outstanding Common Shares upon
conversion of the Series E Preferred Stock), or in the case of any sale or
transfer to another corporation of the property of the Corporation as an
entirety or substantially as an entirety, the Corporation, or such successor,
resulting or purchasing corporation, as the case may be, shall, without benefit
of any additional consideration therefor, execute a new Preferred Stock
providing that the Holder shall have the right to convert such new Preferred
Stock (upon terms and conditions not less favorable to the Holder than those in
effect pursuant to the Series E Preferred Stock) and to receive upon such
exercise, in lieu of each Common Share theretofore issuable upon conversion of
the Series E Preferred Stock, the kind and amount of shares of stock, other
securities, money or property receivable upon such reclassification, change,
consolidation, merger, mandatory share exchange, sale or transfer by the holder
of one Common Share issuable upon conversion of the Series E Preferred Stock had
the Series E Preferred Stock
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been converted immediately prior to such reclassification, change,
consolidation, merger, mandatory share exchange or sale or transfer. The
provisions of this Section 6.4 shall similarly apply to successive
reclassifications, changes, consolidations, mergers, mandatory share exchanges
and sales and transfers.
(e) Adjustments to Conversion Ratio
For so long as any shares of the Series E Preferred Stock are
outstanding, if the Corporation: (i) issues and sells pursuant to an exemption
from registration under the Securities Act (A) Common Shares at a purchase price
on the date of issuance thereof that is lower than the Conversion Price, (B)
warrants or options with an exercise price representing a percentage of the
Current Market Price with an exercise price on the date of issuance of the
warrants or options that is lower than the agreed upon exercise price for the
Holder, except for employee stock option agreements or stock incentive
agreements of the Corporation, or (C) convertible, exchangeable or exercisable
securities with a right to exchange at lower than the Current Market Price on
the date of issuance or conversion, as applicable, of such convertible,
exchangeable or exercisable securities, except for stock option agreements or
stock incentive agreements; and (ii) grants the right to the purchaser(s)
thereof to demand that the Corporation register under the Securities Act such
Common Shares issued or the Common Shares for which such warrants or options may
be exercised or such convertible, exchangeable or exercisable securities may be
converted, exchanged or exercised, then the Conversion Ratio shall be reduced to
equal the lowest of any such lower rates.
(f) Optional Redemption Under Certain Circumstances
At any time after the date of issuance of the Series E Preferred Stock
until the Mandatory Conversion Date (as defined below), the Corporation, upon
notice delivered to all Holders as provided in Section 6.7, may redeem, in cash,
the Series E Preferred Stock in whole or in part (but only with respect to such
shares as to which the Holder has not theretofore furnished a Conversion Notice
in compliance with Section 6.2), at 130% of the Stated Value thereof (the
"Optional Redemption Price"), together with all accrued and unpaid dividends
thereon to the date of redemption (the "Redemption Date"); provided, however,
that the Corporation may only redeem the Series E Preferred Stock under this
Section 6.6 if the Current Market Price is less than the Current Market Price on
the Closing Date. Except as set forth in this Section 6.6, the Corporation
shall not have the right to prepay or redeem the Series E Preferred Stock. Any
redemption pursuant to this Section 6.6 shall be made by the Corporation to all
Holders at the same time and on the same basis, and in the event that the
Corporation redeems less than all of the outstanding Series E Preferred Shares,
the Corporation shall redeem each Holder's Series E Preferred Shares on a pro
rata basis.
(g) Notice of Redemption
Notice of redemption pursuant to Section 6.6 shall be provided by the
Corporation to the Holder in writing (by registered mail or overnight courier at
the Holder's last address appearing in the Corporation's security registry) not
less than 10 nor more than 15 days prior to the Redemption Date, which notice
shall specify the Redemption Date and refer to Section 6.6 (including a
statement of the Market Price per Common Share) and this Section 6.7.
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(h) Surrender of Preferred Stock
Upon any redemption of the Series E Preferred Stock pursuant to
Sections 6.6 or 6.7, the Holder shall either deliver the Series E Preferred
Stock by hand to the Corporation at its principal executive offices or surrender
the same to the Corporation at such address by express courier. Payment of the
optional Redemption Price specified in Section 6.6 shall be made by the
Corporation to the Holder against receipt of the Series E Preferred Stock (as
provided in this Section 6.8) by wire transfer of immediately available funds to
such account(s) as the Holder shall specify to the Corporation. If payment of
such redemption price is not made in full by the Mandatory Redemption Date or
the Redemption Date, as the case may be, the Holder shall again have the right
to convert the Series E Preferred Stock as provided in Article 6 hereof.
(i) Mandatory Conversion
On the third anniversary of the date of this Agreement (the "Mandatory
Conversion Date"), the Corporation shall convert all Series E Preferred Stock
outstanding at the Conversion Price.
(j) Certain Conversion Limitations
(k) Notwithstanding anything herein to the contrary, the Holder
shall not have the right, and the Corporation shall not have the obligation, to
convert all or any portion of the Series E Preferred Stock (and the Corporation
shall not have the right to pay dividends on the Series E Preferred Stock in
shares of Common Stock) if and to the extent that the issuance to the Holder of
shares of Common Stock upon such conversion (or payment of dividends) would
result in the Holder being deemed the "beneficial owner" of more than 5% of the
then outstanding shares of Common Stock within the meaning of Section 13(d) of
the Securities Exchange Act of 1934, as amended, and the rules promulgated
thereunder. If any court of competent jurisdiction shall determine that the
foregoing limitation is ineffective to prevent a Holder from being deemed the
beneficial owner of more than 5% of the then outstanding shares of Common Stock,
then the Corporation shall redeem so many of such Holder's shares (the
"Redemption Shares") of Series E Preferred Stock as are necessary to cause such
Holder to be deemed the beneficial owner of not more than 5% of the then
outstanding shares of Common Stock. Upon such determination by a court of
competent jurisdiction, the Redemption Shares shall immediately and without
further action be deemed returned to the status of authorized but unissued
shares of Series E Preferred Stock, and the Holder shall have no interest in or
rights under such Redemption Shares. Any and all dividends paid on or prior to
the date of such determination shall be deemed dividends paid on the remaining
shares of Series E Preferred Stock held by the Holder. Such redemption shall be
for cash at a redemption price equal to the sum of (i) the Stated Value of the
Redemption Shares and (ii) any accrued and unpaid dividends to the date of such
redemption; provided, however, if the redemption is a result of the mandatory
conversion pursuant to Section 6.9, the Corporation may either (i) make such
redemption in cash at a redemption price equal to the sum of (x) 130% of the
Stated Value of such shares and (y) any accrued and unpaid dividends to the date
of such redemption or (ii) extend the Mandatory Conversion Date for a period of
one year.
(l) Unless the Corporation shall have obtained the approval of its
voting stockholders to such issuance in accordance with the rules of the Nasdaq
or such other stock market
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with which the Corporation shall be required to comply, but only to the extent
required thereby, the Corporation shall not issue shares of Common Stock (i)
upon conversion of any shares of Series E Preferred Stock or (ii) as a dividend
on the Series E Preferred Stock, if such issuance of Common Stock, when added to
the number of shares of Common Stock previously issued by the Corporation (i)
upon conversion of shares of the Series E Preferred Stock, (ii) upon exercise of
the Warrants issued pursuant to the terms of the Securities Purchase Agreement
and (iii) in payment of dividends on the Series E Preferred Stock, would equal
or exceed 20% of the number of shares of the Corporation's Common Stock which
were issued and outstanding on the Closing Date (the "Maximum Issuance Amount").
In the event that a properly executed Conversion Notice is received by the
Corporation which would require the Corporation to issue shares of Common Stock
equal to or in excess of the Maximum Issuance Amount, the Corporation shall
honor such conversion request by (i) converting the number of shares of Series E
Preferred Stock stated in the Conversion Notice not in excess of the Maximum
Issuance Amount and (ii) redeeming the number of shares of Series E Preferred
Stock stated in the Conversion Notice equal to or in excess of the Maximum
Issuance Amount in cash at a price equal to 130% of the Stated Value of the
shares of Series E Preferred Stock to be so redeemed, together with all accrued
and unpaid dividends thereon. In the event that the Corporation shall elect to
pay a dividend in shares of Common Stock which would require the Corporation to
issue shares of Common Stock equal to or in excess of the Maximum Issuance
Amount, the Corporation shall pay (i) a dividend in shares of Common Stock equal
to one less than an amount which would result in the Corporation issuing shares
equal to the Maximum Issuance Amount and (ii) the balance of the dividend in
cash.
7. Voting Rights
The holders of the Series E Preferred Stock have no voting power,
except as otherwise provided by the General Corporation Law of the State of
Delaware ("DGCL"), in this Article 7, and in Article 8 below.
Notwithstanding the above, the Corporation shall provide each Holder
of Series E Preferred Stock with prior notification of any meeting of the
shareholders (and copies of proxy materials and other information sent to
shareholders). In the event of any taking by the Corporation of a record of its
shareholders for the purpose of determining shareholders who are entitled to
receive payment of any dividend or other distribution, any right to subscribe
for, purchase or otherwise acquire (including by way of merger, consolidation or
recapitalization) any share of any class or any other securities or property, or
to receive any other right, or for the purpose of determining shareholders who
are entitled to vote in connection with any proposed liquidation, dissolution or
winding up of the Corporation, the Corporation shall mail a notice to each
Holder, at least 30 days prior to the consummation of the transaction or event,
whichever is earlier), of the date on which any such action is to be taken for
the purpose of such dividend, distribution, right or other event, and a brief
statement regarding, the amount and character of such dividend, distribution,
right or other event to the extent known at such time.
To the extent that under the DGCL the vote of the Holders of the
Series E Preferred Stock, voting separately as a class or series as applicable,
is required to authorize a given action of the Corporation, the affirmative vote
or consent of the Holders of at least a majority of the outstanding shares of
Series E Preferred Stock represented at a duly held meeting at which a quorum
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is present or by written consent of a majority of the outstanding shares of
Series E Preferred Stock (except as otherwise may be required under the DGCL)
shall constitute the approval of such action by the class. To the extent that
under the DGCL holders of the Series E Preferred Stock are entitled to vote on a
matter with holders of Common Stock, voting together as one class, each share of
Series E Preferred Stock shall be entitled to a number of votes equal to the
number of shares of Common Stock into which it is then convertible using the
record date for the taking of such vote of shareholders as the date as of which
the Conversion Price is calculated. Holders of the Series E Preferred Stock
shall be entitled to notice of all shareholder meetings or written consents (and
copies of proxy materials and other information sent to shareholders) with
respect to which they would be entitled to vote, which notice would be provided
pursuant to the Corporation's bylaws and the DGCL.
8. Protective Provisions
So long as shares of Series E Preferred Stock are outstanding, the
Corporation shall not, without first obtaining the approval (by vote or written
consent, as provided by the DGCL) of the Holders of at least a majority of the
then outstanding shares of Series E Preferred Stock:
(i) alter or change the rights, preferences or privileges of
the Series E Preferred Stock;
(ii) create any new class or series of capital stock having a
preference over the Series E Preferred Stock as to distribution of assets upon
liquidation, dissolution or winding up of the Corporation ("Senior Securities")
or alter or change the rights, preferences or privileges of any Senior
Securities so as to affect adversely the Series E Preferred Stock;
(iii) increase the authorized number of shares of Series E
Preferred Stock; or
(iv) do any act or thing not authorized or contemplated by this
Certificate of Designation which would result in taxation of the holders of
shares of the Series E Preferred Stock under Section 305 of the Internal Revenue
Code of 1986, as amended (or any comparable provision of the Internal Revenue
Code as hereafter from time to time amended).
In the event Holders of least a majority of the then outstanding
shares of Series E Preferred Stock agree to allow the Corporation to alter or
change the rights, preferences or privileges of the shares of Series Preferred
Stock, pursuant to subsection (a) above, so as to affect the Series E Preferred
Stock, then the Corporation will deliver notice of such approved change to the
Holders of the Series Preferred Stock that did not agree to such alteration or
change (the "Dissenting Holders") and Dissenting Holders shall have the right
for a period of 30 days to convert pursuant to the terms of this Certificate of
Designation as they exist prior to such alteration or change or continue to hold
their shares of Series E Preferred Stock.
If at any time the Corporation shall "spin-off" certain of its assets
or businesses by transferring, directly or indirectly, such assets or businesses
to a subsidiary of the Corporation ("Spinco") and making a dividend (the "Spin-
off Dividend") to the Corporation's stockholders of the shares of capital stock
of Spinco, prior to making the Spin-off Dividend, the Corporation shall
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cause Spinco to issue to each Holder that number of shares of preferred stock of
Spinco with substantially identical rights, preferences, privileges, powers,
restrictions and other terms as the Series E Preferred Stock equal to the number
of shares of Series E Preferred Shares held by such Holder immediately prior to
the Spin-off Dividend.
9. Miscellaneous
(a) Loss, Theft, Destruction of Preferred Stock
Upon receipt of evidence satisfactory to the Corporation of the loss,
theft, destruction or mutilation of shares of Series E Preferred Stock and, in
the case of any such loss, theft or destruction, upon receipt of indemnity or
security reasonably satisfactory to the Corporation, or, in the case of any such
mutilation, upon surrender and cancellation of the Series E Preferred Stock, the
Corporation shall make, issue and deliver, in lieu of such lost, stolen,
destroyed or mutilated shares of Series E Preferred Stock, new shares of Series
E Preferred Stock of like tenor. The Series E Preferred Stock shall be held and
owned upon the express condition that the provisions of this Section 9.1 are
exclusive with respect to the replacement of mutilated, destroyed, lost or
stolen shares of Series E Preferred Stock and shall preclude any and all other
rights and remedies notwithstanding any law or statute existing or hereafter
enacted to the contrary with respect to the replacement of negotiable
instruments or other securities without the surrender thereof.
(b) Who Deemed Absolute Owner
The Corporation may deem the Person in whose name the Series E
Preferred Stock shall be registered upon the registry books of the Corporation
to be, and may treat it as, the absolute owner of the Series E Preferred Stock
for the purpose of receiving payment of dividends on the Series E Preferred
Stock, for the conversion of the Series E Preferred Stock and for all other
purposes, and the Corporation shall not be affected by any notice to the
contrary. All such payments and such conversion shall be valid and effectual to
satisfy and discharge the liability upon the Series E Preferred Stock to the
extent of the sum or sums so paid or the conversion so made.
(c) Notice of Certain Events
In the case of the occurrence of any event described in Sections 6.1,
6.6 or 6.7 of this Certificate of Designation, the Corporation shall cause to be
mailed to the Holder of the Series E Preferred Stock at its last address as it
appears in the Corporation's security registry, at least 20 days prior to the
applicable record, effective or expiration date hereinafter specified (or, if
such 20 days notice is not possible, at the earliest possible date prior to any
such record, effective or expiration date), a notice stating (x) the date on
which a record is to be taken for the purpose of such dividend, distribution,
issuance or granting of rights, options or warrants, or if a record is not to be
taken, the date as of which the Holders of record of Series E Preferred Stock to
be entitled to such dividend, distribution, issuance or granting of rights,
options or warrants are to be determination or the date on which such
reclassification, consolidation, merger, sale, transfer, dissolution,
liquidation or winding-up is expected to become effective, and (y) the date as
of which it is expected that Holders of record of Series E Preferred Stock will
be entitled to exchange their shares for securities, cash or other
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property deliverable upon such reclassification, consolidation, merger, sale
transfer, dissolution, liquidation or winding-up.
(d) Register
The Corporation shall keep at its principal office a register in which
the Corporation shall provide for the registration of the Series E Preferred
Stock. Upon any transfer of the Series E Preferred Stock in accordance with the
provisions hereof, the Corporation shall register such transfer on the Series E
Preferred Stock register.
The Corporation may deem the person in whose name the Series E
Preferred Stock shall be registered upon the registry books of the Corporation
to be, and may treat it as, the absolute owner of the Series E Preferred Stock
for the purpose of receiving payment of dividends on the Series E Preferred
Stock, for the conversion of the Series E Preferred Stock and for all other
purposes, and the Corporation shall not be affected by any notice to the
contrary. All such payments and such conversions shall be valid and effective
to satisfy and discharge the liability upon the Series E Preferred Stock to the
extent of the sum or sums so paid or the conversion or conversions so made.
(e) Withholding
To the extent required by applicable law, the Corporation may withhold
amounts for or on account of any taxes imposed or levied by or on behalf of any
taxing authority in the United States having jurisdiction over the Corporation
from any payments made pursuant to the Series E Preferred Stock.
(f) Headings
The headings of the Articles and Sections of this Certificate of
Designation are inserted for convenience only and do not constitute a part of
this Certificate of Designation.
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In Witness Whereof, the Corporation has caused this Certificate of
Designation to be signed by its duly authorized officers on June __, 1999.
Thermatrix Inc.
By:____________________________
Name:
Title:
By:____________________________
Name:
Title:
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ANNEX I
FORM OF CONVERSION NOTICE
To: Thermatrix Inc.
