<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
Schedule 13D
Under the Securities Exchange Act of 1934
(Amendment No. __)
The Score Board, Inc.
- --------------------------------------------------------------------------------
(Name of Issuer)
Common Stock, $.01 par value per share
- --------------------------------------------------------------------------------
(Title of Class of Securities)
809173 20 6
- --------------------------------------------------------------------------------
(CUSIP Number)
Klehr, Harrison, Harvey, Branzburg & Ellers
Attn: Brian D. Zuckerman
1401 Walnut Street
Philadelphia, PA 19102
(215) 568-6060
- --------------------------------------------------------------------------------
(Name, Address and Telephone Number of Person
Authorized to Receive Notices and Communications)
November 6, 1996
- --------------------------------------------------------------------------------
(Date of Event which Requires Filing of this Statement)
If the filing person has previously filed a statement on Schedule 13G to report
the acquisition which is the subject of this Schedule 13D, and is filing this
schedule because of Rule 13d-1(b)(3) or (4), check the following box / /.
Check the following box if a fee is being paid with the statement /X/. (A fee is
not required only if the reporting person: (1) has a previous statement on file
reporting beneficial ownership of more than five percent of the class of
securities described in Item 1; and (2) has filed no amendment subsequent
thereto reporting beneficial ownership of five percent or less of such class.)
(See Rule 13d-7.)
Note: Six copies of this statement, including all exhibits, should be filed with
the Commission. See Rule 13d-1(a) for other parties to whom copies are to be
sent.
(Continued on following page(s))
Page 1 of 13
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CUSIP No. 809173 20 6 13D Page 2 of 13 Pages
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- --------------------------------------------------------------------------------
1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
Technology Leaders II L.P.
- --------------------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP*
(a) /x/
(b) / /
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3 SEC USE ONLY
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4 SOURCE OF FUNDS*
WC
- --------------------------------------------------------------------------------
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS
REQUIRED PURSUANT TO ITEMS 2(d) or 2(e)
/ /
- --------------------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION
Delaware
- --------------------------------------------------------------------------------
7 SOLE VOTING POWER
NUMBER OF
SHARES --------------------------------------------
BENEFICIALLY 8 SHARED VOTING POWER
OWNED BY
EACH 1,872,528
REPORTING --------------------------------------------
PERSON 9 SOLE DISPOSITIVE POWER
WITH
--------------------------------------------
10 SHARED DISPOSITIVE POWER
1,872,528
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11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
1,872,528
- --------------------------------------------------------------------------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11)
EXCLUDES CERTAIN SHARES* / /
- --------------------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
11.8%
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14 TYPE OF REPORTING PERSON*
PN
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*SEE INSTRUCTIONS BEFORE FILLING OUT
<PAGE>
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CUSIP No. 809173 20 6 13D Page 3 of 13 Pages
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- --------------------------------------------------------------------------------
1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
Technology Leaders II Offshore C.V.
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2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP*
(a) /x/
(b) / /
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3 SEC USE ONLY
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4 SOURCE OF FUNDS*
WC
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5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS
REQUIRED PURSUANT TO ITEMS 2(d) or 2(e)
/ /
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6 CITIZENSHIP OR PLACE OF ORGANIZATION
Netherland Antilles
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7 SOLE VOTING POWER
NUMBER OF
SHARES --------------------------------------------
BENEFICIALLY 8 SHARED VOTING POWER
OWNED BY
EACH 1,487,472
REPORTING --------------------------------------------
PERSON 9 SOLE DISPOSITIVE POWER
WITH
--------------------------------------------
10 SHARED DISPOSITIVE POWER
1,487,472
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11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
1,487,472
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12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11)
EXCLUDES CERTAIN SHARES* / /
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13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
9.5%
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14 TYPE OF REPORTING PERSON*
PN
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*SEE INSTRUCTIONS BEFORE FILLING OUT
<PAGE>
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CUSIP No. 809173 20 6 13D Page 4 of 13 Pages
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- --------------------------------------------------------------------------------
1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
Technology Leaders II Management L.P.
- --------------------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP*
(a) /x /
(b) / /
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3 SEC USE ONLY
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4 SOURCE OF FUNDS*
N/A
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5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS
REQUIRED PURSUANT TO ITEMS 2(d) or 2(e)
/ /
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6 CITIZENSHIP OR PLACE OF ORGANIZATION
Delaware
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7 SOLE VOTING POWER
NUMBER OF
SHARES --------------------------------------------
BENEFICIALLY 8 SHARED VOTING POWER
OWNED BY
EACH 3,360,000
REPORTING --------------------------------------------
PERSON 9 SOLE DISPOSITIVE POWER
WITH
--------------------------------------------
10 SHARED DISPOSITIVE POWER
3,360,000
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11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
3,360,000
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12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11)
EXCLUDES CERTAIN SHARES* / /
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13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
19.9%
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14 TYPE OF REPORTING PERSON*
PN
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*SEE INSTRUCTIONS BEFORE FILLING OUT
<PAGE>
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CUSIP No. 809173 20 6 13D Page 5 of 13 Pages
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- --------------------------------------------------------------------------------
1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
Ira M. Lubert
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2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP*
(a) / /
(b) / x /
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3 SEC USE ONLY
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4 SOURCE OF FUNDS*
PF
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5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS
REQUIRED PURSUANT TO ITEMS 2(d) or 2(e)
/ /
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6 CITIZENSHIP OR PLACE OF ORGANIZATION
New Jersey
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7 SOLE VOTING POWER
NUMBER OF
SHARES 160,000
BENEFICIALLY --------------------------------------------
OWNED BY 8 SHARED VOTING POWER
EACH
REPORTING --------------------------------------------
PERSON 9 SOLE DISPOSITIVE POWER
WITH
160,000
--------------------------------------------
10 SHARED DISPOSITIVE POWER
- --------------------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
160,000
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12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11)
EXCLUDES CERTAIN SHARES* / /
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13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
1.1%
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14 TYPE OF REPORTING PERSON*
IN
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*SEE INSTRUCTIONS BEFORE FILLING OUT
<PAGE>
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CUSIP No. 809173 20 6 13D Page 6 of 13 Pages
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Item 1. Security and Issuer
The class of equity securities which this statement relates to
is the common stock, $.01 par value per share ("Common Stock"), of The Score
Board, Inc. (the "Issuer"). The principal executive offices of the Issuer are
located at 1951 Old Cuthbert Road, Cherry Hill, New Jersey, 08034.
Item 2. Identity and Background
On November 6, 1996 (the "Closing Date") for an aggregate
purchase price of $4,000,000, the Issuer sold, issued and delivered to a group
of purchasers (the "Purchasers"), including, among others, Technology Leaders II
L.P. ("TL II"), Technology Leaders II Offshore C.V. ("TLO II" and together with
TL II, "Tech Leaders") and Ira Lubert ("Lubert" and together with Tech Leaders,
the "Reporting Purchasers"), (i) an aggregate of 1,600,000 shares (the "Common
Shares") of Common Stock and (ii) immediately exercisable warrants to purchase
up to 2,720,000 shares of Common Stock at an initial exercise price of $3.07 per
share (the "Warrants"), in a transaction intended to be exempt from registration
under the Securities Act of 1933, as amended (the "Securities Act"), by virtue
of Section 4(2) thereof and Regulation D thereunder. The purchases by the
Purchasers were made pursuant to a Securities Purchase Agreement dated November
5, 1996 by and among the Issuer and the Purchasers, a copy of which is attached
hereto as Exhibit A (the "Purchase Agreement").
As a result of the Reporting Purchasers' acquisition of Common
Shares and Warrants, each of the Reporting Purchasers (other than Lubert who
disclaims membership in such group) and Technology Leaders II Management L.P.
("TLM II") affirm that they have become members of a group under Section
13(d)(3) of the Securities Exchange Act of 1934, as amended, and the Rules and
Regulations of the Securities Exchange Commission thereunder (the "Act") which
has acquired beneficial ownership of more than 5% of the Issuer's outstanding
Common Stock and consequently are required to file a statement under Section
13(d)(1) of the Act. Each of the Reporting Purchasers and TLM II are referred
to herein individually as a "Reporting Person" and collectively as the
"Reporting Persons".
The information provided in this Report with respect to each
Reporting Person and the general partners, directors, executive officers and
controlling persons of the Reporting Person, if any, has been provided solely by
that Reporting Person, and no Reporting Person is responsible for the accuracy
and completeness of the information included herein about any Reporting Person
other than itself and such general partners, directors, executive officers and
controlling persons.
Set forth in Exhibit B hereto and the Schedules thereto is the
name of each Reporting Person and the information required by Item 2 of Schedule
13D about the identity and background of that Reporting Person and its general
partners, directors, executive officers and controlling persons, if any,
supplied by such Reporting Person.
Neither the Reporting Persons nor, to the best of each
Reporting Person's knowledge, none of such Reporting Person's officers,
directors, general partners and controlling persons identified in Exhibit B has,
during the last five years, been convicted in a criminal proceeding (excluding
traffic violations or similar misdemeanors), or been a party to a civil
proceeding of a judicial or administrative body of competent jurisdiction and as
a result of such proceeding was or is subject to a judgment, decree or final
order enjoining future violations with respect to such laws.
<PAGE>
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CUSIP No. 809173 20 6 13D Page 7 of 13 Pages
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All of the Reporting Persons and the officers, directors,
general partners and controlling persons of such Reporting Persons are United
States citizens, except where otherwise indicated.
Item 3. Source and Amount of Funds or Other Consideration.
TL II expended $1,671,900 of its working capital funds for (i)
668,760 Common Shares and (ii) 1,203,768 Warrants.
TLO II expended $1,328,100 of its working capital funds for
(i) 531,240 Common Shares and (ii) 956,232 Warrants.
Mr. Lubert expended $397,120 out of his personal funds for
160,000 Common Shares.
Item 4. Purpose of Transaction.
The Common Shares and the Warrants acquired by the Reporting
Purchasers pursuant to the Purchase Agreement, and any shares that may in the
future be issued pursuant to the exercise of such Warrants have been and will be
acquired solely for the purpose of investment and not with a view to acquiring
control of the Issuer. One or more of the Reporting Persons may, however, from
time to time determine to purchase additional shares of the Issuer's Common
Stock on the open market, in negotiated transactions, or otherwise.
No Reporting Person has any plans or proposals of the type
described in paragraphs (a) through (j) of Schedule 13D, except as stated below.
(a) Acquisition of Additional Securities. As more fully
described in Section 7.6 of the Purchase Agreement, the Issuer may be obligated
to offer additional securities to the Reporting Purchasers in connection with
certain future issuances of securities by the Company in order to allow each of
the Reporting Purchasers to maintain its then current proportionate ownership
interest in the Issuer.
Pursuant to a Registration Rights Agreement dated November
5, 1996 (the "Registration Rights Agreement"), the Issuer is obligated to file
on behalf of the registered holders of the securities issued by the Issuer
pursuant to the Purchase Agreement (which are defined in the Registration Rights
Agreement as "Registrable Securities"), a registration statement under the
Securities Act registering all of the Registrable Securities with the SEC for
sale in a public offering and to register or qualify such Registrable Securities
for sale in such public offering under applicable state securities laws. The
Registration Rights Agreement also affords certain "piggyback" registration
rights to such registered holders to include such Registrable Securities on a
registration statement proposed to be filed by the Issuer under the Securities
Act. The Purchasers or other holders from time to time of the Registrable
Securities may exercise one or more of their registration rights in the future.
A copy of the Registration Rights Agreement is attached hereto as Exhibit D.
(d) Directorship/Management. Pursuant to Section 7.5 of the
Purchase Agreement:
(i) The Company has appointed Mr. Lubert, the nominee of
Tech Leaders, to the Company's Board of Directors. The Company has agreed to
maintain Mr. Lubert (or his replacement
<PAGE>
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CUSIP No. 809173 20 6 13D Page 8 of 13 Pages
- --------------------- ------------------
as designated by Tech Leaders) as a member of the Company's Board of Directors
and as a member of the Audit Committee and Compensation Committee thereof for so
long as Tech Leaders beneficially owns any Fully Diluted Shares (as defined
below). Upon the purchase by Tech Leaders of an aggregate of 540,000 shares of
Common Stock upon the exercise of all or any portion of the Warrants purchased
by Tech Leaders pursuant to the Purchase Agreement, the Company is obligated to
use its best efforts to cause an additional person designated by Tech Leaders to
be appointed to the Company's Board of Directors at the Company's first Board
meeting following such exercise and thereafter, for so long as Tech Leaders
beneficially owns at least 500,000 shares of Common Stock shall use its best
efforts to maintain such designee (or such replacement for such designee as Tech
Leaders may designate from time to time) on the Company's Board of Directors. As
used herein, "Fully Diluted Shares" shall mean all shares of Common Stock plus
all shares of Common Stock issuable upon exercise, conversion or exchange of any
securities exercisable or exchangeable for, or convertible into, shares of
Common Stock (including, without limitation, the Warrants).
(ii) The Company is obligated to use its best efforts to
identify and appoint, as soon as practicable, an individual to serve as
President of the Company (it being agreed that the first of such candidates may
be a current officer of the Company), which individual shall report directly to
both the Company's Chief Executive Officer and to the Company's Board of
Directors and shall have such responsibilities and duties as are customary for
the president of a public company. At all times that a designee of Tech Leaders
is a member of the Company's Board of Directors, the Company shall not appoint
any new President (or any other officer performing similar functions) without
the approval of a majority of the Directors constituting the Company's Board of
Directors and the approval of the members(s) of the Company's Board of Directors
designated by Tech Leaders pursuant to clause (i) above.
Item 5. Interest in Securities of the Issuer.
The table below sets forth the aggregate number of shares and
percentage of the Issuer's outstanding Common Stock beneficially owned by each
Reporting Person and each executive officer, director, partner and controlling
person, if any, of that Reporting Person named in Exhibit B and the Schedules
thereto. Any of the aforementioned persons whose names do not appear in the
table below do not beneficially own any shares of the Issuer.
Except for the execution of the Purchase Agreement by the
Reporting Purchasers and the carrying out of the transactions contemplated
thereby, no person named in Exhibit B and the Schedules thereto has, to any
Reporting Person's knowledge, consummated any transaction in the Issuer's Common
Stock during the past sixty days.
<TABLE>
<CAPTION>
Number of Shares Percentage of
Name of Person Beneficially Owned Outstanding Shares1
-------------- ------------------ ------------------
<S> <C> <C>
Technology Leaders II L.P.2 5 1,872,528 11.8%
Technology Leaders II Offshore C.V.3 1,487,472 9.5%
Ira M. Lubert4 160,000 1.1%
Technology Leaders II Management L.P.5 3,360,000 19.9%
</TABLE>
<PAGE>
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CUSIP No. 809173 20 6 13D Page 9 of 13 Pages
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1 Based on 14,689,148 shares of Common Stock outstanding on November 5,
1996.
2 TL II is the record owner of 668,760 Common Shares and 1,203,768
immediately exercisable Warrants.
3 TLO II is the record owner of 531,240 Common Shares and 956,292
immediately exercisable Warrants.
4 Mr. Lubert is a General Partner of TLM II and also holds a limited
partnership interest in TL II. Mr. Lubert disclaims beneficial
ownership of the shares of Common Stock beneficially owned by TL II and
TLO II except to the extent of his proportionate pecuniary interest
therein.
5 TLM II is the sole general partner of TL II and is the co-general
partner of TLO II. TLM II has sole authority and responsibility for all
investment, voting and disposition decisions for TL II and TLO II,
which powers are exercised through its eleven-person executive
committee, by whose decision TLM II's general partners have agreed to
be bound. As a result of TLM II's investment control over all the
Issuer's Common Stock held by TL II and TLO II, TLM may be deemed to be
the beneficial owner of all of the Issuer's Common Stock beneficially
owned by TL II and TLO II.
Item 6. Contracts, Arrangements, Understandings or Relationships With
Respect to Securities of the Issuer
The Purchase Agreement sets forth various arrangements,
obligations, rights and understandings among the Issuer and the Reporting
Purchasers with respect to the Issuer and the securities sold to the Reporting
Purchasers pursuant to the Purchase Agreement. Some of these arrangements,
obligations, rights and understandings are summarized in Item 4 of this Report,
and all are set forth in complete detail in the Purchase Agreement and in the
Registration Rights Agreement, copies of which are attached hereto and are
incorporated herein by reference in their entirety.
Except as described in the preceding paragraph, there are no
contracts, arrangements, understandings or relationships among the persons named
in Exhibit B and the Schedules thereto or between such persons and any person
with respect to any securities of the Issuer.
Item 7. Material to be Filed as Exhibits.
Exhibit A - Securities Purchase Agreement (excluding
the Exhibits and Schedules thereto)
Exhibit B - Information about the identity and
background of Reporting Persons
Exhibit C - Agreement Regarding Joint Filing
Exhibit D - Registration Rights Agreement
<PAGE>
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CUSIP No. 809173 20 6 13D Page 10 of 13 Pages
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SIGNATURE
After reasonable inquiry and to the best of my knowledge and
belief, I certify that the information set forth in this statement is true,
complete and correct.
Dated: November 18, 1996
TECHNOLOGY LEADERS II L.P.
By: Technology Leaders II Management L.P.,
a General Partner
By: Technology Leaders Management, Inc.,
a General Partner
By: /s/ Ira M. Lubert
--------------------------------------
Name: Ira M. Lubert
Title: Vice President
<PAGE>
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CUSIP No. 809173 20 6 13D Page 11 of 13 Pages
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SIGNATURE
After reasonable inquiry and to the best of my knowledge and
belief, I certify that the information set forth in this statement is true,
complete and correct.
Dated: November 18, 1996
TECHNOLOGY LEADERS II OFFSHORE C.V.
By: Technology Leaders II Management L.P.,
a General Partner
By: Technology Leaders Management, Inc.,
a General Partner
By: /s/ Ira M. Lubert
--------------------------------------
Name: Ira M. Lubert
Title: Vice President
<PAGE>
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CUSIP No. 809173 20 6 13D Page 12 of 13 Pages
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SIGNATURE
After reasonable inquiry and to the best of my knowledge and
belief, I certify that the information set forth in this statement is true,
complete and correct.
Dated: November 18, 1996
TECHNOLOGY LEADERS II MANAGEMENT L.P.
By: Technology Leaders Management, Inc.,
a General Partner
By: /s/ Ira M. Lubert
-------------------------------------
Name: Ira M. Lubert
Title: Vice President
<PAGE>
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CUSIP No. 809173 20 6 13D Page 13 of 13 Pages
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SIGNATURE
After reasonable inquiry and to the best of my knowledge and belief,
I certify that the information set forth in this statement is true, complete and
correct.
Dated: November 18, 1996
/s/ Ira M. Lubert
---------------------------
Ira M. Lubert
<PAGE>
EXHIBIT INDEX
Exhibit Title
------- -----
A Securities Purchase Agreement
(excluding Exhibits and Schedules
thereto)
B Information about the Identity and
Background of Reporting Persons
C Agreement Regarding Joint Filing
D Registration Rights Agreement
<PAGE>
EXHIBIT A
THE SCORE BOARD, INC.
