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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) March 3, 2000.
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NET VALUE HOLDINGS, INC.
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(Exact name of registrant as specified in charter)
Delaware 0-29413 65-0867684
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(State or other jurisdic- (Commission File Number) (IRS Employer
tion of incorporation) Identification No.)
1085 Mission Street, San Francisco, CA 94103
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(Address of principle executive offices) (Zip Code)
Registrant's telephone number, including area code 415-575-4755
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N/A
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(Former name or former address, if changed since last report.)
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Exhibit Index appears on Page 6 hereof
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Item 5. Other Events.
On March 3, 2000, Net Value Holdings, Inc. (the "Company") sold
4,166,667 shares of its newly-created Series C Convertible Participating
Preferred Stock (the "Series C Preferred Stock") to a group of institutional
investors and their affiliates led by Tudor Investment Corporation, Brown
Simpson Asset Management and BNY Capital Markets, Inc. (the "Series C
Investors") for an aggregate purchase price of $50 million.
Each share of Series C Preferred Stock is convertible into one share of
the Company's common stock, par value $.001 per share (the "Common Stock"). This
conversion ratio is subject to adjustment under certain circumstances to protect
the holders of the Series C Preferred Stock against future dilutive
transactions. The holders of the Series C Preferred Stock may convert their
shares of Series C Preferred Stock into shares of Common Stock at any time. The
Series C Preferred Stock shall automatically be converted into shares of Common
Stock upon:
o the affirmative vote of holders of 80% of the outstanding shares of Series C
Preferred Stock;
o the closing of a public offering of the Common Stock pursuant to which the
offering price is at least $30 per share; and
o upon the election of the Company, provided that the Company's registration
statement registering the resale of the shares of common stock issuable upon
conversion of the Series C Preferred Stock (the "Registration Statement")
has been declared effective by the United States Securities and Exchange
Commission (the "SEC") and remains effective and the closing market price of
the Common Stock has been equal to at least $18 per share for a period of at
least 20 consecutive business days.
The Series C Preferred Stock accrues a dividend of 8% per annum which
is required to be paid on a quarterly basis in kind in the form of additional
shares of Series C Preferred Stock. This dividend rate shall increase by 1% on
October 3, 2000 and by an additional 1% on the 90th day of each 90-day period
thereafter if the Company's application to list its shares of Common Stock on
the NASDAQ SmallCap Market (the "Listing Application") has not been approved by
NASDAQ prior to such dates. In addition, this dividend rate shall also increase
by 1% on December 31, 2000 and by an additional 1% on the last day of each
calendar quarter thereafter if the Company's registration statement registering
the resale of the shares of common stock issuable upon conversion of the Series
C Preferred Stock (the "Registration Statement") has not been declared effective
by the SEC.
If by December 31, 2000, the Company has not filed the Registration
Statement with the SEC, then, upon receiving 60 days written notice from holders
of at least 80% of the issued and outstanding shares of Series C Preferred
Stock, the Company shall be required to redeem the issued and outstanding shares
of Series C Preferred Stock in installments, as follows:
o one third of the shares on or before the date stated in the written notice;
o one third of the shares on the first anniversary of the date stated in the
written notice; and
o one third of the shares on the second anniversary of the date stated in the
written notice.
The Company shall be obligated to redeem the issued and outstanding shares of
Series C Preferred Stock within 60 days of receiving written notice from holders
of at least 80% of the issued and outstanding shares of Series C Preferred Stock
upon:
o any voluntary or involuntary bankruptcy of the Company, receivership,
assignment for the benefit of creditors, liquidation or acceleration of any
third party obligations;
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o any payment default continuing for at least 120 days where the aggregate
amount in default is greater than $750,000; and
o the Company's use of the proceeds of the offering in a manner which is not
permitted by the Series C Preferred Stock Purchase Agreement.
Any such redemption shall be at a price per share equal to the greater of (i)
the liquidation value of the Series C Preferred Stock of $12.00 per share plus
all accrued and unpaid dividends, or (ii) the fair market value per share of the
Common Stock on the redemption date.
The Company is obligated to file the Registration Statement with the
SEC on or before May 31, 2000 and has agreed to use its best efforts to have the
Registration Statement declared effective not later than June 1, 2000.
In connection with the issuance of the Series C Preferred Stock, the
Company issued warrants (the "Warrants") to purchase an aggregate of 416,667
shares of the Company's common stock to the Series C Investors. The Warrants are
exercisable until March 2, 2003 at an exercise price of $26.58 per share of the
Company's common stock (subject to adjustment in certain circumstances),
provided that if while the Registration Statement is effective, the closing
market price of the Common Stock is at least $39.87 per share for at least 30
consecutive days, then the Company may terminate the Warrants upon 30 days prior
written notice. The Company also agreed to issue to certain purchasers of the
Series C Preferred Stock warrants to purchase an aggregate of 62,500 shares of
the Company's common stock on July 1, 2000 and on the thirtieth day of each
subsequent 30 day period thereafter (the "Compensation Warrants") that the
Company has failed to have the Registration Statement declared effective by the
SEC. The Compensation Warrants are exercisable until the second anniversary of
their date of issuance at an exercise price equal to $4.09 per share.
Until the earlier of March 3, 2001 or the date on which the Company
closes a public offering of its common stock at an offering price of at least
$30 per share and pursuant to which it receives gross proceeds of at least
$20,000,000, each holder of the Series C Preferred Stock has the right to
purchase that number of shares of the Company's capital stock sold in a private
placement offering which the Company completes for financing purposes equal to
its pro rata ownership interest in the Company, calculated on a fully diluted,
as converted basis. This right does not apply to any shares of capital stock
issued pursuant to any stock option, incentive, or benefit plan or in connection
with any merger, acquisition or other strategic purpose which is not primarily
to raise equity capital.
Copies of the Certificate of Designations, Preferences and Rights of
the Series C Preferred Stock, the form of Common Stock Purchase Warrant, the
form of Compensation Warrant, the Registration Rights Agreement and the
Securities Purchase Agreements executed in connection with the transaction are
attached hereto as Exhibits 4.1, 4.2, 4.3, 10.1, 10.2 and 10.3, respectively,
and are incorporated herein by reference.
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits.
(c) Exhibits
4.1 Certificate of Designations, Preferences and Rights of the Series
C Convertible Preferred Stock.
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4.2 Form of Net Value Holdings, Inc. Common Stock Purchase Warrant
issued in connection with the Series C Convertible Preferred
Stock.
4.3 Form of Compensation Warrant to be issued in connection with the
Series C Convertible Preferred Stock.
10.1 Registration Rights Agreement, dated as of March 3, 2000, by and
among Net Value Holdings, Inc. and the Series C Investors.
10.2 Series C Preferred Stock Purchase Agreement, dated as of March 3,
2000, among Net Value Holdings, Inc. and The Altar Rock Fund,
L.P., Raptor Global Portfolio, Ltd., Brown Simpson Strategic
Growth Fund, Ltd. and Brown Simpson Strategic Growth Fund, L.P.
10.3 Series C Preferred Stock Purchase Agreement, dated as of March 3,
2000, among Net Value Holdings, Inc. and the remaining Series C
Investors.
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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.
NET VALUE HOLDINGS, INC.
Date: March 17, 2000 By: /s/ Andrew P. Panzo
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Name: Andrew P. Panzo
Title: Chairman and Chief Executive
Officer
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EXHIBIT INDEX
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No.
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4.1 Certificate of Designations, Preferences and Rights of the Series C
Convertible Preferred Stock.
4.2 Form of Net Value Holdings, Inc. Common Stock Purchase Warrant issued in
connection with the Series C Convertible Preferred Stock.
4.3 Form of Compensation Warrant to be issued in connection with the Series C
Convertible Preferred Stock.
10.1 Registration Rights Agreement, dated as of March 3, 2000, by and among Net
Value Holdings, Inc. and the Series C Investors.
10.2 Series C Preferred Stock Purchase Agreement, dated as of March 3, 2000,
among Net Value Holdings, Inc. and The Altar Rock Fund, L.P., Raptor
Global Portfolio, Ltd., Brown Simpson Strategic Growth Fund, Ltd. and
Brown Simpson Strategic Growth Fund, L.P.
10.3 Series C Preferred Stock Purchase Agreement, dated as of March 3, 2000,
among Net Value Holdings, Inc. and the remaining Series C Investors.
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CERTIFICATE OF DESIGNATION OF POWERS, PREFERENCES AND RIGHTS OF THE
SERIES C CONVERTIBLE PARTICIPATING PREFERRED STOCK
All references to any sections contained within this Certificate of
Designation of Powers, Preferences and Rights ("Certificate of Designation") of
the Series C Convertible Participating Preferred Stock ("Series C Preferred" and
also "Series C Preferred Stock") shall unless otherwise specified be deemed to
be references to other sections also within this Certificate of Designation.
Terms used but not otherwise defined herein (including without limitation the
terms "Adjustment Event", "Affiliate", "Ancillary Agreements", "Closing Date",
"Exchange", "Immediately Registrable Securities", "Listing Application", "Per
Share Purchase Price", "Registration Statement", "SEC", "Shareholder Rights
Agreement", "Subsidiary") shall have the meanings herein ascribed thereto in the
Series C Preferred Stock Purchase Agreement, dated as of March 3, 2000, by and
among the Corporation and various other parties thereto, as such may amended
from time to time (the "Series C Purchase Agreement").
Section 1. Dividends
(a) Generally.
(i) The holders of Series C Preferred shall be entitled to receive
dividends as follows, out of funds legally available therefor, payable in each
case in preference and priority to any payment of any dividend on any other
class or series of capital stock other than the Series B Preferred Stock
(including without limitation any class or series of Common Stock or Series A
Preferred Stock) and pari passu with the Series B Preferred Stock and any other
class of Preferred Stock which by its terms is pari passu with the Series C
Preferred Stock (collectively, "Pari Passu Securities") and in any event upon
the liquidation, dissolution or winding-up of the Corporation (subject to the
limitations set forth in subsection (c), below) or the redemption of the Series
C Preferred and accruing on each share of Series C Preferred from the original
date of issuance thereof whether or not earned or declared: (y) a cumulative
dividend, initially at the rate of 8.00% per annum of the Liquidation Value (as
adjusted from time to time as provided hereinbelow, the "Dividend Rate"), or at
such other Dividend Rate as may from time to time be in effect, payable
quarterly in kind in additional shares of Series C Preferred; and (z) the pro
rata portion, on an as-if-converted basis, of any dividend or other distribution
paid, payable or declared upon the Common Stock. The Dividend Rate shall be
increased from time to time as follows: (I) if the Listing Application has not
been accepted and declared effective by a relevant Exchange on the date which is
seven (7) months after the Closing Date (such date being the "Dividend
Adjustment Trigger Date"), then on such date, and on the 90th day of each 90-day
period thereafter on which such Listing Application shall still not have been
declared effective by a relevant Exchange, the then current Dividend Rate shall
be increased by adding 1.00% thereto (in addition to any other increase therein
as may apply pursuant to clause (II), below, of this sentence), e.g., after the
first such adjustment, if any, the Dividend Rate shall increase from 8.00% per
annum to 9.00% per annum; and (II) if the Registration Statement shall not have
been declared effective by the SEC by December 31, 2000, then on such date and
on the last day of each calendar quarter thereafter on which such Registration
Statement shall still not have been declared effective by the SEC, the then
current Dividend Rate shall be increased by adding 1.00% thereto (in addition to
any other increase therein as may apply pursuant to clause (I), above, of this
sentence).
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(ii) No dividend of cash or other property or other distribution (other
than a stock dividend giving rise to an adjustment under Section 4(e) hereof and
made in accordance with the provisions of Section 6 hereof) shall be paid, or
declared and set apart for payment (A) on any share of Common Stock, unless a
pro rata dividend or other distribution is paid, or declared and set apart for
payment, with respect to all outstanding shares of Series C Preferred, on an as
converted basis, and (B) on any share of any other class or series of capital
stock, including without limitation any other class of Preferred Stock or Common
Stock, unless (I) all accrued and unpaid dividends on shares of Series C
Preferred shall have been paid in full (except that the condition set forth in
this clause (I) shall not apply with respect to Pari Passu Securities), and (II)
a pro rata dividend or other distribution is paid, or declared and set apart for
payment, with respect to all outstanding shares of Series C Preferred, on an
as-if-converted basis.
(b) Ratable Allocation of Dividends. If at any time the Corporation
pays less than the total amount of dividends then accrued and payable with
respect to all shares of Series C Preferred, as a single class, for which
dividends are required to be declared and paid pursuant to Section 1, such
payment of accrued but unpaid dividends will be distributed ratably among the
holders of Series C Preferred, as a single class, pro rata in proportion to the
number of shares of any of such securities held by each such holder, subject to
any right of the holders of shares of Series B Preferred Stock to payment of
dividends on a pari passu basis.
Section 2. Liquidation, Dissolution, or Winding-Up.
(a) Distributions to Holders of Preferred Stock. In the event of any
liquidation, dissolution, or winding-up of the Corporation, whether voluntary or
involuntary, the holders of outstanding shares of Series C Preferred (including
for purposes of this clause (a) any shares of Series C Preferred issuable, but
not yet issued, pursuant to the provisions of Section 1(a)(i), above) shall be
entitled to be paid out of the assets of the Corporation available for
distribution to stockholders, prior and in preference to any payment made to or
set aside for the holders of Common Stock, but pari passu with any payments made
to holders of shares of Series B Preferred Stock and of shares of any series of
Preferred Stock authorized after the date hereof that has rights pari passu with
the Series C Preferred on liquidation ("Subsequent Pari Passu Preferred Stock"),
an amount (the "Liquidation Value") initially equal to the Per Share Purchase
Price and subject to proportionate adjustment on the occurrence of an Adjustment
Event, plus all accrued and unpaid dividends thereon, if any, through the date
of such liquidation, dissolution, or winding-up. If upon any liquidation,
dissolution, or winding-up of the Corporation, the assets lawfully available to
be distributed to the holders of Series C Preferred under the preceding sentence
of this Section 2(a) are insufficient to permit payment to such holders of
Series C Preferred their full respective Liquidation Value per share plus all
accrued and unpaid dividends thereon, then all of the assets of the Corporation
lawfully available for distribution shall be distributed ratably among the
holders of shares of Series B Preferred Stock, Series C Preferred and any series
of Subsequent Pari Passu Preferred Stock, on a pari passu basis as a single
class, in proportion to their relative Liquidation Values as determined in
accordance with the preceding sentence of this Section 2(a). After such payment
shall have been made in full to such holders of such securities, or funds
necessary for such payment shall have been set aside by the Corporation in trust
for the exclusive benefit of such holders of such securities so as to be
available for such payment, any assets remaining available for distribution
shall be distributed to the holders of Series B Preferred Stock, Series C
Preferred and Common Stock of the Corporation, pro rata based on the number of
shares of Common Stock to which the holders of the Series B Preferred Stock and
Series C Preferred would then be entitled upon conversion of such shares.
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(b) Deemed Liquidations by Holders of Series C Preferred Stock. Upon
the written election of the holders of eighty percent (80%) of the outstanding
shares of Series C Preferred, (A) a consolidation or merger of the Corporation
with or into any other person(s) or entity(ies) (other than a consolidation or
merger in which the Corporation is the surviving corporation and upon
consummation of which the holders of voting securities of the Corporation
immediately prior to such transaction continue to own, directly or indirectly,
not less than a majority of the voting securities of the Corporation, as the
surviving corporation, immediately following such transaction), (B) a sale of
all or substantially all of the assets of the Corporation, (C) a sale or other
disposition of more than 50% of the voting capital stock (in a single
transaction or series of related transactions) of the Corporation (whether
issued and outstanding, newly issued or from treasury, or any combination
thereof) or (D) other similar transaction, shall be regarded as a liquidation,
dissolution, or winding-up of the affairs of the Corporation within the meaning
of this Section 2. Notwithstanding the foregoing, each holder of Series C
Preferred shall have the right to elect the benefits of the applicable
provisions of Section 4(a) hereof in lieu of receiving payment in liquidation,
dissolution, or winding-up of the Corporation pursuant to this Section 2; and if
the holders of eighty percent (80%) of the outstanding shares of Series C
Preferred, as a class, shall elect to avail themselves of the benefits of
Section 4(a), such holders may require that the holders of all outstanding
shares of Series C Preferred shall be bound by the same election. For purposes
of this Section 2 and of Sections 4 and 6 hereof, a sale (whether in a single
transaction or a series of related transactions) of substantially all of the
assets of the Corporation shall mean the sale or other disposition, other than
in the ordinary course of business, of more than 50% of such assets, as
determined by reference to the fair market value of the Corporation.
(c) Non-Cash Distributions. In the event of a liquidation, dissolution,
or winding-up of the Corporation resulting in the availability of assets other
than cash for distribution to the holders of shares of Series C Preferred, the
holders of Series C Preferred shall be entitled to a distribution of cash and/or
other assets equal in value to the relative liquidation preference and other
distribution rights stated in Section 2(a). In the event that such distribution
to the holders of shares of Series C Preferred shall include any assets other
than cash, the Board of Directors shall first determine in good faith and with
due care the value of such assets for such purpose, and shall notify all holders
of shares of Series C Preferred of such determination. The value of such assets
for purposes of the distribution under this Section 2(c) shall be the value as
so determined by the Board of Directors, unless the holders of a majority of the
outstanding shares of Series C Preferred shall object thereto in writing within
15 days after the date of such notice.
(d) Dispute Resolution Procedures. In the event of such objection, the
valuation of such assets for purposes of such distribution shall be determined
by an arbitrator mutually agreed upon and selected by the objecting stockholders
and the Board of Directors, or in the event a single arbitrator cannot be agreed
upon within 10 days after the written objection sent by the objecting
stockholders in accordance with subsection (c), the valuation of such assets
shall be determined by an arbitration in which (i) the objecting stockholders
shall name in their notice of objection one arbitrator, (ii) the Board of
Directors shall name a second arbitrator within 15 days from the receipt of such
notice, (iii) the two arbitrators thus selected shall select a third arbitrator
within 15 days thereafter, and (iv) the three arbitrators thus selected shall
determine by majority vote the valuation of such assets within 15 days
thereafter for purposes of such distribution. In the event the third arbitrator
is not selected as provided herein, then such arbitrator shall be selected by
the President of the American Arbitration Association ("AAA"). The costs of such
arbitration shall be borne by the Corporation or by the holders of Series C
Preferred (on a pro rata basis out of the assets otherwise distributable to
them) as follows: (i) if the valuation as determined by the arbitrators is
greater than 90% of the valuation as determined by the Board of Directors, the
holders of Series C Preferred shall pay the costs of the arbitration, and (ii)
otherwise, the Corporation shall bear the costs of the arbitration. The
arbitration shall be held in Boston, Massachusetts, in accordance with the rules
of the AAA. The award made by the arbitrators shall be binding upon the
Corporation and the holders of all shares of Common Stock and Series C
Preferred, no appeal may be taken from such award, and judgment thereon may be
entered in any court of competent jurisdiction.
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Section 3. Voting Rights. Except as otherwise expressly provided herein
or as required by applicable law, the holders of Series C Preferred shall be
entitled to vote on all matters on which holders of Common Stock are entitled to
vote, including without limitation, the election of directors. Each share of
Series C Preferred shall entitle the holder thereof to such number of votes per
share as shall equal the number of shares of Common Stock into which such share
of Series C Preferred is convertible pursuant to the applicable provisions of
Section 4(a) hereof as of the record date for the determination of stockholders
entitled to vote on such matter, or if no record date is established, at the
date such vote is taken or any written consent of stockholders is solicited.
Except as otherwise provided herein, in any relevant agreement, or as required
by applicable law, the holders of shares of Series C Preferred and Common Stock,
respectively, shall vote together as a single class on an as-if-converted basis
on all matters submitted to a vote or consent of stockholders.
Section 4. Conversion. Shares of Series C Preferred shall be entitled
to be converted into shares of Common Stock or other securities, properties, or
rights, as set forth in this Section 4.
(a) Holders' Option to Convert. Subject to and in compliance with the
provisions of this Section 4 and Section 2(b), any shares of Series C Preferred
(including those shares of Series C Preferred for which a Redemption Notice (as
defined below) has been delivered to the Corporation but which shares have not
yet been redeemed) may, at any time or from time to time at the option of the
holder, be converted into fully paid and non-assessable shares of Common Stock.
(i) The number of shares of Common Stock to which a holder of
Series C Preferred shall be entitled upon such conversion shall be equal to the
product obtained by multiplying (y) the number of shares of Series C Preferred
being converted by (z) the Series C Applicable Conversion Rate (determined as
provided in Section 4(c) hereof).
(ii) To exercise conversion rights under this Section 4(a), a
holder of Series C Preferred to be so converted shall surrender the certificate
or certificates representing the shares being converted (or affidavit(s) of the
loss thereof) to the Corporation at its principal office, and shall give written
notice to the Corporation at that office that such holder elects to convert such
shares. Such notice shall also state the name or names (with address or
addresses) in which the certificate or certificates for shares of Common Stock
issuable upon such conversion shall be issued. The certificate or certificates
for shares of Series C Preferred surrendered for conversion shall be accompanied
by evidence of proper assignment thereof to the Corporation. The date when such
written notice is received by the Corporation together with the certificate or
certificates representing the shares of Series C Preferred being converted,
shall be the applicable "Conversion Date." As promptly as practicable after the
applicable Conversion Date, the Corporation shall issue and shall deliver to the
holder of the shares of Series C Preferred being converted, a certificate or
certificates in such denominations as such holder may request in writing for the
number of full shares of Common Stock issuable upon the conversion of such
shares of Series C Preferred in accordance with the provisions of this Section
4, plus cash as provided in Section 4(j) below in respect of any fraction of a
share of Common Stock issuable upon such conversion. Such conversion shall be
deemed to have been effected immediately prior to the close of business on the
applicable Conversion Date, and at such time the rights of the holder as holder
of the converted shares of Series C Preferred shall cease and the person or
persons in whose name or names any certificate or certificates for shares of
Common Stock shall be issuable upon such conversion shall be deemed to have
become the holder or holders of record of shares of Common Stock represented
thereby.
(iii) In lieu of physical delivery of certificates, provided
the Corporation's transfer agent is participating in the Depositary Trust
Company ("DTC") Fast Automated Securities Transfer (FAST)
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program, upon request of the holder and in compliance with the provisions
hereof, the Corporation shall use its best efforts to cause its transfer agent
to electronically transmit the Common Stock to the holder by crediting the
account of the holder's Prime Broker with DTC through its Deposit Withdrawal
Agent Commission system. The time period for delivery described herein shall
apply to any such electronic transmittals.
(b) Automatic Conversion.
(i) Qualified Public Offering. Each share of Series C
Preferred outstanding (including those shares for which a Redemption Notice (as
defined below) has been delivered to the Corporation but which shares have not
yet been redeemed) shall be converted into the number of fully paid and
non-assessable shares of Common Stock into which such share is then convertible
pursuant to the applicable provision of Section 4(a) hereof, automatically and
without further action, immediately upon the closing of a Qualified Public
Offering. A "Qualified Public Offering" shall mean a public offering of shares
of the Corporation's Common Stock pursuant to an effective registration
statement on Form S-1, or successor form, of the Securities and Exchange
Commission (the "SEC"), pursuant to which the per share price to the public is
not less than 250% of the Per Share Purchase Price (as adjusted equitably on the
occurrence of an Adjustment Event) and the gross proceeds to the Corporation are
not less than $20,000,000.
(ii) Class Vote of Series C Preferred Stock. Each share of
Series C Preferred outstanding (including those shares for which a Redemption
Notice (as defined below) has been delivered to the Corporation but which shares
have not yet been redeemed) shall be converted into the number of fully paid and
non-assessable shares of Common Stock into which such share is then convertible
pursuant to Section 4(a) hereof, automatically and without further action,
immediately upon the affirmative vote of holders of eighty percent (80%) of the
outstanding shares of Series C Preferred, voting separately as a class, to cause
such conversion.
(iii) Upon Election of the Corporation. Each share of Series C
Preferred outstanding (including those shares for which a Redemption Notice (as
defined below) has been delivered to the Corporation but which shares have not
yet been redeemed) shall be converted into the number of fully paid and
non-assessable shares of Common Stock into which such share is then convertible
pursuant to the applicable provision of Section 4(a) hereof at the written
election of the Corporation, provided, that, both (x) the Registration Statement
covering all of the Immediately Registrable Securities has been declared
effective by the SEC and is then currently effective, and (y) the closing market
price of the Common Stock has been equal to at least 150% of the Per Share
Purchase Price (as adjusted from time to time on the occurrence of an Adjustment
Event) for a period of twenty (20) consecutive business days (provided that such
20-day period shall end no earlier than the day on which the Registration
Statement has been declared effective by the SEC and no earlier than the fifth
(5th) business day prior to the date of the Corporation's election).
(iv) Mechanics of Automatic Conversion. Upon any automatic
conversion of shares of Series C Preferred into shares of Common Stock pursuant
to this Section 4(b), the holders of such converted shares shall surrender the
certificates (or affidavit(s) of loss thereof) formerly representing such shares
at the office of the Corporation or of any transfer agent for Common Stock.
Thereupon, there shall be issued and delivered to each such holder, promptly at
such office and in his name as shown on such surrendered certificate or
certificates, a certificate or certificates for the number of shares of Common
Stock into which such shares of Series C Preferred were so converted and cash as
provided in Section 4(j) below in respect of any fraction of a share of Common
Stock issuable upon such conversion. The Corporation shall not be obligated to
issue certificates evidencing the shares of Common Stock issuable upon such
conversion unless and until certificates formerly evidencing the converted
shares of Series C Preferred are either
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delivered to the Corporation or its transfer agent, as hereinafter provided, or
the holder thereof notifies the Corporation or such transfer agent that such
certificates have been lost, stolen, or destroyed and executes and delivers an
agreement to indemnify the Corporation from any loss incurred by it in
connection therewith.
(c) Applicable Conversion Rates. The conversion rate in effect at any
time for Series C Preferred shall equal (such amount being the "Series C
Applicable Conversion Rate" or "Applicable Conversion Rate") the quotient
obtained by dividing (A) the sum of (I) the Per Share Purchase Price (as
adjusted on the occurrence of an Adjustment Event), plus (II) an amount equal to
all accrued but unpaid dividends on each share of Series C Preferred, if any, by
(B) the Series C Applicable Conversion Value then in effect, calculated as
hereinafter provided.
(d) Applicable Conversion Values. The "Series C Applicable Conversion
Value" (also referred to herein as the "Applicable Conversion Value") in effect
initially, and until first (and subsequently) adjusted in accordance with
Sections 4(e), 4(f), 4(g) and/or 4(h) hereof, shall be equal to the Per Share
Purchase Price.
(e) Adjustments for Extraordinary Common Stock Events. Upon the
happening of an Extraordinary Common Stock Event (as defined in Section 4(m)
hereof), automatically and without further action, and simultaneously with the
happening of such Extraordinary Common Stock Event, the Applicable Conversion
Value in effect immediately prior to such Extraordinary Common Stock Event shall
be adjusted by multiplying such then effective Applicable Conversion Value by a
fraction, the numerator of which shall be the number of shares of Common Stock
outstanding (excluding treasury stock) immediately before such Extraordinary
Common Stock Event and the denominator of which shall be the number of shares of
Common Stock outstanding (excluding treasury stock) immediately after such
Extraordinary Common Stock Event, and the product so obtained shall thereafter
be the Applicable Conversion Value. The Applicable Conversion Value, as so
adjusted, shall be readjusted in the same manner upon the happening of any
successive Extraordinary Common Stock Event or Events.
(f) Adjustments for Dilutive Issues.
(i) Except as otherwise provided below in this Section
4(f)(i), and except with respect to an Extraordinary Common Stock Event,
adjustments in respect of which are provided for in Section 4(e), if at any time
while there are any shares of Series C Preferred outstanding the Company issues
or is deemed to issue any additional shares of Common Stock at a Net
Consideration Per Share (as hereinafter defined) less than the Series C
Applicable Conversion Value in respect of the Series C Preferred in effect
immediately prior to such issuance or deemed issuance, then and in each such
case, such Series C Applicable Conversion Value for the Series C Preferred will
be reduced as follows:
(A) If such issuance and/or deemed issuance occurs
before the date on which both (x) the Registration Statement has been declared
effective by the SEC in respect of all of the Immediately Registrable
Securities, and (y) the Listing Application in respect of all of the Immediately
Registrable Securities has been accepted by the NASDAQ SmallCap Market or other
relevant Exchange (such date on which both conditions (x) and (y) are satisfied
being the "Ratchet Adjustment Date"), then the Series C Applicable Conversion
Value for the Series C Preferred will be adjusted to equal the Net Consideration
Per Share (as hereinafter defined) at which such additional shares of Common
Stock are issued and/or deemed issued; provided, however, that the Series C
Applicable Conversion Value shall not be adjusted pursuant to this clause (A) in
connection with the issuance of the first 500,000 shares of Common Stock
(subject to adjustment from time to time on the occurrence of an Adjustment
Event) issued or deemed issued after the date of this Certificate of Designation
(the "Carve-Out Shares").
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(B) If such issuance and/or deemed issuance occurs
before the Ratchet Adjustment Date and involves all or any portion of the
Carve-Out Shares (but then only to the extent of the Carve-Out Shares), or
occurs after the Ratchet Adjustment Date, then the Series C Applicable
Conversion Value for the Series C Preferred will be adjusted to equal the result
of the following formula:
New Series C Applicable Conversion Value = (P1 x Q1) + (P2 x Q2)
---------------------
(Q1 + Q2)
where:
P1 = the Series C Applicable Conversion Value in effect immediately prior to
such issuance or deemed issuance of additional shares of Common Stock;
Q1 = the aggregate number of shares of Common Stock outstanding (including
shares of Common Stock issuable upon conversion of all outstanding shares of
Series C Preferred and Series B Preferred Stock and the conversion, exchange
and/or exercise of all outstanding warrants, options and other convertible
securities, each to the extent then convertible, exchangeable and/or
exercisable) immediately prior to such issuance or deemed issuance of additional
shares of Common Stock;
P2 = the Net Consideration Per Share (as hereinafter defined) received by the
Corporation for the shares of Common Stock issued and/or deemed issued in
respect of such issuance of additional shares of Common Stock; and
Q2 = the number of shares of Common Stock issued and/or deemed issued in respect
of such issuance or deemed issuance of additional shares of Common Stock.
The following shall not be deemed issuances of additional shares of
Common Stock for the purposes of this Section 4(f)(i): (A) the Corporation's
issuance of shares of Common Stock upon exercise or conversion of outstanding
shares of Series B Preferred Stock, Series C Preferred, or Derivative Securities
issued and outstanding as of the date of filing of this Certificate of
Designation, (B) rights offerings of securities issued by any Subsidiary of the
Corporation in connection with the initial public offering of the equity
securities of any such Subsidiary so long as any such offering is made pro-rata
on an as-if-converted basis to the holders of Series C Preferred, and (C)
certain transactions disclosed on Schedule 5.23 to the Series C Purchase
Agreement.
For purposes of this Section 4(f), if a part or all of the
consideration received by the Corporation in connection with the issuance or
deemed issuance of shares of Common Stock or the issuance or deemed issuance of
any of the securities described below in paragraph (ii) of this Section 4(f)
consists of property other than cash, such consideration shall be deemed to have
the same value as is recorded on the books of the Corporation with respect to
receipt of such property so long as such recorded value was determined
reasonably and in good faith and with due care by the Board of Directors of the
Corporation, and shall otherwise be deemed to have a value equal to its fair
market value.
The Series C Applicable Conversion Value, as so reduced, shall be
further reduced in the same manner upon the happening of any successive event or
events that cause reduction under this Section 4(f)(i).
(ii) For purposes of this Section 4(f), the issuance of any
Derivative Securities (as defined in Section 4(n)) shall be deemed an issuance
of shares of Common Stock with respect to Section 4(f)(i)(A) and with respect to
Section 4(f)(i)(B) if the Net Consideration Per Share (as defined in Section
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4(f)(ii)(A) and (B) hereof) that may be received by the Corporation for such
Common Stock is less than the Series C Applicable Conversion Value in effect
immediately prior to the time of such issuance, and except as hereinafter
provided, an adjustment in the Series C Applicable Conversion Value shall be
made upon each such issuance of Derivative Securities in the manner provided in
Section 4(f)(i)(A) and (B), as appropriate, as if such deemed Common Stock were
issued for such Net Consideration Per Share. No adjustment of the Series C
Applicable Conversion Value shall be made under this Section 4(f) upon the
issuance of any additional shares of Common Stock that are issued upon the
exercise, conversion, or exchange of any Derivative Securities if any such
adjustment was previously made upon the issuance of such Derivative Securities.
Any adjustment of the Series C Applicable Conversion Value with respect to this
Section 4(f)(ii) shall be disregarded if, as, and to the extent that the
Derivative Securities that gave rise to such adjustment expire or are canceled
without having been exercised, so that the Series C Applicable Conversion Value
effective immediately upon such cancellation or expiration shall be equal to the
Series C Applicable Conversion Value that otherwise would have been in effect
immediately prior to the time of the issuance of the expired or canceled
Derivative Securities, with such additional adjustments as subsequently would
have been made to that Series C Applicable Conversion Value had the expired or
canceled Derivative Securities not been issued. In the event that the terms of
any Derivative Securities previously issued by the Corporation are changed
(whether by their terms or for any other reason, including without limitation,
as a result of the effects of any anti-dilution adjustments contained therein)
so as to lower the Net Consideration Per Share payable with respect thereto
(whether or not the issuance of such Derivative Securities originally gave rise
to an adjustment of the Series C Applicable Conversion Value), the Series C
Applicable Conversion Value shall be recomputed as of the date of such change,
so that the Series C Applicable Conversion Value effective immediately upon such
change shall be equal to the Series C Applicable Conversion Value in effect at
the time of the issuance of the Derivative Securities subject to such change,
adjusted for the issuance thereof in accordance with the terms thereof after
giving effect to such change, and with such additional adjustments as
subsequently would have been made to that Series C Applicable Conversion Value
had the Derivative Securities been issued on such changed terms. For purposes of
this Section 4(f)(ii), the Net Consideration Per Share that may be received by
the Corporation shall be determined as follows:
(A) "Net Consideration Per Share" shall mean the
amount equal to the total amount of consideration, if any, received by
the Corporation for the issuance of such Derivative Securities or
Common Stock, as the case may be, plus, in the case of Derivative
Securities, the minimum amount of additional consideration, if any,
payable to the Corporation upon exercise, conversion, and/or exchange
thereof for shares of Common Stock, divided by the number of shares of
Common Stock issued or the maximum number of shares of Common Stock
that would be issued if all such Derivative Securities were exercised
or converted, as the case may be.
(B) The Net Consideration Per Share that may be
received by the Corporation shall be determined in each instance as of
the date of issuance of Derivative Securities or Common Stock, as the
case may be, without giving effect to any possible future price
adjustments or rate adjustments that may be applicable with respect to
such Derivative Securities and which are contingent upon future events;
provided, that in the case of an adjustment to be made as a result of a
change in terms of such Derivative Securities, including such changes
as may result from the effects of any anti-dilution adjustments
contained therein, the Net Consideration Per Share shall be determined
as of the date of such change.
(g) Adjustments for Reclassifications. If the Common Stock issuable
upon the conversion of shares of Series C Preferred shall be changed into the
same or a different number of shares of any class(es) or series of stock,
whether by reclassification or otherwise (other than an Extraordinary Common
Stock Event or a reorganization, merger, consolidation, or sale of assets
provided for elsewhere in this Section 4), then
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and in each such event the holder of each share of Series C Preferred shall have
the right thereafter to convert such share into the kind and amount of shares of
stock and other securities and property receivable upon such reorganization,
reclassification, or other change by holders of the number of shares of Common
Stock into which such shares of Series C Preferred might have been converted
immediately prior to such reorganization, reclassification, or change, all
subject to further adjustment as provided herein.
(h) Adjustments for Reorganizations. Except as provided in the
following paragraph, in the event that there shall be a capital reorganization
of Common Stock (other than a subdivision, combination of shares,
reclassification, or exchange of shares provided for elsewhere in this Section
4) or a merger or consolidation of the Corporation with or into another company,
or the sale of all or substantially all of the Corporation's assets or sale of
more than 50% of the voting capital stock (in a single transaction or series of
related transactions) of the Corporation (whether issued and outstanding, newly
issued or from treasury, or any combination thereof) to any other person, then,
as a part of and as a condition to the effectiveness of such reorganization,
merger, consolidation, or sale, lawful and adequate provision shall be made so
that if the Corporation is not in economic effect the surviving company, each
share of Series C Preferred shall be converted into a share of capital stock of
the surviving company having equivalent preferences, rights, and privileges,
except that in lieu of being able to convert into shares of Common Stock of the
Corporation or the successor company, the holders of shares of Series C
Preferred (including any such capital stock issued upon conversion of Series C
Preferred) shall thereafter be entitled to receive upon conversion of such
Series C Preferred (including any such capital stock issued upon conversion of
Series C Preferred) the number of shares of stock or other securities or
property of the Corporation or of the successor company resulting from such
merger or consolidation or sale, to which a holder of the number of shares of
Common Stock deliverable upon conversion of such share of Series C Preferred
immediately prior to the capital reorganization, merger, consolidation, or sale
would have been entitled on such capital reorganization, merger, consolidation,
or sale. In any such case, appropriate provisions shall be made with respect to
the rights of the holders of Series C Preferred (including any such capital
stock issued upon conversion of Series C Preferred) after the reorganization,
merger, consolidation, or sale to the end that the provisions of this Section 4
(including without limitation provisions for adjustment of the Applicable
Conversion Values and the number of shares issuable upon conversion of Series C
Preferred or such capital stock) shall thereafter be applicable, as nearly as
may be, with respect to any shares of stock, securities, or assets to be
deliverable thereafter upon the conversion of such Series C Preferred or such
capital stock.
Upon the occurrence of a capital reorganization, merger, or
consolidation of the Corporation or the sale of all or substantially all its
assets or sale or other disposition of more than 50% of the voting capital stock
(in a single transaction or series of related transactions) of the Corporation
(whether issued and outstanding, newly issued or from treasury, or any
combination thereof), as such events are more fully set forth in the first
paragraph of this Section 4(h), holders of a majority of the outstanding shares
of Series C Preferred, as a class, may elect treatment of their shares of Series
C Preferred under Section 2(b) hereof, notice of which election shall be
submitted in writing to the Corporation at its principal offices no later than
10 days before the effective date of such event, provided, that any such notice
shall be effective if given not later than 15 days after the date of the
Corporation's notice, pursuant to Section 8, with respect to such event, and if
the holders of the majority of the outstanding shares of Series C Preferred, as
a class, shall elect treatment of their shares of Series C Preferred under
Section 2(b) hereof, then all holders of Series C Preferred shall be bound by
such election. Subject to the provisions of Section 2(b) hereof, a holder who
fails to give such notice of election pursuant to this Section 4(h) shall be
deemed to have elected treatment under this Section 4(h) in lieu of treatment
under Section 2(b).
(i) Certificate as to Adjustments. In each case of an adjustment or
readjustment of the Applicable Conversion Rate, the Corporation will promptly
furnish each holder of Series C Preferred with
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a certificate, prepared by the chief financial officer of the Corporation,
showing such adjustment or readjustment, and stating in detail the facts upon
which such adjustment or readjustment is based.
(j) Fractional Shares. No fractional shares of Common Stock or scrip
representing fractional shares shall be issued upon conversion of shares of
Series C Preferred. Instead of any fractional shares of Common Stock that would
otherwise be issuable upon conversion of shares of Series C Preferred, the
Corporation shall pay to the holder of the shares of Series C Preferred that
were converted a cash adjustment in respect of such fraction in an amount equal
to the same fraction of the market price per share of Common Stock (as
determined in a manner reasonably prescribed by the Board of Directors) at the
close of business on the applicable Conversion Date.
(k) Partial Conversion. In the event some but not all of the shares of
Series C Preferred represented by a certificate or certificates surrendered by a
holder are converted, the Corporation shall execute and deliver to or on the
order of the holder, at the expense of the Corporation, a new certificate
representing the number of shares of Series C Preferred that were not converted.
(l) Reservation of Common Stock. The Corporation shall at all times
reserve and keep available out of its authorized but unissued shares of Common
Stock, solely for the purpose of effecting the conversion of shares of Series C
Preferred, such number of shares of Common Stock as shall from time to time be
sufficient to effect the conversion of all outstanding shares of Series C
Preferred, and if at any time the number of authorized but unissued shares of
Common Stock shall not be sufficient to effect the conversion of all then
outstanding shares of Series C Preferred, then subject to the provisions of
Section 6(a) hereof, the Corporation shall take such corporate action as may, in
the opinion of its counsel, be necessary to increase its authorized but unissued
shares of Common Stock to such number of shares as shall be sufficient for such
purpose.
(m) Extraordinary Common Stock Event. As used herein, "Extraordinary
Common Stock Event" means (i) the issuance of additional shares of Common Stock
or any Derivative Security as a dividend or other distribution on outstanding
Common Stock or any Derivative Security, (ii) the subdivision of outstanding
shares of Common Stock or any Derivative Security into a greater number of
shares of Common Stock or any Derivative Security, or (iii) the combination of
outstanding shares of Common Stock or any Derivative Security into a smaller
number of shares of Common Stock or any Derivative Security.
(n) Derivative Securities. As used herein, "Derivative Securities"
means (i) all shares of stock and other securities that are convertible into or
exchangeable for shares of Common Stock and (ii) all options, warrants, and
other rights to acquire shares of Common Stock or securities convertible into or
exchangeable for shares of Common Stock.
(o) Further Adjustment Provisions. In the event that, at any time as a
result of an adjustment made pursuant to this Section 4, the holder of any
shares of Series C Preferred upon thereafter surrendering such shares for
conversion shall become entitled to receive any shares or other securities of
the Corporation other than shares of Common Stock, the Applicable Conversion
Rates in respect of such other shares or securities so receivable upon
conversion of shares of Series C Preferred shall thereafter be adjusted, and
shall be subject to further adjustment from time to time, in a manner and on
terms as nearly equivalent as practicable to the provisions with respect to
Series C Preferred contained in this Section 4, and the remaining provisions
hereof with respect to Series C Preferred shall apply on like or similar terms
to any such other shares or securities.
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Section 5. Redemption.
(a) Redemption Request. If on and as of December 31, 2000 (x) the
Registration Statement has not been filed in respect of all of the Immediately
Registrable Securities, or (y) the Listing Application in respect of all of the
Immediately Registrable Securities has not been filed with the NASDAQ SmallCap
Market or other relevant Exchange, then holders of eighty percent (80%) of the
outstanding shares of Series C Preferred may request redemption of all, but not
less than all, of the outstanding shares of Series C Preferred by giving not
less than sixty (60) days prior written notice (a "Redemption Notice") to the
Corporation specifying the number of shares held by such holder. (The date upon
which such notice is provided to the Corporation is referred to herein as a
"Redemption Notice Date.") Upon receipt of a Redemption Notice, the Corporation
shall send a copy of the Redemption Notice to each other holder of shares of
Series C Preferred, and each such other holder shall then be bound by the
decision of the holders of eighty percent (80%) of the outstanding shares of
Series C Preferred that all, but not less than all, of the outstanding shares of
Series C Preferred be redeemed. The Corporation shall redeem at the Redemption
Price (as provided for in Section 5(c) below) all outstanding shares of Series C
Preferred either on the date fixed for redemption as set forth in the Redemption
Notice or in three installments as follows: (i) one-third of all such shares
shall be redeemed on the date fixed for redemption as set forth in the
Redemption Notice, (ii) one- half of the balance of all such shares shall be
redeemed twelve (12) months after the date fixed for redemption as set forth in
the Redemption Notice, and (iii) all the remaining shares shall be redeemed
twenty-four (24) months after the Redemption Notice Date, (each of the
foregoing, the applicable "Redemption Date"). Each holder of outstanding shares
of Series C Preferred shall be bound to redeem such shares as described in this
Section 5(a) and such Redemption Notice (except as otherwise set forth in this
Certificate of Designation) and the Corporation shall also be bound to redeem
such shares as described herein. If at any time, any holders of any other series
of Preferred Stock or Common Stock of the Corporation have elected to have any
of their shares redeemed at the same time as outstanding shares of Series C
Preferred are required to be redeemed hereunder, the Corporation shall pay the
applicable Redemption Price (as provided for in Section 5(c)) on shares of
Series C Preferred prior to any other payment on or redemption of the
Corporation's other classes of capital stock, including any other series of
Preferred Stock or Common Stock.
(b) Class Vote of Series C Preferred Stock. In the case of (i) any
voluntary or involuntary bankruptcy of the Corporation, receivership, assignment
for the benefit of creditors, liquidation, acceleration of any third party
obligations, (ii) any payment default continuing for at least 120 days under the
terms of any funded debt where the aggregate amount in default and/or
accelerated as a result of such payment default equals or is greater than
$750,000, or (iii) the use of proceeds of the issuance of the Series C Preferred
in a manner other than as described in the Use of Proceeds schedule attached to
the Series C Purchase Agreement (as defined in Section 6 below), the holders of
eighty percent (80%) of the outstanding shares of Series C Preferred, voting
separately as a class, may elect early redemption of all of the outstanding
shares of Series C Preferred by giving written notice thereof to the Corporation
of such election. The Corporation shall redeem all outstanding shares of Series
C Preferred within sixty (60) days of such written notice to the Corporation at
the Redemption Price set forth in Section 5(c).
