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SECURITIES PURCHASE AGREEMENT
Between
CYBERSHOP.COM, INC.
and
THE INVESTORS SIGNATORY HERETO
Dated as of December 8, 1999
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SECURITIES PURCHASE AGREEMENT (this "Agreement"), dated as of December
8, 1999, among Cybershop.Com, Inc., a Delaware corporation (the "Company"), and
the investors signatory hereto on the date hereof (each such investor is a
"Purchaser" and all such investors are, collectively, the "Purchasers").
WHEREAS, subject to the terms and conditions set forth in this
Agreement, the Company desires to issue and sell to the Purchasers and the
Purchasers, severally and not jointly, desire to purchase from the Company,
shares of the Company's common stock, $.001 par value per share (the "Common
Stock"), and certain other securities of the Company as more fully described in
this Agreement.
NOW, THEREFORE, IN CONSIDERATION of the mutual covenants contained in
this Agreement, and for other good and valuable consideration the receipt and
adequacy are hereby acknowledged, the Company and the Purchasers agree as
follows:
ARTICLE I
PURCHASE AND SALE
1.1 The Closing.
(a) The Closing. (i) Subject to the terms and conditions set
forth in this Agreement, the Company shall issue and sell to the Purchasers and
the Purchasers shall purchase an aggregate of 528,634 shares of Common Stock
(the "Shares") for an aggregate purchase price of $6,000,000. The closing of the
purchase and sale of the Shares (the "Closing") shall take place at the offices
of Robinson Silverman Pearce Aronsohn & Berman LLP ("Robinson Silverman"), 1290
Avenue of the Americas, New York, New York 10104, immediately following the
execution hereof or such later date as the parties shall agree. The date of the
Closing is hereinafter referred to as the "Closing Date."
(ii) At the Closing, the parties shall deliver or
shall cause to be delivered the following: (A) the Company shall deliver to each
Purchaser (1) a stock certificate representing the number of Shares indicated
below such Purchaser's name on the signature page of this Agreement, registered
in the name of such Purchaser, (2) a Common Stock purchase warrant, in the form
of Exhibit A, registered in the name of such Purchaser, pursuant to which such
Purchaser shall have the right to acquire shares of Common Stock upon the terms
and in such number as set forth therein (each an "Adjustable Warrant"), (3) a
Common Stock purchase warrant, in the form of Exhibit B, registered in the name
of such Purchaser, pursuant to which such Purchaser shall have the right to
acquire the number of shares of Common Stock indicated below such Purchaser's
name on the signature page of this Agreement, upon the terms set forth therein,
at an exercise price per share (subject to adjustment as provided therein) of
$12.00 (each, a "Closing Warrant" and together with the Adjustable Warrants, the
"Warrants"), (4) the legal opinion of Davis & Gilbert LLP, outside counsel to
the Company, substantially in the form of Exhibit C, and (5) all other
documents, instruments and writings required to be delivered at or prior to the
Closing by the Company pursuant to this Agreement, including an executed
Registration Rights Agreement, dated the date hereof, among the Company and the
Purchasers, in the form of Exhibit D (the "Registration Rights Agreement"), and
the Transfer Agent
Instructions, in the form of Exhibit E, delivered to and acknowledged by the
Company's transfer agent (the "Transfer Agent Instructions"); and (B) each
Purchaser shall deliver to the Company (1) the purchase price indicated below
such Purchaser's name on the signature page to this Agreement in United States
dollars in immediately available funds by wire transfer to an account designated
for such purpose prior to the Closing Date in writing by the Company, and (2)
all documents, instruments and writings required to have been delivered at or
prior to the Closing Date by such Purchaser pursuant to this Agreement,
including an executed Registration Rights Agreement.
1.2 Certain Defined Terms. For purposes of this Agreement,"Trading Day"
and "Per Share Market Value" shall have the meanings set forth in Exhibit A and
"Business Day" shall mean any day except Saturday, Sunday and any day which
shall be a federal legal holiday or a day on which banking institutions in the
State of New York generally are authorized or required by law or other
governmental action to close. A "Person" means an individual or corporation,
partnership, trust, incorporated or unincorporated association, joint venture,
limited liability company, joint stock company, government (or an agency or
subdivision thereof) or other entity of any kind
ARTICLE II
REPRESENTATIONS AND WARRANTIES
2.1 Representations and Warranties of the Company. The Company hereby
makes the following representations and warranties to the Purchasers:
(a) Organization and Qualification. The Company is a
corporation duly incorporated, validly existing and in good standing under the
laws of the State of Delaware, with the requisite corporate power and authority
to own and use its properties and assets and to carry on its business as
currently conducted. The Company has no subsidiaries other than as set forth in
Schedule 2.1(a) (collectively, the "Subsidiaries"). Each of the Subsidiaries is
an entity, duly organized, validly existing and in good standing under the laws
of the jurisdiction of its incorporation or organization (as applicable), with
the requisite power and authority to own and use its properties and assets and
to carry on its business as currently conducted. Each of the Company and the
Subsidiaries is duly qualified to do business and is in good standing as a
foreign corporation or other entity in each jurisdiction in which the nature of
the business conducted or property owned by it makes such qualification
necessary, except where the failure to be so qualified or in good standing, as
the case may be, could not, individually or in the aggregate, (x) adversely
affect the legality, validity or enforceability of the Securities (as defined
below) or any of this Agreement, the Registration Rights Agreement, the Transfer
Agent Instructions or the Warrants (collectively, the "Transaction Documents"),
(y) have or result in a material adverse effect on the results of operations,
assets, prospects, or condition (financial or otherwise) of the Company and the
Subsidiaries, taken as a whole, or (z) adversely impair the Company's ability to
perform fully on a timely basis its obligations under any of the Transaction
Documents (any of (x), (y) or (z), a "Material Adverse Effect").
(b) Authorization; Enforcement. The Company has the requisite
corporate power and authority to enter into and to consummate the transactions
contemplated by each of
the Transaction Documents and otherwise to carry out its obligations thereunder.
The execution and delivery of each of the Transaction Documents by the Company
and the consummation by it of the transactions contemplated thereby have been
duly authorized by all necessary action on the part of the Company and no
further action is required by the Company. Each of the Transaction Documents has
been duly executed by the Company and, when delivered in accordance with the
terms hereof, will constitute the valid and binding obligation of the Company
enforceable against the Company in accordance with its terms. Neither the
Company nor any Subsidiary is in violation of any of the provisions of its
respective articles of incorporation, by-laws or other charter or organizational
documents.
(c) Capitalization. The number of authorized, issued and
outstanding capital stock of the Company is set forth in Schedule 2.1(c). Except
as disclosed in Schedule 2.1(c), the Company owns all of the capital stock of
each Subsidiary. Except as disclosed in Schedule 2.1(c), no securities of the
Company or any Subsidiary are entitled to preemptive or similar rights, nor is
any holder of securities of the Company or any Subsidiary entitled to preemptive
or similar rights arising out of any agreement or understanding with the Company
or any Subsidiary by virtue of any of the Transaction Documents. Except as
disclosed in Schedule 2.1(c), there are no outstanding options, warrants, script
rights to subscribe to, calls or commitments of any character whatsoever
relating to, or securities, except as a result of the purchase and sale of the
Securities, or rights or obligations convertible into or exchangeable for, or
giving any Person (as defined below) any right to subscribe for or acquire, any
shares of Common Stock, or contracts, commitments, understandings, or
arrangements by which the Company or any Subsidiary is or may become bound to
issue additional shares of Common Stock, or securities or rights convertible or
exchangeable into shares of Common Stock. To the knowledge of the Company,
except as specifically disclosed in the SEC Reports (as defined below) or
Schedule 2.1(c), no Person or group of related Persons beneficially owns (as
determined pursuant to Rule 13d-3 promulgated under the Securities Exchange Act
of 1934, as amended (the "Exchange Act")), or has the right to acquire by
agreement with or by obligation binding upon the Company, beneficial ownership
of in excess of 5% of the Common Stock..
(d) Issuance of the Securities. The Securities are duly
authorized and, when issued and paid for in accordance with the terms hereof and
the Warrants, shall have been duly and validly issued, fully paid and
nonassessable, free and clear of all liens, encumbrances and rights of first
refusal of any kind (collectively, "Liens"). The Company has reserved a number
of duly authorized number of shares of Common Stock for issuance hereunder upon
exercise of the Warrants that is not less than the sum of (i) the aggregate
number of Shares to be issued hereunder; (ii) the maximum number of Underlying
Shares (as defined below) issuable upon exercise of the Adjustable Warrants,
assuming that the Per Share Market Value utilized to determine the number of
such Underlying Shares is 50% of the average Per Share Market Value on the
Trading Day immediately preceding the Closing Date; and (iii) the number of
Underlying Shares issuable upon exercise in full of the Closing Warrants (such
number of shares of Common Stock as contemplated in clauses (i), (ii) and (iii),
the "Initial Minimum"). The shares of Common Stock issuable upon exercise of the
Warrants are referred to herein as the "Underlying Shares." The Shares, the
Warrants and the Underlying Shares are collectively referred to herein as, the
"Securities."
(e) No Conflicts. The execution, delivery and performance of
the Transaction Documents by the Company and the consummation by the Company of
the transactions contemplated thereby do not and will not (i) conflict with or
violate any provision of the Company's or any Subsidiary's articles of
incorporation, bylaws or other charter documents (each as amended through the
date hereof), or (ii) subject to obtaining the Required Approvals (as defined
below), and except as set forth in Schedule 2.1(e), conflict with, or constitute
a default (or an event which with notice or lapse of time or both would become a
default) under, or give to others any rights of termination, amendment,
acceleration or cancellation (with or without notice, lapse of time or both) of,
any agreement, credit facility, debt or other instrument (evidencing a Company
or Subsidiary debt or otherwise) or other understanding to which the Company or
any Subsidiary is a party or by which any property or asset of the Company or
any Subsidiary is bound or affected, or (iii) result in a violation of any law,
rule, regulation, order, judgment, injunction, decree or other restriction of
any court or governmental authority to which the Company or a Subsidiary is
subject (including federal and state securities laws and regulations), or by
which any property or asset of the Company or a Subsidiary is bound or affected;
except in the case of each of clauses (ii) and (iii), as could not, individually
or in the aggregate, have or result in a Material Adverse Effect. The business
of the Company is not being conducted in violation of any law, ordinance or
regulation of any governmental authority, except for violations which,
individually or in the aggregate, could not have or result in a Material Adverse
Effect.
(f) Filings, Consents and Approvals. Neither the Company nor
any Subsidiary is required to obtain any consent, waiver, authorization or order
of, give any notice to, or make any filing or registration with, any court or
other federal, state, local or other governmental authority or other Person in
connection with the execution, delivery and performance by the Company of the
Transaction Documents, other than (i) the filings required pursuant to Section
3.11, (ii) the filing with the Securities and Exchange Commission (the
"Commission") of a registration statement meeting the requirements set forth in
the Registration Rights Agreement and covering the resale of the Shares and the
Underlying Shares by the Purchasers (the "Underlying Shares Registration
Statement"), (iii) the application(s) to the Nasdaq National Market ("NASDAQ")
for the listing of the Shares and the Underlying Shares with the NASDAQ (and
with any other national securities exchange of market in which the Common Stock
is then listed) in the time and manner required thereby , (vi) applicable Blue
Sky filings, and (v) in all other cases where the failure to obtain such
consent, waiver, authorization or order, or to give such notice or make such
filing or registration could not have or result in, individually or in the
aggregate, a Material Adverse Effect (the items described in clauses (i)-(vi)
are collectively, the "Required Approvals").
(g) Litigation; Proceedings. Except as specified in the SEC
Reports, there is no action, suit, notice of violation, proceeding or
investigation pending or, to the knowledge of the Company, threatened against or
affecting the Company or any of its Subsidiaries or any of their respective
properties before or by any court, governmental or administrative agency or
regulatory authority (federal, state, county, local or foreign) which (i)
adversely affects or challenges the legality, validity or enforceability of any
of the Transaction Documents or the Securities or (ii) could, individually or in
the aggregate, have or result in a Material Adverse Effect.
