_________________________________________________________________
_________________________________________________________________
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
The Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) April 26, 1999
DYNAMICWEB ENTERPRISES, INC.
(Exact name of registrant as specified in its charter)
New Jersey 0-10039 22-2267658
(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Ident. No.)
271 Route 46 West, Building F, Suite 209,
Fairfield, New Jersey 19610 07004
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code 973-244-1000
N/A
(Former name or former address, if changed since last report.)
_________________________________________________________________
_________________________________________________________________
<PAGE>
Item 5: Other Events
(a) Private Placement.
On April 26, 1999, the Company completed a private
placement to Keeway Investments, Ltd. and Cranshire Capital L.P.,
of 141,177 and 94,118 shares of common stock, par value $0.0001
per share (the "Common Stock") respectively.
The total offering price was $1,000,003 and the Company
received net proceeds of approximately $940,253. This private
placement transaction did not involve an underwriter, although
PGN Capital Solutions, L.L.C. acted as placement agent and
received a fee of $53,750 and 5000 shares of common stock as
compensation in connection therewith.
These transactions were deemed to be exempt from
registration under the Securities Act of 1933, as amended, by
virtue of Section 4(2) or Regulation D promulgated thereunder,
including Rule 506 of Regulation D. Keeway Investments, Ltd. and
Cranshire Capital L.P. are "accredited investors" within the
meaning of Rule 501 of Regulation D under the Securities Act.
The purchasers represented their intention to acquire the
securities for investment only and not with a view to the
distribution thereof. Required disclosure was provided, or
access to information in lieu of disclosure was present.
Required legends are affixed to the securities issued in such
transaction.
The Company intends to use the net proceeds for general
purposes.
Item 7. Exhibits
The following exhibits will be filed herewith:
4.2 Securities Purchase Agreement dated April 26, 1999
between DynamicWeb Enterprises, Inc., Cranshire
Capital, L.P., and Keeway Investments Ltd.
4.3 Registration Rights Agreement dated April 26, 1999
between DynamicWeb Enterprises, Inc., Cranshire
Capital, L.P., and Keeway Investments Ltd.
PAGE 2
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act
of 1934, the registrant has duly caused this report to be signed
on its behalf by the undersigned hereunto duly authorized.
DYNAMICWEB ENTERPRISES, INC.
Dated: May 7, 1999
By /s/Steven L. Vanechanos, Jr.
Steven L. Vanechanos, Jr.
President
PAGE 3
<PAGE>
EXHIBIT INDEX
Exhibit Number
4.2 Securities Purchase Agreement dated April 26, 1999
between DynamicWeb Enterprises, Inc., Cranshire
Capital, L.P., and Keeway Investments Ltd.
4.3 Registration Rights Agreement dated April 26, 1999
between DynamicWeb Enterprises, Inc., Cranshire
Capital, L.P., and Keeway Investments Ltd.
<PAGE 4>
SECURITIES PURCHASE AGREEMENT
This SECURITIES PURCHASE AGREEMENT (the "Agreement"), dated
as of April 26, 1999 (the "Closing Date"), is entered into by and
among DynamicWeb Enterprises Inc., a New Jersey corporation, with
headquarters located at 271 Route 46 West, Bldg. F, Fairfield,
New Jersey 07013 (the "Company"), and the investors listed on
Schedule 1 attached hereto (individually, a "Buyer" and
collectively, the "Buyers").
WHEREAS:
A. The Company and the Buyers are executing and delivering
this Agreement in reliance upon the exemption from securities
registration afforded by Rule 506 of Regulation D
("Regulation D") as promulgated by the United States Securities
and Exchange Commission (the "SEC") under the Securities Act of
1933, as amended (the "1933 Act");
B. The Buyers wish to purchase, upon the terms and
conditions stated in this Agreement, an aggregate of 235,295
shares of the Company's Common Stock, par value $.0001 per share
(the "Common Shares"), in the respective amounts set forth
opposite each Buyer's name on Schedule 1; and
C. Contemporaneously with the execution and delivery of
this Agreement, the parties hereto are executing and delivering a
Registration Rights Agreement substantially in the form attached
hereto as Exhibit A (the "Registration Rights Agreement")
pursuant to which the Company has agreed to provide certain
registration rights under the 1933 Act and the rules and
regulations promulgated thereunder, and applicable state
securities laws.
NOW THEREFORE, the Company and the Buyers hereby agree as
follows:
1. PURCHASE AND SALE OF COMMON SHARES.
(a) Purchase of Common Shares. In connection with the
offering (the "Offering") by the Company of its common stock to
certain purchasers, including without limitation, the Buyers, and
subject to the satisfaction (or waiver) of the conditions set
forth in Sections 6 and 7 below, the Company shall issue and sell
to each Buyer and each Buyer severally agrees to purchase from
the Company the respective number of shares of Common Shares set
forth opposite such Buyer's name on Schedule 1 (the "Closing").
The purchase price (the "Purchase Price") of the Common Shares at
the Closing shall be $1,000,003.75.
(b) Form of Payment. Upon the completion of the
conditions contained in Sections 6 and 7 of this Agreement, each
Buyer shall pay the Purchase Price to the Company for the Common
Shares to be issued and sold to such Buyer at the Closing, by
<PAGE 1> wire transfer of immediately available funds in
accordance with the Company's written wire instructions. On the
Closing Date, the Company shall deliver to the Escrow Agent (as
defined in Section 7 of this Agreement),on behalf of each Buyer,
stock certificates (in the denominations as such Buyer shall
request) (the "Common Share Certificates") representing such
number of the Common Shares which such Buyer is then purchasing
(as indicated opposite such Buyer's name on Schedule 1)
hereunder, duly executed on behalf of the Company and registered
in the name of such Buyer or its designee. Upon the completion
of the conditions contained in Sections 6 and 7 of this
Agreement, the Escrow Agent shall deliver the certificates
representing the Common Shares to the Buyers via overnight
courier.
2. BUYER'S REPRESENTATIONS AND WARRANTIES.
Each Buyer represents and warrants with respect to only
itself that:
(a) Investment Purpose. Such Buyer is acquiring the
Common Shares (the Common Shares may also be referred to herein
as the "Securities"), for its own account for investment only and
not with a view towards, or for resale in connection with, the
public sale or distribution thereof, except pursuant to sales
registered or exempted under the 1933 Act; provided, however,
that by making the representations herein, such Buyer does not
agree to hold any of the Securities for any minimum or other
specific term and reserves the right to dispose of the Securities
at any time in accordance with or pursuant to a registration
statement or an exemption under the 1933 Act.
(b) Accredited Investor Status. Such Buyer is an
"accredited investor" as that term is defined in Rule 501(a)(3)
of Regulation D and such Buyer has in excess of $20,000,000 in
assets under its investment management.
(c) Reliance on Exemptions. Such Buyer understands
that the Securities are being offered and sold to it in reliance
on specific exemptions from the registration requirements of
United States federal and state securities laws and that the
Company is relying in part upon the truth and accuracy of, and
such Buyer's compliance with, the representations, warranties,
agreements, acknowledgments and understandings of such Buyer set
forth herein in order to determine the availability of such
exemptions and the eligibility of such Buyer to acquire such
Securities.
(d) Information. Such Buyer and its advisors, if any,
have been furnished with all materials relating to the business,
finances and operations of the Company and materials relating to
the offer and sale of the Securities which have been requested by
such Buyer. Such Buyer and its advisors, if any, have been
afforded the opportunity to ask questions of the Company.
<PAGE 2> Neither such inquiries nor any other due diligence
investigations conducted by such Buyer or its advisors, if any,
or its representatives shall modify, amend or affect such Buyer's
right to rely on the Company's representations and warranties
contained in Section 3 below. Such Buyer understands that its
investment in the Securities involves a high degree of risk.
Such Buyer has sought such accounting, legal and tax advice as it
has considered necessary to make an informed investment decision
with respect to its acquisition of the Securities. Such Buyer
has been informed that the Company had filed a registration
statement on Form S-2 and had as of April 8, 1999 withdrawn such
registration statement. Neither Buyer nor their respective
advisors have been furnished with a copy of such registration
statement and neither Buyer has reviewed nor relied upon the
registration statement in any way in determining to enter into
this transaction.
(e) No Governmental Review. Such Buyer understands
that no United States federal or state agency or any other
government or governmental agency has passed on or made any
recommendation or endorsement of the Securities or the fairness
or suitability of the investment in the Securities nor have such
authorities passed upon or endorsed the merits of the offering of
the Securities.
(f) Transfer or Resale. Such Buyer understands that
except as provided in the Registration Rights Agreement: (i) the
Common Shares have not been and are not being registered under
the 1933 Act or any state securities laws, and may not be offered
for sale, sold, assigned or transferred unless (A) subsequently
registered thereunder, (B) such Buyer shall have delivered to the
Company an opinion of counsel, in a generally acceptable form, to
the effect that such Common Shares to be sold, assigned or
transferred may be sold, assigned or transferred pursuant to an
exemption from such registration, or (C) such Buyer provides the
Company with reasonable assurance that such Common Shares can be
sold, assigned or transferred pursuant to Rule 144 promulgated
under the 1933 Act, as amended, (or a successor rule thereto)
("Rule 144"); and (ii) any sale of the Common Shares made in
reliance on Rule 144 may be made only in accordance with the
terms of Rule 144 and further, and if Seller intends to utilize
Rule 144 but Rule 144 is not applicable to such resale, any
resale of the Common Shares under circumstances in which the
Seller (or the person through whom the sale is made) may be
deemed to be an underwriter (as that term is defined in the 1933
Act) may require compliance with some other exemption under the
1933 Act or the rules and regulations of the SEC thereunder.
Each Buyer shall not deliver a portion or all of the Common
Shares to cover any short position entered into by such Buyer.
(g) Legends. Such Buyer understands that the
certificates or other instruments representing the Commons
Shares, until such time as the sale of the Common Shares has been
registered under the 1933 Act as contemplated by the Registration
<PAGE 3> Rights Agreement, except as set forth below, shall bear
a restrictive legend in substantially the following form (and a
stop-transfer order may be placed against transfer of such stock
certificates):
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR APPLICABLE STATE SECURITIES LAWS. THE
SECURITIES HAVE BEEN ACQUIRED FOR INVESTMENT AND MAY
NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED
(1) IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT
OF 1933, AS AMENDED (THE "1933 ACT"), OR APPLICABLE
STATE SECURITIES LAWS, OR (2) IN THE ABSENCE OF AN
OPINION OF COUNSEL, IN A GENERALLY ACCEPTABLE FORM,
THAT REGISTRATION IS NOT REQUIRED UNDER THE 1933 ACT OR
(3) UNLESS SOLD, TRANSFERRED OR ASSIGNED PURSUANT TO
RULE 144 UNDER SAID ACT.
The legend set forth above shall be removed and the Company shall
issue a certificate without such legend to the holder of the
Securities upon which it is stamped, if, unless otherwise
required by state securities laws, (i) such Securities are
registered for sale under the 1933 Act, (ii) in connection with a
sale transaction, such holder provides the Company with an
opinion of counsel, in a generally acceptable form, to the effect
that a public sale, assignment or transfer of the Securities may
be made without registration under the 1933 Act, or (iii) such
holder provides the Company with reasonable assurances that the
Securities can be sold pursuant to Rule 144 without any
restriction as to the number of securities acquired as of a
particular date that can then be immediately sold.
(h) Validity; Enforcement. This Agreement has been
duly and validly authorized, executed and delivered on behalf of
such Buyer and is a valid and binding agreement of such Buyer
enforceable against such Buyer in accordance with its terms,
subject as to enforceability to general principles of equity and
to applicable bankruptcy, insolvency, reorganization, moratorium,
liquidation and other similar laws relating to, or affecting
generally, the enforcement of applicable creditors' rights and
remedies.