(c) Redemption Price. (i) The redemption price per share of Series C
Preferred (the "Redemption Price") shall be equal to the greater of (i) the
Liquidation Value thereof plus any accrued and unpaid dividends thereon and (ii)
the then current fair market value per share, based on a valuation of the
Company as finally determined in accordance with Sections 5(c)(ii)-(iv) below as
of the applicable Redemption Date, plus all accrued and unpaid dividends
thereon.
(ii) Promptly upon receipt of a Redemption Notice, the
Corporation and the holders of a majority of the shares of Series C Preferred
shall mutually agree on the valuation of the Corporation. In
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the event such an agreement cannot be reached within fifteen (15) days after
delivery of a Redemption Notice, the Corporation shall retain a nationally
recognized, reputable investment banking firm reasonably acceptable to the
holders of a majority of the shares of Series C Preferred, the cost of which
shall be split evenly between the Corporation and the holders of Series C
Preferred (pro rata in proportion to the relative number of shares held by each
of them). As promptly as is practicable, such investment banking firm shall
deliver to the Corporation a written report as to the fair market value of the
Corporation as a whole, on a going-concern basis, using customary and
appropriate valuation methods, as of the date of the most recent audited
financial statements of the Corporation (and not taking into account any
discount for minority ownership or restrictions on transfer of the capital stock
of the Corporation); provided, that if such date is more than six months prior
to the Redemption Notice Date, then another audit as of the most recent
practicable date shall be conducted and used for such purpose, and the
out-of-pocket expenses of such audit shall be paid by the Corporation. Upon
receipt of such report, the Corporation shall promptly send a copy thereof to
each holder of Series C Preferred.
(iii) The valuation set forth in such report (the "First
Valuation") shall be conclusive and binding on the Corporation and each holder
of Series C Preferred unless within 14 days after receipt of such report, the
holders of a majority of the outstanding shares of Series C Preferred notify the
Corporation in writing that they disagree with such valuation. If such
stockholders do so notify the Corporation, they shall promptly engage another
nationally recognized, reputable investment banking firm, at the expense of the
holders of Series C Preferred, pro rata in proportion to the relative number of
shares held by each of them, to render another written report as to the fair
market value of the Corporation (but without regard to any discount for minority
ownership or restrictions on transfer of the capital stock of the Corporation)
as of the appropriate valuation date, a copy of which shall be promptly
delivered to the Corporation.
(iv) If the Corporation does not agree with the valuation of
the Corporation set forth in the second investment banking firm's report (the
"Second Valuation"), then either (i) the Corporation and the holders of a
majority of the outstanding shares of Series C Preferred shall agree on the fair
market value or (ii) in the absence of such agreement, the redemption price
shall be the arithmetic average of the First Valuation and the Second Valuation,
unless, the difference between the First Valuation and Second Valuation is
greater than an amount equal to 5% of the higher of the two valuations, in which
case a third investment banking firm shall be appointed by the two prior
investment banking firms to render a written report as to fair market value (but
without regard to any discount for minority ownership or restrictions on
transfer of the capital stock of the Corporation), the cost of which shall be
split between the Corporation and the holders of Series C Preferred (pro rata
among them in proportion to the relative number of shares held by each of them)
equally, and the fair market value shall be equal to the arithmetic average of
the two (2) closest valuations, unless the third valuation equals the arithmetic
average of the First Valuation and the Second Valuation, in which case the fair
market value shall be equal to the third valuation.
(d) Insufficient Funds. If the Corporation on any Redemption Date does
not have sufficient funds legally available to redeem the shares of Series C
Preferred for which redemption is required pursuant to Section 5(a) or 5(b)
hereof, then it shall, prior to redeeming any other series or class of the
Company's Preferred Stock or Common Stock, to the maximum lawful extent redeem
such shares of Series C Preferred on a pro rata basis among the Series C
Preferred stockholders in proportion to the number of shares held by each of
them, and shall redeem the remaining shares to be redeemed as soon as sufficient
funds are legally available.
(e) Mechanics of Redemption. Each holder of outstanding shares of
Series C Preferred shall promptly surrender the certificate or certificates (or
affidavit(s) of loss thereof) representing such shares to the Corporation at the
Corporation's principal executive office, and thereupon the Corporation shall
pay the
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portion of the Redemption Price for such shares to be paid as described in
Section 5(a) or 5(b) hereof in immediately available funds, by wire transfer to
an account designated by the holder of such shares or by certified or bank check
payable to the order of such holder. Each stock certificate surrendered for
redemption shall be canceled and retired.
(f) Ranking. At no time shall the Corporation redeem shares of any
other series of Preferred Stock of the Corporation or pay the applicable
redemption price for or make any other payment on shares of any other series of
Preferred Stock of the Corporation to holders of such other series of Preferred
Stock so long as any shares of Series C Preferred are outstanding and have not
been redeemed with the exception that the shares of Series C Preferred shall
rank pari passu with the Series B Preferred Stock as to redemption.
Section 6. Negative Covenants. So long as any shares of Series C
Preferred are outstanding, the Corporation shall not do nor shall it cause any
of its subsidiaries, if any, to do any of the following nor alter, amend, modify
or terminate any provision of this Section 6, without the affirmative vote or
written consent of the holders of eighty percent (80%) of the shares of Series C
Preferred (on an as converted basis), in addition to the right of any other
class or classes of capital stock to vote on such matters and any other vote
required by law, and any attempt to do so will be wholly void:
(a) Create or authorize the creation of, or authorize the
issuance of, any additional class(es) or series or shares of capital stock, or
any shares of any existing class(es) or series of capital stock, senior to the
Series C Preferred as to any one or more of liquidation, dividends, redemption
or registration rights ("Senior Shares"), or create or authorize any obligation
or security convertible into Senior Shares, each as approved by a majority of
the non-management members of the Board of Directors.
(b) Amend the Corporation's Certificate of Incorporation or
the bylaws of the Corporation so as to adversely affect the rights and
preferences of the Series C Preferred (it being understood that the
authorization and/or issuance of any shares of any series of stock or securities
of the Corporation with preference or priority senior to the Series C Preferred
as to any one or more of dividends, redemption or the distribution of assets on
liquidation, dissolution or winding-up of the Corporation (as provided in
Section 2 hereof) shall be deemed to affect adversely the rights and preferences
of the Series C Preferred).
(c) Become subject to any agreement that would restrict the
Corporation's performance of its obligations under the terms of this Certificate
of Designation, its bylaws, the Series C Purchase Agreement or under any of the
Ancillary Agreements.
(d) Obligate itself to do any of the foregoing.
Section 7. No Reissuance of Shares of Preferred Stock. No share or
shares of Series C Preferred acquired by the Corporation by reason of
redemption, purchase, conversion, or otherwise shall be reissued, and all such
shares shall be canceled, retired, and eliminated from the shares that the
Corporation is authorized to issue. The Corporation shall from time to time take
such appropriate corporate action as may be necessary to reduce the authorized
number of shares of Series C Preferred accordingly.
Section 8. Notices of Record Dates, Etc. In the event (i) the
Corporation establishes a record date to determine the holders of any class of
securities who are entitled to receive any dividend or other distribution, or
(ii) there occurs any capital reorganization of the Corporation, any
reclassification or recapitalization of the capital stock of the Corporation,
any merger or consolidation of the Corporation, or sale or transfer of all or
substantially all of the assets of the Corporation or more than 50% of the
voting capital stock (in a single transaction or series of related transactions)
of the Corporation (whether issued and
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outstanding, newly issued or from treasury or any combination thereof) to any
other company, entity or person, or any voluntary or involuntary dissolution,
liquidation, or winding-up of the Corporation, the Corporation shall deliver to
each holder of Series C Preferred, in accordance with Section 11(a) hereof, at
least 20 days prior to such record date or the proposed effective date of the
transaction specified therein, as the case may be, a notice specifying (a) the
date of such record date for the purpose of such dividend or distribution and a
description of such dividend or distribution, (b) the date on which any such
reorganization, reclassification, transfer, consolidation, merger, dissolution,
liquidation, or winding-up is expected to become effective, and (c) the time, if
any, that is to be fixed, as to when the holders of record of Common Stock (or
other securities) shall be entitled to exchange their shares of Common Stock (or
other securities) for cash, securities, and/or other property deliverable upon
such reorganization, reclassification, transfer, consolidation, merger,
dissolution, liquidation, or winding-up.
Section 9. Ranking. The Series C Preferred shall rank senior to all
other series of Preferred Stock (other than the Series B Preferred Stock),
including the Series A Preferred Stock, and the Common Stock, as to dividends,
redemption and distribution of assets on liquidation of the Corporation, but
shall rank pari passu with the Series B Preferred Stock as to all of the
foregoing.
Section 10. Definition of Common Stock. For purposes of Section 4
hereof only, the term "Common Stock" shall mean and include the Corporation's
authorized Common Stock, par value $0.001 per share, as constituted on the date
of filing of this Certificate of Designation, and shall also include any capital
stock of any class of the Corporation thereafter authorized which shall neither
be limited to a fixed sum or percentage of par value in respect of the rights of
the holders thereof to participate in dividends or any distributions of earnings
or assets of the Corporation, whether or not such capital stock is entitled to a
preference in the distribution of assets upon the voluntary or involuntary
liquidation, dissolution or winding- up of the Corporation; provided that the
shares of Common Stock receivable upon conversion of shares of Series C
Preferred shall include only shares designated as Common Stock of the
Corporation on the date of filing of this Certificate of Designation, or in case
of any reorganization or reclassification of the outstanding shares thereof, the
stock, securities or assets provided for in Sections 4(g) or (h) hereof.
Section 11. Miscellaneous.
(a) Notices. All notices, requests, payments, instructions or other
documents to be given hereunder shall be delivered in accordance with Section
10.2 of the Series C Purchase Agreement.
(b) Transfer Taxes, Etc. The Corporation shall pay any and all stock
transfer, documentary stamp taxes, and the like that may be payable in respect
of any issuance or delivery of shares of Series C Preferred or shares of Common
Stock or other securities issued in respect of shares of Series C Preferred
pursuant hereto or certificates representing such shares or securities. The
Corporation shall not, however, be required to pay any such tax that may be
payable in respect of any transfer involved in the issuance or delivery of
shares of Series C Preferred or Common Stock or other securities in a name other
than that in which such shares were registered, or in respect of any payment to
any person other than the registered holder thereof with respect to any such
shares, and shall not be required to make any such issuance, delivery or payment
unless and until the person otherwise entitled to such issuance, delivery, or
payment has paid to the Corporation the amount of any such tax or has
established, to the satisfaction of the Corporation, that such tax has been paid
or is not payable.
(c) Transfer Agents. The Corporation may appoint, and from time to time
discharge and change, a transfer agent for the Series C Preferred. Upon any such
appointment or discharge of a transfer agent, the Corporation shall send written
notice thereof to each holder of record of Series C Preferred.
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<PAGE>
(d) Restriction on Conversion by Either the Holder or the Company.
Notwithstanding anything herein to the contrary, and except as provided in
Section 4(b) hereof, in no event shall any holder of the Series C Preferred or
the Company have the right or be required to convert shares of Series C
Preferred to the extent that such conversion would cause the aggregate number of
shares of Common Stock beneficially owned by such holder and its Affiliates to
exceed 4.99% of the outstanding shares of the Common Stock following such
conversion. For purposes of this Section 11(d), beneficial ownership shall be
calculated in accordance with Section 13(d) of the Securities Exchange Act of
1934. The provisions of this Section 11(d) may be waived by a holder as to
itself (and solely as to itself) upon not less than sixty-five (65) days prior
written notice to the Company, and the provisions of this Section 11(d) shall
continue to apply until such 65th day (or later, if stated in the notice of
waiver). Notwithstanding anything to the contrary set forth herein, the
provisions of this Section 11(d) shall not apply to any Tudor Entity or any
Affiliate of any Tudor Entity.
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<PAGE>
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED WITH THE SECURITIES
AND EXCHANGE COMMISSION IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER
THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND, ACCORDINGLY,
MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM,
OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT.
March 3, 2000
______ shares Warrant No. ____
FORM OF
NET VALUE HOLDINGS, INC.
STOCK PURCHASE WARRANT
Registered Owner: __________
This certifies that, for value received, Net Value Holdings, Inc., a
Delaware corporation (the "Company"), grants the following rights to the
Registered Owner, or assigns, of this Warrant:
1. Definitions. Capitalized terms used herein and not otherwise defined
herein shall have the meanings given to such terms in the Purchase Agreement. As
used in this Warrant, the following terms have the following meanings:
"Affiliate" means, with respect to any Person, any other Person that
directly or indirectly controls or is controlled by or under direct or indirect
common control with such Person. For the purposes of this definition, "control,"
when used with respect to any Person, means the possession, directly or
indirectly, of the power to direct or cause the direction of the management and
policies of such Person, whether through the ownership of voting securities, by
contract or otherwise; and the terms of "affiliated," "controlling" and
"controlled" have meanings correlative to the foregoing.
"Appraiser" means a nationally recognized or major regional investment
banking firm or firm of independent certified public accountants of recognized
standing.
"Business Day" means any day except Saturday, Sunday and any day which
shall be a legal holiday or a day on which banking institutions in the state of
Delaware generally are authorized or required by law or other government actions
to close.
"Cashless Exercise" has the meaning assigned to it in Section 6(b)
hereof.
<PAGE>
"Change of Control Transaction" means the occurrence of any of (i) the
merger or consolidation of the Company with or into another entity, unless the
holders of the Company's securities immediately prior to such transaction or
series of transactions continue to hold at least 50% of such securities
following such transaction or series of transactions, (ii) a sale, conveyance,
lease, transfer or disposition of all or substantially all of the assets of the
Company in one or a series of related transactions or (iii) the execution by the
Company of an agreement to which the Company is a party or by which it is bound,
providing for any of the events set forth above in (i) or (ii).
"Closing" and "Closing Date" have the meanings set forth in Section 1.3
of the Purchase Agreement.
"Common Stock" means the shares of the Company's Common Stock, par
value $.001 per share.
"Common Stock Deemed Outstanding" means, at any given time, the sum of
the number of shares of Common Stock actually outstanding at such time plus the
number of shares of Common Stock issuable upon the exercise of all options,
rights and warrants and the conversion or exchange of convertible or
exchangeable securities outstanding at such time, whether or not such options,
rights, or warrants, or convertible or exchangeable securities are actually
exercisable, convertible or exchangeable at such time.
"Company" means Net Value Holdings, Inc., a Delaware corporation.
"Excluded Securities" means (i) shares of Common Stock issued or
issuable pursuant to the Purchase Agreement and the Warrants, (ii) shares of
Common Stock deemed to have been issued by the Company in connection with a
transaction set forth on Schedule 5.23 to the Purchase Agreement or (iii) shares
of Common Stock (including options and warrants) issuable upon the exercise of
any options or warrants outstanding on the date hereof and listed in Schedule
2.5(b) of the Purchase Agreement.
"Exercise Period" has the meaning assigned to it in Section 5 hereof.
"Exercise Price" has the meaning assigned to it in Section 4 hereof.
"Mandatory Exercise" has the meaning assigned to it in Section 8
hereof.
"Mandatory Exercise Date" has the meaning assigned to it in Section 8
hereof.
"Mandatory Exercise Period" has the meaning assigned to it in Section 8
hereof.
"Mandatory Exercise Price" has the meaning assigned to it in Section 8
hereof
"OTCBB" means the OTC Bulletin Board of the National Association of
Securities Dealers, Inc.
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<PAGE>
"Per Share Market Value" means on any particular date (i) the closing
bid price per share of the Common Stock on such date on (a) the OTCBB, as
reported by the National Quotation Bureau Incorporated (or similar organization
or agency succeeding to its functions of reporting prices) at the close of
business on such date, or (b) such other Subsequent Market on which the Common
Stock is then listed or quoted or, if there is no such price on such date, then
the closing bid price on such exchange or quotation system on the date nearest
preceding such date, or (ii) if the Common Stock is not then publicly traded the
fair market value of a share of Common Stock as determined by an Appraiser
selected in good faith by the registered owners of a majority of the Underlying
Shares and Warrants then outstanding; provided, however, that, after receipt of
the determination by such Appraiser, the Company shall have the right to select,
in good faith, an additional Appraiser, in which case the fair market value
shall be equal to the average of the determinations by each such Appraiser; and
provided, further that all determinations of the Per Share Market Value shall be
appropriately adjusted for any stock dividends, stock splits or other similar
transactions during such period.
"Person" means an individual or a corporation, partnership, trust,
incorporated or unincorporated association, joint venture, limited liability
company, joint stock company, government (or an agency or political subdivision
thereof) or other entity of any kind.
"Purchase Agreement" means that certain Series C Preferred Stock
Purchase Agreement, dated March 3, 2000, among the Company and the Purchasers.
"Purchasers" has the meaning set forth in the Purchase Agreement.
"Registered Owner" means the Person identified on the face of this
Warrant as the registered owner hereof or their assigns.
"Registration Statement" has the meaning set forth in Section 5.20 of
the Purchase Agreement.
"Subsequent Market" means the NASDAQ SmallCap Market, the NASDAQ
National Market, the New York Stock Exchange or the American Stock Exchange.
"Trading Day(s)" means any day on which the primary market on which
shares of Common Stock are listed is open for trading.
"Underlying Shares" means the shares of Common Stock issuable upon
exercise of the Warrants.
"Warrant(s)" means the warrants issuable at the Closing, including this
Warrant and the Compensation Warrants (as defined in the Purchase Agreement), if
any.
"Warrant Shares" has the meaning assigned to it in Section 3 hereof.
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<PAGE>
2. Issue. Upon tender to the Company pursuant to Section 6 hereof, the
Company, within three (3) Business Days of the date thereof, shall issue to the
Registered Owner, or its designee, up to the number of shares specified in
Section 3 hereof of fully paid and nonassessable shares of Common Stock that the
Registered Owner, or assigns, is otherwise entitled to purchase.
3. Number of Shares. The total number of shares of Common Stock that
the Registered Owner, or assigns, of this Warrant is entitled to receive upon
exercise of this Warrant is _____ shares (the "Warrant Shares"), subject to
adjustment from time to time as provided herein. The Company shall at all times
reserve and hold available out of its authorized and unissued shares of Common
Stock or other securities, as the case may be, sufficient shares of Common Stock
to satisfy all conversion, exercise and purchase rights represented by
outstanding convertible securities, options and warrants, including this
Warrant. The Company covenants and agrees that all shares of Common Stock that
may be issued upon the exercise of this Warrant shall, upon issuance, be duly
and validly issued, fully paid and nonassessable, free from all taxes, liens and
charges with respect to the purchase and the issuance of the shares, shall not
have any legend or restrictions on resale, expect as required by Section 7.3 of
the Purchase Agreement and, subsequent to the effectiveness of the Registration
Statement (as defined in the Purchase Agreement), shall be freely tradable.
4. Exercise Price. The initial per share exercise price of this
Warrant, representing the price per share at which each share of Common Stock
issuable upon exercise of this Warrant may be purchased, is $26.58, subject to
adjustment from time to time pursuant to the provisions of Section 7 hereof (the
"Exercise Price").
5. Exercise Period. This Warrant may be exercised, in whole or in part,
from the Closing Date up to and including March 2, 2003 (3 years less 1 day)
(the "Exercise Period"). If not exercised during this period, this Warrant and
all rights granted under this Warrant shall expire and lapse.
6. Tender; Issuance of Certificates.
a. This Warrant may be exercised, in whole or in part, by (a)
delivery of the applicable Exercise Price for the number of Warrant
Shares in respect of which this Warrant is exercisable, (b) delivery of
a duly executed Warrant Exercise Form, a copy of which is attached to
this Warrant as Exhibit A, properly executed by the Registered Owner,
or assigns, of this Warrant and (c) surrender of this Warrant. The
number of Warrant Shares so purchased shall be designated on the
Warrant Exercise Form and shall be deemed to be issued to the
Registered Owner as of the close of business on the date on which this
Warrant shall have been surrendered, the completed Warrant Exercise
Form shall have been delivered and payment shall have been made for
such shares as set forth above. The payment and Warrant Exercise Form
must be delivered to the registered office of the Company or of the
Company's transfer agent, either in person or as set for in Section 13
hereof.
b. In addition to the exercise of all or a part of this
Warrant by payment of the Exercise Price in cash as provided above, and
in lieu of such payment, the Registered Owner shall have the right to
effect a cashless exercise (a "Cashless Exercise"). In the event of a
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<PAGE>
Cashless Exercise the Registered Owner may exercise this Warrant in
whole or in part by surrendering this Warrant in exchange for the
number of shares of Common Stock equal to the product of (i) the number
of shares as to which this Warrant is being exercised multiplied by
(ii) a fraction, the numerator of which is the Per Share Market Value
on such date less the Exercise Price then in effect and the denominator
of which is the Per Share Market Value on such date (in each case
adjusted for fractional shares as herein provided).
c. In lieu of physical delivery of this Warrant, provided the
Company's transfer agent is participating in the Depositary Trust
Company ("DTC") Fast Automated Securities Transfer (FAST) program, upon
request of the Registered Owner and in compliance with the provisions
hereof, the Company shall use its best efforts to cause its transfer
agent to electronically transmit the Warrant Shares to the Registered
Owner by crediting the account of the Registered Owner's Prime Broker
with DTC through its Deposit Withdrawal Agent Commission system. The
time period for delivery described herein shall apply to any such
electronic transmittals.
d. Certificates for the Warrant Shares so purchased,
representing the aggregate number of shares specified in the Warrant
Exercise Form, and any cash payments due under Section 15 hereof shall
be delivered to the Registered Owner, or its designee, within 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 Registered Owner and shall be registered in the name
of the Registered Owner or such other name as shall be designated by
such Registered Owner. If this Warrant shall have been exercised only
in part then, unless this Warrant has expired, the Company shall, at
its expense and at the time of delivery of such certificates, deliver
to the Registered Owner a new Warrant representing the number of shares
with respect to which this Warrant shall not then have been exercised.
7. Adjustment of Exercise Price.
a. Common Stock Dividends; Common Stock Splits;
Reclassification. If the Company, at any time while this Warrant is
outstanding, (a) shall pay or make a stock dividend on its Common Stock
in shares of Common Stock, (b) subdivide outstanding shares of Common
Stock into a larger number of shares or (c) issue by reclassification
of shares of Common Stock any shares of capital stock of the Company,
then (i) the Exercise Price shall be multiplied by a fraction, the
numerator of which shall be the number of shares of Common Stock
outstanding before such event and the denominator of which shall be the
number of shares of Common Stock outstanding after such event and (ii)
the number of Warrant Shares shall be multiplied by a fraction, the
numerator of which shall be the number of shares of Common Stock
outstanding immediately after such event and the denominator of which
shall be the number of shares of Common Stock outstanding immediately
prior to such event. Any adjustment made pursuant to this Section 7(a)
shall become effective immediately after the record date for the
determination of shareholders entitled to receive such dividend or
distribution or, in the case of a subdivision or re-classification,
shall become effective immediately after the effective date thereof.
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<PAGE>
b. Rights; Options; Warrants or Other Securities. If the
Company, at any time while this Warrant is outstanding, shall fix a
record date for the issuance of rights, options, warrants or other
securities (collectively, "Rights") to the holders of its Common Stock
entitling them to subscribe for or purchase, convert into, exchange for
or otherwise acquire shares of Common Stock, or any stock or other
securities convertible into or exchangeable for Common Stock for no
consideration or for a price per share less than the Exercise Price,
then the Exercise Price shall be multiplied by a fraction, the
numerator of which shall be (i) the number of shares of Common Stock
outstanding immediately prior to such record date plus (ii) the number
of shares of Common Stock which the aggregate consideration received by
the Company for the issuance of such Rights and the aggregate
consideration receivable by the Company upon exercise, conversion,
exchange or other acquisition of Common Stock pursuant to such rights
would purchase at the Exercise Price, and the denominator of which
shall be (i) the number of shares of Common Stock outstanding
immediately prior to such record date plus (ii) the number of
additional shares of Common Stock offered for subscription, purchase,
conversion, exchange or acquisition, as the case may be, pursuant to
such Rights. Such adjustment shall be made whenever such rights,
options, warrants or other securities are issued, and shall become
effective immediately after the record date for the determination of
shareholders entitled to receive such rights, options, warrants or
other securities. However, upon the expiration of any such Rights, the
issuance of which resulted in an adjustment in the Exercise Price
pursuant to this Section 6(b), if all or any portion of such Rights
shall not have been exercised, the Exercise Price shall immediately
upon such expiration be increased to the price which it would have been
after the issuance of such Rights on the basis of the number of shares
of Common Stock (if any) actually purchased upon the exercise of such
Rights actually exercised.
c. Subscription Rights. If the Company, at any time while this
Warrant is outstanding, shall fix a record date for the distribution to
holders of its Common Stock evidence of its indebtedness or assets or
rights, options, warrants or other securities entitling them to
subscribe for or purchase, convert into, exchange for or otherwise
acquire any security (excluding those referred to in Sections 7(a) and
(b) above), then in each such case the Exercise Price at which this
Warrant shall thereafter be exercisable shall be determined by
multiplying the Exercise Price in effect immediately prior to such
record date by a fraction, the numerator of which shall be the Per
Share Market Value on such record date less the then fair market value
at such record date of the portion of such assets, evidence of
indebtedness, rights, options, warrants or other securities so
distributed applicable to one outstanding share of Common Stock as
determined by the Board of Directors in good faith, and the denominator
of which shall be the Per Share Market Value as of such record date;
provided, however, that in the event of a distribution exceeding ten
percent (10%) of the net assets of the Company, such fair market value
shall be determined by an Appraiser selected in good faith by the
registered owners of a majority of the Warrants and Underlying Shares
then outstanding; and provided, further, that the Company, after
receipt of the determination by such Appraiser shall have the right to
select in good faith an additional Appraiser meeting the same
qualifications, in which case the fair market value shall be equal to
the average of the determinations by each such Appraiser. Such
adjustment shall be made whenever any
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<PAGE>
such distribution is made and shall become effective immediately after
the record date mentioned above.
d. Record Date. If the Company takes a record of the holders
of Common Stock for the purpose of entitling them (a) to receive a
dividend or other distribution payable in Common Stock, Options or in
Convertible Securities or (b) to subscribe for or purchase Common
Stock, Options or Convertible Securities, then such record date will be
deemed to be the date of the issue or sale of the shares of Common
Stock deemed to have been issued or sold upon the declaration of such
dividend or the making of such other distribution or the date of the
granting of such right of subscription or purchase, as the case may be.
e. Notice of Adjustment. Whenever the Exercise Price is
adjusted pursuant to this Section 7 the Company shall promptly deliver
to the Registered Owner a notice setting forth the Exercise Price after
such adjustment and setting forth a brief statement of the facts
requiring such adjustment. Such notice shall be signed by the chairman,
president or chief financial officer of the Company.
f. Treasury Shares. The number of shares of Common Stock
outstanding at any given time shall not include shares owned or held by
or for the account of the Company, and the disposition of any shares so
owned or held shall be considered an issue or sale of Common Stock by
the Company.
g. Change of Control; Compulsory Share Exchange. In case of
(A) any Change of Control Transaction or (B) any compulsory share
exchange pursuant to which the Common Stock is converted into other
securities, cash or property (each, an "Event"), lawful provision shall
be made so that the Registered Owner shall have the right thereafter to
exercise this Warrant for shares of stock and other securities, cash
and property receivable upon or deemed to be held by holders of Common
Stock following such Event, and the Registered Owner shall be entitled
upon such Event to receive such amount of shares of stock and other
securities, cash or property as the shares of the Common Stock of the
Company into which this Warrant could have been exercised immediately
prior to such Event (without taking into account any limitations or
restrictions on the exercisability of this Warrant) would have been
entitled; provided, however, that in the case of a transaction
specified in (A), above, in which holders of the Company's Common Stock
receive cash, the Registered Owner shall have the right to exercise the
Warrant for such number of shares of the surviving company equal to the
amount of cash into which this Warrant is then exercisable, divided by
the fair market value of the shares of the surviving company on the
effective date of such Event. The terms of any such Event shall include
such terms so as to continue to give to the Registered Owner the right
to receive the securities, cash or property set forth in this Section
7(g) upon any exercise or redemption following such Event. In any such
case appropriate adjustment shall be made in the application of the
provisions of this Section 7 with respect to the rights of the
Registered Owner after such transaction to the end that the provisions
of this Section 7 (including adjustment of the Exercise Price then in
effect and the number of Warrant Shares issuable upon exercise of this
Warrant) shall be applicable after that Event and be as nearly
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<PAGE>
equivalent as practicable. In the case of an Event specified in (A),
above, the successor corporation or other entity (if other than the
Company) resulting from such Event, or the Person acquiring the
properties and assets, or such other controlling corporation or entity
as may be appropriate, shall expressly assume the obligation to deliver
the cash, securities or other property which the Registered Owner is
entitled to receive hereunder. The provisions of this Section 7(g)
shall similarly apply to successive Events.
h. Issuance's Below Exercise Price. If the Company, at any
time while this Warrant is outstanding:
(i) issues or sells, or is deemed to have issued or
sold, any Common Stock (other than any Excluded Securities);
(ii) in any manner grants, issues or sells any
rights, options, warrants, options to subscribe for or to
purchase Common Stock or any stock or other securities
convertible into or exchangeable for Common Stock (other than
any Excluded Securities) (such rights, options or warrants
being herein called "Options" and such convertible or
exchangeable stock or securities being herein called
"Convertible Securities"); or
(iii) in any manner issues or sells any Convertible
Securities (other than Excluded Securities);
for (a) with respect to paragraph (h)(i), above, a price per share, or
(b) with respect to paragraphs h(ii) or h(iii), above, a price per
share (including the consideration per share paid on issuance of the
Option or Convertible Securities) for which Common Stock issuable upon
the exercise of such Options or upon conversion or exchange of such
Convertible Securities is, less than the Exercise Price in effect
immediately prior to such issuance, sale or grant, then, immediately
after such issuance, sale or grant, the Exercise Price shall be reduced
to the amount determined by dividing (1) the sum of (x) the product
derived by multiplying the Exercise Price in effect immediately prior
to such issue or sale by the number of shares of Common Stock Deemed
Outstanding immediately prior to such issue or sale, plus (y) the
consideration, if any, received or deemed to have been received by the
Company upon such issue or sale, by (2) the number of shares of Common
Stock Deemed Outstanding immediately after such issue or sale. No
modification of the issuance terms shall be made upon the actual
issuance of such Common Stock upon exercise, conversion or exchange of
such Options or Convertible Securities. If there is a change at any
time in (i) the exercise price provided for in any Options, (ii) the
additional consideration, if any, payable upon the issuance, conversion
or exchange of any Convertible Securities or (iii) the rate at which
any Convertible Securities are convertible into or exchangeable for
Common Stock, then immediately after such change the Exercise Price
shall be adjusted 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 exercise price, additional
consideration or changed conversion rate, as the case may be, at the
time initially granted, issued or sold; provided that
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<PAGE>
no adjustment shall be made if such adjustment would result in an
increase of the Exercise Price then in effect. However, upon the
expiration of any such Options or Convertible Securities, the issuance
of which resulted in an adjustment in the Exercise Price pursuant to
this Section 6(h), if all or any portion of any such Options or
Convertible Securities shall not have been exercised, the Exercise
Price shall immediately upon such expiration be increased to the price
which it would have been after the issuance of such Options or
Convertible Securities on the basis of the Company offering for
subscription, purchase, conversion, exchange or acquisition only that
number of shares of Common Stock (if any) actually purchased upon the
exercise of such Rights actually exercised.
i. Effect on Exercise Price of Certain Events. For purposes of
determining the adjusted Exercise Price under Section 7(h), the
following shall be applicable:
(i) Calculation of Consideration Received. If any
Common Stock, Options or Convertible Securities are issued or
sold or deemed to have been issued or sold for cash, the
consideration received therefor will be deemed to be the net
amount received by the Company therefor, without deducting any
expenses paid or incurred by the Company or any commissions or
compensations paid or concessions or discounts allowed to
underwriters, dealers or others performing similar services in
connection with such issue or sale. In case any Common Stock,
Options or Convertible Securities are issued or sold for a
consideration 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 listed or quoted on a national
securities exchange or national quotation system, in which
case the amount of consideration received by the Company will
be the arithmetic average of the closing sale price of such
security for the five (5) consecutive Trading Days immediately
preceding the date of receipt thereof. In case any Common
Stock, Options or Convertible Securities are issued to the
owners of the non-surviving entity in connection with any
merger in which the Company is the surviving entity, 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 entity 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
listed or quoted on a national securities exchange or national
quotation system will be determined jointly by the Company and
the registered owners of a majority of the Underlying Shares
and Warrants then outstanding. If such parties are unable to
reach agreement within ten (10) days after the occurrence of
an event requiring valuation (the "Valuation Event"), the fair
value of such consideration will be determined within
forty-eight (48) hours of the tenth (10th) day following the
Valuation Event by an Appraiser selected in good faith by the
Company and agreed upon in good faith by registered owners of
a majority of the Underlying Shares and Warrants then
outstanding. The determination of such Appraiser shall be
binding upon all parties absent manifest error.
(ii) Integrated Transactions. In case any Option is
issued in connection with the issue or sale of other
securities of the Company, together comprising one integrated
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transaction in which no specific consideration is allocated to
such Options by the parties thereto, the Options will be
deemed to have been issued for an aggregate consideration of
$.001.
j. Notice of Certain Events. If:
(i) the Company shall declare a dividend (or any
other distribution) on its Common Stock;
(ii) the Company shall declare a special nonrecurring
cash dividend on or a redemption of its Common Stock;
(iii) the Company shall authorize the granting to the
holders of its Common Stock rights, options or warrants to
subscribe for or purchase any shares of capital stock of any
class or of any rights;
(iv) the approval of any shareholders of the Company
shall be required in connection with any reclassification of
the Common Stock or any Change of Control Transaction; or
(v) the Company shall authorize the voluntary or
involuntary dissolution, liquidation or winding up of the
affairs of the Company;
then the Company shall cause to be filed at each office or agency
maintained for the purpose of exercise of this Warrant, and shall cause
to be delivered to the Registered Owner, at least 30 (thirty) calendar
days prior to the applicable record or effective date hereinafter
specified, a notice (provided such notice shall not include any
material non-public information) stating (a) the date on which a record
is to be taken for the purpose of such dividend, distribution,
redemption, or granting of options, rights or warrants, or if a record
is not to be taken, the date as of which the holders of Common Stock of
record to be entitled to such dividend, distributions, redemption,
rights or warrants are to be determined or (b) the date on which such
reclassification or Change of Control Transaction is expected to become
effective or close, and the date as of which it is expected that
holders of record of Common Stock shall be entitled to exchange their
shares of Common Stock for securities, cash or other property
deliverable in connection with such reclassification or Change of
Control Transaction; provided, however, that the failure to mail such
notice or any defect therein or in the mailing thereof shall not affect
the validity of the corporate action required to be specified in such
notice. Nothing herein shall prohibit the Registered Owner from
exercising this Warrant during the 30-day period commencing on the date
of such notice.
k. Rounding. All calculations under this Section 7 shall be
made to the nearest cent or the nearest l/l00th of a share, as the case
may be.
l. Other Events. If any event occurs that would adversely
affect the rights of the Registered Owner of this Warrant but is not
expressly provided for by Section 7 hereof
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(including, without limitation, the granting of stock appreciation
rights, phantom stock rights or other rights with equity features),
then the Company's Board of Directors will make an appropriate
adjustment in the Exercise Price so as to protect the rights of the
Registered Owner; provided, however, that no such adjustment will
increase the Exercise Price.
m. Increase in Exercise Price. In no event shall any provision
in this Section 7 cause the Exercise Price to be greater than the
Exercise Price on the date of issuance of this Warrant.
8. Mandatory Exercise. If, at any time during the Exercise Period, the
Per Share Market Value equals or exceeds $39.87 (the "Mandatory Exercise Price")
for any period of thirty (30) consecutive Trading Days (ending no earlier than
the day that the Registration Statement has been declared effective by the
Securities and Exchange Commission) (the "Mandatory Exercise Period"), then so
long as (i) any Registration Statement required to be filed and be effective
pursuant to the Purchase Agreement is then in effect and (ii) the Company has a
sufficient number of authorized shares of Common Stock reserved for issuance
upon full exercise of the Warrants, the Registered Owner shall be required to
exercise this Warrant in full (the "Mandatory Exercise") in accordance with the
provisions of Section 6 hereof upon written notice from the Company of
satisfaction of the foregoing requirements. This Warrant shall be exercised
pursuant to the Mandatory Exercise on no later than the fifth (5th) Trading Day
following the receipt of such notice from the Company (such date that this
Warrant is exercised pursuant to the Mandatory Exercise, the "Mandatory Exercise
Date").
9. [INTENTIONALLY OMITTED.]
10. Registration on Company Books. This Warrant shall be numbered and
shall be registered upon issuance in a warrant register maintained the Company.
The Company may deem and treat the Registered Owner of this Warrant as the
absolute owner thereof, unless the Registered Owner shall have presented this
Warrant to the Company for transfer and the transferee shall have been entered
in the register as a subsequent holder. The ownership of this Warrant shall be
proven by such register, absent manifest error.
11. Registration Rights. The Company will undertake the registration of
the Common Stock into which this Warrant is exercisable at such times and upon
such terms pursuant to Section 5.20 of the Purchase Agreement.
12. Reservation of Underlying Shares; Listing. The Company covenants
that it will at all times reserve and keep available out of its authorized
shares of Common Stock, free from preemptive rights, solely for the purpose of
issue upon exercise of this Warrants as herein provided, such number of shares
of the Common Stock as shall then be issuable upon the exercise of all
outstanding Warrants into Common Stock. The Company shall promptly secure the
listing of the shares of Common Stock issuable upon exercise of this Warrant
upon each national securities exchange or automated quotation system 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
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<PAGE>
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.
13. Notices. Any notice or other communication required or permitted to
be given hereunder shall be in writing and shall be deemed to have been received
(a) upon hand delivery (receipt acknowledged) or delivery by telex (with correct
answer back received), telecopy or facsimile (with transmission confirmation
report) at the address or number designated below (if received by 5:00 p.m.
Eastern time where such notice is to be received), or the first Business Day
following such delivery (if received after 5:00 p.m. Eastern time where such
notice is to be received) or (b) on the second Business Day following the date
of mailing by express courier service, fully prepaid, addressed to such address,
or upon actual receipt of such mailing, whichever shall first occur. The
addresses for such communications are (i) if to the Company or the Company's
transfer agent to the address set forth in the Purchase Agreement (with copies
to the Company's counsel), and (ii) if to the Registered Owner to the addresses
set forth on the Purchase Agreement (with copies to the Registered Owner's
counsel) or such other address as may be designated in writing hereafter, in the
same manner, by such Person.
14. Compliance With Governmental Requirements. The Company covenants
that if any shares of Common Stock required to be reserved for purposes of
exercise this Warrant requires registration with or approval of any governmental
authority under any federal or state law, or any national securities exchange,
before such shares may be issued upon exercise, the Company will use its best
efforts to cause such shares to be duly registered or approved, as the case may
be.
15. Fractional Shares. Upon any exercise hereunder, the Company shall
not be required to issue stock certificates representing fractions of shares of
Common Stock, but may if otherwise permitted make a cash payment in respect of
any final fraction of a share based on the Per Share Market Value at such time.
If the Company elects not, or is unable, to make such a cash payment, the
Registered Owner shall be entitled to receive, in lieu of the final fraction of
a share, one whole share of Common Stock.
16. Payment of Tax Upon Issue of Transfer. The issuance of certificates
for shares of the Common Stock upon exercise of this Warrant shall be made
without charge to the Registered Owner hereof for any documentary stamp or
similar taxes that may be payable in respect of the issue or delivery of such
certificate, provided that the Company shall not be required to pay any tax that
may be payable in respect of any transfer involved in the issuance and delivery
of any such certificate upon exercise in a name other than that of the
Registered Owner of this Warrant and the Company shall not be required to issue
or deliver such certificates unless or until the Person or Persons requesting
the issuance thereof shall have paid to the Company the amount of such tax or
shall have established to the satisfaction of the Company that such tax has been
paid.
17. Warrants Owned by Company Deemed Not Outstanding. In determining
whether the holders of the outstanding Warrants have concurred in any direction,
consent or waiver under this Warrant, warrants which are owned by the Company or
any other obligor thereof shall be disregarded and deemed not to be outstanding
for the purpose of any such determination; provided, that any
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Warrants owned by the Registered Owner shall be deemed outstanding for purposes
of making such a determination.
18. Effect of Headings. The section headings herein are for convenience
only and shall not affect the construction hereof.
19. No Rights as Stockholder. This Warrant shall not entitle the
Registered Owner to any rights as a stockholder of the Company, including
without limitation, the right to vote, to receive dividends and other
distributions, or to receive notice of, or to attend, meetings of stockholders
or any other proceedings of the Company, unless and to the extent exercised into
shares of Common Stock in accordance with the terms hereof.
20. 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 Registered Owner
in order to protect the exercise privilege of the Registered Owner 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 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.
21. Shareholder Rights Plan. In the event that the Company shall
distribute "poison pill" rights pursuant to a "poison pill" shareholder rights
plan (the "Shareholder Rights"), the Company shall, in lieu of making any
adjustment pursuant to Section 7 hereof, make proper provision so that each
Registered Owner who exercises this Warrant after the record date for such
distribution and prior to the expiration or redemption of the Shareholder Rights
shall be entitled to receive upon such exercise, in addition to the shares of
Common Stock issuable upon such exercise, a number of Shareholder Rights to be
determined as follows: (i) if such exercise occurs on or prior to the date for
the distribution to the holders of Shareholder Rights of separate certificates
evidencing such Shareholder Rights (the "Distribution Date"), the same number of
Shareholder Rights to which a holder of a number of shares of Common Stock equal
to the number of shares of Common Stock issuable upon such exercise at the time
of such exercise would be entitled in accordance with the terms and provisions
of and applicable to the Shareholder Rights; and (ii) if such exercise occurs
after the Distribution Date, the same number of Shareholder Rights to which a
holder of the number of shares into which this Warrant was exercisable
immediately prior to the Distribution Date would have been entitled on the
Distribution Date, in accordance with the terms and provisions of such
Shareholder Rights, and in each case subject to the terms and conditions of the
Shareholder Rights.
22. Successors and Assigns. This Warrant shall be binding upon and
inure to the benefit of the Registered Owners and its assigns, and shall be
binding upon any entity succeeding to the
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Company by merger or acquisition of all or substantially all the assets of the
Company. The Company may not assign this Warrant or any rights or obligations
hereunder without the prior written consent of the Registered Owner. The
Registered Owner may assign this Warrant without the prior written consent of
the Company.
23. Governing Law. This Warrant shall be governed by and construed and
enforced in accordance with the internal laws of the State of Delaware, as
applied to agreements under seal made, and entirely to be performed, within
Delaware, without regard to the principles of conflicts of law thereof. Each
party hereby irrevocably waives personal service of process and consents to
process being served in any such suit, action or proceeding by mailing a copy
thereof to such party at the address for such notices to it under this Warrant
and agrees that such service shall constitute good and sufficient service of
process and notice thereof. Nothing contained herein shall be deemed to limit in
any way any right to serve process in any manner permitted by law. EACH PARTY
HEREBY IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE, AND AGREES NOT TO REQUEST, A
JURY TRIAL FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN CONNECTION
HEREWITH OR ARISING OUT OF THIS AGREEMENT OR ANY TRANSACTION CONTEMPLATED
HEREBY.
24. Remedies. In the event of a breach by the Company of any of their
obligations under this Warrant, the Registered Owner, in addition to being
entitled to exercise all rights granted by law and under the Purchase Agreement,
including recovery of damages, will be entitled to specific performance of its
rights under this Warrant. The Company agrees that monetary damages would not
provide adequate compensation for any losses incurred by reason of a breach by
it of any of the provisions of this Warrant and hereby further agree that, in
the event of any action for specific performance in respect of such breach, it
shall waive the defense that a remedy at law would be adequate.
25. Mutilated or Missing Warrants. In case this Warrant shall be
mutilated, lost, stolen or destroyed, the Company, upon request of the
Registered Owner, shall issue and deliver in exchange and substitution for and
upon cancellation of such mutilated Warrant (upon surrender thereof), or in the
event that this Warrant is lost, stolen or destroyed, a new Warrant of like
tenor and representing an equivalent right or interest upon any indemnification
undertaking by the Holder to the Company in customary form as reasonably
required by the Company.
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<PAGE>
IN WITNESS WHEREOF, the Company has caused this Warrant to be executed
by its duly authorized officer as of the date first set forth above.
NET VALUE HOLDINGS, INC.
By:
Name: Andrew P. Panzo
Title: Chief Executive Officer
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<PAGE>
EXHIBIT A
Warrant Exercise Form
---------------------
TO: NET VALUE HOLDINGS, INC.
The undersigned hereby: (1) irrevocably subscribes for and offers to
purchase _______ shares of Common Stock of Net Value Holdings, Inc., pursuant to
Warrant No. ___ heretofore issued to ___________________ on ____________, ____ ;
(2) encloses either (a) a cash payment of $__________ or (b) a Warrant
representing _____ shares of Common Stock valued at the Per Share Market Price
of $ _____ on ________, ____, for these shares at a price of $____ per share (as
adjusted pursuant to the provisions of the Warrant); and (3) requests that a
certificate for the shares be issued in the name of the undersigned, or the
undersigned's designee, and delivered to the undersigned, or the undersigned's
designee, at the address specified below.
