As filed with the Securities and Exchange Commission on
February 10, 2000.
Registration No. 333-________
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------
FORM SB-2
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
----------
CAPITA RESEARCH GROUP, INC.
(Exact name of registrant as specified in its charter)
----------
Nevada 7372 88-0072350
(State or other jurisdiction (Primary Standard Industrial (I.R.S. Employer
of incorporation or Classification Code Number) Identification Number)
organization)
591 Skippack Pike
Blue Bell, Pennsylvania 19422
(215) 619-7777
(Address, including zip code, and telephone number, including
area code, of registrant's principal executive offices)
----------
David B. Hunter
Chief Executive Officer
Capita Research Group, Inc.
591 Skippack Pike
Blue Bell, Pennsylvania 19422
(215) 619-7777
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
Copies to:
Andrew J. Beck, Esq.
Torys
237 Park Avenue
New York, New York 10017
(212) 880-6000
Approximate date of commencement of proposed
sale to the public: As soon as practicable after
this Registration Statement becomes effective.
If this form is filed to register additional securities for an
offering pursuant to Rule 462(b) under the Securities Act, please check the
following box and list the Securities Act registration statement number of the
earlier effective registration statement for the same offering. [ ] _______
If this form is a post-effective amendment filed pursuant to
Rule 462(c) under the Securities Act, check the following box and list the
Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ] _______
If delivery of the prospectus is expected to be made pursuant
to Rule 434, please check the following box. [ ] ________
<TABLE>
CALCULATION OF REGISTRATION FEE
<CAPTION>
============================ ===================== ===================== ===================== =================
Title of Each Class of Amount To Be Proposed Maximum Proposed Maximum Amount of
Securities To Be Registered Registered Offering Price Aggregate Offering Registration Fee
Per Share(1) Price(1)
- ---------------------------- --------------------- --------------------- --------------------- -----------------
<S> <C> <C> <C> <C>
Common Stock
($.001 par value)........... 5,380,000 $.92 $4,949,600.00 $1309.36
============================ ===================== ===================== ===================== =================
</TABLE>
(1)......Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(c) promulgated under the Securities Act of 1933, as
amended.
-----------
The Registrant hereby amends this Registration Statement on
such date or dates as may be necessary to delay its effective date until the
Registrant shall file a further amendment which specifically states that this
Registration Statement shall thereafter become effective in accordance with
Section 8(a) of the Securities Act of 1933 or until this Registration Statement
shall become effective on such date as the Securities and Exchange Commission,
acting pursuant to said Section 8(a), may determine.
<PAGE>
Subject to Completion
Preliminary Prospectus dated February 10, 2000
PROSPECTUS
----------
CAPITA RESEARCH GROUP, INC.
5,380,000 Shares of Common Stock
- --------------------------------------------------------------------------------
This prospectus:
o Covers the resale of certain shares of our common
stock.
o May be used by the selling security holders or by a
broker-dealer who may participate in sales of the
common stock covered in this prospectus.
The securities covered include:
o 1,600,000 shares of our common stock issuable upon
the conversion of a convertible promissory note o
1,260,000 shares of our common stock issued to
selling security holders in private placements in
January 2000.
o 2,520,000 shares of common stock underlying
warrants issued to selling security holders in the
private placements.
The securities to be resold:
o Represent approximately 20.95 percent of our
currently outstanding common stock (assuming the
conversion of the convertible promissory note and
exercise of all the warrants).
o Are being offered on a continuous basis pursuant to
Rule 415 under the Securities Act of 1933, as
amended.
o Will be sold at prevailing market prices or at
prices negotiated by the selling security holder
and buyer.
Our securities are traded on the OTC Bulletin Board under the
trading symbol "CEEG." The last reported sale price of our common stock on
February 8, 2000 on the OTC Bulletin Board was $1.00 per share.
The resale of the securities:
o Involves no underwriting discounts, commissions or
expenses.
o We will pay any expenses of registering the
securities, which we estimate to be $[ ].
See "Risk Factors" beginning at page 3 to read about certain
factors you should consider before buying common stock.
Neither the Securities and Exchange Commission nor any state
securities commission has approved or disapproved of these securities or passed
upon the adequacy or accuracy of this prospectus. Any representation to the
contrary is a criminal offense.
================================================================================
The date of this Prospectus is__________, 2000.
<PAGE>
PROSPECTUS SUMMARY
This summary highlights information contained elsewhere in
this prospectus. This summary is not complete and may not contain all of the
information that investors should consider before investing in our common stock.
Investors should read the entire prospectus carefully.
Capita Research Group, Inc.
Capita Research Group, Inc. was created as the result of an
exchange transaction between Royal American Mining Properties, Ltd. and NextGen
Systems, Inc., a Pennsylvania corporation (our predecessor) on January 30, 1998.
We have the exclusive license with the National Aeronautics and Space
Administration for the CREW software which measures a test respondent's EEG, or
brain wave impulse, when subjected to sound or pictures. This software then
converts the raw brain wave data into an index, which indicates the respondent's
level of interest, or lack of interest, also called "engagement", with the
stimuli. We believe that we have the only commercial operating system of this
nature and are using it for testing services in the media, advertising and
entertainment industries, as well as in pharmaceutical market research. Our goal
is to become the leading commercial provider of customized, high performance
technology systems and services, including analysis and technical support, for
the real-time, objective measurement of engagement for use in multiple markets.
Our principal executive offices are located at 591 Skippack
Pike, Blue Bell, Pennsylvania 19422, and our telephone number is (215) 619-7777.
Our Web site is located at http//:www.capitaresearch.com. Any information that
is included on or linked to our Web site is not a part of this prospectus.
Summary Consolidated Financial Data
(in thousands, except per share data)
The following table sets forth our summary consolidated
financial data. When you read this summary consolidated financial data, it is
important that you also read the historical financial statements and related
notes included in this prospectus, as well as the section of this prospectus
entitled "Management's Discussion and Analysis of Financial Condition and
Results of Operations."
<PAGE>
<TABLE>
Statement of Operations Data:
<CAPTION>
For the nine Years ended December 31,
months ended ------------------------
September 30, 1998 1997 1996
1999 (Consolidated) (Combined) (Combined)
---------- ----------- ---------- ----------
<S> <C> <C> <C> <C>
Net revenues.................. $ 55,000 $ 85,500 $ 81,894 $ 360,654
Cost of sales................. 126,063 125,826 96,100 253,175
---------- ----------- ---------- ----------
Gross profit (loss) .......... (71,063) (40,326) (14,206) 107,479
========== =========== ========== ==========
Operating expenses.......... 705,387 1,090,374 655,622 504,741
Loss from operations........ 776,450 1,130,700 669,828 397,262
Non-operating income
(expenses) ............. 3,873 (29,982) (19,452) (1,713)
Provision for taxes........... -- -- -- --
Net loss...................... $ $(1,160,682) $(689,280) $ (398,975)
========== =========== ========== ==========
Net income (loss) per
common share............ (0.05) (0.10) (0.40) (0.39)
========== =========== ========== ==========
Shares used in net income
(loss) per common share
computation............. 16,244,218 11,380,306 1,736,458 1,034,658
========== =========== ========== ==========
As of September As of December
30, 1999 31, 1998
--------------- ----------------
Consolidated Balance Sheet Data:
Total assets $ 400,245 $ 141,414
Current liabilities 470,265 300,333
Long-term debt 25,377 23,895
Total stockholders' equity (deficiency) (95,397) (168,533)
</TABLE>
<PAGE>
RISK FACTORS
You should carefully consider the risks described below before
making an investment decision. The risks and uncertainties described below are
not the only ones we face. Additional risks and uncertainties not presently
known to us or that we currently deem immaterial may also impair our business
operations.
If any of the following risks actually occur, our business,
results of operations and financial condition could be materially and adversely
affected, the value of our stock could decline and you may lose all or part of
your investment.
We have a limited operating history and are subject to the risks of new
enterprises.
We are a development stage company and have a limited
operating history. Our limited operating history and the uncertain and emerging
nature of our technology and services make it difficult to assess our prospects
or predict our future operating results. Our prospects must be considered in
light of the numerous risks and uncertainties frequently encountered with new
businesses.
We have a history of losses and expect losses will continue.
We have never been profitable, and we anticipate that we will
continue to incur net losses in future periods. For the nine months ended
September 30, 1999 and the fiscal year ended December 31, 1998, we had net
losses of $772,577 and $1,160,682 respectively. There can be no assurance that
we will successfully implement our business strategy in the future or that we
will achieve profitability. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations."
We face substantial competition from established companies in our industry.
We face substantial competition from other providers of
advertising testing services. Our principal competition consists of companies
within the opinion research industry which provide third party testing services
either to advertising agencies or directly to advertising clients. While we
believe that our technology and testing methodology are not comparable to those
services currently offered by competitors in our industry, we face uncertainty
regarding our ability to compete effectively with established opinion research
companies. Many of our competitors and potential competitors are much larger and
have greater development, marketing and financial resources, making it more
difficult for us to establish name recognition in the marketplace and compete
effectively. See "Business - Competition."
Changes in technology may render our equipment and services obsolete.
We rely on advanced technology and software in the provision
of our advertising testing services. Our success will depend on our ability to
adapt to technological advances. To remain competitive, we must respond quickly
to technological advances in EEG monitoring hardware and software. This could
require us to make substantial investments in new equipment or software that has
made our existing equipment or software obsolete. In addition, other
technologies developed by competitors may significantly reduce demand for our
services or render our services obsolete.
3
<PAGE>
We may be unable to meet our future cash requirements.
We require substantial capital to fund the continued
development and operation of our business. From January 1, 1998 through January
24, 2000, we have received net proceeds from offerings of our common stock and
warrants of $1,750,933 and from offerings of our debt of $500,000. As of January
24, 2000, we had approximate working capital of $400,000. We anticipate, based
on current plans and assumptions relating to our operations, that the proceeds
from recent sales of our common stock, together with projected cash flow from
operations, will be sufficient to satisfy our contemplated cash requirements for
at least the next six months. If, however, we have underestimated our cash
requirements, we will require additional debt or equity financing. Our ability
to obtain the necessary financing, and its cost to us, are uncertain.
Accordingly, we may be forced to curtail our planned business development and
may also be unable to fund our ongoing operations. To the extent we raise
additional capital by issuing securities, dilution may result to the investors
in this offering.
Our technology and services may never be accepted for use in advertising
testing.
The use of EEG technology in advertising testing is a
relatively new alternative to traditional advertising testing. Potential clients
may be unwilling to accept our services as an appropriate or effective method to
measure individual responses to advertising. The extent to which the use of EEG
technology in advertising testing is accepted will materially affect our
business, financial condition and results of operations.
We do not pay, and do not anticipate paying, dividends on our common stock.
We have never paid a cash dividend on our common stock.
Whether we pay cash dividends in the future will depend on our earnings,
financial condition and capital needs and on other factors deemed pertinent by
our board of directors. We currently intend to retain any future earnings to
finance our operations. See "Dividend Policy."
We may fail to attract or retain key management personnel, which will adversely
affect our business.
We are highly dependent on the services of current management
such as David Hunter, our president, and Tomas Stenstrom, our chief technology
officer, and Anthony Baratta, our treasurer. The loss of key management
personnel or an inability to attract, retain and motivate sufficiently
experienced management could have a material adverse effect on our businesses,
financial condition or results of operations.
Possible infringement of intellectual property rights could harm our business.
We are in the process of applying for a number of patents
pertaining to our technology. We have a number of trademarks and servicemarks on
trade names used in our operations and marketing. We cannot be certain that the
4
<PAGE>
steps we have taken to protect our intellectual property rights will be adequate
or that third parties will not infringe or misappropriate our proprietary
rights, nor can we be sure that competitors will not independently develop
technologies that are substantially equivalent or superior to the proprietary
technologies employed in our services. In addition, we cannot be certain that
our business activities will not infringe on the proprietary rights of others,
or that other parties will not assert infringement claims against us. Any claim
of infringement of proprietary rights of others, even if ultimately decided in
our favor, could result in substantial costs and diversion of resources. If a
claim is asserted that we infringed the intellectual property of a third party,
we may be required to seek licenses to such third-party technology. We cannot be
sure that licenses to third-party technology will be available to us at a
reasonable cost, if at all. If we were unable to obtain such a license on
reasonable terms, we could be forced to cease using the third-party technology.
See "Business--Intellectual Property."
The exercise of outstanding options and warrants and the conversion of an
outstanding convertible promissory note may adversely affect the price of our
securities.
We have granted 234,900 options, each to purchase one share of
our common stock for purchase prices ranging from $.90 to $1.37 per share, to
key employees, officers and directors under our stock option plan. We have also
granted warrants to purchase 2,820,000 shares of our common stock, and have
issued a convertible promissory note convertible into 1,600,000 shares of our
common stock. These outstanding options and warrants and the convertible
promissory note could have a significant adverse effect on the trading price of
our common stock, especially if the note were converted or a significant volume
of the options or warrants were exercised and the stock issued was immediately
sold into the public market.
There are significant consequences associated with our stock trading on the NASD
OTC Bulletin Board rather than a national exchange.
We do not currently meet the requirements for trading in the
Nasdaq SmallCap Market or other national exchanges. We can give you no assurance
that we will achieve the quantitative criteria required by the Nasdaq SmallCap
Market or any other national exchange or that, even if we do, our listing
application would be approved by any such exchange. The effects of not being
able to list our securities on a national exchange include limited release of
the market prices of our securities, limited news coverage of our company,
limited interest by investors in our securities, increased difficulty in selling
our securities in certain states due to "blue sky" restrictions, and limited
ability to issue additional securities or to secure additional financing.
We are subject to the application of the Penny Stock Rules.
Because our common stock is not trading in the Nasdaq SmallCap
Market or some other national exchange, and the trading price of the common
stock is less than $5 per share, we are subject to the Penny Stock Rules under
the Securities Enforcement and Penny Stock Reform Act of 1990. In addition to
the risk of volatility of stock prices, low price stocks are subject to the
5
<PAGE>
risks of additional federal and state regulatory requirements and the potential
loss of effective trading markets. In particular, broker-dealers trading in our
common stock are subject to Rule 15g-9 under the Securities Exchange Act of
1934, as amended. Rule 15g-9, among other things, requires that broker-dealers
satisfy special sales practice requirements, including making individualized
written suitability determinations and receiving any purchaser's written consent
prior to any transaction. Broker-dealers handling trades in our securities are
required to make additional disclosure in connection with those trades,
including the delivery of a disclosure schedule explaining the nature and risks
of the penny stock market. Such requirements could severely limit the liquidity
of our securities and your ability to sell your securities in the secondary
market, which could have an adverse impact on the price of our common stock.
SELLING SECURITY HOLDERS
The selling security holders consist of the SoundShore
Investors and the Additional Investors, as defined below and James R. Salim. The
registration statement of which this prospectus is a part is being filed, and
the shares offered in this prospectus are included herein, pursuant to various
registration rights granted by us to the selling security holders. We are unable
to determine the exact amount of securities that will actually be sold pursuant
to this prospectus due to the ability of the selling security holders to
determine individually when and whether they will sell any securities under this
prospectus and uncertainty as to how many of the warrants will be exercised.
The SoundShore Investors
SoundShore Holdings Ltd., SoundShore Opportunity Holding Fund
Ltd. and SoundShore Strategic Holding Fund Ltd. (collectively referred to herein
as the "SoundShore Investors") acquired in a private placement transaction
pursuant to a securities purchase agreement dated as of January 6, 2000 an
aggregate of 1,000,000 units, each unit consisting of one share of our common
stock and two warrants. Each warrant is exercisable for the purchase of one
share of our common stock until January 1, 2005. In each unit, one warrant is
exercisable for $.50 per share and the other warrant is exercisable for $1.00
per share.
The Additional Investors
Andrew Gitlin, John Lepore, Edward Okine, Philip Platek,
Howard Fischer and Michael Hamblett (collectively referred to herein as the
"Additional Investors") acquired in a private placement transaction pursuant to
a securities purchase agreement dated as of January 21, 2000 an aggregate of
260,000 units. These units are identical to the units acquired by the SoundShore
Investors. Each warrant is exercisable for the purchase of one share of our
common stock until January 1, 2005. In each unit, one warrant is exercisable for
$.50 per share and the other warrant is exercisable for $1.00 per share.
James R. Salim
We issued a $400,000 convertible promissory note dated August
5, 1999 to James R. Salim. The note is being converted into 1,600,000 shares of
our common stock.
The following table and accompanying footnotes identify each
selling security holder with respect to the shares beneficially held or
acquirable by, as the case may be, each selling security holder. No selling
6
<PAGE>
security holder has had any position, office or other material relationship with
us or any of our predecessors or affiliates within the past three years. The
percentage figures reflected in the table assume the exercise of all warrants
and the convertible promissory note (other than warrants held by James R. Salim
exercisable for 300,000 shares of common stock) into 2,520,000 shares of common
stock.
<TABLE>
<CAPTION>
Total
Common Stock
Number of Shares of Beneficially Number of
Number of Shares Common Stock Owned Shares to
Name of Investor of Common Stock Underlying Warrants Prior to Offering be Offered
---------------- ------------ ------------------- ----------------- ----------
<S> <C> <C> <C> <C> <C>
James R. Salim(1) 2,189,237(2) 300,000 2,489,237 1,600,000
SoundShore Holdings
Ltd. 666,750 1,333,500 2,000,250 2,000,250
SoundShore 214,500 429,000 643,500 643,500
SoundShore Strategic 118,750 237,500 356,250 356,250
Andrew Gitlin 30,000 60,000 90,000 90,000
John Lepore 20,000 40,000 60,000 60,000
Edward Okine 10,000 20,000 30,000 30,000
Philip Platek 20,000 40,000 60,000 60,000
Howard Fischer 80,000 160,000 240,000 240,000
Michael Hamblett 100,000 200,000 300,000 300,000
</TABLE>
(1) Mr. Salim is not offering the 300,000 shares of common stock issuable upon
the exercise of his warrants. Mr. Salim's 889,237 shares which he will hold
after the offering represent 3.70% of the outstanding shares.
(2) Includes 1,600,000 shares of common stock issuable upon conversion of Mr.
Salim's convertible promissory note.
PLAN OF DISTRIBUTION
The registration statement of which this prospectus forms a
part has been filed pursuant to certain registration rights agreements. To our
knowledge, as of the date hereof, no selling security holder has entered into
any agreement, arrangement or understanding with any particular broker or market
maker with respect to the shares offered hereby, nor do we know the identity of
the brokers or market makers which will participate in the offering.
The shares covered hereby may be offered and sold from time to
time by the selling security holders. The selling security holders will act
7
<PAGE>
independently of us in making decisions with respect to the timing, manner and
size of each sale. Each such sale may be made on the OTC Bulletin Board or
otherwise, at prices and on terms then prevailing or at prices related to the
then market price, or in negotiated transactions. The shares may be sold by one
or more of the following methods:
(a) a block trade in which the broker-dealer engaged by the
selling security holder will attempt to sell the shares as
agent but may position and resell a portion of the block
as principal to facilitate the transaction;
(b) purchases by the broker-dealer as principal and resale by
such broker-dealer for its account pursuant to this
prospectus;
(c) ordinary brokerage transactions and transactions in which
the broker-dealer solicits purchasers;
(d) privately negotiated transactions at negotiated prices;
and
(e) directly to market makers acting as principals.
To our knowledge, the selling security holders have not, as of
the date hereof, entered into any arrangement with a broker-dealer for the sale
of shares through a block trade, special offering, or secondary distribution or
a purchase by a broker-dealer. In effecting sales, broker-dealers engaged by the
selling security holders may arrange for other broker-dealers to participate.
Broker-dealers may receive commissions or discounts from the selling security
holders in amounts to be negotiated.
In offering the shares, the selling security holders and any
broker-dealers who execute sales for the selling security holders may be deemed
to be "underwriters" within the meaning of the Securities Act of 1933, as
amended, in connection with such sales, and any profits realized by the selling
security holders and the compensation of such broker-dealers may be deemed to be
underwriting discounts and commissions. In addition, any shares covered by this
prospectus that qualify for sale pursuant to Rule 144 may be sold under Rule 144
rather than pursuant to this prospectus.
Regulation M under the Securities Exchange Act of 1934, as
amended, prohibits participants in a distribution from bidding for or purchasing
for an account in which the participant has a beneficial interest, any of the
securities that are the subject of the distribution. Rule 104 of Regulation M
governs bids and purchases made to stabilize the price of a security in
connection with a distribution of the security.
This offering will terminate as to each selling security
holder on the earlier of (a) the date on which all such selling security holders
shares may be resold pursuant to Rule 144 under the Securities Act; or (b) the
date on which all shares offered hereby have been sold by the selling security
holder. There can be no assurance that any of the selling security holders will
sell any or all of the shares offered hereby.
8
<PAGE>
MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
Our common stock commenced trading on the OTC Bulletin Board
on August 3, 1998 under the symbol "CEEG". To date, there has been only sporadic
trading in our common stock. As of December 31, 1999, we had 1,013 holders of
record of our common stock and 15 listed market-makers.
The following table sets forth the high and low bid
information for our common stock for the periods indicated. The quotations
reflect inter-dealer prices, without retail mark-up, mark-down or commission,
and may not necessarily represent actual transactions.
High Low
-------- --------
Fiscal Year Ending December 31, 2000
Quarter ended March 31, 2000 (through $ .96875 $.8125
Fiscal Year Ending December 31, 1999
Quarter ended March 31, 1999 $ .375 $.125
Quarter ended June 30, 1999 $ .375 $.0625
Quarter ended September 30, 1999 $2.1875 $.0625
Quarter ended December 31, 1999 $1.9375 $.875
Fiscal Year Ending December 31, 1998
Quarter ended September 30, 1998 $ .03125 $.01
(from August 5, 1998)
Quarter ended December 31, 1998 $ .375 $.03125
DIVIDEND POLICY
We have never paid a cash dividend on our common stock.
Whether we pay cash dividends in the future will depend on the our earnings,
financial condition and capital needs and on other factors deemed pertinent by
the our board of directors. We currently intend to retain any future earnings to
finance our operations.
CAPITALIZATION
The following table sets forth our capitalization as of
September 30, 1999:
o on an actual basis; and
o as adjusted to give effect to the sale of 1,260,000 shares
of common stock in the January 2000 private placements for
$630,000, the exercise of all outstanding warrants for
2,520,000 shares of common stock with an aggregate exercise
price of $1,890,000, and the conversion of the $400,000
convertible promissory note into 1,600,000 shares of common
stock.
This table should be read in conjunction with our financial
statements and related notes included elsewhere in this prospectus.
9
<PAGE>
<TABLE>
<CAPTION>
September 30, 1999
Actual As Adjusted
------------------ -----------
<S> <C> <C>
Cash and cash equivalents.............................. $ 159,596 $ 2,679,596
=========== ===========
Short-term debt ....................................... $ 300,000 $ 0
=========== ===========
Long-term debt (including capital lease obligations) .. $ 25,377 $ 25,377
----------- -----------
Stockholders' deficit:
Common Stock, $.001 par value per share, 100,000,000 20,295 25,675
Capital in excess of par value................... 3,857,663 6,772,283
Stock Subscription Receivable.................... (837,568) (837,568)
Accumulated deficit.............................. (3,135,787) (3,135,787)
----------- -----------
Total stockholders' equity (deficit)........... (95,397) 2,824,603
=========== ===========
</TABLE>
MANAGEMENT'S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion should be read in conjunction with
the consolidated financial statements and the notes thereto included elsewhere
in this prospectus. The following discussion contains forward-looking statements
which reflect our plans, estimates and beliefs. Our actual results could differ
materially from those discussed in these forward-looking statements. Factors
that could cause or contribute to such differences include, but are not limited
to, those discussed below and elsewhere in this prospectus, particularly in
"Risk Factors."
General
The discussion and analysis set forth below is for the
following periods:
o the nine months ended September 30, 1999 and September 30,
1998; and
o the twelve months ended December 31, 1998, December 31,
1997, and December 31, 1996.
10
<PAGE>
RESULTS OF OPERATIONS
Results of Operations for the Nine Months Ended September 30, 1999 and 1998
We are, and have been, a development stage company during the
nine-month periods ended September 30, 1999 and 1998. As a development stage
company, we have had limited marketing activity, with sales of $55,000 and
$85,500 for the nine-months ended September 30, 1999 and 1998, respectively. The
gross profit (loss) on these sales increased to a $71,063 loss in 1999 from a
$2,702 loss in 1998. This was due to the addition of certain fixed costs in cost
of sales, primarily an increase in the depreciation of testing equipment that
has been acquired since 1998.
The operating costs of $705,387 in 1999 were significantly
less than the operating costs incurred for the nine months ended September 30,
1998 of $947,608. The decrease of $242,221 was due primarily to several
expenditures incurred in 1998 which did not reoccur in 1999, which were offset
in part by higher operating costs in 1999. These expenses included approximately
$105,000 of 1998 expense which was attributable to legal, accounting and other
costs relating to the reverse acquisition into Royal American and the filing of
the Form 10-SB/A with the SEC, and the $100,000 of 1998 product development
services performed by an outside contractor.
Results of Operations for Year Ended December 31, 1998 Compared With Year Ended
December 31, 1997
MediaSolutions International ("MSII") (a predecessor of Capita
Research Group, Inc.) licensed the rights from Media Solutions Inc. (also a
predecessor of Capita) to continue the development and selling of MediaLink.
MediaLink was a software system used by marketers to manage direct response
television ("DRTV") advertising campaigns. During the first half of 1997, MSII
was actively engaged in marketing its product and providing technical support to
its clients. During 1998, having previously sold the MediaLink line of business,
and having obtained the rights to commercialize the NASA software, Media
Solutions was engaged in developing and launching a new line of business
directed towards advertising and media copy testing. In addition to validating
our testing system for commercial use, this involved substantial ongoing
technical development, creation of corporate infrastructure, and initiation of a
sale solicitation program among prospective media and advertising company
prospects.
For these reasons, substantially all of the material changes
from period to period in the respective Consolidated Statements of Operations
for the year ended December 31, 1998, reflect a basic change of business
operations and not a change in comparable operating results. Accordingly, in the
period ended December 31, 1997 Media Solutions and MSII generated revenue of
$81,894 from sales of its MediaLink software product. Total expenses of $751,722
(exclusive of interest) were incurred largely in connection with system sales
and support activities. In the year ended December 31, 1998 we had sales of
$85,500 from our copy testing service. This accounted for the entire
period-to-period change in revenue. The gross margin for the year ended December
11
<PAGE>
31, 1998 was a negative ($40,236). Improvements in gross margin are expected
with anticipated sales increases and further technical and operational
improvements to the testing process. Our expenses of $1,216,200 (exclusive of
interest) reflected the technical development of the product, development of our
infrastructure, and the start-up of testing operations. General and
administrative expenses included costs of approximately $104,490 which were
attributable to legal, accounting, and other costs related to the reverse
acquisition into Royal American and the filing of the Form 10-SB/A with the
Securities and Exchange Commission.
Results of Operations for Year Ended December 31, 1997 Compared With Year Ended
December 31, 1996.
In 1996, Media Solutions continued to develop and market the
MediaLink software for the management of television DRTV campaigns. During the
year, the Media Solutions' ongoing product development was funded through system
sales totaling approximately $360,000 and additional investments. In many cases,
to obtain new clients, Media Solutions offered pricing at below the fully
allocated cost of delivering and supporting each new system. Moreover, the Media
Solutions software, once installed at each client site, generally required
greater-than-anticipated technical support resources to maintain stability and
functionality. As a result of these facts and the inadequacy of investment
capital, the company experienced a chronic shortage in working capital, and
results from operations were consistently unprofitable.
In October of 1996, Media Solutions entered into a $100,000
bridge loan agreement with one of its shareholders. Under the terms of the
agreement, the company utilized borrowed funds to satisfy near-term working
capital obligations. Management believed that repayment would come both from
anticipated system sales and from proceeds of an offering of equity securities
to outside investors.
During 1997, MSII, which had licensed the right to use and
market MediaLink, continued to experience strong demand for the product.
However, in addition to the factors mentioned above, operations were
unprofitable because of:
o the heavy investment required to deploy a client/server
application into the media marketplace;
o the lack of the required infrastructure to support the
product;
o the lack of sufficient marketing resources; and
o the inability to obtain venture capital commitments
necessary to finance the company's expansion.
Another major factor contributing to the lack of profits was
the market's inadequate perception of product value in relation to the cost of
developing and supporting a highly complex software application.
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In May of 1997, MSII had exhausted its sources of investment
capital. At that date, the company had raised approximately $540,000 in equity
investment and $330,000 in stockholder debt. Year to date sales totaled
approximately $80,000 resulting in losses of approximately $690,000. Under these
circumstances, Media Solutions initiated discussions with interested parties
about acquiring MediaLink. In July of 1997, Media Solutions sold the MediaLink
asset to MSII and MSII signed a letter of intent to sell Media Link to Columbine
JDS Systems, Inc., a leading media software company and a subsidiary of Big
Flower, Inc., a NYSE listed company. The purchase agreement was effective as of
August 1, 1997. MSII's receipt of proceeds from the sale, totaling $350,000, was
contingent upon certain profitability tests at Columbine. MSII was merged into
Capita, so any proceeds received would be received by Capita.
In July 1997, under new management, Media Solutions
reorganized its existing investment and focused on the development and launch of
a business centered around a NASA licensing agreement for the CREW software. For
the remainder of the year, Media Solutions, operating under the name Capita
Systems, Inc., significantly modified and improved the NASA software and
instrumentation hardware and engaged in extensive benchmark testing and
preliminary marketing, performing its first revenue test in October. The cost of
these activities was borne by incremental equity investment obtained over the
course of the year.
LIQUIDITY AND CAPITAL RESOURCES AT SEPTEMBER 30, 1999
With losses expected to continue in the foreseeable future,
our ability to sustain operations is dependent on our ability to raise added
investment capital. We have taken the following steps during the nine month
period ended September 30, 1999 to improve our liquidity and capital resources:
o During the nine-month period ended September 30, 1999 we received cash
proceeds of $445,858 from the sale of common stock.
o We converted $100,000 of notes payable, $31,384 of accrued interest,
and $16,000 of other payables into our common stock.
o We issued $271,488 of common stock in consideration of services
rendered, including rent, equipment purchases, and legal and accounting
services.
o In March 1999, we entered into an agreement with Quaker Capital Markets
Group, Inc. in order to attempt to raise a currently estimated
$7,500,000. In connection therewith, we paid Quaker $10,000 in cash,
$15,000 in common stock and agreed to pay it a percentage of capital
raised.
o In August 1999, we entered into an agreement with an investor for
$400,000 in short-term notes, which are convertible to common stock.
Prior to September 30, 1999, we received the first three installments
totaling $300,000 and we received the fourth installment of $100,000 in
October 1999. This loan was obtained to meet our working capital needs
as we seek additional equity financing.
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At September 30, 1999, our financial condition remained
impaired, with the working capital shortfall being met primarily from the
proceeds of the issuance of common stock and a short-term working capital loan.
The above transactions net of the operating loss had the effect of reducing the
total stockholders' deficiency by $73,136 to a deficiency of $95,397 at
September 30, 1999.
BUSINESS
Capita Research Group, Inc. is a Nevada corporation, which was
created as the result of an exchange transaction between Royal American Mining
Properties, Ltd. and NextGen Systems, Inc., a Pennsylvania corporation (Capita's
Predecessor), on January 30, 1998. We have the exclusive license with the
National Aeronautics and Space Administration for software, which measures a
test respondent's EEG, or brain wave impulse, when subjected to sound or
pictures. This software then converts the raw brain wave data into an index,
which indicates the respondent's level of interest, or lack of interest, also
called "engagement", with the stimuli. We believe that we have the only
commercial operating system of this nature and are using it for testing services
in the media, advertising and entertainment industries, as well as in
pharmaceutical market research.
On January 27, 1998 Royal entered into an Exchange Agreement
under the terms of which on January 30, 1998 Royal acquired all the issued and
outstanding shares of NextGen in exchange for shares of Royal's common stock.
Royal issued 8,622,000 shares (90%) of its common stock to an exchange agent for
the shareholders of NextGen and in return received all the issued and
outstanding shares of NextGen. Under the terms of the Exchange Agreement,
Royal's management and majority shareholders then effected a two for one forward
split of Royal's remaining common stock. Accordingly, Royal's shareholders were
entitled to two shares of our common stock for every one share they owned. Our
name was also changed to Capita Research Group, Inc.
As of January 24, 2000, 21,555,946 shares of our common stock
were issued and outstanding.
To management's knowledge, we have not been subject to
bankruptcy, receivership or any similar proceedings.
Forward-Looking Statements
This prospectus contains forward-looking statements (within
the meaning of Section 21E of the Securities Exchange Act of 1934, as amended),
representing our current expectations and beliefs concerning future events. When
used in this prospectus, the words "believes," "estimates," "plans," "expects,"
"intends," "anticipates," and similar expressions as they relate to us or our
management are intended to identify forward-looking statements. Our actual
results could differ materially from those indicated by the forward-looking
statements because of various risks and uncertainties discussed below and
elsewhere in this prospectus, particularly under "Risk Factors." These risks and
uncertainties are beyond the ability of us to control, in many cases, and we
cannot predict the risks and uncertainties that could cause actual results to
differ materially from those indicated by the forward-looking statements.
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Business
We are a technology company that designs and markets systems
and services that are used in research to measure communications effectiveness.
We do this by measuring the psycho-physiological engagement of an individual to
various forms of communication. The basic technology is licensed under an
exclusive agreement from NASA to measure electrical activity using an
electroencephalogram (EEG) in the human brain and processing the results through
the computer using an algorithm developed by NASA. Our mission is to become the
leading commercial provider of customized, high performance technology systems
and services, including analysis and technical support, for the real-time,
objective measurement of engagement for use in multiple markets.
We are in the development stage. We are in the process of
obtaining patents for our hardware and software technology. Using this
technology in communications research, we are developing systems to evaluate
individual engagement while watching television and plan to develop systems to
test and measure individual engagement with print media advertising, package
design, and Internet web sites. We will market this technology as a testing
service with particular focus on the television advertising industry. We will
provide our client's test results, which determine whether the test subjects are
mentally engaged by the media being viewed.
This type of testing is referred to as "copy testing" or
"advertising testing" research. In addition to general interviews about consumer
preferences, at present there are two principal methods of conducting such
tests. The first is the use of a meter, or dial, by which the test subject
indicates his positive (or negative) reaction associated with the test material.
The second method of testing is performed by companies specializing in focus
group measurement, whereby a group of demographically selected test subjects
views a program and is then asked a series of questions to determine interest or
lack of interest. A substantial volume of advertising research activity is
conducted with what is referred to as "syndicated research", whereby the
creatives of various advertisers are pooled in common projects, creating
multiple testing slots inside of a single project. Syndicated research is
principally conducted through distributed testing in the home, over unused cable
TV channels or by mailing video cassettes to panel respondents which erase
themselves automatically after a single playing, followed by the administration
of questionnaires delivered to the respondent, or by simultaneous or next day
interview of the respondent by telephone. Some syndicated research is conducted
in central facilities. By doing syndicated research, the cost of a research
project is spread across a number of clients, making the research work more
economical to each client company, and more profitable to the research company.
These forms of testing constitute a well-established industry, although there is
much debate within the media industry about the reliability of these tests due
to the subjective nature of measuring viewer response and the tendency of some
test subjects to follow strong and vocal leaders.
Our method of using brain wave measurement technology differs
from standard industry methods in that it monitors brain activity objectively
during respondents' testing and converts the measured activity into what we call
the Engagement Index(TM). Testing allows an advertiser to evaluate consumer
engagement to its commercials on a second-by-second basis.
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Based on early marketing results, we believe that we can
stimulate significant demand for our objective and passive form of test subject
measurement. Although other means of psycho-physiological measurement have been
used to test advertising material, management believes that no method comparable
to our EEG measurement exists in the marketplace.
We have been developing line extensions to the technology into
additional industries during the past year. There has been a version of the
Capita ETS(TM) print media system developed for the conduct of pharmaceutical
market research of doctor detail creatives. We are also completing a new system
to manage custom and syndicated research of Internet web creatives, such as web
pages, banners, and other web objects.
We introduced a version of the Capita ETS(TM) in the fall of
1999 which operates in a networked environment, offering the ability to test
multiple respondents during one simultaneous session. This innovation has
greatly improved the economics of the technology from our standpoint, in terms
of utilization of staff time, facilities and working capital.
We intend to offer line extensions of the foundation operating
system, so that the Capita ETS(TM) can function on a variety of computer
operating system platforms. We are also developing an inventory of data modeling
systems and project management methodologies to more closely tailor the
technology to the specific needs of clients.
Over time, we intend to offer additional analyses to the
Engagement Index(TM), to give a more complete view of the findings of a project.
With the introduction of the Capita ETS(TM) networked operating system in the
fall of 1999, which offers the ability to test multiple respondents
simultaneously, the utility and marketability of the technology has improved
significantly.
Marketing
We are primarily marketing our testing services to
o the established research industry, as a complement to that industry's
existing research methods;
o advertising agencies, as a tool to help refine creative content and
strategy;
o advertising clients, principally consumer products companies and
pharmaceutical companies;
o media companies, such as television networks, cable networks, Internet
media companies, and print media companies; and
o commercial, industrial and professional clients who wish to measure
engagement in certain business settings or situations.
We reach prospects through initial phone or mail contact,
referrals, networking, industry publications, public relations, and the hiring
of outside media and marketing consultants, nearly all of which are followed by
presentations directly in client offices, or by visits to the company's
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headquarters by clients or prospects. In addition, our personnel regularly
attend industry trade shows to develop a network of prospects and generate
broader exposure. We also receive some inquiries from our newly deployed web
site, as well as a flow of RFP's (requests for proposals) from prospective
clients on a regular basis.
During the past two years, we have established a base of
customers in the following categories: beverage companies, principally beer;
pharmaceutical companies; television networks; advertising agencies; small to
mid-sized research companies; media research organizations which operate as
subsidiaries of agencies; Internet advertising agencies and web development
companies; print media companies; and direct response television agencies and
advertisers. There has been relatively little repeat business to date, which we
believe is due to lack of marketing, research and technology infrastructure, as
well as because of the highly advanced nature of our technology as it is being
introduced into a traditionally slow-to-change industry. Most of our projects to
date have been conducted with clients who are characterized as innovators in
their respective companies and industries. It is expected that this will
continue for the foreseeable future.
We have had incidental revenues during the year and a half
that the product has been offered in the market. Many projects conducted for
clients in the early stages were performed without compensation, with us paying
for all costs, in order to get the technology into distribution. During the past
year, more projects have been revenue producing than not. We have gradually been
upgrading the scope of our product and service offerings, as technical
innovations and client feedback have become available. We expect to increase the
ratio of revenue producing projects to total projects conducted over time,
although there is no assurance that this can be achieved. Due to our unique
position in the research industry, we expect to continue conducting non-revenue
producing projects on an ongoing basis, either for R&D purposes, for marketing
promotion to launch the technology into additional fields, or to make available
pro bono engagement research for publication by leading marketing, Internet or
research trade organizations in new fields of use. It is the position of
management that these ongoing non-paid projects help promote the market
penetration of the technology over time.
The limited progress in producing meaningful revenues to date
is generally due to the lack of adequate capital to fund expansion of
operations, marketing and staffing in a highly complex line of business.
We have conducted virtually no advertising to date, other than
limited direct mail, e-mail campaigns and our web site, due to the lack of
available funding. We have recently hired a local agency specializing in
multimedia creative development and distribution to upgrade our presentation
materials, and for placement of trade advertising. We have also recently hired a
public relations firm to increase exposure in trade publications as well as in
mass media outlets. We have an ongoing relationship with a leading web
development company to create and maintain our web site, and to develop new web
sites for targeted marketing. While only limited funds are available for this
purpose at present, we are optimistic that these new initiatives will increase
the awareness of our technology in the research marketplace, although there is
no assurance that this will occur.
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Competition
We face well-established and well-funded competition. Our
principal competition consists of entities within the opinion research industry
which provide a third party testing service either to advertising agencies or
directly to the advertising client. Often, agencies own their own dedicated
research company. According to Advertising Age, in 1998, combined revenue from
research companies exceeded $4.5 billion in the US and $8.0 billion worldwide.
The top five companies in this group are:
1998 Revenue (Millions)
-----------------------
Company US Worldwide
------- --------- ---------
IMS Health 412.3 $1,084.0
Nielsen Media Research 401.9 401.9
Information Resources Inc. 397.0 511.3
AC Nielsen Corp. 390.4 1,425.4
VNU Marketing Information Services 343.0 428.0
We intend to compete against these established research
entities on the basis of technology differentiation, test reliability and
pricing. As mentioned above, management believes that our technology and testing
methodology are incomparable as to the nature and composition of our test
results. Management further believes that measurements of engagement, developed
with scientific objectivity, will provide a competitive advantage in an industry
seeking more in-depth analysis beyond subjective results.
In addition to established competition, we also face
uncertainty regarding acceptance of, and demand for, our method of advertising
and market research testing. Our method represents a new development in an
established industry. Advertising researchers may be slow to accept our method
of testing, or may reject it.
Research and Development
We are in the development stage. Research and development of
our products and services can be divided into several categories:
o development of the Capita ETS(TM)operating system;
o data modeling and data interpretation of data produced by the technology;
o research project methodology development; and
o development of software and databases to support the Capita ETS(TM).
The Capita ETS(TM) operating system is a series of hardware
and software components, methods and procedures which produce the Engagement
Index(SM) and other measures synchronized with marketing and communications
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media being tested. This operating system requires ongoing research and
development for ways to enhance, debug, miniaturize, and increase ease of use.
We retain a roster of engineers, scientists, and consulting firms to make such
improvements and modifications, and regularly implement updates to our
technology.
Recently, we embarked on a major effort to substantially
improve the data modeling of information produced by our technology. There is no
assurance that these expenditures will result in increased market penetration or
acceptance of the technology.
NASA License
We were granted two successive modifications to the original
license agreement granted to us by NASA on August 4, 1997. The first
modification in 1998 expanded the field of use to include all forms of
advertising, media and entertainment. The second modification, granted in the
fall of 1999, expanded the field of use to include "all fields." In addition,
the second modification increased the expiration date of the license from five
years from the date of the license, to the greater of the life of the patent (20
years from the date of the patent application, which was in 1996), or in the
event that the patent does not issue, the life of the software copyright, which
in the case of the NASA technology, is 75 years from the filing date of 1996.
We are obligated to pay an annual licensing fee of $15,000 to
NASA upon each annual renewal of the CREW license in July of each year. We have
filed all annual reports and paid all licensing fees to date on a timely basis,
and are in compliance of all contractual provisions under the license.
Production and Manufacturing
We require specialized hardware for our operations. Our
employees and contractors manufacture such hardware. Systems and technology are
built and assembled by our personnel as needed.
Intellectual Property
We are in the process of applying for a number of patents
pertaining to our technology. We have a number of trademarks and servicemarks on
trade names used in our operations and marketing. All such trademarks and
servicemarks are under US Trademark filings applied for. All computer software
code used by us is under software source code copyrights filed with the US
Trademark and Copyright office. Although we believe that such patent,
trademarks, servicemarks and copyrights will be adequate to protect our
business, there can be no assurance that they will do so.
We have a number of patents on technology under development,
and additional intellectual property exceeding patents filed to date. We
maintain a policy of applying for patents, trademarks, and intellectual property
copyrights prior to offering any product or service for sale, in order to retain
worldwide ownership rights. This is necessary because virtually all of our asset
value is in our intellectual property rights and technical know-how. There is no
assurance that these policies will adequately protect our intellectual property.
See also "NASA License," above.
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Personnel
We employ 12 full time employees in our Blue Bell,
Pennsylvania headquarters. We also do business with several independent
contractors who perform services on an "as needed" basis.
Insurance
We maintain errors and omissions insurance, as well as general
liability insurance, to cover our risk involving general business operations. We
also maintain directors and officers liability insurance to cover risk of
shareholder and other litigation. We have been advised by counsel that coverage
of and claims arising from any current or future litigation involving Michael
Kline (see "Legal Proceedings" below) are excluded under our D&O policy,
inasmuch as this dispute has been classified as a pre-existing condition at the
time of the policy application. At present we do not have any key man insurance
contemplated, applied for or in force for any of our officers or other
personnel.
Investment Banking Relationships
In March 1999, we entered into an agreement with Quaker
Capital Markets Group, Inc. to solicit equity funding on our behalf on a best
efforts basis. Since that time, Quaker has been successful in obtaining bridge
loan financing during the fall of 1999 in an amount totaling $400,000 from a
private investor, as disclosed below. Following that, Quaker has been actively
engaged in discussions with financial institutions, venture capital funds and
high net worth individuals about securing private placement equity funding for
us. At present, we and Quaker are seeking equity funding in the range of
$7,000,000 to $15,000,000, depending on the terms on which such funding may
become available. Additionally, Quaker is actively soliciting joint venture
arrangements with related publicly traded companies interested in our
technology. Under its agreement, Quaker would receive 7% on any equity funding
raised, as well as 4% on the first year's payment under any joint venture
arrangement solicited and closed by them. There can be no assurance that we will
be successful in obtaining any such equity funding or joint venture
arrangements.
Recent Investment Development
We were approached on an unsolicited basis by AIG SoundShore
Funds in late December 1999 regarding an interim equity financing. This
initiative resulted in the closing of a private placement of units for an
initial cash investment of $500,000 on January 6, 2000. The units consisted of
1,000,000 shares of common stock at $.50 per share, 1,000,000 warrants to
purchase shares of common stock at $.50 per share for five years, and 1,000,000
warrants to purchase shares of common stock at $1.00 per share for five years.
In addition, we closed a second private placement of 260,000 units for an
initial cash investment of $130,000 by certain additional investors on January
21, 2000. We were required under these private placements to file this
registration statement to register the common stock and the common stock
underlying the warrants.
Because of piggyback rights granted to a private investor
under the bridge loan secured by Quaker, an additional 1,600,000 shares of
common stock are to be included under this registration statement. The private
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investor, James R. Salim, has advised us that he intends to convert his bridge
loan into common stock and exercise his registration rights.
Description of Property
Listed below are our principal offices. These properties are
leased under a non-cancellable operating lease providing for minimum future
annual rental payments of $92,712 and $96,765 for 2000 and 2001, respectively.
Location Square Feet Lease Expiration
- -------- ----------- ----------------
591 Skippack Pike, Suite 300 4,939 December 2001
591 Skippack Pike, Suite 100
Blue Bell, Pennsylvania
We believe our facilities are well maintained and are of
adequate size for our present needs and planned expansion in the near future.
Legal Proceedings
Michael Kline, one of our former officers and directors, has
brought an action against us, our subsidiary, Capita Systems, Inc., and David
Hunter, alleging that he was not paid wages which he was due and that he was not
reimbursed for expenses which he incurred in connection with his service to the
Company. Mr. Kline is seeking approximately $90,000 plus interest, fees and
costs. We believe that we have meritorious defenses to this action, and we
intend to vigorously defend against these claims. We have also asserted a
counterclaim against Mr. Kline seeking in excess of $100,000.
MANAGEMENT
Directors and Officers
The following sets forth certain information regarding our
executive officers and directors:
Name Age Position(s) Held with Company
- ---- --- -----------------------------
David B. Hunter 45 President, Chief Executive Officer and Director
Tomas J. Stenstrom 27 Executive Vice President,Chief Technology Officer
and Director&
Anthony J. Baratta 36 Vice President and Treasurer
Steven A. Plisinski 27 Chief Financial Officer
Millard E. Tydings II 41 Secretary and Director
Ralph Anglin 74 Director
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The following is a brief summary of the business experience of
each of our directors and officers:
David B. Hunter, age 45, has been President and Chief Executive Officer since
January 1998 and a Director since June 1995. Mr. Hunter has been responsible for
designing, deploying, financing and marketing the Capita Engagement Testing
System(TM)since its inception, and originated, negotiated and closed the
licensing agreement with NASA in 1997. From 1989 to 1995 Mr. Hunter was an
independent money manager. From 1980 to 1989 he was a Vice President
successively with regional investment firms Tucker Anthony & RL Day, Inc., Piper
Jaffray & Hopwood, Inc. and W.H. Newbolds Son & Co., Inc. Prior to that, Mr.
Hunter was a consulting actuary and actuarial software specialist with a major
pension actuarial firm for two years. Mr. Hunter earned a B.S. degree in
Accounting from Temple University in 1980.
Tomas J. Stenstrom, age 27, Executive Vice President, Chief Technology Officer,
and Director, has been associated with us since August 1997. From 1992 to 1998
he owned and operated a computer consulting firm providing hardware support,
applications training, and software programming and development. From 1997 to
1998 he was employed by Prescient Systems as an Oracle Database Administrator
and a Graphic User Interface (GUI) developer. From 1994 to 1997 he worked for
IntelliPro Inc. as an Applications Engineer developing educational multimedia
software for both the desktop PC and the Internet. He received a B.S. in
Mechanical - Aerospace Engineering from Rutgers University in 1994.
Anthony J. Baratta, age 36, has been Treasurer since November 1998 and with us
since November 1997, and was promoted to Vice President in January 2000. From
1990 to 1997 he was employed by Pennsylvania Hospital as a cash manager. From
1985 to 1990 he was associated with Merrill Lynch and Co., Inc. and Delaware
Group of Investments in operations. Mr. Baratta received a B.S. in business
administration with a concentration in finance and accounting from Temple
University in 1988.
Steven A. Plisinski, age 27, Chief Financial Officer, began his career with us
in September 1999, and was previously associated with Genesis Health Ventures,
Inc., a NYSE-listed company. At Genesis, he was most recently Supervising Senior
Accountant, in charge of a staff of division level accountants, responsible for
overseeing the accounting functions of 24 divisions and the coordination of
internal and external audits. He spent four years with Genesis, and was promoted
several times during his tenure. Mr. Plisinski, who passed his CPA exam in
Pennsylvania, graduated cum laude with a BS in accounting from West Chester
University. He was named Chief Financial Officer in January 2000.
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Millard E. Tydings II, age 41, has been a Director since September 1996.
Currently an independent financial consultant and mergers and acquisitions
specialist. Mr. Tydings was formerly a marketing representative with the United
States Chamber of Commerce from 1992 to 1994. He received a B.A. from Johns
Hopkins University in 1992.
Ralph Anglin, age 74, Director, has been a Director since November 1998.
Currently Mr. Anglin is an active consultant with PRA Development and Management
Corporation. From 1980 to 1985 he was the President of Robb Cape Inc. Mr. Anglin
is a graduate of the Massachusetts Institute of Technology with a B.S. in civil
engineering in 1953.
All directors hold office until the next annual stockholders'
meeting or until death, resignation, retirement, removal, disqualification or
until their successors have been elected and qualified. Vacancies in the
existing board may be filled by majority vote of the remaining directors.
Officers serve at the will of the board of directors. There are no written
employment contracts outstanding.
Executive Compensation
The following sets forth the salary and bonus compensation
paid during the fiscal years ended December 31, 1999, 1998 and 1997 to the
President and Chief Executive Officer. No officer or employee received calendar
1999 salary and bonus compensation which exceeded $100,000. Officers currently
do not receive any bonuses. Directors do not receive any type of compensation
for attending the board meetings.
<TABLE>
<CAPTION>
Summary Compensation Table
Name and Fiscal Long Term
Principal Position Year Annual Compensation Compensation
------------------ ---- ------------------- ------------
Other Annual Restricted Securities
Salary($) Bonus($) Compensation ($) Stock Award(s) Underlying All Other Compensation
($) Options (#) ($)
<S> <C> <C> <C> <C> <C> <C> <C>
David B. Hunter....... 1999 $61,731 -- -- -- -- --
1998 $55,385 -- -- -- -- --
1997 $24,000 -- -- -- -- --
</TABLE>
There are no employment agreements with officers or directors
at the present time.
No options to purchase common stock were granted to Mr. Hunter
during the fiscal year ended December 31, 1999 or held by Mr. Hunter as of
December 31, 1999.
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1999 Stock Option Plan
Effective July 27, 1999, our board of directors and the
shareholders adopted the Capita Research Group, Inc. 1999 Stock Option Plan to
retain and attract key personnel. The following discussion of the material
features of the stock option plan is qualified by reference to the text of the
stock option plan filed as an exhibit to the registration statement of which
this prospectus forms a part.
Share Reserve and Eligibility. Under the stock option plan,
options to purchase up to an aggregate of 2,500,000 shares of common stock may
be granted to our key employees as sell as of our affiliates or other designees,
and to our officers and directors. As of the date of this prospectus, we have
granted options to purchase 234,900 shares under the stock option plan. The
maximum number of shares covered by options which may be granted to any person
under the stock option plan during any fiscal year is 1,000,000.
Administration. The compensation committee of the board of
directors or a subcommittee of the compensation committee appointed by the
compensation committee (the committee or subcommittee administering the plan is
hereinafter referred to as the "committee") administers the stock option plan
and determines the persons who are to receive options and the number of shares
to be subject to each option. In selecting individuals for options and
determining the terms thereof, the committee may consider any factors it deems
relevant including present and potential contributions to the success of our
business. Options granted under the stock option plan must be exercised within a
period fixed by the committee, which may not exceed ten years from the date of
the option or, in the case of incentive stock options granted to any holder on
the date of grant of more than ten percent of the total combined voting power of
all classes of our stock, five years from the date of grant of the option.
Options may be made exercisable in whole or in installments, as determined by
the committee.
Plan Features. Options generally may not be transferred other
than by will or the laws of descent and distribution and during the lifetime of
an optionee may be exercised only by the optionee. However, the committee may,
in its discretion, provide that during the lifetime of an optionee, the optionee
may transfer his options to or for the benefit of a member of his immediate
family or to a charitable organization exempt from income tax under Section
501(c)(3) of Internal Revenue Code of 1986, as amended. The exercise price may
not be less than the market value of the common stock on the date of grant of
the option. In the case of incentive stock options granted to any holders on the
date of grant of more than ten percent of the total combined voting power of all
classes of our stock or of any of our affiliates, the exercise price may not be
less than 110% of the market value per share of the common stock on the date of
grant. Unless designated as "incentive stock options" intended to qualify under
Section 422 of the Internal Revenue Code, options which are granted under the
stock option plan are intended to be "nonstatutory stock options". The exercise
price may be paid in cash, shares of common stock owned by the optionee, or in a
combination of cash and shares.
Change in Common Stock. The Stock Option Plan provides that,
in the event of changes in our corporate structure or certain events affecting
our common stock, the committee may, in its discretion, make adjustments with
respect to the numbers or kind of shares which may be issued under the Stock
Option Plan or which are covered by outstanding options, or in the option price
per share, or both.
24
<PAGE>
Change in Control. The committee may in its discretion provide
that, in connection with any merger or consolidation or any sale or transfer by
us of all or a majority of our assets or any tender offer or exchange offer for
or the acquisition, directly or indirectly, by any person or group of all or a
majority of our then-outstanding voting securities, outstanding options under
the stock option plan will become exercisable in full or in part,
notwithstanding any other provision of the stock option plan or of any
outstanding options granted thereunder, on and after (i) 15 days prior to the
effective date of such merger, consolidation, sale, transfer or acquisition or
(ii) the date of commencement of such tender offer or exchange offer, as the
case may be.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
In October of 1996, Media Solutions, a predecessor of the
Company, entered into a $100,000 bridge loan agreement with Margaret W. Long,
one of its shareholders. Under the terms of the agreement, the company utilized
borrowed funds to satisfy near term working capital obligations. Management
believed that repayment would come both from anticipated system sales and from
proceeds of an offering of equity securities to outside investors. This loan was
converted by mutual agreement into common stock, including all accrued interest,
in July 1999, at the rate of $.25 per share, retiring the loan to Ms. Long in
its entirety.
During 1999, we issued 191,340 shares of common stock at $.25
per share to William Hummel, a former Director, as prepaid rent on office space
that we lease and office equipment.
In January 1999, we issued 84,000 shares of common stock at $
.25 per share to Ralph Anglin, a Director, in return for various office
furniture and fixtures at a fair market value of $21,000. In December 1999, Mr.
Anglin loaned us $24,167.35 to cover temporary working capital needs. This loan
was repaid in January 2000.
In June 1999, we issued 3,350,273 shares of common stock to
officers and directors in exchange for notes receivable totaling $837,568.25, at
the rate of $.25 per share.
In August 1999, we issued a bridge loan note totaling $400,000
to James R. Salim, convertible into our common stock at the rate of $.25 per
share, and 300,000 warrants exercisable for the purchase of 300,000 shares of
common stock at an exercise price of $.25 per share.
DESCRIPTION OF SECURITIES
General
Our authorized capital stock consists of 100,000,000 shares of
common stock, par value $.001 per share, of which 25,675,946 shares will be
issued and outstanding (assuming the full exercise of the warrants held by the
SoundShore Investors and the Additional Investors and the conversion of the
convertible promissory note held by James R. Salim) as of the closing of this
offering.
25
<PAGE>
Common Stock
The holders of shares of common stock are entitled to one vote
per share in the election of our directors and on all other matters to be voted
on by stockholders. The holders of common stock are entitled to receive ratably
such dividends, if any, as may be declared from time to time by the Board of
Directors out of funds legally available therefor. See "Dividend Policy." In the
event of liquidation, dissolution or winding up of the Company, the holders of
common stock are entitled to share ratably in all assets remaining after payment
of liabilities then outstanding. The common stock has no preemptive or
conversion rights or other subscription rights. There are no redemption or
sinking fund provisions applicable to the common stock. All outstanding shares
of common stock are fully paid and nonassessable.
Warrants
Warrants for the purchase of 2,520,000 shares of our common
stock were issued to certain of the selling security holders in connection with
two private placements covering an aggregate of 1,260,000 units, each unit
consisting of one share of common stock and two warrants. Each warrant is
exercisable for the purchase of one share of common stock for a period of five
years ending January 1, 2005. In each unit, one warrant is exercisable for $.50
per share and one warrant is exercisable for $1.00 per share.
In addition, warrants exercisable for 300,000 shares of common
stock at an exercise price of $.25 per share were issued in August 1999 in
connection with a $400,000 convertible bridge note financing.
Stock Transfer Agent and Registrar
The stock transfer agent and registrar for the common stock is
Nevada Agency and Trust Company, Reno, Nevada.
Stockholder Reports
We furnish our stockholders with annual reports containing
audited financial statements and may furnish our stockholders quarterly or
semi-annual reports containing unaudited financial information.
26
<PAGE>
SECURITY OWNERSHIP OF
CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth the number and percentage of
shares of our common stock owned of record and beneficially by each person or
entity owning more than 5% of such shares, each director, our Chief Executive
Officer and all our executive officers and directors, as a group at January 24,
2000. Under the rules of the Commission, a person is deemed to be a beneficial
owner of a security if such person has or shares the power to dispose of or to
direct the disposition of, or to vote or to direct the voting of, such security.
In general, a person is also deemed to be a beneficial owner of any securities
of which that person has the right to acquire beneficial ownership within 60
days.
- -----------------------------------------------------------------------------
Number of
Shares Current
Name Owned Percentage
- -----------------------------------------------------------------------------
David B. Hunter (1) 2,994,727 13.89%
591 Skippack Pike, Suite 300
Blue Bell, PA 19422
- -----------------------------------------------------------------------------
Ralph Anglin (2) (3) 2,815,686 13.06%
- -----------------------------------------------------------------------------
James R. Salim (4) 2,489,237 10.35%
- -----------------------------------------------------------------------------
Michael Kline 1,295,432 6.01%
- -----------------------------------------------------------------------------
Tomas J. Stenstrom (1) 800,000 3.71%
275 Camp Hill Road
Fort Washington, PA 19034
- -----------------------------------------------------------------------------
Millard E. Tydings, II (1) 100,000 0.46%
2705 Pocock Road
Monkton, MD 21111
- -----------------------------------------------------------------------------
SoundShore Holdings Ltd. (5) 2,000,250 8.49%
c/o AIG International Management
Company, Inc.
1281 East Main Street
Stamford, Connecticut 06902
- -----------------------------------------------------------------------------
All Executive Officers and 7,030,413 32.61%
Directors as a Group
- -----------------------------------------------------------------------------
(1) Officer and Director.
(2) Director only.
(3) Included in Mr. Anglin's shareholdings are 76,010 shares owned by his
profit-sharing plan and 902,000 shares owned by his personal IRA.
(4) Included in Mr. Salim's shareholdings are 1,600,000 shares issuable
upon the conversion of his convertible promissory note and 300,000
shares issuable upon the exercise of his warrants.
(5) Included in SoundShore Holdings Ltd.'s shareholdings are 1,333,500
shares issuable upon the exercise of its warrants.