308 North Peters Road, Suite 100
Knoxville, TN 37922
The undersigned owner of this Series E 8% Convertible Preferred Stock
(the "Series E Preferred Stock") issued by Thermatrix Inc. (the "Corporation")
hereby irrevocably exercises its option to convert __________ shares of the
Series E Preferred Stock into shares of the common stock, par value $.001 per
share ("Common Stock"), of the Corporation in accordance with the terms of the
Certificate of Designation. The undersigned hereby instructs the Corporation to
convert the number of shares of the Series E Preferred Stock specified above
into Shares of Common Stock Issued at Conversion in accordance with the
provisions of Article 6 of the Certificate of Designation. The undersigned
directs that the Common Stock issuable and certificates therefor deliverable
upon conversion, the Series E Preferred Stock recertificated, if any, not being
surrendered for conversion hereby, together with any check in payment for
fractional Common Stock, be issued in the name of and delivered to the
undersigned unless a different name has been indicated below. All capitalized
terms used and not defined herein have the respective meanings assigned to them
in the Certificate of Designation. So long as the Series E Preferred Stock
shall have been surrendered for conversion hereby, the conversion pursuant
hereto shall be deemed to have been effected at the date and time specified
below, and at such time the rights of the undersigned as a Holder of the Series
E Preferred Stock shall cease and the Person or Persons in whose name or names
the Common Stock Issued at Conversion shall be issuable shall be deemed to have
become the holder or holders of record of the Common Shares represented thereby
and all voting and other rights associated with the beneficial ownership of such
Common Shares shall at such time vest with such Person or Persons.
Date and time:________________________
_____________________________
Signature
Fill in for registration of Series E Preferred Stock:
______________________________________________________________________________
______________________________________________________________________________
______________________________________________________________________________
Please print name and address (including zip code number)
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EXHIBIT 4.4(a)
THIS COMMON STOCK PURCHASE WARRANT AND THE SECURITIES REPRESENTED HEREBY
HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY
NOT BE TRANSFERRED IN VIOLATION OF SUCH ACT, THE RULES AND REGULATIONS
THEREUNDER OR THE PROVISIONS OF THIS COMMON STOCK PURCHASE WARRANT.
Number of Shares of Common Stock: [105,000]
Warrant No. _____
COMMON STOCK PURCHASE WARRANT
To Purchase Common Stock of
Thermatrix Inc.
This Is To Certify That The Shaar Fund Ltd., or registered assigns, is
entitled, at any time from the Closing Date (as hereinafter defined) to the
Expiration Date (as hereinafter defined), to purchase from Thermatrix Inc., a
Delaware corporation (the "Company"), [105,000] shares of Common Stock (as
hereinafter defined and subject to adjustment as provided herein), in whole or
in part, including fractional parts, at a purchase price equal to 125% of the
Market Price, all on the terms and conditions and pursuant to the provisions
hereinafter set forth.
10. Definitions
As used in this Common Stock Purchase Warrant (this "Warrant"), the
following terms have the respective meanings set forth below:
"Additional Shares of Common Stock" shall mean all shares of Common
Stock issued by the Company after the Closing Date, other than Warrant Stock.
"Book Value" shall mean, in respect of any share of Common Stock on
any date herein specified, the consolidated book value of the Company as of the
last day of any month immediately preceding such date, divided by the number of
Fully Diluted Outstanding shares of Common Stock as determined in accordance
with GAAP (assuming the payment of the exercise prices for such shares) by
Arthur Andersen LLP or any other firm of independent certified public
accountants of recognized national standing selected by the Company and
reasonably acceptable to the Holder.
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"Business Day" shall mean any day that is not a Saturday or Sunday or
a day on which banks are required or permitted to be closed in the State of New
York.
"Closing Date" shall have the meaning set forth in the Securities
Purchase Agreement.
"Commission" shall mean the Securities and Exchange Commission or any
other federal agency then administering the Securities Act and other federal
securities laws.
"Common Stock" shall mean (except where the context otherwise
indicates) the Common Stock, par value $.001 per share, of the Company as
constituted on the Closing Date, and any capital stock into which such Common
Stock may thereafter be changed, and shall also include (i) capital stock of the
Company of any other class (regardless of how denominated) issued to the holders
of shares of Common Stock upon any reclassification thereof which is also not
preferred as to dividends or assets over any other class of stock of the Company
and which is not subject to redemption and (ii) shares of common stock of any
successor or acquiring corporation received by or distributed to the holders of
Common Stock of the Company in the circumstances contemplated by Section 4.4.
"Convertible Securities" shall mean evidences of indebtedness, shares
of stock or other securities which are convertible into or exchangeable, with or
without payment of additional consideration in cash or property, for shares of
Common Stock, either immediately or upon the occurrence of a specified date or a
specified event.
"Current Warrant Price" shall mean, in respect of a share of Common
Stock at any date herein specified, the price at which a share of Common Stock
may be purchased pursuant to this Warrant on such date.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended, or any successor federal statute, and the rules and regulations of the
Commission thereunder, all as the same shall be in effect from time to time.
"Exercise Period" shall mean the period during which this Warrant is
exercisable pursuant to Section 2.1.
"Expiration Date" shall mean June 18, 2002.
"Fully Diluted Outstanding" shall mean, when used with reference to
Common Stock, at any date as of which the number of shares thereof is to be
determined, all shares of Common Stock Outstanding at such date and all shares
of Common Stock issuable in respect of this Warrant, outstanding on such date,
and other options or warrants to purchase, or securities convertible into,
shares of Common Stock outstanding on such date which would be deemed
outstanding in accordance with GAAP for purposes of determining Book Value or
net income per share.
"GAAP" shall mean generally accepted accounting principles in the
United States of America as from time to time in effect.
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"Holder" shall mean the Person in whose name the Warrant or Warrant
Stock set forth herein is registered on the books of the Company maintained for
such purpose.
"Market Price" per Common Share means the closing bid price of the
Common Shares as reported on the Nasdaq National Market ("Nasdaq") on the
trading day immediately preceding the Closing Date.
"Other Property" shall have the meaning set forth in Section 4.4.
"Outstanding" shall mean, when used with reference to Common Stock, at
any date as of which the number of shares thereof is to be determined, all
issued shares of Common Stock, except shares then owned or held by or for the
account of the Company or any subsidiary thereof, and shall include all shares
issuable in respect of outstanding scrip or any certificates representing
fractional interests in shares of Common Stock.
"Person" shall mean any individual, sole proprietorship, partnership,
joint venture, trust, incorporated organization, association, corporation,
institution, public benefit corporation, entity or government (whether federal,
state, county, city, municipal or otherwise, including, without limitation, any
instrumentality, division, agency, body or department thereof).
"Registration Rights Agreement" shall mean the Registration Rights
Agreement dated a date even herewith between the Company and The Shaar Fund
Ltd., as it may be amended from time to time.
"Restricted Common Stock" shall mean shares of Common Stock which are,
or which upon their issuance on their exercise of this Warrant would be,
evidenced by a certificate bearing the restrictive legend set forth in Section
9.1(a).
"Securities Act" shall mean the Securities Act of 1933, as amended, or
any successor federal statute, and the rules and regulations of the Commission
thereunder, all as the same shall be in effect at the time.
"Securities Purchase Agreement" shall mean the Securities Purchase
Agreement dated as of a date even herewith between the Company and The Shaar
Fund Ltd. as it may be amended from time to time.
"Transfer" shall mean any disposition of any Warrant or Warrant Stock
or of any interest in either thereof, which would constitute a sale thereof
within the meaning of the Securities Act.
"Transfer Notice" shall have the meaning set forth in Section 9.2.
"Warrant Price" shall mean an amount equal to (i) the number of shares
of Common Stock being purchased upon exercise of this Warrant pursuant to
Section 2.1, multiplied by (ii) the Current Warrant Price as of the date of such
exercise.
"Warrant Stock" shall mean the shares of Common Stock purchased by the
holders of the Warrants upon the exercise thereof.
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"Warrants" shall mean this Warrant and all warrants issued upon
transfer, division or combination of, or in substitution for, any thereof. All
Warrants shall at all times be identical as to terms and conditions and date,
except as to the number of shares of Common Stock for which they may be
exercised.
11. Exercise of Warrant
(a) Manner of Exercise
From and after the Closing Date and until 5:00 p.m., New York time, on
the Expiration Date, Holder may exercise this Warrant, on any Business Day, for
all or any part of the number of shares of Common Stock purchasable hereunder.
In order to exercise this Warrant, in whole or in part, Holder shall
deliver to the Company at its principal office at 308 North Peters Road, Suite
100, Knoxville, Tennessee 37922 or at the office or agency designated by the
Company pursuant to Section 12, (i) a written notice of Holder's election to
exercise this Warrant, which notice shall specify the number of shares of Common
Stock to be purchased, (ii) to the extent such exercise is not being effected
through a Cashless Exercise, payment of the Warrant Price in cash or wire
transfer or cashier's check drawn on a United States bank and (iii) this
Warrant. Such notice shall be substantially in the form of the subscription
form appearing at the end of this Warrant as Exhibit A, duly executed by Holder
or its agent or attorney. Upon receipt of the items referred to in clauses (i),
(ii) and (iii) above, the Company shall, as promptly as practicable, and in any
event within five Business Days thereafter, execute or cause to be executed and
deliver or cause to be delivered to Holder a certificate or certificates
representing the aggregate number of full shares of Common Stock issuable upon
such exercise, together with cash in lieu of any fraction of a share, as
hereinafter provided. The stock certificate or certificates so delivered shall
be, to the extent possible, in such denomination or denominations as Holder
shall request in the notice and shall be registered in the name of Holder or,
subject to Section 9, such other name as shall be designated in the notice.
This Warrant shall be deemed to have been exercised and such certificate or
certificates shall be deemed to have been issued, and Holder or any other Person
so designated to be named therein shall be deemed to have become a holder of
record of such shares for all purposes, as of the date the notice, together with
the cash or check or checks and this Warrant, is received by the Company as
described above and all taxes required to be paid by Holder, if any, pursuant to
Section 2.2 prior to the issuance of such shares have been paid. If this Warrant
shall have been exercised in part, the Company shall, at the time of delivery of
the certificate or certificates representing Warrant Stock, deliver to Holder a
new Warrant evidencing the rights of Holder to purchase the unpurchased shares
of Common Stock called for by this Warrant, which new Warrant shall in all other
respects be identical with this Warrant, or, at the request of Holder,
appropriate notation may be made on this Warrant and the same returned to
Holder. Notwithstanding any provision herein to the contrary, the Company shall
not be required to register shares in the name of any Person who acquired this
Warrant (or part hereof) or any Warrant Stock otherwise than in accordance with
this Warrant.
Simultaneously with the exercise of this Warrant, payment in full of
the Warrant Price may be made, at the option of the Holder, (i) by payment of
the Warrant Price in cash or by wire transfer or cashier's check drawn on a
United States bank, (ii) by the surrender (which surrender shall be evidenced by
cancellation of the number of Warrants represented by any
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certificate(s) evidencing the Warrants (the "Warrant Certificate") presented in
connection with a Cashless Exercise of a Warrant or Warrants (represented by one
or more Warrant Certificates), and without payment of the Warrant Price in cash,
for such number of shares equal to the product of (1) the number of shares for
which such Warrant is exercisable with payment in cash of the Warrant Price as
of the date of exercise and (2) the Cashless Exercise Ratio or (iii) by any
combination of (i) and (ii). For purposes of this Agreement, the "Cashless
Exercise Ratio" shall equal a fraction, the numerator of which is the excess of
the Current Market Price per share of the Common Stock on the date of exercise
over the Warrant Price per share as of the date of exercise and the denominator
of which is the Current Market Price per share of the Common Stock on the date
of exercise. An exercise of a Warrant in accordance with the immediately
preceding sentences is herein called a "Cashless Exercise." Upon surrender of a
Warrant Certificate representing more than one Warrant in connection with the
Holder's option to elect a Cashless Exercise, the number of shares deliverable
upon a Cashless Exercise shall be equal to the Cashless Exercise Ratio
multiplied by the product of (a) the number of Warrants that the Holder
specifies is to be exercised pursuant to a Cashless Exercise and (b) the number
of shares for which such Warrant is then exercisable (without giving effect to
the Cashless Exercise option). All provisions of this Agreement shall be
applicable with respect to an exercise of a Warrant Certificate pursuant to a
Cashless Exercise for less than the full number of Warrants represented thereby.
(b) Payment of Taxes and Charges
All shares of Common Stock issuable upon the exercise of this Warrant
pursuant to the terms hereof shall be validly issued, fully paid and
nonassessable, freely tradable and without any preemptive rights. The Company
shall pay all expenses in connection with, and all taxes and other governmental
charges that may be imposed with respect to, the issue or delivery thereof,
unless such tax or charge is imposed by law upon Holder, in which case such
taxes or charges shall be paid by Holder. The Company shall not be required,
however, to pay any tax or other charge imposed in connection with any transfer
involved in the issue of any certificate for shares of Common Stock issuable
upon exercise of this Warrant in any name other than that of Holder, and in such
case the Company shall not be required to issue or deliver any stock certificate
until such tax or other charge has been paid or it has been established to the
satisfaction of the Company that no such tax or other charge is due.
(c) Fractional Shares
The Company shall not be required to issue a fractional share of
Common Stock upon exercise of any Warrant. As to any fraction of a share which
Holder would otherwise be entitled to purchase upon such exercise, the Company
shall pay a cash adjustment in respect of such final fraction in an amount equal
to the same fraction of the Market Price per share of Common Stock as of the
Closing Date.
(d) Continued Validity
A holder of shares of Common Stock issued upon the exercise of this
Warrant, in whole or in part (other than a holder who acquires such shares after
the same have been publicly sold pursuant to a Registration Statement under the
Securities Act or sold pursuant to Rule 144 thereunder), shall continue to be
entitled with respect to such shares to all rights to which it would
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have been entitled as Holder under Sections 9, 10 and 14 of this Warrant. The
Company will, at the time of exercise of this Warrant, in whole or in part, upon
the request of Holder, acknowledge in writing, in form reasonably satisfactory
to Holder, its continuing obligation to afford Holder all such rights; provided,
however, that if Holder shall fail to make any such request, such failure shall
not affect the continuing obligation of the Company to afford to Holder all such
rights.
12. Transfer, Division and Combination
(a) Transfer
Subject to compliance with Section 9, transfer of this Warrant and all
rights hereunder, in whole or in part, shall be registered on the books of the
Company to be maintained for such purpose, upon surrender of this Warrant at the
principal office of the Company referred to in Section 2.1 or the office or
agency designated by the Company pursuant to Section 12, together with a written
assignment of this Warrant substantially in the form of Exhibit B hereto duly
executed by Holder or its agent or attorney and funds sufficient to pay any
transfer taxes payable upon the making of such transfer. Upon such surrender
and, if required, such payment, the Company shall, subject to Section 9, execute
and deliver a new Warrant or Warrants in the name of the assignee or assignees
and in the denomination specified in such instrument of assignment, and shall
issue to the assignor a new Warrant evidencing the portion of this Warrant not
so assigned, and this Warrant shall promptly be canceled. A Warrant, if
properly assigned in compliance with Section 9, may be exercised by a new Holder
for the purchase of shares of Common Stock without having a new warrant issued.
(b) Division and Combination
Subject to Section 9, this Warrant may be divided or combined with
other Warrants upon presentation hereof at the aforesaid office or agency of the
Company, together with a written notice specifying the names and denominations
in which new Warrants are to be issued, signed by Holder or its agent or
attorney. Subject to compliance with Section 3.1 and with Section 9, as to any
transfer which may be involved in such division or combination, the Company
shall execute and deliver a new Warrant or Warrants in exchange for the Warrant
or Warrants to be divided or combined in accordance with such notice.
(c) Expenses
The Company shall prepare, issue and deliver at its own expense (other
than transfer taxes) the new Warrants or Warrants under this Section 3.
(d) Maintenance of Books
The Company agrees to maintain, at its aforesaid office or agency,
books for the registration and the registration of transfer of the Warrants.
13. Adjustments
The number of shares of Common Stock for which this Warrant is
exercisable, or the price at which such shares may be purchased upon exercise of
this Warrant, shall be subject to
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adjustment from time to time as set forth in this Section 4. The Company shall
give Holder notice of any event described below which requires an adjustment
pursuant to this Section 4 at the time of such event.
(a) Stock Dividends, Subdivisions and Combinations
If at any time the Company shall:
(i) take a record of the holders of its Common Stock for the
purpose of entitling them to receive a dividend payable in, or other
distribution of, Additional Shares of Common Stock;
(ii) subdivide its outstanding shares of Common Stock into a
larger number of shares of Common Stock; or
(iii) combine its outstanding shares of Common Stock into a
smaller number of shares of Common Stock;
then (i) the number of shares of Common Stock for which this Warrant is
exercisable immediately after the occurrence of any such event shall be adjusted
to equal the number of shares of Common Stock which a record holder of the same
number of shares of Common Stock for which this Warrant is exercisable
immediately prior to the occurrence of such event would own or be entitled to
receive after the happening of such event, and (ii) the Current Warrant Price
shall be adjusted to equal (A) the Current Warrant Price multiplied by the
number of shares of Common Stock for which this Warrant is exercisable
immediately prior to the adjustment divided by (B) the number of shares for
which this Warrant is exercisable immediately after such adjustment.
(b) Certain Other Distributions
If at any time the Company shall take a record of the holders of its
Common Stock for the purpose of entitling them to receive any dividend or other
distribution of:
(i) cash;
(ii) any evidences of its indebtedness, any shares of its stock
or any other securities or property of any nature whatsoever (other than cash,
Convertible Securities or Additional Shares of Common Stock); or
(iii) any warrants or other rights to subscribe for or purchase
any evidences of its indebtedness, any shares of its stock or any other
securities or property of any nature whatsoever (other than cash, Convertible
Securities or Additional Shares of Common Stock);
then Holder shall be entitled to receive such dividend or distribution as if
Holder had exercised the Warrant. A reclassification of the Common Stock (other
than a change in par value, or from par value to no par value or from no par
value to par value) into shares of Common Stock and shares of any other class of
stock shall be deemed a distribution by the Company to the holders of its Common
Stock of such shares of such other class of stock within the meaning of this
Section 4.2 and, if the outstanding shares of Common Stock shall be changed into
a larger or smaller number of shares of
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Common Stock as a part of such reclassification, such change shall be deemed a
subdivision or combination, as the case may be, of the outstanding shares of
Common Stock within the meaning of Section 4.1.
