SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
Current Report Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
June 24, 1999
Date of Report (Date of earliest event reported)
FIDELITY HOLDINGS, INC.
(Exact name of registrant as specified in its charter)
Nevada 000-29182 11-3292094
(State or other (Commission (IRS Employer
jurisdiction of incorporation) File Number) Identification No.)
80-02 Kew Gardens Road, Kew Gardens, NY 11415
(Address of principal executive offices) (Zip Code)
(Registrant's telephone number, including area code): 718/520-6500
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PART II. OTHER INFORMATION
Item 5. OTHER EVENTS
On June 24, 1999, Fidelity Holdings, Inc. (the "Company") entered into an
agreement with three investors, pursuant to which the Company will have the
right or obligation to sell, under certain circumstances, in a series of private
placement transactions, up to $20.0 million of the Company's common stock (the
"Common Stock") and warrants in three tranches. Pursuant to a Securities
Purchase Agreement (the "Agreement"), the first tranche closed on June 24, 1999
and the Company sold an aggregate of 285,714 shares of common stock for an
aggregate of $6,000,000 or $21 per share. Shares issued upon closing of
subsequent tranches, if any, will be priced at 105% of the average closing bid
price of the Common Stock for the five trading days preceding the applicable
closing date.
Under the terms of the Agreement and the adjustable warrant issued in connection
with the Agreement, the purchasers will be entitled to acquire additional shares
exercisable at $.01 per share, pursuant to a "reset" formula which takes into
account the market price of the Common Stock at future dates, commencing 40
trading days after the date on which the purchasers may resell the shares
pursuant to a registration statement (the "Effectiveness Date"). There are three
reset periods for the adjustable warrant issued in connection with each tranche,
covering 34%, 33% and 33%, respectively of the number of shares issued on the
applicable tranche closing date. The first reset period is 40 trading days after
the effective date of a registration statement to be filed in connection with
that tranche. The second reset period is the 40 trading days beginning after the
end of the first reset period. The third reset period is 40 trading days
beginning after the end of the second reset period. The number of shares to be
issued during each reset period is calculated by (a) multiplying the number of
shares subject to price adjustment by (b) an amount equal to 115% of the
applicable tranche purchase price less the reset price and dividing the result
by the reset price. For each reset period, the reset price is the average of the
lowest ten trading days' closing bid prices during the preceding 40 trading-day
period. In the event that the reset price for any reset period is less than
$14.00 per share (the "Floor Price") the adjustable warrant will vest with
respect to shares up to the floor price (the "Initial Shares") and with respect
to shares whose vesting would exceed the number of Initial Shares, the Company
will have the option of paying cash in lieu of issuing such Initial Shares at
the amount equal to the difference between the reset price and $14.00. The
adjustable warrants will cease to vest in the event that, after the
Effectiveness Date, the average market price of the Common Stock exceeds $31.50
over a specified period and under certain conditions.
The Company and the purchasers have agreed that in the event an adjustment to
the number of shares of Common Stock issuable under any adjustable warrants
should result in the issuance of an amount that would exceed 19.999% of the
Common Stock outstanding on the closing date of a particular tranche, the
Company would, at the purchasers' option, either seek shareholder approval for
the issuance of such additional shares or make a cash payment to the purchasers
pursuant to a formula, which would result in the issuance of an aggregate of
less than 20% of the outstanding Common Stock.
The purchasers have agreed that, until the expiration of the final reset period
in connection with the adjustable warrants, they will not enter into certain
short sales of the Common Stock. These restrictions are set forth in the
Agreement attached as an exhibit to this report.
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In addition, the Company issued warrants to the purchasers enabling them to
purchase up to an aggregate of 285,714 shares of common stock at a purchase
price of $23 per share, exercisable for a five-year period.
If specified closing conditions are satisfied, the Company and the purchasers
will be entitled, at either of their election, with respect to tranche two, and
upon satisfaction of certain milestones to be established with respect to
tranche three, to effect tranche two and three investments during applicable
periods ending 100 trading days after the expiration date for adjustable
warrants issued in the preceding tranche. The amount of the investment in
tranches two and three would be $7 million. The closing conditions applicable to
the second and third tranches include, among other things, that the registration
statement required to be filed by the Company with the Securities and Exchange
Commission in connection with each previous tranche has been declared effective
and remained effective prior to the closing of such tranche and (i) that the
average daily trading volume and per share market value of the Common Stock on
the Nasdaq Stock Market has met certain thresholds for the 10 trading days
preceding the applicable tranche closing date and (ii) solely with respect to
the third tranche, that certain milestones to be determined by the purchasers
have been satisfied by the Company.
The Company has entered into a Registration Rights Agreement with the purchasers
requiring the Company to register shares purchased by the purchasers pursuant to
the Agreement under the Act, as well as the shares issuable pursuant to the
exercise of the warrants issued to the purchasers. The Registration Rights
Agreement contains provisions for the payment of certain liquidated damages by
the Company in the event of failure to comply with certain of its terms.
The Company has agreed to pay certain expenses of the purchasers and an advisor
to the purchasers incurred in connection with the private placement, not to
exceed $65,000. A finder's fee of up to 5% of the purchase price, payable 2% in
cash and 3% in Common Stock, of which at least $84,000 is payable in cash, is
being paid to International Securities Corporation in connection with the
transaction. The sale was effected to the purchasers in reliance upon exemptions
provided under Section 4(2) of the Securities Act of 1933, as amended, and
Regulation D and Rule 506 promulgated thereunder.
The Company has granted a right of first refusal in favor of the purchasers with
respect to below-market, non-public issuances of its securities during the
period which commenced on June 24, 1999 and ending 180 days after the
Effectiveness Date. Securities not subject to the right of first refusal include
securities issued under the Company's stock option plans, shares issued upon
exercise of currently outstanding warrants and securities issued in connection
with strategic transactions involving the Company or in connection with certain
commercial financings. The right of first refusal shall expire with respect to
any purchaser who ceases to own at least 20% of the Common Stock issued on June
24, 1999 and the Common Stock issuable upon exercise of the warrants purchased
by it.
Use of Proceeds
The Company is using the net proceeds from the Offering primarily to redeem 85%
of its outstanding $2,750,000 principal amount of 12% convertible subordinated
term debentures issued in January 1999 and intends to use the balance for
developmental activities in its telecommunications and plastics divisions, and
also for working capital purposes of the Company and its subsidiaries, including
the possible acquisition of additional car dealerships.
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Item 7. Financial Statements, Pro Forma Financial Information and Exhibits
(C) Exhibits
The following exhibits, from which schedules and exhibits have been
omitted and will be furnished to the Commission upon its request, are filed with
this report on Form 8-K.
4.14 -- Form of Closing Warrant
4.15 -- Form of Adjustable Warrant
10.63 -- Letter Agreement, dated as of June 24,1999, by and among Fidelity
Holdings, Inc. and Strong River Investments, Inc., Bay Harbor
Investments, Inc. and Augusta Street LLC.
10.64 -- Securities Purchase Agreement dated as of June 24,1999, by and among
Fidelity Holdings, Inc. and Strong River Investments, Inc., Bay
Harbor Investments, Inc. and Augusta Street LLC.
10.65 -- Registration Rights Agreement dated as of June 24,1999, by and among
Fidelity Holdings, Inc. and Strong River Investments, Inc., Bay
Harbor Investments, Inc. and Augusta Street LLC.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
FIDELITY HOLDINGS, INC.
(Registrant)
/s/ Doron Cohen
-----------------------------
Doron Cohen, President
Dated: July 2, 1999
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Exhibit 4.14
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 SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"),
AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE
EXEMPTION FROM THE REGISTRATION REQUIREMENTS THEREUNDER AND IN COMPLIANCE WITH
APPLICABLE STATE SECURITIES OR BLUE SKY LAWS.
FIDELITY HOLDINGS, INC.
WARRANT
Warrant No. SR-2 Dated: June 24, 1999
Fidelity Holdings, Inc., a Nevada corporation (the "Company"), hereby
certifies that, for value received, Strong River Investments, Inc., or its
registered assigns ("Holder"), is entitled, subject to the terms set forth
below, to purchase from the Company up to a total of 95,238 shares of common
stock, $.01 par value per share (the "Common Stock"), of the Company (each such
share, a "Warrant Share" and all such shares, the "Warrant Shares") at an
exercise price equal to $23.00 per share (as adjusted from time to time as
provided in Section 9, the "Exercise Price"), or to convert all or a portion of
the Warrant Shares into a warrant to purchase a pro-rata portion of the stock of
a Spun-Off Entity (as defined in Section 11) pursuant to the provisions of
Section 11, at any time and from time to time from and after the date hereof and
through and including June 24, 2004 (the "Expiration Date"), and subject to the
following terms and conditions:
1. Registration of Warrant. The Company shall register this Warrant,
upon records to be maintained by the Company for that purpose (the "Warrant
Register"), in the name of the record Holder hereof from time to time. The
Company may deem and treat the registered Holder of this Warrant as the absolute
owner hereof for the purpose of any exercise hereof or any distribution to the
Holder, and for all other purposes, and the Company shall not be affected by
notice to the contrary.
2. Registration of Transfers and Exchanges.
(a) The Company shall register the transfer of any portion of
this Warrant in the Warrant Register, upon surrender of this Warrant, with the
Form of Assignment attached
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hereto duly completed and signed, to the Transfer Agent or to the Company at the
office specified in or pursuant to Section 3(b). Upon any such registration or
transfer, a new warrant to purchase Common Stock, in substantially the form of
this Warrant (any such new warrant, a "New Warrant"), evidencing the portion of
this Warrant so transferred shall be issued to the transferee and a New Warrant
evidencing the remaining portion of this Warrant not so transferred, if any,
shall be issued to the transferring Holder. The acceptance of the New Warrant by
the transferee thereof shall be deemed the acceptance of such transferee of all
of the rights and obligations of a holder of a Warrant.
(b) This Warrant is exchangeable, upon the surrender hereof by
the Holder to the office of the Company specified in or pursuant to Section 3(b)
for one or more New Warrants, evidencing in the aggregate the right to purchase
the number of Warrant Shares which may then be purchased hereunder. Any such New
Warrant will be dated the date of such exchange.
3. Duration and Exercise of Warrants.
(a) This Warrant shall be exercisable by the registered Holder
on any business day before 6:30 P.M., New York City time, at any time and from
time to time on or after the date hereof to and including the Expiration Date.
At 6:30 P.M., New York City time on the Expiration Date, the portion of this
Warrant not exercised prior thereto shall be and become void and of no value.
Prior to the Expiration Date, the Company may not call or otherwise redeem this
Warrant without the prior written consent of the Holder.
(b) Subject to Sections 2(b), 6 and 10, upon surrender of this
Warrant, with the Form of Election to Purchase attached hereto duly completed
and signed, to the Company at its address for notice set forth in Section 12 and
upon payment of the Exercise Price multiplied by the number of Warrant Shares
that the Holder intends to purchase hereunder, in the manner provided hereunder,
all as specified by the Holder in the Form of Election to Purchase, the Company
shall promptly (but in no event later than 3 business days after the Date of
Exercise (as defined herein)) issue or cause to be issued and cause to be
delivered to or upon the written order of the Holder and in such name or names
as the Holder may designate, a certificate for the Warrant Shares issuable upon
such exercise, free of restrictive legends except (i) either in the event that a
registration statement covering the resale of the Warrant Shares and naming the
Holder as a selling stockholder thereunder is not then effective or the Warrant
Shares are not freely transferable without volume restrictions pursuant to Rule
144(k) promulgated under the Securities Act of 1933, as amended (the "Securities
Act"), or (ii) if this Warrant shall have been issued pursuant to a written
agreement between the original Holder and the Company, as required by such
agreement. Any person so designated by the Holder to receive Warrant Shares
shall be deemed to have become holder of record of such Warrant Shares as of the
Date of Exercise of this Warrant.
A "Date of Exercise" means the date on which the Company shall
have received (i) this Warrant (or any New Warrant, as applicable), with the
Form of Election to Purchase attached hereto (or attached to such New Warrant)
appropriately completed and duly signed, and (ii)
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payment of the Exercise Price for the number of Warrant Shares so indicated by
the holder hereof to be purchased.
(c) This Warrant shall be exercisable, either in its entirety
or, from time to time, for a portion of the number of Warrant Shares. If less
than all of the Warrant Shares which may be purchased under this Warrant are
exercised at any time, the Company shall issue or cause to be issued, at its
expense, a New Warrant evidencing the right to purchase the remaining number of
Warrant Shares for which no exercise has been evidenced by this Warrant.
4. Piggyback Registration Rights. The Holder shall be entitled to
the piggyback registration rights afforded to a holder pursuant to Section 6(f)
of that certain Registration Rights Agreement dated as of the date hereof, among
the Company and the signatories thereto.
5. Certain Exercise Restrictions.
(a) The Holder may not exercise this Warrant to the extent
such exercise would result in the Holder, together with any affiliate thereof,
beneficially owning (as determined in accordance with Section 13(d) of the
Exchange Act of 1934 (the "Exchange Act") and the rules thereunder) in excess of
4.999% of the then issued and outstanding shares of Common Stock, including
shares issuable upon exercise of this Warrant after application of this Section.
The Holder shall have the sole authority and obligation to determine whether and
to what Warrant Shares the restriction contained in this Section applies. The
provisions of this Section may be waived by the Holder upon not less than 61
days prior notice to the Company.
(b) The Holder may not to exercise this Warrant to the extent
such exercise would result in the Holder, together with any affiliate thereof,
beneficially owning (as determined in accordance with Section 13(d) of the
Exchange Act and the rules thereunder) in excess of 9.999% of the then issued
and outstanding Common Stock, including shares issuable upon exercise of this
Warrant after application of this Section. The Holder shall have the sole
authority and obligation to determine whether and to what Warrant Shares the
restriction contained in this Section applies. The provisions of this Section
may be waived by the Holder upon not less than 61 days prior notice to the
Company.
6. Payment of Taxes. The Company will pay all documentary stamp
taxes attributable to the issuance of Warrant Shares upon the exercise of this
Warrant; provided, however, that the Company shall not be required to pay any
tax which may be payable in respect of any transfer involved in the registration
of any certificates for Warrant Shares or Warrants in a name other than that of
the Holder and the Company shall not be required to issue or cause to be issued
or deliver or cause to be delivered the certificates for Warrant Shares unless
or until the person or persons requesting the issuance thereof shall have paid
to the Company the amount of such tax or shall have established to the
reasonable satisfaction of the Company that such tax has been paid. The Holder
shall be responsible for all other tax liability that may arise as a result of
holding or transferring this Warrant or receiving Warrant Shares upon exercise
hereof.
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7. Replacement of Warrant. If this Warrant is mutilated, lost,
stolen or destroyed, the Company shall issue or cause to be issued in exchange
and substitution for and upon cancellation hereof, or in lieu of and
substitution for this Warrant, a New Warrant, but only upon receipt of evidence
reasonably satisfactory to the Company of such loss, theft or destruction and
indemnity, if requested, satisfactory to it. Applicants for a New Warrant under
such circumstances shall also comply with such other reasonable regulations and
procedures and pay such other reasonable charges as the Company may prescribe.
8. Reservation of Warrant Shares. The Company covenants that it will
at all times reserve and keep available out of the aggregate of its authorized
but unissued Common Stock, solely for the purpose of enabling it to issue
Warrant Shares upon exercise of this Warrant as herein provided, the number of
Warrant Shares which are then issuable and deliverable upon the exercise of this
entire Warrant, free from preemptive rights or any other actual contingent
purchase rights of persons other than the Holder (taking into account the
adjustments and restrictions of Section 9). The Company covenants that all
Warrant Shares that shall be so issuable and deliverable shall, upon issuance
and the payment of the applicable Exercise Price in accordance with the terms
hereof, be duly and validly authorized, issued and fully paid and nonassessable.
9. Certain Adjustments. The Exercise Price and number of Warrant
Shares issuable upon exercise of this Warrant are subject to adjustment from
time to time as set forth in this Section 9. Upon each such adjustment of the
Exercise Price pursuant to this Section 9, the Holder shall thereafter prior to
the Expiration Date be entitled to purchase, at the Exercise Price resulting
from such adjustment, the number of Warrant Shares obtained by multiplying the
Exercise Price in effect immediately prior to such adjustment by the number of
Warrant Shares issuable upon exercise of this Warrant immediately prior to such
adjustment and dividing the product thereof by the Exercise Price resulting from
such adjustment.
(a) If the Company, at any time while this Warrant is
outstanding, (i) shall pay a stock dividend (except scheduled dividends paid on
outstanding preferred stock as of the date hereof which contain a stated
dividend rate) or otherwise make a distribution or distributions on shares of
its Common Stock or on any other class of capital stock payable in shares of
Common Stock, (ii) subdivide outstanding shares of Common Stock into a larger
number of shares, or (iii) combine outstanding shares of Common Stock into a
smaller number of shares, the Exercise Price shall be multiplied by a fraction
of which the numerator shall be the number of shares of Common Stock (excluding
treasury shares, if any) outstanding before such event and of which the
denominator shall be the number of shares of Common Stock (excluding treasury
shares, if any) outstanding after such event. Any adjustment made pursuant to
this Section shall become effective immediately after the record date for the
determination of stockholders entitled to receive such dividend or distribution
and shall become effective immediately after the effective date in the case of a
subdivision or combination, and shall apply to successive subdivisions and
combinations.
