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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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Form 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of earliest event reported: May 9, 2000
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Net Value Holdings, Inc.
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(Exact name of registrant as specified in its charter)
Delaware 0-26929 23-2996071
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State of Incorporation (Commission File Number) (IRS Employer Identification
No.)
1085 Mission Street, San Francisco, CA 94103
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(Address of principal executive offices) (Zip Code)
(415) 575-4755
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(Registrant's telephone number)
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Item 2. Acquisition of Assets.
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On May 9, 2000, Net Value Holdings, Inc. (the "Company") acquired an
interest in Webmodal, Inc., a Delaware corporation ("Webmodal"), pursuant to the
terms of a Series A Convertible Preferred Stock Purchase Agreement dated as of
that date by and among the Company and Webmodal (the "Purchase Agreement").
Webmodal is developing an Internet application for use by shippers in purchasing
and executing domestic full-truckload intermodal freight shipments. This
application will allow shippers to input their specific transportation needs and
receive all of the information necessary for them to schedule and execute
intermodal shipments in a cost-effective manner. Webmodal plans to launch it's
internet website in 2000.
Pursuant to the Purchase Agreement, the Company acquired from Webmodal
563,000 shares of Webmodal Series A Preferred Stock and a warrant to purchase
170,000 shares of Webmodal Common Stock. The aggregate purchase price for the
stock and the warrant, which was established through arm's-length negotiation,
was $5,000,000, comprised of $4,000,000 in cash and 113,174 shares of the
Company's Common Stock valued at $1,000,000 (based on the average closing price
of the Company's Common Stock for the thirty (30) days prior to the closing).
The cash portion of the purchase price was funded from the Company's existing
cash.
Each share of Webmodal Series A Preferred Stock will convert into one
share of Webmodal Common Stock upon the Company's election, or earlier upon
completion of a public offering of Webmodal's Common Stock meeting certain
criteria (a "Qualified Public Offering"). Each share of Webmodal Series A
Preferred Stock is entitled to one vote and the Company has special voting
rights that require its approval for certain material corporate actions and
transactions. The shares of Series A Preferred Stock contain an 8% cumulative
dividend feature, payable at the discretion of Webmodal in cash or shares of
Webmodal Common Stock.
The Company may exercise the warrant prior to the earlier of: (i) May
9, 2005; (ii) a Qualified Public Offering of Webmodal's Common Stock; or (iii)
a merger or consolidation resulting in a change of control of Webmodal. The
exercise price of the warrant is $8.88 per share.
The Company currently has beneficial ownership (assuming conversion of
each share of Preferred Stock and assuming exercise of the warrants) of 43.9% of
the Webmodal Common Stock. This also reflects the effect of two earlier
investments in which the Company acquired an aggregate of 122,100 shares of the
Common Stock of Webmodal.
Allison Stollmeyer, one of the directors of Webmodal, is a Director of
Business Development of the Company.
In connection with the consummation of the Purchase Agreement, the
Company also entered into a Stockholders Agreement dated as of May 9, 2000 with
Webmodal and Christopher Kravas as the principal stockholder of Webmodal, (the
"Stockholders Agreement"), and an Investors Rights Agreement with Webmodal dated
May 9, 2000 (the "Investor Rights Agreement"). The Stockholders Agreement and
Investors Rights Agreement, taken in the aggregate, provide for, among other
things, restrictions on the transferability of securities, co-sale, preemptive
and registration rights. These Agreements terminate upon a Qualified Public
Offering of Webmodal's Common Stock.
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Item 7. Financial Statements, Pro Forma Financial Information and Exhibits.
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(a) Financial Statements of Business Acquired
It is impracticable at the time of the filing of this Current Report
to provide the historical financial information for Webmodal required by
Regulation S-X. Accordingly, the Company will file the required historical
financial statements under cover of an Amendment to this Current Report on Form
8-K as soon as practicable, but in any event, not later than 60 days after the
date on which this Current Report must be filed with the Commission.
(b) Pro Forma Financial Statements of Business Acquired
It is impracticable at the time of the filing of this Current Report
to provide the pro forma financial information for Webmodal required by
Regulation S-X. Accordingly, the Company will file the required pro forma
financial statements under cover of an Amendment to this Current Report on Form
8-K as soon as practicable, but in any event, not later than 60 days after the
date on which this Current Report must be filed with the Commission.
(c) Exhibits (referenced to Item 601 of Regulation S-K)
10.49 Series A Convertible Preferred Stock Purchase Agreement by and among
Net Value Holdings, Inc. and Webmodal, Inc., dated May 9, 2000.
10.50 Investor Rights Agreement dated May 9, 2000 by and between Webmodal,
Inc. and Net Value Holdings, Inc.
10.51 Stock Purchase Warrant dated May 9, 2000 by Webmodal for 170,000 shares
of Common Stock of Net Value Holdings, Inc.
10.52 Stockholders' Agreement dated May 9, 2000 by and among Webmodal, Inc.,
Net Value Holdings, Inc. and Christopher R. Kravas.
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SIGNATURE
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, thereunto duly authorized.
NET VALUE HOLDINGS, INC.
Dated: May 23, 2000 By: /s/ Andrew P. Panzo
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Andrew P. Panzo
Chief Executive Officer
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EXHIBIT INDEX
Exhibit No. Description
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10.49 Series A Convertible Preferred Stock Purchase Agreement by and
among Net Value Holdings, Inc. and Webmodal, Inc., dated May
9, 2000.
10.50 Investor Rights Agreement dated May 9, 2000 by and between
Webmodal, Inc. and Net Value Holdings, Inc.
10.51 Stock Purchase Warrant dated May 9, 2000 by Webmodal for
170,000 shares of Common Stock of Net Value Holdings, Inc.
10.52 Stockholders' Agreement dated May 9, 2000 by and among
Webmodal, Inc., Net Value Holdings, Inc. and Christopher R.
Kravas.
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SERIES A CONVERTIBLE PREFERRED
STOCK PURCHASE AGREEMENT
THIS SERIES A CONVERTIBLE PREFERRED STOCK PURCHASE AGREEMENT (this
"Agreement") is made and entered into as of May 9, 2000, by and between
WEBMODAL, INC., a Delaware corporation (the "Company") and NET VALUE HOLDINGS,
INC., a Delaware corporation (the "Investor").
RECITALS
The Company desires to sell to the Investor, and the Investor desires
to purchase from the Company, shares of the Company's Series A Convertible
Preferred Stock and Warrants to purchase shares of the Company's Common Stock on
the terms and conditions set forth in this Agreement.
AGREEMENT
NOW, THEREFORE, in consideration of the foregoing, and for other good
and valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties hereto hereby agree as follows:
1. AGREEMENT TO PURCHASE AND SELL STOCK.
1.1 Authorization. As of the Closing (as defined below), the
Company will have authorized the issuance, pursuant to the terms and conditions
of this Agreement, of (a) Five Hundred Sixty-Three Thousand (563,000) shares of
the Company's Series A Convertible Preferred Stock, $1.00 par value per share
(the "Series A Stock") having the rights, preferences, privileges and
restrictions set forth in the Certificate of Designation designating the Series
A Stock of the Company attached to this Agreement as Exhibit A (the "Series A
Certificate") and (b) warrants (the "Warrants") to purchase up to One Hundred
Seventy Thousand (170,000) shares of the Company's Common Stock, $.001 par value
per share (the "Common Stock"), substantially in the form attached to this
Agreement as Exhibit B.
1.2 Agreement to Purchase and Sell. The Company agrees to sell
to the Investor at the Closing, and the Investor agrees to purchase from the
Company at the Closing, Five Hundred Sixty-Three Thousand (563,000) shares of
Series A Stock and the Warrants for an aggregate purchase price of Five Million
Dollars ($5,000,000). The shares of Series A Stock purchased and sold pursuant
to this Agreement will be collectively referred to as the "Purchased Shares,"
the shares of Common Stock issuable upon conversion of the Purchased Shares will
be collectively referred to as the "Conversion Shares" and the shares of Common
Stock issuable upon exercise of the Warrants will be collectively referred to as
the "Warrant Shares."
2. CLOSING. The purchase and sale of the Purchased Shares and the
Warrants will take place at the offices of Klehr, Harrison, Harvey, Branzburg &
Ellers LLP, counsel to the Investor, at 260 S. Broad Street, Philadelphia,
Pennsylvania 19102 at 9:00 a.m. Eastern Time, on April __, 2000, or at such
other time and place as the Company and the Investor mutually agree upon (which
time and place are referred to in this Agreement as the "Closing"). At the
Closing, the Company will deliver to the Investor certificates representing the
Purchased Shares and the Warrants, against delivery to the Company by the
Investor of the full purchase price of the Purchased Shares, paid by (i) a wire
transfer of funds to the Company or certified bank check of Four Million Dollars
($4,000,000.00) in cash or immediately available funds and delivery to the
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Company of a certificate representing that number shares of the Investor's
common stock (the "Investor Shares") having a value of One Million Dollars
($1,000,000), valued at the average closing price for the thirty (30) calendar
days preceding the Closing on the NASDAQ Over-The-Counter Bulletin Board
(collectively, the "Purchase Price").
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company hereby
represents and warrants to the Investor that the statements in the following
paragraphs of this Section 3 are all true and correct:
3.1 Organization, Good Standing and Qualification. The Company
is a corporation duly organized, validly existing and in good standing under the
laws of the State of Delaware and has all requisite corporate power and
authority to own its properties and assets and to carry on its business as now
conducted and as presently proposed to be conducted. The Company is duly
qualified and in good standing to do business as a foreign corporation in each
jurisdiction where failure to be so qualified would have a material adverse
effect on its financial condition, business, prospects or operations.
3.2 Capitalization. Upon filing the Series A Certificate,
immediately prior to the Closing, the capitalization of the Company will consist
of the following:
(a) Preferred Stock. A total of Three Million (3,000,000)
authorized shares of preferred stock, $1.00 par value per share, of which Five
Hundred Sixty-Three Thousand (563,000) shares are designated as Series A Stock,
none of which will be issued and outstanding. The rights, preferences and
privileges of the Series A Stock will be as stated in the Series A Certificate
and as provided by law.
(b) Common Stock. A total of Ten Million (10,000,000)
authorized shares of Common Stock, $0.0001 par value per share, of which One
Million Two Hundred Fourteen Thousand (1,214,000) shares are issued and
outstanding.
(c) Options, Warrants, Reserved Shares. Except as set
forth on Schedule 3.2(c), there are not outstanding any options, warrants,
rights (including conversion or preemptive rights) or agreements for the
purchase or acquisition from the Company of any shares of its capital stock or
any securities convertible into or ultimately exchangeable or exercisable for
any shares of the Company's capital stock. Except as set forth on Schedule
3.2(c), no shares of the Company's outstanding capital stock, or stock issuable
upon exercise or exchange of any outstanding options, warrants or rights, or
other stock issuable by the Company, are subject to any rights of first refusal
or other rights to purchase such stock (whether in favor of the Company or any
other person), pursuant to any agreement or commitment of the Company.
(d) Outstanding Security Holders. Attached to this
Agreement as Schedule 3.2(d) is a complete list of all outstanding stockholders,
option holders, warrant holders, convertible note holders and other security
holders of the Company as of immediately prior to the Closing, which schedule
lists the type of instruments, certificate numbers in sequential order (if
applicable), the dates of issuance, the names of holders and the number of
Shares held or to be held upon exercise of such instrument.
3.3 Subsidiaries. The Company does not presently own or
control, directly or indirectly, any interest in any other corporation,
partnership, trust, joint venture, association, or other entity.
3.4 Due Authorization. All corporate action on the part of the
Company, its officers, directors and stockholders necessary for the
authorization, execution, delivery of, and the performance of all obligations of
the Company under, this Agreement, the Investor Rights Agreement (as defined in
Section 5.11), and the Stockholder's Agreement (as defined in Section 5.12)
(collectively, the "Related Agreements") and the authorization, issuance,
reservation for issuance and delivery of all of the Purchased Shares and the
Warrants being sold under this Agreement and of the Conversion Shares and the
Warrants Shares has been taken or will be taken prior to the Closing, and this
Agreement constitutes, and the Related Agreements, when executed, will
constitute, valid and legally binding obligations of the Company, enforceable in
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accordance with their respective terms, except as may be limited by (i)
applicable bankruptcy, insolvency, reorganization or others laws of general
application relating to or affecting the enforcement of creditors' rights
generally and (ii) the effect of rules of law governing the availability of
equitable remedies.
3.5 Valid Issuance of Stock.
(a) The Purchased Shares and the Warrants, when issued,
sold and delivered in accordance with the terms of this Agreement for the
consideration provided for herein, will be duly and validly issued, fully paid
and nonassessable. The Conversion Shares and the Warrant Shares have been duly
and validly reserved for issuance and, upon issuance in accordance with the
terms of the Series A Certificate or the Warrants, as applicable, will be duly
and validly issued, fully paid and nonassessable.
(b) Based in part on the representations made by the
Investor in Section 4 hereof, the Purchased Shares and the Warrants and
(assuming no change in applicable law and no unlawful distribution of Purchased
Shares by the Investor or other parties) the Conversion Shares and the Warrant
Shares will be issued in full compliance with the registration and prospectus
delivery requirements of the U.S. Securities Act of 1933, as amended (the "1933
Act") or in compliance with applicable exemptions therefrom and the registration
and qualification requirements of all applicable state securities laws; provided
that, with respect to the Conversion Shares and the Warrant Shares, no
commission or other remuneration is paid or given, directly or indirectly, for
soliciting the issuance of Conversion Shares or the Warrant Shares upon the
conversion of the Purchased Shares or exercise of the Warrants, if applicable,
and no additional consideration is paid for the Conversion Shares or the Warrant
Shares other than surrender of the applicable Purchased Shares or the Warrants
upon conversion or exercise thereof in accordance with the Series A Certificate
or the Warrants, as applicable.
(c) The outstanding shares of the capital stock of the
Company are duly and validly issued, fully paid and nonassessable, and such
shares of capital stock, and all outstanding options, warrants, convertible
notes and other securities of the Company, have been issued in full compliance
with the registration and prospectus delivery requirements of the 1933 Act or in
compliance with applicable exemptions therefrom and the registration and
qualification requirements of all applicable state securities laws.
3.6 Governmental Consents. No consent, approval, order or
authorization of, or registration, qualification, designation, declaration or
filing with, any federal, state or local governmental authority on the part of
the Company is required in connection with the consummation of the transactions
contemplated by this Agreement and the Related Agreements, except for such
qualifications or filings under the 1933 Act and the regulations thereunder and
all other applicable securities laws of states of the United States as may be
required in connection with the transactions contemplated by this Agreement. All
such qualifications and filings will, in the case of qualifications, be
effective on the Closing and will, in the case of filings, be made within the
time prescribed by law.
3.7 Litigation. There is no action, suit, proceeding, claim,
arbitration or investigation ("Action") pending or, to the best of the Company's
Knowledge (as defined below), currently threatened against the Company, its
activities, properties or assets or, to the best of the Company's Knowledge,
against any officer, director or employee of the Company in connection with such
officer's, director's or employee's relationship with, or actions taken on
behalf of, the Company. To the best of the Company's Knowledge, there is no
factual or legal basis for any such Action that might result, individually or in
the aggregate, in any material adverse change in the business, properties,
assets, financial condition, affairs or prospects of the Company. By way of
example but not by way of limitation, there are no Actions pending or, to the
best of the Company's Knowledge, threatened (or any factual or legal basis
therefor known to the Company) relating to the prior employment of any of the
Company's employees or consultants, their use in connection with the Company's
business of any information, technology or techniques allegedly proprietary to
any of their former employers, clients or other parties, or their obligations
under any agreements with prior employers, clients or other parties. The Company
is not a party to or subject to the provisions of any order, writ, injunction,
judgment or decree of any court or government agency or instrumentality and
there is no Action by the Company currently pending or which the Company intends
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to initiate. For the purposes of this Agreement, "Knowledge" means (i) the
actual knowledge of such party's officers and directors; and (ii) the knowledge
that any such officer or director acting as a prudent business person would have
obtained in the conduct of his or her business after making reasonable inquiry
and exercising reasonable diligence with respect to the particular matter in
question.
3.8 Status of Proprietary Assets.
(a) Ownership. Except as set forth on Schedule 3.8(a), the
Company has full title and ownership of, or has license to, all patents, patent
applications, trademarks, service marks, trade names, copyrights, moral rights,
mask works, trade secrets, confidential and proprietary information,
compositions of matter, formulas, designs, proprietary rights, know-how and
processes (all of the foregoing collectively referred to as the "Proprietary
Assets") necessary to enable it to carry on its business as now conducted and as
presently proposed to be conducted. A complete list of all the Company's
patents, patent applications, trademarks, service marks and trade names is set
forth on Schedule 3.8(a) to this Agreement. To the best of the Company's
Knowledge, no third party has any ownership right, title, interest, claim in or
lien on any of the Company's Proprietary Assets and the Company has taken, and
in the future the Company will use its best efforts to take, all steps
reasonably necessary to preserve its legal rights in, and the secrecy of, all
its Proprietary Assets, except those for which disclosure is required for
legitimate business or legal reasons.
(b) Licenses; Other Agreements. The Company has not
granted, and, there are not outstanding, any options, licenses or agreements of
any kind relating to any Proprietary Asset of the Company and the Company is not
obligated to pay any royalties or other payments to third parties with respect
to the marketing, sale, distribution, manufacture, license or use of any
Proprietary Asset or any other property or rights.
(c) No Infringement. To the best of the Company's
Knowledge, the Company has not violated or infringed, and is not currently
violating or infringing, and the Company has not received any communications
alleging that the Company (or any of its employees or consultants) has violated
or infringed or, by conducting its business as proposed, would violate or
infringe, any Proprietary Asset of any other person or entity.
(d) No Breach by Employee. The Company is not aware that
any employee or consultant of the Company is obligated under any agreement
(including licenses, covenants or commitments of any nature) or subject to any
judgment, decree or order of any court or administrative agency, or any other
restriction that would interfere with the use of his or her best efforts to
carry out his or her duties for the Company or to promote the interests of the
Company or that would conflict with the Company's business as proposed to be
conducted. The carrying on of the Company's business by the employees and
consultants of the Company and the conduct of the Company business as presently
proposed, will not, to the best of the Company's Knowledge, conflict with or
result in a breach of the terms, conditions or provisions of, or constitute a
default under, any contract, covenant or instrument under which any of such
employees or consultants or the Company is now obligated. The Company does not
believe it is or will be necessary to utilize any inventions of any employees of
the Company (or persons the Company currently intends to hire) made prior to
their employment by the Company which have not otherwise become property of the
Company. To the best of the Company's knowledge, at no time during the
conception of or reduction of any of the Proprietary Assets to practice was any
developer, inventor or other contributor to such patents operating under any
grants from any governmental entity or agency or private source, performing
research sponsored by any governmental entity or agency or private source or
subject to any employment agreement or invention assignment or nondisclosure
agreement or other obligation with any third party that could adversely affect
the Company's rights in such Proprietary Assets.
