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
April 14, 2000
Date of Report
(Date of earliest event reported)
HIDENET SECURE ARCHITECTURES, INC.
(formerly known as Savin Electronics Inc.)
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(Exact name of registrant as specified in its charter)
New Jersey 33-36670 22-3061278
(State or other (Commission File (IRS Employer
Jurisdiction of Number) Identification No.)
Incorporation)
103 Medinat Hayehudim Street, POB 837, Herzliya Israel 46733
(Address of registrant's principal executive offices)
011-972-9-957-9795
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(Registrant's telephone number, including area code)
<PAGE>
Item 1. Changes in Control of Registrant
On April 14, 2000, NP Partners, LLC, a New York limited liability company
(the "Investor"), entered into a Stock and Option Purchase Agreement with
Hidenet Secure Architectures, Inc., a New Jersey corporation (the "Company"),
and NetworkPrivacy.com, Inc., a Delaware corporation which is a wholly-owned
subsidiary of the Company ("NPI"), pursuant to which the Investor purchased
80,000 shares of Series A Convertible Preferred Shares of NPI ("Series A
Shares") for $1,000,000, and has the right to purchase up to an additional
80,000 Series A Shares for an additional $1,000,000 investment within 30 days
from April 14, 2000. The Company granted the Investor an option to exchange the
Series A Shares for 873,336 shares of the Company's common stock if the Investor
exercises its option and invests $2,000,000 in NPI, 436,668 shares of the
Company's common stock if the Investor invests $1,000,000 and an appropriately
pro rata number of shares of common stock of the Company if the Investor invests
a portion of $1,000,000 in NPI. In connection with the transaction, Mark S.
Hauser was nominated by the Investor to become a director of both the Company
and NPI, and the Investor has the right to maintain a director on the Board of
Directors of both the Company and NPI so long as the Investor holds at least 75%
of the aggregate of the Series A Shares purchased pursuant to the Stock and
Option Purchase Agreement and the shares exercisable upon exercise of the option
granted by the Company. The Investor was also granted 1% of the outstanding
shares of common stock of the Company as of April 14, 2000.
The Investor was also granted demand registration rights and piggyback
registration rights on the securities of both the Company and NPI and co-sale
rights and pre-emptive rights with respect to future issuances of securities by
either the Company or NPI. In addition, the Investor has a right of first
refusal on transfers of shares of the Company's common stock in excess of
300,000 each 6-month period effectuated by IBDH, LLC, the majority stockholder
of the Company.
The Board of Directors of the Company approved the increase of the size of
the Board of Directors of the Company to five, and such vacancies were filled by
Robert Friedman and Uriel Ginsburg. Each of the directors of the Company (other
than Mr. Hausman) were granted 1% of the outstanding shares of common stock of
the Company as of April 14, 2000.
For terms and conditions of the Stock and Option Purchase Agreement, the
Stock Option Agreement and the Investor Rights Agreement, reference is made to
such documents attached hereto as Exhibits 10.1, 10.2 and 10.3. All statements
made herein concerning the foregoing agreements are qualified in their entirety
by reference to such Exhibits.
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits.
(c) 10.1 Stock and Option Purchase Agreement entered into as of
April 13, 2000, by and between Hidenet Secure
Architectures, Inc., NetworkPrivacy.Com, Inc. and NP
Partners, LLC.
10.2 Stock Option Agreement, dated as of April 13, 2000, by
and between Hidenet Secure Architectures, Inc. and NP
Partners, LLC.
10.3 Investors Rights Agreement, entered into as of April 13,
2000, by and among Hidenet Service Architectures, Inc.,
NetworkPrivacy.Com, Inc., IBDH LLC and NP Partners LLC.
<PAGE>
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.
HIDENET SECURE ARCHITECTURES, INC.
(formerly known as Savin Electronics Inc.)
By:/s/ Ron Fussman
Ron Fussman
President
Date: April 19, 1999
<PAGE>
EXHIBIT INDEX
Exhibit No. Description of Exhibit
10.1 Stock and Option Purchase Agreement entered
into as of April 13, 2000, by and between Hidenet
Secure Architectures, Inc., NetworkPrivacy.Com, Inc.
and NP Partners, LLC.
10.2 Stock Option Agreement, dated as of April 13,
2000, by and between Hidenet Secure Architectures,
Inc. and NP Partners, LLC.
10.3 Investors Rights Agreement, entered into as of
April 13, 2000, by and among Hidenet Service
Architectures, Inc., NetworkPrivacy.Com, Inc., IBDH
LLC and NP Partners LLC.
STOCK AND OPTION PURCHASE AGREEMENT
This Stock and Option Purchase Agreement (the "Agreement") is entered as
of April 13, 2000 by and between Hidenet Secure Architectures, Inc., a New
Jersey corporation ("Parent"), NetworkPrivacy.com, Inc., a company organized
under the laws of Delaware (the "Company") and NP Partners, LLC, a limited
liability company organized under the laws of New York (the "Investor").
WHEREAS, Parent owns all the issued and outstanding shares of the
Company; and
WHEREAS, the Investor desires to acquire shares of Series A Preferred
Stock in the Company (the "Preferred Shares"), and an option to acquire shares
in Parent, and the Company wishes to issue and sell to the Investor said shares
in the Company and the Parent wishes to grant the Invester said option on the
terms and conditions set forth herein.
NOW THEREFORE, the parties agree as follows:
1. Purchase and Sale of Preferred Shares and Issuance of Option.
1.1. Subject to the terms and conditions of this Agreement, the Investor
agrees and undertakes to invest in the Company up to US$ 2,000,000
(the "Aggregate Investment") in consideration for (y) 160,000
Preferred Shares, at a price per share equal to $12.50 and (z) the
Option (as defined in Section 2.2(iii)) (together, the "Purchase
Price"), which investment is based on a $12,500,000 pre-money
valuation of each of the Company and Parent, as follows: (i) at
least US $1,000,000 shall be paid at the initial Closing (as defined
below) and (ii) if the initial Closing occurs, but no later than 30
days after the Closing, such additional amount as the Investor
determines which, when added to the amount paid at the Closing,
shall not exceed $2,000,000. The Preferred Shares purchased pursuant
to this Agreement shall have the rights, restrictions, privileges
and preferences as set forth in the Certificate of Designations,
Rights and Preferences of Series A Convertible Preferred Stock filed
April 13, 2000 and attached hereto as Exhibit 1.1 (the "Certificate
of Designation"). The Company agrees to issue and sell the Preferred
Shares and Parent agrees to issue and sell the Option in accordance
with this Agreement.
1.2. The Company and Parent represent and warrant that upon the purchase
and sale of the Preferred Shares, the outstanding shares of the
Company and of Parent, including all outstanding options and
warrants of each, shall be as specified in Exhibit 1.2 attached
hereto. Exhibit 1.2 shall specify with respect to the Company and
Parent, any holder of 5% or more of the Company's or Parent's shares
and all holders of options, warrants or convertible securities of
the Company and Parent, as of the Closing.
1.3. The Investor shall have the non-transfereable right to complete all
or part of the Aggregate Investment by delivering to the Company,
within 30 business days from the Closing Date, the Purchase Price
for the number of Preferred Shares so purchased, by bank check or
wire transfer to the Company's account. Upon receipt by the Company
thereof, the Company (i) shall deliver to the Investor a certificate
representing the number of additional Preferred Shares so purchased,
(ii) Parent and the Company shall each deliver to the Investor
"bring down certificates" with respect to the representations and
warranties contained herein and (iii) Parent shall deliver to the
Investor confirmation of the number of shares exercisable by the
Option, or, if requested by the Investor, the Option initally issued
shall be cancelled and a new Option for the total number of shares
covered thereby shall be issued, with appropriate changes to Section
1.1(a) thereof.
2. Closing.
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2.1. The purchase and sale of the Preferred Shares shall take place at
the offices of Herrick, Feinstein LLP, Two Park Avenue, New York,
New York, on or prior to April 13, 2000 (the "Closing Date"), or at
such other time and place as the parties mutually agree in writing
(which time and place are designated as the "Closing").
2.2. At the initial Closing, the Company and the Parent shall deliver, or
cause to be delivered, to the Investor the following:
(i) a certificate representing the number of Preferred
Shares so purchased by the Investor on the Closing Date;
(ii) The Investor Rights' Agreement, substantially in the
form of Exhibit A attached hereto (the "Investor Rights
Agreement"), duly executed by the Company and IBDH LLC,
a Delaware limited liability company;
(iii) The Option, substantially in the form of Exhibit B
attached hereto (the "Option"), duly executed by Parent;
(iv) A secretary's certificate with respect to minutes of the
directors and the stockholder of the Company approving
the transactions contemplated hereunder;
(v) A secretary's certificate with respect to minutes of the
directors of Parent approving the Option and the
transactions contemplated hereunder;
(vi) A certified copy of the Certificate of Incorporation of
the Company and of Parent,including all amendments
thereto, and a copy of the By-Laws of each of the
Company and Parent, including all amendments thereto;
(vii) Evidence of the filing of the Certificate of
Designation; and
(viii) A legal opinion from Herrick, Feinstein LLP.
2.3. At the initial Closing, the Investor shall deliver, or cause to be
delivered, to the Company the following:
(i) A wire transfer in immediately available funds to the
account designated by the Company in an amount of not
less than $1,000,000;
(ii) The Investor Rights Agreement, duly executed by the
Investor;
(iii) The Option, duly executed by the Investor; and
(iv) A certified copy of the Certificate of Formation and
Operating Agreement of the Investor, including all
amendments thereto.
3. Representations and Warranties of the Company and Parent.
Each of the Company and Parent hereby jointly and severally represents and
warrants to the Investor as follows and acknowledges and confirms that the
Investor is relying upon such representations and warranties in connection
with the purchase by the Investor of the Preferred Shares and the
acquisition of the Option:
3.1. Corporate Organization; Existence and Power. Each of the Company and
Parent : (a) is a corporation duly organized, validly existing and
in good standing under the laws of the jurisdiction of its
incorporation; (b) has all requisite corporate power and authority
to own and operate its property, to lease the property it operates
as lessee and to conduct the business in which it is currently, or
is currently proposed to be, engaged; (c) is, duly qualified as a
foreign corporation, licensed and in good standing under the laws of
each jurisdiction where its ownership, lease or operation of
property or the conduct of its business requires such qualification,
except to the extent that the failure to so qualify would not have a
material adverse effect on the condition of the Company and Parent,
as the case may be; and (d) has the corporate power and authority to
execute, deliver and perform its obligations under this Agreement,
the Option, the Investor Rights Agreement, and the other documents
entered into in connection with the transactions contemplated by
this Agreement (all such agreements, the "Transaction Documents").
