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SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
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CURRENT REPORT
ON
FORM 8-K
PURSUANT TO SECTION 13 OR 15(d)
OF THE
SECURITIES EXCHANGE ACT OF 1934
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Date of Report (Date of earliest event reported): January 13, 2000
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XCEED, INC.
(Exact name of registrant as specified in its charter)
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Delaware 0-13049 13-3006788
(State or other jurisdiction (Commission (I.R.S. Employer
of incorporation) File Number) Identification No.)
488 Madison Avenue, 3rd Floor, New York, New York 10022
(Address of principal executive offices)
Registrant's telephone number, including area code: (212) 419-1200
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ITEM 1. CHANGES IN CONTROL OF REGISTRANT
Not Applicable.
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
Not Applicable.
ITEM 3. BANKRUPTCY OR RECEIVERSHIP
Not Applicable.
ITEM 4. CHANGES IN REGISTRANT'S CERTIFYING ACCOUNTANT
Not Applicable.
ITEM 5. OTHER EVENTS
Pursuant to the terms of a Subscription Agreement, dated January 13,
2000, by and among Xceed, Inc. (the "Company"), Peconic Fund, Inc., Leonardo,
L.P. and HTFP Investment, L.L.C., the Company issued in a private offering: (i)
30,000 shares of Series A Cumulative Convertible Preferred Stock (the "Class A
Preferred Stock"), which are convertible into shares of common stock of the
Company (the "Common Stock") at a conversion price per share of not less than
$25 or greater than $36; and (ii) warrants to purchase 183,273 shares of Common
Stock at an exercise price of $50.10 per share (the "Warrants"), subject to
adjustment. The Class A Preferred Stock pays a 4% quarterly dividend and is
subject to optional and mandatory redemption and conversion provisions, as more
fully described in the Certificate of Designation, Preferences and Rights filed
with the State of Delaware on January 13, 2000, a copy of which is attached
hereto as Exhibit 3(i) and is incorporated by reference herein in its entirety.
The Warrants expire on January 13, 2005 and contain certain adjustment
provisions, as more fully described in the form of Common Stock Purchase
Warrant, a copy of which is attached hereto as Exhibit 4.1(c) and is
incorporated by reference herein in its entirety. In connection with the
offering and pursuant to the terms of the Subscription Agreement, a copy of
which is attached hereto as Exhibit 4.1(a) and is incorporated by reference
herein in its entirety, the Company granted to the investors registration rights
that require the Company, among other things, to file a registration statement
relating to the shares of Common Stock issuable upon conversion of the Class A
Preferred Stock and exercise of the Warrants by April 1, 2000. A copy of the
Registration Rights Agreement, dated January 13, 2000 by and among the Company
and the investors is attached hereto as Exhibit 4.1(b) and is incorporated by
reference herein in its entirety.
The Company is making this Current Report on Form 8-K solely as a
source of information for its stockholders. The transactions resulting from the
Subscription Agreement did not give rise to any change of control of the
Company.
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ITEM 6. RESIGNATION OF REGISTRANT'S DIRECTORS
Not Applicable.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(a) and (b) Financial Statements. Not Applicable.
(c) Exhibits:
3(i) Certificate of Designation, Preferences and Rights of
Series A Cumulative Convertible Preferred Stock as
filed with the Secretary of State of Delaware on
January 13, 2000.
4.1(a) Subscription Agreement, dated January 13, 2000, by
and among Xceed, Inc., Peconic Fund, Inc., Leonardo,
L.P. and HTFP Investment, L.L.C.
4.1(b) Registration Rights Agreement, dated January 13,
2000, by and among Xceed, Inc., Peconic Fund, Inc.,
Leonardo, L.P. and HTFP Investment, L.L.C.
4.1(c) Form of Common Stock Purchase Warrant issued by
Xceed, Inc. to each of Peconic Fund, Inc., Leonardo,
L.P. and HTFP Investment, L.L.C. on January 13, 2000.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
XCEED, INC.
(Registrant)
Date: January 19, 2000 /s/ Werner Haase
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Werner Haase, Chief Executive Officer
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Exhibit 3(i)
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XCEED, INC.
CERTIFICATE OF DESIGNATION, PREFERENCES AND RIGHTS
OF
SERIES A CUMULATIVE CONVERTIBLE PREFERRED STOCK
Pursuant to Section 151(g) of the General Corporation Law of the State
of Delaware, I, Werner Haase, Chief Executive Officer of XCEED, INC., a Delaware
corporation (the "Corporation"), hereby certify that the following is a true and
correct copy of a resolution duly adopted by the unanimous written consent of
the Board of Directors of the Corporation on January 13, 2000 and that said
resolution has not been rescinded or amended and is in full force and effect at
the date hereof:
RESOLVED, that pursuant to the authority expressly granted to and
vested in the Corporation's Board of Directors by the Certificate of
Incorporation of the Corporation, as amended to date, the Board of
Directors hereby authorizes, creates and provides for a series of
Preferred Stock of the Corporation, par value $0.05 per share, to be
designated the "Series A Cumulative Convertible Preferred Stock", which
series shall consist of thirty thousand (30,000) shares, each having
stated value of $1,000 per share and the voting powers, designations,
preferences and relative, participating, optional or other rights, and
the qualifications, limitations or restrictions thereof as set forth in
the Certificate of Designation, Preferences and Rights as follows:
1. Use of Defined Terms. Capitalized defined terms used herein
but not otherwise defined shall have the respective meanings ascribed to them in
Paragraph 19 hereof.
2. Designation and Dividends. (a) There is hereby created out
of the authorized but unissued shares of Preferred Stock a series to be
designated as the "Series A Cumulative Convertible Preferred Stock" and defined
(and referred to) herein as the "Series A Preferred Stock." The number of shares
in such series shall be thirty thousand (30,000) and the stated value of each
such share of Series A Preferred Stock shall be $1,000 per share (the "Stated
Value"). Each share of Series A Preferred Stock shall be entitled to receive, in
preference to the holders of Junior Securities, cumulative annual dividends at
the rate of 4.0% per annum on the Aggregate Value thereof. Such dividends shall
be due and payable quarterly in arrears on each Dividend Payment Date commencing
on March 31, 2000. Dividends shall accumulate daily on each share of Series A
Preferred Stock from the Issuance Date, whether or not earned or declared, until
such share of Series A Preferred Stock has been converted or redeemed as herein
provided. To the extent dividends are not paid on the applicable Dividend
Payment Date, such dividends shall be cumulative and shall compound quarterly
until the date on which payment of such dividend is made. The dividends so
payable will be paid to the Holder as reflected on the Preferred Stock Register;
provided, however, that the Corporation's obligation to a transferee of a share
of Series A Preferred Stock shall arise only if such transferee has agreed in
writing to be bound by and the subject transfer, sale or other disposition is
made in accordance with the terms
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and conditions hereof and the Subscription Agreement executed and delivered by
the original or transferring Holder as of the Issuance Date.
(b) The dividends are payable in such coin or currency of the
United States of America as at the time of payment is legal tender, to the
Holder on the tenth calendar day prior to the applicable Dividend Payment Date
and at the address last appearing on the Preferred Stock Register as designated
in writing by such Holder from time to time; provided, however, that, in lieu of
paying such dividends in coin or currency, the Corporation may, at its option,
in full or in part, pay dividends on the shares of Series A Preferred Stock on
any Dividend Payment Date by increasing the Aggregate Value of the Series A
Preferred Stock by the amount of such dividend such that the sum of (i) the
amount of such increase in the Aggregate Value and (ii) the amount of cash
dividend paid in part, if any, is equal to the amount of the cash dividend which
would otherwise be paid on such Dividend Payment Date if such dividend were paid
entirely in cash. Any such increase in the Aggregate Value (plus the amount of
cash dividend, if any, paid together therewith) shall constitute full payment of
such dividend. When any dividend is added to the Aggregate Value, such dividend
shall, commencing on the Dividend Payment Date, be deemed to be part of the
Aggregate Value for purposes of determining dividends thereafter payable
hereunder and amounts thereafter convertible into Common Stock hereunder, and
all references herein to the Aggregate Value shall mean the Aggregate Value, as
adjusted pursuant to these provisions.
(c) If the Corporation shall elect to pay any part of a
dividend by increasing the Aggregate Value as described in Paragraph 2(b), the
Corporation shall provide the Dividend Notice setting forth the new Aggregate
Value to each Holder on or prior to the applicable Dividend Payment Date.
(d) If the cash dividends due hereunder are not paid or the
Dividend Notice is not delivered to each Holder within ten (10) calendar days
after the applicable Dividend Payment Date, the Corporation shall no longer have
the right to choose the method by which dividends are paid, and each Holder may
elect either cash dividends or dividends payable by increasing the Aggregate
Value.
(e) Except as specifically provided herein, neither (i) an
election by the Corporation to pay dividends, in full or in part, in cash on any
Dividend Payment Date, nor (ii) failure by the Corporation to make payment on a
prior Dividend Payment Date or provide the Dividend Notice within the specified
ten (10) day period in Paragraph 1(d) above, shall preclude the Corporation from
electing any other available alternative in respect of payment of all or any
portion of any subsequent dividend.
(f) So long as any shares of Series A Preferred Stock are
outstanding, no dividends, including without limitation, dividends or
distributions paid in shares of, or options, warrants or rights to subscribe for
or purchase Junior Securities whether with respect to dividends or upon
liquidation, dissolution, winding up of the Corporation or otherwise or on
Parity Securities whether with respect to dividends or upon liquidation,
dissolution, winding up of the Corporation or otherwise, shall be declared or
paid or set apart for payment or other distribution upon the Junior Securities
or the Parity Securities, nor shall any Junior Securities or
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Parity Securities be redeemed, purchased or otherwise acquired for any
consideration (or any monies to be paid to, or made available for, a sinking
fund for the redemption of any shares of any such stock) by the Corporation,
directly or indirectly (except by conversion to, or exchange for, Junior
Securities or Parity Securities, respectively).
3. Preferred Rank. (a) The Series A Preferred Stock shall, in
respect of dividend rights and preferences as to distributions and payments upon
the liquidation, dissolution, winding up of the Corporation or otherwise, rank
senior to all classes of Junior Securities.
(b) So long as any shares of Series A Preferred Stock
are outstanding, without the prior express written consent of Holders of not
less than two-thirds (2/3) of the then outstanding shares of Series A Preferred
Stock, the Corporation shall not hereafter (i) issue any additional shares of
Series A Preferred Stock (except with respect to payments of dividends made in
kind on the Series A Preferred Stock as provided elsewhere herein); (ii)
authorize or issue any capital stock that ranks senior to the Series A Preferred
Stock in respect of dividend rights or the preferences as to distributions and
payments upon the liquidation, dissolution, winding up of the Corporation or
otherwise; (iii) authorize or issue any Parity Securities with terms and
conditions more favorable than the terms herein (except with respect to payments
of dividends made in kind on the Series A Preferred Stock as provided elsewhere
herein); or (iv) authorize or make any amendment to the Corporation's
Certificate of Incorporation or Bylaws, or file any resolution of the Board of
Directors of the Corporation with the Secretary of State of the State of
Delaware containing any provisions, which, in the case of clause (iv), would
adversely affect or otherwise impair the rights or relative priority of the
Holders of the shares of Series A Preferred Stock relative to the holders of
Parity Securities, the holders of Junior Securities or the holders of any other
class of capital stock.
(c) In the event of the merger, consolidation or
other business combination of the Corporation with or into another corporation,
the Series A Preferred Stock shall maintain its relative powers, designations
and preferences provided for herein and no merger, consolidation or other
business combination shall result inconsistent therewith.
4. Extraordinary Transactions. If at any time any of the
following events occurs (each, an "Extraordinary Transaction"): (i) any merger,
consolidation or other business combination of the Corporation, with or into any
other corporation, entity or person (whether or not the Corporation is the
surviving corporation) or there occurs any other corporate reorganization or
transaction or series of related transactions, and as a result thereof the
shareholders of the Corporation pursuant to such merger, consolidation,
reorganization or other transaction own in the aggregate less than 50% of the
voting power and common equity of the ultimate parent corporation or other
entity surviving or resulting from such merger, consolidation, reorganization or
other transaction, (ii) the Corporation transfers all or substantially all of
the Corporation's assets to another corporation or other entity or person, (iii)
a purchase, tender or exchange offer is made to and accepted by the holders of
more than 50% of the outstanding shares of Common Stock, or (iv) the
Corporation, without obtaining stockholder approval at a duly convened meeting
of stockholders, issues or enters into an agreement providing for the issuance
(contingent or otherwise) of any Common Stock or Derivative
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Securities of the Corporation representing greater than 19.99% of the
outstanding Common Stock of the Corporation immediately prior to the issuance
(for purposes of such calculation, including the shares of Common Stock
underlying the Derivative Securities to be issued but excluding the shares of
Common Stock underlying the Series A Preferred Stock and the Warrants), then
each Holder of the Series A Preferred Stock then outstanding, in its sole
discretion may participate in any such transaction as a class with the holders
of the Common Stock, by converting, on the same basis as if the Series A
Preferred Stock had been converted into Common Stock immediately prior to the
announcement date (or record date for such distribution, dividend or offer) of
such Extraordinary Transaction.
5. Redemption.
(a) Redemption Upon an Extraordinary Transaction. At the
option of each Holder, the Corporation shall redeem all or any portion of such
Holder's outstanding shares of Series A Preferred Stock effective as of the
effective date of an Extraordinary Transaction, and the Holder shall be entitled
to receive on the specified redemption date a redemption price per share of
Series A Preferred Stock being redeemed equal to 120% of the Aggregate Value at
the effective date of the Extraordinary Transaction. Each Holder shall be
entitled to make an election for redemption by delivering the Redemption Notice
by facsimile (with the original of such notice forwarded to the Corporation via
overnight courier) to the Corporation at its principal executive office
indicating that such Holder elects to have redeemed the number of shares of
Series A Preferred Stock (plus accumulated but unpaid dividends thereon, whether
or not earned or declared) specified therein, at any time up to five (5) days
prior to the effective date of any Extraordinary Transaction; provided, however,
at the discretion of such Holder, such Holder may, at any time, elect to convert
its shares of Series A Preferred Stock, in accordance with the terms of
Paragraph 6 hereof, into such number of fully paid, validly issued and
nonassessable shares of Common Stock as determined by the application of the
Conversion Rate, so long as the Corporation has not redeemed such shares of
Series A Preferred Stock.
(b) Redemption Upon a Triggering Event. At the option of each
Holder, the Corporation shall redeem all or any portion of such Holder's
outstanding shares of Series A Preferred Stock effective as of the date of the
occurrence of a Triggering Event, and the Holder shall be entitled to receive on
the specified redemption date a redemption price per share of Series A Preferred
Stock being redeemed equal to 125% of the Aggregate Value as of the effective
date of the Triggering Event. Each Holder shall be entitled to make an election
for redemption at any time following the occurrence of a Triggering Event by
delivering the Redemption Notice by facsimile (with the original of such notice
forwarded to the Corporation via overnight courier) to the Corporation at its
principal executive office indicating that such Holder elects to have redeemed
the number of shares of Series A Preferred Stock specified therein; provided,
however, at the discretion of such Holder, such Holder may, at any time, elect
to convert its shares of Series A Preferred Stock, in accordance with the terms
of Paragraph 6 hereof, into such number of fully paid, validly issued and
nonassessable shares of Common Stock as determined by the application of the
Conversion Rate, so long as the Corporation has not redeemed such shares of
Series A Preferred Stock. In addition to the foregoing, upon the occurrence of a
Triggering Event, the Holders shall have the right to receive a 2.0% reduction
in
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the Conversion Price of the Series A Preferred Stock for each thirty (30) day
period (or part thereof) following a Triggering Event.
(c) Redemption at the Option of the Corporation. The
Corporation may, at its option, at any time, redeem the outstanding shares of
Series A Preferred Stock at a redemption price per share equal to the
Corporation Redemption Price; provided, however, at the discretion of such
Holder, such Holder may, at any time, elect to convert its shares of Series A
Preferred Stock, in accordance with the terms of Paragraph 6 hereof, into such
number of fully paid, validly issued and nonassessable shares of Common Stock as
determined by the application of the Conversion Rate, so long as the Corporation
has not redeemed such shares of Series A Preferred Stock. If the Corporation
redeems any shares of Series A Preferred Stock pursuant to this paragraph, it
must redeem all of the shares of Series A Preferred Stock. The Corporation shall
give the Corporation Redemption Notice, which shall be signed on its behalf by
the President or Chief Executive Officer of the Corporation, to the Holders not
less than thirty (30) days prior to the date upon which the redemption is to be
made pursuant to this paragraph. The Corporation Redemption Notice shall
specify: (i) the Corporation Redemption Price and (ii) the date of such
redemption. The Corporation Redemption Notice having been so given, the amount
of the Corporation Redemption Price of the shares of Series A Preferred Stock
shall become due and payable on the specified redemption date.
(d) Mechanics of Redemption.
(i) In order to redeem any shares of Series A
Preferred Stock (in whole or in part), the applicable Holder shall surrender the
stock certificate(s) representing the shares of Series A Preferred Stock to be
redeemed, by either overnight courier or two-day courier, to the principal
executive office of the Corporation; provided, however, that the Corporation
shall not be obligated to pay the applicable redemption price unless either the
stock certificate(s) evidencing the shares of Series A Preferred Stock being
redeemed is delivered to the Corporation as provided above, or if the Holder
notifies the Corporation that such certificate(s) has been lost, stolen or
destroyed and follows such procedures as are set forth in Paragraph 18. If fewer
than all the shares represented by such certificate or certificates are to be
redeemed, the Corporation shall issue and deliver to or on the order of the
Holder thereof, at the expense of the Corporation, a new certificate or
certificates representing the unredeemed shares, to the same extent as if the
certificate theretofore representing such unredeemed shares had not been
surrendered on redemption.
(ii) The Corporation shall pay the applicable
redemption price on the date of redemption set forth on the Redemption Notice or
Corporation Redemption Notice and after receipt by the Corporation of such stock
certificate(s) evidencing the shares of Series A Preferred Stock being redeemed
(or, in the case of loss, theft or destruction, receipt by the Corporation of
such affidavit, agreement and indemnification set forth in Paragraph 18), to
such Holder and, to the extent that only a portion of the Series A Preferred
Stock evidenced by a certificate(s) is submitted for redemption, a stock
certificate evidencing the number of shares of Series A Preferred Stock not
submitted for redemption; provided that in the case where more than one Holder
submits shares of Series A Preferred Stock for redemption simultaneously and the
Corporation is unable to redeem all shares of Series A Preferred Stock submitted
for such redemption, the Corporation shall redeem an
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amount from each Holder equal to each Holder's pro rata amount (based on the
number of shares of Series A Preferred Stock held by each Holder relative to the
aggregate number of shares of Series A Preferred Stock outstanding) of all
shares of Series A Preferred Stock being redeemed.
(iii) If the Corporation shall fail to redeem all of
the shares of Series A Preferred Stock submitted for redemption, in addition to
any remedy each Holder may have under this Certificate of Designation, the
Subscription Agreement and the Registration Rights Agreement, the applicable
redemption price payable in respect of such unredeemed shares of Series A
Preferred Stock shall bear interest at the rate of 2.0% for the first three
thirty (30) day periods after the required date of payment of the redemption
price and 1.0% for each thirty (30) day period thereafter (in each case, pro
rated for partial periods) until such redemption price is paid in full or the
maximum rate permitted by law (which amount shall be paid as liquidated damages
and not as a penalty). Until the Corporation pays such unpaid redemption price
in full to a Holder, such Holder shall have the option, in lieu of redemption,
but not in limitation of its rights to receive interest as liquidated damages or
any other remedy such Holder may have under law, this Certificate of
Designation, the Subscription Agreement and the Registration Rights Agreement,
to require the Corporation to promptly return to such Holder all of the shares
of Series A Preferred Stock submitted for redemption by such Holder and for
which the applicable redemption price has not been paid, by sending written
notice thereof to the Corporation via facsimile (a "Revocation Notice"). Upon
the Corporation's receipt of such Revocation Notice and prior to payment in full
of the applicable redemption price to such Holder, (i) the Redemption Notice
shall be null and void with respect to those shares of Series A Preferred Stock
submitted for redemption and for which the applicable redemption price has not
been paid, (ii) the Corporation shall immediately return any shares of Series A
Preferred Stock submitted to the Corporation for redemption for which the
applicable redemption price has not been paid, and (iii) the Ceiling Price of
those returned shares shall be converted to the lesser of (A) the Ceiling Price
prior to the date of the Revocation Notice or (B) 90% of the Conversion Period
Conversion Price.
(e) Notwithstanding the foregoing, in the event of a
dispute as to the determination of the calculation of the applicable redemption
price, the amount of the redemption price that is not in dispute shall be
promptly paid to the Holder in accordance with Paragraph 5(d)(ii) hereof. The
Holder shall then be entitled, within sixty (60) days of receipt of the
Redemption Notice by the Corporation, to submit such dispute to the American
Arbitration Association for resolution according to the then applicable rules
thereof, which determination shall be final and binding on all parties. If it
shall be determined that a Holder shall receive additional monies in respect of
such redemption, the Corporation shall deliver to such Holder such amount within
three (3) business days of written notice of such determination. The cost of
such proceeding shall be borne by the Corporation, except that the prevailing
party, as determined by the arbitrator presiding over the arbitration, shall be
entitled to recover reasonable attorneys' fees, in addition to other costs and
expenses and any other available remedy.
6. Conversion at the Option of the Holder. Subject to the
limitations of Paragraph 15, the Holder shall have the following conversion
rights:
(a) Holder's Right to Convert. Subject to the
restrictions set forth below, shares of Series A Preferred Stock shall be
convertible (in whole or in part) at any time at the option
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of the Holder thereof, into fully paid, validly issued and nonassessable shares
of Common Stock in accordance with the terms herein for such number of shares of
Common Stock as determined by the application of the Conversion Rate.
(b) Mechanics of Conversion.
(i) Holder's Delivery Requirements. In order
to convert any shares of Series A Preferred Stock (in whole or in part) into
full shares of Common Stock, the Holder (A) shall, if required by Paragraph
6(b)(iii) below, surrender the original certificate(s) representing the shares
of Series A Preferred Stock to be converted, by either overnight courier or
two-day courier, to the Transfer Agent, and (B) shall deliver the Conversion
Notice by facsimile (with the original of such notice forwarded to the
Corporation via either overnight courier or two-day courier) to the Corporation
at its principal executive office with a copy thereof to the Transfer Agent to
the effect that such Holder elects to have converted the number of shares of
Series A Preferred Stock (plus accumulated but unpaid dividends thereon)
specified therein.
(ii) Corporation's Response. Upon receipt by
the Corporation of a copy of the Conversion Notice, the Corporation shall, as
soon as practicable, but in no event later than one (1) business day, send, via
facsimile, a confirmation of receipt of such Conversion Notice to such Holder
and the Transfer Agent, which confirmation shall constitute an instruction to
the Transfer Agent to process such Conversion Notice in accordance with the
terms herein.
(iii) Book-Entry. Notwithstanding anything
to the contrary set forth herein, upon conversion of shares of Series A
Preferred Stock in accordance with the terms hereof, the Holder thereof shall
not be required to physically surrender the certificate representing the shares
of Series A Preferred Stock to the Corporation unless the full number of shares
of Series A Preferred Stock represented by such certificate are being converted.
Each Holder and the Corporation shall maintain records showing the number of
shares of Series A Preferred Stock so converted and the dates of such
conversions or shall use such other method, reasonably satisfactory to the
Holders and the Corporation, so as not to require physical surrender of the
certificates representing shares of Series A Preferred Stock upon each such
conversion. In the event of any dispute or discrepancy, such records of the
Corporation shall be controlling and determinative in the absence of manifest
error. Notwithstanding the foregoing, if shares of Series A Preferred Stock
represented by a certificate are converted as aforesaid, the Holder may not
transfer the certificate representing the Series A Preferred Stock unless the
Holder first physically surrenders the certificate representing shares of Series
A Preferred Stock to the Corporation, whereupon the Corporation will forthwith
issue and the deliver upon the order of the Holder a new certificate of like
tenor, registered as the Holder may request, representing in the aggregate the
remaining number of shares of Series A Preferred Stock represented by such
certificate. The Holder and any assignee, by acceptance of a certificate,
acknowledge and agree that, by reason of the provisions of this paragraph,
following conversion of any shares of Series A Preferred Stock, the number of
shares of Series A Preferred Stock represented by such certificate may be less
than the number of shares of Series A Preferred Stock stated on the face
thereof.
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(c) The Corporation shall use its best efforts to
issue and deliver within three (3) business days after receipt by the
Corporation of any Conversion Notice and, if required by Paragraph 6(b)(iii)
above, certificate(s) evidencing the shares of Series A Preferred Stock being
converted, or after receipt of the affidavit, agreement and indemnification as
set forth in Paragraph 18, to the Holder, or to its designee, certificates
representing the number of shares of Common Stock to which such Holder shall be
entitled hereunder or, if requested by the Holder, the Corporation shall cause
such shares to be issued in electronic format (i.e., DWAC), together with a
certificate, certified by an appropriate officer of the Corporation, setting
forth the calculation of the Conversion Rate. The Person(s) entitled to receive
the shares of Common Stock issuable upon such conversion shall be treated for
all purposes as the Holder of such shares of Common Stock effective on the
Holder Conversion Date.
(d) Each certificate representing shares of Series A
Preferred Stock surrendered to the Corporation for conversion pursuant to this
Paragraph 6 shall, on the Holder Conversion Date and subject to issuance of the
shares of Common Stock issuable upon conversion thereof, be deemed to be
canceled and retired by the Corporation. Upon issuance of the shares of Common
Stock issuable upon conversion of the Series A Preferred Stock pursuant to this
Paragraph 6 the shares of Series A Preferred Stock formerly represented thereby
shall be deemed to be canceled and shall no longer be considered to be issued
and outstanding for any purpose, including without limitation, for purposes of
accumulating dividends thereon. Such shares of Series A Preferred Stock shall be
retired.
7. Conversion at the Option of the Corporation.
(a) On any date during the Corporation-Directed
Period, the Corporation shall have the right to exercise the Corporation
Conversion Election requiring the outstanding shares of Series A Preferred Stock
to be converted into fully paid, validly issued and nonassessable shares of
Common Stock in accordance with the terms herein for such number of shares of
Common Stock as determined by the application of the Conversion Rate; provided
that the Conditions to Conversion at the Corporation's Election are satisfied as
of the Corporation Election Conversion Period Commencement Date and throughout
the Corporation Election Conversion Period. The Corporation shall exercise the
Corporation Conversion Election by delivering to each Holder the Corporation
Election Conversion Notice by facsimile and overnight courier setting forth: (i)
the Aggregate Value of the shares of Series A Preferred Stock the Corporation
has selected for conversion, (ii) the Corporation Election Conversion Period,
(iii) the Corporation Election Conversion Period Commencement Date, and (iv)
each Holder's Pro Rata Conversion Amount. Subject to the last paragraph of this
Paragraph 7(a), a Corporation Conversion Election Period shall not exceed beyond
the expiration of the Corporation-Directed Period. If the Corporation elects to
require conversion of some, but not all, of such shares of Series A Preferred
Stock then outstanding, the Corporation shall require conversion of the Pro Rata
Conversion Amount from each Holder. Each Holder shall, during the Corporation
Election Conversion Period, deliver one or more Conversion Notices in accordance
with Paragraph 6(b)(i), which one or more Conversion Notices shall relate to an
aggregate number of shares of Series A Preferred Stock having an Aggregate Value
equal to such Holder's Pro Rata Conversion Amount. Upon the expiration of the
Corporation Election Conversion Period, each Holder will be deemed to have
submitted a Conversion Notice (as of the last day of the Corporation Election
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Conversion Period) in accordance with Paragraph 6(b)(i) for a number of shares
of Series A Preferred Stock having an Aggregate Value equal to (a) such holder's
Pro Rata Conversion Amount minus (b) the number of shares of Series A Preferred
Stock previously converted by such Holder during the Corporation Election
Conversion Period; provided, however, in no event shall any Holder be required
to convert during any Corporation Election Conversion Period shares of Series A
Preferred Stock having an Aggregate Value in excess of such Holder's pro rata
portion (determined in the same manner as the Pro Rata Conversion Amount above)
of 10% of the aggregate trading volume of the Common Stock on the Principal
Market (as reported by Bloomberg, L.P.) during the Corporation Election
Conversion Period.