(b) In case of any reclassification of the Common Stock, any
consolidation or merger of the Company with or into another person, the sale or
transfer of all or substantially all
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of the assets of the Company or any compulsory share exchange pursuant to which
the Common Stock is converted into other securities, cash or property, then the
Holder shall have the right thereafter to exercise this Warrant only into the
shares of stock and other securities and property receivable upon or deemed to
be held by holders of Common Stock following such reclassification,
consolidation, merger, sale, transfer or share exchange, and the Holder shall be
entitled upon such event to receive such amount of securities or property equal
to the amount of Warrant Shares such Holder would have been entitled to had such
Holder exercised this Warrant immediately prior to such reclassification,
consolidation, merger, sale, transfer or share exchange. The terms of any such
consolidation, merger, sale, transfer or share exchange shall include such terms
so as to continue to give to the Holder the right to receive the securities or
property set forth in this Section 9(b) upon any exercise following any such
reclassification, consolidation, merger, sale, transfer or share exchange.
(c) If the Company, at any time while this Warrant is
outstanding, shall distribute to all holders of Common Stock (and not to holders
of this Warrant) evidences of its indebtedness or assets or rights or warrants
to subscribe for or purchase any security (excluding those referred to in
Sections 9(a), (b) and (d)) (collectively, "Assets"), then in each such case,
the Holder shall be entitled to receive, for each Warrant Share with respect to
which this Warrant is exercised after the record date fixed for determination of
stockholders entitled to receive such distribution, the Assets received by all
holders of Common Stock with respect to one share of Common Stock.
(d) If, at any time while this Warrant is outstanding, the
Company shall issue or cause to be issued rights or warrants to acquire or
otherwise sell or distribute shares of Common Stock for a consideration per
share less than the market price of the Common Stock then in effect, then,
forthwith upon such issue or sale, the Exercise Price shall be reduced to the
price (calculated to the nearest cent) determined by multiplying the Exercise
Price in effect immediately prior thereto by a fraction, the numerator of which
shall be the sum of (i) the number of shares of Common Stock outstanding
immediately prior to such issuance, and (ii) the number of shares of Common
Stock which the aggregate consideration received (or to be received, assuming
exercise or conversion in full of such rights, warrants and convertible
securities) for the issuance of such additional shares of Common Stock would
purchase at the Exercise Price, and the denominator of which shall be the sum of
the number of shares of Common Stock outstanding immediately after the issuance
of such additional shares. Such adjustment shall be made successively whenever
such an issuance is made.
(e) For the purposes of this Section 9, the following clauses
shall also be applicable:
(i) Record Date. In case the Company shall take a record
of the holders of its Common Stock for the purpose of entitling them (A) to
receive a dividend or other distribution payable in Common Stock or in
securities convertible or exchangeable into shares of Common Stock, or (B) to
subscribe for or purchase Common Stock or securities convertible or exchangeable
into shares of Common Stock, then such record date shall be deemed to be the
date
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of the issue or sale of the shares of Common Stock deemed to have been issued or
sold upon the declaration of such dividend or the making of such other
distribution or the date of the granting of such right of subscription or
purchase, as the case may be.
(ii) Treasury Shares. The number of shares of Common
Stock outstanding at any given time shall not include shares owned or held by or
for the account of the Company, and the disposition of any such shares shall be
considered an issue or sale of Common Stock.
(f) All calculations under this Section 9 shall be made to the
nearest cent or the nearest 1/100th of a share, as the case may be.
(g) If:
(i) the Company shall declare a dividend (or any other
distribution) on its Common Stock; or
(ii) the Company shall declare a special nonrecurring
cash dividend on or a redemption of its Common
Stock; or
(iii) the Company shall authorize the granting to all
holders of the Common Stock rights or warrants to
subscribe for or purchase any shares of capital
stock of any class or of any rights; or
(iv) the approval of any stockholders of the Company
shall be required in connection with any
reclassification of the Common Stock of the
Company, any consolidation or merger to which the
Company is a party, any sale or transfer of all or
substantially all of the assets of the Company, or
any compulsory share exchange whereby the Common
Stock is converted into other securities, cash or
property; or
(v) the Company shall authorize the voluntary
dissolution, liquidation or winding up of the
affairs of the Company,
then the Company shall cause to be mailed to each Holder at their last addresses
as they shall appear upon the Warrant Register, at least 30 calendar days prior
to the applicable record or effective date hereinafter specified, a notice
stating (x) the date on which a record is to be taken for the purpose of such
dividend, distribution, redemption, rights or warrants, or if a record is not to
be taken, the date as of which the holders of Common Stock of record to be
entitled to such dividend,
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distributions, redemption, rights or warrants are to be determined or (y) the
date on which such reclassification, consolidation, merger, sale, transfer or
share exchange is expected to become effective or close, and the date as of
which it is expected that holders of Common Stock of record shall be entitled to
exchange their shares of Common Stock for securities, cash or other property
deliverable upon such reclassification, consolidation, merger, sale, transfer,
share exchange, dissolution, liquidation or winding up; provided, however, that
the failure to mail such notice or any defect therein or in the mailing thereof
shall not affect the validity of the corporate action required to be specified
in such notice.
10. Payment of Exercise Price. The Holder shall pay the Exercise
Price in one of the following manners:
(a) Cash Exercise. The Holder may deliver immediately
available funds; or
(b) Cashless Exercise. At the option of the Company, the
Holder may surrender this Warrant to the Company together with a notice of
cashless exercise, in which event the Company shall issue to the Holder the
number of Warrant Shares determined as follows:
X = Y (A-B)/A where:
X = the number of Warrant Shares to be issued to the
Holder.
Y = the number of Warrant Shares with respect to which
this Warrant is being exercised.
A = the average of the closing sale prices of the Common
Stock on the principal market or exchange in which the
Common Stock is then listed or traded, as reported by
Bloomberg Information Systems, Inc. (or any successor to
its function of reporting stock prices), for the five
(5) trading days immediately prior to (but not
including) the Date of Exercise.
B = the Exercise Price.
For purposes of Rule 144 promulgated under the Securities Act, it is intended,
understood and acknowledged that the Warrant Shares issued in a cashless
exercise transaction shall be deemed to have been acquired by the Holder, and
the holding period for the Warrant Shares shall be deemed to have been
commenced, on the issue date.
11. Right to Receive a Warrant of a Spun-Off Entity. In addition to
any other rights available hereunder to the Holder, the Holder shall have the
right, exercisable at any time prior to the Expiration Date, to convert all or a
portion of the Warrant Shares into a common stock
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purchase warrant to purchase a pro-rata portion of the stock of a Spun-Off
Entity at an exercise price equal to 85% of the price at which the stock of such
Spun-Off Entity is first offered for sale to the public (the "Spun-Off Entity
Warrant"). Upon a conversion of all or a portion of the Warrant Shares into a
Spun-Off Entity Warrant pursuant to the terms hereof, the Holder shall, upon
written request by the Company, enter into a lock-up agreement relating to the
stock underlying the Spun-Off Entity Warrant which lock-up agreement shall be
acceptable to the Holder and any underwriter of the initial public offering of
the stock of the Spun-Off Entity. For purposes hereof, "Spun-Off Entity" shall
mean any operating subsidiary of the Company which is spun-off by the Company
prior to the Expiration Date.
12. Fractional Shares. The Company shall not be required to issue or
cause to be issued fractional Warrant Shares on the exercise of this Warrant.
The number of full Warrant Shares which shall be issuable upon the exercise of
this Warrant shall be computed on the basis of the aggregate number of Warrant
Shares purchasable on exercise of this Warrant so presented. If any fraction of
a Warrant Share would, except for the provisions of this Section 11, be issuable
on the exercise of this Warrant, the Company shall pay an amount in cash equal
to the Exercise Price multiplied by such fraction.
13. Notices. Any and all notices or other communications or
deliveries hereunder shall be in writing and shall be deemed given and effective
on the earliest of (i) the date of transmission, if such notice or communication
is delivered via facsimile at the facsimile telephone number specified in this
Section prior to 6:30 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
Section later than 6:30 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 addresses for such communications shall be: (i) if to the Company, to
80-02 Kew Gardens Road, Suite 5000, Kew Gardens, New York 11415, Attention:
Chief Financial Officer, or to Facsimile No. (718) 793-2455, or (ii) if to the
Holder, to the Holder at the address or facsimile number appearing on the
Warrant Register or such other address or facsimile number as the Holder may
provide to the Company in accordance with this Section 12.
14. Warrant Agent. The Company shall serve as warrant agent under
this Warrant. Upon thirty (30) days' notice to the Holder, the Company may
appoint a new warrant agent. Any corporation into which the Company or any new
warrant agent may be merged or any corporation resulting from any consolidation
to which the Company or any new warrant agent shall be a party or any
corporation to which the Company or any new warrant agent transfers
substantially all of its corporate trust or shareholders services business shall
be a successor warrant agent under this Warrant without any further act. Any
such successor warrant agent shall promptly cause notice of its succession as
warrant agent to be mailed (by first class mail, postage prepaid) to the Holder
at the Holder's last address as shown on the Warrant Register.
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15. Miscellaneous.
(a) This Warrant shall be binding on and inure to the benefit
of the parties hereto and their respective successors and assigns. This Warrant
may be amended only in writing signed by the Company and the Holder and their
successors and assigns.
(b) Subject to Section 14(a), above, nothing in this Warrant
shall be construed to give to any person or corporation other than the Company
and the Holder any legal or equitable right, remedy or cause under this Warrant.
This Warrant shall inure to the sole and exclusive benefit of the Company and
the Holder.
(c) This Warrant shall be governed by and construed and
enforced in accordance with the internal laws of the State of New York without
regard to the principles of conflicts of law thereof. The Company and the Holder
hereby irrevocably submit 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, or that
such suit, action or proceeding is improper. Each of the Company and the Holder
hereby irrevocably waives personal service of process and consents to process
being served in any such suit, action or proceeding by receiving a copy thereof
sent to the Company at the address in effect for notices to it under this
instrument 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.
(d) The headings herein are for convenience only, do not
constitute a part of this Warrant and shall not be deemed to limit or affect any
of the provisions hereof.
(e) In case any one or more of the provisions of this Warrant
shall be invalid or unenforceable in any respect, the validity and
enforceability of the remaining terms and provisions of this Warrant shall not
in any way be affected or impaired thereby and the parties will attempt in good
faith to agree upon a valid and enforceable provision which shall be a
commercially reasonable substitute therefor, and upon so agreeing, shall
incorporate such substitute provision in this Warrant.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK,
SIGNATURE PAGE FOLLOWS]
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<PAGE>
IN WITNESS WHEREOF, the Company has caused this Warrant to be duly
executed by its authorized officer as of the date first indicated above.
FIDELITY HOLDINGS, INC.
By: s/s Doron Cohen
----------------------------
Name: Doron Cohen
Title: President
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<PAGE>
FORM OF ELECTION TO PURCHASE
(To be executed by the Holder to exercise the right to purchase shares of Common
Stock under the foregoing Warrant)
To Fidelity Holdings, Inc.:
In accordance with the Warrant enclosed with this Form of Election to
Purchase, the undersigned hereby irrevocably elects to purchase _____________
shares of common stock, $.01 par value per share, of Fidelity Holdings, Inc.
(the "Common Stock") and , if such Holder is not utilizing the cashless exercise
provisions set forth in this Warrant, encloses herewith $________ in cash,
certified or official bank check or checks, which sum represents the aggregate
Exercise Price (as defined in the Warrant) for the number of shares of Common
Stock to which this Form of Election to Purchase relates, together with any
applicable taxes payable by the undersigned pursuant to the Warrant.
The undersigned requests that certificates for the shares of Common Stock
issuable upon this exercise be issued in the name of
PLEASE INSERT SOCIAL SECURITY OR
TAX IDENTIFICATION NUMBER
________________________________
________________________________________________________________________________
(Please print name and address)
If the number of shares of Common Stock issuable upon this exercise shall
not be all of the shares of Common Stock which the undersigned is entitled to
purchase in accordance with the enclosed Warrant, the undersigned requests that
a New Warrant (as defined in the Warrant) evidencing the right to purchase the
shares of Common Stock not issuable pursuant to the exercise evidenced hereby be
issued in the name of and delivered to:
________________________________________________________________________________
(Please print name and address)
Dated:_______, ___ Name of Holder:
(Print)_______________________________
(By:)_________________________________
(Name:)
(Title:)
(Signature must conform in all
respects to name of holder as
specified on the face of the Warrant)
<PAGE>
FORM OF ASSIGNMENT
[To be completed and signed only upon transfer of Warrant]
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers
unto ________________________________ the right represented by the within
Warrant to purchase ____________ shares of Common Stock of Fidelity Holdings,
Inc. to which the within Warrant relates and appoints ________________ attorney
to transfer said right on the books of Fidelity Holdings, Inc. with full power
of substitution in the premises.
Dated:
_______________, ____
_______________________________________
(Signature must conform in all respects to name of
holder as specified on the face of the Warrant)
_______________________________________
Address of Transferee
_______________________________________
_______________________________________
In the presence of:
__________________________
Exhibit 4.15
NEITHER THESE SECURITIES NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE
EXERCISABLE HAVE BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR
THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM
REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES
ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN
AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS THEREUNDER AND IN
COMPLIANCE WITH APPLICABLE STATE SECURITIES OR BLUE SKY LAWS.
FIDELITY HOLDINGS, INC.
WARRANT
Warrant No. SR-1 Dated: June 24, 1999
Fidelity Holdings, Inc., a Nevada corporation (the "Company"), hereby
certifies that, for value received, Strong River Investments, Inc., or its
registered assigns ("Holder"), is entitled, subject to the terms set forth
below, to purchase from the Company up to the total number of shares of Common
Stock, $.01 par value per share (the "Common Stock"), of the Company (each such
share, a "Warrant Share" and all such shares, the "Warrant Shares") calculated
pursuant to Section 3 of this Warrant at an exercise price equal to $.01 per
share (as adjusted from time to time as provided in Section 9, the "Exercise
Price"), at the times set forth herein through and including the Third Vesting
Period Expiration Date (as defined in Section 3(a)(iii) hereof) (the "Expiration
Date"), and subject to the following terms and conditions (certain terms used
herein are defined in Exhibit A attached hereto):
1. Registration of Warrant. The Company shall register this Warrant, upon
records to be maintained by the Company for that purpose (the "Warrant
Register"), in the name of the record Holder hereof from time to time. The
Company may deem and treat the registered Holder of this Warrant as the absolute
owner hereof for the purpose of any exercise hereof or any distribution to the
Holder, and for all other purposes, and the Company shall not be affected by
notice to the contrary.
<PAGE>
2. Registration of Transfers and Exchanges.
(a) The Company shall register the transfer of any portion of this
Warrant in the Warrant Register, upon surrender of this Warrant, with the Form
of Assignment attached hereto duly completed and signed, to the Transfer Agent
or to the Company at the address specified in Section 13. Upon any such
registration or transfer, a new warrant to purchase Common Stock, in
substantially the form of this Warrant (any such new warrant, a "New Warrant"),
evidencing the portion of this Warrant so transferred shall be issued to the
transferee and a New Warrant evidencing the remaining portion of this Warrant
not so transferred, if any, shall be issued to the transferring Holder. The
acceptance of the New Warrant by the transferee thereof shall be deemed the
acceptance of such transferee of all of the rights and obligations of a holder
of a Warrant.
(b) This Warrant is exchangeable, upon the surrender hereof by the
Holder to the office of the Company at the address specified in Section 13 for
one or more New Warrants, evidencing in the aggregate the right to purchase the
number of Warrant Shares which may then be purchased hereunder. Any such New
Warrant will be dated the date of such exchange.
3. Duration, Vesting and Exercise of Warrant.
(a) The vesting of the Warrant Shares which the Holder is permitted
to acquire pursuant to this Warrant shall occur on the dates set forth below in
this Section 3(a). On each such date, this Warrant shall vest with respect to a
number of Warrant Shares calculated pursuant to Section 3(b) below. Warrant
Shares that have vested on a Vesting Date (as defined below) may be acquired by
the Holder at any time and from time to time only during the forty (40) Trading
Days following such Vesting Date, upon exercise of this Warrant, provided, that
each such forty (40) Trading Day period shall be extended by the number of days
during such period which the Holder is for any reason unable to use the
Underlying Shares Registration Statement or the prospectus thereunder in order
to sell securities thereunder.
(i) The first vesting date (the "First Vesting Date") shall be
the fortieth (40th) Trading Day following the Effectiveness Date, provided, that
if the Effectiveness Date shall not have occurred prior to the Effectiveness
Required Date, then at the option of the Holder (exercisable by notice delivered
to the Company no later than three (3) Trading Days following the Effectiveness
Required Date), the First Vesting Date shall occur on the (30th) Trading Day
following the Effectiveness Required Date (the Warrant Shares with respect to
which this Warrant is exercisable on the First Vesting Date are called the
"First Reset Warrant Shares");
(ii) The second vesting date (the "Second Vesting Date") shall
be the fortieth (40th) Trading Day following the First Vesting Date (the Warrant
Shares with respect to
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<PAGE>
which this Warrant is exercisable on the Second Vesting Date are called the
"Second Reset Warrant Shares"); and
(iii) The third vesting date (the "Third Vesting Date," and
together with the First Vesting Date and the Second Vesting Date, the "Vesting
Dates") shall be the fortieth (40th) Trading Day (such forty (40) Trading
Period, as extended pursuant to the last sentence of Section 3(a), the "Third
Vesting Date Expiration Date") following the Second Vesting Date (the Warrant
Shares with respect to which this Warrant is exercisable on the Third Vesting
Date are called the "Third Reset Warrant Shares").
