<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 8-K
Current Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) December 16, 1996
NUKO INFORMATION SYSTEMS, INC.
(Exact name of registrant as specified in its charter)
New York 2-31438 16-0962874
(State or other jurisdiction of (Commission (I.R.S. Employer
incorporation or organization) File No.) Identification No.)
2391 Qume Drive
San Jose, California 95131
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (408) 526-0288
2235 Qume Drive
San Jose, California 95131
(Former name or former address, if
changed since last report.)
Page 1 of 81
Exhibit Index on Page 4
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ITEM 5. OTHER EVENTS
On December 16, 1996, the Registrant issued to a single institutional
investor (the "Investor") 5,000 shares of Series A Convertible Preferred Stock,
$0.001 par value per share ("Convertible Preferred"), for an aggregate purchase
price of $5,000,000, upon the first closing under a Securities Purchase
Agreement, dated as of December 13, 1996, by and between the Registrant and the
Investor (the "Purchase Agreement"). A second closing under the Purchase
Agreement pursuant to which the Registrant will issue to the Investor an
additional 5,000 shares of Convertible Preferred for an aggregate purchase price
of $5,000,000 will take place upon the effectiveness of a registration statement
registering the resale of shares of the Registrant's Common Stock underlying
both the Convertible Preferred and warrants issuable upon conversion thereof.
The Convertible Preferred, together with a premium thereon accruing at the rate
of 7% per annum, is convertible into Common Stock at a conversion price equal to
the lesser of (i) $16 per share and (ii) a discount to the per share market
price of the Registrant's Common Stock (based on a ten day average thereof) on
the conversion date. The discount ranges from 0% currently to 15% beginning 90
days after the first closing. For every two shares of Common Stock issued upon
conversion of the Convertible Preferred, the holder will receive one five-year
warrant to acquire a share of Common Stock at an exercise price of $18 per
share.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS
<TABLE>
<CAPTION>
(C) EXHIBITS
<S> <C> <C>
3.1 Restated Certificate of Incorporation of the Registrant
(incorporated by reference to Exhibit 3.1 to the Registrant's
Registration Statement on Form SB-2 filed February 26, 1996).
3.2 Certificate of Correction of Restated Certificate of
Incorporation of the Registrant.
3.3 Certificate of Amendment to Certificate of Incorporation of
the Registrant containing the designations, preferences and
rights of the Registrant's Series A Preferred Stock.
4.1 Securities Purchase Agreement, dated as of December 13, 1996,
by and between the Registrant and RGC International Investors,
LDC, including the Form of Stock Purchase Warrant attached as
Exhibit B thereto.
4.2 Registration Rights Agreement, dated as of December 13, 1996,
by and between the Registrant and RGC International Investors,
LDC.
99.1 The Registrant's Press Release dated December 17, 1996.
</TABLE>
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on its behalf by
the undersigned hereunto duly authorized.
NUKO INFORMATION SYSTEMS, INC.
DATE: December 20, 1996 By: /S/ JOHN H. GORMAN
------------------
John H. Gorman
Vice President -- Finance,
Chief Financial
Officer and Secretary
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EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit No. Exhibit Page
- ----------- ------- ----
<S> <C> <C>
3.1 Restated Certificate of Incorporation of the Registrant (incorporated by --
reference to Exhibit 3.1 to the Registrant's Registration
Statement on Form SB-2 filed February 26, 1996).
3.2 Certificate of Correction of Restated Certificate of Incorporation of the 5
Registrant.
3.3 Certificate of Amendment to Certificate of Incorporation of the Registrant 8
containing the designations, preferences and rights of the Registrant's
Series A Preferred Stock.
4.1 Securities Purchase Agreement, dated as of December 13, 26
1996, by and between the Registrant and RGC International
Investors, LDC, including the Form of Stock Purchase
Warrant attached as Exhibit B thereto.
4.2 Registration Rights Agreement, dated as of December 13, 60
1996, by and between the Registrant and RGC International
Investors, LDC.
99.1 The Registrant's Press Release dated December 17, 1996. 81
</TABLE>
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EXHIBIT 3.2
CERTIFICATE OF CORRECTION
OF
RESTATED CERTIFICATE OF INCORPORATION
OF
NUKO INFORMATION SYSTEMS, INC.
UNDER SECTION 105 OF THE
BUSINESS CORPORATION LAW
WE, THE UNDERSIGNED, Pratap Kesav Kondamoori and John H. Gorman, being,
respectively, the President and Secretary of NUKO INFORMATION SYSTEMS, INC., for
the purpose of correcting the inadvertent omission from the Certificate of
Incorporation, as amended and restated, of the final paragraph of paragraph (4)
of the Certificate of Incorporation, as amended prior to such restatement (now
denoted Article IV in the Restated Certificate of Incorporation) which denies
preemptive rights to holders of the corporation's stock, pursuant to Section 105
of the Business Corporation Law, hereby certify that:
1. The name of the corporation is NUKO INFORMATION SYSTEMS, INC.
2. The Restated Certificate of Incorporation was filed in the
Department of State on February 12, 1996. The original Certificate of
Incorporation, filed under the name, Yondata Corporation, was filed in the
Department of State on December 26, 1968.
3. The final paragraph of paragraph (4) of the original Certificate of
Incorporation reads as follows:
No holder of stock of the corporation shall be entitled as
such, as a matter of right, to subscribe for or purchase any part of
any new or additional issue of stock of any class whatsoever, or of
securities convertible into stock of any class whatsoever, whether now
or hereafter authorized, and whether issued for cash or other
consideration or by way of dividend.
<PAGE> 2
4. Article IV of the Certificate of Incorporation (originally paragraph
(4)) was amended by the filing of a Certificate of Amendment of Certificate of
Incorporation on January 21, 1969. Such amendment was filed for the sole purpose
of changing the par value of the Common Stock. No shareholder approval was
obtained for any purpose other than to change the par value. The Certificate of
Amendment so filed on January 21, 1969 unlawfully and inadvertently omitted the
final paragraph of paragraph (4), as set forth in the original Certificate of
Incorporation, which denies preemptive rights to the shareholders. Subsequent
amendments to Article IV have been made from time to time, all for the sole
purpose of changing the authorized capital of the corporation as follows: (i)
Certificate of Amendment filed December 4, 1986; (ii) Certificate of Amendment
filed March 8, 1988; (iii) Certificate of Amendment filed October 5, 1992; (iv)
Certificate of Amendment filed April 27, 1994; (v) Certificate of Correction
filed June 9, 1994. On February 12, 1996, the corporation filed its Restated
Articles of Incorporation, which amended certain portions of the Certificate of
Incorporation but did not amend Article IV.
5. Inasmuch as the language constituting the final paragraph of
paragraph (4) the original Certificate of Incorporation was deleted from
subsequent amendments without shareholder approval in violation of Section 805
of the Business Corporation Law, and inasmuch as such deletion was inadvertent
and a mistake, Article IV of the Certificate is corrected to reinsert the
following paragraph as the final paragraph of said Article IV as though it had
not been inadvertently eliminated:
No holder of stock of the corporation shall be entitled as
such, as a matter of right, to subscribe for or purchase any part of
any new or additional issue of stock of any class whatsoever, or of
securities convertible into stock
2
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of any class whatsoever, whether now or hereafter authorized, and
whether issued for cash or other consideration or by way of dividend.
IN WITNESS WHEREOF, we have signed and subscribed this certificate on
the 17th day of October, 1996, and we affirm the statements contained therein as
true under penalty of perjury.
/s/ PRATAP KESAV KONDAMOORI
----------------------------------------
Pratap Kesav Kondamoori
President
/s/ JOHN H. GORMAN
----------------------------------------
John H. Gorman
Secretary
3
<PAGE> 1
Exhibit 3.3
CERTIFICATE OF AMENDMENT OF
THE CERTIFICATE OF INCORPORATION
OF
NUKO INFORMATION SYSTEMS, INC.
(Pursuant to Section 805 of the
New York Business Corporation Law)
FIRST: The name of the corporation is NUKO Information Systems, Inc.
SECOND: The certificate of incorporation of the corporation was filed in the
Department of State on the 26th of December, 1968 under the name Yondata
Corporation.
THIRD: The certificate of incorporation, as amended to date, is hereby amended
by the addition of the following provisions at the end of Article IV thereof
stating the number, designation, relative rights, preferences and limitations of
Series A Convertible Preferred Stock, as fixed by resolution of the Board of
Directors of the corporation at a meeting held on December 11, 1996:
Series A Convertible Preferred Stock:
I. Designation and Amount
The designation of this series, which consists of 10,000 shares of
Preferred Stock, is Series A Convertible Preferred Stock (the "Series A
Preferred Stock") and the stated value shall be One Thousand Dollars ($1,000)
per share (the "Stated Value").
II. Rank
The Series A Preferred Stock shall rank (i) prior to the Corporation's
Common Stock, par value $.001 per share (the "Common Stock"); (ii) prior to any
class or series of capital stock of the Corporation hereafter created (unless,
with the consent of the holders of Series A Preferred
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Stock obtained in accordance with Article IX hereof, such class or series of
capital stock specifically, by its terms, ranks senior to or pari passu with the
Series A Preferred Stock) (collectively, with the Common Stock, "Junior
Securities"); (iii) pari passu with any class or series of capital stock of the
Corporation hereafter created (with the consent of the holders of Series A
Preferred Stock obtained in accordance with Article IX hereof) specifically
ranking, by its terms, on parity with the Series A Preferred Stock ("Pari Passu
Securities"); and (iv) junior to any class or series of capital stock of the
Corporation hereafter created (with the consent of the holders of Series A
Preferred Stock obtained in accordance with Article IX hereof) specifically
ranking, by its terms, senior to the Series A Preferred Stock ("Senior
Securities"), in each case as to distribution of assets upon liquidation,
dissolution or winding up of the Corporation, whether voluntary or involuntary.
III. No Dividends
The Series A Preferred Stock will bear no dividends, and the
holders of shares of Series A Preferred Stock shall not be entitled to receive
dividends on the Series A Preferred Stock.
IV. Liquidation Preference
A. If the Corporation shall commence a voluntary case under
the Federal bankruptcy laws or any other applicable Federal or State bankruptcy,
insolvency or similar law, or consent to the entry of an order for relief in an
involuntary case under any law or to the appointment of a receiver, liquidator,
assignee, custodian, trustee, sequestrator (or other similar official) of the
Corporation 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 Corporation shall be entered by a court having jurisdiction in
the premises in an involuntary case under the Federal bankruptcy laws or any
other applicable Federal or State bankruptcy, insolvency or similar law
resulting in the appointment of a receiver, liquidator, assignee, custodian,
trustee, sequestrator (or other similar official) of the Corporation or of any
substantial part of its property, or ordering the winding up or liquidation of
its affairs, and any such decree or order shall be unstayed and in effect for a
period of sixty (60) consecutive days and, on account of any such event (a
"Liquidation Event"), the Corporation shall liquidate, dissolve or wind up, or
if the Corporation shall otherwise liquidate, dissolve or wind up, no
distribution shall be made to the holders of any shares of capital stock of the
Corporation (other than Senior Securities) upon liquidation, dissolution or
winding up unless prior thereto, the holders of shares of Series A Preferred
Stock, subject to Article VI, shall have received the Liquidation Preference (as
defined in Article IV.C) with respect to each share. If upon the occurrence of a
Liquidation Event, the assets and funds available for distribution among the
holders of the Series A Preferred Stock and holders of Pari Passu Securities
shall be insufficient to permit the payment to such holders of the preferential
amounts payable thereon, then the entire assets and funds of the Corporation
legally available for distribution to the Series A Preferred Stock and the Pari
Passu Securities shall be distributed
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ratably among such shares in proportion to the ratio that the Liquidation
Preference payable on each such share bears to the aggregate Liquidation
Preference payable on all such shares.
B. At the option of any holder of Series A Preferred Stock,
the sale, conveyance or disposition of all or substantially all of the assets of
the Corporation, the effectuation by the Corporation of a transaction or series
of related transactions in which more than 50% of the voting power of the
Corporation is transferred to one Person (as defined below) or group of
affiliated or related Persons or Persons acting in concert, or the
consolidation, merger or other business combination of the Corporation with or
into any other Person (as defined below) or Persons when the Corporation is not
the survivor (other than a merger effected solely for the purpose of
reincorporating in another jurisdiction) shall either: (i) be deemed to be a
liquidation, dissolution or winding up of the Corporation for purposes of this
Article IV (but not for purposes of Article V); or (ii) be treated pursuant to
Article VI.C(c) hereof. "Person" shall mean any individual, corporation, limited
liability company, partnership, association, trust or other entity or
organization.
C. For purposes hereof, the "Liquidation Preference" with
respect to a share of the Series A Preferred Stock shall mean an amount equal to
the sum of (i) the Stated Value thereof, plus (ii) an amount equal to seven
percent (7%) per annum of such Stated Value for the period beginning on the date
of issuance of such share and ending on the date of final distribution to the
holder thereof (pro rated for any portion of such period). The Liquidation
Preference with respect to any Pari Passu Securities shall be as set forth in
the Certificate of Designation filed in respect thereof.
V. Redemption
A. In the event the Corporation files a registration
statement pursuant to the Securities Act of 1933, as amended, for a firm
commitment underwritten public offering of Common Stock with a good faith, bona
fide intention of consummating such offering (a "Qualifying Registration
Statement"), the Corporation shall have the right (on one occasion only),
exercisable at any time within thirty (30) days of such filing, on not less than
20 Trading Days (as defined in Article VI below) prior written notice to the
holders of Series A Preferred Stock, to redeem the Series A Preferred Stock, in
whole or in any part of not less than $500,000 Stated Value (or such lesser
Stated Value as shall remain outstanding at the time of exercise of such right),
in accordance with this Article V.A. Any notice of redemption (a "Redemption
Notice") shall be irrevocable (unless the transaction contemplated by the
Qualifying Registration Statement is abandoned, in which case the Redemption
Notice may be revoked within one (1) business day following such abandonment)
and shall be delivered to the holders of Series A Preferred Stock at their
registered addresses appearing on the records of the Corporation and shall state
(1) that the Corporation is exercising its right to redeem all or a portion of
the outstanding shares of Series A Preferred Stock, (2) the aggregate number and
Stated Value of shares to be redeemed and (3) the date of redemption (which may
be specified indeterminately as the day following the closing date of the public
offering). On the date fixed for redemption (the
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"Redemption Date"), the Corporation shall make payment of the Redemption Amount
(as hereinafter defined) to or upon the order of the holders of Series A
Preferred Stock as specified by the holders of Series A Preferred Stock in
writing to the Corporation at least one (1) business day prior to the Redemption
Date. If the Corporation exercises its right to redeem all or a portion of the
Series A Preferred Stock, the Corporation shall make payment to the holders of
Series A Preferred Stock or upon the order of the holders of Series A Preferred
Stock of a dollar amount equal to the greater of (1) 110%, multiplied by the sum
of (a) the Stated Value of the shares to be redeemed, plus (b) an amount equal
to seven percent (7%) per annum of such Stated Value for the period beginning on
the issuance of such shares and ending on the Redemption Date and (2) the
"parity value" of the shares to be redeemed, where parity value means the
product of (a) the number of shares of common stock issuable upon conversion of
such shares in accordance with Article VI below (without giving effect to the
proviso in the penultimate sentence of Section VI.B(a) below and treating the
Trading Day immediately preceding the Redemption Date as the "Conversion Date"
(as hereinafter defined)), multiplied by (b) the closing price for the Common
Stock on the principal trading market for such shares on such "Conversion Date"
(the greater of such amounts being referred to as the "Redemption Amount").
Notwithstanding anything to the contrary contained in this Article V.A, the
holders of Series A Preferred Stock shall at all times maintain the right to
convert all or any part of the outstanding shares of the Series A Preferred
Stock in accordance with Article VI below and any shares so converted after
receipt of a Redemption Notice and prior to the Redemption Date of the shares
set forth in such notice (which period shall be at least 20 Trading Days) shall
be deducted from the number of shares which is otherwise subject to redemption
pursuant to such notice. Any redemption of less than all of the outstanding
shares of Series A Preferred Stock shall be pro rata among the holders thereof
based on the number of shares held.
B. If the Series A Preferred Stock ceases to be convertible as
a result of the limitations described in the second paragraph of Article VI.A
below (a "19.99% Redemption Event"), and the Corporation has not prior to, or
within sixty (60) days of, the date that such 19.99% Redemption Event arises,
(i) obtained approval of the issuance of the Series A Preferred Stock by a
majority of the total votes cast on such proposal, in person or by proxy, by the
holders of the then-outstanding Common Stock (not including any shares of Common
Stock held by present or former holders of Series A Preferred Stock that were
issued upon conversion of Series A Preferred Stock or upon exercise of Warrants)
or (ii) received other permission pursuant to NASDAQ National Market Requirement
4460(i) allowing the Corporation to resume issuances of shares of Common Stock
upon conversion of Series A Preferred Stock, then the Corporation shall be
obligated to redeem immediately all of the then outstanding Series A Preferred
Stock, in accordance with this Article V.B. An irrevocable Redemption Notice
shall be delivered promptly to the holders of Series A Preferred Stock at their
registered address appearing on the records of the Corporation and shall state
(1) that 19.99% of the Outstanding Common Amount has been issued upon exercise
of the Series A Preferred Stock, (2) that the Corporation is obligated to redeem
all of the outstanding Series A Preferred Stock and (3) the Redemption Date,
which shall be a date within five (5) business days of the date of the
Redemption Notice. On the Redemption Date, the Corporation shall make payment of
the Redemption Amount (as defined
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in Section V.A. above) in cash or by issuance of a promissory note (a
"Redemption Note") to or upon the order of the holders of Series A Preferred
Stock as specified by such holders in writing to the Corporation at least one
(1) business day prior to the Redemption Date. If the Corporation elects to
issue a Redemption Note, such Note shall be in form and substance reasonably
satisfactory to the holders of the Series A Preferred Stock, shall be payable on
the six (6) month anniversary of the date of issuance (or upon the earlier
occurrence of customary events of default) and shall bear interest on the
outstanding principal balance thereof at the rate of 12% per annum.
C. If any of the following events (each, a "Mandatory
Redemption Event") shall occur:
(i) The Corporation fails to issue shares of Common
Stock or Warrants to the holders of Series A Preferred Stock upon exercise by
the holders of their conversion rights in accordance with the terms of this
Certificate of Designation (for a period of at least ninety (90) days if such
failure is solely as a result of the circumstances governed by the second
paragraph of Article VI.F below and the Corporation is using all commercially
reasonable efforts to authorize a sufficient number of shares of Common Stock as
soon as practicable), fails to transfer or to cause its designated transfer
agent ("Transfer Agent") to transfer any certificate for shares of Common Stock
or Warrants issued to the holders upon conversion of the Series A Preferred
Stock as and when required by this Certificate of Designation or the
Registration Rights Agreement, dated as of December 13, 1996, by and among the
Corporation and the other signatories thereto (the "Registration Rights
Agreement") (or shares of Common Stock issuable upon exercise of the Warrants)
or fails to remove any restrictive legend on any certificate or any shares of
Common Stock issued to the holders of Series A Preferred Stock upon conversion
of the Series A Preferred Stock as and when required by this Certificate of
Designation, the Purchase Agreement or the Registration Rights Agreement (or
shares of Common Stock issuable upon exercise of the Warrants in accordance with
the Warrants) and any such failure shall continue uncured for twenty (20)
business days after the Corporation shall have been notified thereof in writing
by the holder;
(ii) The Corporation fails to obtain effectiveness
with the Securities and Exchange Commission (the "SEC") of the Registration
Statement (as defined in the Registration Rights Agreement) prior to June 15,
1997 (other than because of any act or failure to act of the holders of
registration rights thereunder, because of issues raised by the SEC arising from
the transactions contemplated by the Securities Purchase Agreement dated as of
December 13, 1996, by and between the Corporation and the other signatories
thereto (the "Purchase Agreement") or because of a change in the policy,
procedures, interpretations, positions, practice or rules of the SEC made public
after the date hereof, so long as, in each case, the Corporation is using all
commercially reasonable efforts to achieve the effectiveness of such
Registration Statement) or such Registration Statement lapses in effect (or
sales otherwise cannot be made thereunder) for more than thirty (30) consecutive
days or sixty (60) days in any twelve (12) month period after such Registration
Statement becomes effective;
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(iii) The Corporation or any subsidiary of the
Corporation shall make an assignment for the benefit of creditors, or apply for
or consent to the appointment of a receiver or trustee for it or for all or
substantially all of its property or business; or such a receiver or trustee
shall otherwise be appointed;
(iv) Bankruptcy, insolvency, reorganization or
liquidation proceedings or other proceedings for relief under any bankruptcy law
or any law for the relief of debtors shall be instituted by or against the
Corporation or any subsidiary of the Corporation;
(v) The Corporation shall fail to maintain the
listing of the Common Stock on a national securities exchange or the automated
quotation system of a national securities association and such failure shall
remain uncured for at least 120 days;
then, upon the occurrence and during the continuation of any Mandatory
Redemption Event specified in subparagraphs (i), (ii) or (v) at the option of
the holders of at least 50% of the then outstanding shares of Series A Preferred
Stock by written notice (the "Mandatory Redemption Notice") to the Corporation
of such Mandatory Redemption Event, or upon the occurrence of any Mandatory
Redemption Event specified in subparagraphs (iii) or (iv), the Corporation shall
purchase the holder's shares of Series A Preferred Stock for an amount per share
equal to 95.45% of the Redemption Amount in effect at the time of the redemption
hereunder.
In the case of a Mandatory Redemption Event, if the
Corporation fails to pay the Redemption Amount for each share within five (5)
business days of written notice that such amount is due and payable, then in
addition to all other available remedies, each holder of Series A Preferred
Stock shall have the right at any time, so long as the Mandatory Redemption
Event continues, to require the Corporation, upon written notice, to immediately
issue (in accordance with the terms of Article VI below), in lieu of the
Mandatory Redemption Amount, with respect to each outstanding share of Series A
Preferred Stock held by such holder, the number of shares of Common Stock of the
Corporation equal to the Mandatory Redemption Amount divided by the Conversion
Price then in effect.
D. The payment of the Redemption Amount pursuant to terms of
this Article V shall, in all cases, be accompanied by delivery of a number of
Warrants equal to 100% of the Redemption Amount divided by the applicable
Conversion Price determined in accordance with Article VI below (treating the
Trading Day immediately preceding the Redemption Date as the "Conversion Date").
