>>TMSR SEC FORM 8K [Filed 02/16/99] ISSUES OF FACTS, Pt IV
REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE
STATE SECURITIES LAWS.
The legend set forth above shall be removed from the Shares and the
Adjustment Shares, and the Company shall cause its transfer agent to issue a
certificate or certificates without any legend (upon surrender of the
legended certificates duly endorsed) to each holder of the Shares and/or
Adjustment Shares upon which it is stamped if such legend is not required
under applicable requirements of the Securities Act and other applicable
securities laws. Underlying Shares shall not contain the legend set forth
above nor any other legend if the exercise of Warrants or other issuances of
Underlying Shares as contemplated by the Warrants occurs at any time such
legend is not required under applicable requirements of the Securities Act
and the applicable securities laws.
3.2 ACKNOWLEDGMENT OF DILUTION. The Company acknowledges that the
issuance of the Adjustment Shares on any Adjustment Date and the issuance of
Underlying Shares upon exercise of the Warrants may result in dilution of
the outstanding shares of Common Stock, which dilution may be substantial
under certain market conditions.
3.3 FURNISHING OF INFORMATION. As long as the Company is subject to
Sections 13(a) and 15(d) of the Exchange Act, the Company covenants to timely
file (or obtain extensions in respect thereof and file within the applicable
grace period) all reports required to be filed by the Company after the date
hereof pursuant to Section 13(a) or 15(d) of the Exchange Act. So long as
any of the Purchasers owns Securities, if the Company is not required to file
reports pursuant to such laws, it will prepare and furnish to such Purchaser
and make publicly available in accordance with Rule 144(c) promulgated under
the Securities Act annual and quarterly financial statements, together with a
discussion and analysis of such financial statements in form and substance
substantially similar to those that would otherwise be required to be
included in reports required by Section 13(a) or 15(d) of the Exchange Act,
as well as any other information required thereby, in the time period that
such filings would have been required to have been made under the Exchange
Act. The Company further covenants that it will take such further action as
any holder of Securities may reasonably request, all to the extent required
from time to time to enable such Person to sell Securities without
registration under the Securities Act within the limitation of the exemptions
provided by Rule 144 promulgated under the Securities Act. Upon the request
of any such Person, the Company shall deliver to such Person a written
certification of a duly authorized officer as to whether it has complied with
such requirements.
3.4 [INTENTIONALLY OMITTED.]
3.5 INTEGRATION. The Company shall not, and shall use its best efforts
to ensure that, no Affiliate shall, sell, offer for sale or solicit offers
to buy or otherwise negotiate in respect of any security (as defined in
Section 2 of the Securities Act) that would be integrated with the offer or
sale of the Securities in a manner that would require the registration under
the Securities Act of the sale of the Securities to the Purchasers.
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3.6 STOCKHOLDER APPROVAL UNDER THE RULES AND REGULATIONS OF THE NASDAQ
STOCK MARKET. If on any Adjustment Date or Closing Date (other than the
Tranche 1 Closing Date) (A) the Common Stock is listed for trading on NASDAQ,
(B) the Adjustment Price or Purchase Price, as the case may be, then in
effect is such that the aggregate number of shares of Common Stock that would
then be issuable as Adjustment Shares and/or Shares, as the case may be,
together with any Adjustment Shares and Shares previously issued at a
discount to the Tranche 1 Shares, would equal or exceed 20% of the number of
shares of Common Stock outstanding on the Tranche 1 Closing Date (such number
of shares as would not equal or exceed such 20% limit, the "ISSUABLE
MAXIMUM"), and (C) the Company shall not have previously obtained the vote of
shareholders (the "SHAREHOLDER APPROVAL"), if any, as may be required by the
applicable rules and regulations of the Nasdaq Stock Market, Inc. (or any
successor entity) applicable to approve the issuance of shares of Common
Stock in excess of the Issuable Maximum pursuant to the terms hereof, then
the Company shall issue to the holder so requesting Adjustment Shares or
Shares, as the case may be, a number of shares of Common Stock equal to the
Issuable Maximum and, with respect to the remainder of Adjustment Shares or
Shares, as the case may be, which would result in an issuance of shares of
Common Stock in excess of the Issuable Maximum (the "EXCESS SHARES"), the
Company shall have the option to either (1) use its best efforts to obtain
the Shareholder Approval applicable to such issuance as soon as is possible,
but in any event not later than the 90th day after such request, or (2)
deliver to such holder cash in an amount equal to the product of (x) the Per
Share Market Value on the applicable Adjustment Date or Closing Date, as
applicable, and (y) the number of shares of Common Stock in excess of such
holder's pro rata portion of the Issuable Maximum that would have otherwise
been issuable to the holder but for the provisions of this Section (such
amount of cash being hereinafter referred to as the "DISCOUNT EQUIVALENT").