(b) Except as otherwise set forth in this Warrant, this Warrant
shall vest and become exercisable on each Vesting Date with respect to the
number of Warrant Shares calculated in accordance with the following formula:
(Applicable Share Number) x [(Purchase Price x 1.15) - Adjustment Price]
Adjustment Price
If the number calculated in accordance with the foregoing formula is zero
or a negative number, the Holder shall not be obligated to transfer any shares
of Common Stock to the Company. On each Vesting Date, the Company shall send a
notice to the Holder setting forth in reasonable detail its calculation of the
number of Warrant Shares which shall vest and be exercisable on such Vesting
Date. Notwithstanding anything to the contrary set forth herein, if, on any
Trading Day occurring after the Effectiveness Date during which (1) for the
immediately preceding fifteen (15) Trading Days there was an effective
Underlying Shares Registration Statement pursuant to which the Holder was
permitted to resell Underlying Shares and (2) the average of the Per Share
Market Values for the fifteen (15) Trading Days immediately preceding such date
equaled or exceeded $31.50 (the "Threshold Price"), then this Warrant shall not
vest for any Warrant Shares with respect to any Vesting Date that would occur
after the expiration of such fifteen (15) Trading Day period, provided, that the
application of this sentence shall have no effect on the vesting of Warrant
Shares in respect of a Vesting Date unless all of the Trading Days used to
calculate such fifteen (15) Trading Day average occurred prior to the 15th
Trading Day immediately preceding such Vesting Date, but shall terminate vesting
rights with respect to subsequent Vesting Dates, if any.
(c) The vesting of the Warrant Shares in accordance with this
Section 3 shall not be affected by any failure by the Company to cause the
Underlying Shares Registration Statement declared effective by the Commission or
maintain the effectiveness of the Underlying Shares Registration Statement after
it has been declared effective by the Commission.
(d) Notwithstanding anything herein to the contrary, if on any
Vesting Date the Adjustment Price shall be less than $14.00 (such an Adjustment
Price, the "Floor Price"), then on such Vesting Date: (i) this Warrant shall
vest with respect to the Warrant Shares pursuant to Section 3(a) and (b) hereof,
provided, that the Adjustment Price pursuant to the formula set forth in Section
3(b) shall, exclusively for purposes of this Section 3(d)(i), equal the Floor
Price (such number of
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<PAGE>
Warrant Shares, the "Initial Shares") and (ii) with respect to the Warrant
Shares whose vesting would result in a vesting of Warrant Shares in excess of
the Initial Shares, the Company will have the option to elect by written notice
(the "Notice") delivered to the Holder no later than twenty (20) Trading Days
prior to the applicable Vesting Date to either (x) pay to the Holder, in cash
(the "Cash Payment"), within three (3) Trading Days from the Vesting Date at
issue, an amount equal to the product obtained by multiplying (A) the applicable
Adjustment Price and (B) the difference between the number of Warrant Shares
which would have otherwise vested on such Vesting Date pursuant to Section 3(a)
and (b) hereof and the Initial Shares (such number of Warrant Shares, the
"Subsequent Shares") or (y) allow this Warrant to vest with respect to the
Subsequent Shares. A failure by the Company to deliver the Notice to the Holder
pursuant to the terms of this Section shall constitute an election by the
Company to allow this Warrant to vest as to the Subsequent Shares pursuant to
the terms hereof. If the Company shall fail to pay the Cash Payment in full to
the Holder by the third (3rd) Trading Day from the Vesting Date at issue, then,
at the election of the Holder, the Company shall either (x) pay to the Holder
$5,000 per day until the Cash Payment and all additional payments due hereunder
are paid in full, or (y) allow this Warrant to vest with respect to the
Subsequent Shares.
(e) Notwithstanding the foregoing provisions of this Section 3, at
any time within ten (10) Trading Days following the occurrence of any of the
following events (each, an "Event"), the Holder shall have the option to elect
by notice ("Vesting Notice") to the Company to have this Warrant vest with
respect to those Warrant Shares that have not yet already vested:
(i) The occurrence of a Change of Control Transaction;
(ii) Immediately prior to an assignment by the Company for the
benefit of creditors or commencement of a voluntary case under the Federal
Bankruptcy Code, or an entering into of an order for relief in an involuntary
case under the Federal Bankruptcy Code, or adoption by the Company of a plan of
liquidation or dissolution;
(iii) Five (5) Business Days prior to the proposed
consummation with respect to the Company of a "Rule 13e-3 transaction" as
defined in Rule 13e-3 under the Exchange Act (or, if necessary, such earlier
date as the Company shall determine in good faith to be required in order for
the Holder to be able to participate in such transaction), it being agreed that
the Holder will receive actual notice of the 13e-3 Statement filed with the
Commission on the date filed and actual notice of the date of acceleration
hereunder no later than such date, and that if such transaction is not
consummated, and this Warrant has been exercised, then the Holder (and to the
extent that this Warrant would not but for this paragraph be exercisable, the
Company) shall be entitled to declare the exercise null and void and the Holder
shall, upon return of the Warrant Shares to the Company, be entitled to receive
a refund of the Exercise Price and warrants identical to this Warrant, and such
acceleration shall become void ab initio, and the Warrants shall (as to any
remaining unexercised portion thereof) remain in full force and effect in
accordance with the terms hereof;
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<PAGE>
(iv) For any period of three (3) Trading Days (which need not
be consecutive Trading Days) commencing on or after the date of issuance of this
Warrant, there shall be no closing bid price on the Common Stock on the Nasdaq
or a Subsequent Market;
(v) The Common Stock fails to be listed or quoted for trading
on the Nasdaq or a Subsequent Market or for a period of three (3) Trading Days
(which need not be consecutive Trading Days);
(vi) A holder of Registrable Securities (as defined in the
Registration Rights Agreement) is not permitted to sell Registrable Securities
under an Underlying Shares Registration Statement for any reason for five (5) or
more days (whether or not consecutive); or
(vii) The Company shall fail or default in the timely
performance of any material obligation under the Transaction Documents and such
failure or default shall continue uncured for a period of five (5) Business Days
after the date on which notice of such failure or default is first given to the
Company (it being understood that no prior notice need be provided in the case
of defaults which cannot reasonably be cured within a 5-day period); provided
that no such failure or default shall be considered to have occurred for
purposes of this clause (vii) for a failure of an Underlying Shares Registration
Statement to be declared effective until the 150th day after the issuance of
this Warrant.
In the event the Holder delivers a Vesting Notice, this Warrant
shall vest with respect to the number of Warrant Shares calculated in accordance
with the formula set forth on Section 3(b); provided, however that for purposes
of such calculation, (i) the "Applicable Share Number" shall be deemed to mean
(A) 100% of the number of shares of Common Stock purchased by the Holder
pursuant to the Purchase Agreement (such number, the "Holder Purchased Shares"),
if the Event occurred prior to the First Vesting Date, (B) 66% of the Holder
Purchased Shares, if the Event occurred on or after the First Vesting Date but
prior to the Second Vesting Date and (C) 33% of the Holder Purchased Shares if
the Event occurred on or after the Second Vesting Date but prior to the Third
Vesting Date; and (ii) the "Adjustment Price" shall be deemed to mean the
average of the ten (10) lowest Per Share Market Values (which need not occur on
consecutive Trading Days) during the forty (40) Trading Days immediately
preceding the date on which the Event occurred.
(f) Subject to Sections 3(a) and (b), this Warrant shall be
exercisable by the registered Holder on any Business Day before 6:30 P.M., New
York City time, at any time and from time to time on or after the date hereof to
and including the Expiration Date. At 6:30 P.M., New York City time on the
Expiration Date, the portion of this Warrant not exercised prior thereto shall
be and become void and of no value.
(g) Subject to Sections 3(a) and (b), this Warrant shall be
exercisable, either in its entirety or, from time to time, for a portion of the
number of Warrant Shares. If less than all of the Warrant Shares which may be
purchased under this Warrant are exercised at any time, the Company shall issue
or cause to be issued, at its expense, a New Warrant evidencing the right to
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<PAGE>
purchase the remaining number of Warrant Shares for which no exercise has been
evidenced by this Warrant.
4. Delivery of Warrant Shares.
(a) Subject to Sections 2(b), 7 and 11, upon surrender of this
Warrant, with the Form of Election to Purchase attached hereto duly completed
and signed, to the Company at its address for notice set forth in Section 13 and
upon payment of the Exercise Price multiplied by the number of Warrant Shares
that the Holder intends to purchase hereunder, in the manner provided hereunder,
all as specified by the Holder in the Form of Election to Purchase, the Company
shall promptly (but in no event later than three (3) Trading Days after the Date
of Exercise (as defined herein)) issue or cause to be issued and cause to be
delivered to or upon the written order of the Holder and in such name or names
as the Holder may designate, a certificate for the Warrant Shares issuable upon
such exercise, free of restrictive legends, except in the event that both an
Underlying Shares Registration Statement is not then effective and the Warrant
Shares are not freely transferable without volume restrictions pursuant to Rule
144(k) promulgated under the Securities Act of 1933, as amended (the "Securities
Act"). Any person so designated by the Holder to receive Warrant Shares shall be
deemed to have become holder of record of such Warrant Shares as of the Date of
Exercise of this Warrant.
A "Date of Exercise" means the date on which the Company shall
have received (i) this Warrant (or any New Warrant, as applicable), with the
Form of Election to Purchase attached hereto (or attached to such New Warrant)
appropriately completed and duly signed, and (ii) payment of the Exercise Price
for the number of Warrant Shares so indicated by the holder hereof to be
purchased.
(b) If the Company fails to deliver to the Holder certificate or
certificates representing the Warrant Shares pursuant to Section 4(a) by the
third (3rd) Trading Day after the Date of Exercise, the Company shall pay to
such Holder, in cash, as liquidated damages and not as a penalty, $5,000 for
each day after such third (3rd) Trading Day until such certificates are
delivered. Nothing herein shall limit the Holder's right to pursue actual
damages for the Company's failure to deliver certificates representing shares of
Common Stock upon exercise within the period specified herein and the Holder
shall have the right to pursue all remedies available to it at law or in equity
including, without limitation, a decree of specific performance and/or
injunctive relief. The exercise of any such rights shall not prohibit the Holder
from seeking to enforce damages pursuant to any other Section hereof or under
applicable law. The Company shall, upon request of the Holder, if available, use
its best efforts to deliver Warrant Shares hereunder electronically through the
Depository Trust Corporation or another established clearing corporation
performing similar functions.
(c) In addition to any other rights available to the Holder, if the
Company fails to deliver to the Holder certificate or certificates representing
the Warrant Shares pursuant to Section 4(a) by the third (3rd) Trading Day after
the Date of Exercise, and if after such third (3rd) Trading
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<PAGE>
Day the Holder purchases (in an open market transaction or otherwise) shares of
Common Stock to deliver in satisfaction of a sale by the Holder of the Warrant
Shares which the Holder was entitled to receive upon such exercise (a "Buy-In"),
then the Company shall pay (1) in cash to the Holder (in addition to any
remedies available to or elected by the Holder) the amount by which (x) the
Holder's total purchase price (including brokerage commissions, if any) for the
shares of Common Stock so purchased exceeds (y) the product of (A) the number of
Warrant Shares that the Company was required to deliver pursuant to Section 4(b)
to the Holder in connection with the exercise at issue and (B) the Per Share
Market Value at the time of the sale giving rise to such purchase obligation and
(2) deliver to the Holder the number of shares of Common Stock that would have
been issued had the Company timely complied with its exercise and delivery
obligations under Section 4(b). For example, if the Holder purchases Common
Stock having a total purchase price of $11,000 to cover a Buy-In with respect to
an attempted exercise of shares of Common Stock with a market price on the date
of exercise in the amount of $10,000, under clause (1) of the immediately
preceding sentence the Company shall be required to pay the Holder $1,000. The
Holder shall provide the Company written notice indicating the amounts payable
to the Holder in respect of the Buy-In. Notwithstanding anything contained
herein to the contrary, if the Holder requires the Company to make payment in
respect of a Buy-In for the failure to timely deliver certificates hereunder and
the Company timely pays in full such payment, the Company shall not be required
to pay such Holder liquidated damages under Section 4(b) in respect of the
certificates resulting in such Buy-In.
(d) The Company's obligations to issue and deliver Warrant
Shares in accordance with the terms hereof are absolute and unconditional,
irrespective of any action or inaction by the Holder to enforce the same, any
waiver or consent with respect to any provision hereof, the recovery of any
judgment against any Person or any action to enforce the same, or any setoff,
counterclaim, recoupment, limitation or termination, or any breach or alleged
breach by the Holder or any other Person of any obligation to the Company or any
violation or alleged violation of law by the Holder or any other Person, and
irrespective of any other circumstance which might otherwise limit such
obligation of the Company to the Holder in connection with the issuance of
Warrant Shares. If the Company breaches its obligations under this Warrant,
then, in addition to any other liabilities the Company may have hereunder and
under applicable law, the Company shall pay or reimburse the Holder on demand
for all costs of collection and enforcement (including reasonable attorneys fees
and expenses).
5. Piggyback Registration Rights. The Holder shall be entitled to the
piggyback registration rights afforded to a holder pursuant to Section 6(f) of
that certain Registration Rights Agreement dated as of the date hereof, among
the Company and the signatories thereto.
6. Payment of Taxes. The Company will pay all documentary stamp taxes
attributable to the issuance of Warrant Shares upon the exercise of this
Warrant; provided, however, that the Company shall not be required to pay any
tax which may be payable in respect of any transfer involved in the registration
of any certificates for Warrant Shares or Warrants in a name other than that of
the Holder and the Company shall not be required to issue or cause to be issued
or deliver or cause to be delivered the certificates for Warrant Shares unless
or until the person or persons
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<PAGE>
requesting the issuance thereof shall have paid to the Company the amount of
such tax or shall have established to the reasonable satisfaction of the Company
that such tax has been paid. The Holder shall be responsible for all other tax
liability that may arise as a result of holding or transferring this Warrant or
receiving Warrant Shares upon exercise hereof.
7. Replacement of Warrant. If this Warrant is mutilated, lost, stolen or
destroyed, the Company shall issue or cause to be issued in exchange and
substitution for and upon cancellation hereof, or in lieu of and substitution
for this Warrant, a New Warrant, but only upon receipt of evidence reasonably
satisfactory to the Company of such loss, theft or destruction and customary and
reasonable indemnity, if requested. Applicants for a New Warrant under such
circumstances shall also comply with such other reasonable regulations and
procedures and pay such other reasonable charges as the Company may prescribe.
8. Reservation of Warrant Shares. The Company covenants that it will at
all times reserve and keep available out of the aggregate of its authorized but
unissued Common Stock, solely for the purpose of enabling it to issue Warrant
Shares upon exercise of this Warrant as herein provided, the number of Warrant
Shares which are then issuable and deliverable upon the exercise of this entire
Warrant, free from preemptive rights or any other actual contingent purchase
rights of persons other than the Holder (taking into account the adjustments and
restrictions of Section 9). The Company covenants that all Warrant Shares that
shall be so issuable and deliverable shall, upon issuance and the payment of the
applicable Exercise Price in accordance with the terms hereof, be duly and
validly authorized, issued and fully paid and nonassessable.
9. Certain Adjustments. The Exercise Price and number of Warrant Shares
issuable upon exercise of this Warrant are subject to adjustment from time to
time as set forth in this Section 9. Upon each such adjustment of the Exercise
Price pursuant to this Section 9, the Holder shall thereafter prior to the
Expiration Date be entitled to purchase, at the Exercise Price resulting from
such adjustment, the number of Warrant Shares obtained by multiplying the
Exercise Price in effect immediately prior to such adjustment by the number of
Warrant Shares issuable upon exercise of this Warrant immediately prior to such
adjustment and dividing the product thereof by the Exercise Price resulting from
such adjustment.
(a) If the Company, at any time while this Warrant is outstanding,
(i) shall pay a stock dividend or otherwise make a distribution or distributions
on shares of its Common Stock or on any other class of capital stock payable in
shares of Common Stock, (ii) subdivide outstanding shares of Common Stock into a
larger number of shares, or (iii) combine outstanding shares of Common Stock
into a smaller number of shares, the Exercise Price shall be multiplied by a
fraction of which the numerator shall be the number of shares of Common Stock
outstanding before such event and of which the denominator shall be the number
of shares of Common Stock outstanding after such event. Any adjustment made
pursuant to this Section shall become effective immediately after the record
date for the determination of stockholders entitled to receive such dividend or
distribution and shall become effective immediately after the effective date in
the case of a subdivision or combination, and shall apply to successive
subdivisions and combinations.
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<PAGE>
(b) In case of any reclassification of the Common Stock, or any
compulsory share exchange pursuant to which the Common Stock is converted into
other securities, cash or property, the Holder shall have the right thereafter
to exercise this Warrant only for the shares of stock and other securities, cash
and property receivable upon or deemed to be held by holders of Common Stock
following such reclassification or share exchange, and the Holder shall be
entitled upon such event to receive such amount of securities, cash or property
as equals the number of Warrant Shares such Holder would have been entitled to
had the Holder exercised this Warrant in full immediately prior to such
reclassification or share exchange. This provision shall similarly apply to
successive reclassifications or share exchanges.
(c) If the Company, at any time while this Warrant is outstanding,
shall distribute to all holders of Common Stock (and not to holders of this
Warrant) evidences of its indebtedness or assets or rights or warrants to
subscribe for or purchase any security (excluding those referred to in Sections
9(a), (b) and (d)) (collectively, "Assets"), then in each such case, the Holder
shall be entitled to receive, for each Warrant Share with respect to which this
Warrant is exercised after the record date fixed for determination of
stockholders entitled to receive such distribution, the Assets received by all
holders of Common Stock with respect to one share of Common Stock.
