p15
Page 60 of 81 Pages
Termination Date, with subsequent releases of funds to be at the mutual consent
of the Company and the Placement Agent.
3.4 The Subscriber hereby authorizes and directs the Company to
deliver certificates representing the securities to be issued to such Subscriber
pursuant to this Subscription Agreement either (a) to the residential or
business address indicated in the Investor Questionnaire or (b) directly to the
Subscriber's account maintained with the Placement Agent, if any.
3.5 The Subscriber hereby authorizes and directs the Company to
return any funds for unaccepted subscriptions to the same account from which the
funds were drawn, including any customer account maintained with the Placement
Agent.
3.6 If the Subscriber is not a United States person, such Subscriber
hereby represents that it has satisfied itself as to the full observance of the
laws of its jurisdiction in connection with any invitation to subscribe for the
securities comprising the Units or any use of this Agreement, including (i) the
legal requirements within its jurisdiction for the purchase of the Units, (ii)
any foreign exchange restrictions applicable to such purchase, (iii) any
governmental or other consents that may need to be obtained, and (iv) the income
tax and other tax consequences, if any, that may be relevant to the purchase,
holding, redemption, sale or transfer of the securities comprising the Units.
Such Subscriber's subscription and payment for, and his or her continued
beneficial ownership of the Units, will not violate any applicable securities or
other laws of the Subscriber's jurisdiction.
IV. REGISTRATION RIGHTS
4.1 Required Registration. The Company hereby agrees with the
holders of the Notes, the Warrants and the Warrant Shares or their transferees
(collectively, the "Holders") to include the Warrant Shares in the registration
statement to be filed with the SEC covering the resale of the securities sold by
the Company in its private placement in May 1999. The Company hereby agrees with
the Holders to file a registration statement with the SEC covering the resale of
the Conversion Shares (if the notes have not been converted) on Form S-1 or such
other form as the Company desires, pursuant to the Act within nine months of the
Initial Closing Date, and to use its best efforts to cause such registration to
become effective as soon as practicable thereafter.
The Company shall pay the expenses described in Section 4.3 for the
registration statements filed pursuant to this Section 4.1, except for
underwriting discounts and commissions and legal fees of the Holders, which
shall be borne by the Holders.
4.2 Registration Procedures. If and whenever the Company is required by
the provisions of Section 4.1 to effect the registration of Registrable Shares
under the Act, the Company will:
(a) prepare and file with the SEC a registration statement with
respect to such securities, and use its best efforts to cause such registration
statement to become and remain effective until the Registrable Shares are freely
salable without the volume limitations of Rule 144;
(b) prepare and file with the SEC such amendments to such
registration statement and supplements to the prospectus contained therein as
may be necessary to keep such registration
Page 61 of 81 Pages
statement effective until the Registrable Shares are freely salable without the
volume limitations of Rule 144;
(c) furnish to the Holders participating in such registration and to
the underwriters of the securities being registered such reasonable number of
copies of the registration statement, preliminary prospectus, final prospectus
and such other documents as such underwriters may reasonably request in order to
facilitate the public offering of such securities;
(d) use its best efforts to register or qualify the securities
covered by such registration statement under such state securities or blue sky
laws of such jurisdictions as such participating Holders may reasonably request
in writing within 20 days following the original filing of such registration
statement, except that the Company shall not for any purpose be required to
execute a general consent to service of process or to qualify to do business as
a foreign corporation in any jurisdiction wherein it is not so qualified;
(e) notify the Holders participating in such registration, promptly
after it shall receive notice thereof, of the time when such registration
statement has become effective or a supplement to any prospectus forming a part
of such registration statement has been filed;
(f) notify the Placement Agent promptly of any request by the SEC
for the amending or supplementing of such registration statement or prospectus
or for additional information;
(g) prepare and file with the SEC, promptly upon the request of any
such Holders, any amendments or supplements to such registration statement or
prospectus which, in the opinion of counsel for such Holders (and concurred in
by counsel for the Company), is required under the Act or the rules and
regulations thereunder in connection with the distribution of the Registrable
Shares by such Holders;
(h) prepare and promptly file with the SEC and promptly notify such
Holders of the filing of such amendment or supplement to such registration
statement or prospectus as may be necessary to correct any statements or
omissions if, at the time when a prospectus relating to such securities is
required to be delivered under the Act, any event shall have occurred as the
result of which any such prospectus or any other prospectus as then in effect
would include an untrue statement of a material fact or omit to state any
material fact necessary to make the statements therein, in the light of the
circumstances in which they were made, not misleading; and
(i) advise such Holders, promptly after it shall receive notice or
obtain knowledge thereof, of the issuance of any stop order by the SEC
suspending the effectiveness of such registration statement or the initiation or
threatening of any proceeding for that purpose and promptly use its best efforts
to prevent the issuance of any stop order or to obtain its withdrawal if such
stop order should be issued.
4.3 Expenses.
(a) With respect to the registration required pursuant to Section
4.1 hereof, all fees, costs and expenses of and incidental to such registration,
inclusion and public offering (as specified in paragraph (b) below) in
connection therewith shall be borne by the Company, provided,
Page 62 of 81 Pages
however, that Holders participating in such registration shall bear their pro
rata share of the underwriting discount and commissions and transfer taxes.