3.09 Compliance with Law and Charter Documents. The Company is
not in violation or default of any provisions of its Certificate of
Incorporation or Bylaws, both as amended, and to the best of the Company's
Knowledge, the Company is in compliance with all applicable statutes, laws,
regulations and executive orders of the United States of America and all states,
foreign countries or other governmental bodies and agencies having jurisdiction
over the Company's business or properties. The Company has not received any
notice of any violation of such statutes, laws, regulations or orders which has
not been remedied prior to the date hereof. The execution, delivery and
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performance of this Agreement and the Related Agreements and the consummation of
the transactions contemplated hereby or thereby will not be in conflict with or
constitute, with or without the passage of time or the giving of notice or both,
either a default under the Company's Certificate of Incorporation or Bylaws, or
any agreement or contract of the Company, or, to the best of the Company's
Knowledge, violate any statutes, laws, regulations or orders, or result in the
creation of any lien, charge or encumbrance upon any asset of the Company.
3.10 Material Agreements.
(a) List of Material Agreements. Attached to this
Agreement as Schedule 3.10 is a complete list of all agreements, contracts,
leases, licenses, instruments and commitments (oral or written) to which the
Company is a party or is bound that, individually or in the aggregate, are
material to the business, properties, financial condition, results of operation,
affairs or prospects of the Company ("Material Agreements"); provided that for
purposes of this Section 3.10 only, no agreement under which the only remaining
obligation of the Company is to make a payment of money in the amount of $5,000
or less will be deemed to be material to its business, properties, financial
condition, results of operations, affairs or prospects if the failure to make
such payment will not result in the loss by the Company of any rights that are
material to the conduct of its business.
(b) No Breach. The Company has not breached, nor does the
Company have any Knowledge of any claim or threat that the Company has breached,
any term or condition of any Material Agreement set forth in Schedule 3.10. Each
Material Agreement set forth in Schedule 3.10 is in full force and effect and,
to the Company's Knowledge, no other party to such Material Agreement is in
default thereunder. The Company is not a party to any agreement that restricts
its ability to market or sell any of its products (whether by territorial
restriction or otherwise).
3.11 Registration Rights. Except as set forth on Schedule
3.11, the Company has not granted or agreed to grant to any person or entity any
rights (including piggyback registration rights) to have any securities of the
Company registered with the United States Securities and Exchange Commission
("SEC") or any other governmental authority.
3.12 Charter Documents; Minutes. The Certificate of
Incorporation and the Bylaws of the Company are in the form previously provided
to the Investor. The minute books of the Company made available to the Investor
for inspection contain a complete summary of all meetings, consents and actions
of the board of directors and the stockholders of the Company since the time of
its incorporation, accurately reflecting all transactions referred to in such
minutes in all material respects.
3.13 Title to Property and Assets. The Company owns its
properties and assets free and clear of all mortgages, deeds of trust, liens,
encumbrances, security interests and claims except for statutory liens for the
payment of current taxes that are not yet delinquent and liens, encumbrances and
security interests which arise in the ordinary course of business and which do
not affect in any material respect the properties and assets of the Company.
With respect to the property and assets it leases, the Company is in compliance
with such leases and, to the best of the Company's Knowledge, the Company holds
valid leasehold interests in such assets free of any liens, encumbrances,
security interests or claims of any party other than the lessors of such
property and assets.
3.14 Financial Statements. Attached to this Agreement as
Schedule 3.14 is an unaudited balance sheet of the Company dated December 31,
1999 (the "Balance Sheet Date") and an unaudited income, statement of changes in
stockholder equity and statement of cash flows of the Company for the period
ended December 31,1999 together with an unaudited balance sheet dated March 31,
2000 and related statements of income, changes in stockholder's equity and cash
flows for the three-month period ended March 31, 2000 (all such financial
statements being collectively referred to herein as the "Financial Statements").
Such Financial Statements (a) are in accordance with the books and records of
the Company; (b) are true, correct and complete in all material respects and
present fairly in all material respects the financial condition of the Company
at the date or dates therein indicated and the results of operations for the
period or periods therein specified and (c) have been prepared in accordance
with generally accepted accounting principles applied on a consistent basis,
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except, as to the unaudited financial statement, for the omission of notes
thereto and normal year-end audit adjustments. The Company has good and
marketable title to all assets set forth on the balance sheets of the Financial
Statements, except for such assets as have been spent, sold or transferred in
the ordinary course of business since the Balance Sheet Date.
3.15 Certain Actions. Except as set forth on Schedule 3.15,
since the Balance Sheet Date, the Company has not: (a) declared or paid any
dividends, or authorized or made any distribution upon or with respect to any
class or series of its capital stock; (b) incurred any indebtedness for money
borrowed; (c) made any loans or advances to any person, other than ordinary
advances for travel expenses; (d) sold, exchanged or otherwise disposed of any
material assets or rights other than the sale of inventory in the ordinary
course of its business; or (e) entered into any transactions with any of its
officers, directors or employees or any entity controlled by any of such
individuals other than employment agreements in the ordinary course of business.
3.16 Activities Since Balance Sheet Date. Except as set forth
on Schedule 3.16, since the Balance Sheet Date, the Company has not:
(a) formed or acquired or disposed of any interest in any
corporation, partnership, joint venture, or other entity;
(b) written up, written down, or written off the book
value of any amount of assets;
(c) declared, paid, or set aside for payment any dividend
or distribution with respect to its capital stock; or
(d) redeemed, purchased, or otherwise acquired, or sold,
granted, or otherwise disposed of, directly or indirectly, any of its capital
stock or securities or any rights to acquire such capital stock or securities,
or agreed to changes in the terms and conditions of any such rights.
In addition to the foregoing, since the Balance Sheet Date,
there has not been:
(e) any damage, destruction or loss, whether or not
covered by insurance, materially and adversely affecting the assets, properties,
financial condition, operating results, prospects or business of the Company (as
presently conducted and as presently proposed to be conducted);
(f) any waiver by the Company of a valuable right or of a
material debt owed to it; or
(g) to the Company's Knowledge, any other event or
condition of any character which would materially and adversely affect the
assets, properties, financial condition, operating results or business of the
Company.
3.17 ERISA Plans. Schedule 3.17 identifies all employee
benefit plans or arrangements applicable to the employees of the Company, and
all material fixed or contingent liabilities or obligations of the Company with
respect to any person now or formerly employed by the Company, including pension
or thrift plans, individual or supplemental pension or accrued compensation
arrangements, contributions to hospitalization or other health or life insurance
programs, incentive plans, bonus arrangements, and vacation, sick leave,
disability, and termination arrangements or policies, including workers'
compensation policies. The Company shall furnish or make available to the
Investor true and complete copies of all written documents or information with
respect to employee matters and arrangements, including without limitation all
employee handbooks, rules, policies, plan documents, trust agreements,
employment agreements, summary plan descriptions, and descriptions of any
unwritten plans identified in Schedule 3.17. Any employee benefits and welfare
plans or arrangements identified in Schedule 3.17 were established and have been
executed, managed, and administered in all material respects in accordance with
all applicable requirements of the Internal Revenue Code of 1986, as amended
(the "Code"), and the Employee Retirement Income Security Act of 1974, as
amended, and other applicable laws. There is no governmental audit or
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examination of any of such plans or arrangements pending, nor, to the Knowledge
of the Company, threatened. There exists no action, suit, or claim (other than
routine claims for benefits) with respect to any of such plans or arrangements
pending, or, to the Knowledge of the Company, threatened, against any of such
plans or arrangements, and the Company knows of no facts which could give rise
to any such action, suit, or claim.
3.18 Insurance. The Company has in full force and effect fire
and casualty insurance policies as is customary for the type of business engaged
in by the Company, with extended coverage, sufficient in amount (subject to
reasonable deductibles) to allow it to replace any of its properties that might
be damaged or destroyed. True and complete copies of all such insurance policies
have previously been made available to the Investor for inspection and notice of
any termination or threatened termination of such policies has been made known
to the Investor.
3.19 Tax Returns and Payments. Neither the Company, nor any
entity to whose liabilities the Company has succeeded or assumed, has filed or
been included in a consolidated, unitary, or combined tax return with another
person. Except as set forth on Schedule 3.19, (a) the Company has filed all tax
returns and reports required to have been filed by or for it, including but not
limited to those with respect to income, payroll, property, employee
withholding, social security, unemployment, franchise, excise, use, and sales
taxes; (b) all material information set forth in such returns or reports is
accurate and complete; (c) the Company has paid or made adequate provision for
all taxes, additions to tax, penalties, and interest payable by the Company; (d)
to the best of the Company's Knowledge, no unpaid tax deficiency has been
asserted against or with respect to the Company by any taxing authority, and the
Company has not received written notice of any such assertion; (e) the Company
has collected or withheld all amounts required to be collected or withheld by it
for any taxes, and to the extent required by law, all such amounts have been
paid to the appropriate governmental agencies or set aside in appropriate
accounts for future payment when due; (f) the Company is in compliance with, and
its records contain all information and documents necessary to comply with, all
applicable information reporting and tax withholding requirements; (g) the
balance sheets contained in the Financial Statements fully and properly reflect,
as of the dates thereof, the liabilities of the Company for all accrued taxes,
additions to tax, penalties, and interest; (h) for periods ending after the date
of the most recent Financial Statements, the books and records of the Company
fully and properly reflect its liability for all accrued taxes, additions to
tax, penalties, and interest; (i) the Company has not granted, nor is it subject
to, any waiver of the period of limitations for the assessment of tax for any
currently open taxable period; (j) the Company has not made or entered into, and
holds no asset subject to, a consent filed pursuant to Section 341(f) of the
Code and the regulations thereunder or a "safe harbor lease" subject to former
Section 168(f)(8) of the Internal Revenue Code of 1954, as amended before the
Tax Reform Act of 1986, and the regulations thereunder; (k) the Company is not
required to include in income any amount for an adjustment pursuant to Section
481 of the Code or the regulations thereunder; and (l) the Company is not a
party to, or obligated under, any agreement or other arrangement providing for
the payment of any amount that would be an "excess parachute payment" under
Section 280G of the Code.
3.20 Employee Matters.
(a) The Company is not bound by or subject to any
contract, commitment or arrangement with any labor union, and to the Company's
Knowledge, no labor union has requested, sought or attempted to represent any
employees, representatives or agents of the Company. There is no strike or other
labor dispute involving the Company pending nor, to the Company's Knowledge,
threatened, nor is the Company aware of any labor organization activity
involving its employees.
(b) The Company is not aware that any officer or employee
intends to terminate his or her employment with the Company, nor does the
Company have any present intention to terminate the employment of any of its
officers or employees. Schedule 3.20(b) identifies all employees and consultants
of the Company and the title, term (if other than at will) and compensation of
each.
(c) To the Company's Knowledge, the Company (i) is in
full compliance with all applicable laws respecting employment and employment
practices, terms and conditions of employment, and wages and hours; (ii) is in
full compliance with all of its obligations under applicable workers
compensation laws, rules, and regulations; and (iii) is not engaged in any
unfair labor practice.
<PAGE>
(d) To the Company's Knowledge, no current employee,
director or officer has been indicted or convicted of a felony or misdemeanor
(other than traffic violations).
3.21 Environmental Matters.
(a) During the period that the Company has leased or
owned its properties or owned or operated any facilities, there have been no
disposals, releases or threatened releases of Hazardous Materials (as defined
below) on, from or under such properties or facilities. The Company has no
Knowledge of any presence, disposals, releases or threatened releases of
Hazardous Materials on, from or under any of such properties or facilities,
which may have occurred prior to the Company having taken possession of any of
such properties or facilities. For purposes of this Agreement, the terms
"disposal", "release", and "threatened release" shall have the definitions
assigned thereto by the Comprehensive Environmental Response, Compensation and
Liability Act of 1980, 42 U.S.C. ss. 9601 et seq., as amended ("CERCLA"). For
the purposes of this Section, "Hazardous Materials" shall mean any hazardous or
toxic substance, material or waste which is or becomes prior to the Closing
regulated under, or defined as a "hazardous substance", "pollutant",
"contaminant", "toxic chemical", "hazardous material", "toxic substance", or
"hazardous chemical" under (i) CERCLA; (ii) the Emergency Planning and Community
Right-to-Know Act, 42 U.S.C. Section 11001 et seq.; (iii) the Hazardous
Materials Transportation Act, 49 U.S.C. Section 1801, et seq.; (iv) the Toxic
Substances Control Act, 15 U.S.C. Section 2601 et seq.; (v) the Occupational
Safety and Health Act of 1970, 29 U.S.C. Section 651 et seq.; (vi) regulations
promulgated under any of the above statutes; or (vii) any applicable state or
local statute, ordinance, rule, or regulation that has a scope or purpose
similar to those statutes identified above.
(b) None of the Company's properties or facilities is in
material violation of any federal, state, or local law, ordinance, regulation,
or order relating to industrial hygiene or to the environmental conditions on,
under or about such properties or facilities, including, but not limited to,
soil and ground water condition. During the time that the Company has owned or
leased its properties and facilities, neither the Company nor, to the Company's
Knowledge, any third party, has used, generated, manufactured or stored on,
under or about such properties or facilities or transported to or from such
properties or facilities any Hazardous Materials.
(c) During the time that the Company has owned or leased
its properties and facilities, there has been no litigation brought or
threatened against the Company, or any settlement reached by the Company with,
any party or parties alleging the presence, disposal, release or threatened
release of any Hazardous Materials on, from or under any of such properties or
facilities.
(d) During the period that the Company has owned or
leased its properties and facilities, no Hazardous Materials have been
transported from such properties or facilities to any site or facility now
listed or proposed for listing on the National Priorities List, at 40 C.F.R.
Part 300, or any list with a similar scope or purpose published by any state
authority.
3.22 Interested Party Transactions. Except as set forth on
Schedule 3.22, to the Company's Knowledge,
(a) no officer, employee or director of the Company or
any "affiliate" or "associate" (as those terms are defined in Rule 405 of the
1933 Act) has had, either directly or indirectly, a material interest in: (i)
any person or entity which purchases from or sells, licenses or furnishes to the
Company any goods, property, technology, intellectual or other property rights
or services; or (ii) any contract or agreement to which the Company is a party
or by which it may be bound or affected.
(b) the Company has no indebtedness to or with an
officer, employee, director, affiliate or associate.
<PAGE>
3.23 Use of Proceeds. The Company shall use the proceeds from
the sale of the Purchased Shares for the purposes identified on Schedule 3.23.
3.24 Disclosure. This Agreement and the Schedules and Exhibits
hereto (when read together) do not contain any untrue statement of a material
fact and do not omit to state a material fact necessary to make the statements
therein or herein not misleading.
3.25 Real Property Holding Corporation Status. Since its
inception, the Company has not been a "United States real property holding
corporation", as defined in Section 897(c)(2) of the Code, and in Section
1.897-2(b) of the Treasury Regulations issued thereunder (the "Regulations"),
and the Company has filed with the Internal Revenue Service all statements, if
any, with its United States income tax returns which are required under Section
1.897-2(h) of the Regulations.
3.26 Tax Elections. The Company has not elected pursuant to
the Code to be treated as an "S" corporation under Section 1362(a) of the Code
or a collapsible corporation pursuant to Section 341(f) of the Code, nor has it
made any other elections pursuant to the Code (other than elections which relate
solely to matters of accounting, depreciation or amortization) which would have
a material affect on the Company, its financial condition, its business as
presently conducted or presently properties or material assets.
3.27 No Material Undisclosed Liabilities.
(a) There is no liability or obligation of the Company of
any nature, whether absolute, accrued, contingent, or otherwise, in the amount
of $5,000 or more individually, or $10,000 or more in the aggregate, other than:
(i) the liabilities and obligations that are fully
reflected, accrued or reserved against on the balance sheets of the Financial
Statements, for which the reserves are appropriate and reasonable, or incurred
in the ordinary course of business and consistent with past practices;
(ii) the contractual obligations disclosed on
Schedules 3.10; and
(iii) the liabilities and obligations disclosed on
Schedule 3.27.
(b) The Company is not signatory to, and is not in any
manner a guarantor, endorser, assumptor or otherwise primarily or secondarily
liable for or responsible for the payment of, any notes payable or other
obligations other than those set forth in the Financial Statements.
4. REPRESENTATIONS, WARRANTIES AND CERTAIN AGREEMENTS OF INVESTOR. The
Investor hereby represents and warrants to, and agrees with, the Company that:
4.1 Authorization. This Agreement constitutes, and the Related
Agreements, when executed will constitute, the Investor's valid and legally
binding obligation, enforceable in accordance with its terms except as may be
limited by (i) applicable bankruptcy, insolvency, reorganization or other laws
of general application relating to or affecting the enforcement of creditors'
rights generally and (ii) the effect of rules of law governing the availability
of equitable remedies. The Investor represents that it has full power and
authority to enter into this Agreement and the Related Agreements. All corporate
action on the part of the Investor, its officers, directors and stockholders
necessary for the authorization, execution, delivery of and the performance of
all obligations of the Investor under, this Agreement and the Related Agreements
and the authorization, issuance and delivery of the Investor Shares has been
taken or will be taken prior to the Closing.
<PAGE>
4.2 Purchase for Own Account. The Purchased Shares and the
Warrants to be purchased by the Investor hereunder will be acquired for
investment for the Investor's own account, not as a nominee or agent, and not
with a view to the public resale or distribution thereof within the meaning of
the Act, and the Investor has no present intention of selling, granting any
participation in, or otherwise distributing the same. The Investor has not been
formed for the specific purpose of acquiring the Purchased Shares or the
Warrants.
4.3 Disclosure of Information. The Investor has received or
has had full access to all the information it considers necessary or appropriate
to make an informed investment decision with respect to the Purchased Shares and
the Warrants to be purchased by the Investor under this Agreement. The Investor
further has had an opportunity to ask questions and receive answers from the
Company regarding the terms and conditions of the offering of the Purchased
Shares and the Warrants and to obtain additional information (to the extent the
Company possessed such information or could acquire it without unreasonable
effort or expense) necessary to verify any information furnished to the Investor
or to which the Investor had access. The foregoing, however, does not in any way
limit or modify the representations and warranties made by the Company in
Section 3.