Date:
Investor Name:
Taxpayer Identification Number:
By:
Printed Name:
Title:
Address:
Cashless Exercise (Y or N):
Note: The above signature should correspond exactly with the
name on the face of this Warrant Certificate or with the name
of assignee appearing in assignment form below.
AND, if said number of shares shall not be all the shares purchasable under the
within Warrant, a new Warrant Certificate is to be issued in the name of said
undersigned for the balance remaining of the shares purchasable thereunder less
any fraction of a share paid in cash and delivered to the address stated above.
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<PAGE>
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED WITH THE SECURITIES
AND EXCHANGE COMMISSION IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER
THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND, ACCORDINGLY,
MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM,
OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT.
[Insert Issue Date]
__________ shares(1) Warrant No. ____
NET VALUE HOLDINGS, INC.
STOCK PURCHASE WARRANT
Registered Owner: [Insert Registered Owner]
This certifies that, for value received, Net Value Holdings, Inc., a
Delaware corporation (the "Company"), grants the following rights to the
Registered Owner, or assigns, of this Warrant:
1. Definitions. Capitalized terms used herein and not otherwise defined
herein shall have the meanings given to such terms in the Purchase Agreement. As
used in this Warrant, the following terms have the following meanings:
"Affiliate" means, with respect to any Person, any other Person that
directly or indirectly controls or is controlled by or under direct or indirect
common control with such Person. For the purposes of this definition, "control,"
when used with respect to any Person, means the possession, directly or
indirectly, of the power to direct or cause the direction of the management and
policies of such Person, whether through the ownership of voting securities, by
contract or otherwise; and the terms of "affiliated," "controlling" and
"controlled" have meanings correlative to the foregoing.
"Appraiser" means a nationally recognized or major regional investment
banking firm or firm of independent certified public accountants of recognized
standing.
"Business Day" means any day except Saturday, Sunday and any day which
shall be a legal holiday or a day on which banking institutions in the state of
Delaware generally are authorized or required by law or other government actions
to close.
- --------
(1) The number of Compensation Warrants issued to the Registered Owner shall be
50% of the number of Closing Warrants issued to such Registered Owner.
<PAGE>
"Cashless Exercise" has the meaning assigned to it in Section 6(b)
hereof.
"Change of Control Transaction" means the occurrence of any of (i) the
merger or consolidation of the Company with or into another entity, unless the
holders of the Company's securities immediately prior to such transaction or
series of transactions continue to hold at least 50% of such securities
following such transaction or series of transactions, (ii) a sale, conveyance,
lease, transfer or disposition of all or substantially all of the assets of the
Company in one or a series of related transactions or (iii) the execution by the
Company of an agreement to which the Company is a party or by which it is bound,
providing for any of the events set forth above in (i) or (ii).
"Closing" and "Closing Date" have the meanings set forth in Section 1.3
of the Purchase Agreement.
"Common Stock" means the shares of the Company's Common Stock, par
value $.01 per share.
"Common Stock Deemed Outstanding" means, at any given time, the sum of
the number of shares of Common Stock actually outstanding at such time plus the
number of shares of Common Stock issuable upon the exercise of all options,
rights and warrants and the conversion or exchange of convertible or
exchangeable securities outstanding at such time, whether or not such options,
rights, or warrants, or convertible or exchangeable securities are actually
exercisable, convertible or exchangeable at such time.
"Company" means Net Value Holdings, Inc., a Delaware corporation.
"Excluded Securities" means (i) shares of Common Stock issued or
issuable pursuant to the Purchase Agreement and the Warrants, (ii) shares of
Common Stock deemed to have been issued by the Company in connection with a
transaction set forth on Schedule 5.23 to the Purchase Agreement or (iii) shares
of Common Stock (including options and warrants) issuable upon the exercise of
any options or warrants outstanding on the date hereof and listed in Schedule
2.5(b) of the Purchase Agreement.
"Exercise Period" has the meaning assigned to it in Section 5 hereof.
"Exercise Price" has the meaning assigned to it in Section 4 hereof.
"Mandatory Exercise" has the meaning assigned to it in Section 8
hereof.
"Mandatory Exercise Date" has the meaning assigned to it in Section 8
hereof.
"Mandatory Exercise Period" has the meaning assigned to it in Section 8
hereof.
"Mandatory Exercise Price" has the meaning assigned to it in Section 8
hereof
"OTCBB" means the OTC Bulletin Board of the National Association of
Securities Dealers, Inc.
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<PAGE>
"Per Share Market Value" means on any particular date (i) the closing
bid price per share of the Common Stock on such date on (a) the OTCBB, as
reported by the National Quotation Bureau Incorporated (or similar organization
or agency succeeding to its functions of reporting prices) at the close of
business on such date, or (b) such other Subsequent Market on which the Common
Stock is then listed or quoted or, if there is no such price on such date, then
the closing bid price on such exchange or quotation system on the date nearest
preceding such date, or (ii) if the Common Stock is not then publicly traded the
fair market value of a share of Common Stock as determined by an Appraiser
selected in good faith by the registered owners of a majority of the Underlying
Shares and Warrants then outstanding; provided, however, that, after receipt of
the determination by such Appraiser, the Company shall have the right to select,
in good faith, an additional Appraiser, in which case the fair market value
shall be equal to the average of the determinations by each such Appraiser; and
provided, further that all determinations of the Per Share Market Value shall be
appropriately adjusted for any stock dividends, stock splits or other similar
transactions during such period.
"Person" means an individual or a corporation, partnership, trust,
incorporated or unincorporated association, joint venture, limited liability
company, joint stock company, government (or an agency or political subdivision
thereof) or other entity of any kind.
"Purchase Agreement" means that certain Series C Preferred Stock
Purchase Agreement, dated March 3, 2000, among the Company and the Purchasers.
"Purchasers" has the meaning set forth in the Purchase Agreement.
"Registered Owner" means the Person identified on the face of this
Warrant as the registered owner hereof or their assigns.
"Subsequent Market" means the NASDAQ SmallCap Market, the NASDAQ
National Market, the New York Stock Exchange or the American Stock Exchange.
"Trading Day(s)" means any day on which the primary market on which
shares of Common Stock are listed is open for trading.
"Underlying Shares" means the shares of Common Stock issuable upon
exercise of this Warrant.
"Warrant(s)" means this Compensation Warrant (as defined in the
Purchase Agreement).
"Warrant Shares" has the meaning assigned to it in Section 3 hereof.
2. Issue. Upon tender to the Company pursuant to Section 6 hereof, the
Company, within three (3) Business Days of the date thereof, shall issue to the
Registered Owner, or its designee, up to the number of shares specified in
Section 3 hereof of fully paid and nonassessable shares of Common Stock that the
Registered Owner, or assigns, is otherwise entitled to purchase.
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<PAGE>
3. Number of Shares. The total number of shares of Common Stock that
the Registered Owner, or assigns, of this Warrant is entitled to receive upon
exercise of this Warrant is __________ shares (the "Warrant Shares"), subject to
adjustment from time to time as provided herein. The Company shall at all times
reserve and hold available out of its authorized and unissued shares of Common
Stock or other securities, as the case may be, sufficient shares of Common Stock
to satisfy all conversion, exercise and purchase rights represented by
outstanding convertible securities, options and warrants, including this
Warrant. The Company covenants and agrees that all shares of Common Stock that
may be issued upon the exercise of this Warrant shall, upon issuance, be duly
and validly issued, fully paid and nonassessable, free from all taxes, liens and
charges with respect to the purchase and the issuance of the shares, shall not
have any legend or restrictions on resale, expect as required by Section 7.3 of
the Purchase Agreement and, subsequent to the effectiveness of the registration
statement registering the Underlying Shares, shall be freely tradable.
4. Exercise Price. The initial per share exercise price of this
Warrant, representing the price per share at which each share of Common Stock
issuable upon exercise of this Warrant may be purchased, is $4.09 subject to
adjustment from the Closing Date to the date of issue for stock splits,
dividends, combinations, reorganizations and other similar transactions with
respect to the Common Stock, and subject to adjustment from time to time during
the Exercise Period pursuant to the provisions of Section 7 hereof (the
"Exercise Price").
5. Exercise Period. This Warrant may be exercised, in whole or in part,
from [insert issue date] up to and including [insert date] (2 years less 1 day)
(the "Exercise Period"). If not exercised during this period, this Warrant and
all rights granted under this Warrant shall expire and lapse.
6. Tender; Issuance of Certificates.
a. This Warrant may be exercised, in whole or in part, by (a)
delivery of the applicable Exercise Price for the number of Warrant
Shares in respect of which this Warrant is exercisable, (b) delivery of
a duly executed Warrant Exercise Form, a copy of which is attached to
this Warrant as Exhibit A, properly executed by the Registered Owner,
or assigns, of this Warrant and (c) surrender of this Warrant. The
number of Warrant Shares so purchased shall be designated on the
Warrant Exercise Form and shall be deemed to be issued to the
Registered Owner as of the close of business on the date on which this
Warrant shall have been surrendered, the completed Warrant Exercise
Form shall have been delivered and payment shall have been made for
such shares as set forth above. The payment and Warrant Exercise Form
must be delivered to the registered office of the Company or of the
Company's transfer agent, either in person or as set for in Section 13
hereof.
b. In addition to the exercise of all or a part of this
Warrant by payment of the Exercise Price in cash as provided above, and
in lieu of such payment, the Registered Owner shall have the right to
effect a cashless exercise (a "Cashless Exercise"). In the event of a
Cashless Exercise the Registered Owner may exercise this Warrant in
whole or in part by surrendering this Warrant in exchange for the
number of shares of Common Stock equal to the product of (i) the number
of shares as to which this Warrant is being exercised multiplied by
(ii) a fraction, the numerator of which is the Per Share Market Value
on such date less the Exercise Price then in effect and the denominator
of which is the Per Share Market Value on such date (in each case
adjusted for fractional shares as herein provided).
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<PAGE>
c. In lieu of physical delivery of this Warrant, provided the
Company's transfer agent is participating in the Depositary Trust
Company ("DTC") Fast Automated Securities Transfer (FAST) program, upon
request of the Registered Owner and in compliance with the provisions
hereof, the Company shall use its best efforts to cause its transfer
agent to electronically transmit the Warrant Shares to the Registered
Owner by crediting the account of the Registered Owner's Prime Broker
with DTC through its Deposit Withdrawal Agent Commission system. The
time period for delivery described herein shall apply to any such
electronic transmittals.
d. Certificates for the Warrant Shares so purchased,
representing the aggregate number of shares specified in the Warrant
Exercise Form, and any cash payments due under Section 15 hereof shall
be delivered to the Registered Owner, or its designee, within 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 Registered Owner and shall be registered in the name
of the Registered Owner or such other name as shall be designated by
such Registered Owner. If this Warrant shall have been exercised only
in part then, unless this Warrant has expired, the Company shall, at
its expense and at the time of delivery of such certificates, deliver
to the Registered Owner a new Warrant representing the number of shares
with respect to which this Warrant shall not then have been exercised.
7. Adjustment of Exercise Price.
a. Common Stock Dividends; Common Stock Splits;
Reclassification. If the Company, at any time while this Warrant is
outstanding, (a) shall pay or make a stock dividend on its Common Stock
in shares of Common Stock, (b) subdivide outstanding shares of Common
Stock into a larger number of shares or (c) issue by reclassification
of shares of Common Stock any shares of capital stock of the Company,
then (i) the Exercise Price shall be multiplied by a fraction, the
numerator of which shall be the number of shares of Common Stock
outstanding before such event and the denominator of which shall be the
number of shares of Common Stock outstanding after such event and (ii)
the number of Warrant Shares shall be multiplied by a fraction, the
numerator of which shall be the number of shares of Common Stock
outstanding immediately after such event and the denominator of which
shall be the number of shares of Common Stock outstanding immediately
prior to such event. Any adjustment made pursuant to this Section 7(a)
shall become effective immediately after the record date for the
determination of shareholders entitled to receive such dividend or
distribution or, in the case of a subdivision or re-classification,
shall become effective immediately after the effective date thereof.
b. Rights; Options; Warrants or Other Securities. If the
Company, at any time while this Warrant is outstanding, shall fix a
record date for the issuance of rights, options, warrants or other
securities (collectively, "Rights") to the holders of its Common Stock
entitling them to subscribe for or purchase, convert into, exchange for
or otherwise acquire shares of Common Stock, or any stock or other
securities convertible into or exchangeable for Common Stock for no
consideration or for a price per share less than the Exercise Price,
then the Exercise Price shall be multiplied by a fraction, the
numerator of which shall be (i) the number of shares of Common Stock
outstanding immediately prior to such record date plus (ii) the number
of shares of Common Stock which the aggregate consideration received by
the Company for the issuance of such Rights and the aggregate
consideration receivable by the Company upon exercise, conversion,
exchange or other acquisition of Common Stock pursuant to such rights
would purchase at the Exercise Price, and the denominator of which
shall be (i) the number of shares of Common Stock outstanding
immediately prior to such record date plus (ii) the number of
additional shares of Common Stock offered for subscription, purchase,
conversion, exchange or acquisition, as the case may be, pursuant to
such Rights. Such adjustment shall be made whenever such
5
<PAGE>
rights, options, warrants or other securities are issued, and shall
become effective immediately after the record date for the
determination of shareholders entitled to receive such rights, options,
warrants or other securities. However, upon the expiration of any such
Rights, the issuance of which resulted in an adjustment in the Exercise
Price pursuant to this Section 6(b), if all or any portion of such
Rights shall not have been exercised, the Exercise Price shall
immediately upon such expiration be increased to the price which it
would have been after the issuance of such Rights on the basis of the
number of shares of Common Stock (if any) actually purchased upon the
exercise of such Rights actually exercised.
c. Subscription Rights. If the Company, at any time while this
Warrant is outstanding, shall fix a record date for the distribution to
holders of its Common Stock evidence of its indebtedness or assets or
rights, options, warrants or other securities entitling them to
subscribe for or purchase, convert into, exchange for or otherwise
acquire any security (excluding those referred to in Sections 7(a) and
(b) above), then in each such case the Exercise Price at which this
Warrant shall thereafter be exercisable shall be determined by
multiplying the Exercise Price in effect immediately prior to such
record date by a fraction, the numerator of which shall be the Per
Share Market Value on such record date less the then fair market value
at such record date of the portion of such assets, evidence of
indebtedness, rights, options, warrants or other securities so
distributed applicable to one outstanding share of Common Stock as
determined by the Board of Directors in good faith, and the denominator
of which shall be the Per Share Market Value as of such record date;
provided, however, that in the event of a distribution exceeding ten
percent (10%) of the net assets of the Company, such fair market value
shall be determined by an Appraiser selected in good faith by the
registered owners of a majority of the Warrants and Underlying Shares
then outstanding; and provided, further, that the Company, after
receipt of the determination by such Appraiser shall have the right to
select in good faith an additional Appraiser meeting the same
qualifications, in which case the fair market value shall be equal to
the average of the determinations by each such Appraiser. Such
adjustment shall be made whenever any such distribution is made and
shall become effective immediately after the record date mentioned
above.
d. Record Date. If the Company takes a record of the holders
of Common Stock for the purpose of entitling them (a) to receive a
dividend or other distribution payable in Common Stock, Options or in
Convertible Securities or (b) to subscribe for or purchase Common
Stock, Options or Convertible Securities, then such record date will be
deemed to be the date of the issue or sale of the shares of Common
Stock deemed to have been issued or sold upon the declaration of such
dividend or the making of such other distribution or the date of the
granting of such right of subscription or purchase, as the case may be.
e. Notice of Adjustment. Whenever the Exercise Price is
adjusted pursuant to this Section 7 the Company shall promptly deliver
to the Registered Owner a notice setting forth the Exercise Price after
such adjustment and setting forth a brief statement of the facts
requiring such adjustment. Such notice shall be signed by the chairman,
president or chief financial officer of the Company.
f. Treasury Shares. The number of shares of Common Stock
outstanding at any given time shall not include shares owned or held by
or for the account of the Company, and the disposition of any shares so
owned or held shall be considered an issue or sale of Common Stock by
the Company.
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<PAGE>
g. Change of Control; Compulsory Share Exchange. In case of
(A) any Change of Control Transaction or (B) any compulsory share
exchange pursuant to which the Common Stock is converted into other
securities, cash or property (each, an "Event"), lawful provision shall
be made so that the Registered Owner shall have the right thereafter to
exercise this Warrant for shares of stock and other securities, cash
and property receivable upon or deemed to be held by holders of Common
Stock following such Event, and the Registered Owner shall be entitled
upon such Event to receive such amount of shares of stock and other
securities, cash or property as the shares of the Common Stock of the
Company into which this Warrant could have been exercised immediately
prior to such Event (without taking into account any limitations or
restrictions on the exercisability of this Warrant) would have been
entitled; provided, however, that in the case of a transaction
specified in (A), above, in which holders of the Company's Common Stock
receive cash, the Registered Owner shall have the right to exercise the
Warrant for such number of shares of the surviving company equal to the
amount of cash into which this Warrant is then exercisable, divided by
the fair market value of the shares of the surviving company on the
effective date of such Event. The terms of any such Event shall include
such terms so as to continue to give to the Registered Owner the right
to receive the securities, cash or property set forth in this Section
7(g) upon any exercise or redemption following such Event. In any such
case appropriate adjustment shall be made in the application of the
provisions of this Section 7 with respect to the rights of the
Registered Owner after such transaction to the end that the provisions
of this Section 7 (including adjustment of the Exercise Price then in
effect and the number of Warrant Shares issuable upon exercise of this
Warrant) shall be applicable after that Event and be as nearly
equivalent as practicable. In the case of an Event specified in (A),
above, the successor corporation or other entity (if other than the
Company) resulting from such Event, or the Person acquiring the
properties and assets, or such other controlling corporation or entity
as may be appropriate, shall expressly assume the obligation to deliver
the cash, securities or other property which the
Registered Owner is entitled to receive hereunder. The provisions of
this Section 7(g) shall similarly apply to successive Events.
h. Issuance's Below Exercise Price. If the Company, at any
time while this Warrant is outstanding:
(i) issues or sells, or is deemed to have issued or
sold, any Common Stock (other than any Excluded Securities);
(ii) in any manner grants, issues or sells any rights,
options, warrants, options to subscribe for or to purchase
Common Stock or any stock or other securities convertible into
or exchangeable for Common Stock (other than any Excluded
Securities) (such rights, options or warrants being herein
called "Options" and such convertible or exchangeable stock or
securities being herein called "Convertible Securities"); or
(iii) in any manner issues or sells any Convertible
Securities (other than Excluded Securities);
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for (a) with respect to paragraph (h)(i), above, a price per share, or
(b) with respect to paragraphs h(ii) or h(iii), above, a price per
share (including the consideration per share paid on issuance of the
Option or Convertible Securities) for which Common Stock issuable upon
the exercise of such Options or upon conversion or exchange of such
Convertible Securities is, less than the Exercise Price in effect
immediately prior to such issuance, sale or grant, then, immediately
after such issuance, sale or grant, the Exercise Price shall be reduced
to the amount determined by dividing (1) the sum of (x) the product
derived by multiplying the Exercise Price in effect immediately prior
to such issue or sale by the number of shares of Common Stock Deemed
Outstanding immediately prior to such issue or sale, plus (y) the
consideration, if any, received or deemed to have been received by the
Company upon such issue or sale, by (2) the number of shares of Common
Stock Deemed Outstanding immediately after such issue or sale. No
modification of the issuance terms shall be made upon the actual
issuance of such Common Stock upon exercise, conversion or exchange of
such Options or Convertible Securities. If there is a change at any
time in (i) the exercise price provided for in any Options, (ii) the
additional consideration, if any, payable upon the issuance, conversion
or exchange of any Convertible Securities or (iii) the rate at which
any Convertible Securities are convertible into or exchangeable for
Common Stock, then immediately after such change the Exercise Price
shall be adjusted 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 exercise price, additional
consideration or changed conversion rate, as the case may be, at the
time initially granted, issued or sold; provided that no adjustment
shall be made if such adjustment would result in an increase of the
Exercise Price then in effect. However, upon the expiration of any such
Options or Convertible Securities, the issuance of which resulted in an
adjustment in the Exercise Price pursuant to this Section 6(h), if all
or any portion of any such Options or Convertible Securities shall not
have been exercised, the Exercise Price shall immediately upon such
expiration be increased to the price which it would have been
after the issuance of such Options or Convertible Securities on the
basis of the Company offering for subscription, purchase, conversion,
exchange or acquisition only that number of shares of Common Stock (if
any) actually purchased upon the exercise of such Rights actually
exercised.
i. Effect on Exercise Price of Certain Events. For purposes of
determining the adjusted Exercise Price under Section 7(h), the
following shall be applicable:
(i) Calculation of Consideration Received. If any
Common Stock, Options or Convertible Securities are issued or
sold or deemed to have been issued or sold for cash, the
consideration received therefor will be deemed to be the net
amount received by the Company therefor, without deducting any
expenses paid or incurred by the Company or any commissions or
compensations paid or concessions or discounts allowed to
underwriters, dealers or others performing similar services in
connection with such issue or sale. In case any Common Stock,
Options or Convertible Securities are issued or sold for a
consideration 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 listed or quoted on a national
securities exchange or national quotation system, in which
case the amount of consideration received by the Company will
be the arithmetic average of the closing sale price of such
security for the five (5) consecutive Trading Days immediately
preceding the
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<PAGE>
date of receipt thereof. In case any Common Stock, Options or
Convertible Securities are issued to the owners of the
non-surviving entity in connection with any merger in which
the Company is the surviving entity, 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 entity 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
listed or quoted on a national securities exchange or national
quotation system will be determined jointly by the Company and
the registered owners of a majority of the Underlying Shares
and Warrants then outstanding. If such parties are unable to
reach agreement within ten (10) days after the occurrence of
an event requiring valuation (the "Valuation Event"), the fair
value of such consideration will be determined within
forty-eight (48) hours of the tenth (10th) day following the
Valuation Event by an Appraiser selected in good faith by the
Company and agreed upon in good faith by registered owners of
a majority of the Underlying Shares and Warrants then
outstanding. The determination of such Appraiser shall be
binding upon all parties absent manifest error.
(ii) Integrated Transactions. In case any In case any
Option is issued in connection with the issue or sale of other
securities of the Company, together comprising one integrated
transaction in which no specific consideration is allocated to
such Options by the parties thereto, the Options will be
deemed to have been issued for an aggregate consideration of
$.001.
j. Notice of Certain Events. If:
(i) the Company shall declare a dividend (or any
other distribution) on its Common Stock;
(ii) the Company shall declare a special nonrecurring
cash dividend on or a redemption of its Common Stock;
(iii) the Company shall authorize the granting to the
holders of its Common Stock rights, options or warrants to
subscribe for or purchase any shares of capital stock of any
class or of any rights;
(iv) the approval of any shareholders of the Company
shall be required in connection with any reclassification of
the Common Stock or any Change of Control Transaction; or
(v) the Company shall authorize the voluntary or
involuntary dissolution, liquidation or winding up of the
affairs of the Company;
then the Company shall cause to be filed at each office or agency
maintained for the purpose of exercise of this Warrant, and shall cause
to be delivered to the Registered Owner, at least 30 (thirty) calendar
days prior to the applicable record or effective date hereinafter
specified, a notice (provided such notice shall not include any
material non- public information) stating (a) the date on which a
record is to be taken for the purpose of such dividend, distribution,
redemption, or granting of options, rights or warrants, or if a record
is not to be taken, the date as of which the holders of Common Stock of
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<PAGE>
record to be entitled to such dividend, distributions, redemption,
rights or warrants are to be determined or (b) the date on which such
reclassification or Change of Control Transaction is expected to become
effective or close, and the date as of which it is expected that
holders of record of Common Stock shall be entitled to exchange their
shares of Common Stock for securities, cash or other property
deliverable in connection with such reclassification or Change of
Control Transaction; provided, however, that the failure to mail such
notice or any defect therein or in the mailing thereof shall not affect
the validity of the corporate action required to be specified in such
notice. Nothing herein shall prohibit the Registered Owner from
exercising this Warrant during the 30- day period commencing on the
date of such notice.
k. Rounding. All calculations under this Section 7 shall be
made to the nearest cent or the nearest l/l00th of a share, as the case
may be.
l. Other Events. If any event occurs that would adversely
affect the rights of the Registered Owner of this Warrant but is not
expressly provided for by Section 7 hereof (including, without
limitation, the granting of stock appreciation rights, phantom stock
rights or other rights with equity features), then the Company's Board
of Directors will make an appropriate adjustment in the Exercise Price
so as to protect the rights of the Registered Owner; provided, however,
that no such adjustment will increase the Exercise Price.
m. Increase in Exercise Price. In no event shall any provision
in this Section 7 cause the Exercise Price to be greater than the
Exercise Price on the date of issuance of this Warrant.
8. Mandatory Exercise. If, at any time during the Exercise Period, the
Per Share Market Value equals or exceeds $6.14 (the "Mandatory Exercise Price")
for any period of thirty (30) consecutive Trading Days (ending no earlier than
the day that the registration statement registering the Underlying Shares has
been declared effective by the Securities and Exchange Commission) (the
"Mandatory Exercise Period"), then so long as (i) the registration statement
registering the Underlying Shares is then in effect and (ii) the Company has a
sufficient number of authorized shares of Common Stock reserved for issuance
upon full exercise of the Warrants, the Registered Owner shall be required to
exercise this Warrant in full (the "Mandatory Exercise") in accordance with the
provisions of Section 6 hereof. This Warrant shall be exercised pursuant to the
Mandatory Exercise on no later than the fifth (5th) Trading Day following the
Mandatory Conversion Period (such date that this Warrant is exercised pursuant
to the Mandatory Exercise, the "Mandatory Exercise Date").
9. Restriction on Exercise by Either the Registered Owner or the
Company. Notwithstanding anything herein to the contrary, and except as provided
in Section 8 hereof, in no event shall the Registered Owner or the Company have
the right or be required to exercise this Warrant to the extent that such
exercise would cause the aggregate number of shares of Common Stock beneficially
owned by such Registered Owner and its Affiliates to exceed 4.99% of the
outstanding shares of the Common Stock following such exercise. For purposes of
this Section 9, beneficial ownership shall be calculated in accordance with
Section 13(d) of the Securities Exchange Act of 1934, as amended. The provisions
of this Section 9 may be waived by a Registered Owner as to itself (and solely
as to itself) upon not less than 65 days prior written notice to the Company,
and the provisions of this Section 9 shall continue to apply until such 65th day
(or later, if stated in the notice of waiver). [THIS PROVISION MAY BE DELETED AT
THE OPTION OF THE REGISTERED HOLDER]
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10. Registration on Company Books. This Warrant shall be numbered and
shall be registered upon issuance in a warrant register maintained the Company.
The Company may deem and treat the Registered Owner of this Warrant as the
absolute owner thereof, unless the Registered Owner shall have presented this
Warrant to the Company for transfer and the transferee shall have been entered
in the register as a subsequent holder. The ownership of this Warrant shall be
proven by such register, absent manifest error.
11. Registration Rights. The Company will undertake the registration of
the Common Stock into which this Warrant is exercisable at such times and upon
such terms pursuant to the Registration Rights Agreement, in the form of Exhibit
E to the Purchase Agreement.
12. Reservation of Underlying Shares; Listing. The Company covenants
that it will at all times reserve and keep available out of its authorized
shares of Common Stock, free from preemptive rights, solely for the purpose of
issue upon exercise of this Warrants as herein provided, such number of shares
of the Common Stock as shall then be issuable upon the exercise of all
outstanding Warrants into Common Stock. The Company shall promptly secure the
listing of the shares of Common Stock issuable upon exercise of this Warrant
upon each national securities exchange or automated quotation system 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.
13. Notices. Any notice or other communication required or permitted to
be given hereunder shall be in writing and shall be deemed to have been received
(a) upon hand delivery (receipt acknowledged) or delivery by telex (with correct
answer back received), telecopy or facsimile (with transmission confirmation
report) at the address or number designated below (if received by 5:00 p.m.
Eastern time where such notice is to be received), or the first Business Day
following such delivery (if received after 5:00 p.m. Eastern time where such
notice is to be received) or (b) on the second Business Day following the date
of mailing by express courier service, fully prepaid, addressed to such address,
or upon actual receipt of such mailing, whichever shall first occur. The
addresses for such communications are (i) if to the Company or the Company's
transfer agent to the address set forth in the Purchase Agreement (with copies
to the Company's counsel), and (ii) if to the Registered Owner to the addresses
set forth on the Purchase Agreement (with copies to the Registered Owner's
counsel) or such other address as may be designated in writing hereafter, in the
same manner, by such Person.
14. Compliance With Governmental Requirements. The Company covenants
that if any shares of Common Stock required to be reserved for purposes of
exercise this Warrant requires registration with or approval of any governmental
authority under any federal or state law, or any national securities exchange,
before such shares may be issued upon exercise, the Company will use its best
efforts to cause such shares to be duly registered or approved, as the case may
be.
15. Fractional Shares. Upon any exercise hereunder, the Company shall
not be required to issue stock certificates representing fractions of shares of
Common Stock, but may if otherwise permitted make a cash payment in respect of
any final fraction of a share based on the Per Share Market Value at such time.
If the Company elects not, or is unable, to make such a cash payment, the
Registered Owner shall be entitled to receive, in lieu of the final fraction of
a share, one whole share of Common Stock.
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16. Payment of Tax Upon Issue of Transfer. The issuance of certificates
for shares of the Common Stock upon exercise of this Warrant shall be made
without charge to the Registered Owner hereof for any documentary stamp or
similar taxes that may be payable in respect of the issue or delivery of such
certificate, provided that the Company shall not be required to pay any tax that
may be payable in respect of any transfer involved in the issuance and delivery
of any such certificate upon exercise in a name other than that of the
Registered Owner of this Warrant and the Company shall not be required to issue
or deliver such certificates unless or until the Person or Persons requesting
the issuance thereof shall have paid to the Company the amount of such tax or
shall have established to the satisfaction of the Company that such tax has been
paid.
17. Warrants Owned by Company Deemed Not Outstanding. In determining
whether the holders of the outstanding Warrants have concurred in any direction,
consent or waiver under this Warrant, warrants which are owned by the Company or
any other obligor thereof shall be disregarded and deemed not to be outstanding
for the purpose of any such determination; provided, that any Warrants owned by
the Registered Owner shall be deemed outstanding for purposes of making such a
determination.
18. Effect of Headings. The section headings herein are for convenience
only and shall not affect the construction hereof.
19. No Rights as Stockholder. This Warrant shall not entitle the
Registered Owner to any rights as a stockholder of the Company, including
without limitation, the right to vote, to receive dividends and other
distributions, or to receive notice of, or to attend, meetings of stockholders
or any other proceedings of the Company, unless and to the extent exercised into
shares of Common Stock in accordance with the terms hereof.
20. 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 Registered Owner
in order to protect the exercise privilege of the Registered Owner 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 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.
21. Shareholder Rights Plan. In the event that the Company shall
distribute "poison pill" rights pursuant to a "poison pill" shareholder rights
plan (the "Shareholder Rights"), the Company shall, in lieu of making any
adjustment pursuant to Section 7 hereof, make proper provision so that each
Registered Owner who exercises this Warrant after the record date for such
distribution and prior to the expiration or redemption of the Shareholder Rights
shall be entitled to receive upon such exercise, in addition to the shares of
Common Stock issuable upon such exercise, a number of Shareholder Rights to be
determined as follows: (i) if such exercise occurs on or prior to the date for
the distribution to the holders of Shareholder Rights of separate certificates
evidencing such Shareholder Rights (the "Distribution Date"), the same number of
Shareholder Rights to which a holder of a number of shares of Common Stock equal
to the number of shares of Common Stock issuable upon such exercise at the time
of such exercise would be entitled in accordance with the terms and provisions
of and applicable to the Shareholder Rights; and (ii) if such exercise occurs
after the Distribution Date, the same number of Shareholder Rights to which a
holder of the number of shares into which this Warrant was exercisable
immediately prior to the Distribution Date would have been entitled on the
Distribution Date, in accordance with the terms and provisions of such
Shareholder Rights, and in each case subject to the terms and conditions of the
Shareholder Rights.
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22. Successors and Assigns. This Warrant shall be binding upon and
inure to the benefit of the Registered Owners and its assigns, and shall be
binding upon any entity succeeding to the Company by merger or acquisition of
all or substantially all the assets of the Company. The Company may not assign
this Warrant or any rights or obligations hereunder without the prior written
consent of the Registered Owner. The Registered Owner may assign this Warrant
without the prior written consent of the Company.
23. Governing Law. This Warrant shall be governed by and construed and
enforced in accordance with the internal laws of the [State of Delaware], as
applied to agreements under seal made, and entirely to be performed, within
[Delaware], without regard to the principles of conflicts of law thereof. Each
party hereby irrevocably waives personal service of process and consents to
process being served in any such suit, action or proceeding by mailing a copy
thereof to such party at the address for such notices to it under this Warrant
and agrees that such service shall constitute good and sufficient service of
process and notice thereof. Nothing contained herein shall be deemed to limit in
any way any right to serve process in any manner permitted by law. EACH PARTY
HEREBY IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE, AND AGREES NOT TO REQUEST, A
JURY TRIAL FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN CONNECTION
HEREWITH OR ARISING OUT OF THIS AGREEMENT OR ANY TRANSACTION CONTEMPLATED
HEREBY.
24. Remedies. In the event of a breach by the Company of any of their
obligations under this Warrant, the Registered Owner, in addition to being
entitled to exercise all rights granted by law and under the Purchase Agreement,
including recovery of damages, will be entitled to specific performance of its
rights under this Warrant. The Company agrees that monetary damages would not
provide adequate compensation for any losses incurred by reason of a breach by
it of any of the provisions of this Warrant and hereby further agree that, in
the event of any action for specific performance in respect of such breach, it
shall waive the defense that a remedy at law would be adequate.
25. Mutilated or Missing Warrants. In case this Warrant shall be
mutilated, lost, stolen or destroyed, the Company, upon request of the
Registered Owner, shall issue and deliver in exchange and substitution for and
upon cancellation of such mutilated Warrant (upon surrender thereof), or in the
event that this Warrant is lost, stolen or destroyed, a new Warrant of like
tenor and representing an equivalent right or interest upon any indemnification
undertaking by the Holder to the Company in customary form as reasonably
required by the Company.
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IN WITNESS WHEREOF, the Company has caused this Warrant to be executed
by its duly authorized officer as of the date first set forth above.
NET VALUE HOLDINGS, INC.
By:________________________
Name:
Title:
<PAGE>
EXHIBIT A
Warrant Exercise Form
---------------------
TO: NET VALUE HOLDINGS, INC.
The undersigned hereby: (1) irrevocably subscribes for and offers to
purchase _______ shares of Common Stock of Net Value Holdings, Inc., pursuant to
Warrant No. ___ heretofore issued to ___________________ on ____________, ____ ;
(2) encloses either (a) a cash payment of $__________ or (b) a Warrant
representing _____ shares of Common Stock valued at the Per Share Market Price
of $ _____ on ________, ____, for these shares at a price of $____ per share (as
adjusted pursuant to the provisions of the Warrant); and (3) requests that a
certificate for the shares be issued in the name of the undersigned, or the
undersigned's designee, and delivered to the undersigned, or the undersigned's
designee, at the address specified below.
Date: ________________________________
Investor Name: ________________________________
Taxpayer Identification Number: ________________________________
By: ________________________________
Printed Name: ________________________________
Title: ________________________________
Address: ________________________________
________________________________
________________________________
Cashless Exercise (Y or N): __________
Note: The above signature should correspond exactly with the
name on the face of this Warrant Certificate or with the name
of assignee appearing in assignment form below.
AND, if said number of shares shall not be all the shares purchasable under the
within Warrant, a new Warrant Certificate is to be issued in the name of said
undersigned for the balance remaining of the shares purchasable thereunder less
any fraction of a share paid in cash and delivered to the address stated above.
<PAGE>
REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement (this "Agreement") is made
and entered into as of March 3, 2000, among Net Value Holdings, Inc., a Delaware
corporation (the "Company"), and the parties who have executed this Agreement
and whose names appear on Schedule I hereto (each party listed on Schedule I
hereto is sometimes individually referred to herein as a "Purchaser" and all
such parties are sometimes collectively referred to herein as the "Purchasers").
The Company and the Purchasers hereby agree as follows:
1. Definitions
Capitalized terms used herein and not otherwise defined shall
have the meanings given to such terms in the Purchase Agreement. As used in this
Agreement, the following terms shall have the following meanings:
"Affiliate" means, with respect to any Person, any other
Person that directly or indirectly controls or is controlled by or under common
control with such Person. For the purposes of this definition, "control," when
used with respect to any Person, means the possession, direct or indirect, of
the power to direct or cause the direction of the management and policies of
such Person, whether through the ownership of voting securities, by contract or
otherwise; and the terms "affiliated," controlling" and "controlled" have
meanings correlative to the foregoing.
"Business Day" means any day except Saturday, Sunday and any
day which shall be a legal holiday or a day on which banking institutions in the
Commonwealth of Massachusetts generally are authorized or required by law or
other government actions to close.
"Commission" means the Securities and Exchange Commission.
"Common Stock" means the Company's Common Stock, par value
$0.01per share.
"Demand Registration" has meaning set forth in Section 2(a)
hereof.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"Holder" or "Holders" means the holder or holders, as the case
may be, from time to time of Registrable Securities.
"Indemnified Party" has the meaning set forth in Section 8(c)
hereof.
"Indemnifying Party" has the meaning set forth in Section 8(c)
hereof.
"Losses" has the meaning set forth in Section 8(a) hereof.
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"Majority Holders" means the Holders of at least sixty (60%)
percent of the Registrable Securities.
"Person" means an individual or a corporation, partnership,
trust, incorporated or unincorporated association, joint venture, limited
liability company, joint stock company, government (or an agency or political
subdivision thereof) or other entity of any kind.
"Purchase Agreement" means the Series C Preferred Stock
Purchase Agreement, dated as of the date hereof, by and among the Company and
the Purchasers.
"Proceeding" means an action, claim, suit, investigation or
proceeding (including, without limitation, an investigation or partial
proceeding, such as a deposition), whether commenced or threatened.
"Prospectus" means the prospectus included in the Registration
Statement (including, without limitation, a prospectus that includes any
information previously omitted from a prospectus filed as part of an effective
registration statement in reliance upon Rule 430A promulgated under the
Securities Act), as amended or supplemented by any prospectus supplement, with
respect to the terms of the offering of any portion of the Registrable
Securities covered by the Registration Statement, and all other amendments and
supplements to the Prospectus, including post-effective amendments, and all
material incorporated by reference in such Prospectus.
"Registrable Securities" means any shares of the Company's
Common Stock (i) issuable upon exercise of the Compensation Warrant (as defined
in the Purchase Agreement), (ii) issuable on conversion of the shares of the
Company's Series C Preferred (as defined in the Purchase Agreement) issued to
any Holder in payment of a dividend upon the Series C Preferred and not
otherwise included in the registration statement filed in connection with the
Purchase Agreement and (iii) issued with respect thereto as a result of any
stock split, stock dividend, recapitalization, exchange or similar event or
otherwise.
"Registration Statement" means any registration statements
contemplated by Sections 2(a) and 3(a), including (in each case) the Prospectus,
amendments and supplements to such registration statement or Prospectus,
including pre- and post-effective amendments, all exhibits thereto, and all
material incorporated by reference in such registration statement.
"Rule 144" means Rule 144 promulgated by the Commission
pursuant to the Securities Act, as such Rule may be amended from time to time,
or any similar rule or regulation hereafter adopted by the Commission having
substantially the same effect as such Rule.
"Rule 158" means Rule 158 promulgated by the Commission
pursuant to the Securities Act, as such Rule may be amended from time to time,
or any similar rule or regulation hereafter adopted by the Commission having
substantially the same effect as such Rule.
"Securities Act" means the Securities Act of 1933, as amended.
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"Special Counsel" means one special counsel to the Holders,
chosen by the Holder of a majority of the Registrable Securities, for which the
Holders will be reimbursed by the Company pursuant to Section 7.
"Trading Day" means a day on which the primary market on which
the shares of the Company's Common Stock are traded or quoted is open for
trading.
"Underwritten Registration or Underwritten Offering" means a
registration in connection with which securities of the Company are sold to an
underwriter for reoffering to the public pursuant to an effective registration
statement.
2. Required Registration
(a) Requests for Registration At
any time, and from time to time, the Majority Holders
may request in writing that the Company effect the
registration under the Securities Act of all or part
of their respective Registrable Securities (but in no
event less than 25% of the aggregate Registrable
Securities) for sale in the manner specified in such
request, and on a form that may be used for the
registration of such Registrable Securities. Within
ten days after receipt of any request pursuant to
this Section 2(a) the Company will give written
notice of such request to all other holders of
Registrable Securities (whether or not such holders
could make a request for registration pursuant to the
preceding sentence), and will include in such
registration all Registrable Securities with respect
to which the Company has received written requests
for inclusion therein within thirty (30) days after
the receipt of the Company's notice; provided,
however, that the Company shall not be required to
register any Registrable Securities pursuant to this
Section 2(a) that are eligible for sale pursuant to
Rule 144 without regard to volume restrictions. All
registrations requested pursuant to the foregoing are
referred to herein as "Demand Registrations".
(b) Number of Demand Registrations.
The Company shall be obligated to register
Registrable Securities pursuant to a Demand
Registration on as many occasions as may be
reasonably requested by the Majority Holders to
effect the sale of the Registrable Securities, not to
exceed one (1) Demand Registration in any period of
twelve (12) consecutive months.
(c) Priority on Demand
Registrations. If a Demand Registration is an
Underwritten Offering the Holders of a majority of
the Registrable Securities to be included in such
offering shall be entitled to designate the lead
underwriter and the Company may designate one or more
co-managing underwriters. In such event, and if the
managing underwriters advise the Company and such
Holders in writing that in their opinion the amount
of Registrable Securities and other securities, if
any,
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proposed to be sold in such Underwritten Offering (i)
creates a substantial risk that the price per share
in such registration will be materially and adversely
affected or (ii) exceeds the number of Registrable
Securities and other securities, if any, which can be
sold in such offering, and based on such
determination recommends inclusion in such
registration statement of fewer Registrable
Securities then proposed to be sold by the Holders,
then the number of Registrable Securities of the
Holders included in such registration statement shall
be reduced pro rata among such Holders (based upon
the number of Registrable Securities requested to be
included in the registration); provided, however,
that if securities are being offered for the account
of other persons or entities as well as the Company,
such reduction shall not represent a greater fraction
of the number of Registrable Securities intended to
be offered by the Holders than the fraction of
similar reductions imposed on such other persons or
entities (including the Company). No Holder may
participate in any Underwritten Offering hereunder
unless such Holder (a) agrees to sell its Registrable
Securities on the basis provided in any underwriting
agreements approved by the Persons entitled hereunder
to approve such arrangements and (b) completes and
executes all questionnaires, powers of attorney,
indemnities, underwriting agreements and other
documents required under the terms of such
arrangements.
(d) Restrictions on Registration.
The Company may postpone for up to sixty (60) days
the filing or the effectiveness of a Demand
Registration if at the time of such request to
register the Registrable Securities the Company
furnishes to each Holder seeking to register such
Registrable Securities a certificate signed by a
senior executive officer of the Company stating that
the Company is engaged in any other activity which,
in the good faith determination of the Company's
Board of Directors, is a material non-public event
which would be adversely affected by the requested
registration to the material detriment of the
Company.
3. Piggy-Back Registrations.
(a) Right to Piggyback. Whenever the Company shall determine
to prepare and file with the Commission a registration statement relating to an
offering for its own account or the account of others under the Securities Act
of any of its equity securities, other than on Form S-4 or Form S-8 (each as
promulgated under the Securities Act) 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 Holder of
Registrable Securities written notice of such determination within two (2)
Business Days thereof and, if within twenty (20) days after receipt of such
notice, any such Holder shall so request in writing to participate in such
offering (which request shall specify the Registrable Securities intended to be
disposed of by the Holders), the Company will use its best efforts to effect the
registration under the Securities Act of all
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Registrable Securities which the Company has been so requested to register by
the Holder, to the extent requisite to permit the disposition of the Registrable
Securities so to be registered; provided, that if at any time after giving
written notice of its intention to register any securities and prior to the
effective date of the registration statement filed in connection with such
registration, the Company shall determine for any reason not to register or to
delay registration of such securities, the Company may, at its election, give
written notice of such determination to such Holder and, thereupon, (i) in the
case of a determination not to register, shall be relieved of its obligation to
register any Registrable Securities in connection with such registration (but
not from its obligation to pay expenses in accordance with Section 6 hereof),
and (ii) in the case of a determination to delay registering, shall be permitted
to delay registering any Registrable Securities being registered pursuant to
this Section 3 for the same period as the delay in registering such other
securities.