3.2. Corporate Authorization; No Contravention. The execution, delivery
and performance by the Company and Parent of this Agreement and each
of the other Transaction Documents to which it is or will be a party
and the consummation of the transactions contemplated hereby and
thereby, including, without limitation, the issuance of the
Preferred Shares: (a) has been duly authorized by all necessary
corporate, and if required, stockholder action; (b) do not and will
not contravene the terms of the Certificate of Incorporation or the
By-Laws of such company, or any amendment thereof or any laws
applicable to such company or its respective assets, business or
properties; (c) do not and will not (i) conflict with, contravene,
result in any violation or breach of or default under (with or
without the giving of notice or the lapse of time or both), (ii)
create in any other person or entity a right or claim of termination
or amendment, or (iii) require modification, acceleration or
cancellation of any provision of any security issued by such person
or entity in any agreement, undertaking, contract, indenture,
mortgage, deed of trust or other instrument or arrangement (whether
in writing or otherwise) to which such person or entity or its
property is bound, or any amendment of any of the foregoing
(collectively, "Contractual Obligations"); and (d) do not and will
not result in the creation of any mortgage, deed of trust, pledge,
hypothecation, assignment, lien (statutory or otherwise), charge,
claim, restriction or preference, security interest or preferential
arrangement or any other encumbrance (or obligation to create a
lien) of any kind or nature (collectively, "Liens") against any
property, asset or business of the Company or Parent, as the case
may be, or the suspension, revocation, impairment, forfeiture or non
renewal of any material permit, license, authorization or approval
applicable to the each of said company or its businesses or
operations or any of its assets or properties, other than as
contemplated by the Transaction Documents.
3.3. Governmental Authorization; Third Party Consents No approval,
consent, compliance, exemption, authorization, or other action by,
or notice to, or filing with, any governmental entity or authority
or any other person or entity in respect of any law or Contractual
Obligation, and no lapse of a waiting period under any law or
Contractual Obligation, is necessary or required in connection with
the execution, delivery or performance by (including, without
limitation, the issuance of shares of capital stock upon the
conversion of the Preferred Shares), or enforcement against, the
Company or Parent of this Agreement and the other Transaction
Documents to which it is a party or the consummation of the
transactions contemplated hereby or thereby.
3.4. Binding Effect; Enforceability This Agreement has been, and each of
the other Transaction Documents to which each of the Company and
Parent is a party has been duly executed and delivered by each of
the Company and Parent, and this Agreement constitutes, and such
other Transaction Documents constitute, the legal, valid and binding
obligations of each of the Company and Parent, enforceable against
each of the Company and Parent in accordance with their respective
terms, except as enforceability may be limited by applicable
bankruptcy, insolvency or other similar laws affecting the
enforcement of creditors' rights generally and by general principles
of equity relating to enforceability.
3.5. No Legal Bar Neither the execution, delivery and performance of this
Agreement and the other Transaction Documents, nor the issuance of
or performance of the terms of the Preferred Shares or Option will
violate any law or any Contractual Obligation of the Company or
Parent. Neither the Company nor Parent has previously entered into
any agreement which is currently in effect or to which the Company
is currently bound, granting any rights to any person or entity
which are inconsistent with the rights to be granted by the Company
or Parent herein or in the other Transaction Documents.
3.6. Litigation. There are no legal actions, suits, proceedings, claims
or disputes pending or, to the knowledge of the Company or Parent,
threatened, at law, in equity, in arbitration or before any
governmental entity or authority against or affecting the Company or
Parent (or, as applicable, to the Company's or Parent's knowledge,
any of their respective stockholders, directors, officers, employees
or agents), other than actions, suits, proceedings, claims or
disputes which do not exceed $2,500 in the aggregate. No injunction,
writ, temporary restraining order, decree or any order of any nature
has been issued by any court or other governmental entity or
authority purporting to enjoin or restrain the execution, delivery
or performance of this Agreement or the other Transaction Documents.
Neither the Company nor Parent has commenced nor does it currently
intend to initiate any material action, suit, proceeding, claim or
dispute. The bankruptcy of Savin Electronics, Ltd., an Israeli
corporation, has been completed and there are no outstanding claims
remaining to be discharged.
3.7. Compliance with Laws The Company and Parent are in compliance with
all laws applicable to the Company and Parent, as the case may be,
except where non-compliance will not result in material adverse
effect on such company's business.
3.8. Subsidiaries. The Company has no subsidiaries and does not own of
record or beneficially any capital stock or equity interest or
investment in any corporation, association or business entity. Other
than the Company, Savin Electronics, Ltd. and Hidenet Secure
Architectures, Ltd., an Israeli corporation ("Israeli ------- Sub"),
Parent has no subsidiaries and does not own of record or
beneficially any capital stock or equity interest or investment in
any corporation, association or business entity. Parent owns 100% of
the issued and outstanding shares of the Company, Savin Electronics,
Ltd. and Israeli Sub and no person owns any option, warrant,
convertible securities or other investment or right which entitles
the holder to obtain shares of either the Company, Savin Electronics
Ltd. or Israeli Sub. Savin Electronics Ltd. conducts no business and
has no assets or liabilities. Other than the Assignment Agreement
(defined in Section 3.11), the Israeli Sub conducts no business and
has no assets or liabilities. Parent shall cause Israeli Sub to
distribute to the Parent all funds received by it pursuant to the
Assignment Agreement.
3.9. Financial Statement; Absence of Undisclosed Liabilities. Neither the
Company nor Parent has any accrued or contingent liabilities arising
out of any transaction or state of facts existing prior to the date
hereof, which are not disclosed in the financial statements of the
Company or Parent. Since October 1, 1999 Parent and the Company have
conducted their business in the ordinary course and there has not
been any change or event which has had or could reasonably be
expected to have, individually or in the aggregate, a material
adverse effect on the Company or Parent.
3.10. Registration Rights; SEC Filings. Except as provided in the Investor
Rights Agreement and the piggyback registration rights granted to
Robert Friedman (which are not any more favorable than those granted
to the Investor), neither the Company nor Parent has granted or
agreed to grant any registration rights, including piggyback
registration rights, to any person or entity. Parent has filed all
statements, reports and filings, and other documents requested to be
filed by it under the federal securities laws, other than its Form
10-KSB for fiscal year ended December 31, 1999, which Parent will
use its best efforts to file no later than April 14, 2000, and in
any event by April 24, 2000, and each statement or report was or
will be in substantial compliance with applicable statutory
requirements.
3.11. Material Agreements; Company Not in Default. Except for the
Employment Agreement between Parent and Robert Friedman (the
"Employment Agreement"), the Transfer and Assignment Agreements (the
"Assignment Agreements") between Israeli Sub, Parent and the
Company, copies of which are attached hereto as Exhibit 3.11 and the
Transaction Documents, neither the Company nor Parent has any
contract, agreement, lease, or other commitment, written or oral,
absolute or contingent, other than the leases to the offices of the
Company and Parent. Neither the Company nor Parent is in default or
breach of any material contracts, agreements, written or oral,
indentures or other instruments to which it is a party and there
exists no state of facts after which notice or lapse of time or both
would constitute such a default or breach and all such contracts,
agreements, indentures or other instruments are now in good standing
and the Company and Parent, as the case may be, is entitled to all
benefits thereunder. To the knowledge of the Company and Parent, no
other party to any such material contract is in default thereunder,
nor does any condition exist that with notice or lapse of time or
both would constitute such a default. No approval or consent of any
person or entity is needed for all of the material contracts to
continue to be in full force and effect.
3.12. Tax Matters. Parent and the Company have duly filed all tax returns
required to have been filed by them and have not been subject to a
tax audit by any governmental entity of any kind, and have promptly
paid all taxes for which they are liable or accountable for the
periods from the date of their respectiveincorporation until the
date hereof, other than taxes not yet due and payable, all of which
have been fully reserved.
3.13. Intellectual Property.
3.13.1. To the Company's and Parent's knowledge (after
conducting a self patent search in connection with
filing its patent application), the Company has the
right to use its proprietary information, free and clear
of any rights, liens, encumbrances or claims of others,
except that the possibility exists that other persons
may have independently developed trade secrets or
technical information similar or identical to those of
the Company, but the Company and Parent represent and
warrant that they have no knowledge of any such
independent developments. Reasonable security measures
have been taken by the Company to protect the secrecy,
confidentiality and value of the Company's proprietary
information.
3.13.2. Neither the Company nor Parent has received any
communications alleging that the Company has violated
or, by conducting its business as proposed, would
violate any of the patents, trademarks, service marks,
trade names, copyrights or trade secrets or other
proprietary rights of any other person or entity.
3.13.3. To the Company's and Parent's knowledge, the Company is
not required to make any royalty payments with respect
to any licenses by them of the intellectual property
necessary to conduct its business as now being conducted
and as contemplated to be conducted.
3.13.4. The Company owns or has all license rights for all
software required for the conduct of its business as
described in the Business Plan described below.
3.13.5. All of the foregoing representations in this Section
3.13 are qualified in their entirety by the terms and
provisions of the Assignment Agreement, a copy of which
has been reviewed by the Investor.
3.14. Proprietary Information and Inventions Agreement. Each employee,
officer or consultant of the Company has executed or will execute
promptly after Closing a "Confidentiality, Non-Competition and
Intellectual Property Agreement" or a "Confidentiality and
Intellectual Property Agreement" as applicable, in standard form
used in the industry. The Company is not aware that any of its
employees, officers or consultants are in violation thereof.
3.15. Brokerage. There are no claims for, and no person is entitled to,
brokerage commissions or finder's fees or similar compensation in
connection with the transactions contemplated by this Agreement
based on any arrangement made by or on behalf of the Company or
Parent.
3.16. Title to Properties. The Company has all right, title and interest
in and to its property, free and clear of all Liens, liabilities and
rights of any third party, pursuant to the terms of the Assignment
Agreement. Neither the Company nor Parent have title to any real
property. Both the Company and Parent hold the right, title and
interest of the tenant under leases to the Company or Parent, as the
case may be, free and clear of all Liens, liabilities and rights.
3.17. ERISA -- Employee Benefit Plans. Neither the Company nor Parent has
any Employee Benefit Plan as defined in the Employee Retirement
Income Security Act of 1974.
3.18. Capitalization. The Capitalization Table attached as Exhibit 1.2
provides an accurate list immediately prior to and immediately
following the Closing Date, after giving effect to the transactions
contemplated hereby and the other Transaction Documents of (A) all
stockholders owning the issued and outstanding shares of Preferred
Stock and Common Stock of the Company or Parent, together with the
number held by each, and (B) all of the holders of warrants,
options, rights and securities convertible into capital stock,
together with the number of shares of capital stock to be issued
upon the exercise or conversion of such warrants, options, rights
and convertible securities. On the Closing Date, except as disclosed
on Exhibit 1.2, there will be no outstanding securities convertible
into or exchangeable for capital stock of the Company or Parent or
options, warrants or other rights to purchase or subscribe to
capital stock of the Company or Parent or contracts, commitments,
agreements, understandings or arrangements of any kind to which
either of such company is a party relating to the issuance of any
capital stock of the Company or Parent, as the case may be,, any
such convertible or exchangeable securities or any such options,
warrants or rights.
3.19. Business Plan. The Company has previously provided the Investor with
a true, correct and complete copy of its Business Plan, attached
hereto as Exhibit 3.19. The Business Plan was made in good faith by
the senior management of Company. The financial projections set out
in the Business Plan have been prepared in good faith by the senior
management of the Company based upon reasonable assumptions,
provided, however, there is no assurance that the Company shall meet
such projections.
3.20. Interested Party Transactions. Other than the Employment Agreement,
the Assignment Agreement, the Assignment Agreement dated July 20,
1999 between Parent and Israeli Sub and each of the Transaction
Documents, there are no (i) agreements of any kind, including,
without limitation, with respect to any consideration or otherwise
to be provided by the Parent or the Company to any officer, director
or holder of 5% or more of the outstanding shares of the Parent or
the Company, or (ii) agreements between the Company and Parent.