SECURITIES PURCHASE AGREEMENT
<PAGE>
TABLE OF CONTENTS
SECTION 1. SALE AND PURCHASE OF COMMON STOCK AND WARRANTS; CLOSING
1
1.1 Sale of Common Stock and Warrants............................1
1.2 Purchase Price...............................................2
1.3 Closing......................................................3
SECTION 2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY................3
2.1 Organization and Good Standing...............................3
2.2 Authorization................................................4
2.3 No Conflict with Law or Documents............................4
2.4 Capital Stock of Company.....................................4
2.5 The Common Shares, Warrants and Warrant Shares...............5
2.6 Consents and Approvals.......................................5
2.7 Private Offering.............................................5
2.8 Certificate of Incorporation and By-Laws.....................6
2.9 Subsidiaries.................................................6
2.10 SEC Filings..................................................6
2.11 Litigation...................................................6
2.12 Compliance with Laws.........................................7
2.13 Financial Statements.........................................7
2.14 Assets.......................................................7
2.15 Dividends and Other Distributions............................8
2.16 Tax Matters..................................................8
2.17 Agreements Affecting the Company's Capital Stock.............9
2.18 Patents, Trademarks, Proprietary Rights......................9
2.19 Insurance...................................................11
2.20 Employee Benefit Plans......................................11
2.21 Contracts and Agreements....................................14
2.22 Absence of Certain Developments.............................14
2.23 Contracts with Insiders.....................................15
2.24 Environmental Matters.......................................15
2.25 Certain Agreements..........................................17
2.26 Accounts Receivable.........................................17
2.27 Inventory...................................................17
2.28 Books and Records...........................................18
2.29 Certain Payments............................................18
2.30 U.S. Real Property Holding Company..........................18
2.31 Minute Books................................................18
2.32 Labor Agreements and Actions................................19
2.33 Entire Business; Etc........................................19
2.34 Conditions Affecting Company and Subsidiaries...............19
2.35 Projections.................................................19
2.36 Information.................................................20
SECTION 3. PURCHASERS' REPRESENTATIONS AND WARRANTIES..................20
3.1 Pre-Existing Entity.........................................20
3.2 Principal Place of Business.................................20
3.3 Purchase Without View to Distribute.........................20
3.4 Restrictions on Transfer....................................21
-i-
<PAGE>
3.5 Access to Information.......................................21
3.6 Additional Representations of the Purchaser.................21
SECTION 4. CONDITIONS PRECEDENT TO PURCHASERS' OBLIGATIONS.............22
4.1 Representations and Warranties..............................22
4.2 Performance.................................................22
4.3 Approvals and Consents......................................22
4.4 Delivery of Common Stock Certificates and Warrants..........22
4.5 Opinion of Counsel to the Company...........................22
4.6 Proceedings; Certified Copies...............................22
4.7 Investigation...............................................23
4.8 No Proceeding or Litigation.................................23
4.9 No Material Adverse Change..................................23
4.10 Environmental Obligations...................................23
4.11 NNM.........................................................23
4.12 Executive Officer Agreements................................23
4.13 Cancellation of Options.....................................23
4.14 Waiver by Bookman...........................................23
4.15 Waiver by Holders of Registration Rights....................24
4.16 Waiver by Congress Financial Corporation....................24
4.17 Lock-up Agreements..........................................24
4.18 Other Documents.............................................24
SECTION 5. CONDITIONS PRECEDENT TO THE COMPANY'S OBLIGATIONS...........24
5.1 Representations and Warranties..............................24
5.2 Performance.................................................25
5.3 No Proceeding or Litigation.................................25
SECTION 6. COVENANTS OF THE COMPANY PRIOR TO CLOSING...................25
6.1 Payment of Expenses.........................................25
6.2 Operation of Business in Ordinary Course....................25
6.3 Conditions Precedent........................................25
SECTION 7. COVENANTS OF THE COMPANY AFTER CLOSING......................25
7.1 Rule 144....................................................25
7.2 Financial Statements; SEC Reports...........................26
7.3 Maintenance of Existence; Insurance.........................27
7.4 Compliance with Laws........................................27
7.5 Board Representative...............................27
7.6 Right to Acquire Additional Voting Securities...............28
7.7 Press Releases..............................................30
7.8 NNM Listing.................................................30
7.12 Waivers, Consents, Etc......................................31
SECTION 8. COMPLIANCE WITH 1933 ACT; RESTRICTIONS ON TRANSFERABILITY
OF COMMON SHARES, WARRANTS AND WARRANT SHARES...............31
8.1 Compliance with 1933 Act....................................31
8.2 Restrictive Legend..........................................31
8.3 Restrictions on Transferability.............................31
8.4 Termination of Restrictions on Transferability..............32
SECTION 9. DISPUTE RESOLUTION..........................................32
9.1 Good-Faith Negotiations.....................................32
-ii-
<PAGE>
SECTION 10. SURVIVAL OF REPRESENTATIONS, WARRANTIES AND
AGREEMENTS...............34
SECTION 11. MISCELLANEOUS.................................................34
11.1 Owner of Common Shares, Warrants and Warrant Shares...........34
11.2 Successors....................................................34
11.3 Broker or Finder..............................................34
11.4 Governing Law.................................................35
11.5 Notice........................................................35
11.6 Full Agreement................................................35
11.7 Headings......................................................35
11.8 No Waiver; Cumulative Remedies................................35
11.9 Amendments, Waivers and Consents..............................35
-iii-
<PAGE>
SECURITIES PURCHASE AGREEMENT (the "Agreement") made as of
this 5th day of November, 1996 by and among THE SCORE BOARD, INC. (the
"Company") and each of the persons listed on Schedule 1 hereto (each, a
"Purchaser" and collectively, the "Purchasers").
BACKGROUND:
The Company is issuing an aggregate of 1,600,000 shares of its
Common Stock, $.01 par value per share ("Common Stock") and Warrants (as defined
in Section 1.1 hereof) to purchase up to 2,720,000 shares, subject to adjustment
as provided in the Warrants, of its Common Stock.
Each Purchaser, desiring to purchase Common Stock and
Warrants, hereby subscribes for the number of shares of Common Stock set forth
on Schedule 1 hereto and Warrants to purchase the number of shares, subject to
adjustment as provided therein, of Common Stock as set forth on Schedule 1
hereto.
Intending to be legally bound hereby, the parties hereto agree
as follows:
SECTION 1. SALE AND PURCHASE OF COMMON STOCK AND WARRANTS; CLOSING
1.1 Sale of Common Stock and Warrants.
(a) The Company shall authorize the issuance of an aggregate
of 1,600,000 shares of Common Stock (the "Common Shares").
(b) The Company shall authorize the issuance of warrants
having the terms and provisions provided herein and in the form of warrant
attached hereto as Exhibit A to purchase an aggregate of 1,925,000 shares of
Common Stock, subject to adjustment as provided in such warrants, at a purchase
price of $3.07 per share (individually, a "Series A Warrant" and collectively,
the "Series A Warrants").
(c) The Company shall authorize the issuance of warrants
having the terms and provisions provided herein and in the form of warrant
attached hereto as Exhibit B to purchase an aggregate of 233,333 shares of
Common Stock, subject to adjustment as provided in such warrants, at a purchase
price of $3.07 per share (individually, a "Series B Warrant" and collectively,
the "Series B Warrants").
(d) The Company shall authorize the issuance of warrants
having the terms and provisions provided herein and in the form of warrant
attached hereto as Exhibit C to purchase an aggregate of 233,333 shares of
Common Stock, subject to adjustment as provided in such warrants, at a purchase
price of $3.07 per share (individually, a "Series C Warrant" and collectively,
the "Series C Warrants").
(e) The Company shall authorize the issuance of warrants
having the terms and provisions provided herein and in the form of warrant
attached hereto as Exhibit D to purchase an aggregate of 128,334 shares of
Common Stock, subject to adjustment as provided in such warrant, at a purchase
price of $3.07 per share (individually, a "Series D Warrant" and collectively,
the "Series D Warrants").
(f) The Company shall authorize the issuance of warrants
having the terms and provisions provided herein and in the form of warrant
attached hereto as Exhibit E to purchase an aggregate of 200,000 shares of
Common Stock, subject to adjustment as provided in such warrant, at a purchase
price of $3.07 per share (individually, a "Series E Warrant" and collectively,
the "Series E Warrants").
The Series A Warrants, the Series B Warrants, the Series C
Warrants, the Series D Warrants and the Series E Warrants are hereinafter
referred to as the Warrants. The shares of Common Stock purchasable upon
exercise of the Warrants are hereinafter referred to as the "Warrant Shares".
The Common Shares and Warrant Shares are hereinafter referred to as the
"Shares".
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(g) Subject to the terms and conditions herein set forth, on
the Closing Date (as defined in Section 1.3), the Company agrees to sell, issue
and deliver to each Purchaser, for the purchase price provided for in Section
1.2, such number of Common Shares set forth on Schedule 1, and Warrants of such
series and to purchase the number of shares of Common Stock, subject to
adjustment as provided in the Warrants, set forth on Schedule 1, and each
Purchaser severally agrees to purchase such number of Common Shares and such
Warrants at such Purchase Price.
(h) The stock certificates representing the Common Shares to
be delivered to each Purchaser on the Closing Date shall be duly executed by the
Company, registered in such Purchaser's name (or the name of its nominee), free
of all restrictive and other legends (other than the legend specified in Section
8.2 or other legends reasonably acceptable to the Purchasers) and otherwise in
form for good delivery. The certificates evidencing the Series A Warrants,
Series B Warrants, Series C Warrants, Series D Warrants and Series E Warrants
shall be in substantially the form of Exhibits A, B, C, D and E, as the case may
be, with blanks appropriately completed, for the number of shares of Common
Stock applicable to such Purchaser, duly executed by the Company, registered in
such Purchaser's name (or the name of such nominee), free of all restrictive and
other legends (other than the legend specified in Section 8.2 or other legends
reasonably acceptable to the Purchasers) and otherwise in form for good
delivery. The Company will bear all of its own expenses in connection with the
preparation and issuance to the Purchasers of the certificates representing the
Common Shares and the Warrants.
1.2 Purchase Price.
(a) The aggregate purchase price of the Common Shares and
Warrants to be issued and sold to the Purchasers on the Closing Date shall
aggregate $4,000,000 (the "Purchase Price").
(b) The portion of the Purchase Price for the Common Shares
and Warrants payable by each Purchaser shall be as set forth on Schedule 1 and
shall be paid to the Company by wire transfer of immediately available funds to
an account designated by the Company. Each Purchaser shall only be responsible
for such portion of the Purchase Price attributable to the Common Stock and
Warrants being purchased by such Purchaser.
(c) The Company and the Purchasers agree to allocate the
Purchase Price between the Common Shares and Warrants as follows:
(i) to the Common Shares, an amount equal to
$3,972,800, and
(ii) to the Warrants, an amount equal to $27,200 or
$.01 per each Warrant Share issuable under such Warrants.
(d) Each Purchaser and the Company shall prepare and file
their respective Federal income tax returns in a manner which is consistent with
the allocation of the Purchase Price to the Common Shares and the Warrants as
provided in clause (c) above and consistent with the treatment on the Federal
income tax return of each other party of matters related to such allocation.
1.3 Closing. The closing of the issuance and sale of the Common Shares
and Warrants to the Purchasers hereunder shall be held at the offices of Klehr,
Harrison, Harvey, Branzburg & Ellers, 1401 Walnut Street, Philadelphia,
Pennsylvania as soon as practicable following the satisfaction or waiver of all
the closing conditions set forth in Section 4, but no later than November
10,1996. As used herein "Closing" shall mean the closing of the issuance and
sale of the Common Shares and Warrants to the Purchasers hereunder and the
"Closing Date" shall mean the date on which such Closing takes place.
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SECTION 2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Other than as set forth on the Disclosure Letter (as hereinafter
defined) attached hereto as Exhibit B, the Company represents and warrants to
each Purchaser as follows (which representations shall be true and correct as of
the date hereof and on the Closing Date as if made on each of such dates):
2.1 Organization and Good Standing. Each of the Company and
each of its Subsidiaries (as defined herein) is a corporation duly organized,
validly existing and in good standing under the laws of its incorporation and
has all requisite power and authority, and all necessary licenses and permits,
to own and lease its properties and assets and to conduct its business as now
conducted. Each of the Company and each of its Subsidiaries is qualified to do
business as a foreign corporation and is in good standing in all states where
the conduct of its business or its ownership or leasing of property requires
such qualification, except where the failure to so qualify may have a material
adverse effect on the business, properties, assets, prospects, operations or
condition (financial or otherwise) of the Company or any Subsidiary (a "Material
Adverse Effect").
2.2 Authorization. The Company has all requisite power and
authority to execute and deliver this Agreement and the other agreements and
documents required to be executed and delivered by the Company to the Purchasers
prior to or at the Closing and to carry out the transactions contemplated hereby
and thereby. The execution, delivery and performance by the Company of this
Agreement has been duly authorized by all requisite corporate action, and this
Agreement has been duly executed and delivered by the Company and constitutes
the valid and binding obligation of the Company, enforceable against the Company
in accordance with its terms.
2.3 No Conflict with Law or Documents. The execution, delivery
and performance of this Agreement by the Company will not violate any provision
of law, any rule or regulation of any governmental authority, or any judgment,
decree or order of any court binding on the Company or any of its Subsidiaries
and will not conflict with or result in any breach of any of the terms,
conditions or provisions of, or constitute a default under, or result in the
creation of any lien, security interest, charge or encumbrance upon any of the
properties, assets or outstanding stock of the Company or any of its
Subsidiaries under their respective certificates or articles of incorporation,
by-laws or other organizational documents or any indenture, mortgage, lease,
agreement or other instrument to which the Company or any of its Subsidiaries is
a party or by which any of them or any of their properties are bound.
2.4 Capital Stock of Company. The authorized capital stock of
the Company consists of: (i) 30,000,000 shares of Common Stock, $.01 par value
per share, of which, prior to the issuance of any of the Common Shares and
Warrants pursuant to the Agreement, (A) 13,089,148 shares have been duly and
validly issued and are currently outstanding, fully paid and nonassessable, (B)
921,400 shares have been reserved for issuance upon the awarding of stock grants
or the exercise of options granted and to be granted by the Company (the
"Options" and "Option Shares") under the Company's 1987 Stock Option Plan, the
Company's 1992 Stock Incentive Plan, the Company's 1992 Directors Stock Option
Plan or the Company's 1993 Non-employee Stock Option Plan (collectively, the
"Existing Stock Plans") and (c) 418,410 shares have been reserved of issuance
upon the exercise or conversion of outstanding securities issued by the Company
(the "Convertible Securities" and "Conversion Shares") and (ii) 10,000,000
shares of preferred stock, $.01 par value per share, none of which shares are
presently issued and outstanding. The number of shares of Common Stock issuable
as Option Shares or upon the exercise of Options under the Existing Stock Plans
or as Conversion Shares is not subject to adjustment by reason of the issuance
and sale of the Common Shares or Warrants hereunder, or the Warrant Shares upon
exercise of the Warrants, and no other shares of Common Stock have been reserved
by the Company for issuance. There are no preemptive or similar rights to
purchase or otherwise acquire shares of capital stock of the Company pursuant to
any provision of law or the Certificate of Incorporation or By-Laws of the
Company or by agreement or otherwise. Except as set forth in this Section 2.4
and the disclosure letter from the Company to the Purchasers of even date
herewith
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(the "Disclosure Letter"), there are no outstanding subscriptions, warrants,
options or other rights or commitments of any character to subscribe for or
purchase from the Company, or obligating the Company to issue, any shares of
capital stock of the Company or any securities convertible into or exchangeable
for such shares.
2.5 The Common Shares, Warrants and Warrant Shares. The Common
Shares, when issued and delivered against payment therefor in accordance with
this Agreement, will be duly authorized, validly issued, fully paid and
non-assessable, and free from all taxes, liens (imposed through the actions or
failure to act of the Company) and charges with respect to the issue thereof.
The Warrants, when issued and delivered against payment therefor in accordance
with this Agreement, will be duly authorized and executed by the Company and
will constitute valid and legally binding obligations of the Company,
enforceable in accordance with their terms. The requisite number of shares of
duly authorized and unissued Common Stock of the Company have been duly
authorized and reserved for issuance upon the exercise of the Warrants, and no
further corporate action is required for the valid issuance of the Warrant
Shares upon the exercise of the Warrants. The Warrant Shares will, at the time
of the Closing and thereafter, not be subject to preemptive or similar rights of
any person, and when issued against payment therefor in accordance with the
terms of the Warrants, will be duly and validly issued, fully paid and
nonassessable, and free from all taxes, liens (imposed through the actions or
failure to act of the Company) and charges with respect to the issue thereof.
2.6 Consents and Approvals. Except for filings under Federal
and applicable state securities laws with respect to the Warrant Shares, no
permit, consent, approval or authorization of, or declaration to or filing with,
any federal, state, local or foreign governmental or regulatory authority or
other person, not made or obtained, other than the notification of the National
Association of Securities Dealers, Inc. (the "NASD") with respect to the listing
of the Shares on The Nasdaq National Market System (the "NMS"), is required in
connection with the execution or delivery of this Agreement by the Company, the
offer, issuance, sale or delivery of the Common Shares, Warrants or Warrant
Shares, or the carrying out by the Company of the other transactions
contemplated hereby. Neither the issuance and sale by the Company of the Common
Shares and Warrants as contemplated hereby nor the issuance of the Warrant
Shares upon exercise of the Warrants shall require compliance with the
notification or other requirements of the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended, and the rules and regulations promulgated
thereunder (collectively, "the HSR Act"), or require any action by or in respect
of, or filing with, any governmental body, agency or official, nor any consent
or approval of shareholders as such or of any other individual or entity (except
that if either Technology Leaders II L.P. ("TLLP") or Technology Leaders II C.V.
("TLCV", and together with TTLP, "Tech Leaders") exercises all or a portion of
its Warrants and such exercise would result in TLLP or TLCV owning in the
aggregate 15 percent (15%) or more of the Company's Common Stock, then prior
compliance with the HSR Act would be required before the exercise of such
Warrants).
2.7 Private Offering. Assuming the accuracy of the Purchasers'
representations and warranties contained in Section 3 herein, the offer,
issuance and delivery to the Purchasers pursuant to the terms of this Agreement
of the Common Shares and Warrants and, assuming compliance by the Purchasers
with the terms of this Agreement and applicable law, the Warrant Shares, are
exempt from registration under the Securities Act of 1933, as amended (the "1933
Act"). Based on the representations of the Purchasers contained in Section 3, it
is not necessary, under the circumstances contemplated by this Agreement, to
register the Common Shares, Warrants or Warrant Shares under the 1933 Act or
under any applicable state securities or blue sky laws.
2.8 Certificate of Incorporation and By-Laws. The copies of
the Company's Certificate of Incorporation and By-Laws previously delivered to
the Purchasers are true and correct and are copies of such documents as in full
force and effect as of the date hereof.
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2.9 Subsidiaries. The Disclosure Letter states the name of
each of the Company's subsidiaries (each, a "Subsidiary" and collectively, the
"Subsidiaries"). The Disclosure Letter also states each Subsidiary's
jurisdiction of incorporation and the percentage of its voting stock owned by
the Company and each other Subsidiary. Other than the Subsidiaries, the Company
has no corporate or joint venture affiliates. The Company and each Subsidiary
has good and marketable title to all of the shares it purports to own of the
stock of each Subsidiary, free and clear in each case of any mortgage, lien,
security interest, charge or encumbrance. All such shares have been duly issued
and are fully paid and nonassessable. There are no outstanding warrants, options
or other rights or commitments of any character to subscribe for or purchase
from the Company or a Subsidiary, or obligating such Subsidiary to issue, any
shares of capital stock of such Subsidiary or any securities convertible into or
exchangeable for such shares.
2.10 SEC Filings. The Company has delivered to the Purchasers
prior to the date hereof true and correct copies of (i) its Annual Report on
Form 10-K for the fiscal year ended January 31, 1996 as amended by Form 10-K/A
dated April 29, 1996, (ii) its Quarterly Report on Form 10-Q for the quarter
ended July 31, 1996 and (iii) its Current Reports on Form 8-K and any other
reports and documents filed with the Securities and Exchange Commission since
January 31, 1996. All documents described in this Section are hereinafter
referred to as the "SEC Reports."
2.11 Litigation. The Disclosure Letter lists all material
pending or, to the Company's knowledge, threatened litigation involving the
Company and/or its Subsidiaries. For purposes of this Section 2.11, any one
litigation will not be deemed "material" and need not be disclosed unless the
amount at issue is greater than $50,000, provided, however, that if the amount
at issue with respect to all immaterial litigation is, in the aggregate, greater
than $300,000, then all such litigation must be disclosed. By separate letter
the Company has provided the Purchasers with a summary of the current status of
each litigation set forth on the Disclosure Letter which summary is true and
correct. Except as so disclosed, there is no pending or, to the knowledge of the
Company, threatened suit, action or litigation, or administrative, arbitration
or other proceeding or governmental inquiry or investigation questioning the
validity of this Agreement or the transactions contemplated hereby, or which may
have a Material Adverse Effect, nor is there, to the knowledge of the Company,
any basis for any such suit, action, litigation, proceeding, inquiry or
investigation.
2.12 Compliance with Laws. The Company and each Subsidiary is
in compliance with all laws, ordinances, rules and regulations of governmental
authorities applicable to or affecting it, its properties or its business except
where non-compliance would not have a Material Adverse Effect, and neither the
Company nor any Subsidiary has received notice of any claimed default with
respect to such laws, ordinances, rules and regulations.
2.13 Financial Statements.
(a) (i) The audited consolidated balance sheets and
related audited statements of consolidated income, cash flow and stockholders'
equity of the Company and its Subsidiaries as at and for each of the three
fiscal years of the Company in the three fiscal year period ended January 31,
1996, and (ii) the unaudited consolidated balance sheet and related unaudited
consolidated statements of income, cash flow and stockholders' equity of the
Company and its Subsidiaries, as at and for the six months ended July 31, 1996,
together with the notes thereto, copies of all of which have heretofore been
furnished to the Purchasers, in each case, present fairly in all material
respects the consolidated financial position of the Company and its Subsidiaries
at such dates and the consolidated results of their operations and their
consolidated cash flows for the periods then ended, in conformity with generally
accepted accounting principles, consistently applied ("GAAP").
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(b) Since July 31, 1996 ("the Balance Sheet Date")
there has been no material adverse change in the business, properties, assets,
operations or condition (financial or otherwise) of the Company and its
Subsidiaries taken as a whole.
(c) The consolidated balance sheet of the Company and
its Subsidiaries at the Balance Sheet Date (the "Balance Sheet") reflects all
liabilities and obligations of the Company and of each Subsidiary, whether
accrued, contingent or otherwise as of the date thereof, that are of a nature
required to be set forth as a liability on a consolidated balance sheet under
GAAP.