(c) Other Provisions Applicable to Adjustments under this Section
The following provisions shall be applicable to the making of
adjustments of the number of shares of Common Stock for which this Warrant is
exercisable and the Current Warrant Price provided for in this Section 4:
(i) When Adjustments to be Made. The adjustments required by
this Section 4 shall be made whenever and as often as any specified event
requiring an adjustment shall occur. For the purpose of any adjustment, any
specified event shall be deemed to have occurred at the close of business on the
date of its occurrence.
(ii) Fractional Interests. In computing adjustments under this
Section 4, fractional interests in Common Stock shall be taken into account to
the nearest 1/10th of a share.
(iii) When Adjustment not Required. If the Company shall take a
record of the holders of its Common Stock for the purpose of entitling them to
receive a dividend or distribution or subscription or purchase rights and shall,
thereafter and before the distribution to stockholders thereof, legally abandon
its plan to pay or deliver such dividend, distribution, subscription or purchase
rights, then thereafter no adjustment shall be required by reason of the taking
of such record and any such adjustment previously made in respect thereof shall
be rescinded and annulled.
(iv) Challenge to Good Faith Determination. Whenever the Board
of Directors of the Company shall be required to make a determination in good
faith of the fair value of any item under this Section 4, such determination may
be challenged in good faith by the Holder, and any dispute shall be resolved by
an investment banking firm of recognized national standing selected by the
Company and acceptable to Holder.
(d) Reorganization, Reclassification, Merger, Consolidation or
Disposition of Assets
In case the Company shall reorganize its capital, reclassify its
capital stock, consolidate or merge with or into another corporation (where the
Company is not the surviving corporation or where there is a change in or
distribution with respect to the Common Stock of the Company), or sell, transfer
or otherwise dispose of all or substantially all its property, assets or
business to another corporation and, pursuant to the terms of such
reorganization, reclassification, merger, consolidation or disposition of
assets, shares of common stock of the successor or acquiring corporation, or any
cash, shares of stock or other securities or property of any nature whatsoever
(including warrants or other subscription or purchase rights) in addition to or
in lieu of common stock of the successor or acquiring corporation ("Other
Property"), are to be received by or distributed to the holders of Common Stock
of the Company, then Holder shall have the right thereafter to receive, upon
exercise of the Warrant, the number of shares of common stock of the successor
or acquiring corporation or of the Company, if it is the surviving corporation,
and Other Property receivable upon or as a result of such reorganization,
reclassification, consolidation or disposition of assets by a holder of the
number of shares of Common Stock for which this Warrant is
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exercisable immediately prior to such event. In case of any such reorganization,
reclassification, merger, consolidation or disposition of assets, the successor
or acquiring corporation (if other than the Company) shall expressly assume the
due and punctual observance and performance of each and every covenant and
condition of this Warrant to be performed and observed by the Company and all
the obligations and liabilities hereunder, subject to such modifications as may
be deemed appropriate (as determined by resolution of the Board of Directors of
the Company) in order to provide for adjustments of shares of Common Stock for
which this Warrant is exercisable which shall be as nearly equivalent as
practicable to the adjustments provided for in this Section 4. For purposes of
this Section 4.4, "common stock of the successor or acquiring corporation" shall
include stock of such corporation of any class which is not preferred as to
dividends or assets over any other class of stock of such corporation and which
is not subject to redemption and shall also include any evidences of
indebtedness, shares of stock or other securities which are convertible into or
exchangeable for any such stock, either immediately or upon the arrival of a
specified date or the happening of a specified event and any warrants or other
rights to subscribe for or purchase any such stock. The foregoing provisions of
this Section 4.4 still similarly apply to successive reorganizations,
reclassifications, mergers, consolidations or disposition of assets.
(e) Other Action Affecting Common Stock
In case at any time or from time to time the Company shall take any
action in respect of its Common Stock, other than any action described in this
Section 4, which would have a materially adverse effect upon the rights of
Holder, the number of shares of Common Stock and/or the purchase price thereof
shall be adjusted in such manner as may be equitable in the circumstances, as
determined in good faith by the Board of Directors of the Company.
(f) Certain Limitations
Notwithstanding anything herein to the contrary, the Company agrees
not to enter into any transaction which, by reason of any adjustment hereunder,
would cause the Current Warrant Price to be less than the par value per share of
Common Stock.
14. Notices to Holder
(a) Notice of Adjustments
Whenever the number of shares of Common Stock for which this Warrant
is exercisable, or whenever the price at which a share of such Common Stock may
be purchased upon exercise of the Warrants, shall be adjusted pursuant to
Section 4, the Company shall forthwith prepare a certificate to be executed by
the chief financial officer of the Company setting forth, in reasonable detail,
the event requiring the adjustment and the method by which such adjustment was
calculated (including a description of the basis on which the Board of Directors
of the Company determined the fair value of any evidences of indebtedness,
shares of stock, other securities or property or warrants or other subscription
or purchase rights referred to in Section 4.2), specifying the number of shares
of Common Stock for which this Warrant is exercisable and (if such adjustment
was made pursuant to Section 4.4 or 4.5) describing the number and kind of any
other shares of stock or Other Property for which this Warrant is exercisable,
and any change in the purchase price or prices thereof, after giving effect to
such adjustment or change. The Company
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shall promptly cause a signed copy of such certificate to be delivered to the
Holder in accordance with Section 14.2. The Company shall keep at its office or
agency designated pursuant to Section 12 copies of all such certificates and
cause the same to be available for inspection at said office during normal
business hours by the Holder or any prospective purchaser of a Warrant
designated by Holder.
(b) Notice of Corporate Action
If at any time:
(i) the Company shall take a record of the holders of its
Common Stock for the purpose of entitling them to receive a dividend or other
distribution, or any right to subscribe for or purchase any evidences of its
indebtedness, any shares of stock of any class or any other securities or
property, or to receive any other right; or
(ii) there shall be any capital reorganization of the Company,
any reclassification or recapitalization of the capital stock of the Company or
any consolidation or merger of the Company with, or any sale, transfer or other
disposition of all or substantially all the property, assets or business of the
Company to, another corporation; or
(iii) there shall be a voluntary or involuntary dissolution,
liquidation or winding up of the Company;
then, in any one or more of such cases, the Company shall give to Holder (i) at
least 30 days' prior written notice of the date on which a record date shall be
selected for such dividend, distribution or right or for determining rights to
vote in respect of any such reorganization, reclassification, merger,
consolidation, sale, transfer, disposition, dissolution, liquidation or winding
up, and (ii) in the case of any such reorganization, reclassification, merger,
consolidation, sale, transfer, disposition, dissolution, liquidation or winding
up, at least 30 days' prior written notice of the date when the same shall take
place. Such notice in accordance with the foregoing clause also shall specify
(i) the date on which any such record is to be taken for the purpose of such
dividend, distribution or right, the date on which the holders of Common Stock
shall be entitled to any such dividend, distribution or right, and the amount
and character thereof, and (ii) the date on which any such reorganization,
reclassification, merger, consolidation, sale, transfer, disposition,
dissolution, liquidation or winding up is to take place and the time, if any
such time is to be fixed, as of which the holders of Common Stock shall be
entitled to exchange their shares of Common Stock for securities or other
property deliverable upon such reorganization, reclassification, merger,
consolidation, sale, transfer, disposition, dissolution, liquidation or winding
up. Each such written notice shall be sufficiently given if addressed to Holder
at the last address of Holder appearing on the books of the Company and
delivered in accordance with Section 14.2.
15. No Impairment
The Company shall not by any action, including, without limitation,
amending its certificate of incorporation or through any reorganization,
transfer of assets, consolidation, merger, dissolution, issue or sale of
securities or other voluntary action, avoid or seek to avoid the observance or
performance of any of the terms of this Warrant, but will at all times in good
faith assist in the carrying out of all such terms and in the taking of all such
actions as may be necessary
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or appropriate to protect the rights of Holder against impairment. Without
limiting the generality of the foregoing, the Company will (a) not increase the
par value of any shares of Common Stock receivable upon the exercise of this
Warrant above the amount payable therefor upon such exercise immediately prior
to such increase in par value, (b) take all such action as may be necessary or
appropriate in order that the Company may validly and legally issue fully paid
and nonassessable shares of Common Stock upon the exercise of this Warrant, and
(c) use its best efforts to obtain all such authorizations, exemptions or
consents from any public regulatory body having jurisdiction thereof as may be
necessary to enable the Company to perform its obligations under this Warrant.
Upon the request of Holder, the Company will at any time during the
period this Warrant is outstanding acknowledge in writing, in form satisfactory
to Holder, the continuing validity of this Warrant and the obligations of the
Company hereunder.
16. Reservation and Authorization of Common Stock
From and after the Closing Date, the Company shall at all times
reserve and keep available for issue upon the exercise of Warrants such number
of its authorized but unissued shares of Common Stock as will be sufficient to
permit the exercise in full of all outstanding Warrants. All shares of Common
Stock which shall be so issuable, when issued upon exercise of any Warrant and
payment therefor in accordance with the terms of such Warrant, shall be duly and
validly issued and fully paid and nonassessable and not subject to preemptive
rights.
Before taking any action which would cause an adjustment reducing the
Current Warrant Price below the then par value, if any, of the shares of Common
Stock issuable upon exercise of the Warrants, the Company shall take any
corporate action which may be necessary in order that the Company may validly
and legally issue fully paid and nonassessable shares of such Common Stock at
such adjusted Current Warrant Price.
Before taking any action which would result in an adjustment in the
number of shares of Common Stock for which this Warrant is exercisable or in the
Current Warrant Price, the Company shall obtain all such authorizations or
exemptions thereof, or consents thereto, as may be necessary from any public
regulatory body or bodies having jurisdiction thereof.
17. Taking of Record; Stock and Warrant Transfer Books
In the case of all dividends or other distributions by the Company to
the holders of its Common Stock with respect to which any provision of Section 4
refers to the taking of record of such holders, the Company will in each case
take such a record and will take such record as of the close of business on a
Business Day. The Company will not at any time, except upon dissolution,
liquidation or winding up of the Company, close its stock transfer books or
Warrant transfer books so as to result in preventing or delaying the exercise or
transfer of any Warrant.
18. Restrictions on Transferability
The Warrants and the Warrant Stock shall not be transferred,
hypothecated or assigned before satisfaction of the conditions specified in this
Section 9, which conditions are intended to ensure compliance with the
provisions of the Securities Act with respect to the Transfer
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<PAGE>
of any Warrant or any Warrant Stock. Holder, by acceptance of this Warrant,
agrees to be bound by the provisions of this Section 9.
(a) Restrictive Legend
(i) Holder, by accepting this Warrant and any Warrant
Stock agrees that this Warrant and the Warrant Stock issuable upon exercise
hereof may not be assigned or otherwise transferred unless and until (i) the
Company has received an opinion of counsel for Holder that such securities may
be sold pursuant to an exemption from registration under the Securities Act or
(ii) a registration statement relating to such securities has been filed by the
Company and declared effective by the Commission.
Each certificate for Warrant Stock issuable hereunder shall bear a
legend as follows until such securities have been sold pursuant to an effective
registration statement under the Securities Act:
"THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"),
OR THE SECURITIES LAWS OF ANY STATE, AND ARE BEING OFFERED
AND SOLD PURSUANT TO AN EXEMPTION FROM THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT AND SUCH LAWS. THESE
SECURITIES MAY NOT BE SOLD OR TRANSFERRED EXCEPT PURSUANT TO
AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT
OR PURSUANT TO AN AVAILABLE EXEMPTION FROM THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT OR SUCH OTHER LAWS."
(ii) Except as otherwise provided in this Section 9, the
Warrant shall be stamped or otherwise imprinted with a legend in substantially
the following form:
"THIS WARRANT AND THE SECURITIES REPRESENTED HEREBY HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, AND MAY NOT BE TRANSFERRED IN VIOLATION OF SUCH
ACT, THE RULES AND REGULATIONS THEREUNDER OR THE PROVISIONS
OF THIS WARRANT."
(b) Notice of Proposed Transfers
Prior to any Transfer or attempted Transfer of any Warrants or any
shares of Restricted Common Stock, the Holder shall give ten days' prior written
notice (a "Transfer Notice") to the Company of Holder's intention to effect such
Transfer, describing the manner and circumstances of the proposed Transfer, and
obtain from counsel to Holder who shall be reasonably satisfactory to the
Company, an opinion that the proposed Transfer of such Warrants or such
Restricted Common Stock may be effected without registration under the
Securities Act. After receipt of the Transfer Notice and opinion, the Company
shall, within five days thereof, notify the
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<PAGE>
Holder as to whether such opinion is reasonably satisfactory and, if so, such
holder shall thereupon be entitled to Transfer such Warrants or such Restricted
Common Stock, in accordance with the terms of the Transfer Notice. Each
certificate, if any, evidencing such shares of Restricted Common Stock issued
upon such Transfer shall bear the restrictive legend set forth in Section
9.1(a), and the Warrant issued upon such Transfer shall bear the restrictive
legend set forth in Section 9.1(b), unless in the opinion of such counsel such
legend is not required in order to ensure compliance with the Securities Act.
Holder shall not be entitled to Transfer such Warrants or such Restricted Common
Stock until receipt of notice from the Company under this Section 9.2(a) that
such opinion is reasonably satisfactory.
(c) Required Registration
Pursuant to the terms and conditions set forth in Registration Rights
Agreement, the Company shall prepare and file with the Commission not later than
the 30th day after the Closing Date, a Registration Statement relating to the
offer and sale of the Common Stock issuable upon exercise of the Warrants and
shall use its best efforts to cause the Commission to declare such Registration
Statement effective under the Securities Act as promptly as practicable but no
later than 150 days after the Closing Date.
(d) Termination of Restrictions
Notwithstanding the foregoing provisions of Section 9, the
restrictions imposed by this Section upon the transferability of the Warrants,
the Warrant Stock and the Restricted Common Stock (or Common Stock issuable upon
the exercise of the Warrants) and the legend requirements of Section 9.1 shall
terminate as to any particular Warrant or share of Warrant Stock or Restricted
Common Stock (or Common Stock issuable upon the exercise of the Warrants) (i)
when and so long as such security shall have been effectively registered under
the Securities Act and disposed of pursuant thereto or (ii) when the Company
shall have received an opinion of counsel reasonably satisfactory to it that
such shares may be transferred without registration thereof under the Securities
Act. Whenever the restrictions imposed by Section 9 shall terminate as to this
Warrant, as hereinabove provided, the Holder hereof shall be entitled to receive
from the Company upon written request of the Holder, at the expense of the
Company, a new Warrant bearing the following legend in place of the restrictive
legend set forth hereon:
"THE RESTRICTIONS ON TRANSFERABILITY OF THE WITHIN WARRANT
CONTAINED IN SECTION 9 HEREOF TERMINATED ON __________,
_____ AND ARE OF NO FURTHER FORCE AND EFFECT."
All Warrants issued upon registration of transfer, division or combination of,
or in substitution for, any Warrant or Warrants entitled to bear such legend
shall have a similar legend endorsed thereon. Whenever the restrictions imposed
by this Section shall terminate as to any share of Restricted Common Stock, as
hereinabove provided, the holder thereof shall be entitled to receive from the
Company, at the Company's expense, a new certificate representing such Common
Stock not bearing the restrictive legend set forth in Section 9.1(a).
(e) Listing on Securities Exchange
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If the Company shall list any shares of Common Stock on any securities
exchange or quotation system, it will, at its expense, list thereon, maintain
and, when necessary, increase such listing of, all shares of Common Stock issued
or, to the extent permissible under the applicable securities exchange rules,
issuable upon the exercise of this Warrant so long as any shares of Common Stock
shall be so listed during any such Exercise Period.
19. Supplying Information
The Company shall cooperate with Holder in supplying such information
as may be reasonably necessary for Holder to complete and file any information
reporting forms presently or hereafter required by the Commission as a condition
to the availability of an exemption from the Securities Act for the sale of any
Warrant or Restricted Common Stock.
20. Loss or Mutilation
Upon receipt by the Company from Holder of evidence reasonably
satisfactory to it of the ownership of and the loss, theft, destruction or
mutilation of this Warrant and indemnity reasonably satisfactory to it (it being
understood that the written agreement of the Holder shall be sufficient
indemnity), and in case of mutilation upon surrender and cancellation hereof,
the Company will execute and deliver in lieu hereof a new Warrant of like tenor
to Holder; provided, in the case of mutilation no indemnity shall be required if
this Warrant in identifiable form is surrendered to the Company for
cancellation.
21. Office of the Company
As long as any of the Warrants remain outstanding, the Company shall
maintain an office or agency (which may be the principal executive offices of
the Company) where the Warrants may be presented for exercise, registration of
transfer, division or combination as provided in this Warrant.
22. Limitation of Liability
No provision hereof, in the absence of affirmative action by Holder to
purchase shares of Common Stock, and no enumeration herein of the rights or
privileges of Holder hereof, shall give rise to any liability of Holder for the
purchase price of any Common Stock or as a stockholder of the Company, whether
such liability is asserted by the Company or by creditors of the Company.
23. Miscellaneous
(a) Nonwaiver and Expenses
No course of dealing or any delay or failure to exercise any right
hereunder on the part of Holder shall operate as a waiver of such right or
otherwise prejudice Holder's rights, powers or remedies. If the Company fails
to make, when due, any payments provided for hereunder, or fails to comply with
any other provision of this Warrant, the Company shall pay to Holder such
amounts as shall be sufficient to cover any costs and expenses including,
without limitation, reasonable attorneys' fees, including those of appellate
proceedings, incurred by Holder in collecting any
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amounts due pursuant hereto or in otherwise enforcing any of its rights, powers
or remedies hereunder.