During the continuance of any Corporation Election Conversion
Period, the Corporation shall not be permitted to deliver any additional
Corporation Election Conversion Notices without the consent of each Holder.
Notwithstanding any other provision of this Agreement, upon
the expiration of the Corporation-Directed Period, the Corporation shall be
deemed to have provided a Corporation Election Conversion Notice and to have
commenced a Corporation Election Conversion Period, which Corporation Election
Conversion Period will continue in effect through and including the Maturity
Date.
(b) At such time as the Closing Price of the Common
Stock shall be greater than the Mandatory Conversion Price for thirty (30)
consecutive trading days, the Corporation shall have the right to exercise the
Mandatory Conversion Election to require that some or all of the outstanding
shares of Series A Preferred Stock be converted into fully paid, validly issued
and nonassessable shares of Common Stock in accordance with the terms herein for
such number of shares of Common Stock as determined by the application of the
Conversion Rate; provided that the Conditions to Mandatory Conversion are
satisfied as of the Mandatory Conversion Date. The Corporation shall exercise
the Mandatory Conversion Election by delivering to each Holder a Corporation
Election Conversion Notice by facsimile and overnight courier setting forth (i)
the Aggregate Value of the shares of Series A Preferred Stock the Corporation
has selected for conversion, (ii) the Mandatory Conversion Date, and (iii) each
Holder's Pro Rata Conversion Amount. The Corporation may only consummate the
transactions contemplated by the Mandatory Conversion Election if the Closing
Price of the Common Stock remains at least equal to the Mandatory Conversion
Price for the period of time between the giving of the Corporation Election
Conversion Notice and the trading day immediately preceding the Mandatory
Conversion Date. If the Corporation elects to require conversion of some, but
not all, of the shares of Series A Preferred Stock then outstanding, the
Corporation shall require each Holder (or its predecessor) to convert its Pro
Rata Conversion Amount. Each Holder shall, on the Mandatory Conversion Date, be
deemed to have delivered a Conversion Notice in accordance with Paragraph
6(b)(i), which Conversion Notice shall relate to an aggregate number of shares
of Series A Preferred Stock having an Aggregate Value equal to such Holder's Pro
Rata Conversion Amount.
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8. Maturity.
(a) On the Maturity Date, the Corporation shall cause
the shares of Series A Preferred Stock then outstanding to be automatically
converted into that number of fully paid, validly issued and nonassessable
shares of Common Stock determined in accordance with the terms of this
Certificate of Designation by application of the then applicable Conversion
Rate.
(b) The Corporation shall give the Holders written
notice of the automatic conversion pursuant to Paragraph 8(a) not less than ten
(10) days prior to the Maturity Date, and such written notice shall specify (i)
the Maturity Date, and (ii) the place or places to which stock certificates
representing the Series A Preferred Stock are to be surrendered for conversion.
Such conversion shall be effected as of the Maturity Date in accordance with and
pursuant to the terms of this Certificate of Designation at the then applicable
Conversion Rate and in accordance with the procedures set forth in Paragraph
6(b) of this Certificate of Designation; provided, however, that the Holder
shall not be obligated to provide the Conversion Notice required in Paragraph
6(b)(i) to the Corporation.
(c) Each certificate representing shares of Series A
Preferred Stock surrendered to the Corporation for conversion pursuant to this
Paragraph 8 shall, on the Maturity Date and subject to issuance of the shares of
Common Stock issuable upon conversion, be canceled and retired by the
Corporation. Upon issuance of the shares of Common Stock issuable upon
conversion of the Series A Preferred Stock pursuant to this Paragraph 8, the
shares of Series A Preferred Stock formerly represented thereby shall be deemed
to be canceled and shall no longer be considered to be issued and outstanding
for any purpose, including without limitation, for purposes of accumulating
dividends thereon.
(d) The Corporation shall use its best efforts to
issue and deliver within three (3) business days after receipt by the
Corporation of the certificate(s) evidencing the shares of Series A Preferred
Stock to be converted pursuant to this Paragraph 8 (or, in the case of loss,
theft or destruction, after receipt of the affidavit, agreement and
indemnification described in Paragraph 18) to the Holders (or to their
respective designees), a certificate representing the number of shares of Common
Stock to which each Holder shall be entitled hereunder or, if requested by the
Holder, the Corporation shall cause such shares to be issued in electronic
format (i.e., DWAC), together with a certificate, certified by an appropriate
officer of the Corporation, setting forth the calculation of the Conversion
Rate. The person or persons entitled to receive the shares of Common Stock
issuable upon such conversion shall be treated for all purposes as the record
holder of such shares of Common Stock on the Maturity Date. The Maturity Date
shall be deemed a "Holder Conversion Date" for purposes of the Series A
Preferred Stock.
9. Stock Splits; Dividends; Adjustments; Reorganizations.
(a) Stock Splits and Combinations. So long as any
shares of Series A Preferred Stock is outstanding, the Corporation shall not
effect any stock split, subdivision or combination with an effective date within
thirty (30) trading days of the Maturity Date. If the Corporation at any time
subdivides (by any stock split, subdivision or otherwise) its outstanding
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shares of Common Stock into a greater number of shares, the Ceiling Price in
effect immediately prior to such subdivision will be proportionately reduced. If
the Corporation at any time combines (by combination, reverse stock split or
otherwise) one or more of its outstanding shares of Common Stock into a smaller
number of shares, the Ceiling Price in effect immediately prior to such
combination will be proportionately increased.
(b) Certain Dividends and Distributions. So long as
any shares of Series A Preferred Stock is outstanding, the Corporation shall not
make or fix a record date for the determination of holders of Common Stock or
other securities entitled to receive a dividend or other distribution payable in
additional shares of Common Stock, with an effective date within thirty (30)
trading days of the Maturity Date.
(c) Adjustment for Other Dividends and Distributions.
So long as any shares of Series A Preferred Stock is outstanding, in the event
the Corporation makes or fixes a record date for the determination of holders of
Common Stock entitled to receive a dividend or other distribution payable in
securities other than shares of Common Stock, then and in each such event,
provision shall be made so that the Holders shall receive upon conversion of
their shares of Series A Preferred Stock pursuant to Paragraphs 5 and 8 hereof,
in addition to the number of shares of Common Stock receivable thereupon, the
amount of such other securities to which a Holder on the relevant record or
payment date, as applicable, of the number of shares of Common Stock so
receivable upon conversion would have been entitled, plus any dividends or other
distributions which would have been received with respect to such securities had
such Holder thereafter, during the period from the date of such event to and
including the Holder Conversion Date, retained such securities, subject to all
other adjustments called for during such period under this Paragraph 9 with
respect to the rights of the Holders. For purposes of this Paragraph 9(c), the
number of shares of Common Stock so receivable upon conversion by the Holder
shall be deemed to be that number which the Holder would have received upon
conversion of the Series A Preferred Stock if the Holder Conversion Date had
been the day preceding the date upon which the Corporation announced the making
of such dividend or other distribution.
(d) Adjustment of Conversion Period Conversion Price
upon Issuance of Derivative Securities. So long as any shares of Series A
Preferred Stock is outstanding, if the Corporation in any manner issues or sells
Derivative Securities (other than Derivative Securities issuable pursuant to or
in connection with any business acquisitions, mergers, consolidations or other
corporate combinations or transactions heretofore or hereafter undertaken by the
Corporation in which the Corporation is the surviving entity and any Derivative
Securities issuable pursuant to or in connection with any stock option or other
similar plan of the Corporation pursuant to which the Corporation issues
Derivative Securities to its officers, directors and employees) at a price which
varies with the market price of the Common Stock (the formulation for such
variable price being herein referred to as the "Changing Price") and such
Changing Price is not calculated using the same formula used to calculate the
Conversion Period Conversion Price in effect immediately prior to the time of
such issue or sale, the Corporation shall provide written notice thereof via
facsimile and overnight courier to each holder of the shares of Series A
Preferred Stock ("Changing Notice") on the date of issuance of such Derivative
Securities. If the holders of shares of Series A Preferred Stock representing at
least two-thirds (2/3) of the shares of Series A Preferred Stock then
outstanding provide written notice
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via facsimile and overnight courier (the "Changing Price Election Notice") to
the Corporation within five (5) business days of receiving a Changing Notice
that such holders desire to replace the Conversion Period Conversion Price then
in effect with the Changing Price described in such Changing Notice, then from
and after the date of the Corporation's receipt of the Changing Price Election
Notice the Conversion Period Conversion Price will automatically be replaced
with the Changing Price (together with such modifications to this Certificate of
Designations as may be required to give full effect to the substitution of the
Changing Price for the Conversion Period Conversion Price). In the event that a
holder delivers a Conversion Notice at any time after the Corporation's issuance
of Derivative Securities with a Changing Price but before such holder's receipt
of the Corporation's Changing Notice, then such holder shall have the option by
written notice to the Corporation to rescind such Conversion Notice or to have
the Conversion Price be equal to such Changing Price for the conversion effected
by such Conversion Notice.
(e) Adjustment for Reclassification, Exchange and
Substitution. So long as any shares of Series A Preferred Stock is outstanding,
in the event that the Common Stock issuable upon the conversion of the Series A
Preferred Stock is changed into the same or a different number of shares of any
class or classes of stock, whether by recapitalization, reclassification or
otherwise (other than a subdivision or combination of shares or stock dividend
or reorganization provided for elsewhere in this Paragraph 9 or a merger,
consolidation or other business transaction provided for in Paragraph 4), then
and in each such event each Holder shall thereafter have the right upon
conversion to receive the kind and amount of shares of stock and other
securities, cash and property receivable upon such recapitalization,
reclassification or other change, by holders of the number of shares of Common
Stock which the Holder of shares of Series A Preferred Stock would have received
had it converted such shares immediately prior to such recapitalization,
reclassification or other change, at the Conversion Price then in effect (the
kind, amount and price of such stock and other securities to be subject to
adjustments as herein provided). Prior to the consummation of any
recapitalization, reclassification or other change contemplated hereby, the
Corporation will make appropriate provision (in form and substance reasonably
satisfactory to the Holders of a majority of the Preferred Stock then
outstanding) to ensure that each of the Holders of the Series A Preferred Stock
will thereafter have the right to acquire and receive in lieu of or in addition
to (as the case may be) the shares of Common Stock otherwise acquirable and
receivable upon the conversion of such Holder's Series A Preferred Stock, such
shares of stock, securities or assets that would have been issued or payable in
such recapitalization, reclassification or other change with respect to or in
exchange for the number of shares of Common Stock which would have been
acquirable and receivable upon the conversion of such Holder's Series A
Preferred Stock had such recapitalization, reclassification or other change not
taken place (without taking into account any limitations or restrictions on the
timing or amount of conversions). In the event of such recapitalization,
reclassification or other change, the formulae set forth herein for conversion
and redemption shall be equitably adjusted to reflect such change in number of
shares or, if shares of a new class of stock are issued, to reflect the market
price of the class or classes of stock (applying the same factors used in
determining the Conversion Price for shares of Common Stock) issued in
connection with the above described events.
(f) Reorganization. So long as any shares of Series A
Preferred Stock is outstanding, if is a capital reorganization of the Common
Stock (other than a recapitalization, subdivision, combination, reclassification
or exchange of shares provided for elsewhere in this
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Paragraph 9) then, as a part of such reorganization, provisions shall be made so
that the Holders shall thereafter be entitled to receive upon conversion of its
shares of Series A Preferred Stock the number of shares of stock or other
securities or property to which a holder of the number of shares of Common Stock
deliverable upon conversion would have been entitled to receive had the holder
of shares of Series A Preferred Stock converted such shares immediately prior to
such capital reorganization, at the Conversion Price then in effect. In any such
case, appropriate adjustments shall be made in the application of the provisions
of this Paragraph 9 with respect to the rights of the Holders after such capital
reorganization to the extent that the provisions of this Paragraph 9 shall be
applicable after that event and be as equivalent as may be practicable,
including, by way of illustration and not limitation, by equitably adjusting the
formulae set forth herein for conversion and redemption to reflect the market
price of the securities or property (applying the same factors used in
determining the Conversion Price for shares of Common Stock) issued in
connection with the above described events.
(g) Dispute. In the event of a dispute between a
Holder and the Corporation with respect to any of the adjustments required
pursuant to the provisions of this Paragraph 9, upon conversion of the Series A
Preferred Stock, such Holder shall be entitled to receive the number of shares
of Common Stock as to which no dispute exists and, within sixty (60) days of
receipt of the Schedule of Computations, to submit such dispute to the American
Arbitration Association for resolution according to the then applicable rules
thereof, which determination shall be final and binding on all parties. If it
shall be determined that the subject Holder should have received additional
shares of Common Stock or other securities upon such conversion, then, within
three (3) trading days of receipt of written notice of such determination, the
Corporation shall issue to such Holder that number of additional shares of
Common Stock or other securities as shall have a value, based upon the then
Conversion Price for shares of Common Stock, as shall equal the number of shares
of Common Stock or other securities that such Holder shall have been entitled to
receive but for the dispute multiplied by the Conversion Price for shares of
Common Stock on the date of conversion. The cost of such proceeding shall be
borne by the Corporation, except that the prevailing party, as determined by the
arbitrator presiding over the arbitration, shall be entitled to recover
reasonable attorney's fees, in addition to other costs and expenses and any
other available remedy.
(h) Schedule of Computations. The Corporation shall
provide written notice to the Holders of all adjustments pursuant to this
Paragraph 9 within three (3) trading days of the occurrence thereof and such
notice shall be accompanied by the Schedule of Computations. If so requested by
a Holder, the Corporation shall provide to such Holder within ten (10) business
days of its written request therefor a certificate of concurrence to the
Schedule of Computations by the independent certified public accountants of the
Corporation.
10. Fractional Shares. No fractional shares of Common Stock or
scrip representing fractional shares of Common Stock shall be issuable
hereunder. The number of shares of Common Stock that are issuable upon any
conversion shall be rounded up or down to the nearest whole share.
11. Reservation of Stock; Conversion Default.
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(a) Reservation Requirement. So long as any shares of
the Series A Preferred Stock are outstanding, the Corporation shall at all times
reserve and keep available out of its authorized but unissued shares of Common
Stock such number of shares of Common Stock as shall be necessary for the
purpose of effecting the conversion of shares of Series A Preferred Stock, which
shares shall be free of preemptive rights, for the purpose of enabling the
Corporation to satisfy any obligation to issue shares of its Common Stock, or
other securities, upon conversion of all shares of Series A Preferred Stock
pursuant hereto. The Corporation shall initially reserve a number of shares of
Common Stock equal to one and one-half times the number of shares necessary to
satisfy its obligations on conversion of the Series A Preferred Stock if all
such shares were converted on the Issuance Date.
(b) Default. If the Corporation: (i) notifies a
Holder via facsimile or pursuant to a public disclosure, including but not
limited to a press release, that the Corporation cannot or does not intend to
issue shares of Common Stock upon conversion of any shares of Series A Preferred
Stock; (ii) fails to effectuate a resale by a Holder because there is an
insufficient number of shares covered by the Registration Statement; or (iii)
fails to issue shares of Common Stock registered for resale under the
Registration Statement for any reason (a "Conversion Default"), including
without limitation, because the Corporation: (x) does not have a sufficient
number of shares of Common Stock or other securities authorized and available;
or (y) is otherwise prohibited by applicable law or by the rules and regulations
of any stock exchange, interdealer quotation system or other self-regulatory
organization with jurisdiction over the Corporation or its securities, from
issuing all of the Common Stock which is to be issued to a Holder, then the
Corporation shall issue as many shares of Common Stock as it is able to issue in
accordance with such Holder's Conversion Notice, and with respect to the
unconverted shares of Series A Preferred Stock, notify the Holder of such
Conversion Default (a "Default Notice") which notice shall indicate: (I) the
reason why the Corporation is unable to fully satisfy such holder's Conversion
Notice; (II) the number of shares of Series A Preferred Stock which cannot be
converted; and (III) the applicable mandatory redemption price (as calculated
pursuant to the terms below). Such Holder must within ten (10) business days of
(i) receipt of such Default Notice or (ii) becoming aware of such Conversion
Default, deliver written notice via facsimile to the Corporation ("Remedies
Notice") of its election pursuant to the following provisions.
(c) Each Holder may, upon receipt of a Default Notice
and at its election: (i) demand from the Corporation immediate redemption of its
shares of Series A Preferred Stock in cash at a price equal to 130% of the
Aggregate Value; (ii) if the Corporation's inability to fully convert Series A
Preferred Stock is pursuant to Subparagraph (b)(ii) above, require the
Corporation to issue restricted shares of Common Stock in accordance with such
Holder's Conversion Notice; or (iii) void its Conversion Notice and have
returned to it the unconverted shares of Series A Preferred Stock that were
otherwise to be converted pursuant to such Holder's Conversion Notice.
Notwithstanding the foregoing, no Remedies Notice may be delivered by a Holder
subsequent to receipt by such Holder of notice from the Corporation (sent by
overnight or two-day courier with a copy sent by facsimile) of the availability
of sufficient shares of Common Stock or other securities to perfect conversion
(a "Post-Default Conversion") of all the Series A Preferred Stock; provided that
such rights as set forth herein and election as set forth in the Remedies Notice
shall be reinstated if the Corporation shall
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thereafter fail to perfect such Post-Default Conversion by delivery of Common
Stock certificates or certificates representing other securities in accordance
with the applicable provisions hereof and payment of all accumulated and unpaid
dividends in cash with respect thereto within five (5) business days of delivery
of the notice of Post-Default Conversion.
(d) In addition to the foregoing, upon a Conversion
Default, the Holders shall have the right to receive a 2.0% reduction in the
Conversion Price of the Preferred Stock (including shares of Preferred Stock for
which a Conversion Notice has not yet been sent) for each thirty (30) day period
(or part thereof) following a Conversion Default; provided, however, that if the
Company's inability to fully convert shares of the Series A Preferred Stock is
pursuant to subparagraph (b)(iii)(y) above, the Corporation shall have sixty
(60) days to cure such default prior to giving rise to the right of the Holder
to exercise remedies pursuant to this Paragraph 11.
12. Taxes. The Corporation shall pay any and all taxes
attributable to the issuance and delivery of Common Stock or other securities
upon conversion of the Series A Preferred Stock.
13. Voting Rights. The Holders shall have no voting rights,
except as required by law, including, but not limited to, the Delaware General
Corporation Law, and as expressly provided in this Certificate of Designation.
14. Liquidation, Dissolution, Winding-Up. (a) In the event of
any voluntary or involuntary liquidation, dissolution or winding up of the
Corporation, the Holders shall be entitled to receive in cash out of the assets
of the Corporation, whether from capital or from earnings available for
distribution to its stockholders (the "Preferred Funds"), before any amount
shall be paid to the holders of any Junior Securities, an amount per share of
Series A Preferred Stock equal to the Aggregate Value (the "Liquidation Value");
provided that, if the Preferred Funds are insufficient to pay the full amount
due to the Holders and any holders of Parity Securities, then each Holder and
each holder of Parity Securities shall receive a ratable percentage of the
Preferred Funds in accordance with the respective amounts that would be payable
in full to such holder as a liquidation preference, in accordance with their
respective Certificate of Designation, Preferences and Rights.
(b) The purchase or redemption by the Corporation of
stock of any class, in any manner permitted by law, shall not, for the purposes
hereof, be regarded as a liquidation, dissolution or winding up of the
Corporation. Neither the consolidation or merger of the Corporation with or into
any other person, nor the sale or transfer by the Corporation of less than
substantially all of its assets, shall, for the purposes hereof, be deemed to be
a liquidation, dissolution or winding up of the Corporation.
(c) No Holder shall be entitled to receive any
amounts with respect thereto upon any liquidation, dissolution or winding up of
the Corporation other than the amounts provided for herein.
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15. Limitation on Number of Conversion Shares. (a) The
Corporation shall not be obligated to issue any shares of Common Stock upon
conversion of shares of Series A Preferred Stock if the issuance of such shares
of Common Stock would exceed that number of shares of Common Stock which the
Corporation may issue upon conversion of the shares of Series A Preferred Stock
(the "Exchange Cap") without breaching the Corporation's obligations under the
rules or regulations of the Principal Market, or the market or exchange where
the Common Stock is then traded, except that such limitation shall not apply in
the event that the Corporation (i) obtains the approval of its stockholders as
required by the Section 5.14 of the Subscription Agreement or (ii) obtains a
written opinion from outside counsel to the Corporation that such approval is
not required, which opinion shall be reasonably satisfactory to the Holders of a
majority of the shares of Series A Preferred Stock then outstanding. Until such
approval or written opinion is obtained or such action has been taken by the
required Holders of Shares of Series A Preferred Stock, no Holder shall be
issued, upon conversion of shares of Series A Preferred Stock, shares of Common
Stock in an amount greater than the product of (i) the Exchange Cap amount
multiplied by (ii) a fraction, the numerator of which is the number of shares of
Series A Preferred Stock issued to such Holder pursuant to the Subscription
Agreement and the denominator of which is the aggregate amount of all shares of
Series A Preferred Stock issued to the Holders pursuant to the Subscription
Agreement (the "Cap Allocation Amount"). In the event that any Holder shall sell
or otherwise transfer any such Holder's Series A Preferred Stock, the transferee
shall be allocated a pro rata portion of such Holder's Cap Allocation Amount. In
the event that any Holder shall convert all of such Holder's Series A Preferred
Stock into a number of shares of Common Stock which, in the aggregate, is less
than such Holder's Cap Allocation Amount, then the difference between such
Holder's Cap Allocation Amount and the number of shares of Common Stock actually
issued to such Holder shall be allocated to the respective Cap Allocation
Amounts of the remaining Holders of Series A Preferred Stock on a pro rata basis
in proportion to the number of Shares of Series A Preferred Stock then held by
each such Holder.
(b) In no event shall a Holder be permitted to
convert any shares of Series A Preferred Stock in excess of the number of such
shares upon the conversion of which, (x) the number of shares of Common Stock
owned by such Holder and such Holder's "affiliates" (as defined in Rule 144 of
the Act) (other than shares of Common Stock issuable upon conversion of shares
of Series A Preferred Stock or upon the exercise of the Warrants) plus (y) the
number of shares of Common Stock issuable upon such conversion of such shares of
Series A Preferred Stock, would be equal to or exceed (z) 4.99% of the number of
shares of Common Stock then issued and outstanding, including shares issuable on
conversion of the Series A Preferred Stock held by such Holder after application
of this Paragraph 15(b). For purposes of the foregoing sentence, the aggregate
number of shares of Common Stock beneficially owned by such Holder and its
affiliates shall include the number of shares of Common Stock issuable upon
conversion of the shares of Series A Preferred Stock with respect to which the
determination of such sentence is being made, but shall exclude the number of
shares of Common Stock which would be issuable upon (i) conversion of the
remaining, nonconverted shares of Series A Preferred Stock beneficially owned by
such Holder and its affiliates and (ii) exercise or conversion of the
unexercised or unconverted portion of any other securities of the Corporation
(including, without limitation, any warrants or convertible preferred stock)
subject to a limitation on conversion or exercise analogous to the limitation
contained herein beneficially owned by the
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Holder and its affiliates. Except as provided in the preceding sentence, for
purposes of this Paragraph 15(b), beneficial ownership shall be calculated in
accordance with Section 13(d) of the Exchange Act and the rules and regulations
thereunder. To the extent that the limitation contained in this Paragraph 15(b)
applies, the determination of whether shares of Series A Preferred Stock are
convertible (in relation to other securities owned by a Holder) and of which
shares of Series A Preferred Stock are convertible shall be in the sole
discretion of such Holder, and the submission of shares of Series A Preferred
Stock for conversion shall be deemed to be such Holder's determination of
whether such shares of Series A Preferred Stock are convertible (in relation to
other securities owned by a Holder) and of which shares of Series A Preferred
Stock are convertible, in each case subject to such aggregate percentage
limitation, and the Company shall have no obligation to verify or confirm the
accuracy of such determination. Nothing contained herein shall be deemed to
restrict the right of a Holder to convert such shares of Series A Preferred
Stock at such time as such conversion will not violate the provisions of this
paragraph. No conversion in violation of this paragraph but otherwise in
accordance with this Certificate of Designation shall affect the status of the
securities issued upon such conversion as validly issued, fully-paid and
nonassessable.
16. No Impairment. The Corporation shall not intentionally
take any action which would impair the rights and privileges of the Series A
Preferred Stock set forth herein or the rights of the Holders thereof.
17. Registration Suspension. In the event that at any time or
from time to time the Registration Statement is suspended or trading in the
Common Stock on the Nasdaq National Market is suspended for a period of time
(excluding disruptions from business announcements that result in any halt(s) in
trading of not more than three (3) days on each occasion) and other suspension
of trading on such market in general (each, a "Blackout Period"), the Maturity
Date hereunder shall be extended for a period equal to l.5 times the number of
days in such Blackout Period.
18. Replacement Certificate. In the event that any Holder
notifies the Corporation that a stock certificate evidencing shares of Series A
Preferred Stock has been lost, stolen, destroyed or mutilated, the Corporation
shall issue a replacement stock certificate evidencing the Series A Preferred
Stock identical in tenor and date (or if such certificate is being issued for
shares not covered in a redemption or conversion, or if such Holder has
previously converted shares of Series A Preferred Stock and no new certificate
has been issued to such Holder in accordance with the provisions of Paragraph
6(b) hereunder, in the applicable tenor and date) to the original stock
certificate evidencing the Series A Preferred Stock, provided that the Holder
executes and delivers to the Corporation an affidavit of lost stock certificate
and an agreement reasonably satisfactory to the Corporation to indemnify the
Corporation from any loss incurred by it in connection with such stock
certificate; provided, however, the Corporation shall not be obligated to
re-issue replacement stock certificates if the Holder contemporaneously requests
the Corporation to convert or redeem the full number of shares evidenced by such
lost, stolen, destroyed or mutilated certificate.
19. Definitions. For purposes hereof the following definitions
shall apply:
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"Act" shall mean the Securities Act of 1933, as amended.