VI. Conversion at the Option of the Holder
A. Each holder of shares of Series A Preferred Stock may, at
its option at any time and from time to time, upon surrender of the certificates
therefor, convert any or all of its
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shares of Series A Preferred Stock into Common Stock and Warrants as follows (an
"Optional Conversion"). Each share of Series A Preferred Stock shall be
convertible into (i) such number of fully paid and nonassessable shares of
Common Stock as is determined by dividing (1) the sum of (a) the Stated Value
thereof, plus (b) the product of the Stated Value, multiplied by .07, multiplied
by (N/365), where "N" equals the number of days elapsed from the date of
issuance of the Series A Preferred Stock to and including the Conversion Date
(the "Premium Amount"), by (2) the then effective Conversion Price (as defined
below); and (ii) warrants (the "Warrants"), in the form attached as Exhibit B to
the Purchase Agreement, to acquire a number of shares of Common Stock equal to
50% of the number of shares of Common Stock issuable pursuant to clause (i)
above; provided, however, that in no event shall a holder of shares of Series A
Preferred Stock be entitled to convert any such shares in excess of that number
of shares upon conversion of which the sum of (x) the number of shares of Common
Stock beneficially owned by the holder and its affiliates (other than shares of
Common Stock which may be deemed beneficially owned through the ownership of the
unconverted portion of the shares of Series A Preferred Stock and the
unexercised portion of the Warrants (including any Warrants issuable upon
conversion of the shares of Series A Preferred Stock with respect to which the
determination of this proviso is being made)) and (y) the number of shares of
Common Stock issuable upon the conversion of the shares of Series A Preferred
Stock with respect to which the determination of this proviso is being made,
would result in beneficial ownership by a holder and such holder's affiliates of
more than 4.9% of the outstanding shares of Common Stock. For purposes of the
proviso to the immediately preceding sentence, beneficial ownership shall be
determined in accordance with Section 13(d) of the Securities Exchange Act of
1934, as amended, and Regulation 13 D-G thereunder, except as otherwise provided
in clause (x) of such proviso.
Notwithstanding anything to the contrary contained herein, if,
at any time, the aggregate number of shares of Common Stock then issued upon
exercise of the Series A Preferred Stock (exclusive of shares of Common Stock
issued or issuable upon the exercise of "Out-of-the-Money Warrants" (as
hereinafter defined), but inclusive of shares of Common Stock issued or issuable
upon the exercise of "In-the-Money Warrants" (as hereinafter defined)) equals
19.99% of the "Outstanding Common Amount" (as hereinafter defined), the Series A
Preferred Stock shall, from that time forward, cease to be convertible into
Common Stock in accordance with the terms of this Article VI and Article VII
below, unless the Corporation (i) has obtained approval of the issuance of the
Series A Preferred Stock by a majority of the total votes cast on such proposal,
in person or by proxy, by the holders of the then-outstanding Common Stock (not
including any shares of Common Stock held by present or former holders of Series
A Preferred Stock that were issued upon conversion of Series A Preferred Stock
or upon exercise of Warrants), or (ii) shall have otherwise obtained permission
to allow such issuances from the NASDAQ Stock Market in accordance with NASDAQ
National Market Requirement 4460(i). For purposes of this paragraph,
"Outstanding Common Amount" means (i) the number of shares of the Corporation's
Common Stock outstanding on the date of issuance of the Series A Preferred Stock
pursuant to the Purchase Agreement plus (ii) any additional shares of Common
Stock issued thereafter in respect of such shares pursuant to a stock dividend,
stock split or
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similar event. For purposes of this paragraph, (i) "In-the-Money Warrant" means
a Warrant the exercise price of which is below the last sale price of the Common
Stock on the NASDAQ National Market (the "Last Sale Price") on the Trading Day
immediately preceding the issuance of such Warrant and (ii) "Out-of-the-Money
Warrant" means a Warrant the exercise price of which is above the Last Sale
Price on the Trading Day immediately preceding the issuance of such Warrant.
B. (a) Subject to subparagraph (b) below, the "Conversion
Price" shall be the lesser of (i) the Applicable Percentage (as hereinafter
defined) of the average of the closing bid prices for the Common Stock as
reported by the National Association of Securities Dealers Automated Quotation
System National Market ("NASDAQ-NMS"), or on the principal securities exchange
or other securities market on which the Common Stock is then being traded, for
the ten (10) consecutive Trading Days ending one Trading Day prior to the date
(the "Conversion Date") the Conversion Notice is sent by a holder to the
Corporation or its Transfer Agent via facsimile (the "Variable Conversion
Price"), and (ii) $16.00 (the "Fixed Conversion Price") (subject to equitable
adjustments from time to time pursuant to the antidilution provisions of Article
VI.C below). "Trading Day" shall mean any day on which the Common Stock is
traded for any period on the NASDAQ-NMS, or on the principal securities exchange
or other securities market on which the Common Stock is then being traded.
Applicable Percentage means (i) 100%, if the Conversion Date is within
forty-five (45) days after the closing date in respect of the first closing
pursuant to the Purchase Agreement (the "CLOSING DATE"), (ii) 90%, if the
Conversion Date is within ninety (90) days, but more than forty-five (45) days,
after the Closing Date, and (iii) 85%, if the Conversion Date is more than
ninety (90) days after the Closing Date; provided, however, that notwithstanding
the foregoing, the Applicable Percentage will be 100% for the period beginning
on the filing date of a Qualifying Registration Statement and ending ten (10)
Trading Days following the closing of the offering contemplated thereby, up to a
maximum of ninety (90) days. The immediately preceding proviso will apply in
respect of one Qualifying Registration Statement only.
(b) Notwithstanding anything contained in subparagraph (a)
of this Paragraph B to the contrary, in the event the Corporation (i) makes a
public announcement that it intends to consolidate or merge with any other
corporation (other than a merger in which the Corporation is the surviving or
continuing corporation and its capital stock is unchanged) or sell or transfer
all or substantially all of the assets of the Corporation or (ii) any person,
group or entity (including the Corporation) publicly announces a tender offer to
purchase 50% or more of the Corporation's Common Stock (the date of the
announcement referred to in clause (i) or (ii) is hereinafter referred to as the
"Announcement Date"), then the Conversion Price shall, effective upon the
Announcement Date and continuing through the Adjusted Conversion Price
Termination Date (as defined below), be equal to the lower of (x) the Conversion
Price which would have been applicable for an Optional Conversion occurring on
the Announcement Date and (y) the Conversion Price that would otherwise be in
effect. From and after the Adjusted Conversion Price Termination Date, the
Conversion Price shall be determined as set forth in subparagraph (a) of this
Paragraph VI.B. For purposes hereof, "Adjusted Conversion Price
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<PAGE> 9
Termination Date" shall mean, with respect to any proposed transaction or tender
offer for which a public announcement as contemplated by this subparagraph (b)
has been made, the date upon which the Corporation (in the case of clause (i)
above) or the person, group or entity (in the case of clause (ii) above)
publicly announces the termination or abandonment of the proposed transaction or
tender offer which caused this subparagraph (b) to become operative.
C. The Conversion Price shall be subject to adjustment from
time to time as follows:
(a) Adjustment to Fixed Conversion Price Due to Stock
Split, Stock Dividend, Etc. If at any time when the Series A Preferred Stock is
issued and outstanding, the number of outstanding shares of Common Stock is
increased by a stock split, stock dividend, combination, reclassification,
below-Market Price (as defined in Article VI.D) rights offering to all holders
of Common Stock or other similar event, the Fixed Conversion Price shall be
proportionately reduced, or if the number of outstanding shares of Common Stock
is decreased by a reverse stock split, combination or reclassification of
shares, or other similar event, the Fixed Conversion Price shall be
proportionately increased. In such event, the Corporation shall notify its
Transfer Agent of such change on or before the effective date thereof.
(b) Adjustment to Variable Conversion Price. If at
any time when Series A Preferred Stock is issued and outstanding, the number of
outstanding shares of Common Stock is increased or decreased by a stock split,
stock dividend, combination, reclassification, below-Market Price rights
offering to all holders of Common Stock or other similar event, which event
shall have taken place during the reference period for determination of the
Conversion Price for any Optional Conversion or Automatic Conversion of the
Series A Preferred Stock, then the Variable Conversion Price shall be calculated
giving appropriate effect to the stock split, stock dividend, combination,
reclassification or other similar event for all ten (10) Trading Days
immediately preceding the Conversion Date. In such event, the Corporation shall
notify the Transfer Agent of such change on or before the effective date
thereof.
(c) Adjustment Due to Merger, Consolidation, Etc. If,
at any time when Series A Preferred Stock is issued and outstanding and prior to
the conversion of all Series A Preferred Stock, there shall be any merger,
consolidation, exchange of shares, recapitalization, reorganization, or other
similar event, as a result of which shares of Common Stock of the Corporation
shall be changed into the same or a different number of shares of another class
or classes of stock or securities of the Corporation or another entity, or in
case of any sale or conveyance of all or substantially all of the assets of the
Corporation other than in connection with a plan of complete liquidation of the
Corporation, then the holders of Series A Preferred Stock shall thereafter have
the right to receive upon conversion of the Series A Preferred Stock, upon the
bases and upon the terms and conditions specified herein and in lieu of the
shares of Common Stock and Warrants immediately theretofore issuable upon
conversion, such stock, securities or assets which the holders of Series A
Preferred Stock would have been entitled to receive in such transaction had the
Series A Preferred Stock been converted in full immediately
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<PAGE> 10
prior to such transaction, and in any such case appropriate provisions shall be
made with respect to the rights and interests of the holders of Series A
Preferred Stock to the end that the provisions hereof (including, without
limitation, provisions for adjustment of the Conversion Price and of the number
of shares of Common Stock and Warrants issuable upon conversion of the Series A
Preferred Stock and provisions protecting the right of holders of Series A
Preferred Stock to receive the Warrants) shall thereafter be applicable, as
nearly as may be practicable in relation to any securities or assets thereafter
deliverable upon the conversion hereof. The Corporation shall not effect any
transaction described in this subsection (c) unless (a) it first gives, to the
extent practical, thirty (30) days' prior written notice (but in any event at
least fifteen (15) business days prior written notice) of such merger,
consolidation, exchange of shares, recapitalization, reorganization or other
similar event or sale of assets (during which time the holders of Series A
Preferred Stock shall be entitled to convert the Series A Preferred Stock) and
(b) the resulting successor or acquiring entity (if not the Corporation) assumes
by written instrument the obligations of this subsection (c).
D. For purposes of Sections VI.C(a), and VI.C(b) above,
"Market Price," which shall be measured as of the record date in respect of the
rights offering, (i) means the average of the last reported sale prices for the
shares of Common Stock as reported by the NASDAQ-NMS, as applicable, for the ten
(10) trading days immediately preceding such date, or (ii) if the NASDAQ-NMS is
not the principal trading market for the shares of Common Stock, the average of
the last reported sale prices on the principal trading market for the Common
Stock during the same period, or (iii) if market value cannot be calculated as
of such date on any of the foregoing bases, the Market Price shall be the fair
market value as reasonably determined in good faith by (a) the Board of
Directors of the Corporation or, at the option of a majority-in-interest of the
holders of the outstanding Series A Preferred Stock by (b) an independent
investment bank of nationally recognized standing in the valuation of businesses
similar to the business of the corporation.
E. In order to convert Series A Preferred Stock into full
shares of Common Stock and Warrants, a holder of Series A Preferred Stock shall:
(i) submit a copy of the fully executed notice of conversion in the form
attached hereto as Exhibit A ("Notice of Conversion") to the Corporation by
facsimile dispatched on the Conversion Date (or by other means resulting in
notice to the Corporation or its Transfer Agent on the Conversion Date) to the
office of the Corporation or its Transfer Agent that the holder elects to
convert the same, which notice shall specify the number of shares of Series A
Preferred Stock to be converted, the applicable Conversion Price and a
calculation of the number of shares of Common Stock and Warrants issuable upon
such conversion (together with a copy of the first page of each certificate to
be converted) prior to Midnight, New York City time (the "Conversion Notice
Deadline") on the date of conversion specified on the Notice of Conversion; and
(ii) surrender the original certificates representing the Series A Preferred
Stock being converted (the "Preferred Stock Certificates"), duly endorsed, along
with a copy of the Notice of Conversion to the office of the Corporation or the
Transfer Agent as soon as practicable thereafter. The Corporation shall not be
obligated to issue certificates evidencing the shares of Common Stock issuable
upon such
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<PAGE> 11
conversion, or Warrants to acquire shares of Common Stock issuable upon such
conversion, unless either the Preferred Stock Certificates are delivered to the
Company or its Transfer Agent as provided above, or the holder notifies the
Corporation or its Transfer Agent that such certificates have been lost, stolen
or destroyed (subject to the requirements of subparagraph (a) below). In the
case of a dispute as to the calculation of the Conversion Price, the Corporation
shall promptly issue such number of shares of Common Stock and Warrants to
purchase shares of Common Stock that are not disputed in accordance with
subparagraph (b) below. The Corporation shall submit the disputed calculations
to its outside accountant via facsimile within two (2) business days of receipt
of the Notice of Conversion. The accountant shall audit the calculations and
notify the Corporation and the holder of the results no later than 48 hours from
the time it receives the disputed calculations. The accountant's calculation
shall be deemed conclusive absent manifest error.
(a) Lost or Stolen Certificates. Upon receipt by the
Corporation or its Transfer Agent of evidence of the loss, theft, destruction or
mutilation of any Preferred Stock Certificates representing shares of Series A
Preferred Stock, and (in the case of loss, theft or destruction) of indemnity
reasonably satisfactory to the Corporation, and upon surrender and cancellation
of the Preferred Stock Certificate(s), if mutilated, the Corporation shall
execute and deliver new Preferred Stock Certificate(s) of like tenor and date.
(b) Delivery of Common Stock and Warrants Upon
Conversion. Upon the surrender of certificates as described above together with
a Notice of Conversion, the Corporation shall issue and, within two (2) business
days after such surrender (or, in the case of lost, stolen or destroyed
certificates, after provision of agreement and indemnification pursuant to
subparagraph (a) above) (the "Delivery Period"), deliver (or cause its Transfer
Agent to so issue and deliver) to or upon the order of the holder (i) that
number of shares of Common Stock and Warrants for the portion of the shares of
Series A Preferred Stock converted as shall be determined in accordance herewith
and (ii) a certificate representing the balance of the shares of Series A
Preferred Stock not converted, if any. In addition to any other remedies
available to the holder, including actual damages and/or equitable relief, the
Corporation shall pay to a holder $500 per day in cash for each day beyond the
two (2) day grace period following the Delivery Period that the Corporation
fails to deliver Common Stock and Warrants issuable upon surrender of shares of
Series A Preferred Stock with a Notice of Conversion until such time as the
earlier of the date that the Corporation has delivered all such Common Stock and
Warrants and the tenth day beyond such Delivery Period. Such cash amount shall
be paid to such holder by the fifth day of the month following the month in
which it has accrued or, at the option of the holder (by written notice to the
Corporation by the first day of the month following the month in which it has
accrued), shall be convertible into Common Stock and Warrants in accordance with
the terms of this Article VI. In the event the Corporation fails to deliver such
Common Stock and Warrants prior to the expiration of the ten (10) day period
after the Delivery Period for any reason, such holder shall be entitled (in
addition to any other remedies available to the holder) to Conversion Default
Payments in accordance with Article VI.F hereof beginning on the expiration of
such ten (10) day period.
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<PAGE> 12
(c) No Fractional Shares. If any conversion of Series
A Preferred Stock would result in a fractional share of Common Stock or the
right to acquire a fractional share of Common Stock, such fractional share shall
be disregarded and the number of shares of Common Stock issuable upon
conversion, and the number of shares which may be acquired upon exercise of any
Warrant issuable upon conversion, of the Series A Preferred Stock shall be the
next higher number of shares.
(d) Conversion Date. The "Conversion Date" shall be
the date specified in the Notice of Conversion, provided (i) that the advance
copy of the Notice of Conversion is submitted by facsimile (or by other means
resulting in notice) to the Corporation or its Transfer Agent before Midnight,
New York City time, on the Conversion Date, and (ii) that the original Preferred
Stock Certificate(s), duly endorsed, are surrendered along with a copy of the
Notice of Conversion as soon as practicable thereafter to the office of the
Corporation or the Transfer Agent. The person or persons entitled to receive the
shares of Common Stock and Warrants issuable upon conversion shall be treated
for all purposes as the record holder or holders of such securities as of the
Conversion Date and all rights with respect to the shares of Series A Preferred
Stock surrendered shall forthwith terminate except the right to receive the
shares of Common Stock and Warrants or other securities or property issuable on
such conversion and except that the holders preferential rights as a holder of
Series A Preferred Stock shall survive to the extent the corporation fails to
deliver such securities.
F. A number of shares of the authorized but unissued Common
Stock sufficient to provide for (i) the conversion of the Series A Preferred
Stock outstanding at the then current Conversion Price and (ii) the exercise of
Warrants issuable upon such conversion, if applicable, shall at all times be
reserved by the Corporation, free from preemptive rights, for such conversion or
exercise. If the Corporation shall issue any securities or make any change in
its capital structure which would change the number of shares of Common Stock
into which each share of the Series A Preferred Stock shall be convertible at
the then current Conversion Price or the number of Warrants issuable upon such
conversion, if applicable, the Corporation shall at the same time also make
proper provision so that thereafter there shall be a sufficient number of shares
of Common Stock authorized and reserved, free from preemptive rights, for
conversion of the outstanding Series A Preferred Stock and exercise of the
Warrants on the new basis, if applicable.
If at any time a holder of shares of Series A Preferred Stock
submits a Notice of Conversion, and the Corporation does not have sufficient
authorized but unissued shares of Common Stock available to effect such
conversion (and exercise of the Warrants) in accordance with the provisions of
this Article VI (a "Conversion Default"), the Corporation shall promptly (i)
take all action within its control to cause a sufficient number of additional
shares to be authorized and (ii) issue to the holder (or holders, if more than
one holder submits a Notice of Conversion in respect of the same Conversion
Date, pro-rata based on the ratio that the number of shares of Series A
Preferred Stock then held by each such holder bears to the aggregate
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<PAGE> 13
number of such shares held by such holders) all of the shares of Common Stock
which are available to effect such conversion (including, with the Holder's
written consent, any shares underlying Warrants issued or then issuable
("Borrowed Shares")). The number of shares of Series A Preferred Stock included
in the Notice of Conversion which exceeds the amount which is then convertible
into available shares of Common Stock (including Borrowed Shares, if any) and
Warrants exercisable for Common Stock (the "Excess Amount") shall,
notwithstanding anything to the contrary contained herein, not be convertible
into Common Stock and Warrants in accordance with the terms hereof until (and at
the holder's option at any time after) the date additional shares of Common
Stock are authorized by the Corporation to permit such conversion, at which time
the Conversion Price in respect thereof shall be the lesser of (i) the
Conversion Price on the Conversion Default Date (as defined below) and (ii) the
Conversion Price on the Conversion Date elected by the holder (following the
Conversion Default Date) in respect thereof. The Corporation shall pay to the
holder payments ("Conversion Default Payments") for a Conversion Default in the
amount of (a) (N/365), multiplied by (b) the sum of the Stated Value plus the
Premium Amount per share of Series A Preferred Stock through the Authorization
Date (as defined below), multiplied by (c) the Default Amount (as defined below)
on the day the holder submits a Notice of Conversion giving rise to a Conversion
Default (the "Conversion Default Date"), multiplied by (d) .20, where (i) N =
the number of days from the Conversion Default Date to the date (the
"Authorization Date") that the Corporation authorizes a sufficient number of
shares of Common Stock to effect conversion of the full number of shares of
Series A Preferred Stock and the Warrants and (ii) "Default Amount" means the
Excess Amount plus the number of shares of Series A Preferred Stock that would
not be convertible as a result of this Section VI.E but for the Borrowed Shares.
The Corporation shall send notice to the holder of the authorization of
additional shares of Common Stock, the Authorization Date and the amount of
holder's accrued Conversion Default Payments. The accrued Conversion Default
Payment for each calendar month shall be paid in cash or shall be convertible
into Common Stock and Warrants at the Conversion Price, at the holder's option,
as follows:
(a) In the event holder elects to take such payment
in cash, cash payment shall be made to holder by the fifth day of the month
following the month in which it has accrued; and
(b) In the event holder elects to take such payment
in Common Stock, the holder may convert such payment amount into Common Stock
and Warrants at the Conversion Price (as in effect at the time of Conversion) at
any time after the fifth day of the month following the month in which it has
accrued in accordance with the terms of this Article VI (so long as there is a
sufficient number of authorized shares).
Nothing herein shall limit the holder's right to pursue actual
damages for the Corporation's failure to maintain a sufficient number of
authorized shares of Common Stock, and each holder shall have the right to
pursue all remedies available at law or in equity (including a decree of
specific performance and/or injunctive relief).
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<PAGE> 14
G. Upon the occurrence of each adjustment or readjustment of
the Conversion Price pursuant to this Article VI, the Corporation, at its
expense, shall promptly compute such adjustment or readjustment in accordance
with the terms hereof and prepare and furnish to each holder of Series A
Preferred Stock a certificate setting forth such adjustment or readjustment and
showing in detail the facts upon which such adjustment or readjustment is based.
The Corporation shall, upon the written request at any time of any holder of
Series A Preferred Stock, furnish or cause to be furnished to such holder a like
certificate setting forth (i) such adjustment or readjustment, (ii) the
Conversion Price at the time in effect and (iii) the number of shares of Common
Stock and the amount, if any, of other securities or property which at the time
would be received upon conversion of a share of Series A Preferred Stock.
VII. Automatic Conversion
Each share of Series A Preferred Stock issued and outstanding on
December 15, 2001 (the "Automatic Conversion Date"), automatically shall be
converted into shares of Common Stock and Warrants on such date at the then
effective Conversion Price in accordance with the provisions of Article VI
hereof (the "Automatic Conversion"). The Automatic Conversion Date shall be the
Conversion Date for purposes of determining the Conversion Price and the time
within which certificates representing the Common Stock and Warrants must be
delivered to the holder.
VIII. Voting Rights
The holders of the Series A Preferred Stock have no voting power
whatsoever, except as otherwise provided by the New York Business Corporation
Law ("BCL"), and in this Article VIII, and in Article IX below.
Notwithstanding the above, the Corporation shall provide each holder of
Series A Preferred Stock with prior notification of any meeting of the
shareholders (and copies of proxy materials and other information sent to
shareholders). In the event of any taking by the Corporation of a record of its
shareholders for the purpose of determining shareholders who are entitled to
receive payment of any dividend or other distribution, any right to subscribe
for, purchase or otherwise acquire (including by way of merger, consolidation or
recapitalization) any share of any class or any other securities or property, or
to receive any other right, or for the purpose of determining shareholders who
are entitled to vote in connection with any proposed sale, lease or conveyance
of all or substantially all of the assets of the Corporation, or any proposed
liquidation, dissolution or winding up of the Corporation, the Corporation shall
mail a notice to each holder, at least ten (10) days prior to the record date
specified therein (or 30 days prior to the consummation of the transaction or
event, whichever is earlier), of the date on which any such record is to be
taken for the purpose of such dividend, distribution, right or other event, and
a brief statement regarding the amount and character of such dividend,
distribution, right or other event to the extent known at such time.