(i) Residency. Such Buyer is a resident of that
country specified in its address on Schedule 1.
(j) Section 11 Liability. Each Buyer acknowledges
that the Company agrees to accept liability pursuant to and under
Section 11 and Section 12(a) of the 1933 Act.
<PAGE 4>
AC REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
The Company represents and warrants to each of the Buyers
that:
(a) Organization and Qualification. The Company and
its "Subsidiaries" (which for purposes of this Agreement means
any entity in which the Company, directly or indirectly, owns a
controlling position of capital stock or holds a controlling
position of an equity or similar interest) are corporations duly
organized and validly existing in good standing under the laws of
the jurisdiction in which they are incorporated, and have the
requisite corporate power and authorization to own their
properties and to carry on their business as now being conducted.
Each of the Company and its Subsidiaries is duly qualified as a
foreign corporation to do business and is in good standing in
every jurisdiction in which its ownership of property or the
nature of the business conducted by it makes such qualification
necessary, except to the extent that the failure to be so
qualified or be in good standing would not have a Material
Adverse Effect. As used in this Agreement, "Material Adverse
Effect" means any material adverse effect on the business,
properties, assets, operations, results or operations, financial
condition or prospects of the Company and its Subsidiaries, if
any, taken as a whole, or on the transactions contemplated hereby
or by the agreements and instruments to be entered into in
connection herewith, or on the authority or ability of the
Company to perform its obligations under the Transaction
Documents (as defined below).
(b) Authorization; Enforcement; Validity. (i) The
Company has the requisite corporate power and authority to enter
into and perform this Agreement, the Registration Rights
Agreement, the Transfer Agent Instructions (as defined in
Section 5) and each of the other agreements entered into by the
parties hereto in connection with the transactions contemplated
by this Agreement (collectively, the "Transaction Documents"),
and to issue the Securities in accordance with the terms hereof
and thereof, (ii) the execution and delivery of the Transaction
Documents by the Company and the consummation by it of the
transactions contemplated hereby and thereby, including without
limitation the issuance of the Common Shares, have been duly
authorized by the Company's Board of Directors and no further
consent or authorization is required by the Company, its Board of
Directors or its stockholders, (iii) the Transaction Documents
have been duly executed and delivered by the Company, and (iv)
the Transaction Documents constitute the valid and binding
obligations of the Company enforceable against the Company in
accordance with their terms, except as such enforceability may be
limited by general principles of equity or applicable bankruptcy,
insolvency, reorganization, moratorium, liquidation or similar
laws relating to, or affecting generally, the enforcement of
creditors' rights and remedies.
<PAGE 5>
(c) Issuance of Securities. The Common Shares are
duly authorized and, upon issuance in accordance with the terms
hereof, shall be (i) validly issued, fully paid and non-
assessable and (ii) free from all taxes, liens and charges with
respect to the issue thereof. The issuance by the Company of the
Common Shares is exempt from registration under the 1933 Act.
(d) No Conflicts. The execution, delivery and
performance of the Transaction Documents by the Company and the
consummation by the Company of the transactions contemplated
hereby and thereby (including, without limitation, the Company's
issuance of the Common Shares) will not (i) result in a violation
of the Company's Certificate of Incorporation, as amended and as
in effect on the date hereof (the "Certificate of Incorporation")
or the Company's By-laws, as amended and as in effect on the date
hereof (the "By-laws") or (ii) except with respect to prior
agreements with the Share Fund (which has or will consent to the
transactions contemplated by the Agreement), conflict with, or
constitute a default (or an event which with notice or lapse of
time or both would become a default) under, or give to others any
rights of termination, amendment, acceleration or cancellation
of, any material agreement, indenture or instrument to which the
Company or any of its Subsidiaries is a party, or result in a
violation of any law, rule, regulation, order, judgment or decree
(including federal and state securities laws and regulations and
the rules and regulations of the Principal Market (as defined
below)) applicable to the Company or any of its Subsidiaries or
by which any property or asset of the Company or any of its
Subsidiaries is bound or affected. Neither the Company nor its
Subsidiaries is in violation of any term of or in default under
its Certificate of Incorporation, or By-laws or their
organizational charter or by-laws, respectively. Neither the
Company or any of its Subsidiaries is in violation or any term of
or in default under any contract, agreement, mortgage,
indebtedness, indenture, instrument, judgment, decree or order or
any statute, rule or regulation applicable to the Company or its
Subsidiaries, except for possible conflicts, defaults,
terminations, amendments which would not have a Material Adverse
Effect. The business of the Company and its Subsidiaries is not
being conducted, and shall not be conducted, in violation of any
law, ordinance, regulation of any governmental entity, except for
possible violations the sanctions for which either individually
or in the aggregate would not have a Material Adverse Effect.
Except as specifically contemplated by this Agreement and as
required under the 1933 Act, the Company is not required to
obtain any consent, authorization or order of, or make any filing
or registration with, any court or governmental agency or any
regulatory or self-regulatory agency in order for it to execute,
deliver or perform any of its obligations under or contemplated
by the Transaction Documents in accordance with the terms hereof
or thereof. All consents, authorizations, orders, filings and
registrations which the Company is required to obtain pursuant to
the preceding sentence have been obtained or effected on or prior
to the date hereof. The Company and its Subsidiaries are unaware
<PAGE 6> of any facts or circumstances which might give rise to
any of the foregoing. The Company is not in violation of the
listing requirements of the Principal Market (as defined below).
(e) SEC Documents; Financial Statements. As of the
Closing, the Company has filed all reports, schedules, forms,
statements and other documents required to be filed by it with
the SEC pursuant to the reporting requirements of the Securities
Exchange Act of 1934, as amended (the "1934 Act") (all of the
foregoing filed prior to the date hereof and all exhibits
included therein and financial statements and schedules thereto
and documents incorporated by reference therein being hereinafter
referred to as the "SEC Documents"). As of their respective
dates, the SEC Documents complied in all material respects with
the requirements of the 1934 Act and the rules and regulations of
the SEC promulgated thereunder applicable to the SEC Documents,
and none of the SEC Documents, at the time they were filed with
the SEC, contained any untrue statement of a material fact or
omitted to state a material fact required to be stated therein or
necessary in order to make the statements therein, in light of
the circumstances under which they were made, not misleading. As
of their respective dates, the financial statements of the
Company included in the SEC Documents complied as to form in all
material respects with applicable accounting requirements and the
published rules and regulations of the SEC with respect thereto.
Such financial statements have been prepared in accordance with
generally accepted accounting principles, consistently applied,
during the periods involved (except (i) as may be otherwise
indicated in such financial statements or the notes thereto, or
(ii) in the case of unaudited interim statements, to the extent
they may exclude footnotes or may be condensed or summary
statements) and fairly present in all material respects the
financial position of the Company as of the dates thereof and the
results of its operations and cash flows for the periods then
ended (subject, in the case of unaudited statements, to normal
year-end audit adjustments). No other information provided by or
on behalf of the Company to the Buyers which is not included in
the SEC Documents, including, without limitation contains any
untrue statement of a material fact or omits to state any
material fact necessary in order to make the statements therein,
in the light of the circumstance under which they are or were
made, not misleading. Neither the Company nor any of its
Subsidiaries or any of their officers, directors, employees or
agents have provided the Buyers with any material, nonpublic
information.
(f) Absence of Certain Changes. Since the most recent
filing by the Company with the SEC, there has been no material
adverse change and no material adverse development in the
business, properties, operations, financial condition, results of
operations or prospects of the Company or its Subsidiaries. The
Company has not taken any steps, and does not currently expect to
take any steps, to seek protection pursuant to any bankruptcy law
nor does the Company or any of its Subsidiaries have any
<PAGE 7> knowledge or reason to believe that its creditors intend
to initiate involuntary bankruptcy proceedings.
(g) Absence of Litigation. Except as set forth in the
SEC Documents, there is no action, suit, proceeding, inquiry or
investigation before or by any court, public board, government
agency, self-regulatory organization or body pending or, to the
knowledge of the Company or any of its Subsidiaries, threatened
against or affecting the Company, the Company's common stock, the
Common Shares or any of the Company's Subsidiaries or any of the
Company's or the Company's Subsidiaries' officers or directors in
their capacities as such which would have a Material Adverse
Effect or which has been previously disclosed to Buyer in
writing.
(h) [Reserved].
(i) No Undisclosed Events, Liabilities, Developments
or Circumstances. No event, liability, development or
circumstance has occurred or exists, or is contemplated to occur,
with respect to the Company or its Subsidiaries or their
respective business, properties, prospects, operations or
financial condition, that would be required to be disclosed by
the Company under applicable securities laws on a registration
statement filed with the SEC relating to an issuance and sale by
the Company of its common stock and which has not been publicly
announced.
(j) No General Solicitation. Neither the Company, nor
any of its affiliates, nor any person acting on its or their
behalf, has engaged in any form of general solicitation or
general advertising (within the meaning of Regulation D under the
1933 Act) in connection with the offer or sale of the Securities.
(k) No Integrated Offering. Neither the Company, nor
any of its affiliates, nor any person acting on its or their
behalf has, directly or indirectly, made any offers or sales of
any security or solicited any offers to buy any security, under
circumstances that would require registration of any of the
Securities under the 1933 Act or cause this offering of the
Securities to be integrated with prior offerings by the Company
for purposes of the 1933 Act or any applicable stockholder
approval provisions, including, without limitation, under the
rules and regulations of any exchange or automated quotation
system on which any of the securities of the Company are listed
or designated, nor will the Company or any of its Subsidiaries
take any action or steps that would require registration of any
of the Securities under the 1933 Act or cause the offering of the
Securities to be integrated with other offerings.
(l) Employee Relations. Neither the Company nor any
of its Subsidiaries is involved in any union labor dispute nor,
to the knowledge of the Company or any of its Subsidiaries, is
any such dispute threatened. <PAGE 8>
(m) Intellectual Property Rights. The Company and its
Subsidiaries own or possess adequate rights or licenses to use
all trademarks, trade names, service marks, service mark
registrations, service names, patents, patent rights, copyrights,
inventions, licenses, approvals, governmental authorizations,
trade secrets and rights necessary to conduct their respective
businesses as now conducted. None of the Company's trademarks,
trade names, service marks, service mark registrations, service
names, patents, patent rights, copyrights, inventions, licenses,
approvals, government authorizations, trade secrets or other
intellectual property rights have expired or terminated, or are
expected to expire or terminate within two years from the date of
this Agreement. The Company and its Subsidiaries do not have any
knowledge of any infringement by the Company or its Subsidiaries
of trademark, trade name rights, patents, patent rights,
copyrights, inventions, licenses, service names, service marks,
service mark registrations, trade secret or other similar rights
of others, or of any such development of similar or identical
trade secrets or technical information by others and the Company
and its Subsidiaries are unaware of any facts or circumstances
which might give rise to any of the foregoing. The Company and
its Subsidiaries have taken reasonable security measures to
protect the secrecy, confidentiality and value of all of their
intellectual properties.
(n) Environmental Laws. The Company and its
Subsidiaries (i) are in compliance with any and all applicable
foreign, federal, state and local laws and regulations relating
to the protection of human health and safety, the environment or
hazardous or toxic substances or wastes, pollutants or
contaminants ("Environmental Laws"), (ii) have received all
permits, licenses or other approvals required of them under
applicable Environmental Laws to conduct their respective
businesses and (iii) are in compliance with all terms and
conditions of any such permit, license or approval.