(b) Priority on Piggy-Back Registration. The Company shall
include in such registration statement all or any part of such Registrable
Securities such Holder requests to be registered; provided, however, that the
Company shall not be required to register any Registrable Securities pursuant to
this Section 3(b) that are eligible for sale pursuant to Rule 144 without regard
to volume restrictions. In the case of an Underwritten Offering, if the managing
underwriters advise the Company and such Holders in writing that in their
opinion the amount of Registrable Securities proposed to be sold in such
Underwritten Offering (i) creates a substantial risk that the price per share in
such registration will be materially and adversely affected or (ii) exceeds the
number of Registrable Securities which can be sold in such offering, and based
on such determination recommends inclusion in such registration statement of
fewer Registrable Securities then proposed to be sold by the Holders, then (a)
the number of Registrable Securities of the Holders included in such
registration statement shall be reduced pro rata among such Holders (based upon
the number of Registrable Securities requested to be included in the
registration); provided, however, that if securities are being offered for the
account of other persons or entities as well as the Company, such reduction
shall not represent a greater fraction of the number of Registrable Securities
intended to be offered by the Holders than the fraction of similar reductions
imposed on such other persons or entities.
4. Holdback Agreements. Each of the Holders of Registrable Securities
agrees not to effect any public sale or distribution of equity securities of the
Company, or any securities convertible into or exchangeable or exercisable for
such securities, during the seven (7) days prior to and the 90-day period
beginning on the effective date of any underwritten Demand Registration or any
underwritten Piggyback Registration (except in each case as part of such
Underwritten Registration), unless the underwriters managing the registered
public offering otherwise agree; provided, that all officers, directors and
employees of the Company holding at least 1% of the outstanding Common Stock
enter into similar agreements.
5. Registration Procedures. Whenever the Holders of Registrable
Securities have requested that any shares of Registrable Securities be
registered pursuant to this Agreement, the Company shall use its best efforts to
effect the registration and the sale of such Registrable
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Securities in accordance with the intended method of disposition thereof, and
pursuant thereto the Company shall as expeditiously as possible:
(a) Preparation of Registration Statement. Prepare and file
with the Commission a registration statement on the appropriate form under the
Securities Act, which form shall be available for the sale of such Registrable
Securities in accordance with the intended method or methods of distribution
thereof, and use is best efforts to cause such registration statement to become
effective as soon as commercially practicable, and remain effective for such
period as may be reasonably necessary to effect the sale of such securities, not
to exceed nine months (except in the case of a Shelf Registration);
(b) Amendments. Prepare and file with the Commission such
amendments and supplements to the Registration Statement and the Prospectus used
in connection therewith as may be necessary to comply with the provisions of the
Securities Act with respect to the disposition of all securities covered by the
Registration Statement.
(c) Copies of Prospectus. Furnish such number of Prospectuses
and other documents incident thereto, including any amendment of or supplement
to the Prospectus, as a Holder from time to time may reasonably request.
(d) Registration. Provide a transfer agent and registrar for
all Common Stock registered pursuant to the Registration Statement and a CUSIP
number for all such Common Stock.
(e) Blue Sky. File the documents required of the Company and
otherwise use its best efforts promptly to obtain, if applicable, and maintain
requisite blue sky clearance in (A) all jurisdictions in which any of the
Acquired Securities are originally sold, and (B) all other states specified in
writing by a Holder, provided as to clause (B), however, that the Company shall
not be required to (i) qualify to do business or consent to service of process
in any state in which it is not now so qualified or has not so consented, (ii)
subject itself to general taxation in any such jurisdiction, (iii) file a
general consent to service of process in any such jurisdiction, (iv) provide any
undertakings that cause the Company undue expense or burden, or (v) 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.
(f) Notification. As promptly as practicable after becoming
aware of such event, the Company shall notify each Holder of the happening of
any event, of which the Company has knowledge, as a result of which the
Prospectus included in a Registration Statement, as then in effect, includes an
untrue statement of a material fact or omission to state a material fact
required to be stated therein or necessary to make the statements therein not
misleading (including without limitation any transfer of Registrable Securities
by a person named as a selling shareholder in a Registration Statement), and use
its best efforts promptly to prepare a supplement or amendment to such
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.
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(g) Stop Orders; Suspensions. 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 practicable moment
(including in each case by amending or supplementing such Registration
Statement) and to notify each Holder 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 (and if such Registration
Statement is supplemented or amended, deliver such number of copies of such
supplement or amendment to each Investor as such Investor may reasonably
request).
(h) Listing. (i) Cause all Registrable Securities relating to
such Registration Statement to be listed or authorized for quotation on each
securities exchange or automated quotation system on which similar securities
issued by the Company are then listed or quoted and, if no similar securities
issued by the Company are then listed or quoted, cause the original listing or
quotation of such Registrable Securities, (ii) maintain such listing of all such
Registrable Securities, (iii) provide the Holders evidence of such listing, (iv)
refrain from taking any action which may result in the delisting or suspension
of the Common Stock with respect to such listing and (v) pay all fees and
expenses in connection with satisfying its obligations hereunder.
(i) Certain Agreements. Enter into such customary agreements
(including, if there is an underwriter, underwriting agreements in customary
form including, without limitation, the requirement to obtain an opinion of
counsel to the company and a "comfort letter" from the independent public
accountants to the Company in the usual and customary form for such an
underwritten offering).
(j) Due Diligence. Make available for inspection by any seller
of Registrable Securities, any underwriter participating in any disposition
pursuant to such Registration Statement and any attorney, accountant or other
agent retained by any such seller or underwriter, all financial and other
records, pertinent corporate documents and properties of the Company that is
customary, and cause the Company's officers, directors, employees and
independent accountants to supply all information reasonably requested by any
such seller, underwriter, attorney, accountant or agent in connection with such
Registration Statement
(k) Responses to the Commission. The Company agrees to respond
fully and completely to any and all comments on a Registration Statement
received from the Commission staff as promptly as possible but in no event later
than ten (10) Business Days of the receipt of such comments, regardless of
whether such comments are in oral or written form.
(l) Confirmation of Effectiveness. Within two (2) Business
Days after a Registration Statement which covers applicable Registrable
Securities is ordered effective by the Commission, the Company shall deliver,
and shall cause legal counsel for the Company to deliver, to the transfer agent
for such Registrable Securities (with copies to the Holders whose Registrable
Securities are included in such Registration Statement) confirmation that such
Registration Statement has been declared effective by the Commission in the form
attached hereto as Exhibit A.
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(m) Earnings Statement. Comply in all material respects with
all applicable rules and regulations of the Commission and make generally
available to its securityholders earning statements satisfying the provisions of
Section 11(a) of the Securities Act and Rule 158.
(n) Cooperation. Cooperate, and cause the Company's officers,
directors, employees and independent accountants to cooperate, with the selling
holders of Registrable Securities and the managing underwriters, if any, in the
sale of the Registrable Securities and take any actions necessary to promote,
facilitate or effectuate such sale.
(o) Best Efforts. Otherwise use its best efforts to take all
steps necessary to effect the registration of the Registrable Securities.
6. Obligations of the Holders. In connection with the registration of
the Registrable Securities, the Holders 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 Holder that such Holder 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 five (5)
Business Days prior to the first anticipated filing date of the Registration
Statement, the Company shall notify each Holder of the information the Company
requires from each such Holder.
(b) Each Holder, by such Holder'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 Holder has notified the Company in
writing of such Holder's election to exclude all of such Holder's Registrable
Securities from the Registration Statement.
(c) In the event Holders holding a majority in interest of the
Registrable Securities being offered determine to engage the services of an
underwriter, each Holder agrees to enter into and perform such Holder'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 Holder has notified the
Company in writing of such Holder's election not to participate in such
underwritten distribution.
(d) Each Holder agrees that, upon receipt of any notice from
the Company of the happening of any event of the kind described in Sections 5(f)
or 5(g), such Holder will immediately discontinue disposition of Registrable
Securities pursuant to the Registration Statement covering such Registrable
Securities until such Holder's receipt of the copies of the supplemented or
amended prospectus contemplated by Sections 5(f) or 5(g) and, if so directed
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<PAGE>
by the Company, such Holder 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 Holder's possession, of the prospectus covering such
Registrable Securities current at the time of receipt of such notice.
(e) No Holder may participate in any underwritten distribution
hereunder unless such Holder (i) agrees to sell such Holder'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.
(f) Each Holder agrees that all resales of Registrable
Securities that are covered by an effective Registration Statement shall be made
only in compliance with applicable provisions of the Securities Act and
applicable state law, including without limitation Regulation M under the
Securities Act.
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7. Registration Expenses
All fees and expenses incident to the performance of
or compliance with this Agreement by the Company shall be borne by the Company,
whether or not pursuant to an Underwritten Offering and whether or not the
Registration Statement is filed or becomes effective and whether or not any
Registrable Securities are sold pursuant to the Registration Statement. The fees
and expenses referred to in the foregoing sentence shall include, without
limitation, (i) all registration and filing fees (including, without limitation,
reasonable fees and expenses (A) with respect to filings required to be made
with the securities exchange or market on which Registrable Securities are
required hereunder to be listed or quoted and (B) in compliance with state
securities or Blue Sky laws (including, without limitation, fees and
disbursements of counsel for the Holders in connection with Blue Sky
qualifications of the Registrable Securities and determination of the
eligibility of the Registrable Securities for investment under the laws of such
jurisdictions as the managing underwriters, if any, or the Holders of a majority
of Registrable Securities may designate)), (ii) printing expenses (including,
without limitation, expenses of printing certificates for Registrable Securities
and of printing prospectuses if the printing of prospectuses is requested by the
managing underwriters, if any, or by the Holders of a majority of the
Registrable Securities included in the Registration Statement), (iii) messenger,
telephone and delivery expenses, (iv) fees and disbursements of counsel for the
Company and one (1) Special Counsel for the Holders (not to exceed $10,000 with
respect to any Demand Registration and $5,000 with respect to any "piggy-back"
registration, (v) Securities Act liability insurance, if the Company so desires
such insurance and (vi) reasonable fees and expenses of all other Persons
retained by the Company in connection with the consummation of the transactions
contemplated by this Agreement. In addition, the Company shall be responsible
for all of its internal expenses incurred in connection with the consummation of
the transactions contemplated by this Agreement (including, without limitation,
all salaries and expenses of its officers and employees performing legal or
accounting duties), the expense of any annual audit, and the fees and expenses
incurred in connection with the listing of the Registrable Securities on any
securities exchange as required hereunder.
8. Indemnification
(a) Indemnification by the Company. The Company shall,
notwithstanding any termination of this Agreement, indemnify and hold harmless
each Holder, the officers, directors, agents (including any underwriters
retained by such Holder in connection with the offer and sale of Registrable
Securities), investment advisors and employees of each of them, each Person who
controls any such Holder (within the meaning of Section 15 of the Securities Act
or Section 20 of the Exchange Act) and the officers, directors, agents and
employees of each such controlling Person, to the fullest extent permitted by
applicable law, from and against any and all joint or several losses, claims,
damages, liabilities, costs (including, without limitation, costs of preparation
and attorneys' fees) and expenses (collectively, together with actions,
proceedings or inquiries by any regulatory or self-regulatory organization,
whether commenced or threatened, "Losses"), as incurred, arising out of or
relating to (i) any untrue or alleged untrue statement of a material fact
contained in the Registration Statement, any Prospectus or any form of
prospectus or in any amendment or supplement thereto or in any preliminary
Prospectus, or
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arising out of or relating to any omission or alleged omission of a material
fact required to be stated therein or necessary to make the statements therein
(in the case of any Prospectus or form of prospectus or supplement thereto, in
light of the circumstances under which they were made) not misleading, except to
the extent, but only to the extent, that such untrue statements or omissions are
based solely upon and in conformity with information regarding such Holder
furnished in writing to the Company by such Holder expressly for use therein,
which information was reasonably relied on by the Company for use therein or to
the extent that such information relates to such Holder or such Holder's
proposed method of distribution of Registrable Securities and was reviewed and
expressly approved in writing by such Holder expressly for use in the
Registration Statement, such Prospectus or such form of prospectus or in any
amendment or supplement thereto (provided that the Company amended any
disclosure with respect to the method of distribution upon written notice from
the Holders that such section of the Prospectus should be revised in any way) or
(ii) any violation or alleged violation by the Company of the Securities Act,
the Exchange Act, any other law, including, without limitation, any state
securities law, or any rule or regulation thereunder relating to the offer or
sale of Registrable Securities. The Company shall not, however, be liable for
any Losses to any Holder with respect to any untrue or alleged untrue statement
of material fact or omission or alleged omission of material fact if such
statement or omission was made in a preliminary Prospectus and such Holder did
not receive a copy of the final Prospectus (or any amendment or supplement
thereto) at or prior to the confirmation of the sale of the Registrable
Securities in any case where such delivery is required by the Securities Act and
the untrue or alleged untrue statement of material fact or omission or alleged
omission of material fact contained in such preliminary Prospectus was corrected
in the final Prospectus (or any amendment or supplement thereto), unless the
failure to deliver such final Prospectus (as amended or supplemented) was a
result of noncompliance by the Company with Section 5(c) of this Agreement. The
Company shall notify the Holders promptly of the institution, threat or
assertion of any Proceeding of which the Company is aware in connection with the
transactions contemplated by this Agreement.
(b) Indemnification by Holders. Each Holder shall, severally
and not jointly, indemnify and hold harmless the Company, the directors,
officers, agents and employees, each Person who controls the Company (within the
meaning of Section 15 of the Securities Act and Section 20 of the Exchange Act),
and the directors, officers, agents or employees of such controlling Persons, to
the fullest extent permitted by applicable law, from and against all Losses, as
incurred, arising solely out of or based solely upon any untrue statement of a
material fact contained in the Registration Statement, any Prospectus, or any
form of prospectus, or arising solely out of or based solely upon any omission
of a material fact required to be stated therein or necessary to make the
statements therein not misleading to the extent, but only to the extent, that
such untrue statement or omission is contained in any information so furnished
in writing by such Holder to the Company specifically for inclusion in the
Registration Statement or such Prospectus and that such information was
reasonably relied upon by the Company for use in the Registration Statement,
such Prospectus or such form of prospectus or to the extent that such
information relates to such Holder or such Holder's proposed method of
distribution of Registrable Securities and was reviewed and expressly approved
in writing by such Holder expressly for use in the Registration Statement, such
Prospectus or such form of prospectus; provided, however, that the indemnity
agreement contained in this Section 7(b) shall not apply to amounts paid in
settlement of any Losses if such settlement is effected without the prior
written
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consent of such Holder. In no event shall the liability of any selling Holder
hereunder be greater in amount than the dollar amount of the net proceeds
received by such Holder upon the sale of the Registrable Securities giving rise
to such indemnification obligation.
(c) Conduct of Indemnification Proceedings. If any Proceeding
shall be brought or asserted against any Person entitled to indemnity hereunder
(an "Indemnified Party"), such Indemnified Party promptly shall notify the
Person from whom indemnity is sought (the "Indemnifying Party") in writing, and
the Indemnifying Party shall assume the defense thereof, including the
employment of counsel reasonably satisfactory to the Indemnified Party and the
payment of all fees and expenses incurred in connection with defense thereof;
provided, however, that the failure of any Indemnified Party to give such notice
shall not relieve the Indemnifying Party of its obligations or liabilities
pursuant to this Agreement, except (and only) to the extent that it shall be
finally determined by a court of competent jurisdiction (which determination is
not subject to appeal or further review) that such failure shall have
proximately and materially adversely prejudiced the Indemnifying Party.
An Indemnified Party shall have the right to employ separate
counsel in any such Proceeding and to participate in the defense thereof, but
the fees and expenses of such counsel shall be at the expense of such
Indemnified Party or Parties unless: (i) the Indemnifying Party has agreed in
writing to pay such fees and expenses, or (ii) the Indemnifying Party shall have
failed promptly to assume the defense of such Proceeding and to employ counsel
reasonably satisfactory to such Indemnified Party in any such Proceeding, or
(iii) the named parties to any such Proceeding (including any impleaded parties)
include both such Indemnified Party and the Indemnifying Party, and such
Indemnified Party shall have been advised by counsel that a conflict of interest
is likely to exist if the same counsel were to represent such Indemnified Party
and the Indemnifying Party (in which case, if such Indemnified Party notifies
the Indemnifying Party in writing that it elects to employ separate counsel at
the expense of the Indemnifying Party, the Indemnifying Party shall not have the
right to assume the defense thereof and such counsel shall be at the reasonable
expense of the Indemnifying Party). The Indemnifying Party shall not be liable
for any settlement of any such Proceeding effected without its written consent,
which consent shall not be unreasonably withheld. No Indemnifying Party shall,
without the prior written consent of the Indemnified Party, effect any
settlement of any pending Proceeding in respect of which any Indemnified Party
is a party, unless such settlement includes an unconditional release of such
Indemnified Party from all liability on claims that are the subject matter of
such Proceeding.
All fees and expenses of the Indemnified Party (including
reasonable fees and expenses to the extent incurred in connection with
investigating or preparing to defend such Proceeding in a manner not
inconsistent with this Section) shall be paid to the Indemnified Party, as
incurred, within ten (10) Business Days of written notice thereof to the
Indemnifying Party, which notice shall be delivered no more frequently than on a
monthly basis (regardless of whether it is ultimately determined that an
Indemnified Party is not entitled to indemnification hereunder; provided, that
the Indemnifying Party may require such Indemnified Party to undertake to
reimburse all such fees and expenses to the extent it is finally judicially
determined that such Indemnified Party is not entitled to indemnification
hereunder).
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(d) Contribution. If a claim for indemnification under Section
7(a) or 7(b) is unavailable to an Indemnified Party because of a failure or
refusal of a court of competent jurisdiction to enforce such indemnification in
accordance with its terms (by reason of public policy or otherwise), then each
Indemnifying Party, in lieu of indemnifying such Indemnified Party, shall
contribute to the amount paid or payable by such Indemnified Party as a result
of such Losses, in such proportion as is appropriate to reflect the relative
fault of the Indemnifying Party and Indemnified Party in connection with the
actions, statements or omissions that resulted in such Losses as well as any
other relevant equitable considerations. The relative fault of such Indemnifying
Party and Indemnified Party shall be determined by reference to, among other
things, whether any action in question, including any untrue or alleged untrue
statement of a material fact or omission or alleged omission of a material fact,
has been taken or made by, or relates to information supplied by, such
Indemnifying Party or Indemnified Party, and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
action, statement or omission. The amount paid or payable by a party as a result
of any Losses shall be deemed to include, subject to the limitations set forth
in Section 7(c), any reasonable attorneys' or other reasonable fees or expenses
incurred by such party in connection with any Proceeding to the extent such
party would have been indemnified for such fees or expenses if the
indemnification provided for in this Section was available to such party in
accordance with its terms. In no event shall any selling Holder be required to
contribute an amount under this Section 7(d) in excess of the net proceeds
received by such Holder upon sale of the Registrable Securities pursuant to the
Registration Statement giving rise to such contribution obligation.
The parties hereto agree that it would not be just and
equitable if contribution pursuant to this Section 7(d) were determined by pro
rata allocation or by any other method of allocation that does not take into
account the equitable considerations referred to in the immediately preceding
paragraph. No Person guilty of fraudulent misrepresentation (within the meaning
of Section 11(f) of the Securities Act) shall be entitled to contribution from
any Person who was not guilty of such fraudulent misrepresentation.
The indemnity and contribution agreements contained in this
Section are in addition to any liability that the Indemnifying Parties may have
to the Indemnified Parties.
(a) Remedies. In the event of a breach by the Company or by a
Holder of any of their obligations under this Agreement, each Holder or the
Company, as the case may be, in addition to being entitled to exercise all
rights granted by law and under this Agreement, including recovery of damages,
will be entitled to specific performance of its rights under this Agreement. The
Company and each Holder agree that monetary damages would not provide adequate
compensation for any losses incurred by reason of a breach by it of any of the
provisions of this Agreement and hereby further agrees that, in the event of any
action for specific performance in respect of such breach, it shall waive the
defense that a remedy at law would be adequate.
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(b) Amendments and Waivers. The provisions of this Agreement,
including the provisions of this sentence, may not be amended, modified or
supplemented, and waivers or consents to departures from the provisions hereof
may not be given, unless the same shall be in writing and signed by the Company
and the Majority Holders; provided, however, that for the purposes of this
sentence, Registrable Securities that are owned, directly or indirectly, by the
Company, or an Affiliate of the Company are not deemed outstanding.
Notwithstanding the foregoing, a waiver or consent to depart from the provisions
hereof with respect to a matter that relates exclusively to the rights of
Holders and that does not directly or indirectly affect the rights of other
Holders may be given by the Majority Holders to which such waiver or consent
relates. Upon effectiveness of each such amendment or waiver, the Company shall
promptly give written notice thereof to the Holders who have not previously
consented thereto in writing.
(c) Notices. Any notice or other communication required or
permitted to be given hereunder shall be in writing and shall be deemed to have
been received (a) upon hand delivery (receipt acknowledged) or delivery by telex
(with correct answer back received), telecopy or facsimile (with transmission
confirmation report) at the address or number designated below (if received by
5:00 p.m. New York City time where such notice is to be received), or the first
Business Day following such delivery (if received after 5:00 p.m. New York City
time where such notice is to be received) or (b) on the first Business Day
following the date of mailing by a nationally recognized overnight courier
service, fully prepaid, addressed to such address, or upon actual receipt of
such mailing, whichever shall first occur. The addresses for such communications
are (i) if to the Company to Net Value Holdings, Inc., Two Penn Center Plaza,
Suite 605, Philadelphia, PA 19102 Attn: Mr. Andrew Panzo, President & CEO,
facsimile no.: (215) 564-3133, with copies to Klehr, Harrison, Harvey, Branzburg
& Ellers, 260 S. Broad Street, Philadelphia, PA 19102-5003, Attn: Lawrence D.
Rovin, Esq., facsimile no.: (215) 568-6603 and (ii) if to any Holder to the
address set forth on Schedule I hereto with copies to those specified on the
signature pages hereto or such other address as may be designated in writing
hereafter, in the same manner, by such Person.
(d) Successors and Assigns. This Agreement shall inure to the
benefit of and be binding upon the successors and permitted assigns of each of
the parties and shall inure to the benefit of each Holder. The Company may not
assign its rights or obligations hereunder without the prior written consent of
each Holder. Each Holder may assign its rights hereunder in the manner and to
the Persons as permitted under the Purchase Agreement. In addition, the rights
of each Holder hereunder, including the right to have the Company register for
resale Registrable Securities in accordance with the terms of this Agreement,
shall be automatically assignable by each Holder if: (i) the Holder agrees in
writing with the transferee or assignee to assign such rights, and a copy of
such agreement is furnished to the Company within a reasonable time after such
assignment, (ii) the Company is, within a reasonable time after such transfer or
assignment, furnished with written notice of (a) the name and address of such
transferee or assignee, and (b) the securities with respect to which such
registration rights are being transferred or assigned, (iii) following such
transfer or assignment the further disposition of such securities by the
transferee or assignees is restricted under the Securities Act and applicable
state securities laws, and (iv) at or before the time the Company receives the
written notice contemplated by clause (ii) of this Section, the transferee or
assignee agrees in writing with the Company to be bound by all of the
14
<PAGE>
provisions of this Agreement. The rights to assignment shall apply to the
Holders (and to subsequent) successors and assigns.
(e) Counterparts. This Agreement may be executed in any number
of counterparts, each of which when so executed shall be deemed to be an
original and all of which taken together shall constitute one and the same
Agreement. In the event that any signature is delivered by facsimile
transmission, such signature shall create a valid and binding obligation of the
party executing (or on whose behalf such signature is executed) the same with
the same force and effect as if such facsimile signature were the original
thereof.
(f) Governing Law. All questions concerning the construction,
validity, enforcement and interpretation of this Agreement shall be governed by
and construed in accordance with the laws of the Commonwealth of Massachusetts
applicable to agreements entered into and to be performed wholly within such
state.
(g) Cumulative Remedies. The remedies provided herein are
cumulative and not exclusive of any remedies provided by law.
(h) Severability. If any term, provision, covenant or
restriction of this Agreement is held by a court of competent jurisdiction to be
invalid, illegal, void or unenforceable, the remainder of the terms, provisions,
covenants and restrictions set forth herein shall remain in full force and
effect and shall in no way be affected, impaired or invalidated, and the parties
hereto shall use their reasonable efforts to find and employ an alternative
means to achieve the same or substantially the same result as that contemplated
by such term, provision, covenant or restriction. It is hereby stipulated and
declared to be the intention of the parties that they would have executed the
remaining terms, provisions, covenants and restrictions without including any of
such that may be hereafter declared invalid, illegal, void or unenforceable.
(i) Headings. The headings in this Agreement are for
convenience of reference only and shall not limit or otherwise affect the
meaning hereof.
(j) Shares Held by The Company and its Affiliates. Whenever
the consent or approval of Holders of a specified percentage of Registrable
Securities is required hereunder, Registrable Securities held by the Company or
its Affiliates (other than any Holder or transferees or successors or assigns
thereof if such Holder is deemed to be an Affiliate solely by reason of its
holdings of such Registrable Securities) shall not be counted in determining
whether such consent or approval was given by the Holders of such required
percentage.
15
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Registration Rights
Agreement as of the date first written above.
NET VALUE HOLDINGS, INC.
By: /s/ Andrew P. Panzo
-----------------------------------
Name: Andrew P. Panzo
Title: Chief Executive Officer
THE ALTAR ROCK FUND, L.P.
By: Tudor Investment Corporation,
as General Partner
By: /s/ William T. Flaherty
-----------------------------------
Name: William T. Flaherty
Title: Vice President
RAPTOR GLOBAL PORTFOLIO, LTD.
By: Tudor Investment Corporation,
as Investment Advisor
By: /s/ William T. Flaherty
-----------------------------------
Name: William T. Flaherty
Title: Vice-President
BROWN SIMPSON STRATEGIC GROWTH FUND,
LTD.
By: Brown Simpson Asset Management, LLC
By: /s/ Peter D. Greene
-----------------------------------
Name: Peter D. Greene
Title: Managing Principal
<PAGE>
BROWN SIMPSON STRATEGIC GROWTH FUND,
L.P.
By: Brown Simpson Capital, LLC
its general partner
By: /s/ Peter D. Greene
-----------------------------------
Name: Peter D. Greene
Title: Managing Principal
<PAGE>
SCHEDULE I
Purchasers:
- ----------
THE ALTAR ROCK FUND, L.P.
40 Rowes Wharf, 2nd floor
Boston, MA 02110
Attention: Eric Olander
Facsimile: (617) 737-0993
RAPTOR GLOBAL PORTFOLIO, LTD.
40 Rowes Wharf, 2nd floor
Boston, MA 02110
Attention: Eric Olander
Facsimile: (617) 737-0993
BROWN SIMPSON STRATEGIC GROWTH FUND, L.P.
152 West 57th Street, 40th Floor
New York, New York 10019
Attention: Peter D. Greene
Facsimile: (212) 247-1329
BROWN SIMPSON STRATEGIC GROWTH FUND, LTD.
152 West 57th Street, 40th Floor
New York, New York 10019
Attention: Peter D. Greene
Facsimile: (212) 247-1329
<PAGE>
EXHIBIT A
FORM OF NOTICE OF EFFECTIVENESS
OF REGISTRATION STATEMENT
[TRANSFER AGENT]
Attn.:
Re: Net Value Holdings, Inc.
Ladies and Gentlemen:
We are counsel to Net Value Holdings, Inc., a corporation organized
under the laws of Delaware (the "Company"), and have represented the Company in
connection with that certain Securities Purchase Agreement (the "Purchase
Agreement") entered into by and among the Company and the buyers named therein
(collectively, the "Holders") pursuant to which the Company was required to
issue to the Holders, under certain conditions, securities (the "Securities")
convertible into shares of the Company's common stock, par value $0.01 per share
(the "Common Stock"). Pursuant to the Purchase Agreement, the Company also has
entered into a Registration Rights Agreement with the Holders (the "Registration
Rights Agreement") pursuant to which the Company agreed, among other things, to
register the Registrable Securities (as defined in the Registration Rights
Agreement) under the Securities Act of 1933, as amended (the "1933 Act"). In
connection with the Company's obligations under the Registration Rights
Agreement, on _______________, 2000, the Company filed a Registration Statement
on Form S-3 (File No. _____________) (the "Registration Statement") with the
Securities and Exchange Commission (the "SEC") relating to the Registrable
Securities which names each of the Holders as a selling stockholder thereunder.
In connection with the foregoing, we advise you that a member of the
SEC's staff has advised us by telephone that the SEC has entered an order
declaring the Registration Statement effective under the 1933 Act at [ENTER TIME
OF EFFECTIVENESS] on [ENTER DATE OF EFFECTIVENESS] and we have no knowledge,
after telephonic inquiry of a member of the SEC's staff, that any stop order
suspending its effectiveness has been issued or that any proceedings for that
purpose are pending before, or threatened by, the SEC and the Registrable
Securities are available for resale under the 1933 Act pursuant to the
Registration Statement.
Very truly yours,
[ISSUER'S COUNSEL]
cc: [LIST NAMES OF HOLDERS]
<PAGE>
-1-
SERIES C PREFERRED STOCK
PURCHASE AGREEMENT
This Series C Preferred Stock Purchase Agreement (this "Agreement"),
dated as of March 3, 2000, is by and among (i) NET VALUE HOLDINGS, INC., a
Delaware corporation (the "Company"), and (ii) the Purchasers listed on the
Purchaser Schedule attached hereto (each individually, a "Purchaser," and all of
them, collectively, the "Purchasers").
Capitalized terms used and not otherwise defined upon first usage
herein are defined in Section 9.1 hereof.
1. Sale And Purchase of Purchased Shares.
1.1. Agreement to Sell and Purchase Purchased Shares. The Company
hereby agrees to issue and sell to each Purchaser and, subject to all of the
terms and conditions hereof and in reliance on the representations and
warranties set forth or referred to herein, each Purchaser severally agrees to
purchase (i) such number of shares (collectively, the "Purchased Shares") of
Series C Preferred Stock (also referred to herein as the "Series C Preferred")
as is equal to the result obtained when the aggregate purchase price (as to each
Purchaser, the "Aggregate Purchase Price") being paid by each such Purchaser (as
set forth opposite such Purchaser's name on the Purchaser Schedule attached
hereto as Exhibit A) is divided by the Per Share Purchase Price (as such term is
defined in Section 1.2, below) therefor, and (ii) a Closing Warrant exercisable
for such number of shares of Common Stock as is set forth opposite such
Purchaser's name on the Purchaser Schedule attached hereto as Exhibit A. The
term "Purchased Shares" as used in this Agreement also includes any securities
issued or issuable with respect to the original Purchased Shares upon the
occurrence of an Adjustment Event and any securities into which any of the
original Purchased Shares are converted or convertible, directly or indirectly,
or for which any of the original Purchased Shares are exchanged or exchangeable,
directly or indirectly.
1.2. Purchase Price. The purchase price per share (the "Per Share
Purchase Price") to be paid at Closing by the Purchasers for each of the
Purchased Shares shall be equal to the lesser of (i) $12.00 per share (as
adjusted on the occurrence of an Adjustment Event if the Closing Date shall
occur after the date of this Agreement), and (ii) 80% of the average of the
closing market prices of the Common Stock on each of the three (3) trading days
prior to the occurrence of the Closing Date; provided, however, that if the Per
Share Purchase Price as calculated pursuant to clauses (i) and (ii) of this
sentence would be less than $6.00 per share, (as adjusted from time to time on
the occurrence of an Adjustment Event) then (x) the Per Share Purchase Price
shall be equal to $6.00 per share (as adjusted from time to time on the
occurrence of an Adjustment Event), and (y) the Purchasers shall in such case be
under no obligation to consummate the purchase of the Purchased Shares pursuant
to the terms of this Agreement; provided, further, that the Per Share Purchase
Price shall be equitably adjusted on the occurrence of an Adjustment Event. No
consideration in addition to the Aggregate Purchase Price payable by each
Purchaser in respect of the Purchased Shares being purchased by such Purchaser
shall be payable by such Purchaser in respect of the Closing Warrant being
issued to such Purchaser at Closing.
1.3. Closing. The closing of the initial purchase and sale of the
Purchased Shares (the "Closing") will take place on or before March 3, 2000 at
the offices of Bingham Dana LLP, 150 Federal Street, Boston, Massachusetts
02110, simultaneously with the execution and delivery of this Agreement, or at
such other time, date, and place as the Company and the Purchasers may agree
(the date on which the Closing actually occurs, the "Closing Date").
<PAGE>
-2-
1.4. Use of Proceeds.
(a) The Company agrees that the proceeds from the sale of the Purchased
Shares hereunder will be used as described in the attached Use of Proceeds
Schedule attached hereto as Exhibit B.
(b) The Company further agrees that it will not use any part of the
proceeds from the sale of the Purchased Shares to purchase or carry any "margin
security" or "margin stock" (as such terms are defined in any regulation, rule,
or interpretation of the Board of Governors of the Federal Reserve System).
1.5. Closing Deliveries. The obligation of the Purchasers to purchase
the Purchased Shares at Closing and of the Company to sell the Purchased Shares
at Closing, is subject to the fulfillment, or the waiver by the applicable
party, of each of the following conditions on or before the Closing:
(a) The Company will deliver to each Purchaser one or more stock
certificates representing the Purchased Shares to be sold to and purchased by
such Purchaser pursuant to this Agreement, free and clear of all Liens, each of
which shall be registered in such Purchaser's name (or if requested by such
Purchaser, its nominee or designee) in the Company's records.
(b) Each Purchaser will pay for the Purchased Shares set forth opposite
such Purchaser's name in the attached Purchaser Schedule by payment to the
Company of the aggregate purchase price therefor by certified or bank check or
wire transfer.
(c) The Company shall have paid, in accordance with Section 8, hereof
the fees and disbursements of the Purchasers' counsel and the Tudor Entities as
evidenced by a summary invoice provided at the Closing.
(d) The Company will deliver to the Purchasers each of the following
documents:
(1) Wire transfer instructions in respect of the purchase price for
the Purchased Shares being paid by each of the Purchasers pursuant to the terms
hereof.
(2) The Registration Rights Agreement, duly executed by the Company
and each of its stockholders who is to have any registration rights with respect
to the Company's securities.
(3) (i) With respect to the Company, (A) a copy of its charter
documents, certified as of a date not more than five business days before the
Closing Date, by the Secretary of State of the State of Delaware, (B) a
certificate of the Secretary of State of the State of Delaware, dated as of a
date not more than five business days before the Closing Date, with respect to
the legal existence, charter documents on file with the Secretary of State, and
good standing of the Company in the State of Delaware, and (C) a certificate of
the Secretary of State or equivalent official of each other jurisdiction in
which the Company's activities or ownership or leasing of property require it to
qualify to do business as a foreign corporation, dated not more than five
business days before the Closing Date, with respect to such qualification and
the good standing of the Company in such jurisdiction.
(ii) With respect to the Company, evidence that the Certificate
of Designation has been duly filed with the Secretary of State of the State of
Delaware on or before the Closing Date.
<PAGE>
-3-
(4) With respect to the Company, a certificate of its
secretary, dated the Closing Date, certifying (A) the absence of any amendments
to its charter documents (or proceedings therefor) since the date of the
certificate referred to in Section 1.5(d)(3)(i)(A) above, (B) an attached copy
of its by-laws, (C) an attached copy of the resolutions of its board of
directors and stockholders, respectively and as applicable, with respect to the
transactions hereby contemplated or otherwise to be effected at the Closing, (D)
the incumbency of its officers and directors, and (E) satisfaction of closing
conditions, compliance with covenants set forth herein, and accuracy of
representations and warranties.
(5) Evidence satisfactory to the Purchasers that (i) all of
the Company's employees have executed and delivered to the Company agreements,
in form and substance satisfactory to the Purchasers, with respect to the
confidentiality of the Company's proprietary and confidential information and
the assignment to the Company of any and all rights each employee might have or
acquire with respect to technology, inventions, developments, etc., developed in
connection with their employment with the Company; and (ii) each of the
Company's Chief Executive Officer and Chief Operating Officer has executed and
delivered to the Company a confidentiality, non-disclosure, inventions
assignment and non-competition and non-solicitation agreement, in form and
substance satisfactory to the Purchasers.
(6) The written legal opinion of Klehr, Harrison, Harvey,
Branzburg & Ellers, addressed to the Purchasers, and substantially in the form
of the attached Exhibit C.
(7) A Closing Warrant.
(e) The Purchasers will deliver to the Company the Shareholder Rights
Agreement and the Registration Rights Agreement, duly executed by each of the
Purchasers.
(f) Evidence satisfactory to the Purchasers that the number equal to
80% of the average of the closing market prices of the Common Stock on each of
the three (3) trading days prior to the occurrence of the Closing Date is not
less than $6.00 per share (subject to equitable adjustment on the occurrence of
an Adjustment Event if the Closing Date shall occur after the date of this
Agreement).
2. Representations and Warranties of the Company.
In order to induce the Purchasers to enter into this Agreement and to
purchase the Acquired Securities, the Company hereby represents and warrants to
each of the Purchasers, as follows:
2.1. Organization and Authority. The Company is a corporation duly
organized, validly existing, and in good standing under the laws of the State of
Delaware. The Company has all requisite corporate power and authority to own or
lease and operate its properties and to carry on its business as now conducted
and as proposed to be conducted.
2.2. Corporate Power; Binding Effect; Non-Contravention. The Company
has all requisite power and full legal right to execute and deliver this
Agreement and the Ancillary Agreements, and to perform all of its obligations
hereunder and thereunder in accordance with the respective terms hereof and
thereof. This Agreement and the Ancillary Agreements and the transactions
contemplated hereby and thereby have been duly approved and authorized by all
requisite
<PAGE>
-4-
corporate action on the part of the Company, and this Agreement has been duly
executed and delivered by the Company and constitutes, and each of the Ancillary
Agreements, when executed and delivered by the Company at the Closing, will
constitute, a legal, valid, and binding obligation of the Company, enforceable
against it in accordance with its respective terms. The execution, delivery, and
performance by the Company of this Agreement and the Ancillary Agreements in
accordance with their respective terms, and the consummation by the Company of
the transactions contemplated hereby or thereby, will not result (with or
without the giving of notice or the lapse of time or both) in any conflict,
violation, breach, or default, or the creation of any Lien, or the termination,
acceleration, vesting, or modification of any right or obligation, under or in
respect of (x) the charter documents or by-laws of the Company, (y) any
judgment, decree, order, statute, rule, or regulation binding on or applicable
to the Company, or (z) any agreement or instrument to which the Company is a
party or by which it or any of its assets is or are bound.
2.3. Foreign Qualification. The Company is duly qualified to do
business and in good standing as a foreign corporation in the Commonwealth of
Pennsylvania and the State of California, which jurisdiction is the only
jurisdiction in which the character of the properties owned or leased by it or
the nature of its activities makes such qualification necessary, other than any
jurisdictions in which the failure so to qualify or be in good standing would
not, either in any case or in the aggregate, have a Material Adverse Effect.
2.4. Subsidiaries. The Company does not have any Subsidiaries nor does
it own any legal and/or beneficial interests in any other Person other than as
set forth on Schedule 2.4 hereto.
2.5. Capitalization.
(a) Immediately prior to the Closing, not giving effect to the sale and
purchase of the Purchased Shares or any of the other Acquired Securities
provided for in this Agreement, the authorized and the outstanding capital stock
of the Company (on a fully diluted basis including all Derivative Securities)
will be as set forth in Schedule 2.5(a), and all such outstanding shares of
capital stock will be owned (of record and beneficially) by the persons and in
the amounts there indicated. All such outstanding shares of capital stock will
be duly authorized, validly issued, fully paid, and nonassessable, and will have
been issued free and clear of Liens. No adjustment has previously been made (or
should have been made) nor will any adjustment be required to be made as a
result of the Company's issuance of the Purchased Shares or any of the other
Acquired Securities to the rate at which shares of Series A Preferred Stock, the
Series B Preferred Stock and any other capital stock or Derivative Securities of
the Company are convertible into or exercisable for shares of Common Stock (by
reason of any "anti-dilution" provisions or agreements or otherwise).
(b) Except as set forth in Schedule 2.5(b), the Company does not have,
is not bound by, and has no obligation to grant or enter into, any (i)
outstanding subscriptions, options, warrants, calls, commitments, or agreements
of any character calling for it to issue, deliver, or sell, or cause to be
issued, delivered, or sold, any shares of its capital stock, any membership
interests or any other equity security, or any securities described in the
following clause, or (ii) securities convertible into, exchangeable for, or
representing the right to subscribe for, purchase, or otherwise acquire any
shares of its capital stock, any membership interests or any other equity
security. Except as set forth in Schedule 2.5(b), no adjustment has previously
been made (or should have been made) nor will any adjustment be required to be
made as a result of the Company's issuance of the Purchased Shares or any of the
other Acquired Securities to the number of shares of capital stock or Derivative
Securities of the Company into which any subscriptions, options, warrants,
calls, commitments or agreements are convertible (by reason of any
"anti-dilution" provisions or agreements or otherwise).
<PAGE>
-5-
(c) Except as set forth in Schedule 2.5(c), the Company (i) has no
outstanding obligations, contractual or otherwise, to repurchase, redeem, or
otherwise acquire any shares of capital stock or other equity securities of the
Company, (ii) is not a party to or bound by, and has no knowledge of, any
agreement or instrument relating to the voting of any of its securities, and
(iii) is not a party to or bound by any agreement or instrument under which any
person has the right to require it to effect, or to include any securities held
by such person in, any registration under the Securities Act. There are no other
agreements, contracts, instruments or documents, except as set forth in Schedule
2.5(c), which govern or affect in any way the rights of the holders of
securities, including any class of capital stock, of the Company.
(d) The Company has reserved, solely for the purpose of issuance upon
conversion of shares of Series C Preferred and upon exercise of the Closing
Warrants and Compensation Warrants (if any), a number of shares of Common Stock
sufficient to cover the conversion of all such shares of Series C Preferred and
exercise of the Closing Warrants and Compensation Warrants (if any), as the case
may be. The Company has reserved, solely for the purpose of issuance of any
Dividend Shares as may be issued, a sufficient number of shares of Series C
Preferred to cover any such issuance.
2.6. Lawful Issuance. All of the outstanding shares of capital stock,
membership interests, and other securities of the Company were offered, issued,
and sold, and the Purchased Shares and other Acquired Securities have been
offered and at the Closing will be issued and sold, in compliance with (i) all
applicable preemptive or similar rights of all persons, and (ii) assuming the
truthfulness and accuracy of the representations made by the Purchasers in
Section 3 hereof, all applicable provisions of the Securities Act and the rules
and regulations thereunder, and all applicable state securities laws and the
rules and regulations thereunder. No person has any valid right to rescind any
purchase of any shares of capital stock or other securities of the Company.
2.7 Valid Issuance of Purchased Shares. The Purchased Shares and other
Acquired Securities being issued and sold by the Company hereunder shall, upon
issuance pursuant to the terms hereof, be duly authorized and validly issued,
fully paid and non-assessable and free and clear of any Lien, security interest,
option or other charge or encumbrance. The Common Stock issuable upon the
conversion of the Purchased Shares and exercise of the Closing Warrants and
Compensation Warrants (if any), as the case may be, shall be duly authorized and
validly issued, fully paid and non-assessable and free and clear of any Lien,
security interest, option or other charge or encumbrance. The issuance of the
Purchased Shares and other Acquired Securities are not and will not be subject
to any pre- emptive rights or similar rights with respect to such Purchased
Shares and other Acquired Securities.
2.8. Financial Statements.
The Company has delivered to the Purchasers copies of (i) the unaudited
balance sheet of the Company as of December 31, 1999, and the related statements
of profit and loss and changes in stockholders' equity for the twelve month
period ended on that date, and (ii) the unaudited balance sheet of the Company
as of December 31, 1999 (the "Most Recent Balance Sheet"), and the related
unaudited statements of profit and loss for the period commencing January 1,
2000 and ended on January 31, 2000. Each of such financial statements was
prepared in accordance with GAAP applied on a basis consistent with prior
periods, subject, in the case of the unaudited financial statements referred to
above to the absence of footnotes, and subject to adjustments consisting of
normal year-end accruals, the effect of which absence of footnotes and year-end
accruals, both individually and in the aggregate, is not in any case material.
Each of such balance sheets is true and correct in all material respects and
fairly presents the financial condition of the Company as of its date; and each
of such statements of profit and loss fairly presents the results of operations
of the Company for the period covered thereby.
