<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
----------------------------------
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): July 24, 1997
COMPUTER INTEGRATION CORP.
--------------------------
(Exact name of registrant as specified in its charter)
DELAWARE 0-20732 65-0506623
- -------- ------- ----------
(State or other (Commission (IRS Employer
jurisdiction of File No.) Identification
incorporation) No.)
165 UNIVERSITY AVENUE
WESTWOOD, MA 02090
(Address of principal executive offices)
617-320-8300
------------
(Registrant's telephone number, including area code)
<PAGE> 2
ITEM 1. CHANGE OF CONTROL
On July 24, 1997 (the "Closing Date"), pursuant to an agreement dated
May 15, 1997 (the "Agreement"), between the Registrant and Chartwell Group,
Inc., a Texas corporation ("Chartwell") the Registrant issued to the buyers
listed below (the "Buyers") 6,950,000 shares (the "Shares") of its common stock,
par value $.001 per share ("Common Stock"). The aggregate purchase price was
$7,436,500, or $1.07 per share. (The issuance and purchase of the common stock
pursuant to the Agreement is described herein as the Transaction.)
In connection with the Transaction, the Registrant issued to
Chartwell's designees warrants (the "Warrants") to purchase 300,000 shares of
Common Stock of the Registrant at a purchase price per share of $1.13. The
Warrants expire on June 30, 2004.
Prior to the closing of the Transaction, there were 6,988,940 shares of
Common Stock issued and outstanding. Immediately following the Transaction,
there were 13,938,940 shares of Common Stock outstanding. The shares issued in
the connection with the Transaction account for 49.86% of the shares issued and
outstanding immediately following the Transaction.
The following table sets forth the names and addresses of the buyers of
the Shares (the "Buyers"), the number of Shares purchased by each Buyer, and the
percentage of ownership of each Buyer of issued and outstanding Common Stock
following the Transaction.
<TABLE>
<CAPTION>
NUMBER OF
SHARES PERCENTAGE
NAME AND ADDRESS OF BUYER PURCHASES OWNERSHIP
<S> <C> <C>
Codinvest Limited 4,672,897 33.52%
Road Town
Tortola
British Virgin Islands
Mr. Donald Russell 200,000 1.43%
Chairman, CEA Management Corp.
Communications Equity Associates
101 East Kennedy Blvd., Suite 3300
Tampa, FL 33602
Mr. David Searles 100,000 0.72%
CRT Trust Advisors, Inc.
400 Embassy Row, Suite 500
Atlanta, Ga 30328
Mr. John Perry, III 300,000 2.15%
564 Toro Canyon Road
Santa Barbara, Ca 93108
</TABLE>
2
<PAGE> 3
<TABLE>
<CAPTION>
NUMBER OF
SHARES PERCENTAGE
NAME AND ADDRESS OF BUYER PURCHASES OWNERSHIP
<S> <C> <C>
Robert W. Johnson IV 1,000,000 7.17%
The Johnson Company, Inc.
630 Fifth Avenue, Suite 1510
New York, NY 10111
Neil J. Burmeister 50,000 0.36%
P.O. Box 5415
New York, NY 10185-0044
Arthur DelVesco 427,103 3.06%
12 South Wynstone Drive
North Barrington, Il 60010
Thomas D. McCloskey, Jr 200,000 1.43%
--------- -----
McCloskey Enterprises, Inc.
730 East Durant, Suite 202
Aspen, CO 81611
Total 6,950,000 49.86%
</TABLE>
The Agreement provides that, for one year after the Closing Date, the
Registrant will use its best efforts to cause and maintain the election to the
Registrant's Board of Directors of up to four nominees of Chartwell reasonably
satisfactory to the Registrant, and further provides that the Board of Directors
will consist of no more than eight members during such one year period. The
Registrant has been advised that, in connection with the Transaction, Chartwell
assigned its right to nominate up to three directors to Codinvest Limited
("Codinvest") and the right to nominate one director to the other Buyers
collectively (the "Assignees"). Codinvest nominated three members of the Board
of Directors (John Paget, Michael Santry, and Matthew Waller), each of whom took
office on the Closing Date. On July 8, 1997, Ronald G. Farrell resigned from the
Board of Directors. The other three seats on the Board continue to be occupied
by Araldo Cossutta, Samuel C. McElhaney and Frank Zappala, each of whom was
elected at the last annual meeting of shareholders.
The Registrant has been advised that Codinvest has agreed that, when
the Assignees have chosen their director nominee, one of Codinvest's nominees
will resign. The Registrant has been further advised that the Assignees intend
to choose Donald Russell, Chairman of CEA Management Corp., and one of the
Assignees, as their Board nominee.
In the Agreement, the Registrant granted to Chartwell, and Chartwell
thereafter assigned to Codinvest, the right to designate the President and Chief
Executive Officer, subject to the approval of the Registrant's Board of
Directors. In connection therewith, the Registrant's Board of Directors has
3
<PAGE> 4
approved the appointment of John Paget as President and Chief Executive Officer.
Mr. Paget will take office on or about August 23, 1997. Mr. Paget will replace
Samuel C. McElhaney, who will remain a member of the Registrant's Board of
Directors and will serve as a consultant to the Registrant.
In the Agreement, the Registrant agreed to register the resale of the
shares issuable pursuant to the Agreement and to list the shares on the Nasdaq
Stock Market. The Registrant agreed to maintain the effectiveness of the
registration statement until the Buyers no longer hold the Shares.
Other than as set forth above, the Registrant does not have any
arrangements or understandings with the Buyers, and is not aware of any
arrangements or understandings between the Buyers and the previous control
group.
ITEM 7. EXHIBITS
The following exhibits are filed herewith.
EXHIBIT
NUMBER DESCRIPTION
10.1 Stock Purchase Agreement dated as of May 15,
1997 between the Registrant and Chartwell
Group, Inc., a Texas corporation ("Buyer").
10.2 Computer Integration Corp. Common Stock
Purchase Warrant
4
<PAGE> 5
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
COMPUTER INTEGRATION CORP.
By: /s/ Edward Meltzer
-------------------------
Edward Meltzer
Chief Financial Officer (Principal Financial
and Principal Accounting Officer)
Dated: August 4, 1997
5
<PAGE> 6
EXHIBIT INDEX
EXHIBIT
NUMBER DESCRIPTION
10.1 Stock Purchase Agreement dated as of May 15,
1997 between the Registrant and Chartwell
Group, Inc., a Texas corporation ("Buyer").
10.2 Computer Integration Corp. Common Stock Purchase Warrant
6
<PAGE> 1
EXHIBIT 10.1
STOCK PURCHASE AGREEMENT
This Purchase Agreement (the "Agreement") is entered into as of May 15,
1997, by and among Computer Integration Corp., a Delaware corporation (the
"Company"), and Chartwell Group, Inc., a Texas corporation ("Buyer").
In consideration of the mutual promises, representations, warranties,
covenants, and conditions set forth in this Agreement, the receipt and adequacy
of which all the parties to this Agreement acknowledge, the parties mutually
agree as follows:
ARTICLE I.
AUTHORIZATION AND SALE OF SHARES
--------------------------------
1.1 Authorization and Sale of Shares.
---------------------------------
(a) The Company will take all requisite corporate action to
authorize the issuance and sale of 6,950,000 shares (the "Shares") of
Common Stock, $.001 par value per share ("Common Stock"), to Buyer in
accordance with the terms of this Agreement.
(b) Upon the terms and subject to the conditions herein
contained, at the Closing, the Company will issue and sell to Buyer,
and Buyer will purchase from the Company the Shares for a purchase
price (the "Purchase Price") of $7,436,500 or $1.07 per share.
1.2 Closing. The Closing of the sale and purchase of the Shares
under this Agreement (the "Closing") will occur at 10:00 a.m. on June 30, 1997
at the offices of Hughes & Luce, L.L.P., 1717 Main Street, Suite 2800, Dallas,
Texas 75201, or at such other time and place as the parties may mutually agree.
1.3 Closing Deliveries. At the Closing, Buyer will pay the
Purchase Price by wire transfer of immediately available funds to an account
specified in writing by the Company at least two days prior to the Closing, and
the Company will deliver to Buyer certificates representing the Shares.
ARTICLE II.
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
---------------------------------------------
The Company hereby represents and warrants to Buyer as follows:
2.1 Organization. The Company is a corporation duly organized,
validly existing and in good standing under the laws of the state of Delaware
and has full corporate power to own its properties and to conduct its business
as presently conducted. The Company is qualified or licensed to do business as a
foreign corporation in each state or other jurisdiction where it is required to
be so qualified or licensed, except where the failure to so qualify or be
licensed would not have a material adverse effect on the condition (financial or
otherwise), assets, business, results of operations or prospects of the Company
and its subsidiaries, taken as a whole (a "Material Adverse Effect").
2.2 Authority. The Company has all requisite corporate power and
authority to execute, deliver and perform this Agreement. The execution,
delivery and performance of this Agreement by the Company has been duly
authorized by all necessary action, corporate or otherwise, on the part of the
Company. This Agreement has been duly executed and delivered by the Company and
is a legal, valid and binding agreement of the Company, enforceable against the
Company in accordance with its terms.
2.3 Minute Books. The Company has made available to Buyer or its
designated assignees true, correct and complete copies of the charter documents,
bylaws, minute books and stock transfer records of the Company. The minute books
of the Company contain minutes or consents reflecting all actions taken by the
directors (including any committees) and stockholders of the Company.
1
<PAGE> 2
2.4 Capitalization. The authorized capital stock of the Company
consists solely of 20 million shares of Common Stock, of which 6,988,940 shares
are issued and outstanding and two million shares of Preferred Stock, of which
19,035.85 shares of Series D (convertible into 761,434 shares of Common Stock)
and 125 shares of Series E (convertible into 500,000 shares of Common Stock) are
issued and outstanding. Except as otherwise provided in or contemplated by this
Agreement, all of the issued and outstanding shares of the capital stock are
validly issued, fully paid and nonassessable and were issued free and clear of
preemptive or similar rights. Except as set forth in Schedule 2.4, as otherwise
provided in or contemplated by this Agreement or as disclosed in the SEC Filings
(as defined in Section 2.14), there are no outstanding options, warrants,
convertible securities or other rights, agreements, arrangements or commitments
obligating the Company or any other Person (as defined in Section 2.12) to issue
or sell any securities or ownership interests in the Company. There are no
voting agreements, voting trusts or similar agreements binding the Company or
that will be applicable to any of the Shares. All of the outstanding ownership
interests of the Company have been offered and sold in compliance with all
applicable securities laws, rules and regulations.
2.5 Issuance of Shares. The issuance, sale and delivery of the
Shares in accordance with this Agreement have been duly authorized by all
necessary corporate action on the part of the Company, subject only to the
conditions set forth in Section 5.2. The Shares when so issued, sold, and
delivered against payment therefor in accordance with the provisions of this
Agreement will be duly and validly issued, fully paid and non-assessable.
2.6 No Violation. Except as described in Schedule 2.6, neither the
execution or delivery of this Agreement nor the consummation of the transactions
contemplated hereby, including without limitation the sale of the Shares to
Buyer, will conflict with or result in the breach of any term or provision of,
or violate, or constitute a default under, or result in the creation of any
liens, security interest, liability, claim, encumbrances or contingencies of any
nature (collectively "Liens") on the Company's assets pursuant to, or require
the consent of any Person or relieve any third party of any obligation to the
Company or give any third party the right to terminate or accelerate any
obligation under, any charter provision, bylaw, agreement that is material to
the Company, or any material permit, license, authorization, approval, quality
certification, franchise or right (collectively, "Permits") order, law or
regulation to which the Company is a party or by which the Company, or any of
its assets is in any way bound or obligated.
2.7 Governmental Consents. Except as described in Schedule 2.7, no
consent, approval, order or authorization of, or registration, qualification,
designation, declaration or filing with, any governmental or quasi-governmental
agency, authority, commission, board or other body (collectively, a
"Governmental Body") is required on the part of the Company in connection with
the transactions contemplated by this Agreement.
2.8 Financial Statements.
(a) Attached as Schedule 2.8 are true and complete copies of
(i) the most recent draft of the preliminary unaudited, consolidated
balance sheet of the Company (the "Latest Balance Sheet") as of March
31, 1997 (the "Latest Balance Sheet Date") and the related unaudited,
consolidated statements of operations and cash flow for the nine months
then ended and (ii) the audited, consolidated balance sheets of the
Company as of June 30, 1995 and 1996 and the related audited,
consolidated statements of operations and cash flow for the 12 months
then ended (collectively, the "Financial Statements").