(b) Notice Generally
Except as may be otherwise provided herein, any notice or other
communication or delivery required or permitted hereunder shall be in writing
and shall be delivered personally or sent by certified mail, postage prepaid, or
by a nationally recognized overnight courier service, and shall be deemed given
when so delivered personally or by overnight courier service, or, if mailed,
three days after the date of deposit in the United States mails, as follows:
(i) if to the Company, to:
Thermatrix Inc.
308 North Peters Road, Suite 100
Knoxville, TN 37922
Attention: Edward E. Greene
(423) 539-9603
(423) 539-9643 (Fax)
with a copy to:
Wilson Sonsini Goodrich & Rosati, PC
650 Page Mill Road
Palo Alto, CA 94304-1050
Attention: Michael J. Danaher, Esq.
(650) 493-9300
(650) 493-6811 (Fax)
(ii) if to the Holder, to:
The Shaar Fund Ltd.,
c/o Levinson Capital Management
2 World Trade Center, Suite 1820
New York, NY 10048
Attention: Samuel Levinson
(212) 432-7771
(212) 432-7771 (Fax)
with a copy to:
Cadwalader, Wickersham & Taft
100 Maiden Lane
New York, NY 10038
Attention: Dennis J. Block, Esq.
(212) 504-5555
(212) 504-5557 (Fax)
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The Company or the Holder may change the foregoing address by notice given
pursuant to this Section 14.2.
(c) Indemnification
The Company agrees to indemnify and hold harmless Holder from and
against any liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, claims, costs, attorneys' fees, expenses and disbursements of
any kind which may be imposed upon, incurred by or asserted against Holder in
any manner relating to or arising out of any failure by the Company to perform
or observe in any material respect any of its covenants, agreements,
undertakings or obligations set forth in this Warrant; provided, however, that
the Company will not be liable hereunder to the extent that any liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, claims,
costs, attorneys' fees, expenses or disbursements are found in a final
nonappealable judgment by a court to have resulted from Holder's gross
negligence, bad faith or willful misconduct in its capacity as a stockholder or
warrantholder of the Company.
(d) Remedies
Holder in addition to being entitled to exercise all rights granted by
law, including recovery of damages, will be entitled to specific performance of
its rights under Section 9 of this Warrant. The Company agrees that monetary
damages would not be adequate compensation for any loss incurred by reason of a
breach by it of the provisions of Section 9 of this Warrant and hereby agrees to
waive the defense in any action for specific performance that a remedy at law
would be adequate.
(e) Successors and Assigns
Subject to the provisions of Sections 3.1 and 9, this Warrant and the
rights evidenced hereby shall inure to the benefit of and be binding upon the
successors of the Company and the successors and assigns of Holder. The
provisions of this Warrant are intended to be for the benefit of all Holders
from time to time of this Warrant and, with respect to Section 9 hereof, holders
of Warrant Stock, and shall be enforceable by any such Holder or holder of
Warrant Stock.
(f) Amendment
This Warrant and all other Warrants may be modified or amended or the
provisions hereof waived with the written consent of the Company and Holder.
(g) Severability
Wherever possible, each provision of this Warrant shall be interpreted
in such manner as to be effective and valid under applicable law, but if any
provision of this Warrant shall be prohibited by or invalid under applicable
law, such provision shall only be ineffective to the extent of such prohibition
or invalidity, without invalidating the remainder of such provision or the
remaining provisions of this Warrant.
(h) Headings
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The headings used in this Warrant are for the convenience of reference
only and shall not, for any purpose, be deemed a part of this Warrant.
(i) Governing Law
This Warrant shall be governed by the laws of the State of New York,
without regard to the provisions thereof relating to conflicts of law.
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In Witness Whereof, the Company has caused this Warrant to be duly
executed and its corporate seal to be impressed hereon and attested by its
Secretary or an Assistant Secretary.
Dated: June 18, 1999
Thermatrix Inc.
By:_______________________________________
Name:
Title:
Attest:
By: ___________________________
Name:
Title:
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EXHIBIT A
SUBSCRIPTION FORM
[To be executed only upon exercise of Warrant]
The undersigned registered owner of this Warrant irrevocably exercises
this Warrant for the purchase of ________ shares of Common Stock of Thermatrix
Inc. and herewith makes payment therefor, all at the price and on the terms and
conditions specified in this Warrant and requests that certificates for the
shares of Common Stock hereby purchased (and any securities or other property
issuable upon such exercise) be issued in the name of and delivered to
_______________________________________________________________________________
whose address is
_______________________________________________________________________________
and, if such shares of Common Stock shall not include all of the shares of
Common Stock issuable as provided in this Warrant, that a new Warrant of like
tenor and date for the balance of the shares of Common Stock issuable hereunder
be delivered to the undersigned.
_______________________________________________
(Name of Registered Owner)
_______________________________________________
(Signature of Registered Owner)
_______________________________________________
(Street Address)
_______________________________________________
(City) (State) (Zip Code)
Notice: The signature on this subscription
must correspond with the name as written upon
the face of the within Warrant in every
particular, without alteration or enlargement
or any change whatsoever.
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EXHIBIT B
ASSIGNMENT FORM
For Value Received the undersigned registered owner of this Warrant
hereby sells, assigns and transfers unto the Assignee named below all of the
rights of the undersigned under this Warrant, with respect to the number of
shares of Common Stock set forth below:
No. of
Shares of
Name and Address of Assignee Common Stock
- ---------------------------- ------------
and does hereby irrevocably constitute and appoint
________________________________________________________________________________
attorney-in-fact to register such transfer on the books of Thermatrix Inc.
maintained for the purpose, with full power of substitution in the premises.
Dated: _______________________
____________________________________________
(Print Name)
____________________________________________
(Signature)
____________________________________________
(Print Name of Witness)
____________________________________________
(Witness's Signature)
Notice: The signature on this assignment must correspond with the name as
written upon the face of the within Warrant in every particular, without
alteration or enlargement or any change whatsoever.
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EXHIBIT 4.4(b)
THIS COMMON STOCK PURCHASE WARRANT AND THE SECURITIES REPRESENTED HEREBY
HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY
NOT BE TRANSFERRED IN VIOLATION OF SUCH ACT, THE RULES AND REGULATIONS
THEREUNDER OR THE PROVISIONS OF THIS COMMON STOCK PURCHASE WARRANT.
Number of Shares of Common Stock: 35,000
Warrant No. 2
COMMON STOCK PURCHASE WARRANT
To Purchase Common Stock of
Thermatrix Inc.
This Is To Certify That TECHNOLOGY FUNDING VENTURE PARTNERS III, L.P.,
or registered assigns, is entitled, at any time from the Closing Date (as
hereinafter defined) to the Expiration Date (as hereinafter defined), to
purchase from Thermatrix Inc., a Delaware corporation (the "Company"), 35,000
shares of Common Stock (as hereinafter defined and subject to adjustment as
provided herein), in whole or in part, including fractional parts, at a purchase
price equal to 125% of the Market Price, all on the terms and conditions and
pursuant to the provisions hereinafter set forth.
24. Definitions
As used in this Common Stock Purchase Warrant (this "Warrant"), the
following terms have the respective meanings set forth below:
"Additional Shares of Common Stock" shall mean all shares of Common
Stock issued by the Company after the Closing Date, other than Warrant Stock.
"Book Value" shall mean, in respect of any share of Common Stock on
any date herein specified, the consolidated book value of the Company as of the
last day of any month immediately preceding such date, divided by the number of
Fully Diluted Outstanding shares of Common Stock as determined in accordance
with GAAP (assuming the payment of the exercise prices for such shares) by
Arthur Andersen LLP or any other firm of independent certified public
accountants of recognized national standing selected by the Company and
reasonably acceptable to the Holder.
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"Business Day" shall mean any day that is not a Saturday or Sunday or
a day on which banks are required or permitted to be closed in the State of
California.
"Closing Date" shall have the meaning set forth in the Securities
Purchase Agreement.
"Commission" shall mean the Securities and Exchange Commission or any
other federal agency then administering the Securities Act and other federal
securities laws.
"Common Stock" shall mean (except where the context otherwise
indicates) the Common Stock, par value $.001 per share, of the Company as
constituted on the Closing Date, and any capital stock into which such Common
Stock may thereafter be changed, and shall also include (i) capital stock of the
Company of any other class (regardless of how denominated) issued to the holders
of shares of Common Stock upon any reclassification thereof which is also not
preferred as to dividends or assets over any other class of stock of the Company
and which is not subject to redemption and (ii) shares of common stock of any
successor or acquiring corporation received by or distributed to the holders of
Common Stock of the Company in the circumstances contemplated by Section 4.4.
"Convertible Securities" shall mean evidences of indebtedness, shares
of stock or other securities which are convertible into or exchangeable, with or
without payment of additional consideration in cash or property, for shares of
Common Stock, either immediately or upon the occurrence of a specified date or a
specified event.
"Current Warrant Price" shall mean, in respect of a share of Common
Stock at any date herein specified, the price at which a share of Common Stock
may be purchased pursuant to this Warrant on such date.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended, or any successor federal statute, and the rules and regulations of the
Commission thereunder, all as the same shall be in effect from time to time.
"Exercise Period" shall mean the period during which this Warrant is
exercisable pursuant to Section 2.1.
"Expiration Date" shall mean June ___, 2002.
"Fully Diluted Outstanding" shall mean, when used with reference to
Common Stock, at any date as of which the number of shares thereof is to be
determined, all shares of Common Stock Outstanding at such date and all shares
of Common Stock issuable in respect of this Warrant, outstanding on such date,
and other options or warrants to purchase, or securities convertible into,
shares of Common Stock outstanding on such date which would be deemed
outstanding in accordance with GAAP for purposes of determining Book Value or
net income per share.
"GAAP" shall mean generally accepted accounting principles in the
United States of America as from time to time in effect.
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"Holder" shall mean the Person in whose name the Warrant or Warrant
Stock set forth herein is registered on the books of the Company maintained for
such purpose.
"Market Price" per Common Share means the closing bid price of the
Common Shares as reported on the Nasdaq National Market ("Nasdaq") on the
trading day immediately preceding the Closing Date.
"Other Property" shall have the meaning set forth in Section 4.4.
"Outstanding" shall mean, when used with reference to Common Stock, at
any date as of which the number of shares thereof is to be determined, all
issued shares of Common Stock, except shares then owned or held by or for the
account of the Company or any subsidiary thereof, and shall include all shares
issuable in respect of outstanding scrip or any certificates representing
fractional interests in shares of Common Stock.
"Person" shall mean any individual, sole proprietorship, partnership,
joint venture, trust, incorporated organization, association, corporation,
institution, public benefit corporation, entity or government (whether federal,
state, county, city, municipal or otherwise, including, without limitation, any
instrumentality, division, agency, body or department thereof).
"Registration Rights Agreement" shall mean the Registration Rights
Agreement dated a date even herewith between the Company and Technology Funding
Venture Partners III, L.P., as it may be amended from time to time.
"Restricted Common Stock" shall mean shares of Common Stock which are,
or which upon their issuance on their exercise of this Warrant would be,
evidenced by a certificate bearing the restrictive legend set forth in Section
9.1(a).
"Securities Act" shall mean the Securities Act of 1933, as amended, or
any successor federal statute, and the rules and regulations of the Commission
thereunder, all as the same shall be in effect at the time.
"Securities Purchase Agreement" shall mean the Securities Purchase
Agreement dated as of a date even herewith between the Company and Technology
Funding Venture Partners III, L.P. as it may be amended from time to time.
"Transfer" shall mean any disposition of any Warrant or Warrant Stock
or of any interest in either thereof, which would constitute a sale thereof
within the meaning of the Securities Act.
"Transfer Notice" shall have the meaning set forth in Section 9.2.
"Warrant Price" shall mean an amount equal to (i) the number of shares
of Common Stock being purchased upon exercise of this Warrant pursuant to
Section 2.1, multiplied by (ii) the Current Warrant Price as of the date of such
exercise.
"Warrant Stock" shall mean the shares of Common Stock purchased by the
holders of the Warrants upon the exercise thereof.
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"Warrants" shall mean this Warrant and all warrants issued upon
transfer, division or combination of, or in substitution for, any thereof. All
Warrants shall at all times be identical as to terms and conditions and date,
except as to the number of shares of Common Stock for which they may be
exercised.
25. Exercise of Warrant
(a) Manner of Exercise
From and after the Closing Date and until 5:00 p.m., New York time, on
the Expiration Date, Holder may exercise this Warrant, on any Business Day, for
all or any part of the number of shares of Common Stock purchasable hereunder.
In order to exercise this Warrant, in whole or in part, Holder shall
deliver to the Company at its principal office at 308 North Peters Road, Suite
100, Knoxville, Tennessee 37922 or at the office or agency designated by the
Company pursuant to Section 12, (i) a written notice of Holder's election to
exercise this Warrant, which notice shall specify the number of shares of Common
Stock to be purchased, (ii) to the extent such exercise is not being effected
through a Cashless Exercise, payment of the Warrant Price in cash or wire
transfer or cashier's check drawn on a United States bank and (iii) this
Warrant. Such notice shall be substantially in the form of the subscription
form appearing at the end of this Warrant as Exhibit A, duly executed by Holder
or its agent or attorney. Upon receipt of the items referred to in clauses (i),
(ii) and (iii) above, the Company shall, as promptly as practicable, and in any
event within five Business Days thereafter, execute or cause to be executed and
deliver or cause to be delivered to Holder a certificate or certificates
representing the aggregate number of full shares of Common Stock issuable upon
such exercise, together with cash in lieu of any fraction of a share, as
hereinafter provided. The stock certificate or certificates so delivered shall
be, to the extent possible, in such denomination or denominations as Holder
shall request in the notice and shall be registered in the name of Holder or,
subject to Section 9, such other name as shall be designated in the notice.
This Warrant shall be deemed to have been exercised and such certificate or
certificates shall be deemed to have been issued, and Holder or any other Person
so designated to be named therein shall be deemed to have become a holder of
record of such shares for all purposes, as of the date the notice, together with
the cash or check or checks and this Warrant, is received by the Company as
described above and all taxes required to be paid by Holder, if any, pursuant to
Section 2.2 prior to the issuance of such shares have been paid. If this Warrant
shall have been exercised in part, the Company shall, at the time of delivery of
the certificate or certificates representing Warrant Stock, deliver to Holder a
new Warrant evidencing the rights of Holder to purchase the unpurchased shares
of Common Stock called for by this Warrant, which new Warrant shall in all other
respects be identical with this Warrant, or, at the request of Holder,
appropriate notation may be made on this Warrant and the same returned to
Holder. Notwithstanding any provision herein to the contrary, the Company shall
not be required to register shares in the name of any Person who acquired this
Warrant (or part hereof) or any Warrant Stock otherwise than in accordance with
this Warrant.
Simultaneously with the exercise of this Warrant, payment in full of
the Warrant Price may be made, at the option of the Holder, (i) by payment of
the Warrant Price in cash or by wire transfer or cashier's check drawn on a
United States bank, (ii) by the surrender (which surrender shall be evidenced by
cancellation of the number of Warrants represented by any
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certificate(s) evidencing the Warrants (the "Warrant Certificate") presented in
connection with a Cashless Exercise of a Warrant or Warrants (represented by one
or more Warrant Certificates), and without payment of the Warrant Price in cash,
for such number of shares equal to the product of (1) the number of shares for
which such Warrant is exercisable with payment in cash of the Warrant Price as
of the date of exercise and (2) the Cashless Exercise Ratio or (iii) by any
combination of (i) and (ii). For purposes of this Agreement, the "Cashless
Exercise Ratio" shall equal a fraction, the numerator of which is the excess of
the Current Market Price per share of the Common Stock on the date of exercise
over the Warrant Price per share as of the date of exercise and the denominator
of which is the Current Market Price per share of the Common Stock on the date
of exercise. An exercise of a Warrant in accordance with the immediately
preceding sentences is herein called a "Cashless Exercise." Upon surrender of a
Warrant Certificate representing more than one Warrant in connection with the
Holder's option to elect a Cashless Exercise, the number of shares deliverable
upon a Cashless Exercise shall be equal to the Cashless Exercise Ratio
multiplied by the product of (a) the number of Warrants that the Holder
specifies is to be exercised pursuant to a Cashless Exercise and (b) the number
of shares for which such Warrant is then exercisable (without giving effect to
the Cashless Exercise option). All provisions of this Agreement shall be
applicable with respect to an exercise of a Warrant Certificate pursuant to a
Cashless Exercise for less than the full number of Warrants represented thereby.
(b) Payment of Taxes and Charges
All shares of Common Stock issuable upon the exercise of this Warrant
pursuant to the terms hereof shall be validly issued, fully paid and
nonassessable, freely tradable and without any preemptive rights. The Company
shall pay all expenses in connection with, and all taxes and other governmental
charges that may be imposed with respect to, the issue or delivery thereof,
unless such tax or charge is imposed by law upon Holder, in which case such
taxes or charges shall be paid by Holder. The Company shall not be required,
however, to pay any tax or other charge imposed in connection with any transfer
involved in the issue of any certificate for shares of Common Stock issuable
upon exercise of this Warrant in any name other than that of Holder, and in such
case the Company shall not be required to issue or deliver any stock certificate
until such tax or other charge has been paid or it has been established to the
satisfaction of the Company that no such tax or other charge is due.
(c) Fractional Shares
The Company shall not be required to issue a fractional share of
Common Stock upon exercise of any Warrant. As to any fraction of a share which
Holder would otherwise be entitled to purchase upon such exercise, the Company
shall pay a cash adjustment in respect of such final fraction in an amount equal
to the same fraction of the Market Price per share of Common Stock as of the
Closing Date.
