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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
FEBRUARY 16, 1999
---------------------
(Date of Report)
THRUSTMASTER, INC.
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(EXACT NAME OF REGISTRANT AS SPECIFIED IN CHARTER)
OREGON 0-25520 93-1040330
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(State or Other (Commission File No.) (IRS Employer
Jurisdiction Identification No.)
of Incorporation)
SUITE 400, 7175 N.W. EVERGREEN PARKWAY, HILLSBORO, OREGON 97124
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(Address of principal executive offices)(Zip Code)
(503) 615-3200
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(Registrant's telephone number, including area code)
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ITEM 5. OTHER EVENTS
On January 28, 1999, ThrustMaster, Inc. (the "Company") and three private
investors entered into a Securities Purchase Agreement pursuant to which the
investors agreed to provide equity line financing to the Company in an aggregate
amount up to $16 million.
The equity line provides for three potential tranches of investment by the
investors in Common Stock of the Company. Each tranche of investment is made
solely at the Company's election, subject to certain conditions, including the
market price of the Common Stock. The amount of the initial tranche, which was
funded on January 28, 1998, was $4 million. The 250,000 shares of Common Stock
issued on the closing date were priced at $16.00 per share, the closing bid
price of the Common Stock on the Nasdaq National Market on January 27, 1998.
Shares issued upon any closing of tranches two or three will also be priced at
the closing bid price of the Common Stock on the trading day preceding the
applicable closing date.
If specified closing conditions are satisfied, the Company will be
entitled, at its sole election, to request tranche two and three investments
during applicable periods ending 150 days after the closing date for the
preceding tranche. The amount of the investment in each subsequent tranche
would range from $1.0 million to $6.0 million, depending upon the closing bid
price of the Common Stock at the time of the investment. The Company may elect
that the minimum amount be invested if the average closing bid price per share
for the 10 business days preceding the applicable closing date is at least
$7.00; the Company may elect that up to the maximum amount be invested if the
closing bid price on the trading day preceding the closing date exceeds $20.00.
The closing conditions applicable to the second and third tranches include,
among others, that the registration statement required to be filed by the
Company with the SEC in connection with the previous tranche has been effective
for at least 25 days and that the average daily trading volume of the Common
Stock on the Nasdaq National Market has met certain thresholds for the
20 business days preceding the applicable investment. The Company, at its sole
election, may accelerate 50% of the tranche two investment if certain Common
Stock price-related thresholds have been satisfied.
The equity line includes a "reset" mechanism which may result in the
issuance to the investors of additional shares of Common Stock at no additional
cost. There are two reset periods for each tranche, each covering 50% of the
shares issued on the applicable closing date. The first reset period is the 25
days after the effective date of a registration statement to be filed in
connection with that tranche. The second reset period is the 25 days after the
end of the first reset period. For each reset period, the reset price is the
average of the lowest ten trading days' closing bid prices during the related
25-day period.
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The number of shares to be issued at the end of each reset is calculated by
(a) multiplying the number of shares subject to price adjustment by (b) (i)
an amount equal to 112.5% of the applicable tranche purchase price less the
reset price divided by (ii) the reset price.
The investors have agreed that, until the expiration of the final reset
period in connection with the equity line, they will not enter into certain
short sales of the Company's Common Stock. These restrictions are set forth in
the Securities Purchase Agreement attached as an exhibit to this report.
The equity line also provides for the issuance to the investors of warrants
to purchase Common Stock. At the closing of the first tranche, warrants were
issued to purchase an aggregate of 70,754 shares of Common Stock. The exercise
price applicable to 50% of such warrant shares is $20.00 per share; the exercise
price applicable to the remaining warrant shares is $22.40 per share. The
warrants expire five years after the closing date. To the extent the aggregate
investments in tranches one, two and three were to exceed $12 million,
additional warrants would be issued on the tranche three closing date to
purchase shares of Common Stock. The exercise price for 50% of such shares
would be 125% of the closing bid price on the trading day preceding the tranche
three closing date, and the exercise price for the remaining 50% would be 140%
of such bid price. The warrants are callable by the Company if the Common Stock
trades at or above 130% of the applicable exercise price for ten consecutive
trading days at any time 18 months after the applicable closing date.
The initial sale of securities issued in connection with the equity line
was not registered under the Securities Act of 1933, as amended. The Company
will register for resale by the investors all shares of Common Stock issued or
issuable in connection with the equity line by filing one or more registration
statements in connection with each tranche. Each registration statement is
required to remain in effect for three years.
The Company has granted a right of first refusal in favor of the investors
with respect to non-public issuances of its securities during the period
beginning on the tranche one closing date and ending 180 days after the
effective date of the first registration statement filed by the Company in
connection with the equity line. Issuances of securities not subject to the
right of first refusal include securities issued under the Company's stock
option plans, shares issued upon exercise of currently outstanding warrants and
securities issued in connection with strategic transactions involving the
Company.
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ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS
Listed below are the exhibits filed as a part of this report.
(c) EXHIBITS
EXHIBIT NO. DESCRIPTION
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4.5 Securities Purchase Agreement dated as of
January 28, 1999 among ThrustMaster, Inc. and
the Purchasers party thereto.
4.6 Form of Callable Warrant.
4.7 Registration Rights Agreement dated as of
January 28, 1999 among ThrustMaster, Inc. and
the Purchasers party thereto.
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SIGNATURE
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.
THRUSTMASTER, INC.
Dated: February 16, 1999 By /s/ Frank G. Hausmann
-------------------------------------
Frank G. Hausmann,
President and CEO
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EXHIBIT 4.5
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SECURITIES PURCHASE AGREEMENT
Among
THRUSTMASTER, INC.,
STRONG RIVER INVESTMENTS, INC.,
WESTOVER INVESTMENTS L.P.
and
MONTROSE INVESTMENTS L.P.
January 28, 1999
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SECURITIES PURCHASE AGREEMENT, dated as of January 28, 1999 (this
"AGREEMENT"), among ThrustMaster, Inc., an Oregon corporation (the
"COMPANY"), Strong River Investments Inc. ("STRONG RIVER"), a corporation
organized under the laws of the British Virgin Islands, Westover Investments
L.P. ("WESTOVER"), a Delaware limited partnership, and Montrose Investments
L.P. ("MONTROSE"), a Cayman Islands exempt limited partnership. Strong River,
Westover and Montrose are each referred to herein as a "PURCHASER" and are
collectively referred to herein as the "PURCHASERS".
WHEREAS, subject to the terms and conditions set forth in this
Agreement, the Company desires to issue and the Purchasers desire to purchase
shares (the "SHARES") of the Company's common stock, no par value (the
"COMMON STOCK").
NOW THEREFORE, the Company and the Purchasers hereby agree as follows:
ARTICLE I
PURCHASE AND SALE OF SECURITIES
1.1 PURCHASE OF SHARES. Subject to the terms and conditions set forth
herein, the Company shall issue and sell to the Purchasers and the Purchasers
shall purchase the Shares.
For purposes of this Agreement, "BUSINESS DAY" and "PER SHARE MARKET
VALUE" shall have the meanings set forth in EXHIBIT A. Each of the Tranche 1
Closing, the Tranche 2 Closing and Tranche 3 Closing are sometimes
individually referred to herein as a "CLOSING". Each of the First Tranche 1
Warrant, Second Tranche 1 Warrant, First Tranche 3 Warrant and Second Tranche
3 Warrant are sometimes collectively referred to herein as the "WARRANTS".
Each of the First Tranche 1 Adjustment Shares, Second Tranche 1 Adjustment
Shares, First Tranche 2 Adjustment Shares, Second Tranche 2 Adjustment
Shares, First Tranche 3 Adjustment Shares and Second Tranche 3 Adjustment
Shares are sometimes collectively referred to herein as the "ADJUSTMENT
SHARES".
1.2 THE TRANCHE 1 CLOSING. (a) Subject to the terms and conditions
set forth herein, the Company shall issue and sell to the Purchasers and the
Purchasers shall purchase 250,000 Shares (the "TRANCHE 1 SHARES") for a
purchase price of $4,000,000 (the "PURCHASE PRICE"). The closing of the
purchase and sale of the Tranche 1 Shares (the "TRANCHE 1 CLOSING") shall
take place at the offices of Robinson Silverman Pearce Aronsohn & Berman LLP
("RSPAB"), 1290 Avenue of the Americas, New York, New York 10104, immediately
following the execution hereof or such later date as the parties shall agree.
The date of the Tranche 1 Closing is hereinafter referred to as the "TRANCHE
1 CLOSING DATE."
(b) At the Tranche 1 Closing, (i) the Company shall deliver
to or cause to be delivered to (A) Strong River (1) a stock certificate,
registered in the name of Strong River representing 125,000 Tranche 1 Shares
to be acquired at the Tranche 1 Closing by it, (2) a
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common stock purchase warrant (the "FIRST TRANCHE 1 WARRANT"), in the form of
EXHIBIT D-1, registered in the name of Strong River, entitling the holder
thereof to acquire 17,689 shares of Common Stock upon the terms set forth
therein, (3) a common stock purchase warrant (the "SECOND TRANCHE 1
WARRANT"), in the form of EXHIBIT D-2, registered in the name of Strong
River, entitling the holder thereof to acquire 17,689 shares of Common Stock
upon the terms set forth therein, (4) the legal opinion of Perkins Coie LLP
outside counsel to the Company, addressed to the Strong River, substantially
in the form attached hereto as EXHIBIT C, and (5) all other documents,
instruments and writings required to have been delivered at or prior to the
Tranche 1 Closing by the Company pursuant to this Agreement, including
without limitation, executed originals of each of the Registration Rights
Agreement, dated the date hereof, between the Company and the Purchasers in
the form of EXHIBIT A attached hereto (the "REGISTRATION RIGHTS AGREEMENT")
and the Irrevocable Transfer Agent Instructions, in the form of EXHIBIT B
attached hereto (the "TRANSFER AGENT INSTRUCTIONS"), delivered to and
acknowledged by the Company and the Company's transfer agent, to (B) Westover
(1) a stock certificate, registered in the name of Westover representing
43,750 Tranche 1 Shares to be acquired at the Tranche 1 Closing by it, (2) a
First Tranche 1 Warrant registered in the name of Westover, entitling the
holder thereof to acquire 6,191 shares of Common Stock upon the terms set
forth therein, (3) a Second Tranche 1 Warrant registered in the name of
Westover, entitling the holder thereof to acquire 6,191 shares of Common
Stock upon the terms set forth therein, (4) the legal opinion of Perkins Coie
LLP outside counsel to the Company, addressed to Westover, substantially in
the form attached hereto as EXHIBIT C, and (5) all other documents,
instruments and writings required to have been delivered at or prior to the
Tranche 1 Closing by the Company pursuant to this Agreement, including
without limitation, executed originals of each of the Registration Rights
Agreement and the Irrevocable Transfer Agent Instructions, delivered to and
acknowledged by the Company and the Company's transfer agent, and to (C)
Montrose (1) a stock certificate, registered in the name of Westover
representing 81,250 Tranche 1 Shares to be acquired at the Tranche 1 Closing
by it, (2) a First Tranche 1 Warrant registered in the name of Montrose,
entitling the holder thereof to acquire 11,497 shares of Common Stock upon
the terms set forth therein, (3) a Second Tranche 1 Warrant registered in the
name of Montrose, entitling the holder thereof to acquire 11,497 shares of
Common Stock upon the terms set forth therein, (4) the legal opinion of
Perkins Coie LLP outside counsel to the Company, addressed to Montrose,
substantially in the form attached hereto as EXHIBIT C, and (5) all other
documents, instruments and writings required to have been delivered at or
prior to the Tranche 1 Closing by the Company pursuant to this Agreement,
including without limitation, executed originals of each of the Registration
Rights Agreement and the Irrevocable Transfer Agent Instructions, delivered
to and acknowledged by the Company and the Company's transfer agent, (b) the
Purchasers shall deliver or cause to be delivered to the Company (1)
$4,000,000 (the "TRANCHE 1 PURCHASE PRICE") in immediately available funds
by wire transfer to an account designated in writing by the Company for such
purpose on or prior to the Tranche 1 Closing Date, and (2) all documents,
instruments and writings required to have been delivered at or prior to the
Tranche 1 Closing by the Purchasers pursuant to this Agreement, including,
without limitation, an executed Registration Rights Agreement.
1.3 THE TRANCHE 2 CLOSING. (a) Subject to the terms and conditions
set forth in this Agreement, the Company shall have the right to deliver a
written notice to the Purchasers (a
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"SUBSEQUENT FINANCING NOTICE") requiring the Purchasers or any other fund
under common management with any of the Purchasers (a "Designee") to purchase
such number of shares of Common Stock, for an aggregate purchase price of no
less than $1,000,000 and no more than $6,000,000 (the "TRANCHE 2 PURCHASE
PRICE"), equal to the Tranche 2 Purchase Price divided by the Per Share
Market Value of the Common Stock on the trading day immediately preceding the
Tranche 2 Closing Date (the "TRANCHE 2 SHARES") or, if applicable, 50% of the
Tranche 2 Purchase Price (the "EARLY TRANCHE 2 PURCHASE PRICE") divided by
the Per Share Market Value of the Common Stock on the trading day immediately
preceding the Early Tranche 2 Closing Date (the "EARLY TRANCHE 2 SHARES"),
PROVIDED, HOWEVER that the Tranche 2 Purchase Price shall not be in excess of
(i) $1,000,000 if the Per Share Market Value on the trading day immediately
preceding the Tranche 2 Closing Date, or the Early Tranche 2 Closing Date, if
applicable, is less than or equal to $8.00, (ii) $2,000,000 if the Per Share
Market Value on the trading day immediately preceding the Tranche 2 Closing
Date, or the Early Tranche 2 Closing Date, if applicable, is greater than
$8.00 but less than or equal to $9.00, (iii) $3,000,000 if the Per Share
Market Value on the trading day immediately preceding the Tranche 2 Closing
Date, or the Early Tranche 2 Closing Date, if applicable, is greater than
$9.00 but less than or equal to $10.00, (iv) $4,000,000 if the Per Share
Market Value on the trading day immediately preceding the Tranche 2 Closing
Date, or the Early Tranche 2 Closing Date, if applicable, is greater than
$10.00 but less than or equal to $17.00, (v) $4,500,000 if the Per Share
Market Value on the trading day immediately preceding the Tranche 2 Closing
Date, or the Early Tranche 2 Closing Date, if applicable, is greater than
$17.00 but less than or equal to $18.00, (vi) $5,000,000 if the Per Share
Market Value on the trading day immediately preceding the Tranche 2 Closing
Date, or the Early Tranche 2 Closing Date, if applicable, is greater than
$18.00 but less than or equal to $19.00, (vii) $5,500,000 if the Per Share
Market Value on the Tranche 2 Closing Date, or the Early Tranche 2 Closing
Date, if applicable, is greater than $19.00 but less than or equal to $20.00,
and (viii) $6,000,000 if the Per Share Market Value on the trading day
immediately preceding the Tranche 2 Closing Date, or the Early Tranche 2
Closing Date, if applicable, is greater than $20.00. The Company may not
deliver the Subsequent Financing Notice relating to the Tranche 2 Shares
earlier than five (5) Business Days after the Second Tranche 1 Adjustment
Date or, if such day is not a Business Day, the next succeeding Business Day.
Notwithstanding anything to the contrary ontained herein, in the event that
the average Per Share Market Value for the 25 calendar days immediately
preceding the First Tranche 1 Adjustment Date is greater than $12.00 and the
Per Share Market Value on the First Tranche 1 Adjustment Date is greater than
$10.00, the Company shall have the right to deliver a Subsequent Financing
Notice commencing one trading day after the First Tranche 1 Adjustment Date
(the "EARLY NOTICE DATE") requiring the Purchasers to purchase the Early
Tranche 2 Shares. The closing of the purchase and sale of the Early Tranche
2 Shares (the "EARLY TRANCHE 2 CLOSING"), if applicable, shall take place at
the offices of RSPAB on the fifth Business Day after the Subsequent Financing
Notice relating to the Early Tranche 2 Shares is deemed delivered hereunder
or on such other date as otherwise agreed to by the parties; PROVIDED,
HOWEVER, that in no case shall the Early Tranche 2 Closing take place unless
and until the conditions listed in SECTION 4.1 have been satisfied by the
Company or waived by the Purchasers and in no event shall the Early Tranche 2
Closing occur subsequent to the 10th Business Day after the Early Notice Date
(such date, the "EARLY TRANCHE 2 CLOSING EXPIRATION DATE"). The date of the
Early Tranche 2 Closing is hereinafter referred to as the "EARLY TRANCHE 2
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CLOSING DATE." The closing of the purchase and sale of all of the Tranche 2
Shares, or the remaining 50% of the Tranche 2 Shares, if applicable, (the
"TRANCHE 2 CLOSING") shall take place at the offices of RSPAB on the fifth
Business Day after the Subsequent Financing Notice requiring the purchase of
such Shares is deemed delivered hereunder or on such other date as otherwise
agreed to by the parties; PROVIDED, HOWEVER, that in no case shall the
Tranche 2 Closing take place unless and until the conditions listed in
SECTION 4.1 have been satisfied by the Company or waived by the Purchasers
and in no event shall the Tranche 2 Closing occur subsequent to the 150th day
after the Tranche 1 Closing Date or, if such day is not a Business Day, the
next succeeding Business Day (such date, the "TRANCHE 2 CLOSING EXPIRATION
DATE"). The date of the Tranche 2 Closing is hereinafter referred to as the
"TRANCHE 2 CLOSING DATE."
(b)(i) At the Early Tranche 2 Closing, if applicable, (i)
the Company shall deliver to or cause to be delivered to each Purchaser (1) a
stock certificate, registered in the name of such Purchaser or such
Purchaser's Designee representing such number of Early Tranche 2 Shares equal
to the Early Tranche 2 Purchase Price paid by such Purchaser or such
Purchaser's Designee divided by the Per Share Market Value of the Common
Stock on the trading day immediately preceding the Early Tranche 2 Closing
Date, (2) the legal opinion referred to in Section 4.1(xi), and (3) all other
documents, instruments and writings required to have been delivered at or
prior to the Early Tranche 2 Closing Date by the Company pursuant to this
Agreement, including the Transfer Agent Instructions referenced in Section
4.1(xvi), and (b) the Purchasers shall deliver or cause to be delivered to
the Company (1) the Early Tranche 2 Purchase Price, in immediately available
funds by wire transfer to an account designated in writing by the Company for
such purpose on or prior to the Early Tranche 2 Closing Date, and (2) all
documents, instruments and writings required to have been delivered at or
prior to the Early Tranche 2 Closing Date by the Purchasers pursuant to this
Agreement.
(ii) At the Tranche 2 Closing, (i) the Company shall deliver
to or cause to be delivered to each Purchaser (1) a stock certificate,
registered in the name of such Purchaser or such Purchaser's Designee
representing such number of Tranche 2 Shares equal to the Tranche 2 Purchase
Price (or 50% of the Tranche 2 Purchase Price if there has been an Early
Tranche 2 Closing pursuant to Section 1.3(b)(i) above) paid by such Purchaser
or such Purchaser's Designee divided by the Per Share Market Value of the
Common Stock on the trading day immediately preceding the Tranche 2 Closing
Date, (2) the legal opinion referred to in Section 4.1(xi), and (3) all other
documents, instruments and writings required to have been delivered at or
prior to the Tranche 2 Closing Date by the Company pursuant to this
Agreement, including the Transfer Agent Instructions referenced in Section
4.1(xvi), and (b) the Purchasers shall deliver or cause to be delivered to
the Company (1) the Tranche 2 Purchase Price (or 50% of the Tranche 2
Purchase Price if there has been an Early Tranche 2 Closing pursuant to
Section 1.3(b)(i) above), in immediately available funds by wire transfer to
an account designated in writing by the Company for such purpose on or prior
to the Tranche 2 Closing Date, and (2) all documents, instruments and
writings required to have been delivered at or prior to the Tranche 2 Closing
Date by the Purchasers pursuant to this Agreement.