27
<PAGE>
LEGAL MATTERS
The validity of the shares of common stock offered hereby will
be passed upon for us by Torys, 237 Park Avenue, New York, New York 10017. Torys
owns 260,000 shares of common stock and holds options to purchase 50,000 shares
at an exercise price of $.89 per share.
EXPERTS
Our financial statements for each of the years in the
three-year period ended December 31, 1998 included in this prospectus have been
so included in reliance on the reports of Rudolph, Palitz LLC, our independent
accountants for such periods, given on the authority of said firm as experts in
auditing and accounting.
WHERE YOU CAN FIND MORE INFORMATION
We have filed with the Securities and Exchange Commission a
registration statement on Form SB-2 under the Securities Act of 1933 with
respect to the shares of common stock being offered in this prospectus. This
prospectus, which forms a part of the registration statement, does not contain
all of the information set forth in the registration statement and the exhibits
and schedules thereto. For further information about us and the common stock
being offered by this prospectus, you should read the registration statement and
its exhibits and schedules, which you may read without charge at the Public
Reference Section of the Commission at Room 1024, Judiciary Plaza, 450 Fifth
Street, N.W., Washington, D.C. 20549 and at the regional offices of the
Commission located at Northwestern Atrium Center, Suite 1400, 500 West Madison
Street, Chicago, Illinois 60661-2511 or Seven World Trade Center, New York, New
York 10048. You can also obtain copies of these materials at prescribed rates
from the Public Reference Section of the Commission in Washington, D.C. 20549.
Any statements contained in the prospectus as to the contents of any contract or
other document referred to are not necessarily complete, and in each instance
reference is made to the copy of such contract or document filed as an exhibit
to the registration statement, each such statement being qualified in all
respects by such reference. We also file annual, quarterly and other reports and
other information with the Commission. These materials may be obtained at any of
the places mentioned above or at the Commission's Web site. The address of such
site is http://www.sec.gov.
28
<PAGE>
CAPITA RESEARCH GROUP, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
YEARS ENDED DECEMBER 31, 1998, 1997 and 1996
INDEX TO FINANCIAL STATEMENTS
Table of Contents
PAGE(s)
independent auditors' report F-1
consolidated and combined balance sheets F-2
consolidated and combined statements of operations F-3
consolidated and Combined statements of changes in
stockholders' deficiency
consolidated and combined statements of cash flows F-5
Notes to consolidated and combined financial statements F-6 - F-16
29
<PAGE>
Independent Auditors' Report
Directors and Shareholders
Capita Research Group, Inc.
(Formerly NextGen Systems, Inc.)
(A Development Stage Company)
Blue Bell, Pennsylvania
We have audited the accompanying consolidated balance sheet of Capita
Research Group, Inc. and Subsidiary (Formerly NextGen Systems, Inc. and
Subsidiary and Affiliate) (a development stage company) as of December 31, 1998
and the related consolidated statements of operations, changes in stockholders'
deficiency, and cash flows for the year ended December 31, 1998, and the
combined balance sheets of NextGen Systems, Inc. and Subsidiary and Media
Solutions International, Inc. (an affiliate) (development stage companies) as of
December 31, 1997, and the related combined statements of operations, changes in
stockholders' deficiency and cash flows for each of the two years in the period
ended December 31, 1997. These consolidated and combined financial statements
are the responsibility of the Companies' management. Our responsibility is to
express an opinion on these financial statements based on our audits. We did not
audit the December 31, 1996 financial statements of Media Solutions
International, Inc., whose statements reflect total assets and revenues
constituting 37 percent and 5 percent, respectively, of the related combined
totals for that year. Those statements were audited by other auditors whose
report has been furnished to us, and our opinion, insofar as it relates to the
amounts included in Media Solutions International, Inc., is based solely on the
report of the other auditors.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits and the report of other auditors provide a reasonable
basis for our opinion.
In our opinion, based on our audits and the report of other auditors,
the consolidated and combined financial statements referred to above present
fairly, in all material respects, the financial position of Capita Research
Group, Inc. and Subsidiary (a development stage company), as of December 31,
1998 and 1997 and the results of their operations, and their cash flows for each
of the three years in the period ended December 31, 1998, in conformity with
generally accepted accounting principles.
The accompanying financial statements have been prepared assuming that
the Company will continue as a going concern. As discussed in Note 9 to the
financial statements, the Company is a development stage company with no
significant operating results to date and has suffered recurring losses which
raise substantial doubt about its ability to continue as a going concern.
Management's plans in regard to these matters are also described in Note 9. The
financial statements do not include any adjustments that might result from the
outcome of this uncertainty.
/s/Rudolph, Palitz LLP
- ----------------------
Rudolph Palitz
March 19, 1999
F-1
<PAGE>
<TABLE>
<CAPTION>
CAPITA RESEARCH
GROUP, INC. AND
SUBSIDIARY
(A DEVELOPMENT STAGE
COMPANY)
CONSOLIDATED AND COMBINED
BALANCE SHEETS
DECEMBER 31, 1998 AND
1997
ASSETS
1998 1997
CURRENT ASSETS (Consolidated) (Combined)
- -------------- -------------- ----------
<S> <C> <C>
Cash $ 19,301 $ 15,190
Prepaid expenses 9,508 -
Accounts and other receivables 1,000 2,000
---------- -----------
Total current assets 29,809 17,190
---------- -----------
EQUIPMENT, NET 92,511 85,083
---------- -----------
OTHER ASSETS
Due from stockholder 15,534 -
Organization costs, net - 19,638
Deposits 3,560 4,929
---------- -----------
Total other assets 19,094 24,567
---------- -----------
$ 141,414 $ 126,840
========== ===========
LIABILITIES AND
STOCKHOLDERS'
DEFICIENCY
CURRENT LIABILITIES
Accounts payable and accrued expenses $ 186,052 $ 161,008
Notes payable - 60,000
Current portion of obligations under capital leases 14,281 -
Duc to stockholders 100,000 225,791
---------- -----------
Total current liabilities 300,333 446,799
---------- -----------
LONG-TERM OBLIGATIONS UNDER CAPITAL LEASES,
NET OF CURRENT PORTION 9,614 -
---------- -----------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' DEFICIENCY Common stock, NextGen Systems, Inc.
$1.00 par value, 3,000,000 shares authorized;
issued and outstanding 337,435 in 1997 - 337,435
Common stock, Media Solutions International, Inc.
$.Ol par value, 10,000,000 shares authorized;
issued and outstanding 1,260,100 in 1997 - 12,601
Common stock, Capita Research Group, Inc.
$.001 par value, 100,000,000 shares authorized;
issued and outstanding, 13,562,900, December 31, 1998 13,563 -
Additional paid-in capital 2,181,114 532,533
Deficit accumulated during development stage (2,363,210) (1,202,528)
---------- -----------
Total stockholders' deficiency (168,533) (319,959)
---------- -----------
$ 141,414 $ 126,840
========== ===========
</TABLE>
See Notes to Consolidated and Combined Financial Statements.
F-2
<PAGE>
<TABLE>
CAPITA RESEARCH GROUP, INC. AND SUBSIDIARY
(A Development Stage Company)
CONSOLIDATED AND COMBINED STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
<CAPTION>
1998 1997 1996
(Consolidated) (Combined) (Combined)
-------------- ---------- ----------
<S> <C> <C> <C>
REVENUES $ 85,500 $ 81,894 $ 360,654
COST OF REVENUES 125,826 96,100 253,175
--------------- --------------- --------------
GROSS PROFIT (LOSS) (40,326) (14,206) 107,479
OPERATING EXPENSES
Selling 47,425 31,947 70,669
Technical 195,189 81,725 66,479
Administrative 405,129 154,365 118,738
Other general and administrative 442,631 387,585 248,855
--------------- --------------- --------------
Total operating expenses 1,090,374 655,622 504,741
--------------- --------------- --------------
LOSS FROM OPERATIONS (1,130,700) (669,828) (397,262)
--------------- --------------- --------------
OTHER INCOME (EXPENSE)
Gain on disposition of asset - - 3,900
Interest expense (29,982) (19,452) (5,613)
--------------- --------------- --------------
Total other income (expense) (29,982) (19,452) (1,713)
--------------- --------------- --------------
LOSS BEFORE INCOME TAXES (1,160,682) (689,280) (398,975)
INCOME TAXES - - -
--------------- --------------- --------------
NET LOSS $ (1,160,682) $ (689,280) $ (398,975)
=============== =============== ==============
NET LOSS PER SHARE, BASIC AND DILUTED $ (0.10) $ (0.40) $ (0.39)
=============== =============== ==============
WEIGHTED AVERAGE SHARES OUTSTANDING
11,380,306 1,736,458 1,034,658
=============== =============== ==============
</TABLE>
See Notes to Consolidated and Combined Financial Statements.
F-3
<PAGE>
<TABLE>
CAPITA RESEARCH GROUP, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED AND COMBINED STATEMENTS OF CHANGES IN
STOCKHOLDERS' DEFICIENCY
YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
<CAPTION>
MEDIA SOLUTIONS CAPITA RESEARCH ACCUMULATED
NEXTGEN SYSTEMS, INC. INTERNATIONAL, INC. GROUP, INC. ADDITIONAL DURING
NUMBER OF DOLLAR NUMBER OF DOLLAR NUMBER OF DOLLAR PAID-IN DEVELOPMENT
Balance, SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT CAPITAL STAGE PERIOD TOTAL
- -------- ------ ------ ------ ------ ------ ------ ------- ------------ -----
January 1, 1996
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Issuance of stock 500 $ 500 - $ - - $ - $ 199,429 $ (114,273) $ 85,656
at inception - - 100,000 1000 - - - - 1,000
Issuance of stock - - 1,826,750 18,268 - - 131,732 - 150,000
Net loss - - - - - - - (398,975) (398,975)
------- ------ --------- ------- ------- ------- ------- ------------ ----------
Balance,
December 31, 1996 500 500 1,926,750 19,268 - - 331,161 (513,248) (162,319)
Issuance of stock 337,350 337,350 - - - - - - 337,350
Issuance of stock - - 38,850 388 - - 193,902 - 194,290
Stock redemption
and retirement - - (705,500) (7,055) - - 7,055 - -
Stock redemption
and retirement (415) (415) - - - - 415 - -
Netloss - - - - - - - (689,280) (689,280)
------- ------ --------- ------- ------- ------- ------- ------------ ----------
Balance,
December 31, 1997 337,435 337,435 1,260,100 12,601 - - 532,533 (1,202,528) (319,959)
Exchange and
reorganization:
Issuance of common
stock in
exchange for
debt obligations
(Note 1) 218,485 218,485 10,000 100 - - 24,900 - 243,485
Issuance of common
stock in
exchange for
shares of MSH in
connection
with the
merger of
January
12, 1998 (Note 1) 1,099,250 1,099,250 (219,850) (2,199) - - 2,199 - 1,099,250
Redemption of
shares in
NextGen and
MSII for no
consideration (Note 1) (85) (85) (1,050,250) (10,502) - - 10,587 - -
Issuance of stock 72,000 72,000 - - - - - - 72,000
Issuance of shares
in Royal in
exchange for
shares of NextGen
in connection
with the
merger of
January29,
1998(Note 1) (1,727,085) (1,727,085) - - 9,580,000 9,580 618,155 - 580
-
Issuance of stock - - - - 3,982,900 3,983 992,740 (1,099,350)
Net loss - - - - - - (1,160,682)(1,160,682)
------- ------ --------- ------- ------- ------- ------- ------------ ----------
Balance,
December 31, 1998 - $ - - $- 13,562,900 $ 13,563 $ 2,181,114 (2,363,210 $ (168,533)
========= ======== ========= ======== ========== ======== =========== ========== ==========
</TABLE>
See Notes to Consolidated and Combined Financial
Statements.
F-4
<TABLE>
CAPITA RESEARCH GROUP, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED AND COMBINED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
<CAPTION>
1998 1997 1996
(Consolidated) (Combined) (Combined)
-------------- ---------- ----------
OPERATING ACTIVITIES
<S> <C> <C> <C>
Net loss $(1,160,682) $(689,280) $(398,975)
Adjustments to reconcile net loss to
net cash used in operating activities:
Common stock issued for salaries and services 460,208 - -
Gain on disposition of asset - - (3,900)
Depreciation 41,627 28,007 20,997
Amortization 19,638 14,370 4,875
Changes in operating assets and liabilities:
(Increase) decrease in:
Accounts receivable 1,000 26,201 47,908
Other assets 1,369 (1,126) 197
Prepaid expenses (9,508) - -
Increase (decrease) in:
Accounts payable and accrued expenses 25,044 100,057 12,041
--------- -------- ---------
Net cash used in operating activities (621,304) (521,771) (316,857)
--------- -------- ---------
INVESTING ACTIVITIES
Purchase of equipment (16,255) (34,977) (40,377)
Advances to stockholder (15,534) - -
Organization costs - - (38,883)
--------- -------- ---------
Net cash used in investing activities (31,789) (34,977) (79,260)
--------- -------- ---------
FINANCING ACTIVITIES
Proceeds from issuance of stock 675,075 531,640 151,000
Proceeds from note payable - 60,000 -
Proceeds from (repayment of) stockholder loans (8,966) - 237,832
Proceeds from other loans - - 8,300
Repayment of capital lease obligations (8,905) - -
Repayment of loans - (20,341) (1,000)
--------- -------- ---------
Net cash provided by financing activities 657,204 571,299 396,132
--------- -------- ---------
NET INCREASE IN CASH 4,111 14,551 15
CASH, BEGINNING 15,190 639 624
--------- -------- ---------
CASH, ENDING
$19,301 $15,190 $639
======= ======= =========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Capital lease obligations incurred related to the
acquisition of equipment $32,800 $ - $ -
======= ======= =========
Conversion of notes payable to
common stock $176,825 $ - $ -
======= ======= =========
See Notes to Consolidated and Combined Financial Statements.
</TABLE>
CAPITA RESEARCH GROUP, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED AND COMBINED STATEMENTS OF CASH FLOWS
YEARS ENDED december 31, 1998, 1997 and 1996
NOTE 1. HISTORY AND NATURE OF THE BUSINESSES AND BUSINESS COMBINATIONS
Capita Research Group Inc. and Subsidiaries (the
"Company" or "Capita") (formerly NextGen Systems, Inc., and
Subsidiary and Affiliate ("NextGen")) is in the development
stage of operations.
Capita's predecessor, NextGen (formerly Media
Solutions, Inc., ("Media Solutions" or "MSI")), was
incorporated in Pennsylvania on June 6, 1994, for the purpose
of developing and selling MediaLink, a client/server software
system used by the direct-response advertising industry. From
January 1, 1996 through December 31, 1998, the Company, its
subsidiary Capita Systems, Inc., and their predecessors have
been principally devoted to research and development,
organizational activities, and raising capital. For the years
ended December 31, 1998, 1997 and 1996, the Company had
$85,500, $81,894 and $360,654 of net revenues, respectively.
The ultimate recovery of the Company's investments and costs
is dependent on future profitable operations, which presently
cannot be determined.
In September of 1995, Media Solutions initiated
discussions with the National Aeronautics and Space
Administration ("NASA") in Langley, Virginia about licensing
NASA's software technology known as the "CREW software." This
software measures a test respondent's EEG, or brain wave
impulse, when subjected to aural or visual stimuli. The CREW
software then converts the raw brain wave data into an index,
which indicates the respondent's level of interest in, or
boredom, with the stimuli. In January of 1996, Media Solutions
filed an application with NASA for a license for the
commercial application of the CREW software with the intention
to use it as a testing service in the media and advertising
industries.
In June of 1996, the principal stockholders of NextGen,
along with additional investors formed Media Solutions
International, Inc. ("MSII"), which was incorporated in
Pennsylvania. MSII licensed the rights from Media Solutions to
continue the development and selling of MediaLink.
See Accountants' Review Report and Notes to Financial Statements.
F-6
<PAGE>
CAPITA RESEARCH GROUP, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED AND COMBINED STATEMENTS OF CASH FLOWS
YEARS ENDED december 31, 1998, 1997 and 1996
NOTE 1. HISTORY AND NATURE OF THE BUSINESSES AND BUSINESS COMBINATIONS
(CONTINUED)
In May of 1997, NASA approved Media Solutions'
application for the CREW software license and issued a license
agreement in the name of "NextGen Systems, Inc.", a fictitious
name registered by Media Solutions in the Commonwealth of
Pennsylvania in September 1995. Under its license agreement
with NASA, the Company, by means of its predecessor, NextGen,
obtained an exclusive five-year license commencing August 4,
1997. The agreement provides that prior to the expiration of
the five-year period, the Licensee (NextGen) may request this
agreement to be modified to extend the term. NASA has agreed
that such requests will not be unreasonably denied if NextGen
has met all milestones as specified in the contract. The NASA
license agreement permits the Company to offer testing
services for all direct response advertising applications,
including television and print media and the Internet, and
package design. NASA has agreed that the Company may use the
CREW software for all media and advertising applications and
that such use will not be considered an infringement of NASA's
intellectual property rights in the CREW software. The license
agreement requires the Company to pay NASA a royalty equal to
10% of revenues, payable annually, with a minimum guaranteed
annual royalty of fifteen thousand dollars ($15,000).
In June of 1997, Media Solutions formed Capita Systems,
Inc., a Delaware corporation and a wholly owned subsidiary of
Media Solutions, for the purpose of commercializing and
marketing its advertising testing service.
On July 31, 1997, NextGen and MSII agreed to sell the
MediaLink asset and related business to Columbine JDS Systems,
Inc., an unrelated party, for a future payment of $350,000
contingent upon defined levels of profitability. The
transaction was completed in October 1997. Through December
31, 1998, the Company has not received any payments. In
connection with the agreement, and for no consideration,
NextGen's founder relinquished his officer's position and
stock ownership in NextGen and became an employee in Columbine
JDS Systems, Inc.
Since commencing operations in June 1997, Capita
Systems, Inc., has been engaged in significant additional
software research and development. Beginning in August 1997,
the Company initiated development projects to extensively
modify and enhance the original NASA software to tailor its
use to the more specific demands of media and advertising
clients. This included the integration of video technology
into the application. In addition, the Company has continued
to develop proprietary hardware, specifically the EEG
measurement headset, to facilitate high volume and convenience
in the testing process. The Company has developed a completely
"dry and noninvasive" headset and has applied for a US patent
on this hardware and related components.
F-7
<PAGE>
CAPITA RESEARCH GROUP, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED AND COMBINED STATEMENTS OF CASH FLOWS
YEARS ENDED december 31, 1998, 1997 and 1996
NOTE 1. HISTORY AND NATURE OF THE BUSINESSES AND BUSINESS COMBINATIONS
(CONTINUED)
As stated previously, the Company performed its first
test of the headset in October 1997, and is in various stages
of negotiation with numerous prospects, including major U.S.
marketing companies and advertising agencies.
On December 30, 1997, MSI changed its legal name to
NextGen Systems, Inc. and increased the number of authorized
common shares to 3,000,000.
The following transactions relate to the mergers, stock
issuance and redemptions occurring within the Companies during
January 1998:
On January 3, 1998, $25,000 of notes payable were
converted into 10,000 shares of MSII's common stock.
On January 8, 1998, 1,050,250 shares of MSII were
redeemed for no consideration.
On January 9, 1998, 85 shares of NextGen were redeemed
for no consideration.
On January 12, 1998, NextGen acquired MSII in exchange
for stock, whereby NextGen was the surviving corporation. As a
result of the merger, each share of MSII common stock was
converted into five shares of NextGen.
On January 13, 1998, $116,825 due to a stockholder was
converted into 183,385 shares of NextGen common stock.
On January 15, 1998, NextGen issued 37,000 shares of
common stock for total consideration of $37,000.
F-8
<PAGE>
CAPITA RESEARCH GROUP, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED AND COMBINED STATEMENTS OF CASH FLOWS
YEARS ENDED december 31, 1998, 1997 and 1996
NOTE 1. HISTORY AND NATURE OF THE BUSINESSES AND BUSINESS COMBINATIONS
(CONTINUED)
On January 27, 1998, prior to the transaction explained
below, $35,000 of notes payable were converted into 35,000
shares of NextGen. In addition, the Board of Directors of the
Company approved a transaction with Royal American Mining
Company ("Royal"), a Nevada corporation, whose only activity
had been filing fee expenses during its fiscal year. Royal has
had no significant revenues for the last three fiscal years.
On January 29, 1998, the Exchange was completed as the Company
obtained approval from 100% of its stockholders. On January
30, 1998, the Royal stockholders approved the transaction
between NextGen and Royal, whereby the stockholders of NextGen
exchanged 100% of the outstanding common stock of NextGen for
90% of the outstanding common stock of Royal (the "Exchange").
The Exchange was accounted for as a reverse acquisition
whereby NextGen, in substance, acquired Royal, allocating the
fair value of Royal shares exchanged over the assets and
liabilities of NextGen prior to the merger; therefore, no
goodwill was recognized. Accordingly, the historical financial
statements are those of the accounting acquirer, NextGen and
not the financial statements of the legal acquirer, Royal. No
value was ascribed to Royal's net operating loss carryforwards
as a result of potential decrease and/or limitations in these
carryforwards due to the change in control.
In connection with the Exchange, Royal changed its name
to Capita Research Group, Inc. In addition, the Board of
Directors approved a 2 for 1 stock split whereby the present
stockholders of Royal were entitled to two shares for each
share owned by them in Royal.
In July 1998, the Company filed Form 10-SB with the
Securities and Exchange Commission to register all of its
100,000,000 shares of common stock with a par value of One
Mill ($0.001) per share.
The Company currently employs seven professionals and
two contract consultants. The Company maintains offices in
Blue Bell, Pennsylvania. The Company owns or leases all of its
equipment and software, and has under development, numerous
software and hardware applications to enhance its capabilities
in advertising and media testing. The Company intends to
obtain patents and software copyrights, as products are
developed to protect its intellectual property.
F-9
<PAGE>
CAPITA RESEARCH GROUP, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED AND COMBINED STATEMENTS OF CASH FLOWS
YEARS ENDED december 31, 1998, 1997 and 1996
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation and Combination
For the year ended December 31, 1998, the consolidated
financial statements include the wholly owned subsidiary,
Capita Systems, Inc. For the years ended December 31, 1997 and
1996, the combined financial statements include the accounts
of two entities, which were under common management, NextGen
Systems, Inc. and Subsidiary ("formerly Media Solutions,
Inc.") and Media Solutions International, Inc. The
consolidated financial statements of NextGen included the
accounts of its wholly owned subsidiary, Capita Systems, Inc.
All significant intercompany transactions have been eliminated
in all years presented.
Fair Value of Financial Instruments
The Company's financial instruments consist primarily
of cash, accounts receivable, accrued expenses and debt
instruments. The recorded values of cash, accounts receivable,
accounts payable and accrued expenses are considered to be
representative of their fair values. Based upon the terms of
the Company's debt instruments that are outstanding as of
December 31, 1998 and 1997, the carrying values are considered
to approximate their respective fair values.
Equipment
Equipment, including assets under capital leases, are
stated at cost. Major improvements are capitalized; minor
replacements, maintenance and repairs are charged to current
operations. Depreciation is computed by applying the
straight-line method over the estimated useful lives of the
related assets for financial reporting purposes and an
accelerated method for income tax purposes.
Organization Costs
Expenses were incurred in connection with the formation
of NextGen and MSII, which were capitalized and were being
amortized over a period of five years using the straight-line
method. During the year ended December 31, 1998, the remaining
costs of $19,638 were charged to operations.
F-10
<PAGE>
CAPITA RESEARCH GROUP, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED AND COMBINED STATEMENTS OF CASH FLOWS
YEARS ENDED december 31, 1998, 1997 and 1996
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Long-Lived Assets
The Company reviews for the impairment of long-lived
assets and certain identifiable intangibles whenever events or
changes in circumstances indicate that the carrying amount of
an asset may not be recoverable. An impairment loss would be
recognized when estimated future cash flows expected to result
from the use of the asset and its eventual disposition are
less than its carrying amount. The Company has not identified
any such impairment losses.
Software Development Costs
Development costs incurred in the research and
development of new software products are expensed as incurred
until technological feasibility has been established. Software
development expenses incurred for product enhancements after
the product has reached technological feasibility have not
been material and, accordingly, also have been charged to
operations as incurred. As of December 31, 1998 and 1997 no
software development costs have been capitalized.
Advertising and Promotion Costs
Advertising and promotion costs are charged to current
operations when incurred. Advertising and promotion costs for
1998, 1997 and 1996 were $9,824, $9,916 and $26,430,
respectively.
Income Taxes
The Company accounts for income taxes in accordance
with Statement of Financial Accounting Standards ("SFAS") No.
109, "Accounting for Income Taxes," which requires the use of
an asset and liability approach for financial accounting and
reporting for income taxes. Under this method, deferred tax
assets and liabilities are recognized based on the expected
future tax consequences of temporary differences between the
financial statement carrying amounts and tax bases of assets
and liabilities as measured by the enacted tax rates that are
expected to be in effect when taxes are paid or recovered.
F-11
<PAGE>
CAPITA RESEARCH GROUP, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED AND COMBINED STATEMENTS OF CASH FLOWS
YEARS ENDED december 31, 1998, 1997 and 1996
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Research and Development
Expenditures for research, development and engineering
of products and manufacturing processes are expensed as
incurred. Cost reimbursements under collaborative research
agreements are recorded as offsets to research and development
expenses. Research and development costs for 1998, 1997 and
1996 were $102,534, $118,241 and $206,188, respectively.
Earnings Per Common Share
In 1997, the Financial Accounting Standards Board
issued SFAS No. 128, "Earnings Per Share." SFAS No. 128
replaced the previously reported primary and fully diluted
earnings per share with basic and diluted earnings per share,
respectively. Earnings per share amounts for all periods
presented are based on the weighted average shares outstanding
during the respective periods.
Estimates
The preparation of financial statements in conformity
with generally accepted accounting principles requires
management to make estimates and assumptions that affect the
reported amounts of assets, liabilities, revenues and
expenses, and disclosure of contingent assets and liabilities.
Actual results could differ from those estimates.
Reclassifications
Certain items in the 1997 and 1996 financial statements
were reclassified to conform with the 1998 presentation.
NOTE 3. STOCKHOLDER LOANS
The Company was indebted to its stockholders in the
amount of $100,000 and $225,791 at December 31, 1998 and 1997,
respectively. The loans have an interest rate of prime plus
two percent (9.75% at December 31, 1998) and are payable on
demand. Accrued interest on stockholder loans at December 31,
1998 and 1997 was $23,612 and $25,103, respectively.
F-12
<PAGE>
CAPITA RESEARCH GROUP, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED AND COMBINED STATEMENTS OF CASH FLOWS
YEARS ENDED december 31, 1998, 1997 and 1996
NOTE 4. Equipment
1998 1997
---------- ----------
(Consolidated) (Combined)
Equipment $197,014 $149,110
Furniture and fixtures 12,034 12,034
---------- ----------
209,048 161,144
Less - accumulated depreciation (116,537) (76,061)
---------- ----------
$ 92,511 $ 85,083
========== ==========
NOTE 5. CONCENTRATION OF CREDIT RISK
The Company maintains cash balances at several
financial institutions. The accounts are insured by the
Federal Deposit Insurance Corporation up to $100,000. The
Company performs periodic evaluations of the relative credit
standing of the financial institutions with which it deals.
The Company has not experienced any losses in such accounts
and believes it is not exposed to any significant credit risk
on cash balances.
NOTE 6. INCOME TAXES
<TABLE>
<CAPTION>
A reconciliation of the differences between the
Company's effective tax rates and the statutory Federal income
tax rate of 34% in 1998, 1997 and 1996 is as follows:
1998 1997 1996
---- ---- ----
(Consolidated) (Combined) (Combined)
-------------- ---------- ----------
<S> <C> <C> <C>
Income tax benefit at statutory rate $(394,632) $(234,355) $ (135,652)
Permanent differences 1,210 4,625 715
State income tax benefit,
net of Federal effect (76,605) (44,709) (26,191)
Reduction in income tax benefit
due to valuation allowance 470,027 274,439 161,128
--------- --------- ----------
$ - $ - $ -
========= ========= ==========
</TABLE>
F-13
<PAGE>
CAPITA RESEARCH GROUP, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED AND COMBINED STATEMENTS OF CASH FLOWS
YEARS ENDED december 31, 1998, 1997 and 1996
NOTE 6. INCOME TAXES (Continued)
The Company, its predecessors and its affiliates have
experienced significant losses since inception. As a result of
the business combinations during 1998, certain of the net
operating loss carryforwards generated by these losses may be
lost and/or substantially limited. Notwithstanding such
effect, any deferred tax asset recorded as a result of
potential net operating loss carryforwards available to offset
future taxable income would be offset by an equivalent
valuation allowance, since Management believes that it is more
likely than not that such deferred tax asset would not be
realized.
The deferred tax assets at December 31, 1997 and 1996
of $443,000 and $168,000, respectively, have been offset by
valuation allowances of an equal amount.
note 7. COMMITMENTS
Capital Leases
During 1998, the Company leased under capital lease
arrangements expiring in February 2001, certain computer
equipment with a total cost of $32,800. The assets and
liabilities under the capital lease are recorded at the lower
of the present value of the minimum lease payments or the fair
market value of the asset. The assets are depreciated over the
shorter of the related lease term or the estimated productive
lives. Amortization of $7,811 related to the assets under
capital lease is included in depreciation expense for the year
ended December 31, 1998. Interest expense related to the
capital lease was $3,651 for the year ended December 31, 1998.
Minimum future obligations under capital leases are:
<TABLE>
<CAPTION>
YEARS ENDING
DECEMBER 31, AMOUNT
------------
<S> <C>
1999 $18,470
2000 10,398
2001 192
----------
Total minimum lease payments 29,060
Less - amounts representing interest 5,165
----------
Present value of future minimum lease payments 23,895
Less - current portion 14,281
---------
Long-term portion $ 9,614
=========
</TABLE>
F-14
<PAGE>
CAPITA RESEARCH GROUP, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED AND COMBINED STATEMENTS OF CASH FLOWS
YEARS ENDED december 31, 1998, 1997 and 1996
NOTE 7. COMMITMENTS (Continued)
Operating Leases
Effective November 1, 1997, the Company entered into an
operating lease for its corporate office located in King of
Prussia, Pennsylvania. The lease agreement was for a term of
six months, thereafter, renewable on a monthly basis. Rent
expense for 1998 and 1997 amounted to approximately $22,000
and $2,400, respectively. On January 1, 1999, the Company
moved its offices to Blue Bell, Pennsylvania and signed a
lease agreement expiring December 2001.
Minimum future rental payments under this
noncancellable operating lease through December 2001 and in
the aggregate are:
YEARS ENDING
DECEMBER 31, AMOUNT
------------ ------
1999 $50,740
2000 74,796
2001 78,849
--------
Total minimum future
rental payments $204,385
========
NOTE 8. DEFICIT ACCUMULATED DURING DEVELOPMENT STAGE
The deficit accumulated during the development stage
was $2,363,210, which includes a loss of $114,273 from the
inception of the Company through December 31, 1995. There were
no transactions, which occurred from the inception of the
Company and its predecessors through December 31, 1995 which
were qualitatively or quantitatively material to the 1998,
1997 or 1996 consolidated and combined financial statements.
F-15
<PAGE>
CAPITA RESEARCH GROUP, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED AND COMBINED STATEMENTS OF CASH FLOWS
YEARS ENDED december 31, 1998, 1997 and 1996
NOTE 9. GOING CONCERN
The Company's financial statements are prepared using
generally accepted accounting principles applicable to a going
concern which contemplates the realization of assets and
liquidation of liabilities in the normal course of business.
However, the Company does not have significant cash or other
material assets nor does it have an established source of
revenues sufficient to cover its operating costs and to allow
it to continue as a going concern. It is the intent of the
Company to generate revenue through the sales of its software
and hardware products. The Company continues to focus its
energies on raising capital to begin the manufacturing and
marketing of its products. Toward these ends, the Company
engaged a public relations firm to aid in the raising of
capital and to present seminars on its technology. Management
believes, with successful completion of a financial package,
that delivered sales of the Company's products will occur. In
the opinion of management, sales of the Company's products,
together with the proceeds from the sale of its common stock,
will be sufficient for it to continue as a going concern.
NOTE 10. SUBSEQUENT EVENTS
On January 8, 1999, the Company issued 80,000 shares of
common stock in exchange for $20,000 of rent reduction during
the first quarter of 1999.
On January 8, 1999, the Company issued 84,000 shares of
common stock to a stockholder for various furniture and
fixtures whose fair market value was $21,000.
On January 8, 1999, the Company issued 68,000 shares of
common stock for investor relations services rendered in the
amount of $17,000.
In February and March 1999, the Company issued
approximately 200,000 shares of common stock to two unrelated
parties, for total consideration of $50,000.
On March 10, 1999, the Company issued 50,000 shares of
common stock for legal services rendered in the amount of
$12,500.
On March 10, 1999, the Company entered into an
agreement with Quaker Capital Markets Group, Inc. ("Quaker"),
to render advisory services to the Company in its attempt to
raise up to $5,000,000 in equity capital. In connection
therewith, the Company agreed to pay Quaker $10,000 in cash,
$15,000 in common stock and a percentage of equity capital
raised.
See Accountants' Review Report and Notes to Financial Statements.
F-16
<PAGE>
No dealer, salesperson 5,380,000 Shares
or other person is authorized to give
any information or to represent anything
not contained in this prospectus. You CAPITA RESEARCH GROUP, INC.
must not rely on any unauthorized
information or representations. This
prospectus is an offer to sell only the
shares offered hereby, but only under Common Stock
circumstances and in jurisdictions where
it is lawful to do so. The information
contained in this prospectus is current
only as of its date. -----------
---------------
TABLE OF CONTENTS
Prospectus Summary
Risk Factors
Selling Security Holders
Plan of Distribution
Market for Common Equity and Related Stockholder Matters
Dividend Policy
Capitalization
Management's Discussion and Analysis of
Financial Condition and Results of
Operations
Business
Management
Certain Relationships and Related Transactions
Description of Securities
Security Ownership of Certain Beneficial Owners and
Management
Legal Matters
Experts
Where You Can Find Additional Information
Index to Financial Statements
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 24. INDEMNIFICATION OF OFFICERS AND DIRECTORS.
Section 78.751 of the Nevada General Corporation Law allows the
Company to indemnify any person who was or is threatened to be made a party to
any threatened, or completed action, suit or proceeding by reason of the fact
that he or she is or was a director, officer, employee or agent of the Company
or is or was serving at the request of the Company as a director, officer,
employee or agent of any corporation, partnership, joint venture, trust or other
enterprise. The Company may advance expenses in connection with defending any
such proceeding, provided the indemnitee undertakes to pay any such amounts if
it is later determined that such person was not entitled to be indemnified by
the Company.
Insofar as indemnification for liabilities arising under the
Securities Act of 1933, as amended, may be permitted to directors, officers and
controlling persons of the Company pursuant to the foregoing provisions, or
otherwise, the Company has been advised that, in the opinion of the Securities
and Exchange Commission, such indemnification is against public policy as
expressed in the Securities Act and is, therefore, unenforceable.
ITEM 25. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth the Company's costs and expenses
expected to be incurred in connection with the distribution of the securities
being registered. Except for the SEC Registration Fee, the amounts listed below
are estimates.
SEC Registration Fee........................ $
Accounting Fees and Expenses................
Legal Fees and Expenses.....................
Miscellaneous Expenses......................
---------
Total..................$
=========
The Company shall bear all expenses shown above.
ITEM 26. RECENT SALES OF UNREGISTERED SECURITIES.
Unless otherwise noted, the following sales of securities of
the Registrant were not registered under the Securities Act of 1933 in reliance
on Section 4(2) thereof. Purchase prices were paid in cash, cash equivalents or
services of equivalent value.
On March 31, 1998, the Registrant sold shares of Common Stock
to the persons, in the amounts and for the purchase price set forth below:
II-1
<PAGE>
Number Purchase
Name of Shares Price
- ---- --------- -----
Ralph Anglin 130,000 $32,500
Karen Astrella 12,000 $3,000
Anthony Baratta 40,000 $10,000
Debra D. Berthold 20,000 $5,000
Samuel A. Brattini 10,000 $2,500
Samuel V. Brattini 10,000 $2,500
Richard M. Brueggeman 280,000 $70,000
Matthew Carrafiello 20,000 $5,000
Leonard A. Ciccotello 20,000 $5,000
Sandra Dietrich 40,000 $15,000
Kenneth P. Fratto 520,000 $130,00
Harry Gricevics 60,000 $15,000
David Grimes 20,000 $5,000
Harlan I. Gustafson Jr. 100,000 $25,000
Harvey E. Keim 20,000 $5,000
Kenneth McCarraher 20,000 $5,000
Robb Cape Inc. PSP 140,000 $35,000
Peter Stenstrom 20,000 $5,000
Thomas J. & Stenstrom 30,000 $7,500
Ronald B. Seltmann Jr. 40,000 $10,000
On April 30, 1998, the Registrant sold shares of Common Stock
to the persons, in the amounts and for the purchase price set forth below:
Number Purchase
Name of Shares Price
- ---- --------- -----
William C. Davis 20,000 $5,000
Frank F. Huppe 40,000 $10,000
Eduardo Jimenez III 4,000 $1,000
Kostrub Industries Inc. 12,000 $3,000
Harvey E. Keim 56,000 $14,000
Krisztina Farago 5,000 $1,250
James Millard D.O. 40,000 $10,000
Gary Plisinski 108,000 $27,000
Gary & Jerome Plisinski 48,000 $12,000
On May 6, 1998, the Registrant sold 12,000 shares of Common
Stock to Howard K. Stalker for a purchase price of $3,000.
On May 6, 1998, the Registrant sold 12,000 shares of Common
Stock to Michael J. Welsh for a purchase price of $3,000.
II-2
<PAGE>
On May 18, 1998, the Registrant sold 20,000 shares of Common
Stock to Frank Dibella for a purchase price of $5,000.
On May 19, 1998, the Registrant sold 60,000 shares of Common
Stock to Ralph Anglin for a purchase price of $15,000.
On May 29, 1998, the Registrant sold 15,000 shares of Common
Stock to Anthony and Michele Baratta for a purchase price of $3,750.
On May 29, 1998, the Registrant sold 2,000 shares of Common
Stock to Eduardo Jimenez, III for a purchase price of $500.
On May 29, 1998 the Registrant sold 50,000 shares of Common
Stock to Jerome and Teresa J. Plisinski for a purchase price of $12,500.
On June 4, 1998, the Registrant sold shares of Common Stock to
the persons, in the amounts and for the purchase price set forth below:
Number Purchase
Name of Shares Price
- ---- --------- -----
Haythe & Curley 50,000 $12,500
Donald R. Peterson 100,000 $25,000
Kamilla Stenstrom 20,000 $5,000
Peter Stenstrom 10,000 $2,500
Jennifer Wichterman 8,000 $2,000
Charles Jobs 30,000 $7,500
On June 5, 1998, the Registrant sold 20,000 shares of Common
Stock to Ted W. Baxter for the purchase price of $5,000.
On June 5, 1998, the Registrant sold 120,000 shares of Common
Stock to Richard M. and Judy Brueggman for the purchase price of $30,000.
On June 5, 1998, the Registrant sold 20,000 shares of Common
Stock to Dominic Cafece for the purchase price of $5,000.
On June 9, 1998, the Registrant sold shares of Common Stock to
the persons, in the amounts and for the purchase price set forth below:
Number Purchase
Name of Shares Price
- ---- --------- -----
Leonard J. Ciccotello 20,000 $5,000
Joseph M. Kwiatkowski, Jr. 50,000 $12,500
Charles & Mary Cooper 10,000 $2,500
Thomas J. & Cindy Stenstrom 10,000 $2,500
II-3
<PAGE>
On June 10, 1998, the Registrant sold 20,000 shares of Common
Stock to Randolph C. and Nancy Lindel for the purchase price of $5,000.
On June 17, 1998, the Registrant sold 10,000 shares of Common
Stock to Robert D. and Judith Mlkvy for the purchase price of $2,500.
On June 17, 1998, the Registrant sold 12,000 shares of Common
Stock to Richard Wellbrook for the purchase price of $3,000.
On July 16, 1998, the Registrant sold 80,000 shares of Common
Stock to Ralph Anglin for the purchase price of $20,000.
On July 28, 1998, the Registrant sold 8,000 shares of Common
Stock to Kostrub Industries Inc., for the purchase price of $2,000.
On July 31, 1998, the Registrant sold shares of Common Stock
to the persons, in the amounts and for the purchase price set forth below:
Number of Purchase
Name Shares Price
- ---- ------ -----
Anthony Baratta, II 17,500 $4,375
Krisztina Farago 45,000 $11,250
Henry and Lorraine Gricevics 40,000 $10,000
Tomas J. & Cindy Stenstrom 10,000 $2,500
Richard A. Wescott 10,000 $2,500
On August 10, 1998 the Registrant sold shares of Common Stock
to the persons, in the amounts and for the purchase price set forth below Number
of Purchase Name Shares Price
Number of Purchase
Name Shares Price
- ---- ------ -----
Bradley Billhimer 8,000 $2,000
Joseph Bruno 12,000 $3,000
Gregory C. Cala 8,000 $2,000
Madeleine Franco 32,000 $8,000
Harlan I. Gustafson Jr. 2,400 $600
Robert E. Hayden 3,000 $750
Charles Jobs 3,000 $750
Brian D. & Heather Moyer 25,000 $6,250
David M. Nagle 12,000 $3,000
Joy E. O'Bryon 20,000 $8,000
Raymond K. Ward 10,000 $2,500
Robert B. Warren 8,000 $2,000
Gary J. & Jerome Plisinski 40,000 $10,000
Philip Rosenburg 20,000 $5,000
Aaron R. Schiele 40,000 $10,000
II-4
<PAGE>
On August 24, 1998, the Registrant sold 400,000 shares of
Common Stock to Ralph Anglin for the purchase price of $100,000.
On August 25, 1998, the Registrant sold shares of Common Stock
to the persons, in the amounts and for the purchase price set forth below:
Number Purchase
Name of Shares Price
Thomas Aquilante 10,000 $2,500
Harry & Lorraine Gricevics 20,000 $5,000
Hightech Vac Inc. 20,000 $5,000
Kris A. Keim 20,000 $2,000
Jan T. Stenstrom 10,000 $2,500
Richard D'Avanzo 20,000 $5,000
On August 31, 1998, the Registrant sold 20,000 shares of
Common Stock to Eugene F. Zuecca for the purchase price of $5,000.
On August 31, 1998, the Registrant sold 8,000 shares of Common
Stock to Harvey E. Keim for the purchase price of $2,000.
On September 3, 1998, the Registrant sold 65,000 shares of
Common Stock to William T. Hummel for the purchase price of $16,250.
On September 10, 1998, the Registrant sold 10,000 shares of
Common Stock to Thomas and Renee Piermatto for the purchase price of $2,500.
On September 25, 1998, the Registrant sold shares of Common
Stock to the persons, in the amounts and for the purchase price set forth below:
Number Purchase
Name of Shares Price
Richard Astrella 28,000 $7,000
Michael J. & Jessica Doyle 8,000 $2,000
William T. Hummel 35,000 $8,750
II-5
<PAGE>
On September 29, 1998, the Registrant sold 10,000 shares of
Common Stock to Barry Rhoads for the purchase price of $2,500.
On October 28, 1998, the Registrant sold 60,000 shares of
Common Stock to Haythe & Curley for the purchase price of $15,000.
On October 28, 1998, the Registrant sold 16,000 shares of
Common Stock to Thomas W. Hummel, Jr., for the purchase price of $4,000.
On December 15, 1998, the Registrant sold 40,000 shares of
Common Stock to William Hummel for the purchase price of $10,000.
On December 15, 1998, the Registrant sold 20,000 shares of
Common Stock to Thomas Acqulante for the purchase price of $5,000.
On December 31, 1998, the Registrant sold 48,000 shares of
Common Stock to William Hummel for the purchase price of $12,000.
On January 6, 1999, the Registrant sold 10,000 shares of
Common Stock to Steven Plisinski for the purchase price of $2,500.
On January 6, 1999, the Registrant sold 12,000 shares of
Common Stock to Jerome Plisinski for the purchase price of $3,000.
On January 6, 1999, the Registrant sold 60,000 shares of Common
Stock to Gary and Jeanette Plisinski for the purchase price of $15,000.
On January 11, 1999, the Registrant sold shares of Common Stock
to the persons, in the amounts and for the purchase price set forth below:
Number Purchase
Name of Shares Price
- ---- --------- -----
William Hummell 80,000 $20,000
Ralph Anglin 84,000 $21,000
Madeleine Franco 68,000 $17,000
Harry Gricevics 12,000 $3,000
On February 9, 1999, the Registrant sold 20,000 shares of
Common Stock to Richard D'Avanzo for a purchase price of $5,000.
On February 9, 1999, the Registrant sold 100,000 shares of
Common Stock to Thomas Mirabile for a purchase price of $25,000.
II-6
<PAGE>
On February 9, 1999, the Registrant sold 880 shares of Common
Stock to Dale Allen for a purchase price of $220.
On February 17, 1999, the Registrant sold shares of Common
Stock to the persons, in the amounts and for the purchase price set forth below:
Number Purchase
Name of Shares Price
---- --------- -----
Paul Wolfson 8,000 $2,000
Elizabeth Zeleski 4,000 $1,000
Gary Osting 4,000 $1,000
Karen Longa 20,000 $5,000
John Kovas 20,000 $5,000
Michelle Perry 10,000 $2,500
On March 9, 1999, the Registrant sold shares of Common Stock
to the persons, in the amounts and for the purchase price set forth below:
Number Purchase
Name of Shares Price
- ---- --------- -----
Gerald & Ann Leinenbach 50,000 $12,500
Haythe & Curley 50,000 $12,500
Jerome & Teresa Plisinski 50,000 $5,000
Neil Eklund 20,000 $5,000
On March 23, 1999, the Registrant sold shares of Common Stock
to the persons, in the amounts and for the purchase price set forth below:
Number Purchase
Name of Shares Price
- ---- --------- -----
Charles Freeman 10,000 $2,500
Davis-Trachtenberg 15,000 3,750
Robb Cape, Inc. 12,020 $3,005
Quaker Capital 60,000 $15,000
NABOB Co. 74,000 $18,500
(Ralph Anglin IRA)
On March 30, 1999, the Registrant sold shares of Common Stock
to the persons, in the amounts and for the purchase price set forth below:
Number Purchase
Name of Shares Price
- ---- --------- -----
NABOB Co. 8,000 $2,000
(Ralph Anglin IRA)
Steffen Hauser 8,164 $2,041
II-7
<PAGE>
On April 8, 1999, the Registrant sold shares of Common Stock
to the persons, in the amounts and for the purchase price set forth below:
Number Purchase
Name of Shares Price
- ---- --------- -----
Michael Von Gonton 4,000 $1,000
William Hummel 62,736 $15,684
NABOB Co. 120,000 $30,000
(Ralph Anglin IRA)
On April 26, 1999, the Registrant sold shares of Common Stock
to the persons, in the amounts and for the purchase price set forth below:
Number Purchase
Name of Shares Price
- ---- --------- -----
Harvey Keim 20,000 $5,000
John Robbins 100,000 $25,000
On May 4, 1999, the Registrant sold shares of Common Stock to
the persons, in the amounts and for the purchase price set forth below:
Number Purchase
Name of Shares Price
- ---- --------- -----
Steven Plisinksi 10,000 $2,500
Jerome Plisinski 6,000 $1,500
Donald D. Cooley 10,000 $2,500
Suzanne F. Seeley 10,000 $2,500
Deborah J. Steer 10,000 $2,500
On May 18, 1999, the Registrant sold shares of Common Stock to
the persons, in the amounts and for the purchase price set forth below:
Number Purchase
Name of Shares Price
- ---- --------- -----
NABOB Co. 80,000 $20,000
(Ralph Anglin IRA)
Michael Werner 10,800 $2,700
Todd Veeck 14,000 $3,500
Richard Veeck 4,000 $1,000
Andrew Depativo 30,000 $7,500
Nick Centofante 8,000 $2,000
Samuel Cortina 20,000 $5,000
John Ricketti 80,000 $20,000
Joan Rubin 8,000 $2,000
II-8
<PAGE>
On May 28, 1999, the Registrant sold shares of Common Stock to
the persons, in the amounts and for the purchase price set forth below:
Number Purchase
Name of Shares Price
- ---- --------- -----
Harry & Lorraine Gricevics 3,000 $750
Jerry Valentini 20,000 $5,000
Denise Hall 40,000 $10,000
On June 3, 1999, the Registrant sold shares of Common Stock to
the persons, in the amounts and for the purchase price set forth below:
Number Purchase
Name of Shares Price
- ---- --------- -----
Michael Von Gonton 10,000 $2,500
Raymond and Donna Wuest 40,000 $10,000
William Hummel 48,604 $12,151
On June 8, 1999, the Registrant sold shares of Common Stock to
the persons, in the amounts and for the purchase price set forth below:
Number Purchase
Name of Shares Price
- ---- --------- -----
John Pravel 5,000 $1,250
Bryan Brahm 5,000 $1,250
Harry Roach 20,000 $5,000
On June 11, 1999, the Registrant sold shares of Common Stock
to the persons, in the amounts and for the purchase price set forth below:
Number Purchase
Name of Shares Price
- ---- --------- -----
Kenneth Yeutter 10,000 $2,500
Robert Rozdzielski 20,000 $5,000
II-9
<PAGE>
On June 28, 1999, the Registrant sold shares of Common Stock
to the persons, in the amounts and for the purchase price set forth below:
Number Purchase
Name of Shares Price
- ---- --------- -----
David Hunter 1,500,000 $375,000
Tomas Stenstrom 750,000 $187,500
Ralph Anglin 500,000 $125,000
William Hummel 100,000 $25,000
NABOB Co.
(Ralph Anglin IRA) 100,000 $25,000
Anthony Baratta 200,097 $50,024.25
Millard Tydings 50,176 $12,544
Haythe & Curley 50,000 $12,500
Joseph Kwiatkowski 50,000 $12,500
Donald Peterson 250,000 $62,500
John Fare 10,000 $2,500
On July 8, 1999, the Registrant sold shares of Common Stock to
the persons, in the amounts and for the purchase price set forth below:
Number Purchase
Name of Shares Price
- ---- --------- -----
Harlan Gustafson 10,000 $2,500
Thomas Acquilante 1,168 $292
Gary & Jerome Plisinski 14,000 $3,500
Myron Bloom 40,000 $10,000
John Robbins 80,000 $20,000
Richard Astrella 12,000 $3,000
Harry Gricevics 40,000 $10,000
Brothers Plisinski 24,972 $6,243
Donald Hopper 44,000 $11,000
Michael Zaenglien 2,000 $5,000
Chad Neboer 3,000 $750
Chris Hopper 10,000 $2,500
Haythe & Curley 50,000 $12,500
Erwin Ephron 76,666 $19,166.50
On July 20, 1999, the Registrant sold shares of Common Stock
to the persons, in the amounts and for the purchase price set forth below:
Number Purchase
Name of Shares Price
- ---- --------- -----
John Robbins 120,000 $30,000
John Williams 40,000 $10,000
Thomas Piermatteo 8,000 $2,000
II-10
<PAGE>
On July 26, 1999, the Registrant sold shares of Common Stock
to the persons, in the amounts and for the purchase price set forth below:
Number Purchase
Name of Shares Price
- ---- --------- -----
Nevada Agency & Trust Co. 27,426 $6,856.50
William Helmig 8,000 $2,000
Madeleine Franco 50,000 $12,500
On August 2, 1999, the Registrant sold 200,000 shares of
Common Stock to Kenneth Fratto for a purchase price of
$50,000.
On August 3, 1999, the Registrant sold shares of Common Stock
to the persons, in the amounts and for the purchase price set forth below:
Number Purchase
Name of Shares Price
- ---- --------- -----
Steffen Hausner 2,800 $700
Michael Von Gonten 14,000 $3,500
On August 12, 1999, the Registrant sold shares of Common Stock
to the persons, in the amounts and for the purchase price set forth below:
Number Purchase
Name of Shares Price
- ---- --------- -----
Margaret Long 525,537 $131,384.25
Matthew Carrafiello 20,000 $5,000
II-11
<PAGE>
On August 19, 1999, the Registrant sold shares of Common Stock
to the persons, in the amounts and for the purchase price set forth below:
Number Purchase
Name of Shares Price
- ---- --------- -----
Donald Hopper 2,000 $500
Kathleen Smith 10,000 $2,500
On September 28, 1999, the Registrant sold 120,000 shares of
Common Stock to NABOB Co. (Ralph Anglin IRA) for a purchase price of $30,000.
On January 6, 2000, the Registrant sold a total of 1,000,000
units (the "Units"), each Unit consisting of (i) one share of the Registrant's
Common Stock, (ii) one of the Registrant's A Common Stock Purchase Warrants to
purchase one share of the Registrant's Common Stock exercisable at a purchase
price of $.50 per share of Common Stock, and (iii) one of the Registrant's B
Common Stock Purchase Warrants to purchase one share of the Registrant's Common
Stock exercisable at a purchase price of $1.00 per share of Common Stock, to the
parties, in the amounts and at the purchase prices as set forth below. These
securities were not registered under the Securities Act in reliance on Rule 506
of Regulation D promulgated thereunder.
Number Purchase
Name of Shares Price
---- --------- -----
SoundShore Holdings Ltd. 666,750 $333,375
SoundShore Opportunity
Holding Fund Ltd. 214,500 107,250
SoundShore Strategic
Holding Fund Ltd.
118,750 $59,375
On January 21, 2000, the Registrant sold a total of 260,000
Units to the parties, in the amounts and at the purchase prices as set forth
below. These securities were not registered under the Securities Act in reliance
on Rule 506 of Regulation D promulgated thereunder.
Number Purchase
Name of Shares Price
---- --------- -----
Michael Hamblett 100,000 $50,000
Howard Fischer 80,000 $40,000
Andrew Gitlin 30,000 $15,000
John Lepore 20,000 $10,000
Philip Platek 20,000 $10,000
Edward Okine 10,000 $5,000
II-12
<PAGE>
ITEM 27. EXHIBIT INDEX
3 (i) Articles of Incorporation (Incorporated by reference to Exhibit 3(i) to
the Company's Registration Statement on Form 10-SB).
3(ii) By-laws of the Company (Incorporated by reference to Exhibit 3(ii) to the
Company's Registration Statement on Form 10-SB).
4(a) Capita Research Group, Inc. 1999 Stock Option Plan.
4(b) Warrants dated August 5, 1999 granted to Jim Salim.
4(c) Form of A Warrant
4(d) Form of B Warrant
5 Opinion of Torys (To be filed pursuant to amendment to this Registration
Statement).
10(a) NASA License Agreement (Incorporated by reference to Exhibit 10(c) to the
Company's Registration
10(b) Modification No. 1 to NASA License Agreement 10(c) Modification No. 2 to
NASA License Agreement
10(d) Exchange Agreement dated January 27, 1998 between David B. Hunter,
Exchange Agent for the
10(e) Loan Agreement dated as of August 5, 1999 between the Company and Jim
Salim.
10(f) Securities Purchase Agreement dated as of January 6, 2000 by and among
the Company, SoundShore
10(g) Securities Purchase Agreement dated as of January 21, 2000 by and among
the Company, Andrew Gitlin,
10(h) Registration Rights Agreement dated August 5, 1999 between the Company
and Jim Salim.
10(i) Registration Rights Agreement dated as of January 6, 2000 by and among
the Company, SoundShore
10(j) Registration Rights Agreement dated as of January 21, 2000 by and among
the Company, Andrew Gitlin,
23(a) Consent of Torys (contained in Exhibit 5). 23(b) Consent of Rudolph,
Palitz LLP.
24 Power of Attorney (See "Power of Attorney" in the Registration
Statement).
ITEM 28. UNDERTAKINGS
(a) The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are
being made, a post-effective amendment to this Registration Statement to:
II-13
<PAGE>
(i) include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) reflect in the prospectus any facts or events arising
after the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in the registration
statement. Notwithstanding the foregoing, any increase or decrease in volume of
securities offered (if the total dollar value of securities offered would not
exceed that which was registered) and any deviation from the low or high end of
the estimated maximum offering range may be reflected in the form of prospectus
filed with the Commission pursuant to Rule 424(b) if, in the aggregate, the
changes in volume and price represent no more than a 20 percent change in the
maximum aggregate offering price set forth in the "Calculation of Registration
Fee" table in the effective registration statement; and
(iii) include any additional or changed material information
with respect to the plan of distribution not previously disclosed in the
registration statement or any material change to such information in the
registration statement;
provided, however, that paragraphs (a)(1)(i) and (a)(1)(ii) do not apply if the
information required to be included in a post-effective amendment by those
paragraphs is contained in periodic reports filed with or furnished to the
Commission by the Registrant pursuant to Section 13 or 15(d) or the Securities
Exchange Act of 1934 that are incorporated by reference in the registration
statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed to be
a new registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the termination of
the offering.
(b) Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the Registrant of expenses incurred
or paid by a director, officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
II-14
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933,
the Registrant certifies that it has reasonable grounds to believe that it meets
all of the requirements of filing on Form SB-2, and authorized this Registration
Statement to be signed on its behalf by the undersigned, in the City of Blue
Bell, Commonwealth of Pennsylvania, on the 9th day of February, 2000.
CAPITA RESEARCH GROUP, INC.
By /s/ David B. Hunter
-------------------
David B. Hunter
President and Chief Executive Officer
Each person whose signature appears below constitutes and
appoints David B. Hunter, his true and lawful attorney-in-fact and agent, with
full power of substitution and resubstitution in the premises for him and in his
name, place and stead, and in any and all capacities, to sign any and all
amendments (including post-effective amendments) to this Registration Statement
(or any other Registration Statement for the same offering that is to be
effective upon filing pursuant to Rule 462(b) under the Securities Act of 1933),
and to file the same, with all exhibits thereto and other documents in
connection therewith, with the Securities and Exchange Commission, granting unto
said attorney-in-fact and agent, full power and authority to do and perform each
and every act and thing requisite or necessary to be done in and about the
premises, as fully to all intents and purposes as he might or could do in
person, hereby ratifying and confirming all that said attorney-in-fact and agent
or his substitute or substitutes may lawfully do or cause to be done by virtue
hereof.
Pursuant to the requirements of the Securities Act of 1933,
this Registration Statement has been signed below by the following persons in
the capacities and on the dates indicated.
Signature Title Date
--------- ----- ----
/s/ David B. Hunter President, Chief Executive Officer February 9, 2000
------------------- and
(David B. Hunter) Director (principal executive
officer)
/s/Thomas J. Stenstrom Director February 9, 2000
- ----------------------
/s/Steven A. Plisinki Chief Financial Officer February 9, 2000
- --------------------- (principal financial and
accounting officer)
/s/Millard E. Tydings Director February 9, 2000
- ---------------------
/s/ Ralph Anglin Director February 9, 2000
- ----------------
(Ralph Anglin)
II-15
Exhibit 4(a)
CAPITA RESEARCH GROUP, INC.
1999 STOCK OPTION PLAN
1. PURPOSES OF PLAN. The purposes of this Plan, which shall be known as the
Capita Research Group, Inc. 1999 Stock Option Plan and is hereinafter referred
to as the "Plan," are (i) to provide incentives for key employees, directors,
consultants and other individuals providing services to CAPITA RESEARCH GROUP,
INC., (the "Company") and its subsidiary or parent corporations (within the
respective meanings of Section 424(f) and 424(e) of the Internal Revenue Code of
1986, as amended (the "Code"), and referred to herein as "Subsidiary" and
"Parent," respectively, and such Parent and each Subsidiary are referred to
herein individually as an "Affiliate" and collectively as "Affiliates") by
encouraging their ownership of the common stock, $.001 par value, of the Company
(the "Stock") and (ii) to aid the Company in retaining such key employees,
directors, consultants and other individuals upon whose efforts the Company's
success and future growth depends and in attracting other such employees,
directors, consultants and individuals.
2. ADMINSTRATION. The Plan shall be administered by the Compensation Committee
of the Board of Directors or a subcommittee of the Compensation Committee
appointed by the Compensation Committee as hereinafter provided (the committee
or subcommittee administering the Plan is hereinafter referred to as the
"Committee"). For purposes of administration, the Committee, subject to the
terms of the Plan, shall have plenary authority to establish such rules and
regulations, to make such determinations and interpretations, and to take such
other administrative actions as it deems necessary or advisable. All
determinations and interpretations made by the Committee shall be final,
conclusive and binding on all persons, including Optionees (as hereinafter
defined) and their legal representatives and beneficiaries.
