SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) March 24, 1999
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SoftNet Systems, Inc.
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(Exact name of registrant as specified in charter)
Delaware 001-5270 11-1817252
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(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
650 Townsend Street, Suite 225, San Francisco, CA 94103
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (415) 365-2500
520 Logue Avenue, Mountain View, California 94043
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(Former name or former address, if changed since last report.)
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Item 5. Other Events.
Private Placement
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On March 24, 1999, SoftNet Systems, Inc. (the "Company")
entered into a binding agreement with respect to a $15 million investment from
an individual investor (the "Buyer").
In the investment, the Company sold 660,000 shares of the
Company's Common Stock, for an aggregate of $15 million. The offer and sale of
these securities in the United States was completed pursuant to the exemption
from registration provided by Regulation D under the Securities Act of 1933, as
amended. In addition, in connection with the investment, the Company and the
Buyer have entered into a Common Stock Purchase Agreement, a Registration Rights
Agreement and Amendment dated as of April 9, 1999 to an Agreement by and between
Telecell Systems, Inc. and ISP Channel, Inc., a wholly-owned subsidiary of the
Company (these documents, together, are referred to collectively herein as the
"Transaction Documents").
Pursuant to the Registration Rights Agreement, the Company is
obligated in the future to file with the Securities and Exchange Commission (the
"Commission") a registration statement covering the resale of shares of Common
Stock. In addition to the foregoing, the Company is obligated to allow the Buyer
to inspect certain Company records, to maintain the listing of its Common Stock
on AMEX or Nasdaq, or another market acceptable to the Buyer, and to indemnify
the Buyer or his transferees for all claims arising out of the Transaction
Documents or the registration statement(s).
The foregoing description is only a summary and is qualified
in its entirety by reference to the definite Common Stock Purchase Agreement
dated as of April 12, 1999 by and among the Company and the Buyer listed
therein, the Registration Rights Agreement dated as of the same date by and
among the Company and the Buyer listed therein, the forms of which are attached
to this Current Report as Exhibits 10.29 and 10.30, respectively, and
incorporated herein by reference.
The proceeds from the equity investment will be used for
working capital and general corporate purposes.
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Item 7. Exhibits.
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Exhibit No. Description
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10.29 Common Stock Purchase Agreement dated as of April
12, 1999 by and among the Company and the Buyer
listed therein
10.30 Registration Rights Agreement dated as of April
12, 1999 by and among the Company and the Buyer
listed therein
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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 thereunto duly authorized.
SOFTNET SYSTEMS, INC.
DATE: April 27, 1999 By: /s/ Douglas S. Sinclair
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Name: Douglas S. Sinclair
Title: Chief Financial Officer
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EXHIBIT INDEX
Exhibit No. Description
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10.29 Common Stock Purchase Agreement dated as of April
12, 1999 by and among the Company and the Buyer
listed therein
10.30 Registration Rights Agreement dated as of April
12, 1999 by and among the Company and the Buyer
listed therein
Exhibit 10.29
SOFTNET SYSTEMS, INC.
COMMON STOCK PURCHASE AGREEMENT
Dated as of April 12, 1999
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TABLE OF CONTENTS
Page
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1. Purchase and Sale of Stock..............................................1
1.1 Sale and Issuance of Common Stock..............................1
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1.2 Closing........................................................1
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2. Representations and Warranties of the Company and Its Subsidiaries......1
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2.1 Organization, Good Standing and Qualification..................1
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2.2 Capitalization and Voting Rights...............................1
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2.3 Subsidiaries...................................................2
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2.4 Authorization..................................................3
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2.5 Valid Issuance of Common Stock.................................3
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2.6 Governmental Consents..........................................3
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2.7 Offering.......................................................4
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2.8 Litigation.....................................................4
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2.9 Proprietary Information........................................4
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2.10 Patents and Trademarks.........................................5
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2.11 Compliance with Other Instruments..............................5
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2.12 Agreements; Action.............................................6
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2.13 Related-Party Transactions.....................................6
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2.14 SEC Documents; Financial Statements............................7
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2.15 Changes........................................................7
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2.16 Tax Returns....................................................8
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2.17 Compliance with Laws; Permits..................................9
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2.18 Environmental and Safety Laws..................................9
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2.19 Disclosure.....................................................9
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2.20 Registration Rights...........................................10
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2.21 Corporate Documents; Minute Books.............................10
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2.22 Title to Property and Assets..................................10
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2.23 Insurance.....................................................10
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2.24 Employee Benefit Plans........................................10
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2.25 Labor Agreements and Actions..................................10
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2.26 Year 2000.....................................................11
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3. Representations and Warranties of the Investors........................12
3.1 Authorization.................................................12
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3.2 Purchase Entirely for Own Account.............................12
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3.3 Disclosure of Information.....................................12
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3.4 Investment Experience.........................................12
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3.5 Accredited Investor...........................................12
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3.6 Restricted Securities.........................................12
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3.7 Legends.......................................................13
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3.8 Tax Advisors..................................................13
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3.9 Investor Counsel..............................................13
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4. Conditions of Investor's Obligations at Closing.......................13
4.1 Representations and Warranties................................14
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4.2 Performance...................................................14
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4.3 Compliance Certificate........................................14
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4.4 Qualifications................................................14
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4.5 Proceedings and Documents.....................................14
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4.6 Opinion of Company Counsel....................................14
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4.7 Registration Rights Agreement.................................14
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4.8 Delivery of Shares............................................14
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4.9 Amendment to TeleCell Agreement...............................14
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5. Conditions of the Company's Obligations at Closing.....................14
5.1 Representations and Warranties................................14
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5.2 Payment of Purchase Price.....................................14
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5.3 Qualifications................................................15
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5.4 Registration Rights Agreement.................................15
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6. Indemnification........................................................15
6.1 Indemnification Obligations of the Company....................15
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6.2 Indemnification Obligations of the Investor...................15
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7. Miscellaneous..........................................................15
7.1 Survival......................................................15
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7.2 Successors and Assigns........................................15
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7.3 Governing Law.................................................15
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7.4 Titles and Subtitles..........................................15
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7.5 Notices.......................................................16
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7.6 Finder's Fee..................................................16
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7.7 Expenses......................................................16
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7.8 Amendments and Waivers........................................16
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7.9 Severability..................................................16
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7.10 Entire Agreement..............................................16
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7.11 Counterparts..................................................17
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SCHEDULE A Schedule of Exceptions
EXHIBIT A .........Registration Rights Agreement
EXHIBIT B .........Opinion of Counsel for the Company
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COMMON STOCK PURCHASE AGREEMENT
THIS COMMON STOCK PURCHASE AGREEMENT (the "Agreement") is made
on the 12th day of April, 1999, by and among SoftNet Systems, Inc., a New York
corporation (the "Company"), and Hector R. Gonzalez (the "Investor").
THE PARTIES HEREBY AGREE AS FOLLOWS:
1. Purchase and Sale of Stock.
1.1 Sale and Issuance of Common Stock. Subject to the terms and
conditions of this Agreement, the Investor agrees to purchase and the Company
agrees to sell and issue to the Investor 660,000 shares of the Company's common
stock (the "Shares") for an aggregate purchase price of $15,000,000.
1.2 Closing. The purchase and sale of the Shares shall take place at
the offices of Brobeck, Phleger & Harrison LLP, Two Embarcadero Place, 2200 Geng
Road, Palo Alto, CA 94303, at 10:00 AM., on April 12, 1999, or at such other
time and place as the Company and Investor mutually agree upon orally or in
writing (which time and place are designated as the "Closing"). At the Closing
the Company shall deliver to the Investor a certificate representing the Shares
that the Investor is purchasing against payment of the purchase price therefor
by check or wire transfer. The Investor shall become a party to this Agreement
and that certain Registration Rights Agreement dated as of April 12, 1999 by and
among the Company and the Investor, the form of which is attached hereto as
Exhibit A (the "Registration Rights Agreement").
2. Representations and Warranties of the Company and Its Subsidiaries.
The Company on behalf of itself and each of its Subsidiaries (as hereinafter
defined) hereby represents and warrants to the Investor that, except as set
forth on a Schedule of Exceptions (the "Schedule of Exceptions") furnished the
Investor and special counsel for the Investor prior to execution hereof and
attached hereto as Schedule A, which exceptions shall be deemed to be
representations and warranties as if made hereunder:
2.1 Organization, Good Standing and Qualification. The Company and each
of its Subsidiaries are corporations duly organized, validly existing and in
good standing under the laws of their respective jurisdictions of organization.
The Company and each of its Subsidiaries are duly qualified to transact business
and are in good standing in each jurisdiction in which the failure to so qualify
would have a material adverse effect on the respective businesses or properties
of the Company or any of its Subsidiaries. The Company and each of its
Subsidiaries have full power and authority to own and hold their respective
properties and to carry on their respective businesses as currently conducted
and as proposed to be conducted. The Company has the full power and authority
(a) to execute, deliver and perform this Agreement and the Registration Rights
Agreement, and (b) to issue, sell and deliver the Shares.
2.2 Capitalization and Voting Rights. The authorized capital of the
Company consists, or will consist immediately prior to the Closing, of:
<PAGE>
(a) Preferred Stock. 4,000,000 shares of Preferred Stock, par value
$.10 per share (the "Preferred Stock"), of which (i) 5,110 shares have been
designated Series A Preferred Stock (the "Series A Preferred Stock") of which no
shares are currently outstanding; (ii) 12,500 shares have been designated Series
B Preferred Stock (the "Series B Preferred Stock) of which no shares are
currently outstanding; (iii) 10,000 shares have been designated Series C
Preferred Stock (the "Series C Preferred Stock") of which 7,625.39 shares are
currently outstanding, and (iv) 10,000 shares have been designated Series D
Preferred Stock (the "Series D Preferred Stock") of which no shares are
currently outstanding.
(b) Common Stock. 25,000,000 shares of common stock, par value $.01 per
share ("Common Stock"), of which 10,389,172 shares are issued and outstanding as
of April 7, 1999.
(c) The outstanding shares of Series C Preferred Stock are owned by the
stockholders and in the numbers specified in Schedule 2.2(c) of the Schedule of
Exceptions hereto.
(d) The outstanding shares of Series C Preferred Stock and Common Stock
are all duly and validly authorized and issued, fully paid and nonassessable,
and were issued in compliance with all applicable state and federal laws
concerning the issuance of securities.
(e) Except as disclosed in Schedule 2.2(e) of the Schedule of
Exceptions there are no (A) outstanding options, warrants, rights (including
conversion or preemptive rights) or agreements or obligations (contingent or
otherwise) for the purchase, repurchase or acquisition or retirement of any
shares of its capital stock or other interests therein, (B) securities of the
Company convertible into or exchangeable for any capital stock of the Company,
(C) commitments of the Company to issue any shares, warrants, options or other
such rights or to distribute to holders of any class of its capital stock in
respect thereof, any evidences of indebtedness or assets, or (D) agreements to
pay any dividend or make any other distribution in respect thereof. Except as
disclosed in Schedule 2.2(e) of the Schedule of Exceptions, none of the
outstanding shares of Preferred Stock are subject to, nor were issued in
violation of, any preemptive rights of the Shareholders of the Company or any
right of first refusal or other similar right in favor of any person. None of
the outstanding shares of Common Stock are subject to, nor were they issued in
violation of, any preemptive rights of the shareholders of the Company or any
right of first refusal or other similar right in favor of any person. The
Company is not a party or subject to any agreement or understanding and, to the
Company's knowledge, there is no agreement or understanding between any persons
and/or entities, which affects or relates to the voting or giving of written
consents with respect to any security or by a director of the Company.