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<PAGE> 15
To the extent that under the BCL the vote of the holders of the Series
A Preferred Stock, voting separately as a class or series as applicable, is
required to authorize a given action of the Corporation, the affirmative vote or
consent of the holders of at least a majority of the shares of the Series A
Preferred Stock represented at a duly held meeting at which a quorum is present
or by written consent of a majority of the shares of Series A Preferred Stock
(except as otherwise may be required under the BCL) shall constitute the
approval of such action by the class. To the extent that under the BCL holders
of the Series A Preferred Stock are entitled to vote on a matter with holders of
Common Stock, voting together as one class, each share of Series A Preferred
Stock shall be entitled to a number of votes equal to the number of shares of
Common Stock into which it is then convertible using the record date for the
taking of such vote of shareholders as the date as of which the Conversion Price
is calculated. Holders of the Series A Preferred Stock shall be entitled to
notice of all shareholder meetings or written consents (and copies of proxy
materials and other information sent to shareholders) with respect to which they
would be entitled to vote, which notice would be provided pursuant to the
Corporation's bylaws and the BCL.
IX. Protective Provisions
So long as shares of Series A Preferred Stock are outstanding, the
Corporation shall not, without first obtaining the approval (by vote or written
consent, as provided by the BCL) of the holders of at least a majority of the
then outstanding shares of Series A Preferred Stock:
(a) alter or change the rights, preferences or
privileges of the Series A Preferred Stock or any Senior Securities so as to
affect adversely the Series A Preferred Stock;
(b) create any new class or series of capital stock
having a preference over the Series A Preferred Stock as to distribution of
assets upon liquidation, dissolution or winding up of the Corporation (as
previously defined in Article II hereof, "Senior Securities");
(c) create any new class or series of capital stock
ranking pari passu with the Series A Preferred Stock as to distribution of
assets upon liquidation, dissolution or winding up of the Corporation (as
previously defined in Article II hereof, "Pari Passu Securities");
(d) increase the authorized number of shares of
Series A Preferred Stock; or
(e) do any act or thing not authorized or
contemplated by this Certificate of Designation which would result in taxation
of the holders of shares of the Series A Preferred Stock under Section 305 of
the Internal Revenue Code of 1986, as amended (or any comparable provision of
the Internal Revenue Code as hereafter from time to time amended).
In the event holders of at least a majority of the then outstanding
shares of Series A
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<PAGE> 16
Preferred Stock agree to allow the Corporation to alter or change the rights,
preferences or privileges of the shares of Series A Preferred Stock, pursuant to
subsection (a) above, so as to affect the Series A Preferred Stock, then the
Corporation will deliver notice of such approved change to the holders of the
Series A Preferred Stock that did not agree to such alteration or change (the
"Dissenting Holders") and Dissenting Holders shall have the right for a period
of thirty (30) days to convert pursuant to the terms of this Certificate of
Designation as they exist prior to such alteration or change or continue to hold
their shares of Series A Preferred Stock.
FOURTH: The Board of Directors of the corporation authorized the amendment
under the authority vested in said Board under the provisions of the certificate
of incorporation and of Section 502 of the Business Corporation Law.
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<PAGE> 17
IN WITNESS WHEREOF, we have submitted this document on December 16,
1996 and do affirm, under the penalties of perjury, that the statements
contained therein have been examined by us and are true and correct.
/s/ Pratap Kesav Kondamoori
------------------------------------
Pratap Kesav Kondamoori
President
/s/ John H. Gorman
------------------------------------
John H. Gorman
Secretary
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<PAGE> 18
NOTICE OF CONVERSION
(To be Executed by the Registered Holder
in order to Convert the Series A Preferred Stock)
The undersigned hereby irrevocably elects to convert ______ shares of Series A
Preferred Stock, represented by stock certificate No(s). __________ (the
"Preferred Stock Certificates") into shares of common stock ("Common Stock") and
warrants to acquire Common Stock of NUKO Information Systems, Inc. (the
"Corporation") according to the conditions of the Certificate of Designation of
Series A Preferred Stock, as of the date written below. If securities are to be
issued in the name of a person other than the undersigned, the undersigned will
pay all transfer taxes payable with respect thereto and is delivering herewith
such certificates. No fee will be charged to the Holder for any conversion,
except for transfer taxes, if any. A copy of each Preferred Stock Certificate is
attached hereto (or evidence of loss, theft or destruction thereof).
The undersigned represents and warrants that all offers and sales by the
undersigned of the securities issuable to the undersigned upon conversion of the
Series A Preferred Stock shall be made pursuant to registration of the
securities under the Securities Act of 1933, as amended (the "Act"), or pursuant
to an exemption from registration under the Act.
Date of Conversion:_____________________________
Applicable Conversion Price:____________________
Number of Shares of
Common Stock to be Issued:______________________
Number of Warrants to
be Issued:______________________________________
Signature:______________________________________
Name:___________________________________________
Address:________________________________________
*The Corporation is not required to issue shares of Common Stock or warrants
until the original Series A Preferred Stock Certificate(s) (or evidence of loss,
theft or destruction thereof) to be converted are received by the Corporation or
its Transfer Agent. The Corporation shall issue and deliver shares of Common
Stock and warrants to an overnight courier not later than two (2) business days
following receipt of the original Preferred Stock Certificate(s) to be
converted, and shall make payments pursuant to the Certificate of Designation
for the number of business days such issuance and delivery is late.
<PAGE> 1
Exhibit 4.1
EXECUTION COPY
SECURITIES PURCHASE AGREEMENT
SECURITIES PURCHASE AGREEMENT (this "AGREEMENT"), dated as of December
13, 1996 by and among NUKO Information Systems, Inc., a New York corporation,
with headquarters located at 2391 Qume Drive, San Jose, CA 95131 (the
"COMPANY"), and each of the purchasers set forth on the signature pages hereto
(the "BUYERS").
WHEREAS:
A. The Company and the Buyers are executing and delivering this Agreement in
reliance upon the exemption from securities registration afforded by Rule 506
under Regulation D ("REGULATION D") as promulgated by the United States
Securities and Exchange Commission (the "SEC") under the Securities Act of 1933,
as amended (the "1933 ACT");
B. The Company has authorized a new series of preferred stock, designated as its
Series A Convertible Preferred Stock (the "PREFERRED STOCK"), having the rights,
preferences and privileges set forth in the Certificate of Designations, Rights
and Preferences attached hereto as EXHIBIT "A" (the "CERTIFICATE OF
DESIGNATION");
C. The Preferred Stock is convertible into (i) shares of Common Stock, par value
$.001 per share, of the Company (the "COMMON STOCK") and (ii) warrants (the
"WARRANTS"), in the form attached hereto as EXHIBIT "B", to acquire a number of
shares of Common Stock equal to one-half of the number of shares of Common Stock
issuable upon conversion of the Preferred Stock, upon the terms and subject to
the limitations and conditions set forth in the Certificate of Designation;
D. The Buyers desire to purchase and the Company desires to issue and sell, upon
the terms and conditions set forth in this Agreement, an aggregate of ten
thousand (10,000) shares of Preferred Stock, at a price per share equal to One
Thousand Dollars ($1,000), the stated value thereof, or an aggregate purchase
price of Ten Million Dollars ($10,000,000);
E. Each Buyer wishes to purchase, upon the terms and conditions stated in this
Agreement, the number of shares of Preferred Stock set forth immediately below
its name on the signature pages hereto; and
F. Contemporaneous with the execution and delivery of this Agreement, the
parties hereto are executing and delivering a Registration Rights Agreement, in
the form attached hereto as EXHIBIT "C" (the "REGISTRATION RIGHTS AGREEMENT"),
pursuant to which the Company has agreed to provide certain registration rights
under the 1933 Act and the rules and regulations promulgated thereunder, and
applicable state securities laws;
<PAGE> 2
NOW THEREFORE, the Company and each of the Buyers (severally and not
jointly) hereby agree as follows:
1. PURCHASE AND SALE OF PREFERRED SHARES.
a. Purchase of Preferred Shares. The Company shall issue and
sell to each Buyer and each Buyer severally agrees to purchase from the Company
such number of shares of Series A Preferred Stock as is set forth immediately
below such Buyer's name on the signature pages hereto (collectively, together
with any Preferred Stock issued in replacement thereof or as a dividend thereon
or otherwise with respect thereto in accordance with the terms thereof, the
"PREFERRED SHARES") at a price per share equal to One Thousand Dollars ($1,000)
(the "PER SHARE PURCHASE PRICE"). The issuance, sale and purchase of the
Preferred Shares shall take place in two (2) separate closings, the first of
which is hereinafter referred to as the "FIRST CLOSING" and the second of which
is hereinafter referred to as the "SECOND CLOSING." Subject to the satisfaction
(or waiver) of the conditions thereto set forth in Section 6 and Section 7
below, (i) at the First Closing, the Company shall issue and sell to each Buyer
and each Buyer shall purchase from the Company fifty percent (50%) of the
aggregate number of Preferred Shares which such Buyer is purchasing hereunder
for a price per Preferred Share equal to the Per Share Purchase Price and (ii)
at the Second Closing, the Company shall issue and sell to each Buyer and each
Buyer shall purchase from the Company the remainder of the Preferred Shares
which such Buyer is purchasing hereunder for a price per Preferred Share equal
to the Per Share Purchase Price. The aggregate number of Preferred Shares to be
issued at the First Closing is Five Thousand (5,000) for an aggregate purchase
price of Five Million Dollars ($5,000,000) and the aggregate number of Preferred
Shares to be issued at the Second Closing is Five Thousand for an aggregate
purchase price of Five Million Dollars ($5,000,000).
b. Form of Payment. On each Closing Date (as defined below),
(i) each Buyer shall pay the purchase price for the Preferred Shares to be
issued and sold to it at the applicable closing (the "PURCHASE PRICE") by wire
transfer of immediately available funds to the Company, in accordance with the
Company's written wiring instructions, against delivery of a duly executed
certificate(s) representing such number of Preferred Shares which such Buyer is
then purchasing, and (ii) the Company shall deliver such certificate(s) against
delivery of such Purchase Price.
c. Closing Dates. Subject to the satisfaction (or waiver) of
the conditions thereto set forth in Section 6 and Section 7 below, the date and
time of the issuance and sale of the Preferred Shares pursuant to this Agreement
(the "CLOSING DATES") shall be (i) in the case of the First Closing, 12:00 noon
Eastern Standard Time on December 16, 1996 (subject to a two (2) business day
grace period at either party's option) and (ii) in the case of the Second
Closing, 12:00 noon Eastern Standard Time on the fifth (5th) day following
notification of satisfaction (or waiver) of the conditions to such closing set
forth in Section 7(b) below or, in each case, such other mutually agreed upon
time. The closings shall occur on the Closing Dates at the offices of Latham &
Watkins, 885 Third Avenue, suite 1000, New York, NY 10022.
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2. BUYER'S REPRESENTATIONS AND WARRANTIES.
Each Buyer severally represents and warrants to the Company that:
a. Investment Purpose. The Buyer is purchasing the Preferred
Shares, the shares of Common Stock issuable upon conversion thereof (the
"CONVERSION SHARES"), the Warrants issuable upon conversion of the Preferred
Shares and the shares of Common Stock issuable upon exercise of the Warrants
(the "WARRANT SHARES") (collectively, the "SECURITIES") for its own account for
investment only and not with a present view towards the public sale or
distribution thereof, except pursuant to sales registered under the 1933 Act.
For purposes of this Agreement, the term Warrants includes, in addition to
Warrants issued upon conversion of Preferred Shares, Warrants issued pursuant to
Section 8(m) below and Warrants issued pursuant to Article V.C of the
Certificate of Designation.
b. Accredited Investor Status. The Buyer is an "accredited
investor" as that term is defined in Rule 501(a) of Regulation D.
c. Reliance on Exemptions. The Buyer understands that the
Securities are being offered and sold to it in reliance upon specific exemptions
from the registration requirements of United States federal and state securities
laws and that the Company is relying upon the truth and accuracy of, and the
Buyer's compliance with, the representations, warranties, agreements,
acknowledgments and understandings of the Buyer set forth herein in order to
determine the availability of such exemptions and the eligibility of the Buyer
to acquire the Securities.
d. Information. The Buyer and its advisors, if any, have been
furnished with all materials relating to the business, finances and operations
of the Company and materials relating to the offer and sale of the Securities
which have been requested by the Buyer or its advisors. The Buyer and its
advisors, if any, have been afforded the opportunity to ask questions of the
Company and have received what the Buyer believes to be satisfactory answers to
any such inquiries. Neither such inquiries nor any other due diligence
investigation conducted by Buyer or any of its advisors or representatives shall
modify, amend or affect Buyer's right to rely on the Company's representations
and warranties contained in Section 3 below. The Buyer understands that its
investment in the Securities involves a significant degree of risk.
e. Governmental Review. The Buyer understands that no United
States federal or state agency or any other government or governmental agency
has passed upon or made any recommendation or endorsement of the Securities.
f. Transfer or Resale. The Buyer understands that (i) except
as provided in the Registration Rights Agreement, the Securities have not been
and are not being registered
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under the 1933 Act or any applicable state securities laws, and may not be
transferred unless (a) subsequently registered thereunder, or (b) the Buyer
shall have delivered to the Company an opinion of counsel (which opinion shall
be reasonably acceptable to the Company) to the effect that the Securities to be
sold or transferred may be sold or transferred pursuant to an exemption from
such registration or (c) sold pursuant to Rule 144 promulgated under the 1933
Act (or a successor rule); (ii) any sale of such Securities made in reliance on
Rule 144 may be made only in accordance with the terms of said Rule and further,
if said Rule is not applicable, any resale of such Securities under
circumstances in which the seller (or the person through whom the sale is made)
may be deemed to be an underwriter (as that term is defined in the 1933 Act) may
require compliance with some other exemption under the 1933 Act or the rules and
regulations of the SEC thereunder; and (iii) neither the Company nor any other
person is under any obligation to register such Securities under the 1933 Act or
any state securities laws or to comply with the terms and conditions of any
exemption thereunder (in each case, other than pursuant to the Registration
Rights Agreement).
g. Legends. The Buyer understands that the certificates for
the Preferred Shares, Warrants and, until such time as the Conversion Shares and
Warrant Shares have been registered under the 1933 Act as contemplated by the
Registration Rights Agreement, the Conversion Shares and Warrant Shares, may
bear a restrictive legend in substantially the following form (and a
stop-transfer order may be placed against transfer of the certificates for such
Securities):
"The securities represented by this certificate have not been
registered under the Securities Act of 1933, as amended. The securities
have been acquired for investment and may not be sold, transferred or
assigned in the absence of an effective registration statement for the
securities under said Act, or an opinion of counsel, in form, substance
and scope reasonably acceptable to the Company, that registration is
not required under said Act or unless sold pursuant to Rule 144 under
said Act."
The legend set forth above shall be removed and the Company shall issue
a certificate without such legend to the holder of any Security upon which it is
stamped, if, unless otherwise required by applicable state securities laws, (a)
the sale of such Security is registered under the 1933 Act, or (b) such holder
provides the Company with an opinion of counsel, in form, substance and scope
reasonably acceptable to the Company, to the effect that a public sale or
transfer of such Security may be made without registration under the 1933 Act or
(c) such holder provides the Company with reasonable assurances that such
Security can be sold pursuant to Rule 144 under the 1933 Act (or a successor
rule thereto) without any restriction as to the number of Securities acquired as
of a particular date that can then be immediately sold. The Buyer agrees to sell
all Securities, including those represented by a certificate(s) from which the
legend has been removed, in compliance with applicable securities law.
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h. Authorization; Enforcement. This Agreement and the
Registration Rights Agreement have been duly and validly authorized, executed
and delivered on behalf of the Buyer and are valid and binding agreements of the
Buyer enforceable in accordance with their terms.
i. Residency. The Buyer is a resident of the jurisdiction set
forth immediately below such Buyer's name on the signature pages hereto.
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
The Company represents and warrants to each Buyer that:
a. Organization and Qualification. The Company and each of its
subsidiaries, if any, is a corporation duly organized and existing in good
standing under the laws of the jurisdiction in which it is incorporated, and has
the requisite corporate power to own its properties and to carry on its business
as now being conducted. The Company and each of its subsidiaries is duly
qualified as a foreign corporation to do business and is in good standing in
every jurisdiction in which the nature of the business conducted by it makes
such qualification necessary, except where the failure so to qualify would not
have a Material Adverse Effect. "MATERIAL ADVERSE EFFECT" means any material
adverse effect on the operations, assets, financial condition or prospects of
the Company or its subsidiaries, if any, taken as a whole, or on the
transactions contemplated hereby or by the agreements or instruments to be
entered into in connection herewith.
b. Authorization; Enforcement. (i) The Company has the
requisite corporate power and authority to file and perform its obligations
under the Certificate of Designation and to enter into and perform this
Agreement, the Registration Rights Agreement and the Warrants, and to issue the
Securities, in accordance with the terms hereof and thereof, (ii) the execution
and delivery of this Agreement, the Registration Rights Agreement and the
Warrants by the Company and the consummation by it of the transactions
contemplated hereby and thereby (including without limitation the filing of the
Certificate of Designation and the issuance of the Preferred Shares and the
Warrants and the issuance and reservation for issuance of the Conversion Shares
and Warrant Shares issuable upon conversion or exercise thereof) have been duly
authorized by the Company's Board of Directors and no further consent or
authorization of the Company, its Board or Directors, or its shareholders is
required, (iii) this Agreement has been duly executed and delivered and the
Certificate of Designation has been duly filed by the Company, and (iv) each of
this Agreement and the Certificate of Designation constitutes, and upon
execution and delivery by the Company of the Registration Rights Agreement and
the Warrants, each of such instruments will constitute, a valid and binding
obligation of the Company enforceable against the Company in accordance with its
terms.
c. Capitalization. As of the date hereof, the authorized
capital stock of the Company consists of (i) 20,000,000 shares of Common Stock
(which authorized number will increase to 40,000,000 upon consummation of the
merger referred to in Section 7(b)(ii) below) of
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which 10,466,884 shares are issued and outstanding, 4,097,000 shares are
reserved for issuance pursuant to the Company's stock option plans, 268,400
shares are reserved for issuance pursuant to securities (other than the
Preferred Shares and the Warrants) exercisable for, or convertible into or
exchangeable for shares of Common Stock and 2,500,000 shares are reserved for
issuance upon conversion of the Preferred Shares and exercise of the Warrants
(subject to adjustment pursuant to the Company's covenant set forth in Section
4(h) below); and (ii) 5,000,000 shares of preferred stock, none of which shares
are issued and outstanding (exclusive of the Preferred Shares). All of such
outstanding shares of capital stock are, or upon issuance will be, validly
issued, fully paid and nonassessable. No shares of capital stock of the Company
are subject to preemptive rights or any other similar rights of the stockholders
of the Company or any liens or encumbrances imposed through the actions or
failure to act of the Company. Except as disclosed in SCHEDULE 3(c), as of the
effective date of this Agreement, (i) there are no outstanding options,
warrants, scrip, rights to subscribe for, calls, rights of first refusal or
commitments of any character whatsoever relating to, or securities or rights
convertible into or exchangeable for any shares of capital stock of the Company
or any of its subsidiaries, or arrangements by which the Company or any of its
subsidiaries is or may become bound to issue additional shares of capital stock
of the Company or any of its subsidiaries, and (ii) there are no agreements or
arrangements under which the Company or any of its subsidiaries is obligated to
register the sale of any of its or their securities under the 1933 Act (except
the Registration Rights Agreement). The Company has furnished to the Buyer true
and correct copies of the Company's Restated Certificate of Incorporation as in
effect on the date hereof ("CERTIFICATE OF INCORPORATION"), the Company's
By-laws, as in effect on the date hereof (the "BY-LAWS"), and the terms of all
securities convertible into or exercisable for Common Stock of the Company and
the material rights of the holders thereof in respect thereto. The Company shall
provide the Buyer with a written update of this representation signed by the
Company's Chief Executive or Chief Financial Officer on behalf of the Company as
of each Closing Date.
d. Issuance of Shares. The Preferred Shares, Conversion Shares
and Warrant Shares are duly authorized and, upon issuance in accordance with the
terms of this Agreement, upon conversion of the Preferred Shares and upon proper
exercise of the Warrants, as applicable, the Preferred Shares, Conversion Shares
and Warrant Shares shall be validly issued, fully paid and non-assessable, and
free from all taxes, liens and charges with respect to the issue thereof and
shall not be subject to preemptive rights or other similar rights of
stockholders of the Company. The term Conversion Shares includes the shares of
Common Stock issuable upon conversion of the Preferred Shares, including without
limitation, such additional shares, if any, as are issuable as a result of the
events described in Section 2(c) of the Registration Rights Agreement and
Article VI.E of the Certificate of Designation. The Company understands and
acknowledges the potentially dilutive effect to the Common Stock of the issuance
of the Conversion Shares and Warrant Shares upon Conversion or exercise, as
applicable, of the Preferred Shares and the Warrants.
e. No Conflicts. The execution, delivery and performance of
this Agreement, the Registration Rights Agreement and the Warrants by the
Company and the
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consummation by the Company of the transactions contemplated hereby and thereby
(including, without limitation, the filing of the Certificate of Designation and
the issuance and reservation for issuance of the Preferred Shares, Conversion
Shares and Warrant Shares) will not (i) result in a violation of the Certificate
of Incorporation or By-laws or (ii) conflict with, or constitute a default (or
an event which with notice or lapse of time or both could become a default)
under, or give to others any rights of termination, amendment, acceleration or
cancellation of, any agreement, indenture or instrument to which the Company or
any of its subsidiaries is a party, or result in a violation of any law, rule,
regulation, order, judgment or decree (including federal and state securities
laws and regulations) applicable to the Company or any of its subsidiaries or by
which any property or asset of the Company or any of its subsidiaries is bound
or affected (except for such conflicts, defaults, terminations, amendments,
accelerations, cancellations and violations as would not, individually or in the
aggregate, have a Material Adverse Effect). Neither the Company nor any of its
subsidiaries is in violation of its Certificate of Incorporation, By-laws or
other organizational documents and neither the Company nor any of its
subsidiaries is in default (and no event has occurred which with notice or lapse
of time or both could put the Company or any of its subsidiaries in default)
under, and neither the Company nor any of its subsidiaries has taken any action
or failed to take any action that would give to others any rights of
termination, amendment, acceleration or cancellation of, any agreement,
indenture or instrument to which the Company or any of its subsidiaries is a
party or by which any property or assets of the Company or any of its
subsidiaries is bound or affected, except for possible defaults as would not,
individually or in the aggregate, have a Material Adverse Effect. The businesses
of the Company and its subsidiaries, if any, are not being conducted, and shall
not be conducted so long as a Buyer owns any of the Securities, in violation of
any law, ordinance or regulation of any governmental entity, except for
involuntary violations which either singly or in the aggregate do not have a
Material Adverse Effect. Except as specifically contemplated by this Agreement
and as required under the 1933 Act and any applicable state securities laws, the
Company is not required to obtain any consent, authorization or order of, or
make any filing or registration with, any court or governmental agency or any
regulatory or self regulatory agency in order for it to execute, deliver or
perform any of its obligations under this Agreement, the Registration Rights
Agreement or the Warrants in accordance with the terms hereof or thereof. Except
as set forth on Schedule 3(e), all consents, authorizations, orders, filings and
registrations which the Company is required to obtain pursuant to the preceding
sentence have been obtained or effected on or prior to the date hereof.