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1.4 THE TRANCHE 3 CLOSING. (a) Subject to the terms and conditions
set forth in this Agreement, the Company shall have the right to deliver a
Subsequent Financing Notice requiring the Purchasers to purchase such number
of shares of Common Stock (the "TRANCHE 3 SHARES"), for an aggregate purchase
price of no less than $1,000,000 and no more than $6,000,000 (the "TRANCHE 3
PURCHASE PRICE"), equal to the Tranche 3 Purchase Price divided by the Per
Share Market Value of the Common Stock on the trading day immediately
preceding the Tranche 3 Closing Date, PROVIDED, HOWEVER that the Tranche 3
Purchase Price shall not be in excess of (i) $1,000,000 if the Per Share
Market Value on the trading day immediately preceding the Tranche 3 Closing
Date is less than or equal to $8.00, (ii) $2,000,000 if the Per Share Market
Value on the trading day immediately preceding the Tranche 3 Closing Date is
greater than $8.00 but less than or equal to $9.00, (iii) $3,000,000 if the
Per Share Market Value on the trading day immediately preceding the Tranche 3
Closing Date is greater than $9.00 but less than or equal to $10.00, (iv)
$4,000,000 if the Per Share Market Value on the trading day immediately
preceding the Tranche 3 Closing Date is greater than $10.00 but less than or
equal to $17.00, (v) $4,500,000 if the Per Share Market Value on the trading
day immediately preceding the Tranche 3 Closing Date is greater than $17.00
but less than or equal to $18.00, (vi) $5,000,000 if the Per Share Market
Value on the trading day immediately preceding the Tranche 3 Closing Date is
greater than $18.00 but less than or equal to $19.00, (vii) $5,500,000 if the
Per Share Market Value on the trading day immediately preceding the Tranche 3
Closing Date is greater than $19.00 but less than or equal to $20.00, and
(viii) $6,000,000 if the Per Share Market Value on the trading day
immediately preceding the Tranche 3 Closing Date is greater than $20.00. The
Company may not deliver the Subsequent Financing Notice relating to the
Tranche 3 Shares earlier than 5 Business Days after the earlier to occur of
the Tranche 2 Closing Expiration Date or the Second Tranche 2 Adjustment Date
or, if such day is not a Business Day, the next succeeding Business Day. The
closing of the purchase and sale of the Tranche 3 Shares (the "TRANCHE 3
CLOSING") shall take place at the offices of RSPAB on the fifth Business Day
after the Subsequent Financing Notice is deemed delivered hereunder or on
such other date as otherwise agreed to by the parties; PROVIDED, HOWEVER,
that in no case shall the Tranche 3 Closing take place unless and until the
conditions listed in SECTION 4.2 have been satisfied by the Company or waived
by the Purchasers and in no event shall the Tranche 3 Closing occur
subsequent to the 150th day after the earlier to occur of the Tranche 2
Closing Expiration Date or the Tranche 2 Closing Date or, if such day is not
a Business Day, the next succeeding Business Day (such date, the "TRANCHE 3
CLOSING EXPIRATION DATE"). The date of the Tranche 3 Closing is hereinafter
referred to as the "TRANCHE 3 CLOSING DATE."
(b) At the Tranche 3 Closing, (i) the Company shall deliver
to or cause to be delivered to each Purchaser (1) a stock certificate,
registered in the name of such Purchaser or such Purchaser's Designee
representing such number of Tranche 3 Shares equal to the Tranche 3 Purchase
Price paid by such Purchaser or such Purchaser's Designee divided by the Per
Share Market Value of the Common Stock on the trading day immediately
preceding the Tranche 3 Closing Date to be acquired at the Tranche 3 Closing
by the Purchasers, (2) a common stock purchase warrant (the "FIRST TRANCHE 3
WARRANT"), in the form of EXHIBIT E-1, registered in the name of each
Purchaser or the name of each Purchaser's Designee, entitling the Purchasers
to acquire an aggregate number of shares of Common Stock equal to 6.25% of
the quotient obtained
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by dividing (A) (1) the sum of (i) the Tranche 1 Purchase Price, (ii) the
Tranche 2 Purchase Price and (iii) the Tranche 3 Purchase Price less (2)
$12,000,000, by (B) 132.5% times the Per Share Market Value of the Common
Stock on the trading day immediately preceding the Tranche 3 Closing Date, at
an exercise price equal to 125% of the Per Share Market Value of the Common
Stock on the trading day immediately preceding the Tranche 3 Closing Date,
upon the terms set forth therein, (3) a common stock purchase warrant (the
"SECOND TRANCHE 3 WARRANT"), in the form of EXHIBIT E-2, registered in the
name of each Purchaser or the name of each Purchaser's Designee, entitling
the Purchasers to acquire an aggregate number of shares of Common Stock equal
to 6.25% of the quotient obtained by dividing (A) (1) the sum of (i) the
Tranche 1 Purchase Price, (ii) the Tranche 2 Purchase Price and (iii) the
Tranche 3 Purchase Price less (2) $12,000,000, by (B) 132.5% times the Per
Share Market Value of the Common Stock on the trading day immediately
preceding the Tranche 3 Closing Date, at an exercise price equal to 140% of
the Per Share Market Value of the Common Stock on the trading day immediately
preceding the Tranche 3 Closing Date upon the terms set forth therein, (4)
the legal opinion referred to in Section 4.2(xi), and (5) all other
documents, instruments and writings required to have been delivered at or
prior to the Tranche 3 Closing Date by the Company pursuant to this
Agreement, including the Transfer Agent Instructions referenced in Section
4.1(xvi), and (b) the Purchasers shall deliver or cause to be delivered to
the Company (1) the Tranche 3 Purchase Price, in immediately available funds
by wire transfer to an account designated in writing by the Company for such
purpose on or prior to the Tranche 3 Closing Date, and (2) all documents,
instruments and writings required to have been delivered at or prior to the
Tranche 3 Closing Date by the Purchasers pursuant to this Agreement.
ARTICLE II
REPRESENTATIONS AND WARRANTIES
2.1 REPRESENTATIONS, WARRANTIES AND AGREEMENTS OF THE COMPANY. The
Company hereby makes the following representations and warranties to the
Purchasers:
(a) ORGANIZATION AND QUALIFICATION. The Company is a corporation,
duly incorporated and validly existing under the laws of the jurisdiction of
its incorporation, with the requisite corporate power and authority to own
and use its properties and assets and to carry on its business as currently
conducted. The Company has no subsidiaries other than those set forth on
Schedule 2.1(a) (collectively the "SUBSIDIARIES"). Each of the Subsidiaries
is an entity, duly incorporated or otherwise organized, validly existing and
in good standing under the laws of the jurisdiction of its incorporation or
organization (as applicable), with the requisite power and authority to own
and use its properties and assets and to carry on its business as currently
conducted. Each of the Company and the Subsidiaries is duly qualified to do
business and is in good standing as a foreign corporation in each
jurisdiction in which the nature of the business conducted or property owned
by it makes such qualification necessary, except where the failure to be so
qualified or in good standing, as the case may be, could not, individually or
in the aggregate, be reasonably expected to have or result in a material
adverse effect on the results of operations,
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assets, prospects, or condition (financial or otherwise) of the Company and
the Subsidiaries, taken as a whole (a "MATERIAL ADVERSE EFFECT").
(b) AUTHORIZATION; ENFORCEMENT. The Company has the requisite
corporate power and authority to enter into and to consummate the
transactions contemplated by each of this Agreement, the Registration Rights
Agreement and the Warrants (collectively, the "TRANSACTION DOCUMENTS"), and
otherwise to carry out its obligations thereunder. The execution and
delivery of each of the Transaction Documents by the Company and the
consummation by it of the transactions contemplated thereby have been duly
authorized by all necessary corporate action on the part of the Company and
no further corporate action is required by the Company. Each of the
Transaction Documents has been duly executed by the Company and, when
delivered (or filed, as the case may be) in accordance with the terms hereof,
will constitute the valid and binding obligation of the Company enforceable
against the Company in accordance with its terms. Neither the Company nor
any Subsidiary is in violation of any of the provisions of its respective
articles of incorporation, by-laws or other charter documents.
(c) CAPITALIZATION. The number of authorized, issued and
outstanding capital stock of the Company is set forth in SCHEDULE 2.1(c). No
shares of Common Stock are entitled to statutory preemptive or similar
rights, nor is any holder of the Common Stock entitled to preemptive or
similar rights arising out of any agreement or understanding with the Company
by virtue of any of the Transaction Documents. Except as disclosed in
SCHEDULE 2.1(c), there are no outstanding options, warrants, script rights to
subscribe to, calls or commitments of any character whatsoever relating to,
or, except as a result of the purchase and sale of the Securities, rights or
obligations convertible into or exchangeable for, or giving any Person any
right to subscribe for or acquire any shares of Common Stock, or contracts,
commitments, understandings, or arrangements by which the Company or any
Subsidiary is or may become bound to issue additional shares of Common Stock,
or securities or rights convertible or exchangeable into shares of Common
Stock. To the knowledge of the Company, except as specifically disclosed in
the SEC Reports (as defined below) or SCHEDULE 2.1(c), no Person or group of
related Persons beneficially owns (as determined pursuant to Rule 13d-3
promulgated under the Securities Exchange Act of 1934, as amended (the
"EXCHANGE ACT")) or has the right to acquire by agreement with or by
obligation binding upon the Company beneficial ownership of in excess of 5%
of the Common Shares. A "PERSON" means an individual or corporation,
partnership, trust, incorporated or unincorporated association, joint
venture, limited liability company, joint stock company, government (or an
agency or subdivision thereof) or other entity of any kind.
(d) ISSUANCE OF THE SECURITIES The Securities are duly
authorized, and, when issued and paid for in accordance with the terms
hereof, shall have been validly issued, fully paid and nonassessable, free
and clear of all liens, encumbrances and rights of first refusal of any kind
created by the Company (collectively, "LIENS"). The Company has on the date
hereof and will on each Closing Date, at all times while the Warrants are
outstanding, maintain an adequate reserve of duly authorized Common Stock, to
enable it to perform its exercise and other obligations under this Agreement
and the Warrants on each such Closing Date. With respect to the Securities
to be issued at or in connection with each Closing hereunder, such number of
reserved and available
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shares of Common Stock is not less than the sum (i) the maximum number of
shares of Common Stock which may be issued to the Purchasers pursuant to
Section 1.3 on the Tranche 2 Closing Date and pursuant to Section 1.4 on the
Tranche 3 Closing Date, respectively, assuming, that each of the Tranche 2
Purchase Price and the Tranche 3 Purchase Price equals $6,000,000, (ii) the
maximum number of Adjustment Shares which may be issued to the Purchasers
pursuant to Section 3.15 at any time after the Tranche 1 Closing Date, the
Tranche 2 Closing Date and Tranche 3 Closing Date, respectively, assuming
that the Per Share Market Value of the Common Stock utilized to determine any
such Adjustment Price on each such date is 50% of the Per Share Market Value
on the trading day immediately preceding the Tranche 1 Closing Date and (iii)
the number of shares of Common Stock issuable upon exercise of the First
Tranche 1 Warrants and Second Tranche 1 Warrants and (iv) the number of
shares of Common Stock issuable upon exercise of the First Tranche 3 Warrants
and Second Tranche 3 Warrants assuming that the Tranche 2 Purchase Price is
equal to $6,000,000 and the Tranche 3 Purchase Price is equal to $6,000,000
and the Per Share Market Value of the Common Stock on the trading day
immediately preceding the Tranche 3 Closing Date is $20.01 (such number of
shares of Common Stock to be reserved prior to each Closing Date shall be
referred to as the "INITIAL MINIMUM"). All such authorized shares of Common
Stock shall be duly reserved for issuance to the holders of the Shares,
Adjustment Shares and the Warrants. The shares of Common Stock issuable upon
exercise of the Warrants are referred to herein as the "UNDERLYING SHARES".
The Shares, the Adjustment Shares, the Warrants and the Underlying Shares are
collectively referred to as, the "SECURITIES."
(e) NO CONFLICTS. The execution, delivery and performance of the
Transaction Documents by the Company and the consummation by the Company of
the transactions contemplated thereby do not and will not (i) conflict with
or violate any provision of its Articles of Incorporation (as amended through
the date hereof), or (ii) subject to obtaining the Required Approvals (as
defined below), conflict with, or constitute a default (or an event which
with notice or lapse of time or both would become a default) under, or give
to others any rights of termination, amendment, acceleration or cancellation
(with or without notice, lapse of time or both) of, any agreement, credit
facility, indenture or instrument (evidencing a Company debt or otherwise)
to which the Company or any Subsidiary is a party or by which any property or
asset of the Company or any Subsidiary is bound or affected, or (iii) result
in a violation of any law, rule, regulation, order, judgment, injunction,
decree or other restriction of any court or governmental authority to which
the Company is subject (including federal and state securities laws and
regulations and the rules and regulations of the principal market or exchange
on which the Common Stock is listed or traded), or by which any property or
asset of the Company is bound or affected, except in the case of each of
clauses (ii) and (iii), as could not, individually or in the aggregate,
reasonably be expected to have or result in a Material Adverse Effect. The
business of the Company is not being conducted in violation of any law,
ordinance or regulation of any governmental authority, except for violations
which, individually or in the aggregate, could not reasonably be expected to
have or result in a Material Adverse Effect.
(f) FILINGS, CONSENTS AND APPROVALS. Neither the Company nor any
Subsidiary is required to obtain any consent, waiver, authorization or order
of, give any notice to, or make
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any filing or registration with, any court or other federal, state, local or
other governmental authority or other Person in connection with the
execution, delivery and performance by the Company of the Transaction
Documents, other than (i) the filing of the registration statements with the
Commission meeting the requirements set forth in the Registration Rights
Agreement and covering the resale of the Shares, the Adjustment Shares and
the Underlying Shares by the Purchasers, (ii) the application(s) to the
Nasdaq National Market (the "NASDAQ") for the listing of the Shares, the
Adjustment Shares and the Underlying Shares with the NASDAQ (and with any
other national securities exchange or market on which the Common Stock is
then listed), (iii) applicable Blue Sky filings, (iv) the filing of Current
Reports on Form 8-K with the Commission disclosing the transaction
contemplated hereby, (v) the filing of Forms D with the Commission as
required by Regulation D promulgated under the Securities Act and (vi) in all
other cases where the failure to obtain such consent, waiver, authorization
or order, or to give such notice or make such filing or registration could
not have or result in, individually or in the aggregate, a Material Adverse
Effect (the consents, waivers, authorizations, orders, notices and filings
referred to in (i)-(iv) of this Section are, collectively, the "REQUIRED
APPROVALS").
(g) LITIGATION; PROCEEDINGS. There is no action, suit, notice of
violation, proceeding or investigation pending or, to the knowledge of the
Company, threatened against or affecting the Company or any of its
Subsidiaries or any of their respective properties before or by any court,
governmental or administrative agency or regulatory authority (federal,
state, county, local or foreign) which (i) adversely affects or challenges
the legality, validity or enforceability of any of the Transaction Documents
or the Securities or (ii) could, individually or in the aggregate, be
reasonably expected to have or result in a Material Adverse Effect.
(h) NO DEFAULT OR VIOLATION. Neither the Company nor any
Subsidiary (i) is in default under or in violation of (and no event has
occurred which has not been waived which, with notice or lapse of time or
both, would result in a default by the Company or any Subsidiary under), nor
has the Company or any Subsidiary received notice of a claim that it is in
default under or that it is in violation of, any indenture, loan or credit
agreement or any other agreement or instrument to which it is a party or by
which it or any of its properties is bound, (ii) is in violation of any order
of any court, arbitrator or governmental body, or (iii) is in violation of
any statute, rule or regulation of any governmental authority, except, in
each case as could not individually or in the aggregate, reasonably be
expected to, have or result in a Material Adverse Effect.
(i) PRIVATE OFFERING. Assuming the accuracy of the
representations and warranties of the Purchasers set forth in Sections
2.2(b)-(g), the offer, issuance and sale of the Securities to the Purchasers
as contemplated hereby are exempt from the registration requirements of the
Securities Act of 1933, as amended (the "SECURITIES ACT"). Neither the
Company nor, to the Company's knowledge, any Person acting on its behalf has
taken any action which could subject the offering, issuance or sale of the
Securities to the registration requirements of the Securities Act. Neither
the Company nor, to the Company's knowledge, any Person acting on the
Company's behalf has solicited any offer to buy or sell the Securities by
means of any form of general solicitation or advertising.
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(j) SEC REPORTS; FINANCIAL STATEMENTS. The Company has filed all
reports required to be filed by it under the Exchange Act, including pursuant
to Section 13(a) or 15(d) thereof, for the three years preceding the date
hereof (or such shorter period as the Company was required by law to file
such material) (the foregoing materials being collectively referred to herein
as the "SEC REPORTS" and, together with the Schedules to this Agreement the
"DISCLOSURE MATERIALS") on a timely basis or has received a valid extension
of such time of filing and has filed any such SEC Reports prior to the
expiration of any such extension. As of their respective dates, the SEC
Reports complied in all material respects with the requirements of the
Exchange Act and, the rules and regulations promulgated thereunder, and none
of the SEC Reports, when filed, contained any untrue statement of a material
fact or omitted to state a material fact required to be stated therein or
necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading. All material
agreements to which the Company is a party or to which the property or assets
of the Company are subject have been filed as exhibits to the SEC Reports to
the extent required. The financial statements of the Company included in the
SEC Reports comply in all material respects with applicable accounting
requirements and the rules and regulations of the Commission with respect
thereto as in effect at the time of filing. Such financial statements have
been prepared in accordance with generally accepted accounting principles
("GAAP") applied on a consistent basis during the periods involved, except as
may be otherwise specified in such financial statements or the notes thereto
and the unaudited financial statement do not contain footnotes required by
GAAP, and fairly present in all material respects the financial position of
the Company and its consolidated subsidiaries as of and for the dates thereof
and the results of operations and cash flows for the periods then ended,
subject, in the case of unaudited statements, to normal, immaterial, year-end
audit adjustments. Since September 30, 1998, except as specifically disclosed
in the SEC Reports or SCHEDULE 2.1(j) annexed hereto, (a) there has been no
event, occurrence or development that has had or that could reasonably be
expected to have or result in a Material Adverse Effect, (b) the Company has
not incurred any liabilities (contingent or otherwise) other than (x)
liabilities incurred in the ordinary course of business consistent with past
practice and (y) liabilities not required to be reflected in the Company's
financial statements pursuant to GAAP or required to be disclosed in filings
made with the Commission, (c) the Company has not altered its method of
accounting or the identity of its auditors and (d) the Company has not
declared or made any payment or distribution of cash or other property to its
stockholders or officers or directors (other than in compliance with existing
Company stock option plans) with respect to its capital stock, or purchased,
redeemed (or made any agreements to purchase or redeem) any shares of its
capital stock. The Company last filed audited financial statements with the
Commission on March 26, 1998, and has not received any comments from the
Commission in respect thereof.
(k) INVESTMENT COMPANY. The Company is not, and is not an
Affiliate (as defined in Rule 405 under the Securities Act) of, an
"investment company" within the meaning of the Investment Company Act of
1940, as amended.
(l) CERTAIN FEES. No fees or commissions will be payable by the
Company to any broker, financial advisor or consultant, finder, placement
agent, investment banker, or bank
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with respect to the transactions contemplated by this Agreement. The
Purchasers shall have no obligation with respect to any fees or with respect
to any claims made by or on behalf of other Persons for fees of a type
contemplated in this Section that may be due in connection with the
transactions contemplated by this Agreement as a result of action by or on
behalf of the Company or any of its Affiliates.
(m) FORM S-3 ELIGIBILITY. The Company is eligible to register
securities for resale with the Commission under Form S-3 promulgated under
the Securities Act.
(n) LISTING AND MAINTENANCE REQUIREMENTS COMPLIANCE. The Company
has not, in the two years preceding the date hereof, received notice (written
or oral) from the NASDAQ or any other stock exchange, market or trading
facility on which the Common Stock is or has been listed (or on which it has
been quoted) to the effect that the Company is not in compliance with the
listing or maintenance requirements of such exchange or market. The Company
is currently in compliance with all such maintenance requirements and no fact
or circumstances currently exist which could reasonably be expected to result
in noncompliance with such maintenance requirements in the foreseeable future.
(o) PATENTS AND TRADEMARKS. The Company has, or has rights to
use, all patents, patent applications, trademarks, trademark applications,
service marks, trade names, copyrights, licenses and rights (collectively,
the "INTELLECTUAL PROPERTY RIGHTS") which are necessary or material for use
in connection with its business, and which the failure to so have would have
a Material Adverse Effect. To the best knowledge of the Company, all such
Intellectual Property Rights are enforceable and there is no existing
infringement by another Person of any of the Intellectual Property Rights.
(p) REGISTRATION RIGHTS; RIGHTS OF PARTICIPATION. Except as set
forth on SCHEDULE 6(b) to the Registration Rights Agreement, (i) the Company
has not granted or agreed to grant to any Person any rights (including
"piggy-back" registration rights) to have any securities of the Company
registered with the Commission or any other governmental authority which has
not been satisfied and (ii) no Person, has any right of first refusal,
preemptive right, right of participation, or any similar right to participate
in the transactions contemplated by the Transaction Documents.
(q) REGULATORY PERMITS. The Company and its Subsidiaries possess
all certificates, authorizations and permits issued by the appropriate
Federal, state or foreign regulatory authorities necessary to conduct their
respective businesses as described in the SEC Reports, except where the
failure to possess such permits could not, individually or in the aggregate,
have or result in a Material Adverse Effect ("MATERIAL PERMITS"), and neither
the Company nor any such Subsidiary has received any notice of proceedings
relating to the revocation or modification of any Material Permit.
(r) TITLE. The Company and the Subsidiaries have good and
marketable title in fee simple to all real property and personal property
owned by them which is material to the
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business of the Company and its Subsidiaries, in each case free and clear of
all Liens, except for liens, claims or encumbrances as do not materially
affect the value of such property and do not interfere with the use made and
proposed to be made of such property by the Company and its Subsidiaries.