3.21. Labor Agreements and Actions; Employee Compensation. Neither the
Company nor Parent is aware that any officer or key employee, or
that any group of key employees, intends to terminate their
employment with the Company or Parent, nor does the Company or
Parent have a present intention to terminate the employment of any
of the foregoing, provided that no officer or employee of the
Company or Parent is intended to be a third party beneficiary of the
foregoing. The employment of each officer and employee of the
Company and Parent is terminable at the will of the Company or
Parent, as the case may be, subject to prior notice requirements. To
the best of its knowledge, the Company and Parent have complied in
all material respects with all applicable state and Federal equal
employment opportunity and other Laws related to employment.
3.22. Use of Proceeds. The Company and Parent agree that the proceeds of
the Aggregate Investment shall be used only as provided in Exhibit
3.22 and pursuant to the Assignment Agreement.
3.23. Disclosure. This Agreement, together with the Disclosure Schedule
and all exhibits hereto, and the agreements, certificates and other
documents furnished to the Investor by the Company and Parent at the
Closing, (including, without limitation, the other Transaction
Documents) do not contain any untrue statement of a material fact or
omit to state a material fact necessary in order to make the
statements contained herein or therein, in the light of the
circumstances under which they were made, not misleading.
4. Representations and Warranties of the Investor.
The Investor hereby represents and warrants to the Company and
Parent as follows and acknowledges and confirms that the Company and
Parent are relying upon such representations and warranties in
connection with the offer and sale of the Preferred Shares and the
acquisition of the Option to the Investor:
4.1. Organization; Existence and Power. The Investor: (a) is a limited
liability company duly organized, validly existing and in good
standing under the laws of the jurisdiction of its incorporation;
and (b) has the power and authority to execute, deliver and perform
its obligations under this Agreement and the Transaction Documents.
4.2. Authorization; No Contravention. The execution, delivery and
performance by the Investor of this Agreement and each of the other
Transaction Documents to which it is or will be a party and the
consummation of the transactions contemplated hereby and thereby:
(a) has been duly authorized by all necessary action; (b) do not and
will not contravene the terms of the Certificate of Formation and
Operating Agreement, or any amendment thereof or any laws applicable
to the Investor or its assets, business or properties; (c) do not
and will not (i) conflict with, contravene, result in any violation
or breach of or default under (with or without the giving of notice
or the lapse of time or both), (ii) create in any other person or
entity a right or claim of termination or amendment, or (iii)
require modification, acceleration or cancellation of any provision
of any security issued by such person or entity in any Contractual
Obligation; and (d) do not and will not result in the creation of
any Lien against any property, asset or business of the Investor or
the suspension, revocation, impairment, forfeiture or non renewal of
any material permit, license, authorization or approval applicable
to the Investor or its businesses or operations or any of its assets
or properties, other than as contemplated by the Transaction
Documents.
4.3. Governmental Authorization; Third Party Consents. No approval,
consent, compliance, exemption, authorization, or other action by,
or notice to, or filing with, any governmental entity or authority
or any other person or entity in respect of any law or Contractual
Obligation, and no lapse of a waiting period under any law or
Contractual Obligation, is necessary or required in connection with
the execution, delivery or performance by, or enforcement against,
the Investor of this Agreement and the other Transaction Documents
to which it is a party or the consummation of the transactions
contemplated hereby or thereby.
4.4. Binding Effect; Enforceability. This Agreement has been, and each of
the other Transaction Documents to which the Investor will be a
party to will be, duly executed and delivered by the Investor, and
this Agreement constitutes, and such other Transaction Documents
will constitute, the legal, valid and binding obligations of the
Investor enforceable against the Investor in accordance with their
respective terms, except as enforceability may be limited by
applicable bankruptcy, insolvency or other similar laws affecting
the enforcement of creditors' rights generally and by general
principles of equity relating to enforceability.
4.5. No Legal Bar. Neither the execution, delivery nor performance of
this Agreement and the other Transaction Documents will violate any
law or any Contractual Obligation of the Investor. The Investor has
not previously entered into any agreement which is currently in
effect or to which the Investor is currently bound, granting any
rights to any person or entity which are inconsistent with the
rights to be granted by the Investor herein or in the other
Transaction Documents.
4.6. Litigation. There are no material legal actions, suits, proceedings,
claims or disputes pending or, to the knowledge of the Investor,
threatened, at law, in equity, in arbitration or before any
governmental entity or authority against or affecting the Investor
(or, as applicable, to the Investor's knowledge, any of their
respective stockholders, directors, members, managers, officers,
employees or agents). No injunction, writ, temporary restraining
order, decree or any order of any nature has been issued by any
court or other governmental entity or authority purporting to enjoin
or restrain the execution, delivery or performance of this Agreement
or the other Transaction Documents.
4.7. Compliance with Laws. The Investor is in compliance with all laws
applicable to the Investor, , except where non-compliance will not
result in material adverse effect on the Investor's business.
4.8. Investment RepresentationsThe investment hereunder is made for the
Investor's own account, not as a nominee or agent, and not with a
view to the distribution of any part thereof, and the Investor has
no present intention of selling, granting participation in, or
otherwise distributing any of the Preferred Shares, the common stock
issuable upon conversion of the Preferred Shares, the Option or the
shares of common stock into which the Option is exercisable for
(collectively, the "Securities").
4.8.1. The Investor is knowledgeable in business and financial
matters and is capable of evaluating the merits and
risks of an investment in the Company. The Investor has
received all the information, records and data it
considers necessary or appropriate for deciding whether
to purchase the Securities, and has an opportunity to
ask questions and receive answers from all persons
acting on behalf of the Company and Parent concerning
the Company, Parent and its business and proposed
business, and the Securities, and all questions have
been answered to Investor's satisfaction.
4.8.2. The Investor understands that none of the Securities
have been registered under the Securities Act of 1933,
as amended (the "1933 Act") or any state securities laws
and are being offered and sold pursuant to an exemption
from registration contained in the 1933 Act based in
part upon the representations of the Investor contained
herein.
4.8.3. The Investor further covenants that it will not make any
sale, transfer or other disposition of the Securities
without registration or exemption under the 1933 Act and
any applicable state securities laws.
4.8.4. The Investor acknowledges that it is aware of Rule 144
promulgated under the 1933 Act, which permits limited
public resales of securities acquired in a nonpublic
offering, subject to the satisfaction of certain
conditions. The Investor understands that under Rule
144, except as otherwise provided by section (k) of that
Rule, the conditions include, among other things: the
availability of certain current public information about
the issuer, the resale occurring not less than one year
after the party has purchased and paid for the
securities to be sold and limitations on the amount of
securities to be sold and the manner of sale.
4.8.5. The Investor is an "accredited investor" as that term is
defined in Regulation D under the 1933 Act because all
of the equity owners of the Investor are "accredited
investors", and if there is any change in such status,
the Investor will immediately furnish such revised or
corrected information to the Company.
4.8.6 The Investor recognizes that an investment in the
Company involves substantial risks, including loss of
the entire amount, and has taken full cognizance of, and
understands all the risks related to, the purchase of
the Preferred Shares
4.9 Brokerage. There are no claims for, and no person is entitled to,
brokerage commissions or finder's fees or similar compensation in
connection with the transactions contemplated by this Agreement based
on any arrangement made by or on behalf of the Investor.
5. Board Structure.
Following the Closing of the initial investment pursuant to Section
1, the board of directors (the "Board of Directors") of both the
Company and Parent shall consist of five (5) members, one of which
shall be nominated by Investor. The Investor hereby designates Mark
S. Hauser as its nominee. The Investor shall have a right to
maintain one representative on the Board of Directors of the Company
and Parent so long as Investor retains at least 75% of the aggregate
of the Preferred Shares purchased hereunder and the shares
excercisable upon exercise of the Option.
Simultaneously with the transactions contemplated by this Agreement,
Parent shall issue to Investor or its designee or assignee 1% of the
outstanding shares of Parent. The Company agrees that such interest
may be exchanged at any time for a 1% interest in the Company by
cancelling the 1% interest in the Parent. Such 1% interests may be
transferred or assigned by the party to whom it is issued, subject
to compliance with applicable securities law.
6. Securities Exchange Act Registration
The Parent will maintain effective registration statement
(containing such information and documents as the Commission shall
specify and otherwise complying with the Securities Exchange Act
under section 12(b) or Section 12 (g), whichever is applicable, of
the Securities Exchange Act, with respect to the Common Stock of the
Parent , and the Parent will file on time such information,
documents and reports as the Commission may require or prescribe for
companies whose stock has been registered pursuant to such Section
12(b) or Section 12(g), whichever is applicable.
Parent will, upon request of any holder of Securities, make whatever
other filings with the Commission, or otherwise make generally
available to the public such financial and other information, or any
such holder may deem reasonably necessary or desirable in order to
enable such holder to be permitted to sell Securities pursuant to
the provisions of Rule 144.
7. Non Compete.
The Investor represents and warrants and covenants that it is not,
and undertakes not to become, the holder, directly or indirectly, of
more than 5% of the ownership in competing company or business with
the Company.
The members of the Board of Directors nominated by the Investor for
so long as such member serves as a director of the Company, shall
not serve as a director of a competing company or business, or be
the holder, directly or indirectly, of more than 5% of the ownership
in a competing company or business.
8. General.
8.1. This Agreement contains the entire agreement between the parties
respecting the subject matter hereof, and supersedes and replaces
all previous representations, warranties, agreements,
understandings, commitments or arrangements, oral or written, with
respect thereto. This Agreement may not be modified except by a
written instrument executed by both parties.
8.2. This Agreement shall be interpreted in accordance with, and governed
in all respects by, the laws of the State of Delaware, without
giving effect to the rules of conflict of laws thereof, and the
competent courts of New York shall have exclusive jurisdiction over
all disputes between the parties with respect to this Agreement and
no other court shall have jurisdiction over this Agreement.
8.3. All representations and warranties contained herein shall survive
the execution and delivery of this Agreement.
IN WITNESS WHEREOF, this Stock Purchase Agreement has been executed as of
the date first above written by the parties hereto.
NETWORKPRIVACY.COM, INC.
/s/ Robert Friedman
- -------------------
By: Robert Friedman
Title:Chief Executive Officer
HIDENET SECURE ARCHITECTURES, INC.
/s/ RonFussman
- --------------
By: Ron Fussman
Title: President
NP PARTNERS, LLC
/s/ Mark S. Hauser
- ------------------
By: Mark S. Hauser
Title:Manager
STOCK OPTION AGREEMENT
STOCK OPTION AGREEMENT, dated as of April 13 , 2000 (this "Agreement"), by
and between HIDENET SECURE ARCHITECTURES, INC., a New Jersey corporation with an
address at 103 Medinat Hayehudam Street, Hezliya 46733 Israel (the "Grantor"),
and NP PARTNERS, LLC, a New York limited liability company with an address c/o
Mark S. Hauser, 83 Garden Road, Scarsdale, New York 10583 (the "Grantee").
RECITALS
WHEREAS, simultaneous with the execution of this Agreement, the
Grantee and NetworkPrivacy.com, Inc., a Delaware corporation which is owned by
the Grantor ("NPI"), are entering into a Stock and Option Purchase Agreement
(the "Stock and Option Purchase Agreement") pursuant to which, among other
things, NPI is issuing to the Grantee Series A Convertible Preferred Stock (the
"Preferred Stock"); and
WHEREAS, in consideration for the payment of the Purchase Price (as
such term is defined in the Stock Purchase Agreement), the Grantee is to receive
the Preferred Stock and an option to acquire common stock of the Grantor; and
WHEREAS, the Grantor desires to grant to the Grantee, and the
Grantee desires to acquire from the Grantor, the irrevocable right and option to
purchase shares of common stock of the Grantor, upon the terms and subject to
the conditions set forth herein.