(o) Title. The Company and its Subsidiaries have good
and marketable title in fee simple to all real property and good
and marketable title to all personal property owned by them which
is material to the business of the Company and its Subsidiaries,
in each case free and clear of all liens, encumbrances and
defects except such as are described in the SEC Documents or such
as do not materially affect the value of such property and do not
interfere with the use made and proposed to be made of such
property by the Company and any of its Subsidiaries. Any real
property and facilities held under lease by the Company and any
of its Subsidiaries are held by them under valid, subsisting and
enforceable leases with such exceptions as are not material and
do not interfere with the use made and proposed to be made of
such property and buildings by the Company and its Subsidiaries.
(p) Insurance. The Company and each of its
Subsidiaries are insured by insurers of recognized financial
responsibility against such losses and risks and in such amounts
<PAGE 9> as management of the Company believes to be prudent and
customary in the businesses in which the Company and its
Subsidiaries are engaged and the Company does not have any reason
to believe it will not be able to renew its existing insurance
coverage under substantially similar terms for the next two (2)
years.
(q) Regulatory Permits. The Company and its
Subsidiaries possess all certificates, authorizations and permits
issued by the appropriate federal, state or foreign regulatory
authorities necessary to conduct their respective businesses, and
neither the Company nor any such Subsidiary has received any
notice of proceedings relating to the revocation or modification
of any such certificate, authorization or permit.
(r) Tax Status. The Company and each of its
Subsidiaries has made or filed all federal and state income and
all other tax returns, reports and declarations required by any
jurisdiction to which it is subject (unless and only to the
extent that the Company and each of its Subsidiaries has set
aside on its books provisions reasonably adequate for the payment
of all unpaid and unreported taxes) and has paid all taxes and
other governmental assessments and charges that are material in
amount, shown or determined to be due on such returns, reports
and declarations, except those being contested in good faith and
has set aside on its books provision reasonably adequate for the
payment of all taxes for periods subsequent to the periods to
which such returns, reports or declarations apply. There are no
unpaid taxes in any material amount claimed to be due by the
taxing authority of any jurisdiction, and the officers of the
Company know of no basis for any such claim.
(s) Transactions With Affiliates. Except as set forth
in the SEC Documents filed at least ten days prior to the date
hereof, none of the officers, control parties, control entities,
directors, or employees of the Company is presently a party to
any transaction with the Company or any of its Subsidiaries
(other than for services as employees, officers and directors),
including any contract, agreement or other arrangement providing
for the furnishing of services to or by, providing for rental of
real or personal property to or from, or otherwise requiring
payments to or from any officer, director or such employee or, to
the knowledge of the Company, any corporation, partnership, trust
or other entity in which any officer, director, or any such
employee has a substantial interest or is an officer, director,
trustee or partner.
(t) Eligibility. The Company is currently eligible to
register the resale of the Common Shares on a registration
statement on Form S-2 under the 1933 Act.
<PAGE 10>
4. COVENANTS.
(a) Best Efforts. Each party shall use its best
efforts timely to satisfy each of the conditions to be satisfied
by it as provided in Sections 6 and 7 of this Agreement.
(b) Form D and Blue Sky. The Company agrees to file a
Form D with respect to the Securities as required under
Regulation D and to provide a copy thereof to each Buyer promptly
after such filing. The Company shall, on or before the Closing
Date, take such action as the Company shall reasonably determine
is necessary in order to obtain an exemption for or to qualify
the Securities for sale to the Buyers at the Closing pursuant to
this Agreement under applicable securities or "Blue Sky" laws of
the states of the United States, and shall provide evidence of
any such action so taken to the Buyers on or prior to the Closing
Date. The Company shall make all filings and reports relating
the offer and sale of the Securities required under applicable
securities or "Blue Sky" laws of the states of the United States
following the Closing Date.
(c) Reporting Status. Until the earlier of (i) the
date which is one year after the date as of which the Investors
(as that term is defined in the Registration Rights Agreement)
may sell all of the Common Shares without restriction pursuant to
Rule 144(k) promulgated under the 1933 Act (or successor
thereto), or (ii) the date on which the Investors shall have sold
all the Common Shares (the "Registration Period"), the Company
shall file all reports required to be filed with the SEC pursuant
to the 1934 Act, and the Company shall not terminate its status
as an issuer required to file reports under the 1934 Act even if
the 1934 Act or the rules and regulations thereunder would
otherwise permit such termination.
(d) [Reserved].
(e) [Reserved].
(f) Listing. The Company shall promptly secure the
listing of all of the Registrable Securities (as that term is
defined in the Registration Rights Agreement) upon each national
securities exchange, automated quotation system or bulletin board
system, if any, upon which shares of the Company's common stock
are then listed (subject to official notice of issuance) and
shall maintain, so long as any other shares of common stock shall
be so listed, such listing of all Registrable Securities from
time to time issuable under the terms of the Transaction
Documents. The Company shall maintain the Common Stock's
authorization for quotation on the Nasdaq Bulletin Board System,
Nasdaq Small-Cap Market, The New York Stock Exchange, Inc. or The
American Stock Exchange, Inc., as applicable (the "Principal
Market"). Neither the Company nor any of its Subsidiaries shall
take any action which would be reasonably expected to result in
the delisting or suspension of Company common stock on the
<PAGE 11> Principal Market. The Company shall promptly, and in
no event later than the following business day, provide to each
Buyer copies of any notices it receives from the Principal Market
regarding the continued eligibility of Company common stock for
listing on such automated quotation system or securities
exchange. The Company shall pay all fees and expenses in
connection with satisfying its obligations under this
Section 4(f).
(g) [Reserved].
(h) [Reserved].
(i) Limitation on Filing Registration Statements.
Except as provided for in the Registration Rights Agreement, the
Company shall not file a registration statement (other than the
Registration Statement (as defined in the Registration Rights
Agreement) or a registration statement on Form S-8) covering the
sale or resale of shares of Company common stock with the SEC
during the period beginning on the date hereof and ending on the
date which is 30 days after the Registration Statement has been
declared effective by the SEC.
(j) Independent Auditors. The Company shall, until at
least three (3) years after the Closing Date, maintain as its
independent auditors an accounting firm authorized to practice
before the SEC.
(k) Corporate Existence and Taxes. The Company shall,
until at least the later of (i) the date that is three (3) years
after the Closing Date or (ii) the sale of all of the Common
Shares purchased pursuant to this Agreement, maintain its
corporate existence in good standing (provided, however, that the
foregoing covenant shall not prevent the Company from entering
into any merger or corporate reorganization as long as the
surviving entity in such transaction, if not the Company, has
common stock listed for trading on the Principal Market and shall
pay all its taxes when due except for taxes which the Company
disputes).
5. TRANSFER AGENT INSTRUCTIONS.
The Company shall issue irrevocable instructions to the
Transfer Agent, and any subsequent transfer agent, substantially
in the form of Exhibit B hereto (the "Transfer Agent
Instructions"). Prior to registration of the Common Shares under
the 1933 Act, all such certificates shall bear the restrictive
legend specified in Section 2(g) of this Agreement. The Company
warrants that no instruction other than the Transfer Agent
Instructions referred to in this Section 5, and stop transfer
instructions to give effect to Section 2(f) hereof will be given
by the Company to its Transfer Agent and that the Securities
shall otherwise be freely transferable on the books and records
of the Company as and to the extent provided in this Agreement
<PAGE 12> and the Registration Rights Agreement. Nothing in this
Section 5 shall affect in any way each Buyer's obligations and
agreements set forth in Section 2(g) to comply with all
applicable prospectus delivery requirements, if any, upon resale
of the Securities. If a Buyer provides the Company with an
opinion of counsel, in a generally acceptable form, to the effect
that a public sale, assignment or transfer of the Securities may
be made without registration under the 1933 Act or the Buyer
provides the Company with reasonable assurances that the
Securities can be sold pursuant to Rule 144 without any
restriction as to the number of securities acquired as of a
particular date that can then be immediately sold, the Company
shall permit the transfer, and, promptly instruct its Transfer
Agent to issue one or more certificates in such name and in such
denominations as specified by such Buyer and without any
restrictive legend. The Company acknowledges that a breach by it
of its obligations hereunder will cause irreparable harm to the
Buyers by vitiating the intent and purpose of the transaction
contemplated hereby. Accordingly, the Company acknowledges that
the remedy at law for a breach of its obligations under this
Section 5 will be inadequate and agrees, in the event of a breach
or threatened breach by the Company of the provisions of this
Section 5, that the Buyers shall be entitled, in addition to all
other available remedies, to an order and/or injunction
restraining any breach and requiring immediate issuance and
transfer, without the necessity of showing economic loss and
without any bond or other security being required.
6. CONDITIONS TO THE COMPANY'S OBLIGATION TO SELL.
The obligation of the Company hereunder to issue and sell
the Common Shares to each Buyer at the Closing is subject to the
satisfaction, at or before the Closing Date, of each of the
following conditions, provided that these conditions are for the
Company's sole benefit and may be waived by the Company at any
time in its sole discretion by providing each Buyer with prior
written notice thereof:
(a) Such Buyer shall have executed each of the
Transaction Documents to which it is a party and delivered the
same to the Escrow Agent for the transactions contemplated by
this Agreement.
(b) The representations and warranties of such Buyer
shall be true and correct in all material respects as of the date
when made and as of the Closing Date as though made at that time
(except for representations and warranties that speak as of a
specific date), and such Buyer shall have performed, satisfied
and complied in all material respects with the covenants,
agreements and conditions required by this Agreement to be
performed, satisfied or complied with by such Buyer at or prior
to the Closing Date.
<PAGE 13>
(c) Such Buyer shall have delivered to the Escrow
Agent such other documents relating to the transactions
contemplated by this Agreement as the Escrow Agent or its counsel
may reasonable request.
7. CONDITIONS TO EACH BUYER'S OBLIGATION TO PURCHASE.
The obligation of each Buyer hereunder to purchase the
Common Shares at the Closing is subject to the satisfaction, at
or before the Closing Date, of each of the following conditions,
provided that these conditions are for each Buyer's sole benefit
and may be waived by such Buyer at any time in its sole
discretion by providing the Company with prior written notice
thereof:
(a) The Company shall have executed each of the
Transaction Documents and delivered the same to Katten Muchin &
Zavis, c/o Anthony J. Ribaudo, Esq., located at 525 West Monroe
Street, Suite 1600, Chicago, Illinois 60661 (the "Escrow Agent").
(b) The Company's common stock shall be authorized for
quotation on the Principal Market and trading in Company common
stock shall not have been suspended by the SEC or the Principal
Market.
(c) The representations and warranties of the Company
shall be true and correct as of the date when made and as of the
Closing Date as though made at that time (except for
representations and warranties that speak as of a specific date)
and the Company shall have performed, satisfied and complied with
the covenants, agreements and conditions required by the
Transaction Documents to be performed, satisfied or complied with
by the Company at or prior to the Closing Date.
(d) The Company shall have delivered to the Escrow
Agent the opinion of the Company's counsel dated as of the
Closing Date, in form, scope and substance reasonably
satisfactory to such Buyer and in substantially the form of
Exhibit C attached hereto.
(e) The Company shall have executed and delivered to
the Escrow Agent the certificates representing Common Shares (in
such denominations as such Buyer shall request) for the Common
Shares being purchased by such Buyer at the Closing.
(f) The Transfer Agent Instructions, in the form of
Exhibit B attached hereto, shall have been delivered to and
acknowledged in writing by the Company's transfer agent and a
copy of the executed Transfer Agent Instructions shall have been
delivered to the Escrow Agent.