Any real property and facilities held under lease by the Company and its
Subsidiaries are held by them under valid, subsisting and enforceable leases
with such exceptions as are not material and do not materially interfere with
the use made and proposed to be made of such property and buildings by the
Company and its Subsidiaries.
(s) DISCLOSURE. All disclosure provided to the Purchasers
regarding the Company, its business and the transactions contemplated hereby,
including the Schedules to this Agreement, furnished by or on behalf of the
Company are true and correct and do not contain any untrue statement of a
material fact or omit to state any material fact necessary in order to make
the statements made therein, in light of the circumstances under which they
were made, not misleading.
2.2 REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS. The Purchasers
hereby jointly and severally represent and warrant to the Company as follows:
(a) ORGANIZATION; AUTHORITY. Such Purchaser is duly organized,
validly existing and in good standing under the laws of the jurisdiction of
its organization with the requisite corporate power and authority, to enter
into and to consummate the transactions contemplated by the Transaction
Documents and otherwise to carry out its obligations thereunder. The
purchase by each Purchaser of the Securities hereunder has been duly
authorized by all necessary action on the part of such Purchaser. Each of
this Agreement and the Registration Rights Agreement has been duly executed
and delivered by such Purchaser and constitutes the valid and legally binding
obligation of such Purchaser, enforceable against it in accordance with its
terms.
(b) INVESTMENT INTENT. Such Purchaser is acquiring the Securities
as principal for its own account for investment purposes only and not with a
view to or for distributing or reselling such Securities or any part thereof
or interest therein, without prejudice, however, to such Purchaser's right,
subject to the provisions of this Agreement and the Registration Rights
Agreement, to sell or otherwise dispose of all or any part of such Securities
pursuant to an effective registration statement under the Securities Act and
in compliance with applicable federal and state securities laws or under an
exemption from such registration.
(c) PURCHASER STATUS. At the time such Purchaser was offered the
Securities, it was, and at the date hereof, it is, and at each Closing Date,
Adjustment Date and each exercise date under its Warrant, it will be, an
"accredited investor" as defined in Rule 501(a) under the Securities Act.
(d) EXPERIENCE OF THE PURCHASER. Such Purchaser, either alone or
together with its representatives, has such knowledge, sophistication and
experience in business and financial matters so as to be capable of
evaluating the merits and risks of the prospective investment in the
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Securities, and has so evaluated the merits and risks of such investment.
Such Purchaser has not been organized for the sole purpose of acquiring the
Securities.
(e) ABILITY OF PURCHASER TO BEAR RISK OF INVESTMENT. Such
Purchaser is able to bear the economic risk of an investment in the
Securities and, at the present time, is able to afford a complete loss of
such investment.
(f) ACCESS TO INFORMATION. Such Purchaser acknowledges receipt of
the Disclosure Materials and further acknowledges that it has reviewed the
Disclosure Materials and has been afforded (i) the opportunity to ask such
questions as it has deemed necessary of, and to receive answers from,
representatives of the Company concerning the terms and conditions of the
offering of the Securities and the merits and risks of investing in the
Securities; (ii) access to information about the Company and the Company's
financial condition, results of operations, business, properties, management
and prospects sufficient to enable it to evaluate its investment; and (iii)
the opportunity to obtain such additional information which the Company
possesses or can acquire without unreasonable effort or expense that is
necessary to make an informed investment decision with respect to the
investment and to verify the accuracy and completeness of the information
contained in the Disclosure Materials. Neither such inquiries nor any other
investigation conducted by or on behalf of such Purchaser or its
representatives or counsel shall modify, amend or affect such Purchaser's
right to rely on the truth, accuracy and completeness of the Disclosure
Materials and the Company's representations and warranties contained in the
Transaction Documents.
(g) GENERAL SOLICITATION. Such Purchaser is not purchasing the
Securities as a result of or subsequent to any advertisement, article, notice
or other communication regarding the Securities published in any newspaper,
magazine or similar media or broadcast over television or radio or presented
at any seminar.
(h) RELIANCE. Such Purchaser understands and acknowledges that
(i) the Securities are being offered and sold to it without registration
under the Securities Act in a private placement that is exempt from the
registration provisions of the Securities Act and (ii) the availability of
such exemption, depends in part on, and the Company will rely upon the
accuracy and truthfulness of, the foregoing representations and such
Purchaser hereby consents to such reliance.
(i) INVOLVEMENT IN CERTAIN PROCEEDINGS. Neither the Purchasers
nor any of their Affiliates has been involved in any of the proceedings
described in Section 401(f) of Regulation S-K under the Securities Act during
the periods described therein.
(j) CERTAIN FEES. Except with respect to fees payable to Ram
Capital Resources LLC, the Purchasers have not entered into any written
agreement with any Person with respect to fees or commissions payable to any
broker, financial advisor or consultant, finder, placement agent, investment
banker, or bank with respect to the transactions contemplated by this
Agreement.
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(k) BENEFICIAL OWNERSHIP. Neither the Purchasers nor any of their
Affiliates is the beneficial owner of any shares of the Company's Common
Stock as of the trading day immediately preceding the Tranche 1 Closing Date.
The Company acknowledges and agrees that the Purchasers make no
representations or warranties with respect to the transactions contemplated
hereby other than those specifically set forth in this Section 2.2.
ARTICLE III
OTHER AGREEMENTS OF THE PARTIES
3.1 TRANSFER RESTRICTIONS. (a) Securities may only be disposed of
pursuant to an effective registration statement under the Securities Act, to
the Company or pursuant to an available exemption from or in a transaction
not subject to the registration requirements of the Securities Act, and in
compliance with any applicable federal and state securities laws. In
connection with any transfer of Securities other than pursuant to an
effective registration statement or to the Company, except as otherwise set
forth herein, the Company may require the transferor thereof to provide to
the Company an opinion of counsel selected by the transferor, the form and
substance of which opinion shall be reasonably satisfactory to the Company,
to the effect that such transfer does not require registration of such
transferred securities under the Securities Act. Notwithstanding the
foregoing, the Company hereby consents to and agrees to register on the books
of the Company and with any transfer agent for the securities of the Company
any transfer of Securities by such Purchaser to a Designee of such Purchaser
or any transfer among any such Designees, provided that transferee certifies
to the Company that it is an "accredited investor" within the meaning of Rule
501(a) under the Securities Act and that it is acquiring the Securities
solely for investment purposes. Any such transferee shall agree in writing
to be bound by the terms of this Agreement and shall have the rights of a
Purchaser under this Agreement and the Registration Rights Agreement.
(b) The Purchasers agree to the imprinting, so long as is required
by this Section 3.1(b), of the following legend on the Securities:
NEITHER THESE SECURITIES [NOR THE SECURITIES INTO WHICH THESE
SECURITIES ARE EXERCISABLE] HAVE BEEN REGISTERED WITH THE SECURITIES
AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN
RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT
OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND, ACCORDINGLY, MAY NOT
BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE
EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION
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REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE
STATE SECURITIES LAWS.
The legend set forth above shall be removed from the Shares and the
Adjustment Shares, and the Company shall cause its transfer agent to issue a
certificate or certificates without any legend (upon surrender of the
legended certificates duly endorsed) to each holder of the Shares and/or
Adjustment Shares upon which it is stamped if such legend is not required
under applicable requirements of the Securities Act and other applicable
securities laws. Underlying Shares shall not contain the legend set forth
above nor any other legend if the exercise of Warrants or other issuances of
Underlying Shares as contemplated by the Warrants occurs at any time such
legend is not required under applicable requirements of the Securities Act
and the applicable securities laws.
3.2 ACKNOWLEDGMENT OF DILUTION. The Company acknowledges that the
issuance of the Adjustment Shares on any Adjustment Date and the issuance of
Underlying Shares upon exercise of the Warrants may result in dilution of
the outstanding shares of Common Stock, which dilution may be substantial
under certain market conditions.
3.3 FURNISHING OF INFORMATION. As long as the Company is subject to
Sections 13(a) and 15(d) of the Exchange Act, the Company covenants to timely
file (or obtain extensions in respect thereof and file within the applicable
grace period) all reports required to be filed by the Company after the date
hereof pursuant to Section 13(a) or 15(d) of the Exchange Act. So long as
any of the Purchasers owns Securities, if the Company is not required to file
reports pursuant to such laws, it will prepare and furnish to such Purchaser
and make publicly available in accordance with Rule 144(c) promulgated under
the Securities Act annual and quarterly financial statements, together with a
discussion and analysis of such financial statements in form and substance
substantially similar to those that would otherwise be required to be
included in reports required by Section 13(a) or 15(d) of the Exchange Act,
as well as any other information required thereby, in the time period that
such filings would have been required to have been made under the Exchange
Act. The Company further covenants that it will take such further action as
any holder of Securities may reasonably request, all to the extent required
from time to time to enable such Person to sell Securities without
registration under the Securities Act within the limitation of the exemptions
provided by Rule 144 promulgated under the Securities Act. Upon the request
of any such Person, the Company shall deliver to such Person a written
certification of a duly authorized officer as to whether it has complied with
such requirements.
3.4 [INTENTIONALLY OMITTED.]
3.5 INTEGRATION. The Company shall not, and shall use its best efforts
to ensure that, no Affiliate shall, sell, offer for sale or solicit offers
to buy or otherwise negotiate in respect of any security (as defined in
Section 2 of the Securities Act) that would be integrated with the offer or
sale of the Securities in a manner that would require the registration under
the Securities Act of the sale of the Securities to the Purchasers.
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3.6 STOCKHOLDER APPROVAL UNDER THE RULES AND REGULATIONS OF THE NASDAQ
STOCK MARKET. If on any Adjustment Date or Closing Date (other than the
Tranche 1 Closing Date) (A) the Common Stock is listed for trading on NASDAQ,
(B) the Adjustment Price or Purchase Price, as the case may be, then in
effect is such that the aggregate number of shares of Common Stock that would
then be issuable as Adjustment Shares and/or Shares, as the case may be,
together with any Adjustment Shares and Shares previously issued at a
discount to the Tranche 1 Shares, would equal or exceed 20% of the number of
shares of Common Stock outstanding on the Tranche 1 Closing Date (such number
of shares as would not equal or exceed such 20% limit, the "ISSUABLE
MAXIMUM"), and (C) the Company shall not have previously obtained the vote of
shareholders (the "SHAREHOLDER APPROVAL"), if any, as may be required by the
applicable rules and regulations of the Nasdaq Stock Market, Inc. (or any
successor entity) applicable to approve the issuance of shares of Common
Stock in excess of the Issuable Maximum pursuant to the terms hereof, then
the Company shall issue to the holder so requesting Adjustment Shares or
Shares, as the case may be, a number of shares of Common Stock equal to the
Issuable Maximum and, with respect to the remainder of Adjustment Shares or
Shares, as the case may be, which would result in an issuance of shares of
Common Stock in excess of the Issuable Maximum (the "EXCESS SHARES"), the
Company shall have the option to either (1) use its best efforts to obtain
the Shareholder Approval applicable to such issuance as soon as is possible,
but in any event not later than the 90th day after such request, or (2)
deliver to such holder cash in an amount equal to the product of (x) the Per
Share Market Value on the applicable Adjustment Date or Closing Date, as
applicable, and (y) the number of shares of Common Stock in excess of such
holder's pro rata portion of the Issuable Maximum that would have otherwise
been issuable to the holder but for the provisions of this Section (such
amount of cash being hereinafter referred to as the "DISCOUNT EQUIVALENT").
If the Company fails to pay the Discount Equivalent in full pursuant to this
Section within fifteen (15) days after the Company fails to obtain
Shareholder Approval pursuant to (1) above or the date payable pursuant to
(2) above, the Company will pay interest thereon at a rate of 9% per annum to
the holder, accruing daily from the applicable Adjustment Date or Closing
Date, as the case may be, until such amount, plus all such interest thereon,
is paid in full.
3.7 INCREASE IN AUTHORIZED SHARES. At such times as the Company would
be, if a notice of exercise were to be delivered on such date or Adjustment
Date, precluded from issuing such number of Underlying Shares as would be
issuable upon exercise in full of the Warrants or issuing all of the
Adjustment Shares due to the unavailability of a sufficient number of shares
of authorized but unissued or reserved shares of Common Stock, the Company
shall promptly (and in any case, within 30 Business Days from such date)
prepare and mail to the stockholders of the Company proxy materials
requesting authorization to amend the Company's Articles of Incorporation to
increase the number of shares of Common Stock which the Company is authorized
to issue to at least such number of shares as reasonably requested by the
Purchasers in order to provide for such number of authorized and unissued
shares of Common Stock to enable the Company to comply with its exercise and
reservation of shares obligations as set forth in this Agreement and the
Warrants. In connection therewith, the Board of Directors shall (a) adopt
proper resolutions authorizing such increase, (b) recommend to and otherwise
use its best efforts to promptly and duly obtain stockholder approval to
carry out such resolutions (and hold a special meeting of the stockholders no
later than the 60th day after delivery of the proxy materials
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relating to such meeting) and (c) within five (5) Business Days of obtaining
such stockholder authorization, file an appropriate amendment to the
Company's Articles of Incorporation to evidence such increase.
3.8 LISTING AND RESERVATION OF UNDERLYING SHARES. (a) The Company
shall (i) not later than the tenth Business Day following the Closing Date
prepare and file with the NASDAQ (or such other national securities exchange
or market or trading or quotation facility on which the Common Stock is then
listed) an additional shares listing application covering a number of shares
of Common Stock which is not less than the Initial Minimum applicable to each
such Closing, (ii) take all steps necessary to cause such shares to be
approved for listing in the NASDAQ (or on the other primary national
securities exchange or market or trading or quotation facility on which the
Common Stock is then listed) as soon as possible thereafter, and (iii)
provide to the Purchasers evidence of such listing, and the Company shall
maintain the listing of its Common Stock thereon.
(b) The Company shall maintain a reserve of shares of Common Stock
for issuance pursuant to Section 3.15 and upon exercise of the Warrant in
accordance with its terms, in such amount as may be required to fulfill
obligations in full under the Transaction Documents, which reserve shall
include, with respect to each Closing, a number of shares of Common Stock
equal to no less than the Initial Minimum, with respect to each Closing.
3.9 EXERCISE AND ISSUANCE PROCEDURES. The Warrants set forth the
totality of the procedures with respect to the exercise of the Warrants,
including such other information and instructions as may be reasonably
necessary to enable the Purchasers to exercise the Warrants in accordance
with their terms. The Company shall honor any exercise of the Warrants and
shall deliver Underlying Shares in accordance with the terms, conditions and
time periods set forth in the Warrants and shall issue Adjustment Shares in
accordance with Section 3.15.
3.10 [INTENTIONALLY OMITTED]
3.11 RIGHT OF FIRST REFUSAL; SUBSEQUENT REGISTRATIONS. (a) The Company
shall not, directly or indirectly, without the prior written consent of the
Purchasers, offer, sell, grant any option to purchase, or otherwise dispose
of (or announce any offer, sale, grant or any option to purchase or other
disposition) any of its or its Affiliates' equity or equity-equivalent
securities in a transaction intended to be exempt or not subject to
registration under the Securities Act (a "SUBSEQUENT PLACEMENT") for a period
of 180 days after the effective date of the registration statement covering
the underlying Shares issued pursuant to the Tranche 1 Closing (the
"UNDERLYING SECURITIES REGISTRATION STATEMENT"), except (i) the granting of
options or warrants to employees, officers and directors, and the issuance of
shares upon exercise of options granted, under any stock option plan
heretofore or hereinafter duly adopted by the Company, (ii) shares of Common
Stock issued upon exercise of any currently outstanding warrants and upon
conversion of any currently outstanding convertible securities of the
Company, in each case disclosed in SCHEDULE 2.1(c), (iii) the Securities, and
(iv) equity or equity-equivalent securities issued in connection with
strategic transactions involving the Company and other entities, including,
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without limitation, joint ventures, marketing or distribution agreement,
technology transfer or development arrangements unless (A) the Company
delivers to the Purchasers a written notice (the "SUBSEQUENT PLACEMENT
NOTICE") of its intention effect such Subsequent Placement, which Subsequent
Placement Notice shall describe in reasonable detail the proposed terms of
such Subsequent Placement, the amount of proceeds intended to be raised
thereunder, the Person with whom such Subsequent Placement shall be effected,
and attached to which shall be a term sheet or similar document relating
thereto and (B) no Purchaser shall have notified the Company by 5:00 p.m.
(New York City time) on the fifth (5th) Business Day after its receipt of the
Subsequent Placement Notice of its willingness to cause such Purchaser to
provide (or to cause its Designee to provide), subject to completion of
mutually acceptable documentation, financing to the Company on terms no less
favorable to the Company than those terms set forth in the Subsequent
Placement Notice. If the Purchasers shall fail to notify the Company of its
intention to provide such financing within such time period or shall fail to
provide such financing within thirty (30) Business Days after notifying the
Company of its intention to provide such financing (the "PURCHASERS RIGHT
EXPIRATION DATE"), the Company may effect the Subsequent Placement
substantially upon the terms and to the Persons (or Affiliates of such
Persons) set forth in the Subsequent Placement Notice; PROVIDED, that the
Company shall provide the Purchasers with a second Subsequent Placement
Notice, and the Purchasers shall again have the right of first refusal set
forth above in this paragraph (a), if the Subsequent Placement subject to the
initial Subsequent Placement Notice shall not have been consummated for any
reason on the terms set forth in such Subsequent Placement Notice within
thirty (30) Business Days after (x) the date the Purchasers notify the
Company of their unwillingness to provide such financing or (y) the
Purchasers Right Expiration Date, as the case may be.
(b) Except for (x) Underlying Shares, (y) other "Registrable
Securities" (as such term is defined in the Registration Rights Agreement) to
be registered, and securities of the Company permitted pursuant to Schedule
6(b) of the Registration's Rights Agreement to be registered in the
Underlying Securities Registration Statement in accordance with the
Registration Rights Agreement, and (z) Common Stock to be registered for
resale in connection with financings permitted pursuant to paragraph (a)(i),
(iii) and (iv) of Section 3.11(a), the Company shall not, without the prior
written consent of the Purchasers (i) issue or sell any of its or any of its
Affiliates' equity or equity-equivalent securities pursuant to Regulation S
promulgated under the Securities Act, or (ii) register for resale any
securities of the Company, in each case, for a period of not less than 90
Business Days after the date that any registration statement covering the
resale of any of the Shares, Adjustment Shares and the Underlying Shares by
the Purchasers meeting the requirement of the Registration Rights Agreement
is declared effective by the Commission. Any days that any Purchaser is
unable to sell Underlying Securities under any such registration statement
shall be added to such 90 Business Day period for the purposes of (i) and
(ii) above.
3.12 CERTAIN SECURITIES LAWS DISCLOSURES; PUBLICITY. The Company
shall: (i) issue within one (1) Business Day of each Closing a press release
acceptable to the Purchasers disclosing the transactions contemplated hereby,
(ii) file within ten (10) Business Days after each Closing Date with the
Commission a Current Report on Form 8-K disclosing the transactions
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contemplated hereby, and (iii) timely file with the Commission a Form D
promulgated under the Securities Act as required under Regulation D
promulgated under the Securities Act and provide a copy thereof to the
Purchasers promptly after the filing thereof. The Company shall, no less
than two (2) Business Days prior to the filing of any disclosure required by
clauses (ii) and (iii) above, provide a copy thereof to the Purchasers.
3.13 USE OF PROCEEDS. The Company shall not use the net proceeds form
the sale of Securities hereunder to redeem any Company equity or
equity-equivalent securities. Pending application of the proceeds of this
placement in the manner permitted hereby, the Company will invest such
proceeds in interest bearing accounts and/or short-term, investment grade
interest bearing securities.
3.14 REIMBURSEMENT. If either Purchaser, other than by reason of its
negligence or willful misconduct, becomes involved in any capacity in any
action, proceeding or investigation brought by or against any Person,
including stockholders of the Company, in connection with or as a result of
the consummation of the transactions contemplated by Transaction Documents,
the Company will reimburse such Purchaser for its reasonable legal and other
expenses (including the cost of any investigation and preparation) incurred
in connection therewith, as such expenses are incurred in an amount not to
exceed $200,000 in the aggregate. The reimbursement obligations of the
Company under this paragraph shall be in addition to any liability which the
Company may otherwise have, shall extend upon the same terms and conditions
to any Affiliate of such Purchaser who are actually named in such action,
proceeding or investigation, and partners, directors, agents, employees and
controlling persons (if any), as the case may be, of such Purchaser and any
such Affiliate, and shall be binding upon and inure to the benefit of any
successors, assigns, heirs and personal representatives of the Company, such
Purchaser and any such Affiliate and any such Person. The Company also
agrees that neither such Purchaser nor any Affiliate, partners, directors,
agents, employees or controlling persons shall have any liability to the
Company or any person asserting claims on behalf of or in right of the
Company in connection with or as a result of the consummation of the
Transaction Documents except to the extent that any losses, claims, damages,
liabilities or expenses incurred by the Company result from the negligence or
willful misconduct of such Purchaser. Notwithstanding anything to the
contrary, the Company shall not be obligated to pay any reimbursements
hereunder in the event that a court, in a final unappealable judgement,
determines that such Purchaser is liable for the act upon which reimbursement
is sought and the Company may condition payment of any reimbursemnt hereunder
upon receipt of an undertaking reasonably satisfactory to the Company to
repay any such reimbursement.