NOW, THEREFORE, in consideration of the premises and the mutual
representations, warranties, covenants, agreements and undertakings contained in
this Agreement, and other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the Grantor and the Grantee hereby
agree as follows:
ARTICLE I
GRANT OF OPTION
SECTION 1.1 Grant of Option for Shares.
(a) Upon the terms and subject to the conditions set forth in this
Agreement, the Grantor hereby grants to the Grantee the irrevocable right and
option (the "Option") to purchase the Shares. "Shares" shall mean (i) 873,336
shares of common stock of the Grantor if the Grantee purchases 160,000 shares of
Preferred Stock or (ii) 436,668 shares of common stock of the Grantor if the
Grantee purchases 80,000 shares of Preferred Stock and an appropriately pro
rated number of shares of Common Stock of the Grantor if the Grantee purchases
between 80,000 and 160,000 shares of Preferred Stock, subject in any event to
adjustment as provided in Section 1.2.
(b) At any time after the date hereof, the Grantee may exercise the
Option by sending to the Grantor written notice of its exercise thereof and the
stock certificate evidencing the Preferred Stock. Within two business days from
the receipt thereof (the "Option Closing Date"), the Grantor shall deliver to
the Grantee the stock certificate(s) evidencing the Shares, duly endorsed in
blank or accompanied by stock powers duly executed in blank, in proper form for
transfer and with all required stock transfer tax stamps affixed.
(c) Notwithstanding anything contained herein to the contrary, the Option
shall, without any action taken by the Grantor, the Grantee, NPI or any other
party, immediately expire and be of no force and effect upon the conversion of
the Preferred Stock.
SECTION 1.2 Option Exercise; Anti-Dilution.
(a) In order to exercise the Option, the Grantee must deliver to the
Grantor or its duly appointed agent, the stock certificate evidencing the
Preferred Stock, duly endorsed in blank or accompanied by stock owners duly
executed in blank. Upon exercise of the Option, the Preferred Stock shall be
cancelled. Notwithstanding anything contained herein to the contrary, the Option
may be exercised in whole or in part and from time to time, and if exercised in
part, the number of shares of Preferred Stock deliverable to exercise the Option
and the number of Shares to be issued hereunder shall be adjusted accordingly,
and this Option shall continue in full force and effect to the extent not so
exercised, or, at the request of the Grantee, a new Option shall be issued for
the remaining number of Shares.
(b) In the event of any change in the number of issued and
outstanding shares of common stock of the Grantor by reason of any stock
dividend, subdivision, merger, recapitalization, combination, conversion or
exchange of shares, or any other change in the corporate or capital structure of
the Grantor which would have the effect of diluting or otherwise adversely
affect the Grantee's rights and privileges under this Option, the number and
kind of the Shares and the consideration payable in respect of the Shares shall
be appropriately adjusted to restore to the Grantee its rights and privileges
under the Option. Without limiting the scope of the foregoing, in any such
event, at the option of the Grantee, the Option shall represent the right to
purchase, in addition to the number and kind of Shares which the Grantee would
be entitled to purchase pursuant to the immediately preceding sentence, whatever
securities, cash or other property the Shares subject to such Option shall have
been converted into or otherwise exchanged for, together with any securities,
cash or other property which shall have been distributed with respect to such
Shares.
(c) Adjustments for Dilutive Issues. Notwithstanding anything
contained herein to the contrary, the number of Shares shall be subject to
adjustment if (x) the number of shares of common stock of NPI issuable upon
conversion of the Preferred Stock is increased pursuant to Section 3(g) of the
Certificate of Designations, Rights and Preferences of the Preferred Stock (the
"Certificate of Designation"), in which case the number of Shares shall be
increased by a percentage equal to the percentage increase in the number of
shares of common stock of NPI issuable upon conversion of the Preferred Stock,
or (y) the Grantor shall, with respect to itself, consummate any of the events
described in Section 3(d), (e), (f) or (g) of the Certificate of Designation, in
which case the number of Shares shall be increased in accordance with the
provisions of such Sections, applied to the Grantor, mutatis mutandis, provided
that for purposes hereof the Conversion Price and Original Issue Price shall be
deemed to be $2.29 per share of common stock of Grantor and the number of Shares
shall be increased accordingly. For purposes of illustration only, if the
Grantee invests $2 million in NPI at $12.50 per share of Preferred Stock
(160,000 shares of Preferred Stock; i.e., 873,336 Shares hereunder) and (X) NPI
subsequently issues additional shares of common stock at $6.25 per share for an
aggregate consideration of more than $2 million, or (Y) the Grantor issues
additional shares of common stock at $1.145 per share for an aggregate
consideration of more than $2,000,000, the number of Shares, in either such
case, would be increased by an additional 873,336 shares of Grantor.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE GRANTEE
The Grantee hereby represents and warrants to the Grantor the
following, which representations and warranties shall be true and correct on the
date of this Agreement and on the Option Closing Date:
SECTION 2.1 Ownership of Shares. The Grantee is the sole record and
beneficial owner of the Preferred Stock and has good and marketable title to the
Preferred Stock, free and clear of any Lien, other than pursuant to the Rights
Agreement.
SECTION 2.2 Investment Intent. With respect to the Shares to be
received by the Grantee:
(i) The Shares have not been registered under the
Securities Act of 1933, as amended (the "Securities
----------
Act"), and have not been registered or qualified
---
under the securities laws of any state of the United
States. Grantee acknowledges that it has no right to
require the Grantor to register the Shares under the
Securities Act or to register or qualify the Shares
under the securities laws of any state of the United
States, other than pursuant to the Investor Rights
Agreement;
(ii) The Grantee agrees that it will not, directly or
indirectly, offer, transfer, sell or otherwise
dispose of any of the Shares (or solicit any offers
to buy, purchase or otherwise acquire any of the
Shares), except in compliance with the Securities Act
and the rules and regulations thereunder. The Grantee
further understands, acknowledges and agrees that
none of the Shares may be transferred, sold or
otherwise disposed of unless (x) such disposition is
pursuant to an effective registration statement under
the Securities Act, or (y) the Grantee shall have
delivered to the Grantor an opinion, from counsel and
in form and substance reasonably satisfactory to the
Grantor, to the effect that such disposition is
exempt from the provisions of Section 5 of the
Securities Act;
(iii) The Grantee is acquiring the Shares for its own account,
for investment purposes only and not with a view to or
for sale in connection with any distribution thereof;
(iv) The Grantee must continue to bear the economic risk
of the investment in the Shares unless they are
subsequently registered under the Securities Act or
an exemption from such registration is available. If
any of the Shares are disposed of in accordance with
Rule 144 under the Securities Act, the Grantee shall
deliver to the Grantor at or prior to the time of
such disposition an executed copy of Form 144 (if
required by Rule 144) and such other documentation as
the Grantor may reasonably require in connection with
such disposition;
(v) The Grantee acknowledges that the market value of the
Shares will fluctuate from their value on the date
hereof and, at the time that the Grantee disposes of the
Shares, such shares may not be worth such value;
(vi) The Grantee has such knowledge and experience in
business matters to be able to evaluate the merits
and risks of an investment in the Shares and to make
an informed decision with respect to its acceptance
of the Shares. The Grantee has adequate means of
providing for its current financial needs and
contingencies, is able to bear the substantial
economic risks of an investment in the Shares for an
indefinite period of time, has no need for liquidity
thereof, and could afford a complete loss of the
Purchase Price;
(vii) The Grantee has had an opportunity to discuss the
business, operations and conditions (financial and
otherwise) of the Grantor with representatives of the
Grantor. In accepting the Shares on the Option Closing
Date, no oral representations or written representations
(other than those specifically made herein) will have
been made to the Grantee; and
(viii) The Grantee is an "accredited investor", as that term is
defined in Regulation D under the Securities Act.
SECTION 2.3 Legend. The certificate or certificates representing the
Shares shall bear the following legend:
"THE SHARES REPRESENTED BY THIS CERTIFICATE MAY NOT BE TRANSFERRED,
SOLD OR OTHERWISE DISPOSED OF UNLESS (A) SUCH DISPOSITION IS
PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES
ACT OF 1933, AS AMENDED, OR (B) THE HOLDER HEREOF SHALL HAVE
DELIVERED TO THE COMPANY AN OPINION, FROM COUNSEL AND IN FORM AND
SUBSTANCE REASONABLY SATISFACTORY TO THE COMPANY, TO THE EFFECT THAT
SUCH DISPOSITION IS EXEMPT FROM THE PROVISIONS OF SECTION 5 OF THAT
ACT."
"THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO CERTAIN
REGISTRATION RIGHTS AND RESTRICTIONS ON TRANSFER, AS SET FORTH IN AN
INVESTOR RIGHTS AGREEMENT BETWEEN THE ISSUER AND THE ORIGINAL HOLDER
OF THIS CERTIFICATE, A COPY OF WHICH MAY BE OBTAINED AT THE
PRINCIPAL OFFICE OF THE ISSUER. SUCH TRANSFER RESTRICTIONS AND
MARKET STANDOFF PROVISION ARE BINDING ON TRANSFEREES OF THESE
SHARES."
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE GRANTOR
Grantor hereby represents and warrants to the Grantee the following,
which representations and warranties shall be true and correct on the date of
this Agreement and on the Option Closing Date:
SECTION 3.1 Authority. Grantor is a corporation duly organized,
validly existing and in good standing under the laws of the State of New Jersey.
Grantor has full corporate power and authority to execute and deliver this
Agreement and all documents and instruments specified herein, to carry out its
obligations hereunder and to consummate the transactions contemplated hereby.
This Agreement has been duly executed and delivered by the Grantor, and assuming
due authorization, execution and delivery by the Grantee, constitutes a legal,
valid and binding obligation of the Grantor, enforceable against the Grantor in
accordance with its terms.
SECTION 3.2 No Default. The execution, delivery and performance of
this Agreement by the Grantor does not and will not (x) conflict with or violate
Grantor's Articles of Incorporation or By-laws or any law, rule, regulation,
order, writ, judgment, injunction, decree, determination or award applicable to
the Grantor or (y) result in any breach of, or constitute a default (or event
which with the giving of notice or lapse of time, or both, would become a
default) under, or give to others any rights of termination, amendment,
acceleration or cancellation of, any note, bond, mortgage, indenture, contract,
agreement, lease, license, permit, franchise or other instrument to which the
Grantor is a party.
SECTION 3.3 Approval of Transaction. The execution and delivery of
this Agreement by the Grantor does not, and the performance of this Agreement by
the Grantor will not, require any consent, approval, authorization or other
action by, or filing with or notification to, any person, entity, governmental
authority or regulatory authority.
SECTION 3.4 Claims; Litigation. No actions, suits, claims,
litigation, arbitration proceedings, administrative proceeding or investigations
are pending or, to the Grantor's knowledge, threatened against the Grantor which
could adversely affect the consummation of this transaction.
SECTION 3.5 Shares. The Shares have been duly authorized and, upon
issuance therefor in accordance with the provisions of the Option, will be
validly issued, fully paid and non-assessable. From and after the date hereof,
the Grantor shall at all times reserve and keep available for issuance upon
exercise of the Option such number of its authorized but unissued shares of
common stock as will be sufficient to permit the exercise in full of the Option.