(d) If, within 90 Trading Days of any Vesting Date, the Company or
any subsidiary thereof shall issue or cause to be issued rights, warrants, debt
or other securities entitling the holder thereof to acquire, or shall otherwise
sell or distribute shares of Common Stock or other securities, other than (i)
issuances pursuant to any exercise or conversion of any warrants, options,
subscriptions, convertible notes, convertible debentures, convertible preferred
stock or other convertible securities issued and outstanding on the Closing Date
(as defined in the Purchase Agreement) and set forth on Schedule 2.1(c) to the
Purchase Agreement in accordance with the terms of such securities as of such
date; (ii) issuances pursuant to any grant or exercise of any stock or options
which may hereafter be granted or exercised under any employee benefit plan of
the Company now existing or to be implemented in the future, or upon grant or
exercise of any stock or options to or by any officer, director or employee,
whether or not under a plan, so long as the issuance of such stock or options is
approved by a majority of the non-employee members of the Board of Directors of
the Company or a majority of the members of a committee of non-employee
directors established for such purpose; (iii) issuances pursuant to any Closing
Warrants (as defined in the Purchase Agreement) issued pursuant to the Purchase
Agreement; (iv) securities issued in connection with an underwritten public
offering of the Company; (v) securities issued in connection with any merger,
acquisition or consolidation, or purchase of assets or business from another
person, so long as the Company is the surviving corporation and that such
transaction is not primarily for the purpose of raising capital, or (vi) in
connection with the issuance of Common Stock, not in excess of 1% of the Common
Stock issued and outstanding on the original issue date of this Warrant, upon
the exercise of warrants or other rights granted to any bank other commercial
financing institution, for a consideration per share less than both (x) the
market price at the time of such issuance or distribution and (y) an Adjustment
Price previously used in calculating the vesting of Warrant Shares on previous
Vesting Date (such an issuance, a "Discounted Issuance"), then the Adjustment
Price previously used in calculating the vesting of Warrant Shares on any
previous
-9-
<PAGE>
Vesting Date (if greater than such issuance price) shall equal the consideration
per share at which such Discounted Issuance was made and the Company shall,
within ten (10) Trading Days of such Discounted Issuance, issue to the Holder a
number of shares of Common Stock equal to the difference between the number of
Warrant Shares vested on any previous applicable Vesting Date based on the
Adjusted Price then in effect and the number of Warrant Shares which would have
vested on such previous Vesting Dates based on the imputed Adjustment Price
pursuant to the Discounted Issuance. Such adjustment shall be made successively
whenever such an issuance is made.
(e) In case of any (1) merger or consolidation of the Company with
or into another Person, or (2) sale by the Company of more than one-half of the
assets of the Company (on a book value basis) in one or a series of related
transactions, or (3) tender or other offer or exchange (whether by the Company
or another Person) pursuant to which holders of Common Stock are permitted to
tender or exchange their shares for other securities, stock, cash or property of
the Company or another Person; then the Holder shall have the right thereafter
to (A) exercise this Warrant for the shares of stock and other securities, cash
and property receivable upon or deemed to be held by holders of Common Stock
following such merger, consolidation or sale, and the Holder shall be entitled
upon such event or series of related events to receive such amount of
securities, cash and property as the shares of Common Stock for which this
Warrant could have been exercised immediately prior to such merger,
consolidation or sales would have been entitled, (B) in the case of a merger or
consolidation, require the surviving entity to issue to the Holder a warrant
entitling the Holder to acquire shares of such entity's common stock, which
warrant shall have terms identical (including with respect to exercise) to the
terms of this Warrant and shall be entitled to all of the rights and privileges
set forth herein and the agreements pursuant to which this Warrant was issued
(including, without limitation, as such rights relate to the acquisition,
transferability, registration and listing of such shares of stock other
securities issuable upon exercise thereof), or (C) in the event of an exchange
or tender offer or other transaction contemplated by clause (3) of this Section,
tender or exchange this Warrant for such securities, stock, cash and other
property receivable upon or deemed to be held by holders of Common Stock that
have tendered or exchanged their shares of Common Stock following such tender or
exchange, and the Holder shall be entitled upon such exchange or tender to
receive such amount of securities, cash and property as the shares of Common
Stock for which this Warrant could have been exercised immediately prior to such
tender or exchange would have been entitled as would have been issued. In the
case of clause (B), the exercise price applicable for the newly issued warrant
shall be based upon the amount of securities, cash and property that each share
of Common Stock would receive in such transaction and the Exercise Price
immediately prior to the effectiveness or closing date for such transaction. The
terms of any such merger, sale, consolidation, tender or exchange shall include
such terms so as continue to give the Holder the right to receive the
securities, cash and property set forth in this Section upon any conversion or
redemption following such event. This provision shall similarly apply to
successive such events.
(f) For the purposes of this Section 9, the following clauses shall
also be applicable:
-10-
<PAGE>
(i) Record Date. In case the Company shall take a record of
the holders of its Common Stock for the purpose of entitling them (A) to receive
a dividend or other distribution payable in Common Stock or in securities
convertible or exchangeable into shares of Common Stock, or (B) to subscribe for
or purchase Common Stock or securities convertible or exchangeable into shares
of Common Stock, then such record date shall be deemed to be the date of the
issue or sale of the shares of Common Stock deemed to have been issued or sold
upon the declaration of such dividend or the making of such other distribution
or the date of the granting of such right of subscription or purchase, as the
case may be.
(ii) Treasury Shares. The number of shares of Common Stock
outstanding at any given time shall not include shares owned or held by or for
the account of the Company, and the disposition of any such shares shall be
considered an issue or sale of Common Stock.
(g) All calculations under this Section shall be made to the nearest
1/100th of a share.
(h) If:
(i) the Company shall declare a dividend (or any other
distribution) on its Common Stock; or
(ii) the Company shall declare a special nonrecurring cash
dividend on or a redemption of its Common Stock; or
(iii) the Company shall authorize the granting to all holders
of the Common Stock rights or warrants to subscribe for or purchase any shares
of capital stock of any class or of any rights; or
(iv) the approval of any stockholders of the Company shall be
required in connection with any reclassification of the Common Stock of the
Company, any consolidation or merger to which the Company is a party, any sale
or transfer of all or substantially all of the assets of the Company, or any
compulsory share exchange whereby the Common Stock is converted into other
securities, cash or property; or
(v) the Company shall authorize the voluntary dissolution,
liquidation or winding up of the affairs of the Company,
then the Company shall cause to be mailed to each Holder at their last addresses
as they shall appear upon the Warrant Register, at least 30 calendar days prior
to the applicable record or effective date hereinafter specified, a notice
stating (x) the date on which a record is to be taken for the purpose of such
dividend, distribution, redemption, rights or warrants, or if a record is not to
be taken, the date as of which the holders of Common Stock of record to be
entitled to such dividend, distributions, redemption, rights or warrants are to
be determined or (y) the date on which such
-11-
<PAGE>
reclassification, consolidation, merger, sale, transfer or share exchange is
expected to become effective or close, and the date as of which it is expected
that holders of Common Stock of record shall be entitled to exchange their
shares of Common Stock for securities, cash or other property deliverable upon
such reclassification, consolidation, merger, sale, transfer, share exchange,
dissolution, liquidation or winding up; provided, however, that the failure to
mail such notice or any defect therein or in the mailing thereof shall not
affect the validity of the corporate action required to be specified in such
notice.
10. Payment of Exercise Price. The Holder shall pay the Exercise
Price in one of the following manners:
(a) Cash Exercise. The Holder shall deliver immediately
available funds; or
(b) Cashless Exercise. The Holder shall surrender this Warrant
to the Company together with a notice of cashless exercise, in which event the
Company shall issue to the Holder the number of Warrant Shares determined as
follows:
X = Y (A-B)/A where:
X = the number of Warrant Shares to be issued to the
Holder.
Y = the number of Warrant Shares with respect to which
this Warrant is being exercised.
A = the average of the closing sale prices of the Common
Stock on the principal market or exchange in which the
Common Stock is then listed or traded, as reported by
Bloomberg Information Systems, Inc. (or any successor to
its function of reporting stock prices), for the five
(5) trading days immediately prior to (but not
including) the Date of Exercise.
B = the Exercise Price.
For purposes of Rule 144 promulgated under the Securities Act, it is intended,
understood and acknowledged that the Warrant Shares issued in a cashless
exercise transaction shall be deemed to have been acquired by the Holder, and
the holding period for the Warrant Shares shall be deemed to have been
commenced, on the issue date.
11. Certain Exercise Restrictions.
-12-
<PAGE>
(a) The Holder may not exercise this Warrant to the extent
such exercise would result in the Holder, together with any affiliate thereof,
beneficially owning (as determined in accordance with Section 13(d) of the
Exchange Act of 1934 (the "Exchange Act") and the rules thereunder) in excess of
4.999% of the then issued and outstanding shares of Common Stock, including
shares issuable upon exercise of this Warrant after application of this Section.
The Holder shall have the sole authority and obligation to determine whether and
to what Warrant Shares the restriction contained in this Section applies. The
provisions of this Section may be waived by the Holder upon not less than 61
days prior notice to the Company.
(b) The Holder may not exercise this Warrant to the extent
such exercise would result in the Holder, together with any affiliate thereof,
beneficially owning (as determined in accordance with Section 13(d) of the
Exchange Act and the rules thereunder) in excess of 9.999% of the then issued
and outstanding Common Stock, including shares issuable upon exercise of this
Warrant after application of this Section. The Holder shall have the sole
authority and obligation to determine whether and to what Warrant Shares the
restriction contained in this Section applies. The provisions of this Section
may be waived by the Holder upon not less than 61 days prior notice to the
Company.
(c) If the Company Stock is then listed for trading on the
Nasdaq or the Nasdaq National Market and the Company has not obtained the
Shareholder Approval (as defined below), then the Company may not issue in
excess of 2,639,314 shares of Common Stock upon exercise of this Warrant, which
number of shares shall be subject to adjustment pursuant to Sections 9(a), (b),
(c) and (e) (such number of shares, the "Issuable Maximum"). The Issuable
Maximum equals 19.999% of the number of shares of Common Stock outstanding
immediately prior to the closing of transactions set forth in the Purchase
Agreement. If on any Date of Exercise (A) the Company Stock is listed for
trading on the Nasdaq or the Nasdaq National Market, (B) the Exercise Price then
in effect is such that the aggregate number of shares of Common Stock that would
then be issuable upon exercise in full of this Warrant, together with any shares
of Common Stock previously issued upon exercise of this Warrant, would equal or
exceed the Issuable Maximum, and (C) the Company shall not have previously
obtained the vote of shareholders, if any, as may be required by the applicable
rules and regulations of the Nasdaq Stock Market to approve the issuance of
shares of Common Stock in excess of the Issuable Maximum pursuant to the terms
hereof (the "Shareholder Approval"), then the Company shall issue to the Holder
a number of shares of Common Stock equal to the Issuable Maximum and, with
respect to the shares whose issuance would result in an issuance of shares of
Common Stock in excess of the Issuable Maximum (the "Excess Warrant Shares"),
the Holder shall have the option to require the Company to either (1) use its
best efforts to obtain the Shareholder Approval applicable to such issuance as
soon as possible, but, in any event, no later than 60 days after such request or
(2) pay to the Holder an amount in cash equal to the product of (x) the Excess
Warrant Shares multiplied by (y) the closing sales price of the Common Stock on
(a) the date such Shareholder Approval was required to have been obtained or (b)
the Date of Exercise giving rise to the obligation to seek Shareholder Approval
(whichever is greater). The Company and the Holder understand and agree that
shares of Common Stock issued
-13-
<PAGE>
upon exercise of the Warrant and then held by the Holder or an Affiliate thereof
may not cast votes or be deemed outstanding for purposes of any vote to obtain
the Shareholder Approval.
12. Fractional Shares. The Company shall not be required to issue or
cause to be issued fractional Warrant Shares on the exercise of this Warrant.
The number of full Warrant Shares which shall be issuable upon the exercise of
this Warrant shall be computed on the basis of the aggregate number of Warrant
Shares purchasable on exercise of this Warrant so presented. If any fraction of
a Warrant Share would, except for the provisions of this Section 12, be issuable
on the exercise of this Warrant, the Company shall pay an amount in cash equal
to the Exercise Price multiplied by such fraction.
13. Notices. Any and all notices or other communications or
deliveries hereunder shall be in writing and shall be deemed given and effective
on the earliest of (i) the date of transmission, if such notice or communication
is delivered via facsimile at the facsimile telephone number specified in this
Section prior to 6:30 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
Section later than 6:30 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
with next day delivery specified thereon, or (iv) upon actual receipt by the
party to whom such notice is required to be given. The addresses for such
communications shall be: (i) if to the Company, to 80-02 Kew Gardens Road, Suite
5000, Kew Gardens, New York 11415, facsimile number (718) 793-2455, attention
Chief Financial Officer, or (ii) if to the Holder, to the Holder at the address
or facsimile number appearing on the Warrant Register or such other address or
facsimile number as the Holder may provide to the Company in accordance with
this Section 13.
-14-
<PAGE>
14. Warrant Agent.
(a) The Company shall serve as warrant agent under this
Warrant. Upon thirty (30) days' notice to the Holder, the Company may appoint a
new warrant agent.
(b) Any corporation into which the Company or any new warrant
agent may be merged or any corporation resulting from any consolidation to which
the Company or any new warrant agent shall be a party or any corporation to
which the Company or any new warrant agent transfers substantially all of its
corporate trust or shareholders services business shall be a successor warrant
agent under this Warrant without any further act. Any such successor warrant
agent shall promptly cause notice of its succession as warrant agent to be
mailed (by first class mail, postage prepaid) to the Holder at the Holder's last
address as shown on the Warrant Register.
15. Miscellaneous.
(a) This Warrant shall be binding on and inure to the benefit
of the parties hereto and their respective successors and permitted assigns.
This Warrant may be amended only in writing signed by the Company and the Holder
and their successors and assigns.
(b) Subject to Section 15(a), above, nothing in this Warrant
shall be construed to give to any person or corporation other than the Company
and the Holder any legal or equitable right, remedy or cause under this Warrant.
This Warrant shall inure to the sole and exclusive benefit of the Company and
the Holder.
(c) This Warrant shall be governed by and construed and
enforced in accordance with the internal laws of the State of New York without
regard to the principles of conflicts of law thereof.
(d) The headings herein are for convenience only, do not
constitute a part of this Warrant and shall not be deemed to limit or affect any
of the provisions hereof.
(e) In case any one or more of the provisions of this Warrant
shall be invalid or unenforceable in any respect, the validity and
enforceability of the remaining terms and provisions of this Warrant shall not
in any way be affected or impaired thereby and the parties will attempt in good
faith to agree upon a valid and enforceable provision which shall be a
commercially reasonable substitute therefor, and upon so agreeing, shall
incorporate such substitute provision in this Warrant.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK,
SIGNATURE PAGE FOLLOWS]
-15-
<PAGE>
IN WITNESS WHEREOF, the Company has caused this Warrant to be duly
executed by its authorized officer as of the date first indicated above.
FIDELITY HOLDINGS, INC.
By: /s/ Doron Cohen
-------------------------------
Name: Doron Cohen
Title: President
-16-
<PAGE>
FORM OF ELECTION TO PURCHASE
(To be executed by the Holder to exercise the right to purchase shares of Common
Stock under the foregoing Warrant)
To Fidelity Holdings, Inc.:
In accordance with the Warrant enclosed with this Form of Election to
Purchase, the undersigned hereby irrevocably elects to purchase _____________
shares of Common Stock ("Common Stock"), $.01 par value per share, of Fidelity
Holdings, Inc. and, if such Holder is not utilizing the cashless exercise
provisions set forth in this Warrant, encloses herewith $________ in cash,
certified or official bank check or checks, which sum represents the aggregate
Exercise Price (as defined in the Warrant) for the number of shares of Common
Stock to which this Form of Election to Purchase relates, together with any
applicable taxes payable by the undersigned pursuant to the Warrant.
The undersigned requests that certificates for the shares of Common Stock
issuable upon this exercise be issued in the name of
PLEASE INSERT SOCIAL SECURITY OR
TAX IDENTIFICATION NUMBER
______________________________________
________________________________________________________________________________
(Please print name and address)
If the number of shares of Common Stock issuable upon this exercise shall
not be all of the shares of Common Stock which the undersigned is entitled to
purchase in accordance with the enclosed Warrant, the undersigned requests that
a New Warrant (as defined in the Warrant) evidencing the right to purchase the
shares of Common Stock not issuable pursuant to the exercise evidenced hereby be
issued in the name of and delivered to:
________________________________________________________________________________
(Please print name and address)
Dated: ______________, ____ Name of Holder:
(Print)_______________________________
(By:)_________________________________
(Name:)
(Title:)
<PAGE>
(Signature must conform in all
respects to name of holder as
specified on the face of the Warrant)
<PAGE>
FORM OF ASSIGNMENT
[To be completed and signed only upon transfer of Warrant]
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers
unto ________________________________ the right represented by the within
Warrant to purchase ____________ shares of Common Stock of Fidelity Holdings,
Inc. to which the within Warrant relates and appoints ________________ attorney
to transfer said right on the books of Fidelity Holdings, Inc. with full power
of substitution in the premises.
Dated:
_________________, ____
_______________________________________
(Signature must conform in all respects to name of
holder as specified on the face of the Warrant)
_______________________________________
Address of Transferee
_______________________________________
_______________________________________
In the presence of:
___________________________
<PAGE>
Exhibit A
(i) "Adjustment Price" means the average of the ten (10) lowest Per Share
Market Values (which need not occur on consecutive Trading Days) during the
forty (40) Trading Days immediately preceding either a (i) Vesting Date or (ii)
Trading Day, as applicable.