4.4 Accredited Investor Status. The Investor is an "accredited
investor" within the meaning of Regulation D promulgated under the Act.
4.5 Investment Experience. The Investor understands that the
acquisition of the Purchased Shares and the Warrants involves substantial risk.
The Investor: (i) has experience as an investor in securities of companies in
the development stage and acknowledges that it is able to fend for itself, can
bear the economic risk of its acquisition of the Purchased Shares and the
Warrants and has such knowledge and experience in financial or business matters
that it is capable of evaluating the merits and risks of this acquisition of the
Purchased Shares and the Warrants and protecting its own interests in connection
with this acquisition and/or (ii) has a preexisting personal or business
relationship with the Company and certain of its officers, directors or
controlling persons of a nature and duration that enables the Investor to be
aware of the character, business acumen and financial circumstances of such
persons.
4.6 Restricted Securities. The Investor understands that the
Purchased Shares and the Warrants are characterized as "restricted securities"
under the Act inasmuch as they are being acquired from the Company in a
transaction not involving a public offering and that under the Act and
applicable rules and regulations thereunder such securities may be resold
without registration under the Act only in certain limited circumstances. In
this connection, the Investor represents that it is familiar with Rule 144 of
the rules and regulations promulgated under the Act ("Rule 144"), as presently
in effect, and understands the resale limitations imposed thereby and by the
Act. The Investor understands that the Company is under no obligation to
register any of the securities sold hereunder except as provided in the Investor
Rights Agreement. The Investor understands that no public market now exists for
any of the Purchased Shares or the Warrants and that it is uncertain whether a
public market will ever exist for the Purchased Shares, the Warrants, the
Conversion Shares or the Warrant Shares.
4.7 Further Limitations on Disposition. Without in any way
limiting the representations set forth above, the Investor further agrees not to
make any disposition of all or any portion of the Purchased Shares, the
Warrants, the Conversion Shares or the Warrant Shares unless and until:
(a) there is then in effect a registration statement under
the 1933 Act covering such proposed disposition and such disposition is made in
accordance with such registration statement; or
(b) (i) the Investor shall have notified the Company of
the proposed disposition and shall have furnished the Company with a statement
of the circumstances surrounding the proposed disposition, and (ii) the Investor
shall have furnished the Company, at the expense of the Investor or its
transferees, with an opinion of counsel, reasonably satisfactory to the Company,
that such disposition will not require registration of such securities under the
Act.
4.8 Legends. It is understood that the certificates evidencing
the Purchased Shares, the Warrants, the Conversion Shares, the Warrant Shares
and the Investor Shares will bear the legends set forth below:
<PAGE>
(a) THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR UNDER
THE SECURITIES LAWS OF ANY STATE. THESE SECURITIES ARE SUBJECT TO RESTRICTIONS
ON TRANSFERABILITY AND RESALE AND MAY NOT BE TRANSFERRED OR RESOLD EXCEPT AS
PERMITTED UNDER THE ACT AND THE APPLICABLE STATE SECURITIES LAWS, PURSUANT TO
REGISTRATION OR EXEMPTION THEREFROM. INVESTORS SHOULD BE AWARE THAT THEY MAY BE
REQUIRED TO BEAR THE FINANCIAL RISKS OF THIS INVESTMENT FOR AN INDEFINITE PERIOD
OF TIME. THE ISSUER OF THESE SECURITIES MAY REQUIRE AN OPINION OF COUNSEL IN
FORM AND SUBSTANCE SATISFACTORY TO THE ISSUER TO THE EFFECT THAT ANY PROPOSED
TRANSFER OR RESALE IS IN COMPLIANCE WITH THE ACT AND ANY APPLICABLE STATE
SECURITIES LAWS.
(b) Any legend required by state securities laws,
including a legend on the Purchased Shares substantially in the form of the
following:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE: (1) ARE CONVERTIBLE
INTO SHARES OF COMMON STOCK OF THE COMPANY AT THE OPTION OF THE HOLDER
AT ANY TIME PRIOR TO AUTOMATIC CONVERSION THEREOF; AND (2)
AUTOMATICALLY CONVERT INTO COMMON STOCK OF THE COMPANY IN THE EVENT OF
A PUBLIC OFFERING MEETING CERTAIN REQUIREMENTS PURSUANT TO AND UPON THE
TERMS AND CONDITIONS SPECIFIED IN THE COMPANY'S CERTIFICATE OF
DESIGNATION. A COPY OF SUCH CERTIFICATE OF DESIGNATION MAY BE OBTAINED,
WITHOUT CHARGE, AT THE COMPANY'S PRINCIPAL OFFICE.
The legend set forth in (a) above shall be removed by the Company from
any certificate evidencing Purchased Shares, Conversion Shares or Warrant Shares
in connection with any transfer of such shares upon delivery to the Company of
an opinion by counsel, reasonably satisfactory to the Company, that a
registration statement under the Act is at that time in effect with respect to
the legended security or that such security can be freely transferred in a
public sale pursuant to Rule 144.
5. CONDITIONS TO INVESTOR'S OBLIGATIONS AT CLOSING. The
obligations of the Investor to the Company under this Agreement are subject to
the fulfillment or waiver, on or before the Closing, of each of the following
conditions, the waiver of which shall not be effective against the Investor if
the Investor does not consent to such waiver, which consent may be given by
written communication to the Company or its counsel:
5.1 Representations and Warranties True. Each of the
representations and warranties of the Company contained in Section 3 shall be
true and correct on and as of the Closing with the same effect as though such
representations and warranties had been made on and as of the date of the
Closing.
5.2 Due Diligence. The Investor shall have completed, to its
sole satisfaction, its due diligence of the Company.
5.3 Performance. The Company shall have performed and complied
with all agreements, obligations and conditions contained in this Agreement that
are required to be performed or complied with by it on or before the Closing and
shall have obtained all approvals, consents and qualifications necessary to
complete the purchase and sale described herein.
5.4 Series A Certificate. The Series A Certificate shall have
been duly adopted by the Company by all necessary corporate action of its Board
of Directors and stockholders, and shall have been duly filed with and accepted
by the Delaware Secretary of State.
<PAGE>
5.5 Compliance Certificate. The Company shall have delivered
to the Investor at the Closing a certificate signed on its behalf by its
President, Chief Executive Officer, or Chief Financial Officer certifying that
the conditions specified in Section 5.1 and Sections 5.3 through 5.5 have been
fulfilled and stating that there shall have been no material adverse change in
the business, affairs, prospects, operations, properties, assets or condition of
the Company since the date of this Agreement.
5.6 Securities Exemptions. The offer and sale of the Purchased
Shares to the Investor pursuant to this Agreement shall be exempt from the
registration requirements of the Act and the registration and/or qualification
requirements of all other applicable state securities laws.
5.7 Proceedings and Documents. All corporate and other
proceedings in connection with the transactions contemplated at the Closing and
all documents incident thereto shall be reasonably satisfactory in form and
substance to the Investor and to the counsel for the Investor, and they shall
each have received all such counterpart originals and certified or other copies
of such documents as they may reasonably request. Such documents shall include
(but not be limited to) the following:
(a) Certified Charter Documents. A copy of the Certificate
of Incorporation, Series A Certificate and Bylaws of the Company (as amended
through the date of the Closing), certified by the Secretary of the Company as
true and correct copies thereof as of the Closing.
(b) Secretary's Incumbency Certificate. A certificate of
the Secretary or an Assistant Secretary or other officer of the Company
certifying the names of the officers of the Company authorized to sign this
Agreement, the Related Agreements, the certificates for the Purchased Shares and
the other documents, instruments or certificates to be delivered pursuant to
this Agreement by the Company or any of its officers, together with the true
signatures of such officers.
(c) Corporate Actions. A copy of the resolutions of the
Board of Directors and the stockholders of the Company evidencing the approval
of the Series A Certificate, the approval of this Agreement, the Related
Agreements, the issuance of the Purchased Shares and the other matters
contemplated hereby, certified by the Secretary of the Company to be true,
complete and correct.
(d) Good Standing Certificates. A certificate of good
standing of the Company issued by the Delaware Secretary of State, dated no
earlier than ten (10) days prior to the date of Closing.
5.8 Board of Directors. All appropriate action shall be taken
to ensure that the Company's Board of Directors consists of five (5) directors
and that the directors are Christopher Kravas, Dennis Springer, Allison
Stollmeyer and two vacancies to be elected by the holders of Common Stock
following the Closing.
5.9 No Material Change. There shall have been no material
adverse change in the business, affairs, prospects, operations, properties,
assets or condition of the Company since the date of this Agreement.
5.10 Opinion of Company Counsel. The Investor shall have
received an opinion from Mayer, Brown & Platt, counsel for the Company, dated as
of the date of the Closing, in form reasonably satisfactory to the Investor and
its counsel.
5.11 Investor Rights Agreement. The Company and the Investor
shall have executed and delivered the Investor Rights Agreement in the form
attached to this Agreement as Exhibit B (the "Investor Rights Agreement").
5.12 Stockholders' Agreement. The Company, the stockholders of
the Company named therein and the Investor shall have executed and delivered the
Stockholders' Agreement in the form attached as Exhibit C (the "Stockholder's
Agreement").
<PAGE>
5.13 Payment of Expenses. The Company shall have paid the
commissions, fees, costs and expenses identified in Section 7.11 of this
Agreement.
5.14 Key Man Insurance. The Company shall obtain and maintain,
for a period of three (3) years, term life insurance on the life of Christopher
Kravas for an amount of no less than $2.0 million with the Company and
beneficiary.
5.15 Directors and Officers Insurance. The Company shall
obtain and maintain for the period that precedes a Qualified IPO and provide
evidence of such prior to Closing Directors and Officers Insurance with coverage
limits that are customary for similarly situated companies, but in no event less
than $2.0 million per occurrence.
5.16 Cancellation of Common Stock. Christopher Kravas shall
have delivered to the Company for cancellation certificates representing Fifty
Thousand (50,000) shares of the Company's Common Stock, and receipt by Investor
of evidence satisfactory to it of such cancellation on the stock records of the
Company.
6. CONDITIONS TO THE COMPANY'S OBLIGATIONS AT CLOSING. The
obligations of the Company to the Investor under this Agreement are subject to
the fulfillment or waiver, on or before the Closing, of each of the following
conditions, the waiver of which shall not be effective against the Company if
the Company does not consent to such waiver, which consent may be given by
written communication to the Investor or its counsel:
6.1 Representations and Warranties. The representations and
warranties of the Investor contained in Section 4 shall be true and correct on
the date of the Closing with the same effect as though such representations and
warranties had been made on and as of the Closing.
6.2 Payment of Purchase Price. The Investor shall have
delivered to the Company the Purchase Price in accordance with Section 2.
6.3 Series A Certificate. The Series A Certificate shall have
been duly adopted by the Company by all necessary corporate action of its Board
of Directors and stockholders, and shall have been duly filed with and accepted
by the Delaware Secretary of State.
6.4 Securities Exemptions. The offer and sale of the Purchased
Shares and the Warrants to the Investor pursuant to this Agreement shall be
exempt from the registration requirements of the Act and the registration and/or
qualification requirements of all other applicable state securities laws.
6.5 Proceedings and Documents. All corporate and other
proceedings in connection with the transactions contemplated at the Closing and
all documents incident thereto shall be reasonably satisfactory in form and
substance to the Company and to the Company's legal counsel, and the Company
shall have received all such counterpart originals and certified or other copies
of such documents as it may reasonably request.
6.6 Investor Rights Agreement. The Company and the Investor
shall have executed and delivered the Investor Rights Agreement.
6.7 Stockholder's Agreement. The Company, the stockholders of
the Company named therein and the Investor shall have executed and delivered the
Stockholder's Agreement.
<PAGE>
7. MISCELLANEOUS.
7.1 Year 2000 Budget.Promptly following the Closing, the
Company shall provide the Investor with operating and capital budgets for the
calendar year 2000 which are reasonably acceptable to the Investor.
7.2 Survival of Warranties. The representations, warranties
and covenants of the Company and the Investor contained in or made pursuant to
this Agreement shall survive the execution and delivery of this Agreement and
the Closing and shall in no way be affected by any investigation of the subject
matter thereof made by or on behalf of the Investor, its counsel or the Company,
as the case may be.
7.3 Successors and Assigns. The terms and conditions of this
Agreement shall inure to the benefit of and be binding upon the respective
successors and assigns of the parties.
7.4 Governing Law; Venue; Waiver of Jury Trial. This Agreement
and the Related Agreements shall be governed by and construed under the internal
laws of the State of Delaware, without reference to principles of conflict of
laws or choice of laws. The venue for any claim, controversy or dispute which
arises between the parties hereto (with respect to this Agreement or any Related
Agreement) shall be the United States District Court for the District of
Delaware (or state court if federal jurisdiction does not apply) and the parties
hereby consent to the jurisdiction of such courts and waive any objection to
such venue. THE PARTIES TO THIS AGREEMENT HEREBY WAIVE THEIR RIGHT TO A TRIAL BY
JURY WITH RESPECT TO DISPUTES ARISING UNDER THIS AGREEMENT AND THE RELATED
AGREEMENTS AND CONSENT TO A BENCH TRIAL WITH THE APPROPRIATE JUDGE ACTING AS THE
FINDER OF FACT.
7.6 Counterparts. This Agreement may be executed in two or
more counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
7.7 Headings. The headings and captions used in this Agreement
are used for convenience only and are not to be considered in construing or
interpreting this Agreement. All references in this Agreement to sections,
paragraphs, exhibits and schedules shall, unless otherwise provided, refer to
sections and paragraphs hereof and exhibits and schedules attached hereto, all
of which exhibits and schedules are incorporated herein by this reference.
7.8 Notices. Any notice, request or other communication
required or permitted hereunder shall be in writing and shall be deemed to have
been duly given if personally delivered or if deposited in the U.S. mail by
registered or certified mail, return receipt requested, postage prepaid, as
follows:
If to the Investor: Net Value Holdings, Inc.
Two Penn Center Plaza
Suite 605
Philadelphia, Pennsylvania 19103
Attention: Andrew P. Panzo
with a copy (which shall not constitute notice hereunder) to:
Klehr, Harrison, Harvey,
Branzburg & Ellers LLP
260 S. Broad Street
Philadelphia, Pennsylvania 19102
Attention: Lawrence D. Rovin, Esq.
If to the Company: Webmodal, Inc.
129 East Calhoun Street, Unit B
Woodstock, Illinois 60098
Attention: Christopher R. Kravas
with a copy (which shall not constitute notice hereunder) to:
Mayer, Brown & Platt
190 S. LaSalle Street
Chicago, Illinois 60603-3441
Attention: Carol S. Rivers, Esquire
Any party hereto (and such party's permitted assigns) may by notice so given
change its address for future notices hereunder. Notice shall conclusively be
deemed to have been given when personally delivered or when deposited in the
mail in the mail in the manner set forth above.
<PAGE>
7.9 No Finder's Fees. Neither the Investor, the Company, or
any officer, director, or employee of the Investor or the Company (i) employed
any broker or finder, or (ii) incurred any liability whatsoever, for any
brokerage fees, commissions, or finders' fees in connection with the
transactions contemplated hereby. The Investor agrees to indemnify and to hold
harmless the Company from any liability for any commission or compensation in
the nature of a finders' or broker's fee (and any asserted liability) for which
the Investor or any of its officers, partners, employees, or representatives is
responsible. The Company agrees to indemnify and hold harmless the Investor from
any liability for any commission or compensation in the nature of a finder's or
broker's fee (and any asserted liability) for which the Company or any of its
officers, employees or representatives is responsible.
7.10 Attorneys' Fees. If any action at law or in equity is
necessary to enforce or interpret the terms of this Agreement, the Related
Agreements or the Series A Certificate, the prevailing party shall be entitled
to reasonable attorneys' fees, costs and necessary disbursements in addition to
any other relief to which such party may be entitled.
7.11 Costs, Expenses. The Company shall pay, or reimburse the
Investor, for all costs and out-of pocket expenses of the Investor reasonably
incurred in connection with (i) the Investor's due diligence performed in
connection with its proposed investment in the Company; and (ii) the
negotiation, preparation, execution and delivery of this Agreement, the Related
Agreements, the Warrant and the Series A Certificate (including without
limitation, the fees and expenses of counsel to the Investor), such fees and
expenses not to exceed $20,000.
7.12 Amendments and Waivers. Any term of this Agreement may be
amended and the observance of any term of this Agreement may be waived (either
generally or in a particular instance and either retroactively or
prospectively), only with the written consent of the Company and the Investor.
Any amendment or waiver effected in accordance with this Section 7.12 shall be
binding upon each holder of any Purchased Shares and/or Conversion Shares at the
time outstanding, each future holder of such securities, and the Company.
7.13 Severability. If one or more provisions of this Agreement
are held to be unenforceable under applicable law, such provision(s) shall be
excluded from this Agreement and the balance of the Agreement shall be
interpreted as if such provision(s) were so excluded and shall be enforceable in
accordance with its terms.
7.14 Entire Agreement. This Agreement, together with all
exhibits and schedules hereto, constitutes the entire agreement and
understanding of the parties with respect to the subject matter hereof and
supersedes any and all prior negotiations, correspondence, agreements,
understandings duties or obligations between the parties with respect to the
subject matter hereof.
7.15 Further Assurances. From and after the date of this
Agreement, upon the request of the Investor or the Company, the Company and the
Investor shall execute and deliver such instruments, documents or other writings
as may be reasonably necessary or desirable to confirm and carry out and to
effectuate fully the intent and purposes of this Agreement.
7.16 Mutual Drafting. This Agreement is the result of the
joint efforts of the Company and the Investor, and each provision hereof has
been subject to the mutual consultation, negotiation and agreement of the
parties and there shall be no construction against any party based on any
presumption of the party's involvement in the drafting thereof.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Series A
Convertible Preferred Stock Purchase Agreement as of the date first above
written.