(h) No Default or Violation. Neither the Company nor any
Subsidiary (i) is in default under or in violation of (and no event has occurred
which has not been waived which, with notice or lapse of time or both, would
result in a default by the Company or any Subsidiary under), nor has the Company
or any Subsidiary received notice of a claim that it is in default under or that
it is in violation of, any indenture, loan or credit agreement or any other
agreement or instrument to which it is a party or by which it or any of its
properties is bound (whether or not such default or violation has been waived),
(ii) is in violation of any order of any court, arbitrator or governmental body,
or (iii) is in violation of any statute, rule or regulation of any governmental
authority, except as could not individually or in the aggregate, have or result
in a Material Adverse Effect.
(i) Private Offering. Assuming the accuracy of the
representations and warranties of the Purchasers set forth in Sections
2.2(b)-(g), the offer, issuance and sale of the Securities to the Purchasers as
contemplated hereby are exempt from the registration requirements of the
Securities Act of 1933, as amended (the "Securities Act"). Neither the Company
nor any Person acting on its behalf has taken or is, to the knowledge of the
Company, contemplating taking any action which could subject the offering,
issuance or sale of the Securities to the registration requirements of the
Securities Act including soliciting any offer to buy or sell the Securities by
means of any form of general solicitation or advertising.
(j) SEC Reports; Financial Statements. The Company has filed
all reports required to be filed by it under the Securities Act of 1933, as
amended (the "Securities Act"), and the Exchange Act for the two years preceding
the date hereof (or such shorter period as the Company was required by law to
file such material) (the foregoing materials being collectively referred to
herein as the "SEC Reports" and, together with the Schedules to this Agreement
the "Disclosure Materials") on a timely basis or has received a valid extension
of such time of filing and has filed any such SEC Reports prior to the
expiration of any such extension. As of their respective dates, the SEC Reports
complied in all material respects with the requirements of the Securities Act
and the Exchange Act and the rules and regulations of the Commission promulgated
thereunder, and none of the SEC Reports, when filed, contained any untrue
statement of a material fact or omitted to state a material fact required to be
stated therein or necessary in order to make the statements therein, in light of
the circumstances under which they were made, not misleading. All material
agreements to which the Company is a party or to which the property or assets of
the Company are subject have been filed as exhibits to the SEC Reports. The
financial statements of the Company included in the SEC Reports comply in all
material respects with applicable accounting requirements and the rules and
regulations of the Commission with respect thereto as in effect at the time of
filing. Such financial statements have been prepared in accordance with
generally accepted accounting principles applied on a consistent basis during
the periods involved ("GAAP"), except as may be otherwise specified in such
financial statements or the notes thereto, and fairly present in all material
respects the financial position of the Company and its consolidated subsidiaries
as of and for the dates thereof and the results of operations and cash flows for
the periods then ended, subject, in the case of unaudited statements, to normal,
immaterial, year-end audit adjustments. Since June 30,1999, except as
specifically disclosed in the SEC Reports, (a) there has been no event,
occurrence or development that has or that could result in a Material Adverse
Effect, (b) the Company has not incurred any liabilities (contingent or
otherwise) other than (x) liabilities incurred in the ordinary course of
business consistent with past practice and (y) liabilities not required to be
reflected in
the Company's financial statements pursuant to GAAP or required to be disclosed
in filings made with the Commission, (c) the Company has not altered its method
of accounting or the identity of its auditors and (d) the Company has not
declared or made any payment or distribution of cash or other property to its
stockholders or officers or directors (other than in compliance with existing
Company stock or stock option plans) with respect to its capital stock, or
purchased, redeemed (or made any agreements to purchase or redeem) any shares of
its capital stock.
(k) Investment Company. The Company is not, and is not an
Affiliate (as defined in Rule 405 under the Securities Act) of, an "investment
company" within the meaning of the Investment Company Act of 1940, as amended.
(l) Certain Fees. No fees or commissions will be payable by
the Company to any broker, financial advisor or consultant, finder, placement
agent, investment banker, bank or other person, with respect to the transactions
contemplated by this Agreement. The Purchasers shall have no obligation with
respect to any fees or with respect to any claims made by or on behalf of other
Persons for fees of a type contemplated in this Section that may be due in
connection with the transactions contemplated by this Agreement. The Company
shall indemnify and hold harmless the Purchasers, their employees, officers,
directors, agents, and partners, and its respective Affiliates, from and against
all claims, losses, damages, costs (including the costs of preparation and
attorney's fees) and expenses suffered in respect of any such claimed or
existing fees, as such fees and expenses are incurred.
(m) Form S-3 Eligibility. The Company is eligible to register
its Common Stock for resale under Form S-3 promulgated under the Securities Act.
(n) Listing and Maintenance Requirements. The Company has not,
in the two years preceding the date hereof, except for notice sent by NASDAQ to
the Company in error, received notice (written or oral) from the NASDAQ or any
other stock exchange, market or trading facility on which the Common Stock is or
has been listed (or on which it has been quoted) to the effect that the Company
is not in compliance with the listing or maintenance requirements of such
exchange, market or trading facility. The Company is, and has no reason to
believe that it will not in the foreseeable future continue to be, in compliance
with all such listing and maintenance requirements.
(o) Patents and Trademarks. The Company and its Subsidiaries
have, or have rights to use, all patents, patent applications, trademarks,
trademark applications, service marks, trade names, copyrights, licenses and
rights (collectively, the "Intellectual Property Rights") which are necessary or
material for use in connection with their respective business as described in
the SEC Reports and as contemplated to be conducted, and which the failure to so
have would have a Material Adverse Effect. Neither the Company nor any
Subsidiary has received a written notice that the Intellectual Property Rights
used by the Company or its Subsidiaries violates or infringes upon the rights of
any Person, to the best knowledge of the Company. All such Intellectual Property
Rights are enforceable and there is no existing infringement by another Person
of any of the Intellectual Property Rights.
(p) Regulatory Permits. The Company and its Subsidiaries
possess all certificates, authorizations and permits issued by the appropriate
federal, state or foreign regulatory authorities necessary to conduct their
respective businesses as described in the SEC Reports, except where the failure
to possess such permits could not, individually or in the aggregate, have or
result in a Material Adverse Effect ("Material Permits"), and neither the
Company nor any such Subsidiary has received any notice of proceedings relating
to the revocation or modification of any Material Permit.
(q) Title. Except as set forth in Schedule 2.1(q), the Company
and the Subsidiaries have good and marketable title in fee simple to all real
property and personal property owned by them which is material to the business
of the Company and its Subsidiaries, in each case free and clear of all Liens,
except for Liens as do not materially affect the value of such property and do
not materially interfere with the use made and proposed to be made of such
property by the Company and its Subsidiaries. Any real property and facilities
held under lease by the Company and its Subsidiaries are held by them under
valid, subsisting and enforceable leases with such exceptions as are not
material and do not materially interfere with the use made and proposed to be
made of such property and buildings by the Company and its Subsidiaries.
(r) Disclosure. The Company confirms that neither it nor any
Person acting on its behalf has provided the Purchasers or their agents or
counsel with any information that constitutes or might constitute material
non-public information. The Company understands and confirms that the Purchasers
shall be relying on the foregoing representations in effecting transactions in
securities of the Company. All disclosure provided to the Purchasers regarding
the Company, its business and the transactions contemplated hereby, including
the Schedules to this Agreement, furnished by or on behalf of the Company are
true and correct and do not contain any untrue statement of a material fact or
omit to state any material fact necessary in order to make the statements made
therein not misleading.
2.2 Representations and Warranties of the Purchasers. Each Purchaser
hereby for itself and for no other Purchaser, represents and warrants to the
Company as follows:
(a) Organization; Authority. Such Purchaser is an entity duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its organization with the requisite corporate or partnership
power and authority to enter into and to consummate the transactions
contemplated by the Transaction Documents and otherwise to carry out its
obligations thereunder. The purchase by such Purchaser of the Securities
hereunder has been duly authorized by all necessary action on the part of such
Purchaser. Each of this Agreement and the Registration Rights Agreement has been
duly executed by such Purchaser, and when delivered by such Purchaser in
accordance with the terms hereof, will constitute the valid and legally binding
obligation of such Purchaser, enforceable against it in accordance with its
terms.
(b) Investment Intent. Such Purchaser is acquiring the
Securities as principal for its own account for investment purposes only and not
with a view to or for distributing or reselling such Securities or any part
thereof, without prejudice, however, to such Purchaser's right, subject to the
provisions of this Agreement and the Registration Rights Agreement, at all times
to sell or otherwise dispose of all or any part of such Securities pursuant to
an effective registration statement under the Securities Act and in compliance
with applicable federal and
state securities laws or under an exemption from such registration. Nothing
contained herein shall be deemed a representation or warranty by such Purchaser
to hold Securities for any amount of time.
(c) Purchaser Status. At the time such Purchaser was offered
the Securities, it was, and at the date hereof it is, and at each exercise date
under the Warrants, it will be, an "accredited investor" as defined in Rule
501(a)(8) under the Securities Act.
(d) Experience of such Purchaser. Such Purchaser, either alone
or together with its representatives, has such knowledge, sophistication and
experience in business and financial matters so as to be capable of evaluating
the merits and risks of the prospective investment in the Securities, and has so
evaluated the merits and risks of such investment.
(e) Ability of Purchaser to Bear Risk of Investment. Such
Purchaser is able to bear the economic risk of an investment in the Securities
and, at the present time, is able to afford a complete loss of such investment.
(f) Access to Information. Such Purchaser acknowledges that it
has reviewed the Disclosure Materials and has been afforded (i) the opportunity
to ask such questions as it has deemed necessary of, and to receive answers
from, representatives of the Company concerning the terms and conditions of the
offering of the Securities and the merits and risks of investing in the
Securities; (ii) access to information about the Company and the Company's
financial condition, results of operations, business, properties, management and
prospects sufficient to enable it to evaluate its investment; and (iii) the
opportunity to obtain such additional information which the Company possesses or
can acquire without unreasonable effort or expense that is necessary to make an
informed investment decision with respect to the investment. Neither such
inquiries nor any other investigation conducted by or on behalf of any Purchaser
or its representatives or counsel shall modify, amend or affect a Purchaser's
right to rely on the truth, accuracy and completeness of the Disclosure
Materials and the Company's representations and warranties contained in the
Transaction Documents.
(g) General Solicitation. Such Purchaser is not purchasing the
Securities as a result of or subsequent to any advertisement, article, notice or
other communication regarding the Securities published in any newspaper,
magazine or similar media or broadcast over television or radio or presented at
any seminar or any other general solicitation or general advertisement.
(h) Reliance. Such Purchaser understands and acknowledges that
(i) the Securities are being offered and sold to it without registration under
the Securities Act in a private placement that is exempt from the registration
provisions of the Securities Act and (ii) the availability of such exemption,
depends in part on, and the Company will rely upon the accuracy and truthfulness
of, the foregoing representations and such Purchaser hereby consents to such
reliance.
The Company acknowledges and agrees that no Purchaser makes or
has made representations or warranties with respect to the transactions
contemplated hereby other than those specifically set forth in this Section 2.2.
ARTICLE III
OTHER AGREEMENTS OF THE PARTIES
3.1 Transfer Restrictions. (a) Securities may only be disposed of
pursuant to an effective registration statement under the Securities Act, to the
Company or pursuant to an available exemption from or in a transaction not
subject to the registration requirements of the Securities Act, and in
compliance with any applicable federal and state securities laws. In connection
with any transfer of Securities other than pursuant to an effective registration
statement or to the Company, except as otherwise set forth herein, the Company
may require the transferor thereof to provide to the Company an opinion of
counsel selected by the transferor, the form and substance of which opinion
shall be reasonably satisfactory to the Company, to the effect that such
transfer does not require registration under the Securities Act. Notwithstanding
the foregoing, the Company, without requiring a legal opinion as described in
the immediately preceding sentence, hereby consents to and agrees to register on
the books of the Company and with any transfer agent for the securities of the
Company any transfer of Securities by a Purchaser to an Affiliate of such
Purchaser or to one or more funds or managed accounts under common management
with such Purchaser, and any transfer among any such Affiliates or one or more
funds or managed accounts, provided that the transferee certifies to the Company
that it is an "accredited investor" within the meaning of Rule 501(a) under the
Securities Act and that it is acquiring the Securities solely for investment
purposes (subject to the qualifications hereof). Any such transferee shall agree
in writing to be bound by the terms of this Agreement and shall have the rights
of the Purchaser under this Agreement and the Registration Rights Agreement.
