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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) February 28, 1997
NUKO INFORMATION SYSTEMS, INC.
----------------------------------------------------------------
(Exact name of registrant as specified in its charter)
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<S> <C> <C>
Delaware 2-31438 16-0962874
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(State or other jurisdiction of (Commission (I.R.S. Employer
incorporation or organization) File No.) Identification No.)
2391 Qume Drive
San Jose, California 95131
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(Address of principal executive offices) (Zip Code)
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Registrant's telephone number, including area code (408) 526-0288
______________________________________________________
(Former name or former address,
if changed since last report.)
Page 1 of 57
Exhibit Index on Page 5
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ITEM 5. OTHER EVENTS
On February 28, 1997, 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, pursuant to the second closing under a
Securities Purchase Agreement, dated as of December 13, 1996, by and between
the Registrant and the Investor (the "Purchase Agreement").
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 is 10% through March
16, 1997 and 15% thereafter. 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.
The Registrant also issued to the investor a Stock Purchase
Warrant (the "Warrant") to purchase 625,000 shares of its Common Stock. The
Warrant has an exercise price equal to the average closing bid price for the
Registrant's Common Stock on The Nasdaq Stock Market's National Market System
for the thirty trading days beginning June 1, 1997 and may be exercised at any
time after the end of such thirty-day trading period and before March 1, 2002.
In connection with its issuance of the Warrant, the Registrant has granted
registration rights with respect to the shares of Common Stock underlying the
Warrant pursuant to a Warrant Share Registration Rights Agreement dated as of
February 28, 1997 by and between the Registrant and the Investor.
As consideration for the issuance of the Warrant, the Investor
agreed to defer from March 17, 1997 to April 30, 1997 its right to increase
from 10% to 15% the discount to market at which it may convert shares of
Convertible Preferred purchased at the second closing into shares of Common
Stock. As of the date hereof, there have been no conversions of the
Convertible Preferred.
The foregoing summary of the terms of the Purchase Agreement,
the Convertible Preferred and the Warrant does not purport to be complete and
is qualified in its entirety by reference to the full text of the Purchase
Agreement, the Certificate of Designation containing the designations,
preferences and rights of the Convertible Preferred and the Warrant, which are
incorporated herein by reference.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS
(C) EXHIBITS
3.1 Amended and Restated Certificate of Incorporation of the
Registrant.
3.2 Certificate of Designation containing the designations,
preferences and rights of the Registrant's Series A
Convertible 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
Page 2
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Purchase Warrant attached as Exhibit B thereto (incorporated by
reference to Exhibit 4.1 to the Registrant's Current Report on
Form 8-K filed December 20, 1996).
4.2 Registration Rights Agreement, dated as of December 13, 1996,
by and between the Registrant and RGC International Investors,
LDC (incorporated by reference to Exhibit 4.2 to the
Registrant's Current Report on Form 8-K filed December 20,
1996).
4.3 Stock Purchase Warrant dated February 28, 1997 issued by the
Registrant to RGC International Investors, LDC.
4.4 Warrant Share Registration Rights Agreement, dated as of
February 28, 1997, by and between the Registrant and RGC
International Investors, LDC.
4.5 Letter Agreement dated February 28, 1997 between the
Registrant and RGC International Investors, LDC.
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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: March 5, 1997 By: /S/ JOHN H. GORMAN
------------------------------------
John H. Gorman
Vice President -- Finance,
Chief Financial Officer and Secretary
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EXHIBIT INDEX
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Exhibit No. Exhibit Page
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3.1 Amended and Restated Certificate of Incorporation of the Registrant. 6
3.2 Certificate of Designation containing the designations, preferences and rights of 10
the Registrant's Series A Convertible 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 (incorporated by reference to
Exhibit 4.1 to the Registrant's Current Report on Form 8-K filed December 20,
1996).
4.2 Registration Rights Agreement, dated as of December 13, 1996, by and between the __
Registrant and RGC International Investors, LDC (incorporated by reference to
Exhibit 4.1 to the Registrant's Current Report on Form 8-K filed December 20,
1996).
4.3 Stock Purchase Warrant dated February 28, 1997 issued by the Registrant to RGC 27
International Investors, LDC.
4.4 Warrant Share Registration Rights Agreement, dated as of February 28, 1997, by 40
and between the Registrant and RGC International Investors, LDC.
4.5 Letter Agreement dated February 28, 1997 between the Registrant and RGC 57
International Investors, LDC.