2.3 Subsidiaries. Except as provided for and defined in Schedule 2.3 of
the Schedule of Exceptions, the Company does not presently own or control,
directly or indirectly, any interest in any other corporation, association, or
other business entity, nor is the Company a participant in any joint venture,
partnership, or similar arrangement. None of the entities listed on Schedule 2.3
of the Schedule of Exceptions, other than ISP Channel, Inc., Intellicom, Inc.,
Micrographic Technology Corporation and Kansas Communications, Inc.
(collectively, the "Subsidiaries"), is a "significant subsidiary" within the
meaning of Rule 1-02 of Regulation S-X of the Rules and Regulations of the SEC
(as hereinafter defined). All of the issued and outstanding capital stock and
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other interests of each of the Company's Subsidiaries (i) are owned by the
Company, free and clear of all liens, charges and encumbrances of every kind and
nature whatsoever, and (ii) are validly issued, fully paid and non-assessable.
Except as set forth on Schedule 2.3(A) of the Schedule of Exceptions, there are
no (A) outstanding options, warrants, rights (including conversion or preemptive
rights) or agreements or obligations (contingent or otherwise) for the purchase,
repurchase or acquisition or retirement of any shares of such Subsidiary's
capital stock or other interests therein of any such Subsidiary, (B) securities
of any of the Subsidiaries convertible into or exchangeable for any capital
stock of any such Subsidiary, (C) commitments of any of the Subsidiaries to
issue any shares, warrants, options or other such rights or to distribute to
holders of any class of its capital stock in respect thereof, any evidences of
indebtedness or assets, or (D) agreements to pay any dividend or make any other
distribution in respect thereof. None of the outstanding shares of capital stock
of any of the Subsidiaries are subject to, nor were they issued in violation of,
any preemptive rights of any shareholder of any such Subsidiary or any right of
first refusal or other similar right in favor of any person. Such Subsidiaries
are not party or subject to any agreements or understandings and, to the
Company's best knowledge, there are no agreements or understandings between any
persons and/or entities, which affects or relates to the voting or giving of
written consents with respect to any security or by a director of any of the
Subsidiaries.
2.4 Authorization. All corporate action on the part of the Company, its
officers, directors and stockholders necessary for the authorization, execution
and delivery of this Agreement and the Registration Rights Agreement, the
performance of all obligations of the Company hereunder and thereunder, and the
authorization (or reservation for issuance), sale, delivery and issuance of the
Shares being sold hereunder has been taken or will be taken prior to the
Closing. This Agreement and the Registration Rights Agreement constitute valid
and legally binding obligations of the Company, enforceable in accordance with
their respective terms, except (i) as limited by applicable bankruptcy,
insolvency, reorganization, moratorium and other laws of general application
affecting enforcement of creditors' rights generally, (ii) as limited by laws
relating to the availability of specific performance, injunctive relief or other
equitable remedies, and (iii) to the extent the indemnification provisions
contained in the Registration Rights Agreement may be limited by applicable
federal or state securities laws.
2.5 Valid Issuance of Common Stock. The Shares that are being purchased
by the Investor hereunder, when issued, sold and delivered in accordance with
the terms of this Agreement for the consideration expressed herein, will be duly
and validly issued, fully paid and nonassessable and will be free of
restrictions on transfer, other than restrictions on transfer under this
Agreement and the Registration Rights Agreement and under applicable state and
federal securities laws. The issuance, sale and delivery of the Shares is not
subject to any preemptive rights of shareholders of the Company or to any right
of first refusal or other similar right in favor of any person.
2.6 Governmental Consents. No consent, approval, order or authorization
of, or registration, qualification, designation, declaration or filing with, any
federal, state or local governmental authority on the part of the Company or any
of its Subsidiaries is required in connection with (i) the execution, delivery
and performance of this Agreement and the Registration Rights Agreement, (ii)
the issuance, sale and delivery of the Shares, and (iii) the consummation of the
transactions contemplated by this Agreement, except for such filings required
pursuant to applicable federal and state securities laws and blue sky laws,
which filings will be effected within the required statutory period.
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2.7 Offering. Subject in part to the truth and accuracy of the
Investor's representations set forth in Section 3 of this Agreement, the offer,
sale and issuance of the Shares as contemplated by this Agreement are exempt
from the registration requirements of the Securities Act of 1933, as amended
(the "Act"), and the qualification or registration requirements of applicable
blue sky laws. Neither the Company nor any authorized agent acting on its behalf
will take any action hereafter that would cause the loss of such exemptions.
2.8 Litigation. Except as set forth in Schedule 2.8 of the Schedule of
Exceptions, there is no action, suit, proceeding or investigation pending, or to
the Company's knowledge, currently threatened against the Company or any of its
Subsidiaries that questions the validity of this Agreement, the Registration
Rights Agreement or the right of the Company to enter into such agreements or to
consummate the transactions contemplated hereby or thereby, or that might
result, either individually or in the aggregate, in any material adverse changes
in the business, assets or condition of the Company or any of its Subsidiaries,
financially or otherwise, or any change in the current equity ownership of the
Company or any of its Subsidiaries. Except as set forth in Schedule 2.8, there
is no action, suit, proceeding or investigation pending, or to the Company's
knowledge, currently threatened against the Company or any of its Subsidiaries,
or any of their respective properties or rights, before any court or by or
before any governmental body or any arbitration board or tribunal, nor is there
any judgment, decree, injunction or order of any court, governmental department,
commission, agency, instrumentality or arbitrator against the Company or any of
its Subsidiaries, nor, to the Company's best knowledge, does there exist any
basis for any action, suit, investigation or proceeding against the Company or
any of its Subsidiaries, in each case which, either individually or in the
aggregate, could result in any material adverse effect on the business, assets
or condition of the Company or any of its Subsidiaries. The foregoing includes,
without limitation, actions pending or threatened, to the Company's knowledge,
against any of their respective employees, involving his or her prior
employment, any non-compete or similar agreement binding such person, or use in
connection with the business of the Company or any or its Subsidiaries, of any
information or techniques which are proprietary to his or her former employers.
Neither the Company nor any of its Subsidiaries are a party or subject to the
provisions of any order, writ, injunction, judgment or decree of any court or
government agency or instrumentality. Except as set forth in Schedule 2.8, there
is no action, suit, proceeding or investigation by the Company or any of its
Subsidiaries currently pending or that the Company or any of its Subsidiaries
intends to initiate.
2.9 Proprietary Information. Each employee, officer and consultant of
the Company and each of its Subsidiaries has executed proprietary information
and inventions agreements. The Company, after reasonable investigation, is not
aware that such employees, officers or consultants are in violation thereof or
have otherwise disclosed or utilized any trade secrets or proprietary or
confidential information or documentation of any third party and the Company
will use its best efforts to prevent any such violation, disclosure or
utilization. To the Company's knowledge, no person employed by the Company or
any of its Subsidiaries has employed any trade secrets or any proprietary or
confidential information or documentation of any former employer, or has
violated any non-compete or confidential relationship that such person may have
had with any third party, in connection with the development and sale of any of
the products or services of the Company or any of its Subsidiaries.
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2.10 Patents and Trademarks. The Company and each of its Subsidiaries
owns or possesses the requisite licenses or rights to use all patents, patent
applications, patent rights, inventions, know-how, concepts, computer programs,
technical data, trade secrets, trademarks, trademark applications, service
marks, service names, trade names and copyrights ("Intellectual Property") to
its knowledge necessary to enable it to conduct its business as now operated;
there is no lien, encumbrance, claim or action by any person pertaining to, or
proceeding pending, or to the Company's knowledge threatened, which challenges
the right of the Company or of a Subsidiary with respect to any Intellectual
Property necessary to enable it to conduct its business as now operated. To the
Company's knowledge, the Company's or its Subsidiaries' current and intended
products, services and processes do not infringe on any Intellectual Property or
other rights held by any person and the Company is unaware of any facts or
circumstances which might give rise to any of the foregoing. The Company is not
aware of any independent development nor of any misappropriation of the
Intellectual Property. The Company is not aware that any of its employees, or
employees of any Subsidiary, are obligated under any contract (including
licenses, covenants or commitments of any nature) or other agreement, or subject
to any judgment, decree or order of any court or administrative agency, that
would interfere with the use of his or her best efforts to promote the interests
of the Company or its Subsidiaries or that would conflict with their respective
businesses. The Company does not believe it is or will be necessary to utilize
any inventions of any of its employees (or people it currently intends to hire)
made prior to their employment by the Company or any Subsidiary, except for
inventions that have been assigned or licensed to the Company or any Subsidiary
as of the date hereof, and has taken steps reasonably necessary to protect the
Company's and each Subsidiary's right, title and interest in and to the
Intellectual Property, including, without limitation, the execution of
appropriate confidentiality agreements. Neither the Company nor any of its
Subsidiaries have sold, licensed, leased or otherwise transferred or granted any
interest or rights to any of the Intellectual Property other than in the
ordinary course of business.
2.11 Compliance with Other Instruments. The Company and its
Subsidiaries are not in violation in any material respect of any provision of
their respective certificates of incorporation or bylaws or any instrument,
judgment, order, writ, decree or contract, statute, rule or regulation to which
the Company or any of its Subsidiaries are subject and a violation of which
would have a material adverse effect on the condition, financial or otherwise,
or operations of the Company or any of its Subsidiaries. The Company and its
Subsidiaries are not in violation of any note, bond, mortgage, indenture, deed
of trust, license, franchise, permit, lease, contract, agreement or other
instrument, commitment or obligation to which the Company or of its Subsidiaries
is a party, or by which the Company or any of its Subsidiaries or any of their
respective properties are bound or affected and a violation of which would have
a material adverse effect on the business, properties or condition, financial or
otherwise, or operations of the Company or any of its Subsidiaries. The
execution, delivery and performance of this Agreement and the Registration
Rights Agreement and the consummation of the transactions contemplated hereby
and thereby will not result in any such violation, or be in conflict with or
constitute, with or without the passage of time and giving of notice, either a
default under any such provision or an event that results in the creation of any
lien, charge or encumbrance upon any assets of the Company or any of its
Subsidiaries or the suspension, revocation, impairment, forfeiture or nonrenewal
of any material permit, license, authorization or approval applicable to the
Company or its Subsidiaries or their respective businesses or operations or any
of their respective assets or properties.
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2.12 Agreements; Action. Except as provided in Schedule 2.12 of the
Schedule of Exceptions and agreements expressly contemplated hereby:
(a) there are no agreements, understandings or proposed transactions
between the Company nor any of its Subsidiaries and any of their respective
officers, directors, shareholders or any affiliates thereof; and
(b) there are no agreements, understandings, instruments, contracts,
proposed transactions, judgments, orders, writs or decrees to which the Company
or any of its Subsidiaries are a party or by which it or any of them is bound
that may involve (i) obligations (contingent or otherwise) of, or payments to
the Company or any of its Subsidiaries, in excess of $100,000, other than
obligations of, or payments to, the Company or any of its Subsidiaries arising
from purchase or sale agreements entered into in the ordinary course of
business, (ii) the license of any patent, copyright, trade secret or other
proprietary right to or from the Company or any of its Subsidiaries, other than
licenses arising from the purchase of "off the shelf" or other standard
products, or (iii) provisions restricting or affecting the development or
distribution of the Company's or any of its Subsidiaries' products or services;
and
(c) neither the Company nor any of its Subsidiaries have (i) declared
or paid any dividends or authorized or made any distribution upon or with
respect to any class or series of its capital stock, (ii) incurred any
indebtedness for money borrowed or any other liabilities individually in excess
of $100,000 or, in the case of indebtedness and/or liabilities to any one third
party individually less than $100,000, in excess of $200,000 in the aggregate,
(iii) made any loans or advances to any person, other than ordinary advances for
travel expenses, or (iv) sold, exchanged or otherwise disposed of any of its
assets or rights, other than the sale of its inventory in the ordinary course of
business.