(b) The Financial Statements present fairly the financial
condition of the Company, on a consolidated basis (reflecting all
appropriate intercompany eliminations and adjustments), at the dates
specified and the results of its operations for the periods specified
and have been prepared in accordance with generally accepted accounting
principles in the Unites States, consistently applied, (i) except as
otherwise disclosed in the Financial Statements or in the SEC Filings,
and (ii) except that the interim Financial Statements (which do not
include a statement of cash flow) are subject to the absence of
footnote disclosure and to changes resulting from normal period-end
adjustments for recurring accruals, which will not be material
individually or in the aggregate. The Financial
2
<PAGE> 3
Statements do not contain any items of a special or nonrecurring
nature, except as expressly stated therein. The Financial Statements
have been prepared from the books and records of the Company, which
accurately and fairly reflect all the transactions of, acquisitions and
dispositions of assets by, and incurrence of liabilities by the
Company. All accounts receivable reflected on the Latest Balance Sheet
arose in the ordinary course of business and, in the aggregate, are
fully collectible in the ordinary course of business, without resort to
litigation, at the face amount thereof, less any reserve reflected in
the Latest Balance Sheet, and will not be subject to counterclaim,
set-off or other reduction.
2.9 Absence of Undisclosed Liabilities. The Company has no
material direct or indirect debts, obligations or liabilities of any nature,
whether absolute, accrued, contingent, liquidated or otherwise, and whether due
or to become due, asserted or unasserted, known or unknown (collectively,
"Liabilities"), except for (i) Liabilities specifically identified in the Latest
Balance Sheet, (ii) obligations incurred or to be performed in the ordinary
course of business consistent with past practice, and (iii) items specifically
disclosed in the SEC Filings.
2.10 Absence of Material Adverse Change. Since the Latest Balance
Sheet Date, except as specifically contemplated by this Agreement or as set
forth on Schedule 2.10, there has not been: (a) any material adverse change in
the condition (financial or otherwise), results of operations, business,
prospects, assets or Liabilities of the Company or with respect to the manner in
which the Company conducts its business or operations; (b) any payment or
transfer of assets (including without limitation any dividend, stock repurchase
or other distribution and any repayment of indebtedness) to any stockholder; (c)
any breach or default (or event that with notice or lapse of time would
constitute a breach or default), termination or threatened termination under any
agreement that is material to the Company; (d) any material theft, damage,
destruction, casualty loss, condemnation or eminent domain proceeding affecting
the Company's assets, whether or not covered by insurance; (e) any sale,
assignment or transfer of any of the assets of the Company, except in the
ordinary course of business and consistent with past practices; (f) any waiver
by the Company of any material rights related to the Company's business,
operations or assets; (g) issued any stock, bonds or other corporate securities;
(h) borrowed or refinanced any amount or incurred any material Liabilities,
other than revolving credit facility borrowings and trade payables incurred in
the ordinary course of business consistent with past practices; (i) mortgaged,
pledged or subjected to lien any of its assets, tangible or intangible, other
than liens for current real property taxes not yet due and payable; (j) sold,
assigned or transferred any intellectual property rights or other intangible
assets; (k) made any material increase in the compensation (including, without
limitation, the rate of commissions) payable to, or any payment of a material
cash bonus to any director, officer, employee of, or consultant or agent to, the
Company or any of its subsidiaries or any other material change in the terms or
conditions of any employment relationship; (l) announced any plan or legally
binding commitment to create any employee benefit plan, program or arrangement;
(m) eliminated the vesting conditions or otherwise accelerated the payment of
any compensation, including any stock options; (n) any other transaction,
agreement or commitment entered into by the Company affecting the Company's
business, operations or assets, except in the ordinary course of business and
consistent with past practices; or (o) except in connection with this Agreement
and the transactions contemplated hereby, entered into any agreement, letter of
intent or similar undertaking to take any of the actions listed in clauses (a)
through (o) above.
2.11 Taxes. All required federal, state, local and other tax
returns, notices and reports (including without limitation income, property,
sales, use, franchise, withholding, social security and unemployment tax
returns) relating to or involving transactions with the Company have been
accurately prepared and duly and timely filed, and all taxes required to be paid
with respect to the periods covered by any such returns have been timely paid.
The Company has established reserves that are adequate for the payment of all
taxes not yet due and payable with respect to the results of operations of the
Company and its subsidiaries through the date of this Agreement and the date of
Closing. No tax deficiency has been proposed or assessed against the Company,
and no Company has executed any waiver of any statute of limitations on the
assessment or collection of any tax. Except as set forth on Schedule 2.11, no
tax audit, action, suit, proceeding, investigation or claim is now pending or,
to the knowledge of the Company, threatened against the Company, and no issue or
question has been raised (and is currently pending) by any taxing authority in
connection with the
3
<PAGE> 4
Company's tax returns or reports. The Company has withheld or collected from
each payment made to each of its employees the full amount of all taxes required
to be withheld or collected therefrom and has paid or will timely pay the same
to the proper tax receiving officers or authorized depositories.
2.12 Litigation. Except as described in Schedule 2.12 or as set
forth in the SEC Filings, there are currently no pending or, to the knowledge of
the Company, threatened lawsuits, administrative proceedings or reviews, or
formal or informal complaints or investigations by any individual, corporation,
partnership, association, limited liability company, Governmental Body or other
entity (collectively, a "Person") against or relating to the Company or any
director, employee or agent of the Company (in their capacities as such) or to
which any assets of the Company are subject. The Company is not subject to or
bound by any currently existing judgment, order, writ, injunction or decree.
2.13 Compliance with Laws. The Company has complied in all material
respects with, and the use, operation and maintenance of the Company assets
comply in all material respects with, and none of the Company, its assets nor
the use, operation or maintenance of such assets is in material violation or
contravention of, any applicable statute, law, ordinance, decree, order, rule or
regulation of any Governmental Body, including without limitation all federal,
state and local laws relating to occupational health and safety, employment and
labor matters.
2.14 SEC Filings. The Company has filed all forms, reports and
documents required to be filed with the Securities and Exchange Commission (the
"SEC") since June 30, 1996, and the Company has made available to Buyers, as
filed with the SEC, complete and accurate copies of (i) the Annual Report of the
Company on Form 10-K for the year ended June 30, 1996, and (ii) all other
reports, statements and registration statements (including Current Reports on
Form 8-K) filed by the Company with the SEC since June 30, 1996, in each case
including all amendments and supplements (collectively, the "SEC Filings"). The
SEC Filings (including, without limitation, any financial statements or
schedules included therein) (i) were prepared in compliance with the
requirements of the Securities Act of 1933, as amended (the "Securities Act"),
or the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and the
rules and regulations thereunder, as the case may be, and (ii) did not at the
time of filing (or if amended, supplemented or superseded by a filing prior to
the date hereof, on the date of such filing) contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary in order to make the statements therein, in light of the circumstances
under which they were made, not misleading.
2.15 Offering of the Shares. Neither the Company nor any person
authorized or employed by the Company as agent, broker, dealer or otherwise in
connection with the offering or sale of the Shares or any similar securities of
the Company has offered any such securities for sale to, or solicited any offers
to buy any such securities from, or otherwise approached or negotiated with
respect thereto with any person or persons, under circumstances that involved
the use of any form of general advertising or solicitation as such terms are
defined in Regulation D of the Securities Act; and, assuming the accuracy of the
representations and warranties of Buyers set forth in Article III, neither the
Company nor any person acting on the Company's behalf has taken or will take any
action (including, without limitation, any offer, issuance or sale of any
securities of the Company under circumstances which might require the
integration of such transactions with the sale of the Shares under the
Securities Act or the rules and regulations of the SEC thereunder) which would
subject the offering, issuance or sale of the Shares to Buyer to the
registration provisions of the Securities Act.
2.16 Registration Rights. Except as set forth on Schedule 2.16 or
as provided in this Agreement or the Warrant Agreement, the Company is not under
any obligation to register any securities under the Securities Act or any
similar state law.
2.17 No Misrepresentations. The Company has disclosed to Buyer or
its designated assignees all material facts and information known to it
regarding the Company's condition (financial or otherwise), assets, business,
results of operations and prospects. The representations, warranties and
statements made by the Company in or pursuant to this Agreement (including the
Schedules hereto) are true, complete and correct in all material respects and do
not contain any untrue statement of a material fact or omit to state any
material
4
<PAGE> 5
fact necessary to make any such representation, warranty or statement, under the
circumstances in which it is made, not misleading.
2.18 Brokers. Except as set forth on Schedule 2.18 hereto, all
negotiations relative to this Agreement and the transactions contemplated hereby
have been carried on by the Company directly with Buyer, its agents or its
affiliates without the intervention of any Person on behalf of the Company in
such manner as to give rise to any valid claim by any other Person against Buyer
for a finder's fee, brokerage commission or similar payment.
ARTICLE III.
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer hereby represents and warrants to the Company as follows:
3.1 Organization. Buyer is a corporation duly organized, validly
existing and in good standing under the laws of the State of Texas and has full
corporate power to own its properties and to conduct business.
3.2 Authority. Buyer has all requisite corporate power and authority
to execute, deliver and perform this Agreement. The execution, delivery and
performance of this Agreement by Buyer has been duly authorized by all necessary
action, corporate or otherwise, on the part of Buyer. This Agreement has been
duly executed and delivered by Buyer and is a legal, valid and binding agreement
of Buyer, enforceable against Buyer in accordance with its terms.
3.3 Governmental Consents. No consent, approval, order or
authorization of, or registration, qualification, designation, declaration or
filing with, any Governmental Body is required on the part of Buyer in
connection with the transactions contemplated by this Agreement.
3.4 Brokers. All negotiations relative to this Agreement and the
transactions contemplated hereby have been carried on by Buyer directly with the
Company, its agents or its affiliates without the intervention of any Person on
behalf of the Company in such manner as to give rise to any valid claim by any
other Person against the Company for a finder's fee, brokerage commission or
similar payment.
3.5 Investment Intent; Accredited Investor. Buyer is acquiring the
Shares for investment for Buyer's account only and not with a view to, or for
resale in connection with, any "distribution" thereof within the meaning of the
Securities Act. Buyer represents that it is an "accredited investor" as that
term is defined in Rule 501 of Regulation D promulgated under the Securities
Act.
3.6 Restricted Securities. Buyer acknowledges that the Shares are
being issued to Buyer without registration under the Securities Act or any
applicable state securities laws and that the Shares must be held indefinitely
unless they are subsequently registered under the Securities Act or an exemption
from such registration is available. Buyer acknowledges that the Shares will
bear a restrictive legend preventing transfer except in accordance with the
Securities Act.
ARTICLE IV.
ADDITIONAL COVENANTS
4.1 Financial Statements and Reports; Additional Information. The
Company will deliver to Buyer:
(a) Through and including the Closing, as promptly as
available, but in any event within 30 days after the end of each month,
a balance sheet and a statement of income for each such month
unaudited, but certified by the Company's president or principal
financial officer.
5
<PAGE> 6
(b) For a period of one year following the Closing, within 45
days after the end of each quarter of each fiscal year (other than the
last quarter in each fiscal year) a consolidated balance sheet of the
Company as at the end of each such period and consolidated statements
of income and changes in financial condition of the Company for each
such quarter, prepared in accordance with generally accepted accounting
principles applied on a consistent basis, certified to be true, correct
and complete (subject to normal year-end adjustments) by Company's
president or the principal financial officer.
(c) For a period of one year following the Closing, within 90
days after the end of each fiscal year a consolidated balance sheet of
the Company, as at the end of such fiscal period and consolidated
statements of income and changes in financial position and
stockholders' equity of the Company for such fiscal period prepared in
accordance with generally accepted accounting principles consistently
applied audited by an independent certified public accounting firm of
recognized national standing selected by the Company's Board of
Directors.
(d) For a period of one year following the Closing, promptly
upon filing, copies of all registration statements, prospectuses,
periodic reports and other documents filed by the Company with the SEC.
Delivery of filings that the Company makes with the SEC containing such
statements or information within the specified time frame will be deemed to
satisfy the Company's obligations under this Section 4.1.
4.2 Directors of the Company. For one year after the Closing Date, the
Company will use its best efforts to cause and maintain the election to the
Board of Directors of four nominees of Buyer reasonably satisfactory to the
Company (the "Buyer Nominees") and provide that the Board of Directors will
consist of no more than eight members. If a board vacancy occurs during such
period as a result of resignation, death, removal or otherwise, each of the
Company and Buyer agree to use their best efforts to cause the directors they
have respectively nominated for election to the Board to vote for the election
of a director to fill such vacancy who is nominated by the Buyer Nominees, if
the director who has created the vacancy was a Buyer Nominee, or of a director
to fill such vacancy who is nominated by the Company, if the director who has
created the vacancy was not a Buyer Nominee. Buyer will identify to the Company
its Buyer Nominees, and each of Buyer and the Company will identify to the other
any nominee to fill a vacancy, at least 14 days prior to the nominee's expected
election to the Board.