"Aggregate Value" shall mean for each share of Series A
Preferred Stock the sum of (a) the Stated Value thereof, plus (b) accumulated
but unpaid dividends thereon (whether or not earned or declared).
"Ceiling Price" shall mean $36.00; provided, however, that if,
at any time after the Issuance Date, the Corporation offers, sells, contracts to
sell or otherwise issues or agrees to issue any Derivative Securities in a
private placement transaction (other than pursuant to any existing stock or
option or similar existing equity-based compensation plan for employees,
officers, directors or consultants), with a maximum conversion price per share
of Common Stock of an amount less than the Ceiling Price, then the "Ceiling
Price" shall mean such lower conversion price or offer price per share for the
Series A Preferred Stock not yet converted. The Ceiling Price shall also be
subject to adjustment from time to time ratably for any events set forth in
Paragraphs 5 and 8 hereof.
"Closing Price" shall mean the price of one share of Common
Stock determined as follows:
(a) If the Common Stock is listed for quotation on
the Nasdaq National Market or The Nasdaq SmallCap Market, the closing
transaction price per share, as reported by Bloomberg, L.P. on the subject
valuation date (or, if there is no closing transaction price for such date, the
last closing transaction price reported prior to the valuation date);
(b) If the Common Stock is listed on a national
securities exchange, the last reported closing transaction price on such
exchange on the subject valuation date (or, if there is no closing transaction
price for such date, the last closing transaction price prior to the valuation
date);
(c) If neither (a) nor (b) immediately above apply,
but the Common Stock is traded in the over-the-counter market on the pink sheets
or the electronic bulletin board, the closing bid price on the subject valuation
date; and
(d) If none of clause (a), (b) or (c) immediately
above applies, the market value as determined by a nationally recognized
investment banking firm or other nationally recognized financial advisor
retained in good faith by the Board of Directors of the Corporation, taking into
consideration among other factors, the earnings history, book value and
prospects for the Corporation, and the prices at which shares of Common Stock
recently have been traded. Such determination shall be conclusive and binding on
all persons.
"Common Stock" shall mean the common stock, par value $0.01
per share, of the Corporation, and any stock into which such Common Stock may
hereafter be changed.
"Conditions to Conversion at the Corporation's Election" shall
mean the following conditions: (i) on each day during the period beginning on
and including the date the Registration Statement is declared effective by the
SEC and ending on and including the last day
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<PAGE>
of the Corporation Election Conversion Period, such Registration Statement which
includes the Registrable Securities relating to the Series A Preferred Stock
selected for conversion shall be effective and available for the sale of no less
than all the Registrable Securities required to be included in such Registration
Statement; (ii) on each day during the period beginning on the Issuance Date and
ending on and including the last day of the Corporation Election Conversion
Period, the Common Stock is designated for quotation on the Principal Market and
shall not have been suspended from trading on the Principal Market nor shall
delisting or suspension by the Principal Market (other than suspensions of not
more than one day and occurring prior to the delivery of the Corporation
Election Conversion Notice due to business announcements by the Corporation)
have been threatened either (A) in writing by the Principal Market or (B) by
falling below the minimum listing maintenance requirements of the Principal
Market; (iii) during the period beginning on the Issuance Date and ending on and
including the last day of the Corporation Election Conversion Period, there
shall not have occurred (A) an event constituting a Triggering Event or (B) an
event that with the passage of time and without being cured would constitute a
Triggering Event; (iv) the aggregate number of shares of Series A Preferred
Stock selected for conversion by the Corporation as reflected in the Corporation
Election Conversion Notice is at least 500; (v) during the period beginning on
the Issuance Date and ending on and including the last day of the Corporation
Election Conversion Period, the Corporation shall have delivered shares of
Common Stock upon conversion of shares of Series A Preferred Stock and upon
exercise of the Warrants to the holders thereof on a timely basis as set forth
in Section 6 hereof and Sections 2(a) and 2(b) of the Warrants, respectively;
(vi) the Company otherwise shall have been in compliance in all material
respects with this Certificate of Designation, the Subscription Agreement, the
Warrants and the Registration Rights Agreement and shall not have breached in
any material respect any provision of this Certificate of Designation, the
Subscription Agreement, the Warrants or the Registration Rights Agreement; (vii)
the Company shall not have delivered a Company's Conversion Election Notice
during any Company's Mandatory Conversion Period; and (viii) the Company's
Election Conversion Date is not later than the date which is nine (9) months
after the Issuance Date.
"Conditions to Mandatory Conversion" shall mean the following
conditions: (i) on the Mandatory Conversion Date, the Registration Statement
which includes the Registrable Securities relating to the Series A Preferred
Stock selected for conversion shall be effective and available for the sale of
no less than all the Registrable Securities required to be included in such
Registration Statement; (ii) on the Mandatory Conversion Date, the Common Stock
is designated for quotation on the Principal Market and shall not have been
suspended from trading on the Principal Market nor shall delisting or suspension
by the Principal Market (other than suspensions of not more than one day and
occurring prior to the delivery of the Corporation Election Conversion Notice
due to business announcements by the Corporation) have been threatened either
(A) in writing by the Principal Market or (B) by falling below the minimum
listing maintenance requirements of the Principal Market; (iii) on the Mandatory
Conversion Date, there shall not have occurred (A) an event constituting a
Triggering Event or (B) an event that with the passage of time and without being
cured would constitute a Triggering Event; (iv) the aggregate number of shares
of Series A Preferred Stock selected for conversion by the Corporation as
reflected in the Corporation Election Conversion Notice is at least 500; (v)
during the period beginning on the Issuance Date and ending on and including the
Mandatory Conversion Date, the Corporation shall have delivered shares of Common
Stock upon
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<PAGE>
conversion of shares of Series A Preferred Stock and upon exercise of the
Warrants to the holders thereof on a timely basis as set forth in Section 6
hereof and Sections 2(a) and 2(b) of the Warrants, respectively; and (vi) the
Company otherwise shall have been in compliance in all material respects with
this Certificate of Designation, the Subscription Agreement, the Warrants and
the Registration Rights Agreement and shall not have breached in any material
respect any provision of this Certificate of Designation, the Subscription
Agreement, the Warrants or the Registration Rights Agreement.
"Conversion Notice" shall mean the written notice of
conversion required to be delivered by a Holder to the Corporation requesting
conversion of the Series A Preferred Stock into Common Stock in the form
attached hereto as Exhibit 3.
"Conversion Period Conversion Price" shall mean the lowest of
the daily weighted average trading prices on the Principal Market as reported by
Bloomberg, L.P. (on the VAP function) during the Valuation Period.
"Conversion Price" shall mean (a) the Ceiling Price or (b) (i)
during any Corporation Election Conversion Period, (ii) at any time after the
Corporation shall have delivered a Corporation Redemption Notice or (iii) upon
the occurrence of an Extraordinary Transaction, an amount that is equal to the
lesser of (A) the Ceiling Price and (B) the Conversion Period Conversion Price,
in each case, subject to adjustment as provided herein.
"Conversion Rate" shall mean the number of shares of Common
Stock issuable upon conversion of each share of Series A Preferred Stock
determined by the application of the following formula where D equals the
accumulated but unpaid dividends (whether or not earned or declared) for each
share of Series A Preferred Stock (not previously added to the Aggregate Value
pursuant to Paragraph 1 hereof) as of the Holder Conversion Date:
Aggregate Value + D
--------------------------------
Conversion Price
"Corporation Conversion Election" shall mean the Corporation's
right, in its sole discretion, to require that any or all of the outstanding
shares of Series A Preferred Stock be converted in accordance with Paragraph
7(a) hereof.
"Corporation-Directed Period" shall mean the period beginning
on the date which is ten (10) business days after the Registration Statement has
been declared effective by the SEC and ending on and including the date which is
nine (9) months after the Issuance Date.
"Corporation Election Conversion Notice" shall mean the
written notice in the form attached hereto as Exhibit 4 required to be delivered
to the Holders indicating that the Corporation (i) has chosen to exercise the
Corporation Conversion Election or (ii) has been required to exercise the
Mandatory Conversion Election.
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<PAGE>
"Corporation Election Conversion Period" shall mean the period
selected by the Corporation pursuant to the Corporation Conversion Election
Notice during which it may require conversion of the Series A Preferred Stock in
accordance with Paragraph 7(a) hereof. Such period shall be not less than ten
(10) business days nor more than fifty (50) business days during the
Corporation-Directed Period.
"Corporation Election Conversion Period Commencement Date"
shall mean the date which is two (2) business days after the date of delivery of
the Corporation Election Conversion Notice.
"Corporation Redemption Notice" shall mean the written notice
in the form attached hereto as Exhibit 2 required to be delivered by the
Corporation to the Holders upon exercise by the Corporation of its right to
redeem Series A Preferred Stock in accordance with Paragraph 5(c) hereof.
"Corporation Redemption Price" shall mean the price per share
of Series A Preferred Stock equal to 110% of the Aggregate Value per share of
Series A Preferred Stock as of the date upon which redemption is made, plus: (i)
1% of the Aggregate Value per share of Series A Preferred Stock for each month
since the Issuance Date up to a maximum per share redemption price equal to 140%
of the Aggregate Value per share; and (ii) accumulated but unpaid dividends on
the shares of Series A Preferred Stock being redeemed (not previously added to
Aggregate Value pursuant to Paragraph 2 hereof).
"Derivative Securities" shall mean securities of the
Corporation which are, directly or indirectly, convertible into or exercisable
or exchangeable for Common Stock.
"Dividend Notice" shall mean written notice from the
Corporation to the Holders stating the then Aggregate Value of the shares of
Series A Preferred Stock in accordance with Paragraph 2(c) hereof which notice
shall be delivered to each Holder within ten (10) calendar days after the
applicable Dividend Payment Date to which such notice refers.
"Dividend Payment Date" shall mean the last day of March,
June, September and December of each year.
"Exchange Act" shall mean the Securities Exchange Act of 1934,
as amended.
"Holder" shall mean the person in whose name the shares of
Series A Preferred Stock is recorded on the Preferred Stock Register.
"Holder Conversion Date" shall mean the effective date of
conversion of the Series A Preferred Stock into Common Stock, which shall be the
date on which the Corporation receives by facsimile the Conversion Notice.
"Issuance Date" shall mean January 13, 2000.
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<PAGE>
"Junior Securities" shall mean equity securities of the
Corporation, including the Common Stock, to which the Series A Preferred Stock
ranks senior with respect to dividend rights and preferences as to distributions
and payments upon liquidation, dissolution, winding up or otherwise of the
Corporation.
"Mandatory Conversion Date" shall mean that date selected by
the Corporation to require conversion of the Series A Preferred Stock pursuant
to exercise of its Mandatory Conversion Election, which date shall not be less
than thirty (30) days nor more than sixty (60) days after delivery of the
Corporation Election Conversion Notice relating to such mandatory conversion.
"Mandatory Conversion Election" shall mean the Corporation's
right in its sole discretion, at such time as the Closing Price is greater than
the Mandatory Conversion Price, to require conversion of the Series A Preferred
Stock in accordance with Paragraph 7(b) hereof.
"Mandatory Conversion Price" shall mean that price per share
which is equal to 150% of the Ceiling Price.
"Maturity Date" shall mean that date which is five (5) years
from the Issuance Date or such later date to which such date has been extended
pursuant to Paragraph 17 hereof.
"Parity Securities" shall mean equity securities of the
Corporation which rank on parity with the Series A Preferred Stock with respect
to dividend rights and preferences as to distributions and payments upon
liquidation, dissolution, winding up or otherwise of the Corporation.
"Person" means and includes an individual, a partnership, a
joint venture, a corporation, a company, a limited liability company, a trust,
an unincorporated organization and a government or any department or agency
thereof.
"Preferred Stock Register" shall mean the records of the
Corporation and/or the Transfer Agent regarding registration and transfer of the
Series A Preferred Stock.
"Principal Market" shall mean the Nasdaq National Market, or
if the Common Stock is not traded on the Nasdaq National Market, then the
principal securities exchange or trading market for the Common Stock.
"Pro Rata Conversion Amount" shall mean the amount of shares
of Series A Preferred Stock owned by each Holder based on the Stated Value of
the shares of Series A Preferred Stock owned by a Holder relative to the total
Stated Value of the number of shares of Series A Preferred Stock then
outstanding.
"Redemption Notice" shall mean the written notice in the form
attached hereto as Exhibit 1 required to be delivered via facsimile to the
Corporation by a Holder electing redemption of such Holder's securities pursuant
to Paragraphs 5(a) and 5(b) hereof.
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<PAGE>
"Registrable Securities" shall have the meaning ascribed to
such term in the Registration Rights Agreement.
"Registration Rights Agreement" shall mean the Registration
Rights Agreement, dated as of the Issuance Date, by and among the Corporation
and the purchasers of the Series A Preferred Stock named therein.
"Registration Statement" shall mean the registration statement
filed by the Corporation with the SEC relating to the resale of the shares of
Common Stock issuable upon conversion of shares of Series A Preferred Stock.
"Schedule of Computations" shall mean the schedule detailing
the computations of certain adjustments which is required to accompany the
written notice of adjustment required to be delivered by the Corporation to
Holders pursuant to Paragraph 9 hereof.
"SEC" shall mean the Securities and Exchange Commission and
any successor entity thereto.
"Subscription Agreement" shall mean the Subscription
Agreement, dated as of the Issuance Date, by and among the Corporation and the
Persons named therein subscribing for shares of Series A Preferred Stock.
"Transfer Agent" shall mean American Stock Transfer and Trust
Company.
"Triggering Event" shall mean the occurrence of any of the
following events:
(a) the Common Stock is either delisted or suspended
from trading on the Nasdaq National Market, The Nasdaq SmallCap Market, The New
York Stock Exchange, Inc. or The American Stock Exchange, Inc. for a period of
five (5) consecutive trading days, or any such delisting or suspension is
threatened in writing or pending (excluding disruptions from business
announcements that result in any halt(s) in trading of not more than three (3)
days on each occasion) and other than as a result of the suspension of trading
in securities on such market in general; or
(b) (i) the failure of the Registration Statement to
be declared effective by the SEC on or prior to the date that is 150 days from
the Issuance Date, or (ii) while the Registration Statement is required to be
maintained effective pursuant to the terms of the Registration Rights Agreement,
the effectiveness of the Registration Statement lapses for any reason
(including, without limitation, the issuance of a stop order) or is unavailable
to the holder of the shares of Series A Preferred Stock for sale of all of the
Registrable Securities (as defined in the Registration Rights Agreement) in
accordance with the terms of the Registration Rights Agreement, and such lapse
or unavailability continues for a period of ten (10) consecutive trading days or
for more than an aggregate of thirty (30) trading days in any 365-day period; or
(c) notice by the Corporation or by the Corporation's
transfer agent to any holder of shares of Series A Preferred Stock, including by
way of public announcement, at any time,
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<PAGE>
of its intention not to comply with a request for conversion of any shares of
Series A Preferred Stock into shares of Common Stock that are tendered in
accordance with the provisions of this Certificate of Designation; or
(d) a Conversion Default; or
(e) a Holder has not received all of the shares of
Common Stock to which such Holder is entitled prior to the tenth business day
after the date of receipt by the Corporation of a Conversion Notice; or
(f) the Company shall not have complied with Section
5.14 of the Subscription Agreement or shall not have received the requisite
stockholder approval at the stockholder meeting contemplated by Section 5.14 of
the Subscription Agreement; or
(g) the Corporation shall not be in compliance with
or shall have breached any of the provisions of this Certificate of Designation,
the Subscription Agreement, the Warrants, the Registration Rights Agreement or
any other document, certificate, agreement or other instrument delivered in
connection with the transactions contemplated hereby and thereby.
"Valuation Period" shall mean the ten (10) trading days
immediately preceding and including the Holder Conversion Date or the redemption
date set forth in the Redemption Notice, subject to adjustment from time to time
ratably for any events set forth in Paragraph 9 hereof that occur during such
ten (10) trading day period.
"Warrants" shall mean the warrants to purchase shares of
Common Stock issued by the Corporation in connection with the issuance of the
Series A Preferred Stock.
[Remainder of Page Intentionally Left Blank]
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<PAGE>
IN WITNESS WHEREOF, the Corporation has caused this
Certificate of Designations to be duly executed by an officer thereunto duly
authorized this 13th day of January, 2000.
XCEED, INC.
By: /s/ Werner Haase
-------------------------------------
Name: Werner Haase
Title: Chief Executive Officer
<PAGE>
EXHIBIT 1
HOLDER REDEMPTION NOTICE
Reference is made to the Certificate of Designation, Preferences and Rights (the
"Certificate of Designation") of Xceed, Inc., a Delaware corporation (the
"Corporation"). In accordance with and pursuant to the Certificate of
Designation, the undersigned hereby elects to have the Corporation redeem the
number of shares of Series A Cumulative Convertible Preferred Stock, par value
$0.05 per share (the "Series A Preferred Stock"), of the Corporation, indicated
below by tendering the stock certificate(s) representing the share(s) of Series
A Preferred Stock specified below as of the date specified below.
Date of Redemption: -----------------------------
Number of shares of
Series A Preferred Stock to be redeemed: -----------------------------
Stock certificate no(s). of
Series A Preferred Stock to be redeemed: -----------------------------
Please confirm the following information:
Redemption Price: -----------------------------
The undersigned holder hereby represents, warrants and reaffirms to the
Corporation, as of the date hereof, the accuracy of the representations and
warranties made by it in Article 2 of the Subscription Agreement dated January
13, 2000 executed by the undersigned and accepted by the Corporation.
Please issue any check drawn on an account of the Corporation into which the
Series A Preferred Stock are being redeemed, and, if applicable, issue any
shares of Series A Preferred Stock, in the following name and to the following
address:
Pay to: -----------------------------
-----------------------------
-----------------------------
-----------------------------
Facsimile Number: -----------------------------
Authorization: -----------------------------
By: -----------------------------
Title: -----------------------------
Dated: -----------------------------
<PAGE>
EXHIBIT 2
CORPORATION REDEMPTION NOTICE
Reference is made to the Certificate of Designation, Preferences and Rights (the
"Certificate of Designation") of Xceed, Inc., a Delaware corporation (the
"Corporation"). In accordance with and pursuant to the Certificate of
Designation, the Corporation hereby elects to redeem the number of shares of
Series A Cumulative Convertible Preferred Stock, par value $0.05 per share (the
"Series A Preferred Stock"), of the Corporation in accordance with the
information set forth below. Please tender the stock certificate(s) representing
the share(s) of Series A Preferred Stock specified below as of the Redemption
Date.
Date of Redemption:
Corporation Redemption Price:
XCEED, INC.
By: ________________________________
Name:
Title:
Dated:
<PAGE>
EXHIBIT 3
HOLDER CONVERSION NOTICE
Reference is made to the Certificate of Designation, Preferences and Rights (the
"Certificate of Designation") of Xceed, Inc., a Delaware corporation (the
"Corporation"). In accordance with and pursuant to the Certificate of
Designation, the undersigned hereby elects to have the Corporation convert the
number of shares of Series A Cumulative Convertible Preferred Stock, par value
$0.05 per share (the "Series A Preferred Stock"), of the Corporation, indicated
below into shares of Common Stock, par value $0.01 per share (the "Common
Stock"), of the Corporation, by tendering the stock certificate(s) representing
the share(s) of Series A Preferred Stock specified below as of the date
specified below.
Date of Conversion: -----------------------------
Number of Shares of
Series A Preferred Stock to be converted: -----------------------------
Stock certificate no(s). of
Series A Preferred Stock to be converted: -----------------------------
Please issue the Common Stock and, if applicable, any check drawn on an account
of the Corporation into which the Series A Preferred Stock are being converted
in the following name and to the following address:
Issue to: -----------------------------
-----------------------------
-----------------------------
-----------------------------
Facsimile Number: -----------------------------
Authorization: -----------------------------
By: ----------------------
Title: ----------------------
Dated: -----------------------------
<PAGE>
EXHIBIT 4
CORPORATION ELECTION CONVERSION NOTICE
Reference is made to the Certificate of Designation, Preferences and Rights (the
"Certificate of Designation") of Xceed, Inc., a Delaware corporation (the
"Corporation"). In accordance with and pursuant to the Certificate of
Designation, the Corporation hereby elects to have the Holders convert the
number of shares of Series A Cumulative Convertible Preferred Stock, par value
$0.05 per share (the "Series A Preferred Stock"), of the Corporation, having an
Aggregate Value indicated below into shares of Common Stock, par value $0.01 per
share (the "Common Stock"), of the Corporation.
Aggregate Value of the Series A Preferred Stock
selected for conversion:
[Corporation Election Conversion Period:
From: ______________________________
To: ______________________________
Corporation Election Conversion Period
Commencement Date: ______________________________]1
-or-
[Mandatory Conversion Date ______________________________]2
Holder's Pro Rata Conversion Amount: ______________________________
XCEED, INC.
By: __________________________
Name:
Title:
Dated:
- -----------------------
1 If conversion is made pursuant to Section 8(a).
2 If conversion is made pursuant to Section 8(b).
<PAGE>
<PAGE>
Exhibit 4.1(a)
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<PAGE>
SUBSCRIPTION AGREEMENT
This SUBSCRIPTION AGREEMENT (the "Agreement"), dated as January 13,
2000, has been executed by the undersigned (individually, a "Subscriber" and
collectively, the "Subscribers") in connection with the offer and sale (the
"Offering") of (i) up to 30,000 shares of Series A Cumulative Convertible
Preferred Stock, par value $0.05 per share (the "Preferred Stock"), of Xceed,
Inc., a Delaware corporation (the "Company"), for a purchase price of $1,000 per
share, convertible into shares of common stock, par value $0.01 per share, of
the Company (the "Common Stock"), and possessing such other rights and
preferences as are set forth in the Certificate of Designation, Preferences and
Rights of the Preferred Stock, attached hereto as EXHIBIT A and filed with
Secretary of State of the State of Delaware on or prior to the date hereof (the
"Certificate"), and (ii) warrants (the "Warrants") to purchase an aggregate of
183,273 shares of Common Stock substantially in the form attached hereto as
EXHIBIT B. The solicitation of this Agreement and, if accepted by the Company,
the offer and sale of the Preferred Stock and the Warrants, are being made in
reliance upon the provisions of Regulation D ("Regulation D") promulgated by the
Securities and Exchange Commission (the "SEC") under the United States
Securities Act of 1933, as amended (the "Securities Act"). The shares of Common
Stock issuable upon conversion of the Preferred Stock (the "Underlying Common
Shares") and the shares of Common Stock issuable upon exercise of the Warrants
(the "Underlying Warrant Shares") are sometimes referred to in this Agreement as
the "Underlying Shares."
Upon the terms and subject to the conditions set forth herein, the
Subscribers hereby, severally but not jointly, agree to purchase, and the
Company hereby agrees to issue and sell, up to 30,000 shares of Preferred Stock
and the Warrants at the aggregate purchase price set forth in Section 14 in the
name, number of shares of Preferred Stock and the Warrants set forth opposite
the name of each Subscriber on Schedule I attached hereto. In consideration of
the mutual promises, representations, warranties and conditions set forth
herein, and intending to be legally bound hereby, the Company and the
Subscribers hereby agree as follows:
1. Agreement to Subscribe
1.1 Purchase and Sale of Preferred Stock and Warrants. On the basis of the
representations and warranties contained in this Agreement and subject
to the terms and conditions hereinafter set forth, the Company shall
issue and sell to each Subscriber and each Subscriber hereby subscribes
for and shall purchase the specified number of shares of Preferred
Stock and the specified number of Warrants set forth opposite the name
of such Subscriber on Schedule I attached hereto for an aggregate
purchase price of $1,000 for each share of Preferred Stock and related
Warrants. The closing of the purchase of the shares of Preferred Stock
and Warrants (the "Closing") shall occur on January 13, 2000 or such
other date as may be agreed to in writing by the Company and the
Subscribers (the "Closing Date"); provided that: (a) the aggregate
purchase price for the subscriptions evidenced hereby shall have been
delivered by the Subscribers to the Company or as otherwise agreed
between the parties (in immediately available funds via a wire transfer
pursuant to instructions previously delivered for such purpose); (b)
the shares of Preferred Stock and the Warrants subscribed for hereby
shall have been issued and delivered by the Company to the Subscribers
or as otherwise agreed between the parties; and (c) all other
conditions precedent to the obligations of the Subscribers and the
Company to the Closing set forth herein shall have been satisfied or
waived in writing.
1.2 Conditions Precedent to the Obligation of the Company at Closing. The
obligation of the Company hereunder to issue and sell the shares of
Preferred Stock to each Subscriber is subject to the satisfaction at or
before the Closing of each of the conditions set forth below. Each of
these conditions are for the Company's sole benefit and may be waived
in writing by the Company with respect to any or all Subscribers at any
time in its sole discretion.
(a) Accuracy of the Subscribers' Representations and Warranties.
The representations and warranties of each Subscriber shall be
true and correct as of the date when made and in all material
respects as of the Closing Date as though made at each time.
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<PAGE>
(b) Performance by the Subscribers. Each Subscriber shall have
performed, satisfied and complied in all material respects
with all covenants, agreements and conditions required by this
Agreement or any other Transaction Documents (as defined in
Section 1.3(j) hereof) to be performed, satisfied or complied
with by such Subscriber at or prior to the Closing.
(c) No Injunction. No statute, rule, regulation, executive order,
decree, ruling or injunction shall have been enacted, entered,
promulgated or endorsed by any court or governmental authority
of competent jurisdiction which prohibits or adversely effects
any of the transactions contemplated by this Agreement and the
other Transaction Documents, and no proceeding shall have been
commenced which may have the effect of prohibiting or
adversely affecting any of the transactions contemplated
hereby and thereby.
(d) Legal Investment. At the time of the Closing, the purchase of
the shares of Preferred Stock and the Warrants by the
Subscribers shall be legally permitted by all statutes, rules
and regulations to which each of the Subscribers and the
Company are subject.
1.3 Conditions Precedent to the Obligation of the Subscribers at Closing.
The obligation of each of the Subscribers hereunder to acquire and pay
for the shares of Preferred Stock and Warrants is subject to the
satisfaction at or before the Closing of each of the conditions set
forth below. Each of these conditions is for each Subscriber's sole
benefit and may be waived in writing by each such Subscriber at any
time in its sole discretion (any such waiver shall have effect only
with respect to the waiving Subscriber).
(a) Accuracy of the Company's Representations and Warranties. The
representations and warranties of the Company shall be true
and correct as of the date when made and in all material
respects as of the Closing Date as though made at such time.
(b) Performance by the Company. The Company shall have performed,
satisfied and complied in all material respects with all
covenants, agreements and conditions required by this
Agreement or any of the other Transaction Documents to be
performed, satisfied or complied with by the Company at or
prior to the Closing.
(c) No Injunction. No statute, rule, regulation, executive order,
decree, ruling or injunction shall have been enacted, entered,
promulgated or endorsed by any court or governmental authority
of competent jurisdiction which prohibits or adversely effects
any of the transactions contemplated by this Agreement and the
other Transaction Documents, and no proceeding shall have been
commenced which may have the effect of prohibiting or
adversely affecting any of the transactions contemplated
hereby and thereby.