(d) for the purposes of subsections (b) and (c) above, all
indebtedness, liabilities, agreements, understandings, instruments, contracts
and proposed transactions involving the same person or entity (including persons
or entities the Company has reason to believe are affiliated therewith) shall be
aggregated for the purpose of meeting the individual minimum dollar amounts of
such subsections.
2.13 Related-Party Transactions. Except as set forth in Schedule 2.13
of the Schedule of Exceptions, no employee, officer or director of the Company
nor any of its Subsidiaries or member of his or her immediate family is indebted
to the Company or any of its Subsidiaries, nor is the Company or any of its
Subsidiaries indebted (or committed to make loans or extend or guarantee credit)
to any of them. To the best of the Company's knowledge, none of such persons has
any direct or indirect ownership interest in any firm or corporation with which
the Company or any of its Subsidiaries are affiliated or with which the Company
or any of its Subsidiaries has a business relationship, or any firm or
corporation that competes with the Company or any of its Subsidiaries, except
that employees, officers or directors of the Company and members of their
immediate families may own stock in publicly traded companies that may compete
with the Company. No member of the immediate family of any officer or director
of the Company or any of its Subsidiaries is directly or indirectly interested
in any material contract with the Company.
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2.14 SEC Documents; Financial Statements. The Company has filed all
reports, schedules, forms, statements and other documents required to be filed
by it with the United Securities and Exchange Commission (the "SEC") pursuant to
the reporting requirements of the Securities Exchange Act of 1934, as amended
(the "34 Act") (all of the foregoing filed prior to the date hereof and all
exhibits included therein, financial statements and schedules thereto and
documents incorporated by reference therein being hereinafter referred to as the
"SEC Documents"). The Company has made available to the Investor true and
complete copies of the SEC Documents and agrees to deliver or make available to
the Investor true and complete copies of any additional SEC Documents upon
request. The SEC Documents, as of their respective dates, complied in all
material respects with the requirements of the 34 Act and the rules and
regulations of the SEC promulgated thereunder applicable to the SEC Documents.
The financial statements of the Company and its Subsidiaries included in the SEC
Documents (the "Financial Statements") were prepared in accordance with
generally accepted accounting principles applied on a consistent basis
throughout the periods indicated and with each other, except that unaudited
Financial Statements may not contain all footnotes required by generally
accepted accounting principles. The Financial Statements fairly present the
financial condition and operating results of the Company and its Subsidiaries as
of the dates, and for the periods, indicated therein, subject in the case of
unaudited Financial Statements to normal year-end audit adjustments. Except as
set forth in the Financial Statements, the Company has no material liabilities,
contingent or otherwise, other than (i) liabilities incurred in the ordinary
course of business subsequent to December 31, 1998 and (ii) obligations under
contracts and commitments incurred in the ordinary course of business and not
required under the 34 Act or the rules and regulations of the SEC promulgated
thereunder to be reflected in the SEC Documents, which, in both cases,
individually or in the aggregate, are not material to the financial condition or
operating results of the Company or any of its Subsidiaries. Except as disclosed
in the Financial Statements, neither the Company nor any of its Subsidiaries is
a guarantor or indemnitor of any indebtedness of any other person, firm or
corporation. The Company and its Subsidiaries maintain and will continue to
maintain a standard system of accounting established and administered in
accordance with generally accepted accounting principles.
2.15 Changes. Except as set forth in Schedule 2.15 of the Schedule of
Exceptions, since December 31, 1998, there has not been:
(a) any change in the assets, liabilities, financial condition or
operating results of the Company or any of its Subsidiaries from that reflected
in the Financial Statements, except changes in the ordinary course of business
that have not been, in the aggregate, materially adverse;
(b) any damage, destruction or loss, whether or not covered by
insurance, materially and adversely affecting the assets, properties, financial
condition, operating results or business of the Company or any of its
Subsidiaries;
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(c) any waiver by the Company or any of its Subsidiaries of a valuable
right or of a material debt owed to it;
(d) any satisfaction or discharge of any lien, claim or encumbrance or
payment of any obligation by the Company or any of its Subsidiaries, except in
the ordinary course of business and that is not material to the assets,
properties, financial condition, operating results or business of the Company or
any of its Subsidiaries;
(e) any material change or amendment to a material contract or
arrangement by which the Company or any of its Subsidiaries or any of their
respective assets or properties is bound or subject;
(f) any material change in any compensation arrangement or agreement
with any employee of the Company or any of its Subsidiaries;
(g) any change or amendment to the respective certificates of
incorporation, bylaws or similar organizational documents of the Company or any
of its Subsidiaries;
(h) any incurrence of liability (absolute or contingent) for borrowed
money that would be required to be disclosed on a balance sheet as of the date
hereof prepared in accordance with generally accepted accounting principles,
except current liabilities incurred, and liabilities under contracts entered
into, in the ordinary course of business;
(i) any grant of a security interest, mortgage, pledge, or other lien
on any of its assets, tangible or intangible, other than liens of current real
property taxes not yet due and payable;
(j) any disposition of any material assets or properties, including,
without
limitation, Intellectual Property or Proprietary Information;
(k) any receipt of notification of cancellation, or any cancellation or
waiver of rights which, individually or in the aggregate, are material with
respect to any currently existing agreement, contract right or understanding;
(l) any agreement or transaction except in the ordinary course of
business;
(m) any issuance of capital stock, bonds or other corporate securities;
or
(n) any agreement or commitment by the Company or any of its
Subsidiaries to do any of the things described in this Section 2.15.
2.16 Tax Returns.
(a) The Company and each of its Subsidiaries has duly and timely filed
or caused to be filed (or obtained valid, currently effective extensions for
filing) all Federal, state, local and foreign income, franchise, excise,
payroll, sales and use, property and withholding tax returns, reports, estimates
and information and other statements or returns (collectively, "Tax Returns")
required to be filed by or on behalf of it pursuant to any applicable federal,
state, local or foreign tax laws for all years and periods for which such Tax
Returns have
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<PAGE>
become due. All such filed Tax Returns were correct in all material respects as
filed and correctly reflect the Federal, state, local and foreign income,
franchise, excise, payroll, sales and use, property, withholding and other
taxes, duties, imposts and governmental charges (and charges in lieu of any
thereof), together with interest, additions to tax and penalties (collectively,
"Taxes") required to be paid or collected by (or allocable to) the Company or
any of its Subsidiaries, as the case may be.
(b) The Company and each of its Subsidiaries (i) have paid or caused to
be paid all Taxes required to be paid through the date hereof (or obtained
currently effective deferrals or extensions of such payment obligations) and
(ii) have properly accrued on their respective financial statements all Taxes
for any period from the date of the last reporting period covered by any Tax
Returns which are currently due.
(c) There is no pending or potential audit, dispute or claim concerning
any tax return or tax liability of the Company or any of its Subsidiaries as to
which the Company or any of its Subsidiaries either (i) have been notified in
writing by any tax authority or (ii) have knowledge based on personal contact
with any agent of such authority.
2.17 Compliance with Laws; Permits. The Company and each of its
Subsidiaries have all franchises, permits, licenses and any similar authority
("Permits") necessary for the conduct of their respective businesses, the lack
of which could materially and adversely affect the business, properties or
financial condition of the Company or any of its Subsidiaries. Neither the
Company nor any of its Subsidiaries are in violation of or in default under (i)
any of such Permits, (ii) any order, judgment or decree of any court,
arbitration panel or other tribunal or (iii) any administrative order,
rulemaking, procedure, policy or other published declaration of any Federal,
state or local governmental agency or other authority, except as such violations
or defaults would not, singly or in the aggregate, have a material adverse
effect on the business, properties or condition, financial or otherwise, of the
Company or any of its Subsidiaries. The businesses and activities of the Company
and each of its Subsidiaries have been and are being conducted in compliance
with all provisions of all applicable federal, state and local statutes,
ordinances, rules and regulations.
2.18 Environmental and Safety Laws. Neither the Company nor any of its
Subsidiaries are in violation of any applicable statute, law or regulation
relating to the environment or occupational health and safety, and no material
expenditures are or will be required in order to comply with any such existing
statute, law or regulation.
2.19 Disclosure. The Company has fully provided the Investor with all
the information that the Investor has requested for deciding whether to purchase
the Shares and all information that the Company believes is reasonably necessary
to enable such Investor to make such decision. Neither this Agreement (including
all the exhibits and schedules hereto) nor the SEC documents nor any other
statements or certificates made or delivered in connection herewith contains any
untrue statement of a material fact or omits to state a material fact necessary
to make the statements herein or therein not misleading in light of the
circumstances under which they were made.
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2.20 Registration Rights. Except as provided in Schedule 2.20 of the
Schedule of Exceptions and in the Registration Rights Agreement, the Company has
not granted or agreed to grant any registration rights, including piggyback
rights, to any person or entity.
2.21 Corporate Documents; Minute Books. The Restated Certificate of
Incorporation and Bylaws of the Company and any organizational documents
provided with respect to its Subsidiaries are in the form previously provided to
special counsel for the Investor. The minute books of the Company available to
the Investor contain a complete summary of all meetings of directors and
stockholders since the time of incorporation and reflect all transactions
referred to in such minutes accurately in all material respects.
2.22 Title to Property and Assets. Except as set forth in Schedule 2.22
of the Schedule of Exceptions, the Company and each of its Subsidiaries has good
and marketable title to property and assets owned by the Company or any
Subsidiary, and such assets are free and clear of all mortgages, liens, loans
and encumbrances, except (i) as reflected in the Financial Statements, (ii) for
statutory liens for the payment of current taxes that are not yet delinquent,
and (iii) for liens, encumbrances and security interests that arise in the
ordinary course of business and minor defects in title, none of which,
individually or in the aggregate, materially impair the ownership or use of such
property or assets. With respect to the property and assets it leases, the
Company and its Subsidiaries are in material compliance with such leases and, to
its knowledge, holds a valid leasehold interest free of any liens, claims or
encumbrances, subject to clauses (i)-(iii).
2.23 Insurance. The Company and each of its Subsidiaries has fire,
casualty, liability, workers compensation and other insurance policies with such
coverages in amounts (subject to reasonable deductibles) customary for companies
similarly situated. All premiums with respect to such insurance policies have
been paid and no notice of cancellation or termination has been received with
respect to any such policy. All policies are in full force and effect.
2.24 Employee Benefit Plans. Schedule 2.24 of the Schedule of
Exceptions lists all employee benefit plans as such term is defined in Section
3(3) of the Employee Retirement Income Security Act of 1974, as amended
("ERISA"), that the Company or its Subsidiaries maintains or contributes to, for
the benefit of any current or former employee of the Company or Subsidiaries.
Each employee benefit plan listed in Schedule 2.24 (and each related trust or
insurance contract) complies in form and in operation in all respects with the
applicable requirements of ERISA, the Internal Revenue Code and applicable laws.
All required reports and descriptions have been filed or distributed
appropriately with respect to each employee benefit plan. All contributions
(including all employer contributions and employee salary reduction
contributions) which are due have been paid to each employee benefit plan and
all contributions due have been paid to each employee benefit plan or accrued in
accordance with the past custom and practice of the Company. All premiums or
other payments due and payable have been paid with respect to each employee
benefit plan.