3.15 ISSUANCE OF ADJUSTMENT SHARES. (a) The Company shall, on the
twenty-fifth (25th) day following the date the Underlying Securities
Registration Statement, covering the Tranche 1 Shares, has been declared
effective by the Commission (the "FIRST TRANCHE 1 ADJUSTMENT DATE"), issue to
the Purchasers for no additional consideration such aggregate number of
shares of Common Stock (the "FIRST TRANCHE 1 ADJUSTMENT SHARES") as equals
the quotient obtained by dividing (i) the product of (A) 50% of the Tranche 1
Shares and (B) an amount equal to (x) the difference of (1) 112 1/2% of the
Per Share Market Value of the Common Stock on the Tranche 1
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Closing Date less (2) the average of the lowest ten (10) Per Share Market
Values during the twenty-five (25) days immediately preceding the First
Tranche 1 Adjustment Date (the "FIRST TRANCHE 1 ADJUSTMENT PRICE" and (ii)
the First Tranche 1 Adjustment Price.
(b) The Company shall, on the twenty-fifth (25th) day following
the First Tranche 1 Adjustment Date (the "SECOND TRANCHE 1 ADJUSTMENT DATE"),
issue to the Purchasers for no additional consideration such aggregate number
of shares of Common Stock (the "SECOND TRANCHE 1 ADJUSTMENT SHARES") as
equals the quotient obtained by dividing (i) the product of (A) 50% of the
Tranche 1 Shares and (B) an amount equal to (x) the difference of
(1) 112 1/2% of the Per Share Market Value of the Common Stock on the
Tranche 1 Closing Date less (2) the average of the lowest ten (10) Per Share
Market Values during the twenty-five (25) days immediately preceding the
Second Tranche 1 Adjustment Date (the "SECOND TRANCHE 1 ADJUSTMENT PRICE")
and (ii) the Second Tranche 1 Adjustment Price.
(c) The Company shall, on the twenty-fifth (25th) day following
the date the Underlying Securities Registration Statement, covering the
Tranche 2 Shares, has been declared effective by the Commission (the "FIRST
TRANCHE 2 ADJUSTMENT DATE"), issue to the Purchasers for no additional
consideration such aggregate number of shares of Common Stock (the "FIRST
TRANCHE 2 ADJUSTMENT SHARES") as equals the quotient obtained by dividing (i)
the product of (A) 50% of the Tranche 2 Shares and (B) an amount equal to (x)
the difference of (1) 112 1/2% of the Per Share Market Value of the Common
Stock on the Tranche 2 Closing Date less (2) the average of the lowest ten
(10) Per Share Market Values during the twenty-five (25) days immediately
preceding the First Tranche 2 Adjustment Date (the "FIRST TRANCHE 2
ADJUSTMENT PRICE") and (ii) the First Tranche 2 Adjustment Price.
(d) The Company shall, on the twenty-fifth (25th) day following
the First Tranche 2 Adjustment Date (the "SECOND TRANCHE 2 ADJUSTMENT DATE"),
issue to the Purchasers for no additional consideration such aggregate number
of shares of Common Stock (the "SECOND TRANCHE 2 ADJUSTMENT SHARES") as
equals the quotient obtained by dividing (i) the product of (A) 50% of the
Tranche 2 Shares and (B) an amount equal to (x) the difference of
(1) 112 1/2% of the Per Share Market Value of the Common Stock on the
Tranche 2 Closing Date less (2) the average of the lowest ten (10) Per
Share Market Values during the twenty-five (25) days immediately preceding
the Second Tranche 2 Adjustment Date (the "SECOND TRANCHE 2 ADJUSTMENT PRICE")
and (ii) the Second Tranche 2 Adjustment Price.
(e) The Company shall, on the twenty-fifth (25th) day following
the date the Underlying Securities Registration Statement, covering the
Tranche 3 Shares, has been declared effective by the Commission (the "FIRST
TRANCHE 3 ADJUSTMENT DATE"), issue to the Purchasers for no additional
consideration such aggregate number of shares of Common Stock (the "FIRST
TRANCHE 3 ADJUSTMENT SHARES") as equals the quotient obtained by dividing (i)
the product of (A) 50% of the Tranche 3 Shares and (B) an amount equal to (x)
the difference of (1) 112 1/2 % of the Per Share Market Value of the Common
Stock on the Tranche 3 Closing Date less (2) the average of the lowest ten
(10) Per Share Market Values during the twenty-five (25) days immediately
preceding the First Tranche 3 Adjustment Date (the "FIRST TRANCHE 3
ADJUSTMENT PRICE") and (ii) the First Tranche 3 Adjustment Price.
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(f) The Company shall, on the twenty-fifth (25th) day following
the First Tranche 3 Adjustment Date (the "SECOND TRANCHE 3 ADJUSTMENT DATE"),
issue to the Purchasers for no additional consideration such aggregate number
of shares of Common Stock (the "SECOND TRANCHE 3 ADJUSTMENT SHARES") as
equals the quotient obtained by dividing (i) the product of (A) 50% of the
Tranche 3 Shares and (B) an amount equal to (x) the difference of
(1) 112 1/2% of the Per Share Market Value of the Common Stock on the
Tranche 3 Closing Date less (2) the average of the lowest ten (10) Per Share
Market Values during the twenty-five (25) days immediately preceding the
Second Tranche 3 Adjustment Date (the "SECOND TRANCHE 3 ADJUSTMENT PRICE")
and (ii) the Second Tranche 3 Adjustment Price.
3.16 LIMITATIONS ON SHORT SALES. Each Purchaser agrees that it will not
enter into any Short Sales (as hereinafter defined) from the period
commencing on the First Tranche 1 Closing Date and ending on the last
applicable Adjustment Date. For purposes of this Section 3.16, a "SHORT
SALE" by a Purchaser shall mean a sale of Common Stock by such Purchaser that
is marked as a short sale and that is made at a time when there is no
equivalent offsetting long position in Common Stock held by the Purchaser.
For purposes of determining whether there is an equivalent offsetting long
position in Common Stock held by a Purchaser, Adjustment Shares that have not
yet been issued in connection with the immediately preceding Closing Date
shall be deemed to be held long by the Purchaser, and the number of
Adjustment Shares then held by a Purchaser on any particular date of
computation shall be equal to the number of Adjustment Shares issuable
pursuant to Section 3.15 on the next Adjustment Date calculated as if such
computation date were such Adjustment Date (e.g. using the lowest ten (10)
Per Share Market Values during the twenty-five (25) days immediately
preceding such computation date).
ARTICLE IV
CONDITIONS
4.1 CONDITIONS PRECEDENT TO THE OBLIGATION OF THE PURCHASERS TO
PURCHASE THE EARLY TRANCHE 2 SHARES OR THE TRANCHE 2 SHARES. The obligation
of the Purchasers to acquire the Early Tranche 2 Shares or the Tranche 2
Shares is subject to the satisfaction or waiver by the Purchasers, at or
before the Early Tranche 2 Closing Date or the Tranche 2 Closing Date, as the
case may be, of each of the following conditions:
(i) TRANCHE 1 CLOSING. The Tranche 1 Closing shall have occurred;
(ii) ACCURACY OF THE COMPANY'S REPRESENTATIONS AND WARRANTIES. The
representations and warranties of the Company contained herein shall be true
and correct as of the date when made and as of the Early Tranche 2 Closing
Date or the Tranche 2 Closing Date, as the case may be, as though made on and
as of the Early Tranche 2 Closing Date or the Tranche 2 Closing Date, as the
case may be;
(iii) PERFORMANCE BY THE COMPANY. The Company shall have
performed, satisfied and complied with all covenants, agreements and
conditions required by the Transaction
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Documents to be performed, satisfied or complied with by the Company at or
prior to the Early Tranche 2 Closing Date or the Tranche 2 Closing Date, as
the case may be;
(iv) UNDERLYING SECURITIES REGISTRATION STATEMENT. The Underlying
Securities Registration Statement covering the Tranche 1 Shares, Warrant
Shares and Adjustment Shares issuable in connection with the Tranche 1
Closing shall have been declared effective under the Securities Act by the
Commission for at least twenty-five (25) days and shall have remained
effective at all times, not subject to any actual or threatened stop order or
subject to any actual or threatened suspension at any time prior to the Early
Tranche 2 Closing Date or the Tranche 2 Closing Date, as the case may be;
(v) NO INJUNCTION. No statute, rule, regulation, executive order,
decree, ruling or injunction shall have been enacted, entered, promulgated or
endorsed by any court or governmental authority of competent jurisdiction
which prohibits the consummation of any of the transactions contemplated by
the Transaction Documents, including the issuance of any of the Shares,
Adjustment Shares or exercise of the Warrants;
(vi) ADVERSE CHANGES. Since the Tranche 1 Closing Date, no event
or series of events which reasonably would be expected to have or result in a
Material Adverse Effect shall have occurred.
(vii) MANAGEMENT. Frank G. Housmann, Jr. shall not have left the
Company or suffered a voluntary or involuntary material lessening of
responsibility as Chief Executive Officer of the Company;
(viii) NO SUSPENSIONS OF TRADING IN COMMON STOCK. The trading in
the Common Stock shall not have been suspended by the Commission or on the
NASDAQ (except for any suspension of trading of limited duration solely to
permit dissemination of material information regarding the Company) at any
time since the Tranche 1 Closing Date;
(ix) LISTING OF COMMON STOCK. The Common Stock shall have been
at all times since the Tranche 1 Closing Date listed for trading on the
NASDAQ;
(x) CHANGE OF CONTROL. No Change of Control in the Company
shall have occurred. "CHANGE OF CONTROL" means the occurrence of any of (i)
an acquisition after the date hereof by an individual or legal entity or
"group" (as described in Rule 13d-5(b)(1) promulgated under the Exchange Act)
of in excess of 50% of the voting securities of the Company, (ii) a
replacement of more than one-half of the members of the Company's board of
directors which is not approved by those individuals who are members of the
board of directors on the date hereof in one or a series of related
transactions, (iii) the merger of the Company with or into another entity,
consolidation or sale of all or substantially all of the assets of the
Company in one or a series of related transactions or (iv) the execution by
the Company of an agreement to which the Company is a party or by which it is
bound, providing for any of the events set forth above in (i), (ii) or (iii);
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(xi) LEGAL OPINION. The Company shall have delivered to the
Purchaser the opinion of the Company's outside counsel, in substantially the
form of EXHIBIT C, dated the Early Tranche 2 Closing Date or the Tranche 2
Closing Date, as the case may be;
(xii) REQUIRED APPROVALS. All Required Approvals shall have been
obtained;
(xiii) DELIVERY OF STOCK CERTIFICATE. The Company shall have
delivered to the Purchaser or its Designee the stock certificate(s)
representing the Early Tranche 2 Shares or the Tranche 2 Shares registered in
the name of the Purchaser or its Designee, in form satisfactory to the
Purchasers;
(xiv) PERFORMANCE OF ISSUANCE AND EXERCISE OBLIGATIONS. The
Company shall have (a) delivered Adjustment Shares, as applicable, upon each
Tranche 1 Adjustment Date and otherwise performed its obligations in
accordance with the terms, conditions and timing requirements of this
Agreement and (b) delivered Underlying Shares upon exercise of the Warrants
and otherwise performed its obligations in accordance with the terms of the
Warrants; PROVIDED, HOWEVER that in the event there is an Early Tranche 2
Closing, the Company's obligation to deliver the Second Tranche 1 Adjustment
Shares prior to the Early Tranche 2 Closing Date shall be waived.
(xv) CLOSING THRESHOLDS. For the 20 Business Days immediately
preceding the Early Tranche 2 Closing Date or the Tranche 2 Closing Date, as
the case may be, the average daily trading volume of the Common Stock on
NASDAQ shall be at least 50,000 shares and there shall be no five (5)
consecutive Business Days within such twenty (20) Business Day period where
the average daily volume is less than 30,000 shares per day and the average
of the Per Share Market Values for the ten (10) Business Days immediately
preceding the Early Tranche 2 Closing Date or the Tranche 2 Closing Date, as
the case may be, shall be greater than $7.00; and
(xvi) TRANSFER AGENT INSTRUCTIONS. The Transfer Agent
Instructions, dated the Early Tranche 2 Closing Date or the Tranche 2 Closing
Date, as the case may be, shall have been delivered to and acknowledged in
writing by the Company's transfer agent.
4.2 CONDITIONS PRECEDENT TO THE OBLIGATION OF THE PURCHASERS TO
PURCHASE TRANCHE 3 SHARES. The obligation of the Purchasers to acquire
Tranche 3 Shares is subject to the satisfaction or waiver by the Purchasers,
at or before the Tranche 3 Closing Date of each of the following conditions:
(ii) TRANCHE 2 CLOSING. The Tranche 2 Closing or the Tranche 2
Closing Expiration Date shall have occurred;
(iii) ACCURACY OF THE COMPANY'S REPRESENTATIONS AND WARRANTIES. The
representations and warranties of the Company contained herein shall be true
and correct as of the
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date when made and as of the Tranche 3 Closing Date as though made on and as
of the Tranche 3 Closing Date.
(iv) PERFORMANCE BY THE COMPANY. The Company shall have
performed, satisfied and complied with all covenants, agreements and
conditions required by the Transaction Documents to be performed, satisfied
or complied with by the Company at or prior to the Tranche 3 Closing Date;
(v) UNDERLYING SECURITIES REGISTRATION STATEMENT. The Underlying
Securities Registration Statement covering the Shares, Warrant Shares and
Adjustment Shares issuable in connection with the Tranche 1 Closing and
Tranche 2 Closing shall each have been declared effective under the
Securities Act by the Commission for at least twenty-five (25) days and shall
each have remained effective at all times, not subject to any actual or
threatened stop order or subject to any actual or threatened suspension at
any time prior to the Tranche 3 Closing Date;
(vi) NO INJUNCTION. No statute, rule, regulation, executive
order, decree, ruling or injunction shall have been enacted, entered,
promulgated or endorsed by any court or governmental authority of competent
jurisdiction which prohibits the consummation of any of the transactions
contemplated by the Transaction Documents, including the issuance of any of
the Shares, Adjustment Shares or exercise of the Warrants;
(vii) ADVERSE CHANGES. Since the Tranche 2 Closing Date or the
Tranche 2 Closing Expiration Date, as the case may be, no event or series of
events which reasonably would be expected to have or result in a Material
Adverse Effect shall have occurred;
(viii) MANAGEMENT. Frank G. Housmann, Jr. shall not have left the
Company or suffered a voluntary or involuntary material lessening of
responsibility as Chief Executive Officer of the Company;
(ix) NO SUSPENSIONS OF TRADING IN COMMON STOCK. The trading in
the Common Stock shall not have been suspended by the Commission or on the
NASDAQ (except for any suspension of trading of limited duration solely to
permit dissemination of material information regarding the Company) at any
time since the Tranche 2 Closing Date or the Tranche 2 Closing Expiration
Date, as the case may be;
(x) LISTING OF COMMON STOCK. The Common Stock shall have been
at all times since the Tranche 2 Closing Date or the Tranche 2 Closing
Expiration Date, as the case may be, listed for trading on the NASDAQ;
(xi) CHANGE OF CONTROL. No Change of Control in the Company
shall have occurred.
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(xii) LEGAL OPINION. The Company shall have delivered to the
Purchaser the opinion of the Company's outside counsel, in substantially the
form of EXHIBIT C, dated the Tranche 3 Closing Date;
(xiii) REQUIRED APPROVALS. All Required Approvals shall have been
obtained;
(xiv) DELIVERY OF STOCK CERTIFICATE. The Company shall have
delivered to the Purchaser or its Designee the stock certificate(s)
representing the Tranche 3 Shares registered in the name of the Purchaser or
its Designee, in form satisfactory to the Purchasers;
(xv) PERFORMANCE OF ISSUANCE AND EXERCISE OBLIGATIONS. The
Company shall have (a) delivered Adjustment Shares, as applicable upon each
Tranche 2 Adjustment Date and otherwise performed its obligations in
accordance with the terms, conditions and timing requirements of this
Agreement and (b) delivered Underlying Shares upon exercise of the Warrants
and otherwise performed its obligations in accordance with the terms of the
Warrants;
(xvi) CLOSING THRESHOLD. For the 20 Business Days immediately
preceding the Tranche 3 Closing Date, the average daily trading volume of the
Common Stock on NASDAQ shall be at least 50,000 shares and there shall be no
five (5) consecutive Business Days within such twenty (20) Business Day
period where the average daily volume is less than 30,000 shares per day and
the average of the Per Share Market Values for the ten (10) Business Days
immediately preceding the Tranche 3 Closing Date shall be greater than $7.00;
and
(xvii) TRANSFER AGENT INSTRUCTIONS. The Transfer Agent
Instructions, dated the Tranche 3 Closing Date, shall have been delivered to
and acknowledged in writing by the Company's transfer agent.
ARTICLE V
MISCELLANEOUS
5.1 FEES AND EXPENSES. The Company has paid $30,000 to RAM Capital
Resources, LLP, which amount shall be paid to RSPAB, in connection with the
preparation and negotiation of the Transaction Documents. Other than the
amounts contemplated in the immediately preceding sentence, each party shall
pay the fees and expenses of its advisers, counsel, accountants and other
experts, if any, and all other expenses incurred by such party incident to
the negotiation, preparation, execution, delivery and performance of this
Agreement. The Company shall pay all stamp and other taxes and duties levied
in connection with the issuance of the Securities.
5.2 ENTIRE AGREEMENT; AMENDMENTS. This Agreement, together with the
Exhibits and Schedules hereto, the Registration Rights Agreement and the
Warrants contain the entire understanding of the parties with respect to the
subject matter hereof and supersede all prior agreements and understandings,
oral or written, with respect to such matters.
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5.3 NOTICES. Any and all notices or other communications or deliveries
required or permitted to be provided hereunder shall be in writing and shall
be deemed given and effective on the earliest of (i) the date of
transmission, if such notice or communication is delivered via facsimile at
the facsimile telephone number specified in this Section prior to 6:00 p.m.
(New York City time) on a Business Day, (ii) the Business Day after the date
of transmission, if such notice or communication is delivered via facsimile
at the facsimile telephone number specified in the Purchase Agreement later
than 6:00 p.m. (New York City time) on any date and earlier than 11:59 p.m.
(New York City time) on such date, (iii) the Business Day following the date
of mailing, if sent by nationally recognized overnight courier service, or
(iv) upon actual receipt by the party to whom such notice is required to be
given. The address for such notices and communications shall be as follows:
If to the Company: ThrustMaster, Inc.
7175 N.W. Evergreen Parkway #400
Hillsboro, Oregon 97124-5839
Facsimile: (503) 615-3297
Attention: Frank G. Hausmann, Jr., CEO
With copies to: Perkins Coie LLP
1211 SW Fifth Ave., Suite 1500
Portland, OR 97204
Facsimile: (503) 727-2222
Attention: Patrick Simpson
If to Strong River: Strong River Investments Inc.
c/o Cavallo Capital Corp.
630 Fifth Avenue, Suite 2000
New York, New York 10111
Facsimile: (212) 332-3256
Attention: Avi Vigder
If to Montrose: Montrose Investments, Ltd.
300 Crescent Court, Suite 700
Dallas, TX 75201
Facsimile: (214) 758-1221
Attn: Will Rose
If to Westover: Westover Investments L.P.
300 Crescent Court, Suite 700
Dallas, TX 75201
Facsimile: (214) 758-1221
Attn: Will Rose
With copies to (for all
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communications to each
of the Purchasers): Robinson Silverman Pearce Aronsohn &
Berman LLP
1290 Avenue of the Americas
New York, NY 10104
Facsimile: (212) 541-4630
Attention: Kenneth L. Henderson
or such other address as may be designated in writing hereafter, in the
same manner, by such Person.
5.4 AMENDMENTS; WAIVERS. No provision of this Agreement may be waived
or amended except in a written instrument signed, in the case of an
amendment, by both the Company and the Purchasers, or, in the case of a
waiver, by the party against whom enforcement of any such waiver is sought.
No waiver of any default with respect to any provision, condition or
requirement of this Agreement shall be deemed to be a continuing waiver in
the future or a waiver of any other provision, condition or requirement
hereof, nor shall any delay or omission of either party to exercise any right
hereunder in any manner impair the exercise of any such right accruing to it
thereafter.
5.5 HEADINGS. The headings herein are for convenience only, do not
constitute a part of this Agreement and shall not be deemed to limit or
affect any of the provisions hereof.
5.6 SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon and
inure to the benefit of the parties and their successors and permitted
assigns. The Company may not assign this Agreement or any rights or
obligations hereunder without the prior written consent of the Purchasers.