(d) As of the date hereof and at the time of the
issuance and sale of the Common Shares and Warrants to the Purchasers hereunder,
neither the Company nor any of its Subsidiaries will have any liabilities or
obligations, whether absolute, accrued, contingent, or otherwise, other than (i)
current liabilities reflected on the Balance Sheet not paid since the date of
the Balance Sheet, (ii) current liabilities incurred after the Balance Sheet
Date in the ordinary course of business and (iii) the other indebtedness of the
Company or of its Subsidiaries described in the Disclosure Letter.
2.14 Assets. Neither the Company nor any Subsidiary owns any
real property. The Company and each Subsidiary has good and marketable title to
all of the real and personal properties and assets reflected on the Balance
Sheet as being owned by the Company or such Subsidiary at the Balance Sheet
Date, except for properties and assets sold or otherwise disposed of in the
ordinary course of business since the Balance Sheet Date or that are not
material to its business, subject to no liens, mortgages, security interests,
pledges, encumbrances, or charges of any kind except: (1) liens for taxes or
assessments or other government charges or levies if not yet due and payable or
if due and payable if they are being contested in good faith by appropriate
proceedings and for which appropriate reserves are maintained; (2) liens imposed
by law, such as mechanic's, materialmen's, warehousemen's and carrier's liens,
and other similar liens, securing obligations incurred in the ordinary course of
business which are not past due for more than 30 days, or which are being
contested in good faith by appropriate proceedings and for which appropriate
reserves have been established; (3) liens under workmen's compensation,
unemployment insurance, social security or similar legislation; (4) liens,
deposits or pledges to secure the performance of bids, tenders, contracts (other
than contracts for the payment of money), leases, public or statutory
obligations, surety, stay, appeal, indemnity, performance or other similar
bonds, or other similar obligations arising in the ordinary course of business;
and (5) the liens securing other indebtedness of the Company or its Subsidiaries
described in the Disclosure Letter, or liens which do not and could not
individually or in the aggregate, have a material adverse effect on the
business, properties or assets of the Company and its Subsidiaries taken as a
whole, provided that any such one lien does not secure an individual obligation
of the Company and its Subsidiaries in excess of $25,000, and all such liens in
the aggregate do not secure obligations of the Company and its Subsidiaries in
the aggregate in excess of $100,000 ("Permitted Liens").
2.15 Dividends and Other Distributions. Since the Balance
Sheet Date, neither the Company nor any Subsidiary has declared, set aside, or
made any payment of a dividend or made any other distribution in respect of the
Company's capital stock, repurchased or redeemed any of the Company's capital
stock, or except as disclosed in the SEC Reports, made any other payments to any
holder of 5% or more of the Company's outstanding Common Stock other than salary
paid to such stockholder for bona fide services to the Company or a Subsidiary
as an officer or employee and in accordance with the historical employment
arrangement between the Company and such stockholder or reimbursement of
reasonable expenses incurred in the ordinary course of business.
2.16 Tax Matters. The Company and each Subsidiary has timely
filed (and, through and including the Closing Date, will timely file) with the
appropriate governmental entities all Federal, state, local, foreign and other
tax returns required to be filed on or before the Closing Date and has timely
paid (and through and including the Closing Date, will timely pay) all taxes
which have become due and payable. All such reports and returns (copies of which
have been made available to the Purchasers) were (or, with
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respect to returns and reports not filed as of the date hereof, will be)
materially accurate and complete when filed and reflect all taxes required to be
paid by the Company and its Subsidiaries for the periods reported therein. The
provision for taxes made on the Balance Sheet at the Balance Sheet Date was
sufficient for the payment of all accrued and unpaid taxes of the Company and
its Subsidiaries with respect to the periods then ended. No additional material
assessments, deficiencies or penalties in respect of taxes have been made or
claimed in writing against the Company or any Subsidiary which remain unpaid.
Except as otherwise set forth in the Disclosure Letter, no tax returns or
reports of the Company or any Subsidiary are or ever have been under audit. No
issue has been raised by any governmental authority with respect to any tax
returns of the Company or any Subsidiary which could result in the assertion of
a tax deficiency for any taxable year. As of July 31, 1996, the Company's
aggregate net operating loss carryovers and capital loss carryovers for federal
income tax purposes was $30,080,106, which amount arose in the years reflected
in the notes included in the Company's audited financial statements. The amount
of such carryover is true and accurate, not subject to adjustment other than
immaterial adjustments as a result of audits of the Company or in connection
with the preparation of tax returns, and was properly reported to all applicable
regulatory and taxing authorities. There currently are no limitations on the
utilization of the net operating losses or capital losses under any section of
the Code, including Section 382, or of the Treasury regulations. There will not
be any limitation on the utilization of the net operating losses or capital
losses solely by reason of transactions contemplated by this Agreement. Neither
the Company nor any Subsidiary is a party to, bound by, or obligated under any
tax sharing, indemnification or similar agreement or arrangement.
2.17 Agreements Affecting the Company's Capital Stock. Except
as disclosed in the Disclosure Letter, there are no agreements, written or oral,
between the Company and any holder of its capital stock or, to the knowledge of
the Company, among any holders of its capital stock, relating to the
acquisition, disposition or voting of the capital stock of the Company. Except
as disclosed in the Disclosure Letter and except for the Registration Rights
Agreement by and among the Company and the signatories thereto dated as of the
date hereof (the "Registration Rights Agreement") there are no agreements,
either written or oral, which obligate the Company or any of its Subsidiaries to
effect the registration of any of its securities under the 1933 Act.
2.18 Patents, Trademarks, Proprietary Rights.
(a) Except as disclosed in the Disclosure Letter, the
Company and its Subsidiaries have ownership of, or license to use, all patents,
copyrights, trademarks, servicemarks, tradenames, permits, trade secrets,
customer lists, manufacturing or other processes, computer programs, software
designs and related materials and other intellectual property that are used or
to be used in the business of the Company or any of its Subsidiaries and that
are material to the conduct of the Company's or a Subsidiary's business
(collectively, the "Intellectual Property Rights"). The Intellectual Property
Rights are sufficient to enable the Company and each Subsidiary to carry on its
business as currently conducted in all material respects and the Company's and
each Subsidiary's use and enjoyment of the Intellectual Property Rights does not
violate any license or conflict with or infringe the intellectual property
rights of others in a manner which would materially and adversely affect the
business, assets, properties, prospects, operations or condition (financial or
otherwise) of the Company or such Subsidiary and no proceedings have been
instituted or are pending (or to the knowledge of the Company, threatened) which
allege any violation, conflict or infringement of the intellectual property
rights of others. Other than as described in the Disclosure Letter, there are no
outstanding options, licenses or agreements of any kind to which the Company or
any Subsidiary thereof is a party or by which it may be bound relating to or
affecting any Intellectual Property, whether owned by the Company or a
Subsidiary thereof or another person (which term "person" as used herein
includes both individuals and entities of every kind and description).
(b) Neither the Company nor any Subsidiary is aware
that any of its employees is obligated under any contract or contracts
(including licenses, agreements, covenants and other commitments of any nature),
or is subject to any order, writ, judgment, injunction, decree, determination or
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award of any court, administrative agency or other tribunal, that restricts the
employee's activities on behalf of the Company or such Subsidiary as presently
conducted or interfere with the use of such employee's best efforts to promote
the interests of the Company or such Subsidiary.
(c) The Disclosure Letter sets forth each agreement
pursuant to which the Company or any of its Subsidiaries has obtained a license
to utilize Intellectual Property Rights (including, the use of any name or
likeness) in connection with products offered for resale by the Company or any
of its Subsidiaries and which requires or is reasonably expected to result in
payments by the Company in excess of $20,000 in any fiscal year. True and
correct copies of each such agreement (as in force as of the date hereof) has
been provided to the Purchasers and each of such agreements is in full force and
effect. The Company is not aware of any existing material default or event of
default (or event which with notice or lapse of time, or both, would constitute
a material default or an event of default) by any party under any of such
agreements.
(d) The Disclosure Letter sets forth all patents,
patent applications, trademarks, trademark applications and registrations and
registered copyrights which are owned by or licensed to the Company or any of
its Subsidiaries or used or to be used by the Company or any of its Subsidiaries
in their business as presently conducted, and which are material to the Company
or a Subsidiary. All of such patents, patent applications, trademark
registrations, trademark applications and registered copyrights have been duly
registered in, filed in or issued by the United States Patent and Trademark
Office, the United States Register of Copyrights, or the corresponding offices
of other jurisdictions as identified on the Disclosure Letter, and have been
properly maintained and renewed in accordance with all applicable provisions of
law and administrative regulations in the United States and each such
jurisdiction.
(e) The Disclosure Letter sets forth all material
licenses and other agreements under which the Company or any of its Subsidiaries
has granted rights to others in Intellectual Property Rights owned or licensed
by the Company or any of its Subsidiaries. Except as described in the Disclosure
Letter, all of said licenses or other agreements are in full force and effect,
and there is no material default or event of default (or event which with notice
or lapse of time, or both, would certificate a material default or an event of
default) by any party thereto.
(f) The Company and its Subsidiaries have taken all
steps required in accordance with sound business practice and business judgment
to establish and preserve their ownership of all material Intellectual Property
Rights. To the Company's knowledge, neither the Company nor its Subsidiaries
made any such information available to any person or entity other than employees
of the Company or any of its Subsidiaries except pursuant to written agreements
requiring the recipients to maintain the confidentiality of such information and
appropriately restricting the use thereof. To the knowledge to the Company,
there are no infringements by others of any of its or any Subsidiary's
Intellectual Property Rights.
2.19 Insurance. Except as described in the Disclosure Letter,
all the insurable properties of the Company and the Subsidiaries are insured for
the benefit of the Company and the Subsidiaries against all risks usually
insured against by persons operating similar properties in the locality where
such properties are located under valid and enforceable policies issued by
insurance companies of recognized responsibility in reasonably sufficient
amounts.
2.20 Employee Benefit Plans.
(a) The Disclosure Letter contains a complete and
correct list of all Employee Benefit Plans and Employee Pension Benefit Plans
currently maintained for the benefit of any current or former employees of the
Company or any Subsidiary by the Company or any ERISA Affiliate or to which
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the Company or any ERISA Affiliate currently contributes or is currently
obligated to make payments with respect to any current or former employees of
the Company or any Subsidiary.
(b) With respect to each Employee Benefit Plan listed
on the Disclosure Letter: (i) each Employee Benefit Plan has been administered
in accordance with its terms, and is in compliance in all material respects with
the applicable provisions of ERISA, the Code and all other federal, foreign,
state and other applicable laws, rules and regulations, as they relate to such
plan (including, without limitation, funding, filing, terminating, reporting and
disclosure and COBRA continuation coverage obligations); (ii) the Company has
made or provided for in a timely fashion all contributions to all Employee
Benefit Plans as required under the terms of such Plans through and including
the period ending on the Closing Date; (iii) no Employee Pension Benefit Plan
has incurred or has been the subject of a "reportable event" (as defined in
Section 4043 of ERISA) that is required to be reported to the PBGC, and neither
the Company nor any ERISA Affiliate has any liability to the PBGC with respect
to or arising from the maintenance of any such plan, and there have been no
"prohibited transactions" (as described in Section 4975 of the Code or in Part 4
of Subtitle B of Title I of ERISA) with respect to any Employee Benefit Plan;
(iv) there are and during the past three years there have been no inquiries,
proceedings, claims or suits pending or, to the Company's knowledge, threatened
by any governmental agency or authority or by any participant or beneficiary
against any of the Employee Benefit Plans, the assets of any of the trusts under
such Plans or the Plan sponsor or the Plan administrator, or against any
fiduciary of any of such Employee Benefit Plans with respect to the design or
operation of the Employee Benefit Plans; (v) each Employee Pension Benefit Plan
which is intended to be "qualified" within the meaning of Section 401(a) of the
Code is, and has from its inception been so qualified, and any trust created
pursuant to any such Employee Pension Benefit Plan is exempt from federal income
tax under Section 501(a) of the Code and the IRS has issued each such Plan a
favorable determination letter which is currently applicable; (vi) neither the
Company nor any ERISA Affiliate is aware of any circumstance or event which
could jeopardize the tax-qualified status of any such Employee Pension Benefit
Plan or the tax-exempt status of any related trust, or would cause the
imposition of any liability, penalty or tax under ERISA or the Code with respect
to any Employee Benefit Plan; and (vii) no event has occurred which would permit
the PBGC to impose a lien against any of the assets of the Company or any ERISA
Affiliate under Title IV of ERISA.
(c) Neither the Company nor any ERISA Affiliate
maintains a Multiemployer Plan or an Employee Pension Benefit Plan which is a
defined benefit plan as defined in Section 3(35) of ERISA, and neither the
Company nor any ERISA Affiliate currently has any liability to make any
withdrawal liability payment to any Multiemployer Plan. Neither the Company nor
any ERISA Affiliate is delinquent in making any contributions required to be
paid to any Multiemployer Plan. There is no pending dispute between the Company
or any ERISA Affiliate and any Multiemployer Plan concerning payment of
contributions or payment of withdrawal liability payments.
(d) With respect to each Employee Benefit Plan
maintained by the Company or any ERISA Affiliate: (i) no unsatisfied liabilities
to participants, the IRS, the DOL, the PBGC or to any other person or entity
have been incurred as a result of the termination of any Employee Benefit Plan;
(ii) no Employee Pension Benefit Plan, which is subject to the minimum funding
requirements of Part 3 of Subtitle B of Title I of ERISA or subject to Section
412 of the Code, has incurred any "accumulated funding deficiency" within the
meaning of Section 302 of ERISA or Section 412 of the Code and there has been no
waived funding deficiency within the meaning of Section 303 of ERISA or Section
412 of the Code; (iii) there has been no event with respect to an Employee
Pension Benefit Plan which would require disclosure under Sections 4062(c),
4063(a) or 4041(e) of ERISA.
(e) All reports and information required to be filed
with the DOL, IRS and PBGC and with plan participants and their beneficiaries
with respect to each Employee Benefit Plan required to be listed on the
Disclosure Letter have been filed timely and have been complete and accurate in
all
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respects, and all annual reports (Form 5500 series) of such Plans were certified
without qualification by each Plan's accountants and actuaries.
(f) All Employee Benefit Plans listed on the
Disclosure Letter may, without liability, be amended, terminated or otherwise
discontinued except as specifically prohibited by federal law.
(g) Any bonding required under ERISA with respect to
any Employee Benefit Plan listed on the Disclosure Letter has been obtained and
is in full force and effect and no funds held by or under the control of the
Company are or could be deemed plan assets.
(h) Except as set forth in the Disclosure Letter,
neither the Company nor any ERISA Affiliate maintains any plan, fund or program
that provides post retirement medical benefits, post retirement death benefits
or other post retirement welfare benefits.
(i) The consummation of the transactions contemplated
by this Agreement will not (i) entitle any employee of the Company to severance
pay, unemployment compensation or any other payment, (ii) accelerate the time of
payment or vesting, or increase the amount of compensation due to any such
employee, or (iii) result in any liability of the Company under Title IV of
ERISA or otherwise.
(j) Each Employee Benefit Plan that provides medical
benefits has been operated in compliance with all requirements of Sections 601
through 608 of ERISA and either (i) Section 162(i)(2) and (k) of the Code and
regulations thereunder (prior to 1989); or (ii)Section 4980B of the Code and
regulations thereunder (after 1988), relating to the continuation of coverage
under certain circumstances in which coverage would otherwise cease.
(k) With respect to each Employee Benefit Plan which
is subject to Title IV of ERISA, the present value of accrued benefits under
each such plan, based upon both (i) the actuarial assumptions used for funding
purposes in the most recent actuarial report prepared by such plan's actuary
with respect to such plan, and (ii) the actuarial assumptions specified in
Section 412 of the Code, did not, as of its latest valuation date, exceed the
then current value of the assets of such plans allocable to such accrued
benefits determine as of the latest valuation date.
(l) For purposes hereof:
(i) "COBRA" shall refer to Title V of the
Consolidated Omnibus Budget Reconciliation Act of 1985, as amended.
(ii) "Code" shall refer to the Internal
Revenue Code of 1986, as amended.
(iii) "DOL" shall refer to the United States
Department of Labor.
(iv) "Employee Benefit Plan" shall have the
meaning ascribed to such term by Section 3(3) of ERISA.
(v) "Employee Pension Benefit Plan" shall
have the meaning ascribed to such term by Section 3(2) of ERISA.
(vi) "ERISA" shall refer to the Employee
Retirement Income Security Act of 1974, as amended.
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(vii) "ERISA Affiliate" shall refer to any
trade or business, whether or not incorporated, under common control with the
Company within the meaning of Section 414(b), (c), (m) or (o) of the Code.
(viii) "IRS" shall refer to the Internal
Revenue Service.
(ix) "Multiemployer Plan" shall have the
meaning ascribed to such term by Section 4001(a)(3) of ERISA.
(x) "PBGC" shall refer to the Pension
Benefit Guaranty Corporation.
2.21 Contracts and Agreements.
(a) The Company has filed as exhibits to its annual
report on Form 10-K, as amended, for the fiscal year ended January 31, 1996 and
its quarterly reports on Form 10-Q for the quarters ended April 30, 1996 and
July 31, 1996, all of the contracts and agreements required to be so filed by
the rules and regulations of the Securities and Exchange Commission (the "SEC").
True and correct copies of all such agreements requested by the Purchasers have
been provided to the Purchasers prior to the date hereof. Other than (i) the
contracts and agreements filed as exhibits to its annual report on Form 10-K, as
amended, for the fiscal year ended January 31, 1996 and its quarterly reports on
Form 10-Q for the quarter ended July 31, 1996 and (ii) as described in the SEC
Reports or the Disclosure Letter, neither the Company nor any Subsidiary is a
party to any contract or agreement which is material to the business,
properties, assets, prospects, operations or condition (financial or otherwise)
of the Company and its Subsidiaries taken as a whole.
(b) Except as disclosed in the Disclosure Letter,
neither the Company nor any Subsidiary is (i) in default under any agreement,
contract or instrument to which it is a party or by which it is bound, which
default may have a Material Adverse Effect, (ii) in violation of its Certificate
of Incorporation or By-Laws (or other organizational documents), each as amended
to date, or (iii) in default with respect to any order, writ, injunction or
decree of any court or governmental agency binding on it, and no event has
occurred which with notice or lapse of time, or both, would create any default
or violation described in clauses (i) through (iii).
2.22 Absence of Certain Developments. Except as described in
the Disclosure Letter, since the Balance Sheet Date, neither the Company nor any
Subsidiary has (i) incurred or become subject to any material liabilities
(absolute or contingent) except current liabilities incurred, and liabilities
under contracts entered into, in the ordinary course of business; (ii)
mortgaged, pledged or subjected to lien, charge or any other encumbrance any of
its assets, tangible or intangible, except Permitted Liens; (iii) sold, assigned
or transferred any of its tangible or intangible assets or rights or canceled
any debts or obligations except in the ordinary course of business; (iv)
suffered any material losses of assets (whether tangible or intangible) or
rights (including without limitation, license rights), or waived any rights of
substantial value (whether or not in the ordinary course of business); (v) made
any changes in officer compensation except for annual increases consistent with
past practices; (vi) entered into any material transaction other than in the
ordinary course of business, except for the transactions contemplated by this
Agreement; (vii) made any material change in any of its material contracts, its
Certificate or Articles of Incorporation or Bylaws (or other organizational
documents), or in any arrangements or agreements of any nature relating to its
officers and directors; (viii) granted any stock options or other rights to
acquire its capital stock or modified any outstanding stock options, grants,
awards or other rights to acquire its capital stock; (ix) become aware of any
change in the regulatory climate applicable to its business, including any
proposed legislation or regulations which could have a Material Adverse Effect
or (x) otherwise experienced any material change in its assets, financial
condition or results of operation.
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2.23 Contracts with Insiders. Except as set forth in the SEC
Reports or the Disclosure Letter, no officer or director of the Company, or, to
the Company's knowledge, holder of more than 5% of the Company's outstanding
Common Stock, is a party to any contract, agreement, or arrangement providing
for (a) the Company's or a Subsidiary's employment of, (b) the furnishing of
services to the Company or a Subsidiary by, (c) the rental of real or personal
property by the Company or a Subsidiary from, or (d) the payment by the Company
or a Subsidiary to, any such person, or, to the Company's knowledge, any member
of such person's family, or any corporation, partnership or other entity in
which such person, or, to the Company's knowledge, any member of his family, has
an interest or of which such person, or, to the Company's knowledge, any member
of his family, is an officer, director, trustee, or beneficiary.