SECTION 3.6 No Material Facts Omitted. No representation or warranty
of the Grantor in this Agreement contains any untrue statement of a material
fact or omits to state a material fact necessary to make the statements
contained herein not misleading.
ARTICLE IV
GENERAL PROVISIONS
SECTION 4.1 Entire Agreement. This Agreement contains, and is
intended as, a complete statement of all of the terms of the arrangements and
understandings between the parties with respect to the matters provided for, and
supersedes any previous agreements and understandings between the parties with
respect to those matters.
SECTION 4.2 Governing Law. This Agreement shall be governed by, and
construed and enforced in accordance with the laws of the State of New York
without regard to its principles of conflicts of law. All actions and
proceedings arising out of, or relating to, this Agreement shall be heard and
determined in any state or federal court sitting in New York, New York. The
undersigned, by execution and delivery of this Agreement, expressly and
irrevocably (i) consents and submits to the personal jurisdiction of any of such
courts in any such action or proceeding; (ii) consents to the service of any
complaint, summons, notice or other process relating to any such action or
proceeding by delivery thereof to such party as set forth in Section 4.3 below
governing the giving of notices; and (iii) waives any claim or defense in any
such action or proceeding based on any alleged lack of personal jurisdiction,
improper venue or forum non conveniens or any similar basis. Each of the
undersigned hereby waives for himself and itself, as the case may be, and its
respective permitted successors and assigns, the right to trial by jury in any
action or proceeding instituted in connection with this Agreement.
SECTION 4.3 Notices. All notices and other communications under this
Agreement shall be in writing and shall be hand delivered, mailed by registered
or certified mail, return receipt requested (with a copy simultaneously by
ordinary mail), or recognized overnight delivery service to the parties at the
following addresses (or to such other address as a party may have specified by
notice given to the other party pursuant to this provision):
If to the Grantor, to:
Hidenet Secure Architectures, Inc.
103 Medinat Hayehudam Street
Hezliya 46733 Israel
Attn: Ron Fussman
with a copy to:
Herrick, Feinstein LLP
Two Park Avenue
New York, New York 10016
Attention: David Lubin, Esq.
If to the Grantee, to:
NP Partners, LLC
c/o Mark S. Hauser
83 Garden Road
Scarsdale, NY 10583
with a copy to:
Morrison Cohen Singer & Winston, LLP
750 Lexington Avenue
New York, New York 10022
Attention: Stephen Budow, Esq.
<PAGE>
Each such notice shall be deemed given at the time delivered by
hand, if personally delivered; five business days after being deposited in the
mail, postage prepaid, if mailed; and the next business day after timely
delivery to the courier, if sent by overnight air courier guaranteeing next
business day delivery.
SECTION 4.4 Amendment; Waiver. No provision of this Agreement may be
amended or modified except by an instrument or instruments in writing signed by
the parties hereto. No waiver of any provision hereof shall be construed as a
waiver of any other provision. Any waiver must be in writing.
SECTION 4.5 Assignment and Binding Effect. None of the parties
hereto may assign any of its rights or delegate any of its duties under this
Agreement without the prior written consent of the others. This Agreement shall
be binding on, and shall inure to the benefit of, the parties hereto and their
successors and assigns.
SECTION 4.6 No Benefit to Others. The representations, warranties,
covenants and agreements contained in this Agreement are for the sole benefit of
the parties hereto and their respective successors and assigns and they shall
not be construed as conferring and are not intended to confer any rights on any
other persons.
SECTION 4.7 Further Assurances. From and after the date hereof, the
Grantor and the Grantee agree to execute and deliver such further documents and
instruments and to do such other acts and things any of them, as the case may
be, may reasonably request in order to effectuate the transactions contemplated
by this Agreement.
SECTION 4.8 Counterparts. This Agreement may be executed in
counterparts, each of which shall be deemed an original, and each party thereto
may become a party hereto by executing a counterpart hereof. This Agreement and
any counterpart so executed shall be deemed to be one and the same instrument.
[Remainder of Page Intentionally Omitted;
Signatures to Follow]
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed and delivered
this Stock Option Agreement as of the date first written above.
HIDENET SECURE ARCHITECTURES, INC.
By: /s/ Ron Fussman
---------------
Name: Ron Fussman
Title: President
NP PARTNERS, LLC
/s/ Mark S. Hauser
------------------
Name: Mark S. Hauser
Title: Manager
INVESTOR RIGHTS AGREEMENT
This Investor Rights Agreement (this "Agreement") is entered into as of April
13, 2000, by and among Hidenet Secure Architectures, Inc., a New Jersey
corporation ("Parent"), NetworkPrivacy.com, Inc., a Delaware corporation (the
"Company"); IBDH LLC ("IBDH"); and NP Partners, LLC, a New York limited
liability company (the "Investor").
RECITALS
WHEREAS, the Investor, Parent and the Company are entering into a Stock and
Option Purchase Agreement (the "Purchase Agreement") on the date hereof (the
"Closing Date"), pursuant to which, among other things, the Investor is
acquiring shares of Series A Preferred Stock of the Company (the " Preferred
Shares") and will obtain an option (the "Option") to purchase shares of Parent;
and
WHEREAS, in order to induce the Investor to enter into the Purchase
Agreement, Parent, the Company and IBDH desire to grant to the Investor the
registration and other rights set forth herein.
NOW, THEREFORE, in consideration of the foregoing recitals, and the mutual
covenants set forth herein, the parties hereto agree as follows:
1. Registration Rights. The Company covenants and agrees as follows:
1.1. Definitions. For purposes of this Section 1:
1.1.1. The term "Exchange Act" means the Securities Exchange
Act of 1934, as amended.
1.1.2. The term "Registrable Securities" means (i) any and
all shares of common stock of the Public Company
issued or issuable upon conversion of preferred stock
(including without limiting the Preferred Shares) or
upon exercise of any warrants or options (including
without limitation the Option) held by the Investor
to purchase shares of common stock of the Public
Company; or (ii) shares issued in respect of shares
referred to in (i) above in any reorganization; or
(iii) shares issued in respect of the shares referred
to in (i) or (ii) as a result of a share split, share
dividend, recapitalization or combination.
1.1.3. "Public Company" means (i) Parent, if the Investor
exercised the option granted pursuant to the Purchase
Agreement or notifies the Public Company that it
intends to exercise said option, or (ii) the Company
six months after the consummation of an underwritten
public offering of the securities of the Company
pursuant to the Securities Act.
1.1.4. The terms "register", "registered" and "registration"
refer to a registration effected by preparing and
filing a registration statement or similar document
in compliance with the Securities Act, and the
declaration or ordering of effectiveness of such
registration statement or document.
1.1.5. The term "SEC" shall mean the Securities and Exchange
Commission.
1.1.6. The term "Securities Act" means the Securities Act of
1933, as amended.
1.2. Demand Registration Rights.
The Investor will have demand registration rights as follows:
1.2.1. If the Public Company shall receive at any time after
the expiration of the seventh month from the date
hereof a written request from the Investor requesting
that the Public Company file a registration statement
under the Securities Act covering the registration of
any or all of the Registrable Securities then held by
the Investor, then the Public Company shall:
1.2.1.1. within thirty (30) days of the receipt
thereof, give written notice of such request
to all holders of securities of such Public
Company having registration rights; and
1.2.1.2. promptly file and use its best efforts to
have declared effective as soon as
practicable, the registration under the
Securities Act of all Registrable Securities
which the Investor and such holders request
to be registered.
1.2.2. If the Investor intends to distribute the Registrable
Securities covered by its request by means of an
underwriting, it shall so advise the Public Company
as a part of its request made pursuant to this
section and such Public Company shall include such
information in the written notice referred to in
paragraph 1.2.1.1. The underwriter will be selected
by the Investor and shall be reasonably acceptable to
such Public Company. In such event, the right of any
holder to include securities in such registration
shall be conditioned upon such holder's participation
in such underwriting and the inclusion of such
holder's securities in the underwriting (unless
otherwise mutually agreed by a majority in interest
of the holders) to the extent provided herein. All
holders, proposing to distribute their securities
through such underwriting shall (together with such
Public Company) enter into an underwriting agreement
in customary form with the underwriter or
underwriters selected for such underwriting.
Notwithstanding any other provision of this section
1.2.2. if the underwriter advises in writing that
market factors require a limitation of the number of
shares to be underwritten, then the number of shares
that may be included in the underwriting on behalf of
each holder shall be allocated as follows: (i) first,
the Registrable Shares held by the Investor and (ii)
second, pro ratably amongst the other holders based
upon a fraction: (a) the numerator of which is the
number of shares of such Public Company each such
holder other than the Investor requests to be
registered, and (b) the denominator of which is the
total number of shares all such holders request to be
registered. For purposes of allocation of the
securities to be included in any offering, for any
holder which is a partnership or corporation, the
partners, retired partners and stockholders of such
holder (and in the case of a partnership, any
affiliated partnerships), or the estates and family
members of any such partners and retired partners and
any trusts for the benefit of any of the foregoing
persons shall be deemed to be a single "seller" or
"holder".
1.2.3. Notwithstanding the foregoing, if such Public Company
shall furnish to the Investor a certificate signed by
the Chief Executive Officer of such Public Company
stating that in the good faith judgment of the Board
of Directors of such Public Company compliance with
this Agreement would materially interfere with such
Public Company's ability to consummate a material
transaction that such Public Company is engaged in at
such time or would be otherwise seriously detrimental
to such Public Company and its stockholders for such
registration statement to be filed and it is
therefore essential to defer the filing of such
registration statement, such Public Company shall
have the right to defer taking action with respect to
such filing for a period of not more than one hundred
and eighty (180) days after receipt of the request of
the Investor; provided, however, that such Public
Company may not utilize this right more than once in
any six-month period and provided, further that the
Public Company shall employ good faith in making all
determinations described herein, including without
limitation the duration of any deferal period.
1.2.4. In addition, neither Public Company shall be
obligated to effect, or to take any action to effect,
any registration pursuant to this Section 1.2:
1.2.4.1. After either Public Company has effected two
(2) registrations pursuant to this Section
1.2 which have been declared or ordered
effective and the Investor no longer owns
any Registrable Securities;
1.2.4.2. If less than 6 months have lapsed from the
effective date of a previous underwritten
offering resulting from a demand
registration by the Investor or less than 4
months lapsed from the effective date of a
previous other underwritten offering of the
Public Company's securities to the public;
or
1.2.4.3. If the Public Company delivers notice to the
Investor within thirty (30) days of any
registration request, of its intent to file
a registration statement for such public
offering within ninety (90) days and in fact
does file such statement; provided that the
Public Company is actively employing in good
faith all reasonable efforts to cause such
registration statement to become effective.
1.3. Piggyback Registration Rights.
The Investor will have piggyback registration rights as
follows:
1.3.1. Registration Rights. If the Public Company proposes
to register for its own account or for the account of
other security holders or both any of its stock or
other securities under the Securities Act in
connection with the public offering of such
securities solely for cash (other than a registration
relating solely to the sale of securities to
participants in a Public Company incentive stock
plan, on a Form S-8 or S-4, a registration effected
pursuant to Rule 145 under the Securities Act, or a
registration on any form which does not include
substantially the same information as would be
required to be included in a registration statement
covering the sale of the Registrable Securities),
such Public Company shall, at such time, promptly
give the Investor and each holder of securities of
the Public Company written notice of such
registration. Upon the written request of the
Investor and each holder within twenty (20) days
after mailing of such notice by the Public Company in
accordance with this section 1.3.1, the Public
Company shall, subject to the provisions of paragraph
1.3.2 below, cause to be registered under the
Securities Act all of the Registrable Securities that
each such holder has requested to be registered. The
Investor shall be entitled to an unlimited number of
such piggyback registration rights.