<PAGE>
-6-
2.9. Absence of Certain Changes. Since December 31, 1999, there has not
been:
(a) any (i) acquisition (by purchase, lease as lessee, license as
licensee, or otherwise) or disposition (by sale, lease as lessor, license as
licensor, or otherwise) by the Company of any material properties or assets, or
(ii) other transaction by, or any agreement or commitment on the part of, the
Company, other than those in the ordinary course of business that have not
caused and will not cause, either in any case or in the aggregate, a Material
Adverse Effect, except as set forth on Schedule 2.9(a);
(b) any material change in the condition (financial or otherwise),
properties, assets, liabilities, investments, revenues, expenses, income,
operations, business, or prospects of the Company, or in any of its
relationships with any suppliers, customers, or other third parties with whom it
has financial, commercial, or other business relationships, other than changes
in the ordinary course of business that have not caused and are not reasonably
be expected to cause, either in any case or in the aggregate, a Material Adverse
Effect;
(c) any material transaction or material change in compensation by the
Company with any of its directors, officers, or key employees, other than the
payment of compensation and reimbursement of reasonable employee travel and
other business expenses in accordance with existing employment arrangements and
usual past practices, except as set forth in Schedule 2.9(c);
(d) any damage, destruction, or loss, whether or not covered by
insurance, that, either in any case or in the aggregate, has caused, or could
reasonably be expected to cause, a Material Adverse Effect;
(e) any declaration, setting aside, or payment of any dividend or any
other distribution (in cash, stock, and/or property or otherwise) in respect of
any shares of the capital stock or other securities of the Company;
(f) any issuance of any shares of the capital stock or other securities
of the Company, or any direct or indirect redemption, purchase, or other
acquisition by the Company of any shares of its capital stock or other
securities, except as set forth on Schedule 2.9(f);
(g) any change in the officers, directors, key employees, or key
independent contractors of the Company, except as set forth in Schedule 2.9(g);
(h) any labor trouble or claim of unfair labor practices involving the
Company, any increase in the compensation or other benefits payable or to become
payable by the Company to any of its Affiliates, or to any of its officers,
employees, or independent contractors, or any bonus payments or arrangements
made to or with any of such officers, employees, or independent contractors,
except as set forth in Schedule 2.9(h);
(i) any forgiveness or cancellation of any debt or claim by the Company
or any waiver by the Company of any right of material value, other than
compromises of accounts receivable in the ordinary course of business;
(j) any incurrence or any payment, discharge, or satisfaction by the
Company of any material Indebtedness or any material obligations or material
liabilities, whether absolute, accrued, contingent, or otherwise (including
without limitation liabilities, as guarantor or otherwise, with respect to
obligations of others), except as described in Schedule 2.9(j);
<PAGE>
-7-
(k) any incurrence, discharge, or satisfaction of any Lien (i) by the
Company, or (ii) on any of the capital stock, other securities, properties, or
assets owned or leased by the Company;
(l) any material change in the financial or tax accounting principles,
practices, or methods of the Company; or
(m) any agreement, understanding, or commitment by or on behalf of the
Company, whether in writing or otherwise, to do or permit any of the things
referred to in this Section 2.9.
2.10. Properties, Leases, Etc.
(a) Title to Properties; Condition of Personal Properties. The Company
has (i) good and marketable title to all of the assets and properties owned by
it, including without limitation all assets and properties reflected in the Most
Recent Balance Sheet (in each case excluding any assets and properties sold or
otherwise disposed of to persons other than Affiliates in the ordinary course of
business since the date of such balance sheet), free and clear of all Liens,
(ii) valid title to the lessee interest in all assets and properties leased by
them as lessee, free and clear of all Liens, and (iii) full right to hold and
use all of its assets and properties used in or necessary to its businesses and
operations, in each case all free and clear of all Liens, and in each case
subject to applicable laws and the terms of any lease under which the Company
leases such assets or properties as lessee; except where the failure to have the
title or right set forth in clauses (i) through (iii) would not have a Material
Adverse Effect. All such assets and properties are in good condition and repair,
reasonable wear and tear excepted, and are adequate and sufficient to carry on
the businesses of the Company as presently conducted and as proposed to be
conducted.
(b) No Owned Real Properties. The Company does not own any real
property or any interest (other than a leasehold interest) in any real property.
(c) Leased Properties. Schedule 2.10(c) sets forth a complete and
correct description of all leases of real or personal property under which the
Company is lessor or lessee. Complete and correct copies of all such leases and
all amendments, supplements, and modifications thereto, other than any personal
property lease with an annual rent of less than $10,000 and total remaining
rental payments of less than $20,000, have been delivered to the Purchasers.
Each such lease is valid and subsisting and no event or condition exists that
constitutes, or after notice or lapse of time or both would constitute, a
default thereunder by the Company or, to the Company's knowledge, any other
party thereto. The Company's leasehold interests are subject to no Lien, and the
Company is in quiet possession of the properties covered by such leases. The
Company has established adequate reserves which are reflected in the Most Recent
Balance Sheet, for the anticipated costs of any property renovation and repairs
to its leased premises required to be performed or paid for by it upon
termination of any of its leases of real property.
2.11. Indebtedness. Except to the extent reflected or reserved in the
Most Recent Balance Sheet, and except as set forth on Schedule 2.11, the Company
has no Indebtedness in excess of $25,000 outstanding. The Company is not in
default with respect to any outstanding Indebtedness or any instrument or
agreement relating thereto, and no such Indebtedness or any instrument or
agreement relating thereto purports to limit the issuance of any securities by
the Company or the operation of its business. Complete and correct copies of all
instruments and agreements (including all amendments, supplements, waivers, and
consents) relating to any Indebtedness of the Company have been furnished to the
Purchasers.
2.12. Absence of Undisclosed Liabilities. Except to the extent
reflected or reserved in the Most Recent Balance Sheet, and except as set forth
on Schedule 2.12, or incurred after the date of such balance sheet in the
ordinary course of business (other than in connection with any transactions with
Affiliates), or incurred in connection with the transactions contemplated by
this Agreement and described in Schedule 2.9(j), the Company does not have any
material liabilities or obligations of any nature, whether accrued, absolute,
contingent, or otherwise (including without limitation liabilities as guarantor
or otherwise with respect to obligations of others) and whether due or to become
due.
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2.13. Tax Matters.
(a) Filing of Tax Returns and Payment of Taxes. The Company has filed
all Tax Returns required to be filed by it, each such Tax Return has been
prepared in compliance with all applicable laws and regulations, and all such
Tax Returns are true and accurate in all material respects. All Taxes due and
payable by the Company have been paid, and the Company will not be liable for
any additional Taxes in respect of any taxable period ending on or before the
Closing Date in an amount that exceeds the corresponding reserve therefor, if
any, reflected in the accounting records of the Company as of the Closing Date.
No claim has ever been made by a taxing authority in a jurisdiction where the
Company does not pay Tax or file Tax Returns that the Company is or may be
subject to Taxes assessed by such jurisdiction. There are no Liens for Taxes
(other than current Taxes not yet due and payable) on the assets of the Company.
(b) Audit History, Extensions, Etc. There is no action, suit, taxing
authority proceeding, or audit with respect to any Tax now in progress, pending,
or to the best of the Company's knowledge, threatened, against or with respect
to the Company. No deficiency or proposed adjustment in respect of Taxes that
has not been settled or otherwise resolved has been asserted or assessed by any
taxing authority against the Company. The Company has not consented to extend
the time in which any Tax may be assessed or collected by any taxing authority.
The Company has not requested or been granted an extension of the time for
filing any Tax Return to a date on or after the Closing Date.
(c) Membership in Affiliated Groups, Etc. The Company has never been a
member of any Affiliated Group, or filed or been included in a combined,
consolidated, or unitary Tax Return. The Company is not a party to or bound by
any tax sharing or allocation agreement or has any current or potential
contractual obligation to indemnify any other person with respect to Taxes.
(d) Withholding Taxes. The Company has withheld and paid all Taxes
required to have been withheld and paid by it in connection with amounts paid or
owing to any employee, creditor, independent contractor, or other Person.
2.14. Litigation, Etc. Except as set forth in Schedule 2.14, no
litigation, arbitration, action, suit, claim, demand, proceeding or
investigation (whether conducted by or before any judicial or regulatory body,
arbitrator, commission or other person) is pending or, to the Company's
knowledge, threatened, against the Company, nor is there any basis therefor
known to the Company, where an adverse result would have a Material Adverse
Effect.
2.15. Safety, Zoning, and Environmental Matters.
(a) The Company is not nor has it been in violation in any material
respect of any applicable statute, law, or regulation relating to occupational
health or safety, and no charge, complaint, action, suit, proceeding, hearing,
investigation, claim, demand, or notice has been filed or commenced against or
received by it alleging any failure by it to comply with any such statute, law,
or regulation, nor is there any basis therefor known to the Company.
(b) To the best of the Company's knowledge, none of the real properties
presently owned, leased, or operated by the Company, nor any leasehold
improvements thereto, nor any business conducted by the Company thereon, are in
violation of any applicable land use or zoning requirements, including without
limitation any building line or use or occupancy restriction, any public utility
or other easement, any limitation, condition, or covenant of record, or any
zoning or building law, code, or ordinance, where such violation would have a
Material Adverse Effect.
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(c) The Company is not presently, and has never been, in violation of
any judgment, decree, order, statute, law, permit, license, rule, or regulation
pertaining to environmental matters, including without limitation those arising
under any Environmental Laws, nor has it received any written notice alleging
any such violation.
(d) The Company has not received any notice or request for information
from any third party, including without limitation any federal, state, or local
governmental authority, (i) that it has been identified by the EPA or any state
environmental regulatory authority as a potentially responsible party under
CERCLA with respect to a site listed on the National Priorities List, 40 C.F.R.
Part 300 Appendix B, or under any equivalent state law; (ii) that any Hazardous
Substances that it has generated, transported, or disposed of have been found at
any site at which a federal, state, or local agency or other third party has
conducted or has ordered it to conduct a remedial investigation, removal or
other response action pursuant to any Environmental Law; or (iii) that it is or
will or may be a named party to any claim, action, cause of action, complaint,
or legal or administrative proceeding arising out of any third party's
incurrence of Damages in connection with the release (within the meaning of
CERCLA) of any Hazardous Substances or any other environmental matters. No
circumstances exist that could reasonably be expected to give rise to any such
notice or request for information or to any Damages.
2.16. Labor Relations. The Company is in compliance in all material
respects with all applicable federal and state laws respecting employment and
employment practices, terms and conditions of employment, wages and hours, and
nondiscrimination in employment, and is not engaged in any unfair labor
practice. There is no charge pending or, to the best of the Company's knowledge,
threatened, against or with respect to the Company before any court or agency
and alleging unlawful discrimination in employment practices, and there is no
charge of or proceeding with regard to any unfair labor practice against the
Company pending before the National Labor Relations Board. There is no labor
strike, dispute, slow-down, or work stoppage pending or, to the Company's
knowledge, threatened against or involving the Company. None of the employees of
the Company is covered by any collective bargaining agreement, and no such
collective bargaining agreement is currently being negotiated. No one has
petitioned and, to the Company's knowledge, no one is now petitioning, for union
representation of any employees of the Company. The Company has not experienced
any work stoppage or other material labor difficulty.
2.17. Material Contracts. Except for the contracts, agreements and
other arrangements listed in Schedule 2.17 and contracts, agreements, or other
arrangements that have been fully performed and with respect to which the
Company has no further obligations or liabilities, the Company is not a party to
or otherwise bound by (i) any agreement, instrument, or commitment that may
materially affect its ability to consummate the transactions contemplated hereby
or by the Ancillary Agreements, or (ii) any other material agreement,
instrument, or commitment; including without limitation any:
(a) agreement for the purchase, sale, lease, or license by or from it
of services, products, or assets, requiring total payments by or to it in excess
of $25,000 in any instance, or entered into other than in the ordinary course of
business;
(b) agreement requiring it to purchase all or substantially all of its
requirements for a particular product or service from a particular supplier or
suppliers, or requiring it to supply all of a particular customer's or
customers' requirements for a certain service or product;
(c) agreement or other commitment pursuant to which it has agreed to
indemnify or hold harmless any other person;
<PAGE>
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(d) (i) employment agreement, (ii) consulting agreement, or (iii)
agreement providing for severance payments or other additional rights or
benefits (whether or not optional) in the event of the sale or other change in
control of it;
(e) agreement with any current or former Affiliate, stockholder,
officer, director, employee, or consultant of the Company, or with any person in
which any such Affiliate has an interest;
(f) joint venture, partnership or teaming agreement;
(g) agreement with any domestic or foreign government or agency or
executive office thereof or any subcontract between it and any third party
relating to a contract between such third party and any domestic or foreign
government or agency or executive office thereof;
(h) agreement imposing non-competition or exclusive dealing obligations
on it;
(i) agreement with respect to the confidentiality of the Company's
Proprietary Information (as described in Section 2.20 hereof), and the
assignment to the Company of any and all rights employees of the Company might
have to acquire with respect to technology, inventions, developments, etc.,
developed in connection with this employment with the Company; and
(j) agreement the performance of which is reasonably likely to result
in a loss to it.
The Company has delivered or caused to be delivered to the Purchasers
correct and complete copies (or written summaries of the material terms of oral
agreements or understandings) of each agreement, instrument, and commitment
listed in Schedule 2.17, each as amended to date. Each such agreement,
instrument, and commitment is a valid, binding and enforceable obligation of the
Company and, to the Company's knowledge, of the other party or parties thereto,
and is in full force and effect. The Company is not nor, to the Company's
knowledge, is any other party thereto, (nor is the Company considered by any
other party thereto to be) in breach of or noncompliance with any term of any
such agreement, instrument, or commitment (nor is there any basis for any of the
foregoing), except for any breaches or noncompliances that singly or in the
aggregate would not have a Material Adverse Effect. No claim, change order,
request for equitable adjustment, or request for contract price or schedule
adjustment, between the Company and any supplier or customer, relating to any
agreement, instrument, or commitment listed in Schedule 2.17 is pending or, to
the Company's knowledge, threatened, nor is there any basis for any of the
foregoing. No agreement, instrument, or commitment listed in Schedule 2.17
includes or incorporates any provision, the effect of which may be to enlarge or
accelerate any of the obligations of the Company or to give additional rights to
any other party thereto, or will terminate, lapse, or in any other way be
affected, by reason of the transactions contemplated by this Agreement.
2.18. Employee Benefit Plans.
(a) Identification of Plans. Except for the arrangements set forth in
Schedule 2.18, the Company does not now maintain or contribute to any pension,
profit-sharing, deferred compensation, bonus, stock option, share appreciation
right, severance, group or individual health, dental, medical, life insurance,
survivor benefit, or similar plan, policy or arrangement, whether formal or
informal, for the benefit of any director, officer, consultant, or employee of
any of them, whether active or terminated; nor has it ever maintained or
contributed to any such plan, policy, or arrangement that was subject to ERISA.
Each of the arrangements set forth in Schedule 2.18 is herein referred to as an
"Employee Benefit Plan."
<PAGE>
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(b) Compliance with Terms and Law. Each Employee Benefit Plan is and
has been maintained and operated in compliance in all material respects with the
terms of such plan and with the requirements prescribed (whether as a matter of
substantive law or as necessary to secure favorable tax treatment) by any and
all statutes, governmental, or court orders, or governmental rules or
regulations in effect from time to time, including but not limited to ERISA and
the Code, and applicable to such plan. Each Employee Benefit Plan that is
intended to qualify under Section 401(a) of the Code is so qualified.
(c) Absence of Certain Events and Arrangements.
(1) There is no pending or, to the Company's knowledge, threatened,
legal action, proceeding, or investigation, other than routine claims for
benefits, concerning any Employee Benefit Plan, or any fiduciary or service
provider thereof and there is no basis for any such legal action or proceeding.
(2) No Employee Benefit Plan, nor any party in interest in respect
thereof has engaged in a prohibited transaction that could subject the Company,
directly or indirectly, to liability under Section 409 or 502(i) of ERISA or
Section 4975 of the Code.
(3) No communication, report, or disclosure has been made that, at
the time made, did not accurately reflect the terms and operations of any
Employee Benefit Plan.
(4) No Employee Benefit Plan provides welfare benefits subsequent
to termination of employment to employees or their beneficiaries (except to the
extent required by applicable state insurance laws and Title I, Part 6 of
ERISA).
(5) The Company has not undertaken to maintain any Employee Benefit
Plan for any specific period of time and each such plan is terminable at the
sole discretion of the Company, subject only to such constraints as may imposed
by applicable law.
(6) No Employee Benefit Plan is maintained pursuant to a collective
bargaining agreement or is or has been subject to the minimum funding
requirements of Section 302 of ERISA or Section 412 of the Code.
(d) Funding of Certain Plans. With respect to each Employee Benefit
Plan for which a separate fund of assets is or is required to be maintained,
full payment has been made of all amounts that, under the terms of each such
plan, it is required to have paid as contributions to that plan as of the end of
such plan's most recently ended year.
2.19. Potential Conflicts of Interest. Except as set forth on Schedule
2.19, neither the Company nor, to the best knowledge of the Company, any of its
officers, directors, or employees, (i) owns, directly or indirectly, any
interest (excepting passive holdings for investment purposes of not more than 1%
of the securities of any publicly held and traded company) in, or is an officer,
director, employee, or consultant of, any person that is a competitor, lessor,
lessee, customer, or supplier of the Company; (ii) owns, directly or indirectly,
any interest in any tangible or intangible property used in or necessary to the
business of the Company; (iii) has any cause of action or other claim whatsoever
against the Company, or owes any amount to the Company, except for claims in the
ordinary course of business, such as for accrued vacation pay, accrued benefits
under employee benefit plans, and similar matters and agreements or under any
employment agreements.
<PAGE>
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2.20. Proprietary Information.
(a) Schedule 2.20 lists all patents, patent applications, trademarks,
trade names, service marks, logos, copyrights, and licenses used in or necessary
to the Company's business as now being conducted or as proposed to be conducted
(collectively, and together with any technology, know-how, trade secrets,
processes, formulas, and techniques used in or necessary to the Company's
business, "Proprietary Information"). The Company owns, or is licensed or
otherwise has the full and unrestricted exclusive right to use, without the
payment of royalties or other further consideration, all Proprietary
Information, and no other intellectual property rights, privileges, licenses,
contracts, or other agreements, instruments, or evidences of interests are
necessary to or used in the conduct of its business.
(b) In any instance where the Company's rights to Proprietary
Information arise under a license or similar agreement (other than for software
programs that have not been customized for its use), this is indicated in
Schedule 2.20 and such rights are, to the best knowledge of the Company,
licensed exclusively to it except as indicated in Schedule 2.20. No other person
has an interest in or right or license to use any of the Proprietary
Information. To the best of the Company's knowledge, none of the Proprietary
Information is being infringed by others, or is subject to any outstanding
order, decree, judgment, or stipulation. No litigation (or other proceedings in
or before any court or other governmental, adjudicatory, arbitral, or
administrative body) relating to the Proprietary Information is pending or, to
the Company's knowledge, threatened, nor, to the best of the Company's
knowledge, is there any basis for any such litigation or proceeding. The Company
maintains adequate and sufficient security measures for the preservation of the
secrecy and proprietary nature of the Proprietary Information.
(c) (i) Neither the Company nor any of its employees has infringed or
made unlawful use of, or is, to the Company's knowledge, infringing or making
unlawful use of, any proprietary or confidential information of any Person,
including without limitation any former employer of any past or present employee
or consultant of the Company; and (ii) the activities of the Company's employees
in connection with their employment do not violate any agreements or
arrangements that any such employees or consultants have with any former
employer or any other Person. No litigation (or other proceedings in or before
any court or other governmental, adjudicatory, arbitral, or administrative body)
charging the Company with infringement or unlawful use of any patent, trademark,
copyright, or other proprietary right is pending or, to the Company's knowledge,
threatened; nor is there any basis for any such litigation or proceeding.
(d) No officer, director, employee, or consultant of the Company is
presently obligated under or bound by any agreement or instrument, or any
judgment, decree, or order of any court of administrative agency, that (i)
conflicts or may conflict with his or her agreements and obligations to use his
or her best efforts to promote the interests of the Company, (ii) conflicts or
may conflict with the business or operations of the Company as presently
conducted or as proposed to be conducted, or (iii) restricts or may restrict the
use or disclosure of any information that may be useful to the Company.
2.21. Insurance. Schedule 2.21 lists the policies of theft, fire,
liability, worker's compensation, life, property and casualty, directors' and
officers', medical malpractice, and other insurance owned or held by the Company
and the basis on which such policies provide coverage (i.e., an incurrence or
claims-made basis). Such policies of insurance are maintained with, to the best
knowledge of the Company, financially sound and reputable insurance companies,
funds, or underwriters, are of the kinds and cover such risks, and are in such
amounts and with such deductibles and exclusions, as are consistent with prudent
business practice. All such policies are, and at all times since the respective
dates set forth in Schedule 2.21, have been, in full force and effect, are
sufficient for compliance in all respects by the Company with all requirements
of law and of all agreements to which it is a party, and provide that they will
remain in full force and effect through the respective dates set forth in
Schedule 2.21, and will not terminate or lapse or otherwise be affected in any
way by reason of the transactions contemplated hereby.
<PAGE>
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2.22. Governmental and Other Third-Party Consents. Except for filings
or other notices required by applicable federal and state securities laws (which
will be completed by the Company within the applicable periods), no consent,
approval, or authorization of, or registration, designation, declaration, or
filing with, any governmental authority, federal or other, or any other person
is required on the part of the Company in connection with its execution,
delivery, or performance of this Agreement and the Ancillary Agreements and its
consummation of the transactions contemplated hereby and thereby, or the
continued conduct of the present business of the Company after the Closing Date.
2.23. Employment of Officers, Employees. The Company has delivered to
the Purchasers (a) a list setting forth the name and current annual salary and
other compensation payable by the Company to each of its employees, which list
is true, accurate and correct as of the date of this Agreement, and (b) a list
setting forth the names of positions and/or persons the Company intends to fill
and/or hire within thirty (30) days of the Closing.
2.24. Brokers. Except as set forth on Schedule 2.24 hereto, no finder,
broker, agent, or other intermediary has acted for or on behalf of the Company
in connection with the negotiation or consummation of the transactions
contemplated hereby, and no fee will be payable by the Company to any such
person in connection with such transactions.
2.25. Compliance with Other Instruments, Laws, Etc. The Company has
complied with, and is in compliance with, (i) all laws, statutes, governmental
regulations, judicial or administrative tribunal orders, judgments, writs,
injunctions, decrees, and similar commands applicable to it and its business,
and all unwaived terms and provisions of all agreements, instruments, and
commitments to which it is a party or to which it or any of its assets or
properties is subject, except for any noncompliances that, both individually and
in the aggregate, have not had and could not reasonably be expected to have a
Material Adverse Effect, and (ii) its charter documents and by-laws, each as
amended to date. The Company has not committed, been charged with, or, to the
Company's knowledge, been under investigation with respect to, nor to the best
of the Company's knowledge does there exist, any violation by the Company of any
provision of any federal, state, or local law or administrative regulation,
except for any violations that, both singly or in the aggregate, have not had
and could not reasonably be expected to have a Material Adverse Effect. The
Company has and maintains, and Schedule 2.25 sets forth a complete and correct
list of, all such licenses, permits, and other authorizations from all such
governmental authorities as are legally required for the conduct of its business
or in connection with the ownership or use of its properties, except for any
such licenses, permits, and other authorizations, the failure to obtain or
maintain which in effect, both singly or in the aggregate, has not had and could
not reasonably be expected to have a Material Adverse Effect, and all of which
(except as specifically described in Schedule 2.25) are in full force and effect
in all material respects, and true and complete copies of all of which have been
delivered to the Purchasers.
2.26. Compliance with Securities Laws. Assuming the accuracy of the
representations of each Purchaser contained in Section 3 hereof, the offer,
issuance, and delivery of the Purchased Shares and other Acquired Securities as
contemplated by this Agreement are exempt from the registration requirements of
the Securities Act, and are exempt from registration or qualification under
applicable states' securities laws. Neither the Company nor anyone acting on its
behalf will hereafter offer to sell, solicit offers to buy, or sell any
securities of the Company so as to subject the offer, issuance, and sale of the
Purchased Shares and other Acquired Securities to the registration requirements
of the Securities Act.
<PAGE>
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2.27. Real Property Holding Corporation. The Company hereby represents
that it is not a "United States real property holding corporation" within the
meaning of Section 897 of the Code, as amended, and Treasury Regulation
ss 1.897-2.
2.28. Foreign Corrupt Practices Act. The Company has not taken any
action which would cause it to be in violation of the Foreign Corrupt Practices
Act of 1977, as amended, or any rules or regulations thereunder. To the
Company's knowledge, there is not now, and there has never been, any employment
by the Company of, or beneficial ownership in the Company by, any governmental
or political official in any country in the world.
2.29. Disclosure. No representation or warranty by the Company in this
Agreement, in any schedule to this Agreement, or in the Ancillary Agreements,
contains or will contain any untrue statement of a material fact or omits or
will omit to state a material fact required to be stated herein or therein or
necessary to make the statements contained herein or therein not false or
misleading. There is no fact or circumstance relating specifically to the
current business operations or condition of the Company that could reasonably be
expected to result in a Material Adverse Effect that is not disclosed in a
Schedule attached hereto.
3. Representations and Warranties of the Purchasers.
Each Purchaser severally represents and warrants, as to himself,
herself, or itself only, as follows: Such Purchaser is an "accredited investor"
as defined in Rule 501(a) promulgated under the Securities Act and has such
knowledge and experience in financial and business matters that he, she, or it
is capable of evaluating the merits and risks of the transactions contemplated
under this Agreement. Such Purchaser's financial condition is such that he, she,
or it is able to bear all economic risks of investment in the Purchased Shares
and other Acquired Securities, including a complete loss of his, her, or its
investments therein. The Company has provided such Purchaser with adequate
access to financial and other information concerning the Company as requested
and such Purchaser has had the opportunity to ask questions of and receive
answers from the Company concerning the transactions contemplated by this
Agreement and to obtain therefrom any additional information necessary to make
an informed decision regarding an investment in the Company. Such Purchaser is
acquiring the Purchased Shares and other Acquired Securities solely for
investment purposes, with no present intention of distributing or reselling any
of the Purchased Shares and other Acquired Securities or any interest therein.
Such Purchaser is aware that the Purchased Shares and other Acquired Securities
will not be registered under the Securities Act (other than as provided in
Section 5.20, below), and that neither the Purchased Shares and other Acquired
Securities nor any interest therein may be sold, pledged, or otherwise
transferred unless the Purchased Shares or other Acquired Securities are
registered under the Securities Act or qualify for an exemption under the
Securities Act. Such Purchaser, if not an individual, represents that this
Agreement has been duly authorized by all necessary corporate or partnership
action on its part. This Agreement has been validly executed by such Purchaser,
such Purchaser has all necessary corporate, partnership or other similar power
and authority to enter into this Agreement and this Agreement is such
Purchaser's legal, valid, and binding obligation, enforceable against such
Purchaser in accordance with its terms. The execution, delivery and performance
of this Agreement by such Purchaser, if not an individual, will not conflict
with or violate the partnership agreement or other organizational or governing
documents of such Purchaser. The principal place of business of each Purchaser
is as set forth on the signature pages hereto below or besides such Purchaser's
name.
4. Intentionally Omitted.
5. Covenants.
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The Company covenants that for so long as any Purchased Shares or other
Acquired Securities are outstanding, the Company will comply and cause each of
its Subsidiaries, if any, to comply with each of the following covenants. Except
as required by applicable law, each Purchaser and each person representing or
acting on behalf of such Purchaser will hold in confidence all confidential
information of the Company provided or made available to such Purchaser or such
person pursuant to this Section 5 until such time as such information has been
publicly disclosed other than as a consequence of any breach by any Purchaser or
any such person of its confidentiality obligations hereunder.
5.1. Intentionally Omitted.
5.2. Investments. The Company will not have outstanding, or acquire or
commit itself to acquire or hold, any investment except (a) investments in
corporations, limited liability companies, partnerships or other entities made
in the ordinary course of the Company's business (which as of the date hereof is
as described in the Company's Registration Statement on Form S-1 as declared
effective by the Securities and Exchange Commission on February 15, 2000 (SEC
File No. 333-88629), (b) investments in marketable direct obligations issued or
guaranteed by the United States of America that mature within one year from the
date of acquisition thereof or which are subject to a repurchase agreement,
exercisable within ninety (90) days from the date of acquisition of such
agreement, with any commercial bank or trust company incorporated under the laws
of the United States of America or any State thereof or the District of
Columbia, (b) investments in commercial paper maturing within one year from the
date of acquisition thereof and having, at the date of acquisition thereof, the
highest rating obtainable from Moody's Investors Service, Inc. or Standard &
Poor's Corporation, (c) investments in bankers' acceptances eligible for
rediscount under Federal Reserve Board requirements accepted by any commercial
bank or trust company referred to in clause (a) hereof, (d) investments in
deposits or certificates of deposit maturing within one year from the date of
acquisition thereof issued by any commercial bank or trust company referred to
in clause (a) hereof and having capital and surplus of at least $500,000,000,
(e) investments in certificates of deposit issued by banks organized under the
laws of any other jurisdiction, each having combined capital and surplus of not
less than $500,000,000, (f) investments by the Company in any Subsidiary made
with the prior approval of the Board of Directors; and (g) investments in money
market funds, so long as consistent with the Company's internal investment
policy.
5.3. Annual Statements. As soon as available and in any event within
one hundred twenty (120) days after the close of each fiscal year, commencing
with the fiscal year ending on December 31, 1999, the Company will deliver to
each holder of shares of Series C Preferred Stock, a balance sheet and
statements of income, retained earnings, and cash flows, audited by an
independent public accounting firm selected by the Company and acceptable to the
holders of a majority of the Series C Preferred Stock, showing the financial
condition of the Company as of the close of such fiscal year and the results of
its operations during such fiscal year. Any "big five" independent public
accounting firm shall be deemed acceptable to the holders of the Series C
Preferred Stock. Each of the financial statements delivered hereunder will be
certified by such accounting firm without material qualification (except any
qualifications as the Purchasers holding a majority of the outstanding shares of
Series C Preferred Stock, in their discretion, may approve in writing) to have
been prepared in accordance with GAAP consistently applied (except for changes
in the application of such principles that have been approved by the Company's
Board of Directors). This Section 5.3 may be satisfied by delivery of the
Company's Annual Report on Form 10-K as filed with the SEC.
5.4. Quarterly Statements. As soon as available, and in any event
within forty-five (45) days after the end of each of the first three fiscal
quarters of each fiscal year, commencing with the fiscal quarter ending March
31, 2000 the Company will deliver to each holder of shares of Series C Preferred
Stock an unaudited balance sheet and statements of income, retained earnings,
<PAGE>
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and cash flows of the Company as of the end of and for such fiscal quarter,
certified by the chief financial officer (or other officer acting in a similar
capacity, including the Treasurer) of the Company to be true and correct and to
have been prepared in accordance with GAAP consistently applied (except for
changes in the application of such principles that have been approved by the
Company's Board of Directors), subject to the absence of footnotes and to
adjustments consisting of normal year-end accruals, the effect of which, both
individually and in the aggregate, is not material. This Section 5.4 may be
satisfied by delivery of the Company's Quarterly Report on Form 10-Q as filed
with the SEC.
5.5 Intentionally Omitted.
5.6. Intentionally Omitted.
5.7. Intentionally Omitted.
5.8. Rights to Attend Meetings, Etc. The Company will call and hold a
meeting of its Board of Directors at least once each fiscal quarter. The Company
will give the Tudor Entities at least five business days' prior written notice
of the time, place, and subject matter of each quarterly meeting, at least two
business days' prior written notice of any other proposed meeting, and
reasonable prior notice of any action by written consent of the Board of
Directors of the Company, such notice in all cases to include true and complete
copies of all documents furnished to any director in connection with such
meeting or consent. One officer or authorized representative of the Tudor
Entities will be entitled to attend as an observer at any such meeting or, if a
meeting is held by telephone conference, to participate therein for the purpose
of listening thereto.
5.9. Intentionally Omitted.
5.10. Records and Accounts. The Company will keep true and accurate
records and books of account in which full, true, and correct entries will be
made so as to permit the preparation of financial statements in accordance with
GAAP and maintain adequate accounts and reserves in accordance with good
accounting practice for all taxes (including income taxes), all depreciation,
depletion, obsolescence, and amortization of its properties, all contingencies,
and all other reserves.
5.11. Corporate Existence; Maintenance of Properties. The Company will
preserve and keep in full force and effect its corporate existence, rights, and
franchises. The Company will not engage in any business other than as presently
conducted by it and businesses reasonably ancillary thereto and will not take
any course of action which would result in a substantial change in the nature or
character of its business as it is presently conducted, except with the prior
approval of the Board of Directors of the Company. The Company will maintain all
of its properties used or useful in the conduct of its business in good
condition, repair, and working order and cause to be made all necessary repairs,
renewals, replacements, betterments, and improvements thereof, all as in the
judgment of the Company may be necessary so that the business carried on in
connection therewith may be properly and advantageously conducted at all times;
provided, however, that nothing in this Section 5.11 will prevent the Company
from discontinuing the operation and maintenance of any of such properties if
such discontinuance is, in the judgment of the Company, desirable in the conduct
of its business and does not in the aggregate materially adversely affect the
business of the Company.
5.12. Insurance. The Company will maintain with, to the best knowledge
of the Company, financially sound and reputable insurance companies, funds, or
underwriters such insurance of the kinds, covering the risks (including without
limitation directors' and officers' liability, which the Company will use its
best efforts to obtain within 90 days of the date hereof (pursuant to Section
5.20) and shall thereafter maintain) and in the relative proportionate amounts
<PAGE>
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usually carried by reasonable and prudent companies conducting businesses
similar to that of the Company (such insurance coverage at all times to be at
least as protective as the insurance currently carried by the Company and
described in Schedule 2.21). The Company shall not cause or permit any
assignment or change in beneficiary and shall not borrow against any such
policy.
5.13. Taxes. The Company will pay and discharge, or cause to be paid
and discharged, before they become delinquent, all taxes, assessments, and other
governmental charges imposed upon the Company or any of the properties, sales,
or activities of the Company, or any part thereof, or upon the income or profits
therefrom, as well as all claims for labor, materials, or supplies, which, if
unpaid might by law give rise to a Lien upon any of its properties; provided,
however, that any such tax, assessment, charge, levy, or claim need not be paid
if the validity or amount thereof is currently being contested in good faith by
appropriate proceedings and if the Company has set aside on its books adequate
reserves with respect thereto.
5.14. Compliance with Laws, Contracts, Licenses, and Permits. The
Company will comply in all material respects with (a) its charter documents and
by-laws, (b) all judgments, decrees, orders, statutes, rules, and regulations
binding on or applicable to the Company or its business or properties, and (c)
any agreement or instrument to which it is a party or by which it or any of its
properties are subject (including, without limitation, the Ancillary
Agreements). If at any time any authorization, consent, approval, permit, or
license from any officer, agency, or instrumentality of any government becomes
necessary or required in order that the Company may fulfill any of its
obligations hereunder, the Company will, after providing adequate written notice
to the holders of shares of Series C Preferred Stock, promptly take or cause to
be taken all necessary steps within its power to obtain such authorization,
consent, approval, permit, or license and will, upon written request, promptly
furnish each such holder with evidence thereof.
5.15. Employee Benefit Plans. The Company will take all actions
necessary to maintain, fund, and administer its Employee Benefit Plans in all
material respects in accordance with applicable federal, state, and local law.
5.16. Compensation of Officers and Senior Management. The compensation
of all officers and senior management of the Company will be as determined from
time to time by the Compensation Committee (if any) of the Board of Directors.
5.17. Reservation of Shares; Compliance with Securities Laws. The
Company has and will continue at all times to reserve the appropriate number of
shares of Common Stock solely for the purpose of issuance upon conversion of
outstanding shares of Series C Preferred Stock and exercise of the Closing
Warrants and Compensation Warrants (if any). The Company will file within the
required time periods all filings, notices and other documents required by
applicable federal and state securities laws in connection with the transactions
contemplated by this Agreement.
5.18. Senior Management and Employee Non-Disclosure Agreement. The
Company will at all times ensure that (a) each employee, including each member
of senior management, has executed and delivered to the Company the standard
form agreement (approved by the non- management members of the Company's Board
of Directors) with respect to the confidentiality of the Company's proprietary
and confidential information and the assignment to the Company of any and all
rights each employee might have or acquire with respect to technology,
inventions, developments, etc., developed in connection with his/her employment
with the Company, and (b) each member of the Company's senior management and
certain other key employees, in each case that the Chief Executive Officer and
the Chief Operating Officer shall have determined is appropriate, has executed
and delivered to the Company a confidentiality, non-disclosure, inventions
assignment and non-competition and non-solicitation agreement approved by the
non-management members of the Board of Directors.
<PAGE>
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5.19. Intentionally Omitted.
5.20 Registration Requirements.
(a) No earlier than April 1, 2000, but no later than May 31, 2000, the
Company shall (i) file with the SEC a registration statement on Form S1
(together with any prospectus included therein, a "Registration Statement")
pursuant to Rule 415 of the Securities Act in order to register with the SEC the
continuous resale by the Purchasers, from time to time, of all shares of Common
Stock constituting Immediately Registrable Securities that may be acquired by
the Purchasers, through the Nasdaq SmallCap Market or the facilities of any
national securities exchange on which the Common Stock is then traded, or in
privatelynegotiated transactions, and (ii) use its reasonable best efforts to
file an application for listing (a "Listing Application") of such Common Stock
on the NASDAQ SmallCap Market (the "NSCM") or any other nationally recognized
securities exchange (collectively with the NSCM, the "Exchange"). The Company
shall use its best efforts to cause such Registration Statement to be declared
effective on or before the 90th day after the Closing Date; provided, however,
that if the SEC shall not have declared such Registration Statement effective on
or before the 120th day after the Closing Date, the Company shall then issue a
Compensation Warrant to each Purchaser on the 121st day (the "Compensation
Trigger Date") after the Closing Date and, thereafter, an additional
Compensation Warrant on each 30-day anniversary of such Compensation Trigger
Date for so long as the SEC shall not have declared such Registration Statement
effective. The Company shall further cause a Listing Application covering shares
of Common Stock issued or issuable in respect of, on exercise of, or on
conversion of, or constituting any Acquired Securities to be filed with the
Exchange on or before the 120th day following the Closing Date and shall, upon
filing thereof, use its reasonable best efforts to cause such securities to be
accepted for trading upon the Exchange. Each Purchaser agrees to furnish
promptly to the Company in writing all information required for preparation of
the Registration Statement or thereafter required from time to time to be
disclosed in order to make the information previously furnished to the Company
by such holder not misleading.
(b) If at any time following the filing of a Registration Statement by
the Company, the Company shall qualify to file a registration statement on Form
S3 under the Securities Act, the Company shall thereafter be entitled to replace
any Form S1 registration statement referred to in Section 5.20(a) above with a
registration statement on Form S3 that has been declared effective by the SEC.
Any such Form S3 used to replace a Form S1 pursuant to this Section 5.20(b),
together with any prospectus included in such Form S3, shall thereafter be
referred to as a "Registration Statement" and any Form S1 that is so replaced
shall cease to be referred to by that term for purposes of this Agreement.
(c) The Company shall pay all Registration Expenses (as defined below)
in connection with any registration, qualification or compliance hereunder, and
each Purchaser shall pay all Selling Expenses (as defined below) and other
expenses that are not Registration Expenses relating to the Common Stock resold
by such Purchaser. "Registration Expenses" shall mean all expenses, except for
Selling Expenses, incurred by the Company in complying with the registration
provisions herein described, including without limitation, all registration,
qualification and filing fees (including all SEC and Nasdaq fees), printing
expenses, escrow fees, fees and disbursements of counsel for the Company and for
any underwriter (unless paid by such underwriter), blue sky fees and expenses,
the expense of any special audits incident to or required by any such
registration and the reasonable fees and disbursements of one counsel to all
selling Purchasers. "Selling Expenses" shall mean only selling commissions,
underwriting discounts and stock transfer taxes applicable to the Common Stock
sold by each Purchaser and all fees and disbursements of counsel for any
Purchaser (which counsel, if any, shall be additional to the one counsel to all
selling Purchasers referenced in the preceding sentence).
<PAGE>
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(d) In the case of the registration effected by the Company pursuant to
these registration provisions, the Company will use its best efforts to:
(1) keep such registration statement on Form S1 or Form S3
effective until the earlier of (A) the second anniversary of the date on which
the Registration Statement first becomes effective, (B) the date as of which all
of the Immediately Registrable Securities have been resold, or (C) the time as
of which all of the Common Stock held by the Purchasers can be sold within a
given threemonth period without compliance with the registration requirements of
the Securities Act pursuant to Rule 144;
(2) prepare and file with the SEC such amendments and supplements
to the Registration Statement and the prospectus used in connection therewith as
may be necessary to comply with the provisions of the Securities Act with
respect to the disposition of all securities covered by the Registration
Statement;
(3) furnish such number of prospectuses and other documents
incident thereto, including any amendment of or supplement to the prospectus, as
a Purchaser from time to time may reasonably request;
(4) cause all Common Stock registered as described herein to be
listed on each securities exchange and quoted on each quotation service on which
the common equity securities of the Company are then listed or quoted;
(5) provide a transfer agent and registrar for all Common Stock
registered pursuant to the Registration Statement and a CUSIP number for all
such Common Stock;
(6) otherwise use its best efforts promptly to comply with all
applicable rules and regulations of the SEC;
(7) file the documents required of the Company and otherwise use
its best efforts promptly to obtain, if applicable, and maintain requisite blue
sky clearance in (A) all jurisdictions in which any of the Acquired Securities
are originally sold, and (B) all other states specified in writing by a
Purchaser, provided as to clause (B), however, that the Company shall not be
required to qualify to do business or consent to service of process in any state
in which it is not now so qualified or has not so consented; and
(8) with respect to the initial filing of the Registration
Statement as of the date of declaration of effectiveness, obtain an opinion of
counsel to the Company in customary form and reasonably acceptable to each
Purchaser addressed to each Purchaser selling registrable securities pursuant to
the Registration Statement. The Company shall use its best efforts to qualify
for use of Form S1 or Form S3 under the Securities Act to register the resale of
the Common Stock issuable upon the conversion of the Shares and to maintain such
qualification during the periods described in subsection (c)(i) hereof and to be
listed on the Nasdaq SmallCap market and maintain such listing unless listed on
NASDAQ NMS or another national exchange.
(e) The Company shall furnish to each Purchaser upon request a
reasonable number of copies of the prospectus and a supplement to or an
amendment of such prospectus as may be necessary in order to facilitate the
public sale or other disposition of all or any of the Common Stock held by the
Purchaser.
<PAGE>
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(f) With a view to making available to the Purchasers the benefits of
Rule 144 and any other rule or regulation of the SEC that may at any time permit
a Purchaser to sell Common Stock to the public without registration or pursuant
to registration, the Company covenants and agrees to: (i) make and keep public
information available, as those terms are understood and defined in Rule 144,
until the earlier of (A) the second anniversary of the Closing Date or (B) the
date as of which all of the Common Stock shall have been resold: (ii) file with
the SEC in a timely manner all reports and other documents required of the
Company under the Exchange Act; and (iii) furnish to any Purchaser upon request,
as long as the Purchaser owns any Common Stock, (A) a written statement by the
Company that it has complied with the reporting requirements of the Exchange
Act, (B) a copy of the most recent annual or quarterly report of the Company,
and (C) such other information as may be reasonably requested in order to avail
any Purchaser of any rule or regulation of the SEC that permits the selling of
any such Common Stock without registration.
(g) The Company may, at any time, refuse to permit a Purchaser to
resell any Common Stock pursuant to the Registration Statement; provided,
however, that in order to exercise this right at any time, the Company must
deliver a certificate in writing to the Purchasers, signed by a senior executive
officer of the Company, to the effect that suspension of the sale of shares
under the Registration Statement until such time as the Company can make an
appropriate filing with the SEC is necessary in the good faith determination of
the Company's Board of Directors because a sale pursuant to the Registration
Statement, in its then current form, would be reasonably likely to constitute a
violation of the federal securities laws, which certificate shall specify
whether such filing is required to correct information in the Registration
Statement which was incorrect when included therein (a "Corrective Filing") or
to update or supplement the information therein to reflect new information (a
"Supplemental Filing"). In such an event, the Company shall use its best efforts
to amend the Registration Statement if necessary and take all other actions
necessary to allow such sale under the federal securities laws, and shall notify
the Purchasers promptly after it has determined that such sale has become
permissible under the federal securities laws. Notwithstanding the foregoing,
the Company shall not be entitled to exercise its right to suspend any sales
under the Registration Statement for a Corrective Filing more than one (1) time
in any twelve (12) month period, and the Company shall use its best efforts to
limit any period during which such Registration Statement may be withdrawn,
whether for a Corrective Filing or a Supplemental Filing, to a period not in
excess of thirty (30) days; provided, that all officers and directors of the
Company, and any other Persons to whom the Company has given registration
rights, also agree to suspend the sales of any of the Company's securities owned
by such Person during any such period.
5.21 Indemnification and Contribution.
(a) The Company agrees to indemnify and hold harmless each Purchaser
and its officers, directors, controlling persons and affiliates from and against
any losses, claims, damages or liabilities (or actions or proceedings in respect
thereof) to which such Purchaser may become subject (under the Securities Act,
state law, common law or otherwise) insofar as such losses, claims, damages or
liabilities (or actions or proceedings in respect thereof) arise out of, or are
based upon, any untrue statement of a material fact contained in, or omission of
a material fact from, the Registration Statement, or arise out of any failure by
the Company to fulfill any undertaking included in the Registration Statement or
this Agreement, and the Company will, as incurred, reimburse such Purchaser for
any legal or other expenses reasonably incurred in investigating, defending or
preparing to defend any such action, proceeding or claim; provided however, that
the Company shall not be liable in any such case to the extent that such loss,
claim, damage or liability arises out of, or is based upon, an untrue statement
made in such Registration Statement in reliance upon and in conformity with
information furnished to the Company in writing by or on behalf of such
Purchaser specifically
<PAGE>
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for use in preparation of the Registration Statement. The Company will reimburse
the Purchasers for any legal or other expenses reasonably incurred and
documented in investigating, defending or preparing to defend any such action,
proceeding or claim notwithstanding the absence of a judicial determination as
to the propriety and enforceability of the obligations under this section and
the possibility that such payments might later be held to be improper, provided,
that to the extent any such payment is ultimately held to be improper, the
persons receiving such payments shall promptly refund them.