(ii) "Applicable Share Number" means (i) with respect to the First Vesting
Date, 34% of the number of shares of Common Stock purchased by the Holder
pursuant to the Purchase Agreement and (ii) with respect to each of the Second
Vesting Date and the Third Vesting Date, 33% of the number of shares of Common
Stock purchased by the Holder pursuant to the Purchase Agreement.
(iii) "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 are authorized or required by law or other governmental
action to close.
(iv) "Change of Control Transaction" means the occurrence of any of (1) an
acquisition after the date hereof by an individual or legal entity or "group"
(as described in Rule 13d-5(b)(1) promulgated under the Exchange Act) of
effective control (whether through legal or beneficial ownership of capital
stock of the Company, by contract or otherwise) of in excess of 33.33% of the
voting securities of the Company, (2) a replacement at one time or over time of
more than one-half of the members of the Board which is not approved by a
majority of those individuals who are members of the Board on the date of
issuance of this Warrant (or by those individuals who are serving as members of
the Board on any date whose nomination to the Board was approved by a majority
of the members of the Board who are members on the date of issuance of this
Warrant), (3) the merger of the Company with or into another entity where the
directors comprising the Board immediately prior to such transaction (or the
first to occur of any series of related transactions) do not comprise a majority
of the members of the board of directors of the surviving company immediately
following such transaction, (4) the merger of the Company with or into another
entity where the shareholders of the Company immediately prior to such
transaction (or the first to occur of any series of related transactions) do not
collectively own in excess of 66.66% of the outstanding voting securities of the
surviving company immediately following such transaction, (5) the sale of all or
substantially all of the assets of the Company in one or a series of related
transactions, (6) the merger by the Company with or into another entity where
the voting securities of the surviving company are not listed or quoted for
trading on the Nasdaq or on a Subsequent Market, or (7) the execution by the
Company of an agreement providing for any of the events set forth above in (1) -
(6).
(v) "Commission" means the Securities and Exchange Commission.
(vi) "Effectiveness Date" means the date the Underlying Shares
Registration Statement is declared effective by the Commission.
(vii) "Effectiveness Required Date" means the 120th day following the date
of issuance of this Warrant.
(viii) "Nasdaq" means the Nasdaq SmallCap Market.
(ix) "Per Share Market Value" means on any particular date (a) the closing
bid price per share of the Common Stock on such date on the Nasdaq or on any
Subsequent Market, or if there is no such price on such date, then the closing
bid price on the Nasdaq or on such Subsequent Market on the date nearest
preceding such date, or (b) if the Common Stock is not then listed or quoted on
<PAGE>
the Nasdaq or a Subsequent Market, the closing bid price for a share of Common
Stock in the over-the-counter market, as reported by the National Quotation
Bureau Incorporated or similar organization or agency succeeding to its
functions of reporting prices) at the close of business on such date, or (c) if
the Common Stock is not then reported by the National Quotation Bureau
Incorporated (or similar organization or agency succeeding to its functions of
reporting prices), then the average of the "Pink Sheet" quotes for the relevant
conversion period, as determined in good faith by the Holder, or (d) if the
Common Stock is not then publicly traded the fair market value of a share of
Common Stock as determined by an appraiser selected in good faith by the Holders
of a majority of the applicable Warrant Shares.
(x) "Purchase Agreement" means the Securities Purchase Agreement dated as
of the date hereof, between the Company and the original Holder hereof.
(xi) "Purchase Price" means $21.00.
(xii) "Securities" shall have the meaning set forth in the Purchase
Agreement.
(xiii) "Subsequent Market" shall mean any of the New York Stock Exchange,
Inc., American Stock Exchange, Inc. or Nasdaq National Market.
(xiv) "Trading Day" means (a) a day on which the Common Stock is traded on
the Nasdaq or on the Subsequent Market on which the Common Stock is then listed
or quoted, as the case may be, or (b) if the Common Stock s not listed on the
Nasdaq or on a Subsequent Market, a day on which the Common Stock is traded in
the over-the-counter market, as reported by the OTC Bulletin Board, or (c) if
the Common Stock is not quoted on the OTC Bulletin Board, a day on which the
Common Stock is quoted in the over-the-counter market as reported by the
National Quotation Bureau Incorporated (or any similar organization or agency
succeeding its functions of reporting prices); provided, however, that in the
event that the Common Stock is not listed or quoted as set forth in (a), (b) and
(c) hereof, then Trading Day shall mean a Business Day.
(xv) "Transaction Documents" shall have the meaning set forth in the
Purchase Agreement.
(xvi) "Underlying Shares Registration Statement" means a registration
statement meeting the requirements set forth in the Registration Rights
Agreement dated as of the date hereof between the Company and the original
Holder hereof (the "Registration Rights Agreement") and covering the resale of
the Registrable Securities by the selling stockholders thereunder.
Exhibit 10.63
Strong River Investments, Inc. and Bay Harbor Investments, Inc.
c/o Cavallo Capital Corp.
630 Fifth Avenue, Suite 2000
New York, NY 10111
Augusta Street LLC
c/o Citco Trustees (Cayman) Limited
Commercial Centre
P.O. Box 31106 SMB
Grand Cayman
Cayman Islands
British West Indies
June 24, 1999
Fidelity Holdings, Inc.
80-02 Kew Gardens Road, Suite 5000
Kew Gardens, New York 11415
Attention: President
Re: Fidelity Holdings, Inc. (the "Company").
Gentlemen:
Reference is made to the Securities Purchase Agreement (the
"Purchase Agreement"), of even date hereof, between the Company and the
undersigned (the "Purchasers"), pursuant to which the Company will issue and
sell to the Purchasers (i) an aggregate of 285,714 shares of Common Stock (the
"Initial Shares"), (ii) Common Stock purchase warrants, each in the form of
Exhibit A to the Purchase Agreement, pursuant to which the holder thereof shall
have the right, under certain circumstances described therein, to acquire shares
of Common Stock upon the terms set forth therein (the "Initial Adjustable
Warrant") and (iii) Common Stock purchase warrants, each in the form of Exhibit
D to the Purchase Agreement, pursuant to which the holder thereof shall have the
right at any time and from time to time thereafter through the fifth anniversary
of the Closing Date to acquire an aggregate of 285,714 shares of Common Stock at
an exercise price per share (subject to adjustment as provided therein) of
$23.00 (the "Initial Closing Warrants" and together
<PAGE>
with the Initial Adjustable Warrants, the "Initial Warrants"), for an aggregate
purchase price of $6,000,000. Capitalized terms used and not otherwise defined
in this letter that are defined in the Purchase Agreement shall have the
meanings set forth in the Purchase Agreement. The Initial Warrants and the
Initial Shares are sometimes collectively referred to herein as the "Initial
Securities."
The Purchasers shall, severally and not jointly, commit, subject to
and upon the terms and conditions hereof, to purchase from the Company, and the
Company shall sell to the Purchasers (A) on the First Additional Closing Date
(as defined herein) (i) [ ](1) shares of Common Stock (the "First Additional
Shares"), (ii) additional Initial Adjustable Warrants (the "First Additional
Adjustable Warrants") and (iii) additional Initial Closing Warrants pursuant to
which the holders thereof shall have the right at any time and from time to time
thereafter through the fifth anniversary of the First Additional Closing (as
defined herein) to acquire an aggregate of [ ](1) shares of Common Stock (the
"First Additional Closing Warrants"), for an aggregate purchase price of
$7,000,000 and (B) on the Second Additional Closing Date (as defined herein) (i)
[ ](2) shares of Common Stock (the "Second Additional Shares"), (ii) additional
Initial Adjustable Warrants (the "Second Additional Adjustable Warrants" and
together with the First Additional Adjustable Warrants, the "Additional
Adjustable Warrants") and (iii) additional Initial Closing Warrants pursuant to
which the holders thereof shall have the right at any time and from time to time
thereafter through the fifth anniversary of the Second Additional Closing (as
defined herein) to acquire an aggregate of [ ](2) shares of Common Stock (the
"Second Additional Closing Warrants" and together with the First Additional
Closing Warrants, the "Additional Closing Warrants"), for an aggregate purchase
price of $7,000,000.
The commitment of the Purchasers set forth in this letter is subject
to the terms, conditions and qualifications set forth below:
1. Form of Additional Adjustable Warrants. The Additional Adjustable
Warrants shall be identical to the Initial Adjustable Warrants except that (A)
for purposes of the First Additional Adjustable Warrants, (i) the Purchase Price
(as defined in the Initial Adjustable Warrants) shall equal 105% of the average
of the Per Share Market Values for the five (5) Trading Days immediately
preceding the First Additional Closing Date (the "First Additional Price"), (ii)
the Floor Price (as defined in the Initial Adjustable Warrants) shall equal 60%
of the First Additional Price, and (iii) the Threshold Price (as defined in the
Initial Adjustable Warrants) shall equal 150% of the
- --------
(1) The number which equals $7,000,000 divided by 105% of the average of the
closing bid prices of the Common Stock for the five (5) Trading Days immediately
preceding the First Additional Closing Date.
(2) The number which equals $7,000,000 divided by 105% of the average of the
closing bid prices of the Common Stock for the five (5) Trading Days immediately
preceding the Second Additional Closing Date.
-2-
<PAGE>
First Additional Price and (B) for purposes of the Second Additional Adjustable
Warrants, (i) the Purchase Price shall equal 105% of the average of the Per
Share Market Values for the five (5) Trading Days immediately preceding the
Second Additional Closing Date (the "Second Additional Price"), (ii) the Floor
Price shall equal 60% of the Second Additional Price and (iii) the Threshold
Price shall equal 150% of the Second Additional Price.
2. Form of Additional Closing Warrants. The Additional Closing
Warrants shall be identical to the Initial Closing Warrants except that the
Exercise Price (as defined in the Initial Closing Warrants) applicable to (i)
the First Additional Closing Warrants shall be equal to 115% of the average of
the closing bid prices of the Common Stock for the five (5) Trading Days
immediately preceding the First Additional Closing Date and (ii) the Second
Additional Closing Warrants shall be equal to 115% of the average of the closing
bid prices of the Common Stock for the five (5) Trading Days immediately
preceding the Second Additional Closing Date.
3. First Additional Documentation. In order to effectuate a purchase
and sale of the First Additional Shares, the First Additional Adjustable
Warrants and the First Additional Closing Warrants (collectively, the "First
Additional Securities"), prior to their issuance, the Company and the Purchasers
shall enter into the following agreements: (a) a securities purchase agreement
identical to the Purchase Agreement, mutatis mutandis (the "First Additional
Purchase Agreement") and (b) a registration rights agreement identical to the
Registration Rights Agreement, mutatis mutandis (the "First Additional
Registration Rights Agreement", and together with the First Additional Purchase
Agreement, the First Additional Adjustable Warrants and the First Additional
Closing Warrants, collectively the "First Additional Transaction Documents").
The Purchasers shall prepare the First Additional Transaction Documents.
4. Second Additional Documentation. In order to effectuate a
purchase and sale of the Second Additional Shares, the Second Additional
Adjustable Warrants and the Second Additional Closing Warrants (collectively,
the "Second Additional Securities"), prior to their issuance, the Company and
the Purchasers shall enter into the following agreements: (a) a securities
purchase agreement identical to the Purchase Agreement, mutatis mutandis (the
"Second Additional Purchase Agreement") and (b) a registration rights agreement
identical to the Registration Rights Agreement, mutatis mutandis (the "Second
Additional Registration Rights Agreement", and together with the Second
Additional Purchase Agreement, the Second Additional Adjustable Warrants and the
Second Additional Closing Warrants, collectively the "Second Additional
Transaction Documents"). The Purchasers shall prepare the Second Additional
Transaction Documents.
5. The First Additional Closing. (i) The Purchasers and the Company
shall each have the right to deliver a written notice to the other (the "First
Additional Financing Notice") requiring such other party to either sell or buy
(severally and not jointly), as the case may be, the First Additional Securities
for an aggregate purchase price of $7,000,000 (the "First Additional Purchase
Price"). The First Additional Financing Notice may be delivered no earlier than
sixty (60) Trading Days following the Expiration Date (as defined in the Initial
Adjustable Warrant) and no later than one hundred (100) Trading Days following
the Expiration Date, provided, that such 60th Trading Day
-3-
<PAGE>
following the Expiration Date (but not the 100th Trading Day following the
Expiration Date) shall be extended for the number of days during which the
prospectus included in the Underlying Shares Registration Statement may not be
used by the Purchasers for the resale of Registrable Securities (as defined in
the Registration Rights Agreement), or as otherwise agreed to by the parties
hereto. At the First Additional Closing (as defined herein) each Purchaser shall
(subject to the terms and conditions herein) purchase such portion of the First
Additional Securities as equals such Purchaser's pro-rata portion of the Initial
Securities issued and sold at the Closing. The closing of the purchase and sale
of the First Additional Securities (the "First Additional Closing") shall take
place at the offices of Robinson Silverman,1290 Avenue of the Americas, New
York, New York 10104, on the fifth (5th) Business Day after the First Additional
Financing Notice is received by the Purchasers or the Company, as the case may
be, or on such other date as otherwise agreed to by the parties hereto;
provided, however, that in no case shall the First Additional Closing take place
unless and until all of the conditions listed in Section 7 of this letter shall
have been satisfied by the Company or waived by the Purchasers. The date of the
First Additional Closing is hereinafter referred to as the "First Additional
Closing Date." Notwithstanding anything to the contrary contained in this
letter, each Purchaser may, prior to the First Additional Closing Date,
designate an Affiliate thereof to acquire all or any portion of the First
Additional Securities.
(ii) At the First Additional Closing, the parties shall
deliver or shall cause to be delivered the following: (a) the Company shall
deliver to (x) each Purchaser or its designated Affiliate, (1) the number of
First Additional Shares equal to such Purchaser's pro rata portion of the
Initial Shares issued and sold at the Closing, registered in the name of such
Purchaser or its designated Affiliate, representing the shares of Common Stock
to be issued and sold to such Purchaser at the First Additional Closing; (2) a
First Additional Adjustable Warrant registered in the name of such Purchaser or
its designated Affiliate, (3) a First Additional Closing Warrant registered in
the name of such Purchaser or its designated Affiliate, entitling the holder
thereof to purchase such number of shares of Common Stock as equals such
Purchaser's pro-rata portion of the shares of Common Stock underlying the
Initial Closing Warrants issued and sold at the Closing, (4) a legal opinion in
form and substance acceptable to the Purchasers, and (5) executed First
Additional Transaction Documents and the Transfer Agent Instructions relating to
the First Additional Securities, and (y) Robinson Silverman, the legal fees and
expenses incurred by the Purchasers to prepare the First Additional Transaction
Documents, which amount shall not exceed $20,000 (and Robinson Silverman shall
only be required to deliver its customary form of invoice), shall be deducted by
the Purchasers from the amount due to the Company for the First Additional
Securities and shall be paid directly to Robinson Silverman and (b) each
Purchaser shall deliver to the Company (1) its pro rata portion of the First
Additional Purchase Price, in United States dollars in immediately available
funds by wire transfer to an account designated in writing by the Company for
such purpose prior to the First Additional Closing Date and (2) the executed
First Additional Transaction Documents.
6. The Second Additional Closing. (i) The Purchasers and the Company
shall each have the right to deliver a written notice to the other (the "Second
Additional Financing Notice") requiring such other party to either sell or buy
(severally and not jointly), as the case may be, the
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<PAGE>
Second Additional Securities for an aggregate purchase price of $7,000,000 (the
"Second Additional Purchase Price"). The Second Additional Financing Notice may
be delivered no earlier than twenty (20) Trading Days following the satisfaction
by the Company or the waiver by the Purchasers of the conditions listed in
Section 8 of this letter. At the Second Additional Closing (as defined herein)
each Purchaser shall (subject to the terms and conditions herein) purchase such
portion of the Second Additional Securities as equals such Purchaser's pro-rata
portion of the Initial Securities issued and sold at the Closing. The closing of
the purchase and sale of the Second Additional Securities (the "Second
Additional Closing") shall take place at the offices of Robinson Silverman,1290
Avenue of the Americas, New York, New York 10104, on the fifth (5th) Business
Day after the Second Additional Financing Notice is received by the Purchasers
or the Company, as the case may be, or on such other date as otherwise agreed to
by the parties hereto. The date of the Second Additional Closing is hereinafter
referred to as the "Second Additional Closing Date." Notwithstanding anything to
the contrary contained in this letter, each Purchaser may, prior to the Second
Additional Closing Date, designate an Affiliate thereof to acquire all or any
portion of the Second Additional Securities.
(ii) At the Second Additional Closing, the parties shall
deliver or shall cause to be delivered the following: (a) the Company shall
deliver to (x) each Purchaser or its designated Affiliate, (1) the number of
Second Additional Shares equal to such Purchaser's pro rata portion of the
Initial Shares issued and sold at the Closing, registered in the name of such
Purchaser or its designated Affiliate, representing the shares of Common Stock
to be issued and sold to such Purchaser at the Second Additional Closing; (2) a
Second Additional Adjustable Warrant registered in the name of such Purchaser or
its designated Affiliate, (3) a Second Additional Closing Warrant registered in
the name of such Purchaser or its designated Affiliate, entitling the holder
thereof to purchase such number of shares of Common Stock as equals such
Purchaser's pro-rata portion of the shares of Common Stock underlying the
Initial Closing Warrants issued and sold at the Closing, (4) a legal opinion in
form and substance acceptable to the Purchasers, and (5) executed Second
Additional Transaction Documents and the Transfer Agent Instructions relating to
the Second Additional Securities, and (y) Robinson Silverman, the legal fees and
expenses incurred by the Purchasers to prepare the Second Additional Transaction
Documents, which amount shall not exceed $20,000 (and Robinson Silverman shall
only be required to deliver its customary form of invoice), shall be deducted by
the Purchasers from the amount due to the Company for the Second Additional
Securities and shall be paid directly to Robinson Silverman and (b) each
Purchaser shall deliver to the Company (1) its pro rata portion of the Second
Additional Purchase Price, in United States dollars in immediately available
funds by wire transfer to an account designated in writing by the Company for
such purpose prior to the Second Additional Closing Date and (2) the executed
Second Additional Transaction Documents.