(b) The Purchasers agree to the imprinting, so long as is
required by this Section 3.1(b), of the following legend on the Securities:
[NEITHER] THESE SECURITIES [NOR THE SECURITIES INTO WHICH
THESE SECURITIES ARE EXERCISABLE] HAVE BEEN REGISTERED WITH THE
SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY
STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND,
ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN
AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH
APPLICABLE STATE SECURITIES LAWS.
Neither Shares nor Underlying Shares shall contain the legend
set forth above nor any other legend at any time while an Underlying Shares
Registration Statement is effective under the Securities Act or, in the event
there is not an effective Registration Statement at such time if such legend is
not required under applicable requirements of the Securities Act (including
judicial interpretations and pronouncements issued by the staff of the
Commission). The Company shall cause its counsel to issue the legal opinion
included in the Transfer Agent Instructions to the Company's transfer agent on
the day that such Registration Statement is declared effective by the
Commission. The Company agrees that if any Shares or Underlying
Shares are issued with a legend in accordance with this Section 3.1(b), it will,
within three (3) Trading Days after request therefor by a Purchaser and the
surrender by such Purchaser of the certificate representing the applicable
Shares or Underlying Shares, provide such Purchaser with a certificate or
certificates representing such Shares or Underlying Shares, free from such
legend at such time as such legend would not have been required under this
Section 3.1(b) had such issuance occurred on the date of such request. The
Company may not make any notation on its records or give instructions to any
transfer agent of the Company which enlarge the restrictions of transfer set
forth in this Section.
3.2 Acknowledgment of Dilution. The Company acknowledges that the
issuance of Underlying Shares upon exercise of the Warrants will result in
dilution of the outstanding shares of Common Stock, which dilution may be
substantial under certain market conditions. The Company further acknowledges
that its obligation to issue Underlying Shares upon exercise of the Warrants
pursuant to the terms thereof is unconditional and absolute regardless of the
effect of any such dilution.
3.3 Furnishing of Information. As long as the Purchasers own
Securities, the Company covenants to timely file (or obtain extensions in
respect thereof and file within the applicable grace period) all reports
required to be filed by the Company after the date hereof pursuant to the
Exchange Act. So long as the Purchasers own Securities, if the Company is not
required to file reports pursuant to such laws, it will prepare and furnish to
the Purchasers and make publicly available in accordance with Rule 144(c)
promulgated under the Securities Act such information as is required for the
Purchasers to sell the Securities under Rule 144 promulgated under the
Securities Act. The Company further covenants that it will take such further
action as any holder of Securities may reasonably request, all to the extent
required from time to time to enable such Person to sell Underlying Shares
without registration under the Securities Act within the limitation of the
exemptions provided by Rule 144 promulgated under the Securities Act, including
the legal opinion referenced above in this Section. Upon the request of any such
Person, the Company shall deliver to such Person a written certification of a
duly authorized officer as to whether it has complied with such requirements.
3.4 Integration. The Company shall not, and shall use its best efforts
to ensure that, no Affiliate shall, sell, offer for sale or solicit offers to
buy or otherwise negotiate in respect of any security (as defined in Section 2
of the Securities Act) that would be integrated with the offer or sale of the
Securities in a manner that would require the registration under the Securities
Act of the sale of the Securities to the Purchasers or that would be integrated
with the offer or sale of the Securities for purposes of the rules and
regulations of the Nasdaq Stock Market.
3.5 Increase in Authorized Shares. If on any date the Company would be,
if a notice of exercise were to be delivered on such date, precluded from
issuing 200% of the number of Underlying Shares as would then be issuable upon
exercise in full of the Adjustable Warrants (the "Current Required Minimum") due
to the unavailability of a sufficient number of authorized but unissued or
reserved shares of Common Stock, then the Board of Directors of the Company
shall promptly (and in any case, within 30 Business Days from such date) prepare
and mail to the stockholders of the Company proxy materials requesting
authorization to amend the Company's articles of incorporation to increase the
number of shares of Common Stock which the Company is authorized to issue to at
least such number of shares as is reasonably adequate to enable the
Company to comply with its issuance, exercise and reservation of shares
obligations as set forth in this Agreement and the Warrants (the sum of (x) the
number of shares of Common Stock then outstanding plus all shares of Common
Stock issuable upon exercise of all outstanding options, warrants and
convertible instruments other than the Adjustable Warrants, and (y) the Current
Required Minimum, shall be a reasonable number). In connection therewith, the
Board of Directors shall (a) adopt proper resolutions authorizing such increase,
(b) recommend to and otherwise use its best efforts to promptly and duly obtain
stockholder approval to carry out such resolutions (and hold a special meeting
of the stockholders no later than the earlier to occur of the 60th day after
delivery of the proxy materials relating to such meeting and the 90th day after
request by a holder of Warrants to issue the number of Underlying Shares in
accordance with the terms hereof) and (c) within five (5) Business Days of
obtaining such stockholder authorization, file an appropriate amendment to the
Company's articles of incorporation to evidence such increase.
3.6 Reservation and Listing of Underlying Shares. (a) The Company shall
(i) in the time and manner required by the NASDAQ and such other national
securities exchange or market or trading or quotation facility on which the
Common Stock is then listed for trading, prepare and file with the NASDAQ (and
such other national securities exchange or market or trading or quotation
facility on which the Common Stock is then listed for trading) an additional
shares listing application covering a number of shares of Common Stock which is
not less than the Initial Minimum, (ii) take all steps necessary to cause such
shares of Common Stock to be approved for listing in the NASDAQ (as well as on
any such other national securities exchange or market or trading or quotation
facility on which the Common Stock is then listed) as soon as possible
thereafter, and (iii) provide to the Purchasers evidence of such listing, and
the Company shall maintain the listing of its Common Stock thereon. If the
number of Underlying Shares issuable upon exercise of the then unexercised
portion of the Adjustable Warrants exceeds 85% of the number of Underlying
Shares previously listed on account thereof with NASDAQ (and any such other
required exchanges), then the Company shall take the necessary actions to
immediately list a number of Underlying Shares as equals no less than the then
Current Required Minimum with respect thereto.
(b) The Company shall maintain a reserve of shares of Common
Stock for issuance upon exercise in full of the Warrants in accordance with the
Warrants, in such amount as may be required to fulfill its obligations in full
under the Warrants, which reserve shall equal no less than the then Current
Required Minimum.
3.7 Exercise Procedures. The Transfer Agent Instructions and Form of
Election to Purchase under the Warrants set forth the totality of the procedures
with respect to the exercise of the Warrants, including the form of legal
opinion, if necessary, that shall be rendered to the Company's transfer agent
and such other information and instructions as may be reasonably necessary to
enable the Purchasers to exercise the Warrants.
3.8 Notice of Breaches. Each of the Company and the Purchasers shall
give prompt written notice to the other of any breach by it of any
representation, warranty or other agreement contained in any Transaction
Document, as well as any events or occurrences arising after the date hereof
which would reasonably be likely to cause any representation or warranty or
other agreement of such party, as the case may be, contained therein to be
incorrect or breached as of
the Closing Date. However, no disclosure by a party pursuant to this Section
shall be deemed to cure any breach of any representation, warranty or other
agreement contained in any Transaction Document.
3.9 Right of First Refusal; Subsequent Registrations. (a) The Company
shall not, directly or indirectly, without the prior written consent of the
Purchasers, offer, sell, grant any option to purchase, or otherwise dispose of
(or announce any offer, sale, grant or any option to purchase or other
disposition) any of its or its Affiliates' equity or equity-equivalent
securities or a transaction intended to be exempt or not subject to registration
under the Securities Act (a "Subsequent Placement") until the 180th day after
the Underlying Shares Registration Statement is first declared effective by the
Commission, except (i) the granting of options or warrants to employees,
officers and directors, and the issuance of shares upon exercise of options
granted, under any stock option plan heretofore or hereinafter duly adopted by
the Company, (ii) shares of Common Stock issuable upon exercise of currently
outstanding options and warrants and upon conversion of any currently
outstanding convertible securities of the Company, in each case to the extent
disclosed in Schedule 2.1(c) but not with respect to any amendment or
modification thereof, and (iii) shares of Common Stock issuable upon exercise of
the Warrants in accordance with the terms thereof, unless (A) the Company
delivers to each Purchaser a written notice (the "Subsequent Placement Notice")
of its intention to effect such Subsequent Placement, which Subsequent Placement
Notice shall describe in reasonable detail the proposed terms of such Subsequent
Placement, the amount of proceeds intended to be raised thereunder, the Person
with whom such Subsequent Placement shall be effected, and attached to which
shall be a term sheet or similar document relating thereto and (B) such
Purchaser shall not have notified the Company by 5:30 p.m. (New York City time)
on the fifth (5th) Trading Day after its receipt of the Subsequent Placement
Notice of its willingness to cause such Purchaser to provide (or to cause its
sole designee to provide), subject to completion of mutually acceptable
documentation, financing to the Company on the same terms set forth in the
Subsequent Placement Notice. If the Purchasers shall fail to notify the Company
of their intention to enter into such negotiations within such time period, the
Company may effect the Subsequent Placement substantially upon the terms and to
the Persons (or Affiliates of such Persons) set forth in the Subsequent
Placement Notice; provided, that the Company shall provide the Purchasers with a
second Subsequent Placement Notice, and the Purchasers shall again have the
right of first refusal set forth above in this Section (a), if the Subsequent
Placement subject to the initial Subsequent Placement Notice shall not have been
consummated for any reason on the terms set forth in such Subsequent Placement
Notice within thirty (30) Trading Days after the date of the initial Subsequent
Placement Notice with the Person (or an Affiliate of such Person) identified in
the Subsequent Placement Notice. The rights of the Purchasers under this Section
shall apply to each Subsequent Placement contemplated by the Company or such
Subsidiary, regardless of any prior waivers or non-participation.
(b) Except for (w) Shares, (x) Underlying Shares, (y) other
"Registrable Securities" (as such term is defined in the Registration Rights
Agreement) to be registered, and securities of the Company as set forth in
Schedule 6(b) of the Registration's Rights Agreement to be registered, in the
Underlying Shares Registration Statement in accordance with the Registration
Rights Agreement, and (z) Common Stock permitted to be issued pursuant to
paragraph (a)(i) - (iii) of Section 3.9 (a), the Company shall not, for a period
of not less than 90 Trading Days after the date that the Underlying Shares
Registration Statement is declared
effective by the Commission, without the prior written consent of the Purchasers
(i) issue or sell any of its or any of its Affiliates' equity or
equity-equivalent securities pursuant to Regulation S promulgated under the
Securities Act, or (ii) file a registration statement for the issuance or resale
of any securities of the Company. Any days that a Purchaser is not permitted or
unable to utilize the prospectus or otherwise to sell Underlying Shares under
the Underlying Shares Registration Statement shall be added to such 90 Trading
Day period for the purposes of this Section.
3.10 Certain Securities Laws Disclosures; Publicity. The Company shall:
(i) on the Closing Date, issue a press release acceptable to the Purchasers
disclosing the transactions contemplated hereby, (ii) file with the Commission a
Report on Form 8-K or Form 10-Q (as applicable) disclosing the transactions
contemplated hereby within ten (10) Business Days after the Closing Date, and
(iii) timely file with the Commission a Form D promulgated under the Securities
Act as required under Regulation D promulgated under the Securities Act and
provide a copy thereof to the Purchasers promptly after the filing thereof. The
Company shall, no less than two (2) Business Days prior to the filing of any
disclosure required by clauses (ii) and (iii) above, provide a copy thereof to
the Purchasers. The Company and the Purchasers shall consult with each other in
issuing any press releases or otherwise making public statements or filings and
other communications with the Commission or any regulatory agency or stock
market or trading facility with respect to the transactions contemplated hereby
and neither party shall issue any such press release or otherwise make any such
public statement, filings or other communications pertaining to the transactions
contemplated hereby without the prior written consent of the other, which
consent shall not be unreasonably withheld or delayed, except that no prior
consent shall be required if such disclosure is required by law and such consent
can not reasonably be expected to be received prior to the time required to
complete such filing or make such statement in accordance with such applicable
law, in which such case the disclosing party shall provide the other party with
prior notice of such public statement, filing or other communication.
Notwithstanding the foregoing, the Company shall not publicly disclose the name
of a Purchaser, or include the name of a Purchaser in any filing with the
Commission, or any regulatory agency, trading facility or stock market without
the prior written consent of such Purchaser, except to the extent such
disclosure (but not any disclosure as to the controlling Persons thereof) is
required by law, in which case the Company shall provide such Purchaser with
prior notice of such disclosure.