THE COMPANY:
------------
WEBMODAL, INC.
a Delaware corporation
By:________________________________
Christopher R. Kravas, President
THE INVESTOR:
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NET VALUE HOLDINGS, INC.,
a Delaware corporation
By:________________________________
Andrew P. Panzo, President
<PAGE>
LIST OF SCHEDULES AND EXHIBITS
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SCHEDULES
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Schedule 3.2(c) Outstanding Warrants, Options and Reserved Shares
Schedule 3.2(d) Outstanding Security Holders
Schedule 3.8(a) Ownership of Proprietary Assets
Schedule 3.8(b) Licenses, Other Agreements relating to Proprietary Assets
Schedule 3.10 List of Material Contracts
Schedule 3.14A Year End Financial Statements
Schedule 3.14B Interim Financial Statements
Schedule 3.15 Certain Actions
Schedule 3.16 Activities Since Balance Sheet Date
Schedule 3.17 ERISA Plans
Schedule 3.19 Tax Matters
Schedule 3.20(b) Employee Matters
Schedule 3.23 Use of Proceeds
EXHIBITS
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Exhibit A Series A Certificate
Exhibit B Form of Investor Rights Agreement
Exhibit C Form of Stockholders' Agreement
<PAGE>
INVESTOR RIGHTS AGREEMENT
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THIS INVESTOR RIGHTS AGREEMENT (this "Agreement") is made and entered
into as of this 9th day of May, 2000, by and between WEBMODAL, INC., a Delaware
corporation (the "Company") and NET VALUE HOLDINGS, INC., a Delaware corporation
(the "Investor").
RECITALS
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A. The Investor has agreed to purchase from the Company, and the
Company has agreed to sell to the Investor, Five Hundred Sixty-Three Thousand
(563,000) shares of the Company's Series A Convertible Preferred Stock, par
value $1.00 per share (the "Series A Stock"), and a Warrant to purchase 170,000
shares of Common Stock, on the terms and conditions set forth in that certain
Series A Convertible Preferred Stock Purchase Agreement, of even date herewith,
by and between the Company and the Investor (the "Series A Agreement").
Capitalized terms used herein but not otherwise defined shall have the meaning
given such terms in the Series A Agreement.
B. The Series A Agreement provides that the Investor shall be granted
certain information, registration rights and rights of first refusal, all as
more fully set forth herein.
AGREEMENT
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NOW, THEREFORE, in consideration of the foregoing recitals and the
mutual promises hereinafter set forth, the parties hereto agree as follows:
1. INFORMATION RIGHTS.
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1.1. Financial Information. The Company covenants and agrees
that, commencing on the date of this Agreement, for so long as the Investor
holds any shares of Series A Stock and/or shares of Common Stock of the Company
issued upon the conversion of such shares of Series A Stock, the Company will:
(a) Annual Reports. Furnish to the Investor, as soon as
practicable and in any event within sixty (60) days after the end of each fiscal
year of the Company, a balance sheet as of the end of such fiscal year, a
statement of income and a statement of cash flows of the Company for such year,
setting forth in each case in comparative form the figures from the Company's
previous fiscal year (if any), all prepared in accordance with generally
accepted accounting principles and practices and audited by nationally
recognized independent certified public accountants.
(b) Quarterly Reports. Furnish to the Investor as soon as
practicable, and in any case within thirty (30) days of the end of each fiscal
quarter of the Company (except the last quarter of the Company's fiscal year),
quarterly and year-to-date unaudited financial statements, including an
unaudited balance sheet, an unaudited statement of income and an unaudited
statement of cash flows.
(c) Monthly Reports. Furnish to the Investor within
twenty (20) days of the end of each calendar month, monthly and year-to-date
unaudited financial statements, including an unaudited balance sheet, an
unaudited statement of income and an unaudited statement of cash flows, together
with an unaudited management report thereon (including a budget variance
analysis and management's discussion and analysis), if and to the extent any of
the information described in this Subsection (c) has been otherwise prepared by
the Company.
<PAGE>
(d) Annual Budget. Furnish to the Investor, as soon
as practicable and in any event no later than forty-five (45) days before the
close of each fiscal year of the Company, an annual operating plan and budget,
prepared on a quarterly basis, for the next immediate fiscal year, and on a
basis consistent with prior periods (including, among other items, appropriate
reserves, accruals and provisions for income taxes). The Company shall also
furnish to the Investor, within a reasonable time of its preparation, amendments
to the annual budget, if any. Such budget shall include underlying assumptions
and a qualitative description of the Company's plan by the Chief Executive
Officer, Chief Financial Officer, Chief Accounting Officer or Controller in
support of that budget.
(e) Material Events. The Company will notify the
Investor, as soon as possible and in any event within ten (10) days, of (i) the
existence and status of any litigation, pending or threatened, which could, in
the event of an unfavorable outcome, have a material adverse effect upon the
financial condition or results of operations of the Company considered in the
aggregate and (ii) a default or any event or occurrence which with lapse of time
or notice or both could become a default under the Series A Agreement. Such
notice shall contain a reasonably detailed statement outlining such default or
event, and the Company's proposed response.
(f) Confidentiality. The Investor agrees to hold all
information received pursuant to this Agreement in confidence, and not to use or
disclose any of such information to any third party, except to the extent such
information may be made publicly available by the Company; provided, however,
that the Investor may, in the ordinary course of business, provide the financial
results of the Company to third parties in the same manner such information is
provided by the Investor with respect to its portfolio companies.
(g) Substitute Financials. In the event the Company
fails to provide the reports required by Section 1.1(a), (b) or (c), the
Investor may give the Company notice requesting immediate delivery of such
reports. If the Company fails to deliver such reports within a two-week period
after receipt of such notice from the Investor, then the Investor, shall have
the right and authority, at the Company's sole expense, to request an audit by a
nationally recognized accounting firm of its choice (the expense of which shall
not exceed the usual and customary expenses associated with such an audit), such
that the reports are produced to the satisfaction of the Investor.
(h) Variance Reports; Certifications. Each of the
financial statements and other reports described in this Section 1.1 shall be
accompanied by a report of the Chief Financial Officer, Chief Accounting Officer
or Controller of the Company explaining any material variances in such financial
statement or report from the Company's operating plan and budget for the quarter
covered and stating that such financial statement or report fairly presents in
all material respects the financial position and financial results of the
Company for the period covered.
<PAGE>
1.2. Inspection Rights. The Company shall permit a designated
representative of the Investor, at the Investor's expense, to visit and inspect
the Company's properties, to examine its books of account, operational records,
and reports, and to discuss the business, operations, and financial affairs of
the Company with its respective officers, all at such reasonable times as may be
requested by the Investor.
1.3. Termination of Certain Rights. The Company's obligations
under Sections 1.1 and 1.2 above will terminate upon (i) the consummation of a
Qualifying IPO (as defined in Section 5(b) of the Company's Series A
Certificate) or (ii) a consolidation or merger of the Company with or into any
other corporation in which the holders of record of the Company's outstanding
shares of stock immediately before such consolidation or merger hold (by virtue
of securities issued as consideration in such transaction or otherwise) less
than a majority of the voting power of the surviving corporation of such
consolidation or merger, or the sale of all or substantially all of the assets
of the Company (a "Change of Control Event"). After a Qualifying IPO, the
Company shall provide the Investor with reports and information generally
provided to shareholders.
1.4. Rule 144A Information. At all times during which the
Company is neither subject to the reporting requirements of Section 13 or 15(d)
of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), nor
exempt from reporting pursuant to Rule 12g3-2(b) under the Exchange Act, the
Company shall provide in written form, upon the written request of the Investor,
or a prospective purchaser of securities of the Company from the Investor, all
information required by Rule 144A(d)(4)(i) of the Rules and Regulations
promulgated under the Securities Act (the "144A Information"). The Company's
obligations under this Section 1.4 shall at all times be contingent upon the
Investor's obtaining from a prospective purchaser an agreement to use its
commercially reasonable efforts to safeguard the 144A Information from
disclosure to anyone other than employees of the prospective purchaser who
require access to the 144A Information for the sole purpose of evaluating its
purchase of the Company's securities.
2. REGISTRATION RIGHTS.
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2.1. Definitions. For purposes of this Section 2.1:
(a) Registration. The terms "register," "registered,"
and "registration" refer to a registration effected by preparing and filing a
registration statement in compliance with the Securities Act, and the
declaration or ordering of effectiveness of such registration statement.
(b) Registrable Securities. The term "Registrable
Securities" means: (1) all the shares of Common Stock of the Company issued or
issuable upon the conversion of any shares of Series A Stock originally issued
to the Investor under the Series A Agreement or upon exercise of the Warrant
that are now owned or may hereafter be acquired by the Investor or the
Investor's permitted successors and assigns; and (2) any shares of Common Stock
of the Company issued as (or issuable upon the conversion or exercise of any
warrant, right or other security which is issued as) a dividend or other
distribution with respect to, or in exchange for or in replacement of, all such
shares of Common Stock described in clause (1) of this Section 2.1(b), excluding
in all cases, however, any Registrable Securities sold by a person in a
transaction in which rights under this Section 2.1 are not assigned in
accordance with this Agreement or any Registrable Securities sold to the public
or sold pursuant to Rule 144 promulgated under the Securities Act.
<PAGE>
(c) Holder. The term "Holder" means any person owning
of record Registrable Securities that have not been sold to the public or
pursuant to Rule 144 promulgated under the Securities Act or any assignee of
record of such Registrable Securities to whom rights under this Section 2 have
been duly assigned in accordance with this Agreement; provided, however, that
for purposes of this Agreement, a record holder of shares of Series A Stock
convertible into such Registrable Securities shall be deemed to be the Holder of
such Registrable Securities; provided, further, that the Company shall in no
event be obligated to register shares of Series A Stock, and that Holders of
Registrable Securities will not be required to convert their shares of Series A
Stock into Common Stock in order to exercise the registration rights granted
hereunder, until immediately before the closing of the offering to which the
registration relates.
(d) Form S-3. The term "Form S-3" means such form
under the Securities Act as is in effect on the date hereof or any successor
registration form under the Securities Act subsequently adopted by the SEC which
permits inclusion or incorporation of substantial information by reference to
other documents filed by the Company with the SEC.
(e) Securities Act. The term "Securities Act" means
the Securities Act of 1933, as amended.
(f) SEC. The term "SEC" or "Commission" means the
U.S. Securities and Exchange Commission.
2.2. Demand Registration.
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(a) Request by Holders. If the Company shall receive
at any time after ninety (90) days after the effective date of the Company's
initial public offering of its securities pursuant to a registration filed under
the Securities Act, a written request from the Holders of at least twenty-five
percent (25%) of the Registrable Securities that the Company file a registration
statement under the Securities Act covering the registration of Registrable
Securities pursuant to this Section 2.2 then the Company shall, within ten (10)
business days of the receipt of such written request, give written notice of
such request ("Request Notice") to all Holders, and effect, as soon as
practicable, the registration under the Securities Act of all Registrable
Securities which Holders request to be registered and included in such
registration by written notice given such Holders to the Company within twenty
(20) days after receipt of the Request Notice, subject only to the limitations
of this Section 2.2; provided that the Registrable Securities requested by all
Holders to be registered pursuant to such request must have an anticipated
aggregate public offering price (before any underwriting discounts and
commissions) of not less than Ten Million Dollars ($10,000,000).
(b) Underwriting. If the Holders initiating the
registration request under this Section 2.2 ("Initiating Holders") intend to
distribute the Registrable Securities covered by their request by means of an
underwriting, then they shall so advise the Company as a part of their request
<PAGE>
made pursuant to this Section 2.2 and the Company shall include such information
in the written notice referred to in Section 2.2(a). In such event, the right of
any Holder to include its Registrable Securities in such registration shall be
conditioned upon such Holder's participation in such underwriting and the
inclusion of such Holder's Registrable Securities in the underwriting (unless
otherwise mutually agreed by a majority in interest of the Initiating Holders
and such Holder) to the extent provided herein. All Holders proposing to
distribute their securities through such underwriting shall enter into an
underwriting agreement in customary form with the managing underwriter or
underwriters selected for such underwriting by the Company and a majority in
interest of the Initiating Holders. Notwithstanding any other provision of this
Section 2.2 to the contrary, if the underwriter(s) advise(s) the Company in
writing that marketing factors require a limitation of the number of securities
to be underwritten then the Company shall so advise all Holders of Registrable
Securities which would otherwise be registered and underwritten pursuant hereto,
and the number of Registrable Securities that may be included in the
underwriting shall be reduced as required by the underwriter(s) and allocated
among the Holders of Registrable Securities on a pro rata basis according to the
number of Registrable Securities held by each Holder requesting registration
(including the Initiating Holders); provided, however, that the number of shares
of Registrable Securities to be included in such underwriting and registration
shall not be reduced unless all other securities of the Company are first
entirely excluded from the underwriting and registration. Any Registrable
Securities excluded and withdrawn from such underwriting shall be withdrawn from
the registration.
(c) Maximum Number of Demand Registrations. The
Company is obligated to effect only one (1) Demand Registration pursuant to this
Section 2.2.
(d) Deferral. Notwithstanding anything to the
contrary contained in this Section 2.2, if the Company shall furnish to Holders
requesting the filing of a registration statement pursuant to this Section 2.2,
a certificate signed by the President or Chief Executive Officer of the Company
stating that in the good faith judgment of the Board of Directors of the
Company, it would be seriously detrimental to the Company and its stockholders
for such registration statement to be filed and it is, therefore, essential to
defer the filing of such registration statement, then the Company shall have the
right to defer such filing for a period of not more than 120 days after receipt
of the request of the Initiating Holders; provided, however, that the Company
may not utilize this right more than once in any twelve (12) month period.
(e) Expenses. All expenses incurred in connection
with a registration pursuant to this Section 2.2, including without limitation
all registration and qualification fees, printers' and accounting fees, fees and
disbursements of counsel for the Company, and the reasonable fees and
disbursements of one counsel for the selling Holders not exceeding $20,000
(excluding underwriters' discounts and commissions), shall be borne by the
Company. Each Holder participating in a registration pursuant to this Section
2.2 shall bear such Holder's proportionate share (based on the total number of
shares sold in such registration other than for the account of the Company) of
all discounts, commissions or other amounts payable to underwriters or brokers
in connection with such offering. Notwithstanding the foregoing, the Company
shall not be required to pay for any expenses of any registration proceeding
<PAGE>
begun pursuant to this Section 2.2 if the registration request is subsequently
withdrawn at the request of the Holders of a majority of the Registrable
Securities requested to be registered; provided however, that if at the time of
such withdrawal, the Holders have learned of a material adverse change in the
condition, business, or prospects of the Company not known to the Holders at the
time of their request for such registration and have withdrawn their request for
registration with reasonable promptness after learning of such material adverse
change, then the Holders shall not be required to pay any of such expenses and
shall retain their rights pursuant to this Section 2.2.
2.3. Piggyback Registrations.
-----------------------
(a) Registration Rights. The Company shall notify all
Holders of Registrable Securities in writing at least thirty (30) days prior to
filing any registration statement under the Securities Act for purposes of
effecting a public offering of securities of the Company, including, but not
limited to, registration statements relating to secondary offerings of
securities of the Company, but specifically excluding registration statements
relating to: (i) any registration under Section 2.2 or Section 2.4 of this
Agreement; or (ii) on Form S-8 related to any employee benefit plan or on Form
S-4 related to any corporate reorganization, business combination or acquisition
and will afford each such Holder an opportunity to include in such registration
statement all or any part of the Registrable Securities then held by such
Holder. Each Holder desiring to include in any such registration statement all
or any part of the Registrable Securities held by such Holder shall, within
twenty (20) days after receipt of the above-described notice from the Company,
so notify the Company in writing, and in such notice shall inform the Company of
the number of Registrable Securities such Holder wishes to include in such
registration statement. If a Holder decides not to include all of its
Registrable Securities in any registration statement thereafter filed by the
Company, such Holder shall nevertheless continue to have the right to include
any Registrable Securities in any subsequent registration statement or
registration statements as may be filed by the Company with respect to offerings
of its securities, all upon the terms and conditions set forth herein.
(b) Underwriting. If a registration statement under
which the Company gives notice under this Section 2.3 is for an underwritten
offering, then the Company shall so advise the Holders of Registrable
Securities. In such event, the right of any such Holder's Registrable Securities
to be included in a registration pursuant to this Section 2.3 shall be
conditioned upon such Holder's participation in such underwriting and the
inclusion of such Holder's Registrable Securities in the underwriting to the
extent provided herein. All Holders proposing to distribute their Registrable
Securities through such underwriting shall enter into an underwriting agreement
in customary form with the managing underwriter or underwriter(s) selected for
such underwriting by the Company. Notwithstanding any other provision of this
Agreement, if the managing underwriter determines in good faith that marketing
factors require a limitation of the number of shares to be underwritten, then
the managing underwriter may exclude shares (including Registrable Securities)
from the registration and the underwriting, and the number of shares that may be
included in the registration and the underwriting shall be allocated, first, to
the Company, and second, to each of the Holders requesting inclusion of their
Registrable Securities in such registration statement on a pro rata basis based
on the total number of Registrable Securities then held by each such Holder;
<PAGE>
provided, however, that the right of the underwriters to exclude shares
(including Registrable Securities) from the registration and underwriting as
described above shall be restricted so that (i) the number of Registrable
Securities included in any such registration is not reduced below twenty percent
(20%) of the shares included in the registration, except for a registration
relating to the Company's initial public offering from which all Registrable
Securities shall be excluded; and (ii) all shares that are not Registrable
Securities and are held by persons who are employees or directors of the Company
(or any subsidiary of the Company) shall first be excluded from such
registration and underwriting before any Registrable Securities are so excluded.
If any Holder disapproves of the terms of any such underwriting, such Holder may
elect to withdraw therefrom by written notice to the Company and the
underwriter, delivered at least ten (10) business days prior to the effective
date of the registration statement. Any Registrable Securities excluded or
withdrawn from such underwriting shall be excluded and withdrawn from the
registration. For any Holder which is a partnership or corporation, the
partners, retired partners and stockholders of such Holder, or the estates and
family members of any such partners and retired partners and any trusts for the
benefit of any of the foregoing persons shall be deemed to be a single "Holder,"
and any pro rata reduction with respect to such "Holder" shall be based upon the
aggregate amount of shares carrying registration rights owned by all entities
and individuals included in such "Holder," as defined in this sentence.
(c) Expenses. All expenses incurred in connection with a
registration pursuant to this Section 2.3 (excluding underwriters' and brokers'
discounts and commissions), including, without limitation all federal and "blue
sky" registration and qualification fees, printers' and accounting fees, fees
and disbursements of counsel for the Company and reasonable fees and
disbursements of one counsel for the selling Holders not exceeding $20,000 shall
be borne by the Company.