2.24 Environmental Matters.
(i) With respect to the Company and each of its Subsidiaries:
(a) Each of the Company and its Subsidiaries, and all
operations, processes and other activities on any real properties owned, used,
lease, operated or occupied by them (collectively, the "Company Properties", and
individually, a "Company Property") are, and have been, in compliance with all
Environmental Laws (as defined below);
(b) There is no suit, claim, action, demand,
executive or administrative order, directive, investigation or proceeding
pending or threatened, before any court, governmental agency or board or other
forum against the Company or any of its Subsidiaries or with respect to any
Company Property (x) for alleged noncompliance (including by any predecessor)
with, or liability under, any Environmental Law or (y) relating to the release
into the environment of any Hazardous Material (as defined below) or oil,
whether or not occurring at or on a Company Property;
(c) There is no suit, claim, action, demand,
executive or administrative order, directive, investigation or proceeding
pending or threatened, before any court, governmental agency or board or other
forum relating to or against any Company Property (or the Company or any of its
subsidiaries in respect of such Company Property) (x) relating to alleged
noncompliance (including by any predecessor) with, or liability under, any
Environmental Law or (y) relating to the release into the environment of any
Hazardous Material or oil whether or not occurring at or on Company Property;
(d) There is no factual basis for any suit, claim,
action, demand, executive or administrative order, directive or proceeding of a
type described in Section 2.24 (i)(b) or (c);
(e) The Company Properties and any properties
formerly owned, used, lease, operated or occupied by the Company or any of its
Subsidiaries (including, without limitation, soil, groundwater or surface water
on or under the properties, and buildings thereon) do not contain any Hazardous
Material (as defined below) other than as permitted or acceptable under
applicable Environmental Law or for which the Company or its subsidiaries would
be liable under applicable Environmental Law (provided, however, that with
respect to properties formerly owned, used, leased, operated or occupied by the
Company or any of its Subsidiaries, such representation is limited to the period
the Company or any such Subsidiary owned, used, lease, operated or occupied such
properties);
(f) None of the Company or any of its Subsidiaries
has received any notice, demand letter, executive or administrative order,
directive or request for information from any Federal, state, local or foreign
governmental entity or any third party indicating that it may be in violation
of, or liable under, any Environmental Law;
(g) There are no underground storage tanks on, in or
under any Company Properties and no underground storage tanks have been closed
or removed from any of the Company
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Properties which are, or during any period of time when they have been, in the
ownership of the Company or any of its Subsidiaries; and
(h) During the period of (1) the Company's or any of
its Subsidiaries' ownership, use, leasing, operation or occupation of any of the
Company Properties, or (m) the Company's or any of its Subsidiaries'
participation in the management of any Company Properties, there has been no
release of Hazardous Material or oil in, on, under or affecting such properties
which would subject the Company or its Subsidiaries to liability under any
Environmental Law.
(ii) The following definitions apply for purposes of this
Section 2.24: (x) "Environmental Law" means any federal, state or local law,
statute, ordinance, rule regulation, code, license, permit, authorization,
approval, consent, legal doctrine, order, directive, executive or administrative
order, judgment, decree, injunction, requirement or agreement with any
governmental entity, (A) relating to the protection, preservation or restoration
of the environment (which includes, without limitation, air, water vapor,
surface water, groundwater, drinking water supply, structures, soil, surface
land, subsurface land, plant and animal life or any other natural resource), or
to human health or safety, or (B) the exposure to, or the use, storage,
recycling, treatment, generation, transportation, processing, handling,
labeling, production, release or disposal of, Hazardous Materials, in each case
as amended and as now or hereafter in effect, including all current
Environmental Laws and all future Environmental Laws and subsequent
interpretations thereof; and (y) "Hazardous Material" means any substance which
is or could be detrimental to human health or safety or to the environment,
currently or hereafter listed, defined, designated or classified as hazardous,
toxic, radioactive or dangerous, or otherwise regulated, under any Environmental
Law, whether by type or by quantity, including any substance containing any such
substance as a component. Hazardous Material includes, without limitation, any
toxic waste, pollutant, contaminant, hazardous substance, toxic substance,
hazardous waste, special waste, industrial substance, oil or petroleum or any
derivative or by-product thereof, radon, radioactive material, asbestos,
asbestos-containing material, urea formaldehyde foam insulation, lead and
polychlorinated biphenyl.
2.25 Certain Agreements. The Disclosure Letter lists all
employment and severance agreements (the "Employment and Severance Agreements")
that the Company and each Subsidiary has entered into with its officers and
employees. Except as disclosed in the Disclosure Letter, the issuance and sale
of the Common Shares and Warrants to the Purchasers hereunder, the issuance of
the Warrant Shares upon the exercise of the Warrants, and the completion of the
other transactions provided for herein will not result in (i) a "change of
control" of the Company, as that term is used in any of the Employment and
Severance Agreements or give any employee the right thereunder to terminate his
employment or receive severance or other payments from the Company or any
Subsidiary, or (ii) the acceleration of vesting of any outstanding Option or
Option Share issued by the Company to any employee under the Existing Stock
Plans.
2.26 Accounts Receivable. All accounts and notes receivable of
the Company and its Subsidiaries represent valid obligations from sales made or
services rendered in the ordinary course of business, and are collectible in
full in the ordinary course of business, without any set-off or discount, except
to the extent of the amount of the reserve for possible losses set forth on the
Disclosure Letter, which reserve amount may be adjusted from time to time in
accordance with normal business practices of the Company or such Subsidiary. The
Disclosure Letter includes a correct and complete accounts and notes receivable
aging of the Company and its Subsidiaries as of a recent date including the
reserves for possible losses as of such date.
2.27 Inventory. The Disclosure Letter sets forth, as of
October 31, 1996, the location and fair market value of all inventory of the
Company. Except as described in the Disclosure Letter, all inventory of the
Company and its Subsidiaries is valued on the Company's consolidated books and
records at the lower of cost, determined by the "first in, first out" method of
accounting, or the fair market value
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thereof. All such inventory consisting of finished goods is, to the Company's
knowledge, of merchantable quality, and is saleable in the ordinary course of
business consistent with past practice.
2.28 Books and Records. The books and records of the Company
and its Subsidiaries accurately and fairly reflect their respective income,
expenses, assets and liabilities, and the Company and its Subsidiaries maintain
internal accounting controls which provide reasonable assurance that: (i)
transactions are executed in accordance with management's authorization; (ii)
transactions are recorded as necessary to permit preparation of reliable
financial statements and to maintain accountability for earnings and assets;
(iii) access to assets is permitted only in accordance with management's
authorization; (iv) the recorded accountability of all assets is compared with
existing assets at reasonable intervals; and (iv) all intercompany transactions,
charges and expenses among or between the Company, any Subsidiary, or any other
affiliate of the Company are accurately reflected in all financial statements.
2.29 Certain Payments. Neither the Company nor any of its
Subsidiaries, nor any director, officer, agent or employee of any such person,
or any other person associated with or acting for or on behalf of the Company or
any of its Subsidiaries has directly or indirectly (a) made any unlawful
contributions, gift, bribe, rebate, payoff, influence payment, kickback, or
other payment to any person, private or public, regardless of form, whether in
money, property or services, (i) to obtain favorable treatment in securing
business, (ii) to pay for favorable treatment for business secured, or (iii) to
obtain special concessions or special concessions already obtained, for or in
respect of the Company or any of its Subsidiaries, or (b) established or
maintained any fund or asset that has not been recorded in the books and records
of the Company and its Subsidiaries, or (c) taken any other action in violation
of any provision of the Foreign Corrupt Practices Act of 1977, as amended.
2.30 U.S. Real Property Holding Company. The Company is not
now and has never been a "United States real property holding corporation," as
defined in Section 897(c)(2) of the Code and Section 1.897-2(b) of the
Regulations promulgated by the Internal Revenue Service, and the Company has
filed with the Internal Revenue Service all statements, if any, with its United
States income tax returns which are required under Section 1.897-2(h) of such
Regulations.
2.31 Minute Books. The minute books of the Company and its
Subsidiaries heretofore made available for inspection by the Purchasers contain
complete summaries of all meetings of directors and shareholders since the
incorporation of the Company or such Subsidiary, as applicable, and reflect
accurately in all material respects all transactions referred to in such minutes
or records. No corporate action has been taken on the part of the board of
directors or the executive committee of the Company or any Subsidiary thereof,
nor has any action been taken on the part of the stockholders of the Company as
such, which is not recorded in such minute books, except for actions which will
not have a Material Adverse Effect.
2.32 Labor Agreements and Actions. Neither the Company nor any
Subsidiary thereof is bound by or subject to, any written or oral, express or
implied, contract, commitment or arrangement with any labor union, and no labor
union has requested or, to the knowledge of the Company, has sought to represent
any of the employees, representatives or agents of the Company or any such
Subsidiary thereof. There is no strike or other labor dispute involving the
Company or any Subsidiary thereof pending, or to the knowledge of the Company
threatened, which could have a material adverse effect on the business, assets,
properties, prospects, operations or condition (financial or otherwise) of the
Company or any of its Subsidiaries nor is the Company aware of any labor
organization activity involving any of the employees of the Company or any
Subsidiary thereof. The Company is not aware that any officer or key employee,
or that any group of key employees, intends to terminate his, her or their
employment with the Company or any Subsidiary thereof, nor does the Company or
any such Subsidiary have a present intention to terminate the employment of any
of the foregoing. Except as set forth in the Disclosure Letter, the employment
of each employee of the Company or a Subsidiary thereof is terminable at the
will of the applicable employer without further liability of such employer to
such employee except for the payment of such employee's
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normal salary accrued but not paid through the date of such termination and
amounts due pursuant to change of control or severance provisions as set forth
on the Disclosure Letter.
2.33 Entire Business; Etc. Except as set forth in the
Disclosure Letter, all of the assets (including the Company's and its
Subsidiaries' interests under franchises, licenses, Intellectual Property,
leases and permits) necessary for the conduct of the business of the Company and
its Subsidiaries as presently conducted are held exclusively by the Company or a
Subsidiary thereof.
2.34 Conditions Affecting Company and Subsidiaries. Except as
disclosed in an SEC Report, there is no fact, development or threatened
development with respect to the markets, products, services, clients, customers,
facilities, computer software, databases, personnel, vendors, suppliers,
licensors, operations, assets or prospects of the business of the Company or any
of its Subsidiaries which are known to the Company which is reasonably likely to
materially adversely affect the business, operation or prospects of the Company
and its Subsidiaries considered as a whole, other than such conditions as may
affect as a whole the economy generally.
2.35 Projections. The Company has previously provided the
Purchasers with a true, correct and complete copy of its Consolidated Income
Statement Forcast Quaterly Summary (the "Projections"). The Projections were
prepared in good faith by the senior management of the Company as of October 25,
1996. The Company believes there is a reasonable basis (in the aggregate and not
necessarily as to specific sources of revenues, expenses and profits) for such
Projections. With respect to the foregoing, it shall be understood that the
Projections are based on certain assumptions which may or may not be proved
accurate over time and the results projected are subject to all of the
uncertainties associated with Projections. Because of the number and range of
variables and assumptions involved in a forecast of this nature, actual results
may vary from the results shown therein.
2.36 Information. The SEC Reports are correct and complete and
comply as to form with the requirements of the Securities Exchange Act of 1934,
as amended, and the regulations promulgated thereunder. Neither this Agreement
nor any document delivered to the Purchasers pursuant hereto, including the SEC
Reports, contains an untrue statement of a material fact or omits to state a
material fact necessary in order to make the statements made therein, in the
light of the circumstances under which they were made, not misleading. There is
no fact known to the Company which could have a Material Adverse Effect which
has not been set forth in this Agreement, the Disclosure Letter or the other
documents furnished to the Purchasers on or prior to the date hereof in
connection with the transactions contemplated hereby.
2.37 Cash Flow. Based upon the net proceeds to be received by
the Company upon the closing of the transactions contemplated hereby and the
Company's good faith best estimate of its expected cash flow from operations and
expected cash expenditures, the Company will have sufficient funds to satisfy
its requirements through June 30, 1997 and to cause all of its accounts payable
to be current as of such date (i.e., less than 60 days outstanding).
SECTION 3. PURCHASERS' REPRESENTATIONS AND WARRANTIES
Each Purchaser understands that the offer and sale of the
Common Shares and Warrants pursuant to this Agreement will not be registered
under the 1933 Act on the grounds that such offers and sales are exempt pursuant
to Section 4(2) of the 1933 Act and/or Regulation D promulgated under Section
4(2) of the 1933 Act, and that the reliance of the Company on such exemptions is
predicated in part on such Purchaser's representations, warranties, covenants
and acknowledgments set forth in this Section 3. The representations of each
Purchaser under this Section 3 are made exclusively by and with respect to such
Purchaser and no Purchaser shall be liable or responsible for the breach of any
representation or warranty made by any other Purchaser.
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3.1 Pre-Existing Entity. Each Purchaser severally (and not
jointly) represents and warrants to the Company that such Purchaser was not
organized for the specific purpose of purchasing the Common Shares and Warrants
purchased by it hereunder.
3.2 Principal Place of Business. Each Purchaser severally (and
not jointly) represents and warrants to the Company that the address of its
principal place of business is as set forth on Schedule 1 hereto.
3.3 Purchase Without View to Distribute. Each Purchaser
severally (and not jointly) represents and warrants to the Company that the
Common Shares and Warrants to be purchased by it are being, and any Warrant
Shares acquired upon exercise of such Warrants will be, acquired by such
Purchaser for its own account (with its own funds and not for the account or
benefit of or with funds obtained from any officer, director or affiliate of the
Company or any of its Subsidiaries), not as a nominee or agent, and not with a
view to resale or distribution within the meaning of the 1933 Act, and the rules
and regulations thereunder, and such Purchaser will not distribute the Common
Shares, Warrants or Warrant Shares in violation of the 1933 Act.
3.4 Restrictions on Transfer. Each Purchaser severally (and
not jointly) (i) acknowledges that the Common Shares, Warrants and Warrant
Shares are not registered under the 1933 Act and that the Common Shares,
Warrants and Warrant Shares (if any) to be acquired by it must be held
indefinitely by it unless they are subsequently registered under the 1933 Act or
an exemption from registration is available, (ii) is aware that any routine
sales under Rule 144 of the Securities and Exchange Commission under the 1933
Act of Common Shares, Warrants, and Warrant Shares may be made only in limited
amounts and in accordance with the terms and conditions of that Rule and that in
such cases where the Rule is not applicable, compliance with some other
registration exemption will be required, (iii) is aware that Rule 144 is not
presently available for use by such Purchaser for resale of any such Common
Shares, Warrants and Warrant Shares and (iv) is aware that, except as provided
for in the Registration Rights Agreement, the Company is not obligated to
register under the 1933 Act any sale, transfer or other disposition of the
Common Shares, Warrants or Warrant Shares.
3.5 Access to Information. Each Purchaser confirms that the
Company has made available to it the opportunity to ask questions of and receive
answers from the Company's officers and directors concerning the terms and
conditions of the offering and the business and financial condition of the
Company, and to acquire, and such Purchaser has received to its satisfaction,
such additional information, in addition to that set forth herein, about the
business and financial condition of the Company and the terms and conditions of
the offering as it has requested. Neither such inquiries nor any other due
diligence investigation conducted by any Purchaser or any of its advisors or
representatives shall modify, amend or affect any Purchaser's right to rely on
the Company's representations and warranties contained in Section 2 hereof. Each
of the Purchasers acknowledges that each of TLLP, TLCV and their respective
affiliates has acted for its own account with respect to the transactions
contemplated hereby, that no information provided by the Company to the
Purchasers has been subject to independent verification by Tech Leaders and Tech
Leaders makes no representations or warranty with respect to the accuracy or
completeness of any such information.
3.6 Additional Representations of the Purchaser. Each
Purchaser severally (and not jointly) represents that (i) it is an "accredited
investor" as such term is defined in Rule 501 promulgated under the 1933 Act,
(ii) its financial situation is such that it can afford to bear the economic
risk of holding the Common Shares, Warrants and Warrant Shares for an indefinite
period of time and suffer complete loss of its investment in the Common Shares,
Warrants and Warrant Shares, (iii) its knowledge and experience in financial and
business matters are such that it is capable of evaluating the merits and risks
of its purchase of the Common Shares, Warrants and Warrant Shares as
contemplated by this Agreement and (iv) the
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purchase of the Common Shares, Warrants and Warrant Shares by it has been duly
and properly authorized and this Agreement has been duly executed by it or on
its behalf.
SECTION 4. CONDITIONS PRECEDENT TO PURCHASERS' OBLIGATIONS
The Purchasers' obligation to purchase and make payment for
the Common Stock and Warrants subscribed for hereunder on the Closing Date is
subject, at their option, to the satisfaction of each of the following
conditions:
4.1 Representations and Warranties. On the Closing Date, the
representations and warranties contained in Section 2 hereof shall be true and
correct in all material respects with the same effect as though made on and as
of the Closing Date, and the Company shall have so certified to the Purchasers
in writing.
4.2 Performance. All the covenants, agreements and conditions
contained in this Agreement to be performed or complied with by the Company on
or prior to the Closing Date shall have been performed or complied with in all
material respects, and the Company shall have so certified to the Purchasers in
writing.
4.3 Approvals and Consents. The Company (and if applicable,
the Purchasers) shall have duly obtained, received or effected (and all
applicable waiting and termination periods, if any, including any extensions
thereof, under any applicable law, statute, regulation or rule, including,
without limitation, the applicable waiting period, if any, under the HSR Act,
shall have expired or terminated) all authorizations, consents, approvals,
licenses, franchises, permits and certificates by or of, and shall have made all
filings and effected all notifications, registrations and qualifications with,
all federal, state, local and foreign governmental and regulatory authorities to
the extent required to be obtained, received, effected or filed by the Company
for the issuance, sale and delivery of the Common Stock and Warrants being
issued and sold on the Closing Date and the consummation of the transactions
contemplated hereby.
4.4 Delivery of Common Stock Certificates and Warrants. The
Purchaser shall have received duly executed stock certificates of the Company
evidencing the ownership of the Common Stock being purchased by such Purchaser
hereunder and warrant certificates duly executed by the Company with respect to
the Warrants being purchased by such Purchaser hereunder.
4.5 Opinion of Counsel to the Company. On the Closing Date,
the Purchasers shall have received an opinion from counsel for the Company dated
the Closing Date, addressed to Purchasers covering such matters as may be
specified by the Purchasers, including, without limitation, that no approval of
the stockholders of the Company is required to authorize the transactions
contemplated by this Agreement, and which opinion of counsel shall be in form
and substance satisfactory to the Purchasers in their sole discretion.
4.6 Proceedings; Certified Copies. All proceedings to be taken
in connection with the transactions contemplated by this Agreement and to be
consummated on or prior to the Closing Date, and all documents incident thereto,
shall be satisfactory in form and substance to the Purchasers. The Purchasers
shall have received such certified copies or other copies of such documents as
they may reasonably request.
4.7 Investigation. The results of the Purchasers' due
diligence investigation of the Company shall be satisfactory to the Purchasers
in all respects in their sole and absolute discretion.
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4.8 No Proceeding or Litigation. No suit, action, or other
proceeding seeking to restrain, prevent or change the transactions contemplated
hereby or otherwise questioning the validity or legality of such transactions
shall have been instituted and be pending.
4.9 No Material Adverse Change. There shall have been no
Material Adverse Change to the Company and its Subsidiaries taken as a whole
since the date of this Agreement.
4.10 Environmental Obligations. The Company will cause full
compliance by it and its Subsidiaries with the New Jersey Industrial Sites
Recovery Act, 13:1K-6 et seq. ("ISRA") prior to the Closing Date. The Company
will provide to Purchaser at least five (5) days prior to Closing any and all
documents evidencing such compliance. If the Company believes that ISRA does not
apply to this transaction, it will provide a letter to that effect explaining
the reasoning therefor at least five (5) days prior to the Closing Date, and the
Company will be deemed thereby to have made a representation and warranty to
Purchaser incorporated into this Agreement that ISRA does not apply to this
transaction.
4.11 NNM. The Company shall have notified the NASD of the
issuance of the Shares in accordance with the rules and regulations of the NNM.
4.12 Executive Officer Agreements. Ken Goldin shall have
entered into an employment agreement with the Company in form and substance
satisfactory to the Purchasers.
4.13 Cancellation of Options. The Company shall have delivered
evidence satisfactory to the Purchasers that options exercisable to purchase at
least 150,000 shares of Common Stock owned by Ken Goldin and outstanding at
October 31, 1996 have been cancelled.
4.14 Waiver by Bookman. The Company shall have delivered to
the Purchasers an unconditional, non-revocable acknowledgment by Barry Bookman,
in form and substance satisfactory to the Purchasers, (a) that all references to
beneficial ownership of the Company's Common Stock or voting securities
contained in his employment agreement refer to the actual ownership of shares of
Common Stock or voting securities of the Company, and when determining
beneficial ownership thereunder, no consideration shall be given to any shares
of Common Stock or voting securities issuable upon exercise, conversion or
exchange of any other securities and (b) that Mr. Bookman shall not have any
rights to payment or other remuneration as a result of the execution of this
Agreement, the Registration Rights Agreement or the transactions contemplated
hereby or thereby (including, without limitation, the issuance of the Common
Shares and Warrants.