3.11 Transfer of Intellectual Property Rights. Except in connection
with the sale of all or substantially all of the assets of the Company, the
Company shall not transfer, sell or otherwise dispose of any Intellectual
Property Rights, or allow any of the Intellectual Property Rights to become
subject to any Liens, or fail to renew such Intellectual Property Rights (if
renewable and it would otherwise lapse if not renewed).
3.12 Use of Proceeds. The Company shall use the net proceeds from the
sale of Securities hereunder for working capital purposes and not for the
satisfaction of any portion of the Company's debt (other than trade payables in
the ordinary course of business), to redeem any Company equity or
equity-equivalent securities or to settle any outstanding litigation. Pending
application of the proceeds of this placement in the manner permitted hereby,
the Company will invest such proceeds in interest bearing accounts and/or
short-term, investment grade interest bearing securities.
3.13 Reimbursement. If any Purchaser, other than by reason of its gross
negligence or willful misconduct, becomes involved in any capacity in any
action, proceeding or investigation brought by or against any Person, including
stockholders of the Company, in connection with or as a result of the
consummation of the transactions contemplated by Transaction Documents, the
Company will reimburse such Purchaser for its reasonable legal and other
expenses (including the cost of any investigation and preparation and travel in
connection therewith) incurred in connection therewith, as such expenses are
incurred. The reimbursement obligations of the Company under this paragraph
shall be in addition to any liability which the Company may otherwise have,
shall extend upon the same terms and conditions to any Affiliates of the
Purchasers who are actually named in such action, proceeding or investigation,
and partners, directors, agents, employees and controlling persons (if any), as
the case may be, of the Purchasers and any such Affiliate, and shall be binding
upon and inure to the benefit of any successors, assigns, heirs and personal
representatives of the Company, the Purchasers and any such Affiliate and any
such Person. The Company also agrees that neither the Purchasers nor any such
Affiliates, partners, directors, agents, employees or controlling persons shall
have any liability to the Company or any Person asserting claims on behalf of or
in right of the Company in connection with or as a result of the consummation of
the Transaction Documents except to the extent that any losses, claims, damages,
liabilities or expenses incurred by the Company result from the gross negligence
or willful misconduct of the applicable Purchaser or entity in connection with
the transactions contemplated by this Agreement.
3.14 Purchasers' Obligations Under Letter Agreement. The parties agree
that upon the Closing hereunder, the obligations of the Purchasers under the
letter agreement between the parties, dated September 30, 1999, will be
satisfied in full.
3.15 Warrant Shares. The parties agree that, notwithstanding anything
to the contrary contained therein, the Adjustable Warrants issued to the
Purchasers on September 30, 1999, will no longer vest from and after the Closing
Date. However, any vesting for a prior Vesting Date (as defined in Section 3(a)
of the Adjustable Warrant dated September 30, 1999) will be honored.
ARTICLE IV
MISCELLANEOUS
4.1 Fees and Expenses. At the Closing the Company shall
reimburse the Purchasers for their legal fees and expenses incurred in
connection with the preparation and negotiation of the Transaction Documents by
paying to Robinson Silverman $25,000 for the preparation and negotiation of the
Transaction Documents. The $25,000 may be deducted from the proceeds of the
Purchase Price payable to the Company and paid directly by the Purchasers to
Robinson Silverman. Other than the amounts contemplated in the immediately
preceding sentence, and except as otherwise set forth in the Registration Rights
Agreement, each party shall pay the fees and expenses of its advisers, counsel,
accountants and other experts, if any, and all other expenses incurred by such
party incident to the negotiation, preparation, execution, delivery and
performance of this Agreement. The Company shall pay all stamp and other taxes
and duties levied in connection with the issuance of the Securities.
4.2 Entire Agreement; Amendments. The Transaction Documents,
together with the Exhibits and Schedules thereto contain the entire
understanding of the parties with respect to the subject matter hereof and
supersede all prior agreements and understandings, oral or written, with respect
to such matters, which the parties acknowledge have been merged into such
documents, exhibits and schedules.
4.3 Notices. Any and all notices or other communications or
deliveries required or permitted to be provided hereunder shall be in writing
and shall be deemed given and effective on the earliest of (i) the date of
transmission, if such notice or communication is delivered via facsimile at the
facsimile telephone number specified in this Section prior to 8:00 p.m. (New
York City time) on a Business Day, (ii) the Business Day after the date of
transmission, if such notice or communication is delivered via facsimile at the
facsimile telephone number specified in this Agreement later than 8:00 p.m. (New
York City time) on any date and earlier than 11:59 p.m. (New York City time) on
such date, (iii) the Business Day following the date of mailing, if sent by
nationally recognized overnight courier service, or (iv) upon actual receipt by
the party to whom such notice is required to be given. The address for such
notices and communications shall be as follows:
If to the Company: Cybershop.Com, Inc.
116 Newark Avenue,
Jersey City, New Jersey 07302
Facsimile No.: (201) 234-5052
Attn: Chief Financial Officer
With copies to: Davis & Gilbert LLP
1740 Broadway
New York, NY 10019
Facsimile No.: (212) 468-4888
Attn: Walter M. Epstein, Esq.
If to a Purchaser: To the address
set forth under such
Purchaser's name on the
signature pages hereto.
or such other address as may be designated in writing hereafter, in the same
manner, by such Person.
4.4 Amendments; Waivers. No provision of this Agreement may be
waived or amended except in a written instrument signed, in the case of an
amendment, by both the Company and the Purchasers or, in the case of a waiver,
by the party against whom enforcement of any such waiver is sought. No waiver of
any default with respect to any provision, condition or requirement of this
Agreement shall be deemed to be a continuing waiver in the future or a waiver of
any other provision, condition or requirement hereof, nor shall any delay or
omission of either party to exercise any right hereunder in any manner impair
the exercise of any such right accruing to it thereafter.
4.5 Headings. The headings herein are for convenience only, do
not constitute a part of this Agreement and shall not be deemed to limit or
affect any of the provisions hereof.
4.6 Successors and Assigns. This Agreement shall be binding
upon and inure to the benefit of the parties and their successors and permitted
assigns. The Company may not assign this Agreement or any rights or obligations
hereunder without the prior written consent of the Purchasers. Except as set
forth in Section 3.1(a), the Purchasers may not assign this Agreement or any of
the rights or obligations hereunder without the consent of the Company.
4.7 No Third-Party Beneficiaries. This Agreement is intended
for the benefit of the parties hereto and their respective successors and
permitted assigns and is not for the benefit of, nor may any provision hereof be
enforced by, any other Person.
4.8 Governing Law. The corporate laws of the State of Delaware
shall govern all issues concerning the relative rights of the Company and its
stockholders. All other questions concerning the construction, validity,
enforcement and interpretation of the Transaction Documents shall be governed by
and construed and enforced in accordance with the internal laws of the State of
New York, without regard to the principles of conflicts of law thereof. Each
party hereby irrevocably submits to the exclusive jurisdiction of the state and
federal courts sitting in the City of New York, borough of Manhattan, for the
adjudication of any dispute hereunder or in connection herewith or with any
transaction contemplated hereby or discussed herein (including with respect to
the enforcement of the any of the Transaction Documents), and hereby irrevocably
waives, and agrees not to assert in any suit, action or proceeding, any claim
that it is not personally subject to the jurisdiction of any such court, that
such suit, action or proceeding is improper. Each party hereby irrevocably
waives personal service of process and consents to process being served in any
such suit, action or proceeding by mailing a copy thereof to such party at the
address in effect for notices to it under this Agreement and agrees that such
service shall constitute good and sufficient service of process and notice
thereof. Nothing contained herein shall be deemed to limit in any way any right
to serve process in any manner permitted by law.
4.9 Survival. The representations, warranties, agreements and
covenants contained herein shall survive the Closing and the delivery and
exercise of the Warrants.
4.10 Execution. This Agreement may be executed in two or more
counterparts, all of which when taken together shall be considered one and the
same agreement and shall become effective when counterparts have been signed by
each party and delivered to the other party, it being understood that both
parties need not sign the same counterpart. In the event that any signature is
delivered by facsimile transmission, such signature shall create a valid and
binding obligation of the party executing (or on whose behalf such signature is
executed) the same with the same force and effect as if such facsimile signature
page were an original thereof.
4.11 Severability. In case any one or more of the provisions
of this Agreement shall be invalid or unenforceable in any respect, the validity
and enforceability of the remaining terms and provisions of this Agreement shall
not in any way be affected or impaired thereby and
the parties will attempt to agree upon a valid and enforceable provision which
shall be a reasonable substitute therefor, and upon so agreeing, shall
incorporate such substitute provision in this Agreement.
4.12 Remedies. In addition to being entitled to exercise all
rights provided herein or granted by law, including recovery of damages, the
Purchasers will be entitled to specific performance of the obligations of the
Company under the Transaction Documents. Each of the Company and the Purchasers
agree that monetary damages may not be adequate compensation for any loss
incurred by reason of any breach of its obligations described in the foregoing
sentence and hereby agrees to waive in any action for specific performance of
any such obligation the defense that a remedy at law would be adequate.
4.13 Independent Nature of Purchasers' Obligations and Rights.
The obligations of each Purchaser under any Transaction Document is several and
not joint with the obligations of any other Purchaser, and no Purchaser shall be
responsible in any way for the performance of the obligations of any other
Purchaser under any Transaction Document. Nothing contained herein or in any
Transaction Document, and no action taken by any Purchaser pursuant thereto,
shall be deemed to constitute the Purchasers as a partnership, an association, a
joint venture or any other kind of entity, or create a presumption that the
Purchasers are in any way acting in concert with respect to such obligations or
the transactions contemplated by the Transaction Document. Each Purchaser shall
be entitled to independently protect and enforce its rights, including without
limitation the rights arising out of this Agreement or out of the Transaction
Documents, and it shall not be necessary for any other Purchaser to be joined as
an additional party in any proceeding for such purpose.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK
SIGNATURE PAGE FOLLOWS]
IN WITNESS WHEREOF, the parties hereto have caused this
Securities Purchase Agreement to be duly executed by their respective authorized
signatories as of the date first indicated above.
. CYBERSHOP.COM, INC..
By:_________________________________
Name:
Title:
STRONG RIVER INVESTMENTS, INC.
By:_________________________________
Kenneth L. Henderson
Attorney-in-Fact
Purchase Price for Common Stock
to be acquired at Closing: $3,000,000
Number of Shares to be acquired at
Closing: 264,317
Warrant Shares subject to Closing
Warrant; 118,943
Address for Notice:
Strong River Investments, Inc.
c/o Gonzalez-Ruiz & Aleman (BVI) Limited
Wickhams Cay I, Vanterpool Plaza
P.O. Box 873
Road Town, Tortolla. BVI
With copies to:
Robinson Silverman Pearce Aronsohn & Berman LLP
1290 Avenue of the Americas
New York, NY 10104
Facsimile No.: (212) 541-4630 and (212) 541-1432
Attn: Kenneth L. Henderson, Esq.
Eric L. Cohen, Esq.
MONTROSE INVESTMENTS LTD.
By:_________________________________
Name:
Title:
Purchase Price for Common Stock
to be acquired at Closing: $3,000,000
Number of Shares to be acquired at
Closing: 264,317
Warrant Shares subject to Closing
Warrant; 118,942
Address for Notice:
Montrose Investments, Ltd.
300 Crescent Court, Suite 700
Dallas, TX 75201
Facsimile: (214) 758-1221
Attn: Will Rose
Kim Rozman
With copies to:
Robinson Silverman Pearce Aronsohn & Berman LLP
1290 Avenue of the Americas
New York, NY 10104
Facsimile No.: (212) 541-4630 and (212) 541-1432
Attn: Kenneth L. Henderson, Esq.
Eric L. Cohen, Esq.
EX-10.14
4
REGISTRATION RIGHTS AGREEMENT
REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement (this "Agreement") is made
and entered into as of December 8, 1999,among Cybershop.com, Inc., a Delaware
corporation (the "Company"), and the investors signatory hereto (each such
investor is a "Purchaser" and all such investors are, collectively, the
"Purchasers").
This Agreement is made pursuant to the Securities Purchase
Agreement, dated as of the date hereof, among the Company and the Purchasers
(the "Purchase Agreement").