(b) The fees, costs and expenses of registration to be borne by the
Company as provided in paragraph (a) above shall include, without limitation,
all registration, filing, and NASD fees, printing expenses, fees and
disbursements of counsel and accountants for the Company, and all legal fees and
disbursements and other expenses of complying with state securities or blue sky
laws of any jurisdictions in which the securities to be offered are to be
registered and qualified (except as provided in 4.3(a) above). Fees and
disbursements of counsel and accountants for the participating Holders and any
other expenses incurred by the participating Holders not expressly included
above shall be borne by the such Holders.
4.4 Indemnification.
(a) The Company will indemnify and hold harmless each Holder of
Registrable Shares which are included in a registration statement pursuant to
the provisions of Section 4.1 hereof, its directors and officers, and any
underwriter (as defined in the Act) for such Holder and each person, if any, who
controls such Holder or such underwriter within the meaning of the Act, from and
against, and will reimburse such Holder and each such underwriter and
controlling person with respect to, any and all loss, damage, liability, cost
and expense to which such holder or any such underwriter or controlling person
may become subject under the Act or otherwise, insofar as such losses, damages,
liabilities, costs or expenses are caused by any untrue statement or alleged
untrue statement of any material fact contained in such registration statement,
any prospectus contained therein or any amendment or supplement thereto, or
arise out of or are based upon the omission or alleged omission to state therein
a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances in which they were made, not
misleading; provided, however, that the Company will not be liable in any such
case to the extent that any such loss, damage, liability, cost or expenses
arises out of or is based upon an untrue statement or alleged untrue statement
or omission or alleged omission so made in conformity with information furnished
by or on behalf of such Holder, its directors and officers, such underwriter or
such controlling person in writing specifically for use in the preparation
thereof.
(b) Each Holder of Registrable Shares included in a registration
pursuant to the provisions of Section 4.1 hereof will indemnify and hold
harmless the Company, its directors and officers, any controlling person and any
underwriter from and against, and will reimburse the Company, its directors and
officers, any controlling person and any underwriter with respect to, any and
all loss, damage, liability, cost or expense to which the Company or any
controlling person and/or any underwriter may become subject under the Act or
otherwise, insofar as such losses, damages, liabilities, costs or expenses are
caused by any untrue statement or alleged untrue statement of any material fact
contained in such registration statement, any prospectus contained therein or
any amendment or supplement thereto, or arise out of or are based upon the
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances in which they were made, not misleading, in each case to the
extent that such untrue statement or alleged untrue statement or omission or
alleged omission was so made in conformity with written information furnished by
or on behalf of such Holder specifically for use in the preparation thereof.
Page 63 of 81 Pages
(c) Promptly after receipt by an indemnified party pursuant to the
provisions of paragraph (a) or (b) of this Section 4.4 of notice of the
commencement of any action involving the subject matter of the foregoing
indemnity provisions such indemnified party will, if a claim thereof is to be
made against the indemnifying party pursuant to the provisions of said paragraph
(a) or (b), promptly notify the indemnifying party of the commencement thereof;
but the omission to so notify the indemnifying party will not relieve it from
any liability which it may have to any indemnified party otherwise than
hereunder. In case such action is brought against any indemnified party and it
notifies the indemnifying party of the commencement thereof, the indemnifying
party shall have the right to participate in, and, to the extent that it may
wish, jointly with any other indemnifying party similarly notified, to assume
the defense thereof, with counsel satisfactory to such indemnified party,
provided, however, if the defendants in any action include both the indemnified
party and the indemnifying party and the indemnified party shall have reasonably
concluded that there may be legal defenses available to it and/or other
indemnified parties which are different from or in addition to those available
to the indemnified party, or if there is a conflict of interest which would
prevent counsel for the indemnifying party from also representing the
indemnified party, the indemnified party or parties have the right to select
separate counsel to participate in the defense of such action on behalf of such
indemnified party or parties. After notice from the indemnifying party to such
indemnified party of its election so to assume the defense thereof, the
indemnifying party will not be liable to such indemnified party pursuant to the
provisions of said paragraph (a) or (b) for any legal or other expense
subsequently incurred by such indemnified party in connection with the defense
thereof other than reasonable costs of investigation, unless (i) the indemnified
party shall have employed counsel in accordance with the provisions of the
preceding sentence, (ii) the indemnifying party shall not have employed counsel
satisfactory to the indemnified party to represent the indemnified party within
a reasonable time after the notice of the commencement of the action or (iii)
the indemnifying party has authorized the employment of counsel for the
indemnified party at the expense of the indemnifying party.
V. INVESTMENT IN SUBSEQUENT PRIVATE PLACEMENT
5.1 The Subscriber acknowledges and agrees that pursuant to the
terms of the Notes, if the Company completes a private placement of its debt or
equity securities resulting in gross proceeds to the Company of at least
$15,000,000 (exclusive of Note conversions pursuant to this paragrph) and the
terms of such placement are consented to by Commonwealth Associates L.P. and a
committee of Noteholders holding in the aggregate not less than 10% of the
outstanding Principal Amount of the Notes to be designated by Commonwealth (a
"Subsequent Conversion Placement"), the principal amount of the Subscriber's
Notes will be converted into an investment by the Subscriber in the securities
sold in the Subsequent Conversion Placement.
5.2 The Subscriber agrees that its investment in the Subsequent
Conversion Placement will be made without any further action on the part of the
Subscriber; however, the Subscriber agrees to execute and deliver all documents
reasonably requested by the Company to effectuate such investment.
5.3 The Subscriber understands that the Company will rely on the
representations and warranties of the Subscriber contained in this Subscription
Agreement and the Investor Questionnaire in connection with the Subscriber's
investment in the Subsequent Conversion Placement. |