(d) Adverse Changes. For the period from August 31, 1999 until the
Closing Date, except as (i) publicly disclosed in the
Company's press releases or filings (the "Recent Exchange Act
Reports") pursuant to the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), and (ii) set forth on Schedule
1.3(d) hereto (collectively, "Prior Public Disclosures"), no
event shall have occurred or be threatened to occur which has
had or is likely to have a Material Adverse Effect (as defined
in Section 3.6 hereof) on the Company.
(e) No Suspension of Trading in or Delisting of Common Stock. The
trading in the Common Stock shall not have been suspended by
the SEC or the National Association of Securities Dealers,
Inc. (the "NASD"); the Common Stock shall not have been
delisted from the Nasdaq National Market and the Company shall
not have received any notice of threatened or pending
proceedings for delisting the Common Stock from the Nasdaq
National Market; and trading in securities generally as
reported by the Nasdaq National Market shall not have been
suspended or limited or minimum prices shall not have been
established on securities whose trades are reported by the
Nasdaq National Market.
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<PAGE>
(f) Legal Opinion. The Company shall have delivered to the
Subscribers an opinion of Akin Gump Strauss Hauer & Feld,
L.L.P., counsel to the Company, substantially in the form of
EXHIBIT C annexed hereto, dated the Closing Date.
(g) Officer's Certificate. The Company shall have delivered to the
Subscribers a certificate in form and substance reasonably
satisfactory to the Subscribers, executed by an executive
officer of the Company, to the effect that all the conditions
to the Closing shall have been satisfied and that the
representations and warranties of the Company contained in the
Agreement are true and correct in all respects on and as of
the Closing Date with the same force and effect as though such
representations and warranties had been made on the date
hereof.
(h) Registration Rights Agreement. The Company shall have entered
into the Registration Rights Agreement with the Subscribers
(the "Registration Rights Agreement"), substantially in the
form of EXHIBIT D annexed hereto.
(i) Certificate of Designation. The Company shall have filed the
Certificate in accordance with the provisions hereof, the
Certificate shall have become effective and the Company shall
have delivered evidence thereof to the Subscribers.
(j) Reservation of Shares. On or prior to the Closing Date, the
Company shall have duly reserved the number of Underlying
Shares required by this Agreement, the Certificate, the
Registration Rights Agreement, and the Warrants (collectively,
the "Transaction Documents") to be reserved for issuance upon
conversion of the Preferred Stock and upon exercise of the
Warrants.
(k) Legal Investment. At the time of the Closing, the purchase of
the Preferred Stock and the Warrants by the Subscribers shall
be legally permitted by all statutes, rules and regulations to
which the Subscriber and the Company are subject.
(l) Warrants. The Company shall have executed and delivered to
each Subscriber its respective Warrants.
(m) Secretary's Certificate. The Company shall have delivered to
the Subscribers a certificate in form and substance reasonably
satisfactory to each Subscriber, executed by the secretary of
the Company, certifying as to the truth and accuracy of the
certificate of incorporation of the Company (the "Certificate
of Incorporation"), as in effect on the Closing Date, the
By-Laws of the Company, as in effect on the Closing Date, and
the resolutions duly adopted by the Board of Directors
authorizing and approving the execution and delivery of this
Agreement and the other Transaction Documents and the
consummation of the transactions contemplated hereby and
thereby.
(n) Nasdaq Filing. Pursuant to Rule 4310(c)(17) of The Nasdaq
Stock Market, Inc.'s Marketplace Rules, the Company shall have
filed a form with The Nasdaq Stock Market, Inc. designated by
The Nasdaq Stock Market, Inc. for the listing of the
Underlying Shares not later than required by The Nasdaq Stock
Market, Inc.
(o) Good Standing. On or prior to the Closing Date, the Company
shall have delivered to the Subscribers a long-form
certificate of good standing and tax status of the Company and
each of its subsidiaries, if any, certified as of a recent
date by the Secretary of State of the State of Delaware, and
from every jurisdiction in which the Company is qualified to
do business.
2. Representations and Warranties of the Subscribers
Each Subscriber, with respect only to itself, represents and warrants
to the Company that:
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2.1 No Government Recommendation or Approval. The Subscriber understands
that no federal or state agency or similar agency of any other country,
has passed upon or made any recommendation or endorsement of the
Company or of the Offering.
2.2 Intent. The Subscriber (i) is purchasing the Preferred Stock and the
Warrants, (ii) upon conversion of the Preferred Stock, will acquire the
Underlying Common Shares and (iii) upon exercise of the Warrants, will
acquire the Underlying Warrant Shares (the Preferred Stock, the
Warrants, the Underlying Common Shares and the Underlying Warrant
Shares collectively are referred to herein as the "Securities") for its
own account for investment purposes only and not with a present view
toward resale or distribution and the Subscriber has no contract,
agreement, undertaking or other arrangement to sell the Securities to
or through any person or entity; provided, however, that by making the
representation herein, the Subscriber does not agree, other than as may
be required to be in compliance with applicable federal and state
securities laws, to hold the Securities for any minimum or other
specific term and reserves the right to dispose of the Securities at
any time in accordance with federal and state securities laws. The
Subscriber understands that the Securities must be held indefinitely
unless such Securities are subsequently the subject of registration
under the Securities Act or an exemption from the registration
requirement of the Securities Act is available. The Subscriber has been
advised or is aware of the provisions of Rule 144 promulgated under the
Securities Act.
2.3 Sophisticated Investor. The Subscriber is an "accredited investor" (as
defined in Rule 501 of Regulation D), and the Subscriber has such
experience in business and financial matters that it is capable of
evaluating the merits and risks of an investment in the Securities. The
Subscriber acknowledges that the Securities are speculative and involve
a high degree of risk.
2.4 Independent Investigation. The Subscriber, in making the decision to
purchase the Securities, has relied upon an independent investigation
made by it and/or its representatives and has not relied on any
information or representations made by third parties or on any oral or
written representations or assurances from the Company or any
representative or agent of the Company other than the representations
of the Company set forth herein, in the other Transaction Documents and
in Prior Public Disclosures. The Subscriber has had a reasonable
opportunity to ask questions of, and receive answers from, the Company
concerning the Company, the Securities and the Offering. The Subscriber
acknowledges that the price and terms of the Securities and the
conversion and exercise prices of the Underlying Shares have been
determined by negotiation based in substantial part on the market price
for the Common Stock, and that it does not necessarily bear any
relationship to the assets, book value or potential performance of the
Company or any other recognized criteria of value. Neither such
inquiries nor any other due diligence investigations conducted by such
Subscriber, its representatives and advisors, if any, shall modify,
amend or affect such Subscriber's right to rely on the Company's
representations and warranties contained in Section 3 below.
2.5 Authority. This Agreement has been duly authorized and validly executed
and delivered by the Subscriber and is a legal, valid and binding
obligation of the Subscriber, enforceable against the Subscriber in
accordance with its terms, except as such enforceability may be limited
by applicable bankruptcy, insolvency, or similar laws relating to, or
affecting generally the enforcement of, creditors' rights and remedies
or by other equitable principles of general application.
2.6 No Legal Advice from Company. The Subscriber acknowledges that it has
had sufficient and ample opportunity to review this Agreement and the
other Transaction Documents and to evaluate the transactions
contemplated herein and therein with its own legal counsel and
investment and tax advisors. Except for any statements or
representations of the Company made in this Agreement and the other
Transaction Documents, the Subscriber is relying solely on its counsel
and advisors and not on any statements or representations of the
Company or any of its representatives or agents for legal, tax or
investment advice with respect to this investment, the transactions
contemplated by this Agreement and the other Transaction Documents or
the securities laws of any jurisdiction.
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2.7 No Brokers. The Subscriber has taken no action which would give rise to
any claim by any person for brokerage commissions, finder's fees or
similar payments by the Company relating to this Agreement or the
transactions contemplated hereby.
2.8 Not an Affiliate. The Subscriber is not an officer, director or
"affiliate" (as that term is defined in Rule 405 of Securities Act) of
the Company.
2.9 Reliance on Representations and Warranties. The Subscriber understands
that the Securities are being offered and sold to it in reliance on
specific provisions of federal and state securities laws (including
specifically, but without limitation, the provisions of Regulation D)
and that the Company is relying upon the truth and accuracy of the
representations, warranties, agreements, acknowledgments and
understandings of the Subscriber set forth in this Agreement and the
other Transaction Documents in order to determine the availability of
such provisions.
2.10 No General Solicitation. The Subscribers acknowledges that the
Securities were not offered or sold to the Subscriber by means of
general solicitation, publicly disseminated advertisement or sales
literature.
2.11 Information Provided by Subscribers. All of the information which the
Subscriber has provided to the Company concerning such Subscriber, such
Subscriber's financial condition/position and such Subscriber's
knowledge of financial and business matters was correct and complete
when provided and is correct and complete as of the date hereof. The
Subscriber agrees that, to the extent required by applicable laws,
rules and regulations, any information provided by the Subscriber may
be disclosed by the Company. Each Subscriber further agrees, if
requested by the Company or its representative, to provide bank and
other references confirming the information provided by such
Subscriber.
3. Representations and Warranties of Company
The Company represents and warrants to each Subscriber that:
3.1 Company Status. The Company has registered its Common Stock pursuant to
Section 12(b) or 12(g) of the Exchange Act, is in full compliance with
all reporting requirements of the Exchange Act, and the Company has
maintained all requirements for the continued quotation of its Common
Stock on the Nasdaq National Market, and such Common Stock is currently
listed for trading on the Nasdaq National Market.
3.2 Current Public Information. The Recent Exchange Act Reports are the
only filings made by the Company with the SEC pursuant to Sections
13(a), 13(c), 14 or 15(d) of the Exchange Act since August 31, 1999.
3.3 No Directed Selling Efforts or General Solicitation in Regard to this
Transaction. The Company has not conducted any general solicitation (as
that term is used in Regulation D) with respect to the Securities, nor
has it made any offers or sales of any security or solicited any offers
to buy any security, under circumstances that would require
registration of the Securities under the Securities Act.
3.4 Valid Issuance of Capital Stock. (a) The Company has an authorized
capitalization consisting of 30,000,000 shares of Common Stock and
1,000,000 shares of preferred stock, par value $0.05 per share. The
Company has issued and outstanding on the date hereof 18,693,390 shares
of Common Stock, of which zero shares are held in treasury. As of the
date hereof, the Company has outstanding the following securities
convertible into or exercisable or exchangeable for Common Stock (the
"Derivative Securities"): (i) options to purchase 4,999,161 shares of
Common Stock; and (ii) warrants to purchase 976,562 shares of Common
Stock.
(b) All of the issued shares of capital stock of the Company have been
duly and validly authorized and issued and are fully paid and
non-assessable. On or before the Closing Date, the authorized
capitalization of the Company shall include the Preferred Stock and the
Warrants; upon issuance and payment therefor in accordance with the
Certificate, the shares of Preferred Stock shall be (i) validly
authorized and issued, fully paid and non-assessable, (ii) free and
clear from all taxes, liens and charges with respect to the
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issuance thereof and (iii) entitled to the rights and preferences set
forth in the Certificate. The number of shares of Common Stock required
hereunder and under the other Transaction Documents to be reserved for
issuance upon conversion of the Preferred Stock and exercise of the
Warrants (subject to adjustment pursuant to the Company's covenant set
forth in Section 5.2 below) have been duly authorized and reserved for
issuance. Upon conversion of the Preferred Stock and exercise of the
Warrants, in each case, in accordance with the terms thereof, the
Underlying Shares will be validly issued, fully paid and nonassessable
and free from all taxes, liens and charges with respect to the issuance
thereof, with the holders thereof being entitled to all rights accorded
to holders of Common Stock. The holders of outstanding shares of
capital stock of the Company are not and shall not be entitled to
preemptive or other rights afforded by the Company to subscribe for the
capital stock or other securities of the Company as a result of the
sale of the Securities or the issuance of Underlying Shares upon the
conversion or exercise thereof. The issuance by the Company of the
Securities is exempt from registration under the Securities Act. The
issuance by the Company of the Securities is being made in reliance
upon the exemption from registration set forth in Rule 506 of
Regulation D under the Securities Act and is only being made to
"accredited investors" that meet the requirements of Rule 501(a) of
Regulation D and similar exemptions under state law.
(c) Other than as set forth in Section 3.4(a): (i) no shares of the
Company's capital stock are subject to preemptive rights or any other
similar rights or any liens or encumbrances suffered or permitted by
the Company; (ii) there are no outstanding debt securities issued by
the Company; (iii) there are no outstanding options, warrants, scrip,
rights to subscribe to, calls or commitments of any character
whatsoever relating to, or securities or rights convertible into, any
shares of capital stock of the Company (or any subsidiary of the
Company (each hereinafter referred to as a "Subsidiary" and
collectively, the "Subsidiaries"), or contracts, commitments,
understandings or arrangements by which the Company or any Subsidiary
is or may become bound to issue additional shares of capital stock of
the Company or any Subsidiary or options, warrants, scrip, rights to
subscribe to, calls or commitments of any character whatsoever relating
to, or securities or rights convertible into, any shares of capital
stock of the Company or any Subsidiary; (iv) there are no agreements or
arrangements under which the Company (or any Subsidiary) is obligated
to register the sale of any of their securities under the Securities
Act (except the Registration Rights Agreement); (v) there are no
outstanding securities of the Company or any Subsidiary which contain
any redemption or similar provisions, and there are no contracts,
commitments, understandings or arrangements by which the Company or any
Subsidiary is or may become bound to redeem a security of the Company
or any Subsidiary; (vi) there are no securities or instruments
containing anti-dilution or similar provisions that will be triggered
by the issuance of the Securities as described in this Agreement; and
(vii) the Company does not have any stock appreciation rights or
"phantom stock" plans or agreements or any similar plan or agreement.
(d) All of the authorized shares of capital stock of each Subsidiary
are owned by the Company, free and clear of any lien, charge, security
interest, encumbrance, adverse claim or other restriction, and all the
issued and outstanding shares of capital stock of the Subsidiaries are
validly issued and are fully paid, non-assessable and free of
preemptive and similar rights. Except as set forth on Schedule 3.4(d)
hereto, there are no outstanding agreements or commitments requiring
the Company or any Subsidiary to issue capital stock or Derivative
Securities.
3.5 Share Issuance. The number of shares of Common Stock issuable upon
conversion of the Preferred Stock may increase substantially in certain
circumstances, including, but not necessarily limited to, the
circumstance wherein the trading price of the Common Stock declines
prior to conversion of the Preferred Stock. The Company's executive
officers and directors have studied and fully understand the nature of
the Preferred Stock being sold hereby and recognize that they have a
potentially dilutive effect. The Board of Directors of the Company has
concluded, in its good faith business judgment, that such issuance is
in the best interest of the Company. The Company specifically
acknowledges that its obligation to issue the Underlying Common Shares
upon conversion of the Preferred Stock is binding upon the Company and
enforceable regardless of the dilution such issuance may have on the
ownership interests of other stockholders of the Company.
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3.6 Organization and Qualification. The Company is a corporation duly
organized, validly existing and in good standing under the laws of the
State of Delaware and has the requisite corporate power to own its
properties and assets and to carry on its business as now being
conducted. The Subsidiaries are listed on Schedule 3.6 hereto. Except
as set forth on Schedule 3.6 hereto, the Company owns no securities
other than the capital stock of the Subsidiaries. Each Subsidiary is a
corporation duly organized, validly existing and in good standing under
the laws of its respective state of organization, with the requisite
corporate power to own its properties and assets and to carry on its
business as now being conducted. The Company and each Subsidiary is
duly qualified as a foreign corporation to do business and is in good
standing in every jurisdiction in which the nature of the business
conducted or property owned by it makes such qualification necessary
other than those jurisdictions in which the failure so to qualify would
not have a Material Adverse Effect. "Material Adverse Effect" means any
material adverse effect on the business, operations, properties, cash
flows, prospects or condition (financial or otherwise) of the Company
and the Subsidiaries taken as a whole and any condition or situation
which would prohibit or otherwise materially adversely interfere with
the ability of the Company to enter into and perform its obligations
under the Transaction Documents.
3.7 Authorization; Enforcement. (a) The Company has the requisite corporate
power and authority to enter into and perform this Agreement and the
other Transaction Documents, to issue the Preferred Stock in accordance
with the terms hereof and thereof and to file and perform its
obligations under the Certificate and its Certificate of Incorporation;
(b) the execution and delivery of this Agreement and the other
Transaction Documents, the issuance and delivery of the Preferred Stock
and the Warrants, the filing of the Certificate by the Company and the
consummation by the Company of the transactions contemplated hereby and
thereby have been duly authorized by all necessary corporate action,
and no further consent or authorization of the Company or its Board of
Directors or stockholders is required; (c) this Agreement has been, and
on or before the Closing Date each of the other Transaction Documents
will be, duly executed and delivered by the Company and on the Closing
Date, the Certificate will be duly filed and effective; and (d) this
Agreement constitutes, and upon execution and delivery thereof, each of
the other Transaction Documents shall constitute, legal, valid and
binding obligations of the Company enforceable against the Company in
accordance with their respective terms, except as such enforceability
may be limited by applicable bankruptcy, insolvency, or similar laws
relating to, or affecting generally the enforcement of, creditors'
rights and remedies or by other equitable principles of general
application.
3.8 Corporate Documents. The Company has furnished or made available to the
Subscribers true, correct and complete copies of the Certificate of
Incorporation, as in effect on the date hereof, and each Subsidiary's
articles of incorporation, as in effect on the date hereof (each, a
"Subsidiary Charter"), and the Company's and each Subsidiary's Bylaws,
as in effect on the date hereof (the Certificate of Incorporation, the
Certificate, each Subsidiary Charter, the Company's Bylaws and each
Subsidiary's Bylaws are collectively referred to herein as the "Charter
Documents"). Neither the Company nor any Subsidiary is in violation of
any of the provisions of its Charter Documents.
3.9 No Conflicts. The execution, delivery and performance of this Agreement
and the other Transaction Documents and consummation of the
transactions contemplated hereby and thereby (including the issuance of
the Preferred Stock and the Warrants, conversion of the Preferred
Stock, exercise of the Warrants, issuance of the Underlying Shares upon
conversion of the Preferred Stock and upon exercise of the Warrants and
the filing of the Certificate) do not and will not: (i) result in a
violation of the Charter Documents; or (ii) result in the creation of
any lien, charge, security interest or encumbrance upon any of the
assets of the Company or any Subsidiary pursuant to the terms or
provisions of or, 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 agreement, indenture, credit
facility or instrument to which the Company or any Subsidiary is a
party, or result in a violation of any federal, state, local or foreign
law, rule, regulation, order, judgment or decree (including federal and
state securities laws and regulations) applicable to the Company or any
Subsidiary or by which any property or asset of the Company or any
Subsidiary is bound or affected, except, in the case of clause (ii),
for such conflicts, defaults, terminations, amendments, accelerations,
cancellations and violations as would not, individually or in the
aggregate, have a Material Adverse Effect. The businesses of each of
the Company and each Subsidiary are not being conducted in violation of
any law, ordinance or regulations of
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any governmental entity, except for violations or potential violations
which either individually or in the aggregate do not and will not have
a Material Adverse Effect. The Company is not required under federal,
state or local law, rule or regulation in the United States to obtain
any consent, authorization or order of, or make any filing or
registration with, any court or governmental or self-regulatory agency
in order for it to execute, deliver or perform any of its obligations
under this Agreement or the Registration Rights Agreement or issue and
sell the Preferred Stock, the Warrants or the Underlying Common Shares
in accordance with the terms hereof and thereof (other than any SEC,
NASD, The Nasdaq Stock Market, Inc. or state securities filings which
may be required to be made by the Company, any registration statement
which may be filed pursuant hereto and the filing of the Certificate).
3.10 Exchange Act Reports. The Company has filed all reports required to be
filed by it under the Exchange Act, including pursuant to Section 13(a)
or 15(d) thereof, since August 31, 1995 (the foregoing materials being
collectively referred to herein as the "Exchange Act Reports"). The
Company has delivered or made available to the Subscribers true,
correct and complete copies of the Exchange Act Reports (including,
without limitation, proxy information and solicitation materials). The
Company has not provided to the Subscribers any information which,
according to applicable law, rule or regulation, should have been
disclosed publicly by the Company but which has not been so disclosed.
As of their respective dates, the Exchange Act Reports complied in all
material respects with the requirements of the Exchange Act and the
rules and regulations of the SEC promulgated thereunder and other
applicable federal, state and local laws, rules and regulations, and
none of the Exchange Act Reports 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 not
misleading. The audited financial statements of the Company included in
the Exchange Act Reports comply or will comply in all material respects
as to form with applicable accounting requirements and the published
rules and regulations of the SEC or other applicable rules and
regulations with respect thereto. Such financial statements have been
prepared in accordance with generally accepted accounting principles
applied on a consistent basis during the periods involved (except (a)
as may be otherwise indicated in such financial statements or the notes
thereto or (b) in the case of unaudited interim statements, to the
extent they may not include footnotes or may be condensed or summary
statements) and fairly present (or will fairly present) in all material
respects the consolidated financial position of the Company as of the
dates thereof and the consolidated results of operations and cash flows
for the periods then ended (subject, in the case of unaudited
statements, to normal year-end audit adjustments). The Company has
filed (including filing such documents by incorporation by reference)
all agreements or documents to which the Company is a party that are
required to be filed as exhibits to the Exchange Act Reports.
3.11 No Material Adverse Change. Since August 31, 1999, except as disclosed
in the Prior Public Disclosures, no Material Adverse Effect has
occurred or exists with respect to the Company and the Subsidiaries
taken as a whole.
3.12 No Undisclosed Liabilities. The Company and the Subsidiaries have no
liabilities or obligations not disclosed in the Exchange Act Reports,
other than those incurred in the ordinary course of the Company's or
such Subsidiary's respective businesses since August 31, 1999 and
which, individually or in the aggregate, do not or would not have a
Material Adverse Effect.
3.13 No Undisclosed Events or Circumstances. No event or circumstance has
occurred or exists with respect to the Company or any Subsidiary or
their respective business, operations, properties, prospects or
condition (financial or otherwise), which, under applicable law, rule
or regulation, requires public disclosure or announcement by the
Company but which has not been so publicly announced or disclosed.
3.14 Application of Takeover Protections. The Company and its board of
directors have taken all necessary action, if any, in order to render
inapplicable any control share acquisition, business combination,
poison pill (including any distribution under a rights agreement) or
other similar anti-takeover provision under the Certificate of
Incorporation or the laws of the State of Delaware which is or could
become applicable to the Subscribers as a result of the Subscribers and
the Company fulfilling their obligations under the Transaction
Documents, including, without limitation, the Company's issuance of the
Securities and the Subscribers' ownership of the Securities.
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3.15 No Brokers. The Company has not taken any action which would give rise
to a claim by any person for brokerage commissions, finder's fees or
similar payments by any Subscriber relating to this Agreement or the
transactions contemplated hereby.
3.16 Effectiveness of SEC Filings. The SEC has not issued any stop order or
other order suspending the effectiveness of any registration statement
filed by the Company or the Subsidiary under the Exchange Act or the
Securities Act.
3.17 No Material Litigation Proceedings. Neither the Company nor any
Subsidiary is a party to or the subject of any litigation, arbitration
or other proceeding which, if adversely determined, would individually
or in the aggregate have a Material Adverse Effect. There is no action,
suit, proceeding or investigation pending, or, to the knowledge of the
Company, threatened, against the Company or any Subsidiary before or by
any court, regulatory body or administrative agency or any other
governmental agency or body, domestic or foreign, or any action, suit,
proceeding or investigation pending, or, to the knowledge of the
Company, threatened, which in any such case challenges the validity of
any action taken or to be taken by the Company or any Subsidiary
pursuant to or in connection with this Agreement, the other Transaction
Documents or the issuance of the Securities.
3.18 Compliance with Instruments, etc. Neither the Company nor any
Subsidiary (or the manner in which any of them conducts its businesses)
is in breach or violation of, or in default under, any term or
provision of (i) its Charter Documents, (ii) any indenture, mortgage,
deed of trust, voting trust agreement, stockholders agreement, note
agreement or other agreement or instrument to which it is a party or by
which it is or may be bound or to which any of its property or assets
is or may be subject, or any indebtedness, the effect of which breach
or default, individually or in the aggregate, would have a Material
Adverse Effect, or (iii) any statute, judgment, decree, order, rule or
regulation applicable to the Company or any Subsidiary or of any
arbitrator, court, regulatory body, administrative agency or any other
governmental agency or body, domestic or foreign, having jurisdiction
over the Company or any Subsidiary or any of their respective
activities, properties or assets and the effect of which breach or
default, individually or in the aggregate, would have a Material
Adverse Effect.
3.19 Intellectual Property.
(a) Each of the Company and each Subsidiary has full and exclusive
right, title and interest in and to, or license rights to, all patents,
patent applications, registered or unregistered trademarks, service
marks and trade names, registered or unregistered copyrights and
applications therefor, licenses, approvals or governmental
authorizations to conduct their business as now conducted, know-how,
proprietary rights and processes, trade secrets, customer lists,
methodologies (to the extent protectible), proprietary development and
marketing information and know-how, inventions, inventors' notes (to
the extent such notes exist), drawings, designs associated with the
foregoing, and other confidential information (collectively,
"Intellectual Property") relating to their respective businesses or
otherwise used in or necessary for the proper conduct of their
respective businesses, free and clear of all liens, security interests,
claims and encumbrances of any nature; and (ii) neither the Company nor
any Subsidiary has any obligation to any other person or entity with
respect to the Intellectual Property or any product or process of the
Company or any Subsidiary utilizing or embodying any Intellectual
Property.
(b) There is (i) no infringement, misuse or misappropriation of any
Intellectual Property owned, licensed or controlled by any third party
arising out of any product or process now being used, manufactured or
distributed, or ever having been used, manufactured or distributed at
any time previously, by or on behalf of the Company or the
Subsidiaries, (ii) no pending or, to the knowledge of the Company,
threatened claim or challenge of or proceeding for infringement, misuse
or misappropriation of or interference with any Intellectual Property
owned, licensed or controlled by any third party arising out of any
product or process now being used, manufactured or distributed, or ever
having been used, manufactured or distributed at any time previously,
by or on behalf of the Company or the Subsidiaries, (iii) except as set
forth in Schedule 3.22 hereto, no pending or threatened or potential
claim, challenge or proceeding by the Company or any Subsidiary against
any third party for infringement, misuse or misappropriation of or
interference with any Intellectual Property owned, licensed or
controlled by the
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Company or such Subsidiary or (iv) no notice or, to the knowledge of
the Company, facts or information rendering any Intellectual Property
owned, controlled or licensed by the Company or the Subsidiaries
invalid or unenforceable, nor, to the knowledge of the Company, is
there any allegation that any such Intellectual Property is invalid or
unenforceable.
3.20 Material Contracts. All contracts to which the Company or any
Subsidiary is a party or by which the Company or any Subsidiary is
bound which are filed as or incorporated by reference as exhibits to
the Exchange Act Reports (the "Material Contracts"), are valid, binding
and enforceable in accordance with their terms (assuming the other
parties thereto are bound) and are in full force and effect, except
where such invalidity or unenforceability would not have a Material
Adverse Effect. No payment default, breach or violation or alleged
default by the Company or any Subsidiary exists under the Material
Contracts.
3.21 Investment Company. The Company is not, and is not controlled by or
under common control with an affiliate of, an "investment company"
within the meaning of the Investment Company Act of 1940, as amended.