In consideration of the mutual covenants contained in the Purchase Agreement and
in this Agreement, the Company and the Purchasers hereby agree as follows:
1. Definitions
Capitalized terms used and not otherwise defined herein that
are defined in the Purchase Agreement shall have the meanings given such terms
in the Purchase Agreement. As used in this Agreement, the following terms shall
have the following meanings:
"Adjustable Warrants" shall have the meaning set forth in the
Purchase Agreement.
"Advice" shall have meaning set forth in Section 6(e).
"Affiliate" means, with respect to any Person, any other
Person that directly or indirectly controls or is controlled by or under common
control with such Person. For the purposes of this definition, "control," when
used with respect to any Person, means the possession, direct or indirect, of
the power to direct or cause the direction of the management and policies of
such Person, whether through the ownership of voting securities, by contract or
otherwise; and the terms of "affiliated," "controlling" and "controlled" have
meanings correlative to the foregoing.
"Business Day" means any day except Saturday, Sunday and any
day which shall be a federal legal holiday or a day on which banking
institutions in the state of New York generally are authorized or required by
law or other governmental action to close.
"Closing Date" shall have the meaning set forth in the
Purchase Agreement.
"Closing Warrants" shall have the meaning set forth in the
Purchase Agreement.
"Commission" means the Securities and Exchange Commission.
"Common Stock" means the Company's common stock, $.001 par
value per share and any other securities into which such stock shall hereafter
be redistributed or recapitalized.
"Effectiveness Date" means the 60th day following the Closing
Date.
"Effectiveness Period" shall have the meaning set forth in
Section 2(a).
"Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"Filing Date" means the 10th Business Day following the
Closing Date.
"Holder" or "Holders" means the holder or holders, as the case
may be, from time to time of Registrable Securities.
"Indemnified Party" shall have the meaning set forth in
Section 5(c).
"Indemnifying Party" shall have the meaning set forth in
Section 5(c).
"Losses" shall have the meaning set forth in Section 5(a).
"Person" means an individual or a corporation, partnership,
trust, incorporated or unincorporated association, joint venture, limited
liability company, joint stock company, government (or an agency or political
subdivision thereof) or other entity of any kind.
"Proceeding" means an action, claim, suit, investigation or
proceeding (including, without limitation, an investigation or partial
proceeding, such as a deposition), whether commenced or threatened.
"Prospectus" means the prospectus included a Registration
Statement (including, without limitation, a prospectus that includes any
information previously omitted from a prospectus filed as part of an effective
registration statement in reliance upon Rule 430A promulgated under the
Securities Act), as amended or supplemented by any prospectus supplement, with
respect to the terms of the offering of any portion of the Registrable
Securities covered by such Registration Statement, and all other amendments and
supplements to the Prospectus, including post-effective amendments, and all
material incorporated by reference or deemed to be incorporated by reference in
such Prospectus.
"Registration Delay Payments" shall have the meaning set forth
in Section 2(e).
"Registrable Securities" means (i) the Shares and (ii) the
shares of Common Stock issuable upon exercise of the Warrants.
"Registration Statement" means the registration statement and
any additional registration statement contemplated by Section 2(a), including
(in each case) the Prospectus, amendments and supplements to such registration
statement or Prospectus, including pre- and post-effective amendments, all
exhibits thereto, and all material incorporated by reference or deemed to be
incorporated by reference in such registration statement.
"Rule 144" means Rule 144 promulgated by the Commission
pursuant to the Securities Act, as such Rule may be amended from time to time,
or any rule or regulation hereafter adopted by the Commission to replace such
Rule.
"Rule 415" means Rule 415 promulgated by the Commission
pursuant to the Securities Act, as such Rule may be amended from time to time,
or any rule or regulation hereafter adopted by the Commission to replace such
Rule.
"Rule 424" means Rule 424 promulgated by the Commission
pursuant to the Securities Act, as such Rule may be amended from time to time,
or any rule or regulation hereafter adopted by the Commission to replace such
Rule.
"Securities Act" means the Securities Act of 1933, as amended,
and the rules and regulations promulgated thereunder.
"Shares" means the shares of Common Stock issued to the
Purchasers on the Closing Date pursuant to the Purchase Agreement.
"Special Counsel" means one special counsel to the Holders for
which the Holders will be reimbursed by the Company pursuant to Section 4.
"Transaction Documents" shall have the meaning set forth in
the Purchase Agreement.
"Underwritten Registration or Underwritten Offering" means a
registration in connection with which securities of the Company are sold to an
underwriter for reoffering to the public pursuant to an effective registration
statement.
"Vesting Period" shall have the meaning set forth in the
Adjustable Warrants.
"Warrants" means the Closing Warrants and the Adjustable
Warrants.
2. Shelf Registration
(a) On or prior to the Filing Date, the Company shall prepare
and file with the Commission a "Shelf" Registration Statement covering the
resale of all Registrable Securities for an offering to be made on a continuous
basis pursuant to Rule 415. The Registration Statement shall be on Form S-3
(except if the Company is not then eligible to register for resale the
Registrable Securities on Form S-3, in which case such registration shall be on
another appropriate form in accordance herewith as the Holders may consent). The
Company shall use its best efforts to cause the Registration Statement to be
declared effective under the Securities Act as promptly as possible after the
filing thereof, but in any event prior to the Effectiveness Date, and shall use
its best efforts to keep such Registration Statement continuously effective
under the Securities Act until the date which is two (2) years after the date
that such Registration Statement is declared effective by the Commission or such
earlier date when all Registrable Securities covered by such Registration
Statement have been sold or may be sold without volume restrictions pursuant to
Rule 144(k) as determined by the counsel to the Company pursuant to a written
opinion letter to such effect, addressed and acceptable to the Company's
transfer agent
(the "Effectiveness Period"), provided, that the Company shall not be deemed to
have used its best efforts to keep the Registration Statement effective during
the Effectiveness Period if it voluntarily takes any action that would result in
the Holders not being able to sell the Registrable Securities covered by such
Registration Statement during the Effectiveness Period, unless such action is
required under applicable law or the Company has filed a post-effective
amendment to the Registration Statement and the Commission has not declared it
effective.
(b) In order to account for the fact that the number of shares
of Common Stock that are issuable upon exercise of the Adjustable Warrants is
determined in part upon the Per Share Market Value (as defined in the Adjustable
Warrants) on the Vesting Period, the initial Registration Statement to be filed
hereunder shall include (but not be limited to) a number of shares of Common
Stock equal to no less than the sum of (i) the number of shares issuable upon
exercise of the Adjustable Warrants, assuming, for the purposes of this
subsection (i), that the Adjustment Period Price (as defined in the Adjustable
Warrants) on the Vesting Period is 50% of the Per Share Market Value for the
Trading Day (as defined in the Adjustable Warrants) immediately preceding the
Closing Date, (ii) the number of shares issuable upon exercise in full of the
Closing Warrant and (iii) the number of Shares (the sum of (i), (ii) and (iii),
the "Initial Minimum").
(c) If the Holders of a majority of the Registrable Securities
then outstanding so elect, an offering of Registrable Securities pursuant to a
Registration Statement may be effected in the form of an Underwritten Offering.
In such event, and, if the managing underwriters advise the Company and such
Holders in writing that in their opinion the amount of Registrable Securities
proposed to be sold in such Underwritten Offering exceeds the amount of
Registrable Securities which can be sold in such Underwritten Offering, there
shall be included in such Underwritten Offering the amount of such Registrable
Securities which in the opinion of such managing underwriters can be sold, and
such amount shall be allocated pro rata among the Holders proposing to sell
Registrable Securities in such Underwritten Offering.
(d) If any of the Registrable Securities are to be sold in an
Underwritten Offering, the investment banker that will administer the offering
will be selected by the Holders of a majority of the Registrable Securities
included in such offering upon consultation with the Company. No Holder may
participate in any Underwritten Offering hereunder unless such Holder (i) agrees
to sell its Registrable Securities on the basis provided in any underwriting
agreements approved by the Persons entitled hereunder to approve such
arrangements and (ii) completes and executes all questionnaires, powers of
attorney, indemnities, underwriting agreements and other documents required
under the terms of such arrangements.
(e) If (i) the initial Registration Statement is not filed on
or before the Filing Date (if the Company files such Registration Statement
without affording the Holder the opportunity to review and comment on the same
as required by Section 3(a) hereof, the Company shall not be deemed to have
satisfied this clause (i)), or (ii) the Company fails to file with the
Commission a request to accelerate in accordance with Rule 12d1-2 promulgated
under the Exchange Act within five (5) days of the date that the Company is
notified (orally or in writing, whichever is earlier) by the Commission that a
Registration Statement will not be "reviewed" or is not subject to further
review, or (iii) the initial Registration Statement filed hereunder is not
declared effective by the Commission on or before the Effectiveness Date, or
(iv) after a Registration Statement has been declared effective by the
Commission, such
Registration Statement is either not effective as to all Registrable Securities
required to be covered thereby throughout the Effectiveness Period or the
Holders are not permitted for any reason to make sales thereunder during such
period, (v) an amendment to the Registration Statement is not filed by the
Company with the Commission within ten (10) days of the Commission's notifying
the Company that such amendment is required in order for a Registration
Statement to be declared effective, or (vi) trading in the Common Stock shall be
suspended from the NASDAQ (as defined herein) or a Subsequent Market (as defined
herein) for more than three (3) Business Days (which need not be consecutive
days) (any such failure or breach being referred to as an "Event," and for
purposes of clauses (i), (iii) and (iv) the date on which such Event occurs, or
for purposes of clause (ii) the date on which such five (5) day period is
exceeded, or for purposes of clause (v) the date on which such ten (10) day
period is exceeded, or for purposes of clause (vi) the date on which such three
(3) Business Day period is exceeded being referred to as "Event Date"), then, in
any such case, as partial relief for the damages suffered therefrom by the
Holder (which remedy shall not be exclusive of any other remedies available at
law or in equity), the Company, other than with respect to an Event caused by a
failure under clause (ii) above, shall on the Event Date and on each monthly
anniversary thereof until the triggering Event is cured, pay to the Holder an
amount in cash, as liquidated damages for the estimated cost to the Holders of
not having liquid securities in the time contemplated by the Transaction
Documents and not as a penalty, equal to 2% of the purchase price paid by such
Holder for its Shares pursuant to the Purchase Agreement. In the event that the
Company fails to request that a Registration Statement be declared effective not
later than the 5th day after it is notified by the Commission that the
Registration Statement is not subject to "a review" or no further "review", then
for each day after such 5th day that the Registration Statement has not been
declared effective by the Commission, the Company shall pay to the Holders as
liquidated damages, not as a penalty, the sum of $50,000. The payments to which
the Holders shall be entitled pursuant to this Section are referred to herein as
"Registration Delay Payments." Registration Delay Payments shall be calculated
on a cumulative basis and paid within five (5) Business Days of the Event Date
and each monthly anniversary thereof. If the Company fails to make Registration
Delay Payments in a timely manner, such Registration Delay Payments shall bear
interest at the rate of 2.0% per month (or the maximum rate permitted by law),
pro-rated for partial months, until paid in full.
3. Registration Procedures
In connection with the Company's registration obligations
hereunder, the Company shall:
(a) Prepare and file with the Commission on or prior to the
Filing Date, a Registration Statement on Form S-3 (or if the Company is not then
eligible to register for resale the Registrable Securities on Form S-3 such
registration shall be on another appropriate form in accordance herewith, or, in
connection with an Underwritten Offering hereunder, such other form agreed to by
the Company and the Holders) which shall contain the "Plan of Distribution"
attached hereto as Annex A (except if otherwise directed by the Holders), and
cause the Registration Statement to become effective and remain effective as
provided herein; provided, however, that not less than five (5) Business Days
prior to the filing of a Registration Statement or any related Prospectus or any
amendment or supplement thereto (including any document that would be
incorporated or deemed to be incorporated therein by reference), the Company
shall, (i) furnish to the Holders, their Special Counsel and any managing
underwriters, copies of all such
documents proposed to be filed, which documents (other than those incorporated
or deemed to be incorporated by reference) will be subject to the review of such
Holders, their Special Counsel and such managing underwriters, and (ii) cause
its officers and directors, counsel and independent certified public accountants
to respond to such inquiries as shall be necessary, in the reasonable opinion of
respective counsel to such Holders and such underwriters, to conduct a
reasonable investigation within the meaning of the Securities Act. The Company
shall not file the Registration Statement or any such Prospectus or any
amendments or supplements thereto to which the Holders of a majority of the
Registrable Securities, their Special Counsel, or any managing underwriters,
shall reasonably object on a timely basis.