2.25 Labor Agreements and Actions. Neither the Company nor any of its
Subsidiaries are or have ever been bound by or subject to (and none of their
respective assets or properties are or have ever been bound by or subject to)
any written or oral, express or implied, contract, commitment or arrangement
with any labor union, and no labor union has requested or, to the Company's
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knowledge, has sought to represent any of the employees, representatives or
agents of the Company or any of its Subsidiaries. There is no strike or other
labor dispute involving the Company or any Subsidiary pending, or to the
Company's knowledge, threatened, that could have a material adverse effect on
the assets, properties, financial condition, operating results or business of
the Company or such Subsidiary, nor is the Company aware of any labor
organization activity involving its employees. The Company is not aware that any
officer or key employee, or that any group of key employees, intends to
terminate their employment with the Company or any Subsidiary, nor does the
Company have a present intention to terminate the employment of any of the
foregoing. Except as set forth in Schedule 2.25 of the Schedule of Exceptions,
the employment of each officer and employee of the Company and its Subsidiaries
is terminable at the will of the Company or its Subsidiary, as the case may be.
Except as set forth in Schedule 2.25 in the Schedule of Exceptions, neither the
Company nor any of its Subsidiaries is a party to or bound by any currently
effective employment contract, deferred compensation agreement, bonus plan,
incentive plan, profit sharing plan, retirement agreement or other employee
compensation agreement. To its knowledge after reasonable inquiry, the Company
and its Subsidiaries have complied in all material respects with all applicable
state and federal equal employment opportunity and other laws related to
employment.
2.26 Year 2000. All of the Company's and its Subsidiaries' products
currently being sold and under development and all computer software and
hardware (including microcode, firmware, system and application programs, files,
databases, computer services and microcontrollers), including those embedded in
computer and noncomputer equipment contained in the Company's and its
Subsidiaries' products currently being sold and under development are Year 2000
Compliant, except to the extent that they may be used or interfaced with other
software, data or operating systems that are not Year 2000 Compliant. Except as
set forth in Section 2.26 of the Schedule of Exceptions, the business operations
of the Company and its Subsidiaries, including internal business systems and
external customer and provider compliance, are expected to be Year 2000
Compliant as of August 31, 1999. To its knowledge, all of the Company's and its
Subsidiaries' internal computer systems are Year 2000 Compliant and have been
represented as such by the respective vendors, except that the Company makes no
such representation with respect to off-the-shelf software that is used in the
Company's and its Subsidiaries' internal computer systems the failure or
malfunctioning of which would not have a material adverse effect on the Company
and its Subsidiaries. Some non-critical systems may not be addressed until after
January 1, 2000, but no such lack of Year 2000 Compliance, either individually
or in the aggregate, shall have a material adverse affect or the business,
operations or financial condition of the Company or any of its Subsidiaries. For
purposes of this Agreement, "Year 2000 Compliant" shall mean that such products
and data and information systems and any such data, information or other files
or software it uses, individually and in combination, completely and accurately
record, store, process, calculate and present data involving dates before, on or
after January 1, 2000; specifically: (i) no value for a current date will cause
any interruption in operation; (ii) date-based functionality will behave
consistently when dealing with dates before, on or after January 1, 2000; (iii)
no abnormal endings or incorrect results will be produced when working with
dates before, on or after January 1, 2000; (iv) in all interfaces and data
storage, the century will be specified explicitly and will be unambiguously
derived; and (v) year 2000 will be recognized as a leap year.
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3. Representations and Warranties of the Investors. The Investor hereby
represents, warrants and covenants that:
3.1 Authorization. The Investor has full power and authority to enter
into this Agreement and the Registration Rights Agreement, and each such
agreement constitutes its valid and legally binding obligation, enforceable in
accordance with its terms, except (i) as limited by applicable bankruptcy,
insolvency, reorganization, moratorium and other laws of general application
affecting enforcement of creditors' rights generally, (ii) as limited by laws
relating to the availability of specific performance, injunctive relief or other
equitable remedies, and (iii) to the extent the indemnification provisions
contained in the Registration Rights Agreement may be limited by applicable
federal or state securities laws.
3.2 Purchase Entirely for Own Account. This Agreement is made with the
Investor in reliance upon the Investor's representation to the Company, which by
the Investor's execution of this Agreement the Investor hereby confirms, that
the Shares to be received by the Investor will be acquired for investment for
the Investor's own account, not as a nominee or agent, and not with a view to
the resale or distribution of any part thereof, and that the Investor has no
present intention of selling, granting any participation in or otherwise
distributing the same. By executing this Agreement, the Investor further
represents that the Investor does not have any contract, undertaking, agreement
or arrangement with any person to sell, transfer or grant participations to such
person or to any third person, with respect to any of the Shares.
3.3 Disclosure of Information. The Investor believes it has received
all the information it considers necessary or appropriate for deciding whether
to purchase the Shares. The Investor further represents that it has had an
opportunity to ask questions and receive answers from the Company regarding the
terms and conditions of the offering of the Shares and the business, properties,
prospects and financial condition of the Company. The foregoing, however, does
not limit or modify the representations and warranties of the Company in Section
2 of this Agreement or the right of the Investor to rely thereon.
3.4 Investment Experience. The Investor acknowledges that it is able to
fend for itself, can bear the economic risk of its investment and has such
knowledge and experience in financial or business matters that it is capable of
evaluating the merits and risks of the investment in the Shares. The Investor
also represents it has not been organized for the purpose of acquiring the
Shares.
3.5 Accredited Investor. The Investor is an "accredited investor"
within the meaning of SEC Rule 501 of Regulation D, as presently in effect.
3.6 Restricted Securities. The Investor understands that the Shares it
is purchasing are characterized as "restricted securities" under the federal
securities laws inasmuch as they are being acquired from the Company in a
transaction not involving a public offering and that under such laws and
applicable regulations such shares may be resold without registration under the
Act only in certain limited circumstances. In the absence of an effective
registration statement covering the Shares or an available exemption from
registration under the Act, the Shares must be held indefinitely. In this
connection, such Investor represents that it is familiar with SEC Rule 144, as
presently in effect, and understands the resale limitations imposed thereby and
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<PAGE>
by the Act, including without limitation the Rule 144 condition that current
information about the Company be available to the public. Without in any way
limiting the representations set forth above, the Investor further agrees that
if Investor makes any disposition of all or any portion of the Shares, not
pursuant to Rule 144 or a registration statement under the Act covering such
proposed disposition in accordance with such registration statement, then the
Investor shall notify the Company of such proposed disposition and shall furnish
the Company with a statement of the circumstances surrounding the disposition
and if requested by the Company, the Investor shall have furnished the Company
with an opinion of counsel, reasonably satisfactory to the Company that such
disposition is exempt from registration or qualification requirements. It is
agreed that the Company will not require opinions of counsel for transactions
made pursuant to Rule 144 or a registration statement except in unusual
circumstances.
3.7 Legends. It is understood that the certificates evidencing the
Shares may bear one or all of the following legends:
(a) "These securities have not been registered under the Securities Act
of 1933, as amended. They may not be sold, offered for sale, pledged or
hypothecated in the absence of a registration statement in effect with respect
to the securities under such Act or an opinion of counsel satisfactory to the
Company that such registration is not required or unless sold pursuant to Rule
144 of such Act."
(b) Any legend required by state securities laws or the securities laws
of Puerto Rico.
3.8 Tax Advisors. The Investor has reviewed with such Investor's own
tax advisors the federal, state and local tax consequences to the Investor of
this investment, where applicable, and the transactions contemplated by this
Agreement. The Investor is relying solely on such advisors and not on any
statements or representations of the Company or any of its agents, except for
the representation and warranties contained in this Agreement or the Company's
SEC filings (with respect to such filings to the same extent as any other
Investor) and understands that the Investor (and not the Company) shall be
responsible for such Investor's own tax liability that may arise as a result of
this investment or the transactions contemplated by this Agreement.
3.9 Investor Counsel. The Investor acknowledges that such Investor has
had the opportunity to review this Agreement, the exhibits and the schedules
attached hereto and the transactions contemplated by this Agreement with the
Investor's own legal counsel. The Investor is relying solely on the Investor's
legal counsel and not on any statements or representations of the Company,
except for the representation and warranties contained in this Agreement or the
Company's SEC filings (with respect to such filings, to the same extent as any
other Investor) or any of the Company's agents, including Brobeck, Phleger &
Harrison LLP, for legal advice with respect to this investment or the
transactions contemplated by this Agreement.
4. Conditions of Investor's Obligations at Closing. The obligations of
the Investor under subsection 1.1 of this Agreement are subject to the
fulfillment on or before the Closing of each of the following conditions:
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4.1 Representations and Warranties. The representations and warranties
of the Company contained in Section 2 shall be true on and as of the Closing
with the same effect as though such representations and warranties had been made
on and as of the date of such Closing.
4.2 Performance. The Company shall have performed and complied with all
agreements, obligations and conditions contained in this Agreement that are
required to be performed or complied with by it on or before the Closing.
4.3 Compliance Certificate. An officer of the Company shall deliver to
the Investor at the Closing a certificate stating that the conditions specified
in Sections 4.1 and 4.2 have been fulfilled.
4.4 Qualifications. All authorizations, approvals or permits, if any,
of any governmental authority or regulatory body of the United States or of any
state that are required in connection with the lawful issuance and sale of the
Shares pursuant to this Agreement shall be duly obtained and effective as of the
Closing.
4.5 Proceedings and Documents. All corporate and other proceedings in
connection with the transactions contemplated at the Closing and all documents
incident thereto shall be reasonably satisfactory in form and substance to
Investor's special counsel and the Investor shall have received all such
counterpart original and certified or other copies of such documents as it may
reasonably request.
4.6 Opinion of Company Counsel. The Investor shall have received from
Brobeck, Phleger & Harrison LLP, counsel for the Company, an opinion, dated as
of the Closing, in the form attached hereto as Exhibit B.
4.7 Registration Rights Agreement. The Company and the Investor shall
have entered into the Registration Rights Agreement in the form attached as
Exhibit A.
4.8 Delivery of Shares. The Company shall deliver to the Investor,
concurrent with the Closing, a certificate or certificates, in the name of
Investor, representing the Shares as specified in Section 1.2 hereof.
4.9 Amendment to TeleCell Agreement. The Company or a Subsidiary and
TeleCell Systems, Inc., and affiliate of the Investor, shall have entered into
he Amendment to the Agreement dated November 17, 1998.
5. Conditions of the Company's Obligations at Closing. The obligations
of the Company to the Investor under this Agreement are subject to the
fulfillment on or before the Closing of each of the following conditions by the
Investor:
5.1 Representations and Warranties. The representations and warranties
of the Investor contained in Section 3 shall be true on and as of the Closing
with the same effect as though such representations and warranties had been made
on and as of the Closing.
5.2 Payment of Purchase Price. The Investor shall have delivered the
purchase price specified in Section 1.1.
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5.3 Qualifications. All authorizations, approvals or permits, if any,
of any governmental authority or regulatory body of the United States or of any
state that are required in connection with the lawful issuance and sale of the
Shares pursuant to this Agreement shall be duly obtained and effective as of the
Closing.
5.4 Registration Rights Agreement. The Company and the Investor shall
have entered into the Registration Rights Agreement in the form attached as
Exhibit A.
