UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 13D
Under the Securities Exchange Act of 1934
WILTEK, INC.
------------
(Name of Issuer)
Common Stock, no par value
--------------------------
(Title of Class of Securities)
972482103
---------
(CUSIP Number)
John C. Maxwell
Managing Director
Commercial Electronics, LLC
375 Park Avenue, Suite 1604
New York, New York 10152
Tel No.: (212) 755-9100
(Name, Address and Telephone Number of
Person Authorized to Receive Notices
and Communications)
January 28, 1999
----------------
(Date of Event which Requires Filing of
this Statement)
If the filing person has previously filed a statement on Schedule 13G to report
the acquisition which is the subject of this Schedule 13D, and is filing this
schedule because of Rule 13d-1(b)(3) or (4), check the following box [ ].
Check the following box if a fee is being paid with the statement [ ].
Exhibit Index is at Page 11
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CUSIP NO. 972482103
1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
Commercial Electronics Capital Partnership, L.P.
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) [X]
(b) [ ]
3 SEC USE ONLY
4 SOURCE OF FUNDS
WC
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT
TO ITEM 2(D) OR 2(E) [ ]
6 CITIZENSHIP OR PLACE OF ORGANIZATION
Delaware
7 SOLE VOTING POWER
1,183,040 shares of Common Stock 1/
NUMBER OF 8 SHARED VOTING POWER
SHARES -0-
BENEFICIALLY OWNED
BY EACH REPORTING 9 SOLE DISPOSITIVE POWER
PERSON 1,183,040 shares of Common Stock
WITH
10 SHARED DISPOSITIVE POWER
-0-
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
1,183,040 shares of Common Stock
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN
SHARES [ ]
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
24%
14 TYPE OF REPORTING PERSON
PN
- ------- ------------------------
1/ Includes ownership of (i) 183,040 shares of Common Stock, (ii) 625,00
shares of Common Stock issuable upon conversion of 250,000 shares of
Preferred Stock and (iii) 375,000 shares of Common Stock issuable upon
exercise of 375,000 Warrants to purchase Common Stock.
2
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CUSIP NO. 972482103
1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
Commercial Electronics, L.L.C.
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) [X]
(b) [ ]
3 SEC USE ONLY
4 SOURCE OF FUNDS
WC
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT
TO ITEM 2(D) OR 2(E) [ ]
6 CITIZENSHIP OR PLACE OF ORGANIZATION
Delaware
7 SOLE VOTING POWER
3,549,120 shares of Common Stock 2/
NUMBER OF 8 SHARED VOTING POWER
SHARES -0-
BENEFICIALLY OWNED
BY EACH REPORTING 9 SOLE DISPOSITIVE POWER
PERSON 3,549,120 shares of Common Stock
WITH
10 SHARED DISPOSITIVE POWER
-0-
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
3,549,120 shares of Common Stock
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN
SHARES [ ]
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
51.5%
14 TYPE OF REPORTING PERSON
OO
- ------- ------------------------
2/ Includes ownership of (i) 549,120 shares of Common Stock, (ii)
1,875,000 shares of Common Stock issuable upon conversion of 750,000
shares of Preferred Stock and (iii) 1,125,000 shares of Common Stock
issuable upon exercise of 1,125,000 Warrants to purchase Common Stock.
3
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CUSIP NO. 972482103
1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
Electronic Investments, L.L.C.
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) [X]
(b) [ ]
3 SEC USE ONLY
4 SOURCE OF FUNDS
OO
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT
TO ITEM 2(D) OR 2(E) [ ]
6 CITIZENSHIP OR PLACE OF ORGANIZATION
Delaware
7 SOLE VOTING POWER
NUMBER OF 8 SHARED VOTING POWER
SHARES 1,183,040 shares of Common Stock 3/
BENEFICIALLY OWNED
BY EACH REPORTING 9 SOLE DISPOSITIVE POWER
PERSON
WITH
10 SHARED DISPOSITIVE POWER
1,183,040 shares of Common Stock
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
1,183,040 shares of Common Stock
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN
SHARES [ ]
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
24%
14 TYPE OF REPORTING PERSON
OO
- ------- ------------------------
3/ Includes ownership of (i) 183,040 shares of Common Stock, (ii) 625,000
shares of Common Stock issuable upon conversion of 250,000 shares of
Preferred Stock and (iii) 375,000 shares of Common Stock issuable upon
exercise of 375,000 Warrants to purchase Common Stock.
4
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CUSIP NO. 972482103
1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
Michael P. Schulhof
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) [X]
(b) [ ]
3 SEC USE ONLY
4 SOURCE OF FUNDS
OO
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT
TO ITEM 2(D) OR 2(E) [ ]
6 CITIZENSHIP OR PLACE OF ORGANIZATION
United States
7 SOLE VOTING POWER
4,732,160 shares of Common Stock 4/
NUMBER OF 8 SHARED VOTING POWER
SHARES
BENEFICIALLY OWNED
BY EACH REPORTING 9 SOLE DISPOSITIVE POWER
PERSON 4,732,160 shares of Common Stock
WITH
10 SHARED DISPOSITIVE POWER
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
4,732,160 shares of Common Stock
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN
SHARES [ ]
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
60%
14 TYPE OF REPORTING PERSON
IN
- ------- ------------------------
4/ Includes beneficial ownership of (i) 732,160 shares of Common Stock,
(ii) 2,500,000 shares of Common Stock issuable upon conversion of
1,000,000 shares of Preferred Stock and (iii) 1,500,000 shares of
Common Stock issuable upon exercise of 1,500,000 Warrants to purchase
Common Stock.
5
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SCHEDULE 13D
ITEM 1. SECURITY AND ISSUER.
This statement relates to the common stock, no par value ("Common
Stock"), of Wiltek, Inc., a Connecticut corporation (the "Company"). The address
of the Company's principal executive office is 542 Westport Avenue, Norwalk,
Connecticut 06851-4492. Certain shares of Common Stock that are the subject of
this statement are issuable upon conversion into Common Stock of shares of the
Company's Series A Senior Convertible Preferred Stock, no par value (the "Series
A Preferred Stock"), initially at a conversion rate of 2.5 shares of Common
Stock for each share of Series A Preferred Stock, and warrants (the "Warrants")
to purchase shares of Common Stock at a price of $1.00 per share, subject to
adjustment in certain instances.
ITEM 2. IDENTITY AND BACKGROUND.
(a) - (f). This statement is filed by (i) Commercial Electronics,
L.L.C., a Delaware limited liability company ("CE LLC"), (ii) Commercial
Electronics Capital Partnership, L.P., a Delaware limited partnership ("CECAP"),
(iii) Electronics Investments, L.L.C., a Delaware limited liability company ("EI
LLC"), which serves as the general partner of CECAP, and (iv) Michael P.
Schulhof, an individual and United States Citizen, who serves as the Manager of
CE LLC and EI LLC. The principal place of business of CE LLC, CECAP, EI LLC and
Mr. Schulhof is c/o Commercial Electronics, L.L.C., 375 Park Avenue, Suite 1604,
New York, New York 10152.
The principal business of CE LLC, CECAP and EI LLC consists of
investments in securities of public and private technology companies. EI LLC is
the general partner of CECAP and in such capacity, EI LLC may be deemed to have
shared voting and dispositive power over all of the Common Stock, Series A
Preferred Stock and Warrants held by CECAP. Mr. Schulhof is a private investor
and is acting as the Manager of CE LLC and EI LLC. In such capacity, Mr.
Schulhof exercises sole voting and dispositive power over all of the Common
Stock, Series A Preferred Stock and Warrants held by CE LLC and CECAP.
During the past five years, none of the entities and persons listed
above has been convicted in a criminal proceeding (excluding traffic violations
or similar misdemeanors) or has been a party to a civil proceeding of a judicial
or administrative body of competent jurisdiction and as a result of such
proceeding was or is subject to a judgment, decree or final order enjoining
future violations of, or prohibiting or mandating activities subject to, federal
or state securities laws or finding any violation with respect to such laws.
ITEM 3. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION.
Pursuant to the Stock Purchase Agreement, dated January 28, 1999, among
CECAP, CE LLC and certain stockholders of the Company named therein (the "Stock
Purchase Agreement"), CECAP purchased an aggregate of 183,040 shares of Common
Stock for a total
6
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purchase price of $155,584, and CE LLC purchased an aggregate of 549,120 shares
of Common Stock for a total purchase price of $466,752. The Stock Purchase
Agreement is attached hereto as Exhibit 6.
Pursuant to the Securities Purchase Agreement, dated January 28, 1999,
among the Company, CECAP and CE LLC (the "Securities Purchase Agreement"), CECAP
purchased from the Company 250,000 shares of Series A Preferred Stock and
375,000 Warrants for a total purchase Price of $750,000 and CE LLC purchased
from the Company 750,000 shares of Series A Preferred Stock and 1,125,000
Warrants for a total purchase price of $2,250,000. The Securities Purchase
Agreement is attached hereto as Exhibit 1. Funding of such amounts was provided
by contributions to CECAP and CE LLC as capital by its respective partners and
members.
ITEM 4. PURPOSE OF TRANSACTION.
CECAP, CE LLC, EI LLC and Mr. Schulhof acquired the securities of the
Company to obtain a controlling equity interest in the Company. Depending on
their evaluation of the Company's business and prospects, and upon future
developments (including, but not limited to, performance of the Common Stock in
the market, availability of funds, alternative uses of funds, and money, stock
market and general economic conditions), any of CECAP, CE LLC, EI LLC and Mr.
Schulhof may, from time to time, purchase additional securities of the Company,
dispose of all or a portion of the securities respectively held by them, or
cease buying or selling such securities. Any such additional purchases or sales
of the securities of the Company may be in open market or privately-negotiated
transactions or otherwise.
Pursuant to the Securities Purchase Agreement, the Company has caused
three vacancies, constituting a majority of the Board of Directors of the
Company (the "Board of Directors"), to be created on the Board of Directors and
has elected Messrs. Peter Boni, John Maxwell and Richard Rankin, individuals
designated by CECAP and CE LLC, to fill such vacancies. The Securities Purchase
Agreement also provides that for at least two years after the closing date of
the Securities Purchase Agreement, one member of the Board of Directors will be
an independent director and one director will be the Chief Executive Officer of
the Company. In addition, the Securities Purchase Agreement provides that
commencing with the annual meeting of stockholders of the Company immediately
following the election of the foregoing persons to the Board of Directors, and
at each subsequent annual meeting of stockholders of the Company, so long as
CECAP and CE LLC collectively hold Common Stock, Preferred Stock convertible
and/or Warrants exercisable, in each case, after giving effect to any
adjustments, into shares of Common Stock that represent in the aggregate 25% or
more of the total number of shares of Common Stock then outstanding, CECAP and
CE LLC will have the right to nominate that number of directors to the Board of
Directors that would constitute a majority of the Board of Directors, and the
Company will cause such nominees to be included in the slate of nominees
recommended by the Board of Directors to the Company's stockholders for election
and the Company will use its best efforts to cause the election of such
nominees, including voting all shares for which the Company holds proxies or is
otherwise entitled to vote, in favor of the election of such nominees.
Other than as set forth above, CECAP, CE LLC, EI LLC and Mr. Schulhof
have no plans with respect to any matter specified in Item 4 of Schedule 13D or
any similar action to those enumerated therein.
7
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ITEM 5. INTEREST IN SECURITIES OF THE ISSUER.
(a)-(b) CECAP has the right to acquire 625,000 shares of Common Stock
at any time upon conversion of all or any portion of the 250,000 shares of
Series A Preferred Stock held by it. In addition, CECAP has the right, as owner
of 375,000 Warrants, to acquire all or any portion of 375,000 shares of Common
Stock at a price of $1.00 per share at any time prior to the expiration of the
Warrants on July 28, 2000. Accordingly, based upon calculations made in
accordance with Rule 13d-3 of the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), and information provided by the Company that 3,892,128
shares of Common Stock are currently outstanding, CECAP may be deemed to be the
beneficial owner, having sole voting and/or dispositive power over the
equivalent of 1,183,040 shares of Common Stock, which represents 24% of the
Common Stock currently outstanding, and 13.8% of the Common Stock on a
fully-diluted basis.
CE LLC has the right to acquire 1,875,000 shares of Common Stock at any
time upon conversion of all or any portion of the 750,000 shares of Series A
Preferred Stock held by it. In addition, CE LLC has the right, as owner of
1,125,000 Warrants, to acquire all or any portion of 1,125,000 shares of Common
Stock at a price of $1.00 per share at any time prior to the expiration of the
Warrants on July 28, 2000. Accordingly, based upon calculations made in
accordance with Rule 13d-3 of the Exchange Act, and information provided by the
Company that 3,892,128 shares of Common Stock are currently outstanding, CE LLC
may be deemed to be the beneficial owner, having sole voting and/or dispositive
power over the equivalent of 3,549,120 shares of Common Stock, which represents
51.5% of the Common Stock currently outstanding, and 41.4% of the Common Stock
on a fully-diluted basis.
EI LLC, as the general partner of CECAP, may be deemed to have shared
voting and/or dispositive power over the equivalent of 1,183,040 shares of
Common Stock, constituting 24% of the Common Stock currently outstanding, and
13.8% of Common Stock on a fully-diluted basis.
Mr. Schulhof, as the Manager of both CE LLC and EI LLC, may be deemed
to have sole voting and/or dispositive power over the equivalent of 4,732,160
shares of Common Stock, constituting 60% of the Common Stock currently
outstanding, and 55% of Common Stock on a fully-diluted basis.
(c) Pursuant to the Stock Purchase Agreement, on January 28, 1999,
CECAP and CE LLC purchased an aggregate of 183,040 shares and 549,120 shares of
Common Stock, respectively, from Jay Fitzpatrick, Boris Frenkiel and F. Spencer
Pooley, at a price per share of $0.85, in a private transaction.
Pursuant to the Securities Purchase Agreement, on January 28, 1999,
CECAP purchased 250,000 shares of Series A Preferred Stock , at a price per
share of $2.985 per share and 375,000 Warrants, at a price per Warrant of $0.01,
from the Company, and CE LLC purchased 750,000 shares of Series A Preferred
Stock, at the same price per share, and 1,125,000 Warrant, at the same price per
Warrant, from the Company.
8
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Paragraphs (d) and (e) of Item 5 of Schedule 13D are not applicable to
this filing.
ITEM 6. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH RESPECT
TO SECURITIES OF THE ISSUER.
The responses to Item 2, Item 3 and Item 4, the Securities Purchase
Agreement, the Certificate of Designation and the Warrant, attached hereto as
Exhibit 1, 2, 3 and 4, are incorporated herein by reference.
The Company has also granted registration rights with regard to the
Common Stock to be issued to CECAP and CE LLC upon conversion of the Series A
Preferred Stock and/or exercise of the Warrants. Such registration rights are
described in a Registration Rights Agreement, a copy of which is attached hereto
as Exhibit 5.
ITEM 7. MATERIAL TO BE FILED AS EXHIBITS.
1. Securities Purchase Agreement, dated January 28, 1999, among the
Company, CECAP and CE LLC.
2. Certificate of Designation relating to Series A Preferred Stock.
3. Warrant No.1, issued to CECAP by the Company.
4. Warrant No.2, issued to CE LLC by the Company.
5. Registration Rights Agreement, dated January 28, 1999, among the
Company, CECAP and CE LLC.
6. Stock Purchase Agreement, dated January 28, 1999, among CECAP, CE LLC
and the stockholders named therein.
9
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SIGNATURE
After reasonable inquiry and to the best of my knowledge and belief, I certify
that the information set forth in the statement is true, complete and correct.
Date: February 8, 1999
COMMERCIAL ELECTRONICS CAPITAL
PARTNERSHIP, L.P.
BY Electronics Investments, L.L.C.
Its General Partner
By: /s/ Michael P. Schulhof
---------------------------
Name: Michael P. Schulhof
Its Managing Member
COMMERCIAL ELECTRONICS L.L.C.
By: /s/ Michael P. Schulhof
---------------------------
Name: Michael P. Schulhof
Its CEO
ELECTRONICS INVESTMENTS, L.L.C.
By: /s/ Michael P. Schulhof
---------------------------
Name: Michael P. Schulhof
Its Managing Member
MICHAEL P. SCHULHOF
/s/ Michael P. Schulhof
-----------------------
10
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EXHIBIT INDEX
Exhibit No. Description
----------- -----------
1. Securities Purchase Agreement, dated January
28, 1999, among the Company, CECAP and CE LLC.
2. Certificate of Designation relating to Series
A Preferred Stock.
3. Warrant No.1, issued to CECAP by the Company.
4. Warrant No.2, issued to CE LLC by the Company.
5. Registration Rights Agreement, dated January
28, 1999, among the Company, CECAP and CE LLC.
6. Stock Purchase Agreement, dated January 28,
1999, among CECAP, CE LLC and the stockholders
named therein.
11
================================================================================
SECURITIES PURCHASE AGREEMENT
By and Among
WILTEK, INC.,
COMMERCIAL ELECTRONICS CAPITAL PARTNERSHIP, L.P.
and
COMMERCIAL ELECTRONICS, L.L.C.
------------------------------
Dated as of January 28, 1999
------------------------------
================================================================================
<PAGE>
Table of Contents
-----------------
Page
ARTICLE 1
DEFINITIONS...........................................................1
1.1 Definitions................................................1
1.2 Accounting Terms; Financial Covenants......................7
ARTICLE 2
PURCHASE AND SALE.....................................................7
2.1 Purchase and Sale of Preferred Shares and Warrants.........7
2.2 Closing....................................................8
ARTICLE 3
CONDITIONS TO THE OBLIGATION
OF THE PURCHASERS TO CLOSE .......................................8
3.1 Representations and Warranties True........................8
3.2 Compliance with this Agreement.............................8
3.3 Officer's Certificate......................................8
3.4 Secretary's Certificate....................................8
3.5 Documents..................................................9
3.6 Stock Purchase Agreement...................................9
3.7 Side Letter................................................9
3.8 Purchase Permitted by Applicable Laws; Legal Investment....9
3.9 Filing of Certificate of Amendment.........................9
3.10 Opinion of Counsel.........................................9
3.11 Approval of Counsel to the Purchaser.......................9
3.12 Consents and Approvals.....................................9
3.13 No Material Adverse Change................................10
3.14 Conduct of Business.......................................10
3.15 Registration Rights Agreement.............................10
3.16 Certificate of Incorporation and By-Laws of the Company...10
3.17 No Litigation.............................................10
3.18 No Default or Breach......................................10
ARTICLE 4
CONDITIONS TO THE OBLIGATION
OF THE COMPANY TO CLOSE...........................................11
4.1 Representations and Warranties True.......................11
4.2 Compliance with this Agreement............................11
4.3 Issuance Permitted by Applicable Laws.....................11
4.4 Approval of Counsel to the Company........................11
i
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Page
4.5 Consents and Approvals....................................11
4.6 No Litigation.............................................11
ARTICLE 5
REPRESENTATIONS AND
WARRANTIES OF THE COMPANY............................................12
5.1 Corporate Existence and Power.............................12
5.2 Corporate Authorization; No Contravention.................12
5.3 Governmental Authorization; Third Party Consents..........13
5.4 Binding Effect............................................13
5.5 No Legal Bar..............................................13
5.6 Litigation................................................13
5.7 No Default or Breach......................................14
5.8 Real Properties...........................................14
5.9 Taxes.....................................................14
5.10 Financial Condition; No Undisclosed Liabilities...........14
5.11 No Material Adverse Change................................15
5.12 Environmental Matters.....................................15
5.13 Investment Company........................................15
5.14 Subsidiaries..............................................15
5.15 Capitalization............................................16
5.16 Solvency..................................................16
5.17 Intellectual Property.....................................16
5.18 Anti-Dilution Protection..................................17
5.19 Registration Rights Agreements............................18
5.20 Private Offering..........................................18
5.21 Contractual Obligations...................................18
5.22 Receivables...............................................19
5.23 Operations of the Company.................................19
5.24 Contracts Affecting Stockholders..........................20
5.25 ERISA.....................................................21
5.26 Related Party Transactions................................22
5.27 Broker's, Finder's or Similar Fees........................22
ARTICLE 6
REPRESENTATIONS AND
WARRANTIES OF THE PURCHASERS.........................................22
6.1 Existence and Power.......................................23
6.2 Authorization; No Contravention...........................23
6.3 Binding Effect............................................23
6.4 No Legal Bar..............................................23
6.5 Purchase for Own Account..................................23
6.6 Sophistication............................................24
6.7 Broker's, Finder's or Similar Fees........................25
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Page
6.8 Additional Representations................................25
6.9 Contribution..............................................25
ARTICLE 7
INDEMNIFICATION......................................................25
7.1 Indemnification by the Company............................25
7.2 Indemnification By the Purchasers.........................26
7.3 Notification..............................................26
7.4 Expense Reimbursement.....................................27
7.5 Registration Rights Agreement.............................27
ARTICLE 8
AFFIRMATIVE COVENANTS................................................27
8.1 Financial Statements......................................27
8.2 Preservation of Corporate Existence.......................28
8.3 Payment of Obligations....................................29
8.4 Compliance with Laws......................................29
8.5 Notices...................................................29
8.6 Issue Taxes...............................................30
8.7 Reservation of Shares.....................................30
8.8 Inspection................................................30
8.9 Board Representation......................................30
8.10 Registration and Listing..................................31
8.11 Preemptive Right..........................................32
8.12 Severance Arrangements....................................32
8.13 Transactions with Affiliates..............................32
8.14 No Inconsistent Agreements................................33
8.15 No Solicitation...........................................33
8.16 Securities Law Compliance.................................33
ARTICLE 9
TERMINATION..........................................................34
9.1 Termination...............................................34
9.2 Fees and Expenses.........................................34
9.3 Procedure for the Effect of Termination...................35
ARTICLE 10
MISCELLANEOUS........................................................35
10.1 Survival of Provisions....................................35
10.2 Notices...................................................35
10.3 Successors and Assigns....................................36
10.4 Amendment and Waiver......................................36
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Page
10.5 Counterparts..............................................37
10.6 Headings..................................................37
10.7 Determinations............................................37
10.8 Governing Law.............................................37
10.9 Jurisdiction..............................................37
10.10 Severability..............................................38
10.11 Rules of Construction.....................................38
10.12 Remedies..................................................38
10.13 Entire Agreement..........................................38
10.14 Attorneys' Fees...........................................38
10.15 Publicity.................................................39
iv
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EXHIBITS
Exhibit A Medical Benefit Letter
Exhibit B Escrow Agreement
Exhibit C Form of Certificate of Amendment
Exhibit D Form of Warrant
Exhibit E Form of Registration Rights Agreement
v
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SECURITIES PURCHASE AGREEMENT, dated as of January 28, 1999, by and
among WILTEK, INC., a corporation organized under the laws of Connecticut (the
"Company"), COMMERCIAL ELECTRONICS CAPITAL PARTNERSHIP, L.P., a Delaware limited
partnership, and COMMERCIAL ELECTRONICS, L.L.C., a Delaware limited liability
company (collectively, the "Purchasers").
The Company desires to issue to the Purchasers, and the Purchasers
desire to purchase from the Company, (i) 1,000,000 shares of the Company's
Series A Senior Convertible Preferred Stock, no par value (the "Preferred
Stock"), and Warrants to purchase up to 1,500,000 shares of the Company's Common
Stock, no par value (the "Common Stock"), upon the terms and subject to the
conditions set forth in this Agreement.
In consideration of the mutual covenants and agreements set forth
herein and for good and valuable consideration, the receipt and adequacy of
which is hereby acknowledged, the parties hereto agree as follows:
ARTICLE 1
DEFINITIONS
1.1 Definitions. As used in this Agreement, and unless the context
requires a different meaning, the following terms have the meanings indicated:
"Actions or Proceedings" shall have the meaning assigned to that term
in Section 7.1.
"Affiliate" shall have the meaning ascribed to such term in Rule 12b-2
of the General Rules and Regulations under the Exchange Act.
"Agreement" means this Agreement, as the same may be amended,
supplemented or modified in accordance with the terms hereof.
"Benefit Plans" has the meaning assigned to that term in Section 5.25.
"Board" means the Board of Directors of the Company.
"Business Day" means any day other than a Saturday, Sunday or other day
on which commercial banks in the City of New York are authorized or required by
law or executive order to close.
"Certificate of Amendment" means the Certificate of Amendment setting
forth the Designations, Rights and Preferences with respect to the Preferred
Stock attached hereto as Exhibit C.
<PAGE>
2
"Closing" has the meaning assigned to that term in Section 2.2.
"Closing Date" means the date specified in Section 2.2.
"Code" means the Internal Revenue Code of 1986, as amended.
"Commission" means the Securities and Exchange Commission or any
similar agency then having jurisdiction to enforce the Securities Act.
"Common Stock" means the Common Stock, no par value, of the Company.
"Company" means Wiltek, Inc., a Connecticut corporation.
"Contingent Obligation" means, as applied to any Person, any direct or
indirect liability of that Person with respect to any Indebtedness, lease,
dividend, guaranty, letter of credit or other obligation (the "primary
obligation") of another Person (the "primary obligor"), including, without
limitation, any obligation of such Person, whether or not contingent, (a) to
purchase, repurchase or otherwise acquire such primary obligations or any
property constituting direct or indirect security therefor, or (b) to advance or
provide funds (i) for the payment or discharge of any such primary obligation,
or (ii) to maintain working capital or equity capital of the primary obligor or
otherwise to maintain the net worth or solvency or any balance sheet item, level
of income or financial condition of the primary obligor or (c) to purchase
property, securities or services primarily for the purpose of assuring the owner
of any such primary obligation of the ability of the primary obligor to make
payment of such primary obligation or (d) otherwise to assure or hold harmless
the owner of any such primary obligation against loss in respect thereof;
provided, however, that the Company shall be deemed not to have a Contingent
Obligation by virtue of its guaranty of obligations of a Subsidiary that, except
for shares held by nominees, is wholly owned by the Company. The amount of any
Contingent Obligation shall be deemed to be the stated amount of such Contingent
Obligation or, if there is no such stated amount, an amount equal to the stated
or determinable amount of the primary obligation in respect of which such
Contingent Obligation is made or, if not stated or determinable, the maximum
reasonably anticipated liability in respect thereof as determined by the Company
in good faith.
"Contractual Obligations" means as to any Person, any provision of any
security issued by such Person or of any agreement, undertaking, contract,
indenture, mortgage, deed of trust or other instrument to which such Person is a
party or by which it or any of its property is bound.
"Disclosure Letter" has the meaning assigned to that term in Article 5.
"Environmental Laws" means any federal, state, territorial, provincial
or local law, common law doctrine, rule, order, decree, judgment, injunction,
license,
<PAGE>
3
permit or regulation relating to environmental matters, including those
pertaining to land use, air, soil, surface water, ground water (including the
protection, cleanup, removal, remediation or damage thereof), public or employee
health or safety or any other environmental matter, together with any other laws
(federal, state, territorial, provincial or local) relating to emissions,
discharges, releases or threatened releases of any contaminant including,
without limitation, medical, biological, biohazardous or radioactive waste and
materials, into ambient air, land, surface water, groundwater, person, property
or structures, or otherwise relating to the manufacture, processing,
distribution, use, treatment, storage, disposal, transportation, discharge or
handling of any contaminant, including without limitation, the Comprehensive
Environmental Response, Compensation, and Liability Act (42 U.S.C. ss. 9601 et
seq.), the Hazardous Material Transportation Act (49 U.S.C. ss. 1801 et seq.),
the Resource Conservation and Recovery Act (42 U.S.C. ss. 6901 et seq.), the
Federal Water Pollution Control Act (33 U.S.C. ss. 1251 et seq.), the Clean Air
Act (42 U.S.C. ss. 1251 et seq.), the Toxic Substances Control Act (15 U.S.C.
ss. 2601 et seq.), and the Occupational Safety and Health Act (29 U.S.C. ss. 651
et seq.), as such laws have been amended or supplemented and any analogous
future federal, or present or future state or local laws, statutes and
regulations promulgated thereunder.
"ERISA" has the meaning assigned to that term in Section 5.25.
"Escrow Agreement" has the meaning assigned to that term in Section
3.7.
"Exchange Act" means the Securities Exchange Act of 1934, as amended,
and the rules and regulations of the Commission thereunder.
"GAAP" means generally accepted accounting principles in the United
States in effect from time to time.
"Governmental Authority" means the government of any nation, state or
other political subdivision thereof, any entity exercising executive,
legislative, judicial, regulatory or administrative functions of or pertaining
to government, and any corporation or other entity owned or controlled, through
stock or capital ownership or otherwise, by any of the foregoing.
"Hazardous Materials" means (i) any "hazardous waste" or "solid waste"
as defined by the Resource Conservation and Recovery Act of 1976, as amended,
and regulations promulgated thereunder; (ii) any "hazardous substance" as
defined by the Comprehensive Environmental Response, Compensation and Liability
Act of 1980, as amended, and regulations promulgated thereunder; (iii) any
"pollutant" or "toxic pollutant" or "oil" as defined in the Clear Water Act, as
amended, and regulations promulgated thereunder; (iv) asbestos; (v)
polychlorinated biphenyls; and (vi) any waste oils.
<PAGE>
4
"Holder" means the Purchasers and any subsequent direct or indirect
transferee of Preferred Shares or Warrants, other than a transferee who has
acquired such securities under circumstances not requiring a legend as described
in Section 6.5.
"Indebtedness" means as to any Person, (a) all obligations of such
Person for borrowed money (including, without limitation, reimbursement and all
other obligations with respect to surety bonds, letters of credit and bankers'
acceptances, whether or not matured), (b) all obligations evidenced by notes,
bonds, debentures or similar instruments, (c) all obligations to pay the
deferred purchase price of property or services, except trade accounts payable
and accrued liabilities arising in the ordinary course of business, (d) all
interest rate and currency swaps and similar agreements under which payments are
obligated to be made, whether periodically or upon the happening of a
contingency, (e) all indebtedness created or arising under any conditional sale
or other title retention agreement with respect to property acquired by such
Person (even though the rights and remedies of the seller or lender under such
agreement in the event of default are limited to repossession or sale of such
property), (f) all obligations under leases which have been or should be, in
accordance with GAAP, recorded as capital leases, (g) all indebtedness secured
by any Lien (other than Liens in favor of lessors under leases other than leases
included in clause (f)) on any property or asset owned or held by that Person
regardless of whether the indebtedness secured thereby shall have been assumed
by that Person or is non-recourse to the credit of that Person, and (h) any
Contingent Obligation.
"Indemnified Party" shall have the meaning assigned to that term in
Section 7.3.
"Indemnifying Party" shall have the meaning assigned to that term in
Section 7.3.
"Intellectual Property" shall mean all of the following as they exist
in all jurisdictions throughout the world, in each case, to the extent owned by,
licensed to, or otherwise used by the Company:
(i) patents, patent applications, and other patent rights (including
any divisions, continuations, continuations-in-part, substitutions, or reissues
thereof, whether or not patents are issued on any such applications and whether
or not any such applications are modified, withdrawn, or resubmitted);
(ii) trademarks, service marks, trade dress, trade names, brand names,
Internet domain names, designs, logos, or corporate names, whether registered or
unregistered, and all registrations and applications for registration thereof;
(iii) copyright registrations and applications for registration thereof
and non-registered copyrights;
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5
(iv) trade secrets, concepts, ideas, designs, research processes,
procedures, techniques, methods, know-how, data, mask works, discoveries,
inventions, modifications, extensions, improvements, and other proprietary
rights (whether or not patentable or subject to copyright, mask work, or trade
secret protection) (collectively, "Technology"); and
(v) computer software programs, including, without limitation, all
source code, object code, and documentation related thereto, licensed to or from
the Company (the "Software").
"IP Licenses" has the meaning assigned to that term in Section 5.17(b).
"Liabilities" shall have the meaning assigned to that term in Section
7.1.
"Lien" means any mortgage, deed of trust, pledge, hypothecation,
assignment, encumbrance, lien (statutory or other) or preference, priority or
other security interest or preferential arrangement of any kind or nature
whatsoever (including, without limitation, those created by, arising under or
evidenced by any conditional sale or other title retention agreement, the
interest of a lessor under a capitalized lease obligation, or any financing
lease having substantially the same economic effect as any of the foregoing).
"Medical Benefit Letter" has the meaning assigned to that term in
Section 3.7.
"Minimum Amount" has the meaning assigned to that term in Section 7.1.
"NASDAQ" mean the National Association of Securities Dealers, Inc.
Automated Quotation System.
"New Securities" has the meaning assigned to that term in Section 8.11.
"NYSE" means the New York Stock Exchange, Inc.
"Person" means any individual, firm, corporation, limited liability
company, partnership, trust, incorporated or unincorporated association, joint
venture, joint stock company, governmental authority (or an agency or political
subdivision thereof) or other entity of any kind, and shall include any
successor (by merger or otherwise) of such entity.
"Preferred Shares" has the meaning assigned to that term in Section
2.1.