3.22 No Integration. Neither the Company nor any of its affiliates nor any
person acting on the Company's behalf has, directly or indirectly, at
any time within the past six (6) months made any offer or sale of any
security or solicitation of any offer to buy any security under
circumstances that would (i) eliminate the availability of the
exemption from registration under Regulation D in connection with the
offer and sale of the Securities as contemplated hereby; or (ii) cause
the offering of the Securities pursuant to this Agreement to be
integrated with prior offerings by the Company for purposes of the
Securities Act or any applicable stockholder approval provisions,
including, without limitation, under the rules and regulations of the
NASD, as applicable.
3.23 Year 2000 Compliance. All computer hardware, software, databases,
systems and other computer equipment (collectively, "Software") used by
the Company or the Subsidiaries can be used during and after the
calendar year 2000, and shall operate during each such time period,
both on a stand-alone basis and when interacting or interoperating with
third-party Software, without error relating to the processing,
calculating, comparing, sequencing or other use of Date Data. "Date
Data" is any data derived from or dependent upon the proper recognition
by software or hardware of dates prior to or after the year 2000.
3.24 Form S-3 Eligible. The Company currently meets the requirements for use
of Form S-3 under the Securities Act.
3.25 Disclosure. The written information with respect to the Company and the
Subsidiaries heretofore provided and to be provided by the Company
pursuant to this Agreement and the other Transaction Documents,
including the schedules and exhibits hereto, and each of the
agreements, documents, certificates and writings to be delivered to the
Subscribers or their respective representatives at the Closing, do not
and will not on the Closing Date contain any untrue statement of a
material fact or omit to state a material fact required to be stated
herein or therein or necessary in order to make the statements and
writings contained herein and therein not false or misleading in the
light of the circumstances under which they were made.
4. Covenants of each Subscriber
4.1 Resales. No Subscriber shall make any offers or sales of the Securities
other than pursuant to an effective registration statement under the
Securities Act or pursuant to an exemption from registration under the
Securities Act. Each Subscriber will comply with applicable prospectus
delivery requirements.
5. Covenants of the Company
5.1 Reservation of Common Stock. As of the Closing, the Company will
reserve and the Company shall continue to reserve and keep available at
all times, free of preemptive rights, shares of Common Stock in a
number sufficient to enable the Company to satisfy one and one-half
times the number of shares necessary
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to satisfy any obligation to issue shares of Common Stock upon
conversion of the Preferred Stock as if all the Preferred Stock were
converted as of the Closing at the then applicable conversion price and
at all times thereafter, plus the number of additional shares of Common
Stock as would be issued upon exercise of the Warrants. The number of
shares so reserved may be reduced by the number of shares actually
delivered pursuant to conversion of a portion of the Preferred Stock
(provided that in no event shall the number of shares so reserved be
less than one and one-half times the number required to satisfy the
remaining conversion rights on the unconverted Preferred Stock) and the
number of shares so reserved shall be increased to reflect stock splits
and stock dividends and distributions.
5.2 Listing of Underlying Shares. The Company hereby agrees, promptly
following the Closing, to take such action to cause the Underlying
Shares to be quoted for trading on the Nasdaq National Market not later
than the effective date of the registration statement relating to the
Underlying Shares required to be filed pursuant to the terms of the
Registration Rights Agreement (the "Registration Statement"). The
Company further agrees, if the Company applies to have the Common Stock
traded on any other principal stock exchange or market, that it will
include in such application the Underlying Shares and will take such
other action as is reasonably necessary to cause the Underlying Shares
to be listed on such other exchange or market concurrently with any
other Common Stock.
5.3 Exchange Act Registration. The Company will use its best efforts: (a)
to cause its Common Stock to continue to be registered under Section
12(b) or 12(g) of the Exchange Act; (b) to comply in all material
respects with its reporting and filing obligations under the Exchange
Act; and (c) not to take any action or file any document (whether or
not permitted by the Exchange Act or the rules and regulations
thereunder) to terminate or suspend such registration or to terminate
or suspend its reporting and filing obligations under the Exchange Act.
The Company will use its best efforts to continue the listing and
trading of its Common Stock on the Nasdaq National Market and will use
its best efforts to comply in all material respects with the Company's
reporting, filing and other obligations under the bylaws or rules of
the NASD and the Nasdaq National Market.
5.4 Legends. Except as provided in Section 6.1 below, the Underlying Shares
and certificates evidencing the same shall at all times be free of
legends, "stop transfers," "stock transfer restrictions" or other
restrictions, upon the effectiveness of the Registration Statement.
5.5 Corporate Existence. So long as any Subscriber beneficially owns any
Preferred Stock or Warrants, the Company shall maintain its corporate
existence and shall not sell all or substantially all of the Company's
assets, except in the event of a merger or consolidation or sale of all
or substantially all of the Company's assets, where the surviving or
successor entity in such transaction assumes the Company's obligations
hereunder and under the other Transaction Documents; and (ii) is a
publicly traded corporation on the New York Stock Exchange, the
American Stock Exchange, the Nasdaq National Market or The Nasdaq
SmallCap Market.
5.6 Transfer Agent Instructions. The Company covenants and agrees that,
promptly following execution and delivery of this Agreement, it shall
issue irrevocable instructions (the "Irrevocable Transfer Agent
Instructions") to its transfer agent for the Common Stock, and any
subsequent transfer agent, such instructions to be in form and
substance reasonably acceptable to the Subscribers, to facilitate
trades of the Underlying Shares and to permit the Subscribers to timely
deliver within any applicable settlement period certificates
representing such shares in connection with any transfer or disposition
of the Underlying Shares. The Company further covenants and agrees
that, except as otherwise required by law, no instruction, other than
the Irrevocable Transfer Agent Instructions, will be given by the
Company to its transfer agent and that the Underlying Shares shall
otherwise be freely transferable on the books and records of the
Company as and to the extent provided in this Agreement and the
Registration Rights Agreement. Each of the Subscribers and the Company
acknowledge and agree that their respective obligations pursuant to
this Section 5.6 are subject to compliance by each of them with
applicable securities laws. The Company covenants that it will use its
best efforts to cause the Company's transfer agent to deliver
certificates representing shares issued in connection with a transfer
of Underlying Shares as promptly as practicable but in no event later
than three (3) business days after delivery by a Subscriber of all
required documentation in respect of such transfer to both the Transfer
Agent and the Company as
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required pursuant to Paragraphs 7 and 8 of the Certificate. The Company
acknowledges that a breach by it of its obligations hereunder will
cause irreparable harm to the Subscribers 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 5.6 will be inadequate and agrees, in
the event of a breach or threatened breach by the Company of the
provisions of this Section 5.6, that the Subscribers shall be entitled,
in addition to all other available remedies, to an injunction
restraining any breach and requiring immediate issuance and transfer,
without the necessity of showing economic loss and without any bond or
other security being required.
5.7 Use of Proceeds. The Company shall use all the proceeds of the Offering
for general corporate purposes, including working capital and for the
repayment of the Company's borrowings, provided that the Company shall
not use the proceeds to redeem its equity or equity-equivalent
securities. Pending application of the proceeds of the Offering in the
manner permitted hereby, the Company will invest such proceeds in
interest bearing accounts and/or short-term, investment grade interest
bearing securities.
5.8 Rule 144A Information. The Company will (i) make available, upon
request, to any holder of Securities and any prospective purchaser
thereof designated by such a holder, upon the request of such holder or
prospective purchaser, the information required to be provided to such
holder or prospective purchaser by Rule 144A(d)(4) under the Securities
Act and (ii) update such information from time to time in order to
prevent such information from becoming false and misleading and will
take such other actions as are reasonably necessary to ensure that the
safe harbor exemption from the registration requirements of the
Securities Act under Rule 144A is and will be available for resales of
the Preferred Stock and the Warrants Shares conducted in accordance
with Rule 144A.
5.9 Notice of Adverse Change. The Company will notify the Subscribers
promptly (but in any event within seven days) after becoming aware of
the existence of any condition or event which has had or is likely to
have a Material Adverse Effect.
5.10 Dividends and Distributions. Until the delivery by the Company to the
Subscribers of all of the shares of Common Stock issuable upon
conversion of the Preferred Stock or all sums of cash upon redemption
of the Preferred Stock, as applicable, such that after such delivery
upon any such conversion or redemption no more than 10% of the
Preferred Stock issued on the Closing Date remains outstanding, the
Company shall not make or fix a record date for the determination of
holders of Common Stock or other securities entitled to receive a
dividend or other distribution (special or otherwise) or declare a cash
dividend or other distribution payable in cash or property of the
Company.
5.11 Filing of Current Report on Form 8-K. On or before the second business
day following the Closing Date, the Company shall file with the SEC a
Current Report on Form 8-K in a form reasonably acceptable to the
Subscribers describing the terms of the transaction consummated at the
Closing.
5.12 Form D. The Company agrees to file one or more Form D's with respect to
the Offering as required under Regulation D and to provide a copy
thereof to the Subscribers promptly upon request.
5.13 Integration. The Company shall not sell, offer for sale or solicit
offers to buy or otherwise negotiate in respect of any security (as
defined in Section 2 of the Securities Act) that would be integrated
with the offer or sale of the Securities in a manner that would require
the registration under the Securities Act of the sale of any or all of
such Securities to any Subscriber.
5.14 Shareholder Approval. The Company shall provide each stockholder
entitled to vote at a meeting of the stockholders of the Company, which
meeting shall occur on or before the date which is 60 days after the
Proxy Statement Triggering Date (as defined below) (the "Stockholder
Meeting Deadline"), a proxy statement, which has been previously
reviewed by the Subscribers and counsel of their choice, soliciting
each such stockholder's affirmative vote at such stockholder meeting
for approval of the Company's issuance of all of the Securities as
described in this Agreement, and the Company shall use its best efforts
to (i) solicit its stockholders' approval of such issuance of the
Securities and (ii) cause the Board of Directors of the Company to
recommend to the stockholders that they approve such proposal. A "Proxy
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Statement Triggering Date" shall mean the first date after the date of
this Agreement on which the sum of (A) the number of Underlying Shares
issued and (B) the number of Underlying Shares issuable upon conversion
of all the outstanding shares of Preferred Stock based on the
Conversion Price (as defined in the Certificate), and upon exercise of
all the outstanding Warrants based on the Warrant Price (as defined in
the Warrants) in effect on the date of such determination (without
regard to any limitation upon the conversion of any shares of Preferred
Stock or exercise of Warrants), equals or exceeds 15% of the number of
shares of Common Stock issued and outstanding immediately prior to the
Closing Date.
6. Legends; Subsequent Transfer of Securities; Denominations
6.1 Legend. The Company shall issue one or more certificates evidencing the
Preferred Stock and the Warrants in the name of each Subscriber and in
such number of shares to be specified by such Subscriber prior to (or
from time to time subsequent to) the Closing. The Preferred Stock, the
Warrants and the Underlying Shares shall bear the following legend (the
"Legend"):
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED, OR ANY STATE SECURITIES LAWS, AND MAY
NOT BE SOLD OR OFFERED FOR SALE EXCEPT PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT AS TO THE SECURITIES UNDER
SAID ACT AND ANY APPLICABLE STATE SECURITIES LAWS OR PURSUANT
TO AN AVAILABLE EXEMPTION FROM SUCH REGISTRATION REQUIREMENTS.
Following the effectiveness of the Registration Statement, the Company
will issue certificates representing the Securities without the Legend
to any transferee other than holders who are "affiliates" of the
Company (as such term is defined under the Securities Act). In
addition, the Company will issue certificates representing the
Securities without the Legend, promptly upon request, if: (i) the
holder thereof is permitted to dispose of Securities pursuant to Rule
144 under the Securities Act; (ii) the Securities are sold to a
purchaser or purchasers in a transaction exempt from registration under
the Securities Act, as evidenced by an opinion of counsel to the
transferor delivered and reasonably satisfactory to the Company; or
(iii) the Securities are sold to a purchaser or purchasers pursuant to
an effective registration statement and the prospectus delivery
requirements under the Securities Act are met.
6.2 Subscriber's Compliance. Nothing in this Section 6 shall affect in any
way the Subscribers' obligations and agreement to comply with all
applicable securities laws upon resale of the Securities.
6A. Payment Set Aside
To the extent that the Company makes a payment or payments to any
Subscriber hereunder or pursuant to the Registration Rights Agreement
or the Certificate or any Subscriber enforces or exercises its 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) by
the court of competent jurisdiction in a final non-appealable judgment,
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 set-off had not occurred.
7. Governing Law; Jurisdiction
This Agreement shall be governed by and construed and enforced in
accordance with the laws of the State of Delaware, without regard to
principles of conflicts of law or choice of law, except for matters
arising under the Securities Act or the Exchange Act which matters
shall be construed and interpreted in accordance with such laws. The
Company and the Subscribers hereby agree that all
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actions or proceedings arising directly or indirectly from or in
connection with this Agreement shall be litigated only in the Supreme
Court of the State of Delaware or the United States District Court of
Delaware located in New Castle County, Delaware. The Company and each
Subscriber consents to the jurisdiction and venue of the foregoing
courts and consent that any process or notice of motion or other
application to either of said courts or a judge thereof may be served
inside or outside the State of Delaware by registered mail, return
receipt requested, directed to the such party at its address set forth
in this Agreement (and service so made shall be deemed complete five
(5) days after the same has been posted as aforesaid) or by personal
service or in such other manner as may be permissible under the rules
of said courts. The parties hereto hereby waive any right to a trial by
jury in connection with any litigation pursuant to this Agreement and
the transactions contemplated hereby.
8. Assignment; Entire Agreement; Amendment
8.1 Assignment. Neither this Agreement nor any rights hereunder may be
assigned by either party without the prior written consent of the other
party hereto; provided, however, that the Company may assign its rights
and obligations under this Agreement in connection with a transaction
of the nature contemplated by Section 5.5 hereof and any Subscriber may
assign its rights under this Agreement to an affiliate of such
Subscriber who agrees to be bound by the terms hereof. To the extent
that any party assigns this Agreement with the prior written consent of
the other or any Subscriber assigns this Agreement as permitted herein
to an affiliate of such Subscriber, the provisions of this Agreement,
the Certificate and the Registration Rights Agreement shall inure to
the benefit of, be binding upon, and be enforceable by and against any
such assignee. Notwithstanding anything to the contrary contained
herein or any other Transaction Document, any Subscriber shall be
entitled to pledge the Securities in connection with a bona fide margin
account or other loan secured by the Securities.
8.2 Entire Agreement; Amendment. This Agreement, the Certificate, the
Registration Rights Agreement, the Warrants and the other documents
delivered pursuant hereto and thereto constitute the full and entire
understanding and agreement between the parties with regard to the
subjects hereof and thereof, and no party shall be liable or bound to
any other party in any manner by any warranties, representations or
covenants except as specifically set forth in this Agreement or
therein. Except as expressly provided in this Agreement, neither this
Agreement nor any term hereof may be amended, waived, discharged or
terminated other than by a written instrument signed by the party
against whom enforcement of any such amendment, waiver, discharge or
termination is sought.
9. Publicity
The Company and the Subscribers shall consult with each other in
issuing any press releases or otherwise making public statements with
respect to the transactions contemplated hereby and no party shall
issue any such press release or otherwise make any such public
statement without the prior written consent of the others, which
consent shall not be unreasonably withheld or delayed, except that no
prior consent shall be required if such disclosure is required by law
or applicable law, to the extent a party determines in good faith that
it is legally obligated to do so, in which such case the disclosing
party shall provide the other parties with prior notice of such public
statement. The Company shall not publicly or otherwise disclose the
names of any of the Subscribers without each such Subscriber's prior
written consent unless otherwise required by law, in which case the
Company shall inform such Subscriber of such disclosure in writing
prior to making such disclosure.
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10. Notices, Etc.; Expenses, Indemnity
10.1 Notices. Any notice, demand or request required or permitted to be
given by either the Company or the Subscribers pursuant to the terms of
this Agreement shall be in writing and shall be deemed given when
delivered personally or by facsimile, with a hard copy to follow by two
day courier, addressed to the parties at the addresses of the parties
set forth on Schedule I hereto or such other address as a party may
request by notifying the other in writing. Copies of all notices to a
Subscriber shall be sent to its designee or representative.
10.2 Expenses. The Company shall reimburse the Subscribers for their
respective reasonable expenses and fees in connection with this
Agreement, which amount shall be withheld by the Subscribers from the
purchase price, in an amount not to exceed an aggregate of $50,000.
10.3 Indemnification. Each party shall indemnify the other against any loss,
cost or damages (including reasonable attorney's fees and expenses)
incurred as a result of such parties' breach of any representation,
warranty, covenant or agreement in this Agreement.
11. Counterparts
This Agreement may be executed in any number of counterparts, each of
which shall be enforceable against the parties actually executing such
counterparts, and all of which together shall constitute one
instrument.
12. Survival; Severability
The representations, warranties, covenants and agreements of the
parties hereto shall survive the Closing notwithstanding any due
diligence investigation conducted by or on behalf of the Subscribers.
In the event that any provision of this Agreement becomes or is
declared by a court of competent jurisdiction to be illegal,
unenforceable or void, this Agreement shall continue in full force and
effect without said provision; provided that no such severability shall
be effective if it materially changes the economic benefit of this
Agreement to any party.
13. Titles and Subtitles
The titles and subtitles used in this Agreement are used for
convenience only and are not to be considered in construing or
interpreting this Agreement.
[Remainder of Page Intentionally Left Blank]
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IN WITNESS WHEREOF, the Company and the Subscribers have caused this
Subscription Agreement to be duly executed as of the date first written above.
COMPANY: SUBSCRIBERS:
XCEED, INC. PECONIC FUND, LTD.
By: RAMIUS CAPITAL GROUP, LLC,
Its: Investment Advisor
By: /s/ Werner Haase
-----------------------------------
Name: Werner Haase
Title: Chief Executive Officer By: /s/ Jeffrey M. Solomon
------------------------------
Name: Jeffrey M. Solomon
Title: Managing Officer
LEONARDO, L.P.
By: ANGELO, GORDON & CO., L.P.
Its: General Partner
By:/s/ Michael L. Gordon
---------------------------------
Name: Michael L. Gordon
Title: Chief Operating Officer
HTFP INVESTMENT L.L.C.
By: PROMETHEAN ASSET MANAGEMENT,
L.L.C.
Its: Investment Manager
By:/s/ James F. O'Brien, Jr.
----------------------------------
Name: James F. O'Brien, Jr.
Title: Managing Member
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Exhibit 4.1(b)
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REGISTRATION RIGHTS AGREEMENT
This REGISTRATION RIGHTS AGREEMENT (this "Registration Rights
Agreement") entered into as of January 13, 2000, by and among the Subscribers
set forth on the signature pages hereof (each, a "Subscriber," and collectively,
the "Subscribers") and Xceed, Inc., a Delaware corporation, with offices at 488
Madison Avenue, New York, New York 10022 (the "Company").
W I T N E S S E T H:
WHEREAS, pursuant to the Subscription Agreement, dated as of
the date hereof (the "Agreement"), by and among the Company and the Subscribers,
the Company has agreed to sell and the Subscribers have agreed to purchase up to
Thirty Thousand (30,000) shares of Series A Cumulative Convertible Preferred
Stock, par value $.05 per share (the "Preferred Stock"), of the Company at a
purchase price of $1,000 per share, with such other rights and preferences as
are set forth in the Certificate of Designation, Preferences and Rights of the
Preferred Stock (the "Certificate");
WHEREAS, the Preferred Stock is convertible into shares of the
Company's common stock, par value $.01 per share (the "Underlying Common
Shares"); and
WHEREAS, pursuant to the terms of, and in partial
consideration for, the Subscribers' purchase of the Preferred Stock, the Company
has agreed to provide the Subscribers with certain registration rights with
respect to Underlying Common Shares and any shares of the Company's common stock
underlying warrants (the "Warrants") issued to the Subscribers on the date
hereof (such shares are referred to as the "Underlying Warrant Shares," and,
together with the Underlying Common Shares, the "Shares") as set forth in this
Registration Rights Agreement.
NOW, THEREFORE, in consideration of the mutual promises,
representations, warranties, covenants and conditions set forth in the Agreement
and this Registration Rights Agreement, the Company and the Subscribers agree as
follows:
1. Certain Definitions. As used in this Registration Rights
Agreement, the following terms shall have the following respective meanings, and
terms not otherwise defined herein shall have their respective meanings as
assigned to them in the Agreement:
"Commission" means the Securities and Exchange Commission or
any other federal agency at the time administering the Securities Act.
"Filing Date" means April 1, 2000.
"Holder" means the applicable Subscriber and any transferee of
the Warrants, the Preferred Stock, Shares or other Registrable Securities (as
defined herein), to whom the registration rights conferred by this Registration
Rights Agreement have been transferred in compliance with Section 13 of this
Registration Rights Agreement.
"Person" means and includes an individual, a partnership, a
joint venture, a corporation, a company, a limited liability company, a trust,
an unincorporated organization and a government or any department or agency
thereof.
"Prospectus" means any prospectus relating to the Shares as
filed with the Commission pursuant to Rule 424(b) under the Securities Act or,
if no such filing is required, any form of final prospectus relating to the
Shares included in the Registration Statement, as the case may be, at the time
the Registration Statement is declared effective by the Commission, in either
case, including all amendments and supplements to such prospectus or
Registration Statement, including post-effective amendments, and all material,
if any, incorporated by reference therein.
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The terms "register," "registered" and "registration" shall
refer to a registration effected by preparing and filing with the Commission a
registration statement in compliance with the Securities Act and applicable
rules and regulations thereunder, and the declaration or ordering of the
effectiveness of such registration statement.
"Registration Expenses" means all expenses incurred by the
Company in connection with the registration, qualification or compliance with
Section 2 of this Registration Rights Agreement, including without limitation,
all registration and filing fees, printing expenses, fees and disbursements of
counsel for the Company, blue sky fees and expenses, reasonable fees and
disbursements of counsel to Holders relating directly to review of the
Registration Statement and related documents, and the expense of any special
audits incident to or required by any such registration. With respect to fees
and expenses of counsel to the Holders, Registration Expenses shall include only
fees and disbursements for one (1) designated counsel for all the Holders of
Preferred Stock, which counsel shall be reasonably acceptable to the Company.
"Registration Statement" means any Piggyback Registration
Statement, the Shelf Registration Statement and any additional registration
statements contemplated by Section 2(b), including (in each case) the
Prospectus, amendments and supplements to such registration statement or
Prospectus, including pre- and post-effective amendments, all exhibits thereto,
and all material incorporated by reference in such registration statement.
"Registrable Securities" means any Shares or other securities
issued or issuable to the Holder upon the conversion of any Preferred Stock or
exercise of the Warrants.
"Regulation D" means Regulation D as promulgated pursuant to
the Securities Act, and as it may be subsequently amended.
"Securities Act" means the Securities Act of 1933, as amended.
"Selling Expenses" means all brokerage fees, underwriting
discounts and selling commissions applicable to the offer and sale of
Registrable Securities and all fees and disbursements of counsel for Holders not
included under "Registration Expenses."
2. Registration Requirements. The Company shall use its
diligent best efforts to effect the registration of the Registrable Securities
(including, without limitation, the execution of an undertaking to file
post-effective amendments, appropriate qualification under applicable blue sky
or other state securities laws and appropriate compliance with applicable
regulations issued under the Securities Act) as would permit or facilitate the
sale or distribution of all the Registrable Securities in the manner (including
manner of sale) and in all states reasonably requested by the Holders under a
broad-based plan of distribution reasonably acceptable to the Holders. Such best
efforts by the Company shall include, without limitation, the following:
(a) Piggy-Back Registration. For so long as any
shares of Preferred Stock, Warrants or any Registrable Securities are
outstanding but in no event for more then two years following the
Filing Date, if at any time when there is not an effective Registration
Statement covering the Shares, the Company shall determine to prepare
and file with the Commission a registration statement relating to an
offering for its own account or the account of others under the
Securities Act of any of its equity securities, other than a
registration statement on Form S-4 or Form S-8 (each as promulgated
under the Securities Act) and including any successor forms or their
then equivalents relating to equity securities (each, a "Piggyback
Registration Statement"), the Company shall send to each Holder of
Registrable Securities written notice of such determination (the
"Registration Notice") and, if within thirty (30) days after receipt of
such notice, any such Holder shall so request in writing (which request
shall specify the Registrable Securities intended to be disposed of by
such Holder), the Company will cause to be included in the Piggy-Back
Registration Statement all Registrable Securities which the Company has
been so requested to include by the Holder, provided that if at any
time after giving the Registration Notice and prior to the effective
date of the Piggy-Back Registration Statement, the Company shall
determine for any reason not to proceed or to delay registration of
such securities, the Company may, at its election, give written notice
of such determination to such Holder and, thereupon: (i) in the case of
a determination not to proceed, shall be relieved of its obligation to
include any Registrable Securities in connection with such registration
(but not from its
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obligation to pay the Registration Expenses in accordance with Section
3 hereof); and (ii) in the case of a determination to delay
registration, shall be permitted to delay registration of any
Registrable Securities requested to be included pursuant to this
Section 2(a) for the same period as the delay in registration of the
other securities included in the Piggy-Back Registration Statement. The
Company shall include in the Piggy-Back Registration Statement all or
any part of such Registrable Securities such Holder requests to be
registered; provided, however, that the Company shall not be required
to include in the Piggy-Back Registration Statement the number of
Registrable Securities held by a Holder that are eligible for sale
pursuant to Rule 144 under the Securities Act. In the event that the
Piggy-Back Registration Statement relates to an underwritten public
offering, if the managing underwriter(s) determines that marketing
factors require limitation or exclusion of the Registrable Securities
and objects to the inclusion of the Registrable Securities in the
Piggy-Back Registration Statement, then if the Company (after
consultation with the managing underwriter(s)) determines to include in
the Piggy-Back Registration Statement fewer or none of the Registrable
Securities of the Holders, then the number of Registrable Securities of
the Holders, to the extent permitted to be included in the Piggy-Back
Registration Statement, shall be reduced pro-rata among such Holders
(based upon the total number of Registrable Securities requested by the
Holders to be included in the Piggy-Back Registration Statement);
provided, however, that if securities are being offered for the account
of other Persons as well as the Company, such reduction shall not
represent a greater fraction of the number of Registrable Securities
intended to be offered by the Holders than the fraction of similar
reductions imposed on such other Persons (other than the Company). To
the extent that Registrable Securities of a Holder are included in a
Piggy-Back Registration Statement that relates to an underwritten
public offering, the right of such Holder to have its Registrable
Securities included therein shall be conditioned upon such Holder's
participation in and agreement with the terms of such underwriting.
Each Holder shall (together with the Company and such other Persons
including securities in the Piggy-Back Registration Statement) enter
into an underwriting agreement in customary form with the
underwriter(s) and shall use such Holder's commercially reasonable
efforts to prepare and provide all documents and opinions required to
be delivered thereunder in respect of their participation as selling
securityholders in the subject offering. In connection with the
foregoing, the Company and the Holder's shall also comply with the
provisions of Section 2(e) below. In the event that the managing
underwriter(s) permits inclusion of a Holder's Registrable Securities,
such Holder may be prohibited from selling other Registrable Securities
for a period of time following the effective date of the Piggy-Back
Registration Statement as required by the underwriter(s), such period
not to exceed 90 days from the effective date of the Piggy-Back
Registration Statement.