The Committee shall consist of not fewer than two members of
the Board of Directors. Unless otherwise determined by the Board of Directors,
all members of the Board of Directors who serve on the Committee shall be
"Non-Employee Directors" (as defined in Rule 16b-3 under the Securities Exchange
Act of 1934, as amended and "outside directors" as defined in Treasury
Regulation ss.1.162-27(e)(3). The Compensation Committee shall designate one of
the members of the Committee as its Chairman. The Committee shall hold its
meetings at such times and places as it may determine. A majority of its members
shall constitute a quorum. All determinations of the committee shall be made by
a majority of its members. Any decision or determination reduced to writing and
signed by all members shall be as effective as if it had been made by a majority
vote at a meeting duly called and held. The Committee may appoint a secretary
(who need not be a member of the Committee). No member of the Committee shall be
liable for any act or omission with respect to his service on the Committee if
he acts in good faith and in a manner he reasonably believes to be in or not
opposed to the best interests of the Company.
3. STOCK AVAILABLE FOR OPTIONS. There shall be available for options under the
Plan a total of 2,500,000 shares of Stock, subject to any adjustments which may
1
<PAGE>
be made pursuant to Section 5(f0 hereof. Shares of Stock used for purposes of
the Plan may be either authorized and unissued shares, or previously issued
shares held in the treasury of the Company, or both. Shares of Stock covered by
options, which have terminated or expired prior to exercise, shall be available
for further options hereunder. The maximum number of options which may be
granted to any person under the Plan during any fiscal year of the Company shall
not exceed 1,000,000 shares.
4. ELIGIBILITY. Options under the Plan may be granted to key employees of the
Company or any Affiliate, including officers or directors of the Company or any
Affiliate, and to consultants and other individuals providing services to the
Company or any Affiliate (each such grantee, an "Optionee"). Options may be
granted to eligible individuals whether or not they hold or have held options
previously granted under the Plan or otherwise granted or assumed by the
Company. In selecting individuals for options, the committee may take into
consideration any factors it may deem relevant, including its estimate of the
individual's present and potential contributions to the success of the Company
and its Affiliates. Service as an employee, director, officer or consultant of
or to the Company or any Affiliate shall be considered employment for purposes
of the Plan (and the period of such service shall be considered the period of
employment for purposes of Section 5(d) of this Plan); provided, however, that
incentive stock options may be granted under the plan only to an individual who
is an "employee" (as such term is used in Section 422 of the Code) of the
Company or any Affiliate.
5. TERMS AND CONDITIONS OF OPTIONS. The Committee shall, in its
discretion, prescribe the terms and conditions of the options to be granted
hereunder, which terms and conditions need not be the same in each case, subject
to the following:
(a) Option Price. The price at which each share of Stock covered by an
option granted under the Plan may be purchased shall not be less than
the Market Value (as defined in Section 5(c) hereof) per share of Stock
on the date of grant of the option. The date of the grant of an option
shall be the date specified by the Committee in its grant of the
option.
(b) Option Period. The period for exercise of an option shall in no event
be more than ten years from the date of grant, or in the case of any
option intended to be an incentive stock option granted to an
individual owning, on the date of grant, stock possessing more than 10%
of the total combined voting power of all classes of stock of the
Company of any Parent or Subsidiary, more than five years from the date
of grant. Options may, in the discretion of the Committee, be made
exercisable in installments during the option period. Any shares not
purchased on any applicable installment date may be purchased
thereafter at any time before the expiration of the option period.
(c) Exercise of Options. In order to exercise an option, the Optionee shall
deliver to the Company written notice specifying the number of shares
of Stock to be purchased, together with cash or a certified or bank
cashier's check payable to the order of the Company in the full amount
of the purchase price therefor; provided that, for the purpose of
assisting an Optionee to exercise an option, the Company may make loans
to the Optionee or guarantee loans made by third parties to the
2
<PAGE>
Optionee, on such terms and conditions as the Board of Directors may
authorize; and provided further that such purchase price may be paid in
shares of Stock owned by the Optionee having an aggregate Market Value
of the date of exercise equal to the aggregate purchase price, or in a
combination of cash and Stock. For purposes of the Plan, the Market
Value per share of Stock shall be the last sale price regular way on
the date of reference, or, in case no sale takes place on such date,
the average of the closing high bid and low asked prices regular way,
in either case on the principal national securities exchange on which
the Stock is listed or admitted to trading, or if the Stock is not
listed or admitted to trading on any national securities exchange, the
last sale price reported on the National Market System of the National
Association of Securities Dealers Automated Quotation System ("NASDAQ")
on such date, or the last sale price reported on the NASDAQ Small Cap
Market on such date, or the average of the closing high bid and low
asked prices in the over-the-counter market on such date, whichever is
applicable, or if there are no such prices reported on NASDAQ or in the
over-the-counter market on such date, as furnished to the Committee by
any New York Stock Exchange member selected from time to time by the
Committee for such purpose. If there is no bid or asked price reported
on any such date, the Market Value shall be determined by the Committee
in accordance with the regulations promulgated under Section 2031 of
the Code, or by any other appropriate method selected by the Committee.
If the Optionee so requests, shares of Stock purchased upon exercise of
an option may be issued in the name of the Optionee or another person.
An Optionee shall have none of the rights of a stockholder until the
shares of Stock are issued to him.
(d) Effect of Termination of Employment. An option may not be exercised
after the Optionee has ceased to be in the employ of the Company or any
Affiliate, except in the following circumstances:
(i) If the Optionee's employment is terminated by action of the
Company or an Affiliate, or by reason of disability or
retirement under any retirement plan maintained by the Company
of any Affiliate, the option may be exercised by the Optionee
within three months after such termination, but only as to any
shares exercisable on the date of Optionee's employment so
terminates;
(ii) In the event of the death of the Optionee during the three
month period after termination of employment covered covered
by (i) above, the person or persons to whom his rights are
transferred by will or the laws of descent and distribution
shall have a period of one year from the date of his death to
exercise any options which were exercisable by the Optionee at
the time of his death; and
(iii) In the event of the death of the Optionee while employed, the
option shall thereupon become exercisable in full, and the
person or persons to whom the Optionee's rights are
transferred by will or the laws of descent and distribution
shall have a period of one year from the date of the
Optionee's death to exercise such option. The provisions of
the foregoing sentence shall apply to any outstanding options
which are incentive stock options to the extent permitted by
Section 422(d) of the Code and such outstanding options in
excess thereof shall, immediately upon the occurrence of the
3
<PAGE>
event described in the preceding sentence, be treated for all
purposes of the Plan as nonstatutory stock options and shall
be immediately exercisable as such as provided in the
foregoing sentence. In no event shall any option be
exercisable more than ten years from the date of grant
thereof. Nothing in the Plan or in any option granted pursuant
to the Plan (in the absence of an express provision to the
contrary) shall confer on any individual any right to continue
in the employ of the Company or any Affiliate or interfere in
any way with the right of the Company or any Affiliate to
terminate his employment at any time.
(e) Limitation on Transferability of Options. Except as provided in the
Section 5(e), during the lifetime of an Optionee, options held by such
Optionee shall be exercisable only by him and no option shall be
transferable other than by will or the laws of descent and
distribution. The Committee may, in its discretion, provide that during
the lifetime of an Optionee, options held by such Optionee may be
transferred to or for the benefit of a member of his immediate family
or to a charitable organization exempt from income tax under Section
501(c)(3) of the code. For purposes hereof, the term "immediate family"
of an Optionee shall mean such Optionee's spouse and children (both
natural and adoptive), and the direct lineal descendants of his
children.
(f) Adjustments for Change in Stock Subject to Plan. In the event of a
reorganization, recapitalization, stock split, stock dividend,
combination of shares, merger, consolidation, rights offering, or any
other change in the corporate structure of shares of the Company, the
Committee shall make such adjustments, if any, as it deems appropriate
in the number and kind of shares subject to the Plan, in the number and
kind of shares covered by outstanding options, or in the option price
per share, or both, and, in the case of a merger, consolidation or
other transaction pursuant to which the Company is not the surviving
corporation or pursuant to which the holders of outstanding Stock shall
receive in exchange therefor shares of capital stock of the surviving
corporation or another corporation, the Committee may require an
Optionee to exchange options granted under the Plan for options issued
by the surviving corporation or such other corporation.
(g) Acceleration of Exercisability of Options Upon Occurrence of Certain
Events. The Committee may, in its discretion provide in the case of any
option granted under the Plan that, in connection with any merger or
consolidation which results in the holders of the outstanding voting
securities of the company (determined immediately prior to such merger
or consolidation) owning less than a majority of the outstanding voting
securities of the surviving corporation (determined immediately
following such merger or consolidation), or any sale or transfer by the
Company of all or substantially all its or any tender offer or exchange
offer for or the acquisition, directly or indirectly, by any person or
group of all or a majority of the then outstanding voting securities of
the Company, such option shall become exercisable in full or part,
notwithstanding any other provision of the Plan or of any outstanding
options granted thereunder, on and after (i) the fifteenth day prior to
the effective date of such merger, consolidation, sale, transfer or
acquisition or (ii) the date of commencement of such tender offer or
exchange offer, as the case may be. The provisions of the foregoing
sentence shall apply to any outstanding options which are incentive
stock options to the extent permitted by Section 422(d) of the Code and
such outstanding options in excess thereof shall immediately upon the
occurrence of the event described in clause (i) or (ii) of the
4
<PAGE>
foregoing sentence, be treated for all purposes of the plan as
nonstatutory stock options and shall be immediately exercisable as such
as provided in the foregoing sentence. Notwithstanding the foregoing,
in no event shall any option be exercisable after the date of
termination of the exercise period of such option specified in Sections
5(b) and 5(d).
(h) Registration, Listing and Qualification of Shares of Stock. Each option
shall be subject to the requirement that if at any time the Board of
Directors shall determine that the registration, listing or
qualification of the shares of Stock covered thereby upon any
securities exchange or under any federal or state law, or the consent
or approval of any governmental regulatory body is necessary or
desirable as a condition of, or in connection with, the granting of
such option or the purchase of shares of Stock thereunder, no such
option may be exercised unless and until such registration, listing,
qualification, consent or approval shall have been effected or obtained
free of any conditions not acceptable to the Board of Directors. The
Company may require that any person exercising an option shall make
such representations and agreements and furnish such information as it
deems appropriate to assure compliance with the foregoing or any other
applicable legal requirement.
(i) Other Terms and Conditions. The Committee may impose such other terms
and conditions, not inconsistent with the terms hereof, on the grant or
exercise of options, as it deems advisable.
6. Additional Provisions Applicable to Incentive Stock Options. The Committee
may, in its discretion, grant options under the Plan to eligible employees which
constitute "incentive stock options" within the meaning of Section 422 of the
Code; provided, however, that (a) the aggregate Market Value of the Stock with
respect to which incentive stock options are exercisable for the first time by
the Optionee during any calendar year shall not exceed the limitation set forth
in Section 422(d) of the Code; (b) if the Optionee owns on the date of grant
securities possessing more than 10% of the total combined voting power of all
classes of securities of the Company or of any Affiliate, the price per share
shall not be less than 110% of the Market Value per share on the date of grant
and (c) Section 5(d)(ii) hereof shall not apply to any incentive stock option.
7. Amendment and Termination. Unless the Plan shall theretofore have been
terminated as hereinafter provided, the Plan shall terminate on, and no option
shall be granted hereunder after December 31, 2009; provided, however, that the
Board of Directors may at any time prior to that date terminate the Plan. The
Board of Directors may at any time amend the Plan or any outstanding options. No
termination or amendment of the Plan may, without the consent of an Optionee,
adversely affect the rights of such Optionee under any option held by such
Optionee.
8. Stockholder Approval of Plan. The establishment of the Plan shall be subject
to approval by a majority of the votes cast thereon by the stockholders of the
Company at a meeting of stockholders duly called and held for such purpose or by
a method and in a degree that would be treated as adequate under the applicable
law of the Company's state of incorporation, and no option granted hereunder
shall be exercisable prior to such approval.
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9. Withholding. It shall be a condition to the obligation of the Company to
issue shares of Stock upon exercise of an option, that the Optionee (or any
beneficiary, transferee or person entitled to act under Sections 5(d) or 5(e)
hereof) pay to the Company, upon its demand, such amount as may be requested by
the Company for the purpose of satisfying any liability to withhold federal,
state or local income or other taxes. If the amount requested is not paid, the
Company may refuse to issue such shares of Stock.
10. Issuance of Certification; Legends. The Company may endorse such legend or
legends upon the certificates for shares of Stock issued upon the exercise of an
option granted hereunder and may issue such "stop transfer" instructions to its
transfer agent in respect of such shares as, in its absolute discretion, it
determines to be necessary or appropriate.
11. Other Actions. Nothing contained in the Plan shall be construed to limit the
authority of the Company to exercise its corporate rights and powers, including
but not by way of limitation, the right of the Company to grant or assume
options for proper corporate purposes other than under the Plan with respect to
any employee or other person, firm, corporation or association.
6
Exhibit 4(b)
THE WARRANTS REPRESENTED BY THIS CERTIFICATE AND THE COMMON STOCK ISSUABLE UPON
EXERCISE OF SUCH WARRANTS HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933 AND MAY NOT BE TRANSFERRED IN VIOLATION OF SUCH ACT.
W1 WARRANT CERTIFICATE
300,000 Warrants to Purchase
Common Stock
Void After August 5, 2002
CAPITA RESEARCH GROUP, INC.
(Incorporated under the laws of the State of Nevada)
This is to certify that, for value received, Jim Salim is the
owner (the "Owner") of the number of Warrants set forth above, each of which is
nontransferable and entitles the Owner to purchase from CAPITA RESEARCH GROUP,
INC. (herein called the "Corporation"), at any time (except as hereinafter
provided) before 5 P.M. (New York time) on August 5, 2002, one Stock Unit (as
hereinafter defined) at a purchase price of $.25 (herein called the "Warrant
Price"). For purposes of this Warrant Certificate, a Stock Unit shall consist of
one fully paid and non-assessable share of common stock, $.001 par value (herein
called the "Common Stock"), of the Corporation, as such stock is constituted on
August 5, 1999, subject to adjustment as hereinafter set forth.
Subject to the provisions hereof, the Warrants represented by
this Warrant Certificate may be exercised by the Owner in whole or in part by
surrender of this Warrant Certificate at the principal executive offices of the
Corporation with the form of election to subscribe attached hereto duly executed
and with payment in full to the Corporation of the Warrant Price for each of the
Stock Units so purchased. Payment of such Warrant Price shall be made in cash or
by certified or official bank check. Thereupon, the Warrants shall be deemed to
have been exercised and the Owner shall become a holder of record of the shares
of Common Stock comprising the Stock Units so purchased (or of the other
securities or property to which the Owner is entitled upon such exercise) for
all purposes, and certificates for such shares of Common Stock so purchased
shall be delivered to the Owner within a reasonable time after the Warrants
shall have been exercised as set forth hereinabove. If only a portion of the
Warrants shall be exercised, the Owner shall be entitled to receive a similar
warrant certificate of like tenor and date covering the number of Warrants which
shall not have been exercised, unless such Warrants shall have expired.
The Corporation covenants and agrees that all shares of Common
Stock which may be issued upon the exercise of the rights represented by this
Warrant Certificate will, upon issuance, be validly issued, fully paid and
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non-assessable and free from all taxes, liens and charges with respect to the
issue thereof (other than taxes in respect of any transfer occurring
contemporaneously with such issue). The Corporation further covenants and agrees
that, during the period within which the Warrants represented by this Warrant
Certificate may be exercised, the Corporation will at all times have authorized
and reserved a sufficient number of shares of Common Stock to provide for the
exercise of the Warrants represented by this Warrant Certificate, and will at
its expense expeditiously upon each such reservation of shares of Common Stock
use its best efforts to procure the listing thereof (subject to issuance or
notice of issuance) on all stock exchanges on which the Common Stock is then
listed. The rights of the Owner shall be subject to the following further terms
and conditions:
1.1.(a) The number of shares of Common Stock comprising a
Stock Unit shall be subject to adjustment from time to time as follows:
(i) If the number of shares of Common Stock outstanding
at any time after the date hereof is increased by a stock dividend payable in
shares of Common Stock or by a subdivision or split-up of Common Stock, then,
immediately following the record date fixed for the determination of holders of
Common Stock entitled to receive such stock dividend, subdivision or split-up,
the number of shares of Common Stock comprising a Stock Unit shall be
appropriately increased so that the number of shares of Common Stock issuable on
exercise of each Warrant shall be increased in proportion to such increase of
outstanding shares.
(ii) If the number of shares of Common Stock outstanding at
any time after the date hereof is decreased by a combination of the outstanding
shares of Common Stock, then, immediately following the record date for such
combination, the number of shares of Common Stock comprising a Stock Unit shall
be appropriately decreased so that the number of shares of Common Stock issuable
on exercise of each Warrant shall be decreased in proportion to such decrease in
outstanding shares.
(iii) In case the Corporation shall declare a cash dividend
upon the Common Stock payable otherwise than out of earnings or earned surplus
legally available therefor under the laws of the State of Delaware or shall
distribute to holders of Common Stock shares of its capital stock (other than
Common Stock), stock or other securities of other persons, evidences of
indebtedness issued by the Corporation or other persons, assets (excluding cash
dividends) or options or rights (excluding options to purchase and rights to
subscribe for Common Stock or other securities of the Corporation convertible
into or exchangeable for Common Stock), then, in each such case, immediately
following the record date fixed for the determination of the holders of Common
Stock entitled to receive such dividend or distribution, the number of shares of
Common Stock comprising a Stock Unit thereafter shall be adjusted by multiplying
such number by a fraction of which the denominator shall be an amount equal to
the remainder of (x) the aggregate Current Market Price of all outstanding
shares of Common Stock less (y) the aggregate amount of such cash dividend or
the aggregate fair market value (as determined by the Board of Directors, whose
determination shall be conclusive) of the stock, securities, evidences of
indebtedness, assets, options or rights so distributed, as the case may be, and
of which the numerator shall be the aggregate Current Market Price of all
8
<PAGE>
outstanding shares of Common Stock. Such adjustment shall be made on the date
such dividend or distribution is made, and shall become effective at the opening
of business on the business day next following the record date for the
determination of stockholders entitled to such dividend or distribution.
(iv) In case, at any time after the date hereof, of any
capital reorganization, or any reclassification of the stock of the Corporation
(other than a change in par value or from par value to no par value or from no
par value to par value or as a result of a stock dividend or subdivision,
split-up or combination of shares), or the consolidation or merger of the
Corporation with or into another person (other than a consolidation or merger in
which the Corporation is the continuing corporation and which does not result in
any change in the Common Stock) or of the sale or other disposition of all or
substantially all the properties and assets of the Corporation as an entirety to
any other person, each Warrant shall after such reorganization,
reclassification, consolidation, merger, sale or other disposition be
exercisable for the kind and number of shares of stock or other securities or
property of the Corporation or of the corporation resulting from such
consolidation or surviving such merger or to which such properties and assets
shall have been sold or otherwise disposed to which the Owner would have been
entitled if immediately prior to such reorganization, reclassification,
consolidation, merger, sale or other disposition he had exercised such Warrant
for Common Stock. The provisions of this Section 1.1 shall similarly apply to
successive reorganizations, reclassifications, consolidations, mergers, sales or
other dispositions.
(v) All calculations under this paragraph (a) shall be made
to the nearest cent or to the nearest one hundredth (1/100) of a share, as the
case may be.
(vi) For the purpose of any computation pursuant to this
paragraph (a) or Section 1.2, the Current Market Price at any date of one share
of Common Stock shall be deemed to be the average of the daily closing prices
for Common Stock for the 30 consecutive business days ending no more than 15
business days before the day in question (as adjusted for any stock dividend,
split, combination or reclassification that took effect during such 30
business-day period). The closing price for each day shall be the last reported
sale price regular way or, in case no such reported sales take place on such
day, the average of the last reported bid and asked prices regular way, in
either case on the principal national securities exchange on which the Common
Stock is listed or admitted to trading or as quoted on the Nasdaq National
Market System or Nasdaq SmallCap Market, or if not listed or admitted to trading
on any national securities exchange or so quoted, the average of the highest
reported bid and lowest reported asked prices as furnished by The National
Quotation Bureau Incorporated, all as adjusted; provided, however, that if the
Common Stock is not traded in such manner that the quotations referred to in
this clause (vi) are available for the period required hereunder, Current Market
Price shall be deemed to be the Share Net Asset Value (as used herein the term
"Share Net Asset Value" shall mean the aggregate net asset value of the
Corporation as shown on its most recent available balance sheet divided by the
outstanding number of shares of Common Stock, each determined on the assumption
that the Warrants have been exercised).
(vii) In any case in which the provisions of this paragraph
(a) shall require that an adjustment shall become effective immediately after a
record date for an event, the Corporation may defer until the occurrence of such
event (x) issuing to the Owner with respect to any Warrant exercised after such
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<PAGE>
record date and before the occurrence of such event, the additional shares of
Common Stock issuable upon such exercise by reason of the adjustment required by
such event over and above the shares of Common Stock issuable upon such exercise
before giving effect to such adjustment and (y) paying to the Owner any amount
in cash in lieu of a fractional share of Common Stock pursuant to Section 1.2;
provided, however, that the Corporation shall deliver to the Owner a due bill or
other appropriate instrument evidencing the Owner's right to receive such
additional shares, and such cash, upon the occurrence of the event requiring
such adjustment.
(b) In the event the Corporation shall propose to take any
action of the types described in clauses (i), (ii), (iii) or (iv) of paragraph
(a) of this Section 1.1, the Corporation shall give notice to the Owner in the
manner set forth in Section 1.3, which notice shall specify the record date, if
any, with respect to any such action and the date on which such action is to
take place. Such notice shall also set forth such facts with respect thereto as
shall be reasonably necessary to indicate the effect of such action (to the
extent such effect may be known at the date of such notice) on the number of
shares of Common Stock comprising a Stock Unit and the number, kind or class of
shares or other securities or property which shall be deliverable or purchasable
upon the occurrence of such action or deliverable upon exercise of Warrants. In
the case of any action which would require the fixing of a record date, such
notice shall be given at least 20 days prior to the date so fixed, and in case
of all other action, such notice shall be given at least 30 days prior to the
taking of such proposed action. Failure to give such notice, or any defect
therein, shall not affect the legality or validity of any such action.
(c) In the event that at any time as a result of an adjustment
made pursuant to paragraph (a) of this Section 1.1 the Owner shall become
entitled with respect to any Warrants thereafter surrendered for exercise to
receive any shares of the Corporation or another corporation other than shares
of Common Stock, the provisions of this Section 1.1 and Section 1.2 with respect
to the Common Stock shall apply on like terms to any such other shares.
1.2. No fractional share of Common Stock shall be issued upon
the exercise of Warrants, but in lieu thereof the Corporation shall pay, upon
exercise in full of the Warrants represented by this Warrant Certificate, out of
funds legally available therefor, a cash adjustment in respect of such
fractional share in an amount equal to the same fraction of the then Current
Market Price.
1.3. The Corporation will, within 120 days after the end of
each of its fiscal years, mail to the Owner, at the address of such holder shown
on the books of the Corporation, a certificate of the independent public
accountants for the Corporation (i) specifying the Share Price in effect as of
the end of such fiscal year and the number of shares of Common Stock, or the
kind and amount of any securities or property other than shares of Common Stock,
comprising a Stock Unit and (ii) setting forth in reasonable detail the facts
requiring any adjustments made during such fiscal year.
2.1. The issue of any stock or other certificate upon the
exercise of the Warrants shall be made without charge to the Owner for any
transfer or issuance tax in respect of the issue thereof. The Corporation shall
not, however, be required to pay any tax which may be payable in respect of any
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<PAGE>
transfer involved in the issue and delivery of any certificate in a name other
than that of the Owner, and the Corporation shall not be required to issue or
deliver any such certificate unless and until the person or persons requesting
the issue thereof shall have paid to the Corporation the amount of such tax or
shall have established to the satisfaction of the Corporation that such tax has
been paid.
2.2. This Warrant Certificate and the rights hereunder are not
transferable. In addition, the Warrants evidenced hereby may not be exercised,
and any shares of Common Stock issued upon any exercise thereof may not be
transferred, unless, in the opinion of counsel, who shall be counsel reasonably
acceptable to the Corporation, such exercise or transfer, as the case may be,
would not result in a violation of the provisions of the Securities Act of 1933.
The Owner and any holder of any shares of Common Stock issued upon exercise of
any such Warrants, by taking or holding the same, consents to and agrees to be
bound by the provisions of this Section 2.2.
2.3. If this Warrant Certificate shall be lost, stolen,
mutilated or destroyed, the Corporation shall on such terms as to indemnify or
otherwise protect the Corporation as the Corporation may in its discretion
impose, issue a new warrant certificate of like denomination, tenor and date as
the Warrant Certificate so lost, stolen, mutilated or destroyed. Any such new
warrant certificate shall constitute an original contractual obligation of the
Corporation, whether or not the allegedly lost, stolen, mutilated or destroyed
Warrant Certificate shall be at any time enforceable by anyone.
2.4. The Corporation may deem and treat the Owner as the
absolute owner of this Warrant Certificate for all purposes and shall not be
affected by any notice to the contrary.
2.5. This Warrant Certificate and the Warrants evidenced
hereby shall not entitle the Owner to any rights of a stockholder of the
Corporation either at law or in equity, including, without limitation, the right
to vote, to receive dividends or other distributions, to exercise any
pre-emptive rights or to receive any notice of meetings of stockholders or of
any other proceedings of the Corporation.
2.6. This Warrant Certificate, in all events, shall be wholly
void and have no effect after 5 P.M. (New York time) on August 5, 2002.
2.7. In the event that one or more of the provisions of this
Warrant Certificate shall for any reason be held to be invalid, illegal or
unenforceable in any respect, such invalidity, illegality or unenforceability
shall not affect any other provision of this Warrant Certificate, but this
Warrant Certificate shall be construed as if such invalid, illegal or
unenforceable provision had never been contained herein.
2.8. This Warrant Certificate shall be governed by and
construed in accordance with the laws of the State of New York applicable to
agreements made and to be entirely performed within such State, except to the
extent of the mandatory rules of the State of Nevada with respect to the formal
requisites for authorization of a security and rights and duties with respect to
register of transfer.
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Dated: August 5, 1999
CAPITA RESEARCH GROUP, INC.
By /s/ David B. Hunter
-------------------
David B. Hunter
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FORM OF EXERCISE
- ----------------
(to be executed by the registered holder hereof)
The undersigned hereby exercises the right to purchase
________ shares of common stock, $.001 par value (the "Common Stock"), of CAPITA
RESEARCH GROUP, INC. evidenced by the within Warrant Certificate and herewith
makes payment of the purchase price in full. Kindly issue certificates for
shares of Common Stock in accordance with the instructions given below. The
certificate for the unexercised balance of the Warrants evidenced by the within
Warrant Certificate, if any, will be registered in the name of the undersigned.
Dated: ____________________, ____
Instructions for registration of stock
- ----------------------------------
Name (please print)
Social Security or Other Identifying
Number:___________________________
Address:
- ----------------------------------
Street
- ----------------------------------
City, State and Zip Code
13
Exhibit 4(c)
THIS WARRANT AND ANY SECURITIES ACQUIRED UPON EXERCISE OF THIS WARRANT HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES
LAW OF ANY STATE OF THE UNITED STATES AND MAY NOT BE SOLD, TRANSFERRED OR
OTHERWISE DISPOSED OF EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT
UNDER SUCH ACT AND APPLICABLE STATE SECURITIES LAWS OR PURSUANT TO AN APPLICABLE
EXEMPTION TO THE REGISTRATION REQUIREMENTS OF SUCH ACT AND SUCH LAWS. THIS
WARRANT AND SUCH SECURITIES MAY NOT BE SOLD, TRANSFERRED OR OTHERWISE DISPOSED
OF EXCEPT IN COMPLIANCE WITH THE CONDITIONS SPECIFIED IN THIS WARRANT AND THE
SECURITIES PURCHASE AGREEMENT DATED AS OF JANUARY [ ], 2000 BY AND AMONG CAPITA
RESEARCH GROUP, INC. AND [ ].
CAPITA RESEARCH GROUP, INC.
A COMMON STOCK PURCHASE WARRANT
No. W-A[ ] JANUARY [ ], 2000
Warrant to Purchase [ ]
Shares of Common Stock par value $.001 per share
CAPITA RESEARCH GROUP, INC., a Nevada corporation (the
"Company"), for value received, hereby certifies that [NAME] or registered
assigns (the "Holder"), is entitled to purchase from the Company [ ] duly
authorized, validly issued, fully paid and nonassessable shares of Common Stock,
par value $.001 per share, of the Company (the "Common Stock"), at a purchase
price equal to $.50 per share, at any time or from time to time prior to 5:00
P.M., New York City time, on January 1, 2005 (the "Expiration Date"), all
subject to the terms, conditions and adjustments set forth below in this
Warrant.
This Warrant is one of the A Common Stock Purchase Warrants
(collectively, the "Warrants", such term to include any such warrants issued in
substitution therefor) originally issued pursuant to the terms of the Securities
Purchase Agreement, dated as of January [ ], 2000, by and among the Company and
the "Buyers" signatory thereto (the "Purchase Agreement"). Capitalized terms
used herein and not otherwise defined herein shall have the meanings assigned
such terms in the Purchase Agreement.
After the Closing Date the Company is to register the Common
Stock issuable pursuant to this Warrant with the Securities and Exchange
Commission pursuant to the terms of the Registration Rights Agreement dated
January [ ], 2000.
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1. Definitions. As used herein, unless the context
otherwise requires, the following terms shall have the meanings indicated:
"Additional Shares of Common Stock" shall mean all shares
(including treasury shares) of Common Stock issued or sold (or, pursuant to
Section 3.3 or 3.4, deemed to be issued) by the Company after the date hereof,
whether or not subsequently reacquired or retired by the Company, other than
(a) (i) shares of Common Stock issued upon the exercise of the
Warrants, (ii) shares of Common Stock issued upon the exercise of the B
Common Stock Purchase Warrants, (iii) shares of Common Stock issued at
the Closing under the Purchase Agreement and (iv) such number of
additional shares of Common Stock as may become issuable upon the
exercise of the Warrants by reason of adjustments required pursuant to
the anti-dilution provisions applicable to such Warrants as in effect
on the date hereof; and
(b) shares of Common Stock issued pursuant to Approved
Stock Plans; and
(c) shares issued upon exercise of options, warrants and
other convertible securities outstanding as of the date hereof; and
(d) shares issued to bona fide suppliers or vendors in
consideration for services or supplies rendered to the Company or to a
bank or other financial institution as an inducement to enter into a
financing arrangement with the Company in an amount not to exceed 10%
of the outstanding capital stock of the Company.
"Approved Stock Plan" shall mean any contract, plan or
agreement which has been or shall be approved by the Board of Directors of the
Company, pursuant to which the Company's securities may be issued to any
employee, officer, director, consultant or other service provider of the Company
in an aggregate amount that does not exceed 110% of the number of securities
issuable pursuant to any currently existing Approved Stock Plan.
"B Common Stock Purchase Warrants" shall mean such warrants,
substantially in the form hereof, to acquire shares of Common Stock of the
Company at a purchase price equal to $1.00 per share, issued pursuant to the
terms of the Purchase Agreement.
"Business Day" shall mean any day other than a Saturday or a
Sunday or a day on which commercial banking institutions in the City of New York
are authorized by law to be closed. Any reference to "days" (unless Business
Days are specified) shall mean calendar days.
"Buy In Actual Damages" shall have the meaning assigned to it
in Section 2.6 of this Warrant.
"Closing Bid Prices" shall mean for any security as of any
date, the closing bid price of such security on the principal securities
exchange or trade market where such security is listed or trades as reported by
Bloomberg, L.P. ("Bloomberg"), or if the foregoing does not apply, the closing
bid price of such security in the over-the-counter market on the electronic
bulletin board for such security as reported by Bloomberg, or, if no closing bid
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price is reported for such security by Bloomberg, the average of the bid prices
of any market makers for such security as reported in the "pink sheets" by the
National Quotation Bureau, Inc. If the Closing Bid Price cannot be calculated
for such security on such date, as set forth above, the Closing Bid Price of
such security shall be the fair market value as determined in good faith by an
investment banking firm selected jointly by the Company and the Holder, with the
fees and expenses of such determination borne solely by the Company.
"Commission" shall mean the Securities and Exchange Commission
or any successor agency having jurisdiction to enforce the Securities Act.
"Common Stock" shall have the meaning assigned to it in the
introduction to this Warrant, such term to include any stock into which such
Common Stock shall have been changed or any stock resulting from any
reclassification of such Common Stock, and all other stock of any class or
classes (however designated) of the Company the holders of which have the right,
without limitation as to amount, either to all or to a share of the balance of
current dividends and liquidating dividends after the payment of dividends and
distributions on any shares entitled to preference.
"Company" shall have the meaning assigned to it in the
introduction to this Warrant, such term to include any corporation or other
entity which shall succeed to or assume the obligations of the Company hereunder
in compliance with Section 4.
"Convertible Securities" shall mean any evidences of
indebtedness, shares of stock (other than Common Stock) or other securities
directly or indirectly convertible into or exchangeable for Additional Shares of
Common Stock.
"Current Market Price" shall mean, on any date specified
herein, the average of the daily Closing Bid Prices during the 10 consecutive
trading days commencing 15 trading days before such date, except that, if on any
such date the shares of Common Stock are not listed or admitted for trading on
any national securities exchange or quoted in the over-the-counter market, the
Current Market Price shall be the "Fair Value" on such date.
"Exchange Act" shall mean the Securities Exchange Act of 1934,
as amended from time to time, and the rules and regulations thereunder, or any
successor statute.
"Expiration Date" shall have the meaning assigned to it in the
introduction to this Warrant.
"Fair Value" shall mean, on any date specified herein (i) in
the case of cash, the dollar amount thereof, (ii) in the case of a security
admitted for trading on any national securities exchange or quoted in the
over-the-counter market, the Current Market Price, and (iii) in all other cases
as determined in good faith jointly by the Board of Directors of the Company and
the Holder; provided, however, that if such parties are unable to reach
agreement within a reasonable period of time, the Fair Value shall be determined
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<PAGE>
in good faith by an independent investment banking firm selected jointly by the
Company and the Holder or, if that selection cannot be made within ten days, by
an independent investment banking firm selected by the American Arbitration
Association in accordance with its rules, and provided further, that the Company
shall pay all of the fees and expenses of any third parties incurred in
connection with determining the Fair Value.
"Options" shall mean any rights, options or warrants to
subscribe for, purchase or otherwise acquire either Additional Shares of Common
Stock or Convertible Securities.
"Other Securities" shall mean any stock (other than Common
Stock) and other securities of the Company or any other Person (corporate or
otherwise) which the holders of the Warrants at any time shall be entitled to
receive, or shall have received, upon the exercise of the Warrants, in lieu of
or in addition to Common Stock, or which at any time shall be issuable or shall
have been issued in exchange for or in replacement of Common Stock or Other
Securities pursuant to Section 4 or otherwise.
"Person" shall mean any individual, firm, partnership,
corporation, trust, joint venture, association, joint stock company, limited
liability company, unincorporated organization or any other entity or
organization, including a government or agency or political subdivision thereof,
and shall include any successor (by merger or otherwise) of such entity.
"Purchase Agreement" shall have the meaning assigned to it in
the introduction to this Warrant.
"Purchase Price" shall mean the amount per share indicated in
the introductory paragraph to this Warrant, subject to adjustment and
readjustment from time to time as provided in Section 3, and, as so adjusted or
readjusted, shall remain in effect until a further adjustment or readjustment
thereof is required by Section 3.
"Registration Rights Agreement" shall mean the Registration
Rights Agreement dated as of January [ ], 2000, substantially in the form of
Exhibit C to the Purchase Agreement.
"Rights" shall have the meaning assigned to it in Section
3.10.
"Securities Act" shall mean the Securities Act of 1933, as
amended from time to time, and the rules and regulations thereunder, or any
successor statute.
"Warrants" shall have the meaning assigned to it in the
introduction to this Warrant.
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2. Exercise of Warrant.
-------------------
2.1. Manner of Exercise; Payment of the Purchase Price. (a)
This Warrant may be exercised by the Holder, in whole or in part, at any time or
from time to time prior to the Expiration Date, by surrendering to the Company
at its principal office (or such other office or agency of the Company as the
Company may designate in a written notice to the Holder) this Warrant, together
with the form of Election to Purchase Shares attached hereto as Exhibit A (or a
reasonable facsimile thereof) duly executed by the Holder and accompanied by
payment of the Purchase Price as described below for the number of shares of
Common Stock specified in such form.
(b) Payment of the Purchase Price may be made in United States
currency by cash or delivery of a certified check or bank draft payable to the
order of the Company or by wire transfer to the account of the Company.
2.2. When Exercise Effective. Each exercise of this Warrant
shall be deemed to have been effected immediately prior to the close of business
on the Business Day on which this Warrant shall have been surrendered to, and
the Purchase Price shall have been received by, the Company as provided in
Section 2.1, and at such time the Person or Persons in whose name or names any
certificate or certificates for shares of Common Stock (or Other Securities)
shall be issuable upon such exercise as provided in Section 2.3 shall be deemed
to have become the holder or holders of record thereof for all purposes.
2.3. Delivery of Stock Certificates, etc.; Charges, Taxes and
Expenses. Subject to Section 2.5 (a) As soon as practicable after each exercise
of this Warrant, in whole or in part, and in any event within five Business Days
thereafter, the Company shall cause to be issued in such denominations as may be
requested by Holder in the Election to Purchase Shares, in the name of and
delivered to the Holder or, subject the Purchase Agreement, as the Holder may
direct,
(i) a certificate or certificates, or, if then permissible
under the Securities Act, at the Holder's request to electronically
issue such shares (e.g., through DWAC or DTC), for the number of shares
of Common Stock (or Other Securities) to which the Holder shall be
entitled upon such exercise plus, in lieu of issuance of any fractional
share to which the Holder would otherwise be entitled, if any, a check
for the amount of cash equal to the same fraction multiplied by the
Current Market Price per share on the date of Warrant exercise,
provided, however, that in the event sufficient funds are not legally
available for the payment of such amount, the number of shares of
Common Stock which such certificate(s) represents shall be rounded up
to the nearest whole number, and
(ii) in case such exercise is for less than all of the shares
of Common Stock purchasable under this Warrant, a new Warrant or
Warrants of like tenor, for the balance of the shares of Common Stock
purchasable hereunder.
(b) Issuance of certificates for shares of Common Stock upon
the exercise of this Warrant shall be made without charge to the Holder hereof
for any issue or transfer tax or other incidental expense, in respect of the
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issuance of such certificates, all of which such taxes and expenses shall be
paid by the Company, except that any tax or expense payable as a result of the
issuance of such certificates in a name other than that of the Holder shall be
paid by the Holder.
2.4. Company to Reaffirm Obligations. The Company shall, at
the time of each exercise of this Warrant, upon the request of the Holder
hereof, acknowledge in writing its continuing obligation to afford to such
Holder all rights to which such Holder shall continue to be entitled after such
exercise in accordance with the terms of this Warrant, provided that if the
Holder of this Warrant shall fail to make any such request, such failure shall
not affect the continuing obligation of the Company to afford such rights to the
Holder.
2.5. Exercise Disputes. In the case of any dispute with
respect to the number of shares to be issued upon exercise of this Warrant, the
Company shall promptly issue such number of shares of Common Stock that is not
disputed and shall submit the disputed determinations or arithmetic calculations
to the Holder via facsimile within two (2) Business Days of receipt of the
Holder's Election to Purchase Shares. If the Holder and the Company are unable
to agree as to the determination of such number of shares within two (2)
Business Days of such disputed determination or arithmetic calculation being
submitted to the Holder, then the Company shall in accordance with this Section,
submit via facsimile the disputed determination to an independent reputable
accounting firm of national standing, selected jointly by the Company and the
Holder. The Company shall cause such accounting firm to perform the
determinations or calculations and notify the Company and the Holder of the
results within forty-eight (48) hours from the time it receives the disputed
determinations or calculations. Such accounting firm's determination shall be
binding upon all parties absent manifest error. The Company shall then on the
next Business Day issue certificate(s) representing the appropriate number of
shares of Common Stock in accordance with such accounting firm's determination
and this Section. All fees and expenses of such determination and calculation
shall be borne by the Company.
2.6. Failure to Deliver Common Stock If, at any time, the
Holder of this Warrant submits this Warrant, an Election to Purchase Shares and
payment to the Company of the Purchase Price for each of the shares of Common
Stock specified in the Election to Purchase Shares in accordance with Section
2.1 above, and the Company, for any reason, fails to deliver, on or prior to the
last possible date which the Company could have issued such Common Stock to the
Holder without violating this Section 2, the number of shares of Common Stock
for which the Holder is entitled upon such exercise, the Company shall pay
damages to the Holder equal to the greater of (a) actual damages incurred by the
Holder as a result of the Holder's needing to "buy in" shares of Common Stock to
the extent necessary to satisfy its securities delivery requirements ("Buy In
Actual Damages") and (b) if the Company fails to deliver such certificates
within five days after the last possible date on which the Company could have
issued such Common Stock to the Holder without violating this Section 2, on each
date such exercise is not timely effected in an amount equal to 1% of the
product of (i) the number of shares of Common Stock not issued to the Holder on
a timely basis and to which the Holder is entitled and (ii) the Closing Bid
Price of the Common Stock on the last possible date which the Company could have
issued such Common Stock to the Holder without violating this Section 2.
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3. Adjustment of Common Stock Issuable Upon Exercise.
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3.1. Adjustment of Number of Shares.
------------------------------
Upon each adjustment of the Purchase Price as a
result of the calculations made in this Section 3, this Warrant shall thereafter
evidence the right to receive, at the adjusted Purchase Price, that number of
shares of Common Stock (calculated to the nearest one-hundredth) obtained by
dividing (i) the product of the aggregate number of shares covered by this
Warrant immediately prior to such adjustment and the Purchase Price in effect
immediately prior to such adjustment of the Purchase Price by (ii) the Purchase
Price in effect immediately after such adjustment of the Purchase Price.
3.2. Adjustment of Purchase Price.
----------------------------
3.2.1. Issuance of Additional Shares of Common Stock. In case
the Company at any time or from time to time after the date hereof shall issue
or sell Additional Shares of Common Stock (including Additional Shares of Common
Stock deemed to be issued pursuant to Section 3.3 or 3.4 but excluding
Additional Shares of Common Stock purchasable upon exercise of Rights referred
to in Section 3.10), without consideration or for a consideration per share less
than the fair market value of such additional shares of Common Stock as
determined in good faith by the Board of Directors of the Company as in effect
immediately prior to such issue or sale, then, and in each such case, subject to
Section 3.8, the Purchase Price shall be reduced, concurrently with such issue
or sale, to a price (calculated to the nearest .001 of a cent) determined by
multiplying such Purchase Price by a fraction
(a) the numerator of which shall be the sum of (i) the number
of shares of Common Stock outstanding immediately prior to such issue
or sale and (ii) the number of shares of Common Stock which the gross
consideration received by the Company for the total number of such
Additional Shares of Common Stock so issued or sold would purchase at
such Current Market Price, and
(b) the denominator of which shall be the number of shares of
Common Stock outstanding immediately after such issue or sale, provided
that, for the purposes of this Section 3.2.1, (x) immediately after any
Additional Shares of Common Stock are deemed to have been issued
pursuant to Section 3.3 or 3.4, such Additional Shares shall be deemed
to be outstanding, and (y) treasury shares shall not be deemed to be
outstanding.
3.2.2. Extraordinary Dividends and Distributions. In case the
Company at any time or from time to time after the date hereof shall declare,
order, pay or make a dividend or other distribution (including, without
limitation, any distribution of other or additional stock or other securities or
property or Options by way of dividend or spin-off, reclassification,
recapitalization or similar corporate rearrangement) on the Common Stock (other
than a cash dividend payable out of earnings), then, in each such case, subject
to Section 3.8, the Purchase Price in effect immediately prior to the close of
business on the record date fixed for the determination of holders of any class
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of securities entitled to receive such dividend or distribution shall be
reduced, effective as of the close of business on such record date, to a price
determined by multiplying such Purchase Price by a fraction
(x) the numerator of which shall be the Current Market Price
in effect on such record date or, if the Common Stock trades on an
ex-dividend basis, on the date prior to the commencement of ex-dividend
trading, less the Fair Value of such dividend or distribution
applicable to one share of Common Stock, and
(y) the denominator of which shall be such Current Market
Price.
3.3. Treatment of Options and Convertible Securities. In case
the Company at any time or from time to time after the date hereof shall issue,
sell, grant or assume, or shall fix a record date for the determination of
holders of any class of securities of the Company entitled to receive, any
Options or Convertible Securities (whether or not the rights thereunder are
immediately exercisable), then, and in each such case, the maximum number of
Additional Shares of Common Stock (as set forth in the instrument relating
thereto, without regard to any provisions contained therein for a subsequent
adjustment of such number) issuable upon the exercise of such Options or, in the
case of Convertible Securities and Options therefor, the conversion or exchange
of such Convertible Securities, shall be deemed to be Additional Shares of
Common Stock issued as of the time of such issue, sale, grant or assumption or,
in case such a record date shall have been fixed, as of the close of business on
such record date (or, if the Common Stock trades on an ex-dividend basis, on the
date prior to the commencement of ex-dividend trading), provided that such
Additional Shares of Common Stock shall not be deemed to have been issued unless
(i) the consideration per share (determined pursuant to Section 3.5) of such
shares would be less than the fair market value of such shares as determined in
good faith by the Board of Directors of the Company as in effect on the date of
and immediately prior to such issue, sale, grant or assumption or immediately
prior to the close of business on such record date (or, if the Common Stock
trades on an ex-dividend basis, on the date prior to the commencement of
ex-dividend trading), as the case may be and (ii) such Additional Shares of
Common Stock are not purchasable pursuant to Rights referred to in Section 3.10,
and provided, further, that
(a) whether or not the Additional Shares of Common Stock
underlying such Options or Convertible Securities are deemed to be
issued, no further adjustment of the Purchase Price shall be made upon
the subsequent issue or sale of Convertible Securities or shares of
Common Stock upon the exercise of such Options or the conversion or
exchange of such Convertible Securities;
(b) if such Options or Convertible Securities by their terms
provide, with the passage of time or otherwise, for any increase in the
consideration payable to the Company, or decrease in the number of
Additional Shares of Common Stock issuable, upon the exercise,
conversion or exchange thereof (by change of rate or otherwise), the
Purchase Price computed upon the original issue, sale, grant or
assumption thereof (or upon the occurrence of the record date, or date
prior to the commencement of ex-dividend trading, as the case may be,
with respect thereto), and any subsequent adjustments based thereon,
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shall, upon any such increase or decrease becoming effective, be
recomputed to reflect such increase or decrease insofar as it affects
such Options, or the rights of conversion or exchange under such
Convertible Securities, which are outstanding at such time;
(c) upon the expiration or termination (or purchase by the
Company and cancellation or retirement) of any such Options which shall
not have been exercised or the expiration of any rights of conversion
or exchange under any such Convertible Securities which (or purchase by
the Company and cancellation or retirement of any such Convertible
Securities the rights of conversion or exchange under which) shall not
have been exercised, the Purchase Price computed upon the original
issue, sale, grant or assumption thereof (or upon the occurrence of the
record date, or date prior to the commencement of ex-dividend trading,
as the case may be, with respect thereto), and any subsequent
adjustments based thereon, shall, upon such expiration (or such
cancellation or retirement, as the case may be), be recomputed as if:
(i) in the case of Options for Common Stock or
Convertible Securities, the only Additional Shares of Common
Stock issued or sold were the Additional Shares of Common
Stock, if any, actually issued or sold upon the exercise of
such Options or the conversion or exchange of such Convertible
Securities and the consideration received therefor was the
consideration actually received by the Company for the issue,
sale, grant or assumption of all such Options, whether or not
exercised, plus the consideration actually received by the
Company upon such exercise, or for the issue or sale of all
such Convertible Securities which were actually converted or
exchanged, plus the additional consideration, if any, actually
received by the Company upon such conversion or exchange, and
(ii) in the case of Options for Convertible
Securities, only the Convertible Securities, if any, actually
issued or sold upon the exercise of such Options were issued
at the time of the issue or sale, grant or assumption of such
Options, and the consideration received by the Company for the
Additional Shares of Common Stock deemed to have then been
issued was the consideration actually received by the Company
for the issue, sale, grant or assumption of all such Options,
whether or not exercised, plus the consideration deemed to
have been received by the Company (pursuant to Section 3.5)
upon the issue or sale of such Convertible Securities with
respect to which such Options were actually exercised;
(d) no readjustment pursuant to subdivision (b) or (c) above
shall have the effect of increasing the Purchase Price by an amount in
excess of the amount of the adjustment thereof originally made in
respect of the issue, sale, grant or assumption of such Options or
Convertible Securities; and
(e) in the case of any such Options which expire by their
terms not more than 30 days after the date of issue, sale, grant or
assumption thereof, no adjustment of the Purchase Price shall be made
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until the expiration or exercise of all such Options, whereupon such
adjustment shall be made in the manner provided in subdivision (c)
above.
3.4. Treatment of Stock Dividends, Stock Splits, etc. In case
the Company at any time or from time to time after the date hereof shall declare
or pay any dividend on the Common Stock payable in Common Stock, or shall effect
a subdivision of the outstanding shares of Common Stock into a greater number of
shares of Common Stock (by reclassification or otherwise than by payment of a
dividend in Common Stock), then, and in each such case, Additional Shares of
Common Stock shall be deemed to have been issued (a) in the case of any such
dividend, immediately after the close of business on the record date for the
determination of holders of any class of securities entitled to receive such
dividend, or (b) in the case of any such subdivision, at the close of business
on the day immediately prior to the day upon which such corporate action becomes
effective.
3.5. Computation of Consideration. For the purposes of
this Section 3,
(a) the consideration for the issue or sale of any
Additional Shares of Common Stock shall, irrespective of the accounting
treatment of such consideration,
(i) insofar as it consists of cash, be computed at
the amount of cash received by the Company, without deducting
any expenses paid or incurred by the Company or any
commissions or compensation paid or concessions or discounts
allowed to underwriters, dealers or others performing similar
services in connection with such issue or sale,
(ii) insofar as it consists of property (including
securities) other than cash, be computed at the Fair Value
thereof at the time of such issue or sale, and
(iii) in case Additional Shares of Common Stock are
issued or sold together with other stock or securities or
other assets of the Company for a consideration which covers
both, be the portion of such consideration so received,
computed as provided in clauses (i) and (ii) above, allocable
to such Additional Shares of Common Stock, such allocation to
be determined in the same manner that the Fair Value of
property not consisting of cash or securities is to be
determined as provided in the definition of "Fair Value"
herein;
(b) Additional Shares of Common Stock deemed to have been
issued pursuant to Section 3.3, relating to Options and Convertible
Securities, shall be deemed to have been issued for a consideration per
share determined by dividing
(i) the total amount, if any, received and receivable
by the Company as consideration for the issue, sale, grant or
assumption of the Options or Convertible Securities in
question, plus the minimum aggregate amount of additional
consideration (as set forth in the instruments relating
thereto, without regard to any provision contained therein for
a subsequent adjustment of such consideration to protect
against dilution) payable to the Company upon the exercise in
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full of such Options or the conversion or exchange of such
Convertible Securities or, in the case of Options for
Convertible Securities, the exercise of such Options for
Convertible Securities and the conversion or exchange of such
Convertible Securities, in each case computing such
consideration as provided in the foregoing subdivision (a),
by
(ii) the maximum number of shares of Common Stock (as
set forth in the instruments relating thereto, without regard
to any provision contained therein for a subsequent adjustment
of such number to protect against dilution) issuable upon the
exercise of such Options or the conversion or exchange of such
Convertible Securities; and
(c) Additional Shares of Common Stock deemed to have been
issued pursuant to Section 3.4, relating to stock dividends, stock
splits, etc., shall be deemed to have been issued for no consideration.
3.6. Adjustments for Combinations, etc. In case the
outstanding shares of Common Stock shall be combined or consolidated,
by reclassification or otherwise, into a lesser number of shares of
Common Stock, the Purchase Price in effect immediately prior to such
combination or consolidation shall, concurrently with the effectiveness
of such combination or consolidation, be proportionately increased.
3.7. Dilution in Case of Other Securities. In case any Other
Securities shall be issued or sold or shall become subject to issue or
sale upon the conversion or exchange of any stock (or Other Securities)
of the Company (or any issuer of Other Securities or any other Person
referred to in Section 4) or to subscription, purchase or other
acquisition pursuant to any Options issued or granted by the Company
(or any such other issuer or Person) for a consideration such as to
dilute, on a basis consistent with the standards established in the
other provisions of this Section 3, the purchase rights granted by this
Warrant, then, and in each such case, the computations, adjustments and
readjustments provided for in this Section 3 with respect to the
Purchase Price and the number of shares purchasable upon Warrant
exercise shall be made as nearly as possible in the manner so provided
and applied to determine the amount of Other Securities from time to
time receivable upon the exercise of the Warrants, so as to protect the
holders of the Warrants against the effect of such dilution.
3.8. De Minimis Adjustments. If the amount of any adjustment
of the Purchase Price per share required pursuant to this Section 3 would be
less than $.01, such amount shall be carried forward and adjustment with respect
thereto made at the time of and together with any subsequent adjustment which,
together with such amount and any other amount or amounts so carried forward,
shall aggregate a change in the Purchase Price of at least $.01 per share. All
calculations under this Warrant shall be made to the nearest .001 of a cent or
to the nearest one-hundredth of a share, as the case may be.
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3.9. Abandoned Dividend or Distribution. If the Company shall
take a record of the holders of its Common Stock for the purpose of entitling
them to receive a dividend or other distribution (which results in an adjustment
to the Purchase Price under the terms of this Warrant) and shall, thereafter,
and before such dividend or distribution is paid or delivered to stockholders
entitled thereto, legally abandon its plan to pay or deliver such dividend or
distribution, then any adjustment made to the Purchase Price and number of
shares of Common Stock purchasable upon Warrant exercise by reason of the taking
of such record shall be reversed, and any subsequent adjustments, based thereon,
shall be recomputed.
3.10. Shareholder Rights Plan. Notwithstanding the foregoing,
in the event that the Company shall distribute "poison pill" rights pursuant to
a "poison pill" shareholder rights plan (the "Rights"), the Company shall, in
lieu of making any adjustment pursuant to Section 3.2.1 or Section 3.2.2 hereof,
make proper provision so that each Holder who exercises a Warrant after the
record date for such distribution and prior to the expiration or redemption of
the Rights shall be entitled to receive upon such exercise, in addition to the
shares of Common Stock issuable upon such exercise, a number of Rights to be
determined as follows: (i) if such exercise occurs on or prior to the date for
the distribution to the holders of Rights of separate certificates evidencing
such Rights (the "Distribution Date"), the same number of Rights to which a
holder of a number of shares of Common Stock equal to the number of shares of
Common Stock issuable upon such exercise at the time of such exercise would be
entitled in accordance with the terms and provisions of and applicable to the
Rights; and (ii) if such exercise occurs after the Distribution Date, the same
number of Rights to which a holder of the number of shares into which the
Warrant so exercised was exercisable immediately prior to the Distribution Date
would have been entitled on the Distribution Date in accordance with the terms
and provisions of and applicable to the Rights, and in each case subject to the
terms and conditions of the Rights.
4. Consolidation, Merger, etc.
--------------------------
4.1. Adjustments for Consolidation, Merger, Sale of Assets,
Reorganization, etc. In case the Company after the date hereof (a) shall
consolidate with or merge into any other Person and shall not be the continuing
or surviving corporation of such consolidation or merger, or (b) shall permit
any other Person to consolidate with or merge into the Company and the Company
shall be the continuing or surviving Person but, in connection with such
consolidation or merger, the Common Stock or Other Securities shall be changed
into or exchanged for stock or other securities of any other Person or cash or
any other property, or (c) shall transfer all or substantially all of its
properties or assets to any other Person, or (d) shall effect a capital
reorganization or reclassification of the Common Stock or Other Securities
(other than a capital reorganization or reclassification resulting in the issue
of Additional Shares of Common Stock for which adjustment in the Purchase Price
is provided in Section 3.2.1 or 3.2.2), then, and in the case of each such
transaction, proper provision shall be made so that, upon the basis and the
terms and in the manner provided in this Warrant, the Holder of this Warrant,
upon the exercise hereof at any time after the consummation of such transaction
shall be entitled to receive (at the aggregate Purchase Price in effect at the
time of such consummation for all Common Stock or Other Securities issuable upon
such exercise immediately prior to such consummation), in lieu of the Common
Stock or Other Securities issuable upon such exercise prior to such
consummation, the amount of securities, cash or other property to which such
Holder would actually have been entitled as a stockholder upon such consummation
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if such Holder had exercised this Warrant immediately prior thereto, subject to
adjustments (subsequent to such consummation) as nearly equivalent as possible
to the adjustments provided for in Sections 3 through 5.
4.2. Assumption of Obligations. Notwithstanding anything
contained in the Warrants or in the Purchase Agreement to the contrary, the
Company shall not effect any of the transactions described in clauses (a)
through (d) of Section 4.1 unless, prior to the consummation thereof, each
Person (other than the Company) which may be required to deliver any stock,
securities, cash or property upon the exercise of this Warrant as provided
herein shall assume, by written instrument delivered to, and reasonably
satisfactory to, the Holder of this Warrant, (a) the obligations of the Company
under this Warrant (and if the Company shall survive the consummation of such
transaction, such assumption shall be in addition to, and shall not release the
Company from, any continuing obligations of the Company under this Warrant), (b)
the obligations of the Company under the Purchase Agreement and the Registration
Rights Agreement and (c) the obligation to deliver to the Holder such shares of
stock, securities, cash or property as, in accordance with the foregoing
provisions of this Section 4, the Holder may be entitled to receive. Nothing in
this Section 4 shall be deemed to authorize the Company to enter into any
transaction not otherwise permitted by the Purchase Agreement.
5. Other Dilutive Events. In case any event shall occur as to
which the provisions of Section 3 or Section 4 hereof are not strictly
applicable or if strictly applicable would not fairly protect the purchase
rights of the Holder in accordance with the essential intent and principles of
such Sections, then, in each such case, the Board of Directors of the Company
shall make an adjustment in the application of such provisions, in accordance
with such essential intent and principles, so as to preserve, without dilution,
the purchase rights represented by this Warrant.
6. No Dilution or Impairment. The Company shall not, by
amendment of its certificate of incorporation or through any consolidation,
merger, reorganization, transfer of assets, dissolution, issue or sale of
securities or any other voluntary action, avoid or seek to avoid the observance
or performance of any of the terms of this Warrant, but will at all times in
good faith assist in the carrying out of all such terms and in the taking of all
such action as may be reasonably necessary or appropriate in order to protect
the rights of the Holder of this Warrant against dilution or other impairment.
Without limiting the generality of the foregoing, the Company (a) shall not
permit the par value of any shares of stock receivable upon the exercise of this
Warrant to exceed the amount payable therefor upon such exercise, (b) shall take
all such action as may be necessary or appropriate in order that the Company may
validly and legally issue fully paid and nonassessable shares of stock, free
from all taxes, liens, security interests, encumbrances, preemptive rights and
charges on the exercise of the Warrants from time to time outstanding, (c) shall
not take any action which results in any adjustment of the Purchase Price if the
total number of shares of Common Stock (or Other Securities) issuable after the
action upon the exercise of all of the Warrants would exceed the total number of
shares of Common Stock (or Other Securities) then authorized by the Company's
certificate of incorporation and available for the purpose of issue upon such
exercise, and (d) shall not issue any capital stock of any class which is
preferred as to dividends or as to the distribution of assets upon voluntary or
involuntary dissolution, liquidation or winding-up, unless the rights of the
holders thereof shall be limited to a fixed sum or percentage of par value or a
sum determined by reference to a formula based on a published index of interest
rates, an interest rate publicly announced by a financial institution or a
similar indicator of interest rates in respect of participation in dividends and
to a fixed sum or percentage of par value in any such distribution of assets.