If the Company fails to pay the Discount Equivalent in full pursuant to this
Section within fifteen (15) days after the Company fails to obtain
Shareholder Approval pursuant to (1) above or the date payable pursuant to
(2) above, the Company will pay interest thereon at a rate of 9% per annum to
the holder, accruing daily from the applicable Adjustment Date or Closing
Date, as the case may be, until such amount, plus all such interest thereon,
is paid in full.
3.7 INCREASE IN AUTHORIZED SHARES. At such times as the Company would
be, if a notice of exercise were to be delivered on such date or Adjustment
Date, precluded from issuing such number of Underlying Shares as would be
issuable upon exercise in full of the Warrants or issuing all of the
Adjustment Shares due to the unavailability of a sufficient number of shares
of authorized but unissued or reserved shares of Common Stock, the Company
shall promptly (and in any case, within 30 Business Days from such date)
prepare and mail to the stockholders of the Company proxy materials
requesting authorization to amend the Company's Articles of Incorporation to
increase the number of shares of Common Stock which the Company is authorized
to issue to at least such number of shares as reasonably requested by the
Purchasers in order to provide for such number of authorized and unissued
shares of Common Stock to enable the Company to comply with its exercise and
reservation of shares obligations as set forth in this Agreement and the
Warrants. In connection therewith, the Board of Directors shall (a) adopt
proper resolutions authorizing such increase, (b) recommend to and otherwise
use its best efforts to promptly and duly obtain stockholder approval to
carry out such resolutions (and hold a special meeting of the stockholders no
later than the 60th day after delivery of the proxy materials
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relating to such meeting) and (c) within five (5) Business Days of obtaining
such stockholder authorization, file an appropriate amendment to the
Company's Articles of Incorporation to evidence such increase.
3.8 LISTING AND RESERVATION OF UNDERLYING SHARES. (a) The Company
shall (i) not later than the tenth Business Day following the Closing Date
prepare and file with the NASDAQ (or such other national securities exchange
or market or trading or quotation facility on which the Common Stock is then
listed) an additional shares listing application covering a number of shares
of Common Stock which is not less than the Initial Minimum applicable to each
such Closing, (ii) take all steps necessary to cause such shares to be
approved for listing in the NASDAQ (or on the other primary national
securities exchange or market or trading or quotation facility on which the
Common Stock is then listed) as soon as possible thereafter, and (iii)
provide to the Purchasers evidence of such listing, and the Company shall
maintain the listing of its Common Stock thereon.
(b) The Company shall maintain a reserve of shares of Common Stock
for issuance pursuant to Section 3.15 and upon exercise of the Warrant in
accordance with its terms, in such amount as may be required to fulfill
obligations in full under the Transaction Documents, which reserve shall
include, with respect to each Closing, a number of shares of Common Stock
equal to no less than the Initial Minimum, with respect to each Closing.
3.9 EXERCISE AND ISSUANCE PROCEDURES. The Warrants set forth the
totality of the procedures with respect to the exercise of the Warrants,
including such other information and instructions as may be reasonably
necessary to enable the Purchasers to exercise the Warrants in accordance
with their terms. The Company shall honor any exercise of the Warrants and
shall deliver Underlying Shares in accordance with the terms, conditions and
time periods set forth in the Warrants and shall issue Adjustment Shares in
accordance with Section 3.15.