Except as set forth in Section 3.1(a), the Purchasers may not assign this
Agreement or any of the rights or obligations hereunder or under the
Transaction Documents (other than to a Designee of the respective Purchaser)
without the consent of the Company, except that the Purchasers may assign
their respective rights hereunder and, subject to the terms thereof, under
the Transaction Documents without the consent of the Company as long as such
assignee demonstrates to the reasonable satisfaction of the Company its
satisfaction of the representations and warranties set forth in Section 2.2.
5.7 NO THIRD-PARTY BENEFICIARIES. This Agreement is intended for the
benefit of the parties hereto and their respective successors and permitted
assigns and is not for the benefit of, nor may any provision hereof be
enforced by, any other Person.
5.8 GOVERNING LAW. This Agreement shall be governed by and construed
and enforced in accordance with the internal laws of the State of New York
without regard to the principles of conflicts of law thereof. Each party
hereby irrevocably submits to the non-exclusive jurisdiction of the state and
federal courts sitting in the City of New York, borough of Manhattan, for the
adjudication of any dispute hereunder or in connection herewith or with any
transaction contemplated hereby or discussed herein (including with respect
to the enforcement of the any of
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<PAGE>
the Transaction Documents), and hereby irrevocably waives, and agrees not to
assert in any suit, action or proceeding, any claim that it is not personally
subject to the jurisdiction of any such court, that such suit, action or
proceeding is improper. Each party hereby irrevocably waives personal
service of process and consents to process being served in any such suit,
action or proceeding by mailing a copy thereof to such party at the address
in effect for notices to it under this Agreement and agrees that such service
shall constitute good and sufficient service of process and notice thereof.
Nothing contained herein shall be deemed to limit in any way any right to
serve process in any manner permitted by law.
5.9 SURVIVAL. The representations, warranties, agreements and
covenants contained herein shall survive the Closings and the issuances of
the Adjustment Shares.
5.10 EXECUTION. This Agreement may be executed in two or more
counterparts, all of which when taken together shall be considered one and
the same agreement and shall become effective when counterparts have been
signed by each party and delivered to the other party, it being understood
that both parties need not sign the same counterpart. In the event that any
signature is delivered by facsimile transmission, such signature shall create
a valid and binding obligation of the party executing (or on whose behalf
such signature is executed) the same with the same force and effect as if
such facsimile signature page were an original thereof.
5.11 PUBLICITY. The Company and the Purchasers shall consult with each
other in issuing any press releases or otherwise making public statements or
filings and other communications with the Commission or any regulatory
agency or stock market or trading facility with respect to the transactions
contemplated hereby and neither party shall issue any such press release or
otherwise make any such public statement, filings or other communications
without the prior written consent of the other, which consent shall not be
unreasonably withheld or delayed, except that no prior consent shall be
required if such disclosure is required by law, in which such case the
disclosing party shall provide the other party with prior notice of such
public statement, filing or other communication. Notwithstanding the
foregoing, the Company shall not publicly disclose the name of any of the
Purchasers, or include the name of any of the Purchasers in any filing with
the Commission, or any regulatory agency, trading facility or stock market
without the prior written consent of the respective Purchaser, except to the
extent such disclosure (but not any disclosure as to the controlling Persons
thereof) is required by law or by applicable rules, bylaws or policies of the
NASDAQ, in which case the Company shall provide the respective Purchaser with
prior notice of such disclosure.
5.12 SEVERABILITY. In case any one or more of the provisions of this
Agreement shall be invalid or unenforceable in any respect, the validity and
enforceability of the remaining terms and provisions of this Agreement shall
not in any way be affecting or impaired thereby and the parties will attempt
to agree upon a valid and enforceable provision which shall be a reasonable
substitute therefor, and upon so agreeing, shall incorporate such substitute
provision in this Agreement.
5.13 REMEDIES. In addition to being entitled to exercise all rights
provided herein or granted by law, including recovery of damages, the
Purchasers will be entitled to specific
29
<PAGE>
performance of the obligations of the Company under the Transaction
Documents. Each of the Company and the Purchasers agree that monetary
damages may not be adequate compensation for any loss incurred by reason of
any breach of its obligations described in the foregoing sentence and hereby
agrees to waive in any action for specific performance of any such obligation
the defense that a remedy at law would be adequate.
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SIGNATURE PAGE FOLLOWS]
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Securities
Purchase Agreement to be duly executed by their respective authorized
signatories as of the date first indicated above.
COMPANY:
THRUSTMASTER, INC.
By:
----------------------------------
Name:
Title:
PURCHASERS:
STRONG RIVER INVESTMENTS, INC.
By:
----------------------------------
Name:
Title:
WESTOVER INVESTMENTS L.P.
By:
----------------------------------
Name:
Title:
MONTROSE INVESTMENTS L.P.
By:
----------------------------------
Name:
Title:
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<PAGE>
EXHIBIT 4.6
EXHIBIT D-1
NEITHER THESE SECURITIES NOR THE SECURITIES INTO WHICH THESE SECURITIES
ARE EXERCISABLE HAVE BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE
COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN
EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT
PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR
PURSUANT TO AN AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS
THEREUNDER AND IN COMPLIANCE WITH APPLICABLE STATE SECURITIES OR BLUE SKY
LAWS.
THRUSTMASTER, INC.
CALLABLE WARRANT
Dated: January 28, 1999
ThrustMaster, Inc., an Oregon corporation (the "Company"), hereby
certifies that, for value received, [____________], or its registered assigns
("Holder"), is entitled, subject to the terms set forth below, to purchase
from the Company up to a total of [ ](1)shares of Common Stock, no par
value (the "Common Stock"), of the Company (each such share, a "Warrant
Share" and all such shares, the "Warrant Shares") at an exercise price equal
to [$ ](2) (as adjusted from
- -------------------------
(1) This Warrant and Warrant D-2 shall be for the purchase of an
aggregate amount of shares of Common Stock equal to 6.25% of (A) $12,000,000,
divided by (B) 132.5% times the closing bid price of the Common Stock on the
Tranche 1 Closing Date.
(2) The Exercise Price for this Warrant shall be equal to 125% of the
closing bid price of the Common Stock on the Tranche 1 Closing Date and the
Exercise Price for Warrant D-2 shall be equal to 140% of the closing bid
price of the Common Stock on the Tranche 1 Closing Date.
1
<PAGE>
time to time pursuant to the terms hereunder, the "Exercise Price"), at any
time and from time to time from and after the date hereof and through and
including January [ ], 2004 (the "Expiration Date"), and subject to the
following terms and conditions:
1. REGISTRATION OF WARRANT. The Company shall register this
Warrant, upon records to be maintained by the Company for that purpose (the
"Warrant Register"), in the name of the record Holder hereof from time to
time. The Company may deem and treat the registered Holder of this Warrant as
the absolute owner hereof for the purpose of any exercise hereof or any
distribution to the Holder, and for all other purposes, and the Company shall
not be affected by notice to the contrary.
2. REGISTRATION OF TRANSFERS AND EXCHANGES.
(a) This is one of the Warrants as defined and issued
pursuant to that certain Securities Purchase Agreement dated as of January
[____], 1999 (the "Purchase Agreement") among the Company, Strong River
Investments, Inc. ("Strong River"), Westover Investments L.P. ("Westover")
and Montrose Investments L.P. ("Montrose"). Neither this Warrant nor any
interest herein may be transferred except in compliance with the provisions
of Section 3.1 of the Purchase Agreement and the provisions hereof. The
Company shall register the transfer of any portion of this Warrant in the
Warrant Register, upon surrender of this Warrant, with the Form of Assignment
attached hereto duly completed and signed, to the Transfer Agent or to the
Company at the office specified in or pursuant to Section 3(b). Upon any
such registration or transfer, a new warrant to purchase Common Stock, in
substantially the form of this Warrant (any such new warrant, a "New
Warrant"), evidencing the portion of this Warrant so transferred shall be
issued to the transferee and a New Warrant evidencing the remaining portion
of this Warrant not so transferred, if any, shall be issued to the
transferring Holder. The acceptance of the New Warrant by the transferee
thereof shall be deemed the acceptance of such transferee of all of the
rights and obligations of a holder of a Warrant.
(b) This Warrant is exchangeable, upon the surrender hereof
by the Holder to the office of the Company specified in or pursuant to
Section 3(b) for one or more New Warrants, evidencing in the aggregate the
right to purchase the number of Warrant Shares which may then be purchased
hereunder. Any such New Warrant will be dated the date of such exchange.
3. DURATION, EXERCISE AND REDEMPTION OF WARRANTS.
(a) Subject to the terms and conditions of this Warrant, this
Warrant shall be exercisable by the registered Holder on any business day
before 5:30 P.M., New York City time, at any time and from time to time on or
after the date hereof to and including the Expiration Date. At 5:30 P.M.,
New York City time on the Expiration Date, the portion of this Warrant not
exercised prior thereto shall be and become void and of no value.
2
<PAGE>
(b) Subject to Sections 2(b), 6, 10 and 11, upon surrender of
this Warrant, with the Form of Election to Purchase attached hereto duly
completed and signed, to the Company at its address for notice set forth in
Section 12 and upon payment of the Exercise Price multiplied by the number
of Warrant Shares that the Holder intends to purchase hereunder, in the
manner provided hereunder, all as specified by the Holder in the Form of
Election to Purchase, the Company shall promptly (but in no event later than
5 business days after the Date of Exercise (as defined herein)) issue or
cause to be issued and cause to be delivered to or upon the written order of
the Holder and in such name or names as the Holder may designate, a
certificate for the Warrant Shares issuable upon such exercise, free of
restrictive legends if such legend is not required under applicable
requirements of the Securities Act of 1933, as amended (the "Securities Act")
and other applicable securities laws. Any person so designated by the Holder
to receive Warrant Shares shall be deemed to have become holder of record of
such Warrant Shares as of the Date of Exercise of this Warrant.
A "Date of Exercise" means the date on which the Company shall
have received (i) this Warrant (or any New Warrant, as applicable), with the
Form of Election to Purchase attached hereto (or attached to such New
Warrant) appropriately completed and duly signed, and (ii) payment of the
Exercise Price for the number of Warrant Shares so indicated by the holder
hereof to be purchased.
(c) This Warrant shall be exercisable, either in its entirety
or, from time to time, for a portion of the number of Warrant Shares. If
less than all of the Warrant Shares which may be purchased under this Warrant
are exercised at any time, the Company shall issue or cause to be issued, at
its expense, a New Warrant evidencing the right to purchase the remaining
number of Warrant Shares for which no exercise has been evidenced by this
Warrant.
(d) Commencing on August 1, 2000 (the "Trigger Date"), if (i)
the average closing bid price of the Common Stock on the Nasdaq National
Market (or such other national securities exchange on which the Common Stock
is then listed or quoted) for any ten (10) consecutive trading day period
equals or exceeds 130% of the Exercise Price (a "Trigger Period"), and (ii)
the Warrant Shares are registered for resale pursuant to an effective
registration statement naming the Holder as a selling stockholder thereunder,
then the Company shall have the right, upon 30 days' notice to the Holder
given at any time after the Trigger Date but not later than twenty (20) days
after the conclusion of any such Trigger Period (the "Redemption Notice"), to
redeem this Warrant or any portion thereof at a price of $.01 per Warrant
Share (the "Redemption Price"), on the date set forth in the Redemption
Notice, but in no event earlier than 30 days following the date of the
Redemption Notice (the "Redemption Date"). The Holder may exercise this
Warrant at any time prior to the Redemption Date. Any portion of this
Warrant not exercised by 5:00 p.m. (New York City time) on the Redemption
Date shall no longer be exercisable and shall be returned to the Company, and
the Company, upon its receipt of the unexercised portion of this Warrant,
shall issue therefor in full and complete satisfaction of its obligations
under such remaining portion of this Warrant to the Holder an amount equal to
the number of shares of Common Stock then issuable hereunder multiplied by
the Redemption Price.
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<PAGE>
The Redemption Price shall be mailed to such Holder at its address of record,
and the Warrant shall be canceled.
4. PIGGYBACK REGISTRATION RIGHTS. During the term of this
Warrant, at any time when there is not an effective registration statement
covering the resale of the Warrant Shares and naming the Holder as a selling
stockholder thereunder, the Holder shall be entitled to the Piggyback
registration rights afforded to a holder pursuant to Section 6(d) of that
certain Registration Rights Agreement among the Company, Strong River,
Westover and Montrose dated as of January [___], 1999.
5. [INTENTIONALLY OMITTED]
6. PAYMENT OF TAXES. The Company will pay all documentary stamp
taxes attributable to the issuance of Warrant Shares upon the exercise of
this Warrant; provided, however, that the Company shall not be required to
pay any tax or other charge which may be payable in respect of any transfer
of any certificates for Warrant Shares or Warrants in a name other than that
of the Holder, and the Company shall not be required to issue or cause to be
issued or deliver or cause to be delivered the certificates for Warrant
Shares unless or until the person or persons requesting the issuance thereof
shall have paid to the Company the amount of such tax or other charge or
shall have established to the satisfaction of the Company that such tax or
other charge has been paid. The Holder shall be responsible for all other tax
liability that may arise as a result of holding or transferring this Warrant
or receiving Warrant Shares upon exercise hereof.
7. REPLACEMENT OF WARRANT. If this Warrant is mutilated, lost,
stolen or destroyed, the Company shall issue or cause to be issued in
exchange and substitution for and upon cancellation hereof, or in lieu of and
substitution for this Warrant, a New Warrant, but only upon receipt of
evidence reasonably satisfactory to the Company of such loss, theft or
destruction and indemnity, if requested, satisfactory to it. Applicants for
a New Warrant under such circumstances shall also comply with such other
reasonable regulations and procedures and pay such other reasonable charges
as the Company may prescribe.
8. RESERVATION OF WARRANT SHARES. The Company covenants that it
will at all times reserve and keep available out of the aggregate of its
authorized but unissued Common Stock, solely for the purpose of enabling it
to issue Warrant Shares upon exercise of this Warrant as herein provided, the
number of Warrant Shares which are then issuable and deliverable upon the
exercise of this entire Warrant, free from preemptive rights or any other
actual contingent purchase rights of persons other than the Holder (taking
into account the adjustments and restrictions of Section 9) created by the
Company. The Company covenants that all Warrant Shares that shall be so
issuable and deliverable shall, upon issuance and the payment of the
applicable Exercise Price in accordance with the terms hereof, be duly and
validly authorized, issued and fully paid and nonassessable.
4
<PAGE>
9. CERTAIN ADJUSTMENTS. The Exercise Price and number of Warrant
Shares issuable upon exercise of this Warrant are subject to adjustment from
time to time as set forth in this Section 9. Upon each such adjustment of
the Exercise Price pursuant to this Section 9, the Holder shall thereafter
prior to the Expiration Date be entitled to purchase, at the Exercise Price
resulting from such adjustment, the number of Warrant Shares obtained by
multiplying the Exercise Price in effect immediately prior to such adjustment
by the number of Warrant Shares issuable upon exercise of this Warrant
immediately prior to such adjustment and dividing the product thereof by the
Exercise Price resulting from such adjustment.
(a) If the Company, at any time while this Warrant is
outstanding, (i) shall pay a stock dividend or otherwise make a distribution
or distributions on shares of its Common Stock or on any other class of
capital stock payable in shares of Common Stock, (ii) subdivide outstanding
shares of Common Stock into a larger number of shares, or (iii) combine
outstanding shares of Common Stock into a smaller number of shares, the
Exercise Price shall be multiplied by a fraction of which the numerator shall
be the number of shares of Common Stock outstanding before such event and of
which the denominator shall be the number of shares of Common Stock
outstanding after such event. Any adjustment made pursuant to this Section
shall become effective immediately after the record date for the
determination of stockholders entitled to receive such dividend or
distribution and shall become effective immediately after the effective date
in the case of a subdivision or combination, and shall apply to successive
subdivisions and combinations.
(b) In case of any reclassification of the Common Stock, any
consolidation or merger of the Company with or into another person, the sale
or transfer of all or substantially all of the assets of the Company or any
compulsory share exchange pursuant to which the Common Stock is converted
into other securities, cash or property, then the Holder shall have the right
thereafter to exercise this Warrant (at the aggregate Exercise Price in
effect for all shares of Common Stock issuable upon such exercise immediately
prior to such consummation as adjusted to the time of such transaction) only
into the shares of stock and other securities and property receivable upon or
deemed to be held by holders of Common Stock following such reclassification,
consolidation, merger, sale, transfer or share exchange, and the Holder shall
be entitled upon such event to receive such amount of securities or property
equal to the amount of Warrant Shares such Holder would have been entitled to
had such Holder exercised this Warrant immediately prior to such
reclassification, consolidation, merger, sale, transfer or share exchange.
The terms of any such consolidation, merger, sale, transfer or share exchange
shall include such terms so as to continue to give to the Holder the right to
receive the securities or property set forth in this Section 9(b) upon any
exercise following any such reclassification, consolidation, merger, sale,
transfer or share exchange.
(c) If the Company, at any time while this Warrant is
outstanding, shall distribute to all holders of Common Stock (and not to
holders of this Warrant) evidences of its indebtedness or assets or rights or
warrants to subscribe for or purchase any security (excluding those referred
to in Sections 9(a) and (b), then in each such case the Exercise Price shall
be determined by multiplying the Exercise Price in effect immediately prior
to the record date fixed
5
<PAGE>
for determination of stockholders entitled to receive such distribution by a
fraction of which the denominator shall be the Exercise Price determined as
of the record date mentioned above, and of which the numerator shall be such
Exercise Price on such record date less the then fair market value at such
record date of the portion of such assets or evidence of indebtedness so
distributed applicable to one outstanding share of Common Stock as determined
by the Company's independent certified public accountants that regularly
examines the financial statements of the Company (an "Appraiser").
(d) For the purposes of this Section 9, in case the Company
shall take a record of the holders of its Common Stock for the purpose of
entitling them (A) to receive a dividend or other distribution payable in
Common Stock or in securities convertible or exchangeable into shares of
Common Stock, or (B) to subscribe for or purchase Common Stock or securities
convertible or exchangeable into shares of Common Stock, then such record
date shall be deemed to be the date of the issue or sale of the shares of
Common Stock deemed to have been issued or sold upon the declaration of such
dividend or the making of such other distribution or the date of the granting
of such right of subscription or purchase, as the case may be.
(e) All calculations under this Section 9 shall be made to
the nearest cent or the nearest 1/100th of a share, as the case may be.
(f) Whenever the Exercise Price is adjusted pursuant to
Section 9(c) above, the Holder, after receipt of the determination by the
Appraiser, shall have the right to select an additional appraiser (which
shall be a nationally recognized accounting firm), in which case the
adjustment shall be equal to the average of the adjustments recommended by
each of the Appraiser and such appraiser. The Holder shall promptly mail or
cause to be mailed to the Company, a notice setting forth the Exercise Price
after such adjustment and setting forth a brief statement of the facts
requiring such adjustment. Such adjustment shall become effective
immediately after the record date mentioned above. The Holder shall pay the
expenses of such second appraiser.
(g) If:
(i) the Company shall declare a dividend (or any
other distribution) on its Common Stock; or
(ii) the Company shall declare a special
nonrecurring cash dividend on or a redemption
of its Common Stock; or
(iii) the Company shall authorize the granting to all
holders of the Common Stock rights or warrants
to subscribe for or purchase any shares of
capital stock of any class or of any rights; or
6
<PAGE>
(iv) the approval of any stockholders of the Company
shall be required in connection with any
reclassification of the Common Stock of the
Company, any consolidation or merger to which
the Company is a party, any sale or transfer of
all or substantially all of the assets of the
Company, or any compulsory share exchange
whereby the Common Stock is converted into
other securities, cash or property; or
(v) the Company shall authorize the voluntary
dissolution, liquidation or winding up of the
affairs of the Company,
then the Company shall cause to be mailed to the Holder at its last
address as it shall appear upon the Warrant Register, at least 20 calendar
days prior to the applicable record or effective date hereinafter specified,
a notice stating (x) the date on which a record is to be taken for the
purpose of such dividend, distribution, redemption, rights or warrants, or if
a record is not to be taken, the date as of which the holders of Common Stock
of record to be entitled to such dividend, distributions, redemption, rights
or warrants are to be determined or (y) the date on which such
reclassification, consolidation, merger, sale, transfer or share exchange is
expected to become effective or close, and the date as of which it is
expected that holders of Common Stock of record shall be entitled to exchange
their shares of Common Stock for securities, cash or other property
deliverable upon such reclassification, consolidation, merger, sale,
transfer, share exchange, dissolution, liquidation or winding up; PROVIDED,
HOWEVER, that the failure to mail such notice or any defect therein or in the
mailing thereof shall not affect the validity of the corporate action
required to be specified in such notice.
10. PAYMENT OF EXERCISE PRICE. The Holder may pay the Exercise
Price in one of the following manners:
(a) CASH EXERCISE. The Holder shall deliver immediately
available funds; or
(b) CASHLESS EXERCISE. The Holder shall surrender this
Warrant to the Company together with a notice of cashless exercise, in which
event the Company shall issue to the Holder the number of Warrant Shares
determined as follows:
X = Y (A-B)/A
where:
X = the number of Warrant Shares to be issued to the Holder.
Y = the number of Warrant Shares with respect to which this
Warrant is being exercised.