f. SEC Documents, Financial Statements. Since December 31,
1994, the Company has filed all reports, schedules, forms, statements and other
documents required to be filed by it with the SEC pursuant to the reporting
requirements of the Exchange Act of 1934, as amended (the "1934 ACT") (all of
the foregoing filed prior to the date hereof and all exhibits included therein
and financial statements and schedules thereto and documents (other than
exhibits) incorporated by reference therein, being hereinafter referred to
herein as the "SEC DOCUMENTS"). The Company has delivered to each Buyer true and
complete copies of the SEC Documents, except for such exhibits and incorporated
documents. As of their respective dates, the SEC Documents complied in all
material respects with the requirements of the 1934 Act and
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<PAGE> 8
the rules and regulations of the SEC promulgated thereunder applicable to the
SEC Documents, and none of the SEC Documents, at the time they were filed with
the SEC, contained any untrue statement of a material fact or omitted to state a
material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading. As of their respective dates, the financial statements of the
Company included in the SEC Documents complied as to form in all material
respects with applicable accounting requirements and the published rules and
regulations of the SEC with respect thereto. Such financial statements have been
prepared in accordance with generally accepted accounting principles,
consistently applied, during the periods involved (except (i) as may be
otherwise indicated in such financial statements or the notes thereto, or (ii)
in the case of unaudited interim statements, to the extent they may not include
footnotes or may be condensed or summary statements) and fairly present in all
material respects the consolidated financial position of the Company and its
consolidated subsidiaries as of the dates thereof and the consolidated results
of their operations and cash flows for the periods then ended (subject, in the
case of unaudited statements, to normal year-end audit adjustments). Except as
set forth in the financial statements of the Company included in the SEC
documents, the Company has no liabilities, contingent or otherwise, other than
(i) liabilities incurred in the ordinary course of business subsequent to
September 30, 1996 and (ii) obligations under contracts and commitments incurred
in the ordinary course of business and not required under generally accepted
accounting principles to be reflected in such financial statements, which,
individually or in the aggregate, are not material to the financial condition or
operating results of the Company.
g. Absence of Certain Changes. Since December 31, 1995, there
has been no material adverse change and no material adverse development in the
business, properties, operations, financial condition, results of operations or
prospects of the Company, except as disclosed in SCHEDULE 3(g) or in the SEC
Documents.
h. Absence of Litigation. There is no action, suit,
proceeding, inquiry or investigation before or by any court, public board,
government agency, self-regulatory organization or body pending or, to the
knowledge of the Company or any of its subsidiaries, threatened against or
affecting the Company or any of its subsidiaries that could have a Material
Adverse Effect. SCHEDULE 3(h) contains a complete list and summary description
of any pending or threatened proceeding against or affecting the Company or any
of its Subsidiaries, without regard to whether it would have a Material Adverse
Effect.
i. Patents, Copyrights, etc. The Company owns or possesses the
requisite licenses or rights to use all patents, patent rights, inventions,
know-how, trade secrets, trademarks, service marks, service names, trade names
and copyrights necessary to enable it to conduct its business as now operated;
there is no claim or action by any person pertaining to, or proceeding pending,
or to the Company's knowledge threatened which challenges the right of the
Company or of a subsidiary with respect to any patents, patent rights, licenses,
inventions, know-how, trademarks, service marks, service names, trade names and
copyrights necessary to enable it to conduct its business as now operated; to
the best of the Company's knowledge, the
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Company's or its subsidiaries' current and intended products, services and
processes do not infringe on any patents, patent rights, licenses, inventions,
know-how, trademarks, service marks, service names, tradenames, copyrights or
other rights held by any person; and the Company is unaware of any facts or
circumstances which might give rise to any of the foregoing.
j. No Materially Adverse Contracts, Etc. Neither the Company
nor any of its subsidiaries is subject to any charter, corporate or other legal
restriction, or any judgment, decree, order, rule or regulation which in the
judgment of the Company's officers has or is expected in the future to have a
Material Adverse Effect. Neither the Company nor any of its subsidiaries is a
party to any contract or agreement which in the judgment of the Company's
officers has or is expected to have a Material Adverse Effect.
k. Tax Status. Except as set forth on SCHEDULE 3(k), the
Company and each of its subsidiaries has made or filed all federal and state
income and all other tax returns, reports and declarations required by any
jurisdiction to which it is subject (unless and only to the extent that the
Company and each of its subsidiaries has set aside on its books provisions
reasonably adequate for the payment of all unpaid and unreported taxes) and has
paid all taxes and other governmental assessments and charges that are material
in amount, shown or determined to be due on such returns, reports and
declarations, except those being contested in good faith and has set aside on
its books provisions reasonably adequate for the payment of all taxes for
periods subsequent to the periods to which such returns, reports or declarations
apply. There are no unpaid taxes in any material amount claimed to be due by the
taxing authority of any jurisdiction, and the officers of the Company know of no
basis for any such claim.
l. Certain Transactions. Except as set forth on SCHEDULE 3(l)
or in the SEC Documents and except for arm's length transactions pursuant to
which the Company makes payments in the ordinary course of business upon terms
no less favorable than the Company could obtain from third parties and other
than the grant of stock options disclosed on SCHEDULE 3(c), none of the
officers, directors, or employees of the Company is presently a party to any
transaction with the Company (other than for services as employees, officers and
directors), including any contract, agreement or other arrangement providing for
the furnishing of services to or by, providing for rental of real or personal
property to or from, or otherwise requiring payments to or from any officer,
director or such employee or, to the knowledge of the Company, any corporation,
partnership, trust or other entity in which any officer, director, or any such
employee has a substantial interest or is an officer, director, trustee or
partner.
m. Disclosure. All information relating to or concerning the
Company set forth in this Agreement and provided to the Buyers pursuant to
Section 2(d) hereof and otherwise in connection with the transactions
contemplated hereby is true and correct in all material respects and the Company
has not omitted to state any material fact necessary in order to make the
statements made herein or therein, in light of the circumstances under which
they were made, not misleading.
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n. Acknowledgment Regarding Buyers' Purchase of Preferred
Shares. The Company acknowledges and agrees that the Buyers are acting solely in
the capacity of arm's length purchasers with respect to this Agreement and the
transactions contemplated hereby. The Company further acknowledges that no Buyer
is acting as a financial advisor or fiduciary of the Company (or in any similar
capacity) with respect to this Agreement and the transactions contemplated
hereby and any advice given by any Buyer or any of their respective
representatives or agents in connection with this Agreement and the transactions
contemplated hereby is merely incidental to the Buyers' purchase of the
Preferred Shares. The Company further represents to each Buyer that the
Company's decision to enter into this Agreement has been based solely on the
independent evaluation of the Company and its representatives.
o. No Integrated Offering. Neither the Company, nor any of its
affiliates, nor any person acting on its or their behalf, has directly or
indirectly made any offers or sales in any security or solicited any offers to
buy any security under circumstances that would require registration under the
1933 Act of the issuance of the Securities to the Buyers.
p. No Brokers. The Company has taken no action which would
give rise to any claim by any person for brokerage commissions, finder's fees or
similar payments relating to this Agreement or the transactions contemplated
hereby, except for dealings with Hughes Capital Group, whose commissions and
fees will be paid for by the Company.
4. COVENANTS.
a. Best Efforts. The parties shall use their best efforts to
satisfy timely each of the conditions described in Section 6 and 7 of this
Agreement.
b. Form D; Blue Sky Laws. The Company agrees to file a Form D
with respect to the Securities as required under Regulation D and to provide a
copy thereof to each Buyer promptly after such filing. The Company shall, on or
before each Closing Date, take such action as the Company shall reasonably
determine is necessary to qualify the Securities for sale to the Buyers at the
applicable closing pursuant to this Agreement under applicable securities or
"blue sky" laws of the states of the United States (or to obtain an exemption
from such qualification), and shall provide evidence of any such action so taken
to each Buyer on or prior to such Closing Date.
c. Reporting Status; Eligibility to Use Form S-3. The
Company's Common Stock is registered under Section 12(g) of the 1934 Act. So
long as any Buyer beneficially owns any of the Securities, the Company shall
timely file all reports required to be filed with the SEC pursuant to the 1934
Act, and the Company shall not terminate its status as an issuer required to
file reports under the 1934 Act even if the 1934 Act or the rules and
regulations thereunder would permit such termination. The Company currently
meets, and will take all necessary action to continue to meet, the "registrant
eligibility" requirements set forth in the general instructions to Form S-3.
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d. Use of Proceeds. The Company shall use the proceeds from
the sale of the Preferred Shares in the manner set forth in SCHEDULE 4(d)
attached hereto and made a part hereof and shall not, directly or indirectly,
use such proceeds for any loan to or investment in any other corporation,
partnership, enterprise or other person (except in connection with its currently
existing direct or indirect subsidiaries).
e. Additional Equity Capital; Right of First Refusal. Subject
to the exceptions described below, the Company agrees that during the period
beginning on the date hereof and ending one hundred twenty (120) days following
the Closing Date in respect of the Second Closing (the "LOCK-UP PERIOD"), the
Company will not, without the prior written consent of Rose Glen Capital
Management, L.P. ("RGC"), negotiate or contract with any party to obtain
additional equity financing (including debt financing with an equity component).
In addition, subject to the exceptions described below, the Company will not
conduct any equity financing (including debt with an equity component) ("FUTURE
OFFERINGS") during the period beginning on the first day immediately following
the Lock-Up Period and ending two hundred forty (240) days thereafter unless it
shall have first delivered to RGC, at least fifteen (15) business days prior to
the closing of such Future Offering, written notice describing the proposed
Future Offering, including the terms and conditions thereof, and providing RGC
an option during the ten (10) business day period following delivery of such
notice to purchase the securities being offered in the Future Offering on the
same terms as contemplated by such Future Offering (the limitations referred to
in this and the immediately preceding sentence are collectively referred to as
the "CAPITAL RAISING LIMITATIONS"). The Capital Raising Limitations shall not
apply to any transaction involving (i) issuances of securities in a firm
commitment underwritten public offering or (ii) issuances of securities in
connection with a merger, consolidation or sale of assets, or in connection with
any strategic partnership, strategic investment or joint venture with a current
or future supplier or customer of the Company, or in connection with the
disposition or acquisition of a business, product or license by the Company. The
Capital Raising Limitations also shall not apply to the issuance of securities
upon exercise or conversion of the Company's options, warrants or other
convertible securities outstanding as of the date hereof or to the grant of
additional options or warrants, or the issuance of additional securities, under
any Company stock option or restricted stock plan approved by a majority of the
Company's disinterested directors.
f. Expenses. The Company shall reimburse RGC for all expenses
incurred by it in connection with the negotiation, preparation, execution,
delivery and performance of this Agreement and the other agreements to be
executed in connection herewith, including, without limitation, attorneys' and
consultants' fees and expenses. The Company's obligation to reimburse RGC's
expenses under this Section 4(f) shall be limited to Twenty-five Thousand
Dollars ($25,000), of which Ten Thousand Dollars ($10,000) was advanced
previously.
g. Financial Information. The Company agrees to send the
following reports to each Buyer until such Buyer transfers, assigns, or sells
all of the Securities: (i) within ten (10)
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days after the filing with the SEC, a copy of its Annual Report on Form 10-K,
its Quarterly Reports on Form 10-Q and any Current Reports on Form 8-K; and (ii)
within one (1) day after release, copies of all press releases issued by the
Company or any of its subsidiaries.
h. Reservation of Shares. The Company shall at all times have
authorized, and reserved for the purpose of issuance, a sufficient number of
shares of Common Stock to provide for the full conversion of the outstanding
Preferred Shares and issuance of the Conversion Shares in connection therewith
and the full exercise of the Warrants and the issuance of the Warrant Shares in
connection therewith (based on the Conversion Price of the Preferred Shares and
the exercise price of the Warrants in effect from time to time). The Company
shall not reduce the number of shares of Common Stock reserved for issuance upon
conversion of the Preferred Shares and the full exercise of the Warrants without
the consent of each Buyer, which consent will not be unreasonably withheld. The
Company shall use its best efforts at all times to maintain the number of shares
of Common Stock so reserved for issuance at no less than two (2) times the
number that is then actually issuable upon full conversion of the Preferred
Shares and exercise of the Warrants (based on the Conversion Price of the
Preferred Shares and the exercise price of the Warrants in effect from time to
time).
i. Listing. The Company shall promptly secure the listing of
the Conversion Shares and Warrant Shares upon each national securities exchange
or automated quotation system, if any, upon which shares of Common Stock are
then listed (subject to official notice of issuance) and shall maintain, so long
as any other shares of Common Stock shall be so listed, such listing of all
Conversion Shares from time to time issuable upon conversion of the Preferred
Shares and Warrant Shares issuable upon exercise of the Warrants. The Company
will take all action necessary to obtain and maintain the listing and trading of
its Common Stock on the NASDAQ National Market ("NASDAQ-NMS"), the NASDAQ Small
Cap System ("NASDAQ SMALL CAP"), the New York Stock Exchange ("NYSE"), or the
American Stock Exchange ("AMEX") and will comply in all respects with the
Company's reporting, filing and other obligations under the bylaws or rules of
the NASD and such exchanges, as applicable.
j. Corporate Existence. So long as a Buyer beneficially owns
any Preferred Shares or Warrants, the Company shall maintain its corporate
existence, except in the event of a merger, consolidation or sale of all or
substantially all of the Company's assets, as long as the surviving or successor
entity in such transaction (i) assumes the Company's obligations hereunder and
under the agreements and instruments entered into in connection herewith and
(ii) is a publicly traded corporation whose Common Stock is listed for trading
on the NASDAQ-NMS, NASDAQ Small Cap, NYSE or AMEX.
5. TRANSFER AGENT INSTRUCTIONS.
The Company shall issue irrevocable instructions to its transfer agent
to issue certificates, registered in the name of each Buyer or its nominee, for
the Conversion Shares and Warrant Shares in such amounts as specified from time
to time by each Buyer to the Company upon
12
<PAGE> 13
proper conversion of the Preferred Shares or proper exercise of the Warrants
(the "Irrevocable Transfer Agent Instructions"). Prior to registration of the
Conversion Shares and Warrant Shares under the 1933 Act, all such certificates
shall bear the restrictive legend specified in Section 2(g) of this Agreement.
The Company warrants that no instruction other than the Irrevocable Transfer
Agent Instructions referred to in this Section 5, and stop transfer instructions
to give effect to Section 2(f) hereof (in the case of the Conversion Shares and
Warrant Shares, prior to registration of the Conversion Shares and Warrant
Shares under the 1933 Act), will be given by the Company to its transfer agent
and that the Securities shall otherwise be freely transferable on the books and
records of the Company as and to the extent provided in this Agreement and the
Registration Rights Agreement. Nothing in this Section shall affect in any way
the Buyer's obligations and agreement set forth in Section 2(g) hereof to comply
with all applicable securities laws upon resale of the Securities. If a Buyer
provides the Company with an opinion of counsel, reasonably satisfactory to the
Company in form, substance and scope, that registration of a resale by such
Buyer of any of the Securities is not required under the 1933 Act, the Company
shall permit the transfer, and, in the case of the Conversion Shares and Warrant
Shares, promptly instruct its transfer agent to issue one or more certificates
in such name and in such denominations as specified by such Buyer. The Company
acknowledges that a breach by it of its obligations hereunder will cause
irreparable harm to the Buyers' by obliterating the intent and purpose of the
transaction contemplated hereby. Accordingly, the Company acknowledges that the
remedy at law for a breach of its obligations under this Section 5 will be
inadequate and agrees, in the event of a breach or threatened breach by the
Company of the provisions of this Section, that the Buyers shall be entitled, in
addition to all other available remedies, to an injunction restraining any
breach and requiring immediate issuance and transfer, without the necessity of
showing economic loss and without any bond or other security being required.
6. CONDITIONS TO THE COMPANY'S OBLIGATION TO SELL.
The obligation of the Company hereunder to issue and sell the Preferred
Shares to a Buyer at each of the First Closing and the Second Closing, as
applicable, is subject to the satisfaction, at or before the Closing Date in
respect of such closing, of each of the following conditions thereto, provided
that these conditions are for the Company's sole benefit and may be waived by
the Company at any time in its sole discretion. The obligation of the Company to
issue and sell the Preferred Shares to any Buyer hereunder is distinct and
separate from its obligation to issue and sell Preferred Shares to any other
Buyer hereunder and any failure by one or more Buyers to fulfill the conditions
set forth herein or to consummate the purchase of Preferred Shares hereunder
will not relieve the Company of its obligations with respect to any other Buyer.
With respect to the First Closing and the Second Closing:
a. The applicable Buyer shall have executed this Agreement and
the Registration Rights Agreement, and delivered the same to the Company.
13
<PAGE> 14
b. The applicable Buyer shall have delivered the Purchase
Price in accordance with Section 1(b) above.
c. The Certificate of Designation shall have been filed with
the Secretary of State of the State of New York, in the case of the First
Closing, and Delaware, in the case of the Second Closing.
d. The representations and warranties of the applicable Buyer
shall be true and correct in all material respects as of the date when made and
as of each Closing Date as though made at that time (except for representations
and warranties that speak as of a specific date), and the applicable Buyer shall
have performed, satisfied and complied in all material respects with the
covenants, agreements and conditions required by this Agreement to be performed,
satisfied or complied with by the applicable Buyer at or prior to each Closing
Date.
7. CONDITIONS TO EACH BUYER'S OBLIGATION TO PURCHASE.
The obligation of each Buyer hereunder to purchase the Preferred Shares
at each of the First Closing and the Second Closing, as applicable, is subject
to the satisfaction, at or before the Closing Date in respect of such closing of
each of the following conditions, provided that these conditions are for such
Buyer's sole benefit and may be waived by such Buyer at any time in its sole
discretion:
a. With respect to the First Closing and the Second Closing:
(i) The Company shall have executed this Agreement
and the Registration Rights Agreement, and delivered the same to the Buyer.
(ii) The Certificate of Designation shall have been
filed with the Secretary of State of the State of New York, in the case of the
First Closing, and Delaware, in the case of the Second Closing.
(iii) The Company shall have delivered to such Buyer
duly executed certificates (in such denominations as the Buyer shall request)
representing the Preferred Shares being so purchased in accordance with Section
1(b) above.
(iv) Trading in the Common Stock on the NASDAQ-NMS
shall not have been suspended by the SEC or NASDAQ.
(v) The Irrevocable Transfer Agent Instructions, in
form and substance satisfactory to a majority-in-interest of the Buyers, shall
have been delivered to and acknowledged in writing by the Company's Transfer
Agent.
(vi) The representations and warranties of the
Company shall be true
14
<PAGE> 15
and correct in all material respects as of the date when made and as of each
Closing Date as though made at such time (except for representations and
warranties that speak as of a specific date) and the Company shall have
performed, satisfied and complied in all material respects with the covenants,
agreements and conditions required by this Agreement to be performed, satisfied
or complied with by the Company at or prior to each Closing Date. The Buyer
shall have received a certificate, executed by the chief executive officer of
the Company, dated as of each Closing Date, to the foregoing effect and as to
such other matters as may be reasonably requested by such Buyer.
(vii) The Buyer shall have received an opinion of the
Company's counsel, dated as of each Closing Date, in form, scope and substance
reasonably satisfactory to the Buyer and in substantially the same form as
EXHIBIT "D" attached hereto.
(viii) The Buyer shall have received an officer's
certificate described in Section 3(c) above and an officer's certificate as to
the matters described in the Sections 7(a)(ii), (iv), (v), (vi) and (viii) (and
such other matters as the Buyers shall reasonably request), dated as of each
Closing Date.
b. With respect to the Second Closing:
(i) The registration statement(s) filed by the
Company pursuant to Section 2(a) of the Registration Rights Agreement covering
the resale of the Registrable Securities (as defined in the Registration Rights
Agreement) underlying (i) the Preferred Shares issued or issuable at the First
Closing and the Second Closing and (ii) the Warrants issued or issuable upon
conversion of such Preferred Shares, shall be effective (within ninety (90) days
of the Closing Date in respect of the First Closing) and no stop order shall
have been issued in respect thereof.
(ii) The Company's merger with and into a Delaware
subsidiary for purposes of reincorporating under the laws of the State of
Delaware shall have been completed (and its authorized Common Stock shall have
been increased to at least 40,000,000 shares), and a certified copy of the
Certificate of Merger filed in respect thereof with the Secretary of State of
the State of Delaware shall have been provided to the Buyer.
8. GOVERNING LAW; MISCELLANEOUS.
a. Governing Law. This Agreement shall be governed by and
interpreted in accordance with the laws of the State of Delaware without regard
to the principles of conflict of laws. The parties hereto hereby submit to the
exclusive jurisdiction of the United States Federal Courts located in
Wilmington, Delaware with respect to any dispute arising under this Agreement,
the agreements entered into in connection herewith or the transactions
contemplated hereby or thereby.
15
<PAGE> 16
b. Counterparts. This Agreement may be executed in two or more
counterparts, all of which shall be considered one and the same agreement and
shall become effective when counterparts have been signed by each party and
delivered to the other party.
c. Headings. The headings of this Agreement are for
convenience of reference and shall not form part of, or affect the
interpretation of, this Agreement.
d. Severability. If any provision of this Agreement shall be
invalid or unenforceable in any jurisdiction, such invalidity or
unenforceability shall not affect the validity or enforceability of the
remainder of this Agreement or the validity or enforceability of this Agreement
in any other jurisdiction.
e. Entire Agreement; Amendments. This Agreement and the
instruments referenced herein contain the entire understanding of the parties
with respect to the matters covered herein and therein and, except as
specifically set forth herein or therein, neither the Company nor the Buyer
makes any representation, warranty, covenant or undertaking with respect to such
matters. No provision of this Agreement may be waived or amended other than by
an instrument in writing signed by the party to be charged with enforcement.
f. Notices. Any notices required or permitted to be given
under the terms of this Agreement shall be sent by certified or registered mail
(return receipt requested) or delivered personally or by courier and shall be
effective five days after being placed in the mail, if mailed, or upon receipt,
if delivered personally or by courier, in each case addressed to a party. The
addresses for such communications shall be:
If to the Company:
NUKO Information Systems, Inc.