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EXHIBIT 3.1
AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
NUKO INFORMATION SYSTEMS, INC.
NUKO INFORMATION SYSTEMS, INC., a corporation organized and
existing under and by virtue of the General Corporation Law of the State of
Delaware (the "Corporation"), DOES HEREBY CERTIFY:
1. The Corporation's original Certificate of
Incorporation was filed on November 12, 1996.
2. That by action taken by unanimous written consent of
the Board of Directors on January 2, 1997, resolutions were duly adopted
setting forth a proposed amendment and restatement of the Certificate of
Incorporation of the Corporation, declaring said amendment and restatement to
be advisable and directing its officers to submit said amendment and
restatement to the sole stockholder of the Corporation for consideration
thereof. The resolution setting forth the proposed amendment and restatement
is as follows:
"THEREFORE, BE IT RESOLVED, that the Certificate of
Incorporation of the Corporation is hereby amended to read in its
entirety as follows, subject to the required consent of the sole
stockholder of the corporation:
FIRST: The name of the Corporation (hereinafter the
"Corporation") is
NUKO INFORMATION SYSTEMS, INC.
SECOND: The address, including street, number, city and
county, of the registered office of the Corporation in the
State of Delaware is 1013 Centre Road, City of Wilmington,
County of New Castle; and the name of the Registered Agent of
the Corporation in the State of Delaware is The Prentice-Hall
Corporation System, Inc.
THIRD: The nature of the business or purposes to be
conducted or promoted is to engage in any lawful act or
activity for which corporations may be organized under the
General Corporation Law of Delaware.
FOURTH: The Corporation is authorized to issue two classes of
shares of capital stock to be designated respectively,
"Preferred Stock" and "Common Stock". The
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total number of shares which the Corporation is authorized to
issue is forty-five million (45,000,000). Five million
(5,000,000) shares shall be Preferred Stock and forty million
(40,000,000) shares shall be Common Stock. The Preferred
Stock and the Common Stock shall each have a par value of
$.001 per share.
The Preferred Stock may be issued from time to time in one or
more series. The Board of Directors is hereby authorized
subject to limitations prescribed by law, to fix by resolution
or resolutions the designations, powers, preferences and
rights, and the qualifications, limitations or restrictions
thereof, of each such series of Preferred Stock, including
without limitation authority to fix by resolution or
resolutions, the dividend rights, dividend rate, conversion
rights, voting rights, rights and terms of redemption
(including sinking fund provisions), redemption price or
prices, and liquidation preferences of any wholly unissued
series of Preferred Stock, and the number of shares
constituting any such series and the designation thereof, or
any of the foregoing.
The Board of Directors is further authorized to increase (but
not above the total number of authorized shares of the class)
or decrease (but not below the number of shares of any such
series then outstanding) the number of shares of any series,
the number of which was fixed by it, subsequent to the issue
of shares of such series then outstanding, subject to the
powers, preferences and rights, and the qualifications,
limitations and restrictions thereof stated in the resolution
of the Board of Directors originally fixing the number of
shares of such series. If the number of shares of any series
is so decreased, then the shares constituting such decrease
shall resume the status which they had prior to the adoption
of the resolution originally fixing the number of shares of
such series.
FIFTH: The business and affairs of the Corporation shall be
managed by or under the direction of a Board of Directors
consisting of not less than 4 nor more than 11 directors, the
exact number of directors to be determined from time to time
solely by resolution adopted by the affirmative vote of a
majority of the entire Board of Directors.
SIXTH: The Corporation is to have perpetual existence.
SEVENTH: The following provisions are inserted for the
management of the business and the conduct of the affairs of
the Corporation and for the further definition of the powers
of the Corporation and its directors and stockholders:
(1) The Board of Directors shall have the power
to adopt, amend or repeal the by-laws of the
Corporation.
The stockholders may adopt, amend or repeal the
by-laws only with the affirmative vote of the holders of not
less than 66 2/3% of the total voting power of all outstanding
securities of the Corporation then entitled to vote generally
in the election of directors, voting together as a single
class.
(2) Elections of directors need not be by written
ballot unless the by-laws of the Corporation so provide.
2
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(3) Any action required or permitted to be taken
at any annual or special meeting of stockholders may be taken
only upon the vote of stockholders at an annual or special
meeting duly noticed and called in accordance with Delaware
law, and may not be taken by written consent of stockholders
without a meeting.