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<PAGE>
7. Conditions precedent to the First Additional Closing.
Notwithstanding anything to the contrary contained in this letter, the
commitment of a Purchaser to purchase acquire the First Additional Securities is
subject to the satisfaction or waiver by the Purchasers of each of the following
conditions:
(a) Closing of Initial Shares and Initial Warrants. The Closing
shall have occurred;
(b) Accuracy of the Company's Representations and Warranties. The
representations and warranties of the Company contained in the Purchase
Agreement shall be true and correct as of the date when made and as of the First
Additional Closing Date as though made on and as of the First Additional Closing
Date (other than representations and warranties which relate to a specific date
(which shall not include representations and warranties relating to the "date
hereof") which representations and warranties shall be true as of such specific
date), as evidenced by an Officer's certificate attesting to such effect to be
delivered by the Company to the Purchasers at the First Additional Closing;
(c) Performance by the Company. The Company shall have performed,
satisfied and complied with all covenants, agreements and conditions required by
the Transaction Documents to be performed, satisfied or complied with by the
Company between the Closing Date and the First Additional Closing Date and no
Event (as defined in the Registration Rights Agreement ) shall have occurred
which has not been cured to the satisfaction of the Purchasers;
(d) Underlying Shares Registration Statement. The Underlying Shares
Registration Statement shall have been declared effective under the Securities
Act by the Commission and shall have remained effective at all times, not
subject to any actual or threatened stop order or subject to any actual or
threatened suspension at any time prior to the First Additional Closing Date;
(e) No Injunction. Since the Closing Date, no statute, rule,
regulation, executive order, decree, ruling or injunction shall have been
enacted, entered, promulgated, amended, modified or endorsed by any court of
governmental authority of competent jurisdiction or governmental authority,
stock market or trading facility which prohibits the consummation of any of the
transactions contemplated by the First Additional Transaction Documents or makes
impracticable the transactions contemplated thereby;
(f) Adverse Changes. Since the Closing Date, no event or series of
events which reasonably would be expected to have or result in a Material
Adverse Effect shall have occurred;
(g) No Suspensions of Trading in Common Stock. The trading in the
Common Stock shall not have been suspended by the Commission or on the NASDAQ at
any time since the Closing Date;
-6-
<PAGE>
(h) Listing of Common Stock. The Common Stock shall have been at all
times since the Closing Date listed for trading on the NASDAQ;
(i) Shares of Common Stock. The Company shall have duly reserved the
number of shares of Common Stock as required by the First Additional Transaction
Documents to be reserved for issuance upon exercise of the First Additional
Adjustable Warrants and the First Additional Closing Warrants;
(j) Performance of Exercise Obligations. The Company shall have
timely complied with its exercise and delivery requirements under the Initial
Warrants;
(k) Closing Threshold. For the ten (10) Trading Days immediately
preceding the date of the First Additional Financing Notice, the average daily
trading volume of the Common Stock on the NASDAQ shall be at least 15,000 shares
and the average of the Per Share Market Value for such ten (10) Trading Day
period shall be greater than $15.00 (subject to stock splits and similar
adjustments);
(l) Shareholder Approval. No approval of the shareholders of the
Company shall be required under the rules of the Nasdaq Stock Market or such
other exchange or trading facility or which the Common Stock is the traded or
listed for trading in order to issue a minimum of 200% of the shares of Common
Stock issuable upon exercise of the First Additional Adjustable Warrants
(assuming such exercise occurred on the First Additional Closing Date); and
(m) Deliveries pursuant to First Additional Transaction Documents.
At the First Additional Closing, the Company shall deliver the First Additional
Securities and executed First Additional Transaction Documents and Transfer
Agent Instructions relating to the First Additional Securities in the forms
contemplated by this letter.
8. Conditions precedent to the Second Additional Closing.
Notwithstanding anything to the contrary contained in this letter, the
commitment of a Purchaser to purchase acquire the Second Additional Securities
is subject to the satisfaction or waiver by the Purchasers of each of the
following conditions:
(a) Company Milestones. The Company shall have attained milestones
to be determined at the sole option of the Purchasers;
(b) Closing of the First Additional Securities. The First Additional
Closing shall have occurred;
(c) Accuracy of the Company's Representations and Warranties. The
representations and warranties of the Company contained in the Purchase
Agreement shall be true and correct as of the date when made and as of the
Second Additional Closing Date as though made on and as of the Second Additional
Closing Date (other than representations and warranties which
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<PAGE>
relate to a specific date (which shall not include representations and
warranties relating to the "date hereof") which representations and warranties
shall be true as of such specific date), as evidenced by an Officer's
certificate attesting to such effect to be delivered by the Company to the
Purchasers at the Second Additional Closing;
(d) Performance by the Company. The Company shall have performed,
satisfied and complied with all covenants, agreements and conditions required by
the Transaction Documents and the First Additional Transaction Documents to be
performed, satisfied or complied with by the Company between the Closing Date
and the Second Additional Closing Date and no Event shall have occurred which
has not been cured to the satisfaction of the Purchasers;
(e) Second Underlying Shares Registration Statement. The
registration statement filed pursuant to the First Additional Registration
Rights Agreement shall have been declared effective under the Securities Act by
the Commission and shall have remained effective at all times, not subject to
any actual or threatened stop order or subject to any actual or threatened
suspension at any time prior to the Second Additional Closing Date;
(f) No Injunction. Since the Closing Date, no statute, rule,
regulation, executive order, decree, ruling or injunction shall have been
enacted, entered, promulgated, amended, modified or endorsed by any court of
governmental authority of competent jurisdiction or governmental authority,
stock market or trading facility which prohibits the consummation of any of the
transactions contemplated by the Second Additional Transaction Documents or
makes impracticable the transactions contemplated thereby;
(g) Adverse Changes. Since the Closing Date, no event or series of
events which, in the sole opinion of the Purchasers, could have or result in a
Material Adverse Effect shall have occurred;
(h) No Suspensions of Trading in Common Stock. The trading in the
Common Stock shall not have been suspended by the Commission or on the NASDAQ at
any time since the Closing Date;
(i) Listing of Common Stock. The Common Stock shall have been at all
times since the Closing Date listed for trading on the NASDAQ;
(j) Shares of Common Stock. The Company shall have duly reserved the
number of shares of Common Stock as required by the Second Additional
Transaction Documents to be reserved for issuance upon exercise of the Second
Additional Adjustable Warrants and the Second Additional Closing Warrants;
(k) Performance of Exercise Obligations. The Company shall have
timely complied with its exercise and delivery requirements under the First
Additional Adjustable Warrants and the First Additional Closing Warrants;
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<PAGE>
(l) Closing Threshold. For the ten (10) Trading Days immediately
preceding the date of the Second Additional Financing Notice, the average daily
trading volume of the Common Stock on the NASDAQ shall be at least 15,000 shares
and the average of the Per Share Market Value for such ten (10) Trading Day
period shall be greater than $15.00 (subject to stock splits and similar
adjustments);
(m) Shareholder Approval. No approval of the shareholders of the
Company shall be required under the rules of the Nasdaq Stock Market or such
other exchange or trading facility or which the Common Stock is the traded or
listed for trading in order to issue a minimum of 200% of the shares of Common
Stock issuable upon exercise of the Second Additional Adjustable Warrants
(assuming such exercise occurred on the Second Additional Closing Date); and
(n) Deliveries pursuant to Second Additional Transaction Documents.
At the Second Additional Closing, the Company shall deliver the Second
Additional Securities and executed Second Additional Transaction Documents and
Transfer Agent Instructions relating to the Second Additional Securities in the
forms contemplated by this letter.
9. 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 letter or out of the either
the First Additional Transaction Documents or the Second Additional Transaction
Documents, if any, and it shall not be necessary for any other Purchaser to be
joined as an additional party in any proceeding for such purpose.
10. Governing Law. This letter 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.
11. Execution. This letter 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.
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<PAGE>
Please indicate your agreement with the foregoing by executing a
countersigned copy of this letter and returning the same to our attention,
whereupon effective immediately thereafter this letter shall become a legally
valid and binding agreement between the Purchasers and the Company.
We look forward to our continuing relationship.
Sincerely,
Strong River Investments, Inc.
By: /s/ Ken Henderson
--------------------------------------
Name: Ken Henderson
Title: Attorney-in-Fact
Bay Harbor Investments, Inc.
By: /s/ Ken Henderson
--------------------------------------
Name: Ken Henderson
Title: Attorney-in-Fact
Augusta Street LLC
By: Citco Trustees (Cayman) Limited
By: /s/ Lana Farrington
--------------------------------------
Name: Lana Farington
Title: Attorney-in-Fact
Agreed and accepted
June 24, 1999
Fidelity Holdings, Inc.
By: /s/ Doron Cohen
----------------------------
Name: Doron Cohen
Title: President
-10-
Exhibit 10.64
================================================================================
SECURITIES PURCHASE AGREEMENT
Between
FIDELITY HOLDINGS, INC.
and
THE INVESTORS SIGNATORY HERETO
Dated as of June 24, 1999
================================================================================
<PAGE>
SECURITIES PURCHASE AGREEMENT (this "Agreement"), dated as of June 24,
1999, between Fidelity Holdings, Inc., a Nevada corporation (the "Company"), and
the investors signatory hereto (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, $.01 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, severally and not jointly, shall purchase 285,714 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 Date, 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 to 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
set forth therein (collectively, the "Adjustable Warrants"), (3) a Common Stock
purchase warrant, in the form of Exhibit D, registered in the name of such
Purchaser, pursuant to which such Purchaser shall have the right at any time and
from time to time thereafter through the fifth anniversary of the Closing Date
to acquire the number of shares of Common Stock indicated below such Purchaser's
name on the signature page to this Agreement at an exercise price per share
(subject to adjustment as provided therein) of $23.00 (collectively, the
"Closing Warrants" and together with the Adjustable Warrants, the "Warrants"),
(4) the legal opinion of Littman Krooks Roth & Ball P.C., outside counsel to the
Company, substantially in the form of Exhibit C, and (5) all other documents,
instruments and
<PAGE>
writings required to have been delivered at or prior to the Closing by the
Company pursuant to this Agreement, including (i) an executed Registration
Rights Agreement, dated the date hereof, among the Company and the Purchasers,
in the form of Exhibit B (the "Registration Rights Agreement"), (ii) the
Irrevocable Transfer Agent Instructions, in the form of Exhibit E, delivered to
and acknowledged by the Company's transfer agent (the "Transfer Agent
Instructions") and (iii) an executed Letter Agreement, dated the date hereof,
among the Company and the Purchasers, in the form of Exhibit F (the "Letter
Agreement"); and (B) each Purchaser shall deliver (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 prior to the Closing Date in writing by the Company for such
purpose, 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 and Letter
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.
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 Nevada, 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 Letter
Agreement or the Warrants (collectively, the "Transaction Documents"), (y) be
reasonably expected to 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
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<PAGE>
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 corporate action
on the part of the Company and no further corporate action is required by the
Company other than the obtaining of the Required Approvals (as hereinafter
defined). 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), 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. A "Person"
means an individual or corporation, partnership, trust, incorporated or
unincorporated association, joint venture, limited liability company, joint
stock company, government (or an agency or subdivision thereof) or other entity
of any kind.
(d) Issuance of the Securities. The Securities are duly authorized
and, when issued and paid for in accordance with the terms hereof 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 shares of Common Stock that is not less than the sum of (i) 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%
-3-
<PAGE>
of the average Per Share Market Value on the Trading Day immediately preceding
the Closing Date and (ii) 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) and (ii), the "Initial Minimum"). All such
authorized shares of Common Stock shall be duly reserved for issuance to the
holders of the Shares and the Warrants. The shares of Common Stock issuable upon
exercise of the Warrants are referred to herein as the "Underlying Shares." The
Shares, the 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, indenture or instrument (evidencing a Company or
Subsidiary debt or otherwise) to which the Company or any Subsidiary is a party
or by which any property or asset of the Company or any Subsidiary is bound or
affected, or (iii) result in a violation of any law, rule, regulation, order,
judgment, injunction, decree or other restriction of any court or governmental
authority to which the Company 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,
reasonably be expected to have or result in a Material Adverse Effect. The
business of the Company is not being conducted in violation of any law,
ordinance or regulation of any governmental authority, except for violations
which, individually or in the aggregate, could not reasonably be expected to
have or result in a Material Adverse Effect.
(f) Filings, Consents and Approvals. Neither the Company nor any
Subsidiary is required to obtain any consent, waiver, authorization or order of,
give any notice to, or make 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 SmallCap Market ("NASDAQ")
for the listing of the Shares and the Underlying Shares with the NASDAQ (and
with any other national securities exchange of market on which the Common Stock
is then listed), (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 (collectively,
the "Required Approvals"). The Company has either (i) filed with the NASDAQ an
additional shares listing application for the listing of the Underlying Shares
for trading on the NASDAQ for such number of shares of Common Stock as
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would be issuable upon exercise of the Warrants assuming the Per Share Market
Value on the date of exercise of the Warrants equaled 50% of the Per Share
Market Value on the date of the filing of such application or (ii) received a
telephonic waiver from the NASDAQ from the obligation to file such application.
(g) Litigation; Proceedings. Except as set forth 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, be
reasonably expected to have or result in a Material Adverse Effect.
(h) No Default or Violation. Neither the Company nor any Subsidiary
(i) except as set forth in Schedule 2.1(h), is in default under or in violation
of (and no event has occurred which has not been waived which, with notice or
lapse of time or both, would result in a default by the Company or any
Subsidiary under), nor has the Company or any Subsidiary received notice of a
claim that it is in default under or that it is in violation of, any indenture,
loan or credit agreement or any other agreement or instrument to which it is a
party or by which it or any of its properties is bound, (ii) is in violation of
any order of any court, arbitrator or governmental body, or (iii) is in
violation of any statute, rule or regulation of any governmental authority,
except as could not individually or in the aggregate, reasonably be expected to
have or result in a Material Adverse Effect.
(i) Private Offering. Assuming the accuracy of the representations
and warranties of the Purchasers set forth in Sections 2.2(b)-(g), the offer,
issuance and sale of the Securities to the Purchasers as contemplated hereby are
exempt from the registration requirements of the Securities Act of 1933, as
amended (the "Securities Act"). Neither the Company nor any Person acting on its
behalf has taken or, to the knowledge of the Company, is 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 Exchange Act, including pursuant to
Section 13(a) or 15(d) thereof, 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
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fact required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading. All material agreements to which the Company is a party or to which
the property or assets of the Company are subject have been filed as exhibits to
the SEC Reports to the extent required. The financial statements of the Company
included in the SEC Reports comply in all material respects with applicable
accounting requirements and the rules and regulations of the Commission with
respect thereto as in effect at the time of filing. Such financial statements
have been prepared in accordance with generally accepted accounting principles
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. Except as set forth on Schedule 2.1(j) or except as specifically
disclosed in the SEC Reports, since April 16, 1999 (a) there has been no event,
occurrence or development that has had or that could reasonably be expected to
have or result in a Material Adverse Effect, (b) the Company has not incurred
any liabilities (contingent or otherwise) other than (x) liabilities incurred in
the ordinary course of business consistent with past practice and (y)
liabilities not required to be reflected in the Company's financial statements
pursuant to GAAP or required to be disclosed in filings made with the
Commission, (c) the Company has not altered its method of accounting or the
identity of its auditors and (d) the Company has not declared or made any
payment or distribution of cash or other property to its stockholders or
officers or directors (other than in compliance with existing Company stock 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.
The Company last filed audited financial statements with the Commission on April
16, 1999, and has not received any comments from the Commission in respect
thereof.
(k) Investment Company. The Company is not, and is not an Affiliate
(as defined in Rule 405 under the Securities Act) of, an "investment company"
within the meaning of the Investment Company Act of 1940, as amended.
(l) Certain Fees. Except for certain fees payable by the Company to
International Securities Corporation, and its Affiliates, no fees or commissions
will be payable by the Company to any broker, financial advisor or consultant,
finder, placement agent, investment banker, or bank or other Person with respect
to the transactions contemplated by this Agreement. The Purchasers shall have no
obligation with respect to any such fees or with respect to any claims made by
or on behalf of other Persons (including, without limitation, the Persons
specified in Section 2.1(r)) 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;
provided, that, if it shall be shown that a Purchaser is responsible for
Purchaser Fees (as hereinafter defined) in accordance with Section 2.2(i), then
the Company will have no indemnity obligation to such Purchaser or its
Affiliates, employees, directors or agents under this Section with
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respect to claims made by such Person for such Purchaser Fees and the provisions
of Section 2.2(i) shall apply thereto.
(m) Form S-3 Eligibility. The Company is eligible to register
securities for resale with the Commission under Form S-3 promulgated under the
Securities Act.