3.10 [INTENTIONALLY OMITTED]
3.11 RIGHT OF FIRST REFUSAL; SUBSEQUENT REGISTRATIONS. (a) The Company
shall not, directly or indirectly, without the prior written consent of the
Purchasers, offer, sell, grant any option to purchase, or otherwise dispose
of (or announce any offer, sale, grant or any option to purchase or other
disposition) any of its or its Affiliates' equity or equity-equivalent
securities in a transaction intended to be exempt or not subject to
registration under the Securities Act (a "SUBSEQUENT PLACEMENT") for a period
of 180 days after the effective date of the registration statement covering
the underlying Shares issued pursuant to the Tranche 1 Closing (the
"UNDERLYING SECURITIES REGISTRATION STATEMENT"), except (i) the granting of
options or warrants to employees, officers and directors, and the issuance of
shares upon exercise of options granted, under any stock option plan
heretofore or hereinafter duly adopted by the Company, (ii) shares of Common
Stock issued upon exercise of any currently outstanding warrants and upon
conversion of any currently outstanding convertible securities of the
Company, in each case disclosed in SCHEDULE 2.1(c), (iii) the Securities, and
(iv) equity or equity-equivalent securities issued in connection with
strategic transactions involving the Company and other entities, including,
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without limitation, joint ventures, marketing or distribution agreement,
technology transfer or development arrangements unless (A) the Company
delivers to the Purchasers a written notice (the "SUBSEQUENT PLACEMENT
NOTICE") of its intention effect such Subsequent Placement, which Subsequent
Placement Notice shall describe in reasonable detail the proposed terms of
such Subsequent Placement, the amount of proceeds intended to be raised
thereunder, the Person with whom such Subsequent Placement shall be effected,
and attached to which shall be a term sheet or similar document relating
thereto and (B) no Purchaser shall have notified the Company by 5:00 p.m.
(New York City time) on the fifth (5th) Business Day after its receipt of the
Subsequent Placement Notice of its willingness to cause such Purchaser to
provide (or to cause its Designee to provide), subject to completion of
mutually acceptable documentation, financing to the Company on terms no less
favorable to the Company than those terms set forth in the Subsequent
Placement Notice. If the Purchasers shall fail to notify the Company of its
intention to provide such financing within such time period or shall fail to
provide such financing within thirty (30) Business Days after notifying the
Company of its intention to provide such financing (the "PURCHASERS RIGHT
EXPIRATION DATE"), the Company may effect the Subsequent Placement
substantially upon the terms and to the Persons (or Affiliates of such
Persons) set forth in the Subsequent Placement Notice; PROVIDED, that the
Company shall provide the Purchasers with a second Subsequent Placement
Notice, and the Purchasers shall again have the right of first refusal set
forth above in this paragraph (a), if the Subsequent Placement subject to the
initial Subsequent Placement Notice shall not have been consummated for any
reason on the terms set forth in such Subsequent Placement Notice within
thirty (30) Business Days after (x) the date the Purchasers notify the
Company of their unwillingness to provide such financing or (y) the
Purchasers Right Expiration Date, as the case may be.
(b) Except for (x) Underlying Shares, (y) other "Registrable
Securities" (as such term is defined in the Registration Rights Agreement) to
be registered, and securities of the Company permitted pursuant to Schedule
6(b) of the Registration's Rights Agreement to be registered in the
Underlying Securities Registration Statement in accordance with the
Registration Rights Agreement, and (z) Common Stock to be registered for
resale in connection with financings permitted pursuant to paragraph (a)(i),
(iii) and (iv) of Section 3.11(a), the Company shall not, without the prior
written consent of the Purchasers (i) issue or sell any of its or any of its
Affiliates' equity or equity-equivalent securities pursuant to Regulation S
promulgated under the Securities Act, or (ii) register for resale any
securities of the Company, in each case, for a period of not less than 90
Business Days after the date that any registration statement covering the
resale of any of the Shares, Adjustment Shares and the Underlying Shares by
the Purchasers meeting the requirement of the Registration Rights Agreement
is declared effective by the Commission. Any days that any Purchaser is
unable to sell Underlying Securities under any such registration statement
shall be added to such 90 Business Day period for the purposes of (i) and
(ii) above.