<PAGE>
6
"Preferred Shares Purchase Price" has the meaning assigned to that term
in Section 2.1.
"Preferred Stock" means the Series A Senior Convertible Preferred
Stock, no par value, of the Company.
"Prohibited Activities" has the meaning assigned to that term in
Section 8.15.
"Products" has the meaning assigned to that term in Section 5.17(h).
"Proposed Intellectual Property Agreements" has the meaning assigned to
that term in Section 5.17(c).
"Purchasers" means Commercial Electronics Capital Partnership, L.P., a
Delaware limited partnership, and Commercial Electronics, L.L.C., a Delaware
limited liability company.
"Registration Rights Agreement" means the Registration Rights Agreement
in the form attached hereto as Exhibit E.
"Requirements of Law" means as to any Person, any law, treaty, rule or
regulation or determination of an arbitrator or a court or other Governmental
Authority, in each case applicable or binding upon such Person or any of its
property or to which such Person or any of its property is subject.
"Securities Act" means the Securities Act of 1933, as amended, and the
rules and regulations of the Commission thereunder.
"Selling Stockholders" means any of the persons listed on Schedule I to
the Stock Purchase Agreement.
"Stock Purchase Agreement" means the Stock Purchase Agreement, dated
January 28, 1999, among the Selling Stockholders and the Purchasers.
"Solvent" means, with respect to any Person, that the fair saleable
value of the assets and property of such Person is, on the date of
determination, greater than the total amount of liabilities (including
contingent and unliquidated liabilities) of such Person as of such date and
that, as of such date, such Person is able to pay all liabilities of such Person
as such liabilities mature. In computing the amount of contingent or liquidated
liabilities at any time, such liabilities will be computed as the amount which,
in light of all the facts and circumstances existing at such time, represents
the amount that is probable to become an actual or matured liability.
"Systems" has the meaning assigned to that term in Section 5.17(c).
<PAGE>
7
"Subsidiary" means, with respect to any Person, a corporation,
partnership or other entity of which 50% or more of the voting power of the
voting equity securities or equity interest, or rights to profits, is owned,
directly or indirectly, by such Person. Unless otherwise qualified, all
references to a "Subsidiary" or to "Subsidiaries" in this Agreement shall refer
to a Subsidiary or Subsidiaries of the Company.
"Time of Purchase" has the meaning provided therefor in Section 2.2.
"Warrants" means the warrants, substantially in the form of Exhibit D
hereto, to be acquired by the Purchasers hereunder entitling the holders thereof
to purchase initially up to 1,500,000 shares of Common Stock, as such number may
be adjusted from time to time in accordance with the terms thereof.
"Warrants Purchase Price" has the meaning assigned to that term in
Section 2.1.
"Year 2000 Compliant" has the meaning assigned to that term in Section
5.17(h).
1.2 Accounting Terms; Financial Covenants. All accounting terms used
herein not expressly defined in this Agreement shall have the respective
meanings given to them in accordance with sound accounting practice. The term
"sound accounting practice" shall mean such accounting practice as, in the
opinion of the independent accountants regularly retained by the Company,
conforms at the time to GAAP applied on a consistent basis except for changes
with which such accountants concur.
ARTICLE 2
PURCHASE AND SALE
2.1 Purchase and Sale of Preferred Shares and Warrants. Subject to the
terms and conditions set forth herein, the Company agrees that it will issue to
the Purchasers, and the Purchasers agree that they will acquire from the
Company, at the Time of Purchase, in the aggregate, (i) 1,000,000 shares of
Preferred Stock, for an aggregate purchase price of $2,985,000 (the "Preferred
Shares Purchase Price"), and (ii) the Warrants, for an aggregate purchase price
of $15,000 (the "Warrants Purchase Price"), in cash, by wire transfer of
immediately available funds to an account designated in a notice delivered to
the Purchasers not later than two Business Days prior to the Closing Date. The
number of shares of Preferred Stock and Warrants to be acquired by each
Purchaser, and the purchase price to be paid therefor, is set forth on Schedule
I hereto. The shares of Preferred Stock being purchased pursuant hereto are
referred to herein as the "Preferred Shares." The Preferred Shares shall have
the rights and preferences set forth in the Certificate of Amendment.
<PAGE>
8
2.2 Closing. The purchase and issuance of the Preferred Shares and the
Warrants shall take place at the closing (the "Closing") to be held at the
offices of Paul, Weiss, Rifkind, Wharton & Garrison, 1285 Avenue of the
Americas, New York, New York 10019-6064 on January 28, 1999 (the "Closing
Date"), at 10:00 a.m., New York City time, or on such other date and at such
other time as the Purchasers and the Company may mutually agree. At the Closing,
subject to the terms and conditions set forth herein, the Company shall sell the
Preferred Shares and issue the Warrants to the Purchasers by delivering to the
Purchasers duly executed certificates representing the Preferred Shares and the
Warrants registered in the name of the Purchaser acquiring such Preferred Shares
and Warrants, with appropriate issue stamps, if any, affixed at the expense of
the Company, free and clear of any Lien, and the Purchasers shall purchase the
Preferred Shares and the Warrants for the Preferred Shares Purchase Price (less
$50,000, which has been paid by the Purchasers to the Company prior to the date
hereof) and the Warrants Purchase Price, respectively. The time at which such
Closing shall be concluded is herein called the "Time of Purchase."
ARTICLE 3
CONDITIONS TO THE OBLIGATION
OF THE PURCHASERS TO CLOSE
The obligation of the Purchasers to purchase the Preferred Shares and
the Warrants at the Closing shall be subject to the satisfaction or waiver of
the following conditions on or before the Closing Date:
3.1 Representations and Warranties True. The representations and
warranties of the Company contained in Article 5 hereof shall be true and
correct in all material respects at and as of the Time of Purchase (and after
giving effect to the transactions contemplated hereby) as if made at and as of
such date.
3.2 Compliance with this Agreement. The Company shall have performed
and complied with its agreements and conditions set forth or contemplated herein
that are required to be performed or complied with by the Company on or before
the Closing Date.
3.3 Officer's Certificate. The Purchasers shall have received a
certificate, dated the Closing Date and signed by the President or a
Vice-President of the Company, certifying that the conditions set forth in
Sections 3.1 and 3.2 hereof have been satisfied on and as of such date.
3.4 Secretary's Certificate. The Purchasers shall have received a
certificate, dated the Closing Date and signed by the Secretary or an Assistant
Secretary of the Company, certifying the truth and correctness of attached
copies of the Certificate of Incorporation and By-laws of the Company and
resolutions of the
<PAGE>
9
Board of Directors of the Company approving this Agreement and the transactions
contemplated hereby.
3.5 Documents. The Purchasers shall have received copies of such
documents as they reasonably may request in connection with the sale of the
Preferred Shares and the Warrants and the other transactions contemplated
hereby, all in form and substance reasonably satisfactory to the Purchaser.
3.6 Stock Purchase Agreement. The closing of the transactions
contemplated by the Stock Purchase Agreement shall have simultaneously occurred
with the Closing. All of the conditions set forth in Article 3 of the Stock
Purchase Agreement shall have been satisfied or waived.
3.7 Side Letter. The Company and the Selling Stockholders shall have
executed and delivered the Medical Benefit Letter (the "Medical Benefit Letter")
and the Escrow Agreement (the "Escrow Agreement") in substantially the forms
attached hereto as Exhibits "A" and "B", respectively.
3.8 Purchase Permitted by Applicable Laws; Legal Investment. The
acquisition of and payment for the Preferred Shares, and the Warrants, the
issuance of the Warrants and the consummation of the other transactions
contemplated hereby (i) shall not be prohibited by any applicable law or
governmental regulation, (ii) shall not subject the Purchasers to any penalty
or, in their reasonable judgment, other onerous condition under or pursuant to
any applicable law or governmental regulation and (iii) shall be permitted by
the laws and regulations of the jurisdictions to which it is subject.
3.9 Filing of Certificate of Amendment. The Certificate of Amendment
shall have been duly filed by the Company with the Secretary of the State of the
State of Connecticut.
3.10 Opinion of Counsel. The Purchasers shall have received the opinion
of Finn Dixon & Herling LLP, special counsel to the Company, dated the Closing
Date, in a form reasonably acceptable to the Purchaser.
3.11 Approval of Counsel to the Purchaser. All actions and proceedings
hereunder and all documents required to be delivered by the Company hereunder or
in connection with the consummation of the other transactions contemplated
hereby, and all other related matters, shall have been reasonably acceptable to
Paul, Weiss, Rifkind, Wharton & Garrison, special counsel to the Purchasers, as
to their form and substance.
3.12 Consents and Approvals. All consents, waivers, exemptions,
authorizations, or other actions by, or notices to, or filings with,
Governmental Authorities and other Persons necessary or required in connection
with the execution, delivery or performance by the Company or enforcement
against the Company of this
<PAGE>
10
Agreement, the Preferred Shares, the Warrants, and the Registration Rights
Agreement shall have been obtained and be in full force and effect, and the
Purchasers shall have been furnished with appropriate evidence thereof.
3.13 No Material Adverse Change. Except as set forth in the Disclosure
Letter, there shall have been no material adverse change, nor shall any such
change be threatened, in the assets, business, properties, operations or
financial or other condition of the Company and its Subsidiaries, taken as a
whole, since October 31, 1998.
3.14 Conduct of Business. The Company shall have conducted its business
in the ordinary course from the date hereof to the Closing Date.
3.15 Registration Rights Agreement. The Company shall have duly
executed and delivered to the Purchasers the Registration Rights Agreement.
3.16 Certificate of Incorporation and By-Laws of the Company. Except
for the Certificate of Amendment, no amendments to the Certificate of
Incorporation or By-Laws of the Company as in effect on the date hereof shall
have been effected.
3.17 No Litigation. No action, suit, proceeding, claim or dispute shall
have been brought or otherwise arisen at law, in equity, in arbitration or
before any Governmental Authority against the Company or any of its Subsidiaries
which would, if adversely determined, in the reasonable judgment of the
management of the Purchasers, (i) have a material adverse effect on the assets,
business, properties or financial or other condition of the Company and its
Subsidiaries, taken as a whole or (ii) have a material adverse effect on the
ability of a party to perform its obligations under this Agreement or the
Registration Rights Agreement.
3.18 No Default or Breach. Neither the Company nor any of its
Subsidiaries shall have been in default under or with respect to any Contractual
Obligation in any respect, which, individually or together with all such
defaults, would be materially adverse to the assets, business, properties or
financial or other condition of the Company and its Subsidiaries, taken as a
whole or which could materially adversely affect the ability of the Company to
perform its obligations under this Agreement or the Registration Rights
Agreement.
<PAGE>
11
ARTICLE 4
CONDITIONS TO THE OBLIGATION
OF THE COMPANY TO CLOSE
The obligations of the Company to issue and sell the Preferred Shares
and the Warrants at the Closing shall be subject to the satisfaction or waiver
by it of the following conditions on or before the Closing Date:
4.1 Representations and Warranties True. The representations and
warranties of the Purchasers contained in Article 6 hereof shall be true and
correct in all material respects at and as of the Time of Purchase (and after
giving effect to the transactions contemplated hereby) as if made at and as of
such date.
4.2 Compliance with this Agreement. The Purchasers shall have performed
and complied with all of their agreements and conditions set forth or
contemplated herein that are required to be performed or complied with by the
Purchasers on or before the Closing Date.
4.3 Issuance Permitted by Applicable Laws. The issuance of the
Preferred Shares and the Warrants by the Company and the consummation of the
transactions contemplated hereby (i) shall not be prohibited by any applicable
law or governmental regulation, (ii) shall not subject the Company to any
penalty or, in its reasonable judgment, other onerous condition under or
pursuant to any applicable law or governmental regulation and (iii) shall be
permitted by the laws and regulations of the jurisdictions in which the
transactions are subject.
4.4 Approval of Counsel to the Company. All actions and proceedings
hereunder and all documents required to be delivered by the Purchasers hereunder
or in connection with the consummation of the transactions contemplated hereby,
and all other related matters, shall have been reasonably acceptable to Finn
Dixon & Herling LLP, special counsel to the Company, as to their form and
substance.
4.5 Consents and Approvals. All consents, exemptions, authoriza tions,
waivers or other actions by, or notices to, or filings with, Governmental
Authorities and other Persons necessary or required in connection with the
execution, delivery or performance by the Purchasers or enforcement against the
Purchasers of this Agreement shall have been obtained and be in full force and
effect, and the Company shall have been furnished with appropriate evidence
thereof.
4.6 No Litigation. No action, suit, proceeding, claim or dispute shall
have been brought or otherwise arisen at law, in equity, in arbitration or
before any Governmental Authority against the Company, any of its Subsidiaries
or the Purchasers which would, if adversely determined, in the reasonable
judgment of the management of the Company, have a material adverse effect on the
ability of a party
<PAGE>
12
hereto to perform its obligations under this Agreement or the Registration
Rights Agreement.
ARTICLE 5
REPRESENTATIONS AND
WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to the Purchasers as
follows, except as set forth in the corresponding Section of the "Disclosure
Letter," delivered to the Purchasers simultaneously herewith:
5.1 Corporate Existence and Power.
The Company and each of its Subsidiaries:
(a) is duly organized, validly existing and in good standing
under the laws of the jurisdiction of its organization;
(b) has (i) full corporate power and authority and (ii) all
governmental licenses, authorizations, consents and approvals to own and operate
its property, to lease the property it operates as lessee and to conduct the
business in which it is currently, or is currently proposed to be, engaged;
(c) is duly qualified as a foreign corporation, licensed and
in good standing under the laws of each jurisdiction where its ownership, lease
or operation of property or the conduct of its business requires such
qualification; and
(d) is in compliance with (i) its Certificate of Incorporation
and By-Laws or other organizational or governing documents and (ii) all
Requirements of Law; except, in the case of (b)(ii), (c) or (d)(ii) of this
Section 5.1, to the extent that the failure to do so would not have a material
adverse effect on the assets, business, operations, properties or financial or
other condition of the Company or any of its Subsidiaries.
5.2 Corporate Authorization; No Contravention. The execution, delivery
and performance by the Company of this Agreement, the Registration Rights
Agreement and the transactions contemplated hereby and thereby (such
transactions to include, for purposes of this Agreement, without limitation (A)
the issuance of the Preferred Shares and the Warrants and (B) the issuance of
Common Stock upon the conversion of the Preferred Shares and the exercise of the
Warrants pursuant to the terms of the Certificate of Amendment and the Warrant
Certificate, respectively):
(a) is within the Company's corporate power and authority and
has been duly authorized by all necessary corporate action; and
<PAGE>
13
(b) does not and will not contravene the terms of the
Certificate of Incorporation or By-Laws or other organizational or governing
documents of the Company or any of its Subsidiaries, or any amendment thereof;
and
(c) will not violate, conflict with or result in any breach
of, contravention of or the creation of any Lien under, any Contractual
Obligation of the Company or any of its Subsidiaries, or any order or decree
directly relating to the Company or any of its Subsidiaries.
5.3 Governmental Authorization; Third Party Consents. No approval,
consent, exemption, authorization, or other action by, or notice to, or filing
with, any Governmental Authority or any other Person, is necessary or required
in connection with the execution, delivery or performance by the Company or
enforcement against the Company of this Agreement, the Registration Rights
Agreement or the transactions contemplated hereby or thereby, other than those
that have been obtained or made on or prior to the Closing.
5.4 Binding Effect. This Agreement has been duly executed and delivered
by the Company, and at the Time of Purchase the Registration Rights Agreement,
the Preferred Shares and the Warrants will be duly executed and delivered by the
Company, and this Agreement constitutes the legal, valid and binding obligations
of the Company enforceable against the Company in accordance with its terms, and
at the Time of Purchase the Registration Rights Agreement, the Preferred Shares
and the Warrants will constitute the legal, valid and binding obligations of the
Company enforceable against the Company in accordance with their respective
terms.
5.5 No Legal Bar. Neither the execution, delivery and performance of
this Agreement and the Registration Rights Agreement nor the issuance of or
performance of the terms of the Preferred Shares or the Warrants will violate
any Requirement of Law or any Contractual Obligation of the Company or any of
its Subsidiaries. As of the Time of Purchase, neither the Company nor any of its
Subsidiaries will be a party to any agreement granting any registration rights
to any Person which is inconsistent with the rights to be granted to the
Purchasers in the Registration Rights Agreement.
5.6 Litigation. There are no actions, suits, proceedings, claims or
disputes pending, or to the best knowledge of the Company, threatened, at law,
in equity, in arbitration or before any Governmental Authority against the
Company or any of its Subsidiaries:
(a) with respect to this Agreement, the Preferred Shares, the
Warrants or the Registration Rights Agreement or any of the transactions
contemplated hereby or thereby; or
(b) which would, if adversely determined, (i) have a material
adverse effect on the assets, business, properties, operations or financial or
<PAGE>
14
other condition of the Company or any of its Material Subsidiaries or (ii) have
a material adverse effect on the ability of the Company to perform its
obligations under this Agreement, the Preferred Shares, the Warrants or the
Registration Rights Agreement. No injunction, writ, temporary restraining order,
decree or any order of any nature has been issued by any court or other
Governmental Authority purporting to enjoin or restrain the execution, delivery
and performance of this Agreement, the Preferred Shares, the Warrants or the
Registration Rights Agreement.
5.7 No Default or Breach. Neither the Company nor any of its Sub
sidiaries is in default under or with respect to any Contractual Obligation in
any respect, which, individually or together with all such defaults, would be
materially adverse to the assets, business, properties, operations or financial
or other condition of the Company and its Subsidiaries taken as a whole, or
which could materially adversely affect the ability of the Company to perform
its obligations under this Agreement, the Preferred Shares, the Warrants or the
Registration Rights Agreement.
5.8 Real Properties. Neither the Company nor its Subsidiaries owns any
real property. The Company and each of its Subsidiaries hold leases in full
force and effect in all their real property.
5.9 Taxes. The Company and its Subsidiaries have filed or caused to be
filed, or have properly filed extensions for, all income tax returns which are
required to be filed and have paid or caused to be paid all taxes as shown on
said returns and on all assessments received by it to the extent that such taxes
have become due, except taxes the validity or amount of which is being contested
in good faith by appropriate proceedings and with respect to which adequate
reserves have been set aside. The Company and its Subsidiaries have paid or
caused to be paid, or have established reserves that the Company or such
Subsidiaries reasonably believes to be adequate in all material respects, for
all income tax liabilities applicable to the Company and its Subsidiaries for
all fiscal years which have not been examined and reported on by the taxing
authorities (or closed by applicable statutes).
5.10 Financial Condition; No Undisclosed Liabilities. The Company
heretofore has delivered to the Purchasers true and correct copies of audited
consolidated financial statements of the Company and its Subsidiaries for the
period ending October 31, 1998 (the "1998 Financials"). The 1998 Financials have
been prepared in accordance with GAAP applied consistently throughout the
periods covered thereby, and present fairly the consolidated financial condition
of the Company as of the dates thereof, and the consolidated results of
operations of the Company for the period then ended. Neither the Company nor any
of its Subsidiaries has any material direct or indirect indebtedness, liability
or obligation, whether known or unknown, fixed or unfixed, contingent or
otherwise, and whether or not of a kind required by GAAP to be set forth on a
financial statement (collectively "Company Liabilities"), other than (i) Company
Liabilities fully and adequately reflected on the 1998 Financials, (ii) Company
Liabilities as of October 31, 1998 of a kind not required by GAAP to be set
forth on a financial statement, and (iii) Company
<PAGE>
15
Liabilities incurred since the date of the 1998 Financials in the ordinary
course of business. As of their respective dates, all filings by the Company in
the last three years required to be made under the Exchange Act with the
Securities and Exchange Commission did 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 under
which they were made, not misleading.
5.11 No Material Adverse Change. Since October 31, 1998, there has not
been any material adverse change in the assets, business, properties, operations
or financial or other condition of the Company.
5.12 Environmental Matters.
(a) The property, assets and operations of the Company and its
Subsidiaries comply in all material respects with all applicable Environmental
Laws (except to the extent that failure to comply with such Environmental Laws
would not have a material adverse effect on the assets, business, properties or
financial or other condition of the Company).
(b) To the knowledge of the Company, none of the property,
assets or operations of the Company or its Subsidiaries is the subject of any
federal, state or local investigation evaluating whether any remedial action is
needed to respond to a release of any Hazardous Materials into the environment
or that is in contravention of any federal, state or local law, order or
regulation that is likely to have a materially adverse effect on the assets,
business, properties or financial or other condition of the Company and its
Subsidiaries, taken as a whole.
(c) Neither the Company nor its Subsidiaries has received any
notice or claim, nor are there pending, threatened or reasonably anticipated
lawsuits against them, with respect to violations of an Environmental Law or in
connection with any release of any Hazardous Materials into the environment.
(d) Neither the Company nor any of its Subsidiaries has any
contingent liability which is material to the Company and its Subsidiaries taken
as a whole in connection with any release of any Hazardous Materials into the
environment.
5.13 Investment Company. Neither the Company nor any Person controlling
the Company is an "investment company" within the meaning of the Investment
Company Act of 1940, as amended.
5.14 Subsidiaries. Section 5.14 of the Disclosure Letter sets forth a
complete and accurate list of all of the Subsidiaries of the Company together
with their respective jurisdictions of incorporation or organization. Except as
set forth in Section 5.14 of the Disclosure Letter, each such Subsidiary is
directly or indirectly wholly owned by the Company.
<PAGE>
16
5.15 Capitalization. As of the Closing Date, the authorized capital
stock of the Company will consist of 9,000,000 shares of Common Stock, no par
value, and 1,000,000 shares of Preferred Stock, no par value, of which as of the
Closing Date (but prior to the Closing) 3,892,128 shares of Common Stock (not
including 992,565 treasury shares) and no shares of Preferred Stock will be
issued and outstanding. As of the Closing there will be sufficient shares of
capital stock of the Company reserved for issuance in connection with the
conversion of the Preferred Shares and the exercise of the Warrants. Except for
the forgoing, 760,300 shares covering outstanding options reserved for issuance
pursuant to the Company's stock option plans (165,000 of which shall be
cancelled upon the Closing) and shares reserved for issuance in respect of
unissued options, there are no shares of capital stock of the Company reserved
for issuance. All of the outstanding shares of capital stock of the Company have
been duly authorized and are fully paid and non-assessable. The Preferred Shares
and the Warrants when issued upon payment of the Preferred Share Purchase Price
and the Warrants Purchase Price, and the shares of Common Stock to be issued
upon conversion of the Preferred Shares and the exercise of the Warrants, are
duly authorized, and, when so issued, will be fully paid and non-assessable.
Except as provided for herein, there are no options, warrants or other rights to
purchase shares of capital stock or other securities of the Company, nor is the
Company obligated in any manner to issue shares of its capital stock or other
securities. Except as contemplated hereby and for relevant state and federal
securities laws, there are no restrictions on the Company's ability to transfer
shares of capital stock of the Company.
5.16 Solvency. On and as of the Closing Date, after giving effect to
the transactions contemplated in this Agreement, the Company will be Solvent.
5.17 Intellectual Property.
(a) Section 5.17(a) of the Disclosure Letter sets forth all
material United States and foreign patents and patent applications, trademark
and service mark registrations and applications, Internet domain name
registrations and applications, and copyright registrations and applications
owned or licensed by the Company, specifying as to each item, as applicable: the
nature of the item, including the title; the owner of the item; the
jurisdictions in which the item is issued or registered or in which an
application for issuance or registration has been filed; and the issuance,
registration, or application numbers and dates.
(b) Section 5.17(b) of the Disclosure Letter sets forth all
licenses, sublicenses, and other agreements or permissions ("IP Licenses") under
which (i) the Company is required to make royalty, license or similar payments
and (ii) the Company is a licensor or licensee or otherwise is authorized to use
or practice any Intellectual Property, other than off-the-shelf software and
agreements transferred to customers in the ordinary course of the Company's
business.
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17
(c) Section 5.17(c) of the Disclosure Letter sets forth and
describes the status of any material agreements involving Intellectual Property
currently in negotiation or proposed by the Company ("Proposed Intellectual
Property Agreements").
(d) The Company owns, or has the right to use, sell, or
license, all material items of Intellectual Property used in the conduct of the
business of the Company, in each case free and clear of any Liens.
(e) The Company has not been, during the three (3) years
preceding the date hereof, a party to any claim or action, nor, to the knowledge
of the Company, is any claim or action threatened, that challenges the validity,
enforceability, ownership, or right to use, sell, or license any Intellectual
Property. To the knowledge of the Company, no third party is infringing upon any
Intellectual Property.
(f) The Company causes its employees and consultants to
execute the respective forms of Intellectual Property protection agreements
annexed to Section 5.17(f) of the Disclosure Letter.
(g) All Software on which the Company has an obligation to pay
royalties, license or similar fees is described in Section 5.17(g) of the
Disclosure Letter. To the Company's knowledge, such Software (i) is held by the
Company legitimately, (ii) is free from any significant software defect, and
(iii) performs in conformance with its documentation except, with respect to
each of clauses (i) through (iii), for such defects as are not material to the
Company, its operations or financial condition.
(h) As used herein, the term "Year 2000 Compliant" means that
all software, hardware, databases and embedded control systems (collectively,
the "Systems") and each of the products of the Company (the "Products ") (i)
accurately process date and time data (including, without limitation,
calculating, comparing, and sequencing) from, into, and between the twentieth
and twenty-first centuries, the years 1999 and 2000, and leap year calculations
and (ii) operate accurately with other software and hardware that use standard
date format (4 digits) for representation of the year. To the best of the
Company's knowledge, except as disclosed in the Company's Annual Report on Form
10-KSB for the year ended October 31, 1998, the Company shall not incur any
material expenses arising from or relating to the failure of any of the Systems
or Products to be Year 2000 Compliant.
(i) The Company is not, nor, as a result of the execution and
delivery of this Agreement or the performance of its obligations hereunder, will
be, in violation of any material agreement relating to any Intellectual
Property.
5.18 Anti-Dilution Protection. No holder of shares of Common Stock (or
securities convertible into or exchangeable or exercisable for any of the
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18
foregoing) has any rights to purchase or receive additional or other securities
upon the occurrence of an event that might dilute such holder's percentage
interest in the Company.
5.19 Registration Rights Agreements. No Person has been granted
registration rights by the Company.
5.20 Private Offering. No form of general solicitation or general
advertising was used by the Company or, to its knowledge, its representatives in
connection with the offer or sale of the Preferred Shares or the Warrants. No
registration of the Preferred Shares or the Warrants pursuant to the provisions
of the Securities Act or any state securities or "blue sky" laws will be
required by the offer, sale or issuance of the Preferred Shares or the Warrants
pursuant to this Agreement. The Company agrees that neither it, nor anyone
acting on its behalf, will offer or sell the Preferred Shares, the Warrants or
any other security so as to require the registration of the Preferred Shares or
the Warrants pursuant to the provisions of the Securities Act or any state
securities or "blue sky" laws, unless such securities are so registered.
5.21 Contractual Obligations.
(a) Section 5.21 of the Disclosure Letter sets forth all of
the following Contractual Obligations to which the Company or any of its
Subsidiaries is a party or by or to which any of them or any of their properties
may be bound or subject (other than those specifically set forth in any other
Section of the Disclosure Letter): (i) Contractual Obligations with any current
or former officer or director of the Company or with an entity in which, to the
Company's knowledge, any of the foregoing is a controlling person (including any
Contractual Obligations relating to medical insurance to be provided to the
Selling Stockholders other than as provided in the Medical Benefit Letter and
the Escrow Agreement); (ii) Contractual Obligations with any labor union or
association representing any employee; (iii) Contractual Obligations with any
person to sell, distribute or otherwise market any of the Company's products;
(iv) Contractual Obligations for the purchase of materials, supplies, goods,
services, equipment or other assets providing for annual payments by the Company
or any of its Subsidiaries of, or pursuant to which in the last year the Company
or any of its Subsidiaries paid in the aggregate, $50,000 or more; (v) material
distributorship, sales representative, marketing, agency, dealer or other
similar Contractual Obligations; (vi) Obligations with any person for the
manufacture of any of the Company's products; (vii) Contractual Obligations for
the sale of any properties other than in the ordinary course of business or for
the grant to any person of any option or preferential rights to purchase any
properties; (viii) partnership or joint venture agreements; (ix) Contractual
Obligations under which the Company or any of its Subsidiaries agrees to
indemnify any party or to share tax liability of any party; (x) material
Contractual Obligations which can be canceled without liability, premium or
penalty only on 90 days' or more notice; (xi) material Contractual Obligations
with customers, distributors or suppliers for the sharing of fees, the
<PAGE>
19
rebating of charges or other similar arrangements; (xii) Contractual Obligations
containing covenants of the Company or any of its Subsidiaries not to compete in
any line of business or with any person in any geographical area; (xiii)
Contractual Obligations relating to the acquisition by the Company or any of its
Subsidiaries of any operating business or the capital stock of any other Person;
(xiv) Contractual Obligations relating to the borrowing of money; (xv)
Contractual Obligations containing obligations or liabilities of any kind to
holders of the capital stock of the Company or any of its Subsidiaries as such
(including an obligation to register any of such securities under any federal or
state securities laws); (xvi) Contractual Obligations for the payment of fees or
other consideration to any officer or director of the Company or any of its
Subsidiaries or to any other entity in which any of the foregoing has an
interest; (xvii) options or rights of first refusal for the purchase or lease of
any property; (xviii) management Contractual Obligations and other similar
agreements with any person; and (xix) any other Contractual Obligations pursuant
to the terms of which there is either a current or future obligation or right of
the Company or any of its Subsidiaries to make payments in excess of $30,000 or
receive payments in excess of $30,000.
(b) There have been delivered to the Purchasers true and
complete copies of all of the Contractual Obligations set forth on Section 5.21
of the Disclosure Letter or in any other Section thereof. All of the Contractual
Obligations referred to in the preceding paragraph are valid and binding upon
the Company or one of its Subsidiaries, as the case may be, in accordance with
their terms. Neither the Company nor any of its Subsidiaries is in default in
any material respect under any of such Contractual Obligations, nor does any
condition exist that with notice or lapse of time or both would constitute such
a material default thereunder. To the knowledge of any of the Company or any of
its Subsidiaries, no other party to any such Contractual Obligations is in
default thereunder in any material respect nor does any condition exist that
with notice or lapse of time or both would constitute such a material default
thereunder.
5.22 Receivables. All accounts and notes receivable reflected on the
balance sheet in the 1998 Financials, and all accounts and notes receivable
arising subsequent to the 1998 Financials, have arisen in the ordinary course of
business of the Company or its Subsidiaries and are collectible in the ordinary
course of business of the Company and its Subsidiaries in the aggregate recorded
amounts thereof in accordance with their terms, subject to (i) reserves for
uncollectible accounts established in accordance with historical practices, and
(ii) credit and billing disputes in the ordinary course of the Company's
business, the resolution of which will not materially reduce the aggregate
amount realized from such accounts and notes receivable (i.e. by more than 5
percent of the aggregate amount thereof).
5.23 Operations of the Company. Except as set forth on Section 5.23 of
the Disclosure Letter, since October 31, 1998, neither the Company nor any of
its Subsidiaries has:
<PAGE>
20
(a) declared or paid any dividend or declared or made any
other distributions of any kind to its stockholders (other than dividends by a
Subsidiary to the Company), or made any direct or indirect redemption,
retirement, purchase or other acquisition of any shares of its capital stock;
(b) except for short-term bank borrowings in the ordinary
course of business, incurred any Indebtedness for borrowed money;
(c) waived any material right under any contract or other
agreement of the type required to be set forth on any section to the Disclosure
Letter;
(d) made any change in its accounting methods or practices or
made any change in depreciation or amortization policies or rates adopted by it;
(e) materially changed any of its business policies, including
advertising, investment, marketing, pricing, purchasing, production, personnel,
sales, returns, budget or product acquisition policies;
(f) made any loan or advance to any of its stockholders,
officers, directors, employees, consultants, agents or other representatives
(other than travel advances made in the ordinary course of business), or made
any other loan or advance otherwise than in the ordinary course of business;
(g) except for inventory or equipment in the ordinary course
of business, sold, abandoned or made any other disposition of any of its
properties or assets or made any acquisition of all or any part of the
properties, capital stock or business of any other Person;
(h) paid, directly or indirectly, any of its material
liabilities before the same became due in accordance with its terms or otherwise
than in the ordinary course of business;
(i) terminated or failed to renew, or received any written
threat (that was not subsequently withdrawn) to terminate or fail to renew, any
contract or other agreement that is or was material to the financial condition
of the Company;
(j) amended its Certificate of Incorporation or By-laws or
agreed to change in any manner the rights of its outstanding capital stock or
the character of its business; or
(k) engaged in any other material transaction other than in
the ordinary course of business.