2.4. Form S-3 Registration. In case the Company shall receive
from any Holder or Holders of at least a majority of all Registrable Securities
a written request or requests that the Company effect a registration on Form S-3
and any related qualification or compliance with respect to all or a part of the
Registrable Securities owned by such Holder or Holders, then the Company will:
(a) Notice. Promptly give written notice of the proposed
registration and the Holder's or Holders' request therefor, and any related
qualification or compliance, to all other Holders of Registrable Securities; and
(b) Registration. As soon as practicable, effect such
registration and all such qualifications and compliance as may be so requested
and as would permit or facilitate the sale and distribution of all or such
portion of such Holder's or Holders' Registrable Securities as are specified in
such request, together with all or such portion of the Registrable Securities of
any other Holder or Holders joining in such request as are specified in a
written request given within twenty (20) days after receipt of such written
notice from the Company; provided, however, that the Company shall not be
obligated to effect any such registration, qualification or compliance pursuant
to this Section 2.4:
<PAGE>
(i) if Form S-3 is not available for such
offering by the Holders;
(ii) if the Holders, together with the
holders of any other securities of the Company entitled to inclusion in such
registration, propose to sell Registrable Securities and such other securities
(if any) at an aggregate price to the public of less than $2,000,000;
(iii) if the Company shall furnish to the
Holders a certificate signed by the President or Chief Executive Officer of the
Company stating that in the good faith judgment of the Board of Directors of the
Company, it would be seriously detrimental to the Company and its stockholders
for such Form S-3 registration to be effected at such time, in which event the
Company shall have the right to defer the filing of the Form S-3 registration
statement no more than once during any twelve month period for a period of not
more than 120 days after receipt of the request of the Holder or Holders under
this Section 2.4;
(iv) if the Company has, within the twelve
(12) month period preceding the date of such request, already effected one (1)
registration on Form S-3 for the Holders pursuant to this Section 2.4; or
(v) in any particular jurisdiction in
which the Company would be required to qualify to do business or to execute a
general consent to service of process or to subject itself to taxation in
effecting such registration, qualification or compliance.
(c) Underwriting. If the Holders initiating the
registration request under this Section 2.4 (the "Initiating Holders") intend to
distribute the Registrable Securities covered by their request by means of an
underwriting, then they shall so advise the Company as part of their request
made pursuant to this Section 2.4 and the Company shall include such information
in the written notice referred to in Section 2.4(a). In such event, the right of
any Holder to include its Registrable Securities in such registration shall be
conditioned upon such Holder's participation in such underwriting and the
inclusion of such Holder's Registrable Securities in the underwriting (unless
otherwise mutually agreed by a majority in interest of the Initiating Holders
and such Holder) to the extent provided herein. All Holders proposing to
distribute their securities through such underwriting shall enter into am
underwriting agreement in customary form with the managing underwriter or
underwriters selected for such underwriting by the Company and a majority of the
Initiating Holders. Notwithstanding any other provision of this Section 2.4 to
the contrary, if the underwriter(s) advise(s) the Company in writing that
marketing factors require a limitation of the number of securities to be
underwritten then the Company shall so advise all Holders of Registrable
Securities which would otherwise be registered and underwritten pursuant
thereto, and the number of Registrable Securities that may be included in the
underwriting shall be reduced as required by the underwriter(s) and allocated
among the Holders of Registrable Securities on a pro rata basis according to the
number of Registrable Securities held by each Holder requesting registration
(including the Initiating Holders); provided, however, that the number of shares
of Registrable Securities to be included in such underwriting and registration
shall not be reduced unless all other securities of the Company are first
entirely excluded from the underwriting and registration. Any Registrable
Securities excluded and withdrawn from such underwriting shall be withdrawn from
the registration.
<PAGE>
(d) Expenses. Subject to the foregoing, the Company shall
file a Form S-3 registration statement covering the Registrable Securities and
other securities so requested to be registered pursuant to this Section 2.4 as
soon as practicable after receipt of the request or requests of the Holders for
such registration. The Company shall pay all expenses incurred in connection
with each registration requested pursuant to this Section 2.4, (excluding
underwriters' or brokers' discounts and commissions), including without
limitation all filing, registration and qualification, printers' and accounting
fees and the reasonable fees and disbursements of one counsel for the selling
Holder or Holders not exceeding $20,000 and counsel for the Company.
(e) Not Demand Registration. Form S-3 registrations shall
not be deemed to be a demand registration as described in Section 2.2 above.
(f) Number of Form S-3 Registrations. Upon request in
accordance with this Section 2.4, the Company is obligated to effect four (4)
such registrations pursuant to this Section 2.4.
2.5. Obligations of the Company. Whenever required, upon
request in accordance with this Section 2.5, to effect the registration of any
Registrable Securities under this Agreement, the Company shall, as expeditiously
and as reasonably as possible:
(a) Prepare and file with the SEC a registration
statement with respect to such Registrable Securities and use its best efforts
to cause such registration statement to become effective, and, upon the request
of the Holders of a majority of the Registrable Securities registered
thereunder, keep such registration statement effective for up to ninety (90)
days.
(b) Prepare and file with the SEC such amendments and
supplements to such registration statement and the prospectus used in connection
with such registration statement as may be necessary to comply with the
provisions of the Securities Act with respect to the disposition of all
securities covered by such registration statement.
(c) Furnish to the Holders such number of copies of a
prospectus, including a preliminary prospectus, in conformity with the
requirements of the Securities Act, and such other documents as they may
reasonably request in order to facilitate the disposition of the Registrable
Securities owned by them that are included in such registration.
(d) Use its best efforts to register and qualify the
securities covered by such registration statement under such other securities or
"blue sky" laws of such jurisdictions as shall be reasonably requested by the
Holders, provided that the Company shall not be required in connection therewith
or as a condition thereto to qualify to do business or to file a general consent
to service of process or to subject itself to taxation in any such states or
jurisdictions.
(e) In the event of any underwritten public offering,
enter into and perform its obligations under an underwriting agreement, a
custody agreement and a power of attorney in usual and customary form, with the
managing underwriter(s) of such offering and furnish customary opinions and
certificates in connection therewith. Each Holder participating in such
underwriting shall also enter into and perform its obligations under each such
agreement and provide such documents.
<PAGE>
(f) Notify each Holder of Registrable Securities covered
by such registration statement at any time when a prospectus relating thereto is
required to be delivered under the Securities Act of the happening of any event
as a result of which the prospectus included in such registration statement, as
then in effect, includes an untrue statement of a material fact or omits to
state a material fact required to be stated therein or necessary to make the
statements therein not misleading in the light of the circumstances then
existing.
(g) Furnish, at the request of any Holder requesting
registration of Registrable Securities, on the date that such Registrable
Securities are delivered to the underwriters for sale, if such securities are
being sold through underwriters, or, if such securities are not being sold
through underwriters, on the date that the registration statement with respect
to such securities becomes effective, (i) an opinion, dated as of such date, of
the counsel representing the Company for the purposes of such registration, in
form and substance as is customarily given to underwriters in an underwritten
public offering and reasonably satisfactory to a majority in interest of the
Holders requesting registration, addressed to the underwriters, if any, and to
the Holders requesting registration of Registrable Securities and (ii) a
"comfort" letter dated as of such date, from the independent certified public
accountants of the Company, in form and substance as is customarily given by
independent certified public accountants to underwriters in an underwritten
public offering and reasonably satisfactory to a majority in interest of the
Holders requesting registration, addressed to the underwriters, if any, and to
the Holders requesting registration of Registrable Securities.
2.6. Furnish Information. It shall be a condition precedent to
the obligations of the Company to take any action pursuant to Sections 2.2, 2.3
or 2.4 that the selling Holders shall furnish to the Company such information
regarding themselves, the Registrable Securities held by them, and the intended
method of disposition of such securities as shall be required to timely effect
the registration of their Registrable Securities.
2.7. Delay of Registration. No Holder shall have any right to
obtain or seek an injunction restraining or otherwise delaying any such
registration as the result of any controversy that might arise with respect to
the interpretation or implementation of this Section 2.
2.8. Indemnification. In the event any Registrable Securities
are included in a registration statement under Sections 2.2, 2.3 or 2.4:
(a) By the Company. To the extent permitted by law, the
Company will indemnify and hold harmless each Holder selling securities, the
partners, officers and directors of each such Holder, any underwriter (as
defined in the Securities Act) for such Holder and each person, if any, who
controls such Holder or underwriter within the meaning of the Securities Act or
the Securities Exchange Act of 1934, as amended, (the "1934 Act"), against any
losses, claims, damages, or liabilities (joint or several) to which they may
become subject under the Securities Act, the 1934 Act or other federal or state
law, insofar as such losses, claims, damages, or liabilities (or actions in
respect thereof) arise out of or are based upon any of the following statements,
omissions or violations (collectively a "Violation"):
<PAGE>
(i) any untrue statement or alleged untrue
statement of a material fact contained in such registration statement, including
any preliminary prospectus or final prospectus contained therein or any
amendments or supplements thereto;
(ii) the omission or alleged omission to
state therein a material fact required to be stated therein, or necessary to
make the statements therein not misleading, or
(iii) any violation or alleged violation by
the Company of the Securities Act, the 1934 Act, any federal or state securities
law or any rule or regulation promulgated under the Securities Act, the 1934 Act
or any federal or state securities law in connection with the offering covered
by such registration statement; and the Company will reimburse each such Holder,
partner, officer or director, underwriter or controlling person for any legal or
other expenses reasonably incurred by them, as incurred, in connection with
investigating or defending any such loss, claim, damage, liability or action;
provided, however, that the indemnity agreement contained in this Section 2.8
shall not apply to (A) any such loss, claim, damage or liability (or actions in
respect thereto) that results from a Violation contained in a preliminary
prospectus or a final prospectus which was corrected in the final prospectus or
in the final prospectus as then amended or supplemented and any Holder (if the
Holder is selling securities and no underwriter is involved) or the underwriter
sold securities to a person to whom there was not sent or given, at or prior to
the written confirmation of such sale, a copy of the final prospectus or of the
final prospectus as then amended or supplemented in any case where such delivery
is required by the Act if the Company has previously furnished copies thereof in
sufficient quantity to such Holder or underwriter or (B) amounts paid in
settlement of any such loss, claim, damage, liability or action if such
settlement is effected without the consent of the Company (which consent shall
not be unreasonably withheld), nor shall the Company be liable in any such case
for any such loss, claim, damage, liability or action to the extent that it
arises out of or is based upon a Violation which occurs in reliance upon and in
conformity with written information furnished expressly for use in connection
with such registration by such Holder, partner, officer, director, underwriter
or controlling person of such Holder, including without limitation, any
information furnished by any Holder of the Company pursuant to Section 2.6
hereof.
(b) By Selling Holders. To the extent permitted by
law, each selling Holder will indemnify and hold harmless the Company, each of
its directors, each of its officers who have signed the registration statement,
each person, if any, who controls the Company within the meaning of the
Securities Act, any underwriter and any other Holder selling securities under
such registration statement or any of such other Holder's partners, directors or
officers or any person who controls such Holder within the meaning of the
Securities Act or the 1934 Act (collectively "Company Indemnities"), against any
losses, claims, damages or liabilities (joint or several) to which the Company
or any such Company Indemnities may become subject under the Securities Act, the
1934 Act or other federal or state law, insofar as such losses, claims, damages
<PAGE>
or liabilities (or actions in respect thereto) arise out of or are based upon
any Violation, in each case to the extent (and only to the extent) that such
Violation occurs in reliance upon and in conformity with written information
furnished by such Holder expressly for use in connection with such registration;
and each such Holder will reimburse any legal or other expenses reasonably
incurred by the Company or any such Company Indemnities in connection with
investigating or defending any such loss, claim, damage, liability or action;
provided, however, that the indemnity agreement contained in this Section 2.8
shall not apply to (i) any loss, claim, damage or liability (or actions in
respect thereto) that results from a Violation contained in a preliminary
prospectus or a final prospectus which was corrected in the final prospectus or
in the final prospectus as then amended or supplemented and the Company (if the
Company is selling securities and no underwriter is involved) or the underwriter
sold securities to a person to whom there was not sent or given, at or prior to
the written confirmation of such sale, a copy of the final prospectus or of the
final prospectus as then amended or supplemented in any case where such delivery
is required by the Act if the Company has previously furnished copies thereof in
sufficient quantity to such underwriter or (ii) amounts paid in settlement of
any such loss, claim, damage, liability or action if such settlement is effected
without the consent of the Holder, which consent shall not be unreasonably
withheld; and provided, further, that the total amounts payable in indemnity by
a Holder under this Section 2.8 in respect of any Violation shall not exceed the
gross proceeds received by such Holder in the registered offering out of which
such Violation arises.
(c) Notice. Promptly after receipt by an indemnified
party under this Section 2.8 of notice of the commencement of any action
(including any governmental action), such indemnified party will, if a claim in
respect thereof is to be made against any indemnifying party under this Section
2.8, deliver to the indemnifying party a written notice of the commencement
thereof and the indemnifying party shall have the right to participate in, and,
to the extent the indemnifying party so desires, jointly with any other
indemnifying party similarly noticed, to assume the defense thereof with counsel
mutually satisfactory to the parties; provided, however, that an indemnified
party shall have the right to retain its own counsel, with the reasonable fees
and expenses to be paid by the indemnifying party, if representation of such
indemnified party by the counsel retained by the indemnifying party would be
inappropriate due to actual or potential conflict of interests between such
indemnified party and any other party represented by such counsel in such
proceeding. The failure to deliver written notice to the indemnifying party
within a reasonable time of the commencement of any such action, if prejudicial
to its ability to defend such action, shall relieve such indemnifying party of
any liability to the indemnified party under this Section 2.8, but the omission
so to deliver written notice to the indemnifying party will not relieve it of
any liability that it may have to any indemnified party otherwise than under
this Section 2.8.
(d) Contribution. In order to provide for just and
equitable contribution to joint liability under the Securities Act in any case
in which either (i) any Holder exercising rights under this Agreement, or any
controlling person of any such Holder, makes a claim for indemnification
pursuant to this Section 2.8, but it is judicially determined (by the entry of a
final judgment or decree by a court of competent jurisdiction and the expiration
<PAGE>
of time to appeal or the denial of the last right of appeal) that such
indemnification may not be enforced in such case notwithstanding the fact that
this Section 2.8 provides for indemnification in such case, or (ii) contribution
under the Securities Act may be required on the part of any such selling Holder
or any such controlling person in circumstances for which indemnification is
provided under this Section 2.8; then, and in each such case, the Company and
such Holder will contribute to the aggregate losses, claims, damages or
liabilities to which they may be subject (after contribution from others) in
such proportion so that such Holder is responsible for the portion represented
by the percentage that the public offering price of its Registrable Securities
offered by and sold under the registration statement bears to the public
offering price of all securities offered by and sold under such registration
statement, and the Company and other selling Holders are responsible for the
remaining portion; provided, however, that, in any such case, (a) no such Holder
will be required to contribute any amount in excess of the public offering price
of all such Registrable Securities offered and sold by such Holder pursuant to
such registration statement; and (b) no person or entity guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
will be entitled to contribution from any person or entity who was not guilty of
such fraudulent misrepresentation.
(e) Survival. The obligations of the Company and
Holders under this Section 2.8 shall survive the completion of any offering of
Registrable Securities in a registration statement, and otherwise.
2.9. "Lock-up" Agreement. Each Holder hereby agrees that it
shall not, to the extent requested by the Company or an underwriter of
securities of the Company, sell or otherwise transfer or dispose of any
Registrable Securities or other shares of stock of the Company then owned by
such Holder (other than to donees or partners of the Holder who agree to be
similarly bound) for up to one hundred eighty (180) days following the effective
date of a registration statement of the Company filed under the Securities Act;
provided, however, that:
(a) such agreement shall be applicable only to the first
such registration statement of the Company which covers securities to be sold on
its behalf to the public in an underwritten offering but not to Registrable
Securities sold pursuant to such registration statement; and
(b) all officers, directors then holding Common Stock and
all holders of more than 10% of the outstanding capital stock of the Company
enter into similar agreements.
In order to enforce the foregoing covenant, the Company shall have the right to
place restrictive legends on the certificates representing the shares subject to
this Section and to impose stop transfer instructions with respect to the
Registrable Securities and such other shares of stock of each Holder (and the
shares or securities of every other person subject to the foregoing restriction)
until the end of such period.
2.10. Rule 144 Reporting. With a view to making available the
benefits of certain rules and regulations of the Commission which may at any
time permit the sale of the Registrable Securities to the public without
registration, after such time as a public market exists for the Common Stock of
the Company, the Company agrees to:
<PAGE>
(a) Make and keep public information available, as those
terms are understood and defined in Rule 144 under the Securities Act, at all
times after the effective date of the first registration under the Securities
Act filed by the Company for an offering of its securities to the general
public;
(b) Use its best efforts to file with the Commission in
a timely manner all reports and other documents required of the Company under
the Securities Act and the 1934 Act (at any time after it has become subject to
such reporting requirements); and
(c) So long as a Holder owns any Registrable Securities,
furnish to the Holder forthwith upon request a written statement by the Company
as to its compliance with the reporting requirements of said Rule 144 (at any
time after 90 days after the effective date of the first registration statement
filed by the Company for an offering of its securities to the general public),
and of the Securities Act and the 1934 Act (at any time after it has become
subject to the reporting requirements of the 1934 Act), a copy of the most
recent annual or quarterly report of the Company, and such other reports and
documents of the Company as a Holder may reasonably request in availing itself
of any rule or regulation of the Commission allowing a Holder to sell any such
securities without registration (at any time after the Company has become
subject to the reporting requirements of the 1934 Act).
2.11. Termination of the Company's Obligations. The Company
shall have no obligations pursuant to Sections 2.2 through 2.4 with respect to:
(a) any request or requests for registration made by any Holder on a date more
than five (5) years after the closing date of a Qualifying IPO; or (b) any
Registrable Securities proposed to be sold by a Holder in a registration
pursuant to Section 2.2, 2.3 or 2.4 if, in the opinion of counsel to the
Company, all such Registrable Securities proposed to be sold by a Holder may be
sold in a three-month period without registration under the Securities Act
pursuant to Rule 144 under the Securities Act.
2.12. Limitations on Subsequent Registration Rights. From and
after the date of this Agreement, the Company shall not, without the prior
written consent of the Holders of a majority of the Registrable Securities,
enter into any agreement with any holder or prospective holder of any securities
of the Company which would allow such holder or prospective holder (a) to
include such securities in any registration filed under Section 2.2 hereof,
unless under the terms of such agreement, such holder or prospective holder may
include such securities in any such registration only to the extent that the
inclusion of his securities will not reduce the amount of the Registrable
Securities of the Holders which is included, or (b) to make a demand
registration which could result in such registration statement being declared
within one hundred twenty (120) days of the effective date of any registration
effected pursuant to Section 2.2.