4.15 Waiver by Holders of Registration Rights. The Company
shall have delivered to the Purchasers either (a) an unconditional,
non-revocable waiver from holders of a majority of the Registrable Shares (as
defined in the Registration Rights Agreement dated May 28, 1996 (the "May 28,
1996 Registration Rights Agreement") by and between the Company and Fidelity
Convertible Securities Fund (the "Fidelity Fund")), in form and substance
satisfactory to the Purchasers, waiving the applicability of Section 7 of the
May 28, 1996 Registration Rights Agreement to the Common Shares and Warrants
issuable hereunder and to the Warrant Shares and other securities issuable upon
exercise of the Warrants or (b) evidence, satisfactory to the Purchasers, that
the Fidelity Fund has disposed of all of the shares of Common Stock constituting
Registrable Shares under the May 28, 1996 Registration Rights Agreement pursuant
to an effective Registration Statement within the meaning of the May 28, 1996
Registration Rights Agreement.
4.16 Waiver by Congress Financial Corporation. The Company
shall have delivered to the Purchasers an unconditional, non-revocable waiver
from Congress Financial Corporation ("Congress"), in form and substance
satisfactory to the Purchasers, waiving any ability of Congress to declare a
default or event of default under that certain Loan and Security Agreement dated
July 31, 1995 (as amended, the "Congress Loan Agreement") by and between the
Company and Congress (as amended to date) as a result
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of the execution of this Agreement, the Registration Rights Agreement and the
transactions contemplated hereby and thereby (including, without limitation, the
issuance of the Common Shares and Warrants and the issuance of the Warrant
Shares or other securities upon exercise of the Warrants).
4.17 Lock-up Agreements. The Company shall have delivered an
agreement, in form and substance satisfactory to Tech Leaders, restricting the
ability of Ken Goldin, Carole Goldin and the Estate of Paul Goldin from selling
shares of Common Stock.
4.18 Other Documents. The Company shall have delivered an
executed copy of the Registration Rights Agreement and such other certificates
and documents as the Purchasers shall have reasonably requested.
SECTION 5. CONDITIONS PRECEDENT TO THE COMPANY'S OBLIGATIONS
The Company's obligation to sell the Common Shares and
Warrants to each Purchaser on the Closing Date is subject, at the Company's
option, to the satisfaction of each of the following conditions by the
applicable Purchaser:
5.1 Representations and Warranties. On the Closing Date, the
representations and warranties of such Purchaser contained in Section 3 hereof
shall be true and correct in all material respects with the same effect as
though made on and as of the Closing Date and such Purchaser shall have so
certified to the Company in writing.
5.2 Performance. All the covenants, agreements and conditions
contained in this Agreement to be performed or complied with by such Purchaser
on or prior to the Closing Date shall have been performed or complied with in
all material respects, and such Purchaser shall have so certified to the Company
in writing.
5.3 No Proceeding or Litigation. No suit, action, or other
proceeding seeking to restrain, prevent or change the transactions contemplated
hereby or otherwise questioning the validity or legality of such transactions
shall have been instituted and be pending.
SECTION 6. COVENANTS OF THE COMPANY PRIOR TO CLOSING
6.1 Payment of Expenses. The Company shall (i) pay the
expenses incurred by it in connection with the issuance and sale of the Common
Shares and Warrants and the execution, delivery and performance of this
Agreement and (ii) at Closing, up to a maximum of $25,000, pay the legal,
accounting, consulting and other advisory fees and expenses incurred by the
Purchasers with respect to the negotiation and preparation of this Agreement.
6.2 Operation of Business in Ordinary Course. Prior to the
Closing, the Company will operate its business and the business of each of its
Subsidiaries only in the usual and normal course, and will not, without the
consent of the Purchasers, engage in any of the transactions described in
Section 2.22 hereof.
6.3 Conditions Precedent. The Company and each Purchaser shall
each use its best efforts to cause the conditions specified in Section 4 to be
satisfied by the Closing Date.
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SECTION 7. COVENANTS OF THE COMPANY AFTER CLOSING
7.1 Rule 144.
(a) The Company covenants that (i) the Company will
use its best efforts to comply with the current public information requirements
of Rule 144(c)(1) under the 1933 Act; and (ii) at all such times as Rule 144 is
available for use by the holders of the Common Shares, Warrants or Warrant
Shares, the Company will furnish each such holder upon request with all
information within the possession of the Company required for the preparation
and filing of Form 144.
(b) At all times during which the Company is neither
subject to the reporting requirements of Section 13 or 15(d) of the 1934 Act,
nor exempt from reporting pursuant to Rule 12g3-2(b) under the 1934 Act, it will
provide as promptly as practicable (in any event not later than twenty (20) days
after initial request) in written form, upon the written request of any
Purchaser or a prospective buyer of the Common Shares, Warrants or Warrant
Shares from such Purchaser, all information required by Rule 144A(d)(4)(i) of
the General Regulations promulgated by the Commission under the Securities Act
("Rule 144A Information"). The Company further covenants, upon written request,
as promptly as practicable (in any event not later than twenty (20) days after
initial request) to cooperate with and assist the Purchaser or any member of the
National Association of Securities Dealers, Inc. System for Private Offerings
Resales and Trading through Automated Lindake ("PORTAL") in applying to
designate and thereafter maintain the eligibility of such securities for trading
through PORTAL. The Company's obligations under this Section shall at all times
be contingent upon the Purchaser's obtaining from a prospective buyer an
agreement to take all reasonable precautions to safeguard the Rule 144A
Information from disclosure to anyone other than a person who will assist such
buyer in evaluating the purchase of the Common Shares, Warrants or Warrant
Shares.
7.2 Financial Statements; SEC Reports. The Company and each
Purchaser agrees that the Company shall deliver to each Purchaser owning any
Shares or Warrants the following:
(a) (i) within ninety (90) days after the end of each
fiscal year, an audited consolidated balance sheet, and related, audited
consolidated statements of income, cash flow, and stockholders' equity of the
Company and its Subsidiaries as at the end of and for such fiscal year prepared
in accordance with GAAP, and accompanied by the opinion of an independent public
accountant and (ii) within forty-five (45) days after the end of each of the
first three fiscal quarters of each fiscal year, a consolidated balance sheet
and a consolidated statement of income of the Company and its Subsidiaries as at
the end of and for such quarter and the year to date and as at the end of and
for the corresponding periods of the preceding fiscal year, and a consolidated
statement of cash flow for the year to date and for the corresponding period of
the preceding fiscal year;
(b) promptly after the same are sent, copies of all
proxy statements, financial statements and reports which the Company sends to
its stockholders in their capacities as stockholders, and promptly after the
same are filed, copies of all financial statements and reports which the Company
may make to, or file with, any governmental authority, agency, commission, board
or bureau, including but not limited to 10-K's and 10-Q's as applicable, and any
prospectus or registration statement filed by the Company or any Subsidiary with
the Securities and Exchange Commission or any successor agency;
(c) promptly, such additional financial and other
information as the Purchaser may from time to time reasonably request;
(d) such further information regarding the Company's
business, condition, property, assets or operations, financial or otherwise, as
any Purchaser may from time to time reasonably request, all prepared in form and
detail satisfactory to such Purchaser;
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(e) promptly upon becoming available, one copy of
each report and management letter submitted to the Company or any Subsidiary by
independent accountants in connection with any annual, interim or special audit
or other examination made by them of the books of the Company or any Subsidiary.
7.3 Maintenance of Existence; Insurance. The Company will
keep, and will cause each of its Subsidiaries to keep, its corporate existence,
rights and franchises in full force and effect (subject to the provisions of
this Agreement), and its properties in good repair, working order and condition,
normal wear and tear excepted. The Company will maintain, and will cause each of
its Subsidiaries to maintain, public liability, property damage and workmen's
compensation insurance and insurance on all its insurable property against fire
and other hazards with responsible insurance carriers to substantially the same
extent presently maintained.
7.4 Compliance with Laws. The Company will, and will cause
each Subsidiary to, comply in all material respects with all laws and
regulations applicable to the conduct of its business, including without
limitation ERISA, environmental laws, employee safety laws, and the rules and
regulations of the Federal Trade Commission and Consumer Product Safety
Commission, and will indemnify and hold harmless each holder of Common Shares,
Warrants, or Warrant Shares against any failure or alleged failure by the
Company to do so.
7.5 Board Representative. (a) The Company shall use its best
efforts to cause a person designated by Tech Leaders (any designation to be made
by, or consent required from, Tech Leaders hereunder shall be by the unanimous
consent of TLLP and TLCV for so long as either of them beneficially owns any
Fully Diluted Shares (as defined below)) to be appointed to the Company's Board
of Directors at the Company's first Board meeting after the Closing Date and
thereafter, for so long as Tech Leaders beneficially owns any Fully Diluted
Shares, shall use its best efforts to maintain such designee (or such
replacement for such designee as Tech Leaders may designate from time to time)
as a member of the Company's Board of Directors and as a member of the Audit
Committee and Compensation Committee thereof. Upon the purchase by Tech Leaders
of an aggregate of 540,000 Warrant Shares upon the exercise of all or any
portion of the Warrants purchased by Tech Leaders hereunder, the Company shall
use its best efforts to cause an additional person designated by Tech Leaders to
be appointed to the Company's Board of Directors at the Company's first Board
meeting following such exercise and thereafter, for so long as Tech Leaders
beneficially owns at least 500,000 shares of Common Stock (calculated based on
actual shares issued and outstanding and without giving effect to any shares
issuable upon exercise, exchange or conversion of other securities) shall use
its best efforts to maintain such designee (or such replacement for such
designee as Tech Leaders may designate from time to time) on the Company's Board
of Directors. As used herein, "Fully Diluted Shares" shall mean all shares of
Common Stock plus all shares of Common Stock issuable upon exercise, conversion
or exchange of any securities exercisable or exchangeable for, or convertible
into, shares of Common Stock (including, without limitation, the Warrants).
(b) The Company shall use its best efforts to identify and appoint, as
soon as practicable, an individual to serve as President of the Company (it
being agreed that the first of such candidates may be a current officer of the
Company), which individual shall report directly to both the Company's Chief
Executive Officer and to the Company's Board of Directors and shall have such
responsibilities and duties as are customary for the president of a public
company. At all times that a designee of Tech Leaders is a member of the
Company's Board of Directors, the Company shall not appoint any new President
(or any other officer performing similar functions) without the approval of a
majority of the Directors constituting the Company's Board of Directors and the
approval of the members(s) of the Company's Board of Directors designated by
Tech Leaders pursuant to Section 7.5(a). For the avoidance of doubt, the
President to be appointed pursuant to the first sentence of this Section 7.5(b)
shall require the approval of a majority of the
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Directors constituting the Company's Board of Directors and the approval of the
members(s) of the Company's Board of Directors designated by Tech Leaders
pursuant to Section 7.5(a).
7.6 Right to Acquire Additional Voting Securities.
(a) Right to Maintain Proportionate Ownership of
Voting Securities. From and after the date of Closing, each Purchaser shall have
the right, with respect to any issuance of additional Voting Securities by the
Company other than Permitted Issuances (but including any issuance of Voting
Securities issuable as a result of any issuance of Voting Securities (including
a Permitted Issuance) to other parties with preemptive or similar rights), to
acquire all or any part of such proportion of the Voting Securities to be issued
as (A) the aggregate number of Votes represented by Voting Securities held by
such Purchaser at the time of the applicable issuance bears to (B) the aggregate
number of Votes represented by the Company's outstanding Voting Securities prior
to issuance of such additional Voting Securities; provided that such right to
acquire Voting Securities shall be at the same prices or, in the case of Voting
Securities offered for consideration other than cash, at a price equivalent to
the fair market value of such noncash consideration, valued at the time of the
first written agreement in principle (including any non-binding letter of
intent) or binding agreement with respect to such issuance of additional Voting
Securities, subject to adjustment if the definitive agreement provides for
materially different noncash consideration or if materially different noncash
consideration is paid upon closing of such issuance, and on the same terms and
conditions as the prices, terms and conditions applicable to such issuance. The
right to acquire Voting Securities pursuant to this Section 7.6 (A) shall
terminate on the tenth anniversary of the Closing Date; and (B) shall not be
transferable. To the extent that other parties with preemptive or similar rights
do not exercise such rights with respect to a particular issuance, the number of
shares that such Purchaser has the right to purchase hereunder with respect to
such issuance shall be correspondingly reduced. The Company shall promptly
notify each Purchaser in writing of any and all agreements in principle
(including any nonbinding letter of intent) and binding agreements with respect
to a proposed issuance of additional Voting Securities (other than Permitted
Issuances) and of the actual date of issuance of additional Voting Securities
(other than Permitted Issuances). Any acquisition by a Purchaser pursuant to
this Section 7.6 with respect to an issuance of additional Voting Securities by
the Company shall occur at the date of issuance of such additional Voting
Securities if at least 20 business days have lapsed since the date of first
notice by the Company to such Purchaser of an agreement in principle (including
a nonbinding letter of intent) or binding agreement with respect thereof or, if
such 20 business day period has not lapsed, then within 20 business days
following such notice on a date selected by such Purchaser; provided that, if
such Voting Securities are offered for noncash consideration, any acquisition
shall occur within 20 business days of the determination of the Fair Value (as
defined below) of such noncash consideration on a date selected by such
Purchaser. The fair market value of any noncash consideration shall be
determined as set forth below and shall be made in good faith and utilizing
reasonable business judgment. In any circumstances in which the fair market
value of any such consideration ("Fair Value") is to be determined pursuant to
this Section 7.6, the Company shall give to each Purchaser written notice of the
proposed Fair Value, as determined in good faith by the Board of Directors of
the Company. If, within 30 days after the date such notice is given, the Company
and the Purchasers holding a majority of the Voting Securities held by all the
Purchasers (the "Majority Holders") agree upon the Fair Value then the Fair
Value for purposes of this Section 7.6 shall be as so agreed. If the Majority
Holders and the Company do not agree upon such Fair Value within such 30-day
period, then the Majority Holders and the Company shall appoint a recognized
investment banking firm of national reputation, reasonably acceptable to the
Majority Holders and the Company for the purpose of determining the Fair Value.
If the Company and the Majority Holders cannot agree on the appointment of a
mutually acceptable investment banking firm, or if the firm so appointed
declines or fails to serve, then the Majority Holders and the Company shall each
choose one such investment banking firm and the respective firms so chosen shall
appoint another recognized investment banking firm of national reputation for
the purpose of determining the Fair Value. The investment banking firm so
selected shall appraise the Fair Value for the purposes of this Section 7.6, and
such investment banking firm shall make such appraisal (which shall be in the
form of a written report signed by such investment banking firm) and, for the
purposes of determining the Fair Value
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pursuant to this Section 7.6, such appraised Fair Value shall be determined as
herein provided shall be final and conclusive on the Company and the Purchasers.
All costs of appraisal shall be borne by the Company. Each of the Company and
the Purchasers shall use all reasonable efforts to take or cause to be taken all
action required by this Section 7.6 as promptly as possible.
(b) Certain Definitions. For purposes of Section 7.6,
the following terms shall have the meanings ascribed to them below:
(i) "Voting Securities" shall mean Common
Stock and any other securities or interests entitling the
holder thereof to vote for or designate a director or
directors of the Company and securities or instruments which
are convertible into, exchangeable for or otherwise evidencing
the right to purchase or otherwise acquire shares of Common
Stock or other securities or interests entitling the holder
thereof to vote for or designate a director or directors of
the Company;
(ii) "Votes" shall mean the right to vote
for or designate a director and the number of votes
represented by a Voting Security shall be (A) one Vote per
share with respect to shares of Common Stock, (B) the voting
power relative to a share of Common Stock with respect to any
other securities or interests entitling the holder thereof to
vote for or designate a director or directors of the Company
and (C) the voting power of the underlying Common Stock or
other securities or interests issuable with respect to
securities or instruments convertible into, exchangeable for
or otherwise evidencing the right to purchase or otherwise
acquire shares of Common Stock or other securities or
interests entitling the holder thereof to vote for or
designate a director or directors of the Company;
(iii) "Permitted Issuances" shall mean (A)
issuances of Common Stock by the Company upon exercise or
conversion of presently outstanding securities, (B) the grant
of Plan Options (as defined in the Warrants) to directors,
officers, employees or other persons having a business
relationship with the Company and issuances of Common Stock
upon the exercise of such Plan Options, and (C) the issuance
of Voting Securities (other than for cash) in connection with
mergers, acquisitions or similar transactions.
7.7 Press Releases. The Purchaser shall have the right to
reasonably approve any press release with respect to the transactions
contemplated by this Agreement. In addition, at no time may the Company use or
otherwise refer to the name of any Purchaser or any Purchaser's affiliates in
any press release, publication or other report without the prior consent of such
Purchaser.
7.8 NNM Listing. The Company shall use its best efforts to
cause the listing of the Common Shares and Warrant Shares pursuant to the
notification filed with the NASD pursuant to Section 4.11 to be declared
effective as soon as practicable after the Closing and shall use its best
efforts to maintain such listing of the Common Shares and Warrant Shares for so
long as any Shares or Warrants are outstanding.
7.9 License Agreements. Prior to the execution of any license
or sub-license agreement pursuant to which the Company is obligated or is
reasonably expected to pay in excess of $250,000 during any fiscal year, the
Company shall obtain the Board of Directors' approval.
7.10 Shaquile O'Neal. The Company will not, without the prior
written consent of Tech Leaders, pay all or any portion of that certain $425,000
payment contemplated to be made to Shaquile O'Neal and/or his affiliates
pursuant to that certain Letter Agreement dated September 4, 1996 between Mine
O'Mine, Scoreboard & Classic Games and Management Plus Enterprises.
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7.11 Amendments to Agreements. For so long as Tech Leaders is
entitled to designate a member(s) to the Company's Board of Directors, the
Company shall not amend the employment agreement of either Ken Goldin or Barry
Bookman without obtaining Tech Leaders' prior written consent.
7.12 Waivers, Consents, Etc. Compliance with any of the
covenants in this Section 7 may be waived, either generally or in the particular
instance, and any consent required thereunder may be given by Tech Leaders on
behalf of all the Purchasers.
SECTION 8. COMPLIANCE WITH 1933 ACT; RESTRICTIONS ON TRANSFERABILITY
OF COMMON SHARES, WARRANTS AND WARRANT SHARES
8.1 Compliance with 1933 Act. The Common Shares, Warrants and
Warrant Shares shall not be transferable, except upon the conditions specified
in this Section 8, which conditions are intended to insure compliance with the
provisions of the 1933 Act and applicable state securities laws in respect of
any such transfer.
8.2 Restrictive Legend. The Warrants, and each certificate
representing the Common Shares, Warrant Shares and any shares of Common Stock or
other securities issued in respect of such Common Shares or Warrant Shares upon
any stock split, stock dividend, recapitalization, merger, consolidation,
similar event, shall (unless otherwise permitted by the provisions of Section
9.4 below) be stamped or otherwise imprinted with the following legend:
"[THIS WARRANT HAS] OR [THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE] NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY APPLICABLE
STATE SECURITIES LAW AND THE TRANSFERABILITY [THEREOF IS SUBJECT TO THE
PROVISIONS OF A SECURITIES PURCHASE AGREEMENT BY AND AMONG THE COMPANY AND THE
SIGNATORIES THERETO"
8.3 Restrictions on Transferability. The Company shall not be
required to register the transfer of the Common Shares or the Warrants or any
Warrant Shares on the books of the Company unless the Company shall have been
provided with an opinion of counsel reasonably satisfactory to it prior to such
transfer to the effect that registration under the 1933 Act or any applicable
state securities law is not required in connection with the transaction
resulting in such transfer; provided, however, that no such opinion of counsel
shall be necessary in order to effectuate a transfer in accordance with the
provisions of Rule 144(k) promulgated under the 1933 Act. Each certificate for
Common Shares or Warrant Shares issued upon any transfer as above provided shall
bear the restrictive legend set forth in Section 8.2 above, except that such
restrictive legend shall not be required if the opinion of counsel reasonably
satisfactory to the Company referred to above is to the further effect that such
legend is not required in order to establish compliance with the provisions of
the 1933 Act and any applicable state securities law, or if the transfer is made
in accordance with the provisions of Rule 144(k) under the 1933 Act or pursuant
to a registration statement in effect under the 1933 Act.