1.3.2. Underwriting.
1.3.2.1. If the registration of which the Public
Company gives notice is for a registered
public offering involving an underwriting,
the Public Company shall so advise the
Investor and each holder of securities of
the Public Company, as part of the written
notice given pursuant to paragraph 1.3.1. In
such event, the right of the Investor and
each holder of securities of the Public
Company to registration pursuant to this
subsection 1.3 shall be conditioned upon its
participation in such underwriting and the
inclusion of Registrable Securities in the
underwriting to the extent provided herein.
The Investor and each holder of securities
of the Public Company participating in such
registration shall, together with the Public
Company, enter into an underwriting
agreement in customary form with the
managing underwriter selected for such
underwriting by the Public Company, which
underwriter shall be reasonably acceptable
to the Investor and each holder of
securities of the Public Company
participating in such registration.
1.3.3. Notwithstanding any other provision of this
subsection 1.3, if the managing underwriter
determines that market factors require a limitation
of the number of shares to be underwritten, the
managing underwriter may limit the number of shares
to be included in such registration (the
"Underwriters' Cutback"); provided, however, that the
Underwriters' Cutback shall be restricted so that the
number of Registrable Securities in such registration
shall be no less than 10% of the shares requested to
be included in such registration.
1.3.4. In the case of an Underwriters' Cutback, the number
of shares that may be included pursuant to this
subsection 1.3 on behalf of the Investor and each
holder in such underwriting shall be allocated pro
ratably amongst the Investor and the other holders in
proportion to their interests in the Public
Corporation. For purposes of allocation of the
securities to be included in any offering, for any
seller which is a partnership or corporation, the
partners, retired partners and stockholders of such
holder (and in the case of a partnership, any
affiliated partnerships), or the estates and family
members of any such partners and retired partners and
any trusts for the benefit of any of the foregoing
persons shall be deemed to be a single seller.
1.4. S-3 Registration Rights.
1.4.1. The Investor shall be entitled to an unlimited number
of registrations on Form S-3, at any time after the
Public Company becomes eligible for such type of
registration statement.
1.4.2. The Public Company shall, as soon as practicable,
effect such registration and all such qualifications
and compliances as may be so requested and as would
permit or facilitate the sale and distribution of all
or such portion of the Registrable Securities as are
specified in such request; provided, however, that
the Public Company shall not be obligated to effect
any such registration, qualification or compliance,
pursuant to this Section 1.4: (a) if Form S-3 is not
available for such offering by the Investor; (b) if
the sale of Registrable Securities and such other
securities (if any) is at an aggregate price to the
public (net of any underwriters' discounts or
commissions) of less than one million US Dollars
($1,000,000); (c) if the Public Company shall furnish
to the Investor a certificate signed by the President
of the Public Company stating that in the good faith
judgment of the Board of Directors of the Public
Company, it would be seriously detrimental to the
Public Company and its stockholders for such Form S-3
registration to be effected at such time, in which
event the Public Company shall have the right to
defer the filing of the Form S-3 registration
statement, for a period of not more than ninety (90)
days after receipt of the request of the Holder or
Holders under this Section 1.4, provided, however,
that the Public Company shall not utilize this right
more than once in any twelve month period; and (d) if
the Public Company has, within the twelve (12) month
period preceding the date of such request, already
effected a registration on Form S-3.
1.4.3. Subject to the foregoing, the Public Company shall
file a registration statement covering the
Registrable Securities and other securities so
requested to be registered as soon as practicable
after receipt of the request or requests of the
Investor and the holders of securities of the Public
Company. Registrations effected pursuant to this
Section 1.4 shall not be counted as demands for
registration or registrations effected pursuant to
Sections 1.2.
1.5. Furnish Information. It shall be a condition precedent to the
obligations of the Public Company to take any action pursuant
to this Section 1 with respect to the Registrable Securities
that the Investor and each holder of securities of the Public
Company shall furnish to the Public Company such information
regarding itself, the Registrable Securities held by it, and
the intended method of disposition of such securities as shall
be required to effect the registration of such Registrable
Securities.
1.6. Obligations of the Public Company. Whenever required under
this agreement to effect the registration of any Registrable
Securities, the Public Company shall, as expeditiously as
reasonably possible:
1.6.1. Prepare and file with the SEC a registration
statement with respect to such Registrable Securities
and use its best efforts to cause such registration
statement to become effective, and, upon the request
of the holders of a majority of the Registrable
Securities registered thereunder, keep such
registration statement effective for up to ninety
(90) days.
1.6.2. Prepare and file with the SEC such amendments and
supplements to such registration statement and the
prospectus used in connection with such registration
statement as may be necessary to comply with the
provisions of the Securities Act with respect to the
disposition of all securities covered by such
registration statement.
1.6.3. Furnish to the holders of Registrable Securities such
number of copies of prospectus, including a
preliminary prospectus, in conformity with the
requirements of the Securities Act, and such other
documents as they may reasonably request in order to
facilitate the disposition of Registrable Securities
owned by them.
1.6.4. Use its best efforts to register and qualify the
securities covered by such registration statement
under such other securities or Blue Sky laws of such
jurisdictions as shall be reasonably requested by the
holders, provided that the Public Company shall not
be required in connection therewith or as a condition
thereto to qualify to do business or to file a
general consent to service of process in any such
states or jurisdictions.
1.6.5. In the event of any underwritten public offering,
enter into and perform its obligations under an
underwriting agreement, including indemnification and
other customary provisions, in usual and customary
form, with the managing underwriter of such offering.
The Investor and each holder participating in such
underwriting shall also enter into and perform its
obligations under such an agreement.
1.6.6. Notify the Investor and each holder of Registrable
Securities covered by such registration statement at
any time when a prospectus relating thereto is
required to be delivered under the Securities Act of
the happening of any event as a result of which the
prospectus included in such registration statement,
as then in effect, includes an untrue statement of a
material fact or omits to state a material fact
required to be stated therein or necessary to make
the statements therein not misleading in light of the
circumstances then existing.
1.6.7. Use its best efforts to furnish, at the request of
any holder requesting registration of Registrable
Securities pursuant to this agreement on the date
that such Registrable Securities are delivered to the
underwriters for sale in connection with a
registration pursuant to this agreement, if such
securities are being sold through underwriters, on
the date that the registration statement with respect
to such securities becomes effective, (i) an opinion,
dated such date, of the counsel representing the
Public Company for the purposes of such registration,
in form and substance as is customarily given to
underwriters in an underwritten public offering,
addressed to the underwriters, if any, and to the
holders requesting registration of Registrable
Securities and (ii) a letter dated such date, from
the independent certified public accountants of the
Public Company, in form and substance as is
customarily given by independent certified public
accountants to underwriters in an underwritten public
offering, addressed to the underwriters, if any, and
to the holders requesting registration of Registrable
Securities.
1.7. Expenses of Registration. The Public Company shall bear and
pay all expenses incurred in connection with any registration,
filing or qualification of Registrable Securities with respect
to the registrations pursuant to this Section 1 for each
holder (which right may be assigned as provided in Section
1.10), including, without limitation, all registration,
filing, and qualification fees, printers and accounting fees
relating or apportionable thereto and the fees and
disbursements of counsel for the Public Company and no more
than one counsel for all the holders of Registrable
Securities, but excluding underwriting discounts and
commissions relating to Registrable Securities and excluding
fees of legal counsel other than fees of counsel for all
holders of Registrable Securities.
1.8. Indemnification. In the event any Registrable Securities are
included in a registration statement under this Section 1:
1.8.1. To the extent permitted by law, the Public Company
will indemnify and hold harmless each holder of
Registrable Securities, any underwriter (as defined
in the Securities Act) for such holder and each
person, if any, who controls such holder or
underwriter within the meaning of the Securities Act
or the Exchange Act, against any losses, claims,
damages, or liabilities (joint or several) to which
they may become subject under the Securities Act, the
Exchange Act or other federal or state law, insofar
as such losses, claims, damages, or liabilities (or
actions in respect thereof) arise out of or are based
upon any of the following statements, omissions or
violations (collectively a "Violation"): (a) any
untrue statement or alleged untrue statement of a
material fact contained in such registration
statement, including any preliminary prospectus or
final prospectus contained therein or any amendments
or supplements thereto, (b) the omission or alleged
omission to state therein a material fact required to
be stated therein, or necessary to make the
statements therein not misleading, or (c) any
violation or alleged violation by the Public Company
of the Securities Act, the Exchange Act, any state
securities law or any rule or regulation promulgated
under the Securities Act, the Exchange Act or any
state securities law; and the Public Company will pay
to each such holder, underwriter or controlling
person any legal or other expenses reasonably
incurred by them in connection with investigating or
defending any such loss, claim, damage, liability, or
action, as such expenses are incurred; provided,
however, that the indemnity agreement contained in
this subsection 1.8.1 shall not apply to amounts paid
in settlement of any such loss, claim, damage,
liability, or action if such settlement is effected
without the consent of the Public Company (which
consent shall not be unreasonably withheld), nor
shall the Public Company be liable in any case for
any such loss, claim, damage, liability, or action to
the extent that it arises out of or is based upon a
Violation which occurs in reliance upon and in
conformity with written information furnished by any
such holder, underwriter or controlling person.
1.8.2. To the extent permitted by law, each holder of
Registrable Securities will indemnify and hold
harmless the Public Company, each of its directors,
each of its officers who has signed the registration
statement, each person, if any, who controls the
Public Company within the meaning of the Securities
Act, any underwriter, any other holder selling
securities in such registration statement and any
controlling person of any such underwriter or other
holder, severally but not jointly, against any
losses, claims, damages, or liabilities (joint or
several) to which any of the foregoing persons may
become subject, under the Securities Act, the
Exchange Act or other federal or state law, insofar
as such losses, claims, damages, or liabilities (or
actions in respect thereto) arise out of or are based
upon any Violation, in each case to the extent (and
only to the extent) that such Violation occurs in
reliance upon and in conformity with written
information furnished by such holder; and each such
holder will pay any legal or other expenses
reasonably incurred by any person intended to be
indemnified pursuant to this subsection 1.8.2, in
connection with investigating or defending any such
loss, claim, damage, liability, or action; provided,
however, that the indemnity agreement contained in
this subsection 1.8.2 shall not apply to amounts paid
in settlement of any such loss, claim, damage,
liability or action if such settlement is effected
without the consent of the holder, which consent
shall not be unreasonably withheld; provided, that,
in no event shall any indemnity by any holder under
this subsection 1.8.2 exceed the gross proceeds from
the offering received by such holder.