2391 Qume Drive
San Jose, CA 95131
Attention: Chief Executive Officer
Telecopy: (408) 526-9541
With copy to:
Latham & Watkins
701 "B" Street, Suite 2100
San Diego, CA 92101
Attention: Thomas Edwards
Telecopy: (619) 696-7419
If to a Buyer: To the address set forth immediately below such Buyer's
name on the
16
<PAGE> 17
signature pages hereto.
Each party shall provide notice to the other party of any change in
address.
g. Successors and Assigns. This Agreement shall be binding
upon and inure to the benefit of the parties and their successors and assigns.
Neither the Company nor any Buyer shall assign this Agreement or any rights or
obligations hereunder without the prior written consent of the other.
Notwithstanding the foregoing, any Buyer may assign its rights hereunder to any
person willing to purchase in a private transaction at least One Thousand
(1,000) Preferred Shares, without the consent of the Company.
h. Third Party Beneficiaries. This Agreement is intended for
the benefit of the parties hereto and their respective permitted successors and
assigns, and is not for the benefit of, nor may any provision hereof be enforced
by, any other person.
i. Survival. The representations and warranties of the Company
and the agreements and covenants set forth in Sections 3, 4, 5 and 8 shall
survive the closings hereunder notwithstanding any due diligence investigation
conducted by or on behalf of the Buyers. The Company agrees to indemnify and
hold harmless each of the Buyers for loss or damage arising as a result of or
related to any breach or alleged breach by the Company of any of its
representations set forth in Section 3 hereof, including advancement of expenses
as they are incurred. Notwithstanding anything to the contrary set forth herein,
the representations of the Company set forth in Section 3 shall terminate five
(5) years from the Closing Date in respect of the Second Closing (or, if there
is no Second Closing, from the date the Second Closing is canceled pursuant to
Section 8(m) below).
j. Publicity. The Company and each of the Buyers shall have
the right to approve before issuance any press releases, SEC, NASDAQ or NASD
filings, or any other public statements with respect to the transactions
contemplated hereby; provided, however, that the Company shall be entitled,
without the prior approval of each of the Buyers, to make any press release or
SEC, NASDAQ or NASD filings with respect to such transactions as is required by
applicable law and regulations (although each of the Buyers shall be consulted
by the Company in connection with any such press release prior to its release
and shall be provided with a copy thereof).
k. Further Assurances. Each party shall do and perform, or
cause to be done and performed, all such further acts and things, and shall
execute and deliver all such other agreements, certificates, instruments and
documents, as the other party may reasonably request in order to carry out the
intent and accomplish the purposes of this Agreement and the consummation of the
transactions contemplated hereby.
l. Termination. In the event that the First Closing shall not
have occurred on or before fifteen (15) business days from the date hereof,
unless the parties agree otherwise, this
17
<PAGE> 18
Agreement shall terminate at the close of business on such date.
m. Company Option to Cancel Second Closing. In the event a
"Qualifying Registration Statement" (as defined in Article V of the Certificate
of Designation) is filed with the SEC prior to the satisfaction or waiver of the
conditions to the Buyers' obligations to consummate the Second Closing, the
Company shall have the option to cancel the Second Closing, in whole or in part,
by paying to the Buyers' the "Cancellation Amount." The Cancellation Amount
shall mean an amount in cash equal to 10% of the canceled amount of the Second
Closing, plus a number of Warrants equal to 110% of the canceled amount of the
Second Closing divided by the applicable "Conversion Price" (as defined in the
Certificate of Designation), without giving effect to the proviso in the
penultimate sentence of Section VI.B(a) of the Certificate of Designation and
treating the trading day immediately preceding the cancellation date as the
"Conversion Date" (as defined in the Certificate of Designation).
n. Certain Limitations on Transfer of Preferred Shares. No
"Subject Holder" (as defined below) may sell or otherwise transfer the Preferred
Shares except (i) to the Company or to a stockholder or a group of stockholders
who immediately prior to the sale control a majority of the Company's voting
shares (a "controlling Stockholder" or "Controlling Group", as applicable); (ii)
to an affiliate of such Subject Holder; (iii) in connection with any merger,
consolidation, reorganization or sale of more than 50% of the outstanding Common
Stock of the Company (a "Reorganization"); (iv) in a registered public offering
or a public sale pursuant to Rule 144 or other applicable exemption from the
registration requirements of the Securities Act (or any successor rule or
regulation); or (v) in a private sale (otherwise than to the Company, to a
Controlling Stockholder or a Controlling Group, to an affiliate of such Subject
Holder, or in a Reorganization), provided that pursuant to such private sale(s)
the Subject Holder shall not sell or otherwise transfer during any ninety (90)
day period a portion(s) of the Preferred Shares which, if converted into Common
Stock, would represent, at the time of the transfer, in the aggregate (together
with any other shares of Common Stock the beneficial ownership of which is
transferred), beneficial ownership by the transferee(s) of more than 4.9%
percent of the Common Stock then outstanding. Subject Holder means any Buyer (or
transferee thereof) who, but for the limitations on conversion set forth in
Article VI of the Certificate of Designation, would beneficially own 5% or more
of the outstanding Common Stock of the Company. For the purposes of this
paragraph, beneficial ownership shall be determined in accordance with Section
13(d) of the 1934 Act.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
<PAGE> 19
IN WITNESS WHEREOF, the undersigned Buyer and the Company have caused
this Agreement to be duly executed as of the date first above written.
NUKO Information Systems, Inc.
By: /s/ Pratap Kesav Kondamoori
-------------------------------
Name: Pratap Kondamoori
-----------------------------
Its: President, CEO
------------------------------
NAME OF BUYER: RGC International Investors, LDC
SIGNATURE:
By: Rose Glen Capital Management, LP, Investment Manager
By: RGC General Partner Corp., General Partner
By: /s/ Wayne D. Bloch
-------------------------------
Name: Wayne D. Bloch
-----------------------------
Its: Managing Director
------------------------------
RESIDENCE: Bermuda
ADDRESS:
c/o Rose Glen Capital Management, L.P.
440 E. Swedesford Road
Suite 2025
Wayne, PA 19087
Facsimile: 610-971-2212
Telephone: 610-902-0200
AGGREGATE SUBSCRIPTION AMOUNT:
Number of Shares of Series A Convertible Preferred Stock: 10,000
------------
Aggregate Purchase Price: $10,000,000
------------
19
<PAGE> 20
EXHIBIT B
TO
SECURITIES
PURCHASE
AGREEMENT
THIS WARRANT AND THE SHARES ISSUABLE UPON THE EXERCISE OF THIS WARRANT
HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED.
EXCEPT AS OTHERWISE SET FORTH HEREIN OR IN A SECURITIES PURCHASE
AGREEMENT DATED AS OF DECEMBER 13, 1996, NEITHER THIS WARRANT NOR ANY
OF SUCH SHARES MAY BE SOLD, OFFERED FOR SALE, ASSIGNED, TRANSFERRED, OR
OTHERWISE DISPOSED OF IN THE ABSENCE OF REGISTRATION UNDER SUCH ACT OR
AN OPINION OF COUNSEL THAT REGISTRATION IS NOT REQUIRED UNDER SUCH ACT
OR UNLESS SOLD PURSUANT TO RULE 144 UNDER SUCH ACT. ANY SUCH SALE,
ASSIGNMENT OR TRANSFER MUST ALSO COMPLY WITH APPLICABLE STATE
SECURITIES LAWS.
Right to
Purchase
_______
Shares of
Common
Stock, par
value $.001
per share
STOCK PURCHASE WARRANT
THIS CERTIFIES THAT, for value received, _________________________ or
its registered assigns, is entitled to purchase from NUKO Information Systems,
Inc., a [New York] corporation (the "Company"), at any time or from time to time
during the period specified in Paragraph 2 hereof, ____________________
(_______) fully paid and nonassessable shares of the Company's Common Stock, par
value $___ per share (the "Common Stock"), at an exercise price of $18.00 per
share (the "Exercise Price"). The term "Warrant Shares", as used herein, refers
to the shares of Common Stock purchasable hereunder. The Warrant Shares and the
Exercise Price are subject to adjustment as provided in Paragraph 4 hereof. The
term Warrants means this Warrant and the other warrants of the Company issued
upon conversion of the Series A Preferred Stock of the Company (the "Series A
Preferred Stock).
This Warrant is subject to the following terms, provisions, and
conditions:
1. MANNER OF EXERCISE; ISSUANCE OF CERTIFICATES; PAYMENT FOR SHARES.
Subject to the provisions hereof, this Warrant may be exercised by the holder
hereof, in whole or in part, by
<PAGE> 21
the surrender of this Warrant, together with a completed exercise agreement in
the form attached hereto (the "Exercise Agreement"), to the Company during
normal business hours on any business day at the Company's principal executive
offices (or such other office or agency of the Company as it may designate by
notice to the holder hereof), and upon (i) payment to the Company in cash, by
certified or official bank check or by wire transfer for the account of the
Company of the Exercise Price for the Warrant Shares specified in the Exercise
Agreement or (ii) if the resale of the Warrant Shares by the holder is not then
registered pursuant to an effective registration statement under the Securities
Act of 1933, as amended (the "Securities Act"), delivery to the Company of a
written notice of an election to effect a "Cashless Exercise" (as defined in
Section 11(c) below) for the Warrant Shares specified in the Exercise Agreement.
The Warrant Shares so purchased shall be deemed to be issued to the holder
hereof or such holder's designee, as the record owner of such shares, as of the
close of business on the date on which this Warrant shall have been surrendered,
the completed Exercise Agreement shall have been delivered, and payment shall
have been made for such shares as set forth above. Certificates for the Warrant
Shares so purchased, representing the aggregate number of shares specified in
the Exercise Agreement, shall be delivered to the holder hereof within a
reasonable time, not exceeding three (3) business days, after this Warrant shall
have been so exercised. The certificates so delivered shall be in such
denominations as may be requested by the holder hereof and shall be registered
in the name of such holder or such other name as shall be designated by such
holder. If this Warrant shall have been exercised only in part, then, unless
this Warrant has expired, the Company shall, at its expense, at the time of
delivery of such certificates, deliver to the holder a new Warrant representing
the number of shares with respect to which this Warrant shall not then have been
exercised.
Notwithstanding anything in this Warrant to the contrary, in
no event shall the Holder of this Warrant be entitled to exercise a number of
Warrants (or portions thereof) in excess of the number of Warrants (or portions
thereof) upon exercise of which the sum of (i) the number of shares of Common
Stock beneficially owned by the Holder and its affiliates (other than shares of
Common Stock which may be deemed beneficially owned through the ownership of the
unexercised Warrants and unconverted shares of Series A Preferred Stock) and
(ii) the number of shares of Common Stock issuable upon exercise of the Warrants
(or portions thereof) with respect to which the determination described herein
is being made, would result in beneficial ownership by the Holder and its
affiliates of more than 4.9% of the outstanding shares of Common Stock. For
purposes of the immediately preceding sentence, beneficial ownership shall be
determined in accordance with Section 13(d) of the Securities Exchange Act of
1934, as amended, and Regulation 13D-G thereunder, except as otherwise provided
in clause (i) hereof.
2. PERIOD OF EXERCISE. This Warrant is exercisable at any time or from
time to time on or after the date on which this Warrant is issued and delivered
upon conversion of the shares of Series A Preferred Stock issued pursuant to the
terms of that certain Securities Purchase Agreement, dated as of December 13,
1996, by and among the Company and the Buyer listed on the execution page
thereof (the "Securities Purchase Agreement"), and before 5:00 p.m., New York
City time on the fifth (5th) anniversary of the date of issuance (the "Exercise
Period").
3. CERTAIN AGREEMENTS OF THE COMPANY. The Company hereby covenants and
agrees as follows:
-2-
<PAGE> 22
(a) SHARES TO BE FULLY PAID. All Warrant Shares will, upon
issuance in accordance with the terms of this Warrant, be validly issued, fully
paid, and nonassessable and free from all taxes, liens, and charges with respect
to the issue thereof.
(b) RESERVATION OF SHARES. During the Exercise Period, the
Company shall at all times have authorized, and reserved for the purpose of
issuance upon exercise of this Warrant, a sufficient number of shares of Common
Stock to provide for the exercise of this Warrant.
(c) LISTING. The Company shall promptly secure the listing of
the shares of Common Stock issuable upon exercise of the Warrant upon each
national securities exchange or automated quotation system, if any, upon which
shares of Common Stock are then listed (subject to official notice of issuance
upon exercise of this Warrant) and shall maintain, so long as any other shares
of Common Stock shall be so listed, such listing of all shares of Common Stock
from time to time issuable upon the exercise of this Warrant; and the Company
shall so list on each national securities exchange or automated quotation
system, as the case may be, and shall maintain such listing of, any other shares
of capital stock of the Company issuable upon the exercise of this Warrant if
and so long as any shares of the same class shall be listed on such national
securities exchange or automated quotation system.
(d) CERTAIN ACTIONS PROHIBITED. The Company will not, by
amendment of its charter or through any reorganization, transfer of assets,
consolidation, merger, dissolution, issue or sale of securities, or any other
voluntary action, avoid or seek to avoid the observance or performance of any of
the terms to be observed or performed by it hereunder, but will at all times in
good faith assist in the carrying out of all the provisions of this Warrant and
in the taking of all such action as may reasonably be requested by the holder of
this Warrant in order to protect the exercise privilege of the holder of this
Warrant against dilution or other impairment, consistent with the tenor and
purpose of this Warrant. Without limiting the generality of the foregoing, the
Company (i) will not increase the par value of any shares of Common Stock
receivable upon the exercise of this Warrant above the Exercise Price then in
effect, and (ii) will take all such actions as may be necessary or appropriate
in order that the Company may validly and legally issue fully paid and
nonassessable shares of Common Stock upon the exercise of this Warrant.
(e) SUCCESSORS AND ASSIGNS. This Warrant will be binding upon
any entity succeeding to the Company by merger, consolidation, or acquisition of
all or substantially all the Company's assets.
4. ANTIDILUTION PROVISIONS. During the Exercise Period, the Exercise
Price and the number of Warrant Shares shall be subject to adjustment from time
to time as provided in this Paragraph 4.
In the event that any adjustment of the Exercise Price as required
herein results in a fraction of a cent, such Exercise Price shall be rounded up
to the nearest cent.
(a) ADJUSTMENT OF EXERCISE PRICE AND NUMBER OF SHARES UPON
ISSUANCE OF COMMON STOCK. Except as otherwise provided in Paragraphs 4(c) and
4(e) hereof, if and whenever on or after December 13, 1996, the Company issues
or sells, or in accordance with Paragraph 4(b) hereof is deemed to have issued
or sold, any shares of Common Stock for no
-3-
<PAGE> 23
consideration or for a consideration per share (before deduction of reasonable
expenses or commissions or underwriting discounts or allowances in connection
therewith) less than the Market Price (as hereinafter defined) on the date of
issuance (a "Dilutive Issuance"), then immediately upon the Dilutive Issuance,
the Exercise Price will be reduced to a price determined by multiplying the
Exercise Price in effect immediately prior to the Dilutive Issuance by a
fraction, (i) the numerator of which is an amount equal to the sum of (x) the
number of shares of Common Stock actually outstanding immediately prior to the
Dilutive Issuance, plus (y) the aggregate consideration, calculated as set forth
in Paragraph 4(b) hereof, received by the Company upon such Dilutive Issuance,
divided by the Market Price in effect immediately prior to the Dilutive
Issuance, and (ii) the denominator of which is the total number of shares of
Common Stock Deemed Outstanding immediately after the Dilutive Issuance.
(b) EFFECT ON EXERCISE PRICE OF CERTAIN EVENTS. For purposes
of determining the adjusted Exercise Price under Paragraph 4(a) hereof, the
following will be applicable:
(i) ISSUANCE OF RIGHTS OR OPTIONS. If the Company in
any manner issues or grants any warrants, rights or options, whether or not
immediately exercisable, to subscribe for or to purchase Common Stock or other
securities convertible into or exchangeable for Common Stock ("Convertible
Securities") (such warrants, rights and options to purchase Common Stock or
Convertible Securities are hereinafter referred to as "Options") and the price
per share for which Common Stock is issuable upon the exercise of such Options
is less than the Market Price on the date of issuance, then the maximum total
number of shares of Common Stock issuable upon the exercise of all such Options
will, as of the date of the issuance or grant of such Options, be deemed to be
outstanding and to have been issued and sold by the Company for such price per
share. For purposes of the preceding sentence, the "price per share for which
Common Stock is issuable upon the exercise of such Options" is determined by
dividing (i) the total amount, if any, received or receivable by the Company as
consideration for the issuance or granting of all such Options, plus the minimum
aggregate amount of additional consideration, if any, payable to the Company
upon the exercise of all such Options, plus, in the case of Convertible
Securities issuable upon the exercise of such Options, the minimum aggregate
amount of additional consideration payable upon the conversion or exchange
thereof at the time such Convertible Securities first become convertible or
exchangeable, by (ii) the maximum total number of shares of Common Stock
issuable upon the exercise of all such Options (assuming full conversion of
Convertible Securities, if applicable). No further adjustment to the Exercise
Price will be made upon the actual issuance of such Common Stock upon the
exercise of such Options or upon the conversion or exchange of Convertible
Securities issuable upon exercise of such Options.
(ii) ISSUANCE OF CONVERTIBLE SECURITIES. If the
Company in any manner issues or sells any Convertible Securities, whether or not
immediately convertible (other than where the same are issuable upon the
exercise of Options) and the price per share for which Common Stock is issuable
upon such conversion or exchange is less than the Market Price on the date of
issuance, then the maximum total number of shares of Common Stock issuable upon
the conversion or exchange of all such Convertible Securities will, as of the
date of the issuance of such Convertible Securities, be deemed to be outstanding
and to have been issued and sold by the Company for such price per share. For
the purposes of the preceding sentence, the "price per share for which Common
Stock is issuable upon such conversion or exchange" is determined by
-4-
<PAGE> 24
dividing (i) the total amount, if any, received or receivable by the Company as
consideration for the issuance or sale of all such Convertible Securities, plus
the minimum aggregate amount of additional consideration, if any, payable to the
Company upon the conversion or exchange thereof at the time such Convertible
Securities first become convertible or exchangeable, by (ii) the maximum total
number of shares of Common Stock issuable upon the conversion or exchange of all
such Convertible Securities. No further adjustment to the Exercise Price will be
made upon the actual issuance of such Common Stock upon conversion or exchange
of such Convertible Securities.
(iii) CHANGE IN OPTION PRICE OR CONVERSION RATE. If
there is a change at any time in (i) the amount of additional consideration
payable to the Company upon the exercise of any Options; (ii) the amount of
additional consideration, if any, payable to the Company upon the conversion or
exchange of any Convertible Securities; or (iii) the rate at which any
Convertible Securities are convertible into or exchangeable for Common Stock
(other than under or by reason of provisions designed to protect against
dilution), the Exercise Price in effect at the time of such change will be
readjusted to the Exercise Price which would have been in effect at such time
had such Options or Convertible Securities still outstanding provided for such
changed additional consideration or changed conversion rate, as the case may be,
at the time initially granted, issued or sold.
(iv) TREATMENT OF EXPIRED OPTIONS AND UNEXERCISED
CONVERTIBLE SECURITIES. If, in any case, the total number of shares of Common
Stock issuable upon exercise of any Option or upon conversion or exchange of any
Convertible Securities is not, in fact, issued and the rights to exercise such
Option or to convert or exchange such Convertible Securities shall have expired
or terminated, the Exercise Price then in effect will be readjusted to the
Exercise Price which would have been in effect at the time of such expiration or
termination had such Option or Convertible Securities, to the extent outstanding
immediately prior to such expiration or termination (other than in respect of
the actual number of shares of Common Stock issued upon exercise or conversion
thereof), never been issued.
(v) CALCULATION OF CONSIDERATION RECEIVED. If any
Common Stock, Options or Convertible Securities are issued, granted or sold for
cash, the consideration received therefor for purposes of this Warrant will be
the amount received by the Company therefor, before deduction of reasonable
commissions, underwriting discounts or allowances or other reasonable expenses
paid or incurred by the Company in connection with such issuance, grant or sale.
In case any Common Stock, Options or Convertible Securities are issued or sold
for a consideration part or all of which shall be other than cash, the amount of
the consideration other than cash received by the Company will be the fair value
of such consideration, except where such consideration consists of securities,
in which case the amount of consideration received by the Company will be the
Market Price thereof as of the date of receipt. In case any Common Stock,
Options or Convertible Securities are issued in connection with any merger or
consolidation in which the Company is the surviving corporation, the amount of
consideration therefor will be deemed to be the fair value of such portion of
the net assets and business of the non-surviving corporation as is attributable
to such Common Stock, Options or Convertible Securities, as the case may be. The
fair value of any consideration other than cash or securities will be determined
in good faith by the Board of Directors of the Company.
-5-
<PAGE> 25
(vi) EXCEPTIONS TO ADJUSTMENT OF EXERCISE PRICE. No
adjustment to the Exercise Price will be made (i) upon the exercise of any
warrants, options or convertible securities issued and outstanding on December
11, 1996; (ii) upon the grant or exercise of any stock or options which may
hereafter be granted or exercised under any employee benefit plan of the Company
now existing or to be implemented in the future, so long as the issuance of such
stock or options is approved by a majority of the independent members of the
Board of Directors of the Company or a majority of the members of a committee of
independent directors established for such purpose; (iii) upon the exercise of
the Warrants or the conversion of the Series A Preferred Stock issued pursuant
to the Securities Purchase Agreement; (iv) that would result in an Exercise
Price that is less than the last sale price of the Common Stock on the first
closing date pursuant to the Securities Purchase Agreement (subject to
appropriate adjustments for any stock split, stock dividend or similar event) or
(v) upon the issuance of Common Stock pursuant to a bona fide firm commitment
underwritten public offering registered under the Securities Act.
(c) SUBDIVISION OR COMBINATION OF COMMON STOCK. If the Company
at any time subdivides (by any stock split, stock dividend, recapitalization,
reorganization, reclassification or otherwise) the shares of Common Stock
acquirable hereunder into a greater number of shares, then, after the date of
record for effecting such subdivision, the Exercise Price in effect immediately
prior to such subdivision will be proportionately reduced. If the Company at any
time combines (by reverse stock split, recapitalization, reorganization,
reclassification or otherwise) the shares of Common Stock acquirable hereunder
into a smaller number of shares, then, after the date of record for effecting
such combination, the Exercise Price in effect immediately prior to such
combination will be proportionately increased.