(4) Special meetings of stockholders may be
called by the Board of Directors, the Chairman of the Board of
Directors, the President or the Secretary of the Corporation
and may not be called by any other person. Notwithstanding
the foregoing, whenever holders of one or more classes or
series of Preferred Stock shall have the right, voting
separately as a class or series, to elect directors, such
holders may call special meetings of such holders pursuant to
the certificate of designation for such classes or series.
NINTH: No director of this Corporation shall be personally
liable to the Corporation or its stockholders for monetary
damages for breach of fiduciary duty as a director, except for
liability (i) for any breach of the director's duty of loyalty
to the Corporation or its stockholders, (ii) for acts or
omissions not in good faith or which involve intentional
misconduct or a knowing violation of the law, (iii) under
Section 174 of the General Corporation Law of Delaware, or
(iv) for any transaction from which the director derived an
improper personal benefit."
3. That thereafter, by consent of the sole stockholder
of all of the issued and outstanding shares of stock of the Corporation in
accordance with Section 228 of the General Corporation Law of the State of
Delaware, all of the shares of the Corporation were voted in favor of the
amendment.
4. That said Amended and Restated Certificate of
Incorporation was duly adopted in accordance with the provisions of Sections
242 and 245 of the General Corporation Law of the State of Delaware.
3
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IN WITNESS WHEREOF, NUKO INFORMATION SYSTEMS, INC. has caused
this Certificate to be signed by Pratap Kesav Kondamoori, its President and
John H. Gorman, its Secretary, this 2nd day of January, 1997.
NUKO INFORMATION SYSTEMS, INC.
a Delaware corporation
By: /s/ PRATAP KESAV KONDAMOORI
-----------------------------
Name: Pratap Kesav Kondamoori
Title: President
ATTEST
/s/ JOHN H. GORMAN
- -----------------------------
Name: John H. Gorman
Title: Secretary
4
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Exhibit 3.2
CERTIFICATE OF DESIGNATIONS,
PREFERENCES AND RIGHTS
OF
SERIES A CONVERTIBLE PREFERRED STOCK
OF
NUKO INFORMATION SYSTEMS, INC.
(Pursuant to Section 151 of the
Delaware General Corporation Law)
NUKO Information Systems, Inc., a corporation organized and existing
under the laws of the State of Delaware (the "Corporation"), hereby certifies
that the following resolutions were adopted by the Board of Directors of the
Corporation on January 2, 1997 pursuant to authority of the Board of Directors
as required by Section 151 of the Delaware General Corporation Law.
RESOLVED, that pursuant to the authority granted to and vested in the
Board of Directors of this Corporation (the "Board of Directors" or the
"Board") in accordance with the provisions of its Amended and Restated
Certificate of Incorporation, the Board of Directors hereby authorizes a series
of the Corporation's previously authorized Preferred Stock, par value $.001 per
share (the "Preferred Stock"), and hereby states the designation and number of
shares, and fixes the relative rights, preferences, privileges, powers and
restrictions thereof as follows:
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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<PAGE> 8
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 DGCL 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 DGCL) shall constitute the
approval of such action by the class. To the extent that under the DGCL 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 DGCL.
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 DGCL) 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.
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<PAGE> 17
IN WITNESS WHEREOF, this Certificate of Designation is executed on
behalf of the Corporation this 3rd day of January, 1997.
/s/ Pratap Kesav Kondamoori
------------------------------------
Pratap Kesav Kondamoori
President
/s/ John H. Gorman
------------------------------------
John H. Gorman
Secretary
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<PAGE> 1
EXHIBIT 4.3
THIS WARRANT AND THE SHARES ISSUABLE UPON THE EXERCISE OF THIS WARRANT
HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED.
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
625,000
Shares of
Common Stock,
par value $.001
per share
Dated: February 28, 1997
STOCK PURCHASE WARRANT
THIS CERTIFIES THAT, for value received, RGC International Investors,
LDC or its registered assigns, is entitled to purchase from NUKO Information
Systems, Inc., a Delaware corporation (the "Company"), at any time or from time
to time during the period specified in Paragraph 2 hereof, Six Hundred
Twenty-Five Thousand (625,000) fully paid and nonassessable shares of the
Company's Common Stock, par value $.001 per share (the "Common Stock"), at an
exercise price determined in accordance with Paragraph 2(a) below (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.