1.8.3. Promptly after receipt by an indemnified party under
this Section 1.8 of notice of the commencement of any
action (including any governmental action), such
indemnified party will, if a claim in respect thereof
is to be made against any indemnifying party under
this Section 1.8, deliver to the indemnifying party a
written notice of the commencement thereof and the
indemnifying party shall have the right to
participate in, and, to the extent the indemnifying
party so desires, jointly with any other indemnifying
party similarly noticed, to assume the defense
thereof with one counsel mutually satisfactory to the
parties; provided, however, that an indemnified party
(together with all other indemnified parties which
may be represented without conflict by one counsel)
shall have the right to retain one separate counsel,
with the fees and expenses to be paid by the
indemnifying party, if representation of such
indemnified party by the counsel retained by the
indemnifying party would be inappropriate due to
actual or potential differing interests between such
indemnified party and any other party represented by
such counsel in such proceeding. The failure to
deliver written notice to the indemnifying party
within a reasonable time of the commencement of any
such action shall not relieve such indemnifying party
of any liability to the indemnified party under this
Section 1.8 unless the failure to deliver notice is
materially prejudicial to its ability to defend such
action. Any omission to so deliver written notice to
the indemnifying party will not relieve it of any
liability that it may have to any indemnified party
otherwise than under this Section 1.8.
1.8.4. If the indemnification provided for in this Section
1.8 is held by a court of competent jurisdiction to
be unavailable to an indemnified party with respect
to any loss, liability, claim, damage, or expense
referred to therein, then the indemnifying party, in
lieu of indemnifying such indemnified party
hereunder, shall contribute to the amount paid or
payable by such indemnified party as a result of such
loss, liability, claim, damage, or expense in such
proportion as is appropriate to reflect the relative
fault of the indemnifying party on the one hand and
of the indemnified party on the other in connection
with the statements or omissions that resulted in
such loss, liability, claim, damage, or expense as
well as any other relevant equitable considerations;
provided that in no event shall any Holder be
required to contribute under this subsection 1.8.4 an
aggregate amount in excess of the gross proceeds from
the offering received by such holder less any amounts
paid by the Holder pursuant to subsection 1.8.2. The
relative fault of the indemnifying party and of the
indemnified party shall be determined by reference
to, among other things, whether the untrue or alleged
untrue statement of a material fact or the omission
to state a material fact relates to information
supplied by the indemnifying party or by the
indemnified party and the parties' relative intent,
knowledge, access to information, and opportunity to
correct or prevent such statement or omission.
1.8.5. Notwithstanding the foregoing, to the extent that the
provisions on indemnification and contribution
contained in the underwriting agreement entered into
in connection with the underwritten public offering
are in conflict with the foregoing provisions, the
provisions in the underwriting agreement shall
control.
1.8.6. The obligations of the Public Company and holders of
Registrable Securities under this Section 1.8 shall
survive the completion of any offering of Registrable
Securities in a registration statement under this
Section 1, and otherwise.
1.9. Reports under the Exchange Act. With a view to making
available to the holders of Registrable Securities the
benefits of Rule 144 promulgated under the Securities Act and
any other rule or regulation of the SEC that may at any time
permit a holder to sell securities of the Public Company to
the public without registration or pursuant to a registration
on Form S-3, the Public Company agrees:
1.9.1. to make and keep public information available as
those terms are defined in Rule 144 and to file with
the SEC in a timely manner all reports and other
documents required of the Public Company under the
Securities Act and the Exchange Act; and
1.9.2. to furnish to any holder, so long as the holder owns
any Registrable Securities, forthwith upon request
(i) a written statement by the Public Company that it
has complied with the reporting requirements of SEC
Rule 144, the Securities Act and the Exchange Act (at
any time after it has become subject to such
reporting requirements), (ii) a copy of the most
recent annual or quarterly report of the Public
Company and such other reports and documents so filed
by the Public Company, and (iii) such other
information as may be reasonably requested in writing
by any holder of any rule or regulation of the SEC
which permits the selling of any such securities
without registration.
1.10. Assignment of Registration Rights. The Investor may assign its
rights to cause the Public Company to register its Registrable
Securities pursuant to this Section 1 to a transferee of all
or any part of its Registrable Securities. The transferor
shall, within twenty (20) days after such transfer, furnish
the Public Company with written notice of the name and address
of such transferee and the securities with respect to which
such registration rights are being assigned, and the
transferee's written agreement to be bound by this Section 1.
Notwithstanding the above, in the event that the Investor
sells Registrable Securities to a transferee who is entitled
to sell all of its Registrable Securities under Rule 144
during any one quarter, then such transferee shall not have
the rights under Section 1 herein.
1.11. "Market Stand-Off" Agreement. The Investor and each transferee
thereof hereby agrees that, during the period of duration
specified by the Public Company and an underwriter of common
stock or other securities of the Public Company, following the
effective date of a registration statement of the Public
Company filed under the Securities Act, it shall not, to the
extent requested by the Public Company and such underwriter,
directly or indirectly sell, offer to sell, contract to sell
(including, without limitation, any short sale), grant any
option to purchase or otherwise transfer or dispose of (other
than to donees who agree to be similarly bound), any
securities of the Public Company held by it as of the
effective date, except Registrable Securities included in such
registration; provided, however, that:
1.11.1. all officers and directors of the Public Company and
holders of 5% or more of the outstanding capital
stock of the Public Company enter into similar
agreements and the Public Company uses reasonable
efforts to obtain similar agreements from all other
holders of 1% or more of the outstanding capital
stock of the Public Company; and
1.11.2. such market stand-off time period shall not exceed
one hundred eighty (180) days following the effective
date of any underwritten public offering by the
Public Company of its securities.
The Investor and each transferee thereof agrees to
provide to the managing underwriter(s) of any
underwritten public offering such further agreement
as such underwriter may reasonably require in
connection with this market stand-off agreement. In
order to enforce the foregoing covenant, the Public
Company may impose stop- transfer instructions with
respect to the Registrable Securities of the Investor
and each transfer (and the shares or securities of
every other person subject to the foregoing
restriction) until the end of such period.
1.12. Termination of Registration Rights. The right of the Investor
to include Registrable Securities, in any registration
pursuant to Section 1.2 and the obligation to be subject to
the "market standoff" provisions in Section 1.11 hereof shall
terminate upon such date as a public trading market shall
exist for the Public Company's common stock and all shares of
Registrable Securities beneficially owned or subject to Rule
144 aggregation by the Investor may be sold under Rule 144
(without regard to Rule 144(k)) during any 90-day period.
2. Restriction on Sales.
The Investor shall not directly or indirectly sell, gift, dispose or assign
or transfer any securities of the Company or Parent to any person or entity
which is, directly or indirectly, a competitor of the Company or any of its
subsidiaries, unless such sale or transfer is part of the sale or transfer
of all the Company's shares or a merger, consolidation or other business
combination of the Company and such competitor.
3. Right of First Refusal.
3.1. General. For the purposes of this Section 3, the term
"Transfer" shall mean any sale, assignment, transfer,
hypothecation or other encumbrance or disposition of in any
way.
3.2. Sale Notice. In the event IBDH shall desire to make a Transfer
of common stock of Parent, IBDH shall be obligated to offer
them first to the Investor by giving notice in writing to the
Investor (hereinafter "Sale Notice"), provided, however, that
IBDH shall have the right to sell up to an aggregate of
300,000 shares of common stock of the Parent each 6-month
period without giving such Sale Notice.
3.3. Particulars of Sale Notice. In the Sale Notice IBDH shall
include the number of shares of common stock of the Parent it
wishes to Transfer (hereinafter the "Offered Shares") and the
price for the Offered Shares and all other terms therof. The
Sale Notice shall be irrevocable
3.4. Purchase Notice. The Investor may inform IBDH in writing,
within five (5) business days from the date of receipt of the
Sale Notice, as to its intention to purchase the Offered
Shares, the purchase of which shall be at the purchase price
and payment condition as provided for in the Sale Notice
(hereinafter the "Purchase Notice"). In the event the Investor
has given such Purchase Notice, the Investor shall pay the
purchase price for the Offered Shares, in immediately
available funds, within 7 business days from receipt of the
Sale Notice or when such shares were to be paid for by the
proposed purchaser, whichever is later.
3.5. Sale to Third Party. If by the end of the period referred to
in subsection 3.4 above, IBDH has not received a Purchase
Notice with respect to the total number of Offered Shares,
then IBDH may Transfer some or all of the Offered Shares to
the person or persons described in the sale notice
(hereinafter the "Offeree") within 90 business days from the
expiration of the period for submission of the Purchase
Notice, at a price not less than the price mentioned in the
Sale Notice and upon all other conditions not more favorable
to the Offeree than those provided for in the Sale Notice.
3.6. Re-offer. If IBDH shall not Transfer the Offered Shares as
aforesaid within the period of time specified in subsection
3.4, IBDH shall be obligated, before selling the Offered
Shares to another, to offer them again to the Investor in
accordance with the aforementioned procedure, and such
procedure shall apply to any further offer.
3.7. Permitted Transferees. Notwithstanding the above, IBDH shall
be entitled to transfer its shares to "Permitted Transferees"
without regard to the provisions of these Sections 3, 4 and 5.
A "Permitted Transferee" shall mean any one of the following:
(a) a person or entity that controls or is controlled by or is
under common control with IBDH or either member of IBDH; (b) a
family member of either member of IBDH or a trust for the
benefit thereof; provided that the Permitted Transferee shall
furnish to the Company and Parent a written agreement to be
bound by and comply with all provisions of this Agreement.
3.8. Expiration. The right of first refusal granted pursuant to
this Section 3, shall terminate upon the closing of a firmly
underwritten public offering of common stock of the Company or
the Parent, where the pre- money valuation is in excess of
Forty million dollars ($40,000,000) with gross proceeds to the
Parent or the Company in excess of Eight million five hundred
thousand dollars ($8,500,000) (a "Qualified Offering").
4. Co-Sale Rights.
4.1. Grant of Right. Without derogating from the provisions of
Section 3 above, to the extent that the Investor does not
exercise its right of first refusal set forth in Section 3,
the Investor shall have the right, exercisable upon written
notice to IBDH, within three (3) business days after receipt
of the Sale Notice, to participate in IBDH's sale of the
Offered Shares pursuant to the specified terms and conditions
of the Sale Notice. The number of shares of common stock of
Parent that IBDH may sell pursuant to such Sale Notice shall
be reduced, so as to allow the Investor to participate in the
sale of such number of shares which is the result of the
multiplication of the Offered Shares by a fraction: (a) the
numerator of which is the number of shares of common stock of
the Parent acquired by the Investor upon exercise of the
Option; and (b) the denominator of which is the total number
of shares of Common Stock owned by IBDH plus the number of
shares of common stock of the Parent acquired by the Investor
upon exercise of the Option.
4.2. Mechanics of Transfer. The Investor and IBDH shall transfer
their respective stock certificates to the third party offeree
upon consummation of the sale of the Offered Shares pursuant
to the terms and conditions specified in the Sale Notice to
the Investor, and such offeree shall promptly thereafter remit
to the Investor and to IBDH that portion of the sale proceeds
to which it is entitled by reason of its participation in such
sale. In the event that less than all the shares represented
by such a stock certificate are sold pursuant to Section 4,
IBDH shall instruct the Company to issue a new certificate to
the Investor representing the shares not sold.
4.3. No Effect on Subsequent Rights. The exercise or non- exercise
of the rights of the Investor hereunder to participate in one
or more sales of any Offered Shares made by IBDH shall not
adversely affect the Investor' rights to participate in
subsequent sales of Offered Shares by IBDH.
4.4. Exclusions. The co-sale right of the Investor shall not
pertain or apply to any Transfer to any Permitted Transferee
of IBDH; provided that transferee or donee shall furnish the
Investor with a written agreement to be bound by and comply
with all provisions of this Agreement.