5.24 Contracts Affecting Stockholders. Other than this Agreement and
the Registration Rights Agreement and the other agreements and documents
<PAGE>
21
specifically described herein, as of the Closing Date and after giving effect to
the transactions contemplated hereby, the Company will not be a party to any
stockholders agreement, voting trust agreement, registration rights agreement or
other contracts to which the Common Stock, Preferred Stock, the Warrants or any
other capital stock of the Company is bound by, subject to or entitled to the
benefit of or to which any of the existing stockholders is bound by, subject to
or entitled to the benefit of as a result of its ownership of the Common Stock
or any other interest in the Company.
5.25 ERISA. Section 5.25 of the Disclosure Letter sets forth each
existing plan, policy, program or arrangement providing for compensation,
severance, bonus, profit-sharing, stock options or other stock-related
compensation or other forms of incentive or deferred compensation, insurance
coverage, health or medical benefits, or retirement benefits (including pension,
health, medical or other similar benefits) under which the Company or any of its
Subsidiaries has or in the future could have any liability ("Benefit Plans").
Neither the Company nor any Subsidiary has any direct or indirect, actual or
contingent liability with respect to any Benefit Plan other than to make
contributions to, to administer and operate and pay benefits under, such plans
in accordance with the terms of such plans and applicable laws. None of the
Benefit Plans is subject to Title IV, a multiemployer plan (within the meaning
of 3(37) of ERISA), or a multiple-employer plan (within the meaning of ERISA).
Except as set forth on Schedule 5.25, neither the Company nor any of its
Subsidiaries has any current or projected liability in respect of
post-employment or post-retirement medical benefits for former employees of the
Company or any of its Subsidiaries, except as required to avoid an excise tax
under Section 4980B of the Code. No individual is eligible for coverage under
the Company's medical and dental insurance plan pursuant to the resolution of
the Board of Directors dated October 16, 1997, as set forth on Section 5.25 of
the Disclosure Letter, except the Selling Stockholders, and all individuals
participating in such plans are eligible under the terms thereof to do so. There
are no unfunded obligations under any Benefit Plan which are not properly
reflected in accordance with GAAP on the 1998 Financials. The execution and
delivery of this Agreement and the Registration Rights Statement and the
consummation of the transactions contemplated thereby will not (i) involve any
non-exempt prohibited transaction within the meaning of Section 406 of the
Employee Retirement Income Security Act of 1974, as amended ("ERISA"), or
Section 4975 of the Code on the part of the Company or any of its Subsidiaries,
(ii) accelerate the time of payment or vesting or increase the amount of
compensation due to any current or former employee of the Company or any
Subsidiary or (iii) give rise to an amount that would not be deductible under
Section 280G of the Code. The Company does not and, at and as of the Closing
Date, the Company does not reasonably expect to have any liability for any
prohibited transaction or funding deficiency or any complete or partial
withdrawal liability with respect to any pension, profit sharing or other plan
which is subject to ERISA and which is required to be funded, to which the
Company or any of its Subsidiaries makes or has made within the past six years a
contribution and in which any employee of the Company or any of its Subsidiaries
is or has ever been a participant. With respect to all Benefit Plans,
<PAGE>
22
except as set forth in Section 5.25 of the Disclosure Letter, each of the
Company and its Subsidiaries is and, at and as of the Closing Date, each of the
Company and its Subsidiaries will be in compliance in all material respects with
all applicable laws and regulations, including but not limited to ERISA and each
Benefit Plan which is intended to be qualified under Section 401(a) of the Code
is so qualified and has been so qualified since its adoption and each trust
created thereunder is exempt from tax under Section 501(a) of the Code and has
been so exempt since its adoption.
5.26 Related Party Transactions. Except as set forth on Section 5.26 of
the Disclosure Letter, none of the officers, directors or Affiliates of the
Company and its Subsidiaries:
(a) owns, directly or indirectly, any interest in (excepting
less than 1% stock holdings for investment purposes in securities of publicly
held and traded companies), or is an officer, director, employee or consultant
of, any Person which is, or is engaged in business as, a competitor, lessor,
lessee, supplier, distributor, sales agent or customer of the Company or any of
its Subsidiaries;
(b) owns, directly or indirectly, in whole or in part, any
property that the Company or any of its Subsidiaries use in the conduct of their
business;
(c) is or has been a party to any Contractual Obligations with
the Company or any of its Subsidiaries; or
(d) has any actions, causes of action, suits, claims,
complaints, demands, litigations or legal, administrative or arbitral
proceedings or investigations whatsoever against, or owes any amount to, the
Company or any of its Subsidiaries.
5.27 Broker's, Finder's or Similar Fees. Except as set forth herein,
there are no brokerage commissions, finder's fees or similar fees or commissions
payable in connection with the transactions contemplated hereby based on any
agreement, arrangement or understanding with the Company or any of its
Subsidiaries, or any action taken by any such entity.
ARTICLE 6
REPRESENTATIONS AND
WARRANTIES OF THE PURCHASERS
Each Purchaser (as to itself) represents and warrants to, and covenants
and agrees with, the Company as follows:
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23
6.1 Existence and Power.
Such Purchaser:
(a) is duly organized and validly existing under the laws of
the jurisdiction of its organization; and
(b) has the power and authority to own and operate its
property, to lease the property it operates as lessee and to conduct the
business in which it is currently, or is currently proposed to be, engaged.
6.2 Authorization; No Contravention. The execution, delivery and
performance by such Purchaser of this Agreement and the Registration Rights
Agreement:
(a) is within such Purchaser's power and authority and has
been duly authorized by all necessary action;
(b) does not contravene the terms of such Purchaser's
organizational documents, or any amendment thereof;
(c) will not violate, conflict with or result in any breach or
contravention of or the creation of any Lien under, any Contractual Obligation
of such Purchaser, or any order or decree directly relating to such Purchaser;
and
(d) does not require approval, consent, exemption,
authorization or other action by, or notice to, or filing with, any Governmental
Authority or any other Person, other than those that have been obtained or made
on or prior to the Closing.
6.3 Binding Effect. Each of this Agreement and the Registration Rights
Agreement has been duly executed and delivered by such Purchaser, and
constitutes the legal, valid and binding obligation of such Purchaser
enforceable against it in accordance with its terms, except as enforceability
may be limited by applicable bankruptcy, insolvency, or similar laws affecting
the enforcement of creditors' rights generally or by equitable principles
relating to enforceability.
6.4 No Legal Bar. The execution, delivery and performance of this
Agreement and the Registration Rights Agreement by such Purchaser will not
violate any Requirement of Law.
6.5 Purchase for Own Account. The Preferred Shares and the Warrants
(including, for purposes of this Sections 6.5, 6.6 and 6.8 hereof, the Common
Stock issuable upon conversion of the Preferred Shares and exercise of the
Warrants) to be acquired by the Purchaser acquiring such Preferred Shares and
Warrants pursuant to this Agreement are being acquired for such Purchaser's own
<PAGE>
24
account and with no intention of distributing or reselling such securities or
any part thereof in any transaction that would be in violation of the securities
laws of the United States of America, or any state, without prejudice, however,
to the rights of such Purchaser at all times to sell or otherwise dispose of all
or any part of the Preferred Shares and the Warrants under an effective
registration statement under the Securities Act, or under an exemption from such
registration available under the Securities Act. If the Purchasers should in the
future decide to dispose of any of the Preferred Shares or the Warrants, each
Purchaser understands and agrees that it may do so only in compliance with the
Securities Act and applicable state securities laws, as then in effect, and that
stop-transfer instructions to that effect, where applicable, will be in effect
with respect to such securities. The Purchasers agree to the imprint ing, so
long as required by law, of a legend on certificates representing all of the
Preferred Shares and the Warrants to the following effect: NEITHER THE
[WARRANTS] [SHARES] REPRESENTED HEREBY NOR THE SECURITIES ISSUABLE UPON EXERCISE
HEREOF HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT"), OR THE SECURITIES LAWS OF ANY STATE OR OTHER JURISDICTION.
THE [WARRANTS] [SHARES] REPRESENTED HEREBY AND THE SECURITIES ISSUABLE UPON
EXERCISE HEREOF HAVE BEEN AND WILL BE SOLD IN RELIANCE UPON EXEMPTIONS
THEREUNDER. THE SALE OR OTHER DISPOSITION OF THE [WARRANTS] [SHARES] REPRESENTED
HEREBY AND THE SECURITIES ISSUABLE UPON EXERCISE HEREOF IS RESTRICTED IN
ACCORDANCE WITH THAT ACT AND THOSE LAWS, MAY ONLY BE MADE PURSUANT TO AN
EXEMPTION FROM SUCH REGISTRATION AND, IN THE EVENT OF SUCH AN UNREGISTERED SALE
OR OTHER DISPOSITION, IS PROHIBITED UNLESS THE ISSUER HEREOF RECEIVES AN OPINION
OF COUNSEL SATISFACTORY TO IT AND ITS COUNSEL THAT SUCH SALE OR OTHER
DISPOSITION CAN BE MADE WITHOUT REGISTRATION UNDER THAT ACT OR THOSE LAWS.
6.6 Sophistication. Each Purchaser, by reason of its business and
financial experience, and the business and financial experience of those persons
that may have been retained to advise it with respect to its investment in the
Preferred Shares and the Warrants, together with such advisors, has such
knowledge and experience in business and financial matters to be capable of
evaluating the merits and risks of the prospective investment and to make an
informed investment decision. Each Purchaser acknowledges that it has been
afforded the opportunity (i) to ask such questions as it has deemed necessary
of, and to receive answers from, representatives of the Company concerning the
terms and conditions of the offering of the Preferred Shares and the Warrants
and the merits and risks of investing in such securities and (ii) to obtain such
additional information which the Company possesses or can acquire without
unreasonable effort or expense that is necessary to verify the accuracy and
completeness of the information heretofore provided to it; provided, however,
that the availability of the foregoing opportunity shall not in any way affect,
diminish or
<PAGE>
25
derogate from the representations and warranties made or deemed made to the
Purchasers by the Company hereunder or the Purchasers' right to rely thereon.
6.7 Broker's, Finder's or Similar Fees. Except as otherwise set forth
in this Agreement, there are no brokerage commissions, finder's fees or similar
fees or commissions payable in connection with the transactions contemplated
hereby based on any agreement, arrangement or understanding with the Purchasers
or any action taken by the Purchaser.
6.8 Additional Representations. Each Purchaser understands that the
offer and sale of the Preferred Shares and the Warrants has not been and will
not be registered under the Securities Act, by reason of the issuance of such
securities by the Company in a transaction exempt from the registration
requirements of the Securities Act. Each Purchaser is an accredited investor, as
such term is defined in Rule 501 of Regulation D under the Securities Act, and
was not formed specifically for the purpose of making an investment in the
Company. Each Purchaser is situated in the State of New York, and the investment
decision by such Purchaser to acquire the Preferred Shares and the Warrants
hereunder was made entirely in the State of New York.
6.9 Contribution. Following the Closing, the Purchasers shall
contribute or otherwise make available to the Company certain messaging and
directory software relating to the Company's business. The Purchasers disclaim
representations or warranties regarding such software.
ARTICLE 7
INDEMNIFICATION
7.1 Indemnification by the Company. The Company agrees to indemnify and
hold harmless the Purchasers and their Affiliates and their respective officers,
directors, agents, members, employees and partners to the fullest extent
permitted by law from and against any and all losses, claims, damages, expenses
(including reasonable fees, disbursements and other charges of counsel) or other
liabilities ("Liabilities") resulting from (i) any breach of any representation
or warranty of the Company in this Agreement or (ii) any legal, administrative
or other actions (including actions brought by any equity holders of the Company
or derivative actions brought by any Person claiming through the Company or in
the Company's name), proceedings or investigations (whether formal or informal)
(collectively, "Actions or Proceedings"), or written threats thereof, based
upon, relating to or arising out of this Agreement, the Preferred Shares, the
Warrants, the Registration Rights Agreement, the transactions contemplated
hereby or thereby, or any indemnified person's role therein or in the
transactions contemplated hereby; provided, however, that the Company shall not
be liable under this Section 7.1 (i) for any amount paid in settlement of claims
without the Company's consent (which
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26
consent shall not be unreasonably withheld) or (ii) to the extent that it is
finally judicially determined that such Liabilities resulted primarily from the
willful misconduct, bad faith or gross negligence of such indemnified Party;
provided further, that if and to the extent that such indemnification is
unenforceable for any reason, the Company shall make the maximum contribution to
the payment and satisfaction of such indemnified liability which shall be
permissible under applicable laws. The Company shall not be obligated to pay any
amount for indemnification under this Section 7.1 until the aggregate amount of
Liabilities for which indemnification is sought under this Section 7.1 equals at
least $50,000 (the "Minimum Amount"), whereupon the Company shall be obligated
to pay all such amounts for indemnification (including the Minimum Amount).
7.2 Indemnification By the Purchasers. The Purchasers agree to
indemnify and hold harmless the Company and its Affiliates and their respective
officers, directors, agents, members, employees and partners to the fullest
extent permitted by law from and against any and all Liabilities resulting from
any breach of any representation, warranty or covenant of the Purchasers in this
Agreement; provided, however, that the Purchasers shall not be liable under this
Section 7.2: (i) for any amount paid in settlement of claims without the
Purchasers' consent (which consent shall not be unreasonably withheld); (ii) to
the extent that it is finally judicially determined that such Liabilities
resulted primarily from the willful misconduct, bad faith or gross negligence of
such indemnified party; provided further, that if and to the extent that such
indemnification is unenforceable for any reason, the Company shall make the
maximum contribution to the payment and satisfaction of such indemnified
liability which shall be permissible under applicable laws.
7.3 Notification. Each party entitled to indemnification under Section
7.1 or 7.2 hereof (an "Indemnified Party") will, promptly after the receipt of
notice of the commencement of any action or other proceeding against such
Indemnified Party, or any other event or occurrence in respect of which
indemnity may be sought from the party obligated to provide such indemnification
under Sections 7.1 or 7.2 hereof (an "Indemnifying Party"), notify the
Indemnifying Party in writing thereof. The failure of any Indemnified Party so
to notify an Indemnifying Party shall not relieve such Indemnifying Party from
any liability which it may have to such Indemnified Party (i) other than
pursuant to this Article 7 or (ii) under this Article 7 unless, and only to the
extent that, such omission results in actual prejudice to such Indemnifying
Party. In case any such action or other proceeding shall be brought against any
Indemnified Party and it shall notify the Indemnifying Party of the commencement
thereof, such Indemnifying Party shall be entitled to participate therein and,
to the extent that it may wish, to assume the defense thereof, with counsel
reasonably satisfactory to such Indemnified Party; provided, however, that any
Indemnified Party may, at its own expense, retain separate counsel to
participate in such defense. Notwithstanding the foregoing, in any action or
proceeding in which both an Indemnifying Party and an Indemnified Party is, or
is reasonably likely to become, a party, such Indemnified Party shall have the
right to employ separate counsel reasonably acceptable to the Indemnifying Party
(in terms of such counsel's
<PAGE>
27
experience) at the Indemnifying Party's expense and to control its own defense
of such action or proceeding if, in the reasonable opinion of counsel to such
Indemnified Party, (a) there are or may be legal defenses available to such
Indemnified Party or to other Indemnified Parties that are different from or
additional to those available to the Indemnifying Party or (b) any conflict or
potential conflict exists between the Indemnifying Party and such Indemnified
Party that would make such separate representation advisable; provided, however,
that in no event shall the Indemnifying Party be required to pay fees and
expenses under this Article 7 for more than one firm of attorneys in any
jurisdiction in any one legal action or group of related legal actions. The
Indemnifying Party will not, without the prior written consent of the
Indemnified Party, settle, compromise or consent to the entry of any judgment in
any pending or threatened claim, action or proceeding relating to the matters
contemplated hereby (if any Indemnified Party is a party thereto or has been
actually threatened to be made a party thereto) unless such settlement,
compromise or consent includes an unconditional release of each Indemnified
Party from all liability arising or that may arise out of such claim, action or
proceeding. The rights accorded to Indemnified Parties hereunder shall be in
addition to any rights that any Indemnified Party may have at common law, by
separate agreement or otherwise.
7.4 Expense Reimbursement. In connection with the obligation of an
Indemnifying Party to indemnify an Indemnified Party for expenses pursuant to
Sections 7.1 and/or 7.2 above, the Indemnifying Party shall reimburse each
Indemnified Party for all such expenses (including reasonable fees,
disbursements and other charges of counsel) as they are incurred by such
Indemnified Party; provided, however, that if an Indemnified Party is reimbursed
hereunder for any expenses, such reimbursement of expenses shall be refunded to
the extent that the Indemnified Party was not entitled to be indemnified
therefore pursuant to Section 7.1 or 7.2, as the case may be.
7.5 Registration Rights Agreement. Notwithstanding anything to the
contrary in this Article 7, the indemnification and contribution provisions of
the Registration Rights Agreement shall govern any claim made with respect to
registration statements filed pursuant thereto or sales made thereunder.
ARTICLE 8
AFFIRMATIVE COVENANTS
The Company hereby covenants and agrees that:
8.1 Financial Statements. The Company shall deliver to the Purchasers
and any other Holder designated by either Purchaser:
(a) as soon as available, but not later than one hundred (100)
days after the end of each fiscal year of the Company, a copy of the audited
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28
consolidated balance sheet of the Company and its Subsidiaries as of the end of
such year and the related consolidated statements of income and cash flows for
such fiscal year, setting forth in each case in comparative form the figures for
the previous year, all in reasonable detail and accompanied by a management
summary and analysis of the operations of the Company and its Subsidiaries for
such fiscal year and by the opinion of Grant Thornton LLP (or any successor
thereto) or another nationally recognized independent public accounting firm
which report shall state that such consolidated financial statements present
fairly the financial position for the periods indicated in conformity with GAAP
applied on a basis consistent with prior years; provided, however, that the
delivery of a copy of the Company's Annual Report on Form 10-K or Form 10-KSB
filed pursuant to the Exchange Act shall satisfy the requirements of this
Section 8.1(a);
(b) as soon as available and, in any event not later than
fifty (50) days after the end of each of the first three fiscal quarters of each
year, the unaudited consolidated balance sheet of the Company and its
Subsidiaries, and the related consolidated statements of income and cash flow
for such quarter and for the period commencing on the first day of the fiscal
year and ending on the last day of such quarter, all certified by an appropriate
officer of the Company; provided, however, that the delivery of a copy of the
Company's Quarterly Report on Form 10-Q or Form 10-QSB filed pursuant to the
Exchange Act shall satisfy the requirements of this Section 8.1(b);
(c) budgets, documentation of material financial transactions,
projections, operating reports, acquisition analyses, presentations to banks,
financial institutions or potential investors, consultants' reports and such
other financial and operating data of the Company and its Subsidiaries as the
Purchasers reasonably may request (any such information to be subject to the
provisions of Section 8.9(b));
(d) at any time when it is not subject to Section 13 or 15(d)
of the Exchange Act, upon request, to the Purchasers and any prospective
Purchasers of Preferred Shares or Warrants, information of the type that would
satisfy the requirement of subsection (d)(4)(i) of Rule 144A (or any similar
successor provision) under the Securities Act; and
(e) except as otherwise provided in Section 8.1(a) and (b), so
long as the Company remains subject to the Securities Act or the Exchange Act,
promptly after the same are filed, copies of all reports, statements and other
documents filed with the Commission.
8.2 Preservation of Corporate Existence. The Company shall, and shall
cause each of its operating Subsidiaries to:
(a) preserve and maintain in full force and effect its
corporate existence and good standing under the laws of its jurisdiction of
incorporation or organization;
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29
(b) preserve and maintain in full force and effect all
material rights, privileges, qualifications, licenses and franchises necessary
in the normal conduct of its business; and
(c) use its reasonable efforts to preserve its business
organization.
8.3 Payment of Obligations. The Company shall, and shall cause its
Subsidiaries to, pay and discharge as the same shall become due and payable, all
their respective obligations and liabilities, including without limitation:
(a) all tax liabilities, assessments and governmental charges
or levies upon it or its properties or assets, unless the same are being
contested in good faith by appropriate proceedings and adequate reserves in
accordance with GAAP are being maintained by the Company or such Subsidiary;
(b) all lawful claims which the Company and each of its
Subsidiaries are obligated to pay, which are due and which, if unpaid, might by
law become a Lien upon its property; and
(c) all payments of principal and interest when due (giving
effect to any grace periods relating thereto) on Indebtedness.
8.4 Compliance with Laws. The Company shall comply, and shall cause
each Subsidiary to comply, in all material respects with its Certificate of
Incorporation and By-laws or other organizational or governing documents and all
Requirements of Law and with the directions of any Governmental Authority having
jurisdiction over it or its business, except such as to which such failure to
comply would not have a material adverse effect on the assets, business,
operations, properties or financial or other condition of the Company and its
Subsidiaries.
8.5 Notices. Upon knowledge of the Chief Executive Officer, the
President or the Chief Financial Officer of the Company of the events described
below, the Company shall give written notice within ten days to the Purchasers
and any other Holder designated by either Purchaser:
(a) of the occurrence of any default under, or breach of, any
of the provisions of Article 8 accompanied by a certificate specifying the
nature of such default or breach, the period of existence thereof and the action
that the Company has taken or proposes to take with respect thereto; and
(b) of any (i) material default or event of default under any
material Contractual Obligation of the Company or any of its Subsidiaries, or
(ii) material dispute, litigation, investigation, proceeding or suspension which
may exist at any time between the Company or any of its Subsidiaries and any
Governmental Authority.
<PAGE>
30
(c) Each notice pursuant to this Section 8.5 shall be
accompanied by a statement by the Chief Executive Officer, President or Chief
Financial Officer of the Company setting forth details of the occurrence
referred to therein and stating what action the Company proposes to take with
respect thereto.
8.6 Issue Taxes. The Company shall pay, or cause to be paid, all
documentary and similar taxes levied under the laws of any applicable
jurisdiction in connection with the issuance of the Preferred Shares, the
Warrants and the execution and delivery of the other agreements and documents
contemplated hereby and any modification of the Preferred Shares, the Warrants
or such other agreements and documents and will hold the Purchasers harmless,
without limitation as to time, against any and all liabilities with respect to
all such taxes.
8.7 Reservation of Shares. The Company shall at all times reserve and
keep available out of its authorized Common Stock, solely for the purpose of
issue or delivery upon conversion of the Preferred Shares or the exercise of the
Warrants, such number of shares of Common Stock as shall then be issuable or
deliv erable upon the conversion of all outstanding Preferred Shares and the
exercise of all outstanding Warrants. Such shares of Common Stock shall, when
issued or delivered in accordance with the Certificate of Amendment or the terms
of the Warrants as the case may be, be duly and validly issued and fully paid
and non-assessable. The Company shall issue the Common Stock into which the
Preferred Shares are convertible upon the proper surrender of the Preferred
Shares in accordance with the provisions of the Certificate of Amendment and
shall otherwise comply with the terms thereof, and shall issue the Common Stock
issuable upon exercise of the Warrants upon the proper exercise of the Warrants
in accordance with the provisions thereof, and shall otherwise comply with the
terms thereof.
8.8 Inspection. The Company will permit, and will cause each of its
Subsidiaries to permit, representatives of the Purchasers to visit and inspect
any of its properties, to examine its corporate, financial and operating records
and make copies thereof or abstracts therefrom, and to discuss its affairs,
finances and accounts with their respective directors, officers and independent
public accountants, all at such reasonable times during normal business hours
and as often as may be reasonably requested, upon reasonable advance notice to
the Company. To the extent the Purchasers are advised that any information
obtained from the exercise of the Purchasers' rights hereunder, and not
previously known to the Purchasers, is to be treated in a confidential manner,
the Purchasers shall treat such information as confidential unless otherwise
required by law.
8.9 Board Representation.
(a) The Company shall at or prior to the Closing Date cause
three vacancies, constituting a majority of the Board of Directors, to be
created on its Board of Directors, and on the Closing Date shall cause each of
Messrs. Peter Boni, John Maxwell and Richard Rankin, who have been designated by
the Purchasers to be
<PAGE>
31
elected to its Board of Directors. For at least two (2) years after the Closing
Date, one member of the Board of Directors shall be an independent director and
one director shall be the Chief Executive Officer of the Company.
(b) Commencing with the annual meeting of stockholders of the
Company immediately following the election of such persons to the Board of
Directors, and at each annual meeting of stockholders of the Company thereafter,
so long as the Purchasers hold (A) shares of Common Stock, or (B) Preferred
Shares convertible and/or Warrants exercisable, in each case, after giving
effect to any adjustments, into shares of Common Stock that in the aggregate
represent 25% or more of the total number of shares of Common Stock of the
Company then outstanding on a fully diluted basis, the Purchasers shall be
entitled to nominate (in addition to any rights granted to the holders of
Preferred Stock as set forth in the Certificate of Amendment), from time to
time, that number of directors to the Company's Board of Directors that would
constitute a majority of the Board of Directors. The Company shall cause such
nominees of the Purchasers to be included in the slate of nominees recommended
by the Board to the Company's stockholders for election as directors, and the
Company shall use its best efforts to cause the election of such nominees,
including voting all shares for which the Company holds proxies (unless
otherwise directed by the stockholder submitting such proxy) or is otherwise
entitled to vote, in favor of the election of such persons. The Board of
Directors shall appoint a Nominating Committee, consisting of the Chief
Executive Officer of the Company, a director designated by the Purchaser and Mr.
Graham McLetchie, which shall recommend two nominees for election as directors
at the first Annual Meeting of Stockholders following the Closing (which Annual
Meeting shall occur not earlier than 180 days following the Closing Date).
(c) In the event any nominee of the Purchasers shall cease to
serve as a director for any reason, the Company shall use its best efforts to
cause the vacancy resulting thereby to be filled by a nominee of the Purchasers.
8.10 Registration and Listing. If any shares of Common Stock required
to be reserved for purposes of conversion of the Preferred Shares or exercise of
the Warrants require registration with or approval of any Governmental Authority
under any federal or state or other applicable law before such Common Stock may
be issued or delivered upon conversion, the Company will in good faith and as
expeditiously as possible endeavor to cause such Common Stock to be duly
registered or approved, as the case may be, unless such registration or approval
is required solely because of a breach of the Purchasers' representations
contained in Article 7, the Warrant or the Registration Rights Agreement. In the
event that, and so long as, the Common Stock is listed on the NYSE or quoted or
listed on any other national securities exchange or NASDAQ, the Company will, if
permitted by the rules of such system or exchange, quote or list and keep quoted
or listed on such exchange or NASDAQ, upon official notice of issuance, all
Common Stock issuable or deliverable upon conversion of the Preferred Shares or
exercise of the Warrants.
<PAGE>
32
8.11 Preemptive Right. In the event that, at any time or from time to
time, the Company proposes to issue or sell newly issued shares of Common Stock
(which term shall include, for purposes of this Section 8.11, shares of any
class or series of common stock of the Company, or securities convertible,
exchangeable or exercisable into Common Stock or any class or series of Common
Stock, or any options, warrants or other rights to acquire shares of Common
Stock or any class or series of Common Stock ("New Securities")), the Company
shall first notify each Purchaser of all relevant terms and conditions of the
sale of the New Securities and offer to each Purchaser, and each Purchaser will
have the right to purchase from the Company, upon the same terms and conditions
as the Company proposes to sell the New Securities, such portion of the New
Securities so as to maintain the aggregate proportionate ownership of the
capital stock of the Company, on a fully diluted basis, held by each Purchaser
immediately prior to the issuance of the New Securities. Each Purchaser shall
have 15 Business Days following receipt of any notice to accept or reject such
offer. In the event that after the giving of such notice by the Company the
Company changes the terms or conditions on which it proposes to issue or sell
such New Securities, the Company shall be obligated to notify the Purchasers of
such changed terms and conditions and the Purchaser's rights under this Section
8.11 will again apply. The rights of the Purchaser under this Section 8.11 shall
not apply to: (i) New Securities issued upon the exercise or conversion of any
previously outstanding securities; (ii) New Securities issued in connection with
any merger, consolidation, combination, purchase of all or substantially all of
the assets of another Person or other reorganization; (iii) New Securities
issued in connection with any stock split, stock dividend or recapitalization of
the Company; (iv) New Securities issued to employees, consultants, officers or
directors of the Company pursuant to any stock option, stock purchase or stock
bonus plan, agreement or arrangement for the primary purpose of soliciting or
retaining such employees', consultants|, officers| or directors| services; and
(v) New Securities issued to providers of debt or lease financing to the Company
in connection with the provision of such financing.
8.12 Severance Arrangements. Effective as of the Closing Date, the
Company will amend its employment agreement with the current President of the
Company to provide that if he is terminated without cause during the term of his
employment with the Company, he will continue to be paid his current base salary
and benefits for a period of one year following such termination and up to six
months thereafter for so long as he has not been re-employed. The Company will
also amend its employment agreements with the three current members of the
Company's executive staff to provide that such members will continue to be paid
their current base salary and benefits, should they be terminated during the
term of their employment without cause, for a period of six months following
such termination, and that their current base salary and benefits will continue
for up to an additional six months thereafter for so long as any such executive
has not been re-employed.
8.13 Transactions with Affiliates. The Company shall not, and shall not
permit any of its Subsidiaries to, enter into any transaction with any Affiliate
of the Company or of any such Subsidiary, except in the ordinary course of
business and
<PAGE>
33
pursuant to the reasonable requirements of the business of the Company or such
Subsidiary and on terms no less favorable to the Company or such Subsidiary than
those the Company or such Subsidiary would obtain in a comparable arm|s length
transaction with a Person not an Affiliate of the Company or such Subsidiary.
8.14 No Inconsistent Agreements. Neither the Company nor any of its
Subsidiaries shall (i) enter into any loan or other agreement after the date
hereof which by its terms restricts or prohibits the ability of the Company to
issue Common Stock upon conversion of the Preferred Stock or exercise of the
Warrants or (ii) amend or modify any currently existing loan or other agreement
in order to provide for any such restrictions or prohibitions not currently
contained in such agreement.
8.15 No Solicitation. The Company shall immediately cease, and shall
direct its advisors and other agents to cease, any existing discussions or
negotiations, if any, with any parties conducted heretofore with respect to any
Acquisition Proposal (defined below); provided that following the cessation of
any such discussions or negotiations, future discussions or negotiations with
any such parties shall be governed solely by the following provisions of this
Section 8.15. Except as provided pursuant to this Agreement, the Company shall
not, directly or indirectly (through representatives or otherwise), solicit,
knowingly encourage, participate in or initiate discussions or negotiations
with, or provide any information to (collectively, the "Prohibited Activities"),
any person or group (other than the Purchasers or any designee of the Purchaser)
concerning any proposal (an "Acquisition Proposal") for any acquisition of all
or any substantial part of capital stock of the Company, or an acquisition of
all or any substantial part of the business and properties of the Company and
its subsidiaries taken as a whole, directly or indirectly, whether by merger,
consolidation, share exchange, tender offer, purchase of assets or shares of
capital stock or otherwise (an "Acquisition Transaction"). The Board of
Directors of the Company (the "Board") shall promptly (and in no event later
than 24 hours after receipt of the relevant Acquisition Proposal) notify (which
notice shall be provided both orally and in writing) the Purchasers if any such
Acquisition Proposal is made and shall, in such notice, indicate in reasonable
detail the terms and conditions of such proposal and shall keep the Purchasers
promptly advised of any material changes to such terms and conditions. In
connection with an Acquisition Proposal, the Company agrees not to release any
third party from, or waive any provisions of, any confidentiality or standstill
agreement to which the Company may be a party, unless the Board shall have
determined in good faith that failing to release such third party or waive such
provisions would constitute a breach of the fiduciary duties of the Board under
applicable law.
Each party hereby covenants and agrees that:
8.16 Securities Law Compliance. Subsequent to the Time of Closing, the
Purchasers and the Company shall take all actions necessary to comply
<PAGE>
34
with all federal securities laws necessary in connection with the transactions
contemplated hereby.
ARTICLE 9
TERMINATION
9.1 Termination. This Agreement may be terminated and the transactions
contemplated hereby may be abandoned at any time prior to the Time of Purchase:
(a) by the mutual written consent of the parties hereto;
(b) by the Purchasers or the Company, if the Time of Purchase
shall not have occurred on or prior to 30 days from the date hereof; provided
that the right to terminate this Agreement pursuant to this Section 9.1(b) shall
not be available to any party whose failure to perform any of its obligations
under this Agreement results in the failure of such condition;
(c) by the Purchasers, in the event the Company breaches any
of its representations, warranties, covenants or other agreements contained in
this Agreement which breach, if susceptible of cure, has not been cured within
30 days after the giving of written notice to the Company; and
(d) by the Company, in the event the Purchasers breach any of
their representations, warranties, covenants or other agreements contained in
this Agreement which breach, if susceptible of cure, has not been cured within
30 days after the giving of written notice to the Purchasers.