8.4 Termination of Restrictions on Transferability. The
conditions precedent imposed by this Section 8 upon the transferability of the
Common Shares, Warrants and Warrant Shares shall cease and terminate as to any
of the Common Shares, Warrants or Warrant Shares when (i) such securities shall
have been registered under the 1933 Act and sold or otherwise disposed of in
accordance with the intended method of disposition by the seller or sellers
thereof set forth in the registration statement covering such securities, (ii)
at such time as an opinion of counsel satisfactory to the Company shall have
been rendered as required pursuant to the second sentence of Section 8.3 to the
effect that the restrictive legend on such securities is no longer required, or
(iii) when such securities are transferable in accordance with the
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provisions of Rule 144(k) promulgated under the 1933 Act. Whenever the
conditions imposed by this Section 8 shall terminate as hereinabove provided
with respect to any of the Common Shares, Warrants or Warrant Shares, the holder
of any such securities bearing the legend set forth in this Section 8 as to
which such conditions shall have terminated shall be entitled to receive from
the Company, without expense (except for the payment of any applicable transfer
tax) and as expeditiously as possible, new Warrants in accordance with the terms
thereof, or new stock certificates, not bearing such legend.
SECTION 9. DISPUTE RESOLUTION
9.1 Good-Faith Negotiations.
(a) If any dispute arises under this Agreement that is not
settled promptly in the ordinary course of business, the parties shall seek to
resolve any such dispute between them, first, by negotiating promptly with each
other in good faith in face-to face negotiations. These face-to-face
negotiations shall be conducted by the respective designated senior management
representative of each party (or in the case of a dispute involving the Company
and all Purchasers, a designated senior management representative of Tech
Leaders who shall negotiate on behalf of all the Purchasers). If the parties are
unable to resolve the dispute between them through these face-to-face
negotiations within 20 days (or such period as the parties shall otherwise
agree) following the date of notification (the "Notice Date") by one party to
the other of the existence of such dispute, then any such disputes shall be
resolved in the following manner.
(b) Mediation. The parties shall endeavor to resolve any
dispute arising out of or relating to this Agreement by mediation under the CPR
Mediation Procedures for Business Disputes. Unless otherwise agreed, the parties
will select a mediator from the CPR Panels of Neutrals and shall notify CPR to
initiate the selection process.
(c) Resolution of Disputes.
(i) Any action, suit or proceeding where the amount
in controversy as to at least one party, exclusive of interest and costs,
exceeds $1,000,000 ("Summary Proceeding"), arising out of or relating to this
Agreement, the Registration Rights Agreement, the Warrants or any other
agreement executed in connection herewith or therewith or the breach,
termination or validity thereof which has not been resolved by mediation as
provided herein within 90 days of the Notice Date, shall be litigated
exclusively in the Superior Court of the State of Delaware (the "Delaware
Superior Court") as a summary proceeding pursuant to Rules 124-131 of the
Delaware Superior Court, or any successor rules (the "Summary Proceeding
Rules"). Each of the parties hereto hereby irrevocably and unconditionally (A)
submits to the jurisdiction of the Delaware Superior Court for any Summary
Proceeding, (B) agrees not to commence any Summary Proceeding except in the
Delaware Superior Court, (C) waives, and agrees not to plead or to make, any
objection to the venue of any summary Proceeding in the Delaware Superior Court,
(D) waives, and agrees not to plead or to make any claim that any Summary
Proceeding brought in the Delaware Superior Court has been brought in an
improper or otherwise inconvenient forum, (E) waives, and agrees not to plead or
to make, any claim that the Delaware Superior Court lacks personal jurisdiction
where such courts are vested with sole and exclusive jurisdiction by statute and
(G) understands and agrees that it shall not seek a jury trial or punitive
damages in any Summary Proceeding based upon or arising out of or otherwise
related to this Agreement or any other agreement executed in connection herewith
or the breach, termination or validity thereof, and waives any and all rights to
any such jury trial or to seek punitive damages.
(ii) In the event any action, suit or proceeding
where the amount in controversy as to at least one party, exclusive of interest
and costs, does not exceed $1,000,000 (a "Proceeding"), arising out of or
relating to this Agreement, or any other agreement executed in connection
herewith or the breach, termination or validity thereof is brought, the parties
to such Proceeding agree to make application to the
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<PAGE>
Delaware Superior Court to proceed under the Summary Proceeding Rules. Until
such time as such application is rejected, such Proceeding shall be treated as a
Summary Proceeding and all of the foregoing provisions of this Section relating
to Summary Proceedings shall apply to such Proceeding.
(iii) If a Summary Proceeding is not available to
resolve any dispute hereunder, the controversy or claim shall be settled by
arbitration conducted on a confidential basis, under the U.S. Arbitration Act,
if applicable, and the then current Commercial Arbitration Rules of the American
Arbitration Association (the "Association") strictly in accordance with the
terms of this Agreement and the substantive law of the State of Delaware,
including such law in respect of the statute of limitations. The arbitration
shall be conducted at the Association's regional office located in Philadelphia
by three arbitrators, one of whom shall be an attorney and one of whom shall be
a member of a "Big Six" accounting firm familiar with companies engaged in the
business conducted by the Company. The arbitrators are not empowered to award
damages in excess of compensatory damages and each party hereby irrevocably
waives any right to recover such damages with respect to any such disputes.
Judgment upon the arbitrators' award may be entered and enforced in any court of
competent jurisdiction.
(d) Neither party shall be precluded hereby from securing
equitable remedies in court of any jurisdiction, including, but not limited to,
temporary restraining orders and preliminary injunctions to protect its rights
and interest but shall not be sought as a means to avoid or stay arbitration or
Summary Proceeding.
(e) Each party is required to continue to perform its
obligations under this contract pending final resolution of any dispute arising
out of or relating to this contract, unless to do so would be impossible or
impracticable under the circumstances.
SECTION 10. SURVIVAL OF REPRESENTATIONS, WARRANTIES AND AGREEMENTS
All covenants, agreements, representations and warranties made
herein and in the certificates delivered pursuant hereto shall survive the
execution and delivery of this Agreement and the issuance and sale of the Common
Shares and Warrants hereunder notwithstanding any due diligence investigation
conducted by or on behalf of the Purchasers.
SECTION 11. MISCELLANEOUS
11.1 Owner of Common Shares, Warrants and Warrant Shares. The
Company may deem and treat the person in whose name the Common Shares, Warrants
and Warrant Shares, as the case may be, are registered as the absolute owner
thereof for all purposes whatsoever, and the Company shall not be affected by
any notice to the contrary.
11.2 Successors. This Agreement shall be binding upon and
except as provided herein, shall inure to the benefit of the respective
successors, executors, personal representatives, heirs and assigns of each of
the parties hereto.
11.3 Broker or Finder. Each party to this Agreement represents
and warrants that, to the best of its knowledge, no broker or finder has acted
for such party in connection with this Agreement or the transactions
contemplated by this Agreement and that no broker or finder is entitled to any
broker's or finder's fee or other commission in respect thereof based in any way
on agreements, arrangements or understandings made by such party. The Company
shall indemnify each Purchaser against, and hold it harmless from, any
liability, cost, or expense (including reasonable attorneys' fees and expenses)
resulting from any agreement, arrangement, or understanding made by the Company,
and each Purchaser shall
-26-
<PAGE>
indemnify the Company against, and hold the Company harmless from, any
liability, cost, or expense (including reasonable attorneys fees and expenses)
resulting from any agreement, arrangement, or understanding made by such
Purchaser with any third party, for brokerage or finder's fees or other
commissions in connection with this Agreement or any of the transactions
contemplated hereby.
11.4 Governing Law. This Agreement shall be governed by and
construed and enforced in accordance with the laws of the State of Delaware with
regard to principles of conflict of laws and without regard to any rule
requiring strict construction against the draftsman.
11.5 Notice. Any notice or other communications required or
permitted hereunder shall be deemed given when delivered personally, or upon
receipt by the party entitled to receive the notice when sent by registered or
certified mail, postage prepaid, addressed as follows or to such other address
or addresses as may hereafter be furnished in writing by notice similarly given
by one party to the other:
To the Company:
The Score Board, Inc.
1951 Old Cuthbert Road
Cherry Hill, New Jersey 08034
Attention: President
To the Purchasers at their address as reflected on Schedule I
hereto.
Notice to any holder of Common Shares, Warrants or Warrant
Shares other than a Purchaser shall be given in a like manner to such holder at
the address reflected in the Company's records.
11.6 Full Agreement. This Agreement, together with the
Registration Rights Agreement and Warrants and the Exhibits, Schedules and
Disclosure Letter attached hereto or delivered herewith, and other documents
delivered herewith, sets forth the entire understanding of the parties with
respect to the transactions contemplated hereby.
11.7 Headings. The headings of the sections of this Agreement
are inserted for convenience of reference only and shall not be considered a
part hereof.
11.8 No Waiver; Cumulative Remedies. No failure or delay on
the part of any party to this Agreement in exercising any right, power or remedy
hereunder shall operate as a waiver thereof; nor shall any single or partial
exercise of any right, power or remedy preclude any other or further exercise
thereof or the exercise of any other right, power or remedy hereunder. The
remedies herein provided are cumulative and not exclusive of any remedies
provided by law.
11.9 Amendments, Waivers and Consents. Any provision in the
Agreement to the contrary notwithstanding, and except as hereinafter provided,
changes in, termination or amendments of or additions to this Agreement may be
made, and compliance with any covenant or provision set forth herein may be
omitted or waived, if the Company (i) shall obtain consent thereto in writing
from the holder or holders of at least a majority in interest of the Shares
(treating all Warrant Shares issuable upon exercise of the Warrants as
outstanding for this purpose) and (ii) shall deliver copies of such consent in
writing to any holders who did not execute such consent; provided that no
consents shall be effective to reduce the percentage in interest of the Shares
the consent of the holders of which is required under this Section 11.9. Any
waiver or consent may be given subject to satisfaction of conditions stated
therein and any waiver or consent shall be effective only in the specific
instance and for the specific purpose for which given.
-27-
<PAGE>
IN WITNESS WHEREOF, each of the parties hereto has fully
executed this Agreement as of the date first set forth above.
THE SCORE BOARD, INC.
By: /s/Kenneth Goldin
---------------------------------------
Name: Kenneth Goldin
Title: CEO
PURCHASERS:
TECHNOLOGY LEADERS II L.P.
By: Technology Leaders II Management L.P.,
the General Partner
By: Technology Leaders Management, Inc.,
a General Partner
By: /s/ Tami L. Fratis
---------------------------------------
Tami L. Fratis, Vice President
TECHNOLOGY LEADERS II OFFSHORE C.V.
By: Technology Leaders II Management L.P.,
a General Partner
By: Technology Leaders Management, Inc.,
a General Partner
By: /s/ Tami L. Fratis
---------------------------------------
Tami L. Fratis, Vice President
[SIGNATURES CONTINUED ON NEXT PAGE]
[SIGNATURES CONTINUED FROM PREVIOUS PAGE]
/s/ Ira Lubert
---------------------------------------
Ira Lubert
-28-
<PAGE>
JONATHAN LUBERT TRUST
By: /s/ Howard E. Lubert
---------------------------------------
Howard E. Lubert, Trustee
KRISTINE LUBERT TRUST
By: /s/ Howard E. Lubert
---------------------------------------
Howard E. Lubert, Trustee
THE OUTSOURCING PARTNERSHIP, L.L.C.
By: /s/ John F. White
---------------------------------------
Name: John F. White
Title: CEO
/s/Dean Adler
------------------------------------------
Dean Adler
/s/Robert A. Fox
------------------------------------------
Robert A. Fox
NEWVALU, INC.
By: /s/ Milton Koffman
---------------------------------------
Name: Milton Koffman
Title:President
[SIGNATURES CONTINUED ON NEXT PAGE]
[SIGNATURES CONTINUED FROM PREVIOUS PAGE]
/s/ Milton Koffman
---------------------------------------
Milton Koffman
/s/ Burton I. Koffman
---------------------------------------
Burton I. Koffman
/s/ Ronald Rubin
---------------------------------------
Ronald Rubin
-29-
<PAGE>
SCHEDULE 1
<TABLE>
<CAPTION>
No. of No. of No. of No. of No. of No. of
Common Series A Series B Series C Series D Series E
Purchaser Shares Warrant Shares Warrant Shares Warrant Shares Warrant Shares Warrant Shares Purchase Price
- --------- ------ -------------- -------------- -------------- -------------- -------------- --------------
<S> <C> <C> <C> <C> <C> <C> <C>
Technolgy Leaders
II Offshore C.V 531,240 730,455 88,540 88,540 48,697 -- $1,328,100.00
(Curacao)
Technology Leaders 668,760 919,545 111,460 111,460 61,303 -- $1,671,900.00
II L.P.
(Delaware)
Ira Lubert 160,000 -- -- -- -- -- $ 397,120.00
(New Jersey)
Johnathan Lubert Trust -- 110,000 13,333 13,333 7,334 -- $ 1,440.00
(New Jersey)
Kristine Lubert Trust -- 110,000 13,333 13,333 7,334 -- $ 1,440.00
(New Jersey)
The Outsourcing 10,000 13,750 1,667 1,667 916 -- $ 25,000.00
Partnership, L.L.C
(Delaware)
Dean Adler 30,000 41,250 5,000 5,000 2,750 -- $ 75,000.00
(Pennsylvania)
New Valu, Inc. 40,000 -- -- -- -- 40,000 $ 100,000.00
(New York)
Milton Koffman 40,000 -- -- -- -- 40,000 $ 100,000.00
(New York)
Burton I. Koffman 40,000 -- -- -- -- 40,000 $ 100,000.00
(New York)
Robert A. Fox 40,000 -- -- -- -- 40,000 $ 100,000.00
(Pennsylvania)
Ronald Rubin 40,000 -- -- -- -- 40,000 $ 100,000.00
(Pennsylvania) --------- --------- ------- ------- ------- ------- -------------
TOTALS 1,600,000 1,925,000 233,333 233,333 128,334 200,000 $4,000,000.00
========= ========= ======= ======= ======= ======= =============
</TABLE>
<PAGE>
EXHIBIT B
IDENTITY AND BACKGROUND
1. Technology Leaders II L.P.
Technology Leaders II L.P. ("TL II") is a Delaware limited partnership
with a principal place of business at 800 The Safeguard Building, 435
Devon Park Drive, Wayne, Pennsylvania 19087. TL II and TLO II (see item
2 below) are parallel venture capital funds. TLM II (see item 3 below)
is the sole general partner of TL II.
2. Technology Leaders II Offshore C.V.
Technology Leaders II Offshore C.V. ("TLO II") is a limited partnership
organized under the laws of Netherlands Antilles with a principal place
of business at 800 The Safeguard Building, 435 Devon Park Drive, Wayne,
Pennsylvania 19087. TLO II and TL II are parallel venture capital
funds. TLM II serves as the co-general partner of TLO II. TLO II also
has an offshore general partner, Technology Leaders Curacao N.V., a
Netherlands Antilles limited liability company ("TLC"), but TLC only
has administrative duties and has no control over the management of
TLO. TLC is not, therefore, deemed to beneficially own any securities
held by TLO II. The management and control of TLO II is otherwise
identical to that of TL II.
3. Technology Leaders II Management L.P.
Technology Leaders II Management L.P. ("TLM II"), a Delaware limited
partnership, is the sole general partner of TL II and co-general
partner of TLO II. TLM II has an office at 800 The Safeguard Building,
435 Devon Park Drive, Wayne, Pennsylvania 19087. The general partners
of TLM II are as follows: TLM, Inc., Robert E. Keith, Jr., Gary S.
Anderson, Ira M. Lubert, Mark J. DeNino, Technology Leaders Advisors I,
Inc., Technology Leaders Advisors II, Inc., Technology Leaders Advisors
III, Inc. and Technology Leaders IV, Inc. This Exhibit B and Schedule I
hereto provides information about the general partners of TLM II as of
the date of this filing.
TLM II is controlled by its Executive Committee which presently
consists of those individuals set forth on Schedule II hereto. The
general partners of TLM II have delegated to the Executive Committee
all authority to make decisions regarding the acquisitions, voting and
disposition of, securities, and the general partners have agreed to act
in accordance with the Executive Committee's decisions. The general
partners do not, therefore, beneficially own securities owned by TLM
II.
4. Ira M. Lubert.
Mr. Lubert's principal business address is 800 The Safeguard Building,
435 Devon Park Drive, Wayne, Pennsylvania 19087. His principal
occupation is serving as a general partner of TLM II and as Managing
Director of TLM, Inc.
<PAGE>
5 Technology Leaders Management, Inc
Technology Leaders Management, Inc. ("TLM, Inc."), a Delaware
corporation, is a general partner of TLM II. TLM, Inc. has a principal
place of business at 800 The Safeguard Building, 435 Devon Park Drive,
Wayne, Pennsylvania 19087. TLM, Inc. was formed for the purpose of
acting as a general partner of venture capital fund general partners
and as a management company for venture capital partnerships. Control
of TLM, Inc. has been vested in Warren V. Musser, Robert E. Keith, Jr.
and Gary S. Anderson pursuant to an agreement among such individuals,
TLM, Inc.'s sole shareholder, Safeguard Scientifics (Delaware), Inc.,
and certain other parties. Schedule III provides information about the
executive officers (i.e. managing directors) and directors of TLM, Inc.
and persons controlling TLM, Inc. TLM, Inc. also serves as the managing
member of, and controls, TLC.
6. Technology Leaders Advisors I, Inc.
Technology Leaders Advisors I, Inc. ("TLA I") is a general partner of
TLM II. TLA I is a Delaware corporation which was organized for the
sole purpose of acting as a general partner of a venture capital fund
general partners. TLA I has a principal place of business at 1013
Centre Road, Suite 350, Wilmington, Delaware 19095. TLA I is controlled
by Robert Schoemaker. Dr. Schoemaker's business address and principal
occupation and employer are listed in Schedule II.
7. Technology Leaders Advisors II, Inc.
Technology Leaders Advisors I, Inc. ("TLA II") is a general partner of
TLM II. TLA II is a Delaware corporation which was organized for the
sole purpose of acting as a general partner of a venture capital fund
general partners. TLA II has a principal place of business at 1013
Centre Road, Suite 350, Wilmington, Delaware 19095. TLA I is controlled
by Gerald Bayer. Mr. Bayer is retired and resides in Florida.
8. Technology Leaders Advisors III, Inc.
Technology Leaders Advisors III, Inc. ("TLA III") is a general partner
of TLM II. TLA III is a Delaware corporation which was organized for
the sole purpose of acting as a general partner of a venture capital
fund general partners. TLA III has a principal place of business at
1013 Centre Road, Suite 350, Wilmington, Delaware 19095. TLA I is
controlled by Charles Andes. Mr. Andes' business address and principal
occupation and employer are listed in Schedule II.
9. Technology Leaders Advisors IV, Inc.
Technology Leaders Advisors IV, Inc. ("TLA IV") is a general partner of
TLM II. TLA IV is a Delaware corporation which was organized for the
sole purpose of acting as a general partner of a venture capital fund
general partners. TLA IV has a principal place of business at 1013
Centre Road, Suite 350, Wilmington, Delaware 19095. TLA IV is
controlled by Thomas Gerrity. Dr. Gerrity is Dean of the Wharton School
of the University of Pennsylvania, with a business address at The
Wharton School, University of Pennsylvania, Office of the Dean, 100
Steinberg-Deitrich Hall, Philadelphia, Pennsylvania 19104.
<PAGE>
SCHEDULE I
Individual General Partners of
Technology Leaders II Management L.P.
<TABLE>
<CAPTION>
NAME BUSINESS ADDRESS PRINCIPAL OCCUPATION
- ---- ---------------- --------------------
<S> <C> <C>
Gary S. Anderson 800 The Safeguard Building General Partner of TLM II and
435 Devon Park Drive Managing Director of TLM, Inc.
Wayne, PA 19087
Mark J. DeNino 800 The Safeguard Building General Partner of TLM II and
435 Devon Park Drive Managing Director of TLM, Inc.
Wayne, PA 19087
Robert E. Keith, Jr. 800 The Safeguard Building General Partner of TLM II and
435 Devon Park Drive Managing Director of TLM, Inc.
Wayne, PA 19087
Ira M. Lubert 800 The Safeguard Building General Partner of TLM II and
435 Devon Park Drive Managing Director of TLM, Inc.
Wayne, PA 19087
</TABLE>
<PAGE>
SCHEDULE II
Executive Committee of
Technology Leaders II Management L.P.
<TABLE>
<CAPTION>
NAME BUSINESS ADDRESS PRINCIPAL OCCUPATION
- ---- ---------------- --------------------
<S> <C> <C>
Warren V. Musser 800 The Safeguard Building Chairman of the Board of SSI
435 Devon Park Drive
Wayne, PA 19087
Hubert Schoemaker, Ph.D. 200 Great Valley Parkway Chairman of the Board of
Malvern, PA 19355 Centocor, Inc.
Robert E. Keith, Jr. See Schedule I See Schedule I
Gary J. Anderson See Schedule I See Schedule I
Charles L. Andes 800 The Safeguard Building President, Interactive Marketing
435 Devon Park Drive Ventures, L.L.C.
Wayne, PA 19087
Gerald W. Bayer N/A Retired
Thomas P. Gerrity, Ph.D. The Wharton School, University of Pennsylvania Dean of the Wharton School of
Office of the Dean the University of Pennsylvania
100 Steinberg-Deitrich Hall
Philadelphia, PA 19104
Ira M. Lubert See Schedule I See Schedule I
Mark J. DeNino See Schedule I See Schedule I
</TABLE>
<PAGE>
SCHEDULE III
Executive Officers, Directors and Control Persons of
Technology Leaders Management, Inc.