7
<PAGE>
A = the average of the closing sale prices of the Common
Stock on the Nasdaq National Market for the five (5) trading
days immediately prior to (but not including) the Date of
Exercise as reported by Bloomberg Information Systems, Inc.
(or any successor to its function of reporting stock
prices).
B = the Exercise Price.
For purposes of Rule 144 promulgated under the Securities Act, it is
intended, understood and acknowledged that the Warrant Shares issued in a
cashless exercise transaction shall be deemed to have been acquired by the
Holder, and the holding period for the Warrant Shares shall be deemed to have
been commenced, on the issue date.
11. FRACTIONAL SHARES. The Company shall not be required to issue
or cause to be issued fractional Warrant Shares on the exercise of this
Warrant. The number of full Warrant Shares which shall be issuable upon the
exercise of this Warrant shall be computed on the basis of the aggregate
number of Warrant Shares purchasable on exercise of this Warrant so
presented. If any fraction of a Warrant Share would, except for the
provisions of this Section 11, be issuable on the exercise of this Warrant,
the Company shall pay an amount in cash equal to the Exercise Price
multiplied by such fraction.
12. NOTICES. Any and all notices or other communications or
deliveries hereunder shall be in writing and shall be deemed given and
effective on the earliest of (i) the date of transmission, if such notice or
communication is delivered via facsimile at the facsimile telephone number
specified in this Section prior to 6:00 p.m. (New York time) on a business
day, (ii) the business day after the date of transmission, if such notice or
communication is delivered via facsimile at the facsimile telephone number
specified in this Section later than 6:00 p.m. (New York time) on any date
and earlier than 11:59 p.m. (New York time) on such date, (iii) the business
day following the date of mailing, if sent by nationally recognized overnight
courier service, or (iv) upon actual receipt by the party to whom such notice
is required to be given. The addresses for such communications shall be:
(i) if to the Company, to 7175 NW Evergreen Parkway #400, Hillsboro, Oregon,
facsimile number (503) 615-3297, attention Chief Executive Officer, or (ii)
if to the Holder, to the Holder at the address or facsimile number appearing
on the Warrant Register or such other address or facsimile number as the
Holder may provide to the Company in accordance with this Section 12.
13. WARRANT AGENT.
(a) The Company shall serve as warrant agent under this
Warrant. Upon thirty (30) days' notice to the Holder, the Company may appoint
a new warrant agent.
(b) Any corporation into which the Company or any new warrant
agent may be merged or any corporation resulting from any consolidation to
which the Company or any
8
<PAGE>
new warrant agent shall be a party or any corporation to which the Company or
any new warrant agent transfers substantially all of its corporate trust or
shareholders services business shall be a successor warrant agent under this
Warrant without any further act. Any such successor warrant agent shall
promptly cause notice of its succession as warrant agent to be mailed (by
first class mail, postage prepaid) to the Holder at the Holder's last address
as shown on the Warrant Register.
14. MISCELLANEOUS.
(a) This Warrant shall be binding on and inure to the benefit
of the parties hereto and their respective successors and permitted assigns.
This Warrant may be amended only in writing signed by the Company and the
Holder and their successors and assigns.
(b) Subject to Section 14(a), above, nothing in this Warrant
shall be construed to give to any person or corporation other than the
Company and the Holder any legal or equitable right, remedy or cause under
this Warrant. This Warrant shall inure to the sole and exclusive benefit of
the Company and the Holder.
(c) This Warrant shall be governed by and construed and
enforced in accordance with the internal laws of the State of New York
without regard to the principles of conflicts of law thereof.
(d) The headings herein are for convenience only, do not
constitute a part of this Warrant and shall not be deemed to limit or affect
any of the provisions hereof.
(e) In case any one or more of the provisions of this Warrant
shall be invalid or unenforceable in any respect, the validity and
enforceability of the remaining terms and provisions of this Warrant shall
not in any way be affected or impaired thereby and the parties will attempt
in good faith to agree upon a valid and enforceable provision which shall be
a commercially reasonable substitute therefor, and upon so agreeing, shall
incorporate such substitute provision in this Warrant.
(f) This Warrant shall terminate and be of no further force
and effect on the earlier of 5:00 p.m. (New York time) on the Expiration Date
or the date on which the Warrant has been exercised in full, except that the
provisions of Sections 6 and 8 shall maintain in full force and effect after
such termination date.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK,
SIGNATURE PAGE FOLLOWS]
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IN WITNESS WHEREOF, the Company has caused this Warrant to be duly
executed by its authorized officer as of the date first indicated above.
THRUSTMASTER, INC.
By:
----------------------------------
Name:
--------------------------------
Title:
-------------------------------
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FORM OF ELECTION TO PURCHASE
(To be executed by the Holder to exercise the right to purchase shares
of Common Stock under the foregoing Warrant)
To ThrustMaster, Inc.:
In accordance with the Warrant enclosed with this Form of Election to
Purchase, the undersigned hereby irrevocably elects to purchase
_____________ shares of Common Stock ("Common Stock"), no par value, of
ThrustMaster, Inc. and , if such Holder is not utilizing the cashless
exercise provisions set forth in this Warrant, encloses herewith $________ in
cash, certified or official bank check or checks, which sum represents the
aggregate Exercise Price (as defined in the Warrant) for the number of shares
of Common Stock to which this Form of Election to Purchase relates, together
with any applicable taxes payable by the undersigned pursuant to the Warrant.
[The undersigned elects that this Warrant be exercised in accordance with
Section 10(b) thereof.]
The undersigned requests that certificates for the shares of Common
Stock issuable upon this exercise be issued in the name of
PLEASE INSERT SOCIAL SECURITY
OR
TAX IDENTIFICATION NUMBER
-------------------------------------
------------------------------------------------------------------------
(Please print name and address)
If the number of shares of Common Stock issuable upon this exercise
shall not be all of the shares of Common Stock which the undersigned is
entitled to purchase in accordance with the enclosed Warrant, the undersigned
requests that a New Warrant (as defined in the Warrant) evidencing the right
to purchase the shares of Common Stock not issuable pursuant to the exercise
evidenced hereby be issued in the name of and delivered to:
------------------------------------------------------------------------
(Please print name and address)
------------------------------------------------------------------------
Dated: , Name of Holder:
-------------- ----
(Print)
-----------------------------------
(By:)
-------------------------------------
(Name:)
(Title:)
(Signature must conform in all respects
to name of holder as specified on the face of
the Warrant)
<PAGE>
FORM OF ASSIGNMENT
[To be completed and signed only upon transfer of Warrant]
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers
unto ________________________________ the right represented by the within
Warrant to purchase ____________ shares of Common Stock of ThrustMaster,
Inc. to which the within Warrant relates and appoints ________________
attorney to transfer said right on the books of ThrustMaster, Inc. with full
power of substitution in the premises. The undersigned hereby certifies that
it has fully complied with Section 2 of the Warrant and Section 3.1 of the
Purchase Agreement with respect to this transfer and assignment.
Dated:
,
--------------- ----
---------------------------------------------
(Signature must conform in all respects to
name of holder as specified on the face of the
Warrant)
---------------------------------------------
Address of Transferee
---------------------------------------------
---------------------------------------------
In the presence of:
- --------------------------------
<PAGE>
EXHIBIT 4.7
REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement (this "AGREEMENT") is made and
entered into as of January 28, 1999, among ThrustMaster, Inc., an Oregon
corporation (the "COMPANY"), Strong River Investment Inc. ("STRONG RIVER"),
a corporation organized under the laws of the British Virgin Islands,
Westover Investments L.P. ("WESTOVER"), a Delaware limited partnership, and
Montrose Investments L.P. ("MONTROSE"), a Cayman Islands exempt limited
partnership. Strong River, Westover and Montrose are each referred to herein
as a "PURCHASER" and are collectively referred to herein as the "PURCHASERS".
This Agreement is made pursuant to the Common Stock Purchase Agreement,
dated as of the date hereof, among the Company and the Purchasers (the
"PURCHASE AGREEMENT").
The Company and the Purchasers hereby agree as follows:
1. DEFINITIONS
Capitalized terms used and not otherwise defined herein that are
defined in the Purchase Agreement shall have the meanings given such terms in
the Purchase Agreement. As used in this Agreement, the following terms shall
have the following meanings:
"ADVICE" shall have meaning set forth in Section 3(o).
"AFFILIATE" means, with respect to any Person, any other Person
that directly or indirectly controls or is controlled by or under common
control with such Person. For the purposes of this definition, "CONTROL,"
when used with respect to any Person, means the possession, direct or
indirect, of the power to direct or cause the direction of the management and
policies of such Person, whether through the ownership of voting securities,
by contract or otherwise; and the terms of "AFFILIATED," "CONTROLLING" and
"CONTROLLED" have meanings correlative to the foregoing.
"BUSINESS DAY" means any day except Saturday, Sunday and any day
which shall be a legal holiday or a day on which banking institutions in the
state of New York or Oregon generally are authorized or required by law or
other government actions to close.
"COMMISSION" means the Securities and Exchange Commission.
"COMMON STOCK" means the Company's common stock, no par value.
"EFFECTIVENESS DATE" means (i) with respect to the Registration
Statement to be filed with respect to the Tranche 1 Shares, the First Tranche
1 Warrant Shares, the Second
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Tranche 1 Warrant Shares, the First Tranche 1 Adjustment Shares and the
Second Tranche 1 Adjustment Shares, the 90th day following the Tranche 1
Closing Date, (ii) with respect to the Registration Statement to be filed
with respect to the Tranche 2 Shares, the First Tranche 2 Adjustment Shares
and the Second Tranche 2 Adjustment Shares, the 90th day following the
Tranche 2 Closing Date and (iii) with respect to the Registration Statement
to be filed with respect to the Tranche 3 Shares, the First Tranche 3 Warrant
Shares, the Second Tranche 3 Warrant Shares, the First Tranche 3 Adjustment
Shares and the Second Tranche 3 Adjustment Shares, the 90th day following the
Tranche 3 Closing Date.
"EFFECTIVENESS PERIOD" shall have the meaning set forth in Section
2(a).
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended.
"FILING DATE" means (i) with respect to the Registration Statement
to be filed with respect to the Tranche 1 Shares, the First Tranche 1 Warrant
Shares, the Second Tranche 1 Warrant Shares, the First Tranche 1 Adjustment
Shares and the Second Tranche 1 Adjustment Shares, the 35th day following the
Tranche 1 Closing Date, (ii) with respect to the Registration Statement to be
filed with respect to the Tranche 2 Shares, the First Tranche 2 Adjustment
Shares and the Second Tranche 2 Adjustment Shares, the 35th day following the
Tranche 2 Closing Date and (iii) with respect to the Registration Statement
to be filed with respect to the Tranche 3 Shares, the First Tranche 3 Warrant
Shares, the Second Tranche 3 Warrant Shares, the First Tranche 3 Adjustment
Shares and the Second Tranche 3 Adjustment Shares, the 35th day following the
Tranche 3 Closing Date.
"HOLDER" or "HOLDERS" means the holder or holders, as the case may
be, from time to time of Registrable Securities.
"INDEMNIFIED PARTY" shall have the meaning set forth in Section
5(c).
"INDEMNIFYING PARTY" shall have the meaning set forth in Section
5(c).
"LOSSES" shall have the meaning set forth in Section 5(a).
"MAXIMUM PURCHASE PRICE" shall have the meaning set forth in
Section 2(d).
"PER SHARE MARKET VALUE" means on any particular date (a) the
closing bid price per share of the Common Stock on such date on the Nasdaq
National Market or on any other stock market or trading facility on which the
shares of Common Stock are primarily traded, listed or quoted (each a
"SUBSEQUENT MARKET"), or if there is no such price on such date, then the
closing bid price on the Nasdaq National Market or on such Subsequent Market
on the date nearest preceding such date, or (b) if the Common Stock is not
then listed or quoted on the Nasdaq National Market or a Subsequent Market,
the closing bid price for a share of Common Stock in the over-the-counter
market, as reported by the National Quotation Bureau Incorporated or
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<PAGE>
similar organization or agency succeeding to its functions of reporting
prices) at the close of business on such date, or (c) if the Common Stock is
not then reported by the National Quotation Bureau Incorporated (or similar
organization or agency succeeding to its functions of reporting prices), then
the average of the "Pink Sheet" quotes for the relevant conversion period, as
determined in good faith by the Holder, or (d) if the Common Stock is not
then publicly traded the fair market value of a share of Common Stock as
determined by an appraiser selected in good faith by the Holders of a
majority of the applicable Registrable Securities.
"PERSON" means an individual or a corporation, partnership, trust,
incorporated or unincorporated association, joint venture, limited liability
company, joint stock company, government (or an agency or political
subdivision thereof) or other entity of any kind.
"PROCEEDING" means an action, claim, suit, investigation or
proceeding (including, without limitation, an investigation or partial
proceeding, such as a deposition), whether commenced or threatened.
"PROSPECTUS" means the prospectus included a Registration Statement
(including, without limitation, a prospectus that includes any information
previously omitted from a prospectus filed as part of an effective
registration statement in reliance upon Rule 430A promulgated under the
Securities Act), 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 such Registration Statement, and all other amendments
and supplements to the Prospectus, including post-effective amendments, and
all material incorporated by reference or deemed to be incorporated by
reference in such Prospectus.
"REGISTRATION DELAY PAYMENTS" shall have the meaning set forth in
Section 2(d).
"REGISTRABLE SECURITIES" means (a) with respect to the Registration
Statement to be filed after the Tranche 1 Closing, (i) the Tranche 1 Shares,
(ii) the shares of Common Stock issuable upon exercise of the First Tranche 1
Warrants and the Second Tranche 1 Warrants and (iii) the First Tranche 1
Adjustment Shares and the Second Tranche 1 Adjustment Shares, (b) with
respect to the Registration Statement to be filed after the Tranche 2
Closing, if applicable, (i) the Tranche 2 Shares and (ii) the First Tranche 2
Adjustment Shares and the Second Tranche 2 Adjustment Shares and (c) with
respect to the Registration Statement to be filed after the Tranche 3
Closing, if applicable, (i) the Tranche 3 Shares, (ii) the shares of Common
Stock issuable upon exercise of the First Tranche 3 Warrants and the Second
Tranche 3 Warrants and (iii) the First Tranche 3 Adjustment Shares and the
Second Tranche 3 Adjustment Shares; PROVIDED, HOWEVER that in order to
account for the fact that the number of Adjustment Shares that are issuable
pursuant to the Purchase Agreement is determined in part upon the Per Share
Market Value of the Common Stock at the time of issuance, Registrable
Securities, shall include (but not be limited to), in the case of each of (1)
(a)(iii) above, such number of Adjustment Shares which may be issued to the
Purchasers pursuant to the Purchase Agreement on the First Tranche 1
Adjustment Date and the Second Tranche 1 Adjustment Date, respectively,
assuming, for the purposes of this definition, that the First Tranche 1
Adjustment Price and the Second Tranche 1 Adjustment Price
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<PAGE>
is 50% of the Per Share Market Value on the trading day immediately preceding
the Tranche 1 Closing Date, (2) (b)(ii) above, such number of Adjustment
Shares which may be issued to the Purchasers pursuant to the Purchase
Agreement on the First Tranche 2 Adjustment Date and the Second Tranche 2
Adjustment Date, respectively, assuming, for the purposes of this definition,
that the First Tranche 2 Adjustment Price and the Second Tranche 2 Adjustment
Price is 50% of the Per Share Market Value on the trading day immediately
preceding the Tranche 2 Closing Date and (3) (c)(iii) above, such number of
Adjustment Shares which may be issued to the Purchasers pursuant to the
Purchase Agreement on the First Tranche 3 Adjustment Date and the Second
Tranche 3 Adjustment Date, respectively, assuming, for the purposes of this
definition, that the First Tranche 3 Adjustment Price and the Second Tranche
3 Adjustment Date is 50% of the Per Share Market Value on the trading day
immediately preceding the Tranche 3 Closing Date. The Company shall be
required to file additional Registration Statements to the extent the sum of
the shares of Common Stock issuable as Adjustment Shares in connection with
the Tranche 1 Closing, the Tranche 2 Closing or the Tranche 3 Closing, as
applicable, exceeds the number of shares initially registered in accordance
with the proviso in the immediatel prior sentence. The Company shall have
twenty-five (25) days to file such additional Registration Statements after
notice of the requirement thereof, which the Holders may give at such time
when the number of shares of Common Stock referenced in the preceding
sentence exceeds 85% of the number of shares of Common Stock then registered
in a Registration Statement hereunder. Notwithstanding the foregoing, shares
of Common Stock shall no longer be treated as Registrable Securities when (x)
a registration statement covering such Registrable Securities has been
declared effective and such Registrable Securities have been disposed of
pursuant to such effective registration statement, (y) such Registrable
Securities are sold or otherwise transferred by a person or entity in a
transaction in which the rights under this Agreement are not assigned in
accordance with Section 6(h) or (z) the Holder of such Registrable Securities
is able to dispose of all Registrable Securities held by such Holder in one
three-month period pursuant to Rule 144(k) (or any similar provision then in
force) under the Securities Act without registration under the Securities Act.
"REGISTRATION STATEMENTS" means the registration statements and any
additional registration statements contemplated by Section 2(a), including
(in each case) the Prospectus, amendments and supplements to such
registration statements or Prospectus, including pre- and post-effective
amendments, all exhibits thereto, and all material incorporated by reference
or deemed to be incorporated by reference in such registration statements.
"RULE 144" means Rule 144 promulgated by the Commission pursuant to
the Securities Act, as such Rule may be amended from time to time, or any
similar rule or regulation hereafter adopted by the Commission having
substantially the same effect as such Rule.
"RULE 415" means Rule 415 promulgated by the Commission pursuant to
the Securities Act, as such Rule may be amended from time to time, or any
similar rule or regulation hereafter adopted by the Commission having
substantially the same effect as such Rule.
"SECURITIES ACT" means the Securities Act of 1933, as amended.
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<PAGE>
"SHARES" means the shares of Common Stock issued to and/or to be
issued to the Purchaser on the Tranche 1 Closing Date, the Tranche 2 Closing
Date and the Tranche 3 Closing Date, pursuant to the Purchase Agreement.
"SPECIAL COUNSEL" means one special counsel to all Holders of
Registrable Securities, for which the Holders will be reimbursed by the
Company pursuant to Section 4.
"UNDERWRITTEN REGISTRATION OR UNDERWRITTEN OFFERING" means a
registration in connection with which securities of the Company are sold to
an underwriter for reoffering to the public pursuant to an effective
registration statement.
"WARRANTS" means the Common Stock purchase warrants issued or
issuable to the Purchaser pursuant to the Purchase Agreement.
"WARRANT SHARES" means the shares of Common Stock issuable upon
exercise in full of the Warrants.
2. SHELF REGISTRATION
(a) On or prior to each applicable Filing Date, the Company shall
prepare and file with the Commission a "Shelf" Registration Statement
covering such Registrable Securities applicable to the Tranche 1 Closing, the
Tranche 2 Closing or the Tranche 3 Closing, as the case may be, for an
offering to be made on a continuous basis pursuant to Rule 415. The
Registration Statement shall be on Form S-3 (except if the Company is not
then eligible to register for resale the Registrable Securities on Form S-3,
in which case such registration shall be on another appropriate form in
accordance herewith). The Company shall use its best efforts to cause the
Registration Statement to be declared effective under the Securities Act as
promptly as possible after the filing thereof, but in any event prior to the
applicable Effectiveness Date, and shall use its best efforts to keep such
Registration Statement continuously effective under the Securities Act until
the date which is three years after the date that such Registration Statement
is declared effective by the Commission or such earlier date when all
Registrable Securities covered by such Registration Statement have been sold
or may be sold without volume restrictions pursuant to Rule 144(k) as
determined by the counsel to the Company pursuant to a written opinion letter
to such effect, addressed and acceptable to the Company's transfer agent
(the "EFFECTIVENESS PERIOD"), PROVIDED, HOWEVER, that the Company shall not
be deemed to have used its best efforts to keep the Registration Statement
effective during the Effectiveness Period if it voluntarily takes any action
that would result in the Holders not being able to sell the Registrable
Securities covered by such Registration Statement during the Effectiveness
Period, unless such action is required under applicable law or the Company
has filed a post-effective amendment to the Registration Statement and the
Commission has not declared it effective. The aggregate number of
Registrable Securities under a Registration Statement shall be allocated
among Holders pro rata based on the total number of Registrable Securities
issued or issuable as of the date such Registration Statement is declared
effective by the Commission. All of the provisions of this
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<PAGE>
Section 2(a) relating to a Registration Statement shall apply to any
additional Registration Statement covering any Adjustment Shares as described
in the definition of Registrable Securities.
(b) If the Holders of a majority of the Registrable Securities
then outstanding so elect, an offering of Registrable Securities pursuant to
a Registration Statement may be effected in the form of an Underwritten
Offering. In such event, and, if the managing underwriters advise the Company
and such Holders in writing that in their opinion the amount of Registrable
Securities proposed to be sold in such Underwritten Offering exceeds the
amount of Registrable Securities which can be sold in such Underwritten
Offering, there shall be included in such Underwritten Offering the amount of
such Registrable Securities which in the opinion of such managing
underwriters can be sold, and such amount shall be allocated pro rata among
the Holders proposing to sell Registrable Securities in such Underwritten
Offering.