6. Indemnification.
6.1 Indemnification Obligations of the Company. The Company agrees to
and will indemnify, defend and hold the Investor and its transferees harmless
from and against all demands, claims, actions or cause of action, assessments,
losses, damages, liabilities, costs and expenses, including without limitation,
interest, penalties and reasonable attorney's fees and expenses (hereinafter
collectively referred to as "Damages"), resulting from, imposed upon or incurred
by the Investor or its transferee, by reason of, resulting from or arising out
of a breach of any representation, covenant or agreement of the Company
contained or made pursuant to this Agreement. 6.2 Indemnification Obligations of
the Investor. The Investor agrees to and will indemnify, defend and hold the
Company harmless from and against all Damages resulting from, imposed upon or
incurred by the Company by reason of or resulting from or arising out of a
breach of any representation, warranty, covenant or agreement of the Investor
contained in or made pursuant to this Agreement.
7. Miscellaneous.
7.1 Survival. The warranties, representations and covenants of the
Company and the Investor contained in or made pursuant to this Agreement shall
survive the execution and delivery of this Agreement and the Closing and shall
in no way be affected by any investigation of the subject matter thereof made by
or on behalf of the Investor or the Company.
7.2 Successors and Assigns. Except as otherwise provided herein, the
terms and conditions of this Agreement shall inure to the benefit of and be
binding upon the respective successors and assigns of the parties (including
transferees of any Shares). Nothing in this Agreement, express or implied, is
intended to confer upon any party, other than the parties hereto or their
respective successors and assigns, any rights, remedies, obligations or
liabilities under or by reason of this Agreement, except as expressly provided
in this Agreement.
7.3 Governing Law. This Agreement shall be governed by and construed
under the laws of the State of New York as applied to agreements among New York
residents entered into and to be performed entirely within New York.
7.4 Titles and Subtitles. The titles and subtitles used in this
Agreement are used for convenience only and are not to be considered in
construing or interpreting this Agreement.
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7.5 Notices. All notices required or permitted hereunder shall be in
writing and shall be deemed effectively given: (i) upon personal delivery to the
party to be notified, (ii) when sent by confirmed telex or facsimile if sent
during normal business hours of the recipient, if not, then on the next business
day; (iii) five days after having been sent by registered or certified mail,
return receipt requested, postage prepaid; or (iv) one day after deposit with a
nationally recognized overnight courier, specifying next day delivery, with
written verification of receipt. All communications shall be sent to the address
as set forth on the signature page hereof or at such other address as such party
may designate by ten days advance written notice to the other parties hereto and
if to the Investor, with a copy to Squadron, Ellenoff, Plesent & Sheinfeld, LLP,
551 Fifth Avenue, New York, New York 10176; Attention: Stephen J. Gulotta, Jr.,
Esq.; facsimile: (212) 697-6686.
7.6 Finder's Fee. Each party represents that it neither is nor will be
obligated for any finders' fee or commission in connection with this
transaction. The Investor agrees to indemnify and to hold harmless the Company
from any liability for any commission or compensation in the nature of a
finders' fee (and the costs and expenses of defending against such liability or
asserted liability) for which the Investor or any of its officers, partners,
employees or representatives is responsible. The Company agrees to indemnify and
hold harmless the Investor from any liability for any commission or compensation
in the nature of a finders' fee (and the costs and expenses of defending against
such liability or asserted liability) for which the Company or any of its
officers, employees or representatives is responsible.
7.7 Expenses. Irrespective of whether the Closing is effected, each
party shall pay all costs and expenses that it incurs with respect to the
negotiation, execution, delivery and performance of this Agreement, except that
the Company shall pay for up to $10,000 of the reasonable costs and expenses
actually incurred by the Investor, upon presentation of a bill reflecting such
costs and expenses. If any action at law or in equity is necessary to enforce or
interpret the terms of this Agreement or the Registration Rights Agreement, the
prevailing party shall be entitled to reasonable attorney's fees, costs and
necessary disbursements in addition to any other relief to which such party may
be entitled.
7.8 Amendments and Waivers. Any term of this Agreement may be amended
and the observance of any term of this Agreement may be waived (either generally
or in a particular instance and either retroactively or prospectively), only
with the written consent of the Company and the Investor. Any amendment or
waiver effected in accordance with this paragraph shall be binding upon each
holder of the Shares purchased under this Agreement at the time outstanding,
each future holder of all the Shares and the Company.
7.9 Severability. If one or more provisions of this Agreement are held
to be unenforceable under applicable law, such provision shall be excluded from
this Agreement and the balance of the Agreement shall be interpreted as if such
provision were so excluded and shall be enforceable in accordance with its
terms.
7.10 Entire Agreement. This Agreement and the documents referred to
herein constitute the entire agreement among the parties and no party shall be
liable or bound to any other party in any manner by any warranties,
representations or covenants except as specifically set forth herein or therein.
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7.11 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, the parties have executed this Stock
Purchase Agreement as of the date first above written.
SOFTNET SYSTEMS, INC.
By: /s/ Steven M. Harris
----------------------------------
Steven M. Harris
Vice President and Secretary
Address: 650 Townsend Street, Suite 225
San Francisco, CA 94103
INVESTOR:
HECTOR R. GONZALEZ
-------------------------------------------
/s/ Hector R. Gonzalez
Address:
--------------------------------
--------------------------------
18
Exhibit 10.30
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT (this "Agreement"), is made
as of April 12, 1999, by and among SoftNet Systems, Inc., a New York corporation
(the "Company"), with headquarters located at 650 Townsend Street, Suite 225,
San Francisco, CA 94103 and Hector R. Gonzalez (the "Initial Purchaser").
WHEREAS, in connection with the Common Stock Purchase Agreement dated
of even date herewith by and among the Company and the Initial Purchaser (the
"Stock Purchase Agreement"), the Company has agreed, upon the terms and subject
to the conditions contained therein, to issue and sell to the Initial Purchaser
660,000 shares of common stock of the Company (the "Shares"), par value $0.01
per share (the "Common Stock").
WHEREAS, to induce the Initial Purchaser to execute and deliver the
Stock Purchase Agreement, the Company has agreed to provide certain registration
rights under the Securities Act of 1933, as amended, and the rules and
regulations thereunder, or any similar successor statute (collectively, the
"Securities Act"), and applicable state securities laws.
NOW THEREFORE, in consideration of the premises and the mutual
covenants contained herein and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the Company, and the
Initial Purchaser hereby agree as follows:
ARTICLE I
DEFINITIONS
1.1 Definitions. As used in this Agreement, the following terms shall
have the following meanings:
(a) "Purchaser" means, collectively, the Initial Purchaser and any
transferees or assignees who agree to become bound by the provisions of this
Agreement in accordance with Article IX hereof or who otherwise take rights
under this Agreement in accordance with the terms hereof.
(b) "register," "registered," and "registration" refer to a
registration effected by preparing and filing a Registration Statement or
Statements in compliance with the Securities Act and pursuant to Rule 415 under
the Securities Act or any successor rule providing for offering securities on a
continuous basis ("Rule 415"), and the declaration or ordering of effectiveness
of such Registration Statement by the United States Securities and Exchange
Commission (the "SEC").
(c) "Registrable Securities" means the Common Stock issued pursuant to
the Stock Purchase Agreement, and any shares of capital stock issued or
issuable, from time to time (with any adjustments) on or in exchange for or
otherwise with respect to the Common Stock or any other Registrable Securities.
<PAGE>
(d) "Registration Statement" means any registration statement of the
Company under the Securities Act subject to or pursuant to Article II or another
provision of this Agreement, as applicable.
1.2 Capitalized Terms. Capitalized terms used herein and not otherwise
defined herein shall have the respective meanings set forth in the Stock
Purchase Agreement.
ARTICLE II
REGISTRATION
2.1 Demand Registration. Beginning on July 1, 1999, if the Purchaser
holds at least 200,000 shares of Common Stock, the Purchaser shall have the
right to request that the Company prepare, and file with the SEC a Registration
Statement on Form S-3 covering the resale of all of the Registrable Securities
(a "Demand Registration"). The Registration Statement shall have a minimum
aggregate offering price to the public of $2,000,000. The Company shall send to
all other Purchasers, if any, written notice of such demand and if any such
Purchasers respond within fifteen (15) days after the effective date of such
notice (in accordance with Section 2.6 below), the Company shall include all
Registrable Securities requested by any such Purchase to be registered in the
Demand Registration in accordance with this Section 2.1. The Registration
Statement (and each amendment or material supplement thereto, and each request
for acceleration of effectiveness thereof) shall be provided to (and subject to
the approval of (which approval shall not be unreasonably withheld or denied))
the Purchaser and its counsel prior to its filing. After receiving the
Registration Statement, the Purchaser shall provide the Company with either its
approval of the Registration Statement or its comments or corrections to the
Registration Statement within five (5) business days of receipt of the draft
Registration Statement. If the Purchaser does not respond with approval or
comments within five business days, it shall be deemed to approve the
Registration Statement. Without limiting the Company's obligations under this
Section, if Form S-3 is not available to the Company in connection with
re-sales, the Company shall file a Registration Statement on such form as is
then available to effect a registration, subject to the consent of the Purchaser
(as determined pursuant to Section 11.10 hereof) as to the form used for such
filing. The Purchaser shall have the right to request the filing of a maximum of
two (2) Registration Statements under this Section 2.1.
2.2 Underwritten Offering. If any offering pursuant to a Registration
Statement pursuant to Section 2.1 hereof involves an underwritten offering, the
Purchaser who holds a majority in interest of the Registrable Securities subject
to such underwritten offering shall have the right to select one legal counsel
to represent the Purchaser and an investment banker or bankers and manager or
managers to administer the offering, which counsel and investment banker or
bankers or manager or managers shall be reasonably satisfactory to the Company.
2.3 Registration and Permitted Delays. The Company shall file the
Registration Statement within thirty (30) days of a demand pursuant to Section
2.1 above, and shall use its best efforts to cause the Registration Statement to
become effective as soon as practicable, but in no event later than the sixtieth
(60th) day following the date of the filing of the Registration Statement,
except in instances representing Permitted Delay (as defined below); provided,
however, that if, notwithstanding such best efforts, the Registration Statement
is not declared effective on or prior to the 60th day following the date of the
filing of the Registration Statement as a result of the SEC review process, the
Company shall, so long as it continues to use such best efforts, have an
additional
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sixty (60) days to cause the registration statement to become effective. The
Company shall respond to each item of correspondence from the SEC or the staff
of the SEC relating to such registration statement as promptly as practicable.
If to the actual knowledge of a senior officer of the Company or the Company's
outside counsel the SEC and the staff of the SEC have no comments (or no further
comments) concerning such Registration Statement, the Company shall as soon as
practicable, but in any case within three (3) business days request acceleration
of effectiveness of the Registration Statement from the SEC. For purposes of
this Agreement, "Permitted Delay" shall mean the suspension of, or delay in
filing of in response to a demand, of the Registration Statement for up to one
hundred and twenty (120) days upon the good faith determination by the Company's
Board of Directors that the Company has pending or recently completed (a) a
material financing, acquisition or other extraordinary corporate transaction as
a result of which such suspension or delay is in the best interest of the
Company and the holders of its outstanding Common Stock, or (b) a registration
statement on Form S-3 relating to a primary offering representing value of
equity securities of the Company in excess of $5 million in the aggregate (a
"Primary Offering"), provided, however, that no more than one (1) such Permitted
Delay may be imposed during any period of twelve (12) consecutive months; and
provided, however that no Permitted Delay shall be imposed with respect to a
demand by the Purchaser where such Permitted Delay is not imposed on all other
stockholders, and only to the same extent it is imposed on all other
stockholders holding registration rights with respect to shares of capital stock
of the Company.