<TABLE>
<CAPTION>
NAME BUSINESS ADDRESS PRINCIPAL OCCUPATION
- ---- ---------------- --------------------
<S> <C> <C>
A. Executive Officers
(Managing Directors)
Robert E. Keith, Jr. See Schedule I See Schedule I
Ira M. Lubert See Schedule I See Schedule I
Gary S. Anderson See Schedule I See Schedule I
Mark J. DeNino See Schedule I See Schedule I
Christopher Holler, Ph.D. 800 The Safeguard Building Managing Director of TLM, Inc.
435 Devon Park Drive
Wayne, PA 19087
B. Board of Directors
Warren V. Musser See Schedule II See Schedule II
Robert E. Keith, Jr. See Schedule I See Schedule I
Gary S. Anderson See Schedule I See Schedule I
Ira M. Lubert See Schedule I See Schedule I
Mark J. DeNino See Schedule I See Schedule I
C. Control Persons
Warren V. Musser See Schedule II See Schedule II
Robert E. Keith, Jr. See Schedule I See Schedule I
Gary S. Anderson See Schedule I See Schedule I
</TABLE>
<PAGE>
EXHIBIT C
The undersigned agree, to the extent required by Rule 13d-1(f), that
this statement is being filed on behalf of each of them.
TECHNOLOGY LEADERS II L.P.
By: Technology Leaders II Management L.P.,
a General Partner
By: Technology Leaders Management, Inc.,
a General Partner
By: ______________________________________
Name:
Title:
TECHNOLOGY LEADERS II OFFSHORE C.V.
By: Technology Leaders II Management L.P.,
a General Partner
By: Technology Leaders Management, Inc.,
a General Partner
By: ______________________________________
Name:
Title:
TECHNOLOGY LEADERS II MANAGEMENT L.P.
By: Technology Leaders Management, Inc.,
a General Partner
By: ______________________________________
Name:
Title:
______________________________________
Ira M. Lubert
<PAGE>
EXHIBIT D
REGISTRATION RIGHTS AGREEMENT
REGISTRATION RIGHTS AGREEMENT (this "Agreement"), dated as of November
5, 1996 by and among THE SCORE BOARD, INC. a New Jersey corporation (the
"Company"), and each of the undersigned (together with their respective
affiliates, the "Initial Investors").
WHEREAS:
The Company has entered into a Securities Purchase Agreement dated as
of the date hereof (the "Purchase Agreement") providing for the issuance of
1,600,000 shares (the "Common Shares") of its common stock, $.01 par value per
share (the "Common Stock") and warrants to purchase up to 2,720,000 shares of
its Common Stock (the "Warrants") to a group of investors.
The shares of Common Stock issuable upon the exercise of the Warrants
are hereinafter called the "Warrant Shares"; the Common Shares and Warrant
Shares collectively are hereinafter called the "Shares".
In order to induce the Initial Investors to purchase the Company's
securities as described above, the Company has agreed to provide such investors
(and their transferees) the registration rights set forth in this Agreement.
NOW, THEREFORE, in consideration of the premises and the mutual
covenants contained herein and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the Company and each
of the Initial Investors hereby agree as follows:
1. DEFINITIONS.
As used in this Agreement, the following terms shall have the
following meanings:
1.1 "Investors" means the Initial Investors and any
transferees or assignees who agrees to become bound by the provisions of this
Agreement in accordance with Section 9 hereof.
1.2 "register," "registered," and "registration"
refer to a registration effected by preparing and filing a Registration
Statement or Statements in compliance with the 1933 Act and pursuant to Rule 415
under the 1933 Act or any successor rule providing for offering securities on a
continuous basis ("Rule 415"), and the declaration or ordering of effectiveness
of such Registration Statement by the United States Securities and Exchange
Commission (the "SEC").
1.3 "Registrable Securities" means the Shares plus
all shares of Common Stock, if any, issued pursuant to Section 7.6 of the
Purchase Agreement (relating to preemptive rights) plus all shares of Common
Stock or other securities of the Company issued in respect of the Warrants or
the foregoing securities by way of stock dividend, stock split recapitalization,
merger of consolidation; provided, however, that the term "Registrable
Securities" shall not include any shares or other securities described in the
foregoing clauses sold in a public offering registered under 1933 Act or sold
pursuant to Rule 144.
<PAGE>
1.4 "Registration Statement" means a registration
statement of the Company under the 1933 Act.
2. REGISTRATION.
2.1 Mandatory Registration. The Company shall prepare, and, on
or prior to the date which is fifteen (15) days after the date of the Closing
under the Purchase Agreement (the "Closing Date"), file with the SEC a
Registration Statement on Form S-3 (or, if Form S-3 is not then available, on
such form of Registration Statement as is then available to effect a
registration of the Registrable Securities, subject to the consent of the
Initial Investors (as determined pursuant to Section 11(j) hereof), which
consent will not be unreasonably withheld) covering the resale of all of the
Registrable Securities, which Registration Statement, to the extent allowable
under the 1933 Act and the Rules promulgated thereunder (including Rule 416),
shall state that such Registration Statement also covers such indeterminate
number of additional shares of Common Stock as may become issuable in respect of
the Registrable Securities upon exercise of the Warrants to prevent dilution
resulting from stock splits, stock dividends or similar transactions or by
reason of changes in the exercise price of the Warrants in accordance with the
terms thereof. The Registration Statement (and each amendment or supplement
thereto, and each request for acceleration of effectiveness thereof) shall be
provided to (and subject to the approval of) the Initial Investors and their
counsel prior to its filing or other submission. The provisions of Section 2(c)
shall be applicable with respect to each Registration Statement filed pursuant
to this Section 2(a).
2.2 Underwritten Offering. If any offering pursuant to a
Registration Statement pursuant to Section 2(a) hereof involves an underwritten
offering, the Investors who hold a majority in interest of the Registrable
Securities subject to such underwritten offering shall have the right to select
one legal counsel and an investment banker or bankers and manager or managers to
administer the offering, which investment banker or bankers or manager or
managers shall be reasonably satisfactory to the Company. The Investors shall
have the right to require only two (2) underwritten offerings pursuant to this
Agreement.
2.3 Payments by the Company. The Company shall use its best
efforts to obtain effectiveness of the Registration Statement as soon as
practicable. If (i) the Registration Statement(s) covering the Registrable
Securities required to be filed by the Company pursuant to Section 2(a) hereof
is not declared effective by the SEC within seventy-five (75) days after the
Closing Date (other than by reason of any act or failure to act by the
Investors) or if, after the Registration Statement has been declared effective
by the SEC, sales cannot be made pursuant to the Registration Statement (by
reason of stop order, or the Company's failure to update the Registration
Statement), or (ii) the Common Stock is not listed or included for quotation on
The NASDAQ Stock Market (the "NASDAQ"), the New York Stock Exchange (the "NYSE")
or the American Stock Exchange (the "AMEX"), then the Company will make payments
to the Investors in such amounts and at such times as shall be determined
pursuant to this Section 2(c) as partial relief for the damages to the Investors
by reason of any such delay in or reduction of their ability to sell the
Registrable Securities (which remedy shall not be exclusive of any other
remedies available at law or in equity). The Company shall pay to each holder of
Registerable Securities an amount equal to the Aggregate Value (as defined
below) of all Registrable Securities held by such Investor multiplied by two and
one-half hundredths (.025) times the sum of: (i) the number of months (prorated
for partial months) after the end of such 75-day period and prior to the date
the Registration Statement is declared effective by the SEC, provided, however,
that there shall be excluded from such period any delays which are solely
attributable to changes required by the Investors in the Registration Statement
with respect to information relating to the Investors, including, without
limitation, changes to the plan of distribution, or to the failure of the
Investors to conduct their review of the registration statement pursuant to
Section 2(a) above in a reasonably prompt manner; (ii) the number of months
(prorated for partial months) that sales cannot be made pursuant to the
Registration Statement after the Registration Statement has been declared
effective; and (iii) the number of months (prorated for partial months) that the
Common Stock is not listed or included for quotation on the NASDAQ, NYSE or AMEX
after the Registration Statement has been declared effective. (For example, if
-2-
<PAGE>
the Registration Statement becomes effective one (1) month after the end of such
75-day period, the Company would pay $25,000 for each $1,000,000 of Aggregate
Value and would continue to pay $25,000 for each $1,000,000 of Aggregate Value
until the Registration Statement becomes effective.) Such amounts shall be paid
in cash or, at each Investor's option, may be convertible into Common Stock at
the price of Three Dollars and Seven Cents ($3.07) per share. Any shares of
Common Stock issued upon conversion of such amounts shall be Registrable
Securities. If the Investor desires to convert the amounts due hereunder into
Registrable Securities, it shall so notify the Company in writing within two (2)
business days of the date on which such amounts are first payable in cash and
such amounts shall be so convertible beginning on the last day upon which the
cash amount would otherwise be due in accordance with the following sentence.
Payments of cash pursuant hereto shall be made within five (5) days after the
end of each period that gives rise to such obligation, provided that, if any
such period extends for more than thirty (30) days, interim payments shall be
made for each such thirty (30) day period. The "Aggregate Value" of each Common
Share constituting a Registrable Security shall be Two Dollars and Fifty Cents
($2.50) per share and the "Aggregate Value" of each Warrant Share constituting a
Registrable Share shall be equal to the difference between (x) the higher of the
Market Prices (as defined in the Warrant) of a share of Common Stock on the
first date the Investor was entitled to the payment hereunder with respect to
which this determination is being made and the last date in the payment period
for which the determination hereunder is being made less (y) the purchase price
of the Warrant Share upon exercise of the applicable Warrant on the last date in
the payment period for which the determination hereunder is being made.
2.4 Piggy-Back Registrations. If at any time prior to the
expiration of the Registration Period (as hereinafter defined) the Company shall
file with the SEC a Registration Statement relating to an offering for its own
account or the account of others under the 1933 Act of any of its equity
securities (other than on Form S-4 or Form S-8 or their then equivalents
relating to equity securities to be issued solely in connection with any
acquisition of any entity or business or equity securities issuable in
connection with stock option or other employee benefit plans) the Company shall
send to each Investor who is entitled to registration rights under this Section
2(d) written notice of such determination and, if within fifteen (15) days after
the effective date of such notice, such Investor shall so request in writing,
the Company shall include in such Registration Statement all or any part of the
Registrable Securities such Investor requests to be registered, except that if,
in connection with any underwritten public offering for the account of the
Company the managing underwriter(s) thereof shall impose a limitation on the
number of shares of Common Stock which may be included in the Registration
Statement because, in such underwriter(s)' judgment, marketing or other factors
dictate such limitation is necessary to facilitate public distribution, then the
Company shall be obligated to include in such Registration Statement only such
limited portion of the Registrable Securities with respect to which such
Investor has requested inclusion hereunder as the underwriter shall permit. Any
exclusion of Registrable Securities shall be made pro rata among (i) the
Investors seeking to include Registrable Securities and (ii) holders ("Other
Holders") of other securities entitled to include such securities in such
Registration Statement pursuant to registration rights in existence as of the
date hereof ("Other Registrable Securities"), in proportion to the number of
Registrable Securities sought to be included by such Investors and Other
Holders; provided, however, that the Company shall not exclude any Registrable
Securities unless the Company has first excluded all outstanding securities,
which are not Other Registrable Securities. No right to registration of
Registrable Securities under this Section 2(d) shall be construed to limit any
registration required under Section 2(a) hereof. If an offering in connection
with which an Investor is entitled to registration under this Section 2(d) is an
underwritten offering, then each Investor whose Registrable Securities are
included in such Registration Statement shall, unless otherwise agreed by the
Company, offer and sell such Registrable Securities in an underwritten offering
using the same underwriter or underwriters and, subject to the provisions of
this Agreement, on the same terms and conditions as other shares of Common Stock
included in such underwritten offering.
2.5 Eligibility for Form S-3. The Company represents and
warrants that it meets the requirements for the use of Form S-3 for registration
of the sale by any Investor of the Registrable Securities and the Company shall
file all reports required to be filed by the Company with the SEC in a timely
manner so as to maintain such eligibility for the use of Form S-3.
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3. OBLIGATIONS OF THE COMPANY.
In connection with the registration of the Registrable Securities, the
Company shall have the following obligations:
3.1 The Company shall prepare promptly, and file with the SEC
not later than fifteen (15) days after the Closing Date, a Registration
Statement with respect to the number of Registrable Securities provided in
Section 2(a), and thereafter use its best efforts to cause such Registration
Statement relating to Registrable Securities to become effective as soon as
possible after such filing, and keep the Registration Statement effective
pursuant to Rule 415 at all times until the later of (i) the third anniversary
of the Closing Date and (ii) the date which is two (2) months after the date
that all the Warrants have been exercised or have expired (the "Registration
Period"), which Registration Statement (including any amendments or supplements
thereto and prospectuses contained therein) shall not contain any untrue
statement of a material fact or omit to state a material fact required to be
stated therein, or necessary to make the statements therein not misleading.
3.2 The Company shall prepare and file with the SEC such
amendments (including post-effective amendments) and supplements to the
Registration Statement and the prospectus used in connection with the
Registration Statement as may be necessary to keep the Registration Statement
effective at all times during the Registration Period, and, during such period,
comply with the provisions of the 1933 Act with respect to the disposition of
all Registrable Securities of the Company covered by the Registration Statement
until such time as all of such Registrable Securities have been disposed of in
accordance with the intended methods of disposition by the seller or sellers
thereof as set forth in the Registration Statement. In the event the number of
shares available under a Registration Statement filed pursuant to this Agreement
is insufficient to cover all of the Registrable Securities issued or issuable
upon exercise of the Warrants, the Company shall amend the Registration
Statement, or file a new Registration Statement (on the short form available
therefore, if applicable), or both, so as to cover all of the Registrable
Securities, in each case, as soon as practicable, but in any event within
fifteen (15) days after the necessity therefor arises. The Company shall use its
best efforts to cause such amendment and/or new Registration Statement to become
effective as soon as practicable following the filing thereof. The provisions of
Section 2(c) above shall be applicable with respect to such obligation, with the
seventy-five (75) days running from the day after the date on which the Company
reasonably first determines (or reasonably should have determined) the need
therefor.
3.3 The Company shall furnish to each Investor whose
Registrable Securities are included in the Registration Statement and its legal
counsel (i) promptly after the same is prepared and publicly distributed, filed
with the SEC, or received by the Company, one copy of the Registration Statement
and any amendment thereto, each preliminary prospectus and prospectus and each
amendment or supplement thereto, and, in the case of the Registration Statement
referred to in Section 2(a), each letter written by or on behalf of the Company
to the SEC or the staff of the SEC, and each item of correspondence from the SEC
or the staff of the SEC, in each case relating to such Registration Statement
(other than any portion of any thereof which contains information for which the
Company has sought confidential treatment), and (ii) such number of copies of a
prospectus, including a preliminary prospectus, and all amendments and
supplements thereto and such other documents as such Investor may reasonably
request in order to facilitate the disposition of the Registrable Securities
owned by such Investor.
3.4 The Company shall use reasonable efforts to (i) register
and qualify the Registrable Securities covered by the Registration Statement
under such other securities or "blue sky" laws of such jurisdictions in the
United States as the Investors who hold a majority in interest of the
Registrable Securities being offered reasonably request, (ii) prepare and file
in those jurisdictions such amendments (including post-effective amendments) and
supplements to such registrations and qualifications as may be necessary to
maintain the effectiveness thereof during the Registration Period, (iii) take
such other actions as may be necessary to maintain such registrations and
qualifications in effect at all times during the Registration Period, and (iv)
take all other actions reasonably necessary or advisable to qualify the
Registrable Securities
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for sale in such jurisdictions; provided, however, that the Company shall not be
required in connection therewith or as a condition thereto to (a) qualify to do
business in any jurisdiction where it would not otherwise be required to qualify
but for this Section 3(d), (b) subject itself to general taxation in any such
jurisdiction, (c) file a general consent to service of process in any such
jurisdiction, (d) provide any undertakings that cause the Company undue expense
or burden, or (e) make any change in its charter or by laws, which in each case
the Board of Directors of the Company determines to be contrary to the best
interests of the Company and its stockholders.
3.5 In the event Investors who hold a majority in interest of
the Registrable Securities being offered in the offering select underwriters for
the offering, the Company shall enter into and perform its obligations under an
underwriting agreement, in usual and customary form, including, without
limitation, customary indemnification and contribution obligations, with the
underwriters of such offering.
3.6 As promptly as practicable after becoming aware of such
event, the Company shall notify each Investor of the happening of any event, of
which the Company has knowledge, as a result of which the prospectus included in
the Registration Statement, as then in effect, includes an untrue statement of a
material fact or omission to state a material fact required to be stated therein
or necessary to make the statements therein not misleading, and use its best
efforts promptly to prepare a supplement or amendment to the Registration
Statement to correct such untrue statement or omission, and deliver such number
of copies of such supplement or amendment to each Investor as such Investor may
reasonably request.
3.7 The Company shall use its best efforts to prevent the
issuance of any stop order or other suspension of effectiveness of a
Registration Statement, and, if such an order is issued, to obtain the
withdrawal of such order at the earliest possible moment and to notify each
Investor who holds Registrable Securities being sold (or, in the event of an
underwritten offering, the managing underwriters) of the issuance of such order
and the resolution thereof.
3.8 The Company shall permit a single firm of counsel
designated by Investors who hold a majority of the Registrable Securities being
registered to review the Registration Statement and all amendments and
supplements thereto a reasonable period of time prior to their filing with the
SEC, and not file any document in a form to which such counsel reasonably
objects.
3.9 The Company shall make generally available to its security
holders as soon as practical, but not later than ninety (90) days after the
close of the period covered thereby, an earnings statement (in form complying
with the provisions of Rule 158 under the 1933 Act) covering a twelve-month
period beginning not later than the first day of the Company's fiscal quarter
next following the effective date of the Registration Statement.
3.10 At the request of any Investor, the Company shall
furnish, on the date that Registrable Securities are delivered to an
underwriter, if any, for sale in connection with the Registration Statement or,
if such securities are not being sold by an underwriter, on the date of
effectiveness thereof (i) an opinion, dated as of such date, from counsel
representing the Company for purposes of such Registration Statement, in form,
scope and substance as is customarily given in an underwritten public offering,
addressed to the underwriters, if any, and the Investors and (ii) a letter,
dated such date, from the Company's independent certified public accountants in
form and substance as is customarily given by independent certified public
accountants to underwriters in an underwritten public offering, addressed to the
underwriters, if any, and the Investors.
3.11 The Company shall make available for inspection by (i)
any Investor, (ii) any underwriter participating in any disposition pursuant to
the Registration Statement, (iii) one firm of attorneys and one firm of
accountants or other agents retained by Investors who hold a majority of the
Registrable Securities being registered and (iv) one firm of attorneys retained
by all such underwriters (collectively, the "Inspectors") all pertinent
financial and other records, and pertinent corporate documents and properties of
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the Company (collectively, the "Records"), as shall be reasonably deemed
necessary by each Inspector to enable each Inspector to exercise its due
diligence responsibility, and cause the Company's officers, directors and
employees to supply all information which any Inspector may reasonably request
for purposes of such due diligence; provided, however, that each Inspector shall
hold in confidence and shall not make any disclosure (except to an Investor) of
any Record or other information which the Company determines in good faith to be
confidential, and of which determination the Inspectors are so notified, unless
(a) the disclosure of such Records is necessary to avoid or correct a
misstatement or omission in any Registration Statement, (b) the release of such
Records is ordered pursuant to a subpoena or other order from a court or
government body of competent jurisdiction, or (c) the information in such
Records has been made generally available to the public other than by disclosure
in violation by an Investor of this or any other agreement. The Company shall
not be required to disclose any confidential information in such Records to any
Inspector until and unless such Inspector shall have entered into
confidentiality agreements (in form and substance satisfactory to the Company)
with the Company with respect thereto, substantially in the form of this Section
3(k). Each Investor agrees that it shall, upon learning that disclosure of such
Records is sought in or by a court or governmental body of competent
jurisdiction or through other means, give prompt notice to the Company and allow
the Company, at its expense, to undertake appropriate action to prevent
disclosure of, or to obtain a protective order for, the Records deemed
confidential. Nothing herein shall be deemed to limit the Investor's ability to
sell Registrable Securities in a manner which is otherwise consistent with
applicable laws and regulations.