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7. Certificate as to Adjustments. In each case of any
adjustment or readjustment in the shares of Common Stock (or Other Securities)
issuable upon the exercise of this Warrant, the Company at its expense shall
promptly compute such adjustment or readjustment in accordance with the terms of
this Warrant and prepare a certificate, signed by the Chairman of the Board,
President or one of the Vice Presidents of the Company, and by the Chief
Financial Officer, the Treasurer or one of the Assistant Treasurers of the
Company, setting forth such adjustment or readjustment and showing in reasonable
detail the method of calculation thereof and the facts upon which such
adjustment or readjustment is based, including a statement of (a) the
consideration received or to be received by the Company for any Additional
Shares of Common Stock issued or sold or deemed to have been issued, (b) the
number of shares of Common Stock outstanding or deemed to be outstanding, and
(c) the Purchase Price in effect immediately prior to such issue or sale and as
adjusted and readjusted (if required by Section 3) on account thereof. The
Company shall forthwith mail a copy of each such certificate to each holder of a
Warrant. The Company shall also keep copies of all such certificates at its
principal office and shall cause the same to be available for inspection at such
office during normal business hours by any holder of a Warrant or any
prospective purchaser of a Warrant designated by the holder thereof. The Company
shall, upon the reasonable request in writing of the Holder (at the Company's
expense), retain independent public accountants of recognized national standing
selected by the Board of Directors of the Company to make any computation
required in connection with adjustments under this Warrant, and a certificate
signed by such firm shall be conclusive evidence of the correctness of such
adjustment, which shall be binding on the Holder and the Company.
8. Notices of Corporate Action. In the event of:
---------------------------
(a) any taking by the Company of a record of the holders of
any class of securities for the purpose of determining the holders
thereof who are entitled to receive any dividend or other distribution,
or any right to subscribe for, purchase or otherwise acquire any shares
of stock of any class or any other securities or property, or to
receive any other right, or
(b) any capital reorganization of the Company, any
reclassification or recapitalization of the capital stock of the
Company, any consolidation or merger involving the Company and any
other Person, any transaction or series of transactions in which more
than 50% of the voting securities of the Company are transferred to
another Person, or any transfer, sale or other disposition of all or
substantially all the assets of the Company to any other Person, or
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(c) any voluntary or involuntary dissolution, liquidation or
winding-up of the Company,
the Company shall mail to each holder of a Warrant a notice specifying (i) the
date or expected date on which any such record is to be taken for the purpose of
such dividend, distribution or right, and the amount and character of such
dividend, distribution or right, and (ii) the date or expected date on which any
such reorganization, reclassification, recapitalization, consolidation, merger,
transfer, sale, disposition, dissolution, liquidation or winding-up is to take
place and the time, if any such time is to be fixed, as of which the holders of
record of Common Stock (or Other Securities) shall be entitled to exchange their
shares of Common Stock (or Other Securities) for the securities or other
property deliverable upon such reorganization, reclassification,
recapitalization, consolidation, merger, transfer, dissolution, liquidation or
winding-up. Such notice shall be mailed at least 20 days prior to the date
therein specified but in no event earlier than the public announcement of such
proposed transaction or event.
9. Registration of Common Stock. If any shares of Common Stock
required to be reserved for purposes of exercise of this Warrant require
registration with or approval of any governmental authority under any federal or
state law (other than the Securities Act) before such shares may be issued upon
exercise, the Company shall, at its expense and as expeditiously as possible,
use its best efforts to cause such shares to be duly registered or approved, as
the case may be. At any such time as Common Stock is listed on any national
securities exchange or trade market, the Company shall, at its expense, obtain
promptly and maintain the approval for listing on each such exchange or trade
market, upon official notice of issuance, the shares of Common Stock issuable
upon exercise of the then outstanding Warrants and maintain the listing of such
shares after their issuance; and the Company shall also list on such national
securities exchange or trade market, shall register under the Exchange Act and
shall maintain such listing of, any Other Securities that at any time are
issuable upon exercise of the Warrants, if and at the time that any securities
of the same class shall be listed on such national securities exchange or trade
market by the Company.
10. Reservation of Stock, etc. The Company shall at all times
reserve and keep available, solely for issuance and delivery upon exercise of
the Warrants, the number of shares of Common Stock (or Other Securities) from
time to time issuable upon exercise of all Warrants at the time outstanding and
otherwise in accordance with the terms of the Purchase Agreement. All shares of
Common Stock (or Other Securities) issuable upon exercise of any Warrants shall
be duly authorized and, when issued upon such exercise, shall be validly issued
and, in the case of shares, fully paid and nonassessable with no liability on
the part of the holders thereof, and, in the case of all securities, shall be
free from all taxes, liens, security interests, encumbrances, preemptive rights
and charges. The transfer agent for the Common Stock, which may be the Company
(the "Transfer Agent"), and every subsequent Transfer Agent for any shares of
the Company's capital stock issuable upon the exercise of any of the purchase
rights represented by this Warrant, are hereby irrevocably authorized and
directed at all times until the Expiration Date to reserve such number of
authorized and unissued shares as shall be requisite for such purpose. The
Company shall keep copies of this Warrant on file with the Transfer Agent for
the Common Stock and with every subsequent Transfer Agent for any shares of the
Company's capital stock issuable upon the exercise of the rights of purchase
represented by this Warrant. The Company shall supply such Transfer Agent with
duly executed stock certificates for such purpose. All Warrant Certificates
surrendered upon the exercise of the rights thereby evidenced shall be canceled,
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and such canceled Warrants shall constitute sufficient evidence of the number of
shares of stock which have been issued upon the exercise of such Warrants.
Subsequent to the Expiration Date, no shares of stock need be reserved in
respect of any unexercised Warrant.
11. Registration and Transfer of Warrants, etc.
11.1. Warrant Register; Ownership of Warrants. Each Warrant
issued by the Company shall be numbered and shall be registered in a warrant
register (the "Warrant Register") as it is issued and transferred, which Warrant
Register shall be maintained by the Company at its principal office or, at the
Company's election and expense, by a Warrant Agent or the Company's transfer
agent. The Company shall be entitled to treat the registered Holder of any
Warrant on the Warrant Register as the owner in fact thereof for all purposes
and shall not be bound to recognize any equitable or other claim to or interest
in such Warrant on the part of any other Person, and shall not be affected by
any notice to the contrary, except that, if and when any Warrant is properly
assigned in blank, the Company may (but shall not be obligated to) treat the
bearer thereof as the owner of such Warrant for all purposes. A Warrant, if
properly assigned, may be exercised by a new holder without a new Warrant first
having been issued.
11.2. Transfer of Warrants. If applicable, this Warrant and
all rights hereunder are transferable in whole or in part, without charge to the
Holder hereof (except for any transfer taxes payable with respect thereto), upon
surrender of this Warrant with a properly executed Form of Assignment attached
hereto as Exhibit B at the principal office of the Company (or such other office
or agency of the Company as it may in writing designate to the Holder). Upon any
partial transfer, the Company shall at its expense issue and deliver to the
Holder a new Warrant of like tenor, in the name of the Holder, which shall be
exercisable for such number of shares of Common Stock with respect to which
rights under this Warrant were not so transferred and to the transferee a new
Warrant of like tenor, in the name of the transferee, which shall be exercisable
for such number of shares of Common Stock with respect to which rights under
this Warrant were so transferred.
11.3. Replacement of Warrants. On receipt by the Company of
evidence reasonably satisfactory to the Company of the loss, theft, destruction
or mutilation of this Warrant and, in the case of any such loss, theft or
destruction of this Warrant, on delivery of an indemnity agreement reasonably
satisfactory in form and amount to the Company or, in the case of any such
mutilation, on surrender of such Warrant to the Company at its principal office
and cancellation thereof, the Company at its expense shall execute and deliver,
in lieu thereof, a new Warrant of like tenor.
11.4. Adjustments To Purchase Price and Number of Shares.
Notwithstanding any adjustment in the Purchase Price or in the number or kind of
shares of Common Stock purchasable upon exercise of this Warrant, any Warrant
theretofore or thereafter issued may continue to express the same number and
kind of shares of Common Stock as are stated in this Warrant, as initially
issued.
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11.5. Fractional Shares. Notwithstanding any adjustment
pursuant to Section 3 in the number of shares of Common Stock covered by this
Warrant or any other provision of this Warrant, the Company shall not be
required to issue fractions of shares upon exercise of this Warrant or to
distribute certificates which evidence fractional shares. In lieu of fractional
shares, the Company shall make payment to the Holder, at the time of exercise of
this Warrant as herein provided, in an amount in cash equal to such fraction
multiplied by the Current Market Price of a share of Common Stock on the date of
Warrant exercise.
12. Remedies; Specific Performance. The Company stipulates
that there would be no adequate remedy at law to the Holder of this Warrant in
the event of any default or threatened default by the Company in the performance
of or compliance with any of the terms of this Warrant and accordingly, the
Company agrees that, in addition to any other remedy to which the Holder may be
entitled at law or in equity, the Holder shall be entitled to seek to compel
specific performance of the obligations of the Company under this Warrant,
without the posting of any bond, in accordance with the terms and conditions of
this Warrant in any court of the United States or any State thereof having
jurisdiction, and if any action should be brought in equity to enforce any of
the provisions of this Warrant, the Company shall not raise the defense that
there is an adequate remedy at law. Except as otherwise provided by law, a delay
or omission by the Holder hereof in exercising any right or remedy accruing upon
any such breach shall not impair the right or remedy or constitute a waiver of
or acquiescence in any such breach. No remedy shall be exclusive of any other
remedy. All available remedies shall be cumulative.
13. No Rights or Liabilities as Shareholder. Nothing contained
in this Warrant shall be construed as conferring upon the Holder hereof any
rights as a stockholder of the Company or as imposing any obligation on the
Holder to purchase any securities or as imposing any liabilities on the Holder
as a stockholder of the Company, whether such obligation or liabilities are
asserted by the Company or by creditors of the Company.
14. Notices. Any notices, consents, waivers or other
communications required or permitted to be given hereunder must be in writing
and will be deemed to have been delivered (i) upon receipt, when delivered
personally; (ii) upon receipt, when sent by facsimile, provided a copy is mailed
by U.S. certified mail, return receipt requested; (iii) three (3) days after
being sent by U.S. certified mail, return receipt requested, or (iv) one (1) day
after deposit with a nationally recognized overnight delivery service, in each
case properly addressed to the party to receive the same. The addresses and
facsimile numbers for such communications shall be:
17
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If to the Company:
Capita Research Group, Inc.
591 Skippack Pike
Suite 300
Blue Bell, Pennsylvania 19422
Telephone: 215-619-7777
Facsimile: 215-619-0775
Attention: Chief Financial Officer
With a copy to:
Torys
237 Park Avenue
New York, New York 10017
Telephone: 212-880-6000
Facsimile: 212-682-0200
Attention: Andrew J. Beck, Esq.
If to a Holder, to its address and facsimile number on the
register maintained by the Company. Each party shall provide five (5) days'
prior written notice to the other party of any change in address or facsimile
number. Notwithstanding the foregoing, the exercise of any Warrant shall be
effective in the manner provided in Section 2.
15. Amendments. This Warrant and any term hereof may not be
amended, modified, supplemented or terminated, and waivers or consents to
departures from the provisions hereof may not be given, except by written
instrument duly executed by the party against which enforcement of such
amendment, modification, supplement, termination or consent to departure is
sought.
16. Descriptive Headings, Etc. The headings in this Warrant
are for convenience of reference only and shall not limit or otherwise affect
the meaning of terms contained herein. Unless the context of this Warrant
otherwise requires: (1) words of any gender shall be deemed to include each
other gender; (2) words using the singular or plural number shall also include
the plural or singular number, respectively; (3) the words "hereof", "herein"
and "hereunder" and words of similar import when used in this Warrant shall
refer to this Warrant as a whole and not to any particular provision of this
Warrant, and Section and paragraph references are to the Sections and paragraphs
of this Warrant unless otherwise specified; (4) the word "including" and words
of similar import when used in this Warrant shall mean "including, without
limitation," unless otherwise specified; (5) "or" is not exclusive; and (6)
provisions apply to successive events and transactions.
17. GOVERNING LAW. This Warrant shall be governed by, and
construed in accordance with, the laws of the State of New York (without giving
effect to the conflict of laws principles thereof).
18. Judicial Proceedings. Any legal action, suit or proceeding
brought against the Company with respect to this Warrant may be brought in any
federal court of the Southern District of New York or any state court located in
New York County, State of New York, and by execution and delivery of this
Warrant, the Company hereby irrevocably and unconditionally waives any claim (by
way of motion, as a defense or otherwise) of improper venue, that it is not
subject personally to the jurisdiction of such court, that such courts are an
inconvenient forum or that this Warrant or the subject matter may not be
enforced in or by such court. The Company hereby irrevocably and unconditionally
18
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consents to the service of process of any of the aforementioned courts in any
such action, suit or proceeding by the mailing of copies thereof by registered
or certified mail, postage prepaid, at its address set forth or provided for in
Section 14, such service to become effective 10 days after such mailing. Nothing
herein contained shall be deemed to affect the right of any party to serve
process in any manner permitted by law or commence legal proceedings or
otherwise proceed against any other party in any other jurisdiction to enforce
judgments obtained in any action, suit or proceeding brought pursuant to this
Section. The Company irrevocably submits to the exclusive jurisdiction of the
aforementioned courts in such action, suit or proceeding.
19. Registration Rights Agreement. The shares of Common Stock
(and Other Securities) issuable upon exercise of this Warrant (or upon
conversion of any shares of Common Stock issued upon such exercise) shall
constitute Registrable Securities (as such term is defined in the Registration
Rights Agreement). Each holder of this Warrant shall be entitled to all of the
benefits afforded to a holder of any such Registrable Securities under the
Registration Rights Agreement and such holder, by its acceptance of this
Warrant, agrees to be bound by and to comply with the terms and conditions of
the Registration Rights Agreement applicable to such holder as a holder of such
Registrable Securities.
CAPITA RESEARCH GROUP, INC.
By: /s/ David B. Hunter
--------------------
Name: David B. Hunter
Title: President
19
EXHIBIT A to
Common Stock Purchase Warrant
-----------------------------
[FORM OF]
ELECTION TO PURCHASE SHARES
AND TRANSFER AGENT INSTRUCTIONS
The undersigned hereby irrevocably elects to exercise the
Warrant to purchase ____ shares of Common Stock, par value $.001 per share
("Common Stock"), of CAPITA RESEARCH GROUP, INC. (the "Company") and hereby
makes payment of $________ in consideration therefor. The undersigned hereby
requests that certificates for such shares be issued and delivered as follows:
ISSUE TO:
- --------------------------------------------------------------------------------
(NAME)
- --------------------------------------------------------------------------------
(ADDRESS, INCLUDING ZIP CODE)
- --------------------------------------------------------------------------------
(SOCIAL SECURITY OR OTHER IDENTIFYING NUMBER)
DELIVER TO:
---------------------------------------------------------------------
(NAME)
- --------------------------------------------------------------------------------
(ADDRESS, INCLUDING ZIP CODE)
If the number of shares of Common Stock purchased hereby is
less than the number of shares of Common Stock covered by the Warrant, the
undersigned requests that a new Warrant representing the number of shares of
Common Stock not so purchased be issued and delivered as follows:
ISSUE TO:
-----------------------------------------------------------------------
(NAME OF HOLDER)
- --------------------------------------------------------------------------------
(ADDRESS, INCLUDING ZIP CODE)
- --------------------------------------------------------------------------------
DELIVER TO:
(NAME OF HOLDER)
- --------------------------------------------------------------------------------
(ADDRESS, INCLUDING ZIP CODE)
Dated: _____________________
-----------------------
[date]
20
<PAGE>
__________________, as transfer agent and registrar of the Common
Stock, is hereby authorized and directed to issue the above number of shares of
Common Stock in the name of the above referenced entity or person and to deliver
the certificates representing such shares using an overnight delivery service.
CAPITA RESEARCH GROUP, INC.
By: ___________________________
21
EXHIBIT B to
Common Stock Purchase Warrant
-----------------------------
[FORM OF] ASSIGNMENT
FOR VALUE RECEIVED, the undersigned hereby sells, assigns, and
transfers unto the Assignee named below all of the rights of the undersigned to
purchase Common Stock, par value $.001 per share ("Common Stock") of CAPITA
RESEARCH GROUP, INC. represented by the Warrant, with respect to the number of
shares of Common Stock set forth below:
Name of Assignee Address No. of Shares
- ---------------- ------- -------------
and does hereby irrevocably constitute and appoint ________ as Attorney to make
such transfer on the books of CAPITA RESEARCH GROUP, INC. maintained for that
purpose, with full power of substitution in the premises.
Dated: ____________________
----------------------------
[date]
22
THIS WARRANT AND ANY SECURITIES ACQUIRED UPON EXERCISE OF THIS WARRANT HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES
LAW OF ANY STATE OF THE UNITED STATES AND MAY NOT BE SOLD, TRANSFERRED OR
OTHERWISE DISPOSED OF EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT
UNDER SUCH ACT AND APPLICABLE STATE SECURITIES LAWS OR PURSUANT TO AN APPLICABLE
EXEMPTION TO THE REGISTRATION REQUIREMENTS OF SUCH ACT AND SUCH LAWS. THIS
WARRANT AND SUCH SECURITIES MAY NOT BE SOLD, TRANSFERRED OR OTHERWISE DISPOSED
OF EXCEPT IN COMPLIANCE WITH THE CONDITIONS SPECIFIED IN THIS WARRANT AND THE
SECURITIES PURCHASE AGREEMENT DATED AS OF JANUARY [ ], 2000 BY AND AMONG CAPITA
RESEARCH GROUP, INC. AND [ ].
CAPITA RESEARCH GROUP, INC.
B COMMON STOCK PURCHASE WARRANT
No. W-B[ ] JANUARY [ ], 2000
Warrant to Purchase [ ]
Shares of Common Stock par value $.001 per share
CAPITA RESEARCH GROUP, INC., a Nevada corporation (the
"Company"), for value received, hereby certifies that [NAME] or registered
assigns (the "Holder"), is entitled to purchase from the Company [ ] duly
authorized, validly issued, fully paid and nonassessable shares of Common Stock,
par value $.001 per share, of the Company (the "Common Stock"), at a purchase
price equal to $1.00 per share, at any time or from time to time prior to 5:00
P.M., New York City time, on January 1, 2005 (the "Expiration Date"), all
subject to the terms, conditions and adjustments set forth below in this
Warrant.
This Warrant is one of the B Common Stock Purchase Warrants
(collectively, the "Warrants", such term to include any such warrants issued in
substitution therefor) originally issued pursuant to the terms of the Securities
Purchase Agreement, dated as of January [ ], 2000, by and among the Company and
the "Buyers" signatory thereto (the "Purchase Agreement"). Capitalized terms
used herein and not otherwise defined herein shall have the meanings assigned
such terms in the Purchase Agreement.
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<PAGE>
After the Closing Date the Company is to register the Common
Stock issuable pursuant to this Warrant with the Securities and Exchange
Commission pursuant to the terms of the Registration Rights Agreement dated
January [ ], 2000.
1. Definitions. As used herein, unless the context
otherwise requires, the following terms shall have the meanings indicated:
"A Common Stock Purchase Warrants" shall mean such warrants,
substantially in the form hereof, to acquire shares of Common Stock of the
Company at a purchase price equal to $.50 per share, issued pursuant to the
terms of the Purchase Agreement.
"Additional Shares of Common Stock" shall mean all shares
(including treasury shares) of Common Stock issued or sold (or, pursuant to
Section 3.3 or 3.4, deemed to be issued) by the Company after the date hereof,
whether or not subsequently reacquired or retired by the Company, other than
(a) (i) shares of Common Stock issued upon the exercise of the
Warrants, (ii) shares of Common Stock issued upon the exercise of the A
Common Stock Purchase Warrants, (iii) shares of Common Stock issued at
the Closing under the Purchase Agreement and (iv) such number of
additional shares of Common Stock as may become issuable upon the
exercise of the Warrants by reason of adjustments required pursuant to
the anti-dilution provisions applicable to such Warrants as in effect
on the date hereof; and
(b) shares of Common Stock issued pursuant to Approved
Stock Plans; and
(c) shares issued upon exercise of options, warrants and
other convertible securities outstanding as of the date hereof; and
(d) shares issued to bona fide suppliers or vendors in
consideration for services or supplies rendered to the Company or to a
bank or other financial institution as an inducement to enter into a
financing arrangement with the Company in an amount not to exceed 10%
of the outstanding capital stock of the Company.
"Approved Stock Plan" shall mean any contract, plan or
agreement which has been or shall be approved by the Board of Directors of the
Company, pursuant to which the Company's securities may be issued to any
employee, officer, director, consultant or other service provider of the Company
in an aggregate amount that does not exceed 110% of the number of securities
issuable pursuant to any currently existing Approved Stock Plan.
"Business Day" shall mean any day other than a Saturday or a
Sunday or a day on which commercial banking institutions in the City of New York
are authorized by law to be closed. Any reference to "days" (unless Business
Days are specified) shall mean calendar days.
2
<PAGE>
"Buy In Actual Damages" shall have the meaning assigned to it
in Section 2.6 of this Warrant.
"Closing Bid Prices" shall mean for any security as of any
date, the closing bid price of such security on the principal securities
exchange or trade market where such security is listed or trades as reported by
Bloomberg, L.P. ("Bloomberg"), or if the foregoing does not apply, the closing
bid price of such security in the over-the-counter market on the electronic
bulletin board for such security as reported by Bloomberg, or, if no closing bid
price is reported for such security by Bloomberg, the average of the bid prices
of any market makers for such security as reported in the "pink sheets" by the
National Quotation Bureau, Inc. If the Closing Bid Price cannot be calculated
for such security on such date, as set forth above, the Closing Bid Price of
such security shall be the fair market value as determined in good faith by an
investment banking firm selected jointly by the Company and the Holder, with the
fees and expenses of such determination borne solely by the Company.
"Commission" shall mean the Securities and Exchange Commission
or any successor agency having jurisdiction to enforce the Securities Act.
"Common Stock" shall have the meaning assigned to it in the
introduction to this Warrant, such term to include any stock into which such
Common Stock shall have been changed or any stock resulting from any
reclassification of such Common Stock, and all other stock of any class or
classes (however designated) of the Company the holders of which have the right,
without limitation as to amount, either to all or to a share of the balance of
current dividends and liquidating dividends after the payment of dividends and
distributions on any shares entitled to preference.
"Company" shall have the meaning assigned to it in the
introduction to this Warrant, such term to include any corporation or other
entity which shall succeed to or assume the obligations of the Company hereunder
in compliance with Section 4.
"Convertible Securities" shall mean any evidences of
indebtedness, shares of stock (other than Common Stock) or other securities
directly or indirectly convertible into or exchangeable for Additional Shares of
Common Stock.
"Current Market Price" shall mean, on any date specified
herein, the average of the daily Closing Bid Prices during the 10 consecutive
trading days commencing 15 trading days before such date, except that, if on any
such date the shares of Common Stock are not listed or admitted for trading on
any national securities exchange or quoted in the over-the-counter market, the
Current Market Price shall be the "Fair Value" on such date.
"Exchange Act" shall mean the Securities Exchange Act of 1934,
as amended from time to time, and the rules and regulations thereunder, or any
successor statute.
"Expiration Date" shall have the meaning assigned to it in the
introduction to this Warrant.
3
<PAGE>
"Fair Value" shall mean, on any date specified herein (i) in
the case of cash, the dollar amount thereof, (ii) in the case of a security
admitted for trading on any national securities exchange or quoted in the
over-the-counter market, the Current Market Price, and (iii) in all other cases
as determined in good faith jointly by the Board of Directors of the Company and
the Holder; provided, however, that if such parties are unable to reach
agreement within a reasonable period of time, the Fair Value shall be determined
in good faith by an independent investment banking firm selected jointly by the
Company and the Holder or, if that selection cannot be made within ten days, by
an independent investment banking firm selected by the American Arbitration
Association in accordance with its rules, and provided further, that the Company
shall pay all of the fees and expenses of any third parties incurred in
connection with determining the Fair Value.
"Options" shall mean any rights, options or warrants to
subscribe for, purchase or otherwise acquire either Additional Shares of Common
Stock or Convertible Securities.
"Other Securities" shall mean any stock (other than Common
Stock) and other securities of the Company or any other Person (corporate or
otherwise) which the holders of the Warrants at any time shall be entitled to
receive, or shall have received, upon the exercise of the Warrants, in lieu of
or in addition to Common Stock, or which at any time shall be issuable or shall
have been issued in exchange for or in replacement of Common Stock or Other
Securities pursuant to Section 4 or otherwise.
"Person" shall mean any individual, firm, partnership,
corporation, trust, joint venture, association, joint stock company, limited
liability company, unincorporated organization or any other entity or
organization, including a government or agency or political subdivision thereof,
and shall include any successor (by merger or otherwise) of such entity.
"Purchase Agreement" shall have the meaning assigned to it in
the introduction to this Warrant.
"Purchase Price" shall mean the amount per share indicated in
the introductory paragraph to this Warrant, subject to adjustment and
readjustment from time to time as provided in Section 3, and, as so adjusted or
readjusted, shall remain in effect until a further adjustment or readjustment
thereof is required by Section 3.
"Registration Rights Agreement" shall mean the Registration
Rights Agreement dated as of January [ ], 2000, substantially in the form of
Exhibit C to the Purchase Agreement.
"Rights" shall have the meaning assigned to it in Section
3.10.
"Securities Act" shall mean the Securities Act of 1933, as
amended from time to time, and the rules and regulations thereunder, or any
successor statute.
4
<PAGE>
"Warrants" shall have the meaning assigned to it in the
introduction to this Warrant.
2. Exercise of Warrant.
-------------------
2.1. Manner of Exercise; Payment of the Purchase Price. (a)
This Warrant may be exercised by the Holder, in whole or in part, at any time or
from time to time prior to the Expiration Date, by surrendering to the Company
at its principal office (or such other office or agency of the Company as the
Company may designate in a written notice to the Holder) this Warrant, together
with the form of Election to Purchase Shares attached hereto as Exhibit A (or a
reasonable facsimile thereof) duly executed by the Holder and accompanied by
payment of the Purchase Price as described below for the number of shares of
Common Stock specified in such form.
(b) Payment of the Purchase Price may be made in United States
currency by cash or delivery of a certified check or bank draft payable to the
order of the Company or by wire transfer to the account of the Company.
2.2. When Exercise Effective. Each exercise of this Warrant
shall be deemed to have been effected immediately prior to the close of business
on the Business Day on which this Warrant shall have been surrendered to, and
the Purchase Price shall have been received by, the Company as provided in
Section 2.1, and at such time the Person or Persons in whose name or names any
certificate or certificates for shares of Common Stock (or Other Securities)
shall be issuable upon such exercise as provided in Section 2.3 shall be deemed
to have become the holder or holders of record thereof for all purposes.
2.3. Delivery of Stock Certificates, etc.; Charges, Taxes and
Expenses. Subject to Section 2.5 (a) As soon as practicable after each exercise
of this Warrant, in whole or in part, and in any event within five Business Days
thereafter, the Company shall cause to be issued in such denominations as may be
requested by Holder in the Election to Purchase Shares, in the name of and
delivered to the Holder or, subject the Purchase Agreement, as the Holder may
direct,
(i) a certificate or certificates, or, if then permissible
under the Securities Act, at the Holder's request to electronically
issue such shares (e.g., through DWAC or DTC), for the number of shares
of Common Stock (or Other Securities) to which the Holder shall be
entitled upon such exercise plus, in lieu of issuance of any fractional
share to which the Holder would otherwise be entitled, if any, a check
for the amount of cash equal to the same fraction multiplied by the
Current Market Price per share on the date of Warrant exercise,
provided, however, that in the event sufficient funds are not legally
available for the payment of such amount, the number of shares of
Common Stock which such certificate(s) represents shall be rounded up
to the nearest whole number, and
5
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(ii) in case such exercise is for less than all of the shares
of Common Stock purchasable under this Warrant, a new Warrant or
Warrants of like tenor, for the balance of the shares of Common Stock
purchasable hereunder.
(b) Issuance of certificates for shares of Common Stock upon
the exercise of this Warrant shall be made without charge to the Holder hereof
for any issue or transfer tax or other incidental expense, in respect of the
issuance of such certificates, all of which such taxes and expenses shall be
paid by the Company, except that any tax or expense payable as a result of the
issuance of such certificates in a name other than that of the Holder shall be
paid by the Holder.
2.4. Company to Reaffirm Obligations. The Company shall, at
the time of each exercise of this Warrant, upon the request of the Holder
hereof, acknowledge in writing its continuing obligation to afford to such
Holder all rights to which such Holder shall continue to be entitled after such
exercise in accordance with the terms of this Warrant, provided that if the
Holder of this Warrant shall fail to make any such request, such failure shall
not affect the continuing obligation of the Company to afford such rights to the
Holder.
2.5. Exercise Disputes. In the case of any dispute with
respect to the number of shares to be issued upon exercise of this Warrant, the
Company shall promptly issue such number of shares of Common Stock that is not
disputed and shall submit the disputed determinations or arithmetic calculations
to the Holder via facsimile within two (2) Business Days of receipt of the
Holder's Election to Purchase Shares. If the Holder and the Company are unable
to agree as to the determination of such number of shares within two (2)
Business Days of such disputed determination or arithmetic calculation being
submitted to the Holder, then the Company shall in accordance with this Section,
submit via facsimile the disputed determination to an independent reputable
accounting firm of national standing, selected jointly by the Company and the
Holder. The Company shall cause such accounting firm to perform the
determinations or calculations and notify the Company and the Holder of the
results within forty-eight (48) hours from the time it receives the disputed
determinations or calculations. Such accounting firm's determination shall be
binding upon all parties absent manifest error. The Company shall then on the
next Business Day issue certificate(s) representing the appropriate number of
shares of Common Stock in accordance with such accounting firm's determination
and this Section. All fees and expenses of such determination and calculation
shall be borne by the Company.
2.6. Failure to Deliver Common Stock If, at any time, the
Holder of this Warrant submits this Warrant, an Election to Purchase Shares and
payment to the Company of the Purchase Price for each of the shares of Common
Stock specified in the Election to Purchase Shares in accordance with Section
2.1 above, and the Company, for any reason, fails to deliver, on or prior to the
last possible date which the Company could have issued such Common Stock to the
Holder without violating this Section 2, the number of shares of Common Stock
for which the Holder is entitled upon such exercise, the Company shall pay
damages to the Holder equal to the greater of (a) actual damages incurred by the
Holder as a result of the Holder's needing to "buy in" shares of Common Stock to
6
<PAGE>
the extent necessary to satisfy its securities delivery requirements ("Buy In
Actual Damages") and (b) if the Company fails to deliver such certificates
within five days after the last possible date on which the Company could have
issued such Common Stock to the Holder without violating this Section 2, on each
date such exercise is not timely effected in an amount equal to 1% of the
product of (i) the number of shares of Common Stock not issued to the Holder on
a timely basis and to which the Holder is entitled and (ii) the Closing Bid
Price of the Common Stock on the last possible date which the Company could have
issued such Common Stock to the Holder without violating this Section 2.
3. Adjustment of Common Stock Issuable Upon Exercise.
-------------------------------------------------
3.1. Adjustment of Number of Shares.
------------------------------
Upon each adjustment of the Purchase Price as a
result of the calculations made in this Section 3, this Warrant shall thereafter
evidence the right to receive, at the adjusted Purchase Price, that number of
shares of Common Stock (calculated to the nearest one-hundredth) obtained by
dividing (i) the product of the aggregate number of shares covered by this
Warrant immediately prior to such adjustment and the Purchase Price in effect
immediately prior to such adjustment of the Purchase Price by (ii) the Purchase
Price in effect immediately after such adjustment of the Purchase Price.
3.2. Adjustment of Purchase Price.
----------------------------
3.2.1. Issuance of Additional Shares of Common Stock. In case
the Company at any time or from time to time after the date hereof shall issue
or sell Additional Shares of Common Stock (including Additional Shares of Common
Stock deemed to be issued pursuant to Section 3.3 or 3.4 but excluding
Additional Shares of Common Stock purchasable upon exercise of Rights referred
to in Section 3.10), without consideration or for a consideration per share less
than the fair market value of such additional shares of Common Stock as
determined in good faith by the Board of Directors of the Company as in effect
immediately prior to such issue or sale, then, and in each such case, subject to
Section 3.8, the Purchase Price shall be reduced, concurrently with such issue
or sale, to a price (calculated to the nearest .001 of a cent) determined by
multiplying such Purchase Price by a fraction
(a) the numerator of which shall be the sum of (i) the number
of shares of Common Stock outstanding immediately prior to such issue
or sale and (ii) the number of shares of Common Stock which the gross
consideration received by the Company for the total number of such
Additional Shares of Common Stock so issued or sold would purchase at
such Current Market Price, and
(b) the denominator of which shall be the number of shares of
Common Stock outstanding immediately after such issue or sale, provided
that, for the purposes of this Section 3.2.1, (x) immediately after any
Additional Shares of Common Stock are deemed to have been issued
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pursuant to Section 3.3 or 3.4, such Additional Shares shall be deemed
to be outstanding, and (y) treasury shares shall not be deemed to be
outstanding.
3.2.2. Extraordinary Dividends and Distributions. In case the
Company at any time or from time to time after the date hereof shall declare,
order, pay or make a dividend or other distribution (including, without
limitation, any distribution of other or additional stock or other securities or
property or Options by way of dividend or spin-off, reclassification,
recapitalization or similar corporate rearrangement) on the Common Stock (other
than a cash dividend payable out of earnings), then, in each such case, subject
to Section 3.8, the Purchase Price in effect immediately prior to the close of
business on the record date fixed for the determination of holders of any class
of securities entitled to receive such dividend or distribution shall be
reduced, effective as of the close of business on such record date, to a price
determined by multiplying such Purchase Price by a fraction
(x) the numerator of which shall be the Current Market Price
in effect on such record date or, if the Common Stock trades on an
ex-dividend basis, on the date prior to the commencement of ex-dividend
trading, less the Fair Value of such dividend or distribution
applicable to one share of Common Stock, and
(y) the denominator of which shall be such Current Market
Price.
3.3. Treatment of Options and Convertible Securities. In case
the Company at any time or from time to time after the date hereof shall issue,
sell, grant or assume, or shall fix a record date for the determination of
holders of any class of securities of the Company entitled to receive, any
Options or Convertible Securities (whether or not the rights thereunder are
immediately exercisable), then, and in each such case, the maximum number of
Additional Shares of Common Stock (as set forth in the instrument relating
thereto, without regard to any provisions contained therein for a subsequent
adjustment of such number) issuable upon the exercise of such Options or, in the
case of Convertible Securities and Options therefor, the conversion or exchange
of such Convertible Securities, shall be deemed to be Additional Shares of
Common Stock issued as of the time of such issue, sale, grant or assumption or,
in case such a record date shall have been fixed, as of the close of business on
such record date (or, if the Common Stock trades on an ex-dividend basis, on the
date prior to the commencement of ex-dividend trading), provided that such
Additional Shares of Common Stock shall not be deemed to have been issued unless
(i) the consideration per share (determined pursuant to Section 3.5) of such
shares would be less than the fair market value of such shares as determined in
good faith by the Board of Directors of the Company as in effect on the date of
and immediately prior to such issue, sale, grant or assumption or immediately
prior to the close of business on such record date (or, if the Common Stock
trades on an ex-dividend basis, on the date prior to the commencement of
ex-dividend trading), as the case may be and (ii) such Additional Shares of
Common Stock are not purchasable pursuant to Rights referred to in Section 3.10,
and provided, further, that
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(a) whether or not the Additional Shares of Common Stock
underlying such Options or Convertible Securities are deemed to be
issued, no further adjustment of the Purchase Price shall be made upon
the subsequent issue or sale of Convertible Securities or shares of
Common Stock upon the exercise of such Options or the conversion or
exchange of such Convertible Securities;
(b) if such Options or Convertible Securities by their terms
provide, with the passage of time or otherwise, for any increase in the
consideration payable to the Company, or decrease in the number of
Additional Shares of Common Stock issuable, upon the exercise,
conversion or exchange thereof (by change of rate or otherwise), the
Purchase Price computed upon the original issue, sale, grant or
assumption thereof (or upon the occurrence of the record date, or date
prior to the commencement of ex-dividend trading, as the case may be,
with respect thereto), and any subsequent adjustments based thereon,
shall, upon any such increase or decrease becoming effective, be
recomputed to reflect such increase or decrease insofar as it affects
such Options, or the rights of conversion or exchange under such
Convertible Securities, which are outstanding at such time;
(c) upon the expiration or termination (or purchase by the
Company and cancellation or retirement) of any such Options which shall
not have been exercised or the expiration of any rights of conversion
or exchange under any such Convertible Securities which (or purchase by
the Company and cancellation or retirement of any such Convertible
Securities the rights of conversion or exchange under which) shall not
have been exercised, the Purchase Price computed upon the original
issue, sale, grant or assumption thereof (or upon the occurrence of the
record date, or date prior to the commencement of ex-dividend trading,
as the case may be, with respect thereto), and any subsequent
adjustments based thereon, shall, upon such expiration (or such
cancellation or retirement, as the case may be), be recomputed as if:
(i) in the case of Options for Common Stock or
Convertible Securities, the only Additional Shares of Common
Stock issued or sold were the Additional Shares of Common
Stock, if any, actually issued or sold upon the exercise of
such Options or the conversion or exchange of such Convertible
Securities and the consideration received therefor was the
consideration actually received by the Company for the issue,
sale, grant or assumption of all such Options, whether or not
exercised, plus the consideration actually received by the
Company upon such exercise, or for the issue or sale of all
such Convertible Securities which were actually converted or
exchanged, plus the additional consideration, if any, actually
received by the Company upon such conversion or exchange, and
(ii) in the case of Options for Convertible
Securities, only the Convertible Securities, if any, actually
issued or sold upon the exercise of such Options were issued
at the time of the issue or sale, grant or assumption of such
Options, and the consideration received by the Company for the
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Additional Shares of Common Stock deemed to have then been
issued was the consideration actually received by the Company
for the issue, sale, grant or assumption of all such Options,
whether or not exercised, plus the consideration deemed to
have been received by the Company (pursuant to Section 3.5)
upon the issue or sale of such Convertible Securities with
respect to which such Options were actually exercised;
(d) no readjustment pursuant to subdivision (b) or (c) above
shall have the effect of increasing the Purchase Price by an amount in
excess of the amount of the adjustment thereof originally made in
respect of the issue, sale, grant or assumption of such Options or
Convertible Securities; and
(e) in the case of any such Options which expire by their
terms not more than 30 days after the date of issue, sale, grant or
assumption thereof, no adjustment of the Purchase Price shall be made
until the expiration or exercise of all such Options, whereupon such
adjustment shall be made in the manner provided in subdivision (c)
above.
3.4. Treatment of Stock Dividends, Stock Splits, etc. In case
the Company at any time or from time to time after the date hereof shall declare
or pay any dividend on the Common Stock payable in Common Stock, or shall effect
a subdivision of the outstanding shares of Common Stock into a greater number of
shares of Common Stock (by reclassification or otherwise than by payment of a
dividend in Common Stock), then, and in each such case, Additional Shares of
Common Stock shall be deemed to have been issued (a) in the case of any such
dividend, immediately after the close of business on the record date for the
determination of holders of any class of securities entitled to receive such
dividend, or (b) in the case of any such subdivision, at the close of business
on the day immediately prior to the day upon which such corporate action becomes
effective.
3.5. Computation of Consideration. For the purposes of
this Section 3,
(a) the consideration for the issue or sale of any
Additional Shares of Common Stock shall, irrespective of the accounting
treatment of such consideration,
(i) insofar as it consists of cash, be computed at
the amount of cash received by the Company, without deducting
any expenses paid or incurred by the Company or any
commissions or compensation paid or concessions or discounts
allowed to underwriters, dealers or others performing similar
services in connection with such issue or sale,
(ii) insofar as it consists of property (including
securities) other than cash, be computed at the Fair Value
thereof at the time of such issue or sale, and
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(iii) in case Additional Shares of Common Stock are
issued or sold together with other stock or securities or
other assets of the Company for a consideration which covers
both, be the portion of such consideration so received,
computed as provided in clauses (i) and (ii) above, allocable
to such Additional Shares of Common Stock, such allocation to
be determined in the same manner that the Fair Value of
property not consisting of cash or securities is to be
determined as provided in the definition of "Fair Value"
herein;
(b) Additional Shares of Common Stock deemed to have been
issued pursuant to Section 3.3, relating to Options and Convertible
Securities, shall be deemed to have been issued for a consideration per
share determined by dividing
(i) the total amount, if any, received and receivable
by the Company as consideration for the issue, sale, grant or
assumption of the Options or Convertible Securities in
question, plus the minimum aggregate amount of additional
consideration (as set forth in the instruments relating
thereto, without regard to any provision contained therein for
a subsequent adjustment of such consideration to protect
against dilution) payable to the Company upon the exercise in
full of such Options or the conversion or exchange of such
Convertible Securities or, in the case of Options for
Convertible Securities, the exercise of such Options for
Convertible Securities and the conversion or exchange of such
Convertible Securities, in each case computing such
consideration as provided in the foregoing subdivision (a),
by
(ii) the maximum number of shares of Common Stock (as
set forth in the instruments relating thereto, without regard
to any provision contained therein for a subsequent adjustment
of such number to protect against dilution) issuable upon the
exercise of such Options or the conversion or exchange of such
Convertible Securities; and
(c) Additional Shares of Common Stock deemed to have been
issued pursuant to Section 3.4, relating to stock dividends,
stock splits, etc., shall be deemed to have been issued for no
consideration.
3.6. Adjustments for Combinations, etc. In case the
outstanding shares of Common Stock shall be combined or consolidated, by
reclassification or otherwise, into a lesser number of shares of Common Stock,
the Purchase Price in effect immediately prior to such combination or
consolidation shall, concurrently with the effectiveness of such combination or
consolidation, be proportionately increased.
3.7. Dilution in Case of Other Securities. In case any Other
Securities shall be issued or sold or shall become subject to issue or sale upon
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the conversion or exchange of any stock (or Other Securities) of the Company (or
any issuer of Other Securities or any other Person referred to in Section 4) or
to subscription, purchase or other acquisition pursuant to any Options issued or
granted by the Company (or any such other issuer or Person) for a consideration
such as to dilute, on a basis consistent with the standards established in the
other provisions of this Section 3, the purchase rights granted by this Warrant,
then, and in each such case, the computations, adjustments and readjustments
provided for in this Section 3 with respect to the Purchase Price and the number
of shares purchasable upon Warrant exercise shall be made as nearly as possible
in the manner so provided and applied to determine the amount of Other
Securities from time to time receivable upon the exercise of the Warrants, so as
to protect the holders of the Warrants against the effect of such dilution.
3.8. De Minimis Adjustments. If the amount of any adjustment
of the Purchase Price per share required pursuant to this Section 3 would be
less than $.01, such amount shall be carried forward and adjustment with respect
thereto made at the time of and together with any subsequent adjustment which,
together with such amount and any other amount or amounts so carried forward,
shall aggregate a change in the Purchase Price of at least $.01 per share. All
calculations under this Warrant shall be made to the nearest .001 of a cent or
to the nearest one-hundredth of a share, as the case may be.
3.9. Abandoned Dividend or Distribution. If the Company shall
take a record of the holders of its Common Stock for the purpose of entitling
them to receive a dividend or other distribution (which results in an adjustment
to the Purchase Price under the terms of this Warrant) and shall, thereafter,
and before such dividend or distribution is paid or delivered to stockholders
entitled thereto, legally abandon its plan to pay or deliver such dividend or
distribution, then any adjustment made to the Purchase Price and number of
shares of Common Stock purchasable upon Warrant exercise by reason of the taking
of such record shall be reversed, and any subsequent adjustments, based thereon,
shall be recomputed.
3.10. Shareholder Rights Plan. Notwithstanding the foregoing,
in the event that the Company shall distribute "poison pill" rights pursuant to
a "poison pill" shareholder rights plan (the "Rights"), the Company shall, in
lieu of making any adjustment pursuant to Section 3.2.1 or Section 3.2.2 hereof,
make proper provision so that each Holder who exercises a Warrant after the
record date for such distribution and prior to the expiration or redemption of
the Rights shall be entitled to receive upon such exercise, in addition to the
shares of Common Stock issuable upon such exercise, a number of Rights to be
determined as follows: (i) if such exercise occurs on or prior to the date for
the distribution to the holders of Rights of separate certificates evidencing
such Rights (the "Distribution Date"), the same number of Rights to which a
holder of a number of shares of Common Stock equal to the number of shares of
Common Stock issuable upon such exercise at the time of such exercise would be
entitled in accordance with the terms and provisions of and applicable to the
Rights; and (ii) if such exercise occurs after the Distribution Date, the same
number of Rights to which a holder of the number of shares into which the
Warrant so exercised was exercisable immediately prior to the Distribution Date
would have been entitled on the Distribution Date in accordance with the terms
and provisions of and applicable to the Rights, and in each case subject to the
terms and conditions of the Rights.
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4. Consolidation, Merger, etc.
--------------------------
4.1. Adjustments for Consolidation, Merger, Sale of Assets,
Reorganization, etc. In case the Company after the date hereof (a) shall
consolidate with or merge into any other Person and shall not be the continuing
or surviving corporation of such consolidation or merger, or (b) shall permit
any other Person to consolidate with or merge into the Company and the Company
shall be the continuing or surviving Person but, in connection with such
consolidation or merger, the Common Stock or Other Securities shall be changed
into or exchanged for stock or other securities of any other Person or cash or
any other property, or (c) shall transfer all or substantially all of its
properties or assets to any other Person, or (d) shall effect a capital
reorganization or reclassification of the Common Stock or Other Securities
(other than a capital reorganization or reclassification resulting in the issue
of Additional Shares of Common Stock for which adjustment in the Purchase Price
is provided in Section 3.2.1 or 3.2.2), then, and in the case of each such
transaction, proper provision shall be made so that, upon the basis and the
terms and in the manner provided in this Warrant, the Holder of this Warrant,
upon the exercise hereof at any time after the consummation of such transaction
shall be entitled to receive (at the aggregate Purchase Price in effect at the
time of such consummation for all Common Stock or Other Securities issuable upon
such exercise immediately prior to such consummation), in lieu of the Common
Stock or Other Securities issuable upon such exercise prior to such
consummation, the amount of securities, cash or other property to which such
Holder would actually have been entitled as a stockholder upon such consummation
if such Holder had exercised this Warrant immediately prior thereto, subject to
adjustments (subsequent to such consummation) as nearly equivalent as possible
to the adjustments provided for in Sections 3 through 5.
4.2. Assumption of Obligations. Notwithstanding anything
contained in the Warrants or in the Purchase Agreement to the contrary, the
Company shall not effect any of the transactions described in clauses (a)
through (d) of Section 4.1 unless, prior to the consummation thereof, each
Person (other than the Company) which may be required to deliver any stock,
securities, cash or property upon the exercise of this Warrant as provided
herein shall assume, by written instrument delivered to, and reasonably
satisfactory to, the Holder of this Warrant, (a) the obligations of the Company
under this Warrant (and if the Company shall survive the consummation of such
transaction, such assumption shall be in addition to, and shall not release the
Company from, any continuing obligations of the Company under this Warrant), (b)
the obligations of the Company under the Purchase Agreement and the Registration
Rights Agreement and (c) the obligation to deliver to the Holder such shares of
stock, securities, cash or property as, in accordance with the foregoing
provisions of this Section 4, the Holder may be entitled to receive. Nothing in
this Section 4 shall be deemed to authorize the Company to enter into any
transaction not otherwise permitted by the Purchase Agreement.
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5. Other Dilutive Events. In case any event shall occur as to
which the provisions of Section 3 or Section 4 hereof are not strictly
applicable or if strictly applicable would not fairly protect the purchase
rights of the Holder in accordance with the essential intent and principles of
such Sections, then, in each such case, the Board of Directors of the Company
shall make an adjustment in the application of such provisions, in accordance
with such essential intent and principles, so as to preserve, without dilution,
the purchase rights represented by this Warrant.
6. No Dilution or Impairment. The Company shall not, by
amendment of its certificate of incorporation or through any consolidation,
merger, reorganization, transfer of assets, dissolution, issue or sale of
securities or any other voluntary action, avoid or seek to avoid the observance
or performance of any of the terms of this Warrant, but will at all times in
good faith assist in the carrying out of all such terms and in the taking of all
such action as may be reasonably necessary or appropriate in order to protect
the rights of the Holder of this Warrant against dilution or other impairment.
Without limiting the generality of the foregoing, the Company (a) shall not
permit the par value of any shares of stock receivable upon the exercise of this
Warrant to exceed the amount payable therefor upon such exercise, (b) shall take
all such action as may be necessary or appropriate in order that the Company may
validly and legally issue fully paid and nonassessable shares of stock, free
from all taxes, liens, security interests, encumbrances, preemptive rights and
charges on the exercise of the Warrants from time to time outstanding, (c) shall
not take any action which results in any adjustment of the Purchase Price if the
total number of shares of Common Stock (or Other Securities) issuable after the
action upon the exercise of all of the Warrants would exceed the total number of
shares of Common Stock (or Other Securities) then authorized by the Company's
certificate of incorporation and available for the purpose of issue upon such
exercise, and (d) shall not issue any capital stock of any class which is
preferred as to dividends or as to the distribution of assets upon voluntary or
involuntary dissolution, liquidation or winding-up, unless the rights of the
holders thereof shall be limited to a fixed sum or percentage of par value or a
sum determined by reference to a formula based on a published index of interest
rates, an interest rate publicly announced by a financial institution or a
similar indicator of interest rates in respect of participation in dividends and
to a fixed sum or percentage of par value in any such distribution of assets.
7. Certificate as to Adjustments. In each case of any
adjustment or readjustment in the shares of Common Stock (or Other Securities)
issuable upon the exercise of this Warrant, the Company at its expense shall
promptly compute such adjustment or readjustment in accordance with the terms of
this Warrant and prepare a certificate, signed by the Chairman of the Board,
President or one of the Vice Presidents of the Company, and by the Chief
Financial Officer, the Treasurer or one of the Assistant Treasurers of the
Company, setting forth such adjustment or readjustment and showing in reasonable
detail the method of calculation thereof and the facts upon which such
adjustment or readjustment is based, including a statement of (a) the
consideration received or to be received by the Company for any Additional
Shares of Common Stock issued or sold or deemed to have been issued, (b) the
number of shares of Common Stock outstanding or deemed to be outstanding, and
(c) the Purchase Price in effect immediately prior to such issue or sale and as
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adjusted and readjusted (if required by Section 3) on account thereof. The
Company shall forthwith mail a copy of each such certificate to each holder of a
Warrant. The Company shall also keep copies of all such certificates at its
principal office and shall cause the same to be available for inspection at such
office during normal business hours by any holder of a Warrant or any
prospective purchaser of a Warrant designated by the holder thereof. The Company
shall, upon the reasonable request in writing of the Holder (at the Company's
expense), retain independent public accountants of recognized national standing
selected by the Board of Directors of the Company to make any computation
required in connection with adjustments under this Warrant, and a certificate
signed by such firm shall be conclusive evidence of the correctness of such
adjustment, which shall be binding on the Holder and the Company.
8. Notices of Corporate Action. In the event of:
---------------------------
(a) any taking by the Company of a record of the holders of
any class of securities for the purpose of determining the holders
thereof who are entitled to receive any dividend or other distribution,
or any right to subscribe for, purchase or otherwise acquire any shares
of stock of any class or any other securities or property, or to
receive any other right, or
(b) any capital reorganization of the Company, any
reclassification or recapitalization of the capital stock of the
Company, any consolidation or merger involving the Company and any
other Person, any transaction or series of transactions in which more
than 50% of the voting securities of the Company are transferred to
another Person, or any transfer, sale or other disposition of all or
substantially all the assets of the Company to any other Person, or
(c) any voluntary or involuntary dissolution, liquidation or
winding-up of the Company,
the Company shall mail to each holder of a Warrant a notice specifying (i) the
date or expected date on which any such record is to be taken for the purpose of
such dividend, distribution or right, and the amount and character of such
dividend, distribution or right, and (ii) the date or expected date on which any
such reorganization, reclassification, recapitalization, consolidation, merger,
transfer, sale, disposition, dissolution, liquidation or winding-up is to take
place and the time, if any such time is to be fixed, as of which the holders of
record of Common Stock (or Other Securities) shall be entitled to exchange their
shares of Common Stock (or Other Securities) for the securities or other
property deliverable upon such reorganization, reclassification,
recapitalization, consolidation, merger, transfer, dissolution, liquidation or
winding-up. Such notice shall be mailed at least 20 days prior to the date
therein specified but in no event earlier than the public announcement of such
proposed transaction or event.
9. Registration of Common Stock. If any shares of Common Stock
required to be reserved for purposes of exercise of this Warrant require
registration with or approval of any governmental authority under any federal or
state law (other than the Securities Act) before such shares may be issued upon
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exercise, the Company shall, at its expense and as expeditiously as possible,
use its best efforts to cause such shares to be duly registered or approved, as
the case may be. At any such time as Common Stock is listed on any national
securities exchange or trade market, the Company shall, at its expense, obtain
promptly and maintain the approval for listing on each such exchange or trade
market, upon official notice of issuance, the shares of Common Stock issuable
upon exercise of the then outstanding Warrants and maintain the listing of such
shares after their issuance; and the Company shall also list on such national
securities exchange or trade market, shall register under the Exchange Act and
shall maintain such listing of, any Other Securities that at any time are
issuable upon exercise of the Warrants, if and at the time that any securities
of the same class shall be listed on such national securities exchange or trade
market by the Company.
10. Reservation of Stock, etc. The Company shall at all times
reserve and keep available, solely for issuance and delivery upon exercise of
the Warrants, the number of shares of Common Stock (or Other Securities) from
time to time issuable upon exercise of all Warrants at the time outstanding and
otherwise in accordance with the terms of the Purchase Agreement. All shares of
Common Stock (or Other Securities) issuable upon exercise of any Warrants shall
be duly authorized and, when issued upon such exercise, shall be validly issued
and, in the case of shares, fully paid and nonassessable with no liability on
the part of the holders thereof, and, in the case of all securities, shall be
free from all taxes, liens, security interests, encumbrances, preemptive rights
and charges. The transfer agent for the Common Stock, which may be the Company
(the "Transfer Agent"), and every subsequent Transfer Agent for any shares of
the Company's capital stock issuable upon the exercise of any of the purchase
rights represented by this Warrant, are hereby irrevocably authorized and
directed at all times until the Expiration Date to reserve such number of
authorized and unissued shares as shall be requisite for such purpose. The
Company shall keep copies of this Warrant on file with the Transfer Agent for
the Common Stock and with every subsequent Transfer Agent for any shares of the
Company's capital stock issuable upon the exercise of the rights of purchase
represented by this Warrant. The Company shall supply such Transfer Agent with
duly executed stock certificates for such purpose. All Warrant Certificates
surrendered upon the exercise of the rights thereby evidenced shall be canceled,
and such canceled Warrants shall constitute sufficient evidence of the number of
shares of stock which have been issued upon the exercise of such Warrants.
Subsequent to the Expiration Date, no shares of stock need be reserved in
respect of any unexercised Warrant.
11. Registration and Transfer of Warrants, etc.
--------------------------------------------
11.1. Warrant Register; Ownership of Warrants. Each Warrant
issued by the Company shall be numbered and shall be registered in a warrant
register (the "Warrant Register") as it is issued and transferred, which Warrant
Register shall be maintained by the Company at its principal office or, at the
Company's election and expense, by a Warrant Agent or the Company's transfer
agent. The Company shall be entitled to treat the registered Holder of any
Warrant on the Warrant Register as the owner in fact thereof for all purposes
and shall not be bound to recognize any equitable or other claim to or interest
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in such Warrant on the part of any other Person, and shall not be affected by
any notice to the contrary, except that, if and when any Warrant is properly
assigned in blank, the Company may (but shall not be obligated to) treat the
bearer thereof as the owner of such Warrant for all purposes. A Warrant, if
properly assigned, may be exercised by a new holder without a new Warrant first
having been issued.
11.2. Transfer of Warrants. If applicable, this Warrant and
all rights hereunder are transferable in whole or in part, without charge to the
Holder hereof (except for any transfer taxes payable with respect thereto), upon
surrender of this Warrant with a properly executed Form of Assignment attached
hereto as Exhibit B at the principal office of the Company (or such other office
or agency of the Company as it may in writing designate to the Holder). Upon any
partial transfer, the Company shall at its expense issue and deliver to the
Holder a new Warrant of like tenor, in the name of the Holder, which shall be
exercisable for such number of shares of Common Stock with respect to which
rights under this Warrant were not so transferred and to the transferee a new
Warrant of like tenor, in the name of the transferee, which shall be exercisable
for such number of shares of Common Stock with respect to which rights under
this Warrant were so transferred.
11.3. Replacement of Warrants. On receipt by the Company of
evidence reasonably satisfactory to the Company of the loss, theft, destruction
or mutilation of this Warrant and, in the case of any such loss, theft or
destruction of this Warrant, on delivery of an indemnity agreement reasonably
satisfactory in form and amount to the Company or, in the case of any such
mutilation, on surrender of such Warrant to the Company at its principal office
and cancellation thereof, the Company at its expense shall execute and deliver,
in lieu thereof, a new Warrant of like tenor.
11.4. Adjustments To Purchase Price and Number of Shares.
Notwithstanding any adjustment in the Purchase Price or in the number or kind of
shares of Common Stock purchasable upon exercise of this Warrant, any Warrant
theretofore or thereafter issued may continue to express the same number and
kind of shares of Common Stock as are stated in this Warrant, as initially
issued.
11.5. Fractional Shares. Notwithstanding any adjustment
pursuant to Section 3 in the number of shares of Common Stock covered by this
Warrant or any other provision of this Warrant, the Company shall not be
required to issue fractions of shares upon exercise of this Warrant or to
distribute certificates which evidence fractional shares. In lieu of fractional
shares, the Company shall make payment to the Holder, at the time of exercise of
this Warrant as herein provided, in an amount in cash equal to such fraction
multiplied by the Current Market Price of a share of Common Stock on the date of
Warrant exercise.
12. Remedies; Specific Performance. The Company stipulates
that there would be no adequate remedy at law to the Holder of this Warrant in
the event of any default or threatened default by the Company in the performance
of or compliance with any of the terms of this Warrant and accordingly, the
Company agrees that, in addition to any other remedy to which the Holder may be
entitled at law or in equity, the Holder shall be entitled to seek to compel
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specific performance of the obligations of the Company under this Warrant,
without the posting of any bond, in accordance with the terms and conditions of
this Warrant in any court of the United States or any State thereof having
jurisdiction, and if any action should be brought in equity to enforce any of
the provisions of this Warrant, the Company shall not raise the defense that
there is an adequate remedy at law. Except as otherwise provided by law, a delay
or omission by the Holder hereof in exercising any right or remedy accruing upon
any such breach shall not impair the right or remedy or constitute a waiver of
or acquiescence in any such breach. No remedy shall be exclusive of any other
remedy. All available remedies shall be cumulative.
13. No Rights or Liabilities as Shareholder. Nothing contained
in this Warrant shall be construed as conferring upon the Holder hereof any
rights as a stockholder of the Company or as imposing any obligation on the
Holder to purchase any securities or as imposing any liabilities on the Holder
as a stockholder of the Company, whether such obligation or liabilities are
asserted by the Company or by creditors of the Company.
14. Notices. Any notices, consents, waivers or other
communications required or permitted to be given hereunder must be in writing
and will be deemed to have been delivered (i) upon receipt, when delivered
personally; (ii) upon receipt, when sent by facsimile, provided a copy is mailed
by U.S. certified mail, return receipt requested; (iii) three (3) days after
being sent by U.S. certified mail, return receipt requested, or (iv) one (1) day
after deposit with a nationally recognized overnight delivery service, in each
case properly addressed to the party to receive the same. The addresses and
facsimile numbers for such communications shall be:
If to the Company:
Capita Research Group, Inc.
591 Skippack Pike
Suite 300
Blue Bell, Pennsylvania 19422
Telephone: 215-619-7777
Facsimile: 215-619-0775
Attention: Chief Financial Officer
With a copy to:
Torys
237 Park Avenue
New York, New York 10017
Telephone: 212-880-6000
Facsimile: 212-682-0200
Attention: Andrew J. Beck, Esq.
If to a Holder, to its address and facsimile number on the
register maintained by the Company. Each party shall provide five (5) days'
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prior written notice to the other party of any change in address or facsimile
number. Notwithstanding the foregoing, the exercise of any Warrant shall be
effective in the manner provided in Section 2.
15. Amendments. This Warrant and any term hereof may not be
amended, modified, supplemented or terminated, and waivers or consents to
departures from the provisions hereof may not be given, except by written
instrument duly executed by the party against which enforcement of such
amendment, modification, supplement, termination or consent to departure is
sought.
16. Descriptive Headings, Etc. The headings in this Warrant
are for convenience of reference only and shall not limit or otherwise affect
the meaning of terms contained herein. Unless the context of this Warrant
otherwise requires: (1) words of any gender shall be deemed to include each
other gender; (2) words using the singular or plural number shall also include
the plural or singular number, respectively; (3) the words "hereof", "herein"
and "hereunder" and words of similar import when used in this Warrant shall
refer to this Warrant as a whole and not to any particular provision of this
Warrant, and Section and paragraph references are to the Sections and paragraphs
of this Warrant unless otherwise specified; (4) the word "including" and words
of similar import when used in this Warrant shall mean "including, without
limitation," unless otherwise specified; (5) "or" is not exclusive; and (6)
provisions apply to successive events and transactions.