(b) Each Purchaser, severally and not jointly, agrees to indemnify and
hold harmless the Company from and against any losses, claims, damages or
liabilities (or actions or proceedings in respect thereof) to which the Company
may become subject (under the Securities Act, state law, common law or
otherwise) insofar as such losses, claims, damages or liabilities (or actions or
proceedings in respect thereof) arise out of, or are based upon, an untrue
statement made in such Registration Statement in reliance upon and in conformity
with information furnished to the Company in writing by or on behalf of such
Purchaser specifically for use in preparation of the Registration Statement;
provided, however, that no Purchaser shall be liable in any such case for any
untrue statement included in any Prospectus which statement has been corrected,
in writing, by such Purchaser and delivered to the Company before the sale from
which such loss occurred and in no event shall any Purchaser be liable for any
amount in excess of the net proceeds received for the sale of its Common Stock
pursuant to such Registration Statement.
(c) Promptly after receipt by any indemnified person of a notice of a
claim or the beginning of any action in respect of which indemnity is to be
sought against an indemnifying person pursuant to this Section 5.21, such
indemnified person shall notify the indemnifying person in writing of such claim
or of the commencement of such action, and, subject to the provisions
hereinafter stated, in case any such action shall be brought against an
indemnified person and the indemnifying person shall have been notified thereof,
the indemnifying person shall be entitled to participate therein, and, to the
extent that it shall wish, to assume the defense thereof, with counsel
reasonably satisfactory to the indemnified person. After notice from the
indemnifying person to such indemnified person of the indemnifying person's
election to assume the defense thereof, the indemnifying person shall not be
liable to such indemnified person for any legal expenses subsequently incurred
by such indemnified person in connection with the defense thereof; provided,
however, that if there exists or shall exist a conflict of interest that would
make it inappropriate in the reasonable judgment of the indemnified person for
the same counsel to represent both the indemnified person and such indemnifying
person or any affiliate or associate thereof, the indemnified person shall be
entitled to retain its own counsel at the expense of such indemnifying person.
(d) If the indemnification provided for in this Section 5.21 is
unavailable to or insufficient to hold harmless an indemnified party under
subsection (a) or (b) hereof in respect of any losses, claims, damages or
liabilities (or actions or proceedings in respect thereof) referred to therein,
then each indemnifying party shall contribute to the amount paid or payable by
such indemnified party as a result of such losses, claims, damages or
liabilities (or actions in respect thereof) in such proportion as is appropriate
to reflect the relative fault of the Company on the one hand and the Purchasers
on the other in connection with the statements or omissions which resulted in
such losses, claims, damages or liabilities (or actions in respect thereof), as
well as any other relevant equitable considerations. The relative fault shall be
determined by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or the omission or alleged omission to state
a material fact relates to information supplied by the Company on the one hand
or a Purchaser on the other and the parties' relative intent, knowledge, access
to information and opportunity to correct or prevent such statement or omission.
The Company and the Purchasers agree that it would not be just and equitable if
contribution pursuant to this subsection (d) were determined by pro rata
allocation
<PAGE>
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(even if the Purchasers were treated as one entity for such purpose) or by any
other method of allocation which does not take account of the equitable
considerations referred to above in this subsection (d). The amount paid or
payable by an indemnified party as a result of the losses, claims, damages, or
liabilities (or actions in respect thereof) referred to above in this subsection
(d) shall be deemed to include any legal or other expenses reasonably incurred
by such indemnified party in connection with investigating or defending any such
action or claim. Notwithstanding the provisions of this subsection (d), no
Purchaser shall be required to contribute any amount in excess of the amount, if
any, by which the amount received by the Purchaser from the sale of the Common
Stock to which such loss relates exceeds the amount of any damages which such
Purchaser has otherwise been required to pay by reason of such untrue or alleged
untrue statement or omission or alleged omission. No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation. The Purchasers' obligations in this subsection (d)
to contribute are several in proportion to their respective sales of Common
Stock.
5.22 U.S. Real Property Holding Corporation. The Company covenants that
it will operate in a manner such that it will not become a "United States real
property holding corporation" as that term is defined in Section 897(c)(2) of
the Internal Revenue Code of 1986, as amended ("USRPHC"), and the regulations
thereunder. The Company agrees to make determinations as to its status as a
USRPHC, and will file statements concerning those determinations with the
Internal Revenue Service, in the manner and at the times required under Reg.
1.897-2(h), or any supplementary or successor provision thereto. Within 30 days
of a request from a Purchaser, the Company will inform the requesting party, in
the manner set forth in Reg. 1.897-2(h) or any supplementary or successor
provision thereto, whether that party's interest in the Company constitutes a
United States real property interest (within the meaning of Internal Revenue
Code Section 897(c)(1) and the regulations thereunder) and whether the Company
has provided to the Internal Revenue Service all required notices as to its
USRPHC status.
5.23 Permitted Transactions. Notwithstanding any contrary provision
hereof, the Company shall have the right to effect any of the transactions or
other actions set forth on Schedule 5.23 hereto without prior notice to, or the
prior consent of the holders of, the Series C Preferred Stock being required in
connection therewith.
5A. Pre-Emptive Rights.
5A.1. Participation Rights. Subject to the exclusions set forth in
Section 5A.3 below, and to the provisions of the following sentence in this
Section 5A.1, if at any time after the Closing and prior to the earlier of (x) a
Qualified Public Offering and (y) the date one (1) year after the occurrence of
Closing, the Company authorizes the offer, issuance, or sale, or offers, issues
or sells to any Person (the "Offeree") any shares of Common Stock, Derivative
Securities (as defined in the Purchase Agreement) or other securities of the
Company (whether as newly issued shares or other securities or from the
Company's treasury) in an offering not registered under the Securities Act, the
Company will first offer to sell, by written notice, to each holder of shares of
Series C Preferred Stock a portion (such holder's "Portion") of such shares or
securities authorized to be offered, issued or sold, or proposed to be offered,
issued or sold equal to the product obtained by multiplying (i) the number of
such shares or securities authorized to be offered, issued or sold, or proposed
to be offered, issued or sold, by (ii) the quotient obtained by dividing (A) the
number of shares of Common Stock held by such holder of Series C Preferred Stock
(for this purpose including on an as-if-converted basis the shares of Conversion
Stock held by such holder), by (B) the sum of (I) the aggregate number of shares
of Common Stock issued and outstanding as of such date and (II) the aggregate
number of shares of Conversion Stock (calculated on an as-if-converted basis).
<PAGE>
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5A.2. Procedure. Each holder of Series C Preferred Stock will be
entitled (but not obligated) to purchase all or part of such holder's Portion at
the same price and on the same terms as such stock or securities are to be
offered to the Offeree. Each such holder may exercise such purchase rights
within 10 days after receipt of written notice from the Company describing in
reasonable detail the stock or securities to be offered to the Offeree, the
purchase price thereof, the payment terms, and such holder's percentage
allotment. If any such holder fails in whole or in part to exercise the purchase
rights hereunder within such 10-day period (other than by reason of the
Company's failure to comply with the provisions of this Section 5A), then the
other holders of Series C Preferred Stock shall have the right to acquire such
Portion (which right may be exercised by any such holder by indication in such
holder's notice to the Company of its exercise of purchase rights hereunder such
holder's desire to acquire additional securities, or otherwise). If
oversubscribed for, any such Portion not purchased by the holder initially
entitled thereto shall be allocated among the other holders of Purchased Shares
desiring to acquire such Portion pro rata in proportion to the numbers of shares
of Common Stock held by each such other holder (including for this purpose
shares of Conversion Stock, calculated on an as-if-converted basis). The Company
may sell so much, and only so much, of any Portion as to which no holders of
Series C Preferred Stock, having been offered the right to purchase such Portion
in accordance with all of the provisions of this Section 5A, have exercised such
purchase rights, to the Offeree at the same price and on the same terms as those
offered to such holder, provided, that if the whole of such holder's Portion of
such securities is not sold to the Offeree within 60 days following the lapse of
the 10-day exercise period provided to the holders of Series C Preferred Stock,
such unsold securities will once again be subject to the purchase rights
hereunder. In the event that shares of Common Stock or Derivative Securities are
authorized to be issued and sold by the Company for services, property, or other
non-cash consideration, each holder of Series C Preferred Stock will be allowed
to participate in such issue and sale by substituting cash in the amount of the
fair market value, per share, of such non-cash consideration.
5A.3. Excluded Transactions. The prohibitions and rights provided in
this Section 5A will not apply to (i) shares of Common Stock issued by the
Company pursuant to stock dividends, stock splits, recapitalizations, and
similar transactions; (ii) shares of Common Stock issued upon conversion or
exchange, directly or indirectly, of the Series C Preferred Stock; (iii) options
or other rights to purchase or receive Common Stock, and any shares of Common
Stock issued upon the exercise thereof or upon such a purchase, in each case to
officers, directors, consultants, agents and employees of the Company pursuant
to the Company's incentive stock option plan or other equity incentive plan,
each as approved by a majority of the non-management members of the Board of
Directors; (iv) shares of Common Stock issued pursuant to a registration
statement on Form S-4 or Form S-8 (or any applicable successor form); (v)
non-cash consideration issued or paid in connection with the acquisition of
another entity (whether through merger or otherwise), provided, that such
issuance is otherwise permitted under the terms of the Company's Certificate of
Incorporation; (vi) securities issued in any transaction for a strategic purpose
and not primarily to raise equity capital; and (vii) warrants to purchase
capital stock of the Company (and the capital stock issued upon exercise
thereof) issued to a national banking association and which shall not result in
the right of such national banking association to purchase greater than 1% of
the capital stock of the Company on a fully-diluted basis.
5A.4. Termination of Rights. The prohibitions and rights provided for
in this Section 5A shall terminate automatically upon the closing of a Qualified
Public Offering.
6. Registration and Transfer of Securities.
6.1. Transfer and Exchange of Capital Stock. The Company will maintain
at its principal executive office a register in which will be entered the names
and addresses of the holders of the capital stock and the particulars (including
without limitation the class thereof) of the respective capital stock held by
them and of all transfers of shares of capital stock or conversions of shares of
capital stock from one class to another. Upon surrender at such office of any
<PAGE>
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certificate representing shares of capital stock for registration of conversion,
exchange, or (subject to compliance with applicable federal and state securities
laws and the applicable provisions of this Agreement, including without
limitation the conditions set forth in Section 7.2 hereof) transfer, the Company
will issue, at its expense, one or more new certificates, in such denomination
or denominations as may be requested, for shares of such capital stock and
registered as such holder may request. Any certificate representing shares of
capital stock surrendered for registration of transfer will be duly endorsed, or
accompanied by a written instrument of transfer duly executed by the holder of
such certificate or his attorney duly authorized in writing. The Company will
pay shipping and insurance charges, from and to each holder's principal office,
upon any transfer, exchange, or conversion provided for in this Section 6.1.
6.2. Replacement of Purchased Shares. In the case of any loss, theft,
destruction, or mutilation of the certificate representing any Purchased Shares,
upon receipt of evidence thereof reasonably satisfactory to the Company, and (i)
in the case of any such loss, theft, or destruction, upon delivery of an
indemnity bond in such reasonable amount as the Company may determine, or (ii)
in the case of any such mutilation, upon the surrender to the Company at its
principal office of such mutilated certificate for cancellation, the Company
will execute and deliver, in lieu thereof, new certificates of like tenor. Any
old stock certificate in lieu of which any such new stock certificate has been
so executed and delivered by the Company will not be deemed to be outstanding
for any purpose of this Agreement or otherwise.
6.3. Reliance on Register. The Company may rely for all purposes
hereunder on record ownership as shown on the register described in this Section
6 (except to the extent that such register fails to reflect a transfer of which
the Company received due notice in accordance with Section 7.2 of this
Agreement).
7. Restrictions on Transfer.
7.1. General Restriction. Subject to Section 10.6, the Purchased Shares
and all securities issued in exchange therefor or upon conversion or exercise
thereof (for purposes of this Section 7, the "Restricted Securities"), will be
transferable only upon the satisfaction of the conditions set forth in this
Section 7. Any transfer or purported transfer in violation of this Section 7
will be void.
7.2. Notice of Transfer. Subject to Section 10.6, prior to any transfer
of any Restricted Securities, the holder thereof will give written notice to the
Company describing in reasonable detail the manner and terms of the proposed
transfer and the identity of the proposed transferee, accompanied by the written
agreement of the proposed transferee to be bound by all of the provisions hereof
applicable to holders of such Restricted Securities hereunder or thereunder. The
Company may request an opinion of counsel of such holder prior to such transfer
to the effect that such transfer is exempt from the registration requirements of
the Securities Act of 1933, as amended.
7.3. Restrictive Legends. For so long as the Purchased Shares remain
subject to the restrictions on transfer set forth in this Section 7, the
certificates representing such Purchased Shares will bear restrictive legends in
substantially the following forms:
"The securities represented by this certificate have not been
registered under the Securities Act of 1933, as amended (the
"Securities Act"), and may be transferred only pursuant to an effective
registration statement under the Securities Act or in accordance with
an applicable exemption from the registration requirements of the
Securities Act."
<PAGE>
-25-
"The securities represented by this certificate are subject to certain
restrictions on transfer set forth in a Series C Preferred Stock
Purchase Agreement, dated as of March3, 2000, by and among the issuer
of such securities and the registered holder of this certificate (or
such holder's predecessor-in-interest) and certain others. A copy of
such agreement is on file and may be inspected by the registered
holder of this certificate at the principal executive office of the
issuer."
7.4. Termination of Restrictions. The restrictions imposed by this
Section 7 upon the transferability of Restricted Securities will terminate as to
any particular Restricted Securities when such Restricted Securities have been
sold pursuant to an effective registration statement under the Securities Act,
or pursuant to Rule 144 under the Securities Act or any other exemption from the
registration requirements of the Securities Act pursuant to which the transferee
receives securities that are not "restricted securities" within the meaning of
that term as defined in Rule 144(a)(3). Whenever any of such restrictions
terminates as to any Restricted Securities, the holder thereof will be entitled
to receive from the Company, at the Company's expense, new certificates
representing such Purchased Shares, without restrictive legends.
8. Expenses; Indemnification.
(a) Whether or not the transactions contemplated by this Agreement are
consummated (and whatever the reason or cause for any such failure to consummate
except for an affirmative termination by the Purchasers or the failure of the
Purchasers to negotiate in good faith), the Company hereby agrees to pay on
demand all reasonable out-of-pocket and due diligence expenses incurred by the
Purchasers (i) in connection with the transactions contemplated by this
Agreement (including without limitation the reasonable fees and other expenses
incurred by the Tudor Entities, and charges for fees and disbursements, not to
exceed $25,000.00, of Bingham Dana LLP, special counsel to the Tudor Entities)
and the reasonable travel and out-of-pocket expenses of the representatives of
the Purchasers and (ii) in connection with any amendments or waivers (whether or
not the same become effective) hereof from time to time. In addition, the
Company hereby agrees to pay on demand all reasonable out-of-pocket expenses
(including without limitation the reasonable fees and charges for disbursements
of one counsel to the Purchasers) incurred by the Purchasers or any holder of
any of the Purchased Shares and any other Acquired Securities issued hereunder
in connection with the enforcement of any rights hereunder, or with respect to
any of the Purchased Shares, including without limitation, (a) the cost and
expenses of preparing and duplicating this Agreement and the Purchased Shares
and any other Acquired Securities; (b) the cost of delivering to each
Purchaser's principal office, insured to such Purchaser's satisfaction, the
Purchased Shares and any other Acquired Securities sold to such Purchaser
hereunder and any Purchased Shares and any other Acquired Securities delivered
to such Purchaser in exchange therefor or upon any conversion, exercise,
exchange, or substitution thereof; and (c) all taxes (other than taxes
determined with respect to the income of a Purchaser), including any recording
fees and filing fees and documentary stamp and similar taxes at any time payable
in respect of this Agreement or the issuance of any of the Purchased Shares and
any other Acquired Securities.
(b) All covenants, agreements, representations, and warranties made
herein or in the Ancillary Agreements or any other document referred to herein
or delivered to the Purchasers pursuant hereto will be deemed to have been
relied on by the Purchasers, notwithstanding any investigation made by or on
behalf of the Purchasers, and will survive the Closing. The Company will
indemnify, defend, and hold harmless each Purchaser, and each of such
Purchaser's partners, stockholders, officers, directors, employees, agents, and
representatives, from and against any and all Damages incurred by any of them in
any capacity and resulting from or relating to the breach by the Company of any
of its representations, warranties, covenants, or agreements contained in this
Agreement or in the Ancillary Agreements or any other document referred to
herein or delivered to the Purchasers pursuant hereto, for two (2) years after
the date on which each event or occurrence (or other act or omission) giving
rise to the right to indemnification hereunder occurs.
<PAGE>
-26-
(c) The obligations of the Company under this Section 8 will survive
transfer of the Purchased Shares and any other Acquired Securities and the
termination of this Agreement.
9. Definitions.
9.1. Certain Defined Terms. For all purposes of this Agreement the
following terms will have the meanings set forth or cross-referenced in this
Section 9:
"Acquired Securities" means (i) the Purchased Shares, (ii) the Closing
Warrant, (iii) any Compensation Warrant(s) (if any), (iii) any shares of the
Common Stock of the Company issued and/or issuable upon exercise of the Closing
Warrant and/or any Compensation Warrant (if any), (iv) any Dividend Shares, (v)
any securities issued and/or issuable upon conversion of the Purchased Shares or
the Dividend Shares, and (vi) any securities issued and/or issuable in respect
of any of the foregoing upon the occurrence of an Adjustment Event or upon
exercise or conversion of any of the foregoing.
"Adjustment Event" means the occurrence of any of the following with
respect to any relevant Person and/or any relevant class of its equity
securities: a stock dividend, stock split, exchange, combination or division of
shares or other equity interests, recapitalization, reclassification, merger,
consolidation, reorganization, or the like.
"Affiliate" means any other person directly or indirectly controlling,
controlled by, or under direct or indirect common control with the Company (or
other referenced person) and includes without limitation, (a) any person who is
an officer, director, or direct or indirect beneficial holder of at least 5% of
the then outstanding capital stock of the Company (or other referenced person),
and any of the Family Members of any such person, (b) any person of which the
Company (or other referenced person) and/or its Affiliates (as defined in clause
(a) above), directly or indirectly, either beneficially own(s) at least 5% of
the then outstanding equity securities or constitute(s) at least a 5% equity
participant, (c) in the case of a specified person who is an individual, Family
Members of such person, and (d) in the case of the Purchasers, any entities for
which a Purchaser or any of its Affiliates serve as general partner and/or
investment adviser or in a similar capacity, and all mutual funds or other
pooled investment vehicles or entities under the control or management of such
Purchaser or the general partner or investment adviser thereof, or any Affiliate
of any of them, or any Affiliates of any of the foregoing.
"Affiliated Group" has the meaning given to it in Section 1504 of the
Code, and in addition includes any analogous combined, consolidated, or unitary
group, as defined under any applicable state, local, or foreign income Tax law.
"Ancillary Agreements" means the Certificate of Designation, the
Shareholder Rights Agreement, the Registration Rights Agreement, the Closing
Warrants, any Compensation Warrants (if any), and any other agreement or
document delivered or executed in connection with this Agreement.
"CERCLA" means the Comprehensive Environmental Response, Compensation
and Liability Act of 1980, as amended.
"Certificate of Designation" means the Certificate of Designation of
Powers, Preferences and Rights of the Series C Convertible Participating
Preferred Stock substantially in the form of Exhibit F hereto.
<PAGE>
-27-
"Charter" means the Certificate of Incorporation including the
Certificate of Designation.
"Closing Warrant" means a warrant, in form and substance substantially
in the form of Exhibit C hereto, exercisable by each Purchaser for such number
of shares of Common Stock of the Company as is set forth opposite such
Purchaser's name on Exhibit A hereto.
"Code" means the Internal Revenue Code of 1986, as amended.
"Common Stock" means the common stock, $0.001 par value per share, of
the Company.
"Compensation Warrant" means a warrant to purchase 50,000 shares of
Common Stock (subject to adjustment from time to time on the occurrence of an
Adjustment Event), substantially in the form of Exhibit D hereto.
"Damages" means all damages, losses, claims, demands, actions, causes
of action, suits, litigations, arbitrations, liabilities, costs, and expenses,
including without limitation court costs and the fees and expenses of counsel
and experts.
"Derivative Securities" means (i) all shares of stock and other
securities that are convertible into or exchangeable for shares of Common Stock,
and (ii) all options, warrants, and other rights to acquire shares of Common
Stock or any class of stock or other security or securities convertible into or
exchangeable for shares of Common Stock or any class of stock of other security.
"Dividend Shares" means any shares of Series C Preferred, Common Stock,
or any other securities of the Company paid or payable as a dividend in respect
of any of the Acquired Securities pursuant to the terms of the Charter.
"Environmental Laws" means, collectively, the Resource Conservation and
Recovery Act, CERCLA, the Superfund Amendments and Reauthorization Act of 1986,
the Federal Clean Water Act, the Federal Clean Air Act, the Toxic Substances
Control Act, and any and all state or local statutes, regulations, ordinances,
orders, and decrees relating to health, safety, or the environment, each, as the
case may be, as amended.
"EPA" means the United States Environmental Protection Agency.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"Family Members" means, as applied to any individual, any parent,
spouse, child, spouse of a child, brother or sister of the individual, and each
trust created for the benefit of one or more of such persons and each custodian
of a property of one or more such persons and the estate of any such persons.
"GAAP" means generally accepted accounting principles that are (i)
consistent with the principles promulgated or adopted by the Financial
Accounting Standards Board and its predecessors, (ii) applied on a basis
consistent with prior periods, and (iii) such that, insofar as the use of
accounting principles is pertinent, a certified public accountant could deliver
an unqualified opinion with respect to financial statements in which such
principles have been properly applied.
"Hazardous Substances" means, collectively, any hazardous waste, as
defined by 42 U.S.C. ss. 6903(5), any hazardous substances as defined by 42
U.S.C. ss. 9601(14), any pollutant or contaminant as defined by 42 U.S.C. ss.
9601(33), or any toxic substance, methane gas, oil, or hazardous materials or
other chemicals or substances regulated by any Environmental Laws.
<PAGE>
-28-
"Immediately Registrable Securities" means any shares of Common Stock
issued or issuable (i) on conversion of any Purchased Shares, and (ii) on
exercise of any Closing Warrant, and (iii) on conversion of any Dividend Shares,
and, in the case of any of (i), (ii) or (iii), any securities issued in exchange
or respect of any of thereof, including upon the occurrence of an Adjustment
Event.
"Indebtedness" means (a) all indebtedness for borrowed money, whether
current or long-term, or secured or unsecured, (b) all indebtedness for the
deferred purchase price of property or services represented by a note or
security agreement, (c) all indebtedness created or arising under any
conditional sale or other title retention agreement (even though the rights and
remedies of the seller or lender under such agreement in the event of default
may be limited to repossession or sale of such property), (d) all indebtedness
secured by a purchase money mortgage or other lien to secure all or part of the
purchase price of property subject to such mortgage or lien, (e) all obligations
under leases that have been or must be, in accordance with GAAP, recorded as
capital leases in respect of which it is liable as lessee, (f) any liability in
respect of banker's acceptances or letters of credit, and (g) all indebtedness
of any person that is directly or indirectly guaranteed by the Company or that
it has agreed (contingently or otherwise) to purchase or otherwise acquire or in
respect of which it has otherwise assured a creditor against loss.
"Liens" means any and all liens, claims, mortgages, security interests,
charges, encumbrances, and restrictions on transfer of any kind, except: (i) in
the case of references to securities, any of the same arising under applicable
securities laws solely by reason of the fact that such securities were issued
pursuant to exemptions from registration under such securities laws, (ii) real
estate taxes not yet due and payable, and (iii) any lien in favor of any
landlord for unpaid rent, additional rent, or other charges, which lien is
created by statute or under any lease under which the Company or any of its
Subsidiaries is lessee.
"Material Adverse Effect" means, with reference to the Company, a
material adverse effect on the condition (financial or otherwise), operations,
business, assets, or prospects of the Company, or on its ability to consummate
the transactions hereby contemplated.
"Person" or "person" (regardless of whether capitalized) means any
natural person, entity, or association, including without limitation any
corporation, partnership, limited liability company, government (or agency or
subdivision thereof), trust, joint venture, or proprietorship.
Qualified Public Offering means a public offering of shares of the
Company's Common Stock pursuant to an effective registration statement on Form
S-1, or successor form, of the Securities and Exchange Commission, pursuant to
which the per share price to the public is not less than 250% of the Per Share
Purchase Price (as adjusted equitably on the occurrence of an Adjustment Event)
and the gross proceeds to the Company are not less than $20,000,000.
"Registration Rights Agreement" means the Registration Rights
Agreement, dated as of the date hereof, among the Company and the Purchasers, in
the form of the attached Exhibit E.
"Securities Act" means the Securities Act of 1933, as amended, or any
successor federal statute, and the rules and regulations of the Securities and
Exchange Commission thereunder, all as the same are in effect at the relevant
time of reference.
"Series A Preferred Stock" means the Series A Convertible Preferred
Stock, par value $0.01 per share, of the Company, the terms of which are set
forth in the Charter.
"Series B Preferred Stock" means the Series B Convertible Preferred
Stock, $0.01 par value per share, of the Company, the terms of which are set
forth in the Charter.
<PAGE>
-29-
"Series C Preferred Stock" means the Series C Convertible Participating
Preferred Stock, $0.01 par value per share, of the Company, the terms of which
are set forth in the Charter.
"Subsidiary" or "Subsidiaries" means, with respect to any person, any
corporation a majority (by number of votes) of the outstanding shares of any
class or classes of which are at the time owned by such person or by a
Subsidiary of such person, if the holders of the shares of such class or classes
(a) are ordinarily, in the absence of contingencies, entitled to vote for the
election of a majority of the directors (or persons performing similar
functions) of the issuer thereof, even though the right so to vote has been
suspended by the happening of such a contingency, or (b) are at the time
entitled, as such holders, to vote for the election of a majority of the
directors (or persons performing similar functions) of the issuer thereof,
whether or not the right so to vote exists by reason of the happening of a
contingency.
"Tax" or "Taxes" means any federal, state, local, or foreign income,
gross receipts, franchise, estimated, alternative minimum, add-on minimum,
sales, use, transfer, registration, value added, excise, severance, stamp,
occupation, premium, windfall profit, customs, duties, real property, personal
property, capital stock, intangibles, social security, unemployment, disability,
payroll, license, employee, or other tax or levy, of any kind whatsoever,
including any interest, penalties, or additions to tax in respect of the
foregoing.
"Tax Return" means any return, declaration, report, claim for refund,
information return, or other document (including any related or supporting
estimates, elections, schedules, statements, or information) filed or required
to be filed in connection with the determination, assessment, or collection of
any Tax or the administration of any laws, regulations, or administrative
requirements relating to any Tax.
"Tudor Entity" or "Tudor Entities" means each of the following: Altar
Rock Fund, L.P., Tudor Private Equity Fund, L.P., Tudor Arbitrage Partners,
L.P., Tudor BVI Futures, Ltd., Raptor Global Portfolio, L.P., Raptor Global
Portfolio, Ltd., Raptor Global Fund, L.P. and Raptor Global Fund Ltd., or any
funds or other investment vehicles or entities of which any of the foregoing
entities are Affiliates, or any Affiliate or Affiliated Group of Tudor
Investment Corporation and/or Tudor Global Trading, Inc.
9.2. Terms Defined Elsewhere. The following terms are defined herein in
the sections identified below:
<TABLE>
<CAPTION>
Term Section Term Section
---- ------- ---- -------
<S> <C> <C> <C>
Agreement Preamble Per Share Purchase Price 1.1
Aggregate Purchase Price 1.1 Proprietary Information 2.20
Closing 1.3 Purchased Shares 1.1
Closing Date 1.3 Purchaser(s) Preamble
Company Preamble Registration Expenses 5.20(a)
Compensation Trigger Date 5.20(a) Restricted Securities 7.1
Employee Benefit Plan 2.18(a) Selling Expenses 5.20(a)
Exchange 5.20(a)
Listing Application 5.20(a)
Most Recent Balance Sheet 2.8(a)
</TABLE>
<PAGE>
-30-
10. Miscellaneous Provisions.
10.1. Amendments, Consents, Waivers, Special Provisions Relating to
Tudor.
(a) This Agreement or any provision hereof may be amended or terminated
by the agreement of the Company and the holders of a two-thirds majority of the
outstanding shares of Series C Preferred Stock, and the observance of any
provision of this Agreement that is for the benefit of the holders of Series C
Preferred Stock may be waived (either generally or in a particular instance, and
either retroactively or prospectively), and any consent, approval, or other
action to be given or taken by the holders of Series C Preferred Stock pursuant
to this Agreement may be given or taken by the waiver, consent, approval or
other action of the holders of a two-thirds majority of the outstanding shares
of Series C Preferred Stock on behalf of all of the holders of shares of Series
C Preferred Stock; provided, however, that any Purchaser may in writing waive,
as to itself only, the benefits of any provision of this Agreement.
(b) No course of dealing between the Company and any of the Purchasers
will operate as a waiver of any of the Company's or any Purchaser's rights under
this Agreement. No waiver of any breach or default hereunder will be valid
unless in a writing signed by the waiving party. No failure or other delay by
any person in exercising any right, power, or privilege hereunder will be or
operate as a waiver thereof, nor will any single or partial exercise thereof
preclude any other or further exercise thereof or the exercise of any other
right, power, or privilege.
(c) For purposes of determining whether, for any provision hereof, the
number of shares of Common Stock or Purchased Shares held by a Tudor Entity or
any other Purchaser is sufficient to meet a required threshold, such Tudor
Entity or other Purchaser (as the case may be) shall be deemed to hold the
number of Purchased Shares or shares of Common Stock issued or issuable upon
conversion or exchange, directly or indirectly, of the Purchased Shares, as the
case may be, held by such Tudor Entity and any of its Affiliates and other Tudor
Entities or held by such Purchaser and its Affiliates (as the case may be).
10.2. Notices. All notices, requests, payments, instructions or other
documents to be given hereunder will be in writing or by written
telecommunication, and will be deemed to have been duly given if (i) delivered
personally (effective upon delivery), (ii) mailed by certified mail, return
receipt requested, postage prepaid (effective five business days after
dispatch), (iii) sent by a reputable, established courier service that
guarantees overnight delivery (effective the next business day) or (iv)
dispatched by telecopier if the telecopy is received in complete, readable form
(effective upon dispatch), addressed as follows (or to such other address as the
recipient party may have furnished to the sending party for the purpose pursuant
to this Section 10.2):
(a) If to the Company:
Net Value Holdings, Inc.
Two Penn Center Plaza, Suite 605
Philadelphia, PA 19102
Attention: Mr. Andrew Panzo, President & CEO
Telecopier No. (215) 564-3133
with copies sent at the same time and by the same means to:
Klehr, Harrison, Harvey, Branzburg & Ellers
260 S. Broad Street
Philadelphia, PA 19102-5003
Attention: Lawrence D. Rovin, Esq.
Telecopier No. (215) 568-6603
<PAGE>
-31-
(b) If to any Purchaser, to the address of such Purchaser set forth in
the register referred to in Section 6.1 of this Agreement,
with a copy sent at the same time and by the same means to:
Bingham Dana LLP
150 Federal Street
Boston, Massachusetts 02110
Attention: Victor J. Paci, Esq.
Telecopier No. (617) 951-8736
10.3. Counterparts. This Agreement may be executed by the parties in
separate counterparts, each of which when so executed and delivered will be an
original, but all of which together will constitute one and the same instrument.
In pleading or proving this Agreement, it will not be necessary to produce or
account for more than one such complete counterpart.
10.4. Captions. The captions of sections or subsections of this
Agreement are for reference only and will not affect the interpretation or
construction of this Agreement.
10.5. Binding Effect and Benefits. This Agreement will bind and inure
to the benefit of the parties hereto and their respective successors and
permitted assigns. Except as otherwise provided in this Agreement, the
provisions of this Agreement that are for the Purchasers' benefit will inure to
the benefit of all permitted transferees of Acquired Securities, and the
applicable provisions of this Agreement that bind the Purchasers will bind all
transferees of Acquired Securities. Nothing in this Agreement is intended to or
will confer any rights or remedies on any person other than the parties hereto
and their respective successors and permitted assigns.
10.6. Assignment. This Agreement and the rights and obligations
hereunder may not be assigned by the Company. Notwithstanding the provisions set
forth in Section 7, this Agreement and the rights and obligations hereunder and
the Purchased Shares may be transferred by each of the Purchasers in its sole
discretion at any time, in whole or in part, including without limitation
transfers to any of the Tudor Entities, Affiliates or Affiliated Groups of the
transferor, without the consent of any other party hereto.
10.7. Construction. The language used in this Agreement is the language
chosen by the parties to express their mutual intent, and no rule of strict
construction will be applied against either party.
10.8. Further Assurances. From time to time on and after the Closing
Date, the Company will promptly execute and deliver all such further instruments
and assurances, and will promptly take all such further actions, as the
Purchasers or any of them may reasonably request in order more effectively to
effect or confirm the transactions contemplated by this Agreement and/or any of
the Ancillary Agreements and to carry out the purposes hereof and thereof.
10.9. Severability. No invalidity or unenforceability of any section of
this Agreement or any portion thereof will affect the validity or enforceability
of any other section or the remainder of such section.
<PAGE>
-32-
10.10. Equitable Relief. Each of the parties acknowledges that any
breach by such party of his, her, or its obligations under this Agreement would
cause substantial and irreparable damage to one or more of the other parties and
that money damages would be an inadequate remedy therefor. Accordingly, each
party agrees that the other parties or any of them will be entitled to an
injunction, specific performance, and/or other equitable relief to prevent the
breach of such obligations.
10.11. Entire Agreement. This Agreement, together with the exhibits and
schedules hereto and the Ancillary Agreements, contains the entire understanding
and agreement among the parties, or between or among any of them, and supersedes
any prior understandings or agreements between or among any of them, with
respect to the subject matter hereof.
10.12 Publicity. The Purchasers or any of them will have the right to
publicize their investment in the Company as contemplated hereby by means of a
"tombstone" advertisement or other customary advertisement in newspapers and
other media.
10.13. Governing Law. This Agreement will be governed by and
interpreted and construed in accordance with the internal laws of the
Commonwealth of Massachusetts, as applied to agreements under seal made, and
entirely to be performed, within Massachusetts.
[The rest of this page is intentionally left blank.]
<PAGE>
-33-
IN WITNESS WHEREOF, the Company and each of the Purchasers have
executed this Series C Preferred Stock Purchase Agreement as an agreement under
seal on and as of the date first above written.
COMPANY: NET VALUE HOLDINGS, INC.
- -------
By /s/ Andrew P. Panzo
---------------------------------------
Name: Andrew P. Panzo
Title: Chief Executive Officer
PURCHASERS: THE ALTAR ROCK FUND, L.P.
- ----------
By: Tudor Investment Corporation,
as General Partner
By /s/ William T. Flaherty
---------------------------------------
Name: William T. Flaherty
Title: Vice President
40 Rowes Wharf, 2nd floor
Boston, MA 02110
Attention: Eric Olander
Facsimile: (617) 737-0993
Residence: Boston, Massachusetts
RAPTOR GLOBAL PORTFOLIO, LTD.
By: Tudor Investment Corporation,
as Investment Advisor
By /s/ William T. Flaherty
---------------------------------------
Name: William T. Flaherty
Title: Vice President
40 Rowes Wharf, 2nd floor
Boston, MA 02110
Attention: Eric Olander
Facsimile: (617) 737-0993
Residence: Boston, Massachusetts
<PAGE>
-34-
BROWN SIMPSON STRATEGIC GROWTH FUND, LTD.
By: Brown Simpson Asset Management, LLC
By: /s/ Peter D. Greene
---------------------------------------------
Name: Peter D. Greene
Title: Managing Principal
152 West 57th Street, 40th Floor
New York, New York 10019
Attention: Peter D. Greene
Facsimile: (212) 247-1329
Residence: Grand Cayman, Cayman Islands
BROWN SIMPSON STRATEGIC GROWTH FUND, L.P.
By: Brown Simpson Capital, LLC
its general partner
By: /s/ Peter D. Greene
---------------------------------------------
Name: Peter D. Greene
Title: Managing Principal
152 West 57th Street, 40th Floor
New York, New York 10019
Attention: Peter D. Greene
Facsimile: (212) 247-1329
Residence: New York, New York
<PAGE>
-1-
EXHIBIT A
---------
PURCHASER SCHEDULE
<TABLE>
<CAPTION>
Number of Shares of
Number of Aggregate Common Stock Issuable
Purchased Purchase on Exercise of Closing
Purchaser Shares Price Warrant
- ------------------ ---------- ---------- ----------------------
<S> <C> <C> <C>
The Raptor Global Portfolio, Ltd. 414,833 $4,978,000 41,483
The Altar Rock Fund, L.P. 1,833 $22,000 183
Brown Simpson Strategic Growth 541,667 $6,500,000 54,167
Fund, Ltd.
Brown Simpson Strategic Growth 291,667 $3,500,000 29,167
Fund, L.P.
1,250,000 15,000,000 125,000
Total:
- ------------------------------------------ ---------------- ----------------- ----------------------
</TABLE>
<PAGE>
-2-
EXHIBIT B
---------
USE OF PROCEEDS SCHEDULE
The Company intends to use the net proceeds from this sale of preferred
stock for the following purposes: To make investments in affiliate companies (as
that term is used in the Company's Registration Statement on Form S-1); to
prepay up to $3,500,000 (plus accrued interest) in outstanding convertible
indebtedness; to increase the Company's work force; and to provide general
working capital.
<PAGE>
-3-
EXHIBIT C
---------
FORM OF CLOSING WARRANT
<PAGE>
-4-
EXHIBIT D
---------
FORM OF COMPENSATION WARRANT
<PAGE>
-5-
EXHIBIT E
---------
FORM OF REGISTRATION RIGHTS AGREEMENT
<PAGE>
-6-
EXHIBIT F
---------
SERIES C PF CERTIFICATE OF DESIGNATION
<PAGE>
SERIES C PREFERRED STOCK
PURCHASE AGREEMENT
This Series C Preferred Stock Purchase Agreement (this "Agreement"),
dated as of March 3, 2000, is by and among (i) NET VALUE HOLDINGS, INC., a
Delaware corporation (the "Company"), and (ii) the Purchasers listed on the
Purchaser Schedule attached hereto (each individually, a "Purchaser," and all of
them, collectively, the "Purchasers").
Capitalized terms used and not otherwise defined upon first usage
herein are defined in Section 9.1 hereof.
1. Sale And Purchase of Purchased Shares.
1.1. Agreement to Sell and Purchase Purchased Shares. The Company
hereby agrees to issue and sell to each Purchaser and, subject to all of the
terms and conditions hereof and in reliance on the representations and
warranties set forth or referred to herein, each Purchaser severally agrees to
purchase (i) such number of shares (collectively, the "Purchased Shares") of
Series C Preferred Stock (also referred to herein as the "Series C Preferred")
as is equal to the result obtained when the aggregate purchase price (as to each
Purchaser, the "Aggregate Purchase Price") being paid by each such Purchaser (as
set forth opposite such Purchaser's name on the Purchaser Schedule attached
hereto as Exhibit A) is divided by the Per Share Purchase Price (as such term is
defined in Section 1.2, below) therefor, and (ii) a Closing Warrant exercisable
for such number of shares of Common Stock as is set forth opposite such
Purchaser's name on the Purchaser Schedule attached hereto as Exhibit A. The
term "Purchased Shares" as used in this Agreement also includes any securities
issued or issuable with respect to the original Purchased Shares upon the
occurrence of an Adjustment Event and any securities into which any of the
original Purchased Shares are converted or convertible, directly or indirectly,
or for which any of the original Purchased Shares are exchanged or exchangeable,
directly or indirectly.
1.2. Purchase Price. The purchase price per share (the "Per Share
Purchase Price") to be paid at Closing by the Purchasers for each of the
Purchased Shares shall be equal to the lesser of (i) $12.00 per share (as
adjusted on the occurrence of an Adjustment Event if the Closing Date shall
occur after the date of this Agreement), and (ii) 80% of the average of the
closing market prices of the Common Stock on each of the three (3) trading days
prior to the occurrence of the Closing Date; provided, however, that if the Per
Share Purchase Price as calculated pursuant to clauses (i) and (ii) of this
sentence would be less than $6.00 per share, (as adjusted from time to time on
the occurrence of an Adjustment Event) then (x) the Per Share Purchase Price
shall be equal to $6.00 per share (as adjusted from time to time on the
occurrence of an Adjustment Event), and (y) the Purchasers shall in such case be
under no obligation to -- consummate the purchase of the Purchased Shares
pursuant to the terms of this Agreement; provided, further, that the Per Share
Purchase Price shall be equitably adjusted on the occurrence of an Adjustment
Event. No consideration in addition to the Aggregate Purchase Price payable
<PAGE>
by each Purchaser in respect of the Purchased Shares being purchased by such
Purchaser shall be payable by such Purchaser in respect of the Closing Warrant
being issued to such Purchaser at Closing.
1.3. Closing. The closing of the initial purchase and sale of the
Purchased Shares (the "Closing") will take place on or before March 3, 2000 at
the offices of Bingham Dana LLP, 150 Federal Street, Boston, Massachusetts
02110, simultaneously with the execution and delivery of this Agreement, or at
such other time, date, and place as the Company and the Purchasers may agree
(the date on which the Closing actually occurs, the "Closing Date").
1.4. Use of Proceeds.
(a) The Company agrees that the proceeds from the sale of the
Purchased Shares hereunder will be used as described in the attached Use of
Proceeds Schedule attached hereto as Exhibit B.
(b) The Company further agrees that it will not use any part
of the proceeds from the sale of the Purchased Shares to purchase or carry any
"margin security" or "margin stock" (as such terms are defined in any
regulation, rule, or interpretation of the Board of Governors of the Federal
Reserve System).
1.5. Closing Deliveries. The obligation of the Purchasers to purchase
the Purchased Shares at Closing and of the Company to sell the Purchased Shares
at Closing, is subject to the fulfillment, or the waiver by the applicable
party, of each of the following conditions on or before the Closing:
(a) The Company will deliver to each Purchaser one or more
stock certificates representing the Purchased Shares to be sold to and purchased
by such Purchaser pursuant to this Agreement, free and clear of all Liens, each
of which shall be registered in such Purchaser's name (or if requested by such
Purchaser, its nominee or designee) in the Company's records.
(b) Each Purchaser will pay for the Purchased Shares set forth
opposite such Purchaser's name in the attached Purchaser Schedule by payment to
the Company of the aggregate purchase price therefor by certified or bank check
or wire transfer.
(c) The Company will deliver to the Purchasers each of the
following documents:
(1) Wire transfer instructions in respect of the
purchase price for the Purchased Shares being paid by each of the Purchasers
pursuant to the terms hereof.
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(2) The Registration Rights Agreement, duly executed
by the Company and each of its stockholders who is to have any registration
rights with respect to the Company's securities.
(3) (i) With respect to the Company, (A) a copy of
its charter documents, certified as of a date not more than five business days
before the Closing Date, by the Secretary of State of the State of Delaware, (B)
a certificate of the Secretary of State of the State of Delaware, dated as of a
date not more than five business days before the Closing Date, with respect to
the legal existence, charter documents on file with the Secretary of State, and
good standing of the Company in the State of Delaware, and (C) a certificate of
the Secretary of State or equivalent official of each other jurisdiction in
which the Company's activities or ownership or leasing of property require it to
qualify to do business as a foreign corporation, dated not more than five
business days before the Closing Date, with respect to such qualification and
the good standing of the Company in such jurisdiction.
(ii) With respect to the Company, evidence that the
Certificate of Designation has been duly filed with the Secretary of State of
the State of Delaware on or before the Closing Date.
(4) With respect to the Company, a certificate of its
secretary, dated the Closing Date, certifying (A) the absence of any amendments
to its charter documents (or proceedings therefor) since the date of the
certificate referred to in Section 1.5(d)(3)(i)(A) above, (B) an attached copy
of its by-laws, (C) an attached copy of the resolutions of its board of
directors and stockholders, respectively and as applicable, with respect to the
transactions hereby contemplated or otherwise to be effected at the Closing, (D)
the incumbency of its officers and directors, and (E) satisfaction of closing
conditions, compliance with covenants set forth herein, and accuracy of
representations and warranties.
(5) Evidence satisfactory to the Purchasers that (i)
all of the Company's employees have executed and delivered to the Company
agreements, in form and substance satisfactory to the Purchasers, with respect
to the confidentiality of the Company's proprietary and confidential information
and the assignment to the Company of any and all rights each employee might have
or acquire with respect to technology, inventions, developments, etc., developed
in connection with their employment with the Company; and (ii) each of the
Company's Chief Executive Officer and Chief Operating Officer has executed and
delivered to the Company a confidentiality, non-disclosure, inventions
assignment and non-competition and non-solicitation agreement, in form and
substance satisfactory to the Purchasers.
(6) The written legal opinion of Klehr, Harrison,
Harvey, Branzburg & Ellers, addressed to the Purchasers, and substantially in
the form of the attached Exhibit C.
(7) A Closing Warrant.
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(d) The Purchasers will deliver to the Company the Shareholder
Rights Agreement and the Registration Rights Agreement, duly executed by each of
the Purchasers.
(e) Evidence satisfactory to the Purchasers that the number
equal to 80% of the average of the closing market prices of the Common Stock on
each of the three (3) trading days prior to the occurrence of the Closing Date
is not less than $6.00 per share (subject to equitable adjustment on the
occurrence of an Adjustment Event if the Closing Date shall occur after the date
of this Agreement).