9.2 Fees and Expenses.
(a) In the event that this Agreement is terminated by the
Purchasers pursuant to Section 9.1(c), then, in addition to any other rights and
remedies available to the Purchaser, the Company shall promptly pay to the
Purchasers $50,000 in cash, as reimbursement of the cash deposit previously paid
to the Company by the Purchaser; and
(b) In the event that, within one year following any
termination by the Purchasers pursuant to Section 9.1(c) by reason of the breach
by the Company of Section 8.15, the Company shall have consummated an
Acquisition Transaction with a Person unaffiliated with the Purchaser, then, in
addition to the $50,000 repayment by the Company to the Purchasers as provided
in Section 9.2(a) above and in addition to any other rights and remedies
available to the Purchaser, the Company shall pay to the Purchaser, not later
than one Business Day after the consummation of such Acquisition Proposal, a fee
equal to $250,000.
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35
9.3 Procedure for the Effect of Termination. In the event that this
Agreement is terminated by the Purchaser, on the one hand, or by the Company, on
the other hand, pursuant to Section 9.1, written notice of such termination and
abandonment shall forthwith be given to the other parties and this Agreement
shall terminate and the transactions contemplated hereby shall be abandoned
without any further action. If this Agreement is terminated as provided herein,
no party hereto shall have any liability or further obligation to any other
party under the terms of this Agreement except with respect to the willful
breach by any party hereto and except that the provisions of this Section 9.3,
Section 9.2 and Article 10 shall survive the termination of this Agreement.
ARTICLE 10
MISCELLANEOUS
10.1 Survival of Provisions. All of the representations and warranties
made herein and each of the provisions of Articles 1, 5, 6, 7, 8, 9 and 10 shall
survive the execution and delivery of this Agreement, any investigation by or on
behalf of the Purchasers or any Affiliate, acceptance of the Warrants, the
Preferred Shares and payment therefor, or termination of this Agreement;
provided that (i) the Company's obligations contained in Sections 8.1 through
8.8, inclusive, and Section 8.12 through 8.14, inclusive, shall terminate at
such time as there are no Warrants or Shares of Preferred Stock outstanding,
(ii) the Company's obligations contained in Section 8.15 shall terminate upon
the Closing, and (iii) the Purchasers' rights contained in Section 8.11 shall
expire on the seventh anniversary of the Closing.
10.2 Notices. All notices, demands and other communications provided
for or permitted hereunder shall be made in writing and shall be by registered
or certified first-class mail, return receipt requested, telecopier, courier
services or personal delivery to the following addresses, or to such other
addresses as shall be designated from time to time by a party in accordance with
this Section 10.2:
(a) if to the Purchasers:
Commercial Electronics Capital Partnership, L.P.
375 Park Avenue, Suite 1604
New York, New York 10152
Attention: John C. Maxwell, III
Telephone No.: (212) 755-9100
Telecopier No.: (212) 755-2018
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36
with a copy to:
Paul, Weiss, Rifkind, Wharton & Garrison
1285 Avenue of the Americas
New York, New York 10019-6064
Attention: Michele R. Jenkinson, Esq.
Telephone No.: (212) 373-3101
Telecopier No.: (212) 757-3990
(b) if to the Company:
Wiltek, Inc.
542 Westport Avenue
Norwalk, Connecticut 06853
Attention: President
Telephone No.: (203) 853-7400
Telecopier No.: (203) 846-3170
with a copy to:
Finn Dixon & Herling LLP
1 Landmark Square, Suite 1400
Stamford, CT 06901
Attention: David I. Albin, Esq.
Telephone No.: (203) 325-5000
Telecopier No.: (203) 348-5777
All such notices and communications shall be deemed to have been duly
given: when delivered by hand, if personally delivered; one Business Day after
delivery to a courier, if delivered by commercial overnight courier service;
five Business Days after being deposited in the mail, postage prepaid, if
mailed; and when receipt is acknowledged, if telecopied.
10.3 Successors and Assigns. This Agreement shall inure to the benefit
of and be binding upon the successors and permitted assigns of the parties
hereto. The Purchasers may assign any of their rights under this Agreement or
the Registration Rights Agreement to any of their Affiliates or to any Person to
whom the Preferred Shares or the Warrants (or any portion thereof) are
transferred. The Company may not assign any of its rights hereunder without the
consent of the Purchaser. Except as provided in Article 7, no Person other than
the parties hereto and their permitted assignees is intended to be a beneficiary
of this Agreement or the Registration Rights Agreement.
10.4 Amendment and Waiver. No failure or delay on the part of the
Company or any Holder in exercising any right, power or remedy hereunder shall
operate as a waiver thereof, nor shall any single or partial exercise of any
such right,
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37
power or remedy preclude any other or further exercise thereof or the exercise
of any other right, power or remedy. The remedies provided for herein are
cumulative and are not exclusive of any remedies that may be available to the
Company or the Purchasers at law, in equity or otherwise. No waiver or amendment
of or consent to any departure by the Company or the Purchasers from any
provision of this Agreement shall be effective unless signed in writing by the
party entitled to the benefit thereof; provided that notice of any such waiver
shall be given to each party hereto as set forth below.
Any amendment, supplement or modification of or to any provision of
this Agreement, any waiver of any provision of this Agreement, and any consent
to any departure by the Company or the Purchasers from the terms of any
provision of this Agreement, shall be effective only in the specific instance
and for the specific purpose for which made or given. Except where notice is
specifically required by this Agreement, no notice to or demand on the Company
or the Purchasers in any case shall entitle the Company or the Purchasers to any
other or further notice or demand in similar or other circumstances.
10.5 Counterparts. This Agreement may be executed in any number of
counterparts and by the parties hereto in separate counterparts, each of which
when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement.
10.6 Headings. The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.
10.7 Determinations. All determinations to be made by the Company or
any Holder hereunder in its opinion or judgment or with its approval or
otherwise shall be made by it in its sole discretion.
10.8 Governing Law. This Agreement has been negotiated, executed and
delivered in the State of New York and shall be governed by and construed in
accordance with the laws of the State of New York, without regard to principles
of conflicts of law.
10.9 Jurisdiction. Each party to this Agreement hereby irrevocably
agrees that any legal action or proceeding arising out of or relating to this
Agreement or any agreements or transactions contemplated hereby may be brought
in the courts of the State of New York or of the United States of America for
the Southern District of New York and hereby expressly submits to the personal
jurisdiction and venue of such courts for the purposes thereof and expressly
waives any claim of improper venue and any claim that such courts are an
inconvenient forum. Each party hereby irrevocably consents to the service of
process of any of the aforementioned courts pursuant to a contractual provision
in any such suit, action or proceeding by the mailing of copies thereof by
registered or certified mail, postage prepaid, to the
<PAGE>
38
address set forth in Section 10.2, such service to become effective ten days
after such mailing.
10.10 Severability. In the event that any one or more of the provisions
contained herein, or the application thereof in any circumstance, is held
invalid, illegal or unenforceable in any respect for any reason, the validity,
legality and enforceability of any such provision in every other respect and of
the remaining provisions hereof shall not be in any way impaired, unless the
provisions held invalid, illegal or unenforceable shall substantially impair the
benefits of the remaining provisions hereof.
10.11 Rules of Construction. Unless the context otherwise requires,
"or" is not exclusive, and references to sections or subsections refer to
sections or subsections of this Agreement.
10.12 Remedies. If a breach of this Agreement, the Preferred Shares, or
the Warrants occurs and is continuing, any Holder of Preferred Shares or the
Warrants may pursue any available remedy by proceeding at law or in equity to
enforce the performance (including, without limitation, the specific
performance) of any provision of the Preferred Shares, the Warrants, or this
Agreement. A Holder may maintain a proceeding even if it does not possess any of
the Warrants, or Pre ferred Shares or does not produce any of them in the
proceeding. Except as otherwise provided by law, a delay or omission by any
Holder 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 is exclusive of any other remedy. All available remedies are
cumulative.
10.13 Entire Agreement. This Agreement, together with the exhibits and
schedules hereto, the Preferred Shares, the Warrants and the Registration Rights
Agreement, is intended by the parties as a final expression of their agreement
and intended to be a complete and exclusive statement of the agreement and
understanding of the parties hereto in respect of the subject matter contained
herein and therein. There are no restrictions, promises, warranties or
undertakings, other than those set forth or referred to herein or therein. This
Agreement, together with the exhibits and schedules hereto, the Preferred
Shares, the Warrants and the Registration Rights Agreement, supersede all prior
agreements and understandings among the parties with respect to such subject
matter.
10.14 Attorneys' Fees. In any action or proceeding brought to enforce
any provision of this Agreement, the Preferred Shares, the Warrants and the
Registration Rights Agreement or any other document or instrument contemplated
hereby or thereby, or where any provision hereof or thereof is validly asserted
as a defense, the successful party shall be entitled to recover reasonable
attorneys' fees, charges and disbursements in addition to any other available
remedy.
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39
10.15 Publicity. Except as may be required by applicable law, or as
provided for in Article 8, no party hereto shall issue a publicity release or
announcement or otherwise make any public disclosure concerning this Agreement
or the transactions contemplated hereby, without prior approval by the other
parties hereto. If any announcement is required by law to be made by a party
hereto, prior to making such announcement such party will deliver a draft of
such announcement to the other parties and shall give the other parties an
opportunity to comment thereon.
IN WITNESS WHEREOF, the parties hereto have caused this Securities
Purchase Agreement to be executed and delivered by their respective officers
hereunto duly authorized as of the date first above written.
WILTEK, INC.
By: /s/ David S. Teitelman
--------------------------
Name: David S. Teitelman
Title: President and CEO
COMMERCIAL ELECTRONICS
CAPITAL PARTNERSHIP, L.P.
By Electronics Investments, L.L.C.
Its General Partner
By: /s/ John C. Maxwell, III
----------------------------
Name: John C. Maxwell, III
Its: Member
COMMERCIAL ELECTRONICS L.L.C.
By Electronics Investments, L.L.C.
Its Member
By: /s/ John C. Maxwell, III
----------------------------
Name: John C. Maxwell, III
Its: Member
<PAGE>
SCHEDULE I
Commercial Electronics, L.L.C.
- ------------------------------
Securities Purchased Purchase Price
- -------------------- --------------
750,000 Preferred Shares $ 2,238,750
1,125,000 Warrants 11,250
-----------
Sub-total $ 2,250,000
less pro-rata share of $50,000 prepayment (37,500)
-----------
Total purchase price $ 2,212,500
Commercial Electronics Capital Partnership, L.L.C.
- --------------------------------------------------
Securities Purchased Purchase Price
- -------------------- --------------
250,000 Preferred Shares $ 746,250
375,000 Warrants 3,750
--------------
Sub-total $ 750,000
less pro-rata share of $50,000 prepayment (12,500)
--------------
Total purchase price $ 737,500
Annex I
-------
RESOLVED that, pursuant to the authority vested in the Board of
Directors of Wiltek, Inc., a Connecticut corporation (the "Company") in
accordance with the provisions of the Certificate of Incorporation of the
Company (the "Certificate of Incorporation"), a series of the class of
authorized Senior Convertible Series A Preferred Stock, no par value, of the
Company, is hereby created and that the designation and number of shares thereof
and the voting powers, preferences and relative, participating, optional and
other special rights of the shares of such series, and the qualifications,
limitations and restrictions thereof are as follows:
Section 1. Designation and Number.
(a) The shares of such series shall be designated as "Senior
Convertible Series A Preferred Stock" (the "Series A Stock"). The number of
shares initially constituting the Series A Stock shall be 1,000,000, which
number may be decreased (but not increased) by the Board of Directors without a
vote of stockholders; provided, however, that such number may not be decreased
below the number of then outstanding shares of Series A Stock.
(b) The Series A Stock shall, with respect to dividend rights and
rights upon liquidation, dissolution or winding up, rank prior to all other
classes and series of capital stock of the Company now or hereafter authorized
(except as may be authorized pursuant to Section 3(b)) including, without
limitation, the Common Stock.
(c) Capitalized terms used herein and not otherwise defined shall have
the meanings set forth in Section 9.
Section 2. Dividends and Distributions.
In the event that the Company shall declare a dividend or make any
other distribution (including, without limitation, in cash, in capital stock
(which shall include, without limitation, any options, warrants or other rights
to acquire capital stock) of the Company or other property or assets) to holders
of Common Stock, then the Board of Directors shall declare, and the holder of
each share of Series A Stock shall be entitled to receive, a dividend or
distribution in an amount equal to the amount of such dividend or distribution
received by a holder of the number of shares of Common Stock for which such
share of Series A Stock is convertible on the record date for such dividend or
distribution. Any such amount shall be paid to the holders of shares of Series A
Stock at the same time such dividend or distribution is made to holders of
Common Stock.
<PAGE>
2
Section 3. Voting Rights.
In addition to any voting rights provided by law or in the Securities
Purchase Agreement, the holders of shares of Series A Stock shall have the
following voting rights:
(a) So long as the Series A Stock is outstanding, each share of Series
A Stock shall entitle the holder thereof to vote, in person or by proxy, at a
special or annual meeting of stockholders, on each of the matters entitled to be
voted on by holders of Common Stock, voting together as a single class with
other shares entitled to vote thereon. With respect to any such vote, each share
of Series A Stock shall entitle the holder thereof to cast that number of votes
per share as is equal to the number of votes that such holder would be entitled
to cast had such holder converted its shares of Series A Stock into Common Stock
on the record date for determining the stockholders of the Company eligible to
vote on any such matters.
(b) Unless the consent or approval of a greater number of shares shall
then be required by law, the affirmative vote of the holders of at least a
majority of the outstanding shares of Series A Stock, voting separately as a
single class, in person or by proxy, at a special or annual meeting of
stockholders called for the purpose, shall be necessary to (i) authorize,
increase the authorized number of shares of, or issue (including on conversion
or exchange of any convertible or exchangeable securities or by
reclassification), any shares of any class or classes of Senior Stock or Parity
Stock, (ii) authorize, adopt or approve an amendment to the Certificate of
Incorporation that would increase or decrease the par value of the shares of
Series A Stock, or alter or change the powers, preferences or special rights of
the shares of Series A Stock, other Parity Stock or Senior Stock, (iii) amend,
alter or repeal the Certificate of Incorporation so as to affect the shares of
Series A Stock adversely, including, without limitation, by granting any voting
right to any holder of notes, bonds, debentures or other debt obligations of the
Company, (iv) authorize or issue any security convertible into, exchangeable for
or evidencing the right to purchase or otherwise receive any shares of any class
or classes of Senior Stock or Parity Stock, or (v) effect an Extraordinary
Event.
(c) If on any date (i) the Company shall have failed to satisfy its
obligation to convert shares of Series A Stock pursuant to Section 7, or (ii) a
breach of Article 8 of the Securities Purchase Agreement shall have occurred and
be continuing for a period of at least 30 days, then the number of directors
constituting the Board of Directors shall, without further action, be increased
by one and the holders of shares of Series A Stock shall have, in addition to
the other voting rights set forth herein, the exclusive right, voting separately
as a single class, to elect a director of the Company to fill such newly created
directorship, by written consent as provided herein, or at a special meeting of
such holders called as provided herein. Any such additional director shall
continue as a director (subject to reelection or removal as provided in Section
3(d)(ii)) and the holders of Series A Stock shall have
<PAGE>
3
such additional voting rights until such time as (A) any conversion obligation
provided in Section 7 that has become due shall have been satisfied or (B) there
shall exist no breach of Article 8 of the Stock Purchase Agreement, as the case
may be, at which time such additional director shall cease to be a director and
such additional voting rights of the holders of Series A Stock shall terminate
subject to revesting in the event of each and every subsequent event of the
character indicated above, provided that the conditions set forth in the proviso
above shall not have occurred. Notwithstanding anything to the contrary
contained herein, in the event the Company shall have breached Section 8.9 of
the Securities Purchase Agreement, all references to the right of the holders of
shares of Series A Stock to elect one director to the Board of Directors of the
Company shall instead refer to the right of such holders to elect that number of
directors that shall constitute a majority of such Board of Directors.
(d) (i) The right of holders of shares of Series A Stock to take any
action as provided in Section 3(c) may be exercised at any annual meeting of
stock holders or at a special meeting of holders of shares of Series A Stock
held for such purpose as hereinafter provided or at any adjournment thereof, or
by the written consent, delivered to the Secretary of the Company, of the
holders of the minimum number of shares required to take such action, which
shall be a majority of the outstanding shares of Series A Stock unless otherwise
required by law.
So long as such right to vote continues (and unless such right has been
exercised by written consent of the minimum number of shares required to take
such action), the President of the Company may call, and upon the written
request of holders of record of at least 5% of the outstanding shares of Series
A Stock, addressed to the Secretary of the Company at the principal office of
the Company, shall call, a special meeting of the holders of shares entitled to
vote as provided herein. Such meeting shall be held within 30 days after
delivery of such request to the Secretary, at the place and upon the notice
provided by law and in the by-laws of the Company for the holding of meetings of
stockholders.
(ii) At each meeting of stockholders at which the holders of
shares of Series A Stock shall have the right, voting separately as a single
class, to elect one director of the Company as provided in Section 3(c) (or, in
the case of a breach of Section 8.9 of the Securities Purchase Agreement, the
number of directors that shall constitute a majority of the Board of Directors)
or to take any action, the presence in person or by proxy of the holders of
record of one-third of the total number of shares of Series A Stock then
outstanding and entitled to vote on the matter shall be necessary and sufficient
to constitute a quorum. At any such meeting or at any adjournment thereof:
(A) the absence of a quorum of the holders of shares of Series
A Stock shall not prevent the election of directors other than those to
be elected by the holders of shares of Series A Stock, and the absence
of a quorum of the holders of shares of any other class or series of
capital stock
<PAGE>
4
shall not prevent the election of directors to be elected by the
holders of shares of Series A Stock, or the taking of any action as
provided in this Section 3; and
(B) in the absence of a quorum of the holders of shares of
Series A Stock, a majority of the holders of such shares present in
person or by proxy shall have the power to adjourn the meeting as to
the actions to be taken by the holders of shares of Series A Stock from
time to time and place to place without notice other than announcement
at the meeting until a quorum shall be present.
For taking of any action as provided in Section 3(b) or Section 3(c) by
the holders of shares of Series A Stock, each such holder shall have one vote
for each share of such stock standing in his name on the transfer books of the
Company as of any record date fixed for such purpose or, if no such date be
fixed, at the close of business on the Business Day next preceding the day on
which notice is given, or if notice is waived, at the close of business on the
Business Day next preceding the day on which the meeting is held.
Each director elected by the holders of shares of Series A Stock as
provided in Section 3(c) shall, unless his or her term shall expire earlier in
accordance with the provisions thereof, hold office until the annual meeting of
stockholders next succeeding his election or until his or her successor, if any,
is elected and qualified.
If any director so elected by the holders of Series A Stock shall cease
to serve as a director before his or her term shall expire (except by reason of
the termination of the voting rights accorded to the holders of Series A Stock
in accordance with Section 3(c)), the holders of the Series A Stock then
outstanding and entitled to vote for such director may, by written consent as
provided herein, or at a special meeting of such holders called as provided
herein, elect a successor to hold office for the unexpired term of the director
whose place shall be vacant.
Any director elected by the holders of shares of Series A Stock voting
separately as a single class may be removed from office with or without cause by
the vote or written consent of the holders of at least a majority of the
outstanding shares of Series A Stock, at the time of removal. A special meeting
of the holders of shares of Series A Stock may be called in accordance with the
procedures set forth in Section 3(c)(i).
<PAGE>
5
Section 4. Certain Restrictions.
(a) Whenever the Company shall not have converted shares of Series A
Stock at a time required by Section 7, at such time and thereafter until all
conversion obligations provided in Section 7 that have come due shall have been
satisfied, the Company shall not: (A) declare or pay dividends, or make any
other distributions, on any shares of Junior Stock, or (B) declare or pay
dividends, or make any other distributions, on any shares of Parity Stock,
except dividends or distributions paid ratably on the Series A Stock and all
Parity Stock on which divi dends are payable or in arrears, in proportion to the
total amounts to which the holders of all shares of the Series A Stock and such
Parity Stock are then entitled.
(b) Whenever the Company shall not have converted shares of Series A
Stock at a time required by Section 7, at such time and thereafter until all
conversion obligations provided in Section 7 that have come due shall have been
satis fied, the Company shall not redeem, purchase or otherwise acquire for
consideration, or require the conversion of, any shares of Junior Stock or
Parity Stock.
(c) The Company shall not permit any Subsidiary of the Company, or
cause any other Person, to purchase or otherwise acquire for consideration any
shares of capital stock of the Company unless the Company could, pursuant to
Section 4(b), purchase such shares at such time and in such manner.
Section 5. Reacquired Shares.
Any shares of Series A Stock converted, exchanged, redeemed, purchased
or otherwise acquired by the Company or any of its Subsidiaries or other
Affiliates in any manner whatsoever shall be retired and canceled promptly after
the acquisition thereof. All such shares of Series A Stock shall upon their
cancellation become authorized but unissued shares of Series A Stock, no par
value, of the Company and, upon the filing of an appropriate certificate with
the Secretary of State of the State of Connecticut, may be reissued as part of
another series of preferred stock, no par value per share, of the Company
subject to the conditions or restrictions on issuance set forth herein, but in
any event may not be reissued as shares of Series A Stock or other Parity Stock
unless all of the shares of Series A Stock issued on the Issue Date shall have
already been redeemed, converted or exchanged.
Section 6. Liquidation, Dissolution or Winding Up.
(a) If the Company shall commence a voluntary case under the United
States bankruptcy laws or any applicable bankruptcy, insolvency or similar law
of any other country, or consent to the entry of an order for relief in an
involuntary case under any such law or to the appointment of a receiver,
liquidator, assignee,
<PAGE>
6
custodian, trustee, sequestrator (or other similar official) of the Company or
of any substantial part of its property, or make an assignment for the benefit
of its creditors, or admit in writing its inability to pay its debts generally
as they become due, or if a decree or order for relief in respect of the Company
shall be entered by a court having jurisdiction in the premises in an
involuntary case under the United States bankruptcy laws or any applicable
bankruptcy, insolvency or similar law of any other country, or appointing a
receiver, liquidator, assignee, custodian, trustee, sequestrator (or other
similar official) of the Company or of any substantial part of its property, or
ordering the winding up or liquidation of its affairs, and on account of any
such event the Company shall liquidate, dissolve or wind up, or if the Company
shall otherwise liquidate, dissolve or wind up, no distribution shall be made
(i) to the holders of shares of Junior Stock unless, prior thereto, the holders
of shares of Series A Stock, subject to Section 7, shall have received the
Liquidation Preference, plus all accrued and unpaid dividends, to the date of
distribution, with respect to each share, or (ii) to the holders of shares of
Parity Stock, except distributions made ratably on the Series A Stock and all
other Parity Stock in proportion to the total amounts to which the holders of
all shares of the Series A Stock and other Parity Stock are entitled upon such
liquidation, dissolution or winding up.
(b) Neither the consolidation or merger of the Company with or into any
other Person nor the sale or other distribution to another Person of all or
substantially all the assets, property or business of the Company shall be
deemed to be a liquidation, dissolution or winding up of the Company for
purposes of this Section 6.
Section 7. Conversion.
(a) Any holder of Series A Stock shall have the right, at its option,
at any time and from time to time, to convert, subject to the terms and
provisions of this Section 7, any or all of such holder's shares of Series A
Stock into such number of fully paid and non-assessable shares of Common Stock
as is equal, subject to Section 7(g), to the product of the number of shares of
Series A Stock being so converted multiplied by the quotient of (i) Liquidation
Preference divided by the (ii) Conversion Price (as defined below) then in
effect. The "Conversion Price" shall be $1.20 per share, subject to adjustment
as set forth in Section 7(d). Such conversion right shall be exercised by the
surrender of the shares of Series A Stock to be converted (the "Shares") to the
Company at any time during usual business hours at its principal place of
business to be maintained by it, accompanied by written notice that the holder
elects to convert such Shares and specifying the name or names (with address) in
which a certificate or certificates for shares of Common Stock are to be issued
and (if so required by the Company) by a written instrument or instruments of
transfer in form reasonably satisfactory to the Company duly executed by the
holder or its duly authorized legal representative and transfer tax stamps or
funds therefor, if required pursuant to Section 7(k). All Shares surrendered for
conversion shall be
<PAGE>
7
delivered to the Company for cancellation and canceled by it and no Shares shall
be issued in lieu thereof.
(b) As promptly as practicable after the surrender, as herein provided,
of any Shares for conversion pursuant to Section 7(a), the Company shall deliver
to or upon the written order of the holder of the Shares so surrendered a
certificate or certificates representing the number of fully paid and
non-assessable shares of Common Stock into which such Shares may be or have been
converted in accordance with the provisions of this Section 7. Subject to the
following provisions of this Section 7, such conversion shall be deemed to have
been made immediately prior to the close of business on the date that such
Shares shall have been surrendered in satisfactory form for conversion, and the
Person or Persons entitled to receive the Common Stock deliverable upon
conversion of such Shares shall be treated for all purposes as having become the
record holder or holders of such Common Stock at such appropriate time, and such
conversion shall be at the Conversion Price in effect at such time; provided,
however, that no surrender shall be effective to constitute the Person or
Persons entitled to receive the Common Stock deliverable upon such conversion as
the record holder or holders of such Common Stock while the share transfer books
of the Company shall be closed (but not for any period in excess of five days),
but such surrender shall be effective to constitute the Person or Persons
entitled to receive such Common Stock as the record holder or holders thereof
for all purposes immediately prior to the close of business on the next
preceding day on which such share transfer books are open, and such conversion
shall be deemed to have been made at, and shall be made at the Conversion Price
in effect at, such time on such next preceding day. If the last day for the
exercise of the conversion right shall not be a Business Day, then such
conversion right may be exercised on the next preceding Business Day.
(c) Upon (i) the third anniversary of the Issue Date, each outstanding
share of Series A Stock, or (ii) if earlier, the transfer of any shares of
Series A Stock by an Initial Holder to any Person other than an Affiliate of
such Initial Holder, such shares of Series A Stock, shall automatically, with no
further action required to be taken by the Company or the holder thereof, be
converted into such number of fully paid and non-assessable shares of Common
Stock as is equal to the product of the number of shares of Series A Stock being
so converted, multiplied by the quotient of (i) the Liquidation Preference
divided by (ii) the Conversion Price then in effect. Immediately thereafter,
each holder of Series A Stock subject to such conversion, shall be deemed to be
the holder of record of the Common Stock issuable upon conversion of such
holder's Series A Stock, notwithstanding that the share register of the Company
shall then be closed or that certificates representing such Common Stock shall
not then be actually delivered to such Person. Upon notice from the Company,
each holder of Series A Stock so converted shall promptly surrender to the
Company, at any place where the Company shall maintain a transfer agent for its
Series A Stock and Common Stock, certificates representing the shares so
converted, duly endorsed in blank or accompanied by proper instruments of
transfer. On the
<PAGE>
8
date of such automatic conversion, all rights with respect to the shares of
Series A Stock so converted, including the rights, if any, to receive notices
and vote, will terminate, except only the rights of holders thereof to (A)
receive certificates for the number of shares of Common Stock into which such
shares of Series A Stock have been converted, (B) be paid any declared but
unpaid dividends thereon and (C) exercise the rights to which they are entitled
as holders of Common Stock.
(d) The Conversion Price shall be subject to adjustment as follows:
(i) In case the Company shall at any time or from time to time
(A) pay a dividend or make any other distribution (other than a dividend or
distribution paid or made to holders of shares of Series A Stock in the manner
provided in Section 2) on the outstanding shares of any of its Common Stock in
capital stock (which, for purposes of this Section 7(d) shall include, without
limitation, any dividends or distributions in the form of options, warrants or
other rights to acquire capital stock) of the Company or any Subsidiary or
Affiliate thereof, (B) subdivide the outstanding shares of any of its Common
Stock into a larger number of shares, (C) combine the outstanding shares of any
of its Common Stock into a smaller number of shares, or (D) issue any shares of
its capital stock in a reclassifi cation of any of its Common Stock, then, and
in each such case, the Conversion Price in effect immediately prior to such
event shall be adjusted (and any other appropriate actions shall be taken by the
Company) so that the holder of any share of Series A Stock thereafter
surrendered for conversion shall be entitled to receive the number of shares of
Common Stock or other securities of the Company that such holder would have
owned or would have been entitled to receive upon or by reason of any of the
events described above, had such share of Series A Stock been converted
immediately prior to the occurrence of such event. An adjustment made pursuant
to this Section 7(d)(i) shall become effective retroactively (A) in the case of
any such dividend or distribution, to a date immediately following the close of
business on the record date for the determination of holders of any of its
Common Stock entitled to receive such dividend or distribution or (B) in the
case of any such subdivision, combination or reclassification, to the close of
business on the day upon which such corporate action becomes effective.
(ii) In case the Company shall at any time or from time to
time distribute to any holder of shares of its Common Stock (including any such
distribution made in connection with a consolidation or merger in which the
Company is the resulting or surviving corporation and the Common Stock is not
changed or exchanged) cash, evidences of indebtedness of the Company or another
issuer, securities of the Company or another issuer or other assets (excluding
(A) dividends or distributions paid or made to holders of shares of Series A
Stock in the manner provided in Section 2 and (B) dividends payable in shares of
Common Stock for which adjustment is made under Section 7(d)(i)) or rights or
warrants to subscribe for or purchase securities of the Company (excluding those
in respect of which adjustments in the Conversion Price is made pursuant to
Section 7(d)(i), then, and in
<PAGE>
9
each such case, the Conversion Price then in effect shall be adjusted by
dividing the Conversion Price in effect immediately prior to the date of such
distribution by a fraction (x) the numerator of which shall be the Current
Market Price of the Common Stock on the record date referred to below and (y)
the denominator of which shall be such Current Market Price of the Common Stock
less the then fair market value (as determined in good faith by the Board of
Directors of the Company, in the case of any such distribution other than a
distribution of cash, based on an opinion of a nationally recognized investment
banking firm unaffiliated with either the Company or the holders of the Series A
Stock, chosen by the Company (which shall bear the expense thereof) and
reasonably acceptable to a majority of the holders of the Series A Stock, a
certified resolution with respect to which shall be mailed to the holders of the
Series A Stock) of the portion of the cash, evidences of indebtedness,
securities or other assets so distributed or of such subscription rights or
warrants applicable to one share of Common Stock (but such denominator not to be
less than one); provided, however, that no adjustment shall be made with respect
to any distribution of rights to purchase securities of the Company if the
holder of shares of Series A Stock would otherwise be entitled to receive such
rights upon conversion at any time of shares of Series A Stock into Common Stock
unless such rights are subsequently redeemed by the Company, in which case such
redemption shall be treated for purposes of this Section 7(d)(ii) as a dividend
on the Common Stock. Such adjustment shall be made whenever any such
distribution is made and shall become effective retroactively to a date
immediately following the close of business on the record date for the
determination of stockholders entitled to receive such distribution.
(iii) In case the Company at any time or from time to time
shall take any action affecting its Common Stock which could have a dilutive
effect on the number of shares of Common Stock that may be issued upon
conversion of the Series A Stock, other than an action described in any of
Section 7(d)(i), 7(d)(ii) or Section 7(h), or an action which would have the
same dilutive effect on the Series A Stock as on the Common Stock, then, and in
each such case, the Conversion Price shall be adjusted in such manner and at
such time as the Board of Directors of the Company in good faith determines to
be equitable in the circumstances (such determination to be evidenced in a
resolution, a certified copy of which shall be mailed to the holders of the
Series A Stock).
(iv) In the event that any convertible or exchangeable
securities, options, warrants or other rights, the issuance of which shall have
given rise to an adjustment pursuant to this Section 7(d) ("Convertible
Securities"), shall have expired or terminated without the exercise thereof
and/or if there shall have been an increase, with the passage of time or
otherwise, in the price payable upon the exercise or conversion thereof or a
decrease in the number of shares of Common Stock issuable upon the exercise or
conversion thereof, then the Conversion Price hereunder shall be readjusted (but
to no greater extent then originally adjusted) on the basis of (A) eliminating
from the computation of the Conversion Price as of the time of the issuance of
the Convertible Securities any shares of Common Stock
<PAGE>
10
corresponding to such Convertible Securities as shall have expired or
terminated, (B) treating the additional shares of Common Stock, if any, actually
issued or issuable pursuant to the previous exercise of such Convertible
Securities as having been issued for the consideration actually received and
receivable therefor and (C) treating any of such Convertible Securities which
remain outstanding as being subject to exercise or conversion on the basis of
such exercise or conversion price as shall be in effect at such time.
(e) If the Company shall take a record of the holders of any of its
Common Stock for the purpose of entitling them to receive a dividend or other
distribution, and shall thereafter and before the distribution to stockholders
thereof legally abandon its plan to pay or deliver such dividend or
distribution, then thereafter no adjustment in the Conversion Price then in
effect shall be required by reason of the taking of such record.
(f) Upon any increase or decrease in the Conversion Price, then, and in
each such case, the Company promptly shall deliver to each registered holder of
Series A Stock at least ten Business Days prior to effecting any of the
foregoing transactions a certificate, signed by the President or a
Vice-President and by the Treasurer or an Assistant Treasurer or the Secretary
or an Assistant Secretary of the Company, setting forth in reasonable detail the
event requiring the adjustment and the method by which such adjustment was
calculated and specifying the increased or decreased Conversion Price then in
effect following such adjustment.