4.3 Access to Information. Through and including the Closing, the
Company will permit Buyer or its representatives to visit and inspect the
Company's properties, to examine the Company's books of account and records, and
to discuss the Company's affairs, finances, and accounts with its officers, all
at such reasonable times as may be requested by Buyer.
4.4 Use of Proceeds. The proceeds received by the Company from the
sale of the Shares pursuant to this Agreement will be used for repayment of
corporate indebtedness, working capital and other general corporate purposes .
4.5 President. Buyer has the right to designate one individual for the
position of President and Chief Executive Officer, subject to the approval of
the Company's board of directors, which will not be unreasonably withheld. Upon
such approval, the Company will employ such designee as its President and Chief
Executive Officer upon terms and conditions reasonably acceptable to the Board
of Directors. Buyer will identify its proposed designee for such offices to the
Company by May 31, 1997.
4.6 Negative Covenants. Except as set forth on Schedule 4.6, prior to
Closing, the Company will not, and will not permit any subsidiary, directly or
indirectly, to do any of the following acts without the prior written approval
of Buyer:
6
<PAGE> 7
(a) Except as set forth in Article VII or pursuant to the
exercise of currently outstanding stock options or the conversion of
currently outstanding preferred stock, issue shares of capital stock or
securities that may be converted, directly or indirectly, into the
capital stock of the Company;
(b) Sell, transfer or otherwise dispose of any of its assets
other than in the ordinary course of business or commence any
proceedings with respect to the same and in no event sell assets worth
more than $100,000 in the aggregate, other than sales from inventory in
the ordinary course of business;
(c) Authorize, incur, guarantee, issue or permit to exist any
indebtedness for borrowed money or any other bond, debenture, note or
other evidence of indebtedness except for (i) existing debt, (ii)
accounts payable incurred in the ordinary course of business, or (iii)
other short-term indebtedness aggregating less than $100,000;
(d) Make or incur any expenditures or purchases which are required
to be capitalized in accordance with generally accepted accounting
principles in excess of $250,000;
(e) Make any payment on any debt currently or hereinafter owed
to any current or former officer, employee or director of the Company
or any affiliate thereof, other than salary or reimbursable business
expenses incurred in the ordinary course of business consistent with
prior practices;
(f) Make or permit to exist any investment including any loan,
advance, extension of credit or contribution of capital to any Person,
or any ownership of stocks, notes, debentures, or other securities of
any Person except (i) trade receivables arising in the ordinary course
of business and under terms which contemplate full payment within 60
days or such other term as is commercially reasonable in view of the
size and financial strength of the customer; (ii) notes or other
securities in connection with any bona fide settlement of trade
receivables owing in the ordinary course of its business; (iii) direct
obligations of the United States or other obligations guaranteed by the
United States or any agency thereof, solely for investment purposes,
provided the same will mature within six months; or (iv) certificates
of deposit or bankers acceptances;
(g) Except pursuant to the exercise of currently outstanding
stock options or the conversion of currently outstanding preferred
stock, issue, deliver or agree to issue or deliver any stock, bonds or
other corporate securities of the Company, whether authorized or
unissued or held in the treasury, or grant or agree to grant any
subscriptions, options, warrants, rights or other agreements or
commitments obligating the Company to issue additional shares of its
capital stock or any securities convertible into or having the right to
purchase shares of its capital stock, except as set forth in Article
VII;
(h) Declare or make any payment of dividends or distributions
of any kind whatsoever to the holders of the Company's capital stock or
repurchase or accept as treasury stock any capital stock of the
Company;
(i) Enter or agree to enter into any agreement or arrangement
granting any preferential rights to purchase any of its assets,
properties or rights or requiring the consent of any party to the
transfer and assignment of any such asset, property or right, other
than from inventory in the ordinary course of business;
(j) Make any loan, accrual or arrangement for or payment of
bonuses or special compensation of any kind or severance or termination
pay to any of its present or former officers or employees;
7
<PAGE> 8
(k) Merge or consolidate with any other corporation or entity or
acquire a material amount of assets constituting all or substantially
all of the business or assets of any corporation or entity;
(l) Except as otherwise contemplated herein, make any change in
its charter documents or bylaws;
(m) Solicit or initiate (including by furnishing any information
concerning the business, financial condition, properties or assets of
the Company) discussions, inquiries or proposals for the purpose or
with the intention of leading to any proposal or offer to acquire any
material assets or the business or any capital stock of the Company,
whether by merger, purchase, purchase of assets or other similar
transaction and the Company will immediately notify Buyer of the
receipt of any such inquiry, proposal or offer it may receive from a
third party; or
(n) Commit itself to do any of the foregoing.
4.7 Notification of Certain Matters. Through and including the
Closing, the Company will give prompt notice to Buyer, and Buyer will give
prompt notice to the Company, of (a) the occurrence, or failure to occur, of any
event that such party believes would be likely to cause (i) any of its
representations or warranties contained in this Agreement to be untrue or
inaccurate in any material respect or (ii) any covenant, condition or agreement
contained in this Agreement not to be complied with or satisfied and (b) any
failure of the Company or Buyer, as the case may be, or any officer, director,
employee or agent thereof, to comply with or satisfy any covenant, condition or
agreement to be complied with or satisfied by it hereunder; provided that
failure to give such notice will not constitute a waiver of any defense that may
be validly asserted.
4.8 Public Announcements. Preceding the execution of this Agreement,
Buyer and the Company have prepared the press release attached hereto as Exhibit
B disclosing this Agreement, and have agreed on the timing and manner of
dissemination of the release. Prior to the Closing Date, each of the Company and
Buyer agrees that it will not issue or release any other press release or
otherwise make any public statement with respect to this Agreement (including
the Exhibits and Schedules hereto) or the transactions contemplated hereby
without the prior written consent of the other party, which consent will not be
unreasonably withheld or delayed; provided that such disclosure can be made
without obtaining such prior consent if (i) the disclosure is required by law or
by obligations imposed pursuant to any listing agreement with any national
securities exchange and (ii) the party making such disclosure has first used its
best efforts to consult with the other party about the form and substance of
such disclosure.
4.9 Consents and Approvals. Prior to the Closing Date, the Company
will promptly apply for or otherwise seek and use its best efforts to obtain all
authorizations, consents, waivers and approvals (whether by or from any Person)
as may be required in connection with the consummation of this Agreement and the
transactions contemplated hereby.
4.10 Fulfillment of Conditions by the Company. The Company agrees not
to take any action that would cause the conditions or the obligations of the
parties to effect the transactions contemplated hereby not to be fulfilled,
including without limitation by taking or causing to be taken any action that
would cause the representations and warranties made by the Company herein not to
be true and correct as of the Closing. The Company will take all reasonable
steps within its power to cause to be fulfilled the conditions precedent to
Buyer's obligations to consummate the transactions contemplated hereby that are
dependent on the actions of the Company.
4.11 Fulfillment of Conditions by Buyer. Buyer agrees not to take any
action that would cause the conditions or the obligations of the parties to
effect the transactions contemplated hereby not to be fulfilled, including
without limitation by taking or causing to be taken any action that would cause
the representations and warranties made by Buyer herein not to be true and
correct as of the Closing. Buyer will take all
8
<PAGE> 9
reasonable steps within its power to cause to be fulfilled the conditions
precedent to the Company's obligations to consummate the transactions
contemplated hereby that are dependent on the actions of Buyer.
4.12 Financing. Buyer agrees to use commercially reasonable efforts to
obtain financing sufficient to purchase the Shares. On or before May 31, 1997,
Buyer will disclose to the Company its potential sources of financing for the
Purchase Price.
4.13 Confidentiality. Buyer and the Company agree to abide by the terms
of the Confidentiality Agreement, dated February 4, 1997, between Buyer and the
Company (the "Confidentiality Agreement") for so long as the Confidentiality
Agreement remains in effect.
4.14 Resale Provisions. Buyer agrees to use commercially reasonable
efforts to persuade any assignee of its rights under this Agreement (i) not to
sell, dispose or otherwise transfer the Shares such assignee would purchase for
a period of one year following the Closing, except to such assignee's affiliates
(as defined in Section 8.3) and (ii) not to sell, dispose or otherwise transfer
the Shares in a block trade to a known competitor of the Company.
ARTICLE V.
CONDITIONS TO CLOSING
5.1 Conditions to Buyer's Obligations. The obligations of Buyer are
subject to the fulfillment at or prior to the Closing of the following
conditions:
(a) The representations and warranties made by the Company in
Article II will be true and correct in all material respects as of the
Closing Date with the same force and effect as though such
representations and warranties had been made on and as of said date;
and the Company's business and assets will not have been materially
adversely affected prior to the Closing Date; and the Company will have
performed all obligations and conditions in this Agreement required to
be performed or observed by it or them prior to or on the respective
Closing Date.
(b) The Company will have delivered to Buyer a certificate
dated as of the Closing Date signed by its President and certifying
that the conditions specified in this Sections 5.1 have been fulfilled.
(c) Buyer Nominees (previously identified to the Company as
set forth in Section 4.2) will be duly elected to the Board of
Directors as of the Closing Date.
(d) The Company has entered into a Warrant Agreement with
Buyer or its designees substantially in the form of Exhibit A (the
"Warrant Agreement").
(e) There is no pending or threatened litigation in any court
or any proceeding before or by any Governmental Body against the
Company or Buyer to restrain or prohibit or obtain damages or other
relief with respect to this Agreement or the consummation of the
transactions contemplated hereby.
(f) All necessary contractual and governmental consents,
approvals, orders or authorizations have been obtained and all
necessary contractual or governmental notices have been given.
(g) The Company has delivered to Buyer a legal opinion of its
counsel, in form and substance satisfactory to Buyer and its counsel.
(h) Buyer has received financing for the Purchase Price, on terms
and conditions satisfactory to Buyer in its sole discretion.
9
<PAGE> 10
(i) The Company has received a customary fairness opinion from
a recognized investment banking firm stating that the purchase of the
Shares by Buyer pursuant to this Agreement is fair to the Company's
stockholders from a financial point of view.
(j) Buyer's designee President and Chief Executive Officer
shall have delivered written notice of resignation to his prior
employer and shall have entered into a reasonable and customary
employment agreement with the Company.
5.2 Conditions to Obligations of the Company. The obligations of the
Company under this Agreement are subject to the fulfillment at or prior to the
Closing of the following conditions:
(a) All representations and warranties of Buyer contained in
this Agreement are true and correct in all material respects at and as
of the Closing with the same effect as though such representations and
warranties were made at and as of the Closing.
(b) Buyer has performed and complied with the covenants and
agreements and satisfied the conditions required by this Agreement to
be performed, complied with or satisfied by it at or prior to the
Closing.
(c) There is no pending or threatened litigation in any court
or any proceeding before or by any Governmental Body against the
Company or Buyer to restrain or prohibit or obtain damages or other
relief with respect to this Agreement or the consummation of the
transactions contemplated hereby.
(d) All necessary governmental consents, approvals, orders or
authorizations have been obtained and all necessary governmental
notices have been given.
(e) The Company has received a customary fairness opinion from
a recognized investment banking firm stating that the purchase of the
Shares by Buyer pursuant to this Agreement is fair to the Company's
stockholders from a financial point of view.
(f) Buyer's designee President and Chief Executive Officer
shall have delivered written notice of resignation to his prior
employer and shall have entered into a reasonable and customary
employment agreement with the Company.
ARTICLE VI.
REGISTRATION RIGHTS
6.1 Definitions.
As used in this Article VI, the following capitalized terms will have
the following meanings:
"Holder" will mean Buyer and any of its permitted transferees who own
Registrable Securities.
"Prospectus" will mean the prospectus included in any Registration
Statement, as amended or supplemented by any prospectus supplement with respect
to the terms of the offering of any portion of the Registrable Securities
covered by such Registration Statement, and all other amendments and supplements
to the Prospectus, including post-effective amendments to the Registration
Statement of which such Prospectus is a part, and all material incorporated by
reference in such Prospectus.
"Registrable Securities" will mean the Shares, but only so long as they
remain Restricted Securities.
"Registration Expenses" will have the meaning assigned to such term in
Section 6.7.
10
<PAGE> 11
"Registration Statement" means any registration statement of the
Company which covers any of the Registrable Securities pursuant to the
provisions of this Agreement, including the Prospectus, amendments and
supplements to such Registration Statement, including post-effective amendments,
all exhibits, and all material incorporated by reference in such Registration
Statement.
"Restricted Securities" means the Registrable Securities, other than
those Registrable Securities (i) that have been effectively registered under the
Securities Act and disposed of in accordance with the Registration Statement
covering them or (ii) that are eligible in total for resale under Rule 144 of
the Securities Act (or any successor rule or regulation).