(c) If any of the Registrable Securities are to be sold in an
Underwritten Offering, the underwriter(s) will be selected by the Holders of
a majority of the Registrable Securities included in such offering and,
except in connection with a block trade, such investment banker shall be
subject to approval by the Company, which approval shall not be unreasonably
withheld or delayed. No Holder may participate in any Underwritten Offering
hereunder unless such Holder (i) agrees to sell its Registrable Securities on
the basis provided in any underwriting agreements approved by the Persons
entitled hereunder to approve such arrangements and (ii) completes and
executes all questionnaires, powers of attorney, indemnities, underwriting
agreements and other documents required under the terms of such arrangements.
(d) If (i) a Registration Statement covering Registrable
Securities, to be covered thereby as set forth herein, is not filed on or
before the applicable Filing Date (if the Company files such Registration
Statement without affording the Holder the opportunity to review and comment
on the same as required by Section 3(a) hereof, the Company shall not be
deemed to have satisfied this clause (i)), or (ii) the Company fails to file
with the Commission a request for acceleration in accordance with Rule 12d1-2
promulgated under the Exchange Act within five (5) Business Days of the date
that the Company is notified (orally or in writing, whichever is earlier) by
the Commission that a Registration Statement will not be "reviewed" or is not
subject to further review; or (iii) a Registration Statement covering
Registrable Securities is not declared effective by the Commission on or
before the applicable Effectiveness Date, or (iv) after a Registration
Statement has been declared effective by the Commission, such Registration
Statement is either not effective as to all Registrable Securities to be
covered thereby as set forth herein throughout the applicable Effectiveness
Period for a period of more than ten (10) days or the Holders are not
permitted by reason of the last paragraph of Section 3 to make sales
thereunder for a period of ten (10) days during such period, or (v) an
amendment to the Registration Statement is not filed by the Company with the
Commission within ten (10) days of the Commission's notifying the Company
that such amendment is required in order for a Registration Statement to be
declared effective (any such failure or breach being referred to as an
"EVENT," and for purposes of clauses (i) and (iii) the date on which such
Event occurs, or for purposes of clause (ii) the date on which such five (5)
Business Day period is exceeded, or for purposes of clauses (iv) and (v) the
date on which such ten (10) day period is exceeded, being
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<PAGE>
referred to as "EVENT DATE"), then, in any such case, as partial relief for
the damages suffered therefrom by the Holders (which remedy shall not be
exclusive of any other remedies available at law or in equity), the Company
shall, on the Event Date and on each monthly anniversary following the Event
Date until the triggering Event in cured, pay to the Holders an aggregate
amount, in cash, as liquidated damages and not as a penalty equal to 2.0% of
the purchase price paid by the Purchasers pursuant to the Purchase Agreement
on the Tranche 1 Closing Date, Tranche 2 Closing Date or Tranche 3 Closing
Date (the "PURCHASE PRICE"), PROVIDED, HOWEVER that in the event that the
Registration Statement is filed on or before the applicable Filing Date and
the Company has breached any one or more of its requirements pursuant to
clause (ii) through (v) herein, the Company shall pay to the Holders an
aggregate amount equal to 1% of the Purchase Price on the Event Date and 2%
of the Purchase Price on each monthly anniversary following the Event Date
until the triggering Event is cured. The payments to which a Holder shall be
entitled pursuant to this Section are referred to herein as "REGISTRATION
DELAY PAYMENTS." Registration Delay Payments shall be calculated on a
cumulative basis and paid within five (5) Business Days of the Event Date and
each monthly anniversary thereof. If the Company fails to make Registration
Delay Payments in a timely manner, such Registration Delay Payments shall
bear interest at the rate of 9.0% per annum until paid in full.
Notwithstanding anything to the contrary, the Company shall not be required
to make any Registration Delay Payments if an Event described above arises as
a result of (i) any comments by the Commission relating to or directed at any
of the Holders in connection with a Registration Statement or (ii) the fact
that the Commission refuses to accept or review a Registration Statement
because Adjustment Shares are being included in such Registration Statement.
3. REGISTRATION PROCEDURES
In connection with the Company's registration obligations
hereunder, the Company shall:
(a) Prepare and file with the Commission on or prior to the
applicable Filing Date, a Registration Statement on Form S-3 (or if the
Company is not then eligible to register for resale the Registrable
Securities on Form S-3 such registration shall be on another appropriate form
in accordance herewith, or, in connection with an Underwritten Offering
hereunder, such other form agreed to by the Company and the Holders) which
shall contain the "Plan of Distribution" attached hereto as ANNEX A (except
if otherwise directed by the Holders), and cause the Registration Statement
to become effective and remain effective as provided herein; PROVIDED,
HOWEVER, that not less than five (5) Business Days prior to the filing of a
Registration Statement or any related Prospectus or any amendment or
supplement thereto, the Company shall, (i) furnish to the Holders, their
Special Counsel and any managing underwriters, copies of all such documents
proposed to be filed, which documents will be subject to the review of such
Holders, their Special Counsel and such managing underwriters, and (ii) cause
its officers and directors, counsel and independent certified public
accountants to respond to such inquiries as shall be necessary, in the
reasonable opinion of respective counsel to such Holders and such
underwriters, to conduct a reasonable investigation within the meaning of the
Securities Act. The Company shall not file the Registration Statement or any
such Prospectus or any amendments or
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supplements thereto to which the Holders of a majority of the Registrable
Securities, their Special Counsel, or any managing underwriters, shall
reasonably object on a timely basis.
(b) (i) Prepare and file with the Commission such amendments,
including post-effective amendments, to the Registration Statement as may be
necessary to keep the Registration Statement continuously effective as to the
applicable Registrable Securities for the Effectiveness Period; (ii) cause
the related Prospectus to be amended or supplemented by any required
Prospectus supplement, and as so supplemented or amended to be filed pursuant
to Rule 424 (or any similar provisions then in force) promulgated under the
Securities Act; (iii) respond as promptly as reasonably possible to any
comments received from the Commission with respect to the Registration
Statement or any amendment thereto and as promptly as reasonably possible
provide the Holders true and complete copies of all correspondence from and
to the Commission relating to the Registration Statement; and (iv) comply in
all material respects with the provisions of the Securities Act and the
Exchange Act with respect to the disposition of all Registrable Securities
covered by the Registration Statement during the applicable period in
accordance with the intended methods of disposition by the Holders thereof
set forth in the Registration Statement as so amended or in such Prospectus
as so supplemented.
(c) Notify the Holders of Registrable Securities to be sold, their
Special Counsel and any managing underwriters as promptly as reasonably
possible (and, in the case of (i)(A) below, not less than five (5) days prior
to such filing) and (if requested by any such Person) confirm such notice in
writing no later than one (1) Business Day following the day (i)(A) when a
Prospectus or any Prospectus supplement or post-effective amendment to the
Registration Statement is proposed to be filed; (B) when the Commission
notifies the Company whether there will be a "review" of such Registration
Statement and whenever the Commission comments in writing on such
Registration Statement (the Company shall provide true and complete copies
thereof and all written responses thereto to each of the Holders); and (C)
with respect to the Registration Statement or any post-effective amendment,
when the same has become effective; (ii) of any request by the Commission or
any other Federal or state governmental authority for amendments or
supplements to the Registration Statement or Prospectus or for additional
information; (iii) of the issuance by the Commission of any stop order
suspending the effectiveness of the Registration Statement covering any or
all of the Registrable Securities or the initiation of any Proceedings for
that purpose; (iv) of the receipt by the Company of any notification with
respect to the suspension of the qualification or exemption from
qualification of any of the Registrable Securities for sale in any
jurisdiction, or the initiation or threatening of any Proceeding for such
purpose; and (v) of the occurrence of any event that makes any statement made
in the Registration Statement or Prospectus or any document incorporated or
deemed to be incorporated therein by reference untrue in any material respect
or that requires any revisions to the Registration Statement, Prospectus or
other documents so that, in the case of the Registration Statement or the
Prospectus, as the case may be, it will not contain any untrue statement of a
material fact or omit to state any 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.
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(d) Use its best efforts to avoid the issuance of, or, if issued,
obtain the withdrawal of (i) any order suspending the effectiveness of the
Registration Statement, or (ii) any suspension of the qualification (or
exemption from qualification) of any of the Registrable Securities for sale
in any jurisdiction, at the earliest practicable moment.
(e) If requested by any managing underwriter or the Holders of a
majority in interest of the Registrable Securities to be sold in connection
with an Underwritten Offering, (i) promptly incorporate in a Prospectus
supplement or post-effective amendment to the Registration Statement such
information as such managing underwriters and such Holders reasonably request
should be included therein, and (ii) make all required filings of such
Prospectus supplement or such post-effective amendment as soon as practicable
after the Company has received notification of the matters to be incorporated
in such Prospectus supplement or post-effective amendment; PROVIDED, HOWEVER,
that the Company shall not be required to take any action pursuant to this
Section 3(e) that would, in the opinion of counsel for the Company, violate
applicable law or be materially detrimental to the business prospects of the
Company.
(f) Furnish to each Holder, their Special Counsel and any managing
underwriters, without charge, at least one conformed copy of each
Registration Statement and each amendment thereto, including financial
statements and schedules, all documents incorporated or deemed to be
incorporated therein by reference, and all exhibits to the extent requested
by such Person (including those previously furnished or incorporated by
reference) promptly after the filing of such documents with the Commission.
(g) Promptly deliver to each Holder, their Special Counsel, and
any underwriters, without charge, as many copies of the Prospectus or
Prospectuses (including each form of prospectus) and each amendment or
supplement thereto as such Persons may reasonably request; and the Company
hereby consents to the use of such Prospectus and each amendment or
supplement thereto by each of the selling Holders and any underwriters in
connection with the offering and sale of the Registrable Securities covered
by such Prospectus and any amendment or supplement thereto.
(h) Prior to any public offering of Registrable Securities, use
its best efforts to register or qualify or cooperate with the selling
Holders, any underwriters and their Special Counsel in connection with the
registration or qualification (or exemption from such registration or
qualification) of such Registrable Securities for offer and sale under the
securities or Blue Sky laws of such jurisdictions within the United States as
any Holder or underwriter requests in writing, to keep each such registration
or qualification (or exemption therefrom) effective during the applicable
Effectiveness Period and to do any and all other acts or things necessary or
advisable to enable the disposition in such jurisdictions of the Registrable
Securities covered by a Registration Statement; PROVIDED, HOWEVER, that the
Company shall not be required to qualify generally to do business in any
jurisdiction where it is not then so qualified or to take any action that
would subject it to general service of process in any such jurisdiction where
it is not then so subject or subject the Company to any material tax in any
such jurisdiction where it is not then so subject.
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(i) Cooperate with the Holders and any managing underwriters to
facilitate the timely preparation and delivery of certificates representing
Registrable Securities to be delivered to a transferee pursuant to a
Registration Statement, which certificates shall be free, to the extent
permitted by applicable law, of all restrictive legends, and to enable such
Registrable Securities to be in such denominations and registered in such
names as any such managing underwriters or Holders may request at least two
Business Days prior to any sale of Registrable Securities.
(j) Upon the occurrence of any event contemplated by Section
3(c)(v), as promptly as reasonably possible, prepare a supplement or
amendment, including a post-effective amendment, to the Registration
Statement or a supplement to the related Prospectus or any document
incorporated or deemed to be incorporated therein by reference, and file any
other required document so that, as thereafter delivered, neither the
Registration Statement nor such Prospectus will contain an untrue statement
of a material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading.
(k) Use its best efforts to cause all Registrable Securities
relating to such Registration Statement to be listed on the Nasdaq National
Market or any Subsequent Market, as and when required pursuant to the
Purchase Agreement.
(l) In the case of an Underwritten Offering, enter into such
agreements (including an underwriting agreement in form, scope and substance
as is customary in Underwritten Offerings) and take all such other actions in
connection therewith (including those reasonably requested by any managing
underwriters and the Holders of a majority of the Registrable Securities
being sold) in order to expedite or facilitate the disposition of such
Registrable Securities, and whether or not an underwriting agreement is
entered into, (i) make such representations and warranties to such Holders
and such underwriters as are customarily made by issuers to underwriters in
underwritten public offerings, and confirm the same if and when requested;
(ii) obtain and deliver copies thereof to each Holder and the managing
underwriters, if any, of opinions of counsel to the Company and updates
thereof addressed to each Holder and each such underwriter, in form, scope
and substance reasonably satisfactory to any such managing underwriters and
Special Counsel to the selling Holders covering the matters customarily
covered in opinions requested in Underwritten Offerings and such other
matters as may be reasonably requested by such Special Counsel and
underwriters; (iii) immediately prior to the effectiveness of the
Registration Statement, and, in the case of an Underwritten Offering, at the
time of delivery of any Registrable Securities sold pursuant thereto, use its
reasonable best efforts to obtain and deliver copies to the Holders and the
managing underwriters, if any, of "cold comfort" letters and updates thereof
from the independent certified public accountants of the Company (and, if
necessary, any other independent certified public accountants of any
subsidiary of the Company or of any business acquired by the Company for
which financial statements and financial data is, or is required to be,
included in the Registration Statement), addressed to the Company in form and
substance as are customary in connection with Underwritten Offerings; (iv) if
an underwriting agreement is entered into, the same shall contain
indemnification provisions and procedures no less favorable to the selling
Holders and the underwriters, if any, than those set
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forth in Section 5 (or such other provisions and procedures acceptable to the
managing underwriters, if any, and holders of a majority of Registrable
Securities participating in such Underwritten Offering); and (v) deliver such
documents and certificates as may be reasonably requested by the Holders of a
majority of the Registrable Securities being sold, their Special Counsel and
any managing underwriters to evidence the continued validity of the
representations and warranties made pursuant to clause 3(l)(i) above and to
evidence compliance with any customary conditions contained in the
underwriting agreement or other agreement entered into by the Company.
(m) In connection with any Underwritten Offering, make available
for inspection by the selling Holders, any representative of such Holders,
any underwriter participating in any disposition of Registrable Securities,
and any attorney or accountant retained by such selling Holders or
underwriters, at the offices where normally kept, during reasonable business
hours, all financial and other records, pertinent corporate documents and
properties of the Company and its subsidiaries, and cause the officers,
directors, agents and employees of the Company and its subsidiaries to supply
all information in each case reasonably requested by any such Holder,
representative, underwriter, attorney or accountant in connection with the
Registration Statement; PROVIDED, HOWEVER, that any information that is
determined in good faith by the Company in writing to be of a confidential
non-public nature at the time of delivery of such information shall be kept
confidential by such Persons, unless (i) disclosure of such information is
required by court or administrative order or is necessary to respond to
inquiries of regulatory authorities; (ii) disclosure of such information, in
the opinion of counsel to such Person, is required by law; (iii) such
information becomes generally available to the public other than as a result
of a disclosure or failure to safeguard by such Person; or (iv) such
information becomes available to such Person from a source other than the
Company and such source is not known by such Person to be bound by a
confidentiality agreement with the Company.
(n) Comply with all applicable rules and regulations of the
Commission.
(o) The Company may require each selling Holder to furnish to the
Company such information regarding the distribution of such Registrable
Securities and the beneficial ownership of Common Stock held by such Holder
and any other matter as is required by law to be disclosed in the
Registration Statement, and the Company may exclude from such registration
the Registrable Securities of any such Holder who unreasonably fails to
furnish such information within a time after receiving such request.
If the Registration Statement refers to any Holder by name or
otherwise as the holder of any securities of the Company, then such Holder
shall have the right to require (if such reference to such Holder by name or
otherwise is not required by the Securities Act or any similar Federal
statute then in force) the deletion of the reference to such Holder in any
amendment or supplement to the Registration Statement filed or prepared
subsequent to the time that such reference ceases to be required.
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Each Holder covenants and agrees that (i) it will not sell any
Registrable Securities under the Registration Statement until it has received
copies of the final Prospectus as then amended or supplemented as
contemplated in Section 3(g) and notice from the Company that such
Registration Statement and any post-effective amendments thereto have become
effective as contemplated by Section 3(c) and (ii) it and its officers,
directors or Affiliates, if any, will comply with the prospectus delivery
requirements and all other provisions of the Securities Act as applicable to
any of them in connection with sales of Registrable Securities pursuant to
the Registration Statement.
Each Holder agrees by its acquisition of such Registrable
Securities that, upon receipt of a notice from the Company of the occurrence
of any event of the kind described in Section 3(c)(ii), 3(c)(iii), 3(c)(iv)
or 3(c)(v), such Holder will forthwith discontinue disposition of such
Registrable Securities under the Registration Statement until such Holder's
receipt of the copies of the supplemented Prospectus and/or amended
Registration Statement contemplated by Section 3(j), or until it is advised
in writing (the "ADVICE") by the Company that the use of the applicable
Prospectus may be resumed, and, in either case, has received copies of any
additional or supplemental filings that are incorporated or deemed to be
incorporated by reference in such Prospectus or Registration Statement.
4. REGISTRATION EXPENSES
(a) All fees and expenses incident to the performance of or
compliance with this Agreement by the Company, except as and to the extent
specified in Section 4(b), shall be borne by the Company whether or not
pursuant to an Underwritten Offering and whether or not the Registration
Statement is filed or becomes effective and whether or not any Registrable
Securities are sold pursuant to the Registration Statement. The fees and
expenses referred to in the foregoing sentence shall include, without
limitation, (i) all registration and filing fees (including, without
limitation, fees and expenses (A) with respect to filings required to be made
with the Nasdaq National Market and any Subsequent Market on which the Common
Stock is then listed for trading, and (B) reasonably incurred in compliance
with state securities or Blue Sky laws (including, without limitation,
reasonable fees and disbursements of Special Counsel for the Holders in
connection with Blue Sky qualifications or exemptions of the Registrable
Securities and determination of the eligibility of the Registrable Securities
for investment under the laws of such jurisdictions as the managing
underwriters, if any, or the Holders of a majority of Registrable Securities
may designate)), (ii) printing expenses (including, without limitation,
expenses of printing certificates for Registrable Securities and of printing
prospectuses if the printing of prospectuses is reasonably requested by the
managing underwriters, if any, or by the holders of a majority of the
Registrable Securities included in the Registration Statement), (iii)
messenger, telephone and delivery expenses of the Company, (iv) fees and
disbursements of counsel for the Company and reasonable fees and expense
disbursements of Special Counsel for the Holders, (v) Securities Act
liability insurance, if the Company so desires such insurance, and (vi) fees
and expenses of all other Persons retained by the Company in connection with
the consummation of the transactions contemplated by this Agreement. In
addition, the Company shall be responsible for all of its internal expenses
incurred in connection with the consummation of the transactions
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<PAGE>
contemplated by this Agreement (including, without limitation, all salaries
and expenses of its officers and employees performing legal or accounting
duties), the expense of any annual audit, the fees and expenses incurred in
connection with the listing of the Registrable Securities on any securities
exchange as required hereunder.
(b) If the Holders require an Underwritten Offering pursuant to
the terms hereof, the Company shall be responsible for all costs, fees and
expenses in connection therewith, except for the fees and disbursements of
the Underwriters (including any underwriting commissions and discounts) and
their legal counsel and accountants which will be paid by the Holders. The
Holder shall pay all transfer taxes relating to the Registrable Securities.
By way of illustration which is not intended to diminish from the provisions
of Section 4(a), the Holders shall not be responsible for, and the Company
shall be required to pay the fees or disbursements incurred by the Company
(including by its legal counsel and accountants) in connection with, the
preparation and filing of a Registration Statement and related Prospectus for
such offering, the maintenance of such Registration Statement in accordance
with the terms hereof, the listing of the Registrable Securities in
accordance with the requirements hereof, and printing expenses incurred to
comply with the requirements hereof. Notwithstanding the foregoing, except in
connection with a block trade by a broker who as a result of the trade may be
deemed an underwriter, if at any time the Company has (i) timely filed the
Registration Statement on or prior to the applicable Filing Date, (ii) caused
the Registration Statement to be declared effective as promptly as possible
after the filing thereof but in any event prior to the applicable
Effectiveness Date and (iii) kept the Registration Statement continuously
effective under the Securities Act, all in accordance with the terms of this
Agreement, and if at any such time the Holders require an Underwritten
Offering pursuant to the terms hereof, then Holders shall be responsible for
all costs, fees and expenses in connection with such Underwritten Offering.