(g) No fractional shares or scrip representing fractional shares shall
be issued upon the conversion of any shares of Series A Stock. If more than one
share of Series A Stock shall be surrendered for conversion at one time by the
same holder, the number of full shares of Common Stock issuable upon conversion
thereof shall be computed on the basis of the aggregate number of the shares of
Series A Stock so surrendered. If the conversion of any share or shares of
Series A Stock results in a fraction, an amount equal to such fraction
multiplied by the Current Market Price of the Common Stock on the Business Day
preceding the day of conversion shall be paid to such holder in cash by the
Company.
(h) In case of any capital reorganization or reclassification or other
change of outstanding shares of Common Stock (other than a change in par value,
or from par value to no par value, or from no par value to par value), or in
case of any consolidation or merger of the Company with or into another Person
(other than a consolidation or merger in which the Company is the resulting or
surviving Person and which does not result in any reclassification or change of
outstanding Common Stock), or in case of any sale or other disposition to
another Person of all or sub stantially all of the assets of the Company (any of
the foregoing, a "Transaction"), the Company, or such successor or purchasing
Person, as the case may be, shall execute and deliver to each holder of Series A
Stock at least ten Business Days prior to effecting any of the foregoing
Transactions a certificate that the holder of each share
<PAGE>
11
of Series A Stock then outstanding shall have the right thereafter to convert
such share of Series A Stock into the kind and amount of shares of stock or
other securities (of the Company or another issuer) or property or cash
receivable upon such Transaction by a holder of the number of shares of Common
Stock into which such share of Series A Stock could have been converted
immediately prior to such Transaction. Such certificate shall provide for
adjustments which shall be as nearly equivalent as may be practicable to the
adjustments provided for in this Section 7. If, in the case of any such
Transaction, the stock, other securities, cash or property receivable thereupon
by a holder of Common Stock includes shares of stock or other securities of a
Person other than the successor or purchasing Person and other than the Company,
which controls or is controlled by the successor or purchasing Person or which,
in connection with such Transaction, issues stock, securities, other property or
cash to holders of Common Stock, then such certificate also shall be executed by
such Person, and such Person shall, in such certificate, specifically
acknowledge the obligations of such successor or purchasing Person and
acknowledge its obligations to issue such stock, securities, other property or
cash to the holders of Series A Stock upon conversion of the shares of Series A
Stock as provided above. The provisions of this Section 7(h) and any equivalent
thereof in any such certificate similarly shall apply to successive
Transactions.
(i) In case at any time or from time to time:
(A) the Company shall declare a dividend (or any other
distribution) on its Common Stock;
(B) the Company shall authorize the granting to the holders of
its Common Stock of rights or warrants to subscribe for or purchase any shares
of stock of any class or of any other rights or warrants;
(C) there shall be any reclassification of the Common Stock;
or
(D) there shall be an Extraordinary Event; then the Company
shall mail to each holder of shares of Series A Stock at such holder's address
as it appears on the transfer books of the Company, as promptly as possible but
in any event at least ten days prior to the applicable date hereinafter
specified, a notice stating (x) the date on which a record is to be taken for
the purpose of such dividend, distribution or rights or warrants or, if a record
is not to be taken, the date as of which the holders of Common Stock of record
to be entitled to such dividend, distribution or rights are to be determined, or
(y) the date on which such reclassification or Extraordinary Event is expected
to become effective; provided that in the case of any event to which Section
7(h) applies, the Company shall give at least ten days' prior written notice as
aforesaid. Such notice also shall specify the date as of which it is expected
that holders of Common Stock of record shall be
<PAGE>
12
entitled to exchange their Common Stock for shares of stock or other securities
or property or cash deliverable upon such reclassification or Extraordinary
Event.
(j) The Company shall at all times reserve and keep available for
issuance upon the conversion of the Series A Stock, such number of its
authorized but unissued shares of Common Stock as will from time to time be
sufficient to permit the conversion of all outstanding shares of Series A Stock,
and shall take all action required to increase the authorized number of shares
of Common Stock if at any time there shall be insufficient authorized but
unissued shares of Common Stock to permit such reservation or to permit the
conversion of all outstanding shares of Series A Stock.
(k) The issuance or delivery of certificates for Common Stock upon the
conversion of shares of Series A Stock shall be made without charge to the
converting holder of shares of Series A Stock for such certificates or for any
tax in respect of the issuance or delivery of such certificates or the
securities represented thereby, and such certificates shall be issued or
delivered in the respective names of, or in such names as may be directed by,
the holders of the shares of Series A Stock converted; provided, however, that
the Company shall not be required to pay any tax which may be payable in respect
of any transfer involved in the issuance and delivery of any such certificate in
a name other than that of the holder of the shares of Series A Stock converted,
and the Company shall not be required to issue or deliver such certificate
unless or until the Person or Persons requesting the issuance or delivery
thereof shall have paid to the Company the amount of such tax or shall have
established to the reasonable satisfaction of the Company that such tax has been
paid.
Section 8. Certain Remedies.
Any registered holder of Series A Stock shall be entitled to an
injunction or injunctions to prevent breaches of the provisions of this
Certificate of Amendment and to enforce specifically the terms and provisions of
this Certificate of Amendment in any court of the United States or any state
thereof having jurisdiction, this being in addition to any other remedy to which
such holder may be entitled at law or equity.
Section 9. Definitions.
For the purposes of this Certificate of Designations, Rights and
Preferences, the following terms shall have the meanings indicated:
"Affiliate" shall have the meaning ascribed to such term in Rule 12b-2
of the General Rules and Regulations under the Exchange Act.
<PAGE>
13
"Business Day" shall mean any day other than a Saturday, Sunday or
other day on which commercial banks in the City of New York are authorized or
required by law or executive order to close.
"Common Stock" of the Company shall mean the Common Stock, no par
value, and any other common stock of the Company issued from time to time.
"Conversion Price" shall have the meaning given it in Section 7 hereof.
"Current Market Price" per share shall mean, on any date specified
herein for the determination thereof, (a) the average daily Market Price of the
Common Stock for those days during the period of 30 days, ending on such date,
on which the national securities exchanges were open for trading, and (b) if the
Common Stock is not then listed or admitted to trading on any national
securities exchange or quoted in the over-counter market, the Market Price on
such date.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended, and the rules and regulations of the Securities and Exchange Commission
thereunder.
"Extraordinary Event" means (i) the voluntary or involuntary
liquidation, dissolution or winding up of the Company, (ii) the voluntary sale,
conveyance, exchange or transfer to another Person of all or substantially all
of the assets of the Company and its Subsidiaries or (iii) the merger or
consolidation of the Company with one or more other Persons.
"Fair Market Value" shall mean the amount which a willing buyer, under
no compulsion to buy, would pay a willing seller, under no compulsion to sell,
in an arm's-length transaction.
"Initial Holder" shall mean Commercial Electronics Capital Partnership,
L.P. and Commercial Electronics, L.L.C. or any other Person to whom shares of
Series A Stock are issued pursuant to and in accordance with the terms of the
Securities Purchase Agreement.
"Issue Date" shall mean the first date on which shares of Series A
Stock are issued.
"Junior Stock" shall mean any capital stock of the Company ranking
junior (either as to dividends or upon liquidation, dissolution or winding up)
to the Series A Stock.
"Liquidation Preference" with respect to a share of Series A Stock
shall mean $3.00.
<PAGE>
14
"Market Price" shall mean, per share of Common Stock, on any date
specified herein: (a) the closing price per share of the Common Stock on such
date published in The Wall Street Journal or, if no such closing price on such
date is published in The Wall Street Journal, the average of the closing bid and
asked prices on such date, as officially reported on the principal national
securities exchange on which the Common Stock is then listed or admitted to
trading; or (b) if the Common Stock is not then listed or admitted to trading on
any national securities exchange but is designated as a national market system
security by the NASD, the last trading price of the Common Stock on such date;
or (c) if there shall have been no trading on such date or if the Common Stock
is not so designated, the average of the reported closing bid and asked prices
of the Common Stock, on such date as shown by NASDAQ and reported by any member
firm of the New York Stock Exchange selected by the Company; or (d) if none of
(a), (b) or (c) is applicable, the Fair Market Value per share determined in
good faith by the Board of Directors of the Company based on an opinion of a
nationally recognized investment banking firm unaffiliated with either the
Company or the holders of the Series A Stock, chosen by the Company (who shall
bear the expense thereof) and acceptable to the holders of at least a majority
in interest of the Series A Stock.
"NASD" shall mean the National Association of Securities Dealers, Inc.
"NASDAQ" shall mean the National Market System of the National
Association of Securities Dealers, Inc. Automated Quotations System.
"Parity Stock" shall mean any capital stock of the Company, including
the Series A Stock, ranking on a parity (either as to dividends or upon
liquidation, dissolution or winding up) with the Series A Stock.
"Person" shall mean any individual, firm, corporation, partnership,
trust, incorporated or unincorporated association, joint venture, joint stock
company, government (or an agency or political subdivision thereof) or other
entity of any kind, and shall include any successor (by merger or otherwise) of
such entity.
"Securities Purchase Agreement" shall mean the Securities Purchase
Agreement, dated as of January , 1999, by and between the Company, Commercial
Electronics Capital Partnership, L.P. and Commercial Electronics, L.L.C., as the
same may be amended from time to time.
"Senior Stock" shall mean any capital stock of the Company ranking
senior (either as to dividends or upon liquidation, dissolution or winding up)
to the Series A Stock.
<PAGE>
15
"Subsidiary" of any Person shall mean any corporation or other entity
of which a majority of the voting power of the voting equity securities or
equity interest, or rights to profits, is owned, directly or indirectly, by such
Person.
NEITHER THE WARRANTS REPRESENTED HEREBY NOR THE SECURITIES ISSUABLE UPON
EXERCISE HEREOF HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "SECURITIES ACT"), OR THE SECURITIES LAWS OF ANY STATE OR OTHER
JURISDICTION. THE WARRANTS REPRESENTED HEREBY AND THE SECURITIES ISSUABLE UPON
EXERCISE HEREOF HAVE BEEN AND WILL BE SOLD IN RELIANCE UPON EXEMPTIONS
THEREUNDER. THE SALE OR OTHER DISPOSITION OF THE WARRANTS REPRESENTED HEREBY AND
THE SECURITIES ISSUABLE UPON EXERCISE HEREOF IS RESTRICTED IN ACCORDANCE WITH
THAT ACT AND THOSE LAWS, MAY ONLY BE MADE PURSUANT TO AN EXEMPTION FROM SUCH
REGISTRATION AND, IN THE EVENT OF SUCH AN UNREGISTERED SALE OR OTHER
DISPOSITION, IS PROHIBITED UNLESS THE ISSUER HEREOF RECEIVES AN OPINION OF
COUNSEL SATISFACTORY TO IT AND ITS COUNSEL THAT SUCH SALE OR OTHER DISPOSITION
CAN BE MADE WITHOUT REGISTRATION UNDER THAT ACT OR THOSE LAWS.
WARRANT NO. 1
WARRANT
TO PURCHASE SHARES OF COMMON STOCK,
NO PAR VALUE,
OF
WILTEK, INC.
THIS IS TO CERTIFY THAT COMMERCIAL ELECTRONICS CAPITAL PARTNERSHIP,
L.P., or its registered assigns, is the owner of 375,000 Warrants (as defined
below), each of which entitles the registered holder thereof to purchase from
WILTEK, INC., a Connecticut corporation (the "Company"), one fully paid, duly
authorized and non-assessable share of Common Stock, no par value, of the
Company (the "Common Stock"), at any time prior to 5:00 p.m., New York City
time, on July 28, 2000 (the "Expiration Date"), at $1.00 per share (the
"Exercise Price"), all on the terms and subject to the conditions hereinafter
set forth.
The number of shares of Common Stock issuable upon exercise of each
such Warrant (the "Number Issuable") is subject to adjustment from time to time
<PAGE>
2
pursuant to the provisions of Section 2 of this Warrant Certificate. The
Warrants evidenced by this certificate are part of a series of warrants to
purchase initially up to 1,500,000 shares of Common Stock (the "Warrants")
issued pursuant to a Securities Purchase Agreement, dated as of January 28,
1999, by and among the Company, Commercial Electronics Capital Partnership, L.P.
and Commercial Electronics, L.L.C. (the "Purchase Agreement").
Capitalized terms used herein but not otherwise defined shall have the
meanings given them in Section 11 hereof.
Section 1. Exercise of Warrant. Subject to the last paragraph of this
Section 1, the Warrants evidenced hereby may be exercised, in whole but not in
part, by the registered holder hereof at any time prior to the Expiration Date,
upon delivery to the Company at the principal executive office of the Company in
the United States of America, of (a) this Warrant Certificate, (b) a written
notice stating that such holder elects to exercise all or a specified number of
the Warrants evidenced hereby in accordance with the provisions of this Section
1 and specifying the name or names in which such holder wishes the certificate
or certificates for shares of Common Stock to be issued, (c) an appropriate
investment letter, if deemed reasonably necessary by counsel to the Company to
assure compliance with applicable securities laws, and (d) payment of the
Exercise Price for the shares of Common Stock issuable upon exercise of such
Warrants, which shall be payable in cash or by a certified or official bank
check payable to the order of the Company (collectively, the "Warrant Exercise
Documentation").
As promptly as practicable, and in any event within five Business Days
after receipt of the Warrant Exercise Documentation, the Company shall deliver
or cause to be delivered (i) certificates representing the number of validly
issued, fully paid and non-assessable shares of Common Stock specified in the
Warrant Exercise Documentation, (ii) if applicable, cash in lieu of any fraction
of a share, as hereinafter provided, and (iii) if less than the full number of
Warrants evidenced hereby are then being exercised, a new Warrant Certificate or
Certificates, of like tenor, for the number of Warrants evidenced by this
Warrant Certificate less the number of Warrants then being exercised. Such
exercise shall be deemed to have been made at the close of business on the date
of delivery of the Warrant Exercise Documentation so that the Person entitled to
receive shares of Common Stock upon such exercise shall be treated for all
purposes as having become the record holder of such shares of Common Stock at
such time. No such surrender shall be effective to constitute the Person
entitled to receive such shares as the record holder thereof while the transfer
books of the Company for the Common Stock are closed for any purpose (but not
for any period in excess of five days); but any such surrender of this Warrant
Certificate for exercise during any period while such books are so closed shall
become effective for exercise immediately upon the reopening of such books, as
if the exercise had been made on the date this Warrant Certificate was
surrendered and for
<PAGE>
3
the Number Issuable of Common Stock specified in the Warrant Exercise
Documentation and at the Exercise Price in effect at the date of such surrender.
The Company shall pay all expenses in connection with, and all taxes
and other governmental charges (other than income taxes of the holder) that may
be imposed in respect of, the issue or delivery of any shares of Common Stock
issuable upon the exercise of the Warrants evidenced hereby. The Company shall
not be required, however, to pay any tax or other charge imposed in connection
with any transfer involved in the issue of any certificate for shares of Common
Stock in any name other than that of the registered holder of the Warrants
evidenced hereby.
In connection with the exercise of any Warrants evidenced hereby, no
fractions or shares of Common Stock shall be issued, but in lieu thereof the
Company shall pay a cash adjustment in respect of such fractional interest in an
amount equal to such fractional interest multiplied by the Current Market Price
per share of Common Stock on the Business Day which next precedes the date of
exercise. If more than one such Warrant shall be exercised by the holder thereof
at the same time, the number of full shares of Common Stock issuable on such
exercise shall be computed on the basis of the total number of Warrants so
exercised.
Section 2. Adjustments.
(a) Adjustment of Number Issuable. The Number Issuable shall
be subject to adjustment from time to time as follows:
(i) In case the Company shall at any time or from time to time
after the Issue Date:
(A) pay a dividend or make any other distribution on
the outstanding shares of Common Stock in capital stock
(which, for purposes of this Section 2 shall include, without
limitation, any options, warrants or other rights to acquire
capital stock) of the Company;
(B) subdivide the outstanding shares of Common Stock
into a larger number of shares;
(C) combine the outstanding shares of Common Stock
into a smaller number of shares; or
(D) issue any shares of its capital stock in a
reclassification of the Common Stock;
<PAGE>
4
then, and in each such case, the Number Issuable in effect
immediately prior to such event shall be adjusted (and any
other appropriate actions shall be taken by the Company) so
that the holder of any Warrant evidenced hereby thereafter
exercised shall be entitled to receive the number of shares of
Common Stock or other securities of the Company which such
holder would have owned or had been entitled to receive upon
or by reason of any of the events described above, had such
Warrant been exercised immediately prior to the happening of
such event. An adjustment made pursuant to this clause (i)
shall become effective retroactively (x) in the case of any
such dividend or distribution, to a date immediately following
the close of business on the record date for the determination
of holders of shares of Common Stock entitled to receive such
dividend or distribution, or (y) in the case of any such
subdivision, combination or reclassification, to the close of
business on the date upon which such corporate action becomes
effective.
(ii) In case the Company shall at any time or from time to
time after the Issue Date distribute to any holder of shares of its
Common Stock (including any such distribution made in connection with a
consolidation or merger in which the Company is the resulting or
surviving corporation and the Common Stock is not changed or exchanged)
cash, evidences of indebtedness of the Company or another issuer,
securities of the Company or another issuer or other assets (excluding
dividends or other distributions of shares of Common Stock or other
capital stock for which adjustment is made under Section 2(a)(i)) or
rights or warrants to subscribe for or purchase securities of the
Company (excluding those in respect of which adjustments in the Number
Issuable is made pursuant to Section 2(a)(i), then, and in each such
case, the Number Issuable then in effect shall be adjusted by
multiplying the Number Issuable in effect immediately prior to the date
of such distribution by a fraction (x) the numerator of which shall be
the Current Market Price per share of Common Stock on the record date
referred to below and (y) the denominator of which shall be such
Current Market Price per share of Common Stock less the then Fair
Market Value (as determined in good faith by the Board of Directors of
the Company, in the case of any such distribution other than a
distribution of cash, based on an opinion of a nationally recognized
investment banking firm unaffiliated with either the Company or the
holders of the Warrants, chosen by the Company (which shall bear the
expense thereof) and reasonably acceptable to a majority of the holders
of the Warrants, a certified resolution with respect to which shall be
mailed to the holder of the Warrants evidenced hereby) of the portion
of the cash, evidences of indebtedness, securities or other assets so
distributed or of such subscription rights or warrants applicable to
one share of Common Stock (but such denominator not to be less than
one). Such adjustment shall be made whenever any such distribution is
made and shall become effective retroactively to a date immediately
following the close of business on the
<PAGE>
5
record date for the determination of stockholders entitled to receive
such distribution.
(iii) In case the Company at any time or from time to time
shall take any action affecting its Common Stock which could have a
dilutive effect on the number of shares of Common Stock that may be
issued upon exercise of this Warrant, other than an action described in
any of Section 2(a)(i), 2(a)(ii) or Section 2(b) or an action that
would have the same dilutive effect on this Warrant as on the Common
Stock, then, and in each such case, the Number Issuable shall be
adjusted in such manner and at such time as the Board of Directors of
the Company in good faith determines to be equitable in the
circumstances (such determination to be evidenced in a resolution, a
certified copy of which shall be mailed to the holders of the Warrants
evidenced hereby).
(iv) In the event that any convertible or exchangeable
securities, options, warrants or other rights, the issuance of which
shall have given rise to an adjustment pursuant to this Section 2(a)
("Convertible Securities"), shall have expired or terminated without
the exercise thereof and/or if there shall have been an increase, with
the passage of time or otherwise, in the price payable upon the
exercise or conversion thereof or a decrease in the number of shares of
Common Stock issuable upon the exercise or conversion thereof, then the
Number Issuable hereunder shall be readjusted (but to no greater extent
then originally adjusted) on the basis of (A) eliminating from the
computation of the Number Issuable as of the time of the issuance of
the Convertible Securities any shares of Common Stock corresponding to
such Convertible Securities as shall have expired or terminated, (B)
treating the additional shares of Common Stock, if any, actually issued
or issuable pursuant to the previous exercise of such Convertible
Securities as having been issued for the consideration actually
received and receivable therefor and (C) treating any of such
Convertible Securities which remain outstanding as being subject to
exercise or conversion on the basis of such exercise or conversion
price as shall be in effect at such time.
(v) Upon any increase or decrease in the Number Issuable,
then, and in each such case, the Company promptly shall deliver to each
registered holder of Warrants at least five Business Days prior to
effecting any transaction which would result in such increase or
decrease a notice thereof, together with a certificate, signed by the
Chief Executive Officer or a Vice-President and by the Treasurer or an
Assistant Treasurer or the Secretary or an Assistant Secretary of the
Company, setting forth in reasonable detail the event requiring the
adjustment and the method by which such adjustment was calculated and
specifying the increased or decreased Number Issuable then in effect
following such adjustment.
<PAGE>
6
(b) Reorganization, Reclassification, Consolidation, Merger or
Sale of Assets. In case of any capital reorganization or reclassification or
other change of outstanding shares of Common Stock (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 subdivision or combination), or in case of any consolidation or
merger of the Company with or into another Person (other than a consolidation or
merger in which the Company is the resulting or surviving person and which does
not result in any reclassification or change of outstanding Common Stock), or in
case of any sale or other disposition to another Person of all or substantially
all of the assets of the Company (any of the foregoing, a "Transaction"), the
Company, or such successor or purchasing Person, as the case may be, shall
execute and deliver to each holder of the Warrants evidenced hereby at least
five Business Days prior to effecting any of the foregoing Transactions a
certificate that the holder of each such Warrant then outstanding shall have the
right thereafter to exercise such Warrant into the kind and amount of shares of
stock or other securities (of the Company or another issuer) or property or cash
receivable upon such Transaction by a holder of the number of shares of Common
Stock into which such Warrant could have been exercised immediately prior to
such Transaction. Such certificate shall provide for adjustments which shall be
as nearly equivalent as may be practicable to the adjustments provided for in
this Section 2. If, in the case of any such Transaction, the stock, other
securities, cash or property receivable thereupon by a holder of Common Stock
includes shares of stock or other securities of a Person other than the
successor or purchasing Persons and other than the Company, which controls or is
controlled by the successor or purchasing Person or which, in connection with
such Transaction, issues stock, securities, other property or cash to holders of
Common Stock, then such certificate also shall be executed by such Person, and
such Person shall, in such certificate, specifically assume the obligations of
such successor or purchasing Person and acknowledge its obligations to issue
such stock, securities, other property or cash to holders of the Warrants upon
exercise thereof as provided above. The provisions of this Section 2(b)
similarly shall apply to successive Transactions.
Section 3. Notice of Certain Events. In case at any time or from time
to time the Company shall declare any dividend or any other distribution to the
holders of its Common Stock, or shall authorize the granting to the holders of
its Common Stock of rights or warrants to subscribe for or purchase any
additional shares of stock of any class or any other right, or shall authorize
the issuance or sale of any other shares or rights which would result in an
adjustment to the Number Issuable pursuant to Section 2(a) hereof, or there
shall be any capital reorganization or reclassification of the Common Stock of
the Company or consolidation or merger of the Company with or into another
Person, or any sale or other disposition of all or substantially all the assets
of the Company, or there shall be a voluntary or involuntary dissolution,
liquidation or winding up of the Company, then, in any one or more of such cases
the Company shall mail to each holder of the Warrants evidenced hereby at such
holder's address as it appears on the transfer books of the Company, as promptly
as practicable but in any event at least 30 days prior to the
<PAGE>
7
applicable date hereinafter specified, a notice stating (a) the date on which a
record is to be taken for the purpose of such dividend, distribution, rights or
warrants or, if a record is not to be taken, the date as of which the holders of
Common Stock of record to be entitled to such dividend, distribution, rights or
warrants are to be determined, (b) the date on which such dividends,
distribution, rights or warrants are made or issued or (c) the date on which
such reclassification, consolidation, merger, sale, conveyance, dissolution,
liquidation or winding up is expected to become effective; provided that in the
case of any event to which Section 2(b) applies, the Company shall give at least
ten Business Days' prior written notice as aforesaid. Such notice also shall
specify the date as of which it is expected that the holders of Common Stock of
record shall be entitled to exchange their Common Stock for shares of stock or
other securities or property or cash deliverable upon such reorganization,
reclassification, consolidation, merger, sale, conveyance, dissolution,
liquidation or winding up.
Section 4. Certain Covenants. The Company covenants and agrees that all
shares of capital stock of the Company which may be issued upon the exercise of
the Warrants evidenced hereby will be duly authorized, validly issued and fully
paid and non-assessable. The Company shall at all times reserve and keep
available for issuance upon the exercise of the Warrants, such number of its
authorized but unissued shares of Common Stock as will from time to time be
sufficient to permit the exercise of all outstanding Warrants, and shall take
all action required to increase the authorized number of shares of Common Stock
if at any time there shall be insufficient authorized but unissued shares of
Common Stock to permit such reservation or to permit the exercise of all
outstanding Warrants.
Section 5. Registered Holder. The person in whose name this Warrant
Certificate is registered shall be deemed the owner hereof and of the Warrants
evidenced hereby for all purposes. The registered holder of this Warrant
Certificate, in its capacity as such, shall not be entitled to any rights
whatsoever as a stockholder of the Company, except as herein provided.
Section 6. Transfer of Warrants. Any transfer of the rights represented
by this Warrant Certificate shall be effected by the surrender of this Warrant
Certificate, along with the form of assignment attached hereto, properly
completed and executed by the registered holder hereof, at the principal
executive office of the Company in the United States of America, together with
an appropriate investment letter, if deemed reasonably necessary by counsel to
the Company to assure compliance with applicable securities laws. Thereupon, the
Company shall issue in the name or names specified by the registered holder
hereof and, in the event of a partial transfer, in the name of the registered
holder hereof, a new Warrant Certificate or Certificates evidencing the right to
purchase such number of shares of Common Stock as shall be equal to the number
of shares of Common Stock then purchasable hereunder.
<PAGE>
8
Section 7. Denominations. The Company covenants that it will, at its
expense, promptly upon surrender of this Warrant Certificate at the principal
executive office of the Company in the United States of America, execute and
deliver to the registered holder hereof a new Warrant Certificate or
Certificates in denominations specified by such holder for an aggregate number
of Warrants equal to the number of Warrants evidenced by this Warrant
Certificate.
Section 8. Replacement of Warrants. Upon receipt of evidence
satisfactory to the Company of the loss, theft, destruction or mutilation of
this Warrant Certificate (which evidence, in the case of an institutional holder
of Warrants, shall consist of a letter from such holder to such effect) and, in
the case of loss, theft or destruction, upon delivery of an indemnity reasonably
satisfactory to the Company (which indemnity, in the case of an institutional
holder of Warrants, shall consist of an unsecured letter of indemnity from such
holder), or, in the case of mutilation, upon surrender and cancellation thereof,
the Company will issue a new Warrant Certificate of like tenor for a number of
Warrants equal to the number of Warrants evidenced by this Warrant Certificate.
Section 9. Governing Law. THIS WARRANT CERTIFICATE SHALL BE CONSTRUED
AND ENFORCED IN ACCORDANCE WITH, AND THE RIGHTS OF THE PARTIES SHALL BE GOVERNED
BY, THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO AGREEMENTS MADE AND TO BE
PERFORMED ENTIRELY WITHIN SUCH STATE.
Section 10. Rights Inure to Registered Holder. The Warrants evidenced
by this Warrant Certificate will inure to the benefit of and be binding upon the
registered holder thereof and the Company and their respective successors and
permitted assigns. Nothing in this Warrant Certificate shall be construed to
give to any Person other than the Company and the registered holder thereof any
legal or equitable right, remedy or claim under this Warrant Certificate, and
this Warrant Certificate shall be for the sole and exclusive benefit of the
Company and such registered holder. Nothing in this Warrant Certificate shall be
construed to give the registered holder hereof any rights as a holder of shares
of Common Stock until such time, if any, as the Warrants evidenced by this
Warrant Certificate are exercised in accordance with the provisions hereof.
Section 11. Definitions. For the purposes of this Warrant Certificate,
the following terms shall have the meanings indicated below:
"Business Day" shall mean any day other than a Saturday, Sunday or
other day on which commercial banks in the City of New York are authorized or
required by law or executive order to close.
"Current Market Price" per share shall mean, on any date specified
herein for the determination thereof, (a) the average daily Market Price of the
<PAGE>
9
Common Stock for those days during the period of 30 days, ending on such date,
on which the national securities exchanges were open for trading, and (b) if the
Common Stock is not then listed or quoted in the over-counter market, the Market
Price on such date.
"Exercise Price" shall have the meaning given it in the first paragraph
hereof.
"Expiration Date" shall have the meaning given it in the first
paragraph hereof.
"Fair Market Value" shall mean the amount which a willing buyer, under
no compulsion to buy, would pay a willing seller, under no compulsion to sell,
in an arm's-length transaction.
"Issue Date" shall mean January 28, 1999.
"Market Price" shall mean, per share of Common Stock, on any date
specified herein: (a) the closing price per share of the Common Stock on such
date published in The Wall Street Journal or, if no such closing price on such
date is published in The Wall Street Journal, the average of the closing bid and
asked prices on such date, as officially reported on the principal national
securities exchange on which the Common Stock is then listed or admitted to
trading; or (b) if the Common Stock is not then listed or admitted to trading on
any national securities exchange but is designated as a national market system
security by the NASD, the last trading price of the Common Stock on such date;
or (c) if there shall have been no trading on such date or if the Common Stock
is not so designated, the average of the reported closing bid and asked price of
the Common Stock, on such date as shown by NASDAQ and reported by any member
firm of the New York Stock Exchange, Inc. selected by the Company; or (d) if
none of (a), (b) or (c) is applicable, the Fair Market Value per share
determined in good faith by the Board of Directors of the Company based on an
opinion of a nationally recognized investment banking firm unaffiliated with
either the Company or the holders of the Warrants, chosen by the Company (who
shall bear the expense thereof) and acceptable to the holders of at least a
majority in interest of the Warrants.
"NASD" shall mean the National Association of Securities Dealers, Inc.
"NASDAQ" shall mean the National Market System of the National
Association of Securities Dealers, Inc. Automated Quotations System.
"Number Issuable" shall have the meaning given it in the second
paragraph hereof.
<PAGE>
10
"Person" shall mean any individual, corporation, limited liability
company, partnership, trust, incorporated or unincorporated association, joint
venture, joint stock company, government (or an agency or political subdivision
thereof) or other entity of any kind.
"Preferred Stock" shall mean the Company's Senior Convertible Series A
Stock, no par value, issued pursuant to the Purchase Agreement.
"Purchase Agreement" shall have the meaning given it in the second
paragraph hereof.
"Warrant Exercise Documentation" shall have the meaning given it in
Section 1 hereof.
Section 12. Notices. All notices, demands and other communications
provided for or permitted hereunder shall be made in writing and shall be by
registered or certified first-class mail, return receipt requested, or personal
delivery, (a) if to the holder of a Warrant, at such holder's last known address
appearing on the books of the Company; and (b) if to the Company, at its
principal executive office in the United States located at 542 Westport Avenue,
Norwalk, Connecticut 06853, Attention: President, or such other address as shall
have been furnished to the party given or making such notice, demand or other
communication. All such notices and communications shall be deemed to have been
duly given: when delivered, if delivered by hand or by overnight courier
service; and three Business Days after being deposited in the mail, postage
prepaid, if mailed.
IN WITNESS WHEREOF, the Company has caused this Warrant Certificate to
be duly executed as of the Issue Date.
WILTEK, INC.
By: /s/ David S. Teitelman
--------------------------
Name: David S. Teitelman
Title: President and CEO
<PAGE>
11
{Form of Assignment Form}
{To be executed upon assignment of Warrants}
The undersigned hereby assigns and transfers this Warrant Certificate
to ____________________ whose Social Security Number or Tax ID Number is
_________________ and whose record address is _________________________
____________, and irrevocably appoints ________________ as agent to transfer
this security on the books of the Company. Such agent may substitute another to
act for such agent.
Signature:
------------------------------------
Signature Guarantee:
------------------------------------
Date: ___________________________
NEITHER THE WARRANTS REPRESENTED HEREBY NOR THE SECURITIES ISSUABLE UPON
EXERCISE HEREOF HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "SECURITIES ACT"), OR THE SECURITIES LAWS OF ANY STATE OR OTHER
JURISDICTION. THE WARRANTS REPRESENTED HEREBY AND THE SECURITIES ISSUABLE UPON
EXERCISE HEREOF HAVE BEEN AND WILL BE SOLD IN RELIANCE UPON EXEMPTIONS
THEREUNDER. THE SALE OR OTHER DISPOSITION OF THE WARRANTS REPRESENTED HEREBY AND
THE SECURITIES ISSUABLE UPON EXERCISE HEREOF IS RESTRICTED IN ACCORDANCE WITH
THAT ACT AND THOSE LAWS, MAY ONLY BE MADE PURSUANT TO AN EXEMPTION FROM SUCH
REGISTRATION AND, IN THE EVENT OF SUCH AN UNREGISTERED SALE OR OTHER
DISPOSITION, IS PROHIBITED UNLESS THE ISSUER HEREOF RECEIVES AN OPINION OF
COUNSEL SATISFACTORY TO IT AND ITS COUNSEL THAT SUCH SALE OR OTHER DISPOSITION
CAN BE MADE WITHOUT REGISTRATION UNDER THAT ACT OR THOSE LAWS.