This Warrant is subject to the following terms, provisions, and
conditions:
<PAGE> 2
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 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") (as a result of the Company's failure to comply with its
obligations under the Warrant Share Registration Rights Agreement (as
hereinafter defined) or as a result of any failure to keep a registration
statement filed pursuant to such agreement effective in accordance with the
terms thereof), 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
any unexercised warrants and unconverted convertible securities containing
provisions substantially similar to this provision) 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. (A) EXERCISE PRICE. The Exercise Price shall be equal to
110% of the average closing bid price for the Common Stock (as reported by the
NASDAQ-NMS or the then principal trading market for the Common Stock) during
the 30 trading day period beginning on the first trading day of June 1997.
(B) PERIOD OF EXERCISE. This Warrant is exercisable at
any time or from time
<PAGE> 3
to time on or after the date the Exercise Price is determined in accordance with
paragraph 2(a) above, and before 5:00 p.m., New York City time on February 28,
2002 (the "Exercise Period").
3. CERTAIN AGREEMENTS OF THE COMPANY. The Company hereby
covenants and agrees as follows:
(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. As of the date of issuance of
this Warrant, the Company has 625,000 shares reserved for issuance upon
exercise of this Warrant. 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
<PAGE> 4
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 February 28, 1997, 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 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
<PAGE> 5
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 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
<PAGE> 6
in good faith by the Board of Directors of the Company.
(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 February
28, 1997; (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; (iv) upon the exercise of warrants issued or
issuable upon conversion of the Company's Series A Convertible Preferred Stock
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 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.
<PAGE> 7
(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 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
<PAGE> 8
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 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
<PAGE> 9
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 Warrant Share Registration Rights
Agreement, dated as of February 28, 1997, by and among the Company and the
other signatories thereto (the "Warrant Share 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.
(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
<PAGE> 10
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 $250,000; 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 transfer, would represent, in the aggregate
(together with any other shares of Common Stock so transferred), beneficial
ownership by the transferees of more than 4.9% percent of the Common Stock then
outstanding (after giving full effect to the second paragraph of Section 1
hereof). 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
<PAGE> 11
the Warrant Share 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.
(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.
<PAGE> 12
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
<PAGE> 13
IN WITNESS WHEREOF, the Company has caused this Warrant to be signed
by its duly authorized officer.
NUKO Information Systems, Inc.
By: /s/ Pratap Kesav Kondamoori
-----------------------------
Name: Pratap Kesav Kondamoori
-----------------------
Title: President/CEO
----------------------
Attest:
By: /s/ John H. Gorman
---------------------------
Name: John H. Gorman
Title: Chief Financial Officer
<PAGE> 1
EXHIBIT 4.4
WARRANT SHARE REGISTRATION RIGHTS AGREEMENT
WARRANT SHARE REGISTRATION RIGHTS AGREEMENT (this "AGREEMENT"), dated
as of February 28, 1997 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 RGC International Investors, LDC (together with its
affiliates and any assignee or transferee of all of its rights hereunder, the
"INITIAL INVESTOR").
WHEREAS:
A. The Company has agreed, upon the terms and subject to the
conditions contained in that certain letter agreement dated February 28, 1997
(the "Letter Agreement"), to issue to the Initial Investor warrants (the
"WARRANTS") to acquire 625,000 shares of the Company's common stock (the
"WARRANT SHARES"); and
B. Pursuant to the terms of the Letter Agreement, the Company has
agreed to provide certain registration rights under the Securities Act of 1933,
as amended, and the rules and regulations thereunder, or any similar successor
statute (collectively, the "1933 ACT"), and applicable state securities laws;
NOW, THEREFORE, in consideration of the premises and the mutual
covenants contained herein and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the Company and the
Initial Investor hereby agree as follows:
1. DEFINITIONS.
As used in this Agreement, the following terms shall have the
following meanings:
a. "INVESTORS" means the Initial Investor and any
transferee or assignee who agrees to become bound by the provisions of this
Agreement in accordance with Section 9 hereof.
b. "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
<PAGE> 2
"SEC").
c. "REGISTRABLE SECURITIES" means the Warrant Shares
issued or issuable upon exercise of the warrants issued pursuant to the Letter
Agreement 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.
d. "REGISTRATION STATEMENT" means a registration
statement of the Company under the 1933 Act.