6.2 Securities Subject to Article VI. The securities entitled to the
benefits of this Article VI are the Registrable Securities.
6.3 Registration. Promptly following the Closing, the Company will (i)
prepare and file a Registration Statement on the appropriate form then available
to the Company, and use its best efforts to effect the registration for resale
by the Holders thereof of all the Registrable Securities, and (ii) prepare and
file with the Nasdaq Stock Market an notification form for the listing of
additional securities for the purpose of listing the Shares on the Nasdaq Stock
Market. The Company will use its best efforts to keep such Registration
Statement effective under Rule 415 under the Securities Act until no Holders
hold Registrable Securities. Each Holder agrees that if the Company determines
that there are material developments that require the filing of a post-effective
amendment to the Registration Statement, then each Holder registering
Registrable Securities thereunder agrees to refrain from selling any Registrable
Securities until the post-effective amendment is declared effective. The Company
agrees to file and attempt to have declared effective such post-effective
amendment as soon as possible.
6.4 Piggyback Registration Rights.
(a) If the Company at any time or from time to time subsequent
to the date of this Agreement proposes to register any securities under
the Securities Act either for its own account or the account of any
selling stockholders (other than pursuant to Section 6.3 and other than
pursuant to a registration statement on Forms S-4 or S-8 or any
successor or similar forms), it will give written notice to each of the
Holders of Registrable Securities of its intention at least 20 days in
advance of the filing of any registration statement with respect
thereto. Upon the written request of any of the Holders of Registrable
Securities given within 15 days after receipt of such notice, the
Company, subject to Section 6.4(b), will cause the Registrable
Securities requested by the Holders to be registered, to be so
registered.
(b) Underwritten Offerings.
(i) In the case of an underwritten offering by the Company of
securities, the Company will, with respect to Registrable
Securities that a Holder of Registrable Securities then desires
to sell, enter into an underwriting agreement with the same
underwriters engaged by the Company with respect to securities
being offered by the Company and cause such underwriters to
include in any such underwriting all of the Securities that a
Holder of Registrable Securities then desires to sell; provided
that such underwriting agreement is in substantially the same
form as the underwriting agreement that the Company enters into
in connection with the primary offering it is making.
(ii) If the managing underwriter with respect to an
offering pursuant to this Section 6.4 requests that the number of
shares of Registrable Securities of the Holder that are entitled
to be registered pursuant to this Section 6.4 be reduced because
of marketing factors, then the shares of Registrable Securities
of the Holders that they wish to register pursuant to this
Section 6.4 will be reduced by such amount as the managing
underwriter may determine,
11
<PAGE> 12
which reduced number of shares of Registrable Securities will be
included on a pro rata basis among the Holders of Registrable
Securities who are participating in such offering.
(iii) Selection of Underwriters and Counsel. If any
registration hereunder is to be an underwritten offering with
respect to any issue of Registrable Securities, the Company will
have the right to select the investment banker or bankers and
manager or managers to administer the related offering; provided
that, such investment banker(s) or manager(s) will each be either
(i) nationally recognized investment banking firms, (ii) regional
investment banking firms nationally recognized for their
expertise and experience in financings of companies in the
computer distribution business or (iii) an investment banking
firm approved by a majority in interest of the Holders.
6.5 Information. Upon making a request pursuant to Section 6.3 or
6.4, the Holder(s) of Registrable Securities will specify the number of shares
of Registrable Securities to be registered and will also specify the intended
method of disposition thereof. The Company may require the Holders to furnish to
the Company such information regarding themselves and the distribution of
Registrable Securities as the Company may from time to time reasonably request
in order to comply with the Securities Act. The Holders agree to notify the
Company as promptly as practicable of any inaccuracy or change in information
they have previously furnished to the Company.
6.6 Registration Procedures. If and whenever the Company is required
by the provisions of Section 6.3 or 6.4 to effect a registration under the
Securities Act, the Company will, at its expense, as expeditiously as
practicable:
(a) In accordance with the Securities Act and the rules and
regulations of the SEC, prepare and file with the SEC as expeditiously
as possible (but in no event later than 30 days after the Closing, in
the case of registration under Section 6.3 or after request from
Holder(s) pursuant to the terms of Section 6.4) a Registration
Statement in the form of an appropriate registration statement with
respect to the Registrable Securities and use its best efforts to cause
such Registration Statement to become and remain continuously effective
until all of the Registrable Securities covered by such Registration
Statement have been sold in accordance with the intended methods of
disposition of the seller or sellers set forth in such Registration
Statement. The Company will prepare and file with the SEC such
amendments to such Registration Statement and supplements to the
Prospectus contained therein as may be necessary to keep such
Registration Statement effective and such Registration Statement and
Prospectus accurate and complete during such period;
(b) Furnish to the Holders participating in such registration
such reasonable number of copies of the Registration Statement and
Prospectus and such other documents as such Holders may reasonably
request in order to facilitate the public offering of the Registrable
Securities;
(c) Use its reasonable efforts to register or qualify the
Registrable Securities covered by such Registration Statement under
such state securities or blue sky laws of such jurisdictions as such
Holders may reasonably request; provided that the Company will not be
obligated to file any general consent to service of process or to
qualify as a foreign corporation in any jurisdiction in which it is not
so qualified or to subject itself to taxation in connection with any
such registration or qualification of such Shares;
(d) Notify the Holders participating in such registration,
promptly after it receives notice thereof, of the date and time when
such Registration Statement and each post-effective amendment thereto
has become effective or a supplement to any Prospectus forming a part
of such Registration Statement has been filed;
12
<PAGE> 13
(e) Notify the Holders participating in such registration
promptly of any request by the SEC for the amending or supplementing
of such Registration Statement or Prospectus or for additional
information;
(f) Prepare and promptly file with the SEC and promptly notify
the Holders participating in such registration of the filing of such
amendments or supplements to such Registration Statement or Prospectus
as may be necessary to correct any statements or omissions if, at the
time when a Prospectus relating to such Securities is required to be
delivered under the Securities Act, any event has occurred as the
result of which any such Prospectus or any other Prospectus then in
effect may include an untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary to
make the statements therein not misleading;
(g) Advise the Holders participating in such registration,
promptly after it receives notice or obtains knowledge thereof, of the
issuance of any stop order by the SEC suspending the effectiveness of
such Registration Statement or the initiation or threatening of any
proceeding for that purpose and promptly use its best efforts to
prevent the issuance of any stop order or to obtain its withdrawal if
such stop order should be issued; and
(h) Otherwise use its best efforts to comply with all
applicable rules and regulations of the SEC, and make generally
available to the Company's security holders earnings statements
satisfying the provisions of Section 11(a) of the Securities Act, no
later than 45 days after the end of any 12-- month period (or 90 days,
if such a period is a fiscal year) beginning with the first month of
the Company's first fiscal quarter commencing after the effective date
of the applicable Registration Statement.
6.7 Expenses of Registration. All expenses of the Company incident to
the Company's performance of or compliance with the provisions of this Article
VI ("Registration Expenses") will be borne by the Company including without
limitation:
(a) All registration and filing fees;
(b) Fees and expenses of compliance with all securities or
blue sky laws (including the reasonable fees and disbursements of
counsel for the Company in connection with blue sky qualifications of
the Registrable Securities; provided that the Company will not be
required to consent to general service of process in any such state);
(c) Printing, messenger, telephone and delivery expenses; and
(d) Fees and disbursements of counsel for the Company and its
independent auditors.
Nothing in this Section 6.7 will be deemed to require the Company to
pay any underwriting discounts, selling commissions or similar fees applicable
to Registrable Securities if the applicable registration results in an
underwritten public offering of all or any portion of the Registrable
Securities.
In addition, the Company will pay the reasonable fees and disbursements
of one counsel selected by the Holders registering Registrable Securities in any
such Registration Statement incurred in connection with the offering
contemplated by such Registration Statement.
13
<PAGE> 14
6.8 Indemnification and Contribution.
(a) Indemnification by the Company. Whenever, pursuant to
Section 6.3 or 6.4, a Registration Statement relating to the
Registrable Securities is filed under the Securities Act, the Company
will (except as to matters covered by Section 6.8(b)) indemnify and
hold harmless each Holder participating in the registration, each of
their officers, directors and employees, and each person, if any, who
controls any such Person (collectively, the "Holder Indemnitees" and,
individually, a "Holder Indemnitee"), against any losses, claims,
damages or liabilities, joint or several, to which such Holder
Indemnitees may become subject under the Securities Act or otherwise,
insofar as such losses, claims, damages or liabilities (or actions in
respect thereof) arise out of or are based upon any untrue statement or
alleged untrue statement of any material fact contained in such
Registration Statement, or Prospectus contained therein, or any
amendment or supplement thereto, or arise out of or are based upon the
omission or alleged omission to state therein a material fact required
to be stated therein or necessary to make the statements therein not
misleading, and will reimburse each Holder Indemnitee for all legal or
other expenses reasonably incurred by it in connection with
investigating or defending against such loss, claim, damage, liability
or action.
(b) Indemnification by Holders. Each Holder participating in
such registration will indemnify and hold harmless the Company, each of
its directors, each of its officers and each other person, if any, who
controls the Company, within the meaning of the Securities Act
(collectively, the "Company Indemnitees" and, individually, a "Company
Indemnitee") and each other Holder Indemnitee against all losses,
claims, damages or liabilities, joint or several, to which any of the
Company Indemnitees or the other Holder Indemnitees may become subject
under the Securities Act or otherwise, insofar as such losses, claims,
damages or liabilities (or actions in respect thereof) arise out of or
are based upon any untrue statement or alleged untrue statement of any
material fact contained in such Registration Statement, or Prospectus
contained therein, or any amendment or supplement thereto, or arise out
of or are based upon the omission or alleged omission to state therein
a material fact required to be stated therein or necessary to make the
statements therein not misleading, but only if, and to the extent that,
such statement or omission was in reliance upon and in conformity with
information furnished to the Company by such Holder for use in the
preparation thereof.
(c) Indemnification Procedures. Promptly after receipt by a
Holder Indemnitee or a Company Indemnitee (collectively, "Indemnitees"
and, individually, an "Indemnitee") under Section 6.8(a) or 6.8(b) of
notice of the commencement of any action, such Indemnitee will, if a
claim in respect thereof is to be made against the indemnifying party
under such clause, notify the indemnifying party in writing of the
commencement thereof; but the omission so to notify the indemnifying
party will not relieve the indemnifying party from any liability which
it may have to any Indemnitee otherwise than under such clauses except
to the extent that the indemnifying party has been prejudiced by the
failure to receive such notice. In case any such action is brought
against any Indemnitee, and it notifies the indemnifying party of the
commencement thereof, the indemnifying party will be entitled to
participate in, and, to the extent that it may wish, jointly with any
other indemnifying party similarly notified, to assume the defense
thereof, with counsel reasonably satisfactory to such Indemnitee, and
after written notice from the indemnifying party to such Indemnitee of
its election to assume the defense thereof, the indemnifying party will
not be liable to such Indemnitee under such clause for any legal or
other expenses subsequently incurred by such Indemnitee in connection
with the defense thereof other than reasonable costs of investigation;
provided that the Indemnitee will have the right to employ one counsel
to represent such Indemnitee if, in the reasonable judgment of such
Indemnitee (based on the written opinion of counsel), it is advisable
for such party to be represented by separate counsel because a conflict
of interest exists between such indemnified and indemnifying party in
respect of such claim, and in that event the reasonable fees and
expenses of such separate counsel will be paid by the indemnifying
party. Notwithstanding the foregoing, if the Company is an Indemnitee,
the Company will designate the one counsel, and in all other
circumstances, the one counsel will be designated by a majority in
interest
14
<PAGE> 15
based upon the Registrable Securities of the Indemnities. For purposes
of this Section 6.8 the terms "control," and "controlling person" have
the meanings which they have under the Securities Act.
(d) Contribution. If for any reason the foregoing indemnity is
unavailable, or is insufficient to hold harmless an Indemnitee, then
the indemnifying party will contribute to the amount paid or payable by
the Indemnitee as a result of such losses, claims, damages, liabilities
or expenses (i) in such proportion as is appropriate to reflect the
relative benefits received by the indemnifying party on the one hand
and the Indemnitee on the other from the registration or (ii) if the
allocation provided by clause (i) above is not permitted by applicable
law, or provides a lesser sum to the Indemnitee than the amount
hereinafter calculated, in such proportion as is appropriate to reflect
not only the relative benefits received by the indemnifying party on
the one hand and the Indemnitee on the other but also the relative
fault of the indemnifying party and the Indemnitee as well as any other
relevant equitable considerations. No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the
Securities Act) will be entitled to contribution from any person who
was not guilty of such fraudulent misrepresentation.