(b) (i) Prepare and file with the Commission such amendments,
including post-effective amendments, to the Registration Statement and the
Prospectus used in connection therewith as may be necessary to keep the
Registration Statement continuously effective as to the applicable Registrable
Securities for the Effectiveness Period and prepare and file with the Commission
such additional Registration Statements in order to register for resale under
the Securities Act all of the Registrable Securities; (ii) cause the related
Prospectus to be amended or supplemented by any required Prospectus supplement,
and as so supplemented or amended to be filed pursuant to Rule 424; (iii)
respond as promptly as reasonably possible, and in any event within ten (10)
days, to any comments received from the Commission with respect to the
Registration Statement or any amendment thereto and as promptly as reasonably
possible provide the Holders true and complete copies of all correspondence from
and to the Commission relating to the Registration Statement; and (iv) comply in
all material respects with the provisions of the Securities Act and the Exchange
Act with respect to the disposition of all Registrable Securities covered by the
Registration Statement during the applicable period in accordance with the
intended methods of disposition by the Holders thereof set forth in the
Registration Statement as so amended or in such Prospectus as so supplemented.
(c) (i) File additional Registration Statements if the number
of Registrable Securities at any time exceeds 85% of the number of shares of
Common Stock then registered in a Registration Statement. The Company shall have
twenty (20) days to file such additional Registration Statements after its
receipt of notice of the requirement thereof which the Holders may give at any
time when the number of Registrable Securities exceeds 85% of the number of
shares of Common Stock then registered in a Registration Statement hereunder. In
such event, the Registration Statement required to be filed by the Company shall
include a number of shares of Common Stock equal to no less than the Initial
Minimum and any other Registrable Securities not then registered in a
Registration Statement.
(ii) File such supplements or attach "stickers" to
the Registration Statement or Prospectus as and when required by the Commission
to evidence a material amount of resales by a Holder pursuant to a Prospectus.
In connection therewith, if such supplements or "stickers" are periodically
required by the Commission, the Company shall, within four (4) Business Days,
file such supplements or attach such "stickers" whenever a Holder has sold 50%
of the Registrable Securities covered by the then outstanding Prospectus (as
last supplemented or "stickered") in order to cover 100% of the number of the
outstanding Registrable Securities.
(d) Notify the Holders of Registrable Securities to be sold,
their Special Counsel and any managing underwriters as promptly as reasonably
possible (and, in the case of (i)(A) below, not less than five (5) Business Days
(or, in the case of a supplement or "sticker"
required to be filed or attached pursuant to Section 3(c)(ii), within one (1)
Business Day) prior to such filing) and (if requested by any such Person)
confirm such notice in writing no later than one (1) Business Day following the
day (i)(A) when a Prospectus or any Prospectus supplement or post-effective
amendment to the Registration Statement is proposed to be filed; (B) when the
Commission notifies the Company whether there will be a "review" of such
Registration Statement and whenever the Commission comments in writing on such
Registration Statement (the Company shall provide true and complete copies
thereof and all written responses thereto to each of the Holders); and (C) with
respect to the Registration Statement or any post-effective amendment, when the
same has become effective; (ii) of any request by the Commission or any other
Federal or state governmental authority for amendments or supplements to the
Registration Statement or Prospectus or for additional information; (iii) of the
issuance by the Commission of any stop order suspending the effectiveness of the
Registration Statement covering any or all of the Registrable Securities or the
initiation of any Proceedings for that purpose; (iv) if at any time any of the
representations and warranties of the Company contained in any agreement
(including any underwriting agreement) contemplated hereby ceases to be true and
correct in all material respects; (v) of the receipt by the Company of any
notification with respect to the suspension of the qualification or exemption
from qualification of any of the Registrable Securities for sale in any
jurisdiction, or the initiation or threatening of any Proceeding for such
purpose; and (vi) of the occurrence of any event or passage of time that makes
the financial statements included in the Registration Statement ineligible for
inclusion therein or any statement made in the Registration Statement or
Prospectus or any document incorporated or deemed to be incorporated therein by
reference untrue in any material respect or that requires any revisions to the
Registration Statement, Prospectus or other documents so that, in the case of
the Registration Statement or the Prospectus, as the case may be, it will not
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary to make the statements therein,
in light of the circumstances under which they were made, not misleading.
(e) Use its best efforts to avoid the issuance of, or, if
issued, obtain the withdrawal of (i) any order suspending the effectiveness of
the Registration Statement, or (ii) any suspension of the qualification (or
exemption from qualification) of any of the Registrable Securities for sale in
any jurisdiction, at the earliest practicable moment.
(f) If requested by any managing underwriter or the Holders of
a majority in interest of the Registrable Securities to be sold in connection
with an Underwritten Offering, (i) promptly incorporate in a Prospectus
supplement or post-effective amendment to the Registration Statement such
reasonable information as such managing underwriters and such Holders agree
should be included therein, and (ii) make all required filings of such
Prospectus supplement or such post-effective amendment as soon as practicable
after the Company has received notification of the matters to be incorporated in
such Prospectus supplement or post-effective amendment; provided, however, that
the Company shall not be required to take any action pursuant to this Section
3(f) that would, in the opinion of counsel for the Company, violate applicable
law or be materially detrimental to the business prospects of the Company.
(g) Furnish to each Holder, their Special Counsel and any
managing underwriters, without charge, at least one conformed copy of each
Registration Statement and each amendment thereto, including financial
statements and schedules, all documents incorporated or deemed to be
incorporated therein by reference, and all exhibits to the extent
requested by such Person (including those previously furnished or incorporated
by reference) promptly after the filing of such documents with the Commission.
(h) Promptly deliver to each Holder, their Special Counsel,
and any underwriters, without charge, as many copies of the Prospectus or
Prospectuses (including each form of prospectus) and each amendment or
supplement thereto as such Persons may reasonably request; and the Company
hereby consents to the use of such Prospectus and each amendment or supplement
thereto by each of the selling Holders and any underwriters in connection with
the offering and sale of the Registrable Securities covered by such Prospectus
and any amendment or supplement thereto.
(i) Prior to any public offering of Registrable Securities,
use its best efforts to register or qualify or cooperate with the selling
Holders, any underwriters and their Special Counsel in connection with the
registration or qualification (or exemption from such registration or
qualification) of such Registrable Securities for offer and sale under the
securities or Blue Sky laws of such jurisdictions within the United States as
any Holder or underwriter requests in writing, to keep each such registration or
qualification (or exemption therefrom) effective during the Effectiveness Period
and to do any and all other acts or things necessary or advisable to enable the
disposition in such jurisdictions of the Registrable Securities covered by a
Registration Statement; provided, however, that the Company shall not be
required to qualify generally to do business in any jurisdiction where it is not
then so qualified or to take any action that would subject it to general service
of process in any such jurisdiction where it is not then so subject or subject
the Company to any material tax in any such jurisdiction where it is not then so
subject.
(j) Cooperate with the Holders and any managing underwriters
to facilitate the timely preparation and delivery of certificates representing
Registrable Securities to be delivered to a transferee pursuant to a
Registration Statement, which certificates shall be free, to the extent
permitted by the Purchase Agreement, of all restrictive legends, and to enable
such Registrable Securities to be in such denominations and registered in such
names as any such managing underwriters or Holders may request.
(k) Upon the occurrence of any event contemplated by Section
3(d)(vi), as promptly as reasonably possible, prepare a supplement or amendment,
including a post-effective amendment, to the Registration Statement or a
supplement to the related Prospectus or any document incorporated or deemed to
be incorporated therein by reference, and file any other required document so
that, as thereafter delivered, neither the Registration Statement nor such
Prospectus will contain an untrue statement of a material fact or omit to state
a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading.
(l) Use its best efforts to cause all Registrable Securities
relating to such Registration Statement to be listed on the Nasdaq National
Market ("NASDAQ") or on any other stock market or trading facility on which the
shares of Common Stock are traded, listed or quoted (each a "Subsequent Market")
as and when required pursuant to the Purchase Agreement.
(m) Enter into such agreements (including an underwriting
agreement in form, scope and substance as is customary in Underwritten
Offerings) and take all such other actions in connection therewith (including
those reasonably requested by any managing underwriters and the Holders of a
majority of the Registrable Securities being sold) in order to expedite or
facilitate the disposition of such Registrable Securities, and whether or not an
underwriting agreement is entered into, (i) make such representations and
warranties to such Holders and such underwriters as are customarily made by
issuers to underwriters in underwritten public offerings (subject to the
scheduling of appropriate exceptions to insure such representations and
warranties are accurate), and confirm the same if and when requested; (ii) in
the case of an Underwritten Offering obtain and deliver copies thereof to each
Holder and the managing underwriters, if any, of opinions of counsel to the
Company and updates thereof addressed to each Holder and each such underwriter,
in form, scope and substance reasonably satisfactory to any such managing
underwriters and Special Counsel to the selling Holders covering the matters
customarily covered in opinions requested in Underwritten Offerings and such
other matters as may be reasonably requested by such Special Counsel and
underwriters; (iii) immediately prior to the effectiveness of the Registration
Statement, and, in the case of an Underwritten Offering, at the time of delivery
of any Registrable Securities sold pursuant thereto, use its best reasonable
efforts to obtain and deliver copies to the Holders and the managing
underwriters, if any, of "cold comfort" letters and updates thereof from the
independent certified public accountants of the Company (and, if necessary, any
other independent certified public accountants of any subsidiary of the Company
or of any business acquired by the Company for which financial statements and
financial data is, or is required to be, included in the Registration
Statement), addressed to the Company in form and substance as are customary in
connection with Underwritten Offerings; (iv) if an underwriting agreement is
entered into, the same shall contain indemnification provisions and procedures
no less favorable to the selling Holders and the underwriters, if any, than
those set forth in Section 5 (or such other provisions and procedures acceptable
to the managing underwriters, if any, and holders of a majority of Registrable
Securities participating in such Underwritten Offering); and (v) deliver such
documents and certificates as may be reasonably requested by the Holders of a
majority of the Registrable Securities being sold, their Special Counsel and any
managing underwriters to evidence the continued validity of the representations
and warranties made pursuant to Section 3(m)(i) above and to evidence compliance
with any customary conditions contained in the underwriting agreement or other
agreement entered into by the Company.
(n) Make available for inspection by the selling Holders, any
representative of such Holders, any underwriter participating in any disposition
of Registrable Securities, and any attorney or accountant retained by such
selling Holders or underwriters, at the offices where normally kept, during
reasonable business hours, all financial and other records, pertinent corporate
documents and properties of the Company and its subsidiaries, and cause the
officers, directors, agents and employees of the Company and its subsidiaries to
supply all information in each case reasonably requested by any such Holder,
representative, underwriter, attorney or accountant in connection with the
Registration Statement; provided, however, that any information that is
determined in good faith by the Company in writing to be of a confidential
nature at the time of delivery of such information shall be kept confidential by
such Persons, unless (i) disclosure of such information is required by court or
administrative order or is necessary to respond to inquiries of regulatory
authorities; (ii) disclosure of such information, in the opinion of counsel to
such Person, is required by law; (iii) such information becomes generally
available to the public other than as a result of a disclosure or failure to
safeguard by
such Person; or (iv) such information becomes available to such Person from a
source other than the Company and such source is not known by such Person to be
bound by a confidentiality agreement with the Company.
(o) Comply in all material issues with all applicable rules
and regulations of the Commission.
(p) The Company may require each selling Holder to furnish to
the Company such information regarding the distribution of such Registrable
Securities and the beneficial ownership of Common Stock held by such Holder as
is required by law to be disclosed in the Registration Statement, and the
Company may exclude from such registration the Registrable Securities of any
such Holder who unreasonably fails to furnish such information within a
reasonable time after receiving such request. If the Registration Statement
refers to any Holder by name or otherwise as the holder of any securities of the
Company, then such Holder shall have the right to require (if such reference to
such Holder by name or otherwise is not required by the Securities Act or any
similar Federal statute then in force) the deletion of the reference to such
Holder in any amendment or supplement to the Registration Statement filed or
prepared subsequent to the time that such reference ceases to be required.