3. PREEMPTIVE RIGHT.
----------------
3.1. General. Each Holder and any party to whom such Holder's
rights under this Section 3.1 have been duly assigned in accordance with Section
4.1(b) (each such Holder or assignee being hereinafter referred to as a "Rights
Holder") shall have the right of first refusal to purchase such Rights Holder's
Pro Rata Share (as defined below), of all (or any part) of any "New Securities"
<PAGE>
(as defined in Section 3.2) that the Company may from time to time issue after
the date of this Agreement. A Rights Holder's "Pro Rata Share" for purposes of
this right of first refusal shall mean a fraction, the numerator of which is (a)
the number of Registrable Securities held by such Rights Holder (or deemed held
by the Holder under Section 2.1(c)), and the denominator of which is (b) the
number of shares of common stock of the Company equal to the sum of (i) the
total number of shares of common stock of the Company then outstanding plus (ii)
the total number of shares of common stock of the Company into which all then
outstanding shares of Series A Stock of the Company are then convertible.
3.2. New Securities. "New Securities" shall mean any common
stock or preferred stock of the Company, whether now authorized or not, and
rights, options or warrants to purchase such common stock or preferred stock,
and securities of any type whatsoever that are, or may become, convertible or
exchangeable into such common stock or preferred Stock; provided, however, that
the term "New Securities" does not include:
(i) up to 458,200 shares of the Company's Common
Stock (or options, warrants or other rights therefor) issued to employees,
officers, directors, contractors, advisors, consultants or transportation
carrier partners of the Company pursuant to the Company's Long Term Incentive
Plan or other incentive agreements, plans or arrangements approved by the Board
of Directors of the Company, and including in such number all such shares,
options, warrants or other such rights outstanding on the date hereof (such
number to be calculated net of any repurchases of such shares and net of any
such expired or terminated options, warrants or rights);
(ii) any shares of Series A Stock issued under the
Series A Agreement, as such agreement may be amended;
(iii) any securities issuable upon conversion of or
with respect to any then outstanding shares of Series A Stock of the Company or
Common Stock or other securities issuable upon conversion thereof;
(iv) any shares of Series A Stock issued under the
Warrants;
(v) shares of the Company's Common Stock or Series
A Stock issued in connection with any stock split or stock dividend or similar
event;
(vi) securities offered by the Company to the
public pursuant to a registration statement filed under the Securities Act; or
(vii) securities issued pursuant to strategic
alliances or the acquisition of another corporation or entity by the Company by
consolidation, merger, purchase of all or substantially all of the assets, or
other reorganization in which the Company acquires, in a single transaction or
series of related transactions, all or substantially all of the assets of such
other corporation or entity or fifty-one percent (51%) or more of the voting
power of such other corporation or entity or fifty-one percent (51%) or more of
the equity ownership of such other entity, provided that, such strategic
alliance or acquisition was approved by (A) the Investor Director (as defined
below) or (B) by holders of a majority of the outstanding shares of Series A
Stock.
<PAGE>
3.3. Procedures. In the event that the Company proposes to
undertake an issuance of New Securities, it shall give to each Rights Holder
written notice of its intention to issue New Securities (the "Notice"),
describing the type of New Securities and the price and the general terms upon
which the Company proposes to issue such New Securities. Each Rights Holder
shall have ten (10) days from the date of mailing of any such Notice to agree in
writing to purchase such Rights Holder's Pro Rata Share of such New Securities
for the price and upon the general terms specified in the Notice by giving
written notice to the Company and stating therein the quantity of New Securities
to be purchased (not to exceed such Rights Holder's Pro Rata Share). If any
Rights Holder fails to so agree in writing within such ten (10) day period to
purchase such Rights Holder's full Pro Rata Share of an offering of New
Securities (a "Nonpurchasing Holder"), then such Nonpurchasing Holder shall
forfeit the right hereunder to purchase that part of his Pro Rata Share of such
New Securities that he did not so agree to purchase and the Company shall
promptly give each Rights Holder who has timely agreed to purchase his full Pro
Rata Share of such offering of New Securities (a "Purchasing Holder") written
notice of the failure of any Nonpurchasing Holder to purchase such Nonpurchasing
Rights Holder's full Pro Rata Share of such offering of New Securities (the
"Overallotment Notice"). Each Purchasing Holder shall have the right to purchase
such Rights Holder's Pro Rata Share (according to the relative Pro Rata Shares
of all Purchasing Holders) of the Nonpurchasing Holders' unpurchased Pro Rata
Shares of such offering at any time within five (5) days after receiving the
Overallotment Notice.
3.4. Failure to Exercise. In the event that the Rights Holders
fail to exercise in full the right of first refusal within such ten (10) plus
five (5) day period, then the Company shall have 120 days thereafter to sell the
New Securities with respect to which the Rights Holders' rights of first refusal
hereunder were not exercised, at a price and upon general terms not materially
more favorable to the purchasers thereof than specified in the Company's Notice
to the Rights Holders. In the event that the Company has not issued and sold the
New Securities within such 120 day period, then the Company shall not thereafter
issue or sell any New Securities without again first offering such New
Securities to the Rights Holders pursuant to this Section 3.4.
3.5. Termination. This right of first refusal shall terminate
(a) upon consummation of a Qualifying IPO or (b) upon a Change of Control Event.
4. ASSIGNMENT AND AMENDMENT.
------------------------
4.1. Assignment. Notwithstanding anything herein to the
contrary:
(a) Information Rights. The rights of the Investor
under Section 1 hereof may be assigned only to (i) a Related Party (as defined
below) or (ii) a party who acquires from the Investor (or the Investor's
permitted assigns) at least ten percent (10%) of the Series A Stock or the
equivalent number (on an as-converted basis) of shares of Common Stock of the
Company issued upon the conversion of such shares of Series A Stock.
<PAGE>
(b) Registration Rights; Preemptive Rights. The
registration rights of a Holder under Section 2 hereof and the preemptive rights
of a Rights Holder under Section 3 hereof may be assigned only to a party who
acquires at least ten percent (10%) of the Series A Stock or an equivalent
number (on an as-converted basis) of Registrable Securities issued upon
conversion thereof; provided, however, that no party may be assigned any of the
foregoing rights unless the Company is given written notice by the assigning
party at the time of such assignment stating the name and address of the
assignee and identifying the securities of the Company as to which the rights in
question are being assigned; and provided, further that any such assignee shall
receive such assigned rights subject to all the terms and conditions of this
Agreement, including without limitation the provisions of this Section 4.1.
4.2. Amendment of Rights. Any provision of this Agreement may
be amended and the observance thereof may be waived (either generally or in a
particular instance and either retroactively or prospectively), only with the
written consent of the Company and the Holders of a majority of the outstanding
shares of Series A Stock issued under the Series A Agreement plus all then
outstanding shares of Common Stock issued upon the conversion of any shares of
Series A Stock issued under the Series A Agreement. Any amendment or waiver
effected in accordance with this Section 4.2 shall be binding upon the Investor,
each Holder, each permitted successor or assignee of the Investor or Holder and
the Company.
4.3. Related Party. As used herein, the term "Related Party"
with respect to any Holder means (i) any person or entity that, directly or
indirectly, through one or more intermediaries, has voting control of, or is
under common voting control with, such Holder; or (ii) a trust, corporation,
partnership or other entity, the beneficiaries, stockholders, partners or owners
or persons or entities holding controlling interest of which consist of any
Holder and/or such other persons or entities referred to in the immediately
preceding clause (i); and (iii) any Holders' current partners, stockholders or
members as the case may be, pro rata in accordance with the current distribution
provision of such entities charter documents.
5. COVENANTS OF THE COMPANY.
------------------------
5.1. Minutes. The Company will deliver to the Investor copies
of the complete minutes of all meetings of the Company's Board of Directors
(including all committees thereof) and stockholders no later than the earlier
of: (i) thirty (30) days after any such meeting; or (ii) the next successive
board or stockholder meeting, as applicable.
5.2. Special Voting Rights. The Company shall not, without the
approval, by vote or written consent, of the member of the Company's Board of
Directors designated by the Investor pursuant to the Stockholders' Agreement of
even date herewith among the Investor, the Company and certain of the Company's
shareholders (the "Investor Director"):
(i) amend its Certificate of Incorporation in any
manner that would alter or change any of the rights, preferences, privileges or
restrictions of the Series A Preferred Stock;
<PAGE>
(ii) reclassify any outstanding shares of
securities of the Company into shares having rights, preferences or privileges
senior to or pari passu to the Series A Preferred Stock;
(iii) authorize or issue any additional Series A
Preferred Stock or any other stock having rights or preferences senior to or
pari passu to the Series A Preferred Stock;
(iv) merge or consolidate with or into any
corporation unless the holders of the Company's outstanding shares immediately
after such consolidation or merger retain stock representing a majority of the
voting power of the surviving corporation of such merger or consolidation;
(v) sell all or substantially all the Company's
assets in a single transaction or series of related transactions;
(vi) liquidate or dissolve;
(vii) increase the size of the Board to more than
five (5) directors;
(viii) declare or pay any dividends (other than
dividends payable solely in shares of Common Stock) on or declare or make any
other distribution, directly or indirectly, on account of any shares of Common
Stock now or hereafter outstanding;
(ix) any redemption or repurchase any outstanding
shares of the Company's capital stock, except for shares of Common Stock held by
employees, officers, directors, contractors, advisors, consultants or
transportation carrier partners of the Company pursuant to the Company's Long
Term Incentive Plan or other incentive agreements, plans or arrangements
approved by the Board of Directors of the Company;
(x) pay any bonuses to officers, directors or
employees of the Company not included in the annual budget;
(xi) award stock options, stock warrants, stock
appreciation rights or similar employee benefits or determine vesting schedules,
exercise prices or similar features, except for any such options, warrants,
rights or benefits described in Section 3.2(i) above;
(xii) pledge its assets or guarantee the
obligations of any other individual or entity;
(xiii) incur indebtedness (other than trade
payables) in excess of Five Million Dollars ($5,000,000) in the aggregate,
including (A) the execution of any promissory note, loan agreement or other
agreement evidencing indebtedness, (B) drawing upon a line of credit or similar
credit facility, or (C) causing a letter of credit to be issued in the Company's
name;
(xiv) enter into a new line of business that is
unrelated to its contemplated line of business as of May 9, 2000; or
(xv) modify in any material way the Company's
annual operating and capital budgets.
5.3. Additional Board Members. Any appointment or nomination
of additional directors, whether outside industry representatives or as a
condition of securing additional financing, must be acceptable to the Investor,
such approval not to be unreasonably withheld.
<PAGE>
5.4. Board Committees. The Investor shall have one
representative appointed to the audit and executive committees of the Board of
Directors, each committee to consist of three members. The Investor's
representative to the Audit Committee, if and when established, shall be the
chairman of such committee.
5.5. Bylaws. The Company shall at all times cause its By-laws
to provide that, the number of directors fixed in accordance therewith shall in
no event conflict with any of the terms or provisions of the Series A Stock as
set forth in the Series A Certificate. The Company shall at all times maintain
provisions in its Bylaws or Certificate of Incorporation indemnifying all
directors against liability and absolving all directors from liability to the
Company and its stockholders to the maximum extent permitted under the laws of
the State of Delaware.
5.6. Investor's Expenses. Following the Closing, any
reasonable expenses incurred by the Investor or its representatives on behalf of
the Company, including reasonable expenses associated with attendance at
meetings of the Board of Directors (other than observer expenses if the Investor
no longer has a representative elected to the Board), trade shows or similar
meetings or events, shall be borne by the Company.
5.7. Key Person Life Insurance. The Company shall obtain and
maintain life insurance on Christopher Kravas in an amount not less than $2.0
million, with proceeds payable for the benefit of the Company, upon the death of
Christopher Kravas.
5.8. Conduct of Business. The Company will duly observe and
conform to or cause to be observed or conformed to all valid requirements of all
governmental authorities relative to the conduct of the business of the Company
or to its properties or assets, the failure to observe or conform to which would
have a materially adverse effect on the business of the Company, and will
maintain and keep in full force and effect all licenses and permits necessary to
the proper conduct of the business of the Company.
5.9. Preservation of Corporate Existence. The Company shall
preserve and maintain its respective corporate existence, rights, franchises and
privileges in its jurisdiction of incorporation, and will qualify and remain
qualified as a foreign corporation in every jurisdiction in which such
qualification is necessary in view of the business and operations of the Company
or the ownership of their respective properties.
5.10. Performance Under Other Documents. The Company will
promptly pay or perform or cause to be performed all payments and obligations
required of it under the terms, agreements and covenants of the Series A
Agreement, the Related Agreements and the Series A Certificate.
5.11. Performance of Obligations. The Company will promptly
perform or cause to be performed every commitment, undertaking, agreement or
covenant of the Company with any third person whether or not specifically
referred to in this Agreement, the non-performance of which could cause the
acceleration of indebtedness of the Company; provided, however, that (unless and
until foreclosure, sale or similar proceedings have been commenced) the Company
shall have the right in good faith to contest the obligation to perform any such
commitment, undertaking, agreement or covenant.
<PAGE>
5.12. Payment of Taxes and Accounts. The Company will pay or
cause to be paid all taxes, assessments, and governmental charges or levies
imposed upon the Company or upon its respective income, profits, or properties
before the same shall become delinquent; provided, however, that (unless and
until foreclosure, sale or similar proceedings have been commended) nothing
herein shall require the Company to pay or cause to be paid any such tax,
assessment, charge, levy or account so long as the validity thereof shall be
contested in good faith by appropriate proceedings and the Company has set aside
on its books and maintained adequate reserves with respect thereto.
5.13. Maintenance of Property. The Company will maintain or
cause to be maintained the real and personal property which is required for the
business of the Company in good repair, working order and condition, and from
time to time will make or cause to be made all repairs, renewals, and
replacements that are necessary and proper.
5.14. Insurance on Properties. The Company has and will
maintain or cause to be maintained insurance with reputable insurance companies
on such of the properties of the Company in such amounts and against such risks
as is deemed sufficient by the Company's management. The Company will furnish to
the Investor, upon request, certificates signed by the President or the Chief
Financial Officer of the Company setting forth a list of all insurance in force
on the properties of the Company and containing a general schedule of property
insured, risks insured against and amount of insurance then in force.
5.15. Authorized Capital Stock. The Company covenants that it
shall at all times reserve and keep available out of its authorized but unissued
Common Stock, solely for the purpose of effecting the exercise of the Series A
Stock, such number of shares of Common Stock as shall from time to time be
issuable upon the exercise of all of the Series A Stock, as the case may be.
5.16. Taxes and Costs. The Company shall pay all taxes which
may be imposed with respect to the issuance and delivery of shares of Common
Stock upon conversion of the Series A Stock; provided, however, that the Company
shall not be required, in any event, to pay any transfer or other taxes by
reason of issuance of such shares of Common Stock in a name or names other than
the name of the holder of the Series A Stock surrendered for exchange.
5.17. Proprietary Assets. The Company shall take all steps
reasonably necessary to preserve and protect all of its intellectual property,
including without limitation all patents, copyrights, trade secrets, trademarks,
trade names, and service marks used in its business.
5.18. Professional Advisors. The Company shall consult and
receive the approval from the Investor, which shall not be unreasonably
withheld, as to the Company's hiring of professional advisors, which include,
but are not limited to, the Company's accountants, attorneys, investment bankers
and public relations consultants. The Investor approves of the Company's current
professional advisors.
5.19. Termination. The covenants in this Section 5 shall
terminate (a) upon consummation of a Qualifying IPO, or (b) Change of Control
Event.
<PAGE>
6. GENERAL PROVISIONS.
------------------
6.1. Notices. Any notice, request or other communication
required or permitted hereunder shall be in writing and shall be deemed to have
been duly given if personally delivered or if deposited in the U.S. mail by
registered or certified mail, return receipt requested, postage prepaid, as
follows:
(a) if to the Investor, at:
Net Value Holdings, Inc.
Two Penn Center Plaza,
Suite 605
Philadelphia, PA 19102
Attention: Andrew P. Panzo
with a copy to: Klehr, Harrison, Harvey,
(which shall not constitute Branzburg & Ellers, LLP
notice hereunder) 260 S. Broad Street
Philadelphia, PA 19102
Attention: Lawrence D.
Rovin, Esquire
(b) if to the Company, at:
Webmodal, Inc.
129 East Calhoun Street,
Unit B
Woodstock, IL 60098
Attention: Christopher R.
Kravas
with a copy to: Mayer Brown & Platt
(which shall not constitute 190 S. LaSalle Street
notice hereunder) Chicago, IL 60603-3441
Attention: Carol S.
Rivers, Esquire
Any party hereto (and such party's permitted assigns) may by notice so given
change its address for future notices hereunder. Notice shall conclusively be
deemed to have been given when personally delivered or when deposited in the
mail in the manner set forth above.
6.2. Entire Agreement. This Agreement, together with all the
Exhibits hereto, constitutes and contains the entire agreement and understanding
of the parties with respect to the subject matter hereof and supersedes any and
all prior negotiations, correspondence, agreements, understandings, duties or
obligations between the parties respecting the subject matter hereof.
6.3. Governing Law. This Agreement shall be governed by a
construed exclusively in accordance with the internal laws of the State of
Delaware, excluding that body of law relating to conflict of laws and choice of
law.
6.4. Severability. If one or more provisions of this Agreement
are held to be unenforceable under applicable law, then such provision(s) shall
be excluded from this Agreement and the balance of this Agreement shall be
interpreted as if such provision(s) were so excluded and shall be enforceable in
accordance with its terms.
<PAGE>
6.5. Third Parties. Nothing in this Agreement, express or
implied, is intended to confer upon any person, other than the parties hereto
and their successors and assigns, any rights or remedies under or by reason of
this Agreement.
6.6. Successors and Assigns. Subject to the provisions of
Section 4.1, the provisions of this Agreement shall inure to the benefit of, and
shall be binding upon, the successors and permitted assigns of the parties
hereto.
6.7. Captions. The captions to sections of this Agreement have
been inserted for identification and reference purposes only and shall not be
used to construe or interpret this Agreement.
6.8. Counterparts. This Agreement may be executed in two
counterparts, each of which shall be deemed an original, but both of which
together shall constitute one and the same instrument.
6.9. Costs and Attorneys' Fees. In the event that any action,
suit or other proceeding is instituted concerning or arising out of this
Agreement or any transaction contemplated hereunder, the prevailing party shall
recover all of such party's costs and attorneys' fees reasonably incurred in
each such action, suit or other proceeding, including any and all appeals or
petitions therefrom.