(d) ADJUSTMENT IN NUMBER OF SHARES. Upon each adjustment of
the Exercise Price pursuant to the provisions of this Paragraph 4, the number of
shares of Common Stock issuable upon exercise of this Warrant shall be adjusted
by multiplying a number equal to the Exercise Price in effect immediately prior
to such adjustment by the number of shares of Common Stock issuable upon
exercise of this Warrant immediately prior to such adjustment and dividing the
product so obtained by the adjusted Exercise Price.
(e) CONSOLIDATION, MERGER OR SALE. In case of any
consolidation of the Company with, or merger of the Company into any other
corporation, or in case of any sale or conveyance of all or substantially all of
the assets of the Company other than in connection with a plan of complete
liquidation of the Company, then as a condition of such consolidation, merger or
sale or conveyance, adequate provision will be made whereby the holder of this
Warrant will have the right to acquire and receive upon exercise of this Warrant
in lieu of the shares of Common Stock immediately theretofore acquirable upon
the exercise of this Warrant, such shares of stock, securities or assets as may
be issued or payable with respect to or in exchange for the number of shares of
Common Stock immediately theretofore acquirable and receivable upon exercise of
this Warrant had such consolidation, merger or sale or conveyance not taken
place. In any such case, the Company will make appropriate provision to insure
that the provisions of this Paragraph 4 hereof will thereafter be applicable as
nearly as may be in relation to any shares of stock or securities thereafter
deliverable upon the exercise of this Warrant. The Company will not effect any
consolidation, merger or sale or conveyance unless prior to the consummation
thereof, the successor corporation (if other than the Company) assumes by
written instrument the
-6-
<PAGE> 26
obligations under this Paragraph 4 and the obligations to deliver to the holder
of this Warrant such shares of stock, securities or assets as, in accordance
with the foregoing provisions, the holder may be entitled to acquire.
(f) DISTRIBUTION OF ASSETS. In case the Company shall declare
or make any distribution of its assets (including cash) to holders of Common
Stock as a partial liquidating dividend, by way of return of capital or
otherwise, then, after the date of record for determining stockholders entitled
to such distribution, but prior to the date of distribution, the holder of this
Warrant shall be entitled upon exercise of this Warrant for the purchase of any
or all of the shares of Common Stock subject hereto, to receive the amount of
such assets which would have been payable to the holder had such holder been the
holder of such shares of Common Stock on the record date for the determination
of stockholders entitled to such distribution.
(g) NOTICE OF ADJUSTMENT. Upon the occurrence of any event
which requires any adjustment of the Exercise Price, then, and in each such
case, the Company shall give notice thereof to the holder of this Warrant, which
notice shall state the Exercise Price resulting from such adjustment and the
increase or decrease in the number of Warrant Shares purchasable at such price
upon exercise, setting forth in reasonable detail the method of calculation and
the facts upon which such calculation is based. Such calculation shall be
certified by the chief financial officer of the Company.
(h) MINIMUM ADJUSTMENT OF EXERCISE PRICE. No adjustment of the
Exercise Price shall be made in an amount of less than 1% of the Exercise Price
in effect at the time such adjustment is otherwise required to be made, but any
such lesser adjustment shall be carried forward and shall be made at the time
and together with the next subsequent adjustment which, together with any
adjustments so carried forward, shall amount to not less than 1% of such
Exercise Price.
(i) NO FRACTIONAL SHARES. No fractional shares of Common Stock
are to be issued upon the exercise of this Warrant, but the Company shall pay a
cash adjustment in respect of any fractional share which would otherwise be
issuable in an amount equal to the same fraction of the Market Price of a share
of Common Stock on the date of such exercise.
(j) OTHER NOTICES. In case at any time:
(i) the Company shall declare any dividend upon the
Common Stock payable in shares of stock of any class or make any other
distribution (including dividends or distributions payable in cash out of
retained earnings) to the holders of the Common Stock;
(ii) the Company shall offer for subscription pro
rata to the holders of the Common Stock any additional shares of stock of any
class or other rights;
(iii) there shall be any capital reorganization of
the Company, or reclassification of the Common Stock, or consolidation or merger
of the Company with or into, or sale of all or substantially all its assets to,
another corporation or entity; or
(iv) there shall be a voluntary or involuntary
dissolution, liquidation or
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<PAGE> 27
winding-up of the Company;
then, in each such case, the Company shall give to the holder of this Warrant
(a) notice of the date on which the books of the Company shall close or a record
shall be taken for determining the holders of Common Stock entitled to receive
any such dividend, distribution, or subscription rights or for determining the
holders of Common Stock entitled to vote in respect of any such reorganization,
reclassification, consolidation, merger, sale, dissolution, liquidation or
winding-up and (b) in the case of any such reorganization, reclassification,
consolidation, merger, sale, dissolution, liquidation or winding-up, notice of
the date (or, if not then known, a reasonable approximation thereof by the
Company) when the same shall take place. Such notice shall also specify the date
on which the holders of Common Stock shall be entitled to receive such dividend,
distribution, or subscription rights or to exchange their Common Stock for stock
or other securities or property deliverable upon such reorganization,
reclassification, consolidation, merger, sale, dissolution, liquidation, or
winding-up, as the case may be. Such notice shall be given at least 30 days
prior to the record date or the date on which the Company's books are closed in
respect thereto. Failure to give any such notice or any defect therein shall not
affect the validity of the proceedings referred to in clauses (i), (ii), (iii)
and (iv) above.
(k) CERTAIN EVENTS. If any event occurs of the type
contemplated by the adjustment provisions of this Paragraph 4 but not expressly
provided for by such provisions, the Company will give notice of such event as
provided in Paragraph 4(g) hereof, and the Company's Board of Directors will
make an appropriate adjustment in the Exercise Price and the number of shares of
Common Stock acquirable upon exercise of this Warrant so that the rights of the
Holder shall be neither enhanced nor diminished by such event.
(l) CERTAIN DEFINITIONS.
(i) "Common Stock Deemed Outstanding" shall mean the
number of shares of Common Stock actually outstanding (not including shares of
Common Stock held in the treasury of the Company), plus (x) pursuant to
Paragraph 4(b)(i) hereof, the maximum total number of shares of Common Stock
issuable upon the exercise of Options, as of the date of such issuance or grant
of such Options, if any, and (y) pursuant to Paragraph 4(b)(ii) hereof, the
maximum total number of shares of Common Stock issuable upon conversion or
exchange of Convertible Securities, as of the date of issuance of such
Convertible Securities, if any.
(ii) "Market Price," as of any date, (i) means the
average of the last reported sale prices for the shares of Common Stock as
reported by the National Association of Securities Dealers Automated Quotation
National Market ("NASDAQ-NMS") for the ten (10) trading days immediately
preceding such date, or (ii) if the NASDAQ-NMS is not the principal trading
market for the shares of Common Stock, the average of the last reported sale
prices on the principal trading market for the Common Stock during the same
period, or (iii) if market value cannot be calculated as of such date on any of
the foregoing bases, the Market Price shall be the fair market value as
reasonably determined in good faith by (a) the Board of Directors of the
Corporation or, at the option of a majority-in-interest of the holders of the
outstanding Warrants by (b) an independent investment bank of nationally
recognized standing in the valuation of businesses similar to the business of
the corporation. The manner of determining the Market Price of the Common Stock
set forth in the foregoing definition shall apply with respect
-8-
<PAGE> 28
to any other security in respect of which a determination as to market value
must be made hereunder.
(iii) "Common Stock," for purposes of this Paragraph
4, includes the Common Stock, par value $.001 per share, and any additional
class of stock of the Company having no preference as to dividends or
distributions on liquidation, provided that the shares purchasable pursuant to
this Warrant shall include only shares of Common Stock, par value $.001 per
share, in respect of which this Warrant is exercisable, or shares resulting from
any subdivision or combination of such Common Stock, or in the case of any
reorganization, reclassification, consolidation, merger, or sale of the
character referred to in Paragraph 4(e) hereof, the stock or other securities or
property provided for in such Paragraph.
5. ISSUE TAX. The issuance of certificates for Warrant Shares upon the
exercise of this Warrant shall be made without charge to the holder of this
Warrant or such shares for any issuance tax or other costs in respect thereof,
provided 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
certificate in a name other than the holder of this Warrant.
6. NO RIGHTS OR LIABILITIES AS A SHAREHOLDER. This Warrant shall not
entitle the holder hereof to any voting rights or other rights as a shareholder
of the Company. No provision of this Warrant, in the absence of affirmative
action by the holder hereof to purchase Warrant Shares, and no mere enumeration
herein of the rights or privileges of the holder hereof, shall give rise to any
liability of such holder for the Exercise Price or as a shareholder of the
Company, whether such liability is asserted by the Company or by creditors of
the Company.
7. TRANSFER, EXCHANGE, AND REPLACEMENT OF WARRANT.
(a) RESTRICTION ON TRANSFER. This Warrant and the rights
granted to the holder hereof are transferable, in whole or in part, upon
surrender of this Warrant, together with a properly executed assignment in the
form attached hereto, at the office or agency of the Company referred to in
Paragraph 7(e) below, provided, however, that any transfer or assignment shall
be subject to the conditions set forth in Paragraph 7(f) hereof and to the
applicable provisions of the Securities Purchase Agreement. Until due
presentment for registration of transfer on the books of the Company, the
Company may treat the registered holder hereof as the owner and holder hereof
for all purposes, and the Company shall not be affected by any notice to the
contrary. Notwithstanding anything to the contrary contained herein, the
registration rights described in Paragraph 8 are assignable only in accordance
with the provisions of that certain Registration Rights Agreement, dated as of
December 13, 1996, by and among the Company and the other signatories thereto
(the "Registration Rights Agreement").
(b) WARRANT EXCHANGEABLE FOR DIFFERENT DENOMINATIONS. This
Warrant is exchangeable, upon the surrender hereof by the holder hereof at the
office or agency of the Company referred to in Paragraph 7(e) below, for new
Warrants of like tenor representing in the aggregate the right to purchase the
number of shares of Common Stock which may be purchased hereunder, each of such
new Warrants to represent the right to purchase such number of shares as shall
be designated by the holder hereof at the time of such surrender.
-9-
<PAGE> 29
(c) REPLACEMENT OF WARRANT. Upon receipt of evidence
reasonably satisfactory to the Company of the loss, theft, destruction, or
mutilation of this Warrant and, in the case of any such loss, theft, or
destruction, upon delivery of an indemnity agreement reasonably satisfactory in
form and amount to the Company, or, in the case of any such mutilation, upon
surrender and cancellation of this Warrant, the Company, at its expense, will
execute and deliver, in lieu thereof, a new Warrant of like tenor.
(d) CANCELLATION; PAYMENT OF EXPENSES. Upon the surrender of
this Warrant in connection with any transfer, exchange, or replacement as
provided in this Paragraph 7, this Warrant shall be promptly canceled by the
Company. The Company shall pay all taxes (other than securities transfer taxes)
and all other expenses (other than legal expenses, if any, incurred by the
Holder or transferees) and charges payable in connection with the preparation,
execution, and delivery of Warrants pursuant to this Paragraph 7.
(e) REGISTER. The Company shall maintain, at its principal
executive offices (or such other office or agency of the Company as it may
designate by notice to the holder hereof), a register for this Warrant, in which
the Company shall record the name and address of the person in whose name this
Warrant has been issued, as well as the name and address of each transferee and
each prior owner of this Warrant.
(f) EXERCISE OR TRANSFER WITHOUT REGISTRATION. If, at the time
of the surrender of this Warrant in connection with any exercise, transfer, or
exchange of this Warrant, this Warrant (or, in the case of any exercise, the
Warrant Shares issuable hereunder), shall not be registered under the Securities
Act and under applicable state securities or blue sky laws, the Company may
require, as a condition of allowing such exercise, transfer, or exchange, (i)
that the holder or transferee of this Warrant, as the case may be, furnish to
the Company a written opinion of counsel, which opinion and counsel are
reasonably acceptable to the Company, to the effect that such exercise,
transfer, or exchange may be made without registration under said Act and under
applicable state securities or blue sky laws, (ii) that the holder or transferee
execute and deliver to the Company an investment letter in form and substance
reasonably acceptable to the Company, (iii) that the transferee be an
"accredited investor" as defined in Rule 501(a) promulgated under the Securities
Act and (iv) that, upon such transfer, the transferee beneficially own
Registrable Securities (as defined in the Registration Rights Agreement) having
an aggregate Market Price of at least $500,000; provided that no such opinion,
letter, status as an "accredited investor" or minimum Market Price shall be
required in connection with a transfer pursuant to Rule 144 under the Securities
Act. No "Subject Holder" (as defined below) may sell or otherwise transfer
Warrants, except (i) to the Company or to a stockholder or a group of
stockholders who immediately prior to the sale control a majority of the
Company's voting shares (a "Controlling Stockholder" or "Controlling Group", as
applicable); (ii) to an affiliate of such holder; (iii) in connection with any
merger, consolidation, reorganization or sale of more than 50% of the
outstanding Common Stock of the Company (a "Reorganization"); (iv) in a
registered public offering or a public sale pursuant to Rule 144 or other
applicable exemption from the registration requirements of the Securities Act
(or any successor rule or regulation); or (v) in a private sale (otherwise than
to the Company, to a Controlling Stockholder or a Controlling Group, to an
affiliate of such holder, or in a Reorganization), provided that pursuant to
such private sale(s) the holder shall not sell or otherwise transfer during any
ninety (90) day period a portion(s) of the Warrants which, if converted into
Common Stock at the time of the
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<PAGE> 30
transfer, would represent, in the aggregate (together with any other shares of
Common Stock so transferred), beneficial ownership by the transferee(s) of more
than 4.9% percent of the Common Stock then outstanding. Subject Holder means any
holder who, but for the second paragraph of Section 1 hereof, would beneficially
own 5% or more of the outstanding Common Stock of the Company. The first holder
of this Warrant, by taking and holding the same, represents to the Company that
such holder is acquiring this Warrant for investment and not with a view to the
distribution thereof.
8. REGISTRATION RIGHTS.
The initial holder of this Warrant (and certain assignees
thereof) is entitled to the benefit of such registration rights in respect of
the Warrant Shares as are set forth in Section 2 of the Registration Rights
Agreement.
9. NOTICES. All notices, requests, and other communications required or
permitted to be given or delivered hereunder to the holder of this Warrant shall
be in writing, and shall be personally delivered, or shall be sent by certified
or registered mail or by recognized overnight mail courier, postage prepaid and
addressed, to such holder at the address shown for such holder on the books of
the Company, or at such other address as shall have been furnished to the
Company by notice from such holder. All notices, requests, and other
communications required or permitted to be given or delivered hereunder to the
Company shall be in writing, and shall be personally delivered, or shall be sent
by certified or registered mail or by recognized overnight mail courier, postage
prepaid and addressed, to the office of the Company at NUKO Information Systems,
Inc., 2391 Qume Drive, San Jose, CA 95131, Attention: Chief Financial Officer or
at such other address as shall have been furnished to the holder of this Warrant
by notice from the Company. Any such notice, request, or other communication may
be sent by facsimile, but shall in such case be subsequently confirmed by a
writing personally delivered or sent by certified or registered mail or by
recognized overnight mail courier as provided above. All notices, requests, and
other communications shall be deemed to have been given either at the time of
the receipt thereof by the person entitled to receive such notice at the address
of such person for purposes of this Paragraph 9, or, if mailed by registered or
certified mail or with a recognized overnight mail courier upon deposit with the
United States Post Office or such overnight mail courier, if postage is prepaid
and the mailing is properly addressed, as the case may be.
10. GOVERNING LAW. THIS WARRANT SHALL BE GOVERNED BY AND CONSTRUED AND
ENFORCED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF DELAWARE WITHOUT
REGARD TO THE BODY OF LAW CONTROLLING CONFLICTS OF LAW.
11. MISCELLANEOUS.
(A) AMENDMENTS. This Warrant and any provision hereof may only
be amended by an instrument in writing signed by the Company and the holder
hereof.
(B) DESCRIPTIVE HEADINGS. The descriptive headings of the
several paragraphs of this Warrant are inserted for purposes of reference only,
and shall not affect the meaning or construction of any of the provisions
hereof.
-11-
<PAGE> 31
(C) CASHLESS EXERCISE. Notwithstanding anything to the
contrary contained in this Warrant, if the resale of the Warrant Shares by the
holder is not then registered pursuant to an effective registration statement
under the Securities Act, this Warrant may be exercised by presentation and
surrender of this Warrant to the Company at its principal executive offices with
a written notice of the holder's intention to effect a cashless exercise,
including a calculation of the number of shares of Common Stock to be issued
upon such exercise in accordance with the terms hereof (a "Cashless Exercise").
In the event of a Cashless Exercise, in lieu of paying the Exercise Price in
cash, the holder shall surrender this Warrant for that number of shares of
Common Stock determined by multiplying the number of Warrant Shares to which it
would otherwise be entitled by a fraction, the numerator of which shall be the
difference between the then current Market Price per share of the Common Stock
and the Exercise Price, and the denominator of which shall be the then current
Market Price per share of Common Stock.
12. REDEMPTION.
On or after the thirty (30) month anniversary of the date of
issuance of this Warrant, the Company may, at its option, upon not less than
thirty (30) days' prior written notice (the "Notice Period"), call for
redemption this Warrant, in whole or in part, at a redemption price of $0.001
per Warrant Share (the "Redemption Price"), provided that the closing price for
the Common Stock on the NASDAQ-NMS, or on the principal securities exchange or
other securities market on which the Common Stock is then being traded, is, on
the date written notice of redemption is dispatched (the "Notice Date") and has
been for at least the ten (10) consecutive Trading Days (as defined below)
ending immediately prior thereto, at least 150% of the Exercise Price then in
effect (the "Redemption Threshold Price"). At anytime after the Notice Date
until 5:00 p.m., New York time, on the final date of the Notice Period (or the
last Trading Day immediately prior thereto) (the "Redemption Date"), the holder
of this Warrant may exercise this Warrant at an exercise price equal to 100% of
the Exercise Price in effect immediately prior to the start of the Notice
Period. This Warrant shall cease to be exercisable at 5:00 p.m., New York time,
on the Redemption Date. At any time following the Notice Date until ten (10)
days following the expiration of the Notice Period, the Company will pay the
Redemption Price to or as directed by the holder of this Warrant upon
presentation and surrender of this Warrant at the Company's offices. "Trading
Day" shall mean any day on which the Common Stock is traded for any period on
NASDAQ-NMS, or on the principal securities exchange or other securities market
on which the Common Stock is then being traded.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
-12-
<PAGE> 32
IN WITNESS WHEREOF, the Company has caused this Warrant to be signed by
its duly authorized officer.
By: ________________________
Name:___________________
Title:__________________
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<PAGE> 33
FORM OF EXERCISE AGREEMENT
Dated: ________, ____.
To:_____________________________
The undersigned, pursuant to the provisions set forth in the within
Warrant, hereby agrees to purchase ________ shares of Common Stock covered by
such Warrant, and makes payment herewith in full therefor at the price per share
provided by such Warrant in cash or by certified or official bank check in the
amount of, [or, if the resale of such Common Stock by the undersigned is not
currently registered pursuant to an effective registration statement under the
Securities Act of 1933, as amended, by surrender of securities issued by the
Company (including a portion of the Warrant) having a market value (in the case
of a portion of this Warrant, determined in accordance with Section 11(c) of the
Warrant) equal to] $_________. Please issue a certificate or certificates for
such shares of Common Stock in the name of and pay any cash for any fractional
share to:
Name:________________________________
Signature:___________________________
Address:_____________________________
_____________________________
Note: The above signature should
correspond exactly with the name on
the face of the within Warrant.
and, if said number of shares of Common Stock shall not be all the shares
purchasable under the within Warrant, a new Warrant is to be issued in the name
of said undersigned covering the balance of the shares purchasable thereunder
less any fraction of a share paid in cash.
<PAGE> 34
FORM OF ASSIGNMENT
FOR VALUE RECEIVED, the undersigned hereby sells, assigns, and
transfers all the rights of the undersigned under the within Warrant, with
respect to the number of shares of Common Stock covered thereby set forth herein
below, to:
<TABLE>
<CAPTION>
Name of Assignee Address No of Shares
- ---------------- ------- ------------
<S> <C> <C>
</TABLE>
, and hereby irrevocably constitutes and appoints ______________
________________________ as agent and attorney-in-fact to transfer said Warrant
on the books of the within-named corporation, with full power of substitution in
the premises.
Dated: _____________________, ____,
In the presence of
__________________
Name: ____________________________
Signature: _______________________
Title of Signing Officer or Agent (if any):
__________________________________
Address: ________________________
________________________
Note: The above signature should
correspond exactly with the name on
the face of the within Warrant.
<PAGE> 1
Exhibit 4.2
EXECUTION COPY
REGISTRATION RIGHTS AGREEMENT
REGISTRATION RIGHTS AGREEMENT (this "AGREEMENT"), dated as of December
13, 1996 by and among NUKO Information Systems, Inc., a New York corporation,
with headquarters located at 2391 Qume Drive, San Jose, CA 95131 (the
"COMPANY"), and each of the undersigned (together with their respective
affiliates and any assignee or transferee of all of their respective rights
hereunder, the "INITIAL INVESTORS").
WHEREAS:
A. In connection with the Securities Purchase Agreement by and among
the parties hereto of even date herewith (the "SECURITIES PURCHASE AGREEMENT"),
the Company has agreed, upon the terms and subject to the conditions contained
therein, to issue and sell to the Initial Investors shares of its Series A
Convertible Preferred Stock (the "PREFERRED STOCK") that is convertible into (i)
shares (the "CONVERSION SHARES") of the Company's common stock (the "COMMON
STOCK") and (ii) warrants (the "WARRANTS") to acquire a number of shares of
Common Stock (the "WARRANT SHARES") equal to one-half the number of Conversion
Shares issuable upon conversion of the Preferred Stock, upon the terms and
subject to the limitations and conditions set forth in the Certificate of
Designations, Preferences and Rights with respect to such Preferred Stock (the
"CERTIFICATE OF DESIGNATION"); and
B. To induce the Initial Investors to execute and deliver the
Securities Purchase Agreement, the Company has agreed to provide certain
registration rights under the Securities Act of 1933, as amended, and the rules
and regulations thereunder, or any similar successor statute (collectively, the
"1933 ACT"), and applicable state securities laws;
NOW, THEREFORE, in consideration of the premises and the mutual
covenants contained herein and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the Company and each
of the Initial Investors hereby agree as follows:
1. DEFINITIONS.
a. As used in this Agreement, the following terms shall have
the following meanings:
(i) "INVESTORS" means the Initial Investors and any
transferee or
<PAGE> 2
assignee who agrees to become bound by the provisions of this Agreement in
accordance with Section 9 hereof.