6.9 Transfer of Registration Rights. The rights under this Article
VI may be assigned by a Holder to a transferee or assignee of any of such
Holder's Restricted Securities.
6.10 Rule 144 Reporting. With a view to making available to Buyer
the benefits of certain rules and regulations of the SEC which may permit the
sale of the Restricted Securities to the public without registration, the
Company agrees to use its best efforts to:
(a) Make and keep public information available, as these terms
are understood and defined in Rule 144 under the Securities Act at all
times after the Closing;
(b) File with the SEC in a timely manner all reports and other
documents required of the Company under the Securities Act and the
Exchange Act; and
(c) Furnish to Buyer forthwith upon Buyer's request (i) a
written statement by the Company as to its compliance with the public
information requirements of Rule 144 under the Act (ii) a copy of the
most recent annual or quarterly report of the Company, and (iii) such
other reports and documents as may be reasonably requested in availing
Buyer of any rule or regulation of the SEC permitting the sale of any
such securities without registration.
ARTICLE VII.
RIGHTS OFFERING
For a period of three years following the Closing, in the event the
Company elects to raise capital by issuing debt or equity securities, the
Company agrees to do so by issuing rights to its common shareholders, which
rights shall entitle such common shareholders to purchase their pro rata share
of such offered securities. To the extent any common shareholders do not so
exercise their rights to purchase the offered securities, the Company may offer
such securities to third parties.
15
<PAGE> 16
ARTICLE VIII.
MISCELLANEOUS
8.1 Termination. This Agreement and the transactions contemplated
hereby may be terminated and abandoned (a) at any time prior to the Closing by
mutual written consent of Buyer and the Company; (b) by either Buyer or the
Company if a condition to performance by the terminating party hereunder has not
been satisfied or waived prior to June 30, 1997; provided, however, that in
Buyer's sole discretion, such date may be extended for Buyer's benefit for up to
fifteen days; or (c) on or before the thirtieth day following the date hereof by
Buyer or the Company, if Buyer has not then completed its due diligence review
of the legal, business, financial, operational, and technical affairs of the
Company or the results of such due diligence are not satisfactory to Buyer in
its sole discretion. Notwithstanding the foregoing clause (b), (i) Buyer may not
terminate this Agreement if the event giving rise to its termination right
results from Buyer's willful failure to perform or observe any of its covenants
or agreements set forth herein or if Buyer is, at such time, in breach of this
Agreement, and (ii) the Company may not terminate this Agreement if the event
giving rise to its termination right results from the willful failure of the
Company to perform or observe any of its covenants or agreements set forth
herein or if the Company is, at such time, in breach of this Agreement.
8.2 Survival. The representations, warranties, covenants and
agreements made in this Agreement will survive the Closing and any investigation
made by Buyer until 60 days following the termination of any applicable statute
of limitation. All statements as to factual matters contained in any certificate
or other instrument delivered by or on behalf of the Company pursuant to this
Agreement will be deemed to be representations and warranties by the Company
under this Agreement as of the date of such certificate or instrument.
8.3 Binding Nature and Assignment. Except as otherwise provided in
this Agreement, this Agreement will be binding on the parties to this Agreement
and their respective successors and assigns, but neither party hereto may, or
will have the power to, assign this Agreement without the prior written consent
of the other. Notwithstanding the foregoing, Buyer may assign any or all of its
rights under this Agreement to an affiliate or affiliates of Buyer without the
consent of the Company and Buyer may assign this Agreement to any other person
with the consent of the Company, which consent will not be unreasonably
withheld. Buyer will identify any proposed non-affiliate assignees to the
Company by May 31, 1997. As used in this Section 8.3 "affiliate" of a party will
mean (i) any Person controlled by, controlling or under common control of such
party, (ii) members of a party's immediate family or any entity controlled by or
established for the benefit of such Persons, or (iii) employees of a party,
affiliates of a party, or affiliates of such employees.
8.4 Entire Agreement; Amendment. This Agreement and the other
documents delivered pursuant to this Agreement constitute the full and entire
understanding and agreement between the parties and hereby supersedes and
renders null and void all prior agreements and understandings with regard to the
subjects hereof and thereof other than the Confidentiality Agreement, which will
continue in accordance with its terms. Neither this Agreement nor any term of
this Agreement may be amended, waived, discharged, or terminated orally, but
only by a written instrument signed by the party against whom enforcement of any
such amendment, waiver, discharge or termination is sought.
8.5 Notices. All notices that are required or may be given pursuant
to this Agreement must be in writing and delivered personally, by a recognized
courier service, by a recognized overnight delivery service, by telecopy or by
registered or certified mail, postage prepaid, to the parties at the following
addresses (or to the attention of such other person or such other address as any
party may provide to the other parties by notice in accordance with this Section
8.5):
16
<PAGE> 17
If to Buyer:
Chartwell Group, Inc.
5950 Berkshire Lane
Suite 1650
Dallas, Texas 75225
Attn: Michael G. Santry
Telecopy: (214) 361-9874
If to the Company:
Computer Integration Corp.
2425 Crownpoint Executive Drive
Charlotte, North Carolina 28227
Attn: Samuel C. McElhaney
Telecopy: 704-847-9611
Any such notice or other communication will be deemed to have been
given and received (whether actually received or not) on the day it is
personally delivered or delivered by courier or overnight delivery service or
sent by telecopy or, if mailed, when actually received.
8.6 Further Assurances. Each party agrees to execute any and all
documents and to perform such other acts as may be necessary or expedient to
further the purposes of this Agreement and the transactions contemplated hereby.
8.7 Counterparts. This Agreement may be executed in one or more
counterparts for the convenience of the parties hereto, all of which together
will constitute one and the same instrument.
8.8 GOVERNING LAW. THIS AGREEMENT WILL BE GOVERNED BY AND
CONSTRUED AND INTERPRETED IN ACCORDANCE WITH THE SUBSTANTIVE LAWS OF THE STATE
OF TEXAS, WITHOUT GIVING EFFECT TO ANY CONFLICTS OF LAW RULE OR PRINCIPLE THAT
MIGHT REQUIRE THE APPLICATION OF THE LAWS OF ANOTHER JURISDICTION.
8.9 Dispute Resolution. If any dispute arises out of this
Agreement or any of the other documents to be delivered hereunder, the parties
agree not to commence any lawsuit with respect to such dispute until the
following procedures have been completed:
(a) The party believing a dispute to exist will give the other
parties written notice thereof, setting forth in reasonable detail the
facts alleged to give rise to such dispute, the relevant contractual
provisions, the nature of any claimed default or breach and a statement
of the manner in which such party believes the dispute should be
resolved.
(b) Within 20 days after receipt of such notice, each party
against whom relief is sought in connection with such dispute will
deliver a written response, setting forth in reasonable detail its view
of the facts alleged to give rise to such dispute, the relevant
contractual provisions, the nature of the claimed default or breach and
a statement of the manner in which such party believes the dispute
should be resolved.
(c) If the parties do not agree on the manner in which the
dispute should be resolved, they will arrange to hold a meeting within
10 days after delivery of the response. Each party will have in
attendance at such meeting a representative with authority to bind the
represented party to any agreement resolving the dispute. At the
meeting (and any adjournments thereof), the parties will negotiate in
good faith in an attempt to agree as to whether a dispute exists, the
exact nature of the dispute and the manner in which the dispute should
be resolved. If deemed appropriate by the parties, a professional
mediator may be engaged to assist in resolving the dispute. Any
resolution of
17
<PAGE> 18
the dispute will be evidenced by a written agreement setting forth in
reasonable detail the actions to be taken by each party. If no such
written agreement is reached within 30 days after the first meeting,
the parties may pursue any legal remedies available to them with
respect to such dispute.
8.10 Expenses. The Company will pay all costs and expenses that it
incurs with respect to the negotiation, execution, delivery, and performance of
this Agreement, and the Company will reimburse Buyer for its reasonable
out-of-pocket expenses (which will not include legal fees) in connection with
this transaction; that, provided before incurring expenses that would reasonably
be expected to exceed $10,000, Buyer will provide prior notice to the Company
and obtain the Company's consent.
8.11 Delays or Omissions. No delay or omission to exercise any
right, power or remedy accruing to any holder of the Shares upon any breach or
default of the Company under this Agreement, will impair any such right, power
or remedy of such holder nor will it be construed to be a waiver of any such
breach or default, or an acquiescence therein, or in any similar breach or
default thereafter occurring; nor will any waiver of any single breach or
default be deemed a waiver of any other breach or default theretofore or
thereafter occurring. Any waiver, permit, consent or approval of any kind or
character on the part of any holder of any breach or default under this
Agreement, or any waiver on the part of any holder of any provisions or
conditions of this Agreement, must be in writing and will be effective only to
the extent specifically set forth in such writing. All remedies, either under
this Agreement, or by law, equity or otherwise afforded to any party hereto or
any holder of the Shares, will be cumulative and not alternative.
8.12 Titles and Subtitles. The titles and subtitles used in this
Agreement are used for convenience only and are not to be considered in
construing or interpreting this Agreement.
8.13 Severability. If any provision of this Agreement is declared
or found to be illegal, unenforceable or void, in whole or in part, then both
parties will be relieved of all obligations arising under such provision, but
only to the extent that it is illegal, unenforceable or void, it being the
intent and agreement of the parties that this Agreement will be deemed amended
by modifying such provision to the extent necessary to make it legal and
enforceable while preserving its intent or, if that is not possible, by
substituting therefor another provision that is legal and enforceable and
achieves the same objectives.
8.14 Indemnification. The Company agrees to indemnify, defend and
hold harmless Buyer and its directors, officers, employees and agents from and
against any and all losses, liabilities, damages, judgments, claims,
deficiencies or expenses (including interest, penalties, attorneys' fees and
expenses, and amounts paid in settlement), arising out of third-party claims or
otherwise, to which Buyer may become subject insofar as such loss, liability,
damage, judgment, claim, deficiency or expense arises out of, or is based upon
or relates to a law suit, investigation or proceeding brought or threatened in
connection with, this Agreement, a breach or inaccuracy, or any alleged breach
or inaccuracy of any of the Company's representations, warranties, covenants or
agreements contained in this Agreement or any of the Company's certificates or
schedules related hereto, or any transaction contemplated by this Agreement.
(Remainder of this page intentionally left blank.)
18
<PAGE> 19
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first written above.
COMPUTER INTEGRATION CORP:
By: ............................
Name: Samuel C. McElhaney
Title: Chief Executive Officer
CHARTWELL GROUP, INC.
By: ............................
Name: ..........................
Title: .........................
19
<PAGE> 20
Schedules
2.6 Contractual Consents
2.7 Governmental Consents
2.8 Financial Statements
2.10 Certain Changes
2.11 Taxes
2.12 Litigation
2.16 Registration Rights
2.18 Brokers
4.6 Exceptions to Negative Covenants
Exhibits
A Warrant Agreement
B Press Release
20
<PAGE> 1
EXHIBIT 10.2
THIS WARRANT HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR THE SECURITIES ACT OF ANY STATE (COLLECTIVELY, THE "ACTS"). NEITHER
THIS WARRANT NOR ANY INTEREST THEREIN MAY BE OFFERED, SOLD, TRANSFERRED, PLEDGED
OR OTHERWISE DISPOSED OF IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT
WITH RESPECT HERETO UNDER ALL OF THE APPLICABLE ACTS, OR AN OPINION OF COUNSEL
SATISFACTORY TO COMPUTER INTEGRATION CORP. TO THE EFFECT THAT SUCH REGISTRATIONS
ARE NOT REQUIRED.
COMPUTER INTEGRATION CORP.
COMMON STOCK PURCHASE WARRANT
THIS IS TO CERTIFY THAT, COMPUTER INTEGRATION CORP., a Delaware
corporation (the "Company"), hereby grants to Chartwell Group, Inc., a Warrant
to purchase 300,000 shares of the duly authorized, validly issued, fully paid
and nonassessable shares of Common Stock, $.001 par value, of the Company (the
"Common Stock"), at a purchase price per share of $1.13 (the "Exercise Price"),
and to exercise the other appurtenant rights, powers and privileges hereinafter
set forth. The number of shares of the Common Stock purchasable hereunder and
the Exercise Price are subject to adjustment in accordance with Article III
hereof. This Warrant shall expire at 5:00 p.m., Dallas, Texas time, on June 30,
2004 (the "Maturity").
Certain capitalized terms used in this Warrant are defined in Article V
hereof.