(d) Continued Validity
A holder of shares of Common Stock issued upon the exercise of this
Warrant, in whole or in part (other than a holder who acquires such shares after
the same have been publicly sold pursuant to a Registration Statement under the
Securities Act or sold pursuant to Rule 144 thereunder), shall continue to be
entitled with respect to such shares to all rights to which it would
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have been entitled as Holder under Sections 9, 10 and 14 of this Warrant. The
Company will, at the time of exercise of this Warrant, in whole or in part, upon
the request of Holder, acknowledge in writing, in form reasonably satisfactory
to Holder, its continuing obligation to afford Holder all such rights; provided,
however, that if Holder shall fail to make any such request, such failure shall
not affect the continuing obligation of the Company to afford to Holder all such
rights.
26. Transfer, Division and Combination
(a) Transfer
Subject to compliance with Section 9, transfer of this Warrant and all
rights hereunder, in whole or in part, shall be registered on the books of the
Company to be maintained for such purpose, upon surrender of this Warrant at the
principal office of the Company referred to in Section 2.1 or the office or
agency designated by the Company pursuant to Section 12, together with a written
assignment of this Warrant substantially in the form of Exhibit B hereto duly
executed by Holder or its agent or attorney and funds sufficient to pay any
transfer taxes payable upon the making of such transfer. Upon such surrender
and, if required, such payment, the Company shall, subject to Section 9, execute
and deliver a new Warrant or Warrants in the name of the assignee or assignees
and in the denomination specified in such instrument of assignment, and shall
issue to the assignor a new Warrant evidencing the portion of this Warrant not
so assigned, and this Warrant shall promptly be canceled. A Warrant, if
properly assigned in compliance with Section 9, may be exercised by a new Holder
for the purchase of shares of Common Stock without having a new warrant issued.
(b) Division and Combination
Subject to Section 9, this Warrant may be divided or combined with
other Warrants upon presentation hereof at the aforesaid office or agency of the
Company, together with a written notice specifying the names and denominations
in which new Warrants are to be issued, signed by Holder or its agent or
attorney. Subject to compliance with Section 3.1 and with Section 9, as to any
transfer which may be involved in such division or combination, the Company
shall execute and deliver a new Warrant or Warrants in exchange for the Warrant
or Warrants to be divided or combined in accordance with such notice.
(c) Expenses
The Company shall prepare, issue and deliver at its own expense (other
than transfer taxes) the new Warrants or Warrants under this Section 3.
(d) Maintenance of Books
The Company agrees to maintain, at its aforesaid office or agency,
books for the registration and the registration of transfer of the Warrants.
27. Adjustments
The number of shares of Common Stock for which this Warrant is
exercisable, or the price at which such shares may be purchased upon exercise of
this Warrant, shall be subject to
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adjustment from time to time as set forth in this Section 4. The Company shall
give Holder notice of any event described below which requires an adjustment
pursuant to this Section 4 at the time of such event.
(a) Stock Dividends, Subdivisions and Combinations
If at any time the Company shall:
(i) take a record of the holders of its Common Stock for
the purpose of entitling them to receive a dividend payable in, or other
distribution of, Additional Shares of Common Stock;
(ii) subdivide its outstanding shares of Common Stock into
a larger number of shares of Common Stock; or
(iii) combine its outstanding shares of Common Stock into a
smaller number of shares of Common Stock;
then (i) the number of shares of Common Stock for which this Warrant is
exercisable immediately after the occurrence of any such event shall be adjusted
to equal the number of shares of Common Stock which a record holder of the same
number of shares of Common Stock for which this Warrant is exercisable
immediately prior to the occurrence of such event would own or be entitled to
receive after the happening of such event, and (ii) the Current Warrant Price
shall be adjusted to equal (A) the Current Warrant Price multiplied by the
number of shares of Common Stock for which this Warrant is exercisable
immediately prior to the adjustment divided by (B) the number of shares for
which this Warrant is exercisable immediately after such adjustment.
(b) Certain Other Distributions
If at any time the Company shall take a record of the holders of its
Common Stock for the purpose of entitling them to receive any dividend or other
distribution of:
(i) cash;
(ii) any evidences of its indebtedness, any shares of its
stock or any other securities or property of any nature whatsoever (other than
cash, Convertible Securities or Additional Shares of Common Stock); or
(iii) any warrants or other rights to subscribe for or
purchase any evidences of its indebtedness, any shares of its stock or any other
securities or property of any nature whatsoever (other than cash, Convertible
Securities or Additional Shares of Common Stock);
then Holder shall be entitled to receive such dividend or distribution as if
Holder had exercised the Warrant. A reclassification of the Common Stock (other
than a change in par value, or from par value to no par value or from no par
value to par value) into shares of Common Stock and shares of any other class of
stock shall be deemed a distribution by the Company to the holders of its Common
Stock of such shares of such other class of stock within the meaning of this
Section 4.2 and, if the outstanding shares of Common Stock shall be changed into
a larger or smaller number of shares of
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Common Stock as a part of such reclassification, such change shall be deemed a
subdivision or combination, as the case may be, of the outstanding shares of
Common Stock within the meaning of Section 4.1.
(c) Other Provisions Applicable to Adjustments under this Section
The following provisions shall be applicable to the making of
adjustments of the number of shares of Common Stock for which this Warrant is
exercisable and the Current Warrant Price provided for in this Section 4:
(i) When Adjustments to be Made. The adjustments
required by this Section 4 shall be made whenever and as often as any specified
event requiring an adjustment shall occur. For the purpose of any adjustment,
any specified event shall be deemed to have occurred at the close of business on
the date of its occurrence.
(ii) Fractional Interests. In computing adjustments under
this Section 4, fractional interests in Common Stock shall be taken into account
to the nearest 1/10th of a share.
(iii) When Adjustment not Required. If the Company shall
take a record of the holders of its Common Stock for the purpose of entitling
them to receive a dividend or distribution or subscription or purchase rights
and shall, thereafter and before the distribution to stockholders thereof,
legally abandon its plan to pay or deliver such dividend, distribution,
subscription or purchase rights, then thereafter no adjustment shall be required
by reason of the taking of such record and any such adjustment previously made
in respect thereof shall be rescinded and annulled.
(iv) Challenge to Good Faith Determination. Whenever the
Board of Directors of the Company shall be required to make a determination in
good faith of the fair value of any item under this Section 4, such
determination may be challenged in good faith by the Holder, and any dispute
shall be resolved by an investment banking firm of recognized national standing
selected by the Company and acceptable to Holder.
(d) Reorganization, Reclassification, Merger, Consolidation or
Disposition of Assets
In case the Company shall reorganize its capital, reclassify its
capital stock, consolidate or merge with or into another corporation (where the
Company is not the surviving corporation or where there is a change in or
distribution with respect to the Common Stock of the Company), or sell, transfer
or otherwise dispose of all or substantially all its property, assets or
business to another corporation and, pursuant to the terms of such
reorganization, reclassification, merger, consolidation or disposition of
assets, shares of common stock of the successor or acquiring corporation, or any
cash, shares of stock or other securities or property of any nature whatsoever
(including warrants or other subscription or purchase rights) in addition to or
in lieu of common stock of the successor or acquiring corporation ("Other
Property"), are to be received by or distributed to the holders of Common Stock
of the Company, then Holder shall have the right thereafter to receive, upon
exercise of the Warrant, the number of shares of common stock of the successor
or acquiring corporation or of the Company, if it is the surviving corporation,
and Other Property receivable upon or as a result of such reorganization,
reclassification, consolidation or disposition of assets by a holder of the
number of shares of Common Stock for which this Warrant is
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exercisable immediately prior to such event. In case of any such reorganization,
reclassification, merger, consolidation or disposition of assets, the successor
or acquiring corporation (if other than the Company) shall expressly assume the
due and punctual observance and performance of each and every covenant and
condition of this Warrant to be performed and observed by the Company and all
the obligations and liabilities hereunder, subject to such modifications as may
be deemed appropriate (as determined by resolution of the Board of Directors of
the Company) in order to provide for adjustments of shares of Common Stock for
which this Warrant is exercisable which shall be as nearly equivalent as
practicable to the adjustments provided for in this Section 4. For purposes of
this Section 4.4, "common stock of the successor or acquiring corporation" shall
include stock of such corporation of any class which is not preferred as to
dividends or assets over any other class of stock of such corporation and which
is not subject to redemption and shall also include any evidences of
indebtedness, shares of stock or other securities which are convertible into or
exchangeable for any such stock, either immediately or upon the arrival of a
specified date or the happening of a specified event and any warrants or other
rights to subscribe for or purchase any such stock. The foregoing provisions of
this Section 4.4 still similarly apply to successive reorganizations,
reclassifications, mergers, consolidations or disposition of assets.
(e) Other Action Affecting Common Stock
In case at any time or from time to time the Company shall take any
action in respect of its Common Stock, other than any action described in this
Section 4, which would have a materially adverse effect upon the rights of
Holder, the number of shares of Common Stock and/or the purchase price thereof
shall be adjusted in such manner as may be equitable in the circumstances, as
determined in good faith by the Board of Directors of the Company.
(f) Certain Limitations
Notwithstanding anything herein to the contrary, the Company agrees
not to enter into any transaction which, by reason of any adjustment hereunder,
would cause the Current Warrant Price to be less than the par value per share of
Common Stock.
28. Notices to Holder
(a) Notice of Adjustments
Whenever the number of shares of Common Stock for which this Warrant
is exercisable, or whenever the price at which a share of such Common Stock may
be purchased upon exercise of the Warrants, shall be adjusted pursuant to
Section 4, the Company shall forthwith prepare a certificate to be executed by
the chief financial officer of the Company setting forth, in reasonable detail,
the event requiring the adjustment and the method by which such adjustment was
calculated (including a description of the basis on which the Board of Directors
of the Company determined the fair value of any evidences of indebtedness,
shares of stock, other securities or property or warrants or other subscription
or purchase rights referred to in Section 4.2), specifying the number of shares
of Common Stock for which this Warrant is exercisable and (if such adjustment
was made pursuant to Section 4.4 or 4.5) describing the number and kind of any
other shares of stock or Other Property for which this Warrant is exercisable,
and any change in the purchase price or prices thereof, after giving effect to
such adjustment or change. The Company
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shall promptly cause a signed copy of such certificate to be delivered to the
Holder in accordance with Section 14.2. The Company shall keep at its office or
agency designated pursuant to Section 12 copies of all such certificates and
cause the same to be available for inspection at said office during normal
business hours by the Holder or any prospective purchaser of a Warrant
designated by Holder.
(b) Notice of Corporate Action
If at any time:
(i) the Company shall take a record of the holders of its
Common Stock for the purpose of entitling them to receive a dividend or other
distribution, or any right to subscribe for or purchase any evidences of its
indebtedness, any shares of stock of any class or any other securities or
property, or to receive any other right; or
(ii) there shall be any capital reorganization of the
Company, any reclassification or recapitalization of the capital stock of the
Company or any consolidation or merger of the Company with, or any sale,
transfer or other disposition of all or substantially all the property, assets
or business of the Company to, another corporation; or
(iii) there shall be a voluntary or involuntary
dissolution, liquidation or winding up of the Company;
then, in any one or more of such cases, the Company shall give to Holder (i) at
least 30 days' prior written notice of the date on which a record date shall be
selected for such dividend, distribution or right or for determining rights to
vote in respect of any such reorganization, reclassification, merger,
consolidation, sale, transfer, disposition, dissolution, liquidation or winding
up, and (ii) in the case of any such reorganization, reclassification, merger,
consolidation, sale, transfer, disposition, dissolution, liquidation or winding
up, at least 30 days' prior written notice of the date when the same shall take
place. Such notice in accordance with the foregoing clause also shall specify
(i) the date on which any such record is to be taken for the purpose of such
dividend, distribution or right, the date on which the holders of Common Stock
shall be entitled to any such dividend, distribution or right, and the amount
and character thereof, and (ii) the date on which any such reorganization,
reclassification, merger, consolidation, sale, transfer, disposition,
dissolution, liquidation or winding up is to take place and the time, if any
such time is to be fixed, as of which the holders of Common Stock shall be
entitled to exchange their shares of Common Stock for securities or other
property deliverable upon such reorganization, reclassification, merger,
consolidation, sale, transfer, disposition, dissolution, liquidation or winding
up. Each such written notice shall be sufficiently given if addressed to Holder
at the last address of Holder appearing on the books of the Company and
delivered in accordance with Section 14.2.
29. No Impairment
The Company shall not by any action, including, without limitation,
amending its certificate of incorporation or through any reorganization,
transfer of assets, consolidation, merger, dissolution, issue or sale of
securities or other voluntary action, avoid or seek to avoid the observance or
performance of any of the terms of this Warrant, but will at all times in good
faith assist in the carrying out of all such terms and in the taking of all such
actions as may be necessary
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or appropriate to protect the rights of Holder against impairment. Without
limiting the generality of the foregoing, the Company will (a) not increase the
par value of any shares of Common Stock receivable upon the exercise of this
Warrant above the amount payable therefor upon such exercise immediately prior
to such increase in par value, (b) take all such action as may be necessary or
appropriate in order that the Company may validly and legally issue fully paid
and nonassessable shares of Common Stock upon the exercise of this Warrant, and
(c) use its best efforts to obtain all such authorizations, exemptions or
consents from any public regulatory body having jurisdiction thereof as may be
necessary to enable the Company to perform its obligations under this Warrant.
Upon the request of Holder, the Company will at any time during the
period this Warrant is outstanding acknowledge in writing, in form satisfactory
to Holder, the continuing validity of this Warrant and the obligations of the
Company hereunder.
30. Reservation and Authorization of Common Stock
From and after the Closing Date, the Company shall at all times
reserve and keep available for issue upon the exercise of Warrants such number
of its authorized but unissued shares of Common Stock as will be sufficient to
permit the exercise in full of all outstanding Warrants. All shares of Common
Stock which shall be so issuable, when issued upon exercise of any Warrant and
payment therefor in accordance with the terms of such Warrant, shall be duly and
validly issued and fully paid and nonassessable and not subject to preemptive
rights.
Before taking any action which would cause an adjustment reducing the
Current Warrant Price below the then par value, if any, of the shares of Common
Stock issuable upon exercise of the Warrants, the Company shall take any
corporate action which may be necessary in order that the Company may validly
and legally issue fully paid and nonassessable shares of such Common Stock at
such adjusted Current Warrant Price.
Before taking any action which would result in an adjustment in the
number of shares of Common Stock for which this Warrant is exercisable or in the
Current Warrant Price, the Company shall obtain all such authorizations or
exemptions thereof, or consents thereto, as may be necessary from any public
regulatory body or bodies having jurisdiction thereof.
31. Taking of Record; Stock and Warrant Transfer Books
In the case of all dividends or other distributions by the Company to
the holders of its Common Stock with respect to which any provision of Section 4
refers to the taking of record of such holders, the Company will in each case
take such a record and will take such record as of the close of business on a
Business Day. The Company will not at any time, except upon dissolution,
liquidation or winding up of the Company, close its stock transfer books or
Warrant transfer books so as to result in preventing or delaying the exercise or
transfer of any Warrant.
32. Restrictions on Transferability
The Warrants and the Warrant Stock shall not be transferred,
hypothecated or assigned before satisfaction of the conditions specified in this
Section 9, which conditions are intended to ensure compliance with the
provisions of the Securities Act with respect to the Transfer
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of any Warrant or any Warrant Stock. Holder, by acceptance of this Warrant,
agrees to be bound by the provisions of this Section 9.
(a) Restrictive Legend
(i) Holder, by accepting this Warrant and any Warrant Stock
agrees that this Warrant and the Warrant Stock issuable upon exercise hereof may
not be assigned or otherwise transferred unless and until (i) the Company has
received an opinion of counsel for Holder that such securities may be sold
pursuant to an exemption from registration under the Securities Act or (ii) a
registration statement relating to such securities has been filed by the Company
and declared effective by the Commission.
Each certificate for Warrant Stock issuable hereunder shall bear a
legend as follows until such securities have been sold pursuant to an effective
registration statement under the Securities Act:
"THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"),
OR THE SECURITIES LAWS OF ANY STATE, AND ARE BEING OFFERED
AND SOLD PURSUANT TO AN EXEMPTION FROM THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT AND SUCH LAWS. THESE
SECURITIES MAY NOT BE SOLD OR TRANSFERRED EXCEPT PURSUANT TO
AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT
OR PURSUANT TO AN AVAILABLE EXEMPTION FROM THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT OR SUCH OTHER LAWS."
(ii) Except as otherwise provided in this Section 9, the Warrant
shall be stamped or otherwise imprinted with a legend in substantially the
following form:
"THIS WARRANT AND THE SECURITIES REPRESENTED HEREBY HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, AND MAY NOT BE TRANSFERRED IN VIOLATION OF SUCH
ACT, THE RULES AND REGULATIONS THEREUNDER OR THE PROVISIONS
OF THIS WARRANT."
(b) Notice of Proposed Transfers
Prior to any Transfer or attempted Transfer of any Warrants or any
shares of Restricted Common Stock, the Holder shall give ten days' prior written
notice (a "Transfer Notice") to the Company of Holder's intention to effect such
Transfer, describing the manner and circumstances of the proposed Transfer, and
obtain from counsel to Holder who shall be reasonably satisfactory to the
Company, an opinion that the proposed Transfer of such Warrants or such
Restricted Common Stock may be effected without registration under the
Securities Act. After receipt of the Transfer Notice and opinion, the Company
shall, within five days thereof, notify the
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Holder as to whether such opinion is reasonably satisfactory and, if so, such
holder shall thereupon be entitled to Transfer such Warrants or such Restricted
Common Stock, in accordance with the terms of the Transfer Notice. Each
certificate, if any, evidencing such shares of Restricted Common Stock issued
upon such Transfer shall bear the restrictive legend set forth in Section
9.1(a), and the Warrant issued upon such Transfer shall bear the restrictive
legend set forth in Section 9.1(b), unless in the opinion of such counsel such
legend is not required in order to ensure compliance with the Securities Act.