5. Registration Expenses
(a) All fees and expenses incident to the performance of or
compliance with this Agreement by the Company, except as and to the extent
specified in Section 4(b), shall be borne by the Company whether or not pursuant
to an Underwritten Offering and whether or not the Registration Statement is
filed or becomes effective and whether or not any Registrable Securities are
sold pursuant to the Registration Statement. The fees and expenses referred to
in the foregoing sentence shall include, without limitation, (i) all
registration and filing fees (including, without limitation, fees and expenses
(A) with respect to filings required to be made with the NASDAQ and any
Subsequent Market on which the Common Stock is then listed for trading, and (B)
in compliance with state securities or Blue Sky laws (including, without
limitation, fees and disbursements of counsel for the Holders in connection with
Blue Sky qualifications or exemptions of the Registrable Securities and
determination of the eligibility of the Registrable Securities for investment
under the laws of such jurisdictions as the managing underwriters, if any, or
the Holders of a majority of Registrable Securities may designate)), (ii)
printing expenses (including, without limitation, expenses of printing
certificates for Registrable Securities and of printing prospectuses if the
printing of prospectuses is requested by the managing underwriters, if any, or
by the holders of a majority of the Registrable Securities included in the
Registration Statement), (iii) messenger, telephone and delivery expenses of the
Company, (iv) fees and disbursements of counsel for the Company and Special
Counsel for the Holders at a sum not higher than $15,000, (v) Securities Act
liability insurance, if the Company so desires such insurance, and (vi) fees and
expenses of all other Persons retained by the Company in connection with the
consummation of the transactions contemplated by this Agreement. In addition,
the Company shall be responsible for all of its internal expenses incurred in
connection with the consummation of the transactions contemplated by this
Agreement (including, without limitation, all salaries and expenses of its
officers and employees performing legal or accounting duties), the expense of
any annual audit, the fees and expenses incurred in connection with the listing
of the Registrable Securities on any securities exchange as required hereunder.
(b) If the Holders require an Underwritten Offering pursuant
to the terms hereof, and there shall be at such time no effective Registration
Statement meeting the requirements hereof and covering all of the Registrable
Securities pursuant to which the Holders are both named Selling Security holders
thereunder and permitted to utilize the Prospectus thereunder to resell such
Registrable Securities held by them, then the Company shall be responsible for
all costs, fees and expenses in connection therewith, except for the fees and
disbursements of the Underwriters (including any underwriting commissions and
discounts) and their legal counsel and accountants. By way of illustration which
is not intended to diminish from the provisions of Section 4(a), the Holders
shall not be responsible for, and the Company shall be required to pay the fees
or disbursements incurred by the Company (including by its legal counsel and
accountants) in connection with, the preparation and filing of a Registration
Statement and related Prospectus for such offering, the maintenance of such
Registration Statement in accordance with the terms hereof, the listing of the
Registrable Securities in accordance with the requirements hereof, and printing
expenses incurred to comply with the requirements hereof. However, if the
Holders require an Underwritten Offering at a time when all of the circumstances
specified in the opening clause to the first sentence of this Section 4(b) are
present, then such Holders shall bear all costs associated with such
Underwritten Offering, including those costs specified in Section 4(a) above.
4. Indemnification
(a) Indemnification by the Company. The Company shall,
notwithstanding any termination of this Agreement, indemnify and hold harmless
each Holder, the officers, directors, agents (including any underwriters
retained by such Holder in connection with the offer and sale of Registrable
Securities), brokers (including brokers who offer and sell Registrable
Securities as principal as a result of a pledge or any failure to perform under
a margin call of Common Stock), investment advisors and employees of each of
them, each Person who controls any such Holder (within the meaning of Section 15
of the Securities Act or Section 20 of the Exchange Act) and the officers,
directors, agents and employees of each such controlling Person, to the fullest
extent permitted by applicable law, from and against any and all losses, claims,
damages, liabilities, costs (including, without limitation, costs of preparation
and attorneys' fees) and expenses (collectively, "Losses"), as incurred, arising
out of or relating to any untrue or alleged untrue statement of a material fact
contained in the Registration Statement, any Prospectus or any form of
prospectus or in any amendment or supplement thereto or in any preliminary
prospectus, or arising out of or relating to any omission or alleged omission of
a material fact required to be stated therein or necessary to make the
statements therein (in the case of any Prospectus or form of prospectus or
supplement thereto, in light of the circumstances under which they were made)
not misleading, except to the extent, but only to the extent, that (1) such
untrue statements or omissions are based solely upon information regarding such
Holder furnished in writing to the Company by such Holder expressly for use
therein, or to the extent that such information relates to such Holder or such
Holder's proposed method of distribution of Registrable Securities and was
reviewed and expressly approved in writing by such Holder expressly for use in
the Registration Statement or approved by Special Counsel, such Prospectus or
such form of Prospectus or in any amendment or supplement thereto or (2) in the
case of an occurrence of an event of the type specified in Section
3(d)(ii)-(vi), the use by such Holder of an outdated or defective Prospectus
after the Company has notified such Holder in writing that the Prospectus is
outdated or defective and prior to the receipt by such Holder of the Advice
contemplated in Section 6(e). The Company shall notify the Holders promptly of
the institution, threat or assertion of any Proceeding of which the Company is
aware in connection with the transactions contemplated by this Agreement.
(b) Indemnification by Holders. Each Holder shall, severally
and not jointly, indemnify and hold harmless the Company, its directors,
officers, agents and employees, each Person who controls the Company (within the
meaning of Section 15 of the Securities Act and Section 20 of the Exchange Act),
and the directors, officers, agents or employees of such controlling Persons, to
the fullest extent permitted by applicable law, from and against all Losses (as
determined by a court of competent jurisdiction in a final judgment not subject
to appeal or review) arising solely out of or based solely upon any untrue
statement of a material fact contained in the Registration Statement, any
Prospectus, or any form of prospectus, or in any amendment or supplement
thereto, or arising solely out of or based solely upon any omission of a
material fact required to be stated therein or necessary to make the statements
therein not misleading to the extent, but only to the extent, that such untrue
statement or omission is contained in any information so furnished in writing by
such Holder to the Company specifically for inclusion in the Registration
Statement or such Prospectus or to the extent that such information relates to
such Holder or such Holder's proposed method of distribution of Registrable
Securities and was reviewed and expressly approved in writing by such Holder
expressly for use in the Registration Statement, such Prospectus or such form of
Prospectus, or in any amendment or supplement thereto. In no event shall the
liability of any selling Holder hereunder be greater in amount than the dollar
amount of the net proceeds received by such Holder upon the sale of the
Registrable Securities giving rise to such indemnification obligation.
(c) Conduct of Indemnification Proceedings. If any Proceeding
shall be brought or asserted against any Person entitled to indemnity hereunder
(an "Indemnified Party"), such Indemnified Party shall promptly notify the
Person from whom indemnity is sought (the "Indemnifying Party") in writing, and
the Indemnifying Party shall assume the defense thereof, including the
employment of counsel reasonably satisfactory to the Indemnified Party and the
payment of all fees and expenses incurred in connection with defense thereof;
provided, that the failure of any Indemnified Party to give such notice shall
not relieve the Indemnifying Party of its obligations or liabilities pursuant to
this Agreement, except (and only) to the extent that it shall be finally
determined by a court of competent jurisdiction (which determination is not
subject to appeal or further review) that such failure shall have proximately
and materially adversely prejudiced the Indemnifying Party.
An Indemnified Party shall have the right to employ separate
counsel in any such Proceeding and to participate in the defense thereof, but
the fees and expenses of such counsel shall be at the expense of such
Indemnified Party or Parties unless: (1) the Indemnifying Party has agreed in
writing to pay such fees and expenses; or (2) the Indemnifying Party shall have
failed promptly to assume the defense of such Proceeding and to employ counsel
reasonably satisfactory to such Indemnified Party in any such Proceeding; or (3)
the named parties to any such Proceeding (including any impleaded parties)
include both such Indemnified Party and the Indemnifying Party, and such
Indemnified Party shall have been advised by counsel that a conflict of interest
is likely to exist if the same counsel were to represent such Indemnified Party
and the Indemnifying Party (in which case, if such Indemnified Party notifies
the Indemnifying Party in writing that it elects to employ separate counsel at
the expense of the Indemnifying Party, the Indemnifying Party shall not have the
right to assume the defense thereof and such
counsel shall be at the expense of the Indemnifying Party). The Indemnifying
Party shall not be liable for any settlement of any such Proceeding effected
without its written consent, which consent shall not be unreasonably withheld.
No Indemnifying Party shall, without the prior written consent of the
Indemnified Party, effect any settlement of any pending Proceeding in respect of
which any Indemnified Party is a party, unless such settlement includes an
unconditional release of such Indemnified Party from all liability on claims
that are the subject matter of such Proceeding.
All fees and expenses of the Indemnified Party (including
reasonable fees and expenses to the extent incurred in connection with
investigating or preparing to defend such Proceeding in a manner not
inconsistent with this Section) shall be paid to the Indemnified Party, as
incurred, within ten (10) Business Days of written notice thereof to the
Indemnifying Party (regardless of whether it is ultimately determined that an
Indemnified Party is not entitled to indemnification hereunder; provided, that
the Indemnifying Party may require such Indemnified Party to undertake to
reimburse all such fees and expenses to the extent it is finally judicially
determined that such Indemnified Party is not entitled to indemnification
hereunder).
(d) Contribution. If a claim for indemnification under Section
5(a) or 5(b) is unavailable to an Indemnified Party (by reason of public policy
or otherwise), then each Indemnifying Party, in lieu of indemnifying such
Indemnified Party, shall contribute to the amount paid or payable by such
Indemnified Party as a result of such Losses, in such proportion as is
appropriate to reflect the relative fault of the Indemnifying Party and
Indemnified Party in connection with the actions, statements or omissions that
resulted in such Losses as well as any other relevant equitable considerations.
The relative fault of such Indemnifying Party and Indemnified Party shall be
determined by reference to, among other things, whether any action in question,
including any untrue or alleged untrue statement of a material fact or omission
or alleged omission of a material fact, has been taken or made by, or relates to
information supplied by, such Indemnifying Party or Indemnified Party, and the
parties' relative intent, knowledge, access to information and opportunity to
correct or prevent such action, statement or omission. The amount paid or
payable by a party as a result of any Losses shall be deemed to include, subject
to the limitations set forth in Section 5(c), any reasonable attorneys' or other
reasonable fees or expenses incurred by such party in connection with any
Proceeding to the extent such party would have been indemnified for such fees or
expenses if the indemnification provided for in this Section was available to
such party in accordance with its terms.
The parties hereto agree that it would not be just and
equitable if contribution pursuant to this Section 5(d) were determined by pro
rata allocation or by any other method of allocation that does not take into
account the equitable considerations referred to in the immediately preceding
paragraph. Notwithstanding the provisions of this Section 5(d), no Holder shall
be required to contribute, in the aggregate, any amount in excess of the amount
by which the proceeds actually received by such Holder from the sale of the
Registrable Securities subject to the Proceeding exceeds the amount of any
damages that such Holder has otherwise been required to pay by reason of such
untrue or alleged untrue statement or omission or alleged omission. No Person
guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of
the Securities Act) shall be entitled to contribution from any Person who was
not guilty of such fraudulent misrepresentation.
The indemnity and contribution agreements contained in this
Section are in addition to any liability that the Indemnifying Parties may have
to the Indemnified Parties.
5. Miscellaneous
(a) Remedies. In the event of a breach by the Company or by a
Holder, of any of their obligations under this Agreement, each Holder or the
Company, as the case may be, in addition to being entitled to exercise all
rights granted by law and under this Agreement, including recovery of damages,
will be entitled to specific performance of its rights under this Agreement. The
Company and each Holder agree that monetary damages would not provide adequate
compensation for any losses incurred by reason of a breach by it of any of the
provisions of this Agreement and hereby further agrees that, in the event of any
action for specific performance in respect of such breach, it shall waive the
defense that a remedy at law would be adequate.