3.12 CERTAIN SECURITIES LAWS DISCLOSURES; PUBLICITY. The Company
shall: (i) issue within one (1) Business Day of each Closing a press release
acceptable to the Purchasers disclosing the transactions contemplated hereby,
(ii) file within ten (10) Business Days after each Closing Date with the
Commission a Current Report on Form 8-K disclosing the transactions
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contemplated hereby, and (iii) timely file with the Commission a Form D
promulgated under the Securities Act as required under Regulation D
promulgated under the Securities Act and provide a copy thereof to the
Purchasers promptly after the filing thereof. The Company shall, no less
than two (2) Business Days prior to the filing of any disclosure required by
clauses (ii) and (iii) above, provide a copy thereof to the Purchasers.
3.13 USE OF PROCEEDS. The Company shall not use the net proceeds form
the sale of Securities hereunder to redeem any Company equity or
equity-equivalent securities. Pending application of the proceeds of this
placement in the manner permitted hereby, the Company will invest such
proceeds in interest bearing accounts and/or short-term, investment grade
interest bearing securities.
3.14 REIMBURSEMENT. If either Purchaser, other than by reason of its
negligence or willful misconduct, becomes involved in any capacity in any
action, proceeding or investigation brought by or against any Person,
including stockholders of the Company, in connection with or as a result of
the consummation of the transactions contemplated by Transaction Documents,
the Company will reimburse such Purchaser for its reasonable legal and other
expenses (including the cost of any investigation and preparation) incurred
in connection therewith, as such expenses are incurred in an amount not to
exceed $200,000 in the aggregate. The reimbursement obligations of the
Company under this paragraph shall be in addition to any liability which the
Company may otherwise have, shall extend upon the same terms and conditions
to any Affiliate of such Purchaser who are actually named in such action,
proceeding or investigation, and partners, directors, agents, employees and
controlling persons (if any), as the case may be, of such Purchaser and any
such Affiliate, and shall be binding upon and inure to the benefit of any
successors, assigns, heirs and personal representatives of the Company, such
Purchaser and any such Affiliate and any such Person. The Company also
agrees that neither such Purchaser nor any Affiliate, partners, directors,
agents, employees or controlling persons shall have any liability to the
Company or any person asserting claims on behalf of or in right of the
Company in connection with or as a result of the consummation of the
Transaction Documents except to the extent that any losses, claims, damages,
liabilities or expenses incurred by the Company result from the negligence or
willful misconduct of such Purchaser. Notwithstanding anything to the
contrary, the Company shall not be obligated to pay any reimbursements
hereunder in the event that a court, in a final unappealable judgement,
determines that such Purchaser is liable for the act upon which reimbursement
is sought and the Company may condition payment of any reimbursemnt hereunder
upon receipt of an undertaking reasonably satisfactory to the Company to
repay any such reimbursement.
3.15 ISSUANCE OF ADJUSTMENT SHARES. (a) The Company shall, on the
twenty-fifth (25th) day following the date the Underlying Securities
Registration Statement, covering the Tranche 1 Shares, has been declared
effective by the Commission (the "FIRST TRANCHE 1 ADJUSTMENT DATE"), issue to
the Purchasers for no additional consideration such aggregate number of
shares of Common Stock (the "FIRST TRANCHE 1 ADJUSTMENT SHARES") as equals
the quotient obtained by dividing (i) the product of (A) 50% of the Tranche 1
Shares and (B) an amount equal to (x) the difference of (1) 112 1/2% of the
Per Share Market Value of the Common Stock on the Tranche 1
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Closing Date less (2) the average of the lowest ten (10) Per Share Market
Values during the twenty-five (25) days immediately preceding the First
Tranche 1 Adjustment Date (the "FIRST TRANCHE 1 ADJUSTMENT PRICE" and (ii)
the First Tranche 1 Adjustment Price.