Holder shall not be entitled to Transfer such Warrants or such Restricted Common
Stock until receipt of notice from the Company under this Section 9.2(a) that
such opinion is reasonably satisfactory.
(c) Required Registration
Pursuant to the terms and conditions set forth in Registration Rights
Agreement, the Company shall prepare and file with the Commission not later than
the 30th day after the Closing Date, a Registration Statement relating to the
offer and sale of the Common Stock issuable upon exercise of the Warrants and
shall use its best efforts to cause the Commission to declare such Registration
Statement effective under the Securities Act as promptly as practicable but no
later than 150 days after the Closing Date.
(d) Termination of Restrictions
Notwithstanding the foregoing provisions of Section 9, the
restrictions imposed by this Section upon the transferability of the Warrants,
the Warrant Stock and the Restricted Common Stock (or Common Stock issuable upon
the exercise of the Warrants) and the legend requirements of Section 9.1 shall
terminate as to any particular Warrant or share of Warrant Stock or Restricted
Common Stock (or Common Stock issuable upon the exercise of the Warrants) (i)
when and so long as such security shall have been effectively registered under
the Securities Act and disposed of pursuant thereto or (ii) when the Company
shall have received an opinion of counsel reasonably satisfactory to it that
such shares may be transferred without registration thereof under the Securities
Act. Whenever the restrictions imposed by Section 9 shall terminate as to this
Warrant, as hereinabove provided, the Holder hereof shall be entitled to receive
from the Company upon written request of the Holder, at the expense of the
Company, a new Warrant bearing the following legend in place of the restrictive
legend set forth hereon:
"THE RESTRICTIONS ON TRANSFERABILITY OF THE WITHIN WARRANT
CONTAINED IN SECTION 9 HEREOF TERMINATED ON __________,
_____ AND ARE OF NO FURTHER FORCE AND EFFECT."
All Warrants issued upon registration of transfer, division or combination of,
or in substitution for, any Warrant or Warrants entitled to bear such legend
shall have a similar legend endorsed thereon. Whenever the restrictions imposed
by this Section shall terminate as to any share of Restricted Common Stock, as
hereinabove provided, the holder thereof shall be entitled to receive from the
Company, at the Company's expense, a new certificate representing such Common
Stock not bearing the restrictive legend set forth in Section 9.1(a).
(e) Listing on Securities Exchange
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If the Company shall list any shares of Common Stock on any securities
exchange or quotation system, it will, at its expense, list thereon, maintain
and, when necessary, increase such listing of, all shares of Common Stock issued
or, to the extent permissible under the applicable securities exchange rules,
issuable upon the exercise of this Warrant so long as any shares of Common Stock
shall be so listed during any such Exercise Period.
33. Supplying Information
The Company shall cooperate with Holder in supplying such information
as may be reasonably necessary for Holder to complete and file any information
reporting forms presently or hereafter required by the Commission as a condition
to the availability of an exemption from the Securities Act for the sale of any
Warrant or Restricted Common Stock.
34. Loss or Mutilation
Upon receipt by the Company from Holder of evidence reasonably
satisfactory to it of the ownership of and the loss, theft, destruction or
mutilation of this Warrant and indemnity reasonably satisfactory to it (it being
understood that the written agreement of the Holder shall be sufficient
indemnity), and in case of mutilation upon surrender and cancellation hereof,
the Company will execute and deliver in lieu hereof a new Warrant of like tenor
to Holder; provided, in the case of mutilation no indemnity shall be required if
this Warrant in identifiable form is surrendered to the Company for
cancellation.
35. Office of the Company
As long as any of the Warrants remain outstanding, the Company shall
maintain an office or agency (which may be the principal executive offices of
the Company) where the Warrants may be presented for exercise, registration of
transfer, division or combination as provided in this Warrant.
36. Limitation of Liability
No provision hereof, in the absence of affirmative action by Holder to
purchase shares of Common Stock, and no enumeration herein of the rights or
privileges of Holder hereof, shall give rise to any liability of Holder for the
purchase price of any Common Stock or as a stockholder of the Company, whether
such liability is asserted by the Company or by creditors of the Company.
37. Miscellaneous
(a) Nonwaiver and Expenses
No course of dealing or any delay or failure to exercise any right
hereunder on the part of Holder shall operate as a waiver of such right or
otherwise prejudice Holder's rights, powers or remedies. If the Company fails
to make, when due, any payments provided for hereunder, or fails to comply with
any other provision of this Warrant, the Company shall pay to Holder such
amounts as shall be sufficient to cover any costs and expenses including,
without limitation, reasonable attorneys' fees, including those of appellate
proceedings, incurred by Holder in collecting any
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amounts due pursuant hereto or in otherwise enforcing any of its rights, powers
or remedies hereunder.
(b) Notice Generally
Except as may be otherwise provided herein, any notice or other
communication or delivery required or permitted hereunder shall be in writing
and shall be delivered personally or sent by certified mail, postage prepaid, or
by a nationally recognized overnight courier service, and shall be deemed given
when so delivered personally or by overnight courier service, or, if mailed,
three days after the date of deposit in the United States mails, as follows:
(i) if to the Company, to:
Thermatrix Inc.
308 North Peters Road, Suite 100
Knoxville, TN 37922
Attention: Edward E. Greene
(423) 539-9603
(423) 539-9643 (Fax)
with a copy to:
Wilson Sonsini Goodrich & Rosati, PC
650 Page Mill Road
Palo Alto, CA 94304-1050
Attention: Michael J. Danaher, Esq.
(650) 493-9300
(650) 493-6811 (Fax)
(ii) if to the Holder, to:
(iii) Technology Funding Venture Partners III, L.P.
200 Alameda de las Pulgas, Suite 250
San Mateo, CA 94403
Attention: Charlie Kokesh
(650) 345-2200
(650) 345-1797 (Fax)
The Company or the Holder may change the foregoing address by notice given
pursuant to this Section 14.2.
(c) Indemnification
The Company agrees to indemnify and hold harmless Holder from and
against any liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, claims, costs, attorneys' fees, expenses and disbursements of
any kind which may be imposed upon, incurred by or asserted
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against Holder in any manner relating to or arising out of any failure by the
Company to perform or observe in any material respect any of its covenants,
agreements, undertakings or obligations set forth in this Warrant; provided,
however, that the Company will not be liable hereunder to the extent that any
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
claims, costs, attorneys' fees, expenses or disbursements are found in a final
nonappealable judgment by a court to have resulted from Holder's gross
negligence, bad faith or willful misconduct in its capacity as a stockholder or
warrantholder of the Company.
(d) Remedies
Holder in addition to being entitled to exercise all rights granted by
law, including recovery of damages, will be entitled to specific performance of
its rights under Section 9 of this Warrant. The Company agrees that monetary
damages would not be adequate compensation for any loss incurred by reason of a
breach by it of the provisions of Section 9 of this Warrant and hereby agrees to
waive the defense in any action for specific performance that a remedy at law
would be adequate.
(e) Successors and Assigns
Subject to the provisions of Sections 3.1 and 9, this Warrant and the
rights evidenced hereby shall inure to the benefit of and be binding upon the
successors of the Company and the successors and assigns of Holder. The
provisions of this Warrant are intended to be for the benefit of all Holders
from time to time of this Warrant and, with respect to Section 9 hereof, holders
of Warrant Stock, and shall be enforceable by any such Holder or holder of
Warrant Stock.
(f) Amendment
This Warrant and all other Warrants may be modified or amended or the
provisions hereof waived with the written consent of the Company and Holder.
(g) Severability
Wherever possible, each provision of this Warrant shall be interpreted
in such manner as to be effective and valid under applicable law, but if any
provision of this Warrant shall be prohibited by or invalid under applicable
law, such provision shall only be ineffective to the extent of such prohibition
or invalidity, without invalidating the remainder of such provision or the
remaining provisions of this Warrant.
(h) Headings
The headings used in this Warrant are for the convenience of reference
only and shall not, for any purpose, be deemed a part of this Warrant.
(i) Governing Law
This Warrant shall be governed by the laws of the State of New York,
without regard to the provisions thereof relating to conflicts of law.
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In WITNESS WHEREOF, the Company has caused this Warrant to be duly
executed and its corporate seal to be impressed hereon and attested by its
Secretary or an Assistant Secretary.
Dated: June 18, 1999
THERMATRIX INC.
By:_________________________
Name:
Title:
Attest:
By:_______________________________
Name:
Title:
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EXHIBIT A
SUBSCRIPTION FORM
[To be executed only upon exercise of Warrant]
The undersigned registered owner of this Warrant irrevocably exercises
this Warrant for the purchase of ________ shares of Common Stock of Thermatrix
Inc. and herewith makes payment therefor, all at the price and on the terms and
conditions specified in this Warrant and requests that certificates for the
shares of Common Stock hereby purchased (and any securities or other property
issuable upon such exercise) be issued in the name of and delivered to
________________________________________________________________________________
whose address is
________________________________________________________________________________
and, if such shares of Common Stock shall not include all of the shares of
Common Stock issuable as provided in this Warrant, that a new Warrant of like
tenor and date for the balance of the shares of Common Stock issuable hereunder
be delivered to the undersigned.
________________________________________
(Name of Registered Owner)
________________________________________
(Signature of Registered Owner)
________________________________________
(Street Address)
________________________________________
(City) (State) (Zip Code)
Notice: The signature on this
subscription must correspond with the
name as written upon the face of the
within Warrant in every particular,
without alteration or enlargement or any
change whatsoever.
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EXHIBIT B
ASSIGNMENT FORM
For VALUE RECEIVED the undersigned registered owner of this Warrant
hereby sells, assigns and transfers unto the Assignee named below all of the
rights of the undersigned under this Warrant, with respect to the number of
shares of Common Stock set forth below:
No. of
Shares of
Name and Address of Assignee Common Stock
---------------------------- ------------
and does hereby irrevocably constitute and appoint
________________________________________________________________________________
attorney-in-fact to register such transfer on the books of Thermatrix Inc.
maintained for the purpose, with full power of substitution in the premises.
Dated:_________________________
________________________________________
(Print Name)
________________________________________
(Signature)
________________________________________
(Print Name of Witness)
________________________________________
(Witness's Signature)
Notice: The signature on this assignment must correspond with the name as
written upon the face of the within Warrant in every particular, without
alteration or enlargement or any change whatsoever.
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EXHIBIT 4.4(c)
THIS COMMON STOCK PURCHASE WARRANT AND THE SECURITIES REPRESENTED HEREBY
HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY
NOT BE TRANSFERRED IN VIOLATION OF SUCH ACT, THE RULES AND REGULATIONS
THEREUNDER OR THE PROVISIONS OF THIS COMMON STOCK PURCHASE WARRANT.
Number of Shares of Common Stock: 70,000
Warrant No. 3
COMMON STOCK PURCHASE WARRANT
To Purchase Common Stock of
Thermatrix Inc.
This Is To Certify That CIBC WMV INC., or registered assigns, is
entitled, at any time from the Closing Date (as hereinafter defined) to the
Expiration Date (as hereinafter defined), to purchase from Thermatrix Inc., a
Delaware corporation (the "Company"), 70,000 shares of Common Stock (as
hereinafter defined and subject to adjustment as provided herein), in whole or
in part, including fractional parts, at a purchase price equal to 125% of the
Market Price, all on the terms and conditions and pursuant to the provisions
hereinafter set forth.
38. Definitions
As used in this Common Stock Purchase Warrant (this "Warrant"), the
following terms have the respective meanings set forth below:
"Additional Shares of Common Stock" shall mean all shares of Common
Stock issued by the Company after the Closing Date, other than Warrant Stock.
"Book Value" shall mean, in respect of any share of Common Stock on
any date herein specified, the consolidated book value of the Company as of the
last day of any month immediately preceding such date, divided by the number of
Fully Diluted Outstanding shares of Common Stock as determined in accordance
with GAAP (assuming the payment of the exercise prices for such shares) by
Arthur Andersen LLP or any other firm of independent certified public
accountants of recognized national standing selected by the Company and
reasonably acceptable to the Holder.
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"Business Day" shall mean any day that is not a Saturday or Sunday or
a day on which banks are required or permitted to be closed in the State of
California.
"Closing Date" shall have the meaning set forth in the Securities
Purchase Agreement.
"Commission" shall mean the Securities and Exchange Commission or any
other federal agency then administering the Securities Act and other federal
securities laws.
"Common Stock" shall mean (except where the context otherwise
indicates) the Common Stock, par value $.001 per share, of the Company as
constituted on the Closing Date, and any capital stock into which such Common
Stock may thereafter be changed, and shall also include (i) capital stock of the
Company of any other class (regardless of how denominated) issued to the holders
of shares of Common Stock upon any reclassification thereof which is also not
preferred as to dividends or assets over any other class of stock of the Company
and which is not subject to redemption and (ii) shares of common stock of any
successor or acquiring corporation received by or distributed to the holders of
Common Stock of the Company in the circumstances contemplated by Section 4.4.
"Convertible Securities" shall mean evidences of indebtedness, shares
of stock or other securities which are convertible into or exchangeable, with or
without payment of additional consideration in cash or property, for shares of
Common Stock, either immediately or upon the occurrence of a specified date or a
specified event.
"Current Warrant Price" shall mean, in respect of a share of Common
Stock at any date herein specified, the price at which a share of Common Stock
may be purchased pursuant to this Warrant on such date.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended, or any successor federal statute, and the rules and regulations of the
Commission thereunder, all as the same shall be in effect from time to time.
"Exercise Period" shall mean the period during which this Warrant is
exercisable pursuant to Section 2.1.
"Expiration Date" shall mean June 30, 2002.
"Fully Diluted Outstanding" shall mean, when used with reference to
Common Stock, at any date as of which the number of shares thereof is to be
determined, all shares of Common Stock Outstanding at such date and all shares
of Common Stock issuable in respect of this Warrant, outstanding on such date,
and other options or warrants to purchase, or securities convertible into,
shares of Common Stock outstanding on such date which would be deemed
outstanding in accordance with GAAP for purposes of determining Book Value or
net income per share.
"GAAP" shall mean generally accepted accounting principles in the
United States of America as from time to time in effect.
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"Holder" shall mean the Person in whose name the Warrant or Warrant
Stock set forth herein is registered on the books of the Company maintained for
such purpose.
"Market Price" per Common Share means the closing bid price of the
Common Shares as reported on the Nasdaq National Market ("Nasdaq") on the
trading day immediately preceding the Closing Date.
"Other Property" shall have the meaning set forth in Section 4.4.
"Outstanding" shall mean, when used with reference to Common Stock, at
any date as of which the number of shares thereof is to be determined, all
issued shares of Common Stock, except shares then owned or held by or for the
account of the Company or any subsidiary thereof, and shall include all shares
issuable in respect of outstanding scrip or any certificates representing
fractional interests in shares of Common Stock.
"Person" shall mean any individual, sole proprietorship, partnership,
joint venture, trust, incorporated organization, association, corporation,
institution, public benefit corporation, entity or government (whether federal,
state, county, city, municipal or otherwise, including, without limitation, any
instrumentality, division, agency, body or department thereof).
"Registration Rights Agreement" shall mean the Registration Rights
Agreement dated a date even herewith between the Company and CIBC WMV Inc., as
it may be amended from time to time.
"Restricted Common Stock" shall mean shares of Common Stock which are,
or which upon their issuance on their exercise of this Warrant would be,
evidenced by a certificate bearing the restrictive legend set forth in Section
9.1(a).
"Securities Act" shall mean the Securities Act of 1933, as amended, or
any successor federal statute, and the rules and regulations of the Commission
thereunder, all as the same shall be in effect at the time.
"Securities Purchase Agreement" shall mean the Securities Purchase
Agreement dated as of a date even herewith between the Company and CIBC WMV Inc.
as it may be amended from time to time.
"Transfer" shall mean any disposition of any Warrant or Warrant Stock
or of any interest in either thereof, which would constitute a sale thereof
within the meaning of the Securities Act.
"Transfer Notice" shall have the meaning set forth in Section 9.2.
"Warrant Price" shall mean an amount equal to (i) the number of shares
of Common Stock being purchased upon exercise of this Warrant pursuant to
Section 2.1, multiplied by (ii) the Current Warrant Price as of the date of such
exercise.
"Warrant Stock" shall mean the shares of Common Stock purchased by the
holders of the Warrants upon the exercise thereof.
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"Warrants" shall mean this Warrant and all warrants issued upon
transfer, division or combination of, or in substitution for, any thereof. All
Warrants shall at all times be identical as to terms and conditions and date,
except as to the number of shares of Common Stock for which they may be
exercised.
39. Exercise of Warrant
(a) Manner of Exercise
From and after the Closing Date and until 5:00 p.m., New York time, on
the Expiration Date, Holder may exercise this Warrant, on any Business Day, for
all or any part of the number of shares of Common Stock purchasable hereunder.
In order to exercise this Warrant, in whole or in part, Holder shall
deliver to the Company at its principal office at 308 North Peters Road, Suite
100, Knoxville, Tennessee 37922 or at the office or agency designated by the
Company pursuant to Section 12, (i) a written notice of Holder's election to
exercise this Warrant, which notice shall specify the number of shares of Common
Stock to be purchased, (ii) to the extent such exercise is not being effected
through a Cashless Exercise, payment of the Warrant Price in cash or wire
transfer or cashier's check drawn on a United States bank and (iii) this
Warrant. Such notice shall be substantially in the form of the subscription
form appearing at the end of this Warrant as Exhibit A, duly executed by Holder
or its agent or attorney. Upon receipt of the items referred to in clauses (i),
(ii) and (iii) above, the Company shall, as promptly as practicable, and in any
event within five Business Days thereafter, execute or cause to be executed and
deliver or cause to be delivered to Holder a certificate or certificates
representing the aggregate number of full shares of Common Stock issuable upon
such exercise, together with cash in lieu of any fraction of a share, as
hereinafter provided. The stock certificate or certificates so delivered shall
be, to the extent possible, in such denomination or denominations as Holder
shall request in the notice and shall be registered in the name of Holder or,
subject to Section 9, such other name as shall be designated in the notice.