2. REGISTRATION.
a. Demand Registration. Upon the written request of the
Initial Investor (or a majority-in-interest of Investors), delivered at any
time following August 15, 1997, the Company shall prepare, and, on or prior to
the date which is fifteen (15) business days after the date of receipt of such
Notice (the "NOTICE 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 Investor (or a
majority-in-interest of the Investors), which consent will not be unreasonably
withheld) covering the resale of the Registrable Securities underlying the
Warrants, 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 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 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 the number of Warrant Shares that are then issuable upon exercise of the
Warrants.
b. Underwritten Offering. If any offering pursuant to a
Registration 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 the
Initial Investor, 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 Notice 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 Notice Date, or (b) any act or failure to act by the
Investors) or if, after the Registration Statement has been
2
<PAGE> 3
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 value of the Warrants held by such Investors
(including, without limitation Warrant Shares then held by such Investors)
(the "AGGREGATE VALUE") 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
Value; 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 Value.) Such amounts shall
be paid in cash. 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
"Aggregate Value" means the sum of (i) 50% of the value of the warrants
(including intrinsic value, if the Warrants are "in-the-money") determined in
accordance with the "Black Scholes" warrant valuation model (utilizing the one
year government bond yield and the 100 day volatility figure calculated by
Bloomberg L.P.), plus (ii) the market value of any outstanding Warrant Shares
based on the five day average closing price of the Common Stock ending one day
prior to the calculation date on NASDAQ-NMS or on the principal securities
market on which such stock is then traded). 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
3
<PAGE> 4
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 any 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 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.
4
<PAGE> 5
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) business days after the Notice 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 Investor) 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 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 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. 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
5
<PAGE> 6
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
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 the Initial Investor) 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.
6
<PAGE> 7
h. The Company shall permit a single firm of counsel
designated by the Initial Investor 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
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 Investor, (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
7
<PAGE> 8
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
Investor 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 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
8
<PAGE> 9
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 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.
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 the Registrable
Securities being registered (with the approval of the Initial Investor)
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.
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<PAGE> 10
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.
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 Investor 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
10
<PAGE> 11
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 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
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<PAGE> 12
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.
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 the
Initial Investor), 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
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<PAGE> 13
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.
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
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<PAGE> 14
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, the
Initial Investor (to the extent such Initial Investor still owns Registrable
Securities) and Investors who hold a majority-in-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 when 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
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<PAGE> 15
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.
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
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<PAGE> 16
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.
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<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: /s/ Pratap Kesav Kondamoori
-----------------------------
Name: Pratap Kesav Kondamoori
---------------------------
Its: President/CEO
----------------------------
RGC International Investors, LDC
By: Rose Glen Capital Management, LP, Investment Manager
By: RGC General Partner Corp.
By: /s/ Wayne Bloch
-----------------------------
Name: Wayne Bloch
---------------------------
Its: Managing Director
---------------------------
17
<PAGE> 1
EXHIBIT 4.5
NUKO INFORMATION SYSTEMS, INC.
February 28, 1997
RGC International Investors LDC
c/o Rose Glen Capital Management, LP
440 East Swedesford Road, Suite 2025
Wayne, PA 19087
Gentlemen:
In consideration of the agreements set forth herein, and other good
and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the undersigned parties to this letter agreement, intending to be
legally bound, hereby agree as follows:
Nuko Information Systems, Inc. (the "Company") hereby agrees to issue
to RGC International Investors LDC ("RGC") a warrant, in the form attached
hereto as Exhibit A, to purchase 625,000 shares of the Company's common stock,
par value $.001 per share. The exercise price of the warrant shall be equal to
110% of the average closing bid price for the common stock for the thirty
trading day period beginning on the first trading day of June 1997.
The shares underlying the warrant will be registerable by the Company
pursuant to the terms of the Warrant Share Registration Rights Agreement
attached hereto as Exhibit B.
Notwithstanding anything to the contrary set forth in the Certificate
of Designation defining the rights of the Company's Series A Convertible
Preferred Stock, RGC hereby agrees that the step-up from a 10% discount to a
15% discount described in Section VI(B)(a) thereof that will currently take
effect on March 17, 1997, shall be deferred until April 30, 1997 with respect
to the 5,000 shares of such Series issued pursuant to the second closing under
the Securities Purchase Agreement, December 13, 1996, between the Company and
RGC. Any assignees of RGC's rights in such 5,000 shares shall be bound by the
terms of this paragraph.
If you are in agreement with the foregoing, please execute this letter
agreement in the space provided below.
Sincerely.
/s/ PRATAP S. KONDAMOORI
------------------------------
Bob Kondamoori, President
NUKO Information Systems, Inc.
RGC International Investors, LDC
By: Rose Glen Capital Management, L.P.,
Investment Manager
By: RGC General Partner Corp.,
General Partner
By: /s/ WAYNE D. BLOCH
---------------------------------
Wayne D. Bloch, Managing Director