(ii) "REGISTER," "REGISTERED," and "REGISTRATION"
refer to a registration effected by preparing and filing a Registration
Statement or Statements in compliance with the 1933 Act and pursuant to Rule 415
under the 1933 Act or any successor rule providing for offering securities on a
continuous basis ("RULE 415"), and the declaration or ordering of effectiveness
of such Registration Statement by the United States Securities and Exchange
Commission (the "SEC").
(iii) "REGISTRABLE SECURITIES" means the Conversion
Shares and the Warrant Shares issued or issuable and any shares of capital stock
issued or issuable as a dividend on or in exchange for or otherwise with respect
to any of the foregoing. Without limiting the foregoing, Registrable Securities
includes Warrant Shares issued or issuable upon exercise of Warrants issued
pursuant to Article V.C of the Certificate of Designation and Section 8(m) of
the Securities Purchase Agreement ("Call Warrant Shares").
(iv) "REGISTRATION STATEMENT" means a registration
statement of the Company under the 1933 Act.
b. Capitalized terms used herein and not otherwise defined
herein shall have the respective meanings set forth in the Securities Purchase
Agreement.
2. REGISTRATION.
a. Mandatory Registration. The Company shall prepare, and, on
or prior to the date which is fifteen (15) days after the date of the First
Closing under the Securities Purchase Agreement (the "CLOSING DATE"), file with
the SEC a Registration Statement on Form S-3 (or, if Form S-3 is not then
available, on such form of Registration Statement as is then available to effect
a registration of the Registrable Securities, subject to the consent of the
Initial Investors, which consent will not be unreasonably withheld) covering the
resale of the Registrable Securities underlying the securities issued at the
First Closing and issuable at the Second Closing (and, if applicable, any Call
Warrant Shares), which Registration Statement, to the extent allowable under the
1933 Act and the Rules promulgated thereunder (including Rule 416), shall state
that such Registration Statement also covers such indeterminate number of
additional shares of Common Stock as may become issuable upon conversion of the
Preferred Stock and exercise of the Warrants (i) to prevent dilution resulting
from stock splits, stock dividends or similar transactions or (ii) by reason of
changes in the Conversion Price of the Preferred Stock or the Exercise Price of
the Warrants in accordance with the terms thereof. The number of shares of
Common Stock initially included in such Registration Statement shall be no less
than two (2) times the number of Conversion Shares and Warrant Shares that are
then issuable upon conversion of the Preferred Stock and exercise of the
Warrants.
b. Underwritten Offering. If any offering pursuant to a
Registration
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Statement pursuant to Section 2(a) hereof involves an underwritten offering, the
Investors who hold a majority in interest of the Registrable Securities subject
to such underwritten offering, with the consent of a majority-in-interest of the
Initial Investors, shall have the right to select one legal counsel and an
investment banker or bankers and manager or managers to administer the offering,
which investment banker or bankers or manager or managers shall be reasonably
satisfactory to the Company.
c. Payments by the Company. The Company shall use its best
efforts to obtain effectiveness of the Registration Statement as soon as
practicable. If (i) the Registration Statement(s) covering the Registrable
Securities required to be filed by the Company pursuant to Section 2(a) hereof
is not declared effective by the SEC within one-hundred five (105) days after
the Closing Date (other than by reason of delay caused by (a) a change in a
relevant policy, procedure, interpretation, position, practice or rule of the
SEC announced after the Closing Date, or (b) any act or failure to act by the
Investors) or if, after the Registration Statement has been declared effective
by the SEC, sales cannot be made pursuant to the Registration Statement (by
reason of stop order, or the Company's failure to update the Registration
Statement), or (ii) the Common Stock is not listed or included for quotation on
the NASDAQ National Market (the "NASDAQ-NMS"), the NASDAQ Small Cap System
("NASDAQ SMALL CAP"), the New York Stock Exchange (the "NYSE") or the American
Stock Exchange (the "AMEX") after being so listed or included for quotation,
then the Company will make payments to the Investors in such amounts and at such
times as shall be determined pursuant to this Section 2(c) as partial relief for
the damages to the Investors by reason of any such delay in or reduction of
their ability to sell the Registrable Securities (which remedy shall not be
exclusive of any other remedies available at law or in equity). The Company
shall pay to each holder of Registerable Securities an amount equal to the
aggregate "Purchase Price" (as defined below) of the Preferred Stock held by
such Investors (including, without limitation, Preferred Stock that has been
converted into Conversion Shares and Warrants (including Warrant Shares) then
held by such Investors) (the "AGGREGATE SHARE PRICE") multiplied by the
Applicable Percentage (as defined below) times the sum of: (i) the number of
months (prorated for partial months) after the end of such 105-day period and
prior to the date the Registration Statement is declared effective by the SEC,
provided, however, that there shall be excluded from such period any delays
which are solely attributable to changes required by the Investors in the
Registration Statement with respect to information relating to the Investors,
including, without limitation, changes to the plan of distribution, or to the
failure of the Investors to conduct their review of the registration statement
pursuant to Section 3(h) below in a reasonably prompt manner; (ii) the number of
months (prorated for partial months) that sales cannot be made pursuant to the
Registration Statement after the Registration Statement has been declared
effective; and (iii) the number of months (prorated for partial months) that the
Common Stock is not listed or included for quotation on the NASDAQ-NMS, NASDAQ
Small Cap, or AMEX after the Registration Statement has been declared effective.
(For example, if the Registration Statement becomes effective one (1) month
after the end of such 105-day period, the Company would pay $15,000 for each
$1,000,000 of Aggregate Share Price; if thereafter, sales could not be made
pursuant to the Registration Statement for an additional period of one (1)
month, the Company would pay an additional $30,000 for each $1,000,000 of
Aggregate Share Price.) Such amounts shall be paid in cash or, at each
Investor's option, may be convertible into
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Common Stock and Warrants at the "CONVERSION PRICE" (as defined in the
Certificate of Designation). Any shares of Common Stock (including Common Stock
underlying Warrants) issued upon conversion of such amounts shall be Registrable
Securities. If the Investor desires to convert the amounts due hereunder into
Registrable Securities, it shall so notify the Company in writing within two (2)
business days of the date on which such amounts are first payable in cash and
such amounts shall be so convertible (pursuant to the mechanics set forth under
Article VI of the Certificate of Designation), beginning on the last day upon
which the cash amount would otherwise be due in accordance with the following
sentence. Payments of cash pursuant hereto shall be made within five (5) days
after the end of each period that gives rise to such obligation, provided that,
if any such period extends for more than thirty (30) days, interim payments
shall be made for each such thirty (30) day period. The term "PURCHASE PRICE"
means the purchase price paid by the Investors for the Preferred Stock. The term
"APPLICABLE PERCENTAGE" means one and one-half-hundredths (.015) with respect to
the first month of any calculation under clause (i) of the sentence in which the
term is used, and three hundredths (.030) for any other purpose.
d. Piggy-Back Registrations. If at any time prior to the
expiration of the Registration Period (as hereinafter defined) the Company shall
file with the SEC a Registration Statement relating to an offering for its own
account or the account of others under the 1933 Act of any of its equity
securities (other than on Form S-4 or Form S-8 or their then equivalents
relating to equity securities to be issued solely in connection with any
acquisition of any entity or business or equity securities issuable in
connection with stock option or other employee benefit plans), the Company shall
send to each Investor who is entitled to registration rights under this Section
2(d) written notice of such determination and, if within fifteen (15) days after
the effective date of such notice, such Investor shall so request in writing,
the Company shall include in such Registration Statement all or any part of the
Registrable Securities such Investor requests to be registered, except that (i)
so long as the Registration Statement filed pursuant to Section 2(a) has become
and continues to be effective, the rights referred to herein shall not apply to
any Registration Statement filed in respect of an underwritten public offering
of securities within the 12-month period following the date hereof and (ii) if,
in connection with any underwritten public offering for the account of the
Company the managing underwriter(s) thereof shall impose a limitation on the
number of shares of Common Stock which may be included in the Registration
Statement because, in such underwriter(s)' judgment, marketing or other factors
dictate such limitation is necessary to facilitate public distribution, then the
Company shall be obligated to include in such Registration Statement only such
limited portion of the Registrable Securities with respect to which such
Investor has requested inclusion hereunder as the underwriter shall permit. Any
exclusion of Registrable Securities shall be made pro rata among the Investors
seeking to include Registrable Securities in proportion to the number of
Registrable Securities sought to be included by such Investors; provided,
however, that the Company shall not exclude any Registrable Securities unless
the Company has first excluded all outstanding securities (other than securities
held by holders who are executive officers of the Company on the date hereof
("Current Officers") who shall have priority over all Investors in respect of
the registration rights described in this Section 2(d)), the holders of which
are not entitled to inclusion of such securities in such Registration Statement
or are not entitled to pro rata inclusion with the
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<PAGE> 5
Registrable Securities; and provided, further, however, that, after giving
effect to the immediately preceding proviso, any exclusion of Registrable
Securities shall be made pro rata with holders of other securities having the
right to include such securities in the Registration Statement other than
holders of securities who are Current Officers or who are entitled to inclusion
of their securities in such Registration Statement by reason of demand
registration rights. No right to registration of Registrable Securities under
this Section 2(d) shall be construed to limit any registration required under
Section 2(a) hereof. If an offering in connection with which an Investor is
entitled to registration under this Section 2(d) is an underwritten offering,
then each Investor whose Registrable Securities are included in such
Registration Statement shall, unless otherwise agreed by the Company, offer and
sell such Registrable Securities in an underwritten offering using the same
underwriter or underwriters and, subject to the provisions of this Agreement, on
the same terms and conditions as other shares of Common Stock included in such
underwritten offering.
e. Eligibility for Form S-3. The Company represents and
warrants that it meets the registrant eligibility and transaction requirements
for the use of Form S-3 for registration of the sale by the Initial Investor and
any other Investor of the Registrable Securities and the Company shall file all
reports required to be filed by the Company with the SEC in a timely manner so
as to maintain such eligibility for the use of Form S-3.
3. OBLIGATIONS OF THE COMPANY.
In connection with the registration of the Registrable Securities, the
Company shall have the following obligations:
a. The Company shall prepare promptly, and file with the SEC
not later than fifteen (15) days after the Closing Date, a Registration
Statement with respect to the number of Registrable Securities provided in
Section 2(a), and thereafter use its best efforts to cause such Registration
Statement relating to Registrable Securities to become effective as soon as
possible after such filing, and keep the Registration Statement effective
pursuant to Rule 415 at all times until such date as is the earlier of (i) the
date on which all of the Registrable Securities have been sold and (ii) the date
on which the Registrable Securities (in the opinion of counsel to the Initial
Investors) may be immediately sold without registration (the "REGISTRATION
PERIOD"), which Registration Statement (including any amendments or supplements
thereto and prospectuses contained therein) shall not contain any untrue
statement of a material fact or omit to state a material fact required to be
stated therein, or necessary to make the statements therein not misleading.
b. The Company shall prepare and file with the SEC such
amendments (including post-effective amendments) and supplements to the
Registration Statement and the prospectus used in connection with the
Registration Statement as may be necessary to keep the Registration Statement
effective at all times during the Registration Period, and, during such period,
comply with the provisions of the 1933 Act with respect to the disposition of
all Registrable Securities of the Company covered by the Registration Statement
until such time as
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<PAGE> 6
all of such Registrable Securities have been disposed of in accordance with the
intended methods of disposition by the seller or sellers thereof as set forth in
the Registration Statement. In the event the number of shares available under a
Registration Statement filed pursuant to this Agreement is insufficient to cover
all of the Registrable Securities issued or issuable upon conversion of the
Preferred Stock and exercise of the Warrants, the Company shall amend the
Registration Statement, or file a new Registration Statement (on the short form
available therefore, if applicable), or both, so as to cover all of the
Registrable Securities, in each case, as soon as practicable, but in any event
within twenty (20) business days after the necessity therefor arises (based on
the market price of the Common Stock and other relevant factors on which the
Company reasonably elects to rely). The Company shall use its best efforts to
cause such amendment and/or new Registration Statement to become effective as
soon as practicable following the filing thereof. The provisions of Section 2(c)
above shall be applicable with respect to such obligation, with the one hundred
five (105) days running from the day after the date on which the Company
reasonably first determines (or reasonably should have determined) the need
therefor.
c. The Company shall furnish to each Investor whose
Registrable Securities are included in the Registration Statement and its legal
counsel (i) promptly after the same is prepared and publicly distributed, filed
with the SEC, or received by the Company, one copy of the Registration Statement
and any amendment thereto, each preliminary prospectus and prospectus and each
amendment or supplement thereto, and, in the case of the Registration Statement
referred to in Section 2(a), each letter written by or on behalf of the Company
to the SEC or the staff of the SEC, and each item of correspondence from the SEC
or the staff of the SEC, in each case relating to such Registration Statement
(other than any portion of any thereof which contains information for which the
Company has sought confidential treatment), and (ii) such number of copies of a
prospectus, including a preliminary prospectus, and all amendments and
supplements thereto and such other documents as such Investor may reasonably
request in order to facilitate the disposition of the Registrable Securities
owned by such Investor.
d. The Company shall use reasonable efforts to (i) register
and qualify the Registrable Securities covered by the Registration Statement
under such other securities or "blue sky" laws of such jurisdictions in the
United States as the Investors who hold a majority in interest of the
Registrable Securities being offered reasonably request, (ii) prepare and file
in those jurisdictions such amendments (including post-effective amendments) and
supplements to such registrations and qualifications as may be necessary to
maintain the effectiveness thereof during the Registration Period, (iii) take
such other actions as may be necessary to maintain such registrations and
qualifications in effect at all times during the Registration Period, and (iv)
take all other actions reasonably necessary or advisable to qualify the
Registrable Securities for sale in such jurisdictions; provided, however, that
the Company shall not be required in connection therewith or as a condition
thereto to (a) qualify to do business in any jurisdiction where it would not
otherwise be required to qualify but for this Section 3(d), (b) subject itself
to general taxation in any such jurisdiction, (c) file a general consent to
service of process in any such jurisdiction, (d) provide any undertakings that
cause the Company undue expense or burden, or (e) make any change in its charter
or bylaws, which in each case the Board of Directors of the Company
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<PAGE> 7
determines to be contrary to the best interests of the Company and its
stockholders.
e. In the event Investors who hold a majority-in-interest of
the Registrable Securities being offered in the offering (with the approval of a
majority-in-interest of the Initial Investors) select underwriters for the
offering, the Company shall enter into and perform its obligations under an
underwriting agreement, in usual and customary form, including, without
limitation, customary indemnification and contribution obligations, with the
underwriters of such offering.
f. As promptly as practicable after becoming aware of such
event, the Company shall notify each Investor of the happening of any event, of
which the Company has knowledge, as a result of which the prospectus included in
the Registration Statement, as then in effect, includes an untrue statement of a
material fact or omission to state a material fact required to be stated therein
or necessary to make the statements therein not misleading, and use its best
efforts promptly to prepare a supplement or amendment to the Registration
Statement to correct such untrue statement or omission, and deliver such number
of copies of such supplement or amendment to each Investor as such Investor may
reasonably request.
g. The Company shall use its best efforts to prevent the
issuance of any stop order or other suspension of effectiveness of a
Registration Statement, and, if such an order is issued, to obtain the
withdrawal of such order at the earliest possible moment and to notify each
Investor who holds Registrable Securities being sold (or, in the event of an
underwritten offering, the managing underwriters) of the issuance of such order
and the resolution thereof.
h. The Company shall permit a single firm of counsel
designated by the Initial Investors to review the Registration Statement and all
amendments and supplements thereto (as well as all requests for acceleration or
effectiveness thereof) a reasonable period of time prior to their filing with
the SEC, and not file any document in a form to which such counsel reasonably
objects.
i. The Company shall make generally available to its security
holders as soon as practical, but not later than ninety (90) days after the
close of the period covered thereby, an earnings statement (in form complying
with the provisions of Rule 158 under the 1933 Act) covering a twelve-month
period beginning not later than the first day of the Company's fiscal quarter
next following the effective date of the Registration Statement.
j. At the request of any Investor, the Company shall furnish,
on the date that Registrable Securities are delivered to an underwriter, if any,
for sale in connection with the Registration Statement or, if such securities
are not being sold by an underwriter, on the date of effectiveness thereof (i)
an opinion, dated as of such date, from counsel representing the Company for
purposes of such Registration Statement, in form, scope and substance as is
customarily given in an underwritten public offering, addressed to the
underwriters, if any, and the Investors and (ii) a letter, dated such date, from
the Company's independent certified public accountants in form and substance as
is customarily given by independent certified public
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<PAGE> 8
accountants to underwriters in an underwritten public offering, addressed to the
underwriters, if any, and the Investors.
k. The Company shall make available for inspection by (i) any
Investor, (ii) any underwriter participating in any disposition pursuant to the
Registration Statement, (iii) one firm of attorneys and one firm of accountants
or other agents retained by the Initial Investors, (iv) one firm of attorneys
and one firm of accountants or other agents retained by all other Investors, and
(v) one firm of attorneys retained by all such underwriters (collectively, the
"INSPECTORS") all pertinent financial and other records, and pertinent corporate
documents and properties of the Company (collectively, the "RECORDS"), as shall
be reasonably deemed necessary by each Inspector to enable each Inspector to
exercise its due diligence responsibility, and cause the Company's officers,
directors and employees to supply all information which any Inspector may
reasonably request for purposes of such due diligence; provided, however, that
in no event shall the Company be obligated to provide any information to an
Inspector that it reasonably concludes is, or is acting on behalf of, a
competitor of the Company, and each Inspector shall hold in confidence and shall
not make any disclosure (except to an Investor) of any Record or other
information which the Company determines in good faith to be confidential, and
of which determination the Inspectors are so notified, unless (a) the disclosure
of such Records is necessary to avoid or correct a misstatement or omission in
any Registration Statement, (b) the release of such Records is ordered pursuant
to a subpoena or other order from a court or government body of competent
jurisdiction, or (c) the information in such Records has been made generally
available to the public other than by disclosure in violation of this or any
other agreement. The Company shall not be required to disclose any confidential
information in such Records to any Inspector until and unless such Inspector
shall have entered into confidentiality agreements (in form and substance
satisfactory to the Company) with the Company with respect thereto,
substantially in the form of this Section 3(k). Each Investor agrees that it
shall, upon learning that disclosure of such Records is sought in or by a court
or governmental body of competent jurisdiction or through other means, give
prompt notice to the Company and allow the Company, at its expense, to undertake
appropriate action to prevent disclosure of, or to obtain a protective order
for, the Records deemed confidential. Nothing herein shall be deemed to limit
the Investor's ability to sell Registrable Securities in a manner which is
otherwise consistent with applicable laws and regulations. The cost of any
inspection hereunder shall be borne by the Investors; provided, however, in
connection with the filing of the Registration Statement pursuant to Section
2(a) (or an amendment thereto pursuant to Section 3(b)), the cost of one firm of
attorneys and one firm of accountants selected by the Initial Investors with
respect to the review of such Registration Statement and the disclosure and
financial information contained therein shall be borne by the Company in
accordance with Section 5 below.
l. The Company shall hold in confidence and not make any
disclosure of information concerning an Investor provided to the Company unless
(i) disclosure of such information is necessary to comply with federal or state
securities laws, (ii) the disclosure of such information is necessary to avoid
or correct a misstatement or omission in any Registration Statement, (iii) the
release of such information is ordered pursuant to a subpoena or other order
from a court or governmental body of competent jurisdiction, or (iv) such
information has been
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<PAGE> 9
made generally available to the public other than by disclosure in violation of
this or any other agreement. The Company agrees that it shall, upon learning
that disclosure of such information concerning an Investor is sought in or by a
court or governmental body of competent jurisdiction or through other means,
give prompt notice to such Investor prior to making such disclosure, and allow
the Investor, at its expense, to undertake appropriate action to prevent
disclosure of, or to obtain a protective order for, such information.
m. The Company shall use its best efforts either to (i) cause
all the Registrable Securities covered by the Registration Statement to be
listed on each national securities exchange on which securities of the same
class or series issued by the Company are then listed, if any, if the listing of
such Registrable Securities is then permitted under the rules of such exchange,
or (ii) secure the designation and quotation, of all the Registrable Securities
covered by the Registration Statement on the NASDAQ-NMS or, if not eligible for
the NASDAQ-NMS on the NASDAQ Small Cap and, without limiting the generality of
the foregoing, to arrange for at least two market makers to register with the
National Association of Securities Dealers, Inc.
("NASD") as such with respect to such Registrable Securities.
n. The Company shall provide a transfer agent and registrar,
which may be a single entity, for the Registrable Securities not later than the
effective date of the Registration Statement.
o. The Company shall cooperate with the Investors who hold
Registrable Securities being offered and the managing underwriter or
underwriters, if any, to facilitate the timely preparation and delivery of
certificates (not bearing any restrictive legends) representing Registrable
Securities to be offered pursuant to the Registration Statement and enable such
certificates to be in such denominations or amounts, as the case may be, as the
managing underwriter or underwriters, if any, or the Investors may reasonably
request and registered in such names as the managing underwriter or
underwriters, if any, or the Investors may request, and, within three (3)
business days after a Registration Statement which includes Registrable
Securities is ordered effective by the SEC, the Company shall deliver, and shall
cause legal counsel selected by the Company to deliver, to the transfer agent
for the Registrable Securities (with copies to the Investors whose Registrable
Securities are included in such Registration Statement) an instruction in the
form attached hereto as EXHIBIT 1 and an opinion of such counsel in the form
attached hereto as EXHIBIT 2.
p. The Company shall take all other reasonable actions
necessary to expedite and facilitate disposition by the Investors of Registrable
Securities pursuant to the Registration Statement.