5. INDEMNIFICATION
(a) INDEMNIFICATION BY THE COMPANY. The Company shall,
notwithstanding any termination of this Agreement, indemnify and hold
harmless each Holder, the officers, directors, agents (including any
underwriters retained by such Holder in connection with the offer and sale of
Registrable Securities), brokers (including brokers who offer and sell
Registrable Securities as principal as a result of a pledge or any failure to
perform under a margin call of Common Stock), investment advisors and
employees of each of them, each Person who controls any such Holder (within
the meaning of Section 15 of the Securities Act or Section 20 of the Exchange
Act) and the officers, directors, agents and employees of each such
controlling Person, to the fullest extent permitted by applicable law, from
and against any and all losses, claims, damages, liabilities, costs
(including, without limitation, costs of preparation and reasonable
attorneys' fees) and expenses (collectively, "LOSSES"), as incurred, arising
out of or relating to any untrue or alleged untrue statement of a material
fact contained in the Registration Statement, any Prospectus or any form of
prospectus or in any amendment or supplement thereto or, to the extent such
untrue or alleged untrue statements or omissions or alleged omissions is not
corrected in a subsequent prospectus, in any preliminary prospectus, or
arising out of or relating to any omission or alleged omission of a material
fact required to be stated therein or necessary to make the statements
therein (in the
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<PAGE>
case of any Prospectus or form of prospectus or supplement thereto, in light
of the circumstances under which they were made) not misleading, except to
the extent, but only to the extent, that such untrue statements or alleged
untrue statements or omissions or alleged omissions are based upon
information furnished in writing to the Company by such Holder or such other
indemnified party expressly for use therein, which information was reasonably
relied on by the Company for use therein, or to the extent that such
information relates to such Holder or such Holder's proposed method of
distribution of Registrable Securities and was reviewed and expressly
approved in writing by or was furnished by such Holder expressly for use in
the Registration Statement, such Prospectus or such form of Prospectus or in
any amendment or supplement thereto. The Company shall notify the Holders
promptly of the institution, threat or assertion of any Proceeding of which
the Company is aware in connection with the transactions contemplated by this
Agreement.
(b) INDEMNIFICATION BY HOLDERS. Each Holder shall, severally and
not jointly, indemnify and hold harmless the Company, its directors,
officers, agents and employees, each Person who controls the Company (within
the meaning of Section 15 of the Securities Act and Section 20 of the
Exchange Act), and the directors, officers, agents or employees of such
controlling Persons, to the fullest extent permitted by applicable law, from
and against all Losses (as determined by a court of competent jurisdiction in
a final judgment not subject to appeal or review) arising out of or based
upon any untrue statement or alleged untrue statement of a material fact
contained in the Registration Statement, any Prospectus, or any form of
prospectus, or in any amendment or supplement thereto, or arising out of or
based upon any omission or alleged omission of a material fact required to be
stated therein or necessary to make the statements therein not misleading to
the extent, but only to the extent, that such untrue statement or alleged
untrue statement or omission or alleged omission is contained in any
information so furnished in writing by such Holder to the Company
specifically for inclusion in the Registration Statement or such Prospectus
and that such information was reasonably relied on by the Company for use in
the Registration Statement, such Prospectus or such form of prospectus or to
the extent that such information relates to such Holder or such Holder's
proposed method of distribution of Registrable Securities and was reviewed
and expressly approved in writing by or was furnished by such Holder
expressly for use in the Registration Statement, such Prospectus or such form
of Prospectus, or in any amendment or supplement thereto. In no event shall
the liability of any selling Holder hereunder be greater in amount than the
dollar amount of the net proceeds received by such Holder upon the sale of
the Registrable Securities giving rise to such indemnification obligation.
(c) CONDUCT OF INDEMNIFICATION PROCEEDINGS. If any Proceeding
shall be brought or asserted against any Person entitled to indemnity
hereunder (an "INDEMNIFIED PARTY"), such Indemnified Party shall promptly
notify the Person from whom indemnity is sought (the "INDEMNIFYING PARTY") in
writing, and the Indemnifying Party shall assume the defense thereof,
including the employment of counsel reasonably satisfactory to the
Indemnified Party and the payment of all fees and expenses incurred in
connection with defense thereof; provided, that the failure of any
Indemnified Party to give such notice shall not relieve the Indemnifying
Party of its obligations or liabilities pursuant to this Agreement, except
(and only) to the extent that it shall be
14
<PAGE>
finally determined by a court of competent jurisdiction (which determination
is not subject to appeal or further review) that such failure shall have
proximately and materially adversely prejudiced the Indemnifying Party.
An Indemnified Party shall have the right to employ separate
counsel in any such Proceeding and to participate in the defense thereof, but
the fees and expenses of such counsel shall be at the expense of such
Indemnified Party or Parties unless: (1) the Indemnifying Party has agreed
in writing to pay such fees and expenses; or (2) the Indemnifying Party shall
have failed promptly to assume the defense of such Proceeding and to employ
counsel reasonably satisfactory to such Indemnified Party in any such
Proceeding; or (3) the named parties to any such Proceeding (including any
impleaded parties) include both such Indemnified Party and the Indemnifying
Party, and such Indemnified Party shall have been advised by counsel (which
shall be reasonably acceptable to the indemnifying party) that a conflict of
interest is likely to exist if the same counsel were to represent such
Indemnified Party and the Indemnifying Party (in which case, if such
Indemnified Party notifies the Indemnifying Party in writing that it elects
to employ separate counsel at the expense of the Indemnifying Party, the
Indemnifying Party shall not have the right to assume the defense thereof and
such counsel shall be at the expense of the Indemnifying Party). The
Indemnifying Party shall not be liable for any settlement of any such
Proceeding effected without its written consent, which consent shall not be
unreasonably withheld. No Indemnifying Party shall, without the prior
written consent of the Indemnified Party, effect any settlement of any
pending Proceeding in respect of which any Indemnified Party is a party,
unless such settlement includes an unconditional release of such Indemnified
Party from all liability on claims that are the subject matter of such
Proceeding.
All fees and expenses of the Indemnified Party (including
reasonable fees and expenses to the extent incurred in connection with
investigating or preparing to defend such Proceeding in a manner not
inconsistent with this Section) shall be paid to the Indemnified Party, as
incurred, within ten (10) Business Days of written notice thereof to the
Indemnifying Party (regardless of whether it is ultimately determined that an
Indemnified Party is not entitled to indemnification hereunder; PROVIDED,
that the Indemnifying Party may require such Indemnified Party to undertake
to reimburse all such fees and expenses to the extent it is finally
judicially determined that such Indemnified Party is not entitled to
indemnification hereunder).
(d) CONTRIBUTION. If a claim for indemnification under Section
5(a) or 5(b) is unavailable to an Indemnified Party (by reason of public
policy or otherwise), then each Indemnifying Party, in lieu of indemnifying
such Indemnified Party, shall contribute to the amount paid or payable by
such Indemnified Party as a result of such Losses, in such proportion as is
appropriate to reflect the relative fault of the Indemnifying Party and
Indemnified Party in connection with the actions, statements or omissions
that resulted in such Losses 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 any
action in question, including any untrue or alleged untrue statement of a
material fact or omission or alleged omission of a material fact, has been
taken or made by, or relates to information supplied by, such Indemnifying
Party or Indemnified Party, and the parties' relative intent, knowledge,
15
<PAGE>
access to information and opportunity to correct or prevent such action,
statement or omission. The amount paid or payable by a party as a result of
any Losses shall be deemed to include, subject to the limitations set forth
in Section 5(c), any reasonable attorneys' or other reasonable fees or
expenses incurred by such party in connection with any Proceeding to the
extent such party would have been indemnified for such fees or expenses if
the indemnification provided for in this Section was available to such party
in accordance with its terms.
The parties hereto agree that it would not be just and equitable if
contribution pursuant to this Section 5(d) were determined by PRO RATA
allocation or by any other method of allocation that does not take into
account the equitable considerations referred to in the immediately preceding
paragraph. Notwithstanding the provisions of this Section 5(d), no Holder
shall be required to contribute, in the aggregate, any amount in excess of
the amount by which the proceeds actually received by such Holder from the
sale of the Registrable Securities subject to the Proceeding exceeds the
amount of any damages that such Holder has otherwise been required to pay by
reason of such untrue or alleged untrue statement or omission or alleged
omission. 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 indemnity and contribution agreements contained in this Section
are in addition to any liability that the Indemnifying Parties may have to
the Indemnified Parties.
6. MISCELLANEOUS
(a) REMEDIES. In the event of a breach by the Company or by a
Holder, of any of their obligations under this Agreement, each Holder or the
Company, as the case may be, in addition to being entitled to exercise all
rights granted by law and under this Agreement, including recovery of
damages, will be entitled to specific performance of its rights under this
Agreement. The Company and each Holder agree that monetary damages would not
provide adequate compensation for any losses incurred by reason of a breach
by it of any of the provisions of this Agreement and hereby further agrees
that, in the event of any action for specific performance in respect of such
breach, it shall waive the defense that a remedy at law would be adequate.
(b) NO INCONSISTENT AGREEMENTS. Neither the Company nor any of
its subsidiaries has entered, as of the date hereof, nor shall the Company or
any of its subsidiaries, on or after the date of this Agreement, enter into
any agreement with respect to its securities that is inconsistent with the
rights granted to the Holders in this Agreement or otherwise conflicts with
the provisions hereof. Except as and to the extent specified in SCHEDULE
6(b) hereto, neither the Company nor any of its subsidiaries has previously
entered into any agreement granting any registration rights with respect to
any of its securities to any Person. Without limiting the generality of the
foregoing, without the written consent of the Holders of a majority of the
then outstanding Registrable Securities, the Company shall not, except as set
forth in Section 3.11(b) of the Purchase Agreement, grant to any Person the
right to request the Company to register any securities of the Company under
the Securities Act unless the rights so granted are subject in all
16
<PAGE>
respects to the prior rights in full of the Holders set forth herein, and are
not otherwise in conflict or inconsistent with the provisions of this
Agreement.
(c) NO PIGGYBACK ON REGISTRATIONS. Except as and to the extent
specified in SCHEDULE 6(b) hereto, neither the Company nor any of its
security holders (other than the Holders in such capacity pursuant hereto)
may include securities of the Company in the Registration Statement other
than the Registrable Securities, and, except as set forth in Section 3.11(b)
of the Purchase Agreement, the Company shall not after the date hereof enter
into any agreement providing any such right to any of its security holders.
(d) PIGGY-BACK REGISTRATIONS. (i) If at any time when there is
not an effective Registration Statement covering all of the Registrable
Securities then outstanding, the Company shall determine to prepare and file
with the Commission a registration statement relating to an offering for its
own account or the account of others under the Securities Act of any of its
equity securities, other than on Form S-4 or Form S-8 (each as promulgated
under the Securities Act) or their then equivalents relating to equity
securities to be issued solely in connection with any acquisition of any
entity or business or equity securities issuable in connection with stock
option or other employee benefit plans, then the Company shall send to each
Holder of Registrable Securities written notice of such determination and, if
within fifteen (15) days after receipt of such notice, any such holder shall
so request in writing, the Company shall, subject to the provisions of this
Section 6(d), include in such registration statement all or any part of such
Registrable Securities such holder requests to be registered.
Notwithstanding the foregoing, the Company may abandon or delay any such
registration at any time.
(ii) It shall be a condition precedent to the obligations of
the Company to take any action pursuant to this Section 6(d) with respect to
the Registrable Securities of any selling Holder, that such Holder shall
furnish to the Company such information regarding it, the Registrable
Securities held by it, and the intended method of disposition of such
securities as shall be required to effect the registration of such Holder's
Registrable Securities and to execute such documents (including, without
limitation, any underwriting agreement) in connection with such registration
as the Company may reasonably request.
(e) AMENDMENTS AND WAIVERS. The provisions of this Agreement,
including the provisions of this sentence, may not be amended, modified or
supplemented, and waivers or consents to departures from the provisions
hereof may not be given, unless the same shall be in writing and signed by
the Company and the Holders of at least two-thirds of the then outstanding
Registrable Securities; PROVIDED, HOWEVER, that, for the purposes of this
sentence, Registrable Securities that are owned, directly or indirectly, by
the Company, or an Affiliate of the Company are not deemed outstanding.
Notwithstanding the foregoing, a waiver or consent to depart from the
provisions hereof with respect to a matter that relates exclusively to the
rights of Holders and that does not directly or indirectly affect the rights
of other Holders may be given by Holders of at least a majority of the
Registrable Securities to which such waiver or consent relates; PROVIDED,
HOWEVER, that the provisions of this sentence may not be amended, modified,
or supplemented except in accordance with the provisions of the immediately
preceding sentence.
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<PAGE>
(f) NOTICES. Any notices, consents, waivers or other
communications required or permitted to be given under the terms of this
Agreement must be in writing and will be deemed to have been delivered (i)
upon receipt, when delivered personally; (ii) the date of transmission, if
such notice or communication is delivered via facsimile at the facsimile
telephone number specified in this Section prior to 6:00 p.m. (New York City
time) on a Business Day, (iii) the Business Day after the date of
transmission, if such notice or communication is delivered via facsimile at
the facsimile telephone number specified in this Section later than 6:00 p.m.
(New York City time) on any date and earlier than 11:59 p.m. (New York City
time) on such date; or (iv) upon receipt, when delivered by a reputable
overnight delivery service, in each case properly addressed to the party to
receive the same. The addresses and facsimile numbers for such
communications shall be:
If to the Company: ThrustMaster, Inc.
7175 N.W. Evergreen Parkway #400
Hillsboro, Oregon 97124-5839
Facsimile: (503) 615-3297
Attention: Frank G. Hausmann, Jr., CEO
With copies to: Perkins Coie LLP
1211 SW Fifth Avenue, Suite 1500
Portland, OR 97204
Facsimile: (503) 727-2222
Attention: Patrick Simpson
If to Strong River: Strong River Investments Inc.
c/o Cavallo Capital Corp.
630 Fifth Avenue, Suite 2000
New York, New York 10111
Facsimile: (212) 332-3256
Attention: Avi Vigder
If to Montrose: Montrose Investments, Ltd.
300 Crescent Court, Suite 700
Dallas, TX 75201
Facsimile: (214) 758-1221
Attention: Will Rose
If to Westover: Westover Investments L.P.
300 Crescent Court, Suite 700
Dallas, TX 75201
Facsimile: (214) 758-1221
Attention: Will Rose
18
<PAGE>
With copies to (for all
communications to each
of the Purchasers): Robinson Silverman Pearce Aronsohn &
Berman LLP
1290 Avenue of the Americas
New York, NY 10104
Facsimile: (212) 541-4630
Attention: Kenneth L. Henderson
Each party shall provide five days' prior written notice to the
other party of any change in address or facsimile number.
If to any other Person who is then the registered Holder:
To the address of such Holder as it appears in the stock
transfer books of the Company or such other address as may be
designated in writing hereafter, in the same manner, by such
Person.
(g) SUCCESSORS AND ASSIGNS. This Agreement shall inure to the
benefit of and be binding upon the successors and permitted assigns of each
of the parties and shall inure to the benefit of each Holder. The Company
may not assign its rights or obligations hereunder without the prior written
consent of Holders of a majority of Registrable Securities then outstanding.
Each Holder may assign their respective rights hereunder in the manner and to
the Persons as permitted under this Agreement and the Purchase Agreement.
(h) ASSIGNMENT OF REGISTRATION RIGHTS. The rights of each Holder
hereunder, including the right to have the Company register for resale
Registrable Securities in accordance with the terms of this Agreement, shall
be automatically assignable by each Holder to any Affiliate of such Holder,
any other Holder or Affiliate of any other Holder if: (i) the Holder agrees
in writing with the transferee or assignee to assign such rights, and a copy
of such agreement is furnished to the Company within a reasonable time after
such assignment, (ii) the Company is, within a reasonable time after such
transfer or assignment, furnished with written notice of (a) the name and
address of such transferee or assignee, and (b) the securities with respect
to which such registration rights are being transferred or assigned, (iii)
following such transfer or assignment the further disposition of such
securities by the transferee or assignees is restricted under the Securities
Act and applicable state securities laws, (iv) at or before the time the
Company receives the written notice contemplated by clause (ii) of this
Section, the transferee or assignee agrees in writing with the Company to be
bound by all of the provisions of this Agreement, (v) such transfer shall
have been made in accordance with the applicable requirements of the Purchase
Agreement and (vi) at least 10,000 shares of Registrable Securities
(appropriately adjusted for any stock dividend, split or combination of the
Common Stock) are being transferred to such transferee or assignee in
connection with such assignment of rights. The rights to assignment shall
apply to the Holders (and to subsequent) successors and assigns.
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(i) COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which when so executed shall be deemed to be an
original and, all of which taken together shall constitute one and the same
Agreement. In the event that any signature is delivered by facsimile
transmission, such signature shall create a valid binding obligation of the
party executing (or on whose behalf such signature is executed) the same with
the same force and effect as if such facsimile signature were the original
thereof.
(j) GOVERNING LAW. This Agreement shall be governed by and
construed and enforced in accordance with the internal laws of the State of
New York without regard to the principles of conflicts of law thereof. Each
party hereby irrevocably submits to the non-exclusive jurisdiction of the
state and federal courts sitting in the City of New York, borough of
Manhattan, for the adjudication of any dispute hereunder or in connection
herewith or with any transaction contemplated hereby or discussed herein
(including with respect to the enforcement of the any of the Transaction
Documents), and hereby irrevocably waives, and agrees not to assert in any
suit, action or proceeding, any claim that it is not personally subject to
the jurisdiction of any such court, that such suit, action or proceeding is
improper. Each party hereby irrevocably waives personal service of process
and consents to process being served in any such suit, action or proceeding
by mailing a copy thereof to such party at the address in effect for notices
to it under this Agreement and agrees that such service shall constitute good
and sufficient service of process and notice thereof. Nothing contained
herein shall be deemed to limit in any way any right to serve process in any
manner permitted by law.
(k) CUMULATIVE REMEDIES. The remedies provided herein are
cumulative and not exclusive of any remedies provided by law.
(l) SEVERABILITY. 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 reasonable 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.
(m) HEADINGS. The headings in this Agreement are for convenience
of reference only and shall not limit or otherwise affect the meaning hereof.
(n) SHARES HELD BY THE COMPANY AND ITS AFFILIATES. Whenever the
consent or approval of Holders of a specified percentage of Registrable
Securities is required hereunder, Registrable Securities held by the Company
or its Affiliates (other than any Holder or transferees or successors or
assigns thereof if such Holder is deemed to be an Affiliate solely by reason
of its holdings of such Registrable Securities) shall not be counted in
determining whether such consent or approval was given by the Holders of such
required percentage.
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SIGNATURE PAGE TO FOLLOW]
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IN WITNESS WHEREOF, the parties have executed this Registration Rights
Agreement as of the date first written above.
COMPANY:
THRUSTMASTER, INC.
By:
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Name:
Title:
PURCHASERS:
STRONG RIVER INVESTMENTS, INC.
By:
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Name:
Title:
WESTOVER INVESTMENTS L.P.
By:
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Name:
Title:
MONTROSE INVESTMENTS L.P.
By:
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Name:
Title:
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ANNEX A
PLAN OF DISTRIBUTION
The Selling Stockholders and any of their pledgees, assignees and
successors-in-interest may, from time to time sell any or all of their shares
of Common Stock on any stock exchange on which the shares are traded or in
private transactions. These sales may be at fixed or negotiated prices. The
Selling Stockholders may use any one or more of the following methods when
selling shares:
- - ordinary brokerage transactions and transactions in which the broker-dealer
solicits purchasers;
- - block trades in which the broker-dealer will attempt to sell the shares as
agent but may position and resell a portion of the block as principal to
facilitate the transaction;
- - purchases by a broker-dealer as principal and resale by the broker-dealer
for its account;
- - an exchange distribution in accordance with the rules of the applicable
exchange;
- - privately negotiated transactions;
- - short sales;
- - Broker-dealers may agree with the Selling Stockholders to sell a specified
number of such shares at a stipulated price per share;
- - a combination of any such methods of sale; and
- - any other method permitted pursuant to applicable law.
The Selling Stockholders may also sell shares under SEC Rule 144, if
available, rather than under this prospectus.
The Selling Stockholders may sell shares short, short sales against the
box, puts and calls and other transactions in securities of the Company or
derivatives of Company securities, and may sell or deliver shares in
connection with these trades. The Selling Stockholders may pledge their
shares to their brokers under the margin provisions of customer agreements.
If a Selling Stockholder defaults on a margin loan, the broker may, from time
to time, offer and sell the pledged shares.
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Broker-dealers engaged by the Selling Stockholders may arrange for other
brokers-dealers to participate in sales. Broker-dealers may receive
commissions or discounts from the Selling Stockholders (or, if any
broker-dealer acts as agent for the Purchaser of shares, from the Purchaser)
in amounts to be negotiated. The Selling Stockholders do not expect these
commissions and discounts to exceed what is customary in the types of
transactions involved.
The Selling Stockholders and any broker-dealers or agents that are
involved in selling the shares may be deemed to be "underwriters" within the
meaning of the Securities Act in connection with such sales. In such event,
any commissions received by such broker-dealers or agents and any profit on
the resale of the shares purchased by them may be deemed to be underwriting
commissions or discounts under the Securities Act.
The Company is required to pay all fees and expenses incident to the
registration of the shares, including reasonable fees and disbursements of
counsel to the Selling Stockholders. The Company has agreed to indemnify the
Selling Stockholders against certain losses, claims, damages and liabilities,
including liabilities under the Securities Act.