1
<PAGE> 2
ARTICLE I
EXERCISE OF WARRANT
1.1 Method of Exercise. This Warrant may be exercised in whole or in
part at any time or from time to time on or after the date hereof and prior to
Maturity on any date that is a Business Day; provided, however, that the minimum
number of shares of Common Stock for which this Warrant may be exercised in part
is 3,000 shares, which number is subject to adjustment in accordance with
Article III hereof. To exercise this Warrant, in whole or part, the holder
hereof shall deliver to the Company, at the Warrant Office designated in Section
2.1, (a) a written notice in the form of the Subscription Notice attached as
Exhibit A hereto, stating therein the election of such holder to exercise this
Warrant in the manner provided in the Subscription Notice, (b) payment in full
of the Exercise Price (in the manner described below) for all Warrant Shares
purchased hereunder, and (c) this Warrant. This Warrant shall be deemed to be
exercised on the date of receipt by the Company of the Subscription Notice,
accompanied by payment for the Warrant Shares and surrender of this Warrant, as
aforesaid, and such date is referred to herein as the "Exercise Date". Upon such
exercise, the Company shall within three Business Days issue and deliver to such
holder a certificate for the full number of the Warrant Shares or Other
Securities purchased by such holder hereunder, against the receipt by the
Company of the total Exercise Price payable for all the Warrant Shares so
purchased. Payment of the Exercise Price shall be made by either (i) certified
or official bank check, (ii) cancellation of any debt owed by the Company to the
holder hereof, or (iii) surrendering of Warrant Shares or other shares of Common
Stock valued at the current Fair Market Value. If the holder surrenders a
combination of cash, cancellation of any debt, or Warrant Shares or other shares
of Common Stock, the holder shall specify the respective number of Warrant
Shares to be purchased with each form of consideration, and the foregoing
provisions shall be applied to each form of consideration with the same effect
as if this Warrant were being separately exercised with respect to each form of
consideration. The Person in whose name the certificate(s) for Common Stock is
to be issued shall be deemed to have become a holder of record of such Common
Stock on the Exercise Date. If this Warrant has been exercised in part, the
Company shall deliver to the holder a new Warrant evidencing the rights of such
holder to purchase a number of Warrant Shares with respect to which this Warrant
has not been exercised, which new Warrant shall, in all other respects, be
identical with this Warrant, or, at the option of the Company, appropriate
notation may be made on this Warrant and this Warrant returned to such holder.
The issuance of any Common Stock or Other Securities upon the exercise of the
Warrant shall be made without charge to any holder for any tax, other than
income taxes assessed on such holder, in respect of such issuance.
1.2 Fractional Shares. In lieu of any fractional shares of Common
Stock which would otherwise be issuable upon exercise of this Warrant, the
Company shall issue a certificate for the next higher number of whole shares of
Common Stock for any fraction of a share which is one-half or greater. No shares
shall be issued for less than one-half of a share of Common Stock.
ARTICLE II
WARRANT OFFICE; TRANSFER
2.1 Warrant Office. The Company shall maintain an office for certain
purposes specified herein (the "Warrant Office"), which office shall initially
be the Company's office at 2425 Crownpoint Executive Drive, Charlotte, North
Carolina 28227, and may subsequently be such other office of the Company or of
any transfer agent of the Common Stock in the continental United States as to
which written notice has previously been given to the holder of this Warrant.
The Company shall maintain, at the Warrant Office, a register for the Warrant,
in which the Company shall record the name and address of the person in whose
name this Warrant has been issued, as well as the name and address of each
permitted assignee of the rights of the registered owner hereof.
2.2 Ownership of Warrant. The Company may deem and treat the person
in whose name this Warrant is registered as the holder and owner hereof
(notwithstanding any notations of ownership or writing
2
<PAGE> 3
hereon made by anyone other than the Company) for all purposes and shall not be
affected by any notice to the contrary, until presentation of this Warrant for
registration of transfer as provided in this Article II.
2.3 Transfer and Exchange. The Warrant and all options and rights
under the Warrant are transferable, as to all or any part of the number of
issuable Warrant Shares purchasable upon its exercise, by the holders of the
Warrants, in person or by duly authorized attorney, on the books of the Company
upon surrender of the Warrant at the principal offices of the Company, together
with the form of transfer authorization attached to the Warrant duly executed.
Absent any such transfer, the Company may deem and treat the registered holders
of the Warrant at any time as the absolute owners of the Warrants for all
purposes and shall not be affected by any notice to the contrary. If any Warrant
is transferred in part, the Company shall, at the time of surrender of such
Warrant, issue to the transferee a Warrant covering the number of issuable
Warrant Shares transferred and to the transferor a Warrant covering the number
of issuable Warrant Shares not transferred.
2.4 Restrictions on Exercise and Transfer of Warrants. The Company
agrees to maintain at the Warrant Office books for the registration and transfer
of this Warrant. The Company, from time to time, shall register the transfer of
this Warrant in such books upon surrender of this Warrant at the Warrant Office
properly endorsed or accompanied by appropriate instruments of transfer and
written instructions for transfer satisfactory to the Company.
2.5 Expenses of Delivery of Warrants. The Company shall pay all
expenses, taxes and other charges payable in connection with the preparation,
issuance and delivery of Warrants and related Warrant Shares hereunder.
2.6 Compliance with Securities Laws. The holder hereof understands
and agrees that the following restrictions and limitations shall be applicable
to all Warrant Shares and resales or other transfers of such Warrant Shares
pursuant to the Securities Act:
(a) The holder hereof agrees that the Warrant Shares shall not
be sold or otherwise transferred unless the Warrant Shares are
registered under the Securities Act and state securities laws or are
exempt therefrom.
(b) Unless then covered by an effective registration statement
registering the resale of such Warrant Shares, upon issuance, a legend
in substantially the following form has been or shall be placed on the
certificate(s) evidencing the Warrant Shares:
"The shares represented by this certificate have not been registered
under the Securities Act of 1933, as amended, or any state securities
act. The shares have been acquired for investment and may not be sold,
transferred, pledged or hypothecated unless (i) they shall have been
registered under the Securities Act of 1933, as amended, and any
applicable state securities act, or (ii) Computer Integration Corp.
shall have been furnished with an opinion of counsel, satisfactory to
counsel for Computer Integration Corp., that registration is not
required under any of such acts."
ARTICLE III
ANTI-DILUTION PROVISIONS
3.1 Adjustments to Number of Shares Purchasable.
(a) The Warrants shall be exercisable for the number of shares
of Common Stock in such manner that, following the complete and full
exercise of the Warrant of each holder, the amount of Common Stock
issued to all holders shall equal 300,000 shares of Common Stock, as
adjusted, to the extent necessary, to give effect to the following
events:
3
<PAGE> 4
(i) In case at any time or from time to time, the holders
of any class of Common Stock or Common Stock Equivalent have
received, or (on or after the record date fixed for the
determination of shareholders eligible to receive) have become
entitled to receive, without payment therefor:
(A) consideration (other than cash) by way of dividend
or distribution; or
(B) consideration (including cash) by way of spin-off,
split-up, reclassification (including any reclassification
in connection with a consolidation or merger in which the
Company is the surviving corporation), recapitalization,
combination of shares into a smaller number of shares, or
similar corporate restructuring;
other than additional shares of Common Stock issued as a
stock dividend or in a stock-split (adjustments in respect of
which are provided for in Sections 3.1(a)(ii) and (iii)), then,
and in each such case, the holders, on the exercise of the
Warrants, shall be entitled to receive for each share of Common
Stock issuable under the Warrants as of the record date fixed
for such distribution, the greatest per share amount of
consideration received by any holder of any class of Common
Stock or Common Stock Equivalent or to which such holder is
entitled. All such consideration receivable upon exercise of the
Warrant with respect to such a distribution shall be deemed to
be outstanding and owned by such holder for purposes of
determining the amount of consideration to which such holder is
entitled upon exercise of the Warrant with respect to any
subsequent distribution.
(ii) If at any time there occurs any stock split,stock
dividend, reverse stock split, or other subdivision of the Common
Stock, then the number of shares of Common Stock to be received
by the holder of the Warrant and the Exercise Price, subject to
the limitations set forth in this Agreement, shall be
proportionately adjusted.
(iii) In case of any reclassification or change of
outstanding shares of any class of Common Stock or Common Stock
Equivalent (other than a change in par value, or from par value
to no par value, or from no par value to par value), or in the
case of any consolidation of the Company with, or merger or share
exchange of the Company with or into, another Person, or in case
of any sale of all or a majority of the property, assets,
business, income or revenue generating capacity, or goodwill of
the Company, the Company, or such successor or other Person, as
the case may be, shall provide that the Holder of the Warrant
shall thereafter be entitled to receive the highest per share
kind and amount of consideration received or receivable
(including cash) upon such reclassification, change,
consolidation, merger, share exchange, or sale by any holder of
any class of Common Stock or Common Stock Equivalent that the
Warrant entitles the holder to receive immediately prior to such
reclassification, change, consolidation, merger, share exchange,
or sale (as adjusted pursuant to Section 3.1(a)(i) and otherwise
in this Agreement). Any such successor Person, which thereafter
shall be deemed to be the Company for purposes of the Warrants,
shall provide for adjustments that are as nearly equivalent as
may be possible to the adjustments provided for by this Section
3.1.
(iv) If at any time the Company issues or sells any shares
of any Common Stock or any Common Stock Equivalent at a per unit
or share consideration (which consideration shall include the
price paid upon issuance plus the minimum amount of any exercise,
conversion, or similar payment made upon exercise or conversion
of any Common Stock Equivalent) less than the Exercise Price or
the then current Fair Market Value per share of Common Stock
immediately prior to the time such Common Stock or Common Stock
4
<PAGE> 5
Equivalent is issued or sold, excluding (x) up to 1,800,000
shares of Common Stock issuable to employees performing services
for the Company pursuant to stock option, stock grant or similar
stock incentive plans or arrangements approved by the Board of
Directors, and (y) up to 1,261,434 shares of Common Stock
issuable upon conversion of 19,035.85 shares of Series D
Preferred Stock and 125 shares of Series E Preferred Stock
issued and outstanding on the date hereof (the "Additional
Securities"), then:
(A) the Exercise Price shall be reduced to the lower
of the prices calculated by:
(I) dividing (x) an amount equal to the sum of (1)
the number of shares of Common Stock outstanding on a
fully diluted basis immediately prior to such issuance
or sale multiplied by the then existing Exercise Price
plus (2) the aggregate consideration, if any, received
by the Company upon such issuance or sale, by (y) the
total number of shares of Common Stock outstanding
immediately after such issuance or sale on a fully
diluted basis; and
(II) multiplying the then existing Exercise Price
by a fraction, the numerator of which is (x) the sum of
(1) the number of shares of Common Stock outstanding on
a fully diluted basis immediately prior to such issuance
or sale, multiplied by the Fair Market Value per share
of Common Stock immediately prior to such issuance or
sale, plus (2) the aggregate consideration received by
the Company upon such issuance or sale, (y) divided by
the total number of shares of Common Stock outstanding
on a fully diluted basis immediately after such issuance
or sale, and the denominator of which is the Fair Market
Value per share of Common Stock immediately prior to
such issuance or sale (for purposes of this subsection
(II), the date as of which the Fair Market Value per
share of Common Stock shall be computed shall be the
earlier of the date upon which the Company (aa) enters
into a firm contract for the issuance of such shares, or
(bb) issues such shares); and
(B) the number of shares of Common Stock for which any
of the Warrants may be exercised at the Exercise Price
resulting from the adjustment described in subsection (A)
above shall be equal to the product of the number of shares
of Common Stock purchasable under such Warrants immediately
prior to such adjustment, multiplied by a fraction, the
numerator of which is the Exercise Price in effect
immediately prior to such adjustment and the denominator of
which is the Exercise Price resulting from such adjustment.
(v) In case any event occurs as to which the preceding
Sections 3.1(a)(i) through (iv) are not strictly applicable, but
as to which the failure to make any adjustment would not fairly
protect the purchase rights represented by the Warrants in
accordance with the essential intent and principles of this
Agreement, then, in each such case, the holder may appoint an
independent investment bank or firm of independent public
accountants, which shall give its opinion as to the adjustment,
if any, on a basis consistent with the essential intent and
principles established in this Agreement, necessary to preserve
the purchase rights represented by the Warrants. Upon receipt of
such opinion, the Company shall promptly deliver a copy of such
opinion to the holder and shall make the adjustments described
in such opinion. The fees and expenses of such investment bank
or independent public accountants shall be borne by the Company.