4. OBLIGATIONS OF THE INVESTORS.
In connection with the registration of the Registrable Securities, the
Investors shall have the following obligations:
a. It shall be a condition precedent to the obligations of the
Company to
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complete the registration pursuant to this Agreement with respect to the
Registrable Securities of a particular Investor that such Investor shall furnish
to the Company such information regarding itself, the Registrable Securities
held by it and the intended method of disposition of the Registrable Securities
held by it as shall be reasonably required to effect the registration of such
Registrable Securities and shall execute such documents in connection with such
registration as the Company may reasonably request. At least three (3) business
days prior to the first anticipated filing date of the Registration Statement,
the Company shall notify each Investor of the information the Company requires
from each such Investor if such Investor.
b. Each Investor, by such Investor's acceptance of the
Registrable Securities, agrees to cooperate with the Company as reasonably
requested by the Company in connection with the preparation and filing of the
Registration Statement hereunder, unless such Investor has notified the Company
in writing of such Investor's election to exclude all of such Investor's
Registrable Securities from the Registration Statement.
c. In the event Investors holding a majority-in-interest of
the Registrable Securities being registered (with the approval of the Initial
Investors) determine to engage the services of an underwriter, each Investor
agrees to enter into and perform such Investor's obligations under an
underwriting agreement, in usual and customary form, including, without
limitation, customary indemnification and contribution obligations, with the
managing underwriter of such offering and take such other actions as are
reasonably required in order to expedite or facilitate the disposition of the
Registrable Securities, unless such Investor has notified the Company in writing
of such Investor's election to exclude all of such Investor's Registrable
Securities from the Registration Statement.
d. Each Investor agrees that, upon receipt of any notice from
the Company of the happening of any event of the kind described in Section 3(f)
or 3(g), such Investor will immediately discontinue disposition of Registrable
Securities pursuant to the Registration Statement covering such Registrable
Securities until such Investor's receipt of the copies of the supplemented or
amended prospectus contemplated by Section 3(f) or 3(g) and, if so directed by
the Company, such Investor shall deliver to the Company (at the expense of the
Company) or destroy (and deliver to the Company a certificate of destruction)
all copies in such Investor's possession, of the prospectus covering such
Registrable Securities current at the time of receipt of such notice.
e. No Investor may participate in any underwritten
registration hereunder unless such Investor (i) agrees to sell such Investor's
Registrable Securities on the basis provided in any underwriting arrangements in
usual and customary form entered into by the Company, (ii) completes and
executes all questionnaires, powers of attorney, indemnities, underwriting
agreements and other documents reasonably required under the terms of such
underwriting arrangements, and (iii) agrees to pay its pro rata share of all
underwriting discounts and commissions and any expenses in excess of those
payable by the Company pursuant to Section 5 below.
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5. EXPENSES OF REGISTRATION.
All reasonable expenses, other than underwriting discounts and
commissions, incurred in connection with registrations, filings or
qualifications pursuant to Sections 2 and 3, including, without limitation, all
registration, listing and qualifications fees, printers and accounting fees, the
fees and disbursements of counsel for the Company, and the reasonable fees and
disbursements of one counsel selected by the Initial Investors pursuant to
Section 2(b) hereof shall be borne by the Company.
6. INDEMNIFICATION.
In the event any Registrable Securities are included in a Registration
Statement under this Agreement:
a. To the extent permitted by law, the Company will indemnify,
hold harmless and defend (i) each Investor who holds such Registrable
Securities, (ii) the directors, officers, partners, employees, agents and each
person who controls any Investor within the meaning of the 1933 Act or the
Securities Exchange Act of 1934, as amended (the "1934 ACT"), if any, and (iii)
any underwriter (as defined in the 1933 Act) for the Investors; and the
directors, officers, partners, employees and each person who controls any such
underwriter within the meaning of the 1933 Act or the 1934 Act, if any, (each,
an "INDEMNIFIED PERSON"), against any joint or several losses, claims, damages,
liabilities or expenses (collectively, together with actions, proceedings or
inquiries by any regulatory or self-regulatory organization, whether commenced
or threatened, in respect thereof, "CLAIMS") to which any of them may become
subject insofar as such Claims arise out of or are based upon: (i) any untrue
statement or alleged untrue statement of a material fact in a Registration
Statement or the omission or alleged omission to state therein a material fact
required to be stated or necessary to make the statements therein not
misleading, (ii) any untrue statement or alleged untrue statement of a material
fact contained in any preliminary prospectus if used prior to the effective date
of such Registration Statement, or contained in the final prospectus (as amended
or supplemented, if the Company files any amendment thereof or supplement
thereto with the SEC) or the omission or alleged omission to state therein any
material fact necessary to make the statements made therein, in light of the
circumstances under which the statements therein were made, not misleading, or
(iii) any violation or alleged violation by the Company of the 1933 Act, the
1934 Act, any other law, including, without limitation, any state securities
law, or any rule or regulation thereunder relating to the offer or sale of the
Registrable Securities (the matters in the foregoing clauses (i) through (iii)
being, collectively, "VIOLATIONS"). Subject to the restrictions set forth in
Section 6(c) with respect to the number of legal counsel, the Company shall
reimburse the Investors and each such underwriter or controlling person,
promptly as such expenses are incurred and are due and payable, for any
reasonable legal fees or other reasonable expenses incurred by them in
connection with investigating or defending any such Claim. Notwithstanding
anything to the contrary contained herein, the indemnification agreement
contained in this Section 6(a): (i) shall not apply to a Claim arising out of or
based upon a Violation which occurs in reliance upon and in conformity with
information furnished in writing to the Company by any Indemnified Person
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or underwriter for such Indemnified Person expressly for use in connection with
the preparation of the Registration Statement or any such amendment thereof or
supplement thereto, if such prospectus was timely made available by the Company
pursuant to Section 3(c) hereof; (ii) shall not apply to amounts paid in
settlement of any Claim if such settlement is effected without the prior written
consent of the Company, which consent shall not be unreasonably withheld; and
(iii) with respect to any preliminary prospectus, shall not inure to the benefit
of any Indemnified Person if the untrue statement or omission of material fact
contained in the preliminary prospectus was corrected on a timely basis in the
prospectus, as then amended or supplemented, such corrected prospectus was
timely made available by the Company pursuant to Section 3(c) hereof, and the
Indemnified Person was promptly advised in writing not to use the incorrect
prospectus prior to the use giving rise to a Violation and such Indemnified
Person, notwithstanding such advise, used it. Such indemnity shall remain in
full force and effect regardless of any investigation made by or on behalf of
the Indemnified Person and shall survive the transfer of the Registrable
Securities by the Investors pursuant to Section 9.
b. In connection with any Registration Statement in which an
Investor is participating, each such Investor agrees severally and not jointly
to indemnify, hold harmless and defend, to the same extent and in the same
manner set forth in Section 6(a), the Company, each of its directors, each of
its officers who signs the Registration Statement, each person, if any, who
controls the Company within the meaning of the 1933 Act or the 1934 Act, any
underwriter and any other stockholder selling securities pursuant to the
Registration Statement or any of its directors or officers or any person who
controls such stockholder or underwriter within the meaning of the 1933 Act or
the 1934 Act (collectively and together with an Indemnified Person, an
"INDEMNIFIED PARTY"), against any Claim to which any of them may become subject,
under the 1933 Act, the 1934 Act or otherwise, insofar as such Claim arises out
of or is based upon any Violation, in each case to the extent (and only to the
extent) that such Violation occurs in reliance upon and in conformity with
written information furnished to the Company by such Investor expressly for use
in connection with such Registration Statement; and subject to Section 6(c) such
Investor will reimburse any legal or other expenses (promptly as such expenses
are incurred and are due and payable) reasonably incurred by them in connection
with investigating or defending any such Claim; provided, however, that the
indemnity agreement contained in this Section 6(b) shall not apply to amounts
paid in settlement of any Claim if such settlement is effected without the prior
written consent of such Investor, which consent shall not be unreasonably
withheld; provided, further, however, that the Investor shall be liable under
this Agreement (including this Section 6(b) and Section 7) for only that amount
as does not exceed the net proceeds to such Investor as a result of the sale of
Registrable Securities pursuant to such Registration Statement. Such indemnity
shall remain in full force and effect regardless of any investigation made by or
on behalf of such Indemnified Party and shall survive the transfer of the
Registrable Securities by the Investors pursuant to Section 9. Notwithstanding
anything to the contrary contained herein, the indemnification agreement
contained in this Section 6(b) with respect to any preliminary prospectus shall
not inure to the benefit of any Indemnified Party if the untrue statement or
omission of material fact contained in the preliminary prospectus was corrected
on a timely basis in the prospectus, as then amended or supplemented.
12
<PAGE> 13
c. Promptly after receipt by an Indemnified Person or
Indemnified Party under this Section 6 of notice of the commencement of any
action (including any governmental action), such Indemnified Person or
Indemnified Party shall, if a Claim in respect thereof is to be made against any
indemnifying party under this Section 6, deliver to the indemnifying party a
written notice of the commencement thereof, and the indemnifying party shall
have the right to participate in, and, to the extent the indemnifying party so
desires, jointly with any other indemnifying party similarly noticed, to assume
control of the defense thereof with counsel mutually satisfactory to the
indemnifying party and the Indemnified Person or the Indemnified Party, as the
case may be; provided, however, that an Indemnified Person or Indemnified Party
shall have the right to retain its own counsel with the fees and expenses to be
paid by the indemnifying party, if, in the reasonable opinion of counsel
retained by the indemnifying party, the representation by such counsel of the
Indemnified Person or Indemnified Party and the indemnifying party would be
inappropriate due to actual or potential differing interests between such
Indemnified Person or Indemnified Party and any other party represented by such
counsel in such proceeding. The indemnifying party shall pay for only one
separate legal counsel for the Indemnified Persons or the Indemnified Parties,
as applicable, and such legal counsel shall be selected by Investors holding a
majority-in-interest of the Registrable Securities included in the Registration
Statement to which the Claim relates (with the approval of a
majority-in-interest of the Initial Investors), if the Investors are entitled to
indemnification hereunder, or the Company, if the Company is entitled to
indemnification hereunder, as applicable. The failure to deliver written notice
to the indemnifying party within a reasonable time of the commencement of any
such action shall not relieve such indemnifying party of any liability to the
Indemnified Person or Indemnified Party under this Section 6, except to the
extent that the indemnifying party is actually prejudiced in its ability to
defend such action. The indemnification required by this Section 6 shall be made
by periodic payments of the amount thereof during the course of the
investigation or defense, as such expense, loss, damage or liability is incurred
and is due and payable.
7. CONTRIBUTION.
To the extent any indemnification by an indemnifying party is
prohibited or limited by law, the indemnifying party agrees to make the maximum
contribution with respect to any amounts for which it would otherwise be liable
under Section 6 to the fullest extent permitted by law; provided, however, that
(i) no contribution shall be made under circumstances where the maker would not
have been liable for indemnification under the fault standards set forth in
Section 6, (ii) no seller of Registrable Securities guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the 1933 Act) shall be
entitled to contribution from any seller of Registrable Securities who was not
guilty of such fraudulent misrepresentation, and (iii) contribution (together
with any indemnification or other obligations under this Agreement) by any
seller of Registrable Securities shall be limited in amount to the net amount of
proceeds received by such seller from the sale of such Registrable Securities.
8. REPORTS UNDER THE 1934 ACT.
13
<PAGE> 14
With a view to making available to the Investors the benefits of Rule 144
promulgated under the 1933 Act or any other similar rule or regulation of the
SEC that may at any time permit the investors to sell securities of the Company
to the public without registration ("RULE 144"), the Company agrees to:
a. make and keep public information available, as those terms
are understood and defined in Rule 144;
b. file with the SEC in a timely manner all reports and other
documents required of the Company under the 1933 Act and the 1934 Act so long as
the Company remains subject to such requirements (it being understood that
nothing herein shall limit the Company's obligations under Section 4(c) of the
Securities Purchase Agreement) and the filing of such reports and other
documents is required for the applicable provisions of Rule 144; and
c. furnish to each Investor so long as such Investor owns
Registrable Securities, promptly upon request, (i) a written statement by the
Company that it has complied with the reporting requirements of Rule 144, the
1933 Act and the 1934 Act, (ii) a copy of the most recent annual or quarterly
report of the Company and such other reports and documents so filed by the
Company, and (iii) such other information as may be reasonably requested to
permit the Investors to sell such securities pursuant to Rule 144 without
registration.
9. ASSIGNMENT OF REGISTRATION RIGHTS.
The rights to have the Company register Registrable Securities pursuant
to this Agreement shall be automatically assignable by the Investors to any
transferee of all or any portion of Registrable Securities if: (i) the Investor
agrees in writing with the transferee or assignee to assign such rights, and a
copy of such agreement is furnished to the Company within a reasonable time
after such assignment, (ii) the Company is, within a reasonable time after such
transfer or assignment, furnished with written notice of (a) the name and
address of such transferee or assignee, and (b) the securities with respect to
which such registration rights are being transferred or assigned, (iii)
following such transfer or assignment, the further disposition of such
securities by the transferee or assignee is restricted under the 1933 Act and
applicable state securities laws, (iv) at or before the time the Company
receives the written notice contemplated by clause (ii) of this sentence, the
transferee or assignee agrees in writing with the Company to be bound by all of
the provisions contained herein, (v) such transfer shall have been made in
accordance with the applicable requirements of the Securities Purchase
Agreement, and (vi) such transferee shall be an "ACCREDITED INVESTOR" as that
term defined in Rule 501 of Regulation D promulgated under the 1933 Act.
10. AMENDMENT OF REGISTRATION RIGHTS.
Provisions of this Agreement may be amended and the observance thereof
may be waived (either generally or in a particular instance and either
retroactively or prospectively), only with written consent of the Company, each
of the Initial Investors (to the extent such Initial Investor
14
<PAGE> 15
still owns Registrable Securities) and Investors who hold a majority interest of
the Registrable Securities. Any amendment or waiver effected in accordance with
this Section 10 shall be binding upon each Investor and the Company.
11. MISCELLANEOUS.
a. A person or entity is deemed to be a holder of Registrable
Securities whenever such person or entity owns of record such Registrable
Securities. If the Company receives conflicting instructions, notices or
elections from two or more persons or entities with respect to the same
Registrable Securities, the Company shall act upon the basis of instructions,
notice or election received from the registered owner of such Registrable
Securities.
b. Notices required or permitted to be given hereunder shall
be in writing and shall be deemed to be sufficiently given when personally
delivered (by hand, by courier, by telephone line facsimile transmission or
other means) or which receipt is refused if delivered by hand or by courier or
sent by certified mail, return receipt requested, properly addressed and with
proper postage pre-paid,
if to the Company:
NUKO Information Systems, Inc.
2391 Qume Drive
San Jose, CA 95131
Attention: Chief Executive Officer
Telecopy: (408) 526-9541
With copy to:
Latham & Watkins
701 "B" Street, Suite 2100
San Diego, CA 92101
Attention: Thomas Edwards
Telecopy: (619) 696-7419
and if to any Investor, at such address as such Investor shall have provided in
writing to the Company, or at such other address as each such party furnishes by
notice given in accordance with this Section 11(b), and shall be effective, when
personally delivered, upon receipt and, when so sent by certified or registered
mail (return receipt requested), five days after deposit with the United States
Postal Service.
c. Failure of any party to exercise any right or remedy under
this Agreement or otherwise, or delay by a party in exercising such right or
remedy, shall not operate as a waiver thereof.
15
<PAGE> 16
d. This Agreement shall be enforced, governed by and construed
in accordance with the laws of the State of Delaware applicable to agreements
made and to be performed entirely within such State. In the event that any
provision of this Agreement is invalid or unenforceable under any applicable
statute or rule of law, then such provision shall be deemed inoperative to the
extent that it may conflict therewith and shall be deemed modified to conform
with such statute or rule of law. Any provision hereof which may prove invalid
or unenforceable under any law shall not affect the validity or enforceability
of any other provision hereof. The parties hereto hereby submit to the exclusive
jurisdiction of the United States Federal Courts located in Wilmington, Delaware
with respect to any dispute arising under this Agreement or the transactions
contemplated hereby.
e. This Agreement and the Securities Purchase Agreement
(including all schedules and exhibits thereto) constitute the entire agreement
among the parties hereto with respect to the subject matter hereof and thereof.
There are no restrictions, promises, warranties or undertakings, other than
those set forth or referred to herein and therein. This Agreement and the
Securities Purchase Agreement supersede all prior agreements and understandings
among the parties hereto with respect to the subject matter hereof and thereof.
f. Subject to the requirements of Section 9 hereof, this
Agreement shall inure to the benefit of and be binding upon the successors and
assigns of each of the parties hereto.
g. The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.
h. This Agreement may be executed in two or more counterparts,
each of which shall be deemed an original but all of which shall constitute one
and the same agreement. This Agreement, once executed by a party, may be
delivered to the other party hereto by facsimile transmission of a copy of this
Agreement bearing the signature of the party so delivering this Agreement.
i. Each party shall do and perform, or cause to be done and
performed, all such further acts and things, and shall execute and deliver all
such other agreements, certificates, instruments and documents, as the other
party may reasonably request in order to carry out the intent and accomplish the
purposes of this Agreement and the consummation of the transactions contemplated
hereby.
j. All consents and other determinations to be made by the
Investors pursuant to this Agreement shall be made by Investors holding a
majority of the Registrable Securities, determined as if all shares of Preferred
Stock and Warrants then outstanding (including Warrants issuable upon conversion
of the then outstanding Preferred Stock) have been converted into or exercised
for Registrable Securities.
16
<PAGE> 17
IN WITNESS WHEREOF, the Company and the undersigned Initial Investor
have caused this Agreement to be duly executed as of the date first above
written
NUKO Information Systems, Inc.
By: Pratap S. Kondamoori
-------------------------------
Name: Pratap Kondamoori
-----------------------------
Its: President, CEO
------------------------------
RGC International Investors, LDC
By: Rose Glen Capital Management, LP, Investment Manager
By: RGC General Partner Corp.
By: /s/ Wayne D. Bloch
-------------------------------
Name: Wayne D. Bloch
-----------------------------
Its: Managing Director
------------------------------
17
<PAGE> 18
EXHIBIT 1
TO
REGISTRATION
RIGHTS
AGREEMENT
[Company Letterhead]
[Date]
[Name and address of Transfer Agent]
Ladies and Gentlemen:
This letter shall serve as our irrevocable authorization and
direction to you (1) to transfer or re-register (or at the holders request to
reissue to the holder thereof without any restrictive legend) the certificates
for the shares of Common Stock, $.001 par value (the "COMMON STOCK"), of NUKO
Information Systems, Inc., a Delaware corporation (the "COMPANY"), represented
by certificate numbers _____ for an aggregate of _____ shares (the "OUTSTANDING
SHARES") of Common Stock presently registered in the name of [Name of Investor]
(which shares were previously issued upon conversion or exercise of the
Preferred Shares or Warrants (as hereinafter defined) upon surrender of such
certificates to you, notwithstanding the legend appearing on such certificates,
and (2) to issue shares (the "CONVERSION SHARES") of Common Stock to or upon the
order of the registered holder from time to time of shares of Series Preferred
Stock of the Company ("Preferred Shares") upon surrender to you of a properly
completed and duly executed Conversion Notice and Certificates evidencing such
Preferred Shares, notwithstanding the legend appearing on such Certificates and
(3) to issue shares (the "WARRANT SHARES") of Common Stock to or upon the order
of the registered holder from time to time of the Warrants of the Company issued
upon conversion of Preferred Shares (the "WARRANTS") upon surrender to you of a
properly completed and duly executed Exercise Agreement and such Warrants
notwithstanding the legend appearing on such Warrants. The transfer or
re-registration of the certificates for the Outstanding Shares by you should be
made at such time as you are requested to do so by the record holder of the
Outstanding Shares. The certificate issued upon such transfer or re-
registration should be registered in such name as requested by the holder of
record of the certificate surrendered to you and should not bear any legend
which would restrict the transfer of the shares represented thereby. In
addition, you are hereby directed to remove any stop-transfer instruction
relating to the Outstanding Shares. Certificates for the Conversion Shares and
Warrant Shares should not bear any restrictive legend and should not be subject
to any stop-transfer restriction.
Contemporaneous with the delivery of this letter, the Company
is delivering to you an opinion of ___________________ as to registration of the
Outstanding Shares, the
<PAGE> 19
Conversion Shares and the Warrant Shares under the Securities Act of 1933, as
amended.
Should you have any questions concerning this matter, please
contact me.
Very truly yours,
NUKO INFORMATION SYSTEMS, INC.
By: ________________________________
Name:
Title:
Enclosures:
cc: [Name of Investor]
<PAGE> 20
EXHIBIT 2
TO
REGISTRATION
RIGHTS
AGREEMENT
[Date]
[Name and address
of transfer agent]
RE: NUKO INFORMATION SYSTEMS, INC.
Ladies and Gentlemen:
We are counsel to NUKO Information Systems, Inc., a [Delaware]
corporation (the "COMPANY") , and we understand that [Name of Investor] (the
"HOLDER") has purchased from the Company shares of the Company's Series __
Convertible Preferred Stock (the "PREFERRED STOCK") that is convertible into (i)
the Company's Common Stock, par value $.001 per share (the "Common Stock") and
(ii) warrants to acquire Common Stock. The Preferred Stock was purchased by the
Holder pursuant to a Securities Purchase Agreement, dated as of December ___,
1996, between the Holder and the Company (the "AGREEMENT"). Pursuant to a
Registration Rights Agreement, dated as of December ___, 1996, between the
Company and the Holder (the "REGISTRATION RIGHTS AGREEMENT"), the Company agreed
with the Holder, among other things, to register the Registrable Securities (as
that term is defined in the Registration Rights Agreement) under the Securities
Act of 1933, as amended (the "SECURITIES ACT"), upon the terms provided in the
Registration Rights Agreement. In connection with the Company's obligations
under the Registration Rights Agreement, on December __, 1996, the Company filed
a Registration Statement on Form S-3 (File No. 33- _____________) (the
"REGISTRATION STATEMENT") with the Securities and Exchange Commission (the
"SEC") relating to the Registrable Securities, which names the Holder as a
selling stockholder thereunder.
[Other introductory and scope of examination language to be inserted]
Based on the foregoing, we are of the opinion that the Registrable
Securities have been registered under the Securities Act.
<PAGE> 21
[Other appropriate language to be included.]
Very truly yours,
cc: [Name of investor]
<PAGE> 1
Exhibit 99.1
NEWS RELEASE
FOR: NUKO
FOR IMMEDIATE RELEASE
NUKO INFORMATION SYSTEMS, INC. ANNOUNCES $10 MILLION INVESTMENT
SAN JOSE, CA/December 17, 1996--NUKO Information Systems (Nasdaq: NUKO) today
announced it has raised $10 million in a private placement of Convertible
Preferred Stock to a single institutional investor. $5 million was funded
immediately and the remaining $5 million will be funded upon effectiveness of a
registration statement registering the Common Stock underlying the Preferred
Stock and warrants issued in connection therewith. The company intends to use
the proceeds to fund general corporate needs.
"This investment will strengthen our ability to establish NUKO as a
premier player in the market for digital video networking equipment," commented
Bob Kondamoori, Chief Executive Officer.
NUKO Information Systems, Inc., headquartered in San Jose, CA, is a
provider of end-to-end solutions which enable the networking of digital video
signals. NUKO's Intelligent Broadband Service Network (IBSN) solution uses
open-systems, standards-based MPEG-2 methodology. These advanced products
enable users to digitally encode, compress, transmit, decode and store video
signals for a complete range of applications including distance learning,
broadcasting, conferencing, entertainment and authoring.
###
CONTACTS: John Gorman, CFO Morgen-Walke Associates
(408) 570-2280 Chris Danne, Todd Friedman, Douglas Sherk
(415) 296-7383
Emily Dupree, Elissa Grabowski
(212) 850-5698/(212) 850-5600
[MORGEN WALKE ASSOCIATES INC. LETTERHEAD]