This Warrant shall be deemed to have been exercised and such certificate or
certificates shall be deemed to have been issued, and Holder or any other Person
so designated to be named therein shall be deemed to have become a holder of
record of such shares for all purposes, as of the date the notice, together with
the cash or check or checks and this Warrant, is received by the Company as
described above and all taxes required to be paid by Holder, if any, pursuant to
Section 2.2 prior to the issuance of such shares have been paid. If this Warrant
shall have been exercised in part, the Company shall, at the time of delivery of
the certificate or certificates representing Warrant Stock, deliver to Holder a
new Warrant evidencing the rights of Holder to purchase the unpurchased shares
of Common Stock called for by this Warrant, which new Warrant shall in all other
respects be identical with this Warrant, or, at the request of Holder,
appropriate notation may be made on this Warrant and the same returned to
Holder. Notwithstanding any provision herein to the contrary, the Company shall
not be required to register shares in the name of any Person who acquired this
Warrant (or part hereof) or any Warrant Stock otherwise than in accordance with
this Warrant.
Simultaneously with the exercise of this Warrant, payment in full of
the Warrant Price may be made, at the option of the Holder, (i) by payment of
the Warrant Price in cash or by wire transfer or cashier's check drawn on a
United States bank, (ii) by the surrender (which surrender shall be evidenced by
cancellation of the number of Warrants represented by any
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certificate(s) evidencing the Warrants (the "Warrant Certificate") presented in
connection with a Cashless Exercise of a Warrant or Warrants (represented by one
or more Warrant Certificates), and without payment of the Warrant Price in cash,
for such number of shares equal to the product of (1) the number of shares for
which such Warrant is exercisable with payment in cash of the Warrant Price as
of the date of exercise and (2) the Cashless Exercise Ratio or (iii) by any
combination of (i) and (ii). For purposes of this Agreement, the "Cashless
Exercise Ratio" shall equal a fraction, the numerator of which is the excess of
the Current Market Price per share of the Common Stock on the date of exercise
over the Warrant Price per share as of the date of exercise and the denominator
of which is the Current Market Price per share of the Common Stock on the date
of exercise. An exercise of a Warrant in accordance with the immediately
preceding sentences is herein called a "Cashless Exercise." Upon surrender of a
Warrant Certificate representing more than one Warrant in connection with the
Holder's option to elect a Cashless Exercise, the number of shares deliverable
upon a Cashless Exercise shall be equal to the Cashless Exercise Ratio
multiplied by the product of (a) the number of Warrants that the Holder
specifies is to be exercised pursuant to a Cashless Exercise and (b) the number
of shares for which such Warrant is then exercisable (without giving effect to
the Cashless Exercise option). All provisions of this Agreement shall be
applicable with respect to an exercise of a Warrant Certificate pursuant to a
Cashless Exercise for less than the full number of Warrants represented thereby.
(b) Payment of Taxes and Charges
All shares of Common Stock issuable upon the exercise of this Warrant
pursuant to the terms hereof shall be validly issued, fully paid and
nonassessable, freely tradable and without any preemptive rights. The Company
shall pay all expenses in connection with, and all taxes and other governmental
charges that may be imposed with respect to, the issue or delivery thereof,
unless such tax or charge is imposed by law upon Holder, in which case such
taxes or charges shall be paid by Holder. The Company shall not be required,
however, to pay any tax or other charge imposed in connection with any transfer
involved in the issue of any certificate for shares of Common Stock issuable
upon exercise of this Warrant in any name other than that of Holder, and in such
case the Company shall not be required to issue or deliver any stock certificate
until such tax or other charge has been paid or it has been established to the
satisfaction of the Company that no such tax or other charge is due.
(c) Fractional Shares
The Company shall not be required to issue a fractional share of
Common Stock upon exercise of any Warrant. As to any fraction of a share which
Holder would otherwise be entitled to purchase upon such exercise, the Company
shall pay a cash adjustment in respect of such final fraction in an amount equal
to the same fraction of the Market Price per share of Common Stock as of the
Closing Date.
(d) Continued Validity
A holder of shares of Common Stock issued upon the exercise of this
Warrant, in whole or in part (other than a holder who acquires such shares after
the same have been publicly sold pursuant to a Registration Statement under the
Securities Act or sold pursuant to Rule 144 thereunder), shall continue to be
entitled with respect to such shares to all rights to which it would
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have been entitled as Holder under Sections 9, 10 and 14 of this Warrant. The
Company will, at the time of exercise of this Warrant, in whole or in part, upon
the request of Holder, acknowledge in writing, in form reasonably satisfactory
to Holder, its continuing obligation to afford Holder all such rights; provided,
however, that if Holder shall fail to make any such request, such failure shall
not affect the continuing obligation of the Company to afford to Holder all such
rights.
40. Transfer, Division and Combination
(a) Transfer
Subject to compliance with Section 9, transfer of this Warrant and all
rights hereunder, in whole or in part, shall be registered on the books of the
Company to be maintained for such purpose, upon surrender of this Warrant at the
principal office of the Company referred to in Section 2.1 or the office or
agency designated by the Company pursuant to Section 12, together with a written
assignment of this Warrant substantially in the form of Exhibit B hereto duly
executed by Holder or its agent or attorney and funds sufficient to pay any
transfer taxes payable upon the making of such transfer. Upon such surrender
and, if required, such payment, the Company shall, subject to Section 9, execute
and deliver a new Warrant or Warrants in the name of the assignee or assignees
and in the denomination specified in such instrument of assignment, and shall
issue to the assignor a new Warrant evidencing the portion of this Warrant not
so assigned, and this Warrant shall promptly be canceled. A Warrant, if
properly assigned in compliance with Section 9, may be exercised by a new Holder
for the purchase of shares of Common Stock without having a new warrant issued.
(b) Division and Combination
Subject to Section 9, this Warrant may be divided or combined with
other Warrants upon presentation hereof at the aforesaid office or agency of the
Company, together with a written notice specifying the names and denominations
in which new Warrants are to be issued, signed by Holder or its agent or
attorney. Subject to compliance with Section 3.1 and with Section 9, as to any
transfer which may be involved in such division or combination, the Company
shall execute and deliver a new Warrant or Warrants in exchange for the Warrant
or Warrants to be divided or combined in accordance with such notice.
(c) Expenses
The Company shall prepare, issue and deliver at its own expense (other
than transfer taxes) the new Warrants or Warrants under this Section 3.
(d) Maintenance of Books
The Company agrees to maintain, at its aforesaid office or agency,
books for the registration and the registration of transfer of the Warrants.
41. Adjustments
The number of shares of Common Stock for which this Warrant is
exercisable, or the price at which such shares may be purchased upon exercise of
this Warrant, shall be subject to
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adjustment from time to time as set forth in this Section 4. The Company shall
give Holder notice of any event described below which requires an adjustment
pursuant to this Section 4 at the time of such event.
(a) Stock Dividends, Subdivisions and Combinations
If at any time the Company shall:
(i) take a record of the holders of its Common Stock for the
purpose of entitling them to receive a dividend payable in, or other
distribution of, Additional Shares of Common Stock;
(ii) subdivide its outstanding shares of Common Stock into a
larger number of shares of Common Stock; or
(iii) combine its outstanding shares of Common Stock into a
smaller number of shares of Common Stock;
then (i) the number of shares of Common Stock for which this Warrant is
exercisable immediately after the occurrence of any such event shall be adjusted
to equal the number of shares of Common Stock which a record holder of the same
number of shares of Common Stock for which this Warrant is exercisable
immediately prior to the occurrence of such event would own or be entitled to
receive after the happening of such event, and (ii) the Current Warrant Price
shall be adjusted to equal (A) the Current Warrant Price multiplied by the
number of shares of Common Stock for which this Warrant is exercisable
immediately prior to the adjustment divided by (B) the number of shares for
which this Warrant is exercisable immediately after such adjustment.
(b) Certain Other Distributions
If at any time the Company shall take a record of the holders of its
Common Stock for the purpose of entitling them to receive any dividend or other
distribution of:
(i) cash;
(ii) any evidences of its indebtedness, any shares of its stock
or any other securities or property of any nature whatsoever (other than cash,
Convertible Securities or Additional Shares of Common Stock); or
(iii) any warrants or other rights to subscribe for or purchase
any evidences of its indebtedness, any shares of its stock or any other
securities or property of any nature whatsoever (other than cash, Convertible
Securities or Additional Shares of Common Stock);
then Holder shall be entitled to receive such dividend or distribution as if
Holder had exercised the Warrant. A reclassification of the Common Stock (other
than a change in par value, or from par value to no par value or from no par
value to par value) into shares of Common Stock and shares of any other class of
stock shall be deemed a distribution by the Company to the holders of its Common
Stock of such shares of such other class of stock within the meaning of this
Section 4.2 and, if the outstanding shares of Common Stock shall be changed into
a larger or smaller number of shares of
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Common Stock as a part of such reclassification, such change shall be deemed a
subdivision or combination, as the case may be, of the outstanding shares of
Common Stock within the meaning of Section 4.1.
(c) Other Provisions Applicable to Adjustments under this Section
The following provisions shall be applicable to the making of
adjustments of the number of shares of Common Stock for which this Warrant is
exercisable and the Current Warrant Price provided for in this Section 4:
(i) When Adjustments to be Made. The adjustments required by
this Section 4 shall be made whenever and as often as any specified event
requiring an adjustment shall occur. For the purpose of any adjustment, any
specified event shall be deemed to have occurred at the close of business on the
date of its occurrence.
(ii) Fractional Interests. In computing adjustments under this
Section 4, fractional interests in Common Stock shall be taken into account to
the nearest 1/10th of a share.
(iii) When Adjustment not Required. If the Company shall take a
record of the holders of its Common Stock for the purpose of entitling them to
receive a dividend or distribution or subscription or purchase rights and shall,
thereafter and before the distribution to stockholders thereof, legally abandon
its plan to pay or deliver such dividend, distribution, subscription or purchase
rights, then thereafter no adjustment shall be required by reason of the taking
of such record and any such adjustment previously made in respect thereof shall
be rescinded and annulled.
(iv) Challenge to Good Faith Determination. Whenever the Board
of Directors of the Company shall be required to make a determination in good
faith of the fair value of any item under this Section 4, such determination may
be challenged in good faith by the Holder, and any dispute shall be resolved by
an investment banking firm of recognized national standing selected by the
Company and acceptable to Holder.
(d) Reorganization, Reclassification, Merger, Consolidation or
Disposition of Assets
In case the Company shall reorganize its capital, reclassify its
capital stock, consolidate or merge with or into another corporation (where the
Company is not the surviving corporation or where there is a change in or
distribution with respect to the Common Stock of the Company), or sell, transfer
or otherwise dispose of all or substantially all its property, assets or
business to another corporation and, pursuant to the terms of such
reorganization, reclassification, merger, consolidation or disposition of
assets, shares of common stock of the successor or acquiring corporation, or any
cash, shares of stock or other securities or property of any nature whatsoever
(including warrants or other subscription or purchase rights) in addition to or
in lieu of common stock of the successor or acquiring corporation ("Other
Property"), are to be received by or distributed to the holders of Common Stock
of the Company, then Holder shall have the right thereafter to receive, upon
exercise of the Warrant, the number of shares of common stock of the successor
or acquiring corporation or of the Company, if it is the surviving corporation,
and Other Property receivable upon or as a result of such reorganization,
reclassification, consolidation or disposition of assets by a holder of the
number of shares of Common Stock for which this Warrant is
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exercisable immediately prior to such event. In case of any such reorganization,
reclassification, merger, consolidation or disposition of assets, the successor
or acquiring corporation (if other than the Company) shall expressly assume the
due and punctual observance and performance of each and every covenant and
condition of this Warrant to be performed and observed by the Company and all
the obligations and liabilities hereunder, subject to such modifications as may
be deemed appropriate (as determined by resolution of the Board of Directors of
the Company) in order to provide for adjustments of shares of Common Stock for
which this Warrant is exercisable which shall be as nearly equivalent as
practicable to the adjustments provided for in this Section 4. For purposes of
this Section 4.4, "common stock of the successor or acquiring corporation" shall
include stock of such corporation of any class which is not preferred as to
dividends or assets over any other class of stock of such corporation and which
is not subject to redemption and shall also include any evidences of
indebtedness, shares of stock or other securities which are convertible into or
exchangeable for any such stock, either immediately or upon the arrival of a
specified date or the happening of a specified event and any warrants or other
rights to subscribe for or purchase any such stock. The foregoing provisions of
this Section 4.4 still similarly apply to successive reorganizations,
reclassifications, mergers, consolidations or disposition of assets.
(e) Other Action Affecting Common Stock
In case at any time or from time to time the Company shall take any
action in respect of its Common Stock, other than any action described in this
Section 4, which would have a materially adverse effect upon the rights of
Holder, the number of shares of Common Stock and/or the purchase price thereof
shall be adjusted in such manner as may be equitable in the circumstances, as
determined in good faith by the Board of Directors of the Company.
(f) Certain Limitations
Notwithstanding anything herein to the contrary, the Company agrees
not to enter into any transaction which, by reason of any adjustment hereunder,
would cause the Current Warrant Price to be less than the par value per share of
Common Stock.
42. Notices to Holder
(a) Notice of Adjustments
Whenever the number of shares of Common Stock for which this Warrant
is exercisable, or whenever the price at which a share of such Common Stock may
be purchased upon exercise of the Warrants, shall be adjusted pursuant to
Section 4, the Company shall forthwith prepare a certificate to be executed by
the chief financial officer of the Company setting forth, in reasonable detail,
the event requiring the adjustment and the method by which such adjustment was
calculated (including a description of the basis on which the Board of Directors
of the Company determined the fair value of any evidences of indebtedness,
shares of stock, other securities or property or warrants or other subscription
or purchase rights referred to in Section 4.2), specifying the number of shares
of Common Stock for which this Warrant is exercisable and (if such adjustment
was made pursuant to Section 4.4 or 4.5) describing the number and kind of any
other shares of stock or Other Property for which this Warrant is exercisable,
and any change in the purchase price or prices thereof, after giving effect to
such adjustment or change. The Company
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shall promptly cause a signed copy of such certificate to be delivered to the
Holder in accordance with Section 14.2. The Company shall keep at its office or
agency designated pursuant to Section 12 copies of all such certificates and
cause the same to be available for inspection at said office during normal
business hours by the Holder or any prospective purchaser of a Warrant
designated by Holder.
(b) Notice of Corporate Action
If at any time:
(i) the Company shall take a record of the holders of its
Common Stock for the purpose of entitling them to receive a dividend or other
distribution, or any right to subscribe for or purchase any evidences of its
indebtedness, any shares of stock of any class or any other securities or
property, or to receive any other right; or
(ii) there shall be any capital reorganization of the Company,
any reclassification or recapitalization of the capital stock of the Company or
any consolidation or merger of the Company with, or any sale, transfer or other
disposition of all or substantially all the property, assets or business of the
Company to, another corporation; or
(iii) there shall be a voluntary or involuntary dissolution,
liquidation or winding up of the Company;
then, in any one or more of such cases, the Company shall give to Holder (i) at
least 30 days' prior written notice of the date on which a record date shall be
selected for such dividend, distribution or right or for determining rights to
vote in respect of any such reorganization, reclassification, merger,
consolidation, sale, transfer, disposition, dissolution, liquidation or winding
up, and (ii) in the case of any such reorganization, reclassification, merger,
consolidation, sale, transfer, disposition, dissolution, liquidation or winding
up, at least 30 days' prior written notice of the date when the same shall take
place. Such notice in accordance with the foregoing clause also shall specify
(i) the date on which any such record is to be taken for the purpose of such
dividend, distribution or right, the date on which the holders of Common Stock
shall be entitled to any such dividend, distribution or right, and the amount
and character thereof, and (ii) the date on which any such reorganization,
reclassification, merger, consolidation, sale, transfer, disposition,
dissolution, liquidation or winding up is to take place and the time, if any
such time is to be fixed, as of which the holders of Common Stock shall be
entitled to exchange their shares of Common Stock for securities or other
property deliverable upon such reorganization, reclassification, merger,
consolidation, sale, transfer, disposition, dissolution, liquidation or winding
up. Each such written notice shall be sufficiently given if addressed to Holder
at the last address of Holder appearing on the books of the Company and
delivered in accordance with Section 14.2.
43. No Impairment
The Company shall not by any action, including, without limitation,
amending its certificate of incorporation or through any reorganization,
transfer of assets, consolidation, merger, dissolution, issue or sale of
securities or other voluntary action, avoid or seek to avoid the observance or
performance of any of the terms of this Warrant, but will at all times in good
faith assist in the carrying out of all such terms and in the taking of all such
actions as may be necessary
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or appropriate to protect the rights of Holder against impairment. Without
limiting the generality of the foregoing, the Company will (a) not increase the
par value of any shares of Common Stock receivable upon the exercise of this
Warrant above the amount payable therefor upon such exercise immediately prior
to such increase in par value, (b) take all such action as may be necessary or
appropriate in order that the Company may validly and legally issue fully paid
and nonassessable shares of Common Stock upon the exercise of this Warrant, and
(c) use its best efforts to obtain all such authorizations, exemptions or
consents from any public regulatory body having jurisdiction thereof as may be
necessary to enable the Company to perform its obligations under this Warrant.