WARRANT NO. 2
WARRANT
TO PURCHASE SHARES OF COMMON STOCK,
NO PAR VALUE,
OF
WILTEK, INC.
THIS IS TO CERTIFY THAT COMMERCIAL ELECTRONICS, L.L.C., or its
registered assigns, is the owner of 1,125,000 Warrants (as defined below), each
of which entitles the registered holder thereof to purchase from WILTEK, INC., a
Connecticut corporation (the "Company"), one fully paid, duly authorized and
non-assessable share of Common Stock, no par value, of the Company (the "Common
Stock"), at any time prior to 5:00 p.m., New York City time, on July 28, 2000
(the "Expiration Date"), at $1.00 per share (the "Exercise Price"), all on the
terms and subject to the conditions hereinafter set forth.
The number of shares of Common Stock issuable upon exercise of each
such Warrant (the "Number Issuable") is subject to adjustment from time to time
pursuant to the provisions of Section 2 of this Warrant Certificate. The
Warrants
<PAGE>
2
evidenced by this certificate are part of a series of warrants to purchase
initially up to 1,500,000 shares of Common Stock (the "Warrants") issued
pursuant to a Securities Purchase Agreement, dated as of January 28, 1999, by
and among the Company, Commercial Electronics Capital Partnership, L.P. and
Commercial Electronics, L.L.C. (the "Purchase Agreement").
Capitalized terms used herein but not otherwise defined shall have the
meanings given them in Section 11 hereof.
Section 1. Exercise of Warrant. Subject to the last paragraph of this
Section 1, the Warrants evidenced hereby may be exercised, in whole but not in
part, by the registered holder hereof at any time prior to the Expiration Date,
upon delivery to the Company at the principal executive office of the Company in
the United States of America, of (a) this Warrant Certificate, (b) a written
notice stating that such holder elects to exercise all or a specified number of
the Warrants evidenced hereby in accordance with the provisions of this Section
1 and specifying the name or names in which such holder wishes the certificate
or certificates for shares of Common Stock to be issued, (c) an appropriate
investment letter, if deemed reasonably necessary by counsel to the Company to
assure compliance with applicable securities laws, and (d) payment of the
Exercise Price for the shares of Common Stock issuable upon exercise of such
Warrants, which shall be payable in cash or by a certified or official bank
check payable to the order of the Company (collectively, the "Warrant Exercise
Documentation").
As promptly as practicable, and in any event within five Business Days
after receipt of the Warrant Exercise Documentation, the Company shall deliver
or cause to be delivered (i) certificates representing the number of validly
issued, fully paid and non-assessable shares of Common Stock specified in the
Warrant Exercise Documentation, (ii) if applicable, cash in lieu of any fraction
of a share, as hereinafter provided, and (iii) if less than the full number of
Warrants evidenced hereby are then being exercised, a new Warrant Certificate or
Certificates, of like tenor, for the number of Warrants evidenced by this
Warrant Certificate less the number of Warrants then being exercised. Such
exercise shall be deemed to have been made at the close of business on the date
of delivery of the Warrant Exercise Documentation so that the Person entitled to
receive shares of Common Stock upon such exercise shall be treated for all
purposes as having become the record holder of such shares of Common Stock at
such time. No such surrender shall be effective to constitute the Person
entitled to receive such shares as the record holder thereof while the transfer
books of the Company for the Common Stock are closed for any purpose (but not
for any period in excess of five days); but any such surrender of this Warrant
Certificate for exercise during any period while such books are so closed shall
become effective for exercise immediately upon the reopening of such books, as
if the exercise had been made on the date this Warrant Certificate was
surrendered and for the Number Issuable of Common Stock specified in the Warrant
Exercise Documentation and at the Exercise Price in effect at the date of such
surrender.
<PAGE>
3
The Company shall pay all expenses in connection with, and all taxes
and other governmental charges (other than income taxes of the holder) that may
be imposed in respect of, the issue or delivery of any shares of Common Stock
issuable upon the exercise of the Warrants evidenced hereby. The Company shall
not be required, however, to pay any tax or other charge imposed in connection
with any transfer involved in the issue of any certificate for shares of Common
Stock in any name other than that of the registered holder of the Warrants
evidenced hereby.
In connection with the exercise of any Warrants evidenced hereby, no
fractions or shares of Common Stock shall be issued, but in lieu thereof the
Company shall pay a cash adjustment in respect of such fractional interest in an
amount equal to such fractional interest multiplied by the Current Market Price
per share of Common Stock on the Business Day which next precedes the date of
exercise. If more than one such Warrant shall be exercised by the holder thereof
at the same time, the number of full shares of Common Stock issuable on such
exercise shall be computed on the basis of the total number of Warrants so
exercised.
Section 2. Adjustments.
(a) Adjustment of Number Issuable. The Number Issuable shall
be subject to adjustment from time to time as follows:
(i) In case the Company shall at any time or from time to time
after the Issue Date:
(A) pay a dividend or make any other distribution on
the outstanding shares of Common Stock in capital stock
(which, for purposes of this Section 2 shall include, without
limitation, any options, warrants or other rights to acquire
capital stock) of the Company;
(B) subdivide the outstanding shares of Common Stock
into a larger number of shares;
(C) combine the outstanding shares of Common Stock
into a smaller number of shares; or
(D) issue any shares of its capital stock in a
reclassification of the Common Stock;
then, and in each such case, the Number Issuable in effect immediately
prior to such event shall be adjusted (and any other appropriate
actions shall be taken by the Company) so that the holder of any
Warrant evidenced hereby thereafter exercised shall be entitled to
receive the number of shares of
<PAGE>
4
Common Stock or other securities of the Company which such holder would
have owned or had been entitled to receive upon or by reason of any of
the events described above, had such Warrant been exercised immediately
prior to the happening of such event. An adjustment made pursuant to
this clause (i) shall become effective retroactively (x) in the case of
any such dividend or distribution, to a date immediately following the
close of business on the record date for the determination of holders
of shares of Common Stock entitled to receive such dividend or
distribution, or (y) in the case of any such subdivision, combination
or reclassification, to the close of business on the date upon which
such corporate action becomes effective.
(ii) In case the Company shall at any time or from time to
time after the Issue Date distribute to any holder of shares of its
Common Stock (including any such distribution made in connection with a
consolidation or merger in which the Company is the resulting or
surviving corporation and the Common Stock is not changed or exchanged)
cash, evidences of indebtedness of the Company or another issuer,
securities of the Company or another issuer or other assets (excluding
dividends or other distributions of shares of Common Stock or other
capital stock for which adjustment is made under Section 2(a)(i)) or
rights or warrants to subscribe for or purchase securities of the
Company (excluding those in respect of which adjustments in the Number
Issuable is made pursuant to Section 2(a)(i), then, and in each such
case, the Number Issuable then in effect shall be adjusted by
multiplying the Number Issuable in effect immediately prior to the date
of such distribution by a fraction (x) the numerator of which shall be
the Current Market Price per share of Common Stock on the record date
referred to below and (y) the denominator of which shall be such
Current Market Price per share of Common Stock less the then Fair
Market Value (as determined in good faith by the Board of Directors of
the Company, in the case of any such distribution other than a
distribution of cash, based on an opinion of a nationally recognized
investment banking firm unaffiliated with either the Company or the
holders of the Warrants, chosen by the Company (which shall bear the
expense thereof) and reasonably acceptable to a majority of the holders
of the Warrants, a certified resolution with respect to which shall be
mailed to the holder of the Warrants evidenced hereby) of the portion
of the cash, evidences of indebtedness, securities or other assets so
distributed or of such subscription rights or warrants applicable to
one share of Common Stock (but such denominator not to be less than
one). Such adjustment shall be made whenever any such distribution is
made and shall become effective retroactively to a date immediately
following the close of business on the record date for the
determination of stockholders entitled to receive such distribution.
(iii) In case the Company at any time or from time to time
shall take any action affecting its Common Stock which could have a
<PAGE>
5
dilutive effect on the number of shares of Common Stock that may be
issued upon exercise of this Warrant, other than an action described in
any of Section 2(a)(i), 2(a)(ii) or Section 2(b) or an action that
would have the same dilutive effect on this Warrant as on the Common
Stock, then, and in each such case, the Number Issuable shall be
adjusted in such manner and at such time as the Board of Directors of
the Company in good faith determines to be equitable in the
circumstances (such determination to be evidenced in a resolution, a
certified copy of which shall be mailed to the holders of the Warrants
evidenced hereby).
(iv) In the event that any convertible or exchangeable
securities, options, warrants or other rights, the issuance of which
shall have given rise to an adjustment pursuant to this Section 2(a)
("Convertible Securities"), shall have expired or terminated without
the exercise thereof and/or if there shall have been an increase, with
the passage of time or otherwise, in the price payable upon the
exercise or conversion thereof or a decrease in the number of shares of
Common Stock issuable upon the exercise or conversion thereof, then the
Number Issuable hereunder shall be readjusted (but to no greater extent
then originally adjusted) on the basis of (A) eliminating from the
computation of the Number Issuable as of the time of the issuance of
the Convertible Securities any shares of Common Stock corresponding to
such Convertible Securities as shall have expired or terminated, (B)
treating the additional shares of Common Stock, if any, actually issued
or issuable pursuant to the previous exercise of such Convertible
Securities as having been issued for the consideration actually
received and receivable therefor and (C) treating any of such
Convertible Securities which remain outstanding as being subject to
exercise or conversion on the basis of such exercise or conversion
price as shall be in effect at such time.
(v) Upon any increase or decrease in the Number Issuable,
then, and in each such case, the Company promptly shall deliver to each
registered holder of Warrants at least five Business Days prior to
effecting any transaction which would result in such increase or
decrease a notice thereof, together with a certificate, signed by the
Chief Executive Officer or a Vice-President and by the Treasurer or an
Assistant Treasurer or the Secretary or an Assistant Secretary of the
Company, setting forth in reasonable detail the event requiring the
adjustment and the method by which such adjustment was calculated and
specifying the increased or decreased Number Issuable then in effect
following such adjustment.
(b) Reorganization, Reclassification, Consolidation, Merger or Sale of
Assets. In case of any capital reorganization or reclassification or other
change of outstanding shares of Common Stock (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
<PAGE>
6
subdivision or combination), or in case of any consolidation or merger of the
Company with or into another Person (other than a consolidation or merger in
which the Company is the resulting or surviving person and which does not result
in any reclassification or change of outstanding Common Stock), or in case of
any sale or other disposition to another Person of all or substantially all of
the assets of the Company (any of the foregoing, a "Transaction"), the Company,
or such successor or purchasing Person, as the case may be, shall execute and
deliver to each holder of the Warrants evidenced hereby at least five Business
Days prior to effecting any of the foregoing Transactions a certificate that the
holder of each such Warrant then outstanding shall have the right thereafter to
exercise such Warrant into the kind and amount of shares of stock or other
securities (of the Company or another issuer) or property or cash receivable
upon such Transaction by a holder of the number of shares of Common Stock into
which such Warrant could have been exercised immediately prior to such
Transaction. Such certificate shall provide for adjustments which shall be as
nearly equivalent as may be practicable to the adjustments provided for in this
Section 2. If, in the case of any such Transaction, the stock, other securities,
cash or property receivable thereupon by a holder of Common Stock includes
shares of stock or other securities of a Person other than the successor or
purchasing Persons and other than the Company, which controls or is controlled
by the successor or purchasing Person or which, in connection with such
Transaction, issues stock, securities, other property or cash to holders of
Common Stock, then such certificate also shall be executed by such Person, and
such Person shall, in such certificate, specifically assume the obligations of
such successor or purchasing Person and acknowledge its obligations to issue
such stock, securities, other property or cash to holders of the Warrants upon
exercise thereof as provided above. The provisions of this Section 2(b)
similarly shall apply to successive Transactions.
Section 3. Notice of Certain Events. In case at any time or from time
to time the Company shall declare any dividend or any other distribution to the
holders of its Common Stock, or shall authorize the granting to the holders of
its Common Stock of rights or warrants to subscribe for or purchase any
additional shares of stock of any class or any other right, or shall authorize
the issuance or sale of any other shares or rights which would result in an
adjustment to the Number Issuable pursuant to Section 2(a) hereof, or there
shall be any capital reorganization or reclassification of the Common Stock of
the Company or consolidation or merger of the Company with or into another
Person, or any sale or other disposition of all or substantially all the assets
of the Company, or there shall be a voluntary or involuntary dissolution,
liquidation or winding up of the Company, then, in any one or more of such cases
the Company shall mail to each holder of the Warrants evidenced hereby at such
holder's address as it appears on the transfer books of the Company, as promptly
as practicable but in any event at least 30 days prior to the applicable date
hereinafter specified, a notice stating (a) the date on which a record is to be
taken for the purpose of such dividend, distribution, rights or warrants or, if
a record is not to be taken, the date as of which the holders of Common Stock of
record to be entitled to such dividend, distribution, rights or warrants are to
be
<PAGE>
7
determined, (b) the date on which such dividends, distribution, rights or
warrants are made or issued or (c) the date on which such reclassification,
consolidation, merger, sale, conveyance, dissolution, liquidation or winding up
is expected to become effective; provided that in the case of any event to which
Section 2(b) applies, the Company shall give at least ten Business Days' prior
written notice as aforesaid. Such notice also shall specify the date as of which
it is expected that the holders of Common Stock of record shall be entitled to
exchange their Common Stock for shares of stock or other securities or property
or cash deliverable upon such reorganization, reclassification, consolidation,
merger, sale, conveyance, dissolution, liquidation or winding up.
Section 4. Certain Covenants. The Company covenants and agrees that all
shares of capital stock of the Company which may be issued upon the exercise of
the Warrants evidenced hereby will be duly authorized, validly issued and fully
paid and non-assessable. The Company shall at all times reserve and keep
available for issuance upon the exercise of the Warrants, such number of its
authorized but unissued shares of Common Stock as will from time to time be
sufficient to permit the exercise of all outstanding Warrants, and shall take
all action required to increase the authorized number of shares of Common Stock
if at any time there shall be insufficient authorized but unissued shares of
Common Stock to permit such reservation or to permit the exercise of all
outstanding Warrants.
Section 5. Registered Holder. The person in whose name this Warrant
Certificate is registered shall be deemed the owner hereof and of the Warrants
evidenced hereby for all purposes. The registered holder of this Warrant
Certificate, in its capacity as such, shall not be entitled to any rights
whatsoever as a stockholder of the Company, except as herein provided.
Section 6. Transfer of Warrants. Any transfer of the rights represented
by this Warrant Certificate shall be effected by the surrender of this Warrant
Certificate, along with the form of assignment attached hereto, properly
completed and executed by the registered holder hereof, at the principal
executive office of the Company in the United States of America, together with
an appropriate investment letter, if deemed reasonably necessary by counsel to
the Company to assure compliance with applicable securities laws. Thereupon, the
Company shall issue in the name or names specified by the registered holder
hereof and, in the event of a partial transfer, in the name of the registered
holder hereof, a new Warrant Certificate or Certificates evidencing the right to
purchase such number of shares of Common Stock as shall be equal to the number
of shares of Common Stock then purchasable hereunder.
Section 7. Denominations. The Company covenants that it will, at its
expense, promptly upon surrender of this Warrant Certificate at the principal
executive office of the Company in the United States of America, execute and
deliver to the registered holder hereof a new Warrant Certificate or
Certificates in
<PAGE>
8
denominations specified by such holder for an aggregate number of Warrants equal
to the number of Warrants evidenced by this Warrant Certificate.
Section 8. Replacement of Warrants. Upon receipt of evidence
satisfactory to the Company of the loss, theft, destruction or mutilation of
this Warrant Certificate (which evidence, in the case of an institutional holder
of Warrants, shall consist of a letter from such holder to such effect) and, in
the case of loss, theft or destruction, upon delivery of an indemnity reasonably
satisfactory to the Company (which indemnity, in the case of an institutional
holder of Warrants, shall consist of an unsecured letter of indemnity from such
holder), or, in the case of mutilation, upon surrender and cancellation thereof,
the Company will issue a new Warrant Certificate of like tenor for a number of
Warrants equal to the number of Warrants evidenced by this Warrant Certificate.
Section 9. Governing Law. THIS WARRANT CERTIFICATE SHALL BE CONSTRUED
AND ENFORCED IN ACCORDANCE WITH, AND THE RIGHTS OF THE PARTIES SHALL BE GOVERNED
BY, THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO AGREEMENTS MADE AND TO BE
PERFORMED ENTIRELY WITHIN SUCH STATE.
Section 10. Rights Inure to Registered Holder. The Warrants evidenced
by this Warrant Certificate will inure to the benefit of and be binding upon the
registered holder thereof and the Company and their respective successors and
permitted assigns. Nothing in this Warrant Certificate shall be construed to
give to any Person other than the Company and the registered holder thereof any
legal or equitable right, remedy or claim under this Warrant Certificate, and
this Warrant Certificate shall be for the sole and exclusive benefit of the
Company and such registered holder. Nothing in this Warrant Certificate shall be
construed to give the registered holder hereof any rights as a holder of shares
of Common Stock until such time, if any, as the Warrants evidenced by this
Warrant Certificate are exercised in accordance with the provisions hereof.
Section 11. Definitions. For the purposes of this Warrant Certificate,
the following terms shall have the meanings indicated below:
"Business Day" shall mean any day other than a Saturday, Sunday or
other day on which commercial banks in the City of New York are authorized or
required by law or executive order to close.
"Current Market Price" per share shall mean, on any date specified
herein for the determination thereof, (a) the average daily Market Price of the
Common Stock for those days during the period of 30 days, ending on such date,
on which the national securities exchanges were open for trading, and (b) if the
Common Stock is not then listed or quoted in the over-counter market, the Market
Price on such date.
<PAGE>
9
"Exercise Price" shall have the meaning given it in the first paragraph
hereof.
"Expiration Date" shall have the meaning given it in the first
paragraph hereof.
"Fair Market Value" shall mean the amount which a willing buyer, under
no compulsion to buy, would pay a willing seller, under no compulsion to sell,
in an arm's-length transaction.
"Issue Date" shall mean January 28, 1999.
"Market Price" shall mean, per share of Common Stock, on any date
specified herein: (a) the closing price per share of the Common Stock on such
date published in The Wall Street Journal or, if no such closing price on such
date is published in The Wall Street Journal, the average of the closing bid and
asked prices on such date, as officially reported on the principal national
securities exchange on which the Common Stock is then listed or admitted to
trading; or (b) if the Common Stock is not then listed or admitted to trading on
any national securities exchange but is designated as a national market system
security by the NASD, the last trading price of the Common Stock on such date;
or (c) if there shall have been no trading on such date or if the Common Stock
is not so designated, the average of the reported closing bid and asked price of
the Common Stock, on such date as shown by NASDAQ and reported by any member
firm of the New York Stock Exchange, Inc. selected by the Company; or (d) if
none of (a), (b) or (c) is applicable, the Fair Market Value per share
determined in good faith by the Board of Directors of the Company based on an
opinion of a nationally recognized investment banking firm unaffiliated with
either the Company or the holders of the Warrants, chosen by the Company (who
shall bear the expense thereof) and acceptable to the holders of at least a
majority in interest of the Warrants.
"NASD" shall mean the National Association of Securities Dealers, Inc.
"NASDAQ" shall mean the National Market System of the National
Association of Securities Dealers, Inc. Automated Quotations System.
"Number Issuable" shall have the meaning given it in the second
paragraph hereof.
"Person" shall mean any individual, corporation, limited liability
company, partnership, trust, incorporated or unincorporated association, joint
venture, joint stock company, government (or an agency or political subdivision
thereof) or other entity of any kind.
<PAGE>
10
"Preferred Stock" shall mean the Company's Senior Convertible Series A
Stock, no par value, issued pursuant to the Purchase Agreement.
"Purchase Agreement" shall have the meaning given it in the second
paragraph hereof.
"Warrant Exercise Documentation" shall have the meaning given it in
Section 1 hereof.
Section 12. Notices. All notices, demands and other communications
provided for or permitted hereunder shall be made in writing and shall be by
registered or certified first-class mail, return receipt requested, or personal
delivery, (a) if to the holder of a Warrant, at such holder's last known address
appearing on the books of the Company; and (b) if to the Company, at its
principal executive office in the United States located at 542 Westport Avenue,
Norwalk, Connecticut 06853, Attention: President, or such other address as shall
have been furnished to the party given or making such notice, demand or other
communication. All such notices and communications shall be deemed to have been
duly given: when delivered, if delivered by hand or by overnight courier
service; and three Business Days after being deposited in the mail, postage
prepaid, if mailed.
IN WITNESS WHEREOF, the Company has caused this Warrant Certificate to
be duly executed as of the Issue Date.
WILTEK, INC.
By: /s/ David S. Teitelman
--------------------------
Name: David S. Teitelman
Title: President and CEO
<PAGE>
11
{Form of Assignment Form}
{To be executed upon assignment of Warrants}
The undersigned hereby assigns and transfers this Warrant Certificate
to ____________________ whose Social Security Number or Tax ID Number is
_________________ and whose record address is _________________________
____________, and irrevocably appoints ________________ as agent to transfer
this security on the books of the Company. Such agent may substitute another to
act for such agent.
Signature:
------------------------------------
Signature Guarantee:
------------------------------------
Date: ___________________________
EXHIBIT E
---------
================================================================================
REGISTRATION RIGHTS AGREEMENT
among
COMMERCIAL ELECTRONICS CAPITAL PARTNERSHIP, L.P.,
COMMERCIAL ELECTRONICS, L.L.C.
and
WILTEK, INC.
-----------------------
January 28, 1999
-----------------------
================================================================================
<PAGE>
Table of Contents
Page
1. Registration on Request...............................................1
2. Incidental Registration...............................................4
3. Registration Procedures...............................................5
4. Underwritten Offerings................................................8
5. Preparation; Reasonable Investigation................................10
6. Rights of Requesting Holders.........................................10
7. Registration Expenses................................................11
8. Indemnification and Contribution.....................................11
9. Registration Rights to Others........................................14
10. Nominees for Beneficial Owners.......................................14
11. Rule 144.............................................................14
12. Definitions..........................................................15
13. Miscellaneous........................................................17
i
<PAGE>
REGISTRATION RIGHTS AGREEMENT
REGISTRATION RIGHTS AGREEMENT, dated as of January 28, 1999, by and
among COMMERCIAL ELECTRONICS CAPITAL PARTNERSHIP, L.P., a Delaware limited
partnership, COMMERCIAL ELECTRONICS, L.L.C., a Delaware limited liability
company, (collectively, the "Purchasers"), and WILTEK, INC., a Connecticut
corporation (the "Company").
This Agreement is made in connection with (a) the Securities Purchase
Agreement, dated as of the date hereof, by and between the Company and the
Purchasers (the "Securities Purchase Agreement"), pursuant to which the Company
has agreed to issue and sell to the Purchasers, and the Purchasers have agreed
to purchase from the Company, (i) an aggregate of 1,000,000 shares of the
Company's Series A Senior Convertible Preferred Stock, no par value (the
"Preferred Stock"), and (ii) Warrants ("Warrants") to purchase up to 1,500,000
shares of the Company's Common Stock, no par value (the "Common Stock"), and (b)
the Stock Purchase Agreement, dated the date hereof, by and between the
stockholders named therein (the "Selling Stockholders") and the Purchasers (the
"Stock Purchase Agreement"), pursuant to which the Selling Stockholders have
agreed to sell to the Purchasers and the Purchasers have agreed to purchase from
the Selling Stockholders, an aggregate of 732,160 shares of the Company's Common
Stock. The Preferred Stock is convertible into shares of the Company's Common
Stock. In order to induce the Purchasers to purchase the shares of Preferred
Stock and the Warrants, the Company has agreed to grant registration rights with
respect to the Registrable Securities as set forth in this Agreement.
Capitalized terms used herein and not otherwise defined shall have the
respective meanings given them in Section 12.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
herein contained, the parties hereto agree as follows:
1. Registration on Request.
(a) Request. Except as otherwise provided in this Section 1,
at any time and from time to time, upon the written request of one or more
Initiating Holders requesting that the Company effect a registration under the
Securities Act of all or any part of such Initiating Holders' Registrable
Securities, and specifying the intended method or methods of disposition
thereof, the Company will promptly, but in any event within ten (10) days after
receipt of such written request, give written notice of such requested
registration to all holders of Registrable Securities, and thereupon will use
its best efforts to effect, as reasonably expeditiously as practicable, the
registration under the Securities Act, including by means of a shelf
registration pursuant to Rule 415 under the Securities Act if so requested in
such request (but in
<PAGE>
2
the case of a shelf registration only if the Company is then eligible to use
Form S-2 or S-3 (or any successor forms) for such a shelf registration), of:
(i) the Registrable Securities which the Company has been so
requested to register by such Initiating Holder or Holders, for
disposition in accordance with the intended method or methods of
disposition stated in such request,
(ii) all other Registrable Securities which the Company has
been requested to register by the holders thereof by written request
delivered to the Company within thirty (30) days after the giving of
such written notice by the Company (which request shall specify the
intended method or methods of disposition thereof), and
(iii) all other securities which the Company wishes to
register, whether for its own account or for the account of the holders
thereof,
all to the extent necessary to permit the disposition (in accordance with the
intended methods thereof as aforesaid) of the Registrable Securities so to be
registered; provided that any holder of Registrable Securities to be included in
any such registration, by written notice to the Company within ten (10) days
after its receipt of a copy of a notice from the managing underwriter delivered
pursuant to Section 1(e), may withdraw such request and, upon receipt of such
notice of the withdrawal of such request from holders comprising the Requisite
Holders, the Company may elect not to effect such registration.
(b) Number of Registrations. The Company shall not be required
to effect more than three (3) registrations pursuant to this Section 1.
(c) Registration Statement Form. Registrations under this
Section 1 shall be on such appropriate registration form of the Commission (i)
as shall be requested by the Requisite Holders (provided that the Company is
then eligible to use such form) and (ii) as shall permit the disposition of such
Registrable Securities in accordance with the intended method or methods of
disposition specified in the request for their registration.
(d) Effective Registration Statement. A registration requested
pursuant to this Section 1 shall not be deemed to have been effected (i) unless
a registration statement with respect thereto has become effective, (ii) if the
registration does not remain effective for a period of at least ninety (90) days
(or, with respect to any registration statement filed pursuant to Rule 415 under
the Securities Act, for a period of at least one (1) year) or, in either case if
earlier, until all the Registrable Securities requested to be registered in
connection therewith were sold or withdrawn by the participating Holders, (iii)
if, after it has become effective, such registration is subject to any stop
order, injunction or other order or requirement
<PAGE>
3
of the Commission or other governmental agency or court for any reason not
attributable to actions taken by the holders of Registrable Securities), or (iv)
if the conditions to closing specified in the purchase agreement or underwriting
agreement entered into in connection with such registration are not satisfied
and no such closing occurs, other than by reason of some act or omission by the
holders of the Registrable Securities that were to have been registered.
(e) Registration of Other Securities. Whenever the Company
shall effect a registration pursuant to this Section 1, no securities other than
Registrable Securities shall be included among the securities covered by such
registration unless holders of Registrable Securities requesting registration
thereof pursuant to Section 1, representing not less than 50% of the Registrable
Securities with respect to which registration has been requested, shall have
consented in writing to the inclusion of such other securities.
(f) Postponement. The Company shall be entitled to postpone
for a reasonable period of time (but not exceeding sixty (60) days) the filing
of any registration statement otherwise required to be prepared and filed by it
pursuant to this Section 1 if the Company determines, in its reasonable
judgment, that such registration and offering would interfere with any material
financing, acquisition, corporate reorganization or other material transaction
involving the Company or any of its Affiliates and promptly gives the holders of
Registrable Securities requesting registration thereof pursuant to this Section
1 written notice of such determination, containing a general statement of the
reasons for such postponement and an approximation of the anticipated delay. The
Company may not postpone a filing pursuant to this Section 1(f) more than once
in any twelve-month period. If the Company shall so postpone the filing of a
registration statement, holders of Registrable Securities requesting
registration thereof pursuant to Section 1, representing not less than 15% of
the Registrable Securities with respect to which registration has been requested
and constituting not less than 50% of the Initiating Holders, shall have the
right to withdraw the request for registration by giving written notice to the
Company within thirty (30) days after receipt of the notice of postponement and,
in the event of such withdrawal, such request shall not be counted for purposes
of the requests for registration to which holders of Registrable Securities are
entitled pursuant to Section 1.
(g) Limitations on Registration on Request. Notwithstanding
anything in this Section 1 to the contrary, the Company shall not be required to
effect a registration pursuant to this Section 1 (i) prior to the first
anniversary of the date hereof or (ii) within the 12-month period occurring
immediately subsequent to the effectiveness (within the meaning of Section 1(d)
hereof) of a registration statement filed pursuant to this Section 1.
<PAGE>
4
2. Incidental Registration.
(a) Incidental Rights. If the Company at any time proposes to
register, on any form which may be used for the registration of Registrable
Securities other than Form S-4 or Form S-8 (or any successor or similar forms
then in effect), any of its securities under the Securities Act (other than
pursuant to Section 1), whether or not pursuant to registration rights granted
to other holders of its securities and whether or not for sale for its own
account, in a manner which would permit registration of Registrable Securities
for sale to the public under the Securities Act, it will each such time give
written notice to all holders of Registrable Securities of its intention to do
so and of such holders' rights under this Section 2; such notice to be given to
all such holders at least twenty (20) days prior to the filing of such proposed
registration statement. Upon the written request of any such holder (a
"Requesting Holder") made within fifteen (15) days after the giving of any such
notice (which request shall specify the Registrable Securities intended to be
disposed of by such holder and the intended method or methods of disposition
thereof), the Company will use its best efforts to effect the registration under
the Securities Act of all Registrable Securities which the Company has been so
requested to register by the Requesting Holders, to the extent necessary to
permit the disposition (in accordance with the intended methods thereof as
aforesaid) of the Registrable Securities so to be registered. With respect to an
underwritten offering, prior to the effective date of any registration statement
filed in connection with a registration described in this Section 2, promptly
upon notification to the Company from the managing underwriter of the price at
which the Registrable Securities requested to be registered pursuant to this
Section 2 are to be sold, the Company shall advise each Requesting Holder of
such price, and if such price is below the price which any Requesting Holder
shall have indicated to be acceptable to such Requesting Holder, such Requesting
Holder shall then have the right to withdraw its request to have its Registrable
Securities included in such registration statement.
(b) Not Deemed a Demand Registration. No registration effected
pursuant to this Section 2 shall be deemed to have been effected pursuant to
Section 1.
(c) Holdback. If the Company previously shall have received a
request for registration pursuant to Section 1 or this Section 2, and if such
previous registration shall not have been withdrawn or abandoned, the Company
will not effect any registration of any of its securities under the Securities
Act, whether or not for sale for its own account, until a period of ninety (90)
days shall have elapsed from the effective date of such previous registration.
(d) Discontinuance. Notwithstanding anything to the contrary
in this Section 2, the Company shall have the right to discontinue any
registration under this Section 2 at any time prior to the effective date of
such registration, if the registration of other securities giving rise to such
registration under
<PAGE>
5
this Section 2 is discontinued; but no such discontinuation shall preclude an
immediate or subsequent request for registration pursuant to Section 1 or 2.