6.10. Adjustments for Stock Splits, Etc. Wherever in this
Agreement there is a reference to a specific number of shares of Common Stock or
Series A Stock of the Company of any class or series, then, upon the occurrence
of any subdivision, combination or stock dividend of such class or series of
stock, the specific number of shares so referenced in this Agreement shall
automatically be proportionally adjusted to reflect the affect on the
outstanding shares of such class or series of stock by such subdivision,
combination or stock dividend.
6.11. Aggregation of Stock. All shares held or acquired by
affiliated entities or persons shall be aggregated together for the purpose of
determining the availability of any rights under this Agreement.
[SIGNATURES ON FOLLOWING PAGE]
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this
Investor Rights Agreement as of the date and year first above written.
THE COMPANY:
------------
WEBMODAL, INC.
a Delaware corporation
By: ________________________________
Christopher R. Kravas, President
THE INVESTOR:
NET VALUE HOLDINGS, INC.,
a Delaware corporation
By: ________________________________
Andrew P. Panzo, President
<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.
May 9, 2000
170,000 shares of Common Stock Warrant No. ____
WEBMODAL, INC.
STOCK PURCHASE WARRANT
Registered Owner: NET VALUE HOLDINGS, INC.
This certifies that, for value received, Webmodal, 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:
"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
Pennsylvania or Illinois 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.
"Change of Control Event" has the meaning assigned to it in Section 5
hereof.
"Closing" and "Closing Date" have the meanings set forth in Section 2
of the Purchase Agreement.
"Common Stock" means the shares of the Company's Common Stock, par
value $.0001 per share.
"Company" means Webmodal, Inc., a Delaware corporation.
-------
"Exercise Period" has the meaning assigned to it in Section 5 hereof.
"Exercise Price" has the meaning assigned to it in Section 4 hereof.
"Investor" has the meaning set forth in the Purchase Agreement.
<PAGE>
"OTCBB" means the OTC Bulletin Board of the National Association of
Securities Dealers, Inc.
"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 a 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 A Preferred Stock
Purchase Agreement, dated May 9, 2000, among the Company and the Investor.
"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 the Warrants.
"Warrant(s)" means the warrants issuable at the Closing, including this
Warrant.
"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.
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 that number set forth on the first page of this
Warrant (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 the exercise
rights of 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, except as
required by Section 4.8 of the Purchase Agreement.
<PAGE>
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 $8.88, 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, (i) May 9, 2005 (the "Exercise
Period") or the upon the earlier of (ii) the Registered Owner's redemption of
all shares of the Company's Series A Preferred Stock held by the Registered
Owner or (iii) the last business day prior to a Qualified IPO, a merger or
consolidation of the Company and another entity following which the shareholders
of the Company control less then 50% of the voting securities of the resulting
entity or a sale of all or substantially all of the Company's assets (a "Change
in Control Event"), provided that the Registered Owner has received at least
thirty (30) days' written notice of the Change in Control Event. 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 11
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).
(c) 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 14 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 Event. Upon the occurrence of a Common Stock
Event (as hereinafter defined) then 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. 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,
<PAGE>
shall become effective immediately after the effective date thereof. As
used herein, the term "Common Stock Event" shall mean (i) the issue by
the Company of additional shares of Common Stock as a dividend or other
distribution on outstanding Common Stock, (ii) a subdivision of the
outstanding shares of Common Stock into a greater number of shares of
Common Stock, or (iii) a combination of the outstanding shares of
Common Stock into a smaller number of shares of Common Stock.
(b) Adjustments for Other Dividends and Distributions. If at
any time or from time to time while this Warrant is outstanding the
Company pays a dividend or makes another distribution to the holders of
the Common Stock payable in securities of the Company other than shares
of Common Stock, then in each such event provision shall be made so
that the holder of this Warrant shall receive upon exercise thereof, in
addition to the number of shares of Common Stock receivable upon
exercise thereof, the amount of securities of the Company which such
holder would have received had this Warrant been exercised on the date
of such event (or such record date, as applicable) and had it
thereafter, during the period from the date of such event (or such
record date, as applicable) to and including the exercise date,
retained such securities receivable by it as aforesaid during such
period, subject to all other adjustments called for during such period
under this Section 7 with respect to the rights of the holder of this
Warrant or with respect to such other securities by their terms.
(c) Adjustment for Reclassification, Exchange and
Substitution. If at any time or from time to time while this Warrant is
outstanding the Common Stock issuable upon the exercise of this Warrant
is changed into the same or a different number of shares of any class
or classes of stock, whether by recapitalization, reclassification or
otherwise, or is otherwise converted to other securities, cash or
property (other than by a Common Stock Event or other event provided
for elsewhere in this Section 7), then in any such event the holder of
this Warrant shall have the right thereafter upon exercise hereof to
receive the kind and amount of stock and other securities, cash and
property receivable upon such recapitalization, reclassification or
other change by holders of the number of shares of Common Stock for
which this Warrant could have been exercised immediately prior to such
recapitalization, reclassification or change, all subject to further
adjustment as provided herein or with respect to such other securities
or property by the terms thereof. 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(c) upon any exercise 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 event 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.
(d) Sale of Shares Below Exercise Price.
(1) Adjustment Formula. If at any time or from time to
time while this Warrant is outstanding the Company issues or sells, or
is deemed by the provisions of this Section 7(d) to have issued or
sold, Additional Shares of Common Stock (as hereinafter defined),
otherwise than in connection with a Common Stock Event as provided in
Section 7(a), a dividend or distribution as provided in Section 7(b) or
a recapitalization, reclassification or other change as provided in
Section 7(c), for an Effective Price (as hereinafter defined) that is
less than the Exercise Price in effect immediately prior to such issue
or sale, then, and in each such case, the Exercise Price shall be
reduced, as of the close of business on the date of such issue or sale,
to a new Exercise Price determined pursuant to the following formula:
(CS/OxEP)+AC
------------
AEP = CS/I
AEP = Adjusted Exercise Price.
<PAGE>
CS/O = Number of shares of Common Stock
outstanding immediately prior to the
issuance of Additional Shares of
Common Stock.
EP = Exercise Price in effect immediately
prior to the issuance of Additional
Shares of Common Stock.
AC = Aggregate Consideration Received
(as defined below) from the issuance
of Additional Shares of Common
Stock.
CS/I = Number of shares of Common Stock
outstanding and deemed outstanding
immediately following the issuance
of Additional Shares of Common
Stock.
(2) Certain Definitions. For the purpose of making any
adjustment required under this Section 7(d):
(i) "Additional Shares of Common Stock"
shall mean all shares of Common Stock issued by the Company, whether or
not subsequently reacquired or retired by the Company, other than: (A)
shares of Common Stock issued or issuable upon conversion of Series A
Preferred Stock; (B) shares of Common Stock issued or issuable upon
exercise of this Warrant; and (C) up to 458,200 shares of Common Stock
(or options, stock appreciation rights or similar employee benefits
exercisable or convertible into or measured with respect to Common
Stock, and including all such options, rights or benefits outstanding
on the date of this Warrant) issued to employees, officers or directors
of, or contractors, consultants or advisers to, or transportation
carrier partners of, the Company pursuant to the Company's Long Term
Incentive Stock Option Plan or other incentive agreements or
arrangements approved by the Company's board of directors (such number
of shares to be calculated net of any repurchases of such shares by the
Company and net of any such expired or terminated options, warrants or
rights and to be proportionally adjusted to reflect any subsequent
Common Stock Event);
(ii) "Aggregate Consideration Received"
by the Company for any issue or sale (or deemed issue or sale) of
securities shall (A) to the extent it consists of cash, be computed at
the gross amount of cash received by the Company before deduction of
any underwriting or similar commissions, compensation or concessions
paid or allowed by the Company in connection with such issue or sale
and without deduction of any expenses payable by the Company; (B) to
the extent it consists of property other than cash, be computed at the
fair value of that property as determined in good faith by the Board;
and (C) if Additional Shares of Common Stock, Convertible Securities or
Rights or Options to purchase either Additional Shares of Common Stock
or Convertible Securities are issued or sold together with other stock
or securities or other assets of the Company for a consideration which
covers both, be computed as the portion of the consideration so
received that may be reasonably determined in good faith by the Board
to be allocable to such Additional Shares of Common Stock, Convertible
Securities or Rights or Options.
(iii) "Convertible Securities" shall mean
stock or other securities convertible into or exchangeable for shares
of Common Stock.
(iv) "Effective Price" of Additional
Shares of Common Stock shall mean the quotient determined by dividing
the total number of Additional Shares of Common Stock issued or sold,
or deemed to have been issued or sold, by the Company under this
Section 7(d), into the Aggregate Consideration Received, or deemed to
have been received, by the Company under this Section 7(d), for the
issue of such Additional Shares of Common Stock; and
(v) "Rights or Options" shall mean
warrants, options or other rights to purchase or acquire shares of
Common Stock or Convertible Securities.
<PAGE>
(3) Deemed Issuances. For the purpose of making any
adjustment to the Exercise Price required under this Section 7(d), if
the Company issues or sells any Rights or Options or Convertible
Securities and if the Effective Price of the shares of Common Stock
issuable upon exercise of such Rights or Options and/or the conversion
or exchange of Convertible Securities (computed without reference to
any additional or similar protective or antidilution clauses) is less
than the Exercise Price then in effect, then the Company shall be
deemed to have issued, at the time of the issuance of such Rights,
Options or Convertible Securities, that number of Additional Shares of
Common Stock that is equal to the maximum number of shares of Common
Stock issuable upon exercise or conversion of such Rights, Options or
Convertible Securities upon their issuance and to have received, as the
Aggregate Consideration Received for the issuance of such shares, an
amount equal to the total amount of the consideration, if any, received
by the Company for the issuance of such Rights or Options or
Convertible Securities, plus, in the case of such Rights or Options,
the minimum amounts of consideration, if any, payable to the Company
upon the exercise in full of such Rights or Options, plus, in the case
of Convertible Securities, the minimum amounts of consideration, if
any, payable to the Company (other than by cancellation of liabilities
or obligations evidenced by such Convertible Securities) upon the
conversion or exchange thereof; provided that:
(i) if the minimum amounts of such
consideration cannot be ascertained, but are a function of antidilution
or similar protective clauses, then the Company shall be deemed to have
received the minimum amounts of consideration without reference to such
clauses;
(ii) if the minimum amount of consideration
payable to the Company upon the exercise of Rights or Options or the
conversion or exchange of Convertible Securities is reduced over time
or upon the occurrence or non-occurrence of specified events other than
by reason of antidilution or similar protective adjustments, then the
Effective Price shall be recalculated using the figure to which such
minimum amount of consideration is reduced; and
(iii) if the minimum amount of consideration
payable to the Company upon the exercise of such Rights or Options or
the conversion or exchange of Convertible Securities is subsequently
increased, then the Effective Price shall again be recalculated using
the increased minimum amount of consideration payable to the Company
upon the exercise of such Rights or Options or the conversion or
exchange of such Convertible Securities.
No further adjustment of the Exercise Price, adjusted upon the
issuance of such Rights or Options or Convertible Securities, shall be
made as a result of the actual issuance of shares of Common Stock on
the exercise of any such Rights or Options or the conversion or
exchange of any such Convertible Securities. If any such Rights or
Options or the conversion rights represented by any such Convertible
Securities shall expire without having been fully exercised, then the
Exercise Price as adjusted upon the issuance of such Rights or Options
or Convertible Securities shall be readjusted to the Exercise Price
which would have been in effect had an adjustment been made on the
basis that the only shares of Common Stock so issued were the shares of
Common Stock, if any, that were actually issued or sold on the exercise
of such Rights or Options or rights of conversion or exchange of such
Convertible Securities, and such shares of Common Stock, if any, were
issued or sold for the consideration actually received by the Company
upon such exercise, plus the consideration, if any, actually received
by the Company for the granting of all such Rights or Options, whether
or not exercised, plus the consideration received for issuing or
selling all such Convertible Securities actually converted or
exchanged, plus the consideration, if any, actually received by the
Company (other than by cancellation of liabilities or obligations
evidenced by such Convertible Securities) on the conversion or exchange
of such Convertible Securities.
e. 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, Rights or
Options or in Convertible Securities or (b) to subscribe for or
purchase Common Stock, Rights or 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.
<PAGE>
f. 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.
g. 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.
h. 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 Event; 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 Event 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 Event; 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.
i. Adjustment to Number of Warrant Shares. Upon any adjustment
to the Exercise Price under this Section 7, the number of Warrant
Shares purchasable hereunder shall be adjusted to equal the number of
Warrant Shares purchasable hereunder prior to said adjustment times a
fraction, the numerator of which is the Exercise Price prior to the
adjustment and the denominator of which is the Exercise Price after the
adjustment.
<PAGE>
j. 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.
k. 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.
l. 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. 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.
9. 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 Investor Rights Agreement (as defined in the Purchase
Agreement).
10. Reservation of Underlying Shares. 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.
11. 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.
12. 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.
13. 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.
14. 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
<PAGE>
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.
15. Effect of Headings. The section headings herein are for convenience
only and shall not affect the construction hereof.
16. 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.
17. 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.
18. Successors and Assigns. This Warrant shall be binding upon and
inure to the benefit of the Registered Owners and its successors and 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 in connection with
a transfer of shares of Series A Preferred Stock of the Company or shares of
Common Stock issued upon the conversion thereof.
19. 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.
20. 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.
21. 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.
<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.
WEBMODAL, INC.
By:________________________
Name: Christopher R. Kravas
Title: President
<PAGE>
EXHIBIT A
Warrant Exercise Form
---------------------
TO: WEBMODAL, INC.
The undersigned hereby: (1) irrevocably subscribes for and offers to
purchase _______ shares of Common Stock of ___________________, Inc., pursuant
to Warrant No. ___ heretofore issued to Net Value Holdings, Inc. on May 9, 2000;
(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>
STOCKHOLDERS' AGREEMENT
-----------------------
This Stockholders' Agreement (this "Agreement"), is made as of
May 9, 2000, by and among Webmodal, Inc., a Delaware corporation (the
"Company"), Net Value Holdings, Inc. (the "Investor"), and Christopher R. Kravas
(the "Founder") and such other parties as may from time to time and with the
consent of the Company become parties hereto (the Founder and the other parties
who become parties hereto being collectively referred to as the "Principal
Stockholders" and, collectively with the Investor, the "Stockholders"). This
Agreement shall become effective as of the Closing (as defined therein) of that
certain Series A Preferred Stock Purchase Agreement dated as of even date
herewith (the "Purchase Agreement") by and between the Company and the Investor.
RECITALS
--------
WHEREAS, the parties hereto desire to restrict the sale,
assignment, transfer, encumbrance or other disposition of the securities of the
Company which the Principal Stockholders currently own or may hereafter acquire
(collectively, the "Securities") and to provide for certain rights and
obligations in respect thereto as hereinafter provided and the parties also wish
to agree upon the composition of the Board of Directors.
WHEREAS, the execution and delivery of this Agreement by the
Company, the Investor and the Principal Stockholders is a condition to the
closing of the issuance, sale and purchase of the Series A Preferred Stock
pursuant to the Purchase Agreement.
AGREEMENT
NOW, THEREFORE, in consideration of the agreements set forth
herein and other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the parties hereto, intending to be legally bound
hereby, agree as follows:
1. Restrictions on Transfers.
1.1 General Prohibition on Transfers; Permitted Transfers.
(a) Except as otherwise permitted hereby, no Stockholder shall
directly or indirectly sell, assign, pledge, encumber or otherwise transfer to
any person or entity (a "Transferee") any Securities unless the Stockholder has
complied with all of the terms of this Agreement. Any purported sale,
assignment, pledge, encumbrance or other transfer in violation of any provision
of this Agreement shall be void and ineffective and shall not operate to
transfer any interest or title to the purported Transferee.
(b) The restrictions contained in this Agreement with respect
to transfers by Stockholders of Securities shall not apply (i) to repurchases of
Securities of a Principal Stockholder pursuant to any stock option plan or other
incentive agreement, plan or arrangement approved by the board of directors of
the Company between the Principal Stockholder and the Company which provides the
Company with the right to repurchase such Securities; (ii) to any transfer of
Securities by a Principal Stockholder to any such Principal Stockholder's
spouse, parents, siblings (by blood or adoption) or lineal descendants (by blood
or adoption); (iii) to any transfer of Securities by a Principal Stockholder to
a trust, partnership, corporation, limited liability company or other similar
entity solely for the benefit of such Principal Stockholder or such Principal
Stockholder's spouse, parents, siblings or lineal descendants; (iv) to any
transfer of Securities by a Principal Stockholder, or upon a Principal
Stockholder's death to the executors, administrators, testamentary trustees,
legatees or beneficiaries of such Principal Stockholder; or (v) to any transfer
of Securities by the Investor to its Affiliates (as defined in Section
1.2(b)(iii) hereof); provided, that in each of clauses (ii) through (v), each
transferee, donee, heir or distributee shall, as a condition precedent to such
transfer, become a party to this Agreement by executing an Adoption Agreement
substantially in the form attached as Annex A and shall have all of the rights
and obligations of a Stockholder hereunder.
<PAGE>
1.2 Right of First Offer.
(a) Except as otherwise permitted in Section 1.1(b) of this
Agreement, transfers of the Securities by Stockholders shall not be permitted
unless the Stockholder has complied with this Section 1.2. Any Stockholder who
intends to transfer any of such Stockholder's Securities (the "Proposed Seller")
shall give written notice (the "Seller's Notice") to the Company and each other
Stockholder (the "Offerees") stating that the Proposed Seller intends to make
such a transfer, identifying the party who made the bona fide offer, if any (the
"Proposed Transferee"), specifying the number of Securities proposed to be
transferred (the "First Offer Shares"), and specifying the per share purchase
price at which the Proposed Seller intends to transfer the First Offer Shares or
which the Proposed Transferee, if any, has offered to pay for the First Offer
Shares (the "Sale Price"). A copy of the bona fide offer, if available, and a
statement of the number of shares held by each Stockholder shall be attached to
the Seller's Notice, if available.