(b) Additional Registration. Not later than the
Filing Date, the Company shall file: (i) a registration statement on
Form S-3 with the Commission pursuant to Rule 415 under the Securities
Act covering the Registrable Securities (the "Shelf Registration
Statement"); (ii) such blue sky filings as shall be necessary (based
upon the determination of counsel to the Company or counsel to the
Holders reasonably acceptable to the Company) to enable the Holders to
resell their Registrable Securities in such jurisdictions as they
reasonably request in writing; and (iii) any required filings with the
National Association of Securities Dealers, Inc., the Nasdaq National
Market or such other exchange or market on which the Shares are traded.
Thereafter, the Company shall use its best efforts to: (i) respond
timely to all comments received from the Commission on the Shelf
Registration Statement and/or any documents incorporated by reference
therein; and (ii) cause such Shelf Registration Statement and any
filings incorporated therein to be declared effective as promptly as
practicable but in no event later than 60 days from the Filing Date. If
an additional Registration Statement is required to be filed because
the actual number of Registrable Securities exceeds the number of
shares of Common Stock included in the Shelf Registration Statement or
the Piggy-Back Registration Statement, the Company shall use its best
efforts to cause an additional Registration Statement (the "Additional
Registration Statement") to be filed and declared effective by the
Commission as soon as possible, but in no event later than 60 days
after the filing thereof.
(c) The Company and the Subscribers agree that the
Holders will suffer damages if one or more Registration Statements
covering all of the Registrable Securities are not filed on or prior to
the Filing Date and not declared effective by the Commission on or
prior to the 90th day after the Filing Date and maintained in the
manner contemplated herein during the Effectiveness Time or if certain
other events occur. The Company and the Holders further agree that it
would not be feasible at this time to
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ascertain the extent of such damages with precision. Accordingly, if:
(i) one or more Registration Statements covering all of the Registrable
Securities are not filed with the Commission on or prior to the Filing
Date; (ii) after 90 days from the Filing Date, such Registration
Statement or Statements have not been declared effective by the
Commission; or (iii) in the event that filing of the Additional
Registration Statement is necessary, and the Additional Registration
Statement is not declared effective with the time periods set forth in
Section 2(b) (any such failure or breach, being referred to as an
"Event," and the date following expiration of the applicable time
periods on which such Event occurs, being referred to as "Event Date"),
and such Event is in no manner the result of action or inaction on the
part of a Subscriber or Subsequent Holder, the Holders shall have, in
addition to, and without limiting, any other rights they may have at
law, in equity or under the Certificate, the Agreement or this
Registration Rights Agreement (including the right to specific
performance), the right to receive cash payment from the Company, as
liquidated damages, in an amount equal to 1.5% of the Aggregate Value
(as defined in the Certificate) of the shares of Preferred Stock held
by such Holder plus the Aggregate Value of any shares of Preferred
Stock that have been converted to the extent any of the Underlying
Common Shares issued upon such conversion have not been sold (or
previously included in a Registration Statement in the case of an Event
arising in connection with an Additional Registration Statement), for
each 30-day period (or portion thereof) from the Event Date until the
applicable Event is cured. Payments to be made pursuant to this Section
2(c) shall be due and payable immediately upon demand in immediately
available funds. In addition to the foregoing, if at any time after 120
days from the Filing Date, one or more Registration Statements covering
all of the Registrable Securities have not been declared effective by
the Commission, then upon demand of any Holder, the Company shall
redeem all or any specified portion of the Preferred Stock held by such
Holder at a redemption price equal to 125% of the Aggregate Value (as
defined in the Certificate) thereof, together with all other payments
due under this Section 2, the Certificate and the Agreement.
(d) If the Holders intend to distribute the
Registrable Securities covered by the Registration Statement by means
of an underwritten offering, the Holders shall so advise the Company.
The Holders will have the right to select the investment bankers for
such underwriting subject to such investment bankers being reasonably
satisfactory to the Company. If, in the opinion of the managing
underwriter of such offering, the inclusion of the Registrable
Securities requested to be registered hereunder would adversely affect
the marketing of such shares, after any shares otherwise intended to be
included by the Company or other holders of Common Stock have been
excluded, Registrable Securities to be included by the Holders shall be
excluded in such manner that the Registrable Securities to be included
shall be allocated among such Holders pro rata based on their ownership
of Registrable Securities.
(e) In the event that the Registrable Securities are
included in a Registration Statement relating to an underwritten
offering:
(i) the Company and the Holders shall enter into
such customaryagreements (including a customary underwriting
agreement) with the underwriter(s) and take all such other actions
reasonably requested in connection therewith in order to expedite or
facilitate the disposition of such Registrable Securities.
(ii) the Company and the Holders shall make
such representations and warrantiesto the Holders (with respect to the
Company), to the Company (with respect to the Holders) and to the
underwriter(s), in form, substance and scope as are customarily made
in secondary underwritten offerings;
(iii) the Company shall cause to be
delivered to the Holders of Registrable Securities included in the
underwritten offering and to the underwriter(s) opinions of counsel to
the Company, dated as of the effective date of the Registration
Statement (which counsel and opinions, shall be reasonably
satisfactory in form, scope and substance to the managing
underwriter(s) and counsel of the Holders), addressed to the Holders
and the underwriter(s) covering the matters customarily covered in
opinions requested in secondary underwritten offerings;
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(iv) the Company shall cause to be
delivered, immediately prior to the effectiveness of the Registration
Statement, a "comfort" letter from the Company's independent certified
public accountants addressed to the Holders and the underwriter(s)
stating that such accountants are independent public accountants
within the meaning of the Securities Act and the applicable published
rules and regulations thereunder, and otherwise in customary form and
covering such financial and accounting matters as are customarily
covered by letters of the independent certified public accountants
delivered in connection with secondary underwritten public offerings;
(v) if an underwriting agreement is
entered into, the same shall set forth in full the indemnification and
contribution provisions and procedures of Sections 6 and 7 with
respect to all parties to be indemnified pursuant to such sections;
(vi) the Company and the Holders shall
deliver such documents and certificates as may be reasonably requested
by the underwriter(s) to evidence compliance with clause (ii) above
and with any customary conditions contained in the underwriting
agreement, if any, or other agreement entered into by the Company in
connection with such underwritten offering; and
(vii) the Holders shall use their reasonable
commercial efforts to timely prepare and provide all information,
documentation and opinions addressed to the underwriter(s), in form,
scope and substance reasonably satisfactory to counsel to the
underwriter(s) as customarily required in secondary underwritten
offerings.
(f) The Company shall make available for inspection
during normal business hours and upon reasonable request by a
representative or representatives of the Holders, the underwriter(s)
participating in a proposed underwritten offering pursuant to a
Registration Statement, and the attorney and/or accountant retained by
such Holders or underwriter(s), customary financial and other records
for such purposes, pertinent corporate documents and properties of the
Company, and use its best efforts to cause the Company's officers,
directors and employees to supply information reasonably and
customarily requested in connection with such an underwritten offering,
in the case of an underwriting, and, in any event, in connection with
preparation of such a Registration Statement. The Holders (and each
representative, accountant and counsel thereto) shall keep all
information deemed by the Company to be "non-public" information which
is supplied to the Holders (and any representative, accountant and
counsel thereto) confidential unless and until such information is
included in the Registration Statement filed with the Commission.
3. Expenses of Registration. All Registration Expenses shall
be borne by the Company and all Selling Expenses shall be borne by the Holders.
4. Registration on Form S-3. The Company shall use its best
efforts to qualify under the Securities Act for registration on Form S-3 or any
comparable or successor form or forms.
5. Registration Procedures. In the case of each Registration
Statement (other than a Piggyback Registration Statement) filed by the Company
pursuant to this Registration Rights Agreement, the Company shall keep the
Holders advised in writing as to the initiation of each registration and as to
the completion thereof. At its expense, the Company shall use its best efforts
to:
(a) Keep such Registration Statement continuously
effective for the period ending at the earlier of the following: (i)
twenty four (24) months after the effective date of the Registration
Statement (as such time period is extended pursuant to Section 5A
hereof), (ii) the time the Holders have completed their distribution of
the Shares; or (iii) the time all of the Registrable Securities are
eligible for distribution to the public by the Holder pursuant to Rule
144 under the Securities Act (or any similar provision then in force)
(the earliest of (i), (ii) and (iii) being referred to as the
"Effectiveness Time");
(b) Furnish such number of prospectuses, and
amendments and supplements thereto, and other documents incident
thereto as any Holder from time to time may reasonably request;
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(c) Prepare and file with the Commission such
amendments and post-effective amendments to the Registration Statement
as may be necessary to keep such Registration Statement effective for
the applicable period; cause the related Prospectus to be supplemented
by any required Prospectus supplement, and as so supplemented to be
filed pursuant to Rule 424 under the Securities Act; and comply with
the provisions of the Securities Act applicable to it with respect to
the disposition of all securities covered by such Registration
Statement during the applicable period in accordance with the intended
methods of disposition by the sellers thereof set forth in such
Registration Statement or supplement to such Prospectus;
(d) Promptly notify each Holder of Registrable
Securities included in the Registration Statement, counsel for the
Holders and the managing underwriters, if any, promptly, and (if
reasonably requested by any such Person) confirm such notice (a
"Notice") in writing: (i) when a Prospectus or any Prospectus
supplement or post-effective amendment has been filed, and, with
respect to a Registration Statement or any post-effective amendment,
when the same has become effective; (ii) of any request by the
Commission for amendments or supplements to a Registration Statement or
related Prospectus or for additional information; (iii) of the issuance
by the Commission of any stop order suspending the effectiveness of a
Registration Statement or the initiation of any proceedings for that
purposes; (iv) if at any time the representations and warranties of the
Company contained in agreements contemplated by Section 2(d) cease to
be true and correct; (v) of the receipt by the Company of any
notification with respect to the suspension of the qualification of any
of the Registrable Securities for sale in any jurisdiction or the
initiation or threatening of any proceeding for such purpose; (vi) of
the happening of any event as a result of which the Prospectus included
in the Registration Statement (as then in effect) contains any untrue
statement of a material fact or omits to state any material fact
required to be stated therein or necessary to make the statements
therein (in the case of the Prospectus or any preliminary Prospectus,
in light of the circumstances under which they were made) not
misleading; and (vii) of the Company's reasonable determination that a
post-effective amendment to a Registration Statement would be
appropriate or that there exist circumstances not yet disclosed to the
public which make further sales under such Registration Statement
inadvisable pending such disclosure and post-effective amendment;
(e) Upon the occurrence of any event contemplated by
Section 5(d)(ii) through (vii) and immediately upon the expiration of
any Blocking Period (as defined in Section 5A), prepare, if the
occurrence of such event or period requires such preparation, a
supplement or post-effective amendment to the Registration Statement or
related Prospectus or any document incorporated therein by reference or
file any other required document so that the Prospectus thereafter
delivered to the purchasers of the Registrable Securities being sold
thereunder will not contain an untrue statement of a material fact or
omit to state any material fact necessary to make the statements made
therein not misleading;
(f) Make every reasonable effort to obtain the
withdrawal of any order suspending the effectiveness of the
Registration Statement or the lifting of any suspension of the
qualification of any of the Registrable Securities for sale in any
jurisdiction, at the earliest possible moment;
(g) To the extent applicable or otherwise required to
enable the Holders to resell their Registrable Securities, ensure that
the Registrable Securities subject to the Registration Statement shall
be registered or qualified for offer and sale under the securities or
blue sky laws of such jurisdictions as the Holder(s) or underwriter(s),
if any, reasonably request in writing; use its best efforts to keep
each such registration or qualification effective, including through
new filings or amendments or renewals, during the period such
Registration Statement is required to be kept effective hereunder and
do any and all other acts or things reasonably necessary or advisable
(based on the opinion of counsel to the Company or counsel, reasonably
acceptable to the Company, of the Holders or the underwriter(s), as the
case may be) to enable the disposition in such jurisdictions of the
Registrable Securities covered by the applicable Registration
Statement; provided, however, that the Company will not be required to
qualify to do business or take any action that would subject it to
taxation or general service of process in any jurisdiction where it is
not then so qualified or subject;
(h) Use its best efforts to cause the Registrable
Securities covered by the Registration Statement to be registered with
or approved by the National Association of Securities Dealers,
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Inc. as may be necessary to enable the Holders or the underwriters, if
any, to consummate the disposition of such Registrable Securities in
accordance with the chosen method or methods of distribution; and
(i) Cause all Registrable Securities included in such
Registration Statement to be listed, by the date of first sale of
Registrable Securities pursuant to such Registration Statement, on the
Nasdaq National Market, The Nasdaq SmallCap Market or such other
principal securities exchange or automated interdealer system on which
the same class of securities of the Company are then listed or traded.
5A. Suspensions of Effectiveness.
(a) The Company may suspend dispositions under the
Registration Statement and notify the Holders that they may not sell the
Registrable Securities pursuant to any Registration Statement or Prospectus (a
"Blocking Notice") if the Company's board of directors determines in its
reasonable good faith judgment that the Company's obligation to ensure that such
Registration Statement and Prospectus are current and complete would require the
Company to take actions that might reasonably be expected to have a materially
adverse detrimental effect on the Company and its stockholders; provided that
the Company shall diligently and expeditiously take all actions it reasonably
determines to be necessary or advisable to cause such Registration Statement and
Prospectus to be current and complete and to remove such suspension pursuant to
a Blocking Notice or the Notice described below or as a result of the
circumstances described in Section 5(d)(ii) through (vii). Each Holder agrees by
acquisition of the Registrable Securities that, upon receipt of a Blocking
Notice or "Notice" from the Company of the existence of any fact of the kind
described in the following sentence, such Holder shall not dispose of, sell or
offer for sale the Registrable Securities pursuant to the Registration Statement
until such Holder receives: (i) copies of the supplemented or amended
Prospectus, or until counsel for the Company shall have determined that such
disclosure is not required due to subsequent events; (ii) notice in writing (the
"Advice") from the Company that the use of the Prospectus may be resumed; and
(iii) copies of any additional or supplemental filings that are incorporated by
reference in the Prospectus. Pursuant to the immediately preceding sentence, the
Company may provide such Notice to such Holder upon the determination by the
Company of the existence of any fact or the happening or any event that makes
any statement of a material fact made in the Registration Statement, the
Prospectus, any amendment or supplement thereto, or any document incorporated by
reference therein untrue in any material respect, or that requires the making of
any additions to or changes in the Registration Statement or the Prospectus, in
order to make the statements therein not misleading in any material respect. If
so directed by the Company in connection with any such notice, each Holder will
deliver to the Company (at the Company's expense) all copies, other than
permanent file copies then in such Holder's possession, of the Prospectus
covering such Registrable Securities that was current immediately prior to the
time of receipt of such notice.
(b) In the event: (i) the Company shall give any such Blocking
Notice or Notice, pursuant to Section 5A(a) or (ii) the Registration Statement
is suspended (including, but not limited to, suspensions resulting from the
delisting of the Common Stock or a stop order issued by the Commission) or
trading in the Common Stock on the Nasdaq National Market is suspended for a
period of time (excluding disruptions from business announcements that result in
any halt(s) in trading of not more than one day on each occasion) and other
suspension of trading on such market in general (each, a "Blackout Period"), the
time regarding the effectiveness of such Registration Statement set forth in
Section 5(a) and the Maturity Date (as defined in the Certificate) of the
Preferred Stock and the expiration date of the Warrants shall be extended by one
and one-half (1-1/2) times the number of days during the period (i) from and
including the date of the giving of such Blocking Notice or Notice to and
including the date when the Holders shall have received the copies of the
supplemented or amended Prospectus, the Advice and any additional or
supplemental filings that are incorporated by reference in the Prospectus or
(ii) from and including the date of such suspension to and including the date
when the Registration Statement is declared effective, as applicable. Delivery
of a Blocking Notice or Notice and the related suspension of any Registration
Statement or the occurrence of a Blackout Period shall not constitute a default
under this Registration Rights Agreement and shall not create any obligation to
pay liquidated damages under Section 2 hereof. However, if the Holder's ability
to sell under the Registration Statement is suspended for more than ten
consecutive trading days or for sixty (60) days (whether or not consecutive)
during any twelve (12) month period (an "Excess Blocking Period"), then the
Holders shall have the right to receive a 2.0% reduction in the Conversion Price
(as defined in the Certificate) of the Preferred Stock for each 30-day period
(or part thereof) following the beginning of an Excess Blocking Period until the
Excess Blocking Period terminates. In addition, if the Excess Blocking Period
continues
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for more than an aggregate of 180 days in any 360-day period, then at
Holder's option, the Company shall redeem Holder's Preferred Stock at a
redemption price equal to 130% of the Aggregate Value thereof, together with all
payments due under this Section and the Agreement.
6. Indemnification.
(a) Company Indemnity. The Company will indemnify each Holder
whose securities are included in a Registration Statement, each of its officers,
directors, managers, members and partners, and each person controlling such
Holder within the meaning of Section 15 of the Securities Act and the rules and
regulations thereunder with respect to which registration, qualification or
compliance has been effected pursuant to this Registration Rights Agreement, and
each underwriter, if any, and each person who controls, within the meaning of
Section 15 of the Securities Act and the rules and regulations thereunder, any
underwriter, against all claims, losses, damages and liabilities (or actions in
respect thereof) arising out of or based on any untrue statement (or alleged
untrue statement) of a material fact contained in any prospectus, offering
circular or other document (including any related registration statement,
notification or the like) incident to any such registration, qualification or
compliance, or arising out of or based on any omission (or alleged omission) to
state therein a material fact required to be stated therein or necessary to make
the statements therein not misleading, or any violation by the Company of the
Securities Act or any state securities law or in either case, any rule or
regulation thereunder applicable to the Company and relating to action or
inaction required of the Company in connection with any such registration,
qualification or compliance, and will reimburse each Holder, each of its
officers, directors and partners, and each person controlling such Holder, each
such underwriter and each person who controls any such underwriter, for any
legal and any other expenses reasonably incurred in connection with
investigating and defending any such claim, loss, damage, liability or action,
provided that the Company will not be liable in any such case to the extent that
any such claim, loss, damage, liability or expense arises out of or is based
solely on any untrue statement or omission (or alleged untrue statement or
omission) that is made in reliance upon and in conformity with written
information furnished to the Company by such Holder or the underwriter expressly
for use therein. The indemnity agreement contained in this Section 6(a) shall
not apply to amounts paid in settlement of any such loss, claim, damage,
liability or action if such settlement is effected without the consent of the
Company (which consent will not be unreasonably withheld).
(b) Holder Indemnity. Each Holder will, if Registrable
Securities held by it are included in the securities as to which such
registration, qualification or compliance is being effected, indemnify the
Company, each of its directors, officers, partners, and each underwriter, if
any, of the Company's securities covered by such a registration statement, each
person who controls the Company or such underwriter within the meaning of
Section 15 of the Securities Act and the rules and regulations thereunder, each
other Holder (if any), and each of their officers, directors, managers, members
and partners, and each person controlling such other Holder within the meaning
of Section 15 of the Securities Act and the rules and regulations thereunder
against all claims, losses, damages and liabilities (or actions in respect
thereof) arising out of or based on any untrue statement (or alleged untrue
statement) of a material fact contained in any such registration statement,
prospectus, offering circular or other document, or arising out of or based on
any omission (or alleged omission) to state therein a material fact required to
be stated therein or necessary to make the statement therein not misleading, and
will reimburse the Company and such other Holders and their directors, officers,
managers, members and partners, underwriters or control persons for any legal or
any other expenses reasonably incurred in connection with investigating and
defending any such claim, loss, damage, liability or action, in each case to the
extent, but only to the extent, that such untrue statement (or alleged untrue
statement) or omission (or alleged omission) is made in such registration
statement, prospectus, offering circular or other document in reliance upon and
in conformity with written information furnished to the Company by such Holder
expressly for use therein; provided that no Holder shall be liable under this
indemnity for an amount in excess of the net proceeds received by such Holder
from the sale of the Registrable Securities pursuant to such registration
statement. The indemnity agreement contained in this Section 6(b) shall not
apply to amounts paid in settlement of any such claims, losses, damages or
liabilities if such settlement is effected without the consent of such Holder
(which consent shall not be unreasonably withheld).
(c) Procedure. Each party entitled to indemnification under
this Article (the "Indemnified Party") shall give notice to the party required
to provide indemnification (the "Indemnifying Party") promptly after such
Indemnified Party has actual knowledge of any claim as to which indemnity may be
sought, and shall permit the Indemnifying Party to assume the defense of any
such claim in any litigation resulting therefrom; provided that
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counsel for the Indemnifying Party, who shall conduct the defense of such claim
or any litigation resulting therefrom, shall be approved by the Indemnified
Party (whose approval shall not be unreasonably withheld), and the Indemnified
Party may participate in such defense at the Indemnified Party's expense;
provided further that the failure of any Indemnified Party to give notice as
provided herein shall not relieve the Indemnifying Party of its obligations
under this Section 6 except to the extent that the Indemnifying Party is
materially and adversely affected by such failure to provide notice. The
Indemnifying Party shall not, in connection with any one such action or
proceeding or separate but substantially similar or related actions or
proceedings in the same jurisdiction arising out of the same general allegations
or circumstances, be liable for the reasonable fees and expenses of more than
one separate firm of attorneys (in addition to any local counsel) at any time
for such Indemnified Party; provided, however, that if separate firm(s) of
attorneys are required due to a conflict of interest, then the Indemnifying
Party shall be liable for the reasonable fees and expenses of each such separate
firm. No Indemnifying Party, in the defense of any such claim or litigation,
shall, except with the consent of each Indemnified Party, consent to entry of
any judgment or enter into any settlement which does not include as an
unconditional term thereof the giving by the claimant or plaintiff to such
Indemnified Party of a release from all liability in respect to such claim or
litigation. Each Indemnified Party shall furnish such information regarding
itself or the claim in question as an Indemnifying Party may reasonably request
in writing and as shall be reasonably required in connection with the defense of
such claim and litigation resulting therefrom.
7. Contribution. (a) If the indemnification provided for in
Section 6 herein is unavailable to the Indemnified Parties in respect of any
losses, claims, damages or liabilities referred to herein (other than by reason
of the exceptions provided therein), then each such Indemnifying Party, in lieu
of indemnifying such Indemnified Party, shall contribute to the amount paid or
payable by such Indemnified Party as a result of such losses, claims, damages or
liabilities (i) as between the Company on the one hand and the Holder or
underwriters, as the case may be, on the other, in such proportion as is
appropriate to reflect the relative benefits received by the Company on the one
hand and the Holder or underwriters, as the case may be, on the other from the
offering of the Registrable Securities, or if such allocation is not permitted
by applicable law, in such proportion as is appropriate to reflect not only such
relative benefits but also the relative fault of the Company on the one hand and
of the Holder or underwriters, as the case may be, on the other in connection
with the statements or omissions which resulted in such losses, claims, damages
or liabilities, as well as any other relevant equitable considerations and (ii)
as between the Company on the one hand and the Holder on the other, in such
proportion as is appropriate to reflect the relative fault of the Company and of
the Holder in connection with the statements or omissions which resulted in such
losses, claims, damages or liabilities, as well as any other relevant equitable
considerations.
(b) The relative benefits received by the Company on the one
hand and the Holders or the underwriters, as the case may be, on the other shall
be deemed to be in the same proportion as the proceeds from the offering (net of
underwriting discounts and commissions but before deducting expenses) received
by the Company from the initial sale of the Registrable Securities by the
Company to the Holders pursuant to this Registration Rights Agreement bear to
the net proceeds received by the Holders from the sale of Registrable Securities
pursuant to the Registration Statement or the total underwriting discounts and
commissions received by the underwriters as set forth in the table on the cover
page of the Prospectus, as the case may be. The relative fault of the Company on
the one hand and of the Holders or underwriters, as the case may be, on the
other shall be determined by reference to, among other things, whether the
untrue or alleged untrue statement of a material fact or omission or alleged
omission to state a material fact relates to information supplied by the
Company, by the Holders or by the underwriters.
(c) In no event shall the obligation of any Indemnifying Party
to contribute under this Section 7 exceed the amount that such Indemnifying
Party would have been obligated to pay by way of indemnification if the
indemnification provided for under clauses (a) or (b) of Section 6 hereof had
been available under the circumstances.
(d) The Company and the Holders agree that it would not be
just and equitable if contribution pursuant to this Section 7 were determined by
pro rated allocation (even if the Holders or the underwriters were treated as
one entity for such purpose) or by any other method of allocation which does not
take account the equitable considerations referred to in the immediately
preceding paragraphs. The amount paid or payable by an Indemnified Party as a
result of the losses, claims, damages and liabilities referred to in the
immediately preceding paragraphs shall be deemed to include, subject to the
limitations set forth above, any legal or other expenses reasonably incurred by
such Indemnified Party in connection with investigating or defending any
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such action or claim. Notwithstanding the provisions of this Section 7, no
Holder or underwriter shall be required to contribute any amount in excess of
the amount by which (i) in the case of such Holder, the total price at which the
shares of Common Stock offered by such Holder and distributed to the public, or
offered to the public, exceed the amount paid by such Holder for the underlying
Preferred Stock converted into such shares of Common Stock, (ii) in the case of
an underwriter, the total price at which the Registrable Securities purchased by
it and distributed to the public were offered to the public exceeds, in any such
case, the amount of any damages that the Holders or underwriter have otherwise
been required to pay by reason of such untrue or alleged untrue statement or
omission or alleged omission. No person guilty of fraudulent misrepresentation
(within the meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation.
8. Changes in Common Stock or Preferred Stock. If, and as
often as, there is any change in the Common Stock or Preferred Stock by way of a
stock split, stock dividend, combination or reclassification, or through a
merger, consolidation, reorganization or recapitalization, or by any other
means, appropriate adjustment shall be made in the provisions hereof so that the
rights and privileges granted hereby shall continue with respect to the Common
Stock or Preferred Stock as so changed.
9. Rule 144 Reporting. With a view to making available the
benefits of certain rules and regulations of the Commission which may at any
time permit the sale of the Preferred Stock and the Shares to the public without
registration, at all times after ninety (90) days after any registration
statement covering a public offering of securities of the Company under the
Securities Act shall have become effective, the Company agrees to:
(a) make and keep public information available, as
those terms are understood and defined in Rule 144 under the Securities
Act;
(b) use its best efforts to file with the Commission
in a timely manner all reports and other documents required of the
Company under the Securities Act and the Exchange Act; and
(c) furnish to each Holder forthwith upon request a
written statement by the Company as to its compliance with the
reporting requirements of such Rule 144 and of the Securities Act and
the Exchange Act, a copy of the most recent annual or quarterly report
of the Company, and such other reports and documents so filed by the
Company as such holder may reasonably request in availing itself of any
rule or regulation of the Commission allowing such Holder to sell any
Preferred Stock or Shares without registration.