2.4 "Piggyback" Registration. Except for the registration statement on
Form S-3 for a Primary Offering, pending as of the date of the Agreement: (a)
If, after the date hereof, the Company shall file with the SEC a Registration
Statement relating to an offering for its own account or the account of others,
including a Demand Registration pursuant to Section 2.1 (unless inclusion
therein would require the consent of such other party, and the Company is
unable, despite exercise of good faith efforts, to obtain such consent) under
the 1933 Act of any of its equity securities (any such Registration Statement
other than a registration statement on Form S-4 or Form S-8 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, stock purchase or other employee benefit plans, a
"Company Registration Statement"), the Company shall send to the Purchaser
written notice of such determination and, if within fifteen (15) days after the
effective date of such notice (in accordance with Section 2.6 below), the
Purchaser shall so request in writing, the Company shall include in such Company
Registration Statement all or any part of the Registrable Securities the
Purchaser requests to be registered, except that if, in connection with any
underwritten public offering for the account of the Company the managing
underwriter(s) thereof shall impose a limitation on the number of shares of
Common Stock which may be included in a Company Registration Statement because,
in such underwriter(s)' judgment, marketing or other factors dictate such
limitation is necessary to facilitate public distribution, then the Company
shall be obligated to include in such Company Registration Statement only such
limited portion of the Registrable Securities with respect to which the
Purchaser has requested inclusion hereunder as the underwriter shall permit;
provided, however, that the Company shall not exclude any Registrable Securities
unless the Company has first excluded all outstanding securities, the holders of
which are not entitled to inclusion of such securities in such Company
Registration Statement; and provided further, however, that, after giving effect
to the immediately preceding proviso, any exclusion of Registrable Securities
shall be made pro rata with holders of other securities having the right to
include such securities in a Company Registration Statement and holders of
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securities not subject to a similar cut-back provision; and provided further,
that after giving effect to such cut back the number of Registrable Securities
of the Purchaser which may be included in such Registration Statement shall not
be less than 20% of the offered shares.
(b) If an offering in connection with which an Investor is entitled to
registration under this Section 2.4 is an underwritten offering, then each
Investor whose Registrable Securities are included in such Company Registration
Statement shall, unless otherwise agreed by the Company, offer and sell such
Registrable Securities in an underwritten offering using the same underwriter or
underwriters and, subject to the provisions of this Agreement, on the same terms
and conditions as other shares of Common Stock included in such underwritten
offering.
2.5 Eligibility for Form S-3. The Company represents and warrants that
it currently meets the requirements for the use of Form S-3 for registration of
the re-sale by the Purchaser and that the Company shall use its best efforts to
continue to meet such requirements, and that such re-sales may currently be
effected pursuant to Form S-3; the Company shall file all reports required to be
filed by the Company with the SEC in a timely manner so as to maintain such
eligibility for the use of Form S-3 and shall use its best efforts in all other
respects to maintain such eligibility.
2.6 Notices. Upon receipt of a request for a Demand Registration, the
Company shall give all other Purchasers, if any, prompt written notice of such
Demand Registration, which other Purchasers shall otherwise have the right to
participate in such Demand Registration either pursuant to (i) Section 2.1, in
the case of the Initial Purchaser, any affiliates of the Initial Purchaser, or
Purchasers holding at least 200,000 shares of Common Stock, or (ii) Section 2.4,
hereof, in the case of Purchasers not otherwise described in (i).
ARTICLE III
OBLIGATIONS OF THE COMPANY
In connection with the registration of the Registrable Securities, the
Company shall have the following obligations:
3.1 Availability of Registration Statement. The Company shall prepare
promptly and file with the SEC the Registration Statement required by Section
2.1, and use its best efforts to cause such Registration Statement relating to
Registrable Securities to become effective as soon as practicable after such
filing, and keep the Registration Statement continuously effective pursuant to
Rule 415 and available for use at all times, except as set forth herein, until
such date as is the earlier of (i) the date on which all of the Registrable
Securities have been sold (and no further Registrable Securities may be issued
in the future) and (ii) the date on which all of the Registrable Securities (in
the reasonable opinion of counsel to the Purchaser) may be immediately sold to
the public without registration and without restriction as to the number of
Registrable Securities to be sold, whether pursuant to Rule 144 or otherwise
(the "Registration Period").
3.2 Amendments to Registration Statement. The Company shall prepare and
file with the SEC such amendments (including post-effective amendments) and
supplements to a Registration Statement and the prospectus used in connection
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with the Registration Statement as may be necessary to keep the Registration
Statement effective and available for use at all times during the Registration
Period, (including, without limitation, amendments and supplements necessary in
connection with a change in the "Plan of Distribution" section in any
Registration Statement or prospectus) and, during such period, comply with the
provisions of the Securities Act with respect to the disposition of all
Registrable Securities of the Company covered by the Registration Statement
until the termination of the Registration Period or, if earlier, such time as
all of such Registrable Securities have been disposed of in accordance with the
intended methods of disposition by the seller or sellers thereof as set forth in
the Registration Statement. The Company shall cause such amendment and/or new
Registration Statement to become effective as soon as practicable following the
filing thereof.
3.3 Information. The Company shall furnish to the Purchaser upon its
written request whose Registrable Securities are included in the Registration
Statement and its legal counsel promptly after the same is prepared and publicly
distributed, filed with the SEC, or received by the Company, one copy of the
Registration Statement and any amendment thereto, each preliminary prospectus
and prospectus and each amendment or supplement thereto and, such number of
copies of a prospectus, including a preliminary prospectus, and all amendments
and supplements thereto and such other documents as the Purchaser may reasonably
request in order to facilitate the disposition of the Registrable Securities
owned (or to be owned) by the Purchaser. The Company shall promptly notify the
Purchaser of the effectiveness of any Registration Statement or post-effective
amendments thereto.
3.4 Blue Sky. The Company shall (a) register and qualify the
Registrable Securities covered by the Registration Statement under securities
laws of such jurisdictions in the United States (including Puerto Rico) as each
Purchaser who holds (or has the right to hold) Registrable Securities being
offered reasonably requests, (b) prepare and file in those jurisdictions such
amendments (including post-effective amendments) and supplements to such
registrations and qualifications as may be necessary to maintain the
effectiveness thereof and availability for use during the Registration Period,
(c) take such other actions as may be reasonably necessary to maintain such
registrations and qualifications in effect at all times during the Registration
Period, and (d) take all other actions reasonably necessary or advisable to
qualify the Registrable Securities for sale in such jurisdictions; provided,
however, that the Company shall not be required in connection therewith or as a
condition thereto to (i) qualify to do business in any jurisdiction where it
would not otherwise be required to qualify but for this Section 3.4, (ii)
subject itself to general taxation in any such jurisdiction, (iii) file a
general consent to service of process in any such jurisdiction, (iv) provide any
undertakings that cause the Company material expense or burden, or (v) make any
change in its charter or by-laws, which in each case the board of directors of
the Company determines to be contrary to the best interests of the Company and
its stockholders.
3.5 Underwriters. In the event the Purchaser, holding a majority in
interest of the Registrable Securities being offered in an offering pursuant to
a Registration Statement or any amendment or supplement thereto under Section
2.1 or 2.4 hereof, selects underwriters for the offering, the Company shall
enter into and perform its obligations under an underwriting agreement, in usual
and customary form, including, without limitation, customary indemnification and
contribution obligations, with the underwriters of such offering.
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3.6 Correction of Statements or Omissions. As soon as practicable after
becoming aware of such event, the Company shall publicly announce or notify by
facsimile the Purchaser (at the facsimile number for such Purchaser set forth on
the signature page hereto) of the happening of any event, of which the Company
has actual knowledge, as a result of which the prospectus included in the
Registration Statement, as then in effect, includes an untrue statement of a
material fact or omission to state a material fact required to be stated therein
or necessary to make the statements therein not misleading, and use its best
efforts as soon as possible to (but in any event it shall within five (5)
business days) prepare a supplement or amendment to the Registration Statement
(and make all required filings with the SEC) to correct such untrue statement or
omission if not otherwise satisfied through the filing of a report to the SEC or
otherwise pursuant to applicable securities laws (but such a supplement or
amendment or other filing shall not be required if, notwithstanding the
Company's best efforts to so prepare and file such supplement, amendment or
other filing, such a supplement, amendment or other filing is no longer required
by applicable law to correct such untrue statement or omission because such
untrue statement or omission no longer exists) and the Company shall
simultaneously (and thereafter as requested) deliver such number of copies of
such supplement or amendment to each Purchaser (or other applicable document) as
such Purchaser may request in writing. Unless such an event is publicly
announced, the Company shall not, without the consent of a Purchaser, give such
Purchaser any material non-public information, but shall inform the Purchaser
that the such prospectus includes an untrue statement of a material fact or
omission to state a material fact required to be stated therein or necessary to
make the statements therein not misleading.
3.7 Stop Orders. The Company shall use its best efforts to prevent the
issuance of any stop order or other suspension of effectiveness of a
Registration Statement, and, if such an order is issued, to obtain the
withdrawal of such order at the earliest practicable time, and the Company shall
immediately notify by facsimile the Purchaser (at the facsimile number set forth
on the signature page hereto) or, in the event of an underwritten offering, the
managing underwriters, of the issuance of such order and the resolution thereof.
3.8 Opinions of Counsel. If reasonably requested by the Purchaser in
writing (taking into account any applicable legal precedent and any SEC staff
positions), the Company shall use its reasonable efforts to furnish, on the date
of effectiveness of the Registration Statement and thereafter from time to time
on such dates as the Purchaser may reasonably request (a) an opinion, dated as
of such applicable date, from counsel representing the Company addressed to the
Purchaser and in form, scope and substances as is customarily given in an
underwritten public offering and reasonably satisfactory to such counsel and (b)
a letter, dated as of such applicable date, from the Company's independent
certified public accountants addressed to the Purchaser and in form, scope and
substance as customarily given to underwriters in an underwritten public
offering; provided, however, that the Purchaser shall only be entitled to the
foregoing to the extent it is reasonably requested by the Purchaser and
consented to by the Company after consultation with its counsel (which consent
will not be unreasonably withheld based upon all relevant facts and
circumstances and taking into account the advice of such counsel) and in any
event no more than one time in any three-month period (unless a shorter period
would otherwise be reasonable under the applicable circumstances).
3.9 Inspection of Records. The Company shall provide the Purchaser, and
any underwriter who may participate in the distribution of Registrable
Securities, registered pursuant to the Registration Statement and their
respective
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representatives, the opportunity, each at its own expense, to conduct a
reasonable inquiry of the Company's financial and other records during normal
business hours and make available its officers, directors and employees for
questions regarding information which the Purchaser may reasonably request in
connection with the Registration Statement; provided, however, the Purchaser
shall hold in confidence and shall not make any disclosure of any record or
other information which the Company determines in good faith to be confidential,
and of which determination the inspectors are so notified in writing, unless (a)
the disclosure of such records is necessary to avoid or correct a misstatement
or omission in any Registration Statement, (b) the release of such records is
ordered pursuant to a subpoena or other order from a court or government body of
competent jurisdiction, or is otherwise required by applicable law or legal
process or (c) the information in such records has been made generally available
to the public other than by disclosure in violation of this or any other
agreement (to the knowledge of the relevant inspector); provided further, that
the Company is not required to waive the attorney-client privilege and the
Company shall not provide the Purchaser with material non-public information in
connection with such inquiry.