(g) The Company shall have made all filings, other
than those contemplated by the Registration Rights Agreement,
under all applicable federal and state securities laws necessary
<PAGE 14> to consummate the issuance of the Securities pursuant
to this Agreement in compliance with such laws.
(h) The Company shall have delivered to the Escrow
Agent such other documents relating to the transactions
contemplated by this Agreement as the Escrow Agent may reasonably
request.
(i) Subject to Section 11(l) below, at Closing, the
Company shall reimburse the Buyers for the Buyers' attorneys'
fees and expenses (in an amount not to exceed $15,000.00)
incurred by the Buyers concerning the due diligence review of the
contemplated transactions and the Company, and the negotiation
and preparation of the Transaction Documents and the consummation
of the transactions contemplated thereby.
8. INDEMNIFICATION.
In consideration of each Buyer's execution and delivery of
the Transaction Documents and acquiring the Securities thereunder
and in addition to all of the Company's other obligations under
the Transaction Documents, the Company shall defend, protect,
indemnify and hold harmless each Buyer and each other holder of
the Securities and all of their stockholders, officers,
directors, employees and direct or indirect investors and any of
the foregoing person's agents or other representatives
(including, without limitation, those retained in connection with
the transactions contemplated by this Agreement) (collectively,
the "Indemnitees") from and against any and all actions, causes
of action, suits, claims, losses, costs, penalties, fees,
liabilities and damages, and expenses in connection therewith
(irrespective of whether any such Indemnitee is a party to the
action for which indemnification hereunder is sought), and
including reasonable attorneys' fees and disbursements (the
"Indemnified Liabilities"), incurred by any Indemnitee as a
result of, or arising out of, or relating to (a) any
misrepresentation or breach of any representation or warranty
made by the Company in the Transaction Documents or any other
certificate, instrument or document contemplated hereby or
thereby, (b) any breach of any covenant, agreement or obligation
of the Company contained in the Transaction Documents or any
other certificate, instrument or document contemplated hereby or
thereby, (c) any cause of action, suit or claim brought or made
against such Indemnitee and arising out of or resulting from the
execution, delivery, performance or enforcement of the
Transaction Documents or any other certificate, instrument or
document contemplated hereby or thereby, (d) any transaction
financed or to be financed in whole or in part, directly or
indirectly, with the proceeds of the issuance of the Securities
or (e) the status of such Buyer or holder of the Securities as an
investor in the Company. To the extent that the foregoing
undertaking by the Company may be unenforceable for any reason,
the Company shall make the maximum contribution to the payment
<PAGE 15> and satisfaction of each of the Indemnified Liabilities
which is permissible under applicable law.
9. ANTI-DILUTION ADJUSTMENTS.
If the Corporation shall, at any time or from time to time,
(a) declare a dividend on the Company common stock payable in
shares of its capital stock (including Company common stock) or,
(b) subdivide the outstanding Company common stock or, (c)
combine the outstanding Company common stock into a smaller
number of shares, or (d) issue any shares of its capital stock in
a reclassification of the Company common stock (excluding any
such reclassification in connection with a consolidation or
merger in which the Corporation is the continuing corporation),
then in each such case, the number of shares of Company common
stock constituting the Common Shares at the time of the record
date for such dividend or of the effective date of such
subdivision, combination or reclassification and the number and
kind of Common Shares on such date shall be proportionately
adjusted by virtue of such dividend, subdivision, combination or
reclassification. Any such adjustment to the Common Shares shall
become effective immediately after the record date of such
dividend or the effective date of such subdivision, combination
or reclassification. Such adjustment to the Common Shares shall
be made successively whenever any event listed above shall occur.
10. LIQUIDATED DAMAGES.
The Company agrees that Buyers will suffer damages if the
Company violates any provision of or fails to fulfill any of its
obligations or duties pursuant to the Transaction Documents,
other than the Registration Rights Agreement (a "Company
Violation"), and that it would not be possible to ascertain the
extent of such damages. Accordingly, in the event of such
Company Violation, the Company hereby agrees to pay liquidated
damages ("Liquidated Damages") to each Buyer following the
occurrence of such Company Violation in an amount determined by
multiplying (i) $.085 per Common Share then held by such Buyer by
(ii) the percentage derived by dividing (A) the actual number of
days elapsed from the first day of the date of the Company
Violation or the prior 30-day period, as applicable, to the day
such Company Violation has been completely cured by (B) 30, in
cash, or at the Buyer's option, in the number of shares of
Company common stock equal to the quotient of (v) the dollar
amount of the Liquidated Damages on the Payment Date (as defined
below) by (w) the closing bid price of the Company's common stock
as of the date of the Company Violation (as quoted in the
Principal Market or the market or exchange where the Company's
common stock is then traded). The Liquidated Damages payable
pursuant hereto shall be payable within five (5) business days
from the end of the calendar month commencing on the first
calendar month in which the Company Violation occurs (each, a
"Payment Date"). In the event the Buyer elects to receive the
Liquidated Damages amount in shares of Company common stock, such
<PAGE 16> shares shall also be considered Common Shares and shall
have the registration rights set forth in the Registration Rights
Agreement.
11. GOVERNING LAW; MISCELLANEOUS.
(a) Governing Law; Jurisdiction; Jury Trial. This
Agreement shall be governed by and construed in all respects by
the internal laws of the State of Illinois (except for the proper
application of the United States federal securities laws),
without giving effect to any choice of law or conflict of law
provision or rule (whether of the State of Illinois or any other
jurisdictions) that would cause the application of the laws of
any jurisdictions other than the State of Illinois. Each party
hereby irrevocably submits to the non-exclusive jurisdiction of
the state and federal courts sitting in the City of Chicago.
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.
(b) Counterparts. This Agreement may be executed in
two or more identical counterparts, all of which shall be
considered one and the same agreement and shall become effective
when counterparts have been signed by each party and delivered to
the other party; provided that a facsimile signature shall be
considered due execution and shall be binding upon the signatory
thereto with the same force and effect as if the signature were
an original, not a facsimile signature.
(c) Headings. The headings of this Agreement are for
convenience of reference and shall not form part of, or affect
the interpretation of, this Agreement.
(d) Severability. If any provision of this Agreement
shall be invalid or unenforceable in any jurisdiction, such
invalidity or unenforceability shall not affect the validity or
enforceability of the remainder of this Agreement in that
jurisdiction or the validity or enforceability of any provision
of this Agreement in any other jurisdiction.
(e) Entire Agreement; Amendments. This Agreement
supersedes all other prior oral or written agreements between the
Buyers, the Company, their affiliates and persons acting on their
behalf with respect to the matters discussed herein, and this
Agreement and the instruments referenced herein contain the
entire understanding of the parties with respect to the matters
covered herein and therein and, except as specifically set forth
herein or therein, neither the Company nor any Buyer makes any
representation, warranty, covenant or undertaking with respect to
such matters. No provision of this Agreement may be amended
other than by an instrument in writing signed by the Company and
the Buyers, and no provision hereof may be waived other than by
<PAGE 17> an instrument in writing signed by the party against
whom enforcement is sought.
(f) Notices. Any notices, consents, waivers or other
communications required or permitted to be given under the terms
of this Agreement must be in writing and will be deemed to have
been delivered: (i) upon receipt, when delivered personally;
(ii) upon receipt, when sent by facsimile (provided confirmation
of transmission is mechanically or electronically generated and
kept on file by the sending party); or (iii) one business day
after deposit with a nationally recognized overnight delivery
service, in each case properly addressed to the party to receive
the same. The addresses and facsimile numbers for such
communications shall be:
If to the Company:
DynamicWeb Enterprises Inc.
271 Route 46 West, Bldg. F
Fairfield, New Jersey 07013
Telephone: (973) 276-3107
Facsimile: (973) 575-9830
Attention: Steve Vanechanos
With a copy to:
Stevens & Lee, P.C.
1275 Drummers Lane
One Glenhardie Corporate Center, Ste. 202
Wayne, PA 19087-0236
Telephone: (610)293-4979
Facsimile: (610)687-1384
Attention: Stephen F. Ritner, Esq.
If to the Transfer Agent:
American Stock Transfer & Trust Company
40 Wall Street
New York, New York 10005
Telephone: (718)921-8247
Facsimile: (718)236-4588
Attention: Wilbert Myles
If to a Buyer, to it at the address and facsimile number set
forth on Schedule 1 with copies to such Buyer's representatives
as set forth on Schedule 1, or at such other address and/or
facsimile number and/or to the attention of such other person as
the recipient party has specified by written notice given to each
other party five days prior to the effectiveness of such change.
(g) Successors and Assigns. This Agreement shall be
binding upon and inure to the benefit of the parties and their
respective successors and assigns, including any purchasers of
the Common Shares. The Company shall not assign this Agreement
<PAGE 18> or any rights or obligations hereunder without the
prior written consent of the Buyers. A Buyer may assign some or
all of its rights hereunder without the consent of the Company,
provided, however, that any such assignment shall not release
such Buyer from its obligations hereunder unless such obligations
are assumed by such assignee and the Company has consented to
such assignment and assumption.
(h) No Third Party Beneficiaries. This Agreement is
intended for the benefit of the parties hereto and their
respective permitted successors and assigns, and is not for the
benefit of, nor may any provision hereof be enforced by, any
other person.
(i) Survival. Unless this Agreement is terminated
under Section 11(l), the agreements and covenants set forth in
Sections 4, 5 and 11, the indemnification provisions set forth in
Section 8, the anti-dilution adjustments and provisions set forth
in Section 9 and the liquidated damages provisions set forth in
Section 10 shall survive the Closing. Each Buyer shall be
responsible only for its own representations, warranties,
agreements and covenants hereunder.
(j) [Reserved].
(k) Further Assurances. Each party shall do and
perform, or cause to be done and performed, all such further acts
and things, and shall execute and deliver all such other
agreements, certificates, instruments and documents, as the other
party may reasonably request in order to carry out the intent and
accomplish the purposes of this Agreement and the consummation of
the transactions contemplated hereby.
(l) Termination. In the event that the Closing shall
not have occurred with respect to a Buyer on or before three (3)
business days from the date hereof due to the Company's or such
Buyer's failure to satisfy the conditions set forth in Sections 6
and 7 above (and the nonbreaching party's failure to waive such
unsatisfied condition(s)), the nonbreaching party shall have the
option to terminate this Agreement with respect to such breaching
party at the close of business on such date without liability of
any party to any other party; provided, however, that if this
Agreement is terminated pursuant to this Section 11(l), the
Company shall remain obligated to reimburse the nonbreaching
Buyers for the expenses described in Section 4(g) above.
(m) [Reserved.]
(n) No Strict Construction. The language used in this
Agreement will be deemed to be the language chosen by the parties
to express their mutual intent, and no rules of strict
construction will be applied against any party.
<PAGE 19>
(o) Remedies. Each Buyer and each holder of the
Securities shall have all rights and remedies set forth in the
Transaction Documents and all rights and remedies which such
holders have been granted at any time under any other agreement
or contract and all of the rights which such holders have under
any law. Any Person having any rights under any provision of
this Agreement shall be entitled to enforce such rights
specifically (without posting a bond or other security), to
recover damages by reason of any breach of any provision of this
Agreement and to exercise all other rights granted by law.
(p) Payment Set Aside. To the extent that the Company
makes a payment or payments to the Buyers hereunder or pursuant
to the Transaction Documents or the Buyers enforce or exercise
their rights hereunder or thereunder, and such payment or
payments or the proceeds of such enforcement or exercise or any
part thereof are subsequently invalidated, declared to be
fraudulent or preferential, set aside, recovered from, disgorged
by or are required to be refunded, repaid or otherwise restored
to the Company, a trustee, receiver or any other person under any
law (including, without limitation, any bankruptcy law, state or
federal law, common law or equitable cause of action), then to
the extent of any such restoration the obligation or part thereof
originally intended to be satisfied shall be revived and
continued in full force and effect as if such payment had not
been made or such enforcement or setoff had not occurred.