3.12 The Company shall hold in confidence and not make any
disclosure of information concerning an Investor provided to the Company unless
(i) disclosure of such information is necessary to comply with federal or state
securities laws, (ii) the disclosure of such information is necessary to avoid
or correct a misstatement or omission in any Registration Statement, (iii) the
release of such information is ordered pursuant to a subpoena or other order
from a court or governmental body of competent jurisdiction, or (iv) such
information has been made generally available to the public other than by
disclosure in violation of this or any other agreement. The Company agrees that
it shall, upon learning that disclosure of such information concerning an
Investor is sought in or by a court or governmental body of competent
jurisdiction or through other means, give prompt notice to such Investor prior
to making such disclosure, and allow the Investor, at its expense, to undertake
appropriate action to prevent disclosure of, or to obtain a protective order
for, such information.
3.13 The Company shall use its best efforts to cause all the
Registrable Securities covered by the Registration Statement to be designated
for quotation on the NASDAQ and listed on each national securities exchange on
which securities of the same class or series issued by the Company are then
listed, if any, if the designation for quotation or listing of such Registrable
Securities is then permitted under the rules of such interdealer quotation
system or exchange and, without limiting the generality of the foregoing, to
arrange for at least two market makers to register with the National Association
of Securities Dealers, Inc. ("NASD") as such with respect to such Registrable
Securities.
3.14 The Company shall provide a transfer agent and registrar,
which may be a single entity, for the Registrable Securities not later than the
effective date of the Registration Statement.
3.15 The Company shall cooperate with the Investors who hold
Registrable Securities being offered and the managing underwriter or
underwriters, if any, to facilitate the timely preparation and delivery of
certificates (not bearing any restrictive legends) representing Registrable
Securities to be offered pursuant to the Registration Statement and enable such
certificates to be in such denominations or amounts, as the case may be, as the
managing underwriter or underwriters, if any, or the Investors may reasonably
request and registered in such names as the managing underwriter or
underwriters, if any, or the Investors may request.
3.16 The Company shall take all other reasonable actions
necessary to expedite and facilitate disposition by the Investors of Registrable
Securities pursuant to the Registration Statement.
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4. OBLIGATIONS OF THE INVESTORS.
In connection with the registration of the Registrable Securities, the
Investors shall have the following obligations:
4.1 It shall be a condition precedent to the obligations of
the Company to complete the registration pursuant to this Agreement with respect
to the Registrable Securities of a particular Investor that such Investor shall
furnish to the Company such information regarding itself, the Registrable
Securities held by it and the intended method of disposition of the Registrable
Securities held by it as shall be reasonably required to effect the registration
of such Registrable Securities and shall execute such documents in connection
with such registration as the Company may reasonably request. At least ten (10)
business days prior to the first anticipated filing date of the Registration
Statement, the Company shall notify each Investor of the information the Company
requires from each such Investor if such Investor elects to have any of such
Investor's Registrable Securities included in the Registration Statement.
4.2 Each Investor, by such Investor's acceptance of the
Registrable Securities, agrees to cooperate with the Company as reasonably
requested by the Company in connection with the preparation and filing of the
Registration Statement hereunder, unless such Investor has notified the Company
in writing of such Investor's election to exclude all of such Investor's
Registrable Securities from the Registration Statement.
4.3 In the event Investors holding a majority in interest of
the Registrable Securities being registered determine to engage the services of
an underwriter, each Investor agrees to enter into and perform such Investor's
obligations under an underwriting agreement, in usual and customary form,
including, without limitation, customary indemnification and contribution
obligations, with the managing underwriter of such offering and take such other
actions as are reasonably required in order to expedite or facilitate the
disposition of the Registrable Securities, unless such Investor has notified the
Company in writing of such Investor's election to exclude all of such Investor's
Registrable Securities from the Registration Statement.
4.4 Each Investor agrees that, upon receipt of any notice from
the Company of the happening of any event of the kind described in Section 3(f)
or 3(g), such Investor will immediately discontinue disposition of Registrable
Securities pursuant to the Registration Statement covering such Registrable
Securities until such Investor's receipt of the copies of the supplemented or
amended prospectus contemplated by Section 3(f) or 3(g) and, if so directed by
the Company, such Investor shall deliver to the Company (at the expense of the
Company) or destroy (and deliver to the Company a certificate of destruction)
all copies in such Investor's possession, of the prospectus covering such
Registrable Securities current at the time of receipt of such notice.
4.5 No Investor may participate in any underwritten
registration hereunder unless such Investor (i) agrees to sell such Investor's
Registrable Securities on the basis provided in any underwriting arrangements in
usual and customary form entered into by the Company, (ii) completes and
executes all questionnaires, powers of attorney, indemnities, underwriting
agreements and other documents reasonably required under the terms of such
underwriting arrangements, and (iii) agrees to pay its pro rata share of all
underwriting discounts and commissions and any expenses in excess of those
payable by the Company pursuant to Section 5 below.
5. EXPENSES OF REGISTRATION.
All reasonable expenses, other than underwriting discounts and
commissions, incurred in connection with registrations, filings or
qualifications pursuant to Sections 2 and 3, including, without limitation, all
registration, listing and qualifications fees, printers and accounting fees, the
fees and disbursements of
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counsel for the Company (but excluding all fees and disbursements of advisors
(including legal counsel) to the Investors) shall be borne by the Company.
6. INDEMNIFICATION.
In the event any Registrable Securities are included in a Registration
Statement under this Agreement:
6.1 To the extent permitted by law, the Company will
indemnify, hold harmless and defend (i) each Investor who holds such Registrable
Securities, (ii) the directors, officers, partners, employees, agents and each
person who controls any Investor within the meaning of the 1933 Act or the
Securities Exchange Act of 1934, as amended (the "1934 Act"), if any, and (iii)
any underwriter (as defined in the 1933 Act) for the Investors; and the
directors, officers, partners, employees and each person who controls any such
underwriter within the meaning of the 1933 Act or the 1934 Act, if any (each, an
"Indemnified Person"), against any joint or several losses, claims, damages,
liabilities or expenses (collectively, together with actions, proceedings or
inquiries by any regulatory or self-regulatory organization, whether commenced
or threatened, in respect thereof, "Claims") to which any of them may become
subject insofar as such Claims arise out of or are based upon: (i) any untrue
statement or alleged untrue statement of a material fact in a Registration
Statement or the omission or alleged omission to state therein a material fact
required to be stated or necessary to make the statements therein not
misleading, (ii) any untrue statement or alleged untrue statement of a material
fact contained in any preliminary prospectus if used prior to the effective date
of such Registration Statement, or contained in the final prospectus (as amended
or supplemented, if the Company files any amendment thereof or supplement
thereto with the SEC) or the omission or alleged omission to state therein any
material fact necessary to make the statements made therein, in light of the
circumstances under which the statements therein were made, not misleading, or
(iii) any violation or alleged violation by the Company of the 1933 Act, the
1934 Act, any other law, including, without limitation, any state securities
law, or any rule or regulation thereunder relating to the offer or sale of the
Registrable Securities (the matters in the foregoing clauses (i) through (iii)
being, collectively, "Violations"). Subject to the restrictions set forth in
Section 6(c) with respect to the number of legal counsel, the Company shall
reimburse the Investors and each such underwriter or controlling person,
promptly as such expenses are incurred and are due and payable, for any
reasonable legal fees or other reasonable expenses incurred by them in
connection with investigating or defending any such Claim. Notwithstanding
anything to the contrary contained herein, the indemnification agreement
contained in this Section 6(a): (i) shall not apply to a Claim arising out of or
based upon a Violation which occurs in reliance upon and in conformity with
information furnished in writing to the Company by any Indemnified Person or
underwriter for such Indemnified Person expressly for use in connection with the
preparation of the Registration Statement or any such amendment thereof or
supplement thereto, if such prospectus was timely made available by the Company
pursuant to Section 3(c) hereof; (ii) shall not apply to amounts paid in
settlement of any Claim if such settlement is effected without the prior written
consent of the Company, which consent shall not be unreasonably withheld; and
(iii) with respect to any preliminary prospectus, shall not inure to the benefit
of any Indemnified Person if the untrue statement or omission of material fact
contained in the preliminary prospectus was corrected on a timely basis in the
prospectus, as then amended or supplemented, and such corrected prospectus was
timely made available by the Company to the Indemnified Person pursuant to
Section 3(c) hereof, and the Indemnified Person was promptly advised in writing
not to use the incorrect prospectus prior to the use giving rise to a Violation
and such Indemnified Person, notwithstanding such advise, used it. Such
indemnity shall remain in full force and effect regardless of any investigation
made by or on behalf of the Indemnified Person and shall survive the transfer of
the Registrable Securities by the Investors pursuant to Section 9.
6.2 In connection with any Registration Statement in which an
Investor is participating, each such Investor agrees severally and not jointly
to indemnify, hold harmless and defend, to the same extent and in the same
manner set forth in Section 6(a), the Company, each of its directors, each of
its officers who signs the Registration Statement, each person, if any, who
controls the Company within the
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meaning of the 1933 Act or the 1934 Act, any underwriter and any other
stockholder selling securities pursuant to the Registration Statement or any of
its directors or officers or any person who controls such stockholder or
underwriter within the meaning of the 1933 Act or the 1934 Act (collectively and
together with an Indemnified Person, an "Indemnified Party"), against any Claim
to which any of them may become subject, under the 1933 Act, the 1934 Act or
otherwise, insofar as such Claim arises out of or is based upon any Violation,
in each case to the extent (and only to the extent) that such Violation occurs
in reliance upon and in conformity with written information furnished to the
Company by such Investor expressly for use in connection with such Registration
Statement; and subject to Section 6(c) such Investor will reimburse any legal or
other expenses (promptly as such expenses are incurred and are due and payable)
reasonably incurred by them in connection with investigating or defending any
such Claim; provided, however, that the indemnity agreement contained in this
Section 6(b) shall not apply to amounts paid in settlement of any Claim if such
settlement is effected without the prior written consent of such Investor, which
consent shall not be unreasonably withheld; provided, further, however, that the
Investor shall not be liable under this Agreement (including under this Section
6(b) and Section 7) to the extent that all amounts payable by such Investor on
account of its indemnification, contribution and other obligations under this
Agreement for only that amount as does not exceed the net proceeds to such
Investor as a result of the sale of Registrable Securities pursuant to such
Registration Statement. Such indemnity shall remain in full force and effect
regardless of any investigation made by or on behalf of such Indemnified Party
and shall survive the transfer of the Registrable Securities by the Investors
pursuant to Section 9. Notwithstanding anything to the contrary contained
herein, the indemnification agreement contained in this Section 6(b) with
respect to any preliminary prospectus shall not inure to the benefit of any
Indemnified Party if the untrue statement or omission of material fact contained
in the preliminary prospectus was corrected on a timely basis in the prospectus,
as then amended or supplemented.
6.3 Promptly after receipt by an Indemnified Person or
Indemnified Party under this Section 6 of notice of the commencement of any
action (including any governmental action), such Indemnified Person or
Indemnified Party shall, if a Claim in respect thereof is to be made against any
indemnifying party under this Section 6, deliver to the indemnifying party a
written notice of the commencement thereof, and the indemnifying party shall
have the right to participate in, and, to the extent the indemnifying party so
desires, jointly with any other indemnifying party similarly noticed, to assume
control of the defense thereof with counsel mutually satisfactory to the
indemnifying party and the Indemnified Person or the Indemnified Party, as the
case may be; provided, however, that an Indemnified Person or Indemnified Party
shall have the right to retain its own counsel with the fees and expenses to be
paid by the indemnifying party, if, in the reasonable opinion of counsel
retained by the indemnifying party, the representation by such counsel of the
Indemnified Person or Indemnified Party and the indemnifying party would be
inappropriate due to actual or potential differing interests between such
Indemnified Person or Indemnified Party and any other party represented by such
counsel in such proceeding. The indemnifying party shall pay for only one
separate legal counsel for the Indemnified Persons or the Indemnified Parties,
as applicable, and such legal counsel shall be selected by Investors holding a
majority-in-interest of the Registrable Securities included in the Registration
Statement to which the Claim relates, if the Investors are entitled to
indemnification hereunder, or the Company, if the Company is entitled to
indemnification hereunder, as applicable. The failure to deliver written notice
to the indemnifying party within a reasonable time of the commencement of any
such action shall not relieve such indemnifying party of any liability to the
Indemnified Person or Indemnified Party under this Section 6, except to the
extent that the indemnifying party is actually prejudiced in its ability to
defend such action. The indemnification required by this Section 6 shall be made
by periodic payments of the amount thereof during the course of the
investigation or defense, as such expense, loss, damage or liability is incurred
and is due and payable.
7. CONTRIBUTION.
To the extent any indemnification by an indemnifying party is
prohibited or limited by law, the indemnifying party agrees to make the maximum
contribution with respect to any amounts for which it would otherwise be liable
under Section 6 to the fullest extent permitted by law; provided, however, that
(i)
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no seller of Registrable Securities guilty of fraudulent misrepresentation
(within the meaning of Section 11(f) of the 1933 Act) shall be entitled to
contribution from any seller of Registrable Securities who was not guilty of
such fraudulent misrepresentation, and (ii) the total amount payable by an
Investor on account of its contribution, other obligations under this Agreement
shall be limited in amount to the net amount of proceeds received by such
Investor from the sale of such Registrable Securities.
8. REPORTS UNDER THE 1934 ACT.
With a view to making available to the Investors the benefits of Rule
144 promulgated under the 1933 Act or any other similar rule or regulation of
the SEC that may at any time permit the investors to sell securities of the
Company to the public without registration ("Rule 144"), the Company agrees to:
8.1 make and keep public information available, as those terms
are understood and defined in Rule 144;
8.2 file with the SEC in a timely manner all reports and other
documents required of the Company under the 1933 Act and the 1934 Act so long as
the Company remains subject to such requirements (it being understood that
nothing herein shall limit the Company's obligations under Section 4(c) of the
Securities Purchase Agreement) and the filing of such reports and other
documents is required for the applicable provisions of Rule 144; and
8.3 furnish to each Investor so long as such Investor owns
Registrable Securities, promptly upon request, (i) a written statement by the
Company that it has complied with the reporting requirements of Rule 144, the
1933 Act and the 1934 Act, (ii) a copy of the most recent annual or quarterly
report of the Company and such other reports and documents so filed by the
Company, and (iii) such other information as may be reasonably requested to
permit the Investors to sell such securities pursuant to Rule 144 without
registration.
9. ASSIGNMENT OF REGISTRATION RIGHTS.
The rights to have the Company register Registrable Securities pursuant
to this Agreement shall be automatically assignable by the Investors to any
transferee of all or any portion of Registrable Securities if: (i) the Investor
agrees in writing with the transferee or assignee to assign such rights, and a
copy of such agreement is furnished to the Company within a reasonable time
after such assignment, (ii) the Company is, within a reasonable time after such
transfer or assignment, furnished with written notice of (a) the name and
address of such transferee or assignee, and (b) the securities with respect to
which such registration rights are being transferred or assigned, (iii)
following such transfer or assignment, the further disposition of such
securities by the transferee or assignee is restricted under the 1933 Act and
applicable state securities laws, (iv) at or before the time the Company
receives the written notice contemplated by clause (ii) of this sentence, the
transferee or assignee agrees in writing with the Company to be bound by all of
the provisions contained herein and (v) such transfer shall have been made in
accordance with the applicable requirements of the Securities Purchase
Agreement.
10. AMENDMENT OF REGISTRATION RIGHTS.
Provisions of this Agreement may be amended and the observance thereof
may be waived (either generally or in a particular instance and either
retroactively or prospectively), only with written consent of the Company and
Investors who hold a majority interest of the Registrable Securities. Any
amendment or waiver effected in accordance with this Section 10 shall be binding
upon each Investor and the Company.
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11. MISCELLANEOUS.
11.1 A person or entity is deemed to be a holder of
Registrable Securities whenever such person or entity owns of record such
Registrable Securities. If the Company receives conflicting instructions,
notices or elections from two or more persons or entities with respect to the
same Registrable Securities, the Company shall act upon the basis of
instructions, notice or election received from the registered owner of such
Registrable Securities.
11.2 Notices required or permitted to be given hereunder shall
be in writing and shall be deemed to be sufficiently given when personally
delivered (by hand, by courier, by telephone line facsimile transmission or
other means) or by courier or sent by certified mail, return receipt requested,
properly addressed and with proper postage pre-paid,
if to the Company:
The Score Board, Inc.
1951 Old Cuthbert Road
Cherry Hill, NJ 08034
Attention: President
with copy to:
Blank Rome Comisky & McCauley
Woodland Falls Corporate Park
Suite 200
210 Lake Drive East
Cherry Hill, NJ 08002
(609) 779-7647
Attention: Frederick A. Ruttenberg, Esq.
if to an Investor:
to the registered address of such Investor as reflected on the
books of the Company
with a copy to:
Klehr, Harrison, Harvey, Branzburg & Ellers
1401 Walnut Street
Philadelphia, PA 19102
Telecopy: (215) 568-6603
Attention: Leonard M. Klehr, Esq.
11.3 Failure of any party to exercise any right or remedy
under this Agreement or otherwise, or delay by a party in exercising such right
or remedy, shall not operate as a waiver thereof.
11.4 This Agreement shall be enforced, governed by and
construed in accordance with the laws of the Commonwealth of Pennsylvania
applicable to agreements made and to be performed entirely within such State. In
the event that any provision of this Agreement is invalid or unenforceable under
any applicable statute or rule of law, then such provision shall be deemed
inoperative to the extent that it may conflict therewith and shall be deemed
modified to conform with such statute or rule of law. Any provision hereof which
may prove invalid or unenforceable under any law shall not affect the validity
or enforceability of any other provision hereof.
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11.5 This Agreement and the Purchase Agreement (including all
schedules and exhibits thereto) constitute the entire agreement among the
parties hereto with respect to the subject matter hereof and thereof. There are
no restrictions, promises, warranties or undertakings, other than those set
forth or referred to herein and therein. This Agreement and the Purchase
Agreement supersede all prior agreements and understandings among the parties
hereto with respect to the subject matter hereof and thereof.
11.6 Subject to the requirements of Section 9 hereof, this
Agreement shall inure to the benefit of and be binding upon the successors and
assigns of each of the parties hereto.
11.7 The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.
11.8 This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original but all of which shall
constitute one and the same agreement. This Agreement, once executed by a party,
may be delivered to the other party hereto by facsimile transmission of a copy
of this Agreement bearing the signature of the party so delivering this
Agreement.
11.9 Each party shall do and perform, or cause to be done and
performed, all such further acts and things, and shall execute and deliver all
such other agreements, certificates, instruments and documents, as the other
party may reasonably request in order to carry out the intent and accomplish the
purposes of this Agreement and the consummation of the transactions contemplated
hereby.
11.10 All consents and other determinations to be made by the
Initial Investors or the Investors pursuant to this Agreement shall be made by
Initial Investors or Investors, as the case may be, holding a majority of the
Registrable Securities (determined as if all Warrants then outstanding had been
exercised for Registrable Securities).
11.11 The Company and each of the Initial Investors has
participated in the drafting of this Agreement and expressly acknowledges such
joint participation, to avoid application of any rule construing contractual
language against the party which drafted the language.
IN WITNESS WHEREOF, the Company and each of the undersigned Initial
Investors have caused this Agreement to be duly executed as of the date first
above written.
THE SCORE BOARD, INC.
By: /s/Kenneth Goldin
---------------------
Name: Kenneth Goldin
Title: CEO
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<PAGE>
INITIAL INVESTORS:
TECHNOLOGY LEADERS II L.P.
By: Technology Leaders II Management L.P.,
the General Partner
By: Technology Leaders Management, Inc.,
a General Partner
By: /s/ Tami L. Fratis
--------------------------------------
Tami L. Fratis, Vice President
TECHNOLOGY LEADERS II OFFSHORE C.V.
By: Technology Leaders II Management L.P.,
a General Partner
By: Technology Leaders Management, Inc.,
a General Partner
By:/s/ Tami L. Fratis
--------------------------------------
Tami L. Fratis, Vice President
/s/ Ira Lubert
------------------------------------------
Ira Lubert
JONATHAN LUBERT TRUST
By: /s/ Howard E. Lubert
--------------------------------------
Howard E. Lubert, Trustee
KRISTINE LUBERT TRUST
By: /s/ Howard E. Lubert
--------------------------------------
Howard E. Lubert, Trustee
THE OUTSOURCING PARTNERSHIP, L.L.C.
By: /s/ John F. White
--------------------------------------
Name: John F. White
Title: CEO
[SIGNATURES CONTINUED ON NEXT PAGE]
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<PAGE>
[SIGNATURES CONTINUED FROM PREVIOUS PAGE]
/s/Dean Adler
------------------------------------------
Dean Adler
/s/Robert A. Fox
------------------------------------------
Robert A. Fox
NEWVALU, INC.
By: /s/ Milton Koffman
---------------------------------------
Name: Milton Koffman
Title:President
/s/ Milton Koffman
------------------------------------------
Milton Koffman
/s/ Burton I. Koffman
------------------------------------------
Burton I. Koffman
/s/ Ronald Rubin
------------------------------------------
Ronald Rubin
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