2. Representations and Warranties of the Company.
In order to induce the Purchasers to enter into this Agreement and to
purchase the Acquired Securities, the Company hereby represents and warrants to
each of the Purchasers, as follows:
2.1. Organization and Authority. The Company is a corporation duly
organized, validly existing, and in good standing under the laws of the State of
Delaware. The Company has all requisite corporate power and authority to own or
lease and operate its properties and to carry on its business as now conducted
and as proposed to be conducted.
2.2. Corporate Power; Binding Effect; Non-Contravention. The Company
has all requisite power and full legal right to execute and deliver this
Agreement and the Ancillary Agreements, and to perform all of its obligations
hereunder and thereunder in accordance with the respective terms hereof and
thereof. This Agreement and the Ancillary Agreements and the transactions
contemplated hereby and thereby have been duly approved and authorized by all
requisite corporate action on the part of the Company, and this Agreement has
been duly executed and delivered by the Company and constitutes, and each of the
Ancillary Agreements, when executed and delivered by the Company at the Closing,
will constitute, a legal, valid, and binding obligation of the Company,
enforceable against it in accordance with its respective terms. The execution,
delivery, and performance by the Company of this Agreement and the Ancillary
Agreements in accordance with their respective terms, and the consummation by
the Company of the transactions contemplated hereby or thereby, will not result
(with or without the giving of notice or the lapse of time or both) in any
conflict, violation, breach, or default, or the creation of any Lien, or the
termination, acceleration, vesting, or modification of any right or obligation,
under or in respect of (x) the charter documents or by-laws of the Company, (y)
any judgment, decree, order, statute, rule, or regulation binding on or
applicable to the Company, or (z) any agreement or instrument to which the
Company is a party or by which it or any of its assets is or are bound.
2.3. Foreign Qualification. The Company is duly qualified to do
business and in good standing as a foreign corporation in the Commonwealth of
Pennsylvania and the State of California, which jurisdiction is the only
jurisdiction in which the character of the properties owned or leased by it or
the nature of its activities makes such qualification necessary, other
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<PAGE>
than any jurisdictions in which the failure so to qualify or be in good standing
would not, either in any case or in the aggregate, have a Material Adverse
Effect.
2.4. Subsidiaries. The Company does not have any Subsidiaries nor does
it own any legal and/or beneficial interests in any other Person other than as
set forth on Schedule 2.4 hereto.
2.5. Capitalization.
(a) Immediately prior to the Closing, not giving effect to the
sale and purchase of the Purchased Shares or any of the other Acquired
Securities provided for in this Agreement, the authorized and the outstanding
capital stock of the Company (on a fully diluted basis including all Derivative
Securities) will be as set forth in Schedule 2.5(a), and all such outstanding
shares of capital stock will be owned (of record and beneficially) by the
persons and in the amounts there indicated. All such outstanding shares of
capital stock will be duly authorized, validly issued, fully paid, and
nonassessable, and will have been issued free and clear of Liens. No adjustment
has previously been made (or should have been made) nor will any adjustment be
required to be made as a result of the Company's issuance of the Purchased
Shares or any of the other Acquired Securities to the rate at which shares of
Series A Preferred Stock, the Series B Preferred Stock and any other capital
stock or Derivative Securities of the Company are convertible into or
exercisable for shares of Common Stock (by reason of any "anti-dilution"
provisions or agreements or otherwise).
(b) Except as set forth in Schedule 2.5(b), the Company does
not have, is not bound by, and has no obligation to grant or enter into, any (i)
outstanding subscriptions, options, warrants, calls, commitments, or agreements
of any character calling for it to issue, deliver, or sell, or cause to be
issued, delivered, or sold, any shares of its capital stock, any membership
interests or any other equity security, or any securities described in the
following clause, or (ii) securities convertible into, exchangeable for, or
representing the right to subscribe for, purchase, or otherwise acquire any
shares of its capital stock, any membership interests or any other equity
security. Except as set forth in Schedule 2.5(b), no adjustment has previously
been made (or should have been made) nor will any adjustment be required to be
made as a result of the Company's issuance of the Purchased Shares or any of the
other Acquired Securities to the number of shares of capital stock or Derivative
Securities of the Company into which any subscriptions, options, warrants,
calls, commitments or agreements are convertible (by reason of any
"anti-dilution" provisions or agreements or otherwise).
(c) Except as set forth in Schedule 2.5(c), the Company (i)
has no outstanding obligations, contractual or otherwise, to repurchase, redeem,
or otherwise acquire any shares of capital stock or other equity securities of
the Company, (ii) is not a party to or bound by, and has no knowledge of, any
agreement or instrument relating to the voting of any of its securities, and
(iii) is not a party to or bound by any agreement or instrument under which any
person has the right to require it to effect, or to include any securities held
by such person in, any registration
5
<PAGE>
under the Securities Act. There are no other agreements, contracts, instruments
or documents, except as set forth in Schedule 2.5(c), which govern or affect in
any way the rights of the holders of securities, including any class of capital
stock, of the Company.
(d) The Company has reserved, solely for the purpose of
issuance upon conversion of shares of Series C Preferred and upon exercise of
the Closing Warrants, a number of shares of Common Stock sufficient to cover the
conversion of all such shares of Series C Preferred and exercise of the Closing
Warrants. The Company has reserved, solely for the purpose of issuance of any
Dividend Shares as may be issued, a sufficient number of shares of Series C
Preferred to cover any such issuance.
2.6. Lawful Issuance. All of the outstanding shares of capital stock,
membership interests, and other securities of the Company were offered, issued,
and sold, and the Purchased Shares and other Acquired Securities have been
offered and at the Closing will be issued and sold, in compliance with (i) all
applicable preemptive or similar rights of all persons, and (ii) assuming the
truthfulness and accuracy of the representations made by the Purchasers in
Section 3 hereof, all applicable provisions of the Securities Act and the rules
and regulations thereunder, and all applicable state securities laws and the
rules and regulations thereunder. No person has any valid right to rescind any
purchase of any shares of capital stock or other securities of the Company.
2.7 Valid Issuance of Purchased Shares. The Purchased Shares and other
Acquired Securities being issued and sold by the Company hereunder shall, upon
issuance pursuant to the terms hereof, be duly authorized and validly issued,
fully paid and non-assessable and free and clear of any Lien, security interest,
option or other charge or encumbrance. The Common Stock issuable upon the
conversion of the Purchased Shares and exercise of the Closing Warrants, as the
case may be, shall be duly authorized and validly issued, fully paid and
non-assessable and free and clear of any Lien, security interest, option or
other charge or encumbrance. The issuance of the Purchased Shares and other
Acquired Securities are not and will not be subject to any pre-emptive rights or
similar rights with respect to such Purchased Shares and other Acquired
Securities.
2.8. Financial Statements.
The Company has delivered to the Purchasers copies of (i) the unaudited
balance sheet of the Company as of December 31, 1999, and the related statements
of profit and loss and changes in stockholders' equity for the twelve month
period ended on that date, and (ii) the unaudited balance sheet of the Company
as of December 31, 1999 (the "Most Recent Balance Sheet"), and the related
unaudited statements of profit and loss for the period commencing January 1,
2000 and ended on January 31, 2000. Each of such financial statements was
prepared in accordance with GAAP applied on a basis consistent with prior
periods, subject, in the case of the unaudited financial statements referred to
above to the absence of footnotes, and subject to adjustments consisting of
normal year-end accruals, the effect of which absence of footnotes and year-end
accruals, both individually and in the aggregate, is not in any case material.
Each
6
<PAGE>
of such balance sheets is true and correct in all material respects and fairly
presents the financial condition of the Company as of its date; and each of such
statements of profit and loss fairly presents the results of operations of the
Company for the period covered thereby.
2.9. Absence of Certain Changes. Since December 31, 1999, there has not
been:
(a) any (i) acquisition (by purchase, lease as lessee, license
as licensee, or otherwise) or disposition (by sale, lease as lessor, license as
licensor, or otherwise) by the Company of any material properties or assets, or
(ii) other transaction by, or any agreement or commitment on the part of, the
Company, other than those in the ordinary course of business that have not
caused and will not cause, either in any case or in the aggregate, a Material
Adverse Effect, except as set forth on Schedule 2.9(a);
(b) any material change in the condition (financial or
otherwise), properties, assets, liabilities, investments, revenues, expenses,
income, operations, business, or prospects of the Company, or in any of its
relationships with any suppliers, customers, or other third parties with whom it
has financial, commercial, or other business relationships, other than changes
in the ordinary course of business that have not caused and are not reasonably
be expected to cause, either in any case or in the aggregate, a Material Adverse
Effect;
(c) any material transaction or material change in
compensation by the Company with any of its directors, officers, or key
employees, other than the payment of compensation and reimbursement of
reasonable employee travel and other business expenses in accordance with
existing employment arrangements and usual past practices, except as set forth
in Schedule 2.9(c);
(d) any damage, destruction, or loss, whether or not covered
by insurance, that, either in any case or in the aggregate, has caused, or could
reasonably be expected to cause, a Material Adverse Effect;
(e) any declaration, setting aside, or payment of any dividend
or any other distribution (in cash, stock, and/or property or otherwise) in
respect of any shares of the capital stock or other securities of the Company;
(f) any issuance of any shares of the capital stock or other
securities of the Company, or any direct or indirect redemption, purchase, or
other acquisition by the Company of any shares of its capital stock or other
securities, except as set forth on Schedule 2.9(f);
(g) any change in the officers, directors, key employees, or
key independent contractors of the Company, except as set forth in Schedule
2.9(g);
(h) any labor trouble or claim of unfair labor practices
involving the Company, any increase in the compensation or other benefits
payable or to become payable by the
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<PAGE>
Company to any of its Affiliates, or to any of its officers, employees, or
independent contractors, or any bonus payments or arrangements made to or with
any of such officers, employees, or independent contractors, except as set forth
in Schedule 2.9(h);
(i) any forgiveness or cancellation of any debt or claim by
the Company or any waiver by the Company of any right of material value, other
than compromises of accounts receivable in the ordinary course of business;
(j) any incurrence or any payment, discharge, or satisfaction
by the Company of any material Indebtedness or any material obligations or
material liabilities, whether absolute, accrued, contingent, or otherwise
(including without limitation liabilities, as guarantor or otherwise, with
respect to obligations of others), except as described in Schedule 2.9(j);
(k) any incurrence, discharge, or satisfaction of any Lien (i)
by the Company, or (ii) on any of the capital stock, other securities,
properties, or assets owned or leased by the Company;
(l) any material change in the financial or tax accounting
principles, practices, or methods of the Company; or
(m) any agreement, understanding, or commitment by or on
behalf of the Company, whether in writing or otherwise, to do or permit any of
the things referred to in this Section 2.9.
2.10. Properties, Leases, Etc.
(a) Title to Properties; Condition of Personal Properties. The
Company has (i) good and marketable title to all of the assets and properties
owned by it, including without limitation all assets and properties reflected in
the Most Recent Balance Sheet (in each case excluding any assets and properties
sold or otherwise disposed of to persons other than Affiliates in the ordinary
course of business since the date of such balance sheet), free and clear of all
Liens, (ii) valid title to the lessee interest in all assets and properties
leased by them as lessee, free and clear of all Liens, and (iii) full right to
hold and use all of its assets and properties used in or necessary to its
businesses and operations, in each case all free and clear of all Liens, and in
each case subject to applicable laws and the terms of any lease under which the
Company leases such assets or properties as lessee; except where the failure to
have the title or right set forth in clauses (i) through (iii) would not have a
Material Adverse Effect. All such assets and properties are in good condition
and repair, reasonable wear and tear excepted, and are adequate and sufficient
to carry on the businesses of the Company as presently conducted and as proposed
to be conducted.
(b) No Owned Real Properties. The Company does not own any
real property or any interest (other than a leasehold interest) in any real
property.
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(c) Leased Properties. Schedule 2.10(c) sets forth a complete
and correct description of all leases of real or personal property under which
the Company is lessor or lessee. Complete and correct copies of all such leases
and all amendments, supplements, and modifications thereto, other than any
personal property lease with an annual rent of less than $10,000 and total
remaining rental payments of less than $20,000, have been delivered to the
Purchasers. Each such lease is valid and subsisting and no event or condition
exists that constitutes, or after notice or lapse of time or both would
constitute, a default thereunder by the Company or, to the Company's knowledge,
any other party thereto. The Company's leasehold interests are subject to no
Lien, and the Company is in quiet possession of the properties covered by such
leases. The Company has established adequate reserves which are reflected in the
Most Recent Balance Sheet, for the anticipated costs of any property renovation
and repairs to its leased premises required to be performed or paid for by it
upon termination of any of its leases of real property.
2.11. Indebtedness. Except to the extent reflected or reserved in the
Most Recent Balance Sheet, and except as set forth on Schedule 2.11, the Company
has no Indebtedness in excess of $25,000 outstanding. The Company is not in
default with respect to any outstanding Indebtedness or any instrument or
agreement relating thereto, and no such Indebtedness or any instrument or
agreement relating thereto purports to limit the issuance of any securities by
the Company or the operation of its business. Complete and correct copies of all
instruments and agreements (including all amendments, supplements, waivers, and
consents) relating to any Indebtedness of the Company have been furnished to the
Purchasers.
2.12. Absence of Undisclosed Liabilities. Except to the extent
reflected or reserved in the Most Recent Balance Sheet, and except as set forth
on Schedule 2.12, or incurred after the date of such balance sheet in the
ordinary course of business (other than in connection with any transactions with
Affiliates), or incurred in connection with the transactions contemplated by
this Agreement and described in Schedule 2.9(j), the Company does not have any
material liabilities or obligations of any nature, whether accrued, absolute,
contingent, or otherwise (including without limitation liabilities as guarantor
or otherwise with respect to obligations of others) and whether due or to become
due.
2.13. Tax Matters.
(a) Filing of Tax Returns and Payment of Taxes. The Company
has filed all Tax Returns required to be filed by it, each such Tax Return has
been prepared in compliance with all applicable laws and regulations, and all
such Tax Returns are true and accurate in all material respects. All Taxes due
and payable by the Company have been paid, and the Company will not be liable
for any additional Taxes in respect of any taxable period ending on or before
the Closing Date in an amount that exceeds the corresponding reserve therefor,
if any, reflected in the accounting records of the Company as of the Closing
Date. No claim has ever been made by a taxing authority in a jurisdiction where
the Company does not pay Tax or file Tax Returns
9
<PAGE>
that the Company is or may be subject to Taxes assessed by such jurisdiction.
There are no Liens for Taxes (other than current Taxes not yet due and payable)
on the assets of the Company.
(b) Audit History, Extensions, Etc. There is no action, suit,
taxing authority proceeding, or audit with respect to any Tax now in progress,
pending, or to the best of the Company's knowledge, threatened, against or with
respect to the Company. No deficiency or proposed adjustment in respect of Taxes
that has not been settled or otherwise resolved has been asserted or assessed by
any taxing authority against the Company. The Company has not consented to
extend the time in which any Tax may be assessed or collected by any taxing
authority. The Company has not requested or been granted an extension of the
time for filing any Tax Return to a date on or after the Closing Date.
(c) Membership in Affiliated Groups, Etc. The Company has
never been a member of any Affiliated Group, or filed or been included in a
combined, consolidated, or unitary Tax Return. The Company is not a party to or
bound by any tax sharing or allocation agreement or has any current or potential
contractual obligation to indemnify any other person with respect to Taxes.
(d) Withholding Taxes. The Company has withheld and paid all
Taxes required to have been withheld and paid by it in connection with amounts
paid or owing to any employee, creditor, independent contractor, or other
Person.
2.14. Litigation, Etc. Except as set forth in Schedule 2.14, no
litigation, arbitration, action, suit, claim, demand, proceeding or
investigation (whether conducted by or before any judicial or regulatory body,
arbitrator, commission or other person) is pending or, to the Company's
knowledge, threatened, against the Company, nor is there any basis therefor
known to the Company, where an adverse result would have a Material Adverse
Effect.
2.15. Safety, Zoning, and Environmental Matters.
(a) The Company is not nor has it been in violation in any
material respect of any applicable statute, law, or regulation relating to
occupational health or safety, and no charge, complaint, action, suit,
proceeding, hearing, investigation, claim, demand, or notice has been filed or
commenced against or received by it alleging any failure by it to comply with
any such statute, law, or regulation, nor is there any basis therefor known to
the Company.
(b) To the best of the Company's knowledge, none of the real
properties presently owned, leased, or operated by the Company, nor any
leasehold improvements thereto, nor any business conducted by the Company
thereon, are in violation of any applicable land use or zoning requirements,
including without limitation any building line or use or occupancy restriction,
any public utility or other easement, any limitation, condition, or covenant of
record, or any zoning or building law, code, or ordinance, where such violation
would have a Material Adverse Effect.
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(c) The Company is not presently, and has never been, in
violation of any judgment, decree, order, statute, law, permit, license, rule,
or regulation pertaining to environmental matters, including without limitation
those arising under any Environmental Laws, nor has it received any written
notice alleging any such violation.
(d) The Company has not received any notice or request for
information from any third party, including without limitation any federal,
state, or local governmental authority, (i) that it has been identified by the
EPA or any state environmental regulatory authority as a potentially responsible
party under CERCLA with respect to a site listed on the National Priorities
List, 40 C.F.R. Part 300 Appendix B, or under any equivalent state law; (ii)
that any Hazardous Substances that it has generated, transported, or disposed of
have been found at any site at which a federal, state, or local agency or other
third party has conducted or has ordered it to conduct a remedial investigation,
removal or other response action pursuant to any Environmental Law; or (iii)
that it is or will or may be a named party to any claim, action, cause of
action, complaint, or legal or administrative proceeding arising out of any
third party's incurrence of Damages in connection with the release (within the
meaning of CERCLA) of any Hazardous Substances or any other environmental
matters. No circumstances exist that could reasonably be expected to give rise
to any such notice or request for information or to any Damages.
2.16. Labor Relations. The Company is in compliance in all material
respects with all applicable federal and state laws respecting employment and
employment practices, terms and conditions of employment, wages and hours, and
nondiscrimination in employment, and is not engaged in any unfair labor
practice. There is no charge pending or, to the best of the Company's knowledge,
threatened, against or with respect to the Company before any court or agency
and alleging unlawful discrimination in employment practices, and there is no
charge of or proceeding with regard to any unfair labor practice against the
Company pending before the National Labor Relations Board. There is no labor
strike, dispute, slow-down, or work stoppage pending or, to the Company's
knowledge, threatened against or involving the Company. None of the employees of
the Company is covered by any collective bargaining agreement, and no such
collective bargaining agreement is currently being negotiated. No one has
petitioned and, to the Company's knowledge, no one is now petitioning, for union
representation of any employees of the Company. The Company has not experienced
any work stoppage or other material labor difficulty.
2.17. Material Contracts. Except for the contracts, agreements and
other arrangements listed in Schedule 2.17 and contracts, agreements, or other
arrangements that have been fully performed and with respect to which the
Company has no further obligations or liabilities, the Company is not a party to
or otherwise bound by (i) any agreement, instrument, or commitment that may
materially affect its ability to consummate the transactions contemplated hereby
or by the Ancillary Agreements, or (ii) any other material agreement,
instrument, or commitment; including without limitation any:
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(a) agreement for the purchase, sale, lease, or license by or
from it of services, products, or assets, requiring total payments by or to it
in excess of $25,000 in any instance, or entered into other than in the ordinary
course of business;
(b) agreement requiring it to purchase all or substantially
all of its requirements for a particular product or service from a particular
supplier or suppliers, or requiring it to supply all of a particular customer's
or customers' requirements for a certain service or product;
(c) agreement or other commitment pursuant to which it has
agreed to indemnify or hold harmless any other person;
(d) (i) employment agreement, (ii) consulting agreement, or
(iii) agreement providing for severance payments or other additional rights or
benefits (whether or not optional) in the event of the sale or other change in
control of it;
(e) agreement with any current or former Affiliate,
stockholder, officer, director, employee, or consultant of the Company, or with
any person in which any such Affiliate has an interest;
(f) joint venture, partnership or teaming agreement;
(g) agreement with any domestic or foreign government or
agency or executive office thereof or any subcontract between it and any third
party relating to a contract between such third party and any domestic or
foreign government or agency or executive office thereof;
(h) agreement imposing non-competition or exclusive dealing
obligations on it;
(i) agreement with respect to the confidentiality of the
Company's Proprietary Information (as described in Section 2.20 hereof), and the
assignment to the Company of any and all rights employees of the Company might
have to acquire with respect to technology, inventions, developments, etc.,
developed in connection with this employment with the Company; and
(j) agreement the performance of which is reasonably likely to
result in a loss to it.
The Company has delivered or caused to be delivered to the Purchasers
correct and complete copies (or written summaries of the material terms of oral
agreements or understandings) of each agreement, instrument, and commitment
listed in Schedule 2.17, each as amended to date. Each such agreement,
instrument, and commitment is a valid, binding and enforceable obligation of the
Company and, to the Company's knowledge, of the other party or
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parties thereto, and is in full force and effect. The Company is not nor, to the
Company's knowledge, is any other party thereto, (nor is the Company considered
by any other party thereto to be) in breach of or noncompliance with any term of
any such agreement, instrument, or commitment (nor is there any basis for any of
the foregoing), except for any breaches or noncompliances that singly or in the
aggregate would not have a Material Adverse Effect. No claim, change order,
request for equitable adjustment, or request for contract price or schedule
adjustment, between the Company and any supplier or customer, relating to any
agreement, instrument, or commitment listed in Schedule 2.17 is pending or, to
the Company's knowledge, threatened, nor is there any basis for any of the
foregoing. No agreement, instrument, or commitment listed in Schedule 2.17
includes or incorporates any provision, the effect of which may be to enlarge or
accelerate any of the obligations of the Company or to give additional rights to
any other party thereto, or will terminate, lapse, or in any other way be
affected, by reason of the transactions contemplated by this Agreement.
2.18. Employee Benefit Plans.
(a) Identification of Plans. Except for the arrangements set
forth in Schedule 2.18, the Company does not now maintain or contribute to any
pension, profit-sharing, deferred compensation, bonus, stock option, share
appreciation right, severance, group or individual health, dental, medical, life
insurance, survivor benefit, or similar plan, policy or arrangement, whether
formal or informal, for the benefit of any director, officer, consultant, or
employee of any of them, whether active or terminated; nor has it ever
maintained or contributed to any such plan, policy, or arrangement that was
subject to ERISA. Each of the arrangements set forth in Schedule 2.18 is herein
referred to as an "Employee Benefit Plan."
(b) Compliance with Terms and Law. Each Employee Benefit Plan
is and has been maintained and operated in compliance in all material respects
with the terms of such plan and with the requirements prescribed (whether as a
matter of substantive law or as necessary to secure favorable tax treatment) by
any and all statutes, governmental, or court orders, or governmental rules or
regulations in effect from time to time, including but not limited to ERISA and
the Code, and applicable to such plan. Each Employee Benefit Plan that is
intended to qualify under Section 401(a) of the Code is so qualified.
(c) Absence of Certain Events and Arrangements.
(1) There is no pending or, to the Company's
knowledge, threatened, legal action, proceeding, or investigation, other than
routine claims for benefits, concerning any Employee Benefit Plan, or any
fiduciary or service provider thereof and there is no basis for any such legal
action or proceeding.
(2) No Employee Benefit Plan, nor any party in
interest in respect thereof has engaged in a prohibited transaction that could
subject the Company, directly or indirectly, to liability under Section 409 or
502(i) of ERISA or Section 4975 of the Code.
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(3) No communication, report, or disclosure has been
made that, at the time made, did not accurately reflect the terms and operations
of any Employee Benefit Plan.
(4) No Employee Benefit Plan provides welfare
benefits subsequent to termination of employment to employees or their
beneficiaries (except to the extent required by applicable state insurance laws
and Title I, Part 6 of ERISA).
(5) The Company has not undertaken to maintain any
Employee Benefit Plan for any specific period of time and each such plan is
terminable at the sole discretion of the Company, subject only to such
constraints as may imposed by applicable law.
(6) No Employee Benefit Plan is maintained pursuant
to a collective bargaining agreement or is or has been subject to the minimum
funding requirements of Section 302 of ERISA or Section 412 of the Code.
(d) Funding of Certain Plans. With respect to each Employee
Benefit Plan for which a separate fund of assets is or is required to be
maintained, full payment has been made of all amounts that, under the terms of
each such plan, it is required to have paid as contributions to that plan as of
the end of such plan's most recently ended year.
2.19. Potential Conflicts of Interest. Except as set forth on Schedule
2.19, neither the Company nor, to the best knowledge of the Company, any of its
officers, directors, or employees, (i) owns, directly or indirectly, any
interest (excepting passive holdings for investment purposes of not more than 1%
of the securities of any publicly held and traded company) in, or is an officer,
director, employee, or consultant of, any person that is a competitor, lessor,
lessee, customer, or supplier of the Company; (ii) owns, directly or indirectly,
any interest in any tangible or intangible property used in or necessary to the
business of the Company; (iii) has any cause of action or other claim whatsoever
against the Company, or owes any amount to the Company, except for claims in the
ordinary course of business, such as for accrued vacation pay, accrued benefits
under employee benefit plans, and similar matters and agreements or under any
employment agreements.
2.20. Proprietary Information.
(a) Schedule 2.20 lists all patents, patent applications,
trademarks, trade names, service marks, logos, copyrights, and licenses used in
or necessary to the Company's business as now being conducted or as proposed to
be conducted (collectively, and together with any technology, know-how, trade
secrets, processes, formulas, and techniques used in or necessary to the
Company's business, "Proprietary Information"). The Company owns, or is licensed
or otherwise has the full and unrestricted exclusive right to use, without the
payment of royalties or other further consideration, all Proprietary
Information, and no other intellectual property rights, privileges, licenses,
contracts, or other agreements, instruments, or evidences of interests are
necessary to or used in the conduct of its business.
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(b) In any instance where the Company's rights to Proprietary
Information arise under a license or similar agreement (other than for software
programs that have not been customized for its use), this is indicated in
Schedule 2.20 and such rights are, to the best knowledge of the Company,
licensed exclusively to it except as indicated in Schedule 2.20. No other person
has an interest in or right or license to use any of the Proprietary
Information. To the best of the Company's knowledge, none of the Proprietary
Information is being infringed by others, or is subject to any outstanding
order, decree, judgment, or stipulation. No litigation (or other proceedings in
or before any court or other governmental, adjudicatory, arbitral, or
administrative body) relating to the Proprietary Information is pending or, to
the Company's knowledge, threatened, nor, to the best of the Company's
knowledge, is there any basis for any such litigation or proceeding. The Company
maintains adequate and sufficient security measures for the preservation of the
secrecy and proprietary nature of the Proprietary Information.
(c) (i) Neither the Company nor any of its employees has
infringed or made unlawful use of, or is, to the Company's knowledge, infringing
or making unlawful use of, any proprietary or confidential information of any
Person, including without limitation any former employer of any past or present
employee or consultant of the Company; and (ii) the activities of the Company's
employees in connection with their employment do not violate any agreements or
arrangements that any such employees or consultants have with any former
employer or any other Person. No litigation (or other proceedings in or before
any court or other governmental, adjudicatory, arbitral, or administrative body)
charging the Company with infringement or unlawful use of any patent, trademark,
copyright, or other proprietary right is pending or, to the Company's knowledge,
threatened; nor is there any basis for any such litigation or proceeding.
(d) No officer, director, employee, or consultant of the
Company is presently obligated under or bound by any agreement or instrument, or
any judgment, decree, or order of any court of administrative agency, that (i)
conflicts or may conflict with his or her agreements and obligations to use his
or her best efforts to promote the interests of the Company, (ii) conflicts or
may conflict with the business or operations of the Company as presently
conducted or as proposed to be conducted, or (iii) restricts or may restrict the
use or disclosure of any information that may be useful to the Company.
2.21. Insurance. Schedule 2.21 lists the policies of theft, fire,
liability, worker's compensation, life, property and casualty, directors' and
officers', medical malpractice, and other insurance owned or held by the Company
and the basis on which such policies provide coverage (i.e., an incurrence or
claims-made basis). Such policies of insurance are maintained with, to the best
knowledge of the Company, financially sound and reputable insurance companies,
funds, or underwriters, are of the kinds and cover such risks, and are in such
amounts and with such deductibles and exclusions, as are consistent with prudent
business practice. All such policies are, and at all times since the respective
dates set forth in Schedule 2.21, have been, in full force and effect, are
sufficient for compliance in all respects by the Company with all requirements
of law and of all agreements to which it is a party, and provide that they will
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remain in full force and effect through the respective dates set forth in
Schedule 2.21, and will not terminate or lapse or otherwise be affected in any
way by reason of the transactions contemplated hereby.
2.22. Governmental and Other Third-Party Consents. Except for filings
or other notices required by applicable federal and state securities laws (which
will be completed by the Company within the applicable periods), no consent,
approval, or authorization of, or registration, designation, declaration, or
filing with, any governmental authority, federal or other, or any other person
is required on the part of the Company in connection with its execution,
delivery, or performance of this Agreement and the Ancillary Agreements and its
consummation of the transactions contemplated hereby and thereby, or the
continued conduct of the present business of the Company after the Closing Date.
2.23. Employment of Officers, Employees. The Company has delivered to
the Purchasers (a) a list setting forth the name and current annual salary and
other compensation payable by the Company to each of its employees, which list
is true, accurate and correct as of the date of this Agreement, and (b) a list
setting forth the names of positions and/or persons the Company intends to fill
and/or hire within thirty (30) days of the Closing.
2.24. Brokers. Except as set forth on Schedule 2.24 hereto, no finder,
broker, agent, or other intermediary has acted for or on behalf of the Company
in connection with the negotiation or consummation of the transactions
contemplated hereby, and no fee will be payable by the Company to any such
person in connection with such transactions.
2.25. Compliance with Other Instruments, Laws, Etc. The Company has
complied with, and is in compliance with, (i) all laws, statutes, governmental
regulations, judicial or administrative tribunal orders, judgments, writs,
injunctions, decrees, and similar commands applicable to it and its business,
and all unwaived terms and provisions of all agreements, instruments, and
commitments to which it is a party or to which it or any of its assets or
properties is subject, except for any non-compliances that, both individually
and in the aggregate, have not had and could not reasonably be expected to have
a Material Adverse Effect, and (ii) its charter documents and by-laws, each as
amended to date. The Company has not committed, been charged with, or, to the
Company's knowledge, been under investigation with respect to, nor to the best
of the Company's knowledge does there exist, any violation by the Company of any
provision of any federal, state, or local law or administrative regulation,
except for any violations that, both singly or in the aggregate, have not had
and could not reasonably be expected to have a Material Adverse Effect. The
Company has and maintains, and Schedule 2.25 sets forth a complete and correct
list of, all such licenses, permits, and other authorizations from all such
governmental authorities as are legally required for the conduct of its business
or in connection with the ownership or use of its properties, except for any
such licenses, permits, and other authorizations, the failure to obtain or
maintain which in effect, both singly or in the aggregate, has not had and could
not reasonably be expected to have a Material Adverse Effect, and all of which
(except as specifically described in Schedule 2.25) are in full force and effect
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in all material respects, and true and complete copies of all of which have been
delivered to the Purchasers.
2.26. Compliance with Securities Laws. Assuming the accuracy of the
representations of each Purchaser contained in Section 3 hereof, the offer,
issuance, and delivery of the Purchased Shares and other Acquired Securities as
contemplated by this Agreement are exempt from the registration requirements of
the Securities Act, and are exempt from registration or qualification under
applicable states' securities laws. Neither the Company nor anyone acting on its
behalf will hereafter offer to sell, solicit offers to buy, or sell any
securities of the Company so as to subject the offer, issuance, and sale of the
Purchased Shares and other Acquired Securities to the registration requirements
of the Securities Act.
2.27. Real Property Holding Corporation. The Company hereby represents
that it is not a "United States real property holding corporation" within the
meaning of Section 897 of the Code, as amended, and Treasury
Regulation ss.1.897-2.
2.28. Foreign Corrupt Practices Act. The Company has not taken any
action which would cause it to be in violation of the Foreign Corrupt Practices
Act of 1977, as amended, or any rules or regulations thereunder. To the
Company's knowledge, there is not now, and there has never been, any employment
by the Company of, or beneficial ownership in the Company by, any governmental
or political official in any country in the world.
2.29. Disclosure. No representation or warranty by the Company in this
Agreement, in any schedule to this Agreement, or in the Ancillary Agreements,
contains or will contain any untrue statement of a material fact or omits or
will omit to state a material fact required to be stated herein or therein or
necessary to make the statements contained herein or therein not false or
misleading. There is no fact or circumstance relating specifically to the
current business operations or condition of the Company that could reasonably be
expected to result in a Material Adverse Effect that is not disclosed in a
Schedule attached hereto.
3. Representations and Warranties of the Purchasers.
Each Purchaser severally represents and warrants, as to himself,
herself, or itself only, as follows: Such Purchaser is an "accredited investor"
as defined in Rule 501(a) promulgated under the Securities Act and has such
knowledge and experience in financial and business matters that he, she, or it
is capable of evaluating the merits and risks of the transactions contemplated
under this Agreement. Such Purchaser's financial condition is such that he, she,
or it is able to bear all economic risks of investment in the Purchased Shares
and other Acquired Securities, including a complete loss of his, her, or its
investments therein. The Company has provided such Purchaser with adequate
access to financial and other information concerning the Company as requested
and such Purchaser has had the opportunity to ask questions of and receive
answers from the Company concerning the transactions contemplated by this
Agreement and to obtain therefrom any additional information necessary to make
an informed decision
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regarding an investment in the Company. Such Purchaser is acquiring the
Purchased Shares and other Acquired Securities solely for investment purposes,
with no present intention of distributing or reselling any of the Purchased
Shares and other Acquired Securities or any interest therein. Such Purchaser is
aware that the Purchased Shares and other Acquired Securities will not be
registered under the Securities Act (other than as provided in Section 5.20,
below), and that neither the Purchased Shares and other Acquired Securities nor
any interest therein may be sold, pledged, or otherwise transferred unless the
Purchased Shares or other Acquired Securities are registered under the
Securities Act or qualify for an exemption under the Securities Act. Such
Purchaser, if not an individual, represents that this Agreement has been duly
authorized by all necessary corporate or partnership action on its part. This
Agreement has been validly executed by such Purchaser, such Purchaser has all
necessary corporate, partnership or other similar power and authority to enter
into this Agreement and this Agreement is such Purchaser's legal, valid, and
binding obligation, enforceable against such Purchaser in accordance with its
terms. The execution, delivery and performance of this Agreement by such
Purchaser, if not an individual, will not conflict with or violate the
partnership agreement or other organizational or governing documents of such
Purchaser. The principal place of business of each Purchaser is as set forth on
the signature pages hereto below or besides such Purchaser's name.
4. Intentionally Omitted.
5. Covenants.
The Company covenants that for so long as any Purchased Shares or other
Acquired Securities are outstanding, the Company will comply and cause each of
its Subsidiaries, if any, to comply with each of the following covenants. Except
as required by applicable law, each Purchaser and each person representing or
acting on behalf of such Purchaser will hold in confidence all confidential
information of the Company provided or made available to such Purchaser or such
person pursuant to this Section 5 until such time as such information has been
publicly disclosed other than as a consequence of any breach by any Purchaser or
any such person of its confidentiality obligations hereunder.
5.1. Intentionally Omitted.
5.2. Investments. The Company will not have outstanding, or acquire or
commit itself to acquire or hold, any investment except (a) investments in
corporations, limited liability companies, partnerships or other entities made
in the ordinary course of the Company's business (which as of the date hereof is
as described in the Company's Registration Statement on Form S-1 as declared
effective by the Securities and Exchange Commission on February 15, 2000 (SEC
File No. 333-88629), (b) investments in marketable direct obligations issued or
guaranteed by the United States of America that mature within one year from the
date of acquisition thereof or which are subject to a repurchase agreement,
exercisable within ninety (90) days from the date of acquisition of such
agreement, with any commercial bank or trust company incorporated
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under the laws of the United States of America or any State thereof or the
District of Columbia, (b) investments in commercial paper maturing within one
year from the date of acquisition thereof and having, at the date of acquisition
thereof, the highest rating obtainable from Moody's Investors Service, Inc. or
Standard & Poor's Corporation, (c) investments in bankers' acceptances eligible
for rediscount under Federal Reserve Board requirements accepted by any
commercial bank or trust company referred to in clause (a) hereof, (d)
investments in deposits or certificates of deposit maturing within one year from
the date of acquisition thereof issued by any commercial bank or trust company
referred to in clause (a) hereof and having capital and surplus of at least
$500,000,000, (e) investments in certificates of deposit issued by banks
organized under the laws of any other jurisdiction, each having combined capital
and surplus of not less than $500,000,000, (f) investments by the Company in any
Subsidiary made with the prior approval of the Board of Directors; and (g)
investments in money market funds, so long as consistent with the Company's
internal investment policy.
5.3. Annual Statements. As soon as available and in any event within
one hundred twenty (120) days after the close of each fiscal year, commencing
with the fiscal year ending on December 31, 1999, the Company will deliver to
each holder of shares of Series C Preferred Stock, a balance sheet and
statements of income, retained earnings, and cash flows, audited by an
independent public accounting firm selected by the Company and acceptable to the
holders of a majority of the Series C Preferred Stock, showing the financial
condition of the Company as of the close of such fiscal year and the results of
its operations during such fiscal year. Any "big five" independent public
accounting firm shall be deemed acceptable to the holders of the Series C
Preferred Stock. Each of the financial statements delivered hereunder will be
certified by such accounting firm without material qualification (except any
qualifications as the Purchasers holding a majority of the outstanding shares of
Series C Preferred Stock, in their discretion, may approve in writing) to have
been prepared in accordance with GAAP consistently applied (except for changes
in the application of such principles that have been approved by the Company's
Board of Directors). This Section 5.3 may be satisfied by delivery of the
Company's Annual Report on Form 10-K as filed with the SEC.
5.4. Quarterly Statements. As soon as available, and in any event
within forty-five (45) days after the end of each of the first three fiscal
quarters of each fiscal year, commencing with the fiscal quarter ending March
31, 2000 the Company will deliver to each holder of shares of Series C Preferred
Stock an unaudited balance sheet and statements of income, retained earnings,
and cash flows of the Company as of the end of and for such fiscal quarter,
certified by the chief financial officer (or other officer acting in a similar
capacity, including the Treasurer) of the Company to be true and correct and to
have been prepared in accordance with GAAP consistently applied (except for
changes in the application of such principles that have been approved by the
Company's Board of Directors), subject to the absence of footnotes and to
adjustments consisting of normal year-end accruals, the effect of which, both
individually and in the aggregate, is not material. This Section 5.4 may be
satisfied by delivery of the Company's Quarterly Report on Form 10-Q as filed
with the SEC.
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5.5 Intentionally Omitted.
5.6. Intentionally Omitted.
5.7. Intentionally Omitted.
5.8. Intentionally Omitted.
5.9. Intentionally Omitted.
5.10. Records and Accounts. The Company will keep true and accurate
records and books of account in which full, true, and correct entries will be
made so as to permit the preparation of financial statements in accordance with
GAAP and maintain adequate accounts and reserves in accordance with good
accounting practice for all taxes (including income taxes), all depreciation,
depletion, obsolescence, and amortization of its properties, all contingencies,
and all other reserves.
5.11. Corporate Existence; Maintenance of Properties. The Company will
preserve and keep in full force and effect its corporate existence, rights, and
franchises. The Company will not engage in any business other than as presently
conducted by it and businesses reasonably ancillary thereto and will not take
any course of action which would result in a substantial change in the nature or
character of its business as it is presently conducted, except with the prior
approval of the Board of Directors of the Company. The Company will maintain all
of its properties used or useful in the conduct of its business in good
condition, repair, and working order and cause to be made all necessary repairs,
renewals, replacements, betterments, and improvements thereof, all as in the
judgment of the Company may be necessary so that the business carried on in
connection therewith may be properly and advantageously conducted at all times;
provided, however, that nothing in this Section 5.11 will prevent the Company
from discontinuing the operation and maintenance of any of such properties if
such discontinuance is, in the judgment of the Company, desirable in the conduct
of its business and does not in the aggregate materially adversely affect the
business of the Company.
5.12. Insurance. The Company will maintain with, to the best knowledge
of the Company, financially sound and reputable insurance companies, funds, or
underwriters such insurance of the kinds, covering the risks (including without
limitation directors' and officers' liability, which the Company will use its
best efforts to obtain within 90 days of the date hereof (pursuant to Section
5.20) and shall thereafter maintain) and in the relative proportionate amounts
usually carried by reasonable and prudent companies conducting businesses
similar to that of the Company (such insurance coverage at all times to be at
least as protective as the insurance currently carried by the Company and
described in Schedule 2.21). The Company shall not cause or permit any
assignment or change in beneficiary and shall not borrow against any such
policy.
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5.13. Taxes. The Company will pay and discharge, or cause to be paid
and discharged, before they become delinquent, all taxes, assessments, and other
governmental charges imposed upon the Company or any of the properties, sales,
or activities of the Company, or any part thereof, or upon the income or profits
therefrom, as well as all claims for labor, materials, or supplies, which, if
unpaid might by law give rise to a Lien upon any of its properties; provided,
however, that any such tax, assessment, charge, levy, or claim need not be paid
if the validity or amount thereof is currently being contested in good faith by
appropriate proceedings and if the Company has set aside on its books adequate
reserves with respect thereto.
5.14. Compliance with Laws, Contracts, Licenses, and Permits. The
Company will comply in all material respects with (a) its charter documents and
by-laws, (b) all judgments, decrees, orders, statutes, rules, and regulations
binding on or applicable to the Company or its business or properties, and (c)
any agreement or instrument to which it is a party or by which it or any of its
properties are subject (including, without limitation, the Ancillary
Agreements). If at any time any authorization, consent, approval, permit, or
license from any officer, agency, or instrumentality of any government becomes
necessary or required in order that the Company may fulfill any of its
obligations hereunder, the Company will, after providing adequate written notice
to the holders of shares of Series C Preferred Stock, promptly take or cause to
be taken all necessary steps within its power to obtain such authorization,
consent, approval, permit, or license and will, upon written request, promptly
furnish each such holder with evidence thereof.
5.15. Employee Benefit Plans. The Company will take all actions
necessary to maintain, fund, and administer its Employee Benefit Plans in all
material respects in accordance with applicable federal, state, and local law.
5.16. Compensation of Officers and Senior Management. The compensation
of all officers and senior management of the Company will be as determined from
time to time by the Compensation Committee (if any) of the Board of Directors.
5.17. Reservation of Shares; Compliance with Securities Laws. The
Company has and will continue at all times to reserve the appropriate number of
shares of Common Stock solely for the purpose of issuance upon conversion of
outstanding shares of Series C Preferred Stock and exercise of the Closing
Warrants. The Company will file within the required time periods all filings,
notices and other documents required by applicable federal and state securities
laws in connection with the transactions contemplated by this Agreement.
5.18. Senior Management and Employee Non-Disclosure Agreement. The
Company will at all times ensure that (a) each employee, including each member
of senior management, has executed and delivered to the Company the standard
form agreement (approved by the non- management members of the Company's Board
of Directors) with respect to the confidentiality of the Company's proprietary
and confidential information and the assignment to the Company of any and all
rights each employee might have or acquire with respect to technology,
inventions, developments, etc., developed in connection with his/her employment
with the
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Company, and (b) each member of the Company's senior management and certain
other key employees, in each case that the Chief Executive Officer and the Chief
Operating Officer shall have determined is appropriate, has executed and
delivered to the Company a confidentiality, non-disclosure, inventions
assignment and non-competition and non-solicitation agreement approved by the
non-management members of the Board of Directors.
5.19. Intentionally Omitted.
5.20 Registration Requirements.
(a) No earlier than April 1, 2000, but no later than May 31,
2000, the Company shall (i) file with the SEC a registration statement on Form
S-1 (together with any prospectus included therein, a "Registration Statement")
pursuant to Rule 415 of the Securities Act in order to register with the SEC the
continuous resale by the Purchasers, from time to time, of all shares of Common
Stock constituting Immediately Registrable Securities that may be acquired by
the Purchasers, through the Nasdaq SmallCap Market or the facilities of any
national securities exchange on which the Common Stock is then traded, or in
privately-negotiated transactions, and (ii) use its reasonable best efforts to
file an application for listing (a "Listing Application") of such Common Stock
on the NASDAQ SmallCap Market (the "NSCM") or any other nationally recognized
securities exchange (collectively with the NSCM, the "Exchange"). The Company
shall use its best efforts to cause such Registration Statement to be declared
effective on or before the 90th day after the Closing Date. The Company shall
further cause a Listing Application covering shares of Common Stock issued or
issuable in respect of, on exercise of, or on conversion of, or constituting any
Acquired Securities to be filed with the Exchange on or before the 120th day
following the Closing Date and shall, upon filing thereof, use its reasonable
best efforts to cause such securities to be accepted for trading upon the
Exchange. Each Purchaser agrees to furnish promptly to the Company in writing
all information required for preparation of the Registration Statement or
thereafter required from time to time to be disclosed in order to make the
information previously furnished to the Company by such holder not misleading.