17. GOVERNING LAW. This Warrant shall be governed by, and
construed in accordance with, the laws of the State of New York (without giving
effect to the conflict of laws principles thereof).
18. Judicial Proceedings. Any legal action, suit or proceeding
brought against the Company with respect to this Warrant may be brought in any
federal court of the Southern District of New York or any state court located in
New York County, State of New York, and by execution and delivery of this
Warrant, the Company hereby irrevocably and unconditionally waives any claim (by
way of motion, as a defense or otherwise) of improper venue, that it is not
subject personally to the jurisdiction of such court, that such courts are an
inconvenient forum or that this Warrant or the subject matter may not be
enforced in or by such court. The Company hereby irrevocably and unconditionally
consents to the service of process of any of the aforementioned courts in any
such action, suit or proceeding by the mailing of copies thereof by registered
or certified mail, postage prepaid, at its address set forth or provided for in
Section 14, such service to become effective 10 days after such mailing. Nothing
herein contained shall be deemed to affect the right of any party to serve
process in any manner permitted by law or commence legal proceedings or
otherwise proceed against any other party in any other jurisdiction to enforce
judgments obtained in any action, suit or proceeding brought pursuant to this
Section. The Company irrevocably submits to the exclusive jurisdiction of the
aforementioned courts in such action, suit or proceeding.
19. Registration Rights Agreement. The shares of Common Stock
(and Other Securities) issuable upon exercise of this Warrant (or upon
19
<PAGE>
conversion of any shares of Common Stock issued upon such exercise) shall
constitute Registrable Securities (as such term is defined in the Registration
Rights Agreement). Each holder of this Warrant shall be entitled to all of the
benefits afforded to a holder of any such Registrable Securities under the
Registration Rights Agreement and such holder, by its acceptance of this
Warrant, agrees to be bound by and to comply with the terms and conditions of
the Registration Rights Agreement applicable to such holder as a holder of such
Registrable Securities.
CAPITA RESEARCH GROUP, INC.
By: /s/ David B. Hunter
---------------------
Name: David B. Hunter
Title: President
20
EXHIBIT A to
Common Stock Purchase Warrant
-----------------------------
[FORM OF]
ELECTION TO PURCHASE SHARES
AND TRANSFER AGENT INSTRUCTIONS
The undersigned hereby irrevocably elects to exercise the
Warrant to purchase ____ shares of Common Stock, par value $.001 per share
("Common Stock"), of CAPITA RESEARCH GROUP, INC. (the "Company") and hereby
makes payment of $________ in consideration therefor. The undersigned hereby
requests that certificates for such shares be issued and delivered as follows:
ISSUE TO:
----------------------------------------------------------------------
(NAME)
- --------------------------------------------------------------------------------
(ADDRESS, INCLUDING ZIP CODE)
- --------------------------------------------------------------------------------
(SOCIAL SECURITY OR OTHER IDENTIFYING NUMBER)
DELIVER TO:
---------------------------------------------------------------------
(NAME)
- --------------------------------------------------------------------------------
(ADDRESS, INCLUDING ZIP CODE)
If the number of shares of Common Stock purchased hereby is
less than the number of shares of Common Stock covered by the Warrant, the
undersigned requests that a new Warrant representing the number of shares of
Common Stock not so purchased be issued and delivered as follows:
ISSUE TO:
-----------------------------------------------------------------------
(NAME OF HOLDER)
- --------------------------------------------------------------------------------
(ADDRESS, INCLUDING ZIP CODE)
- --------------------------------------------------------------------------------
DELIVER TO:
---------------------------------------------------------------------
(NAME OF HOLDER)
- --------------------------------------------------------------------------------
(ADDRESS, INCLUDING ZIP CODE)
Dated: _____________________
[name]
__________________, as transfer agent and registrar of the Common
Stock, is hereby authorized and directed to issue the above number of shares of
Common Stock in the name of the above referenced entity or person and to deliver
the certificates representing such shares using an overnight delivery service.
CAPITA RESEARCH GROUP, INC.
By: ___________________________
10 EXHIBIT B to
Common Stock Purchase Warrant
[FORM OF] ASSIGNMENT
FOR VALUE RECEIVED, the undersigned hereby sells, assigns, and
transfers unto the Assignee named below all of the rights of the undersigned to
purchase Common Stock, par value $.001 per share ("Common Stock") of CAPITA
RESEARCH GROUP, INC. represented by the Warrant, with respect to the number of
shares of Common Stock set forth below:
Name of Assignee Address No. of Shares
- ---------------- ------- -------------
and does hereby irrevocably constitute and appoint ________ as Attorney to make
such transfer on the books of CAPITA RESEARCH GROUP, INC. maintained for that
purpose, with full power of substitution in the premises.
Dated: ____________________
-------------------------
[name]
<PAGE>
359151.5
22795-0999
Exhibit 10(b)
MODIFICATION NO. 1
NASA and NextGen Systems, Incorporated entered into Exclusive
License Agreement No. DE-234 on August 4, 1997. By this Agreement
NASA and NextGen Systems, Incorporated modify Exclusive License
Agreement No. DE-234 as follows:
Article II, Section 2.9 is replaced by:
"FIELD OF USE" means advertising and promotions for, and
content of, products, services, entertainment, and organizations,
including DIRECT RESPONSE product or services promotions, and
including packaging and product design and ON- PRODUCT advertising,
for use in appropriate media.
In witness whereof, each party has caused this Agreement to be
executed by its duly authorized representative:
National Aeronautics and NextGen Systems, Inc.
Space Administration
By: /s/ Edward A. Frankle By: /s/ David B. Hunter
--------------------- -------------------
Edward A. Frankle David B. Hunter
Typed Name Typed Name
Title: General Counsel Title: Vice President
--------------- ---------------------
Date: 7/31/98 Date: 6/29/98
------- -------
Exhibit 10(c)
MODIFICATION NO. 2
NASA and NextGen Systems, Incorporated entered into Exclusive License Agreement
No. DE-234 on August 4, 1997. By this Agreement, NASA and NextGen Systems,
Incorporated modify Exclusive License Agreement DE-234 as follows:
Article II, Sections 2.7 and 2.20 are deleted.
Article II, Section 2.9 is replaced by:
2.9 "FIELD OF USE" means all fields.
Article IV, Section 4.1 is replaced by:
4.1 This license shall commence as of the date this Agreement is
executed by the last party to do so and shall continue until the last
LICENSED PATENT and COPYRIGHT expire, unless revoked or terminated in
accordance with other provisions of this Agreement. Upon expiration of
the last LICENSED PATENT, the license of the COPYRIGHT and the PROGRAM,
all provisions pertaining to the COPYRIGHT and the PROGRAM, and all
provisions pertaining to the COPYRIGHT and the PROGRAM license
contained in this Agreement, shall remain in force. The license of the
LICENSED INVENTION shall terminate as of the date of such expiration.
Except for those provisions specified within this Agreement to survive
termination, all provisions contained within this Agreement pertaining
specifically to the license by NASA of or the obligations of NEXTGEN
SYSTEMS with respect to, including royalty payments under Article X,
the LICENSED INVENTION shall no longer be in effect from the date of
such expiration. NASA shall notify NEXTGEN SYSTEMS in writing of such
expiration. All outstanding royalties accrued as of the date of such
expiration are due within thirty (30) days of such notice.
Article IV, Section 4.2 is replaced by:
4.2 The license of the LICENSED INVENTION shall terminate if all of the
claims of all LICENSED PATENT APPLICATION are ultimately rejected and
if the last remaining claim of all LICENSED PATENT, and any
continuation, divisional, reissue or Patent and Trademark Office in a
reexamination proceeding, and NASA, in its discretion, has exhausted
all available appeals Except for those provisions specified in this
Agreement to survive termination, all provisions contained in the
Agreement pertaining specifically to the license by NASA of or the
1
<PAGE>
obligations of NEXTGEN SYSTEMS with respect to, including royalty
payments under Article X, the LICENSED INVENTION shall no longer be in
effect from the date of termination. NASA shall notify NEXTGEN SYSTEMS
in writing of such occurrence. All outstanding royalties accrued at the
date of such termination are due within thirty (30) days of such
notice. The license of the COPYRIGHT and the PROGRAM, all provisions
pertaining to the COPYRIGHT and the PROGRAM, and all provisions
pertaining to the COPYRIGHT and the PROGRAM license contained in the
Agreement, shall remain in force.
Article IV, Section 4.3 is replaced by:
4.3 The license of the COPYRIGHT shall terminate if registration of the
COPYRIGHT is found to be invalid by a competent court of by the United
States Copyright Office, and NASA, in its discretion, has exhausted all
available appeals. Except for those provisions specified in the
Agreement to survive termination, all provisions contained in this
Agreement pertaining specifically to the license by NASA of or the
obligations on NEXTGEN SYSTEMS with respect to, including consideration
under Article XI, the COPYRIGHT shall no longer be in effect from the
date of such termination. NASA shall notify NEXTGEN SYSTEMS in writing
of such occurrence. All outstanding consideration accrued at the date
of such termination is due within thirty (30) days of such notice. The
license of the LICENSED INVENTION, and all provisions pertaining to the
LICENSED INVENTION and such LICENSED INVENTION license contained in
this Agreement, shall remain in force.
Article X, the following section 10.12 is added:
10.12 In consideration of the extended exclusivity granted via
Modification NO. 2 to this Agreement, NEXTGEN SYSTEMS agrees to pay
NASA a royalty of FIVE THOUSAND DOLLARS ($5,000.00) payable upon
execution of Modification No. 2. In addition, NEXTGEN SYSTEMS agrees to
pay NASA a royalty of TEN THOUSAND DOLLARS ($10,000.00) upon issuance
of a first LICENSED PATENT. These royalties are nonrefundable and will
not be credited against any royalties which, become due and payable
under this Agreement.
Article X, Section 10.8 is replaced by:
10.8 NEXTGEN SYSTEMS agrees that it shall annually pay to NASA, the TEN
PERCENT (10%) royalty of Section 10.2 above for any ROYALTY-BASE
PRODUCTS of any and all SUBLICENSEE of NEXTGEN SYSTEMS. In addition to
the running royalties of Section 7.2, NEXTGEN SYSTEMS agrees to pay
NASA, FIFTY PERCENT (50%) of any consideration, including but not
2
<PAGE>
limited to sublicense issue fees, received from SUBLICENSEE in
consideration for any sublicense granted for the LICENSED INVENTION.
For nonmonetary consideration, including but not limited to equity in
the SUBLICENSEE, such FIFTY PERCENT (50%) shall be calculated based on
the present market value of such nonmonetary consideration.
Article XXVIII, Section 28.1 is modified to reflect the licensee's (wholly-owned
subsidiary's) new address as:
Mr. David B. Hunter
President/CEO
NextGen Systems, Inc.
591 Skippack Pike
Suite 300
Blue Bell, PA 19422
In witness thereof, each party has caused the Agreement to be executed by its
duly authorized representative:
National Aeronautics and NextGen Systems, Inc.
Space Administration
By: /s/ Edward A. Frankle By: David B. Hunter
--------------------- ---------------
Edward A. Frankle David B. Hunter
NASA General Counsel President/CEO
Date: 9/28/99 Date: 9/14/99
----------- ----------
3
Exhibit 10(e)
LOAN AGREEMENT
--------------
This Loan Agreement, dated as of August 5, 1999, is between
Capita Research Group, Inc., a Nevada corporation ("Borrower"), and Jim Salim
(the "Lender").
WHEREAS, the Lender has agreed to provide loans to Borrower in
the aggregate amount of up to $400,000;
NOW, THEREFORE, the parties hereto, in consideration of their
mutual covenants and agreements hereinafter set forth and intending to be
legally bound hereby, covenant and agree as follows:
ARTICLE I
THE CREDIT
----------
1.01 Loans. Subject to the terms and conditions hereof, and
relying upon the representations and warranties of Borrower set forth herein,
the Lender agrees to make loans to Borrower (individually, a "Loan" and,
collectively, the "Loans") in the amount of $100,000 each on each of the
following dates (each, a "Loan Disbursement Date"): the date hereof, September
1, 1999 and October 1, 1999 (the later such date being the "Commitment
Expiration Date"), for an aggregate amount outstanding at any one time not
exceeding $400,000. On the terms and subject to the conditions of this
Agreement, Borrower may prepay the Loans.
1.02 Use of the Loans. Borrower shall use the proceeds of the
Loans for general corporate purposes.
1.03 The Note. The obligation of Borrower to repay the
aggregate unpaid principal amount of the Loans hereunder shall be evidenced by a
convertible promissory note (the "Note") in the form of Exhibit A annexed
hereto, payable to the order of the Lender, duly executed by Borrower and
delivered to the Lender and bearing interest at the rate equal to the prime or
reference rate published from time to time by Citibank, N.A., New York, New
York. Interest will be payable on demand upon 10 days' prior written notice,
which notice may not be delivered prior to six months after the initial Loan
Disbursement Date. The Lender shall, and is hereby authorized by Borrower to,
set forth on the schedule which forms a part of the Note appropriate notations
regarding the principal amount and date of each Loan made hereunder and the
other information provided therein, which notations shall be made
contemporaneously and shall be prima facie evidence of the information set forth
therein; provided, however, that the failure to make any such notations or an
error in making any such notations shall not limit, expand or otherwise affect
the obligations of Borrower hereunder or under the Note. The Note shall cease to
permit Loans on and after the Commitment Expiration Date and, as provided
therein, the principal amount of Loans outstanding shall be paid with respect to
each Loan on the first anniversary of the applicable Loan Disbursement Date.
1
<PAGE>
1.04 Prepayments. Borrower shall have the right, at its
option, to prepay the Loans (or any portion thereof) in whole at any time or in
part from time to time, without premium or penalty. Borrower shall give notice
(which shall be irrevocable) to the Lender not later than the fifth business day
preceding the date of prepayment, specifying the aggregate principal amount to
be repaid and the prepayment date, whereupon the principal amount specified in
such notice, together with interest on the amount of each such prepayment to the
date of prepayment, shall become due and payable on such date of prepayment.
1.05 Payments. All payments and prepayments to be made with
respect to principal of or interest on each of the Loans shall be made to the
Lender at its address set forth below (or at any other payment office in the
United States of America previously designated by the Lender to Borrower in
writing), on the day when due, in lawful money of the United States of America.
Notwithstanding the foregoing, at the option of the Lender exercised in the
demand for interest, interest will be payable in shares of common stock, $.001
par value ("Common Stock"), of Borrower valued as set forth in the Note. The
Lender or any other holder of the Note is hereby authorized to endorse on the
Note an appropriate notation evidencing each payment made on account of
principal; provided, however, that the failure to make any such notation shall
not limit or expand or otherwise affect the obligations of Borrower under the
Note and payments of principal on the Note shall not be affected by the failure
to make any such notation.
ARTICLE II
REPRESENTATIONS AND WARRANTIES
------------------------------
Borrower hereby makes the following representations and
warranties which shall survive the execution and delivery of this Agreement and
the Note hereunder:
2.01 Authority; Binding Agreement. The execution and delivery
of this Agreement and the other agreements contemplated hereby by Borrower, the
performance by Borrower of its covenants and agreements hereunder and thereunder
and the consummation by Borrower of the transactions contemplated hereby and
thereby have been duly authorized by all necessary corporate action. This
Agreement and the other agreements contemplated hereby constitute the valid and
legally binding agreements of Borrower, enforceable in accordance with their
respective terms.
2.02 No Legal Bar; Conflicts. Neither the execution and
delivery of this Agreement nor the other agreements contemplated hereby, nor the
consummation of the transactions contemplated hereby or thereby, violates or
will violate any provision of the Certificate of Incorporation or By-Laws of
Borrower or any law, rule, regulation, writ, judgment, injunction, decree,
determination, award or other order of any court, government, or governmental
agency or instrumentality, domestic or foreign, or violates or will violate, or
conflicts with or will conflict with, or will result in any breach of any of the
2
<PAGE>
terms of, or constitutes or will constitute a default under or results in or
will result in the termination of or the creation or imposition of any lien
pursuant to, the terms of any contract, commitment, agreement, understanding or
arrangement of any kind to which Borrower is a party or by which Borrower or any
of the assets of Borrower is bound. No consents, approvals or authorizations of,
or filings with, any governmental authority or any other person or entity are
required in connection with the execution and delivery of this Agreement by
Borrower and the consummation of the transactions contemplated hereby.
2.03 SEC Filings. All filings made by Borrower with the
Securities and Exchange Commission were true and correct in all material
respects when made and did not contain any material misstatement of fact or fail
to state any material fact necessary to make the statements contained therein
not misleading in the light of the circumstances under which they were made.
ARTICLE III
CONDITIONS PRECEDENT
--------------------
The obligation of the Lender to make any of the Loans under
this Agreement on any Loan Disbursement Date is expressly made subject to and
contingent upon the truthfulness in all material respects of Borrower's
representations and warranties contained in this Agreement. In addition, the
obligation of the Lender to make the initial Loan under this Agreement is
expressly made subject to and contingent upon (i) the execution and delivery by
Borrower to the Lender of the Warrant Certificate substantially in the form of
Exhibit B annexed hereto providing for a Warrant Price (as defined therein)
equal to 125% of the closing bid price per share of the Common Stock on the
business day immediately preceding the initial Loan Disbursement Date and (ii)
the execution and delivery of the Registration Rights Agreement between the
Lender and Borrower substantially in the form of Exhibit C annexed hereto.
ARTICLE IV
EVENTS OF DEFAULT AND REMEDIES
------------------------------
4.01 Events of Default. The entire unpaid principal amount of
the Note, together with all accrued interest thereon, shall, at the option of
the Lender exercised by written notice to Borrower at its principal executive
offices, forthwith become and be due and payable if any one or more of the
following events (herein called "Events of Default") shall have occurred (for
any reason whatsoever and whether such happening shall be voluntary or
involuntary or come about or be effected by operation of law or pursuant to or
in compliance with any judgment, decree or order of any court or any order, rule
or regulation of any administrative or governmental body), which event (in the
case of an event specified in clause (a), (b), (c) or (d) below) shall have
continued for a period of 90 days and which event shall be continuing at the
time of such notice, that is to say:
3
<PAGE>
(a) if default shall be made in the due and punctual
payment of the principal of the Note when and as the same shall become
due and payable, whether at maturity, by acceleration or otherwise;
(b) if default shall be made in the due and punctual
payment of any interest on the Note when and as such interest shall
become due and payable;
(c) if any representation or warranty of Borrower
contained in this Agreement shall have been breached in any material
respect;
(d) if Borrower shall default beyond any period of grace
provided with respect thereto in the payment of principal of or
interest on any obligation in respect of borrowed money when due,
whether by acceleration or otherwise; or if Borrower shall default in
the performance or observance of any other agreement, term or condition
contained in such obligation or in any agreement under which any such
obligation is created, if the effect of any such default is to cause or
permit the holder or holders of such obligations (or a trustee on
behalf of such holder or holders) to cause such obligation to become
due prior to the date of its stated maturity, unless such holder or
holders or trustee shall have waived such default after its occurrence
or unless such holder or holders or trustee shall have failed to give
any notice required to create a default thereunder;
(e) if Borrower shall:
(i) admit in writing its inability to pay its
debts generally as they become due;
(ii) file a petition in bankruptcy or a petition
to take advantage of any insolvency act;
(iii) make an assignment for the benefit of
creditors;
(iv) consent to the appointment of a receiver of
itself or of the whole or any substantial part of its
property;
(v) on a petition in bankruptcy filed against
it, be adjudicated a bankrupt; or
(vi) file a petition or answer seeking
reorganization or arrangement under the Federal bankruptcy laws
or any other applicable law or statute of the United States of
America or any State, district or territory thereof;
(f) if a court of competent jurisdiction shall enter an order,
judgment, or decree appointing, without the consent of Borrower, a
receiver of Borrower or of the whole or any substantial part of its
property, or approving a petition filed against it seeking
reorganization or arrangement of Borrower under the Federal bankruptcy
laws or any other applicable law or statute of the United States of
America or any State, district or territory thereof, and such order,
decree shall not be vacated or set aside or stayed within 90
days from the date of entry thereof;
(g) if, under the provisions of any other law for the relief or
aid of debtors, any court of competent jurisdiction shall assume custody
or control of Borrower or of the whole or any substantial part of its
property and such custody or control shall not be terminated or stayed
within 90 days from the date of assumption of such custody or control;
or
(h) if final judgment for the payment of money in excess of
$50,000 shall be rendered by a court of record against Borrower and
Borrower shall not discharge the same or provide for its discharge in
accordance with its terms, or shall not procure a stay of execution
thereon within 90 days from the date of entry thereof and within the
period during which execution of such judgment shall have been stayed,
appeal therefrom, and cause the execution thereof to be stayed during
such appeal.
4.02 Remedies. In case any one or more of the Events of Default
specified in Section 4.01 hereof shall have occurred and be continuing, the
Lender may proceed to protect and enforce its rights either by suit in equity
and/or by action at law, whether for the specific performance of any covenant or
agreement contained in the Note or in this Agreement or in aid of the exercise
of any power granted in the Note or in this Agreement, or the Lender may proceed
to enforce the payment of all sums due upon the Note or to enforce any other
legal or equitable right of the Lender.
4.03 Remedies Cumulative. No remedy herein conferred upon the
Lender is intended to be exclusive of any other remedy and each and every such
remedy shall be cumulative and shall be in addition to every other remedy given
hereunder or under the Note or now or hereafter existing at law or in equity or
by statute or otherwise.
4.04 No Waiver. No course of dealing between Borrower and the
Lender or any delay on the part of the Lender in exercising any rights hereunder
or under the Note shall operate as a waiver of any rights of the Lender.
ARTICLE V
MISCELLANEOUS
-------------
5.01 Implied Waivers; Cumulative Remedies; Writing Required. No
delay or failure by the Lender in exercising any right, power or remedy
hereunder shall affect or operate as a waiver thereof, nor shall any single or
partial exercise thereof or any abandonment or discontinuance of steps to
enforce such a right, power or remedy preclude any further exercise thereof or
of any other right, power or remedy. The rights and remedies hereunder of the
Lender are cumulative and not exclusive of any rights or remedies which it would
otherwise have. Any waiver, permit, consent or approval of any kind or character
on the part of the Lender of any breach or default under this Agreement or any
such waiver of any provision or condition of this Agreement must be in writing
and shall be effective only to the extent in such writing specifically set
forth.
5
<PAGE>
5.02 Notices. All notices and other communications given to or
made upon any party hereto in connection with this Agreement shall, except as
otherwise expressly herein provided, be in writing (including telecopied,
telexed or telegraphic communication) and mailed, telecopied, telexed,
telegraphed or personally delivered to the respective parties, as follows:
Borrower: Capita Research Group, Inc.
591 Shippack Pike, Suite 300
Blue Bell, Pennsylvania 19422
Attention: President
Telecopy: (215) 619-0775
Lender: Mr. Jim Salim
3510 Turtle Creek Boulevard, #2D
Dallas, Texas 75219
Telecopy: (214) 526-0435
or in accordance with any subsequent written direction from the recipient party
to the sending party. All such notices and other communications shall, except as
otherwise expressly herein provided, be effective upon delivery if delivered by
hand, when deposited in the mail, postage prepaid, in the case of mail, and in
the case of telecopy or telex, when received, or in the case of telegraph, when
delivered to the telegraph company, charges prepaid.
5.03 Survival. All representations, warranties, covenants and
agreements of Borrower contained herein or made in writing in connection
herewith shall survive the execution and delivery of this Agreement, the making
of the Loans hereunder and the issuance of the Note, and shall continue in full
force and effect so long as the Note is outstanding and until payment in full of
all of Borrower's obligations hereunder or thereunder.
5.04 Governing Law. This Agreement and the Note and the rights
and obligations of the parties hereto and thereto shall be deemed to be
contracts under the laws of the Commonwealth of Pennsylvania and for all
purposes shall be governed by and construed and enforced in accordance with the
laws of such Commonwealth applicable to agreements made and to be entirely
performed in such Commonwealth. Borrower and the Lender agree that any legal
suit, action, or proceeding arising out of this Agreement or the Note may be
instituted in any Pennsylvania state or Federal court sitting in the City of
Philadelphia which has subject matter jurisdiction and waive any objection which
either of them may now or hereafter have to the laying of venue of any such
suit, action or proceeding in such jurisdiction. Borrower and the Lender further
agree that service of process shall be properly served if served personally or
by registered mail return receipt requested at the address set forth in Section
5.02.
5.05 Severability. Whenever possible, each provision of this
Agreement shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement is held to be prohibited
by or invalid under applicable law in any jurisdiction, such provision shall be
ineffective only to the extent of such prohibition or invalidity, without
invalidating any other provision of this Agreement.
6
<PAGE>
5.06 Headings. Section and subsection headings in this
Agreement are included for convenience of reference only and shall not
constitute a part of this Agreement for any other purpose.
5.07 Counterparts. This Agreement may be executed in any
number of counterparts and by any party hereto on separate counterparts, each of
which, when so executed and delivered, shall be an original, but all such
counterparts shall together constitute one and the same instrument.
5.08 Binding Effect. This Agreement shall be binding upon and
inure to the benefit only of the parties hereto and their respective successors
and assigns and no party who is not a party hereto shall have any rights
hereunder, including any rights to require Borrower to borrow Loans.
5.09 Payment of Commission. The parties acknowledge that
Borrower is paying Quaker Capital Markets Group a commission equal to seven
percent of the principal amount of each Loan. The Lender shall have no liability
for such commission.
* * *
7
<PAGE>
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the day and year first above written.
BORROWER:
CAPITA RESEARCH GROUP, INC.
By /s/ David B. Hunter
----------------------
David B. Hunter
Title: President
LENDER:
/s/ Jim Salim
-------------
Jim Salim
8
Exhibit 10(f)
SECURITIES PURCHASE AGREEMENT
SECURITIES PURCHASE AGREEMENT (the "Agreement"), dated as of
January 6, 2000, by and among Capita Research Group, Inc., a Nevada corporation,
with headquarters located at 591 Skippack Pike, Suite 300, Blue Bell,
Pennsylvania 19422 (the "Company"), and the investors listed on the Schedule of
Buyers attached hereto (individually, a "Buyer" and collectively, the "Buyers").
WHEREAS:
A. The Company and the Buyers are executing and delivering
this Agreement in reliance upon the exemption from securities registration
afforded by Rule 506 of Regulation D ("Regulation D") as promulgated by the
United States Securities and Exchange Commission (the "SEC") under the
Securities Act of 1933, as amended (the "1933 Act");
B. The Company has authorized the issuance of up to 1,000,000
of the Company's units (the "Units"), each unit consisting of (i) one share of
the Company's common stock, $.001 par value per share (the "Common Stock"), (ii)
one of the Company's A Common Stock Purchase Warrants to purchase one share of
the Company's Common Stock exercisable at a purchase price of $.50 per share of
Common Stock (the "A Warrants"), in the form attached hereto as Exhibit A, and
(iii) one of the Company's B Common Stock Purchase Warrants to purchase one
share of the Company's Common Stock exercisable at a purchase price of $1.00 per
share of Common Stock, in the form attached hereto as Exhibit B (the "B
Warrants", and together with the A Warrants, the "Warrants") (such shares of
Common Stock issued upon exercise of the Warrants are hereinafter referred to as
the "Warrant Shares", and together with the Units, Common Stock and Warrants,
the "Securities");
C. The Buyers wish to purchase, upon the terms and conditions
stated in this Agreement, an aggregate of $500,000.00 of Units in the respective
amounts set forth opposite each Buyer's name on the Schedule of Buyers; and
D. Contemporaneously with the execution and delivery of this
Agreement, the parties hereto are executing and delivering a Registration Rights
Agreement in the form attached hereto as Exhibit C (the "Registration Rights
Agreement") pursuant to which the Company has agreed to provide certain
registration rights under the 1933 Act and the rules and regulations promulgated
thereunder, and applicable state securities laws.
NOW, THEREFORE, the Company and the Buyers hereby agree as
follows:
1. PURCHASE AND SALE OF UNITS
--------------------------
a. Purchase of Units. Subject to the
satisfaction (or waiver) of the conditions set forth in Sections 6 and 7 below,
the Company shall issue and sell to the Buyers and the Buyers shall purchase
from the Company an aggregate of 1,000,000 Units in the respective amounts set
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forth opposite each Buyer's name on the Schedule of Buyers at the Closing (the
"Closing"). The per unit purchase price (the "Purchase Price") of the Units
shall be $.50 or an aggregate purchase price of $500,000.00. On the Closing Date
(as defined below), the Company shall issue and deliver to each Buyer (i) a
stock certificate(s) representing such number of the shares of Common Stock and
(ii) certificates representing such number of A Warrants and B Warrants, which
such Buyer is then purchasing (as indicated opposite such Buyer's name on the
Schedule of Buyers), duly executed on behalf of the Company and registered in
the name of such Buyer or its designee (the "Stock Certificates").
b. Closing Date. The date and time of the
Closing (the "Closing Date") shall be 10:00 a.m. Eastern Standard Time on
January 6, 2000, subject to notification of satisfaction (or waiver) of the
conditions to the Closing set forth in Sections 6 and 7 below (or such later
date as is mutually agreed to by the Company and the Buyers). The Closing shall
occur on the Closing Date at the offices of Schulte Roth & Zabel LLP, 900 Third
Avenue, New York, New York 10022.
c. Form of Payment. On the Closing Date, each
Buyer shall pay the Purchase Price to the Company for the Units to be issued and
sold to such Buyer at the Closing, by wire transfer of immediately available
funds in accordance with the Company's written wire instructions provided in
writing to the Buyers prior to the Closing Date.
2. BUYER'S REPRESENTATIONS AND WARRANTIES.
--------------------------------------
Each Buyer represents and warrants with respect to only itself
that:
a. Investment Purpose. Such Buyer (i) is
purchasing the Units consisting of Common Stock and Warrants and (ii) upon
exercise of the Warrants, will acquire the Warrant Shares, then issuable for its
own account for investment only and not with a present view towards or for
resale in connection with, the public sale or distribution thereof, except
pursuant to sales registered or exempted under the 1933 Act; provided, however,
that by making the representations herein, such Buyer does not agree to hold any
Securities for any minimum or other specific term and reserves the right to
dispose of the Securities at any time in accordance with or pursuant to a
registration statement or an exemption under the 1933 Act.
b. Accredited Investor Status. Such Buyer is an
"accredited investor" as that term is defined in Rule 501(a) of Regulation D.
c. Reliance on Exemptions. Such Buyer
understands that the Units are being offered and sold to it in reliance on
specific exemptions from the registration requirements of United States federal
and state securities laws and that the Company is relying in part upon the truth
and accuracy of, and such Buyer's compliance with, the representations,
warranties, agreements, acknowledgments and understandings of such Buyer set
forth herein in order to determine the availability of such exemptions and the
eligibility of such Buyer to acquire the Units.
d. Information. Such Buyer and its advisors, if
any, have been furnished with all materials relating to the business, finances
and operations of the Company and materials relating to the offer and sale of
the Units which have been requested by such Buyer. Such Buyer and its advisors,
if any, have been afforded the opportunity to ask questions of the Company.
Neither such inquiries nor any other due diligence investigations conducted by
such Buyer or its advisors, if any, or its representatives shall modify, amend
or affect such Buyer's right to rely on the Company's representations and
warranties contained in Section 3 below.
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e. No Governmental Review. Such Buyer
understands that no United States federal or state agency or any other
government or governmental agency has passed on or made any recommendation or
endorsement of the Units or the fairness or suitability of the investment in the
Securities nor have such authorities passed upon or endorsed the merits of the
offering of the Units.
f. Transfer or Resale. Such Buyer understands
that except as provided in the Registration Rights Agreement: (i) the Securities
have not been and are not being registered under the 1933 Act or any state
securities laws, and may not be offered for sale, sold, assigned or transferred
unless (A) subsequently registered thereunder, (B) such Buyer shall have
delivered to the Company an opinion of counsel, in a generally acceptable form,
to the effect that such Securities to be sold, assigned or transferred may be
sold, assigned or transferred pursuant to an exemption from such registration,
or (C) such securities can be sold, assigned or transferred pursuant to Rule 144
promulgated under the 1933 Act (or a successor rule thereto) ("Rule 144"); (ii)
any sale of such securities made in reliance on Rule 144 may be made only in
accordance with the terms of Rule 144 and further, if Rule 144 is not
applicable, any resale of such securities under circumstances in which the
seller (or the person through whom the sale is made) may be deemed to be an
underwriter (as that term is defined in the 1933 Act) may require compliance
with some other exemption under the 1933 Act or the rules and regulations of the
SEC thereunder; and (iii) neither the Company nor any other person is under any
obligation to register such securities under the 1933 Act or any state
securities laws or to comply with the terms and conditions of any exemption
thereunder.
g. Legends. Such Buyer understands that the
certificates or other instruments representing the Warrants and, until such time
as the sale of the Common Stock or Warrant Shares have been registered under the
1933 Act as contemplated by the Registration Rights Agreement, the stock
certificates or other documents representing the Common Stock and Warrant Shares
except as set forth below, shall bear a restrictive legend in substantially the
following form (and a stop-transfer order may be placed against transfer of such
certificates):
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE
SECURITIES LAWS. THE SECURITIES HAVE BEEN ACQUIRED FOR INVESTMENT AND
MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED IN THE
ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER
THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES
LAWS, OR AN OPINION OF COUNSEL, IN A GENERALLY ACCEPTABLE FORM, THAT
REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR APPLICABLE STATE
SECURITIES LAWS OR UNLESS SOLD PURSUANT TO RULE 144 UNDER SAID ACT.
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The legend set forth above shall be removed and the Company shall issue a
certificate without such legend to the holder of any Securities upon which it is
stamped, if (i) any such Securities are registered for sale under the 1933 Act,
(ii) in connection with a sale transaction, such holder provides the Company
with an opinion of counsel, in a generally acceptable form, to the effect that a
public sale, assignment or transfer of any of the Securities may be made without
registration under the 1933 Act, or (iii) any of the Securities can be sold
pursuant to Rule 144 without any restriction as to the number of securities
acquired as of a particular date that can then be immediately sold. Each Buyer
acknowledges, covenants and agrees to sell any of the Securities represented by
a certificate(s) from which the legend has been removed, only pursuant to (i) a
registration statement effective under the 1933 Act, or (ii) advice of counsel
that such sale is exempt from registration required by Section 5 of the 1933
Act. In the event the above legend is removed from any of the Securities, the
Company may, upon reasonable advance notice to the holder, require that the
above legend be placed on any of the Securities that cannot then be sold
pursuant to an effective registration statement or Rule 144(k) under the 1933
Act (or any successor rule thereto).
h. Authorization; Enforcement. This Agreement
has been duly and validly authorized, executed and delivered on behalf of such
Buyer and is a valid and binding agreement of such Buyer enforceable in
accordance with its terms, subject as to enforceability to general principles of
equity and to applicable bankruptcy, insolvency, reorganization, moratorium,
liquidation and other similar laws relating to, or affecting generally, the
enforcement of applicable creditors' rights and remedies.
i. Residency. Such Buyer is a resident of that
country specified in the Schedule of Buyers.
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
---------------------------------------------
The Company represents and warrants to each of the
Buyers that:
a. Organization and Qualification. The Company
and its subsidiaries are corporations duly incorporated and validly existing in
good standing under the laws of the jurisdiction in which they are incorporated,
and have the requisite corporate power to own their properties and to carry on
their business as now being conducted. Each of the Company and its subsidiaries
is duly qualified as a foreign corporation to do business and is in good
standing in every jurisdiction in which the nature of the business conducted by
it makes such qualification necessary, except to the extent that the failure to
be so qualified or be in good standing would not have a Material Adverse Effect.
"Material Adverse Effect" means any material adverse effect on (i) the business,
properties, operations, condition (financial or otherwise), or results of
operations of the Company and its subsidiaries, taken as a whole, (ii) on the
ability of the Company to perform its obligations hereunder, under the
Registration Rights Agreement or under the other agreements or instruments to be
entered into or filed in connection herewith or therewith, or (iii) the
Securities.
b. Authorization; Enforcement; Compliance with
Other Instruments. (i) The Company has the requisite corporate power and
authority to enter into and perform its obligations under this Agreement, the
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Warrants and the Registration Rights Agreement, (collectively, the "Closing
Agreements") to issue, sell and perform its obligations with respect to the
Units and Warrant Shares in accordance with the terms hereof and the Warrants
and to issue the Warrant Shares upon exercise of the Warrants, in accordance
with the terms and conditions of the Warrants, (ii) the execution and delivery
of the Closing Agreements by the Company and the consummation by it of the
transactions contemplated hereby and thereby, including, without limitation, the
issuance of the Common Stock and the Warrants and the reservation for issuance
and the issuance of the Warrant Shares upon exercise of the Warrants have been
duly authorized by the Company's Board of Directors and no further consent or
authorization is required by the Company, its Board of Directors or its
shareholders, (iii) the Closing Agreements have been duly executed and delivered
by the Company, and (iv) the Closing Agreements constitute the legal, valid and
binding obligations of the Company enforceable against the Company in accordance
with their terms, except as such enforceability may be limited by general
principles of equity or applicable bankruptcy, insolvency, reorganization,
moratorium, liquidation or similar laws relating to, or affecting generally, the
enforcement of creditors' rights and remedies.
c. Capitalization and Indebtedness. As of the
date hereof, the authorized capital stock of the Company consists of 100,000,000
shares of Common Stock, of which as of the date hereof, 20,295,946 shares are
issued and outstanding and no shares of Preferred Stock. All of such outstanding
shares have been validly issued and are fully paid and nonassessable. No shares
of Common Stock are subject to preemptive rights or any other similar rights or
any liens or encumbrances suffered or permitted by the Company. Except as
disclosed in Schedule 3(c), as of the date hereof, (i) there are no outstanding
options, warrants, scrip, rights to subscribe to, calls or commitments of any
character whatsoever relating to, or securities or rights convertible into, any
shares of capital stock of the Company or any of its subsidiaries, or contracts,
commitments, understandings or arrangements by which the Company or any of its
subsidiaries is or may become bound to issue additional shares of capital stock
of the Company or any of its subsidiaries or options, warrants, scrip, rights to
subscribe to, calls or commitments of any character whatsoever relating to, or
securities or rights convertible into, any shares of capital stock of the
Company or any of its subsidiaries, (ii) there are no outstanding debt
securities, notes, credit agreements, or other agreements, documents or
instruments evidencing indebtedness of the Company or any of its subsidiaries or
by which the Company or any of its subsidiaries is or may become bound and (iii)
there are no agreements or arrangements under which the Company or any of its
subsidiaries is obligated to register the sale of any of their securities under
the 1933 Act (except the Registration Rights Agreement). There are no securities
or instruments containing anti-dilution or similar provisions that will be
triggered by the issuance of any of the Securities as described in this
Agreement. The Company has furnished to the Buyer true and correct copies of the
Company's Certificate of Incorporation as amended and as in effect on the date
hereof (the "Certificate of Incorporation"), and the Company's By-laws, as in
effect on the date hereof (the "By-laws"), and the terms of all securities
convertible into or exercisable for Common Stock and the material rights of the
holders thereof in respect thereto.
d. Issuance of Securities. The Securities are
duly authorized and, upon issuance in accordance with the terms hereof shall be
(i) validly issued, fully paid and non-assessable, (ii) free from all taxes,
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liens and charges with respect to the issue thereof and are not and shall not be
subject to preemptive rights or other similar rights of stockholders of the
Company. 3,000,000 shares of Common Stock have been duly authorized and reserved
for issuance in connection with the Units.
e. No Conflicts. The execution, delivery and
performance of the Closing Agreements by the Company and the consummation by the
Company of the transactions contemplated hereby and thereby (including, without
limitation, the issuance of the Securities) will not (i) result in a violation
of the Certificate of Incorporation or By-laws or (ii) except as disclosed in
Schedule 3(e), violate or conflict with, or result in a breach of any provision
of, or constitute a default (or an event which with notice or lapse of time or
both would become a default) under, or give to others any rights of termination,
amendment, acceleration or cancellation of, any material agreement, indenture or
instrument to which the Company or any of its subsidiaries is a party, or result
in a violation of any law, rule, regulation, order, judgment or decree
(including federal and state securities laws and regulations and the rules and
regulations of the principal market or exchange on which the Common Stock is
traded or listed) applicable to the Company or any of its subsidiaries or by
which any property or asset of the Company or any of its subsidiaries is bound
or affected. Neither the Company nor its subsidiaries are in violation of any
term of or in default under its Certificate of Incorporation or By-laws or their
organizational charter or by-laws, respectively, or in violation of any term of
or in default under any contract, agreement, mortgage, indebtedness, indenture,
instrument, judgment, decree or order or any statute, rule or regulation
applicable to the Company or its subsidiaries, except for violations or defaults
which would not, individually or in the aggregate, have a Material Adverse
Effect. The business of the Company and its subsidiaries is not being conducted
in violation of any law, ordinance or regulation of any governmental entity,
which violations, individually or in the aggregate, would have a Material
Adverse Effect. Except as specifically contemplated by this Agreement and as
required under the 1933 Act, the Company is not required to obtain any consent,
authorization or order of, or make any filing or registration with, any court or
governmental or regulatory or self-regulatory agency in order for it to execute,
deliver or perform any of its obligations under or contemplated by this
Agreement, the Registration Rights Agreement or the Warrants in accordance with
the terms hereof or thereof. Except as disclosed in Schedule 3(e), all consents,
authorizations, orders, filings and registrations which the Company is required
to obtain pursuant to the preceding sentence have been obtained or effected on
or prior to the date hereof. The Company and its subsidiaries are unaware of any
facts or circumstances which might give rise to any of the foregoing.
f. SEC Documents; Financial Statements. Since
December 31, 1997, the Company has filed all reports, schedules, forms,
statements and other documents required to be filed by it with the SEC pursuant
to the reporting requirements of the Securities Exchange Act of 1934, as amended
(the "1934 Act") (all of the foregoing filed prior to the date hereof and all
exhibits included therein and financial statements and schedules thereto and
documents incorporated by reference therein being hereinafter referred to as the
"SEC Documents"). The Company has delivered or made available to each Buyer or
its representative true and complete copies of the SEC Documents and agrees to
deliver or make available to each Buyer or its representatives true and complete
copies of any additional SEC Documents, upon request. As of their respective
dates, the SEC Documents complied in all material respects with the requirements
of the 1934 Act and the rules and regulations of the SEC promulgated thereunder
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applicable to the SEC Documents, and none of the SEC Documents, at the time they
were filed with the SEC, contained any untrue statement of a material fact or
omitted to state a material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under which
they were made, not misleading. As of their respective dates, the financial
statements of the Company included in the SEC Documents complied as to form in
all material respects with applicable accounting requirements and the published
rules and regulations of the SEC with respect thereto. Such financial statements
have been prepared in accordance with generally accepted accounting principles,
consistently applied during the periods involved (except (i) as may be otherwise
indicated in such financial statements or the notes thereto, or (ii) in the case
of unaudited interim statements, to the extent they may exclude footnotes or may
be condensed or summary statements) and fairly present in all material respects
the financial position of the Company as of the dates thereof and the results of
its operations and cash flows for the periods then ended (subject, in the case
of unaudited statements, to normal year-end audit adjustments).
g. Absence of Certain Changes. Except as
expressly set forth in Schedule 3(g) or as otherwise disclosed in SEC Documents
filed after December 31, 1998, since December 31, 1998, there has been no
material adverse change and no material adverse development in the business,
properties, operations, condition (financial or otherwise), or results of
operations of the Company and its subsidiaries taken as a whole. The Company has
not taken any steps, and does not currently expect to take any steps, to seek
protection pursuant to any bankruptcy law nor does the Company or its
subsidiaries have any knowledge or reason to believe that its creditors intend
to initiate involuntary bankruptcy proceedings.
h. Absence of Litigation. Except as set forth
in Schedule 3(h), there is no action, suit, proceeding, inquiry or investigation
before or by any court, public board, government agency, self-regulatory
organization or body pending or, to the knowledge of the Company or any of its
subsidiaries, threatened against or affecting the Company or its subsidiaries or
their respective directors or officers, or the Common Stock, wherein an
unfavorable decision, ruling or finding would individually or in the aggregate
have a Material Adverse Effect.
i. Acknowledgment Regarding Buyers' Purchase of
the Securities. The Company acknowledges and agrees that each of the Buyers is
acting solely in the capacity of arm's length purchaser with respect to this
Agreement and the transactions contemplated hereby. The Company further
acknowledges that each Buyer is not acting as a financial advisor or fiduciary
of the Company (or in any similar capacity) with respect to this Agreement and
the transactions contemplated hereby and any advice given by any of the Buyers
or any of their respective representatives or agents in connection with this
Agreement and the transactions contemplated hereby is merely incidental to such
Buyer's purchase of the Securities. The Company further represents to each Buyer
that the Company's decision to enter into this Agreement has been based solely
on the independent evaluation by the Company and its representatives.
j. No General Solicitation. Neither the
Company, nor any of its affiliates, nor any person acting on its or their
behalf, has engaged in any form of general solicitation or general advertising
(within the meaning of Regulation D under the 1933 Act) in connection with the
offer or sale of any of the Securities offered hereby.
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k. No Integrated Offering. Neither the Company,
nor any of its affiliates, nor any person acting on its or their behalf has,
directly or indirectly, made any offers or sales of any security or solicited
any offers to buy any security, under circumstances that would require
registration of any of the Securities under the 1933 Act or cause the offering
of any of the Securities to be integrated with prior offerings by the Company
for purposes of the 1933 Act or any applicable shareholder approval provisions.
l. Employment Matters; ERISA Matters. The
Company and its subsidiaries are in compliance with all federal, state, local
and foreign laws and regulations respecting employment and employment practices,
terms and conditions of employment and wages and hours except where failure to
be in compliance would not have a Material Adverse Effect. There are no pending
investigations involving the Company or any of its subsidiaries by the U.S.
Department of Labor or any other governmental agency responsible for the
enforcement of such federal, state, local or foreign laws and regulations. There
is no unfair labor practice charge or complaint against the Company or any of
its subsidiaries pending before the National Labor Relations Board or any
strike, picketing, boycott, dispute, slowdown or stoppage pending or, to the
Company's knowledge, threatened against or involving the Company or any of its
subsidiaries. No representation question exists respecting the employees of the
Company or any of its subsidiaries, and no collective bargaining agreement or
modification thereof is currently being negotiated by the Company or any of its
subsidiaries. No grievance or arbitration proceeding is pending under any
expired or existing collective bargaining agreements of the Company or any of
its subsidiaries. No material labor dispute with the employees of the Company or
any of its subsidiaries exists or, to the knowledge of the Company, is imminent.
The Company has no employee benefit plans subject to the Employee Retirement
Income Security Act of 1974, as amended.
m. Intellectual Property Rights. The Company
and its subsidiaries own or possess the requisite rights or licenses to use all
trademarks, trade names, service marks, service mark registrations, service
names, patents, patent rights, copyrights, inventions, licenses, approvals,
governmental authorizations, trade secrets and rights (collectively
"Intellectual Property Rights") necessary to conduct their respective businesses
as now conducted and as presently contemplated to be operated in the future,
except where the failure to possess the same would not have a Material Adverse
Effect. None of the Intellectual Property Rights or other material intellectual
property rights owned or possessed by the Company have expired or terminated, or
are expected to expire or terminate in the near future. The Company and its
subsidiaries do not have any knowledge of any event, fact or circumstance
relating to (i) any infringement by the Company or its subsidiaries of any
trademarks, trade names, service marks, service mark registrations, service
names, patents, patent rights, copyrights, inventions, licenses, approvals,
governmental authorizations, trade secrets or other similar rights of others, or
of any such development of similar or identical trade secrets or technical
information by others or (ii) except as set forth on Schedule 3(m), any person
or entity now infringing any Intellectual Property Rights or other similar
rights or any such development of similar or identical trade secrets or
technical information owned or used by the Company or any of its subsidiaries
and, except as set forth on Schedule 3(m), there is no claim, action or
proceeding being made or brought against, or to the Company's knowledge, being
threatened against, the Company or its subsidiaries regarding any trademarks,
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trade names, service marks, service mark registrations, service names, patents,
patent rights, copyrights, inventions, licenses, approvals, governmental
authorizations, trade secrets or other similar rights of others, or of any such
development of similar or identical trade secrets or technical information by
others or any person or entity now infringing any Intellectual Property Rights
or other similar rights or any such development of similar or identical trade
secrets or other infringement; and the Company and its subsidiaries are unaware
of any facts or circumstances which might give rise to any of the foregoing. The
Company and its subsidiaries have taken reasonable security measures to protect
the secrecy, confidentiality and value of all of their Intellectual Property
Rights.
n. Environmental Laws. The Company and its subsidiaries (A)
are in compliance with any and all Environmental Laws, (B) have received all
permits, licenses or other approvals required of them under applicable
Environmental Laws to conduct their respective businesses, and (C) are in
compliance with all terms and conditions of any such permit, license or
approval, except where the failure to be in compliance or to receive such
permits, licenses or approvals would not have a Material Adverse Effect. With
respect to the Company and/or its subsidiaries (A) there are no past or present
releases of any material into the environment, actions, activities,
circumstances, conditions, events, incidents, or contractual obligations which
may give rise to any material common law environmental liability or any material
liability under any Environmental Law and (B) neither the Company nor any of its
subsidiaries has received any notice with respect to the foregoing, nor is any
action pending or to the Company's knowledge, threatened in connection with the
foregoing. The term "Environmental Laws" means all federal, state, local or
foreign laws relating to pollution or protection of human health or the
environment (including, without limitation, ambient air, surface water,
groundwater, land surface or subsurface strata), including, without limitation,
laws relating to emissions, discharges, releases or threatened releases of
chemicals, pollutants, contaminants, or toxic or hazardous substances or wastes
(collectively, "Hazardous Materials") into the environment, or otherwise
relating to the manufacture, processing, distribution, use, treatment, storage,
disposal, transport or handling of Hazardous Materials, as well as all
authorizations, codes, decrees, demands or demand letters, injunctions,
judgments, licenses, notices or notice letters, orders, permits, plans or
regulations issued, entered, promulgated or approved thereunder.
o. Title. The Company and its subsidiaries have
good and marketable title in fee simple to all real property and good and
marketable title to all personal property owned by them which is material to the
business of the Company and its subsidiaries, in each case free and clear of all
liens, encumbrances and defects except such as do not materially affect the
value of such property and do not materially interfere with the use made and
proposed to be made of such property by the Company and its subsidiaries. Any
real property and facilities held under lease by the Company and its
subsidiaries are held by them under valid, subsisting and enforceable leases
with such exceptions as are not material and do not interfere with the use made
and proposed to be made of such property and buildings by the Company and its
subsidiaries.
p. Insurance. The Company and each of its
subsidiaries are insured by insurers of recognized financial responsibility
against such losses and risks and in such amounts as is prudent and customary in
the businesses in which the Company and its subsidiaries are engaged. Neither
the Company nor any such subsidiary has any reason to believe that it will not
be able to renew its existing insurance coverage as and when such coverage
expires or to obtain similar coverage from similar insurers as may be necessary
to continue its business at a cost that would not individually or in the
aggregate have a Material Adverse Effect.
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q. Regulatory Permits; Compliance. The Company
and its subsidiaries possess all franchises, grants, authorizations, licenses,
permits, easements, consents, certificates, approvals and orders necessary to
own, lease and operate their respective properties and to conduct their
respective businesses as currently being conducted (collectively, the "Company
Permits"), except for any such Company Permits the failure to possess which
would not have a Material Adverse Effect. There is no action pending, or to the
knowledge of the Company, threatened regarding the suspension or cancellation of
any of the Company Permits. Neither the Company nor any of its subsidiaries is
in conflict with, or in default or violation of, any of the Company Permits,
which conflict, default or violation would have a Material Adverse Effect.
Neither the Company nor any of its subsidiaries has received any notification
with respect to possible conflicts, defaults, or violations of applicable laws.
r. Internal Accounting Controls. The Company
and each of its subsidiaries maintain a system of internal accounting controls
sufficient, in the judgment of the Company's board of directors, and in relation
to the size and complexity of their respective businesses, to provide reasonable
assurance that (i) transactions are executed in accordance with management's
general or specific authorizations, (ii) transactions are recorded as necessary
to permit preparation of financial statements in conformity with generally
accepted accounting principles and to maintain asset accountability, (iii)
access to assets is permitted only in accordance with management's general or
specific authorization and (iv) the recorded accountability for assets is
compared with the existing assets at reasonable intervals and appropriate action
is taken with respect to any differences.
s. No Materially Adverse Contracts, Etc.
Neither the Company nor any of its subsidiaries is subject to any charter,
corporate or other legal restriction, or any judgment, decree, order, rule or
regulation which in the reasonable judgment of the Company's officers has or is
expected in the future individually or in the aggregate to have a Material
Adverse Effect. Neither the Company nor any of its subsidiaries is a party to
any contract or agreement which in the reasonable judgment of the Company's
officers has or is expected to have a Material Adverse Effect.
t. Tax Status. Except as set forth on Schedule
3(t), the Company and each of its subsidiaries has made or filed all federal,
state and foreign income and all other tax returns, reports and declarations
required by any jurisdiction to which it is subject (unless and only to the
extent that the Company and each of its subsidiaries has set aside on its books
provisions reasonably adequate for the payment of all unpaid and unreported
taxes) and has paid all taxes and other governmental assessments and charges
that are material in amount, shown or determined to be due on such returns,
reports and declarations, except those being contested in good faith and has set
aside on its books provisions reasonably adequate for the payment of all taxes
for periods subsequent to the periods to which such returns, reports or
declarations apply. There are no unpaid taxes in any material amount claimed to
be due by the taxing authority of any jurisdiction, and the officers of the
Company know of no basis for any such claim. The Company has not executed a
waiver with respect to the statute of limitations relating to the assessment or
collection of any foreign, federal, state or local tax. The Company has not been
notified that any of its tax returns is currently being audited by any taxing
authority.
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u. Certain Transactions. Except as set forth on
Schedule 3(u) and except for arm's length transactions pursuant to which the
Company makes payments in the ordinary course of business upon terms no less
favorable than the Company could obtain from third parties and other than the
grant of stock options disclosed on Schedule 3(c), none of the officers,
directors or employees of the Company is presently a party to any material
transaction with the Company (other than for services as employees, officers and
directors), including any contract, agreement or other arrangement providing for
the furnishing of services to or by, providing for rental of real or personal
property to or from, or otherwise requiring payments to or from any officer,
director or such employee or, to the knowledge of the Company, any corporation,
partnership, trust or other entity in which any officer, director or any such
employee has a substantial interest or is an officer, director, trustee or
partner.
v. Disclosure. All information relating to or
concerning the Company or any of its subsidiaries set forth in this Agreement
and provided to the Buyer pursuant to Section 2(d) hereof and otherwise in
connection with the transactions contemplated hereby is true and correct in all
material respects and the Company has not omitted to state any material fact
necessary in order to make the statements made herein or therein, in light of
the circumstances under which they were made, not misleading. No event or
circumstance has occurred or information exists with respect to the Company or
any of its subsidiaries or its or their business, properties, operations or
financial condition, which, under applicable law, rule or regulation, requires
public disclosure or announcement by the Company but which has not been so
publicly announced or disclosed (assuming for this purpose that the Company's
reports filed under the 1934 Act are being incorporated into an effective
registration statement filed by the Company under the 1933 Act). The Company has
not provided any Buyer with any material non-public information nor any
projections or assurance regarding the future financial performance of the
Company.
w. Investment Company Status. The Company is
not and upon consummation of the sale of the Securities will not be an
"investment company," a company controlled by an "investment company" or an
"affiliated person" of, or "promoter" or "principal underwriter" for, an
"investment company" as such terms are defined in the Investment Company Act of
1940, as amended.
x. Foreign Corrupt Practices. Neither the
Company nor any of its subsidiaries, nor any director, officer, agent, employee
or other person acting on behalf of the Company or any subsidiary has, in the
course of his actions for, or on behalf of, the Company used any corporate funds
for any unlawful contribution, gift, entertainment or other unlawful expenses
relating to political activity; made any direct or indirect unlawful payment to
any foreign or domestic government official or employee from corporate funds;
violated or is in violation of any provision of the U.S. Foreign Corrupt
Practices Act of 1977; or made any bribe, rebate, payoff, influence payment,
kickback or other unlawful payment to any foreign or domestic government
official or employee.
11
<PAGE>
y. Year 2000. Any reprogramming required to
permit the proper functioning, in and following the year 2000, of the Company's
and its subsidiaries' (i) computer systems and (ii) equipment containing
embedded microchips (including systems and equipment supplied by others or with
which the Company's or any of its subsidiaries' systems interface) and the
testing of such systems and equipment, as so reprogrammed were completed by
September 1, 1999. The cost to the Company and its subsidiaries of such
reprogramming and testing and of the reasonably foreseeable consequences of year
2000 to the Company and its subsidiaries (including without limitation,
reprogramming errors and the failure of others' systems or equipment) will not
have a Material Adverse Effect. Except for the reprogramming referred to herein
as may be necessary, the computer and management information systems of the
Company and each of its subsidiaries are and, with ordinary course upgrading and
maintenance, will continue to be, sufficient to permit the Company and each
subsidiary to conduct its business without a Material Adverse Effect.
4. COVENANTS AND AGREEMENTS.
------------------------
a. Best Efforts. Each party shall use its best
efforts timely to satisfy each of the conditions to be satisfied by it as
provided in Sections 6 and 7 of this Agreement.
b. Form D. The Company agrees to file a Form D
with respect to the Securities as required under Regulation D and to provide a
copy thereof to each Buyer promptly after such filing. The Company shall, on or
before the Closing Date, take such action as the Company shall reasonably
determine is necessary to qualify the Securities for, or obtain exemption for
the Securities for, sale to the Buyers at the Closing pursuant to this Agreement
under applicable securities or "Blue Sky" laws of the states of the United
States, and shall provide evidence of any such action so taken to the Buyers on
or prior to the Closing Date.
c. Reporting Status. Until the earlier of (i)
six months after the date as of which the Investors (as that term is defined in
the Registration Rights Agreement) may sell all of the Securities without
restriction pursuant to Rule 144(k) promulgated under the 1933 Act (or successor
thereto) or (ii) the date which is six months after the date on which none of
the Securities are outstanding (the "Registration Period"), the Company shall
timely file all reports required to be filed with the SEC pursuant to the 1934
Act, and the Company shall not terminate its status as an issuer required to
file reports under the 1934 Act even if the 1934 Act or the rules and
regulations thereunder would otherwise permit such termination.
d. Use of Proceeds. The Company will use the
proceeds from the sale of the Securities for working capital and general
corporate purposes and shall not otherwise, directly or indirectly, use such
proceeds for any loan to or investment in any other corporation, partnership,
enterprise or other person (except in connection with its direct or indirect
subsidiaries) or for the repurchase, redemption or retirement of any capital
stock of the Company.
e. Financial Information. The Company agrees to
file all reports, schedules, forms, statements and other documents required to
be filed by it with the SEC pursuant to the reporting requirements of the 1934
Act. The financial statements of the Company will be prepared in accordance with
generally accepted accounting principles, consistently applied (except for any
12
<PAGE>
required changes in such principles), and will fairly present in all material
respects the consolidated financial position of the Company and its consolidated
subsidiaries and results of their operations and cash flows for the periods then
ended (subject, in the case of unaudited statements, to normal year-end audit
adjustments). The Company agrees to send the following to each Investor (as that
term is defined in the Registration Rights Agreement) during the Registration
Period: (i) within five (5) days after the filing thereof with the SEC, a copy
of its Annual Reports on Form 10-K or Form 10-KSB, as applicable, its Quarterly
Reports on Form 10-Q or Form 10-QSB, as applicable, any Current Reports on Form
8-K and any registration statements or amendments filed pursuant to the 1933
Act; (ii) within one (1) day after release thereof, copies of all press releases
issued by the Company or any of its subsidiaries; and (iii) copies of any
notices and other information made available or given to the shareholders of the
Company generally, contemporaneously with the making available or giving thereof
to the shareholders.
f. Reservation of Shares. The Company shall
take all action necessary to at all times have authorized, and reserved for the
purpose of issuance, no less than 2,000,000 shares of Common Stock to provide
for the issuance of the Warrant Shares upon exercise of the Warrants in
accordance with the terms of this Agreement and the Warrants.
g. Expenses. The Company agrees to pay on
demand all reasonable costs and expenses (including, without limitation,
reasonable fees and expenses of counsel to the Buyers) incurred by the Buyers in
connection with the enforcement of the Buyers' rights and/or the collection of
all amounts due under the Closing Agreements and all other related documents.
h. Additional Issuances of Securities.