IN WITNESS WHEREOF, the Buyers and the Company have caused
this Securities Purchase Agreement to be duly executed as of the
date first written above.
COMPANY: BUYERS:
DYNAMICWEB ENTERPRISES INC. CRANSHIRE CAPITAL, L.P.
By: Downsview Capital,
the General Partner
By:_________________________ By:___________________________
Name: Steve Vanechanos Name: Mitchell Kopin
Title: Chief Executive Officer Title: President
KEEWAY INVESTMENTS LTD.
By:___________________________
Name:
Title:
PAGE 20
<PAGE>
SCHEDULE 1: LIST OF INVESTORS
<TABLE>
<CAPTION>
Investor's Legal
Investor's Investor Address Purchase Number of Representatives
Name and Facsimile Number Price Common Shares Address and Facsimile Number
<S> <C> <C> <C> <C>
Cranshire Capital, L.P. 770 Frontage Rd., $400,001.50 94,118 Katten Muchin & Zavis
St. 134 525 W. Monroe Street
Attn: Mitchell Kopin Chicago, IL 60661-3693
(p) 847/784-1544 Attn: Anthony J. Ribaudo, Esq.
(f) 847/784-1546 (p) 312/902-5521
(f) 312/577-8763
Keeway Investments, Ltd. 19 Mount Havelock $600,002.25 141,177
Douglas, Isle of Man
United Kingdom
1M1 2QG
(p) 011-44-171-323-2131
(f) 011-44-171-323-0773
Attn: Martin Peters
</TABLE>
<PAGE>
EXHIBITS
Exhibit A Form of Registration Rights Agreement
Exhibit B Form of Transfer Agent Instructions
Exhibit C Form of Company Counsel Opinion
REGISTRATION RIGHTS AGREEMENT
This REGISTRATION RIGHTS AGREEMENT (this "Agreement"), dated
as of April 26, 1999, is entered into by and among DynamicWeb
Enterprises Inc., a New Jersey corporation, with headquarters
located at 271 Route 46 West, Bldg. F, Fairfield, New Jersey
07013 (the "Company"), and the undersigned buyers (each, a
"Buyer" and collectively, the "Buyers").
WHEREAS:
A. In connection with the Securities Purchase Agreement by
and among the parties dated as of April 26, 1999 (the "Securities
Purchase Agreement"), the Company has agreed, upon the terms and
subject to the conditions of the Securities Purchase Agreement,
to issue and sell to the Buyers 235,295 shares of the Company's
Common Stock, par value $.0001 per share (the "Common Shares");
and
B. To induce the Buyers to execute and deliver the
Securities Purchase Agreement, the Company has agreed to provide
certain registration rights under the Securities Act of 1933, as
amended, and the rules and regulations thereunder, or any similar
successor statute (collectively, the "1933 Act"), and applicable
state securities laws.
NOW, THEREFORE, in consideration of the premises and the
mutual covenants contained herein and other good and valuable
consideration, the receipt and sufficiency of which are hereby
acknowledged, the Company and the Buyers hereby agree as follows:
1. DEFINITIONS.
As used in this Agreement, the following terms shall
have the following meanings:
a. "Investor" means a Buyer, any transferee or
assignee thereof to whom a Buyer assigns its rights under this
Agreement and who agrees to become bound by the provisions of
this Agreement in accordance with Section 9 and any transferee or
assignee thereof to whom a transferee or assignee assigns its
rights under this Agreement and who agrees to become bound by the
provisions of this Agreement in accordance with Section 9.
b. "Person" means a corporation, a limited liability
company, an association, a partnership, an organization, a
business, an individual, a governmental or political subdivision
thereof or a governmental agency.
c. "Register," "registered," and "registration" refer
to a registration effected by preparing and filing one or more
Registration Statements (as defined below) in compliance with the
1933 Act and pursuant to Rule 415 under the 1933 Act or any
successor rule providing for offering securities on a continuous
<PAGE 1> basis ("Rule 415"), and the declaration or ordering of
effectiveness of such Registration Statement(s) by the United
States Securities and Exchange Commission (the "SEC").
d. "Registrable Securities" means the Common Shares
purchased pursuant to the Securities Purchase Agreement and any
shares of capital stock issued or issuable with respect to the
Common Shares as a result of any stock split, stock dividend,
recapitalization, exchange, anti-dilution rights or similar event
or otherwise.
e. "Registration Statement" means a registration
statement of the Company filed under the 1933 Act.
Capitalized terms used herein and not otherwise defined herein
shall have the respective meanings set forth in the Securities
Purchase Agreement.
2. REGISTRATION.
a. Mandatory Registration. The Company shall
prepare, and, as soon as practicable but in no event later than
sixty (60) calendar days after the date of issuance of the
relevant Common Shares, file with the SEC a Registration
Statement or Registration Statements (as is necessary) on
Form S-2 or Form S-3 covering the resale of all of the
Registrable Securities. The initial Registration Statement
prepared pursuant hereto shall register for resale at least that
number of Company common stock shares equal to the number of
Registrable Securities as of the date immediately preceding the
date the Registration Statement is initially filed with the SEC,
subject to adjustment as provided in Section 3(b). The Company
shall use its best efforts to have the Registration Statement
declared effective by the SEC as soon as practicable, but in no
event later than one-hundred eighty (180) calendar days after the
issuance of the relevant Common Shares.
b. Piggy-Back Registrations. If at any time prior to
the expiration of the Registration Period (as defined in
Section 3(a)) the Company proposes to file with the SEC a
Registration Statement relating to an offering for its own
account or the account of others under the 1933 Act of any of its
securities the Company shall promptly send to each Investor
written notice of the Company's intention to file a Registration
Statement and of such Investor's rights under this Section 2(b)
and, if within five (5) days after receipt of such notice, such
Investor shall so request in writing, the Company shall include
in such Registration Statement all or any part of the Registrable
Securities such Investor requests to be registered, subject to
the priorities set forth in Section 2(b) below. No right to
registration of Registrable Securities under this Section 2(b)
shall be construed to limit any registration required under
Section 2(a). The obligations of the Company under this
Section 2(b) may be waived by the Buyers. If an offering in
<PAGE 2> connection with which an Investor is entitled to
registration under this Section 2(b) is an underwritten offering,
then each Investor whose Registrable Securities are included in
such Registration Statement shall, unless otherwise agreed by the
Company, offer and sell such Registrable Securities in an
underwritten offering using the same underwriter or underwriters
and, subject to the provisions of this Agreement, on the same
terms and conditions as other shares of Company common stock
included in such underwritten offering. If a registration
pursuant to this Section 2(b) is to be an underwritten public
offering and the managing underwriter(s) advise the Company in
writing, that in their reasonable good faith opinion, marketing
or other factors dictate that a limitation on the number of
shares of Company common stock which may be included in the
Registration Statement is necessary to facilitate and not
adversely affect the proposed offering, then the Company shall
include in such registration: (1) first, all the securities
requested to be registered by the Investors and other holders of
securities entitled to participate in the registration, as of the
date hereof, (2) second, up to the full number of securities
proposed to be registered for the account of the holders of
securities entitled to inclusion of their securities in the
Registration Statement by reason of demand registration rights,
and (3) third, all securities the Company proposes to sell for
its own account.
c. Allocation of Registrable Securities. The initial
number of Registrable Securities included in any Registration
Statement and each increase in the number of Registrable
Securities included therein shall be allocated pro rata among the
Investors based on the number of Registrable Securities held, or
which could be held, by each Investor at the time the
Registration Statement covering such initial number of
Registrable Securities or increase thereof is declared effective
by the SEC. In the event that an Investor sells or otherwise
transfers any of such Person's Registrable Securities, each
transferee shall be allocated a pro rata portion of the then
remaining number of Registrable Securities included in such
Registration Statement for such transferor. Any Common Shares
included in a Registration Statement and which remain allocated
to any Person which ceases to hold any Registrable Securities
shall be allocated to the remaining Investors, pro rata based on
the number of Registrable Securities then held by such Investors.
d. Legal Counsel. Subject to Section 5 hereof, the
Buyers shall have the right to select one legal counsel to review
and oversee any offering pursuant to this Section 2 ("Legal
Counsel"), which shall be Katten Muchin & Zavis or such other
counsel as thereafter designated by the holders of a majority of
Registrable Securities. The Company shall reasonably cooperate
with Legal Counsel in performing the Company's obligations under
this Agreement.
e. [Reserved.] <PAGE 3>
f. Rule 416. The Company and the Investors each
acknowledge that each Registration Statement prepared in
accordance hereunder shall include an indeterminate number of
Registrable Securities pursuant to Rule 416 under the 1933 Act so
as to cover any and all Registrable Securities which may become
issuable (i) to prevent dilution resulting from stock splits,
stock dividends or similar transactions and (ii) if permitted by
law, by reason of the anti-dilution provisions contained in
Section 9 of the Securities Purchase Agreement in accordance with
the terms thereof (collectively, the "Rule 416 Securities"). In
this regard, the Company agrees to use all reasonable efforts to
ensure that the maximum number of Registrable Securities which
may be registered pursuant to Rule 416 under the 1933 Act are
covered by each Registration Statement and, absent guidance from
the SEC or other definitive authority to the contrary, the
Company shall use all reasonable efforts to affirmatively support
and to not take any position adverse to the position that each
Registration Statement filed hereunder covers all of the Rule 416
Securities. If the Company determines that the Registration
Statement filed hereunder does not cover all of the Rule 416
Securities, the Company shall immediately (i) provide to each
Investor written evidence setting forth the basis for the
Company's position and the authority therefor and (ii) prepare
and file an amendment to such Registration Statement or a new
Registration Statement in accordance with Section 2(g).
g. Sufficient Number of Shares Registered. In the
event the number of shares available under a Registration
Statement filed pursuant to Section 2(a) or 2(b) is insufficient
to cover all of the Registrable Securities or an Investor's
allocated portion of the Registrable Securities pursuant to
Section 2(c) (a "Deficit Failure"), the Company shall amend the
Registration Statement, or file a new Registration Statement (on
the short form available therefor, if applicable), or both, so as
to cover at least two hundred percent (200%) of such Registrable
Securities in each case, as soon as practicable, but in any event
not later than fifteen (15) days after the necessity therefor
arises. The Company shall use it best efforts to cause such
amendment and/or new Registration Statement to become effective
as soon as practicable following the filing thereof. For
purposes of the foregoing provision, the number of shares
available under a Registration Statement shall be deemed
"insufficient to cover all of the Registrable Securities" if at
any time the number of Registrable Securities is greater than the
number of shares of Company common stock available for resale
under such Registration Statement.