(b) If at any time following the filing of a Registration
Statement by the Company, the Company shall qualify to file a registration
statement on Form S-3 under the Securities Act, the Company shall thereafter be
entitled to replace any Form S-1 registration statement referred to in Section
5.20(a) above with a registration statement on Form S-3 that has been declared
effective by the SEC. Any such Form S-3 used to replace a Form S-1 pursuant to
this Section 5.20(b), together with any prospectus included in such Form S-3,
shall thereafter be referred to as a "Registration Statement" and any Form S-1
that is so replaced shall cease to be referred to by that term for purposes of
this Agreement.
(c) The Company shall pay all Registration Expenses (as
defined below) in connection with any registration, qualification or compliance
hereunder, and each Purchaser shall pay all Selling Expenses (as defined below)
and other expenses that are not Registration Expenses relating to the Common
Stock resold by such Purchaser. "Registration Expenses"
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shall mean all expenses, except for Selling Expenses, incurred by the Company in
complying with the registration provisions herein described, including without
limitation, all registration, qualification and filing fees (including all SEC
and Nasdaq fees), printing expenses, escrow fees, fees and disbursements of
counsel for the Company and for any underwriter (unless paid by such
underwriter), blue sky fees and expenses, the expense of any special audits
incident to or required by any such registration and the reasonable fees and
disbursements of one counsel to all selling Purchasers. "Selling Expenses" shall
mean only selling commissions, underwriting discounts and stock transfer taxes
applicable to the Common Stock sold by each Purchaser and all fees and
disbursements of counsel for any Purchaser (which counsel, if any, shall be
additional to the one counsel to all selling Purchasers referenced in the
preceding sentence).
(d) In the case of the registration effected by the Company
pursuant to these registration provisions, the Company will use its best efforts
to:
(1) keep such registration statement on Form S-1 or
Form S-3 effective until the earlier of (A) the second anniversary of the date
on which the Registration Statement first becomes effective, (B) the date as of
which all of the Immediately Registrable Securities have been resold, or (C) the
time as of which all of the Common Stock held by the Purchasers can be sold
within a given three-month period without compliance with the registration
requirements of the Securities Act pursuant to Rule 144;
(2) prepare and file with the SEC such amendments and
supplements to the Registration Statement and the prospectus used in connection
therewith as may be necessary to comply with the provisions of the Securities
Act with respect to the disposition of all securities covered by the
Registration Statement;
(3) furnish such number of prospectuses and other
documents incident thereto, including any amendment of or supplement to the
prospectus, as a Purchaser from time to time may reasonably request;
(4) cause all Common Stock registered as described
herein to be listed on each securities exchange and quoted on each quotation
service on which the common equity securities of the Company are then listed or
quoted;
(5) provide a transfer agent and registrar for all
Common Stock registered pursuant to the Registration Statement and a CUSIP
number for all such Common Stock;
(6) otherwise use its best efforts promptly to comply
with all applicable rules and regulations of the SEC;
(7) file the documents required of the Company and
otherwise use its best efforts promptly to obtain, if applicable, and maintain
requisite blue sky clearance in (A) all jurisdictions in which any of the
Acquired Securities are originally sold, and (B) all other states specified in
writing by a Purchaser, provided as to clause (B), however, that the Company
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shall not be required to qualify to do business or consent to service of process
in any state in which it is not now so qualified or has not so consented; and
(8) with respect to the initial filing of the
Registration Statement as of the date of declaration of effectiveness, obtain an
opinion of counsel to the Company in customary form and reasonably acceptable to
each Purchaser addressed to each Purchaser selling registrable securities
pursuant to the Registration Statement. The Company shall use its best efforts
to qualify for use of Form S-1 or Form S-3 under the Securities Act to register
the resale of the Common Stock issuable upon the conversion of the Shares and to
maintain such qualification during the periods described in subsection (c)(i)
hereof and to be listed on the Nasdaq SmallCap market and maintain such listing
unless listed on NASDAQ NMS or another national exchange.
(e) The Company shall furnish to each Purchaser upon request a
reasonable number of copies of the prospectus and a supplement to or an
amendment of such prospectus as may be necessary in order to facilitate the
public sale or other disposition of all or any of the Common Stock held by the
Purchaser.
(f) With a view to making available to the Purchasers the
benefits of Rule 144 and any other rule or regulation of the SEC that may at any
time permit a Purchaser to sell Common Stock to the public without registration
or pursuant to registration, the Company covenants and agrees to: (i) make and
keep public information available, as those terms are understood and defined in
Rule 144, until the earlier of (A) the second anniversary of the Closing Date or
(B) the date as of which all of the Common Stock shall have been resold: (ii)
file with the SEC in a timely manner all reports and other documents required of
the Company under the Exchange Act; and (iii) furnish to any Purchaser upon
request, as long as the Purchaser owns any Common Stock, (A) a written statement
by the Company that it has complied with the reporting requirements of the
Exchange Act, (B) a copy of the most recent annual or quarterly report of the
Company, and (C) such other information as may be reasonably requested in order
to avail any Purchaser of any rule or regulation of the SEC that permits the
selling of any such Common Stock without registration.
(g) The Company may, at any time, refuse to permit a Purchaser
to resell any Common Stock pursuant to the Registration Statement; provided,
however, that in order to exercise this right at any time, the Company must
deliver a certificate in writing to the Purchasers, signed by a senior executive
officer of the Company, to the effect that suspension of the sale of shares
under the Registration Statement until such time as the Company can make an
appropriate filing with the SEC is necessary in the good faith determination of
the Company's Board of Directors because a sale pursuant to the Registration
Statement, in its then current form, would be reasonably likely to constitute a
violation of the federal securities laws, which certificate shall specify
whether such filing is required to correct information in the Registration
Statement which was incorrect when included therein (a "Corrective Filing") or
to update or supplement the information therein to reflect new information (a
"Supplemental Filing"). In such an event, the Company shall use its best efforts
to amend the Registration Statement if
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necessary and take all other actions necessary to allow such sale under the
federal securities laws, and shall notify the Purchasers promptly after it has
determined that such sale has become permissible under the federal securities
laws. Notwithstanding the foregoing, the Company shall not be entitled to
exercise its right to suspend any sales under the Registration Statement for a
Corrective Filing more than one (1) time in any twelve (12) month period, and
the Company shall use its best efforts to limit any period during which such
Registration Statement may be withdrawn, whether for a Corrective Filing or a
Supplemental Filing, to a period not in excess of thirty (30) days; provided,
that all officers and directors of the Company, and any other Persons to whom
the Company has given registration rights, also agree to suspend the sales of
any of the Company's securities owned by such Person during any such period.
5.21 Indemnification and Contribution.
(a) The Company agrees to indemnify and hold harmless each
Purchaser and its officers, directors, controlling persons and affiliates from
and against any losses, claims, damages or liabilities (or actions or
proceedings in respect thereof) to which such Purchaser may become subject
(under the Securities Act, state law, common law or otherwise) insofar as such
losses, claims, damages or liabilities (or actions or proceedings in respect
thereof) arise out of, or are based upon, any untrue statement of a material
fact contained in, or omission of a material fact from, the Registration
Statement, or arise out of any failure by the Company to fulfill any undertaking
included in the Registration Statement or this Agreement, and the Company will,
as incurred, reimburse such Purchaser for any legal or other expenses reasonably
incurred in investigating, defending or preparing to defend any such action,
proceeding or claim; provided however, that the Company shall not be liable in
any such case to the extent that such loss, claim, damage or liability arises
out of, or is based upon, an untrue statement made in such Registration
Statement in reliance upon and in conformity with information furnished to the
Company in writing by or on behalf of such Purchaser specifically for use in
preparation of the Registration Statement. The Company will reimburse the
Purchasers for any legal or other expenses reasonably incurred and documented in
investigating, defending or preparing to defend any such action, proceeding or
claim notwithstanding the absence of a judicial determination as to the
propriety and enforceability of the obligations under this section and the
possibility that such payments might later be held to be improper, provided,
that to the extent any such payment is ultimately held to be improper, the
persons receiving such payments shall promptly refund them.
(b) Each Purchaser, severally and not jointly, agrees to
indemnify and hold harmless the Company from and against any losses, claims,
damages or liabilities (or actions or proceedings in respect thereof) to which
the Company may become subject (under the Securities Act, state law, common law
or otherwise) insofar as such losses, claims, damages or liabilities (or actions
or proceedings in respect thereof) arise out of, or are based upon, an untrue
statement made in such Registration Statement in reliance upon and in conformity
with information furnished to the Company in writing by or on behalf of such
Purchaser specifically for use in preparation of the Registration Statement;
provided, however, that no Purchaser shall be liable in any such case for any
untrue statement included in any Prospectus which statement has been
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corrected, in writing, by such Purchaser and delivered to the Company before the
sale from which such loss occurred and in no event shall any Purchaser be liable
for any amount in excess of the net proceeds received for the sale of its Common
Stock pursuant to such Registration Statement.
(c) Promptly after receipt by any indemnified person of a
notice of a claim or the beginning of any action in respect of which indemnity
is to be sought against an indemnifying person pursuant to this Section 5.21,
such indemnified person shall notify the indemnifying person in writing of such
claim or of the commencement of such action, and, subject to the provisions
hereinafter stated, in case any such action shall be brought against an
indemnified person and the indemnifying person shall have been notified thereof,
the indemnifying person shall be entitled to participate therein, and, to the
extent that it shall wish, to assume the defense thereof, with counsel
reasonably satisfactory to the indemnified person. After notice from the
indemnifying person to such indemnified person of the indemnifying person's
election to assume the defense thereof, the indemnifying person shall not be
liable to such indemnified person for any legal expenses subsequently incurred
by such indemnified person in connection with the defense thereof; provided,
however, that if there exists or shall exist a conflict of interest that would
make it inappropriate in the reasonable judgment of the indemnified person for
the same counsel to represent both the indemnified person and such indemnifying
person or any affiliate or associate thereof, the indemnified person shall be
entitled to retain its own counsel at the expense of such indemnifying person.
(d) If the indemnification provided for in this Section 5.21
is unavailable to or insufficient to hold harmless an indemnified party under
subsection (a) or (b) hereof in respect of any losses, claims, damages or
liabilities (or actions or proceedings in respect thereof) referred to therein,
then each indemnifying party shall contribute to the amount paid or payable by
such indemnified party as a result of such losses, claims, damages or
liabilities (or actions in respect thereof) in such proportion as is appropriate
to reflect the relative fault of the Company on the one hand and the Purchasers
on the other in connection with the statements or omissions which resulted in
such losses, claims, damages or liabilities (or actions in respect thereof), as
well as any other relevant equitable considerations. The relative fault shall be
determined by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or the omission or alleged omission to state
a material fact relates to information supplied by the Company on the one hand
or a Purchaser on the other and the parties' relative intent, knowledge, access
to information and opportunity to correct or prevent such statement or omission.
The Company and the Purchasers agree that it would not be just and equitable if
contribution pursuant to this subsection (d) were determined by pro rata
allocation (even if the Purchasers were treated as one entity for such purpose)
or by any other method of allocation which does not take account of the
equitable considerations referred to above in this subsection (d). The amount
paid or payable by an indemnified party as a result of the losses, claims,
damages, or liabilities (or actions in respect thereof) referred to above in
this subsection (d) shall be deemed to include any legal or other expenses
reasonably incurred by such indemnified party in connection with investigating
or defending any such action or claim. Notwithstanding the provisions of this
subsection (d), no Purchaser shall be required to
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contribute any amount in excess of the amount, if any, by which the amount
received by the Purchaser from the sale of the Common Stock to which such loss
relates exceeds the amount of any damages which such Purchaser has otherwise
been required to pay by reason of such untrue or alleged untrue statement or
omission or alleged omission. No person guilty of fraudulent misrepresentation
(within the meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation. The Purchasers' obligations in this subsection (d) to
contribute are several in proportion to their respective sales of Common Stock.
5.22 U.S. Real Property Holding Corporation. The Company covenants that
it will operate in a manner such that it will not become a "United States real
property holding corporation" as that term is defined in Section 897(c)(2) of
the Internal Revenue Code of 1986, as amended ("USRPHC"), and the regulations
thereunder. The Company agrees to make determinations as to its status as a
USRPHC, and will file statements concerning those determinations with the
Internal Revenue Service, in the manner and at the times required under Reg.
1.897-2(h), or any supplementary or successor provision thereto. Within 30 days
of a request from a Purchaser, the Company will inform the requesting party, in
the manner set forth in Reg. 1.897-2(h) or any supplementary or successor
provision thereto, whether that party's interest in the Company constitutes a
United States real property interest (within the meaning of Internal Revenue
Code Section 897(c)(1) and the regulations thereunder) and whether the Company
has provided to the Internal Revenue Service all required notices as to its
USRPHC status.
5.23 Permitted Transactions. Notwithstanding any contrary provision
hereof, the> Company shall have the right to effect any of the transactions or
other actions set forth on Schedule 5.23 hereto without prior notice to, or the
prior consent of the holders of, the Series C Preferred Stock being required in
connection therewith, and no such transaction or action shall constitute a
breach of any covenant set forth herein.
5A. Pre-Emptive Rights.
5A.1. Participation Rights. Subject to the exclusions set
forth in Section 5A.3 below, and to the provisions of the following sentence in
this Section 5A.1, if at any time after the Closing and prior to the earlier of
(x) a Qualified Public Offering and (y) the date one (1) year after the
occurrence of Closing, the Company authorizes the offer, issuance, or sale, or
offers, issues or sells to any Person (the "Offeree") any shares of Common
Stock, Derivative Securities (as defined in the Purchase Agreement) or other
securities of the Company (whether as newly issued shares or other securities or
from the Company's treasury) in an offering not registered under the Securities
Act, the Company will first offer to sell, by written notice, to each holder of
shares of Series C Preferred Stock a portion (such holder's "Portion") of such
shares or securities authorized to be offered, issued or sold, or proposed to be
offered, issued or sold equal to the product obtained by multiplying (i) the
number of such shares or securities authorized to be offered, issued or sold, or
proposed to be offered, issued or sold, by (ii) the
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quotient obtained by dividing (A) the number of shares of Common Stock held by
such holder of Series C Preferred Stock (for this purpose including on an
as-if-converted basis the shares of Conversion Stock held by such holder), by
(B) the sum of (I) the aggregate number of shares of Common Stock issued and
outstanding as of such date and (II) the aggregate number of shares of
Conversion Stock (calculated on an as-if-converted basis).
5A.2. Procedure. Each holder of Series C Preferred Stock will
be entitled (but not obligated) to purchase all or part of such holder's Portion
at the same price and on the same terms as such stock or securities are to be
offered to the Offeree. Each such holder may exercise such purchase rights
within 10 days after receipt of written notice from the Company describing in
reasonable detail the stock or securities to be offered to the Offeree, the
purchase price thereof, the payment terms, and such holder's percentage
allotment. If any such holder fails in whole or in part to exercise the purchase
rights hereunder within such 10-day period (other than by reason of the
Company's failure to comply with the provisions of this Section 5A), then the
other holders of Series C Preferred Stock shall have the right to acquire such
Portion (which right may be exercised by any such holder by indication in such
holder's notice to the Company of its exercise of purchase rights hereunder such
holder's desire to acquire additional securities, or otherwise). If
oversubscribed for, any such Portion not purchased by the holder initially
entitled thereto shall be allocated among the other holders of Purchased Shares
desiring to acquire such Portion pro rata in proportion to the numbers of shares
of Common Stock held by each such other holder (including for this purpose
shares of Conversion Stock, calculated on an as-if-converted basis). The Company
may sell so much, and only so much, of any Portion as to which no holders of
Series C Preferred Stock, having been offered the right to purchase such Portion
in accordance with all of the provisions of this Section 5A, have exercised such
purchase rights, to the Offeree at the same price and on the same terms as those
offered to such holder, provided, that if the whole of such holder's Portion of
such securities is not sold to the Offeree within 60 days following the lapse of
the 10-day exercise period provided to the holders of Series C Preferred Stock,
such unsold securities will once again be subject to the purchase rights
hereunder. In the event that shares of Common Stock or Derivative Securities are
authorized to be issued and sold by the Company for services, property, or other
non-cash consideration, each holder of Series C Preferred Stock will be allowed
to participate in such issue and sale by substituting cash in the amount of the
fair market value, per share, of such non-cash consideration.
5A.3. Excluded Transactions. The prohibitions and rights
provided in this Section 5A will not apply to (i) shares of Common Stock issued
by the Company pursuant to stock dividends, stock splits, recapitalizations, and
similar transactions; (ii) shares of Common Stock issued upon conversion or
exchange, directly or indirectly, of the Series C Preferred Stock; (iii) options
or other rights to purchase or receive Common Stock, and any shares of Common
Stock issued upon the exercise thereof or upon such a purchase, in each case to
officers, directors, consultants, agents and employees of the Company pursuant
to the Company's incentive stock option plan or other equity incentive plan,
each as approved by a majority of the non-management members of the Board of
Directors; (iv) shares of Common
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Stock issued pursuant to a registration statement on Form S-4 or Form S-8 (or
any applicable successor form); (v) non-cash consideration issued or paid in
connection with the acquisition of another entity (whether through merger or
otherwise), provided, that such issuance is otherwise permitted under the terms
of the Company's Certificate of Incorporation; (vi) securities issued in any
transaction for a strategic purpose and not primarily to raise equity capital;
and (vii) warrants to purchase capital stock of the Company (and the capital
stock issued upon exercise thereof) issued to a national banking association and
which shall not result in the right of such national banking association to
purchase greater than 1% of the capital stock of the Company on a fully-diluted
basis.
5A.4. Termination of Rights. The prohibitions and rights
provided for in this Section 5A shall terminate automatically upon the closing
of a Qualified Public Offering.
6. Registration and Transfer of Securities.
6.1. Transfer and Exchange of Capital Stock. The Company will maintain
at its principal executive office a register in which will be entered the names
and addresses of the holders of the capital stock and the particulars (including
without limitation the class thereof) of the respective capital stock held by
them and of all transfers of shares of capital stock or conversions of shares of
capital stock from one class to another. Upon surrender at such office of any
certificate representing shares of capital stock for registration of conversion,
exchange, or (subject to compliance with applicable federal and state securities
laws and the applicable provisions of this Agreement, including without
limitation the conditions set forth in Section 7.2 hereof) transfer, the Company
will issue, at its expense, one or more new certificates, in such denomination
or denominations as may be requested, for shares of such capital stock and
registered as such holder may request. Any certificate representing shares of
capital stock surrendered for registration of transfer will be duly endorsed, or
accompanied by a written instrument of transfer duly executed by the holder of
such certificate or his attorney duly authorized in writing. The Company will
pay shipping and insurance charges, from and to each holder's principal office,
upon any transfer, exchange, or conversion provided for in this Section 6.1.
6.2. Replacement of Purchased Shares. In the case of any loss, theft,
destruction, or mutilation of the certificate representing any Purchased Shares,
upon receipt of evidence thereof reasonably satisfactory to the Company, and (i)
in the case of any such loss, theft, or destruction, upon delivery of an
indemnity bond in such reasonable amount as the Company may determine, or (ii)
in the case of any such mutilation, upon the surrender to the Company at its
principal office of such mutilated certificate for cancellation, the Company
will execute and deliver, in lieu thereof, new certificates of like tenor. Any
old stock certificate in lieu of which any such new stock certificate has been
so executed and delivered by the Company will not be deemed to be outstanding
for any purpose of this Agreement or otherwise.
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6.3. Reliance on Register. The Company may rely for all purposes
hereunder on record ownership as shown on the register described in this Section
6 (except to the extent that such register fails to reflect a transfer of which
the Company received due notice in accordance with Section 7.2 of this
Agreement).
7. Restrictions on Transfer.
7.1. General Restriction. Subject to Section 10.6, the Purchased Shares
and all securities issued in exchange therefor or upon conversion or exercise
thereof (for purposes of this Section 7, the "Restricted Securities"), will be
transferable only upon the satisfaction of the conditions set forth in this
Section 7. Any transfer or purported transfer in violation of this Section 7
will be void.
7.2. Notice of Transfer. Subject to Section 10.6, prior to any transfer
of any Restricted Securities, the holder thereof will give written notice to the
Company describing in reasonable detail the manner and terms of the proposed
transfer and the identity of the proposed transferee, accompanied by the written
agreement of the proposed transferee to be bound by all of the provisions hereof
applicable to holders of such Restricted Securities hereunder or thereunder. The
Company may request an opinion of counsel of such holder prior to such transfer
to the effect that such transfer is exempt from the registration requirements of
the Securities Act of 1933, as amended.
7.3. Restrictive Legends. For so long as the Purchased Shares remain
subject to the restrictions on transfer set forth in this Section 7, the
certificates representing such Purchased Shares will bear restrictive legends in
substantially the following forms:
"The securities represented by this certificate have not been
registered under the Securities Act of 1933, as amended (the
"Securities Act"), and may be transferred only pursuant to an effective
registration statement under the Securities Act or in accordance with
an applicable exemption from the registration requirements of the
Securities Act."
"The securities represented by this certificate are subject to certain
restrictions on transfer set forth in a Series C Preferred Stock
Purchase Agreement, dated as of March 3, 2000, by and among the issuer
of such securities and the registered holder of this certificate (or
such holder's predecessor-in-interest) and certain others. A copy of
such agreement is on file and may be inspected by the registered holder
of this certificate at the principal executive office of the issuer."
7.4. Termination of Restrictions. The restrictions imposed by this
Section 7 upon the transferability of Restricted Securities will terminate as to
any particular Restricted Securities when such Restricted Securities have been
sold pursuant to an effective registration statement under the Securities Act,
or pursuant to Rule 144 under the Securities Act or any other exemption from the
registration requirements of the Securities Act pursuant to which the
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transferee receives securities that are not "restricted securities" within the
meaning of that term as defined in Rule 144(a)(3). Whenever any of such
restrictions terminates as to any Restricted Securities, the holder thereof will
be entitled to receive from the Company, at the Company's expense, new
certificates representing such Purchased Shares, without restrictive legends.
8. Expenses; Indemnification.
(a) Whether or not the transactions contemplated by this Agreement are
consummated (and whatever the reason or cause for any such failure to consummate
except for an affirmative termination by the Purchasers or the failure of the
Purchasers to negotiate in good faith), the Company hereby agrees to pay on
demand all reasonable out-of-pocket and due diligence expenses incurred by the
Purchasers in connection with any amendments or waivers (whether or not the same
become effective) hereof from time to time. In addition, the Company hereby
agrees to pay on demand all reasonable out-of-pocket expenses (including without
limitation the reasonable fees and charges for disbursements of one counsel to
the Purchasers) incurred by the Purchasers or any holder of any of the Purchased
Shares and any other Acquired Securities issued hereunder in connection with the
enforcement of any rights hereunder, or with respect to any of the Purchased
Shares, including without limitation, (a) the cost and expenses of preparing and
duplicating this Agreement and the Purchased Shares and any other Acquired
Securities; (b) the cost of delivering to each Purchaser's principal office,
insured to such Purchaser's satisfaction, the Purchased Shares and any other
Acquired Securities sold to such Purchaser hereunder and any Purchased Shares
and any other Acquired Securities delivered to such Purchaser in exchange
therefor or upon any conversion, exercise, exchange, or substitution thereof;
and (c) all taxes (other than taxes determined with respect to the income of a
Purchaser), including any recording fees and filing fees and documentary stamp
and similar taxes at any time payable in respect of this Agreement or the
issuance of any of the Purchased Shares and any other Acquired Securities.
(b) All covenants, agreements, representations, and warranties made
herein or in the Ancillary Agreements or any other document referred to herein
or delivered to the Purchasers pursuant hereto will be deemed to have been
relied on by the Purchasers, notwithstanding any investigation made by or on
behalf of the Purchasers, and will survive the Closing. The Company will
indemnify, defend, and hold harmless each Purchaser, and each of such
Purchaser's partners, stockholders, officers, directors, employees, agents, and
representatives, from and against any and all Damages incurred by any of them in
any capacity and resulting from or relating to the breach by the Company of any
of its representations, warranties, covenants, or agreements contained in this
Agreement or in the Ancillary Agreements or any other document referred to
herein or delivered to the Purchasers pursuant hereto, for two (2) years after
the date on which each event or occurrence (or other act or omission) giving
rise to the right to indemnification hereunder occurs.
(c) The obligations of the Company under this Section 8 will survive
transfer of the Purchased Shares and any other Acquired Securities and the
termination of this Agreement.
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9. Definitions.
9.1. Certain Defined Terms. For all purposes of this Agreement the
following terms will have the meanings set forth or cross-referenced in this
Section 9:
"Acquired Securities" means (i) the Purchased Shares, (ii) the Closing
Warrant, (iii) any shares of the Common Stock of the Company issued and/or
issuable upon exercise of the Closing Warrant, (iv) any Dividend Shares, (v) any
securities issued and/or issuable upon conversion of the Purchased Shares or the
Dividend Shares, and (vi) any securities issued and/or issuable in respect of
any of the foregoing upon the occurrence of an Adjustment Event or upon exercise
or conversion of any of the foregoing.
"Adjustment Event" means the occurrence of any of the following with
respect to any relevant Person and/or any relevant class of its equity
securities: a stock dividend, stock split, exchange, combination or division of
shares or other equity interests, recapitalization, reclassification, merger,
consolidation, reorganization, or the like.
"Affiliate" means any other person directly or indirectly controlling,
controlled by, or under direct or indirect common control with the Company (or
other referenced person) and includes without limitation, (a) any person who is
an officer, director, or direct or indirect beneficial holder of at least 5% of
the then outstanding capital stock of the Company (or other referenced person),
and any of the Family Members of any such person, (b) any person of which the
Company (or other referenced person) and/or its Affiliates (as defined in clause
(a) above), directly or indirectly, either beneficially own(s) at least 5% of
the then outstanding equity securities or constitute(s) at least a 5% equity
participant, (c) in the case of a specified person who is an individual, Family
Members of such person, and (d) in the case of the Purchasers, any entities for
which a Purchaser or any of its Affiliates serve as general partner and/or
investment adviser or in a similar capacity, and all mutual funds or other
pooled investment vehicles or entities under the control or management of such
Purchaser or the general partner or investment adviser thereof, or any Affiliate
of any of them, or any Affiliates of any of the foregoing.
"Affiliated Group" has the meaning given to it in Section 1504 of the
Code, and in addition includes any analogous combined, consolidated, or unitary
group, as defined under any applicable state, local, or foreign income Tax law.
"Ancillary Agreements" means the Certificate of Designation, the
Shareholder Rights Agreement, the Registration Rights Agreement, the Closing
Warrants, and any other agreement or document delivered or executed in
connection with this Agreement.
"CERCLA" means the Comprehensive Environmental Response, Compensation
and Liability Act of 1980, as amended.
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"Certificate of Designation" means the Certificate of Designation of
Powers, Preferences and Rights of the Series C Convertible Participating
Preferred Stock substantially in the form of Exhibit F hereto.
"Charter" means the Certificate of Incorporation including the
Certificate of Designation.
"Closing Warrant" means a warrant, in form and substance substantially
in the form of Exhibit C hereto, exercisable by each Purchaser for such number
of shares of Common Stock of the Company as is set forth opposite such
Purchaser's name on Exhibit A hereto.
"Code" means the Internal Revenue Code of 1986, as amended.
"Common Stock" means the common stock, $0.001 par value per share, of
the Company.
"Damages" means all damages, losses, claims, demands, actions, causes
of action, suits, litigations, arbitrations, liabilities, costs, and expenses,
including without limitation court costs and the fees and expenses of counsel
and experts.
"Derivative Securities" means (i) all shares of stock and other
securities that are convertible into or exchangeable for shares of Common Stock,
and (ii) all options, warrants, and other rights to acquire shares of Common
Stock or any class of stock or other security or securities convertible into or
exchangeable for shares of Common Stock or any class of stock of other security.
"Dividend Shares" means any shares of Series C Preferred, Common Stock,
or any other securities of the Company paid or payable as a dividend in respect
of any of the Acquired Securities pursuant to the terms of the Charter.
"Environmental Laws" means, collectively, the Resource Conservation and
Recovery Act, CERCLA, the Superfund Amendments and Reauthorization Act of 1986,
the Federal Clean Water Act, the Federal Clean Air Act, the Toxic Substances
Control Act, and any and all state or local statutes, regulations, ordinances,
orders, and decrees relating to health, safety, or the environment, each, as the
case may be, as amended.
"EPA" means the United States Environmental Protection Agency.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"Family Members" means, as applied to any individual, any parent,
spouse, child, spouse of a child, brother or sister of the individual, and each
trust created for the benefit of one or more
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of such persons and each custodian of a property of one or more such persons and
the estate of any such persons.
"GAAP" means generally accepted accounting principles that are (i)
consistent with the principles promulgated or adopted by the Financial
Accounting Standards Board and its predecessors, (ii) applied on a basis
consistent with prior periods, and (iii) such that, insofar as the use of
accounting principles is pertinent, a certified public accountant could deliver
an unqualified opinion with respect to financial statements in which such
principles have been properly applied.
"Hazardous Substances" means, collectively, any hazardous waste, as
defined by 42 U.S.C. ss. 6903(5), any hazardous substances as defined by 42
U.S.C. ss. 9601(14), any pollutant or contaminant as defined by 42 U.S.C. ss.
9601(33), or any toxic substance, methane gas, oil, or hazardous materials or
other chemicals or substances regulated by any Environmental Laws.
"Immediately Registrable Securities" means any shares of Common Stock
issued or issuable (i) on conversion of any Purchased Shares, and (ii) on
exercise of any Closing Warrant, and (iii) on conversion of any Dividend Shares,
and, in the case of any of (i), (ii) or (iii), any securities issued in exchange
or respect of any of thereof, including upon the occurrence of an Adjustment
Event.
"Indebtedness" means (a) all indebtedness for borrowed money, whether
current or long-term, or secured or unsecured, (b) all indebtedness for the
deferred purchase price of property or services represented by a note or
security agreement, (c) all indebtedness created or arising under any
conditional sale or other title retention agreement (even though the rights and
remedies of the seller or lender under such agreement in the event of default
may be limited to repossession or sale of such property), (d) all indebtedness
secured by a purchase money mortgage or other lien to secure all or part of the
purchase price of property subject to such mortgage or lien, (e) all obligations
under leases that have been or must be, in accordance with GAAP, recorded as
capital leases in respect of which it is liable as lessee, (f) any liability in
respect of banker's acceptances or letters of credit, and (g) all indebtedness
of any person that is directly or indirectly guaranteed by the Company or that
it has agreed (contingently or otherwise) to purchase or otherwise acquire or in
respect of which it has otherwise assured a creditor against loss.
"Liens" means any and all liens, claims, mortgages, security interests,
charges, encumbrances, and restrictions on transfer of any kind, except: (i) in
the case of references to securities, any of the same arising under applicable
securities laws solely by reason of the fact that such securities were issued
pursuant to exemptions from registration under such securities laws, (ii) real
estate taxes not yet due and payable, and (iii) any lien in favor of any
landlord for unpaid rent, additional rent, or other charges, which lien is
created by statute or under any lease under which the Company or any of its
Subsidiaries is lessee.
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<PAGE>
"Material Adverse Effect" means, with reference to the Company, a
material adverse effect on the condition (financial or otherwise), operations,
business, assets, or prospects of the Company, or on its ability to consummate
the transactions hereby contemplated.
"Person" or "person" (regardless of whether capitalized) means any
natural person, entity, or association, including without limitation any
corporation, partnership, limited liability company, government (or agency or
subdivision thereof), trust, joint venture, or proprietorship.
Qualified Public Offering means a public offering of shares of the
Company's Common Stock pursuant to an effective registration statement on Form
S-1, or successor form, of the Securities and Exchange Commission, pursuant to
which the per share price to the public is not less than 250% of the Per Share
Purchase Price (as adjusted equitably on the occurrence of an Adjustment Event)
and the gross proceeds to the Company are not less than $20,000,000.
"Registration Rights Agreement" means the Registration Rights
Agreement, dated as of the date hereof, among the Company and the Purchasers, in
the form of the attached Exhibit E.
"Securities Act" means the Securities Act of 1933, as amended, or any
successor federal statute, and the rules and regulations of the Securities and
Exchange Commission thereunder, all as the same are in effect at the relevant
time of reference.
"Series A Preferred Stock" means the Series A Convertible Preferred
Stock, par value $0.01 per share, of the Company, the terms of which are set
forth in the Charter.
"Series B Preferred Stock" means the Series B Convertible Preferred
Stock, $0.01 par value per share, of the Company, the terms of which are set
forth in the Charter.
"Series C Preferred Stock" means the Series C Convertible Participating
Preferred Stock, $0.01 par value per share, of the Company, the terms of which
are set forth in the Charter.
"Subsidiary" or "Subsidiaries" means, with respect to any person, any
corporation a majority (by number of votes) of the outstanding shares of any
class or classes of which are at the time owned by such person or by a
Subsidiary of such person, if the holders of the shares of such class or classes
(a) are ordinarily, in the absence of contingencies, entitled to vote for the
election of a majority of the directors (or persons performing similar
functions) of the issuer thereof, even though the right so to vote has been
suspended by the happening of such a contingency, or (b) are at the time
entitled, as such holders, to vote for the election of a majority of the
directors (or persons performing similar functions) of the issuer thereof,
whether or not the right so to vote exists by reason of the happening of a
contingency.
"Tax" or "Taxes" means any federal, state, local, or foreign income,
gross receipts, franchise, estimated, alternative minimum, add-on minimum,
sales, use, transfer, registration, value added, excise, severance, stamp,
occupation, premium, windfall profit, customs, duties,
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<PAGE>
real property, personal property, capital stock, intangibles, social security,
unemployment, disability, payroll, license, employee, or other tax or levy, of
any kind whatsoever, including any interest, penalties, or additions to tax in
respect of the foregoing.
"Tax Return" means any return, declaration, report, claim for refund,
information return, or other document (including any related or supporting
estimates, elections, schedules, statements, or information) filed or required
to be filed in connection with the determination, assessment, or collection of
any Tax or the administration of any laws, regulations, or administrative
requirements relating to any Tax.
9.2. Terms Defined Elsewhere. The following terms are defined herein in
the sections identified below:
Term Section
---- -------
Agreement Preamble
Aggregate Purchase Price 1.1
Closing 1.3
Closing Date 1.3
Company Preamble
Employee Benefit Plan 2.18(a)
Exchange 5.20(a)
Listing Application 5.20(a)
Most Recent Balance Sheet 2.8(a)
Per Share Purchase Price 1.1
Proprietary Information 2.20
Purchased Shares 1.1
Purchaser(s) Preamble
Registration Expenses 5.20(a)
Restricted Securities 7.1
Selling Expenses 5.20(a)
10. Miscellaneous Provisions.
10.1. Amendments, Consents, Waivers.
(a) This Agreement or any provision hereof may be amended or
terminated by the agreement of the Company and the holders of a two-thirds
majority of the outstanding shares of Series C Preferred Stock, and the
observance of any provision of this Agreement that is for the benefit of the
holders of Series C Preferred Stock may be waived (either generally or in a
particular instance, and either retroactively or prospectively), and any
consent, approval, or other action to be given or taken by the holders of Series
C Preferred Stock pursuant to this Agreement may be given or taken by the
waiver, consent, approval or other action of the holders
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<PAGE>
of a two-thirds majority of the outstanding shares of Series C Preferred Stock
on behalf of all of the holders of shares of Series C Preferred Stock; provided,
however, that any Purchaser may in writing waive, as to itself only, the
benefits of any provision of this Agreement.
(b) No course of dealing between the Company and any of the
Purchasers will operate as a waiver of any of the Company's or any Purchaser's
rights under this Agreement. No waiver of any breach or default hereunder will
be valid unless in a writing signed by the waiving party. No failure or other
delay by any person in exercising any right, power, or privilege hereunder will
be or operate as a waiver thereof, nor will any single or partial exercise
thereof preclude any other or further exercise thereof or the exercise of any
other right, power, or privilege.
10.2. Notices. All notices, requests, payments, instructions or other
documents to be given hereunder will be in writing or by written
telecommunication, and will be deemed to have been duly given if (i) delivered
personally (effective upon delivery), (ii) mailed by certified mail, return
receipt requested, postage prepaid (effective five business days after
dispatch), (iii) sent by a reputable, established courier service that
guarantees overnight delivery (effective the next business day) or (iv)
dispatched by telecopier if the telecopy is received in complete, readable form
(effective upon dispatch), addressed as follows (or to such other address as the
recipient party may have furnished to the sending party for the purpose pursuant
to this Section 10.2):
(a) If to the Company:
Net Value Holdings, Inc.
Two Penn Center Plaza, Suite 605
Philadelphia, PA 19102
Attention: Mr. Andrew Panzo, President & CEO
Telecopier No. (215) 564-3133
with copies sent at the same time and by the same
means to:
Klehr, Harrison, Harvey, Branzburg & Ellers
260 S. Broad Street
Philadelphia, PA 19102-5003
Attention: Lawrence D. Rovin, Esq.
Telecopier No. (215) 568-6603
(b) If to any Purchaser, to the address of such Purchaser set
forth in the register referred to in Section 6.1 of this Agreement,
10.3. Counterparts. This Agreement may be executed by the parties in
separate counterparts, each of which when so executed and delivered will be an
original, but all of which
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<PAGE>
together will constitute one and the same instrument. In pleading or proving
this Agreement, it will not be necessary to produce or account for more than one
such complete counterpart.
10.4. Captions. The captions of sections or subsections of this
Agreement are for reference only and will not affect the interpretation or
construction of this Agreement.
10.5. Binding Effect and Benefits. This Agreement will bind and inure
to the benefit of the parties hereto and their respective successors and
permitted assigns. Except as otherwise provided in this Agreement, the
provisions of this Agreement that are for the Purchasers' benefit will inure to
the benefit of all permitted transferees of Acquired Securities, and the
applicable provisions of this Agreement that bind the Purchasers will bind all
transferees of Acquired Securities. Nothing in this Agreement is intended to or
will confer any rights or remedies on any person other than the parties hereto
and their respective successors and permitted assigns.
10.6. Assignment. This Agreement and the rights and obligations
hereunder may not be assigned by the Company. Notwithstanding the provisions set
forth in Section 7, this Agreement and the rights and obligations hereunder and
the Purchased Shares may be transferred by each of the Purchasers in its sole
discretion at any time, in whole or in part, including without limitation
transfers to any of the Affiliates or Affiliated Groups of the transferor,
without the consent of any other party hereto.
10.7. Construction. The language used in this Agreement is the language
chosen by the parties to express their mutual intent, and no rule of strict
construction will be applied against either party.
10.8. Further Assurances. From time to time on and after the Closing
Date, the Company will promptly execute and deliver all such further instruments
and assurances, and will promptly take all such further actions, as the
Purchasers or any of them may reasonably request in order more effectively to
effect or confirm the transactions contemplated by this Agreement and/or any of
the Ancillary Agreements and to carry out the purposes hereof and thereof.
10.9. Severability. No invalidity or unenforceability of any section of
this Agreement or any portion thereof will affect the validity or enforceability
of any other section or the remainder of such section.
10.10. Equitable Relief. Each of the parties acknowledges that any
breach by such party of his, her, or its obligations under this Agreement would
cause substantial and irreparable damage to one or more of the other parties and
that money damages would be an inadequate remedy therefor. Accordingly, each
party agrees that the other parties or any of them will be entitled to an
injunction, specific performance, and/or other equitable relief to prevent the
breach of such obligations.
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10.11. Entire Agreement. This Agreement, together with the exhibits and
schedules hereto and the Ancillary Agreements, contains the entire understanding
and agreement among the parties, or between or among any of them, and supersedes
any prior understandings or agreements between or among any of them, with
respect to the subject matter hereof.
10.12 Publicity. The Purchasers or any of them will have the right to
publicize their investment in the Company as contemplated hereby by means of a
"tombstone" advertisement or other customary advertisement in newspapers and
other media.
10.13. Governing Law. This Agreement will be governed by and
interpreted and construed in accordance with the internal laws of the
Commonwealth of Massachusetts, as applied to agreements under seal made, and
entirely to be performed, within Massachusetts.
[The rest of this page is intentionally left blank.]
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<PAGE>
IN WITNESS WHEREOF, the Company and each of the Purchasers have
executed this Series C Preferred Stock Purchase Agreement as an agreement under
seal on and as of the date first above written.
COMPANY: NET VALUE HOLDINGS, INC.
- -------
By___________________________
Name: Andrew P. Panzo
Title:
PURCHASERS:
- ----------
CATALYST PARTNERS
By___________________________
Name: Allison Rosen
Title:
TGT CAPITAL PARTNERS, L.P.
By___________________________
Name: Campbell Gibson
Title:
NARRAGANSETT ONE, L.P.
By___________________________
Name: Joseph L. Dowling III
Title:
EMERGENT CAPITAL INVESTMENTS
By__________________________
Name: Mark Waldron
Title:
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<PAGE>
GAVLEBORGE LANSFORSAKRINGER
By________________________
Name: Janexel Nasman
Title:
THE NORTON HERRICK IRREVOCABLE SECURITIES
TRUST
By_______________________
Name: Howard Herrick
Title:
FORMULA FUND MANAGEMENT LLC
By_______________________
Name: William Dobbs
Title:
ACIE/NET VALUE, LLC
By_______________________
Name: Jay Howard
Title:
SAJ (IOM) LTD.
By_______________________
Name: Simon Kippax
Title:
MONTROSE INVESTMENTS L.P.
By_______________________
Name: Will Rose
Title:
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<PAGE>
THE ANEGADA FUND, LTD.
By_______________________
Name: Gregory Swart
Title:
TONGA PARTNERS, L.P.
By_______________________
Name: J. Carlo Cannel
Title:
ASPEN INTERNATIONAL, LTD.
By_______________________
Name: Dee Dee McCoy
Title:
GILSTON CORPORATION, LTD.
By_______________________
Name: Dee Dee McCoy
Title:
By_______________________
Name: Martin H. Garvey
By_______________________
Name: Eric Hauser
By_______________________
Name: Michael Lauer
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<PAGE>
LANCER PARTNERS, L.P.
By_______________________
Name: Michael Lauer
Title:
LANCER OFFSHORE INC.
By_______________________
Name: Michael Lauer
Title:
BRIDGEWATER PARTNERS, L.P.
By_______________________
Name: Joseph P. Weiss
Title:
CSL ASSOCIATES
By_______________________
Name: Charles S. Lipson
Title:
GLADSTONE EQUITY FUNDS, INC.
By_______________________
Name: Mark Gladstone
Title:
OGDEN PROPERTIES, INC.
By_______________________
Name: Neil Weissman
Title:
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<PAGE>
SCHOTTENFELD ASSOCIATES, L.P.
By________________________
Name: Richard Schottenfeld
Title:
NICHOLAS STIASSNI & SUZANNE STIASSNI CO.
By________________________
Name: Nicholas Stiassni
Title:
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<PAGE>
EXHIBIT A
PURCHASER SCHEDULE
<TABLE>
<CAPTION>
Closing
Purchaser Purchased Shares Purchase Price Warrant Shares
- ----------------------------------------- ------------------------- ---------------------- -----------------------
<S> <C> <C> <C>
Catalyst Partners 83,333 $1,000,000 8,333
TGT Capital Partners, L.P. 166,667 2,000,000 16,667
Narragansett One, L.P. 83,333 1,000,000 8,333
Emergent Capital Investments 166,667 2,000,000 16,667
Gavleborge Lansforsakringer 83,333 1,000,000 8,333
The Norton Herrick
Irrevocable Securities Trust 166,667 2,000,000 16,667
Formula Fund Management
LLC 166,667 2,000,000 16,667
Acuro Capital 83,333 1,000,000 8,333
ACIE/Net Value, LLC 125,000 1,500,000 12,500
SAJ (Iom) Ltd. 83,333 1,000,000 8,333
Montrose Investments, L.P. 583,333 7,000,000 58,333
The Anegada Fund, Ltd. 25,000 300,000 2,500
Tonga Partners, L.P. 58,333 700,000 5,833
Aspen International, Ltd. 41,667 500,000 4,167
Gilston Corporation, Ltd. 41,667 500,000 4,167
Martin H. Garvey 9,000 108,000 900
Eric Hauser 9,000 108,000 900
Michael Lauer 72,000 864,000 7,200
Lancer Partners, L.P. 125,000 1,500,000 12,500
Lancer Offshore Inc. 202,000 2,424,000 20,200
Bridgewater Partners, L.P. 83,333 1,000,000 8,333
CSL Associates 83,333 1,000,000 8,333
Gladstone Equity Funds, Inc. 20,833 250,000 2,083
Ogden Properties, Inc. 83,333 1,000,000 8,333
Schottenfeld Associates, L.P. 125,000 1,500,000 12,500
Nicholas Stiassni & Suzanne
Stiassni Co. 25,000 300,000 2,500
------------------------- ---------------------- -----------------------
Total 2,796,167 $33,554,000 279,617
</TABLE>
<PAGE>
EXHIBIT B
USE OF PROCEEDS SCHEDULE
The Company intends to use the net proceeds from this sale of preferred
stock for the following purposes: To make investments in affiliate companies (as
that term is used in the Company's Registration Statement on Form S-1); to
prepay up to $3,500,000 (plus accrued interest) in outstanding convertible
indebtedness; to increase the Company's work force; and to provide general
working capital.
<PAGE>
EXHIBIT C
FORM OF CLOSING WARRANT
<PAGE>
EXHIBIT D
FORM OF COMPENSATION WARRANT
<PAGE>
EXHIBIT E
FORM OF REGISTRATION RIGHTS AGREEMENT
<PAGE>
EXHIBIT F
SERIES C PF CERTIFICATE OF DESIGNATION