3.10 Purchaser Information. The Company shall hold in confidence and
not make any disclosure of non-public information concerning the Purchaser
provided to the Company by the Purchaser unless (a) disclosure of such
information is necessary to comply with federal or state securities laws, rules,
statutes or regulations, (b) the disclosure of such information is necessary to
avoid or correct a misstatement or omission in any Registration Statement or
other public filing by the Company, (c) the release of such information is
ordered pursuant to a subpoena or other order from a court or governmental body
of competent jurisdiction or is otherwise required by applicable law or legal
process, (d) such information has been made generally available to the public
other than by disclosure in violation, to the knowledge of the Company, of this
or any other agreement, or (e) the Purchaser consents to the form and content of
any such disclosure. The Company agrees that it shall, upon learning that
disclosure of such information concerning the Purchaser is sought in or by a
court or governmental body of competent jurisdiction in or through other means,
give prompt notice to the Purchaser prior to making such disclosure, and allow
the Purchaser, at its expense, to undertake appropriate action to prevent
disclosure of, or to obtain a protective order for, such information.
3.11 Listing. The Company shall use its best efforts to cause the
listing and the continuation of listing of all the Registrable Securities
covered by the Registration Statement on the American Stock Exchange, The Nasdaq
National Market System, The Nasdaq SmallCap Market or the New York Stock
Exchange, and cause the Registrable Securities to be quoted or listed on each
additional national securities exchange or quotation system upon which the other
Common Stock of the Company is then listed or quoted.
3.12 Transfer Agent. The Company shall provide a transfer agent and
registrar, which may be a single entity, for the Registrable Securities not
later than the effective date of the Registration Statement.
3.13 Delivery of Certificates. The Company shall cooperate with the
Purchaser who holds Registrable Securities being offered and the managing
underwriter or underwriters, if any, to facilitate the timely preparation and
delivery of certificates (not bearing any restrictive legends) representing
Registrable Securities to be offered pursuant to the Registration Statement and
enable such certificates to be in such denominations or amounts, as the case may
be, as the
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managing underwriter or underwriters, if any, or the Purchaser may reasonably
request and registered in such names as the managing underwriter or
underwriters, if any, or the Purchaser may request, and, within two (2) business
days after a Registration Statement which includes Registrable Securities is
ordered effective by the SEC, the Company shall cause legal counsel selected by
the Company to deliver, to the transfer agent for the Registrable Securities
(with copies to the Purchaser whose Registrable Securities are included in such
Registration Statement) an opinion of such counsel substantially in the form
attached hereto as Exhibit 1.
3.14 Compliance with Laws. The Company shall comply with all applicable
laws related to a Registration Statement and offering and sale of securities
covered by the Registration Statement and all applicable rules and regulations
of governmental authorities in connection therewith (including, without
limitation, the Securities Act and the Securities Exchange Act of 1934, as
amended, and the rules and regulations promulgated by the SEC).
ARTICLE IV
OBLIGATIONS OF THE PURCHASER
In connection with the registration of the Registrable Securities, the
Purchaser shall have the following obligations:
4.1 Information Concerning Purchasers. Purchaser shall furnish to the
Company such information regarding itself, the Registrable Securities held by it
and the intended method of disposition of the Registrable Securities held by it
as shall be required to effect the registration of such Registrable Securities.
At least five (5) business days prior to the first anticipated filing date of
the Registration Statement, the Company shall notify each Purchaser of the
information the Company so requires from each such Purchaser.
4.2 Cooperation. Purchaser, by such Purchaser's acceptance of the
Registrable Securities, agrees to cooperate with the Company as reasonably
requested by the Company in connection with the preparation and filing of the
Registration Statements hereunder, unless such Purchaser has notified the
Company in writing of such Purchaser's election to exclude all of such
Purchaser's Registrable Securities from the Registration Statement.
4.3 Prospectus Delivery Requirements. The Purchaser understands that
the Securities Act may require delivery of a prospectus relating thereto in
connection with any sale thereof pursuant to such Registration Statement, and
each such Purchaser shall comply with any applicable prospectus delivery
requirements of the Securities Act in connection with any such sale.
4.4 Discontinuance of Distribution. The Purchaser agrees that, upon
receipt of written notice from the Company of the happening of any event of the
kind described in Section 3.6, the Purchaser will immediately discontinue
disposition of Registrable Securities pursuant to the Registration Statement
covering such Registrable Securities until such Purchaser's receipt of the
copies of the supplemented or amended prospectus contemplated by Section 3.6 or
advice that a supplement or amendment is not required and, if so directed by the
Company, the Purchaser shall deliver to the Company (at the expense of the
Company) or destroy (and deliver to the Company a certificate of destruction)
all copies in such Purchaser's possession (other than a limited number of
permanent file copies), of the prospectus covering such Registrable Securities
current at the
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time of receipt of such notice. Purchaser's obligations under this paragraph
shall in no way limit the Company's obligations under this Agreement or
Purchaser's rights or remedies against the Company with respect to any breach or
threatened breach by the Company of any such obligations.
4.5 Underwriting Agreements. Without limiting Purchaser's rights under
Section 2.1 or 2.4 hereof, no Purchaser may participate in any underwritten
distribution hereunder unless such Purchaser (a) agrees to sell the Purchaser's
Registrable Securities on the basis provided in any underwriting agreements in
usual and customary form entered into by the Company pursuant to Section 3.5
hereof, (b) completes and executes all questionnaires, powers of attorney,
indemnities, underwriting agreements and other documents reasonably required
under the terms of such underwriting arrangements, and (c) agrees to pay its pro
rata share of all underwriting discounts and commissions and any expenses in
excess of those payable by the Company pursuant to Article V.
4.6 SEC. The Purchaser agrees to use reasonable efforts to cooperate
with the Company (at the Company's expense) in responding to comments of the
staff of the SEC, provided nothing in this Section 4.6 shall affect any
obligations of the Company under this Agreement or otherwise create any
liability on the part of the Purchaser or require any change to the terms and
conditions of this Agreement or the Stock Purchase Agreement.
ARTICLE V
EXPENSES OF REGISTRATION
All reasonable expenses, other than underwriting discounts and
commissions, incurred in connection with registrations, filings or
qualifications pursuant to Articles II and III, including, without limitation,
the reasonable fees and disbursements of one counsel to the Purchaser, including
any of its transferees (fees and expenses not to exceed $5,000), all
registration, listing and qualification fees, printers and accounting fees, and
the fees and disbursements of counsel for the Company, shall be borne by the
Company.
ARTICLE VI
INDEMNIFICATION
In the event any Registrable Securities are included in a Registration
Statement under this Agreement:
6.1 Indemnification. To the extent permitted by law, the Company will
indemnify, hold harmless and defend (a) the Purchaser, (b) each underwriter of
Registrable Securities and (c) the directors, officers, partners, members,
employees, agents and persons who control the Purchaser and any such underwriter
within the meaning of Section 15 of the Securities Act or Section 20 of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), if any (each,
an "Indemnified Person"), against any losses, claims, damages, liabilities or
expenses (collectively, together with actions, proceedings or inquiries whether
or not in any court, before any administrative body or by any regulatory or
self-regulatory organization, whether commenced or threatened, in respect
thereof, "Claims") to which any of them may become subject insofar as such
Claims arise out of or are based upon: (i) any untrue statement or alleged
untrue statement of a material fact in a Registration Statement or the omission
or alleged omission to state therein a material fact required to be stated or
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necessary to make the statements therein not misleading, (ii) any untrue
statement or alleged untrue statement of a material fact contained in any
preliminary prospectus if used prior to the effective date of such Registration
Statement, or contained in the final prospectus (as amended or supplemented, if
the Company files any amendment thereof or supplement thereto with the SEC) or
the omission or alleged omission to state therein any material fact necessary to
make the statements made therein, in light of the circumstances under which the
statements therein were made, not misleading, or (iii) any violation or alleged
violation by the Company of the Securities Act, the Exchange Act, any other law,
including, without limitation, any state securities law, or any rule or
regulation thereunder relating to the offer or sale of the Registrable
Securities (the matters in the foregoing clauses (i) through (iii) being,
collectively, "Violations"). The Company shall reimburse each such Indemnified
Person, promptly as such expenses are incurred and are due and payable, for any
reasonable legal fees or other reasonable expenses incurred by them in
connection with investigating or defending any such Claim. Notwithstanding
anything to the contrary contained herein, the indemnification agreement
contained in this Section 6.1: (x) shall not apply to an Indemnified Person with
respect to a Claim arising out of or based upon a Violation which occurs in
reliance upon and in conformity with information furnished in writing to the
Company by such Indemnified Person expressly for use in the Registration
Statement or any such amendment thereof or supplement thereto; (y) shall not
apply to amounts paid in settlement of any Claim if such settlement is effected
without the prior written consent of the Company, which consent shall not be
unreasonably withheld; and (z) with respect to any preliminary prospectus, shall
not inure to the benefit of any Indemnified Person if the untrue statement or
omission of material fact contained in the preliminary prospectus was corrected
on a timely basis in the prospectus, as then amended or supplemented, if such
corrected prospectus was timely made available by the Company pursuant to
Section 3.3 hereof, and the Indemnified Person was promptly advised in writing
not to use the incorrect prospectus prior to the use giving rise to a Violation
and such Indemnified Person, notwithstanding such advice, used it. Such
indemnity shall remain in full force and effect regardless of any investigation
made by or on behalf of the Indemnified Person and shall survive the transfer of
the Registrable Securities by a Purchaser pursuant to Article IX.
6.2 Claims. To the extent permitted by law, the Purchaser agrees to
indemnify, hold harmless and defend, to the same extent and in the same manner
set forth in Section 6.1, the Company, each of its directors, each of its
officers who signs the Registration Statement, its employees, agents and
persons, if any, who control the Company within the meaning of Section 15 of the
Securities Act or Section 20 of the Exchange Act, and any other stockholder
selling securities pursuant to the Registration Statement, together with its
directors, officers and members, and any person who controls such stockholder or
underwriter within the meaning of the Securities Act or the Exchange Act (such
an "Indemnified Party"), against any Claim to which any of them may become
subject, under the Securities Act, the Exchange Act or otherwise, insofar as
such Claim arises out of or is based upon any Violation, in each case to the
extent (and only to the extent) that such Violation occurs in reliance upon and
in conformity with written information furnished to the Company by the Purchaser
expressly for use in connection with such Registration Statement; and the
Purchaser will reimburse any legal or other expenses (promptly as such expenses
are incurred and are due and payable) reasonably incurred by them in connection
with investigating or defending any such Claim; provided, however, that the
indemnity agreement contained in this Section 6.2 shall not apply to amounts
paid in settlement of
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any Claim if such settlement is effected without the prior written consent of
the Purchaser, which consent shall not be unreasonably withheld; provided,
further, however, that the Purchaser shall be liable under this Agreement
(including this Section 6.2 and Article VII) for only that amount as does not
exceed the net proceeds actually received by the Purchaser as a result of the
sale of Registrable Securities pursuant to such Registration Statement. Such
indemnity shall remain in full force and effect regardless of any investigation
made by or on behalf of such Indemnified Party and shall survive the transfer of
the Registrable Securities by the Purchaser pursuant to Article IX.
Notwithstanding anything to the contrary contained herein, the indemnification
agreement contained in this Section 6.2 with respect to any preliminary
prospectus shall not inure to the benefit of any Indemnified Party if the untrue
statement or omission of material fact contained in the preliminary prospectus
was corrected on a timely basis in the prospectus, as then amended or
supplemented, and the Indemnified Party failed to utilize such corrected
prospectus.