(b) (i) Upon delivery of the Seller's Notice, the Company
shall have the irrevocable and exclusive option to purchase, upon delivery to
the Proposed Seller within 20 days of delivery of the Seller's Notice, all or
any portion of the First Offer Shares at the price specified in the Seller's
Notice and, if pursuant to a bona fide offer, on the same terms as the bona fide
offer. The Company shall deliver a notice (the "Company Notice") to the Proposed
Seller and each of the Offerees of its election to purchase such First Offer
Shares within such 20 day period. To the extent that the Company does not elect
to purchase all of the First Offer Shares, each Offeree shall have the
irrevocable and exclusive option to purchase up to that number of the remaining
First Offer Shares at the Sale Price as equals the product of (A) the number of
remaining First Offer Shares multiplied by (B) a fraction, the numerator of
which shall be the number of shares of Common Stock owned by such Offeree
(assuming full conversion and exercise of all convertible and exercisable
securities into Common Stock) and the denominator of which shall be the number
of shares of Common Stock owned by all of the Offerees (assuming full conversion
and exercise of all convertible and exercisable securities into Common Stock)
(the "Proportionate Share"). Upon delivery of the Company Notice, each Offeree
shall have 20 days to deliver to the Proposed Seller a written notice stating
whether it elects to exercise its option under this Section 1.2(b) and the
maximum number of First Offer Shares (up to all of such Offeree's Proportionate
Share) that it is willing to purchase, and such notice shall constitute an
irrevocable commitment to purchase such First Offer Shares, subject only to such
conditions as were contained in the bona fide offer, if applicable.
(ii) If an Offeree does not elect to purchase its
full Proportionate Share, the Proposed Seller shall deliver another written
notice to each Offeree that has elected to purchase its full Proportionate Share
(a "Fully Exercising Offeree") stating the number of unpurchased First Offer
Shares. Each Fully Exercising Offeree shall be entitled, by delivering written
notice to the Proposed Seller within five days following the delivery of such
notice, to purchase up to all of the remaining First Offer Shares at the Sale
Price. In the event of an oversubscription, the oversubscribed amount shall be
allocated among such Fully Exercising Offerees pro rata based on the number of
shares of Common Stock (assuming full conversion and exercise of all convertible
and exercisable securities into Common Stock) owned by each of them. The
delivery of the notice of election under this paragraph shall constitute an
irrevocable commitment to purchase such First Offer Shares, subject only to such
conditions as were contained in the bona fide offer, if applicable. The closing
of the sale of First Offer Shares to the Company and any exercising Offerees
shall occur in accordance with the terms of the bona fide offer, if applicable,
and otherwise on or before the fifth business day following the expiration of
the first refusal rights under this Section 1.2. At such closing, the Proposed
Seller shall deliver a certificate or certificates representing the First Offer
Shares, properly endorsed for transfer, and the Company and the exercising
Offerees shall deliver payment of the purchase price therefor in accordance with
the terms of the bona fide offer, if applicable, and otherwise by cashier's
check or wire transfer of immediately available funds.
(iii) For the purposes of determining the number of
shares an Offeree is entitled to sell or purchase pursuant to this Agreement,
the shares held by the Investor shall be deemed to include any shares of Common
Stock (assuming full conversion and exercise of all convertible and exercisable
securities into Common Stock) held by officers, directors, employees and
affiliates of the Investor and any partners, officers or directors of the
Investor's affiliates ("Affiliates").
<PAGE>
(c) If any First Offer Shares are not elected to be purchased
pursuant to this Section 1.2, then, subject to Section 1.3 hereof, the Proposed
Seller shall be free, for a period of 90 days from the date of the Seller's
Notice, to sell the remaining First Offer Shares (i) to the Transferee at the
price and on the terms and conditions of the bona fide offer, if applicable, and
(ii) otherwise, at a price equal to or greater than the Sale Price and upon
terms no more favorable to the Transferee than those specified in the Seller's
Notice. Any transfer of the remaining First Offer Shares by the Proposed Seller
after the end of such 90 day period or any change in the terms of the sale as
set forth in the Seller's Notice which are more favorable to the Transferee
shall give rise anew to the rights provided in the preceding paragraphs.
(d) If the Company and/or the Offerees elect to purchase any
or all of the First Offer Shares mentioned in the Seller's Notice, the Company
and/or such Offeree shall have the right to purchase the First Offer Shares for
cash consideration whether or not part or all of the consideration specified in
the Seller's Notice is other than cash. If part or all of the consideration to
be paid for the First Offer Shares as stated in the Seller's Notice is other
than cash, the price stated in such Seller's Notice shall be deemed to be the
sum of the cash consideration, if any, specified in such Seller's Notice, plus
the fair market value of the non-cash consideration. The fair market value of
the non-cash consideration shall be determined by the Board of Directors of the
Company, and its judgment as to the fair market value of such non-cash
consideration shall be binding upon the Proposed Seller and the other Offerees.
1.3 Right of Co-Sale. In the event that all of the First Offer Shares
are not purchased by the Company or the Offerees as provided in Section 1.2
hereof, the Proposed Seller (if it is not the Investor) shall deliver a notice
to the Investor informing the Investor of the number of First Offer Shares not
elected to be purchased by the Offerees and the number of First Offer Shares it,
he or she still holds and intends to sell to the Proposed Transferee (the
"Co-Sale Shares"). The Investor shall have the right, exercisable upon written
notice to the Proposed Seller within five days after the giving of such notice
by the Proposed Seller, to participate in the Proposed Seller's sale of Co-Sale
Shares at the Sale Price. The delivery of the notice of election under this
paragraph shall constitute an irrevocable commitment to sell such shares
contingent only upon the closing of the proposed sale on the terms communicated
in the notice. To the extent the Investor exercises such right of participation
in accordance with the terms and conditions set forth below, the number of
Securities which the Proposed Seller may sell to the Proposed Transferee shall
be correspondingly reduced. The right of participation of the Investor shall be
subject to the following terms and conditions:
(a) The Investor may elect to sell all or any part of that
number of shares of the Company held by the Investor equal to the product
obtained by multiplying (i) the aggregate number of Co-Sale Shares by (ii) a
fraction, the numerator of which is the number of shares of Common Stock of the
Company (assuming full conversion and exercise of all convertible and
exercisable securities into Common Stock) at the time owned by the Investor and
the denominator of which is the combined number of shares of Common Stock of the
Company (assuming full conversion and exercise of convertible and exercisable
securities into Common Stock) at the time owned by the Proposed Seller and the
Investor (the "Co-Sale Share").
(b) The Investor shall (i) effectuate the sale by promptly
delivering to the Proposed Seller for transfer to the Proposed Transferee one or
more certificates, properly endorsed for transfer, which represent the number of
shares of Common Stock which the Investor elects to sell and (ii) provide a
written representation and warranty to the Proposed Transferee that the shares
of capital stock represented by such certificates are free and clear of all
pledges, liens and other encumbrances and that the person transferring on behalf
of the Investor has requisite power to do so.
(d) The stock certificates which the Investor delivers to the
Proposed Seller shall be transferred by the Proposed Seller to the Proposed
Transferee in consummation of the sale pursuant to the terms and conditions
specified in the Sellers' Notice, and the Proposed Seller shall instruct the
Proposed Transferee to remit directly to the Investor that portion of the Sale
Price to which the Investor is entitled by reason of its participation in such
<PAGE>
sale. To the extent that any prospective purchaser or purchasers prohibits such
assignment or otherwise refuses to purchase securities from the Investor, the
Proposed Seller shall not sell to such prospective purchaser or purchasers any
Securities unless and until, simultaneously with such sale, the Proposed Seller
shall purchase such securities from the Investor for the same consideration and
on the same terms and conditions as the proposed transfer described in the
Seller's Notice.
1.4 Additional Transactions. The exercise or non-exercise of the rights
of the Investor hereunder to participate in one or more sales made by a Proposed
Seller shall not adversely affect its rights to participate in subsequent sales
by such Proposed Seller or other Principal Stockholders.
2. Legended Certificates
2.1 Principal Stockholders' Stock. Each certificate representing shares
of the Securities now or hereafter owned by the Investor or the Principal
Stockholders or their permitted Transferees pursuant to clauses (ii) through (v)
of Section 1.1(b) shall be endorsed with the following legend:
"THE SHARES REPRESENTED HEREBY MAY NOT BE VOTED,
SOLD, ASSIGNED, PLEDGED, ENCUMBERED, OR OTHERWISE TRANSFERRED
EXCEPT IN CONFORMITY WITH THE TERMS OF A STOCKHOLDERS'
AGREEMENT AMONG THE HOLDER (OR THE PREDECESSOR IN INTEREST TO
THE SHARES), THE COMPANY AND CERTAIN OTHER STOCKHOLDERS OF THE
COMPANY. THE COMPANY WILL UPON WRITTEN REQUEST FURNISH A COPY
OF SUCH AGREEMENT TO THE HOLDER HEREOF WITHOUT CHARGE."
The legend required under Section 2.1 hereof shall be removed
upon termination of this Agreement in accordance with the provisions of Section
5.1.
3. Prohibited Transfers
3.1 Grant. In the event that any Proposed Seller (if it is not the
Investor) should sell any Securities in contravention of the participation
rights of the Investor under Section 1.3 of this Agreement (a "Prohibited
Transfer"), the Investor shall have the put option provided in Section 3.2.
3.2 Put Option. In the event of a Prohibited Transfer, the Investor
shall have the option to sell to the Proposed Seller a number of shares of
Common Stock of the Company (either directly or through delivery of Series A
Preferred Stock) equal to the number of shares that the Investor would have been
entitled to sell had such Prohibited Transfer been effected in accordance with
Article 1 hereof, on the following terms and conditions:
(a) The price per share at which the shares are to be sold to
the Proposed Seller shall be equal to the price per share paid to the Proposed
Seller by the third-party purchaser or purchasers of the Proposed Seller's
Securities.
(b) The Investor shall deliver to the Proposed Seller, within
30 days after they have received notice from the Proposed Seller or otherwise
become aware of the Prohibited Transfer, the certificate or certificates
representing shares to be sold, each certificate to be properly endorsed for
transfer.
(c) The Proposed Seller shall, upon receipt of the
certificates for the repurchased shares, pay the aggregate purchase price
therefor provided for in this Article 3, by delivery of consideration in the
same form such Proposed Seller received for the Securities sold in the
Prohibited Transfer and shall reimburse the Investor for any expenses incurred,
including reasonable legal fees and expenses.
<PAGE>
4. Voting Provisions.
4.1 Voting Agreement.
(a) The shares of Series A Preferred Stock, and, unless the
context requires otherwise, the shares of Common Stock issued or issuable upon
the conversion of such shares of Series A Preferred Stock are referred to in
this Agreement as the "Shares." The Investor and the Founder agree that, except
as set forth below, in any election of directors of the Company, the Founder
shall vote all shares of capital stock of the Company owned or controlled by him
to elect one (1) director designated by the Investor ("Investor Director").
(b) The Founder further agrees to vote 1,100 shares of common
stock held by him as directed by the Investor on all other matters submitted to
a vote by the shareholders of the Company. This subsection (b) shall expire on
the earlier of the termination of this Agreement in accordance with Section 5.1
or Investor's exercise in full (or the expiration) of the Stock Purchase Warrant
issued in favor of the Investor by the Company of even date herewith.
(c) In the event the Company for any reason is not in
compliance with its obligation to redeem shares of Series A Preferred Stock in
accordance with the terms and conditions in Article 7 of the Series A
Certificate (as defined in the Purchase Agreement), the Investor and Principal
Stockholders agree to vote all shares of capital stock of the Company owned or
controlled by them to increase the number of directors of the Company from five
(5) to nine (9) and to elect as directors of the Company five (5) directors
designated by the holders of a majority of the Shares.
4.2 Elections, Vacancies, Removal. The Investor and each Principal
Stockholder agrees to use its, his or her best efforts to cause the Investor
Director to be elected to the Board of Directors as provided in Section 4.1. In
the event of any vacancy in the Board of Directors, the Investor and each
Principal Stockholder agrees to vote all shares of capital stock owned or
controlled by them and to otherwise use their best efforts to fill such vacancy
so that the Board of Directors of the Company will include directors designated
as provided in Section 4.1. Each Investor and each Principal Stockholder agrees
to vote all shares of capital stock owned or controlled by them for the removal
of the Investor Director whenever (but only whenever) there shall be presented
to the Board of Directors the written direction that the Investor Director be
removed, signed by the Investor.
5. General.
5.1 Termination. This Agreement shall terminate upon the occurrence of,
and shall not be applicable to, any of the following events:
(a) the liquidation, dissolution or indefinite cessation of the
business operations of the Company, or a merger, recapitalization,
reorganization or sale of all or substantially all of the assets of the Company
which will result in the Company's stockholders immediately prior to such event
not holding at least 50% of the voting power of the surviving, continuing or
purchasing entity immediately after such event;
(b) the execution by the Company of a general assignment for the
benefit of creditors or the appointment of a receiver or trustee to take
possession of the property and assets of the Company;
(c) the closing of the Company's first underwritten public
offering pursuant to an effective registration statement filed under the
Securities Act of 1933, as amended, covering the offer and sale of Common Stock
for the account of the Company in which the aggregate gross proceeds received
(before deduction of underwriters' discounts and commissions) equals or exceeds
$20 million at an offering price per share of Common Stock not less than four
(4) times the price per share paid by Investor to purchase shares of the
Company's Series A Preferred Stock pursuant to the Purchase Agreement (as
adjusted for any stock dividends, combinations, splits and similar events with
respect to the Common Stock) (a "Qualifying IPO");
(d) the written agreement of the Company, the Investor and the
holders of a majority of the shares of Common Stock held by all the Principal
Stockholders hereunder; or
<PAGE>
(e) upon the fifth (5th) anniversary of the execution of this
Agreement.
5.2 Notices. All notices and other communications hereunder shall be in
writing and shall be deemed given if delivered personally or by commercial
delivery service, or mailed by registered or certified mail (return receipt
requested) or sent via facsimile (with confirmation of receipt) to the parties
at the following address for such party (or at such other address for a party as
shall be specified by like notice):
(i) in the case of the Company:
Webmodal, Inc.
129 East Calhoun Street, Unit B
Woodstock, IL 60098
Attention: Christopher R. Kravas
(ii) in the case of the Investor:
NetValue Holdings, Inc.
Two Penn Center Plaza, Suite 605
Philadelphia, PA 19103
Attn: Andrew Panzo
(iii) in the case of a Principal Stockholder, to the address
for such Principal Stockholder listed on Schedule A hereto.
Notice given by personal delivery, courier service or mail
shall be effective upon actual receipt. Notice given by facsimile shall be
confirmed by appropriate answer back and shall be effective upon actual receipt
if received during the recipient's normal business hours, or at the beginning of
the recipient's next business day after receipt if not received during the
recipient's normal business hours. All notices by facsimile shall be confirmed
promptly after transmission in writing by certified mail, commercial delivery
service or personal delivery. Any party may change any address to which notice
is to be given to it by giving notice as provided above of such change of
address.
5.3 Successors and Assigns. This Agreement and the rights and
obligations of the parties hereunder shall inure to the benefit of, and be
binding upon, their respective successors, assigns and legal representatives. By
their execution hereof or of an Adoption Agreement attached hereto as Annex A,
each party hereto hereby appoints the Company as its attorney-in-fact for the
sole purpose of executing Adoption Agreements with any subsequent permitted
transferees.
5.4 Severability. In the event one or more of the provisions of this
Agreement should, for any reason be held to be invalid, illegal or
unenforceable, such provisions shall be excluded from this Agreement and the
balance of this Agreement shall be interpreted as if such provision had never
been contained herein.
5.5 Entire Agreement; Amendments and Waivers. This Agreement
constitutes the entire agreement among the parties hereto with respect to the
subject matter hereof. Other than with respect to amendments to Schedule A
hereto, any amendment or modification of this Agreement shall be effective only
if evidenced by a written instrument executed by the Company, the Investor and
the holders of a majority of the shares of Common Stock held by all the
Principal Stockholders hereunder. Any waiver hereunder shall be effective only
if evidenced by a written instrument executed by the Investor or the holders of
a majority of the shares of Common Stock held by all the Principal Stockholders,
as the case may be, whose rights are being waived.
<PAGE>
5.6 Governing Law. The construction, validity and interpretation of
this Agreement will be governed by the internal laws of the State of Delaware
without giving effect to any choice of law or conflict of law provision or rule
(whether of the State of Delaware or any other jurisdiction) that would cause
the application of the laws of any jurisdiction other than the State of
Delaware.
5.7 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original but all of which, when
taken together, shall constitute one and the same instrument.
5.8 Remedies. The parties hereto shall have all remedies for breach of
this Agreement available to them as provided by law or equity. Without limiting
the generality of the foregoing, the parties agree that in addition to any other
rights and remedies available at law or in equity, the parties shall be entitled
to obtain specific performance of the obligations of each party to this
Agreement and immediate injunctive relief and that, in the event any action or
proceeding is brought in equity or to enforce the same, no party will urge, as a
defense, that there is an adequate remedy at law.
[SIGNATURE PAGES FOLLOW]
<PAGE>
IN WITNESS WHEREOF, the parties have executed this
Stockholders' Agreement on the day and year indicated above.
COMPANY:
--------
WEBMODAL, INC.
By:____________________________
Name: Christopher R. Kravas
Title: President
INVESTOR:
---------
NET VALUE HOLDINGS, INC.
By:____________________________
Name: Andrew P. Panzo
Title: President
PRINCIPAL STOCKHOLDERS:
----------------------
_______________________________
Christopher R. Kravas
<PAGE>
Schedule A
Schedule of Principal Stockholders
[Name and Address]
______________________ ______________________ Fax Number:__________________
[Name and Address]
______________________ ______________________ Fax Number:__________________
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ANNEX A
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ADOPTION AGREEMENT
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This Adoption Agreement ("Adoption Agreement") is executed by
the undersigned (the "Transferee") pursuant to the terms of that certain
Stockholders' Agreement dated as of May 9, 2000 (the "Agreement") by and among
Webmodal, Inc., Net Value Holdings, Inc. and certain Principal Stockholders.
Capitalized terms used but not defined herein shall have the respective meanings
ascribed to such terms in the Agreement. By the execution of this Adoption
Agreement, the Transferee agrees as follows:
1. Acknowledgment. Transferee acknowledges that Transferee is
acquiring certain securities of the Company (the "Securities"), subject to the
terms and conditions of the Agreement.
2. Agreement. Transferee (i) agrees that the Securities
acquired by Transferee shall be bound by and subject to the terms of the
Agreement, and (ii) hereby adopts the Agreement with the same force and effect
as if Transferee were originally a party thereto.
3. Notice. Any notice required or permitted by the Agreement
shall be given to Transferee at the address listed beside Transferee's signature
below.
EXECUTED AND DATED this __ day of _________________, 200_.
TRANSFEREE:
By:_________________________________
Name:_______________________________
Title:______________________________
Address:____________________________
Fax:________________________________
Spouse: (if applicable):
____________________________________
Name:
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Accepted and agreed to by the Company on behalf of itself and
pursuant to Section 5.3 on behalf of the other parties to the Agreement.
Webmodal, Inc.
By:________________________
Name:______________________
Title:_____________________