----------------------------------
(a) Right of First Refusal. For a period
of 180 days from and after the Closing Date if the Company shall desire to issue
any Common Stock or any security convertible, exchangeable or exercisable for
Common Stock or any other right to acquire any Common Stock pursuant to Section
4(2) of the 1933 Act or an offering under Regulation D or Regulation S of the
1933 Act or in any other private placement (other than Exempt Issuances under
Section 4(h)(e) below), then the Company shall comply with the terms of this
Section 4(i).
(b) Notice Requirements. The Company
shall notify, or cause to be notified, the Buyers not less than ten (10)
business days nor more than twenty (20) business days prior to the time the
Company intends to consummate such issuance (the "Issuance Notice"). The
Issuance Notice shall set forth all of the terms of such proposed issuance.
(c) Exercise of Right of First Refusal.
The right of first refusal provided for in this Section 4(i) may be exercised by
the Buyers by delivery of a written notice to the Company (the "Exercise
Notice"), within ten (10) business days following receipt of the Issuance Notice
(the "Refusal Period"). The Exercise Notice shall state that the Buyers agree to
purchase all or any specified part of the proposed issuance of such Common Stock
or Convertible Securities on terms substantially equal to the terms set forth in
the Issuance Notice.
(d) Right to Issue Securities. After
expiration of the Refusal Period, if the provisions of this Section 4(h) have
been complied with in all respects by the Company and no Exercise Notice has
13
<PAGE>
been given, or if given, the Buyers have not agreed to purchase all of the
securities set forth in the Issuance Notice, the Company shall have the right
for forty-five (45) calendar days following the termination of the Refusal
Period to issue such securities, or any portion thereof not being purchased by
the Buyers, specified in the Issuance Notice on the terms described in the
Issuance Notice without further notice to the Buyers, but after such forty-five
(45) calendar days, no such issuance may be made without again giving notice to
the Buyers and complying with all of the requirements of this Section 4(h).
(e) Exempt Issuances. The following
issuances of Common Stock or Convertible Securities shall be "Exempt Issuances"
not subject to the right of purchase in this Section 4(h):
(a) any shares of the Company's Common
Stock issued pursuant to Approved Stock Plans (as defined in the
Warrants);
(b) any shares issued upon exercise of
options, warrants and other convertible securities outstanding as of
the date hereof; and
(c) shares issued to bonafide suppliers
or vendors in consideration for services or supplies rendered to the
Company or to a bank or other financial institution as an inducement to
enter into a financing arrangement with the Company in an amount not to
exceed 10% of the outstanding capital stock of the Company.
i. Disclosure. From and after the date hereof,
the Company will not provide to any Buyer any material non-public information
which, according to applicable law, rule or regulation should be disclosed
publicly by the Company but which has not been so disclosed.
j. Corporate Existence. So long as any Buyer
beneficially owns any Securities, the Company shall maintain its corporate
existence in good standing under the laws of the jurisdiction in which it is
incorporated and shall not sell all or substantially all of the Company's
assets, except in the event of a merger or consolidation or sale of all or
substantially all of the Company's assets, where either (i) no part of the
consideration consists of securities of the surviving or successor entity in
such transaction or (ii) the surviving or successor entity in such transaction
(A) assumes the Company's obligations hereunder and under the agreements and
instruments entered into or filed in connection herewith and (B) is a publicly
traded corporation whose common stock is registered pursuant to Section 12(b) or
(g) of the 1934 Act.
k. Solvency; Compliance with Law. The Company,
individually, and together with its subsidiaries on a consolidated basis (both
before and after giving effect to the transactions contemplated by this
Agreement) is solvent (i.e., its assets have a fair market value in excess of
the amount required to pay its probable liabilities on its existing debts as
they become absolute and matured) and currently the Company has no information
that would lead it to reasonably conclude that the Company would not have, nor
does it intend to take any action that would impair, its ability to pay its
debts from time to time incurred in connection therewith as such debts mature.
The Company will conduct its business in compliance with all applicable laws,
rules, ordinances and regulations of the jurisdictions in which it is conducting
business, including, without limitation, all applicable local, state and federal
environmental laws and regulations, the failure to comply with which would have
a Material Adverse Effect.
14
<PAGE>
l. Insurance. The Company shall maintain
liability, casualty and other insurance (subject to customary deductions and
retentions) with responsible insurance companies against such risk of the types
and in the amounts customarily maintained by companies of comparable size to the
Company.
m. No Integration. The Company will not conduct
any future offering that will be integrated with the issuance of the Securities
for purposes of the rules promulgated by the SEC.
n. Year 2000. The Company will take all actions
to assure that the Company's and its subsidiaries' computer systems and
equipment containing embedded microchips (including systems and equipment
supplied by others or with which the Company's or any of its subsidiaries'
systems interface) will operate and effectively process data including
datafields requiring references to dates on and after January 1, 2000 and the
testing of such systems and equipment.
5. TRANSFER AGENT INSTRUCTIONS.
---------------------------
The Company shall issue irrevocable instructions to its
transfer agent (in the form attached hereto as Exhibit D) to issue certificates,
or at a Buyer's request, to electronically issue if possible, such shares (e.g.,
through DWAC or DTC), registered in the name of each Buyer or its respective
nominee(s), for the Securities in such amounts as specified from time to time by
each Buyer to the Company (the "Irrevocable Transfer Agent Instructions"). Prior
to registration of the Common Stock and the Warrant Shares under the 1933 Act,
all such certificates shall bear the restrictive legend specified in Section
2(g) of this Agreement. The Company warrants that no instruction other than (i)
the Irrevocable Transfer Agent Instructions referred to in this Section 5, and
(ii) stop transfer instructions (a) to give effect to Section 2(f) hereof (in
the case of the Common Stock and the Warrant Shares prior to registration under
the 1933 Act), (b) to comply with any SEC or court order, or (c) to suspend use
of a then effective registration statement in the event an amendment or
supplement thereto is necessary, will be given by the Company to its transfer
agent and that the Securities shall otherwise be freely transferable on the
books and records of the Company as and to the extent provided in the Closing
Agreements. Nothing in this Section 5 shall affect in any way each Buyer's
obligations and agreement to comply with all applicable securities laws upon
resale of any of the Securities. If a Buyer provides the Company with an opinion
of counsel, reasonably satisfactory in form and substance to the Company, that
registration of a resale by such Buyer of any of the Securities is not required
under the 1933 Act, the Company shall permit the transfer, and, in the case of
the Securities, promptly instruct its transfer agent to issue one or more
certificates in such name and in such denominations as specified by such Buyer.
The Company acknowledges that a breach by it of its obligations hereunder will
cause irreparable harm to the Buyers by vitiating the intent and purpose of the
transaction contemplated hereby. Accordingly, the Company acknowledges that the
remedy at law for a breach of its obligations under this Section 5 will be
inadequate and agrees, in the event of a breach or threatened breach by the
Company of the provisions of this Section 5, that the Buyers shall be entitled,
in addition to all other available remedies, to an injunction restraining any
breach and requiring immediate issuance and transfer, without the necessity of
showing economic loss and without any bond or other security being required.
15
<PAGE>
6. CONDITIONS TO THE COMPANY'S OBLIGATION TO SELL.
----------------------------------------------
The obligation of the Company hereunder to issue and sell the
Units to each Buyer at the Closing is subject to the satisfaction, with respect
to each Buyer, at or before the Closing Date, of each of the following
conditions, provided that these conditions are for the Company's sole benefit
and may be waived by the Company at any time in its sole discretion:
a. Such Buyer shall have executed this
Agreement and the Registration Rights Agreement and delivered the same to the
Company.
b. Such Buyer shall have delivered to the
Company the Purchase Price for the Units being purchased by such Buyer at the
Closing by wire transfer of immediately available funds pursuant to the wire
instructions provided by the Company.
c. The representations and warranties of such
Buyer shall be true and correct in all material respects as of the date when
made and as of the Closing Date as though made at that time (except for
representations and warranties that speak as of a specific date), and such Buyer
shall have performed, satisfied and complied in all material respects with the
covenants, agreements and conditions required by this Agreement to be performed,
satisfied or complied with by such Buyer at or prior to the Closing Date.
d. The transactions contemplated hereby shall
not violate any law, regulation or order then in effect and applicable to such
Buyer or the Company.
7. CONDITIONS TO EACH BUYER'S OBLIGATION TO PURCHASE.
-------------------------------------------------
The obligation of each Buyer hereunder to purchase the Units
is subject to the satisfaction, at or before the Closing Date, of each of the
following conditions, provided that these conditions are for each Buyer's sole
benefit and may be waived by such Buyer at any time in its sole discretion:
a. The Company shall have executed this
Agreement, the Warrants and the Registration Rights Agreement, and delivered the
same to such Buyer.
b. Trading in the Common Stock or Warrant
Shares issuable upon the conversion of the Warrants shall not have been
suspended by the SEC.
c. The representations and warranties of the
Company shall be true and correct in all material respects (except to the extent
that any of such representations and warranties is already qualified as to
materiality in Section 3 above, in which case such representations and
warranties shall be true and correct without further qualification) as of the
date when made and as of the Closing Date as though made at that time (except
for representations and warranties that speak as of a specific date) and the
16
<PAGE>
Company shall have performed, satisfied and complied in all material respects
with the covenants, agreements and conditions required by this Agreement to be
performed, satisfied or complied with by the Company at or prior to the Closing
Date. Such Buyer shall have received a certificate, executed by the Chief
Executive Officer of the Company, dated as of the Closing Date, to the foregoing
effect and as to such other matters as may be reasonably requested by such Buyer
including, without limitation, an update as of the Closing Date regarding the
representation contained in Section 3(c) above.
d. Each Buyer shall have received the opinion
of the Company's counsel dated as of the Closing Date, in form, scope and
substance reasonably satisfactory to such Buyer and in substantially the form of
Exhibit E attached hereto.
e. The Company shall have executed and
delivered to such Buyer the Stock Certificates for the Common Stock being
purchased by such Buyer at the Closing.
f. The Company shall have executed and
delivered to each Buyer the Warrants being purchased by such Buyer at the
Closing.
g. As of the Closing Date, the Company shall
have reserved out of its authorized and unissued Common Stock, solely for the
purpose of effecting the exercise of the Warrants, 2,000,000 shares of Common
Stock.
h. The Board of Directors of the Company shall
have adopted the resolutions in substantially the form of Exhibit F attached
hereto.
i. The Irrevocable Transfer Agent Instructions,
in the form of Exhibit D attached hereto, shall have been delivered to and
acknowledged in writing by the Company's transfer agent.
j. The transactions contemplated hereby shall
not violate any law, regulation or order then in effect and applicable to Buyers
or the Company.
k. There shall not have occurred any material
adverse change in the business condition (financial or otherwise), or results of
operations of the Company since the date of this Agreement.
8. INDEMNIFICATION.
---------------
In consideration of each Buyer's execution and delivery of
this Agreement and acquiring the Securities hereunder and in addition to all of
the Company's other obligations under this Agreement, the Company shall defend,
protect, indemnify and hold harmless each Buyer and each other holder of
Securities and all of their officers, directors, employees and agents
(including, without limitation, those retained in connection with the
transactions contemplated by this Agreement) (collectively, the "Buyer
Indemnitees") from and against any and all actions, causes of action, suits,
claims, losses, costs, penalties, fees, liabilities and damages, and expenses in
connection therewith (irrespective of whether any such Buyer Indemnitee is a
party to the action for which indemnification hereunder is sought), and
including reasonable attorneys' fees and disbursements (the "Buyer Indemnified
17
<PAGE>
Liabilities"), incurred by any Buyer Indemnitee (and shall advance the same) as
a result of, or arising out of, or relating to (a) subject to Section 9(i), any
misrepresentation or breach of any representation or warranty made by the
Company in the Closing Agreements or any other certificate, instrument or
document contemplated hereby or thereby, (b) any breach of any covenant,
agreement or obligation of the Company contained in the Closing Agreements or
any other certificate, instrument or document contemplated hereby or thereby, or
(c) any transaction financed or to be financed in whole or in part, directly or
indirectly, with the proceeds of the issuance of the Units or the status of such
Buyer or holder of any of the Securities as an investor in the Company. To the
extent that the foregoing undertaking by the Company may be unenforceable for
any reason, the Company shall make the maximum contribution to the payment and
satisfaction of each of the Buyer Indemnified Liabilities which is permissible
under applicable law.
9. GOVERNING LAW; MISCELLANEOUS.
----------------------------
a. Governing Law. This Agreement shall be
governed by and interpreted in accordance with the laws of the State of New York
without regard to the principles of conflict of laws.
b. Counterparts. This Agreement may be executed
in two or more identical counterparts, all of which shall be considered one and
the same agreement and shall become effective when counterparts have been signed
by each party and delivered to the other party. In the event any signature page
is delivered by facsimile transmission, the party using such means of delivery
shall cause four (4) additional original executed signature pages to be
physically delivered to the other party within five (5) days of the execution
and delivery hereof.
c. Headings. The headings of this Agreement are
for convenience of reference and shall not form part of, or affect the
interpretation of, this Agreement.
d. Severability. If any provision of this
Agreement shall be invalid or unenforceable in any jurisdiction, such invalidity
or unenforceability shall not affect the validity or enforceability of the
remainder of this Agreement in that jurisdiction or the validity or
enforceability of any provision of this Agreement in any other jurisdiction.
e. Entire Agreement; Amendments. This Agreement
supersedes all other prior oral or written agreements between the Buyers, the
Company, their affiliates and persons acting on their behalf with respect to the
matters discussed herein, and this Agreement and the instruments and documents
referenced herein contain the entire understanding of the parties with respect
to the matters covered herein and therein and, except as specifically set forth
herein or therein, neither the Company nor any Buyer makes any representation,
warranty, covenant or undertaking with respect to such matters. No provision of
this Agreement may be waived or amended other than by an instrument in writing
signed by the party to be charged with enforcement.
f. Notices. Any notices, consents, waivers or
other communications required or permitted to be given under the terms of this
Agreement shall be in writing and will be deemed to have been delivered (i) upon
receipt, when delivered personally; (ii) upon receipt, when sent by facsimile,
provided a copy is mailed by U.S. certified mail, return receipt requested;
18
<PAGE>
(iii) three (3) days after being sent by U.S. certified mail, return receipt
requested, or (iv) one (1) day after deposit with a nationally recognized
overnight delivery service, in each case properly addressed to the party to
receive the same. The addresses and facsimile numbers for such communications
shall be:
if to the Company:
Capita Research Group, Inc.
591 Skippack Pike
Suite 300
Blue Bell, Pennsylvania 19422
Telephone: 215-619-7777
Facsimile: 215-619-0775
Attention: Chief Financial Officer
with a copy to:
Andrew J. Beck, Esq.
Torys
237 Park Avenue
New York, New York 10017
Facsimile: 212-682-0200
if to the Transfer Agent:
Nevada Agency and Trust Company
50 West Liberty Street, Suite 880
Reno, Nevada 89501
Telephone: 775-322-0626
Facsimile: 775-322-5623
Attention: Compliance Department
If to a Buyer, to its address and facsimile number on the
Schedule of Buyers, with copies to such Buyer's counsel as set forth on the
Schedule of Buyers. Each party shall provide five (5) days' prior written notice
to the other party of any change in address or facsimile number.
g. Successors and Assigns. This Agreement shall
be binding upon and inure to the benefit of the parties and their respective
successors and assigns, including any purchasers of the Units. The Company shall
not assign this Agreement or any rights or obligations hereunder without the
prior written consent of the Buyers. A Buyer may assign some or all of its
rights hereunder without the consent of the Company, provided, however, that (i)
any such assignment shall not release such Buyer from its obligations hereunder
unless such obligations are assumed by such assignee and the Company has
consented to such assignment and assumption, and (ii) no Buyer may assign its
rights hereunder in a manner that would cause the offering of Securities
hereunder to be required to be registered under the 1933 Act.
h. No Third Party Beneficiaries. This Agreement
is intended for the benefit of the parties hereto and their respective permitted
successors and assigns, and is not for the benefit of, nor may any provision
hereof be enforced by, any other person.
19
<PAGE>
i. Survival. The representations and warranties
of the Company and the Buyers contained in Sections 3 and 2, respectively, shall
survive the Closing until eighteen months after the Closing Date. The agreements
and covenants set forth in Sections 4, 5 and 9, and the indemnification
provisions set forth in Section 8, shall survive the Closing. Each Buyer shall
be responsible only for its own representations, warranties, agreements and
covenants hereunder.
j. Publicity. The Company and each Buyer shall
have the right to approve before issuance any press releases or any other public
statements with respect to the transactions contemplated hereby; provided,
however, that the Company shall be entitled, without the prior approval of any
Buyer, to make any press release or other public disclosure with respect to such
transactions as is required by applicable law and regulations (although each
Buyer shall be consulted by the Company in connection with any such press
release or other public disclosure prior to its release and shall be provided
with a copy thereof), but only to the extent required by such law or regulation.
k.
Further Assurances. Each party shall do and
perform, or cause to be done and performed, all such further acts and things,
and shall execute and deliver all such other agreements, certificates,
instruments and documents, as the other party may reasonably request in order to
carry out the intent and accomplish the purposes of this Agreement and the
consummation of the transactions contemplated hereby.
l. No Strict Construction. The language used in
this Agreement will be deemed to be the language chosen by the parties to
express their mutual intent, and no rules of strict construction will be applied
against any party.
m. Equitable Relief. The Company recognizes
that in the event that it fails to perform, observe, or discharge any or all of
its obligations under this Agreement, any remedy at law may prove to be
inadequate relief to the Buyers. The Company therefore agrees that the Buyers
shall be entitled to temporary and permanent injunctive relief in any such case
without the necessity of proving actual damages.
n. Consent to Jurisdiction. The parties hereto
expressly submit themselves to the exclusive jurisdiction of the state and
federal courts of New York in any action or proceeding relating to this
Agreement or any of the other documents contemplated hereby or any of the
transactions contemplated hereby or thereby. Each party hereby irrevocably
waives, to the fullest extent permitted by law, any objection that it may now or
hereafter have to the laying of venue of any such action, suit or proceeding
brought in such a court and any claim that any such action, suit or proceeding
brought in such a court has been brought in an inconvenient forum. The parties
hereto irrevocably and unconditionally consent to the service of process of any
of the aforementioned courts in any such action, suit or proceeding by the
mailing of copies thereof by registered or certified mail, postage prepaid, at
their respective addresses set forth or provided for herein, such service to
become effective 10 days after such mailing. Nothing herein shall affect the
right of any party to serve process in any manner permitted by law or to
commence legal proceedings or otherwise proceed against the other parties in any
other jurisdiction.
20
<PAGE>
IN WITNESS WHEREOF, the Buyer and the Company have caused this
Securities Purchase Agreement to be duly executed as of the date first written
above.
COMPANY:
CAPITA RESEARCH GROUP, INC.
By: /s/ David B. Hunter
-------------------
Name: David B. Hunter
Its: President
21
<PAGE>
BUYERS:
SOUNDSHORE HOLDINGS LTD.
By: /s/ Anthony Giordano
--------------------
Name: Anthony Giordano
Its: Director
SOUNDSHORE OPPORTUNITY HOLDING FUND LTD.
By: /s/ Anthony Giordano
--------------------
Name: Anthony Giordano
Its: Director
SOUNDSHORE STRATEGIC HOLDING FUND LTD.
By: /s/ Anthony Giordano
--------------------
Name: Anthony Giordano
Its: Director
22
<PAGE>
<TABLE>
SCHEDULE OF BUYERS
<CAPTION>
<S> <C> <C> <C>
Investor Name, Address and Number of shares of Number of Investor's Advisor and
Facsimile Number Common Stock Warrants Lega; Counsel Address
---------------- ------------ -------- ---------------------
SoundShore Holdings Ltd. (Bermuda) 666,750 666,750 (A Warrants) Eleazer Klein, Esq.
666,750 (B Warrants) New York, NY 10022
c/o AIG International Management Fax: (212) 593-5955
Company, Inc.
1281 East Main Street
Stamford, Connecticut 06902
Fax: (203) 324-8488
SoundShore Strategic 118,750 118,750 (A Warrants) Eleazer Klein, Esq.
Holding Fund Ltd. (Bermuda) Schulte Roth & Zabel LLP
118,750 (B Warrants) New York, NY 10022
c/o AIG International Management Fax: (212) 593-5955
Company, Inc.
1281 East Main Street
Stamford, Connecticut 06902
Fax: (203) 324-8488
</TABLE>
Exhibit 10(g)
SECURITIES PURCHASE AGREEMENT
SECURITIES PURCHASE AGREEMENT (the "Agreement"), dated as of
January 21, 2000, by and among Capita Research Group, Inc., a Nevada
corporation, with headquarters located at 591 Skippack Pike, Suite 300, Blue
Bell, Pennsylvania 19422 (the "Company"), and the investors listed on the
Schedule of Buyers attached hereto (individually, a "Buyer" and collectively,
the "Buyers").
WHEREAS:
A. The Company and the Buyers are executing and delivering
this Agreement in reliance upon the exemption from securities registration
afforded by Rule 506 of Regulation D ("Regulation D") as promulgated by the
United States Securities and Exchange Commission (the "SEC") under the
Securities Act of 1933, as amended (the "1933 Act");
B. The Company has authorized the issuance of up to 260,000 of
the Company's units (the "Units"), each unit consisting of (i) one share of the
Company's common stock, $.001 par value per share (the "Common Stock"), (ii) one
of the Company's A Common Stock Purchase Warrants to purchase one share of the
Company's Common Stock exercisable at a purchase price of $.50 per share of
Common Stock (the "A Warrants"), in the form attached hereto as Exhibit A, and
(iii) one of the Company's B Common Stock Purchase Warrants to purchase one
share of the Company's Common Stock exercisable at a purchase price of $1.00 per
share of Common Stock, in the form attached hereto as Exhibit B (the "B
Warrants", and together with the A Warrants, the "Warrants") (such shares of
Common Stock issued upon exercise of the Warrants are hereinafter referred to as
the "Warrant Shares", and together with the Units, Common Stock and Warrants,
the "Securities");
C. The Buyers wish to purchase, upon the terms and conditions
stated in this Agreement, an aggregate of $130,000 of Units in the respective
amounts set forth opposite each Buyer's name on the Schedule of Buyers; and
D. Contemporaneously with the execution and delivery of this
Agreement, the parties hereto are executing and delivering a Registration Rights
Agreement in the form attached hereto as Exhibit C (the "Registration Rights
Agreement") pursuant to which the Company has agreed to provide certain
registration rights under the 1933 Act and the rules and regulations promulgated
thereunder, and applicable state securities laws.
NOW, THEREFORE, the Company and the Buyers hereby agree as
follows:
1. PURCHASE AND SALE OF UNITS
a. Purchase of Units. Subject to the
satisfaction (or waiver) of the conditions set forth in Sections 6 and 7 below,
the Company shall issue and sell to the Buyers and the Buyers shall purchase
from the Company an aggregate of 260,000 Units in the respective amounts set
forth opposite each Buyer's name on the Schedule of Buyers at the Closing (the
"Closing"). The per unit purchase price (the "Purchase Price") of the Units
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shall be $.50 or an aggregate purchase price of $130,000. On the Closing Date
(as defined below), the Company shall issue and deliver to each Buyer (i) a
stock certificate(s) representing such number of the shares of Common Stock and
(ii) certificates representing such number of A Warrants and B Warrants, which
such Buyer is then purchasing (as indicated opposite such Buyer's name on the
Schedule of Buyers), duly executed on behalf of the Company and registered in
the name of such Buyer or its designee (the "Stock Certificates").
b. Closing Date. The date and time of the
Closing (the "Closing Date") shall be 1:00 p.m. Eastern Standard Time on January
21, 2000, subject to notification of satisfaction (or waiver) of the conditions
to the Closing set forth in Sections 6 and 7 below (or such later date as is
mutually agreed to by the Company and the Buyers). The Closing shall occur on
the Closing Date at the offices of Torys, 237 Park Avenue, New York, New York
10017.
c. Form of Payment. On the Closing Date, each
Buyer shall pay the Purchase Price to the Company for the Units to be issued and
sold to such Buyer at the Closing, by wire transfer of immediately available
funds in accordance with the Company's written wire instructions provided in
writing to the Buyers prior to the Closing Date.
2. BUYER'S REPRESENTATIONS AND WARRANTIES.
--------------------------------------
Each Buyer represents and warrants with respect to only itself
that:
a. Investment Purpose. Such Buyer (i) is
purchasing the Units consisting of Common Stock and Warrants and (ii) upon
exercise of the Warrants, will acquire the Warrant Shares, then issuable for its
own account for investment only and not with a present view towards or for
resale in connection with, the public sale or distribution thereof, except
pursuant to sales registered or exempted under the 1933 Act; provided, however,
that by making the representations herein, such Buyer does not agree to hold any
Securities for any minimum or other specific term and reserves the right to
dispose of the Securities at any time in accordance with or pursuant to a
registration statement or an exemption under the 1933 Act.
b. Accredited Investor Status. Such Buyer is an
"accredited investor" as that term is defined in Rule 501(a) of Regulation D.
c. Reliance on Exemptions. Such Buyer
understands that the Units are being offered and sold to it in reliance on
specific exemptions from the registration requirements of United States federal
and state securities laws and that the Company is relying in part upon the truth
and accuracy of, and such Buyer's compliance with, the representations,
warranties, agreements, acknowledgments and understandings of such Buyer set
forth herein in order to determine the availability of such exemptions and the
eligibility of such Buyer to acquire the Units.
d. Information. Such Buyer and its advisors, if
any, have been furnished with all materials relating to the business, finances
and operations of the Company and materials relating to the offer and sale of
the Units which have been requested by such Buyer. Such Buyer and its advisors,
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if any, have been afforded the opportunity to ask questions of the Company.
Neither such inquiries nor any other due diligence investigations conducted by
such Buyer or its advisors, if any, or its representatives shall modify, amend
or affect such Buyer's right to rely on the Company's representations and
warranties contained in Section 3 below.
e. No Governmental Review. Such Buyer
understands that no United States federal or state agency or any other
government or governmental agency has passed on or made any recommendation or
endorsement of the Units or the fairness or suitability of the investment in the
Securities nor have such authorities passed upon or endorsed the merits of the
offering of the Units.
f. Transfer or Resale. Such Buyer understands
that except as provided in the Registration Rights Agreement: (i) the Securities
have not been and are not being registered under the 1933 Act or any state
securities laws, and may not be offered for sale, sold, assigned or transferred
unless (A) subsequently registered thereunder, (B) such Buyer shall have
delivered to the Company an opinion of counsel, in a generally acceptable form,
to the effect that such Securities to be sold, assigned or transferred may be
sold, assigned or transferred pursuant to an exemption from such registration,
or (C) such securities can be sold, assigned or transferred pursuant to Rule 144
promulgated under the 1933 Act (or a successor rule thereto) ("Rule 144"); (ii)
any sale of such securities made in reliance on Rule 144 may be made only in
accordance with the terms of Rule 144 and further, if Rule 144 is not
applicable, any resale of such securities under circumstances in which the
seller (or the person through whom the sale is made) may be deemed to be an
underwriter (as that term is defined in the 1933 Act) may require compliance
with some other exemption under the 1933 Act or the rules and regulations of the
SEC thereunder; and (iii) neither the Company nor any other person is under any
obligation to register such securities under the 1933 Act or any state
securities laws or to comply with the terms and conditions of any exemption
thereunder.
g. Legends. Such Buyer understands that the
certificates or other instruments representing the Warrants and, until such time
as the sale of the Common Stock or Warrant Shares have been registered under the
1933 Act as contemplated by the Registration Rights Agreement, the stock
certificates or other documents representing the Common Stock and Warrant Shares
except as set forth below, shall bear a restrictive legend in substantially the
following form (and a stop-transfer order may be placed against transfer of such
certificates):
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE
SECURITIES LAWS. THE SECURITIES HAVE BEEN ACQUIRED FOR INVESTMENT AND
MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED IN THE
ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER
THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES
LAWS, OR AN OPINION OF COUNSEL, IN A GENERALLY ACCEPTABLE FORM, THAT
REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR APPLICABLE STATE
SECURITIES LAWS OR UNLESS SOLD PURSUANT TO RULE 144 UNDER SAID ACT.
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The legend set forth above shall be removed and the Company shall issue a
certificate without such legend to the holder of any Securities upon which it is
stamped, if (i) any such Securities are registered for sale under the 1933 Act,
(ii) in connection with a sale transaction, such holder provides the Company
with an opinion of counsel, in a generally acceptable form, to the effect that a
public sale, assignment or transfer of any of the Securities may be made without
registration under the 1933 Act, or (iii) any of the Securities can be sold
pursuant to Rule 144 without any restriction as to the number of securities
acquired as of a particular date that can then be immediately sold. Each Buyer
acknowledges, covenants and agrees to sell any of the Securities represented by
a certificate(s) from which the legend has been removed, only pursuant to (i) a
registration statement effective under the 1933 Act, or (ii) advice of counsel
that such sale is exempt from registration required by Section 5 of the 1933
Act. In the event the above legend is removed from any of the Securities, the
Company may, upon reasonable advance notice to the holder, require that the
above legend be placed on any of the Securities that cannot then be sold
pursuant to an effective registration statement or Rule 144(k) under the 1933
Act (or any successor rule thereto).
h. Authorization; Enforcement. This Agreement
has been duly and validly authorized, executed and delivered on behalf of such
Buyer and is a valid and binding agreement of such Buyer enforceable in
accordance with its terms, subject as to enforceability to general principles of
equity and to applicable bankruptcy, insolvency, reorganization, moratorium,
liquidation and other similar laws relating to, or affecting generally, the
enforcement of applicable creditors' rights and remedies.
i. Residency. Such Buyer is a resident of that
country specified in the Schedule of Buyers.
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
---------------------------------------------
The Company represents and warrants to each of the
Buyers that:
a. Organization and Qualification. The Company
and its subsidiaries are corporations duly incorporated and validly existing in
good standing under the laws of the jurisdiction in which they are incorporated,
and have the requisite corporate power to own their properties and to carry on
their business as now being conducted. Each of the Company and its subsidiaries
is duly qualified as a foreign corporation to do business and is in good
standing in every jurisdiction in which the nature of the business conducted by
it makes such qualification necessary, except to the extent that the failure to
be so qualified or be in good standing would not have a Material Adverse Effect.
"Material Adverse Effect" means any material adverse effect on (i) the business,
properties, operations, condition (financial or otherwise), or results of
operations of the Company and its subsidiaries, taken as a whole, (ii) on the
ability of the Company to perform its obligations hereunder, under the
Registration Rights Agreement or under the other agreements or instruments to be
entered into or filed in connection herewith or therewith, or (iii) the
Securities.
b. Authorization; Enforcement; Compliance with
Other Instruments. (i) The Company has the requisite corporate power and
authority to enter into and perform its obligations under this Agreement, the
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Warrants and the Registration Rights Agreement, (collectively, the "Closing
Agreements") to issue, sell and perform its obligations with respect to the
Units and Warrant Shares in accordance with the terms hereof and the Warrants
and to issue the Warrant Shares upon exercise of the Warrants, in accordance
with the terms and conditions of the Warrants, (ii) the execution and delivery
of the Closing Agreements by the Company and the consummation by it of the
transactions contemplated hereby and thereby, including, without limitation, the
issuance of the Common Stock and the Warrants and the reservation for issuance
and the issuance of the Warrant Shares upon exercise of the Warrants have been
duly authorized by the Company's Board of Directors and no further consent or
authorization is required by the Company, its Board of Directors or its
shareholders, (iii) the Closing Agreements have been duly executed and delivered
by the Company, and (iv) the Closing Agreements constitute the legal, valid and
binding obligations of the Company enforceable against the Company in accordance
with their terms, except as such enforceability may be limited by general
principles of equity or applicable bankruptcy, insolvency, reorganization,
moratorium, liquidation or similar laws relating to, or affecting generally, the
enforcement of creditors' rights and remedies.
c. Capitalization and Indebtedness. As of the
date hereof, the authorized capital stock of the Company consists of 100,000,000
shares of Common Stock, of which as of the date hereof, 21,295,946 shares are
issued and outstanding and no shares of Preferred Stock. All of such outstanding
shares have been validly issued and are fully paid and nonassessable. No shares
of Common Stock are subject to preemptive rights or any other similar rights or
any liens or encumbrances suffered or permitted by the Company. Except as
disclosed in Schedule 3(c), as of the date hereof, (i) there are no outstanding
options, warrants, scrip, rights to subscribe to, calls or commitments of any
character whatsoever relating to, or securities or rights convertible into, any
shares of capital stock of the Company or any of its subsidiaries, or contracts,
commitments, understandings or arrangements by which the Company or any of its
subsidiaries is or may become bound to issue additional shares of capital stock
of the Company or any of its subsidiaries or options, warrants, scrip, rights to
subscribe to, calls or commitments of any character whatsoever relating to, or
securities or rights convertible into, any shares of capital stock of the
Company or any of its subsidiaries, (ii) there are no outstanding debt
securities, notes, credit agreements, or other agreements, documents or
instruments evidencing indebtedness of the Company or any of its subsidiaries or
by which the Company or any of its subsidiaries is or may become bound and (iii)
there are no agreements or arrangements under which the Company or any of its
subsidiaries is obligated to register the sale of any of their securities under
the 1933 Act (except the Registration Rights Agreement). There are no securities
or instruments containing anti-dilution or similar provisions that will be
triggered by the issuance of any of the Securities as described in this
Agreement. The Company has furnished to the Buyer true and correct copies of the
Company's Certificate of Incorporation as amended and as in effect on the date
hereof (the "Certificate of Incorporation"), and the Company's By-laws, as in
effect on the date hereof (the "By-laws"), and the terms of all securities
convertible into or exercisable for Common Stock and the material rights of the
holders thereof in respect thereto.
d. Issuance of Securities. The Securities are
duly authorized and, upon issuance in accordance with the terms hereof shall be
(i) validly issued, fully paid and non-assessable, (ii) free from all taxes,
liens and charges with respect to the issue thereof and are not and shall not be
subject to preemptive rights or other similar rights of stockholders of the
Company. Seven hundred eighty thousand (780,000) shares of Common Stock have
been duly authorized and reserved for issuance in connection with the Units.
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e. No Conflicts. The execution, delivery and
performance of the Closing Agreements by the Company and the consummation by the
Company of the transactions contemplated hereby and thereby (including, without
limitation, the issuance of the Securities) will not (i) result in a violation
of the Certificate of Incorporation or By-laws or (ii) except as disclosed in
Schedule 3(e), violate or conflict with, or result in a breach of any provision
of, or constitute a default (or an event which with notice or lapse of time or
both would become a default) under, or give to others any rights of termination,
amendment, acceleration or cancellation of, any material agreement, indenture or
instrument to which the Company or any of its subsidiaries is a party, or result
in a violation of any law, rule, regulation, order, judgment or decree
(including federal and state securities laws and regulations and the rules and
regulations of the principal market or exchange on which the Common Stock is
traded or listed) applicable to the Company or any of its subsidiaries or by
which any property or asset of the Company or any of its subsidiaries is bound
or affected. Neither the Company nor its subsidiaries are in violation of any
term of or in default under its Certificate of Incorporation or By-laws or their
organizational charter or by-laws, respectively, or in violation of any term of
or in default under any contract, agreement, mortgage, indebtedness, indenture,
instrument, judgment, decree or order or any statute, rule or regulation
applicable to the Company or its subsidiaries, except for violations or defaults
which would not, individually or in the aggregate, have a Material Adverse
Effect. The business of the Company and its subsidiaries is not being conducted
in violation of any law, ordinance or regulation of any governmental entity,
which violations, individually or in the aggregate, would have a Material
Adverse Effect. Except as specifically contemplated by this Agreement and as
required under the 1933 Act, the Company is not required to obtain any consent,
authorization or order of, or make any filing or registration with, any court or
governmental or regulatory or self-regulatory agency in order for it to execute,
deliver or perform any of its obligations under or contemplated by this
Agreement, the Registration Rights Agreement or the Warrants in accordance with
the terms hereof or thereof. Except as disclosed in Schedule 3(e), all consents,
authorizations, orders, filings and registrations which the Company is required
to obtain pursuant to the preceding sentence have been obtained or effected on
or prior to the date hereof. The Company and its subsidiaries are unaware of any
facts or circumstances which might give rise to any of the foregoing.
f. SEC Documents; Financial Statements. Since
December 31, 1997, the Company has filed all reports, schedules, forms,
statements and other documents required to be filed by it with the SEC pursuant
to the reporting requirements of the Securities Exchange Act of 1934, as amended
(the "1934 Act") (all of the foregoing filed prior to the date hereof and all
exhibits included therein and financial statements and schedules thereto and
documents incorporated by reference therein being hereinafter referred to as the
"SEC Documents"). The Company has delivered or made available to each Buyer or
its representative true and complete copies of the SEC Documents and agrees to
deliver or make available to each Buyer or its representatives true and complete
copies of any additional SEC Documents, upon request. As of their respective
dates, the SEC Documents complied in all material respects with the requirements
of the 1934 Act and the rules and regulations of the SEC promulgated thereunder
applicable to the SEC Documents, and none of the SEC Documents, at the time they
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were filed with the SEC, contained any untrue statement of a material fact or
omitted to state a material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under which
they were made, not misleading. As of their respective dates, the financial
statements of the Company included in the SEC Documents complied as to form in
all material respects with applicable accounting requirements and the published
rules and regulations of the SEC with respect thereto. Such financial statements
have been prepared in accordance with generally accepted accounting principles,
consistently applied during the periods involved (except (i) as may be otherwise
indicated in such financial statements or the notes thereto, or (ii) in the case
of unaudited interim statements, to the extent they may exclude footnotes or may
be condensed or summary statements) and fairly present in all material respects
the financial position of the Company as of the dates thereof and the results of
its operations and cash flows for the periods then ended (subject, in the case
of unaudited statements, to normal year-end audit adjustments).
g. Absence of Certain Changes. Except as
expressly set forth in Schedule 3(g) or as otherwise disclosed in SEC Documents
filed after December 31, 1998, since December 31, 1998, there has been no
material adverse change and no material adverse development in the business,
properties, operations, condition (financial or otherwise), or results of
operations of the Company and its subsidiaries taken as a whole. The Company has
not taken any steps, and does not currently expect to take any steps, to seek
protection pursuant to any bankruptcy law nor does the Company or its
subsidiaries have any knowledge or reason to believe that its creditors intend
to initiate involuntary bankruptcy proceedings.
h. Absence of Litigation. Except as set forth
in Schedule 3(h), there is no action, suit, proceeding, inquiry or investigation
before or by any court, public board, government agency, self-regulatory
organization or body pending or, to the knowledge of the Company or any of its
subsidiaries, threatened against or affecting the Company or its subsidiaries or
their respective directors or officers, or the Common Stock, wherein an
unfavorable decision, ruling or finding would individually or in the aggregate
have a Material Adverse Effect.
i. Acknowledgment Regarding Buyers' Purchase of
the Securities. The Company acknowledges and agrees that each of the Buyers is
acting solely in the capacity of arm's length purchaser with respect to this
Agreement and the transactions contemplated hereby. The Company further
acknowledges that each Buyer is not acting as a financial advisor or fiduciary
of the Company (or in any similar capacity) with respect to this Agreement and
the transactions contemplated hereby and any advice given by any of the Buyers
or any of their respective representatives or agents in connection with this
Agreement and the transactions contemplated hereby is merely incidental to such
Buyer's purchase of the Securities. The Company further represents to each Buyer
that the Company's decision to enter into this Agreement has been based solely
on the independent evaluation by the Company and its representatives.
j. No General Solicitation. Neither the
Company, nor any of its affiliates, nor any person acting on its or their
behalf, has engaged in any form of general solicitation or general advertising
(within the meaning of Regulation D under the 1933 Act) in connection with the
offer or sale of any of the Securities offered hereby.
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k. No Integrated Offering. Neither the Company,
nor any of its affiliates, nor any person acting on its or their behalf has,
directly or indirectly, made any offers or sales of any security or solicited
any offers to buy any security, under circumstances that would require
registration of any of the Securities under the 1933 Act or cause the offering
of any of the Securities to be integrated with prior offerings by the Company
for purposes of the 1933 Act or any applicable shareholder approval provisions.
l. Employment Matters; ERISA Matters. The
Company and its subsidiaries are in compliance with all federal, state, local
and foreign laws and regulations respecting employment and employment practices,
terms and conditions of employment and wages and hours except where failure to
be in compliance would not have a Material Adverse Effect. There are no pending
investigations involving the Company or any of its subsidiaries by the U.S.
Department of Labor or any other governmental agency responsible for the
enforcement of such federal, state, local or foreign laws and regulations. There
is no unfair labor practice charge or complaint against the Company or any of
its subsidiaries pending before the National Labor Relations Board or any
strike, picketing, boycott, dispute, slowdown or stoppage pending or, to the
Company's knowledge, threatened against or involving the Company or any of its
subsidiaries. No representation question exists respecting the employees of the
Company or any of its subsidiaries, and no collective bargaining agreement or
modification thereof is currently being negotiated by the Company or any of its
subsidiaries. No grievance or arbitration proceeding is pending under any
expired or existing collective bargaining agreements of the Company or any of
its subsidiaries. No material labor dispute with the employees of the Company or
any of its subsidiaries exists or, to the knowledge of the Company, is imminent.
The Company has no employee benefit plans subject to the Employee Retirement
Income Security Act of 1974, as amended.
m. Intellectual Property Rights. The Company
and its subsidiaries own or possess the requisite rights or licenses to use all
trademarks, trade names, service marks, service mark registrations, service
names, patents, patent rights, copyrights, inventions, licenses, approvals,
governmental authorizations, trade secrets and rights (collectively
"Intellectual Property Rights") necessary to conduct their respective businesses
as now conducted and as presently contemplated to be operated in the future,
except where the failure to possess the same would not have a Material Adverse
Effect. None of the Intellectual Property Rights or other material intellectual
property rights owned or possessed by the Company have expired or terminated, or
are expected to expire or terminate in the near future. The Company and its
subsidiaries do not have any knowledge of any event, fact or circumstance
relating to (i) any infringement by the Company or its subsidiaries of any
trademarks, trade names, service marks, service mark registrations, service
names, patents, patent rights, copyrights, inventions, licenses, approvals,
governmental authorizations, trade secrets or other similar rights of others, or
of any such development of similar or identical trade secrets or technical
information by others or (ii) except as set forth on Schedule 3(m), any person
or entity now infringing any Intellectual Property Rights or other similar
rights or any such development of similar or identical trade secrets or
technical information owned or used by the Company or any of its subsidiaries
and, except as set forth on Schedule 3(m), there is no claim, action or
proceeding being made or brought against, or to the Company's knowledge, being
threatened against, the Company or its subsidiaries regarding any trademarks,
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trade names, service marks, service mark registrations, service names, patents,
patent rights, copyrights, inventions, licenses, approvals, governmental
authorizations, trade secrets or other similar rights of others, or of any such
development of similar or identical trade secrets or technical information by
others or any person or entity now infringing any Intellectual Property Rights
or other similar rights or any such development of similar or identical trade
secrets or other infringement; and the Company and its subsidiaries are unaware
of any facts or circumstances which might give rise to any of the foregoing. The
Company and its subsidiaries have taken reasonable security measures to protect
the secrecy, confidentiality and value of all of their Intellectual Property
Rights.
n. Environmental Laws. The Company and its subsidiaries (A)
are in compliance with any and all Environmental Laws, (B) have received all
permits, licenses or other approvals required of them under applicable
Environmental Laws to conduct their respective businesses, and (C) are in
compliance with all terms and conditions of any such permit, license or
approval, except where the failure to be in compliance or to receive such
permits, licenses or approvals would not have a Material Adverse Effect. With
respect to the Company and/or its subsidiaries (A) there are no past or present
releases of any material into the environment, actions, activities,
circumstances, conditions, events, incidents, or contractual obligations which
may give rise to any material common law environmental liability or any material
liability under any Environmental Law and (B) neither the Company nor any of its
subsidiaries has received any notice with respect to the foregoing, nor is any
action pending or to the Company's knowledge, threatened in connection with the
foregoing. The term "Environmental Laws" means all federal, state, local or
foreign laws relating to pollution or protection of human health or the
environment (including, without limitation, ambient air, surface water,
groundwater, land surface or subsurface strata), including, without limitation,
laws relating to emissions, discharges, releases or threatened releases of
chemicals, pollutants, contaminants, or toxic or hazardous substances or wastes
(collectively, "Hazardous Materials") into the environment, or otherwise
relating to the manufacture, processing, distribution, use, treatment, storage,
disposal, transport or handling of Hazardous Materials, as well as all
authorizations, codes, decrees, demands or demand letters, injunctions,
judgments, licenses, notices or notice letters, orders, permits, plans or
regulations issued, entered, promulgated or approved thereunder.
o. Title. The Company and its subsidiaries have
good and marketable title in fee simple to all real property and good and
marketable title to all personal property owned by them which is material to the
business of the Company and its subsidiaries, in each case free and clear of all
liens, encumbrances and defects except such as do not materially affect the
value of such property and do not materially interfere with the use made and
proposed to be made of such property by the Company and its subsidiaries. Any
real property and facilities held under lease by the Company and its
subsidiaries are held by them under valid, subsisting and enforceable leases
with such exceptions as are not material and do not interfere with the use made
and proposed to be made of such property and buildings by the Company and its
subsidiaries.
p. Insurance. The Company and each of its
subsidiaries are insured by insurers of recognized financial responsibility
against such losses and risks and in such amounts as is prudent and customary in
the businesses in which the Company and its subsidiaries are engaged. Neither
the Company nor any such subsidiary has any reason to believe that it will not
be able to renew its existing insurance coverage as and when such coverage
expires or to obtain similar coverage from similar insurers as may be necessary
to continue its business at a cost that would not individually or in the
aggregate have a Material Adverse Effect.
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q. Regulatory Permits; Compliance. The Company
and its subsidiaries possess all franchises, grants, authorizations, licenses,
permits, easements, consents, certificates, approvals and orders necessary to
own, lease and operate their respective properties and to conduct their
respective businesses as currently being conducted (collectively, the "Company
Permits"), except for any such Company Permits the failure to possess which
would not have a Material Adverse Effect. There is no action pending, or to the
knowledge of the Company, threatened regarding the suspension or cancellation of
any of the Company Permits. Neither the Company nor any of its subsidiaries is
in conflict with, or in default or violation of, any of the Company Permits,
which conflict, default or violation would have a Material Adverse Effect.
Neither the Company nor any of its subsidiaries has received any notification
with respect to possible conflicts, defaults, or violations of applicable laws.
r. Internal Accounting Controls. The Company
and each of its subsidiaries maintain a system of internal accounting controls
sufficient, in the judgment of the Company's board of directors, and in relation
to the size and complexity of their respective businesses, to provide reasonable
assurance that (i) transactions are executed in accordance with management's
general or specific authorizations, (ii) transactions are recorded as necessary
to permit preparation of financial statements in conformity with generally
accepted accounting principles and to maintain asset accountability, (iii)
access to assets is permitted only in accordance with management's general or
specific authorization and (iv) the recorded accountability for assets is
compared with the existing assets at reasonable intervals and appropriate action
is taken with respect to any differences.
s. No Materially Adverse Contracts, Etc.
Neither the Company nor any of its subsidiaries is subject to any charter,
corporate or other legal restriction, or any judgment, decree, order, rule or
regulation which in the reasonable judgment of the Company's officers has or is
expected in the future individually or in the aggregate to have a Material
Adverse Effect. Neither the Company nor any of its subsidiaries is a party to
any contract or agreement which in the reasonable judgment of the Company's
officers has or is expected to have a Material Adverse Effect.
t. Tax Status. Except as set forth on Schedule
3(t), the Company and each of its subsidiaries has made or filed all federal,
state and foreign income and all other tax returns, reports and declarations
required by any jurisdiction to which it is subject (unless and only to the
extent that the Company and each of its subsidiaries has set aside on its books
provisions reasonably adequate for the payment of all unpaid and unreported
taxes) and has paid all taxes and other governmental assessments and charges
that are material in amount, shown or determined to be due on such returns,
reports and declarations, except those being contested in good faith and has set
aside on its books provisions reasonably adequate for the payment of all taxes
for periods subsequent to the periods to which such returns, reports or
declarations apply. There are no unpaid taxes in any material amount claimed to
be due by the taxing authority of any jurisdiction, and the officers of the
Company know of no basis for any such claim. The Company has not executed a
waiver with respect to the statute of limitations relating to the assessment or
collection of any foreign, federal, state or local tax. The Company has not been
notified that any of its tax returns is currently being audited by any taxing
authority.
10
<PAGE>
u. Certain Transactions. Except as set forth on
Schedule 3(u) and except for arm's length transactions pursuant to which the
Company makes payments in the ordinary course of business upon terms no less
favorable than the Company could obtain from third parties and other than the
grant of stock options disclosed on Schedule 3(c), none of the officers,
directors or employees of the Company is presently a party to any material
transaction with the Company (other than for services as employees, officers and
directors), including any contract, agreement or other arrangement providing for
the furnishing of services to or by, providing for rental of real or personal
property to or from, or otherwise requiring payments to or from any officer,
director or such employee or, to the knowledge of the Company, any corporation,
partnership, trust or other entity in which any officer, director or any such
employee has a substantial interest or is an officer, director, trustee or
partner.
v. Disclosure. To the Company's knowledge, all
information relating to or concerning the Company or any of its subsidiaries set
forth in this Agreement and provided to the Buyer pursuant to Section 2(d)
hereof and otherwise in connection with the transactions contemplated hereby is
true and correct in all material respects and the Company has not omitted to
state any material fact necessary in order to make the statements made herein or
therein, in light of the circumstances under which they were made, not
misleading. No event or circumstance has occurred or information exists with
respect to the Company or any of its subsidiaries or its or their business,
properties, operations or financial condition, which, under applicable law, rule
or regulation, requires public disclosure or announcement by the Company but
which has not been so publicly announced or disclosed (assuming for this purpose
that the Company's reports filed under the 1934 Act are being incorporated into
an effective registration statement filed by the Company under the 1933 Act).
The Company has not provided any Buyer with any material non-public information
nor any projections or assurance regarding the future financial performance of
the Company.
w. Investment Company Status. The Company is
not and upon consummation of the sale of the Securities will not be an
"investment company," a company controlled by an "investment company" or an
"affiliated person" of, or "promoter" or "principal underwriter" for, an
"investment company" as such terms are defined in the Investment Company Act of
1940, as amended.
x. Foreign Corrupt Practices. Neither the
Company nor any of its subsidiaries, nor any director, officer, agent, employee
or other person acting on behalf of the Company or any subsidiary has, in the
course of his actions for, or on behalf of, the Company used any corporate funds
for any unlawful contribution, gift, entertainment or other unlawful expenses
relating to political activity; made any direct or indirect unlawful payment to
any foreign or domestic government official or employee from corporate funds;
violated or is in violation of any provision of the U.S. Foreign Corrupt
Practices Act of 1977; or made any bribe, rebate, payoff, influence payment,
kickback or other unlawful payment to any foreign or domestic government
official or employee.
11
<PAGE>
y. Year 2000. Any reprogramming required to
permit the proper functioning, in and following the year 2000, of the Company's
and its subsidiaries' (i) computer systems and (ii) equipment containing
embedded microchips (including systems and equipment supplied by others or with
which the Company's or any of its subsidiaries' systems interface) and the
testing of such systems and equipment, as so reprogrammed were completed by
September 1, 1999. The cost to the Company and its subsidiaries of such
reprogramming and testing and of the reasonably foreseeable consequences of year
2000 to the Company and its subsidiaries (including without limitation,
reprogramming errors and the failure of others' systems or equipment) will not
have a Material Adverse Effect. Except for the reprogramming referred to herein
as may be necessary, the computer and management information systems of the
Company and each of its subsidiaries are and, with ordinary course upgrading and
maintenance, will continue to be, sufficient to permit the Company and each
subsidiary to conduct its business without a Material Adverse Effect.
4. COVENANTS AND AGREEMENTS.
------------------------
a. Best Efforts. Each party shall use its best
efforts timely to satisfy each of the conditions to be satisfied by it as
provided in Sections 6 and 7 of this Agreement.
b. Form D. The Company agrees to file a Form D
with respect to the Securities as required under Regulation D and to provide a
copy thereof to each Buyer promptly after such filing. The Company shall, on or
before the Closing Date, take such action as the Company shall reasonably
determine is necessary to qualify the Securities for, or obtain exemption for
the Securities for, sale to the Buyers at the Closing pursuant to this Agreement
under applicable securities or "Blue Sky" laws of the states of the United
States, and shall provide evidence of any such action so taken to the Buyers on
or prior to the Closing Date.
c. Reporting Status. Until the earlier of (i)
six months after the date as of which the Investors (as that term is defined in
the Registration Rights Agreement) may sell all of the Securities without
restriction pursuant to Rule 144(k) promulgated under the 1933 Act (or successor
thereto) or (ii) the date which is six months after the date on which none of
the Securities are outstanding (the "Registration Period"), the Company shall
timely file all reports required to be filed with the SEC pursuant to the 1934
Act, and the Company shall not terminate its status as an issuer required to
file reports under the 1934 Act even if the 1934 Act or the rules and
regulations thereunder would otherwise permit such termination.
d. Use of Proceeds. The Company will use the
proceeds from the sale of the Securities for working capital and general
corporate purposes and shall not otherwise, directly or indirectly, use such
proceeds for any loan to or investment in any other corporation, partnership,
enterprise or other person (except in connection with its direct or indirect
subsidiaries) or for the repurchase, redemption or retirement of any capital
stock of the Company.
e. Financial Information. The Company agrees to
file all reports, schedules, forms, statements and other documents required to
be filed by it with the SEC pursuant to the reporting requirements of the 1934
Act. The financial statements of the Company will be prepared in accordance with
generally accepted accounting principles, consistently applied (except for any
12
<PAGE>
required changes in such principles), and will fairly present in all material
respects the consolidated financial position of the Company and its consolidated
subsidiaries and results of their operations and cash flows for the periods then
ended (subject, in the case of unaudited statements, to normal year-end audit
adjustments). The Company agrees to send the following to each Investor (as that
term is defined in the Registration Rights Agreement) during the Registration
Period: (i) within five (5) days after the filing thereof with the SEC, a copy
of its Annual Reports on Form 10-K or Form 10-KSB, as applicable, its Quarterly
Reports on Form 10-Q or Form 10-QSB, as applicable, any Current Reports on Form
8-K and any registration statements or amendments filed pursuant to the 1933
Act; (ii) within one (1) day after release thereof, copies of all press releases
issued by the Company or any of its subsidiaries; and (iii) copies of any
notices and other information made available or given to the shareholders of the
Company generally, contemporaneously with the making available or giving thereof
to the shareholders.
f. Reservation of Shares. The Company shall
take all action necessary to at all times have authorized, and reserved for the
purpose of issuance, no less than 2,000,000 shares of Common Stock to provide
for the issuance of the Warrant Shares upon exercise of the Warrants in
accordance with the terms of this Agreement and the Warrants.
g. Expenses. The Company agrees to pay on
demand all reasonable costs and expenses (including, without limitation,
reasonable fees and expenses of counsel to the Buyers) incurred by the Buyers in
connection with the enforcement of the Buyers' rights and/or the collection of
all amounts due under the Closing Agreements and all other related documents.
h. Additional Issuances of Securities.
(a) Right of First Refusal. For a period
of 180 days from and after the Closing Date if the Company shall desire to issue
any Common Stock or any security convertible, exchangeable or exercisable for
Common Stock or any other right to acquire any Common Stock pursuant to Section
4(2) of the 1933 Act or an offering under Regulation D or Regulation S of the
1933 Act or in any other private placement (other than Exempt Issuances under
Section 4(h)(e) below), then the Company shall comply with the terms of this
Section 4(i).
(b) Notice Requirements. The Company
shall notify, or cause to be notified, the Buyers not less than ten (10)
business days nor more than twenty (20) business days prior to the time the
Company intends to consummate such issuance (the "Issuance Notice"). The
Issuance Notice shall set forth all of the terms of such proposed issuance.
(c) Exercise of Right of First Refusal.
The right of first refusal provided for in this Section 4(i) may be exercised by
the Buyers by delivery of a written notice to the Company (the "Exercise
Notice"), within ten (10) business days following receipt of the Issuance Notice
(the "Refusal Period"). The Exercise Notice shall state that the Buyers agree to
purchase all or any specified part of the proposed issuance of such Common Stock
or Convertible Securities on terms substantially equal to the terms set forth in
the Issuance Notice.
13
<PAGE>
(d) Right to Issue Securities. After
expiration of the Refusal Period, if the provisions of this Section 4(h) have
been complied with in all respects by the Company and no Exercise Notice has
been given, or if given, the Buyers have not agreed to purchase all of the
securities set forth in the Issuance Notice, the Company shall have the right
for forty-five (45) calendar days following the termination of the Refusal
Period to issue such securities, or any portion thereof not being purchased by
the Buyers, specified in the Issuance Notice on the terms described in the
Issuance Notice without further notice to the Buyers, but after such forty-five
(45) calendar days, no such issuance may be made without again giving notice to
the Buyers and complying with all of the requirements of this Section 4(h).
(e) Exempt Issuances. The following
issuances of Common Stock or Convertible Securities shall be "Exempt Issuances"
not subject to the right of purchase in this Section 4(h):
(a) any shares of the Company's Common
Stock issued pursuant to Approved Stock Plans (as defined in the Warrants);
(b) any shares issued upon exercise of
options, warrants and other convertible securities outstanding as of the date
hereof; and
(c) shares issued to bonafide suppliers
or vendors in consideration for services or supplies rendered to the Company or
to a bank or other financial institution as an inducement to enter into a
financing arrangement with the Company in an amount not to exceed 10% of the
outstanding capital stock of the Company.
i. Disclosure. From and after the date hereof,
the Company will not provide to any Buyer any material non-public information
which, according to applicable law, rule or regulation should be disclosed
publicly by the Company but which has not been so disclosed.
j. Corporate Existence. So long as any Buyer
beneficially owns any Securities, the Company shall maintain its corporate
existence in good standing under the laws of the jurisdiction in which it is
incorporated and shall not sell all or substantially all of the Company's
assets, except in the event of a merger or consolidation or sale of all or
substantially all of the Company's assets, where either (i) no part of the
consideration consists of securities of the surviving or successor entity in
such transaction or (ii) the surviving or successor entity in such transaction
(A) assumes the Company's obligations hereunder and under the agreements and
instruments entered into or filed in connection herewith and (B) is a publicly
traded corporation whose common stock is registered pursuant to Section 12(b) or
(g) of the 1934 Act.
k. Solvency; Compliance with Law. The Company,
individually, and together with its subsidiaries on a consolidated basis (both
before and after giving effect to the transactions contemplated by this
Agreement) is solvent (i.e., its assets have a fair market value in excess of
the amount required to pay its probable liabilities on its existing debts as
they become absolute and matured) and currently the Company has no information
that would lead it to reasonably conclude that the Company would not have, nor
does it intend to take any action that would impair, its ability to pay its
debts from time to time incurred in connection therewith as such debts mature.
The Company will conduct its business in compliance with all applicable laws,
rules, ordinances and regulations of the jurisdictions in which it is conducting
business, including, without limitation, all applicable local, state and federal
environmental laws and regulations, the failure to comply with which would have
a Material Adverse Effect.
14
<PAGE>
l. Insurance. The Company shall maintain
liability, casualty and other insurance (subject to customary deductions and
retentions) with responsible insurance companies against such risk of the types
and in the amounts customarily maintained by companies of comparable size to the
Company.
m. No Integration. The Company will not conduct
any future offering that will be integrated with the issuance of the Securities
for purposes of the rules promulgated by the SEC.
n. Year 2000. The Company will take all actions
to assure that the Company's and its subsidiaries' computer systems and
equipment containing embedded microchips (including systems and equipment
supplied by others or with which the Company's or any of its subsidiaries'
systems interface) will operate and effectively process data including
datafields requiring references to dates on and after January 1, 2000 and the
testing of such systems and equipment.