3. RELATED OBLIGATIONS.
Whenever an Investor has requested that any Registrable
Securities be registered pursuant to Section 2(b) or at such time
as the Company is obligated to file a Registration Statement with
the SEC pursuant to Section 2(a) or 2(g), the Company will use
its best efforts to effect the registration of the Registrable
<PAGE 4> Securities in accordance with the intended method of
disposition thereof and, pursuant thereto, the Company shall have
the following obligations:
a. The Company shall promptly prepare and file with
the SEC a Registration Statement with respect to the Registrable
Securities (on or prior to the sixtieth (60th) calendar day after
the date of issuance of any Common Shares for the registration of
Registrable Securities pursuant to Section 2(a)) and use its best
efforts to cause such Registration Statement relating to the
Registrable Securities to become effective as soon as possible
after such filing (but in no event later than one-hundred eighty
(180) calendar days after the issuance of any Common Shares for
the registration of Registrable Securities), and keep such
Registration Statement effective at all times until the earlier
of (i) the date as of which the Investors may sell all of the
Registrable Securities without restriction pursuant to
Rule 144(k) promulgated under the 1933 Act (or successor thereto)
or (ii) the date on which the Investors shall have sold all the
Registrable Securities (the "Registration Period"), which
Registration Statement (including any amendments or supplements
thereto and prospectuses contained therein) shall not contain any
untrue statement of a material fact or omit to state a material
fact required to be stated therein, or necessary to make the
statements therein, in light of the circumstances in which they
were made, not misleading.
b. The Company shall prepare and file with the SEC
such amendments (including post-effective amendments) and
supplements to a Registration Statement and the prospectus used
in connection with such Registration Statement, which prospectus
is to be filed pursuant to Rule 424 promulgated under the 1933
Act, as may be necessary to keep such Registration Statement
effective at all times during the Registration Period, and,
during such period, comply with the provisions of the 1933 Act
with respect to the disposition of all Registrable Securities of
the Company covered by such Registration Statement until such
time as all of such Registrable Securities shall have been
disposed of in accordance with the intended methods of
disposition by the seller or sellers thereof as set forth in such
Registration Statement.
c. The Company shall permit Legal Counsel to review
and comment upon a Registration Statement and all amendments and
supplements thereto at least three (3) days prior to their filing
with the SEC, and not file any document in a form to which Legal
Counsel reasonably objects. The Company shall not submit a
request for acceleration of the effectiveness of a Registration
Statement or any amendment or supplement thereto without the
prior approval of Legal Counsel, which consent shall not be
unreasonably withheld. The Company shall furnish to Legal
Counsel, without charge, (i) any correspondence from the SEC or
the staff of the SEC to the Company or its representatives
relating to any Registration Statement, (ii) promptly after the
<PAGE 5> same is prepared and filed with the SEC, one copy of any
Registration Statement and any amendment(s) thereto, including
financial statements and schedules, all documents incorporated
therein by reference and all exhibits and (iii) upon the
effectiveness of any Registration Statement, one copy of the
prospectus included in such Registration Statement and all
amendments and supplements thereto.
d. The Company shall furnish to each Investor whose
Registrable Securities are included in any Registration
Statement, without charge, (i) promptly after the same is
prepared and filed with the SEC, at least one copy of such
Registration Statement and any amendment(s) thereto, including
financial statements and schedules, all documents incorporated
therein by reference and all exhibits, (ii) upon the
effectiveness of any Registration Statement, ten (10) copies of
the prospectus included in such Registration Statement and all
amendments and supplements thereto (or such other number of
copies as such Investor may reasonably request) and (iii) such
other documents, including copies of any preliminary or final
prospectus, as such Investor may reasonably request from time to
time in order to facilitate the disposition of the Registrable
Securities owned by such Investor.
e. The Company shall use reasonable efforts to
(i) register and qualify the Registrable Securities covered by a
Registration Statement under such other securities or "blue sky"
laws of such jurisdictions in the United States as Legal Counsel
or any Investor reasonably requests, (ii) prepare and file in
those jurisdictions, such amendments (including post-effective
amendments) and supplements to such registrations and
qualifications as may be necessary to maintain the effectiveness
thereof during the Registration Period, (iii) take such other
actions as may be necessary to maintain such registrations and
qualifications in effect at all times during the Registration
Period, and (iv) take all other actions reasonably necessary or
advisable to qualify the Registrable Securities for sale in such
jurisdictions; provided, however, that the Company shall not be
required in connection therewith or as a condition thereto to
(x) qualify to do business in any jurisdiction where it would not
otherwise be required to qualify but for this Section 3(e) or
(y) subject itself to general taxation in any such jurisdiction.
The Company shall promptly notify Legal Counsel and each Investor
who holds Registrable Securities of the receipt by the Company of
any notification with respect to the suspension of the
registration or qualification of any of the Registrable
Securities for sale under the securities or "blue sky" laws of
any jurisdiction in the United States or its receipt of actual
notice of the initiation or threatening of any proceeding for
such purpose.
f. In the event Investors who hold a majority of the
Registrable Securities being offered in the offering select
underwriters for the offering, the Company shall enter into and
<PAGE 6> perform its obligations under an underwriting agreement,
in usual and customary form, including, without limitation,
customary indemnification and contribution obligations, with the
underwriters of such offering.
g. As promptly as practicable after becoming aware of
such event, the Company shall notify Legal Counsel and each
Investor in writing of the happening of any event as a result of
which the prospectus included in a Registration Statement, as
then in effect, includes an untrue statement of a material fact
or omission to state a material fact required to be stated
therein or necessary to make the statements therein, in light of
the circumstances under which they were made, not misleading, and
promptly prepare a supplement or amendment to such Registration
Statement to correct such untrue statement or omission, and
deliver ten (10) copies of such supplement or amendment to Legal
Counsel and each Investor (or such other number of copies as
Legal Counsel or such Investor may reasonably request). The
Company shall also promptly notify Legal Counsel and each
Investor in writing (i) when a prospectus or any prospectus
supplement or post-effective amendment has been filed, and when a
Registration Statement or any post-effective amendment has become
effective (notification of such effectiveness shall be delivered
to Legal Counsel and each Investor by facsimile on the same day
of such effectiveness and by overnight mail), (ii) of any request
by the SEC for amendments or supplements to a Registration
Statement or related prospectus or related information, and
(iii) of the Company's reasonable determination that a post-
effective amendment to a Registration Statement would be
appropriate.
h. The Company shall use its best efforts to prevent
the issuance of any stop order or other suspension of
effectiveness of a Registration Statement, or the suspension of
the qualification of any of the Registrable Securities for sale
in any jurisdiction and, if such an order or suspension is
issued, to obtain the withdrawal of such order or suspension at
the earliest possible moment and to notify Legal Counsel and each
Investor who holds Registrable Securities being sold (and, in the
event of an underwritten offering, the managing underwriters) of
the issuance of such order and the resolution thereof or its
receipt of actual notice of the initiation or threat of any
proceeding for such purpose.
i. At the request of any Investor, the Company shall
furnish to such Investor, on the date of the effectiveness of the
Registration Statement and thereafter from time to time on such
dates as an Investor may reasonably request (i) if required by an
underwriter, a letter, dated such date, from the Company's
independent certified public accountants in form and substance as
is customarily given by independent certified public accountants
to underwriters in an underwritten public offering, addressed to
the underwriters, and (ii) an opinion, dated as of such date, of
counsel representing the Company for purposes of such <PAGE 7>
Registration Statement, in form, scope and substance as is
customarily given in an underwritten public offering, addressed
to the underwriters and the Investors.
j. The Company shall make available for inspection by
(i) any Investor, (ii) Legal Counsel, (iii) any underwriter
participating in any disposition pursuant to a Registration
Statement, (iv) one firm of accountants or other agents retained
by the Investors, and (v) one firm of attorneys retained by such
underwriters (collectively, the "Inspectors") all pertinent
financial and other records, and pertinent corporate documents
and properties of the Company (collectively, the "Records"), as
shall be reasonably deemed necessary by each Inspector, and cause
the Company's officers, directors and employees to supply all
information which any Inspector may reasonably request; provided,
however, that each Inspector shall hold in strict confidence and
shall not make any disclosure (except to an Investor) or use of
any Record or other information which the Company determines in
good faith to be confidential, and of which determination the
Inspectors are so notified, unless (a) the disclosure of such
Records is necessary to avoid or correct a misstatement or
omission in any Registration Statement or is otherwise required
under the 1933 Act, (b) the release of such Records is ordered
pursuant to a final, non-appealable subpoena or order from a
court or government body of competent jurisdiction, or (c) the
information in such Records has been made generally available to
the public other than by disclosure in violation of this or any
other agreement of which the Inspector has knowledge. Each
Investor agrees that it shall, upon learning that disclosure of
such Records is sought in or by a court or governmental body of
competent jurisdiction or through other means, give prompt notice
to the Company and allow the Company, at its expense, to
undertake appropriate action to prevent disclosure of, or to
obtain a protective order for, the Records deemed confidential.
k. The Company shall hold in confidence and not make
any disclosure of information concerning an Investor provided to
the Company unless (i) disclosure of such information is
necessary to comply with federal or state securities laws,
(ii) the disclosure of such information is necessary to avoid or
correct a misstatement or omission in any Registration Statement,
(iii) the release of such information is ordered pursuant to a
subpoena or other final, non-appealable order from a court or
governmental body of competent jurisdiction, or (iv) such
information has been made generally available to the public other
than by disclosure in violation of this Agreement or any other
agreement. The Company agrees that it shall, upon learning that
disclosure of such information concerning an Investor is sought
in or by a court or governmental body of competent jurisdiction
or through other means, give prompt written notice to such
Investor and allow such Investor, at the Investor's expense, to
undertake appropriate action to prevent disclosure of, or to
obtain a protective order for, such information.
<PAGE 8>
l. The Company shall use its best efforts either to
(i) cause all the Registrable Securities covered by a
Registration Statement to be listed on each securities exchange
on which securities of the same class or series issued by the
Company are then listed, if any, if the listing of such
Registrable Securities is then permitted under the rules of such
exchange, or (ii) secure designation and quotation of all the
Registrable Securities covered by the Registration Statement on
the Nasdaq Small-Cap System. The Company shall pay all fees and
expenses in connection with satisfying its obligation under this
Section 3(l).
m. [Reserved.]
n. The Company shall provide a transfer agent and
registrar of all such Registrable Securities not later than the
effective date of such Registration Statement.
o. If requested by the managing underwriters or an
Investor, the Company shall (i) immediately incorporate in a
prospectus supplement or post-effective amendment such
information as the managing underwriters and the Investors agree
should be included therein relating to the sale and distribution
of Registrable Securities, including, without limitation,
information with respect to the number of Registrable Securities
being sold to such underwriters, the purchase price being paid
therefor by such underwriters and any other terms of the
underwritten (or best efforts underwritten) offering of the
Registrable Securities to be sold in such offering; (ii) make all
required filings of such prospectus supplement or post-effective
amendment as soon as notified of the matters to be incorporated
in such prospectus supplement or post-effective amendment; and
(iii) supplement or make amendments to any Registration Statement
if requested by a shareholder or any underwriter of such
Registrable Securities.
p. The Company shall use its best efforts to cause
the Registrable Securities covered by the applicable Registration
Statement to be registered with or approved by such other
governmental agencies or authorities as may be necessary to
consummate the disposition of such Registrable Securities.
q. [Reserved.]
r. The Company shall otherwise use its best efforts
to comply with all applicable rules and regulations of the SEC in
connection with any registration hereunder and the Company shall
use its best efforts to file with the SEC in a timely manner all
reports and documents required of the Company under the 1933 Act
and the 1934 Act (as defined in Section 6(a)).
s. Within two (2) business days after the
Registration Statement which includes the Registrable Securities
is ordered effective by the SEC, the Company shall deliver, and
<PAGE 9> shall cause legal counsel for the Company to deliver, to
the transfer agent for such Registrable Securities (with copies
to the Investors whose Registrable Securities are included in
such Registration Statement) confirmation that the Registration
Statement has been declared effective by the SEC in the form
attached hereto as Exhibit A.
t. [Reserved.]
u. The Company shall take all other reasonable
actions necessary to expedite and facilitate disposition by the
Investors of Registrable Securities pursuant to a Registration
Statement.
v. Notwithstanding anything to the contrary contained
in this Agreement, unless the Registrable Securities are being
registered pursuant to Section 2(b) of this Agreement, the
Registration Statement shall register only the Registrable
Securities.