(n) Listing and Maintenance Requirements Compliance. The Company has
not, in the two years preceding the date hereof, received notice (written or
oral) from the NASDAQ or any other stock exchange, market or trading facility on
which the Common Stock is or has been listed (or on which it has been quoted) to
the effect that the Company is not in compliance with the listing or maintenance
requirements of such exchange or market. The Company is currently in compliance
with all such maintenance requirements and no fact or circumstances currently
exist which could reasonably be expected to result in noncompliance with such
maintenance requirements in the foreseeable future.
(o) Patents and Trademarks. The Company 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, and which the
failure to so have would have a Material Adverse Effect. To the best knowledge
of the Company all such Intellectual Property Rights are enforceable and there
is no existing infringement by another Person of any of the Intellectual
Property Rights.
(p) 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, except for the
transactions contemplated by this Agreement, the termination of the Company's
arrangement with Zanett Securities Corporation and the hiring of Coleman and
Company Securities, Inc. to provide the
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Company with investment banking services, it has not 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 in all material respects and do
not contain any untrue statement of a material fact or omit to state any
material fact necessary in order to make the statements made therein, in light
of the circumstances under which they were made, not misleading.
2.2 Representations and Warranties of the Purchasers. Each Purchaser
hereby, for itself and for no other Purchaser, represents and warrants to the
Company as follows:
(a) Organization; Authority. Such Purchaser is duly organized,
validly existing and in good standing under the laws of the jurisdiction of its
organization with the requisite corporate 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 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. By
executing this Agreement, such Purchaser further represents that such Purchaser
does not presently have any contract, undertaking, agreement or arrangement with
any Person to sell or transfer to such Person or to any third person, with
respect to any of the Securities.
(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) under the Securities Act.
(d) Experience of 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. Such Purchaser is not relying
on the Company or any of its employees or agents with respect to the legal, tax,
economic and related
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considerations of an investment in the Securities. Such Purchaser is
knowledgeable about investment considerations in development-stage companies.
(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. Such
Purchaser's overall commitment to investments which are not readily marketable
is not excessive in view of its net worth and financial circumstances and the
purchase of the Securities will not cause such commitment to become excessive.
(f) Access to Information. Such Purchaser acknowledges receipt of
the Disclosure Materials and further acknowledges that it has reviewed the
Disclosure Materials and has been afforded (i) the opportunity to ask such
questions as it has deemed necessary of, and to receive answers from,
representatives of the Company concerning the terms and conditions of the
offering of the Securities and the merits and risks of investing in the
Securities; (ii) access to information about the Company and the Company's
financial condition, results of operations, business, proper ties, management
and prospects sufficient to enable it to evaluate its investment; and (iii) the
opportunity to obtain such additional information which the Company possesses or
can acquire without unreasonable effort or expense that is necessary to make an
informed investment decision with respect to the investment and to verify the
accuracy and completeness of the information contained in the Disclosure
Materials. Neither such inquiries nor any other investigation conducted by or on
behalf of such Purchaser or its representatives or counsel shall modify, amend
or affect such Purchaser's right to rely on the truth, accuracy and completeness
of the Disclosure Materials and the Company's representations and warranties
contained in the Transaction Documents.
(g) General Solicitation. Such Purchaser is not purchasing the
Securities as a result of or subsequent to any advertisement, article, notice or
other communication regarding the Securities published in any newspaper,
magazine or similar media or broadcast over television or radio or presented at
any seminar 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. Such Purchaser understands that the Securities are "restricted
securities" under applicable U.S. federal and state securities laws and that,
pursuant to these laws, such Purchaser must hold the Securities indefinitely
unless they are registered with the and qualified by applicable state
authorities, or an exemption from such registration and qualification
requirements is available. Such Purchaser acknowledges that the Company has no
obligation to register or qualify the Securities for resale except as set forth
in the Registration Rights Agreement. Such Purchaser further acknowledges that
if an exemption from registration or qualification is available, it may be
conditioned on various requirements including, but not limited to, the time and
manner of sale, the holding period for the Securities, and on requirements
relating to the Company which are outside
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of such Purchaser's control, and which the Company may be under no obligation
and may not be able to satisfy.
(i) Certain Fees. Such Purchaser has not entered into (a) any
written agreement or written understanding pursuant to which such Purchaser has
agreed, directly or indirectly, to pay fees or commissions to any placement
agent, finder, investment banker or bank or broker with respect to the
transactions contemplated by this Agreement or (b) any agreement or
understanding pursuant to which it agreed, directly or indirectly, to pay fees
or commissions to any placement agent, finder, investment banker or bank or
broker, in connection with the introduction of another Purchaser to the
transactions contemplated by this Agreement (collectively, "Purchaser Fees").
The Company shall not be responsible for the payment of any Purchaser Fees, and
such Purchaser shall indemnify and hold harmless the Company, its 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
Purchaser Fees.
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 of such transferred Securities 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 (including, without limitation, that the provisions of Section
2.2 hereof shall apply to such transferee) and shall have the rights of the
Purchaser under this Agreement and the Registration Rights Agreement.
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(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.
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 while an Underlying
Shares Registration Statement is effective under the Securities Act and provided
that the conditions set forth in the Transfer Agent Instructions have been
satisfied 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, in the event 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 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 and that
the conditions set forth in the Transfer Agent Instructions have been satisfied.
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 pursuant to the terms
thereof, 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, subject to the
limitations set forth in the Warrants, 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 Section 13(a) or 15(d) of the
Exchange Act. So long as the Purchasers own Securities, if the Company is not
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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. 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 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 45 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 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 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 105th day after
request by the holders of the 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 (subject to any waiver
received from NASDAQ) and such other national securities exchange or market or
trading or quotation facility on which the Common Stock is then listed for
trading but in any event no later than two (2) Trading Days following the
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Closing Date, 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 or on any 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. If the number of Underlying
Shares issuable upon exercise of the then unexercised portion of the 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.
(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 either 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 Exercise Obligations of the Company. The Company shall honor exercises
of the Warrants and shall deliver Underlying Shares in accordance with the
respective terms, conditions and time periods set forth in the Warrants.
3.10 Right of First Refusal; Subsequent Registrations. (a) The Company
shall not, directly or indirectly (including through one or more Affiliates,
other than principal stockholders of the Company), without the prior written
consent of the Purchasers, issue or offer to issue shares of Common Stock or
rights, warrants, options or other securities or debt that are convertible into
or exchangeable for shares of Common Stock in a transaction intended to be
exempt or not subject to registration under the Securities Act ("Common Stock
Equivalents"), at a price per share less than the then market price of the
Common Stock at the time of the original issuance of such Common Stock or Common
Stock Equivalent (if the holder of the Common Stock or Common Stock
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Equivalent so issued shall, at any time, whether by operation of purchase price
adjustments, reset provisions, floating conversion, exercise or exchange prices
or otherwise, or due to warrants, options or rights issued in connection with
such issuance, receive or be entitled to acquire shares of Common Stock at a
price per share less than the market price of the Common Stock measured at the
date of the original issuance of such originally issued Common Stock or Common
Stock Equivalent, then such issuance shall be deemed to have occurred for less
than the then such market value and such issuance shall be subject to the right
of first refusal set forth in this Section)(any such issuance, a "Subsequent
Placement") for a period from the Closing Date hereof to the 180th day following
the first date that the Underlying Shares Registration Statement is first
declared effective by the Commission, except (i) the grant or exercise of any
stock or options which may hereafter be granted or exercised under any employee
benefit plan of the Company now existing or to be implemented in the future, or
upon grant or exercise of any stock or options to or by an officer, director,
employee, agent, consultant whether or not under a plan, so long as the issuance
of such stock or options is approved by a majority of the non-employee members
of the Board of Directors of the Company or a majority of the members of a
committee of non-employee directors established for such purpose, (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) but not with respect to any amendment
or modification thereof, (iii) shares of Common Stock issuable upon exercise of
the Warrants in accordance with the terms thereof, (iv) securities issued in
connection with an underwritten public offering of the Company; (v) securities
issued in connection with any merger, acquisition or consolidation, or purchase
of assets or business from another person, so long as the Company is the
surviving corporation and that such transaction is not primarily for the purpose
of raising capital, and (vi) in connection with the issuance of Common Stock,
not in excess of 1% of the Common Stock issued and outstanding on the Closing
Date, upon the exercise of warrants or other rights granted to any bank other
commercial financing institution, 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 (which, by its execution and
delivery of this Agreement each Purchaser hereby agrees to keep confidential),
and attached to which shall be a term sheet or similar document relating thereto
and (B) the Purchasers shall not have notified the Company by 5:30 p.m. (New
York City time) on the tenth (10th) Trading Day after its receipt of the
Subsequent Placement Notice of its willingness to cause the Purchasers to
provide (or to cause their sole designee to provide), subject to completion of
mutually acceptable documentation (which completion of documentation shall be
expedited in good faith by the parties thereto) , 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 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
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<PAGE>
thirty (30) Business Days after the date the Purchasers notify the Company of
their unwillingness to provide such financing. If the Purchasers shall indicate
a willingness to provide financing in excess of the amount set forth in the
Subsequent Placement Notice, then each Purchaser shall be entitled to provide
financing pursuant to such Subsequent Placement Notice up to an amount equal to
such Purchaser's pro rata portion of the aggregate amount of Securities
purchased by the Purchasers under this Agreement, but the Company shall not be
required to accept financing from the Purchasers in an amount in excess of the
amount set forth in the Subsequent Placement Notice. Notwithstanding anything
herein to the contrary, the rights under this Section 3.10(a) shall cease to be
available with respect to any Purchaser on the date, if any, on which such
Purchaser ceases to own a minimum of 20% of the sum of (i) the Shares purchased
by it, (ii) the shares of Common Stock then issuable upon exercise of the
Closing Warrant issued to it and (iii) the shares of Common Stock which have
then vested pursuant to the Adjustment Warrant issued to it.
(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 set forth in to
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) - (vi) of Section 3.10(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) except in the case of a bona fide
underwritten public offering of the Company's securities, file a registration
statement for the issuance or resale of any securities of the Company, provided,
that any adjustment relating to the Warrants shall apply in the case of a bona
fide underwritten public offering of the Company's securities. Any Trading Days
that a Purchaser is unable to sell Underlying Shares under the Underlying Shares
Registration Statement shall be added to such 90 Trading Day period for the
purposes of (i) and (ii) above.
3.11 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
Current Report on Form 8-K 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. No such
filing or disclosure may be made that mentions the Purchasers by name without
the prior consent of the Purchasers. Such filings shall be subject to Section
4.11 hereof.
3.12 Transfer of Intellectual Property Rights. Except as set forth in
Schedule 3.12 and 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
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Property Rights (if renewable and it would otherwise lapse if not renewed),
without the prior written consent of the Purchasers.
3.13 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, to redeem any Company equity
or equity-equivalent securities or to settle any outstanding litigation, except
as set forth in Schedule 3.13. 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 Limitations on Short Sales. Each Purchaser agrees that it will not
enter into any Short Sales (as hereinafter defined) from the period commencing
on the Closing Date and ending on the Third Vesting Date (as defined in the
Adjustable Warrants). For purposes of this Section 3.14, a "Short Sale" by a
Purchaser shall mean a sale of Common Stock by such Purchaser that is marked as
a short sale and that is made at a time when there is no equivalent offsetting
long position in Common Stock held by the Purchaser. For purposes of determining
whether there is an equivalent offsetting long position in Common Stock held by
a Purchaser, Warrant Shares that have not yet been issued on exercise of the
Warrants or vested pursuant to such Warrants shall be deemed to be held long by
such Purchaser and the number of Warrant Shares then held by such Purchaser on
any particular date of computation shall be equal to the sum of (i) the number
of Warrant Shares then issuable upon exercise of the Closing Warrant held by
such Purchaser and (ii) the number of Warrant Shares issuable pursuant to the
Adjustable Warrant held by such Purchaser on the next Vesting Date (as defined
in the Adjustable Warrants) calculated as if such Vesting Date occurred on the
date of computation (whether or not then a Vesting Date) (e.g. using the lowest
ten (10) Per Share Market Values during the forty (40) Trading Days immediately
preceding such computation date), provided, that on and after the Third Vesting
Date, such number shall equal the number of Warrant Shares that have vested on
such Third Vesting Date. Each Purchaser agrees that it will not, directly or
indirectly, individually or through any Affiliate, engage in any transaction
which would be in violation of Regulation M promulgated under the Exchange Act
with respect to transactions in the Underlying Shares.
3.15 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) incurred in
connection therewith, as such expenses are incurred. In addition, other than
with respect to any matter in which a Purchaser is a named party, the Company
will pay such Purchaser the charges, as reasonably determined by such Purchaser,
for the time of any officers or employees of such Purchaser devoted to appearing
and preparing to appear as witnesses, assisting in preparation for hearings,
trials or pretrial matters, or otherwise with respect to inquiries, hearings,
trials, and other proceedings relating to the subject matter of this Agreement.
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
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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.
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. 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, and the Transfer Agent
Instructions 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:
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If to the Company: Fidelity Holdings, Inc.
80-02 Kew Gardens Road, Suite 5000
Kew Gardens, New York 11415
Facsimile No.: (718) 793-2455
Attn: Doron Cohen, President
With copies to: Littman Krooks Roth & Ball P.C.
655 Third Avenue
New York, New York 10017-5617
Attn: Mitchell C. Littman, Esq. and
James J. Quinlan, Esq.
Facsimile No.: (212) 490-2990
If to a Purchaser: To the address set forth under such Purchaser's name
on the signature pages hereto.
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 Nevada 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 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
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<PAGE>
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 Publicity. The Company and the Purchasers shall consult with
each other in issuing any press releases or otherwise making public statements
or filings and other communications with the Commission or any regulatory agency
or stock market or trading facility with respect to the transactions
contemplated hereby and neither party shall issue any such press release or
otherwise make any such public statement, filings or other communications
without the prior written consent of the other, which consent shall not be
unreasonably withheld or delayed, except that no prior consent shall be required
if such disclosure is required by law, in which such case the disclosing party
shall provide the other party with prior notice of such public statement, filing
or other communication. Notwithstanding the foregoing, the Company shall not
publicly disclose the name of 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.
4.12 Severability. In case any one or more of the provisions of this
Agreement shall be invalid or unenforceable in any respect, the validity and
enforceability of the remaining terms and provisions of this Agreement shall not
in any way be affecting or impaired thereby and the parties will attempt to
agree upon a valid and enforceable provision which shall be a reasonable
substitute therefor, and upon so agreeing, shall incorporate such substitute
provision in this Agreement.
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<PAGE>
4.13 Remedies. In addition to being entitled to exercise all rights
provided herein or granted by law, including recovery of damages, the Purchasers
will be entitled to specific 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.
4.14 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 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]
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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.
FIDELITY HOLDINGS, INC.
By: /s/ Doron Cohen
----------------------------------
Name: Doron Cohen
Title: President
STRONG RIVER INVESTMENTS, INC.
By: /s/ Ken Henderson
----------------------------------
Name: Ken Henderson
Title: Attorney-in-Fact
Purchase Price for Shares
to be acquired at Closing: $2,000,000
Shares to be acquired
at Closing: 95,238
Warrant Shares to be acquired
at Closing: 95,238
Address for Notice:
Strong River Investments, Inc.
c/o Cavallo Capital Corp.
630 Fifth Avenue, Suite 2000
New York, NY 10111
Facsimile No.: (212) 332-3256
Attn: Avi Vigder
With copies to:
Robinson Silverman Pearce Aronsohn & Berman LLP
1290 Avenue of the Americas
New York, NY 10104
Facsimile No.: (212) 541-4630
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<PAGE>
Attn: Kenneth L. Henderson, Esq. and
Eric L. Cohen. Esq.
BAY HARBOR INVESTMENTS, INC.
By: /s/ Ken Henderson
----------------------------------
Name: Ken Henderson
Title: Attorney-in-Fact
Purchase Price for Shares
to be acquired at Closing: $2,000,000
Shares to be acquired
at Closing: 95,238
Warrant Shares to be acquired
at Closing: 95,238
Address for Notice:
Bay Harbor Investments, Inc.
c/o Cavallo Capital Corp.
630 Fifth Avenue, Suite 2000
New York, NY 10111
Facsimile No.: (212) 332-3256
Attn: Avi Vigder
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.
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<PAGE>
AUGUSTA STREET LLC
By: Citco Trustees (Cayman) Limited
By: Lana Farrington
----------------------------------
Name: Lana Farrington
Title: Attorney-in-Fact
Purchase Price for Shares
to be acquired at Closing: $2,000,000
Shares to be acquired
at Closing: 95,238
Warrant Shares to be acquired
at Closing: 95,238
Address for Notice:
Augusta Street LLC
c/o Citco Trustees (Cayman) Limited
Commercial Centre
P.O. Box 31106 SMB
Grand Cayman
Cayman Islands
British West Indies
Facsimile No.: (345) 945-7566
With copies to:
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<PAGE>
Krieger & Prager, Esqs.
319 Fifth Avenue
New York, NY 10016
Facsimile No.: (212) 213-2077
Attn: Samuel L. Krieger, Esq
-and-
Southridge Capital Management LLC
Executive Pavillon
90 Grove Street
Ridgefield, CT 06877
Facsimile No.: (203) 431-8301
Attn: Henry Sargent, Esq.
-24-
Exhibit 10.65
REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement (this "Agreement") is made and
entered into as of June 24, 1999, among Fidelity Holdings, Inc., a Nevada
corporation (the "Company"), and the investors signatory hereto on the date of
this Agreement (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").
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.
<PAGE>
"Commission" means the Securities and Exchange Commission.
"Common Stock" means the Company's common stock, $.01 par value per
share.