3. Registration Procedures. If and whenever the Company is required to
use its best efforts to effect the registration of any Registrable Securities
under the Securities Act as provided in Section 1 or Section 2, the Company will
promptly:
(a) prepare and (in any event within ninety (90) days after
the end of the period within which requests for registration may be given to the
Company) file with the Commission the requisite registration statement to effect
such registration and thereafter use its best reasonable efforts promptly to
cause such registration statement to become effective; provided that the Company
may discontinue any registration of its securities which are not Registrable
Securities at any time prior to the effective date of the registration statement
relating thereto;
(b) prepare and file with the Commission such amendments,
post-effective amendments and supplements to such registration statement and the
prospectus used in connection therewith as may be necessary to keep such
registration statement effective and to comply with the provisions of the
Securities Act with respect to the disposition of all Registrable Securities
covered by such registration statement until the earlier of (i) such time as all
of such Registrable Securities have either been disposed of in accordance with
the intended methods of disposition by the sellers thereof set forth in such
registration statement or the sale thereof has been abandoned by such sellers
and (ii) ninety (90) days after the effective date of such registration
statement, except with respect to any such registration statement filed pursuant
to Rule 415 (or any successor Rule) under the Securities Act, in which case such
period shall be one year;
(c) furnish as soon as available to each seller of Registrable
Securities covered by such registration statement such number of copies of such
drafts and final versions of such registration statement and of each such
amendment, post-effective amendment and supplement thereto (in each case
including all exhibits), such number of copies of such drafts and final versions
of the prospectus contained in such registration statement (including each
preliminary prospectus and any summary prospectus), any other prospectus filed
under Rule 424 under the Securities Act, in conformity with the requirements of
the Securities Act, such documents, if any, incorporated by reference in such
registration statement or prospectus, and such other documents, as such seller
or such holder may reasonably request;
(d) use its commercially reasonably efforts to register or
qualify all Registrable Securities covered by such registration statement under
such other securities or blue sky laws of such jurisdictions as each seller
thereof shall reasonably request, to keep such registration or qualification in
effect for so long as such registration statement remains in effect, and take
any other action which may be
<PAGE>
6
reasonably necessary or advisable to enable such seller to consummate the
disposition in such jurisdictions of the securities owned by such seller, except
that the Company shall not for any such purpose be required to qualify generally
to do business as a foreign corporation in any jurisdiction wherein it would not
but for the requirements of this clause (d) be obligated to be so qualified or
to consent to general service of process in any such jurisdiction;
(e) cooperate with the sellers of such Registrable Securities
to facilitate the timely preparation and delivery of certificates representing
Registrable Securities to be sold, which securities shall not bear any
restrictive legends indicating that the securities have not been registered
under the Securities Act and shall be in a form eligible for deposit with The
Depository Trust Company; and enable such Registrable Securities to be in such
denominations and registered in such names as such sellers may request at least
two (2) business days prior to any sale of Registrable Securities;
(f) furnish to each seller of Registrable Securities upon
request a copy of (i) an opinion of counsel for the Company, dated the effective
date of such registration statement (or, if such registration involves an
underwritten public offering, dated the date of the closing under the
underwriting agreement), covering substantially the same matters with respect to
such registration statement (and the prospectus included therein) as are
customarily covered in opinions of issuer's counsel in underwritten public
offerings of securities and (ii) a "comfort" letter signed by the independent
public accountants who have certified the Company's financial statements
included or incorporated by reference in such registration statement, covering
substantially the same matters with respect to such registration statement (and
the prospectus included therein) and, with respect to events subsequent to the
date of such financial statements, as are customarily covered in accountants'
comfort letters delivered to the underwriters in underwritten public offerings
of securities and such other financial matters as the Requisite Holders or the
underwriters, as the case may be, may reasonably request, subject to the
delivery by such seller to such independent public accountants of such documents
as are reasonable and customary in transactions of this nature;
(g) promptly notify each seller of such Registrable
Securities, and (if requested by any such seller) confirm such advice in
writing, (i) when the prospectus or any prospectus supplement or post-effective
amendment has been filed and, with respect to the registration statement or any
post-effective amendment, when the same has become effective, (ii) of any
request by the Commission for amendments or supplements to the registration
statement or the prospectus or for additional information, (iii) of the issuance
by the Commission of any stop order suspending the effectiveness of the
registration statement or the initiation of any proceedings for that purpose and
(iv) of the receipt by the Company of any notification with respect to the
suspension of the qualification of the
<PAGE>
7
Registrable Securities for sale in any jurisdiction or the initiation or
threatening of any proceeding for such purpose;
(h) promptly notify each seller of Registrable Securities
covered by such registration statement, at any time when a prospectus relating
thereto is required to be delivered under the Securities Act, upon discovery
that, or upon 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 any material fact required to be
stated therein or necessary to make the statements therein not misleading in the
light of the circumstances under which they were made, and at the request of any
such seller or holder promptly prepare and furnish to such seller or holder 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 or prospective purchasers of such securities, 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 under which they were made;
(i) use its reasonable commercial efforts to obtain the
withdrawal of any order suspending the effectiveness of the registration
statement at the earliest possible time;
(j) otherwise comply with all applicable rules and regulations
of the Commission, and make available to its securities holders, as soon as
reasonably practicable, an earnings statement covering the period of at least
twelve months, but not more than eighteen (18) months, beginning with the first
full calendar month after the effective date of such registration statement,
which earning statement shall satisfy the provisions of Section 11(a) of the
Securities Act, and furnish to each such seller at least ten (10) days prior to
the filing thereof a copy of any amendment or supplement to such registration
statement or prospectus and shall not file any thereof to which any such seller
shall have reasonably objected on the grounds that such amendment or supplement
does not comply in all material respects with the requirements of the Securities
Act or the rules or regulations thereunder;
(k) provide and cause to be maintained a transfer agent and a
registrar for all Registrable Securities covered by such registration statement
from and after a date not later than the effective date of such registration
statement;
(l) cause all Registrable Securities covered by such
registration statement to be listed on each securities exchange or approved for
quotation on any inter-dealer quotation system on which similar securities
issued by the Company are then listed or quoted;
(m) makes its officers and employees available to participate
in presentations to potential purchasers of Registrable Securities;
<PAGE>
8
(n) cause its subsidiaries and affiliates to take all action
necessary or advisable to effect the registration of the Registrable Securities
contemplated hereby, including preparing and filing any required financial
information;
(o) provide a CUSIP number for all Registrable Securities, not
later than the effective date of the applicable registration statement; and
(p) enter into such agreements and take such other actions as
the Requisite Holders shall reasonably request in order to expedite or
facilitate the disposition of such Registrable Securities.
The Company may require each holder of Registrable Securities which will be
included in such registration (i) to furnish the Company such information
relating to such holder as the Company may reasonably request and as is required
by applicable laws or regulations, and (ii) to provide the Company with written
confirmation that such holder will comply with applicable laws and regulations,
and provide the Company with such further information necessary for the Company
to abide by applicable laws and regulations, in such form as the Company may
reasonably request.
4. Underwritten Offerings.
(a) Requested Underwritten Offerings. If requested by the
underwriters for any underwritten offering of Registrable Securities pursuant to
a registration requested under Section 1, the Company will use its commercially
reasonable efforts to enter into a firm commitment underwriting agreement with
such underwriters for such offering, such agreement to be reasonably
satisfactory in substance and form to the underwriters and to contain such
representations and warranties by the Company and such other terms as are
generally prevailing in such agreements, including, without limitation,
indemnities to the effect and to the extent provided in Section 8. The holders
of Registrable Securities to be distributed by such underwriters shall be
parties to such underwriting agreement and may, at their option, require that
any or all of the representations and warranties by, and the other agreements on
the part of, the Company to and for the benefit of such underwriters shall also
be made to and for the benefit of such holders of Registrable Securities. Except
as set forth in this Agreement, no holder of Registrable Securities shall be
required (i) to make any representations or warranties to or agreements with the
Company or the underwriters other than representations, warranties or agreements
regarding such holder, such holder's Registrable Securities and such holder's
intended method of distribution and any other representation required by law or
(ii) to indemnify (or contribute with respect to an indemnifiable claim) the
Company or any underwriters of the Registrable Securities, except as set forth
in Section 8.
<PAGE>
9
(b) Incidental Underwritten Offerings. If the Company at any
time proposes to register any of its securities under the Securities Act as
contemplated by Section 2, whether or not pursuant to registration rights
granted to other holders of its securities and whether or not for sale for its
own account, and such securities are to be distributed by or through one or more
underwriters, the Company will, if requested by any holder of Registrable
Securities as provided in Section 2 and subject to the provisions of this
Section 4(b), use its best efforts to arrange for such underwriters to include
all the Registrable Securities to be offered and sold by such holder among the
securities to be distributed by such underwriters; provided that if the managing
underwriter of such underwritten offering shall advise the Company in writing
(with a copy to the holders of Registrable Securities requesting such
registration) that, in its opinion the total number of shares which the Company,
the holders of Registrable Securities and any other holders of securities of the
Company propose to be included in such registration is sufficiently large to
materially and adversely affect the success of such offering (such writing to
state the basis of such opinion and the approximate number of such securities
which may be included in such offering without such effect), then after
inclusion of the number of securities to be sold by the Company for its own
account in such registration, the amount of securities to be offered for the
accounts of holders of Registrable Securities shall be reduced pro rata (in
accordance with the number of Registrable Securities requested to be included in
such registration) to the extent necessary to reduce the total amount of
securities to be included in such offering to the amount recommended by such
managing underwriter; provided that if securities are being offered for the
account of other Persons as well as the Company, such reduction shall not
represent a greater fraction of the number of securities intended to be offered
by holders of Registrable Securities than the fraction of similar reductions
imposed on such other Persons over the amount of securities they intended to
offer. Any holder of Registrable Securities to be included in such registration
may withdraw its request to have its securities so included by notice to the
Company promptly after receipt of a copy of a notice from the managing
underwriter pursuant to this Section 4(b). The holders of Registrable Securities
to be distributed by such underwriters shall be parties to the underwriting
agreement between the Company and such underwriters and may, at their option,
require that any or all of the representations and warranties by, and the other
agreements on the part of, the Company to and for the benefit of such
underwriters shall also be made to and for the benefit of such holders of
Registrable Securities. Except as set forth in this Agreement, no holder of
Registrable Securities shall be required (i) to make any representations or
warranties to or agreements with the Company or the underwriters other than
customary representations, warranties or agreements regarding such holder, such
holder's Registrable Securities and such holder's intended method of
distribution and any other representation required by law or (ii) to indemnify
(or contribute with respect to an indemnifiable claim) the Company or any
underwriters of the Registrable Securities, except as set forth in Section 8,
except to the extent that the other holders of securities included in such
registration statement (other than holders of Registrable
<PAGE>
10
Securities) have agreed to make such representations and warranties or to
indemnify the Company in connection with such registration.
(c) Holdback Agreements. Each holder of Registrable Securities
agrees, if so required by the managing underwriter, not to effect any public
sale or distribution of securities of the Company of the same class as the
securities included in such registration statement, during the seven (7) days
prior to the date on which any underwritten registration pursuant to Section 1
or 2 has become effective and the ninety (90) days (or such longer period as
shall have been agreed to by all of the holders of securities included in such
registration statement other than the holders of Registrable Securities)
thereafter, except as part of such underwritten registration or to the extent
that such holder is prohibited by applicable law from agreeing to withhold
Registrable Securities from sale or is acting in its capacity as a fiduciary or
an investment adviser. The Company agrees not to effect any public sale or
distribution of its equity securities or securities convertible into or
exchangeable or exercisable for any of such securities during the seven (7) days
prior to and the ninety (90) days after any underwritten registration pursuant
to Section 1 or 2 has become effective, except as part of such underwritten
registration.
(d) Selection of Underwriters. If a requested registration
pursuant to Section 1 involves an underwritten offering, the underwriter or
underwriters thereof shall be selected by the Company, which selection shall be
subject to the approval of the Requisite Holders. If an incidental registration
pursuant to Section 2 involves one or more underwriters, the underwriter or
underwriters shall be selected by the Company.
5. Preparation; Reasonable Investigation. In connection with the
preparation and filing of each registration statement registering Registrable
Securities under the Securities Act, the Company will give the holders of
Registrable Securities on whose behalf such Registrable Securities are to be so
registered, and their underwriters, if any, and their respective counsel the
opportunity to participate in the preparation of such registration statement,
each prospectus included therein or filed with the Commission, and each
amendment thereof or supplement thereto, and will give each of them such access
to its books and records and such opportunities to discuss the business of the
Company with its officers and the independent public accountants who have
certified its financial statements as shall be necessary, in the opinion of such
holders and such underwriters or their respective counsel, to conduct a
reasonable investigation within the meaning of the Securities Act.
6. Rights of Requesting Holders. If any registration statement refers
to any Requesting Holder by name or otherwise as the holder of any securities of
the Company, such holder shall have the right to require (a) the insertion
therein of language, in form and substance reasonably satisfactory to such
holder, to the effect that, if true, the holding by such holder of such
securities does not necessarily make such holder a "controlling person" of the
Company within the meaning of the
<PAGE>
11
Securities Act or (b) in the event that such reference to such holder by name or
otherwise is not required by the Securities Act or any rules and regulations
promulgated thereunder, the deletion of the reference to such holder.
7. Registration Expenses. The Company will, whether or not any
registration pursuant to this Agreement shall become effective, pay all
Registration Expenses incident to its performance under or compliance with this
Agreement promptly as such Registration Expenses are incurred.
8. Indemnification and Contribution.
(a) The Company will, and hereby does, indemnify and hold
harmless, in the case of any registration statement filed pursuant to Section 1
or 2, each seller of any Registrable Securities covered by such registration
statement and each other Person who participates as an underwriter in the
offering or sale of such securities and each other Person, if any, who controls
such seller or any such underwriter within the meaning of the Securities Act,
and their respective directors, officers, partners, agents and Affiliates,
against any losses, claims, damages or liabilities, joint or several, to which
such seller or underwriter or any such director, officer, partner, agent,
Affiliate or controlling person may become subject under the Securities Act or
otherwise, including, without limitation, the reasonable fees and expenses of
legal counsel, insofar as such losses, claims, damages or liabilities (or
actions or proceedings, whether commenced or threatened, in respect thereof)
arise out of or are based upon any untrue statement or alleged untrue statement
of any material fact contained in any registration statement under which such
securities were registered under the Securities Act, any preliminary prospectus,
final prospectus or summary prospectus contained therein, or any amendment or
supplement thereto, or any omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein in light of the circumstances in which they were made not misleading,
and the Company will reimburse such seller or underwriter and each such
director, officer, partner, agent, Affiliate and controlling Person for any
legal or any other expenses reasonably incurred by them in connection with
investigating or defending any such loss, claim, liability, action or
proceeding; provided, however, that the Company shall not be liable in any such
case to the extent that any such loss, claim, damage, liability (or action or
proceeding in respect thereof) or expense arises out of or is based upon an
untrue statement or alleged untrue statement or omission or alleged omission
made in such registration statement, any such preliminary prospectus, final
prospectus, summary prospectus, amendment or supplement in reliance upon and in
conformity with written information furnished to the Company by or on behalf of
such seller or underwriter, as the case may be, specifically stating that it is
for use in the preparation thereof; and provided, further, that the Company
shall not be liable to any Person who participates as an underwriter in the
offering or sale of Registrable Securities or any other Person, if any, who
controls such underwriter within the meaning of the Securities Act, in any such
case to the extent that any such loss, claim, damage, liability (or action or
proceeding in
<PAGE>
12
respect thereof) or expense arises out of such Person's failure to send or give
a copy of the final prospectus, as the same may be then supplemented or amended,
to the Person asserting an untrue statement or alleged untrue statement or
omission or alleged omission at or prior to the written confirmation of the sale
of Registrable Securities to such Person if such statement or omission was
corrected in such final prospectus and such final prospectus was required to be
delivered to such Person. Such indemnity shall remain in full force and effect
regardless of any investigation made by or on behalf of such seller or any such
director, officer, partner, agent, Affiliate or controlling person and shall
survive the transfer of such securities by such seller.
(b) As a condition to including any Registrable Securities in
any registration statement, the Company shall have received an undertaking
satisfactory to it from the prospective seller of such Registrable Securities,
to indemnify and hold harmless (in the same manner and to the same extent as set
forth in Section 8(a)) the Company, and each director of the Company, each
officer of the Company and each other Person, if any, who participates as an
underwriter in the offering or sale of such securities and each other Person who
controls the Company or any such underwriter within the meaning of the
Securities Act, with respect to any statement or alleged statement in or
omission or alleged omission from such registration statement, any preliminary
prospectus, final prospectus or summary prospectus, contained therein, or any
amendment or supplement thereto, if such statement or alleged statement or
omission or alleged omission was made in reliance upon and in conformity with
written information furnished to the Company by such seller specifically stating
that it is for use in the preparation of such registration statement,
preliminary prospectus, final prospectus, summary prospectus, amendment or
supplement; provided, however, that the liability of such indemnifying party
under this Section 8(b) shall be limited to the amount of proceeds received by
such indemnifying party in the offering giving rise to such liability. Such
indemnity shall remain in full force and effect, regardless of any investigation
made by or on behalf of the Company or any such director, officer or controlling
person and shall survive the transfer of such securities by such seller.
(c) Promptly after receipt by an indemnified party of notice
of the commencement of any action or proceeding involving a claim referred to in
Section 8(a) or (b), such indemnified party will, if a claim in respect thereof
is to be made against an indemnifying party, give written notice to the latter
of the commencement of such action; provided, however, that the failure of any
indemnified party to give notice as provided herein shall not relieve the
indemnifying party of its obligations under the preceding subdivisions of this
Section 8, except to the extent that the indemnifying party is actually
prejudiced by such failure to give notice. In case any such action is brought
against an indemnified party the indemnifying party shall be entitled to
participate in and, unless in such indemnified party's reasonable judgment a
conflict of interest between such indemnified and indemnifying parties may exist
in respect of such claim, to assume the defense thereof, jointly with any
<PAGE>
13
other indemnifying party similarly notified to the extent that it may wish, with
counsel reasonably satisfactory to such indemnified party, and after notice from
the indemnifying party to such indemnified party of its election so to assume
the defense thereof, the indemnifying party shall not be liable to such
indemnified party for any legal or other expenses subsequently incurred by the
latter in connection with the defense thereof other than reasonable costs of
investigation. In the event a bona fide conflict of interest between the
indemnified and indemnifying parties exists, the indemnifying party hereunder
shall only be responsible for the payment of reasonable fees and expenses of a
single counsel for the indemnified parties hereunder. No indemnifying party
shall be liable for any settlement of any action or proceeding effected without
its written consent, which consent shall not be unreasonably withheld. No
indemnifying party shall, without the consent of the indemnified party, which
consent shall not be unreasonably withheld, consent to entry of any judgment or
enter into any settlement which does not include as an unconditional term
thereof the giving by the claimant or plaintiff to such indemnified party of a
release from all liability in respect to such claim or litigation or which
requires action other than the payment of money by the indemnifying party.
(d) Contribution. If the indemnification provided for in this
Section 8 shall for any reason be held by a court to be unavailable to an
indemnified party under Section 8(a) or (b) hereof in respect of any loss,
claim, damage or liability, or any action in respect thereof, then, in lieu of
the amount paid or payable under Section 8(a) or (b), the indemnified party and
the indemnifying party under Section 8(a) or (b) shall contribute to the
aggregate losses, claims, damages and liabilities (including legal or other
expenses reasonably incurred in connection with investigating the same), (i) in
such proportion as is appropriate to reflect the relative fault of the Company
and the prospective sellers of Registrable Securities covered by the
registration statement which resulted in such loss, claim, damage or liability,
or action or proceeding in respect thereof, with respect to the statements or
omissions which resulted in such loss, claim, damage or liability, or action or
proceeding in respect thereof, as well as any other relevant equitable
considerations or (ii) if the allocation provided by clause (i) above is not
permitted by applicable law, in such proportion as shall be appropriate to
reflect the relative benefits received by the Company and such prospective
sellers from the offering of the securities covered by such registration
statement, provided, that for purposes of clause (i) or (ii), the relative
benefits received by the prospective sellers shall be deemed not to exceed the
amount of proceeds received by such prospective sellers and no holder of
Registrable Securities shall be required to contribute any amount in excess of
the amount such holder would have been required to pay to an indemnified party
if the indemnity under clause (a) of this Section 8 was available. No Person
guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of
the Securities Act) shall be entitled to contribution from any Person who was
not guilty of such fraudulent misrepresentation. As among sellers who are guilty
of such fraudulent misrepresentation, such sellers' obligations to contribute as
provided in this Section 8(d) are several in proportion to the relative value of
their respective
<PAGE>
14
Registrable Securities covered by such registration statement and not joint. In
addition, no Person shall be obligated to contribute hereunder any amounts in
payment for any settlement of any action or claim effected without such Person's
consent, which consent shall not be unreasonably withheld.
(e) Indemnification and contribution similar to that specified
in the preceding subdivisions of this Section 8 (with appropriate modifications)
shall be given by the Company and each seller of Registrable Securities with
respect to any required registration or other qualification of securities under
any federal or state law or regulation of any governmental authority other than
the Securities Act.
(f) An indemnifying party shall make payments of all amounts
required to be made pursuant to the foregoing provisions of this Section 8 to or
for the account of the indemnified party from time to time promptly upon receipt
of bills or invoices relating thereto or when otherwise due or payable; provided
that the indemnified party shall reimburse the indemnifying party for any
payments made with the stated purpose of satisfying the requirements of this
clause (f) which were not required to be made by this Section 8.
9. Registration Rights to Others. The Company hereby represents to the
holders of Registrable Securities that the rights granted herein do not conflict
with the rights, if any, granted to any other holder of securities of the
Company. If the Company shall at any time provide to any holder of any
securities of the Company rights with respect to the registration of such
securities under the Securities Act, such rights shall not be in conflict with
any of the rights provided in this Agreement to the holders of Registrable
Securities. The Company shall provide to the holders of Registrable Securities
copies of any agreements which purport to grant rights with respect to the
registration of any of the Company's securities to any holder or prospective
holder thereof promptly upon executing the same.
10. Nominees for Beneficial Owners. For purposes of this Agreement, in
the event that any Registrable Securities are held by a nominee for the
beneficial owner thereof, the beneficial owner thereof may, at its election, be
treated as the holder of such Registrable Securities for purposes of any request
or other action by any holder or holders of Registrable Securities pursuant to
this Agreement or any determination of any number or percentage of shares of
Registrable Securities held by any holder or holders of Registrable Securities
contemplated by this Agreement. If the beneficial owner of any Registrable
Securities so elects, the Company may require assurances reasonably satisfactory
to it of such owner's beneficial ownership of such Registrable Securities.
11. Rule 144. So long as the Company shall be required to file reports
under the Exchange Act, the Company shall take all actions reasonably necessary
to enable holders of Registrable Securities to sell such securities without
registration under the Securities Act within the limitation of the provisions of
Rule
<PAGE>
15
144 under the Securities Act, as such Rule may be amended from time to time, or
any similar rule or regulation hereafter adopted by the Commission, including,
without limitation, filing on a timely basis all reports required to be filed
pursuant to the Exchange Act. Upon the request of any holder of Registrable
Securities, the Company will deliver to such holder a written statement as to
whether it has complied with such requirements.
12. Definitions. As used herein, unless the context otherwise requires,
the following terms have the following respective meanings:
"Affiliate" means any Person controlling, controlled by or under common
control with the Person in question. As used herein, "control" means the
beneficial ownership of at least a majority of the equity interests of a Person
entitling the owner of such interests to direct the policies and operations of
such Person.
"Commission" means the Securities and Exchange Commission and any
successor federal agency having similar powers.
"Common Stock" means the Common Stock, no par value, of the Company,
together with 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, but shall not mean the Preferred Stock.
"Company" shall have the meaning assigned such term in the introductory
paragraph of this Agreement.
"Exchange Act" means the Securities Exchange Act of 1934, as amended,
or any successor federal statute, and the rules and regulations of the
Commission thereunder, all as the same shall be in effect at the time.
"Initiating Holders" means, as of any date of determination, any holder
or holders of Registrable Securities holding individually or in the aggregate
more than 50% of the shares of Registrable Securities then outstanding.
"Person" means an individual, a partnership, a limited liability
company, a joint venture, a corporation, a trust, an association, an
organization, a business, an unincorporated organization or a government or
political subdivision thereof or agency thereof or other entity of any kind.
"Preferred Stock" shall have the meaning assigned to that term in the
recitals of this Agreement.
<PAGE>
16
"Purchasers" shall have the meaning assigned such term in the
introductory paragraph of this Agreement.
"Registrable Securities" means any shares of Common Stock (i) sold to
the Purchasers pursuant to the Stock Purchase Agreement, (ii) issued or issuable
upon conversion of shares of Preferred Stock sold to the Purchasers pursuant to
the Securities Purchase Agreement or upon exercise of the Warrants or (iii)
issued or issuable with respect to any of the securities referred to in clauses
(i) or (ii) by way of a dividend or stock split or in connection with a
combination of shares, recapitalization, merger, consolidation or other
reorganization or antidilution protection or otherwise. As to any particular
Registrable Security, such security shall cease to be a Registrable Security
when (x) a registration statement with respect to the sale of such security
shall have become effective under the Securities Act and the holder thereof
shall have had the opportunity to dispose of such security in accordance with
such registration statement, (y) such security shall have been sold as permitted
by Rule 144 (or any successor provision) under the Securities Act, or (z) such
security, once issued, shall have ceased to be outstanding.
"Registration Expenses" means all expenses incident to the Company's
performance of or compliance with Sections 1 and 2, including, without
limitation, all registration and filing fees, all fees of national securities
exchanges or the National Association of Securities Dealers, Inc., all fees and
expenses of complying with securities or blue sky laws, all word processing,
duplicating and printing expenses, messenger and delivery expenses, the fees and
disbursements of counsel for the Company and of its independent public
accountants, including the expenses of "cold comfort" letters required by or
incident to such performance and compliance, any fees and disbursements of
underwriters customarily paid by issuers or sellers of securities (excluding any
underwriting discounts or commissions with respect to the Registrable
Securities, which shall not be paid by the Company) and all of the first
$10,000, and 50% of the amount in excess of $10,000, of the reasonable fees and
expenses of one counsel to the selling holders of Registrable Securities
(selected by selling holders of Registrable Securities representing a majority
of the Registrable Securities covered by such registration); provided, however,
that in the event the Company shall, in accordance with Section 2(d), not
register any securities with respect to which it had given written notice of its
intention to so register to holders of Registrable Securities, all of the costs
of the type (and subject to any limitation to the extent) set forth in this
definition and incurred by Requesting Holders in connection with such
registration shall be deemed Registration Expenses.
"Requesting Holders" shall have the meaning assigned to such term in
Section 2 hereof.
"Requisite Holders" means with respect to any registration of
Registrable Securities by the Company pursuant to this Agreement, any holder or
holders of a majority of the Registrable Securities requested to be registered.
<PAGE>
17
"Securities Act" means the Securities Act of 1933, as amended, or any
successor federal statute, and the rules and regulations of the Commission
thereunder, all as the same shall be in effect at the time.
"Selling Stockholders" shall have the meaning assigned such term in the
recitals of this Agreement.
"Securities Purchase Agreement" shall have the meaning assigned such
term in the recitals of this Agreement.
"Stock Purchase Agreement" shall have the meaning assigned such term in
the recitals of this Agreement.
"Warrants" shall have the meaning assigned such term in the recitals of
this Agreement.
13. Miscellaneous.
(a) Remedies. Each holder of Registrable Securities, in
addition to the rights provided herein and at law, including recovery of
damages, will be entitled to specific performance of its rights under this
Agreement. The Company agrees that monetary damages would not be adequate
compensation for any loss incurred by reason of a breach by the Company of the
provisions of this Agreement and hereby agrees to waive the defense in any
action for specific performance that a remedy at law would be adequate.
(b) Adjustments Affecting Registrable Securities. The Company
will not take any action, or permit any change to occur, with respect to the
Registrable Securities which would adversely affect the ability of the holders
of Registrable Securities to include such Registrable Securities in a
registration undertaken pursuant to the terms of this Agreement.
(c) Amendments and Waivers. The provisions of this Agreement,
including the provisions of this sentence, may not be amended, modified or
supplemented, and waivers or consents to departures from the provisions hereof
may not be given unless the Company has obtained the written consent of holders
of a majority of the Registrable Securities.
(d) Notices. All notices and other communications provided for
or permitted hereunder shall be made in writing by hand-delivery, registered
first-class mail, or air courier guaranteeing overnight delivery:
(i) if to a holder of Registrable Securities, at the
most current address given by such holder to the Company in accordance
with the provisions of this Section 13(d); and
<PAGE>
18
(ii) if to the Company, at Wiltek, Inc., 542 Westport
Avenue, Norwalk, Connecticut 06853, Attention: President; or at such
other address, notice of which is given in accordance with the
provisions of this Section 13(d).
All such notices and communications shall be deemed to have been duly
given at the time delivered by hand, if personally delivered; five (5) business
days after being deposited in the mail, postage prepaid, if mailed; and on the
next business day if timely delivered to an air courier guaranteeing overnight
delivery.
(e) Assignment. This Agreement shall be binding upon and inure
to the benefit of and be enforceable by the parties hereto and, with respect to
the Company, its respective successors and permitted assigns and, with respect
to the Purchasers, any subsequent holder of any Registrable Securities, subject
to the provisions respecting the minimum numbers of percentages of shares of
Registrable Securities required in order to be entitled to certain rights, or
take certain actions, contained herein. This Agreement may not be assigned by
the Company without the prior written consent of the holders of a majority of
the Registrable Securities at the time such consent is requested. The Purchasers
(and not any other holder of Registrable Securities or any other Person) shall
be permitted, in connection with the transfer or disposition of Registrable
Securities, to impose conditions or constraints on the ability of the
transferee, as a holder of Registrable Securities, to request a registration
pursuant to Section 1 and shall provide the Company with copies of such
conditions or constraints and the identity of such transferees.
(f) Calculation of Percentage Interests in Registrable
Securities. For purposes of this Agreement, all references to a percentage of
the Registrable Securities shall be calculated based upon the number of shares
of Registrable Securities outstanding at the time such calculation is made,
assuming, if applicable, the exercise, conversion or exchange of the Company's
securities into Registrable Securities in accordance with the terms of such
securities.
(g) Counterparts. This Agreement may be executed in any number
of counterparts and by the parties hereto in separate counterparts, each of
which when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same Agreement.
(h) Headings. The headings in this Agreement are for
convenience of reference only and shall not limit or otherwise affect the
meaning hereof.
(i) GOVERNING LAW. THIS AGREEMENT SHALL BE CONSTRUED AND
ENFORCED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF NEW YORK
WITHOUT REGARD TO CONFLICTS OF LAWS PRINCIPLES.
<PAGE>
19
(j) Severability. In the event that any one or more of the
provisions contained herein, or the application thereof in any circumstance, is
held invalid, illegal or unenforceable, the validity, legality and
enforceability of any such provision in every other respect and of the remaining
provisions contained herein shall not be affected or impaired thereby.
(k) Certain Distributions. The Company shall not at any time
make a distribution on or with respect to the Common Stock (including any such
distribution made in connection with a consolidation or merger in which the
Company is the resulting or surviving corporation and such Registrable
Securities are not changed or exchanged) of securities of another issuer if
holders of Registrable Securities are entitled to receive such securities in
such distribution as holders of Registrable Securities and any of the securities
so distributed are registered under the Securities Act, unless the securities to
be distributed to the holders of Registrable Securities are also registered
under the Securities Act.
(l) Entire Agreement. This Agreement is intended by the
parties as a final expression of their agreement and intended to be a complete
and exclusive statement of the agreement and understanding of the parties hereto
in respect of the subject matter contained herein and therein. There are no
restrictions, promises, warranties or undertakings, other than those set forth
or referred to herein and therein. This Agreement supersedes all prior
agreements and understandings between the parties with respect to such subject
matter.
<PAGE>
20
IN WITNESS WHEREOF, each of the undersigned has executed this
Registration Rights Agreement as of the date first above written.
COMMERCIAL ELECTRONICS CAPITAL
PARTNERSHIP, L.P.
By Electronics Investments, L.L.C.
Its General Partner
By: /s/ John C. Maxwell, III
----------------------------
Name: John C. Maxwell, III
Its: Member
COMMERCIAL ELECTRONICS, L.L.C.
By Electronics Investments, L.L.C.
Its Member
By: /s/ John C. Maxwell, III
----------------------------
Name: John C. Maxwell, III
Its: Member
WILTEK, INC.
By: /s/ David S. Teitelman
--------------------------
Name: David S. Teitelman
Its: President and CEO
================================================================================
STOCK PURCHASE AGREEMENT
By and Among
THE STOCKHOLDERS NAMED HEREIN,
COMMERCIAL ELECTRONICS CAPITAL PARTNERSHIP, L.P.
and
COMMERCIAL ELECTRONICS, L.L.C.