4. OBLIGATIONS OF THE INVESTORS.
a. At least seven (7) days prior to the first
anticipated filing date of the Registration Statement, the
Company shall notify each Investor in writing of the information
the Company requires from each such Investor if such Investor
elects to have any of such Investor's Registrable Securities
included in such Registration Statement. It shall be a condition
precedent to the obligations of the Company to complete the
registration pursuant to this Agreement with respect to the
Registrable Securities of a particular Investor that such
Investor shall furnish to the Company such information regarding
itself and the Registrable Securities held by it as shall be
reasonably required to effect the registration of such
Registrable Securities and shall execute such documents in
connection with such registration as the Company may reasonably
request.
b. Each Investor by such Investor's acceptance of the
Registrable Securities agrees to cooperate with the Company as
reasonably requested by the Company in connection with the
preparation and filing of any Registration Statement hereunder,
unless such Investor has notified the Company in writing of such
Investor's election to exclude all of such Investor's Registrable
Securities from such Registration Statement.
c. In the event any Investor elects to participate in
an underwritten public offering pursuant to Section 2, each such
Investor agrees to enter into and perform such Investor's
obligations under an underwriting agreement, in usual and
customary form, including, without limitation, customary
indemnification and contribution obligations, with the managing
underwriter of such offering and take such other actions as are
<PAGE 10> reasonably required in order to expedite or facilitate
the disposition of the Registrable Securities.
5. EXPENSES OF REGISTRATION.
All reasonable expenses, other than underwriting
discounts and commissions, incurred in connection with
registrations, filings or qualifications pursuant to Sections 2
and 3, including, without limitation, all registration, listing
and qualifications fees, printers and accounting fees, and fees
and disbursements of counsel for the Company and fees and
disbursements of Legal Counsel, shall be paid by the Company.
6. INDEMNIFICATION.
In the event any Registrable Securities are included in
a Registration Statement under this Agreement:
a. To the fullest extent permitted by law, the
Company will, and hereby does, indemnify, hold harmless and
defend each Investor who holds such Registrable Securities, the
directors, officers, partners, employees, agents, representatives
of, and each Person, if any, who controls any Investor within the
meaning of the 1933 Act or the Securities Exchange Act of 1934,
as amended (the "1934 Act"), and any underwriter (as defined in
the 1933 Act) for the Investors, and the directors and officers
of, and each Person, if any, who controls, any such underwriter
within the meaning of the 1933 Act or the 1934 Act (each, an
"Indemnified Person"), against any losses, claims, damages,
liabilities, judgments, fines, penalties, charges, costs,
attorneys' fees, amounts paid in settlement or expenses, joint or
several, (collectively, "Claims") incurred in investigating,
preparing or defending any action, claim, suit, inquiry,
proceeding, investigation or appeal taken from the foregoing by
or before any court or governmental, administrative or other
regulatory agency, body or the SEC, whether pending or
threatened, whether or not an indemnified party is or may be a
party thereto ("Indemnified Damages"), to which any of them may
become subject insofar as such Claims (or actions or proceedings,
whether commenced or threatened, in respect thereof) arise out of
or are based upon: (i) any untrue statement or alleged untrue
statement of a material fact in a Registration Statement or any
post-effective amendment thereto or in any filing made in
connection with the qualification of the offering under the
securities or other "blue sky" laws of any jurisdiction in which
Registrable Securities are offered ("Blue Sky Filing"), or the
omission or alleged omission to state a material fact required to
be stated therein or necessary to make the statements therein not
misleading, (ii) any untrue statement or alleged untrue statement
of a material fact contained in any preliminary prospectus if
used prior to the effective date of such Registration Statement,
or contained in the final prospectus (as amended or supplemented,
if the Company files any amendment thereof or supplement thereto
with the SEC) or the omission or alleged omission to state
<PAGE 11> therein any material fact necessary to make the
statements made therein, in light of the circumstances under
which the statements therein were made, not misleading, (iii) any
violation or alleged violation by the Company of the 1933 Act,
the 1934 Act, any other law, including, without limitation, any
state securities law, or any rule or regulation thereunder
relating to the offer or sale of the Registrable Securities
pursuant to a Registration Statement or (iv) any material
violation of this Agreement (the matters in the foregoing
clauses (i) through (iv) being, collectively, "Violations"). The
Company shall reimburse the Investors and each such underwriter
or controlling person, promptly as such expenses are incurred and
are due and payable, for any legal fees or other reasonable
expenses incurred by them in connection with investigating or
defending any such Claim. Notwithstanding anything to the
contrary contained herein, the indemnification agreement
contained in this Section 6(a): (i) shall not apply to a Claim
by an Indemnified Person arising out of or based upon a Violation
which occurs in reliance upon and in conformity with information
furnished in writing to the Company by such Indemnified Person or
underwriter for such Indemnified Person expressly for use in
connection with the preparation of the Registration Statement or
any such amendment thereof or supplement thereto, if such
prospectus was timely made available by the Company pursuant to
Section 3(d); (ii) with respect to any preliminary prospectus,
shall not inure to the benefit of any such person from whom the
person asserting any such Claim purchased the Registrable
Securities that are the subject thereof (or to the benefit of any
person controlling such person) if the untrue statement or
omission of material fact contained in the preliminary prospectus
was corrected in the prospectus, as then amended or supplemented,
if such prospectus was timely made available by the Company
pursuant to Section 3(d), and the Indemnified Person was promptly
advised in writing not to use the incorrect prospectus prior to
the use giving rise to a violation and such Indemnified Person,
notwithstanding such advice, used it; (iii) shall not be
available to the extent such Claim is based on a failure of the
Investor to deliver or to cause to be delivered the prospectus
made available by the Company, if such prospectus was timely made
available by the Company pursuant to Section 3(d); and (iv) shall
not apply to amounts paid in settlement of any Claim if such
settlement is effected without the prior written consent of the
Company, which consent shall not be unreasonably withheld. Such
indemnity shall remain in full force and effect regardless of any
investigation made by or on behalf of the Indemnified Person and
shall survive the transfer of the Registrable Securities by the
Investors pursuant to Section 9.
b. In connection with any Registration Statement in
which an Investor is participating, each such Investor agrees to
severally and not jointly indemnify, hold harmless and defend, to
the same extent and in the same manner as is set forth in
Section 6(a), the Company, each of its directors, each of its
officers who signs the Registration Statement, each Person, if
<PAGE 12> any, who controls the Company within the meaning of the
1933 Act or the 1934 Act (collectively and together with an
Indemnified Person, an "Indemnified Party"), against any Claim or
Indemnified Damages to which any Indemnified Party may become
subject, under the 1933 Act, the 1934 Act or otherwise, insofar
as such Claim or Indemnified Damages 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 to the Company by
such Investor expressly for use in connection with such
Registration Statement; and, subject to Section 6(d), such
Investor will reimburse any legal or other expenses reasonably
incurred by them in connection with investigating or defending
any such Claim; provided, however, that the indemnity agreement
contained in this Section 6(b) and the agreement with respect to
contribution contained in Section 7 shall not apply to amounts
paid in settlement of any Claim if such settlement is effected
without the prior written consent of such Investor, which consent
shall not be unreasonably withheld; provided, further, however,
that the Investor shall be liable under this Section 6(b) for
only that amount of a Claim or Indemnified Damages as does not
exceed the net proceeds to such Investor as a result of the sale
of Registrable Securities pursuant to such Registration
Statement. Such indemnity shall remain in full force and effect
regardless of any investigation made by or on behalf of such
Indemnified Party and shall survive the transfer of the
Registrable Securities by the Investors pursuant to Section 9.
Notwithstanding anything to the contrary contained herein, the
indemnification agreement contained in this Section 6(b) with
respect to any preliminary prospectus shall not inure to the
benefit of any Indemnified Party if the untrue statement or
omission of material fact contained in the preliminary prospectus
was corrected on a timely basis in the prospectus, as then
amended or supplemented.
c. The Company shall be entitled to receive
indemnities from underwriters, selling brokers, dealer managers
and similar securities industry professionals participating in
any distribution, to the same extent as provided above, with
respect to information such persons so furnished in writing
expressly for inclusion in the Registration Statement.
d. Promptly after receipt by an Indemnified Person or
Indemnified Party under this Section 6 of notice of the
commencement of any action or proceeding (including any
governmental action or proceeding) involving a Claim, such
Indemnified Person or Indemnified Party shall, if a Claim in
respect thereof is to be made against any indemnifying party
under this Section 6, deliver to the indemnifying party a written
notice of the commencement thereof, and the indemnifying party
shall have the right to participate in, and, to the extent the
indemnifying party so desires, jointly with any other
indemnifying party similarly noticed, to assume control of the
defense thereof with counsel mutually satisfactory to the
<PAGE 13> indemnifying party and the Indemnified Person or the
Indemnified Party, as the case may be; provided, however, that an
Indemnified Person or Indemnified Party shall have the right to
retain its own counsel with the fees and expenses to be paid by
the indemnifying party, if, in the reasonable opinion of counsel
retained by the indemnifying party, the representation by such
counsel of the Indemnified Person or Indemnified Party and the
indemnifying party would be inappropriate due to actual or
potential differing interests between such Indemnified Person or
Indemnified Party and any other party represented by such counsel
in such proceeding. The Company shall pay reasonable fees for
only one separate legal counsel for the Investors, and such legal
counsel shall be selected by the Investors holding a majority in
interest of the Registrable Securities included in the
Registration Statement to which the Claim relates. The
Indemnified Party or Indemnified Person shall cooperate fully
with the indemnifying party in connection with any negotiation or
defense of any such action or claim by the indemnifying party and
shall furnish to the indemnifying party all information
reasonably available to the Indemnified Party or Indemnified
Person which relates to such action or claim. The indemnifying
party shall keep the Indemnified Party or Indemnified Person
fully apprised at all times as to the status of the defense or
any settlement negotiations with respect thereto. No
indemnifying party shall be liable for any settlement of any
action, claim or proceeding effected without its written consent,
provided, however, that the indemnifying party shall not
unreasonably withhold, delay or condition its consent. No
indemnifying party shall, without the consent of the Indemnified
Party or Indemnified Person, consent to entry of any judgment or
enter into any settlement or other compromise which does not
include as an unconditional term thereof the giving by the
claimant or plaintiff to such Indemnified Party or Indemnified
Person of a release from all liability in respect to such claim
or litigation. Following indemnification as provided for
hereunder, the indemnifying party shall be subrogated to all
rights of the Indemnified Party or Indemnified Person with
respect to all third parties, firms or corporations relating to
the matter for which indemnification has been made. The failure
to deliver written notice to the indemnifying party within a
reasonable time of the commencement of any such action shall not
relieve such indemnifying party of any liability to the
Indemnified Person or Indemnified Party under this Section 6,
except to the extent that the indemnifying party is prejudiced in
its ability to defend such action.
e. The indemnification required by this Section 6
shall be made by periodic payments of the amount thereof during
the course of the investigation or defense, as and when bills are
received or Indemnified Damages are incurred.
f. The indemnity agreements contained herein shall be
in addition to (i) any cause of action or similar right of the
Indemnified Party or Indemnified Person against the indemnifying
<PAGE 14> party or others, and (ii) any liabilities the
indemnifying party may be subject to pursuant to the law.