10. Rule 416. The Company and the Subscribers each acknowledge
that an indeterminate number of Registrable Securities shall be registered
pursuant to Rule 416 under the Securities Act so as to include in such
Registration Statement 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 reductions in
the Conversion Price (as defined in the Certificate) of the Preferred Stock in
accordance with the terms of thereof, including, without limitation, the terms
which case the Conversion Period Conversion Price (as defined in the
Certificate) to decrease as the price of the Common Stock decreases
(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 Securities Act
are covered by the Registration Statement and, absent guidance from the
Commission or other definitive authority to the contrary, the Company shall use
all reasonable efforts to affirmatively support and not to take any position
adverse to the position that the Registration Statement filed hereunder covers
all of the Rule 416 Securities.
11. Survival. The indemnity and contribution agreements
contained in Sections 6 and 7 and the representations and warranties of the
Company referred to in Section 2(e)(i) shall remain operative and in full force
and effect regardless of (a) any termination of this Registration Rights
Agreement or any underwriting agreement, (b) any investigation made by or on
behalf of any Indemnified Party or by or on behalf of the Company and (c) the
consummation of the sale or successive resales of the Registrable Securities.
12. Information by Holder. Each Holder shall promptly furnish
to the Company such information regarding such Holder and the distribution
proposed by such Holder as the Company may reasonably
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request in writing and as shall be reasonably required in connection with any
registration, qualification or compliance referred to in this Registration
Rights Agreement; provided, however, each Holder shall be given at least ten
(10) days to respond to such request. All information provided to the Company by
such Holder shall be accurate and complete in all material respects and such
Holder shall promptly notify the Company if any such information becomes
incorrect or incomplete. If such Holder does not timely provide such reasonably
requested information, such Holder shall not be entitled to the liquidated
damages contemplated by Section 2(c) to the extent that such delay in the
Registration Statement becoming effective is caused by such failure to timely
provide information unless such Holder shall be able to demonstrate to the
Company's satisfaction that such failure to timely provide did not
proportionately contribute to the event giving rise to the damages obligation.
13. Transfer or Assignment of Registration Rights. The rights
granted to the Subscribers by the Company under this Registration Rights
Agreement to cause the Company to register Registrable Securities, may be
transferred or assigned to a transferee or assignee together with any transfer
or assignment of the Registrable Securities, provided that the Company is given
written notice by any applicable Holder at the time of or within a reasonable
time after said transfer or assignment, stating the name and address of said
transferee or assignee and identifying the securities with respect to which such
registration rights are being transferred or assigned, and provided further that
the transferee or assignee of such rights agrees in writing to be bound by this
Registration Rights Agreement.
14. Representations and Warranties of the Company. The Company
represents and warrants that there are no agreements, understandings or
commitments, oral or written, between the Company and the holders of its
securities pursuant to which such holders have a right to require the Company to
register or qualify any of its securities under the Securities Act or any
applicable state securities laws.
15. Miscellaneous.
(a) Entire Agreement. This Registration Rights Agreement
contains the entire understanding and agreement of the parties with respect to
the subject matter hereof, and may not be modified or terminated except by a
written agreement signed by the parties.
(b) Notices. Any notice, demand or request required or
permitted to be given by either the Company or the Holders pursuant to the terms
of this Registration Rights Agreement shall be in writing and shall be deemed
given when delivered personally, by overnight courier service or by facsimile,
with a hard copy to follow by overnight or two day courier, addressed to the
other party at the address of the party set forth at the end of this
Registration Rights Agreement or such other address as a party may request by
notifying the other in writing. Copies of all notices to the Holders or to the
Company shall be sent to the address set forth on Schedule I to the Subscription
Agreement or to such other address as the Holders or the Company, as applicable,
may hereafter designate.
(c) Gender of Terms. All terms used herein shall be deemed to
include the feminine and the neuter, and the singular and the plural, as the
context requires.
(d) Governing Law; Consent of Jurisdiction. This Registration
Rights Agreement shall be governed by and construed and enforced in accordance
with the laws of the State of Delaware, without regard to principles of
conflicts of law or choice of law except for matters arising under the
Securities Act or the Securities Exchange Act of 1934, as amended, which matters
shall be construed and interpreted in accordance with such laws. The Company and
the Holders hereby agree that all actions or proceedings arising directly or
indirectly from or in connection with this Registration Rights Agreement shall
be litigated only in the Supreme Court of the State of Delaware or the United
States District Court of Delaware located in New Castle County, Delaware. The
Company and the Holders consent to the jurisdiction and venue of the foregoing
courts and consent that any process or notice of motion or other application to
either of said courts or a judge thereof may be served inside or outside the
State of Delaware by registered mail, return receipt requested, directed to the
such party at its address set forth in this Registration Rights Agreement (and
service so made shall be deemed complete five (5) days after the same has been
posted as aforesaid) or by personal service or in such other manner as may be
permissible under the rules of said courts. The parties hereto hereby waive any
right to a trial by jury in connection with any litigation.
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<PAGE>
(e) Severability. Notwithstanding any provision of this
Registration Rights Agreement, neither the Company nor any other party hereto
shall be required to take any action which would be in violation of any
applicable law. The invalidity or unenforceability of any provision of this
Registration Rights Agreement in any jurisdiction shall not affect the validity,
legality or enforceability of any other provision of this Registration Rights
Agreement in such jurisdiction or the validity, legality or enforceability of
this Registration Rights Agreement, including any such provision, in any other
jurisdiction, it being intended that all rights and obligations of the parties
hereunder shall be enforceable to the fullest extent permitted by law.
(f) Further Assurances. Each of the parties hereto shall
execute such documents and other papers and perform such further acts as may be
reasonably required or deemed necessary to carry out the provisions of this
Registration Rights Agreement and the transactions contemplated hereby.
(g) Titles. The titles used in this Registration Rights
Agreement are used for convenience of reference only and are not to be
considered in construing or interpreting this Registration Rights Agreement.
(h) Counterparts. This Registration Rights Agreement may be
executed in any number of counterparts, each of which shall be enforceable
against the parties actually executing such counterparts and all of which
together constitute one instrument.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this
Registration Rights Agreement to be duly executed as of the date first above
written.
XCEED, INC.
By: /s/ Werner Haase
--------------------
Name: Werner Haase
Title: Chief Executive Officer
PECONIC FUND, LTD.
By: RAMIUS CAPITAL GROUP, LLC
Its: Investment Advisor
By: /s/ Jeffrey M. Solomon
--------------------------
Name: Jeffrey M. Solomon
Title: Managing Officer
LEONARDO, L.P.
By: ANGELO, GORDON & CO., L.P.
Its: General Partner
By:/s/ Michael L. Gordon
------------------------
Name: Michael L. Gordon
Title: Chief Operating Officer
HTFP INVESTMENT L.L.C.
By: PROMETHEAN ASSET MANAGEMENT,
L.L.C.
Its: Investment Advisor
By:/s/ James F. O'Brien, Jr.
----------------------------
Name: James F. O'Brien, Jr.
Title: Managing Member
<PAGE>
Exhibit 4.1(c)
<PAGE>
THIS WARRANT AND THE SHARES OF COMMON STOCK ISSUABLE UPON EXERCISE HEREOF HAVE
NOT BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION IN RELIANCE UPON
AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT
TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO
AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT.
WARRANT TO PURCHASE
SHARES OF COMMON STOCK
OF
XCEED, INC.
Expires January 13, 2005
No. W-__ New York, New York
January 13, 2000
FOR VALUE RECEIVED, subject to the provisions hereinafter set forth, the
undersigned, XCEED, INC., a Delaware corporation (together with its successors
and assigns, the "Issuer"), hereby certifies that
HFTP INVESTMENT L.L.C.
or its registered assigns is entitled to subscribe for and purchase, during the
period specified in this Warrant, up to 61,091 shares (subject to adjustment as
hereinafter provided) of the duly authorized, validly issued, fully paid and
non-assessable common stock, par value $0.01 per share, of the Issuer (the
"Common Stock"), at an exercise price per share equal to the Warrant Price then
in effect, subject, however, to the provisions and upon the terms and conditions
hereinafter set forth. Capitalized terms used in this Warrant and not otherwise
defined herein shall have the respective meanings specified in Section 7 hereof.
1. Term. The right to subscribe for and purchase shares of Warrant
Stock represented hereby shall commence on the date of issuance of this Warrant
and shall expire at 5:00 p.m., New York City time, on January 13, 2005 (such
period being the "Term"). Prior to the end of the Term, the Issuer will not take
any action which would terminate the Warrants.
2. Method of Exercise; Payment; Issuance of New Warrant; Registration;
Transfer and Exchange.
(a) Time of Exercise. The purchase rights represented by this Warrant
may be exercised in whole or in part at any time and from time to time during
the Term.
(b) Method of Exercise. The Holder hereof may exercise this Warrant, in
whole or in part, by the surrender of this Warrant (with the exercise form
attached hereto duly executed) at the principal executive office of the Issuer,
and by the payment to the Issuer of an amount of consideration therefor equal to
the Warrant Price in effect on the date of such exercise multiplied by the
number of shares of Warrant Stock with respect to which this Warrant is then
being exercised, payable at such Holder's election (i) by certified or official
bank check, (ii) if the Per Share Market Value is greater than the Warrant Price
(at the date of calculation as set forth below), in lieu of exercising this
Warrant for cash, by receiving shares equal to the value (as determined below)
of this Warrant (or the portion thereof being canceled) by surrender of this
Warrant at the principal executive office of the Company together with the
properly endorsed Subscription Form annexed hereto and notice of such election
in which event
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<PAGE>
the Company shall issue to the Warrantholder a number of shares of Common
Stock computed using the following formula:
Y(A-B)
------
X = A
Where X = the number of shares of Common Stock to
be issued to the Holder
Y = the number of shares of Common Stock
purchasable under the Warrant or, if only a
portion of the Warrant is being exercised,
the portion of the Warrant being canceled
(at the date of such calculation)
A = the Per Share Market Value of one share of
the Common Stock (at the date of such
calculation)
B = Warrant Price (as adjusted to the date of
such calculation),
or (iii) by a combination of the foregoing methods of payment selected by the
Holder of this Warrant. In any case where the consideration payable upon such
exercise is being paid in whole or in part pursuant to the provisions of clause
(ii) of this subsection (b), such exercise shall be accompanied by written
notice from the Holder of this Warrant specifying the manner of payment thereof
and containing a calculation showing the number of shares of Warrant Stock with
respect to which rights are being surrendered thereunder and the net number of
shares to be issued after giving effect to such surrender.
(c) Issuance of Stock Certificates. In the event of any exercise of
this Warrant in accordance with and subject to the terms and conditions hereof,
(i) certificates for the shares of Warrant Stock so purchased shall be dated the
date of such exercise and the Issuer shall use its best efforts to deliver to
the Holder hereof within a reasonable time, not exceeding three Trading Days
after such exercise, and the Holder hereof shall be deemed for all purposes to
be the Holder of the shares of Warrant Stock so purchased as of the date of such
exercise, and (ii) unless this Warrant has expired, a new Warrant representing
the number of shares of Warrant Stock, if any, with respect to which this
Warrant shall not then have been exercised (less any amount thereof which shall
have been cancelled in payment or partial payment of the Warrant Price as
hereinabove provided) shall also be issued to the Holder hereof at the Issuer's
expense within such time.
(d) Registration. The Warrants shall be numbered and shall be
registered in a Warrant register (the "Warrant Register"). The Issuer shall be
entitled to treat the registered holder of any Warrant on the Warrant Register
(the "Holder") as the owner in fact thereof for all purposes and shall not be
bound to recognize any equitable or other claim to or interest in such Warrant
on the part of any other person, and shall not be liable for any registration of
transfer of Warrants which are registered or are to be registered in the name of
a fiduciary or the nominee of a fiduciary unless made with the actual knowledge
that a fiduciary or nominee is committing a breach of trust in requesting such
registration of transfer, or with such knowledge of such facts that its
participation therein amounts to bad faith. The Warrants shall be registered
initially in the name of Holder as set forth in the first sentence of this
Warrant in such denominations as Holder may request in writing to the Issuer.
(e) Transfer of Warrant. Until such time as the shares of Warrant Stock
issuable hereunder shall have been the subject of registration and are covered
by an effective registration statement under the Securities Act, or there is
available (in the opinion of counsel to the Issuer or counsel to the Holder,
acceptable to the Issuer) an exemption from the registration requirements of the
Securities Act, the Warrants shall not be sold, transferred, assigned or
hypothecated, in part or in whole (other than by will or pursuant to the laws of
descent and distribution), and then only to registered assigns of the Holder and
thereafter only upon delivery thereof duly endorsed by the Holder or by his duly
authorized attorney or representative, or accompanied by proper evidence of
succession, assignment or authority to transfer. In all cases of transfer by an
attorney, the original power of attorney, duly approved, or an official copy
thereof, duly certified, shall be deposited with the Issuer. In case of transfer
by executors, administrators, guardians or other legal representatives, duly
authenticated evidence of their authority shall be produced, and may be required
to be deposited with the Issuer in its discretion. Upon any registration of
transfer, the Issuer shall deliver a new Warrant or Warrants to the persons
entitled thereto. The Warrants may be
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<PAGE>
exchanged at the option of the Holder thereof for another Warrant, or other
Warrants, of different denominations, of like tenor and representing in the
aggregate the right to purchase a like number of shares of Common Stock upon
surrender to the Issuer or its duly authorized agent. Notwithstanding the
foregoing, the Issuer shall have no obligation to cause Warrants to be
transferred on its books to any person if such transfer would violate the
Securities Act.
(f) Compliance with Securities Laws.
(i) The Holder of this Warrant, by acceptance hereof,
acknowledges that neither this Warrant nor the shares of Warrant Stock
to be issued upon exercise hereof have been registered under the
Securities Act and have been offered and sold by the Issuer in reliance
upon exemption from the registration provisions of the Securities Act
and the Holder represents that such securities are being acquired
solely for the Holder's own account and not as a nominee for any other
party, and for investment, and that the Holder will not offer, sell or
otherwise dispose of this Warrant or any shares of Warrant Stock to be
issued upon exercise hereof except pursuant to an effective
registration statement, or an exemption from registration, under the
Securities Act and any applicable state securities laws.
(ii) Except as provided in paragraph (iii) below, this Warrant
and all certificates representing shares of Warrant Stock issued upon
exercise hereof shall be stamped or imprinted with a legend in
substantially the following form:
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN
REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION IN
RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"),
AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT
TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES
ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A
TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF
THE SECURITIES ACT.
(iii) The restrictions imposed by this subsection (f) upon the
transfer of this Warrant and the shares of Warrant Stock to be
purchased upon exercise hereof shall terminate (A) when such securities
shall have been effectively registered under the Securities Act, (B)
upon the Issuer's receipt of an opinion of counsel, in form and
substance reasonably satisfactory to the Issuer, addressed to the
Issuer to the effect that such restrictions are no longer required to
ensure compliance with the Securities Act or (C) upon the Issuer's
receipt of other evidence reasonably satisfactory to the Issuer that
such registration is not required. Whenever such restrictions shall
cease and terminate as to any such securities, the Holder thereof shall
be entitled to receive from the Issuer (or its transfer agent and
registrar), without expense (other than applicable transfer taxes, if
any), new Warrants (or, in the case of shares of Warrant Stock, new
stock certificates) of like tenor not bearing the applicable legends
required by paragraph (ii) above relating to the Securities Act and
state securities laws.
(g) Continuing Rights of Holder. The Issuer will, at the time of or at
any time after each exercise of this Warrant, upon the request of the Holder
hereof or of any shares of Warrant Stock issued upon such exercise, acknowledge
in writing the extent, if any, of its continuing obligation to afford to such
Holder all rights to which such Holder shall continue to be entitled after such
exercise in accordance with the terms of this Warrant, provided that if any such
Holder shall fail to make any such request, the failure shall not affect the
continuing obligation of the Issuer to afford such rights to such Holder.
3. Stock Fully Paid; Reservation and Listing of Shares;
Covenants.
(a) Stock Fully Paid. The Issuer represents, warrants, covenants and
agrees that all shares of Warrant Stock which may be issued upon the exercise of
this Warrant or otherwise hereunder will, upon issuance and payment in
accordance with the terms hereof, be duly authorized, validly issued, fully paid
and non-assessable and free from all taxes, liens and charges created by or
through Issuer. The Issuer further covenants and agrees that during the period
within which this Warrant may be exercised, the Issuer will at all times have
authorized and
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<PAGE>
reserved for the purpose of the issue upon exercise of this Warrant a sufficient
number of shares of Common Stock to provide for the exercise of this Warrant.
(b) Payment of Taxes. The Issuer will pay all documentary stamp taxes,
if any, attributable to the issuance of Warrant Stock; provided, however, that
the Issuer shall not be required to pay any tax or taxes which may be payable in
respect of any transfer involved in the issue or delivery of any certificates
for Warrant Stock in a name other than that of the Holder of Warrants in respect
of which such Warrant Stock is issued.
(c) Reservation. If any shares of Common Stock required to be reserved
for issuance upon exercise of this Warrant or as otherwise provided hereunder
require registration or qualification with any governmental authority under any
federal or state law before such shares may be so issued, the Issuer will in
good faith use its best efforts as expeditiously as possible at its expense to
cause such shares to be duly registered or qualified. The transfer agent for the
Common Stock (the "Transfer Agent"), and every subsequent transfer agent, if
any, for the Warrant Stock will be irrevocably authorized and directed at all
times until the end of the Term to reserve such number of authorized and
unissued shares of Common Stock as shall be required for such purpose. The
Issuer will keep a copy of this Agreement on file with the Transfer Agent and
with every subsequent transfer agent for the Issuer's securities issuable upon
the exercise of the Warrants. The Issuer will supply the Transfer Agent or any
subsequent transfer agent with duly executed certificates for such purpose and
will itself provide or otherwise make available any cash which may be
distributable as provided in Section 6 of this Agreement. All Warrants
surrendered in the exercise of the rights thereby evidenced shall be canceled,
and such canceled Warrants shall constitute sufficient evidence of the number of
Shares that have been issued upon the exercise of such Warrants. No shares of
Common Stock shall be subject to reservation in respect of unexercised Warrants
subsequent to the end of the Term. If the Issuer shall list any shares of Common
Stock on any securities exchange or market it will, at its expense, list
thereon, maintain and increase when necessary such listing, of, all shares of
Warrant Stock from time to time issued upon exercise of this Warrant or as
otherwise provided hereunder, and, to the extent permissible under the
applicable securities exchange rules, all unissued shares of Warrant Stock which
are at any time issuable hereunder, so long as any shares of Common Stock shall
be so listed. The Issuer will also so list on each securities exchange or
market, and will maintain such listing of, any other securities which the Holder
of this Warrant shall be entitled to receive upon the exercise of this Warrant
if at the time any securities of the same class shall be listed on such
securities exchange or market by the Issuer.
(d) Covenants. The Issuer shall not by any action including, without
limitation, amending the certificate of incorporation or the by-laws of the
Issuer, or through any reorganization, transfer of assets, consolidation,
merger, dissolution, issue or sale of securities or any other action, avoid or
seek to avoid the observance or performance of any of the terms of this Warrant,
but will at all times in good faith assist in the carrying out of all such terms
and in the taking of all such actions as may be necessary or appropriate to
protect the rights of the Holder hereof against dilution (to the extent
specifically provided herein) or impairment. Without limiting the generality of
the foregoing, the Issuer will (i) not permit the par value, if any, of its
Common Stock to exceed the then effective Warrant Price, (ii) not amend or
modify any provision of the certificate of incorporation or by-laws of the
Issuer in any manner that would adversely affect in any way the powers,
preferences or relative participating, optional or other special rights of the
Common Stock or which would adversely affect the rights of the Holders of the
Warrants, (iii) take all such action as may be reasonably necessary in order
that the Issuer may validly and legally issue fully paid and nonassessable
shares of Common Stock, free and clear of any liens, claims, encumbrances and
restrictions (other than as provided herein) upon the exercise of this Warrant,
and (iv) use its best efforts to obtain all such authorizations, exemptions or
consents from any public regulatory body having jurisdiction thereof as may be
reasonably necessary to enable the Issuer to perform its obligations under this
Warrant.
(e) Loss, Theft, Destruction of Warrants. Upon receipt of evidence
satisfactory to the Issuer of the ownership of and the loss, theft, destruction
or mutilation of any Warrant and, in the case of any such loss, theft or
destruction, upon receipt of indemnity or security satisfactory to the Issuer
or, in the case of any such mutilation, upon surrender and cancellation of such
Warrant, the Issuer will make and deliver, in lieu of such lost, stolen,
destroyed or mutilated Warrant, a new Warrant of like tenor and representing the
right to purchase the same number of shares of Common Stock.
(f) Rights and Obligations under the Registration Rights Agreement.
This Warrant and the Warrant Stock are entitled to the benefits and subject to
the terms of the Registration Rights Agreement dated as of even date
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<PAGE>
herewith between the Issuer and the Holders listed on the signature pages
thereof (as amended from time to time, the "Registration Rights Agreement"). The
Issuer shall keep or cause to be kept a copy of the Registration Rights
Agreement, and any amendments thereto, at its principal executive office and
shall furnish, without charge, copies thereof to the Holder upon request.
4. Adjustment of Warrant Price and Warrant Share Number. The number and
kind of Securities purchasable upon the exercise of this Warrant and the Warrant
Price shall be subject to adjustment from time to time upon the happening of
certain events as follows:
(a) Recapitalization, Reorganization, Reclassification,
Consolidation, Merger or Sale.
(i) In case the Issuer after the Original Issue Date shall do
any of the following (each, a "Triggering Event"): (a) consolidate with
or merge into any other Person and the Issuer shall not be the
continuing or surviving corporation of such consolidation or merger, or
(b) permit any other Person to consolidate with or merge into the
Issuer and the Issuer shall be the continuing or surviving Person but,
in connection with such consolidation or merger, any Capital Stock of
the Issuer shall be changed into or exchanged for Securities of any
other Person or cash or any other property, or (c) transfer all or
substantially all of its properties or assets to any other Person, or
(d) effect a capital reorganization or reclassification of its Capital
Stock, then, and in the case of each such Triggering Event, proper
provision shall be made so that, upon the basis and the terms and in
the manner provided in this Warrant, the Holder of this Warrant shall
be entitled, upon the exercise hereof at any time after the
consummation of such Triggering Event, to the extent this Warrant is
not exercised prior to such Triggering Event, or is redeemed in
connection with such Triggering Event, to receive at the Warrant Price
in effect at the time immediately prior to the consummation of such
Triggering Event in lieu of the Common Stock issuable upon such
exercise of this Warrant prior to such Triggering Event, the
Securities, cash and property to which such Holder would have been
entitled upon the consummation of such Triggering Event if such Holder
had exercised the rights represented by this Warrant immediately prior
thereto, subject to adjustments and increases (subsequent to such
corporate action) as nearly equivalent as possible to the adjustments
provided for in Section 4 hereof.
(ii) Notwithstanding anything contained in this Warrant to the
contrary, the Issuer will not effect any Triggering Event unless, prior
to the consummation thereof, each Person (other than the Issuer) which
may be required to deliver any Securities, cash or property upon the
exercise of this Warrant as provided herein shall assume, by written
instrument delivered to, and reasonably satisfactory to, the Holder of
this Warrant: (A) the obligations of the Issuer under this Warrant (and
if the Issuer shall survive the consummation of such Triggering Event,
such assumption shall be in addition to, and shall not release the
Issuer from, any continuing obligations of the Issuer under this
Warrant); and (B) the obligation to deliver to such Holder such shares
of Securities, cash or property as, in accordance with the foregoing
provisions of this subsection (a).
(b) Subdivision or Combination of Shares. If the Issuer, at any time
while this Warrant is outstanding, shall subdivide or combine any shares of
Common Stock, (i) in case of subdivision of shares, the Warrant Price shall be
proportionately reduced (as at the effective date of such subdivision or, if the
Issuer shall take a record of Holders of its Common Stock for the purpose of so
subdividing, as at the applicable record date, whichever is earlier) to reflect
the increase in the total number of shares of Common Stock outstanding as a
result of such subdivision, or (ii) in the case of a combination of shares, the
Warrant Price shall be proportionately increased (as at the effective date of
such combination or, if the Issuer shall take a record of Holders of its Common
Stock for the purpose of so combining, as at the applicable record date,
whichever is earlier) to reflect the reduction in the total number of shares of
Common Stock outstanding as a result of such combination.
(c) Certain Dividends and Distributions. If the Issuer, at any time
while this Warrant is outstanding, shall:
(i) Stock Dividends. Pay a dividend in, or make any other
distribution to its stockholders (without consideration therefor) of,
shares of Common Stock, the Warrant Price shall be adjusted, as at the
date the Issuer shall take a record of the Holders of the Issuer's
Capital Stock for the purpose of receiving such dividend or other
distribution (or if no such record is taken, as at the date of such
payment or other
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distribution), to that price determined by multiplying the Warrant
Price in effect immediately prior to such record date (or if no such
record is taken, then immediately prior to such payment or other
distribution), by a fraction (1) the numerator of which shall be the
total number of shares of Common Stock outstanding immediately prior to
such dividend or distribution, and (2) the denominator of which shall
be the total number of shares of Common Stock outstanding immediately
after such dividend or distribution (plus in the event that the Issuer
paid cash for fractional shares, the number of additional shares which
would have been outstanding had the Issuer issued fractional shares in
connection with said dividends); or
(ii) Other Dividends. Pay a dividend on, or make any
distribution of its assets upon or with respect to (including, but not
limited to, a distribution of its property as a dividend in liquidation
or partial liquidation or by way of return of capital), the Common
Stock (other than as described in clause (i) of this subsection (c)),
or in the event that the Issuer shall offer options or rights to
subscribe for shares of Common Stock, or issue any Common Stock
Equivalents, to all of its holders of Common Stock, then on the record
date for such payment, distribution or offer or, in the absence of a
record date, on the date of such payment, distribution or offer, the
Holder shall receive what the Holder would have received had it
exercised this Warrant in full immediately prior to the record date of
such payment, distribution or offer or, in the absence of a record
date, immediately prior to the date of such payment, distribution or
offer.
(d) Issuance of Additional Shares of Common Stock. If the Issuer, at
any time while this Warrant is outstanding, shall issue any Additional Shares of
Common Stock (otherwise than as provided in the foregoing subsections (a)
through (c) of this Section 4), at a price per share less than the lower of (x)
the Warrant Price then in effect or (y) the Per Share Market Value then in
effect or without consideration, then the Warrant Price upon each such issuance
shall be adjusted to the price (rounded to the nearest cent) determined by
multiplying the Warrant Price then in effect by a fraction:
(i) the numerator of which shall be equal to the sum of (A)
the number of shares of Common Stock outstanding immediately prior to
the issuance of such Additional Shares of Common Stock plus (B) the
number of shares of Common Stock (rounded to the nearest whole share)
which the aggregate consideration for the total number of such
Additional Shares of Common Stock so issued would purchase at a price
per share equal to the greater of the Per Share Market Value then in
effect and the Warrant Price then in effect; and
(ii) the denominator of which shall be equal to the number of
shares of Common Stock outstanding immediately after the issuance of
such Additional Shares of Common Stock.