5. TRANSFER AGENT INSTRUCTIONS.
---------------------------
The Company shall issue irrevocable instructions to its
transfer agent (in the form attached hereto as Exhibit D) to issue certificates,
or at a Buyer's request, to electronically issue if possible, such shares (e.g.,
through DWAC or DTC), registered in the name of each Buyer or its respective
nominee(s), for the Securities in such amounts as specified from time to time by
each Buyer to the Company (the "Irrevocable Transfer Agent Instructions"). Prior
to registration of the Common Stock and the Warrant Shares under the 1933 Act,
all such certificates shall bear the restrictive legend specified in Section
2(g) of this Agreement. The Company warrants that no instruction other than (i)
the Irrevocable Transfer Agent Instructions referred to in this Section 5, and
(ii) stop transfer instructions (a) to give effect to Section 2(f) hereof (in
the case of the Common Stock and the Warrant Shares prior to registration under
the 1933 Act), (b) to comply with any SEC or court order, or (c) to suspend use
of a then effective registration statement in the event an amendment or
supplement thereto is necessary, will be given by the Company to its transfer
agent and that the Securities shall otherwise be freely transferable on the
books and records of the Company as and to the extent provided in the Closing
Agreements. Nothing in this Section 5 shall affect in any way each Buyer's
obligations and agreement to comply with all applicable securities laws upon
resale of any of the Securities. If a Buyer provides the Company with an opinion
of counsel, reasonably satisfactory in form and substance to the Company, that
registration of a resale by such Buyer of any of the Securities is not required
under the 1933 Act, the Company shall permit the transfer, and, in the case of
the Securities, promptly instruct its transfer agent to issue one or more
certificates in such name and in such denominations as specified by such Buyer.
The Company acknowledges that a breach by it of its obligations hereunder will
cause irreparable harm to the Buyers by vitiating the intent and purpose of the
transaction contemplated hereby. Accordingly, the Company acknowledges that the
remedy at law for a breach of its obligations under this Section 5 will be
inadequate and agrees, in the event of a breach or threatened breach by the
Company of the provisions of this Section 5, that the Buyers shall be entitled,
in addition to all other available remedies, to an injunction restraining any
breach and requiring immediate issuance and transfer, without the necessity of
showing economic loss and without any bond or other security being required.
15
<PAGE>
6. CONDITIONS TO THE COMPANY'S OBLIGATION TO SELL.
----------------------------------------------
The obligation of the Company hereunder to issue and sell the
Units to each Buyer at the Closing is subject to the satisfaction, with respect
to each Buyer, at or before the Closing Date, of each of the following
conditions, provided that these conditions are for the Company's sole benefit
and may be waived by the Company at any time in its sole discretion:
a. Such Buyer shall have executed this
Agreement and the Registration Rights Agreement and delivered the same to the
Company.
b. Such Buyer shall have delivered to the
Company the Purchase Price for the Units being purchased by such Buyer at the
Closing by wire transfer of immediately available funds pursuant to the wire
instructions provided by the Company.
c. The representations and warranties of such
Buyer shall be true and correct in all material respects as of the date when
made and as of the Closing Date as though made at that time (except for
representations and warranties that speak as of a specific date), and such Buyer
shall have performed, satisfied and complied in all material respects with the
covenants, agreements and conditions required by this Agreement to be performed,
satisfied or complied with by such Buyer at or prior to the Closing Date.
d. The transactions contemplated hereby shall
not violate any law, regulation or order then in effect and applicable to such
Buyer or the Company.
7. CONDITIONS TO EACH BUYER'S OBLIGATION TO PURCHASE.
-------------------------------------------------
The obligation of each Buyer hereunder to purchase the Units
is subject to the satisfaction, at or before the Closing Date, of each of the
following conditions, provided that these conditions are for each Buyer's sole
benefit and may be waived by such Buyer at any time in its sole discretion:
a. The Company shall have executed this
Agreement, the Warrants and the Registration Rights Agreement, and delivered the
same to such Buyer.
b. Trading in the Common Stock or Warrant
Shares issuable upon the conversion of the Warrants shall not have been
suspended by the SEC.
c. The representations and warranties of the
Company shall be true and correct in all material respects (except to the extent
that any of such representations and warranties is already qualified as to
materiality in Section 3 above, in which case such representations and
warranties shall be true and correct without further qualification) as of the
date when made and as of the Closing Date as though made at that time (except
for representations and warranties that speak as of a specific date) and the
Company shall have performed, satisfied and complied in all material respects
16
<PAGE>
with the covenants, agreements and conditions required by this Agreement to be
performed, satisfied or complied with by the Company at or prior to the Closing
Date. Such Buyer shall have received a certificate, executed by the Chief
Executive Officer of the Company, dated as of the Closing Date, to the foregoing
effect and as to such other matters as may be reasonably requested by such Buyer
including, without limitation, an update as of the Closing Date regarding the
representation contained in Section 3(c) above.
d. The Company shall have executed and
delivered to such Buyer the Stock Certificates for the Common Stock being
purchased by such Buyer at the Closing.
e. The Company shall have executed and
delivered to each Buyer the Warrants being purchased by such Buyer at the
Closing.
f. As of the Closing Date, the Company shall
have reserved out of its authorized and unissued Common Stock, solely for the
purpose of effecting the exercise of the Warrants, 520,000 shares of Common
Stock.
g. The Board of Directors of the Company shall
have adopted the resolutions in substantially the form of Exhibit E attached
hereto.
h. The Irrevocable Transfer Agent Instructions,
in the form of Exhibit D attached hereto, shall have been delivered to and
acknowledged in writing by the Company's transfer agent.
i. The transactions contemplated hereby shall
not violate any law, regulation or order then in effect and applicable to Buyers
or the Company.
j. There shall not have occurred any material
adverse change in the business condition (financial or otherwise), or results of
operations of the Company since the date of this Agreement.
8. INDEMNIFICATION.
---------------
In consideration of each Buyer's execution and delivery of
this Agreement and acquiring the Securities hereunder and in addition to all of
the Company's other obligations under this Agreement, the Company shall defend,
protect, indemnify and hold harmless each Buyer and each other holder of
Securities and all of their officers, directors, employees and agents
(including, without limitation, those retained in connection with the
transactions contemplated by this Agreement) (collectively, the "Buyer
Indemnitees") from and against any and all actions, causes of action, suits,
claims, losses, costs, penalties, fees, liabilities and damages, and expenses in
connection therewith (irrespective of whether any such Buyer Indemnitee is a
party to the action for which indemnification hereunder is sought), and
including reasonable attorneys' fees and disbursements (the "Buyer Indemnified
Liabilities"), incurred by any Buyer Indemnitee (and shall advance the same) as
a result of, or arising out of, or relating to (a) subject to Section 9(i), any
misrepresentation or breach of any representation or warranty made by the
17
<PAGE>
Company in the Closing Agreements or any other certificate, instrument or
document contemplated hereby or thereby, (b) any breach of any covenant,
agreement or obligation of the Company contained in the Closing Agreements or
any other certificate, instrument or document contemplated hereby or thereby, or
(c) any transaction financed or to be financed in whole or in part, directly or
indirectly, with the proceeds of the issuance of the Units or the status of such
Buyer or holder of any of the Securities as an investor in the Company. To the
extent that the foregoing undertaking by the Company may be unenforceable for
any reason, the Company shall make the maximum contribution to the payment and
satisfaction of each of the Buyer Indemnified Liabilities which is permissible
under applicable law.
9. GOVERNING LAW; MISCELLANEOUS.
-----------------------------
a. Governing Law. This Agreement shall be
governed by and interpreted in accordance with the laws of the State of New York
without regard to the principles of conflict of laws.
b. Counterparts. This Agreement may be executed
in two or more identical counterparts, all of which shall be considered one and
the same agreement and shall become effective when counterparts have been signed
by each party and delivered to the other party. In the event any signature page
is delivered by facsimile transmission, the party using such means of delivery
shall cause four (4) additional original executed signature pages to be
physically delivered to the other party within five (5) days of the execution
and delivery hereof.
c. Headings. The headings of this Agreement are
for convenience of reference and shall not form part of, or affect the
interpretation of, this Agreement.
d. Severability. If any provision of this
Agreement shall be invalid or unenforceable in any jurisdiction, such invalidity
or unenforceability shall not affect the validity or enforceability of the
remainder of this Agreement in that jurisdiction or the validity or
enforceability of any provision of this Agreement in any other jurisdiction.
e. Entire Agreement; Amendments. This Agreement
supersedes all other prior oral or written agreements between the Buyers, the
Company, their affiliates and persons acting on their behalf with respect to the
matters discussed herein, and this Agreement and the instruments and documents
referenced herein contain the entire understanding of the parties with respect
to the matters covered herein and therein and, except as specifically set forth
herein or therein, neither the Company nor any Buyer makes any representation,
warranty, covenant or undertaking with respect to such matters. No provision of
this Agreement may be waived or amended other than by an instrument in writing
signed by the party to be charged with enforcement.
f. Notices. Any notices, consents, waivers or
other communications required or permitted to be given under the terms of this
Agreement shall be in writing and will be deemed to have been delivered (i) upon
receipt, when delivered personally; (ii) upon receipt, when sent by facsimile,
provided a copy is mailed by U.S. certified mail, return receipt requested;
(iii) three (3) days after being sent by U.S. certified mail, return receipt
requested, or (iv) one (1) day after deposit with a nationally recognized
overnight delivery service, in each case properly addressed to the party to
receive the same. The addresses and facsimile numbers for such communications
shall be:
18
<PAGE>
if to the Company:
Capita Research Group, Inc.
591 Skippack Pike
Suite 300
Blue Bell, Pennsylvania 19422
Telephone: 215-619-7777
Facsimile: 215-619-0775
Attention: Chief Financial Officer
with a copy to:
Andrew J. Beck, Esq.
Torys
237 Park Avenue
New York, New York 10017
Facsimile: 212-682-0200
if to the Transfer Agent:
Nevada Agency and Trust Company
50 West Liberty Street, Suite 880
Reno, Nevada 89501
Telephone: 775-322-0626
Facsimile: 775-322-5623
Attention: Compliance Department
If to a Buyer, to its address and facsimile number on the
Schedule of Buyers, with copies to such Buyer's counsel as set forth on the
Schedule of Buyers. Each party shall provide five (5) days' prior written notice
to the other party of any change in address or facsimile number.
g. Successors and Assigns. This Agreement shall
be binding upon and inure to the benefit of the parties and their respective
successors and assigns, including any purchasers of the Units. The Company shall
not assign this Agreement or any rights or obligations hereunder without the
prior written consent of the Buyers. A Buyer may assign some or all of its
rights hereunder without the consent of the Company, provided, however, that (i)
any such assignment shall not release such Buyer from its obligations hereunder
unless such obligations are assumed by such assignee and the Company has
consented to such assignment and assumption, and (ii) no Buyer may assign its
rights hereunder in a manner that would cause the offering of Securities
hereunder to be required to be registered under the 1933 Act.
h. No Third Party Beneficiaries. This Agreement
is intended for the benefit of the parties hereto and their respective permitted
successors and assigns, and is not for the benefit of, nor may any provision
hereof be enforced by, any other person.
i. Survival. The representations and warranties
of the Company and the Buyers contained in Sections 3 and 2, respectively, shall
survive the Closing until eighteen months after the Closing Date. The agreements
and covenants set forth in Sections 4, 5 and 9, and the indemnification
provisions set forth in Section 8, shall survive the Closing. Each Buyer shall
be responsible only for its own representations, warranties, agreements and
covenants hereunder.
19
<PAGE>
j. Publicity. The Company and each Buyer shall
have the right to approve before issuance any press releases or any other public
statements with respect to the transactions contemplated hereby; provided,
however, that the Company shall be entitled, without the prior approval of any
Buyer, to make any press release or other public disclosure with respect to such
transactions as is required by applicable law and regulations (although each
Buyer shall be consulted by the Company in connection with any such press
release or other public disclosure prior to its release and shall be provided
with a copy thereof), but only to the extent required by such law or regulation.
k. Further Assurances. Each party shall do and
perform, or cause to be done and performed, all such further acts and things,
and shall execute and deliver all such other agreements, certificates,
instruments and documents, as the other party may reasonably request in order to
carry out the intent and accomplish the purposes of this Agreement and the
consummation of the transactions contemplated hereby.
l. No Strict Construction. The language used in
this Agreement will be deemed to be the language chosen by the parties to
express their mutual intent, and no rules of strict construction will be applied
against any party.
m. Equitable Relief. The Company recognizes
that in the event that it fails to perform, observe, or discharge any or all of
its obligations under this Agreement, any remedy at law may prove to be
inadequate relief to the Buyers. The Company therefore agrees that the Buyers
shall be entitled to temporary and permanent injunctive relief in any such case
without the necessity of proving actual damages.
n. Consent to Jurisdiction. The parties hereto
expressly submit themselves to the exclusive jurisdiction of the state and
federal courts of New York in any action or proceeding relating to this
Agreement or any of the other documents contemplated hereby or any of the
transactions contemplated hereby or thereby. Each party hereby irrevocably
waives, to the fullest extent permitted by law, any objection that it may now or
hereafter have to the laying of venue of any such action, suit or proceeding
brought in such a court and any claim that any such action, suit or proceeding
brought in such a court has been brought in an inconvenient forum. The parties
hereto irrevocably and unconditionally consent to the service of process of any
of the aforementioned courts in any such action, suit or proceeding by the
mailing of copies thereof by registered or certified mail, postage prepaid, at
their respective addresses set forth or provided for herein, such service to
become effective 10 days after such mailing. Nothing herein shall affect the
right of any party to serve process in any manner permitted by law or to
commence legal proceedings or otherwise proceed against the other parties in any
other jurisdiction.
* * *
20
<PAGE>
IN WITNESS WHEREOF, the Buyers and the Company have caused
this Securities Purchase Agreement to be duly executed as of the date first
written above.
COMPANY:
CAPITA RESEARCH GROUP, INC.
By: /s/ David B. Hunter
-----------------------
Name: David B. Hunter
Its: President
21
<PAGE>
THE BUYERS:
/s/ Andrew Gitlin
-----------------
Andrew Gitlin
/s/John Lepore
--------------
John Lepore
/s/ Edward Okine
----------------
Edward Okine
/s/ Philip Platek
-----------------
Philip Platek
/s/ Howard Fischer
------------------
Howard Fischer
/s/ Michael Hamblett
--------------------
Michael Hamblett
22
<PAGE>
SCHEDULE OF BUYERS
SCHEDULE OF BUYERS
Investor Name, Address and Number of shares of Number of
Facsimile Number Common Stock Warrants
---------------- ------------ --------
Andrew Gitlin 30,000 30,000 (A Warrants)
16 Outlook Drive
Darien, CT 06820 30,000 (B Warrants)
(203) 324-8498
John Lepore 20,000 20,000(A Warrants)
167 Old Hyde Road
Weston, CT 06883
(2030 324-8498) 20,000(B Warrants)
Edward Okine 10,000 10,000(A Warrants)
162 Steephill Road
Weston, CT 06883 10,000(B Warrants)
Philip Platek 20,000 20,000(A Warrants)
10 Old Redding Rd
Weston, CT 06883 20,000(B Warrants)
Howard Fischer 80,000 80,000(A Warrants)
36 Wampus Lake Drive
Armonk, NY 10504 80,000(B Warrants)
(203) 324-8498
Michael Hamblett 100,000 100,000(A Warrants)
5 Mckinnel Court
Branford, CT 06405 100,000(B Warrants)
(203) 324-8498
Exhibit 10(h)
REGISTRATION RIGHTS AGREEMENT dated as of August 5, 1999 (this
"Agreement") between Capita Research Group, Inc., a Nevada corporation (the
"Corporation"), and Jim Salim (the "Stockholder").
W I T N E S S E T H:
- - - - - - - - - --
WHEREAS, the Corporation desires to provide the Stockholder
with certain registration rights and the parties wish to make the
representations and enter into the covenants set forth herein.
NOW, THEREFORE, in consideration of the mutual benefits to be
derived and the conditions and promises herein contained, and intending to be
legally bound hereby, the parties hereto agree as follows:
1. Registration of Common Stock. (a) In the event that, at any
time, the Corporation proposes to register the sale of any shares of its common
stock, $.001 par value, ("Common Stock") to be issued by the Corporation or sold
by any holder of shares of Common Stock (the "Registration Shares") under the
Securities Act of 1933, as amended (the "Securities Act"), other than pursuant
to a registration statement on Forms S-4 or S-8, or any successor to such Forms,
for the purpose of the issuance, sale or other transfer of the Registration
Shares by the Corporation or such holder, the Corporation shall mail or deliver
to the Stockholder at least 25 days prior to the filing of the registration
statement covering such Registration Shares, a written notice (a "Registration
Notice") of its intention so to register the Registration Shares, and specifying
the date by which the Supplemental Notice referred to in Section 1(b) below must
be returned to the Corporation.
(b) In the event that a Registration Notice shall have been so
mailed or delivered, the Stockholder, at such person's election, may mail or
deliver to the Corporation a written notice (a "Supplemental Notice") (i)
specifying the number of shares of Common Stock ("Supplemental Registration
Shares") issued or issuable upon the exercise of Warrants and/or the conversion
of, or as interest upon, that certain Convertible Promissory Note, in each case
acquired by the Stockholder pursuant to the Loan Agreement dated as of the date
hereof between the Corporation and the Stockholder, proposed to be sold or
otherwise transferred by the Stockholder, (ii) describing the proposed manner of
sale or other transfer thereof and (iii) requesting the registration thereof
under the Securities Act; provided, however, that such Supplemental Notice shall
be so mailed or delivered by the Stockholder not more than 15 days after the
date of the Registration Notice.
(c) From and after receipt of a Supplemental Notice, the
Corporation shall, subject to the prior sale or other transfer of some or all of
such Registration Shares, use its reasonable best efforts to cause the
Supplemental Registration Shares specified in such Supplemental Notice to be
registered under the Securities Act and to effect and to comply with all such
regulatory qualifications and requirements as may be necessary to permit the
sale or other transfer of such Supplemental Registration Shares in the manner
described in such Supplemental Notice, including, without limitation,
qualifications under applicable blue sky or other state securities laws
(provided that the Corporation shall not be required in connection therewith to
qualify as a foreign corporation or to execute a general consent to service of
process in any jurisdiction); provided, however, that (i) if in the case of an
underwritten public offering of the Registration Shares the managing underwriter
shall advise the Corporation that the inclusion of some or all of such
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Supplemental Registration Shares would, in such managing underwriter's judgment,
materially interfere with the proposed distribution of the Registration Shares,
then the Corporation may, upon written notice to the Stockholder, reduce or
eliminate the Supplemental Registration Shares otherwise to be included in the
registration statement (if and to the extent such reduction or elimination is
indicated by such managing underwriter as necessary to eliminate such
interference), (ii) if any firm of counsel representing the Corporation in
connection with such registration or representing the Stockholder that is
reasonably satisfactory to the Corporation shall advise the Corporation and the
Stockholder in writing that in its opinion the registration under the Securities
Act contemplated hereby is not necessary to permit the sale of the Supplemental
Registration Shares in the intended method of disposition by the Stockholder,
then the Corporation shall not be required to take any action with respect to
such registration or other steps contemplated hereby and (iii) the Corporation
shall have the right to delay or abandon such registration at any time in the
event that the Board of Directors of the Corporation determines in good faith
that such delay or abandonment is in the best interest of the Corporation.
(d) At any time after April 1, 2000, in the event that the
Stockholder shall not have theretofore been offered the opportunity to register
the Stockholder's Supplemental Registration Shares pursuant to Sections 1(a)
through 1(c), the Stockholder shall have the right to request that the
Corporation effect the registration under the Securities Act of any or all
Supplemental Registration Shares. The Corporation shall not be obligated to file
and cause to become effective more than one registration statement in which
Supplemental Registration Shares are registered pursuant to this subsection (d).
The Stockholder's rights under this subsection (d) shall terminate upon the
second anniversary of the date hereof.
(e) In the event that the Stockholder, if the Stockholder has
the right to do so, exercises such person's rights under Section 1(d), the
Corporation shall use its reasonable best efforts to cause the sale of the
Supplemental Registration Shares to be registered under the Securities Act and
to effect and to comply with all such regulatory qualifications, compliances and
requirements as may be necessary to permit the sale or other transfer of such
Supplemental Registration Shares, in the manner described in such request,
including, without limitation, qualifications under applicable blue sky or other
state securities laws (provided that the Corporation shall not be required in
connection therewith to qualify as a foreign corporation or to execute a general
consent to service of process in any jurisdiction); provided, however, that (i)
if any firm of counsel representing the Corporation in connection with any such
registration shall advise the Corporation and the Stockholder in writing that in
its opinion the registration under the Securities Act contemplated hereby is not
necessary to permit the sale of the Supplemental Registration Shares in the
intended method of disposition by the Stockholder, then the Corporation shall
not be required to take any action with respect to such registration or other
steps contemplated hereby and (ii) the Corporation shall have the right to delay
such registration for one period of up to 120 days by written notice to the
Stockholder in the event that the Board of Directors of the Corporation
determines in good faith that such delay is in the best interests of the
Corporation, provided that the Stockholder shall be entitled to withdraw such
request within 30 days of receipt of such notice and if such request is
withdrawn, such registration shall not constitute a registration to which the
Stockholder is entitled pursuant to Section 1(d).
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(f) If and whenever the Corporation is required by the
provisions of this Section 1 to use its reasonable best efforts to effect the
registration under the Securities Act of any securities requested to be so
registered by the Stockholder, the Corporation will, as promptly as practicable:
(i) prepare and file with the Securities and Exchange
Commission (the "Commission") a registration statement with
respect to such securities and use its reasonable best efforts
to cause such registration statement to become effective;
(ii) prepare and file with the Commission such
amendments and supplements to such registration statement and
the prospectus used in connection therewith as may be
necessary to keep such registration statement effective for a
period from the date of the effectiveness thereof through the
earlier of (1) the date which is nine (9) months after the
date of effectiveness thereof and (2) the date on which all
Supplemental Registration Shares included in such registration
statement shall have been sold or otherwise disposed of by the
Stockholder pursuant to such registration statement, and to
comply with the provisions of the Securities Act with respect
to the sale or other disposition of all shares of Common Stock
covered by such registration statement whenever the
Stockholder shall desire to sell or otherwise dispose of the
same within such period;
(iii) furnish to the Stockholder such number of
copies of a prospectus, including a preliminary prospectus and
final prospectus, in conformity with the requirements of the
Securities Act, and such other documents as may reasonably be
requested thereby in order to facilitate the public sale or
other disposition of such shares of Common Stock owned
thereby;
(iv) notify the Stockholder promptly of any request
by the Commission for the amendment or supplement of such
registration statement or prospectus or for additional
information, and notify the Stockholder promptly of the filing
of each amendment or supplement to such registration statement
or prospectus;
(v) advise the Stockholder, promptly after it shall
receive notice, of the issuance of any stop order by the
Commission suspending the effectiveness of such registration
statement or the initiation or threatening of any proceeding
for that purpose and promptly use its reasonable best efforts
to prevent the issuance of any stop order or to obtain its
withdrawal if such stop order should be issued;
(vi) with respect to any registration statement being
prepared as a result of the exercise of rights pursuant to
Section 1(d) hereof relating to an underwritten offering, upon
the request of the Stockholder, the Corporation shall
cooperate with the Stockholder to obtain and furnish at the
closing provided for in the underwriting agreement (1) an
opinion of counsel to the Corporation, dated such date,
addressed to the underwriters and to the Stockholder
registering the sale of shares of Common Stock, and (2) a
"cold comfort" letter from the independent certified public
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<PAGE>
accountants of the Corporation, dated such date, addressed to
the underwriters and to the Stockholder, in each case,
covering substantially the same matters with respect to the
issuer, such registration statement (and the prospectus
included therein) and with respect to the events subsequent to
the date of the financial statements included in such
registration statement, as are customarily covered in opinions
of issuer's counsel and in accountants' letters delivered to
the underwriters in underwritten public offerings of
securities; and
(vii) notify the Stockholder, in writing, at any time
when a prospectus relating to such shares of Common Stock is
required to be delivered under the Securities Act within the
appropriate period mentioned in clause (ii) immediately
preceding, 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 the light of the circumstances then existing,
and promptly prepare (and file with the Commission) and
furnish to the Stockholder a reasonable number of copies of a
supplement to or an amendment of such prospectus as may be
necessary so that, as thereafter delivered to the purchasers
of such shares of Common Stock, such prospectus shall not
include an untrue statement of a material fact or omit to
state a material fact required to be stated therein or
necessary to make the statements therein not misleading in the
light of the circumstances then existing.
(g) The Stockholder agrees to furnish the Corporation such
information regarding itself and the proposed distribution of Supplemental
Registration Shares by the Stockholder as the Corporation may from time to time
reasonably request in writing in order to prepare a registration statement and
prospectus or any supplement or amendment thereto pursuant to the Securities Act
and the rules and regulations promulgated thereunder.
(h) The Stockholder agrees that, upon receipt of a written
notice from the Corporation of the happening of any event of the kind described
in clause (vii) of Section 1(f) above, it will forthwith discontinue its
disposition of Supplemental Registration Shares pursuant to the registration
statement relating to such Supplemental Registration Shares until its receipt of
the copies of the supplemented or amended prospectus contemplated by clause
(vii) of Section 1(f) above and, if so requested by the Corporation in writing,
will deliver to the Corporation (at the Corporation's expense) all copies then
in its possession, other than permanent file copies, of the prospectus relating
to such Supplemental Registration Shares; provided, however, that in the event
that the Stockholder discontinues its disposition of Supplemental Registration
Shares pursuant to the foregoing provisions, the nine month period for the
effectiveness of the registration statement shall be extended by the period
during which the Stockholder discontinued its disposition.
(i) The Corporation shall pay all expenses (the "Registration
Expenses") necessary to effect under the Securities Act any registration
statements, amendments or supplements filed pursuant to this Section 1 (other
than any underwriters' discounts and commissions and any brokerage commissions
and fees payable with respect to shares of Common Stock sold by the Stockholder
and legal fees and expenses of counsel to the Stockholder), including, without
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<PAGE>
limitation, printing expenses, fees of the Commission and the National
Association of Securities Dealers, Inc., expenses of compliance with blue sky
and other state securities laws, and accounting and legal fees and expenses of
counsel to the Corporation; provided, however, that the Stockholder shall pay up
to the first $50,000 of any Registration Expenses in connection with a demand
registration pursuant to Sections 1(d) and (e).
(j) The Stockholder agrees that, in the event the Corporation
files a registration statement under the Securities Act with respect to an
underwritten public offering of any securities of the Corporation for cash,
primarily for the account of the Corporation, in which the Stockholder was
permitted to participate (whether or not the Stockholder does in fact
participate), if required by an underwriter, the Stockholder will not effect any
public sale or distribution, including any sale pursuant to Rule 144 promulgated
under the Securities Act, of any equity securities of the Corporation or any
securities convertible into or exchangeable or exercisable for any equity
security of the Corporation (other than as part of such underwritten public
offering) during the seven days prior to, and such period after (not to exceed
in any event 180 days), the effectiveness of such registration statement as may
be required by such underwriter.
(k) In the event of any registration pursuant to this Section
1 covering shares of Common Stock beneficially owned by the Stockholder, the
Corporation will indemnify and hold harmless the Stockholder, and each person or
entity, if any, who controls the Stockholder within the meaning of the
Securities Act (collectively, the "Indemnitees") against any losses, claims,
damages, costs, expenses (including reasonable attorneys' fees), or liabilities
(or actions in respect thereof) to which the Stockholder or controlling person
or entity becomes subject, under the Securities Act or otherwise, insofar as
such losses, claims, damages, costs, expenses or liabilities (or actions in
respect thereof) arise out of or are based upon any untrue statement or alleged
untrue statement of any material fact contained in the related registration
statement, any preliminary prospectus or final prospectus contained therein, or
any amendment or supplement thereto, or arise out of or are based upon the
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading in
light of the circumstances in which they were made; provided, however, that the
Corporation will not be liable in any such case to an Indemnitee to the extent
that any such loss, claim, damage, cost, expense or liability arises out of or
is primarily based upon (x) an untrue statement or alleged untrue statement or
omission or alleged omission made in such registration statement, preliminary
prospectus, prospectus or amendment or supplement in reliance upon and in
conformity with written information furnished by any Indemnitee, specifically
for use in the preparation thereof or (y) such Indemnitee's failure to deliver a
copy of the prospectus or any amendments or supplements thereto (if required by
applicable law) to the person asserting any loss, claim, damage or liability
after the Corporation has furnished such Indemnitee with the same. The
Corporation also agrees to reimburse each Indemnitee for any legal or other
expenses reasonably incurred by such Indemnitee in connection with investigating
or defending any such loss, claim, damage, liability or action.
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(l) In the event of any registration pursuant to this Section
1 covering shares of Common Stock beneficially owned by the Stockholder, the
Stockholder shall indemnify and hold harmless the Corporation, each of its
directors and officers who has signed any registration statement, and each
person or entity, if any, who controls the Corporation within the meaning of the
Securities Act, against any losses, claims, damages, costs, expenses (including
reasonable attorneys' fees) or liabilities (or actions in respect thereof) to
which the Corporation or any such director, officer, or controlling person
becomes subject, under the Securities Act or otherwise, insofar as such losses,
claims, damages, costs, expenses or liabilities (or actions in respect thereof)
primarily arise out of or are based upon any untrue or alleged untrue statement
of any material fact contained in the related registration statement, and any
preliminary prospectus or final prospectus contained therein, or any amendment
or supplement thereto, or primarily arise out of or are based upon the omission
or the alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading in light of
the circumstances in which they were made, in each case to the extent, but only
to the extent, that such loss, claim, damage, cost, expense or liability
primarily arises out of or is based upon (x) an untrue statement or alleged
untrue statement or omission or alleged omission made in such registration
statement, preliminary prospectus, prospectus, amendment or supplement in
reliance upon and in conformity with written information furnished by the
Stockholder specifically for use in the preparation thereof or (y) the
Stockholder's failure to deliver a copy of the prospectus or any amendments or
supplements thereto (if required by applicable law) to the person asserting any
loss, claim, damage or liability after the Corporation has furnished the
Stockholder with the same. The Stockholder shall reimburse any legal or other
expenses reasonably incurred by the Corporation or any such director, officer,
or controlling person or entity in connection with investigating or defending
any such loss, claim, damage, liability or action. The liability of the
Stockholder pursuant to this Section 1(l) shall be limited to the total proceeds
from the offering (net of sales commissions) received by the Stockholder.
(m) Promptly after receipt by an indemnified party under this
Section 1 of notice of the commencement of any action, such indemnified party
shall, if a claim in respect thereof is to be made against any indemnifying
party under this Section 1, notify the indemnifying party of the commencement
thereof; provided, however, that failure to so notify the indemnifying party
shall not affect an indemnifying party's obligations hereunder, except to the
extent that the indemnifying party is materially prejudiced by such failure. The
indemnifying party shall be entitled to appoint counsel of the indemnifying
party's choice at the indemnifying party's expense to represent the indemnified
party in any action for which indemnification is sought (in which case the
indemnifying party shall not thereafter be responsible for the fees and expenses
of any separate counsel retained by the indemnified party or parties except as
set forth below); provided, however, that such counsel shall be reasonably
satisfactory to the indemnified party. Notwithstanding the indemnifying party's
election to appoint counsel to represent the indemnified party in an action, the
indemnified party shall have the right to employ separate counsel (including
local counsel), and the indemnifying party shall bear the reasonable fees, costs
and expenses of such separate counsel if (i) the use of counsel chosen by the
indemnifying party to represent the indemnified party would present such counsel
with a conflict of interest, (ii) the actual or potential defendants in, or
targets of, any such action include both the indemnified party and the
indemnifying party and the indemnified party shall have reasonably concluded
that there may be legal defenses available to it and/or other indemnified
parties which are different from or additional to those available to the
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indemnifying party, (iii) the indemnifying party shall not have employed counsel
reasonably satisfactory to the indemnified party to represent the indemnified
party within a reasonable time after notice of the institution of such action or
(iv) the indemnifying party shall authorize the indemnified party to employ
separate counsel at the expense of the indemnifying party. It is understood,
however, that the indemnifying party shall, in connection with any one such
action or separate but substantially similar or related actions in the same
jurisdiction arising out of the same general allegations or circumstances, be
liable for the reasonable fees and expenses of only one separate firm of
attorneys (in addition to any local counsel) at any time.
(n) No indemnifying party shall, without the prior written
consent of the indemnified party, effect any settlement of any pending or
threatened action, suit or proceeding in respect of which any indemnified party
is or could have been a party and indemnity could have been sought hereunder by
such indemnified party, unless such settlement includes an unconditional release
of such indemnified party from all liability on claims that are the subject
matter of such action, suit or proceeding.
(o) With respect to any underwritten offering, the Stockholder
(if shares of Common Stock of the Stockholder are included in the subject
registration statement) and the Corporation shall, in addition to the foregoing,
provide the underwriter of such offering with customary representations and
warranties, and indemnification and contribution, in each instance as shall be
reasonably requested by the underwriter, provided, however, that any such
agreement to indemnify an underwriter with respect to any preliminary prospectus
shall not inure to the benefit of any such underwriter to the extent that any
loss, claim, damage, cost, expense or liability of any such underwriter results
solely from an untrue statement of material fact contained in, or the omission
of a material fact from, such preliminary prospectus which untrue statement or
omission was corrected in the final prospectus, if such underwriter failed to
send or give a copy of the final prospectus to the person asserting such loss,
claim, damage, cost, expense or liability at or prior to the written
confirmation of the sale of such securities to such person, and provided further
that any such agreement by the Stockholder to indemnify an underwriter shall be
on a several (and not joint) basis in proportion to the number of securities
sold by the Stockholder in such underwritten offering and shall be limited in
amount to the net proceeds received by the Stockholder in such underwritten
offering.
(p) If the indemnification provided for in this Section 1 is
unavailable to any indemnified party with respect to any losses, claims,
damages, liabilities or expenses referred to therein, then the indemnifying
party, in lieu of indemnifying such indemnified party, will contribute to the
amount paid or payable by such indemnified party, as a result of such losses,
claims, damages, liabilities or expenses (i) in such proportion as is
appropriate to reflect the relative benefits received by the indemnified party
on the one hand, and the indemnifying party on the other hand, from the offering
or (ii) if the allocation provided by clause (i) above is not permitted by
applicable law, in such proportion as is appropriate to reflect not only the
relative benefits referred to in clause (i) above but also the relative fault of
the indemnified party on the one hand, and of the indemnifying party on the
other hand, in connection with the statements or omissions which resulted in
such losses, claims, damages, liabilities or expenses as well as any other
relevant equitable considerations. The relative benefits received by the
indemnified party on the one hand, and the indemnifying party on the other hand,
shall be deemed to be in the same proportion as the total proceeds from the
offering (net of sales commissions) received by the indemnified party relative
to such proceeds received by the indemnifying party. The relative fault of the
indemnified party on the one hand, and the indemnifying party on the other hand,
7
<PAGE>
will be determined with 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 indemnified party or the
indemnifying party, and its relative intent, knowledge, access to information
and opportunity to correct or prevent such statement or omission. The amount
payable by a party as a result of the losses, claims, damages, liabilities or
expenses referred to above will be deemed to include, subject to the limitations
set forth in Section 1(q) below, any legal or other fees or expenses reasonably
incurred by such party in connection with investigating or defending any action
or claim.
(q) The indemnified party and the indemnifying party agree
that it would not be just and equitable if contribution pursuant to this Section
1 were determined by pro rata allocation or by any other method of allocation
which does not take into account the equitable considerations referred to in
Section 1(p). No person committing fraudulent misrepresentation (within the
meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution or indemnification from any person not committing such fraudulent
misrepresentation.
2. Legend and Compliance with Securities Laws.
(a) The stock certificates evidencing the shares of Common Stock of the
Stockholder subject to this Agreement shall bear a legend reading substantially
as follows:
"The Shares represented by this Certificate have not
been registered under the Securities Act of 1933, as amended
(the "Act"), but have been issued pursuant to an exemption
from such registration. Neither such Shares nor any interest
therein may be sold, transferred, pledged, hypothecated or
otherwise disposed of until either (i) the holder thereof
shall have received an opinion from counsel reasonably
satisfactory to the Company that registration thereof under
the Act is not required or (ii) a registration statement under
the Act covering such Shares or such interest and the
disposition thereof shall have become effective under the
Act."
(b) In the event that a registration statement covering the
shares of Common Stock of the Corporation owned by the Stockholder which are
subject to this Agreement shall become effective under the Securities Act and
under any applicable state securities laws or in the event that the Corporation
shall receive an opinion of counsel to the holder of such shares of Common Stock
in form and substance reasonably satisfactory to the Corporation that, in the
opinion of such counsel, the above stated legend is not, or is no longer,
necessary or required under applicable law (including, without limitation,
because of the availability of the exemption afforded by Rule 144(k) promulgated
under the Securities Act), the Corporation shall, or shall instruct its transfer
agents and registrars to, remove the above stated legend from the stock
certificates evidencing such shares of Common Stock or issue new certificates
without such legend in lieu thereof.
(c) The Stockholder consents to the Corporation making a
notation on its records and giving instructions to any transfer agent for the
Common Stock in order to implement the restrictions on transfer established in
this Section 2.
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3. Reorganization, Etc. The provisions of this Agreement shall
apply mutatis mutandi to any shares of capital stock resulting from any stock
split or reverse split, stock dividend, reclassification of the capital stock of
the Corporation, consolidation, merger or reorganization of the Corporation, and
any shares or other securities of the Corporation or of any successor company
which may be received by the Stockholder (and/or its successors, permitted
assigns, legal representatives and heirs) by virtue of its ownership of Common
Stock or other capital stock of the Corporation.
4. Notices. Any notice or other communication
under this Agreement shall be in writing and sufficient if delivered personally,
by telecopy or sent by registered or certified mail, postage prepaid, addressed
as follows:
If to the Corporation:
Capita Research Group, Inc.
591 Shippack Pike, Suite 300
Blue Bell, Pennsylvania 19422
Attention: President
Telecopy: (215) 619-0775
Telephone: (215) 619-7777
If to the Stockholder:
Mr. Jim Salim
3510 Turtle Creek Boulevard, #2D
Dallas, Texas 75219
Telecopy: (214) 526-0435
Telephone: (214) 526-0205
All such notices and communications shall be deemed to have been duly given at
the time delivered by hand, if personally delivered, upon receipt, if sent by
telecopy, or three (3) business days after being deposited in the mail, if sent
by registered or certified mail. Any party may, upon written notice to the other
parties hereto, change the address to which notices or other communications to
such party are to be delivered or mailed.
5. Counterparts. This Agreement may be executed in any number
of counterparts, each of which shall be deemed an original, but all of which
taken together shall constitute one and the same instrument.
6. Entire Agreement. This Agreement contains the entire
agreement among the parties hereto with respect to the subject matter hereof.
This Agreement may be amended or modified or any provision hereof may be waived
by a written agreement between the Stockholder and the Corporation. This
Agreement supersedes all prior understandings, negotiations and agreements
relating to the subject matter hereof.
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7. Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Nevada applicable to
agreements made and to be performed entirely within such State, without regard
to any conflict of laws principles of such State which would apply the laws of
any other jurisdiction.
8. Jurisdiction; Waiver of Trial by Jury. THE PARTIES HERETO
HEREBY IRREVOCABLY SUBMIT TO THE JURISDICTION OF ANY PENNSYLVANIA STATE OR
UNITED STATES FEDERAL COURT SITTING IN THE CITY OF PHILADELPHIA OVER ANY ACTION
OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT, AND HEREBY
IRREVOCABLY AGREE THAT ALL CLAIMS IN RESPECT OF SUCH ACTION OR PROCEEDING MAY BE
HEARD AND DETERMINED IN SUCH PENNSYLVANIA STATE OR FEDERAL COURT. THE PARTIES
AGREE THAT A FINAL JUDGMENT IN ANY SUCH ACTION OR PROCEEDING SHALL BE CONCLUSIVE
AND MAY BE ENFORCED IN OTHER JURISDICTIONS BY SUIT ON THE JUDGMENT OR IN ANY
OTHER MANNER PROVIDED BY LAW. THE PARTIES FURTHER WAIVE TRIAL BY JURY, ANY
OBJECTION TO VENUE IN SUCH STATE AND ANY OBJECTION TO ANY ACTION OR PROCEEDING
IN SUCH STATE ON THE BASIS OF FORUM NON CONVENIENS. THE PARTIES FURTHER AGREE
THAT ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT SHALL
BE BROUGHT ONLY IN A PENNSYLVANIA STATE OR UNITED STATES FEDERAL COURT SITTING
IN THE CITY OF PHILADELPHIA.
9. Headings. The headings in this Agreement are solely for
convenience of reference and shall not affect the interpretation of any of the
provisions hereof.
10. Severability. If any provision herein contained shall be
held to be illegal or unenforceable, such holding shall not affect the validity
or enforceability of the other provisions of this Agreement.
11. Binding Effect. This Agreement shall be binding upon and
inure to the benefit of the Corporation, the Stockholder, each of their
respective successors, permitted assigns, executors, administrators, legal
representatives and heirs, as applicable.
12. Construction. The parties hereto agree that this Agreement
is the product of negotiations between sophisticated parties and individuals,
all of whom were represented by counsel, and each of whom had an opportunity to
participate in, and did participate in, the drafting of each provision hereof.
Accordingly, ambiguities in this Agreement, if any, shall not be construed
strictly or in favor of or against any party hereto but rather shall be given a
fair and reasonable construction without regard to the rule of contra
proferentum.
* * *
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IN WITNESS WHEREOF, each of the parties hereto has executed
this Registration Rights Agreement on the date first above written.
CAPITA RESEARCH GROUP, INC.
By /s/ David B. Hunter
----------------------
David B. Hunter
Title: President
/s/ Jim Salim
-------------
Jim Salim
11
Exhibit 10(i)
REGISTRATION RIGHTS AGREEMENT
REGISTRATION RIGHTS AGREEMENT (this "Agreement"), dated as of
January 6, 2000 by and among Capita Research Group, Inc., a Nevada corporation,
with headquarters located at 591 Skippack Pike, Suite 300, Blue Bell,
Pennsylvania 19422 (the "Company"), and the undersigned buyers (each, a "Buyer"
and collectively, the "Buyers").
WHEREAS:
A. In connection with the Securities Purchase Agreement by and
among the Company and the Buyers and dated of even date herewith (the
"Securities Purchase Agreement"), the Company has agreed, upon the terms and
subject to the conditions of the Securities Purchase Agreement, to issue and
sell to the Buyers 1,000,000 of the Company's units (the "Units"), each unit
consisting of (i) one share of the Company's common stock, $.001 par value per
share (the "Common Stock"), (ii) one of the Company's A Common Stock Purchase
Warrants to purchase one share of the Company's Common Stock exercisable at a
purchase price of $.50 per share of Common Stock (the "A Warrants") and (iii)
one of the Company's B Common Stock Purchase Warrants to purchase one share of
the Company's Common Stock exercisable at a purchase price of $1.00 per share of
Common Stock (the "B Warrants", and together with the A Warrants, the
"Warrants") (such shares of Common Stock issued upon exercise of the Warrants
are hereinafter referred to as the "Warrant Shares", and together with the
Units, Common Stock and the Warrants, the "Securities"); and
B. To induce the Buyers to execute and deliver the Securities
Purchase Agreement, the Company has agreed to provide certain registration
rights under the Securities Act of 1933, as amended, and the rules and
regulations thereunder, or any similar successor statute (collectively, the
"1933 Act"), and applicable state securities laws;
NOW, THEREFORE, in consideration of the premises and the
mutual covenants contained herein and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the Company and the
Buyers hereby agree as follows:
1. DEFINITIONS.
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As used in this Agreement, the following terms shall have the
following meanings:
a. "Investor" means a Buyer and any transferee or assignee
thereof to whom a Buyer assigns its rights under this Agreement and who agrees
to become bound by the provisions of this Agreement in accordance with Section
9.
b. "Person" means a corporation, a limited liability company,
an association, a partnership, an organization, a business, an individual, an
entity, a governmental or political subdivision thereof or a governmental
agency.
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c. "register," "registered," and "registration" refer to a
registration effected by preparing and filing one or more Registration
Statements in compliance with the 1933 Act and pursuant to Rule 415 under the
1933 Act or any successor rule providing for offering securities on a continuous
basis ("Rule 415"), and the declaration or ordering of effectiveness of such
Registration Statement(s) by the United States Securities and Exchange
Commission (the "SEC").
d. "Registrable Securities" means (i) the Common Stock issued
and sold pursuant to the Securities Purchase Agreement, (ii) the Warrant Shares
issued or issuable upon exercise of the Warrants and (iii) any shares of capital
stock issued or issuable with respect to the Common Stock, Warrant Shares or the
Warrants as a result of any stock split, stock dividend, recapitalization,
exchange or similar event.
e. "Registration Statement" means a registration statement of
the Company filed under the 1933 Act.
Capitalized terms used herein and not otherwise defined herein shall
have the respective meanings set forth in the Securities Purchase Agreement.
2. REGISTRATION.
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a. Mandatory Registration. The Company shall prepare, and, on
or prior to thirty (30) calendar days after the date of the initial issuance of
the Units, file with the SEC a Registration Statement or Registration Statements
(as is necessary), covering the resale of all of the Registrable Securities,
which Registration Statement(s) shall state that, in accordance with Rule 416
promulgated under the 1933 Act, such Registration Statement(s) also covers such
indeterminate number of additional shares of Common Stock as may become issuable
in connection with the Common Stock or upon exercise of the Warrants to prevent
dilution resulting from stock splits, stock dividends or similar transactions.
Such Registration Statement shall initially register for resale 3,000,000 shares
of Common Stock equal to the number of Registrable Securities as of the date
immediately preceding the date the Registration Statement is initially filed
with the SEC subject to adjustment as provided in Section 3(b). Such registered
shares of Common Stock shall be allocated among the Investors pro rata based on
the total number of Registrable Securities issued or issuable as of each date
that a Registration Statement, as amended, relating to the resale of the
Registrable Securities is declared effective by the SEC. The Company shall use
its reasonable best efforts to have the Registration Statement declared
effective by the SEC within ninety (90) days after the date of the initial
issuance of the Units.
b. Counsel and Investment Bankers. Subject to Section 5
hereof, in connection with any offering pursuant to Section 2, the Buyers shall
have the right to select legal counsel and an investment banker or bankers and
manager or managers to administer their interest in the offering, which
investment banker or bankers or manager or managers shall be reasonably
satisfactory to the Company. The Company shall reasonably cooperate with any
such counsel, investment bankers and managers.
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c. Form S-3. The Company shall register the Registrable
Securities on Form S-3 as soon as such form is available, provided that the
Company shall maintain the effectiveness of the Registration Statement then in
effect until such time as a Registration Statement on Form S-3 covering the
Registrable Securities has been declared effective by the SEC. The Company shall
file all reports required to be filed by the Company with the SEC in a timely
manner so as to maintain such eligibility for the use of Form S-3.
3. RELATED OBLIGATIONS.
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At such time as the Company is obligated to file a
Registration Statement with the SEC pursuant to Section 2(a), the Company will
use its best efforts to effect the registration of the Registrable Securities in
accordance with the intended method of disposition thereof and, pursuant
thereto, the Company shall have the following obligations:
a. The Company shall promptly prepare and file with the SEC a
Registration Statement with respect to the Registrable Securities (on or prior
to the thirtieth (30th) calendar day after the date of the initial issuance of
the Units) and use its reasonable best efforts to cause such Registration
Statement(s) relating to Registrable Securities to become effective as soon as
possible after such filing (but no later than ninety (90) days after the initial
issuance of the Units for the registration of Registrable Securities pursuant to
Section 2(a)), and keep the Registration Statement(s) effective pursuant to Rule
415 at all times until the earlier of (i) the date as of which the Investors may
sell all of the Registrable Securities without restriction pursuant to Rule
144(k) promulgated under the 1933 Act (or successor thereto) and (ii) the date
on which the Investors shall have sold all the Registrable Securities (the
"Registration Period"), which Registration Statement(s) (including any
amendments or supplements thereto and prospectuses contained therein) shall not
contain any untrue statement of a material fact or omit to state a material fact
required to be stated therein, or necessary to make the statements therein, in
light of the circumstances in which they were made, not misleading. In the event
that such Registration Statement is not filed with the SEC within 30 days after
the initial issuance of the Units, the Company will pay the Investors a
nonrefundable penalty payment of Common Stock in the amount of 100,000 shares of
Common Stock for each 30 day period thereafter (prorated for any partial period
thereof) until the Registration Statement is filed.
b. The Company shall prepare and file with the SEC such
amendments (including post-effective amendments) and supplements to the
Registration Statement(s) and the prospectus(es) used in connection with the
Registration Statement(s), which prospectus(es) are to be filed pursuant to Rule
424 promulgated under the 1933 Act, as may be necessary to keep the Registration
Statement(s) effective at all times during the Registration Period, and, during
such period, comply with the provisions of the 1933 Act with respect to the
disposition of all Registrable Securities of the Company covered by the
Registration Statement(s) until such time as all of such Registrable Securities
shall have been disposed of in accordance with the intended methods of
disposition by the seller or sellers thereof as set forth in the Registration
Statement(s). In the event the number of shares available under a Registration
Statement filed pursuant to this Agreement is insufficient to cover all of the
Registrable Securities, the Company shall amend the Registration Statement, or
file a new Registration Statement (on the short form available therefor, if
applicable), or both, so as to cover all of the Registrable Securities, in each
case, as soon as practicable, but in any event within fifteen (15) days after
the necessity therefor arises (based on the market price of the Common Stock and
other relevant factors on which the Company reasonably elects to rely). The
Company shall use it best efforts to cause any such necessary amendment and/or
new Registration Statement to become effective as soon as practicable following
the filing thereof. In addition any such amendment or new Registration Statement
shall for purposes of Section 3(a) above be deemed to be a "Registration
Statement".
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c. The Company shall furnish to each Investor whose
Registrable Securities are included in the Registration Statement(s) and its
legal counsel without charge (i) promptly after the same is prepared and filed
with the SEC at least one copy of the Registration Statement and any amendment
thereto, including financial statements and schedules, all documents
incorporated therein by reference and all exhibits, the prospectus(es) included
in such Registration Statement(s) (including each preliminary prospectus) and,
with regards to the Registration Statement, any correspondence by or on behalf
of the Company to the SEC or the staff of the SEC and any correspondence from
the SEC or the staff of the SEC to the Company or its representatives, (ii) upon
the effectiveness of any Registration Statement, ten (10) copies of the
prospectus included in such Registration Statement and all amendments and
supplements thereto (or such other number of copies as such Investor may
reasonably request) and (iii) such other documents, including any preliminary
prospectus, as such Investor may reasonably request in order to facilitate the
disposition of the Registrable Securities owned by such Investor. The Company
will promptly respond to any and all comments received from the SEC, with a view
towards causing any Registration Statement or any amendment thereto to be
declared effective by the SEC as soon as practicable and shall, subject to
Section 3(h), promptly file an acceleration request as soon as practicable
following the resolution or clearance of all SEC comments or, if applicable,
following notification by the SEC that the Registration Statement or any
amendment thereto will not be subject to review.
d. The Company shall use reasonable efforts to (i) register
and qualify the Registrable Securities covered by the Registration Statement(s)
under such other securities or "blue sky" laws of such jurisdictions in the
United States as any Investor reasonably requests, (ii) prepare and file in
those jurisdictions, such amendments (including post-effective amendments) and
supplements to such registrations and qualifications as may be necessary to
maintain the effectiveness thereof during the Registration Period, (iii) take
such other actions as may be necessary to maintain such registrations and
qualifications in effect at all times during the Registration Period, and (iv)
take all other actions reasonably necessary or advisable to qualify the
Registrable Securities for sale in such jurisdictions; provided, however, that
the Company shall not be required in connection therewith or as a condition
thereto to (x) qualify to do business in any jurisdiction where it would not
otherwise be required to qualify but for this Section 3(d), (y) subject itself
to general taxation in any such jurisdiction, or (z) file a general consent to
service of process in any such jurisdiction. The Company shall promptly notify
each Investor who holds Registrable Securities of the receipt by the Company of
any notification with respect to the suspension of the registration or
qualification of any of the Registrable Securities for sale under the securities
or "blue sky" laws of any jurisdiction in the United States or its receipt of
actual notice of the initiation or threatening of any proceeding for such
purpose.
e. In the event Investors who hold a majority of the
Registrable Securities being offered in the offering select underwriters for the
offering, the Company shall, subject to Section 2(b) hereof, enter into and
perform its obligations under an underwriting agreement, in usual and customary
form, including, without limitation, customary indemnification and contribution
obligations, with the underwriters of such offering.
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f. As promptly as practicable after becoming aware of such
event, the Company shall notify each Investor in writing of the happening of any
event as a result of which the prospectus included in a Registration Statement,
as then in effect, includes an untrue statement of a material fact or omission
to state a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading, and promptly prepare a supplement or amendment to the
Registration Statement to correct such untrue statement or omission, and deliver
ten (10) copies of such supplement or amendment to each Investor (or such other
number of copies as such Investor may reasonably request). The Company may
postpone such filing for a reasonable period of time, not to exceed 60 days
during any twelve-month period, if the Company has been advised by legal counsel
that such filing would require the disclosure of a material impending
transaction or other material, non-public matter and the Company determined
reasonably and in good faith that such disclosure would have a material adverse
effect on the Company. The Company shall also promptly notify each Investor in
writing (i) when a prospectus or any prospectus supplement or post-effective
amendment has been filed, and when a Registration Statement or any
post-effective amendment has become effective (notification of such
effectiveness shall be delivered to each Investor by facsimile on the same day
of such effectiveness and by overnight mail), (ii) of any request by the SEC for
amendments or supplements to a Registration Statement or related prospectus or
related information, and (iii) of the Company's reasonable determination that a
post-effective amendment to a Registration Statement would be appropriate.
g. The Company shall use its best efforts to prevent the
issuance of any stop order or other suspension of effectiveness of a
Registration Statement, or the suspension of the qualification of any of the
Registrable Securities for sale in any jurisdiction and, if such an order or
suspension is issued, to obtain the withdrawal of such order or suspension at
the earliest possible moment and to notify each Investor who holds Registrable
Securities being sold (and, in the event of an underwritten offering, the
managing underwriters) of the issuance of such order and the resolution thereof
or its receipt of actual notice of the initiation or threat of any proceeding
for such purpose.
h. The Company shall permit each Investor and a single firm of
counsel, initially Schulte Roth & Zabel LLP or such other counsel as thereafter
designated as selling stockholders' counsel by the Investors who hold a majority
of the Registrable Securities being sold, to review and comment upon the
Registration Statement(s) and all amendments and supplements thereto at least
(i) ten (10) days prior to its filing with the SEC in the case of the initial
registration statement pursuant to Section 3(a) and (ii) in all other cases
seven (7) days prior to their filing with the SEC, and not file any document in
a form to which such counsel reasonably objects, provided, however, that the
application of the penalty provisions set forth in Section 3(a) hereof shall be
extended for the number of days that such counsel does not timely comment
thereon (it being understood and agreed that, (i) in the case of the initial
registration statement pursuant to Section 3(a), comments shall be deemed not
timely to the extent given more than five (5) days after submission to such
counsel and (ii) in all other cases comments shall be deemed not timely to the
extent given more than four (4) days after submission to such counsel. The
Company shall not submit a request for acceleration of the effectiveness of a
Registration Statement(s) or any amendment or supplement thereto without the
prior approval of such counsel, which consent shall not be unreasonably
withheld.
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i. At the request of the Investors who hold a majority of the
Registrable Securities being sold, the Company shall furnish, on the date that
Registrable Securities are delivered to an underwriter, if any, for sale in
connection with the Registration Statement (i) if required by an underwriter, a
letter, dated such date, from the Company's independent certified public
accountants in form and substance as is customarily given by independent
certified public accountants to underwriters in an underwritten public offering,
addressed to the underwriters, and (ii) if required by an underwriter, an
opinion, dated as of such date, of counsel representing the Company for purposes
of such Registration Statement, in form, scope and substance as is customarily
given in an underwritten public offering, addressed to the underwriters.
j. The Company shall make available for inspection by (i) any
Investor, (ii) any underwriter participating in any disposition pursuant to a
Registration Statement, (iii) one firm of attorneys and one firm of accountants
or other agents retained by the Investors, and (iv) one firm of attorneys
retained by all such underwriters (collectively, the "Inspectors") all pertinent
financial and other records, and pertinent corporate documents and properties of
the Company (collectively, the "Records"), as shall be reasonably deemed
necessary by each Inspector to enable each Inspector to exercise its due
diligence responsibility, and cause the Company's officers, directors and
employees to supply all information which any Inspector may reasonably request
for purposes of such due diligence; provided, however, that each Inspector shall
hold in strict confidence and shall not make any disclosure (except to an
Investor) or use of any Record or other information which the Company determines
in good faith to be confidential, and of which determination the Inspectors are
so notified, unless (a) the disclosure of such Records is necessary to avoid or
correct a misstatement or omission in any Registration Statement or is otherwise
required under the 1933 Act, (b) the release of such Records is ordered pursuant
to a final, non-appealable subpoena or order from a court or government body of
competent jurisdiction, or (c) the information in such Records has been made
generally available to the public other than by disclosure in violation of this
Agreement. Each Investor agrees that it shall, upon learning that disclosure of
such Records is sought in or by a court or governmental body of competent
jurisdiction or through other means, give prompt notice to the Company and allow
the Company, at its expense, to undertake appropriate action to prevent
disclosure of, or to obtain a protective order for, the Records deemed
confidential. Nothing herein (or in any other confidentiality agreement between
the Company and any Investor) shall be deemed to limit the Investors' ability to
sell Registrable Securities in a manner which is otherwise consistent with
applicable laws and regulations.
k. The Company shall hold in confidence and not make any
disclosure of information concerning an Investor provided to the Company unless
(i) disclosure of such information is necessary to comply with federal or state
securities laws, (ii) the disclosure of such information is necessary to avoid
or correct a misstatement or omission in any Registration Statement, (iii) the
release of such information is ordered pursuant to a subpoena or other final,
non-appealable order from a court or governmental body of competent
jurisdiction, or (iv) such information has been made generally available to the
public other than by disclosure by the Company in violation of this or any other
agreement. The Company agrees that it shall, upon learning that disclosure of
such information concerning an Investor is sought in or by a court or
governmental body of competent jurisdiction or through other means, give prompt
written notice to such Investor and allow such Investor, at the Investor's
expense, to undertake appropriate action to prevent disclosure of, or to obtain
a protective order for, such information.
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l. The Company shall use its best efforts either to (i) cause
all the Registrable Securities covered by a Registration Statement to be listed
on each securities exchange on which securities of the same class or series
issued by the Company are then listed, if any, if the listing of such
Registrable Securities is then permitted under the rules of such exchange, or
(ii) if securities of the same class or series issued by the Company are then
designated or quoted on the Nasdaq National Market System or Nasdaq SmallCap
Market, secure designation and quotation of all the Registrable Securities
covered by the Registration Statement on the Nasdaq National Market System or
the Nasdaq SmallCap Market, as applicable, and, without limiting the generality
of the foregoing, to arrange for at least two market makers to register with the
New York Stock Exchange or, if applicable, the National Association of
Securities Dealers, Inc. as such with respect to such Registrable Securities.
The Company shall pay all fees and expenses in connection with satisfying its
obligation under this Section 3(l).
m. The Company shall cooperate with the Investors who hold
Registrable Securities being offered and, to the extent applicable, any managing
underwriter or underwriters, to facilitate the timely preparation and delivery
of certificates (not bearing any restrictive legend) representing the
Registrable Securities to be offered pursuant to a Registration Statement and
enable such certificates to be in such denominations or amounts, as the case may
be, as the managing underwriter or underwriters, if any, or, if there is no
managing underwriter or underwriters, the Investors may reasonably request and
registered in such names as the managing underwriter or underwriters, if any, or
the Investors may request. Not later than the date on which any Registration
Statement registering the resale of Registrable Securities is declared
effective, the Company shall deliver to its transfer agent instructions,
accompanied by any reasonably required opinion of counsel, that permit sales of
unlegended securities in a timely fashion that complies with then mandated
securities settlement procedures for regular way market transactions.
n. The Company shall take all other reasonable actions
necessary to expedite and facilitate disposition by the Investors of Registrable
Securities pursuant to a Registration Statement.
o. The Company shall provide a CUSIP number and a transfer
agent of all such Registrable Securities not later than the effective date of
such Registration Statement.
p. If requested by the managing underwriters or an Investor,
the Company shall immediately incorporate in a prospectus supplement or
post-effective amendment such information as the managing underwriters and the
Investors agree should be included therein relating to the sale and distribution
of Registrable Securities, including, without limitation, information with
respect to the number of Registrable Securities being sold to such underwriters,
the purchase price being paid therefor by such underwriters and with respect to
any other terms of the underwritten (or best efforts underwritten) offering of
the Registrable Securities to be sold in such offering; make all required
filings of such prospectus supplement or post-effective amendment as soon as
notified of the matters to be incorporated in such prospectus supplement or
post-effective amendment; and supplement or make amendments to any Registration
Statement if requested by a shareholder or any underwriter of such Registrable
Securities.