(b) The Company shall, on the twenty-fifth (25th) day following
the First Tranche 1 Adjustment Date (the "SECOND TRANCHE 1 ADJUSTMENT DATE"),
issue to the Purchasers for no additional consideration such aggregate number
of shares of Common Stock (the "SECOND TRANCHE 1 ADJUSTMENT SHARES") as
equals the quotient obtained by dividing (i) the product of (A) 50% of the
Tranche 1 Shares and (B) an amount equal to (x) the difference of
(1) 112 1/2% of the Per Share Market Value of the Common Stock on the
Tranche 1 Closing Date less (2) the average of the lowest ten (10) Per Share
Market Values during the twenty-five (25) days immediately preceding the
Second Tranche 1 Adjustment Date (the "SECOND TRANCHE 1 ADJUSTMENT PRICE")
and (ii) the Second Tranche 1 Adjustment Price.
(c) The Company shall, on the twenty-fifth (25th) day following
the date the Underlying Securities Registration Statement, covering the
Tranche 2 Shares, has been declared effective by the Commission (the "FIRST
TRANCHE 2 ADJUSTMENT DATE"), issue to the Purchasers for no additional
consideration such aggregate number of shares of Common Stock (the "FIRST
TRANCHE 2 ADJUSTMENT SHARES") as equals the quotient obtained by dividing (i)
the product of (A) 50% of the Tranche 2 Shares and (B) an amount equal to (x)
the difference of (1) 112 1/2% of the Per Share Market Value of the Common
Stock on the Tranche 2 Closing Date less (2) the average of the lowest ten
(10) Per Share Market Values during the twenty-five (25) days immediately
preceding the First Tranche 2 Adjustment Date (the "FIRST TRANCHE 2
ADJUSTMENT PRICE") and (ii) the First Tranche 2 Adjustment Price.
(d) The Company shall, on the twenty-fifth (25th) day following
the First Tranche 2 Adjustment Date (the "SECOND TRANCHE 2 ADJUSTMENT DATE"),
issue to the Purchasers for no additional consideration such aggregate number
of shares of Common Stock (the "SECOND TRANCHE 2 ADJUSTMENT SHARES") as
equals the quotient obtained by dividing (i) the product of (A) 50% of the
Tranche 2 Shares and (B) an amount equal to (x) the difference of
(1) 112 1/2% of the Per Share Market Value of the Common Stock on the
Tranche 2 Closing Date less (2) the average of the lowest ten (10) Per
Share Market Values during the twenty-five (25) days immediately preceding
the Second Tranche 2 Adjustment Date (the "SECOND TRANCHE 2 ADJUSTMENT PRICE")
and (ii) the Second Tranche 2 Adjustment Price.
(e) The Company shall, on the twenty-fifth (25th) day following
the date the Underlying Securities Registration Statement, covering the
Tranche 3 Shares, has been declared effective by the Commission (the "FIRST
TRANCHE 3 ADJUSTMENT DATE"), issue to the Purchasers for no additional
consideration such aggregate number of shares of Common Stock (the "FIRST
TRANCHE 3 ADJUSTMENT SHARES") as equals the quotient obtained by dividing (i)
the product of (A) 50% of the Tranche 3 Shares and (B) an amount equal to (x)
the difference of (1) 112 1/2 % of the Per Share Market Value of the Common
Stock on the Tranche 3 Closing Date less (2) the average of the lowest ten
(10) Per Share Market Values during the twenty-five (25) days immediately
preceding the First Tranche 3 Adjustment Date (the "FIRST TRANCHE 3
ADJUSTMENT PRICE") and (ii) the First Tranche 3 Adjustment Price..."
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