7. CONTRIBUTION.
To the extent any indemnification by an indemnifying
party is prohibited or limited by law, the indemnifying party
agrees to make the maximum contribution with respect to any
amounts for which it would otherwise be liable under Section 6 to
the fullest extent permitted by law; provided, however, that:
(i) no seller of Registrable Securities guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the
1933 Act) shall be entitled to contribution from any seller of
Registrable Securities who was not guilty of fraudulent
misrepresentation; and (ii) contribution by any seller of
Registrable Securities shall be limited in amount to the net
amount of proceeds received by such seller from the sale of such
Registrable Securities.
8. LIQUIDATED DAMAGES.
The Company agrees that the Buyers will suffer damages
if (x) the Company violates any provision of or fails to fulfill
its obligations pursuant to this Agreement or (y) the Company
fails to file with the SEC a Registration Statement on Form S-2
covering the resale of all of the Registrable Securities, within
fourteen (14) calendar days after the issuance of the relevant
Common Shares, (a "Registration Default") and that it would not
be possible to ascertain the extent of such damages.
Accordingly, in the event of such Registration Default, the
Company hereby agrees to pay liquidated damages ("Liquidated
Damages") to each Buyer following the occurrence of such
Registration Default in an amount determined by multiplying
(i) $.085 per Common Share then held by such Buyer by (ii) the
percentage derived by dividing (A) the actual number of days
elapsed from the first day of the date of the Registration
Default or the prior 30-day period, as applicable, to the day
such Registration Default has been completely cured by (B) 30, in
cash, or at the Buyer's option, in the number of shares of
Company common stock equal to the quotient of (v) the dollar
amount of the Liquidated Damages on the Payment Date (as defined
below) by (w) the closing bid price of the Company's common stock
as of the date of the Registration Default (as quoted in the
Principal Market or the market or exchange where the Company's
common stock is then traded). The Liquidated Damages payable
pursuant hereto shall be payable within five (5) business days
from the end of the calendar month commencing on the first
calendar month in which the Registration Default occurs (each, a
"Payment Date"). In the event the Buyer elects to receive the
Liquidated Damages amount in shares of Company common stock, such
shares shall also be considered Registrable Securities and shall
have the registration rights set forth in this Agreement.
<PAGE 15>
9. ASSIGNMENT OF REGISTRATION RIGHTS.
The rights under this Agreement shall be automatically
assignable by the Investors to any transferee of all or any
portion of Registrable Securities if: (i) the Investor agrees in
writing with the transferee or assignee to assign such rights,
and a copy of such agreement is furnished to the Company within a
reasonable time after such assignment; (ii) the Company is,
within a reasonable time after such transfer or assignment,
furnished with written notice of (a) the name and address of such
transferee or assignee, and (b) the securities with respect to
which such registration rights are being transferred or assigned;
(iii) immediately following such transfer or assignment the
further disposition of such securities by the transferee or
assignee is restricted under the 1933 Act and applicable state
securities laws; provided, however, that the transferee or
assignee may subsequently transfer or assign all or any portion
of the Registrable Securities if an exemption from registration
under the 1933 Act is applicable to such transfer or assignment;
(iv) at or before the time the Company receives the written
notice contemplated by clause (ii) of this sentence the
transferee or assignee agrees in writing with the Company to be
bound by all of the provisions contained herein; and (v) such
transfer shall have been made in accordance with the applicable
requirements of the Securities Purchase Agreement.
10. AMENDMENT OF REGISTRATION RIGHTS.
Provisions of this Agreement may be amended and the
observance thereof may be waived (either generally or in a
particular instance and either retroactively or prospectively),
only with the written consent of the Company and Investors who
then hold two-thirds (2/3) of the Registrable Securities. Any
amendment or waiver effected in accordance with this Section 10
shall be binding upon each Investor and the Company. No such
amendment shall be effective to the extent that it applies to
less than all of the holders of the Registrable Securities. No
consideration shall be offered or paid to any Person to amend or
consent to a waiver or modification of any provision of any of
this Agreement unless the same consideration also is offered to
all of the parties to this Agreement.
11. MISCELLANEOUS.
a. A Person is deemed to be a holder of Registrable
Securities whenever such Person owns or is deemed to own of
record such Registrable Securities. If the Company receives
conflicting instructions, notices or elections from two or more
Persons with respect to the same Registrable Securities, the
Company shall act upon the basis of instructions, notice or
election received from the registered owner of such Registrable
Securities.
<PAGE 16>
b. Any notices, consents, waivers or other
communications required or permitted to be given under the terms
of this Agreement must be in writing and will be deemed to have
been delivered: (i) upon receipt, when delivered personally;
(ii) upon receipt, when sent by facsimile (provided confirmation
of transmission is mechanically or electronically generated and
kept on file by the sending party); or (iii) one business day
after deposit with a nationally recognized overnight delivery
service, in each case properly addressed to the party to receive
the same. The addresses and facsimile numbers for such
communications shall be:
If to the Company:
DynamicWeb Enterprises Inc.
271 Route 46 West, Bldg. F
Fairfield, New Jersey 07013
Telephone: (973)276-3107
Facsimile: (973)575-9830
Attention: Steve Vanechanos
With a copy to:
Stevens & Lee, P.C.
1275 Drummers Lane
One Glenhardie Corporate Center, Ste. 202
Wayne, PA 19087-0236
Telephone: (610)293-4979
Facsimile: (610)687-1384
Attention: Stephen F. Ritner, Esq.
If to Legal Counsel:
Katten Muchin & Zavis
525 West Monroe Street, Suite 1600
Chicago, Illinois 60661-3693
Telephone: (312) 902-5521
Facsimile: (312) 577-8763
Attention: Anthony J. Ribaudo, Esq.
If to a Buyer, to it at the address and facsimile number set
forth on the Schedule of Buyers attached hereto, with copies to
such Buyer's representatives as set forth on the Schedule of
Buyers, or at such other address and/or facsimile number and/or
to the attention of such other person as the recipient party has
specified by written notice given to each other party five days
prior to the effectiveness of such change.
c. Failure of any party to exercise any right or
remedy under this Agreement or otherwise, or delay by a party in
<PAGE 17> exercising such right or remedy, shall not operate as a
waiver thereof.
d. This Agreement shall be governed by and construed
in all respects by the internal laws of the State of Illinois
(except for the proper application of the United States federal
securities laws), without giving effect to any choice of law or
conflict of law provision or rule (whether of the State of
Illinois or any other jurisdictions) that would cause the
application of the laws of any jurisdictions other than the State
of Illinois. Each party hereby irrevocably submits to the non-
exclusive jurisdiction of the state and federal courts sitting
the City of Chicago, for the adjudication of any dispute
hereunder. If any provision of this Agreement shall be invalid
or unenforceable in any jurisdiction, such invalidity or
unenforceability shall not affect the validity or enforceability
of the remainder of this Agreement in that jurisdiction or the
validity or enforceability of any provision of this Agreement in
any other jurisdiction.
e. This Agreement and the Securities Purchase
Agreement constitute the entire agreement among the parties
hereto with respect to the subject matter hereof and thereof.
There are no restrictions, promises, warranties or undertakings,
other than those set forth or referred to herein and therein.
This Agreement and the Securities Purchase Agreement supersede
all prior agreements and understandings among the parties hereto
with respect to the subject matter hereof and thereof.
f. Subject to the requirements of Section 9, this
Agreement shall inure to the benefit of and be binding upon the
permitted successors and assigns of each of the parties hereto.
g. The headings in this Agreement are for convenience
of reference only and shall not limit or otherwise affect the
meaning hereof.
h. This Agreement may be executed in identical
counterparts, each of which shall be deemed an original but all
of which shall constitute one and the same agreement. This
Agreement, once executed by a party, may be delivered to the
other party hereto by facsimile transmission of a copy of this
Agreement bearing the signature of the party so delivering this
Agreement.
i. Each party shall do and perform, or cause to be
done and performed, all such further acts and things, and shall
execute and deliver all such other agreements, certificates,
instruments and documents, as the other party may reasonably
request in order to carry out the intent and accomplish the
purposes of this Agreement and the consummation of the
transactions contemplated hereby.
<PAGE 18>
j. All consents and other determinations to be made
by the Investors pursuant to this Agreement shall be made, unless
otherwise specified in this Agreement, by Investors holding a
majority of the Registrable Securities.
k. The language used in this Agreement will be deemed
to be the language chosen by the parties to express their mutual
intent and no rules of strict construction will be applied
against any party.
l. This Agreement is intended for the benefit of the
parties hereto and their respective permitted successors and
assigns, and is not for the benefit of, nor may any provision
hereof be enforced by, any other Person.
[Signature Page Follows]
PAGE 19
<PAGE>
IN WITNESS WHEREOF, the parties have caused this
Registration Rights Agreement to be duly executed as of day and
year first above written.
COMPANY: BUYERS:
DYNAMICWEB ENTERPRISES INC. CRANSHIRE CAPITAL, L.P.
By:___________________________ By: Downsview Capital,
Incorporated, the General
Name: Steve Vanechanos Partner
Title: Chief Executive Officer
By:______________________
Name: Mitchell Kopin
Title: President
KEEWAY INVESTMENTS LTD.
By:___________________________
Name:_________________________
Title:________________________
PAGE 20
<PAGE>
SCHEDULE OF BUYERS
Investor's Address
Investor Name and Facsimile Number
Cranshire Capital, L.P. 770 Frontage Road, Ste. 134
Northfield, Illinois 60093
Attn: Mitchell Kopin
(p) 847/784-1544
(f) 847/784-1546
Keeway Investments Ltd. 19 Mount Havelock
Douglas, Isle of Man
United Kingdom
1M1 2QG
(p) 011-44-171-323-2131
(f) 011-44-171-323-0733
Attention: Martin Peters
PAGE 21
<PAGE>
EXHIBIT A
FORM OF NOTICE OF EFFECTIVENESS
OF REGISTRATION STATEMENT
[TRANSFER AGENT]
Attn: ___________________________
Re: DYNAMICWEB ENTERPRISES INC.
Ladies and Gentlemen:
We are counsel to DynamicWeb Enterprises Inc., a New Jersey
corporation (the "Company"), and have represented the Company in
connection with that certain Securities Purchase Agreement (the
"Purchase Agreement") entered into by and among the Company and
the buyers named therein (collectively, the "Holders") pursuant
to which the Company issued to the Holders shares of its Common
Stock, par value $.0001 per share, (the "Common Shares").
Pursuant to the Purchase Agreement, the Company also has entered
into a Registration Rights Agreement with the Holders (the
"Registration Rights Agreement") pursuant to which the Company
agreed, among other things, to register the Registrable
Securities (as defined in the Registration Rights Agreement),
including the Common Shares, under the Securities Act of 1933, as
amended (the "1933 Act"). In connection with the Company's
obligations under the Registration Rights Agreement, on April 26,
1999, the Company filed a Registration Statement on [Form S-
2/Form S-3] (File No. _____________) (the "Registration
Statement") with the Securities and Exchange Commission (the
"SEC") relating to the Registrable Securities which names each of
the Holders as a selling stockholder thereunder.
In connection with the foregoing, we advise you that a
member of the SEC's staff has advised us by telephone that the
SEC has entered an order declaring the Registration Statement
effective under the 1933 Act at [ENTER TIME OF EFFECTIVENESS] on
[ENTER DATE OF EFFECTIVENESS] and we have no knowledge, after
telephonic inquiry of a member of the SEC's staff, that any stop
order suspending its effectiveness has been issued or that any
proceedings for that purpose are pending before, or threatened
by, the SEC and the Registrable Securities are available for
resale under the 1933 Act pursuant to the Registration Statement.
Very truly yours,
[ISSUER'S COUNSEL]
By:________________________________
cc: [LIST NAMES OF HOLDERS]