4.5. Expiration. The co-sale right granted under this Section 4
shall terminate upon a Qualified Offering.
5. Pre-emptive Rights.
Subject to the terms and conditions specified in this Section 5, each
of Parent and the Company hereby grants to the Investor a pre-emptive
right with respect to future sales by the Company and Parent of its
Securities (as hereinafter defined), other than in a transaction
registered under the Securities Act, or a merger or other Organic
Transaction (as defined in the Company's Certificate of Designations
for the Preferred Shares) of the Company or the Parent.
5.1. General. Each time the Company or Parent offers any shares of
its common stock, or securities convertible into or
exercisable into its common stock ("Securities"), the Company
or Parent, as the case may be, shall give prior written notice
of such offering to the Investor in accordance with the
following provisions:
5.1.1. The Company or Parent, as the case may be, shall
deliver a written notice (the "Offer Notice") to the
Investor stating (i) its bona fide intention to offer
such Securities (ii) the number of such Securities
being offered, and (iii) the price and terms upon
which it is offering such Securities.
5.1.2. Within fourteen (14) business days after giving the
Offer Notice, the Investor may elect to purchase or
obtain, at the price and on the terms specified in
the Offer Notice, up to Investor's pro rata portion
necessary to maintain its equity interest in the
Company or Parent, as the case may be, on a
fully-diluted basis.
5.1.3. If all Securities referred to in the Offer Notice
which Investor is entitled to obtain pursuant to
Section 5.1.2 are not purchased as provided therein,
the Company or Parent, as the case may be, may,
during the ninety (90) day business period following
the expiration of the period provided in Section
5.1.2 hereof, offer the Unpurchased Securities to any
person or persons ("Offeree") at a price not less
than, and upon terms no more favorable to the Offeree
than those specified in the Offer Notice. If the
Company or Parent, as the case may be, does not enter
into an agreement for the sale of the unpurchased
Securities within such period, or if such agreement
is not consummated within ninety (90) business days
of the execution thereof, the right provided
hereunder shall be deemed to be revived and such
unpurchased Securities shall not be offered unless
first re-offered to the Investor in accordance
herewith.
5.2. Exceptions. The pre-emptive right in this Section 5 shall not
be applicable to (a) the issuance or sale of options
exercisable for any shares of any class of capital stock of
the Company or Parent pursuant to a stock option plan approved
by the Company's or Parent's Board of Directors to its
officers, directors, employees or consultants, (b) common
stock issuable upon the conversion of the Preferred Shares,
(c) the issuance of securities in connection with any stock
split, stock dividend or recapitalization by the Company or
Parent, (d) dividends payable in common stock; or (e) issuance
of securities to a strategic investor.
5.3. Expiration. The pre-emptive right granted pursuant to this
Section 5 shall terminate upon a Qualified Offering.
6. Bring Along Rights.
6.1. The Investor agrees that, in the event that holders owning at
least seventy percent (70%) of the total number of shares of
capital stock of the Parent (the "Proposing Shareholders")
shall have approved in writing a transaction or series of
related transactions with any person or persons regarding a
sale of all of the outstanding shares of Parent stock held by
such Proposing Shareholders, or the merger or consolidation or
other recapitalization of the Parent with another entity, or
the sale of assets of the Parent to another entity, or the
liquidation or dissolution of the Parent, such Proposing
Shareholders shall be entitled, at their option, to require
the Investor to include all of its securities in the Parent in
such transfer at the same price and at the same other terms
and conditions or to approve (by vote or written consent) such
merger, consolidation, recapitalization, sale of assets,
liquidation or dissolution, by providing the Investor with a
notice (the "Bring-Along Notice"), at least fourteen (14)
business days prior to the consummation of or vote for the
proposed transaction, setting forth in reasonable detail the
material terms and conditions of the proposed transaction and
if applicable the price per share at which the Investor shall
be required to sell its shares (which price shall be equal to
the price at which such Proposing Shareholders have agreed to
sell their shares and shall be at least two times the price
per share paid by Investor) (such entitlement shall be
referred to herein as the "Bring-Along Rights"), provided that
the Investor shall not be so obligated unless the Investor
would gain as a result of such transaction at least a 40%
annual rate of return on the purchase price paid for the
Preferred Shares and Option, the purchase price thereof shall
be payable in cash upon the closing thereof, and the Investor
shall not be required to make any representation or warranty
other than with respect to title to the Preferred Shares and
Option.
6.2. At the closing of the proposed transaction (which date, place
and time shall be designated by the Proposing Shareholders and
provided to Investor in writing at least five (5) business
days prior thereto), the Investor shall (if required by the
Proposing Shareholders, Parent or the Company), deliver
certificates evidencing all its shares, duly endorsed, or
accompanied by written instruments of transfer in form
satisfactory to the proposed purchaser, duly executed, by the
Investor, free and clear of any liens, against delivery of the
purchase price therefor.
6.3. The Bring-Along Rights shall not apply to a disposition by any
stockholder to (a) any other shareholder of the Company or
Parent or (b) an affiliate of the Proposing Shareholder
(including any family member of a stockholder or trust for the
benefit of a stockholder or family members), provided the
transferee agrees in writing to be subject to the terms and
conditions of this Agreement as if it were an original party
thereto.
6.4. The Bring-Along Rights granted under this Section 6 shall
terminate upon a Qualified Offering.
7. Restrictive Legends and Stop-Transfer Orders.
7.1. Legends. Investor understands and agrees that the Company
shall cause the legends set forth below or legends
substantially equivalent thereto, to be placed upon any
certificate(s) evidencing ownership of securities subject to
this Agreement, together with any other legends that may be
required by state or federal securities laws:
7.2. "THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT").
THESE SECURITIES MAY NOT BE TRANSFERRED OR RESOLD EXCEPT AS
PERMITTED UNDER THE ACT AND OTHER APPLICABLE SECURITIES LAWS."
"THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO
CERTAIN REGISTRATION RIGHTS AND RESTRICTIONS ON TRANSFER, AS
SET FORTH IN AN INVESTOR RIGHTS AGREEMENT BETWEEN THE ISSUER
AND THE ORIGINAL HOLDER OF THESE SHARES, A COPY OF WHICH MAY
BE OBTAINED AT THE PRINCIPAL OFFICE OF THE ISSUER. SUCH
TRANSFER RESTRICTIONS AND MARKET STANDOFF PROVISION ARE
BINDING ON TRANSFEREES OF THESE SHARES."
7.3. Stop-Transfer Notices. Investor agrees that, in order to
ensure compliance with the restrictions referred to herein,
the Company may issue appropriate "stop transfer" instructions
to its transfer agent, if any, and that, if the Company
transfers its own securities, it may make appropriate
notations to the same effect in its own records.
7.4. Refusal to Transfer. The Company shall not be required (i) to
transfer on its books any securities that have been sold or
otherwise transferred in violation of any of the provisions of
this Agreement or (ii) to treat as owner of such securities or
to accord the right to vote or pay dividends to any purchaser
or other transferee to whom such securities shall have been so
transferred.
8. Miscellaneous.
8.1. Successors and Assigns. Except as otherwise provided herein,
the terms and conditions of this Agreement shall inure to the
benefit of and be binding upon the respective successors and
assigns of the parties (including transferees of any shares of
Registrable Securities). Nothing in this Agreement, express or
implied, is intended to confer upon any party other than the
parties hereto or their respective successors and assigns any
rights, remedies, obligations, or liabilities under or by
reason of this Agreement, except as expressly provided in this
Agreement.
8.2. Aggregation of Stock. All securities held or acquired (or
common stock issuable upon conversion thereof) by the Investor
and affiliated entities or persons shall be aggregated
together for the purpose of determining the availability or
discharge of any rights under this Agreement.
8.3. Titles and Subtitles. The titles and subtitles used in this
Agreement are used for convenience only and are not to be
considered in construing or interpreting this Agreement.
8.4. Notices. All notices and other communications required or
permitted hereunder shall be in writing, shall be effective
when given, and shall in any event be deemed to be given upon
receipt or, if earlier, (a) five (5) business days after
deposit with the U.S. Postal Service or other applicable
postal service, if delivered by first class mail, postage
prepaid, or inter-country delivery (fifteen (15) business days
for inter-country delivery), (b) upon delivery, if delivered
by hand, (c) one (1) business day after the business day of
deposit with Federal Express or similar overnight courier,
freight prepaid for inter-country delivery (two (2) business
days after such deposit for inter- country delivery) or (d)
one (1) business day after the business day of facsimile
transmission, if delivered by facsimile transmission; and
shall be addressed as follows:
if to the Investor:
NP Partners, LLC
83 Garden Road
Scarsdale, New York 10583
if to the Company, Parent or IBDH:
103 Medinat Hayehudam Street
Herzliya 46733 Israel
Attn: Ron Fussman
or in any other address as a party may designate by ten (10)
days' advance written notice to the other party pursuant to
the provisions above.
8.5. Expenses. If any action at law or in equity is necessary to
enforce or interpret the terms of this Agreement, the
prevailing party shall be entitled to reasonable attorneys'
fees, costs and necessary disbursements in addition to any
other relief to which such party may be entitled.
8.6. Amendments and Waivers. Any term of this Agreement may be
amended and the observance of any term of this Agreement may
be waived (either generally or in a particular instance and
either retroactively or prospectively), only with the written
consent of all the parties hereto.
8.7. Severability. If one or more provisions of this Agreement are
held to be unenforceable under applicable law, such provision
shall be excluded from this Agreement and the balance of the
Agreement shall be interpreted as if such provision were so
excluded and shall be enforceable in accordance with its
terms.
8.8. Entire Agreement. This Agreement constitutes the full and
entire understanding and agreement between the parties with
regard to the subjects hereof and thereof and supersedes all
prior agreements and understandings with respect to the
subject matter hereof.
8.9. Governing Law; Jurisdiction. This Agreement shall be governed
by and construed in accordance with the corporate laws of the
State of Delaware and, as to any matter other than matter of
corporate law, the laws of the State of New York, excluding
that body of law pertaining to conflicts of law. All disputes
arising under or in relation to this Agreement, or to the
validity, interpretation, breach, violation of term thereof,
shall be finally and solely determined and settled by the
competent court for New York, and each of the parties hereby
submits irrevocably to the jurisdiction of the court.
8.10. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but
all of which together shall constitute one and the same
instrument.
[Remainder of Page Intentionally Omitted;
Signatures to Follow]
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Investor Rights
Agreement as of the date first above written.
HIDENET SECURE ARCHITECUTURES, INC.
By: _________________________
Name: ________________________
Title: ________________________
NETWORKPRIVACY.COM, INC. NP PARTNERS, LLC
By: _________________________ By: _________________________
Name: ________________________ Name: ________________________
Title: Title:
- ------------------------ ------------------------
IBDH, LLC
By: _________________________
Name: ________________________
Title:
- ------------------------
IN WITNESS WHEREOF, the parties have executed this Investor Rights Agreement
as of the date first above written.
HIDENET SECURE ARCHITECUTURES, INC.
By: /s/ Ron Fussman_____________
Name: Ron Fussman
Title: President
NETWORKPRIVACY.COM, INC. NP PARTNERS, LLC
By: /s/ Robert By: /s/ Mark
Friedman_________ Hauser_____________
Name: Robert Friedman Name: Mark S. Hauser
Title: Chief Executive Officer Title: Manager
IBDH, LLC
By: /s/ Ron
Fussman_____________
Name: Ron Fussman
Title: Member