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q. The Company shall use its best efforts to cause the
Registrable Securities covered by the applicable Registration Statement to be
registered with or approved by such other governmental agencies or authorities
as may be necessary to consummate the disposition of such Registrable
Securities.
r. The Company shall otherwise use its best efforts to comply
with all applicable rules and regulations of the SEC in connection with any
registration hereunder.
4. OBLIGATIONS OF THE INVESTORS.
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a. At least seven (7) days prior to the first anticipated
filing date of the Registration Statement, the Company shall notify each
Investor or its counsel in writing of the information the Company requires from
each such Investor if such Investor elects to have any of such Investor's
Registrable Securities included in the Registration Statement. It shall be a
condition precedent to the obligations of the Company to complete the
registration pursuant to this Agreement with respect to the Registrable
Securities of a particular Investor that such Investor shall furnish to the
Company such information as may be requested in writing by the Company regarding
itself, the Registrable Securities held by it and the intended method of
disposition of the Registrable Securities held by it as shall be reasonably
required to effect the registration of such Registrable Securities and shall
execute such documents in connection with such registration as the Company may
reasonably request.
b. Each Investor by such Investor's acceptance of the
Registrable Securities agrees to cooperate with the Company as reasonably
requested by the Company in connection with the preparation and filing of the
Registration Statement(s) hereunder unless such Investor has notified the
Company in writing of such Investor's election to exclude all of such Investor's
Registrable Securities from the Registration Statement.
c. Each Investor agrees that, upon receipt of any notice from
the Company of the happening of any event of the kind described in Section 3(g)
or the first sentence of 3(f), such Investor will immediately discontinue
disposition of Registrable Securities pursuant to the Registration Statement(s)
covering such Registrable Securities until such Investor's receipt of the copies
of the supplemented or amended prospectus contemplated by Section 3(g) or the
first sentence of 3(f) and, if so directed by the Company, such Investor shall
deliver to the Company (at the expense of the Company) or destroy all copies in
such Investor's possession, of the prospectus covering such Registrable
Securities current at the time of receipt of such notice.
d. No Investor may participate in any underwritten
registration hereunder unless such Investor (i) agrees to sell such Investor's
Registrable Securities on the basis provided in any underwriting arrangements
approved by the Investors entitled hereunder to approve such arrangements, (ii)
completes and executes all questionnaires, powers of attorney, indemnities,
underwriting agreements and other documents reasonably required under the terms
of such underwriting arrangements, and (iii) agrees to pay its pro rata share of
all underwriting discounts and commissions.
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5. EXPENSES OF REGISTRATION.
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All reasonable expenses, other than underwriting discounts and
commissions, incurred in connection with registrations, filings or
qualifications pursuant to Sections 2 and 3, including, without limitation, all
registration, listing and qualifications fees, printers and accounting fees, and
fees and disbursements of counsel for the Company and fees and disbursements of
one counsel for the Investors (up to a maximum of $5,000 per registration) shall
be paid by the Company. In addition, the Company shall pay all of the Investors'
reasonable costs (including legal fees) incurred in connection with the
successful enforcement of the Investors' rights hereunder.
6. INDEMNIFICATION.
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In the event any Registrable Securities are included in a
Registration Statement under this Agreement:
a. To the fullest extent permitted by law, the Company will,
and hereby does, indemnify, hold harmless and defend each Investor who holds
such Registrable Securities, the directors, officers, partners, employees,
agents and each Person, if any, who controls any Investor within the meaning of
the 1933 Act or the Securities Exchange Act of 1934, as amended (the "1934
Act"), and any underwriter (as defined in the 1933 Act) for the Investors, and
the directors and officers of, and each Person, if any, who controls any such
underwriter within the meaning of the 1933 Act or the 1934 Act (each, an
"Indemnified Person"), against any losses, claims, damages, liabilities,
judgments, fines, penalties, charges, costs, attorneys' fees, amounts paid in
settlement or expenses, joint or several (collectively, "Claims"), incurred in
investigating, preparing or defending any action, claim, suit, inquiry,
proceeding, investigation or appeal taken from the foregoing by or before any
court or governmental, administrative or other regulatory agency, body or the
SEC, whether pending or threatened, whether or not an indemnified party is or
may be a party thereto ("Indemnified Damages"), to which any of them may become
subject insofar as such Claims (or actions or proceedings, whether commenced or
threatened, in respect thereof) arise out of or are based upon: (i) any untrue
statement or alleged untrue statement of a material fact in a Registration
Statement or any post-effective amendment thereto or in any filing made in
connection with the qualification of the offering under the securities or other
"blue sky" laws of any jurisdiction in which Registrable Securities are offered,
or the omission or alleged omission to state a material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances under which the statements therein were made, not misleading, (ii)
any untrue statement or alleged untrue statement of a material fact contained in
any preliminary prospectus if used prior to the effective date of such
Registration Statement, or contained in the final prospectus (as amended or
supplemented, if the Company files any amendment thereof or supplement thereto
with the SEC) or the omission or alleged omission to state therein any material
fact necessary to make the statements made therein, in light of the
circumstances under which the statements therein were made, not misleading, or
(iii) any violation or alleged violation by the Company of the 1933 Act, the
1934 Act, any other law, including, without limitation, any state securities
law, or any rule or regulation thereunder relating to the offer or sale of the
Registrable Securities pursuant to a Registration Statement (the matters in the
foregoing clauses (i) through (iii) being, collectively, "Violations"). Subject
to the restrictions set forth in Section 6(d) with respect to the number of
legal counsel, the Company shall reimburse the Investors and each such
underwriter or controlling person, promptly as such expenses are incurred and
are due and payable, for any legal fees or other reasonable expenses incurred by
them in connection with investigating or defending any such Claim.
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Notwithstanding anything to the contrary contained herein, the indemnification
agreement contained in this Section 6(a): (i) shall not apply to a Claim arising
out of or based upon a Violation which occurs in reliance upon and in conformity
with information furnished in writing to the Company by any Indemnified Person
or underwriter for such Indemnified Person expressly for use in connection with
the preparation of the Registration Statement or any such amendment thereof or
supplement thereto; (ii) with respect to any preliminary prospectus, shall not
inure to the benefit of any such person from whom the person asserting any such
Claim purchased the Registrable Securities that are the subject thereof (or to
the benefit of any person controlling such person) if the untrue statement or
omission of material fact contained in the preliminary prospectus was corrected
in the prospectus, as then amended or supplemented, if such prospectus was
timely made available by the Company pursuant to Section 3(c), and the
Indemnified Person was promptly advised in writing not to use the incorrect
prospectus prior to the use giving rise to a Violation and such Indemnified
Person, notwithstanding such advice, used it; and (iii) shall not apply to
amounts paid in settlement of any Claim if such settlement is effected without
the prior written consent of the Company, which consent shall not be
unreasonably withheld. Such indemnity shall remain in full force and effect
regardless of any investigation made by or on behalf of the Indemnified Person
and shall survive the transfer of the Registrable Securities by the Investors
pursuant to Section 9.
b. In connection with any Registration Statement in which an
Investor is participating, each such Investor agrees to severally and not
jointly indemnify, hold harmless and defend, to the same extent and in the same
manner as is set forth in Section 6(a), the Company, each of its directors, each
of its officers who signs the Registration Statement, each Person, if any, who
controls the Company within the meaning of the 1933 Act or the 1934 Act
(collectively and together with an Indemnified Person, an "Indemnified Party"),
against any Claim or Indemnified Damages to which any of them may become
subject, under the 1933 Act, the 1934 Act or otherwise, insofar as such Claim or
Indemnified Damages 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 to the Company by such
Investor expressly for use in connection with such Registration Statement; and,
subject to Section 6(d), such Investor will reimburse any legal or other
expenses reasonably incurred by them in connection with investigating or
defending any such Claim; provided, however, that the indemnity agreement
contained in this Section 6(b) and the agreement with respect to contribution
contained in Section 7 shall not apply to amounts paid in settlement of any
Claim if such settlement is effected without the prior written consent of such
Investor, which consent shall not be unreasonably withheld; provided, further,
however, that the Investor shall be liable under this Section 6(b) for only that
amount of a Claim or Indemnified Damages as does not exceed the net proceeds to
such Investor as a result of the sale of Registrable Securities pursuant to such
Registration Statement. Such indemnity shall remain in full force and effect
regardless of any investigation made by or on behalf of such Indemnified Party
and shall survive the transfer of the Registrable Securities by the Investors
pursuant to Section 9. Notwithstanding anything to the contrary contained
herein, the indemnification agreement contained in this Section 6(b) with
respect to any preliminary prospectus shall not inure to the benefit of any
Indemnified Party if the untrue statement or omission of material fact contained
in the preliminary prospectus was corrected on a timely basis in the prospectus,
as then amended or supplemented.
10
<PAGE>
c. The Company shall be entitled to receive indemnities from
underwriters, selling brokers, dealer managers and similar securities industry
professionals participating in any distribution, to the same extent as provided
above, with respect to information such persons so furnished in writing
expressly for inclusion in the Registration Statement.
d. Promptly after receipt by an Indemnified Person or
Indemnified Party under this Section 6 of notice of the commencement of any
action or proceeding (including any governmental action or proceeding) involving
a Claim, such Indemnified Person or Indemnified Party shall, if a Claim in
respect thereof is to be made against any indemnifying party under this Section
6, 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 control of the defense thereof
with counsel reasonably satisfactory to the Indemnified Person or the
Indemnified Party, as the case may be; provided, however, that an Indemnified
Person or Indemnified Party shall have the right to retain its own counsel with
the fees and expenses to be paid by the indemnifying party, if, in the
reasonable opinion of counsel retained by the Indemnified Person or Indemnified
Party, as the case may be, the representation by such counsel of the Indemnified
Person or Indemnified Party and the indemnifying party would be inappropriate
due to actual or potential differing interests between such Indemnified Person
or Indemnified Party and any other party represented by such counsel in such
proceeding. The Company shall pay reasonable fees for only one separate legal
counsel for the Investors, and such legal counsel shall be selected by the
Investors holding a majority in interest of the Registrable Securities included
in the Registration Statement to which the Claim relates. The Indemnified Party
or Indemnified Person shall cooperate fully with the indemnifying party in
connection with any negotiation or defense of any such action or claim by the
indemnifying party and shall furnish to the indemnifying party all information
reasonably available to the Indemnified Party or Indemnified Person which
relates to such action or claim. The indemnifying party shall keep the
Indemnified Party or Indemnified Person fully apprised at all times as to the
status of the defense or any settlement negotiations with respect thereto. No
indemnifying party shall be liable for any settlement of any action, claim or
proceeding effected without its written consent, provided, however, that the
indemnifying party shall not unreasonably withhold, delay or condition its
consent. No indemnifying party shall, without the consent of the Indemnified
Party or Indemnified Person, which consent shall not be unreasonably withheld,
delayed or conditioned, consent to entry of any judgment or enter into any
settlement or other compromise which does not include as an unconditional term
thereof the giving by the claimant or plaintiff to such Indemnified Party or
Indemnified Person of a release from all liability in respect to such claim or
litigation. Following indemnification as provided for hereunder, the
indemnifying party shall be subrogated to all rights of the Indemnified Party or
Indemnified Person with respect to all third parties, firms or corporations
relating to the matter for which indemnification has been made. 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 Person or Indemnified Party under this Section 6,
except to the extent that the indemnifying party is prejudiced in its ability to
defend such action.
11
<PAGE>
e. The indemnification required by this Section 6 shall be
made by periodic payments of the amount thereof during the course of the
investigation or defense, as and when bills are received or Indemnified Damages
are incurred.
f. The indemnity agreements contained herein shall be in
addition to (i) any cause of action or similar right of the Indemnified Party or
Indemnified Person against the indemnifying party or others, and (ii) any
liabilities the indemnifying party may be subject to pursuant to the law.
7. CONTRIBUTION.
-------------
To the extent any indemnification by an indemnifying party is
prohibited or limited by law, the indemnifying party agrees to make the maximum
contribution with respect to any amounts for which it would otherwise be liable
under Section 6 to the fullest extent permitted by law; provided, however, that:
(i) no contribution shall be made under circumstances where the maker would not
have been liable for indemnification under the fault standards set forth in
Section 6; (ii) no seller of Registrable Securities guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the 1933 Act) shall be
entitled to contribution from any seller of Registrable Securities who was not
guilty of fraudulent misrepresentation; and (iii) contribution (together with
any indemnification or other obligations under this Agreement) by any seller of
Registrable Securities shall be limited in amount to the net amount of proceeds
received by such seller from the sale of such Registrable Securities.
8. REPORTS UNDER THE 1934 ACT.
--------------------------
With a view to making available to the Investors the benefits
of Rule 144 promulgated under the 1933 Act or any other similar rule or
regulation of the SEC that may at any time permit the Investors to sell
securities of the Company to the public without registration ("Rule 144"), the
Company agrees to:
a. make and keep public information available, as those terms
are understood and defined in Rule 144;
b. file with the SEC in a timely manner all reports and other
documents required of the Company under the 1933 Act and the 1934 Act so long as
the Company remains subject to such requirements (it being understood that
nothing herein shall limit the Company's obligations under Section 4(c) of the
Securities Purchase Agreement) and the filing of such reports and other
documents is required for the applicable provisions of Rule 144; and
c. furnish to each Investor so long as such Investor owns
Registrable Securities, promptly upon request, (i) a written statement by the
Company that it has complied with the reporting requirements of Rule 144, the
1933 Act and the 1934 Act, (ii) a copy of the most recent annual or quarterly
report of the Company and such other reports and documents so filed by the
Company, and (iii) such other information as may be reasonably requested to
permit the Investors to sell such securities pursuant to Rule 144 without
registration.
12
<PAGE>
9. ASSIGNMENT OF REGISTRATION RIGHTS.
---------------------------------
The rights to have the Company register Registrable Securities
pursuant to this Agreement shall be automatically assignable by the Investors to
any transferee or assignee (a "Transferee") of all or any portion of Registrable
Securities representing the equivalent of at least 175,000 shares of Common
Stock (as appropriately adjusted for stock splits, stock dividends and reverse
stock splits) if: (i) the Investor agrees in writing with the Transferee to
assign such rights, and a copy of such agreement is furnished to the Company
within a reasonable time after such assignment; (ii) the Company is, within a
reasonable time after such transfer or assignment, furnished with written notice
of (a) the name and address of such Transferee, and (b) the securities with
respect to which such registration rights are being transferred or assigned;
(iii) immediately following such transfer or assignment the further disposition
of such securities by the Transferee is restricted under the 1933 Act and
applicable state securities laws; (iv) at or before the time the Company
receives the written notice contemplated by clause (ii) of this sentence the
Transferee agrees in writing with the Company to be bound by all of the
provisions contained herein; (v) such transfer shall have been made in
accordance with the applicable requirements of the Securities Purchase
Agreement; (vi) such Transferee shall be an "accredited investor" as that term
is defined in Rule 501 of Regulation D promulgated under the 1933 Act; and (vii)
in the event the assignment occurs subsequent to the date of effectiveness of
the Registration Statement required to be filed pursuant to Section 2(a), the
Transferee agrees to pay all reasonable expenses of amending or supplementing
such Registration Statement to reflect such assignment.
10. AMENDMENT OF REGISTRATION RIGHTS.
--------------------------------
Provisions of this Agreement may be amended and the observance
thereof may be waived (either generally or in a particular instance and either
retroactively or prospectively), only with the written consent of the Company
and Investors who hold two-thirds (2/3) of the Registrable Securities. Any
amendment or waiver effected in accordance with this Section 10 shall be binding
upon each Investor and the Company.
11. MISCELLANEOUS.
-------------
a. A person or entity is deemed to be a holder of Registrable
Securities whenever such person or entity owns of record such Registrable
Securities. If the Company receives conflicting instructions, notices or
elections from two or more persons or entities with respect to the same
Registrable Securities, the Company shall act upon the basis of instructions,
notices or elections received from the registered owner of such Registrable
Securities.
b. Any notices, consents, waivers or other communications
required or permitted to be given under the terms of this Agreement must be in
writing and will be deemed to have been delivered (i) upon receipt, when
delivered personally; (ii) upon receipt, when sent by facsimile, provided a copy
is mailed by U.S. certified mail, return receipt requested; (iii) three (3) days
after being sent by U.S. certified mail, return receipt requested; or (iv) one
(1) day after deposit with a nationally recognized overnight delivery service,
in each case properly addressed to the party to receive the same. The addresses
and facsimile numbers for such communications shall be:
13
<PAGE>
if to the Company:
Capita Research Group, Inc.
591 Skippack Pike
Suite 300
Blue Bell, Pennsylvania 19422
Telephone: 215-619-7777
Facsimile: 215-619-0775
Attention: Chief Financial Officer
With a copy to:
Torys
237 Park Avenue
New York, New York 10017
Facsimile: 212-682-0200
Attention: Andrew J. Beck, Esq.
if to a Buyer, to its address and facsimile number on the
Schedule of Buyers attached hereto, with copies to such
Buyer's counsel as set forth on the Schedule of Buyers.
Each party shall provide five (5) days prior notice to the other party
of any change in address, phone number or facsimile number.
c. Failure of any party to exercise any right or remedy under
this Agreement or otherwise, or delay by a party in exercising such right or
remedy, shall not operate as a waiver thereof.
d. This Agreement shall be governed by and interpreted in
accordance with the laws of the State of New York without regard to the
principles of conflict of laws. If any provision of this Agreement shall be
invalid or unenforceable in any jurisdiction, such invalidity or
unenforceability shall not affect the validity or enforceability of the
remainder of this Agreement in that jurisdiction or the validity or
enforceability of any provision of this Agreement in any other jurisdiction.
e. This Agreement, the Warrants and the Securities Purchase
Agreement (including all schedules and exhibits thereto) constitute the entire
agreement among the parties hereto with respect to the subject matter hereof and
thereof. There are no restrictions, promises, warranties or undertakings, other
than those set forth or referred to herein and therein. The aforementioned
documents supersede all prior agreements and understandings among the parties
hereto with respect to the subject matter hereof and thereof.
f. Subject to the requirements of Section 9, this Agreement
shall inure to the benefit of and be binding upon the permitted successors and
assigns of each of the parties hereto.
g. The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.
14
<PAGE>
h. This Agreement may be executed in two or more identical
counterparts, each of which shall be deemed an original but all of which shall
constitute one and the same agreement. This Agreement, once executed by a party,
may be delivered to the other party hereto by facsimile transmission of a copy
of this Agreement bearing the signature of the party so delivering this
Agreement.
i. Each party shall do and perform, or cause to be done and
performed, all such further acts and things, and shall execute and deliver all
such other agreements, certificates, instruments and documents, as the other
party may reasonably request in order to carry out the intent and accomplish the
purposes of this Agreement and the consummation of the transactions contemplated
hereby.
15
<PAGE>
IN WITNESS WHEREOF, the Buyers and the Company have caused
this Registration Rights Agreement to be duly executed as of the date first
written above.
COMPANY:
--------
CAPITA RESEARCH GROUP, INC.
By:/s/ David B. Hunter
----------------------
Name: David B. Hunter
Its: President
16
<PAGE>
BUYERS:
SOUNDSHORE HOLDINGS LTD.
By: /s/ Anthony Giordano
------------------------
Name: Anthony Giordano
Its: Director
SOUNDSHORE OPPORTUNITY HOLDING FUND LTD.
By: /s/ Anthony Giordano
------------------------
Name: Anthony Giordano
Its: Director
SOUNDSHORE STRATEGIC HOLDING FUND LTD.
By: /s/ Anthony Giordano
------------------------
Name: Anthony Giordano
Its: Director
<PAGE>
<TABLE>
SCHEDULE OF BUYERS
<CAPTION>
Investor Name, Address and Number of shares of Number of Investor's Advisor and
Facsimile Number Common Stock Warrants Legal Counsel Address
---------------- ------------ -------- ---------------------
<S> <C> <C> <C>
SoundShore Holdings Ltd. (Bermuda) 666,750 666,750 (A Warrants) Eleazer Klein, Esq.
Schulte Roth & Zabel LLP
666,750 (B Warrants) New York, NY 10022
c/o AIG International Management Fax: (212) 593-5955
Company, Inc.
1281 East Main Street
Stamford, Connecticut 06902
Fax: (203) 324-8488
SoundShore Strategic 118,750 118,750 (A Warrants) Eleazer Klein, Esq.
Holding Fund Ltd. (Bermuda) Schulte Roth & Zabel LLP
118,750 (B Warrants) New York, NY 10022
c/o AIG International Management Fax: (212) 593-5955
Company, Inc.
1281 East Main Street
Stamford, Connecticut 06902
Fax: (203) 324-8488
</TABLE>
17
Exhibit 10(j)
REGISTRATION RIGHTS AGREEMENT
REGISTRATION RIGHTS AGREEMENT (this "Agreement"), dated as of
January 21, 2000 by and among Capita Research Group, Inc., a Nevada corporation,
with headquarters located at 591 Skippack Pike, Suite 300, Blue Bell,
Pennsylvania 19422 (the "Company"), and the undersigned buyers (each, a "Buyer"
and collectively, the "Buyers").
WHEREAS:
A. In connection with the Securities Purchase Agreement by and
among the Company and the Buyers and dated of even date herewith (the
"Securities Purchase Agreement"), the Company has agreed, upon the terms and
subject to the conditions of the Securities Purchase Agreement, to issue and
sell to the Buyers 260,000 of the Company's units (the "Units"), each unit
consisting of (i) one share of the Company's common stock, $.001 par value per
share (the "Common Stock"), (ii) one of the Company's A Common Stock Purchase
Warrants to purchase one share of the Company's Common Stock exercisable at a
purchase price of $.50 per share of Common Stock (the "A Warrants") and (iii)
one of the Company's B Common Stock Purchase Warrants to purchase one share of
the Company's Common Stock exercisable at a purchase price of $1.00 per share of
Common Stock (the "B Warrants", and together with the A Warrants, the
"Warrants") (such shares of Common Stock issued upon exercise of the Warrants
are hereinafter referred to as the "Warrant Shares", and together with the
Units, Common Stock and the Warrants, the "Securities"); and
B. To induce the Buyers to execute and deliver the Securities
Purchase Agreement, the Company has agreed to provide certain registration
rights under the Securities Act of 1933, as amended, and the rules and
regulations thereunder, or any similar successor statute (collectively, the
"1933 Act"), and applicable state securities laws;
NOW, THEREFORE, in consideration of the premises and the
mutual covenants contained herein and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the Company and the
Buyers hereby agree as follows:
1. DEFINITIONS.
-----------
As used in this Agreement, the following terms shall have the
following meanings:
a. "Investor" means a Buyer and any transferee or assignee
thereof to whom a Buyer assigns its rights under this Agreement and who agrees
to become bound by the provisions of this Agreement in accordance with Section
9.
b. "Person" means a corporation, a limited liability company,
an association, a partnership, an organization, a business, an individual, an
entity, a governmental or political subdivision thereof or a governmental
agency.
1
<PAGE>
c. "register," "registered," and "registration" refer to a
registration effected by preparing and filing one or more Registration
Statements in compliance with the 1933 Act and pursuant to Rule 415 under the
1933 Act or any successor rule providing for offering securities on a continuous
basis ("Rule 415"), and the declaration or ordering of effectiveness of such
Registration Statement(s) by the United States Securities and Exchange
Commission (the "SEC").
d. "Registrable Securities" means (i) the Common Stock issued
and sold pursuant to the Securities Purchase Agreement, (ii) the Warrant Shares
issued or issuable upon exercise of the Warrants and (iii) any shares of capital
stock issued or issuable with respect to the Common Stock, Warrant Shares or the
Warrants as a result of any stock split, stock dividend, recapitalization,
exchange or similar event.
e. "Registration Statement" means a registration statement of
the Company filed under the 1933 Act.
Capitalized terms used herein and not otherwise defined herein shall
have the respective meanings set forth in the Securities Purchase Agreement.
2. REGISTRATION.
------------
a. Mandatory Registration. The Company shall prepare, and, on
or prior to thirty (30) calendar days after the date of the initial issuance of
the Units, file with the SEC a Registration Statement or Registration Statements
(as is necessary), covering the resale of all of the Registrable Securities,
which Registration Statement(s) shall state that, in accordance with Rule 416
promulgated under the 1933 Act, such Registration Statement(s) also covers such
indeterminate number of additional shares of Common Stock as may become issuable
in connection with the Common Stock or upon exercise of the Warrants to prevent
dilution resulting from stock splits, stock dividends or similar transactions.
Such Registration Statement shall initially register for resale 780,000 shares
of Common Stock equal to the number of Registrable Securities as of the date
immediately preceding the date the Registration Statement is initially filed
with the SEC subject to adjustment as provided in Section 3(b). Such registered
shares of Common Stock shall be allocated among the Investors pro rata based on
the total number of Registrable Securities issued or issuable as of each date
that a Registration Statement, as amended, relating to the resale of the
Registrable Securities is declared effective by the SEC. The Company shall use
its reasonable best efforts to have the Registration Statement declared
effective by the SEC within ninety (90) days after the date of the initial
issuance of the Units.
b. Counsel and Investment Bankers. Subject to Section 5
hereof, in connection with any offering pursuant to Section 2, the Buyers shall
have the right to select legal counsel and an investment banker or bankers and
manager or managers to administer their interest in the offering, which
investment banker or bankers or manager or managers shall be reasonably
satisfactory to the Company. The Company shall reasonably cooperate with any
such counsel, investment bankers and managers.
2
<PAGE>
c. Form S-3. The Company shall register the Registrable
Securities on Form S-3 as soon as such form is available, provided that the
Company shall maintain the effectiveness of the Registration Statement then in
effect until such time as a Registration Statement on Form S-3 covering the
Registrable Securities has been declared effective by the SEC. The Company shall
file all reports required to be filed by the Company with the SEC in a timely
manner so as to maintain such eligibility for the use of Form S-3.
3. RELATED OBLIGATIONS.
-------------------
At such time as the Company is obligated to file a
Registration Statement with the SEC pursuant to Section 2(a), the Company will
use its best efforts to effect the registration of the Registrable Securities in
accordance with the intended method of disposition thereof and, pursuant
thereto, the Company shall have the following obligations:
a. The Company shall promptly prepare and file with the SEC a
Registration Statement with respect to the Registrable Securities (on or prior
to the thirtieth (30th) calendar day after the date of the initial issuance of
the Units) and use its reasonable best efforts to cause such Registration
Statement(s) relating to Registrable Securities to become effective as soon as
possible after such filing (but no later than ninety (90) days after the initial
issuance of the Units for the registration of Registrable Securities pursuant to
Section 2(a)), and keep the Registration Statement(s) effective pursuant to Rule
415 at all times until the earlier of (i) the date as of which the Investors may
sell all of the Registrable Securities without restriction pursuant to Rule
144(k) promulgated under the 1933 Act (or successor thereto) and (ii) the date
on which the Investors shall have sold all the Registrable Securities (the
"Registration Period"), which Registration Statement(s) (including any
amendments or supplements thereto and prospectuses contained therein) shall not
contain any untrue statement of a material fact or omit to state a material fact
required to be stated therein, or necessary to make the statements therein, in
light of the circumstances in which they were made, not misleading. In the event
that such Registration Statement is not filed with the SEC within 30 days after
the initial issuance of the Units, the Company will pay the Investors a
nonrefundable penalty payment of Common Stock in the amount of 26,000 shares of
Common Stock for each 30 day period thereafter (prorated for any partial period
thereof) until the Registration Statement is filed.
b. The Company shall prepare and file with the SEC such
amendments (including post-effective amendments) and supplements to the
Registration Statement(s) and the prospectus(es) used in connection with the
Registration Statement(s), which prospectus(es) are to be filed pursuant to Rule
424 promulgated under the 1933 Act, as may be necessary to keep the Registration
Statement(s) effective at all times during the Registration Period, and, during
such period, comply with the provisions of the 1933 Act with respect to the
disposition of all Registrable Securities of the Company covered by the
Registration Statement(s) until such time as all of such Registrable Securities
shall have been disposed of in accordance with the intended methods of
disposition by the seller or sellers thereof as set forth in the Registration
Statement(s). In the event the number of shares available under a Registration
Statement filed pursuant to this Agreement is insufficient to cover all of the
Registrable Securities, the Company shall amend the Registration Statement, or
file a new Registration Statement (on the short form available therefor, if
applicable), or both, so as to cover all of the Registrable Securities, in each
case, as soon as practicable, but in any event within fifteen (15) days after
the necessity therefor arises (based on the market price of the Common Stock and
other relevant factors on which the Company reasonably elects to rely). The
Company shall use it best efforts to cause any such necessary amendment and/or
new Registration Statement to become effective as soon as practicable following
the filing thereof. In addition any such amendment or new Registration Statement
shall for purposes of Section 3(a) above be deemed to be a "Registration
Statement".
3
<PAGE>
c. The Company shall furnish to each Investor whose
Registrable Securities are included in the Registration Statement(s) and its
legal counsel without charge (i) promptly after the same is prepared and filed
with the SEC at least one copy of the Registration Statement and any amendment
thereto, including financial statements and schedules, all documents
incorporated therein by reference and all exhibits, the prospectus(es) included
in such Registration Statement(s) (including each preliminary prospectus) and,
with regards to the Registration Statement, any correspondence by or on behalf
of the Company to the SEC or the staff of the SEC and any correspondence from
the SEC or the staff of the SEC to the Company or its representatives, (ii) upon
the effectiveness of any Registration Statement, ten (10) copies of the
prospectus included in such Registration Statement and all amendments and
supplements thereto (or such other number of copies as such Investor may
reasonably request) and (iii) such other documents, including any preliminary
prospectus, as such Investor may reasonably request in order to facilitate the
disposition of the Registrable Securities owned by such Investor. The Company
will promptly respond to any and all comments received from the SEC, with a view
towards causing any Registration Statement or any amendment thereto to be
declared effective by the SEC as soon as practicable and shall, subject to
Section 3(h), promptly file an acceleration request as soon as practicable
following the resolution or clearance of all SEC comments or, if applicable,
following notification by the SEC that the Registration Statement or any
amendment thereto will not be subject to review.
d. The Company shall use reasonable efforts to (i) register
and qualify the Registrable Securities covered by the Registration Statement(s)
under such other securities or "blue sky" laws of such jurisdictions in the
United States as any Investor reasonably requests, (ii) prepare and file in
those jurisdictions, such amendments (including post-effective amendments) and
supplements to such registrations and qualifications as may be necessary to
maintain the effectiveness thereof during the Registration Period, (iii) take
such other actions as may be necessary to maintain such registrations and
qualifications in effect at all times during the Registration Period, and (iv)
take all other actions reasonably necessary or advisable to qualify the
Registrable Securities for sale in such jurisdictions; provided, however, that
the Company shall not be required in connection therewith or as a condition
thereto to (x) qualify to do business in any jurisdiction where it would not
otherwise be required to qualify but for this Section 3(d), (y) subject itself
to general taxation in any such jurisdiction, or (z) file a general consent to
service of process in any such jurisdiction. The Company shall promptly notify
each Investor who holds Registrable Securities of the receipt by the Company of
any notification with respect to the suspension of the registration or
qualification of any of the Registrable Securities for sale under the securities
or "blue sky" laws of any jurisdiction in the United States or its receipt of
actual notice of the initiation or threatening of any proceeding for such
purpose.
e. In the event Investors who hold a majority of the
Registrable Securities being offered in the offering select underwriters for the
offering, the Company shall, subject to Section 2(b) hereof, enter into and
perform its obligations under an underwriting agreement, in usual and customary
form, including, without limitation, customary indemnification and contribution
obligations, with the underwriters of such offering.
4
<PAGE>
f. As promptly as practicable after becoming aware of such
event, the Company shall notify each Investor in writing of the happening of any
event as a result of which the prospectus included in a Registration Statement,
as then in effect, includes an untrue statement of a material fact or omission
to state a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading, and promptly prepare a supplement or amendment to the
Registration Statement to correct such untrue statement or omission, and deliver
ten (10) copies of such supplement or amendment to each Investor (or such other
number of copies as such Investor may reasonably request). The Company may
postpone such filing for a reasonable period of time, not to exceed 60 days
during any twelve-month period, if the Company has been advised by legal counsel
that such filing would require the disclosure of a material impending
transaction or other material, non-public matter and the Company determined
reasonably and in good faith that such disclosure would have a material adverse
effect on the Company. The Company shall also promptly notify each Investor in
writing (i) when a prospectus or any prospectus supplement or post-effective
amendment has been filed, and when a Registration Statement or any
post-effective amendment has become effective (notification of such
effectiveness shall be delivered to each Investor by facsimile on the same day
of such effectiveness and by overnight mail), (ii) of any request by the SEC for
amendments or supplements to a Registration Statement or related prospectus or
related information, and (iii) of the Company's reasonable determination that a
post-effective amendment to a Registration Statement would be appropriate.
g. The Company shall use its best efforts to prevent the
issuance of any stop order or other suspension of effectiveness of a
Registration Statement, or the suspension of the qualification of any of the
Registrable Securities for sale in any jurisdiction and, if such an order or
suspension is issued, to obtain the withdrawal of such order or suspension at
the earliest possible moment and to notify each Investor who holds Registrable
Securities being sold (and, in the event of an underwritten offering, the
managing underwriters) of the issuance of such order and the resolution thereof
or its receipt of actual notice of the initiation or threat of any proceeding
for such purpose.
h. The Company shall permit each Investor and a single firm of
counsel, designated as selling stockholders' counsel by the Investors who hold a
majority of the Registrable Securities being sold, to review and comment upon
the Registration Statement(s) and all amendments and supplements thereto at
least seven (7) days prior to their filing with the SEC, and not file any
document in a form to which such counsel reasonably objects, provided, however,
that the application of the penalty provisions set forth in Section 3(a) hereof
shall be extended for the number of days that such counsel does not timely
comment thereon (it being understood and agreed that comments shall be deemed
not timely to the extent given more than four (4) days after submission to such
counsel. The Company shall not submit a request for acceleration of the
effectiveness of a Registration Statement(s) or any amendment or supplement
thereto without the prior approval of such counsel, which consent shall not be
unreasonably withheld.
i. At the request of the Investors who hold a majority of the
Registrable Securities being sold, the Company shall furnish, on the date that
Registrable Securities are delivered to an underwriter, if any, for sale in
connection with the Registration Statement (i) if required by an underwriter, a
letter, dated such date, from the Company's independent certified public
accountants in form and substance as is customarily given by independent
certified public accountants to underwriters in an underwritten public offering,
addressed to the underwriters, and (ii) if required by an underwriter, an
opinion, dated as of such date, of counsel representing the Company for purposes
of such Registration Statement, in form, scope and substance as is customarily
given in an underwritten public offering, addressed to the underwriters.
5
<PAGE>
j. The Company shall make available for inspection by (i) any
Investor, (ii) any underwriter participating in any disposition pursuant to a
Registration Statement, (iii) one firm of attorneys and one firm of accountants
or other agents retained by the Investors, and (iv) one firm of attorneys
retained by all such underwriters (collectively, the "Inspectors") all pertinent
financial and other records, and pertinent corporate documents and properties of
the Company (collectively, the "Records"), as shall be reasonably deemed
necessary by each Inspector to enable each Inspector to exercise its due
diligence responsibility, and cause the Company's officers, directors and
employees to supply all information which any Inspector may reasonably request
for purposes of such due diligence; provided, however, that each Inspector shall
hold in strict confidence and shall not make any disclosure (except to an
Investor) or use of any Record or other information which the Company determines
in good faith to be confidential, and of which determination the Inspectors are
so notified, unless (a) the disclosure of such Records is necessary to avoid or
correct a misstatement or omission in any Registration Statement or is otherwise
required under the 1933 Act, (b) the release of such Records is ordered pursuant
to a final, non-appealable subpoena or order from a court or government body of
competent jurisdiction, or (c) the information in such Records has been made
generally available to the public other than by disclosure in violation of this
Agreement. Each Investor agrees that it shall, upon learning that disclosure of
such Records is sought in or by a court or governmental body of competent
jurisdiction or through other means, give prompt notice to the Company and allow
the Company, at its expense, to undertake appropriate action to prevent
disclosure of, or to obtain a protective order for, the Records deemed
confidential. Nothing herein (or in any other confidentiality agreement between
the Company and any Investor) shall be deemed to limit the Investors' ability to
sell Registrable Securities in a manner which is otherwise consistent with
applicable laws and regulations.
k. The Company shall hold in confidence and not make any
disclosure of information concerning an Investor provided to the Company unless
(i) disclosure of such information is necessary to comply with federal or state
securities laws, (ii) the disclosure of such information is necessary to avoid
or correct a misstatement or omission in any Registration Statement, (iii) the
release of such information is ordered pursuant to a subpoena or other final,
non-appealable order from a court or governmental body of competent
jurisdiction, or (iv) such information has been made generally available to the
public other than by disclosure by the Company in violation of this or any other
agreement. The Company agrees that it shall, upon learning that disclosure of
such information concerning an Investor is sought in or by a court or
governmental body of competent jurisdiction or through other means, give prompt
written notice to such Investor and allow such Investor, at the Investor's
expense, to undertake appropriate action to prevent disclosure of, or to obtain
a protective order for, such information.
l. The Company shall use its best efforts either to (i) cause
all the Registrable Securities covered by a Registration Statement to be listed
on each securities exchange on which securities of the same class or series
issued by the Company are then listed, if any, if the listing of such
6
<PAGE>
Registrable Securities is then permitted under the rules of such exchange, or
(ii) if securities of the same class or series issued by the Company are then
designated or quoted on the Nasdaq National Market System or Nasdaq SmallCap
Market, secure designation and quotation of all the Registrable Securities
covered by the Registration Statement on the Nasdaq National Market System or
the Nasdaq SmallCap Market, as applicable, and, without limiting the generality
of the foregoing, to arrange for at least two market makers to register with the
New York Stock Exchange or, if applicable, the National Association of
Securities Dealers, Inc. as such with respect to such Registrable Securities.
The Company shall pay all fees and expenses in connection with satisfying its
obligation under this Section 3(l).
m. The Company shall cooperate with the Investors who hold
Registrable Securities being offered and, to the extent applicable, any managing
underwriter or underwriters, to facilitate the timely preparation and delivery
of certificates (not bearing any restrictive legend) representing the
Registrable Securities to be offered pursuant to a Registration Statement and
enable such certificates to be in such denominations or amounts, as the case may
be, as the managing underwriter or underwriters, if any, or, if there is no
managing underwriter or underwriters, the Investors may reasonably request and
registered in such names as the managing underwriter or underwriters, if any, or
the Investors may request. Not later than the date on which any Registration
Statement registering the resale of Registrable Securities is declared
effective, the Company shall deliver to its transfer agent instructions,
accompanied by any reasonably required opinion of counsel, that permit sales of
unlegended securities in a timely fashion that complies with then mandated
securities settlement procedures for regular way market transactions.
n. The Company shall take all other reasonable actions
necessary to expedite and facilitate disposition by the Investors of Registrable
Securities pursuant to a Registration Statement.
o. The Company shall provide a CUSIP number and a transfer
agent of all such Registrable Securities not later than the effective date of
such Registration Statement.
p. If requested by the managing underwriters or an Investor,
the Company shall immediately incorporate in a prospectus supplement or
post-effective amendment such information as the managing underwriters and the
Investors agree should be included therein relating to the sale and distribution
of Registrable Securities, including, without limitation, information with
respect to the number of Registrable Securities being sold to such underwriters,
the purchase price being paid therefor by such underwriters and with respect to
any other terms of the underwritten (or best efforts underwritten) offering of
the Registrable Securities to be sold in such offering; make all required
filings of such prospectus supplement or post-effective amendment as soon as
notified of the matters to be incorporated in such prospectus supplement or
post-effective amendment; and supplement or make amendments to any Registration
Statement if requested by a shareholder or any underwriter of such Registrable
Securities.
q. The Company shall use its best efforts to cause the
Registrable Securities covered by the applicable Registration Statement to be
registered with or approved by such other governmental agencies or authorities
as may be necessary to consummate the disposition of such Registrable
Securities.
7
<PAGE>
r. The Company shall otherwise use its best efforts to comply
with all applicable rules and regulations of the SEC in connection with any
registration hereunder.
4. OBLIGATIONS OF THE INVESTORS.
----------------------------
a. At least seven (7) days prior to the first anticipated
filing date of the Registration Statement, the Company shall notify each
Investor or its counsel in writing of the information the Company requires from
each such Investor if such Investor elects to have any of such Investor's
Registrable Securities included in the Registration Statement. It shall be a
condition precedent to the obligations of the Company to complete the
registration pursuant to this Agreement with respect to the Registrable
Securities of a particular Investor that such Investor shall furnish to the
Company such information as may be requested in writing by the Company regarding
itself, the Registrable Securities held by it and the intended method of
disposition of the Registrable Securities held by it as shall be reasonably
required to effect the registration of such Registrable Securities and shall
execute such documents in connection with such registration as the Company may
reasonably request.
b. Each Investor by such Investor's acceptance of the
Registrable Securities agrees to cooperate with the Company as reasonably
requested by the Company in connection with the preparation and filing of the
Registration Statement(s) hereunder unless such Investor has notified the
Company in writing of such Investor's election to exclude all of such Investor's
Registrable Securities from the Registration Statement.
c. Each Investor agrees that, upon receipt of any notice from
the Company of the happening of any event of the kind described in Section 3(g)
or the first sentence of 3(f), such Investor will immediately discontinue
disposition of Registrable Securities pursuant to the Registration Statement(s)
covering such Registrable Securities until such Investor's receipt of the copies
of the supplemented or amended prospectus contemplated by Section 3(g) or the
first sentence of 3(f) and, if so directed by the Company, such Investor shall
deliver to the Company (at the expense of the Company) or destroy all copies in
such Investor's possession, of the prospectus covering such Registrable
Securities current at the time of receipt of such notice.
d. No Investor may participate in any underwritten
registration hereunder unless such Investor (i) agrees to sell such Investor's
Registrable Securities on the basis provided in any underwriting arrangements
approved by the Investors entitled hereunder to approve such arrangements, (ii)
completes and executes all questionnaires, powers of attorney, indemnities,
underwriting agreements and other documents reasonably required under the terms
of such underwriting arrangements, and (iii) agrees to pay its pro rata share of
all underwriting discounts and commissions.
5. EXPENSES OF REGISTRATION.
------------------------
All reasonable expenses, other than underwriting discounts and
commissions, incurred in connection with registrations, filings or
qualifications pursuant to Sections 2 and 3, including, without limitation, all
registration, listing and qualifications fees, printers and accounting fees, and
fees and disbursements of counsel for the Company and fees and disbursements of
one counsel for the Investors (up to a maximum of $5,000 per registration) shall
be paid by the Company. In addition, the Company shall pay all of the Investors'
reasonable costs (including legal fees) incurred in connection with the
successful enforcement of the Investors' rights hereunder.
8
<PAGE>
6. INDEMNIFICATION.
---------------
In the event any Registrable Securities are included in a
Registration Statement under this Agreement:
a. To the fullest extent permitted by law, the Company will,
and hereby does, indemnify, hold harmless and defend each Investor who holds
such Registrable Securities, the directors, officers, partners, employees,
agents and each Person, if any, who controls any Investor within the meaning of
the 1933 Act or the Securities Exchange Act of 1934, as amended (the "1934
Act"), and any underwriter (as defined in the 1933 Act) for the Investors, and
the directors and officers of, and each Person, if any, who controls any such
underwriter within the meaning of the 1933 Act or the 1934 Act (each, an
"Indemnified Person"), against any losses, claims, damages, liabilities,
judgments, fines, penalties, charges, costs, attorneys' fees, amounts paid in
settlement or expenses, joint or several (collectively, "Claims"), incurred in
investigating, preparing or defending any action, claim, suit, inquiry,
proceeding, investigation or appeal taken from the foregoing by or before any
court or governmental, administrative or other regulatory agency, body or the
SEC, whether pending or threatened, whether or not an indemnified party is or
may be a party thereto ("Indemnified Damages"), to which any of them may become
subject insofar as such Claims (or actions or proceedings, whether commenced or
threatened, in respect thereof) arise out of or are based upon: (i) any untrue
statement or alleged untrue statement of a material fact in a Registration
Statement or any post-effective amendment thereto or in any filing made in
connection with the qualification of the offering under the securities or other
"blue sky" laws of any jurisdiction in which Registrable Securities are offered,
or the omission or alleged omission to state a material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances under which the statements therein were made, not misleading, (ii)
any untrue statement or alleged untrue statement of a material fact contained in
any preliminary prospectus if used prior to the effective date of such
Registration Statement, or contained in the final prospectus (as amended or
supplemented, if the Company files any amendment thereof or supplement thereto
with the SEC) or the omission or alleged omission to state therein any material
fact necessary to make the statements made therein, in light of the
circumstances under which the statements therein were made, not misleading, or
(iii) any violation or alleged violation by the Company of the 1933 Act, the
1934 Act, any other law, including, without limitation, any state securities
law, or any rule or regulation thereunder relating to the offer or sale of the
Registrable Securities pursuant to a Registration Statement (the matters in the
foregoing clauses (i) through (iii) being, collectively, "Violations"). Subject
to the restrictions set forth in Section 6(d) with respect to the number of
legal counsel, the Company shall reimburse the Investors and each such
underwriter or controlling person, promptly as such expenses are incurred and
are due and payable, for any legal fees or other reasonable expenses incurred by
them in connection with investigating or defending any such Claim.
Notwithstanding anything to the contrary contained herein, the indemnification
agreement contained in this Section 6(a): (i) shall not apply to a Claim arising
out of or based upon a Violation which occurs in reliance upon and in conformity
with information furnished in writing to the Company by any Indemnified Person
or underwriter for such Indemnified Person expressly for use in connection with
9
<PAGE>
the preparation of the Registration Statement or any such amendment thereof or
supplement thereto; (ii) with respect to any preliminary prospectus, shall not
inure to the benefit of any such person from whom the person asserting any such
Claim purchased the Registrable Securities that are the subject thereof (or to
the benefit of any person controlling such person) if the untrue statement or
omission of material fact contained in the preliminary prospectus was corrected
in the prospectus, as then amended or supplemented, if such prospectus was
timely made available by the Company pursuant to Section 3(c), and the
Indemnified Person was promptly advised in writing not to use the incorrect
prospectus prior to the use giving rise to a Violation and such Indemnified
Person, notwithstanding such advice, used it; and (iii) shall not apply to
amounts paid in settlement of any Claim if such settlement is effected without
the prior written consent of the Company, which consent shall not be
unreasonably withheld. Such indemnity shall remain in full force and effect
regardless of any investigation made by or on behalf of the Indemnified Person
and shall survive the transfer of the Registrable Securities by the Investors
pursuant to Section 9.
b. In connection with any Registration Statement in which an
Investor is participating, each such Investor agrees to severally and not
jointly indemnify, hold harmless and defend, to the same extent and in the same
manner as is set forth in Section 6(a), the Company, each of its directors, each
of its officers who signs the Registration Statement, each Person, if any, who
controls the Company within the meaning of the 1933 Act or the 1934 Act
(collectively and together with an Indemnified Person, an "Indemnified Party"),
against any Claim or Indemnified Damages to which any of them may become
subject, under the 1933 Act, the 1934 Act or otherwise, insofar as such Claim or
Indemnified Damages 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 to the Company by such
Investor expressly for use in connection with such Registration Statement; and,
subject to Section 6(d), such Investor will reimburse any legal or other
expenses reasonably incurred by them in connection with investigating or
defending any such Claim; provided, however, that the indemnity agreement
contained in this Section 6(b) and the agreement with respect to contribution
contained in Section 7 shall not apply to amounts paid in settlement of any
Claim if such settlement is effected without the prior written consent of such
Investor, which consent shall not be unreasonably withheld; provided, further,
however, that the Investor shall be liable under this Section 6(b) for only that
amount of a Claim or Indemnified Damages as does not exceed the net proceeds to
such Investor as a result of the sale of Registrable Securities pursuant to such
Registration Statement. Such indemnity shall remain in full force and effect
regardless of any investigation made by or on behalf of such Indemnified Party
and shall survive the transfer of the Registrable Securities by the Investors
pursuant to Section 9. Notwithstanding anything to the contrary contained
herein, the indemnification agreement contained in this Section 6(b) with
respect to any preliminary prospectus shall not inure to the benefit of any
Indemnified Party if the untrue statement or omission of material fact contained
in the preliminary prospectus was corrected on a timely basis in the prospectus,
as then amended or supplemented.
c. The Company shall be entitled to receive indemnities from
underwriters, selling brokers, dealer managers and similar securities industry
professionals participating in any distribution, to the same extent as provided
above, with respect to information such persons so furnished in writing
expressly for inclusion in the Registration Statement.
10
<PAGE>
d. Promptly after receipt by an Indemnified Person or
Indemnified Party under this Section 6 of notice of the commencement of any
action or proceeding (including any governmental action or proceeding) involving
a Claim, such Indemnified Person or Indemnified Party shall, if a Claim in
respect thereof is to be made against any indemnifying party under this Section
6, 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 control of the defense thereof
with counsel reasonably satisfactory to the Indemnified Person or the
Indemnified Party, as the case may be; provided, however, that an Indemnified
Person or Indemnified Party shall have the right to retain its own counsel with
the fees and expenses to be paid by the indemnifying party, if, in the
reasonable opinion of counsel retained by the Indemnified Person or Indemnified
Party, as the case may be, the representation by such counsel of the Indemnified
Person or Indemnified Party and the indemnifying party would be inappropriate
due to actual or potential differing interests between such Indemnified Person
or Indemnified Party and any other party represented by such counsel in such
proceeding. The Company shall pay reasonable fees for only one separate legal
counsel for the Investors, and such legal counsel shall be selected by the
Investors holding a majority in interest of the Registrable Securities included
in the Registration Statement to which the Claim relates. The Indemnified Party
or Indemnified Person shall cooperate fully with the indemnifying party in
connection with any negotiation or defense of any such action or claim by the
indemnifying party and shall furnish to the indemnifying party all information
reasonably available to the Indemnified Party or Indemnified Person which
relates to such action or claim. The indemnifying party shall keep the
Indemnified Party or Indemnified Person fully apprised at all times as to the
status of the defense or any settlement negotiations with respect thereto. No
indemnifying party shall be liable for any settlement of any action, claim or
proceeding effected without its written consent, provided, however, that the
indemnifying party shall not unreasonably withhold, delay or condition its
consent. No indemnifying party shall, without the consent of the Indemnified
Party or Indemnified Person, which consent shall not be unreasonably withheld,
delayed or conditioned, consent to entry of any judgment or enter into any
settlement or other compromise which does not include as an unconditional term
thereof the giving by the claimant or plaintiff to such Indemnified Party or
Indemnified Person of a release from all liability in respect to such claim or
litigation. Following indemnification as provided for hereunder, the
indemnifying party shall be subrogated to all rights of the Indemnified Party or
Indemnified Person with respect to all third parties, firms or corporations
relating to the matter for which indemnification has been made. 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 Person or Indemnified Party under this Section 6,
except to the extent that the indemnifying party is prejudiced in its ability to
defend such action.
e. The indemnification required by this Section 6 shall be
made by periodic payments of the amount thereof during the course of the
investigation or defense, as and when bills are received or Indemnified Damages
are incurred.
11
<PAGE>
f. The indemnity agreements contained herein shall be in
addition to (i) any cause of action or similar right of the Indemnified Party or
Indemnified Person against the indemnifying party or others, and (ii) any
liabilities the indemnifying party may be subject to pursuant to the law.
7. CONTRIBUTION.
------------
To the extent any indemnification by an indemnifying party is
prohibited or limited by law, the indemnifying party agrees to make the maximum
contribution with respect to any amounts for which it would otherwise be liable
under Section 6 to the fullest extent permitted by law; provided, however, that:
(i) no contribution shall be made under circumstances where the maker would not
have been liable for indemnification under the fault standards set forth in
Section 6; (ii) no seller of Registrable Securities guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the 1933 Act) shall be
entitled to contribution from any seller of Registrable Securities who was not
guilty of fraudulent misrepresentation; and (iii) contribution (together with
any indemnification or other obligations under this Agreement) by any seller of
Registrable Securities shall be limited in amount to the net amount of proceeds
received by such seller from the sale of such Registrable Securities.
8. REPORTS UNDER THE 1934 ACT.
--------------------------
With a view to making available to the Investors the benefits
of Rule 144 promulgated under the 1933 Act or any other similar rule or
regulation of the SEC that may at any time permit the Investors to sell
securities of the Company to the public without registration ("Rule 144"), the
Company agrees to:
a. make and keep public information available, as those terms
are understood and defined in Rule 144;
b. file with the SEC in a timely manner all reports and other
documents required of the Company under the 1933 Act and the 1934 Act so long as
the Company remains subject to such requirements (it being understood that
nothing herein shall limit the Company's obligations under Section 4(c) of the
Securities Purchase Agreement) and the filing of such reports and other
documents is required for the applicable provisions of Rule 144; and
c. furnish to each Investor so long as such Investor owns
Registrable Securities, promptly upon request, (i) a written statement by the
Company that it has complied with the reporting requirements of Rule 144, the
1933 Act and the 1934 Act, (ii) a copy of the most recent annual or quarterly
report of the Company and such other reports and documents so filed by the
Company, and (iii) such other information as may be reasonably requested to
permit the Investors to sell such securities pursuant to Rule 144 without
registration.
9. ASSIGNMENT OF REGISTRATION RIGHTS.
---------------------------------
The rights to have the Company register Registrable Securities
pursuant to this Agreement shall be automatically assignable by the Investors to
any transferee or assignee (a "Transferee") of all or any portion of Registrable
12
<PAGE>
Securities representing the equivalent of at least 40,000 shares of Common Stock
(as appropriately adjusted for stock splits, stock dividends and reverse stock
splits) if: (i) the Investor agrees in writing with the Transferee to assign
such rights, and a copy of such agreement is furnished to the Company within a
reasonable time after such assignment; (ii) the Company is, within a reasonable
time after such transfer or assignment, furnished with written notice of (a) the
name and address of such Transferee, and (b) the securities with respect to
which such registration rights are being transferred or assigned; (iii)
immediately following such transfer or assignment the further disposition of
such securities by the Transferee is restricted under the 1933 Act and
applicable state securities laws; (iv) at or before the time the Company
receives the written notice contemplated by clause (ii) of this sentence the
Transferee agrees in writing with the Company to be bound by all of the
provisions contained herein; (v) such transfer shall have been made in
accordance with the applicable requirements of the Securities Purchase
Agreement; (vi) such Transferee shall be an "accredited investor" as that term
is defined in Rule 501 of Regulation D promulgated under the 1933 Act; and (vii)
in the event the assignment occurs subsequent to the date of effectiveness of
the Registration Statement required to be filed pursuant to Section 2(a), the
Transferee agrees to pay all reasonable expenses of amending or supplementing
such Registration Statement to reflect such assignment.
10. AMENDMENT OF REGISTRATION RIGHTS.
--------------------------------
Provisions of this Agreement may be amended and the observance
thereof may be waived (either generally or in a particular instance and either
retroactively or prospectively), only with the written consent of the Company
and Investors who hold two-thirds (2/3) of the Registrable Securities. Any
amendment or waiver effected in accordance with this Section 10 shall be binding
upon each Investor and the Company.
11. MISCELLANEOUS.
-------------
a. A person or entity is deemed to be a holder of Registrable
Securities whenever such person or entity owns of record such Registrable
Securities. If the Company receives conflicting instructions, notices or
elections from two or more persons or entities with respect to the same
Registrable Securities, the Company shall act upon the basis of instructions,
notices or elections received from the registered owner of such Registrable
Securities.
b. Any notices, consents, waivers or other communications
required or permitted to be given under the terms of this Agreement must be in
writing and will be deemed to have been delivered (i) upon receipt, when
delivered personally; (ii) upon receipt, when sent by facsimile, provided a copy
is mailed by U.S. certified mail, return receipt requested; (iii) three (3) days
after being sent by U.S. certified mail, return receipt requested; or (iv) one
(1) day after deposit with a nationally recognized overnight delivery service,
in each case properly addressed to the party to receive the same. The addresses
and facsimile numbers for such communications shall be:
13
<PAGE>
if to the Company:
Capita Research Group, Inc.
591 Skippack Pike
Suite 300
Blue Bell, Pennsylvania 19422
Telephone: 215-619-7777
Facsimile: 215-619-0775
Attention: Chief Financial Officer
With a copy to:
Torys
237 Park Avenue
New York, New York 10017
Facsimile: 212-682-0200
Attention: Andrew J. Beck, Esq.
if to a Buyer, to its address and facsimile number on the
Schedule of Buyers attached hereto, with copies to such
Buyer's counsel as set forth on the Schedule of Buyers.
Each party shall provide five (5) days prior notice to the other party
of any change in address, phone number or facsimile number.
c. Failure of any party to exercise any right or remedy under
this Agreement or otherwise, or delay by a party in exercising such right or
remedy, shall not operate as a waiver thereof.
d. This Agreement shall be governed by and interpreted in
accordance with the laws of the State of New York without regard to the
principles of conflict of laws. If any provision of this Agreement shall be
invalid or unenforceable in any jurisdiction, such invalidity or
unenforceability shall not affect the validity or enforceability of the
remainder of this Agreement in that jurisdiction or the validity or
enforceability of any provision of this Agreement in any other jurisdiction.
e. This Agreement, the Warrants and the Securities Purchase
Agreement (including all schedules and exhibits thereto) constitute the entire
agreement among the parties hereto with respect to the subject matter hereof and
thereof. There are no restrictions, promises, warranties or undertakings, other
than those set forth or referred to herein and therein. The aforementioned
documents supersede all prior agreements and understandings among the parties
hereto with respect to the subject matter hereof and thereof.
f. Subject to the requirements of Section 9, this Agreement
shall inure to the benefit of and be binding upon the permitted successors and
assigns of each of the parties hereto.
g. The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.
14
<PAGE>
h. This Agreement may be executed in two or more identical
counterparts, each of which shall be deemed an original but all of which shall
constitute one and the same agreement. This Agreement, once executed by a party,
may be delivered to the other party hereto by facsimile transmission of a copy
of this Agreement bearing the signature of the party so delivering this
Agreement.
i. Each party shall do and perform, or cause to be done and
performed, all such further acts and things, and shall execute and deliver all
such other agreements, certificates, instruments and documents, as the other
party may reasonably request in order to carry out the intent and accomplish the
purposes of this Agreement and the consummation of the transactions contemplated
hereby.
* * *
15
<PAGE>
IN WITNESS WHEREOF, the Buyers and the Company have caused
this Registration Rights Agreement to be duly executed as of the date first
written above.
COMPANY:
CAPITA RESEARCH GROUP, INC.
By:/s/ David B. Hunter
----------------------
Name: David B. Hunter
Its: President
16
<PAGE>
THE BUYERS:
-----------
/s/ Andrew Gitlin
-----------------
Andrew Gitlin
/s/ John Lepore
---------------
John Lepore
/s/ Edward Okine
----------------
Edward Okine
/s/ Philip Platek
-----------------
Philip Platek
/s/ Howard Fischer
------------------
Howard Fischer
/s/ Michael Hamblett
--------------------
Michael Hamblett
17
<PAGE>
SCHEDULE OF BUYERS
Investor Name, Address and Number of shares of Number of
Facsimile Number Common Stock Warrants
---------------- ------------ --------
Andrew Gitlin 30,000 30,000 (A Warrants)
16 Outlook Drive
Darien, CT 06820 30,000 (B Warrants)
(203) 324-8498
John Lepore 20,000 20,000(A Warrants)
167 Old Hyde Road
Weston, CT 06883
(2030 324-8498) 20,000(B Warrants)
Edward Okine 10,000 10,000(A Warrants)
162 Steephill Road
Weston, CT 06883 10,000(B Warrants)
Philip Platek 20,000 20,000(A Warrants)
10 Old Redding Rd
Weston, CT 06883 20,000(B Warrants)
Howard Fischer 80,000 80,000(A Warrants)
36 Wampus Lake Drive
Armonk, NY 10504 80,000(B Warrants)
(203) 324-8498
Michael Hamblett 100,000 100,000(A Warrants)
5 Mckinnel Court
Branford, CT 06405 100,000(B Warrants)
(203) 324-8498
18
Exhibit 23(b)
CONSENT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors
Capita Research Group, Inc.
Blue Bell, Pennsylvania
We consent to the inclusion of our report, dated March 19, 1999, on the
consolidated financial statements of Capita Research Group, Inc. and Subsidiary,
and to the reference to our Firm under the heading "Experts," in the
Registration Statement on Form SB-2, relating to registration of 5,380,000
shares of the Company's common stock.
/s/RUDOLPH, PALITZ LLC
----------------------
Rudolph, Palitz LLC
Blue Bell, Pennsylvania
February 10, 2000