Upon the request of Holder, the Company will at any time during the
period this Warrant is outstanding acknowledge in writing, in form satisfactory
to Holder, the continuing validity of this Warrant and the obligations of the
Company hereunder.
44. Reservation and Authorization of Common Stock
From and after the Closing Date, the Company shall at all times
reserve and keep available for issue upon the exercise of Warrants such number
of its authorized but unissued shares of Common Stock as will be sufficient to
permit the exercise in full of all outstanding Warrants. All shares of Common
Stock which shall be so issuable, when issued upon exercise of any Warrant and
payment therefor in accordance with the terms of such Warrant, shall be duly and
validly issued and fully paid and nonassessable and not subject to preemptive
rights.
Before taking any action which would cause an adjustment reducing the
Current Warrant Price below the then par value, if any, of the shares of Common
Stock issuable upon exercise of the Warrants, the Company shall take any
corporate action which may be necessary in order that the Company may validly
and legally issue fully paid and nonassessable shares of such Common Stock at
such adjusted Current Warrant Price.
Before taking any action which would result in an adjustment in the
number of shares of Common Stock for which this Warrant is exercisable or in the
Current Warrant Price, the Company shall obtain all such authorizations or
exemptions thereof, or consents thereto, as may be necessary from any public
regulatory body or bodies having jurisdiction thereof.
45. Taking of Record; Stock and Warrant Transfer Books
In the case of all dividends or other distributions by the Company to
the holders of its Common Stock with respect to which any provision of Section 4
refers to the taking of record of such holders, the Company will in each case
take such a record and will take such record as of the close of business on a
Business Day. The Company will not at any time, except upon dissolution,
liquidation or winding up of the Company, close its stock transfer books or
Warrant transfer books so as to result in preventing or delaying the exercise or
transfer of any Warrant.
46. Restrictions on Transferability
The Warrants and the Warrant Stock shall not be transferred,
hypothecated or assigned before satisfaction of the conditions specified in this
Section 9, which conditions are intended to ensure compliance with the
provisions of the Securities Act with respect to the Transfer
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of any Warrant or any Warrant Stock. Holder, by acceptance of this Warrant,
agrees to be bound by the provisions of this Section 9.
(a) Restrictive Legend
(i) Holder, by accepting this Warrant and any Warrant Stock
agrees that this Warrant and the Warrant Stock issuable upon exercise hereof may
not be assigned or otherwise transferred unless and until (i) the Company has
received an opinion of counsel for Holder that such securities may be sold
pursuant to an exemption from registration under the Securities Act or (ii) a
registration statement relating to such securities has been filed by the Company
and declared effective by the Commission.
Each certificate for Warrant Stock issuable hereunder shall bear a
legend as follows until such securities have been sold pursuant to an effective
registration statement under the Securities Act:
"THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE "SECURITIES ACT"), OR THE SECURITIES LAWS OF ANY
STATE, AND ARE BEING OFFERED AND SOLD PURSUANT TO AN EXEMPTION FROM
THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND SUCH LAWS.
THESE SECURITIES MAY NOT BE SOLD OR TRANSFERRED EXCEPT PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT
TO AN AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT OR SUCH OTHER LAWS."
(ii) Except as otherwise provided in this Section 9, the
Warrant shall be stamped or otherwise imprinted with a legend in substantially
the following form:
"THIS WARRANT AND THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT
BE TRANSFERRED IN VIOLATION OF SUCH ACT, THE RULES AND REGULATIONS
THEREUNDER OR THE PROVISIONS OF THIS WARRANT."
(b) Notice of Proposed Transfers
Prior to any Transfer or attempted Transfer of any Warrants or any
shares of Restricted Common Stock, the Holder shall give ten days' prior written
notice (a "Transfer Notice") to the Company of Holder's intention to effect such
Transfer, describing the manner and circumstances of the proposed Transfer, and
obtain from counsel to Holder who shall be reasonably satisfactory to the
Company, an opinion that the proposed Transfer of such Warrants or such
Restricted Common Stock may be effected without registration under the
Securities Act. After receipt of the Transfer Notice and opinion, the Company
shall, within five days thereof, notify the
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Holder as to whether such opinion is reasonably satisfactory and, if so, such
holder shall thereupon be entitled to Transfer such Warrants or such Restricted
Common Stock, in accordance with the terms of the Transfer Notice. Each
certificate, if any, evidencing such shares of Restricted Common Stock issued
upon such Transfer shall bear the restrictive legend set forth in Section
9.1(a), and the Warrant issued upon such Transfer shall bear the restrictive
legend set forth in Section 9.1(b), unless in the opinion of such counsel such
legend is not required in order to ensure compliance with the Securities Act.
Holder shall not be entitled to Transfer such Warrants or such Restricted Common
Stock until receipt of notice from the Company under this Section 9.2(a) that
such opinion is reasonably satisfactory.
(c) Required Registration
Pursuant to the terms and conditions set forth in Registration Rights
Agreement, the Company shall prepare and file with the Commission not later than
the 30th day after the Closing Date, a Registration Statement relating to the
offer and sale of the Common Stock issuable upon exercise of the Warrants and
shall use its best efforts to cause the Commission to declare such Registration
Statement effective under the Securities Act as promptly as practicable but no
later than 150 days after the Closing Date.
(d) Termination of Restrictions
Notwithstanding the foregoing provisions of Section 9, the
restrictions imposed by this Section upon the transferability of the Warrants,
the Warrant Stock and the Restricted Common Stock (or Common Stock issuable upon
the exercise of the Warrants) and the legend requirements of Section 9.1 shall
terminate as to any particular Warrant or share of Warrant Stock or Restricted
Common Stock (or Common Stock issuable upon the exercise of the Warrants) (i)
when and so long as such security shall have been effectively registered under
the Securities Act and disposed of pursuant thereto or (ii) when the Company
shall have received an opinion of counsel reasonably satisfactory to it that
such shares may be transferred without registration thereof under the Securities
Act. Whenever the restrictions imposed by Section 9 shall terminate as to this
Warrant, as hereinabove provided, the Holder hereof shall be entitled to receive
from the Company upon written request of the Holder, at the expense of the
Company, a new Warrant bearing the following legend in place of the restrictive
legend set forth hereon:
"THE RESTRICTIONS ON TRANSFERABILITY OF THE WITHIN WARRANT CONTAINED
IN SECTION 9 HEREOF TERMINATED ON __________, _____ AND ARE OF NO
FURTHER FORCE AND EFFECT."
All Warrants issued upon registration of transfer, division or combination of,
or in substitution for, any Warrant or Warrants entitled to bear such legend
shall have a similar legend endorsed thereon. Whenever the restrictions imposed
by this Section shall terminate as to any share of Restricted Common Stock, as
hereinabove provided, the holder thereof shall be entitled to receive from the
Company, at the Company's expense, a new certificate representing such Common
Stock not bearing the restrictive legend set forth in Section 9.1(a).
(e) Listing on Securities Exchange
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If the Company shall list any shares of Common Stock on any securities
exchange or quotation system, it will, at its expense, list thereon, maintain
and, when necessary, increase such listing of, all shares of Common Stock issued
or, to the extent permissible under the applicable securities exchange rules,
issuable upon the exercise of this Warrant so long as any shares of Common Stock
shall be so listed during any such Exercise Period.
47. Supplying Information
The Company shall cooperate with Holder in supplying such information
as may be reasonably necessary for Holder to complete and file any information
reporting forms presently or hereafter required by the Commission as a condition
to the availability of an exemption from the Securities Act for the sale of any
Warrant or Restricted Common Stock.
48. Loss or Mutilation
Upon receipt by the Company from Holder of evidence reasonably
satisfactory to it of the ownership of and the loss, theft, destruction or
mutilation of this Warrant and indemnity reasonably satisfactory to it (it being
understood that the written agreement of the Holder shall be sufficient
indemnity), and in case of mutilation upon surrender and cancellation hereof,
the Company will execute and deliver in lieu hereof a new Warrant of like tenor
to Holder; provided, in the case of mutilation no indemnity shall be required if
this Warrant in identifiable form is surrendered to the Company for
cancellation.
49. Office of the Company
As long as any of the Warrants remain outstanding, the Company shall
maintain an office or agency (which may be the principal executive offices of
the Company) where the Warrants may be presented for exercise, registration of
transfer, division or combination as provided in this Warrant.
50. Limitation of Liability
No provision hereof, in the absence of affirmative action by Holder to
purchase shares of Common Stock, and no enumeration herein of the rights or
privileges of Holder hereof, shall give rise to any liability of Holder for the
purchase price of any Common Stock or as a stockholder of the Company, whether
such liability is asserted by the Company or by creditors of the Company.
51. Miscellaneous
(a) Nonwaiver and Expenses
No course of dealing or any delay or failure to exercise any right
hereunder on the part of Holder shall operate as a waiver of such right or
otherwise prejudice Holder's rights, powers or remedies. If the Company fails
to make, when due, any payments provided for hereunder, or fails to comply with
any other provision of this Warrant, the Company shall pay to Holder such
amounts as shall be sufficient to cover any costs and expenses including,
without limitation, reasonable attorneys' fees, including those of appellate
proceedings, incurred by Holder in collecting any
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amounts due pursuant hereto or in otherwise enforcing any of its rights, powers
or remedies hereunder.
(b) Notice Generally
Except as may be otherwise provided herein, any notice or other
communication or delivery required or permitted hereunder shall be in writing
and shall be delivered personally or sent by certified mail, postage prepaid, or
by a nationally recognized overnight courier service, and shall be deemed given
when so delivered personally or by overnight courier service, or, if mailed,
three days after the date of deposit in the United States mails, as follows:
(i) if to the Company, to:
Thermatrix Inc.
308 North Peters Road, Suite 100
Knoxville, TN 37922
Attention: Edward E. Greene
(423) 539-9603
(423) 539-9643 (Fax)
with a copy to:
Wilson Sonsini Goodrich & Rosati, PC
650 Page Mill Road
Palo Alto, CA 94304-1050
Attention: Michael J. Danaher, Esq.
(650) 493-9300
(650) 493-6811 (Fax)
(ii) if to the Holder, to:
(iii) CIBC WMV Inc.
425 Lexington Ave.
New York, NY 10017
Attention: Robi Blumenstein
(212) 856-4000
(212) 697-1544 (Fax)
The Company or the Holder may change the foregoing address by notice given
pursuant to this Section 14.2.
(c) Indemnification
The Company agrees to indemnify and hold harmless Holder from and
against any liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, claims, costs, attorneys' fees, expenses and disbursements of
any kind which may be imposed upon, incurred by or asserted
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against Holder in any manner relating to or arising out of any failure by the
Company to perform or observe in any material respect any of its covenants,
agreements, undertakings or obligations set forth in this Warrant; provided,
however, that the Company will not be liable hereunder to the extent that any
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
claims, costs, attorneys' fees, expenses or disbursements are found in a final
nonappealable judgment by a court to have resulted from Holder's gross
negligence, bad faith or willful misconduct in its capacity as a stockholder or
warrantholder of the Company.
(d) Remedies
Holder in addition to being entitled to exercise all rights granted by
law, including recovery of damages, will be entitled to specific performance of
its rights under Section 9 of this Warrant. The Company agrees that monetary
damages would not be adequate compensation for any loss incurred by reason of a
breach by it of the provisions of Section 9 of this Warrant and hereby agrees to
waive the defense in any action for specific performance that a remedy at law
would be adequate.
(e) Successors and Assigns
Subject to the provisions of Sections 3.1 and 9, this Warrant and the
rights evidenced hereby shall inure to the benefit of and be binding upon the
successors of the Company and the successors and assigns of Holder. The
provisions of this Warrant are intended to be for the benefit of all Holders
from time to time of this Warrant and, with respect to Section 9 hereof, holders
of Warrant Stock, and shall be enforceable by any such Holder or holder of
Warrant Stock.
(f) Amendment
This Warrant and all other Warrants may be modified or amended or the
provisions hereof waived with the written consent of the Company and Holder.
(g) Severability
Wherever possible, each provision of this Warrant shall be interpreted
in such manner as to be effective and valid under applicable law, but if any
provision of this Warrant shall be prohibited by or invalid under applicable
law, such provision shall only be ineffective to the extent of such prohibition
or invalidity, without invalidating the remainder of such provision or the
remaining provisions of this Warrant.
(h) Headings
The headings used in this Warrant are for the convenience of reference
only and shall not, for any purpose, be deemed a part of this Warrant.
(i) Governing Law
This Warrant shall be governed by the laws of the State of California,
without regard to the provisions thereof relating to conflicts of law.
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In Witness Whereof, the Company has caused this Warrant to be duly
executed and its corporate seal to be impressed hereon and attested by its
Secretary or an Assistant Secretary.
Dated: June ___, 1999
Thermatrix Inc.
By:___________________________
Name:
Title:
Attest:
By:______________________
Name:
Title:
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EXHIBIT A
SUBSCRIPTION FORM
[To be executed only upon exercise of Warrant]
The undersigned registered owner of this Warrant irrevocably exercises
this Warrant for the purchase of ________ shares of Common Stock of Thermatrix
Inc. and herewith makes payment therefor, all at the price and on the terms and
conditions specified in this Warrant and requests that certificates for the
shares of Common Stock hereby purchased (and any securities or other property
issuable upon such exercise) be issued in the name of and delivered to
________________________________________________________________________________
whose address is
________________________________________________________________________________
and, if such shares of Common Stock shall not include all of the shares of
Common Stock issuable as provided in this Warrant, that a new Warrant of like
tenor and date for the balance of the shares of Common Stock issuable hereunder
be delivered to the undersigned.
_____________________________________________
(Name of Registered Owner)
_____________________________________________
(Signature of Registered Owner)
_____________________________________________
(Street Address)
____________________________________________
(City) (State) (Zip Code)
Notice: The signature on this subscription
must correspond with the name as written upon
the face of the within Warrant in every
particular, without alteration or enlargement
or any change whatsoever.
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EXHIBIT B
ASSIGNMENT FORM
For Value Received the undersigned registered owner of this Warrant
hereby sells, assigns and transfers unto the Assignee named below all of the
rights of the undersigned under this Warrant, with respect to the number of
shares of Common Stock set forth below:
No. of Shares of
Name and Address of Assignee Common Stock
---------------------------- ----------------
and does hereby irrevocably constitute and appoint
- --------------------------------------------------------------------------------
attorney-in-fact to register such transfer on the books of Thermatrix Inc.
maintained for the purpose, with full power of substitution in the premises.
Dated:___________________________
____________________________________________
(Print Name)
____________________________________________
(Signature)
____________________________________________
(Print Name of Witness)
____________________________________________
(Witness's Signature)
Notice: The signature on this assignment must correspond with the name as
written upon the face of the within Warrant in every particular, without
alteration or enlargement or any change whatsoever.
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EXHIBIT 99.1
THERMATRIX INC. NEWS RELEASE
Thermatrix Inc.
2025 Gateway Place, Suite 132
San Jose, CA 95110
For further information contact: John T. Schofield, Chairman, President & CEO
408-453-0490
Daniel S. Tedone, Executive VP and CFO
423-539-9603
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THERMATRIX CLOSES $6 MILLION EQUITY FINANCING
(San Jose, CA July 8, 1999) -- Thermatrix Inc. (NASDAQ: TMXI) announced today
that it has closed a private placement of $6 Million Convertible Redeemable
Preferred Stock. The two largest existing shareholders of Thermatrix combined
to purchase $3 Million of the Preferred Shares and a single new investor
purchased the remainder.
The Preferred Shares carry an 8% coupon payable in stock or cash upon
conversion. Conversion into Common Stock will be at the lesser of 85% of the
market price or $5.00 per share. Fifty percent of the Preferred Shares may be
converted after November 27, 1999 and the remainder cannot be converted until
after January 26, 2000. The Company has the right to redeem the Preferred
Shares at any time for 130% of the purchase price. The placement of Preferred
Shares included warrants equivalent to 35,000 per $1 Million placed, convertible
within three years at $5.31 per share.
The net proceeds of the placement are to be used for working capital and general
business purposes. This equity transaction represents the first phase of a
three-phase combined equity and debt placement program. The Company expects to
raise up to $27 Million in the remainder of the program and is in active
negotiations to place the balance of the financing. The proceeds of these
phases will be used for additional working capital, execution of the strategic
growth program and to repay seller financed debt associated with the acquisition
of Wahlco Environmental Systems, Inc.
"We are pleased to have completed this critical first phase on a timely basis,"
said John T. Schofield, Chairman, President and CEO. "We believe completion of
the three-phase financing will provide the strong financial base from which to
execute our global growth program."
Thermatrix is a global industrial technology company that provides a range of
products for the destruction or treatment of volatile organic compounds and
hazardous air pollutants, including patented flameless thermal oxidation
technology to provide the world's leading flameless solution for destroying
these pollutants and compounds. Thermatrix is currently focusing its
development activities on the application of its FTO technology to treat
emissions from diesel
<PAGE>
engines, both mobile and stationary. Earlier this year Thermatrix significantly
broadened its line of products and services with the acquisition of Wahlco
Environmental Systems, Inc. Wahlco manufactures and sells a variety of
engineered products and related services together with the air pollution control
systems to electric utilities, independent power producers, co-generation plants
and industrial manufacturers worldwide.
This announcement contains forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933 and Section 21E of the Securities and
Exchange Act of 1934. Actual results could differ materially due to various
risk factors set forth under "Risk Factors" in the Company's Annual Report on
Form 10-K (Commission File No. 0-20819) and such other risks detailed from time
to time in the Company's reports filed with the Securities and Exchange
Commission. The Company undertakes no obligation to publicly release the
results of any revisions to these forward-looking statements which may be made
to reflect events or circumstances after the date hereof or to reflect the
occurrence of anticipated events.
-Thermatrix Inc.-