5
<PAGE> 6
(b) The Company shall not by any action including, without
limitation, amending, or permitting the amendment of, the charter
documents, bylaws, or similar instruments of the Company or through any
reorganization, reclassification, transfer of assets, consolidation,
merger, share exchange, dissolution, issue or sale of securities, or
any other similar voluntary action, avoid or seek to avoid the
observance or performance of any of the terms of this Agreement or the
Warrants, but shall at all times in good faith assist in the carrying
out of all such terms and in the taking of all such actions as may be
necessary or appropriate to protect the rights of the holders against
impairment or dilution. Without limiting the generality of the
foregoing, the Company shall (i) take all such action as may be
necessary or appropriate in order that the Company may validly and
legally issue fully paid and nonassessable shares of Common Stock and
Other Securities, free and clear of all liens, encumbrances, equities,
and claims and (ii) use its best efforts to obtain all such
authorizations, exemptions, or consents from any public regulatory body
having jurisdiction as may be necessary to enable the Company to
perform its obligations under the Warrants. Without limiting the
generality of the foregoing, the Company represents and warrants that
the board of directors of the Company has determined the Exercise Price
to be adequate and the issuance of the Warrants to be in the best
interests of the Company.
(c) Any calculation under this Section 3.1 shall be made to
the nearest one ten-thousandth of a share and the number of issuable
Warrant Shares resulting from such calculation shall be rounded up to
the next whole share of Common Stock or Other Securities comprising
issuable Warrant Shares.
(d) The Company shall not, and shall not permit any Subsidiary
to, issue any Capital Stock other than, Common Stock and Common Stock
Equivalents.
3.2 Costs. The Company shall pay all documentary, stamp, transfer
or other transactional taxes attributable to the issuance or delivery of Warrant
Shares upon exercise of this Warrant.
3.3 Reservations of Shares. The Company shall reserve at all times
so long as this Warrant remains outstanding, free from preemptive rights, out of
its treasury Common Stock or its authorized but unissued shares of Common Stock,
or both, solely for the purposes of effecting the exercise of this Warrant,
sufficient shares of Common Stock to provide for the exercise hereof.
3.4 Valid Issuance. All shares of Common Stock which may be issued
upon exercise of this Warrant shall upon issuance by the Company be duly and
validly issued, fully paid and nonassessable and free from all taxes, liens and
charges with respect to the issuance thereof attributable to any act or omission
by the Company, and the Company shall take no action which shall cause a
contrary result (including without limitation, any action which would cause the
Exercise Price to be less than the par value, if any, of the Common Stock).
ARTICLE IV
REGISTRATION RIGHTS
4.1 Definitions.
As used in this Article IV, the following capitalized terms shall have
the following meanings:
"Holder" shall mean Buyer and any of its permitted transferees who own
Registrable Securities.
"Prospectus" shall mean the prospectus included in any Registration
Statement, as amended or supplemented by any prospectus supplement with respect
to the terms of the offering of any portion of the Registrable Securities
covered by such Registration Statement, and all other amendments and supplements
to
6
<PAGE> 7
the Prospectus, including post-effective amendments to the Registration
Statement of which such Prospectus is a part, and all material incorporated by
reference in such Prospectus.
"Registrable Securities" shall mean all Warrant Shares, but only so
long as they remain Restricted Securities.
"Registration Expenses" shall have the meaning assigned to such term in
Section 4.7.
"Registration Statement" means any registration statement of the
Company which covers any of the Registrable Securities pursuant to the
provisions of this Agreement, including the Prospectus, amendments and
supplements to such Registration Statement, including post-effective amendments,
all exhibits, and all material incorporated by reference in such Registration
Statement.
"Restricted Securities" means the Registrable Securities, other than
those Registrable Securities (i) that have been effectively registered under the
Securities Act and disposed of in accordance with the Registration Statement
covering them or (ii) that are eligible in total for resale under Rule 144 of
the Securities Act (or any successor rule or regulation).
4.2 Securities Subject to Article IV. The securities entitled to the
benefits of this Article IV are the Registrable Securities.
4.3 Registration. Promptly following the Closing, the Company shall
(i) prepare and file a Registration Statement on the appropriate form then
available to the Company, and use its best efforts to effect the registration
for resale by the Holders thereof of all the Registrable Securities, and (ii)
prepare and file with the Nasdaq Stock Market an notification form for the
listing of additional securities for the purpose of listing the Shares on the
Nasdaq Stock Market. The Company shall use its best efforts to keep such
Registration Statement effective under Rule 415 under the Securities Act until
no Holders hold Registrable Securities. Each Holder agrees that if the Company
determines that there are material developments that require the filing of a
post-effective amendment to the Registration Statement, then each Holder
registering Registrable Securities thereunder agrees to refrain from selling any
Registrable Securities until the post-effective amendment is declared effective.
The Company agrees to file and attempt to have declared effective such
post-effective amendment as soon as possible.
4.4 Piggyback Registration Rights.
(a) If the Company at any time or from time to time subsequent
to the date of this Agreement proposes to register any securities under
the Securities Act either for its own account or the account of any
selling stockholders (other than pursuant to Section 4.3 and other than
pursuant to a registration statement on Forms S-4 or S-8 or any
successor or similar forms), it shall give written notice to each of
the Holders of Registrable Securities of its intention at least 20 days
in advance of the filing of any registration statement with respect
thereto. Upon the written request of any of the Holders of Registrable
Securities given within 15 days after receipt of such notice, the
Company, subject to Section 4.4(b), shall cause the Registrable
Securities requested by the Holders to be registered, to be so
registered.
7
<PAGE> 8
(b) Underwritten Offerings.
(i) In the case of an underwritten offering by the
Company of securities, the Company shall, with respect to
Registrable Securities that a Holder of Registrable Securities
then desires to sell, enter into an underwriting agreement with
the same underwriters engaged by the Company with respect to
securities being offered by the Company and cause such
underwriters to include in any such underwriting all of the
Securities that a Holder of Registrable Securities then desires
to sell; provided, however, that such underwriting agreement is
in substantially the same form as the underwriting agreement
that the Company enters into in connection with the primary
offering it is making.
(ii) If the managing underwriter with respect to an
offering pursuant to this Section 4.4 requests that the number
of shares of Registrable Securities of the Holder that are
entitled to be registered pursuant to this Section 4.4 be
reduced because of marketing factors, then the shares of
Registrable Securities of the Holders that they wish to register
pursuant to this Section 4.4 shall be reduced by such amount as
the managing underwriter may determine, which reduced number of
shares of Registrable Securities shall be included on a pro rata
basis among the Holders of Registrable Securities who are
participating in such offering.
(iii) Selection of Underwriters and Counsel. If any
registration hereunder is to be an underwritten offering with
respect to any issue of Registrable Securities, the Company
shall have the right to select the investment banker or bankers
and manager or managers to administer the related offering;
provided that, such investment banker(s) or manager(s) shall
each be either (i) nationally recognized investment banking
firms, (ii) regional investment banking firms nationally
recognized for their expertise and experience in financings of
companies in the computer distribution business or (iii) an
investment banking firm approved by a majority in interest of
the Holders.
4.5 Information. Upon making a request pursuant to Section 4.3 or
4.4, the Holder(s) of Registrable Securities shall specify the number of shares
of Registrable Securities to be registered and shall also specify the intended
method of disposition thereof. The Company may require the Holders to furnish to
the Company such information regarding themselves and the distribution of
Registrable Securities as the Company may from time to time reasonably request
in order to comply with the Securities Act. The Holders agree to notify the
Company as promptly as practicable of any inaccuracy or change in information
they have previously furnished to the Company.
4.6 Registration Procedures. If and whenever the Company is required
by the provisions of Section 4.3 or 4.4 to effect a registration under the
Securities Act, the Company shall, at its expense, as expeditiously as
practicable:
(a) In accordance with the Securities Act and the rules and
regulations of the SEC, prepare and file with the SEC as expeditiously
as possible (but in no event later than 30 days after the date of this
Warrant, in the case of registration under Section 4.3 or after request
from Holder(s) pursuant to the terms of Section 4.4) a Registration
Statement in the form of an appropriate registration statement with
respect to the Registrable Securities and use its best efforts to cause
such Registration Statement to become and remain continuously effective
until the all of the Registrable Securities covered by such
Registration Statement have been sold in accordance with the intended
methods of disposition of the seller or sellers set forth in such
Registration Statement. The Company shall prepare and file with the SEC
such amendments to such Registration Statement and supplements to the
Prospectus contained therein as may be necessary to keep such
Registration Statement effective and such Registration Statement and
Prospectus accurate and complete during such period;
8
<PAGE> 9
(b) Furnish to the Holders participating in such registration
such reasonable number of copies of the Registration Statement and
Prospectus and such other documents as such Holders may reasonably
request in order to facilitate the public offering of the Registrable
Securities;
(c) Use its reasonable efforts to register or qualify the
Registrable Securities covered by such Registration Statement under
such state securities or blue sky laws of such jurisdictions as such
Holders may reasonably request, provided that the Company shall not be
obligated to file any general consent to service of process or to
qualify as a foreign corporation in any jurisdiction in which it is not
so qualified or to subject itself to taxation in connection with any
such registration or qualification of such Registrable Securities;
(d) Notify the Holders participating in such registration,
promptly after it receives notice thereof, of the date and time when
such Registration Statement and each post-effective amendment thereto
has become effective or a supplement to any Prospectus forming a part
of such Registration Statement has been filed;
(e) Notify the Holders participating in such registration
promptly of any request by the SEC for the amending or supplementing of
such Registration Statement or Prospectus or for additional
information;
(f) Prepare and promptly file with the SEC and promptly notify
the Holders participating in such registration of the filing of such
amendments or supplements to such Registration Statement or Prospectus
as may be necessary to correct any statements or omissions if, at the
time when a Prospectus relating to such Securities is required to be
delivered under the Securities Act, any event has occurred as the
result of which any such Prospectus or any other Prospectus then in
effect may include an untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary to
make the statements therein not misleading;
(g) Advise the Holders participating in such registration,
promptly after it receives notice or obtain knowledge thereof, of the
issuance of any stop order by the SEC suspending the effectiveness of
such Registration Statement or the initiation or threatening of any
proceeding for that purpose and promptly use its best efforts to
prevent the issuance of any stop order or to obtain its withdrawal if
such stop order should be issued; and
(h) Otherwise use its best efforts to comply with all applicable
rules and regulations of the SEC, and make generally available to the
Company's security holders earnings statements satisfying the
provisions of Section 11(a) of the Securities Act, no later than 45
days after the end of any 12-month period (or 90 days, if such a
period is a fiscal year) beginning with the first month of the
Company's first fiscal quarter commencing after the effective date of
the applicable Registration Statement.
4.7 Expenses of Registration. All expenses of the Company incident to
the Company's performance of or compliance with the provisions of this Article
IV ("Registration Expenses") shall be borne by the Company including without
limitation:
(a) All registration and filing fees;
(b) Fees and expenses of compliance with all securities or
blue sky laws (including the reasonable fees and disbursements of
counsel for the Company in connection with blue sky qualifications of
the Registrable Securities; provided, however, that the Company shall
not be required to consent to general service of process in any such
state);
(c) Printing, messenger, telephone and delivery expenses; and
9
<PAGE> 10
(d) Fees and disbursements of counsel for the Company and its
independent auditors.
Nothing in this Section 4.7 shall be deemed to require the Company to
pay any underwriting discounts, selling commissions or similar fees applicable
to Registrable Securities if the applicable registration results in an
underwritten public offering of all or any portion of the Registrable
Securities.
In addition, the Company shall pay the reasonable fees and
disbursements of one counsel selected by the Holders registering Registrable
Securities in any such Registration Statement incurred in connection with the
offering contemplated by such Registration Statement.
4.8 Indemnification and Contribution.
(a) Indemnification by the Company. Whenever, pursuant to
Section 4.3 or 4.4, a Registration Statement relating to the
Registrable Securities is filed under the Securities Act, the Company
shall (except as to matters covered by Section 4.8(b) hereof) indemnify
and hold harmless each Holder participating in the registration, each
of their officers, directors and employees, and each person, if any,
who controls any such Person (collectively, the "Holder Indemnitees"
and, individually, a "Holder Indemnitee"), against any losses, claims,
damages or liabilities, joint or several, to which such Holder
Indemnitees may become subject under the Securities Act or otherwise,
insofar as such losses, claims, damages or liabilities (or actions in
respect thereof) arise out of or are based upon any untrue statement or
alleged untrue statement of any material fact contained in such
Registration Statement, or Prospectus contained therein, or any
amendment or supplement thereto, or arise out of or are based upon the
omission or alleged omission to state therein a material fact required
to be stated therein or necessary to make the statements therein not
misleading, and shall reimburse each Holder Indemnitee for all legal or
other expenses reasonably incurred by it in connection with
investigating or defending against such loss, claim, damage, liability
or action.