The provisions of this subsection (d) shall not apply under any of the
circumstances for which an adjustment is provided in subsections (a), (b) or (c)
of this Section 4. No adjustment of the Warrant Price shall be made under this
subsection (d) upon the issuance of any Additional Shares of Common Stock which
are issued pursuant to any Common Stock Equivalent if upon the issuance of such
Common Stock Equivalent (x) any adjustment shall have been made pursuant to
subsection (e) of this Section 4 or (y) no adjustment was required pursuant to
subsection (e) of this Section 4. No adjustment of the Warrant Price shall be
made under this subsection (d) in an amount less than $.01 per share, but any
such lesser adjustment shall be carried forward and shall be made at the time
and together with the next subsequent adjustment, if any, which together with
any adjustments so carried forward shall amount to $.01 per share or more,
provided that upon any adjustment of the Warrant Price as a result of any
dividend or distribution payable in Common Stock or Convertible Securities or
the reclassification, subdivision or combination of Common Stock into a greater
or smaller number of shares, the foregoing figure of $.01 per share (or such
figure as last adjusted) shall be adjusted (to the nearest one-half cent) in
proportion to the adjustment in the Warrant Price.
(e) Issuance of Common Stock Equivalents. If the Issuer, at any time
while this Warrant is outstanding, shall issue any Common Stock Equivalent and
the price per share for which Additional Shares of Common Stock may be issuable
thereafter pursuant to such Common Stock Equivalent shall be less than the lower
of (w) the Warrant Price then in effect or (x) the Per Share Market Value then
in effect, or if, after any such issuance of Common Stock Equivalents, the price
per share for which Additional Shares of Common Stock may be issuable thereafter
is amended or adjusted, and such price as so amended shall be less than the
lower of (y) the Warrant Price or (z) the Per Share Market Value in effect at
the time of such amendment, then the Warrant Price upon each such issuance or
amendment shall be adjusted as provided in the first sentence of subsection (d)
of this Section 4 on the
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basis that (1) the maximum number of Additional Shares of Common Stock issuable
pursuant to all such Common Stock Equivalents shall be deemed to have been
issued (whether or not such Common Stock Equivalents are actually then
exercisable, convertible or exchangeable in whole or in part) as of the earlier
of (A) the date on which the Issuer shall enter into a firm contract for the
issuance of such Common Stock Equivalent, or (B) the date of actual issuance of
such Common Stock Equivalent, and (2) the aggregate consideration for such
maximum number of Additional Shares of Common Stock shall be deemed to be the
minimum consideration received or receivable by the Issuer for the issuance of
such Additional Shares of Common Stock pursuant to such Common Stock Equivalent.
No adjustment of the Warrant Price shall be made under this subsection (e) upon
the issuance of any Convertible Security which is issued pursuant to the
exercise of any warrants or other subscription or purchase rights therefor, if
any adjustment shall previously have been made in the Warrant Price then in
effect upon the issuance of such warrants or other rights pursuant to this
subsection (e). If no adjustment is required under this subsection (e) upon
issuance of any Common Stock Equivalent or once an adjustment is made under this
subsection (e) based upon the Per Share Market Value in effect on the date of
such adjustment, no further adjustment shall be made under this subsection (e)
based solely upon a change in the Per Share Market Value after such date.
(f) Purchase of Common Stock by the Issuer. If the Issuer at any time
while this Warrant is outstanding shall, directly or indirectly through a
Subsidiary or otherwise, purchase, redeem or otherwise acquire any shares of
Common Stock at a price per share greater than the Per Share Market Value then
in effect, then the Warrant Price upon each such purchase, redemption or
acquisition shall be adjusted to that price determined by multiplying such
Warrant Price by a fraction (i) the numerator of which shall be the number of
shares of Common Stock outstanding immediately prior to such purchase,
redemption or acquisition minus the number of shares of Common Stock which the
aggregate consideration for the total number of such shares of Common Stock so
purchased, redeemed or acquired would purchase at the Per Share Market Value;
and (ii) the denominator of which shall be the number of shares of Common Stock
outstanding immediately after such purchase, redemption or acquisition. For the
purposes of this subsection (f), the date as of which the Per Share Market Value
shall be computed shall be the earlier of (x) the date on which the Issuer shall
enter into a firm contract for the purchase, redemption or acquisition of such
Common Stock, or (y) the date of actual purchase, redemption or acquisition of
such Common Stock. For the purposes of this subsection (f), a purchase,
redemption or acquisition of a Common Stock Equivalent shall be deemed to be a
purchase of the underlying Common Stock, and the computation herein required
shall be made on the basis of the full exercise, conversion or exchange of such
Common Stock Equivalent on the date as of which such computation is required
hereby to be made, whether or not such Common Stock Equivalent is actually
exercisable, convertible or exchangeable on such date.
(g) Other Provisions Applicable to Adjustments Under this Section 4.
The following provisions shall be applicable to the making of adjustments in the
Warrant Price hereinbefore provided in Section 4:
(i) Computation of Consideration. The consideration received
by the Issuer shall be deemed to be the following: to the extent that
any Additional Shares of Common Stock or any Common Stock Equivalents
shall be issued for a cash consideration, the consideration received by
the Issuer therefor, or if such Additional Shares of Common Stock or
Common Stock Equivalents are offered by the Issuer for subscription,
the subscription price, or, if such Additional Shares of Common Stock
or Common Stock Equivalents are sold to underwriters or dealers for
public offering without a subscription offering, the public offering
price, in any such case excluding any amounts paid or receivable for
accrued interest or accrued dividends and without deduction of any
compensation, discounts, commissions, or expenses paid or incurred by
the Issuer for or in connection with the underwriting thereof or
otherwise in connection with the issue thereof; to the extent that such
issuance shall be for a consideration other than cash, then, except as
herein otherwise expressly provided, the fair market value of such
consideration at the, time of such issuance as determined in good faith
by the Board. The consideration for any Additional Shares of Common
Stock issuable pursuant to any Common Stock Equivalents shall be the
consideration received by the Issuer for issuing such Common Stock
Equivalents, plus the additional consideration payable to the Issuer
upon the exercise, conversion or exchange of such Common Stock
Equivalents. In case of the issuance at any time of any Additional
Shares of Common Stock or Common Stock Equivalents in payment or
satisfaction of any dividend upon any class of Capital Stock of the
Issuer other than Common Stock, the Issuer shall be deemed to have
received for such Additional Shares of Common Stock or Common Stock
Equivalents a consideration equal to the amount of such dividend so
paid or satisfied. In any case in which the consideration to be
received or paid shall be other than cash, the Board shall notify the
Holder of this
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Warrant of its determination of the fair market value of such
consideration prior to payment or accepting receipt thereof. If, within
thirty days after receipt of said notice, the Majority Holders shall
notify the Board in writing of their objection to such determination, a
determination of the fair market value of such consideration shall be
made by an Independent Appraiser selected by the Majority Holders with
the approval of the Board (which approval shall not be unreasonably
withheld), whose fees and expenses shall be paid by the Issuer.
(ii) Readjustment of Warrant Price. Upon the expiration or
termination of the right to convert, exchange or exercise any Common
Stock Equivalent the issuance of which effected an adjustment in the
Warrant Price, if such Common Stock Equivalent shall not have been
converted, exercised or exchanged in its entirety, the number of shares
of Common Stock deemed to be issued and outstanding by reason of the
fact that they were issuable upon conversion, exchange or exercise of
any such Common Stock Equivalent shall no longer be computed as set
forth above, and the Warrant Price shall forthwith be readjusted and
thereafter be the price which it would have been (but reflecting any
other adjustments in the Warrant Price made pursuant to the provisions
of this Section 4 after the issuance of such Common Stock Equivalent)
had the adjustment of the Warrant Price been made in accordance with
the issuance or sale of the number of Additional Shares of Common Stock
actually issued upon conversion, exchange or issuance of such Common
Stock Equivalent and thereupon only the number of Additional Shares of
Common Stock actually so issued shall be deemed to have been issued and
only the consideration actually received by the Issuer (computed as in
clause (i) of this subsection (g)) shall be deemed to have been
received by the Issuer.
(iii) Outstanding Common Stock. The number of shares of Common
Stock at any time outstanding shall (A) not include any shares thereof
then directly or indirectly owned or held by or for the account of the
Issuer or any of its Subsidiaries, and (B) be deemed to include all
shares of Common Stock then issuable upon conversion, exercise or
exchange of any then outstanding Common Stock Equivalents or any other
evidences of indebtedness, shares of Capital Stock (including, without
limitation, the Preferred Stock) or other Securities which are or may
be at any time convertible into or exchangeable for shares of Common
Stock or Other Common Stock.
(h) Adjustment of Warrant Share Number. Upon each adjustment in the
Warrant Price pursuant to any of the foregoing provisions of this Section 4, the
Warrant Share Number shall be adjusted, to the nearest one hundredth of a whole
share, to the product obtained by multiplying the Warrant Share Number
immediately prior to such adjustment in the Warrant Price by a fraction, the
numerator of which shall be the Warrant Price immediately before giving effect
to such adjustment and the denominator of which shall be the Warrant Price
immediately after giving effect to such adjustment. If the Issuer shall be in
default under any provision contained in Section 3 of this Warrant so that
shares issued at the Warrant Price adjusted in accordance with this Section 4
would not be validly issued, the adjustment of the Warrant Share Number provided
for in the foregoing sentence shall nonetheless be made and the Holder of this
Warrant shall be entitled to purchase such greater number of shares at the
lowest price at which such shares may then be validly issued under applicable
law. Such exercise shall not constitute a waiver of any claim arising against
the Issuer by reason of its default under Section 3 of this Warrant.
(i) Form of Warrant after Adjustments. The form of this Warrant need
not be changed because of any adjustments in the Warrant Price or the number and
kind of Securities purchasable upon the exercise of this Warrant.
5. Notice of Adjustments. Whenever the Warrant Price or Warrant Share
Number shall be adjusted pursuant to Section 4 hereof (for purposes of this
Section 5, each an "adjustment"), the Issuer shall cause its Chief Financial
Officer to prepare and execute a certificate setting forth, in reasonable
detail, the event requiring the adjustment, the amount of the adjustment, the
method by which such adjustment was calculated (including a description of the
basis on which the Board made any determination hereunder), and the Warrant
Price and Warrant Share Number after giving effect to such adjustment, and shall
cause copies of such certificate to be delivered to the Holder of this Warrant
promptly after each adjustment. Any dispute between the Issuer and the Holder of
this Warrant with respect to the matters set forth in such certificate may at
the option of the Holder of this Warrant be submitted to one of the national
accounting firms currently known as the "big five" selected by the Holder,
provided that the Issuer shall have ten days after receipt of notice from such
Holder of its selection of such firm to object thereto, in which case such
Holder shall select another such firm and the Issuer shall have no such right of
objection.
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The firm selected by the Holder of this Warrant as provided in the preceding
sentence shall be instructed to deliver a written opinion as to such matters to
the Issuer and such Holder within thirty days after submission to it of such
dispute. Such opinion shall be final and binding on the parties hereto. The fees
and expenses of such accounting firm shall be paid by the Issuer.
6. Fractional Shares. No fractional shares of Warrant Stock will be
issued in connection with and exercise hereof, but in lieu of such fractional
shares, the Issuer shall make a cash payment therefor equal in amount to the
product of the applicable fraction multiplied by the Per Share Market Value then
in effect.
7. Definitions. For the purposes of this Warrant, the
following terms have the following meanings:
"Additional Shares of Common Stock" means all shares of Common
Stock issued by the Issuer after the Original Issue Date, and all
shares of Other Common, if any, issued by the Issuer after the Original
Issue Date, except: (i) Warrant Stock; (ii) any shares of Common Stock
issuable upon conversion of the Preferred Stock pursuant to the
Preferred Stock Certificate of Designation; (iii) any shares of Common
Stock issuable pursuant to or in connection with exercise of (A) any
Convertible Security or (B) any other Common Stock Equivalent,
outstanding on the date hereof; (iv) any shares of Common Stock
issuable pursuant to or in connection with any business acquisitions,
mergers, consolidations or other corporate combinations or transactions
heretofore or hereafter undertaken by the Issuer in which the Issuer is
the surviving entity (including, without limitation, shares issuable
under Common Stock Equivalents that may be issued pursuant to or in
connection with any of the foregoing transactions); (v) any shares of
Common Stock issuable pursuant to or in connection with any stock
option or other similar plan of the Issuer pursuant to which the Issuer
issues Common Stock to its officers, directors and employees; and (vi)
any shares of Common Stock issued in an underwritten public offering of
securities by the Issuer.
"Board" shall mean the Board of Directors of the Issuer.
"Capital Stock" means and includes (i) any and all shares,
interests, participations or other equivalents of or interests in
(however designated) corporate stock, including, without limitation,
shares of preferred or preference stock, (ii) all partnership interests
(whether general or limited) in any Person which is a partnership,
(iii) all membership interests or limited liability company interests
in any limited liability company, and (iv) all equity or ownership
interests in any Person of any other type.
"Common Stock" means the Common Stock, $0.01 par value, of the
Issuer and any other Capital Stock into which such stock may hereafter
be changed.
"Common Stock Equivalent" means any Convertible Security or
warrant, option or other right to subscribe for or purchase any
Additional Shares of Common Stock or any Convertible Security.
"Convertible Securities" means evidences of indebtedness,
shares of Capital Stock or other Securities which are or may be at any
time convertible into or exchangeable for Additional Shares of Common
Stock. The term "Convertible Security" means one of the Convertible
Securities.
"Governmental Authority" means any governmental, regulatory or
self-regulatory entity, department, body, official, authority,
commission, board, agency or instrumentality, whether federal, state or
local, and whether domestic or foreign.
"Holders" mean the Persons who shall from time to time own any
Warrant. The term "Holder" means one of the Holders.
"Independent Appraiser" means a nationally recognized or major
regional investment banking firm or firm of independent certified
public accountants of recognized standing (which may be the firm that
regularly examines the financial statements of the Issuer) that is
regularly engaged in the business of appraising the Capital Stock or
assets of corporations or other entities as going concerns, and which
is not affiliated with either the Issuer or the Holder of any Warrant.
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"Issuer" means Xceed, Inc., a Delaware corporation, and its
successors.
"Majority Holders" means at any time the Holders of Warrants
exercisable for a majority of the shares of Warrant Stock issuable
under the Warrants at the time outstanding.
"NASDAQ" means the National Association of Securities Dealers
Automated Quotation System.
"Original Issue Date" means January 13, 2000.
"Other Common" means any other Capital Stock of the Issuer of
any class which shall be authorized at any time after the date of this
Warrant (other than Common Stock) and which shall have the right to
participate in the distribution of earnings and assets of the Issuer
without limitation as to amount.
"Person" means an individual, corporation, limited liability
company, partnership, joint stock company, trust, unincorporated
organization, joint venture, Governmental Authority or other entity of
whatever nature.
"Per Share Market Value" means on any particular date (a) the
closing price per share of the Common Stock on such date on the Nasdaq
National Market, The Nasdaq SmallCap Market or other registered
national stock exchange on which the Common Stock is then listed or if
there is no such price on such date, then the closing price on such
exchange or quotation system on the date nearest preceding such date,
or (b) if the Common Stock is not listed then on the Nasdaq National
Market, The Nasdaq SmallCap Market or any registered national stock
exchange, the closing price for a share of Common Stock in the
over-the-counter market, as reported by NASDAQ or in the National
Quotation Bureau Incorporated or similar organization or agency
succeeding to its functions of reporting prices) at the close of
business on such date, or (c) if the Common Stock is not then reported
by the National Quotation Bureau Incorporated (or similar organization
or agency succeeding to its functions of reporting prices), then the
average of the "Pink Sheet" quotes for the relevant conversion period,
as determined in good faith by the holder, or (d) if the Common Stock
is not then publicly traded the fair market value of a share of Common
Stock as determined by an Independent Appraiser selected in good faith
by the Majority Holders; provided, however, that the Issuer, after
receipt of the determination by such Independent Appraiser, shall have
the right to select an additional Independent Appraiser, in which case,
the fair market value shall be equal to the average of the
determinations by each such Independent Appraiser; and provided,
further that all determinations of the Per Share Market Value shall be
appropriately adjusted for any stock dividends, stock splits or other
similar transactions during such period. The determination of fair
market value by an Independent Appraiser shall be based upon the fair
market value of the Issuer determined on a going concern basis as
between a willing buyer and a willing seller and taking into account
all relevant factors determinative of value, and shall be final and
binding on all parties. In determining the fair market value of any
shares of Common Stock, no consideration shall be given to any
restrictions on transfer of the Common Stock imposed by agreement or by
federal or state securities laws, or to the existence or absence of, or
any limitations on, voting rights.
"Preferred Stock" means the Issuer's Series A Cumulative
Convertible Preferred Stock, $0.05 par value and stated value $1,000
per share.
"Preferred Stock Certificate of Designation" means the
Certificate of Designation, Powers, Preferences and Rights of the
Preferred Stock adopted by the Board on January 13, 2000.
"Registration Rights Agreement" has the meaning specified in
Section 3(f) hereof.
"Securities" means any debt or equity securities of the
Issuer, whether now or hereafter authorized, any instrument convertible
into or exchangeable for Securities or a Security, and any option,
warrant or other right to purchase or acquire any Security. "Security"
means one of the Securities.
"Securities Act" means the Securities Act of 1933, as amended,
or any similar federal statute then in effect.
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"Subsidiary" means any corporation at least 50% of whose
outstanding Voting Stock shall at the time be owned directly or
indirectly by the Issuer or by one or more of its Subsidiaries, or by
the Issuer and one or more of its Subsidiaries.
"Trading Day" means (a) a day on which the Common Stock is
traded on the Nasdaq National Market, The Nasdaq SmallCap Market or
other registered national stock exchange on which the Common Stock has
been listed, or (b) if the Common Stock is not listed on the Nasdaq
National Market, The Nasdaq SmallCap Market or any registered national
stock exchange, a day or which the Common Stock is traded in the
over-the-counter market, as reported by the OTC Bulletin Board, or (c)
if the Common Stock is not quoted on the OTC Bulletin Board, a day on
which the Common Stock is quoted in the over-the-counter market as
reported by the National Quotation Bureau Incorporated (or any similar
organization or agency succeeding its functions of reporting prices);
provided, however, that in the event that the Common Stock is not
listed or quoted as set forth in (a), (b) and (c) hereof, then Trading
Day shall mean any day except Saturday, Sunday and any day which shall
be a legal holiday or a day on which banking institutions in the State
of New York are authorized or required by law or other government
action to close.
"Term" has the meaning specified in Section 1 hereof.
"Voting Stock", as applied to the Capital Stock of any
corporation, means Capital Stock of any class or classes (however
designated) having ordinary voting power for the election of a majority
of the members of the Board of Directors (or other governing body) of
such corporation, other than Capital Stock having such power only by
reason of the happening of a contingency.
"Warrants" means the Warrants issued and sold pursuant to the
Subscription Agreement, dated January 13, 2000, including, without
limitation, this Warrant, and any other warrants of like tenor issued
in substitution or exchange for any thereof pursuant to the provisions
of Section 2(c), 2(d) or 2(e) hereof or of any of such other Warrants.
"Warrant Price" means $50.10, as such price may be adjusted
from time to time as shall result from the adjustments specified in
Section 4 hereof.
"Warrant Share Number" means at any time the aggregate number
of shares of Warrant Stock which may at such time be purchased upon
exercise of this Warrant, after giving effect to all prior adjustments
and increases to such number made or required to be made under the
terms hereof.
"Warrant Stock" means Common Stock issuable upon exercise of
any Warrant or Warrants or otherwise issuable pursuant to any Warrant
or Warrants.
8. Other Notices. In case at any time:
(A) the Issuer shall make any
distributions to the holders
of Common Stock; or
(B) the Issuer shall authorize the
granting to all holders of its
Common Stock of rights to subscribe
for or purchase any shares of
Capital Stock of any class or of any
Common Stock Equivalents or
Convertible Securities or other
rights; or
(C) there shall be any reclassification
of the Capital Stock of the Issuer;
or
(D) there shall be any capital
reorganization by the Issuer; or
(E) there shall be any (i) consolidation
or merger involving the Issuer or
(ii) sale, transfer or other
disposition of all or substantially
all of the Issuer's property, assets
or business (except a merger or
other
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reorganization in which the
Issuer shall be the surviving
corporation and its shares of
Capital Stock shall continue to be
outstanding and except a
consolidation, merger, sale,
transfer or other disposition
involving a wholly-owned
Subsidiary); or
(F) there shall be a voluntary or
involuntary dissolution, liquidation
or winding-up of the Issuer or any
partial liquidation of the Issuer or
distribution to holders of Common
Stock;
then, in each of such cases, the Issuer shall give written notice to the Holder
of the date on which (i) the books of the Issuer shall close or a record shall
be taken for such dividend, distribution or subscription rights or (ii) such
reorganization, reclassification, consolidation, merger, disposition,
dissolution, liquidation or winding-up, as the case may be, shall take place.
Such notice also shall specify the date as of which the holders of Common Stock
of record shall participate in such dividend, distribution or subscription
rights, or shall be entitled to exchange their certificates for Common Stock for
securities or other property deliverable upon such reorganization,
reclassification, consolidation, merger, disposition, dissolution, liquidation
or winding-up, as the case may be. Such notice shall be given at least twenty
days prior to the action in question and not less than twenty days prior to the
record date or the date on which the Issuer's transfer books are closed in
respect thereto. The Issuer shall give to the Holder notice of all meetings and
actions by written consent of its stockholders, at the same time in the same
manner as notice of any meetings of stockholders is required to be given to
stockholders who do not waive such notice (or, if such requires no notice, then
two Trading Days written notice thereof describing the matters upon which action
is to be taken). The Holder shall have the right to send two representatives
selected by it to each meeting, who shall be permitted to attend, but not vote
at, such meeting and any adjournments thereof. This Warrant entitles the Holder
to receive copies of all financial and other information distributed or required
to be distributed to the holders of the Common Stock.
9. Amendment and Waiver. Any term, covenant, agreement or condition in
this Warrant may be amended, or compliance therewith may be waived (either
generally or in a particular instance and either retroactively or
prospectively), by a written instrument or written instruments executed by the
Issuer and the Majority Holders; provided, however, that no such amendment or
waiver shall reduce the Warrant Share number, increase the Warrant Price,
shorten the period during which this Warrant may be exercised or modify any
provision of this Section 9 without the consent of the Holder of this Warrant.
10. Governing Law. THIS WARRANT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF DELAWARE, WITHOUT GIVING EFFECT TO
PRINCIPLES OF CONFLICTS OF LAW.
11. Notices. Any and all notices or other communications or deliveries
required or permitted to be provided hereunder shall be in writing and shall be
deemed given and effective on the earlier of (i) the date of transmission, if
such notice or communication is delivered via facsimile at the facsimile
telephone number specified for notice prior to 5:00 p.m., New York City time, on
a Business Day, (ii) the Business Day after the date of transmission, if such
notice or communication is delivered via facsimile at the facsimile telephone
number specified for notice later than 5:00 p.m., New York City time, on any
date and earlier than 11:59 p.m., New York City time, on such date, (iii) the
Business Day following the date of mailing, if sent by nationally recognized
overnight courier service or (iv) actual receipt by the party to whom such
notice is required to be given. The addresses for such communications shall be
with respect to the Holder of this Warrant or of Warrant Stock issued pursuant
hereto, addressed to such Holder at its last known address or facsimile number
appearing on the books of the Issuer maintained for such purposes, or with
respect to the Issuer, addressed to:
Xceed, Inc.
488 Madison Avenue
New York, New York 10022
Attention: Werner Haase
Facsimile No.: (212) 758-4385
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<PAGE>
or to such other address or addresses or facsimile number or numbers as any such
party may most recently have designated in writing to the other parties hereto
by such notice. Copies of notices to the Holder shall be sent to Stroock &
Stroock & Lavan LLP, 180 Maiden Lane, New York New, York 10038-4982, Attention:
James R. Tanenbaum, facsimile no.: (212) 806-6006. Copies of notices to the
Issuer shall be sent to Akin, Gump, Strauss, Hauer & Feld, LLP, Attention:
Victoria A. Baylin, facsimile no.: (202) 887-4288.
12. Warrant Agent. The Issuer may, by written notice to each Holder of
this Warrant, appoint an agent having an office in New York, New York for the
purpose of issuing shares of Warrant Stock on the exercise of this Warrant
pursuant to subsection (b) of Section 2 hereof, exchanging this Warrant pursuant
to subsection (d) of Section 2 hereof or replacing this Warrant pursuant to
subsection (d) of Section 3 hereof, or any of the foregoing, and thereafter any
such issuance, exchange or replacement, as the case may be, shall be made at
such office by such agent.
13. Remedies. The Issuer stipulates that the remedies at law of the
Holder of this Warrant in the event of any default or threatened default by the
Issuer in the performance of or compliance with any of the terms of this Warrant
are not and will not be adequate and that, to the fullest extent permitted by
law, such terms may be specifically enforced by a decree for the specific
performance of any agreement contained herein or by an injunction against a
violation of any of the terms hereof or otherwise.
14. Successors and Assigns. This Warrant and the rights evidenced
hereby shall inure to the benefit of and be binding upon the successors and
assigns of the Issuer, the Holder hereof and (to the extent provided herein) the
Holders of Warrant Stock issued pursuant hereto, and shall be enforceable by any
such Holder or Holder of Warrant Stock.
15. Modification and Severability. If, in any action before any court
or agency legally empowered to enforce any provision contained herein, any
provision hereof is found to be unenforceable, then such provision shall be
deemed modified to the extent necessary to make it enforceable by such court or
agency. If any such provision is not enforceable as set forth in the preceding
sentence, the unenforceability of such provision shall not affect the other
provisions of this Warrant, but this Warrant shall be construed as if such
unenforceable provision had never been contained herein.
16. Headings. The headings of the Sections of this Warrant are for
convenience of reference only and shall not, for any purpose, be deemed a part
of this Warrant.
[THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, the Issuer has executed this Warrant as of the day
and year first above written.
XCEED, INC.
By:__________________________
Name: Werner Haase
Title: Chief Executive Officer
<PAGE>
SUBSCRIPTION AGREEMENT
(To be signed only upon exercise of Warrant)
To XCEED, INC.:
The undersigned, the holder of the within Warrant, hereby irrevocably
elects to exercise the purchase right represented by such Warrant for, and to
purchase thereunder, (3) shares of Common Stock of XCEED, INC. and herewith (a)
makes payment of $ therefor, or (b) exercises Warrants with a Per Share Market
Value of $ . The undersigned requests that the certificates for such
shares be issued in the name of, and delivered to, , whose address is
.
Dated: ____________, 20__ __________________________________________
(Signature must conform in all respects to name of
holder as specified on the face of the Warrant)
_________________________________________
(Address)
- ----------------
(3) Insert here the number of shares called for on the face of the Warrant (or,
in the case of a partial exercise, the portion thereof as to which the Warrant
is being exercised), in either case without making any adjustment for additional
Common Stock or any other stock or other securities or property or cash which,
pursuant to the adjustment provisions of the Warrant, may be deliverable upon
exercise.
<PAGE>
ASSIGNMENT
(To be signed only upon transfer of Warrant)
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers
all of the rights of the undersigned under the within Warrant, with respect to
the number of shares of Common Stock of XCEED, INC. covered thereby set forth
hereinbelow unto:
Name of Assignee Address No. of Shares
Dated: __________, 20__ _______________________________________
(Signature must conform in all respects
to name of holder as specified on the
face of the Warrant)
_______________________________________
(Address)
Signed in the presence of:
_____________________________
2