6.3 Notices. Promptly after receipt by an Indemnified Person or
Indemnified Party under this Article VI of notice of the commencement of any
action (including any governmental action), such Indemnified Person or
Indemnified Party shall, if a Claim in respect thereof is to be made against any
indemnifying party under this Article VI, deliver to the indemnifying party a
written notice of the commencement thereof, and the indemnifying party shall
have the right (at its expense) to participate in, and, to the extent the
indemnifying party so desires, jointly with any other indemnifying party
similarly noticed, to assume and continue control of the defense thereof with
counsel mutually satisfactory to the indemnifying party and the Indemnified
Person or the Indemnified Party, as the case may be; provided, however, that
such indemnifying party shall diligently pursue such defense and an indemnifying
party shall not be entitled to assume (or continue) such defense if the
representation by such counsel of the Indemnified Person or Indemnified Party
and the indemnifying party would be inappropriate due to actual or potential
conflicts of interest between such Indemnified Person or Indemnified Party and
any other party represented by such counsel in such proceeding or the actual or
potential defendants in, or targets of, any such action include both the
Indemnified Person or the Indemnified Party and the indemnifying party, and any
such Indemnified Person or Indemnified Party reasonably determines that there
may be legal defenses available to such Indemnified Person or Indemnified Party
which are different from or in addition to those available to such indemnifying
party. Notwithstanding any assumption of such defense and without limiting any
indemnification obligation provided for in Section 6.1 or 6.2, the Indemnified
Party or Indemnified Person, as the case may be, shall be entitled to be
represented by counsel (at its own expense if the indemnifying party is
permitted to assume and continue control of the defense and otherwise at the
expense of the indemnifying party) and such counsel shall be entitled to
participate in such defense. The failure to deliver written notice to the
indemnifying party within a reasonable time of the commencement of any such
action shall not relieve such indemnifying party of any liability to the
Indemnified Person or Indemnified Party under this Article VI, except to the
extent that the indemnifying party is actually prejudiced in its ability to
defend such action. The indemnification required by this Article VI shall be
made by periodic payments of the amount thereof during the course of the
investigation or defense, as such expense, loss, damage or liability is incurred
and is due and payable.
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ARTICLE VII
CONTRIBUTION
To the extent any indemnification by an indemnifying party is
prohibited or limited by law, the indemnifying party agrees to make the maximum
contribution with respect to any amounts for which it would otherwise be liable
under Article VI to the fullest extent permitted by law; provided, however, that
(i) no party shall be liable for contribution if it is not liable for
indemnification pursuant to the provisions of Article VI hereof; (ii) 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; and (iii) contribution
(together with any indemnification or other obligations under this Agreement) by
any Purchaser of Registrable Securities shall be limited in amount to the net
amount of proceeds received by such Purchaser from the sale of its Registrable
Securities.
ARTICLE VIII
REPORTS UNDER THE EXCHANGE ACT
With a view to making available to each Purchaser the benefits of Rule
144, the Company agrees that so long as a Purchaser holds 200,000 shares of
Registrable Securities, the Company shall use its best efforts to:
(a) Not terminate its status as an issuer required to file reports
under the Exchange Act even if the Exchange Act or the rules and regulations
thereunder would permit such termination;
(b) File with the SEC in a timely manner and make and keep available
all reports and other documents required of the Company under the Securities Act
and the Exchange Act so long as the filing and availability of such reports and
other documents is required for the applicable provisions of Rule 144; and
(c) Furnish to the Purchaser promptly upon written request, (i) a copy
of the most recent annual or quarterly report of the Company and such other
reports and documents so filed by the Company, and (iii) such other information
as may be reasonably requested to permit the Purchaser to sell such securities
pursuant to Rule 144 without registration.
ARTICLE IX
ASSIGNMENT OF REGISTRATION RIGHTS
The rights of the Purchaser hereunder as to Registrable Securities
transferred by the Purchaser, including the right to have the Company register
Registrable Securities pursuant to this Agreement, shall be automatically
assigned by the Purchaser to any transferee of all or any portion of the
Registrable Securities who either (x) is an affiliate or subsidiary of the
Purchaser or (y) acquires at least 200,000 shares of Common Stock of the
Company, whether such transfer occurs before or after the Registration Statement
becomes effective, if: (a) the Purchaser agrees in writing with the transferee
or assignee to assign such rights, and a copy of such agreement is furnished to
the Company within a reasonable time after such assignment, (b) the Company is,
within a reasonable time after such transfer or assignment, furnished with
written notice of (i) the name and address of such transferee or assignee, and
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(ii) the securities with respect to which such registration rights are being
transferred or assigned, (c) following such transfer or assignment, the further
disposition of such securities by the transferee or assignee is restricted under
the Securities Act or applicable state securities laws, and (d) at or before the
time the Company receives the written notice contemplated by clause (ii) of this
sentence, the transferee or assignee agrees in writing for the benefit of the
Company to be bound by all of the provisions contained herein. The rights of the
Purchaser hereunder with respect to any Registrable Securities not shall not be
assigned by virtue of the transfer of other Registrable Securities or
transferred Registrable Securities.
ARTICLE X
AMENDMENT OF REGISTRATION RIGHTS
Provisions of this Agreement may be amended and the observance thereof
may be waived (either generally or in a particular instance and either
retroactively or prospectively), only with written consent of the Company and
the Purchaser. Any amendment or waiver effected in accordance with this Article
X shall be binding upon the Purchaser and the Company.
ARTICLE XI
MISCELLANEOUS
11.1 Registered Holders. A person or entity is deemed to be a holder
(or a holder in interest) of Registrable Securities whenever such person or
entity owns of record such Registrable Securities. If the Company receives
conflicting instructions, notices or elections from two or more persons or
entities with respect to the same Registrable Securities, the Company shall act
upon the basis of instructions, notice or election received from the registered
owner of such Registrable Securities.
11.2 Notices. Any notices herein required or permitted to be given
shall be in writing and may be personally served or delivered by courier or by
machine generated confirmed telecopy, and shall be deemed delivered at the time
and date of receipt (which shall include telephone line facsimile transmission).
The addresses for such communications shall be:
If to the Company:
SoftNet Systems, Inc.
650 Townsend Street
Suite 225
San Francisco, California 94103
Telecopy: (415) 365-2556
Attention: Steven Harris
with a copy to:
Brobeck, Phleger & Harrison LLP
2200 Geng Road
Palo Alto, California 94303-0913
Telecopy: (650) 496-2733
Attention: Scott Lester, Esq.
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If to the Purchaser, as shown on the signature page hereto and if to
any other Purchaser, at such address as such Purchaser shall have provided in
writing to the Company, or at such other address as each such party furnishes by
notice given in accordance with this Section 11.2.
11.3 Waiver. Failure of any party to exercise any right or remedy under
this Agreement or otherwise, or delay by a party in exercising such right or
remedy, shall not operate as a waiver thereof.
11.4 Governing Law. This Agreement shall be governed by and construed
in accordance with the laws of the State of California applicable to contracts
made and to be performed in the State of California.
11.5 Entire Agreement. This Agreement and the Stock Purchase Agreement
(including all schedules and exhibits thereto and all certificates and opinions
and other documents required thereby) constitute the entire agreement among the
parties hereto with respect to the subject matter hereof and thereof. There are
no restrictions, promises, warranties or undertakings, other than those set
forth or referred to herein and therein. This Agreement and the Stock Purchase
Agreement supersede all prior agreements and understandings among the parties
hereto with respect to the subject matter hereof and thereof.
11.6 Successors and Assigns. Subject to the requirements of Article IX
hereof, this Agreement shall inure to the benefit of and be binding upon the
successors and assigns of each of the parties hereto.
11.7 Headings. The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.
11.8 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original but all of which shall
constitute one and the same agreement. This Agreement, once executed by a party,
may be delivered to the other party hereto, by facsimile transmission of a copy
of this Agreement bearing the signature of the party so delivering this
Agreement.
11.9 Further Assurances. Each party shall do and perform, or cause to
be done and performed, all such further acts and things, and shall execute and
deliver all such other agreements, certificates, instruments and documents, as
the other party may reasonably request in order to carry out the intent and
accomplish the purposes of this Agreement and the consummation of the
transactions contemplated hereby.
11.10 Consents. Unless otherwise provided herein, all consents and
other determinations to be made pursuant to this Agreement shall be made on the
basis of a majority in interest with respect to the Registrable Securities.
11.11 Transferees. The number of Registrable Securities included in any
Registration Statement pursuant to Section 2.4 shall be allocated pro rata among
the Purchasers based on the number of Registrable Securities held by each
Purchaser at the time of establishment of such number. In the event a Purchaser
shall sell or otherwise transfer any of such holder's Registrable Securities,
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each transferee shall be allocated a pro rata portion of the number of
Registrable Securities included on a Registration Statement for such transferor.
Any shares of Common Stock included on a Registration Statement and which remain
allocated to any person or entity which does not hold any Registrable Securities
shall be allocated to the remaining Purchasers, pro rata based on the number of
shares of Registrable Securities then held by such remaining Purchasers.
11.12 Severability. If any provision of this Agreement shall be invalid
or unenforceable, such invalidity or unenforceability shall not affect the
validity or enforceability of the remainder of this Agreement.
* * *
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IN WITNESS WHEREOF, the parties have caused this Registration
Rights Agreement to be duly executed as of the date first above written.
SOFTNET SYSTEMS, INC.
By: /s/ Steven M. Harris
---------------------------------
Steven M. Harris
General Counsel and Secretary
PURCHASER:
HECTOR R. GONZALEZ
By: /s/ Hector R. Gonzlaez
---------------------------------
Name:
---------------------------------
Title
---------------------------------
Address:
---------------------------------
---------------------------------
Telecopy:
---------------------------------
with a copy to:
Squadron, Ellenoff, Plesent & Sheinfeld, LLP
551 Fifth Avenue
New York, New York 10176
Attention: Stephen J. Gullota, Jr., Esquire
Telecopy: 212-697-6686
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EXHIBIT 1
to Registration
Rights Agreement
[Date]
[Name and address
of transfer agent]
RE: SoftNet Systems, Inc.
Ladies and Gentlemen:
We are counsel to SoftNet Systems, Inc., a New York
corporation (the "Company"), and we understand that [Name of Purchaser] (the
"Holder") has purchased from the Company Common Stock of the Company, par value
$.01 per share (the "Common Stock"). The Common Stock was purchased by the
Holder pursuant to a Stock Purchase Agreement, dated as of April ___, 1999, by
and among the Company and the signatories thereto (the "Agreement"). Pursuant to
a Registration Rights Agreement, dated as of April __, 1999, by and among the
Company and the Holder (the "Registration Rights Agreement"), the Company agreed
with the Holder, among other things, to register the Registrable Securities (as
that term is defined in the Registration Rights Agreement) under the Securities
Act of 1933, as amended (the "Securities Act"), upon the terms provided in the
Registration Rights Agreement. In connection with the Company's obligations
under the Registration Rights Agreement, on __________ __, ____, the Company
filed a Registration Statement on Form S-3 (File No. 333- __________) (the
"Registration Statement") with the Securities and Exchange Commission (the
"SEC") relating to the Registrable Securities, which names the Holder as a
selling stockholder thereunder.
[Other customary introductory and scope of examination
language to be inserted, in each case as acceptable to Holders.]
Based on the foregoing, we are of the opinion that the
Registrable Securities have been registered under the Securities Act.
[Other appropriate customary language to be included, in each
case as acceptable to Holders.]
Very truly yours,
cc: [Name of Purchaser]