(b) No Inconsistent Agreements. Neither the Company nor any of
its subsidiaries has entered, as of the date hereof, nor shall the Company or
any of its subsidiaries, on or after the date of this Agreement, enter into any
agreement with respect to its securities that is inconsistent with the rights
granted to the Holders in this Agreement or otherwise conflicts with the
provisions hereof. Except as and to the extent specified in Schedule 6(b)
hereto, neither the Company nor any of its subsidiaries has previously entered
into any agreement granting any registration rights with respect to any of its
securities to any Person that have not been satisfied in full. Without limiting
the generality of the foregoing, without the written consent of the Holders of a
majority of the then outstanding Registrable Securities, the Company shall not
grant to any Person the right to request the Company to register any securities
of the Company under the Securities Act unless the rights so granted are subject
in all respects to the prior rights in full of the Holders set forth herein, and
are not otherwise in conflict or inconsistent with the provisions of this
Agreement.
(c) No Piggyback on Registrations. Except as and to the extent
specified in Schedule 6(b) hereto, neither the Company nor any of its security
holders (other than the Holders in such capacity pursuant hereto) may include
securities of the Company in the Registration Statement other than the
Registrable Securities, and the Company shall not after the date hereof enter
into any agreement providing any such right to any of its security holders.
(d) Compliance. Each Holder covenants and agrees that it will
comply with the prospectus delivery requirements of the Securities Act as
applicable to it in connection with sales of Registrable Securities pursuant to
the Registration Statement.
(e) Discontinued Disposition. Each Holder agrees by its
acquisition of such Registrable Securities that, upon receipt of a notice from
the Company of the occurrence of any event of the kind described in Sections
3(d)(ii), 3(d)(iii), 3(d)(iv), 3(d)(v) or 3(d)(vi), such Holder will forthwith
discontinue disposition of such Registrable Securities under the Registration
Statement until such Holder's receipt of the copies of the supplemented
Prospectus and/or amended Registration Statement contemplated by Section 3(k),
or until it is advised in writing (the "Advice") by the Company that the use of
the applicable Prospectus may be resumed, and, in either case, has received
copies of any additional or supplemental filings that
are incorporated or deemed to be incorporated by reference in such Prospectus or
Registration Statement. The Company may provide appropriate stop orders to
enforce the provisions of this paragraph.
(f) Piggy-Back Registrations. If at any time when there is not
an effective Registration Statement covering all of the Registrable Securities
then outstanding and the Company shall determine to prepare and file with the
Commission a registration statement relating to an offering for its own account
or the account of others under the Securities Act of any of its equity
securities, other than on Form S-4 or Form S-8 (each as promulgated under the
Securities Act) or their then equivalents relating to equity securities to be
issued solely in connection with any acquisition of any entity or business or
equity securities issuable in connection with stock option or other employee
benefit plans, then the Company shall send to each Holder of Registrable
Securities written notice of such determination and, if within fifteen (15) days
after receipt of such notice, any such holder shall so request in writing, the
Company shall include in such registration statement all or any part of such
Registrable Securities such holder requests to be registered, provided such
Registrable Securities are not freely tradable without volume restrictions under
Rule 144k.
(g) Amendments and Waivers. The provisions of this Agreement,
including the provisions of this sentence, may not be amended, modified or
supplemented, and waivers or consents to departures from the provisions hereof
may not be given, unless the same shall be in writing and signed by the Company
and the Holders of at least two-thirds of the then outstanding Registrable
Securities. Notwithstanding the foregoing, a waiver or consent to depart from
the provisions hereof with respect to a matter that relates exclusively to the
rights of Holders and that does not directly or indirectly affect the rights of
other Holders may be given by Holders of at least a majority of the Registrable
Securities to which such waiver or consent relates; provided, however, that the
provisions of this sentence may not be amended, modified, or supplemented except
in accordance with the provisions of the immediately preceding sentence.
(h) Notices. Any and all notices or other communications or
deliveries required or permitted to be provided hereunder shall be in writing
and shall be deemed given and effective on the earliest of (i) the date of
transmission, if such notice or communication is delivered via facsimile at the
facsimile telephone number specified in this Section prior to 8:00 p.m. (New
York City time) on a Business Day, (ii) the Business Day after the date of
transmission, if such notice or communication is delivered via facsimile at the
facsimile telephone number specified in the Purchase Agreement later than 8:00
p.m. (New York City time) on any date and earlier than 11:59 p.m. (New York City
time) on such date, (iii) the Business Day following the date of mailing, if
sent by nationally recognized overnight courier service, or (iv) upon actual
receipt by the party to whom such notice is required to be given. The address
for such notices and communications shall be as follows:
If to the Company: Cybershop.Com, Inc.
116 Newark Avenue,
Jersey City, New Jersey 07302
Facsimile No.: (201) 234-5052
Attn: Chief Financial Officer
With copies to: Davis & Gilbert LLP
1740 Broadway
New York, NY 10019
Facsimile No.: (212) 468-4888
Attn: Walter M. Epstein, Esq.
If to any other Person who is then the registered Holder:
To the address of such Holder
as it appears in the stock transfer books of the
Company or such other address as may be designated in
writing hereafter, in the same manner, by such
Person.
(i) Successors and Assigns. This Agreement shall inure to the
benefit of and be binding upon the successors and permitted assigns of each of
the parties and shall inure to the benefit of each Holder. The Company may not
assign its rights or obligations hereunder without the prior written consent of
Holders of a majority of Registrable Securities then outstanding. Each Holder
may assign their respective rights hereunder in the manner and to the Persons as
permitted under this Agreement and the Purchase Agreement.
(j) Counterparts. This Agreement may be executed in any number
of counterparts, each of which when so executed shall be deemed to be an
original and, all of which taken together shall constitute one and the same
Agreement. In the event that any signature is delivered by facsimile
transmission, such signature shall create a valid binding obligation of the
party executing (or on whose behalf such signature is executed) the same with
the same force and effect as if such facsimile signature were the original
thereof.
(k) Governing Law. This Agreement shall be governed by and
construed and enforced in accordance with the internal laws of the State of New
York without regard to the principles of conflicts of law thereof. Each party
hereby irrevocably submits to the exclusive jurisdiction of the state and
federal courts sitting in the City of New York, borough of Manhattan, for the
adjudication of any dispute hereunder or in connection herewith or with any
transaction contemplated hereby or discussed herein and hereby irrevocably
waives, and agrees not to assert in any suit, action or proceeding, any claim
that it is not personally subject to the jurisdiction of any such court, that
such suit, action or proceeding is improper. Each party hereby irrevocably
waives personal service of process and consents to process being served in any
such suit, action or proceeding by mailing a copy thereof to such party at the
address in effect for notices to it under this Agreement and agrees that such
service shall constitute good and sufficient service of process and notice
thereof. Nothing contained herein shall be deemed to limit in any way any right
to serve process in any manner permitted by law.
(l) Cumulative Remedies. The remedies provided herein are
cumulative and not exclusive of any remedies provided by law.
(m) Severability. If any term, provision, covenant or
restriction of this Agreement is held by a court of competent jurisdiction to be
invalid, illegal, void or unenforceable, the remainder of the terms, provisions,
covenants and restrictions set forth herein shall remain in full force and
effect and shall in no way be affected, impaired or invalidated, and the parties
hereto shall use their reasonable efforts to find and employ an alternative
means to achieve the same or substantially the same result as that contemplated
by such term, provision, covenant or restriction.
It is hereby stipulated and declared to be the intention of the parties that
they would have executed the remaining terms, provisions, covenants and
restrictions without including any of such that may be hereafter declared
invalid, illegal, void or unenforceable.
(n) Headings. The headings in this Agreement are for
convenience of reference only and shall not limit or otherwise affect the
meaning hereof.
(o) Shares Held by the Company and its Affiliates. Whenever
the consent or approval of Holders of a specified percentage of Registrable
Securities is required hereunder, Registrable Securities held by the Company or
its Affiliates (other than any Holder or transferees or successors or assigns
thereof if such Holder is deemed to be an Affiliate solely by reason of its
holdings of such Registrable Securities) shall not be counted in determining
whether such consent or approval was given by the Holders of such required
percentage.
(p) Independent Nature of Purchasers' Obligations and Rights.
The obligations of each Purchaser hereunder is several and not joint with the
obligations of any other Purchaser hereunder, and neither Purchaser shall be
responsible in any way for the performance of the obligations of any other
Purchaser hereunder. Nothing contained herein or in any other agreement or
document delivered at any closing, and no action taken by any Purchaser pursuant
hereto or thereto, shall be deemed to constitute the Purchasers as a
partnership, an association, a joint venture or any other kind of entity, or
create a presumption that the Purchasers are in any way acting in concert with
respect to such obligations or the transactions contemplated by this Agreement.
Each Purchaser shall be entitled to protect and enforce its rights, including
without limitation the rights arising out of this Agreement, and it shall not be
necessary for any other Purchaser to be joined as an additional party in any
proceeding for such purpose.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK
SIGNATURE PAGES TO FOLLOW]
IN WITNESS WHEREOF, the parties have executed this Registration Rights
Agreement as of the date first written above.
CYBERSHOP.COM, INC.
By:_____________________________________
Name:
Title:
STRONG RIVER INVESTMENTS, INC.
By:_____________________________________
Kenneth L. Henderson
Attorney-in-Fact
Address for Notice:
Strong River Investments, Inc.
c/o Gonzalez-Ruiz & Aleman (BVI) Limited
Wickhams Cay I, Vanterpool Plaza
P.O. Box 873
Road Town, Tortolla. BVI
With copies to:
Robinson Silverman Pearce Aronsohn & Berman LLP
1290 Avenue of the Americas
New York, NY 10104
Facsimile No.: (212) 541-4630
Attn: Kenneth L. Henderson, Esq. and
Eric L. Cohen, Esq.
MONTROSE INVESTMENTS LTD.
By:_____________________________________
Name:
Title:
Address for Notice:
Montrose Investments, Ltd.
300 Crescent Court, Suite 700
Dallas, TX 75201
Facsimile: (214) 758-1221
Attn: Will Rose
Kim Rozman
With copies to:
Robinson Silverman Pearce Aronsohn & Berman LLP
1290 Avenue of the Americas
New York, NY 10104
Facsimile No.: (212) 541-4630 and (212) 541-1432
Attn: Kenneth L. Henderson, Esq.
Eric L. Cohen, Esq.
Annex A
Plan of Distribution
The Selling Stockholders and any of their pledgees, assignees and
successors-in-interest may, from time to time, sell any or all of their shares
of Common Stock on any stock exchange, market or trading facility on which the
shares are traded or in private transactions. These sales may be at fixed or
negotiated prices. The Selling Stockholders may use any one or more of the
following methods when selling shares:
o ordinary brokerage transactions and transactions in which the
broker-dealer solicits purchasers;
o block trades in which the broker-dealer will attempt to sell the shares
as agent but may position and resell a portion of the block as
principal to facilitate the transaction;
o purchases by a broker-dealer as principal and resale by the
broker-dealer for its account;
o an exchange distribution in accordance with the rules of the applicable
exchange;
o privately negotiated transactions;
o short sales;
o broker-dealers may agree with the Selling Stockholders to sell a
specified number of such shares at a stipulated price per share;
o a combination of any such methods of sale; and
o any other method permitted pursuant to applicable law.
The Selling Stockholders may also sell shares under Rule 144 under the
Securities Act, if available, rather than under this prospectus.
The Selling Stockholders may also engage in short sales against the
box, puts and calls and other transactions in securities of the Company or
derivatives of Company securities and may sell or deliver shares in connection
with these trades. The Selling Stockholders may pledge their shares to their
brokers under the margin provisions of customer agreements. If a Selling
Stockholder defaults on a margin loan, the broker may, from time to time, offer
and sell the pledged shares.
Broker-dealers engaged by the Selling Stockholders may arrange for
other brokers-dealers to participate in sales. Broker-dealers may receive
commissions or discounts from the Selling Stockholders (or, if any broker-dealer
acts as agent for the purchaser of shares, from the purchaser) in amounts to be
negotiated. The Selling Stockholders do not expect these commissions and
discounts to exceed what is customary in the types of transactions involved.
The Selling Stockholders and any broker-dealers or agents that are
involved in selling the shares may be deemed to be "underwriters" within the
meaning of the Securities Act in connection with such sales. In such event, any
commissions received by such broker-dealers or agents and any profit on the
resale of the shares purchased by them may be deemed to be underwriting
commissions or discounts under the Securities Act.
The Company is required to pay all fees and expenses incident to the
registration of the shares, including fees and disbursements of counsel to the
Selling Stockholders. The Company has agreed to indemnify the Selling
Stockholders against certain losses, claims, damages and liabilities, including
liabilities under the Securities Act.
Securities Purchase Agreement - CyberShop.Com Inc.
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