(b) Indemnification by Holders. Each Holder participating in
such registration shall indemnify and hold harmless the Company, each
of its directors, each of its officers and each other person, if any,
who controls the Company, within the meaning of the Securities Act
(collectively, the "Company Indemnitees" and, individually, a "Company
Indemnitee") and each other Holder Indemnitee against all losses,
claims, damages or liabilities, joint or several, to which any of the
Company Indemnitees or the other Holder Indemnitees may become subject
under the Securities Act or otherwise, insofar as such losses, claims,
damages or liabilities (or actions in respect thereof) arise out of or
are based upon any untrue statement or alleged untrue statement of any
material fact contained in such Registration Statement, or Prospectus
contained therein, or any amendment or supplement thereto, or arise out
of or are based upon the omission or alleged omission to state therein
a material fact required to be stated therein or necessary to make the
statements therein not misleading, but only if, and to the extent that,
such statement or omission was in reliance upon and in conformity with
information furnished to the Company by such Holder for use in the
preparation thereof.
(c) Indemnification Procedures. Promptly after receipt by a
Holder Indemnitee or a Company Indemnitee (collectively, "Indemnitees"
and, individually, an "Indemnitee") under Section 4.8(a) or 4.8(b) of
notice of the commencement of any action, such Indemnitee shall, if a
claim in respect thereof is to be made against the indemnifying party
under such clause, notify the indemnifying party in writing of the
commencement thereof; but the omission so to notify the indemnifying
party shall not relieve the indemnifying party from any liability which
it may have to any Indemnitee otherwise than under such clauses except
to the extent that the indemnifying party has been prejudiced by the
failure to receive such notice. In case any such action shall be
brought against any Indemnitee, and it shall notify the indemnifying
party of the commencement thereof, the indemnifying party shall be
entitled to participate in, and, to the extent that it may wish,
jointly with any other indemnifying party similarly notified, to assume
the defense thereof, with counsel reasonably satisfactory to such
Indemnitee, and after written notice from the indemnifying party to
such
10
<PAGE> 11
Indemnitee of its election to assume the defense thereof, the
indemnifying party shall not be liable to such Indemnitee under such
clause for any legal or other expenses subsequently incurred by such
Indemnitee in connection with the defense thereof other than reasonable
costs of investigation; provided, however, that the Indemnitee shall
have the right to employ one counsel to represent such Indemnitee if,
in the reasonable judgment of such Indemnitee (based on the written
opinion of counsel), it is advisable for such party to be represented
by separate counsel because a conflict of interest exists between such
indemnified and indemnifying party in respect of such claim, and in
that event the reasonable fees and expenses of such separate counsel
shall be paid by the indemnifying party. Notwithstanding the foregoing,
if the Company is an Indemnitee, the Company shall designate the one
counsel, and in all other circumstances, the one counsel shall be
designated by a majority in interest based upon the Registrable
Securities of the Indemnities. For purposes of this Section 4.8 the
terms "control," and "controlling person" have the meanings which they
have under the Securities Act.
(d) Contribution. If for any reason the foregoing indemnity is
unavailable, or is insufficient to hold harmless an Indemnitee, then
the indemnifying party shall contribute to the amount paid or payable
by the Indemnitee as a result of such losses, claims, damages,
liabilities or expenses (i) in such proportion as is appropriate to
reflect the relative benefits received by the indemnifying party on the
one hand and the Indemnitee on the other from the registration or (ii)
if the allocation provided by clause (i) above is not permitted by
applicable law, or provides a lesser sum to the Indemnitee than the
amount hereinafter calculated, in such proportion as is appropriate to
reflect not only the relative benefits received by the indemnifying
party on the one hand and the Indemnitee on the other but also the
relative fault of the indemnifying party and the Indemnitee as well as
any other relevant equitable considerations. No person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of
the Securities Act) shall be entitled to contribution from any person
who was not guilty of such fraudulent misrepresentation.
4.9 Transfer of Registration Rights. The rights under this Article
IV may be assigned by a Holder to a transferee or assignee of any of such
Holder's Restricted Securities.
4.10 Rule 144 Reporting. With a view to making available to the
Holders the benefits of certain rules and regulations of the SEC which may
permit the sale of the Restricted Securities to the public without registration,
the Company agrees to use its best efforts to:
(a) Make and keep public information available, as these terms
are understood and defined in Rule 144 under the Securities Act at all
times after the Closing;
(b) File with the SEC in a timely manner all reports and other
documents required of the Company under the Securities Act and the
Exchange Act; and
(c) Furnish to Buyer forthwith upon Buyer's request (i) a
written statement by the Company as to its compliance with the public
information requirements of Rule 144 under the Act (ii) a copy of the
most recent annual or quarterly report of the Company, and (iii) such
other reports and documents as may be reasonably requested in availing
Buyer of any rule or regulation of the SEC permitting the sale of any
such securities without registration.
ARTICLE V
TERMS DEFINED
As used in this Warrant, unless the context otherwise requires, the
following terms have the respective meanings set forth below or in the Section
indicated:
Average Market Value -- The average of the Closing Price for the
security in question for the 20 trading days immediately preceding the date of
determination.
11
<PAGE> 12
Board of Directors -- the Board of Directors of the Company.
Business Day -- any day that NASDAQ is open for trading.
Closing Price --
(a) If the primary market for the security in question is a
national securities exchange registered under the Exchange Act, the
National Association of Securities Dealers Automated Quotation System
-- National Market System, or other market or quotation system in which
last sale transactions are reported on a contemporaneous basis, the
last reported sales price, regular way, of such security for such day,
or, if there has not been a sale on such trading day, the highest
closing or last bid quotation therefor on such trading day (excluding,
in any case, any price that is not the result of bona fide arm's length
trading); or
(b) If the primary market for such security is not an
exchange or quotation system in which last sale transactions are
contemporaneously reported, the highest closing or last bona fide bid
or asked quotation by disinterested Persons in the over-the-counter
market on such trading day as reported by the National Association of
Securities Dealers through its Automated Quotation System or its
successor or such other generally accepted source of publicly reported
bid quotations as the holders of the Warrant or Warrant Shares
designate.
Common Stock -- shall mean and include the Company's Common Stock, par
value $.001 per share, authorized on the date of the original issue of this
Warrant and shall also include (i) in case of any reorganization,
reclassification, consolidation, merger, share exchange or sale, transfer or
other disposition of assets of the character referred to in Section 3.1(a)(iii)
hereof, the stock, securities or assets provided for in such Section
3.1(a)(iii), and (ii) any other shares of common stock of the Company into which
such shares of Common Stock may be converted.
Common Stock Equivalent -- any option, warrant, right, or similar
security exercisable into, exchangeable for, or convertible to Common Stock.
Exchange Act -- the Securities Exchange Act of 1934 and the rules and
regulations thereunder, all as the same shall be in effect at the time.
Fair Market Value -- (a) as to securities regularly traded in the
organized securities markets, the Average Market Value; and (b) as to all
securities not regularly traded in the securities markets and other property,
the fair market value of such securities or property as determined in good faith
by the Board of Directors of the Company at the time it authorizes the
transaction (a "Valuation Event") requiring a determination of Fair Market Value
under this Agreement.
Maturity -- 5:00 p.m., Dallas, Texas time, on June 30, 2004.
NASDAQ -- National Association of Securities Dealers Automated
Quotations System.
Other Securities -- any stock, other securities, property, or other
property or rights (other than Common Stock) that the holders become entitled to
receive upon exercise of the Warrants.
Outstanding -- when used with reference to Common Stock at any date,
all issued shares of Common Stock (including, without duplication, shares deemed
issued pursuant to Article III) at such date, except shares then held in the
treasury of the Company.
Person -- any individual, corporation, partnership, trust, limited
liability company, organization, association or other entity or individual.
12
<PAGE> 13
Securities Act -- the Securities Act of 1933 and the rules and
regulations thereunder, all as the same shall be in effect at the time.
Warrant -- this Warrant and any successor or replacement Warrant
delivered in accordance with Section 2.4 or 6.8.
Warrant Office -- as defined in Section 2.1.
Warrant Shares -- shall mean the shares of Common Stock or Other
Securities purchased or purchasable by the registered holder of this Warrant or
the permitted assignees of such holder upon exercise thereof pursuant to Article
I hereof.
ARTICLE VI
MISCELLANEOUS
6.1 Entire Agreement. This Warrant contains the entire agreement
between the holder hereof and the Company with respect to the shares purchasable
upon exercise hereof and the related transactions, and supersedes all prior
arrangements or understanding with respect thereto.
6.2 Governing Law. This Warrant shall be governed by and construed in
accordance with the laws of the State of Delaware.
6.3 Waiver and Amendment. Any term or provision of this Warrant may be
waived at any time by the party which is entitled to the benefits thereof and
any term or provision of this Warrant may be amended or supplemented at any time
by agreement of the holder hereof and the Company, except that any waiver of any
term or condition, or any amendment or supplementation, of this Warrant must be
in writing. A waiver of any breach or failure to enforce any of the terms or
conditions of this Warrant shall not in any way effect, limit or waive a party's
rights hereunder at any time to enforce strict compliance thereafter with every
term or condition of this Warrant.
6.4 Illegality. In the event that any one or more of the provisions
contained in this Warrant shall be determined to be invalid, illegal or
unenforceable in any respect for any reason, the validity, legality and
enforceability of any such provision in any other respect and the remaining
provisions of this Warrant shall not, at the election of the party for whom the
benefit of the provision exists, be in any way impaired.
6.5 Copy of Warrant. A copy of this Warrant shall be filed among the
records of the Company.
6.6 Notice. Any notice or other document required or permitted to be
given or delivered to the holder hereof shall be delivered at, or sent by
certified or registered mail to such holder at, the last address shown on the
books of the Company maintained at the Warrant Office for the registration of
this Warrant or at any more recent address of which the holder hereof shall have
notified the Company in writing. Any notice or other document required or
permitted to be given or delivered to the Company, other than such notice or
documents required to be delivered to the Warrant Office, shall be delivered at,
or sent by certified or registered mail to, the office of the Company at 2425
Crownpoint Executive Drive, Charlotte, North Carolina 28227, or such other
address within the continental United States of America as shall have been
furnished by the Company to the holder of this Warrant.
6.7 Limitation of Liability; Not Shareholders. No provision of this
Warrant shall be construed as conferring upon the holder hereof the right to
vote, consent, receive dividends or receive notices other than as herein
expressly provided in respect of meetings of shareholders for the election of
directors of the Company or any other matter whatsoever as a shareholder of the
Company. No provision hereof, in the absence of affirmative action by the holder
hereof to purchase shares of Common Stock, and no mere enumeration herein of the
rights or privileges of the holder hereof, shall give rise to any liability of
such holder
13
<PAGE> 14
for the purchase price of any shares of Common Stock or as a shareholder of the
Company, whether such liability is asserted by the Company or by creditors of
the Company.
6.8 Exchange, Loss, Destruction, etc. of Warrant. Upon receipt of
evidence satisfactory to the Company of the loss, theft, mutilation or
destruction of this Warrant, and in the case of any such loss, theft or
destruction upon delivery of a bond of indemnity in such form and amount as
shall be reasonably satisfactory to the Company, or in the event of such
mutilation upon surrender and cancellation of this Warrant, the Company shall
make and deliver a new Warrant of like tenor, in lieu of such lost, stolen,
destroyed or mutilated Warrant. Any Warrant issued under the provisions of this
Section 6.8 in lieu of any Warrant alleged to be lost, destroyed or stolen, or
in lieu of any mutilated Warrant, shall constitute an original contractual
obligation on the part of the Company. This Warrant shall be promptly canceled
by the Company upon the surrender hereof in connection with any exchange or
replacement. The holder of this Warrant shall pay all taxes and all other
expenses and charges payable in connection with the preparation, execution and
delivery of Warrants pursuant to this Section 6.8.
6.9 Headings. The Article and Section and other headings herein are
for convenience only and are not a part of this Warrant and shall not affect the
interpretation thereof.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
14
<PAGE> 15
IN WITNESS WHEREOF, the Company has caused this Warrant to be signed in its
name.
Dated: June ___, 1997.
COMPUTER INTEGRATION CORP.
By:
------------------------
Its:
-----------------------
15
<PAGE> 16
EXHIBIT A
SUBSCRIPTION NOTICE
The undersigned, the holder of the foregoing Warrant, hereby elects to
exercise purchase rights represented by said Warrant for, and to purchase
thereunder _________________ shares of the Common Stock covered by said Warrant
and herewith makes payment in full therefor pursuant to Section 1.1 of such
Warrant as follows: ___________________________, and requests (a) that
certificates for such shares (and any securities or other property issuable upon
such exercise) be issued in the name of, and delivered to,
____________________________________________________ and (b) if such shares
shall not include all of the shares issuable as provided in said Warrant, that a
new Warrant of like tenor and date for the balance of the shares issuable
thereunder be delivered to the undersigned.
-----------------------------------------
Dated:
--------------
16