"Effectiveness Date" means the 90th day following the Closing Date,
except that with respect to any Registration Statement to be filed pursuant to
Section 2(f) hereof, means the ninetieth (90) day following a Vesting Date,
provided, that if (i) the Commission fails to respond with either comments
(whether or not such comments request the filing of additional material), a
request for additional information, a notice of no-review, or a notice of no
further review (whether, in any case, orally or in writing) to the filing by the
Company with the Commission of a Registration Statement or an amendment thereto
within 20 days of the date that such Registration Statement or amendment thereto
was filed (the "Response Period"), and (ii) the Company shall have during such
entire period used its best efforts to obtain such comments, requests or
notifications, then, for each day after the Response Period during which such
failure by the Commission continues and during which the Company shall have
continued to have used its best efforts to obtain such comments, requests or
notifications, one day will be added to the definition of "Effectiveness Date"
for all purposes of this Agreement, provided, however, that for purposes of
measuring the period of initial response to the Company's filing of the initial
Registration Statement pursuant to the terms hereof, the Response Period shall
be 30 days.
"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 30th day following the Closing Date, except
that with respect to any Registration Statement to be filed pursuant to Section
2(f) hereof, means the fifteenth (15) day following a Vesting 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.
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<PAGE>
"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 Statements" means the registration statements and any
additional registration statements contemplated by Sections 2(a) and 2(f),
including (in each case) the Prospectus, amendments and supplements to such
registration statements or Prospectus, including pre- and post-effective
amendments, all exhibits thereto, and all material incorporated by reference or
deemed to be incorporated by reference in such registration statements.
"Rule 144" means Rule 144 promulgated by the Commission pursuant to
the Securities Act, as such Rule may be amended from time to time, or any rule
or regulation hereafter adopted by the Commission to replace such Rule.
"Rule 158" means Rule 158 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.
"Securities Act" means the Securities Act of 1933, as amended.
"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.
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<PAGE>
"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 Date" shall have the meaning set forth in the Adjustable
Warrants.
"Warrants" means the Closing Warrants and the Adjustable Warrants.
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<PAGE>
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 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, however, that the Company shall not be deemed to have used
its best efforts to keep the Registration Statement effective during the
Effectiveness Period if it voluntarily takes any action that would result in the
Holder 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 Warrant is
determined in part upon the Per Share Market Value (as defined in the Adjustable
Warrant) on a Vesting Date (as defined in the Adjustable Warrant), 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 Warrant, assuming, for
the purposes of this subsection (i), that the Adjustment Price (as defined in
the Adjustable Warrant) on each Vesting Date is 50% of the Per Share Market
Value for the Trading Day (as defined in the Adjustable Warrant) immediately
preceding the Closing Date, (ii) the number of shares issuable upon exercise in
full of the Closing Warrant and (iii) the 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.
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(d) If any of the Registrable Securities are to be sold in an
Underwritten Offering, the investment banker in interest that will administer
the offering will be selected by the Company upon consultation with the Holders
of a majority of the Registrable Securities. 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 covering the
Registrable Securities to be covered thereby as set forth herein 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 for acceleration in accordance with Rule 12d1-2 promulgated
under the Exchange Act within five (5) Business Days of the date that the
Company is notified (orally or in writing, whichever is earlier) by the
Commission that a Registration Statement will not be "reviewed" or is not
subject to further review, or (iii) the initial Registration Statement filed
hereunder is not declared effective by the Commission on or before the thirtieth
(30) day following 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 for a period of more than
three (3) aggregate days 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, (vi) the Company
shall become ineligible to register securities for resale with the Commission
under Form S-3, or (vii) 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 (vi) the date on which such Event occurs, or for purposes of
clause (ii) the date on which such five (5) Business Day period is exceeded, or
for purposes of clause (v) the date on which such ten (10) day period is
exceeded, or for purposes of clause (iv) the date on which such three (3) day
period is exceeded, or for purposes of clause (vii) 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 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 1% (the "Percentage") of the purchase
price paid by such Holder pursuant to the Purchase Agreement, provided, that (i)
after the Event Date, the Percentage shall equal 3% and (ii) in the case of an
Event under clause 2(e)(iii), on and after the ninetieth (90th) day following
the Effectiveness Date, the Percentage shall equal 5%. The payments to which the
Holders shall be entitled pursuant to this Section are referred to herein as
"Registration Delay Payments."
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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. Notwithstanding anything to the contrary, the Company shall
not be required to make any Registration Delay Payments if an Event described
above arises solely as a result of (i) comments by the Commission relating to or
directed at any of the Holders in connection with a Registration Statement and
no other comments relating to the Registration Statement remain outstanding or
(ii) the fact that the Commission refuses to accept or review a Registration
Statement because shares of Common Stock issuable upon exercise of the
Adjustment Warrants are being included in such Registration Statement unless the
Company refuses to permit all other Registrable Securities to immediately go
effective in such initial Registration Statement.
(f) Notwithstanding anything to the contrary, if the Commission
refuses to accept or review a Registration Statement because shares of Common
Stock issuable upon exercise of the Adjustment Warrants are being included in
such Registration Statement, then, with respect to each Vesting Date, the
Company shall, within fifteen (15) days of a Vesting Date, file an additional
Registration Statement covering the Registrable Securities then issuable upon
exercise of the Adjustable Warrants and use its best efforts to cause such
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
ninetieth (90th) day following the applicable Vesting Date.
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, the Company shall, (i) furnish to the Holders,
their Special Counsel and any managing underwriters, copies of all such
documents proposed to be filed, which documents will be subject to the review of
such Holders, their Special Counsel and such managing underwriters, and (ii)
cause its officers and directors, counsel and independent certified public
accountants to respond to such inquiries as shall be necessary, in the
reasonable opinion of respective counsel to such Holders and such underwriters,
to conduct a reasonable investigation within the meaning of the Securities Act.
The Company shall not file the Registration Statement or any such Prospectus or
any amendments or
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supplements thereto to which the Holders of a majority of the Registrable
Securities, their Special Counsel, or any managing underwriters, shall
reasonably object on a timely basis.
(b) (i) Prepare and file with the Commission such amendments,
including post-effective amendments, to the Registration Statement 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 (or any
similar provisions then in force) promulgated under the Securities Act; (iii)
use its best effort to respond as quickly as possible, and, in case the
obtainment of information requested by the Commission which is within the
control of the Company, no later than ten (10) Business Days of receipt thereof,
to all comments received from the Commission with respect to the Registration
Statement or any amendment thereto and as promptly as 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 30
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
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 three (3) 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
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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, which the Holders shall keep confidential); 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 information as such
managing underwriters and such Holders reasonably request should be included
therein, and (ii) make all required filings of such Prospectus supplement or
such post-effective amendment as soon as practicable after the Company has
received notification of the matters to be incorporated in such Prospectus
supplement or post-effective amendment; provided, however, that the Company
shall not be required to take any action pursuant to this Section 3(f) that
would, in the opinion of counsel for the Company or the Board of Directors of
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
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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
commercially reasonable 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 or make any change in its charter or by-laws, which in each case the
Board of Directors of the Company determines to be contrary to the best
interests of the Company and its stockholders.
(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 applicable law, of all restrictive legends, and to enable such
Registrable Securities to be in such denominations and registered in such names
as any such managing underwriters or Holders may request.
(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.
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(l) Use its best efforts to cause all Registrable Securities
relating to such Registration Statement to be listed on the Nasdaq SmallCap
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) In the event of an Underwritten Offering, enter into such
agreements (including an underwriting agreement in form, scope and substance as
is customary in Underwritten Offerings) and take all such other actions in
connection therewith (including those reasonably requested by any managing
underwriters and the Holders of a majority of the Registrable Securities being
sold) in order to expedite or facilitate the disposition of such Registrable
Securities, and whether or not an underwriting agreement is entered into, (i)
make such representations and warranties to such Holders and such underwriters
as are customarily made by issuers to underwriters in underwritten public
offerings, and confirm the same if and when requested; (ii) obtain and deliver
copies thereof to each Holder and the managing underwriters, if any, of opinions
of counsel to the Company and updates thereof addressed to each Holder and each
such underwriter, in form, scope and substance reasonably satisfactory to any
such managing underwriters and Special Counsel to the selling Holders covering
the matters customarily covered in opinions requested in Underwritten Offerings
and such other matters as may be reasonably requested by such Special Counsel
and underwriters; (iii) immediately prior to the effectiveness of the
Registration Statement, and, in the case of an Underwritten Offering, at the
time of delivery of any Registrable Securities sold pursuant thereto, use its
reasonable best efforts to obtain and deliver copies to the Holders and the
managing underwriters, if any, of "cold comfort" letters and updates thereof
from the independent certified public accountants of the Company (and, if
necessary, any other independent certified public accountants of any subsidiary
of the Company or of any business acquired by the Company for which financial
statements and financial data is, or is required to be, included in the
Registration Statement), addressed to the Company in form and substance as are
customary in connection with Underwritten Offerings; (iv) if an underwriting
agreement is entered into, the same shall contain indemnification provisions and
procedures no less favorable to the selling Holders and the underwriters, if
any, than those set 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 reason ably 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) In the event of an Underwritten Offering, make available for
inspection by any underwriter participating in any disposition of Registrable
Securities, and any Special Counsel 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 person;
provided, however, that any information that is determined in good faith by the
Company in writing to be of a
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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 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.
4. Registration Expenses
(a) All fees and expenses incident to the performance of or
compliance with this Agreement by the Company, except as and to the extent
specified in Section 4(b), shall be borne by the Company whether or not pursuant
to an Underwritten Offering and whether or not the Registration Statement is
filed or becomes effective and whether or not any Registrable Securities are
sold pursuant to the Registration Statement. The fees and expenses referred to
in the foregoing sentence shall include, without limitation, (i) all
registration and filing fees (including, without limitation, fees and expenses
(A) with respect to filings required to be made with the NASDAQ and any
Subsequent Market on which the Common Stock is then listed for trading, and (B)
reasonably incurred in compliance with state securities or Blue Sky laws
(including, without limitation, 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
reasonably 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, up to an aggregate of $7,500
(v) Securities Act liability insurance, if the Company so desires such
insurance, and (vi) fees and expenses of all other
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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, 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. Notwithstanding the
foregoing, except in connection with a block trade by a broker who as a result
of the trade may be deemed an underwriter, if at any time the Company has (i)
timely filed the Registration Statement on or prior to the applicable Filing
Date, (ii) caused the Registration Statement to be declared effective as
promptly as possible after the filing thereof but in any event prior to the
applicable Effectiveness Date and (iii) kept the Registration Statement
continuously effective under the Securities Act, all in accordance with the
terms of this Agreement, and if at any such time the Holders require an
Underwritten Offering pursuant to the terms hereof, then Holders shall be
responsible for all costs, fees and expenses in connection with such
Underwritten Offering.
5. Indemnification
(a) Indemnification by the Company. The Company shall,
notwithstanding any termination of this Agreement, indemnify and hold harmless
each Holder, the officers, directors, agents (including any underwriters
retained by such Holder in connection with the offer and sale of Registrable
Securities), brokers (including brokers who offer and sell Registrable
Securities as principal as a result of a pledge or any failure to perform under
a margin call of Common Stock), investment advisors and employees of each of
them, each Person who controls any such Holder (within the meaning of Section 15
of the Securities Act or Section 20 of the Exchange Act) and the officers,
directors, agents and employees of each such controlling Person, to the fullest
extent permitted by applicable law, from and against any and all losses, claims,
damages, liabilities, costs (including, without limitation, costs of preparation
and attor neys' 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
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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, 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
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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,
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subject to the limitations set forth in Section 5(c), any reasonable attorneys'
or other reasonable fees or expenses incurred by such party in connection with
any Proceeding to the extent such party would have been indemnified for such
fees or expenses if the indemnification provided for in this Section was
available to such party in accordance with its terms.
The parties hereto agree that it would not be just and equitable if
contribution pursuant to this Section 5(d) were determined by pro rata
allocation or by any other method of allocation that does not take into account
the equitable considerations referred to in the immediately preceding paragraph.
Notwithstanding the provisions of this Section 5(d), no Holder shall be required
to contribute, in the aggregate, any amount in excess of the amount by which the
proceeds actually received by such Holder from the sale of the Registrable
Securities subject to the Proceeding exceeds the amount of any damages that such
Holder has otherwise been required to pay by reason of such untrue or alleged
untrue statement or omission or alleged omission. No Person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
shall be entitled to contribution from any Person who was not guilty of such
fraudulent misrepresentation.
The indemnity and contribution agreements contained in this Section
are in addition to any liability that the Indemnifying Parties may have to the
Indemnified Parties.
6. Miscellaneous
(a) Remedies. In the event of a breach by the Company or by a
Holder, of any of their obligations under this Agreement, each Holder or the
Company, as the case may be, in addition to being entitled to exercise all
rights granted by law and under this Agreement, including recovery of damages,
will be entitled to specific performance of its rights under this Agreement. The
Company and each Holder agree that monetary damages would not provide adequate
compensation for any losses incurred by reason of a breach by it of any of the
provisions of this Agreement and hereby further agrees that, in the event of any
action for specific performance in respect of such breach, it shall waive the
defense that a remedy at law would be adequate.
(b) No Inconsistent Agreements. Neither the Company nor any of its
subsidiaries has entered, as of the date hereof, nor, during the Effectiveness
Period, shall the Company or any of its subsidiaries, on or after the date of
this Agreement, enter into any agreement with respect to the registration of the
Common Stock 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 the registration of the Common Stock to any Person that
have not been satisfied. 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 shares of the Common Stock under the Securities
Act unless the rights so granted are subject in all respects to the prior rights
in full of
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<PAGE>
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 (i) it will
not sell any Registrable Securities under the Registration Statement until it
has received copies of the Prospectus as then amended or supplemented as
contemplated in Section 3(h) and notice from the Company that such Registration
Statement and any post-effective amendments thereto have become effective as
contemplated by Section 3(d) and (ii) it and its officers, directors or
Affiliates, if any, will comply with the prospectus delivery requirements of the
Securities Act as applicable to any of them 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. (i) If at any time, during the period
from the date hereof until two (2) years from the date hereof, when there is not
an effective Registration Statement covering all of the Registrable Securities,
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, subject, in the event of an
underwritten offering, to customary cutbacks and lock-ups requested by the
managing underwriter of all selling stockholders thereunder, on a pro-rata basis
with such other selling stockholders.
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<PAGE>
(ii) It shall be a condition precedent to the obligations of
the Company to take any action pursuant to this Section 6(f) with respect to the
Registrable Securities of any selling Holder, that such Holder shall furnish to
the Company such information regarding it, the Registrable Securities held by
it, and the intended method of disposition of such securities as shall be
required under the Securities Act to effect the registration of such Holder's
Registrable Securities and to execute such documents (including, without
limitation, any underwriting agreement) in connection with such registration as
the Company may reasonably request.
(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 80% 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 6:30 p.m. (New
York City time) on a Business Day, (ii) the Business Day after the date of
transmission, if such notice or communication is delivered via facsimile at the
facsimile telephone number specified in the Purchase Agreement later than 6:30
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: Fidelity Holdings, Inc.
80-02 Kew Gardens Road, Suite 5000
Kew Gardens, New York 11415
Facsimile No.: (718) 793-2455
Attn: Doron Cohen, President
With copies to: Littman Krooks Roth & Ball P.C.
655 Third Avenue
New York, New York 10017-5617
Attn: Mitchell C. Littman, Esq. and
James J. Quinlan, Esq.
Facsimile No.: (212) 490-2990
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<PAGE>
If to a Purchaser: To the address set forth under such Purchaser's name
on the signature pages hereto.
(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 Agree ment 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 restric tion. 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.
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<PAGE>
(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.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK
SIGNATURE PAGE TO FOLLOW]
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IN WITNESS WHEREOF, the parties have executed this Registration Rights
Agreement as of the date first written above.
FIDELITY HOLDINGS, INC.
By: /s/ Doron Cohen
----------------------------
Name: Doron Cohen
Title: President
STRONG RIVER INVESTMENTS, INC.
By: /s/ Ken Henderson
----------------------------
Name: Ken Henderson
Title: Attorney-in-Fact
Address for Notice:
Strong River Investments, Inc.
c/o Cavallo Capital Corp.
630 Fifth Avenue, Suite 2000
New York, NY 10111
Facsimile No.: (212) 332-3256
Attn: Avi Vigder
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.
BAY HARBOR INVESTMENTS, INC.
By: /s/ Ken Henderson
----------------------------
Name: Ken Henderson
Title: Attorney-in-Fact
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<PAGE>
Address for Notice:
Bay Harbor Investments, Inc.
c/o Cavallo Capital Corp.
630 Fifth Avenue, Suite 2000
New York, NY 10111
Facsimile No.: (212) 332-3256
Attn: Avi Vigder
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.
AUGUSTA STREET LLC
By: Citco Trustees (Cayman) Limited
By: Lana Farrington
----------------------------
Name: Lana Farrington
Title: Attorney-in-Fact
Address for Notice:
Augusta Street LLC
c/o Citco Trustees (Cayman) Limited
Commercial Centre
P.O. Box 31106 SMB
Grand Cayman
Cayman Islands
British West Indies
Facsimile No.: (345) 945-7566
With copies to
Krieger & Prager, Esqs.
319 Fifth Avenue
New York, NY 10016
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<PAGE>
Facsimile No.: (212) 213-2077
Attn: Samuel L. Krieger, Esq
-and-
Southridge Capital Management LLC
Executive Pavillon
90 Grove Street
Ridgefield, CT 06877
Facsimile No.: (203) 431-8301
Attn: Henry Sargent, Esq.
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<PAGE>
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,
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<PAGE>
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.
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