------------------------------
Dated as of January 28, 1999
------------------------------
================================================================================
<PAGE>
Table of Contents
-----------------
Page
----
ARTICLE 1
DEFINITIONS...........................................................1
1.1 Definitions................................................1
ARTICLE 2
PURCHASE AND SALE.....................................................3
2.1 Purchase and Sale of Common Shares.........................3
2.2 Closing....................................................4
2.3 Legal Fee Reimbursement....................................4
ARTICLE 3
CONDITIONS TO THE OBLIGATION
OF THE PURCHASERS TO CLOSE .......................................4
3.1 Representations and Warranties True........................4
3.2 Compliance with this Agreement.............................4
3.3 Selling Stockholders' Certificate..........................5
3.4 Documents..................................................5
3.5 Purchase Permitted by Applicable Laws; Legal Investment....5
3.6 Opinion of Counsel.........................................5
3.7 Approval of Counsel to the Purchasers......................5
3.8 Consents and Approvals.....................................5
3.9 Securities Purchase Agreement..............................5
3.10 Director Resignation.......................................5
3.11 Cancellation of Options....................................6
3.12 Medical Benefit Letter.....................................6
ARTICLE 4
CONDITIONS TO THE OBLIGATION
OF THE SELLING STOCKHOLDERS TO CLOSE..................................6
4.1 Representations and Warranties True........................6
4.2 Compliance with this Agreement.............................6
4.3 Sale Permitted by Applicable Laws..........................6
4.4 Approval of Counsel to the Selling Stockholders............6
4.5 Consents and Approvals.....................................7
4.6 Medical Benefit Letter.....................................7
i
<PAGE>
Page
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ARTICLE 5
REPRESENTATIONS AND
WARRANTIES OF THE SELLING STOCKHOLDERS................................7
5.1 Title to Common Shares.....................................7
5.2 Authorization; No Contravention............................7
5.3 Governmental Authorization; Third Party Consents...........7
5.4 Binding Effect.............................................7
5.5 No Legal Bar...............................................8
5.6 Litigation.................................................8
5.7 No Liability. ............................................8
5.8 Broker's, Finder's or Similar Fees.........................8
5.9 Other Representations......................................8
ARTICLE 6
REPRESENTATIONS AND
WARRANTIES OF THE PURCHASERS..........................................9
6.1 Existence and Power........................................9
6.2 Authorization; No Contravention............................9
6.3 Binding Effect.............................................9
6.4 No Legal Bar...............................................9
6.5 Broker's, Finder's or Similar Fees........................10
ARTICLE 7
INDEMNIFICATION......................................................10
7.1 Indemnification by Selling Stockholders...................10
7.2 Notification..............................................10
ARTICLE 8
MISCELLANEOUS........................................................12
8.1 Survival of Provisions....................................12
8.2 Notices...................................................12
8.3 Successors and Assigns....................................13
8.4 Amendment and Waiver......................................13
8.5 Counterparts..............................................14
8.6 Headings..................................................14
8.7 Determinations............................................14
8.8 Governing Law.............................................14
8.9 Jurisdiction..............................................14
8.10 Severability..............................................14
ii
<PAGE>
Page
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8.11 Rules of Construction.....................................14
8.12 Remedies..................................................15
8.13 Entire Agreement..........................................15
8.14 Attorneys' Fees...........................................15
8.15 Publicity.................................................15
iii
<PAGE>
SCHEDULES
Schedule I Selling Stockholders
iv
<PAGE>
STOCK PURCHASE AGREEMENT, dated as of January 28, 1999, by and among
the persons listed on Schedule I hereto (the "Selling Stockholders"), COMMERCIAL
ELECTRONICS CAPITAL PARTNERSHIP, L.P., a Delaware limited partnership and
COMMERCIAL ELECTRONICS, L.L.C., a Delaware limited liability company
(collectively, the "Purchasers").
The Selling Stockholders wish to sell to the Purchasers, and the
Purchasers wish to purchase from the Selling Stockholders, an aggregate of
732,160 shares of the Common Stock of Wiltek, Inc., a Connecticut corporation
(the "Company"), no par value (the "Common Stock"), upon the terms and subject
to the conditions set forth in this Agreement.
In consideration of the mutual covenants and agreements set forth
herein and for good and valuable consideration, the receipt and adequacy of
which is hereby acknowledged, the parties hereto agree as follows:
ARTICLE 1
DEFINITIONS
1.1 Definitions. As used in this Agreement, and unless the context
requires a different meaning, the following terms have the meanings indicated:
"Actions or Proceedings" has the meaning assigned to that term in
Section 7.1.
"Affiliate" has the meaning ascribed to such term in Rule 12b-2 of the
General Rules and Regulations under the Exchange Act.
"Agreement" means this Agreement, as the same may be amended,
supplemented or modified in accordance with the terms hereof.
"Business Day" means any day other than a Saturday, Sunday or other day
on which commercial banks in the City of New York are authorized or required by
law or executive order to close.
"Closing" has the meaning assigned to that term in Section 2.2.
"Closing Date" means the date specified in Section 2.2.
"Commission" means the Securities and Exchange Commission or any
similar agency then having jurisdiction to enforce the Securities Act.
<PAGE>
2
"Common Shares" has the meaning assigned to that term in Section 2.1.
"Common Stock" means the Common Stock, no par value, of the Company.
"Company" means Wiltek, Inc., a Connecticut corporation.
"Contractual Obligations" means as to any Person, any provision of any
security issued by such Person or of any agreement, undertaking, contract,
indenture, mortgage, deed of trust or other instrument to which such Person is a
party or by which it or any of its property is bound.
"Escrow Agreement" has the meaning assigned to that term in Section
3.12.
"GAAP" means generally accepted accounting principles in the United
States in effect from time to time.
"Governmental Authority" means the government of any nation, state or
other political subdivision thereof, any entity exercising executive,
legislative, judicial, regulatory or administrative functions of or pertaining
to government, and any corporation or other entity owned or controlled, through
stock or capital ownership or otherwise, by any of the foregoing.
"Indemnified Party" has the meaning assigned to that term in Section
7.1.
"Indemnifying Party" has the meaning assigned to that term in Section
7.2.
"Liabilities" has the meaning assigned to that term in Section 7.1.
"Lien" means any mortgage, deed of trust, pledge, hypothecation,
assignment, encumbrance, lien (statutory or other) or preference, priority or
other security interest or preferential arrangement of any kind or nature
whatsoever (including, without limitation, those created by, arising under or
evidenced by any conditional sale or other title retention agreement, the
interest of a lessor under a capitalized lease obligation, or any financing
lease having substantially the same economic effect as any of the foregoing).
"Medical Benefit Letter" has the meaning assigned to that term in
Section 3.12.
<PAGE>
3
"Person" means any individual, firm, corporation, limited liability
company, partnership, trust, incorporated or unincorporated association, joint
venture, joint stock company, governmental authority (or an agency or political
subdivision thereof) or other entity of any kind, and shall include any
successor (by merger or otherwise) of such entity.
"Purchase Price" has the meaning assigned to that term in Section 2.1.
"Purchasers" means Commercial Electronics Capital Partnership, L.P., a
Delaware limited partnership and Commercial Electronics, L.L.C., a Delaware
limited liability company.
"Requirements of Law" means as to any Person, any law, treaty, rule or
regulation or determination of an arbitrator or a court or other Governmental
Authority, in each case applicable or binding upon such Person or any of its
property or to which such Person or any of its property is subject.
"Securities Act" means the Securities Act of 1933, as amended, and the
rules and regulations of the Commission thereunder.
"Securities Purchase Agreement" means the Securities Purchase
Agreement, dated January 28, 1999, between the Company and the Purchasers.
"Selling Stockholder" means any of the persons listed on Schedule I
hereto.
"Time of Purchase" has the meaning provided therefor in Section 2.3.
ARTICLE 2
PURCHASE AND SALE
2.1 Purchase and Sale of Common Shares. Subject to the terms and
conditions herein set forth, each Selling Stockholder agrees that he will sell
to the Purchasers, and each Purchaser agrees that it will acquire from each
Selling Stockholder, at the Time of Purchase, that number of shares of Common
Stock set forth opposite such Selling Stockholder's name on Schedule I hereto,
aggregating 732,160 shares, for an aggregate purchase price of $622,336 (or
$0.85 per share) (the "Purchase Price"), payable in cash by wire transfer of
immediately available funds to an account designated in a notice delivered to
the Purchasers not later than two Business Days prior to the Closing Date. The
number of shares of Common Stock to be purchased by each Purchaser, and the
amount of the Purchaser Price to be paid
<PAGE>
4
therefor is set forth on Schedule I. The shares of Common Stock being purchased
pursuant hereto are referred to herein as the "Common Shares."
2.2 Closing. The purchase and sale of the Common Shares shall take
place at the closing (the "Closing") to be held at the offices of Paul, Weiss,
Rifkind, Wharton & Garrison, 1285 Avenue of the Americas, New York, New York
10019-6064 on January 28, 1999 (the "Closing Date"), at 10:00 a.m., New York
City time, or on such other date and at such other time as the Purchasers and
the Selling Stockholders may mutually agree. At the Closing, subject to the
terms and conditions set forth herein, each Selling Stockholder shall sell such
Selling Stockholder's Common Shares to the Purchasers by delivering to the
Purchasers stock certificates representing such Common Shares, duly endorsed in
blank or with duly executed stock powers attached, in proper form for transfer,
with all signatures guaranteed and with appropriate transfer stamps, if any,
affixed at the expense of such Selling Stockholder, free and clear of any Lien,
and the Purchasers shall purchase the Common Shares from the Selling
Stockholders for the Purchase Price. The time at which such Closing shall be
concluded is herein called the "Time of Purchase."
2.3 Legal Fee Reimbursement. The Purchaser have previously delivered
$10,000 to the Selling Stockholders for legal fees incurred by them in
connection with the transactions contemplated hereby. The Selling Stockholders
shall, not later than 10 days following the Closing, remit to the Purchasers any
unused portion of such amount.
ARTICLE 3
CONDITIONS TO THE OBLIGATION
OF THE PURCHASERS TO CLOSE
The obligation of the Purchasers to purchase the Common Shares at the
Closing shall be subject to the satisfaction or waiver of the following
conditions on or before the Closing Date:
3.1 Representations and Warranties True. The representations and
warranties of the Selling Stockholders contained in Article 5 hereof shall be
true and correct in all material respects at and as of the Time of Purchase (and
after giving effect to the transactions contemplated hereby) as if made at and
as of such date.
3.2 Compliance with this Agreement. Each of the Selling Stockholders
shall have performed and complied with each of their respective agreements and
conditions set forth or contemplated herein that are required to be performed or
complied with by such Selling Stockholder on or before the Closing Date.
<PAGE>
5
3.3 Selling Stockholders' Certificate. The Purchasers shall have
received a certificate, dated the Closing Date and signed by each Selling
Stockholder, certifying that the conditions set forth in Sections 3.1 and 3.2
hereof have been satisfied on and as of such date.
3.4 Documents. The Purchasers shall have received copies of such
documents as it reasonably may request in connection with the sale of the Common
Shares and the transactions contemplated hereby, all in form and substance
reasonably satisfactory to the Purchasers.
3.5 Purchase Permitted by Applicable Laws; Legal Investment. The
acquisition of and payment for the Common Shares and the consummation of the
transactions contemplated hereby (i) shall not be prohibited by any applicable
law or governmental regulation, (ii) shall not subject the Purchasers to any
penalty or, in its reasonable judgment, other onerous condition under or
pursuant to any applicable law or governmental regulation and (iii) shall be
permitted by the laws and regulations of the jurisdictions to which it is
subject.
3.6 Opinion of Counsel. The Purchasers shall have received the opinion
of The Jacobson Law Firm, counsel to the Selling Stockholders, dated the Closing
Date, in a form reasonably acceptable to the Purchasers.
3.7 Approval of Counsel to the Purchasers. All actions and proceedings
hereunder and all documents required to be delivered by the Selling Stockholders
hereunder or in connection with the consummation of the transactions
contemplated hereby, and all other related matters, shall have been reasonably
acceptable to Paul, Weiss, Rifkind, Wharton & Garrison, special counsel to the
Purchasers, as to their form and substance.
3.8 Consents and Approvals. All consents, waivers, exemptions,
authorizations, or other actions by, or notices to, or filings with,
Governmental Authorities and other Persons necessary or required in connection
with the execution, delivery or performance by the Selling Stockholders or
enforcement against the Selling Stockholders of this Agreement and the Common
Shares shall have been obtained and be in full force and effect, and the
Purchasers shall have been furnished with appropriate evidence thereof.
3.9 Securities Purchase Agreement. The closing of the transactions
contemplated by the Securities Purchase Agreement shall simultaneously occur
with the Closing hereof. All of the conditions set forth in Article 3 of the
Securities Purchase Agreement shall have been satisfied or waived.
3.10 Director Resignation. Each of the Selling Stockholders shall have
tendered his resignation as a director of the Company, effective as of the Time
of Purchase.
<PAGE>
6
3.11 Cancellation of Options. The Company and the Selling Stockholders
shall have taken all action necessary such that each outstanding option to
purchase shares of Common Stock owned by any of the Selling Stockholders (and
any rights thereunder) shall be canceled as of the Time of Purchase.
3.12 Medical Benefit Letter. The Company and the Selling Stockholders
shall have executed and delivered the Medical Benefit Letter (the "Medical
Benefit Letter") and the Escrow Agreement (the "Escrow Agreement") substantially
in the forms attached to the Securities Purchase Agreement as Exhibits "A" and
"B", respectively.
ARTICLE 4
CONDITIONS TO THE OBLIGATION
OF THE SELLING STOCKHOLDERS TO CLOSE
The obligations of each Selling Stockholder to sell his Common Shares
at the Closing shall be subject to the satisfaction or waiver by him of the
following conditions on or before the Closing Date:
4.1 Representations and Warranties True. The representations and
warranties of the Purchasers contained in Article 6 hereof shall be true and
correct in all material respects at and as of the Time of Purchase (and after
giving effect to the transactions contemplated hereby) as if made at and as of
such date.
4.2 Compliance with this Agreement. The Purchasers shall have performed
and complied with all of its agreements and conditions set forth or contemplated
herein that are required to be performed or complied with by the Purchasers on
or before the Closing Date.
4.3 Sale Permitted by Applicable Laws. The sale of the Common Shares by
the Selling Stockholders and the consummation of the transactions contemplated
hereby (i) shall not be prohibited by any applicable law or governmental
regulation, (ii) shall not subject the Selling Stockholders to any penalty or,
in their reasonable judgments, other onerous condition under or pursuant to any
applicable law or governmental regulation and (iii) shall be permitted by the
laws and regulations of the jurisdictions in which they are subject.
4.4 Approval of Counsel to the Selling Stockholders. All actions and
proceedings hereunder and all documents required to be delivered by the
Purchasers hereunder or in connection with the consummation of the transactions
contemplated hereby, and all other related matters, shall have been reasonably
<PAGE>
7
acceptable to The Jacobson Law Firm, counsel to the Selling Stockholders, as to
their form and substance.
4.5 Consents and Approvals. All consents, exemptions, authoriza tions,
waivers or other actions by, or notices to, or filings with, Governmental
Authorities and other Persons necessary or required in connection with the
execution, delivery or performance by the Purchasers or enforcement against the
Purchasers of this Agreement shall have been obtained and be in full force and
effect, and the Company shall have been furnished with appropriate evidence
thereof.
4.6 Medical Benefit Letter. The Company shall have executed and
delivered the Medical Benefit Letter and the Escrow Agreement.
ARTICLE 5
REPRESENTATIONS AND
WARRANTIES OF THE SELLING STOCKHOLDERS
Each Selling Stockholder (as to himself) represents and warrants to,
and covenants and agrees with, the Purchasers as follows:
5.1 Title to Common Shares. Such Selling Stockholder owns beneficially
and of record, free and clear of any Lien, the Common Shares set forth opposite
such Selling Stockholder's name on Schedule I hereto and, upon delivery of and
payment for such Common Shares as herein provided, the Purchaser acquiring such
Common Shares will acquire good and valid title thereto, free and clear of any
Lien. Such Selling Stockholder does not own, whether beneficially or of record,
any Common Stock other than the aggregate number of Common Shares set forth
opposite such Selling Stockholder's name on Schedule I hereto.
5.2 Authorization; No Contravention. The execution, delivery and
performance by such Selling Stockholder of this Agreement (i) is within such
Selling Stockholder's legal right, power and authority and (ii) will not
violate, conflict with or result in any breach or contravention of or the
creation of any Lien under, any Contractual Obligation of such Selling
Stockholder or any order or decree directly relating to such Selling
Stockholder.
5.3 Governmental Authorization; Third Party Consents. No approval,
consent, exemption, authorization or other action by, or notice to, or filing
with, any Governmental Authority, or any other Person, is necessary or required
in connection with the execution, delivery or performance by such Selling
Stockholder or enforcement against such Selling Stockholder of this Agreement or
the transactions contemplated hereby.
<PAGE>
8
5.4 Binding Effect. This Agreement has been duly executed and delivered
by such Selling Stockholder, and at the Time of Purchase such Selling
Stockholder's Common Shares will be duly delivered, and this Agreement
constitutes the legal, valid and binding obligation of such Selling Stockholder
enforceable against him in accordance with its terms.
5.5 No Legal Bar. Neither the execution, delivery or performance of
this Agreement nor the transfer of such Selling Shareholder's Common Shares to
the Purchasers will violate any Requirements of Law or any Contractual
Obligation of such Selling Stockholder.
5.6 Litigation. There are no actions, suits, proceedings, claims or
disputes pending, or to the best knowledge of such Selling Stockholder,
threatened, at law, in equity, in arbitration or before any Governmental
Authority against such Selling Stockholder, (i) with respect to this Agreement,
the Common Shares or any of the transactions contemplated hereby or (ii) which
would, if adversely determined, have a material adverse effect on the ability of
such Selling Stockholder to perform his obligations under this Agreement. No
injunction, writ, temporary restraining order, decree or other order of any
nature has been issued by any court or other Governmental Authority purporting
to enjoin or restrain the execution, delivery and performance of this Agreement
by such Selling Stockholder.
5.7 No Liability. Following the Closing Date, except with respect to
the Medical Benefit Letter, accrued and unpaid directors' fees and unreimbursed
business expenses incurred in the ordinary course, none of the Selling
Stockholders shall have any claim against the Purchasers, the Company and their
respective Subsidiaries and Affiliates and the Purchasers, the Company and their
respective Subsidiaries and Affiliates shall not have any obligation or
liability with respect to any Selling Stockholder, whether in their respective
capacities as directors, officers or employees of the Company or otherwise.
5.8 Broker's, Finder's or Similar Fees. There are no brokerage
commissions, finder's fees or similar fees or commissions payable in connection
with the transactions contemplated hereby based on any agreement, arrangement or
understanding with such Selling Stockholder.
5.9 Other Representations. To the best of such Selling Stockholder's
knowledge, the representations of the Company in Article 5 of the Securities
Purchase Agreement are true and correct in all material respects.
<PAGE>
9
ARTICLE 6
REPRESENTATIONS AND
WARRANTIES OF THE PURCHASERS
Each Purchaser (as to itself) represents and warrants to, and covenants
and agrees with, the Selling Stockholders as follows:
6.1 Existence and Power. Such Purchaser:
(a) is duly organized and validly existing under the laws of
the jurisdiction of its organization; and
(b) has the power and authority to own and operate its
property, to lease the property it operates as lessee and to conduct the
business in which it is currently, or is currently proposed to be, engaged.
6.2 Authorization; No Contravention. The execution, delivery and
performance by such Purchaser of this Agreement:
(a) is within the its power and authority and has been duly
authorized by all necessary action;
(b) does not contravene the terms of its organizational
documents, or any amendment thereof;
(c) will not violate, conflict with or result in any breach or
contravention of or the creation of any Lien under, any Contractual Obligation
of such Purchaser, or any order or decree directly relating to such Purchaser;
and
(d) does not require approval, consent, exemption,
authorization or other action by, or notice to, or filing with, any Governmental
Authority or any other Person, other than those that have been obtained or made
on or prior to the Closing.
6.3 Binding Effect. This Agreement has been duly executed and delivered
by each of the Purchasers, and constitutes the legal, valid and binding
obligation of each Purchaser enforceable against it in accordance with its
terms, except as enforceability may be limited by applicable bankruptcy,
insolvency, or similar laws affecting the enforcement of creditors' rights
generally or by equitable principles relating to enforceability.
6.4 No Legal Bar. The execution, delivery and performance of this
Agreement will not violate any Requirement of Law applicable to such Purchaser.
<PAGE>
10
6.5 Broker's, Finder's or Similar Fees. Except as otherwise set forth
in this Agreement, there are no brokerage commissions, finder's fees or similar
fees or commissions payable in connection with the transactions contemplated
hereby based on any agreement, arrangement or understanding with such Purchaser
or any action taken by such Purchaser.
ARTICLE 7
INDEMNIFICATION
7.1 Indemnification by Selling Stockholders. Each Selling Stockholder
agrees, severally but not jointly, to indemnify and hold harmless the Purchasers
and their respective Affiliates, officers, directors, agents, members, employees
and partners (each, an "Indemnified Party") to the fullest extent permitted by
law from and against any and all losses, claims, damages, expenses (including
reasonable fees, disbursements and other charges of counsel) or other
liabilities ("Liabilities") to the extent resulting from any breach of any
representation or warranty of such Selling Stockholder in this Agreement or any
legal, administrative or other actions (collectively "Actions or Proceedings"),
or written threats thereof, based upon, relating to or arising out of the
purchase and sale of the Common Shares pursuant to this Agreement, or any
Indemnified Party's role therein or in the transactions contemplated thereby;
provided, however, that such Selling Stockholder shall not be liable under this
Section 7.1: (i) for any amount paid in settlement of claims without such
Selling Stockholder's consent (which consent shall not be unreasonably withheld)
or (ii) to the extent that it is finally judicially determined that such
Liabilities resulted primarily from the willful misconduct, bad faith or
negligence of such Indemnified Party; provided, further, that if and to the
extent such indemnification is unenforceable for any reason, such Selling
Stockholder shall make the maximum contribution to the payment and satisfaction
of such indemnified Liability which shall be permissible under applicable laws;
provided, further, that the aggregate amount payable by each Selling Stockholder
under this Section 7.1 shall be limited to the Purchase Price paid to such
Selling Stockholder. In connection with the obligation of such Selling
Stockholder to indemnify for expenses as set forth above, such Selling
Stockholder further agrees to reimburse each Indemnified Party for all such
expenses (including reasonable fees, disbursements and other charges of counsel)
as they are incurred by such Indemnified Party; provided, however, that if an
Indemnified Party is reimbursed hereunder for any expenses, such reimbursement
of expenses shall be refunded to the extent it is finally judicially determined
that the Liabilities in question resulted primarily from the willfulness, bad
faith or negligence of such Indemnified Party.
7.2 Notification. Each Indemnified Party under this Article 7 will,
promptly after the receipt of notice of the commencement of any action or other
<PAGE>
11
proceeding against such Indemnified Party in respect of which indemnity may be
sought from a Selling Stockholder (an "Indemnifying Party"), notify the
Indemnifying Party in writing of the commencement thereof. The omission of any
Indemnified Party so to notify an Indemnifying Party of any such action shall
not relieve the Indemnifying Party from any liability which it may have to such
Indemnified Party (i) other than pursuant to this Article 7 or (ii) under this
Article 7 unless, and only to the extent that, such omission results in the
Indemnifying Party's forfeiture of substantive rights or defenses. In case any
such action or other proceeding shall be brought against any Indemnified Party
and it shall notify an Indemnifying Party of the commencement thereof, the
Indemnifying Party shall be entitled to participate therein and, to the extent
that it may wish, to assume the defense thereof, with counsel reasonably
satisfactory to such Indemnified Party; provided, however, that any Indemnified
Party may, at its own expense, retain separate counsel to participate in such
defense. Notwithstanding the foregoing, in any action or proceeding in which
both an Indemnifying Party and an Indemnified Party is, or is reasonably likely
to become, a party, such Indemnified Party shall have the right to employ
separate counsel reasonably acceptable to the Indemnifying Party (in terms of
such counsel's experience) at the Indemnifying Party's expense and to control
its own defense of such action or proceeding if, in the reasonable opinion of
counsel to such Indemnified Party, (a) there are or may be legal defenses
available to such Indemnified Party or to other Indemnified Parties that are
different from or additional to those available to the Indemnifying Party or (b)
any conflict or potential conflict exists between the Indemnifying Party and
such Indemnified Party that would make such separate representation advisable;
provided, however, that in no event shall the Indemnifying Party be required to
pay fees and expenses under this Article 8 for more than one firm of attorneys
in any jurisdiction in any one legal action or group of related legal actions.
Each Indemnifying Party agrees that the Indemnifying Party will not, without the
prior written consent of the Indemnified Party, settle, compromise or consent to
the entry of any judgment in any pending or threatened claim, action or
proceeding relating to the matters contemplated hereby (if any Indemnified Party
is a party thereto or has been actually threatened to be made a party thereto)
unless such settlement, compromise or consent includes an unconditional release
of the Indemnified Party and each other Indemnified Party from all liability
arising or that may arise out of such claim, action or proceeding. The rights
accorded to Indemnified Parties hereunder shall be in addition to any rights
that any Indemnified Party may have at common law, by separate agreement or
otherwise.
<PAGE>
12
ARTICLE 8
MISCELLANEOUS
8.1 Survival of Provisions. All of the representations and warranties
made herein and each of the provisions of Articles 1, 5, 6, 7 and 8 shall
survive the execution and delivery of this Agreement, any investigation by or on
behalf of the Purchasers or any Affiliate, acceptance of the Common Shares and
payment therefor, or termination of this Agreement.
8.2 Notices. All notices, demands and other communications provided for
or permitted hereunder shall be made in writing and shall be by registered or
certified first-class mail, return receipt requested, telecopier, courier
services or personal delivery to the following addresses, or to such other
addresses as shall be designated from time to time by a party in accordance with
this Section 8.2:
(a) if to the Purchasers:
Commercial Electronics Capital Partnership, L.P.
375 Park Avenue, Suite 1604
New York, New York 10152
Attention: John C. Maxwell, III
Telecopier No.: (212) 755-2018
with a copy to:
Paul, Weiss, Rifkind, Wharton & Garrison
1285 Avenue of the Americas
New York, New York 10019-6064
Attention: Michele R. Jenkinson, Esq.
Telephone No.: (212) 373-3101
Telecopier No.: (212) 757-3990
(b) if to any Selling Stockholder, at his address as it
appears on record books of the Company.
<PAGE>
13
with a copy to:
The Jacobson Law Firm
P.O. Box 272
96 Myrtle Avenue
Westport, Connecticut 06881
Attention: Paul Jacobson
Telephone No.: (203) 226-4231
Telecopier No.: (203) 222-9131
All such notices and communications shall be deemed to have been duly
given: when delivered by hand, if personally delivered; when delivered to a
courier, if delivered by commercial overnight courier service; five Business
Days after being deposited in the mail, postage prepaid, if mailed; and when
receipt is acknowledged, if telecopied.
8.3 Successors and Assigns. This Agreement shall inure to the benefit
of and be binding upon the successors and permitted assigns of the parties
hereto. Each Purchaser may assign any of its rights under this Agreement to any
of its Affiliates or to any Person to whom the Common Shares (or any portion
thereof) are transferred. The Selling Stockholders may not assign any of their
rights hereunder without the consent of the Purchasers. Except as provided in
Article 7, no Person other than the parties hereto and their permitted assignees
is intended to be a beneficiary of this Agreement.
8.4 Amendment and Waiver. No failure or delay on the part of the
Purchasers or any Selling Stockholder in exercising any right, power or remedy
hereunder shall operate as a waiver thereof, nor shall any single or partial
exercise of any such right, power or remedy preclude any other or further
exercise thereof or the exercise of any other right, power or remedy. The
remedies provided for herein are cumulative and are not exclusive of any
remedies that may be available to the Purchasers or any Selling Stockholder at
law, in equity or otherwise. No waiver or amendment of or consent to any
departure by any Purchaser or any Selling Stockholder from any provision of this
Agreement shall be effective unless signed in writing by the party entitled to
the benefit thereof; provided that notice of any such waiver shall be given to
each party hereto as set forth below.
Any amendment, supplement or modification of or to any provision of
this Agreement, any waiver of any provision of this Agreement, and any consent
to any departure by the Purchasers or any Selling Stockholder from the terms of
any provision of this Agreement, shall be effective only in the specific
instance and for the specific purpose for which made or given. Except where
notice is specifically required by this Agreement, no notice to or demand on
either Purchaser or any Selling Stockholder in any case shall entitle either
Purchaser or any Selling
<PAGE>
14
Stockholder to any other or further notice or demand in similar or other
circumstances.
8.5 Counterparts. This Agreement may be executed in any number of
counterparts and by the parties hereto in separate counterparts, each of which
when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement.
8.6 Headings. The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.
8.7 Determinations. All determinations to be made by any Holder or any
Selling Stockholder hereunder in its opinion or judgment or with its approval or
otherwise shall be made by it in its sole discretion.
8.8 Governing Law. This Agreement has been negotiated, executed and
delivered in the State of New York and shall be governed by and construed in
accordance with the laws of the State of New York, without regard to principles
of conflicts of law.
8.9 Jurisdiction. Each party to this Agreement hereby irrevocably
agrees that any legal action or proceeding arising out of or relating to this
Agreement or any agreements or transactions contemplated hereby may be brought
in the courts of the State of New York or of the United States of America for
the Southern District of New York and hereby expressly submits to the personal
jurisdiction and venue of such courts for the purposes thereof and expressly
waives any claim of improper venue and any claim that such courts are an
inconvenient forum. Each party hereby irrevocably consents to the service of
process of any of the aforementioned courts pursuant to a contractual provision
in any such suit, action or proceeding by the mailing of copies thereof by
registered or certified mail, postage prepaid, to the address set forth in
Section 8.2, such service to become effective ten days after such mailing.
8.10 Severability. In the event that any one or more of the provisions
contained herein, or the application thereof in any circumstance, is held
invalid, illegal or unenforceable in any respect for any reason, the validity,
legality and enforceability of any such provision in every other respect and of
the remaining provisions hereof shall not be in any way impaired, unless the
provisions held invalid, illegal or unenforceable shall substantially impair the
benefits of the remaining provisions hereof.
8.11 Rules of Construction. Unless the context otherwise requires, "or"
is not exclusive, and references to sections or subsections refer to sections or
subsections of this Agreement.
<PAGE>
15
8.12 Remedies. If a breach of this Agreement occurs and is continuing,
any party hereto may pursue any available remedy by proceeding at law or in
equity to enforce the performance (including, without limitation, the specific
performance) of any provision of this Agreement. Except as otherwise provided by
law, a delay or omission by any party 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 is exclusive of any other
remedy. All available remedies are cumulative.
8.13 Entire Agreement. This Agreement, together with the exhibits and
schedules hereto and the Common Shares, is intended by the parties as a final
expression of their agreement and intended to be a complete and exclusive
statement of the agreement and understanding of the parties hereto in respect of
the subject matter contained herein and therein. There are no restrictions,
promises, warranties or undertakings, other than those set forth or referred to
herein or therein. This Agreement, together with the exhibits and schedules
hereto, supersedes all prior agreements and understandings among the parties
with respect to such subject matter.
8.14 Attorneys' Fees. In any action or proceeding brought to enforce
any provision of this Agreement and the Common shares or any other document or
instrument contemplated hereby or thereby, or where any provision hereof or
thereof is validly asserted as a defense, the successful party shall be entitled
to recover reasonable attorneys' fees, charges and disbursements in addition to
any other available remedy.
8.15 Publicity. Except as may be required by applicable law, no party
hereto shall issue a publicity release or announcement or otherwise make any
public disclosure concerning this Agreement or the transactions contemplated
hereby, without prior approval by the other parties hereto. If any announcement
is required by law to be made by a party hereto, prior to making such
announcement such party will deliver a draft of such announcement to the other
parties and shall give the other parties an opportunity to comment thereon.
<PAGE>
16
IN WITNESS WHEREOF, the parties hereto have caused this Stock Purchase
Agreement to be executed and delivered by them or their respective
representatives or officers hereunto duly authorized as of the date first above
written.
COMMERCIAL ELECTRONICS
CAPITAL PARTNERSHIP, L.P.
By Electronics Investments, L.L.C.
Its General Partner
By: /s/ John C. Maxwell, III
----------------------------
Name: John C. Maxwell, III
Its: Member
COMMERCIAL ELECTRONICS, L.L.C.
By Electronics Investments, L.L.C.
Its Member
By: /s/ John C. Maxwell, III
----------------------------
Name: John C. Maxwell, III
Its: Member
/s/ Jay Fitzpatrick
-------------------
Jay Fitzpatrick
/s/ F. Spencer Pooley
---------------------
F. Spencer Pooley
/s/ Boris Frenkiel
------------------
Boris Frenkiel
<PAGE>
SCHEDULE I
Shares to be Purchased by Commercial Electronics, L.L.C.
--------------------------------------------------------
Selling Stockholder Number of Shares Purchase Price
- ------------------- ---------------- --------------
Jay Fitzpatrick 210,527 $178,947.95
Boris Frenkiel 184,315 $156,667.75
F. Spencer Pooley 154,278 $131,136.30
------- -----------
Total: 549,120 $466,752.00
-----
Shares to be Purchased by Commercial Electronics Capital Partnership, L.P.
--------------------------------------------------------------------------
Selling Stockholder Number of Shares Purchase Price
- ------------------- ---------------- --------------
Jay Fitzpatrick 70,176 $59,649.60
Boris Frenkiel 61,438 52,222.30
F. Spencer Pooley 51,426 43,712.10
------ ---------
Total: 183,040 $155,584.00
-----
Shares to be Retained by Selling Stockholders
---------------------------------------------
Selling Stockholder Number of Shares
- ------------------- ----------------
Jay Fitzpatrick 9,790
Boris Frenkiel 5,010
F. Spencer Pooley 50,000
------
Total: 64,800
-----
